TIDMSAFE
RNS Number : 1650C
Safestore Holdings plc
17 June 2021
17 June 2021
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Interim results for the 6 months ended 30 April 2021
Strong first half performance with further growth in property
pipeline
Key Measures 6 months 6 months Change(1)
ended ended Change-CER
30 April 30 April (2)
2021 2020
-------------------------------- ---------- ---------- ---------- -------------
Underlying and Operating
Metrics- total
Revenue GBP88.1m GBP79.3m 11.1% 10.5%
Underlying EBITDA(3) GBP54.4m GBP45.9m 18.5% 17.8%
Closing Occupancy (let sq
ft- million)(4) 5.635 4.824 16.8% n/a
Closing Occupancy (% of
MLA)(5) 80.7% 71.1% +9.6ppts n/a
Average Storage Rate(6) GBP26.51 GBP26.52 (0.0%) (0.7%)
Adjusted Diluted EPRA Earnings
per Share(7) 18.1p 14.5p 24.8% n/a
Free Cash flow(8) GBP40.3m GBP32.4m 24.4% n/a
EPRA Basic NAV per Share(13) GBP5.96 GBP4.87 22.4% n/a
Underlying and Operating
Metrics- like-for-like (9)
Storage Revenue GBP69.9m GBP63.6m 9.9% 9.1%
Ancillary Revenue GBP14.4m GBP13.8m 4.3% 4.3%
Revenue GBP84.3m GBP77.4m 8.9% 8.3%
Underlying EBITDA(3) GBP51.9m GBP44.5m 16.6% 15.9%
Closing Occupancy (let sq
ft- million)(4) 5.394 4.664 15.7% n/a
Closing Occupancy (% of
MLA)(5) 82.3% 71.5% +10.8ppts n/a
Average Occupancy (let sq
ft- million)(4) 5.307 4.795 10.7% n/a
Average Storage Rate(6) GBP26.55 GBP26.68 (0.5%) (1.0%)
Statutory Metrics
Operating Profit(10) GBP173.2m GBP105.8m 63.7% n/a
Profit before Income Tax(10) GBP167.3m GBP99.7m 67.8% n/a
Diluted Earnings per Share 74.4p 42.4p 75.5% n/a
Dividend per Share 7.50p 5.90p 27.1% n/a
Cash Inflow from Operating GBP43.9m GBP35.7m 23.0% n/a
Activities
Highlights
Strong Financial Performance
-- Group revenue up 11.1% and in CER(2) up 10.5%
-- Group like-for-like(4) storage revenue in CER(2) up 9.1% and
like-for-like total revenue up 8.3%
-- Strong operational gearing driving growth in Adjusted Diluted
EPRA EPS(7) , up 24.8% at 18.1p (2020: 14.5p)
-- 27.1% increase in the interim dividend to 7.5p (2020: 5.9p)
reflecting improved profitability
-- Profit before income tax up to GBP167.3m from GBP99.7m in
2020 driven by strong trading performance and increased gain on
investment properties of GBP127.7m (2020: gain of GBP64.0m)
-- Strong conversion of profitability to cash with Cash Inflow
from Operating Activities up 23.0% to GBP43.9m
-- Adjusted Diluted EPRA Earnings per Share7 expected to be at least 38p for the full year
Operational and Strategic Progress
-- COVID-19; stores operating normally with full observation of
social distancing rules and protective personal equipment provided
to all colleagues
-- Strong like-for-like operational performance
o Like-for-like(9) average occupancy for the period up 10.7%
o Like-for-like(4) occupancy up 10.8ppts at 82.3% (2020:
71.5%)
-- UK up 11.8ppts at 82.4% (2020: 70.6%)
-- Paris up 6.6ppts at 81.7% (2020: 75.1%)
o Like-for-like(9) average storage rate for the period down 1.0%
in CER(2)
-- Opened 58,500 sq ft freehold store at Birmingham Middleway
and 50,000 sq ft leasehold store in Paris Magenta in the period
-- Three new development sites and two store extensions in
London as well as five new development sites in Spain in Madrid and
Barcelona and new project in Paris which will together add c.
425,000 sq ft of MLA
-- Total Group development and extension pipeline now fourteen
stores and c. 575,000 sq ft of MLA
-- Joint venture(14) with Carlyle acquired three-store portfolio
of Opslag XL in the Netherlands in December 2020 and a development
site in Nijmegen in the Netherlands in June 2021
-- Industry leading digital marketing platform continues to
support customer acquisition growth, with online enquiries rising
to 89% of the total in the UK (2020: 87%) and 83% in France (2020:
77%)
Strong and Flexible Balance Sheet
-- Group loan-to-value ratio ("LTV"(11) ) at 27% (H1 2020: 30%)
and interest cover ratio ("ICR"(12) ) at 10.0x (H1 2020: 8.6x)
-- Unutilised bank facilities of GBP128m at April 2020 and no maturities before June 2023
-- In May 2021 a further GBP150m of new competitively priced US
Private Placement financing was secured and will be drawn in June
and August 2021 with an additional available uncommitted Shelf debt
facility of c. GBP80m equivalent available
Frederic Vecchioli, Safestore's Chief Executive Officer,
commented:
"I am pleased to report a very strong performance in the first
six months of the year with trading momentum accelerating in the
second quarter driven by the strength of our UK performance
combined with continued robust results from our French and Spanish
businesses. The Group closing occupancy at 30 April 2021 was 5.635m
sq ft (up 16.8% on 2020) or 80.7% (up 9.6ppts on 2020), while rate
was broadly flat. Our joint venture with Carlyle, operating in
Belgium and the Netherlands, continues to perform in line with its
business plan."
"Our Birmingham Middleway and Paris Magenta stores opened
successfully in the Spring and we recently added an additional
freehold development site at Bow in East London where we plan to
build a 74,000 sq ft store, and another Spanish site in South
Barcelona where we will develop a 30,000 sq ft facility. In
addition, we are participating in a mixed-use development project
in Paris which will provide us with a new 44,000 sq ft facility in
La Défense. Our self-financed pipeline of new stores and extensions
in the UK, Paris and Spain will add c. 575,000 sq ft of MLA (5)
."
"Our financing capacity has been extended through the issuance
of a further GBP150m equivalent of new 7, 10 and 12 year US Private
Placement Notes which, in addition to a c. GBP80m shelf debt
facility, provides us with further flexibility to target selected
development and acquisition opportunities as they arise."
"Our performance in this period has demonstrated the excellent
operating leverage in our platform as we drive net lets and
revenue. We continue to focus on the significant upside from
filling the 1.3m square feet of fully invested currently unlet
space in our UK, Paris and Spain markets. Including our pipeline
stores we have 1.9m sq ft to fill or the equivalent of 45 stores.
On average over the last six years, the business has grown
like-for-like revenue by 7.2% per annum and its total revenue by
9.8% per annum over the same timeframe. Our track record in
customer acquisition, occupancy and revenue management, combined
with our existing available lettable space, our new store pipeline
and self-funding capacity, should allow the business, in the
absence of macro-economic disruption, to deliver consistent growth
for the foreseeable future."
"The strong history of revenue growth and cost control combined
with the operational gearing of the business model and our
self-funded rigorous investment policy has allowed the group to
deliver over the last 6 years an average Adjusted Diluted EPRA
Earnings per Share growth of +16.1% per year."
"The accelerating momentum in our second quarter performance
gives me confidence in relation to the outlook for the full year
and I anticipate that the business should deliver Adjusted Diluted
EPRA Earnings per Share(7) for 2020/21 at least at the top end of
our previous guidance of 37p to 38p, which would represent growth
of at least 26% compared to the prior year."
"Finally, I would like to thank all of our colleagues in the UK,
Paris, Barcelona and the Netherlands, for their commitment and
resilience, and for how they have responded to the unprecedented
challenges caused by the COVID-19 crisis over the last fifteen
months."
Notes
We prepare our financial statements using IFRS. However, we also
use a number of adjusted measures in assessing and managing the
performance of the business. These include like-for-like figures,
to aid in the comparability of the underlying business as they
exclude the impact on results of purchased, sold, opened or closed
stores; and constant exchange rate (CER) figures are provided in
order to present results on a more comparable basis, removing fx
movements. These metrics have been disclosed because management
review and monitor performance of the business on this basis. We
have also included a number of measures defined by EPRA, which are
designed to enhance transparency and comparability across the
European Real Estate sector, see notes 7 and 13 below and "Non-GAAP
financial information" in the notes to the financial
statements.
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. Euro denominated results for
the comparative period are translated at the exchange rates
effective in that period. This is performed in order to present the
reported results for the current period 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 EBITDA
therefore excludes all leasehold rent charges. 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 2021, closing occupancy includes 14,000 sq ft of bulk
tenancy (30 April 2020: 14,000 sq ft).
5 - MLA is Maximum Lettable Area. At 30 April 2021, Group MLA
was 6.98m sq ft (30 April 2020: 6.78m sq ft).
6 - Average Storage Rate is calculated as the revenue generated
from self-storage revenues divided by the average square footage
occupied during the period in question.
7 - 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 will 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.
8 - Free cash flow is defined as cash flow before investing and
financing activities but after leasehold rent payments.
9 - Like-for-like adjustments remove the impact of the 2021
openings of Birmingham Middleway and Magenta in Paris, the 2021
closure of Birmingham South, the 2020 acquisitions of Valencia,
Calabria, Glories and Marina in Barcelona and Chelsea and St Johns
Wood in London and the 2020 openings of Carshalton, Sheffield and
Gateshead.
10 - Operating profit increased by GBP67.4m to GBP173.2m (30
April 2020: GBP105.8m) compared to last year, principally as a
result of an increase in the gain on Investment properties of
GBP63.7m to GBP127.7m (30 April 20209: GBP64.0m) and an increase of
GBP8.5m in Underlying EBITDA as a result of stronger trading
performance. Profit before tax additionally included an increase in
the share base payments charge of GBP3.1m compared to H1 2020
resulting from a reduction in the probability of lapses and
forfeiture by the option holders and the scheme nears vesting
date.
11 - LTV ratio is Loan-to-Value ratio, which is defined as gross
debt (excluding finance leases) as a proportion of the valuation of
investment properties and investment properties under construction
(excluding finance leases).
12 - ICR is interest cover ratio, and is calculated as the ratio
of underlying EBITDA after leasehold rent to underlying finance
charges.
13 - EPRA basic NAV has been superseded and has transitioned to
3 new measures: EPRA NRV (net reinstatement value); EPRA NTA (net
tangible assets) and EPRA NDV (net disposal value) for periods
commencing 1 January 2020 or thereafter. Safestore considers EPRA
NAV to remain the appropriate measure for the business at this
point in time whilst the Group continues to interpret the impact of
the new guidelines. However, of the new measures, EPRA NTA is
considered to be most consistent with the nature of Group's
business with initial calculations indicating material consistency
with EPRA basic NAV. Safestore will transition to the new EPRA best
practice measures for the 2021 annual report and future reporting
periods. The basis of calculation is set out in the "Net assets per
share" note to the financial statements.
14 - The joint venture with CERF, which represents a 20%
investment, has been accounted for as an associate using the equity
method of accounting, as described in the "Investment in
associates" note to the financial statements.
Reconciliations between underlying metrics and statutory metrics
can be found in the financial review and financial statements
sections of this announcement.
Summary
Safestore has delivered another strong financial performance in
the first half of the financial year, driven by accelerating
trading momentum and a growing property pipeline. Reported Group
revenue increased 10.5% at CER(2) with like-for-like(9) revenue
growing by 8.3%. The Group's like-for-like average occupancy grew
by 10.7% with the like-for-like average storage rate down slightly
by (1.0%) at CER(2) . Reflecting the high degree of operating
leverage from our fully invested estate the improved revenue
performance has driven growth in like-for-like EBITDA margin(3) ,
on a CER basis, of 3.9ppts to 61.5% (2020: 57.6%). Profit before
income tax is up to GBP167.3m from GBP99.7m in 2020 driven by
strong trading performance and increased gain on investment
properties of GBP127.7m (2020: gain of GBP64.0m).
Our operational performance across all regions of the UK has
been strong in the period resulting in a 10.4% increase in
like-for-like revenue(9) . Driven by our industry leading digital
marketing platform, enquiry generation and store team conversion
have both performed well across all regions of the UK delivering
excellent occupancy performance, resulting in like-for-like average
occupancy growing by 12.2% in the period whilst the UK
like-for-like average rate grew by 0.1%. Like-for-like closing
occupancy at the period end was up 11.8ppts at 82.4% (2020: 70.6%).
Total revenue growth of 13.9% reflected the strong like-for-like
performance, the annualisation of the 2020 store openings in
Carshalton, Gateshead and Sheffield and of the acquisitions of our
St John's Wood and Chelsea stores and management fees from our
Joint Venture with Carlyle in the Benelux.
In Paris, our trading performance has been steady with
like-for-like revenue(9) growing by 1.7%. This was driven by our
average like-for-like occupancy performance which increased by 4.9%
compared to the prior year offset slightly by like-for-like average
rate which decreased by (3.0%). This decrease was partly driven by
promotional activity and a shift in the occupancy mix towards
bigger units which command a lower price per sq ft. Like-for-like
closing occupancy at the period end was up 6.6ppts at 81.7% (2020:
75.1%).
Our Barcelona business, which was acquired in December 2019,
contributed EUR1.6m in revenue for the 6 months. Closing occupancy
was up 0.3ppts at 89.4% (2020: 89.1%) whilst the average rate grew
by 5.2% to EUR31.61 (2020: EUR30.04). In the last 3 months, the
revenue was up 14.3% over the same period last year.
Group underlying EBITDA of GBP54.4m increased 17.8% at CER(2) on
the prior year and 18.5% on a reported basis, reflecting the impact
of the 2.3% weakening of the average Sterling to Euro exchange
rate, compared to the prior period, on the profit earned on our
Paris and Spain businesses. Rent costs increased as a result of the
acquisition of leasehold stores in Barcelona and London in the
period and, as a result, adjusted diluted EPRA EPS(7) grew by 24.8%
in the period to 18.1p (2020: 14.5p).
Our property portfolio valuation (excluding investment
properties under construction) has increased by GBP126.3m since
October 2020 to GBP1,683.8m. The increase comprises GBP11.1m of
additions and reclassifications, a negative currency impact of
(GBP14.6m) and a GBP129.8m revaluation gain (equivalent to 8.3% of
the valuation at October 2020) driven by reduced exit cap rates and
strong operational performance of the business, leasehold renewals
and store extensions. The Group's external valuers, Cushman &
Wakefield Debenham Tie Leung Limited ("C&W"), valued 42% of the
portfolio at April 2021 with a Directors' valuation being carried
out, with the assistance of C&W, on the remaining 58%.
Reflecting the Group's good trading performance, the Board is
pleased to recommend a 27.1% increase in the interim dividend to
7.5p per share (2020: 5.9p).
Outlook
Trading in the third quarter has started well. Group
like-for-like sales (CER) for the month of May were up 16% on May
2020, which is slightly ahead of our expectations at the time of
issuing our earnings guidance in our 10 May announcement. Since 30
April 2021, the Group has added a further c. 187,000 sq ft of
occupancy through to 15 June (2020: c. 74,000 sq ft).
We will continue to monitor closely our internal forecasts over
the coming months. However, our business model remains highly
resilient with multiple drivers of demand and we believe the group,
whilst not entirely immune from any macro-economic issues, is
strongly positioned to withstand any downturn. Having previously
provided revised guidance in May 2021, as it currently stands, the
Board anticipates earnings for the full year being at least at the
top end of its previous guidance of Adjusted Diluted EPRA Earnings
per Share(7) for 2020/21 of 37p to 38p.
For further information, please contact:
Safestore Holdings PLC
Frederic Vecchioli, Chief Executive via Instinctif Partners
Officer
Andy Jones, Chief Financial
Officer
www.safestore.com
Instinctif Partners
Guy Scarborough/ Bryn Woodward 07917 178920/ 07739 342009
A conference call for analysts will be held at 09:30am
today.
For dial-in details of the presentation please contact:
Guy Scarborough ( guy.scarborough@instinctif.com or telephone on
07917 178920) .
Notes to Editors
-- Safestore is the UK's largest self-storage group with 161
stores at 30 April 2021, comprising 128 wholly owned stores in the
UK (including 71 in London and the South East with the remainder in
key metropolitan areas such as Manchester, Birmingham, Glasgow,
Edinburgh, Liverpool, Sheffield, Leeds, Newcastle and Bristol) and
29 wholly owned stores in the Paris region and four stores in
Barcelona. In addition, the Group operates nine stores in the
Netherlands and six stores in Belgium under a joint venture
agreement with Carlyle.
-- 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 French markets.
-- Safestore was founded in the UK in 1998. It acquired the
French business "Une Pièce en Plus" ("UPP") in 2004 which was
founded in 1998 by the current Safestore Group CEO Frederic
Vecchioli.
-- Safestore has been listed on the London Stock Exchange since
2007. It entered the FTSE 250 index in October 2015.
-- The Group provides storage to around c. 79,500 personal and business customers.
-- As at 30 April 2021, Safestore had a maximum lettable area
("MLA") of 6.983 million sq ft (excluding the expansion pipeline
stores) of which 5.635 million sq ft was occupied.
-- Safestore employs around 700 people in the UK, Paris and Barcelona.
COVID-19
At Safestore, the health and wellbeing of our customers and
colleagues is our absolute priority. Throughout the various stages
of the pandemic, we implemented strict safeguarding measures across
our portfolio, in line with government guidance in each geography,
to maintain social distancing and ensure we could operate safely,
protect our staff, and allow necessary access for our
customers.
All our stores in the UK, Paris, Barcelona and the Netherlands
remained open or accessible during the first lockdowns but the
reception areas were closed, the staffing and opening hours were
reduced and we removed the provision of services that involve
person-to-person contact. Access to our stores is largely automated
and, in general, the premises have relatively low footfall. We
supported our employees with alternative means of transport to work
where public transport continues to be a challenge.
The process for new enquiries remained unchanged with customers
able to enquire via our website or phone, and we adjusted the new
let process so that contracts were concluded electronically. In
addition, we intensified the daily cleaning levels of our stores,
especially commonly touched areas.
Safestore paid all our employees' salaries throughout the crisis
and did not access any of the UK government's support measures.
In line with UK government guidance relating to storage and
points of delivery facilities, our UK stores remained open as they
provide important support to small business customers and companies
engaged in key supply chains including healthcare, food industry
suppliers and infrastructure support such as electrical and
mechanical repair providers.
As lockdowns were gradually relaxed across our geographies in
early summer 2020, operational processes reverted to more normal
practices. Colleagues were provided with personal protective
equipment ("PPE") and adhered to the social distancing rules
required in each geography.
During the second phase of restrictions and lockdowns, stores
remained open in all geographies with all reception areas adapted
to become COVID-secure environments with Perspex screens, personal
protective equipment and hand sanitiser provided whilst ensuring
social distancing measures were maintained. It is planned that this
approach will continue in the current third UK lockdown.
While COVID-19 continues to create uncertainty, we are
monitoring developments daily to ensure we adhere to government
advice in each of our geographies and continue to ensure the safety
of our staff and customers.
Our Strategy
The Group's proven strategy has evolved over the last two years
with the creation of our joint venture(14) with Carlyle and our
acquisition of OhMyBox ("OMB") in Barcelona, but otherwise remains
largely unchanged. We believe that the Group has a well-located
asset base, management expertise, infrastructure, scale and balance
sheet strength and, as we look forward, we consider that the Group
has the potential to further increase its earnings per share
by:
-- Optimising the trading performance of the existing portfolio;
-- Maintaining a strong and flexible capital structure; and
-- Taking advantage of selective portfolio management and
expansion opportunities in our existing markets and, if
appropriate, in attractive new geographies either through a joint
venture (14) or in our own right.
Optimisation of Existing Portfolio
With the opening of 17 new stores since August 2016, and the
acquisitions of 31 stores through the purchases of Space Maker in
July 2016, Alligator in November 2017, our Heathrow store, Fort Box
in London and OMB in Barcelona in 2019, we have established and
strengthened our market-leading portfolio in the UK and Paris and
have entered the Spanish market. We have a high quality, fully
invested estate in all geographies and, of our 161 stores as at 30
April 2021, 100 are in London and the South East of England or in
Paris with 57 in the other major UK cities and four in Barcelona.
We now operate 48 stores within the M25, which represents a higher
number of stores than any other competitor.
Our MLA(4) has increased to 6.98m sq ft at 30 April 2021 (2020:
6.78m sq ft). At the current occupancy level of 80.7% we have 1.35m
sq ft of unoccupied space (1.9m including the development
pipeline), of which 1.05m sq ft is in our UK stores and 0.29m sq ft
in Paris. In total, this unlet space is the equivalent of circa 35
empty stores located across the estate and provides the Company
with significant opportunity to grow further. We have a proven
track record of filling our vacant space so we view this
availability of space with considerable optimism. We will also
benefit from the operational leverage from the fact that this
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. Between the full
financial years 2013 and 2020, occupancy on the stores in the
portfolio in 2013 that remain in the Group today, has increased
from 63.1% to 82.6% i.e. an average of 2.8 percentage points per
year.
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.
Digital Marketing Expertise- UK Number 1 Self-Storage Brand
Awareness of self-storage remains relatively low with 50%
(FY2020: 52%) of the UK population either knowing very little or
nothing about self-storage (source: 2021 SSA Annual Report). In the
UK, many of our new customers are using self-storage for the first
time. It is largely a brand blind purchase. 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") which means that geographic
coverage and search engine prominence remain key competitive
advantages.
We believe there is a clear benefit of scale in the generation
of customer enquiries. The Group has continued to invest in
technology and in-house expertise which has resulted in the
development of a leading digital marketing platform that has
generated 88% enquiry growth for the Group over the last five
years. Our in-house expertise and significant annual budget have
enabled us to deliver strong results. Safestore is the UK Number 1
self-storage brand as it moves in more customers per year than any
other brand.
The Group's online strength came to the fore during the first
COVID-19 lockdown and has since continued to support customer
acquisition growth. Online enquiries in H1 rose to 89% of our
enquiries in the UK (H1 2020: 87%) and 83% in France (H1 2020:
77%). Approximately 64% of our online enquiries in the UK originate
from a mobile device (excluding tablets), compared to c. 63% in H1
last year, highlighting the need for continual investment in our
responsive web platform for a "mobile-first" world. We continue to
invest in activities that promote a strong search engine presence
to grow enquiry volume whilst managing efficiency in terms of
overall cost per enquiry and cost per new let. UK enquiries in H1
increased by 34% whereas costs per enquiry decreased by a further
22%. Group marketing costs as a percentage of revenue were 3.9% in
the six months to April (H1 2020: 4.3%).
During H1, the Group demonstrated its ability to integrate newly
developed and acquired stores into its marketing platform with
successful new openings at Birmingham Middleway and Paris Magenta.
The joint venture managed by the Group in the Netherlands expanded
its coverage beyond Amsterdam and Haarlem with the acquisition and
integration of stores in The Hague and Het Gooi, north of
Hilversum. The Group also completed the integration of OMB (Spain,
acquired December 2019) onto the Safestore platform with uplifts
seen in both enquiry generation and marketing efficiency despite
the impact of the pandemic. Spanish cost per enquiry, for example
was reduced by c. 60% although the number of enquiries was
increased by a factor of 4.
In February 2021, Safestore UK won the Feefo Platinum Trusted
Service award for the second time. The award is given to businesses
who have achieved Gold standard for three consecutive years. It is
an independent mark of excellence that recognises businesses for
delivering exceptional experiences, as rated by real customers. In
addition to using Feefo, Safestore invites customers to leave a
review on a number of review platforms, including Google and
Trustpilot. Our rating for each of these three providers in the UK
are between 4.7 and 4.8 out of 5. This way, wherever customers look
for trust and reputational signals about Safestore, they will see
an impartial view of our excellent customer satisfaction. In
France, Une Pièce en Plus uses Trustpilot to obtain independent
customer reviews. In 2020, 93% of customers rated their service
experience as "Excellent" or "Great" resulting in a TrustScore of
4.7 out of 5. In Spain, OMB collects customer feedback via Google
reviews and has maintained a score of at least 4.8 out of 5.
Motivated and effective store teams benefiting from investment
in training and development
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.
The impact of the COVID-19 pandemic has been fast moving and
uncertain but our teams created and implemented our plans quickly.
The health, safety and wellbeing of our colleagues and customers is
of paramount importance and all sites were operated in accordance
with UK government guidelines in providing a COVID-secure
workplace. We consulted our colleagues about managing risks
associated with COVID-19, which included collaborating with them
about key decisions we made during this time. The decision was
taken not to access the UK government's COVID-19 related support
schemes including the job retention scheme. Our colleagues received
their full salary entitlement, irrespective of whether they were
working reduced hours or were unable to work because they were
self-isolating.
Our enthusiastic, well-trained and customer-centric sales team
remains a key differentiator and a strength of our business.
Understanding the needs of our customers and using this knowledge
to develop in-store trusted advisers is a fundamental part of
driving revenue growth and market share.
Safestore has been an Investors in People ("IIP") organisation
since 2003 and our aim is to be an employer of choice in our sector
as we passionately believe that our continued success is dependent
on our highly motivated and well-trained colleagues. Following the
award of a Bronze standard accreditation in 2015 and our subsequent
Gold standard accreditation in 2018, Safestore was awarded the "we
invest in people" Platinum accreditation in February 2021, the
highest accolade in the Investors in People scale. This firmly
places Safestore in the top 2% of accredited organisations in the
UK, with the accreditation panel commenting: "Safestore are a
fantastic example of sustained great practice". 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 also across 14,000 organisations in 75
countries. This sustained people development focus is an essential
component of our continuous improvement mentality.
We are committed to growing and rewarding our people and tailor
our development, reward and recognition programmes to this end. Our
IIP recognised coaching programme, launched in 2018, and upgraded
every year since, continues to be a driving force behind the
continuous performance improvement demonstrated by our store
colleagues.
The last 18 months provided a challenging environment requiring
us to operate in some new and innovative ways. Our online learning
portal, combined with the energy and flexibility of our store
colleagues, allowed us to not only continue to deliver our
award-winning development programs but also to capitalise on the
strength of our IT platforms. In the first half of 2021 we rolled
out our annual sales refresher program to every store colleague
on-line, utilising some innovative technologies along with more
common communication tools such as Microsoft Teams to once again
raise our performance bar. We recognised the changing needs of our
customers through these challenging times and provided solutions,
systems and support to our store colleagues allowing them to
continue to fulfil the needs of our customers.
The day-to-day training and development of our store and
customer-facing colleagues is an essential part of our daily
routines. Due to the restrictions created by the COVID-19 pandemic,
our learning and development programme has been continually
delivered online via our Learning Management System and the use of
the digital platforms mentioned above. This allowed us the
flexibility to continue with high-quality delivery of our core
sales and development modules without the need to meet
face-to-face. To support a safe working environment 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 colleagues are up to date in relation
to their technical knowledge and continue to operate a safe
environment for both our colleagues and customers. These tools,
systems and resources have allowed us to effectively communicate
changes quickly and manage compliance robustly. The onset of a
national lockdown in March 2020 did not stop the continued
development and training of our colleagues. Our training,
developmental, welfare and compliance training modules can all be
remotely accessed. Along with our online-learning portal and the
adaptation of our face-to-face training programmes into a
video-linked Microsoft Teams format, we delivered a continuous
seamless learning experience for all our colleagues.
All new recruits to the business benefit from enhanced induction
and training tools that have been developed in-house and enable us
to quickly identify high-potential individuals and increase their
speed to competency. They receive individual performance targets
within four weeks of joining the business and are placed on the
"pay-for-skills" programme that allows accelerated basic pay
increases dependent on success in demonstrating specific and
defined skills. The key target of our programme remains that close
to 100% of our Store Manager appointments are internal hires via
our Store Manager Development programme, and we are pleased with
our progress to date.
Our internal Store Manager Development programme has been in
place since 2016 and is a key part of succession planning of future
Store Managers. The 5(th) intake are well under way on their
program in 2021, and along with the necessary skills and attributes
they need to become a Safestore Store Manager, delegates have the
opportunity to gain a nationally recognised qualification from ILM
(Institute of Leadership & Management) at Level 3.
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 from our training
Store Managers and senior business leaders. This allows our people
to be trained with the knowledge and skills to sell effectively in
today's market place. December 2019 also saw the inaugural launch
of our Senior Manager Development programme ("LEAD") which focuses
on developing our high performing middle managers aimed at
preparing them for more senior roles within the business. This
programme is built on the foundations of our Store Manager
Development programme and includes Level 5 accreditation from the
Institute of Leadership & Management upon successful
completion. Our LEAD group delegates are already delivering
performance-enhancing projects to our wider business and are fast
heading towards their graduation day.
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 employee
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' performance in
order to assess team members' performance and development needs on
a quarterly basis.
February 2019 saw the launch of our "Make the Difference" forum"
when 14 of our colleagues were voted to be the "People Champions"
and attend our people's forum. This initiative allows our champions
to be the representative voice for each of the twelve Regions and
Head Office in order to influence change and drive improvement for
"Our Business, Our Customers and Our Colleagues".
People Champions:
-- Consult and collect the views and suggestions of all colleagues that they represent;
-- Engage in the bi-annual "Make the Difference Forum", raising
and representing the views of their colleagues; and
-- Consult with and discuss feedback with management and the leadership team at Safestore.
2021 saw our Forum representative positions up for election
after they had successfully completed their 2-year tenure. After a
strongly contested election, our 15 new members were elected and
they are already delivering high quality contributions to our
business.
Our Values and Behaviours framework concentrates our culture on
our customers. Customers continue to be at the heart of everything
we do, whether it be in store, online or in their communities. In
2021 we further improved our customer ratings when we were awarded
the Feefo PLATINUM trusted service award along with maintaining our
"Excellent" Trustpilot and strong Google ratings reflecting our
ongoing commitment to their satisfaction.
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 are
adjusted on a real time basis, 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 five 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 very granular pricing policy and the confidence provided
by analytical capabilities and systems that smaller players might
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 five occasions,
each time optimising our debt structure and improving terms; and
believe we have maintained 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.
At 30 April 2021, based on the current level of borrowings and
interest swap rates, the Group's weighted average cost of debt was
2.10% and 78% of our debt facilities are at fixed rate or hedged.
The weighted average maturity of the Group's drawn debt is 4.5
years at the current period end and the Group's LTV ratio is 27% as
at 30 April 2021.
This LTV and interest cover ratio of 10.0x for the rolling
twelve-month period ended 30 April 2021 provides us with
significant headroom compared to our banking covenants. We had
GBP128m of undrawn bank facilities at 30 April 2021 before taking
into consideration the additional funding described below.
Taking into account the improvements we have made in the
performance of the business and the reduction in underlying finance
charges of c. GBP9.3m over the last eight years, the Group is
capable of generating free cash after dividends sufficient to fund
the building of two to four 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 a
Group LTV(11) ratio of between 30% and 40% which the Board
considers to be appropriate for the Group.
New Financing
On 7 May 2021, Safestore extended its borrowing facilities with
the issuance of the equivalent of GBP150m new sterling and euro
denominated US Private Placement ("USPP") notes with the following
coupons and tenors:
- GBP20m 7 year notes at a coupon of 1.96% (credit spread of 140 bps)
- EUR29m 7 year notes a coupon of 0.93% (credit spread of 105 bps)
- GBP80m 10 year notes a coupon of 2.39% (credit spread of 150 bps)
- EUR29m 12 year notes a coupon of 1.42% (credit spread of 118 bps)
The funds will be received in June 2021 and August 2021 and will
be used initially to pay down Revolving Credit Facilities ("RCF")
thereby providing further capacity for medium-term growth.
The USPP notes were issued to a group of existing institutional
investors.
In addition, an uncommitted EUR115m Shelf facility, which can be
drawn in Euros or Sterling, was agreed with one existing lender,
giving the Group further financing flexibility. The facility would
be drawn in the form of Private Placement Notes at a coupon to be
agreed at the time of funding.
The existing USPP notes and banking arrangements remain
unchanged and are detailed in the Financial Review.
Taking into consideration the existing property pipeline and the
new financing, it is anticipated that the average cost of debt of
the Group will remain broadly unchanged at c 2.2% and the weighted
average tenor of our facilities increases from 4.0 years to 5.2
years.
FX Forward Contracts
During the first half of 2020, the Group took out average rate
FX forward contracts to hedge the majority of the Group's exposure
to the translation of Euro denominated earnings for the period
until April 2023. The remaining values are EUR7.5m for the second
half of the 2021 financial year, EUR16m for the 2022 financial year
and EUR8.5m for the first half of the 2023 financial year. This has
the effect of fixing the rate at which Euro earnings are translated
to the rate of EUR1.0751 to GBP1, up to the value of the
contract.
For the six month period to April 2021, the Group received
GBP0.3m in relation to the EUR7.0m of FX forwards in place for the
period.
Portfolio Management
Our approach to store development and acquisitions in the UK,
Paris and Spain continues to be pragmatic, flexible and focused on
the return on capital.
Our property teams in the UK, Paris and Spain 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. Our preference is to
acquire sites that are capable of being fully operational within
18-24 months from completion.
Since 2016, the Group has opened 17 new stores: Chiswick,
Wandsworth, Mitcham, Paddington Marble Arch, Carshalton (all in
London), Birmingham-Central, Birmingham-Merry Hill, Birmingham-
Middleway, Altrincham, Peterborough, Gateshead and Sheffield in the
UK, and Emerainville, Combs-la-Ville, Poissy, Pontoise and Magenta
in Paris, adding 870,000 sq ft. of MLA.
In addition, the Group has acquired 31 existing stores through
the acquisitions of Space Maker, Alligator, Fort Box, OhMyBox in
Barcelona and our London Heathrow store. These acquisitions added a
further 1,238,000 sq ft of MLA.
We have also completed the extensions and refurbishments of our
Acton, Barking, Bedford, Chingford and Longpont (Paris) stores
adding a net 65,000 sq ft of fully invested space to the estate.
All of these stores are performing in line with or ahead of their
business plans.
Property Pipeline
Store Openings
In July 2020, the Group completed the acquisition of a freehold
2.17-acre site including an existing warehouse in Birmingham. The
site is well located on the southern side of the inner A4540 ring
road and the new 58,500 sq ft MLA store opened in April 2021. Our
existing nearby store at Digbeth (MLA 44,500 sq ft) will close
shortly with the majority of customers expected to relocate to the
Middleway site. In due course, we intend to sell the Digbeth site,
which has residential development potential.
In April 2018, we agreed a lease on a site at Magenta in central
Paris. We are pleased to confirm that the 50,000 sq ft store opened
in late April 2021.
Development Sites
UK
In May 2021 the Group completed the freehold acquisition of a
0.8 acre site with a 108,000 sq ft warehouse to the east of London
in a prominent position on the A12 in Bow. The building has
existing consent for storage and we only require planning consents
for some external modifications to the building. Otherwise the
building is suitable for immediate conversion to self-storage. It
is anticipated that a 74,000 sq ft store will be opened by Q1 FY
22.
In April 2021, the Group exchanged contracts on a freehold 1.3
acre site at Lea Bridge in North East London. Subject to contract
and planning, we will open a 76,500 sq ft MLA store in 2024 as the
leases for existing tenants on the site have up to two years to
run. Rental income of approximately GBP170k per annum is currently
received on this site.
In April 2021, the Group exchanged contracts on a freehold site
in North East London. Subject to contract and planning, we will
open a 56,500 sq ft MLA store in 2025.
In June 2018 Safestore opened its Paddington Marble Arch store.
A separate satellite store at Paddington Park West Place, with MLA
of 13,000 sq ft will open during 2023.
The Group has also previously acquired two additional sites in
London at Morden and Bermondsey. Morden is a freehold 0.9-acre site
in an established industrial location. Planning permission for a
52,000 sq ft self-storage facility has now been granted and we are
planning to commence construction on this site in August this year
with a view to opening in H2 2022. Bermondsey is a 0.5-acre
freehold site with income from existing tenants and is adjacent to
our existing leasehold store. Our medium term aim, subject to
planning permission, is to extend our existing Bermondsey
operations with the addition of a new self-storage facility to
complement our existing store.
Paris
Safestore has for many years owned a vacant freehold site in the
town of Nanterre on the edge of La Défense, Paris' main business
district. The site is valued at EUR6.85m in the Investment Property
valuation on the Group's Balance Sheet. This area of Paris is
undergoing significant development and Safestore has invested a
24.9% stake in a joint venture development company, PBC Les Groues
SAS, which plans to complete a c 300,000 sq ft development of
offices, retail, a school and residential properties subject to
planning. The maximum investment for Safestore in the joint venture
is EUR2m.
In addition, Safestore will contribute its Nanterre site into
the project and will receive cash of EUR1.7m in addition to an
underground storage area and reception within the complex, ready to
be fitted out into a 44,000 sq ft self-storage facility.
It is anticipated that the project will be completed in early
2025 when the self-storage facility will open.
Spain
In December 2019 the Group completed the acquisition of OMB Self
Storage which operates three leasehold properties and one freehold
property, all very well located in the centre of Barcelona. The
four locations (Valencia, Calabria, Glories and Marina) have an MLA
totalling 108,000 sq ft. The occupancy of the business at the end
of April 2021, was 89.4%.
We are pleased to announce the next phase of expansion of the
business in Barcelona and its entry into Madrid with the following
sites.
In April 2021, the Group exchanged contracts on a freehold
building in a high population density area in northern Madrid.
Subject to contract and planning, we will convert the existing
building into a 48,000 sq ft MLA self-storage facility. It is
anticipated that the site will open in the second half of 2022.
In March 2021, the Group exchanged contracts on a freehold
building in southern Madrid. Subject to contract and planning, we
will convert the existing building into a 29,000 sq ft MLA
self-storage facility. It is anticipated that the site will open in
the second half of 2022.
In January 2021, the Group exchanged contracts on a freehold
building in a densely populated area in central Barcelona. Subject
to contract and planning, we will convert the existing building
into a 13,500 sq ft MLA self-storage facility. It is anticipated
that the site will open in the first half of 2022.
In April 2021, the Group exchanged contracts on a freehold
building in northern Barcelona. Subject to contract and planning,
we will convert the existing building into a 36,300 sq ft MLA
self-storage facility. It is anticipated that the site will open in
the second half of 2022.
In June 2021 the Group exchanged contracts on a freehold
property in South Barcelona. The site includes an existing
industrial building which will be converted into a 30,000 sq ft MLA
self-storage facility. We expect to open the site in the fourth
quarter of 2022.
The total cost of acquisition and construction of the new
Spanish sites is anticipated to be c EUR29m and the five stores
will add 157,000 sq ft of additional MLA.
Store Extensions
In April 2021, we exchanged contracts on the acquisition of a
0.5 acre site adjacent to our existing London Wimbledon store (MLA
58,800). Subject to completion of this transaction, the existing
reception area will be relocated to a more prominent and visible
roadside location and a further 9,000 sq ft of storage capacity and
1,000 sq ft of offices will be added. The Wimbledon store's peak
occupancy, prior to the COVID pandemic, was 92%.
In May 2021, the Group exchanged contracts on a leasehold
basement car park adjacent to our existing London Paddington Marble
Arch store. Subject to planning, a further 8,500 sq ft of space
will be added to our site. The occupancy of the Paddington Marble
Arch store at 31 March 2021 was 80%.
In September 2020 the Group received planning permission to
extend its Southend store by 10,100 sq ft. The existing store has
an MLA of 49,400 sq ft and was 86% occupied at the end of September
2020. It is anticipated that the extension will be open in the
fourth calendar quarter of 2021 and that there will be minimal
impact on day-to-day operations of the store during
construction.
The Group also has planning permission to extend its Edgware
store by a further 22,900 sq ft. It is anticipated that this
extension will be completed in the fourth quarter of the financial
year. The existing store has MLA of 24,000 sq ft and reached a peak
occupancy of 91% prior to extension works commencing.
Property Pipeline Summary
Store FH/ Status MLA SQFT Target Other
LH Opening
London- Bow FH Completed 74,000 Q1 2022 Conversion of
existing building
---- --------------------- ---------- --------- ------------------------
London- Lea Bridge FH Contracts exchanged/ 76,500 Q4 2024 New build.
subject to planning GBP170k pa of
rental income
prior to opening.
---- --------------------- ---------- --------- ------------------------
London- North FH Contracts exchanged/ 56,500 Q4 2025 New build.
East London subject to planning
---- --------------------- ---------- --------- ------------------------
London- Morden FH Completed/ Planning 52,000 Q4 2022 New build.
granted
---- --------------------- ---------- --------- ------------------------
London- Bermondsey FH Completed/ Subject 50,000 Q2 2026 New build.
to Planning
---- --------------------- ---------- --------- ------------------------
London- Paddington LH Completed/ Planning 13,000 Q2 2023 Conversion of
Park West granted Basement Car Park-
Satellite store
to existing Paddington
store
---- --------------------- ---------- --------- ------------------------
London- Paddington LH Contracts exchanged/ 8,500 Q1 2022 Extension of existing
Marble Arch subject to planning site via conversion
of adjacent basement
car park
---- --------------------- ---------- --------- ------------------------
London- Wimbledon FH Contracts exchanged/ 9,000 Q2 2022 Extension of existing
subject to planning storage site
1,000
office
---- --------------------- ---------- --------- ------------------------
Southend FH Completed/ Planning 10,100 Q4 2021 Extension of existing
granted site
---- --------------------- ---------- --------- ------------------------
London- Edgware FH Completed/ Planning 22,900 Q4 2021 Extension of existing
granted site
---- --------------------- ---------- --------- ------------------------
Paris- La Défense FH Completed/ Subject 44,000 Q2 2025 Facility within
to Planning mixed use development
---- --------------------- ---------- --------- ------------------------
Total UK and Paris Pipeline MLA c 418k
---------- -----------------------------------
Total Further UK and Paris Capex c GBP75m.
---------- -----------------------------------
Store FH/ Status MLA SQFT Target Other
LH Opening
Northern Madrid FH Subject to contract 48,000 Q3 2022 Conversion of
and planning existing building
----- --------------------- --------- --------- -------------------
Southern Madrid FH Subject to contract 29,000 Q3 2022 Conversion of
and planning existing building
----- --------------------- --------- --------- -------------------
Central Barcelona FH Subject to contract 13,500 Q1 2022 Conversion of
and planning existing building
----- --------------------- --------- --------- -------------------
Northern Barcelona FH Subject to contract 36,300 Q3 2022 Conversion of
and planning existing building
----- --------------------- --------- --------- -------------------
South Barcelona FH Subject to planning 30,000 Q4 2022 Conversion of
and contract Existing building
----- --------------------- --------- --------- -------------------
Total Spain Pipeline MLA c 157k
--------- --------- -------------------
Total Further Spain Capex EUR34m
--------- --------- -------------------
Lease Extensions and Assignments
In the period, we agreed a new 18-year lease on our Hayes store
which starts at the expiry of the current lease in June 2027. The
new lease is protected under the Landlord and Tenant Act. A
six-month rent-free period was granted immediately under the
current lease with a further three-month rent-free period when the
new lease commences.
As part of our ongoing asset management programme, we have now
extended the leases on 23 stores or 64% of our leased store
portfolio in the UK since 2012.
Joint Venture(14) with Carlyle- Investment in Opslag XL
As announced as part of our 14 January 2021 results
announcement, the Group's joint venture with Carlyle acquired the
three-store portfolio of Opslag XL in the Netherlands in December
2020. Safestore's equity investment in the joint venture, relating
to Opslag XL, was c. EUR0.9m funded from the Group's existing
resources. Safestore also earns a fee for providing management
services to the joint venture. Safestore expects to earn an initial
return on investment of 12% before transaction related costs for
the first full year reflecting its share of expected joint venture
profits and fees for management services.
Opslag XL has three locations in The Hague, Hilversum and
Amsterdam. The Hague and Hilversum are freehold; the Amsterdam
store is a short leasehold (December 2021). The business had 7,000
sq metres (75,000 sq ft) of MLA and an occupancy of 58%.
In June 2021, the joint venture acquired a freehold site with an
existing building in Nijmegen in the Netherlands. Nijmegen has a
population of 177,000 and the site is well located on a main road
with good visibility and access. Safestore will provide 20% of the
equity required to acquire and develop the site which will have an
MLA of c. 40,000 sq ft.
These acquisitions complement the six stores in Amsterdam and
Haarlem in the Netherlands acquired in August 2019 as well as the 6
stores purchased in 2020 in Brussels, Charleroi and Liège. In
total, the joint venture will own 16 stores with 57,300 sq metres
(614,000 sq ft) of MLA. The Group's further investment in the joint
venture has been immediately accretive to Group earnings per share
from completion and will support the Group's future dividend
capacity.
Our joint venture provides an earnings-accretive opportunity to
gain detailed operational exposure to new markets while carefully
managing the investment risk. The Group's leading digital platform
has already delivered substantial marketing benefits both in terms
of costs and in terms of volume of enquiries. The operational
integration has been completed in an efficient manner, leveraging
the skills and capacities of our existing Head Offices in the UK
and Paris.
Our local property development team also enables us to further
our understanding of local property markets, which will allow the
Group to allocate equity investment efficiently with a risk/reward
profile similar to that of our historical core markets.
Portfolio Summary
The self-storage market has been growing consistently for over
20 years across many European countries but few regions offer the
unique characteristics 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 per square mile 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.95 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 77 stores,
contributed GBP49.5m of revenue and GBP35.7m 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 Spain Group
South East UK Total Total
Number of Stores 71 57 128 29 4 161
Let Square Feet (m sq ft) 2.29 2.18 4.47 1.07 0.10 5.64
Maximum Lettable Area (m
sq ft) 2.78 2.73 5.51 1.36 0.11 6.98
Average Let Square Feet
per store (k sq ft) 32 38 35 37 24 35
Average Store Capacity
(k sq ft) 39 48 43 47 27 43
Closing Occupancy % 82.4% 79.6% 81.0% 78.7% 89.4% 80.7%
Average Rate (GBP per sq
ft) 30.15 18.77 24.66 34.08 27.86 26.51
Revenue (GBP'm) 42.2 25.0 67.2 19.5 1.4 88.1
Average Revenue per Store
(GBP'm) 0.59 0.44 0.53 0.67 0.35 0.55
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 128 stores in the UK, 71 of which are in London and the
South East, and 29 stores in Paris.
In the UK, 63% 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 48 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 nine stores branded as Une Pièce
en Plus ("UPP") ("A spare room"). 59% 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 2021 London, the South East and Paris
represent 62% of our stores, 70% of our revenues, as well as 58% 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, Newcastle, Glasgow and Edinburgh.
Our 2019 acquisition of OMB in Barcelona represents a platform into
the Spanish market where we hope to take advantage of development
and acquisition opportunities and have recently announced the
acquisition of five development sites in Barcelona and Madrid.
Market
The Self Storage Association ("SSA") stated in its May 2021
report, that in relation to COVID-19, the self-storage industry
"held up well during the pandemic." Previous downturns have
presented opportunities for self-storage and the report suggested
that increased working from home, online retailing, a potentially
greater tendency for home improvements and the government's stamp
duty holiday in the UK have complemented the already broad range of
demand drivers. The pandemic seems to have once again demonstrated
the resilience of the self-storage industry.
The self-storage market in the UK and France remains relatively
immature compared to geographies such as the USA and Australia. The
SSA Annual Survey (May 2020) confirmed that self-storage capacity
stands at 0.73 sq ft per head of population in the UK and 0.20 sq
ft 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 sq ft per inhabitant. This compares with 9.44 sq ft
per inhabitant in the USA and 1.89 sq ft in Australia. In the UK,
in order to reach the US density of supply, it would require the
addition of around another 17,000 stores as compared to c.1,400
currently. In the Paris region, it would require around 2,400 new
facilities versus c.95 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 were limited to an average of 19 stores per
annum between 2011 and 2016 (including container storage
openings).
The volume of new store openings increased in 2017 and 2018. In
2018, the SSA 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. In the 2019 SSA Survey, it was estimated that c.40
traditional self-storage stores were opened in 2018 (excluding
container storage) with less than half competing directly with
Safestore. The 2020 and 2021 reports do not give detailed
indications of the level of openings in 2019 or 2020 but our own
estimates are that also around 40 were opened in each period.
The 40 comparable sites represent around 3% of the traditional
self-storage industry in the UK. These figures represent gross
openings and do not take into account storage facilities closing or
being converted for alternative uses. We estimate that only around
25% of these sites compete with existing Safestore stores.
The SSA 2021 Survey also reported that operators' expectations
in terms of new store openings and site acquisitions remained
relatively consistent with previous years. For 2021, operators are
estimating the completion of around 44 developments and around 48
in 2022. Traditionally, operators have opened or acquired far fewer
stores than originally estimated. Based on these estimates, and
adjusting for historical inaccuracy, we estimate that around 20-25
stores per annum will be developed over the coming years. If that
supply is not within a relatively narrow radius of a Safestore
store, it does not represent a competitive threat.
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 despite a number of acquisitions in
the sector in the last four years. The SSA's estimates of the scale
of the UK industry are finessed each year and changes from one year
to the next represent improved data rather than new supply. In the
2021 report the SSA estimates that 1,997 self-storage facilities
exist in the UK market including around 598 container-based
operations. According to the 2021 survey, Safestore is the industry
leader by number of stores with 128 wholly owned sites followed by
Big Yellow with 102 stores (including Armadillo), Access with 57
stores, Lok'n Store with 37 stores, Shurgard with 34 stores and
Storage King with 30 stores. In aggregate, the top ten leading
operators account for almost 20% of the UK store portfolio. The
remaining c.1,600 self-storage outlets (including 598
container-based operations) are independently owned in small chains
or single units. In total there are 998 storage brands 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.
Our Spanish business operates in Barcelona and has recently
announced its future expansion into Madrid. The metropolitan areas
of Barcelona and Madrid have combined growing high density
populations of 12m inhabitants and significant barriers to
entry.
Consumer awareness of self-storage is increasing but remains
relatively low, providing an opportunity for future industry
growth. The SSA survey indicated that 50% (52% in 2020) of
consumers either knew nothing about the service offered by
self-storage operators or had not heard of self-storage at all.
Since 2014, this statistic has only fallen 12ppts from 62%.
Therefore, the opportunity to grow awareness, combined with limited
new industry supply, makes for an attractive industry backdrop.
Self-storage is a brand-blind product. 56% of respondents were
unable to name a self-storage business in their local area (54% in
2020). 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 77% of those
surveyed (73% in 2020) 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 only c. 25% of respondents (c. 26% in 2020).
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.
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 Spain
Personal Customers
Numbers (% of total) 77% 83% 88%
Square feet occupied (% of
total) 58% 67% 82%
Average Length of Stay (months) 20.0 28.3 21.1
Business Customers
Numbers (% of total) 23% 17% 12%
Square feet occupied (% of
total) 42% 33% 18%
Average Length of Stay (months) 29.8 32.6 22.7
Safestore's customer base is resilient and diverse and consists
of around 79,500 domestic, business and National Accounts customers
across London, Paris, Spain and the UK regions.
Business Model
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 in the UK on self-storage in
2012, the industry has been exceptionally resilient. In the context
of uncertain economic conditions, driven by the COVID-19 pandemic
and 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. With 92% of customers travelling for
less than 30 minutes to their storage facility (2021 SSA Survey)
Safestore's national store footprint represents a competitive
advantage.
The Group's capital-efficient portfolio of 161 wholly owned
stores in the UK, Paris and Barcelona 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 a third of our stores in the UK are leaseholds
with an average remaining lease length at 30 April 2021 of 12.6
years (FY2020: 12.5 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 38% 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.
The Group believes there is an opportunity to leverage its
highly scalable marketing and operational expertise in new
geographies outside the UK and Paris. During 2019, a joint
venture(14) was established with Carlyle, which acquired the M3
Self Storage business in the Netherlands which has six stores in
Amsterdam and Haarlem. In June 2020, the joint venture(14) added
the Lokabox business, a portfolio of six stores in Brussels (2),
Liege (2), Charleroi and Nivelles. In December 2020, the joint
venture(14) acquired the Opslag XL portfolio adding a further three
stores in Amsterdam, The Hague and Hilversum. The Group earns a
management fee and a share of the profits of the joint venture(14)
. The joint venture(14) added a development site at Nijmegen in the
Netherlands in June 2021 and it is anticipated that it will
investigate further opportunities in due course.
Our experience is that being flexible in its approach has
enabled Safestore to operate from properties and in markets 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.
However, the internet is now by far the dominant channel,
accounting for 89% (2020: 87%) of our enquiries in the UK and 83%
(2020: 77%) in France. Telephone enquiries comprise 8% of the total
(11% in France) and 'walk-ins' amount to only 3% (6% 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 88% enquiry growth over the last five years. Towards
the end of 2015, the Group launched a new dynamic and
mobile-friendly UK website, which has achieved its aim of providing
the customer with an even clearer, more efficient experience. A
similar website was launched in our Paris business at the end of
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 handles customer
service issues in addition to enquiries, in particular when the
store colleagues are busy handling calls or outside of normal store
opening hours.
Our pricing platform provides the store and CSC colleagues with
system-generated real-time prices managed by our centrally based
yield-management team. Local colleagues 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. 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 42% of our total space
let and have an average length of stay of 30 months. Within our
business customer category, our National Accounts business
represents around 530k sq ft of occupied space (around 12% 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 c. 79,500 business and
domestic customers with an average length of stay of 30 months and
22 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, the refinancing of all
facilities in May 2017 and the issuances of a further GBP125m of US
Private Placement Notes in 2019 and GBP150m in 2021, 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 2021 we had 1.0m sq ft of unoccupied space in the UK
and 0.3m sq ft in France, equivalent to c.35 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 Trading Performance
UK Operating Performance- total 2021 2020 Change(1)
-------------------------------------------- ------ ------ ----------
Revenue (GBP'm) 67.2 59.8 12.4%
EBITDA (GBP'm)(3) 39.8 33.0 20.6%
EBITDA (after leasehold costs)
(GBP'm) 35.8 29.1 23.0%
Closing Occupancy (let sq ft-
million)(4) 4.466 3.745 19.3%
Maximum Lettable Area (MLA)(5) 5.51 5.36 2.8%
Closing Occupancy (% of MLA)(5) 81.0% 69.8% +11.2ppts
Average Storage Rate (GBP)(6) 24.66 24.72 (0.2%)
UK Operating Performance- like-for-like(9) 2021 2020 Change(1)
-------------------------------------------- ------ ------ ----------
Storage Revenue (GBP'm) 52.1 46.5 12.0%
Ancillary Revenue (GBP'm) 12.7 12.2 4.1%
Revenue (GBP'm) 64.8 58.7 10.4%
EBITDA (GBP'm)(3) 38.3 32.4 18.2%
Closing Occupancy (let sq ft-
million)(4) 4.322 3.679 17.5%
Closing Occupancy (% of MLA)(5) 82.4% 70.6% +11.8ppts
Average Occupancy (let sq ft-
million)(4) 4.255 3.792 12.2%
Average Storage Rate (GBP)(6) 24.69 24.66 0.1%
The UK business accelerated strongly in the second quarter with
total revenue up 12.4% for the six months. Like-for-like storage
revenue was up 12.0% whilst the performance of ancillary revenues
improved with growth of 4.1% compared to 2020. As a result, total
like-for-like revenue was up 10.4% for the period.
The strong UK result was driven by an excellent occupancy
performance. Like-for-like average occupancy grew by 12.2% compared
to 2020 and the like-for-like closing occupancy at the end of April
2021 was up 11.8ppts at 82.4% (2020: 70.6%). The first half of the
year saw a like-for-like occupancy inflow of 108,000 sq ft compared
to an outflow of 247,000 sq ft in 2020, which reflected the impact
of the first COVID-19 lockdown in March/ April 2020. Like-for-like
average rate was up 0.1% for the six-month period.
Total revenue growth of 12.4% reflected the strong like-for-like
performance, the 2020 store openings in Carshalton, Gateshead and
Sheffield, the annualisation of the acquisitions of our St John's
Wood and Chelsea stores and management fees from our Joint Venture
with Carlyle. All acquisitions and new store developments are
performing in line with or ahead of their business cases.
Our continued focus on cost was evident in the half year. During
the period, our cost base increased by 0.9% or GBP0.2m on a
like-for-like basis.
As a result, underlying EBITDA after leasehold costs for the UK
business was GBP35.8m (2020: GBP29.1m), an increase of GBP6.7m or
23.0%.
Total EBITDA margins at store level increased by 3.7ppts to
67.6% and after administrative costs EBITDA margins grew by 4.0ppts
to 59.2%.
As of 15 June 2021, 98.4% of our April 2021 and May 2021 revenue
has been collected in the UK (96.9% in 2020).
Paris Trading Performance
Paris Operating Performance- 2021 2020 Change(1)
total and
like-for-like(4)
--------------------------------- ------ ------ ----------
Storage Revenue (EUR'm) 20.17 19.90 1.4%
Ancillary Revenue (EUR'm) 1.94 1.85 4.9%
Revenue (EUR'm) 22.11 21.75 1.7%
EBITDA (EUR'm)(3) 15.4 14.1 9.2%
EBITDA (after leasehold costs)
(EUR'm) 12.7 11.4 11.4%
Closing Occupancy (let sq ft-
million)(4) 1.072 0.985 8.8%
Maximum Lettable Area (MLA)(5) 1.36 1.31 3.8%
Closing Occupancy (% of MLA)(5) 81.7% 75.1% +6.6ppts
Average Storage Rate (EUR)(6) 38.67 39.88 (3.0%)
Revenue (GBP'm) 19.5 18.7 4.3%
For the current year to date, it should be noted that all stores
in the portfolio are classified as like-for-like. Paris Magenta
opened in late April 2021 so had not meaningfully contributed to
revenue at the period end.
Paris had a robust period, growing revenue by 1.7% compared to
last year.
Occupancy performance was strong with closing occupancy at
81.7%, up 6.6ppts compared to 2020. The period saw an occupancy
inflow of 38,000 sq ft compared to an outflow of 30,000 sq ft in
2020, which reflected the impact of the first COVID-19 lockdown in
March/ April 2020.
The average storage rate was down 3.0% for the period driven by
promotional activity and a shift in the occupancy mix towards
bigger units which command a lower price per sq ft. Ancillary
revenues were strong, growing by 4.9% compared to 2020.
Sterling equivalent revenue was up 4.3% reflecting a 2.3%
weakening in the average Sterling to Euro exchange rate over the 6
months period.
The like-for-like cost base in Paris remained well controlled
during the period and was down 11.8% compared to the prior
year.
As a result, like-for-like EBITDA after leasehold costs grew to
EUR12.7m (2020: EUR11.4m), an improvement of EUR1.3m or 11.4% on
2020.
Total EBITDA margins at store level increased by 3.1ppts to
75.6% and after administrative costs EBITDA margins grew by 5.0ppts
to 69.7%.
As of 15 June 2021, 90.5% of our April 2021 and May 2021 revenue
has been collected in Paris (83.8% in 2020).
Spain Trading Performance
Our Barcelona business, which was acquired in December 2019,
contributed EUR1.6m of revenue in the period. In the second
quarter, the first fully comparable quarter under the Group's
ownership, the business grew total revenue by 11.5%. Closing
occupancy was up 0.3ppts at 89.4% (2020: 89.1%) whilst average rate
for the second quarter grew by 6.8% to EUR32.16 (2020: EUR30.10)
with ancillary revenues improving strongly.
The business contributed EUR1.0m of EBITDA.
Frederic Vecchioli
16 June 2021
Financial Review
Underlying Income Statement
The table below sets out the Group's underlying results of
operations for the six months ended 30 April 2021 and the six
months ended 30 April 2020.
H1 2021 H1 2020 Mvmt
GBP'm GBP'm %
Revenue 88.1 79.3 11.1%
Underlying costs (34.0) (33.7) 0.9%
Share of associate's underlying
EBITDA 0.3 0.3 -
-------- --------
Underlying EBITDA 54.4 45.9 18.5%
Leasehold rent (6.5) (6.3) 3.2%
-------- --------
Underlying EBITDA after leasehold
rent 47.9 39.6 21.0%
Depreciation (0.5) (0.4) 25.0%
Finance charges (4.8) (4.9) (2.0%)
Share of associate's finance
charges (0.2) (0.2) -
-------- --------
Underlying profit before tax 42.4 34.1 24.3%
Current tax (2.8) (2.5) 12.0%
Share of associate's tax (0.1) (0.1) -
Adjusted EPRA earnings 39.5 31.5 25.4%
Share-based payments charge (5.9) (2.8) 110.7%
EPRA basic earnings 33.6 28.7 17.1%
======== ========
Average shares in issue (m) 210.8 210.4
Diluted shares (for ADE EPS)
(m) 218.4 217.2
Adjusted diluted EPRA EPS (p) 18.1 14.5 24.8%
Notes:
1. Alternative performance measures (APM's) are used to assess,
manage and monitor the financial performance, financial position,
and cash flows of the business that are not defined as a statutory
measure under IFRS. The Directors believe that these measures
provide valuable supplementary information to investors, other
stakeholders and the wider market in evaluating the Group's
underlying business. Accordingly, these measures are to be viewed
in addition to the statutory measures. For definitions of key
APM's, refer to the glossary in the Group's Annual Report 2020,
page 147. Relevant reconciliations of the APM's to the underlying
financial statements are contained within the financial review and
financial statements of the Group's annual report.
2. Adjusted Diluted EPRA EPS is defined in note 2 to the financial statements.
3. 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.
The table below reconciles profit before tax in the income
statement to underlying profit before tax in the table above.
H1 2021 H1 2020
GBP'm GBP'm
Profit before tax 167.3 99.7
Adjusted for
- gain on investment properties
and investment property under
construction (131.3) (67.3)
- change in fair value of derivatives (1.6) (1.6)
- net exchange loss 0.1 -
- share of associate's tax 0.1 0.1
- share-based payments 5.9 2.8
- exceptional items 1.9 0.4
Underlying profit before tax 42.4 34.1
======== ========
Management considers the above presentation of earnings to be
appropriate as it is representative of the underlying trading
performance of the business.
Underlying EBITDA increased by 18.5% to GBP54.4m (H1 2020:
GBP45.9m) reflecting an 11.1% increase in revenue offset by a 0.9%
increase in the underlying cost base (see below). The leasehold
rent charge has increased by 3.2% from GBP6.3m in H1 2020 to
GBP6.5m, reflecting increased rents arising from rent reviews
during the period.
Finance charges decreased by 2.0% from GBP4.9m in H1 2020 to
GBP4.8m in H1 2021. This principally reflects GBP0.3m of finance
income earned on the maturity of FX forwards.
The share based payments charge increased as the 2017 LTIP
scheme nears the vesting date with a reduced probability of lapses
and forfeiture by the option holders.
Given the Group's REIT status in the UK, tax is normally only
payable in France and Spain. The current tax charge for the period
increased by 12.0% to GBP2.8m (H1 2020: GBP2.5m).
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 24.8%
to 18.1 pence (H1 2020: 14.5 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the
consolidated income statement to underlying EBITDA.
H1 2021 H1 2020
GBP'm GBP'm
Operating profit 173.2 105.8
Adjusted for
- gain on investment properties
and investment property under
construction (131.3) (67.3)
- fair value re-measurement
of lease liabilities add-back 3.6 3.3
- share of associate's
depreciation, interest
and tax 0.3 0.3
- depreciation 0.5 0.4
- variable lease payments 0.3 0.2
- share-based payments 5.9 2.8
Exceptional
items
- costs incurred relating to
corporate transactions and exceptional
taxation costs 1.9 0.4
Underlying
EBITDA 54.4 45.9
======== ========
The main reconciling item between operating profit and
underlying EBITDA is the gain on investment properties, which was
GBP127.7m in H1 2021 (H1 2020: GBP64.0m) represented by gain on
investment property and investment property under construction of
GBP131.3m and fair value re-measurement of lease liabilities
add-back (GBP3.6m). The Group's approach to the valuation of its
investment property portfolio at 30 April 2021 is discussed
below.
Underlying Profit by geographical region
The Group is organised and managed in three operating segments
based on geographical region. The table below details the
underlying profitability of each region.
H1 2021 H1 2020
Total Total
UK Paris Spain (CER) UK Paris Spain (CER)
GBP'm EUR'm EUR'm GBP'm GBP'm EUR'm EUR'm GBP'm
Revenue 67.2 22.1 1.6 87.6 59.8 21.8 1.0 79.3
Underlying cost
of sales (21.8) (5.4) (0.3) (26.8) (21.6) (6.0) (0.2) (26.9)
------- ------ ------ ------- ------- ------ ------ -------
Store EBITDA 45.4 16.7 1.3 60.8 38.2 15.8 0.8 52.4
Store EBITDA
margin 67.6% 75.6% 81.3% 69.4% 63.9% 72.5% 80% 66.1%
Underlying administrative
expenses (5.6) (1.3) (0.3) (7.0) (5.2) (1.7) (0.2) (6.8)
Underlying EBITDA 39.8 15.4 1.0 53.8 33.0 14.1 0.6 45.6
EBITDA margin 59.2% 69.7% 62.5% 61.4% 55.2% 64.7% 60.0% 57.5%
Leasehold rent (4.0) (2.7) (0.2) (6.5) (3.9) (2.7) (0.2) (6.3)
Underlying EBITDA
after leasehold
rent 35.8 12.7 0.8 47.3 29.1 11.4 0.4 39.3
======= ====== ====== ======= ======= ====== ====== =======
EBITDA after
leasehold rent
margin 53.3% 57.5% 50.0% 54.0% 48.7% 52.3% 40.0% 49.6%
UK Paris Spain Total UK Paris Spain Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Underlying EBITDA
after leasehold rent
(CER) 35.8 10.9 0.6 47.3 29.1 9.9 0.3 39.3
Adjustment to actual
exchange rate - 0.3 - 0.3
Share of associates
underlying EBITDA 0.3 0.3
======= ====== ====== ======= ======= ====== ====== =======
Reported underlying
EBITDA after leasehold
rent 35.8 11.2 0.6 47.9 29.1 9.9 0.3 39.6
======= ====== ====== ======= ======= ====== ====== =======
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. Euro denominated results for
the comparative period are translated at the exchange rates
effective in that period. This is performed in order to present the
reported results for the current period on a more comparable
basis).
Underlying EBITDA in the UK increased by GBP6.8m, or 20.6%, to
GBP39.8m (H1 2020: GBP33.0m), reflecting a 12.4% increase in
revenue, arising from a 13.7% increase in average occupancy offset
partially by a 0.9% increase in the underlying cost base, driven by
strong like-for-like revenue growth of 10.4% in addition to
acquisitions and new store openings. The underlying UK EBITDA
margin increased to 59.2% compared to 55.2% in H1 2020.
In Paris, underlying EBITDA increased by EUR1.3m, or 9.2%, to
EUR15.4m (H1 2020: EUR14.1m), reflecting a EUR0.3m increase in
revenue, arising from a 4.9% increase in average occupancy offset
by a 3.0% decrease in the average storage rate. The EBITDA after
leasehold costs margin in Paris grew from 52.3% in H1 2020 to 57.5%
in H1 2021, reflecting the improving occupancy. Underlying EBITDA
after leasehold rent in Paris increased by 11.4% to EUR12.7m (H1
2020: EUR11.4m).
In Spain, underlying EBITDA increased by EUR0.4m, or 66.7%, to
EUR1.0m, reflecting an increase in revenue, arising from a 0.5%
increase in average occupancy coupled with a 5.3% increase in the
average storage rate as well as the annualisation of the
acquisition in 2020.
The combined performance of the UK, Paris and Spain resulted in
a 20.4% increase in underlying EBITDA after leasehold rent at
constant exchange rates. Adjusting for a favourable exchange impact
of GBP0.3m in the current year and share of associate's underlying
EBITDA of GBP0.3m (H1 2020: GBP0.3m), Group reported underlying
EBITDA after leasehold rent has increased by 21.0% or GBP8.3m to
GBP47.9m (H1 2020: GBP39.6m).
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 2021 and H1 2020.
% of % of
H1 2021 total H1 2020 total % change
UK GBP'm 67.2 76% 59.8 75% 12.4%
Paris
Local currency EUR'm 22.1 21.8 1.4%
Average exchange
rate EUR:GBP 1.135 1.162 2.3%
Paris in Sterling GBP'm 19.5 22% 18.7 24% 4.3%
Spain
Local currency EUR'm 1.6 1.0 60%
Average exchange
rate EUR:GBP 1.135 1.162 2.3%
Spain in Sterling GBP'm 1.4 2% 0.8 1% 75%
Total revenue 88.1 100% 79.3 100% 11.1%
======== ======= ======== ======= =========
The Group's reported revenue increased by 11.1% or GBP8.8m
during the period. The Group's occupied space was 811,000 sq ft
higher at 30 April 2021 (5.63 million sq ft) than at 30 April 2020
(4.82 million sq ft). Average occupancy during the period was 11.6%
higher at 5.53 million sq ft (H1 2020: 4.95 million sq ft), and the
reported average rental rate for the Group for the period remained
steady at GBP26.51 (H1 2020 GBP26.52).
On a like-for-like basis, adjusting for the impact of new
stores, the Group's revenue has increased by 8.9% since H1 2020.
Adjusting for a favourable exchange impact in the current year,
revenue increased by 8.3% on a constant currency basis.
In the UK, reported revenue increased by GBP7.4m or 12.4%.
Closing occupancy increased by 19.3% to 4.47 million sq ft at 30
April 2021 (H1 2020: 3.74 million sq ft) and the average rental
rate decreased slightly by (0.2)% to GBP24.66 (H1 2020: GBP24.72).
The average space occupied during the period was up 13.6% compared
with H1 2020 at 4.38 million sq ft (H1 2020: 3.86 million sq
ft).
On a like-for-like basis, adjusting for new stores, UK revenue
increased by GBP6.1m or 10.4% arising from a 12.2% increase in
average occupancy and a 0.1% increase in the average store
rate.
In Paris, revenue increased by EUR0.3m or 1.4%. The average Euro
exchange rate for H1 2021 was EUR1.135:GBP1 compared with
EUR1.162:GBP1 in H1 2020 resulting in a positive impact on revenue
of GBP0.5m and revenue in constant currency increased by GBP0.3m to
GBP19.0m (H1 2020: GBP18.7m).
Paris closing occupancy at 30 April 2021 has increased by 8.8%
compared to 30 April 2020 to 1.07 million sq ft and average
occupancy for the period of 1.05 million sq ft is a 4.9% increase
compared to H1 2020, primarily as a result of robust like-for-like
trading. The average rental rate in Paris was EUR38.67 for the
period, a decrease of 3.0% on H1 2020, EUR39.88.
For Spain, revenue was EUR1.6m with a closing occupancy 0.97
million sq ft (H1 2020: 0.94 million sq ft), or 89.4% (H1 2020:
89.1%).
Analysis of Cost Base
Cost of sales
The table below details the key movements in cost of sales
between H1 2020 and H1 2021.
Cost of sales H1 2021 H1 2020
GBP'm GBP'm
Reported cost
of sales (27.7) (27.5)
Adjusted for:
Depreciation 0.5 0.4
Contingent rent 0.3 0.2
Underlying cost of
sales (26.9) (26.9)
======== ========
Underlying cost of sales
for H1 2020 (26.9)
New developments cost of
sales 0.8
Underlying cost of sales for H1
2020 (Like-for-like) (26.1)
Volume related cost of sales 0.1
Facilities and utilities
savings 0.8
Employee remuneration (0.4)
Underlying cost of sales for H1
2021 (Like-for-like; CER) (25.6)
New developments cost of
sales (1.2)
Underlying cost of sales
for H1 2021 (CER) (26.8)
Foreign exchange (0.1)
Underlying cost of sales
for H1 2021 (26.9)
========
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 stores, underlying cost of sales
on a like-for-like basis decreased by 1.9% or GBP0.5m, to GBP25.6m
(H1 2020: GBP26.1m) in constant currency, principally due to
savings in volume related cost of sales and facilities and
rates.
The cost of sales attributable to new and acquired sites at
Birmingham, Carshalton, Gateshead and Sheffield in the UK and
Magenta in Paris and the annualisation of the acquisitions of our
St John's Wood and Chelsea in the UK and in the consolidated
results in Spain is GBP1.2m in H1 2021. Underlying cost of sales
remained flat at GBP26.9m in H1 2021.
Administrative Expenses
The table below reconciles reported administrative expenses to
underlying administrative expenses and details the key movements in
underlying administrative expenses between H1 2020 and H1 2021.
Administrative expenses H1 2021 H1 2020
GBP'm GBP'm
Reported administrative
expenses (14.9) (10.0)
Adjusted for:
Share-based payments 5.9 2.8
Exceptional items 1.9 0.4
Underlying administrative
expenses (7.1) (6.8)
======== ========
Underlying administrative expenses
for H1 2020 (6.8)
New development administrative
expenses 0.1
Underlying administrative expenses for
H1 2020 (Like-for-like) (6.7)
Employee related and
travel costs 0.3
Professional fees and administration
costs (0.3)
Underlying administrative expenses for
H1 2021 (Like-for-like; CER) (6.7)
New development administrative
expenses (0.3)
Underlying administrative expenses
for H1 2021 (CER) (7.0)
Foreign exchange (0.1)
Underlying administrative expenses
for H1 2021 (7.1)
========
In order to arrive at underlying administrative expenses,
adjustments are made to remove the impact of exceptional items,
share based payments and corporate transaction costs.
Underlying administrative expenses increased by 4.4% or GBP0.3m
to GBP7.1m (H1 2020: GBP6.8m). The increase arose predominantly
from new stores and developments (GBP0.2m).
Investment Properties
A full external valuation of the store portfolio is undertaken
by the Group on an annual, rather than a six monthly basis. At 30
April 2021, a sample of the Group's largest properties,
representing approximately 42% of the value of the Group's
investment property portfolio at 31 October 2020, has been valued
by the Group's external valuers, Cushman & Wakefield LLP
("C&W"). In addition, at the same date, the Directors have
prepared estimates of fair values for the remaining 58% of the
Group's investment property portfolio, updating 31 October 2020
valuations to incorporate latest assumptions 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 2021 H1 2020
GBP'm GBP'm
Revaluation of investment
properties 129.8 68.6
Revaluation of investment properties
under construction 1.5 (1.3)
Fair value re-measurement
of lease liabilities add
back (3.6) (3.3)
Gain on investment
properties 127.7 64.0
======== ========
The movement on investment properties reflects the increased
value of the Group's store portfolio as a result of the continuing
strong trading performance and the impact of leasehold renewals and
store extensions. The UK business contributed GBP107.6m of the
GBP131.3m net revaluation gain (including investment properties
under construction), with a GBP23.1m revaluation gain arising in
Paris and a GBP0.6m revaluation gain arising in Spain. The
valuation gain has primarily arisen due to reduced exit cap rates
resulting from strong demand for self-storage suitable real estate
as well as improving trading cash flow forecasts.
Operating profit
Reported operating profit increased by GBP67.4m from GBP105.8m
in H1 2020 to GBP173.2m in H1 2021, primarily reflecting a GBP63.7m
higher investment property gain (including investment properties
under construction) as well as a GBP3.7m increase in operating
profit before investment properties.
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
GBP0.2m to GBP5.9m in H1 2021 (H1 2020: GBP6.1m). The main driver
of the decrease was the interest received on the loan to associates
as well as the financial instruments income. It should be noted,
movements in the fair value of derivatives are now required to be
disclosed as net of finance interest expense and therefore, within
finance costs.
H1 2021 H1 2020
GBP'm GBP'm
Interest from loan
to associates 0.1
Financial instruments
income 0.1
-------- --------
Underlying finance
income 0.2 -
Fair value movement
on derivatives 1.6
-------- --------
Total finance income 0.2 1.6
Interest payable on
bank loans and overdrafts (4.8) (4.7)
Amortisation of debt issuance costs
on bank loans (0.2) (0.2)
-------- --------
Underlying finance costs (5.0) (4.9)
Interest on obligations under
finance leases (2.6) (2.8)
Fair value movement on derivatives 1.6
Net exchange losses (0.1) -
-------- --------
Total finance
costs (6.1) (7.7)
Net finance
costs (5.9) (6.1)
======== ========
Underlying finance charge
The net underlying finance charge (Interest payable on bank
loans and overdrafts) decreased to GBP4.8m, from GBP4.9m in H1
2020. The decrease reflects the gain made during the period arising
from the maturity of FX forwards, implemented to minimise the
Euro:GBP volatility. Underlying finance costs also includes the
amortisation of debt issue costs of GBP0.2m as at 30 April 2021 (H1
2020: GBP0.2m).
Based on the drawn debt position as at 30 April 2021, 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 GBP157.0 GBP55.0 35% 1.25% 0.82% 0.05% 1.57%
UK Revolver- non-utilisation GBP93.0 - - - 0.50% - - 0.50%
Euro Revolver EUR70.0 GBP26.1 GBP26.1 100% 1.25% 0.17% (0.55%) 1.42%
Euro Revolver-
non-utilisation EUR40.00 - - - 0.50% - - 0.50%
US Private Placement
2024 EUR50.9 GBP44.3 GBP44.3 100% 1.59% - - 1.59%
US Private Placement
2027 EUR74.1 GBP64.4 GBP64.4 100% 2.00% - - 2.00%
US Private Placement
2029 GBP50.5 GBP50.5 GBP50.5 100% 2.92% - - 2.92%
US Private Placement
2026 EUR70.0 GBP60.9 GBP60.9 100% 1.26% - - 1.26%
US Private Placement
2026 GBP35.0 GBP35.0 GBP35.0 100% 2.59% - - 2.59%
US Private Placement
2029 GBP30.0 GBP30.0 GBP30.0 100% 2.69% - - 2.69%
Unamortised finance
costs - (GBP1.3) - - - - - -
Total GBP596.0 GBP466.9 GBP366.2 78% 2.10%
========== ========= ========= ======= ======
As at 30 April 2021, GBP157m of the GBP250m UK revolver and
EUR30m (GBP26.1m) 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 GBP93m and
EUR40m respectively.
The Group has interest rate hedge agreements in place to June
2023, swapping LIBOR on GBP55m at a weighted average effective rate
of 0.82% and EURIBOR on EUR30m at an effective rate of 0.17%.
The EUR50.9m 2024, EUR70.0m 2026 and EUR74.1m 2027 US Private
Placement Notes are denominated in Euro and attract a fixed
interest rate of 1.59%, 1.26% and 2.00% respectively. The Euro
denominated borrowings provide a natural hedge against the Group's
investment in the Paris business.
The GBP35.0m 2026, GBP50.5m 2029 and GBP30.0m 2029 US Private
Placement Notes are denominated in Sterling and attract a fixed
interest rate of 2.59%, 2.92% and 2.69% respectively.
78 % 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 2.10% at 30 April 2021, compared to 2.13%
at the previous year end, as a result of increased weighting of
bank borrowing in the overall mix of debt.
On 7 May 2021, Safestore extended its borrowing facilities with
the issuance of the equivalent of GBP150m new sterling and euro
denominated US Private Placement ("USPP") Notes with the following
coupons and tenors:
- GBP20m 7 year notes at a coupon of 1.96% (credit spread of 140 bps)
- EUR29m 7 year notes a coupon of 0.93% (credit spread of 105 bps)
- GBP80m 10 year notes a coupon of 2.39% (credit spread of 150 bps)
- EUR29m 12 year notes a coupon of 1.42% (credit spread of 118 bps)
The funds will be received in June 2021 and August 2021 and will
be used initially to pay down Revolving Credit Facilities ("RCF")
thereby providing further capacity for medium-term growth. The USPP
notes were issued to a group of existing institutional
investors.
In addition, an uncommitted EUR115m Shelf facility, which can be
drawn in Euros or Sterling, was agreed with one existing lender,
giving the Group further financing flexibility. The facility would
be drawn in the form of Private Placement Notes at a coupon to be
agreed at the time of funding.
Non-underlying finance charge
Interest on finance leases was GBP2.6m (H1 2020: GBP2.8m) 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 variable lease payments in the income
statement. Overall, the leasehold rent charge increased from
GBP6.3m in H1 2020 to GBP6.5m in H1 2021, reflecting increased
rents arising from rent reviews during the period. A net gain of
GBP1.6m was recognised on fair valuation of derivatives (H1 2020:
net gain of GBP1.6m).
The Group undertakes net investment hedge accounting for its
Euro denominated loan notes.
Tax
The tax credit for the period is analysed below:
Tax charge H1 2021 H1 2020
GBP'm GBP'm
Underlying current
tax (2.8) (2.5)
Prior year - exceptional 0.5 -
-------- --------
Current tax charge (2.3) (2.5)
-------- --------
Tax on investment properties
movement (6.7) (7.9)
Other - 0.2
Deferred tax (charge)/credit (6.7) (7.7)
-------- --------
Net tax (charge)/credit (9.0) (10.2)
======== ========
Income tax in the period was a net charge of GBP9.0m (H1 2020:
GBP10.2m).
In the UK, the Group is a REIT, so the current tax charge
relates to the Paris and Spain businesses. The current tax charge
for the period amounted to GBP2.8m (H1 2020: GBP2.5m).
Profit after tax
The profit after tax for the period was GBP158.3m, compared with
GBP89.5m in H1 2020, an increase of GBP68.8m which arose
principally due to the increased gain on investment properties
(contributing GBP67.7m of the increase), which is explained
above.
Basic EPS was 75.1 pence (H1 2020: 42.5 pence) and diluted EPS
was 74.4 pence (H1 2020: 42.4 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.
Dividends
The Board has announced an interim dividend of 7.5 pence per
share, representing a 27.1% increase from the interim dividend paid
last year of 5.9 pence. This will amount to a dividend payment of
GBP15.8m (H1 2020: GBP12.4m). The dividend will be paid on 13
August 2021 to shareholders who are on the Company's register at
the close of business on 9 July 2021. The ex-dividend date will be
8 July 2021. 100% (H1 2020: 100%) of the dividend will be paid as a
REIT Property Income Distribution ("PID").
Property Valuation
As discussed above, a sample of the Group's largest properties,
representing approximately 42% of the value of the Group's
investment property, has been valued by the Group's external
valuers and the Directors have prepared estimates of fair values
for the remaining 58% of the Group's investment property
portfolio.
UK Paris Spain Total Paris Spain
GBP'm GBP'm GBP'm GBP'm EUR'm EUR'm
Value as at 1 November
2020 1,135.2 400.9 21.4 1,557.5 445.4 23.9
Currency translation
movement - (14.0) (0.6) (14.6) - -
Additions 4.9 2.3 0.2 7.4 2.6 0.2
Reclassifications 1.5 2.2 - 3.7 2.5 -
Revaluation 106.1 23.1 0.6 129.8 26.2 0.7
Value as at 30
April 2021 1,247.7 414.5 21.6 1,683.8 476.7 24.8
======== ======= ====== ======== ====== ======
The table above summarises the movement in the valuations of the
Group's investment property portfolio excluding investment
properties under construction.
The exchange rate at 30 April 2021 was EUR1.15:GBP1 compared to
EUR1.11:GBP1 at 31 October 2020. This movement in the foreign
exchange rate has resulted in a GBP14.6m negative currency
translation movement in the period. This affects 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 excluding investment
properties under construction has increased by GBP126.3m from the
valuation of GBP1,557.5m at 31 October 2020. This reflects the gain
on valuation of GBP129.8m, which is explained above, plus GBP11.1m
relating to additions, store refurbishments and reclassifications
and (GBP14.6m) of foreign exchange movements on the translation of
the Paris and Spain portfolios.
EPRA Basic NAV (13) per share was GBP5.96, an increase of 11.9%
since 31 October 2020.
Gearing and Capital Structure
As at 30 April 2021, 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 US Private
Placements.
Net debt (including finance leases and cash) stood at GBP505.1m
at 30 April 2021, a decrease of GBP7.0m during the period, from
GBP512.1m at 31 October 2020, that is principally due to increased
revenue generated by the Group resulting in reduced drawings for
development property acquisition and construction costs relating to
acquired leasehold property. Total capital (net debt plus equity)
increased from GBP1,547.7m at 31 October 2020 to GBP1,671.8m at 30
April 2021. The net impact is that the gearing ratio has decreased
to 30.2% at 30 April 2021 from 33.1% at 31 October 2020.
Management also measures gearing with reference to its loan to
value ("LTV") ratio defined as gross debt (excluding lease
liabilities) as a proportion of the valuation of investment
properties and investment properties under construction (excluding
finance leases). At 30 April 2021, the Group LTV ratio was 27%
compared with 29% at 31 October 2020. 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 2021, GBP157m of the GBP250m UK revolver and
EUR30m (GBP26.1m) of the EUR70m Euro revolver were drawn. Including
the US Private Placement debt of EUR195m (GBP169.6m) and GBP115.5m,
the Group's borrowings totalled GBP468.2m (before adjustment for
unamortised finance costs). As at 30 April 2021, the weighted
average remaining term for the Group's committed borrowing
facilities is 4.0 years, excluding the new USPP signed in early May
2021.
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 2021 is 10x ,
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 2021,
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 2021 and, based on forecast projections
(which considered a number of factors, including the current
balance sheet position, the principal and emerging risks which
could impact the performance of the Group and the Group's strategic
and financial plan), is expected to be in compliance for a period
in excess of twelve months from the date of this report, as
discussed in note 2 of the financial statements.
Cash flow
The table below sets out the cash flow of the business in H1
2021 and H1 2020.
H1 2021 H1 2020
GBP'm GBP'm
Underlying
EBITDA 54.4 45.9
Working capital/ exceptionals/
other (0.3) -
Adjusted operating cash
inflow 54.1 45.9
Interest payments (4.6) (4.6)
Leasehold rent payments (6.5) (6.3)
Tax payments (2.7) (2.6)
Free cash flow (before investing and
financing activities) 40.3 32.4
Acquisition of subsidiary,
net of cash acquired - (18.5)
Loans to associates (0.2) -
Investment in associates (1.5) -
Capital expenditure - investment
properties (16.1) (31.9)
Capital expenditure - property,
plant and equipment (0.3) (0.6)
Adjusted net cash flow after
investing activities 22.2 (18.6)
Issues of share capital 0.7 -
Dividends paid (23.0) (21.8)
Net drawdown of borrowings 19.0 22.2
Debt issuance
costs - (0.5)
Net increase/(decrease)
in cash 18.9 (18.7)
======== ========
Note: Free cash flow is a non-GAAP alternative performance
measure, defined as cash flow before investing and financing
activities but after leasehold rent payments.
Adjusted operating cash flow increased by GBP8.2m in the period,
principally reflecting the GBP8.5m increase in underlying
EBITDA.
Interest payments remained steady compared to the prior half
year, driven by increases in interest on the UK RCF of GBP0.3m
offset by gains made on maturity of FX forwards, GBP0.3m. Tax paid
during the period increased slightly by GBP0.1m principally due to
increased payments on account associated with the stronger Paris
performance. As a result, free cash flow (before investing and
financing activities) grew by GBP7.9m to GBP40.3m (H1 2020:
GBP32.4m).
Investing activities experienced a net outflow of GBP18.1m (H1
2020: net outflow of GBP51.0m) from capital expenditure relating to
new sites at Paris Magenta, Paddington Park West Place in London,
Birmingham and several store extensions. Of the GBP16.1m cash
outflow on investment properties, GBP1.6m (H1 2020: GBP2.4m) 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 GBP21.8m in H1
2020 to GBP23.0m in H1 2021, and the Group drew a net GBP19.0m of
borrowings, primarily to finance capital expenditure.
The first table below reconciles free cash flow (before
investing and financing activities) in the table above to net cash
inflow from operating activities in the consolidated cash flow
statement. The second table below reconciles adjusted net cash flow
after investing activities in the table above to the consolidated
cash flow statement.
H1 2021 H1 2020
GBP'm GBP'm
Free cash flow (before investing
and financing activities) 40.3 32.4
Addback: Finance lease principal payments 3.6 3.3
Net cash inflow from operating activities 43.9 35.7
H1 2021 H1 2020
GBP'm GBP'm
From table
above:
Adjusted net cash flow after investing
activities 22.2 (18.6)
Addback: Finance lease principal
payments 3.6 3.3
Net cash outflow after investing
activities 25.8 (15.3)
From consolidated cash
flow:
Net cash inflow from
operating activities 43.9 35.7
Net cash outflow from investing
activities (18.1) (51.0)
Net cash outflow after investing activities 25.8 (15.3)
Consolidated income statement
for the six months ended 30 April 2021
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
------------------------------------------------------------------ ----- ------------ ------------ ------------
Revenue 4,5 88.1 79.3 162.3
Cost of sales (27.7) (27.5) (56.3)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Gross profit 60.4 51.8 106.0
Administrative expenses (14.9) (10.0) (20.3)
Share of profit in associate - - -
Underlying EBITDA 5 54.4 45.9 93.9
Exceptional items 6 (1.9) (0.4) (0.2)
Share-based payments (5.9) (2.8) (6.5)
Depreciation and variable lease payments (0.8) (0.6) (1.2)
Share of associate's depreciation, interest and tax (0.3) (0.3) (0.3)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Operating profit before gain on investment properties 45.5 41.8 85.7
Gain on investment properties 13 127.7 64.0 126.5
------------------------------------------------------------------ ----- ------------ ------------ ------------
Operating profit 173.2 105.8 212.2
Finance income 7 0.2 1.6 0.5
Finance expense 7 (6.1) (7.7) (14.8)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Profit before income tax 5 167.3 99.7 197.9
Income tax charge 8 (9.0) (10.2) (19.9)
------------------------------------------------------------------ ----- ------------ ------------ ------------
Profit for the period 158.3 89.5 178.0
------------------------------------------------------------------ ----- ------------ ------------ ------------
Earnings per share for profit attributable to the equity holders
------------------------------------------------------------------ ----- ------------ ------------ ------------
- basic (pence) 11 75.1 42.5 84.6
------------------------------------------------------------------ ----- ------------ ------------ ------------
- diluted (pence) 11 74.4 42.4 84.0
------------------------------------------------------------------ ----- ------------ ------------ ------------
All items in the income statement relate to continuing
operations.
Underlying EBITDA is an Alternative Performance Measure and is
defined as operating profit before exceptional items, share-based
payments, corporate transaction costs, gain/loss on investment
properties, depreciation and variable lease payments and the share
of associate's depreciation, interest and tax.
An interim dividend of 7.5 pence per ordinary share has been
declared for the period ended 30 April 2021 (30 April 2020: 5.9
pence).
Consolidated statement of comprehensive income
for the six months ended 30 April 2021
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------------------------------- ----------- ----------- -----------
Profit for the period 158.3 89.5 178.0
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss:
Currency translation differences (10.6) 2.9 12.1
Net investment hedge 5.6 (1.6) (7.4)
Total other comprehensive (expense)/income, net of tax (5.0) 1.3 4.7
---------------------------------------------------------------- ----------- ----------- -----------
Total comprehensive income for the period 153.3 90.8 182.7
---------------------------------------------------------------- ----------- ----------- -----------
Consolidated balance sheet
as at 30 April 2021
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
-------------------------------------------------------------- ---- ----------- ----------- ----------
Non-current assets
Investment in associates 12 6.8 2.8 5.3
-------------------------------------------------------------- ---- ----------- ----------- ----------
Fair value of investment properties, net of lease liabilities 1,683.8 1,451.2 1,557.5
Add-back of lease liabilities 76.2 81.6 76.9
Investment properties under construction 18.2 15.6 14.0
-------------------------------------------------------------- ---- ----------- ----------- ----------
Total investment properties 13 1,778.2 1,548.4 1,648.4
Property, plant and equipment 3.0 3.0 3.2
Derivative financial instruments 17 0.8 1.4 0.5
Deferred tax assets 9 0.2 0.2 0.2
Other receivables - 0.2 -
1,789.0 1,556.0 1,657.6
-------------------------------------------------------------- ---- ----------- ----------- ----------
Current assets
Inventories 0.3 0.3 0.3
Derivative financial instruments 17 0.9 0.8 0.4
Trade and other receivables 28.8 27.4 23.2
Current income tax assets 0.2 - -
Cash and cash equivalents 38.2 14.6 19.6
-------------------------------------------------------------- ---- ----------- ----------- ----------
68.4 43.1 43.5
-------------------------------------------------------------- ---- ----------- ----------- ----------
Total assets 1,857.4 1,599.1 1,701.1
-------------------------------------------------------------- ---- ----------- ----------- ----------
Current liabilities
Trade and other payables (55.9) (49.9) (47.2)
Current income tax liabilities - (2.5) (0.2)
Obligations under lease liabilities (12.2) (12.2) (12.3)
(68.1) (64.6) (59.7)
-------------------------------------------------------------- ---- ----------- ----------- ----------
Non-current liabilities
Bank borrowings 16 (466.9) (436.8) (454.5)
Derivative financial instruments 17 (0.8) (1.2) (1.4)
Deferred tax liabilities 9 (88.7) (73.2) (85.0)
Obligations under lease liabilities (64.2) (69.7) (64.9)
Provisions 23 (2.0) - -
(622.6) (580.9) (605.8)
-------------------------------------------------------------- ---- ----------- ----------- ----------
Total liabilities (690.1) (645.2) (665.5)
-------------------------------------------------------------- ---- ----------- ----------- ----------
Net assets 1,166.7 953.6 1,035.6
-------------------------------------------------------------- ---- ----------- ----------- ----------
Shareholders' equity
Ordinary shares 18 2.1 2.1 2.1
Share premium 61.3 60.6 60.6
Translation reserve 9.5 11.1 14.5
Retained earnings 1,093.8 879.8 958.4
-------------------------------------------------------------- ---- ----------- ----------- ----------
Total equity 1,166.7 953.6 1,035.6
-------------------------------------------------------------- ---- ----------- ----------- ----------
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 2021
Share Share Translation Retained Total
capital premium reserve earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ------------ ---------- --------
At 1 November 2020 2.1 60.6 14.5 958.4 1,035.6
Total comprehensive income
for the period - - (5.0) 158.3 153.3
Transactions with owners
in their capacity as owner:
Dividends (note 10) - - - (26.8) (26.8)
Increase in share capital - 0.7 - - 0.7
Employee share options - - - 3.9 3.9
------------------------------ --------- --------- ------------ ---------- --------
At 30 April 2021 2.1 61.3 9.5 1,093.8 1,166.7
------------------------------ --------- --------- ------------ ---------- --------
Condensed consolidated statement of changes in equity
for the six months ended 30 April 2020
Share Share Translation Retained Total
capital premium reserve earnings Equity
GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ------------ ---------- --------
At 1 November 2019 2.1 60.6 9.8 813.4 885.9
Total comprehensive income
for the period - - 1.3 89.5 90.8
Transactions with owners
in their capacity as owner:
Dividends (note 10) - - - (25.3) (25.3)
Employee share options - - - 2.2 2.2
--------- --------- ------------ ---------- --------
At 30 April 2020 2.1 60.6 11.1 879.8 953.6
------------------------------ --------- --------- ------------ ---------- --------
Condensed consolidated statement of changes in equity
for the year ended 31 October 2020
Share Share Translation Retained Total
capital premium reserve earnings Equity
GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ------------ ---------- --------
At 1 November 2019 2.1 60.6 9.8 813.4 885.9
Total comprehensive income
for the year - - 4.7 178.0 182.7
Transactions with owners
in their capacity as owner:
Dividends (note 10) - - - (37.7) (37.7)
Increase in share capital - - - - -
Employee share options - - - 4.7 4.7
------------------------------ --------- --------- ------------ ---------- --------
At 31 October 2020 2.1 60.6 14.5 958.4 1,035.6
------------------------------ --------- --------- ------------ ---------- --------
Consolidated cash flow statement
for the six months ended 30 April 2021
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- -----------
Profit before income tax 167.3 99.7 197.9
Gain on the revaluation of investment properties (127.7) (64.0) (126.5)
Share of profit in associate - - -
Depreciation 0.5 0.4 0.9
Net finance expense 5.9 6.1 14.3
Employee share options 3.9 2.2 4.7
Increase in trade and other receivables (5.2) (4.4) (0.1)
Increase in trade and other payables 7.1 5.7 4.3
Increase in provision 2.0 - -
Cash flows from operating activities 53.8 45.7 95.5
----------------------------------------------------- ----------- ----------- -----------
Interest received 0.3 - 0.2
Interest paid (7.5) (7.4) (14.7)
Tax paid (2.7) (2.6) (5.3)
----------------------------------------------------- ----------- ----------- -----------
Net cash inflow from operating activities 43.9 35.7 75.7
----------------------------------------------------- ----------- ----------- -----------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired - (18.5) (14.3)
Investment in associates (1.5) - (2.5)
Loans to associates (0.2) - -
Expenditure on investment and development properties (16.1) (31.9) (59.9)
Proceeds in respect of Capital Goods Scheme - - 0.3
Purchase of property, plant and equipment (0.3) (0.6) (1.3)
Proceeds from sale of property, plant and equipment - - 0.1
Net cash outflow from investing activities (18.1) (51.0) (77.6)
----------------------------------------------------- ----------- ----------- -----------
Cash flows from financing activities
Issue of share capital 0.7 - -
Equity dividends paid (23.0) (21.8) (37.7)
Proceeds from borrowings 27.0 39.5 57.5
Repayment of borrowings (8.0) (17.3) (24.4)
Debt issuance costs - (0.5) (0.5)
Principal payment of lease liabilities (3.6) (3.3) (6.9)
Net cash outflow from financing activities (6.9) (3.4) (12.0)
----------------------------------------------------- ----------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents 18.9 (18.7) (13.9)
Exchange (loss)/gain on cash and cash equivalents (0.3) 0.1 0.3
Opening cash and cash equivalents 19.6 33.2 33.2
----------------------------------------------------- ----------- ----------- -----------
Closing cash and cash equivalents 38.2 14.6 19.6
----------------------------------------------------- ----------- ----------- -----------
Reconciliation of net cash flow to movement in net debt
for the six months ended 30 April 2021
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------------------------------------- ----------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents (after exchange
adjustments) 18.6 (18.6) (13.6)
Increase in debt financing (11.6) (42.2) (55.2)
------------------------------------------------------------------------------- ----------- ----------- -----------
Decrease/(Increase) in net debt 7.0 (60.8) (68.8)
Net debt at start of period (512.1) (443.3) (443.3)
------------------------------------------------------------------------------- ----------- ----------- -----------
Net debt at end of period (505.1) (504.1) (512.1)
------------------------------------------------------------------------------- ----------- ----------- -----------
Notes to the interim report for the six months ended 30 April
2021
1 General information
The Company is a public limited company incorporated 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 17 June 2021.
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 2020, which received an
unqualified report from the auditors, and did not contain a
statement under S.498(2) or (3) of the Companies Act 2006, were
filed with the Registrar of Companies on 21 March 2021.
This condensed consolidated interim financial information for 30
April 2021 and 30 April 2020 is unaudited. The interim financial
information for 30 April 2021 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 2021 has been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority (previously the Financial Services Authority) and with
International Accounting Standard 34 'Interim Financial Reporting'
(IAS 34) as adopted by the European Union.
The Directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than twelve months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing this condensed consolidated interim financial
information.
In assessing the Group's going concern position as at 30 April
2021, the Directors have considered a number of factors, including
the current balance sheet position, the principal and emerging
risks which could impact the performance of the Group and the
Group's strategic and financial plan. Consideration has been given
to compliance with borrowing covenants along with the uncertainty
inherent in future financial forecasts. The Directors considered
the most recent five-year forecast recently approved by the Board.
In the context of the current environment, five plausible scenarios
were applied to the plan, including a stress test scenario. These
were based on the potential financial impact of the Group's
principal risks and uncertainties and the specific risks associated
with the Covid-19 pandemic. These scenarios are differentiated by
the impact of lockdowns, demand levels post lockdowns and the level
of cost savings. A stress test scenario was also performed where we
have carried out a reverse stress test to model what would be
required to breach ICR and LTV covenants which indicated highly
improbable changes would be needed before any issues were to arise.
The impact of these scenarios has been reviewed against the Group's
projected cash flow position and financial covenants over a
five-year period. Should any of these scenarios occur, clear
mitigating actions are available to ensure that the Group remains
liquid and financially viable. The financial position of the Group,
including details of its financing and capital structure, is set
out in the Financial Review section of this announcement. Further
details of the Group's viability statement is included in page 34
Annual Report and Financial Statements for the year ended 31
October 2020.
The assessment concluded that, for the foreseeable future, the
Group has sufficient capital to support its operations; has a
funding and liquidity base which is strong, robust and well managed
with substantial future capacity and has expectations that
performance will continue to improve as the Group's strategy is
executed.
The condensed consolidated interim financial information should
be read in conjunction with the annual financial statements for the
year ended 31 October 2020, 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 an Alternative Performance Measure and
is defined as operating profit before exceptional items,
share-based payments, corporate transaction costs, gain/loss on
investment properties, depreciation and variable lease payments and
the share of associate's depreciation, interest and tax. 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 investment properties, and the impact of exceptional
credits, costs and finance charges.
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 ("EPRA") 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 company specific adjustments for the
impact of exceptional items, IFRS 2 share-based payment charges,
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 11.
-- EPRA basic net assets per share is an EPRA measure. EPRA
basic NAV has been superseded and has transitioned to 3 new
measures: EPRA NRV (net reinstatement value); EPRA NTA (net
tangible assets) and EPRA NDV (net disposal value) for periods
commencing 1 January 2020 or thereafter. Safestore considers EPRA
NAV to remain the appropriate measure for the business at this
point in time whilst the Group continues to interpret the impact of
the new guidelines . However, of the new measures, EPRA NTA is
considered to be most consistent with the nature of Group's
business, with initial calculations indicating material consistency
with EPRA basic NAV. Safestore will transition to the new EPRA best
practice measures for the 2021 annual report and future reporting
periods . The basis of calculation, including a reconciliation to
reported net assets, is set out in note 15.
-- Like-for-like figures are presented to aid in the
comparability of the underlying business as they exclude the impact
on results of purchased, sold, opened or closed stores.
-- Constant exchange rate (CER) figures are provided in order to
present results on a more comparable basis, removing foreign
exchange movements
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 2021 applicable to
companies under IFRS. The only exception being the Group's fair
value measurement of investment properties. As at the interim
reporting date, 30 April 2021, a sample of the Group's largest
properties, representing approximately 42% (30 April 2020: 53%) of
the value of the Group's investment property portfolio at the
preceding financial year end, has been valued by the Group's
professionally qualified external valuers. In addition, at the same
date, the Directors have prepared estimates of fair values for the
remaining 58% (30 April 2020: 47%) of the Group's investment
property portfolio, incorporating assumptions for estimated
absorption, revenue growth and capitalisation rates to reflect
current market conditions and trading. At the financial year end
100% of the Group's investment property portfolio is fair valued
externally by the same valuers. The IFRS and IFRIC interpretations
as adopted by the European Union that will be applicable at 31
October 2021, 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 and IFRIC
interpretations and pronouncements issued between 17 June 2021 and
publication of the annual IFRS financial statements for the year
ending 31 October 2021.
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 2020. There have been no property acquisitions through the
purchase of corporate vehicles in the period, so any judgement
surrounding the accounting treatment between business combinations
or an asset purchase was not applicable. There have been no other
significant changes in accounting estimates in the period.
The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest financial statements.
The nature of the Critical Judgements and Key Sources of Estimation
Uncertainty applied in the condensed financial statements have
remained consistent with those applied in the Group's latest annual
audited financial statements, except where as described above.
4 Revenue
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------- ----------- ----------- -----------
Self storage income 72.7 65.3 134.0
Insurance income 10.5 9.5 19.4
Other non-storage income 4.9 4.5 8.9
Total revenue 88.1 79.3 162.3
------------------------- ----------- ----------- -----------
5 Segmental information
The segmental information for the six months ended 30 April 2021
is as follows:
United Paris Spain Total
Kingdom
GBPm GBPm GBPm GBPm
------------------------------------ --------- ------ ------ --------
Continuing operations
Revenue 67.2 19.5 1.4 88.1
------------------------------------ --------- ------ ------ --------
Underlying EBITDA 40.1 13.5 0.8 54.4
Exceptional items and corporate
transaction costs - (1.9) - (1.9)
Share-based payments (5.3) (0.6) - (5.9)
Depreciation and variable lease
payments (0.7) (0.1) - (0.8)
Share of associate's depreciation,
interest and tax (0.3) - - (0.3)
------------------------------------ --------- ------ ------ --------
Operating profit before gain on
investment properties 33.8 10.9 0.8 45.5
Gain on investment properties 105.8 21.5 0.4 127.7
Operating profit 139.6 32.4 1.2 173.2
Net finance expense (5.0) (0.9) - (5.9)
------------------------------------ --------- ------ ------ --------
Profit before tax 134.6 31.5 1.2 167.3
------------------------------------ --------- ------ ------ --------
Total assets 1,394.9 441.4 21.1 1,857.4
------------------------------------ --------- ------ ------ ----------
The segmental information for the six months ended 30 April 2020
is as follows:
United Paris Spain Total
Kingdom
GBPm GBPm GBPm GBPm
------------------------------------ --------- ------ ------ --------
Continuing operations
Revenue 59.8 18.7 0.8 79.3
------------------------------------ --------- ------ ------ --------
Underlying EBITDA 33.3 12.1 0.5 45.9
Exceptional items and corporate
transaction costs (0.4) - - (0.4)
Share-based payments (2.5) (0.3) - (2.8)
Depreciation and variable lease
payments (0.5) (0.1) - (0.6)
Share of associate's depreciation,
interest and tax (0.3) - - (0.3)
------------------------------------ --------- ------ ------ --------
Operating profit before gain on
investment properties 29.6 11.7 0.5 41.8
Gain on investment properties 39.6 27.2 (2.8) 64.0
Operating profit/(loss) 69.2 38.9 (2.3) 105.8
Net finance expense (5.1) (1.0) - (6.1)
------------------------------------ --------- ------ ------ --------
Profit/(loss) before tax 64.1 37.9 (2.3) 99.7
------------------------------------ --------- ------ ------ --------
Total assets 1,176.9 400.6 21.6 1,599.1
------------------------------------ --------- ------ ------ ----------
Underlying EBITDA is defined as operating profit before
exceptional items, share-based payments, corporate transaction
costs, gain/loss on investment properties, depreciation and
variable lease payments and the share of associate's depreciation,
interest and tax.
6 Exceptional items
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- -----------
Costs relating to corporate transactions
and exceptional property taxation (1.9) (0.4) (0.3)
Other exceptional items - - 0.1
Net exceptional cost (1.9) (0.4) (0.2)
----------------------------------------- ----------- ----------- -----------
Costs relating to corporate transactions and exceptional
property taxation of GBP1.9m (30 April 2020: GBP0.4m) was incurred
in the period, in relation to a provision for potential liabilities
in respect of the French commercial tax audit of financial years
2012 to 2020 as described further in note 22 (30 April 2020: costs
in relation to acquisition transactions).
7 Finance income and costs
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------ ----------- ----------- -----------
Finance income
Interest receivable from loan to associates 0.1 - 0.1
Financial instruments income 0.1 - 0.2
Underlying finance income 0.2 - 0.3
Fair value movement on derivatives - 1.6 -
Net exchange gains - - 0.2
Total finance income 0.2 1.6 0.5
------------------------------------------------ ----------- ----------- -----------
Finance costs
Interest payable on bank loans and overdrafts (4.8) (4.7) (9.1)
Amortisation of debt issuance costs on
bank loans (0.2) (0.2) (0.3)
------------------------------------------------ ----------- ----------- -----------
Underlying finance charges (5.0) (4.9) (9.4)
Interest on obligations under lease liabilities (2.6) (2.8) (5.6)
Fair value movement on derivatives 1.6 - 0.2
Net exchange losses (0.1) - -
Total finance costs (6.1) (7.7) (14.8)
------------------------------------------------ ----------- ----------- -----------
Net finance costs (5.9) (6.1) (14.3)
------------------------------------------------ ----------- ----------- -----------
Included within interest payable of GBP4.8m (30 April 2020:
GBP4.7m) is GBP0.3m (30 April 2020: GBPnil) 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 GBP1.6m (30 April 2020: net gain of
GBP1.6m). Included within finance income is GBP0.1m (30 April 2020:
GBPnil) in relation to the GBP0.3m received on settlement of the
EUR7.0m average rate forward contract acquired in March 2020 and
settled in April 2021 less the disposal of the fair value of this
derivative asset of GBP0.2m held on balance sheet prior to
settlement.
8 Income tax charge
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------- ----------- ----------- -----------
Current tax - current year (2.8) (2.5) (5.2)
Current tax - prior year 0.5 - 2.4
Deferred tax (6.7) (7.7) (17.1)
(9.0) (10.2) (19.9)
--------------------------- ----------- ----------- -----------
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 the UK, the Group is a Real Estate Investment Trust ("REIT").
As a result, the Group is exempt from UK corporation tax on the
profits and gains arising from its qualifying property 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.
The main rate of corporation tax in the UK is 19%. Accordingly,
the Group's results for this accounting period are taxed at an
effective rate of 19.0% (30 April 2020: 19.0%). Following the
Finance Bill 2021, the main rate of corporation tax will increase
from 19% to 25% from 1 April 2023. There will be no deferred
taxation impact in respect of this change in taxation rates if it
is re-introduced.
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
An exceptional prior year current tax credit of GBP0.5m arose
during the period in relation to a provision for potential
liabilities in respect of the French commercial property tax audit
in respect of financial years 2012 to 2020 (note 22).
9 Deferred income tax
As at As at As at
30 April 30 April 31 October 2020
2021 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------------------------- ----------- ----------- ----------------
The amounts provided in the accounts are:
Revaluation of investment properties and tax depreciation 88.5 73.0 84.8
Other timing differences 0.2 0.2 0.2
---------------------------------------------------------- ----------- ----------- ----------------
Deferred tax liabilities 88.7 73.2 85.0
---------------------------------------------------------- ----------- ----------- ----------------
Interest rate swap instruments 0.1 0.1 0.1
Other timing differences 0.1 0.1 0.1
---------------------------------------------------------- ----------- ----------- ----------------
Deferred tax assets 0.2 0.2 0.2
---------------------------------------------------------- ----------- ----------- ----------------
Net deferred tax liability 88.5 73.0 84.8
---------------------------------------------------------- ----------- ----------- ----------------
As at 30 April 2021, the Group had income losses of GBP22.7m (30
April 2020: GBP26.4m) and capital losses of GBP36.4m (30 April
2020: GBP36.4m) in respect of its UK operations. All losses can be
carried forward indefinitely. No deferred tax asset has been
recognised in respect of these losses.
10 Dividends
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------------- ----------- ----------- -----------
For the year ended 31 October 2019:
Final dividend - paid 9 April 2020 (12.00p per share) - 25.3 25.3
For the year ended 31 October 2020:
Interim dividend - paid 14 August 2020 (5.9p per share) - - 12.4
Final dividend - paid 9 April 2021 (12.70p per share) 26.8 - -
Dividends in the statement of changes in equity 26.8 25.3 37.7
Timing difference on payment of withholding tax (3.8) (3.5) -
-------------------------------------------------------- ----------- ----------- -----------
Dividends in the cash flow statement 23.0 21.8 37.7
-------------------------------------------------------- ----------- ----------- -----------
An interim dividend of 7.5 pence per ordinary share (April 2020:
5.9 pence) has been declared. The ex-dividend date will be 8 July
2021 and the record date 9 July 2021, with an intended payment date
of 13 August 2021.
It is intended that 100% (April 2020: 100%) of the interim
dividend of 7.5 pence per ordinary share (April 2020: 5.9 pence)
will be paid as a REIT Property Income Distribution ("PID") net of
withholding tax where appropriate.
The interim dividend, amounting to GBP15.8m (April 2020:
GBP12.4m), has not been included as a liability at 30 April 2021.
It will be recognised in shareholders' equity in the year to 31
October 2021.
11 Earnings per ordinary share
Basic earnings per share has been calculated by dividing the
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
period/year excluding ordinary shares held by the Safestore
Employee Benefit Trust. Diluted earnings per share are calculated
by adjusting the weighted average numbers of ordinary shares to
assume conversion of all dilutive potential shares. The Company has
one category of dilutive potential ordinary shares: share options.
For the share options, a calculation is done to determine the
number of shares that could have been acquired at fair value
(determined as the average annual market price of the Company's
shares) based on the monetary value of the subscription rights
attached to the outstanding share options. The number of shares
calculated as above is compared with the number of shares that
would have been issued assuming the exercise of the share
options.
Six months ended Six months ended Year ended
30 April 2021 30 April 2020 31 October 2020
(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 158.3 210.8 75.1 89.5 210.4 42.5 178.0 210.4 84.6
Dilutive share
options - 1.9 (0.7) - 0.8 (0.1) - 1.4 (0.6)
--------------- -------- -------- ------ -------- -------- ---------- -------- -------- ------
Diluted 158.3 212.7 74.4 89.5 211.2 42.4 178.0 211.8 84.0
--------------- -------- -------- ------ -------- -------- ---------- -------- -------- ------
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 are 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 2021 30 April 2020 31 October 2020
(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 158.3 210.8 75.1 89.5 210.4 42.5 178.0 210.4 84.6
Adjustments:
Gain on investment
properties (127.7) - (60.6) (64.0) - (30.4) (126.5) - (60.1)
Exceptional items 1.9 - 0.9 0.4 - 0.2 0.2 - 0.1
Net exchange
loss/(gain) 0.1 - - - - - (0.2) - (0.1)
Gain in fair value
of derivatives (1.6) - (0.8) (1.6) - (0.8) (0.2) - (0.1)
Tax on adjustments 5.8 - 2.8 7.3 - 3.5 13.9 - 6.6
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
Adjusted 36.8 210.8 17.4 31.6 210.4 15.0 65.2 210.4 31.0
EPRA adjusted:
Fair value
re-measurement
of lease liabilities
add-back (3.6) - (1.7) (3.3) - (1.6) (6.9) - (3.3)
Tax on lease
liabilities
add-back adjustment 0.4 - 0.2 0.4 - 0.2 0.8 - 0.4
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
Adjusted EPRA
basic EPS 33.6 210.8 15.9 28.7 210.4 13.6 59.1 210.4 28.1
Share-based payment
charge 5.9 - 2.8 2.8 - 1.3 6.5 - 3.1
Dilutive shares - 7.6 (0.6) - 6.8 (0.4) - 6.8 (1.0)
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
Adjusted Diluted
EPRA EPS 39.5 218.4 18.1 31.5 217.2 14.5 65.6 217.2 30.2
--------------------- --------------- -------- ------ --------- -------- ---------- --------- -------- ------
The definition of Adjusted Diluted EPRA EPS can be found in note
2 to the financial statements, being based on the EPRA definition
of earnings with company adjustments for specific items such as tor
the impact of exceptional items, IFRS 2 share-based payment
charges, and deferred tax charges .
Gain on investment properties includes the fair value
re-measurement of lease liabilities add-back of GBP3.6m (30 April
2020: GBP3.3m) and the related tax thereon of GBP0.4m (30 April
2020: GBP0.4m). As an industry standard measure, EPRA earnings is
presented. EPRA earnings of GBP33.6m (30 April 2020: GBP28.7m) and
EPRA earnings per share of 15.9 pence (30 April 2020: 13.6 pence)
are calculated after further adjusting for these items.
12 Investment in associates
As at As at As at
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------- ------------ ------------ ------------
Investment in associates 6.8 2.8 5.3
-------------------------- ------------ ------------ ------------
CERF Storage JV B.V.
The Group has a 20% interest in CERF Storage JV B.V. ("CERF"), a
company registered and operating in the Netherlands. CERF is
accounted for using the equity method of accounting. CERF invests
in carefully selected self storage opportunities in Europe. The
Group will earn a fee for providing management services to CERF.
This investment is considered immaterial relative to the Group's
underlying operations.
The aggregate carrying value of the Group's interest in CERF was
GBP8.1m (31 October 2020: GBP7.3m), made up of an investment, of
GBP5.9m (31 October 2020: GBP5.3m), a loan to the associate
including interest accrued of GBP2.1m (31 October 2020: GBP1.9m)
and other current receivables of GBP0.1m (31 October 2020: GBP0.1m)
(note 21). The Group's share of profits from continuing operations
for the period was GBPnil (30 April 2020: GBPnil). The Group's
share of total comprehensive income of associates for the period
was GBPnil (30 April 2020: GBPnil).
PBC Les Groues SAS
During the period the Group acquired a 24.9% interest in PBC Les
Groues SAS ("PBC"), a company registered and operating in France.
PBC is accounted for using the equity method of accounting. PBC is
the parent company of Nanterre FOCD 92, a company also registered
and operating in France, which will be developing a new store as
part of a wider development programme located in Paris. The
development project will be managed by its joint venture partners,
therefore the Group will have no operational liability during this
phase. During the period the Group have invested GBP0.9m (EUR1.0m)
into this investment. The investment is considered immaterial
relative to the Group's underlying operations.
The aggregate carrying value of the Group's interest in PBC was
GBP0.9m (31 October 2020: GBPnil), made up of an investment of
GBP0.9m (31 October 2020: GBPnil). The Group's share of profits
from continuing operations for the period was GBPnil. The Group's
share of total comprehensive income of associates for the period
was GBPnil.
13 Property portfolio
Fair value of investment Add-back of Investment Total
properties, net of lease lease liabilities properties under investment
liabilities construction properties
GBPm GBPm GBPm GBPm
--------------------------- -------------------------- ------------------- -------------------------- ------------
At 1 November 2020 1,557.5 76.9 14.0 1,648.4
Additions 7.4 3.7 6.5 17.6
Reclassification 3.7 - (3.7) -
Revaluation movement 129.8 - 1.5 131.3
Fair value re-measurement
of lease liabilities
add-back - (3.6) - (3.6)
Exchange movements (14.6) (0.8) (0.1) (15.5)
--------------------------- -------------------------- ------------------- -------------------------- ------------
At 30 April 2021 1,683.8 76.2 18.2 1,778.2
--------------------------- -------------------------- ------------------- -------------------------- ------------
Fair value of investment Add-back of Investment Total
properties, net of lease lease liabilities properties under investment
liabilities construction properties
GBPm GBPm GBPm GBPm
--------------------------- -------------------------- ------------------- -------------------------- ------------
At 1 November 2019 1,331.8 63.5 13.9 1,409.2
IFRS 16 day one transition
adjustment - 8.7 - 8.7
Additions 21.2 1.7 9.9 32.8
Acquisition of subsidiary 18.8 10.6 - 29.4
Reclassification 6.9 - (6.9) -
Revaluation movement 68.6 - (1.3) 67.3
Fair value re-measurement
of lease liabilities
add-back - (3.3) - (3.3)
Exchange movements 3.9 0.4 - 4.3
--------------------------- -------------------------- ------------------- -------------------------- ------------
At 30 April 2020 1,451.2 81.6 15.6 1,548.4
--------------------------- -------------------------- ------------------- -------------------------- ------------
Gain on investment properties of GBP127.7m (30 April 2020:
GBP64.0m) as disclosed in the consolidated income statement
comprises a GBP131.3m (30 April 2020: GBP67.3m) revaluation gain on
investment properties, net of lease liabilities and investment
properties under construction less the fair value re-measurement of
lease liabilities add-back of GBP3.6m (30 April 2020: GBP3.3m).
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 2021 is explained in note 14.
The fair value of investment property held by the Group
classified as the add-back of lease liabilities of GBP76.2m (30
April 2020: GBP81.6m) reflects expected cash flows (including rent
reviews settled that are expected to become payable). Accordingly,
if a valuation obtained for a property is net of all payments
expected to be made, it will be necessary to add-back any
recognised lease liability, to arrive at the carrying amount of the
investment property using the fair value model under IAS 40. The
lease liability of GBP76.4m (30 April 2020: GBP81.9m) differs by
GBP0.2m (30 April 2020: GBP0.3m) which relates to the right-of-use
asset classified as part of property, plant and equipment.
14 Valuations
External valuation
A sample of the Group's largest properties, representing
approximately 42% of the value of the Group's investment property
portfolio at 31 October 2020, has been valued by the Group's
external valuers, C&W, as at 30 April 2021. The valuation has
been carried out in accordance with the requirements of the RICS
Valuation - Global Standards which incorporate the International
Valuation Standards ("IVS") and the RICS Valuation UK National
Supplement (the "RICS Red Book") edition current at 30 April 2021.
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 previous
valuations, has done so since April 2020;
-- 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;
-- The proportion of fees payable by the Group to C&W to the
total fee income of C&W's last financial year to 31 December
2020, was less than 5%. We anticipate that the proportion of fees
for the financial year to 31 December 2021 will remain at 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 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. That said,
C&W report a significant increase in transactions since January
2020. As at the valuation date, they are aware of 21 transactions
in the UK alone. This is unprecedented activity in the investment
market and C&W state this provides them with a higher degree of
certainty when providing valuation advice to clients.
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 2020, including the valuation method and assumptions, are
set out in note 13 to the Group's annual report and financial
statements for the year ended 31 October 2020. This note should be
read in conjunction with note 13 of the Group's annual report.
Directors' valuation
In addition, at the same date, the Directors have prepared
estimates of fair values for the remaining 58% of the Group's
investment property portfolio, incorporating assumptions for
estimated absorption, revenue growth and capitalisation rates to
reflect current market conditions and trading.
Assumptions
The key assumptions incorporated into both the external
valuation and the Directors' valuation, calculated on a weighted
average basis across the entire portfolio, are:
-- Net operating income is based on projected revenue received
less projected operating costs together with a central
administration charge of 6% of the estimated annual revenue subject
to a cap and collar. The initial net operating income is calculated
by estimating the net operating income in the first twelve months
following the valuation date.
-- The net operating income in future years is calculated
assuming either straight line absorption from day one actual
occupancy or variable absorption over years one to four of the cash
flow period, to an estimated stabilised/mature occupancy level. In
the valuations the assumed stabilised occupancy level for the
trading stores (both freeholds and all leaseholds) open at 30 April
2021 averages 88.62 % (31 October 2020: 87.09%). 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 24.76 months (31 October 2020: 23.79
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 6.59 %
(31 October 2020: 6.60%), rising to stabilised net yield
pre-administration expenses of 7.12 % (31 October 2020: 7.41%).
-- The weighted average freehold exit yield on UK freeholds is
6.24% ( 31 October 2020: 6.40% ), France freeholds is 6.00% ( 31
October 2020: 6.27% ) and on Spain freeholds is 5.58% ( 31 October
2020: 5.62% ). The weighted average freehold exit yield for all
freeholds adopted 6.18% ( 31 October 2020: 6.37% ).
-- 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 leaseholds) in
the UK portfolio is 9.27% ( 31 October 2020: 9.44% ) in the France
portfolio is 9.13% ( 31 October 2020: 9.51% ) and in the Spain
portfolio is 8.89% ( 31 October 2020: 8.85% ). The weighted average
annual discount rate adopted (for both freeholds and all
leaseholds) is 9.22% ( 31 October 2020: 9.46% ).
-- Purchaser's costs in the range of approximately 3.3% to 6.8%
for the UK, 7.5% for Paris and 2.5% for Spain 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 5.3% to 8.8% (UK), 9.5% (Paris) and 4.5% (Spain) 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 2021, the Group's
investment property portfolio has been valued at GBP1,683.8m (30
April 2020: GBP1,451.2m), and a revaluation gain of GBP129.8m (30
April 2020: GBP68.6m) 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 2021.
Sensitivity analysis
As part of the Directors valuation, a key sensitivity analysis
was performed to understand the impact on the entire property
portfolio in relation to capitalisation yields, stable occupancy
rates, and a delay in the time to stabilised occupancy. The impact
on the valuation would be mitigated by the inter-relationship
between inputs moving in opposite directions. For example, an
increase in stable occupancy may be offset by an increase yield,
resulting in no net impact on the valuation. A sensitivity analysis
showing the impact on valuations of changes in capitalisation rates
and stable occupancy is shown below:
Impact of a change Impact of a delay
Impact of change in in stabilised occupancy in stabilised occupancy
capitalisation rates assumption assumption
GBP'm GBP'm GBP'm
--------- -------------------------------- -------------------------- ------------------------
25 bps decrease 25 bps increase 1% increase 1% decrease 24-month delay
--------- --------------- --------------- ------------ ------------ ------------------------
Reported
Group 34.5 (31.7) 26.7 (26.7) (16.9)
--------- --------------- --------------- ------------ ------------ ------------------------
15 Net assets per share
As at As at As at
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
Analysis of net asset value GBPm GBPm GBPm
--------------------------------------------------------------------- ----------- ----------- -----------
Net assets 1,166.7 953.6 1,035.6
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax) (1.0) (1.1) 0.4
Deferred tax liabilities on the revaluation of investment properties 88.5 73.0 84.8
--------------------------------------------------------------------- ----------- ----------- -----------
EPRA net asset value (13) 1,254.2 1,025.5 1,120.8
--------------------------------------------------------------------- ----------- ----------- -----------
Basic net assets per share (pence) 554 453 492
EPRA basic net assets per share (pence) 596 487 532
Diluted net assets per share (pence) 549 451 489
EPRA diluted net assets per share (pence) 590 485 529
--------------------------------------------------------------------- ----------- ----------- -----------
Number Number Number
--------------------------------------------------------------------- ----------- ----------- -----------
Shares in issue 210,607,948 210,406,518 210,578,509
--------------------------------------------------------------------- ----------- ----------- -----------
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 3,259 shares (30 April 2020: 32,698
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
1,851,676 shares (30 April 2020: 838,619 shares).
16 Borrowings
The tables below set out the Group's borrowings position as at
30 April 2021:
As at As at As at
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
Non-current GBPm GBPm GBPm
-------------------------------------- ------------ ------------ ------------
Borrowings:
Secured - bank loans 183.1 153.1 165.0
Secured - US Private placement notes 285.1 285.2 291.0
Debt issue costs (1.3) (1.5) (1.5)
-------------------------------------- ------------ ------------ ------------
466.9 436.8 454.5
-------------------------------------- ------------ ------------ ------------
The Group's borrowings consist of bank facilities of GBP250m and
EUR70m maturing in June 2023. US Private Placement Notes of EUR195m
have maturities extending to 2024, 2026 and 2027, and GBP115.5m
have maturities extending to 2026 and 2029.
The borrowings were secured by a fixed charge over the Group's
investment property portfolio.
Borrowings are stated before unamortised issue costs of GBP1.3m
(30 April 2020: GBP1.5m). The bank loans and private placement
notes were repayable as follows:
As at As at As at
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------- ------------ ------------ ------------
Between two and five years 227.4 197.4 210.8
After more than five years 240.8 240.9 245.2
---------------------------- ------------ ------------ ------------
Borrowings 468.2 438.3 456.0
Unamortised issue costs (1.3) (1.5) (1.5)
---------------------------- ------------ ------------ ------------
466.9 436.8 454.5
---------------------------- ------------ ------------ ------------
The effective interest rates at the balance sheet date were as
follows:
As at As at As at
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
----------------------- --------------------- ------------------ ------------------
Bank loans (Sterling) Quarterly or monthly Quarterly or Quarterly or
LIBOR plus 1.25% monthly LIBOR monthly LIBOR
plus 1.25% plus 1.25%
Bank loans (Euro) Quarterly EURIBOR Quarterly EURIBOR Quarterly EURIBOR
plus 1.25% plus 1.25% plus 1.25%
Private placement Weighted average Weighted average Weighted average
notes (Euro) rate of 1.63% rate of 1.63% rate of 1.63%
Private placement
notes (Sterling) 2.76% 2.76% 2.76%
----------------------- --------------------- ------------------ ------------------
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
2021 2020 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------- ------------ ------------ ------------
Expiring beyond one year 127.8 157.8 179.7
-------------------------- ------------ ------------ ------------
17 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
2021 2020 2020
(unaudited) (unaudited) (audited)
Assets per the balance sheet GBPm GBPm GBPm
------------------------------------- ------------ ------------ ------------
Derivative financial instruments -
Level 2 1.7 2.2 0.9
Amounts due from associates - Level
2 2.2 1.8 2.0
------------------------------------- ------------ ------------ ------------
As at As at As at
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
Liabilities per the balance sheet GBPm GBPm GBPm
------------------------------------ ------------ ------------ ------------
Derivative financial instruments -
Level 2 0.8 1.2 1.4
------------------------------------ ------------ ------------ ------------
The fair value of financial instruments that are not traded in
an active market, such as over-the-counter derivatives, is
determined using valuation techniques. The Group obtains such
valuations from counterparties who use a variety of assumptions
based on market conditions existing at each balance sheet date. The
valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in
level 2.
If one or more of the significant inputs is not based on
observable market data, the asset or liability is included in level
3. The Group has no disclosable level 3 financial instruments.
There have been no transfers of assets or liabilities between
levels of the fair value hierarchy.
18 Share capital
As at As at As at
30 April 30 April 31 October
2021 2020 2020
(unaudited) (unaudited) (audited)
Called up, issued and fully paid GBPm GBPm GBPm
------------------------------------------ ------------ ------------ ------------
210,816,276 (30 April 2020: 210,439,216)
ordinary shares of 1p each 2.1 2.1 2.1
------------------------------------------ ------------ ------------ ------------
19 Capital commitments
The Group had capital commitments of GBP98.2m as at 30 April
2021 (30 April 2020: GBP30.1m).
20 Seasonality
Self-storage revenues are subject to seasonal fluctuations, with
peak sales normally occurring in the second and third quarters of
the calendar year. This is due to seasonal weather conditions and
holiday periods leading to fluctuating demand for storage. For the
six months ended April 2020, 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 49.1% (30 April 2020: 48.3%) of
the annual level of self-storage revenue in the year ended 31
October 2020.
21 Related party transactions
The Group's shares are widely held. Transactions between the
Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
Transactions with CERF Storage JV B.V.
As described in note 12, the Group has a 20% interest in CERF
Storage JV B.V. ("CERF"), and entered into transactions with CERF.
During the period the Group recharged GBP0.1m to CERF for costs
paid on behalf of CERF, and received GBP0.2m for recharges
previously invoiced. Amounts due from CERF as at 30 April 2021
amounted to GBP1.8m (30 April 2020: GBPnil).
During the period the Group invested a further GBP0.8m into CERF
which was used to acquire three additional stores for the portfolio
in located in the Netherlands. GBP0.6m is included as part of its
non-current investments in associates with the remaining GBP0.2m
added to the existing loan note in place.
During the period the Group recharged GBP0.1m (30 April 2020:
GBP0.1m) to CERF for costs paid on behalf of CERF and were repaid
GBP0.1m (30 April 2020: GBP0.2m) of cumulative outstanding
balances. GBP0.1m (30 April 2020: GBPnil) of unpaid interest was
accrued and charged during the period on the EUR2.2m principal loan
note outstanding, GBP2.1m (30 April 2020: GBP1.8m). The total
amount outstanding at 30 April 2021 included within trade and other
receivables was GBP2.3m (30 April 2020: GBP1.8m).
Transactions with PBC Les Groues SAS
As described in note 12, the Group has a 24.9% interest in PBC
Les Groues SAS ("PBC"). During the period, the Group made an
initial investment GBP0.9m (EUR1.0m) into PBC to fund the
development of a new store in France. This amount is included as
part of its non-current investments in associates.
22 Provisions
Following tax audits carried out on the Group's operations in
Paris, the basis on which property taxes have been previously
assessed was challenged by the French Tax Administration ("FTA")
for financial years 2011 to 2013 and 2016 to 2020. Similar
challenges from the FTA have also been made to other operators
within the self-storage industry. In March 2021, following the
latest phase of litigation, the French Court of Appeal delivered
its judgement on the Group's appeal. The ruling represented a
partial success for the Group however, a further appeal has been
lodged with the French Supreme Court against those decisions on
which the Group's appeal in the Court of Appeal was unsuccessful. A
provision has been included in the consolidated financial accounts
of GBP2.0m at 30 April 2021 (31 October 2020: GBPnil), to reflect
the increased uncertainty surrounding the likelihood of a fully
successful outcome. Of the total provided, GBP1.9m has been
recorded as an exceptional charge in respect of financial years
2012 to 2020 and GBP0.1m has been charged in relation to 6 months
to 30 April 2021 within cost of sales (underlying EBITDA).
It is possible that the French tax authority may still appeal
the decisions of the French Court of Appeal on which the Group was
successful to the French Supreme Court. Based on our analysis of
the relevant information, the maximum potential exposure in
relation to these issues at 30 April 2021 is GBP2.7m (31 October
2020: GBP4.2m). No provision for any potential exposure has been
recorded in the consolidated financial statements since the Group
believes it is more likely than not that a successful outcome will
be achieved resulting in no eventual additional liabilities.
Bank guarantees to cover any potential additional tax assessment
are currently being put in place, of which guarantees totalling
GBP1.3m have been put in place as at 30 April 2021 (31 October
2020: GBP0.6m).
23 Contingent liabilities
As part of the Group banking facility, the Company has
guaranteed the borrowings totalling GBP468.2m (30 April 2020:
GBP438.3m) of fellow Group undertakings by way of a charge over all
of its property and assets. There are similar cross guarantees
provided by the Group companies in respect of any bank borrowings
which the Company may draw under a Group facility agreement. The
financial liability associated with this guarantee is considered
unlikely to crystallise and therefore no provision has been
recorded.
The Group also has a contingent liability in respect of property
taxation in the French subsidiary as disclosed in note 22.
24 Post balance sheet events
On 7 May 2021, the Group extended its borrowing facilities with
the issuance of new Sterling and Euro denominated US Private
Placement Notes to a group of existing institutional investors with
the following coupons and tenors:
-- GBP20m seven year notes at a coupon of 1.96% due June 2028
-- EUR29m seven year notes at a coupon of 0.93% due June 2028
-- GBP80m ten year notes at a coupon of 2.39% due August 2031
-- EUR29m twelve year notes at a coupon of 1.42% due August 2033
These funds will be received in June 2021 and August 2021
respectively.
In addition, an uncommitted EUR115m Shelf facility, which can be
drawn in Euros or Sterling, was agreed on 7 May 2021 with one
existing lender, giving the Group further financing flexibility.
The facility would be drawn in the form of Private Placement Notes
at a coupon to be agreed at the time of funding.
Principal risks and uncertainties
The delivery of our strategic objectives is dependent on
effective risk management. There are a number of potential risks
and uncertainties which could have a material impact on the Group's
performance and could cause actual results to differ materially
from expected and historical results. Details of the principal
risks facing the Group were included on pages 30 to 32 of the
Annual Report and Financial Statements for the year ended 31
October 2020, 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
-- Regulatory compliance risk
-- Marketing risk
-- Reputational 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 2020 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.
The impact of the ongoing global pandemic, COVID-19, has had
limited discernible impact on the Group's performance during the
period. The Group continues to monitor the COVID-19 pandemic,
taking prudent steps to mitigate any potential impacts to the
health and safety of employees, customers and suppliers, and to the
successful operation of our business. Potential risks to the
business are seen as closure of stores due to limitations on the
ability of employees to work on site, physical and mental health of
employees as a result of home working, failure of IT systems and
support in the face of significant levels of home working and
reduced occupancy levels and customer financial hardship leading to
reduced profitability and cash generation. These risks have been
reviewed by the Risk Committee and actions agreed, following which
management has taken action to address each of the risks, as well
as ensuring that the Group's control environment is maintained, if
not enhanced. We are confident that we have the necessary resources
to meet even the most pessimistic of our forecasts.
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 in 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 2021
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 2020. 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
16 June 2021 16 June 2021
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(th) April 2021 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 24. 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.
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 Guidance 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 international accounting
standards in conformity with the requirements of the Companies Act
2006 and International Financial Reporting Standards 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 Financial Reporting Council 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(th)
April 2021 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Use of our report
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 Financial
Reporting Council. 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.
Deloitte LLP
Statutory Auditor
London, United Kingdom
16 June 2021
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END
IR VQLFFFQLLBBE
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June 17, 2021 02:00 ET (06:00 GMT)
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