Unite Group announces cost savings, cancels dividend

Unite Group updated the market on the potential impact of the Covid-19 coronavirus pandemic on its business on Wednesday, and the measures it was taking to mitigate the resulting risks.

The FTSE 250 student accommodation provider said it was “well-positioned” to withstand the impact of the pandemic until trading conditions normalised.

It said its balance sheet and liquidity position was “robust”, with “significant” headroom against debt covenants, reporting £291m of cash and undrawn debt facilities available.

In order to protect the long-term reputation of the business, and despite a “strong” contractual position, the firm said it would offer to forgo rent for students who chose to return home for the rest of the 2019-2020 academic year.

That implied a reduction in group cash flow of between £90m and £125m in 2020.

The firm said it was working closely with its university partners, and would continue to provide accommodation through its nomination agreements.

“We are implementing a number of actions to mitigate this cash shortfall, including deferring development and non-essential operational capital expenditure and cost savings, which would retain an additional £95m to £105m of cash in the business in 2020,” the board said in its statement.

“We will continue to review the cost base of the business and have the ability to make further savings if required.”

In addition, the directors said they had decided to cancel the final dividend for 2019 and suspend further distributions by the company until market conditions stabilised.

That would retain an additional £124m in cash during 2020 if no dividend payments are made.

Unite said the combination of those measures would ensure the firm retained cash headroom through the rest of the year.

“At this stage, we expect the 2020-2021 academic year to commence according to its usual timetable in September.

“This reflects the government's decision to cancel A-Level exams and award grades to students using alternative assessment methods.

Latest reservations for 2020-2021 are 78%, in line with the prior year.”

At 0806 GMT, shares in Unite Group were up 2.04% at 799.5p.