TIDMSAFE
RNS Number : 3275R
Safestore Holdings plc
14 June 2018
14 June 2018
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Interim results for the 6 months ended 30 April 2018
Good H1 performance, Alligator integration progressing well, on
course to meet full year expectations
Key Measures 6 months 6 months Change(1)
ended ended Change-CER(2)
30 April 30 April
2018 2017
-------------------------------- ---------- ---------- ---------- ----------------
Underlying and Operating
Metrics- total
Revenue GBP69.2m GBP62.6m 10.5% 9.7%
Underlying EBITDA(3) GBP39.1m GBP34.9m 12.0% 11.2%
Closing Occupancy (let sq
ft- million)(4) 4.50 3.94 14.2% n/a
Closing Occupancy (% of
MLA)(5) 71.5% 69.8% +1.7ppts n/a
Average Storage Rate GBP25.91 GBP26.85 (3.5%) (4.2%)
Adjusted Diluted EPRA Earnings
per Share(6) 12.6p 10.4p 21.2% n/a
Free Cash flow(7) GBP23.1m GBP23.2m (0.4%) n/a
EPRA Basic NAV per Share GBP3.57 GBP3.14 13.7% n/a
Underlying and Operating
Metrics- like-for-like(8)
Revenue GBP64.7m GBP61.4m 5.4% 4.6%
Underlying EBITDA(3) GBP36.7m GBP34.1m 7.6% 6.7%
Closing Occupancy (let sq
ft- million)(4) 4.09 3.88 5.4% n/a
Closing Occupancy (% of
MLA)(5) 73.4% 69.9% +3.5ppts n/a
Average Occupancy (let sq
ft- million)(4) 4.03 3.84 4.9% n/a
Average Storage Rate GBP26.76 GBP26.75 = (0.8%)
Statutory Metrics
Profit before tax GBP81.9m GBP55.0m 48.9% n/a
Basic Earnings per Share 40.3p 28.1p 43.4% n/a
Dividend per Share 5.1p 4.2p 21.4% n/a
Highlights
Good Financial Performance
-- Group Revenue up 10.5% (9.7% at CER(2) )
-- Group like-for-like(8) revenue at CER(2) up 4.6% with UK up 4.3% and Paris up 5.6%
-- Adjusted Diluted EPRA EPS up 21.2% at 12.6p
-- 21.4% increase in the interim dividend to 5.1p
Operational Progress
-- Strongest occupancy performance in the last five years as
like-for-like increases of 5.2% in UK and 6.0% in Paris drive
210,000 sq ft or 5.4% growth in Group closing occupancy to 4.09m sq
ft (4.50m sq ft including Alligator and new stores)
-- Alligator acquisition integration progressing well and trading in line with expectations
-- New Mitcham, London store opened in April 2018
-- Paddington Marble Arch, London store opened in June 2018 with
Paddington Green store to close in July 2018
-- Further new store openings scheduled in Poissy Paris in
August 2018 (planning granted) and Birmingham Merry Hill in April
2019 (subject to planning)
-- Two new stores secured subject to planning in Carshalton, London and Magenta in central Paris
Strong and Flexible Balance Sheet
-- Group loan-to-value ratio ("LTV"(9) ) at 32.6%, interest cover ratio ("ICR"(10) ) at 8.6x
Frederic Vecchioli, Safestore's Chief Executive Officer,
commented:
"Safestore has performed well in the first half of the year
across all regions and continues to build on the strong earnings
and dividend growth achieved over the last five years. Our recent
acquisitions of Space Maker and Alligator have been integrated into
the Group and are progressing well. The stores opened since Autumn
2016 are trading at or ahead of their business plans and we have a
pipeline of a further four stores to open over the next eighteen
months. The acquisitions and developments (opened prior to 30 April
2018) have complemented our best like-for-like occupancy
performance over the last five years of +5.4%. Over the last five
years, the like-for-like (excluding all stores acquired or opened
in this period) occupancy compound annual growth rate for the Group
has been 4.3%.
"As we enter our peak trading period, we continue to see
encouraging levels of interest in self-storage in the UK and in
Paris. We are well-placed to meet this demand with our 1.79m square
feet of currently unlet, fully invested space, and our pipeline of
four stores, plus Paddington Marble Arch (which opened after the
period end), will add a further 262,000 sq ft.
"Our strong, efficient, low cost balance sheet, combined with
the free cash generation of the business allows us to continue to
target selected development and acquisition opportunities. With our
leading market positions across the UK and in Paris, the Company is
in a strong position and remains on-course to meet the Board's full
year expectations."
Notes
1 - Where reported amounts are presented either to the nearest
GBP0.1m or to the nearest 10,000 sq ft, the effect of rounding may
impact the reported percentage change.
2 - 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).
3 - Underlying EBITDA is defined as operating profit before
exceptional items, share-based payments, 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 2018, closing occupancy includes 27,250 sq ft of bulk
tenancy (30 April 2017: 36,750 sq ft).
5 - MLA is Maximum Lettable Area. Group MLA at 30 April 2018 is
6.29m sq ft (30 April 2017: 5.64m sq ft).
6 - Adjusted Diluted EPRA EPS is defined as profit or loss for
the period after tax but excluding corporate transaction costs,
change in fair value of derivatives, gain/loss on investment
properties and the associated tax impacts, IFRS 2 share-based
payment charges, exceptional tax items and deferred tax charges.
This adjusted earnings is divided by the diluted number of shares
(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 - Like-for-like adjustments have been made to remove the 2017
opening of Combs-la-Ville, the 2018 opening of Mitcham and closures
of Leeds Central and Paddington in 2018 and Deptford in 2017. In
addition, the impact of the acquisition of Alligator on 1 November
2017 has been adjusted.
9 - 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).
10 - ICR is interest cover ratio. It is calculated in accordance
with the requirements of our borrowings covenants, which is the
ratio of underlying EBITDA after leasehold rent to underlying
finance charges (excluding the amortisation of debt issue costs) on
a rolling twelve month basis.
Reconciliations between underlying metrics and statutory metrics
can be found in the financial review and financial statements
sections of this announcement.
Summary
Safestore has once again delivered a good financial performance
in the first half of the year through a combination of solid
organic growth and the earnings accretive acquisition of the twelve
store Alligator portfolio on 1 November 2017. Reported Group
revenue increased 9.7% at CER(2) and like-for-like(8) revenue
increased by 4.6%. The Group's like-for-like closing occupancy
increased by 3.5 percentage points ("ppts") to 73.4% with the
average storage rate down 0.8% at CER(2) . Like-for-like Store
EBITDA margin, on a CER basis, grew by 0.9ppts to 65.4% (2017:
64.5%).
Our operational performance across the UK has been strong in the
period resulting in a 4.3% increase in like-for-like revenue.
During the second quarter we have seen increasing momentum in
enquiry generation and, combined with a good conversion
performance, this has contributed to like-for-like closing
occupancy growing by 3.5ppts to 71.7% in the period. All regions of
the UK have delivered a strong occupancy performance. Overall, the
UK like-for-like average rate declined by 0.7% in the period but
improved in all regions in the second quarter, ending broadly flat
year on year in April.
The Alligator portfolio is now fully integrated into the Group
from an operational and marketing perspective and is performing in
line with our expectations. The re-branding of the stores will be
completed during the second half of the year. The 4.2% CER
reduction in Group average rate for the period is principally
driven by the first time inclusion of the Alligator portfolio and
we see opportunities to improve this position in future.
In Paris our trading performance has also been strong with
like-for-like revenue growing by 5.6%. This was driven by our
average like-for-like occupancy performance which increased by 7.4%
compared to the prior year. Like-for-like closing occupancy ended
the period up 3.1ppts at 80.4% (2017: 77.3%). We are now in the
twentieth consecutive year of revenue growth in Paris. Our new
store at Combs-la-Ville, which opened in the second half of 2017,
is trading in line with expectations. Our like-for-like average
rate in the period was down 1.5% although, excluding our lower
price suburban Emerainville store (opened in September 2016),
average rate was down 0.2% for the period and, like the UK, ended
the period slightly up on the previous year.
Group underlying EBITDA of GBP39.1m increased 11.2% at CER(2) on
the prior year and 12.0% on a reported basis, reflecting the impact
of the 3% strengthening of the average Euro rate compared to the
prior period on the profit earned on our Paris business. In May
2017, we completed a refinancing of our bank debt and US Private
Placement Notes. The reduced finance costs resulting from the
refinancing, combined with the strong EBITDA performance, are
reflected in a 21.2% increase in adjusted diluted EPRA EPS(6) in
the period to 12.6p (2017: 10.4p).
Our property portfolio valuation, including investment
properties under construction, has increased by 12.1% since 31
October 2017. The UK portfolio is up GBP115.8m to GBP860.2m, the
increase comprising GBP55.9m on the acquisition of Alligator,
GBP52.8m revaluation gain and GBP7.1m of additions. The French
portfolio was valued at EUR306.0m at 30 April 2018, an increase of
EUR7.4m, comprising EUR5.7m of additions and a EUR1.7m revaluation
gain. The impact of currency movements during the period was
immaterial.
Reflecting the Group's good trading performance, the Board is
pleased to recommend a 21.4% increase in the interim dividend to
5.1p per share (2017: 4.2p).
Outlook
Safestore has a strong market presence in both the UK and Paris.
Trading in the stores that we opened in 2016 and 2017 is strong and
our Alligator acquisition is performing in line with expectations.
Our recent opening in London Mitcham has started well and,
following the opening of Paddington Marble Arch since the period
end, we are looking forward to further openings, spread over the
next 18 months, in Poissy Paris, Magenta Paris, London Carshalton
and Birmingham Merry Hill. With 1.79m sq ft of fully invested unlet
space available at 30 April 2018 (the equivalent of c.40 stores)
and a pipeline of 0.26m sq ft, we have significant, low-cost growth
potential ahead.
Our priority remains the ongoing improvement of the operational
performance of the business and leveraging our leading market
positions to full effect. We will continue our strategy of managing
revenue growth by a combination of dynamic tactical store level
rate and occupancy decisions made by our central pricing team. Our
strong and flexible balance sheet combined with healthy cash
generation and proven management expertise, 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.
With our resilient business model, scale, geographical
diversity, strong balance sheet and marketing expertise we believe
that we are well placed for future growth in what remains a young
and expanding industry. As we progress through our peak Q3 trading
period, we are in good shape and are on course to meet the Board's
full year expectations.
For further information, please contact:
Safestore Holdings PLC
Frederic Vecchioli, Chief Executive
Officer
Andy Jones, Chief Financial
Officer
www.safestore.com 020 7457 2020
Instinctif Partners
Mark Reed
Guy Scarborough 020 7457 2020
A presentation for analysts will be held at 10.30am today
at:
Instinctif Partners, 65 Gresham Street, London EC2V 7NQ
For dial-in details of the presentation please contact:
Guy Scarborough (guy.scarborough@instinctif.com or telephone on
020 7457 2020).
Notes to Editors
-- Safestore is the UK's largest self-storage group with 146 stores at 30 April 2018, comprising
120 wholly owned stores in the UK (including 68 in London and the South East with the remainder
in key metropolitan areas such as Manchester, Birmingham, Glasgow, Edinburgh, Liverpool and
Bristol) and 26 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.
These two markets constitute around two thirds of the Group's revenue and Store EBITDA.
-- 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 60,000 personal and business customers.
-- Safestore has a maximum lettable area ("MLA") of 6.29 million sq ft. At 30 April 2018, 4.50
million sq ft was occupied. Including the stores opened and closed after 30 April 2018 and
the new store pipeline, the MLA will be c.6.53m sq ft.
-- Safestore employs around 650 people in the UK and France.
Our Strategy
The Group's strategy remains unchanged. 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
Since 2016, Safestore has strengthened its market leading
portfolio in the UK and Paris with the Space Maker and Alligator
acquisitions, adding 24 stores, as well as the organic development
of eight new stores (including Paddington Marble Arch, opened since
the period end in June 2018). We have a high quality, fully
invested estate in both the UK and Paris. Of the Group's 146
stores, 94 are in London and the South East of England or in Paris
with 52 in the other major UK cities. The Group now operates 48
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
Alligator acquisition, our MLA has increased by 11.5% to 6.29m sq
ft at 30 April 2018. At the current occupancy level of 71.5% we
have 1.79m sq ft of unoccupied space, of which 1.52m sq ft is in
our UK stores and 0.27m sq ft in Paris. This is the equivalent of
c.40 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 still
remains relatively low with 54% (2017: 58%) of the UK population
either knowing very little or nothing about self-storage (source:
2018 SSA Annual Report). In the UK around 75% of our new customers
are using self-storage for the first time. It is largely a brand
blind purchase with only 12% of respondents in the Self Storage
Association Annual Survey stating that a brand would influence
their purchase decision. Only 3% of respondents in the same survey
associated any particular features or benefits with a certain
brand. Typically, customers requiring storage start their journey
by conducting online research using generic keywords in their
locality (e.g. "storage in Borehamwood", "self-storage near
me").
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 has resulted
in the development of a leading digital marketing platform that has
generated over 39.7% enquiry growth over the last five years.
Online enquiries now represent over 83% of our enquiries in the
UK (H1 2017: 82%) and 74% in France (H1 2017: 73%). 60% of our
online enquiries in the UK originate from a mobile device, compared
to 56% last year highlighting the need for continual investment in
our responsive web platform.
Our digital marketing team has recently been enhanced with the
recruitment of a Digital and Marketing Director. Our increasing
in-house expertise and significant annual budget enable us to
achieve the above results. We will continue to invest in activities
that promote a strong search engine presence to grow enquiry volume
whilst managing efficiency in terms of the overall cost per
enquiry.
Feefo, the independent review system, which allows our 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 96% and we have achieved a
Feefo Gold Service Merchant rating every year since its
introduction.
Motivated and effective store teams benefiting from improved
training and coaching
Our enthusiastic, well trained and customer centric sales team
remains a key differentiator and a strength of our business.
Understanding the needs of our customer and using this knowledge to
develop in-store trusted advisers is a fundamental part of driving
revenue growth and market share.
On 1 November 2017, we acquired the Alligator self-storage
portfolio of twelve stores. Drawing on the experience gained from
the integration of the Space Maker brand in 2016 we implemented
enhancements to our regional leadership structure and successfully
and efficiently integrated the stores into our geographical
regional structure. Our dedicated on-line learning platform allows
our new colleagues to take part in our industry leading training
and development programmes. The Alligator internal and external
rebrand to Safestore commences in June 2018.
November 2016 saw the launch of our internal Store Manager
Development programme designed to provide the business with its
future store managers. The first group of trainees graduated in
November 2017 and the second intake of sales consultants is
progressing through the 2018 programme.
As with our new Alligator colleagues, all 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 and increase their speed to competency. Our
Store Manager Development programme demonstrates the effectiveness
of our learning tools. In a spirit of constant improvement our
content and delivery process is dynamically enhanced through our
360 degree feedback process utilising the learnings from not only
the candidates but also our training store managers. This allows
our people to be trained with the knowledge and skills to sell
effectively in today's market place.
All new recruits receive individual performance targets within
four weeks of joining the business and are placed on the
'pay-for-skills' programme which allows accelerated basic pay
increases dependent on success in demonstrating specific and
defined skills. The key target of our programme, to ensure that
close to 100% of our store managers are promoted internally, still
remains and we are pleased with our progress to date.
The training and development of our store and customer facing
colleagues is an essential part of our daily routines. In 2017 we
delivered a further 22,500 hours of training 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, fire
and compliance training, ensuring that our staff are up-to-date in
relation to their technical knowledge and continue to operate a
safe environment for both our colleagues and customers. These
modules are continually updated to target the areas of most
opportunity and maintain colleague engagement. These tools, systems
and resources have allowed us to effectively communicate changes
quickly and manage compliance robustly.
To further support our Cyber security and GDPR compliance we
have introduced further enhanced online training modules. All
colleagues are required to complete this training.
Our performance dashboard allows our store and field teams to
focus on the key operating metrics of the business providing an
appropriate level of management information to enable swift
decision making. Reporting performance down to individual level
enhances our competitive approach to team and individual
performance. We continue to reward our people for their
performances with bonuses of up to 50% of basic salary based on
their achievements against individual 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.
Customers continue to be at the heart of everything we do.
Whether it be in store, online or in their communities. Our Gold
standard Feefo customer service score, currently at 96%, reflects
our ongoing commitment to their satisfaction.
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.
Safestore has been an "Investors in People" (IIP) organisation
since 2003 and 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. In April 2018,
Safestore was awarded the Gold accreditation under the IIP
programme, a significant improvement from the Bronze accreditation
awarded in 2015. This puts Safestore in the top 1% of the 14,000
IIP companies. IIP is the international standard for people
management, defining what it takes to lead, support and manage
people effectively to achieve sustainable results. Underpinning the
Standard is the Investors in People framework, reflecting the
latest workplace trends, essential skills and effective structures
required to outperform in any industry. Investors in People enables
organisations to benchmark against the best in the business on an
international scale. We are proud to have our colleagues recognised
to such a high standard not only in our industry but across 14,000
organisations across 75 countries.
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 four years is linked to
store team variable incentives and is monitored closely by the
central pricing team.
Average rates are 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
Since 2014 we have refinanced the business on three occasions,
each time on improved terms, and believe we now have a 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.
In 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. The terms of the Amendment
and Extension of the bank facilities allow for an option to extend
the facilities by a further year.
We recently hedged a further GBP35m of our Sterling revolving
credit facility drawings at a rate of 1.2915%. Currently, 87% of
our debt facilities are either fixed rate or hedged.
At 30 April 2018, based on the current level of borrowings and
interest swap rates, the Group's weighted average cost of debt is
2.24%. The weighted average maturity of the Group's drawn debt is
6.2 years at the current period end and the Group's LTV ratio under
the new financing arrangements is 32.6% as at 30 April 2018.
This LTV and interest cover ratio of 8.6x for the rolling twelve
month period ended 30 April 2018 provide us with significant
headroom compared to our banking covenants. We have GBP103m of
available bank facilities at 30 April 2018.
Taking into account the improvements we have made in the
performance of the business and the reduction in underlying finance
charges of c.GBP10m per annum over the last four 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
Our approach to store development and acquisitions in the UK and
Paris continues to be pragmatic, flexible and focused on the return
on capital.
Our property teams in both the UK and Paris, which have been
strengthened in the last two years, continue to seek 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.
During the course of 2016 and 2017, the Group opened six new
stores in Chiswick and Wandsworth in London, Birmingham, Altrincham
and Emerainville and Combs-la-Ville in Paris as well as completing
the extension and refurbishment of our Acton and Longpont (Paris)
stores. All of these stores are performing in line with or ahead of
their business plans.
In April 2018, we opened a new c.54,000 sq ft store in Mitcham,
in South West London. The site was acquired in December 2016 with
the planning and building process taking just 16 months.
In July 2017, we obtained planning permission and exchanged
contracts for a new 37,000 sq ft leasehold store located between
Paddington and Marble Arch in central London. The lease is for a
period of 20 years, with an option to extend for a further 10
years. The store has opened since the period end in June 2018 and
we expect the former Paddington store to close in July 2018 with a
significant proportion of its customers transferred to the new
store.
In October 2017, we completed the acquisition of a 1.34 acre
industrial site at Merry Hill, around ten miles west of the centre
of Birmingham, in a very prominent location close to Merry Hill
regional shopping centre. Subject to receiving planning consent we
expect to open a purpose-built freehold 55,000 sq ft store in the
first half of 2019.
In March 2018, we exchanged contracts to acquire a freehold site
in Carshalton, in South London. Subject to planning permission, we
expect to complete the purchase of the site in summer 2018. We then
plan to build a c.40,000 sq ft store on this site which we would
anticipate opening in the second half of the 2019 financial
year.
In Paris, where regulatory barriers are likely to continue to
restrict meaningful 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 November 2017, we exchanged contracts on a site at Poissy, in
the West of Paris, an area where we currently have no stores. We
have since completed the acquisition of the site and expect to open
a freehold 80,000 sq ft store in summer 2018.
Also in April 2018, we agreed a lease on a site at Magenta in
central Paris. Subject to planning, we aim to open a 50,000 sq ft
store here towards the end of the next financial year.
We believe there will be further opportunities to develop new
stores in the outer suburbs of Paris and are actively reviewing the
market for new opportunities.
In the UK we plan to redevelop a small number of our older
stores. The expenditure for this programme will be included within
our capital expenditure guidance. Currently, our Leeds store is
closed as part of this programme and most of the store's customers
have been relocated to other sites.
On 1 November 2017 the Group completed the acquisition of Stork
Self Storage (Holdings) Limited ("SSSHL"), trading as Alligator
Self Storage. The consideration paid was GBP55.9m, net of cash
acquired with the business.
SSSHL was the eleventh largest self-storage portfolio in the UK
with twelve stores and a maximum lettable area estimated at
c.569,000 sq ft. SSSHL's stores, which are geographically
complementary to the existing estate, are located in London
(Camden), the South East of the UK (Fareham, Farnham, Luton and
Winchester), Birmingham (three stores), Southampton, Bolton,
Bristol and Nottingham. Ten of the SSSHL stores are freehold or
long leasehold and two are leasehold stores with an average
remaining lease length of 14.8 years.
The Alligator stores have now been fully integrated into the
Safestore portfolio from an operational and back office perspective
and the rebranding of the portfolio will be completed during the
course of the current financial year. Trading of the Alligator
portfolio is in line with our expectations.
Portfolio Summary
The self-storage market has been growing consistently in the
last 20 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 69% 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.245 storage centres within
the M25 as compared to only c.90 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 71 stores,
contribute GBP40.3m of revenue and GBP27.6m 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 by London Rest
Region & of UK Paris Group
South
East UK Total Total
Number of Stores 68 52 120 26 146
Let Square Feet (m sq ft) 1.90 1.70 3.60 0.90 4.50
Maximum Lettable Area (m
sq ft) 2.63 2.49 5.12 1.17 6.29
Average Let Square Feet
per store (k sq ft) 28 33 30 35 31
Average Store Capacity (k
sq ft) 39 48 43 45 43
Closing Occupancy % 72.4 % 68.0% 70.3% 77.0% 71.5%
Average Rate (GBP per sq
ft) 28.57 18.08 23.66 34.92 25.91
Revenue (GBP'm) 33.4 19.0 52.4 16.8 69.2
Average Revenue per Store
(GBP'm) 0.49 0.37 0.44 0.65 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 120 stores in the UK, 68 of which are in London and the
South East, and 26 stores in Paris.
In the UK, 64% 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 45 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. 69% 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 2018 London, the South-East and Paris
represent 64% of our stores, 73% of our revenues, as well as 56% 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 2018) confirmed
that self-storage capacity stands at 0.67 square feet per head of
population in the UK and 0.16 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 compares with 7.3 square feet per inhabitant
in the USA and 2.0 square feet in Australia. In the UK, in order to
reach the US density of supply would require the addition of around
another 12,000 stores as compared to c.1,150 currently. In the
Paris region, it would require around 1,800 new facilities versus
c.90 currently opened.
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).
The SSA 2018 Survey reported 70 stores as having been opened
across the industry in 2017. However, our own analysis of these
openings shows that many were container-based operators and only
c.30 of the sites represent self-storage sites that are comparable
with Safestore's own portfolio. Of those sites, only around half
are in catchments where Safestore has a presence. The 30 comparable
sites represent around 2.6% of the traditional self-storage
industry in the UK.
The SSA 2018 Survey also reported that operators have become
more conservative since 2017 in terms of new store openings and
site acquisitions. For 2019, operators have revised their new store
predictions down from 52 to 47 and their site acquisitions down
from 46 to 31. Traditionally, operators have opened or acquired far
fewer stores than originally estimated. For 2017, the survey group
had predicted in the previous year that it would open 47 stores and
only 26 were in fact opened by the operators in the survey group.
For 2020, around 42 new developments are predicted. Based on these
estimates, and adjusting for historical inaccuracy, we estimate
that around 30 stores per annum will be developed over the coming
years.
New supply in London and Paris is likely to continue to be
limited in the short and medium term as a result of planning
restrictions and the availability of suitable land.
The supply in the UK market, according to the SSA survey,
remains relatively fragmented. Safestore is the leader by number of
stores with 120 wholly owned sites (including Alligator), followed
by Big Yellow with 74 wholly owned stores, Access with 57 stores,
Lok'n Store with 29 stores, Shurgard with 28 stores and Storage
King with 26 stores. In aggregate, the top ten leading operators
account for 28% of the UK store portfolio. The remaining c.1,100
self-storage outlets (including 345 container based operations) are
independently owned in small chains or single units. In total there
are 723 storage businesses operating in the UK.
Safestore's 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
relatively low, providing an opportunity for future industry
growth. The SSA survey indicated that 54% (58% in 2017) 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. 61% 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 67% of those
surveyed (71% in 2017) 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.23% in 2017).
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.
Safestore's domestic customers' need for storage is often driven
by life 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. This is consistent with the SSA 2018 Survey which
reported that only 22.5% of the industry's customer base use
self-storage as temporary storage whilst moving house which
includes both the rental and the owner occupier market.
The Group's 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) 73% 82%
Square feet occupied (% of
total) 52% 66%
Average Length of Stay
(months) 21.1 27.6
Business Customers
Numbers (% of total) 27% 18%
Square feet occupied (% of
total) 48% 34%
Average Length of Stay
(months) 30.7 32.5
Safestore's customer base is resilient and diverse and consists
of around 60,000 domestic, business and National Accounts customers
across London, Paris and the UK regions.
Business Model
Safestore's business model remains unchanged.
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.
The Group's capital-efficient portfolio of 146 wholly owned
stores in the UK and Paris consists of a mix of freehold and
leasehold stores. In order to grow the business and secure the best
locations for our facilities we have maintained a flexible approach
to leasehold and freehold developments.
Currently, around 30% of our stores in the UK are leaseholds
with an average remaining lease length at 30 April 2018 of 13.0
years (FY2017: 13.3 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 42% 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 but at a significantly higher exit cap rate.
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
83% (2017: 82%) of our enquiries in the UK and 74% (2017: 73%) in
France. Telephone enquiries comprise 11% of the total (18% in
France) and 'walk-ins' amount to only 6% (8% in France). This
dynamic 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
39.7% enquiry growth over the last five years (excluding
Alligator). 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 2016.
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 13% 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 96% 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
represents around 415k sq ft of occupied space (around 11% of the
UK's occupancy). 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 60,000 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 2018 we had 1.52m sq ft of unoccupied space in the
UK and 0.27m sq ft in France, equivalent to c.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 with improving momentum
UK Operating Performance- total 2018 2017 Change(1)
--------------------------------- ------ ------ ----------
Revenue (GBP'm) 52.4 47.3 10.8%
EBITDA (GBP'm)(3) 28.4 25.0 13.6%
EBITDA (after leasehold costs)
(GBP'm) 25.2 21.9 15.1%
Closing Occupancy (let sq ft-
million)(4) 3.60 3.11 15.8%
Maximum Lettable Area (MLA)(5) 5.12 4.57 12.0%
Closing Occupancy (% of MLA)(5) 70.3% 68.1% +2.2ppts
Average Storage Rate (GBP) 23.66 24.75 (4.4%)
UK Operating Performance- like-for-like(8) 2018 2017 Change(1)
-------------------------------------------- ------ ------ ----------
Revenue (GBP'm) 48.0 46.1 4.3%
EBITDA (GBP'm)(3) 25.9 24.2 7.0%
Closing Occupancy (let sq ft-
million)(4) 3.21 3.05 5.2%
Closing Occupancy (% of MLA)(5) 71.7% 68.2% +3.5ppts
Average Occupancy (let sq ft-
million)(4) 3.16 3.03 4.3%
Average Storage Rate (GBP) 24.40 24.58 (0.7%)
Revenue in the UK has grown by 10.8% in the period reflecting
the acquisition of Alligator on 1 November 2017.
On a like-for-like basis, revenue grew by 4.3%. We saw strong
like-for-like average occupancy growth of 4.3% in the period and
like-for-like closing occupancy increased by 3.5ppts to 71.7%
(2017: 68.2%). Given the usual cyclicality of the industry it is
typical to see an outflow of occupancy in the first half of the
financial year. However, the like-for-like occupancy outflow in the
period was just 3,000 sq ft as compared to an outflow of 40,000 sq
ft in the first half of 2017.
Our occupancy performance was partially offset by a small
reduction in the like-for-like average rate of 0.7% for the period,
although we have seen improving momentum in the average rate over
the final quarter of 2017 and the first half of 2018, with
year-on-year rate broadly flat at the end of the period.
Our total closing occupancy was up 2.2ppts at 70.3% (2017:
68.1%), driven by the five stores opened between 2016 and the
period end, but was diluted by the fact that the occupancy of
Alligator, which had not yet been acquired in the first half of
2017, is lower than the average of the Safestore portfolio.
Similarly, the initial discounts on the recently opened stores and
the lower Alligator rate have resulted in the total average storage
rate reducing by 4.4% to GBP23.66 (2017: GBP24.75).
We remain focused on our cost base. During the period, our cost
base increased by 0.9% or GBP0.2m on a like-for-like basis largely
driven by the variable costs related to incremental revenue. Total
costs increased by GBP1.7m reflecting the acquisition of Alligator
at the beginning of the financial year.
As a result, EBITDA for the UK business was GBP28.4m (2017:
GBP25.0m), an increase of GBP3.4m or 13.6%.
Paris - now in twentieth consecutive year of growth
Paris Operating Performance- 2018 2017 Change(1)
total
--------------------------------- ------ ------ ----------
Revenue (EUR'm) 19.0 17.9 6.1%
EBITDA (EUR'm)(3) 12.1 11.5 5.2%
EBITDA (after leasehold costs)
(EUR'm) 9.6 9.3 3.2%
Closing Occupancy (let sq ft-
million)(4) 0.90 0.83 8.4%
Maximum Lettable Area (MLA)(5) 1.17 1.07 9.3%
Closing Occupancy (% of MLA)(5) 77.0% 77.3% (0.3ppts)
Average Storage Rate (EUR) 39.58 40.57 (2.4%)
Revenue (GBP'm) 16.8 15.3 9.8%
Paris Operating Performance- 2018 2017 Change(1)
like-for-like(8)
--------------------------------- ------ ------ ----------
Revenue (EUR'm) 18.9 17.9 5.6%
EBITDA (EUR'm)(3) 12.3 11.5 7.0%
Closing Occupancy (let sq ft-
million)(4) 0.88 0.83 6.0%
Closing Occupancy (% of MLA)(5) 80.4% 77.3% +3.1ppts
Average Occupancy (let sq ft-
million)(4) 0.87 0.81 7.4%
Average Storage Rate (EUR) 39.98 40.57 (1.5%)
Our Paris business had a good first half of the year growing
like-for-like revenue by 5.6%. Our like-for-like average occupancy
for the period was 7.4% ahead of 2017 and the like-for-like closing
occupancy ended the half-year up 3.1ppts at 80.4% (2017: 77.3%).
The occupancy performance was partially offset by a 1.5% reduction
in the like-for-like average rate in the period.
Excluding our lower price suburban Emerainville store, which
opened in September 2016, from the like-for-like stores the average
rate was down 0.2% throughout the period, ending marginally up in
April on the prior year. In the comparative period to April 2017,
the like-for-like stores (excluding Emerainville) had performed
particularly strongly, growing rate by 2.7%.
Total revenue was up 6.1% in the period. We opened a new store
at Combs-la-Ville in the second half of 2017 and its lower
occupancy levels mean that our total occupancy was 77.0%, down
0.3ppts on the first half of 2017. Our recently opened stores at
Emerainville and Combs-la-Ville are trading slightly ahead of our
initial expectations.
The impact of Sterling being 3% weaker than in the comparative
period resulted in Sterling equivalent revenue growing by 9.8% 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 twentieth year of uninterrupted revenue growth in local
currency.
The cost base in Paris remained well controlled during the year
and, as a result, like-for-like EBITDA grew to EUR12.3m (2017:
EUR11.5m), an improvement of EUR0.8m or 7.0% on 2017.
Frederic Vecchioli
13 June 2018
Financial Review
Underlying Income Statement
The table below sets out the Group's underlying results of
operations for the six months ended 30 April 2018 and the six
months ended 30 April 2017.
H1 2018 H1 2017 Mvmt
GBP'm GBP'm %
Revenue 69.2 62.6 10.5%
Underlying
costs (30.1) (27.7) 8.7%
-------- --------
Underlying
EBITDA 39.1 34.9 12.0%
Leasehold rent (5.4) (5.0) 8.0%
-------- --------
Underlying EBITDA after
leasehold rent 33.7 29.9 12.7%
Depreciation (0.3) (0.2) 50.0%
Finance charges (4.0) (5.3) (24.5%)
-------- --------
Underlying profit
before tax 29.4 24.4 20.5%
Current tax (2.1) (2.0) 5.0%
Adjusted EPRA earnings 27.3 22.4 21.9%
Share-based payments
charge (2.7) (0.7) 285.7%
EPRA basic earnings 24.6 21.7 13.4%
======== ========
Average shares in
issue (m) 209.7 209.0
Diluted shares (for
ADE EPS) (m) 216.8 216.4
Adjusted diluted EPRA EPS (pro
forma) (p) 12.6 10.4 21.2%
Notes:
1. Adjusted Diluted EPRA EPS is defined in note 2 to the financial statements.
2. Adjusted EPRA earnings excludes share-based payment charges
and, accordingly, the underlying EBITDA, underlying EBITDA after
leasehold rent and underlying profit before tax measures have been
restated to exclude share-based payment charges for
consistency.
Management considers the above presentation of earnings to be
representative of the underlying performance of the business.
Underlying EBITDA increased by 12.0% to GBP39.1m (H1 2017:
GBP34.9m) reflecting a 10.5% increase in revenue offset by an 8.7%
increase in the underlying cost base (see below). The leasehold
rent charge has increased by 8.0% from GBP5.0m in H1 2017 to
GBP5.4m, principally reflecting the addition of two new leases
through the acquisition of the Alligator business and the
non-repeat of favourable rent settlements in Paris in H1 2017.
Finance charges decreased by 24.5% from GBP5.3m in H1 2017 to
GBP4.0m in H1 2018. This principally reflects the benefit of the
refinancing of our borrowing arrangements undertaken in May 2017,
as well as the restructuring of our hedging arrangements undertaken
in August 2017.
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 GBP2.1m (H1 2017: GBP2.0m).
As explained in note 2 to the financial statements, management
considers that the most representative earnings per share ("EPS")
measure is Adjusted Diluted EPRA EPS which has increased by 21.2%
to 12.6 pence (H1 2017: 10.4 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the
consolidated income statement to underlying EBITDA.
H1 2018 H1 2017
GBP'm GBP'm
Operating profit 87.3 64.6
Adjusted
for
- gain on investment
properties (51.8) (30.8)
- depreciation 0.3 0.2
- contingent
rent 0.6 0.2
- share-based payments 2.7 0.7
Underlying
EBITDA 39.1 34.9
======== ========
The main reconciling item between operating profit and
underlying EBITDA is the gain on investment properties, which
increased by GBP21.0m to GBP51.8m in H1 2018. The Group's approach
to the valuation of its investment property portfolio at 30 April
2018 is discussed below.
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 2018 H1 2017
Total Total
UK Paris (CER) UK Paris (CER)
GBP'm EUR'm GBP'm GBP'm EUR'm GBP'm
Revenue 52.4 19.0 68.7 47.3 17.9 62.6
Underlying cost of sales (19.5) (5.5) (24.3) (17.9) (5.0) (22.1)
------- ------ ------- ------- ------ -------
Store EBITDA 32.9 13.5 44.4 29.4 12.9 40.5
Store EBITDA margin 62.8% 71.1% 64.6% 62.2% 72.1% 64.7%
Underlying administrative
expenses (4.5) (1.4) (5.6) (4.4) (1.4) (5.6)
Underlying EBITDA 28.4 12.1 38.8 25.0 11.5 34.9
EBITDA margin 54.2% 63.7% 56.5% 52.9% 64.2% 55.8%
Leasehold rent (3.2) (2.5) (5.3) (3.1) (2.2) (5.0)
Underlying EBITDA after
leasehold rent 25.2 9.6 33.5 21.9 9.3 29.9
======= ====== ======= ======= ====== =======
EBITDA after leasehold
rent margin 48.1% 50.5% 48.8% 46.3% 52.0% 47.8%
UK Paris Total UK Paris Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Underlying EBITDA after
leasehold rent (CER) 25.2 8.3 33.5 21.9 8.0 29.9
Adjustment to actual exchange
rate - 0.2 0.2 - - -
Reported underlying EBITDA
after leasehold rent 25.2 8.5 33.7 21.9 8.0 29.9
======= ====== ======= ======= ====== =======
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 GBP3.4m, or 13.6%, to
GBP28.4m (H1 2017: GBP25.0m), reflecting a 10.8% increase in
revenue offset partially by 7.6% increase in the underlying cost
base. The recently acquired Alligator stores contributed revenue of
GBP3.8m and underlying EBITDA of GBP2.2m. Underlying UK EBITDA
after leasehold rent increased by 15.1% to GBP25.2m (H1 2017:
GBP21.9m) with the margin increasing to 48.1% from 46.3% in H1
2017, principally as a result of revenue improvements being
delivered whilst effectively managing costs.
In Paris, underlying EBITDA increased by EUR0.6m, or 5.2%, to
EUR12.1m (H1 2017: EUR11.5m), reflecting a EUR1.1m increase in
revenue, arising from an 8.7% increase in average occupancy partly
offset by a 2.4% decrease in the average storage rate. The EBITDA
margin in Paris fell from 64.2% in H1 2017 to 63.7% in H1 2018,
reflecting the dilutive effect of newly opened stores. However, on
the like-for-like basis the EBITDA margin increased to 65.1% (H1
2017: 64.2%). Underlying EBITDA after leasehold rent in Paris
increased by 3.2% to EUR9.6m (H1 2017: EUR9.3m).
The combined results of the UK and Paris delivered a 12.0%
increase in underlying EBITDA after leasehold rent at constant
exchange rates at Group level. Adjusting for a favourable exchange
impact of GBP0.2m in the current year, Group reported underlying
EBITDA after leasehold rent has increased by 12.7% or GBP3.8m to
GBP33.7m (H1 2017: GBP29.9m).
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 2018 and H1 2017.
% of % of
H1 2018 total H1 2017 total % change
UK GBP'm 52.4 76% 47.3 76% 10.8%
Paris
Local currency EUR'm 19.0 17.9 6.1%
Average exchange
rate EUR:GBP 1.133 1.168 3.0%
Paris in Sterling GBP'm 16.8 24% 15.3 24% 9.8%
Total revenue 69.2 100% 62.6 100% 10.5%
======== ======= ======== ======= =========
The Group's reported revenue increased by 10.5% or GBP6.6m
during the period. The Group's occupied space was 560,000 sq ft
higher at 30 April 2018 (4.50 million sq ft) than at 30 April 2017
(3.94 million sq ft) with Alligator contributing 373,000 of the
increase. Average occupancy during the period was 13.8% higher at
4.44 million sq ft (H1 2017: 3.90 million sq ft), and the reported
average rental rate for the Group for the period was 3.5% lower at
GBP25.91 than in H1 2017 (GBP26.85), driven by the dilutive impact
of the Alligator acquisition and new store openings.
On a like-for-like basis, adjusting for the impact of new and
closed stores and the acquisition of Alligator, the Group's revenue
has increased by 5.4% since the comparative period. Adjusting for a
favourable exchange impact in the current year, revenue increased
by 9.7% on a constant currency basis.
In the UK reported revenue increased by GBP5.1m or 10.8%,
occupancy increased by 15.8% to 3.60 million sq ft at 30 April 2018
(H1 2017: 3.11 million sq ft) and the average rental rate decreased
by 4.4% to 23.66 (H1 2017: GBP24.75). The average space occupied
during the period was up 15.2% compared with H1 2017 at 3.56
million sq ft (H1 2017: 3.09 million sq ft).
On a like-for-like basis, adjusting for the acquisition of
Alligator and new and closed stores, UK revenue increased by
GBP1.9m or 4.3% arising from a 4.3% increase in average occupancy
and a 0.7% decrease in the average store rate.
In Paris, revenue increased by EUR1.1m or 6.1%. The average Euro
exchange rate for H1 2018 was EUR1.133:GBP1 compared with
EUR1.168:GBP1 in H1 2017 resulting in a GBP0.5m benefit at the
revenue level when comparing to a constant currency basis. Further
adjusting for the impact of the Combs-la-Ville store opening in
June 2017, like-for-like revenue in constant currency increased by
GBP0.9m or 5.9% to GBP16.2m (H1 2017: GBP15.3m).
Paris closing occupancy at 30 April 2018 has increased by 8.4%
compared to 30 April 2017 to 0.90 million sq ft and average
occupancy for the period of 0.88 million sq ft is an 8.6% increase
compared to H1 2017. The average rental rate in Paris was EUR39.58
for the period, a decrease of 2.4% on H1 2017 (EUR40.57).
Analysis of Cost Base
Cost of sales
The table below details the key movements in cost of sales
between H1 2017 and H1 2018.
Cost of sales H1 2018 H1 2017
GBP'm GBP'm
Reported cost
of sales (25.3) (22.5)
Adjusted for:
Depreciation 0.3 0.2
Contingent rent 0.6 0.2
Underlying cost of
sales (24.4) (22.1)
======== ========
Underlying cost of sales
for H1 2017 (22.1)
Closed and new store cost
of sales 0.3
Underlying cost of sales for H1
2017 (Like-for-like) (21.8)
Enquiry generation
spend (0.7)
Store maintenance and facilities
savings 0.3
Underlying cost of sales for H1
2018 (Like-for-like; CER) (22.2)
Alligator, closed and new
store cost of sales (2.1)
Underlying cost of sales
for H1 2018 (CER) (24.3)
Foreign exchange (0.1)
Underlying cost of sales
for H1 2018 (24.4)
========
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 Alligator, underlying cost of sales increased by
1.8% or GBP0.4m, to GBP22.2m (H1 2017: GBP21.8m) on a constant
currency basis, principally due to a GBP0.7m increase in the
marketing spend to generate customer enquiries, offset by reduced
spending on store maintenance and facilities.
The cost of sales attributable to new and acquired stores,
including Alligator, is GBP2.1m. Reflecting the impact of exchange
rate movements, reported underlying cost of sales increased by
GBP2.3m or 10.4% to GBP24.4m in H1 2018.
Administrative Expenses
The table below reconciles reported administrative expenses to
underlying administrative expenses and details the key movements in
underlying administrative expenses between H1 2017 and H1 2018.
Administrative expenses H1 2018 H1 2017
GBP'm GBP'm
Reported administrative
expenses (8.4) (6.3)
Adjusted for:
Share-based payments 2.7 0.7
Underlying administrative
expenses (5.7) (5.6)
======== ========
Underlying administrative expenses
for H1 2017 (5.6)
Employee remuneration (0.2)
Professional fees and administration
costs 0.2
Underlying administrative expenses for
H1 2018 (Like-for-like; CER) (5.6)
Alligator, closed and new store
administrative expenses -
Underlying administrative expenses
for H1 2018 (CER) (5.6)
Foreign exchange (0.1)
Underlying administrative expenses
for H1 2018 (5.7)
========
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 1.8% or GBP0.1m
to GBP5.7m (H1 2017: GBP5.6m). The increase arose primarily due to
a GBP0.1m adverse currency impact, with increased employee
remuneration (GBP0.2m) as a result of increased headcount and lower
vacancy rates being offset by savings in like-for-like professional
services and administrative costs totalling GBP0.2m.
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 2018, a sample of the Group's largest properties,
representing approximately 41% of the value of the Group's
investment property portfolio at 31 October 2017, 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 59% of the
Group's investment property portfolio and the Alligator portfolio
acquired on 1 November 2017, updating 31 October 2017 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 2018 H1 2017
GBP'm GBP'm
Revaluation of investment
properties 54.2 33.4
Revaluation of investment properties
under construction 0.1 -
Depreciation on leasehold
properties (2.5) (2.6)
Gain on investment
properties 51.8 30.8
======== ========
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
GBP52.8m of the GBP54.3m net revaluation gain, with GBP1.5m arising
in Paris. The valuation gain has arisen due to the impact of
improving trading performance on the valuation assumptions, in
particular occupancy, as well as improvements to market metrics,
including capitalisation rates.
Operating profit
Reported operating profit increased by GBP22.7m from GBP64.6m in
H1 2017 to GBP87.3m in H1 2018, primarily reflecting the increase
in the gain on investment properties and a GBP4.2m improvement in
underlying EBITDA.
Net finance costs
Net finance costs includes interest payable, interest on
obligations under finance leases, fair value movements on
derivatives, exchange gains or losses, unwinding of discounts and
exceptional refinancing costs. Net finance costs decreased by
GBP4.2m to GBP5.4m in H1 2018 (H1 2017: GBP9.6m).
H1 2018 H1 2017
GBP'm GBP'm
Net bank interest
payable (4.0) (5.3)
Interest on obligations
under finance leases (2.3) (2.2)
Fair value movement on derivatives 0.8 (7.6)
Net exchange gains - 5.4
Unwinding of discount on Capital Goods
Scheme receivable 0.1 0.1
Net finance
costs (5.4) (9.6)
======== ========
Underlying finance charge
The underlying finance charge (net bank interest payable)
decreased to GBP4.0m, from GBP5.3m in H1 2017. The decrease
reflects interest savings arising from the refinancing of our
borrowing arrangements undertaken in May 2017, as well as the
restructuring of our hedging arrangements in August 2017. Net bank
interest payable also includes the amortisation of debt issue
costs, which decreased to GBP0.1m (H1 2017: GBP0.2m).
Based on the drawn debt position as at 30 April 2018, 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 Revolver GBP250.0 GBP171.0 GBP135.0 79% 1.25% 0.94% 0.71% 2.14%
UK Revolver- non-utilisation GBP79.0 - - - 0.50% - - 0.50%
Euro Revolver EUR70.0 GBP37.8 GBP26.4 70% 1.25% 0.16% (0.33%) 1.27%
Euro Revolver-
non-utilisation EUR27.0 - - - 0.50% - - 0.50%
US Private Placement
2024 EUR50.9 GBP44.7 GBP44.7 100% 1.59% - - 1.59%
US Private Placement
2027 EUR74.1 GBP65.1 GBP65.1 100% 2.00% - - 2.00%
US Private Placement
2029 GBP50.5 GBP50.5 GBP50.5 100% 2.92% - - 2.92%
Unamortised finance
costs - (GBP0.5) - - - - - -
Total GBP471.8 GBP368.6 GBP321.7 87% 2.24%
========== ========= ========= ======= ======
As at 30 April 2018, GBP171m of the GBP250m UK revolver and
EUR43m (GBP37.8m) of the EUR70m Euro revolver were drawn. The drawn
amounts attract a bank margin of 1.25%, and the Group pays a
non-utilisation fee of 0.50% on the undrawn balances of GBP79m and
EUR27m.
The Group has interest rate hedge agreements in place to June
2022, swapping LIBOR on GBP135m at a weighted average effective
rate of 0.94% and EURIBOR on EUR30m at an effective rate of
0.16%.
The 2024 and 2027 US Private Placement Notes are denominated in
Euros and attract fixed interest rates of 1.59% (on EUR50.9m) and
2.00% (on EUR74.1m) respectively. The Euro denominated borrowings
provide a natural hedge against the Group's investment in the Paris
business.
The GBP50.5m 2029 US Private Placement Notes are denominated in
Sterling and attract a fixed interest rate of 2.92%.
87% of the Group's drawn debt is effectively at fixed rates of
interest, as a result of the hedging arrangements and fixed
interest loan notes. Overall, the Group has an effective interest
rate on its borrowings of 2.24% at 30 April 2018, compared to 2.14%
at the previous year end, as a result of a combination of
increasing UK interest rates on the unhedged portion of the UK
revolver and the rate impact of the Group's additional GBP35m
hedging arrangements.
Non-underlying finance charge
Interest on finance leases was GBP2.3m (H1 2017: GBP2.2m) 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 GBP5.0m in H1
2017 to GBP5.4m in H1 2018, principally reflecting the addition of
two new leases through the acquisition of the Alligator business
and the non-repeat of favourable rent settlements in Paris in H1
2017.
Net finance costs includes no exchange gain or loss (H1 2017:
GBP5.4m of net exchange gains). The gain in the prior period arose
primarily on retranslation of the Group's US dollar denominated
borrowings.
A net gain of GBP0.8m was recognised on fair valuation of
derivatives (H1 2017: net loss of GBP7.6m). The loss in the prior
period principally comprised a GBP7.9m loss in respect of cross
currency swaps taken out by the Group to hedge against movements in
the US dollar denominated borrowings.
Since our refinancing in May 2017, the Group is no longer
exposed to exchange movements on US dollar denominated borrowings,
and the US dollar cross currency swaps were broken as part of the
refinancing. The Group undertakes net investment hedge accounting
for its new Euro denominated loan notes, so the income statement is
not exposed to fluctuations in the Euro exchange rate.
Tax
The tax credit for the period is analysed below:
Tax credit H1 2018 H1 2017
GBP'm GBP'm
Underlying current
tax (2.1) (2.0)
Current tax
charge (2.1) (2.0)
-------- --------
Tax on investment properties
movement (0.8) (2.9)
Tax on revaluation of interest
rate swaps - (0.1)
Impact of tax rate change
in France 5.6 8.7
Other (0.1) 0.1
Deferred tax
credit 4.7 5.8
-------- --------
Net tax credit 2.6 3.8
======== ========
Income tax in the period was a net credit GBP2.6m (H1 2017:
GBP3.8m net credit).
In the UK the Group is a REIT, so the current tax charge relates
to the Paris business. The current tax charge for the period
amounted to GBP2.1m (H1 2017: GBP2.0m).
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, and the 2018
Finance Bill, adopted in December 2017, introduced further
progressive reductions in the tax rate to 25.0% by 2022. As a
result, the net deferred tax charge reflects an exceptional
deferred tax credit of GBP5.6m (H1 2017: GBP8.7m) relating to these
changes.
Profit after tax
The profit after tax for the period was GBP84.5m, compared with
GBP58.8m in H1 2017, an increase of GBP25.7m which arose
principally due to the higher gain on investment properties
(GBP21.0m) and the lower net finance expense (GBP4.2m), both of
which are explained above.
Basic EPS was 40.3 pence (H1 2017: 28.1 pence) and diluted EPS
was 40.2 pence (H1 2017: 28.0 pence). As explained in note 2 to the
financial statements, management considers adjusted diluted EPRA
EPS to be more representative of the underlying EPS performance of
the business, and this is considered above.
Dividends
The Board has announced an interim dividend of 5.1 pence per
share, an increase of 21.4% on the interim dividend paid last year
of 4.2 pence. This will amount to a dividend payment of GBP10.7m
(H1 2017: GBP8.8m). The dividend will be paid on 17 August 2018 to
shareholders who are on the Company's register at the close of
business on 13 July 2018. The ex-dividend date will be 12 July
2018. 50% (H1 2017: 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 41% 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 59% of the Group's investment property
portfolio.
UK Paris Total Paris
GBP'm GBP'm GBP'm EUR'm
Value as at 1 November
2017 736.6 262.6 999.2 298.6
Currency translation
movement - (0.1) (0.1) -
Additions 5.0 1.5 6.5 1.7
On acquisition of subsidiary 55.9 55.9 -
Disposals - - - -
Reclassifications 5.1 - 5.1 -
Revaluation 52.7 1.5 54.2 1.7
Value at 30
April 2018 855.3 265.5 1,120.8 302.0
====== ====== ======== ======
The table above summarises the movement in the valuations.
The exchange rate at 30 April 2018 was EUR1.1373:GBP1 compared
to EUR1.1371:GBP1 at 31 October 2017. This movement in the foreign
exchange rate has resulted in a GBP0.1m adverse currency
translation movement in the period. 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.
The Group's property portfolio valuation has increased by
GBP121.6m from the valuation of GBP999.2m at 31 October 2017. This
reflects the gain on valuation of GBP54.2m, which is explained
above, plus additions of GBP11.6m (including the reclassification
of Mitcham from investment properties under construction) as well
as the newly acquired Alligator portfolio, fair valued on
acquisition at GBP55.9m.
The value of the Company's pipeline of expansion stores of
GBP8.4m as at 30 April 2018 includes the development sites at
Birmingham Merry Hill, Paddington Marble Arch in London and Poissy
in Paris.
Adjusted EPRA NAV per share is 357 pence, an increase of 8.5%
since 31 October 2017, reflecting the revaluation gain and
additions described above.
Gearing and Capital Structure
As at 30 April 2018, 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.
Net debt (including finance leases and cash) stood at GBP422.7m
at 30 April 2018, an increase of GBP68.5m during the period from
GBP354.2m at 31 October 2017 which is principally due to the
GBP55.9m net consideration paid to acquire Alligator Self Storage
on 1 November 2017. Total capital (net debt plus equity) increased
from GBP991.9m at 31 October 2017 to GBP1,126.4m at 30 April 2018.
The net impact is that the gearing ratio has increased from 36% to
38% 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 2018 the Group LTV ratio was 33%
compared with 36% at 31 October 2017. The Board considers the
current level of gearing is appropriate for the business to enable
the Group to increase returns on equity, maintain financial
flexibility and to achieve our medium-term strategic
objectives.
As at 30 April 2018, GBP171m of the GBP250m UK revolver and
EUR43m (GBP37.8m) of the EUR70m Euro revolver were drawn. Including
the US Private Placement debt of EUR125m (GBP109.8m) and GBP50.5m,
the Group's borrowings totalled GBP369.1m (before adjustment for
unamortised finance costs).
As at 30 April 2018, the weighted average remaining term for the
Group's committed borrowing facilities is 5.8 years. We are
currently discussing the exercise of the option to extend our
banking facilities by a further year to June 2023, which would
increase the weighted average remaining term for the committed
borrowing facilities to 6.4 years.
Borrowings under the existing 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 of EBITDA:interest is 2.4:1, where it
will remain until the end of the facilities' terms. Interest cover
for the rolling twelve month period to 30 April 2018 is 8.6x,
calculated on the basis required under our financial covenants.
The LTV covenant is 60% in both the UK and France, where it will
remain until the end of the facilities' terms. As at 30 April 2018,
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 2018 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.
Alligator Acquisition
On 1 November 2017 the Group completed the acquisition of Stork
Self Storage Holdings Limited, trading as Alligator Self Storage, a
company controlled by funds managed or advised by York Capital
Management, for consideration of GBP55.9m, net of cash acquired.
The consideration paid is greater than the provisional fair value
of the identifiable net assets and, as a result GBP1.0m of goodwill
has been recognised. In respect of this transaction, GBP1.4m of
transaction related costs were reported as an exceptional item
within administrative expenses for the year ended 31 October
2017.
Cash flow
The table below sets out the cash flow of the business in H1
2018 and H1 2017.
H1 2018 H1 2017
GBP'm GBP'm
Underlying
EBITDA 39.1 34.9
Working capital/other (2.2) 0.7
Operating cash inflow 36.9 35.6
Interest payments (4.1) (5.8)
Leasehold rent payments (5.4) (5.0)
Tax payments (4.3) (1.6)
Free cash flow (before investing and
financing activities) 23.1 23.2
Acquisition of subsidiary, net
of cash acquired (55.9) -
Capital expenditure - investment
properties (13.7) (13.8)
Capital expenditure - property,
plant and equipment (0.4) (0.3)
Proceeds from disposal - investment
properties - 3.4
Net cash flow after investing
activities (46.9) 12.5
Dividends paid (17.7) (14.7)
Net drawdown of borrowings 5.0 3.4
Debt issuance
costs (0.6) -
Net (decrease)/increase
in cash (60.2) 1.2
======== ========
Note: Free cash flow is a non-GAAP measure, defined as cash flow
before investing and financing activities but after leasehold rent
payments.
Operating cash flow increased by GBP1.3m in the period,
principally reflecting the GBP4.2m increase in underlying EBITDA,
partly offset by the impact of working capital outflows. The
working capital outflows include the payment of transaction costs
related to the acquisition of Alligator, deposits paid in respect
of pipeline stores and other seasonal and volume related cash flow
fluctuations.
Interest payments were GBP1.7m lower than the prior half year,
principally as a result of the refinancing of our borrowing
arrangements in May 2017. However, tax paid during the period
increased by GBP2.7m due to timing differences, arising from the
benefit of tax losses utilised in France in previous years reducing
payments on account made in the prior year. As a result, free cash
flow (before investing and financing activities) fell by GBP0.1m to
GBP23.1m (H1 2017: GBP23.2m).
Investing activities experienced a net outflow of GBP70.0m (H1
2017: GBP10.7m), principally due to the GBP55.9m (net of cash
acquired) paid for the acquisition of Alligator, plus capital
expenditure relating to the new sites at Mitcham in London,
Paddington Marble Arch and Merry Hill in Birmingham and Poissy in
Paris. Of the GBP13.7m cash outflow on investment properties,
GBP3.2m (H1 2017: GBP2.9m) was spent on capital maintenance and
store fit-outs, with the balance principally spent on new stores
and development of the existing portfolio.
Dividends paid to shareholders increased from GBP14.7m in H1
2017 to GBP17.7m in H1 2018, and the Group drew a net GBP5.0m of
borrowings, primarily to finance capital expenditure.
Consolidated income statement
for the six months ended 30 April 2018
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
------------------------------------------------------------------ ----- ------------ ------------ ------------
Revenue 4 69.2 62.6 129.9
Cost of sales (25.3) (22.5) (45.7)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Gross profit 43.9 40.1 84.2
Administrative expenses (8.4) (6.3) (13.8)
Underlying EBITDA 4 39.1 34.9 74.4
Exceptional items - - (1.4)
Share-based payments (2.7) (0.7) (1.5)
Depreciation and contingent rent (0.9) (0.4) (1.1)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Operating profit before gain on investment properties 35.5 33.8 70.4
Gain on investment properties 10 51.8 30.8 39.2
------------------------------------------------------------------ ----- ------------ ------------ ------------
Operating profit 87.3 64.6 109.6
Finance income 5 1.0 5.7 6.1
Finance expense 5 (6.4) (15.3) (36.8)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Profit before income tax 4 81.9 55.0 78.9
Income tax credit/(charge) 6 2.6 3.8 (0.6)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Profit for the period 84.5 58.8 78.3
------------------------------------------------------------------ ----- ------------ ------------ ------------
Earnings per share for profit attributable to the equity holders
------------------------------------------------------------------ ----- ------------ ------------ ------------
- basic (pence) 9 40.3 28.1 37.4
------------------------------------------------------------------ ----- ------------ ------------ ------------
- diluted (pence) 9 40.2 28.0 37.3
------------------------------------------------------------------ ----- ------------ ------------ ------------
All items in the income statement relate to continuing
operations.
Underlying EBITDA is defined as operating profit before
exceptional items, share-based payments, corporate transaction
costs, change in fair value of derivatives, gain/loss on investment
properties, contingent rent and depreciation.
An interim dividend of 5.1 pence per ordinary share has been
declared for the period ended 30 April 2018 (30 April 2017: 4.2
pence).
Consolidated statement of comprehensive income
for the six months ended 30 April 2018
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------------------------------- ----------- ----------- -----------
Profit for the period 84.5 58.8 78.3
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss:
Currency translation differences - (9.8) (3.0)
Net investment hedge - - (0.9)
Total other comprehensive income, net of tax - (9.8) (3.9)
---------------------------------------------------------------- ----------- ----------- -----------
Total comprehensive income for the period 84.5 49.0 74.4
---------------------------------------------------------------- ----------- ----------- -----------
Consolidated balance sheet
as at 30 April 2018
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
----------------------------------------- ---- ----------- ----------- ----------
Non-current assets
Goodwill 18 1.0 - -
Investment properties 10 1,120.8 972.0 999.2
Interests in leasehold properties 10 59.5 55.6 56.2
Investment properties under construction 10 8.4 8.3 7.8
Property, plant and equipment 2.2 2.0 2.0
Derivative financial instruments 14 1.6 13.0 0.9
Deferred tax assets 7 - 0.1 0.1
Other receivables 1.1 2.1 1.1
1,194.6 1,053.1 1,067.3
----------------------------------------- ---- ----------- ----------- ----------
Current assets
Inventories 0.2 0.2 0.2
Trade and other receivables 26.6 26.4 23.5
Cash and cash equivalents 5.4 6.3 65.6
----------------------------------------- ---- ----------- ----------- ----------
32.2 32.9 89.3
----------------------------------------- ---- ----------- ----------- ----------
Total assets 1,226.8 1,086.0 1,156.6
----------------------------------------- ---- ----------- ----------- ----------
Current liabilities
Trade and other payables (44.7) (44.7) (42.1)
Current income tax liabilities (2.7) (3.4) (4.5)
Obligations under finance leases (10.2) (8.9) (9.0)
(57.6) (57.0) (55.6)
----------------------------------------- ---- ----------- ----------- ----------
Non-current liabilities
Bank borrowings 13 (368.6) (311.4) (363.6)
Derivative financial instruments 14 (0.1) (3.1) (0.2)
Deferred tax liabilities 7 (47.5) (47.6) (52.3)
Obligations under finance leases (49.3) (46.7) (47.2)
(465.5) (408.8) (463.3)
----------------------------------------- ---- ----------- ----------- ----------
Total liabilities (523.1) (465.8) (518.9)
----------------------------------------- ---- ----------- ----------- ----------
Net assets 703.7 620.2 637.7
----------------------------------------- ---- ----------- ----------- ----------
Shareholders' equity
Ordinary shares 15 2.1 2.1 2.1
Share premium 60.4 60.1 60.4
Translation reserve 12.7 6.8 12.7
Retained earnings 628.5 551.2 562.5
----------------------------------------- ---- ----------- ----------- ----------
Total equity 703.7 620.2 637.7
----------------------------------------- ---- ----------- ----------- ----------
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 2018
Share Share Translation Retained Total
capital premium reserve earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ------------ ---------- --------
At 1 November 2017 2.1 60.4 12.7 562.5 637.7
Total comprehensive income
for the period - - - 84.5 84.5
Transactions with owners
in their capacity as owner:
Dividends (note 8) - - - (20.6) (20.6)
Employee share options - - - 2.1 2.1
------------------------------ --------- --------- ------------ ---------- --------
At 30 April 2018 2.1 60.4 12.7 628.5 703.7
------------------------------ --------- --------- ------------ ---------- --------
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 year ended 31 October 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 year - - (3.9) 78.3 74.4
Transactions with owners
in their capacity as owner:
Dividends (note 8) - - - (25.6) (25.6)
Increase in share capital - 0.3 - - 0.3
Employee share options - - - 1.2 1.2
------------------------------ --------- --------- ------------ ---------- --------
At 31 October 2017 2.1 60.4 12.7 562.5 637.7
------------------------------ --------- --------- ------------ ---------- --------
Consolidated cash flow statement
for the six months ended 30 April 2018
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- -----------
Profit before income tax 81.9 55.0 78.9
Gain on the revaluation of investment properties (51.8) (30.8) (39.2)
Depreciation 0.3 0.2 0.5
Net finance expense 5.4 9.6 30.7
Employee share options 2.1 0.6 1.2
Increase in trade and other receivables (2.2) (3.8) (1.0)
Increase in trade and other payables 0.6 4.6 1.9
Cash flows from operating activities 36.3 35.4 73.0
Interest paid (6.4) (8.0) (14.8)
Tax paid (4.3) (1.6) (2.6)
----------------------------------------------------- ----------- ----------- -----------
Net cash inflow from operating activities 25.6 25.8 55.6
----------------------------------------------------- ----------- ----------- -----------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (55.9) - -
Expenditure on investment and development properties (13.7) (13.8) (21.7)
Proceeds in respect of Capital Goods Scheme - - 1.4
Purchase of property, plant and equipment (0.4) (0.3) (0.6)
Proceeds from disposal of investment properties - 3.4 8.1
Net cash outflow from investing activities (70.0) (10.7) (12.8)
----------------------------------------------------- ----------- ----------- -----------
Cash flows from financing activities
Issue of share capital - - 0.3
Equity dividends paid (17.7) (14.7) (25.6)
Proceeds from borrowings 17.0 17.4 238.0
Repayment of borrowings (12.0) (14.0) (199.1)
Debt issuance costs (0.6) - (2.0)
Hedge breakage receipts - - 13.9
Hedge breakage payments - - (2.6)
Finance lease principal payments (2.5) (2.6) (5.3)
Net cash (outflow)/inflow from financing activities (15.8) (13.9) 17.6
----------------------------------------------------- ----------- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (60.2) 1.2 60.4
Exchange loss on cash and cash equivalents - (0.3) (0.2)
Opening cash and cash equivalents 65.6 5.4 5.4
----------------------------------------------------- ----------- ----------- -----------
Closing cash and cash equivalents 5.4 6.3 65.6
----------------------------------------------------- ----------- ----------- -----------
Reconciliation of net cash flow to movement in net debt
for the six months ended 30 April 2018
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------------------------------------- ----------- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (after exchange
adjustments) (60.2) 0.9 60.2
(Increase)/decrease in debt financing (8.3) 7.6 (45.2)
------------------------------------------------------------------------------- ----------- ----------- -----------
(Increase)/decrease in net debt (68.5) 8.5 15.0
Net debt at start of period (354.2) (369.2) (369.2)
------------------------------------------------------------------------------- ----------- ----------- -----------
Net debt at end of period (422.7) (360.7) (354.2)
------------------------------------------------------------------------------- ----------- ----------- -----------
Notes to the interim report for the six months ended 30 April
2018
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, Hertfordshire
WD6 2BT.
The Company is listed on the London Stock Exchange.
This interim report was approved for issue on 13 June 2018.
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 2017, which received an
unqualified report from the auditor, 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 21 March 2018.
This condensed consolidated interim financial information for 30
April 2018 and 30 April 2017 is unaudited. The interim financial
information for 30 April 2018 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 2018 has been prepared in accordance with
the Disclosure Guidance 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 2017, which have been prepared in accordance
with IFRS as adopted by the European Union.
Non-GAAP financial information
The Directors have identified certain measures that they believe
will assist the understanding of the performance of the business.
The measures are not defined under IFRS and they may not be
directly comparable with other companies' adjusted measures. The
non-GAAP measures are not intended to be a substitute for, or
superior to, any IFRS measures of performance but they have been
included as the Directors consider them to be important comparables
and key measures used within the business for assessing
performance. The following are the key non-GAAP measures identified
by the Group:
-- The Group defines exceptional items to be those that warrant,
by virtue of their nature, size or frequency, separate disclosure
on the face of the income statement where, in the opinion of the
Directors, this enhances the understanding of the Group's financial
performance.
-- Underlying EBITDA is defined as operating profit before
exceptional items, share-based payments, corporate transaction
costs, change in fair value of derivatives, gain/loss on investment
properties, contingent rent and depreciation. Management considers
this presentation to be representative of the underlying
performance of the business, as it removes the income statement
impact of items not fully controllable by management, such as the
revaluation of derivatives and investment properties, and the
impact of exceptional credits, costs and finance charges. This
definition has been updated since the 2017 annual report to
incorporate the adjustment made for share-based payments to reflect
the new adjusted
EPRA earnings measure, which was introduced in the 2017 annual
report and is defined below. The reconciliation of statutory
operating profit to underlying EBITDA can be found in the financial
review section of this announcement.
-- Adjusted Diluted EPRA EPS is based on the European Public
Real Estate Association's definition of earnings and is defined as
profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts. The
Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional
tax items and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore neither the Company's ability to
distribute nor pay dividends are impacted (with the exception of
the associated National Insurance element). The financial
statements disclose earnings both on a statutory, EPRA and Adjusted
Diluted EPRA basis and will provide a full reconciliation of the
differences in the financial year in which any LTIP awards may
vest. A reconciliation of statutory basic earnings per share to
Adjusted Diluted EPRA EPS can be found in note 9.
-- EPRA basic net assets per share is an industry standard
measure recommended by the European Public Real Estate Association
("EPRA"). The basis of calculation, including a reconciliation to
reported net assets, is set out in note 12.
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 2018 applicable to
companies under IFRS. The IFRS and IFRIC interpretations as adopted
by the European Union that will be applicable at 31 October 2018,
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 13 June 2018 and publication of the annual IFRS financial
statements for the year ending 31 October 2018.
The accounting policies and presentation applied are consistent
with those in the annual financial statements for the year ended 31
October 2017, 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
ending 31 October 2018:
Amendments relating to the Disclosure Initiative;
* IAS 7
Amendments relating to recognition of deferred tax assets
* IAS 12 for unrealised losses; and
* Annual improvements to IFRSs 2014-2016 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 2017. 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 2018
is as follows:
United Paris Total
Kingdom
GBPm GBPm GBPm
-------------------------------------------- --------- ------ --------
Continuing operations
Revenue 52.4 16.8 69.2
-------------------------------------------- --------- ------ --------
Underlying EBITDA 28.4 10.7 39.1
Share-based payments (2.7) - (2.7)
Depreciation and contingent rent (0.7) (0.2) (0.9)
-------------------------------------------- --------- ------ --------
Operating profit before gain on investment
properties 25.0 10.5 35.5
Gain on investment properties 51.8 - 51.8
Operating profit 76.8 10.5 87.3
Net finance expense (4.7) (0.7) (5.4)
-------------------------------------------- --------- ------ --------
Profit before tax 72.1 9.8 81.9
-------------------------------------------- --------- ------ --------
Total assets 936.4 290.4 1,226.8
-------------------------------------------- --------- ------ --------
The segmental information for the six months ended 30 April 2017
is as follows:
United Paris Total
Kingdom
GBPm GBPm GBPm
-------------------------------------------- --------- ------ --------
Continuing operations
Revenue 47.3 15.3 62.6
--------- ------ --------
Underlying EBITDA 25.0 9.9 34.9
Share-based payments (0.7) - (0.7)
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
-------------------------------------------- --------- ------ --------
Underlying EBITDA is defined as operating profit before
exceptional items, share-based payments, corporate transaction
costs, change in fair value of derivatives, gain/loss on investment
properties, contingent rent and depreciation.
5 Finance income and costs
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -----------
Finance income
Fair value movement of derivatives 0.9 0.2 1.5
Unwinding of discount on Capital Goods
Scheme receivable 0.1 0.1 0.1
Net exchange gains - 5.4 4.5
--------------------------------------- ----------- ----------- -----------
Total finance income 1.0 5.7 6.1
--------------------------------------- ----------- ----------- -----------
Finance costs
Interest payable on bank loans and
overdrafts (3.9) (5.1) (9.1)
Amortisation of debt issuance costs
on bank loans (0.1) (0.2) (0.3)
--------------------------------------- ----------- ----------- -----------
Underlying finance charges (4.0) (5.3) (9.4)
Interest on obligations under finance
leases (2.3) (2.2) (4.4)
Fair value movement of derivatives (0.1) (7.8) (6.7)
Exceptional finance expense - - (16.3)
Total finance costs (6.4) (15.3) (36.8)
--------------------------------------- ----------- ----------- -----------
Net finance costs (5.4) (9.6) (30.7)
--------------------------------------- ----------- ----------- -----------
Included within interest payable of GBP3.9m (April 2017: 5.1m)
is GBP0.2m (April 2017: GBP0.6m) 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 gain of GBP0.8m (April 2017: net charge of GBP7.6m).
6 Income tax credit/(charge)
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------- ----------- ----------- -----------
Current tax (2.1) (2.0) (4.0)
Deferred tax 4.7 5.8 3.4
2.6 3.8 (0.6)
------------- ----------- ----------- -----------
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, and the 2018
Finance Bill, adopted in December 2017, introduced further
progressive reductions in the tax rate to 25.0% by 2022. As a
result, the deferred tax (charge)/credit reflects an exceptional
deferred tax credit of GBP5.6m (April 2017: GBP8.7m) relating to
these changes.
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 2017
2018 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------ ----------- ----------- ----------------
The amounts provided in the accounts are:
Revaluation of investment properties 47.0 47.1 51.8
Other timing differences 0.5 0.5 0.5
------------------------------------------ ----------- ----------- ----------------
Deferred tax liabilities 47.5 47.6 52.3
------------------------------------------ ----------- ----------- ----------------
Interest rate swap instruments - (0.1) (0.1)
------------------------------------------ ----------- ----------- ----------------
Deferred tax assets - (0.1) (0.1)
------------------------------------------ ----------- ----------- ----------------
Net deferred tax liability 47.5 47.5 52.2
------------------------------------------ ----------- ----------- ----------------
8 Dividends
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------------- ----------- ----------- -----------
For the year ended 31 October 2016:
Final dividend - paid 7 April 2017 (8.05p per share) - 16.8 16.8
For the year ended 31 October 2017:
Interim dividend - paid 15 August 2017 (4.2p per share) - - 8.8
Final dividend - paid 6 April 2018 (9.8p per share) 20.6 - -
Dividends in the statement of changes in equity 20.6 16.8 25.6
Timing difference on payment of withholding tax (2.9) (2.1) -
-------------------------------------------------------- ----------- ----------- -----------
Dividends in the cash flow statement 17.7 14.7 25.6
-------------------------------------------------------- ----------- ----------- -----------
An interim dividend of 5.1 pence per ordinary share (April 2017:
4.2 pence) has been declared. The ex-dividend date will be 12 July
2018 and the record date 13 July 2018, with an intended payment
date of 17 August 2018.
It is intended that 50% (April 2017: 50%) of the interim
dividend of 5.1 pence per ordinary share (April 2017: 4.2 pence)
will be paid as a REIT Property Income Distribution ("PID") net of
withholding tax where appropriate.
The interim dividend, amounting to GBP10.7m (April 2017:
GBP8.8m), has not been included as a liability at 30 April 2018. It
will be recognised in shareholders' equity in the year to 31
October 2018.
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 number 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 2018 30 April 2017 31 October 2017
(unaudited) (unaudited) (audited)
Earnings Shares Pence Earnings Shares Pence Earnings Shares Pence
GBPm million per GBPm million per share GBPm million per
share share
--------------- -------- -------- ------ -------- -------- ---------- -------- -------- ------
Basic 84.5 209.7 40.3 58.8 209.0 28.1 78.3 209.2 37.4
Dilutive
share options - 0.7 (0.1) - 1.0 (0.1) - 1.0 (0.1)
--------------- -------- -------- ------ -------- -------- ---------- -------- -------- ------
Diluted 84.5 210.4 40.2 58.8 210.0 28.0 78.3 210.2 37.3
--------------- -------- -------- ------ -------- -------- ---------- -------- -------- ------
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. Adjusted
diluted earnings is also presented by adding back the share-based
payment charge to 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 2018 30 April 2017 31 October 2017
(unaudited) (unaudited) (audited)
Earnings/(loss) Shares Pence Earnings/ Shares Pence Earnings/ Shares Pence
GBPm million per (loss) million per share (loss) million per
share GBPm GBPm share
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
Basic 84.5 209.7 40.3 58.8 209.0 28.1 78.3 209.2 37.4
Adjustments:
Gain on investment
properties (51.8) - (24.7) (30.8) - (14.7) (39.2) - (18.8)
Exceptional
items - - - - - - 1.4 - 0.7
Exceptional
finance costs - - - - - - 16.3 - 7.8
Unwinding of
discount on
CGS receivable (0.1) - - (0.1) - - (0.1) - -
Net exchange
gains - - - (5.4) - (2.6) (4.5) - (2.2)
Change in fair
value of derivatives (0.8) - (0.4) 7.6 - 3.6 5.2 - 2.5
Tax on adjustments (5.2) - (2.5) (6.3) - (3.0) (4.4) - (2.1)
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
Adjusted 26.6 209.7 12.7 23.8 209.0 11.4 53.0 209.2 25.3
EPRA adjusted:
Depreciation
of leasehold
properties (2.5) - (1.2) (2.6) - (1.2) (5.3) - (2.5)
Tax on leasehold
depreciation
adjustment 0.5 - 0.2 0.5 - 0.2 1.0 - 0.5
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
EPRA basic 24.6 209.7 11.7 21.7 209.0 10.4 48.7 209.2 23.3
Share-based
payment charge 2.7 - 1.3 0.7 - 0.3 1.5 - 0.7
Pro forma Dilutive
shares - 7.1 (0.4) - 7.4 (0.3) - 7.5 (0.8)
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
Adjusted Diluted
EPRA EPS (pro
forma) 27.3 216.8 12.6 22.4 216.4 10.4 50.2 216.7 23.2
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
The definition of Adjusted Diluted EPRA EPS is found in note 2
to the financial statements.
10 Property portfolio
Investment Interest in Investment Total
properties leasehold properties under construction investment
properties properties
GBPm GBPm GBPm GBPm
-------------------------------- ------------ ------------ ------------------------------- ------------
At 1 November 2017 999.2 56.2 7.8 1,063.2
Additions 6.5 4.4 5.6 16.5
On acquisition of subsidiaries 55.9 1.4 - 57.3
Reclassification 5.1 - (5.1) -
Revaluation movement 54.2 - 0.1 54.3
Depreciation - (2.5) - (2.5)
Exchange movements (0.1) - - (0.1)
-------------------------------- ------------ ------------ ------------------------------- ------------
At 30 April 2018 1,120.8 59.5 8.4 1,188.7
-------------------------------- ------------ ------------ ------------------------------- ------------
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
---------------------- ------------ ------------ ------------------------------- ------------
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 2018 is explained in note 11.
11 Valuations
External valuation
A sample of the Group's largest properties, representing
approximately 41% of the value of the Group's investment property
portfolio at 31 October 2017, has been valued by the Group's
external valuers, Cushman & Wakefield ("C&W"), as at 30
April 2018. 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:
-- the member of the RICS who has been the signatory to the
valuations provided to the Group for the same purposes as this
valuation, has done so since October 2006;
-- 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 2015
there have only been twelve transactions involving multiple assets
and ten 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 2017, 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 2017. 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 59% 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
2018 averages 83.39% (31 October 2017: 80.91%). 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 28.38 months (31 October 2017: 23.10
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 mature stores
(i.e. excluding those stores categorised as "developing") is 7.35%
(31 October 2017: 7.84%), rising to stabilised net yield
pre-administration expenses of 8.84% (31 October 2017: 8.80%).
-- 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 10.50% (31 October 2017: 10.55%).
-- Purchaser's costs in the range of approximately 4.0% to 6.8%
for the UK and 7.5% for Paris 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 6.0% to 8.8% (UK) and 9.5% (Paris) 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 2018, the Group's
investment property portfolio has been valued at GBP1,120.8m (April
2017: GBP972.0m), and a revaluation gain of GBP54.2m (April 2017:
GBP33.4m) 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 2018.
12 Net assets per share
As at As at As at
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
Analysis of net asset value GBPm GBPm GBPm
--------------------------------------------------------------------- ----------- ----------- -----------
Net assets 703.7 620.2 637.7
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax) (1.5) (10.0) (0.8)
Deferred tax liabilities on the revaluation of investment properties 47.0 47.1 51.8
--------------------------------------------------------------------- ----------- ----------- -----------
EPRA net asset value 749.2 657.3 688.7
--------------------------------------------------------------------- ----------- ----------- -----------
Basic net assets per share (pence) 335 296 304
EPRA basic net assets per share (pence) 357 314 329
Diluted net assets per share (pence) 334 295 303
EPRA diluted net assets per share (pence) 356 313 327
--------------------------------------------------------------------- ----------- ----------- -----------
Number Number Number
--------------------------------------------------------------------- ----------- ----------- -----------
Shares in issue 210,008,901 209,289,938 209,466,956
--------------------------------------------------------------------- ----------- ----------- -----------
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 2,316 shares (April 2017: 16,263 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 650,770
shares (April 2017: 973,694 shares). As an industry standard
measure, European Public Real Estate Association ("EPRA") net asset
values are presented.
13 Borrowings
The tables below set out the Group's borrowings position as at
30 April 2018:
As at As at As at
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
Non-current GBPm GBPm GBPm
-------------------------------- ------------ ------------ ------------
Borrowings:
Secured - bank loans 208.8 225.7 203.8
Secured - US Private placement
notes 160.3 87.2 160.4
Debt issue costs (0.5) (1.5) (0.6)
-------------------------------- ------------ ------------ ------------
368.6 311.4 363.6
-------------------------------- ------------ ------------ ------------
The bank loan facility agreement expires in June 2022, with an
option to extend to June 2023. The private placement notes have
EUR50.9m due for repayment in 2024, EUR74.1m due 2027 and GBP50.5m
due 2029. The borrowings are secured by a fixed charge over the
Group's investment property portfolio.
Borrowings are stated before unamortised issue costs of GBP0.5m
(31 October 2017: GBP0.6m). The bank loans and private placement
notes were repayable as follows:
As at As at As at
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------- ------------ ------------ ------------
Between two and five years 208.8 276.4 203.8
After more than five years 160.3 36.5 160.4
---------------------------- ------------ ------------ ------------
Borrowings 369.1 312.9 364.2
Unamortised issue costs (0.5) (1.5) (0.6)
---------------------------- ------------ ------------ ------------
368.6 311.4 363.6
---------------------------- ------------ ------------ ------------
The effective interest rates at the balance sheet date were as
follows:
As at As at As at
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
----------------------- --------------------- ----------------- ------------------
Bank loans (Sterling) Quarterly or monthly Monthly LIBOR Quarterly or
LIBOR plus 1.25% plus 1.50% monthly LIBOR
plus 1.25%
Bank loans (Euro) Quarterly EURIBOR Quarterly or Quarterly EURIBOR
plus 1.25% monthly EURIBOR plus 1.25%
plus 1.50%
Private placement n/a Weighted average n/a
notes (US Dollar) rate of 6.21%
Private placement Weighted average n/a Weighted average
notes (Euro) rate rate of 1.83%
of 1.83%
Private placement
notes (Sterling) 2.92% n/a 2.92%
----------------------- --------------------- ----------------- ------------------
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
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------- ------------ ------------ ------------
Expiring beyond one year 102.7 84.2 107.7
-------------------------- ------------ ------------ ------------
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
2018 2017 2017
(unaudited) (unaudited) (audited)
Assets per the balance sheet GBPm GBPm GBPm
---------------------------------- ------------ ------------ ------------
Derivative financial instruments
- Level 2 1.6 13.0 0.9
---------------------------------- ------------ ------------ ------------
As at As at As at
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
Liabilities per the balance sheet GBPm GBPm GBPm
----------------------------------- ------------ ------------ ------------
Derivative financial instruments
- Level 2 0.1 3.1 0.2
----------------------------------- ------------ ------------ ------------
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
2018 2017 2017
(unaudited) (unaudited) (audited)
Called up, issued and fully paid GBPm GBPm GBPm
------------------------------------------ ------------ ------------ ------------
210,011,217 (30 April 2017: 209,306,201)
ordinary shares of 1p each 2.1 2.1 2.1
------------------------------------------ ------------ ------------ ------------
16 Capital commitments
The Group had capital commitments of GBP5.6m as at 30 April 2018
(April 2017: GBP1.2m).
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
2017, 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 48.1% (April 2016: 47.8%) of the annual level of
self-storage revenue in the year ended 31 October 2017.
18 Acquisition of Subsidiary
On 1 November 2017 the Group completed the acquisition of Stork
Self Storage (Holdings) Limited trading as Alligator Self Storage,
a company controlled by funds managed or advised by York Capital
Management, for consideration of GBP55.9m, net of cash acquired.
The consideration paid is greater than the provisional fair value
of the identifiable net assets and, as a result GBP1.0m of goodwill
has been recognised. In respect of this transaction, GBP1.4m of
transaction related costs were reported as an exceptional item
within administrative expenses for the year ended 31 October
2017.
The fair values of the net assets acquired and the fair value of
the consideration paid are as follows:
GBPm
---------------------------------- -----
Assets
Investment properties 55.9
Interests in leasehold properties 1.4
Trade and other receivables 0.8
Cash 2.2
----------------------------------- -----
Total Assets 60.3
----------------------------------- -----
Liabilities
Trade and other payables (1.8)
Obligations under finance leases (1.4)
----------------------------------- -----
Total liabilities (3.2)
----------------------------------- -----
Net Assets 57.1
Goodwill 1.0
----------------------------------- -----
Consideration paid 58.1
----------------------------------- -----
The determination of the fair values of the net assets acquired
is provisional and may be subject to further review during the
twelve months following the acquisition date.
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 14 to 16 of the Annual Report and Financial
Statements for the year ended 31 October 2017, 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 2017 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 2018
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 2017. 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
13 June 2018 13 June 2018
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 2018 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 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 2018 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
13 June 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFIRRVIVLIT
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