Executive directors at student accommodation provider Unite will absorb a 30% cut to their salaries and pensions contributions for four months, alongside a suspension in bonus payments.
Senior management will take pay cuts of 10-20%, and there will be a 30% reduction in fees payable to non-executive directors. These will be effective for four months from 1 April.
Unite said the savings, together with its decision to defer development and non-essential operational capex, would retain an additional £95m-£105m of cash in the business in 2020.
The company still plans to make awards under its long-term incentive plan. It added that it had not used the government’s furlough scheme.
Income will drop
The news comes as Unite predicted its income for the current academic year would decline by 16-20%.
Despite the impact coronavirus has had on rental income, Unite said its latest prediction marked an improvement on previous expectations.
The student housing company said it expected to forgo rent on around 43,000-46,000 beds for the current academic year, representing around 62-65% of all owned and managed beds.
Students choosing to stay with Unite, and beds let under nomination or lease agreements, together represented 21% of beds.
Within this proportion, Unite has received 94% of the rent due to date in April. Remaining payments by universities for the summer semester are staggered between April and September 2020.
Reservations across the group for the 2020/21 academic year stand at 80%, compared with 81% at the same time last year.
Unite said it had seen healthy levels of demand from UK students but enquiries from international students had slowed.
The company has also recently shifted its marketing activity to focus on students living houses in multiple occupation.
Development pipeline
While income uncertainties remain, delivery of its Middlesex Street and Bristol developments have been deferred to 2022. However, the possibility of delivering 2022 completions ahead of the start of the 2022/23 academic year is being reviewed, to generate income from short-term lets.
Work has restarted across all sites with reduced numbers of operatives to maintain social distancing, in accordance with government advice.
Cashflow update
The company retained its previous guidance for a £90m-125m reduction in group cashflow in 2020. At the upper end of this range, Unite said it had modelled a four-week delay to the start of the 2020/21 academic year while awaiting greater clarity around admissions and timetable.
This would result in reductions of up to 30% to group cashflow for the autumn semester of the 2020/21 academic year.
In addition, it is in discussions with banks and potential new lenders around future funding requirements. Unite’s earliest group debt maturity is April 2022.
As of 17 April, the company had £269m of unrestricted cash reserves. All of the group’s revolving credit facilities are now fully drawn.
The company also expected to access an initial £50m from the government’s Covid Corporate Financing Facility.
Chief executive Richard Smith 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.”
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