Unite Group PLC (UTG) Earnings Call Transcript & Summary

Good morning, everybody. Welcome, and thank you to all those in the room who've taken the time to come up to what is unfortunately a rainy Manchester today. It's very unusual to have rain in Manchester, I'm told. That's a bit disappointing. But we'll try and keep you as dry as possible. If I just flip the slides on, the agenda for today. And every one in the room, I think, you've got a pack. So there'll be a brief introduction from me. Delighted to say following that, Nick Hillman from HEPI, I'll introduce him in a minute, will give his view on higher education. That's followed by then updates covering our customer strategy, our portfolio review, sustainability, and then the financial outlook, and finally a summary. Then an opportunity for lunch before we embark on the tour. Lots of the team here today, and you'll meet lots of the team as we go around. But a couple of new faces for many of you, I think, in the leadership team. Firstly, Karan Khanna. I'm delighted to say Karan joined us about 5 months ago. Most recently, Karan ran IHG's business, all their hotels in the U.K. and Ireland, including this [indiscernible] which, if any of you get the opportunity is a wonderful hotel but a real labyrinth. So don't wander too far because you will get lost. Before that, Karan was with Cadbury Schweppes and also McKinsey. And Karan will lead our customer service, efficiency and people agenda in the business. And also Nicola Marsden, who's at the back of the room, Nicola joined the business nearly 18 months ago and brings vast experience in sort of communication and brand. And 1 of Nicola's most recent achievement is the launch of our new corporate website, which went live yesterday. I'm sure you're all looking at the website on your way out this morning. If not, please, I encourage you to have a look on the way down. I think it's a great step forward for us in terms of our sort of online presence. And also probably more importantly than us is the operational team. We've got several members of the operational team here in the room. We've got Steph Dale and David Marr, 2 of our heads of operations, and there's actually 3 heads of operations that run our entire business. I'd say 2 of them are here. And then Louise, Chloe, Natalie and Will, all have responsibility for Manchester. You'll meet them on the tour. These are the guys that do really run our business. It is where it's at. They will have all the real answers. So as we're going around on the tour, please feel free to ask them any questions. Then also Nick Hillman. Nick is at the front here. Delighted to welcome Nick, as I said. Nick used to work for the right vulnerable David Willetts MP, now Lord Willetts, as Chief of Staff and Special Adviser in the Department for Business, Innovation and Skills, and that was between 2007 and 2013. Since 2014, Nick has been the Director of HEPI, the Higher Education Policy Institute, which is the lead -- U.K.'s leading think tank devoted to higher education, someone that really does have -- a really good view, a good understanding and is really listened to in the sector. So a great opportunity for you all to hear from Nick. Nick is also a Governor of 2 universities, including the University of Manchester. So just turning to my introduction. Our purpose as a business since 2014 has been a Home for Success. And I believe it's a purpose that's as relevant now as it's ever been. We have great foundations of a business and really clear opportunities to further leverage our platform, our people and our estate to really deliver for customers, for our shareholders and stakeholders, but also, and really critically, have a positive social impact more broadly. But without stating sort of the blindingly obvious, I guess the past 18 months have really tested us. But I do think we've come through that. We've made the right decisions. We've demonstrated our resilience of the business -- We've enhanced our reputation. So we are now really well positioned to fully recover and look to continue to grow. And looking ahead, we've got really high visibility over the growth of the business. We're confident in being able to deliver sustainable rental growth of 3% to 3.5%. That rental growth supported by a significant portfolio investment opportunity. You'll hear a little bit more about that later. But Manchester is a great example of that investment opportunity. We've got really clear visibility over our earnings growth. The earnings growth of 6% to 8% delivered through our platform but also through our development pipeline, which remains significant. And that's all supported and underpinned by the strength of our sector. Combining those things giving us real confidence we can deliver sustained TAR of 8.5% to 10%. So those sector-leading returns can all be delivered while we do have that really meaningful impact on society and particularly young people. And you're going to hear bits about each of those things that I've just said as we go through the rest of the presentation today. But the short term has obviously been a little bit different, a little bit different for everybody. And the sales cycle and the performance, therefore, in the sales cycle has just -- has impacted us. So it's worth just reflecting on sort of where we are. Now a lot of what we expected to happen did happen. The recruitment cycle, some of the trends we expected around student numbers remaining at record levels and really strong growth in domestic and non-EU international students happened. We expected EU student numbers to fall, but they actually fell more than we thought. And that was a combination of Brexit. We were anticipating about a 35% decline in unit numbers from Brexit. If you combine that with COVID, we've actually seen an over 50% decline in EU student numbers. And the flight to quality that we've been talking about, the desire of students to go to the best universities is absolutely continuing and really important for us to make sure we're partnering with those growing universities. And also some of the proactive measures that we took during the pandemic to shift away from an international focus in certain areas and focus more on the domestic market, really has had success. We've grown the number of domestic students and really points to that sustainable opportunity to continue to take market share from HMO particularly. However, there have also been some surprises, certainly surprised in terms of the magnitude of the change. And the most significant of that was grade inflation. We've seen the normal distribution of students through the sort of university ecosystem of high-, mid- and low-ranked universities disrupted by many more students getting higher grades and therefore, getting their first choice university. And to put the grade inflation, and I'm sure you've read about it in the press into some kind of context. In the last 2 years, the grade inflation that we have seen for young people would normally take between 30 to 40 years of educational improvement to deliver. So it's a huge shift. And now the challenge is how does that get reversed. Now I do believe it's short-term phenomenon. We will go back closer to more typical grades. The government have indicated that they'll look to make interventions into integrating over the next 2 years. And I think universities will take action as well. Universities will increase their entry tariff just to rebalance things a little bit. So the disruption that we've seen and that disruption, we estimate, has probably cost us 1% to 2% of occupancy will reverse in large part from the next academic cycle. And we've also seen international students. They're coming to the U.K. They want to come to the U.K., they're starting their studies, but some have delayed their buying decisions, and aren't necessarily coming for semester 1, but will look to come in semester 2 and semester 3. That obviously, therefore, presents a sales opportunity for us later in the year. But despite those 2 surprises, overall, student numbers are or are at record levels, and the structural growth supporting our sector does continue. So what does that all mean for the '21, '22 sales cycle? And this isn't new information, obviously, to any of you. But our occupancy result was 94%, delivering rental growth of 2.3%. So a good outcome given the challenging market backdrop and all of those sort of moving variables, but clearly slightly below the expectations that we had set out. But I believe -- we believe we have materially outperformed our competitors. It's not a market where it's very easy to get comparative data, but we believe our occupancy is significantly ahead of our peers. And that outperformance has been driven by our nominations and our partnerships, and they are as strong as ever and arguably, pre-COVID have been enhanced. Our platform, which does appeal to the widest range of students, and also our flexibility, as I mentioned, in changing our marketing strategy and our tactics to focus on the strength of U.K. direct recruitment. And 2 other points as well, I think, sort of relevant for the current sales cycle. That's our portfolio performance. We have been very deliberate over the course of the last few years and ensuring that our portfolio, our development pipeline is aligned to the strongest universities, the universities that are growing. And the vast majority of our cities have performed well and are full or indeed, some of them with significant waiting lists of students wanting accommodation. But there are a number of markets, 5 markets there, that have underperformed where we've not got to the occupancy that we expected, and that's what really caused us to fall short. And that's been driven by those factors that I talked about, international delaying and grade inflation. But we understand that, and we can be proactive at the start of the next sales cycle. The next sales cycle starts in about a month's time. And we can be proactive. We can correct that for next year and look to move back to full occupancy. And international student numbers, I've referenced the EU decline for the factors that we know about. But that has been largely offset by non-EU international demand. China remains very important. But really, really strong growth from emerging markets, India -- Indonesia, Saudi Arabia and a number of other countries. And that is a trend that is going to continue. So sort of looking further ahead, and if we look forward, sort of over the next 10 years, I think we can really be quite positive that our business does remain sort of structurally supported by the higher education sector. Our core market is U.K. 18 year olds. And that is a market that is going to continue to grow over the course of the next 10 years. In absolute terms, there are going to be more 18 year olds just simply because of demographics. I even if you assume static participation, i.e., not an increase that we have been seeing, you'll see something like 200,000 more students potentially go into university by 2030. And I do believe that participation rates will continue because that's a societal trend of wanting to go to university is continuing to grow. But there will be some challenge. There will likely be some government intervention into students looking to go to university. I think we will finally get a response in some way, shape or form to the Augar report that we've referenced before alongside the spending review, obviously slated for the 27th of October. We don't quite know what that will look like. But certainly, the headlines consider anything from a change in the headline fee. So that will be reducing the cost of university from GBP 9,250 to something like GBP 7,500. I think that's probably unlikely, but never say never. A reduction in the level of which students start to repay their loan, I think that's probably much more likely that students will start paying the loan back at sort of a lower future earnings level because the government wants some of that debt to be paid off. And also a potential increase in the time line as to how long students will have to repay that debt, that's quite likely. And potential for the government to impose some form of restriction on who can go to university. Not sure what that might look like, but certainly, things that have been talked about is if you haven't got a GCSE in maths and English, should you be able to access the student loan. Obviously, any minimum entry requirements is arguably sort of a tax on sort of aspiration. So whether that will be implemented. But to put that in context, if you were to restrict students that didn't have maths or English or GCSE or equivalent, you're probably talking about 1% of students not being out to go to university. So combining all of those factors, I think we will see some changes to the higher education funding sector announced at the end of the month. But I think they will have very limited impact on the demand for our core business, from our core customers, and also for the types of universities that we are partnering with. And while the government are looking at U.K. students going to university, they're absolutely supportive of international students. They want to grow the number of international students coming to the U.K. They recognize the value that they bring. They recognize the economic impact that they have. And the government announced that they want to see at least 600,000 students in the U.K. by 2030. That's a material increase. And very clearly, they are students that all need accommodation when they come and live in the U.K. The flight to quality, I've already mentioned it, but it's been a consistent trend. It is continuing. Arguably, grade inflation has sort of turbocharged it a little bit this academic cycle. But students selecting the best opportunities, the 1 -- the best university to give them the best opportunities is absolutely continuing. So therefore, our alignment, our proactive disposal program is important, and we'll continue to do the things that we've done over the last few years. And university outsourcing, the pandemic has demonstrated to universities, I think, the real cost and complexity of running student accommodation. And remember, universities sort of own and operate in excess of 300,000 beds. So I am confident that there remains an opportunity for universities to outsourcing, whatever that means, whatever structure that is, and Joe will talk about that a little bit more in a few moments. But that opportunity is still there. It's an opportunity that I believe with our relationships. We are absolutely best placed to benefit from. But it is an opportunity that will be lumpy and will take time, but I still see that it's there. So the outlook over the next 10 years, the structural tailwinds that have been supporting our sector are absolutely still there. And I believe that will ensure that we will continue to grow and develop as we go forward. So with that, I'd like to just hand over to Nick, welcome Nick to give us his view on higher education.

Great. Well, thanks very much, Richard, and it's great to be here in Manchester, rainy Manchester. Richard already told you a little bit about my organization. We're the U.K.'s only specialist think tank. We're specialists because we only look at higher education, and we -- I don't think you could plot us any on the political spectrum despite my own background in Whitehall. And we do all the things think tanks do. We do a lot of reports, lots of events. But my own background again is up on the screen. Richard kindly talked about my experience and I've told my experience here in Manchester. I was a student here in Manchester actually. That's what I looked like at the time. It's great. We're meeting in Manchester actually because not only do I have a lot of [indiscernible] Richard mentioned the Augar report, which was announced just 200 meters away from here by Theresa May when she was Prime Minister. He mentioned Brexit. Of course, the Brexit referendum result was announced about 400 meters away over there in the big square in front of the town hall in Manchester. So it's very timely. And of course, you've got the wonderful Unite building just opposite. So here's an example of some of the reports that we publish. I mean some of them will be of less interest to you, some of them we have more interest to you. The 1 in the bottom row, in the middle of the bottom row was meant to be a compendium of the state of student accommodation, particularly PBSA, purpose-built student accommodation. It's really aimed at policymakers because we felt that a lot of the information getting into the hands of policymakers about this sector was inaccurate. It wasn't up to date. It was more about what life had been like when they had gone to university, not like while life was really like now. Some of the others might be of interest as well, like 1 on climate change, 1 on how university is now perceived in the media. The red 1 there written by the former education editor at The Times, who said very interestingly, I think, if you want to understand about how this sector has now written about in the media and talked about in the media, you've got to remember, it's now a consumer sector. More than half of the population go to university. Most young students live away from home, about 80% do. And it's no longer a policy story. It's a consumer story. So COVID, just -- I've been asked to sort of provide some general background. I will drill down in a minute about the changes that I think are coming that I think occur and reinforce some of the things Richard said but perhaps go a little bit deeper. When COVID happened, there were a lot of people who said nothing about the higher education sector in the U.K. or indeed globally would ever be the same again. 1 example of this, I could give you 10s of examples of this. But 1 example from our own country was the new statement that claims that because online learning was now happening, you could teach a close to 0 marginal cost. And therefore, the whole university model of moving away from home, having intensive education was completely kaput and was never going to come back. But I think actually, what has happened during the crisis in our sector is almost every prediction that has been made about the U.K. higher education sector during the crisis has turned out to be wrong. The most well -- sadly not ours, the most well-respected think tank in the country, The Institute for Fiscal Studies were saying just over a year ago, 13 universities would go bust. They did -- they said that because they thought demand for higher education would go down in the crisis. Anybody who's a parent, who's lived through lockdown knows the young people are desperate to get away from home, desperate to get on with their lives, desperate to better themselves through education. And the that sort of assumption was nonsense. And of course, no university -- actually, no British university has ever gone bust in the history of higher education in the U.K. It doesn't mean it won't ever happen, but it hasn't happened yet. And in fact, of course, we have record numbers of students making their way to university. The international seems a bit different and I'll come on to that. Another example of predictions that have been made about our sector that turned out to be wrong is policymakers actually like the idea of students living at home and going along to their local university. Margaret Thatcher liked it when she was at Edward Heath's Education Secretary 50 years ago, partly because Carol, her own, effect daughter, did exactly that. And similarly, when I was working for David Willetts and we tripled tuition fees back in the 2010 to 2012 period, people made that prediction. They said no one would want to get into that level of debt. No one would want to go away from home. University cities would become ghost towns that was Liverpool Victoria's prediction. In fact, that has just not happened. And we published a history of student accommodation by William Whyte who's an architectural historian at the University of Oxford, who said, actually, there's a long-term consistent trend that about 80% of young, full-time school leaders who go to higher education live away from home. Yes, there are more commuter students than they used to be. But as a proportion of the total, it's actually about the same as the long-term trend. Another prediction about our sector that's turned out to be nonsense, I mean, is some of the tech stuff. So -- and this has been true for over a century. So Thomas Edison said, once the cinema has been invented, why would anybody want to go to a traditional university experience because you could pop along to your local cinema, see the world's best lecturer in your discipline, beamed in your local cinema. How they did it in those days with the roles to film, and you wouldn't want to go to see your own academic in your own local university. But of course, that is not the case because people want that all around student experience. And we did some very interesting research with Unite students actually. Initially, before the crisis, and we said to people, it was very prescient, we didn't know the crisis was going to happen, of course. But we said, if lectures were to be canceled, what would you want to take that place? And the most popular option by far, the orange bar on the far left there, was other forms of face-to-face learning. And the 1 of the less popular options was Edtech, 28%. When we -- actually, it was Unite students without us. When Unite students repeated that exercise after the crisis, the popularity of face-to-face learning had gone up and the people who said mainly Edtech, online stuff had gone down. And so the ratio changed from double from -- face-to-face is twice as popular. It's now 3x as popular in the crisis. So if anything, the crisis has actually reinforced the popularity of the traditional U.K. higher education model. So just -- I'm just giving an eye on the time. I now want to run through 10 points of sort of what I think is currently going on. So as I said, on home students, the naysayers were profoundly wrong even in 2020 in the depth of the crisis. They're profoundly wrong again in 2021. And we've got record proportions of young people heading to university. And it's brilliant walking up and down Oxford Road, you're going to have -- well, another 300 meters up there, and you're in the midst of Royal Northern College of Music, Manchester Metropolitan University. The streets are absolutely full and buzzing with students. And I know because it's my third week in a row in Manchester. And 1 thing that people always forget in education policy, which is bizarre if you're a parent or engage with young people a lot, is young people are rational. The minute you remember the young people are rational, then all these mad predictions suddenly become to see mad. Young people know getting a degree serves them well in the labor market. Young people know that the alternatives to higher education are not as good in our country as in other countries. Young people know that getting away from home and living in a different city and having that all around student experience is a really exciting thing to be doing. Will demand tail off? People have been saying demand will tail off for 50 years. Kingsley Amis famously said, more will mean worse. Maybe 1 day, it will. But we are nothing like that at the head of the OECD pack for the proportion of people who go to higher education. And in fact, in the millennium cohort study, which is a really serious piece of social science research where they're tracking families with babies born around the time of the millennium, so these are families whose children all are now about 18, 19. They said to the mothers when the children were about 6 to 8, they said, "Would you like your kid to go to university?" And 97% said yes. And it doesn't matter if the mother was poor or rich, well educated, ill-educated in Scotland or in England, 97% said yes. Now they won't all go. Of course, they won't all go, but it shows how deep the aspiration levels in our country run. And the politicians who say too many people go to university are actually standing in quite a dangerous place. And we saw that this time last year when Gavin Williamson, Secretary of State for Education, briefly said he was going to impose number caps on universities to calm the market down, and they didn't. Although they legislated for that in Parliament, they decided not to do it in the end because there was such an absurd idea. As Richard said, growth is not even. So some universities are much more popular than others. Some cities are much more popular than others. I mean Unite students watch the market. We range a happy over that everything in higher education. Unite students watch the market city by city more closely than we do. But it's not -- you need to be a rocket scientist to work out which cities are doing really well. I mean The Times, for example, this morning, has a story about Glasgow. Demand in Glasgow is very high. Here in Manchester, demand is very high. Of course, 1 of the problems here in Manchester -- I shouldn't say this as a Board member of Manchester University, and so please don't repeat it outside this room. But 1 of the problems of Manchester University is Manchester University's own accommodation is, frankly, not always up to scratch because they -- their focus is on getting better in research and some of the other options. So the private PBSA sector in the city like Manchester is particularly important. York, some of the students are being made to live in hall because the demand there is so strong. There are other cities where things are not quite as positive, Aberdeen. Aberdeen have the highest proportion of EU students of any university in the U.K. So they've taken a real knock. Leicester, although Leicester got 2 universities and most cities with 2 universities are probably doing okay, DMUs have challenges and Leicester itself is not in the Russell Group for bizarre historical reasons, so they suffer. Portsmouth another 1 that's been suffering. So it's not -- as Richard said, it's not absolutely the same across the country. 1 thing that's happening this year is a higher proportion of students are Brits, partly for the reasons Richard said, like grade inflation, the grades are really high. Partly again because what Richard said about Brexit and the EU numbers have tailed off. So you've got both of those things happening. I regret that. I think it's going to make our campuses a little bit less diverse a little bit. The EU students that are still coming tend to be from the wealthier Western European countries, not the Eastern European countries. So it's a little bit less diverse. It's not absolutely guaranteed to last. I mean these are the non-EU international student numbers. And around here, this is when the subsidy -- they all used to be subsidized by the British government. Margaret Thatcher stopped it in the early '80s. And everybody said, nobody from non-EU countries would ever come to the U.K. EU wasn't called EU then. And then the universities, of course, began to realize that if they used the agents and if they were smart in their marketing, then they could appeal to EU students even though -- sorry, non-EU students, even though the fees are very high. And we could see that happen in Europe eventually. We could see universities beginning to use agents in Europe. We could see some of the EU market come back. I wouldn't take it for granted, but it's not absolutely implausible. Fourth, the value of international students, which Richard referred to, just keeping an eye on the time, which Richard referred to. We recently published a report on this. It's different and more sophisticated, I think, than other research on this issue because we didn't just look at the benefits to the country of having so many international students here, EU and non-EU, and close to 0.5 million. We also looked at the costs. There are some costs. If they fall ill, they use the NHS, and the NHS levy doesn't cover the full cost. But nonetheless, even if you take off the costs, you're left with a net economic benefit to the country each year of about GBP 25 billion a year and every single part of the country benefits. So this is crucial to leveling up, for example. And Theresa May was Home Secretary and Prime Minister and wanted to discourage international students from coming here, that was really bad for the part of the country, even the Northeast, which makes you see, GBP 1.2 billion from the presence of international students. The clicker went a bit crazy there. I'm going to keep on going very fast because you can see I've got a lot of slides. There are some elements of our offer to international students that probably need to get a bit better. We have published a report last week about what Korea's advice for international students is like. We question -- we titled it, as you can see, Paying More for Less? International students pay a hell of a lot of money. They normally get at least as good a service as home students. Maybe with career support, they don't. So we're urging universities to really think about that. Some groups are lagging behind, which sounds like a negative, but it's also a positive because it means there's a big market opportunity there. 1 group that's falling behind is young men. Our education system really let down young men, even with the teacher-assessed grades. So even without the pressure of exams, boys fell behind in nearly every subject. The orange line here is women, and the blue line is men and outside languages. These are the top grades of this year's A-levels relative to 2019 and girls outperformed boys in almost everything. But -- so that sounds like a negative. But if you think, well, maybe if we make an education system better for boys and it deems that how we are very interested in that, maybe more boys will go. Maybe there's an opportunity there for really a further growth. What happened in terms of student numbers. And again, this reinforces something Richard said, is some student group's have actually fallen in recent years, part-time students in particular, they'd be much less likely to live in a Unite accommodation. Of course, because part-time students tend to go to their local university. But the group that's really growing is the full-time undergraduate, which is that sort of pale blue line there. Actually, a full time postgraduates have grown too, and I'll come back to that in a moment, this sort of 1-year, 12- months courses. Richard mentioned this. So what you've got here is this is birth rate. This is a number of 18 year olds in the country. And as Richard said, it's due to grow for 10 years now. So if you've got young kids, you'll know the schools have been growing in recent years. That wave that has gone through schools is now hitting universities. The biggest driver of growth is actually not the birth rate potentially, it's the proportion of the people who are 18, who have the qualifications, the attitude, the desire to go. And if you ignore the zigzag, that's when higher fees came in and people canceled their gap years. If you assume the middle line is male and female combined, if you assume that line continues on a similar trajectory, that actually leads to greater demand than just looking at the birth rate. And we've had periods indeed, including recent years where the birth rate numbers, the number of 18 year olds have fallen, but the number of places has still gone up. So I'm an optimist, and we wrote a whole report on this that suggested we need sort of hundreds of thousands of extra places by 2035. As Richard suggested, we looked at it regionally. Scottish demographics, for example, are very different to English demographics. And just earlier this week in the -- sorry, last week, the end of last week Friday, in the paper, other people are using our numbers to talk about the pressure that's about to come to universities. Post grads, we often forget to talk about post grads. And 1 of the reasons for that is there's a terrible delay in good data on this. But if you walk half a mile down the road and talk to Nancy Rothwell, Vice chancellor of Manchester, she will tell you they took thousands of extra postgraduate students last year. If you go to Imperial, I think the number 6,000 in London, partly because they thought the international students wouldn't come, they took more home post graduates. But nonetheless, the numbers are rising. And if you look at what's happened with post-graduate numbers historically, when the last financial crisis happened, this is a total post-grad numbers. There was a big increase. And then it went drifted down a bit. And then when student loans were extended, post-graduates as they were then there was another big increase. Well, this time, we've got a financial crisis and we've got master's loans in existence. So there's been a big increase in post-grad numbers, but it's not there yet in all the published data. And again, it's particularly what Richard called the flight to quality institutions. On A-level results day, on results today, Gavin Williamson was touring the media studios going well done, everybody, you did well in your A-levels. But remember, there's a lot of other alternatives apart from higher education. It's frankly not really true. I mean good quality degree of apprenticeships and good quality apprenticeships are fantastic. I mean the degree of apprenticeship, there is actually some higher education built in there. But they almost don't exist. Last year, in the first 6 months of the last academic year, when 0.5 million new undergraduates -- well, not quite 0.5 million, but hundreds of thousands of new undergraduates were enrolling. The number of young degree level of apprenticeships enrolling was 2,800. So it's about 1% of the number of going into [ Ag ]. And even if you include all 19 to 24, it's only another 13,000. So yes, degree level of apprenticeships are great. Employers don't want to offer them in the crisis. There were many of them even before the crisis. It's not as popular -- we're not Germany. Our labor market is more flexible. We don't have the same manufacturing sector. Our apprenticeship sector is never going to be quite like Germany's. Final 2 more slides, and I'm going to stop. There is, of course, and Richard referred to this, a strand of thinking in Parliament, particularly perhaps on the conservative benches, they tend to represent rural areas with our universities. There is a bit of a view that too many people go to university, that slam the numbers down. All I would say is that's a very dangerous place for a policymaker to be because of the aspiration levels that I've already shown you. And we published a report -- had no press coverage at all because it came out the same week that pandemic was declared. We published a report from Australia where they have the same debate about number caps. And he concluded, this Australian guy, that even in periods in Australia where the governments try to control the number of students, in the end, they've had to find extra places because elected politicians don't want to stand in the way of stopping people bettering themselves through education. And they're useful, of course, keeps people off the unemployment numbers as well. There's also a very good book via Cambridge historian that makes a similar point. He looks at the whole of post war British educational history and says, the story is not actually policymakers dragging people into educational institutions. It's policymakers responding to demand from consumers for more education. He said education is a consumer good. And then my final slide is just a plug-in event. We've got -- sorry, this thing keeps jumping ahead. Coming up on Thursday, because the 1 thing I haven't had time to cover is research spending. And those really good top-notch universities that Richard was talking about, we call it research heavy institutions. And the big thing we -- the other big thing apart from student loan changes we're waiting to hear about in the spending review is what's going to happen to research spending. The government has a commitment to spend 2.4% of GDP, public and private on research by 2027. They may backtrack on that a little bit, but most of that money will go to universities because more research is done in universities in the U.K. than proportionally in other countries. And we've got an event on that on Thursday if you want to hear more about what's going on higher education. Thank you very much.

Thanks very much. That was brilliant. Obviously, you've got sort of vast, vast experience. We do now have an opportunity just to ask Nick any questions if there are any in the room or if there are any on the webcast and we've got the laptop mic. But if there are any questions for Nick, please do ask them.

Chris? Sorry, with questions in the room, if you could just wait for the mic, so then the people on the webcast can hear you.

Christopher Fremantle from Morgan Stanley. And I just wanted to -- like you speak it over universities and their financial position. What do you just say a few words about the financial -- they're clearly underwriting about rent for these guys. So are they -- what position are they in? And what are the major risks are there?

Yes. So it's a really good and important question. The difficulty with questions like that is, of course, there are about 150 universities in the U.K. And there are actually hundreds of other higher education providers too like FE colleges. So quite hard to answer any question with a single story. And it does -- that's my alarm telling me just shut up. It's quite hard to answer any question with a single story. But the basic operating model of a British University is this. They more or less, more or less breakeven on home students. They might lose money on the physicist to make money on their historian, but they are more or less breakeven on the home students. They lose on research. Nobody funds research properly. It doesn't matter if you're a charity, the European Union, the British government, they all underfund the true costs. And then they make a surplus, not profit because they're charities, but a surplus from international students. And the international students cross-subsidize all the loss-making stuff. They do also make small surpluses on student accommodation, university-owned conference organization. But it's quite small scale. So those international student numbers are really important. I mean the British Council says the number should be back by about 2023 to where they would have been. It depends how many planes are in the skies. And there are -- look, don't be wrong, there are some British universities that are seriously worried about the finances. The average 1 like Manchester down the road is just not making quite as big a surplus as they would have liked to renew their estate. There are others who may be used to teach a lot of part-time students maybe in an unsexy part of the country that international students don't want to study at. Maybe they've had some not fantastic leadership that are struggling more. I think it would be a bit invidious to name names, but it wouldn't be that hard to work out where they are. None of them have been mentioned this morning. Even the ones like Portsmouth, I mentioned this morning, they're struggling. I don't mean places like that. I mean places where very modern universities very often that are struggling. Others -- Scottish universities have a tough time because they have no attrition fees and that had a particularly high number of EU students. So Dundee University, for example, has controlled its losses by just saying we're not going to take on any big new research projects. So they won't go bust, but that's probably bad for their long-term reputation because research -- you do the research to get you the lead table position to get you the prestige that then builds a virtuous circle that attracts the international students, et cetera. So I'd say Scottish universities have a slightly tougher time. And if in the spending review next Thursday, the government were to do something drastic like slash tuition fees to GBP 7,500 at a time inflation is going up and not replace that money, then we'd be in a whole different ball game. I don't think -- like Richard, I don't think they'll do that. They have talked about cutting it by at least GBP 500. Don't think they'll do that, but we won't know for sure until next Thursday.

Great. Thank you, Nick. Sorry.

[ Alex Fries ] from Credit Suisse. My question is with regards to government policy. 2 questions. Firstly, what do you think most likely policy mistake? And secondly, which do you think is the most impactful policy in the state?

Do you mean has already been made?

That may happen.

That may happen, okay. If you're asking me historically, by the way, and I worked on the current tuition-fee package, it would be what happened to part-time students. We thought extending the same tuition fee and loan package to part-time students would be a success people told us it would be. The part time numbers have fallen. The biggest mistake universities could make would be to impose a student number cap because, look, so take leveling up, okay? People in rich, I live in rural Buckinghamshire, probably 80% of the people in my village ended up going to university. When I work with David Willetts, he's a member of Parliament for Havant on the [ South Coast ], about 20% of [ sick farmers haven't ] them go to university. If you cut the number of places, how are the people in those parts of the country that the government says they want to level up ever going to have the same opportunities that people in rural Buckinghamshire have. So if you cap numbers and -- but they might want to cap numbers, partly if you think too many people go to university, but more important is a way of saving costs. So there's this -- Richard referred to it, this is debate going on in a moment. So the current funding model costs the government more than they expected. The main reason for that is an announcement Theresa May when she was doing that speech about the Augar report, 200 meters away from here in 2017, she raised the student loan repayment threshold. So you don't repay GBP 0.01 of your student loan until you're on GBP 27,000. So that means 54p in the pound loaned out to these students walking up and down the road outside will never be repaid. And so the government, the treasury wants to reduce the costs. Now 1 way you can reduce the cost is you cut tuition fees. So you lend them less money, so there's lower loan write-off costs. Another way, as you just say, fewer people can go to university. You will be mad when the numbers are going up. Or the third way, which is not politically easy, but it's not politically harder than the other team is you tweak the student loan repayment terms to get more of the money out of graduates. So you lower the repayment threshold back to where it was meant to be before Theresa May did this 1 big off jump. You lower it to GBP 23,000 or something. You can say we've modeled this. You can say GBP 4 billion quid a year from higher education sector by doing that without cutting a single student place and without cutting a single GBP 0.01 of income that's going to universities. So I think that is probably what will happen. But the mistake would be not to do that and to simply cut the number of student places. That would be the mistake. And I don't think it would last if they did it, but it would be very bad in the short term.

Question [indiscernible]

I am [ Angela ] from Resolution Capital. I just have a question in relation to international students specifically. So I'm just looking at that they are, that the [indiscernible] don't seem to be off too much. Will these [ are applications as June seem] [indiscernible] Do you have any visibility on actually the students are still offshore and treating to commence to study online? Do you have any visibility on the [indiscernible] the potential to get to come and then into as far as the question for you not in there [ potential upside as clearly next year ] [indiscernible]

So I mean as a board, University of Manchester Board meetings are obviously confidential, but I was a whole day on down the road last week. And all I'd say the British Council were predicting a couple of months ago because the planes in the skies are not back up to pre-pandemic levels, maybe only 50% to 60% of the students who had said they are going to coming internationally would arrive. That has not happened. The numbers at 80%, 90%. And there are some studying from their home countries that are expected to arrive in January is certainly Manchester's experience.

But that will be borne out across our estate as well. If you were to sort of roll the clock back to this time last year, we had several thousand students that had said they were going to come, have booked accommodation and hadn't arrived. It's a few hundred at the moment who are delaying their arrival or can't get access to a flight. So that 80%, 90% would absolutely be borne out, then I would agree. I think those students who've decided to stay away for semester 1, whether that's availability of flights, whether that's concerns about what the U.K. is going to be like in terms of sort of COVID instances will come by -- in January. They need to be in the U.K. by April if they want to get access to the post-study visa, which is really attractive for other international students. So I think that does present a small opportunity for us to potentially sell further accommodation for semester 2 and 3 when those students come.

The biggest nonsense about young people is they're snowflakes. They're actually incredibly resilient, actually really resilient. They travel half way around the world even when half the normal travel aren't open to get here. I mean I think it's very different to the sort of public perception, I think, that sometimes comes across.

Great. I don't think there's any further -- sorry, there's 1.

Just talk about comments from kind of [ across organization ] when these international students for the rest of the sector. You maybe comment a little bit on, i mean Chinese risk of calling out the students. So strategy maybe about training all of the students.

So do you say Chinese -- the risk of China calling their students back basically?

Yes.

Yes. I mean...

[indiscernible]

Yes. I mean, look, you're right. I mean there are a couple of risks. Geopolitics, if you know, I don't know, something happened in Hong Kong and China and the U.K. government completely fell out, and there have been -- I mean there are some precedents. Australia has been largely closed for the last year or so. Saudi Arabia, I think pulled all the students. Canada at 1 point. But -- and actually, Chinese universities themselves are growing and getting better. But equally -- and maybe, there is an argument that maybe we're a little bit over line on China, but it's about 1/3 of our international students from 1 country. But equally, if you look at anybody that's modeled this, the British Council monitors it most closely, they have people in all these countries, of course, their prediction is that the growth of the middle class in India and China will mean growth patterns in cross-national flows of students are likely to continue growing even as the numbers of people who study in China grow. And even as actually, China is also a recruit of international students and countries more than China. And sometimes they then come on, do a postgraduate study. I was talking to 1 the other day, did that undergraduate in Wuhan, and then came here and did the post-grad here in Manchester. So all the people in model there think demand will continue to be robust. And then you look at age patterns at the demographics of Africa, for example, which means young people in Africa [ bound to ] usually explained. So you're right, we should worry about these things. But no one who's looking to a real detail thinks the Chinese numbers are going to fall off a lift, unless something really terrible happen in the geopolitics. And even then, some Chinese families would probably want still to send their kids. Whether they're allowed to by the Chinese government, a bit different. But I think we're at the level then of catastrophic risk. Probably, Richard would want to add...

I mean I think when you sort of look at the geopolitics, and we've looked at it and you also then need to look at undergraduates versus post-graduates and the type of students that -- or the families that are sending students in the U.K. would need that catastrophic intervention, it is probably the subset of the Chinese population that the government would be most resistant to sort of restricting in that way. So I think your point is right. We need to ensure that we're not overly exposed and diversification into those growing countries that recognize is important. But it's not going to fall off a cliff certainly in our expectations. I think over a 10-, 15-year time horizon, you're absolutely right. China investing hugely in their higher education system. It will continue to get better. That will mean less -- I think less undergraduates coming to study internationally. But I think the post-graduate study will remain. And the U.K. has probably the most attractive post-graduate package overall and some of the best institutions. So it's something we need to monitor. But I don't see it as a fundamental risk, particularly offset against that growing demand from India and North African countries and Saudi Arabia and the likes we've already referenced.

I personally think it will continue to look at prestigious thing as well. Just as for Brit, it looks prestigious to go to an Ivy League university in America. We'll look prestigious Chinese middle class come to an English-speaking country to get that education. And of course, the other way of rebalancing is not to take fewer people from China, it's to look at the growth -- and we used to take as many students from India as we do from China. In recent years, the Chinese numbers have exploded. The Indian numbers have not. And that's largely to do with post study work, right? So the Indians, particularly want the right to work in the U.K. after study the way they get it in countries like Australia and Canada, New Zealand. And we now offer that. We now offer that in a way we used to them. We stopped and now we offer it again. So Bangladesh, India, Pakistan, those numbers have enormous room for growth, I think, partly. And that is already happening actually despite pandemic.

Great. Great. I don't think we have any further questions in the room. I don't know -- I haven't got any in the webcast. So just to say thanks again, Nick, a great presentation. Nick is going to be around, I think, for a little bit more time this morning. We're now going to here from Karan, who's going to tell us how we're going to ensure that our strategy best serve domestic and international students. But yes, just to say thank you again, Nick.

Great. Thanks, Richard. And just to a sort of reinforce next point, I come from India. And it was pretty much the single silver bullet that was out there that could get you through your sort of social status. And as a parent, I really don't care what the government says, my son is going to university. To the extent my wife was a bit more progressive suggested once that maybe he doesn't want to go to university, and I don't think you've spoke and seen. Certainly he's not getting his junior is if it doesn't get university. Let's put it that way. Anyway, as Richard mentioned, I look after the brand, commercial and our operations team. And I'm very, very early in my journey at Unite. So this is my sort of month 5, so still sort of forming a view on where the business is. Over the last sort of 5 months, I've been to about 90 properties. I've been to most of my cities right now. And I'll spend a real time to understand what makes us great at what we do. Where are the -- that wasn't me. There we go. What are the opportunities that we have? Where is the market changing? And as a business, what is our strategy they need to evolve? So I just wanted to give you a sense in about 15 minutes, how we see our business today, how we see the landscape changing and effectively, what is our long-term customer strategy in order to deliver on our core purpose as well and drive profitable revenue growth as well. The thing that became sort of very obvious to me very early on is the foundations that we have at Unite. And these strong foundations are fundamentally important because as you all know and as you all sort of heard from Nick as well, the market is changing, customer needs are changing. The segments we market to are changing. And it's only a business that has very strong foundations that can actually go ahead, change from a position of strength and capture these opportunities. So in our case, if I look at what drives our foundations, number 1 is the strength of our operating platform, that's built on the caliber and the passion of our frontline teams. It's built on the systems and processes that we have, which we call as PRISM. But it's also our industry-leading student welfare package, which for parents is usually important because, in many cases, and especially true for international parents, we are the guardians of their students when they send their sort of 18 year olds offshore. And then we have an uncompromising safety culture. So these foundations underpin our operating model or frankly, from my point of view, a fundamental to our growth going forward. At the same time, these foundations also drive the strength of our relationships with universities, as Richard talked about. We have a very, very high degree of visibility that comes from having these strong relationships and the 50% to 60% nominations base that we have within our sales structure. That brand of Unite has been enhanced by the support that we've offered, not just universities through the COVID program, through COVID dynamic, but also the support that we've offered to students through this crisis as well. And that has allowed us to create real scale at a city level, which then translates into a really efficient operating model. And it's also made us a partner of choice when it comes to new developments and especially with the way of planning regulations work now having the partner support is fundamental to getting that growth, unit growth going as well. And finally, we have a very strong portfolio for our customers. We have a range of price points, which I think is exactly what we need as a business. And Nick will talk about this, the properties that we've recently launched, the properties in our portfolio are absolutely fantastic. You will get a chance to see some of those examples today. Artisan Heights is a specific 1 in Manchester. We have a really great platform that we've got going in terms of our new unit growth. And we have been relatively proactive in addressing the cladding challenge as well, which I know Joe will talk about a little bit more as well. So when you look at all those 3 pillars, it sort of gives me real confidence and comfort. And when I look at how the market is changing, that as a business, we can evolve and meet those changes head-on. And in fact, being a strong player in this market, we should, frankly, do better than some of our competitors is given our strength. In terms of some of the things that are changing, again, this will not be new news to you, but student expectations from student accommodation are fundamentally changing. So you cannot have just a simple bland room. You cannot have no common areas. They have expectations in terms of the quality of technology in their rooms, the availability of study spaces, if they are a postgraduate versus social spaces if they are undergraduates. And also the overall service he thoughts that they expect from operators like Unite. That is constantly evolving and is elevating and what they expect from us. So we have to, as a business, respond to those changes. At the same time, our university partners have high expectations. They're not just looking for a supplier of accommodation and they're looking for an accommodation partner. And specifically within that, they are really, really particular that the student welfare programs that we have, the student support programs that we have when they're staying with us, which is a big portion of their time at university, they are being as well looked after. So they will only work with providers who can offer them that enhanced level of support and not just another supplier, as I said. And finally, and again, this applies to many firms. It's certainly true in our sector where we are dealing with a lot of young people who are probably much more active in the activism space than probably I was when I was 18 years old or 20 years old. They want to stay and be part of a business and a culture that is constantly looking at what impact it makes in the community, what its core values are and what social impact it's going to have. So these are all elements that from a customer point of view, from a commercial strategy point of view, that we have to constantly look at as we evolve our strategy going forward. And what that does is also it's had an impact on how the market is structured. In many ways, the structure that I see in the accommodation space is actually getting closer and closer to what I was used to in my past working in the hospitality space. As a business and the professional sort of PBSA sort of sector, Unite as a business, I fundamentally believe we are in absolutely the right space to be. We are affordable. We are mainstream. That's where most of the customers are. That's why university has 1 more accommodation stock as well. It offers a really good balance of amenities, but also a really good price. So we are certainly affordable and great value for money. There are absolutely segments on either side of that mainstream, but they are significantly smaller, be it the budget end where it's predominantly no frills. It's our sort of first-generation stock or on the premium end, which certainly appeals more to possibly internationals and postgraduates are looking for more of a full-service offer. Actually, as a business, we can flex between those different segments. We firmly believe the mainstream is probably where we want to be. But in certain markets, in certain micro locations, we are very, very easily given our capabilities on our platform. We can have a much more of a premium offer or if we need to be a bit more value for money, a bit more budget, we can do that as well. But the core remains the same. The other sort of -- the other key thing in the structure of the market is the unorganized sector. So that's your HMO sector where some of you may have lived in that when you were students yourself. But when I look at it, certainly, the variable quality, not just for the product but also the landlord that you're dealing with and the issues that you will have to deal with, and that's been borne through COVID as well. I think it's a real actually opportunity for Unite, where by changing our offer by making us attractive for the reasons why students may choose to go to a HMO. We believe we can actually take a lot more of the market going forward, and that's a core part of the commercial strategy that we're going to put forward going forward. So that's sort of how the market is structured and sort of the key message for you there is the core of where we are mainstream is where we believe the market will remain going forward. So that's kind of a whistle-stop tour on how we see the market and how the market is evolving. I'm going to spend the next sort of 5 minutes giving you a sense of what our commercial strategy is and then finish off with an example of how we've actually brought that commercial strategy to life, which is the way we've changed some of our properties from a segmentation point of view. So our aspiration certainly is on delivering on a core purpose, which is Home for Success. And I fundamentally believe in the service value chain, which is if you offer a great experience to your customers, they'll probably stay longer for you with you or they'll pay more for you or they refer more of our -- their family and friends to you as well. So if you do right for your customer, everything else will follow. And that's certainly my aspiration, which is build an organization and build a commercial strategy that delivers on our core purpose, which is Home for Success. There's probably 5 core elements of it, and I'm not going to go through each of them in too much detail, but probably miss major on a couple of them. It starts by having the right product portfolio from a segmentation point of view. Now just to clarify, right, segmentation is a big word, and it can get super complicated. It can get super theoretical very, very quickly. My essence in the way we think about segmentation is that we need to find the core elements that make students different that we can actually then do something about. So this may be about services that they're looking for, which are distinct from one segment to the other or this might be product attributes that they're looking for in their room or in the overall public areas that tend to be different than what the other customer group might be looking for. Everything else is noise. And this is something that we can actually do quite quickly with our portfolio. And on the next slide, I'll show you an example of how you've made it come alive. So the first thing that we're getting right is understanding our customers in a very granular detail and really understanding who are the distinct elements and how does the proposition that we go to them with, how does that need to be different. You get that right and then what you need to do is get your product portfolio right. So as much as I love the new properties that Nick is handing over to my team, we do have an existing estate of over 170 properties. And across those properties, there are some phenomenal opportunities for asset improvement. Now those asset improvement opportunities are -- would be because the building is 30 years old. We need to update it to stay with its current target market or we've actually got some underleveraged space. We could add more rooms, we could add common areas, which then allows my commercial teams to go and charge a premium than what they were charging before. So we are taking a very granular view of property by property to understand, what's the level of return that we can generate and what's the product offer that we can then have on the back of the returns that we can generate. So there's a huge program of work that -- it's a multiyear program of work that where we will continue to renovate our properties and make sure we do it with the right return mindsets as well. Once you do that, the third stage of -- the third key pillar for us is making sure that our go-to-market strategy is fit-for-purpose for how the customers are now choosing or booking student accommodation well. And the big change for us over here is making our programs much more digital led, so the overall digital experience that we offer to our students. Just as an example, go back 3 or 4 years, most of our bookings especially for a U.K. undergraduate, the parents and the student would come to Artisan Heights, they'll have a look around, the team will take them to the common areas, they'll take them to the room and then they'll make the booking because it's a big ticket item, it's GBP 7,000 to GBP 8,000. COVID sort of changed that. People are much more comfortable dreaming on the web, understanding what experience they could get. They want to know what are the different types of rooms that they have, whether it's south facing, lower floor, upper flow, how many rooms there are in a particular flat. So all of that -- I didn't touch anything. It will come back, I'm sure. All of those elements are going to be much more at the forefront of our digital experience going forward. And then when it comes to the actual marketing programs, we're taking a much more mobile-first approach as well because, again, the students of today, the Gen Z of the world, and the Gen Alpha, who are, I think, currently 10 or 12, they live on the mobile. They don't live on the laptops anymore. So for us, our marketing approach needs to evolve much closer to a mobile approach than it has in the past. Along with that, we are going to be focusing very heavily on our second and third years. So as I mentioned earlier, there is a real opportunity for us. Students who either stayed with us but because the building was fully nominated and they couldn't, or because it's a right of passage, they've gone to a HMO, but they realize the grass isn't really greener on the other side and they want to come back. We have a massive drive to drive retentions and bring second and third years back into our business. So all of that is enabled by having a much more digital and mobile-first commercial model and then that then allows us to do a yield management and revenue management as well. The fourth core pillar is what I would call our operational sort of basics. So this is an area where we are already really strong. And when you see the team later, David, Steph, Louise and the others, they can talk to you about all the things that we do at the frontline to drive that overall student experience. But fundamentally, this is about making sure that we deliver outstanding service at the front line. If they have a problem, which they will, anybody who stayed in apartments, things do go wrong. But what students really care about, what customers really care about is not necessarily whether they had a problem, but how you actually solve them. So really putting a problem resolution mindset in our teams as well and are having outstanding customer service on the back of that as well. And then the last thing that we're sort of focused on is making sure that our underlying technology platforms, our PRISM operating model is continuing to help us be not just effective in what we do, which will be through things like CRM and our property management systems, but also efficient in what we do. So we continue to get the margin improvement that our scale should really drive as well. So that program is -- these are also continuous programs. They will take -- they are in flight, and they'll take 2 or 3 years to deliver. So at an overarching level, these are our core pillars for our commercial strategy going forward. And what they will drive is greater customer advocacy, which then will drive greater retention and ultimately drive an increased operating margin as well. So ultimately, this strategy will deliver the returns that we wanted to deliver. Just a sort of bring it all to life because there's a lot there in terms of how things come together. So just to give you an example of how we've already started to implement some of our commercial strategies and plans and how the segmentation principles actually work in real life. So these are 3 sort of segments. And they are sort of high-level segments. You can then break them out into smaller segments as well. But if you look at our core undergraduate first years, which is about 50% to 60% of our beds, this is the bulk of our nominations business as well and where we have really strong links. Fundamentally, this is the first time they've left home. They want to have a great social experience. They want to find their tribe. So what we have done is created the right clusters of flat. So they don't want to live by themselves. They want flats of 6, 8, 10 because they want to make as many friends as possible. We've had a program called a resident ambassador, whose role is to provide them support through induction because for some of them, it's a bit scary as well, but that resident ambassador would also then organize social events. Our service ethos is there when you need us. So that could just be if they have a problem in their flat, the shower was not working or they need some help with the temperature controls. But at the same time, if they had -- if they have a real challenge, if they're lonely, which does tend to happen sort of late October, November when the initial sort of excitement of coming to college wanes and they're getting a bit homesick, so our service philosophy there is very much around supporting them in those -- at those points of need. And then from a parent point of view, the safety and security element is huge, given, again, they're 18 year olds, and there's a lot happening outside as well. So our first year offer is geared around that proposition. But when the same students then go into a second and third year, they need start to change. So they no longer want to live in a 6, 8, 10 bedroom flat. They want to live with the 3 or 4 friends that they've made. So to them, we market our smaller cluster flats. We don't market the 8 or 10 flats to them. They want hassle-free living. They almost want to live like an adult. So our service philosophy is much more around it's all inclusive. So from a landlord point of view, you're not going to be stung by surprise bills. But at the same time, we're going to give you greater independence. We're probably not going to come for inspection as often as we do because we trust you a bit more as well. So our maintenance approach is much more responsive as well. And from a rate point of view, if you book early with us, we'll give you either the best rate or the best choice of room, so there's a real value in coming early to us. When the same students then go and become postgraduates, their needs evolve again. And actually, internationals are actually close to postgraduates in many cases. In those examples, they actually don't want to live with undergrads in many cases. So what we've created is some dedicated buildings, or if you've got a property with 4 or 5 different blocks, a dedicated block where it's just postgraduates because then they're living with like-minded peers almost as young adults. They're looking for smaller flat sizes. Studios are really important to them. Potentially clusters of 2 or 3 are more important to them. They are really into their studies because they paid a hell of a lot of money, and they want to get the maximum out of it. So we've created quiet zones. We've got less social spaces. We've got more study spaces. And some of them are looking for a full-service offer. So we're looking at how do we have laundry service, can we do weekly cleans or at least introduce them to companies who can do the weekly clean for them. And actually, they're probably getting a bit late, grab and go breakfast as well. That offer is very different to the undergraduate first level offer where this is all about potentially socializing and finding my tribe. So hopefully, that gives you a sense where without a lot of work, you can start to take the insights you have about your customer and start to make some real change in how you go-to-market to them. Very conscious of time. So I'm going to pause there because I'm between you and a break, I believe. So back to you, Richard.

Thanks, Karan. If we could just pause there and maybe if we could be back in the room at 11:35, and then we can pick up the rest of them. If you go back outside the room, there's some refreshments and comfort breaks and things like that, towards just down that way. But yes, if we could be back in here 11:35, that would be great. Thank you. [Break]

Okay. Good morning, everybody. So just in terms of order of play for the rest of the morning afternoon, I'm going to spend a few minutes talking about our portfolio strategy. I'm then going to hand over to Mike Burt, who's going to talk about sustainability at ESG. Joe is then going to cover the numbers. Richard will wrap up, and there'll be time for a Q&A for The Unite team, then -- we then transition into lunch. And then we've got tools around our much of the portfolio this afternoon. So I just going to spend a few moments just talking through our portfolio strategy and just building on some of the comments that Karan has been making in terms of customer segmentation. For those of you that have been following the business for a few years, you'll be well aware of our strategy, which has been to sell assets in the weakest markets and use those proceeds to fund new development and investment in the strongest markets. And I think we've done a pretty good job of that over the past few years. For example, we've exited markets such as Bradford, Huddersfield, Plymouth, Wolverhampton and reinvested and growing in markets such as London, Bristol, Edinburgh and Manchester. And off the back of that now, about 90% of our income is generated from Russell Group cities, and that will continue to grow as we continue to sell assets and as our development pipeline, which is 100% aligned, gets completed and comes on stream. In terms of growth areas, we are focused on a relatively narrow number of markets in the U.K., primarily on London and some prime regional cities, and I'll talk about London in a bit more detail in a few moments time, and we will continue to sell assets to fund that growth, and we're forecasting to sell between GBP 300 million and GBP 400 million worth of assets over the next 2 years. And then just furthering on from what Karan was saying, in terms of segmentation, we do see a real opportunity in our portfolio to think about how we can position some of our buildings to really capture some of the growth areas that Nick and Richard were talking about in terms of student numbers moving forward. So there are the best part of 1 million second, third year post-graduate students that are there that we believe there will be demand for Unite's accommodation if we can change our approach and reposition some of the assets in our portfolio. I just want to spend a moment talking about London because it's a significant growth area for us. It's a market where we expect there to be significant growth in student demand but also underpinned by real difficulties and growing supply in the market, primarily through challenging planning frameworks, but also the tricky planning environments as well. I think it's fair to say that London is globally the best HE market, just given the number of world-class institutions in the city and also the kind of demand and the attractiveness that London has to both international and domestic students moving forward. And as I say, we expect to see significant demographic growth over the course of the next few years there. We've also got sector-leading relationships in the London market. So you see the charts on the bottom right hand there, which just shows the level of relationship we have with UCL and King's. Both of those institutions want to continue to grow that relationship with us. But also attractively, there's a number of other world-class institutions where we believe or where they want to continue to grow the relationship with Unite and continue to support us through development of new projects moving forward. So I see real value and real opportunity in London moving forward for us to secure new projects, new developments over the course of the next few years. I don't think our growth will be primarily driven through investments. London acquisitions are very dry. Total returns on London assets are a little bit dilutive to us. But I do see that being good longevity in London development moving forward. And about 75% of our pipeline by value is attributed to London. Once that is built out, 40% of our portfolio be weighted towards London, which was around the number that we had in place prior to the Liberty transaction. One area we haven't really talked too much about is what we're doing from an asset management perspective and how we're investing into our portfolio. And one of the reasons we wanted to have the Capital Markets Day in Manchester is we've got 3 brilliance of examples of assets that we're investing into and trying to reposition those assets to fit a certain customer segment. The Liberty portfolio has also provided opportunity for us for investment. On average, the portfolio was about 3 years older than the Unite portfolio. A number of first-generation and older buildings where buildings through the low rise are underutilized, which gives opportunity for us to invest into those buildings and create additional value. Over the next few years, we expect to invest between GBP 35 million and GBP 50 million a year on accretive projects, which will deliver between 0.5% and 1% rental growth moving forward. And those projects will be funded through our ongoing disposals strategy as well. In terms of nomination -- I'm sorry, in terms of asset management opportunities, they're really factored into 3 areas. First of all, segmentation, which we've talked about, so repositioning buildings to a slightly different or a specific customer type. Those opportunities where we can reposition assets, see the buildings fallen behind the market, there's opportunity to go in and refurbish the asset and reposition rents or indeed where we've come out of nomination agreements and rents have fallen behind the direct let market, which gives an actual opportunity for reversion. And then those assets where we've got the opportunity to extend and have new build elements to them as well. Across all of those different types of opportunities, we will be looking at the ESG credentials of the buildings. We're looking to move EPC ratings in particular, up to day to ensure that they are future-proofed at the same time. So I just want to touch a bit on Manchester as well. Again, it's a core market for us, one of the leading HE markets in the U.K., just under 70,000 full-time students. We're a dominant player within the market. We've got 6,000 beds across 11 properties. That's almost more than double the amount of our next nearest competitor. And around half of our beds are around nominations, which again gives us strategic advantage in just thinking about those relationships and how they've added value. We're going to see Artisan Heights, which is our new building later on this afternoon, and that was a building that we secured planning consent of the back of securing support from University of Manchester to the project. Prior to that, there hasn't been a new build consent in Manchester for 7 years. So it really underpins what university relationships can do in markets such as Manchester. In terms of our portfolio, it is really well located. We've got -- all of our buildings are either adjacent to Manchester Metropolitan University or University of Manchester campus. But also, we've got a really brilliant spread of assets right through from the older generation assets, which offer more budget accommodation through to a brand-new world-class architectural leading buildings like Artisan Heights, which is at a slightly higher price point range and more attractive to international students. And as I mentioned, we've got 3 asset management projects in total at the moment. The combined cost of those are just over GBP 40 million, generating a 7% yield on cost. So just picking up on some of the specifics of these projects, which we'll go and see, we've got Parkway Gate, which is a 730 bed scheme that opened in 2008. It's a project in a building that was very attractive to international students. It's a building where we've had to remediate cladding, and we thought whilst we were doing that, that we were trying to reposition and focus on the international market. So we're refurbishing the property. We are investing into the communal areas who managed to secure planning consent for additional 24 beds as well, which has helped fund some of these works, some are improving the EPC rating to B with a total investment of just under GBP 20 million and 6% yield on cost. Kincardine Court is a brilliant example of a first-generation low-rise asset where we've been able to extend out into a car park. This particular property was very popular with postgrads. It's got small cluster sizing. But we've taken the opportunity actually to reduce the number of beds we got planning consent for. So we secured consent for about 100 beds into the extension. We then reduced the cluster sizing to focus the combined building on the post-graduate market, reduced that numbers to around 92. That extension will help fund the refurbishment of the existing building, reposition some of the communal space, refurbishing kitchens, bedrooms, and with a real post-graduate field to the building moving forward. And again, our EPC rating moving up from D to B. Total CapEx of GBP 12 million and it yield a cost of 6%. And then finally, New Medlock House. Again, a brilliant example of U.K. undergraduate and proposition building. The building was starting to become a little bit tired. We wanted to invest into the building to bring it up to the standard of Manchester, and we managed to agree a 5-year nomination agreement with Manchester Metropolitan University. We secured planning consent for additional 17 bedrooms, which again helps with the -- covering the cost of the refurbishment. We're creating a new common space, new study space, increasing the EPC rating again to B, and it's a GBP 11 million CapEx, delivering 10% yield on cost. So we'll get time to have a look at some of these projects as we go through the tool this afternoon and any questions you may have feel free to ask on that tool. But without further ado, I'll pass it over to Mike, who's going to take us through sustainability.

Thanks, Nick. Hi, everyone. I'm going to spend some time taking you through the key elements of our sustainability strategy, which was launched earlier this year. It builds on the work of the business over a number of years to improve our environmental impact and also improve the outcomes for students. However, reflecting the expectations of our stakeholders, which are only growing in this area, our targets are now becoming more ambitious. And that's particularly reflected in commitments such as our net 0 carbon ambition by 2030. We know sustainability is a key focus for our student customers as well as our university partners. Our research shows that our customers are more concerned about climate change than any other issue. And we believe our proactive approach to addressing our environmental and social impact can be a positive differentiator for Unite with our customers. It's also important to say that a number of our university partners have ambitions for things like net 0 carbon over the next 10 to 20 years. And in many cases, this also aligns the objectives at a city level. So again, we do feel that we have a significant opportunity here to be one of the most sort of front-running PBSA providers in the sector, and therefore, positively differentiate ourselves. The following slide goes on to discuss how we consider our environmental approach. We take a holistic view of environmental performance that links into the work that Nick has been talking about around asset management initiatives. We have plans for each individual property with a focus on what we call the 4 Cs, that involves consumption, carbon, cost and compliance. Consumption reflects our efforts to improve the energy use of our properties and that happens in 2 ways. It's by encouraging improved behavioral use of the properties by our employees and students as well as targeted investments to improve the energy use of our properties. This has a direct link to the carbon savings we can also achieve and which are needed to deliver our net 0 commitment. Our strategy also considers the cost savings we can deliver through these initiatives and there are significant savings that can be achieved through reduced energy use. Finally, we also consider compliance. So this is compliance with all current and future environmental regulation with a particular focus on increasing EPC standards, which tightened significantly over the next decade. We're investing to make these improvements in each of these areas, and we anticipate an annual cost of around GBP 5 million to GBP 7 million per annum on an Unite share basis. As well as being the right thing to do, there's also a strong business case for making these investments. And we see a payback period of less than 10 years on aggregate through operating cost savings around utilities. The next slide goes into an overview of our net 0 carbon approach. As I said, our target is to deliver net 0 carbon by 2030 for both our operations and our developments. The chart on the top right gives the breakdown of our emissions from 2019 from pre-pandemic levels. What it will show you is that development makes up the bulk of our emissions today. It's also worth noting that our tenants pay a rent inclusive of energy costs, meaning our carbon footprint is different from a number of other landlords where it will be excluded. What this means is our direct energy emissions are higher than they would be for most other landlords, but we also have far greater transparency over the carbon impact of our buildings. What this also means is we have a far greater opportunity to improve the carbon impact of our portfolio. There are 3 key steps to reducing our carbon footprint. The first is reducing operational energy intensity, and we think we'll require around 28% reduction in that area over the next 10 years. The second is how we source renewable energy, and we've already made a commitment to procure 100% renewable energy going forward. And the final step in our development activities is to achieve a 20% reduction in embodied carbon. And that starts today for all future developments. We will be publishing our net 0 pathway before the end of this year, and this will include detailed science-based targets validated by the SBTi. The next slide gives you a sense of the variety of initiatives we're pursuing to achieve net 0 carbon. And it's fair to say that the first point in the net 0 carbon hierarchy is to encourage reduce energy use. There are a number of ways you can do this, but behavior is a key first step. So what we are looking to do is engage our students and our employees to encourage sustainable living and working habits across the estate. We do this through a student engagement program called Positive Impact, which we run in conjunction with the NUS, and this is rolled out by our city teams. There's a particular opportunity here with our students, many of whom are living away from home for the first time. And we do believe well this is one of the hardest things to do in the strategy that there are potentially big savings that can be achieved in future years. In addition to this, we employed a variety of technologies across the estate to improve our energy use, and these have been proven over a number of years. LED lighting is a major opportunity. We've already rolled out LED lighting across all of what was the former Unite Estate prior to the Liberty Living transaction, and there are opportunities now to roll that LED lighting similarly to a number of Liberty Living properties. In addition, we have a well-proven system of heating controls that we've rolled out across our estates, called Prefect Irus, and these will be rolled out as part of our asset management program. In addition to this, we are now also starting to roll out air-source heat pumps as part of our refurbishment plans. And these are one of the key ways of helping to minimize our gas use across the estate going forward. We're also, as I said earlier, committed to acquiring 100% renewable energy. We do that with effect from today. But we've also got a target to increase the share of that renewable energy coming from new supply. What I mean by that is we already procure 20% of our electricity directly from the Scottish wind farm, and we're also looking at new opportunities through power purchase agreements to procure renewable energy that we can prove as a direct link to creating new supply. On the following slide, we look at net 0 development. So achieving incredible net 0 development for our construction activity is frankly one of the most challenging parts of the net 0 carbon story, and that's just because of the intensity of development activity. We're targeting 20% reductions or more from all future development schemes. And we've already had success in identifying some major savings in our projects at Paddington in Edinburgh from the use of building materials such as low-carbon concrete as well as recycled furnishings. But going beyond that, we'd like to achieve a target savings of 40% by 2030. This will require more fundamental look at design, and we'll be looking to do this through our sustainable construction framework. We do think the building to net 0 standard will result in ultimate increase in build costs. However, we ultimately see this being mitigated through reduced land pricing over time as well as the potential for a green premium to emerge in PBSA. I think it's best to say this isn't as clear as it would be in sectors such as offices, but we do believe it will start to materialize over time. Finally, it should be said when we consider net 0 development, we're also looking at how the buildings will be used from cradle to grave. So that also means considering their operational carbon use given this accounts actually for the bulk of their emissions over their lifetime. So all of our future developments will also be delivered to a standard to meet the net 0 in operation as well. On the following slide, we look at our EPC ratings. 53% of our portfolio is currently A to C rated today and also all of our portfolio is compliant with current regulations. We're already actively investing to improve the EPC ratings of our estate, and we have projects either underway or planned for a further 8% of the floor space across the portfolio, which is taking place this year or next. Also, in all of our future developments, they will be targeting an A rating. We're achieving these improvements for a variety of measures, some of which I mentioned earlier. In particular, LED lighting, heating controls and air-source heat pumps will give us the type of improvements we need to improve that rating to at least the B rating ahead of the 2030 cutoff. The cost of achieving this EPC compliance a part of the GBP 5 million to GBP 7 million I mentioned earlier, and Joe will go on to discuss how we're looking to budget for around GBP 1,000 per bed of protected CapEx annually, and he'll talk about that in more detail shortly. And then finally, on this slide, we talk about our social impact initiatives. So in Unite, we've always had a real focus on delivering a positive social impact across our students, our universities, but also the communities in which we work and that social impact has a clear link to our Home for Success purpose. Our initiatives are focused on helping the young people succeed, and that really happens in a couple of key areas. Firstly, supporting them with the transition from school to university. And we did that through a program called Leapskills, which has been endorsed by the Department of Education. And then also, we look to help to widen access to higher education. In particular, we've done this through the Unite Foundation, which provides accommodation scholarship to disadvantaged students. The Unite Foundation has provided scholarships to 500 students so far, and it will celebrate its tenth anniversary next year. And it's widely recognized across the sector for its contribution helping to widen participation in university. We remain committed to delivering positive social impact as a business over the long term for our students and our communities. And that's why we've set a target to invest around GBP 1.5 million per annum in these initiatives over time. To put that into context, that equates to around 1% of our profits. So with that, I'll hand you over to Joe.

Thank you, Mike, and good morning, everyone. I haven't said hello to you so far. My annual task is to try and pull that all together for you in some sort of financial outlook. So you can take some notes home for writing up tomorrow. So I guess that really what I'm going to talk through is our 3 key financial priorities and what we're looking to do over the next 4 to 5 years. And that's really focusing on an attractive total return that we're able to generate, and that's underpinned by high quality and growing earnings, that we'll aim to pay out 80% of that EPS as a dividend and that we will see that grow with earnings over time. We will deliver capital return driven by rental growth and development profits whilst maintaining that balance sheet discipline that we've had in place for a number of years, and I'll come on to talk about each of those in turn now. So the key financial target is really around that total accounting return and aiming to deliver 8.5% to 10% each year. Importantly, EPS will be the major component of that return, delivering 5% to 5.5% EPS yield. And that's been driven by those core activities, many of which Karan talked us through, the market-driven growth, having the right product and the right locations, segmenting our portfolio, really optimizing the nominations agreements in all the cities we operate and using that dynamic pricing and yield management to ensure that we are driving the best level of income from our properties. It will also be supplemented by that CapEx-driven rental growth that Nick talked about, looking to invest around GBP 35 million to GBP 50 million per annum each year. And that really supporting that rental growth and aiming -- helping us to deliver 3% to 3.5% per annum each year. And as Nick mentioned, the Liberty portfolio giving us plenty of opportunities to go at given the age price point and location of those buildings. Development will remain a key component of what we do and of our total returns. We still see meaningful opportunities in our target 8 to 10 cities where we are looking to add new beds. That will also allow us to maintain and grow alignment to those best universities. As Nick said, 100% of that development activity aligned to those strongest universities. It allows us to build on those partnerships with universities further and keep the portfolio refreshed offering different product points in those cities as well. Development is currently about 15% of our GAV. And we're looking to hold it around that level. That means we'll be investing about GBP 200 million to GBP 250 million each year into development activities, and that's delivering a profit on cost of around 25% to 30%, and therefore, adding the 1.5% to 2% to our total returns each year. We do continue to and we need to continue investing into our estates on an annual basis. And there are 3 component parts to this. The first is defensive or protective life cycle, which covers that routine maintenance on things like boilers, safety systems, heating -- sort of painting and flooring and other aesthetics of the building. And that's something that we've always done. The sustainability investments, which Mike has been talking about. And then the fire safety activities, again, which we've been updating you on over the past few sets of results, where we are responding to but also importantly, staying ahead of the new and emerging legislation around facades and cladding in particular. These last 2 are effectively new levels of CapEx, and we'll see the CapEx run rate increase to about GBP 1,000 per bed per annum for the next few years, and that's a step-up from our historic levels of GBP 500 per annum, but we'd expect to return to that level over the longer term. Growth has long been a part of Unite's story, and earnings growth remains a critical part of our investment case going forward. And we will deliver this through returning to and then maintaining full occupancy. The rental growth from those core activities and asset management investments that we've been talking about, development activity, offset obviously by the disposals we make to fund that development activity and the continued focus that we will have on cost efficiencies and funding efficiencies throughout the organization. Our EBIT margin has been hit by the occupancy, rental growth and timing impact of new openings as a result of COVID. Therefore, we are updating our target on EBIT margin, and we're aiming to get to a 74% to 75% EBIT margin by 2025. Factoring all of this in, we are aiming to deliver EPS growth of 6% to 8% per annum over the next 4 to 5 years. As I mentioned, we do continue to invest in all aspects of fire safety across our estates. Cladding and facades have been brought into the spotlight as a result of the Grenfell tragedy. We were one of the first to remove ACM cladding across our estates, and we are now underway on work for all of our tall buildings have HPL cladding as well. This has been fully provided for in our half year numbers and will be concluded over the next 12 to 18 months. Beyond HPL and ACM, it is emerging that we will need to remove combustion materials from tall buildings and that there will be tighter regulations on those buildings less than 18 meters as well. And this means that some rectification works are likely. We are adopting a risk-based approach to addressing those buildings, which you know from our building registers represent the greatest risk. And this means that we are conducting detailed facade assessments across the portfolio, and this will be completed over the next 12 months. This will give us a clearer picture of exactly what work will be required and the costs involved, but that will fall within the GBP 1,000 per bed cost allowance that we've been talking about. Since we've started work, it's also become clear that we do have the ability to claim for the cost of that work from contractors who were involved or we can get the contractors to carry out that work for us at no cost to ourselves. And that is where those buildings did not originally meet the building regulations at the time that they were signed off by those contractors or that they weren't built to the specifications that we set out. Of the 10 buildings that we have completed so far, we've already claimed or had the contractors rectified to a value of GBP 10 million, [ GBP 4 million ] on our share. We expect overall recoveries to be in the range of 50% to 75% of the total amount spent over time. We do see university partnerships continuing to represent a major opportunity for growth, as Richard outlined. We have been very successful at delivering off-campus partnerships. Increasingly, as Nick mentioned, planners are requiring university support, and this has been codified in the London plan as well. And then our relationships to universities have placed us incredibly well to allow us to open up these opportunities with universities. We delivered 4 of these schemes already in Leeds, Bristol, Oxford and Sheffield, and we have a further 5 in the pipeline, 3 of which are in London. These opportunities are included in our GBP 200 million to GBP 250 million of CapEx per annum, but will be a really important part of our growth going forward. Looking more broadly at the university partnership opportunities, as Richard mentioned, COVID clearly has impacted the way in which universities are thinking about their accommodation provision. And it is more important than ever for universities to be able to offer a range of high-quality accommodation to their students as part of their recruitment package. It's clear that working with a trusted partner is important. And we feel that the traditional PFI model that has settled for the news on-campus developments is broken. We hear that because of the high leverage structures that are in place, often 80%, 90% loan-to-value, special purpose vehicles. Throughout COVID, those operators were unable to offer any sort of rental concessions to the universities, and that really has a long-term negative impact on their ability to continue to grow and offer products to universities going forward. So we are stepping up our activity in this space. I know we've been talking to you for quite some time. But we are aware that there are 3 potential deals coming out in the next 12 months from high-quality universities where we have deep relationships with them, and we will work very hard to make sure that we're in the best place to secure those. They are likely to be public procurement processes, and those do take time. But again, I think that given our position in the market and our relationships with those universities, we believe that we're in the right place to be able to put in really good bids for these opportunities. We will obviously update you as we make progress on them. Turning then to the balance sheet. We continue to focus on leverage and maintaining leverage in the right place at 30% to 35% and improving our ICR cover ratios back up to the 3 to 4x cover and over time improving beyond that level as well. We will fund our CapEx into that core development and asset management activity through the ongoing recycling of capital programs that we've been doing for so many years. The market remains incredibly competitive for PBSA assets. U.S. private equity has been leading the way over the last 6 to 12 months. We've seen Blackstone and iQ, buying the Nido asset in West Hampstead, Blackstone buying GCP and Scape, and then the lights of Lone Star, Brookfield and Apollo being very active in the space at the moment. We'd expect to see more deals concluding over the second half of this year, taking total transactions to around GBP 3.5 billion to GBP 4 billion. All of that as very supportive evaluation yields that we're currently carrying our assets at and underpinning new investments as well. In terms of that recovery and where we see earnings going, we do see 2022 as a significant step back towards normal conditions for us, that return to full occupancy that we expect in '22, '23 and supporting rental growth of 3% to 3.5% in '22 and beyond. And that's because we're not anticipating the same level of disruption caused by the grade inflation or international travel. And that will also support a return to the normal levels for summer occupancy in 2022 and then back to full levels of summer income in 2023. This supports our rental growth expectations and growth in earnings, back for earnings to be around 41p to 43p level in 2022 and expect that to increase to the mid-to-high 40p in 2023. It would be possible for me not to mention inflation at the moment. I know it's something that we and all corporates are thinking about. But actually, we feel we're in a pretty positive place compared to many to face into inflation. The nominations agreements that we have do give us really good protection against inflation. We have that contractual protection that's provided, linking rents to RPI or CPI. These typically have a cap at 4%, so we can accommodate a moderate level of inflation, and this covers around 30% of our income. On top of that, we repriced direct let and those single year nominations agreements every year, that gives us the ability to reprice and reset in an inflationary environment. And rents have consistently outstripped inflation over a 30-year time line in our sector, and there's no reason we don't expect that to continue. Secondly, direct costs represent 25% of revenues in our sector, that's 35% if you include overheads. So if cost that strip growth by 1%, there is only a GBP 1 million impact on our bottom line and therefore, something that we believe is containable. And in terms of controlling those costs, utilities are hedged. They make up about 1/3 of our direct costs. We are fully hedged for our energy cost for 2022 and 50% hedged for 2023 as well. So a good level of control over those costs. The other big element is staff costs. We are expecting those to increase of about 3% to next pay rental next year. But we are a real living wage employer, so we're under less pressure and got less catch-up than many employers have. And we feel that, again, that is controllable given the growth in the top line of our business. On the development costs, as we outlined at the time of our interims, our '22 deliveries are fully fixed. The '23 deliveries, obviously, we hadn't anticipated this sharp step-up in inflation. So we could see a reduction in development yields of around 10 to 20 basis points, but then further out to that 24 and 25, we price that into our appraisals in terms of build cost inflation going further forward. And then the final element for us we think about is interest rates and where will interest rates go in an inflationary environment. We're 80% fixed on our interest cost for a 6-year time horizon at current levels, and again giving us a really good level of protection that interest costs and funding costs won't increase. Clearly, we'll continue to monitor this and keep it under watch. As I say, we feel we've got a reasonable level of protection against inflation at this stage. On that note, I will hand back to Richard to wrap up and move to Q&A.

Cheers. Thank you, Joe. Just before Q&A, it's fair to say that the last 18 months have challenged us, but I believe we've made the right decisions. And I do believe we've enhanced our reputation within the sector. And as you've heard today from a number of people, we have the ambition, the talent and the platform that will sustain our success. And that confidence, it's easy to say, but I think it is supported by some pretty clear fundamentals. Structural growth within the higher education sector will persist. The high-quality portfolio that we have, it provides the homes that students want. It provides the services that universities want. And through the targeted investment you've heard about today, we can improve that further. The platform. The platform PRISM is already best-in-class, but can be enhanced further to drive service enhancements and to drive efficiencies to support a margin. And that all gives us real confidence in rental growth, as Joe has outlined. And the pipeline that really giving us clear visibility over returns. And as Joe said, university partnerships, they will come. There's an active discussions going on at the moment. I don't believe any university should be operating student accommodation. And so it is an opportunity, I think, we're really well positioned to grasp. And we can do all those things as we play our part as we make a positive contribution to society, particularly focused on young people that really want to see businesses that they interact with doing the right thing. So on that point, if we hand over for questions, we'll go for questions in the room first. If we can try the mics, the mics might not be working. So if they're not working, I'll just repeat the question before handing the difficult ones over to everybody else in the room. I'll just turn this off, so these guys aren't completely blinded. And also, I'm just going to move that all. Otherwise, it's in the camera line. Yes. And then after we've done questions in the room, we'll then take questions from the webcast. So yes, great.

It's Kieran Lee from Berenberg. It was just a question on nominations agreements. We've seen those tick down over the last few years despite the big sort of increase in application rates. Could you talk to some of the sort of moving parts behind the fall, where we're seeing the declines in higher-quality or lower-quality university cities? And then secondly, the properties which have come back after nominations agreements. Where have the rents come back out in the direct market to just sort of talk to that reversion point that you are mentioning?

Yes. The tick down, I think probably that question was well picked up, but it was a question about nomination agreements and how they have trended down slightly over the course of the last sort of 2 or 3 cycles. In part, that was due to Liberty. Liberty had a lower proportion of nominations in their estate. So on a combined basis, were a bit lower. And then quite sensibly through the pandemic, a number of our university partners have been a little bit more conservative, particularly with those single year rolling nominations. They might have previously taken 750 beds. They just said, "well, we'll take 500," because we just don't know what was happening. Where those beds have come back and got into the direct-let market, we've probably on average, generated slightly better rental growth than we might have otherwise got from our nomination partners. And that should largely due to the sort of the flow with our nomination agreements, which give us generally that sort of 2% uplift. Over time, if we look forward, as we recover from the pandemic as we get strength to demand, I'd expect that nomination balance for us to get back to anywhere around sort of 55% on a sustainable basis of our estate being nominated. It may well go a little bit higher. There'll certainly be cities that have a higher proportion of that, but that's probably the balance that we'll look to aim for.

Bill Casey from Schroders. Just a follow-up on the nomination agreements. Clearly, a lot of the universities have been oversubscribed. How is this focus the mind or change the mind towards the future of nomination agreements on the university boards?

I think when we've seen universities being oversubscribed, I think the immediate focus has been find accommodation wherever we can. I think Nick referenced students from York staying in hall, certainly at Bristol, there students staying in bath, and sort of slightly further afield. I think it does present an opportunity for those universities that those students have come now. There's at least 3 years of those students being in the market. That will put huge pressure on the local housing supply and the high move market, therefore, drive our rental growth as well, by the way. But I think it will get that mean to those counselors really think about how do we ensure we've got the right level of supply. So if I take this as an example, I think it really supports our nomination sort of strategy with those universities. So I think it's all supportive of rental growth and supportive of deepening our relationships.

Tim Leckie, JPMorgan. You said in the presentation you're looking to take market share from HMO side of things. I thought that Page 16 laid out understanding the student path and how to shift the portfolio to that. But what was -- we thought maybe was missing was addressing the price difference between the PBSA and the HMO, GBP 40 or so per week difference. How much is that playing into your plans? And is that an obstacle? If you do pivot more towards capturing that market, does that put a break on the overall rent you're able to attract?

There's a question around the price differential between sort of HMO and PBSA. It actually that sort of price differential, that's the sort of headline rent level, we actually have a sort of a presentation or disadvantage. You look on our website in a typical regional price point may be around sort of GBP 130. When you look at an HMO on right move, it will be GBP 40 or even more. But it's exclusive of utilities, exclusive of broadband, exclusive of WiFi, exclusive of content insurance. So what we've seen pre to pandemic was our pricing actually in regional cities are on a comparable basis. And there is a bit of tenancy length difference. HMO generally 51 weeks, hours for domestic students, 40 to 42 to 44 weeks. We're actually at par in terms of pricing or even that a little bit cheaper. So when you've got an informed customer living in HMO, they've had the experience, they've had the independence, they've had the problem of chasing down the landlord that Karan mentioned. Because they know the question of price because they know the price point is similar. It becomes more a question is the living environment right for me? Do I still really want independence? Or actually, am I happy to go back into purpose-built student accommodation that's better supportive for independent living? But actually, it's also better supportive for me just, frankly, knuckling down and getting on with my studies. So I think from a pricing perspective, we've got a real opportunity. It's more of that sort of personal choice as to whether the product works. And we saw pre to pandemic, more final year students coming back to us. I think that will persist. But as we say, if we can get first years to rebook in the second year, then they're probably not going to go into HMO in the third year.

Maybe more a question for Nick rather than you. I don't know. But it was more a question about maintenance. It was a question about maintenance funding and policy. So normally, I mean, we talked a lot about the tuition fee. But actually, in the Augar review, I think there was some talk about the cost of accommodation. And actually, the maintenance loan is very conveniently, seems to be going up by 3% per annum, most of which is going into [loss] and present company's pockets. Effectively, the government is funding that 3% growth in accommodation cost. Is there any pressure for that to change? Or is that a part of the Augar review that is basically being sort of kicked into the long grass because it's a sort of -- is a secondary detail? Or is there any pressure from government that the maintenance part of the funding model is going to be changed?

Do you want me to go first, and you are okay. I mean, it certainly was sort of recommendation of 13 when the Augar review looked exactly as that. We have done some analysis looking at the proportion of our students that do qualify for the maintenance grant. Obviously, it's means tested. A very significant proportion of our students don't actually get any kind of support. So I guess the rents to us are coming from mothers, fathers, families, whatever the situation might be. I don't -- I've not heard that there's a lot of focus on that at the moment. One of the things that we're really focused on as a business and our interaction with government and as a sector is actually demonstrating that we're doing the right thing. We're delivering a huge amount of value, isn't just about selling a box for a student to live in, then they go on. Actually a student that comes and live with us, there are real opportunities to learn new skills, to transition to adulthood and really be a valuable sort of contribution to society. And then obviously, we've got all of our -- the S of ESG. So I'm not sure that's a focus at the moment. I'm not hearing about it. I think if there was a significant change in that regard, it would have a fairly small impact on our customer base. But it's always an area that we look at because we are only successful because universities are successful. And if you ignore maintenance, students are funded. It's new cost at the point of consumption, which is one of the great attributes of our education sector, but it's something definitely to be recognize it of. I don't know, Nick, if you've got...

Yes. Well, I mean we could spend all day about maintenance. It's interesting because I mean the Augar report was announced 4 years ago, reported 2.5 years ago. And the government still hasn't said anything at all about what they think of its recommendations. The recommendation -- there were 2 interesting recommendations on maintenance in the Augar report. One was have -- just have a review, get the office for students, which is the regulator in England, just to have a review of the cost of accommodation and whether they are reasonable or not. And I think a lot of the big student accommodation part as I talk to you actually relative react to that an okay story to tell. It also recommended bringing back maintenance grants because they're very odd situation in England now is that there's no maintenance grants at all, unlike in Wales and Scotland and elsewhere. And so the poor students do now leave university with the biggest debt because they have to borrow more for their maintenance. In some of our work, we've shown that if, for example, you did change the student loan repayment terms and save that GBP 4 billion, you could maybe bank GBP 2 billion and use GBP 2 billion to bring back the old maintenance grant that used to exist. I think that would be quite a public policy. But I think as Richard says, actually, it's not -- and as your question implies, there isn't actually as much conversation about this going on as one might think. Maybe there'll be more -- once next Thursday happens and the spending review happens. And then the government has been promising us for a month, actually almost for years a consultation on the Augar proposals. If we do get a consultation on the Augar proposal, they'll have to say something on this. But the drafts that have been floating around all has been very much sitting on the fence. They haven't actually until come down on one side or the other. So I think it's definitely one to watch, but I don't think we're expecting any really big announcements very quickly. Sorry to give you...

I don't know if there are any other questions in the room. Yes, one more.

Sorry guys, one more from me. We've seen the sort of 2.3% rental growth rate that's been sort of put in for this year. When we totally look at that sort of 20% of the portfolio that's underoccupied, what risk is there that you are going to try and prioritize occupancy over rate, and we could see that fall over the course of the next 12 months?

Yes. I mean, I definitely think in order to get back to full occupancy, we'll really need to think about pricing in those sort of 5 or so markets, some of which were highlighted earlier. I think in any normal year, even without COVID, our rental growth has varied anything from sort of 1% to 5% to give us that sort of typical average of around 3%. I don't think that will be particularly different going forward. What we haven't seen this year, indeed by us or any of our competitors, is massive slashing of pricing to drive occupancy. Everybody has remained relatively disciplined. So while I think we might see subdued rental growth in those 5 markets, I think we still can with the weight of demand drive rental growth in the stronger markets. And that will give us that sort of blended 3% that we're targeting. One more question.

James Schofield from Peel Hunt. You talked quite a bit about the spend in the EPC and fire safety. Just clearly, you have the skills, the balance sheet to do that. But then when you think about some of the university-owned accommodation, maybe they don't have the skills, and maybe they don't want to be committing CapEx in the same way. I mean do you think that gives you an opportunity over the next decade, I guess, to work more with those universities as we approach those kind of deadlines?

Yes. I think the question around sort of university stock, first-generation stock, perhaps underinvested, that's not true of all universities. I mean, Nick, sorry, referenced Manchester, maybe it's an opportunity here. I do think it is. I think universities really understand the importance of accommodation within the overall student experience. They didn't understand that pre the pandemic, and the vast majority did, they certainly understand it now. Therefore, having accommodation that is safe, that meets regulations is absolutely critical. So that use of their balance sheet into student accommodation isn't going to be a priority. That's where I think they can come and talk to organizations like us, whether that's sort of refurbishment, knockdown and rebuild. So I definitely think, over time, that will create an opportunity for unite to invest on campus in helping the universities face some of the challenges that they will be facing.

The flip side to that is that student accommodation does represent a small profit source to those universities. So finding structures which sort of provides some of that return or something back to universities on an ongoing basis is where we're focusing some of our thinking. So there's a kind of a share of income such that the university is getting as much income back, but they also get the investment and a partner in to run it, because that seems to be unlocking those conversations more such that they sort of see that sort of contribution to their surpluses as well from accommodation.

Great. I don't know if there's any more questions in the room, Mike. I don't know if we've got any questions on the...

Yes, we've got one question the webcast, which is would you consider expanding abroad in light of the potential headwinds in the U.K. due to Brexit? And in light of the nascent fragmented markets on the continent, would it not be interesting for you to expand?

We certainly had a good look at what's going on in Europe. There are interesting opportunities in Germany. If we look at Paris, Paris is a student market that's significantly larger than London. But in each of those markets, it is highly fragmented. There isn't necessarily a proven sort of PBSA product. And in order to be sort of really successful, you clearly need real scale, either real scale at a country level or at a city level, which I'm so simply not convinced the returns that we would generate there or indeed actually some of our skills being transferable if we went overseas is better than the opportunity that we have here in the U.K. We talked about the opportunity to continue to grow our relationships of university outsourcing of the continued development opportunity in those 8 to 10 markets, as well as the opportunity of opening up the HMO market. So I think the growth we can generate in the U.K. is better, frankly, than what we would generate internationally. And I think there isn't a scale platform to be able to invest internationally. I think what's probably more interesting for us and an area that we're beginning to have a look at is that as we develop our product, as we segment our product and we can do that really efficiently and provide a great service, we are seeing more and more mature students living with us than ever before. And if you think about how many university students there are now and how many graduates there are now and how many young people, young professionals there are in the U.K. But at the moment, a graduate and the job market, in some areas, it's strong, and other areas clearly challenged. But where are they going to live? Where are they going to work? And every town and city we operate in, the local authority and the university are desperate to keep those young professionals in that city. And there's very few cities that achieve that actually. Cities like London, the cities like Birmingham do. Actually, Manchester does a pretty good job of it, but and all lot of other cities really struggle to retain their young professionals. And that's largely because there isn't necessarily the jobs, some of those changing, but there isn't the accommodation. There isn't the homes available for those young people. So is there an opportunity for us to extend our product offering slightly into sort of the young professional purpose built or some kind of product that really meets the needs of that group, people who are just starting on their first career. They want flexibility. They want to live with like-minded people as part of the community. Maybe they want to live somewhere where there is that sort of communal space to come together to learn from one another. Could we replicate what we do with universities in terms of building partnerships with some of the big employees, some people in this room today. I'm sure you have large graduate programs. So I think that adjacency is really quite interesting. Probably for me, a much more natural extension of what we do than it is sort of going overseas. So we'll look at that. Nothing is happening in the very near term, but I definitely think it's interesting. Great. I think we've got one more question in the room. Sorry, we got a mic. Sorry, we just drop the mics back.

Just a question on external growth. Are you contemplating any larger acquisitions? So in 2019, you saw significant amount of capital deployed, private equity starts building portfolio. So in the next sort of few years as they potentially look to exit, are you in discussions? And are you interested in larger transactions?

For us, we'll always look at everything that sort of comes to the market in terms of investment opportunities. There isn't a large portfolio out there that would sort of probably interest us at the moment. Obviously, we completed for us, a pretty significant transaction in November of 2019. But that's not to say there aren't assets out there. It's still a very fragmented market after ourselves, after iQ, after Brookfield, there's a very long tail of small operators that there are potentially assets that maybe there's a great opportunity to enhance a relationship with a university to buy an asset and reposition it. So we'll continue to look at those investment opportunities, but sort of much more small scale. It might be things that we do ourselves or it might be something we could do through use that for example, that can provide us access to some of those opportunities sometimes. So definitely part of the strategy, but not a significant part of our growth strategy. I think, therefore, that's the end of the questions. Thank you very much, everybody. Just before we break for lunch, and thank you to everybody, at least one person, I guess, listening on the webcast somewhere, asked one question. But thank you very much, everybody that listened in. Just in terms of sort of a bit of housekeeping, what's going to happen after lunch. I think we've got until 1:15, so 40 minutes or so for lunch. 1:15, we're all going to walk over en masse to Artisan, which is I think that way is it? Yes, I've lost my bearings, just literally over that way. You really can't miss it. But if we all go over there, when we get over there, then we are going to split into 2 groups, and 2 -- one group is going to have a look at Artisan, and the other one goes to Bridgewater and then sort of going to swap. Then we're going to walk over to another property, but that's too much detail. Basically, the key point is to go from here at 1:15 over to Artisan, and then the team will look after you. We'll then get on a bus, do a bit more of a broader tour. And then we will have you back at the train station around 3:30 to get to trains. Just one sort of bit of COVID-related advice. You don't need -- if you don't want to wear masks on the coach or whatever. But we will be going up and down in lifts in our buildings. If you want to, obviously, at any point wear a mask, feel comfortable to do so, obviously. But in the lifts, if maybe you could just wear your masks when we are going up and down in the lifts, that will be appreciated. There are some lovely Unite-branded mask, I wish if you could take them, wear them with pride, I'd be forever indebted to you. But yes, if you could wear your masks in the lifts, if that's okay. But thank you very much. Thank you again for Nick come to speak to us today. And we've got lunch now and then, say, over the road for 1:15. So thank you.