REG - Safestore Hldgs plc - Preliminary Results <Origin Href="QuoteRef">SAFE.L</Origin> - Part 3
21/01/2016 07:10
- Part 3: For the preceding part double click ID:nRSU5165Mb
implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as
a result of new information, future events or otherwise.
2. Segmental analysis
The segmental information presented has been prepared in accordance with the requirements of IFRS 8. The Group's revenue,
profit before income tax and net assets are attributable to one activity: the provision of self-storage accommodation and
related services. Segmental information is presented in respect of the Group's geographical segments. This is based on the
Group's management and internal reporting structure.
Safestore is organised and managed in two operating segments, based on geographical areas, being the United Kingdom and
France.
The chief operating decision maker, being the Executive Directors, identified in accordance with the requirements of IFRS
8, assesses the performance of the operating segments on the basis of adjusted EBITDA.
The operating profits and assets include items directly attributable to a segment as well as those that can be allocated on
a reasonable basis.
Year ended 31 October 2015 UK£'m France£'m Group£'m
Continuing operations
Revenue 79.9 24.9 104.8
EBITDA before exceptional items, change in fair values of derivatives, gain on investment properties, depreciation and contingent rent 40.6 16.5 57.1
Exceptional items - - -
Change in fair value of derivative - (0.3) (0.3)
Contingent rent and depreciation (0.9) (0.6) (1.5)
Operating profit before gain on investment properties 39.7 15.6 55.3
Gain on investment properties 64.9 14.0 78.9
Operating profit 104.6 29.6 134.2
Net finance expense (13.6) (2.4) (16.0)
Profit before tax 91.0 27.2 118.2
Total assets 668.5 199.2 867.7
Year ended 31 October 2014 UK£'m France£'m Group£'m
Continuing operations
Revenue 71.8 26.1 97.9
EBITDA before exceptional items, change in fair values of derivatives, gain on investment properties, depreciation and 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
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
2015£'m 2014£'m
Finance costs
Interest payable on bank loans and overdraft (11.2) (13.6)
Amortisation of debt issuance costs on bank loan (0.2) (0.1)
Underlying finance charges (11.4) (13.7)
Interest on obligations under finance leases (3.8) (4.2)
Fair value movement of derivatives (1.2) (0.8)
Recycling of hedge reserve - (3.4)
Net exchange losses (2.8) (3.7)
Exceptional finance expense - (2.1)
Total finance cost (19.2) (27.9)
Finance income
Fair value movement of derivatives 3.1 4.5
Unwinding of discount on Capital Goods Scheme ("CGS") receivable 0.1 0.2
Total finance income 3.2 4.7
Net finance costs (16.0) (23.2)
Included within interest payable of £11.2 million (FY2014: £13.6 million) is £1.1 million (FY2014: £1.3 million) of
interest relating to derivative financial instruments that are economically hedging the Group's borrowings. The total
change in fair value of derivatives reported within net finance costs for the year is a net gain of £1.9 million (FY2014:
£3.7 million).
In the prior year, exceptional finance costs of £2.1 million were incurred in respect of the Group's debt re-financing in
January 2014.
4. Exceptional items
2015£'m 2014£'m
Restructuring costs - (0.8)
Other exceptional items - (0.2)
Total exceptional costs - (1.0)
There were no exceptional items in the current year. Restructuring costs of £0.8 million were incurred in the prior year,
primarily in respect of organisational changes during the year, which were a fundamental element of the business'
strategy.
5. Income tax charge
Analysis of tax charge in the year:
2015£'m 2014£'m
Current tax:
- UK corporation tax (0.2) -
- tax in respect of overseas subsidiaries (1.4) (0.9)
(1.6) (0.9)
Deferred tax:
- current year (7.7) (3.6)
- adjustment in respect of prior year (0.2) (1.1)
(7.9) (4.7)
Tax charge (9.5) (5.6)
Reconciliation of income tax charge
The tax for the period is lower (FY2014: lower) than the standard effective rate of corporation tax in the UK for the year
ended 31 October 2015 of 20.4% (FY2014: 21.8%). The differences are explained below:
2015£'m 2014£'m
Profit before tax 118.2 52.4
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20.4% (FY2014: 21.8%) 24.1 11.4
Effect of:
- permanent differences 0.2 (0.5)
- profits from the tax exempt business (18.5) (8.1)
- difference from overseas tax rates 3.5 1.7
- adjustments in respect of prior years 0.2 1.1
Tax charge 9.5 5.6
The Group is a 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 main rate of corporation tax in the UK reduced from 23% to 21% with effect from 1 April 2014 and to 20% from 1 April
2015. Accordingly the Group's results for this accounting period are taxed at an effective rate of 20.4%. 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 2015 was £17.2 million (8.30 pence per share) (FY2014: £12.5 million (6.05 pence per share)). A final
dividend in respect of the year ended 31 October 2015 of 6.65 pence (FY2014: 5.30 pence) per share, amounting to a total
final dividend of £13.8 million (FY2014: £11.0 million), is to be proposed at the AGM on 23 March 2016. The ex-dividend
date will be 10 March 2016 and the record date will be 11 March 2016 with an intended payment date of 8 April 2016. The
final dividend has not been included as a liability at 31 October 2015.
The PID element of the final dividend is 6.65 pence (FY2014: 2.65 pence), making the PID payable for the year 9.65 pence
(FY2014: 4.80 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 performed to determine the number of shares that could have been acquired at fair value
(determined as the average annual market price of the Company's shares) based on the monetary value of the subscription
rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of
shares that would have been issued assuming the exercise of the share options.
Year ended 31 October 2015 Year ended 31 October 2014
Earnings£'m Sharesmillion Penceper share Earnings£'m Sharesmillion Penceper share
Basic 108.7 207.5 52.4 46.8 202.1 23.2
Dilutive securities - 1.6 (0.4) - 1.5 (0.2)
Diluted 108.7 209.1 52.0 46.8 203.6 23.0
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 2015 Year ended 31 October 2014
Earnings£'m Sharesmillion Penceper share Earnings£'m Sharesmillion Penceper share
Basic 108.7 207.5 52.4 46.8 202.1 23.2
Adjustments:
Gain on investment properties (78.9) - (38.0) (24.1) - (12.0)
Exceptional operating items - - - 1.0 - 0.5
Exceptional finance costs - - - 2.1 - 1.0
Unwinding of discount on CGS receivable (0.1) - - (0.2) - (0.1)
Net exchange losses 2.8 - 1.3 3.7 - 1.8
Change in fair value of derivatives and recycling of hedge reserve (1.6) - (0.8) (1.5) - (0.7)
Tax on adjustments 5.7 - 2.7 1.4 - 0.7
Adjusted 36.6 207.5 17.6 29.2 202.1 14.4
EPRA adjusted:
Depreciation of leasehold properties (4.1) - (2.0) (4.9) - (2.4)
Tax on leasehold depreciation adjustment 0.8 - 0.4 0.9 - 0.5
EPRA basic 33.3 207.5 16.0 25.2 202.1 12.5
Adjustment for underlying deferred tax 1.2 - 0.6 2.1 - 1.0
Adjusted cash tax earnings1 34.5 207.5 16.6 27.3 202.1 13.5
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 £4.1 million (FY2014: £4.9 million) and the
related tax thereon of £0.8 million (FY2014: £0.9 million). As an industry standard measure, EPRA earnings is presented.
EPRA earnings of £33.3 million (FY2014: £25.2 million) and EPRA earnings per share of 16.0 pence (FY2014: 12.5 pence) are
calculated after further adjusting for these items.
Group
EPRA adjusted income statement (non-statutory) 2015£'m 2014£'m Movement%
Revenue 104.8 97.9 7.0
Operating expenses (excluding depreciation and contingent rent) (47.7) (44.9) (6.2)
EBITDA before contingent rent 57.1 53.0 7.7
Depreciation and contingent rent (1.5) (1.7) 11.8
Operating profit before depreciation on leasehold properties 55.6 51.3 8.4
Depreciation on leasehold properties (4.1) (4.9) 16.3
Operating profit 51.5 46.4 11.0
Net financing costs (15.2) (17.9) 15.1
Profit before income tax 36.3 28.5 27.4
Income tax (3.0) (3.3) 9.1
Profit for the year ("EPRA earnings") 33.3 25.2 32.1
Adjusted EPRA earnings per share 16.0 pence 12.5 pence 28.0
Final dividend per share 6.65 pence 5.3 pence 25.5
8. Investment properties, investment properties under construction and interests in leasehold properties
Investmentproperty£'m Interests inleaseholdproperties£'m Investmentpropertyunderconstruction£'m Totalinvestmentproperties£'m
As at 1 November 2014 704.0 51.0 5.3 760.3
Additions 5.5 7.1 0.8 13.4
Disposals (1.5) (4.9) - (6.4)
Purchase of freehold 1.8 (0.7) - 1.1
Revaluations 83.1 - (0.1) 83.0
Depreciation - (4.1) - (4.1)
Exchange movements (17.4) (1.3) - (18.7)
As at 31 October 2015 775.5 47.1 6.0 828.6
Investmentproperty£'m Interests inleaseholdproperties£'m Investmentpropertyunderconstruction£'m Totalinvestmentproperties£'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
The gain on investment properties comprises:
2015£'m 2014£'m
Revaluations 83.0 29.0
Depreciation (4.1) (4.9)
78.9 24.1
Cost£'m Valuation£'m Revaluationon cost£'m
Freehold stores
As at 1 November 2014 358.8 566.8 208.0
Movement in year 5.7 61.8 56.1
As at 31 October 2015 364.5 628.6 264.1
Leasehold stores
As at 1 November 2014 75.5 137.2 61.7
Movement in year (0.9) 9.7 10.6
As at 31 October 2015 74.6 146.9 72.3
All stores
As at 1 November 2014 434.3 704.0 269.7
Movement in year 4.8 71.5 66.7
As at 31 October 2015 439.1 775.5 336.4
The valuation of £775.5 million (FY2014: £704.0 million) excludes £0.6 million in respect of owner occupied property, which
is included within property, plant and equipment. Rental income earned from investment properties for the year ended 31
October 2015 was £86.0 million (FY2014: £80.6 million).
The Group has classified the investment property and investment property under construction, held at fair value, within
Level 3 of the fair value hierarchy. There were no transfers to or from Level 3 during the year.
The freehold and leasehold investment properties have been valued as at 31 October 2015 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:
· of the members of the RICS who have been the signatories to the valuations provided to the Group for the same purposes
as this valuation, one has done so since October 2006 and the other has done so since October 2014;
· 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 in the UK since the start of 2013 there have only been four transactions involving multiple assets
and twelve single asset transactions, and C&W is unaware of any comparable transactions in the Paris market. 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 more active market conditions.
Portfolio premium
C&W's valuation report confirms that the properties have been valued individually but that if the portfolio was to be sold
as a single lot or in selected groups of properties, the total value could be different. C&W states that in current market
conditions it is of the view that there could be a material portfolio premium.
Valuation method and assumptions
The valuation of the operational self-storage facilities has been prepared having regard to trading potential. Cash flow
projections have been prepared for all of the properties reflecting estimated absorption, revenue growth and expense
inflation. A discounted cash flow method of valuation based on these cash flow projections has been used by C&W to arrive
at its opinion of fair value for these properties.
C&W has adopted different approaches for the valuation of the leasehold and freehold assets as follows:
Freehold and long leasehold (UK and France)
The valuation is based on a discounted cash flow of the net operating income over a ten-year period and a notional sale of
the asset at the end of the tenth year.
Assumptions:
· Net operating income is based on projected revenue received less projected operating costs together with a central
administration charge of 6% of the estimated annual revenue, subject to a cap and collar. The initial net operating income
is calculated by estimating the net operating income in the first twelve months following the valuation date.
· The net operating income in future years is calculated assuming either straight line absorption from day one actual
occupancy or variable absorption over years one to four of the cash flow period, to an estimated stabilised/mature
occupancy level. In the valuation the assumed stabilised occupancy level for the trading stores (both freeholds and all
leaseholds) open at 31 October 2015 averages 77.87% (31 October 2014: 77.81%). 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 23.93 months (31 October 2014: 29.67 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 109 mature stores (i.e. excluding
those stores categorised as "developing") is 7.89% (31 October 2014: 7.82%), rising to a stabilised net yield
pre-administration expenses of 9.08% (31 October 2014: 9.73%).
· 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 10.79% (31 October 2014: 11.82%).
· 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 coststotalling 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 12.73 years (31 October 2014: 11.11 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, three of the stores in the portfolio are relatively
immature and have low initial cash flow. C&W has endeavoured to reflect the nature of the cash flow profile for these
properties in its valuation, and the higher associated risks relating to the as yet unproven future cash flow, by
adjustment to the capitalisation rates and discount rates adopted. However, immature low cash flow stores of this nature
are rarely, if ever, traded individually in the market, unless as part of a distressed sale or similar situation. Although,
there is more evidence of 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 three 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 marketplace.
C&W considers this approach to be a valuation assumption but not a Special Assumption, the latter being an assumption that
assumes facts that differ from the actual facts existing at the valuation date and which, if not adopted, could produce a
material difference in value.
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 adjusting for
notional purchaser's costs of 5.8% (UK) and 6.2% to 6.9% (France), as if they were sold directly as property assets. The
valuation is an asset valuation which is strongly linked to the operating performance of the business. They would have to
be sold with the benefit of operational contracts, employment contracts and customer contracts, which would be difficult to
achieve except in a corporate structure.
This approach follows the logic of the valuation methodology in that the valuation is based on a capitalisation of the net
operating income after allowing a deduction for operational cost and an allowance for central administration costs. 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 and
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.
2015£'m 2014£'m
Analysis of net asset value:
Net assets 490.6 408.0
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax) 0.7 4.2
Deferred tax liabilities on the revaluation of investment properties 41.2 38.8
Adjusted net asset value 532.5 451.0
Basic net assets per share (pence) 236.2 197.1
EPRA basic net assets per share (pence) 256.4 217.9
Diluted net assets per share (pence) 234.4 195.7
EPRA diluted net assets per share (pence) 254.4 216.4
Number Number
Shares in issue 207,682,712 206,991,414
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
1,651,532 shares (FY2014: 1,466,877 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 £532.5 million (FY2014: £451.0 million), giving EPRA net assets per share of 256.4
pence (FY2014: 217.9 pence). The Directors consider that these alternative measures provide useful information on the
performance of the Group.
EPRA adjusted balance sheet (non-statutory)
Group
2015£'m 2014£'m Movement%
Assets
Non-current assets 833.6 768.3 8.5
Current assets 33.4 35.9 (7.0)
Total assets 867.0 804.2 7.8
Liabilities
Current liabilities (44.4) (49.7) 10.7
Non-current liabilities (290.1) (303.5) 4.4
Total liabilities (334.5) (353.2) 5.3
EPRA net asset value 532.5 451.0 18.1
EPRA net asset value per share 256.4 pence 217.9 pence 17.7
10. Financial liabilities - bank borrowings and secured notes
Current 2015£'m 2014£'m
Bank loans and overdrafts due within one year or on demand:
Secured - bank loan - 5.0
- 5.0
Non-current 2015£'m 2014£'m
Bank loans and secured notes:
Secured 251.3 260.2
Debt issue costs (1.8) (0.6)
249.5 259.6
The Group's borrowings consist of bank facilities of £206 million and E70 million, which run to June 2020, and a $112.9
million US private placement note issue, originally of seven and twelve years with maturities extending to 2019 and 2024.
The blended cost of interest on the overall debt is 3.9% per annum.
The bank facilities attract a margin over LIBOR/EURIBOR. Since the August 2015 re-financing, the margin ratchets between
1.50% and 2.75%, by reference to the Group's performance against its interest cover covenant. Approximately 63% of the
drawn bank facilities have been hedged at 1.447% (LIBOR) or 0.309% (EURIBOR).
The Company also has in issue $65.6 million (FY2014: $65.6 million) 5.52% Series A Senior Secured Notes due 2019 and $47.3
million (FY2014: $47.3 million) 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 £1.8 million (FY2014: £0.6 million).
Bank loans and secured notes are repayable as follows:
Group
2015£'m 2014£'m
In one year or less - 5.0
Between one and two years - 10.0
Between two and five years 220.6 220.6
After more than five years 30.7 29.6
Bank loans and secured notes 251.3 265.2
Unamortised debt issue costs (1.8) (0.6)
249.5 264.6
The effective interest rates at the balance sheet date were as follows:
2015 2014
Bank loans (UK term loan) Quarterly or monthly LIBOR plus 1.50% Quarterly LIBOR plus 2.25%
Bank loans (Euro term loan) Quarterly EURIBOR plus 1.50% Quarterly EURIBOR plus 2.25%
Private placement notes Weighted average rate of 6.21% Weighted average rate of 6.21%
The private placement secured loan notes bear interest at 5.83% on $65.6 million (FY2014: $65.6 million) and 6.7375% on
$47.3 million (FY2014: $47.3 million), 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
2015£'m 2014£'m
Expiring beyond one year 77.8 66.6
The carrying amounts of the Group's borrowings are denominated in the following currencies:
2015£'m 2014£'m
Sterling 146.0 156.0
Euro 32.1 38.6
US Dollar 73.2 70.6
251.3 265.2
11. Financial instruments
Financial instruments disclosures are set out below. Additional disclosures are set out in the Financial Review.
2015 2014
Asset£'m Liability£'m Asset£'m Liability£'m
Interest rate swaps - (0.8) - (1.7)
Cross currency swaps 0.6 (0.6) - (3.1)
Foreign exchange contracts - - 0.3 -
0.6 (1.4) 0.3 (4.8)
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 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 bank loans is calculated as:
2015 2014
Book value£'m Fair value£'m Book value£'m Fair value£'m
Bank loans 249.5 259.3 264.6 272.0
Fair value hierarchy
IFRS 13 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of
the inputs used in the measurements, according to the following levels:
Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly.
Level 3 - inputs for the asset or liability that are not based on observable market data.
The table below shows the level in the fair value hierarchy into which fair value measurements have been categorised:
Assets per the balance sheet 2015£'m 2014£'m
Derivative financial instruments - Level 2 0.6 0.3
Liabilities per the balance sheet 2015£'m 2014£'m
Derivative financial instruments - Level 2 1.4 4.8
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 2015 were £90 million and E30
million (FY2014: £80 million and E45 million). At 31 October 2015 the fixed interest rates were Sterling at 1.447% and Euro
at 0.309% (FY2014: Sterling at 1.640% and Euro at 0.8085%) and floating rates are at quarterly LIBOR and quarterly EURIBOR.
The LIBOR swaps and the EURIBOR swaps expire in June 2020.
The Group restructured its bank borrowing facilities in August 2015, extending the maturity of existing bank facilities
from June 2018 to June 2020 and reducing the interest rates payable on the facilities. 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 2020. Settlement payments totalling £2.0 million 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 £1.2 million (FY2014: net loss of £0.7
million).
Foreign exchange swap not designated as part of a hedging arrangement
At the start of the financial year the Group had foreign currency swap contracts outstanding for a notional principal
amount of E6.0 million which matured during the year. The movement in the fair value recognised in the income statement in
the period was a loss of £0.3 million (FY2014: gain of £1.2 million). The Group has no foreign currency swap contracts
outstanding at 31 October 2015.
Cross currency swaps not 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 $65.6 million and $47.3 million US Senior Secured Notes. These cross currency
swaps commenced in May 2012 and terminate in 2019 and 2024 in line with the maturity of the notes. The movement in fair
value during the year recognised in the income statement was a net gain of £3.1 million (FY2014: £4.4 million).
Financial instruments by category
Assets per the balance sheet Loans andreceivables£'m Assets at fairvalue throughprofit and loss£'m Total£'m
Trade receivables and other receivables excluding prepayments 14.4 - 14.4
Derivative financial instruments - 0.6 0.6
Cash and cash equivalents 13.8 - 13.8
As at 31 October 2015 28.2 0.6 28.8
Liabilities per the balance sheet Liabilities at fairvalue throughprofit and loss£'m Other financialliabilities atamortised cost£'m Total£'m
Borrowings (excluding finance lease liabilities) - 249.5 249.5
Finance lease liabilities - 47.1 47.1
Derivative financial instruments 1.4 - 1.4
Payables and accruals - 25.5 25.5
As at 31 October 2015 1.4 322.1 323.5
Assets per the balance sheet Loans andreceivables£'m Assets at fairvalue throughprofit and loss£'m Total£'m
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
Liabilities per the balance sheet Liabilities at fairvalue throughprofit and loss£'m Other financialliabilities atamortised cost£'m Total£'m
Borrowings (excluding finance lease liabilities) - 264.6 264.6
Finance lease liabilities - 51.0 51.0
Derivative financial instruments 4.8 - 4.8
Trade and other payables - 26.1 26.1
As at 31 October 2014 4.8 341.7 346.5
The interest rate risk profile, after taking account of derivative financial instruments, was as follows:
2015 2014
Floating rate£'m Fixed rate£'m Total£'m Floating rate£'m Fixed rate£'m Total£'m
Borrowings 64.9 184.6 249.5 78.5 186.1 264.6
The weighted average interest rate of the fixed rate financial borrowing was 4.11% (FY2014: 4.61%) and the weighted average
remaining period for which the rate is fixed was five years for bank borrowings and four/nine years for the notes (FY2014:
four years for bank borrowings; five/ten 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 thanone year£'m One to twoyears£'m Two to fiveyears£'m More thanfive years£'m
2015
Borrowings 8.2 8.2 242.4 38.4
Derivative financial instruments 5.3 5.3 13.3 8.0
Contractual interest payments and finance lease charges 7.6 7.3 18.7 41.6
Payables and accruals 25.5 - - -
46.6 20.8 274.4 88.0
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
Payables and accruals 26.1 - - -
55.6 34.1 281.5 89.1
12. Obligations under finance leases
The Group leases certain of its investment properties under finance leases. The average remaining lease term is 13.9 years
(FY2014: 12.1 years).
Minimum
- More to follow, for following part double click ID:nRSU5165MdRecent news on Safestore Holdings
See all newsREG - Safestore Hldgs plc - Result of AGM
AnnouncementREG - 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
Announcement