TIDMSAFE
RNS Number : 1236I
Safestore Holdings plc
15 June 2017
15 June 2017
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Interim results for the 6 months ended 30 April 2017
A good half year, significant refinancing completed
Key measures
6 months 6 months Change
ended ended Change-CER(1)
30 April 30 April
2017 2016
---------------------------- ---------- ---------- ---------- ----------------
Underlying and Operating
Metrics- like-for-like(2)
---------------------------- ---------- ---------- ---------- ----------------
Revenue GBP57.4m GBP53.6m 7.1% 3.7%
---------------------------- ---------- ---------- ---------- ----------------
Underlying EBITDA(3) GBP31.5m GBP28.9m 9.0% 4.8%
---------------------------- ---------- ---------- ---------- ----------------
Closing Occupancy
(let sq ft- million)(4) 3.52 3.47 1.4% n/a
---------------------------- ---------- ---------- ---------- ----------------
Closing Occupancy
(% of MLA)(5) 71.9% 70.8% +1.1ppts n/a
---------------------------- ---------- ---------- ---------- ----------------
Average Occupancy
(let sq ft- million)(4) 3.51 3.45 1.7% n/a
---------------------------- ---------- ---------- ---------- ----------------
Average Storage Rate GBP27.51 GBP26.06 5.6% 1.9%
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Underlying and Operating
Metrics- total
---------------------------- ---------- ---------- ---------- ----------------
Revenue GBP62.6m GBP54.1m 15.7% 12.4%
---------------------------- ---------- ---------- ---------- ----------------
Underlying EBITDA(3) GBP34.2m GBP29.3m 16.7% 12.3%
---------------------------- ---------- ---------- ---------- ----------------
Closing Occupancy
(let sq ft- million)(4) 3.94 3.49 12.9% n/a
---------------------------- ---------- ---------- ---------- ----------------
Closing Occupancy
(% of MLA)(5) 69.8% 70.9% (1.1ppts) n/a
---------------------------- ---------- ---------- ---------- ----------------
Average Storage Rate GBP26.85 GBP26.02 3.2% (0.2%)
---------------------------- ---------- ---------- ---------- ----------------
Cash Tax Adjusted
Earnings per Share(6) 10.4p 9.0p 15.6% 11.1%
---------------------------- ---------- ---------- ---------- ----------------
Free Cash flow(7) GBP23.2m GBP19.7m 17.8% n/a
---------------------------- ---------- ---------- ---------- ----------------
EPRA Basic NAV per GBP3.14 GBP2.78 12.9% n/a
Share
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Statutory Metrics
---------------------------- ---------- ---------- ---------- ----------------
Profit before tax GBP55.0m GBP49.1m 12.0% n/a
---------------------------- ---------- ---------- ---------- ----------------
Basic Earnings per
Share 28.1p 22.0p 27.7% n/a
---------------------------- ---------- ---------- ---------- ----------------
Dividend per Share 4.2p 3.6p 16.7% n/a
---------------------------- ---------- ---------- ---------- ----------------
Highlights
Good Financial Performance
-- Group Revenue up 15.7% (12.4% at CER(1) )
-- Group like-for-like(2) revenue at CER(1) up 3.7% with UK up 3.9% and Paris up 2.9%
-- Cash Tax Adjusted Earnings per Share up 15.6% at 10.4p
-- 16.7% increase in the interim dividend to 4.2p (2016: 3.6p)
Operational Focus
-- Space Maker acquisition fully integrated and performing in line with expectations
-- All five recently opened stores trading well
-- New consumer website in Paris business, following the UK's success
-- New site acquired at Combs-la-Ville in Paris opened in June 2017
-- Mitcham site acquired in December 2016 and subject to planning, scheduled to open in FY18
Strong and Flexible Balance Sheet
-- Group loan-to-value ratio ("LTV"(8) ) at 30%, interest cover ratio ("ICR"(9) ) at 5.5x
-- Refinancing completed on 31 May 2017 reducing effective
interest rate to c.2.3% from 3.5% and extending the weighted
average maturity of debt from 3.4 years to 7.5 years
Frederic Vecchioli, Safestore's Chief Executive Officer,
commented:
"Safestore has performed well in the first half of the year and
continues to build on the strong earnings and dividend growth
achieved over the last four years. Notwithstanding the uncertain
macro-economic backdrop, the Group continues to generate a record
number of enquiries across its entire platform. In addition to
solid growth in our existing business, our recently acquired Space
Maker business and the five new stores opened during the last
twelve months are trading well. I am delighted to announce the
addition of another site in Paris, at Combs-la-Ville, which opened
earlier this month.
"As we enter our peak trading period, we continue to see good
levels of interest in self-storage in the UK and increasing
momentum in Paris. We are well placed to meet this demand with our
1.7m square feet of currently unlet, fully invested space.
"I am delighted with our recent refinancing which further
reduces our ongoing finance costs, increases our debt maturity and
improves our balance sheet capacity and flexibility, allowing us to
continue to seek selected development and acquisition
opportunities. The company is in a strong position and remains
on-course to meet the board's full year expectations."
Notes
1 - CER is Constant Exchange Rates (Euro denominated results for
the current period have been retranslated at the exchange rate
effective for the comparative period, in order to present the
reported results on a more comparable basis).
2 - Like-for-like adjustments have been made to remove the 2016
openings of Wandsworth, Altrincham, Birmingham (including closure
of our existing Birmingham store) and Emerainville, as well as
Chiswick in the current financial year. In addition, the impact of
the acquisition of Space Maker on 29 July 2016 has been
adjusted.
3 - Underlying EBITDA is defined as operating profit before
exceptional items, corporate transaction costs, change in fair
value of derivatives, gain/loss on investment properties,
contingent rent and depreciation. Underlying profit before tax is
defined as underlying EBITDA less leasehold rent, depreciation
charged on property, plant and equipment and net finance charges
relating to bank loans and cash.
4 - Occupancy excludes offices but includes bulk tenancy. As at
30 April 2017, closing occupancy includes 36,750 sq ft of bulk
tenancy (30 April 2016: 37,750 sq ft).
5 - MLA is Maximum Lettable Area. Group MLA at 30 April 2017 is
5.64m sq ft (30 April 2016: 4.93m sq ft).
6 - Cash tax adjusted earnings per share (EPS) is defined as
profit or loss for the year before exceptional items, corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts as well as
exceptional tax items and deferred tax charges, divided by the
weighted average number of shares in issue (excluding shares held
by the Safestore Employee Benefit Trust).
7 - Free cash flow is defined as cash flow before investing and
financing activities but after leasehold rent payments.
8 - LTV ratio is Loan-to-Value ratio, which is defined as gross
debt (excluding finance leases, but adjusted for the fair value of
the US dollar cross currency swap) as a proportion of the valuation
of investment properties and investment properties under
construction (excluding finance leases).
9 - ICR is interest cover ratio, and is calculated as the ratio
of underlying EBITDA after leasehold rent to underlying finance
charges.
10 - Adjusted for the impact of cross currency swap
agreements.
Reconciliations between underlying metrics and statutory metrics
can be found in the financial review and financial statements
sections of this announcement.
Summary
Safestore has delivered a good financial performance in the
first half of the year through a combination of solid organic
growth, the acquisition of Space Maker and the opening of five new
stores over the last twelve months. Reported Group revenue
increased 12.4% at CER(1) and like-for-like(2) revenue increased by
3.7%. The Group's like-for-like average occupancy increased by 1.1
percentage points ("ppts") to 71.9% with the average storage rate
up 1.9% at CER(1) .
Our operational performance across the UK has been robust in the
half-year resulting in a 3.9% increase in like-for-like revenue.
Our new consumer website, which was successfully launched at the
end of 2015, is performing consistently, resulting in continued
good enquiry growth. In the UK like-for-like occupancy increased
0.9ppts to 69.5%, driven by a strong performance in regional
UK.
The Space Maker portfolio, acquired in July 2016, is now fully
integrated into the Group and performing in line with our
expectations. In addition, the four new UK stores in
London-Chiswick, London-Wandsworth, Birmingham and Altrincham are
performing well against our expectations.
In Paris, our recently launched consumer website, building on
the success of the UK site, is now fully operational. Our trading
performance has been robust with like-for-like revenue growing by
2.9%. Our balanced approach to revenue management resulted in rate
growth of 2.7% and average occupancy growth of 1.3% on a
like-for-like basis. Like-for-like closing occupancy ended the
period up 1.5ppts at 80.9% (2016: 79.4%). We are now in the
nineteenth consecutive year of revenue growth in Paris. Our new
store at Emerainville to the east of Paris opened on time and on
budget in September 2016 and is trading in line with expectations
and our Longpont extension, adding 22,600 sq ft to the store, was
completed in January 2017. We opened our recently acquired new
store, announced today, at Combs-la-Ville in Paris, earlier this
month.
Group underlying EBITDA of GBP34.2m increased 12.3% at CER(1) on
the prior year and 16.7% on a reported basis reflecting the impact
of the strengthening Euro on the profit earned on our Paris
business. The Group's strong EBITDA performance is reflected in a
15.6% increase in cash tax adjusted EPS(6) in the period to 10.4p
(2016: 9.0p).
Our property portfolio valuation, including investment
properties under construction, has increased by 4.5% on a constant
currency basis since 31 October 2016. After exchange rate movements
the portfolio valuation increased by 2.7% to GBP980.3m with the UK
portfolio up GBP27.6m, to GBP738.2m and the French portfolio
increased EUR16.9m to EUR287.8m.
Reflecting the Group's good trading performance, the Board is
pleased to recommend a 16.7% increase in the interim dividend to
4.2p per share (2016: 3.6p).
Outlook
Safestore has a strong market presence in both the UK and Paris.
Trading in our newly opened stores and in the recently acquired
Space Maker business is encouraging. With 1.7m square feet of unlet
space available at 30 April 2017 (the equivalent of 40+ stores), we
have significant, low-cost growth potential ahead.
We remain focused on the continuous improvement of the
operational performance of the business and leveraging our leading
market positions to full effect. Our recent refinancing further
improves our balance sheet flexibility and, combined with strong
cash generation, provides us with the opportunity to take advantage
of further selective development and acquisition opportunities in
our key markets, subject to our rigorous investment criteria. We
continue to build our new store pipeline with our acquisition of a
development site in Mitcham, South West London in December 2016 and
a site in Combs-la-Ville, south of Paris in April 2017.
Self-storage continues to be a relatively immature industry,
with significant potential for further market growth. We continue
to see good levels of interest in self-storage and believe that we
are well placed to trade through current future macro-economic
uncertainty given our resilient business model, scale and marketing
expertise combined with our improved operational capability,
geographical diversity and strong balance sheet.
For further information, please contact:
Safestore Holdings PLC
Frederic Vecchioli, Chief
Executive Officer 0207 457 2020
Andy Jones, Chief Financial
Officer
www.safestore.com
Instinctif Partners
Mark Reed/ Guy Scarborough 020 7457 2020
A presentation for analysts will be held at 9.30am today at:
Investec, 2 Gresham St, London EC2V 7QP
For dial-in details of the presentation please contact:
Gemma Mountford (gemma.mountford@instinctif.com or telephone on
020 7457 2020).
Notes to Editors
-- Safestore is the UK's largest self-storage group with 134 stores, comprising 109 wholly owned
stores in the UK (including 63 in London and the South East with the remainder in key metropolitan
areas such as Manchester, Birmingham, Glasgow, Edinburgh, Liverpool and Bristol) and 25 wholly
owned stores in the Paris region.
-- Safestore operates more self-storage sites inside the M25 and in central Paris than any competitor
providing more proximity to customers in the wealthiest and densest UK and Parisian markets.
-- Safestore was founded in the UK in 1998. It acquired the French business "Une Pièce en
Plus" ("UPP") in 2004 which was founded in 1998 by the current Safestore Group CEO Frederic
Vecchioli.
-- Safestore has been listed on the London Stock Exchange since 2007. It entered the FTSE 250
in October 2015.
-- The Group provides storage to around 55,000 personal and business customers.
-- Safestore has a maximum lettable area ("MLA") of 5.64 million sq ft. At 30 April 2017, 3.94
million sq ft was occupied.
-- Safestore employs around 600 people in the UK and France.
Our Strategy
The Group's strategy remains the same as stated in our last
annual report. We believe that the Group has a well located asset
base, management expertise, infrastructure, scale and balance sheet
strength to exploit the healthy industry dynamics of the
self-storage sector. As we look forward, we consider that the Group
has the potential to significantly further increase its earnings
per share by:
-- Optimising the trading performance of its existing portfolio;
-- Maintaining a strong and flexible capital structure; and
-- Taking advantage of selective portfolio management and expansion opportunities.
Optimisation of Existing Portfolio
With the opening of five new stores and the acquisition of Space
Maker over the last twelve months, we have strengthened our market
leading portfolio in the UK and Paris. We have a high quality,
fully invested estate in both the UK and Paris. Of our 134 stores,
88 are in London and the South East of England or in Paris with 46
in the other major UK cities. We now operate 44 stores within the
M25 which represents a higher number of stores than any of our
competitors.
In the last year, with the aforementioned new store openings and
acquisition our MLA has increased by 14.4% to 5.64m sq ft at 30
April 2017. At the current occupancy level of 69.8% we have 1.70m
sq ft of unoccupied space, of which 1.46m sq ft is in our UK stores
and 0.24m sq ft in Paris. This is the equivalent of over 40 empty
stores located across the estate. The available space is fully
invested and the related operating costs are essentially fixed and
already included in the Group cost base. Our continued focus will
be on ensuring that we drive occupancy to utilise this capacity at
carefully managed rates.
There are three elements that are critical to the optimisation
of our existing portfolio;
-- Enquiry generation through an effective and efficient marketing operation;
-- Strong conversion of enquiries into new lets; and
-- Disciplined central revenue management and cost control.
In-house digital marketing expertise
Awareness of self-storage is increasing each year but remains
relatively low with 58% of the UK population either knowing very
little or nothing about self-storage (source 2017 SSA Annual
Report).
In the UK around 75% of our new customers are using self-storage
for the first time. It is essentially a brand-blind product with
only 12% of respondents in the 2017 Self Storage Association Annual
Survey stating that a brand would influence their purchase
decision. Typically customers requiring storage start their journey
by conducting online research using generic keywords in their
locality.
We believe there is a clear benefit of scale in the generation
of customer enquiries. The Group has continued to invest in its
consumer website as well as in-house expertise which, combined with
the employment of carefully selected external partners, has
resulted in the development of a leading digital marketing platform
that has generated 37% enquiry growth over the last four years. In
that period, enquiries originating from internet searches have
increased by 42%.
The Group has recently launched a new trading website for the
Paris business, building on the success of the new UK site. Online
enquiries now represent 82% of our enquiries in the UK (2016: 80%)
and 73% in France (2016: 62%). 56% of our online enquiries in the
UK originate from mobiles or tablets, compared to 52% last year.
The ranking in the search pages is a result of a complex function
that combines (i) the budget invested directly into the paid search
and the capacity to allocate it efficiently on a real time basis,
with (ii) the budget invested indirectly into the numerous actions
that optimise the website, which, together with its size and
traffic, determines its relevance and quality score for the search
engines. Our in-house expertise and skills and significant annual
budget enable us to achieve the above results. Approximately 95% of
our marketing budget in the UK is spent on digital marketing.
A key objective of our marketing team has been to improve the
volume of digital enquiries generated by the business and we will
continue to invest in activities that promote a strong search
engine presence. In addition to driving volume, we have managed to
reduce the cost per enquiry continuously over the past few
years.
Feefo, the independent merchant review system, which allows
customers to leave their feedback on the quality of our customer
service, has been integrated into our website since 2013. Over this
period, our customer satisfaction score has averaged above 96%.
Motivated and effective store teams benefiting from improved
training and coaching
In what is still a relatively immature and poorly understood
product, customer service and selling skills at the point of sale
remain essential in earning the trust of the customer and in
driving the appropriate balance of volumes and unit price in order
to optimise revenue growth in each store.
Over the last three years we have established an enthusiastic,
dynamic and effective store team. The employees of Space Maker,
which was acquired during last year, are now fully integrated into
the Safestore training and incentive framework and the twelve
stores have each been geographically integrated into one of our
eleven regions. Two new Divisional Managers, reporting to our
Director of Operations, have been internally recruited to further
support our experienced team of Regional Managers.
In the last twelve months we have invested further resources to
better manage our building maintenance and facilities management
programme. By way of example, the efficiencies and progress made in
this area have allowed us to start our LED lighting roll-out
earlier than expected.
New recruits to the business benefit from enhanced induction and
training tools which have been developed in-house and enable us to
quickly identify high potential individuals. All new recruits
receive individual performance targets within four weeks of joining
the business and certain new recruits are placed on the
'pay-for-skills' programme which allows accelerated basic pay
increases dependent on success in demonstrating specific and
defined skills. A key target of our programme is to ensure that
close to 100% of our store managers are promoted internally and our
Management Development programme was launched in November 2016 with
15% of our sales consultants participating. The first 16 candidates
are due to graduate from the programme in November 2017 and the
second intake commenced their programme on 31 May 2017.
All store staff continue to benefit from on-going training and
development. In 2016, we delivered 27,500 hours of training to
sales staff through face-to-face sessions and via our internally
developed online learning tool. This Learning Management System
also provides the opportunity for team members to receive
rigorously enforced Health and Safety and compliance training,
ensuring that our staff are up to date in relation to their
technical knowledge in these areas. These modules are continually
updated to target the areas of most opportunity and maintain
colleague engagement. Cyber security continues to be an increasing
global threat. Safestore's online training modules relating to a
new security policy were completed by all Safestore employees in
the first half of 2017 and will continue to be updated in the light
of any enhanced threats.
Over the last two years we have developed a customised coaching
programme for Store Managers. The training is delivered by Regional
Managers and is focused on continual improvement in sales
performance. Along with an enhanced selling skills module we have
devised and launched a refresher programme that is currently being
rolled out to all our store colleagues. This programme is being
delivered by our training store managers regionally to ensure an
efficient and cost effective delivery.
The performance of all team members is monitored closely via a
series of daily, weekly and monthly Key Performance Indicators. A
new dashboard was introduced in the last year which has enabled
increased focus at store and regional level on the key operating
metrics of the business. Bonuses of up to 50% of basic salary can
be earned monthly based on performance against new lets, occupancy,
ancillary sales and pricing targets. In addition, a Values and
Behaviours framework is overlaid on individuals' financial
performance in order to assess team members' performance and
development needs on a quarterly basis.
The benefit of these initiatives is reflected in an improved
performance by the stores in converting enquiries into new lets.
Conversion of enquiries is now consistently strong and has improved
by c.19% since 2013. Our customers are at the forefront of
everything we do and our twelve month rolling Feefo customer
service score of 96% reflects our ongoing commitment to their
satisfaction.
As an "Investors in People" organisation since 2003 our aim is
to be an employer of choice in our sector and we passionately
believe that our continued success is dependent on our highly
motivated and well trained colleagues.
Central Revenue Management and Cost Control
We continue to pursue a balanced approach to revenue management.
We aim to optimise revenue by improving the utilisation of the
available space in our portfolio at carefully managed rates. Our
central pricing team is responsible for the management of our
dynamic pricing policy, the implementation of promotional offers
and the identification of additional ancillary revenue
opportunities. Whilst price lists are managed centrally and can be
adjusted on a real time basis when needed, the store sales teams
have the ability to offer a Lowest Price Guarantee in the event
that a local competitor is offering a lower price. The reduction in
the level of discount offered over the last three years is linked
to store team variable incentives and is monitored closely by the
central pricing team.
Our strategy to optimise revenue is implemented by continually
reviewing the appropriate mix of occupancy and rate growth targets,
store by store. The work of the central pricing team has
contributed to like-for-like average rate increases of 1.7% in the
UK and 2.7% in Paris over the period, while maintaining an average
occupancy that was 1.9% up in the UK and 1.3% up in Paris over the
previous year on a like-for-like basis.
Rate growth is predominantly influenced by:
-- The store location and catchment area;
-- The volume of enquiries generated online;
-- The store team skills at converting these enquiries into new
lets at the expected price; and
-- The pricing policy and the confidence provided by analytical
capabilities that smaller players may lack.
We believe that Safestore has a very strong proposition in each
of these areas.
Costs are managed centrally with a lean structure maintained at
the Head Office. Enhancements to cost control are continually
considered and the cost base is challenged on an ongoing basis.
Strong and Flexible Capital Structure
On 31 May 2017 we completed the refinancing of the Group's US
Private Placement Notes ("USPP") and an amendment and extension of
its existing bank facilities to extend the average maturity and
lower the cost of the Group's debt financing. Since 2014 we have
refinanced the business on three occasions and believe we now have
an optimised capital structure that is appropriate for our business
and which provides us with the flexibility to take advantage of
carefully evaluated development and acquisition opportunities.
The key terms of the new and amended arrangements are as
follows:
US Private Placement Notes
-- The previous $65.6m 5.83%(10) 2019 USPP and $47.3m 6.74%(10) 2024 USPP were repaid in full;
-- New Euro and Sterling denominated USPP notes were issued with
the following tenor and coupons:
o EUR50.9m 7 year notes at a coupon of 1.59%;
o EUR74.1m 10 year notes at a coupon of 2.00%; and
o GBP50.5m 12 year notes at a coupon of 2.92%.
Amendment and Extension of Bank Facilities
-- The previous UK and Euro revolving credit facilities were
extended by two years from June 2020 to June 2022 with an option
(on an uncommitted basis) to extend for a further year with the
previous GBP126m term loan cancelled.
-- The amended facilities comprise:
o a GBP190m revolving credit facility of which GBP117m is drawn;
and
o a EUR70m revolving facility of which EUR46m is drawn.
-- The margin on the amended facilities was reduced by 25 bps from 150 bps to 125 bps.
-- Similarly, the non-utilisation fee on the undrawn facilities reduced from 0.6% to 0.5%.
-- The Group also has the option (on an uncommitted basis) to
increase the quantum of the sterling revolving credit facility by
GBP60m.
The Group has paid a 'make-whole' payment to existing USPP
noteholders of GBP12.4m and broke the Sterling/Dollar
cross-currency swap relating to the existing USPP notes, leading to
the Group receiving GBP13.9m, being the mark to market value of the
swap which was in the Group's favour and which was carried at that
value at the date of breakage. Exceptional finance charges to be
reported by the Group in respect of the refinancing in the second
half of the year are estimated to be c.GBP16m, comprising the
GBP12.4m 'make-whole' payment, with the balance relating to fees
and the write off of previous unamortised issue costs. The
refinancing was broadly cash flow neutral.
The USPP was issued to insurance company affiliates of AIG, Inc.
and the bank facilities are provided by a syndicate of RBS, HSBC,
Lloyds, Santander and BRED.
Based on the current level of borrowings and interest swap rates
the Group's pro forma annual underlying finance charge will, over a
full year, reduce by c.GBP3m per annum and the Group's overall
ongoing average cost of debt, including the USPP, has reduced by
c.120 bps. The weighted average maturity of the Group's debt has
increased from 3.4 years to 7.5 years. On a pro forma basis, the
Group's LTV ratio under the new financing arrangements would have
been 32% as at 30 April 2017.
The LTV of 32% and pro forma interest cover ratio of c.7.5x
under our new financing arrangements provide us with significant
headroom compared to our banking covenants. We have GBP153m
(including the GBP60m uncommitted accordion facility) of available
bank facilities.
Taking into account the improvements we have made in the
performance of the business and the reduction in pro forma interest
costs of over GBP10m per annum over the last three and a half
years, the Group is now capable of generating free cash after
dividends sufficient to fund the building of 2-3 new stores per
annum depending on location and availability of land.
The Group evaluates development and acquisition opportunities in
a careful and disciplined manner against rigorous investment
criteria. Our investment policy requires certain Board approved
hurdle rates to be considered achievable prior to progressing an
investment opportunity. In addition, the Group aims to maintain LTV
of between 30% and 40% for the foreseeable future.
Portfolio Management
As ever, our approach to store development and acquisitions in
the UK and Paris will continue to be pragmatic, flexible and
focused on the return on capital.
Our property teams in both the UK and Paris have been
strengthened in the last twelve months and are continually seeking
investment opportunities in new sites to add to the store pipeline.
However, investments will only be made if they comply with our
disciplined and strict investment criteria.
In the last twelve months, the Group opened five new stores in
Chiswick and Wandsworth in London, Birmingham, Altrincham and
Emerainville in Paris as well as completing the extension and
refurbishment of our Acton and Longpont (Paris) stores. All of
these stores are performing at or above their business plans.
In December 2016, we acquired the freehold of a site in Mitcham,
in South West London. Subject to planning permission, we plan to
build a c.54,000 sq ft store on this site, scheduled to open in the
first half of the 2018 financial year.
In Paris, where regulatory barriers are likely to continue to
restrict new development inside the city, we will continue our
policy of segmenting our demand and encouraging the customers who
wish to reduce their storage costs to utilise the second belt
stores. We will also manage occupancy and rates upwards in the more
central stores and ensure that pricing recognises the value
customers place on the convenience of physical proximity. The
strong selling organisation and store network established by Une
Pièce en Plus in Paris uniquely enables it to implement this
commercial policy to complement the strong second belt markets in
which we operate.
In April 2017 we completed the acquisition of a freehold site in
south-eastern Paris adjacent to the M104 motorway at
Combs-la-Ville. The site contains an existing 100,000 sq ft
warehouse and c.10,000 sq ft of serviced offices. The building was
constructed in 2001 and is in good condition requiring a relatively
simple reconfiguration for self-storage usage. The cost to buy and
convert the site was less than EUR6m and the store opened for
business earlier this month.
The Altrincham, Emerainville and Combs-la-Ville stores
demonstrate that, with a skilled property development team and a
flexible development model, it is possible to convert existing
buildings into storage facilities in an expeditious and cost
effective manner. In all cases, the time between exchanging
contracts and opening the stores was less than twelve months, with
Combs-la-Ville opening within three months.
At the end of July 2016 we completed of the acquisition of Space
Maker for a total consideration of GBP42.3m.
Space Maker was the ninth largest self-storage portfolio in the
UK with twelve stores, located in Bournemouth (two stores),
Colchester, Redhill, Romford, Brentford, Chelmsford, Exeter, Leeds,
Plymouth, Portsmouth and Poole, and has a fully invested built out
lettable area of c.496,000 sq ft. Six of the Space Maker stores are
freehold or long leasehold and six are leasehold stores with an
average remaining lease length of 15.4 years at 30 April 2017.
The Space Maker stores have now been rebranded and fully
integrated into the Group and trading performance is in line with
our expectations.
Portfolio Summary
The self-storage market has been growing consistently in the
last 15 years across many European countries but few regions offer
the unique characteristic of London and Paris, both of which
consist of large, wealthy and densely populated markets. In the
London region, the population is 13 million inhabitants with a
density of 5,200 inhabitants per square mile in the region, 11,000
per square mile in central London and up to 32,000 in the densest
boroughs.
The population of the Paris urban area is 10.7 million
inhabitants with a density of 9,300 inhabitants per square mile in
the urban area but 54,000 per square mile in the City of Paris and
first belt, where 72% of our French stores are located and which
has one of the highest population densities in the western world.
85% of the Paris region population live in central parts of the
city versus the rest of the urban area which compares with 60% in
the London region. There are currently c.240 storage centres within
the M25 as compared to only c.87 in the Paris urban area.
In addition, barriers to entry in these two important city
markets are high, due to land values and limited availability of
sites as well as planning regulation. This is the case for Paris
and its first belt in particular, which inhibits new development
possibilities.
Our combined operations in London and Paris, with 69 stores,
contribute GBP38.4m of revenue and GBP26.3m of store EBITDA in the
first half of the financial year and offer a unique exposure to the
two most attractive European self-storage markets.
Owned Store Portfolio London Rest
by Region & of UK Paris Group
South
East UK Total Total
Number of Stores 63 46 109 25 134
Let Square Feet (m
sq ft) 1.72 1.39 3.11 0.83 3.94
Maximum Lettable Area
(m sq ft) 2.45 2.12 4.57 1.07 5.64
Average Let Square
Feet per store (k
sq ft) 27 30 29 33 29
Average Store Capacity
(k sq ft) 39 46 42 43 42
Closing Occupancy 70.4
% % 65.5% 68.1% 77.3% 69.8%
Average Rate (GBP
per sq ft) 29.30 18.87 24.75 34.75 26.85
Revenue (GBP'm) 31.2 16.1 47.3 15.3 62.6
Average Revenue per
Store (GBP'm) 0.50 0.35 0.43 0.61 0.47
The reported totals have not been adjusted
for the impact of rounding
We have a strong position in both the UK and Paris markets
operating 109 stores in the UK, 63 of which are in London and the
South East, and 25 stores in Paris.
In the UK, 66% of our revenue is generated by our stores in
London and the South East. On average, our stores in London and the
South East are smaller than in the rest of the UK but the rental
rates achieved are materially higher enabling these stores to
typically achieve similar or better margins than the larger stores.
In London we operate 44 stores within the M25, more than any other
competitor.
In France, we have a leading position in the heart of the
affluent City of Paris market with eight stores branded as Une
Pièce en Plus ("UPP") ("A spare room") with more than twice the
number of stores of our two major competitors combined. 72% of the
UPP stores are located in a cluster within a five-mile radius of
the city centre, which facilitates strong operational and marketing
synergies as well as options to differentiate and channel customers
to the right store subject to their preference for convenience or
price affordability. The Parisian market has attractive
socio-demographic characteristics for self-storage and we believe
that UPP enjoys unique strategic strength in such an attractive
market.
Together, as at 30 April 2017 London, the South-East and Paris
represent 66% of our owned stores, 74% of our revenues, as well as
57% of our available capacity.
In addition, Safestore has the benefit of a leading national
presence in the UK regions where the stores are predominantly
located in the centre of key metropolitan areas such as Birmingham,
Manchester, Liverpool, Bristol, Glasgow and Edinburgh.
Market
The self-storage market in the UK and France remains relatively
immature compared to geographies such as the USA and Australia. The
Self-Storage Association ("SSA") Annual Survey (May 2017) confirmed
that self-storage capacity stands at 0.64 square feet per head of
population in the UK and 0.15 square feet per capita in France.
Whilst the Paris market density is greater than France, we estimate
it to be significantly lower than the UK at around 0.36 square feet
per inhabitant. This compared with 7.8 square feet per inhabitant
in the USA and 1.8 square feet in Australia.
While capacity increased significantly between 2007 and 2010
with respondents to the survey opening an average of 32 stores per
annum, new additions have been limited to an average of 19 stores
per annum between 2011 and 2016 (including container storage
openings).
New supply in London and Paris is likely to be limited in the
short and medium term as a result of planning restrictions and the
availability of suitable land.
Respondents to the survey indicated aspirations to develop an
average of 49 stores per annum from 2017 to 2019. Typically, actual
developments have averaged less than 50% of respondents'
aspirations although the 25 new openings in 2016 were closer than
usual to the previous year's aspirations. This recent history
suggests that c.25 to 40 new stores are likely to be added in the
coming year.
The supply in the UK market, according to the SSA survey,
remains relatively fragmented. Safestore is the leader by number of
stores with 109 wholly owned sites, followed by Big Yellow with 73
wholly owned stores, Access with 57 stores, Shurgard with 26
stores, Lok'n Store with 25 stores and Storage King with 25 stores.
In aggregate, the top ten leading operators account for 27% of the
UK store portfolio. The remaining c.1,000 self-storage outlets
(including 317 container based operations) are independently owned
in small chains or single units. In total there are 693 storage
businesses operating in the UK.
Our French Business, UPP, is mainly present in the core
wealthier and more densely populated inner Paris and first belt
areas, whereas our two main competitors, Shurgard and Homebox, have
a greater presence in the outskirts and second belt of Paris.
Consumer awareness of self-storage is increasing but remains
low, providing an opportunity for future industry growth. The SSA
survey indicated that 58% (58% in 2016) of consumers either knew
nothing about the service offered by self-storage operators or had
not heard of self-storage at all. The opportunity to grow
awareness, combined with limited new industry supply makes for an
attractive industry backdrop.
Self-storage is a brand-blind product. 62% of respondents were
unable to name a self-storage business in their local area. The
lack of relevance of brand in the process of purchasing a
self-storage product emphasises the need for operators to have a
strong online presence. This requirement for a strong online
presence was also reiterated by the SSA survey where 71% of those
surveyed (68% in 2016) confirmed that an internet search would be
their chosen means of finding a self-storage unit to contact,
whilst knowledge of a physical location of a store as reason for
enquiry was c.23% of respondents (c.28% in 2016).
There are numerous drivers of self-storage growth. Most private
and business customers need storage either temporarily or
permanently for different reasons at any point in the economic
cycle, resulting in a market depth that is in our view the reason
for its exceptional resilience. The growth of the market is driven
both by the fluctuation of economic conditions, which has an impact
on the mix of demand, and by growing awareness of the product.
Our domestic customers' need for storage is often driven by
lifestyle events such as births, marriages, bereavements, divorces
or by the housing market including house moves and developments and
moves between rental properties. Safestore has estimated that UK
owner-occupied housing transactions drive around 10-15% of the
Group's new lets. The SSA survey confirmed that only 28% of
domestic self-storage customers stored for reasons related to a
property move and this would include people renting
accommodation.
Our business customer base includes a range of businesses from
start-up online retailers through to multi-national corporates
utilising our national coverage to store in multiple locations
while maintaining flexibility in their cost base.
Business and Personal
Customers UK Paris
Personal
Customers
Numbers (% of
total) 72% 82%
Square feet occupied
(% of total) 52% 66%
Average Length
of Stay (months) 21.0 27.1
Business
Customers
Numbers (% of
total) 28% 18%
Square feet occupied
(% of total) 48% 34%
Average Length
of Stay (months) 30.7 31.5
Safestore's customer base is resilient and diverse and consists
of around 55,000 domestic, business and National Accounts customers
across London, Paris and the UK regions.
Business Model
Safestore's business model remains unchanged in the last
year.
The Group operates in a market with relatively low consumer
awareness. It is anticipated that this will increase over time as
the industry matures. To date, despite the financial crisis in
2007/08 and the implementation of VAT on self-storage in 2012, the
industry has been exceptionally resilient. In the context of
uncertain economic conditions as the UK approaches Brexit, the
industry remains well positioned with limited new supply coming
into the self-storage market.
With more stores inside London's M25 than any other operator and
a strong position in central Paris, Safestore has leading positions
in the two most important and demographically favourable markets in
Europe. In addition, our regional presence in the UK is unsurpassed
and contributes to the success of our industry leading National
Accounts business. In the UK, Safestore is the leading operator by
number of wholly owned stores.
Our capital-efficient portfolio of 134 wholly owned stores in
the UK and Paris consists of a mix of freehold and leasehold
stores. In order to grow our business and secure the best locations
for our facilities we have maintained a flexible approach to
leasehold and freehold developments.
Currently, one-third of our stores in the UK are leaseholds with
an average remaining lease length at 30 April 2017 of 13.2 years
(FY2016: 13.7 years). Although our property valuation for
leaseholds is conservatively based on future cash flows until the
next contractual lease renewal date, Safestore has a demonstrable
track record of successfully re-gearing leases several years before
renewal whilst at the same time achieving concessions from
landlords.
In England, we benefit from the Landlord and Tenant Act that
protects our rights for renewal except in case of redevelopment.
The vast majority of our leasehold stores have building
characteristics or locations in retail parks that make current
usage either the optimal and best use of the property or the only
one authorised by planning. We observe that our Landlords, who are
property investors, value the quality of Safestore as a tenant and
typically prefer to extend the length of the leases that they have
in their portfolio, enabling Safestore to maintain favourable
terms.
In Paris, where 44% of stores are leaseholds, our leases
typically benefit from the well enshrined Commercial Lease statute
that provides that tenants own the commercial property of the
premises and that they are entitled to renew their lease at a rent
that is indexed to the National Construction Index published by the
state. Taking into account this context, the valuer values the
French leaseholds based on an indefinite property tenure, similar
to freeholds.
Our experience is that being flexible in its approach has
enabled Safestore to operate from properties that would have been
otherwise unavailable and to generate strong returns on capital
invested.
Safestore excels in the generation of customer enquiries which
are received through a variety of channels including the internet,
telephone and 'walk-ins'. In the early days of the industry, local
directories and store visibility were key drivers of enquiries.
The Internet is now by far the dominant channel, accounting for
82% of our enquiries in the UK and 73% in France. Telephone
enquiries comprise 11% of the total (18% in France) and 'walk-ins'
amount to only 7% (9% in France). This key change is a clear
benefit to the leading national operators that possess the budget
and the management skills necessary to generate a commanding
presence in the major search engines. Safestore has developed a
leading digital marketing platform that has generated 54% enquiry
growth over the last four years. Towards the end of 2015 the Group
launched a new dynamic and mobile-friendly UK website, which has
achieved its aim of providing the customer with an even clearer,
more efficient experience. A similar website was launched in our
Paris business at the end of last year.
Although mostly generated online, our enquiries are
predominantly handled directly by the stores and, in the UK, we
have a Customer Support Centre ("CSC") which now handles 18% of all
enquiries, in particular when the store staff are busy handling
calls or outside of normal store opening hours.
Our pricing platform provides the store and CSC staff with
system-generated real time prices managed by our centrally based
yield management team. Local staff have certain levels of
discretion to flex the system-generated prices but this is
continually monitored.
Customer service standards are high and customer satisfaction
feedback is consistently very positive. Over the last twelve months
we have achieved over 95% customer satisfaction, based on
'excellent' or 'good' ratings as collected by Feefo via our
customer website.
The key drivers of sales success are the capacity to generate
enquiries in a digital world, the capacity to provide storage
locations that are conveniently located close to the customers'
requirements and the ability to maintain a consistently high
quality, motivated retail team that is able to secure customer
sales at an appropriate storage rate, all of which can be better
provided by larger, more efficient organisations.
We remain focused on business as well as domestic customers. Our
national network means that we are uniquely placed to further grow
the business customer market and in particular National Accounts.
Business customers in the UK now constitute 48% of our total space
let and have an average length of stay of 31 months. Within our
business customer category, our National Accounts business
continues to grow with storage revenue increasing by 80% compared
with 2013. The space let to National Accounts customers has
increased by 13% compared with 2016 and, at 383,000 sq ft,
constitutes 12% of our total occupied space in the UK business.
Approximately two-thirds of the space occupied by National Accounts
customers is outside London, demonstrating the importance and
quality of our well invested national estate.
The business now has in excess of 55,000 business and domestic
customers with an average length of stay of 31 months and 23 months
respectively.
The cost base of the business is relatively fixed. Each store
typically employs three staff. Our Group Head Office comprises
business support functions such as Yield Management, Property,
Marketing, HR, IT and Finance.
Since the completion of the rebalancing of our capital structure
in early 2014, the subsequent amendment and extension of our
banking facilities in Summer 2015 and the refinancing of all
facilities in May 2017, Safestore has secure financing, a strong
balance sheet and significant covenant headroom. This provides the
Group with financial flexibility and the ability to grow
organically and via carefully selected new development or
acquisition opportunities.
At 30 April 2017 we had 1.46m sq ft of unoccupied space in the
UK and 0.24m sq ft in France, equivalent to over 40 full new
stores. Our main focus is on filling the spare capacity in our
stores at optimally yield-managed rates. The operational leverage
of our business model will ensure that the bulk of the incremental
revenue converts to profit given the relatively fixed nature of our
cost base.
Trading Performance
UK- a solid performance
UK Operating Performance- 2017 2016 Change
like-for-like(2)
--------------------------- ------ ------ ----------
Revenue (GBP'm) 42.2 40.6 3.9%
--------------------------- ------ ------ ----------
EBITDA (GBP'm)(3) 21.6 20.4 5.9%
--------------------------- ------ ------ ----------
Closing Occupancy (let
sq ft- million)(4) 2.70 2.67 1.1%
--------------------------- ------ ------ ----------
Closing Occupancy (%
of MLA) 69.5% 68.6% +0.9ppts
--------------------------- ------ ------ ----------
Average Occupancy (let
sq ft- million)(4) 2.70 2.65 1.9%
--------------------------- ------ ------ ----------
Average Storage Rate
(GBP) 25.28 24.86 1.7%
--------------------------- ------ ------ ----------
UK Operating Performance- 2017 2016 Change
total
--------------------------- ------ ------ ----------
Revenue (GBP'm) 47.3 41.1 15.1%
--------------------------- ------ ------ ----------
EBITDA (GBP'm)(3) 24.3 20.8 16.8%
--------------------------- ------ ------ ----------
EBITDA (after leasehold
costs) (GBP'm) 21.2 18.7 13.4%
--------------------------- ------ ------ ----------
Closing Occupancy (let
sq ft- million)(4) 3.11 2.69 15.6%
--------------------------- ------ ------ ----------
Maximum Lettable Area
(MLA)(5) 4.57 3.92 16.6%
--------------------------- ------ ------ ----------
Closing Occupancy (%
of MLA) 68.1% 68.6% (0.5ppts)
--------------------------- ------ ------ ----------
Average Storage Rate
(GBP) 24.75 24.82 (0.3%)
--------------------------- ------ ------ ----------
Revenue in the UK has grown by 15.1% in the period reflecting
the acquisition of Space Maker in July 2016 and the opening of four
new stores in Chiswick, Wandsworth, Birmingham and Altrincham
between August and November 2016.
On a like-for-like basis, revenue grew by 3.9%. We take a
balanced approach to revenue management and our like-for-like
average occupancy growth of 1.9% was accompanied by a 1.7% increase
in the like-for-like average storage rate for the period.
Like-for-like closing occupancy was 69.5% (2016: 68.6%).
Our total closing occupancy was down 0.5ppts at 68.1% (2016:
68.6%) driven by the four new stores mentioned above and the fact
that the occupancy of Space Maker, which had not yet been acquired
in the first half of 2016, is lower than the average of the
Safestore portfolio. Similarly, the initial discounts on the newly
opened stores has resulted in the total average storage rate
reducing by 0.3% to GBP24.75 (2016: GBP24.82).
We remain focused on our cost base. During the period, our cost
base increased by around 2% or GBP0.4m on a like-for-like basis
largely driven by the variable costs related to incremental
revenue. Total costs increased by GBP2.7m reflecting the
acquisition of Space Maker and the opening of four new stores.
As a result EBITDA for the UK business was GBP24.3m (2016:
GBP20.8m), an increase of GBP3.5m or 16.8%.
Paris - a robust half year
Paris Operating Performance- 2017 2016 Change
like-for-like(2)
------------------------------ ------ ------ ----------
Revenue (EUR'm) 17.8 17.3 2.9%
------------------------------ ------ ------ ----------
EBITDA (EUR'm)(3) 11.6 11.3 2.7%
------------------------------ ------ ------ ----------
Closing Occupancy (let
sq ft- million)(4) 0.82 0.80 2.5%
------------------------------ ------ ------ ----------
Closing Occupancy (%
of MLA) 80.9% 79.4% +1.5ppts
------------------------------ ------ ------ ----------
Average Occupancy (let
sq ft- million)(4) 0.81 0.80 1.3%
------------------------------ ------ ------ ----------
Average Storage Rate
(EUR) 40.78 39.71 2.7%
------------------------------ ------ ------ ----------
Paris Operating Performance- 2017 2016 Change
total
------------------------------ ------ ------ ----------
Revenue (EUR'm) 17.9 17.3 3.5%
------------------------------ ------ ------ ----------
EBITDA (EUR'm)(3) 11.5 11.3 1.8%
------------------------------ ------ ------ ----------
EBITDA (after leasehold
costs) (EUR'm) 9.3 8.8 5.7%
------------------------------ ------ ------ ----------
Closing Occupancy (let
sq ft- million)(4) 0.83 0.80 3.8%
------------------------------ ------ ------ ----------
Maximum Lettable Area
(MLA)(5) 1.07 1.01 5.9%
------------------------------ ------ ------ ----------
Closing Occupancy (%
of MLA) 77.3% 79.4% (2.1ppts)
------------------------------ ------ ------ ----------
Average Storage Rate
(EUR) 40.57 39.71 2.2%
------------------------------ ------ ------ ----------
Revenue (GBP'm) 15.3 13.0 17.7%
------------------------------ ------ ------ ----------
Our Paris business had a solid first half of the year growing
like-for-like revenue by 2.9%. Pricing was robust and our
like-for-like average rate was up 2.7% for the period. Our
like-for-like average occupancy for the period was 1.3% ahead of
2016 and the closing occupancy ended the half-year up 1.5ppts at
80.9% (2016: 79.4%).
Our new store at Emerainville in the east of Paris opened on
time and on budget at the end of the 2016 financial year adding
60,000 sq ft of MLA to our portfolio. In addition, the extension of
our Longpont store, which added 22,600 sq ft of new space, was
completed in the period. Given that the new space has only recently
started to trade, there was a dilutive effect to total closing
occupancy at the period end.
The impact of Sterling being 12% weaker than in the comparative
period resulted in Sterling equivalent revenue growing by 17.7% for
the period.
We continue to pursue our proven strategy of growing the revenue
of our market leading Parisian portfolio by achieving an
appropriate balance of rate and occupancy growth and we are now in
the nineteenth year of uninterrupted revenue growth in local
currency.
The cost base in Paris remained well controlled during the year
and, as a result, EBITDA after leasehold costs in France grew to
EUR9.3m (2016: EUR8.8m), an improvement of EUR0.5m or 5.7% on
2016.
Frederic Vecchioli
14 June 2017
Financial Review
Underlying Income Statement
The table below sets out the Group's underlying results of
operations for the six months ended 30 April 2017 and the six
months ended 30 April 2016.
H1 H1
2017 2016 Mvmt
GBP'm GBP'm %
Revenue 62.6 54.1 15.7%
Underlying
costs (28.4) (24.8) 14.5%
------- -------
Underlying
EBITDA 34.2 29.3 16.7%
Leasehold
rent (5.0) (3.9) 28.2%
------- -------
Underlying EBITDA
after leasehold rent 29.2 25.4 15.0%
Depreciation (0.2) (0.2) 0.0%
Finance
charges (5.3) (5.0) 6.0%
------- -------
Underlying profit
before tax 23.7 20.2 17.3%
Current
tax (2.0) (1.6) 25.0%
------- -------
Cash tax
earnings 21.7 18.6 16.7%
======= =======
Average shares
in issue (m) 209.0 207.8
Underlying (cash tax
adjusted) EPS (p) 10.4 9.0 15.6%
Note: As the Group no longer incurs deferred tax on underlying
trading, EPRA earnings and EPRA EPS are now identical to cash tax
earnings and cash tax adjusted EPS respectively.
Management considers the above presentation of earnings to be
representative of the underlying performance of the business.
Underlying EBITDA increased by 16.7% to GBP34.2m (H1 2016:
GBP29.3m) reflecting a 15.7% increase in revenue less a 14.5%
increase in the underlying cost base (see below). The leasehold
rent charge has increased by 28.2% from GBP3.9m in H1 2016 to
GBP5.0m, principally reflecting the addition of six new leases
through the acquisition of the Space Maker business.
Finance charges increased by 6.0% from GBP5.0m in H1 2016 to
GBP5.3m in H1 2017, reflecting the increase in borrowings required
to finance the Space Maker acquisition in the second half of last
year and our new store developments.
Given the Group's REIT status in the UK, tax is normally only
payable in France. The current tax charge for the period increased
to GBP2.0m (H1 2016: GBP1.6m).
Management considers that the most representative earnings per
share ("EPS") measure is cash tax adjusted EPS, which increased by
15.6% to 10.4p (H1 2016: 9.0p). At constant exchange rates, cash
tax adjusted EPS would have been 10.0p, an increase of 11.1% since
H1 2016.
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the
consolidated income statement to underlying EBITDA.
H1 H1
2017 2016
GBP'm GBP'm
Operating
profit 64.6 56.9
Adjusted
for
- gain on investment
properties (30.8) (28.2)
- depreciation 0.2 0.2
- contingent
rent 0.2 0.1
- costs incurred relating
to corporate transactions - 0.3
Underlying
EBITDA 34.2 29.3
======= =======
The main reconciling item between operating profit and
underlying EBITDA is the gain on investment properties, which has
increased from GBP28.2m in H1 2016 to GBP30.8m in H1 2017, which
continues to reflect the benefit of our trading performance
improvements and cost controls. The Group's approach to the
valuation of its investment property portfolio at 30 April 2017 is
discussed below.
During H1 2016, the Group incurred GBP0.3m of costs relating to
corporate transactions, which are unrelated to the Group's trading
performance, so have been excluded from underlying EBITDA.
Underlying Profit by geographical region
The Group is organised and managed in two operating segments
based on geographical region. The table below details the
underlying profitability of each region.
H1 2017 H1 2016
Total Total
UK Paris (CER) UK Paris (CER)
GBP'm EUR'm GBP'm GBP'm EUR'm GBP'm
Revenue 47.3 17.9 60.8 41.1 17.3 54.1
Underlying cost
of sales (17.9) (5.0) (21.7) (15.4) (4.8) (19.0)
------- ------ ------- ------- ------ -------
Store EBITDA 29.4 12.9 39.1 25.7 12.5 35.1
Store EBITDA margin 62.2% 72.1% 64.3% 62.5% 72.3% 64.9%
Underlying administrative
expenses (5.1) (1.4) (6.2) (4.9) (1.2) (5.8)
Underlying EBITDA 24.3 11.5 32.9 20.8 11.3 29.3
EBITDA margin 51.4% 64.2% 54.1% 50.6% 65.3% 54.2%
Leasehold rent (3.1) (2.2) (4.8) (2.1) (2.5) (3.9)
Underlying EBITDA
after leasehold
rent 21.2 9.3 28.1 18.7 8.8 25.4
======= ====== ======= ======= ====== =======
EBITDA after leasehold
rent margin 44.8% 52.0% 46.2% 45.5% 50.9% 47.0%
UK Paris Total UK Paris Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Underlying EBITDA
after leasehold
rent (CER) 21.2 6.9 28.1 18.7 6.7 25.4
Adjustment to
actual exchange
rate - 1.1 1.1 - - -
Reported underlying
EBITDA after leasehold
rent 21.2 8.0 29.2 18.7 6.7 25.4
======= ====== ======= ======= ====== =======
Note: CER is Constant Exchange Rates (Euro denominated results
for the current period have been retranslated at the exchange rate
effective for the comparative period in order to present the
reported results on a more comparable basis).
Underlying EBITDA in the UK increased by GBP3.5m, or 16.8%, to
GBP24.3m (H1 2016: GBP20.8m), reflecting a 15.1% increase in
revenue offset partially by 13.3% increase the underlying cost
base, although on a like-for-like basis underlying costs grew by
only 2.0%. Underlying UK EBITDA after leasehold rent increased by
13.4% to GBP21.2m (H1 2016: GBP18.7m), but the margin decreased
from 45.5% in H1 2016 to 44.8% in the current year due to the
impact of the Space Maker acquisition and new store openings in the
second half of last year.
In Paris, underlying EBITDA increased by EUR0.2m, or 1.8%, to
EUR11.5m (H1 2016: EUR11.3m), reflecting a EUR0.6m increase in
revenue, arising from a 2.2% increase in the average storage rate
and a 1.3% increase in average occupancy. Underlying EBITDA after
leasehold rent in Paris increased by 5.7% to EUR9.3m (H1 2016:
EUR8.8m), and the margin improved from 50.9% in H1 2016 to 52.0% in
the current year as a result of a EUR0.3m decrease in rent arising
due to the favourable settlement of outstanding rent reviews.
The combined results of the UK and Paris delivered a 10.6%
increase in Group underlying EBITDA after leasehold rent at
constant exchange rates at Group level. Adjusting for a favourable
exchange impact of GBP1.1m in the current year, Group reported
underlying EBITDA after leasehold rent has increased by 15.0% or
GBP3.8m to GBP29.2m (H1 2016: GBP25.4m).
Revenue
Revenue for the Group is primarily derived from the rental of
self-storage space and the sale of ancillary products such as
insurance and merchandise (e.g. packing materials and padlocks) in
both the UK and Paris.
The split of the Group's revenues by geographical segment is set
out below for H1 2017 and H1 2016.
H1 % of H1 % of
2017 total 2016 total % change
GBP
UK 'm 47.3 76% 41.1 76% 15.1%
Paris
Local currency EUR'm 17.9 17.3 3.5%
Average exchange
rate EUR:GBP 1.168 1.325
Paris in
sterling GBP'm 15.3 24% 13.0 24% 17.7%
Total revenue 62.6 100% 54.1 100% 15.7%
====== ======= ====== ======= =========
The Group's reported revenue increased by 15.7% or GBP8.5m
during the period. The Group's occupied space was 450,000 sq ft
higher at 30 April 2017 (3.94 million sq ft) than at 30 April 2016
(3.49 million sq ft), with average occupancy during the period
12.4% higher at 3.90 million sq ft (H1 2016: 3.47 million sq ft),
and the reported average rental rate for the Group for the period
was 3.2% higher at GBP26.85 than in H1 2016 (GBP26.02).
On a like-for-like basis, adjusting for the impact of new and
closed stores and the acquisition of Space Maker, the Group's
revenue has increased by 7.1% since the comparative period.
Adjusting for a favourable exchange impact in the current year,
revenue increased by 3.7% on a constant currency basis.
In the UK reported revenue increased by GBP6.2m or 15.1%,
occupancy increased by 15.6% to 3.11 million sq ft at 30 April 2017
(H1 2016: 2.69 million sq ft) and the average rental rate decreased
0.3% to GBP24.75 (H1 2016: GBP24.82). The average space occupied
during the period was up 15.7% compared with H1 2016 at 3.09
million sq ft (H1 2016: 2.67 million sq ft).
On a like-for-like basis, adjusting for the acquisition of Space
Maker and new and closed stores, UK revenue increased by GBP1.6m or
3.9% arising from a 1.7% increase in the average store rate and
1.9% increase in average occupancy.
In Paris, revenue increased by EUR0.6m or 3.5%. The average Euro
exchange rate for H1 2017 was EUR1.168:GBP1 compared with
EUR1.325:GBP1 in H1 2016 resulting in a GBP1.8m benefit at the
revenue level when comparing to a constant currency basis. Further
adjusting for the impact of the Emerainville store opening in the
second half of last year, like-for-like revenue in constant
currency increased by GBP0.4m or 3.1% to GBP13.4m (H1 2016:
GBP13.0m)
Paris closing occupancy at 30 April 2017 has increased by 3.8%
since 30 April 2016 to 0.83 million sq ft and average occupancy for
the period of 0.81 million sq ft is a 1.3% increase compared to H1
2016. The average rental rate in France was EUR40.57 for the
period, an increase of 2.2% on H1 2016 (EUR39.71).
Analysis of Cost Base
Cost of sales
The table below details the key movements in cost of sales
between H1 2016 and H1 2017.
H1 H1
Cost of sales 2017 2016
GBP'm GBP'm
Reported
cost of sales (22.5) (19.3)
Adjusted
for:
Depreciation 0.2 0.2
Contingent
rent 0.2 0.1
Underlying cost
of sales (22.1) (19.0)
Underlying cost of
sales for H1 2016 (19.0)
Closed store cost
of sales 0.1
Underlying cost of
sales for H1 2016 (LFL) (18.9)
Store maintenance and
business rates (0.2)
Employee remuneration and
volume related cost of sales (0.1)
Underlying cost of sales
for H1 2017 (LFL CER) (19.2)
Space Maker and new
store cost of sales (2.5)
Underlying cost of
sales for H1 2017 (CER) (21.7)
Foreign exchange (0.4)
Underlying cost of
sales for H1 2017 (reported) (22.1)
=======
In order to arrive at underlying cost of sales adjustments are
made to remove the impact of depreciation and contingent rent.
Adjusting for the impact of new and closed stores and the
acquisition of Space Maker, underlying cost of sales increased by
GBP0.3m, to GBP19.2m (H1 2016: GBP18.9m) on a constant currency
basis. The cost of sales attributable to new and acquired stores,
including Space Maker, is GBP2.5m. Reflecting the impact of
exchange rate movements, reported underlying cost of sales
increased by GBP3.1m or 16.3% to GBP22.1m in H1 2017.
Administrative Expenses
The table below reconciles reported administrative expenses to
underlying administrative expenses and details the key movements in
underlying administrative expenses between H1 2016 and H1 2017.
Administrative H1 H1
expenses 2017 2016
GBP'm GBP'm
Reported administrative
expenses (6.3) (6.1)
Adjusted
for:
Exceptionals and non-underlying
items - 0.3
Underlying administrative
expenses (6.3) (5.8)
Underlying administrative
expenses for H1 2016 (5.8)
Employee remuneration (0.3)
Other administrative
costs (0.1)
Underlying administrative
expenses for H1 2017 (CER) (6.2)
Foreign exchange (0.1)
Underlying administrative
expenses for H1 2017 (reported) (6.3)
======
In order to arrive at underlying administrative expenses
adjustments are made to remove the impact of exceptional items,
corporate transaction costs and changes in the fair value of
derivatives.
Underlying administrative expenses increased by GBP0.5m to
GBP6.3m (H1 2016: GBP5.8m). The increase arose primarily due to
increased employee remuneration (GBP0.3m) as a result of increased
headcount and lower vacancy rates, with other administrative costs
including professional fees and IT costs arising from the new and
acquired stores contributing a further GBP0.1m.
Investment Properties
A full external valuation of the store portfolio is undertaken
by the Group on an annual, rather than a bi-annual, basis. At 30
April 2017, a sample of the Group's largest properties,
representing approximately 42% of the value of the Group's
investment property portfolio at 31 October 2016, has been valued
by the Group's external valuers, Cushman & Wakefield LLP
("C&W"). In addition, at the same date, the directors have
prepared estimates of fair values for the remaining 58% of the
Group's investment property portfolio, updating 31 October 2016
valuations to incorporate latest assumptions for estimated
absorption, revenue growth and capitalisation rates to reflect
current market conditions and trading.
As a result of this exercise, the net gain or loss on investment
properties during the period was as follows.
H1 H1
2017 2016
GBP'm GBP'm
Revaluation of investment
properties 33.4 30.5
Revaluation of investment
properties under construction - (0.2)
Depreciation on leasehold
properties (2.6) (2.1)
Gain on investment
properties 30.8 28.2
====== ======
The movement on investment properties reflects the increased
value of the Group's store portfolio as a result of the continuing
trading performance improvement. The UK business contributed
GBP24.7m of the GBP33.4m net revaluation gain, with GBP8.7m arising
in France.
Operating profit
Reported operating profit increased by GBP7.7m from GBP56.9m in
H1 2016 to GBP64.6m in H1 2017, primarily reflecting the GBP4.9m
improvement in underlying EBITDA plus the GBP2.6m higher investment
property gain.
Net finance costs
Net finance costs consist of interest payable, interest on
obligations under finance leases, fair value movements on
derivatives and exchange gains or losses.
H1 H1
2017 2016
GBP'm GBP'm
Net bank interest
payable (5.3) (5.0)
Interest on obligations
under finance leases (2.2) (1.7)
Fair value movement
on derivatives (7.6) 2.8
Net exchange
gains/(losses) 5.4 (4.0)
Unwinding of discount on Capital
Goods Scheme receivable 0.1 0.1
Net finance
costs (9.6) (7.8)
====== ======
Underlying finance charge
The underlying finance charge (net bank interest payable)
increased to GBP5.3m, from GBP5.0m in H1 2016. The increase
reflects a higher level of borrowings in the current year,
primarily arising on the acquisition of Space Maker in the second
half of last year, which was partly mitigated by a 0.25% reduction
in UK interest rates in August 2016.
The Group announced a refinancing after the period end, on 19
May 2017, which is discussed below. However, based on the drawn
debt position as at 30 April 2017, the effective interest rate is
analysed as follows:
Facility Drawn Hedged Hedged Bank Hedged Floating Total
GBP/EUR/$'m GBP'm GBP'm % Margin Rate Rate Rate
UK Term Loan GBP126.0 GBP126.0 GBP100.0 79% 1.50% 1.34% 0.26% 2.62%
UK Revolver GBP125.0 GBP61.0 - - 1.50% - 0.26% 1.76%
UK Revolver-
non-utilisation GBP64.0 - - - 0.60% - - 0.60%
Euro Revolver EUR70.0 GBP38.7 GBP25.2 65% 1.50% 0.31% (0.33%) 1.58%
Euro Revolver-
non-utilisation EUR24.0 - - - 0.60% - - 0.60%
US Private
Placement 2019 $65.6 GBP50.7 GBP50.7 100% 5.52% - - 5.83%
US Private
Placement 2024 $47.3 GBP36.5 GBP36.5 100% 6.29% - - 6.74%
Unamortised
finance costs - (GBP1.5) - - - - - -
Total GBP397.1 GBP311.4 GBP212.4 68% 3.52%
============ ========= ========= ======= ======
The UK term loan of GBP126m was fully drawn as at 30 April 2017
and attracted a bank margin of 1.50%. The Group has interest rate
hedge agreements in place to June 2020 swapping LIBOR on GBP100.0m
at a weighted average effective rate of 1.34%.
The Group's committed UK revolver facility was GBP125m, of which
GBP61m was drawn as at 30 April 2017. Drawn amounts also attracted
a bank margin of 1.50%, and the Group paid a non-utilisation fee of
0.6% on undrawn balances.
The Euro revolver of EUR70m had EUR46m (GBP38.7m) drawn as at 30
April 2017, following the drawdown of EUR4m during the period to
finance expansionary capital expenditure. It attracted a bank
margin of 1.50%. The Group has interest rate hedges in place to
June 2020 swapping EURIBOR on EUR30m at an effective rate of
0.309%. In addition, the Group paid a non-utilisation fee of 0.6%
on undrawn balances.
The US Private Placement Notes were fully hedged at 5.83% for
the 2019 notes and 6.74% for the 2024 notes.
The hedge arrangements provided cover for 68% of the Group's
drawn debt. Overall, the Group had an effective interest rate on
its outstanding borrowings of 3.52% at 30 April 2017 (H1 2016:
4.08%).
Non-underlying finance charge
Interest on finance leases was GBP2.2m (H1 2016: GBP1.7m) and
reflects part of the leasehold rental payment. The balance of the
leasehold payment is charged through the gain or loss on investment
properties line and contingent rent in the income statement.
Overall, the leasehold rent charge increased from GBP3.9m in H1
2016 to GBP5.0m in H1 2017, principally reflecting the six
additional leases acquired with the Space Maker business in the
second half of last year.
Net finance costs reflects GBP5.4m of net exchange gains (H1
2016: net exchange losses of GBP4.0m) arising primarily on
retranslation of the Group's US dollar denominated borrowings. This
partly offsets the net fair value loss on derivatives of GBP7.6m
(H1 2016: net gain of GBP2.8m), which includes a GBP7.9m loss (H1
2016: GBP4.4m gain) in respect of cross currency swaps taken out by
the Group to hedge against movements in the US dollar denominated
borrowings.
Refinancing in May 2017
On 19 May 2017, after the period end, the Group announced the
refinancing of its US Private Placement Notes ("USPP") and an
amendment and extension of its existing bank facilities to extend
the average maturity and lower the cost of the Group's debt
financing. The key terms of the new and amended arrangements, which
came into effect on 31 May 2017, are as follows:
US Private Placement Notes
-- The previous $65.6m 5.83% 2019 USPP and $47.3m 6.74% 2024 USPP were repaid in full;
-- New Euro and Sterling denominated USPP notes were issued with
the following tenor and coupons:
o EUR50.9m 7 year notes at a coupon of 1.59%;
o EUR74.1m 10 year notes at a coupon of 2.00%; and
o GBP50.5m 12 year notes at a coupon of 2.92%.
Amendment and Extension of Bank Facilities
-- The previous UK and Euro revolving credit facilities were
extended by two years from June 2020 to June 2022 with an option
(on an uncommitted basis) to extend for a further year with the
previous GBP126m term loan cancelled.
-- The amended facilities comprise:
o a GBP190m revolving credit facility of which GBP117m is drawn;
and
o a EUR70m revolving facility of which EUR46m is drawn.
-- The margin on the amended facilities was reduced by 25 bps from 150 bps to 125 bps.
-- Similarly, the non-utilisation fee on the undrawn facilities reduced from 0.6% to 0.5%.
-- The Group also has the option (on an uncommitted basis) to
increase the quantum of the sterling revolving credit facility by
GBP60m.
The Group has paid a 'make-whole' payment to existing USPP
noteholders of GBP12.4m and broke the Sterling/Dollar
cross-currency swap relating to the existing USPP notes, leading to
the Group receiving GBP13.9m, being the mark to market value of the
swap which was in the Group's favour and which was carried at that
value at the date of breakage. Exceptional finance charges to be
reported by the Group in respect of the refinancing in the second
half of the year are estimated to be c.GBP16m, comprising the
GBP12.4m 'make-whole' payment, with the balance relating to fees
and the write off of previous unamortised issue costs. The
refinancing was broadly cash flow neutral.
Had the refinanced arrangements been in place at 30 April 2017,
on a pro forma basis the Group's effective interest rate would have
been as follows:
Facility Drawn Hedged Hedged Bank Hedged Floating Total
GBP/EUR/$'m GBP'm GBP'm % Margin Rate Rate Rate
UK Revolver GBP190.0 GBP117.0 GBP100.0 85% 1.25% 1.34% 0.25% 2.43%
UK Revolver-
non-utilisation GBP73.0 - - - 0.50% - - 0.50%
Euro Revolver EUR70.0 GBP38.7 GBP25.2 65% 1.25% 0.31% (0.33%) 1.34%
Euro Revolver-
non-utilisation EUR24.0 - - - 0.50% - - 0.50%
US Private
Placement 2024 EUR50.9 GBP42.8 GBP42.8 100% 1.59% - - 1.59%
US Private
Placement 2027 EUR74.1 GBP62.3 GBP62.3 100% 2.00% - - 2.00%
US Private
Placement 2029 GBP50.5 GBP50.5 GBP50.5 100% 2.92% - - 2.92%
Total GBP404.5 GBP311.3 GBP280.8 90% 2.32%
============ ========= ========= ======= ======
Note: the above table has been prepared on a pro forma basis,
using exchange rates at 30 April 2017 for comparison.
The Group's pro forma annual underlying finance charge will,
over a full year, reduce by c.GBP3m per annum and the Group's
overall ongoing average cost of debt will reduce by c.120 bps to
2.32% per annum.
Tax
The tax credit/(charge) for the period is analysed below:
H1 H1
Tax credit/(charge) 2017 2016
GBP'm GBP'm
Underlying current
tax (2.0) (1.6)
Current
tax (2.0) (1.6)
------ ------
Tax on investment
properties movement (2.9) (1.9)
Tax on revaluation
of interest rate swaps (0.1) 0.1
Impact of tax rate
change in France 8.7 -
Other 0.1 -
Deferred
tax 5.8 (1.8)
------ ------
Tax credit/(charge) 3.8 (3.4)
====== ======
The income tax credit in the period was GBP3.8 (H1 2016: GBP3.4m
charge).
In the UK the Group is a REIT, so the tax charge relates to the
Paris business. The current tax charge for the period amounted to
GBP2.0m (H1 2016: GBP1.6m).
In France, the 2017 Finance Bill, which was adopted in December
2016, introduced a reduction in the income tax rate from 33.33% to
28.0%, applicable progressively from 2017 to 2020 according to size
of company. As a result, the deferred tax credit/(charge) includes
a non-recurring deferred tax credit of GBP8.7m (H1 2016: GBPnil)
relating to this change.
Profit after tax
The profit after tax for the period was GBP58.8m, compared with
GBP45.7m in H1 2016. Basic EPS was 28.1 pence (H1 2016: 22.0 pence)
and diluted EPS was 28.0 pence (H1 2016: 21.8 pence). Management
considers cash tax adjusted EPS to be more representative of the
underlying EPS performance of the business and this is discussed
above.
Dividends
The Board has announced an interim dividend of 4.2 pence per
share, an increase of 16.7% on the interim dividend paid last year
of 3.6 pence. This will amount to a dividend payment of GBP8.8m (H1
2016: GBP7.5m). The dividend will be paid on 18 August 2017 to
shareholders who are on the Company's register at the close of
business on 14 July 2017. The ex-dividend date will be 13 July
2017. 50% (H1 2016: 50%) of the dividend will be paid as a property
income dividend ("PID").
Property Valuation
As discussed above, a sample of the Group's largest properties,
representing approximately 42% of the value of the Group's
investment property, has been valued by the Group's external
valuers and the directors have prepared estimates of fair values
for the remaining 58% of the Group's investment property
portfolio.
UK Paris Total Paris
GBP'm GBP'm GBP'm EUR'm
Value as at 1
November 2016 699.7 243.6 943.3 270.9
Currency translation
movement - (15.9) (15.9) -
Additions 1.9 1.8 3.7 2.0
Disposals (3.4) - (3.4) -
Reclassifications 10.9 - 10.9 -
Revaluation 24.7 8.7 33.4 10.3
Value at 30 April
2017 733.8 238.2 972.0 283.2
====== ======= ======= ======
The table above summarises the movement in the valuations.
The exchange rate at 30 April 2017 was EUR1.19:GBP1 compared to
EUR1.11:GBP1 at 31 October 2016. This movement in the foreign
exchange rate has resulted in a GBP15.9m adverse currency
translation movement in the period, reversing some of the
favourable translation movements experienced in the prior year.
This impacts net asset value ("NAV") but has no impact on the loan
to value ("LTV") covenant as the assets in Paris are tested in
Euro.
Despite the GBP15.9m exchange loss described above, the Group's
property portfolio valuation has increased by GBP28.7m from the
valuation of GBP943.3m at 31 October 2016. This reflects the gain
on valuation of GBP33.4m plus additions of GBP14.6m (including the
reclassification of Chiswick from investment properties under
construction), less the GBP3.4m disposal of our old site in
Birmingham.
The value of the Company's pipeline of expansion stores of
GBP8.3m as at 30 April 2017, reflects the development sites at
Mitcham in London and Combs-la-Ville in Paris, both of which were
acquired during the period.
The adjusted EPRA NAV per share is 314 pence, an increase of
4.7% since 31 October 2016, reflecting the revaluation gain and
additions described above, less the impact of exchange losses
reported for the period.
Gearing and Capital Structure
As at 30 April 2017, the Group's borrowings comprised bank
borrowing facilities, made up of a UK term loan and revolving
facilities in the UK and France, as well as a US Private Placement.
As noted above, the Group has refinanced its facilities since the
period end.
Net debt (including finance leases and cash) stood at GBP360.7m
at 30 April 2017, a decrease of GBP8.5m during the period from
GBP369.2m at 31 October 2016. Total capital (net debt plus equity)
increased from GBP956.6m at 31 October 2016 to GBP980.9m at 30
April 2017. The net impact is that the gearing ratio has reduced
from 39% to 37% in the period.
Management also measures gearing with reference to its loan to
value ("LTV") ratio defined as gross debt (excluding finance
leases, but adjusted for the fair value of the US dollar cross
currency swaps) as a proportion of the valuation of investment
properties and investment properties under construction (excluding
finance leases). At 30 April 2017 the Group LTV ratio was 30%
compared with 31% at 31 October 2016.
Prior to the refinancing in May 2017, the Group's GBP126m UK
term loan facility and GBP125m UK revolver both ran to June 2020
and attracted a margin of 1.50%. The amount drawn under the UK
revolver was GBP61m at both 30 April 2017 and 31 October 2016,
although amounts totalling GBP14m were both drawn and repaid during
the period.
The Group's Euro revolver remains EUR70m, of which EUR46m had
been drawn as at 30 April 2017, following the drawdown of EUR4m
during the period. Prior to the refinancing, it also ran to June
2020 and attracted a margin of 1.50%.
Of the US private placement debt issued in 2012 which totalled
$113 million, $66 million was issued at 5.52% (swapped to 5.83%)
with 2019 maturity and $47 million was issued at 6.29% (swapped to
6.74%) with 2024 maturity.
Borrowings under both the previous and refinanced loan
facilities are subject to certain financial covenants. The UK bank
facilities and the US private placement share interest cover and
LTV covenants. The interest cover requirement is set at a ratio of
EBITDA:interest of 2.4:1, and the actual interest cover for the
period to 30 April 2017 was 5.5:1.
The LTV covenant for the UK bank facilities and private
placement is set at 60% and is calculated by reference to the value
of designated properties in the UK. The LTV covenant is also 60%
for the Euro revolver in France, calculated by reference to the
value of designated French freehold properties. As at 30 April
2017, there is significant headroom in both the UK LTV and the
French LTV covenant calculations.
The Group is in compliance with its covenants at 30 April 2017
and, based on forecast projections, is expected to be in compliance
for a period in excess of twelve months from the date of this
report.
Cash flow
The table below sets out the cash flow of the business in H1
2017 and H1 2016.
H1 H1
2017 2016
GBP'm GBP'm
Underlying
EBITDA 34.2 29.3
Working capital/exceptionals/other 1.4 (0.1)
Operating cash
inflow 35.6 29.2
Interest
payments (5.8) (4.7)
Leasehold rent
payments (5.0) (3.9)
Tax payments (1.6) (0.9)
Free cash flow (before investing
and financing activities) 23.2 19.7
Capital expenditure
- investment properties (13.8) (9.2)
Capital expenditure - property,
plant and equipment (0.3) (0.4)
Proceeds from disposal
- investment properties 3.4 -
Net cash flow after
investing activities 12.5 10.1
Dividends
paid (14.7) (12.1)
Net drawdown/(repayment)
of borrowings 3.4 (0.8)
Debt issuance
costs - (0.4)
Net decrease
in cash 1.2 (3.2)
======= =======
Operating cash flow increased by GBP6.4m in the period,
principally reflecting the GBP4.9m increase in underlying
EBITDA.
Free cash flow (before investing and financing activities) grew
by 17.8% to GBP23.2m (H1 2016: GBP19.7m) reflecting the stronger
trading performance. Interest payments were GBP1.1m higher than the
prior year due to the increased interest charge, but also due to
timing differences arising from the scheduling of payments in
anticipation of our refinancing.
Investing activities has increased by GBP1.1m to GBP10.7m (H1
2016: GBP9.6m). In the current year, net capital expenditure
principally relates to acquisition of new sites at Mitcham in
London and Combs-la-Ville in Paris, less the GBP3.4m disposal of
our old site in Birmingham.
Dividends paid to shareholders increased from GBP12.1m in H1
2016 to GBP14.7m in H1 2017, and the Group drew a net GBP3.4m of
borrowings, primarily to finance capital expenditure.
Consolidated income statement
for the six months ended 30 April 2017
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
------------------------------------------------------------------ ----- ------------ ------------ ------------
Revenue 4 62.6 54.1 115.4
Cost of sales (22.5) (19.3) (40.9)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Gross profit 40.1 34.8 74.5
Administrative expenses (6.3) (6.1) (12.5)
Negative goodwill on acquisition of subsidiary - - 5.6
------------------------------------------------------------------ ----- ------------ ------------ ------------
Underlying EBITDA 4 34.2 29.3 64.2
Exceptional items - - 4.3
Costs incurred relating to corporate transactions - (0.3) -
Depreciation and contingent rent (0.4) (0.3) (0.9)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Operating profit before gain on investment properties 33.8 28.7 67.6
Gain on investment properties 10 30.8 28.2 41.7
------------------------------------------------------------------ ----- ------------ ------------ ------------
Operating profit 64.6 56.9 109.3
Finance income 5 5.7 4.5 21.0
Finance expense 5 (15.3) (12.3) (35.4)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Profit before income tax 4 55.0 49.1 94.9
Income tax credit/(charge)* 6 3.8 (3.4) (7.5)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Profit for the period 58.8 45.7 87.4
------------------------------------------------------------------ ----- ------------ ------------ ------------
Earnings per share for profit attributable to the equity holders
------------------------------------------------------------------ ----- ------------ ------------ ------------
- basic (pence) 9 28.1 22.0 42.0
------------------------------------------------------------------ ----- ------------ ------------ ------------
- diluted (pence) 9 28.0 21.8 41.7
------------------------------------------------------------------ ----- ------------ ------------ ------------
All items in the income statement relate to continuing
operations.
* Includes a deferred tax credit of GBP8.7m reflecting changes
in the tax rate applicable in France (30 April 2016 and 31 October
2016: GBPnil).
Underlying EBITDA is defined as operating profit before
exceptional items, corporate transaction costs, change in fair
value of derivatives, gain/loss on investment properties,
contingent rent and depreciation.
An interim dividend of 4.2 pence per ordinary share has been
declared for the period ended 30 April 2017 (30 April 2016: 3.6
pence).
Consolidated statement of comprehensive income
for the six months ended 30 April 2017
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------------------------- ----------- ----------- -----------
Profit for the period 58.8 45.7 87.4
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss
Currency translation differences (9.8) 10.8 29.4
Total other comprehensive income, net of tax (9.8) 10.8 29.4
--------------------------------------------------------------- ----------- ----------- -----------
Total comprehensive income for the period 49.0 56.5 116.8
--------------------------------------------------------------- ----------- ----------- -----------
Consolidated balance sheet
as at 30 April 2017
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
----------------------------------------- ---- ----------- ----------- ----------
Non-current assets
Investment properties 10 972.0 826.6 943.3
Interests in leasehold properties 10 55.6 49.1 58.9
Investment properties under construction 10 8.3 12.0 10.9
Property, plant and equipment 2.0 1.8 2.0
Derivative financial instruments 14 13.0 4.3 20.9
Deferred tax assets 7 0.1 0.2 0.2
Other receivables 2.1 3.5 2.1
1,053.1 897.5 1,038.3
----------------------------------------- ---- ----------- ----------- ----------
Current assets
Inventories 0.2 0.2 0.2
Trade and other receivables 26.4 22.4 23.0
Cash and cash equivalents 6.3 11.2 5.4
----------------------------------------- ---- ----------- ----------- ----------
32.9 33.8 28.6
----------------------------------------- ---- ----------- ----------- ----------
Total assets 1,086.0 931.3 1,066.9
----------------------------------------- ---- ----------- ----------- ----------
Current liabilities
Trade and other payables (44.7) (40.8) (41.2)
Current income tax liabilities (3.4) (1.5) (3.2)
Obligations under finance leases (8.9) (7.8) (9.4)
(57.0) (50.1) (53.8)
----------------------------------------- ---- ----------- ----------- ----------
Non-current liabilities
Bank borrowings 13 (311.4) (255.7) (315.7)
Derivative financial instruments 14 (3.1) (2.4) (3.4)
Deferred tax liabilities 7 (47.6) (47.9) (57.1)
Obligations under finance leases (46.7) (41.3) (49.5)
(408.8) (347.3) (425.7)
----------------------------------------- ---- ----------- ----------- ----------
Total liabilities (465.8) (397.4) (479.5)
----------------------------------------- ---- ----------- ----------- ----------
Net assets 620.2 533.9 587.4
----------------------------------------- ---- ----------- ----------- ----------
Shareholders' equity
Ordinary shares 15 2.1 2.1 2.1
Share premium 60.1 60.0 60.1
Translation reserve 6.8 (2.0) 16.6
Retained earnings 551.2 473.8 508.6
----------------------------------------- ---- ----------- ----------- ----------
Total equity 620.2 533.9 587.4
----------------------------------------- ---- ----------- ----------- ----------
The notes set out below form an integral part of this condensed
consolidated interim financial information.
Condensed consolidated statement of changes in equity
for the six months ended 30 April 2017
Share Share Translation Retained Total
capital premium reserve earnings equity
GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- --------- ------------ ---------- --------
At 1 November 2016 2.1 60.1 16.6 508.6 587.4
Total comprehensive
income for the period - - (9.8) 58.8 49.0
Transactions with
owners in their capacity
as owner:
Dividends (note 8) - - - (16.8) (16.8)
Employee share options - - - 0.6 0.6
--------------------------- --------- --------- ------------ ---------- --------
At 30 April 2017 2.1 60.1 6.8 551.2 620.2
--------------------------- --------- --------- ------------ ---------- --------
Condensed consolidated statement of changes in equity
for the six months ended 30 April 2016
Share Share Translation Retained Total
capital premium reserve earnings Equity
GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- --------- ------------ ---------- --------
At 1 November 2015 2.1 60.0 (12.8) 441.3 490.6
Total comprehensive
income for the period - - 10.8 45.7 56.5
Transactions with
owners in their capacity
as owner:
Dividends (note 8) - - - (13.8) (13.8)
Employee share options - - - 0.6 0.6
--------- --------- ------------ ---------- --------
At 30 April 2016 2.1 60.0 (2.0) 473.8 533.9
--------------------------- --------- --------- ------------ ---------- --------
Condensed consolidated statement of changes in equity
for the year ended 31 October 2016
Share Share Translation Retained Total
capital premium reserve earnings Equity
GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- --------- ------------ ---------- --------
At 1 November 2015 2.1 60.0 (12.8) 441.3 490.6
Total comprehensive
income for the year - - 29.4 87.4 116.8
Transactions with
owners in their capacity
as owner:
Dividends (note 8) - - - (21.3) (21.3)
Increase in share
capital - 0.1 - - 0.1
Employee share options - - - 1.2 1.2
--------------------------- --------- --------- ------------ ---------- --------
At 31 October 2016 2.1 60.1 16.6 508.6 587.4
--------------------------- --------- --------- ------------ ---------- --------
Consolidated cash flow statement
for the six months ended 30 April 2017
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- -----------
Profit before income tax 55.0 49.1 94.9
Gain on the revaluation of investment properties (30.8) (28.2) (41.7)
Negative goodwill on acquisition of subsidiary - - (5.6)
Depreciation 0.2 0.2 0.4
Net finance expense 9.6 7.8 14.4
Employee share options 0.6 0.6 1.2
Increase in trade and other receivables (3.8) (2.4) (0.3)
Increase/(decrease) in trade and other payables 4.6 2.0 (1.4)
Cash flows from operating activities 35.4 29.1 61.9
Interest paid (8.0) (6.4) (13.2)
Tax paid (1.6) (0.9) (1.7)
----------------------------------------------------- ----------- ----------- -----------
Net cash inflow from operating activities 25.8 21.8 47.0
----------------------------------------------------- ----------- ----------- -----------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired - - (41.8)
Expenditure on investment and development properties (13.8) (9.2) (28.3)
Proceeds in respect of Capital Goods Scheme - - 1.5
Purchase of property, plant and equipment (0.3) (0.4) (0.8)
Proceeds from disposal of investment properties 3.4 - -
Net cash outflow from investing activities (10.7) (9.6) (69.4)
----------------------------------------------------- ----------- ----------- -----------
Cash flows from financing activities
Issue of share capital - - 0.1
Equity dividends paid (14.7) (12.1) (21.3)
Proceeds from borrowings 17.4 5.0 58.4
Debt issuance costs - (0.4) (0.4)
Finance lease principal payments (2.6) (2.1) (4.6)
Repayment of borrowings (14.0) (5.8) (19.8)
Net cash (outflow)/inflow from financing activities (13.9) (15.4) 12.4
----------------------------------------------------- ----------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents 1.2 (3.2) (10.0)
Exchange (loss)/gain on cash and cash equivalents (0.3) 0.6 1.6
Opening cash and cash equivalents 5.4 13.8 13.8
----------------------------------------------------- ----------- ----------- -----------
Closing cash and cash equivalents 6.3 11.2 5.4
----------------------------------------------------- ----------- ----------- -----------
Reconciliation of net cash flow to movement in net debt
for the six months ended 30 April 2017
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------------------------------------- ----------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents (after exchange
adjustments) 0.9 (2.6) (8.4)
Decrease/(increase) in debt financing 7.6 (8.2) (78.0)
------------------------------------------------------------------------------- ----------- ----------- -----------
Decrease/(increase) in net debt 8.5 (10.8) (86.4)
Net debt at start of period (369.2) (282.8) (282.8)
------------------------------------------------------------------------------- ----------- ----------- -----------
Net debt at end of period (360.7) (293.6) (369.2)
------------------------------------------------------------------------------- ----------- ----------- -----------
Notes to the interim report for the six months ended 30 April
2017
1 General information
The Company is a public limited company incorporated in Great
Britain and domiciled in the UK. The address of its registered
office is Brittanic House, Stirling Way, Borehamwood, WD6 2BT.
The Company is listed on the London Stock Exchange.
This interim report was approved for issue on 14 June 2017.
This condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. The full accounts of Safestore Holdings
plc for the year ended 31 October 2016, which received an
unqualified report from the auditors, and did not contain a
statement under S.498(2) or (3) of the Companies Act 2006, were
filed with the Registrar of Companies on 23 March 2017.
This condensed consolidated interim financial information for 30
April 2017 and 30 April 2016 is unaudited. The interim financial
information for 30 April 2017 has been reviewed by the auditors and
their Independent Review report is included within this financial
information.
2 Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 April 2017 has been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority (previously the Financial Services Authority) and with
International Accounting Standard 34 'Interim Financial Reporting'
(IAS 34) as adopted by the European Union.
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than twelve months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing this condensed consolidated interim financial
information.
The condensed consolidated interim financial information should
be read in conjunction with the annual financial statements for the
year ended 31 October 2016, which have been prepared in accordance
with IFRS as adopted by the European Union.
3 Accounting policies
The condensed consolidated interim financial information has
been prepared on the basis of the accounting policies expected to
apply for the financial year to 31 October 2017 applicable to
companies under IFRS. The IFRS and IFRIC interpretations as adopted
by the European Union that will be applicable at 31 October 2017,
including those that will be applicable on an optional basis, are
not known with certainty at the time of preparing these interim
financial statements. Thus the accounting policies adopted in these
interim financial statements may be subject to revision to reflect
further IFRS, IFRIC interpretations and pronouncements issued
between 14 June 2017 and publication of the annual IFRS financial
statements for the year ending 31 October 2017.
The accounting policies and presentation applied are consistent
with those in the annual financial statements for the year ended 31
October 2016, as described in those financial statements. The
following new or revised accounting standards or IFRIC
interpretations are applicable for the first time in the year ended
31 October 2017:
IFRS 14 'Regulatory Deferral Accounts';
IFRS 10, IFRS Amendments relating to investment entities:
12 and IAS applying the consolidation exception;
28
IFRS 11 Amendments relating to acquisitions
of interests in joint operations;
IAS 1 Amendments relating to the Disclosure
Initiative
IAS 16 and Amendments relating to clarification
IAS 38 of acceptable methods of depreciation
and amortisation;
IAS 16 and Amendments relating to bearer plants;
IAS 41
IAS 27 Amendments relating to equity method
in separate financial statements; and
Annual improvements to IFRSs 2012-2014 Cycle.
There has been no significant impact from the adoption of these
accounting standards and IFRIC interpretations.
The financial statements have been prepared under the historical
cost convention as modified by the revaluation of investment
properties and fair value of derivative financial instruments.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
certain critical accounting estimates. It also requires management
to exercise judgement in the process of applying the Company's
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the condensed consolidated interim financial
statements are disclosed within the Group's accounting policies as
disclosed in the IFRS financial statements for the year ended 31
October 2016. There have been no significant changes in accounting
estimates in the period.
4 Segmental information
The segmental information for the six months ended 30 April 2017
is as follows:
United France Total
Kingdom
GBPm GBPm GBPm
------------------------------- --------- ------- --------
Continuing operations
Revenue 47.3 15.3 62.6
------------------------------- --------- ------- --------
Underlying EBITDA 24.3 9.9 34.2
Depreciation and contingent
rent (0.4) - (0.4)
------------------------------- --------- ------- --------
Operating profit before gain
on investment properties 23.9 9.9 33.8
Gain on investment properties 23.5 7.3 30.8
Operating profit 47.4 17.2 64.6
Net finance expense (8.8) (0.8) (9.6)
------------------------------- --------- ------- --------
Profit before tax 38.6 16.4 55.0
------------------------------- --------- ------- --------
Total assets 822.5 263.5 1,086.0
------------------------------- --------- ------- --------
The segmental information for the six months ended 30 April 2016
is as follows:
United France Total
Kingdom
GBPm GBPm GBPm
------------------------------- --------- ------- ------
Continuing operations
Revenue 41.1 13.0 54.1
--------- ------- ------
Underlying EBITDA 20.8 8.5 29.3
Costs incurred relating to
corporate transactions (0.3) - (0.3)
Depreciation and contingent
rent (0.2) (0.1) (0.3)
------------------------------- --------- ------- ------
Operating profit before gain
on investment properties 20.3 8.4 28.7
Gain on investment properties 25.0 3.2 28.2
Operating profit 45.3 11.6 56.9
Net finance expense (6.8) (1.0) (7.8)
------------------------------- --------- ------- ------
Profit before tax 38.5 10.6 49.1
------------------------------- --------- ------- ------
Total assets 704.8 226.5 931.3
------------------------------- --------- ------- ------
Underlying EBITDA is defined as operating profit before
exceptional items, corporate transaction costs, change in fair
value of derivatives, gain/loss on investment properties,
contingent rent and depreciation.
During H1 2016, the Group incurred GBP0.3m of costs relating to
corporate transactions, which are unrelated to the Group's trading
performance, so have been excluded from underlying EBITDA.
5 Finance income and costs
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------- ----------- ----------- -----------
Finance income
Fair value movement of derivatives 0.2 4.4 20.9
Unwinding of discount on Capital
Goods Scheme receivable 0.1 0.1 0.1
Net exchange gains 5.4 - -
----------------------------------- ----------- ----------- -----------
Total finance income 5.7 4.5 21.0
----------------------------------- ----------- ----------- -----------
Finance costs
Interest payable on bank loans
and overdrafts (5.1) (4.8) (9.7)
Amortisation of debt issuance
costs on bank loans (0.2) (0.2) (0.4)
----------------------------------- ----------- ----------- -----------
Underlying finance charges (5.3) (5.0) (10.1)
Interest on obligations under
finance leases (2.2) (1.7) (3.7)
Fair value movement of derivatives (7.8) (1.6) (2.5)
Net exchange losses - (4.0) (19.1)
Total finance costs (15.3) (12.3) (35.4)
----------------------------------- ----------- ----------- -----------
Net finance costs (9.6) (7.8) (14.4)
----------------------------------- ----------- ----------- -----------
Included within interest payable of GBP5.1m (April 2016: 4.8m)
is GBP0.6m (April 2016: GBP0.5m) of interest relating to derivative
financial instruments that are economically hedging the Group's
borrowings. The change in fair value of derivatives for the period
is a net charge of GBP7.6m (April 2016: net credit of GBP2.8m).
6 Income tax credit/(charge)
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------- ----------- ----------- -----------
Current tax (2.0) (1.6) (3.7)
Deferred tax 5.8 (1.8) (3.8)
3.8 (3.4) (7.5)
------------- ----------- ----------- -----------
Income tax is recognised based on management's best estimate of
the weighted average annual income tax rate expected for the full
financial year.
In France, the 2017 Finance Bill, which was adopted in December
2016, introduced a reduction in the income tax rate from 33.33% to
28.0%, applicable progressively from 2017 to 2020 according to size
of company. As a result, the deferred tax credit/(charge) includes
a non-recurring deferred tax credit of GBP8.7m (April 2016: GBPnil)
relating to this change.
The Group is a Real Estate Investment Trust ("REIT"), and as a
result is exempt from UK corporation tax on the profits and gains
from its qualifying rental business in the UK provided that it
meets certain conditions. Non-qualifying profits and gains of the
Group remain subject to corporation tax as normal. The Group
monitors its compliance with the REIT conditions. There have been
no breaches of the conditions to date.
7 Deferred income tax
As at As at As at
30 April 30 April 31 October 2016
2017 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------------------------- ----------- ----------- ----------------
The amounts provided in the accounts are:
Revaluation of investment properties and tax depreciation 47.1 47.2 56.3
Other timing differences 0.5 0.7 0.8
---------------------------------------------------------- ----------- ----------- ----------------
Deferred tax liabilities 47.6 47.9 57.1
---------------------------------------------------------- ----------- ----------- ----------------
Interest rate swap instruments (0.1) (0.2) (0.2)
---------------------------------------------------------- ----------- ----------- ----------------
Deferred tax assets (0.1) (0.2) (0.2)
---------------------------------------------------------- ----------- ----------- ----------------
Net deferred tax liability 47.5 47.7 56.9
---------------------------------------------------------- ----------- ----------- ----------------
As at 30 April 2017, the Group had trading losses of GBP5.8m
(April 2016: GBP10.7m) and capital losses of GBP36.4m (April 2016:
GBP36.4m) in respect of its UK operations. No deferred tax asset
has been recognised in respect of these losses.
8 Dividends
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------------------- ----------- ----------- -----------
For the year ended 31 October 2015:
Final dividend - paid 8 April 2016 (6.65p per share) - 13.8 13.8
For the year ended 31 October 2016:
Interim dividend - paid 12 August 2016 (3.60p per share) - - 7.5
Final dividend - paid 7 April 2017 (8.05p per share) 16.8 - -
Dividends in the statement of changes in equity 16.8 13.8 21.3
Timing difference on payment of withholding tax (2.1) (1.7) -
--------------------------------------------------------- ----------- ----------- -----------
Dividends in the cash flow statement 14.7 12.1 21.3
--------------------------------------------------------- ----------- ----------- -----------
An interim dividend of 4.2 pence per ordinary share (April 2016:
3.6 pence) has been declared. The ex-dividend date will be 13 July
2017 and the record date 14 July 2017, with an intended payment
date of 18 August 2017.
It is intended that 50% (April 2016: 50%) of the interim
dividend of 4.2 pence per ordinary share (April 2016: 3.6 pence)
will be paid as a REIT Property Income Distribution ("PID") net of
withholding tax where appropriate.
The interim dividend, amounting to GBP8.8m (April 2016:
GBP7.5m), has not been included as a liability at 30 April 2017. It
will be recognised in shareholders' equity in the year to 31
October 2017.
9 Earnings per ordinary share
Basic earnings per share has been calculated by dividing the
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
period/year excluding ordinary shares held by the Safestore
Employee Benefit Trust. Diluted earnings per share are calculated
by adjusting the weighted average numbers of ordinary shares to
assume conversion of all dilutive potential shares. The Company has
one category of dilutive potential ordinary shares: share options.
For the share options, a calculation is done to determine the
number of shares that could have been acquired at fair value
(determined as the average annual market price of the Company's
shares) based on the monetary value of the subscription rights
attached to the outstanding share options. The number of shares
calculated as above is compared with the number of shares that
would have been issued assuming the exercise of the share
options.
Six months ended Six months ended Year ended
30 April 2017 30 April 2016 31 October
2016
(unaudited) (unaudited) (audited)
Earnings Shares Pence Earnings Shares Pence Earnings Shares Pence
GBPm million per GBPm million per GBPm million per
share share share
--------------- -------- -------- ------ -------- -------- ------ -------- -------- ------
Basic 58.8 209.0 28.1 45.7 207.8 22.0 87.4 208.2 42.0
Dilutive
share options - 1.0 (0.1) - 1.5 (0.2) - 1.5 (0.3)
--------------- -------- -------- ------ -------- -------- ------ -------- -------- ------
Diluted 58.8 210.0 28.0 45.7 209.3 21.8 87.4 209.7 41.7
--------------- -------- -------- ------ -------- -------- ------ -------- -------- ------
Adjusted earnings per share
Adjusted earnings per share represents profit after tax adjusted
for the valuation movement on investment properties, exceptional
items, change in fair value of derivatives and the associated tax
thereon. As an industry standard measure, European Public Real
Estate Association ("EPRA") earnings are presented below. Cash tax
adjusted earnings are also presented by deducting all deferred
taxation from the EPRA earnings. The Directors consider that these
alternative measures provide useful information on the performance
of the Group.
Six months ended Six months ended Year ended
30 April 2017 30 April 2016 31 October 2016
(unaudited) (unaudited) (audited)
Earnings/(loss) Shares Pence Earnings/ Shares Pence Earnings/ Shares Pence
GBPm million per (loss) million per (loss) million per
share GBPm share GBPm share
---------------------- --------------- -------- ------ --------- -------- ------ --------- -------- ------
Basic 58.8 209.0 28.1 45.7 207.8 22.0 87.4 208.2 42.0
Adjustments:
Gain on investment
properties (30.8) - (14.7) (28.2) - (13.6) (41.7) - (20.1)
Exceptional items - - - - - - (4.3) - (2.1)
Costs relating
to corporate
transactions - - - 0.3 - 0.1 - - -
Unwinding of
discount on CGS
receivable (0.1) - - (0.1) - - (0.1) - -
Net exchange
(gains) / losses (5.4) - (2.6) 4.0 - 1.9 19.1 - 9.2
Change in fair
value of derivatives 7.6 - 3.6 (2.8) - (1.3) (18.4) - (8.8)
Tax on adjustments (6.3) - (3.0) 1.4 - 0.7 2.9 - 1.4
---------------------- --------------- -------- ------ --------- -------- ------ --------- -------- ------
Adjusted 23.8 209.0 11.4 20.3 207.8 9.8 44.9 208.2 21.6
EPRA adjusted:
Depreciation
of leasehold
properties (2.6) - (1.2) (2.1) - (1.0) (4.6) - (2.2)
Tax on leasehold
depreciation
adjustment 0.5 - 0.2 0.4 - 0.2 0.9 - 0.4
---------------------- --------------- -------- ------ --------- -------- ------ --------- -------- ------
EPRA basic 21.7 209.0 10.4 18.6 207.8 9.0 41.2 208.2 19.8
Adjustment for - - - - - - - - -
underlying deferred
tax
---------------------- --------------- -------- ------ --------- -------- ------ --------- -------- ------
Adjusted cash
tax earnings 21.7 209.0 10.4 18.6 207.8 9.0 41.2 208.2 19.8
---------------------- --------------- -------- ------ --------- -------- ------ --------- -------- ------
10 Property portfolio
Investment Interest in Investment Total
properties leasehold properties under construction investment
properties properties
GBPm GBPm GBPm GBPm
---------------------- ------------ ------------ ------------------------------- ------------
At 1 November 2016 943.3 58.9 10.9 1,013.1
Additions 3.7 0.3 8.4 12.4
Disposals (3.4) - - (3.4)
Reclassification 10.9 - (10.9) -
Revaluation movement 33.4 - - 33.4
Depreciation - (2.6) - (2.6)
Exchange movements (15.9) (1.0) (0.1) (17.0)
---------------------- ------------ ------------ ------------------------------- ------------
At 30 April 2017 972.0 55.6 8.3 1,035.9
---------------------- ------------ ------------ ------------------------------- ------------
Investment Interest in Investment Total
Properties leasehold properties under construction investment
properties properties
GBPm GBPm GBPm GBPm
---------------------- ------------ ------------ ------------------------------- ------------
At 1 November 2015 775.5 47.1 6.0 828.6
Additions 2.9 3.0 6.1 12.0
Revaluation movement 30.5 - (0.2) 30.3
Depreciation - (2.1) - (2.1)
Exchange movements 17.7 1.1 0.1 18.9
---------------------- ------------ ------------ ------------------------------- ------------
At 30 April 2016 826.6 49.1 12.0 887.7
---------------------- ------------ ------------ ------------------------------- ------------
The Group has classified investment property and investment
property under construction, held at fair value, within Level 3 of
the fair value hierarchy. There were no transfers to or from Level
3 during the period. The fair valuation exercise undertaken at 30
April 2017 is explained in note 11.
11 Valuations
External valuation
A sample of the Group's largest properties, representing
approximately 42% of the value of the Group's investment property
portfolio at 31 October 2016, has been valued by the Group's
external valuers, Cushman & Wakefield LLP ("C&W"), as at 30
April 2017. The valuation has been carried out in accordance with
the current UK edition of the RICS Valuation - Professional
Standards, published by The Royal Institution of Chartered
Surveyors ("the Red Book"). The valuation of each of the investment
properties has been prepared on the basis of fair value as a fully
equipped operational entity, having regard to trading potential.
The valuation has been provided for accounts purposes and, as such,
is a Regulated Purpose Valuation as defined in the Red Book. In
compliance with the disclosure requirements of the Red Book,
C&W has confirmed that:
-- of the members of the RICS who have been the signatories to
the valuations provided to the Group for the same purposes as this
valuation, one has done so since October 2006 and the other has
done so since October 2016;
-- C&W has been carrying out regular valuations for the same
purpose as this valuation on behalf of the Group since October
2006;
-- C&W does not provide other significant professional or agency services to the Group;
-- in relation to the preceding financial year of C&W, the
proportion of total fees payable by the Group to the total fee
income of the firm is less than 5%; and
-- the fee payable to C&W is a fixed amount per property and
is not contingent on the appraised value.
Market uncertainty
C&W's valuation report comments on valuation uncertainty
resulting from low liquidity in the market for self-storage
property. C&W notes that in the UK since the start of 2013
there have only been nine transactions involving multiple assets
and thirteen single asset transactions, and C&W is aware of
only one recent comparable transaction in the Paris market. C&W
states that due to the lack of comparable market information in the
self-storage sector, there is greater uncertainty attached to its
opinion of value than would be anticipated during more active
market conditions.
Portfolio premium
C&W's valuation report further confirms that the properties
have been valued individually but that if the portfolio was to be
sold as a single lot or in selected groups of properties, the total
value could be different. C&W states that in current market
conditions it is of the view that there could be a material
portfolio premium.
Further details of the valuation carried out by C&W as at 31
October 2016, including the valuation method and assumptions, are
set out in note 11 to the Group's annual report and financial
statements for the year ended 31 October 2016. This note should be
read in conjunction with note 11 of the Group's annual report.
Directors' valuation
In addition, at the same date, the directors have prepared
estimates of fair values for the remaining 58% of the Group's
investment property portfolio, incorporating assumptions for
estimated absorption, revenue growth and capitalisation rates to
reflect current market conditions and trading.
Assumptions
The key assumptions incorporated into both the external
valuation and the directors' valuation, calculated on a weighted
average basis across the entire portfolio, are:
-- Net operating income is based on projected revenue received
less projected operating costs together with a central
administration charge of 6% of the estimated annual revenue subject
to a cap and collar. The initial net operating income is calculated
by estimating the net operating income in the first twelve months
following the valuation date.
-- The net operating income in future years is calculated
assuming either straight line absorption from day one actual
occupancy or variable absorption over years one to four of the cash
flow period, to an estimated stabilised/mature occupancy level. In
the valuations the assumed stabilised occupancy level for the
trading stores (both freeholds and all leaseholds) open at 30 April
2017 averages 80.80% (31 October 2016: 80.23%). The projected
revenues and costs have been adjusted for estimated cost inflation
and revenue growth. The average time assumed for stores to trade at
their maturity levels is 29.88 months (31 October 2016: 23.78
months).
-- The capitalisation rates applied to existing and future net
cash flows have been estimated by reference to underlying yields
for industrial and retail warehouse property, yields for other
trading property types such as student housing and hotels, bank
base rates, ten year money rates, inflation and the available
evidence of transactions in the sector. The valuations included in
the accounts assume rental growth in future periods. If an
assumption of no rental growth is applied to the valuations, the
net initial yield pre-administration expenses for the 127 mature
stores (i.e. excluding those stores categorised as "developing") is
7.49% (31 October 2016: 7.98%), rising to stabilised net yield
pre-administration expenses of 9.04% (31 October 2016: 8.99%).
-- The future net cash flow projections (including revenue
growth and cost inflation) have been discounted at a rate that
reflects the risk associated with each asset. The weighted average
annual discount rate adopted (for both freeholds and all
leaseholds) is 10.73% (31 October 2016: 10.75%).
-- Purchaser's costs in the range of approximately 6.0% to 6.8%
for the UK and 7.5% for France have been assumed initially,
reflecting the progressive SDLT rates brought into force in March
2016 in the UK, and sales plus purchaser's costs totalling
approximately 8.0% to 8.8% (UK) and 9.5% (France) are assumed on
the notional sales in the tenth year in relation to freehold and
long leasehold stores.
All other factors being equal, higher net operating income would
lead to an increase in the valuation of a store and an increase in
the capitalisation rate or discount rate would result in a lower
valuation, and vice versa. Higher assumptions for stabilised
occupancy, absorption rate, rental rate and other revenue, and a
lower assumption for operating costs, would result in an increase
in projected net operating income, and thus an increase in
valuation.
As a result of these exercises, as at 30 April 2017, the Group's
investment property portfolio has been valued at GBP972.0m (April
2016: GBP826.6), and a revaluation gain of GBP33.4m (April 2016:
GBP30.5m) has been recognised in the income statement for the
period.
A full external valuation of the Group's investment property
portfolio will be performed at 31 October 2017.
12 Net assets per share
As at As at As at
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Analysis of net asset value GBPm GBPm GBPm
--------------------------------------------------------------------- ----------- ----------- -----------
Net assets 620.2 533.9 587.4
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax) (10.0) (2.1) (17.7)
Deferred tax liabilities on the revaluation of investment properties 47.1 47.2 56.3
--------------------------------------------------------------------- ----------- ----------- -----------
EPRA net asset value 657.3 579.0 626.0
--------------------------------------------------------------------- ----------- ----------- -----------
Basic net assets per share (pence) 296.3 256.4 281.5
EPRA basic net assets per share (pence) 314.1 278.1 300.0
Diluted net assets per share (pence) 295.0 254.6 279.5
EPRA diluted net assets per share (pence) 312.6 276.1 297.9
--------------------------------------------------------------------- ----------- ----------- -----------
Number Number Number
--------------------------------------------------------------------- ----------- ----------- -----------
Shares in issue 209,289,938 208,210,529 208,656,168
--------------------------------------------------------------------- ----------- ----------- -----------
Basic net assets per share is shareholders' funds divided by the
number of shares at the period end. The number of shares in issue
at the period end excludes 16,263 shares (April 2016: 80,420
shares) held by the Safestore Employee Benefit Trust. Diluted net
assets per share is shareholders' funds divided by the number of
shares at the period end, adjusted for dilutive share options of
973,694 shares (April 2016: 1,462,774 shares). As an industry
standard measure, European Public Real Estate Association ("EPRA")
net asset values are presented.
13 Borrowings
As explained in note 18, the Group has refinanced its borrowings
arrangements since the period end. The tables below set out the
Group's borrowings position as at 30 April 2017, which has been
superseded as a result of the refinancing:
As at As at As at
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Non-current GBPm GBPm GBPm
-------------------------------- ------------ ------------ ------------
Borrowings:
Secured - bank loans 225.7 180.4 224.8
Secured - US Private placement
notes 87.2 77.3 92.7
Debt issue costs (1.5) (2.0) (1.8)
-------------------------------- ------------ ------------ ------------
311.4 255.7 315.7
-------------------------------- ------------ ------------ ------------
The bank loan facility agreement expires in June 2020. The
private placement notes have $65.6m (31 October 2016: $65.6m) due
for repayment in 2019 and $47.3m (31 October 2016: $47.3m) due for
repayment in 2024.
The borrowings were secured by a fixed charge over the Group's
investment property portfolio.
Borrowings are stated before unamortised issue costs of GBP1.5m
(31 October 2016: GBP1.8m). The bank loans and private placement
notes were repayable as follows:
As at As at As at
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------- ------------ ------------ ------------
Between two and five years 276.4 225.3 278.7
After more than five years 36.5 32.4 38.8
---------------------------- ------------ ------------ ------------
Borrowings 312.9 257.7 317.5
Unamortised issue costs (1.5) (2.0) (1.8)
---------------------------- ------------ ------------ ------------
311.4 255.7 315.7
---------------------------- ------------ ------------ ------------
The effective interest rates at the balance sheet date were as
follows:
As at As at As at
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
------------------ ----------------- ----------------- -----------------
Bank loans Monthly LIBOR Quarterly Quarterly
plus 1.50% or monthly or monthly
LIBOR plus LIBOR plus
1.50% 1.50%
Bank loans Quarterly Quarterly Quarterly
or monthly EURIBOR plus or monthly
EURIBOR plus 1.50% EURIBOR plus
1.50% 1.50%
Private placement Weighted average Weighted average Weighted average
notes rate of 6.21% rate of 6.21% rate of 6.21%
------------------ ----------------- ----------------- -----------------
Borrowing facilities
The Group has the following undrawn committed borrowing
facilities available at the period end in respect of which all
conditions precedent had been met at that date:
Floating rate
As at As at As at
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------- ------------ ------------ ------------
Expiring beyond one year 84.2 125.5 89.2
-------------------------- ------------ ------------ ------------
14 Financial instruments
IFRS 13 requires disclosure of fair value measurements by level
of the following measurement hierarchy:
Level 1 - unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level
1 that are observable for the asset of liability, either directly
or indirectly.
Level 3 - inputs for the asset of liability that are not based
on observable market data.
The table below shows the level in the fair value hierarchy into
which fair value measurements have been categorised:
As at As at As at
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Assets per the balance sheet GBPm GBPm GBPm
---------------------------------- ------------ ------------ ------------
Derivative financial instruments
- Level 2 13.0 4.3 20.9
---------------------------------- ------------ ------------ ------------
As at As at As at
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Liabilities per the balance GBPm GBPm GBPm
sheet
---------------------------------- ------------ ------------ ------------
Derivative financial instruments
- Level 2 3.1 2.4 3.4
---------------------------------- ------------ ------------ ------------
The fair value of financial instruments that are not traded in
an active market, such as over-the-counter derivatives, is
determined using valuation techniques. The Group obtains such
valuations from counterparties who use a variety of assumptions
based on market conditions existing at each balance sheet date. The
valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in
level 2.
If one or more of the significant inputs is not based on
observable market data, the asset or liability is included in level
3. The Group has no disclosable level 3 financial instruments.
There have been no transfers of assets or liabilities between
levels of the fair value hierarchy.
15 Share capital
As at As at As at
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Called up, issued and fully GBPm GBPm GBPm
paid
------------------------------- ------------ ------------ ------------
209,306,201 (30 April 2016:
208,290,949) ordinary shares
of 1p each 2.1 2.1 2.1
------------------------------- ------------ ------------ ------------
16 Capital commitments
The Group had capital commitments of GBP1.2m as at 30 April 2017
(April 2016: GBP18.7m).
17 Seasonality
Self-storage revenues are subject to seasonal fluctuations, with
peak sales occurring in the second and third quarters of the year.
This is due to seasonal weather conditions and holiday periods
leading to less demand for storage. For the six months ended April
2016, on a like-for-like basis adjusting for the impact of changes
to the Group's store portfolio, the level of self-storage revenues
represented 47.8% (April 2015: 48.1%) of the annual level of
self-storage revenue in the year ended 31 October 2016.
18 Post balance sheet events
On 19 May 2017, the Group announced the refinancing of its US
Private Placement Notes ("USPP") and an amendment and extension of
its existing bank facilities to extend the average maturity and
lower the cost of the Group's debt financing. Further details are
set out in the Financial Review section of this report.
Principal risks and uncertainties
The principal risks and uncertainties which could affect the
Group for the remainder of the financial year are consistent with
those detailed on pages 15 and 16 of the Annual Report and
Financial Statements for the year ended 31 October 2016, a copy of
which is available at www.safestore.com, and include:
-- Strategy risk
-- Finance risk
-- Treasury risk
-- Property investment and development risk
-- Valuation risk
-- Occupancy risk
-- Real estate investment trust ("REIT") risk
-- Catastrophic event risk
-- Consequences of the UK's decision to leave the EU "Brexit"
The Company regularly assesses these risks together with the
associated mitigating factors listed in the 2016 Annual Report. The
levels of activity in the Group's markets and the level of
financial liquidity and flexibility continue to be the areas
designated as appropriate for added management focus.
We continue to believe that our market leading position in the
UK and Paris, our strong brand and depth of management, as well as
our retail expertise and infrastructure, help mitigate the effects
of fluctuations the economy or the housing market. Furthermore, the
UK self-storage market remains immature with little risk of supply
outstripping demand in the medium term.
Our prudent approach on new stores reduces our dependence on the
number of non-trading investment properties in relation to the
established and mature stores that provide relatively stable and
growing cash flow. The Board regularly reviews the cash
requirements of the business, including the covenant position
although given the nature of the product, customer base and lack of
working capital requirements, liquidity is not considered to be a
significant risk.
The Outlook section of this half yearly report provides a
commentary concerning the remainder of the financial year.
Forward-looking statements
Certain statements in this interim results announcement are
forward-looking statements. By their nature, forward-looking
statements involve a number of risks, uncertainties or assumptions
that could cause actual results or events to differ materially from
those expressed or implied by the forward-looking statements. These
risks, uncertainties or assumptions could adversely affect the
outcome and financial effects of the plans and events described
herein. Forward-looking statements contained in this interim
results announcement regarding past trends or activities should not
be taken as a representation that such trends or activities will
continue in the future. You should not place undue reliance on
forward-looking statements, which speak only as of the date of this
interim results announcement. Except as required by law, the
Company is under no obligation to update or keep current the
forward-looking statements contained in this interim results
announcement or to correct any inaccuracies which may become
apparent in such forward-looking statements.
Statement of directors' responsibilities for the six months
ended 30 April 2017
The directors confirm that, to the best of their knowledge, this
condensed consolidated interim financial information has been
prepared in accordance with IAS 34 as adopted by the European Union
and that the interim management report includes a fair review of
the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Safestore Holdings plc are listed in the
Safestore Holdings plc Annual Report for 31 October 2016. There
have been no changes of director since the Annual Report. A list of
current directors is maintained on the Safestore Holdings plc
website, www.safestore.com.
The directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
By order of the Board
Frederic Vecchioli Andrew Jones
14 June 2017 14 June 2017
Chief Executive Officer Chief Financial Officer
INDEPENDENT REVIEW REPORT TO SAFESTORE HOLDINGS PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 April 2017 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the condensed consolidated
statement of changes in equity, the consolidated cash flow
statement and related notes 1 to 18. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
April 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
London, United Kingdom
14 June 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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