REG - Safestore Hldgs plc - Final Results
17/01/2023 07:00
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RNS Number : 9070M Safestore Holdings plc 17 January 2023
17 January 2023
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Results for the year ended 31 October 2022
A strong trading performance in a year of significant strategic progress and
geographic expansion
Key measures
Year Ended 31 October 2022 Year Ended 31 October 2021 Change
Change-CER(1)
Underlying and Operating Metrics- total
Revenue £212.5m £186.8m 13.8% 14.3%
Underlying EBITDA(2) £135.1m £118.0m 14.5% 15.1%
Closing Occupancy (let sq ft- million)(3) 6.317 5.883 7.4% n/a
Closing Occupancy (% of MLA)(4) 82.1% 84.5% -2.4ppts n/a
Average Storage Rate(5) £29.25 £26.95 8.5% 9.2%
Adjusted Diluted EPRA Earnings per Share(6) 47.5p 40.5p 17.3% n/a
Free Cash Flow(7) £101.4m £89.5m 13.3% n/a
EPRA Basic NTA per Share(13) £9.08 £6.97 30.3% n/a
Underlying and Operating Metrics- like-for-like(8)
Revenue £204.3m £185.5m 10.1% 10.7%
Underlying EBITDA(2) £131.6m £117.0m 12.5% 13.0%
Closing Occupancy (let sq ft- million)(3) 5.725 5.838 -1.9% n/a
Closing Occupancy (% of MLA)(4) 83.1% 85.2% -2.1ppts n/a
Average Occupancy (let sq ft- million)(3) 5.723 5.685 0.7% n/a
Average Storage Rate(5) £29.99 £27.03 11.0% 11.5%
Statutory Metrics
Operating profit(9) £514.5m £417.0m 23.4% n/a
Profit before tax(9) £498.8m £404.6m 23.3% n/a
Diluted Earnings per Share 212.4p 176.4p 20.4% n/a
Dividend per Share 29.8p 25.1p 18.7% n/a
Cash inflow from operating activities £109.8m £97.0m 13.2% n/a
Diluted net assets per share(13) £8.20 £6.35 29.1% n/a
Highlights
Strong Financial Performance
· Group revenue for the year up 13.8% (up 14.3% in CER(1))
· Like-for-like(8) Group revenue for the year in CER(1) up 10.7%:
· Underlying EBITDA(2) up 15.1% in CER(1) which, combined with an
increased gain on investment properties of £381.6m (FY2021: £321.1m),
resulted in statutory operating profit(9) of £514.5m (FY2021: £417.0m)
· Adjusted Diluted EPRA Earnings per Share(6) up 17.3% at 47.5
pence (FY2021: 40.5 pence). Diluted Earnings per Share was 212.4 pence
(FY2021: 176.4 pence) largely due to the higher property valuation gain in
FY2022
· 15.9% increase in the final dividend to 20.4 pence (FY2021: 17.6
pence) giving a total 18.7% increase for the year to 29.8 pence (FY2021: 25.1
pence)
Continued Operational Delivery
· Continued balanced approach to revenue management together with
an efficient marketing platform driving returns and record occupancy
performance:
· Like-for-like(8) average storage rate(5) for the year up 11.5% in
CER(1)
· Like-for-like(8) average occupancy for the year up 0.7%
· Like-for-like(8) closing occupancy of 83.1% down 2.1ppts on 2021
(FY2021: 85.2%)
· 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 FY2022 rose to 90% of our total enquiries in
the UK (FY2021: 89%) and 85% in France (FY2021: 84%)
· Marketing cost as a percentage of revenue reduced to 3.6%
(FY2021: 3.7%)
Strategic Progress
· Store openings in London Bow, Barcelona and Nijmegen in the
Netherlands added c.126,000 sq ft of MLA(4) with a further two Madrid stores
opened post year end in November 2022, adding a further 85,000 sq ft of
MLA(4).
· Lease extensions signed in Exeter, London Crayford and
Sunderland.
· Five store extensions adding c.38,000 sq ft of MLA(4) in London
Paddington Marble Arch, Southend, London Edgware, London Wimbledon and
Winchester
· Acquired a 14,000 sq ft MLA(4) freehold store in
Christchurch(10), Dorset, from Your Room Self Storage
· Development pipeline expanded by c.0.7m sq ft of future MLA(4)
and eleven projects to c.1.4m sq ft and 29 projects (equivalent to c.18% of
existing portfolio):
· Eleven UK projects to add c.512,000 sq ft
· Six developments in Barcelona and Madrid to add c.262,000 sq ft
(an additional two developments opened since year-end, adding a further 85,000
sq ft)
· Seven Paris projects to add c.349,000 sq ft
· Five Netherlands sites to add c.283,000 sq ft
· Completed EPS accretive acquisition of remaining 80% of equity
owned by Carlyle in the Benelux JV(14) in March 2022 at an Enterprise Value of
€146m. The Benelux business now consists of 15 high quality stores with an
MLA(4) of 600,000 sq ft in the Netherlands and Belgium
· Entry into German market via a new joint venture ("JV") with
Carlyle which has acquired the seven-store myStorage business with 326,000 sq
ft of MLA(4)
ESG
· Continued development of Environmental, Social and Governance
("ESG") strategy:
· Linkage of new £400m refinancing to ESG targets
· Group commitment to be operationally carbon neutral by 2035
· ESG progress illustrated by awards of:
· GRESB "A" rating for public disclosures
· EPRA Silver rating for sustainability
· MSCI AA rating for ESG
· Highest rating of five stars from Support The Goals
Strong and Flexible Balance Sheet
· 30.9% increase in property valuation (including investment
properties under construction) driven by improved trading performance, new
stores, acquisitions, revisions to exit cap rates and stabilised occupancy
assumptions
· Revolving Credit Facilities (RCF's) refinanced with a new
increased £400m unsecured multi-currency four-year facility (with two
one-year extension options). Margins remain at 1.25% in line with previous
RCF's and all facilities, including private placement notes, are now unsecured
· Group loan-to-value ratio ("LTV"(11)) at 23.6%, calculated on net
debt (31 October 2021: 22.7%) and interest cover ratio ("ICR"(12)) at 11.4x
(31 October 2021: 10.5x)
· In addition to strong free cash flow, significant financing in
place to fund pipeline including unutilised bank facilities of £208.4m at
October 2022 and no borrowings to refinance before May 2024. In addition, a
further uncommitted £100m accordion facility incorporated into the new bank
facilities
· 93% of drawn debt at fixed rates or hedged at 31 October 2022
Frederic Vecchioli, Chief Executive Officer commented:
"I am pleased to report another excellent year in which we delivered
significant strategic progress, having enhanced our funding capacity, doubled
our development pipeline to c.1.4m sq ft of MLA and extended our geographical
footprint. The strong trading performance for the year is especially pleasing
as it follows a record year in 2021. Our 2022 result was achieved through
strong revenue growth in the UK market, good performances in our Parisian and
Spanish businesses, and seven months' contribution from our Benelux business,
which was acquired in March 2022.
Early trading in the new financial year shows broadly stable levels of demand
compared to last year (but significantly ahead of pre-pandemic levels) with
rates paid by new customers continuing to grow.
Over the last seven years, the Group has developed or acquired 68 stores and
expanded into four new countries (Netherlands, Belgium, Spain and now
Germany). In addition, our development pipeline of 29 new stores, extensions,
and projects represents a further c.18% of our existing portfolio's MLA.
Throughout this period of expansion, the Group has maintained its disciplined
approach to return on capital.
In March 2022, the Group completed the acquisition of our partner Carlyle's
80% stake in our Benelux JV. Over the last three years we have learnt much
about the Netherlands and Belgian markets and feel confident about the ongoing
development of our presence in these attractive geographies. It is our
intention to gradually increase our footprint in these two markets and our
development pipeline now includes five stores and c.283,000 sq ft of MLA in
the Netherlands.
Following this successful JV with Carlyle, we established a new German JV
which has acquired the seven-store myStorage business. Germany is one of
Europe's most under-penetrated self storage markets and I look forward to
growing our presence there.
Our strong and flexible balance sheet has been significantly enhanced by the
agreement of a new unsecured four-year £400 million multi-currency RCF which
increases funding capacity, allowing us to continue to consider strategic,
value-accretive investments as and when they arise.
We have delivered a strong occupancy performance over recent years and, after
a significant level of acquisition and development activity over the last six
years, we still have 1.4m sq ft of fully invested currently unlet space in our
UK, Paris, Spain and Benelux markets in addition to 1.4m sq ft of pipeline
space. Our most significant upside opportunity is from filling our existing
unlet space and that remains our priority. The business has demonstrated its
inherent resilience in recent times and, despite the challenging macroeconomic
environment, we are confident in the future of the business.
The underlying fundamentals of the European self storage industry with limited
supply, strong barriers to entry and a steadily growing product awareness are
as strong as ever. Over the last nine years, Safestore has delivered a
market leading 18% CAGR of its adjusted diluted EPRA EPS. During that period,
we have gradually expanded our geographical reach to six European countries
leveraging and improving our platform and central functions while managing
investment risk very carefully. I'm confident that Safestore will continue to
play a leading role in the development of the self storage industry across
Europe, delivering significant further value to its stakeholders.
None of this would be possible without the dedication and skills of our teams
and I would like to thank all our colleagues in the UK, France, Spain, the
Netherlands and Belgium for their performance in 2022 as well as their
commitment and loyalty. We are appreciative of their efforts."
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. Euro denominated results for the comparative period are
translated at the exchange rates effective in that period. This is performed
in order to present the reported results for the current period on a more
comparable basis).
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
2022, closing occupancy includes 24,000 sq ft of bulk tenancy (31 October
2021: 14,000 sq ft).
4 - MLA is Maximum Lettable Area. At 31 October 2022, Group MLA was c.7.70m sq
ft (FY2021: c.6.96m 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 is 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 remove the impact of the 2022 acquisition of the
Netherlands and Belgium Joint Venture, the 2022 acquisition of Christchurch,
the 2022 openings of Bow, Nijmegen (Netherlands) and Barcelona, the 2021
openings of Birmingham Middleway and Magenta in Paris and the 2021 closure of
Birmingham South.
9 - Operating profit increased by £97.5 million to £514.5 million (FY2021:
£417.0 million) principally as a result of an increase in the gain on
investment properties of £60.5 million to £381.6 million (FY2021: £321.1
million), as well as an increase of £17.1 million or 14.5% in Underlying
EBITDA as a result of stronger trading performance. Profit before income tax
additionally included exceptional items of £10.8m, being other exceptional
gains. This included £5.5m relating to the valuation gain of the 20% equity
investment held in the Joint Venture with CERF, when the Group acquired the
remaining 80% on 30 March 2022 and £5.1m relating to the net gain on
disposal of the Paris Nanterre site in November 2021.
10 - The enterprise value paid for Your Room Self Storage in Christchurch,
Dorset, on 7 December 2021 was £2.45 million.
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). At 31 October 2022, the Group LTV ratio was 24.4%. Under the new
revolving credit facility, signed 11 November 2022, LTV is to be calculated
against net debt which equates to an LTV of 23.6%.
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 was superseded and transitioned to three new measures:
EPRA Net Reinstatement Value ("NRV"), EPRA Net Tangible Assets ("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 of the Financial
Statements.
14 - On 30 March 2022, the Group acquired the remaining 80% of the Joint
Venture with CERF. Prior to acquiring the 80%, the Joint Venture with CERF,
which represented a 20% investment, was accounted for as an associate using
the equity method of accounting, as described in the "Investment in
associates" note to the financial statements..
15 - On 1 December 2022, the Group made an initial investment into a new joint
venture with Carlyle, to enter the German self storage market, of c.€2.2
million for a 10% share. The Group will also earn a fee for providing
management services to the joint venture.
Summary
The Group has delivered an excellent performance in 2022 building on a record
2021.
In 2022, the Group delivered 17.3% growth in Adjusted Diluted EPRA Earnings
per Share largely driven by organic growth. Total Group revenue increased by
13.8% (14.3% CER(1)) with a particularly strong performance in the UK (+13.1%)
and continued strength in Paris (+6.1%) and Spain (+9.1%). On a
like-for-like(8) basis in CER(1), Group revenue increased by 10.7% with the UK
up 12.2%, Paris up 5.3% and Spain up 8.5% reflecting the strategy to balance
rate growth and occupancy performance to maximise revenue; the Group's
like-for-like average storage rate(5) was up 11.5% at CER(1) and average
occupancy was up 0.7%, whilst like-for-like(8) closing occupancy decreased by
2.1ppts to 83.1%.
The Group has traded well throughout the year despite a difficult comparable
performance in the record 2021 financial year. Our digital marketing platform
has driven good enquiry generation and conversion, and our ongoing commitment
to investing in and supporting the development of our staff has resulted in
like-for-like(8) revenue in the UK growing by 12.2%. The like-for-like average
rate growth drove the UK revenue performance and increased by 13.9% in the
year. After an exceptionally strong 2021, average occupancy grew by 0.6% and
closing occupancy was down 2.6ppts at 83.0%.
In Paris, our performance has also been strong with like-for-like(8) revenue
growing by 5.3% at CER(1) driven by a like-for-like growth in average
occupancy of 1.4% and like-for-like average storage rate growing by 4.3% at
CER(1). Like-for-like(8) closing occupancy ended the year at a similar level
to the prior year at 83.4% (FY2021: 83.6%). This is the 24(th) consecutive
year of revenue growth in Paris with average growth over the last seven years
of approximately 5%.
Our Spanish business saw a strong 8.5% growth in like-for-like revenue for the
year driven by an increase in the like-for-like average rate of 5.8%.
Ancillary sales were also strong. A fifth Spanish store opened in the year and
total revenue growth was 9.1%.
The Group's current pipeline of new developments and store extensions has
grown significantly over the last year and now constitutes c.1.4m sq ft of
future MLA (equivalent to 18% of the existing portfolio) and associated
outstanding capital expenditure of £146 million. The pipeline consists of
eleven projects in the UK, seven in Paris, six in Spain and five in the
Netherlands.
The Group completed the EPS accretive acquisition of the remaining 80% of
equity owned by Carlyle in the Benelux JV(14) in March 2022 at an Enterprise
Value of €146 million. The Benelux business consists of 15 high quality
stores with an MLA of 600,000 sq ft in the Netherlands and Belgium.
Group Underlying EBITDA(2) of £135.1 million increased by 15.1% at CER(1) on
the prior year. The Group's EBITDA(2) performance, offset by a modest
increase in leasehold rent and an increase in finance costs, resulted in a
17.3% increase in Adjusted Diluted EPRA EPS(6) in the period to 47.5 pence
(FY2021: 40.5 pence). Statutory operating profit increased by £97.5 million
to £514.5 million (FY2021: £417.0 million) principally as a result of an
increase in the gain on investment properties of £60.5 million to £381.6
million (FY2021: £321.1 million), along with an increase of £17.1 million or
14.5% 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 30.9%, driven by the stronger
underlying performance of the stores, modest revisions to exit cap rates and
stabilised occupancy assumptions, new stores, acquisitions and FX. After
exchange rate movements, the portfolio valuation increased to £2,552.3
million with the UK portfolio up £340.7 million to a total UK value of
£1,815.5 million and the French portfolio increasing by €104.3 million to
€625.9 million.
Reflecting the Group's strong trading performance, the Board is pleased to
recommend a 15.9% increase in the final dividend to 20.4 pence per share
(FY2021: 17.6 pence) resulting in a full year dividend up 18.7% to 29.8 pence
per share (FY2021: 25.1 pence). Over the last nine years, the Group has grown
the annual dividend by 418% or 24.1 pence per share.
Outlook
In the last seven 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 20 new stores, with a further two Madrid stores opening in
November 2022, and establishing a pipeline of c.1.4m sq ft of MLA. In
addition, the Group has entered new markets in Spain together with Belgium and
the Netherlands and more recently Germany through our new joint venture with
Carlyle. Excluding the joint venture and the development pipeline, there is
1.4m 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
and continuing to grow in all of our geographies. Our development pipeline
represents 18% of our existing MLA and our balance sheet strength and
flexibility provide us with the opportunity to consider further selective
development and acquisition opportunities in all of our markets.
Whilst we are aware of the current macro-economic challenges, our business
model has proven to be highly resilient with multiple drivers of demand and we
believe the Group, whilst not entirely immune from any cost of living or
inflationary issues, is strongly positioned to withstand any downturn.
In the first two months of the 2022/23 financial year we have seen broadly
stable levels of demand compared to last year (but significantly ahead of
pre-pandemic levels) with like-for-like Group revenue (at CER) up 3.5% and
total revenue (at CER) up 8.7%.
Enquiries
Safestore Holdings plc 020 8732 1500
Frederic Vecchioli, Chief Executive Officer
Andy Jones, Chief Financial Officer
www.safestore.com (http://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 179 stores on 31
October 2022, comprising 130 wholly owned stores in the UK (including 72
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, 5
stores in Spain, 9 stores in the Netherlands and 6 stores in Belgium.
· 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 90,000 personal and business
customers.
· As of 31 October 2022, Safestore had a maximum lettable area ("MLA") of
7.698 million sq ft (excluding the expansion pipeline stores) of which 6.317
million sq ft was occupied.
· Safestore employs around 750 people in the UK, Paris, Spain, the
Netherlands and Belgium.
Chairman's Statement
Our purpose remains simple - to add stakeholder value by developing profitable
and sustainable spaces that allow individuals, businesses and local
communities to thrive
The last year has been one of considerable strategic and financial progress
for the Group which is especially impressive on the back of an exceptionally
strong year in 2021. After three years in the role, I continue to be impressed
by the dedication and resilience of the store and Head Office teams which have
been instrumental in delivering this progress.
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
In the last year the quality, resilience and, importantly, the scalability of
the business model at Safestore have again been demonstrated and I am
delighted to announce, on behalf of the Board of the Group, an excellent set
of results for the financial year ended 31 October 2022.
Management's first priority remains to maximise the economic return on our
existing store portfolio and its 1.4 million sq ft of fully invested unlet
space, building on the significant operational improvements made over the
current management team's tenure.
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 acquired 46 and opened 20 stores over the last six years and all are
performing well. The acquisition of OMB in Barcelona in 2019 is now fully
integrated into the business and has an exciting pipeline, with two stores
opening in November 2022, and a further six stores over the next two financial
years. Our EPS accretive acquisition of the 80% share in the Benelux joint
venture owned by Carlyle means that the Group now fully owns the operations of
fifteen stores in the Netherlands and Belgium with a further five in the
pipeline. Overall, we have a development property pipeline of an additional
1.4m sq ft of MLA, which provides significant future opportunity for the
business and underpins our continued growth.
The recent establishment of a new £400 million unsecured multi-currency RCF
at attractive margins offers us significantly greater strategic flexibility to
support these growth plans.
Our new joint venture(14) with Carlyle in Germany and recent acquisitions in
Spain, the Netherlands and Belgium provide us with exciting platforms in new
attractive geographies. I believe that Safestore's highly scalable platform
will allow us to take advantage of further opportunities in due course.
Financial results
Revenue for the year was £212.5 million, 13.8% ahead of last year (FY2021:
£186.8 million), or 14.3% ahead on a constant currency basis.
Like-for-like(8) revenue was up 10.7% in constant currency. This result was
driven by an exceptional performance in the UK which grew like-for-like(8)
revenue by 12.2%, combined with another strong performance by Une Pièce en
Plus, our Parisian business, which grew like-for-like(8) revenue by 5.3%.
Particularly encouragingly, this significant growth in revenue delivered a
further improvement in margins. Underlying EBITDA(2) increased by 14.5% to
£135.1 million (FY2021: £118.0 million) and on a constant currency basis by
15.1%.
Operating profit increased by £97.5 million from £417.0 million in 2021 to
£514.5 million in 2022, reflecting a higher investment property gain in 2022
combined with the increase in Underlying EBITDA(2), a reduction in the
share-based payments charge, as well as other exceptional gains.
Adjusted Diluted EPRA Earnings per Share(6) grew by 17.3% to 47.5 pence
(FY2021: 40.5 pence). Adjusted Diluted EPRA Earnings per Share(6) has grown by
36.8 pence or 344% over the last nine years. Statutory diluted Earnings per
Share increased to 212.4 pence (FY2021: 176.4 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 24.4%, calculated on gross debt (FY2021: 24.9%) and an ICR(12) of 11.4x
(FY2021: 10.5x). 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 results continue a sustained period of excellent performance by
the Group. Over the last nine years, the management and store teams have
delivered a Total Shareholder Return of 779.4%, 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
Away from the financial results, I am pleased with the progress the Group has
made with its ESG strategy.
Even though Safestore already has one of the lowest environmental impact
profiles of any company within the overall property sector, we have continued
to focus on our environmental agenda, with year-on-year reductions in
greenhouse gas emissions and enhanced disclosures in recognition of the
recommendations of the TCFD. I am pleased to report that we have retained a
Silver rating in the 2022 EPRA sustainability awards, an 'A' rating for public
disclosures by GRESB, an 'AA' rating for ESG by MSCI and the highest rating of
five stars by Support the Goals.
In addition, we have demonstrated our commitment to our ESG agenda by linking
the margin on our new £400 million bank facility to ESG related KPI's agreed
with our lending group. 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
During the financial year Claire Balmforth stepped down from the Board. Claire
has served on the Safestore Board for six years and has chaired the
Remuneration Committee for all that time. As both a Director and Chair of
the Remuneration Committee, Claire has served the business outstandingly
throughout the last six years and both personally and on behalf of the Board I
would like to thank her for her contribution.
I am also delighted to welcome Jane Bentall to the Board. Jane has extensive
experience and understanding of operating multi-site, consumer-led businesses.
Most recently, Jane was Managing Director of Haven, the UK holiday parks
chain and largest business division of Bourne Leisure. Prior to becoming
Managing Director of Haven, she was the Group Chief Financial Officer for
twelve years and previously spent six years as Operations Director. In her
career she has also held senior financial roles at the Rank Group.
Dividend
Finally, reflecting the Group's strong trading performance and in line with
our progressive dividend policy, the Board is pleased to recommend a 15.9%
increase in the final dividend to 20.4 pence per share (FY2021: 17.6 pence)
resulting in a full year dividend up 18.7% to 29.8 pence per share (FY2021:
25.1 pence).
Over the last nine years, the Group has grown the dividend by 418% or 24.1
pence per share during which period the Group has returned to shareholders a
total of 155.8 pence per share. The total dividend for the year is covered
1.59 times by Adjusted EPRA Diluted Earnings (1.61 times in 2021).
Shareholders will be asked to approve the dividend at the Company's Annual
General Meeting on 15 March 2023 and, if approved, the final dividend will be
payable on 7 April 2023 to Shareholders on the register at close of business
on 3 March 2023.
Summary
In conclusion, the Board remains confident in the future growth prospects for
the Group and will continue its progressive dividend policy in 2023 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
16 January 2023
Our Strategy
The Group intends to continue to deliver on its proven strategy of leveraging
its well-located asset base, management expertise, infrastructure, scale and
balance sheet strength and 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 further on.
Optimisation of Existing Portfolio
With the opening of 22 new stores since August 2016, and the acquisitions of
46 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, Your Room in 2021 and the Benelux JV in 2022, we have established and
strengthened our market-leading portfolio in the UK and Paris and have entered
the Spanish, Netherlands and Belgium markets. We have a high quality, fully
invested estate in all geographies and, of our 179 stores as at 31 October
2022, 101 are in London and the South East of England or in Paris, with 58 in
the other major UK cities and 20 in Barcelona and the Benelux region. In the
UK, we now operate 49 stores within the M25, which represents a higher number
of stores than any other competitor.
Our MLA(4) has increased to 7.7m sq ft at 31 October 2022 (FY2021: 6.96m sq
ft). At the current occupancy level of 82.1% we have 1.4m sq ft of fully
invested unoccupied space (2.8m sq ft including the development pipeline), of
which 1.0m sq ft is in our UK stores, 0.2m sq ft is in Paris and 0.2m sq ft is
in Barcelona and Benelux. In total, unlet space at our existing stores is the
equivalent of c.35 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
2022, occupancy of the stores in the portfolio in 2013 that remain in the
Group today has increased from 63.1% to 84.2%, i.e. an average of 2.3ppts per
year and equivalent to a total of 1.1m 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 half of the UK
population either knowing very little or nothing about self storage (source:
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 54% 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 has more new lets 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 FY2022 rose to 90% of our enquiries in the UK (FY2021:
89%) and 85% in France (FY2021: 84%). The majority of our online enquiries
now originate from a mobile device (65% share in FY2022), 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. Group
marketing costs as a percentage of revenue were 3.6% for the full year
(FY2021: 3.7%). This percentage has constantly reduced over the last eight
years and is now at its lowest level in that period.
During the 2021/22 trading year, the Group demonstrated its ability to
integrate newly developed and acquired stores into its marketing platform with
successful new openings at Bow (London, UK), Christchurch (Dorset, UK),
Nijmegen (Netherlands), and an additional store in Barcelona. We have now
clearly demonstrated that our marketing platform is transferrable into
multiple overseas geographies.
In February 2022, Safestore UK won the Feefo Platinum Trusted Service award
for the third 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 4.6 and 4.8 out of 5. In France, Une Pièce en Plus uses Trustpilot to
obtain independent customer reviews and in FY2022 achieved a "TrustScore" of
4.6 out of 5. In Spain, OMB collects customer feedback via Google reviews and
has maintained a score of 4.6 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.
In the first half of our 2021/22 trading year, we moved away from Covid-based
restrictions to a business-as-usual operating model in stores removing all
screens and signage, although we continue to display advisory mask and
distancing messages along with safe working protocols for both our customers
and colleagues.
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") accredited organisation
since 2003 and we passionately believe that our continued success is dependent
on our highly motivated and well-trained colleagues. Following the award of a
Bronze accreditation in 2015 and a Gold accreditation in 2018, we were
delighted to be awarded the "we invest in people" Platinum accreditation in
February 2021. This is the highest accolade in the Investors in People scale
and positions us as an employer of choice. Shortly after our Platinum
accreditation, we were shortlisted for the Platinum Employer of the Year
(250+) category in the Investors in People Awards 2021. This further endorses
the high standard of our teams and the people development programmes that
drive our skill and talent retention.
IIP is the international standard for people management, defining what it
takes to lead, support, and engage 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 over 50,000
organisations in 66 countries. This sustained people engagement focus is an
essential component of our continuous improvement mentality.
We are committed to growing and rewarding our people and we tailor our
development, reward and recognition programmes to reflect this. 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 Covid-19 pandemic 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. As the restrictions in the UK
relaxed through the second half of 2021, we were able to combine our newly
created technology communication skills with our tried and tested face-to-face
training sessions in a newly created "impact" sales refresher.
Following our late 2021 sales refreshers, we took the opportunity to review
many of our training, coaching and compliance tools to take advantage of our
higher performance levels and skilled colleagues. The integration of flexible
contract types and enhanced digital contracts have all been included in our
updated version of QUEST, our sales framework. This two-day programme has been
delivered, face-to-face, to every colleague in our store and field teams in
the first half of 2022.
We recognised the changing needs and demands of our customers, not only
through the challenging times of 2020/21, but also through the newly emerging
demands and requirements in late 2021. Combining new, along with tried and
tested, solutions and systems, we are further able to support our store
colleagues, allowing them to fulfil the needs of our customers over and above
that of our competitors. Our flexible contract types and enhanced digital
contract completion further enhance our customer offer and experience. These
enhancements have combined to help us create our 2023 QUEST programme which
commenced roll-out in late September 2022 focusing on the new contract types
and technologies available to us.
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 we grow our
talent through 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. In May
2022, we began our assessment process for the sixth intake of the SMD (Store
Manager Development programme) with a first-class group of candidates ready to
learn the necessary skills and attributes they need to become a Safestore
Store Manager. Funded by the Apprenticeship Levy this programme provides the
opportunity to complete a Level 3 Management and Leadership apprenticeship,
with the additional opportunity to complete an Institute of Leadership and
Management ("ILM") qualification.
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
marketplace.
Our Senior Manager Development programme ("LEAD") focuses on developing our
high performing store 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 included delegates delivering
performance-enhancing projects to our wider business. We are proud that all
nine participants of our Senior Leadership Development programme (LEAD
Academy) successfully completed their Level 5 Management and Leadership
apprenticeship; six of those participants were awarded Distinctions.
Furthermore, we have re-launched our Graduate programme, with our first intake
commencing in October 2022, providing an opportunity for newly qualified
graduates to build their skillset and experience resulting in a career with
Safestore.
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 colleague 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,
our Values and Behaviours framework is overlaid on individuals' performance in
order to assess performance and development needs on a quarterly basis.
Our "Make the Difference" people forum, launched in 2018, enables frequent
opportunities for us to hear and respond to our colleagues. Our network of 15
"People Champions" collect questions and feedback from their peers across the
business and put them to members of the Executive Committee. We drive change
and continuous improvement in responding to the feedback we receive 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" people forum,
raising and representing the views of their colleagues; and
· Consult with and discuss feedback with management and the
leadership team at Safestore.
Our values are authentic, having been created by our people. They are core to
the employment life cycle and bring consistency to our culture. Our leaders
have high values alignment enabling us to make the right decisions for our
colleagues and our customers. Our customers continue to be at the heart of
everything we do, whether it be in store, online or in their communities. In
2022 we maintained our industry-leading independent customer ratings, with a
Feefo Platinum Trusted Service award and a 5-star Trustpilot rating, with over
twice the reviews of our nearest competitor. Along with our strong Google
ratings, these independent assessments further reflect our ongoing commitment
to customer 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, or the ability to offer discretionary discounts. The
Lowest Price Guarantee and discretionary discount are centrally controlled and
activated on a store by store and unit by unit basis.
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 seven 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 2022, based on the current level of borrowings and interest swap
rates, the Group's weighted average cost of debt was 2.41% and 93% of our
drawn debt was at fixed rate or hedged. The weighted average maturity of the
Group's drawn debt is 5.1 years at the current period end and the Group's LTV
ratio is 24.4% as at 31 October 2022.
Based on our current development pipeline and our internal assumptions on how
SONIA and Euribor will grow over the coming months, we anticipate that our
weighted average cost of debt will increase to c.2.6% to 2.8% by the end of
2023.
This LTV of 24.4% and interest cover ratio of 11.4x for the rolling
twelve-month period ended 31 October 2022 provides us with significant
headroom compared to our banking covenants. We had £208.4 million of undrawn
bank facilities at 31 October 2022 before taking into consideration the
additional £100 million uncommitted accordion facility.
Taking into account the improvements we have made in the performance of the
business, 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
In April 2022, Safestore drew its existing uncommitted $115 million Shelf
Facility. The facility was drawn in Euros for a 7- year term at an interest
rate of 2.45% in order to partially fund the acquisition of Carlyle's 80%
share of the Benelux JV.
Since the end of the financial year, the Group has completed the refinancing
of its Revolving Credit Facilities ("RCF's") which were due to expire in June
2023.
The previous £250 million Sterling and €70 million Euro secured RCFs have
been replaced with a single multi-currency unsecured £400 million facility.
In addition, a further £100 million uncommitted accordion facility is
incorporated into the facility agreement.
The facility is for a four-year term with two one-year extension options
exercisable after the first and second years of the agreement.
The Group will pay interest at a margin of 1.25% plus SONIA or Euribor
depending on whether the borrowings are drawn in Sterling or Euros. The margin
is at the same level as the previous facility agreements.
A commitment fee of 35% of the margin is payable on undrawn amounts under the
facility. This has reduced from 40% under the previous facility agreements.
Reflecting the Group's improved credit profile, the banking group and existing
US Private Placement Noteholders have agreed that all of the Group's
previously secured borrowings move to an unsecured basis, thus reducing
administrative and legal costs associated with the facilities.
The main covenants under all of the Group's borrowings are a Group
Loan-to-value ("LTV") covenant of 60% (replacing separate UK and French LTV
covenants) which is based on net debt rather than gross debt and an Interest
Cover Ratio covenant of 2.4x.
The hedging arrangements under the previous facility agreements have been
continued under the new agreements. Therefore, the Group benefits from £55
million of Interest Rate Swaps until 30 June 2023 at a rate of 0.6885%
Environmental, Social and Governance ("ESG") KPI's have been agreed with the
Group's lenders. The margin under the facility is now linked to ESG targets,
where met enable a reduction in the margin of up to 5bps.
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 to progress in FY2022.
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 response during the pandemic lockdowns and aftermath has had a
profound impact on trust in leadership and colleague engagement and
motivation.
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 44,000 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 to 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 FY2022, the space occupied by local charities in
222 units across 103 stores was 18,903 sq ft and worth £0.7 million.
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 2021 report by KPMG and EPRA, 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 FY2022, the Group continued to progress with a further 2.7%
decline in absolute emissions despite continued portfolio growth and greater
utilisation of stores compared to 2021. Safestore's absolute (location-based)
emissions are now 54% below, and emissions intensity 68% 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 £3 million.
In addition to the IIP award and the customer satisfaction ratings, the Group
has received recognition for its sustainability progress and disclosures in
the last twelve months. Safestore has been given a Silver rating in the 2022
EPRA Sustainability BPR awards. The Global ESG Benchmark for Real Assets
("GRESB") has once again awarded Safestore an "A" rating in its 2022 Public
Disclosures assessment. MSCI has awarded Safestore its second-highest rating
of "AA" for ESG in 2022. The Group has also been awarded the highest rating of
five stars by Support the Goals.
Finally, the Group has worked with its banking lenders to agree ESG related
KPI's which are linked to the margin payable under its new £400 million
facility. Two KPI's have been agreed, which, when achieved, result in a
reduction in margin of up 5bps.
Portfolio Management
Our approach to store development and acquisitions in the UK, Paris and Spain
and now the Netherlands and Belgium, continues to be pragmatic, flexible and
focused on the return on capital.
Our property teams 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 22 new stores: Chiswick, Wandsworth, Mitcham,
Paddington Marble Arch, Carshalton, Bow (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, Nijmegen in the Netherlands and Pronvenca in
Barcelona, with a further two stores opening in Madrid in November 2022 adding
1,093,000 sq ft of MLA.
In addition, the Group has acquired 46 existing stores through the
acquisitions of Space Maker, Alligator, Fort Box, Salus and Your Room in the
UK, OhMyBox! in Barcelona, and the Lokabox and M3 group from our Benelux JV
acquisition. These acquisitions added a further 1,844,000 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, Wimbledon, Edgware, Southend, Paddington Marble
Arch, Winchester and Longpont (Paris) stores adding a net 122,000 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 (see
below) has grown significantly over the last year and now constitutes
c.1,407,000 sq ft of future MLA. The pipeline and store openings since the end
of the 2022 financial year is equivalent to c.19% of the existing portfolio.
The outstanding capital expenditure of £146 million is expected to be funded
from the Group's existing resources. The total capital expenditure on stores
opened in the 2022/23 financial year-to-date as well as the outstanding
pipeline is estimated to be c. £245m. At our usual cash on cash return
hurdles of c.10% we would estimate that these stores will add c. £24.5m of
EBITDA at stabilisation (c. 4 years after opening).
Property Pipeline
Openings of New Stores and Extensions in the period
Open 2022 FH/LH Opening Date MLA Other
Redevelopments and Extensions
London- Paddington Marble Arch LH Q1 2022 8,500 Extension
Southend FH Q1 2022 10,100 Extension
London- Edgware FH Q1 2022 22,900 Extension
London- Wimbledon FH Q1 2022 9,000 Extension
Winchester FH Q4 2022 11,000 Extension
New Developments
London- Bow FH Q1 2022 74,000 Conversion
Central Barcelona FH Q1 2022 12,500 Conversion
Nijmegen- Netherlands FH Q1 2022 40,000 Conversion
Open 2023
New Developments
Northern Madrid FH Q1 2023 53,000 Conversion
Southern Madrid FH Q1 2023 32,000 Conversion
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.
In January 2021, the Group exchanged contracts on a freehold building in a
densely populated area in Central Barcelona. The conversion of the existing
building into a 12,500 sq ft MLA self storage facility is complete and the
store is now open.
In March 2021 and April 2021, the Group exchanged contracts on two freehold
buildings in Southern Madrid and Northern Madrid respectively. Both
acquisitions have been completed with planning granted and the existing
buildings have been converted into 32,000 and 53,000 sq ft MLA self storage
facilities. Both sites opened post-year end in November 2022.
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 construction was completed
just after the period end. The existing reception area has been 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 have been added. The Wimbledon
store's peak occupancy, prior to the Covid-19 pandemic, was 92%.
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 had 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 addition, 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 on 31 March 2021 was
80%. The extension opened in December 2021, adding 8,500 sq ft of MLA.
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.
An 11,000 sq ft extension to our existing Winchester store opened in the
quarter. The existing store has an MLA of 42,000 sq ft and has peaked at more
than 90% occupancy.
In January 2022, the Netherlands business opened a new store in Nijmegen. The
store is freehold with an MLA of 40,000 sq ft and is a conversion of an
existing building. Nijmegen has a population of 177,000 and the site is well
located on a main road with good visibility and access.
Development Sites
UK
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 2024.
In April 2021, the Group exchanged contracts on a freehold 1.3-acre site at
Lea Bridge in Northeast 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 £170k per annum is currently received on this site.
In addition, in April 2021, the Group exchanged contracts on a freehold site
in Woodford in Northeast London. Subject to planning, we will open a 76,000 sq
ft MLA store in 2025.
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 2024.
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 Southeast 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 May 2022, the Group completed the acquisition of a 2.1-acre freehold site
including an existing warehouse in Wigan in Greater Manchester. Subject to
minor planning approvals for elevations and signage, we plan to convert the
existing building and open a c.42,700 sq ft MLA store in 2023.
The Group has also previously acquired two additional sites in London at
Morden and Bermondsey. Morden is a freehold 0.9-acre site in an established
industrial location. Planning permission for a 52,000 sq ft self storage
facility has now been granted and construction on this site is underway with a
view to opening in 2023. 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 Romford in London, we have secured a freehold site with an existing
warehouse which will be converted, subject to planning permission, to a 41,000
sq ft store, opening in 2024.
In Crayford, we have secured a leasehold site on which we will convert an
existing warehouse to a 9,400 sq ft extension to our existing Crayford site.
We hope to open the satellite store in 2023.
In Walton-on-Thames in London, we have secured a freehold site with an
existing warehouse which will be converted, subject to planning permission, to
a 20,700 sq ft store. We hope to open the store in 2025.
Our total UK development pipeline now amounts to c.511,800 sq ft of which
c.415,100 sq ft is in London.
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. 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
is constructing a c.300,000 sq ft development of offices, retail, a school and
residential properties.
Safestore has contributed its Nanterre site into the project, receiving cash
of €1.0 million in addition to the delivery of 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 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. We expect the store to open in 2023.
Over the first half of 2022 we exchanged contracts on three freehold
development sites to the west of Paris. All sites required planning permission
and newly built stores of 56,000 sq ft, 20,000 sq ft and 58,000 sq ft were
planned to be constructed by the end of 2023. Our Paris West 2 site (20,000 sq
ft) did not receive planning permission and has been removed from the
pipeline.
Paris East 1 and Paris North West 1 are freehold sites on which we will
convert existing buildings, subject to planning, to 60,000 sq ft and 54,000 sq
ft stores respectively. We expect the stores to open in 2023.
Our Paris pipeline now amounts to c.349,200 sq ft.
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. A fifth
store, in Central Barcelona, was opened during 2022. The occupancy of the
business at the end of October 2022 was 78.9% and 85.9% on a like-for-like
basis.
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
Northern Barcelona. Subject to planning, we will convert the existing building
into a 42,000 sq ft MLA . It is anticipated that the site will open in 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 2022/23 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
24,700 sq ft MLA store which, subject to planning, should open in 2024.
In December 2021, the Group exchanged contracts on a freehold building in a
commercial and industrial area of Eastern Madrid. Subject to completion, we
will convert the existing building into a 50,000 sq ft MLA self storage
facility. It is anticipated that the site will open in 2023.
In August 2022, the Group exchanged contracts on a freehold building in a
commercial and industrial area of South West Madrid. Subject to planning and
completion, we will convert the existing building into a 46,800 sq ft MLA self
storage facility. It is anticipated that the site will open in 2024.
A new freehold site has been secured in Southern Madrid (Southern Madrid 2) on
which we will convert an existing building, subject to planning permission,
into a 68,800 sq ft storage facility. It is anticipated that the site will
open in 2024.
Our Spanish pipeline now amounts to c.262,300 sq ft including 165,600 sq ft
across three stores in Madrid and 96,700 sq ft over three stores in Barcelona.
The Spanish business now has seven open stores and a pipeline consisting of a
further six stores amounting to c.262,300 sq ft of MLA.
Netherlands
During the year we exchanged contracts on a freehold site at Amersfoort, 40
minutes east of Amsterdam. The acquisition is subject to planning permission
and we anticipate that the new store, which will have an MLA of 58,000 sq ft,
will be opened in 2023.
The Group completed the acquisition of a freehold site in Almere, a city with
a population of 214,000 which is 20 minutes' drive from Amsterdam. Subject to
planning, we will convert the two existing buildings on the site into a 44,500
sq ft MLA self storage facility. It is anticipated that the site will open in
2023.
New freehold sites have been secured in Amsterdam and Aalsmeer where we will
build new stores, subject to planning, of 61,400 sq ft and 48,400 sq ft
respectively. The two stores should open in 2024.
Since the year end, the Group has secured a freehold site in Rotterdam for
construction of a 71,000 sq ft MLA store subject to planning. Rotterdam is one
of the major cities in the Netherlands with a population of 588,000 and forms
part of the larger Randstad area. The new site forms part of a larger
re-development within the heart of an affluent district of the city.
In the Netherlands, our pipeline now consists of 283,300 sq ft of space in
five stores.
Store Extensions
The Group plans to redevelop and extend its Pyrénées store in Paris. The
extension will add 22,200 sq ft and is planned to open in 2023. As of
September 2022, the store occupancy was 94%.
Lease Extensions and Assignments
During the period we extended the lease on our Exeter store in the UK. The
lease will now continue until February 2045 with tenant-only break clauses in
2035 and 2040. A six-month rent-free period was agreed as part of the
renegotiation.
In Crayford, we have extended the lease on our existing store to 2042, with a
tenant-only break option in 2032. A rent-free period of four months was agreed
as part of this agreement. The lease on the new satellite store reported above
also terminates in 2042.
In Sunderland, we have extended the lease on our store to 2047 with a tenant
break option in 2037. A six-month rent-free period was agreed as part of this
lease extension.
As part of our ongoing asset management programme, we have now extended the
leases on 27 stores or 70% 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.11-13 years.
Site Disposal
In April 2021 we opened our Birmingham Middleway store (58,000 sq ft MLA) and
closed our Digbeth store (44,500 sq ft MLA) shortly thereafter. Customers were
relocated to the bigger, better located new store. At the time, we stated that
we intended to sell the Digbeth site.
We are pleased to confirm that the Digbeth site sale was completed in August
2022. The proceeds received funded the entire acquisition and construction of
the Middleway site. As of September 2022, the Middleway site was 83% occupied.
Property Pipeline Summary
Our pipeline of c.1.4m sq ft represents c.18% of our existing property
portfolio.
Opening 2023 FH/LH Status* MLA Other
Redevelopments and Extensions
London- Crayford LH C, UC 9,400 Extension
Paris- Pyrenees LH C, UC 22,200 Extension
New Developments
London- Morden FH C, PG, UC 52,000 New build
Wigan FH C, UC 42,700 Conversion
Paris- South Paris FH C, PG 55,000 New build
Paris- West 1 FH CE, STP 56,000 New build
Paris- West 3 FH CE, STP 58,000 New build
Paris- East 1 FH CE, STP 60,000 Conversion
Paris- North West 1 FH CE, STP 54,000 Conversion
Eastern Madrid FH C, PG 50,000 Conversion
Northern Barcelona FH C, PG 42,000 Conversion
South Barcelona FH C, PG 30,000 Conversion
Amersfoort- Netherlands FH CE, STP 58,000 New build
Almere- Netherlands FH C, STP 44,500 Conversion
Opening 2024
Redevelopments and Extensions
New Developments
London- Paddington Park West FH C, PG 13,000 Conversion, Satellite
London- Lea Bridge FH C, PG 76,500 New build
London- Romford FH C, STP 41,000 New build
Shoreham FH CE, STP 54,000 New build
South West Madrid FH CE, STP 46,800 Conversion
Southern Madrid 2 FH CE, STP 68,800 Conversion
Central Barcelona 2 LH CE, STP 24,700 Conversion
Amsterdam- Netherlands FH CE, STP 61,400 New build
Aalsmeer- Netherlands FH CE, STP 48,400 New build
Rotterdam- Netherlands FH CE, PG 71,000 New build
Opening Beyond 2024
New Developments
London- Old Kent Road FH C, STP 76,500 New build
London- Woodford FH CE, PG 76,000 New build
London- Bermondsey FH C, STP 50,000 New build
London- Walton FH C, STP 20,700 Conversion
Paris- La Défense FH C, PG 44,000 Mixed use facility
Total Pipeline MLA (let sq ft- million) c.1.407
Total Outstanding CAPEX (£'m) c.146.0
*C = completed, CE = contracts exchanged, STP = subject to planning, PG =
planning granted, UC = under construction
Acquisitions
Acquisition of Your Room Self Storage, Christchurch(10)
In December 2021, Safestore acquired Your Room Self Storage in Christchurch,
Dorset, for £2.45 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.
Acquisition of remaining 80% of Carlyle JV(14)
As announced on 31 March 2022, Safestore acquired the remaining 80% of the
equity owned by Carlyle in the Joint Venture(14) formed in 2019 (the "Joint
Venture"). The total consideration paid to Carlyle was €67 million. The
total initial cash outflow was €135.3 million and included the share
purchase (€53.6 million), debt purchase (€13.4 million), and refinancing
of the existing borrowings (€68.3 million) and was funded from the Group's
existing loan facilities. The Joint Venture was acquired based on an
enterprise value of €146 million.
The Joint Venture(14) was set up in 2019 to acquire and develop assets in the
Netherlands and Belgium in order to leverage Safestore's operating platform
outside our core markets. Since then, the Joint Venture has grown to a
portfolio of 55,000 sq m (600,000 sq ft) of MLA.
The portfolio is made up of 15 high quality properties (twelve freehold
properties, two ground leases and one leasehold property). Nine properties are
located in the Netherlands, six of which are concentrated in the
Haarlem/Amsterdam area with additional properties in The Hague, Het Gooi and
the recently opened Nijmegen store. In Belgium, two stores are located in the
Brussels area, two in the city of Liege and further properties in Nivelles and
Charleroi. Safestore has managed the properties since acquisition by the Joint
Venture.
The Group's investment was marginally accretive to Group Earnings per Share in
FY2021/22 and supports the Group's future dividend capacity. The expected
initial yield based on total enterprise value was 3.9% which we expect to grow
to Safestore's normal returns hurdles as the portfolio matures.
New Joint Venture with Carlyle and Investment in myStorage in Germany
Safestore has entered the German self storage market via a new joint venture
with Carlyle, which has acquired the myStorage business.
Safestore has developed a multi-country highly scalable platform with leading
marketing and operational expertise in self storage, with a proven track
record for developing its platform in new markets.
The acquisition of myStorage represents an excellent opportunity to develop
our platform into the attractive German self storage market. The Joint Venture
builds upon our previous successful relationship with Carlyle having entered
the Benelux market in 2019. Our common intention is to target development and
acquisition opportunities through the Joint Venture, providing the opportunity
to achieve operational scale and to develop local market knowledge, whilst
also retaining the option for Safestore to develop its own wholly owned self
storage sites in Germany. We look forward to continuing our working
relationship with Carlyle, and to developing a long and mutually beneficial
relationship.
The German market is one of Europe's more under-penetrated markets with just
0.09 sq ft of storage space per capita which compares to 0.76 sq ft in the UK,
0.24 sq ft in France, 0.24 sq ft in Spain, 0.60 sq ft in the Netherlands and
0.20 sq ft in Belgium. According to the 2022 FEDESSA report, there are just
320 facilities in Germany and 7.6m sq ft of lettable space.
myStorage has seven medium to long-term leasehold stores and 326,000 sq ft of
MLA in Berlin, Heidelburg, Mannheim, Fürth, Nuremburg, Neu-Ulm and
Reutlingen.
The occupancy of the portfolio is 67% with two of the stores having opened in
2021.
Safestore's initial investment in the Joint Venture was a c.€2.2 million
equity investment for a 10% share of the Joint Venture. Safestore will also
earn a fee for providing management services to the Joint Venture. The Group
expects to earn an initial return on investment of c.15% for the first full
year before transaction related costs reflecting its share of expected joint
venture profits and fees for management services.
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, 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 78 stores, contributed
£113.2 million of revenue and £82.3 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 Region London & Rest of UK Paris Spain Benelux Group
South East UK Total Total
72 58 130 29 5 15 179
Number of Stores
Let Square Feet (m sq ft) 2.42 2.22 4.64 1.11 0.10 0.47 6.32
Maximum Lettable Area (m sq ft) 2.92 2.70 5.62 1.36 0.12 0.60 7.70
Average Let Square Feet per store (k sq ft) 34 38 36 38 19 32 35
Average Store Capacity (k sq ft) 41 47 43 47 24 40 43
Closing Occupancy % 83.1% 82.0% 82.6% 81.7% 78.9% 78.8% 82.1%
Average Rate (£ per sq ft) 34.76 22.38 28.79 34.36 28.92 16.61 29.25
Revenue (£'m) 101.1 61.9 163.0 41.4 3.0 5.1 212.5
Average Revenue per Store (£'m) 1.40 1.07 1.25 1.43 0.60 0.34 1.19
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 130
stores in the UK, 72 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 49 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.
As at 31 October 2022, 70% of our Group Revenue, 65% of our stores and 58% of
our available capacity are in London, South East England, Paris, Amsterdam and
the Randstad area, Brussels and Barcelona. These major population areas
deliver 71% of the Group's store EBITDA from 62% of our MLA, highlighting the
attractiveness of being present in these major cities and conurbations. The
current pipeline includes 26 further developments in these areas which will
increase the number of stores to 68% of our portfolio.
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 and
our 2022 Benelux JV acquisition represents a platform into the Spanish,
Netherlands and Belgium markets where we hope to take advantage of further
development and acquisition opportunities.
Market
The Self Storage Association ("SSA") noted in its May 2022 report that,
"despite two record years, inflationary pressures, escalating costs of
construction and a war in Europe, operators remain optimistic about the
future.". Previous downturns have presented opportunities for self storage and
the pandemic seems to have once again demonstrated the resilience of the self
storage industry and the broad range of demand drivers.
The self storage market in the UK, France, Spain and Benelux remains
relatively immature compared to geographies such as the USA and Australia. The
SSA Annual Survey (May 2022) confirmed that self storage capacity stands at
0.76 sq ft per head of population in the UK. The most recent report relating
to Europe (FEDESSA's 2022 report) showed that capacity in France is 0.24 sq ft
per capita. Whilst the Paris market density is greater than France, we
estimate it to be significantly lower than the UK at around 0.4 sq ft per
inhabitant. This compares with closer to 10 sq ft per inhabitant in the USA
and 2 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.
In Spain, the Netherlands and Belgium, geographies the Group has recently
entered, penetration is similarly low. In Spain capacity is around 0.24 sq ft
per head of population and the consumer is serviced by just 580 stores. In the
Netherlands penetration is 0.6 sq ft per head of population (355 stores) and
in Belgium 0.2 sq ft per head of population (101 stores).
The Group recently entered a JV with Carlyle in Germany. The German market is
one of Europe's more under-penetrated markets with just 0.09 sq ft of storage
space per capita and, according to the 2022 FEDESSA report, there are just 320
facilities in the country and 7.6m sq ft of lettable space.
Our interpretation of the most recent 2022 SSA report is that similar levels
of capacity are likely to be developed in 2022 and 2023 at around 30-40 stores
per annum. We do not consider this level of new supply growth to be of
concern.
The 30-40 comparable sites represent between 2% and 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 a small proportion of these sites
compete with existing Safestore stores.
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, competition from a
variety of other uses 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 2022 report the SSA estimates that 2,050 self storage
facilities exist in the UK market including around 621 container-based
operations. According to the 2022 survey, Safestore is the industry leader by
number of stores with 130 wholly owned sites followed by Big Yellow with 105
stores (including Armadillo), Access with 60 stores, Shurgard with 40 stores,
Lok'n Store with 39 stores, Storage King with 37 stores and Ready Steady Store
with 27 stores. In aggregate, the top seven leading operators account for
almost 21% of the UK store portfolio. The remaining c.1,613 self storage
outlets (including 621 container-based operations) are independently owned in
small chains or single units. In total there are 1,015 storage brands
operating in the UK.
Safestore's French business, UPP, is mainly present in the core wealthier and
more densely populated inner Paris and first belt areas, whereas our two main
competitors, Shurgard and Homebox, have a greater presence in the outskirts
and second belt of Paris.
Our Spanish business operates in Barcelona and has a pipeline of future store
openings in both Barcelona and Madrid. The metropolitan areas of Barcelona and
Madrid have combined growing high-density populations of twelve million
inhabitants and significant barriers to entry.
Consumer awareness of self storage is increasing but remains relatively low,
providing an opportunity for future industry growth. The SSA survey
consistently indicates that approximately half of consumers either knew
nothing about the service offered by self storage operators or had not heard
of self storage at all. Since 2016, this statistic has only fallen 10ppts from
59%. 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. 64% of respondents were unable to name
a self storage business in their local area (56% in 2021). The lack of
relevance of brand in the process of purchasing a self storage product
emphasises the need for operators to have a strong online presence. This
requirement for a strong online presence was also reiterated by the SSA Survey
where 73% of those surveyed (77% in 2021) 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.26% of respondents (c.25% in 2021).
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 8-13% of the Group's new lets.
The Group's business customer base includes a range of businesses from
start-up online retailers through to multi-national corporates utilising our
national coverage to store in multiple locations while maintaining flexibility
in their cost base.
Business and Personal Customers UK Paris Spain Benelux
Personal Customers
Numbers (% of total) 77% 82% 89% 85%
Square feet occupied (% of total) 58% 65% 83% 77%
Average Length of Stay (months) 17.4 28.7 23.2 28.4
Business Customers
Numbers (% of total) 23% 18% 11% 15%
Square feet occupied (% of total) 42% 35% 17% 23%
Average Length of Stay (months) 26.4 32.0 31.2 30.2
Safestore's customer base is resilient and diverse and consists of around
90,000 domestic, business and National Accounts customers across London,
Paris, Spain, the UK regions, the Netherlands and Belgium.
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, the implementation of VAT in
the UK on self storage in 2012, Brexit and the Covid-19 pandemic, the industry
has been exceptionally resilient. In the context of uncertain economic
conditions, driven by inflation and the war in Ukraine, 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 85% of customers
travelling for less than 30 minutes to their storage facility (2022 SSA
Survey) Safestore's national store footprint represents a competitive
advantage.
The Group's capital-efficient portfolio of 179 wholly owned stores in the UK,
Paris, Spain, the Netherlands and Belgium 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 as well as being comfortable with a range of building
types, from new builds to conversions of warehouses and underground car parks.
Currently, around a quarter of our stores in the UK are leaseholds with an
average remaining lease length at 31 October 2022 of 12.7 years (FY2021: 11.8
years). Although our property valuation for leaseholds is conservatively based
on future cash flows until the next contractual lease renewal date, Safestore
has a demonstrable track record of successfully re-gearing leases several
years before renewal whilst at the same time achieving concessions from
landlords.
In England, we benefit from the Landlord and Tenant Act that protects our
rights for renewal except in case of redevelopment. The vast majority of our
leasehold stores have building characteristics or locations in retail parks
that make current usage either the optimal and best use of the property or the
only one authorised by planning. We observe that our landlords, who are
property investors, value the quality of Safestore as a tenant and typically
prefer to extend the length of the leases that they have in their portfolio,
enabling Safestore to maintain favourable terms.
In Paris, where 41% of stores are leaseholds, our leases typically benefit
from the well-enshrined Commercial Lease statute that provides that tenants
own the commercial property of the premises and that they are entitled to
renew their lease at a rent that is indexed to the Indice des Loyers
Commerciaux (Commercial Rental Index) published by the state. Taking into
account this context, the valuer values the French leaseholds based on an
indefinite property tenure, similar to freeholds but at a significantly higher
exit cap rate.
The Group believes there is an opportunity to leverage its highly scalable
marketing and operational expertise in new geographies outside the UK and
Paris. During 2019, a Joint Venture(14) was established with Carlyle, which
acquired the M3 Self Storage business in the Netherlands which had six stores
in Amsterdam and Haarlem. In June 2020, the Joint Venture(14) added the
Lokabox business, a portfolio of six stores in Brussels (2), Liege (2),
Charleroi and Nivelles. In December 2020, the Joint Venture(14) acquired the
Opslag XL portfolio adding a further three stores in Amsterdam, The Hague and
Hilversum and opened a store in Nijmegen in the Netherlands in January 2022.
The Amsterdam store has subsequently been closed as planned following lease
expiry. After three years of learning about and understanding these markets,
the Group acquired the remaining 80% of equity in the Joint Venture(14) owned
by Carlyle in March 2022.
In 2019 the Group entered the Spanish market with the acquisition of OhMyBox.
Our Spanish portfolio currently consists of five stores in Barcelona, and two
recently opened Madrid stores. We have a further six stores in our development
pipeline situated in both Madrid and Barcelona. We consider both of these
cities to have attractive characteristics in relation to self storage and
intend to continue to seek further expansion opportunities.
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 cash-on-cash returns.
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 90% (2021: 89%) of our enquiries in the
UK and 85% (2021: 84%) in France. This dynamic is a clear benefit to the
leading national operators that possess the budget and the management skills
necessary to generate a commanding presence in the major search engines.
Safestore has developed and continues to invest in a leading digital marketing
platform that has generated 54% enquiry growth over the last five years.
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. Safestore invites customers to leave a review on a
number of review platforms, including Feefo, Google and Trustpilot. Our
ratings for each of these three providers in the UK are between 4.6 and 4.8
out of 5. In France, Une Pièce en Plus uses Trustpilot to obtain independent
customer reviews and In HY2022, achieved a "TrustScore" of 4.6 out of 5. In
Spain, OMB collects customer feedback via Google reviews and has maintained a
score of 4.6 out of 5. 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 26 months. Within our business customer category, our National
Accounts business represents around 623,000 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.90,000 business and domestic customers
with an average length of stay of 28 months and 22 months respectively.
The cost base of the business is relatively fixed. Each store typically
employs three staff. Our Group Head Office comprises business support
functions such as Yield Management, Property, Marketing, HR, IT and Finance.
Since the completion of the rebalancing of our capital structure in early
2014, the subsequent amendment and extension of our banking facilities in
summer 2015, the refinancing of all facilities in May 2017 and the issuances
of a further £125 million of US Private Placement Notes in 2019, £150
million in 2021 and £89 million in 2022, as well as the recent establishment
of a new £400 million unsecured multi-currency Revolving Credit Facility,
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 2022 we had 1.0m sq ft of unoccupied space in the UK, 0.2m sq ft
in France and 0.2m in Spain and Benelux, equivalent to c.35 full new stores.
Our main focus is on filling the spare capacity in our stores at optimally
yield-managed rates. The operational leverage of our business model will
ensure that the bulk of the incremental revenue converts to profit given the
relatively fixed nature of our cost base.
Trading Performance
UK - an excellent year
UK Operating Performance- total 2022 2021 Change
Revenue (£'m) 163.0 144.1 13.1%
Underlying EBITDA (£'m)(2) 103.6 88.6 16.9%
Underlying EBITDA (after leasehold costs) (£'m) 95.6 80.9 18.2%
Closing Occupancy (let sq ft - million)(3) 4.637 4.690 -1.1%
Maximum Lettable Area (MLA)(4) 5.62 5.49 2.4%
Closing Occupancy (% of MLA) 82.6% 85.4% -2.8ppts
Average Storage Rate (£)(5) 28.79 25.32 13.7%
UK Operating Performance- like-for-like(8) 2022 2021 Change
Revenue (£'m) 160.2 142.8 12.2%
Underlying EBITDA (£'m)(2) 101.7 87.9 15.7%
Closing Occupancy (let sq ft- million)(3) 4.538 4.648 -2.4%
Closing Occupancy (% of MLA) 83.0% 85.6% -2.6ppts
Average Occupancy (let sq ft- million)(3) 4.537 4.512 0.6%
Average Storage Rate (£)(5) 28.94 25.40 13.9%
UK statutory metrics 2022 2021 Change
Operating Profit (£'m) 393.1 331.9 18.4%
Profit before Tax (£'m) 378.7 321.4 17.8%
The UK's revenue performance was excellent in the year with the business
growing total revenue by 13.1% and like-for-like(8) revenue by 12.2%.
Performance was strong in both Regional UK as well as London and the South
East where like-for-like(8) revenue was up 13.0% and 11.7% respectively.
The UK's performance was driven by strong rate growth in the year with
like-for-like average rates up 13.9% for the year. Rate momentum was strong in
the final quarter with like-for-like storage rates up 3.8% compared to the
third quarter. Average like-for-like occupancy was up 0.6% over the course of
the year.
Like-for-like closing occupancy, at 83.0%, decreased by 2.6ppts compared to
the prior year. The addition of extensions in four of the like-for-like stores
had the impact of diluting MLA by 0.7ppts. In addition, the volume of
like-for-like new lets was up 6% in the year but the average new let unit size
was lower than in 2021 resulting in a lower new let sq ft.
Total revenue grew by 13.1% for the full year. This reflected like-for-like
growth of 12.2%, the 2021 opening of our Birmingham Middleway and subsequent
closure of our Birmingham South store and the 2022 opening of our London Bow
store. 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 6.6% or £3.6 million. Inflationary
pressures on utilities, staff costs and insurance contributed to this
increase. Our total reported underlying UK cost base grew by £3.9 million or
7.0% reflecting the cost bases relating to newly and recently opened stores.
As a result, Underlying EBITDA(2) for the UK business was £103.6 million
(FY2021: £88.6 million), an increase of £15.0 million or 16.9%. Despite the
increase in costs, the excellent revenue performance resulted in a 2.1ppt
increase in EBITDA margins from 61.5% to 63.6%.
For the two months to December 2022 trading continued to be robust and stable
through the period. Like-for-like average rate was up 7.3%, offset by a
reduction in closing occupancy which was down 3.6ppts at 78.6% (FY2021:
82.2%). Overall, like-for-like revenue increased by 3.7% and total revenue
grew by 4.6%.
Operating profit for the UK business was £393.1 million (FY2021: £331.9
million), an increase of £61.2 million or 18.4%, largely driven by the
increase in the gain on investment properties of £35.2 million to £295.7
million (FY2021: £260.5 million). Profit before tax was £378.7 million
(FY2021: £321.4 million), an increase of £57.3 million or 17.8%.
Paris - another strong year
Paris Operating Performance- total 2022 2021 Change
Revenue (€'m) 48.8 46.0 6.1%
Underlying EBITDA (€'m)(2) 33.0 31.4 5.1%
Underlying EBITDA (after leasehold costs) (€'m) 27.1 25.7 5.4%
Closing Occupancy (let sq ft - million)(3) 1.112 1.100 1.1%
Maximum Lettable Area (MLA)(4) 1.36 1.36 -
Closing Occupancy (% of MLA) 81.7% 80.7% +1.0ppts
Average Storage Rate (€)(5) 40.47 38.90 4.0%
Revenue (£'m) 41.4 39.9 3.8%
Paris Operating Performance- like-for-like(8) 2022 2021 Change
Revenue (€'m) 48.37 45.94 5.3%
Underlying EBITDA (€'m)(2) 33.0 31.3 5.4%
Closing Occupancy (let sq ft- million)(3) 1.094 1.097 -0.3%
Closing Occupancy (% of MLA) 83.4% 83.6% -0.2ppts
Average Occupancy (let sq ft- million)(3) 1.092 1.077 1.4%
Average Storage Rate (€)(5) 40.56 38.90 4.3%
Paris statutory metrics 2022 2021 Change
Operating Profit (£'m) 110.4 78.8 40.1%
Operating Profit (€'m) 130.0 90.7 43.3%
Profit before Tax (£'m) 108.8 77.0 41.3%
Profit before Tax (€'m) 128.2 88.7 44.5%
On a like-for-like(8) basis, the business grew revenue by 5.3% for the full
year. This was driven by average occupancy growth of 1.4% for the year and an
average rate improvement of 4.3%.
Like-for-like(8) closing occupancy was 83.4%, down 0.2ppts compared to the
prior year.
The average Sterling-Euro exchange rate for the year was 1.1778, 2.3% stronger
than the prior year (FY2021: 1.1516). As a result, there was a small foreign
exchange impact on the translation of Paris revenues which were up 3.8% for
the year in Sterling.
After cost reductions in 2021, like-for-like(8) costs grew by 5.5% or €0.8
million compared to the prior year in local currency as a result of increases
in employee costs and utilities. As a result, like-for-like(8) underlying
EBITDA(2) in Paris grew by €1.7 million and Underlying EBITDA(2) grew by
€1.6 million to €33.0 million (FY2021: €31.4 million).
For the two months to December 2022 trading has been robust and improving as
the period progressed. Like-for-like closing occupancy was up 2.0ppts at 80.8%
(FY2021: 78.8%) and like-for-like average rate was up 1.0%, which resulted in
a 2.5% increase in like-for-like revenue.
Operating profit for the Paris business was €130.0 million (FY2021: €90.7
million), an increase of €39.3 million or 43.3%, largely driven by the
increase in the gain on investment properties of €28.0 million to €92.5
million (FY 2021: €64.5 million). Profit before tax was €128.2 million
(FY2021: €88.7 million), an increase of €39.5 million or 44.5%.
Spain Trading Performance
Spain Operating Performance- total 2022 2021 Change
Revenue (€'m) 3.59 3.29 9.1%
Underlying EBITDA (€'m)(2) 1.8 2.0 (10.0%)
Underlying EBITDA (after leasehold costs) (€'m) 1.3 1.5 (13.3%)
Closing Occupancy (let sq ft - million)(3) 0.095 0.093 2.2%
Maximum Lettable Area (MLA)(4) 0.12 0.11 9.1%
Closing Occupancy (% of MLA) 78.9% 86.0% -7.1ppts
Average Storage Rate (€)(5) 34.07 32.25 5.6%
Revenue (£'m) 3.0 2.8 7.1%
Spain Operating Performance- like-for-like(8) 2022 2021 Change
Revenue (€'m) 3.57 3.29 8.5%
Underlying EBITDA (€'m)(2) 2.1 2.0 5.0%
Closing Occupancy (let sq ft- million)(3) 0.093 0.093 -
Closing Occupancy (% of MLA) 85.9% 86.0% -0.1ppts
Average Occupancy (let sq ft- million)(3) 0.094 0.096 -2.1%
Average Storage Rate (€)(5) 34.11 32.25 5.8%
Spain statutory metrics 2022 2021 Change
Operating Profit (£'m) 2.8 6.3 (55.6%)
Operating Profit (€'m) 3.3 7.2 (54.2%)
Profit before Tax (£'m) 2.7 6.2 (56.5%)
Profit before Tax (€'m) 3.2 7.1 (54.9%)
Our Spanish business was acquired in December 2019. The original four stores
are, therefore, now considered like-for-like and grew like-for-like revenue by
8.5% in the year to €3.57 million (FY2021: €3.29 million). A deliberate
strategy of improving average rate and ancillary revenues has continued to be
pursued in the period. Closing occupancy in sq ft was consequently flat
compared to 2021 whilst like-for-like average rate in the year grew by 5.8% to
€34.11 (FY2021: €32.25) with ancillary revenues improving strongly.
Like-for-like Underlying EBITDA grew by 5.0% in the period after investment in
additional Head Office resource dedicated to growing the development pipeline.
The Spanish business opened an additional store in Barcelona in the period. As
a result, total revenue increased by 9.1%.
For the two months to December 2022 trading continued to be robust and stable
through the period. Like-for-like occupancy was down 3.0ppts at 81.8% (FY2021:
84.8%) but like-for-like average rate was up 7.6%, which, combined with strong
ancillary revenues, resulted in a 7.4% increase in like-for-like revenue.
Total revenue was up 11.5% for the period.
Operating profit for the Spanish business was €3.3 million (FY2021: €7.2
million). 2021 included an increase in the gain on investment properties of
€5.3 million, against an increase in 2022 of €2.0 million. Accordingly,
profit before tax was €3.2 million (FY2021: €7.1 million).
Benelux Trading Performance
Our Netherlands and Belgium businesses were acquired on 30 March 2022 and,
therefore, contributed seven months' revenue (€5.9 million) in the period.
The Benelux businesses grew revenue by 5.3% compared to the third quarter of
2022 and the businesses ended the period with a combined closing occupancy of
78.8%.
The business was originally established in 2019 with the acquisition of six
stores and it has been subsequently developed into a 15-store portfolio with a
pipeline of five additional stores.
Frederic Vecchioli
16 January 2023
Financial Review
EPS(1) has grown by 344% over the last nine years
Underlying income statement
The table below sets out the Group's underlying results of operations for the
year ended 31 October 2022 and the year ended 31 October 2021. 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.
2022 2021 Mvmt
£'m £'m %
Revenue 212.5 186.8 13.8%
Underlying costs (77.5) (69.3) 11.8%
Share of associate's Underlying EBITDA 0.1 0.5 (80.0%)
Underlying EBITDA 135.1 118.0 14.5%
Leasehold costs (13.6) (13.0) 4.6%
Underlying EBITDA after leasehold costs 121.5 105.0 15.7%
Depreciation (1.0) (1.0) 0.0%
Finance charges (10.9) (9.5) 14.7%
Share of associate's finance charges (0.4) (0.5) (20.0%)
Underlying profit before tax 109.2 94.0 16.2%
Current tax (5.2) (5.5) (5.5%)
Adjusted EPRA earnings 104.0 88.5 17.5%
Share-based payments charge (11.2) (18.3) (38.8%)
EPRA basic earnings 92.8 70.2 32.2%
Average shares in issue (m) 210.9 210.8
Diluted shares (for ADE EPS) (m) 218.9 218.3
Adjusted Diluted EPRA EPS(1) (pro forma) (p) 47.5 40.5 17.3%
Note:
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.
2022 2021
£'m £'m
Statutory profit before tax 498.8 404.6
Adjusted for:
- Gain on investment properties and investment property under construction (389.9) (328.5)
- Change in fair value of derivatives 0.3 (2.9)
- Net exchange loss - 0.6
- Share-based payments 11.2 18.3
- Exceptional items and other exceptional gains (10.7) 1.9
- Exceptional finance income (0.5) -
Underlying profit before tax 109.2 94.0
Management considers the above presentation of earnings to be representative
of the underlying performance of the business.
Underlying EBITDA increased by 14.5% to £135.1 million (FY2021: £118.0
million), reflecting a 13.8% increase in revenue and a 11.8% increase to the
underlying cost base. This performance reflects the strong growth in average
rate of 8.5% to £29.25 in 2022 from £26.95 in 2021 offset by a slight
reduction in occupancy of 2.4ppts to 82.1% in 2022 from 84.5% in 2021, whilst
maintaining control over costs.
Leasehold costs increased by 4.6% from £13.0 million to £13.6 million,
principally due to reflecting the impact of rent reviews across the portfolio
in addition to the Netherlands leaseholds now forming part of the Group.
Underlying finance charges increased by 14.7% from £9.5 million to £10.9
million. This principally reflects interest charges which increased from £9.7
million in 2021 to £11.9 million in 2022 driven by higher USPP borrowing to
fund the Group's acquisition and development activity, offset by the gains
made on financial instruments of £1.3 million in 2022 (FY2021: £0.5
million).
As a result, we achieved a 16.2% increase in underlying profit before tax of
£109.2 million (FY2021: £94.0 million). The main contributing factor in the
increase in statutory profit before tax in the year is the £61.4 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 a reduction in the share-based payment charge by £7.1 million to £11.2
million (FY2021: £18.3 million).
Included within statutory profit before tax are other exceptional gains of
£10.7 million. £5.5 million relates to the valuation gain of Safestore's 20%
investment in the Joint Venture formed in 2019 with Carlyle that arose on
acquisition of the remaining 80%, with £5.1 million relating to the profit on
the sale of the Nanterre land in Paris in November 2021. The exceptional
finance income relates to the profit made on the termination of interest rate
swaps associated with the Joint Venture.
Given the Group's REIT status in the UK, tax is normally only payable in
France, Spain, the Netherlands and Belgium. The underlying tax charge for the
year was £5.2 million (FY2021: £5.5 million), calculated by applying the
effective underlying tax rate of 20.9% to the respective underlying profits
earned by the non-UK businesses.
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 17.3% to 47.5 pence (FY2021: 40.5 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the income
statement to Underlying EBITDA.
2022 2021
£'m £'m
Statutory Operating profit 514.5 417.0
Adjusted for:
- Gain on investment properties (381.6) (321.1)
- Share of associate's Underlying EBITDA 0.4 0.5
- Depreciation 1.0 1.0
- Variable lease payments 0.3 0.4
- Share-based payments 11.2 18.3
Exceptional items:
- Costs incurred relating to corporate restructuring and 0.1 1.9
exceptional taxation costs
Other exceptional gains:
- Profit on sale of land (5.1) -
- Profit on disposal of investment property (0.2) -
- Valuation gain on associate buy-out (5.5) -
Underlying EBITDA 135.1 118.0
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,
exceptional gains and the share of associate's Underlying EBITDA. The gain on
investment properties was £381.6 million, as compared to £321.1 million in
2021 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 2022 is discussed below.
Underlying profit by geographical region
The Group is organised and managed in four operating segments based on
geographical region. The table below details the underlying profitability of
each region.
2022 2021
UK Paris Spain Benelux Total (CER) UK Paris Spain Total (CER)
£'m €'m €'m €'m £'m £'m €'m €'m £'m
Revenue 163.0 48.8 3.6 5.9 213.5 144.1 46.0 3.3 186.8
Underlying cost of sales (48.2) (12.2) (1.2) (2.5) (61.9) (45.2) (11.2) (0.7) (55.5)
Store EBITDA 114.8 36.6 2.4 3.4 151.6 98.9 34.8 2.6 131.3
Store EBITDA margin 70.4% 75.0% 66.7% 57.6% 71.0% 68.6% 75.7% 78.8% 70.3%
LFL Store EBITDA margin 70.5% 75.6% 75.0% n/a 71.6% 68.8% 75.8% 78.8% 70.5%
Underlying administrative expenses (11.2) (3.6) (0.6) (1.2) (15.9) (10.3) (3.4) (0.6) (13.8)
Underlying EBITDA 103.6 33.0 1.8 2.2 135.7 88.6 31.4 2.0 117.5
EBITDA margin 63.6% 67.6% 50.0% 37.3% 63.6% 61.5% 68.3% 60.6% 62.9%
LFL EBITDA margin 63.5% 68.2% 58.3% n/a 64.4% 61.6% 68.2% 60.6% 63.1%
Leasehold costs (8.0) (5.9) (0.5) (0.1) (13.7) (7.7) (5.7) (0.5) (13.0)
Underlying EBITDA after leasehold costs 95.6 27.1 1.3 2.1 122.0 80.9 25.7 1.5 104.5
EBITDA after leasehold costs margin 58.7% 55.5% 36.1% 35.6% 57.1% 56.1% 55.9% 45.5% 55.9%
UK Paris Spain Benelux Total UK Paris Spain Total
£'m £'m £'m £'m £'m £'m £'m £'m £'m
Underlying EBITDA after leasehold costs (CER) 95.6 23.4 1.2 1.8 122.0 80.9 22.3 1.3 104.5
Adjustment to actual exchange rate - (0.5) (0.1) - (0.6) - - - -
Reported Underlying EBITDA after leasehold costs 95.6 22.9 1.1 1.8 121.4 80.9 22.3 1.3 104.5
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 £15.0 million, or 16.9%, to £103.6
million (FY2021: £88.6 million), underpinned by a 13.1% or £18.9 million
increase in revenue, which was driven by an increase in average occupancy
levels and rate improvements in the like-for-like portfolio as well as the
impact of the 2021 store opening in Birmingham Middleway (offset by the
closure of Birmingham Digbeth), the December 2021 acquisition of Christchurch,
and the December 2021 opening of our London Bow store. Underlying UK EBITDA
after leasehold costs increased by 18.2% to £95.6 million (FY2021: £80.9
million).
In Paris, Underlying EBITDA increased by €1.6 million, or 5.1%, to €33.0
million (FY2021: €31.4 million), primarily driven by a €2.8 million
increase in revenue. Underlying EBITDA after leasehold costs in Paris
increased by 5.4% to €27.1 million (FY2021: €25.7 million).
In Spain, Underlying EBITDA decreased slightly by €0.2 million, from €2.0
million in 2021 to €1.8 million in 2022. This directly translated into a
decrease in Underlying EBITDA after leasehold costs from €1.5 million in
2021 to €1.3 million in 2022.
Our Netherlands and Belgium businesses were acquired on 30 March 2022 and,
therefore, contributed seven months' revenue (€5.9 million) in the period.
The combined results of the UK, Paris, Spain and Benelux delivered a 16.3%
increase in Underlying EBITDA after leasehold costs at constant exchange rates
at Group level. Adjusting for an unfavourable exchange impact of £0.6
million, the combined results of the UK, Paris and Spain reported an
Underlying EBITDA after leasehold costs increase of 16.2% or £16.9 million to
£121.4 million (FY2021: £104.5 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).
The split of the Group's revenues by geographical segment is set out below for
2022 and 2021.
2022 % of total 2021 % of total % change
UK £'m 163.0 76% 144.1 77% 13.1%
Paris
Local currency €'m 48.8 46.0 6.1%
Paris in Sterling £'m 41.4 19% 39.9 21% 3.8%
Spain
Local currency €'m 3.6 3.3 9.1%
Spain in Sterling £'m 3.0 2% 2.8 2% 7.1%
Benelux
Local currency €'m 5.9 - - -
Benelux in Sterling £'m 5.1 3% - - -
Average exchange rate 1.178 1.152 (2.3%)
Total revenue £'m 212.5 100% 186.8 100% 13.8%
The Group's revenue increased by 13.8% or £25.7 million in the year. The
Group's occupied space was 434,000 sq ft higher at 31 October 2022 (6.317
million sq ft) than at 31 October 2021 (5.883 million sq ft), and the average
storage rate per sq ft for the Group was, at £29.25, 8.5% higher than in 2021
(£26.95).
Adjusting the Group's revenue to a like-for-like basis (adjusting for the
Benelux acquisition in 2022, adjusting the UK for the 2021 opening of our
Birmingham Middleway store and the sale of Birmingham Digbeth, the December
2021 acquisition of Christchurch, and the December 2021 opening of our London
Bow store, and in Paris for the opening of our Magenta store), revenue has
increased by 10.1%. There was minimal exchange rate movement in the year so
Group like-for-like revenue at constant exchange rates has increased by 10.7%.
In the UK, revenue grew by £18.9 million or 13.1%, and on a like-for-like
basis it increased by 12.2%. Occupancy was 53,000 sq ft lower at 31 October
2022 than at 31 October 2021, at 4.637 million sq ft (FY2021: 4.690 million sq
ft). The average storage rate for the year grew 13.7%, from £25.32 in 2021 to
£28.79 in 2022. On a like-for-like basis, the average storage rate in the UK
also increased by 13.9% to £28.94 (FY2021: £25.40).
In Paris, revenue grew by €2.8 million or 6.1% and on a like-for-like basis
it increased by 5.3% to €48.37 million (FY2021: €45.94 million). This was
driven by an increase in the average storage rate of 4.0% to €40.47 for the
year (FY2021: €38.90), and an increase in average occupancy growth of 2.3%,
with closing occupancy growing to 1.112 million sq ft (FY2021: 1.100 million
sq ft).
For Spain, revenue was €3.6 million, reflecting the growth in average rate
of 5.6% to €34.07 (FY2021: €32.25), with a closing occupancy of 0.095
million sq ft (78.9%).
Our Netherlands and Belgium businesses, acquired on 30 March 2022 from the
buyout of the remaining 80% of the equity owned by Carlyle in the Joint
Venture formed in 2019, contributed seven months' revenue, €5.9 million in
the period. Collectively, the businesses saw 6,000 sq ft of occupancy inflows
in the fourth quarter and our Netherlands and Belgium businesses ended the
period with a closing occupancy of 78.8%. The average rate for the seven-month
period was €19.18 and €18.79 for the Netherlands and Belgium respectively.
Analysis of cost base
Cost of sales
The table below details the key movements in cost of sales between 2021 and
2022.
Cost of sales 2022 2021
£'m £'m
Statutory cost of sales (63.0) (56.9)
Adjusted for:
Depreciation 1.0 1.0
Variable lease payments 0.3 0.4
Underlying cost of sales (61.7) (55.5)
Underlying cost of sales for FY2021 (55.5)
New developments cost of sales 0.7
Underlying cost of sales for FY2021 (Like-for-like) (54.8)
Volume related cost of sales (1.0)
Employee remuneration, recruitment and training (0.2)
Facilities and rates (2.0)
Enquiry generation (0.3)
Underlying cost of sales for FY2022 (Like-for-like; CER) (58.3)
New developments cost of sales (3.6)
Underlying cost of sales for FY2022 (CER) (61.9)
Foreign exchange 0.2
Underlying cost of sales for FY2022 (61.7)
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 £6.2 million in the year, from £55.5
million in 2021 to £61.7 million in 2022. On a like-for-like basis and at
constant exchange rates, cost of sales increased by £3.5 million or 6.4%,
with a £2.0 million increase in facilities and business rates due to business
rates reviews, and increases in utilities and store maintenance charges as
well as a £1.0 million increase in volume related costs of sales attributed
to the stronger store performance. The investment in marketing during the year
represented 3.6% of revenue (FY2021: 3.7%).
Administrative expenses
The table below reconciles reported administrative expenses to underlying
administrative expenses and details the key movements in underlying
administrative expenses between 2021 and 2022.
Administrative expenses 2022 2021
£'m £'m
Statutory administrative expenses (27.1) (34.0)
Adjusted for:
Share-based payments 11.2 18.3
Exceptional items 0.1 1.9
Underlying administrative expenses (15.8) (13.8)
Underlying administrative expenses for FY2021 (13.8)
New developments administration costs 0.1
Underlying administrative expenses for FY2021 (Like-for-like) (13.7)
Employee remuneration (0.7)
Other employee related costs (0.4)
Underlying administrative expenses for FY2022 (Like-for-like; CER) (14.8)
New developments administration costs (1.1)
Underlying administrative expenses for FY2022 (CER) (15.9)
Foreign exchange 0.1
Underlying administrative expenses for FY2022 (15.8)
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 decrease in share-based payments relates to the
prior year recognising full performance of the Earnings per Share criteria of
the 5 year scheme, which was measured over a 5 year period from 1 November
2016 to 31 October 2021. As the performance period completed in 2021,
measurement of this performance criteria and the associated National Insurance
charge was able to be measured accurately and in full. The current year charge
reflects the charge associated with the remaining schemes.
Underlying administrative expenses increased by £2.0 million in the year,
from £13.8 million in 2021 to £15.8 million in 2022. Like-for-like
administrative expenses at constant exchange rates grew by 8.0% to £14.8
million. This is the result of year-on-year increases in employee remuneration
and other employee related costs, which are associated with the strong
business performance.
Therefore, total underlying costs (cost of sales plus administrative expenses)
on a like-for-like basis and at constant exchange rates have increased by
£4.6 million to £73.1 million (FY2021: £68.5 million).
Exceptional items and other exceptional gains
Included within exceptional items and other exceptional gains of £10.7
million are £5.5 million relating to the valuation gain of Safestore's 20%
investment in the Joint Venture and £5.1 million relating to the profit on
the sale of the Nanterre land in Paris in November 2021.
In France, the basis on which property taxes have been assessed has been
challenged by the tax authority for financial years 2011 onwards. In March
2021 the French Court of Appeal delivered a judgement, which resulted in 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 was
unsuccessful. A provision is included in the consolidated financial accounts
of £2.4 million at 31 October 2022 (31 October 2021: £2.1 million), to
reflect the increased uncertainty surrounding the likelihood of a successful
outcome. Of the total provided, £0.3 million has been charged in relation to
the year ended 31 October 2022 within cost of sales (Underlying EBITDA) (31
October 2021: £0.2 million within cost of sales (underlying EBITDA) and £1.9
million recorded as an exceptional charge in respect of financial years 2012
to 2020).
It is possible that the French tax authority may appeal the decisions of the
French Court of Appeal on which the Group was successful to the French Supreme
Court. The maximum potential exposure in relation to these issues at 31
October 2022 is £3.0 million (31 October 2021: £2.7 million). No provision
for any further 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 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.
2022 2021
£'m £'m
Revaluation of investment properties 394.1 329.0
Revaluation of investment properties under construction (4.2) (0.5)
Fair value re-measurement of lease liabilities add-back (8.3) (7.4)
Statutory gain on investment properties 381.6 321.1
In the current financial year, the UK business contributed £299.8 million to
the positive valuation movement, the Paris business contributed £82.3
million, Spain contributing £1.6 million, with the remaining £6.2 million in
Benelux. 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 8.5% to £29.25 in 2022
from £26.95 in 2021, capitalisation rates and stabilised occupancy.
Operating profit
Operating profit increased by £97.5 million from £417.0 million in 2021 to
£514.5 million in 2022, comprising a £17.1 million increase in Underlying
EBITDA, a £61.4 million higher investment properties and investment
properties under construction gain primarily due to significant improvement in
store performance and a reduction in the share-based payments charge of £7.1
million as well as other exceptional gains and exceptional items of £10.7
million, of which £5.5 million relates to the valuation gain of Safestore's
20% investment in the Joint Venture formed in 2019 with Carlyle that arose on
acquisition of the remaining 80%, with £5.1 million relating to the profit on
the sale of the Nanterre land in Paris in November 2021.
Net finance costs
Net finance costs include interest payable, interest on lease liabilities,
fair value movements on derivatives, exchange gains or losses, unwinding of
discounts and exceptional refinancing costs. Net finance costs increased by
£3.3 million in 2022 to £15.7 million from £12.4 million in 2021,
principally due to the increased interest charges associated with the USPP's
to fund the Group's acquisition and development activity, offset by the gains
made on financial instruments.
2022 2021
£'m £'m
Net bank interest payable (11.9) (9.7)
Amortisation of debt issuance costs on bank loans (0.5) (0.4)
Interest from loan to associates 0.1 0.1
Financial instruments income 1.3 0.5
Other interest received 0.1 -
Underlying finance charges (10.9) (9.5)
Interest on lease liabilities (5.0) (5.2)
Fair value movement on derivatives (0.3) 2.9
Net exchange losses - (0.6)
Exceptional finance income 0.5 -
Net finance costs (15.7) (12.4)
Underlying finance charge
The underlying finance charge (net bank interest payable reflecting term loan,
swap and USPP interest costs) increased by £1.4 million to £10.9 million,
principally reflecting the increased interest charge associated with 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 lease
liabilities and is disclosed because management reviews and monitors
performance of the business on this basis.
Financial instruments income in the year of £1.3 million (FY2021: £0.5
million) related to the gains made on the expiration of average rate forwards
which matured in April 2022 and October 2022.
Based on the year-end drawn debt position the effective interest rate is
analysed as follows:
Facility Drawn Hedged Hedged Bank Hedged Floating Total
£/€'m £'m £'m % Margin Rate Rate Rate
% % % %
UK Revolver £250.0 £76.0 £55.0 72% 1.25% 0.69% 2.19% 2.35%
UK Revolver- non-utilisation £174.0 - - - 0.50% - - 0.50%
Euro Revolver €70.0 £25.8 - - 1.25% - 1.38% 2.63%
Euro Revolver- non-utilisation €40.0 - - - 0.50% - - 0.50%
US Private Placement 2024 €50.9 £43.8 £43.8 100% 1.59% - - 1.59%
US Private Placement 2026 €70.0 £60.2 £60.2 100% 1.26% - - 1.26%
US Private Placement 2026 £35.0 £35.0 £35.0 100% 2.59% - - 2.59%
US Private Placement 2027 €74.1 £63.7 £63.7 100% 2.00% - - 2.00%
US Private Placement 2028 £20.0 £20.0 £20.0 100% 1.96% - - 1.96%
US Private Placement 2028 €29.0 £24.9 £24.9 100% 0.93% - - 0.93%
US Private Placement 2029 £50.5 £50.5 £50.5 100% 2.92% - - 2.92%
US Private Placement 2029 £30.0 £30.0 £30.0 100% 2.69% - - 2.69%
US Private Placement 2029 €105.0 £90.3 £90.3 100% 2.45% - - 2.45%
US Private Placement 2031 £80.0 £80.0 £80.0 100% 2.39% - - 2.39%
US Private Placement 2033 €29.0 £24.9 £24.9 100% 1.42% - - 1.42%
Unamortised finance costs - (£1.3) - - - - - -
Total £833.5 £623.8 £578.3 93% 2.41%
As at 31 October 2022, £76.0 million of the £250.0 million UK Revolver and
€30.0 million (£25.8 million) of the €70.0 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 £174.0 million and
€40.0 million.
The Group has £55.0 million of interest rate swaps in place to June 2023,
swapping SONIA at a weighted average effective rate of 0.69%. These interest
rate swaps are in place to hedge the UK Revolver floating SONIA rate.
On 21 April 2022, Safestore extended its borrowing facilities with the
issuance of €105.0 million denominated US Private Placement ("USPP") Notes
with the following coupon and tenor:
· €105.0 million seven-year notes at a coupon of 2.45% (credit
spread of 120 bps)
The funds were received in April 2022 and were used to pay down Revolving
Credit Facilities ("RCF") utilised to acquire the remaining 80% owned by
Carlyle in the Joint Venture formed in 2019. The Joint Venture was set up in
2019 to acquire and develop assets in the Netherlands and Belgium in order to
leverage Safestore's operating platform outside our core markets. Since then,
the Joint Venture has grown to a portfolio of 600,000 sq ft of MLA which is
currently 78.8% occupied.
The 2024, 2026, 2027, 2028, 2029 and 2033 US Private Placement Notes are
denominated in Euros and attract fixed interest rates of 1.59% (on €50.9
million), 1.26% (on €70.0 million), 2.00% (on €74.1 million), 0.93% (on
€29.0 million), 2.45% (on €105.0 million) and 1.42% (on €29.0 million)
respectively. The Euro denominated borrowings provide a natural hedge against
the Group's investment in the Paris and Spain businesses.
The 2026 (£35.0 million), 2028 (£20.0 million), 2029 (£50.5 million), 2029
(£30.0 million) and 2031 (£80.0 million) US Private Placement Notes are
denominated in Sterling and attract a fixed interest rate of 2.59%, 1.96%,
2.92%, 2.69% and 2.39% respectively.
As a result of the hedging arrangements and fixed interest loan notes,
effectively 93% of the Group's drawn debt is at fixed rates of interest.
Overall, the Group has an effective interest rate on its borrowings of 2.41%
as at 31 October 2022, consistent with 2.36% at the previous year end.
On 11 November 2022, the Group completed the refinancing of its RCF which were
due to expire in June 2023.
The previous £250.0 million Sterling and €70.0 million Euro RCF's have been
replaced with a single multi-currency £400 million facility. In addition, a
further £100 million uncommitted accordion facility is incorporated in the
facility agreement. The facility is for a four-year term with two one-year
extension options exercisable after the first and second years of the
agreement.
The Group will pay interest at a margin of 1.25% plus SONIA or Euribor
depending on whether the borrowings are drawn in Sterling or Euros. The margin
is at the same level as the previous facility agreements.
Non-underlying finance charge
Interest on lease liabilities was £5.0 million (FY2021: £5.2 million) and
reflects part of the leasehold rent 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 rent
costs charge increased from £13.0 million in 2021 to £13.6 million in 2022,
principally reflecting the increase rent costs across the portfolio in
addition to the Netherlands leaseholds now forming part of the Group.
A net loss of £0.3 million was recognised on fair valuation of derivatives
(FY2021: net gain of £2.9 million). The prior year gain was primarily driven
by the movement in the unexpired interest rate swaps year on year due to
future market expectations around rising inflation and interest rates.
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 2022 2021
£'m £'m
Underlying current tax (5.2) (5.5)
Current year - exceptional (0.9) -
Current tax charge (6.1) (5.5)
Tax on investment properties movement (29.9) (17.8)
Tax on revaluation of interest rate swaps - (0.1)
Other 0.1 0.8
Deferred tax charge (29.8) (17.1)
Net tax charge (35.9) (22.6)
The net income tax charge for the year is £35.9 million (FY2021: £22.6
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 £5.2 million (FY2021: £5.5 million),
calculated by applying the effective overall underlying tax rate of 20.9% to
the underlying profits arising earned by the non-UK businesses.
The deferred tax charge relating to Paris, Spain and Benelux was £29.8
million (FY2021: Paris and Spain £17.1 million charge).
In 2022, an exceptional current year tax charge of £0.9 million arose on the
disposal of the Nanterre land.
All deferred tax movements are non-underlying. The deferred tax impact of the
revaluation gain on investment properties was a charge of £29.9 million
(FY2021: £17.8 million charge).
Earnings per Share
As a result of the movements explained above, profit after tax for 2022 was
£462.9 million as compared with £382.0 million in 2021. Basic EPS was 219.5
pence (FY2021: 181.2 pence) and diluted EPS was 212.4 pence (FY2021: 176.4
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 is 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 schemes, Management considers that the
real cost to existing shareholders is the dilution that they will experience
from the LTIP schemes; 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 FY2022 results, for every 10 cents variance to the average
exchange rate of 1.178, there would be an impact of £1.5 million to Adjusted
EPRA Earnings.
Adjusted Diluted EPRA EPS for the year was 47.5 pence (FY2021: 40.5 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:
2022 2021
Earnings Shares Pence Earnings Shares Pence
£'m million per share £'m million per share
Basic earnings 462.9 210.9 219.5 382.0 210.8 181.2
Adjustments:
Gain on investment properties (381.6) - (180.9) (321.1) - (152.3)
Exceptional items 0.1 - - 1.9 - 0.9
Other exceptional gains (10.8) - (5.1) - - -
Exceptional finance income (0.5) - (0.2) - - -
Net exchange loss - - - 0.6 - 0.3
Change in fair value of derivatives 0.3 - 0.1 (2.9) - (1.4)
Tax on adjustments/exceptional tax 29.7 - 14.1 16.2 - 7.7
Adjusted 100.1 210.9 47.5 76.7 210.8 36.4
EPRA adjusted:
Fair value re-measurement of lease liabilities add-back (8.3) - (3.9) (7.4) - (3.5)
Tax on lease liabilities add-back adjustment 1.0 - 0.5 0.9 - 0.4
EPRA basic EPS 92.8 210.9 44.1 70.2 210.8 33.3
Share-based payments charge 11.2 - 5.3 18.3 - 8.7
Dilutive shares - 8.0 (1.9) - 7.5 (1.5)
Adjusted Diluted EPRA EPS 104.0 218.9 47.5 88.5 218.3 40.5
Dividends
The Directors are recommending a final dividend of 20.4 pence (FY2021: 17.6
pence) which Shareholders will be asked to approve at the Company's Annual
General Meeting on 15 March 2023. If approved by Shareholders, the final
dividend will be payable on 7 April 2023 to Shareholders on the register at
close of business on 3 March 2023.
Reflective of the Group's improved performance, the Group's full year dividend
of 29.8 pence is 18.7% up on the prior year dividend of 25.1 pence. The
Property Income Distribution ("PID") element of the full year dividend is
22.75 pence (FY2021: 25.1 pence).
Property valuation and Net Asset Value ("NAV")
Cushman & Wakefield Debenham Tie Leung Limited LLP ("C&W") has valued
the Group's property portfolio. As at 31 October 2022, the total value of the
Group's property portfolio was £2,457.8 million (excluding investment
properties under construction of £94.5 million and net of lease liabilities
of £95.1 million). This represents an increase of £576.0 million compared
with the £1,881.8 million valuation as at 31 October 2021. A reconciliation
of the movement is set out below:
UK Paris Spain Benelux Total Paris Spain Benelux
£'m £'m £'m £'m £'m €'m €'m €'m
Value as at 1 November 2021 1,416.2 440.4 25.2 - 1,881.8 521.6 29.8 -
Currency translation movement - 9.1 0.4 2.1 11.6 - - -
Additions 19.7 6.3 0.1 5.7 31.8 7.4 0.1 6.8
On acquisition of subsidiary 2.6 - - 125.6 128.2 - - 148.4
Disposals (6.2) - - - (6.2) - - -
Reclassifications 16.5 - - - 16.5 - - -
Revaluation 308.0 82.3 1.6 2.2 394.1 96.9 2.0 2.5
Value at 31 October 2022 1,756.8 538.1 27.3 135.6 2,457.8 625.9 31.9 157.7
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 8.5% to £29.25 in
2022 from £26.95 in 2021 with a slight reduction in occupancy, which is down
2.4ppts to 82.1% in 2022 from 84.5% in 2021, capitalisation rates and
stabilised occupancy, as explained further below.
The exchange rate at 31 October 2022 was €1.16:£1 compared with €1.18:£1
at 31 October 2021. This movement in the foreign exchange rate has resulted in
a £11.6 million favourable currency translation movement in the year. This
has slightly improved 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 Group's property portfolio valuation excluding investment properties under
construction has increased by £576.0 million from the valuation of £1,881.8
million at 31 October 2021. This reflects the gain on valuation of £394.1
million, which is explained above, plus £128.2 million relating to the
acquisition of the remaining 80% in the Joint Venture and the UK Christchurch
store as well as £42.1 million relating to additions, store refurbishments,
reclassifications and disposals together with £11.6 million of favourable
foreign exchange movements on the translation of the European portfolios.
The value of the UK investment property portfolio including investment
properties under construction has increased by £340.7 million (comprising
£324.1 million in investment properties and £16.6 million in investment
properties under construction) compared with 31 October 2021. This includes a
£299.8 million valuation gain, £44.5 million of capital additions, £2.6
million of acquisitions, offset by £6.2 million of disposals.
In Paris, the value of the property portfolio including investment properties
under construction increased by €104.3 million, of which €96.9 million was
valuation gain and capital additions were €7.4 million. The net increase in
investment properties when translated into Sterling amounted to £97.7
million, reflecting the foreign exchange impact described above.
In Spain, the value of the property portfolio including investment properties
under construction increased by €26.9 million, of which €2.0 million was
valuation gain and capital additions were €24.9 million. The net increase in
investment properties including investment properties under construction when
translated into Sterling amounted to £23.6 million, reflecting the foreign
exchange impact described above.
In Benelux, the value of the property portfolio including investment
properties under construction was £141.1 million.
Our pipeline of future development opportunities remains strong and gives us
further confidence in our future growth plans, comprising eleven stores or
store extensions in the UK, seven in France, six in Spain and five in Benelux.
The Group's freehold exit yield for the valuation at 31 October 2022 reduced
to 5.66%, from 6.03% at 31 October 2021, and the weighted average annual
discount rate for the whole portfolio has reduced from 8.72% at 31 October
2021 to 8.49% at 31 October 2022.
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's Best Practices Recommendations guidelines for Net Asset Value ("NAV")
metrics are EPRA Net Tangible Assets ("NTA"), EPRA Net Reinstatement Value
("NRV") and EPRA Net Disposal Value ("NDV"). Safestore considers EPRA NTA to
be most consistent with the nature of the Group's business.
The EPRA Basic NTA per Share, as reconciled to IFRS net assets per share in
note 15 of the financial statements, was 908 pence (FY2021: 697 pence) at 31
October 2022, up 30.3% since 31 October 2021, and the IFRS reported diluted
NAV per share was 820 pence (FY2021: 635 pence), reflecting a £418.5 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 Notes.
Net debt (including lease liabilities and cash) stood at £698.3 million at 31
October 2022, an increase of £174.5 million from the 2021 position of £523.8
million, reflecting funding for the continued expansion of the Group
portfolio. Total capital (net debt plus equity) increased from £1,898.7
million at 31 October 2021 to £2,491.7 million at 31 October 2022. The net
impact is that the gearing ratio has increased from 27.6% to 28.0% 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 2022 the Group LTV
ratio was 24.4% as compared to 24.9% at 31 October 2021. It should be noted,
under the new facility, signed 11 November 2022, LTV is to be calculated
against net debt which equates to an LTV of 23.6%. 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 2022
As at 31 October 2022, £76.0 million of the £250.0 million UK Revolver and
€30.0 million (£25.8 million) of the €70.0 million Euro Revolver were
drawn. Including the US Private Placement debt of €358.0 million (£307.8
million) and £215.5 million, the Group's borrowings totalled £623.8 million
(after adjustment for unamortised finance costs).
As at 31 October 2022, the weighted average remaining term for the Group's
available borrowing facilities is 4.0 years (FY2021: 4.6 years). If we take
into consideration the new financing completed on 11 November 2022, with a
four-year term to November 2026, the weighted average remaining term for the
Group's available borrowing facilities is 5.1 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 2022 is 11.4x (FY2021: 10.5x).
The LTV covenant is 60% in both the UK and France under the current facility.
As at 31 October 2022, 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 2022 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 2022 and
2021. 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.
2022 2021
£'m £'m
Underlying EBITDA 135.1 118.0
Working capital/exceptionals/other (2.7) (2.1)
Adjusted operating cash inflow 132.4 115.9
Interest payments (11.8) (8.0)
Leasehold rent payments (13.6) (13.0)
Tax payments (5.6) (5.4)
Free cash flow (before investing and financing activities) 101.4 89.5
Acquisition of subsidiary, net of cash acquired (111.5) -
Loan to associates - (0.9)
Investment in associates (0.8) (1.9)
Capital expenditure - investment properties (95.2) (62.4)
Capital expenditure - property, plant and equipment (1.0) (1.0)
Net proceeds from disposal of land 1.0 -
Net proceeds from disposal of investment properties 6.4 -
Proceeds from disposal - property, plant and equipment 0.2 -
Net cash flow after investing activities (99.5) 23.3
Issue of share capital 0.5 0.7
Dividends paid (56.9) (42.6)
Net drawdown of borrowings 132.1 43.8
Debt issuance costs (0.1) (0.7)
Financial instruments 1.3 -
Swap termination 0.5 -
Net (decrease)/increase in cash (22.1) 24.5
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.
2022 2021
£'m £'m
Free cash flow (before investing and financing activities) 101.4 89.5
Add back: principal payment of lease liabilities 8.4 7.5
Net cash flow from operating activities 109.8 97.0
2022 2021
£'m £'m
From table above:
Adjusted net cash flow after investing activities (99.5) 23.3
Add back: principal payment of lease liabilities 8.4 7.5
Net cash flow after investing activities (91.1) 30.8
From consolidated cash flow:
Net cash inflow from operating activities 109.8 97.0
Net cash outflow from investing activities (200.9) (66.2)
Net cash flow after investing activities (91.1) 30.8
2022 2021
£'m £'m
Adjusted operating cash inflow 132.4 115.9
Cash outflow on variable lease payments (0.2) (0.3)
Cash flow from operations 132.2 115.6
Adjusted operating cash flow increased by £16.5 million in the year,
principally due to the £17.1 million improvement in Underlying EBITDA.
Working capital, exceptional items and other movements resulted in a net £2.7
million outflow (FY2021: £2.1 million outflow), principally relating to
movements in trade receivables and trade payables.
Free cash flow (before investing and financing activities) grew by 13.3% to
£101.4 million (FY2021: £89.5 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 £200.9 million (FY2021:
£66.2 million outflow), which included £111.5 million relating to the
acquisition of the remaining 80% in the Joint Venture as well as the
acquisition of the new site at Christchurch and £95.2 million of capital
expenditure on our investment property portfolio as well as cash generated
from the sale of our Birmingham - Digbeth store. Of the £95.2 million capital
expenditure on investment properties, £60.2 million related to the UK, £6.4
million related to France, £21.3 million related to Spain and £7.3 million
related to Benelux. Of the £95.2 million, £7.5 million related to
maintenance, £68.4 million to new stores and £19.3 million to developments
and property, plant and equipment.
Adjusted financing activities generated a net cash inflow of £77.4 million
(FY2021: £1.2 million inflow). Dividend payments totalled £56.9 million
(FY2021: £42.6 million). The net drawdown of borrowings was £132.1 million
(FY2021: £43.8 million), in order to finance the acquisition of the remaining
80% in the Joint Venture as well as development and pipeline stores.
Andy Jones
16 January 2023
Consolidated income statement
for the year ended 31 October 2022
Group
Notes 2022 2021
£'m £'m
Revenue 2,3 212.5 186.8
Cost of sales (63.0) (56.9)
Gross profit 149.5 129.9
Administrative expenses (27.1) (34.0)
Share of loss in associate 9 (0.3) -
Underlying EBITDA 135.1 118.0
Exceptional items 4 (0.1) (1.9)
Share-based payments (11.2) (18.3)
Depreciation and variable lease payments (1.3) (1.4)
Share of associate's depreciation, interest and tax (0.4) (0.5)
Operating profit before gains on investment properties and other exceptional 122.1 95.9
gains
Gain on investment properties 10 381.6 321.1
Other exceptional gains 4 10.8 -
Operating profit 3 514.5 417.0
Finance income 5 2.0 0.6
Finance expense 5 (17.7) (13.0)
Profit before income tax 498.8 404.6
Income tax charge 6 (35.9) (22.6)
Profit for the year 462.9 382.0
Earnings per share for profit attributable to the equity holders
- basic (pence) 8 219.5 181.2
- diluted (pence) 8 212.4 176.4
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 2022
Group
2022 2021
£'m £'m
Profit for the year 462.9 382.0
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences 8.0 (20.3)
Net investment hedge (4.6) 10.9
Other comprehensive income/(expense), net of tax 3.4 (9.4)
Total comprehensive income for the year 466.3 372.6
Consolidated balance sheet
as at 31 October 2022
Group
Notes 2022 2021
£'m £'m
Assets
Non-current assets
Investment in associates 9 1.8 7.2
External valuation of investment properties, net of lease liabilities 2,457.8 1,881.8
Add-back of lease liabilities 95.1 82.1
Investment properties under construction 94.5 67.4
Total investment properties 10 2,647.4 2,031.3
Property, plant and equipment 3.4 3.2
Derivative financial instruments 14 - 0.9
Deferred income tax assets 0.8 0.8
2,653.4 2,043.4
Current assets
Inventories 0.3 0.5
Derivative financial instruments 14 1.7 1.3
Trade and other receivables 31.2 28.9
Cash and cash equivalents 12, 18 20.9 43.2
54.1 73.9
Total assets 2,707.5 2,117.3
Current liabilities
Financial liabilities
- bank borrowings 13, 18 (101.7) -
- derivative financial instruments 14 - (0.2)
Trade and other payables (62.7) (75.8)
Current income tax liabilities (0.8) (0.3)
Lease liabilities 15 (13.2) (12.3)
(178.4) (88.6)
Non-current liabilities
Financial liabilities
- bank borrowings 13, 18 (522.1) (484.7)
Deferred income tax liabilities (129.0) (97.0)
Lease liabilities 15 (82.2) (70.0)
Provisions 19 (2.4) (2.1)
(735.7) (653.8)
Total liabilities (914.1) (742.4)
Net assets 1,793.4 1,374.9
Equity
Ordinary shares 16 2.1 2.1
Share premium 61.8 61.3
Translation reserve 8.5 5.1
Retained earnings 1,721.0 1,306.4
Total equity 1,793.4 1,374.9
These financial statements were authorised for issue by the Board of Directors
on 16 January 2023 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 2022
Group
Share Share Translation Retained Total
capital premium reserve earnings £'m
£'m £'m £'m £'m
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 income/(expense)
Currency translation differences - - (20.3) - (20.3)
Net investment hedge - - 10.9 - 10.9
Total other comprehensive expense - - (9.4) - (9.4)
Total comprehensive 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 1 November 2021 2.1 61.3 5.1 1,306.4 1,374.9
Comprehensive income
Profit for the year - - - 462.9 462.9
Other comprehensive income/(expense)
Currency translation differences - - 8.0 - 8.0
Net investment hedge - - (4.6) - (4.6)
Total other comprehensive income - - 3.4 - 3.4
Total comprehensive income - - 3.4 462.9 466.3
Transactions with owners
Dividends (note 7) - - - (56.9) (56.9)
Increase in share capital - 0.5 - - 0.5
Employee share options - - - 8.6 8.6
Transactions with owners - 0.5 - (48.3) (47.8)
Balance at 31 October 2022 2.1 61.8 8.5 1,721.0 1,793.4
Consolidated cash flow statement
for the year ended 31 October 2022
Group
Notes 2022 2021
£'m £'m
Cash flows from operating activities
Cash generated from operations 17 132.2 115.6
Interest received 0.1 0.9
Interest paid (16.9) (14.1)
Tax paid (5.6) (5.4)
Net cash inflow from operating activities 109.8 97.0
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (111.5) -
Investment in associates (0.8) (1.9)
Loans to associates - (0.9)
Expenditure on investment properties and development properties (95.2) (62.4)
Proceeds from disposal of investment properties 6.4 -
Proceeds from disposal of land 1.0 -
Purchase of property, plant and equipment (1.0) (1.0)
Proceeds from sale of property, plant and equipment 0.2 -
Net cash outflow from investing activities (200.9) (66.2)
Cash flows from financing activities
Issue of share capital 0.5 0.7
Equity dividends paid 7 (56.9) (42.6)
Proceeds from borrowings 266.1 196.8
Repayment of borrowings (134.0) (153.0)
Exceptional swap termination 5 0.5 -
Financial instruments income 5 1.3 -
Debt issuance costs (0.1) (0.7)
Principal payment of lease liabilities (8.4) (7.5)
Net cash inflow/(outflow) from financing activities 69.0 (6.3)
Net (decrease)/increase in cash and cash equivalents (22.1) 24.5
Exchange loss on cash and cash equivalents (0.2) (0.9)
Cash and cash equivalents at 1 November 43.2 19.6
Cash and cash equivalents at 31 October 12, 18 20.9 43.2
Notes to the financial statements
for the year ended 31 October 2022
The Board approved this preliminary announcement on 16 January 2023.
The financial information included in this preliminary announcement does not
constitute the Group's statutory accounts for the years ended 31 October 2021
or 31 October 2022. Statutory accounts for the year ended 31 October 2021 have
been delivered to the Registrar of Companies. The statutory accounts for the
year ended 31 October 2022 will be delivered to the Registrar of Companies
following the Company's annual general meeting.
The auditor has reported on the 2022 and 2021 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 2022 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 2021,
except for items as described below. All amounts are presented in Sterling and
are rounded to the nearest £0.1 million, unless otherwise stated.
The financial information included in this preliminary announcement has been
prepared in accordance with United Kingdom adopted 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 consolidated financial
information.
In assessing the Group's going concern position as at 31 October 2022, 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 three-year outlook 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 pandemics and the conflict in
Ukraine. 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. Since the
end of the financial year, the Group has completed the refinancing of its
Revolving Credit Facilities ("RCF") which were due to expire in June 2023. The
previous £250 million and €70 million revolving credit facilities have been
replaced with a single multi-currency £400 million facility, with a four-year
term with two one-year extension options (note 23). 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, which are differentiated by the impact of demand and enquiry
levels, average rate growth and the level of cost savings occur, clear
mitigating actions are available to ensure that the Group remains liquid and
able to meet its liabilities as they fall due. 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 2022:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest
Rate Benchmark Reform - Phase 2
• Amendment to IFRS 16 Covid-19 - Related Rent Concessions beyond 30
June 2021
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.
Critical accounting judgements and key sources of estimation uncertainty
The following key source of estimation uncertainty has significant risk of
causing a material adjustment, within the next financial year, 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
estimates made by management that are adopted in the valuation of the
investment properties as well as detailed sensitivity analysis is set out in
note 10 to the financial statements.
Critical accounting 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, or where the transaction meets the
requirements of the Concentration of Fair Value test, the transaction is
treated as an asset purchase. The Directors also have to assess when the Group
has gained control of the acquired corporate vehicle. There have been two
transactions where properties were acquired through the purchase of corporate
vehicles in the year, both judged to meet the accounting definition of an
asset purchase. The most significant of the two transactions was whereby the
Group acquired the remaining interest in Safestore Storage Benelux B.V. (note
9) that was previously accounted for as a 20% associate. Upon gaining control,
the total consideration price was allocated across the group of assets being
acquired and the increased carrying values recognised within the now
subsidiary investment.
Non-GAAP financial information/Alternative Performance Measures
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/Alternative Performance 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/Alternative Performance
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's Best Practices Recommendations guidelines for Net Asset Value
("NAV") metrics are 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. 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:
2022 2021
£'m £'m
Self storage income 178.0 154.3
Insurance income 23.9 22.3
Other non-storage income 10.6 10.2
Total revenue 212.5 186.8
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 four operating segments, based on
geographical areas, being the United Kingdom, Paris in France, Spain, and the
Netherlands and Belgium in Benelux.
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.
Year ended 31 October 2022 UK Paris Spain Benelux Group
£'m £'m £'m £'m £'m
Continuing operations
Revenue 163.0 41.4 3.0 5.1 212.5
Share of loss in associates (0.3) - - - (0.3)
Underlying EBITDA 103.5 28.0 1.5 2.1 135.1
Exceptional items - (0.1) - - (0.1)
Share-based payments (10.2) (1.0) - - (11.2)
Variable lease payments and depreciation (1.2) (0.1) - - (1.3)
Share of associate's depreciation, interest and tax (0.4) - - - (0.4)
Operating profit before gain on investment properties and other exceptional 91.7 26.8 1.5 2.1 122.1
gains
Gain on investment properties 295.7 78.5 1.3 6.1 381.6
Other exceptional gains 5.7 5.1 - - 10.8
Operating profit 393.1 110.4 2.8 8.2 514.5
Net finance (expense)/ income (14.4) (1.6) (0.1) 0.4 (15.7)
Profit before tax 378.7 108.8 2.7 8.6 498.8
Total assets 2,024.8 581.7 28.2 72.8 2,707.5
Year ended 31 October 2021 UK Paris Spain Group
£'m £'m £'m £'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
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 and other exceptional gains
2022 2021
£'m £'m
Costs relating to corporate transactions and exceptional property taxation (0.1) (1.9)
Exceptional items (0.1) (1.9)
2022 2021
£'m £'m
Valuation gain on associate buy-out 5.5 -
Gain on disposals of investment properties 0.2 -
Gain on disposal of land 5.1 -
Other exceptional gains 10.8 -
Exceptional items of £0.1 million were incurred in the year, relating to fees
associated with the Group's corporate restructuring (FY2021: £1.9 million in
relation to a provision for potential liabilities in respect of the French
commercial tax audit of financial years 2012 to 2020).
On 10 November 2021, the Group sold the Nanterre site to the joint venture
partner of Nanterre FOCD 92 for a total price of €7.6 million excluding VAT
and including demolition cost reimbursement, where the settlement is done
partially in cash £1.0 million (€1.1 million excluding tax), and partially
in kind through the delivery of the new building at the end of the operation
(estimated at €6.5 million). This resulted in a net gain on disposal of
£5.1 million (€5.9 million) included within other exceptional gains.
On 30 March 2022, the Group acquired the remaining 80% equity of Safestore
Storage Benelux B.V., from its previous joint venture partner for €53.6
million (£45.3 million) and became a wholly owned subsidiary (note 9). The
original 20% equity investment was effectively derecognised and re-recognised
back at the fair value based on the revised equity value effective at the 30
March 2022 transaction. This resulted in a valuation gain on the associate
buy-out of £5.5 million included within other exceptional gains.
On 16 August 2022, the Group sold their Birmingham Digbeth store to a third
party for £6.5 million and incurred a 1% agent fee on the sale price. The
carrying value of this store included within investment properties prior to
disposal was £6.2 million, resulting in a gain on disposal of investment
properties of £0.2 million included within other exceptional gains.
5. Finance income and costs
2022 2021
£'m £'m
Finance income
Other interest and similar income 0.1 -
Interest receivable from loan to associates 0.1 0.1
Financial instruments income 1.3 0.5
Underlying finance income 1.5 0.6
Exceptional finance income 0.5 -
Total finance income 2.0 0.6
Finance costs
Interest payable on bank loans and overdraft (11.9) (9.7)
Amortisation of debt issuance costs on bank loan (0.5) (0.4)
Underlying finance charges (12.4) (10.1)
Interest on lease liabilities (5.0) (5.2)
Fair value (loss)/gain of derivatives (0.3) 2.9
Net exchange losses - (0.6)
Total finance costs (17.7) (13.0)
Net finance costs (15.7) (12.4)
Included within interest payable of £11.9 million (FY2021: £9.7 million) is
£nil (FY2021: £0.6 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 £0.3 million net loss (FY2021: £2.9 million net gain). Included
within finance income is £1.3 million, received on settlement of two €8.0
million average rate forward contracts acquired in March 2020 and settled in
April 2022, £0.7 million, and October 2022, £0.6 million, respectively. The
fair value of these two forward contracts held at 31 October 2021 was £1.3
million asset now disposed and included as part of the net fair value gain of
derivatives within finance costs. Further, included within finance income is
£0.5 million (FY2021: £nil) in relation to the swaps held in the subsidiary
acquired during the period, Safestore Storage Benelux B.V., and terminated
post acquisition in order to utilise the Group's existing debt facilities and
financial instruments held.
6. Income tax charge
Analysis of tax charge in the year:
2022 2021
£'m £'m
Current tax:
- current year 6.1 5.5
- prior year - -
6.1 5.5
Deferred tax:
- current year 29.8 17.1
- prior year - -
29.8 17.1
Tax charge 35.9 22.6
Reconciliation of income tax charge
The tax for the period is lower (FY2021: lower) than the standard rate of
corporation tax in the UK for the year ended 31 October 2022 of 19.0% (FY2021:
19.0%). The differences are explained below:
2022 2021
£'m £'m
Profit before tax 498.8 404.6
Profit on ordinary activities multiplied by standard rate of corporation tax 94.8 76.9
in the UK of 19.0% (FY2021: 19.0%)
Effect of:
- permanent differences - 3.6
- profits from the tax exempt business (71.5) (63.5)
- deferred tax arising on acquisition of overseas subsidiary 4.5 -
- difference from overseas tax rates 8.6 6.4
- potential deferred tax assets not recognised 0.4 -
- utilisation of unrecognised brought forward tax losses (0.9) (0.8)
Tax charge 35.9 22.6
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%
(FY2021: 19%). 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.
7. Dividends per share
The dividend paid in 2022 was £56.9 million (27.00 pence per share) (FY2021:
£42.6 million (20.20 pence per share)). A final dividend in respect of the
year ended 31 October 2022 of 20.40 pence (FY2021: 17.60 pence) per share,
amounting to a total final dividend of £42.8 million (FY2021: £37.0
million), is to be proposed at the AGM on 15March 2023. The ex-dividend date
will be 2 March 2023 and the record date will be 3 March 2023 with
an intended payment date of 7 April 2023. The final dividend has not been
included as a liability at 31 October 2022.
The Property Income Distribution ("PID") element of the final dividend is
20.40 pence (FY2021: 17.60 pence), making the PID payable for the year 22.75
pence (FY2021: 25.10 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 2022 Year ended 31 October 2021
Earnings Shares Pence Earnings Shares Pence
£'m m per share £'m m per share
Basic 462.9 210.9 219.5 382.0 210.8 181.2
Dilutive securities - 7.0 (7.1) - 5.8 (4.8)
Diluted 462.9 217.9 212.4 382.0 216.6 176.4
Adjusted Earnings per Share
Explanations related to the adjusted earnings measures adopted by the Group
are set out in note 2 under the heading Non-GAAP financial
information/Alternative Performance Measures. 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 2022 Year ended 31 October 2021
Earnings Shares Pence Earnings Shares Pence
£'m m per share £'m m per share
Basic 462.9 210.9 219.5 382.0 210.8 181.2
Adjustments:
Gain on investment properties (381.6) - (180.9) (321.1) - (152.3)
Exceptional items 0.1 - - 1.9 - 0.9
Other exceptional gains (10.8) - (5.1) - - -
Exceptional finance income (0.5) - (0.2) - - -
Net exchange loss - - - 0.6 - 0.3
Change in fair value of derivatives 0.3 - 0.1 (2.9) - (1.4)
Tax on adjustments 29.7 - 14.1 16.2 - 7.7
Adjusted 100.1 210.9 47.5 76.7 210.8 36.4
EPRA adjusted:
Fair value re-measurement of lease liabilities add-back (8.3) - (3.9) (7.4) - (3.5)
Tax on lease liabilities add-back adjustment 1.0 - 0.5 0.9 - 0.4
Adjusted EPRA basic EPS 92.8 210.9 44.1 70.2 210.8 33.3
Share-based payments charge 11.2 - 5.3 18.3 - 8.7
Dilutive shares - 8.0 (1.9) - 7.5 (1.5)
Adjusted Diluted EPRA EPS(1) 104.0 218.9 47.5 88.5 218.3 40.5
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 £8.3 million (FY2021: £7.4 million) and the related
tax thereon of £1.0 million (FY2021: £0.9 million). As an industry standard
measure, EPRA earnings is presented. EPRA earnings of £92.8 million (FY2021:
£70.2 million) and EPRA Earnings per Share of 44.1 pence (FY2021: 33.3 pence)
are calculated after further adjusting for these items.
EPRA adjusted income statement (non-statutory) 2022 2021 Movement
£'m £'m %
Revenue 212.5 186.8 13.8
Underlying operating expenses (excluding depreciation and variable lease (77.5) (69.3) 11.8
payments)
Share of associate's underlying EBITDA 0.1 0.5 (80.0)
Underlying EBITDA before variable lease payments 135.1 118.0 14.5
Share-based payments charge (11.2) (18.3) (38.8)
Depreciation and variable lease payments (1.3) (1.4) (7.1)
Operating profit before fair value re-measurement lease liabilities add-back 122.6 98.3 24.7
Fair value re-measurement of lease liabilities add-back (8.3) (7.4) 12.2
Operating profit 114.3 90.9 25.7
Net financing costs (15.9) (14.7) 8.2
Share of associate's finance charges (0.4) (0.5) (20.0)
Profit before income tax 98.0 75.7 29.5
Income tax (5.2) (5.5) (5.5)
Profit for the year ("Adjusted EPRA basic earnings") 92.8 70.2 32.2
Adjusted EPRA basic EPS 44.1 pence 33.3 pence 32.4
Final dividend per share 20.40 pence 17.60 pence 15.9
9. Investment in associates
2022 2021
£'m £'m
Safestore Storage Benelux B.V. - 6.2
PBC Les Groues SAS 1.8 1.0
1.8 7.2
Safestore Storage Benelux B.V. (formerly CERF Storage JV B.V.)
Until 30 March 2022, the Group had a 20% interest in Safestore Storage Benelux
B.V. ("SSB") (formerly CERF Storage JV B.V.), a company registered and
operating in the Netherlands. SSB was accounted for using the equity method of
accounting. SSB invests in carefully selected self-storage opportunities in
Europe. The Group earned a fee for providing management services to SSB. This
investment as an associate was considered immaterial relative to the Group's
underlying operations. On 30 March 2022, the Group acquired the remaining 80%
equity from its previous joint venture partner for €53.6 million (£45.3
million) and SSB became a wholly owned subsidiary. IFRS 3 requires the
consideration price be allocated across the assets being acquired. On 30 March
2022 when the Group gained control, the equity accounting of SSB ceased. The
difference between the equity accounted carrying value of the investment
immediately prior to acquisition and the fair value of increased investment is
a valuation gain of £5.5 million (note 4).
The aggregate carrying value of the Group's 20% interest in SSB at 30 March
2022 was £8.7 million (FY2021: £8.9 million), made up of an investment of
£5.9 million (FY2021: £6.2 million), a loan to the associate including
interest accrued of £2.8 million (FY2021: £2.7 million) (note 22). The
Group's share of losses from continuing operations for the period was £0.3
million (FY2021: £nil). The Group's share of total comprehensive income of
associates in the year was £0.3 million (FY2021: £nil).
Note 2022 2022
£'m €'m
Initial 20% investment in SSB:
At 31 October 2021 6.2 7.1
Share of loss in associate (0.3) (0.4)
5.9 6.7
Revised fair value of 20% investment in SSB at 30 March 2022 :
Net assets of SSB (100%) 56.7 67.0
Net assets of SSB (80%) (45.3) (53.6)
11.4 13.4
Difference: Valuation gain on acquisition of additional 80% investment in SSB 4 5.5 6.7
The following provides a breakdown of the 80% share of fair value of the
assets and liabilities acquired on 30 March 2022. Under IFRS 3 this
transaction where properties were acquired through the purchase of a corporate
vehicle in the year, has been judged to meet the accounting definition of an
asset purchase.
2022 2022
£'m €'m
Assets:
Investment properties net of lease liabilities 100.5 118.7
Add-back of lease liabilities 0.5 0.6
Inventories 0.1 0.1
Trade and other receivables 0.5 0.6
Cash and cash equivalents 4.4 5.2
106.0 125.2
Liabilities:
Trade and other payables (2.6) (3.0)
Lease liabilities (0.5) (0.6)
Amounts owed to joint venture partner (11.4) (13.4)
Bank borrowings (46.2) (54.6)
(60.7) (71.6)
Net assets (80%) 45.3 53.6
The cash outflow classified as investing activities (excluding acquisition
costs) from this buy-out is summarised as follows:
2022 2022
£'m €'m
Net assets acquired (remaining 80%) 45.3 53.6
Non-Safestore debt acquired settled with third parties 69.2 81.7
Less: cash and cash equivalents acquired (5.5) (6.5)
Acquisition of subsidiary, net of cash acquired 109.0 128.8
The Group incurred acquisition related costs of £5.1 million on legal fees
and real estate transfer tax ("RETT"). These costs have been capitalised in
accordance with IFRS 3, asset purchase.
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 £0.8 million (€0.9 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 £1.8 million
(FY2021: £1.0 million), made up of an investment of £1.8 million (FY2021:
£1.0 million) (note 22). The Group's share of profits from continuing
operations for the period was £nil (FY2021: £nil). The Group's share of
total comprehensive income of associates for the year was £nil (FY2021:
£nil). The Group's share of total comprehensive income of associates in the
year was £nil (FY2021: £nil).
10. Investment properties
External valuation Add-back of Investment Total
of investment lease liabilities property investment
properties, net of £'m under properties
lease liabilities construction £'m
£'m £'m
At 1 November 2021 1,881.8 82.1 67.4 2,031.3
Acquisition of subsidiaries 128.2 0.6 - 128.8
Additions 31.8 20.2 47.4 99.4
Disposals (6.2) - - (6.2)
Reclassifications 16.5 - (16.5) -
Revaluations 394.1 - (4.2) 389.9
Fair value re-measurement of lease liabilities add-back - (8.3) - (8.3)
Exchange movements 11.6 0.5 0.4 12.5
At 31 October 2022 2,457.8 95.1 94.5 2,647.4
On 7 December 2021, the Group completed the acquisition of Your Room Self
Storage Limited, which included a freehold store located in Christchurch,
Dorset. Under IFRS 3 this transaction was treated as an asset acquisition,
with a fair value of the investment property of £2.6 million.
On 30 March 2022, the Group completed the buy-out of Safestore Storage Benelux
B.V., which included a portfolio made of twelve freehold properties, two
ground leases and one leasehold property. Nine properties are located in the
Netherlands and six properties are located in Belgium. Under IFRS 3 this
transaction was treated as an asset acquisition, where the fair value of 100%
share of the investment properties amounting to £125.6 million.
On 16 August 2022, the Group sold their Birmingham Digbeth store to a third
party for £6.5 million. The carrying value of this store included within
investment properties prior to disposal was £6.2 million, resulting in a gain
on disposal of investment properties of £0.2 million included within other
exceptional gains (note 4).
External valuation Add-back of Investment Total
of investment lease liabilities property investment
properties, net of £'m under properties
lease liabilities construction £'m
£'m £'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
The gain on investment properties comprises:
2022 2021
£'m £'m
Revaluations of investment property and investment property under construction 389.9 328.5
Fair value re-measurement of lease liabilities add-back (8.3) (7.4)
381.6 321.1
Cost Revaluation Valuation
£'m on cost £'m
£'m
Freehold stores
At 1 November 2021 684.8 846.8 1,531.6
Movement in year 207.9 295.6 503.5
At 31 October 2022 892.7 1,142.4 2,035.1
Leasehold stores
At 1 November 2021 127.6 222.6 350.2
Movement in year 6.1 66.4 72.5
At 31 October 2022 133.7 289.0 422.7
All stores
At 1 November 2021 812.4 1,069.4 1,881.8
Movement in year 214.0 362.0 576.0
At 31 October 2022 1,026.4 1,431.4 2,457.8
The valuation of £2,457.8 million (FY2021: £1,881.8 million) excludes £0.6
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 2022 was £179.3 million (FY2021: £155.5
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 2 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 £95.4
million (FY2021: £82.3 million) per note 21 differs to the £95.1 million
(FY2021: £82.1 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 £0.3 million as at
31 October 2022 (FY2021: £0.2 million).
All direct operating expenses arising from investment property that generated
rental income as outlined in note 3 were £75.3 million (FY2021: £68.5
million).
The freehold and leasehold investment properties have been valued as at 31
October 2022 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.
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, Spain, the Netherlands and Belgium)
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 2022 averages 89.18% (FY2021: 89.10%). 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 18.51 months (FY2021: 18.27 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 6.30% (FY2021: 6.73%),
rising to a stabilised net yield pre-administration expenses of 6.74% (FY2021:
6.90%).
• The weighted average freehold exit yield on UK freeholds is 5.83%
(FY2021: 6.07%), on France freeholds is 5.49% (FY2021: 5.88%), on Spain
freeholds is 5.50% (FY2021: 5.38%), on the Netherlands freeholds is 5.08% and
Belgium freeholds is 5.02%. The weighted average freehold exit yield for all
freeholds adopted is 5.66% (FY2021: 6.03%).
• 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 8.40% (FY2021: 8.62%), in the
France portfolio is 8.78% (FY2021: 8.98%), in the Spain portfolio is 8.00%
(FY2021: 7.87%), in the Netherlands portfolio is 7.33% and in the Belgium
portfolio 7.62%. The weighted average annual discount rate adopted (for both
freeholds and all leaseholds) is 8.49% (FY2021: 8.72%).
• Purchaser's costs in the range of approximately 3.3% to 6.8% for the
UK, 7.5% for Paris, 2.5% for Spain, 7.5% for the Netherlands and 7.5% for
Belgium, 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),4.5% (Spain), 7.5%
(the Netherlands) and 7.5% (Belgium) 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 13.0 years (FY2021: 12.2 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.
Short leaseholds (the Netherlands)
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.
Short leaseholds (Belgium)
There are no short term leaseholds in Belgium.
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), 2.5% (Spain), 7.5%
(the Netherlands) and 7.5% (Belgium), 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
involves 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 of change in Impact of a change in stabilised occupancy assumption Impact of a delay
capitalisation rates £'m in stabilised
£'m occupancy
assumption
£'m
25 bps decrease 25 bps increase 1% increase 1% decrease 24-month delay
Reported Group 107.0 (90.2) 40.0 (32.0) (10.6)
11. Net assets per share
EPRA's Best Practices Recommendations guidelines for Net Asset Value ("NAV")
metrics are 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:
2022 2021
Diluted pence Diluted pence
£'m per share £'m per share
Balance sheet net assets 1,793.4 820 1,374.9 635
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax) (1.7) (2.0)
Deferred tax liabilities on the revaluation of investment properties 129.0 96.9
EPRA NTA 1,920.7 879 1,469.8 679
Basic net assets per share 848 652
EPRA basic NTA per share 908 697
The basic and diluted net assets per share have been calculated based on the
following number of shares:
2022 2021
Number Number
Shares in issue
At year end 211,927,497 210,823,703
Adjustment for Employee Benefit Trust (treasury) shares (359,795) (41,259)
IFRS/EPRA number of shares (basic) 211,567,702 210,782,444
Dilutive effect of Save As You Earn shares 87,562 109,100
Dilutive effect of Long Term Incentive Plan shares 6,956,633 5,706,061
IFRS/EPRA number of shares (diluted) 218,611,897 216,597,605
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 7,044,195 shares (FY2021: 5,815,161 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
£1,920.7 million (FY2021: £1,469.8 million), giving EPRA NTA per share of
879 pence (FY2021: 679 pence). The Directors consider that these alternative
measures provide useful information on the performance of the Group.
EPRA adjusted balance sheet (non-statutory)
2022 2021
£'m £'m
Assets
Non-current assets 2,653.4 2,042.5
Current assets 52.4 72.6
Total assets 2,705.8 2,115.1
Liabilities
Current liabilities (178.4) (88.4)
Non-current liabilities (606.7) (557.0)
Total liabilities (785.1) (645.4)
EPRA adjusted Net Asset Value 1,920.7 1,469.7
EPRA adjusted basic net assets per share 908 pence 697 pence
12. Cash and cash equivalents
2022 2021
£'m £'m
Cash at bank and in hand 20.9 43.2
13. Financial liabilities - bank borrowings and secured notes
Non-current 2022 2021
£'m £'m
Bank loans and secured notes
Secured 625.1 486.5
Debt issue costs (1.3) (1.8)
623.8 484.7
The Group's borrowings consist of bank facilities of £250 million and €70
million maturing in June 2023. Further in April 2022, the Group extended its
borrowing facilities, with the issuance of a €105 million US Private Shelf
Placement Note from a group of existing investors. The Group now has US
Private Placement Notes of € 358 million (FY2021: €253 million) which have
maturities extending to 2024, 2026, 2027, 2028, 2029 and 2033 and £215.5
million (FY2021: £215.5 million) which have maturities extending to 2026,
2028, 2029 and 2031. The blended cost of interest on the overall debt at 31
October 2022 was 2.41% per annum. Since the year end the Group has
successfully refinanced their bank facilities borrowings (note 23).
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 54% of the drawn bank facilities have
been hedged at an effective rate of 0.6885% (SONIA).
The Company has in issue €50.9 million (FY2021: €50.9 million) 1.59%
Series A Senior Secured Notes due 2024, €70.0 million (FY2021: €70.0
million) 1.26% Series A Secured Notes due 2026, £35.0 million (FY2021: £35.0
million) 2.59% Series B Senior Secured Notes due 2026, €74.1 million
(FY2021: €74.1 million) 2.00% Series B Senior Secured Notes due 2027, £20.0
million (FY2021: £20.0 million) 1.96% Series A Secured Notes due 2028,
€29.0 million (FY2021: €29.0 million) 0.93% Series B Secured Notes due
2028, £50.5 million (FY2021: £50.5 million) 2.92% Series C Senior Secured
Notes due 2029, £30.0 million (FY2021: £30.0 million) 2.69% Series C Senior
Secured Notes due 2029, €105.0 million (FY2021: €nil) 2.45% Private Shelf
Senior Secured Notes due 2029, £80.0 million (FY2021: £80.0 million) 2.39%
Series C Secured Notes due 2031 and €29.0 million (FY2021: €29.0 million)
1.42% Series D Secured Notes due 2033. The €358.0 million of Euro
denominated borrowings provides a natural hedge against the Group's investment
in the France, Spain, the Netherlands and Belgium 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
£1.3 million (FY2021: £1.8 million).
Bank loans and secured notes are repayable as follows:
Group
2022 2021
£'m £'m
Within one year 101.8 -
Between one and two years 43.8 57.3
Between two and five years 158.9 137.1
After more than five years 320.6 292.1
Bank loans and secured notes 625.1 486.5
Unamortised debt issue costs (1.3) (1.8)
623.8 484.7
The effective interest rates at the balance sheet date were as follows:
2022 2021
Bank loans (UK term loan) Quarterly or monthly SONIA plus 1.25% Quarterly or monthly SONIA plus 1.25%
Bank loans (Euro term loan) Quarterly EURIBOR plus 1.25% Quarterly EURIBOR plus 1.25%
Private Placement Notes (Euros) 1.80% Weighted average rate of 1.52%
Private Placement Notes (Sterling) 2.55% Weighted average rate of 2.55%
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
2022 2021
£'m £'m
Expiring within one year 208.4 -
Expiring beyond one year - 251.8
208.4 251.8
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:
2022 2021
£'m £'m
Sterling 295.1 247.5
Euros 333.6 239.0
625.1 486.5
14. Financial instruments
Financial instruments disclosures are set out below:
2022 2021
Asset Liability Asset Liability
£'m £'m £'m £'m
Interest rate swaps 1.2 - 0.3 (0.2)
Foreign currency forwards 0.5 - 1.9 -
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
approximates to their fair value.
The fair value of bank loans is calculated as:
2022 2021
Book value Fair value Book value Fair value
£'m £'m £'m £'m
Bank loans 623.8 694.1 484.7 543.9
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:
Assets per the balance sheet 2022 2021
£'m £'m
Derivative financial instruments - Level 2 1.7 2.2
Amounts due from associates - Level 2 - 2.7
Liabilities per the balance sheet 2022 2021
£'m £'m
Derivative financial instruments - Level 2 - 0.2
Bank loans - Level 2 694.1 543.9
There were no transfers between Level 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 £nil 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 2022 were £55.0 million and €nil (FY2021: £55.0 million and
€30.0 million). At 31 October 2022 the weighted average fixed interest rates
were Sterling at 0.6885% (FY2021: Sterling at 0.8152% and Euro at 0.1656%),
and floating rates are at quarterly SONIA. The £55.0 million SONIA swaps
expire in June 2023. The movement in fair value recognised in the income
statement was a net gain of £1.0 million (FY2021: net gain of £1.5 million).
Foreign currency forwards not designated as part of a hedging arrangement
As at 31 October 2022, the Group has one tranche of average rate forward
contracts for a notional amount totalling €8.5 million at a rate of
€1.0751 to the Pound (FY2021: three tranches totalling €24.5 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 has a maturity date of 28 April 2023. The movement in
the fair value recognised in the income statement in the period was a net loss
of £1.3 million (FY2021: net gain of £1.4 million). The €8.0 million
tranche previously held matured and was settled in April 2022, resulting in a
fair value disposal of £0.7 million and a receipt of £0.7 million. The
€8.0 million tranche previously held matured and was settled in October
2022, resulting in a fair value disposal of £0.6 million and a receipt of
£0.6 million. This resulted in £1.3 million recognised as finance income and
£1.3 million expense as part of the £0.3 million expense recognised in fair
value movement of derivatives within finance costs in the income statement.
Financial instruments by category
Assets per the balance sheet Financial assets Assets at fair Total
at amortised cost value through £'m
£'m profit and loss
£'m
Trade receivables and other receivables excluding prepayments 24.0 - 24.0
Derivative financial instruments - 1.7 1.7
Cash and cash equivalents 20.9 - 20.9
At 31 October 2022 44.9 1.7 46.6
Liabilities per the balance sheet Other financial Liabilities at fair Total
liabilities at value through £'m
amortised cost profit and loss
£'m £'m
Borrowings (excluding lease liabilities) 623.8 - 623.8
Lease liabilities 95.4 - 95.4
Payables and accruals 43.9 - 43.9
At 31 October 2022 763.1 - 763.1
Assets per the balance sheet Financial assets Assets at fair Total
at amortised cost value through £'m
£'m profit and loss
£'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
Liabilities per the balance sheet Other financial Liabilities at fair Total
liabilities at value through £'m
amortised cost profit and loss
£'m £'m
Borrowings (excluding lease liabilities) 484.7 - 484.7
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
The interest rate risk profile, after taking account of derivative financial
instruments, was as follows:
2022 2021
Floating rate Fixed rate Total Floating rate Fixed rate Total
£'m £'m £'m £'m £'m £'m
Borrowings 46.8 577.0 623.8 - 484.7 484.7
The weighted average interest rate of the fixed rate financial borrowing was
2.05% (FY2021: 2.01%) and the weighted average remaining period for which the
rate is fixed was five years (FY2021: 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.
Less than One to two Two to five More than
one year years years five years
£'m £'m £'m £'m
2022
Borrowings 114.7 53.9 187.8 348.3
Derivative financial instruments 1.0 - - -
Lease liabilities 13.8 12.9 35.9 74.7
Payables and accruals 43.9 - - -
173.4 66.8 223.7 423.0
Less than One to two Two to five More than
one year years years five years
£'m £'m £'m £'m
2021
Borrowings 10.6 67.4 162.1 313.4
Derivative financial instruments 0.3 0.3 - -
Lease liabilities 12.9 11.5 30.9 58.8
Payables and accruals 58.2 - - -
82.0 79.2 193.0 372.2
15. Lease liabilities
The Group leases certain of its investment properties under lease liabilities.
The average remaining lease term is 10.9 years (FY2021: 10.3 years).
Minimum lease payments Present value of minimum
lease payments
2022 2021 2022 2021
£'m £'m £'m £'m
Within one year 13.8 12.9 13.2 12.3
Within two to five years 48.8 42.4 40.6 35.3
Greater than five years 74.7 58.8 41.6 34.7
137.3 114.1 95.4 82.3
Less: future finance charges on lease liabilities (41.9) (31.8) - -
Present value of lease liabilities 95.4 82.3 95.4 82.3
2022 2021
£'m £'m
Current 13.2 12.3
Non-current 82.2 70.0
95.4 82.3
Amounts recognised within the consolidated income statement include interest
on lease liabilities of £5.0 million and variable lease payments not included
in the measurement of the lease liabilities of £0.3 million. Amounts
recognised in the consolidated statement of cash flows include lease
liabilities principal payments of £8.4 million and interest on lease
liabilities of £5.0 million. The maturity analysis for lease liabilities
under contractual undiscounted cash flows is included in note 14.
16. Called up share capital
2022 2021
£'m £'m
Called up, allotted and fully paid
211,927,497 (FY2021: 210,823,703) 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:
Cash generated from continuing operations Notes 2022 2021
£'m £'m
Profit before income tax 498.8 404.6
Gain on investment properties 10 (381.6) (321.1)
Other exceptional gains 4 (10.8) -
Share of loss in associates 0.3 -
Depreciation 1.0 1.0
Net finance expense 15.7 12.4
Employee share options 8.6 8.6
Changes in working capital:
Decrease/(increase) in inventories 0.2 (0.2)
Decrease/(increase) in trade and other receivables 0.1 (5.4)
(Decrease)/increase in trade and other payables (0.4) 13.6
Increase in provisions 0.3 2.1
Cash generated from continuing operations 132.2 115.6
18. Analysis of movement in gross and net debt
2021 Cash flows Non-cash 2022
£'m £'m movements £'m
£'m
Bank loans (484.7) (132.0) (7.1) (623.8)
Lease liabilities (82.3) 8.4 (21.5) (95.4)
Total gross debt (liabilities from financing activities) (567.0) (123.6) (28.6) (719.2)
Cash in hand 43.2 (22.1) (0.2) 20.9
Total net debt (523.8) (145.7) (28.8) (698.3)
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 £0.5
million (FY2021: £0.4 million), foreign exchange movements of £6.8 million
(FY2021: £12.4 million) and unwinding of discount to lease liabilities of
£21.5 million (FY2021: £12.6 million).
19. Provisions
In France, the basis on which property taxes have been assessed has been
challenged by the tax authority for financial years 2011 onwards. In March
2021 the French Court of Appeal delivered a judgement, which resulted in 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 was
unsuccessful. A provision is included in the consolidated financial accounts
of £2.4 million at 31 October 2022 (FY2021: £2.1 million), to reflect the
increased uncertainty surrounding the likelihood of a successful outcome. Of
the total provided, £0.3 million has been charged in relation to twelve
months to 31 October 2022 within cost of sales (Underlying EBITDA) (FY2021:
£1.9 million was recorded as an exceptional charge in respect of financial
years 2012 to 2020 and £0.2 million was charged in relation to twelve months
to 31 October 2021 within underlying cost of sales).
It is possible that the French tax authority may appeal the decisions of the
French Court of Appeal on which the Group was successful to the French Supreme
Court. The maximum potential further exposure in relation to these issues at
31 October 2022 is £3.0 million (FY2021: £2.7 million). No provision for any
potential further 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 additional liabilities.
Bank guarantees to cover any potential additional tax assessment are currently
being put in place, of which guarantees totalling £1.2 million have been put
in place as at 31 October 2022 (FY2021: £1.3 million).
20. Contingent liabilities
As part of the Group banking facility, the Company has guaranteed the
borrowings totalling £625.1 million (FY2021: £486.5 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 £146.0 million of capital commitments as at 31 October 2022
(FY2021: £98.6 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 Safestore Storage Benelux B.V. (formerly CERF Storage JV
B.V.)
As described in note 9, the Group had a 20% interest in Safestore Storage
Benelux B.V. ("SSB") up until 30 March 2022 and was classified as an
investment in associate. From 30 March 2022, SSB became a wholly owned
subsidiary of the Group, from which point all intra-group transactions and
balances are eliminated on consolidation.
During the period to 30 March 2022 the Group recharged £0.2 million (FY2021:
£nil) to SSB for operational costs paid on behalf of SSB and was repaid £0.2
million (FY2021: £0.2 million) of cumulative outstanding balances during the
year. Unpaid interest of £0.1 million (FY2021: £0.1 million) was accrued and
charged during the year on the €3.0 million (£2.7 million) principal loan
note outstanding. The total amount outstanding at 30 March 2022 included
within current trade and other receivables was £2.8 million (FY2021: £2.7
million). Management fees charged and settled during the year amounted to
£0.3 million (FY2021: £1.0 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 a further investment £0.8 million
(€0.9 million) into PBC to fund the development of a new store in France,
taking the total investment to £1.8 million (€2.1 million) (FY2021: £1.0
million (€1.2 million)). The total amount invested is included as part of
its noncurrent investments in associates. The total amount outstanding at 31
October 2022 included within trade and other receivables was £nil (FY2021:
£nil).
As described in note 4, during the period, the Group sold the Nanterre site to
the joint venture partner of Nanterre FOCD 92 for a total price of €7.6
million excluding VAT and including demolition cost reimbursement, where the
settlement is done partially in cash £1.0 million (€1.1 million excluding
tax), and partially in kind through the delivery of the new building at the
end of the operation (estimated at €6.5 million).
23. Post balance sheet events
On 11 November 2022 the Group completed their refinancing exercise obtaining a
new increased unsecured £400 million multi-currency four-year Revolving
Credit Facility (with two one-year extension options). In addition, a further
£100 million uncommitted accordion facility is incorporated into the facility
agreement.
On 1 December 2022 the Group acquired a 10.0% interest in CERF II German
Storage Topco S.à r.l, a company registered in Luxembourg and the indirect
holder of myStorage GmbH, a company registered and operating in Germany.
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