TIDMSAFE
RNS Number : 2739Y
Safestore Holdings plc
13 January 2022
13 January 2022
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Results for the year ended 31 October 2021
A record-breaking year of self-funded growth and occupancy with
EPS(6) up 34.1% and final dividend up 38.6%
Key measures
Year Ended Year Ended Change
31 October 31 October Change-CER
2021 2020 (1)
-------------------------------- ------------ ------------ --------- -------------
Underlying and Operating
Metrics- total
Revenue GBP186.8m GBP162.3m 15.1% 15.5%
Underlying EBITDA(2) GBP118.0m GBP93.9m 25.7% 26.2%
Closing Occupancy (let sq
ft- million)(3) 5.883 5.454 7.9% n/a
Closing Occupancy (% of
MLA)(4) 84.5% 79.5% +5.0ppts n/a
Average Storage Rate(5) GBP26.95 GBP26.44 1.9% 2.3%
Adjusted Diluted EPRA Earnings
per Share(6) 40.5p 30.2p 34.1% n/a
Free Cash Flow(7) GBP89.5m GBP68.8m 30.1% n/a
EPRA NTA per Share(13) GBP6.79 GBP5.29 28.4% n/a
Underlying and Operating
Metrics- like-for-like (8)
Storage Revenue GBP148.1m GBP129.9m 14.0% 14.4%
Ancillary Revenues GBP30.6m GBP27.7m 10.5% 10.8%
Revenue GBP178.7m GBP157.6m 13.4% 13.8%
Underlying EBITDA(2) GBP113.3m GBP91.9m 23.3% 23.7%
Closing Occupancy (let sq
ft- million)(3) 5.598 5.249 6.6% n/a
Closing Occupancy (% of
MLA)(4) 85.1% 80.1% +5.0ppts n/a
Average Occupancy (let sq
ft- million)(3) 5.474 4.897 11.8% n/a
Average Storage Rate(5) GBP27.06 GBP26.51 2.1% 2.4%
Statutory Metrics
Operating profit(9) GBP417.0m GBP212.2m 96.5% n/a
Profit before tax(9) GBP404.6m GBP197.9m 104.4% n/a
Diluted Earnings per Share 176.4p 84.0p 110.0% n/a
Dividend per Share 25.1p 18.6p 34.9% n/a
Cash inflow from operating GBP97.0m GBP75.7m 28.1% n/a
activities
Diluted net assets per share(13) GBP6.35 GBP4.89 29.9% n/a
Highlights
Record Financial Performance
-- Group revenue for the year up 15.1% (up 15.5% in CER(1) )
-- Like-for-like(8) Group revenue for the year in CER(1) up 13.8%:
-- UK up 16.8%
-- Paris up 4.3%
-- Underlying EBITDA(2) up 26.2% in CER(1) which, combined with
an increased gain on investment properties of GBP321.1m (FY2020:
GBP126.5m), resulted in statutory operating profit(9) of GBP417.0m
(FY2020: GBP212.2m)
-- Adjusted Diluted EPRA Earnings per Share(6) up 34.1% at 40.5
pence (FY2020: 30.2 pence). Diluted Earnings per Share was 176.4
pence (FY2020: 84.0 pence) largely due to the higher property
valuation gain in FY2021
-- 38.6% increase in the final dividend to 17.6 pence (FY2020:
12.7 pence) giving a total for the year of 25.1 pence (FY2020: 18.6
pence)
Operational Focus
-- Continued balanced approach to revenue management together
with an efficient marketing platform driving returns and record
occupancy performance:
-- Like-for-like(8) closing occupancy of 85.1% up 5.0ppts on 2020 (FY2020: 80.1%)
-- Like-for-like(8) average occupancy for the year up 11.8%
-- Like-for-like(8) average storage rate(5) for the year up 2.4% in CER(1)
-- New and recently opened stores trading well and in line with business plans
-- Investment in our digital marketing platform continuing to deliver for the business:
-- Online enquiries in FY2021 rose to 89% of our total enquiries
in the UK (FY2020: 88%) and 85% in France (FY2020: 79%)
Strategic Progress
-- New freehold Birmingham Middleway (58,500 sq ft of MLA) and
leasehold Paris Magenta (50,000 sq ft of MLA) stores opened in
April 2021
-- New freehold store in Bow, London (74,000 sq ft of MLA), opened in December 2021
-- Three store extensions in London Edgware, London Paddington
Marble Arch and Southend opened in December 2021 adding 41,000 sq
ft of MLA
-- Development pipeline expanded to c. 732,000 sq ft of future
MLA (equivalent to c. 11% of existing portfolio)
-- Seven London and South East developments to add 387,000 sq ft
-- Seven developments in Barcelona and Madrid to add 225,000 sq ft
-- Two Paris developments to add 99,000 sq ft
-- Two existing store extensions to add 21,000 sq ft
-- New 18-year lease signed on Hayes store commencing in June 2027
-- Acquisition of a 14,000 sq ft MLA freehold store in
Christchurch(10) , Dorset, from Your Room Self Storage
-- 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 which is due to open in January
2022
-- Continued development of Environmental, Social, and
Governance ("ESG") agenda illustrated by:
-- Investors In People Platinum accreditation,
-- GRESB "A" rating for public disclosures
-- EPRA Silver rating for sustainability
-- MSCI AA rating for ESG
-- Third FTSE 250 company to achieve the highest rating of five stars from Support The Goals
-- Group commitment to be operationally carbon neutral by 2035
Strong and Flexible Balance Sheet
-- Group loan-to-value ratio ("LTV"(11) ) at 25% (31 October
2020: 29%) and interest cover ratio ("ICR"(12) ) at 10.5x (31
October 2020: 9.0x)
-- Unutilised bank facilities of GBP252m at October 2021 and no
borrowings to refinance before June 2023. In addition, a further
uncommitted EUR115m shelf facility available from an existing
lender
-- 24.0% increase in property valuation (including investment
properties under construction) driven by improved trading
performance, new stores, revisions to exit cap rates and stabilised
occupancy assumptions
-- As a result, our pipeline continues to be financed by free
cash flow and existing debt facilities
Frederic Vecchioli, Chief Executive Officer commented:
"I am pleased to report an exceptional and record result for the
year. I would like to thank our staff for continuing to perform
excellently throughout the period, particularly given the
challenges presented by Covid-19."
"All geographies have performed strongly and have shown good
momentum in the final quarter. The UK business has traded
particularly well in 2021, with closing occupancy up by 6.0ppts to
a record 85.4% and an exceptionally strong growth in average rate
in the final three months driving like-for-like revenue growth of
16.8% for the year. Our Paris business saw pleasing average rate
improvement in the final quarter and, combined with 4.8ppts of
like-for-like occupancy growth for the year (to 83.6%), grew
like-for-like revenue by 4.3% which accelerated to 8.3% in the
final quarter. Our Spanish business, in its first full year of
ownership, also performed ahead of our expectations."
"The Group has also made excellent strategic progress during the
year. Our property pipeline continues to grow and we now have
732,000 sq ft of new space planned to open over the coming years in
the UK, Paris and Spain, representing growth of c. 11% in the size
of our estate. Our pipeline will be financed by our free cash flow
and existing debt facilities and we anticipate continuing to add
further sites over the coming months. Our balance sheet remains
strong and our financing capacity allows us to continue to consider
acquisition opportunities."
"In December 2021, Safestore acquired Your Room Self Storage in
Christchurch, Dorset for GBP2.45 million, which comprises a
freehold store with an MLA of 14,000 sq ft. The store will be
operated as an automated satellite of our two existing Bournemouth
stores, and we anticipate the first year initial yield will be in
excess of 6%."
"Since 2013, we have added 22.9ppts of occupancy to the 113
stores still in the Group today, which now have an occupancy of
86.0% (an average increase of 2.9ppts per annum). Over that period
the same stores have grown average rate by 16.1% (a CAGR of 1.9%
per annum)."
"The Company has weathered the pandemic well and remains in a
very strong position. Despite the current high levels of occupancy,
the business still has 1.1m sq ft of currently unlet space in its
existing fully invested estate in addition to 0.8m sq ft in its
pipeline. This represents a significant organic growth opportunity
in what remains a fragmented and growing market. Our leading market
positions in the UK and Paris, combined with our balance sheet
strength and resilient business model, leave us well positioned for
the future."
Pleasingly, the strong performance of the final quarter has
continued into the first two months of the new financial year with
Group like-for-like revenue up 17.3% CER compared to the first two
months of the prior year. Whilst accepting the potential for
further disruption arising from Covid-19 restrictions, I look
forward with confidence to the 2021/22 financial year."
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 measures are not defined under
IFRS and they may not be directly comparable with other companies'
adjusted measures and are not intended to be a substitute for, or
superior to, any IFRS measures of performance. 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 reviews and monitors 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 6
and 13 below and "Non-GAAP financial information" in the notes to
the financial statements.
1 - CER is Constant Exchange Rates (Euro denominated results for
the current period have been retranslated at the exchange rate
effective for the comparative period in order to present the
reported results on a more comparable basis).
2 - 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, variable lease payments, depreciation and the share of
associate's depreciation, interest and tax. 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.
3 - Occupancy excludes offices but includes bulk tenancy. As at
31 October 2021, closing occupancy includes 14,000 sq ft of bulk
tenancy (31 October 2020: 14,000 sq ft).
4 - MLA is Maximum Lettable Area. At 31 October 2021, Group MLA
was c.6.96m sq ft (FY2020: c. 6.86m sq ft).
5 - 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.
6 - 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 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.
7 - Free cash flow is defined as cash flow before investing and
financing activities but after leasehold rent payments.
8 - Like-for-like adjustments have been made to remove the
impact of the 2021 openings in Birmingham Middleway and Magenta in
Paris, the 2021 closure of Birmingham South, the 2020 acquisitions
of Valencia, Calabria, Glories and Marina in Barcelona, the
acquisition of Chelsea and St John's Wood in London, and the 2020
openings of Carshalton, Sheffield and Gateshead.
9 - Operating profit increased by GBP204.8 million to GBP417.0
million (FY2020: GBP212.2 million) principally as a result of an
increase in the gain on investment properties of GBP194.6 million
to GBP321.1 million (FY2020: GBP126.5 million), as well as an
increase of GBP24.1 million or 25.7% in Underlying EBITDA as a
result of stronger trading performance. Profit before tax
additionally included an increase in the fair value of derivatives
of GBP2.9 million (FY2020: net gain GBP0.2 million).
10 - The enterprise value paid for Your Room Self Storage in
Christchurch, Dorset, on 7 December 2021 was GBP2.45 million. The
total transaction costs are expected to be GBP2.6 million subject
to customary working capital adjustments.
11 - LTV ratio is Loan-to-Value ratio, which is defined as gross
debt (excluding lease liabilities) as a proportion of the valuation
of investment properties and investment properties under
construction (excluding lease liabilities).
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
three 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
NTA to be most consistent with the nature of the Group's business.
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.
Summary
The Group has delivered an exceptional performance in 2021.
In 2021, the Group delivered 34.1% growth in Adjusted Diluted
EPRA Earnings per Share largely driven by organic growth. Total
Group revenue increased by 15.1% (15.5% CER(1) ) with an
outstanding performance in the UK (+18.8%) and continued strength
in Paris (+4.3%). In addition, the newly acquired Spanish business
contributed GBP2.8 million of revenue. On a like-for-like(8) basis
in CER(1) , Group revenue increased by 13.8% with the UK up 16.8%
and Paris up 4.3%. The Group's like-for-like(8) closing occupancy
increased by 5.0ppts to a record 85.1% with the like-for-like
average storage rate(5) up 2.4% at CER(1) .
The Group has traded strongly throughout the year with momentum
improving as the year progressed. Our digital marketing platform
has driven excellent enquiry generation and conversion, and our
ongoing commitment to investing in and supporting our staff has
resulted in like-for-like(8) closing occupancy in the UK growing by
5.0ppts to 85.4%. Growth in occupancy across the UK has been
healthy with the UK regions and London and the South East once
again all performing well.
In Paris, our performance has also been strong with
like-for-like(8) revenue growing by 4.3% driven by a like-for-like
growth in average occupancy of 6.1%. Like-for-like(8) closing
occupancy ended the year at 83.6% (FY2020: 78.8%). This is the
23(rd) consecutive year of revenue growth in Paris with average
growth over the last seven years of approximately 5%.
The Group's current pipeline of new developments and store
extensions has grown significantly over the last year and now
constitutes c. 732,000 sq ft of future MLA (equivalent to 11.5% of
the existing portfolio) and associated outstanding capital
expenditure of GBP96 million. This does not include the c. 130,000
sq ft of MLA opened since the year end. The pipeline consists of
seven new stores in London and the South East of England, two in
Paris, three in Madrid and four in Barcelona as well as two
existing store extensions in the UK.
In December 2020, the Group's joint venture(14) ("JV") with
Carlyle acquired Opslag XL in the Netherlands which has three
stores in The Hague, Hilversum and Amsterdam. In addition, in June
2021, the JV acquired a freehold site with an existing building in
Nijmegen in the Netherlands. Safestore provided 20% of the equity
required to acquire and develop the site which will have an MLA of
c. 40,000 sq ft. The Group earns management fees and a 20% share of
the profits of the joint venture(14) .
In December 2021, Safestore acquired Your Room Self Storage in
Christchurch(10) , Dorset, for GBP2.45 million. The freehold
Christchurch store has an MLA of 14,000 sq ft and the Group
anticipates that the initial first year yield will be in excess of
6%. The store will be operated as an automated satellite of our two
existing Bournemouth stores.
Group Underlying EBITDA(2) of GBP118.0 million increased by
26.2% at CER(1) on the prior year. The Group's EBITDA(2)
performance, combined with modest increases in leasehold rent and
finance costs, resulted in a 34.1% increase in Adjusted Diluted
EPRA EPS(6) in the period to 40.5 pence (FY2020: 30.2 pence).
Statutory operating profit increased by GBP204.8 million to
GBP417.0 million (FY2020: GBP212.2 million) principally as a result
of an increase in the gain on investment properties of GBP194.6
million to GBP321.1 million (FY2020: GBP126.5 million), along with
an increase of GBP24.1 million or 25.7% in Underlying EBITDA(2) as
a result of stronger trading performance.
Our property portfolio valuation, including investment
properties under construction, increased in the year by 24.0%,
driven by the stronger underlying performance of the stores,
revisions to exit cap rates, stabilised occupancy assumptions and
FX. After exchange rate movements, the portfolio valuation
increased to GBP1,949.2 million with the UK portfolio up GBP327.9
million to a total UK value of GBP1,474.8 million and the French
portfolio increasing by EUR73.7 million to EUR521.6 million.
Reflecting the Group's strong trading performance, the Board is
pleased to recommend a 38.6% increase in the final dividend to 17.6
pence per share (FY2020: 12.7 pence) resulting in a full year
dividend up 34.9% to 25.1 pence per share (FY2020: 18.6 pence).
Over the last eight years, the Group has grown the annual dividend
by 337% or 19.4 pence per share.
Outlook
As we approach the second anniversary of the beginning of the
Covid-19 pandemic, we believe the resilience of the business model
has once again been proven. There remains the potential for
disruption from Covid-19 restrictions but we anticipate that the
Group is in a good position to withstand any ongoing challenges
presented by the crisis.
In the last six financial years, Safestore has strengthened its
market-leading positions in the UK and Paris with the acquisitions
of Space Maker, Alligator, Fort Box and our stores at Heathrow and
Christchurch(10) , as well as opening 17 new stores and
establishing a pipeline of c. 732,000 sq ft of MLA. In addition,
the Group has entered new markets in Spain together with Belgium
and the Netherlands through our joint venture with Carlyle.
Excluding the joint venture and the development pipeline, there is
1.1m sq ft of fully invested unlet space available, offering
significant operational upside within the existing portfolio. We
remain focused on further optimising the Group's operational
performance whilst our balance sheet strength and flexibility
provide us with the opportunity to consider further selective
development and acquisition opportunities in our key markets.
The strong performance of the final quarter of 2020/21 has
continued into the new financial year with like-for-like Group
revenue (CER(1) ) up 17.3% for the first two months. We anticipate
a return to a normal cycle of trading in the coming months but look
forward to the 2021/22 financial year with confidence.
Enquiries
Safestore Holdings plc 020 8732 1500
Frederic Vecchioli, Chief Executive
Officer
Andy Jones, Chief Financial
Officer
www.safestore.com
Instinctif Partners 020 7457 2020
Guy Scarborough
Bryn Woodward
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 31 October 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), 29 wholly owned stores in the Paris region and four
stores in Barcelona. In addition, the Group operates eight 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 more densely populated 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 80,000 personal and business customers.
-- As at 31 October 2021, Safestore had a maximum lettable area
("MLA") of 6.960 million sq ft (excluding the expansion pipeline
stores, and the Carlyle Joint Venture) of which 5.883 million sq ft
was occupied.
-- Safestore employs around 700 people in the UK, Paris and Barcelona.
Chairman's Statement
Our purpose is simple - to add stakeholder value by developing
profitable and sustainable spaces that allow individuals,
businesses and local communities to thrive
Covid-19
The Covid-19 pandemic has continued to present challenges over
the last financial year to all of us. Our first priority throughout
the crisis has been, and will continue to be, the safety and
wellbeing of our staff and customers. The Covid-19 processes and
procedures adopted during the prior financial year have continued
to be implemented where applicable with store teams able to adapt
quickly as new Covid-19 restrictions are introduced.
After two years in the role, I have been consistently impressed
by the dedication of the store and Head Office teams. The Covid-19
pandemic has highlighted an adaptability, commitment and resilience
across the business that has enabled the continued operation of the
stores throughout the crisis and which has delivered an outstanding
and record set of results.
Our purpose remains simple, to continue to add stakeholder value
by developing profitable and sustainable spaces that allow
individuals, businesses and local communities to thrive. Our
strategy is underpinned by our values, our behaviours and our
governance structure which shape our culture and remain central to
the way we conduct our business
I would like to take this opportunity to congratulate all my
colleagues throughout the Group for their exceptional contributions
this year.
Financial and strategic progress
Over the last two years the quality and resilience of the
business model at Safestore has been demonstrated and I am
delighted to announce, on behalf of the Board of the Group, a
record set of results for the year ended 31 October 2021.
Management's first priority remains to maximise the economic
return on our existing store portfolio and its 1.1 million sq ft of
fully invested unlet space, building on the operational
improvements made over the previous seven years.
In addition to improving returns from our existing portfolio,
the Group has continued to make significant strategic progress in
expanding its footprint through a combination of new store openings
and acquisitions. The Group has now opened seventeen stores over
the last five years and all are performing well. The acquisition of
both Fort Box Self Storage and OMB in Barcelona, acquired in
November 2019 and December 2019 respectively are now fully
integrated into the business. In addition, we have a further
property pipeline of an additional 732,000 sq ft of MLA, which
provides significant opportunity for the business and underpins our
future growth.
Our joint venture(14) with Carlyle and our OMB acquisition in
Barcelona provide us with exciting platforms in new attractive
geographies. Opslag in the Netherlands, acquired by the joint
venture(14) with Carlyle in December 2020, is performing strongly
and complements the joint venture's previous acquisitions of M3 in
the Netherlands and Lokabox in Belgium. Safestore's highly scalable
platform will allow us to take advantage of further opportunities
in due course.
Financial results
Revenue for the year was GBP186.8 million, 15.1% ahead of last
year (FY2020: GBP162.3 million), or 15.5% ahead on a constant
currency basis. Like-for-like(8) revenue was up 13.8% in constant
currency. This result was driven by an exceptional performance in
the UK which grew like-for-like(8) revenue by 16.8%, combined with
another strong performance by Une Pièce en Plus, our Parisian
business, which grew like-for-like(8) revenue by 4.3%.
Underlying EBITDA(2) increased by 25.7% to GBP118.0 million
(FY2020: GBP93.9 million) and on a constant currency basis by
26.2%. Underlying EBITDA(2) after rental costs increased by 29.5%
to GBP105.0 million (FY2020: GBP81.1 million).
Operating profit increased by GBP204.8 million from GBP212.2
million in 2020 to GBP417.0 million in 2021, reflecting a higher
investment property gain in 2021, combined with the increase in
Underlying EBITDA(2) , offset by an increase in the share-based
payments charge of GBP11.8 million to GBP18.3 million (FY2020:
GBP6.5 million). The increase in share-based payments arises from
the crystallisation of the Earnings per Share performance measure
of the 2017 LTIP, which is measured over a 5 year period from 1
November 2016 to 31 October 2021 (further explanation will be
provided within the 2021 Directors' Remuneration Report).
Adjusted Diluted EPRA Earnings per Share(6) grew by 34.1% to
40.5 pence (FY2020: 30.2 pence). Adjusted Diluted EPRA Earnings per
Share(6) has grown by 29.8 pence or 279% over the last eight years.
Statutory diluted Earnings per Share increased to 176.4 pence
(FY2020: 84.0 pence) as a result of the increase in Adjusted
Diluted EPRA Earnings per Share(6) combined with an increased gain
on valuation of investment properties.
Finally, the Group's balance sheet remains robust with a Group
LTV(11) ratio of 25% (FY2020: 29%) and an ICR(12) of 10.5x (FY2020:
9.0x). This represents a level of gearing we consider appropriate
for the business to enable the Group to increase returns on equity,
maintain financial flexibility and achieve our medium term
strategic objectives.
This year's record performance continues a sustained period of
excellent performance by the Company. Over the last eight years,
the management and store teams have delivered a Total Shareholder
Return of 1,013.1%, ranking at number one in the UK property
sector. Since flotation in 2007, Safestore has also delivered the
highest Total Shareholder Return of any UK listed self storage
operator.
ESG
Safestore's business processes and operations are supported by
the pillars of its ESG strategy; and whilst I am delighted with
this record financial performance, I am equally proud of our other
non-financial achievements.
The Board and management are particularly proud of the fact that
the business was awarded the prestigious Investors in People (IIP)
Platinum accreditation, and made the final 10 shortlist in the
'Platinum Employer of the Year (250+)' category in The Investors in
People Awards 2021.This is the result of our continuous efforts to
support our people and help them to develop through open
communication and specifically developed day to day training
courses to help build their skills.
We have also made significant progress in pursuing our other ESG
goals. We have continued to focus on our environmental agenda, with
year-on-year reductions in greenhouse gas emission and enhanced
disclosures in recognition of the recommendations of the TCFD. I am
pleased to report that we were awarded a Silver rating in the 2021
EPRA sustainability awards, an 'A' rating for public disclosures by
GRESB and an 'AA' rating for ESG by MSCI. We were also awarded the
highest rating of 5 stars by Support the Goals, recognising
Safestore as the third member of the FTSE250 to achieve this level.
Details of these achievements are covered more fully in the Chief
Executive's report and the sustainability section of our annual
report.
Non-Executive Board changes
At the end of the financial year two of our Non-Executive
Directors stood down from the Board due to other commitments. On
behalf of the Board, I would like to thank both Bill Oliver and
Joanne Kenrick for their contribution and commitment to the
business over many years and wish them well in all their future
endeavours.
I am also delighted to welcome the two new Non-Executive
Directors whom we appointed after a comprehensive search through an
international independent search firm. I am delighted that in
Delphine Mousseau and Laure Duhot we have two new Board members
whose experience and expertise will help us move forward. It is
also worth noting that the appointment of these new directors means
that over one third of our Board is now female which is a further
step in our journey towards greater diversity and inclusion at both
Board and leadership level within the Company.
Dividend
Finally, reflecting the Group's strong trading performance, the
Board is pleased to recommend a 38.6% increase in the final
dividend to 17.6 pence per share (FY2020: 12.7 pence) resulting in
a full year dividend up 34.9% to 25.1 pence per share (FY2020: 18.6
pence).
Over the last eight years, the Group has grown the dividend by
337% or 19.4 pence per share during which period the Group has
returned to shareholders a total of 120.2 pence per share. The
total dividend for the year is covered 1.61 times by Adjusted EPRA
diluted earnings (1.62 times in 2020). Shareholders will be asked
to approve the dividend at the Company's Annual General Meeting on
16 March 2022 and, if approved, the final dividend will be payable
on 7 April 2022 to Shareholders on the register at close of
business on 4 March 2022.
Summary
In conclusion, the Board remains confident in the future growth
prospects for the Group and will continue its progressive dividend
policy in 2022 and beyond. In the medium term it is anticipated
that the Group's dividend will grow at least in line with Adjusted
Diluted EPRA Earnings per Share(6) .
David Hearn
12 January 2022
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 lockdown 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 subsequent phases of restrictions and lockdowns, stores
remained open in all geographies with all reception areas adapted
to become Covid-19 secure environments with Perspex screens,
personal protective equipment and hand sanitiser provided whilst
ensuring social distancing measures were maintained.
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 three
years with the creation of our joint venture(14) with Carlyle and
our acquisition of OhMyBox! ("OMB") in Barcelona. 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.
In addition, the Group's strategy is pursued whilst maintaining
a strong focus on Environmental, Social and Governance ("ESG")
matters and a summary of our ESG strategy is provided below.
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 31
October 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.
In the UK, 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 6.96m sq ft at 31 October 2021
(2020: 6.86m sq ft). At the current occupancy level of 84.5% we
have 1.1m sq ft of fully invested unoccupied space (1.8m sq
ftincluding the development pipeline), of which 0.8m sq ft is in
our UK stores and 0.3m sq ft is in Paris. In total, this unlet
space is the equivalent of c. 27.5 empty stores located across the
estate and provides the Group 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 2021, occupancy of
the stores in the portfolio in 2013 that remain in the Group today
has increased from 63.1% to 86.0%, i.e. an average of 2.9ppts per
year and equivalent to a total of 1.2m sq ft.
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 63% 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 various
Covid-19 lockdowns and has since continued to support customer
acquisition growth. Online enquiries in FY2021 rose to 89% of our
enquiries in the UK (FY2020: 88%) and 85% in France (FY2020: 79%).
Approximately 64% of our online enquiries in the UK originate from
a mobile device (excluding tablets), compared to c. 60% 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 increased by 25%
whereas costs per enquiry decreased by 23%. Group marketing costs
as a percentage of revenue were 3.7% for the full year (FY2020:
4.5%).
During the year, 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.
Spanish cost per enquiry, for example was reduced by c. 60%
although the number of enquiries more than doubled. With the
integration of OMB, the Group has now completed the on-boarding of
all of its managed brands onto its Digital platform.
In February 2021, Safestore UK won the Feefo Platinum Trusted
Service award for the second time. The award is given to businesses
which 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 ratings 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 FY2021, 93% of customers rated their service
experience as "Excellent" or "Great" resulting in a TrustScore of
4.6 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-19 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. Shortly after
our Platinum accreditation, we also made the final top ten
shortlist for the Platinum Employer of the Year (250+) category in
the Investors in People Awards 2021. This nomination further
endorses the high standard of our teams and the people development
programmes that drive our skill and talent retention.
The Investors in People Awards firmly place Safestore in the top
2% of accredited organisations in the UK. The accreditation panel
commented: "There are real gains on all of the indicators and
individual themes compared to the survey conducted three years ago,
and the response rate of 93% is excellent. Safestore are a
fantastic example of sustained great practice." - Matthew Filbee,
IIP Practitioner.
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 24 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 programmes but also to capitalise on the
strength of our IT platforms. In the first half of 2021 we rolled
out our annual sales refresher programme to every store colleague
online, utilising some innovative technologies along with more
common communication tools such as Microsoft Teams to once again
raise our performance bar. As the restrictions in the UK relaxed
through the second half of the year, we were able to combine our
newly created technology communication skills with our tried and
tested face-to-face training sessions. In preparation for the start
of our new trading year, early September saw us deliver a newly
created "impact" sales refresher, further strengthening our charge
into 2022.
We recognised the changing needs and demands of our customers,
not only through the challenging times of 2020/21 but through the
newly emerging demands and requirements that late 2021 brought.
Combining new, along with tried and tested solutions and systems,
we are further able to support 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 programmes have 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. The relaxation
of the restrictions in mid-2021 has seen us take a blended approach
to our training and coaching utilising the best of both remote and
face to face engagement.
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 for
future Store Managers. The fifth intake are well underway on their
programme for 2021/22, 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 performance
with bonuses of up to 50% of basic salary based on their
achievements against individual targets for new lets, occupancy and
ancillary sales. 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 15 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 people's 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. Later in the year, we
became the only Self Storage provider in the UK to have a 5 STAR
Trustpilot rating. Along with our strong Google ratings, these
independent assessments further reflect our ongoing commitment to
their satisfaction as the number one storage provider in the
UK.
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, from
time to time, 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
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 31 October 2021, based on the current level of borrowings and
interest swap rates, the Group's weighted average cost of debt was
2.36% and 68% of our debt facilities are at fixed rate or hedged.
The weighted average maturity of the Group's drawn debt is 6.2
years at the current period end and the Group's LTV ratio is 25% as
at 31 October 2021.
This LTV and interest cover ratio of 10.5x for the rolling
twelve-month period ended 31 October 2021 provides us with
significant headroom compared to our banking covenants. We had
GBP252 million of undrawn bank facilities at 31 October 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. GBP8.9 million over the last nine years, the Group is
capable of generating free cash after dividends sufficient to fund
the building of three 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 below 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 GBP149 million 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 at a coupon of 0.93% (credit spread of 105 bps)
-- GBP80m 10 year notes at a coupon of 2.39% (credit spread of 150 bps)
-- EUR29m 12 year notes at a coupon of 1.42% (credit spread of 118 bps)
The funds were received in June 2021 and August 2021 and were
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 EUR115 million 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.
ESG Strategy
ESG: Sustainable Self Storage
Our purpose - to add stakeholder value by developing profitable
and sustainable spaces that allow individuals, businesses and local
communities to thrive - is supported by the 'pillars' of our
sustainability strategy: our people, our customers, our community
and our environment. In addition, the Group and its stakeholders
recognise that its efforts are part of a broader movement and we
have therefore aligned our objectives with the UN Sustainable
Development Goals ("SDGs"). We reviewed the significance of each
goal to our business and the importance of each goal to our
stakeholders and assessed our ability to contribute to each goal.
Following this materiality exercise, we have chosen to focus our
efforts in the areas where we can have a meaningful impact. These
are 'Decent work and economic growth' (goal 8), ' Sustainable
cities and communities' (goal 11), 'Responsible consumption and
production' (goal 12) and 'Climate action' (goal 13).
Sustainability is embedded into day-to-day responsibilities at
Safestore and, accordingly, we have opted for a governance
structure which reflects this. Two members of the Executive
Management team co-chair a cross-functional sustainability group
consisting of the functional leads responsible for each area of the
business.
In 2018, The Group established medium term targets in each of
the 'pillars' towards which the Group continued recent progress in
FY2021.
Our people: Safestore was awarded the prestigious Investors in
People (IIP) Platinum accreditation and was in the final top ten
shortlist for Platinum Employer of the Year (250+) category in The
Investors in People Awards 2021. The Group's pandemic response in
particular has had a profound impact on trust in leadership and
colleague engagement and motivation. This year, more than ever, our
people have truly made the difference.
Our customers: The Group's brands continue to deliver a high
quality experience, from online enquiry to move-in. This is
reflected in customer satisfaction scores on independent review
platforms (Trustpilot, Feefo, Google) of over 90% in each market.
The introduction of digital contracts during the pandemic offers
both customer convenience and a reduction in printing, saving an
estimated 156,000 pieces of paper each month.
Our community: Safestore remains committed to being a
responsible business by making a positive contribution within the
local communities wherever our stores are based. We continue do
this by developing brownfield sites and actively engaging with
local communities when we establish a new store, identifying and
implementing greener approaches in the way we build and operate our
stores, helping charities and communities to make better use of
limited space, and creating and sustaining local employment
opportunities directly and indirectly through the many small and
medium-sized enterprises which use our space. During the year, the
space occupied by local charities in 226 units across 102 stores
was 18,266 sq ft and worth GBP636,945.
Our environment: Safestore is committed to ensuring our
buildings are constructed responsibly and their ongoing operation
has a minimal impact on local communities and the environment. It
should be noted that the self storage sector is not a significant
consumer of energy when compared with other real estate subsectors.
As a result, operational emissions intensity tends to be far lower.
According to a recent report by KPMG & EPRA(1) , self storage
generates the lowest greenhouse gas emissions intensity (5.75
kg/m(2) for scope 1 and 2) of all European real estate sub-sectors,
with emissions per m(2) less than 30% of the European listed real
estate average (19.5 kg/m(2) ) and notably 21% of the emissions
intensity of the residential sub-sector (27.0 kg/m(2) ). Reflecting
the considerable progress made on energy mix, efficiency measures
and waste reduction to date, Safestore's emissions intensity (3.9
kg/m(2) in 2020) is considerably lower (-32%) than the self storage
subsector average. In FY2021, the Group continued to progress with
a further 12% decline in absolute emissions despite continued
portfolio growth and greater utilisation of stores compared to
2020. Safestore's absolute (location-based) emissions are now 53%
below, and emissions intensity 65% below the 2013 baseline level
despite significant growth in portfolio floor space. Moving
forward, the Group has a commitment to be operationally carbon
neutral by 2035 with a medium term target to reduce operational
emissions (market-based) by 50% compared to the level in FY2021 by
2025. The total investment to achieve carbon neutrality should be
around GBP3 million.
In addition to the IIP award and the customer satisfaction
ratings, the Group has received recognition for its sustainability
progress and disclosures in FY2021. Safestore has been given a
Silver rating in the 2021 EPRA Sustainability BPR awards. The
Global ESG Benchmark for Real Assets ("GRESB") has once again
awarded Safestore an "A" rating in its 2020 Public Disclosures
assessment. MSCI has awarded Safestore its second-highest rating of
"AA" for ESG in 2021. The Group has also been awarded the highest
rating of five stars by Support the Goals, recognising Safestore as
the third member of the FTSE 250 to achieve this level.
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 and revenue performance has been
enhanced in all cases under the Group's ownership.
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.
The Group's current pipeline of new developments and store
extensions has grown significantly over the last year and now
constitutes c. 732,000 sq ft of future MLA (equivalent to c.11% of
the existing portfolio) with an associated outstanding capital
expenditure of GBP96 million.
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 Birmingham Middleway store opened
in April 2021. Our existing nearby store at Digbeth (MLA 44,500 sq
ft) closed shortly afterwards and customers were relocated to the
Birmingham Middleway store. 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.
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. As a result, since 2012 the
remaining lease length of our UK stores has remained at c. 12-13
years.
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 required planning consents
for some external modifications to the building. Otherwise the
building was suitable for immediate conversion to self storage. The
74,000 sq ft store opened in December 2021.
In April 2021, the Group exchanged contracts on a freehold 1.3
acre site at Lea Bridge in North East London. The acquisition of
the site has now been completed and we plan to 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 November 2021, the Group completed the acquisition of a 1.2
acre freehold site off Old Kent Road in the London Borough of
Southwark in South East London. Subject to planning, we hope to
open a c. 76,500 sq ft MLA store in due course. Existing tenants on
the site will provide a rental income in the meantime.
In April 2021, the Group exchanged contracts on a freehold site
in Woodford in North East London. Subject to contract and planning,
we will open a 56,500 sq ft MLA store in 2025.
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
construction on this site is underway 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.
In July 2021, the Group exchanged contracts on a freehold 0.8
acre site in Shoreham, West Sussex. Shoreham is situated between
Brighton and Worthing on the south coast of England. Subject to
planning, we will open a purpose built 54,000 sq ft MLA store in Q4
of 2022.
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.
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 EUR6.85 million 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 EUR2 million.
In addition, Safestore will contribute its Nanterre site into
the project and will receive cash of EUR1.7 million 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.
Planning for the project has been received and construction has
commenced.
It is anticipated that the project will be completed in early
2025 when the self storage facility will open.
In August 2021, the Group exchanged contracts on a freehold site
in southern Paris with a significant frontage onto the N104
motorway. The site includes an existing building which will be
demolished and replaced by a 55,000 sq ft MLA store. Subject to
planning we expect the store to open in the third quarter of
2022.
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 October 2021 was 86.0%.
The Group is continuing its expansion of the business in
Barcelona and its entry into the Madrid market with the acquisition
of the following sites.
In April 2021, the Group exchanged contracts on a freehold
building in a high population density area in northern Madrid. The
acquisition has been completed and planning granted and 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 fourth
quarter of the 2021/22 financial year.
In March 2021, the Group exchanged contracts on a freehold
building in southern Madrid. The acquisition has been completed and
planning granted and 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 fourth quarter of the 2021/22 financial
year.
In December 2021, the Group exchanged contracts on a freehold
building in a commercial and industrial area of eastern Madrid.
Subject to completion and planning permission, we will convert the
existing building into a 49,000 sq ft MLA self storage facility. It
is anticipated that the site will open in the second quarter of
2023.
In January 2021, the Group exchanged contracts on a freehold
building in a densely populated area in central Barcelona. The
acquisition has been completed and planning granted and 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 third
quarter of the 2021/22 financial year.
In August 2021, the Group exchanged contracts on a leasehold
site in central Barcelona. The site is a former car dealership
which will be converted to a 19,000 sq ft MLA store which, subject
to planning, should open in Q4 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
first quarter of the 2022/23 financial year.
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. Planning has been granted and we expect to
open the site in the first quarter of the 2022/23 financial
year.
The total further cost of the acquisition and construction of
the new Spanish sites is anticipated to be c. EUR32 million and the
seven stores will add 225,000 sq ft of additional MLA.
Store Extensions
In May 2021, the Group exchanged contracts on a leasehold
basement car park adjacent to our existing London Paddington Marble
Arch store. The occupancy of the Paddington Marble Arch store at 31
March 2021 was 80%.The extension opened in December 2021, adding
8,500 sq ft of MLA.
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 sq ft). We completed this transaction in December 2021 and
work will commence in January 2022. 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-19 pandemic, was 92%.
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. The extension opened in December 2021.
The Group has also received planning permission to extend its
Edgware store by a further 22,900 sq ft. The existing store has MLA
of 24,000 sq ft and reached a peak occupancy of 91% prior to
extension works commencing. The extension opened in December
2021.
In September 2021 the Group received planning permission to
extend its Winchester store by 11,000 sq ft. The existing store has
an MLA of 42,000 sq ft and has been more than 90% occupied for the
last twelve months. It is anticipated that the extension will be
open in the fourth calendar quarter of 2022 and that there will be
minimal impact on day-to-day operations of the store during
construction.
Property Pipeline Summary
FH/ MLA sq Target
Store LH Status ft Opening Other
New build.
GBP170k pa of
Completed/ Subject rental income
London- Lea Bridge FH to Planning 76,500 Q1 2025 prior to opening
---- --------------------- ---------- --------- -----------------------------
New build.
Rental income
London- Old Kent Completed/ Subject receivable prior
Road FH to Planning 76,500 TBC to opening
---- --------------------- ---------- --------- -----------------------------
Contracts exchanged/
London- Woodford FH subject to planning 65,000 Q4 2025 New build
---- --------------------- ---------- --------- -----------------------------
Completed/ Planning
London- Morden FH granted 52,000 Q1 2023 New build
---- --------------------- ---------- --------- -----------------------------
Completed/ Subject
London- Bermondsey FH to Planning 50,000 Q4 2026 New build
---- --------------------- ---------- --------- -----------------------------
Contracts exchanged/
Shoreham FH subject to planning 54,000 Q4 2022 New build
---- --------------------- ---------- --------- -----------------------------
Conversion of
basement car park-satellite
London- Paddington Completed/ Planning store to existing
Park West LH granted 13,000 Q2 2023 Paddington store
---- --------------------- ---------- --------- -----------------------------
9,000
storage
Completed/ planning 1,000 Extension of existing
London- Wimbledon FH granted office Q2 2022 site
---- --------------------- ---------- --------- -----------------------------
Extension of existing
Winchester FH Planning granted 11,000 Q4 2022 site
---- --------------------- ---------- --------- -----------------------------
Completed/ Planning Facility within
Paris- La Défense FH granted 44,000 Q2 2025 mixed use development
---- --------------------- ---------- --------- -----------------------------
Paris- Southern Contracts exchanged/
Paris FH subject to Planning 55,000 Q3 2022 New build
---- --------------------- ---------- --------- -----------------------------
Completed/ Planning Conversion of
Northern Madrid FH granted 48,000 Q4 2022 existing building
---- --------------------- ---------- --------- -----------------------------
Completed/ Planning Conversion of
Southern Madrid FH granted 29,000 Q4 2022 existing building
---- --------------------- ---------- --------- -----------------------------
Contracts exchanged/ Conversion of
Eastern Madrid FH subject to Planning 49,000 Q2 2023 existing building
---- --------------------- ---------- --------- -----------------------------
Central Barcelona Completed/ Planning Conversion of
1 FH granted 13,500 Q3 2022 existing building
---- --------------------- ---------- --------- -----------------------------
Central Barcelona Contracts exchanged/ Conversion of
2 LH subject to Planning 19,000 Q4 2022 existing building
---- --------------------- ---------- --------- -----------------------------
Contracts exchanged/ Conversion of
Northern Barcelona FH subject to Planning 36,300 Q1 2023 existing building
---- --------------------- ---------- --------- -----------------------------
Contracts exchanged/ Conversion of
South Barcelona FH planning granted 30,000 Q4 2022 existing building
---- --------------------- ---------- --------- -----------------------------
Total Pipeline MLA c. 732k
---------- ----------------------------------------
Total Further Capex c. GBP96m
---------- ----------------------------------------
Acquisitions
Acquisition of Your Room Self Storage, Christchurch(10)
In December 2021, Safestore acquired Your Room Self Storage in
Christchurch, Dorset, for GBP2.45 million. The freehold
Christchurch store has an MLA of 14,000 sq ft and the Group
anticipates that the initial yield in the first year will be in
excess of 6%.
The Group will rebrand the store and has taken over operation of
the site with immediate effect. The store will operate as a
satellite store to our two existing Bournemouth stores.
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. EUR0.9 million 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 provided 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
six stores purchased in 2020 in Brussels, Charleroi and Liège,
Belgium. 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 volume of enquiries. The operational integration has
been completed in an efficient manner, leveraging the skills and
capacities of our existing Head Office teams 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 GBP103.5 million of revenue and GBP75.0 million of
store EBITDA for the financial year and offer a unique exposure to
the two most attractive European self storage markets.
Owned Store Portfolio by London
Region & Rest 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) 2.41 2.28 4.69 1.10 0.09 5.88
Maximum Lettable Area (m
sq ft) 2.80 2.69 5.49 1.36 0.11 6.96
Average Let Square Feet
per store (k sq ft) 34 40 37 38 23 37
Average Store Capacity
(k sq ft) 39 47 43 47 27 43
Closing Occupancy % 86.1% 84.7% 85.4% 80.7% 86.0% 84.5%
Average Rate (GBP per sq
ft) 30.85 19.45 25.32 33.78 28.00 26.95
Revenue (GBP'm) 89.7 54.4 144.1 39.9 2.8 186.8
Average Revenue per Store
(GBP'm) 1.26 0.95 1.13 1.38 0.70 1.16
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, 62% 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 ten stores branded as Une Pièce
en Plus ("UPP") ("A spare room"). Over 60% 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 31 October 2021, London, the South East and
Paris represent 62% of our stores, 69% of our revenues, and 60% 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 six 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 2021) confirmed that self storage capacity
stands at 0.74 sq ft per head of population in the UK and 0.25 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 also that 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 six 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
more affluent and 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 12 million inhabitants and significant barriers to
entry for self storage.
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. The 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
corporations 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) 76% 83% 88%
Square feet occupied (% of total) 58% 66% 81%
Average Length of Stay
(months) 18.9 28.0 22.9
Business Customers
Numbers (% of total) 24% 17% 12%
Square feet occupied (% of total) 42% 34% 19%
Average Length of Stay
(months) 28.0 31.9 25.1
Safestore's customer base is resilient and diverse and consists
of around 80,000 domestic, business and National Accounts customers
across London, Paris 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
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 31 October 2021 of 11.8
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, which
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 our 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 an
indexed rent. Taking into account this context, the valuer values
the French leaseholds based on an indefinite property tenure,
similar to freeholds.
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 in Belgium, 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 in the
Netherlands, 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% (FY2020: 88%) of our enquiries in the UK and 85%
(FY2020: 79%) in France. Telephone enquiries comprise 8% of the
total (10% in France) and "walk-ins" amount to only 3% (5% 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 internet
search engines. Safestore has developed a leading digital marketing
platform that has generated 63% 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 28 months. Within our
business customer category, our National Accounts business
represents around 617k sq ft of occupied space (around 13% 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. 80,000 business and
domestic customers with an average length of stay of 29 months and
21 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 GBP125
million of US Private Placement Notes in 2019 and GBP150 million 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 31 October 2021 we had 0.8m sq ft of unoccupied space in the
UK and 0.3m sq ft in France, equivalent to c.27.5 full new stores,
not including the 0.8m sq ft in our development pipeline in the UK,
Paris and Spain. 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 - an exceptional year
UK Operating Performance- total 2021 2020 Change
------------------------------------ ------ ------ ---------
Revenue (GBP'm) 144.1 121.3 18.8%
Underlying EBITDA (GBP'm)(2) 88.6 67.2 31.8%
Underlying EBITDA (after leasehold
costs) (GBP'm) 80.9 59.6 35.7%
Closing Occupancy (let sq ft
- million)(3) 4.690 4.325 8.4%
Maximum Lettable Area (MLA)(4) 5.49 5.44 0.9%
Closing Occupancy (% of MLA) 85.4% 79.4% +6.0ppts
Average Storage Rate (GBP)(5) 25.32 24.37 3.9%
UK Operating Performance- like-for-like(8) 2021 2020 Change
-------------------------------------------- ------ ------ ---------
Storage Revenue (GBP'm) 111.7 94.4 18.3%
Ancillary Revenues (GBP'm) 27.1 24.4 11.1%
Revenue (GBP'm) 138.8 118.8 16.8%
Underlying EBITDA (GBP'm)(2) 85.4 66.5 28.4%
Closing Occupancy (let sq ft-
million)(3) 4.501 4.215 6.8%
Closing Occupancy (% of MLA) 85.4% 80.4% +5.0ppts
Average Occupancy (let sq ft-
million)(3) 4.397 3.882 13.3%
Average Storage Rate (GBP)(5) 25.41 24.32 4.5%
UK statutory metrics 2021 2020 Change
--------------------------- ------ ------ -------
Operating Profit (GBP'm) 331.9 139.9 137.2%
Profit before Tax (GBP'm) 321.4 127.8 151.5%
The UK's revenue performance was outstanding in the year with
the business growing total revenue by 18.8% and like-for-like(8)
revenue by 16.8%. Performance was strong in both Regional UK as
well as London and the South East where like-for-like(8) revenue
was up 20.4% and 14.9% respectively.
The UK's fourth quarter performance, in particular, was
exceptional with the business growing total revenue by 25.4% and
like-for-like revenue by 23.4%. Momentum was strong in the quarter
with like-for-like storage rates up 14.8% compared to the prior
year as a result of the cumulative effect of pricing actions taken
throughout the year as well as reduced discounting. For the full
year, like-for-like average rate was up 4.5%.
In a reversion to more normal cyclical trading patterns, the
business saw a like-for-like occupancy outflow of 96,000 sq ft in
the fourth quarter. In the prior year, reflecting a trading rebound
after the Covid-19 lockdowns of Q2 and Q3, the business added
245,000 sq ft of occupancy on a like-for-like basis. Over the year
the business added occupancy of 286,000 sq ft on a like-for-like
basis (FY2020: 289,000 sq ft). As a result, like-for-like closing
occupancy, at 85.4%, increased by 5.0ppts compared to the prior
year.
Like-for-like ancillary revenues improved over the period and
were up 11.1% for the full year.
Total revenue grew by 18.8% for the full year. This reflected
like-for-like growth of 16.8%, the 2020 store openings in
Carshalton, Gateshead and Sheffield, the annualisation of the
acquisitions of our St John's Wood and Chelsea stores, the 2021
opening of our Birmingham Middleway store 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.
We remain focused on our cost base. During the year, our UK cost
base, on a like-for-like(8) basis, increased by just 2.1% or GBP1.1
million. Our total reported underlying UK cost base grew by GBP1.4
million or 2.6% reflecting the cost bases relating to newly and
recently opened stores.
As a result, Underlying EBITDA(2) for the UK business was
GBP88.6 million (FY2020: GBP67.2 million), an increase of GBP21.4
million or 31.8%. The tight cost control, combined with the
exceptional revenue performance, have resulted in a 6.1 ppt
increase in EBITDA margins from 55.4% to 61.5%.
For the two months to December 2021 trading continued to be
strong. Like-for-like occupancy was up 2.6ppts at 82.3% (2020:
79.7%) and like-for-like average rate was up 16.7% which resulted
in a 20.3% increase in like-for-like revenue.
Operating profit for the UK business was GBP331.9 million
(FY2020: GBP139.9 million), an increase of GBP192.0 million or
137.2%, largely driven by the increase in the gain on investment
properties of GBP180.8 million to GBP260.5 million (FY 2020: 79.7
million). Profit before tax was GBP321.4 million (FY2020: GBP127.8
million), an increase of GBP193.6 million or 151.5%.
Paris - a strong year with good momentum in the final
quarter
Paris Operating Performance- 2021 2020 Change
total
------------------------------------ ------ ------ ---------
Revenue (EUR'm) 46.0 44.1 4.3%
Underlying EBITDA (EUR'm)(2) 31.4 28.5 10.2%
Underlying EBITDA (after leasehold
costs) (EUR'm) 25.7 23.2 10.8%
Closing Occupancy (let sq ft
- million)(3) 1.100 1.034 6.4%
Maximum Lettable Area (MLA)(4) 1.36 1.31 3.8%
Closing Occupancy (% of MLA) 80.7% 78.8% +1.9ppts
Average Storage Rate (EUR)(5) 38.90 39.64 -1.9%
Revenue (GBP'm) 39.9 38.8 2.8%
Paris Operating Performance- 2021 2020 Change
like-for-like(8)
------------------------------- ------ ------ ---------
Storage Revenue (EUR'm) 41.90 40.23 4.2%
Ancillary Revenues (EUR'm) 4.04 3.82 5.8%
Revenue (EUR'm) 45.94 44.05 4.3%
Underlying EBITDA (EUR'm)(2) 31.5 28.4 10.9%
Closing Occupancy (let sq ft-
million)(3) 1.097 1.034 6.1%
Closing Occupancy (% of MLA) 83.6% 78.8% +4.8ppts
Average Occupancy (let sq ft-
million)(3) 1.077 1.015 6.1%
Average Storage Rate (EUR)(5) 38.90 39.64 -1.9%
Paris statutory metrics 2021 2020 Change
--------------------------- ----- ----- -------
Operating Profit (GBP'm) 78.8 71.2 10.7%
Operating Profit (EUR'm) 90.7 80.9 12.1%
Profit before Tax (GBP'm) 77.0 69.1 11.4%
Profit before Tax (EUR'm) 88.7 78.5 13.0%
On a like-for-like(8) basis, the business grew revenue by 4.3%
for the full year. This was driven by average occupancy growth of
6.1% for the year, offset by an average rate decline of 1.9%.
Average rate has been improving over the period and was up 0.5% in
the fourth quarter which saw accelerated like-for-like revenue
growth of 8.1%.
Like-for-like(8) occupancy increased by 63,000 sq ft for the
year (FY2020: increase of 19,000 sq ft) resulting in closing
occupancy of 83.6%, up 4.8ppts compared to the prior year.
The average Sterling-Euro exchange rate for the year was 1.1516,
1.4% stronger than the prior year (FY2020: 1.1356). As a result,
there was a small foreign exchange impact on the translation of
Paris revenues which were up 2.8% for the year in Sterling.
The cost base in Paris was strongly controlled during the year
with both like-for-like(8) costs and total costs down compared to
the prior year in local currency through savings in enquiry
generation, maintenance and utilities. As a result,
like-for-like(8) Underlying EBITDA(2) in Paris grew by EUR3.1
million and Underlying EBITDA(2) grew by EUR2.9 million to EUR31.4
million (FY2020: EUR28.5 million).
For the two months to December 2021 trading has been strong.
Like-for-like occupancy was up 1.9ppts at 81.5% (2020: 79.6%) and
like-for-like average rate was up 1.5%, which resulted in an 8.0%
increase in like-for-like revenue.
Operating profit for the Paris business was EUR90.7 million
(FY2020: EUR80.9 million), an increase of EUR9.8 million or 12.1%,
largely driven by the increase in the gain on investment properties
of EUR11.0 million to EUR64.5 million (FY 2020: EUR53.5 million).
Profit before tax was EUR88.7 million (FY2020: EUR78.5 million), an
increase of EUR10.2 million or 13.0%.
Spain Trading Performance
Our Spanish business, which was acquired in December 2019 and
is, therefore, not considered like-for-like, grew revenue by 32.0%
in the year to EUR3.3 million (10 months to October 2020: EUR2.5
million). A deliberate strategy of improving average rate and
ancillary revenues has been pursued in the period. Closing
occupancy in sq ft was consequently down 2.1% compared to 2020
whilst average rate in the year-to-date grew by 6.4% to EUR32.25
(2020: EUR30.32) with ancillary revenues improving strongly.
Closing occupancy was 86.0% (2020: 90.0%).
Like-for-like revenue for the Spanish business for the two
months to December 2021 was up 11.9%.
The business contributed EUR2.0 million EBITDA before rent in
the year and EUR1.5 million EBITDA after rent.
Operating profit for the Spanish business was EUR7.3 million (10
months to October 2020: EUR1.2 million), an increase of EUR6.1
million largely driven by the increase in the gain on investment
properties of EUR4.8 million to EUR5.3 million (2020: EUR0.5
million). Profit before tax was EUR7.1 million (10 months to
October 2020: EUR1.1 million), an increase of EUR6.0 million.
Frederic Vecchioli
12 January 2022
Financial Review
EPS(1) has grown by 279% over the last eight years
Underlying income statement
The table below sets out the Group's underlying results of
operations for the year ended 31 October 2021 and the year ended 31
October 2020. To calculate the underlying performance metrics,
adjustments are made for the impact of exceptional items,
share-based payments, corporate transaction costs, change in fair
value of derivatives, gain or loss on investment properties and the
associated tax impacts, as well as exceptional tax items and
deferred tax. Management considers this presentation of earnings to
be representative of the underlying performance of the business, as
it removes the income statement impact of items not fully
controllable by management, such as the revaluation of derivatives
and investment properties, and the impact of exceptional credits,
costs and finance charges.
2021 2020 Mvmt
GBP'm GBP'm %
Revenue 186.8 162.3 15.1%
Underlying costs (69.3) (68.7) 0.9%
Share of associate's Underlying
EBITDA 0.5 0.3 66.7%
------- -------
Underlying EBITDA 118.0 93.9 25.7%
Leasehold costs (13.0) (12.8) 1.6%
------- -------
Underlying EBITDA after leasehold
costs 105.0 81.1 29.5%
Depreciation (1.0) (0.9) 11.1%
Finance charges (9.5) (9.1) 4.4%
Share of associate's finance
charges (0.5) (0.2) 150.0%
------- -------
Underlying profit before
tax 94.0 70.9 32.6%
Current tax (5.5) (5.2) 5.8%
Share of associate's
tax - (0.1) -
Adjusted EPRA earnings 88.5 65.6 34.9%
Share-based payments
charge (18.3) (6.5) 181.5%
EPRA basic earnings 70.2 59.1 18.8%
------- -------
Average shares in issue
(m) 210.8 210.4
Diluted shares (for
ADE EPS) (m) 218.3 217.2
Adjusted Diluted EPRA EPS(1)
(pro forma) (p) 40.5 30.2 34.1%
1. 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 statutory profit before tax in the
income statement to underlying profit before tax in the previous
table.
2021 2020
GBP'm GBP'm
Statutory profit before tax 404.6 197.9
Adjusted for
- Gain on investment properties
and investment property under
construction (328.5) (133.4)
- Change in fair value of derivatives (2.9) (0.2)
- Net exchange (gain)/ loss 0.6 (0.2)
- Share of associate's tax - 0.1
- Share-based payments 18.3 6.5
- Exceptional items 1.9 0.2
Underlying profit before tax 94.0 70.9
-------- --------
Management considers the above presentation of earnings to be
representative of the underlying performance of the business.
Underlying EBITDA increased by 25.7% to GBP118.0 million
(FY2020: GBP93.9 million), reflecting a 15.1% increase in revenue
and a 0.9% increase to the underlying cost base. This performance
reflects the strong growth in occupancy, up 5.0ppts to 84.5% in
2021 from 79.5% in 2020, coupled with an increase in average rate
of 1.9% to GBP26.95 in 2021 from GBP26.44 in 2020, whilst
maintaining control over costs
Leasehold costs increased by 1.6% from GBP12.8 million to
GBP13.0 million, principally due to the opening of the Magenta
store in Paris coupled with the full year trading of Valencia,
Calabria and Marina in Spain acquired in December 2019.
Underlying finance charges increased by 4.4% from GBP9.1 million
to GBP9.5 million. This reflects increased interest charges from
drawdowns in the year to fund the Group's acquisition and
development activity, which increased from GBP9.1 million in 2020
to GBP9.7 million in 2021, offset by the gains made on financial
instruments of GBP0.3 million in 2021 (FY2020: GBP0.2 million)
As a result, we achieved a 32.6% increase in underlying profit
before tax of GBP94.0 million (FY2020: GBP70.9 million). The main
additional factor in the increase in statutory profit before tax in
the year is the GBP195.1 million increase in the gain on investment
and development property, primarily due to the stronger underlying
performance of the stores, as mentioned above, as well as an
increase in the stabilised occupancy assumption and a reduction in
exit cap rates, offset by an increase in the share-based payment
charge of GBP11.8 million as outlined below.
Given the Group's REIT status in the UK, tax is normally only
payable in France and Spain. The underlying tax charge for the year
was GBP5.5 million (FY2020: GBP5.2 million), calculated by applying
the effective underlying tax rate of 24.5% (for France and Spain)
to the respective underlying profits earned by the France and Spain
businesses.
The Group's share-based payment charge increased by GBP11.8
million to GBP18.3 million (FY2020: GBP6.5 million). This increase
arises from one performance measure, Earnings per Share, being
measured over a 5 year period from 1 November 2016 to 31 October
2021, where EPS is measured against the Adjusted Diluted EPRA EPS
growth over this period against a performance target of 12% per
annum. As the performance period has completed, measurement of this
performance criteria and associated National Insurance charge,
which vests in 2022, can be accurately measured and has been
provided for in full, reflecting the strong performance of the
business over this period.
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 34.1%
to 40.5 pence (FY2020: 30.2 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the
income statement to Underlying EBITDA.
2021 2020
GBP'm GBP'm
Statutory Operating profit 417.0 212.2
Adjusted for
- Gain on investment
properties (321.1) (126.5)
- Share of associate's Underlying
EBITDA 0.5 0.3
- Depreciation 1.0 0.9
- Variable lease payments 0.4 0.3
- Share-based payments 18.3 6.5
Exceptional
items
- Exceptional taxation costs 1.9 0.2
Underlying
EBITDA 118.0 93.9
-------- --------
The main reconciling items between statutory operating profit
and Underlying EBITDA are the gain on investment properties as well
as adjustments for depreciation, variable lease payments,
share-based payment charges and the share of associate's Underlying
EBITDA. The gain on investment properties was GBP321.1 million, as
compared to GBP126.5 million in 2020 primarily due to the stronger
underlying performance of the stores. The Group's approach to the
valuation of its investment property portfolio at 31 October 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.
2021 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 144.1 46.0 3.3 187.5 121.3 44.1 2.5 162.3
Underlying cost
of sales (45.2) (11.2) (0.7) (55.7) (44.3) (11.8) (0.5) (55.1)
------- ------- ------ -------- ------- ------- ------ -------
Store EBITDA 98.9 34.8 2.6 131.8 77.0 32.3 2.0 107.2
Store EBITDA margin 68.6% 75.7% 78.8% 70.3% 63.5% 73.2% 80.0% 66.1%
LFL Store EBITDA
margin 68.8% 76.0% n/a 70.5% 63.6% 73.0% n/a 65.9%
Underlying administrative
expenses (10.3) (3.4) (0.6) (13.8) (9.8) (3.8) (0.5) (13.6)
Underlying EBITDA 88.6 31.4 2.0 118.0 67.2 28.5 1.5 93.6
EBITDA margin 61.5% 68.3% 60.6% 62.9% 55.4% 64.6% 60.0% 57.7%
LFL EBITDA margin 61.5% 68.6% n/a 63.1% 56.0% 64.5% n/a 58.1%
Leasehold costs (7.7) (5.7) (0.5) (13.1) (7.6) (5.3) (0.5) (12.8)
Underlying EBITDA
after leasehold
costs 80.9 25.7 1.5 104.9 59.6 23.2 1.0 80.8
------- ------- ------ -------- ------- ------- ------ -------
EBITDA after leasehold
costs margin 56.1% 55.9% 45.5% 55.9% 49.1% 52.6% 40.0% 49.8%
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
costs (CER) 80.9 22.7 1.3 104.9 59.6 20.3 0.9 80.8
Adjustment to
actual exchange
rate - (0.4) - (0.4) - - - -
Reported Underlying
EBITDA after leasehold
costs 80.9 22.3 1.3 104.5 59.6 20.3 0.9 80.8
------- ------- ------ -------- ------- ------- ------ -------
Note: CER is Constant Exchange Rates (Euro denominated results
for the current period have been retranslated at the exchange rate
effective for the comparative period in order to present the
reported results on a more comparable basis).
Underlying EBITDA in the UK increased by GBP21.4 million, or
31.8%, to GBP88.6 million (FY2020: GBP67.2 million), underpinned by
an 18.8% or GBP22.8 million increase in revenue, which was driven
by an increase in occupancy levels and rate improvements in the
like-for-like portfolio as well as the impact of 2020 store
openings in Carshalton, Gateshead and Sheffield; and the 2021
opening of our Birmingham Middleway store. Underlying UK EBITDA
after leasehold costs increased by 35.7% to GBP80.9 million
(FY2020: GBP59.6 million).
In Paris, Underlying EBITDA increased by EUR2.9 million, or
10.2%, to EUR31.4 million (FY2020: EUR28.5 million), primarily
driven by a EUR1.9 million increase in revenue. Underlying EBITDA
after leasehold costs in Paris increased by 10.8% to EUR 25.7
million (FY2020: EUR23.2 million).
In Spain, Underlying EBITDA increased by EUR0.5 million, from
EUR1.5 million in 2020 to EUR2.0 million in 2021. This directly
translated into an increase in Underlying EBITDA after leasehold
costs from EUR1.0 million in 2020 to EUR1.5 million in 2021.
The combined results of the UK, Paris and Spain delivered a
29.8% increase in Underlying EBITDA after leasehold costs at
constant exchange rates at Group level. Adjusting for an
unfavourable exchange impact of GBP0.4 million, the combined
results of the UK, Paris and Spain reported an Underlying EBITDA
after leasehold costs increase of 29.3% or GBP23.7 million to
GBP104.5 million (FY2020: GBP80.8 million).
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 2021 and 2020.
% of % of
2021 total 2020 total % change
UK GBP'm 144.1 77% 121.3 75% 18.8%
Paris
Local currency EUR'm 46.0 44.1 4.3%
Average exchange
rate EUR:GBP 1.152 1.136 (1.4%)
Paris in Sterling GBP'm 39.9 21% 38.8 24% 2.8%
Spain
Local currency EUR'm 3.3 2.5 32.0%
Average exchange
rate EUR:GBP 1.152 1.136 (1.4%)
Spain in Sterling GBP'm 2.8 2% 2.2 1% 27.3%
Total revenue GBP'm 186.8 100% 162.3 100% 15.1%
------ ------- ------ ------- ---------
The Group's revenue increased by 15.1% or GBP24.5 million in the
year. The Group's occupied space was 429,000 sq ft higher at 31
October 2021 (5.883 million sq ft) than at 31 October 2020 (5.454
million sq ft), and the average storage rate per sq ft for the
Group was, at GBP26.95, 1.9% higher than in 2020 (GBP26.44).
Adjusting the Group's revenue to a like-for-like basis
(adjusting for the 2020 store openings in Carshalton, Gateshead and
Sheffield; the Spain stores acquired in December 2019; and the 2021
opening of our Birmingham Middleway store), revenue has increased
by 13.4%. There was minimal exchange rate movement in the year so
Group like-for-like revenue at constant exchange rates has
increased by 13.8%.
In the UK, revenue grew by GBP22.8 million or 18.8%, and on a
like-for-like basis it increased by 16.8%. Occupancy was 365,000 sq
ft higher at 31 October 2021 than at 31 October 2020, at 4.690
million sq ft (FY2020: 4.325 million sq ft), largely reflecting
occupancy increases in the established portfolio. The average
storage rate for the year grew 3.9%, from GBP24.37 in 2020 to
GBP25.32 in 2021. On a like-for-like basis, the average storage
rate in the UK also increased by 4.5% to GBP25.41 (FY2020:
GBP24.32).
In Paris, revenue increased by 4.3% to EUR45.94 million on a
like-for-like basis (FY2020: EUR44.05 million). This was driven by
average occupancy growth of 6.1%, with closing occupancy growing to
1.100 million sq ft (FY2020: 1.034 million sq ft), offset by a
slight decrease in the average storage rate of -1.9% to EUR38.90
for the year (FY2020: EUR39.64).
For Spain, revenue was EUR3.3 million, reflecting the growth in
average rate of 6.4% to EUR32.25 (2020: EUR30.32), with a closing
occupancy of 0.093 million sq ft (86.0%) in addition to the full
twelve months' trading in 2021, with 2020 representing only ten
months.
Analysis of cost base
Cost of sales
The table below details the key movements in cost of sales
between 2020 and 2021.
Cost of sales 2021 2020
GBP'm GBP'm
Statutory cost of sales (56.9) (56.3)
Adjusted
for:
Depreciation 1.0 0.9
Variable lease payments 0.4 0.3
Underlying cost of sales (55.5) (55.1)
------- -----------
Underlying cost of sales
for FY2020 (55.1)
New developments cost of sales 1.4
Underlying cost of sales for FY2020
(Like-for-like) (53.7)
Volume related cost of sales 0.3
Employee remuneration (1.3)
Facilities and rates 1.3
Enquiry generation savings 0.5
Underlying cost of sales for FY2021
(Like-for-like; CER) (52.9)
New developments cost of sales (2.8)
Underlying cost of sales
for FY2021 (CER) (55.7)
Foreign exchange 0.2
Underlying cost of sales
for FY2021 (55.5)
-----------
In order to arrive at underlying cost of sales, adjustments are
made to remove the impact of depreciation, which does not form part
of Underlying EBITDA, and variable lease payments, which forms part
of our leasehold costs in the presentation of our underlying income
statement.
Underlying cost of sales increased by GBP0.4 million in the
year, from GBP55.1 million in 2020 to GBP55.5 million in 2021. On a
like-for-like basis, cost of sales reduced by GBP0.8 million or
1.5%, with a GBP 1.3 million reduction from business rates and
facilities due to lower than expected historical business rates
reviews as well as savings on utilities and store maintenance
charges, offset by an increase in employee remuneration of GBP1.3
million attributed to the stronger store performance. The
investment in marketing during the year represented 3.7% of revenue
(FY2020: 4.5%).
Administrative expenses
The table below reconciles reported administrative expenses to
underlying administrative expenses and details the key movements in
underlying administrative expenses between 2020 and 2021.
Administrative expenses 2021 2020
GBP'm GBP'm
Statutory administrative expenses (34.0) (20.3)
Adjusted for:
Share-based payments 18.3 6.5
Exceptional items 1.9 0.2
Underlying administrative
expenses (13.8) (13.6)
------- -------
Underlying administrative expenses
for FY2020 (13.6)
New developments administration
costs 1.3
Underlying administrative expenses for
FY2020 (Like-for-like) (12.3)
Employee remuneration (1.0)
Other employee related costs 0.3
Professional fees and administration
costs (0.2)
Underlying administrative expenses for
FY2021 (Like-for-like; CER) (13.2)
New developments administration
costs (0.6)
Underlying administrative expenses
for FY2021 (CER) (13.8)
Foreign exchange -
Underlying administrative expenses
for FY2021 (13.8)
-------
In order to arrive at underlying administrative expenses,
adjustments are made to remove the impact of exceptional items,
share-based payments and other non-underlying items. The increase
in share-based payments arises from one performance measure,
Earnings per Share, being measured over a 5 year period from 1
November 2016 to 31 October 2021, where EPS is measured against the
Adjusted Diluted EPRA EPS growth over this period against a
performance target of 12% per annum. As the performance period has
completed, measurement of this performance criteria and the
associated National Insurance charge, which vests in 2022, can
accurately be measured and has been provided for in full,
reflecting the strong performance of Safestore over this
period.
Underlying administrative expenses increased by GBP0.2 million
in the year, from GBP13.6 million in 2020 to GBP13.8 million in
2021. Like-for-like administrative expenses in absolute and
constant currencies grew by 7.3% to GBP13.2 million. This is the
result of year-on-year increases in employee remuneration, which
are associated with the strong business performance together with
increases in underlying professional fees from the prior year.
Total underlying costs (cost of sales plus administrative
expenses) on a like-for-like basis have remained constant at
GBP66.1 million (FY2020: GBP66.0 million).
Exceptional items
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 GBP2.1 million at 31 October 2021 (31 October 2020: GBPnil), to
reflect the increased uncertainty surrounding the likelihood of a
fully successful outcome. Of the total provided, GBP1.9 million has
been recorded as an exceptional charge in respect of financial
years 2012 to 2020 and GBP0.2 million has been charged in relation
to the 31 October 2021 financial year 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 October 2021 is GBP2.7 million (31
October 2020: GBP4.2 million). 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.
Gain on investment properties
The gain on investment properties consists of the revaluation
gains and losses with respect to investment properties under IAS 40
and the fair value re-measurement of lease liabilities add-back and
other items as detailed below.
2021 2020
GBP'm GBP'm
Revaluation of investment
properties 329.0 137.7
Revaluation of investment properties
under construction (0.5) (4.3)
Fair value re-measurement of lease
liabilities add-back (7.4) (6.9)
Statutory gain on investment
properties 321.1 126.5
------ ------
In the current financial year, the UK business contributed
GBP260.5 million to the positive valuation movement and the Paris
business contributed GBP56.0 million, with the remaining GBP4.6
million in Spain. The gain on investment properties principally
reflects the continuing progress in the performance of the
businesses, which has driven further positive changes in the cash
flow metrics that are used to assess the value of the store
portfolio which are predominantly based on trading potential,
underpinned by average rate which has increased by 1.9% to GBP26.95
in 2021 from GBP26.44 in 2020 and occupancy which is up 5.0ppts to
84.5% in 2021 from 79.5% in 2020, capitalisation rates and
stabilised occupancy.
Operating profit
Operating profit increased by GBP204.8 million from GBP212.2
million in 2020 to GBP417.0 million in 2021, comprising a GBP24.1
million increase in Underlying EBITDA, a GBP194.6 million higher
investment property gain primarily due to significant improvement
in store performance, offset by the higher share-based payments
charge outlined earlier.
Net finance costs
Net finance costs include interest payable, interest on
obligations under lease liabilities, fair value movements on
derivatives, exchange gains or losses, unwinding of discounts and
exceptional refinancing costs. Net finance costs decreased by
GBP1.9 million in 2021, to GBP12.4 million from GBP14.3 million in
2020, principally due to a favourable net fair value movement on
derivatives in the year of GBP2.9 million compared to GBP0.2
million in 2020.
2021 2020
GBP'm GBP'm
Net bank interest payable (9.7) (9.1)
Amortisation of debt issuance costs
on bank loans (0.4) (0.3)
Interest from loan to associates 0.1 0.1
Financial instruments income 0.5 0.2
------- -------
Underlying finance charges (9.5) (9.1)
Interest on obligations under lease
liabilities (5.2) (5.6)
Fair value movement on derivatives 2.9 0.2
Net exchange gains/(losses) (0.6) 0.2
------- -------
Net finance costs (12.4) (14.3)
------- -------
Underlying finance charge
The underlying finance charge (net bank interest payable
reflecting term loan, swap and USPP interest costs) increased by
GBP0.4 million to GBP9.5 million, principally reflecting the
Group's additional borrowings in the year drawn to fund the Group's
acquisition and development activity. The underlying finance charge
represents the finance expense before exceptional items and changes
in fair value of derivatives, amortisation of debt issuance costs
and interest on obligations under lease liabilities and is
disclosed because management reviews and monitors performance of
the business on this basis.
Financial instruments income in the year of GBP0.5 million
(FY2020: GBP0.2 million) related to the gains made on the
expiration of average rate forwards which matured in April 2021 and
October 2021.
Based on the year-end drawn debt position 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 GBP32.0 GBP32.0 100% 1.25% 0.82% 0.04% 1.60%
UK Revolver-
non-utilisation GBP218.0 - - - 0.50% - - 0.50%
Euro Revolver EUR70.0 GBP25.3 GBP25.3 100% 1.25% 0.17% (0.56%) 1.42%
Euro Revolver-
non-utilisation EUR40.0 - - - 0.50% - - 0.50%
US Private Placement
2024 EUR50.9 GBP43.0 GBP43.0 100% 1.59% - - 1.59%
US Private Placement
2027 EUR74.1 GBP62.6 GBP62.6 100% 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 GBP59.1 GBP59.1 100% 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%
US Private Placement
2028 GBP20.0 GBP20.0 GBP20.0 100% 1.96% - - 1.96%
US Private Placement
2028 EUR29.0 GBP24.5 GBP24.5 100% 0.93% - - 0.93%
US Private Placement
2031 GBP80.0 GBP80.0 GBP80.0 100% 2.39% - - 2.39%
US Private Placement
2033 EUR29.0 GBP24.5 GBP24.5 100% 1.42% - - 1.42%
Unamortised finance
costs - (GBP1.8) - - - - - -
Total GBP589.3 GBP484.7 GBP486.5 100% 2.36
---------- --------- --------- ------- ------
As at 31 October 2021, GBP32.0 million of the GBP250 million UK
Revolver and EUR30.0 million (GBP25.3 million) of the EUR70 million
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 GBP218.0 million and EUR40.0 million.
The Group has GBP55.3 million of interest rate swaps in place to
June 2023, swapping SONIA at a weighted average effective rate of
0.82% and EURIBOR on EUR30.0 million at an effective rate of 0.17%.
These interest rate swaps are in place to hedge the UK Revolver
floating SONIA rate and the Euro Revolver floating EURIBOR
rate.
The 2024, 2026 and 2027 US Private Placement Notes are
denominated in Euros and attract fixed interest rates of 1.59% (on
EUR50.9 million), 2.00% (on EUR74.1 million) and 1.26% (on EUR70.0
million) respectively. The Euro denominated borrowings provide a
natural hedge against the Group's investment in the Paris and Spain
businesses.
The 2029 (GBP50.5 million), 2026 (GBP35.0 million) and 2029
(GBP30.0 million) US Private Placement Notes are denominated in
Sterling and attract a fixed interest rate of 2.92%, 2.59% and
2.69% respectively.
On 7 May 2021, Safestore extended its borrowing facilities with
the issuance of the equivalent of GBP149.0 million new Sterling and
Euro denominated US Private Placement ("USPP") Notes with the
following coupons and tenors:
-- GBP20.0m 7 year notes at a coupon of 1.96% (credit spread of 140 bps)
-- EUR29.0m 7 year notes a coupon of 0.93% (credit spread of 105 bps)
-- GBP80.0m 10 year notes a coupon of 2.39% (credit spread of 150 bps)
-- EUR29.0m 12 year notes a coupon of 1.42% (credit spread of 118 bps)
The funds were received in June 2021 and August 2021 and were
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 EUR115.0 million 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.
As a result of the hedging arrangements and fixed interest loan
notes, effectively 100% of the Group's drawn debt is at fixed rates
of interest. Overall, the Group has an effective interest rate on
its borrowings of 2.36% at 31 October 2021, compared to 2.13% at
the previous year end, reflecting the increased weighting of USPP's
given the lower drawn element of the RCF at year end.
Non-underlying finance charge
Interest on obligations under lease liabilities was GBP5.2
million (FY2020: GBP5.6 million) and reflects part of the leasehold
costs. 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 costs
charge increased from GBP12.8 million in 2020 to GBP13.0 million in
2021, principally reflecting the full year of cost for the Spain
stores and the opening of the Paris Magenta store.
Net finance costs include a GBP0.6 million exchange loss
(FY2020: GBP0.2 million gain) arising primarily on retranslation of
the Group's Euro denominated borrowings.
A net gain of GBP2.9 million was recognised on fair valuation of
derivatives (FY2020: net gain of GBP0.2 million). This gain is
primarily driven by the movement in the interest rate swaps year on
year due to future market expectations around rising inflation.
The Group undertakes net investment hedge accounting for its
Euro denominated loan notes.
Tax
The tax charge for the year is analysed below:
Tax charge 2021 2020
GBP'm GBP'm
Underlying current
tax (5.5) (5.2)
Prior year - exceptional - 2.4
Current tax charge (5.5) (2.8)
------- -------
Tax on investment properties
movement (17.8) (17.1)
Tax on revaluation of interest
rate swaps (0.1) -
Other 0.8 -
Deferred tax charge (17.1) (17.1)
------- -------
Net tax charge (22.6) (19.9)
------- -------
The net income tax charge for the year is GBP22.6 million
(FY2020: GBP19.9 million), which relates solely to the Group's
non-UK European businesses. In the UK, the Group is a REIT and
benefits from a zero rate of tax on its qualifying earnings. The
underlying current tax charge relating to the European businesses
amounted to GBP 5.5 million (FY2020: GBP5.2 million), calculated by
applying the effective overall underlying tax rate of 24.5% (for
France and Spain) to the underlying profits arising earned by the
France and Spain businesses.
The deferred tax charge relating to Paris and Spain was GBP17.1
million (FY2020: GBP17.1 million charge).
In 2020, an exceptional prior year current tax credit of GBP2.4
million arose as a result of confirmation of loss claims made in
2015 and 2016 by an overseas subsidiary following the expiry of the
statutory limitation period allowed for challenging the utilisation
of these losses on 31 December 2019.
All deferred tax movements are non-underlying. The deferred tax
impact of the revaluation gain on investment properties was a
charge of GBP17.1 million (FY2020: GBP17.1 million charge).
Earnings per Share
As a result of the movements explained above, profit after tax
for 2021 was GBP382.0 million as compared with GBP178.0 million in
2020. Basic EPS was 181.2 pence (FY2020: 84.6 pence) and diluted
EPS was 176.4 pence (FY2020: 84.0 pence).
Adjusted Diluted EPRA EPS is based on the European Public Real
Estate Association's definition of earnings and is defined as
profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts. The
Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional
tax items and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore, neither the Company's ability to
distribute nor pay dividends are impacted (with the exception of
the associated National Insurance element). The financial
statements disclose earnings on a statutory, EPRA and Adjusted
Diluted EPRA basis and provide a full reconciliation of the
differences in the financial year in which any Long Term Incentive
Plan ("LTIP") awards may vest.
Management introduced Adjusted Diluted EPRA EPS as a measure of
EPS following the implementation of the Group's LTIP scheme in
2017. Management considers that the real cost to existing
shareholders is the dilution that they will experience from the
LTIP scheme; therefore, earnings has been adjusted for the IFRS 2
share-based payment charge, and the number of shares used in the
EPS calculation has been adjusted for the dilutive effect of the
LTIP scheme.
The Group has exposure to the movement in the Euro/Sterling
exchange rate. Based on the FY2021 results, for every 10 cents
variance to the average exchange rate of 1.1516, there would be an
impact of GBP1.4 million to Adjusted EPRA Earnings.
Adjusted Diluted EPRA EPS for the year was 40.5 pence (FY2020:
30.2 pence), calculated on a pro forma basis, as if the dilutive
LTIP shares were in issue throughout both the current and prior
years, as follows:
2021 2020
Earnings Shares Pence Earnings Shares Pence
per per
GBPm million share GBPm million share
Basic earnings 382.0 210.8 181.2 178.0 210.4 84.6
Adjustments
Gain on investment
properties (321.1) - (152.3) (126.5) - (60.1)
Exceptional items 1.9 - 0.9 0.2 - 0.1
Exceptional finance
costs - - - - - -
Net exchange (gain)/loss 0.6 - 0.3 (0.2) - (0.1)
Change in fair value
of derivatives (2.9) - (1.4) (0.2) - (0.1)
Tax on adjustments/exceptional
tax 16.2 - 7.7 13.9 - 6.6
Adjusted 76.7 210.8 36.4 65.2 210.4 31.0
EPRA adjusted:
Fair value re-measurement
of lease liabilities
add-back (7.4) - (3.5) (6.9) - (3.3)
Tax on lease liabilities
add-back adjustment 0.9 - 0.4 0.8 - 0.4
EPRA basic EPS 70.2 210.8 33.3 59.1 210.4 28.1
Share-based payments
charge 18.3 - 8.7 6.5 - 3.1
Dilutive shares - 7.5 (1.5) - 6.8 (1.0)
Adjusted Diluted
EPRA EPS 88.5 218.3 40.5 65.6 217.2 30.2
--------- -------- -------- --------- -------- -------
Dividends
The Directors are recommending a final dividend of 17.6 pence
(FY2020: 12.7 pence) which Shareholders will be asked to approve at
the Company's Annual General Meeting on 16 March 2022. If approved
by Shareholders, the final dividend will be payable on 7 April 2022
to Shareholders on the register at close of business on 4 March
2022.
Reflective of the Group's improved performance, the Group's full
year dividend of 25.1 pence is 34.9% up on the prior year dividend
of 18.6 pence. The Property Income Distribution ("PID") element of
the full year dividend is 25.1 pence (FY2020: 18.6 pence).
Property valuation and Net Asset Value ("NAV")
Cushman & Wakefield Debenham Tie Leung Limited LLP
("C&W") have valued the Group's property portfolio. As at 31
October 2021, the total value of the Group's property portfolio was
GBP1,881.8 million (excluding investment properties under
construction of GBP67.4 million and net of lease liabilities of
GBP82.2 million). This represents an increase of GBP324.3 million
compared with the GBP1,557.5 million valuation as at 31 October
2020. A reconciliation of the movement is set out below:
UK Paris Spain Total Paris Spain
GBP'm GBP'm GBP'm GBP'm EUR'm EUR'm
Value as at 1 November
2020 1,135.2 400.8 21.5 1,557.5 445.4 23.9
Currency translation
movement - (26.5) (1.4) (27.9) - -
Additions 14.8 4.5 0.2 19.5 5.3 0.2
Reclassifications 1.5 2.2 - 3.7 2.5 -
Revaluation 264.7 59.4 4.9 329.0 68.4 5.7
Value at 31 October
2021 1,416.2 440.4 25.2 1,881.8 521.6 29.8
-------- ------- ------ -------- ------ ------
As described in note 13 of the financial statements, the
valuation is based on a discounted cash flow of the net operating
income over a ten-year period and a notional sale of the asset at
the end of the tenth year. Accordingly, the gain on investment
properties principally reflects the continuing progress in the
performance of the business and the strong underlying trading of
the store, underpinned by average rate which has increased by 1.9%
to GBP26.95 in 2021 from GBP26.44 in 2020 and occupancy which is up
5.0ppts to 84.5% in 2021 from 79.5% in 2020, capitalisation rates
and stabilised occupancy, as explained further below.
The exchange rate at 31 October 2021 was EUR1.18:GBP1 compared
with EUR1.11:GBP1 at 31 October 2020. This movement in the foreign
exchange rate has resulted in a GBP27.9 million unfavourable
currency translation movement in the year. This has slightly
reduced the Group net asset value ("NAV") but had no impact on the
loan-to-value ("LTV") covenant as the assets in Paris are tested in
Euros.
The value of the UK investment property portfolio including
investment properties under construction has increased by GBP327.9
million (comprising of GBP281.0 million in investment properties
and GBP46.9 million in investment properties under construction)
compared with 31 October 2020. This includes a GBP264.2 million
valuation gain and GBP63.7 million of capital additions.
In Paris, the value of the property portfolio including
investment properties under construction increased by EUR73.7
million, of which EUR68.4 million was valuation gain and capital
additions (including our pipeline store at Paris-Magenta) were
EUR5.3 million. The net increase in investment properties when
translated into Sterling amounted to GBP37.3 million, reflecting
the foreign exchange impact described above.
In Spain, the value of the property portfolio including
investment properties under construction increased by EUR16.3
million, of which EUR5.7 million was valuation gain and capital
additions were EUR10.6 million. The net increase in investment
properties including investment properties under construction when
translated into Sterling amounted to GBP12.5 million, reflecting
the foreign exchange impact described above.
Our pipeline of future development opportunities remains strong
and gives us further confidence in our future growth plans,
comprising 13 stores or store extensions in the UK, two in France
and six in
Spain.
The Group's freehold exit yield for the valuation at 31 October
2021 reduced to 6.03%, from 6.37% at 31 October 2020, and the
weighted average annual discount rate for the whole portfolio has
reduced from 9.45% at 31 October 2020 to 8.72% at 31 October
2021.
C&W's valuation report confirms that the properties have
been valued individually but that if the portfolio were 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.
EPRA basic NAV has been superseded and has transitioned to three
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
NTA to be most consistent with the nature of the Group's
business.
The EPRA NTA per share, as reconciled to IFRS net assets per
share in note 15 of the financial statements, was 679 pence at 31
October 2021, up 28% since 31 October 2020, and the IFRS reported
diluted NAV per share was 635 pence (FY2020: 489 pence), reflecting
a GBP339.3 million increase in reported net assets during the
year.
Gearing and capital structure
The Group's borrowings comprise revolving bank borrowing
facilities in the UK and France and US Private Placement.
Net debt (including lease liabilities and cash) stood at
GBP523.8 million at 31 October 2021, an increase of GBP11.7 million
from the 2020 position of GBP512.1 million, reflecting funding for
the continued expansion of the Group portfolio. Total capital (net
debt plus equity) increased from GBP1,547.7 million at 31 October
2020 to GBP1,898.7 million at 31 October 2021. The net impact is
that the gearing ratio has decreased from 33.1% to 27.6% in the
year.
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
lease liabilities). At 31 October 2021 the Group LTV ratio was 25%
as compared to 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 achieve our medium term strategic objectives.
Borrowings at 31 October 2021
As at 31 October 2021, GBP32.0 million of the GBP250.0 million
UK Revolver and EUR30.0 million (GBP27.0 million) of the EUR70.0
million Euro Revolver were drawn. Including the US Private
Placement debt of EUR253.0 million (GBP213.7 million) and GBP215.5
million, the Group's borrowings totalled GBP486.5 million (before
adjustment for unamortised finance costs).
As at 31 October 2021, the weighted average remaining term for
the Group's available borrowing facilities is 4.6 years (FY2020:
4.5 years).
Borrowings under the existing loan facilities are subject to
certain financial covenants. The UK bank facilities and the US
Private Placement share interest cover and LTV covenants. The
interest cover requirement of EBITDA: interest is 2.4:1, where it
will remain until the end of the facilities' terms. Interest cover
for the year ended 31 October 2021 is 10.5x (FY2020: 9.0x).
The LTV covenant is 60% in both the UK and France, where it will
remain until the end of the facilities' terms. As at 31 October
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 31 October 2021
and, based on forecast projections, is expected to be in compliance
for a period in excess of twelve months from the date of this
report.
Cash flow
The table below sets out the underlying cash flow of the
business in 2021 and 2020. For statutory reporting purposes,
leasehold costs cash flows are allocated between finance costs,
principal repayments and variable lease payments. However,
management considers a presentation of cash flows that reflects
leasehold costs as a single line item to be representative of the
underlying cash flow performance of the business.
2021 2020
GBP'm GBP'm
Underlying EBITDA 118.0 93.9
Working capital/exceptionals/other (2.1) 1.9
Adjusted operating cash
inflow 115.9 95.8
Interest payments (8.0) (8.9)
Leasehold rent payments (13.0) (12.8)
Tax payments (5.4) (5.3)
Free cash flow (before investing and
financing activities) 89.5 68.8
Acquisition of subsidiary,
net of cash acquired - (14.3)
Loan to associates (0.9) -
Investment in associates (1.9) (2.5)
Capital expenditure - investment
properties (62.4) (59.9)
Capital expenditure - property,
plant and equipment (1.0) (1.3)
Capital Goods Scheme
receipt - 0.3
Proceeds from disposal - Property,
Plant and Equipment - 0.1
Net cash flow after investing
activities 23.3 (8.8)
Issue of share capital 0.7 -
Dividends paid (42.6) (37.7)
Net drawdown of borrowings 43.8 33.1
Debt issuance costs (0.7) (0.5)
Net hedge breakage costs - -
Net (decrease)/increase
in cash 24.5 (13.9)
------- -------
Note: Free cash flow is a non-GAAP measure, defined as cash flow
before investing and financing activities but after leasehold rent
payments.
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. The third table below reconciles adjusted
operating cash inflow to the cash generated from operations in the
consolidated cash flow statement.
2021 2020
GBP'm GBP'm
Free cash flow (before investing and
financing activities) 89.5 68.8
Add back: principal payment of
lease liabilities 7.5 6.9
Net cash flow from operating
activities 97.0 75.7
2021 2020
GBP'm GBP'm
From table above:
Adjusted net cash flow after investing
activities 23.3 (8.8)
Add back: principal payment of
lease liabilities 7.5 6.9
Net cash flow after investing
activities 30.8 (1.9)
------- -------
From consolidated cash flow:
Net cash inflow from operating activities 97.0 75.7
Net cash outflow from investing
activities (66.2) (77.6)
Net cash flow after investing
activities 30.8 (1.9)
------- -------
2021 2020
GBP'm GBP'm
Adjusted operating cash inflow 115.9 95.8
Cash outflow on variable lease
payments (0.3) (0.3)
Cash flow from operations 115.6 95.5
Adjusted operating cash flow increased by GBP20.1 million in the
year, principally due to the GBP24.1 million improvement in
Underlying EBITDA.
Working capital, exceptional items and other movements resulted
in a net GBP2.1 million outflow (FY2020: GBP1.9 million inflow),
principally relating to increases in trade receivables offset by
trade payables relating to our ongoing portfolio development.
Free cash flow (before investing and financing activities) grew
by 30.1% to GBP89.5 million (FY2020: GBP68.8 million). The free
cash flow benefited from the increase in Underlying EBITDA and the
increase in adjusted operating cash flow.
Investing activities experienced a net outflow of GBP66.2
million (FY2020: GBP77.6 million outflow), which included GBP62.4
million of capital expenditure on our investment property portfolio
in respect of our new store at Birmingham Middleway; store
extensions at Edgware and Southend and the acquisition of
development properties at Park West Place, Bow, Woodford, Lea
Bridge, Shoreham as wells as several pipeline sites in Spain.
Adjusted financing activities generated a net cash inflow of
GBP1.2 million (FY2020: GBP5.1 million outflow). Dividend payments
totalled GBP42.6 million (FY2020: GBP37.7 million). The net
drawdown of borrowings was GBP43.8 million (FY2020: GBP33.1
million), in order to finance the acquisition of development and
pipeline stores.
Andy Jones
12 January 2022
Consolidated income statement
for the year ended 31 October 2021
Group
--------------
2021 2020
Notes GBP'm GBP'm
-------------------------------------------- ----- ------ ------
Revenue 2, 3 186.8 162.3
Cost of sales (56.9) (56.3)
-------------------------------------------- ----- ------ ------
Gross profit 129.9 106.0
Administrative expenses (34.0) (20.3)
Share of profit in associate 9 - -
-------------------------------------------- ----- ------ ------
Underlying EBITDA 118.0 93.9
Exceptional items 4 (1.9) (0.2)
Share-based payments (18.3) (6.5)
Depreciation and variable lease payments (1.4) (1.2)
Share of associate's depreciation, interest
and tax (0.5) (0.3)
-------------------------------------------- ----- ------ ------
Operating profit before gains on investment
properties 95.9 85.7
Gain on investment properties 10 321.1 126.5
-------------------------------------------- ----- ------ ------
Operating profit 3 417.0 212.2
Finance income 5 0.6 0.5
Finance expense 5 (13.0) (14.8)
-------------------------------------------- ----- ------ ------
Profit before income tax 404.6 197.9
Income tax charge 6 (22.6) (19.9)
-------------------------------------------- ----- ------ ------
Profit for the year 382.0 178.0
-------------------------------------------- ----- ------ ------
Earnings per Share for profit attributable
to the equity holders
- basic (pence) 8 181.2 84.6
- diluted (pence) 8 176.4 84.0
-------------------------------------------- ----- ------ ------
The financial results for both years 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.
Consolidated statement of comprehensive income
for the year ended 31 October 2021
Group
--------------
2021 2020
GBP'm GBP'm
------------------------------------------------------ ------ ------
Profit for the year 382.0 178.0
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit
or loss:
Currency translation differences (20.3) 12.1
Net investment hedge 10.9 (7.4)
------------------------------------------------------ ------ ------
Other comprehensive (expense)/income, net of tax (9.4) 4.7
------------------------------------------------------ ------ ------
Total comprehensive income for the year 372.6 182.7
------------------------------------------------------ ------ ------
Consolidated balance sheet
as at 31 October 2021
Group
----------------
2021 2020
Notes GBP'm GBP'm
--------------------------------------------- ------ ------- -------
Assets
Non-current assets
Investment in associates 9 7.2 5.3
--------------------------------------------- ------ ------- -------
External valuation of investment properties,
net of lease liabilities 1,881.8 1,557.5
Add-back of lease liabilities 82.1 76.9
Investment properties under construction 67.4 14.0
--------------------------------------------- ------ ------- -------
Total investment properties 10 2,031.3 1,648.4
Property, plant and equipment 3.2 3.2
Derivative financial instruments 14 0.9 0.5
Deferred income tax assets 0.8 0.2
--------------------------------------------- ------ ------- -------
2,043.4 1,657.6
--------------------------------------------- ------ ------- -------
Current assets
Inventories 0.5 0.3
Derivative financial instruments 14 1.3 0.4
Trade and other receivables 28.9 23.2
Cash and cash equivalents 12,18 43.2 19.6
--------------------------------------------- ------ ------- -------
73.9 43.5
--------------------------------------------- ------ ------- -------
Total assets 2,117.3 1,701.1
--------------------------------------------- ------ ------- -------
Current liabilities
Financial liabilities
- derivative financial instruments 14 (0.2) -
Trade and other payables (75.8) (47.2)
Current income tax liabilities (0.3) (0.2)
Obligations under lease liabilities 15 (12.3) (12.3)
--------------------------------------------- ------ ------- -------
(88.6) (59.7)
--------------------------------------------- ------ ------- -------
Non-current liabilities
Financial liabilities
- bank borrowings 13, 18 (484.7) (454.5)
- derivative financial instruments 14 - (1.4)
Deferred income tax liabilities (97.0) (85.0)
Obligations under lease liabilities 15 (70.0) (64.9)
Provisions 19 (2.1) -
--------------------------------------------- ------ ------- -------
(653.8) (605.8)
--------------------------------------------- ------ ------- -------
Total liabilities (742.4) (665.5)
--------------------------------------------- ------ ------- -------
Net assets 1,374.9 1,035.6
--------------------------------------------- ------ ------- -------
Equity
Ordinary shares 16 2.1 2.1
Share premium 61.3 60.6
Translation reserve 5.1 14.5
Retained earnings 1,306.4 958.4
--------------------------------------------- ------ ------- -------
Total equity 1,374.9 1,035.6
--------------------------------------------- ------ ------- -------
These financial statements were authorised for issue by the
Board of Directors on 12 January 2022 and signed on its behalf
by:
A Jones F Vecchioli
Chief Financial Officer Chief Executive Officer
Company registration number: 04726380
Consolidated statement of changes in shareholders' equity
for the year ended 31 October 2021
Group
---------------------------------------------------
Share Share Translation Retained
capital premium reserve earnings Total
GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------------------- -------- -------- ----------- --------- -------
Balance at 1 November 2019 2.1 60.6 9.8 813.4 885.9
Comprehensive income
Profit for the year - - - 178.0 178.0
Other comprehensive income/(expense)
Currency translation differences - - 12.1 - 12.1
Net investment hedge - - (7.4) - (7.4)
------------------------------------- -------- -------- ----------- --------- -------
Total other comprehensive income - - 4.7 - 4.7
------------------------------------- -------- -------- ----------- --------- -------
Total comprehensive income - - 4.7 178.0 182.7
------------------------------------- -------- -------- ----------- --------- -------
Transactions with owners
Dividends (note 7) - - - (37.7) (37.7)
Increase in share capital - - - - -
Employee share options - - - 4.7 4.7
------------------------------------- -------- -------- ----------- --------- -------
Transactions with owners - - - (33.0) (33.0)
------------------------------------- -------- -------- ----------- --------- -------
Balance at 1 November 2020 2.1 60.6 14.5 958.4 1,035.6
Comprehensive income
Profit for the year - - - 382.0 382.0
Other comprehensive (expense)/income
Currency translation differences - - (20.3) - (20.3)
Net investment hedge - - 10.9 - 10.9
------------------------------------- -------- -------- ----------- --------- -------
Total other comprehensive expense - - (9.4) - (9.4)
------------------------------------- -------- -------- ----------- --------- -------
Total comprehensive (expense)/income - - (9.4) 382.0 372.6
------------------------------------- -------- -------- ----------- --------- -------
Transactions with owners
Dividends (note 7) - - - (42.6) (42.6)
Increase in share capital - 0.7 - - 0.7
Employee share options - - - 8.6 8.6
------------------------------------- -------- -------- ----------- --------- -------
Transactions with owners - 0.7 - (34.0) (33.3)
------------------------------------- -------- -------- ----------- --------- -------
Balance at 31 October 2021 2.1 61.3 5.1 1,306.4 1,374.9
------------------------------------- -------- -------- ----------- --------- -------
Consolidated cash flow statement
for the year ended 31 October 2021
Group
---------------
2021 2020
Notes GBP'm GBP'm
----------------------------------------------------- ------ ------- ------
Cash flows from operating activities
Cash generated from operations 17 115.6 95.5
Interest received 0.9 0.2
Interest paid (14.1) (14.7)
Tax paid (5.4) (5.3)
----------------------------------------------------- ------ ------- ------
Net cash inflow from operating activities 97.0 75.7
----------------------------------------------------- ------ ------- ------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired - (14.3)
Investment in associates (1.9) (2.5)
Loans to associates (0.9) -
Expenditure on investment properties and development
properties (62.4) (59.9)
Proceeds in respect of Capital Goods Scheme - 0.3
Purchase of property, plant and equipment (1.0) (1.3)
Proceeds from sale of property, plant and equipment - 0.1
----------------------------------------------------- ------ ------- ------
Net cash outflow from investing activities (66.2) (77.6)
----------------------------------------------------- ------ ------- ------
Cash flows from financing activities
Issue of share capital 0.7 -
Equity dividends paid 7 (42.6) (37.7)
Proceeds from borrowings 196.8 57.5
Repayment of borrowings (153.0) (24.4)
Debt issuance costs (0.7) (0.5)
Principal payment of lease liabilities (7.5) (6.9)
----------------------------------------------------- ------ ------- ------
Net cash outflow from financing activities (6.3) (12.0)
----------------------------------------------------- ------ ------- ------
Net increase/(decrease) in cash and cash equivalents 24.5 (13.9)
Exchange (loss)/gain on cash and cash equivalents (0.9) 0.3
Cash and cash equivalents at 1 November 19.6 33.2
----------------------------------------------------- ------ ------- ------
Cash and cash equivalents at 31 October 12, 18 43.2 19.6
----------------------------------------------------- ------ ------- ------
Notes to the financial statements
for the year ended 31 October 2021
1. Basis of preparation
The Board approved this preliminary announcement on 12 January
2022.
The financial information included in this preliminary
announcement does not constitute the Group's statutory accounts for
the years ended 31 October 2020 or 31 October 2021. Statutory
accounts for the year ended 31 October 2020 have been delivered to
the Registrar of Companies. The statutory accounts for the year
ended 31 October 2021 will be delivered to the Registrar of
Companies following the Company's annual general meeting.
The auditor has reported on the 2021 and 2020 accounts; their
report was unqualified, did not include any references to any
matters by way of emphasis and did not contain statements under
section 498 (2) or (3) of the Companies Act 2006.
These financial statements for the year ended 31 October 2021
have been prepared under the historical cost convention except for
the following assets and liabilities, which are stated at their
fair value: investment property, derivative financial instruments
and financial interest in property assets. The accounting policies
used are consistent with those contained in the Group's last annual
report and accounts for the year ended 31 October 2020, except for
items as described below. All amounts are presented in Sterling and
are rounded to the nearest GBP0.1 million, unless otherwise
stated.
The financial information included in this preliminary
announcement has been prepared in accordance with EU endorsed
International Financial Reporting Standards ("IFRS"), International
Financial Reporting Interpretations Committee ("IFRIC")
interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
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 financial information.
In assessing the Group's going concern position as at 31 October
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 approved by the Board. In the
context of the current environment, four 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
continued Covid-19 pandemic. These scenarios are differentiated by
the impact of demand and enquiry levels, average rate growth and
the level of cost savings. A 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.
With the current
revolving credit facilities of GBP250 million and EUR70 million
maturing in June 2023, in assessing the scenarios, with the current
strength of underlying performance of the business and its balance
sheet, the Directors are of the view that it is reasonable to
expect the refinancing of the Revolving Credit Facility to be
available on similar terms. The impact of these scenarios has been
reviewed against the Group's projected cash flow position and
financial covenants over a three-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.
Standards, amendments to standards and interpretations issued
and applied
The following new or revised accounting standards or IFRIC
interpretations are applicable for the first time in the year ended
31 October 2021:
-- Amendments to References to Conceptual Framework in IFRS Standards
-- Amendments to IFRS 3 Definition of a Business
-- Amendments to IAS 1 and IAS 8 Definition of Material
-- Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform
-- Amendment to IFRS 16 Covid-19 - Related Rent Concessions
The adoption of the standards and interpretations has not
significantly impacted these financial statements and any changes
to our accounting policies as a result of their adoption have been
reflected in this note.
Key sources of estimation uncertainty
The following key estimate has significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the consolidated financial statements:
Estimate of fair value of investment properties and investment
properties under construction
The Group values its investment properties using a discounted
cash flow methodology which is based on projections of net
operating income. Principal assumptions and management's underlying
estimation of the fair value of those relate to: stabilised
occupancy levels; expected future growth in storage rental income
and operating costs; maintenance requirements; capitalisation rate;
and discount rates. There are inter-relationships between the
valuation inputs and they are primarily determined by market
conditions. The effect of an increase in more than one input could
be to magnify the impact on the valuation. However, the impact on
the valuation could be offset by the inter-relationship of two
inputs moving in opposite directions, e.g. an increase in rent may
be offset by a decrease in occupancy, resulting in minimal net
impact on the valuation. For immature stores, these underlying
estimates hold a higher risk of uncertainty, due to the unproven
nature of its cash flows. A more detailed explanation of the
background, methodology and judgements made by management that is
adopted in the valuation of the investment properties and is set
out in note 10 to the financial statements.
Judgement of business combinations
The Directors assess whether the acquisition of property through
the purchase of a corporate vehicle should be accounted for as an
asset purchase or a business combination. Where the acquired
vehicle is an integrated set of activities and assets that is
capable of being conducted and managed to provide a return to
investors, the transaction is accounted for as a business
combination. Where this is not the case the transaction is treated
as an asset purchase. The Directors assess when the risks and
rewards associated with an acquisition or disposal have
transferred. 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
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 derivatives and investment properties, and the
impact of exceptional credits, costs and finance charges. A
reconciliation of statutory operating profit to Underlying EBITDA
can be found in the financial review section of this
announcement.
-- Adjusted Diluted EPRA Earnings per Share 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 company-specific
adjustments for the impact of exceptional items, net exchange
gains/losses recognised in net finance costs, exceptional tax
items, and deferred and current tax in respect of these
adjustments. The Company also adjusts for IFRS 2 share-based
payment 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 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 Earnings per Share can
be found in note 8.
-- EPRA basic net assets per share is an EPRA measure. EPRA
basic NAV has been superseded and has transitioned to three new
measures: EPRA Net Reinstatement Value ("NRV"); EPRA Net Tangible
Asset ("NTA") and EPRA Net Disposal Value ("NDV") for periods
commencing 1 January 2020 or thereafter. Safestore considers EPRA
NTA to be the most consistent with the nature of the Group's
business. The basis of calculation, including a reconciliation to
reported net assets, is set out in note 11.
-- 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.
Forward looking statements
Certain statements in this preliminary announcement are forward
looking. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward looking statements. We undertake no obligation to
update any forward looking statements whether as a result of new
information, future events or otherwise.
2. Revenue
Analysis of the Group's operating revenue can be found
below:
2021 2020
GBP'm GBP'm
------------------------- ------ ------
Self storage income 154.3 132.2
Insurance income 22.3 19.4
Other non-storage income 10.2 10.7
------------------------- ------ ------
Total revenue 186.8 162.3
------------------------- ------ ------
3. Segmental analysis
The segmental information presented has been prepared in
accordance with the requirements of IFRS 8. The Group's revenue,
profit before income tax and net assets are attributable to one
activity: the provision of self storage accommodation and related
services. This is based on the Group's management and internal
reporting structure.
Safestore is organised and managed in three operating segments,
based on geographical areas, being the United Kingdom, Paris in
France and Barcelona in Spain.
The chief operating decision maker, being the Executive
Directors, identified in accordance with the requirements of IFRS
8, assesses the performance of the operating segments on the basis
of Underlying EBITDA, which 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.
The operating profits and assets include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis.
UK Paris Spain Group
Year ended 31 October 2021 GBP'm GBP'm GBP'm GBP'm
-------------------------------------------- ------- ------ ------ -------
Continuing operations
Revenue 144.1 39.9 2.8 186.8
Share of profit in associates - - - -
-------------------------------------------- ------- ------ ------ -------
Underlying EBITDA 89.1 27.2 1.7 118.0
Exceptional items - (1.9) - (1.9)
Share-based payments (16.1) (2.2) - (18.3)
Variable lease payments and depreciation (1.1) (0.3) - (1.4)
Share of associate's depreciation, interest
and tax (0.5) - - (0.5)
-------------------------------------------- ------- ------ ------ -------
Operating profit before gain on investment
properties 71.4 22.8 1.7 95.9
Gain on investment properties 260.5 56.0 4.6 321.1
-------------------------------------------- ------- ------ ------ -------
Operating profit 331.9 78.8 6.3 417.0
Net finance expense (10.5) (1.8) (0.1) (12.4)
-------------------------------------------- ------- ------ ------ -------
Profit before tax 321.4 77.0 6.2 404.6
-------------------------------------------- ------- ------ ------ -------
Total assets 1,617.9 474.1 25.3 2,117.3
-------------------------------------------- ------- ------ ------ -------
UK Paris Spain Group
Year ended 31 October 2020 GBP'm GBP'm GBP'm GBP'm
-------------------------------------------- ------- ------ ------ -------
Continuing operations
Revenue 121.3 38.8 2.2 162.3
Share of profit in associates - - - -
-------------------------------------------- ------- ------ ------ -------
Underlying EBITDA 67.5 25.0 1.4 93.9
Exceptional items (0.3) 0.1 - (0.2)
Share-based payments (5.8) (0.7) - (6.5)
Variable lease payments and depreciation (0.9) (0.3) - (1.2)
Share of associate's depreciation, interest
and tax (0.3) - - (0.3)
-------------------------------------------- ------- ------ ------ -------
Operating profit before gain on investment
properties 60.2 24.1 1.4 85.7
Gain on investment properties 79.7 47.1 (0.3) 126.5
-------------------------------------------- ------- ------ ------ -------
Operating profit 139.9 71.2 1.1 212.2
Net finance expense (12.1) (2.1) (0.1) (14.3)
-------------------------------------------- ------- ------ ------ -------
Profit before tax 127.8 69.1 1.0 197.9
-------------------------------------------- ------- ------ ------ -------
Total assets 1,244.4 435.9 20.8 1,701.1
-------------------------------------------- ------- ------ ------ -------
Inter-segment transactions are entered into under the normal
commercial terms and conditions that would also be available to
unrelated third parties. There is no material impact from
inter-segment transactions on the Group's results.
4. Exceptional items
2021 2020
GBP'm GBP'm
--------------------------------------------------------- ------ ------
Costs relating to corporate transactions and exceptional
property taxation (1.9) (0.3)
Other exceptional items - 0.1
--------------------------------------------------------- ------ ------
Net exceptional cost (1.9) (0.2)
--------------------------------------------------------- ------ ------
A net exceptional cost of GBP1.9 million (FY2020: GBP0.2
million) was incurred in the year, 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 19
(FY2020: GBP0.3 million relating to fees associated with the
Group's acquisitions in the year and exceptional legal and
employment related costs less GBP0.1 million compensation received
from a landlord in respect of water damage in France).
5. Finance income and costs
2021 2020
GBP'm GBP'm
------------------------------------------------- ------ ------
Finance income
Interest receivable from loan to associates 0.1 0.1
Financial instruments income 0.5 0.2
------------------------------------------------- ------ ------
Underlying finance income 0.6 0.3
Net exchange gains - 0.2
------------------------------------------------- ------ ------
Total finance income 0.6 0.5
------------------------------------------------- ------ ------
Finance costs
Interest payable on bank loans and overdraft (9.7) (9.1)
Amortisation of debt issuance costs on bank loan (0.4) (0.3)
------------------------------------------------- ------ ------
Underlying finance charges (10.1) (9.4)
Interest on obligations under lease liabilities (5.2) (5.6)
Fair value gain of derivatives 2.9 0.2
Net exchange losses (0.6) -
------------------------------------------------- ------ ------
Total finance costs (13.0) (14.8)
------------------------------------------------- ------ ------
Net finance costs (12.4) (14.3)
------------------------------------------------- ------ ------
Included within interest payable of GBP9.7 million (FY2020:
GBP9.1 million) is GBP0.6 million (FY2020: GBP0.3 million) of
interest relating to derivative financial instruments that are
economically hedging the Group's borrowings. The total change in
fair value of derivatives reported within net finance costs for the
year is a GBP2.9 million net gain (FY2020: GBP0.2 million net
gain). Included within finance income is GBP0.9 million, received
on settlement of the EUR7.0 million and EUR7.5 million average rate
forward contract acquired in March 2020 and settled in April 2021
and October 2021 respectively less the GBP0.4 million fair value of
these forward contracts held at 31 October 2020.
6. Income tax charge
Analysis of tax charge in the year:
2021 2020
GBP'm GBP'm
--------------- ------ ------
Current tax:
- current year 5.5 5.2
- prior year - (2.4)
---------------- ------ ------
5.5 2.8
--------------- ------ ------
Deferred tax:
- current year 17.1 17.1
- prior year - -
--------------- ------ ------
17.1 17.1
--------------- ------ ------
Tax charge 22.6 19.9
---------------- ------ ------
Reconciliation of income tax charge
The tax for the period is lower (FY2020: lower) than the
standard effective rate of corporation tax in the UK for the year
ended 31 October 2021 of 19.0% (FY2020: 19.0%). The differences are
explained below:
2021 2020
GBP'm GBP'm
------------------------------------------------------------- ------ ------
Profit before tax 404.6 197.9
------------------------------------------------------------- ------ ------
Profit on ordinary activities multiplied by standard
rate of corporation tax in the UK of 19.0% (FY2020:
19.0%) 76.9 37.6
Effect of:
- permanent differences 3.6 0.3
- profits from the tax exempt business (63.5) (24.2)
- deferred tax arising on acquisition of overseas subsidiary - 3.0
- difference from overseas tax rates 6.4 5.6
- prior year adjustments - exceptional - (2.4)
- utilisation of unrecognised brought forward tax losses (0.8) -
------------------------------------------------------------- ------ ------
Tax charge 22.6 19.9
------------------------------------------------------------- ------ ------
The Group is a UK real estate investment trust ("REIT"). As a
result, the Group is exempt from UK corporation tax on the profits
and gains from its qualifying property rental business in the UK,
providing 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% (FY2020: 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.
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
An exceptional prior year current tax credit of GBP2.4 million
arose during the prior year as a result of confirmation of loss
claims made in 2015 and 2016 by an overseas subsidiary following
the expiry of the statutory limitation period allowed for
challenging the utilisation of these losses on 31 December
2019.
7. Dividends per share
The dividend paid in 2021 was GBP42.6 million (20.20 pence per
share) (FY2020: GBP37.7 million (17.90 pence per share)). A final
dividend in respect of the year ended 31 October 2021 of 17.60
pence (FY2020: 12.70 pence) per share, amounting to a total final
dividend of GBP37.0 million (FY2020: GBP26.7 million), is to be
proposed at the AGM on 16 March 2022. The ex-dividend date will be
3 March 2022 and the record date will be 4 March 2022 with an
intended payment date of 7 April 2022. The final dividend has not
been included as a liability at 31 October 2021.
The Property Income Distribution ("PID") element of the final
dividend is 17.60 pence (FY2020: 12.70 pence), making the PID
payable for the year 25.10 pence (FY2020: 18.60 pence) per
share.
8. Earnings per Share
Basic Earnings per Share ("EPS") is calculated by dividing the
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year
excluding ordinary shares held as treasury shares. Diluted EPS is
calculated by adjusting the weighted average number of ordinary
shares to assume conversion of all dilutive potential shares. The
Company has one category of dilutive potential ordinary shares:
share options. For the share options, a calculation is performed 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.
Year ended 31 October Year ended 31 October
2021 2020
------------------------------ ------------------------------
Earnings Shares Pence Earnings Shares Pence
GBP'm million per share GBP'm million per share
-------------------- -------- -------- ---------- -------- -------- ----------
Basic 382.0 210.8 181.2 178.0 210.4 84.6
Dilutive securities - 5.8 (4.8) - 1.4 (0.6)
-------------------- -------- -------- ---------- -------- -------- ----------
Diluted 382.0 216.6 176.4 178.0 211.8 84.0
-------------------- -------- -------- ---------- -------- -------- ----------
Adjusted Earnings per Share
Explanations related to the adjusted earnings measures adopted
by the Group are set out in note 1 under the heading Non-GAAP
financial information. Adjusted EPS represents profit after tax
adjusted for the valuation movement on investment properties,
exceptional items, change in fair value of derivatives, exchange
gains/losses, unwinding of the discount on the CGS receivable and
the associated tax thereon. The Directors consider that these
alternative measures provide useful information on the performance
of the Group.
EPRA earnings and Earnings per Share before non-recurring items,
movements on revaluations of investment properties and changes in
the fair value of derivatives have been disclosed to give a clearer
understanding of the Group's underlying trading performance.
Year ended 31 October Year ended 31 October
2021 2020
------------------------------ ------------------------------
Earnings Shares Pence Earnings Shares Pence
GBP'm million per share GBP'm million per share
------------------------------ -------- -------- ---------- -------- -------- ----------
Basic 382.0 210.8 181.2 178.0 210.4 84.6
Adjustments:
Gain on investment properties (321.1) - (152.3) (126.5) - (60.1)
Exceptional items 1.9 - 0.9 0.2 - 0.1
Net exchange loss/(gain) 0.6 - 0.3 (0.2) - (0.1)
Change in fair value
of derivatives (2.9) - (1.4) (0.2) - (0.1)
Tax on adjustments 16.1 - 7.6 13.9 - 6.6
------------------------------ -------- -------- ---------- -------- -------- ----------
Adjusted 76.6 210.8 36.3 65.2 210.4 31.0
EPRA adjusted:
Fair value re-measurement
of lease liabilities
add-back (7.4) - (3.5) (6.9) - (3.3)
Tax on lease liabilities
add-back adjustment 1.0 - 0.5 0.8 - 0.4
------------------------------ -------- -------- ---------- -------- -------- ----------
Adjusted EPRA basic EPS 70.2 210.8 33.3 59.1 210.4 28.1
Share-based payments
charge 18.3 - 8.7 6.5 - 3.1
Dilutive shares - 7.5 (1.5) - 6.8 (1.0)
------------------------------ -------- -------- ---------- -------- -------- ----------
Adjusted Diluted EPRA
EPS(1) 88.5 218.3 40.5 65.6 217.2 30.2
------------------------------ -------- -------- ---------- -------- -------- ----------
Note
1 Adjusted Diluted EPRA EPS is based on the European Public Real
Estate Association's definition of earnings and is defined as
profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts. The
Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional
tax items and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore neither the Company's ability to
distribute nor pay dividends are impacted (with the exception of
the associated National Insurance element). The financial
statements disclose earnings both on a statutory, EPRA and Adjusted
Diluted EPRA basis and will provide a full reconciliation of the
differences in the financial year in which any LTIP awards may
vest.
Gain on investment properties includes the fair value
re-measurement of lease liabilities add-back of GBP7.4 million
(FY2020: GBP6.9 million) and the related tax thereon of GBP1.0
million (FY2020: GBP0.8 million). As an industry standard measure,
EPRA earnings is presented. EPRA earnings of GBP70.2 million
(FY2020: GBP59.1 million) and EPRA Earnings per Share of 33.3 pence
(FY2020: 28.1 pence) are calculated after further adjusting for
these items.
2021 2020 Movement
EPRA adjusted income statement (non-statutory) GBP'm GBP'm %
------------------------------------------------------ ----------- ----------- --------
Revenue 186.8 162.3 15.1
Underlying operating expenses (excluding depreciation
and variable lease payments) (69.3) (68.7) 66.7
Share of associate's Underlying EBITDA 0.5 0.3 0.9
------------------------------------------------------ ----------- ----------- --------
Underlying EBITDA before variable lease payments 118.0 93.9 25.7
Share-based payments charge (18.3) (6.5) 181.5
Depreciation and variable lease payments (1.4) (1.2) 16.7
------------------------------------------------------ ----------- ----------- --------
Operating profit before fair value re-measurement
lease liabilities add-back 98.3 86.2 14.0
Fair value re-measurement of lease liabilities
add-back (7.4) (6.9) 7.2
------------------------------------------------------ ----------- ----------- --------
Operating profit 90.9 79.3 14.6
Net financing costs (14.7) (14.7) 0.0
Share of associate's finance charges (0.5) (0.2) 150.0
------------------------------------------------------ ----------- ----------- --------
Profit before income tax 75.7 64.4 17.5
Income tax (5.5) (5.2) 5.8
Share of associate's tax - (0.1) (100.0)
------------------------------------------------------ ----------- ----------- --------
Profit for the year ("Adjusted EPRA basic earnings") 70.2 59.1 18.8
------------------------------------------------------ ----------- ----------- --------
Adjusted EPRA basic EPS 33.3 pence 28.1 pence 18.5
Final dividend per share 17.60 pence 12.70 pence 38.6
------------------------------------------------------ ----------- ----------- --------
9. Investment in associates
2021 2020
GBP'm GBP'm
--------------------- ------ ------
CERF Storage JV B.V. 6.2 5.3
PBC Les Groues SAS 1.0 -
--------------------- ------ ------
7.2 5.3
--------------------- ------ ------
CERF Storage JV B.V.
The Group acquired 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 the
associate was GBP8.9 million (FY2020: GBP7.3 million), made up of
an investment of GBP6.2 million (FY2020: GBP5.3 million), a loan to
the associate including interest accrued of GBP2.7 million (FY2020:
GBP1.9 million) and other receivables of GBPnil (FY2020: GBP0.1
million) (note 22). The Group's share of profits from continuing
operations for the period was GBPnil (FY2020: GBPnil). The Group's
share of total comprehensive income of associates in the year was
GBPnil (FY2020: 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 has invested GBP1.0 million
(EUR1.2 million) 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
GBP1.0 million (FY2020: GBPnil), made up of an investment of GBP1.0
million (FY2020: GBPnil) (note 22). The Group's share of profits
from continuing operations for the period was GBPnil (FY2020:
GBPnil). The Group's share of total comprehensive income of
associates for the period was GBPnil (FY2020: GBPnil). The Group's
share of total comprehensive income of associates in the year was
GBPnil (FY2020: GBPnil).
10. Investment properties
External
valuation
of investment Investment
properties, Add-back property Total
net of of under investment
lease liabilities lease liabilities construction properties
GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 1 November 2020 1,557.5 76.9 14.0 1,648.4
Additions 19.5 14.1 57.9 91.5
Reclassifications 3.7 - (3.7) -
Revaluations 329.0 - (0.5) 328.5
Fair value re-measurement of lease liabilities
add-back - (7.4) - (7.4)
Exchange movements (27.9) (1.5) (0.3) (29.7)
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 31 October 2021 1,881.8 82.1 67.4 2,031.3
----------------------------------------------- ------------------ ------------------ ------------- -----------
External
valuation
of investment Investment
properties, Add-back property Total
net of of under investment
lease liabilities lease liabilities construction properties
GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 1 November 2019 1,331.8 63.5 13.9 1,409.2
IFRS 16 day one transition adjustment - 9.4 - 9.4
Additions 42.2 3.9 14.5 60.6
Acquisition of subsidiary 14.6 10.0 - 24.6
Disposals - - - -
Reclassifications/purchase of freehold 14.5 (4.4) (10.1) -
Revaluations 137.7 - (4.3) 133.4
Fair value re-measurement of lease liabilities
add-back - (6.9) - (6.9)
Exchange movements 16.7 1.4 - 18.1
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 31 October 2020 1,557.5 76.9 14.0 1,648.4
----------------------------------------------- ------------------ ------------------ ------------- -----------
The gain on investment properties comprises:
2021 2020
GBP'm GBP'm
------------------------------------------------------------ ------ ------
Revaluations of investment property and investment property
under construction 328.5 133.4
Fair value re-measurement of lease liabilities add-back (7.4) (6.9)
------------------------------------------------------------ ------ ------
321.1 126.5
------------------------------------------------------------ ------ ------
Revaluation
Cost on cost Valuation
GBP'm GBP'm GBP'm
------------------- ------ ----------- ---------
Freehold stores
At 1 November 2020 630.2 618.2 1,248.4
Movement in year 54.6 228.6 283.2
------------------- ------ ----------- ---------
At 31 October 2021 684.8 846.8 1,531.6
------------------- ------ ----------- ---------
Leasehold stores
At 1 November 2020 122.9 186.2 309.1
Movement in year 4.7 36.4 41.1
------------------- ------ ----------- ---------
At 31 October 2021 127.6 222.6 350.2
------------------- ------ ----------- ---------
All stores
At 1 November 2020 753.1 804.4 1,557.5
Movement in year 59.3 265.0 324.3
------------------- ------ ----------- ---------
At 31 October 2021 812.4 1,069.4 1,881.8
------------------- ------ ----------- ---------
The valuation of GBP1,881.8 million (FY2020: GBP1,557.5 million)
excludes GBP0.6 million in respect of owner-occupied property,
which is included within property, plant and equipment. Rental
income earned from investment properties for the year ended 31
October 2021 was GBP155.5 million (FY2020: GBP135.2 million).
The Group has classified the 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 year.
As described in note 1 summary of significant accounting
policies, where the valuation obtained for investment property is
net of all payments to be made, it is necessary to add back the
lease liability to arrive at the carrying amount of investment
property at fair value. The lease liability of GBP82.3 million
(FY2020: GBP77.2 million) per note 15 differs to the GBP82.1
million (FY2020: GBP76.9 million) disclosed above as a result of
accounting for the French Head Office lease under IFRS 16. This
lease is included as part of property, plant and equipment, and has
a net book value of GBP0.2 million as at 31 October 2021 (FY2020:
GBP0.3 million).
All direct operating expenses (excluding depreciation) arising
from investment property that generated rental income as outlined
in note 3 were GBP68.5 million (FY2020: GBP67.9 million).
The freehold and leasehold investment properties have been
valued as at 31 October 2021 by external valuers, Cushman &
Wakefield Debenham Tie Leung Limited ("C&W"). The valuation has
been carried out in accordance with the current edition of the RICS
Valuation - Global Standards, which incorporates the International
Valuation Standards and the RICS Valuation UK National Supplement
(the "RICS Red Book"). The valuation of each of the investment
properties has been prepared on the basis of fair value as a fully
equipped operational entity, having regard to trading potential.
Two non-trading properties were valued on the basis of fair value.
The valuation has been provided for accounts purposes and, as such,
is a Regulated Purpose Valuation as defined in the RICS Red Book.
In compliance with the disclosure requirements of the RICS Red
Book, C&W has confirmed that:
-- the member of the RICS who has been the signatory to the
valuations provided to the Group for the same purposes as this
valuation has done so since April 2020. The valuations have been
reviewed by an internal investment committee comprising two
valuation partners and an investment partner, all unconnected with
the assignment;
-- C&W has been carrying out regular valuations for the same
purpose as this valuation on behalf of the Group since October
2006;
-- C&W does not provide other significant professional or agency services to the Group;
-- in relation to the preceding financial year of C&W, the
proportion of total fees payable by the Group to the total fee
income of the firm is less than 5%; and
-- the fee payable to C&W is a fixed amount per property and
is not contingent on the appraised value.
Market uncertainty
C&W's valuation report comments on valuation uncertainty
resulting from low liquidity in the market for self storage
property. C&W believes that this is due to a lack of supply of
good quality stock rather than a weakness of demand for the same.
Very few property transactions have taken place and most activity
that has occurred in this sector has been corporate. Due to this
lack of comparable market information in the self storage sector,
C&W has had to exercise more than the usual degree of judgement
in arriving at its opinion of value.
Portfolio premium
C&W's valuation report 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.
Valuation method and assumptions
The valuation of the operational self storage facilities has
been prepared having regard to trading potential. Cash flow
projections have been prepared for all of the properties reflecting
estimated absorption, revenue growth and expense inflation. A
discounted cash flow method of valuation based on these cash flow
projections has been used by C&W to arrive at its opinion of
fair value for these properties.
C&W has adopted different approaches for the valuation of
the leasehold and freehold assets as follows:
Freehold and long leasehold (UK, Paris and Spain)
The valuation is based on a discounted cash flow of the net
operating income over a ten-year period and a notional sale of the
asset at the end of the tenth year.
Assumptions:
-- 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 valuation the assumed stabilised occupancy level for the
trading stores (both freeholds and all leaseholds) open at 31
October 2021 averages 89.10% (FY2020: 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 18.27 months (FY2020: 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 purpose-built student housing and
hotels, bank base rates, ten-year money rates, inflation and the
available evidence of transactions in the sector. The valuation
included in the accounts assumes rental growth in future periods.
If an assumption of no rental growth is applied to the external
valuation, the net initial yield pre-administration expenses for
mature stores (i.e. excluding those stores categorised as
"developing") is 6.73% (FY2020: 6.60%), rising to a stabilised net
yield pre-administration expenses of 6.90% (FY2020: 7.41%).
-- The weighted average freehold exit yield on UK freeholds is
6.07% (FY2020: 6.40%), on France freeholds is 5.88% (FY2020: 6.27%)
and on Spain freeholds is 5.38% (FY2020: 5.62%). The weighted
average freehold exit yield for all freeholds adopted is 6.03%
(FY2020: 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 8.62% (FY2020: 9.44%), in the France portfolio
is 8.98% (FY2020: 9.51%) and in the Spain portfolio is 7.87%
(FY2020: 8.12%). The weighted average annual discount rate adopted
(for both freeholds and all leaseholds) is 8.72% (FY2020:
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.
Short leaseholds (UK)
The same methodology has been used as for freeholds, except that
no sale of the assets in the tenth year is assumed but the
discounted cash flow is extended to the expiry of the lease. The
average unexpired term of the Group's UK short term leasehold
properties is 12.2 years (FY2020: 12.0 years). The average
unexpired term excludes the commercial leases in France and
Spain.
Short leaseholds (Paris)
In relation to the commercial leases in Paris, C&W has
valued the cash flow projections in perpetuity due to the security
of tenure arrangements in that market and the potential
compensation arrangements in the event of the landlord wishing to
take possession. The valuation treatment is therefore the same as
for the freehold properties. The capitalisation rates on these
stores reflect the risk of the landlord terminating the lease
arrangements.
Short leaseholds (Spain)
In relation to the two commercial leases in Spain, C&W has
valued the cash flow projections in perpetuity due to the nature of
the lease agreements which allows the tenant to renew the lease
year on year into perpetuity. The valuation treatment is therefore
the same as for the freehold properties. The capitalisation rates
on these stores reflect the risk of the rolling lease
arrangements.
In relation to one other short leasehold in Spain, the lease
allows for a five-year automatic extension beyond the initial lease
expiry date subject to neither party serving notice stating it does
not wish to do so. This allows the landlord to terminate the lease
at the original expiry date if it so wishes. The same methodology
has been used as for freeholds, except that no sale of the asset in
the tenth year is assumed but the discounted cash flow is extended
to the expiry of the lease.
Investment properties under construction
C&W has valued the stores in development adopting the same
methodology as set out above but on the basis of the cash flow
projection expected for the store at opening and allowing for the
outstanding costs to take each store from its current state to
completion and full fit out, except several recently acquired
stores which have been valued at acquisition costs. C&W has
allowed for carry costs and construction contingency, as
appropriate.
Immature stores: value uncertainty
C&W has assessed the value of each property individually.
However, three of the stores in the portfolio are relatively
immature and have low initial cash flow. C&W has endeavoured to
reflect the nature of the cash flow profile for these properties in
its valuation, and the higher associated risks relating to the as
yet unproven future cash flow, by adjustment to the capitalisation
rates and discount rates adopted. However, immature low cash flow
stores of this nature are rarely, if ever, traded individually in
the market, unless as part of a distressed sale or similar
situation, although, there is more evidence of such stores being
traded as part of a group or portfolio transaction.
C&W considers there to be market uncertainty in the self
storage sector due to the lack of comparable market transactions
and information. The degree of uncertainty relating to the three
immature stores is greater than in relation to the balance of the
properties due to there being even less market evidence than might
be available for more mature properties and portfolios.
C&W states that, in practice, if an actual sale of the
properties was to be contemplated then any immature low cash flow
stores would normally be presented to the market for sale lotted or
grouped with other more mature assets owned by the same entity, in
order to alleviate the issue of negative or low short term cash
flow. This approach would enhance the marketability of the group of
assets and assist in achieving the best price available in the
market by diluting the cash flow risk.
C&W has not adjusted its opinion of fair value to reflect
such a grouping of the immature assets with other properties in the
portfolio and all stores have been valued individually. However,
C&W highlights the matter to alert the Group to the manner in
which the properties might be grouped or lotted in order to
maximise their attractiveness to the marketplace.
C&W considers this approach to be a valuation assumption but
not a special assumption, the latter being an assumption that
assumes facts that differ from the actual facts existing at the
valuation date and which, if not adopted, could produce a material
difference in value.
Valuation assumption for purchaser's costs
The Group's investment property assets have been valued for the
purposes of the financial statements after adjusting for notional
purchaser's costs in the range of approximately 3.3% to 6.8% (UK),
7.5% (Paris) and 2.5% (Spain), as if they were sold directly as
property assets. The valuation is an asset valuation which is
strongly linked to the operating performance of the business. They
would have to be sold with the benefit of operational contracts,
employment contracts and customer contracts, which would be
difficult to achieve except in a corporate structure.
This approach follows the logic of the valuation methodology in
that the valuation is based on a capitalisation of the net
operating income after allowing a deduction for operational cost
and an allowance for central administration costs. A sale in a
corporate structure would result in a reduction in the assumed
stamp duty land tax but an increase in other transaction costs
reflecting additional due diligence resulting in a reduced notional
purchaser's cost of c.2.75% of gross value. All the significant
sized transactions that have been concluded in the UK in recent
years were completed in a corporate structure. The Group therefore
instructed C&W to prepare additional valuation advice on the
basis of purchaser's cost of 2.75% of gross value which is used for
internal management purposes.
Sensitivity of the valuation to assumptions
As noted in "Key sources of estimation uncertainty", self
storage valuations are complex, derived from data which is not
widely publicly available and involve a degree of judgement. 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.
There are inter-relationships between the valuation inputs, and
they are primarily determined by market conditions. The effect of
an increase in more than one input could be to magnify the impact
on the valuation. However, the impact on the valuation could be
offset by the inter-relationship of two inputs moving in opposite
directions, e.g. an increase in rent may be offset by a decrease in
occupancy, resulting in no net impact on the valuation.
As noted in "Key sources of estimation uncertainty", self
storage valuations are complex, derived from data which is not
widely available and involve a degree of judgement. For these
reasons we have classified the valuation of our property portfolio
as Level 3 as defined by IFRS 13. Inputs to the valuation, some of
which are "unobservable" as defined by IFRS 13, include
capitalisation yields, stable occupancy rates, and time to
stabilised occupancy. The existence of an increase of more than one
unobservable input would augment the impact on the valuation. The
impact on the valuation would be mitigated by the
inter-relationship between unobservable inputs moving in opposite
directions. For example, an increase in stable occupancy may be
offset by an increase in 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
Impact of change of a delay
in Impact of a change in stabilised
capitalisation in stabilised occupancy occupancy
rates assumption assumption
GBP'm GBP'm GBP'm
-------------------- -------------------------- --------------
25 bps 25 bps 24-month
decrease increase 1% increase 1% decrease delay
--------------- --------- --------- ------------ ------------ --------------
Reported Group 40.1 (36.4) 29.3 (29.0) (10.1)
--------------- --------- --------- ------------ ------------ --------------
11. Net assets per share
In October 2019, EPRA issued new Best Practices Recommendations
guidelines for Net Asset Value ("NAV") metrics; these
recommendations are effective for accounting periods starting on 1
January 2020 and thereafter and have been adopted by the Group this
year.
EPRA have introduced three new NAV metrics: EPRA Net Tangible
Assets ("NTA"), EPRA Net Reinstatement Value ("NRV") and EPRA Net
Disposal Value ("NDV").
EPRA NTA is considered to be the most relevant measure for the
Group's business which provides sustainable long-term progressive
returns and is now the primary measure of net assets, replacing the
previously reported EPRA NAV metric. EPRA NTA assumes that entities
buy and sell assets, thereby crystallising certain levels of
unavoidable deferred tax. Due to the Group's REIT status, deferred
tax is only provided at each balance sheet date on properties
outside the REIT regime. As a result, deferred taxes are excluded
from EPRA NTA for properties within the REIT regime. For properties
outside of the REIT regime, deferred tax is included to the extent
that it is expected to crystallise, based on the Group's track
record and tax structuring.
There are no reconciling items between EPRA NTA and the
previously reported EPRA NAV metric. EPRA NTA is shown in the table
below:
2021 2020
Diluted Diluted
pence GBP'm pence
GBP'm per share per share
----------------------------------------------- ------- ---------- ------- ----------
Balance sheet net assets 1,374.9 635 1,035.6 489
Adjustments to exclude:
Fair value of derivative financial instruments
(net of deferred tax) (2.0) 0.4
Deferred tax liabilities on the revaluation
of investment properties 96.9 84.8
----------------------------------------------- ------- ---------- ------- ----------
EPRA NTA 1,469.8 679 1,120.8 529
----------------------------------------------- ------- ---------- ------- ----------
Basic net assets per share 652 492
EPRA basic NTA per share 697 532
----------------------------------------------- ------- ---------- ------- ----------
The basic and diluted net assets per share have been calculated
based on the following number of shares:
2021 2020
Number Number
-------------------------------------------------------- ----------- -----------
Share in issue
At year end 210,823,703 210,611,207
Adjustment for Employee Benefit Trust (treasury) shares (41,259) (32,698)
-------------------------------------------------------- ----------- -----------
IFRS/EPRA number of shares (basic) 210,782,444 210,578,509
-------------------------------------------------------- ----------- -----------
Dilutive effect of Save As You Earn shares 109,100 163,432
Dilutive effect of Long Term Incentive Plan shares 5,706,061 1,237,331
-------------------------------------------------------- ----------- -----------
IFRS/EPRA number of shares (diluted) 216,597,605 211,979,272
-------------------------------------------------------- ----------- -----------
Basic net assets per share is shareholders' funds divided by the
number of shares at the year end. Diluted net assets per share is
shareholders' funds divided by the number of shares at the year
end, adjusted for dilutive share options of 5,815,161 shares
(FY2020: 1,400,763 shares). EPRA diluted net assets per share
excludes deferred tax liabilities arising on the revaluation of
investment properties. The EPRA NAV, which further excludes fair
value adjustments for debt and related derivatives net of deferred
tax, was GBP1,469.8 million (FY2020: GBP1,120.8 million), giving
EPRA NTA per share of 679pence (FY2020: 529 pence). The Directors
consider that these alternative measures provide useful information
on the performance of the Group.
EPRA adjusted balance sheet (non-statutory)
2021 2020
GBP'm GBP'm
----------------------------------------- --------- ---------
Assets
Non-current assets 2,042.5 1,657.1
Current assets 72.6 43.1
----------------------------------------- --------- ---------
Total assets 2,115.1 1,700.2
----------------------------------------- --------- ---------
Liabilities
Current liabilities (88.4) (59.7)
Non-current liabilities (557.0) (519.7)
----------------------------------------- --------- ---------
Total liabilities (645.4) (579.4)
----------------------------------------- --------- ---------
EPRA adjusted net asset value 1,469.7 1,120.8
----------------------------------------- --------- ---------
EPRA adjusted basic net assets per share 697 pence 532 pence
----------------------------------------- --------- ---------
12. Cash and cash equivalents
2021 2020
GBP'm GBP'm
------------------------- ------ ------
Cash at bank and in hand 43.2 19.6
------------------------- ------ ------
13. Financial liabilities - bank borrowings and secured
notes
2021 2020
Non-current GBP'm GBP'm
----------------------------- ------ ------
Bank loans and secured notes
Secured 486.5 456.0
Debt issue costs (1.8) (1.5)
----------------------------- ------ ------
484.7 454.5
----------------------------- ------ ------
The Group's borrowings consist of bank facilities of GBP250
million and EUR70 million maturing in June 2023. 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. In June 2021 additional US
Private Placement Notes were issued of GBP20 million and EUR29
million, maturing in 2028. In August 2021 additional US Private
Placement Notes were issued of GBP80 million and EUR29 million,
maturing in 2031 and 2033 respectively. The Group now has US
Private Placement Notes of EUR253 million (FY2020: EUR195 million)
which have maturities extending to 2024, 2026, 2027, 2028 and 2033
and GBP215.5 million (FY2020: GBP115.5 million) which have
maturities extending to 2026, 2028, 2029 and 2031. The blended cost
of interest on the overall debt at 31 October 2020 was 2.36% per
annum.
For accounting periods starting from 1 January 2020 the
benchmark Interbank Offered Rates ("IBORs"), such as LIBOR has been
replaced by new official benchmark rates, known as alternative risk
free rates ("RFR"). The RFR that has been introduced applicable to
the Group is the Standard Overnight Index Average ("SONIA").
The bank facilities attract a margin over SONIA/EURIBOR. The
margin ratchets between 1.25% and 2.50%, by reference to the
Group's performance against its interest cover covenant.
Approximately 50% of the drawn bank facilities have been hedged at
an effective rate of 0.8152% (SONIA) or 0.1656% (EURIBOR).
The Company has in issue EUR50.9 million (FY2020: EUR50.9
million) 1.59% Series A Senior Secured Notes due 2024, EUR70.0
million (FY2020: EUR70.0 million) 1.26% Series A Secured Notes due
2026, GBP35.0 million (FY2020: GBP35.0 million) 2.59% Series B
Senior Secured Notes due 2026, EUR74.1 million (FY2020: EUR74.1
million) 2.00% Series B Senior Secured Notes due 2027, GBP20.0
million (FY2020: GBPnil) 1.96% Series A Secured Notes due 2028,
EUR29 million (FY2020: EURnil) 0.93% Series B Secured Notes due
2028, GBP50.5 million (FY2020: GBP50.5 million) 2.92% Series C
Senior Secured Notes due 2029, GBP30.0 million (FY2020: GBP30.0
million) 2.69% Series C Senior Secured Notes due 2029, GBP80.0
million (FY2020: GBPnil) 2.39% Series C Secured Notes due 2031 and
EUR29.0 million (FY2020: EURnil) 1.42% Series D Secured Notes due
2033. The EUR253.0 million of Euro denominated borrowings provides
a natural hedge against the Group's investment in the France and
Spain businesses, so the Group has applied net investment hedge
accounting and the retranslation of these borrowings is recognised
directly in the translation reserve.
The bank loans and overdrafts are secured by a fixed charge over
the Group's investment property portfolio. As part of the Group's
interest rate management strategy, the Group has entered into
several interest rate swap contracts, details of which are shown in
note 14.
Bank loans and secured notes are stated before unamortised issue
costs of GBP1.8 million (FY2020: GBP1.5 million).
Bank loans and secured notes are repayable as follows:
Group
--------------
2021 2020
GBP'm GBP'm
----------------------------- ------ ------
Between one and two years 57.3 -
Between two and five years 137.1 210.8
After more than five years 292.1 245.2
----------------------------- ------ ------
Bank loans and secured notes 486.5 456.0
Unamortised debt issue costs (1.8) (1.5)
----------------------------- ------ ------
484.7 454.5
----------------------------- ------ ------
The effective interest rates at the balance sheet date were as
follows:
2021 2020
----------------------- -------------------------- --------------------------
Bank loans (UK term Quarterly or monthly SONIA Quarterly or monthly LIBOR
loan) plus 1.25% plus 1.25%
Bank loans (Euro term Quarterly EURIBOR plus Quarterly EURIBOR plus
loan) 1.25% 1.25%
Private Placement Notes Weighted average rate of Weighted average rate
(Euros) 1.52% of 1.63%
Private Placement Notes Weighted average rate of Weighted average rate
(Sterling) 2.55% of 2.76%
----------------------- -------------------------- --------------------------
Borrowing facilities
The Group has the following undrawn committed borrowing
facilities available at 31 October in respect of which all
conditions precedent had been met at that date:
Floating rate
---------------
2021 2020
GBP'm GBP'm
------------------------- ------- ------
Expiring beyond one year 251.8 148.0
------------------------- ------- ------
As described above the Group's bank facilities mature in June
2023.
The carrying amounts of the Group's borrowings are denominated
in the following currencies:
2021 2020
GBP'm GBP'm
--------- ------ ------
Sterling 247.5 253.5
Euros 239.0 202.5
--------- ------ ------
486.5 456.0
--------- ------ ------
14. Financial instruments
Financial instruments disclosures are set out below:
2021 2020
----------------- -----------------
Asset Liability Asset Liability
GBP'm GBP'm GBP'm GBP'm
-------------------------- ------ --------- ------ ---------
Interest rate swaps 0.3 (0.2) - (1.4)
Foreign currency forwards 1.9 - 0.9 -
-------------------------- ------ --------- ------ ---------
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 which use a variety of assumptions
based on market conditions existing at each balance sheet date.
The fair values of all financial instruments are equal to their
book value, with the exception of bank loans, which are set out
below. The fair value of secured loan notes is determined using a
discounted cash flow, while the fair value of bank loans drawn from
the Group's bank facilities equates to book value. The carrying
value less impairment provision of trade receivables, other
receivables and the carrying value of trade payables and other
payables approximate to their fair value.
The fair value of bank loans is calculated as:
2021 2020
---------------------- ----------------------
Book value Fair value Book value Fair value
GBP'm GBP'm GBP'm GBP'm
----------- ---------- ---------- ---------- ----------
Bank loans 484.7 543.9 454.5 495.3
----------- ---------- ---------- ---------- ----------
Fair value hierarchy
IFRS 13 requires fair value measurements to be recognised using
a fair value hierarchy that reflects the significance of the inputs
used in the measurements, according to the following levels:
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 or liability, either directly
or indirectly.
Level 3 - inputs for the asset or 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:
2021 2020
Assets per the balance sheet GBP'm GBP'm
------------------------------------------- ------ ------
Derivative financial instruments - Level 2 2.2 0.9
Amounts due from associates - Level 2 2.7 2.0
------------------------------------------- ------ ------
2021 2020
Liabilities per the balance sheet GBP'm GBP'm
------------------------------------------- ------ ------
Derivative financial instruments - Level 2 0.2 1.4
Bank loans - Level 2 543.9 495.3
------------------------------------------- ------ ------
There were no transfers between Levels 1, 2 and 3 fair value
measurements during the current or prior year.
Over the life of the Group's derivative financial instruments,
the cumulative fair value gain/loss on those instruments will be
GBPnil as it is the Group's intention to hold them to maturity.
Interest rate swaps not designated as part of a hedging
arrangement
The notional principal amounts of the outstanding interest rate
swap contracts at 31 October 2021 were GBP55 million and EUR30
million (FY2020: GBP55 million and EUR30 million). At 31 October
2021 the weighted average fixed interest rates were Sterling at
0.8152% and Euro at 0.1656% (FY2020: Sterling at 0.8152% and Euro
at 0.1656%), and floating rates are at quarterly SONIA and
quarterly EURIBOR. The GBP55.0 million SONIA swaps and the EURIBOR
swaps expire in June 2022, whilst a further GBP55.0 million SONIA
forward-starting swaps become effective in June 2022 and expire in
June 2023 and have a fixed interest rate of 0.6885%. The movement
in fair value recognised in the income statement was a net gain of
GBP1.5 million (FY2020: GBP0.8 million net loss).
Foreign currency forwards not designated as part of a hedging
arrangement
As at 31 October 2021, the Group has three tranches of average
rate forward contracts for a notional amount totalling EUR24.5
million at a rate of EUR1.0751 to the Pound (FY2020: five tranches
totalling EUR39.0 million). The Group will receive the Sterling
equivalent at this average exchange rate and pay the Sterling
equivalent of the average monthly spot rates on the Euro notional
amounts, which have maturity dates as follows: EUR8.0 million
maturing 29 April 2022, EUR8.0 million maturing 31 October 2022 and
EUR8.5 million maturing 28 April 2023. The movement in the fair
value recognised in the income statement in the period was a gain
of GBP1.4 million. The EUR7.0 million tranche previously held
matured and was settled in April 2021, resulting in a fair value
disposal of GBP0.2 million and a receipt of GBP0.3 million. The
EUR7.5 million tranche previously held matured and was settled in
October 2021, resulting in a fair value disposal of GBP0.2 million
and a receipt of GBP0.6 million. This resulted in a net gain of
GBP0.5 million recognised as finance income in the profit and
loss.
Financial instruments by category
Assets
Financial at fair
assets value through
at amortised profit
cost and loss Total
Assets per the balance sheet GBP'm GBP'm GBP'm
-------------------------------------------------- ------------- -------------- ------
Trade receivables and other receivables excluding
prepayments 20.9 - 20.9
Amounts due from associates 2.7 - 2.7
Derivative financial instruments - 2.2 2.2
Cash and cash equivalents 43.2 - 43.2
-------------------------------------------------- ------------- -------------- ------
At 31 October 2021 66.8 2.2 69.0
-------------------------------------------------- ------------- -------------- ------
Other financial Liabilities
liabilities at fair
at value through
amortised profit
cost and loss Total
Liabilities per the balance sheet GBP'm GBP'm GBP'm
---------------------------------------------- --------------- -------------- ------
Borrowings (excluding obligations under lease
liabilities) 484.7 - 484.7
Obligations under lease liabilities 82.3 - 82.3
Derivative financial instruments - 0.2 0.2
Payables and accruals 58.2 - 58.2
---------------------------------------------- --------------- -------------- ------
At 31 October 2021 625.2 0.2 625.4
---------------------------------------------- --------------- -------------- ------
Assets
Financial at fair
assets value through
at amortised profit
cost and loss Total
Assets per the balance sheet GBP'm GBP'm GBP'm
-------------------------------------------------- ------------- -------------- ------
Trade receivables and other receivables excluding
prepayments 15.0 - 15.0
Amounts due from associates 2.0 - 2.0
Derivative financial instruments - 0.9 0.9
Cash and cash equivalents 19.6 - 19.6
-------------------------------------------------- ------------- -------------- ------
At 31 October 2020 36.6 0.9 37.5
-------------------------------------------------- ------------- -------------- ------
Other financial Liabilities
liabilities at fair
at value through
amortised profit
cost and loss Total
Liabilities per the balance sheet GBP'm GBP'm GBP'm
---------------------------------------------- --------------- -------------- ------
Borrowings (excluding obligations under lease
liabilities) 454.5 - 454.5
Obligations under lease liabilities 77.2 - 77.2
Derivative financial instruments - 1.4 1.4
Payables and accruals 31.5 - 31.5
---------------------------------------------- --------------- -------------- ------
At 31 October 2020 563.2 1.4 564.6
---------------------------------------------- --------------- -------------- ------
The interest rate risk profile, after taking account of
derivative financial instruments, was as follows:
2021 2020
---------------------------- ----------------------------
Floating Floating
rate Fixed rate Total rate Fixed rate Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
----------- -------- ---------- ------ -------- ---------- ------
Borrowings - 484.7 484.7 81.5 373.0 454.5
----------- -------- ---------- ------ -------- ---------- ------
The weighted average interest rate of the fixed rate financial
borrowing was 2.01% (FY2020: 2.03%) and the weighted average
remaining period for which the rate is fixed was six years (FY2020:
six years).
Maturity analysis
The table below analyses the Group's financial liabilities and
non-settled derivative financial instruments into relevant maturity
groupings based on the remaining period at the balance sheet date
to the contractual maturity dates. The amounts disclosed in the
table are the contractual undiscounted cash flows.
One to Two to
Less than two five More than
one year years years five years
GBP'm GBP'm GBP'm GBP'm
------------------------------------ --------- ------ ------ -----------
2021
Borrowings 10.6 67.4 162.1 313.4
Derivative financial instruments 0.3 0.3 - -
Obligations under lease liabilities 12.9 11.5 30.9 58.8
Payables and accruals 58.2 - - -
------------------------------------ --------- ------ ------ -----------
82.0 79.2 193.0 372.2
------------------------------------ --------- ------ ------ -----------
One to Two to
Less than two five More than
one year years years five years
GBP'm GBP'm GBP'm GBP'm
------------------------------------ --------- ------ ------ -----------
2020
Borrowings 8.8 8.8 230.1 258.6
Derivative financial instruments 0.4 0.4 0.3 -
Obligations under lease liabilities 12.8 12.6 31.1 57.9
Payables and accruals 31.5 - - -
------------------------------------ --------- ------ ------ -----------
53.5 21.8 261.5 316.5
------------------------------------ --------- ------ ------ -----------
15. Obligations under lease liabilities
The Group leases certain of its investment properties under
lease liabilities. The average remaining lease term is 10.3 years
(FY2020: 10.5 years).
Present value of
minimum
Minimum lease payments lease payments
------------------------ ------------------
2021 2020 2021 2020
GBP'm GBP'm GBP'm GBP'm
-------------------------------------- ----------- ----------- -------- --------
Within one year 12.9 12.8 12.3 12.3
Within two to five years 42.4 43.7 35.3 35.6
Greater than five years 58.8 57.9 34.7 29.3
-------------------------------------- ----------- ----------- -------- --------
114.1 114.4 82.3 77.2
Less: future finance charges on lease
liabilities (31.8) (37.2) - -
-------------------------------------- ----------- ----------- -------- --------
Present value of lease liabilities 82.3 77.2 82.3 77.2
-------------------------------------- ----------- ----------- -------- --------
2021 2020
GBP'm GBP'm
------------ ------ ------
Current 12.3 12.3
Non-current 70.0 64.9
------------ ------ ------
82.3 77.2
------------ ------ ------
Amounts recognised within the consolidated income statement
include interest on lease liabilities of GBP5.2 million and
variable lease payments not included in the measurement of the
lease liabilities of GBP0.4 million. Amounts recognised in the
consolidated statement of cash flows include lease liabilities
principal payments of GBP6.9 million and interest on lease
liabilities of GBP5.2 million. The maturity analysis for
obligations under lease liabilities under contractual undiscounted
cash flows is included in note 14.
16. Called up share capital
2021 2020
GBP'm GBP'm
----------------------------------------------------- ------ ------
Called up, allotted and fully paid
210,823,703 (FY2020: 210,611,207) ordinary shares of
1 pence each 2.1 2.1
----------------------------------------------------- ------ ------
17. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from
operating activities:
2021 2020
Cash generated from continuing operations Notes GBP'm GBP'm
------------------------------------------ ----- ------- -------
Profit before income tax 404.6 197.9
Gain on investment properties 10 (321.1) (126.5)
Share of profit in associates - -
Depreciation 1.0 0.9
Net finance expense 5 12.4 14.3
Employee share options 8.6 4.7
Changes in working capital:
Increase in inventories (0.2) -
Increase in trade and other receivables (5.4) (0.1)
Increase in trade and other payables 13.6 4.3
Increase in provisions 2.1 -
------------------------------------------ ----- ------- -------
Cash generated from continuing operations 115.6 95.5
------------------------------------------ ----- ------- -------
18. Analysis of movement in gross and net debt
Non-cash
2020 Cash flows movements 2021
GBP'm GBP'm GBP'm GBP'm
--------------------------------------------- ------- ---------- ---------- -------
Bank loans (454.5) (43.1) 12.9 (484.7)
Lease liabilities (77.2) 7.5 (12.6) (82.3)
--------------------------------------------- ------- ---------- ---------- -------
Total gross debt (liabilities from financing
activities) (531.7) (35.6) 0.3 (567.0)
--------------------------------------------- ------- ---------- ---------- -------
Cash in hand 19.6 24.5 (0.9) 43.2
--------------------------------------------- ------- ---------- ---------- -------
Total net debt (512.1) (11.1) (0.6) (523.8)
--------------------------------------------- ------- ---------- ---------- -------
The table above details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's consolidated cash flow statement as cash flows from
financing activities.
The cash flows from bank loans make up the net amount of
proceeds from borrowings, repayment of borrowings and debt issuance
costs.
Non-cash movements relate to the amortisation of debt issue
costs of GBP0.4 million (FY2020: GBP0.3 million), foreign exchange
movements of GBP12.4 million (FY2020: GBP8.3 million) and unwinding
of discount to lease liabilities of GBP12.6 million (FY2020:
GBP20.6 million (including IFRS 16 transition adjustments)).
19. 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 2012 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 GBP2.1 million at 31 October 2021 (FY2020: GBPnil) to reflect
the increased uncertainty surrounding the likelihood of a fully
successful outcome. Of the total provided, GBP1.9 million has been
recorded as an exceptional charge in respect of financial years
2012 to 2020 and GBP0.2 million has been charged in relation to
twelve months to 31 October 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 31 October 2021 is GBP2.7 million
(FY2020: GBP4.2 million). 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
GBP1.3 million have been put in place as at 31 October 2021
(FY2020: GBP0.6 million).
20. Contingent liabilities
As part of the Group banking facility, the Company has
guaranteed the borrowings totalling GBP486.5 million (FY2020:
GBP456.0 million) 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 remote 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 19.
21. Capital commitments
The Group had GBP98.6 million of capital commitments as at 31
October 2021 (FY2020: GBP15.3 million).
22. 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 9, the Group has a 20% interest in CERF
Storage JV B.V. ("CERF") and entered into transactions with CERF.
During the year, the Group invested a further GBP1.8 million into
CERF, which was used to acquire two additional stores and one
development site for the portfolio, located in the Netherlands.
GBP0.9 million is included as part of its non-current investments
in associates.
During the year the Group recharged GBPnil (FY2020: GBP0.2
million) to CERF for operational costs paid on behalf of CERF and
was repaid GBP0.2 million (FY2020: GBP0.3 million) of cumulative
outstanding balances during the year. Unpaid interest of GBP0.1
million (FY2020: GBP0.1 million) was accrued and charged during the
year on the EUR2.2 million (GBP2.1 million) principal loan note
outstanding (FY2020: EUR2 million (GBP1.8 million)). The total
amount outstanding at 31 October 2021 included within current trade
and other receivables was GBP2.7 million (FY2020: GBP2.0 million).
Management fees charged and settled during the year amounted to
GBP1.0 million (FY2020: GBP0.3 million).
Transactions with PBC Les Groues SAS
As described in note 9, the Group has a 24.9% interest in PBC
Les Groues SAS ("PBC"). During the period, the Group made an
initial investment of GBP1.0 million (EUR1.2 million) 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.
23. Post balance sheet events
On 10 November 2021, the Group agreed the sale of the Nanterre
site to the joint venture partner of Nanterre FOCD 92 (note 9) for
a total price of EUR6.9 million excluding VAT, where the settlement
is done partially in cash (EUR1.1 million), received on 18 November
2021 and partially in kind through the delivery of the new building
at the end of the operation (estimated at EUR5.8 million).
On 7 December 2021, the Group completed the acquisition of Your
Room Self Storage Limited, which includes a freehold store located
in Christchurch, Dorset, for GBP2.6 million.
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