THE UNITE GROUP PLC Annual Report and Accounts 2024 62 STRATEGIC REPORT VIABILITY STATEMENT The Directors have assessed the viability of the Group over a three-year period to December 2027, taking account of the Group’s current position and the potential impact of its principal risks. The Directors consider the three-year lookout period to be the most appropriate, as this aligns with the Group’s own strategic planning period combined with the levels of planning certainty that can be derived from the development pipeline. The Directors believe that UK universities will continue to experience strong demand from UK students as a result of strong demographic growth in the period to 2030 and the UK’s leading HE sector continues to attract students from around the world. The Group has an annual business planning process, which comprises a Strategic Plan, a financial forecast for the current year and a financial projection for the forthcoming three years (which includes stress testing and scenario planning and also rolls forwards for another two years). This plan is reviewed each year by the Board as part of its strategy setting process. Once approved by the Board, the plan is cascaded across the Group and provides a basis for setting all detailed financial budgets and strategic actions that are subsequently used by the Board to monitor performance. The forecast performance outlook is also used by the Remuneration Committee to establish the targets for the annual and longer-term incentive schemes. To stress test the viability of the business, a viability scenario was prepared using the Group’s Strategic Plan as a base. The key viability assumptions were: • Rental growth reduced to 1% p.a., reflecting principal risks 1–3 • Cost growth of 5% p.a., allowing for further sustained increases in utility and other costs • A 50bps increase in property valuation yields, translating to approximately a 10% decline in asset values • Interest costs of 7% on all new debt and refinancing activity, reflecting principal risk 11 • No further development commitments, disposals or acquisitions, reflecting principal risks 5 and 6. The result of this scenario showed a significant deterioration in forecast performance, with earnings and NTA significantly reduced (to 45.5p and 943p respectively) in 2027 while LTV increased substantially to 35.8%. Despite the significant contraction in the size of the business over the forecast period, the business would remain viable under such a scenario. We also considered whether the Group’s climate change principal risk would impact our assessment of the Group’s viability but concurred that as we have an ongoing programme of capital investment to achieve our science-based net zero target by 2030, this mitigated the risk sufficiently for this viability assessment. Following visa policy changes in 2024, aimed at reducing net migration, the UK is less attractive for international postgraduate taught students who can no longer bring dependent family members to the UK. However, we have experienced limited impact from the changes as our rooms are single occupancy. The Group achieved 97.5% occupancy for the 2024/25 academic year and has an encouraging outlook for 2025/26. International student demand is not expected to impact the longer-term viability of the Group. The financing risks of the Group are considered to have the greatest immediate potential impact on the Group’s financial viability. The three principal financing risks for the Group are: • short-term debt covenant compliance • the Group’s ability to arrange new debt/ replace expiring debt facilities • any adverse interest rate movements. To hedge against the potential of adverse interest rate movements, the Group manages its exposure with a combination of fixed rate facilities and using interest rate swaps for its floating rate debt. During the year, the Group has complied with all covenant requirements attached to its financing facilities and expects to continue to do so. The outlook and future prospects beyond the viability period for the business remain strong, reflecting the underlying strength of student demand, our alignment to the strongest universities and the capabilities of our best-in-class operating platform. There are significant growth opportunities for the business created by the ongoing shortage of high quality and affordable purpose-built student accommodation; universities need to deliver an exceptional student experience through their accommodation and the growing awareness of the benefits of PBSA among non-first-year students. Emerging risks to the outlook and prospects are identified and assessed through our broader risk management process. Based on their assessment and the mitigating actions available, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to December 2027. RISK MANAGEMENT continued