REG - Safestore Hldgs plc - Preliminary Results <Origin Href="QuoteRef">SAFE.L</Origin> - Part 3
28/01/2015 02:06
- Part 3: For the preceding part double click ID:nRSV8130Cb
contingent rent 36.7 16.3 53.0
Exceptional items (1.0) - (1.0)
Change in fair value of derivative - 1.2 1.2
Contingent rent and depreciation (1.1) (0.6) (1.7)
Operating profit before gain on investment properties 34.6 16.9 51.5
Gain on investment properties 21.6 2.5 24.1
Operating profit 56.2 19.4 75.6
Net finance expense (18.8) (4.4) (23.2)
Profit before tax 37.4 15.0 52.4
Total assets 603.6 201.2 804.8
Year ended 31 October 2013 UK£'m France£'m Group£'m
Continuing operations
Revenue 70.2 25.9 96.1
EBITDA before exceptional items, change in fair values of derivatives, gain on investment properties, depreciation and contingent rent 34.8 16.0 50.8
Exceptional items (1.8) 1.1 (0.7)
Change in fair value of derivative - (1.3) (1.3)
Contingent rent and depreciation (0.6) (0.5) (1.1)
Operating profit before gain on investment properties 32.4 15.3 47.7
Gain on investment properties 16.7 4.8 21.5
Operating profit 49.1 20.1 69.2
Net finance expense (16.1) (4.5) (20.6)
Profit before tax 33.0 15.6 48.6
Total assets 615.1 215.3 830.4
Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available
to unrelated third parties. There is no material impact from inter-segment transactions on the Group's results.
3. Finance income and costs
Note 2014 £'m 2013£'m
Finance costs
Interest payable on bank loans and overdraft (13.6) (18.3)
Amortisation of debt issuance costs on bank loan 10 (0.1) (0.1)
Underlying finance charges (13.7) (18.4)
Interest on obligations under finance leases (4.2) (5.0)
Fair value movement of derivatives (0.8) -
Recycling of hedge reserve (3.4) -
Net exchange losses (3.7) -
Exceptional finance expense (2.1) -
Total finance cost (27.9) (23.4)
Finance income
Fair value movement of derivatives 4.5 2.8
Unwinding of discount on CGS receivable 0.2 -
Total finance income 4.7 2.8
Net finance costs (23.2) (20.6)
Exceptional finance costs of £2.1m were incurred in respect of the Group's debt refinancing in January 2014.
Included within interest payable of £13.6m (FY2013: £18.3m) is £1.3m (FY2013: £2.3m) of interest relating to derivative
financial instruments that are economically hedging the Group's borrowings. The total change in fair value of derivatives
reported within net finance costs for the year is a net gain of £3.7m (FY2013: £2.8m).
4. Exceptional items
2014 £'m 2013£'m
Restructuring costs (0.8) (1.7)
Insurance proceeds - 1.6
VAT and REIT related costs - (0.3)
Other exceptional Items (0.2) (0.3)
Total exceptional costs (1.0) (0.7)
Restructuring costs of £0.8m (FY2013: £1.7m) were incurred primarily in respect of organisational changes during the year,
which were a fundamental element of the business' strategy.
The insurance proceeds recognised in the comparative period relate to claims for property damage and consequential losses
arising from the December 2010 fire at the La Défense store in Paris.
5. Income tax (charge)/credit
Analysis of tax (charge)/credit in the year:
2014 £'m 2013£'m
Current tax:
- UK corporation tax - -
- tax in respect of overseas subsidiaries (0.9) (1.1)
- adjustment in respect of prior year - 0.2
(0.9) (0.9)
Deferred tax:
- current year, including exceptional credit of £nil (FY2013: £63.2m) (3.6) 59.9
- adjustment in respect of prior year (1.1) 0.9
(4.7) 60.8
Tax (charge)/credit (5.6) 59.9
Reconciliation of income tax charge/(credit)
The tax for the period is lower (FY2013: lower) than the standard effective rate of corporation tax in the UK for the year
ended 31 October 2014 of 21.8% (FY2013: 23.4%). The differences are explained below:
2014 £'m 2013£'m
Profit before tax 52.4 48.6
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 21.8% (FY2013: 23.4%) 11.4 11.4
Effect of:
- permanent differences (0.5) (6.3)
- profits from the tax exempt business (8.1) (3.2)
- difference from overseas tax rates 1.7 1.7
- losses not recognised in the year - 0.8
- adjustments in respect of prior years 1.1 (1.1)
- release of UK deferred tax arising on the conversion to REIT - (63.2)
Tax charge/(credit) 5.6 (59.9)
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 from its qualifying 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 deferred tax credit of £60.8m for the year ended 31 October 2013 comprises an exceptional credit of £63.2m which arose
from the release of UK deferred tax following the REIT conversion and a charge of £2.4m in respect of the French business.
The main rate of corporation tax in the UK reduced from 23% to 21% with effect from 1 April 2014 and will further reduce to
20% from 1 April 2015. Accordingly the Group's results for this accounting period are taxed at an effective rate of 21.8%.
Due to the Group's REIT status there will be no deferred taxation impact in respect of the changes in taxation rates.
6. Dividends per share
The dividend paid in 2014 was £12.5m (6.05 pence per share) (FY2013: £10.6m (5.65 pence per share)). A dividend in respect
of the year ended 31 October 2014 of 5.30 pence (FY2013: 3.90 pence) per share, amounting to a final dividend of £11.0m
(FY2013: £7.3m), is to be proposed at the AGM on 19 March 2015. The ex-dividend date will be 12 March 2015 and the record
date will be 13 March 2015 with an intended payment date of 8 April 2015. The final dividend has not been included as a
liability at 31 October 2014.
The PID element of the final dividend is 2.65 pence (FY2013: 3.90 pence), making the PID payable for the year 4.80 pence
(FY2013: 4.08 pence) per share.
7. Earnings per share
Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year excluding ordinary shares held as treasury shares.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares to assume conversion
of all dilutive potential shares. The Company has one category of dilutive potential ordinary shares: share options. For
the share options, a calculation is 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.
Year ended 31 October 2014 Year ended 31 October 2013
Earnings £'m Shares million Pence per share Earnings £'m Shares million Pence per share
Basic 46.8 202.1 23.2 108.5 187.9 57.8
Dilutive securities - 1.5 (0.2) - 1.3 (0.5)
Diluted 46.8 203.6 23.0 108.5 189.2 57.3
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. The Directors consider that these
alternative measures provide useful information on the performance of the Group.
EPRA earnings and earnings per share before non-recurring items, movements on revaluations of investment properties and
changes in the fair value of derivatives have been disclosed to give a clearer understanding of the Group's underlying
trading performance.
Year ended 31 October 2014 Year ended 31 October 2013
Earnings £'m Shares million Pence per share Earnings £'m Shares million Pence per share
Basic 46.8 202.1 23.2 108.5 187.9 57.8
Adjustments:
Gain on investment properties (24.1) - (12.0) (21.5) - (11.4)
Exceptional operating items 1.0 - 0.5 0.7 - 0.3
Exceptional finance costs 2.1 - 1.0 - - -
Unwinding of discount on CGS receivable (0.2) - (0.1) - - -
Net exchange losses 3.7 - 1.8 - - -
Change in fair value of derivatives and recycling of hedge reserve (1.5) - (0.7) (1.5) - (0.8)
Tax adjustments 1.4 - 0.7 (63.6) - (33.9)
Adjusted 29.2 202.1 14.4 22.6 187.9 12.0
EPRA adjusted
Depreciation of leasehold properties (4.9) - (2.4) (4.5) - (2.4)
Tax on leasehold depreciation adjustment 0.9 - 0.5 0.6 - 0.3
EPRA basic 25.2 202.1 12.5 18.7 187.9 9.9
Adjustment for cash tax 2.1 - 1.0 2.2 - 1.2
Adjusted cash tax earnings1 27.3 202.1 13.5 20.9 187.9 11.1
1 Adjusted cash tax earnings is defined as profit or loss for the year before exceptional items, change in fair value of
derivatives, gain/loss on investment properties (adjusted for leasehold depreciation), discount unwind on the CGS
receivable and the associated tax impacts, as well as exceptional tax items and deferred tax charges.
Gain on investment properties includes depreciation on leasehold properties of £4.9m (FY2013: £4.5m) and the related tax
thereon of £0.9m (FY2013: £0.6m). As an industry standard measure, EPRA earnings is presented. EPRA earnings of £25.2m
(FY2013: £18.7m) and EPRA earnings per share of 12.5 pence (FY2013: 9.9 pence) are calculated after further adjusting for
these items.
Group
EPRA adjusted income statement (non-statutory) 2014 £'m 2013 £'m Movement%
Revenue 97.9 96.1 1.9
Operating expenses (excluding depreciation and contingent rent) (44.9) (45.3) 0.9
EBITDA before contingent rent 53.0 50.8 4.3
Depreciation and contingent rent (1.7) (1.1) (54.5)
Operating profit before depreciation on leasehold properties 51.3 49.7 3.2
Depreciation on leasehold properties (4.9) (4.5) (8.9)
Operating profit 46.4 45.2 2.7
Net financing costs (17.9) (23.4) 23.5
Profit before income tax 28.5 21.8 30.7
Income tax (3.3) (3.1) (6.5)
Profit for the year ("EPRA earnings") 25.2 18.7 34.8
Adjusted EPRA earnings per share 12.5 pence 9.9 pence 26.3
Final dividend per share 5.3 pence 3.9 pence 35.9
8. Investment properties, investment properties under construction and interests in leasehold properties
Investment property £'m Interests inleaseholdproperties £'m Investmentpropertyunder construction£'m Totalinvestment properties £'m
As at 1 November 2013 724.6 55.7 5.6 785.9
Additions 3.4 3.2 - 6.6
Disposals (41.6) (1.5) - (43.1)
Purchase of freehold 2.9 (0.3) - 2.6
Revaluations 29.3 - (0.3) 29.0
Depreciation - (4.9) - (4.9)
Exchange movements (14.6) (1.2) - (15.8)
As at 31 October 2014 704.0 51.0 5.3 760.3
Investment property £'m Interests inleaseholdproperties £'m Investmentpropertyunder construction£'m Totalinvestment properties £'m
As at 1 November 2012 685.1 58.0 5.4 748.5
Additions 4.2 20.6 - 24.8
Disposals - (13.4) - (13.4)
Capital Goods Scheme (2.2) - - (2.2)
Reclassifications 1.3 - - 1.3
Revaluations 25.8 - 0.2 26.0
Adjustment to present value - (5.8) - (5.8)
Depreciation - (4.5) - (4.5)
Exchange movements 10.4 0.8 - 11.2
As at 31 October 2013 724.6 55.7 5.6 785.9
The adjustment to present value on interest in leasehold properties reflects the improved recoverability of input taxation
following the implementation of VAT on UK self-storage sales from 1 October 2013.
The Capital Goods Scheme adjustment relates to an increase in the discounted receivable initially recognised as at 31
October 2013.
Gain/(loss) on investment properties comprises:
2014 £'m 2013£'m
Revaluations 29.0 26.0
Depreciation (4.9) (4.5)
24.1 21.5
Cost £'m Valuation £'m Revaluation on cost £'m
Freehold stores
As at 1 November 2013 360.0 591.1 231.1
Movement in year (1.2) (24.3) (23.1)
As at 31 October 2014 358.8 566.8 208.0
Leasehold stores
As at 1 November 2013 75.5 133.5 58.0
Movement in year - 3.7 3.7
As at 31 October 2014 75.5 137.2 61.7
All stores
As at 1 November 2013 435.5 724.6 289.1
Movement in year (1.2) (20.6) (19.4)
As at 31 October 2014 434.3 704.0 269.7
The valuation of £704.0m (FY2013: £724.6m) excludes £0.6m in respect of owner occupied property, which is included within
property, plant and equipment. Rental income earned from investment properties for the year ended 31 October 2014 was
£80.6m (FY2013: £78.3m).
The Group has classified the investment property and investment property under construction, held at fair value, within
Level 3 of the fair value hierarchy. There were no transfers to or from Level 3 during the year.
The freehold and leasehold investment properties have been valued as at 31 October 2014 by external valuers, Cushman &
Wakefield LLP ("C&W"). The valuation has been carried out in accordance with the current UK edition of the RICS Valuation -
Professional Standards, published by The Royal Institution of Chartered Surveyors ("the Red Book"). The valuation of each
of the investment properties has been prepared on the basis of fair value as a fully equipped operational entity, having
regard to trading potential. One non-trading property was valued on the basis of fair value. The valuation has been
provided for accounts purposes and, as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance
with the disclosure requirements of the Red Book, C&W has confirmed that:
· one of the members of the RICS who has been a signatory to the valuations provided to the Group for the same
purposes as this valuation has been so since October 2006, with the second signatory, also a member of the RICS, doing so
for the first time;
· C&W has been carrying out regular valuations for the same purpose as this valuation on behalf of the Group since
October 2006;
· C&W does not provide other significant professional or agency services to the Group;
· in relation to the preceding financial year of C&W, the proportion of total fees payable by the Group to the total
fee income of the firm is less than 5%; and
· the fee payable to C&W is a fixed amount per property and is not contingent on the appraised value.
Market uncertainty
C&W's valuation report comments on valuation uncertainty resulting from low liquidity in the market for self-storage
property. C&W notes that, although there were a number of self-storage transactions in 2007, the only significant
transactions since 2007 are:
· the sale of a 51% share in Shurgard Europe which was announced in January 2008 and completed on 31 March 2008;
· the sale of the former Keepsafe portfolio by Macquarie to Alligator Self Storage which was completed in January
2010;
· the purchase by Shurgard Europe of the 80% interests held by its joint venture partner (Arcapita) in its two
European joint venture vehicles, First Shurgard and Second Shurgard. The price paid was E172m and the transaction was
announced in March 2011. The two joint ventures owned 72 self-storage properties;
· the purchase of Selstor, Sweden, by Pelican Self Storage/M3 Capital in Q4 2013;
· the purchase of Armadillo Self Storage by a joint venture between Big Yellow and an Australian consortium in April
2014;
· the purchase of Alligator Self Storage by Ready Steady Store in October 2014; and
· in December 2014 Big Yellow bought out the remaining 66.7% stake it did not already own in the Big Yellow
Partnership, from its JV partner Pramerica.
There have been 12 single store market transactions in the UK since 2010. C&W states that, due to the lack of comparable
market information in the self-storage sector, there is greater uncertainty attached to its opinion of value than would be
anticipated during a more active market.
Valuation method and assumptions
The valuation of the operational self-storage facilities has been prepared having regard to trading potential. Cash flow
projections have been prepared for all of the properties reflecting estimated absorption, revenue growth and expense
inflation. A discounted cash flow method of valuation based on these cash flow projections has been used by C&W to arrive
at its opinion of fair value for these properties.
C&W has adopted different approaches for the valuation of the leasehold and freehold assets as follows:
Freehold and long leasehold (UK and France)
The valuation is based on a discounted cash flow of the net operating income over a ten year period and notional sale of
the asset at the end of the tenth year.
Assumptions:
· Net operating income is based on projected revenue received less projected operating costs together with a central
administration charge of 6% of the estimated annual revenue subject to a cap and collar. The initial net operating income
is calculated by estimating the net operating income in the first twelve months following the valuation date.
· The net operating income in future years is calculated assuming either straight line absorption from day one actual
occupancy or variable absorption over years one to four of the cash flow period, to an estimated stabilised/mature
occupancy level. In the valuation the assumed stabilised occupancy level for the trading stores (both freeholds and all
leaseholds) open at 31 October 2014 averages 77.81% (31 October 2013: 78.26%). 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 29.67 months (31 October 2013: 36.95 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 valuation included in the accounts assumes rental growth in future periods. If an assumption of no rental
growth is applied to the external valuation, the net initial yield pre-administration expenses for the 107 mature stores
(i.e. excluding those stores categorised as "developing") is 7.82% (31 October 2013: 7.42%), rising to stabilised net yield
pre-administration expenses of 9.73% (31 October 2013: 9.87%).
· 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 all leaseholds) is 11.82% (31 October 2013: 11.91%).
· Purchaser's costs of 5.8% (for the UK) and 6.2% to 6.9% (for France) have been assumed initially and sales plus
purchaser's costs totalling 7.8% (UK) and 8.2% to 8.9% (France) are assumed on the notional sales in the tenth year in
relation to freehold and long leasehold stores.
Short leaseholds (UK)
The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the
discounted cash flow is extended to the expiry of the lease. The average unexpired term of the Group's UK short-term
leasehold properties is 11.11 years (31 October 2013: 12.71 years). The average unexpired term excludes the French
commercial leases.
Short leaseholds (France)
In relation to the French commercial leases, C&W has valued the cash flow projections in perpetuity due to the security of
tenure arrangements in that market and the potential compensation arrangements in the event of the landlord wishing to take
possession. The valuation treatment is therefore the same as for the freehold properties. The capitalisation rates on these
stores reflect the risk of the landlord terminating the lease arrangements.
Investment properties under construction (UK only)
C&W has valued the stores in development adopting the same methodology as set out above but on the basis of the cash flow
projection expected for the store at opening and allowing for the outstanding costs to take each store from its current
state to completion and full fit out. C&W has allowed for carry costs and construction contingency, as appropriate.
Immature stores: value uncertainty
C&W has assessed the value of each property individually. However, four of the stores in the portfolio are relatively
immature and have low initial cash flow. C&W has endeavoured to reflect the nature of the cash flow profile for these
properties in its valuation, and the higher associated risks relating to the as yet unproven future cash flow, by
adjustment to the capitalisation rates and discount rates adopted. However, immature low cash flow stores of this nature
are rarely, if ever, traded individually in the market, unless as part of a distressed sale or similar situation. Although,
there is more evidence of immature low cash flow stores being traded as part of a group or portfolio transaction.
C&W considers there to be market uncertainty in the self-storage sector due to the lack of comparable market transactions
and information. The degree of uncertainty relating to the four immature stores is greater than in relation to the balance
of the properties due to there being even less market evidence that might be available for more mature properties and
portfolios.
C&W states that in practice, if an actual sale of the properties were to be contemplated then any immature low cash flow
stores would normally be presented to the market for sale lotted or grouped with other more mature assets owned by the same
entity, in order to alleviate the issue of negative or low short-term cash flow. This approach would enhance the
marketability of the group of assets and assist in achieving the best price available in the market by diluting the cash
flow risk.
C&W has not adjusted its opinion of fair value to reflect such a grouping of the immature assets with other properties in
the portfolio and all stores have been valued individually. However, C&W highlights the matter to alert the Group to the
manner in which the properties might be grouped or lotted in order to maximise their attractiveness to the market place.
C&W considers this approach to be a valuation assumption but not a Special Assumption, the latter being an assumption that
assumes facts that differ from the actual facts existing at the valuation date and which, if not adopted, could produce a
material difference in value.
C&W has not assumed that the entire portfolio of properties owned by the Group would be sold as a single lot and the value
for the whole portfolio in the context of a sale as a single lot may differ significantly (either higher or lower) from the
aggregate of the individual values for each property in the portfolio, reflecting the lotting assumption described above.
Lotting of stores with customer transfers
Where stores within the portfolio are expected to close in the short term, C&W has assumed that a proportion of the
customer base from these stores will be transferred, at closure, to nearby stores also owned by the Group.
C&W has assumed that the properties that are closing would be sold together with the stores where customers will be
transferred to, in the event they were offered to the market. C&W considers this approach to be a valuation assumption but
not a Special Assumption, the latter being an assumption that assumes facts that differ from the actual facts existing at
the valuation date and which, if not adopted, could produce a material difference in value.
Valuation assumption for purchaser's costs
The Group's investment property assets have been valued for the purposes of the financial statements after deducting
notional purchaser's costs of 5.8% (UK) and 6.2% to 6.9% (France) of gross value, as if they were sold directly as property
assets. The valuation is an asset valuation which is strongly linked to the operating performance of the business. They
would have to be sold with the benefit of operational contracts, employment contracts and customer contracts, which would
be very difficult to achieve except in a corporate structure.
This approach follows the logic of the valuation methodology in that the valuation is based on a capitalisation of the net
operating income after allowing a deduction for operational cost and an allowance for central administration costs. Sale in
a corporate structure would result in a reduction in the assumed Stamp Duty Land Tax but an increase in other transaction
costs reflecting additional due diligence resulting in a reduced notional purchaser's cost of 2.75% of gross value. All the
significant sized transactions that have been concluded in the UK in recent years were completed in a corporate structure.
The Group therefore instructed C&W to prepare additional valuation advice on the basis of purchaser's cost of 2.75% of
gross value which are used for internal management purposes.
Sensitivity of the valuation to assumptions
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.
9. Net assets per share
EPRA earnings and earnings per share before non-recurring items, movements on revaluations of investment properties,
changes in the fair value of derivatives have been disclosed to give a clearer understanding of the Group's underlying
trading performance.
The European Public Real Estate Association ("EPRA") has issued recommended bases for the calculation of net assets per
share information and these are shown in the table below.
2014 £'m 2013£'m
Analysis of net asset value:
Net assets 408.0 345.9
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax) 4.2 11.0
Deferred tax liabilities on the revaluation of investment properties 38.8 39.3
Adjusted net asset value 451.0 396.2
Basic net assets per share (pence) 197.1 183.7
EPRA basic net assets per share (pence) 217.9 210.4
Diluted net assets per share (pence) 195.7 182.4
EPRA diluted net assets per share (pence) 216.4 208.8
Number Number
Shares in issue 206,991,414 188,345,784
Basic net assets per share is shareholders' funds divided by the number of shares at the year end. Diluted net assets per
share is shareholders' funds divided by the number of shares at the year end, adjusted for dilutive share options of
1,466,877 shares (FY2013: 1,297,572 shares). EPRA diluted net assets per share exclude deferred tax liabilities arising on
the revaluation of investment properties. The EPRA NAV, which further excludes fair value adjustments for debt and related
derivatives net of deferred tax, was £451.0m (FY2013: £396.2m), giving EPRA net assets per share of 217.9 pence (FY2013:
210.4 pence). The Directors consider that these alternative measures provide useful information on the performance of the
Group.
EPRA adjusted balance sheet (non-statutory)
Group
2014 £'m 2013 £'m Movement%
Assets
Non-current assets 768.3 797.4 (3.6)
Current assets 35.9 33.0 8.8
Total assets 804.2 830.4 (3.2)
Liabilities
Current liabilities (49.7) (49.2) (1.0)
Non-current liabilities (303.5) (385.0) 21.2
Total liabilities (353.2) (434.2) 18.7
EPRA net asset value 451.0 396.2 13.8
EPRA net asset value per share 217.9 pence 210.4 pence 3.6
10. Financial liabilities - bank borrowings and secured notes
Current 2014£'m 2013£'m
Bank loans and overdrafts due within one year or on demand:
Secured - bank loan 5.0 5.0
5.0 5.0
Non-current 2014£'m 2013£'m
Bank loans and secured notes:
Secured 260.2 338.6
Debt issue costs (0.6) (0.7)
259.6 337.9
The bank facilities of £206m and E70m run to June 2018 and a $112.9m US private placement note issue of seven and twelve
years has maturities extending to 2019 and 2024. The blended cost of interest on the overall debt is 4.3% per annum.
The bank facilities attract a margin over LIBOR/EURIBOR. Since the January 2014 refinancing, the margin ratchets between
2.25% and 3.25%, by reference to the Group's performance against its interest cover covenant. Approximately 60% of the
drawn bank facilities have been hedged at 1.64% (LIBOR) or 0.81% (EURIBOR).
The Company has in issue $65.6m (FY2013: $67.0m) 5.52% Series A Senior Secured Notes due 2019 and $47.3m (FY2013: $48.0m)
6.29% Series B Senior Secured Notes due 2024. The proceeds of the US private placement have been fully hedged by cross
currency swaps converting the US Dollar exchange risk into £ Sterling.
The bank loans and overdrafts are secured by a fixed charge over the Group's investment property portfolio. As part of the
Group's interest rate management strategy, the Group entered into several interest rate swap contracts, details of which
are shown in note 11.
Bank loans and secured notes are stated before unamortised issue costs of £0.6m (FY2013: £0.7m).
Bank loans and secured notes are repayable as follows:
Group
2014 £'m 2013£'m
In one year or less 5.0 5.0
Between one and two years 10.0 10.0
Between two and five years 220.6 256.9
After more than five years 29.6 71.7
Bank loans and secured notes 265.2 343.6
Unamortised issue costs due after one year (0.6) (0.7)
264.6 342.9
The effective interest rates at the balance sheet date were as follows:
2014 2013
Bank loans (UK term loan) Quarterly LIBOR plus 2.25% Quarterly LIBOR plus 3.25%
Bank loans (Euro term loan) Quarterly EURIBOR plus 2.25% Quarterly EURIBOR plus 3.25%
Private placement notes Weighted average rate of 6.21% Weighted average rate of 6.21%
Secured loan notes bear interest at 5.83% on $65.6m (FY2013: $67.0m) and 6.7375% on $47.3m (FY2013: $48.0m), as a result of
cross currency swap agreements.
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 31 October in respect of which all
conditions precedent had been met at that date:
Floating rate
2014 £'m 2013£'m
Expiring beyond one year 66.6 58.0
The carrying amounts of the Group's borrowings are denominated in the following currencies:
2014£'m 2013£'m
Sterling 156.0 230.0
Euro 38.6 41.9
US Dollar 70.6 71.7
265.2 343.6
11. Financial instruments
Financial instruments disclosures are set out below. Additional disclosures are set out in the Financial Review.
2014 2013
Asset£'m Liability£'m Asset£'m Liability£'m
Interest rate swaps - (1.7) - (5.9)
Cross currency swaps - (3.1) - (4.3)
Foreign exchange contracts 0.3 - - (0.8)
0.3 (4.8) - (11.0)
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 fair values of all financial instruments are equal to their book value, with the exception of bank loans and finance
lease obligations which are set out below. The carrying value less impairment provision of trade receivables, other
receivables and the carrying value of trade payables and other payables approximate their fair value.
The fair value of finance leases is approximately equal to their book value. The fair value of bank loans is calculated
as:
2014 2013
Book value£'m Fair value£'m Book value£'m Fair value£'m
Bank loans 264.6 272.0 342.9 365.6
Fair value hierarchy
IFRS 13 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of
the inputs used in the measurements, according to the following levels:
Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset 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:
Assets per the balance sheet 2014£'m 2013£'m
Derivative financial instruments - Level 2 0.3 -
Liabilities per the balance sheet 2014£'m 2013£'m
Derivative financial instruments - Level 2 4.8 11.0
There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior year.
Over the life of the Group's derivative financial instruments, the cumulative fair value gain/loss on those instruments
will be £nil as it is the Group's intention to hold them to maturity.
Interest rate swaps not designated as part of a hedging arrangement
The notional principal amounts of the outstanding interest rate swap contracts at 31 October 2014 were £80m and E45m
(FY2013: £196.7m and E40m). At 31 October 2014 the fixed interest rates were Sterling at 1.640% and Euro at 0.8085%
(FY2013: Sterling at 1.710% and Euro at 1.361%) and floating rates are at quarterly LIBOR and quarterly EURIBOR. The LIBOR
swaps and the EURIBOR swaps expire in June 2018.
The Group restructured its bank borrowing facilities in January 2014, extending the maturity of existing bank facilities
from June 2016 to June 2018. As a result, the existing interest rate swap contracts were cancelled, and replaced by new
interest rate swap contracts to coincide with the new maturity in June 2018. Settlement payments totalling £4.9m were made
to counterparties in respect of the cancelled contracts. The movement in fair value recognised in the income statement was
a net loss of £0.7m (FY2013: gain of £2.8m).
Foreign exchange swap not designated as part of a hedging arrangement
At 31 October 2014, the Group had foreign currency swap contracts outstanding for a notional principal amount of E6.0m
maturing on 30 April 2015 and on 31 October 2015. The Group will receive the Sterling equivalent of the notional principal
amount at an average exchange rate of E1.2343 to the pound and pay the Sterling equivalent of the average monthly spot
rates for the six months. The movement in the fair value recognised in the income statement in the period was a gain of
£1.2m (FY2013: loss of £1.3m).
Cross currency swaps no longer designated as part of a hedging arrangement
The Group entered into cross currency swaps to mitigate the foreign exchange risk arising on future interest payments and
the principal repayments arising from the $65.6m and $47.3m US Secured Senior Notes. These cross currency swaps commenced
in May 2012 and terminate in 2019 and 2024 in line with the maturity of the notes. Following a review during the year of
the Group's hedge accounting procedures in the light of recent accounting developments, management decided to de-designate
the hedge relationship from 1 May 2014 and cease hedge accounting for these cross currency swaps. As a result, previous
hedge accounting adjustments totalling £3.4m have been recycled during the year. The movement in fair value recognised
during the period, was a gain of £4.4m (FY2013: £nil) to the income statement, and a charge of £3.3m (FY2013: £nil) in
other comprehensive income.
Financial instruments by category
Group Loans and receivables £'m Assets at fair value through profit and loss £'m Total £'m
Assets as per balance sheet
Trade receivables and other receivables excluding prepayments 14.9 - 14.9
Derivative financial instruments - 0.3 0.3
Cash and cash equivalents 15.3 - 15.3
As at 31 October 2014 30.2 0.3 30.5
Group Liabilities at fair value through profit and loss £'m Other financial liabilities at amortised cost £'m Total £'m
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities) - 264.6 264.6
Finance lease liabilities - 51.0 51.0
Derivative financial instruments 4.8 - 4.8
Trade payable and other payables - 36.7 36.7
As at 31 October 2014 4.8 352.3 357.1
Group assets as per balance sheet Loans and receivables £'m Assets at fair value through profit and loss £'m Total £'m
Trade receivables and other receivables excluding prepayments 11.4 - 11.4
Cash and cash equivalents 15.8 - 15.8
As at 31 October 2013 27.2 - 27.2
Group liabilities as per balance sheet Liabilities at fair value through profit and loss £'m Other financial liabilities at amortised cost £'m Total £'m
Borrowings (excluding finance lease liabilities) - 342.9 342.9
Finance lease liabilities - 55.7 55.7
Derivative financial instruments 11.0 - 11.0
Trade payable and other payables - 34.8 34.8
As at 31 October 2013 11.0 433.4 444.4
The interest rate risk profile, after taking account of derivative financial instruments, is as follows:
2014 2013
Floating rate£'m Fixed rate £'m Total£'m Floating rate£'m Fixed rate £'m Total£'m
Borrowings 78.5 186.1 264.6 40.3 302.6 342.9
The weighted average interest rate of the fixed rate financial borrowing was 4.61% (FY2013: 5.22%) and the weighted average
remaining period for which the rate is fixed was four years for bank borrowings and five/ten years for the notes (FY2013:
three years for bank debt; six/eleven for notes).
Maturity analysis
The table below analyses the Group's financial liabilities and non-settled derivative financial instruments into relevant
maturity groupings based on the remaining period at the balance sheet date to the contractual maturity dates. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Less than one year£'m One to two years £'m Two to five years £'m More than five years £'m
2014
Borrowings 15.1 20.0 243.3 38.9
Derivative financial instruments 5.5 5.5 15.3 10.1
Contractual interest payments and finance lease charges 8.9 8.6 22.9 40.1
Trade and other payables 36.7 - - -
66.2 34.1 281.5 89.1
2013
Borrowings 22.1 27.8 274.4 92.1
Derivative financial instruments 7.2 7.2 15.6 14.7
Contractual interest payments and finance lease charges 9.2 8.8 24.1 44.2
Trade and other payables 34.8 - - -
73.3 43.8 314.1 151.0
12. Obligations under finance leases
Minimum lease payments Present value of minimumlease payments
2014£'m 2013£'m 2014£'m 2013£'m
Within one year 8.9 9.2 8.0 8.6
Within two to five years 31.5 32.9 23.9 26.1
Greater than five years 40.1 44.2 19.1 21.0
80.5 86.3 51.0 55.7
Less: future finance charges on finance leases (29.5) (30.6) - -
Present value of finance lease obligations 51.0 55.7 51.0 55.7
The comparative minimum lease payments have been adjusted to appropriately reflect the profile of lease payments as they
fall due.
2014£'m 2013£'m
Current 8.0 8.6
Non-current 43.0 47.1
51.0 55.7
13. Called up share capital
2014£'m 2013£'m
Called up, allotted and fully paid
207,134,266 (FY2013: 188,345,784) ordinary shares of 1 pence each 2.1 1.9
14. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from operating activities:
Cash generated from continuing operations 2014£'m 2013£'m
Profit before income tax 52.4 48.6
Gain on investment properties (24.1) (21.5)
Depreciation 0.5 0.4
Impairment of non-current assets - 0.5
Change in fair value of derivatives (1.2) 1.3
Net finance expense 23.2 20.6
Employee share options 1.0 0.2
Changes in working capital:
Increase in inventories (0.1) -
Increase in trade and other receivables (3.5) (0.6)
Increase in trade and other payables 4.4 2.1
Cash generated from continuing operations 52.6 51.6
15. Analysis of movement in net debt
2013£'m Cash flows£'m Non-cash movements£'m 2014£'m
Cash in hand 15.8 0.5 (1.0) 15.3
Debt due within one year (5.0) 5.0 (5.0) (5.0)
Debt due after one year (337.9) 70.3 8.0 (259.6)
Total net debt excluding finance leases (327.1) 75.8 2.0
- More to follow, for following part double click ID:nRSV8130CdRecent news on Safestore Holdings
See all newsREG - Safestore Hldgs plc - First Quarter Trading Update
AnnouncementREG - Safestore Hldgs plc - Notice of First Quarter Trading Update
AnnouncementREG - Safestore Hldgs plc - Publication of Annual Report and Notice of Meeting
AnnouncementREG - Safestore Hldgs plc - Final Results
AnnouncementREG - Safestore Hldgs plc - Notice of Final Results
Announcement