REG - Safestore Hldgs plc - Final Results
17/01/2024 07:00
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RNS Number : 9144Z Safestore Holdings plc 17 January 2024
17 January 2024
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Results for the year ended 31 October 2023
A year of significant strategic progress
Key measures
Key Measures - Total Year ended Year ended Change Change CER(1)
31 October 2023 31 October 2022
Group
Revenue (£'m) 224.2 212.5 5.5% 4.8%
Underlying EBITDA(2) (£'m) 142.2 135.1 5.3% 4.5%
Closing Occupancy (let sq ft- million) 6.231 6.317 -1.4% n/a
Closing Occupancy (% of MLA) 77.0% 82.1% -5.1% n/a
Maximum Lettable Area (MLA)(4) 8.09 7.70 5.1% n/a
Average Storage Rate (£) 30.26 29.25 3.5% 2.7%
Adjusted Diluted EPRA EPS(6) (pence) 47.9 47.5 0.8% n/a
Free Cash Flow (£'m) 89.2 101.4 -12.0% n/a
EPRA Basic NTA per Share(13) (pence) 952 908 4.8% n/a
REVPAF (£)(10) 27.70 27.59 0.4% -0.2%
Key Measures - Like-For-Like(8) Year ended Year ended Change Change CER(1)
31 October 2023 31 October 2022
Group
Revenue (£'m) 209.9 205.3 2.2% 1.7%
Underlying EBITDA(2) (£'m) 136.1 131.7 3.3% 2.8%
Closing Occupancy (let sq ft- million) 5.583 5.793 -3.6% n/a
Closing Occupancy (% of MLA) 79.6% 82.8% -3.2% n/a
Average Occupancy (let sq ft- million) 5.586 5.779 -3.3% n/a
Maximum Lettable Area (MLA)(4) 7.02 7.00 0.3% n/a
Average Storage Rate (£) 31.57 29.89 5.6% 5.0%
REVPAF (£)(10) 29.91 29.34 1.9% 1.4%
Statutory Metrics Year ended Year ended Change Change CER
31 October 2023 31 October 2022
Operating Profit(9) (£'m) 230.4 514.5 -55.2% n/a
Profit Before Tax (£'m) 207.8 498.8 -58.3% n/a
Diluted Earnings per Share (pence) 91.8 212.4 -56.8% n/a
Dividends per Share (pence) 30.1 29.8 1.0% n/a
Cash Inflow from Operating Activities (£'m) 98.0 109.8 -10.7% n/a
Basic Net Assets per Share (pence) 888 848 4.7% n/a
Highlights
Financial Performance
· Group revenue for the year up 5.5% (up 4.8% in CER(1))
· Like-for-like(8) Group revenue for the year in CER(1) up 1.7%
· Underlying EBITDA(2) up 4.5% in CER(1) which, combined with a
reduced gain on investment properties of £93.8 million (FY2022: £381.6
million), resulted in statutory operating profit(9) of £230.4 million
(FY2022: £514.5 million)
· Strong cost control with like-for-like costs increasing 0.3% on a
CER basis
· Adjusted Diluted EPRA Earnings per Share(6) up 0.8% at 47.9 pence
(FY2022: 47.5 pence)
· 1% increase in the dividend for the year to 30.1 pence (FY2022:
29.8 pence) in line with our progressive policy
Strategic Progress
· New stores or acquisitions adding c. 500,000 sq ft of new MLA(4)
across thirteen projects in the financial year (five in the UK, six in Spain
and two in Netherlands)
· Total Group development and extension pipeline increased to 30
projects and 1.5 million sq ft representing c. 18% of the existing portfolio
providing £25-£30 million of future EBITDA at stabilisation
· Purchases of the freehold interests of two stores in Barcelona
and West Birmingham
· Lease extensions completed for four stores in Edinburgh, London-
Charlton, London- Slough and Burnley
· Successful integration of Benelux acquisition
· Entry into German market via a new Joint Venture(15) ("JV") with
Carlyle which has acquired the seven-store myStorage business with 326,000 sq
ft of MLA(4)
Strong and Flexible Balance Sheet
· 9.3% increase in property valuation (including investment
properties under construction)
· 4.8% increase in EPRA basic NTA per share to £9.52 (FY2022:
£9.08)
· New ESG linked Revolving Credit Facilities (RCFs) completed in
November 2022 with an increased £400 million unsecured multi-currency
four-year facility (with two, one-year extension options, the first of which
has been completed recently). Margins remain at 1.25% in line with previous
RCFs and all facilities, including private placement notes, are unsecured
· Approximately £200 million of headroom under the RCF plus £100
million accordion facility
· 73% of debt at fixed interest rates with tenors from 2024 to 2033
· Group loan-to-value ratio ("LTV"(11)) at 25.4%, calculated on net
debt (31 October 2022: 23.6%) and interest cover ratio ("ICR"(12)) at 6.7x (31
October 2022: 10.4x)
Frederic Vecchioli, Chief Executive Officer commented:
"I am pleased that 2023 has been a resilient year of significant strategic and
operational progress building on two years of out-performance in which we
delivered total like-for-like(8) revenue growth of over 30.3% and Adjusted
Diluted EPRA EPS growth of 57.3%.
The Group's industry leading REVPAF(10) grew by 1.9% on a like-for-like(8)
basis whilst Total Group revenue grew by 5.5% reflecting recently added new
stores and the annualisation effect of our acquisition of the Benelux
business.
We have made excellent strategic progress during the year having opened,
acquired, or extended thirteen stores across three countries adding c. 500,000
sq ft of MLA to the portfolio. In addition, we have grown the development
pipeline to a further 1.5 million sq ft across 30 projects which represents
18% of the existing MLA of the business and will contribute £25-30 million
upside to EBITDA upon stabilisation. Following our previous successful JV with
Carlyle, we partnered again to facilitate the Group's entry into the
under-penetrated German market and the integration of our Benelux business,
acquired in 2022, is now complete.
Our strong and flexible balance sheet was significantly enhanced by the
agreement of an unsecured four-year £400 million multi-currency RCF at the
beginning of the year which increases funding capacity, allowing us to
continue to consider strategic, value-accretive investments as and when they
arise.
Importantly, 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. We believe that the COVID period has acted
as an accelerator of growth for the still relatively immature self storage
industry. Whilst demand (as measured by enquiry growth) stabilised during the
year at a level that is below 2022, we are still seeing enquiry levels that
are ahead of the pre-COVID period.
Over the last ten years, Safestore has delivered an industry leading 16% CAGR
of its adjusted diluted EPRA EPS. During that period, we expanded our
geographical reach to six European countries leveraging and improving our
platform and central functions while carefully managing investment risk. 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.
Our industry leading business model remains unchanged and we have substantial
EPS growth to deliver both from filling the 1.9 million sq ft of fully
invested, currently unlet space, and from the new sites and expansion of
existing sites in our pipeline, across major cities in the UK and continental
Europe. Safestore has a proven track record, and as the returns we deliver are
significantly ahead of our cost of debt, we look to the future with
confidence.
Finally, I would like to thank all our colleagues in the UK, France, Spain,
the Netherlands and Belgium for their commitment and loyalty in 2023. 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 cost charges. Underlying
profit before tax is defined as Underlying EBITDA less leasehold cost,
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
2023, closing occupancy includes 18,000 sq ft of bulk tenancy (31 October
2022: 24,000 sq ft).
4 - MLA is Maximum Lettable Area. At 31 October 2023, Group MLA was c. 8.09
million sq ft (FY2022: c. 7.70 million 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 cost payments.
8 - Like-for-like adjustments remove the impact of the 2023 acquisition of
Apeldoorn, the 2023 openings of Wigan, London-Morden, Ellesmere Port, North
Barcelona, South Barcelona, Central Barcelona 3, South Madrid, North Madrid,
East Madrid, Nijmegen, and Amersfoort, the 2022 acquisition of the Netherlands
and Belgium Joint Venture, the 2022 acquisition of Christchurch, and the 2022
openings of London-Bow and Central Barcelona
9 - Operating profit decreased by £284.1 million to £230.4 million (FY2022:
£514.5 million) principally as a result of a decrease in the gain on
investment properties of £287.8 million to £93.8 million (FY2022: £381.6
million), as well as an increase of £7.1 million or 5.3% in Underlying EBITDA
as a result of stronger trading performance. Profit before income tax in
FY2022 additionally included exceptional items of £10.8m, being other
exceptional gains. This included £5.5 million 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 £5.1 million relating
to the net gain on disposal of the Paris Nanterre site in November 2021.
10 - REVPAF is an alternative performance measure used by the business. REVPAF
stands for Revenue per Available Square Foot and is calculated by dividing
revenue for the period by weighted average available square feet for the same
period
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 2023, the Group LTV ratio was 25.4%, calculated on
a net debt basis.
12 - ICR is interest cover ratio and is calculated as the ratio of Underlying
EBITDA after leasehold costs to net interest payable.
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 - In 2019, Safestore entered a strategic arrangement with Carlyle to enter
the Benelux market, with an investment of 20%. This arrangement represented a
joint venture and has been referred to as such. 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.
16 - Store Protect has replaced our customer goods insurance programme from 1
November 2023, attracting VAT rather than Insurance Premium Tax (IPT). When
comparing the first two months of the 2024 financial year, the 2023
comparative included revenue of £0.4 million representing 12% IPT on
insurance sales for the two months. For 2024, VAT is not included in the
revenue. The overall impact of these changes is neutral at EBITDA. With the
LFL revenue figure adjusted to remove the IPT from the prior year, LFL revenue
is down 0.6%. Including the IPT in revenue in the PY would result in a
variance of -1.6%.
Summary
The Group has delivered a resilient performance in 2023 and has made
significant strategic and operational progress.
In 2023, the Group delivered 0.8% growth in Adjusted Diluted EPRA Earnings per
Share, which, if calculated on a like-for-like basis, grew by 3.3%. Total
Group revenue increased by 5.5% (4.8% CER(1)) with the UK up 2.1%, Paris up
3.5%, Spain up 19.4%, Netherlands up 100% and Belgium up 78.3%. Resilient
performances in the UK and Paris were complemented by new store driven growth
in Spain and the annualisation of our ownership of the Netherlands and Belgium
businesses. On a like-for-like(8) basis in CER(1), Group revenue increased by
1.7% with the UK up 1.2%, Paris up 3.5% and Spain flat. The Group's
like-for-like average storage rate(5) was up 5.0% at CER(1) with average
occupancy down 3.3%, whilst like-for-like(8) closing occupancy decreased by
3.2ppts to 79.6%.
The Group has traded solidly over the year despite strong comparable
performances in the record 2021 and 2022 financial years over which c. 25%
like-for-like revenue growth was delivered. Our digital marketing platform has
driven good enquiry generation and conversion despite a slightly weaker
overall market such that enquiry levels remain ahead of the pre-COVID period.
The like-for-like average storage rate growth drove the UK revenue performance
and increased by 5.1% in the year whilst average occupancy declined by 4.1%
and closing occupancy was down 3.8ppts at 79.2%.
In Paris, our performance was resilient with like-for-like(8) revenue growing
by 3.5% at CER(1) driven by a like-for-like growth in average storage rate of
3.9% with like-for-like average storage occupancy broadly flat.
Like-for-like(8) closing occupancy ended the year at a similar level to the
prior year at 81.3% (FY2022: 81.7%). This is the 25(th) consecutive year of
revenue growth in Paris with average growth over the last eight years of
approximately 6.2%.
Our Spanish business saw flat like-for-like revenue for the year with an
increase in the like-for-like average storage rate of 7.4% offsetting a
decline in average occupancy of 7.4% which reflects the impact of opening new
stores in catchment areas of existing stores increasing overall revenue but
impacting like-for-like occupancy. Ancillary sales were also strong. Spain
opened six stores in the year and now has eleven stores open and a pipeline of
a further five sites. Total revenue growth was 19.4%.
Our Netherlands and Belgium businesses performed well in their first full
financial years as fully owned subsidiaries of the Group. The businesses were
not treated as like-for-like in the year but, over the two quarters (Q3 and
Q4) for which comparable revenue figures are available, like-for-like growth
would have been 11.0% and 9.7% respectively.
The Group's current pipeline of 30 new developments and store extensions has
been replenished over the last year and now constitutes c. 1.5 million sq ft
of future MLA (equivalent to 18% of the existing portfolio) with associated
outstanding capital expenditure of £128 million. 29 of the 30 projects are in
London, Paris, Spain, the Randstad region of the Netherlands and Brussels with
just one in the UK outside of London, in the South-East of England.
Group Underlying EBITDA(2) of £142.2 million increased by 4.5% at CER(1) on
the prior year. The Group's Underlying EBITDA(2) performance, offset by a 9.6%
increase in leasehold cost and a £5.0 million or 45.9% increase in finance
costs, resulted in a 0.8% increase in Adjusted Diluted EPRA EPS(6) in the
period to 47.9 pence (FY2022: 47.5 pence). The increase in finance costs was
driven by higher debt levels to fund the development pipeline and an increase
in the marginal cost of borrowing. On a like-for-like basis the increase
Adjusted Diluted EPRA EPS(6) in the period, as mentioned above, would have
been 3.3%. Statutory operating profit decreased by 55.2% to £230.4 million
(FY2022: £514.5 million) as a result of the gain on investment properties of
£93.8 million being lower than the record gain experienced in 2022 of £381.6
million.
Our property portfolio valuation, including investment properties under
construction, increased in the year by 9.3%, driven by the underlying
performance of the stores, new stores, acquisitions and exchange rate
movements. After exchange rate movements, the portfolio valuation increased to
£2,789.7 million with the UK portfolio up £118.6 million to a total UK value
of £1,934.0 million and the French portfolio increasing by €50.8 million to
€676.7 million.
Reflecting the Group's dividend policy, the Board is pleased to recommend a
final dividend of 20.2 pence per share (FY2022: 20.4 pence) resulting in a
full year dividend up 1.0% to 30.1 pence per share (FY2022: 29.8 pence). Over
the last ten years, the Group has grown the annual dividend by 419% or 24.3
pence per share.
Outlook
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.
As disclosed in our 2023 half year results we expect the development pipeline
and associated financing to be dilutive to earnings in the 2024 financial year
before becoming highly accretive in future years as the stores stabilise. We
believe that, on stabilisation, an incremental £25-£30 million of EBITDA
will be added by the 30 projects in the pipeline.
For the first two months of the 2024 financial year total Group revenue is
broadly flat with like-for-like revenue down 0.6%(16) on the prior year.
Regionally, we have seen strong like-for-like growth in the Netherlands and
Belgium, solid improvements in Paris and Spain and a modest decline in the UK.
Further, in the first two months of the 2024 financial year, the Group took
limited promotional actions that resulted in year-on-year UK like-for-like
occupancy improving from -3.8ppts as at 31 October 2023 to -1.4ppts at 31
December 2023, and similarly from -0.4ppts to +0.3ppts in Paris. The immediate
impact on rates is expected to gradually reduce over the next few months,
particularly as the Group will annualise the discounting activity that took
place later last year in spring.
Whilst we are fully aware of the current macro-economic environment, our
business model has proven to be highly resilient with multiple drivers of
demand. We believe the Group is strongly positioned to withstand pressures
from challenging market conditions.
Enquiries
Safestore Holdings plc 020 8732 1500
Frederic Vecchioli, Chief Executive Officer
Andy Jones, Chief Financial Officer
www.safestore.com
(file:///C%3A/Users/jbett/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/LT7UFD4G/www.safestore.com)
Instinctif Partners 020 7457 2020
Guy Scarborough
Bryn Woodward
Analyst and investor presentation
A presentation will be held at 09:30am today at the offices of Instinctif
Partners.
A live-webcast facility will also be available and to register please use the
following link:
https://storm-virtual-uk.zoom.us/webinar/register/WN_X5npmDXhTyilRoS8yh0qgA
(https://storm-virtual-uk.zoom.us/webinar/register/WN_X5npmDXhTyilRoS8yh0qgA)
Notes to Editors
· Safestore is the UK's largest self storage group with 190
stores on 31 October 2023, comprising 133 wholly owned stores in
the UK (including 73 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, 11 stores in Spain, 11 stores in the Netherlands and 6
stores in Belgium. In addition, the Group operates 7 stores in Germany under a
Joint Venture agreement with Carlyle.
· Safestore operates more self storage sites inside the M25 and in
central Paris than any competitor providing more proximity to customers in
the wealthiest and more densely populated UK and French markets.
· Safestore was founded in the UK in 1998. It acquired the French
business "Une Pièce en Plus" ("UPP") in 2004 which was founded in 1998 by the
current Safestore Group CEO Frederic Vecchioli.
· Safestore has been listed on the London Stock Exchange since
2007. It entered the FTSE 250 index in October 2015.
· The Group provides storage to around 90,000 personal and business
customers.
· As of 31 October 2023, Safestore had a maximum lettable area
("MLA") of 8.090 million sq ft (excluding the expansion pipeline stores) of
which 6.231 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 demonstrated Safestore's resilience and significant
strategic and operational progress, after two exceptional years over which the
Group delivered 57% growth in Earnings per Share. After four years in the
role, I continue to be impressed by the dedication and resilience of the
store, property development 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.
Strategic progress
Management's first priority remains to maximise the economic return on our
existing store portfolio and its 1.9 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 presence
across Europe through a combination of new store openings and acquisitions.
The Group has now acquired 47 and opened 31 stores over the last seven years
and all are performing in line with or better than their original business
cases. Our Spanish business, acquired as a four store portfolio in 2019, now
has eleven open stores and a further five in the pipeline. Our Benelux
businesses which was acquired in 2022 is now fully integrated into the
business and has a pipeline of a further five stores. Overall, we have a
development property pipeline of an additional 1.5 million sq ft of MLA, which
provides significant future opportunity for the business and underpins our
continued growth.
Our joint venture(15) with Carlyle in Germany provides us an exciting platform
to gain exposure to a new attractive geography and I believe that Safestore's
highly scalable platform will allow us to take advantage of further
opportunities in due course.
The establishment, in November 2022, of a £400 million unsecured
multi-currency RCF at attractive margins offers us significantly greater
strategic flexibility to support these growth plans.
Financial results
Revenue for the year was £224.2 million, 5.5% ahead of last year (FY2022:
£212.5 million), or 4.8% ahead on a constant currency basis. Like-for-like(8)
revenue was up 1.7% in constant currency.
The growth in like-for-like revenue, combined with strong cost control despite
the challenging inflationary environment was particularly encouraging,
delivering a further improvement in like-for-like margins. On a total basis,
underlying EBITDA(2) increased by 5.3% to £142.2 million (FY2022: £135.1
million) and on a constant currency basis by 4.5%.
Statutory operating profit reduced by £284.1 million to £230.4 million in
2023 (FY2022: £514.5 million), reflecting a lower investment property gain in
2023 combined with the increase in Underlying EBITDA(2) and a reduction in the
share-based payments charge.
Adjusted Diluted EPRA Earnings per Share(6) grew by 0.8% to 47.9 pence
(FY2022: 47.5 pence). Adjusted Diluted EPRA Earnings per Share(6) has grown by
37.2 pence or 348% over the last ten years. Statutory diluted Earnings per
Share decreased to 91.8 pence (FY2022: 212.4 pence) as a result of the reduced
gain on valuation of investment properties, offset by an increase in Adjusted
Diluted EPRA Earnings per Share(6).
The Group's balance sheet remains robust with a Group LTV(11) ratio of 25.4%,
calculated on net debt (FY2022: 23.6%) and an ICR(12) of 6.7x (FY2022: 10.4x)
leaving considerable headroom against our banking covenants and internal
thresholds. 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.
Finally, this year's results consolidated a sustained period of excellent
performance by the Group. Over the last ten years, the management and store
teams have delivered a Total Shareholder Return of 607.9%, 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 (Environmental, Social and Governance)
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 2023 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 £400 million bank facility to ESG related KPIs 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.
Board changes
During the year, Ian Krieger, our Senior Independent Director and Audit
Committee Chair, has confirmed his intention to step down at the 2024 AGM. I
would like to thank Ian for his excellent contribution over the last ten
years. Jane Bentall will take over as Chair of the Audit Committee.
I have also been pleased to welcome Avis Darzins to the Board in the period.
Avis has over 20 years of senior executive level and management consulting
experience in the retail, entertainment and media sectors, specialising in
customer experience, strategy and business transformation and I look forward
to working with her.
Finally, Andy Jones, our CFO, notified the Board of his intention to retire
from his role as Chief Financial Officer and as a director of the Company.
Andy will continue in his role until the transition to his successor is
complete and an external search for Andy's replacement is underway. For over
ten years, Andy has been instrumental in helping deliver the Company's
strategy, significantly expanding its store portfolio and entering four
additional geographies. During his career with Safestore, he has overseen a
period of sector leading growth and shareholder returns and I'd like to thank
Andy for his outstanding contribution and to wish him well for the future.
Dividend
Reflecting the Group's progressive dividend policy, the Board is pleased to
recommend a final dividend of 20.2 pence per share (FY2022: 20.4 pence)
resulting in a full year dividend up 1% to 30.1 pence per share (FY2022: 29.8
pence).
Over the last ten years, the Group has grown the dividend by 423% or 24.4
pence per share during which period the Group has returned to shareholders a
total of 180.1 pence per share. The total dividend for the year is covered
1.59 times by Adjusted EPRA Diluted Earnings (1.59 times in 2022).
Shareholders will be asked to approve the dividend at the Company's Annual
General Meeting on 13 March 2024 and, if approved, the final dividend will be
payable on 9 April 2024 to Shareholders on the register at close of business
on 7 March 2024.
Summary
In conclusion, the Board remains confident in the future growth prospects for
the Group and will continue its progressive dividend policy in 2024 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 2024
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 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 31 new stores since August 2016 in addition to the
acquisitions of 47 existing trading stores 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 190 stores as at 31 October
2023, 102 are in London and the South East of England or in Paris, with 60 in
the other major UK cities and 28 in Barcelona and the Benelux region. In the
UK, we now operate 50 stores within the M25, which represents a higher number
of stores than any other competitor.
Our MLA(4) has increased to 8.1 million sq ft at 31 October 2023 (FY2022: 7.7
million sq ft). At the current occupancy level of 77% we have 1.9 million sq
ft of fully invested unoccupied space (3.4 million sq ft including the
development pipeline), of which 1.2 million sq ft is in our UK stores, 0.2
million sq ft is in Paris and 0.5 million sq ft is in Barcelona and Benelux.
In total, unlet space at our existing stores is the equivalent of c. 47 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 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 2023,
occupancy of the stores in the portfolio in 2013 that remain in the Group
today has increased from 63.1% to 80.7%, i.e. an average of 1.8ppts per year
and equivalent to a total of 0.9 million sq ft.
One of the key measures of operational success for a self storage asset is the
Revenue per available foot (REVPAF) and Safestore's priority will remain to
maximise its leading REVPAF with a sustainable combination of occupancy and
rate. Between the full financial years 2013 and 2023, the company's REVPAF has
maintained industry leading levels increasing 46.5% for the Group, 66.4% for
the UK (60.5% for London and the South East; and 84.2% for regional UK) and
32.1% for Paris.
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 the product (source:
SSA Annual Report 2023). In the UK, many of our new customers are using self
storage for the first time and 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 digital capability 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 43% enquiry growth for
the Group over the last five years, an annual growth of over 7%. 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.
Online marketing remains the predominant channel for customer acquisition.
Online enquiries made up 89% of all our enquiries in the UK (FY2022: 90%),
with 84% in France (FY2022: 85%). The majority of our online enquiries now
originate from a mobile device 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 for the full year as a percentage
of revenue were broadly in line with the previous year at 3.8% (FY2022: 3.6%).
During 2023, the Group demonstrated its ability to integrate newly developed
and acquired stores into its marketing platform with successful new openings
in the UK (Morden, Wigan, Ellesmere Port), Spain (Barcelona, Madrid) and the
Netherlands (Apeldoorn, Amersfoort). We have clearly demonstrated that our
marketing platform is transferrable into multiple overseas geographies.
Motivated and effective store teams benefiting from investment in training and
development
Training, People and Performance Management
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 trusted in-store advisors 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.
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.
Our online learning portal, combined with the energy and flexibility of our
store colleagues, allows us to not only continue to deliver our award-winning
development programmes but also to capitalise on the strength of our IT
platforms. We have been able to combine our technology communication skills
with our tried and tested face-to-face training sessions in a newly created
"impact" sales refresher.
We have always aimed to recognise the changing needs and demands of our
customers. 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.
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. 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. In 2023, of the eleven delegates who successfully completed the
program ten of them did so with distinction.
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.
Further development opportunities are available through our Senior Manager
Development programme ("LEAD") focusing on developing our high performing
store managers. This program is aimed at preparing candidates for more senior
roles within the business in addition to attaining a Level 5 Management and
Leadership apprenticeship. The relaunch of our graduate program, in October
2022, provides 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, which is a formal
workplace advisory panel, 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. Our commitment to our customers
mirrors that of our commitment to our colleagues.
Technological Developments
After delivering the appropriate technology the Group recently opened its
first fully automated, unmanned, satellite self storage centre in Christchurch
shortly followed by its second in Eastleigh. Utilising industry leading
automated technology, along with in-house created communication and control
technologies, customers can securely enter the building and their storage unit
from a simple app on their mobile phone Several additional unmanned satellite
stores are currently under various stages of development in the UK.
Our customers also have the option to complete a booking and contract for a
self storage unit online for any UK store location. The Group's belief is that
its multi-channel sales strategy utilising, full automation, colleague
interaction through our store sales teams or our specialist call centre and
National Accounts team provide each type of customer with the most tailored
and easy way to buy self storage at Safestore.
Customer Satisfaction
In February 2023, Safestore UK won the Feefo Platinum Trusted Service award
for the fourth year running. 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
is 4.8 out of 5. In France, Une Pièce en Plus uses Trustpilot to obtain
independent customer reviews with a "TrustScore" of 4.6 out of 5. In Spain,
OMB collects customer feedback via Google reviews and has maintained a score
of 4.8 out of 5.
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 2023, based on the current level of borrowings and interest
rates, the Group's weighted average cost of debt, after adjusting for
capitalised interest costs, was 2.97% (FY2022: 2.23%). The weighted average
maturity of the Group's drawn debt is 4.7 years at the current period end and
the Group's LTV ratio is 25.4% as at 31 October 2023.
The Group has £528m of fixed rate US private placement notes which constitute
72% of the total drawn debt. The tenors of the notes are from 2024 to 2033
with €51m of notes expiring in May 2024.
This LTV of 25.4% and interest cover ratio of 6.7x for the rolling
twelve-month period ended 31 October 2023 provides us with significant
headroom compared to our banking covenants (LTV of 60% and ICR of 2.4:1). The
reduction in ICR(12) reflects the increased interest costs from funding the
development pipeline. We had c. £200 million of undrawn bank facilities at 31
October 2023 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.
November 2022 refinancing
In November 2022, the Group completed the refinancing of its Revolving Credit
Facilities ("RCFs") 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 first
extension has recently been completed.
The Group pays 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.
Environmental, Social and Governance ("ESG") KPIs have been agreed with the
Group's lenders. The margin under the facility is now linked to ESG targets,
which could enable a reduction in the margin of up to 5bps to 120bps.
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.
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 FY2023.
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 FY2023, the space occupied by local charities in
184 units across 104 stores was 21,000 sq ft and worth £0.9 million.
Our environment: Safestore is committed to ensuring our buildings are
constructed responsibly and that 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 sub-sectors. As a result, operational emissions intensity
tends to be far lower. According to a 2023 report by KPMG and EPRA, self
storage generates the lowest greenhouse gas emissions intensity (4
kg/m(2) for scope 1 and 2) of all European real estate sub-sectors.
Reflecting the considerable progress made on energy mix, efficiency measures
and waste reduction to date, Safestore's emissions intensity (3.4 kg/m(2) in
2022) is considerably lower than the self storage sub-sector average. In
FY2023, the Group continued to progress with a further 17% decline in absolute
market based emissions despite continued portfolio growth. Emissions intensity
has reduced 19% to below 1.0 kgCO(2)e/ m(2). Per our commitments, our new
stores in the UK, Spain and Netherlands have all achieved a minimum energy
performance rating of B. 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 34% 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 2023
EPRA Sustainability BPR awards. The Global ESG Benchmark for Real Assets
("GRESB") has once again awarded Safestore an "A" rating in its 2023 Public
Disclosures assessment. MSCI has awarded Safestore its second-highest rating
of "AA" for ESG in 2023. 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
KPIs which are linked to the margin payable under its new £400 million
facility. Two KPIs have been agreed, which, when achieved, result in a
reduction in margin of up to 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 31 new stores including seven in London, five
in Paris, seven in Barcelona and Madrid, six in major UK cities, four in UK
conurbations and two in the Netherlands adding 1,446,000 sq ft of MLA.
In addition, the Group has acquired 47 existing stores through the
acquisitions of Space Maker, Alligator, Fort Box, Salus and Your Room in the
UK, OhMyBox! in Barcelona, the Lokabox and M3 group from our Benelux JV
acquisition and a store in Apeldoorn in the Netherlands. These acquisitions
added a further 1,890,000 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 twelve stores
across the portfolio adding a net 140,000 sq ft of fully invested space to the
estate. All of these stores are performing in line with or ahead of their
business plans.
Despite thirteen stores being opened, extended or acquired and c. 500,000 sq
ft of new MLA in the period, the Group's current pipeline of new developments
and store extensions (see below) has grown over the last year and now
constitutes c. 1,454,000 sq ft of future MLA. The pipeline is equivalent to c.
18% of the existing portfolio. The outstanding capital expenditure of £128
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. £251
million. Our industry leading level of REVPAF typically allows us to deliver
returns above our cash on cash hurdle of at least 10%. Our current average
portfolio cash on cash return is 15%. On a 10% return basis, a further
£25-£30m of EBITDA will be generated at stabilisation (c. four years after
opening).
Property Pipeline
Openings of New Stores and Extensions in the period
Open 2023 FH/LH MLA Other
Redevelopments and Extensions
London- Crayford LH 9,400 Extension
London- Paddington Marble Arch LH 8,400 Extension
New Developments
London- Morden FH 52,000 New build
Madrid- North FH 53,000 Conversion
Madrid- South FH 32,000 Conversion
Madrid- East FH 50,000 Conversion
Barcelona- South FH 30,600 Conversion
Barcelona- North FH 42,000 Conversion
Barcelona- Central 3 LH 14,700 Conversion
Netherlands- Amersfoort FH 58,000 New build
Wigan FH 42,700 Conversion
Ellesmere Port FH 55,000 New build
Total MLA 447,800
Open 2023 (post-year end) FH/LH MLA Other
New Developments
Eastleigh LH 14,000 Conversion, Satellite
Lease Extensions
During the period we completed the extensions of our leases at Edinburgh Fort
Kinnaird, London- Charlton, London- Slough and Burnley stores.
The Edinburgh lease has been extended by a further 10 years to 2040.
At London- Charlton we have extended the lease term to 2038. In doing so we
have agreed a three-month rent-free period.
In Burnley we have also extended the lease to 2038 with tenant break options
every five years.
At London- Slough the lease was re-geared to extend by 15 years, the total
lease length at the end of the current financial year is 18 years.
As part of our ongoing asset management programme, we have now extended the
leases on 31 stores or 84% 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.
Freehold Purchases
In Barcelona, the Group has been leasing its Valencia store since 2013. During
the period, the freehold of the site was acquired for €3.6m.
In addition, the freehold of our Oldbury store in West Birmingham was acquired
for £5.7m.
Property Pipeline Summary
Our pipeline of c. 1.5 million sq ft represents c. 18% of our existing
property portfolio.
Opening 2024 FH/LH Status* MLA Other
Redevelopments and Extensions
London- Holloway FH C, STP 9,500 Extension
Paris- Poissy FH C, UC 12,000 Extension
Paris- Pyrenees LH C, UC 22,200 Extension
New Developments
London- Paddington Park West FH C, UC 13,000 Conversion, Satellite
London- Lea Bridge FH C, UC 80,900 New build
Paris- South Paris FH C, UC 55,000 New build
Paris- West 3 FH C, UC 58,000 New build
Paris- East 1 FH C, PG 60,000 Conversion
Paris- North West 1 FH C, PG 54,000 Conversion
Paris- West 4 FH CE, PG 53,000 New Build
Madrid- South West FH C, UC 46,800 Conversion
Madrid- South 2 FH C, UC 68,800 Conversion
Madrid- North East FH C, STP 57,000 Conversion
Barcelona- Central 2 LH C, PG 20,400 Conversion
Randstad- Almere FH C, UC 44,500 Conversion
Randstad- Aalsmeer FH C, UC 48,400 New build
Randstad- Rotterdam FH C, UC 71,000 New build
Opening 2025
New Developments
London- Woodford FH C, PG 68,700 New build
London- Walton FH C, PG 20,700 Conversion
London- Watford FH CE, PG 46,750 New build
London- Wembley FH C, STP 49,000 New build
Paris- West 1 FH C, PG 56,000 New build
Paris- La Défense FH C, UC 44,000 Mixed use facility
Randstad- Amsterdam FH CE, PG 61,400 New build
Brussels- Zaventem FH CE, PG 47,400 New build
Pamplona FH C, PG 64,500 Conversion
Opening Beyond 2025
New Developments
London- Old Kent Road FH C, STP 76,500 New build
London- Bermondsey FH C, STP 50,000 New build
London- Romford FH C, STP 41,000 New build
Shoreham FH CE, PG 54,000 New build
Total Pipeline MLA (let sq ft- million) c. 1.454
Total Outstanding CAPEX (£'m) c. 128.0
*C = completed, CE = contracts exchanged, STP = subject to planning, PG =
planning granted, UC = under construction
The pipeline of 1,454,000 sq ft of future MLA includes;
· ten projects with c. 456,000 sq ft of MLA in London (31% of the
pipeline),
· one project with c. 54,000 sq ft of MLA in the South East of the
UK (4% of the pipeline)
· nine projects with c. 414,000 sq ft of MLA in Paris (29% of the
pipeline),
· five projects with c. 258,000 sq ft of MLA in Spain (18% of the
pipeline),
· four projects with c. 225,000 sq ft of MLA in the Netherlands
(15% of the pipeline)
· one project in Belgium with c. 47,000 sq ft of MLA (3% of the
pipeline)
Since our fourth quarter announcement in November 2023, three sites have had
planning granted. Of the 30 projects in the pipeline only six are now subject
to planning.
Acquisitions
Acquisition of Apeldoorn Self Storage Facility in the Netherlands
During the period, the Group completed the acquisition of an existing 58,000
sq ft self storage facility in Apeldoorn in the Netherlands. The store was
operating under the Stoor brand and is situated in an easily accessible
commercial district on the north side of the city, which has a population of
165,000.
New Joint Venture with Carlyle and Investment in myStorage in Germany
In December 2022 Safestore 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
0.21 sq ft of storage space per capita which compares to 0.82 sq ft in the UK,
0.35 sq ft in France, 0.32 sq ft in Spain, 0.50 sq ft in the Netherlands and
0.20 sq ft in Belgium. According to the 2023 FEDESSA report, there are just
530 facilities in Germany and 17.6 million 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.
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. 122 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.
Over the last four years the Group has expanded into further attractive,
under-penetrated markets in Spain, the Netherlands and Belgium with a focus on
the conurbations of Barcelona, Madrid, the Randstad area and Brussels.
As at 31 October 2023, 97% of our Group Revenue, 94% of our stores and 95% of
our available capacity are in London, Paris, South East England, major UK
cities, Spain, Amsterdam and the Randstad area and Brussels. These major
population areas deliver 97% of the Group's store EBITDA from 95% of our MLA,
highlighting the attractiveness of being present in these major cities and
conurbations. The current pipeline includes 30 further developments in these
areas which will increase the number of stores to 95% of our portfolio.
Owned Store Portfolio by Region UK France Spain Nether' Belgium Group
lands
Total
133 29 11 11 6 190
Number of Stores
Let Square Feet (m sq ft) 4.472 1.107 0.135 0.352 0.164 6.231
Maximum Lettable Area (m sq ft) 5.730 1.360 0.340 0.440 0.220 8.090
Average Let Square Feet per store (k sq ft) 34 38 12 32 27 33
Average Store Capacity (k sq ft) 43 47 31 40 37 43
Closing Occupancy % 78.1% 81.3% 39.5% 80.7% 74.1% 77.0%
Average Rate (£ per sq ft) 30.25 36.59 28.82 16.20 18.67 30.26
Revenue (£'m) 166.5 43.9 3.8 6.4 3.6 224.2
Average Revenue per Store (£'m) 1.25 1.51 0.35 0.58 0.60 1.18
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 133
stores in the UK, 73 of which are in London and the South East, and 29 stores
in Paris.
In the UK, 63% of our revenue is generated by our stores in London and the
South East. On average, our stores in London and the South East are smaller
than in the rest of the UK but the rental rates achieved are materially
higher, enabling these stores to typically achieve similar or better margins
than the larger stores. In London we operate 50 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.
In Spain the Group has eleven stores open in Barcelona and Madrid with a
further five stores in the pipeline in these two cities and in Pamplona in the
Basque Country, a region with a dynamic and healthy economy.
In the Benelux Region the Group has eleven stores open in the Netherlands and
six in Belgium. The pipeline contains a further four stores in the Netherlands
and one in Belgium.
In addition, Safestore has the benefit of a leading national presence in the
UK outside of London where the stores are predominantly located in the centre
of key metropolitan areas such as Birmingham, Manchester, Liverpool, Bristol,
Newcastle, Glasgow and Edinburgh.
Market
The self storage market in the UK, France, Spain, the Netherlands and Belgium
remains relatively immature compared to geographies such as the USA and
Australia. The SSA Annual Survey (May 2023) confirmed that self storage
capacity stands at 0.82 sq ft per head of population in the UK. The most
recent report relating to Europe (FEDESSA's 2023 report) showed that capacity
in France is 0.35 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. 1,500 currently. In the Paris region, it would
require around 2,400 new facilities versus c. 122 currently opened.
In Spain, the Netherlands and Belgium, geographies the Group has recently
entered, penetration is similarly low. In Spain capacity is around 0.32 sq ft
per head of population and the consumer is serviced by just 585 stores. In the
Netherlands penetration is 0.50 sq ft per head of population (320 stores) and
in Belgium 0.20 sq ft per head of population (96 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 0.21 sq ft of storage
space per capita and, according to the 2023 FEDESSA report, there are just 530
facilities in the country and 17.4 million sq ft of lettable space.
Our interpretation of the most recent 2023 SSA report is that operators remain
optimistic about expansion and the future growth of the industry. The level of
development estimated for the next three years is similar to that witnessed in
recent years and we do not consider this level of new supply growth to be of
concern, especially as we believe new supply helps to create increased
awareness of what is a relatively immature product on Europe. We estimate
new supply to represent around 2% to 3% of the traditional self storage
industry in the UK. These figures represent gross openings and do not consider
storage facilities closing or being converted for alternative uses. We
estimate that 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 recent 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 in addition to new
supply. In the 2023 report the SSA estimates that 2,231 self storage
facilities exist in the UK market including around 739 container-based
operations. At the point in time that the 2023 survey was written, Safestore
is the industry leader by number of stores with 129 wholly owned sites
followed by Big Yellow with 108 stores (including Armadillo), Access with 60
stores, Shurgard with 41 stores, Lok'n Store with 40 stores, Storage King with
38 stores and Ready Steady Store with 27 stores. In aggregate, the top seven
leading operators account for around 20% of the UK store portfolio. The
remaining c. 1,780 self storage outlets (including 739 container-based
operations) are independently owned in small chains or single units. In total
there are 1,086 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 currently operates in 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.
Our focus in the Netherlands market is on the densely populated Amsterdam and
Randstad conurbations. The Netherlands is the second most developed self
storage market in Europe (after the UK) but still remains under-penetrated
with approximately 320 stores and 0.50 sq ft per capita of storage space.
Belgium is one of the more under-penetrated markets in Europe with just 96
stores and 0.20 sq ft per capita of self storage space. In Belgium our
presence is focused on Brussels and the significant urban conurbations of
Liege, Charleroi and Nivelles.
Consumer awareness of self storage appears to be increasing but at a
relatively slow rate, providing an opportunity for future industry growth. The
SSA survey indicates that approximately half of consumers have low awareness
about the service offered by self storage operators or had not heard of self
storage at all. Since 2014, this statistic has only fallen 6ppts from 62%.
Therefore, the opportunity to grow awareness, combined with limited new
industry supply, makes for an attractive industry backdrop.
Self storage is a brand-blind product. 66% of respondents were unable to name
a self storage business in their local area (64% in 2022). 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 76% of those surveyed (73% in 2022) 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.
30% of respondents (c. 26% in 2022).
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 Group UK Paris Spain Benelux
Personal Customers
Numbers (% of total) 79% 77% 81% 90% 84%
Square feet occupied (% of total) 61% 58% 64% 84% 76%
Average Length of Stay (months) 20.9 17.5 26.7 23.2 30.9
Business Customers
Numbers (% of total) 21% 23% 19% 10% 16%
Square feet occupied (% of total) 39% 42% 36% 16% 24%
Average Length of Stay (months) 26.7 25.7 28.2 27.0 31.5
Safestore's customer base is resilient and diverse and consists of around
90,000 domestic, business and National Accounts customers across London,
Paris, Spain, major UK cities, 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
presence in major cities 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 62%
of customers travelling for less than 15 minutes to their storage facility
(2023 SSA Survey) Safestore's national store footprint represents a
competitive advantage.
The Group's capital-efficient portfolio of 190 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 2023 of 12.4 years (FY2022: 12.7
years). Although our property valuation for leaseholds is conservatively based
on future cash flows until the next contractual lease renewal date, Safestore
has a demonstrable track record of successfully re-gearing leases several
years before renewal whilst at the same time achieving concessions from
landlords.
In England, we benefit from the Landlord and Tenant Act that protects our
rights for renewal except in case of redevelopment. The vast majority of our
leasehold stores have building characteristics or locations in retail parks
that make current usage either the optimal and best use of the property or the
only one authorised by planning. We observe that our landlords, who are
property investors, value the quality of Safestore as a tenant and typically
prefer to extend the length of the leases that they have in their portfolio,
enabling Safestore to maintain favourable terms.
In Paris, where 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 and subsequently added a further two stores.
In 2019, the Group entered the Spanish market with the acquisition of OhMyBox.
Our Spanish portfolio currently consists of eight stores in Barcelona, and
three Madrid stores. We have a further five stores in our development pipeline
situated in Madrid, Barcelona and Pamplona. We consider these cities to have
attractive characteristics in relation to self storage and intend to continue
to seek further expansion opportunities.
In late 2022, Safestore entered the German self storage market via a new Joint
Venture(15) with Carlyle, which has acquired the myStorage business. 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.
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 89% (FY2022: 90%) of our enquiries in the
UK and 84% (FY2022: 85%) 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 43% 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 is 4.8 out of 5. In
France, Une Pièce en Plus uses Trustpilot to obtain independent customer
reviews with a "TrustScore" of 4.6 out of 5. In Spain, OMB collects customer
feedback via Google reviews and has maintained a score of 4.7 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 487,000 sq ft of occupied space (around 8%
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 27 months and 21 months respectively.
The cost base of the business is relatively fixed. Each store typically
employs three staff. Our Group Head Office comprises business support
functions such as Yield Management, Property, Marketing, HR, IT and Finance.
With the establishment of a £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 2023, we had 1.2 million sq ft of unoccupied space in the UK,
0.2 million sq ft in France and 0.5 million sq ft in Spain and Benelux,
equivalent to c. 47 full new stores. Our continued 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
Trading Data- Total
Key Measures - Total Year ended Year ended Change
31 October 2023 31 October 2022
Revenue
UK (£'m) 166.5 163.0 2.1%
Paris (€'m) 50.5 48.8 3.5%
Spain (€'m) 4.3 3.6 19.4%
Netherlands (€'m) 7.2 3.6 100.0%
Belgium (€'m) 4.1 2.3 78.3%
Underlying EBITDA
UK (£'m) 106.2 103.6 2.5%
Paris (€'m) 35.0 33.0 6.1%
Spain (€'m) 1.2 1.8 -33.3%
Netherlands (€'m) 3.6 1.3 176.9%
Belgium (€'m) 1.4 0.9 55.6%
Maximum Lettable Area (MLA)
UK (let sq ft- million) 5.730 5.620 2.0%
Paris (let sq ft- million) 1.360 1.360 0.0%
Spain (let sq ft- million) 0.340 0.120 183.3%
Netherlands (let sq ft- million) 0.440 0.380 15.8%
Belgium (let sq ft- million) 0.220 0.220 0.0%
Closing Occupancy
UK (let sq ft- million) 4.473 4.637 -3.5%
Paris (let sq ft- million) 1.107 1.112 -0.4%
Spain (let sq ft- million) 0.135 0.095 42.1%
Netherlands (let sq ft- million) 0.352 0.298 18.1%
Belgium(let sq ft- million) 0.164 0.175 -6.3%
Closing Occupancy (% of MLA)
UK 78.1% 82.6% -4.5%
Paris 81.3% 81.7% -0.4%
Spain 39.5% 78.9% -39.4%
Netherlands 80.7% 78.8% 1.9%
Belgium 74.1% 78.8% -4.7%
Average Rate
UK (£) 30.25 28.79 5.1%
Paris (€) 42.05 40.47 3.9%
Spain (€) 33.12 34.07 -2.8%
Netherlands (€) 18.61 19.18 -3.0%
Belgium (€) 21.45 18.79 14.2%
REVPAF
UK (£) 29.07 29.02 0.2%
Paris (€) 37.10 35.81 3.6%
Spain (€) 12.64 29.78 -57.6%
Netherlands (€) 16.53 16.20 2.0%
Belgium (€) 18.68 17.43 7.2%
Trading Data- Like-For-Like
Key Measures - Like-For-Like Year ended Year ended Change
31 October 2023 31 October 2022
Revenue
UK (£'m) 162.8 160.9 1.2%
Paris (€'m) 50.5 48.8 3.5%
Spain (€'m) 3.6 3.6 0.0%
Underlying EBITDA
UK (£'m) 104.3 101.9 2.4%
Paris (€'m) 35.0 33.0 6.1%
Spain (€'m) 1.6 2.0 -20.0%
Underlying EBITDA Margin %
UK (%) 64.1% 63.3% 0.8%
Paris (%) 69.3% 67.6% 1.7%
Spain (%) 44.4% 55.6% -11.2%
Closing Occupancy
UK (let sq ft- million) 4.392 4.587 -4.3%
Paris (let sq ft- million) 1.107 1.112 -0.4%
Spain (let sq ft- million) 0.084 0.093 -9.7%
Closing Occupancy (% of MLA)
UK 79.2% 83.0% -3.8%
Paris 81.3% 81.7% -0.4%
Spain 77.9% 85.9% -8.0%
Average Occupancy
UK (let sq ft- million) 4.396 4.582 -4.1%
Paris (let sq ft- million) 1.103 1.103 0.0%
Spain (let sq ft- million) 0.087 0.094 -7.4%
Average Rate
UK (£) 30.31 28.83 5.1%
Paris (€) 42.05 40.47 3.9%
Spain (€) 36.64 34.11 7.4%
REVPAF
UK (£) 29.35 29.10 0.9%
Paris (€) 37.10 35.81 3.6%
Spain (€) 33.33 33.05 0.8%
Details of trading operating KPIs are included in the tables above.
UK
UK revenue was up 2.1% for the year in total and 1.2% on a like-for-like(8)
basis.
Demand, measured by enquiry levels, was down on the previous year but ahead of
pre-COVID levels.
We believe that our REVPAF(10), a measure of how effectively we yield manage
our assets, is the strongest in the industry and materially above some of our
competitors. REVPAF(10) grew by 0.9% for the year on a like-for-like(8) basis.
Like-for-like EBITDA(2) grew by 2.4% with EBITDA margins improving by 0.8ppts
to 64.1% reflecting strong cost control in the business. Like-for-like costs
declined by 1.0% in the year.
Paris
Our Paris business did not experience the same surge in demand that we saw in
the UK during the COVID period but continued to grow steadily.
Paris revenue grew 3.5% in total for the year on a total and like-for-like(8)
basis. Like-for-like(8) revenue growth in the fourth quarter was 3.2%.
Our REVPAF(10), which we believe is materially ahead of the local competition,
grew by a further 3.6% for the year.
Enquiry levels in Paris were marginally down compared to the same period last
year but ahead of pre-COVID levels.
Like-for-like EBITDA grew by 6.1% with EBITDA margins improving by 1.7ppts to
64.1% reflecting tight cost control in the business. Like-for-like costs
reduced by 2% in the year.
Spain
Since acquiring our Spanish business in 2019 we have opened a further seven
stores. We now have eleven open stores and a pipeline of a further five stores
in Madrid, Barcelona and one in Pamplona.
Over the year our Spanish business grew revenue by 19.4% and by 44.4% in the
fourth quarter. Like-for-like(8) revenue was flat over the year.
In line with our expectations, like-for-like(8) occupancy in Barcelona has
initially been diluted by the new Barcelona stores which have opened in close
proximity and within the same catchment area as an existing store. Management
believes that, given the limited supply in central Barcelona, once the
absorption phase has been passed, the stores will generate higher revenue and
profits and provide significant long-term value.
Like-for-like EBITDA was broadly flat at store level but declined by
£0.4million after professional fees.
Netherlands
Our Netherlands business, acquired on 30 March 2022, contributed €7.2
million revenue for the year and €3.6 million of EBITDA.
During the year, a new store in Amersfoort has opened and an additional store
in Apeldoorn was acquired. We now have eleven stores open in the Netherlands
and a pipeline of a further four sites located in the Randstad area.
The Netherlands business is not treated as like-for-like(8) during the 2023
financial year. However, the stores that were in the Group for the whole of
the fourth quarter in 2022 delivered 10.7% growth in Q4 2023.
Belgium
Our Belgium business, acquired with our Netherlands business on 30 March 2022,
contributed €4.1 million revenue for the year and €1.4 million of EBITDA.
We have six stores open in Belgium and a pipeline of one additional site
located in Brussels.
The Belgian business is not treated as like-for-like(8) during the 2023
financial year. However, the stores that were in the Group for the whole of
the fourth quarter in 2022 delivered 10.0% growth in Q4 2023.
Frederic Vecchioli
16 January 2024
Financial Review
EPS(1) has grown by 348% over the last ten years
Underlying income statement
The table below sets out the Group's underlying results of operations for the
year ended 31 October 2023 and the year ended 31 October 2022. 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.
Although not superseding IFRS, 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.
2023 2022 Mvmt
£'m £'m %
Revenue 224.2 212.5 5.5%
Underlying costs (82.0) (77.5) 5.8%
Share of associate's Underlying EBITDA - 0.1 (100.0%)
Underlying EBITDA 142.2 135.1 5.3%
Leasehold costs (14.9) (13.6) 9.6%
Underlying EBITDA after leasehold costs 127.3 121.5 4.8%
Depreciation (1.3) (1.0) 30.0%
Finance charges (15.9) (10.9) 45.9%
Share of associate's finance charges - (0.4) (100.0%)
Underlying profit before tax 110.1 109.2 0.8%
Current tax (5.1) (5.2) (1.9%)
Adjusted EPRA earnings 105.0 104.0 1.0%
Share-based payments charge (3.5) (11.2) (68.8%)
EPRA basic earnings 101.5 92.8 9.4%
Average shares in issue (m) 217.2 210.9
Diluted shares (for ADE EPS) (m) 219.1 218.9
Adjusted Diluted EPRA EPS(1) (p) 47.9 47.5 0.8%
Note:
1. Adjusted EPRA earnings excludes share-based payment charges and,
accordingly, the Underlying EBITDA, Underlying EBITDA after leasehold costs
and Underlying profit before tax measures have been adjusted 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.
2023 2022
£'m £'m
Statutory profit before tax 207.8 498.8
Adjusted for:
- Gain on investment properties and investment property under construction (102.6) (389.9)
- Change in fair value of derivatives 1.7 0.3
- Net exchange loss (0.3) -
- Share-based payments 3.5 11.2
- Exceptional items and other exceptional gains - (10.7)
- Exceptional finance income - (0.5)
Underlying profit before tax 110.1 109.2
Underlying EBITDA increased by 5.3% to £142.2 million (FY2022: £135.1
million), reflecting a 5.5% increase in revenue and a 5.8% increase to the
underlying cost base. This performance reflects the growth in average rate of
3.5% to £30.26 in 2023 from £29.25 in 2022 offset by a reduction in
occupancy of 5.1ppts to 77.0% in 2023 from 82.1% in 2022, whilst maintaining
control over costs. Like-for-like revenue grew by 2.2% with the like-for-like
cost base broadly flat compared to 2022.
Leasehold costs increased by 9.6% from £13.6 million to £14.9 million,
principally due to 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 45.9% from £10.9 million to £15.9
million. This principally reflects interest charges which increased from
£11.9 million in 2022 to £15.1 million in 2023 driven by higher debt levels
and higher rates on borrowing to fund the Group's acquisition and development
activity, offset by the gains made on financial instruments of £0.4 million
in 2023 (FY2022: £1.3 million).
As a result, we achieved a 0.8% increase in underlying profit before tax of
£110.1 million (FY2022: £109.2 million). The main movement in statutory
profit before tax in the year is the £287.3 million decrease in the gain on
investment and development property to £102.6 million (FY 2022: £389.9
million) partially offset by the reduction in the share-based payment charge
of £7.7 million to £3.5 million (FY2022: £11.2 million).
Included within statutory profit before tax in 2022 were other exceptional
gains of £10.7 million. £5.5 million related 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 related to
the profit on the sale of the Nanterre land in Paris in November 2021.
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 £5.1 million (FY2022: £5.2 million), calculated by applying the
effective underlying tax rate of 22.5% 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 0.8% to 47.9 pence (FY2022: 47.5 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the income
statement to Underlying EBITDA.
2023 2022
£'m £'m
Statutory Operating profit 230.4 514.5
Adjusted for:
- Gain on investment properties (93.8) (381.6)
- Share of associate's Underlying EBITDA - 0.4
- Depreciation 1.3 1.0
- Variable lease payments 0.8 0.3
- Share-based payments 3.5 11.2
Exceptional items:
- Costs incurred relating to corporate restructuring and - 0.1
exceptional taxation costs
Other exceptional gains:
- Profit on sale of land - (5.1)
- Profit on disposal of investment property - (0.2)
- Net gain on deemed disposal of investment in associate - (5.5)
Underlying EBITDA 142.2 135.1
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 £93.8 million, as compared to £381.6 million in
2022 primarily due to the stable performance of the stores over the period,
against a period of outperformance in 2021 and 2022. The Group's approach to
the valuation of its investment property portfolio at 31 October 2023 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.
2023 2022
UK Paris Spain Benelux Total (CER) UK Paris Spain Benelux Total (CER)
£'m €'m €'m €'m £'m £'m €'m €'m €'m £'m
Revenue 166.5 50.5 4.3 11.3 222.7 163.0 48.8 3.6 5.9 212.5
Underlying cost of sales (51.1) (12.1) (1.9) (5.0) (67.3) (48.2) (12.2) (1.2) (2.5) (61.7)
Store EBITDA 115.4 38.4 2.4 6.3 155.4 114.8 36.6 2.4 3.4 150.8
Store EBITDA margin 69.3% 76.0% 55.8% 55.8% 69.8% 70.4% 75.0% 66.7% 57.6% 71.0%
LFL store EBITDA margin 69.3% 76.0% 75.0% n/a 70.7% 70.3% 75.0% 75.0% n/a 71.3%
Underlying administrative expenses (9.2) (3.4) (1.2) (1.3) (14.2) (11.2) (3.6) (0.6) (1.2) (15.8)
Underlying EBITDA 106.2 35.0 1.2 5.0 141.2 103.6 33.0 1.8 2.2 135.0
EBITDA margin 63.8% 69.3% 27.9% 44.2% 63.4% 63.6% 67.6% 50.0% 37.3% 63.5%
LFL EBITDA margin 64.1% 69.3% 44.4% n/a 64.8% 63.3% 67.6% 55.6% n/a 64.1%
Leasehold costs (8.6) (6.3) (0.5) (0.3) (14.7) (8.0) (5.9) (0.5) (0.1) (13.6)
Underlying EBITDA after leasehold costs 97.6 28.7 0.7 4.7 126.5 95.6 27.1 1.3 2.1 121.4
EBITDA after leasehold costs margin 58.6% 56.8% 16.3% 41.6% 56.8% 58.7% 55.5% 36.1% 35.6% 57.1%
UK Paris Spain Benelux Total UK Paris Spain Benelux Total
£'m £'m £'m £'m £'m £'m £'m £'m £'m £'m
Underlying EBITDA after leasehold costs (CER) 97.6 24.3 0.6 4.0 126.5 95.6 22.9 1.1 1.8 121.4
Adjustment to actual exchange rate - 0.6 0.1 0.1 0.8 - - - - -
Reported underlying EBITDA after leasehold costs 97.6 24.9 0.7 4.1 127.3 95.6 22.9 1.1 1.8 121.4
Note: CER is Constant Exchange Rates (Euro denominated results for the current
period have been retranslated at the exchange rate effective for the
comparative period in order to present the reported results on a more
comparable basis).
Underlying EBITDA in the UK increased by £2.6 million, or 2.5%, to £106.2
million (FY2022: £103.6 million), underpinned by a 2.1% or £3.5 million
increase in revenue, which was driven by an increase in average rate of 5.1%,
offset by a decrease in average occupancy of 3.3% and an increase of 1.5% n
the underlying cost base, with like-for-like underlying costs decreasing
0.8%. The UK also reflected steady like-for-like revenue growth of 1.2%. The
underlying UK EBITDA margin was slightly up at 63.8% compared to 2022 at 63.6%
whilst the like-for-like EBITDA margin saw a 0.8ppt increase to 64.1% from
63.3% in 2022.
In Paris, underlying EBITDA increased by €2.0m, or 6.1%, to €35m (FY2022:
€33.0m), reflecting a €1.7m increase in revenue, arising from a 3.9%
increase in the average storage rate coupled with average occupancy remaining
constant. The EBITDA after leasehold costs margin in Paris increased from
55.5% in 2022 to 56.8% in 2023, reflecting the control over the underlying
cost base of the portfolio, with a reduction in underlying cost of sales of
0.8% and administrative costs of 5.6%, offset by underlying leasehold costs
increasing by 6.8%. Underlying EBITDA after leasehold rent in Paris increased
by 5.9% to €28.7m (FY2022: €27.1m).
In Spain, revenue increased to €4.3m (FY2022: €3.6m), arising from the
opening of six new stores and a 7.4% increase in like-for-like average storage
rate, offset by a decrease in like-for-like average occupancy of 7.4%.
Underlying EBITDA decreased by €0.6m to €1.2m, due to an increase in the
underlying cost base and administrative expenses resulting from additional
employment costs to support the new stores as well as their dilutive impact
whilst they achieve stabilisation.
On 30 March 2022, Safestore acquired the remaining 80% of the equity owned by
Carlyle Europe Realty 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. The contribution to revenue for the period was €11.3m and €4.7m
EBITDA after leasehold costs. In 2022, the businesses contributed seven
months' revenue which equated to €5.9 million.
The combined results of the UK, Paris, Spain and Benelux delivered a 4.2%
increase in Underlying EBITDA after leasehold costs at constant exchange rates
at Group level. Adjusting for a favourable exchange impact of £0.8 million,
the combined results of the UK, Paris, Spain and Benelux reported an
Underlying EBITDA after leasehold costs increase of 4.9% or £5.9 million to
£127.3 million (FY2022: £121.4 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
2023 and 2022.
2023 % of total 2022 % of total % change
UK £'m 166.5 73% 163.0 76% 2.1%
Paris
Local currency €'m 50.5 48.8 3.5%
Paris in Sterling £'m 43.9 20% 41.4 19% 6.0%
Spain
Local currency €'m 4.3 3.6 19.4%
Spain in Sterling £'m 3.8 2% 3.0 2% 26.7%
Benelux
Local currency €'m 11.3 5.9 91.5%
Benelux in Sterling £'m 10.0 5% 5.1 3% 94.1%
Average exchange rate 1.149 1.178 2.5%
Total revenue £'m 224.2 100% 212.5 100% 5.5%
The Group's revenue increased by 5.5% or £11.7 million in the year. The
average storage rate per sq ft for the Group was, at £30.26, 3.5% higher than
in 2022 (£29.25) offset by occupied space which was 86,000 sq ft lower at 31
October 2023 (6.231 million sq ft) than at 31 October 2022 (6.317 million sq
ft).
Adjusting the Group's revenue for the impact of new stores to a like-for-like
basis, revenue has increased by 2.2%. Adjusting for the exchange rate impact
in the current year, Group like-for-like revenue at constant exchange rates
has increased by 1.7%.
In the UK, revenue grew by £3.5 million or 2.1%, and on a like-for-like basis
it increased by 1.2%. Occupancy was 164,000 sq ft lower at 31 October 2023
than at 31 October 2022, at 4.473 million sq ft (FY2022: 4.637 million sq ft).
The average storage rate for the year grew 5.1%, from £28.79 in 2022 to
£30.25 in 2023. On a like-for-like basis, the average storage rate in the UK
also increased by 5.1% to £30.31 (FY2022: £28.83).
In Paris, revenue grew by €1.7 million or 3.5% and on a like-for-like basis
it increased by 3.5% to €50.52 million (FY2022: €48.76 million). This was
driven by an increase in the average storage rate of 3.9% to €42.05 for the
year (FY2022: €40.47), with average occupancy being flat, with closing
occupancy decreasing to 1.107 million sq ft (FY2022: 1.112 million sq ft).
For Spain, revenue was €4.3 million (FY2022: €3.6 million), reflecting the
growth in new stores, with like-for-like revenue being flat at €3.6 million.
On a like-for-like basis, average rate increased 6.1% to €36.64 (FY2022:
€34.11), with a closing occupancy of 0.084 million sq ft (77.9%, on a like
for like basis).
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 €11.3 million revenue (FY2022: €5.9m,
representing seven months' revenue since acquisition date). Collectively, the
businesses saw 43,000 sq ft of occupancy inflows over the year and our
Netherlands and Belgium businesses ended the period with a closing occupancy
of 78.5% (FY 2022: 78.8%). The average rate for the period was €18.61 and
€21.45 for the Netherlands and Belgium respectively. (FY2022: €19.18 and
€18.79 respectively for the seven month period).
Analysis of cost base
Cost of sales
The table below details the key movements in cost of sales between 2022 and
2023.
Cost of sales 2023 2022
£'m £'m
Statutory cost of sales (69.9) (63.0)
Adjusted for:
Depreciation 1.3 1.0
Variable lease payments 0.8 0.3
Underlying cost of sales (67.8) (61.7)
Underlying cost of sales for FY2022 (61.7)
New developments cost of sales 2.7
Underlying cost of sales for FY2022 (Like-for-like) (59.0)
Volume related cost of sales 0.9
Employee remuneration, recruitment and training (1.1)
Facilities and rates (1.4)
Enquiry generation (0.5)
Underlying cost of sales for FY2023 (Like-for-like; CER) (61.1)
New developments cost of sales (6.2)
Underlying cost of sales for FY2023 (CER) (67.3)
Foreign exchange (0.5)
Underlying cost of sales for FY2023 (67.8)
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 £6.1 million in the year, from £61.7
million in 2022 to £67.8 million in 2023. On a like-for-like basis and at
constant exchange rates, cost of sales increased by £2.1 million or 3.6%,
with a £1.4 million increase in facilities and business rates due to business
rates reviews, and increases in utilities and store maintenance charges as
well as a £1.1 million increase in employee costs offset by a reduction in
volume related costs of sales of £0.9 million. The investment in marketing
during the year represented 3.8% of revenue (FY2022: 3.6%).
Administrative expenses
The table below reconciles reported administrative expenses to underlying
administrative expenses and details the key movements in underlying
administrative expenses between 2022 and 2023.
Administrative expenses 2023 2022
£'m £'m
Statutory administrative expenses (17.7) (27.1)
Adjusted for:
Share-based payments 3.5 11.2
Exceptional items - 0.1
Underlying administrative expenses (14.2) (15.8)
Underlying administrative expenses for FY2022 (15.8)
New developments administration costs 1.1
Underlying administrative expenses for FY2022 (Like-for-like) (14.7)
Employee related costs 2.7
Professional fees and administration costs (0.4)
Underlying administrative expenses for FY2023 (Like-for-like; CER) (12.4)
New developments administration costs (1.8)
Underlying administrative expenses for FY2023 (CER) (14.2)
Foreign exchange -
Underlying administrative expenses for FY2023 (14.2)
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.
Underlying administrative expenses decreased by £1.6 million in the year,
from £15.8 million in 2022 to £14.2 million in 2023. Like-for-like
administrative expenses at constant exchange rates decreased by £2.3 million.
This is the result of a reduction in expected variable employee remuneration
and other employee related costs.
Therefore, total underlying costs (cost of sales plus administrative expenses)
on a like-for-like basis and at constant exchange rates have remained
relatively constant at £73.5 million (FY2022: £73.7 million).
Exceptional items and other exceptional gains
In 2022, 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 November
2022 the French Supreme Court delivered a final judgement in respect of
litigation for years 2011 to 2013, which resulted in a partial success for the
Group. The Group is separately pursuing litigation in respect of years since
2013 and has lodged an appeal with the French administrative tribunal against
the issues included in assessments for 2013 onwards on which it was ultimately
unsuccessful in the French Supreme Court for the earlier years. A provision is
included in the consolidated financial accounts of £2.6 million at 31 October
2023 (31 October 2022: £2.4 million), to reflect the increased uncertainty
surrounding the likelihood of a successful outcome. Of the total provided,
£0.2m has been charged in relation to the year ended 31 October 2023 within
cost of sales (Underlying EBITDA) (31 October 2022: £0.3 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 2023 is £3.0 million (31 October 2022: £3.0 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.
2023 2022
£'m £'m
Revaluation of investment properties 103.5 394.1
Revaluation of investment properties under construction (0.9) (4.2)
Fair value re-measurement of lease liabilities add-back (8.8) (8.3)
Statutory gain on investment properties 93.8 381.6
In the current financial year, the UK business contributed £75.8 million to
the positive valuation movement, the Paris business contributed £20.5 million
and Benelux contributing £7.5 million. Spain showed a flat valuation movement
over the period as the stores start to generate income, growing toward
stabilised occupancy. 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 3.5% to £30.26
in 2023 from £29.25 in 2022; and capitalisation rates and stabilised
occupancy which have remained constant at 5.72% and 89.33% respectively.
Operating profit
Operating profit decreased by £284.1 million from £514.5 million in 2022 to
£230.4 million in 2023, comprising a £7.1 million increase in Underlying
EBITDA, a £287.8 million reduction in the gain on investment properties and
investment properties under construction primarily due to the stable
performance of the stores over the period, against a period of outperformance
in 2021 and 2022, a reduction in the share-based payments charge of £7.7
million as well as the one-off other exceptional gains and exceptional items
of £10.7 million in 2022
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
£6.9 million in 2023 to £22.6 million from £15.7 million in 2022,
principally due to the increased interest charges associated with borrowing to
fund the Group's acquisition and development activity and the amortisation of
debt issuance costs associated with the refinancing of the existing revolving
credit facility in November 2022, offset by the gains made on financial
instruments.
2023 2022
£'m £'m
Net bank interest payable (15.1) (11.9)
Amortisation of debt issuance costs on bank loans (1.3) (0.5)
Interest from loan to associates - 0.1
Financial instruments income 0.4 1.3
Other interest received 0.1 0.1
Underlying finance charges (15.9) (10.9)
Interest on lease liabilities (5.3) (5.0)
Fair value movement on derivatives (1.7) (0.3)
Net exchange gains 0.3 -
Exceptional finance income - 0.5
Net finance costs (22.6) (15.7)
Net bank interest payable 15.1 11.9
Capitalised interest 4.4 1.1
Total interest paid 19.5 13.0
Underlying finance charge
The underlying finance charge (net bank interest payable reflecting term loan,
swap and USPP interest costs) increased by £5.0 million to £15.9 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 and the amortisation of debt issuance
costs associated with the refinancing. 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.
During the year, the Group capitalised interest of £4.4 million (FY2022:
£1.1 million) associated with borrowings to fund the acquisition of
properties. Interest is capitalised from the point of acquiring the site until
the store opens.
Financial instruments income in the year of £0.4 million (FY2022: £1.3
million) related to the gains made on the expiration of interest rate swaps
that matured in June 2023.
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 - GBP drawn £400.0 £162.0 - - 1.25% - 5.19% 6.44%
UK Revolver - EUR drawn £41.0 - - 1.25% - 3.88% 5.13%
UK Revolver- non-utilisation £197.0 - - - 0.50% - - 0.50%
US Private Placement 2024 €50.9 £44.6 £44.6 100% 1.59% - - 1.59%
US Private Placement 2026 €70.0 £61.1 £61.1 100% 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 £64.6 £64.6 100% 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 £25.3 £25.3 100% 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 £91.6 £91.6 100% 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 £25.3 £25.3 100% 1.42% - - 1.42%
Unamortised finance costs - (£5.0) - - - - - -
Total £927.8 £725.8 £527.8 73% 3.58%
Capitalised interest costs (£4.4m)
Effective Interest Rate after capitalised interest costs 2.97%
On 11 November 2022, the Group completed the refinancing of its RCFs which
were due to expire in June 2023. The previous £250.0 million Sterling and
€70.0 million Euro RCFs were 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, with the first one-year extension being
granted in October 2023.
The margin is at the same level as the previous facility agreements, with the
Group paying interest at a margin of 1.25% plus SONIA or Euribor depending on
whether the borrowings are drawn in Sterling or Euros. This margin is now
linked to ESG targets, which where met enable a reduction in the margin of up
to 5bps to 120bps.
As at 31 October 2023, £203.0m of the £400.0m UK revolver was drawn as
£162.0m and €47.0m (£41.0m). The drawn amounts attract a bank margin of
1.25%, and the Group pays a non-utilisation fee of 0.4375% on the undrawn
balance of £197.0m. The Group had interest rate hedge agreements in place to
June 2023, swapping SONIA on £55.0m at a weighted average effective rate of
0.69%. Upon maturity, the group recognised £0.4m gain
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.
Predominantly, as a result of the fixed interest loan notes, effectively 73%
of the Group's drawn debt is at fixed rates of interest. Overall, the Group
has an effective interest rate on its borrowings of 3.58% as at 31 October
2023, compared with 2.41% at the previous year end. After adjusting for
capitalised interest costs the Group has an effective interest rate on its
borrowings of 2.97%.
Non-underlying finance charge
Interest on lease liabilities was £5.3 million (FY2022: £5.0 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 £13.6 million in 2022 to £14.9 million in 2023,
principally reflecting the increase rent costs across the portfolio in
addition to the Netherlands leaseholds now forming part of the Group.
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 2023 2022
£'m £'m
Underlying current tax (5.1) (5.2)
Current year - exceptional - (0.9)
Current tax charge (5.1) (6.1)
Tax on investment properties movement (8.3) (29.9)
Deferred tax asset 5.8 -
Other - 0.1
Deferred tax charge (2.5) (29.8)
Net tax charge (7.6) (35.9)
The net income tax charge for the year is £7.6 million (FY2022: £35.9
million). 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 £5.1 million (FY2022: £5.2 million),
calculated by applying the effective overall underlying tax rate of 22.5% to
the underlying profits arising earned by the non-UK businesses.
The deferred tax charge relating to Paris, Spain and Benelux was £8.3 million
(FY2022: £29.9 million).
A deferred tax asset of £5.8 million (FY2022: £nil) relates to the
recognition of carried forward losses in the UK business, recognising the
extent to which the Group believes these losses will be utilised in future to
reduce income tax liabilities.
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.
Earnings per Share
As a result of the movements explained above, profit after tax for 2023 was
£200.2 million as compared with £462.9 million in 2022. Basic EPS was 92.2
pence (FY2022: 219.5 pence) and diluted EPS was 91.8 pence (FY2022: 212.4
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 FY2023 results, for every 10 cents variance to the average
exchange rate of 1.149, there would be an impact of £1.3 million to Adjusted
EPRA Earnings.
Adjusted Diluted EPRA EPS for the year was 47.9 pence (FY2022: 47.5 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:
2023 2022
Earnings Shares Pence Earnings Shares Pence
£'m million per share £'m million per share
Basic earnings 200.2 92.2 462.9 210.9 219.5
217.2
Adjustments:
Gain on investment properties (93.8) - (43.2) (381.6) - (180.9)
Exceptional items - - 0.1 - -
Other exceptional gains - - (10.8) - (5.1)
Exceptional finance income - - (0.5) - (0.2)
Net exchange loss (0.3) - (0.1) - - -
Change in fair value of derivatives 1.7 - 0.8 0.3 - 0.1
Tax on adjustments/exceptional tax 1.4 - 0.6 29.7 - 14.1
Adjusted 109.2 217.2 50.3 100.1 210.9 47.5
EPRA adjusted:
Fair value re-measurement of lease liabilities add-back (8.8) - (4.1) (8.3) - (3.9)
Tax on lease liabilities add-back adjustment 1.1 - 0.5 1.0 - 0.5
EPRA basic EPS 101.5 217.2 46.7 92.8 210.9 44.1
Share-based payments charge 3.5 - 1.6 11.2 - 5.3
Dilutive shares - 1.9 (0.4) - 8.0 (1.9)
Adjusted Diluted EPRA EPS 105.0 219.1 47.9 104.0 218.9 47.5
Dividends
The Directors are recommending a final dividend of 20.2 pence (FY2022: 20.4
pence) which Shareholders will be asked to approve at the Company's Annual
General Meeting on 13 March 2024. If approved by Shareholders, the final
dividend will be payable on 9 April 2024 to Shareholders on the register at
close of business on 7 March 2024.
Reflective of the Group's improved performance, the Group's full year dividend
of 30.1 pence is 1.0% up on the prior year dividend of 29.8 pence. The
Property Income Distribution ("PID") element of the full year dividend is
17.62 pence (FY2022: 22.75 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 2023, the total value of the
Group's property portfolio was £2,681.1 million (excluding investment
properties under construction of £108.6 million and net of lease liabilities
of £101.2 million). This represents an increase of £223.3 million compared
with the £2,457.8 million valuation as at 31 October 2022. 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 2022 1,756.8 538.1 27.3 135.6 2,457.8 625.9 31.9 157.7
Currency translation movement 8.0 0.5 1.7 10.2 - - -
Additions 32.6 7.3 12.1 15.6 67.6 8.4 13.9 17.9
Reclassifications 7.2 - 30.6 4.2 42.0 35.2 4.8
Revaluation 75.8 20.5 (0.3) 7.5 103.5 23.6 (0.4) 8.5
Value at 31 October 2023 1,872.4 573.9 70.2 164.6 2,681.1 657.9 80.6 188.9
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 3.5% to £30.26 in
2023 from £29.25 in 2022 with a reduction in occupancy, which is down 5.1ppts
to 77.0% in 2023 from 82.1% in 2022. The valuation assumptions for
capitalisation rates and stabilised occupancy remaining fairly constant, as
explained further below.
The exchange rate at 31 October 2023 was €1.146:£1 compared with
€1.163:£1 at 31 October 2022. This movement in the foreign exchange rate
has resulted in a £10.4 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 are tested in
their functional currency.
The Group's property portfolio valuation excluding investment properties under
construction has increased by £223.3 million from the valuation of £2,457.8
million at 31 October 2022. This reflects the gain on valuation of £103.5m,
which is explained above, £109.6m relating to additions, store refurbishments
and reclassifications as well as £10.2m of favourable foreign exchange
movements on the translation of the European portfolios. On a like for like
basis the portfolio increased 6.2%.
The value of the UK investment property portfolio including investment
properties under construction has increased by £118.6 million (comprising
£115.6 million in investment properties and £3.0 million in investment
properties under construction) compared with 31 October 2022. This includes a
£74.9 million valuation gain and £43.7 million of capital additions.
In Paris, the value of the property portfolio including investment properties
under construction increased by €50.8 million, of which €23.6 million was
valuation gain and capital additions were €27.2 million. The net increase in
investment properties, when translated into Sterling, amounted to £52.2
million, reflecting the foreign exchange impact described above.
In Spain, the value of the property portfolio including investment properties
under construction increased by €28.6 million, of which €29.0 million were
additions, with the valuation remaining flat over the period as the stores
start to generate income, growing toward stabilised occupancy where we would
expect to see the benefits in the future. The net increase in investment
properties including investment properties under construction when translated
into Sterling amounted to £25.8 million, reflecting the foreign exchange
impact described above.
In Benelux, the value of the property portfolio including investment
properties under construction was €208.7 million, representing an increase
of €44.5 million from 2022, This increase is predominantly made up of
€36.0 million of additions as well as a €8.5 million valuation increase.
Our pipeline of future development opportunities remains strong and gives us
further confidence in our future growth plans, The pipeline of c. 1.5m sq ft
representing c. 18% of our existing property portfolio is estimated, on
stabilisation, to deliver in the range of £25-£30m of incremental EBITDA.
The Group's freehold exit yield for the valuation at 31 October 2023 reduced
to 5.72%, from 5.78% at 31 October 2022, and the weighted average annual
discount rate for the whole portfolio has increased from 8.48% at 31 October
2022 to 8.54% at 31 October 2023.
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 952 pence (FY2022: 908 pence) at 31
October 2023, up 4.7% since 31 October 2022, and the IFRS reported diluted NAV
per share was 884 pence (FY2022: 820 pence), reflecting a £153.6 million
increase in reported net assets during the year.
Gearing and capital structure
As at 31 October 2023, the Group's borrowings comprised bank borrowing
facilities, made up of revolving facilities in the UK as well as US Private
Placements.
Net debt (including lease liabilities and cash) stood at £810.3 million at 31
October 2023, an increase of £112.0 million from the 2022 position of £698.3
million, reflecting funding for the continued expansion of the Group
portfolio. Total capital (net debt plus equity) increased from £2,491.7
million at 31 October 2022 to £2,745.4 million at 31 October 2023. The net
impact is that the gearing ratio has increased from 28.0% to 29.5% in the
year.
Management also measures gearing with reference to its loan-to-value ("LTV")
ratio defined as net debt (excluding lease liabilities) as a proportion of
the valuation of investment properties and investment properties under
construction (excluding lease liabilities). At 31 October 2023 the Group LTV
ratio was 25.4% as compared to 23.6% at 31 October 2022. 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 2023
As at 31 October 2023, £203.0 million of the £400.0 million Revolver was
drawn. Including the US Private Placement debt of €358.0 million (£312.3
million) and £215.5 million, the Group's borrowings totalled £730.8 million
(after adjustment for unamortised finance costs).
As at 31 October 2023, the weighted average remaining term for the Group's
available borrowing facilities is 4.5 years (FY2022: 4.0 years). If we take
into consideration the second 1 year extension available under the revolving
credit facility, the weighted average remaining term for the Group's available
borrowing facilities is 5.0 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 2023 is 6.7x (FY2022: 10.4x).
The LTV covenant is 60% under the current facility. As at 31 October 2023,
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 2023 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 2023 and
2022. 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.
2023 2022
£'m £'m
Underlying EBITDA 142.2 135.1
Working capital/exceptionals/other (13.0) (2.7)
Adjusted operating cash inflow 129.2 132.4
Interest payments (19.6) (11.8)
Leasehold rent payments (14.9) (13.6)
Tax payments (5.5) (5.6)
Free cash flow (before investing and financing activities) 89.2 101.4
Acquisition of subsidiary, net of cash acquired - (111.5)
Investment in associates (2.3) (0.8)
Capital expenditure - investment properties (119.0) (95.2)
Capital expenditure - property, plant and equipment (2.9) (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 (35.0) (99.5)
Issue of share capital 0.2 0.5
Dividends paid (65.9) (56.9)
Net drawdown of borrowings 101.3 132.1
Debt issuance costs (4.9) (0.1)
Financial instruments 0.4 1.3
Swap termination - 0.5
Net (decrease)/increase in cash (3.9) (22.1)
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.
2023 2022
£'m £'m
Free cash flow (before investing and financing activities) 89.2 101.4
Add back: principal payment of lease liabilities 8.8 8.4
Net cash flow from operating activities 98.0 109.8
2023 2022
£'m £'m
From table above:
Adjusted net cash flow after investing activities (35.0) (99.5)
Add back: principal payment of lease liabilities 8.8 8.4
Net cash flow after investing activities (26.2) (91.1)
From consolidated cash flow:
Net cash inflow from operating activities 98.0 109.8
Net cash outflow from investing activities (124.2) (200.9)
Net cash flow after investing activities (26.2) (91.1)
2023 2022
£'m £'m
Adjusted operating cash inflow 129.2 132.4
Cash outflow on variable lease payments (0.8) (0.2)
Cash flow from operations 128.4 132.2
Adjusted operating cash flow decreased by £3.2 million in the year. The
movement in working capital is primarily associated with settlement of
employment related taxes connected with the maturity of the five and
three-year share based payment schemes at the end of 2022 and early 2023
respectively, and other trade receivable and payables timings. These are
offset by the £7.1m increase in underlying EBITDA.
Free cash flow (before investing and financing activities) decreased by 12.0%
to £89.2 million (FY2022: £101.4 million). The free cash flow benefited from
the increase in Underlying EBITDA which was offset by interest payments and
working capital movements.
Investing activities experienced a net outflow of £124.2 million (FY2022:
£200.9 million outflow), which included £123.4 million of capital
expenditure on our investment property portfolio. In 2022, the acquisition of
the remaining 80% in the Joint Venture as well as the acquisition of the new
site at Christchurch resulted in an outflow of £111.5 million. Of the £123.4
million capital expenditure on investment properties, £43.3 million related
to the UK, £23.5 million related to France, £25.2 million related to Spain
and £31.4 million related to Benelux. Of the £123.4 million, £6.7 million
related to maintenance, £95.4 million to new stores and £21.3 million to
developments and property, plant and equipment.
Adjusted financing activities generated a net cash inflow of £31.1 million
(FY2022: £77.4 million inflow). Dividend payments totalled £65.9 million
(FY2022: £56.9 million). The net drawdown of borrowings was £101.3 million
(FY2022: £132.1 million), in order to finance the acquisition of development
and pipeline stores.
Andy Jones
16 January 2024
Consolidated income statement
for the year ended 31 October 2023
Group
Notes 2023 2022
£'m £'m
Revenue 2, 3 224.2 212.5
Cost of sales (69.9) (63.0)
Gross profit 154.3 149.5
Administrative expenses (17.7) (27.1)
Share of loss in associate 9 - (0.3)
Underlying EBITDA 142.2 135.1
Exceptional items 4 - (0.1)
Share-based payments (3.5) (11.2)
Depreciation and variable lease payments (2.1) (1.3)
Share of associate's depreciation, interest and tax - (0.4)
Operating profit before gains on investment properties and other exceptional 136.6 122.1
gains
Gain on investment properties 10 93.8 381.6
Other exceptional gains 4 - 10.8
Operating profit 3 230.4 514.5
Finance income 5 0.8 2.0
Finance expense 5 (23.4) (17.7)
Profit before income tax 207.8 498.8
Income tax charge 6 (7.6) (35.9)
Profit for the year 200.2 462.9
Earnings per share for profit attributable to the equity holders
- basic (pence) 8 92.2 219.5
- diluted (pence) 8 91.8 212.4
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 2023
Group
2023 2022
£'m £'m
Profit for the year 200.2 462.9
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences 7.1 8.0
Net investment hedge (2.9) (4.6)
Other comprehensive income, net of tax 4.2 3.4
Total comprehensive income for the year 204.4 466.3
Consolidated balance sheet
as at 31 October 2023
Group
Notes 2023 2022
£'m £'m
Assets
Non-current assets
Investment in associates 9 4.1 1.8
External valuation of investment properties, net of lease liabilities 2,681.1 2,457.8
Add-back of lease liabilities 101.2 95.1
Investment properties under construction 108.6 94.5
Total investment properties 10 2,890.9 2,647.4
Property, plant and equipment 5.2 3.4
Deferred tax assets 6.6 0.8
2,906.8 2,653.4
Current assets
Inventories 0.4 0.3
Derivative financial instruments 14 - 1.7
Trade and other receivables 32.7 31.2
Amounts due from associates 0.1 -
Cash and cash equivalents 12, 18 16.9 20.9
50.1 54.1
Total assets 2,956.9 2,707.5
Current liabilities
Bank borrowings 13, 18 (44.5) (101.7)
Trade and other payables (52.4) (62.7)
Current income tax liabilities (0.4) (0.8)
Lease liabilities 15 (13.1) (13.2)
(110.4) (178.4)
Non-current liabilities
Bank borrowings 13, 18 (681.3) (522.1)
Deferred income tax liabilities (139.2) (129.0)
Lease liabilities 15 (88.3) (82.2)
Provisions 19 (2.6) (2.4)
(911.4) (735.7)
Total liabilities (1,021.8) (914.1)
Net assets 1,935.1 1,793.4
Equity
Ordinary share capital 16 2.2 2.1
Share premium 62.0 61.8
Translation reserve 12.7 8.5
Retained earnings 1,858.2 1,721.0
Total equity 1,935.1 1,793.4
These financial statements were authorised for issue by the Board of Directors
on 16 January 2024 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 2023
Group
Share Share Translation Retained Total
capital premium reserve earnings £'m
£'m £'m £'m £'m
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
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 1 November 2022 2.1 61.8 8.5 1,721.0 1,793.4
Comprehensive income
Profit for the year - - - 200.2 200.2
Other comprehensive income
Currency translation differences - - 7.1 - 7.1
Net investment hedge - - (2.9) - (2.9)
Total other comprehensive income - - 4.2 - 4.2
Total comprehensive income - - 4.2 200.2 204.4
Transactions with owners
Dividends (note 7) - - - (65.9) (65.9)
Increase in share capital and share premium 0.1 0.2 - - 0.3
Employee share options - - - 2.9 2.9
Transactions with owners 0.1 0.2 - (63.0) (62.7)
Balance at 31 October 2023 2.2 62.0 12.7 1,858.2 1,935.1
Consolidated cash flow statement
for the year ended 31 October 2023
Group
Notes 2023 2022
£'m £'m
Cash flows from operating activities
Cash generated from operations 17 128.4 132.2
Interest received - 0.1
Interest paid (24.9) (16.9)
Tax paid (5.5) (5.6)
Net cash inflow from operating activities 98.0 109.8
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired 9 - (111.5)
Investment in associates 9 (2.3) (0.8)
Expenditure on investment properties and development properties (119.0) (95.2)
Proceeds from disposal of investment properties - 6.4
Proceeds from disposal of land - 1.0
Purchase of property, plant and equipment (2.9) (1.0)
Proceeds from sale of property, plant and equipment - 0.2
Net cash (outflow) from investing activities (124.2) (200.9)
Cash flows from financing activities
Issue of share capital 0.2 0.5
Equity dividends paid 7 (65.9) (56.9)
Proceeds from borrowings 108.4 266.1
Repayment of borrowings (7.1) (134.0)
Exceptional swap termination 5 - 0.5
Financial instruments income 5 0.4 1.3
Debt issuance costs (4.9) (0.1)
Principal payment of lease liabilities (8.8) (8.4)
Net cash inflow from financing activities 22.3 69.0
Net (decrease) in cash and cash equivalents (3.9) (22.1)
Exchange loss on cash and cash equivalents (0.1) (0.2)
Cash and cash equivalents at 1 November 20.9 43.2
Cash and cash equivalents at 31 October 12, 18 16.9 20.9
Notes to the financial statements
for the year ended 31 October 2023
The Board approved this preliminary announcement on 16 January 2024.
The financial information included in this preliminary announcement does not
constitute the Group's statutory accounts for the years ended 31 October 2022
or 31 October 2023. Statutory accounts for the year ended 31 October 2022 have
been delivered to the Registrar of Companies. The statutory accounts for the
year ended 31 October 2023 will be delivered to the Registrar of Companies
following the Company's annual general meeting.
The auditor has reported on the 2023 and 2022 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 2023 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 2022,
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 2023, 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 reverse 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 cost of living crisis 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. In November 2022, the Group 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 unsecured £400 million facility, with a
four-year term with two one-year extension options (available headroom
£197m). One tranche of Private Placement notes matures in 2024 and it has
been assumed this will be renewed at market rates. 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 2023:
• Amendments to IFRS 3 References to the Conceptual Framework in
IFRS Standards
• Amendments to IAS 16 Property, Plant and Equipment - Proceeds
before Intended Use
• Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a
Contract
• Annual Improvements to IFRS Standards 2018-2020 Cycle
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
their 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.
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:
2023 2022
£'m £'m
Self storage income 187.2 178.0
Insurance income 25.5 23.9
Other non-storage income 11.5 10.6
Total revenue 224.2 212.5
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 2023 UK Paris Spain Benelux Group
£'m £'m £'m £'m £'m
Continuing operations
Revenue 166.5 43.9 3.8 10.0 224.2
Underlying EBITDA 106.2 30.5 1.1 4.4 142.2
Share-based payments (3.1) (0.3) (0.1) - (3.5)
Variable lease payments and depreciation (1.9) (0.2) - - (2.1)
Operating profit before gain on investment properties and other exceptional 101.2 30.0 1.0 4.4 136.6
gains
Gain/(loss) on investment properties 70.9 16.3 (0.7) 7.3 93.8
Operating profit 172.1 46.3 0.3 11.7 230.4
Net finance expense (13.8) (2.2) (1.1) (5.5) (22.6)
Profit before tax 158.3 44.1 (0.8) 6.2 207.8
Total assets 2,298.2 606.6 28.0 24.1 2,956.9
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
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.
The segmental results exclude intercompany transactions.
4. Exceptional items and other exceptional gains
2023 2022
£'m £'m
Costs relating to corporate transactions and exceptional property taxation - (0.1)
Exceptional items - (0.1)
2023 2022
£'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 £nil were incurred in the year (FY2022: £0.1 million
relating to fees associated with the Group's corporate restructuring).
In the prior year, 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 was done
partially in cash of £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 in 2022.
In addition, 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 de-recognised 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 in 2022.
Finally, the Group sold its 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 in 2022.
5. Finance income and costs
2023 2022
£'m £'m
Finance income
Other interest and similar income 0.1 0.1
Interest receivable from loan to associates - 0.1
Financial instruments income 0.4 1.3
Underlying finance income 0.5 1.5
Net exchange gains 0.3 -
Exceptional finance income - 0.5
Total finance income 0.8 2.0
Finance costs
Interest payable on bank loans and overdraft (15.1) (11.9)
Amortisation of debt issuance costs on bank loan (1.3) (0.5)
Underlying finance charges (16.4) (12.4)
Interest on lease liabilities (5.3) (5.0)
Fair value (loss) of derivatives (1.7) (0.3)
Net exchange losses - -
Total finance costs (23.4) (17.7)
Net finance costs (22.6) (15.7)
The total change in fair value of derivatives reported within net finance
costs for the year is a £1.7 million net loss (FY2022: £0.3 million net
loss). Included within finance income is £0.4 million relating to swaps
settled in June 2023. In the prior year (FY2022: £1.3 million) received on
settlement of two €8.0 million average rate contracts acquired in March 2020
and settled in April 2022 for £0.7 million and October 2022 for £0.6 million
respectively.
6. Income tax charge
Analysis of tax charge in the year:
Note 2023 2022
£'m £'m
Current tax:
- current year 5.1 6.1
- prior year - -
5.1 6.1
Deferred tax:
- current year 5.3 29.8
- prior year (2.8) -
22 2.5 29.8
Tax charge 7.6 35.9
Reconciliation of income tax charge
The tax for the period is lower (FY2022: lower) than the standard rate of
corporation tax in the UK for the year ended 31 October 2023 of 22.5% (FY2022:
19%). The differences are explained below:
2023 2022
£'m £'m
Profit before tax 207.8 498.8
Profit on ordinary activities multiplied by the standard rate of corporation 46.8 94.8
tax in the UK of 22.5% (FY2022: 19%)
Effect of:
- permanent differences (6.3) -
- profits from the tax exempt business (32.4) (71.5)
- deferred tax arising on acquisition of overseas subsidiary - 4.5
- difference from overseas tax rates 0.9 8.6
- potential deferred tax assets not recognised 1.4 0.4
- utilisation of unrecognised brought forward tax losses - (0.9)
- prior year adjustment (2.8) -
Tax charge 7.6 35.9
The Group is a UK real estate investment trust ("REIT"). As a result, the
Group is exempt from UK corporation tax on the profits and gains from its
qualifying property rental business in the UK, providing it meets certain
conditions. Non-qualifying profits and gains of the Group remain subject to
corporation tax as normal. The Group monitors its compliance with the REIT
conditions. There have been no breaches of the conditions to date.
The main rate of corporation tax in the UK increased from 19% to 25% with
effect from 1 April 2023. Accordingly, the Group's results for this accounting
period are taxed at a blended effective rate of 22.5% (FY2022: 19%).
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
7. Dividends per share
The dividend paid in 2023 was £65.9 million (30.30 pence per share) (FY2022:
£56.9 million (27.00 pence per share)). A final dividend in respect of the
year ended 31 October 2023 of 20.20 pence (FY2022: 20.40 pence) per share,
amounting to a total final dividend of £44.1 million (FY2022: £42.8
million), is to be proposed at the AGM on 13(th) March 2024. The ex-dividend
date will be 7(th) March 2024 and the record date will be 8(th) March 2024
with an intended payment date of 9(th) April 2024. The final dividend has not
been included as a liability at 31 October 2023.
The Property Income Distribution ("PID") element of the final dividend is
15.15 pence (FY2022: 20.4 pence), making the PID payable for the year 17.62
pence (FY2022: 22.75 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 2023 Year ended 31 October 2022
Earnings Shares Pence Earnings Shares Pence
£'m million per share £'m million per share
Basic 200.2 217.2 92.2 462.9 210.9 219.5
Dilutive securities - 0.9 (0.4) - 7.0 (7.1)
Diluted 200.2 218.1 91.8 462.9 217.9 212.4
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 2023 Year ended 31 October 2022
Earnings Shares Pence Earnings Shares Pence
£'m million per share £'m million per share
Basic 200.2 217.2 92.2 462.9 210.9 219.5
Adjustments:
Gain on investment properties (93.8) - (43.2) (381.6) - (180.9)
Exceptional items - - - 0.1 - -
Other exceptional gains - - - (10.8) - (5.1)
Exceptional finance income - - - (0.5) - (0.2)
Net exchange gain (0.3) - (0.1) - - -
Change in fair value of derivatives 1.7 - 0.8 0.3 - 0.1
Tax on adjustments 1.4 - 0.6 29.7 - 14.1
Adjusted 109.2 217.2 50.3 100.1 210.9 47.5
EPRA adjusted:
Fair value re-measurement of lease liabilities add-back (8.8) - (4.1) (8.3) - (3.9)
Tax on lease liabilities add-back adjustment 1.1 - 0.5 1.0 - 0.5
Adjusted EPRA basic EPS 101.5 217.2 46.7 92.8 210.9 44.1
Share-based payments charge 3.5 1.6 11.2 - 5.3
Dilutive shares - 1.9 (0.4) - 8.0 (1.9)
Adjusted Diluted EPRA EPS(1) 105.0 219.1 47.9 104.0 218.9 47.5
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 £8.8 million (FY2022: £8.3 million) and the related
tax thereon of £1.1 million (FY2022: £1.0 million). As an industry standard
measure, EPRA earnings is presented. EPRA earnings of £101.5 million (FY2022:
£92.8 million) and EPRA Earnings per Share of 46.7 pence (FY2022: 44.1 pence)
are calculated after further adjusting for these items.
EPRA adjusted income statement (non-statutory) 2023 2022 Movement
£'m £'m %
Revenue 224.2 212.5 5.5%
Underlying operating expenses (excluding depreciation and variable lease (82.0) (77.5) 5.8%
payments)
Share of associate's Underlying EBITDA - 0.1 (100%)
Underlying EBITDA before variable lease payments 142.2 135.1 5.3%
Share-based payments charge (3.5) (11.2) (68.8%)
Depreciation and variable lease payments (2.1) (1.3) 61.5%
Operating profit before fair value re-measurement lease liabilities add-back 136.6 122.6 11.4%
Fair value re-measurement of lease liabilities add-back (8.8) (8.3) 6.0%
Operating profit 127.8 114.3 11.8%
Net financing costs (21.2) (15.9) 33.3%
Share of associate's finance charges - (0.4) (100%)
Profit before income tax 106.6 98.0 8.8%
Income tax (5.1) (5.2) (1.9)
Profit for the year ("Adjusted EPRA basic earnings") 101.5 92.8 9.4%
Adjusted EPRA basic EPS 46.7 pence 44.1 pence 5.9%
Final dividend per share 20.20 pence 20.40 pence (0.98%)
9. Investment in associates
2023 2022
£'m £'m
PBC Les Groues SAS 1.8 1.8
CERF II German Storage Topco S.a.r.l. 2.3 -
4.1 1.8
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. 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.
PBC Les Groues SAS
The Group has 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 is developing a new store as
part of a wider development programme located in Paris. The development
project is managed by its joint venture partners, therefore the Group has no
operational liability during this phase. During the current period there has
been no material investment in the company (31 October 2022: £0.8m). The
investment is considered immaterial relative to the Group's underlying
operations. The aggregate carrying value of the Group's interest in PBC was
£1.8m (31 October 2022: £1.8m), made up of an investment of £1.8m (31
October 2022: £1.8m). The Group's share of profits from continuing operations
for the period was £nil (30 October 2022: £nil). The Group's share of total
comprehensive income of associates for the period was £nil (31 October 2022:
£nil).
CERF II German Storage Topco S.a.r.l.
On 1 December 2022 the Group acquired a 10.0% interest in CERF II German
Storage Topco S.a.r.l. (CERF II), a company registered in Luxembourg for which
the Group has board representation. The reporting date of the financial
statements for the company is 31 December. CERF II is accounted for using the
equity method of accounting. Safestore entered the German Self Storage market
via a new investment with Carlyle which acquired the myStorage business. The
aggregate carrying value of the Group's interest in CERF II was £2.3m (31
October 2022: £nil), made up of an investment of £2.3m (31 October 2022:
£nil). The Group's share of profits from continuing operations for the period
was £nil (31 October 2022: £nil). The Group's share of total comprehensive
income of associates for the period was £nil (31 October 2022: £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 2022 2,457.8 95.1 94.5 2,647.4
Additions 67.6 17.5 56.4 141.5
Disposals - (3.1) - (3.1)
Reclassifications 42.0 - (42.0) -
Revaluations 103.5 - (0.9) 102.6
Fair value re-measurement of lease liabilities add-back - (8.8) - (8.8)
Exchange movements 10.2 0.5 0.6 11.3
At 31 October 2023 2,681.1 101.2 108.6 2,890.9
The Group acquired the freehold of the Oldbury property on 22 February 2023
and Valencia property in January 2023. This resulted in the disposal of lease
liabilities with a carrying value of £2.2m and £0.9m respectively.
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
Cost Revaluation Valuation
£'m on cost £'m
£'m
Freehold stores
At 1 November 2022 892.7 1,142.4 2,035.1
Movement in year 126.1 75.7 201.8
At 31 October 2023 1,018.8 1,218.1 2,236.9
Leasehold stores
At 1 November 2022 133.7 289.0 422.7
Movement in year 5.5 16.0 21.5
At 31 October 2023 139.2 305.0 444.2
All stores
At 1 November 2022 1,026.4 1,431.4 2,457.8
Movement in year 131.6 91.7 223.3
At 31 October 2023 1,158.0 1,523.1 2,681.1
The gain on investment properties comprises:
2023 2022
£'m £'m
Revaluations of investment property and investment property under construction 102.6 389.9
Fair value re-measurement of lease liabilities add-back (8.8) (8.3)
93.8 381.6
The valuation of £2,681.1 million (FY2022: £2,457.8 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 2023 was £188.5 million (FY2022: £179.3
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 £101.4
million (FY2022: £95.4 million) per note 21 differs to the £101.2 million
(FY2022: £95.1 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 £0.2 million as at
31 October 2023 (FY2022: £0.3 million) (note 14).
All direct operating expenses arising from investment property that generated
rental income as outlined in note 3 were £82.0 million (FY2022: £75.3
million).
The freehold and leasehold investment properties have been valued as at 31
October 2023 by external valuer, 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.
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 2023 averages 89.33% (FY2022: 89.18%). 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 13.44 months (FY2022: 18.51 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 5.92% (FY2022: 6.08%),
rising to a stabilised net yield pre-administration expenses of 6.71% (FY2022:
6.74%).
• The weighted average freehold exit yield on UK freeholds is 5.75%
(FY2022: 5.74%), on France freeholds is 5.61% (FY2022: 5.96%), on Spain
freeholds is 5.50% (FY2022: 5.50%), on the Netherlands freeholds is 5.15%
(FY2022: 5.05%) and on Belgium freeholds is 5.00% (FY2022: 5.02%). The
weighted average freehold exit yield for all freeholds adopted is 5.72%
(FY2022: 5.78%).
• 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 8.59% (FY2022:
8.40%), in the France portfolio is 8.38% (FY2022: 8.58%), in the Spain
portfolio is 8.39% (FY2022: 8.29%), in the Netherlands portfolio is 7.74%
(FY2022: 7.49%) and in the Belgium portfolio is 7.99% (FY2022: 7.62%). The
weighted average annual discount rate adopted (for both freeholds and all
leaseholds) is 8.54% (FY2022: 8.49%).
• 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 13.2 years (FY2022: 13.0 years). The
average unexpired term excludes the commercial leases in France and Spain.
Short leaseholds (Paris)
In relation to the commercial leases in Paris, C&W has valued the cash
flow projections in perpetuity due to the security of tenure arrangements in
that market and the potential compensation arrangements in the event of the
landlord wishing to take possession. The valuation treatment is therefore the
same as for the freehold properties. The capitalisation rates on these stores
reflect the risk of the landlord terminating the lease arrangements.
Short leaseholds (Spain)
In relation to the 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. Where 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 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 129.1 (88.1) 53.5 (31.9) (16.22)
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:
2023 2022
£'m Diluted pence Diluted pence
per share £'m per share
Balance sheet net assets 1,935.1 884 1,793.4 820
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax) - (1.7)
Deferred tax liabilities on the revaluation of investment properties 139.2 129.0
EPRA NTA 2,074.3 948 1,920.7 879
Basic net assets per share 888 848
EPRA basic NTA per share 952 908
The basic and diluted net assets per share have been calculated based on the
following number of shares:
2023 2022
Number Number
Shares in issue
At year end 218,039,419 211,927,497
Adjustment for Employee Benefit Trust (treasury) shares (64,363) (359,795)
IFRS/EPRA number of shares (basic) 217,975,056 211,567,702
Dilutive effect of Save As You Earn shares 39,269 87,562
Dilutive effect of Long Term Incentive Plan shares 860,328 6,956,633
IFRS/EPRA number of shares (diluted) 218,874,653 218,611,897
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 899,597 shares (FY2022: 7,044,195 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
£2,074.3 million (FY2022: £1,920.7 million), giving EPRA NTA per share of
948 pence (FY2022: 879 pence). The Directors consider that these alternative
measures provide useful information on the performance of the Group.
EPRA adjusted balance sheet (non-statutory)
2023 2022
£'m £'m
Assets
Non-current assets 2,906.8 2,653.4
Current assets 50.1 52.4
Total assets 2,956.9 2,705.8
Liabilities
Current liabilities (110.4) (178.4)
Non-current liabilities (772.2) (606.7)
Total liabilities (882.6) (785.1)
EPRA adjusted Net Asset Value 2,074.3 1,920.7
EPRA adjusted basic net assets per share 952 pence 908 pence
12. Cash and cash equivalents
2023 2022
£'m £'m
Cash at bank and in hand 16.9 20.9
The carrying amounts of the Group's cash and cash equivalents are denominated
in the following currencies:
2023 2022
£'m £'m
Sterling 4.9 6.4
Euros 12.0 14.5
16.9 20.9
13. Financial liabilities - bank borrowings and notes
2023 2022
£'m £'m
Bank loans and notes
Secured - 625.1
Unsecured 730.8 -
Debt issue costs (5.0) (1.3)
725.8 623.8
On 11 November 2022, the Group completed the refinancing of its RCFs which
were due to expire in June 2023. The previous £250.0 million Sterling and
€70.0 million Euro RCFs 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 first of which was completed in
October.
The Group has US Private Placement Notes of € 358 million (FY2022: €358
million) which have maturities extending to 2024, 2026, 2027, 2028, 2029 and
2033 and £212.5 million (FY2022: £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 2023 was 3.58% per annum. Since the year end the
Group has successfully refinanced its bank facilities borrowings (note 32). 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 were 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, with the first one-year extension being granted
in October 2023.
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 The Company has in issue €50.9 million (FY2022:
€50.9 million) 1.59% Series A Senior Notes due 2024, €70.0 million
(FY2022: €70.0 million) 1.26% Series A Notes due 2026, £35.0 million
(FY2022: £35.0 million) 2.59% Series B Senior Notes due 2026, €74.1 million
(FY2022: €74.1 million) 2.00% Series B Senior Notes due 2027, £20.0 million
(FY2022: £20.0 million) 1.96% Series A Notes due 2028, €29.0 million
(FY2022: €29.0 million) 0.93% Series B Notes due 2028, £50.5 million
(FY2022: £50.5 million) 2.92% Series C Senior Notes due 2029, £30.0 million
(FY2022: £30.0 million) 2.69% Series C Senior Notes due 2029, €105.0
million (FY2022: €105.0 million) 2.45% Private Shelf Senior Notes due 2029,
£80.0 million (FY2022: £80.0 million) 2.39% Series C Notes due 2031 and
€29.0 million (FY2022: €29.0 million) 1.42% Series D Notes due 2033.
The €358.0 million of Euro denominated borrowings provides a natural hedge
against the Group's investment in the France, Spain, 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.
Bank loans and unsecured notes are stated before unamortised issue costs of
£5.0 million (FY2022: £1.3 million).
Bank loans and unsecured notes are repayable as follows:
Group
2023 2022
£'m £'m
Within one year 44.5 101.8
Between one and two years - 43.8
Between two and five years 409.0 158.9
After more than five years 277.3 320.6
Bank loans and notes 730.8 625.1
Unamortised debt issue costs (5.0) (1.3)
725.8 623.8
The effective interest rates at the balance sheet date were as follows:
2023 2022
Bank loans (UK term loan) Monthly, quarterly or six monthly SONIA plus 1.25% Quarterly or monthly SONIA plus 1.25%
Bank loans (Euro term loan) Monthly, quarterly or six monthly EURIBOR plus 1.25% Quarterly EURIBOR plus 1.25%
Private Placement Notes (Euros) 1.80% 1.80%
Private Placement Notes (Sterling) 2.55% 2.55%
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available
at 31 October 2023 in respect of which all conditions precedent had been met
at that date:
Floating rate
2023 2022
£'m £'m
Expiring within one year - 208.4
Expiring beyond one year 297.0 -
297.0 208.4
The carrying amounts of the Group's borrowings are denominated in the
following currencies:
2023 2022
£'m £'m
Sterling 377.5 291.5
Euros 353.3 333.6
730.8 625.1
14. Financial instruments
Financial instruments disclosures are set out below:
2023 2022
Asset Liability Asset Liability
£'m £'m £'m £'m
Interest rate swaps - - 1.2 -
Foreign currency forwards - - 0.5 -
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
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:
2023 2022
Book value Fair value Book value Fair value
£'m £'m £'m £'m
Bank loans 725.8 789.3 623.8 694.1
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 2023 2022
£'m £'m
Derivative financial instruments - Level 2 - 1.7
Amounts due from associates - Level 2 0.1 -
Liabilities per the balance sheet 2023 2022
£'m £'m
Derivative financial instruments - Level 2 - -
Bank loans - Level 2 725.8 694.1
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 2023 were £nil million and €nil million (FY2022: £55.0
million and €nil). At 31 October 2023 the weighted average fixed interest
rates were Sterling %nil as the swaps were expired in June 2023 (FY2022:
Sterling at 0.6885%), and floating rates are at quarterly SONIA and the
quarterly EURIBOR. The movement in fair value recognised in the income
statement was a net loss of £1.2 million (FY2022: net gain of £1.0 million).
Foreign currency forwards not designated as part of a hedging arrangement
As at 31 October 2023, all average rate forward contracts had matured for the
Group (FY2022: one tranche totalling €8.5 million). The movement in the fair
value recognised in the income statement in the period was a net loss of £0.5
million (FY2022: net loss of £1.3 million). The €8.5 million tranche
previously held matured and was settled in April 2023, resulting in a fair
value disposal of £0.5 million and a receipt of £0.4 million. This resulted
in £0.4 million recognised as finance income and £0.5 million expense as
part of the £1.7 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 22.5 - 22.5
Derivative financial instruments - - -
Cash and cash equivalents 16.9 - 16.9
At 31 October 2023 39.4 - 39.4
Other financial Liabilities at fair Total
liabilities at value through £'m
Liabilities per the balance sheet amortised cost profit and loss
£'m £'m
Borrowings (excluding lease liabilities) 725.8 - 725.8
Lease liabilities 101.4 - 101.4
Payables and accruals 27.2 - 27.2
At 31 October 2023 854.4 - 854.4
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 37.7* - 37.7
At 31 October 2022 756.9 - 756.9
* The financial liabilities exclude other taxes and social security payable in
FY 2023: £6.3 million (FY 2022: £6.2 million) as they do not meet the
definition of a financial liability
The interest rate risk profile, after taking account of derivative financial
instruments, was as follows:
2023 2022
Floating rate Fixed rate Total Floating rate Fixed rate Total
£'m £'m £'m £'m £'m £'m
Borrowings 203.0 522.8 725.8 46.8 577.0 623.8
The weighted average interest rate of the fixed rate financial borrowing was
2.10% (FY2022: 2.05%) and the weighted average remaining period for which the
rate is fixed was five years (FY2022: five 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
2023
Borrowings 54.6 10.2 436.0 297.0
Derivative financial instruments - - - -
Lease liabilities 13.8 13.7 36.4 77.0
Payables and accruals 29.4 - - -
97.8 23.9 472.4 374.0
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
15. Lease liabilities
The Group leases certain of its investment properties under lease liabilities.
The average remaining lease term is 10.7 years (FY2022: 10.9 years).
Minimum lease payments Present value of minimum
lease payments
2023 2022 2023 2022
£'m £'m £'m £'m
Within one year 13.8 13.8 13.1 13.2
Within two to five years 50.1 48.8 42.0 40.6
Greater than five years 77.0 74.7 46.3 41.6
140.9 137.3 101.4 95.4
Less: future finance charges on lease liabilities (39.5) (41.9) - -
Present value of lease liabilities 101.4 95.4 101.4 95.4
2023 2022
£'m £'m
Current 13.1 13.2
Non-current 88.3 82.2
101.4 95.4
Amounts recognised within the consolidated income statement include interest
on lease liabilities of £5.3 million and variable lease payments not included
in the measurement of the lease liabilities of £0.8 million. Amounts
recognised in the consolidated statement of cash flows include lease
liabilities principal payments of £8.8 million and interest on lease
liabilities of £5.3 million. The maturity analysis for lease liabilities
under contractual undiscounted cash flows is included in note 14.
16. Called up share capital
2023 2022
£'m £'m
Called up, allotted, and fully paid
218,039,419 (FY2022: 211,927,497) ordinary shares of 1 pence each 2.2 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 2023 2022
£'m £'m
Profit before income tax 207.8 498.8
Gain on investment properties 10 (93.8) (381.6)
Other exceptional gains 4 - (10.8)
Share of loss in associates - 0.3
Depreciation 1.3 1.0
Net finance expense 22.6 15.7
Employee share options 2.9 8.6
Changes in working capital:
Decrease in inventories - 0.2
Decrease/(increase) in trade and other receivables (1.4) 0.1
(Decrease) in trade and other payables (11.2) (0.4)
Increase in provisions 0.2 0.3
Cash generated from continuing operations 128.4 132.2
18. Analysis of movement in gross and net debt
2022 Cash flows Non-cash 2023
£'m £'m movements £'m
£'m
Bank loans (623.8) (96.4) (5.6) (725.8)
Lease liabilities (95.4) 8.8 (14.8) (101.4)
Total gross debt (liabilities from financing activities) (719.2) (87.6) (20.4) (827.2)
Cash in hand 20.9 (3.9) (0.1) 16.9
Total net debt (698.3) (91.5) (20.5) (810.3)
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 £1.3
million (FY2022: £0.5 million), foreign exchange movements of £4.3 million
(FY2022: £6.8 million) and unwinding of discount to lease liabilities of
£14.8 million (FY2022: £21.5 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 November
2022 the French Supreme Court delivered a final judgement in respect of
litigation for years 2011 to 2013, which resulted in a partial success for the
Group. The Group is separately pursuing litigation in respect of years since
2013 and has lodged an appeal with the French administrative tribunal against
the issues included in assessments for 2013 onwards on which it was ultimately
unsuccessful in the French Supreme Court for the earlier years. A provision is
included in the consolidated financial accounts of £2.6 million at 31 October
2023 (31 October 2022: £2.4 million), to reflect the increased uncertainty
surrounding the likelihood of a successful outcome. Of the total provided,
£0.2m has been charged in relation to the year ended 31 October 2023 within
cost of sales (Underlying EBITDA) (31 October 2022: £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). The litigation is expected
to be resolved over the next few years.
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 2023 is £3.0 million (31 October 2022: £3.0 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.
20. Contingent liabilities
As part of the Group banking facility, the Company has guaranteed the
borrowings totalling £730.8 million (FY2022: £625.1 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 £128 million of capital commitments as at 31 October 2023
(FY2022: £146.0 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 PBC Les Groues SAS
As described in note 12, the Group has a 24.9% interest in PBC Les Groues SAS
("PBC"). During the period, the Group made no transactions with PBC (FY2022:
£0.8 million (€0.9 million). The total amount invested is included as part
of its non-current investments in associates. The total amount outstanding at
31 October 2023 included within trade and other receivables was £nil (FY2022:
£nil).
Transactions with CERF II German Storage Topco S a r l (CERF II)
As described in note 12, the Group has a 10.0% interest in CERF II German
Storage Topco S a r l (CERF II). During the period, the Group recharged £0.4
million.
23. Post balance sheet events
There are no post balance sheet events.
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