REG - Safestore Hldgs plc - Half-year Report
14/06/2023 07:00
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RNS Number : 6155C Safestore Holdings plc 14 June 2023
14 June 2023
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Interim results for the 6 months ended 30 April 2023
A solid first half performance building on the momentum of two record years;
significant strategic progress
Key Measures 6 months ended 30 April 2023 6 months ended 30 April 2022 Change(1) Change-CER(2)
Underlying and Operating Metrics- total
Revenue £110.1m £101.0m 9.0% 7.7%
Underlying EBITDA(3) £69.7m £65.2m 6.9% 5.4%
Closing Occupancy (let sq ft- million)(4) 6.124 6.186 -1.0% n/a
Closing Occupancy (% of MLA)(5) 76.7% 80.7% -4.0ppts n/a
Average Storage Rate(6) £30.58 £29.38 4.1% 2.8%
REVPAF(16) (£) £28.28 £28.56 -1.0% -2.1%
Adjusted Diluted EPRA Earnings per Share(7) 23.7p 22.5p 5.3% n/a
Free Cash flow(8) £31.9m £50.7m -37.1% n/a
EPRA NTA per Share(13) £9.09 £7.93 14.6% n/a
Underlying and Operating Metrics- like-for-like(9)
Storage Revenue £87.3m £83.7m 4.3% 3.2%
Ancillary Revenue £16.2m £15.7m 3.2% 2.5%
Revenue £103.5m £99.4m 4.1% 3.1%
Underlying EBITDA(3) £66.7m £64.1m 4.1% 2.8%
Closing Occupancy (let sq ft- million)(4) 5.527 5.707 -3.2% n/a
Closing Occupancy (% of MLA)(5) 78.9% 81.8% -2.9ppts n/a
Average Occupancy (let sq ft- million)(4) 5.530 5.708 -3.1% n/a
Average Storage Rate(6) 31.84 29.59 7.6% 6.5%
REVPAF(16) (£) £29.77 £28.76 3.5% 2.5%
Statutory Metrics
Operating Profit(10) £114.9 £292.6m -60.7% n/a
Profit before Income Tax(10) £103.4m £285.2m -63.7% n/a
Diluted Earnings per Share 42.7p 124.5p -65.7% n/a
Dividend per Share 9.9p 9.4p 5.3% n/a
Cash Inflow from Operating Activities £36.3m £54.7m -33.6% n/a
Diluted net assets per share(13) £8.45 £7.42 13.9% n/a
Highlights
Solid financial performance
· Group revenue up 9.0% and in CER(2) up 7.7%
· Group like-for-like storage revenue in CER(2) up 3.2% and
like-for-like total revenue in CER(2) up 3.1%
· Adjusted Diluted EPRA EPS(7), up 5.3% at 23.7p (2022: 22.5p)
· 5.3% increase in the interim dividend to 9.9p (2022: 9.4p)
reflecting improved underlying profitability
· Statutory profit before income tax of £103.4m down from £285.2m
in 2022 with a robust trading performance offset by the lower gain on
investment properties of £47.3m (2022: gain of £223.9m)
· Adjusted Diluted EPRA Earnings per Share(7) for the full year
expected to be broadly in line with the consensus of 49.45p (17)
Operational and Strategic Progress
· Robust like-for-like operational performance driven by continued
strong rate growth
o Like-for-like revenue up 3.1% in CER(2)
§ UK up 2.7%
§ Paris up 4.3%
§ Spain up 4.7%
o Like-for-like(9) average storage rate(6) for the period up 6.5% in CER(2)
§ UK up 6.9% to £30.55 (2022: £28.57)
§ Paris up 4.1% to €42.02 (2022: €40.38)
§ Spain up 9.1% to €37.18 (2022: €34.09)
o Like-for-like(9) occupancy(4) down 2.9ppts at 78.9% (2022: 81.8%)
§ UK down 3.4ppts at 78.6% (2022: 82.0%)
§ Paris down 0.5ppts at 80.1% (2022: 80.6%)
§ Spain down 8.3ppts at 78.3% (2022: 86.6%)
· Openings of 222,000 sq ft of new capacity across five stores in
Madrid, Barcelona, London, and Wigan in addition to a store extension
completion in London-Crayford of 9,000 sq ft.
· Total Group development and extension pipeline of 30 stores and
1.5m sq ft representing c. 18% of the existing portfolio
· New development or extension sites in the period acquired or
identified in Barcelona, Madrid, London-Charlton, and Ellesmere Port adding
193,000 sq ft of future MLA
· Purchases of the freehold interests of two stores in Barcelona
and Manchester
· Lease extensions completed for three stores in Edinburgh, London,
and Burnley
· Entry into German market via a new Joint Venture ("JV") with
Carlyle which has acquired the seven-store myStorage business with 326,000 sq
ft of MLA(5)
· Acquisition of 58,000 sq ft existing storage facility in
Apeldoorn in the Netherlands
Strong and Flexible Balance Sheet
· Group loan-to-value ratio ("LTV"(11)) at 25.3% (2022: 24.8%) and
interest cover ratio ("ICR"(12)) at 10.8x (2022: 10.0x)
· Unutilised bank facilities of £227.1m at 30 April 2023 (2022:
£198.5m)
Frederic Vecchioli, Safestore's Chief Executive Officer, commented:
"I am glad to report a solid performance in the period with strong average
storage rates driving the results of our UK, French and Spanish businesses,
with revenue increasing 9.0% from £101.0m to £110.1m. The performance is all
the more pleasing as it builds on two record financial years. We are confident
that our focus on balancing occupancy and rate to drive revenue per available
foot (REVPAF), which has grown by 19.4% over the last three years, will
continue to serve us well and drive shareholder value.
Over the last six months the Group has opened or extended six new stores,
added a further five new developments or extensions to the pipeline, extended
the leases on three stores, acquired the freeholds of two stores, acquired an
existing store in the Netherlands and entered the German market through a new
JV with Carlyle.
Over the last seven years, the Group has now developed or acquired 72 stores
and expanded into four new countries (Netherlands, Belgium, Spain and now
Germany) leveraging and improving our platform and central functions while
managing investment risk very carefully. In addition, our development pipeline
of 30 new stores, extensions, and projects represents a further c. 18% of our
existing portfolio's MLA. Throughout this period of expansion, the Group has
maintained its disciplined approach to return on capital.
Our strong and flexible balance sheet has been significantly enhanced by the
agreement of a new unsecured four-year £400 million multi-currency RCF in
November 2022 which increases funding capacity, allowing us to continue to
consider strategic, value-accretive investments as and when they arise.
We have delivered a strong occupancy performance over recent years and, after
a significant level of acquisition and development activity over the last six
years, we still have 1.9m sq ft of fully invested currently unlet space in our
UK, Paris, Spain and Benelux markets in addition to 1.5m sq ft of pipeline
space. Our most significant upside opportunity is from filling our existing
unlet space at appropriate rates and that remains our priority. The business
has demonstrated its inherent resilience and, despite the challenging
macroeconomic environment, we are confident in the future of the business.
The underlying fundamentals of the European self storage industry with limited
supply, strong barriers to entry and a steadily growing product awareness are
as strong as ever. Over the last ten years, Safestore has delivered a market
leading 17.3% CAGR of its adjusted diluted EPRA Earnings per Share(7) and 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.
The first six month's trading performance has provided us with a solid base
for the rest of the financial year and, as we enter the peak season of
trading, we anticipate that the business should deliver Adjusted Diluted EPRA
Earnings per Share(7) for 2022/23 broadly in line with the consensus of
analysts' forecasts of 49.45p(17).
None of this would be possible without the dedication and skills of our teams
and I would like to thank all our colleagues in the UK, France, Spain, the
Netherlands and Belgium for their performance so far in 2023 as well as their
commitment and loyalty. We are appreciative of their efforts."
Notes
We prepare our financial statements using IFRS. However, we also use a number
of adjusted measures in assessing and managing the performance of the
business. These measures are not defined under IFRS and they may not be
directly comparable with other companies' adjusted measures and are not
intended to be a substitute for, or superior to, any IFRS measures of
performance. These include like-for-like figures, to aid in the comparability
of the underlying business as they exclude the impact on results of purchased,
sold, opened or closed stores; and constant exchange rate (CER) figures are
provided in order to present results on a more comparable basis, removing FX
movements. These metrics have been disclosed because management review and
monitor performance of the business on this basis. We have also included a
number of measures defined by EPRA, which are designed to enhance transparency
and comparability across the European Real Estate sector, see notes 7 and 13
below and "Non-GAAP financial information" in the notes to the financial
statements.
1 - Where reported amounts are presented either to the nearest £0.1m or to
the nearest 10,000 sq ft, the effect of rounding may impact the reported
percentage change.
2 - CER is Constant Exchange Rates (Euro denominated results for the current
period have been retranslated at the exchange rate effective for the
comparative period. Euro denominated results for the comparative period are
translated at the exchange rates effective in that period. This is performed
in order to present the reported results for the current period on a more
comparable basis).
3 - Underlying EBITDA is defined as Operating Profit before exceptional items,
share-based payments, corporate transaction costs, change in fair value of
derivatives, gain/loss on investment properties, variable lease payments,
depreciation and the share of associate's depreciation, interest and tax.
Underlying EBITDA therefore excludes all leasehold rent charges. Underlying
profit before tax is defined as underlying EBITDA less leasehold rent,
depreciation charged on property, plant and equipment and net finance charges
relating to bank loans and cash.
4 - Occupancy excludes offices but includes bulk tenancy. As at 30 April 2023,
closing occupancy includes 18,000 sq ft of bulk tenancy (30 April 2022: 14,000
sq ft).
5 - MLA is Maximum Lettable Area. At 30 April 2023, Group MLA was 7.99m sq ft
(30 April 2022: 7.67m sq ft).
6 - Average Storage Rate is calculated as the revenue generated from self
storage revenues divided by the average square footage occupied during the
period in question.
7 - Adjusted Diluted EPRA EPS is based on the European Public Real Estate
Association's definition of Earnings and is defined as profit or loss for the
period after tax but excluding corporate transaction costs, change in fair
value of derivatives, gain/loss on investment properties and the associated
tax impacts. The Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional tax items,
and deferred tax charges. This adjusted earnings is divided by the diluted
number of shares. The IFRS 2 cost is excluded as it is written back to
distributable reserves and is a non-cash item (with the exception of the
associated National Insurance element). Therefore, neither the Company's
ability to distribute nor pay dividends are impacted (with the exception of
the associated National Insurance element). The financial statements will
disclose earnings on a statutory, EPRA and Adjusted Diluted EPRA basis and
will provide a full reconciliation of the differences in the financial year in
which any LTIP awards may vest.
8 - Free cash flow is defined as cash flow before investing and financing
activities but after leasehold rent payments.
9 - Like-for-like adjustments remove the impact of the 2023 acquisition of
Apeldoorn, the 2023 openings of Wigan, London-Morden, North Barcelona, South
Madrid and North Madrid, the 2022 acquisition of the Netherlands and Belgium
Joint Venture, the 2022 acquisition of Christchurch, and the 2022 openings of
London-Bow and South Madrid Central Barcelona
10 - Operating profit decreased by £177.7m to £114.9m (30 April 2022:
£292.6m) compared to last year, principally as a result of a decrease in the
gain on Investment properties of £176.6m to £47.3m (30 April 2022: £223.9m)
and an increase of £4.5m in Underlying EBITDA as a result of stronger trading
performance. It should be noted, in the prior period, Profit before income tax
additionally included exceptional items of £10.5m, being other exceptional
gains. £5.5m relating to the valuation gain recognised on the 20% equity
investment held in the joint venture with CERF, when the Group acquired the
remaining 80% on 30 March 2022. Further, £5.0m related to the net gain on
disposal of the Nanterre site in Paris in November 2021
11 - LTV ratio is Loan-to-Value ratio, which is 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
30 April 2023, the Group LTV ratio was 25.3%. (31 October 2022: 23.6%)
12 - ICR is interest cover ratio and is calculated as the ratio of underlying
EBITDA after leasehold rent to underlying finance charges.
13 - EPRA'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 15.
14 - On 30 March 2022, the Group acquired the remaining 80% of the Joint
Venture with CERF. Prior to acquiring the 80%, the Joint Venture with CERF,
which represented a 20% investment, was accounted for as an associate using
the equity method of accounting, as described in the "Investment in
associates" note to the financial statements.
15 - On 1 December 2022, the Group made an initial investment into a new joint
venture with Carlyle, to enter the German self storage market, of c. €2.2
million for a 10% share. The Group will also earn a fee for providing
management services to the joint venture.
16 - REVPAF is a new 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.
17 - As at the date of publication, the consensus of 10 analysts' forecasts of
Adjusted EPRA EPS was 49.45p and the range of forecasts was from 47.3p to
51.7p
Reconciliations between underlying metrics and statutory metrics can be found
in the financial review and financial statements sections of this
announcement.
Summary
Safestore has delivered a solid financial performance in the first half of the
financial year, driven by strong average achieved storage rates(6). Reported
Group revenue increased 7.7% at CER(2) with like-for-like(9) revenue at CER(2)
growing by 3.1%. The Group's like-for-like average storage rate at CER(2) grew
by 6.5% with like-for-like average occupancy(4) down by 3.1%. Profit before
income tax decreased to £103.4m from £285.2m in 2022 as a result of the
lower gain on investment properties of £47.3m (2022: gain of £223.9m) offset
by the increase in underlying trading performance of £4.5m.
Our operational performance across the UK has been resilient in the period
resulting in a 2.7% increase in like-for-like(9) revenue. Average storage
rate, driven by our industry leading digital marketing platform, enquiry
generation and store team conversion, has again performed well, particularly
considering the strength of the prior year performance, delivering growth of
6.9% in the period on a like-for-like basis to £30.55 (2022: £28.57).
Like-for-like(9) closing occupancy(4) at the period end was down 3.4ppts at
78.6% (2022: 82.0%). Total UK revenue growth of 3.5% reflected the strong
like-for-like performance, the 2023 openings of Wigan and London-Morden, the
2022 acquisition of Christchurch, and the 2022 opening of London-Bow.
In Paris, our trading performance was strong with revenue growing by 4.3%.
This was driven by our average rate performance which increased by 4.1%
compared to the prior year with average occupancy growing by 0.7%. Closing
occupancy(4) at the period end was down 0.5ppts at 80.1% (2022: 80.6%).
Our Spanish business, which was acquired in December 2019, contributed
€1.80m of like-for-like revenue, up 4.7% compared to the prior year. This
was driven by like-for-like average rate growth of 9.1% compared to the prior
year, with the average like-for-like storage rate(6) increasing to €37.18
(2022: €34.09). This was offset by a reduction in like-for-like average
occupancy of 6.5%. Closing like-for-like occupancy(4) was down 8.3ppts at
78.3% (2022: 86.6%). Ancillary revenues, an area of particular focus, continue
to improve.
Group underlying EBITDA of £69.7m increased 5.4% at CER(2) on the prior year
and 6.9% on a reported basis, reflecting the impact of the 4.3% weakening of
the average Sterling to Euro exchange rate, compared to the prior period, on
the profit earned on our Paris, Spain and Benelux businesses. Adjusted diluted
EPRA EPS(7) grew by 5.3% in the period to 23.7p (2022: 22.5p).
Our property portfolio valuation (excluding investment properties under
construction) has increased by £128.8m since October 2022 to £2,586.6m. The
increase comprises £63.1m of additions and reclassifications, a positive
currency impact of £13.4m and a £52.3m revaluation gain (equivalent to 2.1%
of the valuation at October 2022). The Group's external valuers, Cushman &
Wakefield Debenham Tie Leung Limited ("C&W"), valued 43% of the portfolio
at April 2023 with a Directors' valuation being carried out, with the
assistance of C&W, on the remaining 57%.
Reflecting the Group's robust trading performance, the Board is pleased to
recommend a 5.3% increase in the interim dividend to 9.9p per share (2022:
9.4p).
Outlook
Enquiry levels in the UK, whilst significantly ahead of pre-pandemic levels,
were slightly below prior year levels in the UK in May but have showed some
improvement in June. In our continental European business, enquiry levels have
been ahead of prior year in May and June.
Group revenue for May 2023 grew by 3.9% (CER) compared to May 2022 and by 2.2%
on like-for-like CER(2) basis.
Our business has proved itself to be resilient with multiple drivers of demand
and, despite the current macro-economic challenges, we believe the Group,
whilst not entirely immune from any cost of living or inflationary issues, is
well positioned to withstand any downturn. At present, Adjusted Diluted EPRA
earnings per share for the full year is anticipated to be broadly in line with
consensus(17).
For further information, please contact:
Safestore Holdings PLC
Frederic Vecchioli, Chief Executive Officer via Instinctif Partners
Andy Jones, Chief Financial Officer
www.safestore.com (http://www.safestore.com)
Instinctif Partners
Guy Scarborough/ Bryn Woodward 07917 178920/ 07739 342009
A conference call for analysts will be held at 9:30am today.
For dial-in details of the presentation please contact:
Guy Scarborough (guy.scarborough@instinctif.com
(mailto:guy.scarborough@instinctif.com) or telephone on 07917 178920).
Notes to Editors
· Safestore is the UK's largest self storage group with 185
stores on 30 April 2023, comprising 132 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, 8 stores in Spain, 10 stores in the Netherlands and 6
stores in Belgium.
· Safestore operates more self storage sites inside the M25 and in
central Paris than any competitor providing more proximity to customers in
the wealthiest and more densely populated UK and French markets.
· Safestore was founded in the UK in 1998. It acquired the French
business "Une Pièce en Plus" ("UPP") in 2004 which was founded in 1998 by the
current Safestore Group CEO Frederic Vecchioli.
· Safestore has been listed on the London Stock Exchange since
2007. It entered the FTSE 250 index in October 2015.
· The Group provides storage to around 90,000 personal and business
customers.
· As at 30 April 2023, Safestore had a maximum lettable area
("MLA") of 7.990 million sq ft (excluding the expansion pipeline stores) of
which 6.124 million sq ft was occupied.
· Safestore employs around 750 people in
the UK, Paris, Spain, the Netherlands and Belgium.
Our Strategy
The Group intends to continue to deliver on its proven strategy of leveraging
its well-located asset base, management expertise, infrastructure, scale and
balance sheet strength and further increase its Earnings per Share by:
· Optimising the trading performance of the existing portfolio;
· Maintaining a strong and flexible capital structure; and
· Taking advantage of selective portfolio management and expansion
opportunities in our existing markets and, if appropriate, in attractive new
geographies either through a joint venture(14/15) 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 Portfolio
With the opening of 25 new stores since August 2016, and the acquisitions of
47 stores through the purchases of Space Maker in July 2016, Alligator in
November 2017, our Heathrow store, Fort Box in London and OMB in Barcelona in
2019, Your Room in 2021, the Benelux JV in 2022 and Apeldoorn in 2023, 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 185 stores as at
30 April 2023, 102 are in London and the South East of England or in Paris,
with 59 in other major UK cities and 24 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. In addition, we recently entered a
sixth market via a Joint Venture with Carlyle which acquired the seven-store
German self storage group myStorage.
Our MLA(5) has increased to 8.0m sq ft at 30 April 2023 (FY2022: 7.7m sq ft).
At the current occupancy level of 78.9% on a like-for-like basis, we have 1.9m
sq ft of fully invested unoccupied space (3.4m sq ft including the development
pipeline), of which 1.3m sq ft is in our UK stores, 0.3m sq ft is in Paris and
0.3m sq ft is in Spain 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 at efficiently managed rates
so we view this availability of space with considerable optimism. We will also
benefit from the operational leverage from the fact that this available space
is fully invested and the related operating costs are essentially fixed and
already included in the Group cost base. Our continued focus will be on
ensuring that we drive occupancy to utilise this capacity at carefully managed
rates. From full year 2013 to half year 2023, occupancy of the stores in the
portfolio in 2013 that remain in the Group today has increased from 63.1% to
81.5%, i.e., an average of 1.9ppts per year and equivalent to a total of 1.0m
sq ft.
There are three elements that are critical to the optimisation of our existing
portfolio:
· Enquiry generation through an effective and efficient marketing
operation;
· Strong conversion of enquiries into new lets; and
· Disciplined central revenue management and cost control.
Digital Marketing Expertise- UK Number 1 Self Storage Brand
Awareness of self storage remains relatively low with half of the UK
population either knowing very little or nothing about self storage (source:
SSA Annual Report 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 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 46% enquiry growth for the Group over the last
five years, an annual growth of 8%. Our in-house expertise and significant
annual budget have enabled us to deliver strong results. Safestore is the UK
number 1 self storage brand as it has more new lets per year than any other
brand.
The Group's online strength came to the fore during the various Covid-19
lockdowns and has since continued to be the predominant channel for customer
acquisition. Online enquiries in the first half of this year made up 89% of
all our enquiries in the UK (H12022: 90%), with 84% in France (H12022:
85%). The majority of our online enquiries now originate from a mobile device
(69% share in UK for H12023, H12022: 65.5%), 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 half year
as a percentage of revenue were in line with the previous year at 3.6%
(H12022: 3.5%).
During H1 2023, the Group demonstrated its ability to integrate newly
developed and acquired stores into its marketing platform with successful new
openings at Morden (London) and Wigan in the UK, North Barcelona, North Madrid
and South Madrid in Spain and Apeldoorn in the Netherlands. 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
In what is still a relatively immature and poorly understood market, customer
service and selling skills at the point of sale remain essential in earning
the trust of the customer and in driving the appropriate balance of volumes
and unit price in order to optimise revenue growth in each store.
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.
IIP is the international standard for people management, defining what it
takes to lead, support, and engage people effectively to achieve sustainable
results. Underpinning the standard is the Investors in People framework,
reflecting the latest workplace trends, essential skills and effective
structures required to outperform in any industry. Investors in People enables
organisations to benchmark against the best in the business on an
international scale. We are proud to have our colleagues recognised to such a
high standard, not only in our industry, but also across over 50,000
organisations in 66 countries. This sustained people engagement focus is an
essential component of our continuous improvement mentality.
We are committed to growing and rewarding our people and we tailor our
development, reward and recognition programmes to reflect this. Our IIP
recognised coaching programme, launched in 2018 and upgraded every year since,
continues to be a driving force behind the continuous performance improvement
demonstrated by our store colleagues.
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 newly created 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. These enhancements have combined to
help us create our 2023 QUEST programme which commenced roll-out in late
September 2022 focusing on the new contract types and technologies available
to us.
All new recruits to the business benefit from enhanced induction and training
tools that have been developed in-house and enable us to quickly identify
high-potential individuals and increase their speed to competency. They
receive individual performance targets within four weeks of joining the
business and are placed on the "pay-for-skills" programme that allows
accelerated basic pay increases dependent on success in demonstrating specific
and defined skills. The key target of our programme remains that we grow our
talent through our Store Manager Development programme, and we are pleased
with our progress to date.
Our internal Store Manager Development programme has been in place since 2016
and is a key part of succession planning for future Store Managers. In May
2022, we began our assessment process for the sixth intake of the SMD (Store
Manager Development programme) with a first-class group of candidates ready to
learn the necessary skills and attributes they need to become a Safestore
Store Manager. Funded by the Apprenticeship Levy this programme provides the
opportunity to complete a Level 3 Management and Leadership apprenticeship,
with the additional opportunity to complete an Institute of Leadership and
Management ("ILM") qualification. The group are due to graduate in the third
quarter of 2023.
Our Store Manager Development programme demonstrates the effectiveness of our
learning tools. In a spirit of constant improvement, our content and delivery
process is dynamically enhanced through our 360-degree feedback process
utilising the learnings from not only the candidates but also from our
training Store Managers and senior business leaders. This allows our people to
be trained with the knowledge and skills to sell effectively in today's
marketplace.
Our Senior Manager Development programme ("LEAD") focuses on developing our
high performing store managers, aimed at preparing them for more senior roles
within the business. This programme is built on the foundations of our Store
Manager Development programme and included delegates delivering
performance-enhancing projects to our wider business. We are proud that all
nine participants of our Senior Leadership Development programme (LEAD
Academy) successfully completed their Level 5 Management and Leadership
apprenticeship; six of those participants were awarded Distinctions.
Furthermore, we have re-launched our Graduate programme, with our first intake
commencing in October 2022, providing an opportunity for newly qualified
graduates to build their skillset and experience resulting in a career with
Safestore.
Our performance dashboard allows our store and field teams to focus on the key
operating metrics of the business providing an appropriate level of management
information to enable swift decision making. Reporting performance down to
individual colleague level enhances our competitive approach to team and
individual performance. We continue to reward our people for their performance
with bonuses of up to 50% of basic salary based on their achievements against
individual targets for new lets, occupancy, and ancillary sales. In addition,
our Values and Behaviours framework is overlaid on individuals' performance in
order to assess performance and development needs on a quarterly basis.
Our "Make the Difference" people forum, launched in 2018, enables frequent
opportunities for us to hear and respond to our colleagues. Our network of 15
"People Champions" collect questions and feedback from their peers across the
business and put them to members of the Executive Committee. We drive change
and continuous improvement in responding to the feedback we receive for "Our
Business, Our Customers and Our Colleagues".
People Champions:
· Consult and collect the views and suggestions of all colleagues
that they represent;
· Engage in the bi-annual "Make the Difference" people forum,
raising and representing the views of their colleagues; and
· Consult with and discuss feedback with management and the
leadership team at Safestore.
Our values are authentic, having been created by our people. They are core to
the employment life cycle and bring consistency to our culture. Our leaders
have high values alignment enabling us to make the right decisions for our
colleagues and our customers.
Our customers continue to be at the heart of everything we do, whether it be
in store, online or in their communities. 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. 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. Our in-house created video portal allows customers to instantly
talk to a Safestore colleague at any time from a help screen located in the
building. The portal also allows the customer to access services and products
directly from the store, with or without the support of a Safestore colleague.
Several additional unmanned satellite stores are currently under various
stages of development in the UK.
The Group's customers also have the option to contract remotely for their unit
in any UK store. The Group's belief is that its multi-channel sales strategy
with either full automation or combined with human interaction through our
store sales teams, our call centre and the 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 time. The award is given to businesses which have achieved Gold
standard for three consecutive years. It is an independent mark of excellence
that recognises businesses for delivering exceptional experiences, as rated by
real customers. In addition to using Feefo, Safestore invites customers to
leave a review on a number of review platforms, including Google and
Trustpilot. Our ratings for each of these three providers in the UK are
between 4.6 and 4.8 out of 5. In France, Une Pièce en Plus uses Trustpilot to
obtain independent customer reviews and in H12023 achieved a "TrustScore" of
4.6 out of 5. In Spain, OMB collects customer feedback via Google reviews and
has maintained a score of 4.6 out of 5.
Central Revenue Management and Cost Control
We continue to pursue a balanced approach to revenue management. We aim to
optimise REVPAF 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, particularly in
the context of the current inflationary environment, 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 30 April 2023, based on the current level of borrowings and interest swap
rates, the Group's weighted average cost of debt was 2.77% and 84% of our
drawn debt was at fixed rate or hedged (H1 2022: 2.30% and 95% respectively).
The weighted average maturity of the Group's drawn debt is 5.4 years at the
current period end and the Group's LTV ratio is 25.3% as at 30 April 2023.
This LTV of 25.3% and interest cover ratio of 10.8x for the rolling
twelve-month period ended 30 April 2023 provides us with significant headroom
compared to our banking covenants (LTV of 60% and ICR of 2.4:1). We had
£227.1 million of undrawn bank facilities at 30 April 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.
Recent 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 Group will pay interest at a margin of 1.25% plus SONIA or Euribor
depending on whether the borrowings are drawn in Sterling or Euros. The margin
is at the same level as the previous facility agreements.
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 where met 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.
The main covenants under all of the Group's borrowings are a Group
Loan-to-value ("LTV") covenant of 60% (replacing separate UK and French LTV
covenants) which is based on net debt rather than gross debt and an Interest
Cover Ratio covenant of 2.4x.
The hedging arrangements under the previous facility agreements have been
continued under the new agreements. Therefore, the Group benefits from £55
million of Interest Rate Swaps until 30 June 2023 at a rate of 0.6885%
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 H12023.
Our people: Safestore was awarded the prestigious Investors in People ("IIP")
Platinum accreditation and was in the final top ten shortlist for Platinum
Employer of the Year (250+) category in The Investors in People Awards 2021.
The Group's response during the pandemic lockdowns and aftermath has had a
profound impact on trust in leadership and colleague engagement and
motivation.
Our customers: The Group's brands continue to deliver a high-quality
experience, from online enquiry to move-in. This is reflected in customer
satisfaction scores on independent review platforms (Trustpilot, Feefo,
Google) of over 90% in each market. The introduction of digital contracts
during the pandemic offers both customer convenience and a reduction in
printing, saving an estimated 44,000 pieces of paper each month.
Our community: Safestore remains committed to being a responsible business by
making a positive contribution within the local communities wherever our
stores are based. We continue to do this by developing brownfield sites and
actively engaging with local communities when we establish a new store,
identifying and implementing greener approaches in the way we build and
operate our stores, helping charities and communities to make better use of
limited space, and creating and sustaining local employment opportunities
directly and indirectly through the many small and medium-sized enterprises
which use our space. During FY2022, the space occupied by local charities in
222 units across 103 stores was 18,903 sq ft and worth £0.7 million.
Our environment: Safestore is committed to ensuring our buildings are
constructed responsibly and their ongoing operation has a minimal impact on
local communities and the environment. It should be noted that the self
storage sector is not a significant consumer of energy when compared with
other real estate sub-sectors. As a result, operational emissions intensity
tends to be far lower. According to a 2021 report by KPMG and EPRA, self
storage generates the lowest greenhouse gas emissions intensity (5.75 kg/m(2)
for scope 1 and 2) of all European real estate sub-sectors, with emissions per
m(2) less than 30% of the European listed real estate average (19.5 kg/m(2))
and notably 21% of the emissions intensity of the residential sub-sector (27.0
kg/m(2)). Reflecting the considerable progress made on energy mix, efficiency
measures and waste reduction to date, Safestore's emissions intensity (3.9
kg/m(2) in 2020) is considerably lower (-32%) than the self storage sub-sector
average. In FY2022, the Group continued to progress with a further 2.7%
decline in absolute emissions despite continued portfolio growth and greater
utilisation of stores compared to 2021. Safestore's absolute (location-based)
emissions are now 54% below, and emissions intensity 68% below, the 2013
baseline level despite significant growth in portfolio floor space. Moving
forward, the Group has a commitment to be operationally carbon neutral by 2035
with a medium-term target to reduce operational emissions (market-based) by
50% compared to the level in FY2021 by 2025. The total investment to achieve
carbon neutrality should be around £3 million.
In addition to the IIP award and the customer satisfaction ratings, the Group
has received recognition for its sustainability progress and disclosures in
the last twelve months. Safestore has been given a Silver rating in the 2022
EPRA Sustainability BPR awards. The Global ESG Benchmark for Real Assets
("GRESB") has once again awarded Safestore an "A" rating in its 2022 Public
Disclosures assessment. MSCI has awarded Safestore its second-highest rating
of "AA" for ESG in 2022. The Group has also been awarded the highest rating of
five stars by "Support the Goals".
Finally, the Group has worked with its banking lenders to agree ESG related
KPIs which are linked to the margin payable under its new £400 million
facility. Two KPI's have been agreed, which, when achieved, result in a
reduction in margin of up to 5bps.
Portfolio Management
Our approach to store development and acquisitions in the UK, Paris, Spain,
the Netherlands, Belgium and, through our Joint Venture with Carlyle, in
Germany, continues to be pragmatic, flexible and focused on the return on
capital.
Our experienced and skilled property teams in all geographies 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 25 new stores: Chiswick, Wandsworth, Mitcham,
Paddington Marble Arch, Carshalton, Bow, Morden (all in London), Birmingham
Central, Birmingham Merry Hill, Birmingham Middleway, Altrincham,
Peterborough, Gateshead, Sheffield and Wigan in the UK, and Emerainville,
Combs-la-Ville, Poissy, Pontoise and Magenta in Paris, Nijmegen in the
Netherlands and Central Barcelona, North Madrid, South Madrid and North
Barcelona in Spain, adding 1,232,000 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 Apeldoorn in the Netherlands. These acquisitions added a
further 1,905,000 sq ft of MLA and revenue performance has been enhanced in
all cases under the Group's ownership.
We have also completed the extensions and refurbishments of our Acton,
Barking, Bedford, Chingford, Wimbledon, Edgware, Southend, Paddington Marble
Arch, Winchester, Crayford and Longpont (Paris) stores adding a net 131,000 sq
ft of fully invested space to the estate. All of these stores are performing
in line with or ahead of their business plans.
The Group's current pipeline of new developments and store extensions (see
below) has grown significantly over the last year and now constitutes c.
1,455,000 sq ft of future MLA. The pipeline is equivalent to c. 18% of the
existing portfolio. The outstanding capital expenditure of £134 million is
expected to be funded from the Group's existing resources.
Property Pipeline
Openings of New Stores and Extensions in the period
Open 2023 FH/LH Opening Date MLA Other
Redevelopments and Extensions
London- Crayford LH Q2 2023 9,400 Extension
New Developments
London- Morden FH Q2 2023 52,000 New build
Wigan FH Q2 2023 42,700 Conversion
Northern Madrid FH Q1 2023 53,000 Conversion
Southern Madrid FH Q1 2023 32,000 Conversion
Northern Barcelona FH Q2 2023 42,000 Conversion
UK
In May 2022, the Group completed the acquisition of a 2.1-acre freehold site
including an existing warehouse in Wigan in Greater Manchester. A 42,700 sq ft
MLA store in opened in February 2023.
In September 2019 the Group acquired a freehold 0.9-acre site in Morden in
London in an established industrial location. A 52,000 sq ft self storage
facility opened in March 2023.
In Crayford, we secured a leasehold site on which we have converted an
existing warehouse to a 9,400 sq ft extension to our existing Crayford site.
The extension opened in December 2022.
Spain
In March 2021 and April 2021, the Group exchanged contracts on two freehold
buildings in Southern Madrid and Northern Madrid, respectively. Both existing
buildings have been converted into 32,000 and 53,000 sq ft MLA self storage
facilities and were opened in November 2022.
In April 2021, the Group exchanged contracts on a freehold building in
Northern Barcelona. The existing building has been converted into a 42,000 sq
ft MLA store which opened in April 2023.
Development Sites
Opening 2023 FH/LH Status* MLA Other
Redevelopments and Extensions
London- Paddington Marble Arch LH CE, PG 8,400 Extension
Paris- Pyrenees LH C, UC 22,200 Extension
New Developments
Ellesmere Port FH C, UC 55,000 New build
Paris- South Paris FH C, UC 55,000 New build
Paris- West 1 FH CE, PG 56,000 New build
Paris- West 3 FH C, UC 58,000 New build
Paris- East 1 FH CE, PG 60,000 Conversion
Paris- North West 1 FH C, STP 54,000 Conversion
Eastern Madrid FH C, UC 50,000 Conversion
South Barcelona FH C, PG 30,600 Conversion
Central Barcelona 3 LH C, UC 14,700 Conversion
Amersfoort- Netherlands FH C, UC 58,000 New build
Almere- Netherlands FH C, UC 44,500 Conversion
Opening 2024
New Developments
London- Paddington Park West FH C, UC 13,000 Conversion, Satellite
London- Lea Bridge FH C, UC 76,500 New build
South West Madrid FH C, STP 46,800 Conversion
Southern Madrid 2 FH C, STP 68,800 Conversion
Central Barcelona 2 LH CE, STP 24,700 Conversion
North East Madrid FH CE, STP 66,000 Conversion
Amsterdam- Netherlands FH CE, STP 61,400 New build
Aalsmeer- Netherlands FH C, UC 48,400 New build
Rotterdam- Netherlands FH C, UC 71,000 New build
Opening 2025
New Developments
London- Woodford FH C, PG 76,000 New build
London- Walton FH C, PG 20,700 Conversion
London- Wembley FH C, STP 49,000 New build
Paris- La Défense FH C, UC 44,000 Mixed use facility
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, STP 54,000 New build
Total Pipeline MLA (let sq ft- million) c. 1.455
Total Outstanding CAPEX (£'m) c. 134.0
*C = completed, CE = contracts exchanged, STP = subject to planning, PG =
planning granted, UC = under construction
UK
In Ellesmere Port in Northwest England we have secured a new freehold
development site, located in an accessible position near junction 8 of the M53
on the affluent Wirral Peninsular. A 55,000 sq ft MLA new build store should
open in late 2023.
In June 2018, Safestore opened its Paddington Marble Arch store. A separate
satellite store at Paddington Park West Place, with MLA of 13,000 sq ft, will
open during 2024. In addition, Safestore has secured the lease of an existing
space adjacent to our Paddington Marble Arch store and will convert an
existing warehouse into a 8,400 extension due to open in late 2023.
In April 2021, the Group exchanged contracts on a freehold 1.3-acre site at
Lea Bridge in Northeast London. The acquisition of the site has now been
completed and we plan to open a 76,500 sq ft MLA store in 2024 as the leases
for existing tenants on the site have up to two years to run. Rental income of
approximately £170k per annum is currently received on this site.
In addition, in April 2021, the Group exchanged contracts on a freehold site
in Woodford in Northeast London. Subject to planning, we will open a 76,000 sq
ft MLA store in 2025.
In Walton-on-Thames in London, we have secured a freehold site with an
existing warehouse which will be converted, subject to planning permission, to
a 20,700 sq ft store. We hope to open the store in 2025.
The Group has completed the acquisition of a 0.5-acre site in Wembley in North
West London. The existing building will be demolished and, subject to
planning, a new purpose-built store will be developed with an MLA of 49,000 sq
ft. It is anticipated that the store will open in 2025.
In November 2021, the Group completed the acquisition of a 1.2-acre freehold
site off Old Kent Road in the London Borough of Southwark in Southeast London.
Subject to planning, we hope to open a c. 76,500 sq ft MLA store in due
course. Existing tenants on the site will provide a rental income in the
meantime.
The Group has also previously acquired a site in Bermondsey in London.
Bermondsey is a 0.5-acre freehold site with income from existing tenants and
is adjacent to our existing leasehold store. Our medium-term aim, subject to
planning permission, is to extend our existing Bermondsey operations with the
addition of a new self storage facility to complement our existing store.
In Romford in London, we have secured a freehold site with an existing
warehouse which will be converted, subject to planning permission, to a 41,000
sq ft store, opening in 2025.
In July 2021, the Group exchanged contracts on a freehold 0.8-acre site in
Shoreham, West Sussex. Shoreham is situated between Brighton and Worthing on
the south coast of England. Subject to planning, we will open a purpose built
54,000 sq ft MLA store beyond 2025.
Our total UK development pipeline now amounts to c. 520,450 sq ft of which c.
411,100 sq ft is in London.
Paris
Safestore has for many years owned a vacant freehold site in the town of
Nanterre on the edge of La Défense, Paris' main business district. This area
of Paris is undergoing significant development and Safestore has invested a
24.9% stake in a joint venture development company, PBC Les Groues SAS, which
is constructing a c. 300,000 sq ft development of offices, retail, a school
and residential properties.
Safestore has contributed its Nanterre site into the project, receiving cash
of €1.0 million in addition to the delivery of an underground storage area
and reception within the complex, ready to be fitted out into a 44,000 sq ft
self storage facility. Planning for the project has been received and
construction has commenced.
It is anticipated that the project will be completed in 2025 when the self
storage facility will open.
In August 2021, the Group exchanged contracts on a freehold site in Southern
Paris with a significant frontage onto the N104 motorway. The site includes an
existing building which will be demolished and replaced by a 55,000 sq ft MLA
store. We expect the store to open in 2023.
Over the first half of 2022 we exchanged contracts on two freehold development
sites to the west of Paris. The sites require planning permission and newly
built stores of 56,000 sq ft and 58,000 sq ft are planned to be constructed by
the end of 2023.
Paris East 1 and Paris North West 1 are freehold sites on which we will
convert existing buildings, subject to planning, to 60,000 sq ft and 54,000 sq
ft stores respectively. We expect the stores to open in 2023.
Our Paris pipeline now amounts to c. 349,200 sq ft.
Spain
In December 2019, the Group completed the acquisition of OMB Self Storage
which operated three leasehold properties and one freehold property, all very
well located in the centre of Barcelona. Subsequently a further four stores
have been opened, two in Barcelona and two in Madrid and the business
currently has an MLA of 248,000 sq ft.
The Group is continuing its expansion of the business in Barcelona and Madrid
with the acquisition of the following sites.
In June 2021, the Group exchanged contracts on a freehold property in South
Barcelona. The site includes an existing industrial building which will be
converted into a 30,600 sq ft MLA self storage facility. Planning has been
granted and we expect to open the site in the 2022/23 financial year.
In August 2021, the Group exchanged contracts on a leasehold site in Central
Barcelona (Central Barcelona 2). The site is a former car dealership which
will be converted to a 24,700 sq ft MLA store which, subject to planning,
should open in 2024.
In December 2021, the Group exchanged contracts on a freehold building in a
commercial and industrial area of Eastern Madrid. Subject to completion, we
will convert the existing building into a 50,000 sq ft MLA self storage
facility. It is anticipated that the site will open in 2023.
In August 2022, the Group exchanged contracts on a freehold building in a
commercial and industrial area of South West Madrid. Subject to planning and
completion, we will convert the existing building into a 46,800 sq ft MLA self
storage facility. It is anticipated that the site will open in 2024.
A new freehold site has been secured in Southern Madrid (Southern Madrid 2) on
which we will convert an existing building, subject to planning permission,
into a 68,800 sq ft storage facility. It is anticipated that the site will
open in 2024.
A new leasehold site in Central Barcelona (Central Barcelona 3) has been
acquired. The existing building will be converted into a 14,700 sq ft MLA
store and is expected to open in 2023. The building has planning permission
and the lease is 30 years in length.
During the period the Group acquired a building in North East Madrid close to
Madrid Barajas airport. Subject to planning, the building will be converted
into a 66,000 sq ft MLA store which we anticipate will open in 2024.
The Spanish business now has eight open stores and a pipeline consisting of a
further seven stores with c. 301,600 sq ft of MLA including 231,600 sq ft
across four stores in Madrid and 70,000 sq ft over three stores in Barcelona.
Netherlands
During the year we exchanged contracts on a freehold site at Amersfoort, 40
minutes east of Amsterdam. The acquisition is subject to planning permission
and we anticipate that the new store, which will have an MLA of 58,000 sq ft,
will be opened in 2023.
The Group completed the acquisition of a freehold site in Almere, a city with
a population of 214,000 which is a 20 minute drive from Amsterdam. Subject to
planning, we will convert the two existing buildings on the site into a 44,500
sq ft MLA self storage facility. It is anticipated that the site will open in
2023.
New freehold sites have been secured in Amsterdam and Aalsmeer where we will
build new stores, subject to planning, of 61,400 sq ft and 48,400 sq ft
respectively. The two stores should open in 2024.
The Group has secured a freehold site in Rotterdam for construction of a
71,000 sq ft MLA store subject to planning. Rotterdam is one of the major
cities in the Netherlands with a population of 588,000 and forms part of the
larger Randstad area. The new site forms part of a larger re-development
within the heart of an affluent district of the city.
In the Netherlands, our pipeline now consists of 283,300 sq ft of space in
five stores.
Store Extensions
The Group plans to redevelop and extend its Pyrénées store in Paris. The
extension will add 22,200 sq ft and is planned to open in 2023. As of
September 2022, the store occupancy was 94%.
Lease Extensions
During the period we completed the extensions of our leases at Edinburgh Fort
Kinnaird, London- Charlton and Burnley stores.
The Edinburgh lease has been extended by a further 10 years to 2040 whilst
Charlton's and Burnley's lease terms have both been extended by 10 years to
2038.
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.
As part of our ongoing asset management programme, we have now extended the
leases on 30 stores or 83% 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 £5.65m.
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
0.09 sq ft of storage space per capita which compares to 0.76 sq ft in the UK,
0.24 sq ft in France, 0.24 sq ft in Spain, 0.60 sq ft in the Netherlands and
0.20 sq ft in Belgium. According to the 2022 FEDESSA report, there are just
320 facilities in Germany and 7.6m sq ft of lettable space.
myStorage has seven medium to long-term leasehold stores and 326,000 sq ft of
MLA in Berlin, Heidelburg, Mannheim, Fürth, Nuremburg, Neu-Ulm and
Reutlingen.
The occupancy of the portfolio is 73% with two of the stores having opened in
2021.
Safestore's initial investment in the Joint Venture was a c. €2.2 million
equity investment for a 10% share of the Joint Venture. Safestore will also
earn a fee for providing management services to the Joint Venture. The Group
expects to earn an initial return on investment of c.15% for the first full
year before transaction related costs reflecting its share of expected Joint
Venture profits and fees for management services
.
Portfolio Summary
The self storage market has been growing consistently for over 20 years across
many European countries but few regions offer the unique characteristics of
London and Paris, both of which consist of large, wealthy and densely
populated markets. In the London region, the population is 13 million
inhabitants with a density of 5,200 inhabitants per square mile in the region,
11,000 per square mile in central London and up to 32,000 per square mile in
the densest boroughs.
The population of the Paris urban area is 10.7 million inhabitants with a
density of 9,300 inhabitants per square mile in the urban area but 54,000 per
square mile in the City of Paris and first belt, where 69% of our French
stores are located and which has one of the highest population densities in
the western world. 85% of the Paris region population live in central parts of
the city versus the rest of the urban area, which compares with 60% in the
London region. There are currently c. 245 storage centres within the M25 as
compared to only c. 95 in the Paris urban area.
In addition, barriers to entry in these two important city markets are high,
due to land values and limited availability of sites as well as planning
regulation. This is the case for Paris and its first belt in particular, which
inhibits new development possibilities.
Our combined operations in London and Paris, with 79 stores, contributed
£58.9m of revenue and in the first half of the financial year and offer a
unique exposure to the two most attractive European self storage markets.
Our Spanish portfolio currently consists of six stores in Barcelona and two in
Madrid. We have a further seven stores in our development pipeline situated in
both Madrid and Barcelona. We consider both of these cities to have attractive
characteristics in relation to self storage and intend to continue to seek
further expansion opportunities.
Owned Store Portfolio by Region London & Rest of UK Paris Group
Spain Benelux
South East UK Total Total
Number of Stores 73 59 132 29 8 16 185
Let Square Feet (m sq ft) 2.284 2.126 4.410 1.091 0.105 0.518 6.124
Maximum Lettable Area (m sq ft) 2.970 2.750 5.720 1.360 0.250 0.660 7.990
Average Let Square Feet per store (k sq ft) 31 36 33 38 13 32 33
Average Store Capacity (k sq ft) 41 47 43 47 31 41 43
Closing Occupancy % 76.9% 77.2% 77.1% 80.1% 42.4% 78.8% 76.7%
Average Rate (£ per sq ft) 37.36 23.12 30.50 36.90 31.12 17.32 30.58
Revenue (£'m) 51.5 30.2 81.7 21.8 1.7 4.9 110.1
Average Revenue per Store (£'m) 0.71 0.51 0.62 0.75 0.21 0.31 0.60
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 132
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 nine stores branded as Une Pièce en Plus ("UPP") ("A spare
room"). Over 60% of the UPP stores are located in a cluster within a five-mile
radius of the city centre, which facilitates strong operational and marketing
synergies as well as options to differentiate and channel customers to the
right store subject to their preference for convenience or price
affordability. The Parisian market has attractive socio-demographic
characteristics for self storage and we believe that UPP enjoys unique
strategic strength in such an attractive market.
As at 30 April 2023, 71% of our Group Revenue, 65% of our stores and 63% of
our available capacity are in London, South East England, Paris, Amsterdam and
the Randstad area, Brussels, Barcelona and Madrid. These major population
areas deliver 71% of the Group's store EBITDA from 62% of our MLA,
highlighting the attractiveness of being present in these major cities and
conurbations. The current pipeline includes 28 further developments in these
areas which will increase the number of stores to 69% of our portfolio.
In addition, Safestore has the benefit of a leading national presence in the
UK regions where the stores are predominantly located in the centre of key
metropolitan areas such as Birmingham, Manchester, Liverpool, Bristol,
Newcastle, Glasgow and Edinburgh. Our 2019 acquisition of OMB in Barcelona and
our 2022 Benelux JV acquisition represents a platform into the Spanish,
Netherlands and Belgium markets where we hope to take advantage of further
development and acquisition opportunities.
Market
The self storage 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 2022 report) showed that capacity
in France is 0.24 sq ft per capita. Whilst the Paris market density is greater
than France, we estimate it to be significantly lower than the UK at around
0.4 sq ft per inhabitant. This compares with closer to 10 sq ft per inhabitant
in the USA and 2 sq ft in Australia. In the UK, in order to reach the US
density of supply, it would require the addition of around another 17,000
stores as compared to c. 1,500 currently. In the Paris region, it would
require around 2,400 new facilities versus c. 95 currently opened.
In Spain, the Netherlands and Belgium, geographies the Group has recently
entered, penetration is similarly low. In Spain capacity is around 0.24 sq ft
per head of population and the consumer is serviced by just 580 stores. In the
Netherlands penetration is 0.6 sq ft per head of population (355 stores) and
in Belgium 0.2 sq ft per head of population (101 stores).
The Group recently entered a JV with Carlyle in Germany. The German market is
one of Europe's more under-penetrated markets with just 0.09 sq ft of storage
space per capita and, according to the 2022 FEDESSA report, there are just 320
facilities in the country and 7.6m sq ft of lettable space.
Our interpretation of the most recent 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. 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 rather than 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.
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 UK Paris Spain Benelux
Personal Customers
Numbers (% of total) 77% 81% 89% 84%
Square feet occupied (% of total) 58% 64% 82% 75%
Average Length of Stay (months) 17.2 28.3 21.5 29.1
Business Customers
Numbers (% of total) 23% 19% 11% 16%
Square feet occupied (% of total) 42% 36% 18% 25%
Average Length of Stay (months) 25.8 29.4 28.5 29.8
Safestore's customer base is resilient and diverse and consists of around
90,000 domestic, business and National Accounts customers across London,
Paris, Spain, the UK regions, the Netherlands and Belgium.
Business Model
The Group operates in a market with relatively low consumer awareness. It is
anticipated that this will increase over time as the industry matures. To
date, despite the financial crisis in 2007/08, the implementation of VAT in
the UK on self storage in 2012, Brexit and the Covid-19 pandemic, the industry
has been exceptionally resilient. In the context of uncertain economic
conditions, driven by inflation and the war in Ukraine, the industry remains
well positioned with limited new supply coming into the self storage market.
With more stores inside London's M25 than any other operator and a strong
position in central Paris, Safestore has leading positions in the two most
important and demographically favourable markets in Europe. In addition, our
regional presence in the UK is unsurpassed and contributes to the success of
our industry-leading National Accounts business. In the UK, Safestore is the
leading operator by number of wholly owned stores. With 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 185 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 30 April 2023 of 13.4 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.
In 2019, the Group entered the Spanish market with the acquisition of OhMyBox.
Our Spanish portfolio currently consists of six stores in Barcelona, and two
recently opened Madrid stores. We have a further seven stores in our
development pipeline situated in both Madrid and Barcelona. We consider both
of these cities to have attractive characteristics in relation to self storage
and intend to continue to seek further expansion opportunities.
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% (H12022: 90%) of our enquiries in the
UK and 84% (H12022: 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 46% enquiry growth over the last five years.
Although mostly generated online, our enquiries are predominantly handled
directly by the stores and, in the UK, we have a Customer Support Centre
("CSC") which handles customer service issues in addition to enquiries, in
particular when the store colleagues are busy handling calls or outside of
normal store opening hours.
Our pricing platform provides the store and CSC colleagues with
system-generated real-time prices managed by our centrally based
yield-management team. Local colleagues have certain levels of discretion to
flex the system-generated prices but this is continually monitored.
Customer service standards are high and customer satisfaction feedback is
consistently very positive. Safestore invites customers to leave a review on a
number of review platforms, including Feefo, Google and Trustpilot. Our
ratings for each of these three providers in the UK are between 4.6 and 4.8
out of 5. In France, Une Pièce en Plus uses Trustpilot to obtain independent
customer reviews and In H12023, achieved a "TrustScore" of 4.6 out of 5. In
Spain, OMB collects customer feedback via Google reviews and has maintained a
score of 4.6 out of 5. The key drivers of sales success are the capacity to
generate enquiries in a digital world, the capacity to provide storage
locations that are conveniently located close to the customers' requirements
and the ability to maintain a consistently high quality, motivated retail team
that is able to secure customer sales at an appropriate storage rate, all of
which can be better provided by larger, more efficient organisations.
We remain focused on business as well as domestic customers. Our national
network means that we are uniquely placed to further grow the business
customer market and in particular National Accounts. Business customers in the
UK now constitute 42% of our total space let and have an average length of
stay of 26 months. Within our business customer category, our National
Accounts business represents around 632,000 sq ft of occupied space (around
13% of the UK's occupancy). Approximately two-thirds of the space occupied by
National Accounts customers is outside London, demonstrating the importance
and quality of our well invested national estate.
The business now has in excess of c. 90,000 business and domestic customers
with an average length of stay of 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 recent establishment of a new £400 million unsecured multi-currency
Revolving Credit Facility, Safestore has secure financing, a strong balance
sheet and significant covenant headroom. This provides the Group with
financial flexibility and the ability to grow organically and via carefully
selected new development or acquisition opportunities.
At 30 April 2023, we had 1.3m sq ft of unoccupied space in the UK, 0.3m sq ft
in France and 0.3m sq ft in Spain and Benelux, equivalent to c. 47 full new
stores. Our main focus is on filling the spare capacity in our stores at
optimally yield-managed rates. The operational leverage of our business model
will ensure that the bulk of the incremental revenue converts to profit given
the relatively fixed nature of our cost base.
Trading Performance
UK Trading Performance
UK Operating Performance 2023 2022 Change
Revenue (£'m) 81.7 78.9 3.5%
EBITDA (£'m)(3) 51.9 50.1 3.6%
EBITDA (after leasehold costs) (£'m) 47.8 46.3 3.2%
Closing Occupancy (let sq ft- million)(4) 4.410 4.549 -3.1%
Closing Occupancy (% of MLA) 77.1% 81.3% -4.2ppts
Maximum Lettable Area (MLA)(5) 5.720 5.600 2.1%
Average Storage Rate (£)(6) 30.50 28.53 6.9%
REVPAF (£) 29.19 28.60 2.1%
UK Operating Performance- like-for-like(9) 2023 2022 Change
Storage Revenue (£'m) 65.9 64.1 2.8%
Ancillary Revenue (£'m) 14.2 13.9 2.2%
Revenue (£'m) 80.1 78.0 2.7%
EBITDA (£'m)(3) 50.8 49.3 3.0%
Closing Occupancy (let sq ft- million)(4) 4.351 4.515 -3.6%
Closing Occupancy (% of MLA) 78.6% 82.0% -3.4ppts
Average Occupancy (let sq ft- million)(4) 4.348 4.528 -4.0%
Average Storage Rate (£)(6) 30.55 28.57 6.9%
REVPAF (£) 29.16 28.58 2.0%
UK Statutory metrics 2023 2022 Change
Operating profit (£'m) 74.5 232.6 -68.0%
The UK business had a solid first half of the year with revenue up 3.5% for
the six months. Like-for-like storage revenue was up 2.8% with ancillary
revenues up 2.2% compared to April 2022. As a result, total like-for-like
revenue was up 2.7% for the period.
The UK result was driven by a continuing excellent like-for-like average rate
performance which was up 6.9% compared to the first half of 2022. The
like-for-like average rate also grew sequentially in the second quarter of the
period by 0.4% compared to the first quarter. Like-for-like average occupancy
was down by 4.0% compared to H12022 and the like-for-like closing occupancy at
the end of April 2023 was down 3.4ppts at 78.6% (H12022: 82.0%).
Total revenue growth of 3.5% reflected the like-for-like performance, the 2023
openings of Wigan and London-Morden, the 2022 acquisition of Christchurch, and
the 2022 opening of London-Bow. All acquisitions and new store developments
are performing in line with or ahead of their business cases.
Our continued focus on cost was evident in the half year. During the period,
our cost base increased by 3.5% in total or 2.1% on a like-for-like basis.
As a result, underlying EBITDA after leasehold costs for the UK business was
£47.8m (2022: £46.3m), an increase of £1.5m or 3.2%.
Operating profit for the UK business was £74.5m (H1 2022: £232.6m), a
decrease of £158.1m or 68%, driven by the decrease in the gain of investment
properties of £158.5m to £24.5m (H1 2022: £183.0m).
Paris Trading Performance
Paris Operating Performance - Total and like-for-like(9) 2023 2022 Change
Storage Revenue (€'m) 22.81 21.77 4.8%
Ancillary Revenue (€'m) 2.01 2.03 -1.0%
Revenue (€'m) 24.82 23.80 4.3%
EBITDA (€'m)(3) 16.9 16.3 3.7%
EBITDA (after leasehold costs) (€'m) 13.7 13.3 3.3%
Closing Occupancy (let sq ft- million)(4) 1.091 1.098 -0.6%
Closing Occupancy (% of MLA) 80.1% 80.6% -0.5ppts
Maximum Lettable Area (MLA)(5) 1.360 1.360 -%
Average Occupancy (let sq ft- million)(4) 1.095 1.087 0.7%
Average Storage Rate (€)(6) 42.02 40.38 4.1%
REVPAF (€) 36.73 35.24 4.2%
Revenue (£'m) 21.8 20.0 9.0%
Paris Statutory metrics 2023 2022 Change
Operating profit (£'m) 29.1 58.5 -50.3%
Operating profit (€'m) 33.1 69.5 -52.4%
Paris' performance in the period was encouraging with good momentum in the
second quarter. Storage revenue grew by 4.8% compared to H1 2022 and by 6.6%
in the second quarter. Ancillary revenues were down 1.0% compared to April
2022, Overall, this resulted in like-for-like revenue growing by 4.3%.
Further, the total and like-for-like cost base in Paris was up 5.3% compared
to the prior year and, as a result, like-for-like EBITDA grew to €16.9m
(2022: €16.3m), an improvement of €0.6m or 3.7% on 2022.
The average storage rate was up 4.1% for the period and grew sequentially in
the second quarter by 3.7% compared to the first quarter. Average occupancy
was up 0.7% and closing occupancy, at 80.1%, was down 0.5ppts compared to
April 2022
Sterling equivalent revenue was up 9.0% reflecting a 4.3% weakening in the
average Sterling to Euro exchange rate over the comparative period.
Operating profit for the Paris business was £29.1m (H1 2022: £58.5m), a
decrease of £29.4m or 50.3%, driven by the decrease in the gain of investment
properties of £26.1m to £14.4m (H1 2022: £40.5m).
Spain Trading Performance
Spain Operating Performance- total 2023 2022 Change
Storage Revenue (€'m) 1.72 1.57 9.6%
Ancillary Revenue (€'m) 0.24 0.16 50.0%
Revenue (€'m) 1.95 1.73 13.4%
EBITDA (€'m)(3) 0.5 1.1 -54.5%
EBITDA (after leasehold costs) (€'m) 0.3 0.8 -62.5%
Closing Occupancy (let sq ft- million)(4) 0.105 0.094 11.7%
Closing Occupancy (% of MLA) 42.4% 86.6% -44.2ppts
Maximum Lettable Area (MLA)(5) 0.250 0.110 127.3%
Average Storage Rate (€)(6) 35.44 34.09 4.0%
REVPAF (€) 19.81 32.13 -38.3%
Revenue (£'m) 1.7 1.4 21.4%
Spain Operating Performance- like-for-like(9) 2023 2022 Change
Storage Revenue (€'m) 1.61 1.57 2.5%
Ancillary Revenue (€'m) 0.20 0.16 23.1%
Revenue (€'m) 1.80 1.73 4.7%
EBITDA (€'m)(3) 1.1 1.0 10.0%
EBITDA (after leasehold costs) (€'m) 0.9 0.7 28.6%
Closing Occupancy (let sq ft- million)(4) 0.085 0.094 -9.6%
Closing Occupancy (% of MLA) 78.3% 86.6% -8.3ppts
Average Occupancy (let sq ft- million)(4) 0.087 0.093 -6.5%
Maximum Lettable Area (MLA)(5) 0.110 0.110 -
Average Storage Rate (€)(6) 37.18 34.09 9.1%
REVPAF (€) 33.55 32.13 4.4%
Spain Statutory metrics 2023 2022 Change
Operating profit (£'m) 2.8 1.2 133.3%
Operating profit (€'m) 3.1 1.4 121.4%
Our Spanish business, which was acquired in December 2019, contributed
€1.95m of revenue in the period, up 13.4% compared to the prior year. The
strategy of improving average rate and ancillary sales whilst sacrificing some
occupancy is working. Closing occupancy on a like-for-like basis was down
8.3ppts at 78.3% (H12022: 86.6%) whilst like-for-like average storage rate for
the six months grew by 9.1% to €37.18 (H12022: €34.09) with ancillary
revenues improving strongly by 23.1%.
It should be noted that the like-for-like occupancy in Barcelona has initially
been diluted by the new Central Barcelona 2 store having opened in close
proximity and within the same catchment area as an existing store. In
addition, the imminent opening of Central Barcelona 3 also within short
distance may initially further dilute the like-for-like occupancy, but
management believes that, given the limited supply in central Barcelona, once
the absorption phase has been passed, the business will generate higher
revenue and profits.
The business currently operates eight stores, four of them having only
recently opened. A further seven stores are due to open in the next 18 months.
Once their revenue stabilizes, we expect the business to be able to provide
similar levels of margins as the rest of the more mature business.
The above revenue performance, combined with a modest investment in central
headcount resulted in the business contributing €0.5m of EBITDA (H12022:
€1.1m)
Operating profit for the Spain business was £2.8m (H1 2022: £1.2m), an
increase of £1.6m or 133.3%, driven by the increased in gain of investment
properties of £1.7m to £2.1m (H1 2022: £0.4m).
Benelux Trading Performance(14)
Our Netherlands and Belgium businesses were acquired on 30 March 2022,
contributed €5.5m revenue in the period and EBITDA of €2.8m.
Our Netherlands business ended the period with a closing occupancy of 80.3%
whilst our Belgian business had a 75.9% occupancy.
Frederic Vecchioli
13 June 2023
Financial Review
Underlying Income Statement
The table below sets out the Group's underlying results of operations for the
six months ended 30 April 2023 and the six months ended 30 April 2022.
H1 2023 H1 2022 Mvmt
£'m £'m %
Revenue 110.1 101.0 9.0%
Underlying costs (40.4) (36.0) 12.2%
Share of associate's underlying EBITDA - 0.2 (100.0%)
Underlying EBITDA 69.7 65.2 6.9%
Leasehold rent (7.2) (6.5) 10.8%
Underlying EBITDA after leasehold rent 62.5 58.7 6.5%
Depreciation (0.6) (0.5) 20.0%
Finance charges (7.5) (5.9) 27.1%
Share of associate's finance charges - (0.5) (100.0%)
Underlying profit before tax 54.4 51.8 5.0%
Current tax (2.6) (2.6) 0.0%
Adjusted EPRA earnings 51.8 49.2 5.3%
Share-based payments charge (1.3) (6.0) (78.3%)
EPRA basic earnings 50.5 43.2 16.9%
Average shares in issue (m) 216.5 210.8
Diluted shares (for ADE EPS) (m) 219.0 218.6
Adjusted diluted EPRA EPS (p) 23.7 22.5 5.3%
Notes:
1. Adjusted Diluted EPRA EPS is defined in note 2 to the financial
statements.
2. Adjusted EPRA earnings excludes share-based payment charges and,
accordingly, the underlying EBITDA, underlying EBITDA after leasehold rent and
underlying profit before tax measures have been restated to exclude
share-based payment charges for consistency.
The table below reconciles statutory profit before tax in the income statement
to underlying profit before tax in the table above.
H1 2023 H1 2022
£'m £'m
Statutory profit before tax 103.4 285.2
Adjusted for
- gain on investment properties and investment properties under construction (51.7) (227.9)
- change in fair value of derivatives 1.4 (0.8)
- net exchange loss - 0.3
- share-based payments 1.3 6.0
- other exceptional gains - (10.5)
- exceptional finance income - (0.5)
Underlying profit before tax 54.4 51.8
Management considers the above presentation of earnings to be representative
of the underlying performance of the business.
Underlying EBITDA increased by 6.9% to £69.7m (H1 2022: £65.2m) reflecting a
9.0% increase in revenue offset by a 12.2% increase in the underlying cost
base (see below).
Finance charges increased from £5.9m in H1 2022 to £7.5m in H1 2023. This
principally reflects the increased borrowing associated with store
acquisitions and developments. It should be noted, on 11 November 2022, the
Group completed the refinancing of its RCF which was 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.
As a result, we achieved a 5.0% increase in underlying profit before tax of
£54.4m (H1 2022: £51.8m).
The reduction in statutory profit of £181.8m to £103.4m (H1 2022: £285.2)
results from the lower gain on investment properties of £176.2m to £51.7m
(H1 2022: £227.9m) as well as a reduction in exceptional items of £11.0m
offset by the lower share-based payment charge by £4.7 million to £1.3
million (H1 2022: £6.0 million)
In the prior year, included within statutory profit before tax were other
exceptional gains of £10.5m. £5.5m 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 £5.0m relating to the
profit on the sale of the Nanterre land in Paris in November 2021. Further, in
the prior year, the exceptional finance income related to the profit made on
the termination of interest rate swaps associated with the Joint Venture.
Given the Group's REIT status in the UK, tax is normally only payable in
France, Spain, Netherlands and Belgium. The current tax charge for the period
was flat at £2.6m (H1 2022: £2.6m).
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 5.3% to 23.7 pence (H1 2022: 22.5 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the consolidated
income statement to underlying EBITDA.
H1 2023 H1 2022
£'m £'m
Statutory operating profit 114.9 292.6
Adjusted for
- gain on investment properties (47.3) (223.9)
- share of associate's finance charges - 0.5
- depreciation 0.6 0.5
- variable lease payments 0.2 -
- share-based payments 1.3 6.0
Other exceptional gains
- net gain on deemed disposal of investment in associate - (5.5)
- profit on sale of land - (5.0)
Underlying EBITDA 69.7 65.2
The main reconciling items between statutory operating profit and underlying
EBITDA are the gain on investment properties of £47.3m in H1 2023 (H1 2022:
£223.9m), represented by a gain on investment properties and investment
properties under construction of £51.7m and fair value re-measurement of
lease liabilities add-back (£4.4m), as well as adjustments for other
exceptional gains, as mentioned above. The Group's approach to the valuation
of its investment property portfolio at 30 April 2023 is discussed below.
Underlying Profit by geographical region
The Group is organised and managed in five operating segments based on
geographical region, with Benelux representing our Netherlands and Belgium
operations. The table below details the underlying profitability of each
region.
H1 2023 H1 2022
UK Paris Spain Benelux Total (CER) UK Paris Spain Benelux Total (CER)
£'m €'m €'m €'m £'m £'m €'m €'m €'m £'m
Revenue 81.7 24.8 1.8 5.5 108.8 78.9 23.8 1.7 0.8 101.0
Underlying cost of sales (25.2) (6.4) (0.8) (2.3) (33.5) (23.0) (5.9) (0.4) (0.3) (28.6)
Store EBITDA 56.5 18.4 1.0 3.2 75.3 55.9 17.9 1.3 0.5 72.4
Store EBITDA margin 69.2% 74.2% 55.6% 58.2% 69.2% 70.8% 75.2% 76.5% 62.5% 71.7%
LFL store EBITDA margin 68.9% 74.2% 77.8% - 70.0% 70.6% 75.2% 76.5% - 71.6%
Underlying administrative expenses (4.6) (1.5) (0.5) (0.4) (6.6) (5.8) (1.6) (0.2) (0.1) (7.4)
Underlying EBITDA 51.9 16.9 0.5 2.8 68.7 50.1 16.3 1.1 0.4 65.0
EBITDA margin 63.5% 68.1% 27.8% 50.9% 63.1% 63.5% 68.5% 64.7% 50.0% 64.4%
LFL EBITDA margin 63.4% 68.1% 61.1% - 64.3% 63.2% 68.5% 58.8% - 64.3%
Leasehold rent (4.1) (3.2) (0.2) (0.2) (7.0) (3.8) (3.0) (0.3) - (6.5)
Underlying EBITDA after leasehold rent 47.8 13.7 0.3 2.6 61.7 46.3 13.3 0.8 0.4 58.5
EBITDA after leasehold rent margin 58.5% 55.2% 16.7% 47.3% 56.7% 58.7% 55.9% 47.1% 50.0% 57.9%
UK Paris Spain Benelux Total UK Paris Spain Benelux Total
£'m £'m £'m £'m £'m £'m £'m £'m £'m £'m
Underlying EBITDA after leasehold rent (CER) 47.8 11.6 0.3 2.0 61.7 46.3 11.3 0.6 0.3 58.5
Adjustment to actual exchange rate - 0.5 0.1 0.2 0.8 - - - - -
Reported underlying EBITDA after leasehold rent 47.8 12.1 0.4 2.2 62.5 46.3 11.3 0.6 0.3 58.5
Note: CER is Constant Exchange Rates (Euro denominated results for the current
period have been retranslated at the exchange rate effective for the
comparative period in order to present the reported results on a more
comparable basis).
Underlying EBITDA in the UK increased by £1.8m, or 3.6%, to £51.9m (H1 2022:
£50.1m), reflecting a 3.5% increase in revenue, arising from a 6.9% increase
in average rate offset by a decrease in like-for-like average occupancy of
4.0%, and an increase of 3.5% in the underlying cost base, with like-for-like
underlying costs increasing 2.1%. The UK also reflected steady like-for-like
revenue growth of 2.7%. The underlying UK EBITDA margin remained constant at
63.5% compared to H1 2022 whilst the like-for-like EBITDA margin saw a
marginal increase.
In Paris, underlying EBITDA increased by €0.6m, or 3.7%, to €16.9m (H1
2022: €16.3m), reflecting a €1.0m increase in revenue, arising from a 4.1%
increase in the average storage rate coupled with a 0.7% increase in average
occupancy. The EBITDA after leasehold costs margin in Paris decreased slightly
from 55.9% in H1 2022 to 55.2% in H1 2023, reflecting the underlying cost base
of the portfolio, with underlying costs increasing by 5.3%. Underlying EBITDA
after leasehold rent in Paris increased by 3.0% to €13.7m (H1 2022:
€13.3m).
In Spain, revenue increased to €1.8m (H1 2002: €1.7m), arising from a 9.1%
increase in like-for-like average storage rate, offset by a decrease in
like-for-like average occupancy of 6.5%. Underlying EBITDA decreased by
€0.6m to €0.5m, 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 €5.5m and €2.6m
EBITDA after leasehold costs.
The combined performance of the UK, Paris, Spain, Netherlands and Belgium
resulted in a 5.5% increase in underlying EBITDA after leasehold rent at
constant exchange rates. Adjusting for a favourable exchange rate movement of
4.3% resulting in an impact of £0.8m in the current year, Group reported
underlying EBITDA after leasehold rent has increased by 6.8% or £4.0m to
£62.5m (H1 2022: £58.5m, excluding £0.2m of associate EBITDA).
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
H1 2022 and H1 2023.
H1 2023 % of total H1 2022 % of total % change
UK £'m 81.7 73% 78.9 78% 3.5%
Paris
Local currency €'m 24.8 23.8 4.3%
Paris in Sterling £'m 21.8 20% 20.0 20% 9.0%
Spain
Local currency €'m 1.8 1.7 13.4%
Spain in Sterling £'m 1.7 2% 1.4 1% 21.4%
Benelux
Local currency €'m 5.5 0.8 588%
Benelux in Sterling £'m 4.9 5% 0.7 1% 600%
Average exchange rate €:£ 1.139 1.190 4.3%
Total revenue 110.1 100% 101.0 100% 9.0%
The Group's reported revenue increased by 9.0% or £9.1m during the period.
This was driven by the reported average rental rate for the Group increasing
to £30.58 (H1 2022 £29.38), offset by a decrease in occupancy of 4.0ppts to
76.7% (H1 2022: 80.7%). The Group's occupied space was 62,000 sq ft lower at
30 April 2023 (6.124 million sq ft) than at 30 April 2022 (6.186 million sq
ft).
On a like-for-like basis, adjusting for the impact of new stores, the Group's
revenue has increased by 4.1% compared to H1 2022. Adjusting for the exchange
impact in the current year, revenue increased by 3.1% on a constant currency
and like-for-like basis.
In the UK, reported revenue increased by £2.8m or 3.5%. This was driven by
the average rental rate increasing by 6.9% to £30.50 (H1 2022: £28.53)
offset by a closing occupancy decrease of 3.1% to 4.410 million sq ft at 30
April 2023 (H1 2022: 4.549 million sq ft). The average space occupied during
the period decreased by 3.2% compared with H1 2022 at 4.40 million sq ft (H1
2022: 4.55 million sq ft).
On a like-for-like basis, adjusting for new stores, UK revenue increased by
£2.1m or 2.7% arising from a 6.9% increase in the average store rate offset
by a 4.0% decrease in average occupancy.
In Paris, revenue increased by €1.0m or 4.3%. The average Euro exchange rate
for H1 2023 was €1.139:£1 compared with €1.190:£1 in H1 2022 resulting
in a positive impact on revenue of £0.9m and revenue in constant currency
increased by £0.9m to £20.9m (H1 2022: £20.0m).
The average rental rate in Paris was €42.02 for the period, an increase of
4.1% on H1 2022, €40.38.
Paris average occupancy for the period has increased by 0.7% compared to 30
April 2022 to 1.095 million sq ft with closing occupancy at 30 April 2023
decreasing slightly by 0.6% compared to 30 April 2022 to 1.091 million sq ft.
For Spain, revenue was €1.8m in the period. The average rental rate in Spain
was €35.44 for the period, an increase of 4.0% on H1 2022 at €34.09.
Closing occupancy was 0.105 million sq ft (H1 2022: 0.094 million sq ft), or
78.3% (H1 2022: 86.6%) on a like-for-like basis.
The Benelux business contributed of €5.5m of revenue for the period. For the
Netherlands, closing occupancy was 80.3% with an average rental rate of
€18.95, and for Belgium, closing occupancy was 75.9% with an average rental
rate of €20.80.
Analysis of Cost Base
On a like-for-like basis, adjusting for new stores, total costs increased by
3.1% from £35.5m in H1 2022 to £36.6m in H1 2023, The below tables detail
the key movements in cost of sales and administration expenses between H1 2022
and H1 2023.
Cost of sales
Cost of sales H1 2023 H1 2022
£'m £'m
Reported cost of sales (34.5) (29.1)
Adjusted for:
Depreciation 0.6 0.5
Variable lease payments 0.2 -
Underlying cost of sales (33.7) (28.6)
Underlying cost of sales for H1 2022 (28.6)
New developments cost of sales 0.4
Underlying cost of sales for H1 2022 (Like-for-like) (28.2)
Employee remuneration and volume related (1.1)
Utilities, facilities and business rates (1.2)
Enquiry generation (0.3)
Underlying cost of sales for H1 2023 (Like-for-like; CER) (30.8)
New developments cost of sales (2.7)
Underlying cost of sales for H1 2023 (CER) (33.5)
Foreign exchange (0.2)
Underlying cost of sales for H1 2023 (33.7)
In order to arrive at underlying cost of sales, adjustments are made to remove
the impact of depreciation and variable lease payments.
Adjusting for the impact of new stores, underlying cost of sales at CER on a
like-for-like basis increased by 9.2% or £2.6m, to £33.7m (H1 2022:
£28.6m), principally due to increased employee remuneration and volume
related costs and facilities and utilities costs.
The cost of sales attributable to new and acquired sites at Christchurch,
Wigan, London-Morden, North Barcelona, Central Barcelona, North Madrid, South
Madrid and Belgium and The Netherlands is £2.7m in H1 2023.
Administrative Expenses
The table below reconciles reported administrative expenses to underlying
administrative expenses and details the key movements in underlying
administrative expenses between H1 2022 and H1 2023.
Administrative expenses H1 2023 H1 2022
£'m £'m
Reported administrative expenses (8.0) (13.4)
Adjusted for:
Share-based payments 1.3 6.0
Exceptional items - -
Underlying administrative expenses (6.7) (7.4)
Underlying administrative expenses for H1 2022 (7.4)
New development administrative expenses 0.1
Underlying administrative expenses for H1 2022 (Like-for-like) (7.3)
Employee related costs 1.2
Professional fees and administration costs 0.3
Underlying administrative expenses for H1 2023 (Like-for-like; CER) (5.8)
New development administrative expenses (0.8)
Underlying administrative expenses for H1 2023 (CER) (6.6)
Foreign exchange (0.1)
Underlying administrative expenses for H1 2023 (6.7)
In order to arrive at underlying administrative expenses, adjustments are made
to remove the impact of exceptional items, share-based payments and corporate
transaction costs.
Underlying administrative expenses decreased by 9.5% or £0.6m to £6.7m (H1
2022: £7.3m). The decrease arose predominantly from a reduction in employee
and related costs of £1.2m, offset by new stores and development
administrative expenses of £0.7m.
Exceptional items
In France, the basis on which property taxes have been assessed has been
challenged by the tax authority for financial years 2012 to 2013 and 2016
onwards. In March 2021 the French Court of Appeal (COA) delivered a judgement
in respect of years 2012 and 2013, which resulted in a partial success for the
Group. A further appeal was lodged with the French Supreme Court (SC) against
those decisions on which the Group was unsuccessful, but this was unsuccessful
following decisions released by the SC in H1 2023. The outcome for 2012 and
2013 is therefore final. A provision is included in the consolidated financial
accounts of £2.6m at 30 April 2023 (31 October 2022: £2.4m), to reflect the
increased uncertainty surrounding the likelihood of a successful outcome for
years 2016 onwards, which are subject to separate litigation. Of the total
provided, £0.2m has been charged in relation to 6 months to 30 April 2023 (30
April 2022: £0.1m) within cost of sales (underlying EBITDA).
Investment Properties
A full external valuation of the store portfolio is undertaken by the Group on
an annual, rather than a six-monthly basis. At 30 April 2023, a sample of the
Group's largest properties, representing approximately 43% of the value of the
Group's investment property portfolio at 31 October 2022, has been valued by
the Group's external valuers, Cushman & Wakefield LLP ("C&W"). In
addition, at the same date, the Directors have prepared estimates of fair
values for the remaining 57% of the Group's investment property portfolio,
updating 31 October 2022 valuations to incorporate latest assumptions to
reflect current market conditions and trading.
As a result of this exercise, the net gain or loss on investment properties
during the period was as follows.
H1 2023 H1 2022
£'m £'m
Revaluation of investment properties 52.3 229.8
Revaluation of investment properties under construction (0.6) (1.9)
Fair value re-measurement of lease liabilities add back (4.4) (4.0)
Gain on investment properties 47.3 223.9
The movement on investment properties reflects the increased value of the
Group's store portfolio as a result of the continuing strong trading
performance and store extensions. The UK business contributed £24.4m of the
£52.3m net revaluation gain, with a £16.5m revaluation gain arising in
Paris, a £2.3m revaluation gain arising in Spain and a £9.1m valuation gain
arising in Benelux. The valuation gain has primarily arisen due to improving
average rate achieved in each of the geographies.
Operating profit
Reported operating profit decreased by £177.7m from £292.6m in H1 2022 to
£114.9m in H1 2023, primarily reflecting a £176.6m lower investment property
gain offset by a £4.5m improvement in underlying EBITDA.
Net finance costs
Net finance costs include interest payable, interest on obligations under
lease labilities, fair value movements on derivatives, exchange gains or
losses, unwinding of discounts and exceptional finance income. Net finance
costs increased by £4.1m to £11.5m in H1 2023 (H1 2022: £7.4m). The main
driver of the increase was net bank interest payable reflecting the Group's
additional borrowings to fund the Group's acquisition and development activity
and fair value movements on derivatives.
H1 2023 H1 2022
£'m £'m
Interest from loan to associates - 0.1
Other interest received 0.5 0.1
Underlying finance income 0.5 0.2
Exceptional finance income - 0.5
Total finance income 0.5 0.7
Net bank interest payable (7.3) (5.8)
Amortisation of debt issuance costs on bank loans (0.7) (0.3)
Underlying finance costs (8.0) (6.1)
Interest on obligations under lease liabilities (2.6) (2.5)
Fair value movement on derivatives (1.4) 0.8
Net exchange losses - (0.3)
Total finance costs (12.0) (8.1)
Net finance costs (11.5) (7.4)
Underlying finance charge
The underlying finance costs (net bank interest payable reflecting term loan,
swap and USPP interest costs and the amortisation of debt issuance costs)
increased by £1.9m to £8.0m (H1 2022: £6.1m), principally reflecting the
Group's additional borrowings in the year drawn to fund the Group's
acquisition and development activity as wells as increased amortisation of
debt issuance costs arising from the refinancing in November 2022. The
underlying finance costs represent the finance expense before interest on
obligations under lease liabilities, changes in fair value of derivatives and
exceptional items and is disclosed because management reviews and monitors
performance of the business on this basis.
Offsetting the underlying finance costs is the underlying finance income of
£0.5m (H1 2022: £0.2m). The increase in underlying finance income is mostly
due to £0.4m received on settlement of interest rate swaps at the end of
April 2023. As a result, net underlying finance charges were £7.5m in the
period (H1 2022: £5.9m).
Based on the drawn debt position as at 30 April 2023, 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 £137.0 £55.0 40% 1.25% 0.69% 4.18% 4.03%
UK Revolver - EUR drawn £35.9 - - 1.25% - 2.89% 4.14%
UK Revolver- non-utilisation £227.1 - - - 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 £61.4 £61.4 100% 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 £64.9 £64.9 100% 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 £25.4 £25.4 100% 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 £92.0 £92.0 100% 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 £25.4 £25.4 100% 1.42% - - 1.42%
Unamortised finance costs - (£4.9) - - - - - -
Total £929.3 £697.2 £584.2 84% 2.77%
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 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 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.
As at 30 April 2023, £172.9m of the £400.0m UK revolver was drawn as
£137.0m and €41.0m (£35.9m). 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 £227.1m.
The Group has interest rate hedge agreements in place to June 2023, swapping
SONIA on £55.0m at a weighted average effective rate of 0.69%. These interest
rate swaps are in place to hedge the UK Revolver floating SONIA rate.
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 €50.9m),
1.26% (on €70.0m), 2.00% (on €74.1m), 0.93% (on €29.0m), 2.45% (on
€105.0m) and 1.42% (on €29.0m) respectively. The Euro denominated
borrowings provide a natural hedge against the Group's investment in the
Paris, Spain and Benelux businesses.
The 2026 (£35.0m), 2028 (£20.0m), 2029 (£50.5m), 2029 (£30.0m), 2031
(£80.0m) US Private Placement Notes are denominated in Sterling and attract a
fixed interest rate of 2.59%, 1.96%, 2.92%, 2.69% and 2.39% respectively.
As a result of the hedging arrangements and fixed interest loan notes,
effectively 84% of the Group's drawn debt is at fixed rates of interest.
Overall, the Group has an effective interest rate on its borrowings of 2.77%
at 30 April 2023, compared to 2.41% at the previous year end.
Non-underlying finance charge
Interest on finance leases was £2.6m (H1 2022: £2.5m) and reflects part of
the leasehold rental payment. The balance of the leasehold payment is charged
through the gain or loss on investment properties line and variable lease
payments in the income statement. Overall, the leasehold rent charge increased
by £0.7m to £7.2m in H1 2023 (H1 2022: £6.5m). A net loss of £1.4m was
recognised on fair valuation of derivatives (H1 2022: net gain of £0.8m).
The Group undertakes net investment hedge accounting for its Euro denominated
loan notes.
Tax
The tax charge for the period is analysed below:
Tax charge H1 2023 H1 2022
£'m £'m
Underlying current tax 2.6 2.6
Prior year - exceptional - 0.9
Current tax charge 2.6 3.5
Tax on investment properties movement 8.0 11.7
Deferred tax charge 8.0 11.7
Net tax charge 10.6 15.2
Income tax in the period was a net charge of £10.6m (H1 2022: £15.2m).
In the UK, the Group is a REIT, so the current tax charge relates to the
Paris, Spain and Netherlands businesses. The underlying current tax charge for
the period amounted to £2.6m (H1 2022: £2.6m).
Profit after tax
The profit after tax for the period was £92.8m, compared with £270.0m in H1
2022, a decrease of £177.2m which arose principally due to the decreased gain
on investment properties, which is explained above.
Basic EPS was 42.9 pence (H1 2022: 128.1 pence) and diluted EPS was 42.7 pence
(H1 2022: 124.5 pence). As explained in note 2 to the financial statements,
management considers adjusted diluted EPRA EPS to be more representative of
the underlying EPS performance of the business.
Dividends
The Board has announced an interim dividend of 9.9 pence per share,
representing a 5.3% increase from the interim dividend paid last year of 9.4
pence. This will amount to a dividend payment of £21.6m (H1 2022: £19.8m).
The dividend will be paid on 10 August 2023 to shareholders who are on the
Company's register at the close of business on 7 July 2023. The ex-dividend
date will be 6 July 2023. 25% (H1 2022: 25%) of the dividend will be paid as a
REIT Property Income Distribution ("PID").
Property Valuation
As discussed above, a sample of the Group's largest properties, representing
approximately 43% of the value of the Group's investment property, has been
valued by the Group's external valuers and the Directors have prepared
estimates of fair values for the remaining 57% of the Group's investment
property portfolio.
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 - 10.4 0.4 2.6 13.4
Additions 16.9 3.3 5.6 7.4 33.2 3.7 6.3 8.5
Reclassifications 7.2 - 22.7 - 29.9 - 25.8 -
Revaluation 24.4 16.5 2.3 9.1 52.3 18.8 2.6 10.5
Value at 30 April 2023 1,805.3 568.3 58.3 154.7 2,586.6 648.4 66.6 176.7
The table above summarises the movement in the valuations of the Group's
investment property portfolio excluding investment properties under
construction.
The exchange rate at 30 April 2023 was €1.141:£1 compared to €1.163:£1
at 31 October 2022. This movement in the foreign exchange rate has resulted in
a £13.4m positive currency translation movement in the period.
The Group's property portfolio valuation excluding investment properties under
construction has increased by £128.8m from the valuation of £2,457.8m at 31
October 2022. This reflects the gain on valuation of £52.3m, which is
explained above, £63.1m relating to additions, store refurbishments and
reclassifications as well as £13.4m of favourable foreign exchange movements
on the translation of the European portfolios. On a like-for like basis the
portfolio increased 2.7%.
The EPRA basic NTA per share, as reconciled to IFRS net assets per share in
financial statements, was 848 pence at 30 April 2023, 31 October 2022 (848
pence), and the IFRS reported NAV per share was 845 pence (FY2022: 820 pence),
reflecting a £54.9m increase in reported net assets since 31 October 2022.
Gearing and Capital Structure
As at 30 April 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 finance leases and cash) stood at £776.6m at 30 April
2023, an increase of £78.3m during the period, from £698.3m at 31 October
2022, principally due to increased funding required for store acquisitions and
developments. Total capital (net debt plus equity) increased from £2,491.7m
at 31 October 2022 to £2,624.9m at 30 April 2023. The net impact is that the
gearing ratio has increased to 29.6% at 30 April 2023 from 28.0% at 31 October
2022.
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 finance leases). At 30 April 2023, the Group LTV ratio
was 25.3% compared with 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 to achieve
our medium term strategic objectives.
As at 30 April 2023, £172.9m of the £400.0m UK revolver were drawn.
Including the US Private Placement debt of €358.0m (£313.7m) and £215.5m,
the Group's borrowings totalled £702.1m (before adjustment for unamortised
finance costs). As at 30 April 2023, the weighted average remaining term for
the Group's committed borrowing facilities is 5.5 years, including the new RCF
signed in November 2022.
Borrowings under the existing loan facilities are subject to certain financial
covenants. The UK bank facilities and the US Private Placement share interest
cover and LTV covenants. The interest cover requirement of EBITDA:interest is
2.4:1, where it will remain until the end of the facilities' terms. Interest
cover for the rolling twelve month period to 30 April 2023 is 10.8x (FY2022:
11.4x), calculated on the basis required under our financial covenants.
The LTV covenant is 60% for the Group, where it will remain until the end of
the facilities' terms. As at 30 April 2023, there is significant headroom in
the Group LTV covenant calculations. The Group is in compliance with its
covenants at 30 April 2023 and, based on forecast projections (which
considered a number of factors, including the current balance sheet position,
the principal and emerging risks which could impact the performance of the
Group, and the Group's strategic and financial plan), is expected to be in
compliance for a period in excess of twelve months from the date of this
report and accordingly, this interim statement is prepared on the basis of
going concern.
Cash flow
The table below sets out the cash flow of the business in H1 2022 and H1 2023.
H1 2023 H1 2022
£'m £'m
Underlying EBITDA 69.7 65.2
Working capital/ exceptionals/ other (19.8) (0.1)
Adjusted operating cash inflow 49.9 65.1
Interest payments (7.1) (5.0)
Leasehold rent payments (7.2) (6.5)
Tax payments (3.7) (2.9)
Free cash flow (before investing and financing activities) 31.9 50.7
Acquisition of subsidiaries, net of cash acquired - (111.5)
Investment in associates (1.5) (0.7)
Capital expenditure - investment properties (62.2) (44.7)
Capital expenditure - property, plant and equipment (0.5) (0.3)
Net proceeds from disposal of land - 1.0
Adjusted net cash flow after investing activities (32.3) (105.5)
Issues of share capital 0.3 -
Dividends paid (37.7) (31.9)
Net drawdown of borrowings 71.1 141.1
Swap termination income 0.4 0.5
Debt issuance costs (4.3) (0.1)
Net (decrease)/increase in cash (2.5) 4.1
Note: Free cash flow is a non-GAAP measure, defined as cash flow before
investing and financing activities but after leasehold rent payments.
Adjusted operating cash flow decreased by £15.2m in the period. 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 partly offset by the
£4.5m increase in underlying EBITDA.
Interest payments increased compared to the prior half year as a result of the
increased interest charge associated with the additional borrowings to fund
the capital expenditure on new stores and development of the existing
portfolio.
Tax paid during the period increased by £0.8m principally due to increased
payments on account associated with the stronger European performance. As a
result, free cash flow (before investing and financing activities) decreased
by £18.8m to £31.9m (H1 2022: £50.7m).
Investing activities generated a net outflow of £64.2m (H1 2022: net outflow
of £156.2m) from capital expenditure on new stores and development of the
existing portfolio. In the prior year, the capital expenditure outflow
predominantly related to the acquisition of the remaining 80% of the Joint
Venture with Carlyle Europe Realty. Of the £62.2m cash outflow on investment
properties, £59.4m (H1 2022: £42.5m) was spent on new stores and development
of the existing portfolio, with the balance principally spent on capital
maintenance.
Dividends paid to shareholders increased from £31.9m in H1 2022 to £37.7m in
H1 2023, and the Group drew a net £71.1m of borrowings, primarily to finance
capital expenditure.
The first table below reconciles free cash flow (before investing and
financing activities) in the table above to net cash inflow from operating
activities in the consolidated cash flow statement. The second table below
reconciles adjusted net cash flow after investing activities in the table
above to the consolidated cash flow statement.
H1 2023 H1 2022
£'m £'m
Free cash flow (before investing and financing activities) 31.9 50.7
Addback: Finance lease principal payments 4.4 4.0
Net cash inflow from operating activities 36.3 54.7
H1 2023 H1 2022
£'m £'m
From table above:
Adjusted net cash flow after investing activities (32.3) (105.5)
Addback: Finance lease principal payments 4.4 4.0
Net cash outflow after investing activities (27.9) (101.5)
From consolidated cash flow:
Net cash inflow from operating activities 36.3 54.7
Net cash outflow from investing activities (64.2) (156.2)
Net cash outflow after investing activities (27.9) (101.5)
Financial Reporting Council
During the half year to 30 April 2023, the Board received correspondence from
the Financial Reporting Council ("FRC") concerning the payment of the 2022
interim dividend. Although the Company had adequate distributable reserves to
cover this interim dividend, paid on 11 August 2022, the Company had not made
the relevant filings at Companies House in respect of the payment of these
interim dividends. In order to rectify the situation, the Company intends to
file the required interim accounts for the Company and propose resolutions at
its 2024 AGM to approve deeds of release between the Company and each of its
shareholders and directors. The Company has also taken the necessary steps to
ensure that procedural issues do not arise in future in relation to the
payment of dividends. The FRC has acknowledged this remedy as appropriate.
Consolidated income statement
for the six months ended 30 April 2023
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
Note £m £m £m
Revenue 4,5 110.1 101.0 212.5
Cost of sales (34.5) (29.1) (63.0)
Gross profit 75.6 71.9 149.5
Administrative expenses (8.0) (13.4) (27.1)
Share of (loss)/profit in associate - (0.3) (0.3)
Underlying EBITDA 5 69.7 65.2 135.1
Exceptional items 6 - - (0.1)
Share-based payments (1.3) (6.0) (11.2)
Depreciation and variable lease payments (0.8) (0.5) (1.3)
Share of associate's depreciation, interest and tax - (0.5) (0.4)
Operating profit before gain on investment properties and other exceptional 67.6 58.2 122.1
gains
Gain on investment properties 13 47.3 223.9 381.6
Other exceptional gains 6 - 10.5 10.8
Operating profit 114.9 292.6 514.5
Finance income 7 0.5 0.7 2.0
Finance expense 7 (12.0) (8.1) (17.7)
Profit before income tax 5 103.4 285.2 498.8
Income tax charge 8 (10.6) (15.2) (35.9)
Profit for the period 92.8 270.0 462.9
Earnings per share for profit attributable to the equity holders
- basic (pence) 11 42.9 128.1 219.5
- diluted (pence) 11 42.7 124.5 212.4
All items in the income statement relate to continuing operations.
Underlying EBITDA is an Alternative Performance Measure and is defined as
operating profit before exceptional items, share-based payments, corporate
transaction costs, gain/loss on investment properties, depreciation and
variable lease payments and the share of associate's depreciation, interest
and tax.
An interim dividend of 9.9 pence per ordinary share has been declared for the
period ended 30 April 2023 (30 April 2022: 9.4 pence).
Consolidated statement of comprehensive income
for the six months ended 30 April 2023
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Profit for the period 92.8 270.0 462.9
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss:
Currency translation differences 9.2 (3.1) 8.0
Net investment hedge (3.8) 0.7 (4.6)
Total other comprehensive income / (expense) net of tax 5.4 (2.4) 3.4
Total comprehensive income for the period 98.2 267.6 466.3
Consolidated balance sheet
as at 30 April 2023
30 April 30 April 31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
Note £m £m £m
Non-current assets
Investment in associates 12 3.3 1.8 1.8
Fair value of investment properties, net of lease liabilities 2,586.6 2,271.1 2,457.8
Add-back of lease liabilities 97.3 82.6 95.1
Investment properties under construction 93.7 60.9 94.5
Total investment properties 13 2,777.6 2,414.6 2,647.4
Property, plant and equipment 3.2 3.0 3.4
Derivative financial instruments 17 - 0.8 -
Deferred tax assets 9 0.8 1.5 0.8
2,784.9 2,421.7 2,653.4
Current assets
Inventories 0.4 0.4 0.3
Derivative financial instruments 17 0.3 1.4 1.7
Trade and other receivables 36.0 27.8 31.2
Current income tax assets 0.2 - -
Cash and cash equivalents 18.1 46.8 20.9
55.0 76.4 54.1
Total assets 2,839.9 2,498.1 2,707.5
Current liabilities
Bank Borrowings 16 - - (101.7)
Derivative financial instruments 17 - (0.1) -
Trade and other payables (54.9) (66.3) (62.7)
Current income tax liabilities - (0.9) (0.8)
Obligations under lease liabilities (13.1) (12.5) (13.2)
(68.0) (79.8) (178.4)
Non-current liabilities
Bank borrowings 16 (697.2) (624.3) (522.1)
Deferred tax liabilities 9 (139.4) (112.8) (129.0)
Obligations under lease liabilities (84.4) (70.3) (82.2)
Provisions 21 (2.6) (2.2) (2.4)
(923.6) (809.6) (735.7)
Total liabilities (991.6) (889.4) (914.1)
Net assets 1,848.3 1,608.7 1,793.4
Shareholders' equity
Ordinary shares 18 2.2 2.1 2.1
Share premium 62.0 61.3 61.8
Translation reserve 13.9 2.7 8.5
Retained earnings 1,770.2 1,542.6 1,721.0
Total equity 1,848.3 1,608.7 1,793.4
The notes set out below form an integral part of this condensed consolidated
interim financial information.
Condensed consolidated statement of changes in equity
for the six months ended 30 April 2023
Share Share Translation Retained Total
capital Premium reserve earnings equity
£m £m £m £m £m
Balance at 1 November 2022 2.1 61.8 8.5 1,721.0 1,793.4
Total comprehensive income for the period - - 5.4 92.8 98.2
Transactions with owners in their capacity as owner:
Dividends (note 10) - - - (44.5) (44.5)
Increase in share capital 0.1 0.2 - - 0.3
Employee share options - - - 0.9 0.9
Balance at 30 April 2023 2.2 62.0 13.9 1,770.2 1,848.3
Condensed consolidated statement of changes in equity
for the six months ended 30 April 2022
Share Share Translation Retained Total
capital premium reserve earnings Equity
£m £m £m £m £m
Balance at 1 November 2021 2.1 61.3 5.1 1,306.4 1,374.9
Total comprehensive income for the period - - (2.4) 270.0 267.6
Transactions with owners in their capacity as owner:
Dividends (note 10) - - - (37.1) (37.1)
Increase in share capital - - - - -
Employee share options - - - 3.3 3.3
Balance at 30 April 2022 2.1 61.3 2.7 1,542.6 1,608.7
Condensed consolidated statement of changes in equity
for the year ended 31 October 2022
Share Share Translation Retained Total
capital premium reserve earnings Equity
£m £m £m £m £m
Balance at 1 November 2021 2.1 61.3 5.1 1,306.4 1,374.9
Total comprehensive income for the year - - 3.4 462.9 466.3
Transactions with owners in their capacity as owner:
Dividends (note 10) - - - (56.9) (56.9)
Increase in share capital - 0.5 - - 0.5
Employee share options - - - 8.6 8.6
Balance at 31 October 2022 2.1 61.8 8.5 1,721.0 1,793.4
Consolidated cash flow statement
for the six months ended 30 April 2023
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Profit before income tax 103.4 285.2 498.8
Gain on the revaluation of investment properties (47.3) (223.9) (381.6)
Other exceptional gains - (10.5) (10.8)
Share of loss in associate - 0.3 0.3
Depreciation 0.6 0.5 1.0
Net finance expense 11.5 7.4 15.7
Employee share options 1.0 3.3 8.6
(Increase)/decrease in inventories (0.1) 0.1 0.2
(Increase)/decrease in trade and other receivables (4.2) (1.2) 0.1
(Decrease)/increase in trade and other payables (15.4) 3.8 (0.4)
Increase in provision 0.2 0.1 0.3
Cash flows from operating activities 49.7 65.1 132.2
Interest received - 0.8 0.1
Interest paid (9.7) (8.3) (16.9)
Tax paid (3.7) (2.9) (5.6)
Net cash inflow from operating activities 36.3 54.7 109.8
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - (111.5) (111.5)
Investment in associates (1.5) (0.7) (0.8)
Expenditure on investment and development properties (62.2) (44.7) (95.2)
Proceeds from sale of investment properties - - 6.4
Proceeds from sale of land - 1.0 1.0
Purchase of property, plant and equipment (0.5) (0.3) (1.0)
Proceeds from sale of property, plant and equipment - - 0.2
Net cash (outflow) from investing activities (64.2) (156.2) (200.9)
Cash flows from financing activities
Issue of share capital 0.3 - 0.5
Equity dividends paid (37.7) (31.9) (56.9)
Proceeds from borrowings 176.2 241.1 266.1
Repayment of borrowings (105.1) (100.0) (134.0)
Debt issuance costs (4.4) (0.1) (0.1)
Financial instruments income 0.4 - 1.3
Swap termination income - 0.5 0.5
Principal payment of lease liabilities (4.3) (4.0) (8.4)
Net cash inflow/ from financing activities 25.4 105.6 69.0
Net (decrease) / increase in cash and cash equivalents (2.5) 4.1 (22.1)
Exchange loss on cash and cash equivalents (0.3) (0.5) (0.2)
Opening cash and cash equivalents 20.9 43.2 43.2
Closing cash and cash equivalents 18.1 46.8 20.9
econciliation of net cash flow to movement in net debt
for the six months ended 30 April 2023
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Net increase in cash and cash equivalents (after exchange adjustments) (2.8) 3.6 (22.3)
Increase in debt financing (75.5) (140.1) (152.2)
(Increase)/decrease in net debt (78.3) (136.5) (174.5)
Net debt at start of period (698.3) (523.8) (523.8)
Net debt at end of period (776.6) (660.3) (698.3)
Notes to the interim report for the six months ended 30 April 2023
1 General information
The Company is a public limited company incorporated and domiciled in the UK.
The address of its registered office is Brittanic House, Stirling Way,
Borehamwood, Hertfordshire WD6 2BT.
The Company is listed on the London Stock Exchange.
This interim report was approved for issue on 13 June 2023.
This condensed consolidated interim financial information does not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. The full accounts of Safestore Holdings plc for the year ended 31
October 2022, which received an unqualified report from the auditors, and did
not contain a statement under S.498(2) or (3) of the Companies Act 2006, were
filed with the Registrar of Companies on 23 March 2023.
This condensed consolidated interim financial information for 30 April 2023
and 30 April 2022 is unaudited. The interim financial information for 30 April
2023 has been reviewed by the auditors and their Independent Review report is
included within this financial information.
2 Basis of preparation
The condensed consolidated interim financial information for the six months
ended 30 April 2023 has been prepared in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority and
with United Kingdom adopted International Accounting Standard 34 'Interim
Financial Reporting' (IAS 34).
The Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not less than
twelve months from the date of this report. Accordingly, they continue to
adopt the going concern basis in preparing this condensed consolidated interim
financial information.
In assessing the Group's going concern position as at 30 April 2023, the
Directors have considered a number of factors, including the net current
liability balance sheet position, the principal and emerging risks which could
impact the performance of the Group and the Group's strategic and financial
plan. Consideration has been given to compliance with borrowing covenants
along with the uncertainty inherent in future financial forecasts. The
Directors considered the most recent three-year outlook approved by the Board.
In the context of the current environment, four plausible scenarios were
applied to the plan, including a stress test scenario. These were based on the
potential financial impact of the Group's principal risks and uncertainties
and the specific risks associated with the continued cost-of-living 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 a reverse stress test was carried out 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 £227m). 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.
Further details of the Group's viability statement is included in page 44 of
the Annual Report and Financial Statements for the year ended 31 October 2022.
The assessment concluded that, for the foreseeable future, the Group has
sufficient capital to support its operations; has a funding and liquidity base
which is strong, robust and well managed with substantial future capacity and
has expectations that performance will continue to improve as the Group's
strategy is executed.
The condensed consolidated interim financial information should be read in
conjunction with the annual financial statements for the year ended 31 October
2022, which have been prepared in accordance with IFRS.
Non-GAAP financial information
The Directors have identified certain measures that they believe will assist
the understanding of the performance of the business. The measures are not
defined under IFRS and they may not be directly comparable with other
companies' adjusted measures. The non-GAAP measures are not intended to be a
substitute for, or superior to, any IFRS measures of performance but they have
been included as the Directors consider them to be important comparables and
key measures used within the business for assessing performance. The following
are the key non-GAAP measures identified by the Group:
· The Group defines exceptional items to be those that warrant, by
virtue of their nature, size or frequency, separate disclosure on the face of
the income statement where, in the opinion of the Directors, this enhances the
understanding of the Group's financial performance.
· Underlying EBITDA is an Alternative Performance Measure and is
defined as operating profit before exceptional items, share-based payments,
corporate transaction costs, gain/loss on investment properties, depreciation
and variable lease payments and the share of associate's depreciation,
interest and tax. Management considers this presentation to be representative
of the underlying performance of the business, as it removes the income
statement impact of items not fully controllable by management, such as the
revaluation of derivatives and investment properties, and the impact of
exceptional credits, costs and finance charges. A reconciliation of statutory
operating profit to Underlying EBITDA can be found in the financial review
section of this announcement.
· Adjusted Diluted EPRA EPS is based on the European Public Real
Estate Association's ("EPRA") definition of earnings and is defined as profit
or loss for the period after tax but excluding corporate transaction costs,
change in fair value of derivatives, gain/loss on investment properties and
the associated tax impacts. The Company then makes further company-specific
adjustments for the impact of exceptional items, 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 EPS can be found in note 11.
· 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 15.
· Like-for-like figures are presented to aid in the comparability
of the underlying business as they exclude the impact on results of purchased,
sold, opened or closed stores.
· Constant exchange rate (CER) figures are provided in order to
present results on a more comparable basis, removing foreign exchange
movements.
3 Accounting policies
The condensed consolidated interim financial information has been prepared on
the basis of the accounting policies expected to apply for the financial year
to 31 October 2023 and the same as applied for the Group's Financial
Statements for the Full Year October 2022 applicable to companies under IFRS.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of certain critical accounting
estimates. It also requires management to exercise judgement in the process of
applying the Company's accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates
are significant to the condensed consolidated interim financial statements are
disclosed within the Group's accounting policies as disclosed in the IFRS
financial statements for the year ended 31 October 2022. There have been no
other significant changes in accounting estimates in the period.
The same accounting policies, presentation and methods of computation are
followed in the condensed set of financial statements as applied in the
Group's latest financial statements. The nature of the Critical Accounting
Judgements and Key Sources of Estimation Uncertainty applied in the condensed
financial statements have remained consistent with those applied in the
Group's latest annual audited financial statements.
4 Revenue
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Self storage income 92.4 84.6 178.0
Insurance income 12.1 11.3 23.9
Other non-storage income 5.6 5.1 10.6
Total revenue 110.1 101.0 212.5
5 Segmental information
The segmental information for the six months ended 30 April 2023 is as
follows:
United Kingdom Paris Spain Benelux Total
£m £m £m £m £m
Continuing operations
Revenue 81.7 21.8 1.7 4.9 110.1
Underlying EBITDA 51.9 14.9 0.6 2.3 69.7
Share-based payments (1.2) (0.1) - - (1.3)
Depreciation and variable lease payments (0.7) (0.1) - - (0.8)
Operating profit before gain on investment properties and other exceptional 50.0 14.7 0.6 2.3 67.6
gains
Gain on investment properties 24.5 14.4 2.1 6.3 47.3
Operating profit 74.5 29.1 2.7 8.6 114.9
Net finance (expense)/ income (10.8) (0.6) (0.1) - (11.5)
Profit before income tax 63.7 28.5 2.6 8.6 103.4
Total assets 2,143.9 586.2 30.7 79.1 2,839.9
The segmental information for the six months ended 30 April 2022 is as
follows:
United Kingdom Paris Spain Benelux Total
£m £m £m £m £m
Continuing operations
Revenue 78.9 20.0 1.4 0.7 101.0
Underlying EBITDA 50.3 13.8 0.8 0.3 65.2
Share-based payments (5.3) (0.7) - - (6.0)
Depreciation and variable lease payments (0.4) (0.1) - - (0.5)
Share of associate's depreciation, interest and tax (0.5) - - -
Operating profit before gain on investment properties and other exceptional 44.1 13.0 0.8 0.3 58.2
gains
Gain on investment properties 183.0 40.5 0.4 - 223.9
Other exceptional gains 5.5 5.0 - - 10.5
Operating profit 232.6 58.5 1.2 0.3 292.6
Net finance expense (7.1) (0.8) - 0.5 (7.4)
Profit before income tax 225.5 57.7 1.2 0.8 285.2
Total assets 1,887.5 519.3 26.7 64.6 2,498.1
Underlying EBITDA is defined as operating profit before exceptional items,
share-based payments, corporate transaction costs, gain/loss on investment
properties, depreciation and variable lease payments and the share of
associate's depreciation, interest and tax
6 Exceptional items and other exceptional gains
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Costs relating to corporate transactions and exceptional property taxation - - (0.1)
Exceptional items - - (0.1)
Valuation gain on associate buy-out - 5.5 5.5
Gain on disposal of investment properties - - 0.2
Gain on disposal of land - 5.0 5.1
Other exceptional gains - 10.5 10.8
There are no exceptional items in the current period.
On 10 November 2021, the Group sold the Nanterre site to the joint venture
partner of Nanterre FOCD 92 for a total price of €7.6m excluding VAT and
including demolition cost reimbursement, where the settlement is done
partially in cash £1.0m (€1.1m excluding tax), and partially in kind
through the delivery of the new building at the end of the operation
(estimated at €6.5m). This resulted in a net gain on disposal of £5.0m
(€5.9m) included within other exceptional gains in the prior period.
On 30 March 2022, the Group acquired the remaining 80% equity of Safestore
Storage Benelux B.V. from its previous joint venture partner for €53.6
million (£45.3 million) and became a wholly owned subsidiary. 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 the prior period.
7 Finance income and costs
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Finance income
Interest receivable from loan to associates - 0.1 0.1
Other interest received 0.1 0.1 0.1
Financial instruments income 0.4 - 1.3
Underlying finance income 0.5 0.2 1.5
Exceptional finance income - 0.5 0.5
Total finance income 0.5 0.7 2.0
Finance costs
Interest payable on bank loans and overdrafts (7.3) (5.8) (11.9)
Amortisation of debt issuance costs on bank loans (0.7) (0.3) (0.5)
Underlying finance charges (8.0) (6.1) (12.4)
Interest on obligations under lease liabilities (2.6) (2.5) (5.0)
Fair value movement on derivatives (1.4) 0.8 (0.3)
Net exchange losses - (0.3) -
Total finance costs (12.0) (8.1) (17.7)
Net finance costs (11.5) (7.4) (15.7)
The change in fair value of derivatives for the period is a net loss of £1.4m
(30 April 2022: net gain of £0.8m). Included within finance income is £0.4m
(30 April 2022: £nil) on settlement of the FX forwards held by the Group.
8 Income tax charge
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Current tax - current year 2.6 2.6 6.1
Current tax - current year exceptional - 0.9 -
Deferred tax 8.0 11.7 29.8
10.6 15.2 35.9
Income tax is recognised based on management's best estimate of the weighted
average annual income tax rate expected for the full financial year.
In the UK, the Group is a Real Estate Investment Trust ("REIT"). As a result,
the Group is exempt from UK corporation tax on the profits and gains arising
from its qualifying property rental business in the UK provided that it meets
certain conditions. Non-qualifying profits and gains of the Group remain
subject to corporation tax as normal. The Group monitors its compliance with
the REIT conditions. There have been no breaches of the conditions to date.
The main rate of corporation tax in the UK is 25%. Accordingly, the Group's
results for this accounting period are taxed at an effective rate of 18% (30
April 2022: 19%). The main rate of corporation tax in the UK increased from
19% to 25% from 1 April 2023. There is no deferred taxation impact in respect
of this change in taxation rate.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
In the prior year, an exceptional charge of £0.9m arose during the period in
relation to the capital gain on disposal of the Nanterre site to the joint
venture partner of Nanterre FOCD 92 (note 6).
9 Deferred income tax
As at As at As at
30 April
30 April
31 October 2022
2023
2022
(unaudited) (unaudited) (audited)
£m £m £m
The amounts provided in the accounts are:
Revaluation of investment properties and tax depreciation 139.4 112.8 129.0
Deferred tax liabilities 139.4 112.8 129.0
Other timing differences 0.8 1.5 0.8
Deferred tax assets 0.8 1.5 0.8
Net deferred tax liability 138.6 111.3 128.2
As at 30 April 2023, the Group had income losses of £41.0m (30 April 2022:
£23.4m) and capital losses of £36.4m (30 April 2022: £36.4m) in respect of
its UK operations. All losses can be carried forward indefinitely. No deferred
tax asset has been recognised in respect of these losses.
10 Dividends
Six months Six months Year
ended
ended
ended
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
For the year ended 31 October 2021:
Final dividend - paid 7 April 2022 (17.60p per share) - 37.1 37.1
For the year ended 31 October 2022
Interim dividend - paid 11 August 2022 (9.40p per share) - - 19.8
Final dividend - paid 7 April 2023 (20.40p per share) 44.5 - -
Dividends in the statement of changes in equity 44.5 37.1 56.9
Timing difference on payment of withholding tax (6.8) (5.2)
Dividends in the cash flow statement 37.7 31.9 56.9
An interim dividend of 9.9 pence per ordinary share (April 2022: 9.4 pence)
has been declared. The ex-dividend date will be 6 July 2023 and the record
date 7 July 2023, with an intended payment date of 10 August 2023.
It is intended that 25% (April 2022: 25%) of the interim dividend of 9.9 pence
per ordinary share (April 2022: 9.4 pence) will be paid as a REIT Property
Income Distribution ("PID") net of withholding tax where appropriate.
The interim dividend, amounting to £21.6m (April 2022: £19.8m), has not been
included as a liability at 30 April 2023. It will be recognised in
shareholders' equity in the year to 31 October 2023.
11 Earnings per ordinary share
Basic earnings per share has been calculated by dividing the profit
attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the period/year excluding ordinary shares
held by the Safestore Employee Benefit Trust. Diluted earnings per share are
calculated by adjusting the weighted average numbers of ordinary shares to
assume conversion of all dilutive potential shares. The Company has one
category of dilutive potential ordinary shares: share options. For the share
options, a calculation is done to determine the number of shares that could
have been acquired at fair value (determined as the average annual market
price of the Company's shares) based on the monetary value of the subscription
rights attached to the outstanding share options. The number of shares
calculated as above is compared with the number of shares that would have been
issued assuming the exercise of the share options.
Six months ended Six months ended Year ended
30 April 2023
30 April 2022
31 October 2022
(unaudited) (unaudited) (audited)
Earnings Shares million Pence Earnings Shares million Pence per share Earnings Shares million Pence
£m
per share
£m
£m
per share
Basic 92.8 216.5 42.9 270.0 210.8 128.1 462.9 210.9 219.5
Dilutive share options - 0.8 (0.2) - 6.1 (3.6) - 7.0 (7.1)
Diluted 92.8 217.3 42.7 270.0 216.9 124.5 462.9 217.9 212.4
Adjusted earnings per share
Adjusted earnings per share represents profit after tax adjusted for the
valuation movement on investment properties, exceptional items, change in fair
value of derivatives and the associated tax thereon. As an industry standard
measure, European Public Real Estate Association ("EPRA") earnings are
presented below. Adjusted diluted earnings are also presented by adding back
the share-based payment charge to the EPRA earnings. The Directors consider
that these alternative measures provide useful information on the performance
of the Group.
Six months ended Six months ended Year ended
30 April 2023
30 April 2022
31 October 2022
(unaudited) (unaudited) (audited)
Earnings/(loss) Shares million Pence Earnings/ Shares million Pence per share Earnings/ Shares million Pence
£m
per share
(loss)
(loss)
per share
£m
£m
Basic 92.8 216.5 42.9 270.0 210.8 128.1 462.9 210.9 219.5
Adjustments:
Gain on investment properties (47.3) - (21.9) (223.9) - (106.2) (381.6) - (180.9)
Exceptional items - - - - - - 0.1 - -
Other exceptional gains - - - (10.5) - (5.0) (10.8) - (5.1)
Exceptional finance income - - - (0.5) - (0.2) (0.5) - (0.2)
Net exchange loss - - - 0.3 - 0.1 - - -
Gain in fair value of derivatives 1.4 - 0.6 (0.8) - (0.4) 0.3 - 0.1
Tax on adjustments and exceptional tax 7.4 - 3.4 12.1 - 5.7 29.7 - 14.1
Adjusted 54.3 216.5 25.0 46.7 210.8 22.1 100.1 210.9 47.5
EPRA adjusted:
Fair value re-measurement of lease liabilities add-back (4.4) - (2.0) (4.0) - (1.9) (8.3) - (3.9)
Tax on lease liabilities add-back adjustment 0.6 - 0.3 0.5 - 0.2 1.0 - 0.5
Adjusted EPRA basic EPS 50.5 216.5 23.3 43.2 210.8 20.4 92.8 210.9 44.1
Share-based payment charge 1.3 - 0.6 6.0 - 2.8 11.2 - 5.3
Dilutive shares - 2.5 (0.2) - 7.8 (0.7) - 8.0 (1.9)
Adjusted Diluted EPRA EPS 51.8 219.0 23.7 49.2 218.6 22.5 104.0 218.9 47.5
The definition of Adjusted Diluted EPRA EPS can be found in note 2 to the
financial statements, being based on the EPRA definition of earnings with
company adjustments for specific items such as for the impact of exceptional
items, IFRS 2 share-based payment charges, and deferred tax charges.
Gain on investment properties includes the fair value re-measurement of lease
liabilities add-back of £4.4m (30 April 2022: £4.0m) and the related tax
thereon of £0.6m (30 April 2022: £0.5m). As an industry standard measure,
EPRA earnings is presented. EPRA earnings of £50.5m (30 April 2022: £43.2m)
and EPRA earnings per share of 23.3 pence (30 April 2022: 20.4 pence) are
calculated after further adjusting for these items.
12 Investment in associates
As at As at As at
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Investment in associates 3.3 1.8 1.8
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 (30 April 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 (30
April 2022: £1.8m), made up of an investment of £1.8m (30 April 2022:
£1.8m). The Group's share of profits from continuing operations for the
period was £nil (30 April 2022: £nil). The Group's share of total
comprehensive income of associates for the period was £nil (30 April 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 £1.5m (30
April 2022: £nil), made up of an investment of £1.5m (30 April 2022: £nil).
The Group's share of profits from continuing operations for the period was
£nil (30 April 2022: £nil). The Group's share of total comprehensive income
of associates for the period was £nil (30 April 2022: £nil).
13 Investment properties
Fair value of investment properties, net of lease liabilities Add-back of Investment Total
properties under construction
lease liabilities investment
properties
£m £m £m £m
Balance at 1 November 2022 2,457.8 95.1 94.5 2,647.4
Additions 33.2 9.0 29.0 71.2
Disposals - (3.1) - (3.1)
Reclassification 29.9 (29.9) -
Revaluation movement 52.3 - (0.6) 51.7
Fair value re-measurement of lease liabilities add-back - (4.4) - (4.4)
Exchange movements 13.4 0.7 0.7 14.8
Balance at 30 April 2023 2,586.6 97.3 93.7 2,777.6
Fair value of investment properties, net of lease liabilities Add-back of Investment Total
properties under construction
lease liabilities investment
properties
£m £m £m £m
Balance at 1 November 2021 1,881.8 82.1 67.4 2,031.3
Additions 15.7 4.1 12.0 31.8
Acquisition of subsidiaries 132.1 0.6 - 132.7
Reclassification 16.5 - (16.5) -
Revaluation movement 229.8 - (1.9) 227.9
Fair value re-measurement of lease liabilities add-back - (4.0) - (4.0)
Exchange movements (4.8) (0.2) (0.1) (5.1)
Balance at 30 April 2022 2,271.1 82.6 60.9 2,414.6
The gain on investment properties of £47.3m (30 April 2022: £223.9m) as
disclosed in the consolidated income statement comprises a £51.7m (30 April
2022: £227.9m) revaluation gain on investment properties, net of lease
liabilities and investment properties under construction less the fair value
re-measurement of lease liabilities add-back of £4.4m (30 April 2022:
£4.0m).
The Group has classified investment property and investment property under
construction, held at fair value, within Level 3 of the fair value hierarchy.
There were no transfers to or from Level 3 during the period. The fair
valuation exercise undertaken at 30 April 2023 is explained in note 14.
The fair value of investment property held by the Group classified as the
add-back of lease liabilities of £97.3m (30 April 2022: £82.6m) reflects
expected cash flows (including rent reviews settled that are expected to
become payable). Accordingly, if a valuation obtained for a property is net of
all payments expected to be made, it will be necessary to add-back any
recognised lease liability, to arrive at the carrying amount of the investment
property using the fair value model under IAS 40. The lease liability of
£97.5m (30 April 2022: £82.8m) differs by £0.2m (30 April 2022: £0.2m)
which relates to the right-of-use asset classified as part of property, plant
and equipment
14 Valuations
External valuation
A sample of the Group's largest properties, representing approximately 43% of
the value of the Group's investment property portfolio at 31 October 2022, has
been valued by the Group's external valuers, C&W, as at 30 April 2023. The
valuation has been carried out in accordance with the requirements of the RICS
Valuation - Global Standards which incorporate the International Valuation
Standards ("IVS") and the RICS Valuation UK National Supplement (the "RICS Red
Book") edition current at 30 April 2023. The valuation of each of the
investment properties has been prepared on the basis of fair value as a fully
equipped operational entity, having regard to trading potential. The valuation
has been provided for accounts purposes and, as such, is a Regulated Purpose
Valuation as defined in the Red Book. In compliance with the disclosure
requirements of the Red Book, C&W has confirmed that:
· the member of the RICS who has been the signatory to the
valuations provided to the Group for the same purposes as previous valuations,
has done so since April 2020;
· C&W has been carrying out regular valuations for the same
purpose as this valuation on behalf of the Group since October 2006;
· C&W does not provide other significant professional or agency
services to the Group;
· The proportion of fees payable by the Group to C&W to the
total fee income of C&W's last financial year to 31 December 2022, was
less than 5%. We anticipate that the proportion of fees for the financial year
to 31 December 2023 will remain at less than 5%; and
· the fee payable to C&W is a fixed amount per property and is
not contingent on the appraised value.
Further details of the valuation carried out by C&W as at 31 October 2022,
including the valuation method and assumptions, are set out in note 13 to the
Group's annual report and financial statements for the year ended 31 October
2022. This note should be read in conjunction with note 13 of the Group's
annual report.
Directors' valuation
In addition, at the same date, the Directors have prepared estimates of fair
values for the remaining 57% of the Group's investment property portfolio,
incorporating assumptions for estimated absorption, revenue growth and
capitalisation rates to reflect current market conditions and trading.
Assumptions
The key assumptions incorporated into both the external valuation and the
Directors' valuation, calculated on a weighted average basis across the entire
portfolio, are:
· Net operating income is based on projected revenue received less
projected operating costs together with a central administration charge of 6%
of the estimated annual revenue subject to a cap and collar. The initial net
operating income is calculated by estimating the net operating income in the
first twelve months following the valuation date.
· The net operating income in future years is calculated assuming
either straight line absorption from day one actual occupancy or variable
absorption over years one to four of the cash flow period, to an estimated
stabilised/mature occupancy level. In the valuations the assumed stabilised
occupancy level for the trading stores (both freeholds and all leaseholds)
open at 30 April 2023 averages 89.23% (31 October 2022: 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 16.18 months (31 October 2022: 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
student housing and hotels, bank base rates, ten year money rates, inflation
and the available evidence of transactions in the sector. The valuations
included in the accounts assume rental growth in future periods. If an
assumption of no rental growth is applied to the valuations, the net initial
yield pre-administration expenses for the mature stores (i.e., excluding those
stores categorised as "developing") is 5.88% (31 October 2022: 6.08%), rising
to stabilised net yield pre-administration expenses of 6.71% (31 October 2022:
6.74%).
· The weighted average freehold exit yield on UK freeholds is 5.76%
(31 October 2022: 5.74%), France freeholds is 6.04% (31 October 2022: 5.96%)
and on Spain freeholds is 5.50% (31 October 2022: 5.50%). The weighted average
freehold exit yield for all freeholds adopted 5.75% (31 October 2022: 5.66%).
· 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 8.52% (31 October
2022: 8.40%) in the France portfolio is 8.91% (31 October 2022: 8.78%) and in
the Spain portfolio is 8.34% (31 October 2022: 8.00%). The weighted average
annual discount rate adopted (for both freeholds and all leaseholds) is 8.57%
(31 October 2022: 8.49%).
· Purchaser's costs in the range of approximately 3.3% to 6.8% for
the UK, 7.5% for Paris and 2.5% for Spain have been assumed initially,
reflecting the progressive SDLT rates brought into force in March 2016 in the
UK, and sales plus purchaser's costs totalling approximately 5.3% to 8.8%
(UK), 9.5% (Paris) and 4.5% (Spain) are assumed on the notional sales in the
tenth year in relation to freehold and long leasehold stores.
All other factors being equal, higher net operating income would lead to an
increase in the valuation of a store and an increase in the capitalisation
rate or discount rate would result in a lower valuation, and vice versa.
Higher assumptions for stabilised occupancy, absorption rate, rental rate and
other revenue, and a lower assumption for operating costs, would result in an
increase in projected net operating income, and thus an increase in valuation.
As a result of these exercises, as at 30 April 2023, the Group's investment
property portfolio has been valued at £2,586.6m (30 April 2022: £2,271.1m),
and a revaluation gain of £52.3m (30 April 2022: £229.8m) has been
recognised in the income statement for the period.
A full external valuation of the Group's investment property portfolio will be
performed at 31 October 2023.
Sensitivity analysis
As part of the Directors valuation, a key sensitivity analysis was performed
to understand the impact on the entire property portfolio in relation to
capitalisation yields, stable occupancy rates, and a delay in the time to
stabilised occupancy. The impact on the valuation would be mitigated by the
inter-relationship between inputs moving in opposite directions. For example,
an increase in stable occupancy may be offset by an increase yield, resulting
in no net impact on the valuation. A sensitivity analysis showing the impact
on valuations of changes in capitalisation rates and stable occupancy is shown
below:
Impact of change in capitalisation rates Impact of a change in stabilised occupancy assumption Impact of a delay in stabilised occupancy assumption
£'m £'m £'m
25 bps decrease 25 bps increase 1% increase 1% decrease 24-month delay
Reported Group 106.0 (97.0) 36.7 (33.5) (29.3)
15 Net assets per share
As at As at As at
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
Analysis of net asset value £m £m £m
Balance sheet net assets 1,848.3 1,608.7 1,793.4
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax) (0.3) (2.1) (1.7)
Deferred tax liabilities on the revaluation of investment properties 139.4 112.8 129.0
EPRA NTA 1,987.4 1,719.4 1,920.7
Basic net assets per share (pence) 848 763 848
EPRA basic NTA per share (pence) 912 816 908
Diluted net assets per share (pence) 845 742 820
EPRA diluted NTA per share (pence) 909 793 879
Number Number Number
Shares in issue 218,006,528 210,825,202 211,927,497
Basic net assets per share is shareholders' funds divided by the number of
shares at the period end. The number of shares in issue at the period end
excludes 145,493 shares (30 April 2022: 1,902 shares) held by the Safestore
Employee Benefit Trust. Diluted net assets per share is shareholders' funds
divided by the number of shares at the period end, adjusted for dilutive share
options of 821,170 shares (30 April 2022: 6,087,545 shares).
16 Borrowings
The tables below set out the Group's borrowings position as at 30 April 2023:
As at As at As at
30 April
30 April
31 October 2022
2023
2022
(unaudited) (unaudited) (audited)
Non-current £m £m £m
Borrowings:
Secured - bank loans 172.9 110.2 101.8
Secured - US Private placement notes 529.2 515.7 523.3
Debt issue costs (4.9) (1.6) (1.3)
697.2 624.3 623.8
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.
US Private Placement Notes of €358m have maturities extending to 2024, 2026,
2027, 2028, 2029 and 2033 and £215.5m which have maturities extending to
2026, 2028, 2029 and 2031.
Borrowings are stated before unamortised issue costs of £4.9m (30 April 2022:
£1.6m). The bank loans and private placement notes were repayable as follows:
As at As at As at
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Within one year - - 101.8
Between one and two years 44.6 110.2 43.8
Between two and five years 334.2 136.4 158.9
After more than five years 323.3 379.3 320.6
Borrowings 702.1 625.9 625.1
Unamortised issue costs (4.9) (1.6) (1.3)
697.2 624.3 623.8
For accounting periods starting from 1 January 2020 the benchmark Interbank
Offered Rates ("IBORs"), such as LIBOR, have been replaced by new official
benchmark rates, known as alternative risk free rates ("RFR"). The RFR that
has been introduced applicable to the Group is the Standard Overnight Index
Average ("SONIA").
The effective interest rates at the balance sheet date were as follows:
As at As at As at
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
Bank loans (Sterling) Monthly, quarterly or six monthly SONIA plus 1.25% Quarterly or monthly SONIA plus 1.25% Quarterly or monthly SONIA plus 1.25%
Bank loans (Euro) Monthly, quarterly or six monthly EURIBOR plus 1.25% Quarterly EURIBOR plus 1.25% Quarterly EURIBOR plus 1.25%
Private placement notes (Euro) Weighted average rate of 1.80% Weighted average rate of 1.80% Weighted average rate of 1.80%
Private placement notes (Sterling) 2.55% 2.55% 2.55%
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available
at the period end in respect of which all conditions precedent had been met at
that date:
Floating rate
As at As at As at
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
£m £m £m
Expiring within one year - - 208.4
Expiring beyond one year 227.1 198.5 -
17 Financial instruments
IFRS 13 requires disclosure of fair value measurements by level of the
following measurement hierarchy:
Level 1 - unadjusted quoted prices in active markets for identical assets or
liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are
observable for the asset of liability, either directly or indirectly.
Level 3 - inputs for the asset of liability that are not based on observable
market data.
The table below shows the level in the fair value hierarchy into which fair
value measurements have been categorised:
As at As at As at
30 April
30 April
31 October 2022
2023
2022
(unaudited) (unaudited) (audited)
Assets per the balance sheet £m £m £m
Derivative financial instruments - Level 2 0.4 2.2 1.7
As at As at As at
30 April
30 April
31 October 2022
2023
2022
(unaudited) (unaudited) (audited)
Liabilities per the balance sheet £m £m £m
Derivative financial instruments - Level 2 - 0.1 -
The fair value of financial instruments that are not traded in an active
market, such as over-the-counter derivatives, is determined using valuation
techniques. The Group obtains such valuations from counterparties who use a
variety of assumptions based on market conditions existing at each balance
sheet date. The valuation techniques maximise the use of observable market
data where it is available and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value an instrument are
observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market
data, the asset or liability is included in level 3. The Group has no
disclosable level 3 financial instruments.
There have been no transfers of assets or liabilities between levels of the
fair value hierarchy.
18 Share capital
As at As at As at
30 April
30 April
31 October
2023
2022
2022
(unaudited) (unaudited) (audited)
Called up, issued and fully paid £m £m £m
218,006,528 (30 April 2022: 210,827104) ordinary shares of 1p each 2.2 2.1 2.1
19 Capital commitments
The Group had capital commitments of £134.0m as at 30 April 2023 (30 April
2022: £108.0m).
20 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 a further investment £0.02m
(€0.02m) into PBC to fund the development of a new store in France, taking
the total investment to £1.8m (€2.2m). The total amount invested is
included as part of its non-current investments in associates. The total
amount outstanding at 30 April 2023 included within trade and other
receivables was £nil (30 April 2022: £nil).
As described in note 6, in the prior period, the Group sold the Nanterre site
to the joint venture partner of Nanterre FOCD 92 for a total price of €7.6m
excluding VAT and including demolition cost reimbursement, where the
settlement was done partially in cash £1.0m (€1.1m excluding tax), and
partially in kind through the delivery of the new building at the end of the
operation (estimated at €6.5m).
Transactions with CERF II German Storage Topco S.a.r.l.
As described in note 12, the Group has a 10% investment in CERF II German
Storage Topco S.a.r.l.. During the period to April 2023 the Group recharged
£0.2m of management fees.
Transactions with Safestore Storage Benelux B.V. (formerly CERF Storage JV
B.V.)
The Group had a 20% interest in Safestore Storage Benelux B.V. ("SSB") up
until 30 March 2022 and was classified as an investment in associate. From 30
March 2022, SSB became a wholly owned subsidiary of the Group, from which
point such intra-group transactions and balances are eliminated on
consolidation.
21 Provisions
In France, the basis on which property taxes have been assessed has been
challenged by the tax authority for financial years 2012 to 2013 and 2016
onwards. In March 2021 the French Court of Appeal (COA) delivered a judgement
in respect of years 2012 and 2013, which resulted in a partial success for the
Group. A further appeal was lodged with the French Supreme Court (SC) against
those decisions on which the Group was unsuccessful, but this was unsuccessful
following decisions released by the SC in H1 2023. The outcome for 2012 and
2013 is therefore final. A provision is included in the consolidated financial
accounts of £2.6m at 30 April 2023 (31 October 2022: £2.4m), to reflect the
increased uncertainty surrounding the likelihood of a successful outcome for
years 2016 onwards, which are subject to separate litigation. Of the total
provided, £0.2m has been charged in relation to 6 months to 30 April 2023 (30
April 2022: £0.1m) within cost of sales (underlying EBITDA).
It is possible that the French tax authority may pursue claims for 2016
onwards in respect of matters on which the Group were successful in the French
Supreme Court for 2012 and 2013. The maximum potential further exposure in
relation to these issues at 30 April 2023 is £2.8m (31 October 2022: £2.8m).
No provision for any potential further exposure has been recorded in the
consolidated financial statements since the Group believes it is more likely
than not that a successful outcome will be achieved, resulting in no
additional liabilities.
Bank guarantees to cover any potential additional tax assessment are currently
being put in place, of which guarantees totalling £1.3m are in place as at 30
April 2023 (31 October 2022: £1.2m).
22 Contingent liabilities
The Group has a contingent liability in respect of property taxation in the
French subsidiary as disclosed in note 21.
Principal risks and uncertainties
The delivery of our strategic objectives is dependent on effective risk
management. There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance and could cause actual
results to differ materially from expected and historical results. Details of
the principal risks facing the Group were included on pages 37 to 42 of the
Annual Report and Financial Statements for the year ended 31 October 2022, a
copy of which is available at www.safestore.com (http://www.safestore.com) ,
and include:
· Strategic risks
· Pandemic risk
· Finance risk
· Treasury risk
· Property investment and development risk
· Valuation risk
· Occupancy risk
· Real estate investment trust ("REIT") risk
· Catastrophic event risk
· Regulatory compliance risk
· Marketing risk
· IT security/GDPR
· Brand and Reputational risk
· Geographical expansion
· Human resource risk
· Climate change related risk
The Company regularly assesses these risks together with the associated
mitigating factors listed in the 2022 Annual Report. The levels of activity in
the Group's markets and the level of financial liquidity and flexibility
continue to be the areas designated as appropriate for added management focus.
We continue to believe that our market leading position in the UK and Paris,
our strong brand and depth of management, as well as our retail expertise and
infrastructure, help mitigate the effects of fluctuations in the economy or
the housing market. Furthermore, the UK self storage market remains immature
with little risk of supply outstripping demand in the medium term.
Our prudent approach on new stores reduces our dependence on the number of
non-trading investment properties in relation to the established and mature
stores that provide relatively stable and growing cash flow. The Board
regularly reviews the cash requirements of the business, including the
covenant position although given the nature of the product, customer base and
lack of working capital requirements, liquidity is not considered to be a
significant risk.
The Outlook section of this half yearly report provides a commentary
concerning the remainder of the financial year.
Forward-looking statements
Certain statements in this interim results announcement are forward-looking
statements. By their nature, forward-looking statements involve a number of
risks, uncertainties or assumptions that could cause actual results or events
to differ materially from those expressed or implied by the forward-looking
statements. These risks, uncertainties or assumptions could adversely affect
the outcome and financial effects of the plans and events described herein.
Forward-looking statements contained in this interim results announcement
regarding past trends or activities should not be taken as a representation
that such trends or activities will continue in the future. You should not
place undue reliance on forward-looking statements, which speak only as of the
date of this interim results announcement. Except as required by law, the
Company is under no obligation to update or keep current the forward-looking
statements contained in this interim results announcement or to correct any
inaccuracies which may become apparent in such forward-looking statements.
Statement of Directors' responsibilities for the six months ended 30 April
2023
The Directors confirm that, to the best of their knowledge, this condensed
consolidated interim financial information has been prepared in accordance
with IAS 34 as contained in the United Kingdom adopted IFRS and that the
interim management report includes a fair review of the information required
by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R, namely:
· the condensed set of financial statements gives a true and fair
view of the assets, liabilities, financial position and profit or loss of
Safestore Holdings plc, or the undertakings included in the consolidation;
· an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed set
of financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
· material related-party transactions in the first six months and
any material changes in the related-party transactions described in the last
annual report.
A list of current Directors is maintained on the Safestore Holdings plc
website, www.safestore.com (http://www.safestore.com) .
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
By order of the Board
Frederic Vecchioli Andrew Jones
13 June 2023 13 June 2023
Chief Executive Officer Chief Financial Officer
INDEPENDENT REVIEW REPORT TO SAFESTORE HOLDINGS PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
April 2023 which comprises consolidated income statement, the consolidated
statement of comprehensive income, the consolidated balance sheet, the
condensed consolidated statement of changes in equity, the consolidated cash
flow statement and related notes 1 to 22.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 April 2023 is not prepared, in
all material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
13 June 2023
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