The country’s largest student flat provider The Unite Group Plc is expecting to lose up to £125million because of the coronavirus pandemic.
The company, in a statement to the stock exchange, said it is predicting a cashflow reduction for 2020 of between £90million and £125million.
Unite Students has refunded rent money to students who have returned home during the lockdown and senior board members have taken pay cuts of up to 30% during the crisis.
The firm said it has also stopped work on new flats developments at Middlesex Street, in London, and the former Bristol Royal Infirmary site.
The company said it may now end up with a four-week delay to the start of the 2020/21 academic year, which would result in reductions of up to 30% to group cashflow for the autumn term.
Unite is the UK’s largest owner, manager and developer of student accommodation, with a presence in 27 UK cities including London, Manchester, Liverpool, Newcastle, Birmingham, Nottingham, Sheffield, Leeds, Cardiff, Bristol and Exeter.
It has already contacted students to see if they want to leave their flats for the summer term and, based on cancellation requests received so far, expects to forgo rent on about 43,000 to 46,000 beds representing about 62% to 65% of all its owned and managed beds.
Overall, Unite expects a reduction in income from the 2019/20 academic year of 16% to 20%.
Meanwhile, reservations across the group for the 2020/21 academic year are currently at 80%, compared with 81% at the same time in 2019.
“Positively, we have seen healthy levels of demand from UK students, reflecting our decision to switch the focus of our sales and marketing efforts to the domestic market,” the report said. “We are still seeing inquiries from international students but, as expected, demand has slowed.
“A number of universities have already begun to allocate students to us for the new academic year, reflecting confidence around their accommodation requirements.”
So in a bid to save cash, Unite’s board has agreed to a 30% reduction to salaries and pension contributions for executive directors, 10% to 20% for senior management and a 30% reduction in fees payable to non-executive directors. These reductions will be effective for a four-month period from 1 April, the firm said.
Bonus payments for executive directors will also be suspended for 2020. The company still plans to make awards under its Long Term Incentive Plan with a three-year performance period through to December 31, 2022, and further two year holding period for the executive directors, based on the performance conditions announced in the company’s 2019 Annual Report and set prior to the impact of Coronavirus.
These savings, together with our decision to defer development and non-essential operational capital expenditure, will retain an additional £95million to £105million of cash in the business in 2020.
The firm said that given the priority of conserving cash while income uncertainties remain, it has deferred the delivery of flats at Middlesex Street, in London, and Old BRI, in Bristol, into 2022.
A decision on resumption of those schemes will be made “once we have greater visibility over the impact of coronavirus on the 2020/21 academic year”.
The report said: “We are reviewing the possibility of delivering 2022 completions ahead of the start of the 2022/23 academic year to generate income from short-term lets”.
Meanwhile, delivery of 2020 completions will also be delayed by temporary site closures and amended working practices.
But work has now re-started across all sites with reduced numbers of operatives to maintain social distancing. A number of scenarios are being considered for completion of the projects, including phased delivery where possible, the firm said.
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Richard Smith, Unite Students chief executive officer, said: “We are committed to doing the right thing for our customers, colleagues and other stakeholders, despite the unprecedented times we face.
“This underpinned our decision to forgo rent for students wishing to return home for the remainder of the current academic year and the reduction in board remuneration announced today.
“We now have greater income visibility for the summer semester and our operating platform provides us with the flexibility to rapidly implement new marketing strategies for 2020/21 and reduce costs.
“This provides increased confidence over the liquidity of our balance sheet through the 2020/21 academic year. We will emerge stronger from this challenging time, building on our enhanced reputation with students and universities.”