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RNS
Big Yellow Group PLC  -  BYG   

Results for the year ended 31 March 2018

Released 07:00 22-May-2018

RNS Number : 7923O
Big Yellow Group PLC
22 May 2018
 

Big Yellow Group PLC

("Big Yellow", "the Group" or "the Company")

Results for the YEAR ended 31 MARCH 2018

 

CONTINUED GROWTH IN ALL KEY METRICS
 


Financial metrics

Year ended

31 March 2018

Year ended
31 March 2017

 

Growth

Revenue

£116.7m

£109.1m

7%

Like-for-like revenue(1)

£114.7m

£107.3m

7%

Store EBITDA(1)

£79.5m

£73.5m

8%

Adjusted profit before tax(1)

£61.4m

£54.6m

12%

EPRA earnings per share(1)

38.5p

34.5p

12%

Dividend         - final

                        - total

15.5p

30.8p

14.1p

27.6p

10%

12%

Statutory metrics

 

 

 

Profit before tax

£134.1m

£99.8m

34%

Cash flow from operating activities (after net finance costs)

£63.0m

£56.0m

13%

Basic earnings per share

85.0p

63.6p

34%

Store metrics

Occupancy growth(1)

 

179,000 sq ft

 

112,000 sq ft

 

67,000 sq ft

Closing occupancy(1)

81.0%

78.0%

3 ppts

Occupancy - like-for-like stores (%)(1)

81.9%

78.0%

3.9 ppts

Average net achieved rent per sq ft(1)

£26.37

£26.16

0.8%

Closing net rent per sq ft(1)

£26.74

£26.03

2.7%

1 See note 28 for glossary of terms

 

Highlights

·     Strong occupancy performance driving 7% revenue growth

·     Closing net rent up 2.7% from 31 March 2017, average rate up 0.8% year on year and up 1.5% in the second half;

·     Cash flow from operating activities (after net finance costs) increased by 13% to £63.0 million

·     Adjusted profit before tax up 12% to £61.4 million

·     12% increase in total dividend to 30.8 pence per share

·     Acquisition of new development sites in Wapping (London), Uxbridge (London), Bracknell, Hove and Slough taking pipeline to approximately 640,000 sq ft (14% of current MLA)

·     Planning consent obtained at Manchester for a landmark city centre store of 60,000 sq ft

·     Planning consent obtained at Camberwell, London for a 72,000 sq ft store

·     Refinancing extending the term of the Group's debt and reducing the average cost

Nicholas Vetch, Executive Chairman of Big Yellow, commented:

"We remain focussed on our core objective of increasing occupancy to 90%.  As we have previously indicated, higher levels of occupancy deliver more traction on pricing and drive rate growth and indeed we have seen that materialise in the second half of the year.

As our vacant capacity has reduced we have been more aggressively pursuing an expansion strategy.  There are very few existing stores that are of sufficient quality available to purchase and brand as Big Yellow.  We continue therefore to acquire raw land and develop our own stores, and are pleased to have secured a number of quality sites during the year.  The development process however, of which we have unparalleled experience, remains long, does carry risk, and is increasingly complex.

Risks external to our business remain, and there will no doubt be setbacks in economic growth.  It is for that reason that we keep the business very conservatively financed thus enabling us to plan and execute the next phase of growth."

ABOUT US

Big Yellow is the UK's brand leader in self storage.  Big Yellow now operates from a platform of 96 stores, including 22 stores branded as Armadillo Self Storage, in which the Group has a 20% interest.  We own a further ten Big Yellow self storage development sites (including one extension site), of which three have planning consent.  The current maximum lettable area of the existing platform (including Armadillo) is 5.6 million sq ft.  When fully built out the portfolio will provide approximately 6.2 million sq ft of flexible storage space.  Of the Big Yellow stores and sites, 97% by value are held freehold and long leasehold, with the remaining 3% short leasehold.

The Group has pioneered the development of the latest generation of self storage facilities, which utilise state of the art technology and are located in high profile, accessible, main road locations.  Our focus on the location and visibility of our Big Yellow stores, coupled with our excellent customer service and our market leading online platform, has created the most recognised brand name in the UK self storage industry.

For further information, please contact:

Big Yellow Group PLC

01276 477811

Nicholas Vetch, Executive Chairman

 

James Gibson, Chief Executive Officer

 

John Trotman, Chief Financial Officer

 

 

 

Teneo Blue Rubicon

020 7260 2700

Ben Foster

 

Matthew Denham

 

 

Chairman's Statement

 

Big Yellow Group PLC ("Big Yellow", "the Group" or "the Company"), the UK's brand leader in self storage, is pleased to announce its results for the year ended 31 March 2018.

We have delivered another year of occupancy, revenue and earnings growth.  In May 2017, along with our year end results, we set out our ambition to see material growth in occupancy towards our long held target of 85%.  In November, with our interim results, we adjusted our occupancy target for the business as a whole to 90%.  We are therefore pleased to be reporting significant progress in occupancy with these results.  Like-for-like closing Group occupancy is up 3.9 percentage points to 81.9% compared to 78.0% at 31 March 2017.  Closing net rent was £26.74, an increase of 2.7% from the same time last year.  Average rental growth was up 0.8% year-on-year and up 1.5% in the second half. 

We would expect to see further growth in occupancy over the summer, peaking at or above 85%, providing there are no significant external shocks.  It remains our firm belief that occupancy gains are hard won and are of significant value to drive long term increases in average rent.  As our occupancy rises, rate growth will come through driven by our yield management systems, and we have seen that in the second half of the year, and expect to see more of a contribution to revenue from rate growth in the current year.

Financial results

Revenue for the year was £116.7 million (2017: £109.1 million), an increase of 7%.  Like-for-like revenue growth (excluding Nine Elms and Twickenham 2 acquired in April 2016 and Guildford Central opened in March 2018) was 7%. 

Operating cash flow increased by £7.0 million (13%) to £63.0 million for the year (2017: £56.0 million).  During the year we spent £42.0 million on growth capital expenditure, more than double the £20.6 million in 2017.  The Group's operating profit before property revaluations increased by £5.6 million (9%) to £70.9 million.  The Group's statutory profit before tax was £134.1 million, an increase of 34% from £99.8 million in the prior year due to the increase in operating profit and an increased revaluation gain on our investment properties in the year. 

Given that our central overhead and operating expense is largely embedded in the business, this revenue growth has delivered an increase of 12% in the adjusted profit before tax in the year of £61.4 million (2017: £54.6 million).  Adjusted earnings per share increased by 12% to 38.5p (2017: 34.5p) with an equivalent 12% increase in the dividend per share for the year. 

The Group has net debt of £323.7 million at 31 March 2018 (2017: £298.0 million).  This represents approximately 25% (2017: 25%) of the Group's gross property assets totalling £1,303.3 million (2017: £1,190.5 million) and 31% (2017: 31%) of the adjusted net assets of £1,059.1 million (2017: £963.4 million).  The Group's interest cover for the year, expressed as the ratio of cash generated from operations against interest paid was 7.6 times (2017: 6.1 times).  This is comfortably ahead of our internal minimum interest cover target of 5 times.

Investment in new capacity

Our 55,000 sq ft Guildford Central store on Woodbridge Meadows opened in March 2018, and after its first two months it is 12% occupied.  The 25,000 sq ft extension to our Wandsworth store has just opened. 

We have acquired five freehold development sites since 1 April 2017, increasing our pipeline to nine new stores and one extension, with a total capacity (subject to planning) of approximately 640,000 sq ft (14% of current MLA).  The acquisitions in Wapping (just east of Tower Bridge), Uxbridge (West London), Hove, Bath Road in Slough, and Bracknell are all in London and the South East, and we believe when developed will be quality additions to the portfolio. 

We continue to look for land and existing storage centres in large urban conurbations, with a focus on London and the South East, and should the current uncertainties throw up new opportunities, we will pursue them aggressively.  That said, developing stores in these areas remains challenging given the competition for land, an increasingly long, expensive and complex planning process and the understandable pressure to produce more housing. 

We have successfully acquired four of the six long leasehold interests within the Wapping building and are currently fitting out the available vacant space to create a self storage centre of approximately 25,000 sq ft, which will open in late summer. 

As reported in our interims, we have obtained planning consent for a landmark Manchester city centre store of 60,000 sq ft on Water Street, which is currently under construction with a scheduled opening in spring 2019.  We have also recently obtained planning consent for a 72,000 sq ft store in Camberwell, London, with the store scheduled to open in spring 2020.  After lengthy consultations, we have made good progress on planning at Kings Cross and Battersea and anticipate submitting applications for both schemes later this year.   

We are working up the planning applications on the recently acquired schemes in Bracknell, Slough, Hove and Uxbridge and will submit them in due course following negotiations with the relevant councils.  As always, this process is subject to the vagaries of the planning system.  At 31 March 2018, the future cost of the current pipeline of ten development sites and extensions, seven of which are subject to planning, is estimated to be £110 million. 

Dividends                                                                                                                                                                                

The Group's dividend policy is to distribute 80% of full year adjusted earnings per share.  The final dividend declared is 15.5 pence per share.  The dividend declared for the year of 30.8 pence per share represents an increase of 12% from 27.6 pence per share last year. 

Our people

A business will only succeed if it has a fully motivated and engaged team.  From the start we have always aimed to create a culture which is accessible, apolitical, non-hierarchical, socially responsible, and very importantly, a fun and enjoyable place to work.  Some of you may have seen that we formally launched The Big Yellow Foundation in February, supporting six charities who focus on the rehabilitation of adults through work.  This is a further step in the evolution of Big Yellow as a business, which has received very positive feedback and support from our people and customers.  More details on the Foundation can be found online and in the CSR report.

In addition, we focus on customer service and engagement, measuring and responding to their feedback.  There has been a further improvement in our customer net promoter scores ("NPS") to an average of 80.1 over the year.  NPS scores at these levels are highly unusual and a good reflection of the culture of this business.

I would like to thank all our people for their efforts in contributing to another year of growth.

Board

Tim Clark has announced that he is stepping down as a Non-Executive Director at the Group's next AGM.  He joined the Company in 2008 and over the past ten years has been a valuable Senior Independent Director, and Chair of the Remuneration and Nomination Committees.  I will miss his sound advice, judgement, and considerable brainpower and along with the Board, would like to thank him for his significant contribution to Big Yellow's success. 

Vince Niblett joined the Board as a Non-Executive Director and Chairman of the Audit Committee in June 2017.  Vince was previously the Global Managing Partner Audit for Deloitte, and held a number of senior leadership roles there before his retirement in May 2015.   

Anna Keay joined the Board as a Non-Executive Director in March 2018.  Anna has been the CEO of the Landmark Trust since 2012, having started her career at Historic Royal Palaces, and then from 2002 to 2012 she was Curatorial Director of English Heritage.

I am delighted to welcome Vince and Anna.  I consider it a plaudit that we can attract such high quality people to our Board.

Outlook

We remain focussed on our core objective of increasing occupancy to 90%.  As we have previously indicated, higher levels of occupancy deliver more traction on pricing and drive rate growth and indeed we have seen that materialise in the second half of the year.

As our vacant capacity has reduced we have been more aggressively pursuing an expansion strategy.  There are very few existing stores that are of sufficient quality available to purchase and brand as Big Yellow.  We continue therefore to acquire raw land and develop our own stores, and are pleased to have secured a number of quality sites during the year.  The development process however, of which we have unparalleled experience, remains long, does carry risk, and is increasingly complex.

Risks external to our business remain, and there will no doubt be setbacks in economic growth.  It is for that reason that we keep the business very conservatively financed thus enabling us to plan and execute the next phase of growth.

Nicholas Vetch, Executive Chairman

21 May 2018

 

Strategic Report

 

OUR STRATEGY AND BUSINESS MODEL

Our Strategy

Our strategy from the outset has been to develop Big Yellow into the market leading self storage brand, delivering excellent customer service, with a great culture and highly motivated employees.  We continue to be the market leading brand, with unprompted awareness of seven times that of our nearest competitor (source: YouGov survey, April 2018).  We concentrate on developing our stores in main road locations with high visibility, where our distinctive branding generates high awareness of Big Yellow.  Our accreditation in 2016 for the Best 100 Companies to work for was pleasing as an independent assessment of our employee engagement, and our customer satisfaction survey scores remain very high, with an average customer net promoter score of 80 in the year, and average Trustpilot scores of 9.5 out of 10. 

Self storage demand from businesses and individuals at any given store is linked in part to local economic activity, consumer and business confidence, all of which are inter-related.  Fluctuations in housing activity whether in the rented or owner occupied sector, are also a factor and in our view influence the top slice of demand over and above a core occupancy.  The performance of our stores was relatively resilient during the collapse in housing activity and GDP over the period 2007 to 2009, with London and the South East proving to be less volatile.

Local GDP and hence business and housing activity are greatest in the larger urban conurbations and in particular London and the South East.  Furthermore, people and businesses are space constrained in these more densely populated areas.  Barriers to entry in terms of competition for land and difficulty around obtaining planning are also highest in more urbanised locations. 

Over the last 19 years we have built a portfolio of 74 Big Yellow self storage centres, largely freehold, purpose-built and focussed on London, the South East and large metropolitan cities.  We believe that by owning a predominantly freehold estate we are insulating ourselves against adverse rent reviews and in the long term possible redevelopment of key stores by the landlord.  We currently have a pipeline of ten freehold development opportunities (including one extension) and are looking to expand that pipeline with a view to growing the Big Yellow platform to 100 stores.

65% of our current annualised store revenue derives from within the M25; for London and the South East, the proportion of current annualised store revenue is 83%.  Any future external growth will be executed in a way that is likely to maintain a balance of 80% in London and the South East and 20% in regional cities.

Our Big Yellow stores are on average 62,000 sq ft, compared to an industry average of approximately 46,000 sq ft (source: The Self Storage Association 2018 UK Annual Survey).  The upside from filling our larger than average sized stores is, in our view, only possible in large metropolitan markets, where self storage demand from domestic and business customers is the highest.  As the operating costs of our assets are relatively fixed, larger stores in bigger urban conurbations, particularly London, drive higher revenues and higher operating margins.

We continue to believe that the medium term opportunity to create shareholder value will be achieved principally by increasing occupancy and net rent per sq ft in our existing platform to drive revenue, the majority of which flows through to the bottom line.  Our key objectives remain:

-  leveraging our market leading brand position to generate new prospects, principally from our digital, mobile and desktop platforms;

-   focusing on training, selling skills, and customer satisfaction to maximise prospect conversion and referrals;

-   growing occupancy and net rent so as to drive revenue optimally at each store;

-   maintaining a focus on cost control, so revenue growth is transmitted through to earnings growth;

-  increasing the footprint of the Big Yellow platform to 100 stores principally through new site development and where possible existing prime freehold stores that meet our quality criteria; 

-   selectively acquiring existing self storage assets into the Armadillo platform;

-   maintaining a conservative capital structure in the business with Group interest cover of a minimum of five times; and

-   producing sustainable returns for shareholders through a low leverage, low volatility, high distribution REIT.

In the eighteen years since flotation in May 2000, Big Yellow has delivered a Total Shareholder Return ("TSR"), including dividends reinvested, of 15.0% per annum, in aggregate 1,128% at the closing price of 853p on 31 March 2018.  This compares to 6.5% per annum for the FTSE Real Estate Index and 5.0% per annum for the FTSE All Share index over the same period.  This demonstrates the power of compounding over the longer term.

Our business model

Attractive market dynamics

•     UK self storage penetration in key urban conurbations remains relatively low

•     Limited new supply coming onto the market

•     Resilient through the downturn

•     Sector growth is positive, with increasing domestic demand

Our competitive advantage

•     UK industry's most recognised brand

•    Prominent stores on arterial or main roads, with extensive frontage and high visibility

•     Largest share of web traffic from mobile and desktop platforms

•     Strong customer satisfaction and NPS scores reflecting excellent customer service

•     5.6 million sq ft UK footprint (Big Yellow and Armadillo combined)

•   Primarily freehold estate concentrated in London and South East and other large metropolitan cities

•     Larger average store capacity - economies of scale, higher operating margins

•     Secure financing structure with strong balance sheet

Evergreen income streams

•     55,000 customers from a diverse base - individuals, SMEs and national accounts

•     Average length of stay for existing customers of 26 months

•     30% of customers in stores greater than two year length of stay

•     Low bad debt expense (0.2% of revenue in the year)

Strong growth opportunities

•     Opportunities to drive further occupancy growth

•     Yield management as occupancy increases

•     Densification of living and scarcity of flexible business space drives demand

•     Growth in national accounts and business customer base

•     Increasing the platform financed from internal resources

•     Growth in our Armadillo joint venture platform

Conversion into

quality returns

•     Freehold assets for high operating margins and operational advantage

•     Low technology and obsolescence product, maintenance capex fully expensed

•     Annual compound adjusted eps growth of 16% since 2004/5 (IFRS adoption year)

•     Annual compound cash flow growth of 16% since 2004/5

•     Dividend payout ratio of 80% of adjusted eps

 

The self storage market

In the recently published 2018 Self Storage Association UK Survey, only 46% of those surveyed had a reasonable or good awareness of self storage.  Furthermore, only 6% of the 2,083 adults surveyed were currently using self storage, or were thinking of using self storage, in the next year.  This indicates a continued opportunity for growth and with increasing use of self storage, together with the ongoing marketing efforts of everyone in the industry, we anticipate awareness will grow.

Self storage is not a commoditised product and awareness is driven largely by businesses and individuals using self storage.  Consequently, the increase in awareness over time has been relatively slow, with good awareness of self storage increasing from 38% in 2014 to 46% in 2018 across the UK (source: UK SSA Survey 2018).  Our YouGov Survey carried out in April 2018 showed higher levels of awareness in London of 63%, up from 58% in 2014. 

Growth in new facilities across the industry has been largely in regional areas of the UK and in particular in smaller towns.  In London in the year to 31 March 2018, we believe there were five new store openings offset by three closures. 

The Self Storage Association ("SSA") estimates that the UK industry is made up of approximately 1,504 self storage facilities (of which 345 are purely container operations), providing 44.6 million sq ft of self storage space, equating to 0.7 sq ft per person in the UK.  This compares to 9.5 sq ft per person in the US, 1.8 sq ft per person in Australia and 0.1 sq ft for mainland Europe, where the roll-out of self storage is a more recent phenomenon (source: FEDESSA European Self Storage Annual Survey 2017).  393 self storage facilities in the UK are held by large operators (defined as those managing 10 facilities or more), which represents 34% of the total number of self storage centres (excluding container operations), but the SSA estimate over 40% of total capacity.  Given the dominance of the larger brands in the South East, we would expect the proportion of revenue earned by the top five operators to be in excess of 40% of the annual industry turnover of £750 million.

Big Yellow is well placed to benefit from the growing self storage market, given the strength of our brand, and our online platform which delivers 88% of our prospect enquiries.  Our portfolio is strategically focussed on London, the South East and large metropolitan cities, where barriers to entry and economic activity are at their highest.

 

Operational and Marketing Review

Overview

We now have a portfolio of 74 open and trading Big Yellow stores, with a further ten development sites including one extension opportunity.  The current maximum lettable area of the 74 stores is 4.6 million sq ft.  When fully built out the portfolio will provide approximately 5.3 million sq ft of flexible storage space.

In addition we part-own and manage 22 Armadillo stores which are principally located in northern UK towns and cities, and operate from a platform of 1.0 million sq ft.  

Growth in new self storage centre openings, excluding container operators, over the last six years has averaged 1% to 2% of total capacity per annum, down significantly from the previous decade.  Additionally, in our core markets in London and the South East, high land values driven by competing uses such as residential, and complex planning rules, are making the creation of new supply very difficult for all operators.  We believe that we are in a relatively strong position given the strength of our balance sheet and our proven property development expertise, together with our ability to access funding to exploit the right opportunities.

Operations

The Big Yellow store model is well established. The "typical" store has 60,000 sq ft of MLA and takes some three to four years to achieve 85% plus occupancy.  The average room size occupied in the portfolio is currently 68 sq ft, in line with last year.  The store is open seven days a week and is initially run by three staff, with a part time member of staff added once the store occupancy justifies the need for the extra administrative and sales workload.

The drive to improve store operating standards and consistency across the portfolio remains a key focus for the Group. Excellent customer service is at the heart of our business objectives, as a satisfied customer is our best marketing tool. We measure customer service standards through a programme of mystery shopping and online customer reviews, which are externally managed.  Over the year, we have achieved an average net promoter score of 80. 

We have a team of nine area managers in place who have on average worked for Big Yellow for 13 years.  They develop and support the stores to drive the growth of the business.

The store bonus structure rewards occupancy performance, sales growth and cost control through quarterly targets based on occupancy and store profitability, including the contribution from ancillary sales of insurance and packing materials.  Information on bonus build up is circulated monthly and stores are consulted in preparing their own targets and budgets each quarter, leading to improved visibility, a better understanding of sales lines and control of operating costs.

We believe, that as a consumer-facing branded business, it is paramount to maintain the quality of our estate and customer offering.  We therefore continue to invest in preventative maintenance, store cleaning and the repair and replacement of essential equipment, such as lifts and gates.  The ongoing annual expenditure is approximately £35,000 per store, which is included within cost of sales.  This excludes our rolling programme of store makeovers, which typically take place every five years, at a cost of approximately £20,000 per store.  Over the last five years we have invested £12 million in the upkeep and maintenance of our stores, all of which has been expensed in the income statement.

Demand

Demand for self storage is largely driven by need, with security, convenience, quality of product, service and location being key drivers.  Awareness remains relatively low compared to commoditised products, such as hotel rooms or airline seats, albeit it is increasing slowly year on year with increased supply, marketing spend and customer use.

We are confident that Big Yellow benefits disproportionately from this improving market for our product, due to our market-leading brand and operating platform with our focus on London, the South East and large metropolitan cities.  Our digital platform now accounts for 88% of our prospects, of which over half come through our mobile site.

Customers renting storage space whilst moving within the rental or owner occupied sectors represent 42% of move-ins during the year (2017: 43%).  11% of our customers who moved in took storage space as a spare room for decluttering (2017: 11%).  35% of our customers used the product because some event has occurred in their lives generating the need for storage; they may be moving abroad for a job, have inherited possessions, are getting married or divorced, are students who need storage during the holidays, or homeowners developing into their lofts or basements (2017: 34%). The balance of 12% of our customer demand during the year came from businesses (2017: 12%). 

There is a growing trend towards self-employment and smaller business start-ups in the UK, dynamics that are positive for self storage.  Additionally, businesses in the UK are increasingly seeking flexible office and storage space rather than longer inflexible leases.  The deindustrialisation of big cities with the conversion of commercial space into residential and other uses, is also a driver for demand from the SME market seeking flexible warehouse space.

During the year, the Group commissioned an external survey to assess the impact the average Big Yellow store generates for its local economy.  35% of the Group's space is occupied by business customers, and the average store is home to 105 different businesses who between them employ 300 people as a direct result of their occupation.  60% of the businesses that occupy our stores are start-ups who have never rented space anywhere else before.  For over half of the businesses, this is the only space they rent, for others this complements their other space.  The report estimated that across Big Yellow over 23,000 jobs are created working for over 7,700 businesses.  In addition, average local Gross Value Added generated by Big Yellow's business customers in each store is approximately £17 million per annum, or over £1 billion nationally.

Of our occupied space today, customers who are longer stay lifestyle users, decluttering into small rooms as an extension to their accommodation, occupy 10% to 15%; 50% to 55% are using it for less than 12 months largely event driven, which could be inheritance, moving in the owner occupied or rental sector, home improvements, travelling; and the balance of 35% are businesses.

We have a dedicated national accounts team for business customers who wish to occupy space in multiple stores.  These accounts are billed and managed centrally.  We have four full time members of staff working on growing and managing our national account customers.  The national accounts team can arrange storage at short notice at any location for our customers.  In smaller towns where we do not have representation, we have negotiated sub-contract arrangements with other operators who meet certain operating standards. 

Marketing and ecommerce

Our marketing strategy focuses on driving enquiries and customer satisfaction through our digital platforms.

For the last 12 years, we have commissioned a YouGov survey to help us monitor our brand awareness.  In our most recent survey conducted in April 2018, we used a statistically robust sample size of 1,000 respondents in London and 2,003 for the rest of the UK.  The survey has shown our prompted awareness to be at 71% in London, over two and a half times higher than our nearest competitor and 46% for the rest of the UK, over three times higher than our nearest competitor.

For unprompted brand awareness, our recall in London is 46%, six and a half times higher than our nearest competitor and for the rest of the UK it is 23%, nearly eight times higher than our nearest competitor.  The UK Self Storage Association ("SSA") has also conducted a brand awareness survey with similar results.  According to their YouGov survey conducted in January 2018, Big Yellow's unprompted brand awareness across the UK is seven times higher than our nearest competitor.  These surveys continue to prove we are the UK's brand leader in self storage.

The Big Yellow website, whether accessed by desktop, tablet or smartphone, delivers the largest share of our prospects, accounting for 88% of all sales leads across the year ended 31 March 2018.  Telephone is the first point of contact for 8% of our prospects and walk in enquiries, where we have had no previous contact with a prospect, represent 4%.

We have the largest online market share of web visits to self storage company websites in the UK.  Across the year ended 31 March 2018, our online market share of web visits ranged from 28% to 34%.  Our nearest competitor ranged from 18% to 24% online market share for the same period (source: Connexity Hitwise 35 largest UK self storage operators).

We monitor and improve the website user journeys on an ongoing basis.  We are committed to making the experience as easy, intuitive and informative as possible for our customers.  Both the mobile specific website and our desktop site are designed with helpful and time saving online tools such as Check-in Online, online FAQs, video store tours, online chat, BoxShop and a Click and Collect service for packing materials.  These all help the customer to make an informed choice about their self storage requirements.

Online customer reviews

Consistent with our strategy of putting the customer at the heart of our business, our online customer reviews generate real-time feedback from customers as well as providing positive word of mouth referral to our web visitors.  Through our 'Big Impressions' customer feedback programme, we ask our new customers to rate our service.  With the users' permission, we then publish these independent reviews on the Big Yellow website.  There are currently over 23,000 of these customer reviews published averaging 4.8 out of 5.

The Big Impressions programme also generates customer feedback on their experience when they move out of a Big Yellow store and also from those prospects who decided not to store with us. This programme reinforces best practice of customer service at our stores where customer reviews and mystery shop results are transparently accessible at all levels.

We also gain real-time customer insight from over 3,800 Google Reviews averaging 4.5 out of 5 and 1,100 TrustPilot Reviews currently averaging 9.5 out of 10.

We regularly monitor any mentions of Big Yellow within all customer reviews, on social media, external blogs, news sites and across the web generally.  We use this insight to monitor our brand and continually improve our service offering.

Driving online traffic

Self storage is a consumer facing business and the development of strong, sustainable brands is multi-layered and requires a consistency of product, customer service and interaction at all touch points, particularly online, which represents 88% of our total enquiries. 

Search engines are the most important acquisition tool for us, accounting for the majority of traffic to our website.  We continue to invest in search engine optimisation ("SEO") techniques both on and off the site.  This helps us to maintain high positions for the most popular and most searched for self storage related search terms in the organic listings on Google.  Of the top 100 self storage search terms, 47 feature brands, representing approximately 50% of the search traffic (source: Connexity Hitwise, 12 weeks ended 12 May 2018).  This clearly indicates, that although self storage is a relatively immature industry with 70% to 75% of customers using it for the first time, brand is important in driving higher levels of prospects and customer referrals, leading to improved operational performance.  We have demonstrated this through significant improvements in performance of existing storage centres following their acquisition, rebranding and assimilation into our business. 

The sponsored search listings remain the largest source of paid for traffic and we ensure our prominence in these listings is balanced with effective landing pages to maximise website conversion.

Efficiencies in online spend are continuing into the year ending 31 March 2019, ensuring the return on investment is maximised from all of our different online traffic sources.  Online marketing budgets will continue to remain focussed on the media with the best return on investment.

Social media

Social media continues to be complementary to our existing marketing channels.  Our activity is most focussed on Twitter and Facebook, not only monitoring and answering queries regarding self storage, but also publishing our own creative posts, advice, news and CSR initiatives. 

The Big Yellow YouTube channel is used to showcase our stores to web prospects through a video store tour.  We use both domestic and business versions to help prospects experience the quality of the product without the need for them to visit the store in person. Our online blog is updated regularly with tips and advice for homeowners and businesses, as well as summaries of our charitable and CSR initiatives.  We have also developed our LinkedIn profile to help promote Big Yellow as an inviting and engaging place to work and as a direct recruitment channel.

PR

We have been developing regional PR stories throughout the year to help raise the awareness of Big Yellow and the benefits of self storage across the UK.  We have been highlighting newsworthy stories of charitable endeavours from Big Yellow staff or the support we provide to the local charities through offering free storage.

Budget

During the year the Group spent approximately £4.7 million on marketing (4% of total store revenue).  We have increased the budget for the year ahead to £5.3 million with a focus on delivering and converting more prospects to our stores from our digital channels.

Cyber security

The Group receives specialist advice and consultancy in respect of cyber security and we have dedicated in-house monitoring.  We continue to invest in and review our security systems and we limit the retention of customer data to the minimum requirement.  Some of the changes include more frequent penetration testing of internet facing systems, adding components such as anti-ransomware as well as the maintenance and replacement of components (such as firewalls) to the latest technology and specification.  Policies and procedures are under regular review and benchmarked against industry best practice by our consultants.  These policies also include defend, detect and response policies.  We have aligned our policies and procedures to ensure our compliance with the new EU General Data Protection Regulation ("GDPR") which comes into effect on 25 May 2018.

 

Store Performance

 

PORTFOLIO SUMMARY - BIG YELLOW STORES

 

2018

2017

 

Mature(1)

Established

Developing

Total

Mature

Established

Developing

Total

 

 

 

 

 

 

 

 

 

Number of stores

67

4

3

74

67

4

2

73

At 31 March:

 

 

 

 

 

 

 

 

Total capacity (sq ft)

4,157,000

271,000

178,000

4,606,000

4,157,000

271,000

123,000

4,551,000

Occupied space (sq ft)

3,417,000

223,000

90,000

3,730,000

3,271,000

213,000

67,000

3,551,000

Percentage occupied

82.2%

82.3%

50.6%

81.0%

78.7%

78.6%

54.5%

78.0%

Net rent per sq ft

£26.96

£26.08

£19.88

£26.74

£26.16

£25.29

£18.63

£26.03

 

For the year:

 

 

 

 

 

 

 

 

REVPAF(2)

£25.55

£24.71

£14.51

£25.19

£24.11

£22.47

£9.45

£23.62

Average occupancy

82.0%

80.8%

43.6%

81.4%

78.2%

75.6%

40.7%

77.1%

Average annual rent psf 

£26.55

£26.00

£19.59

£26.37

£26.33

£25.27

£19.03

£26.16

 

£000

£000

£000

£000

£000

£000

£000

£000

Self storage income

90,495

5,694

1,528

97,717

85,469

5,179

952

91,600

Other storage related

income (3)

15,243

918

333

16,494

14,162

822

205

15,189

Ancillary store rental

Income

435

84

5

524

432

88

6

526

Total store revenue

106,173

6,696

1,866

114,735

100,063

6,089

1,163

107,315

Direct store operating

costs (excluding

depreciation)

(30,451)

(1,948)

(760)

(33,159)

(29,088)

(1,885)

(744)

(31,717)

Short and long

leasehold rent(4)

(2,101)

-

-

(2,101)

(2,126)

-

-

(2,126)

Store EBITDA(5)

73,621

4,748

1,106

79,475

68,849

4,204

419

73,472

Store EBITDA margin

69.3%

70.9%

59.3%

69.3%

68.8%

69.0%

36.0%

68.5%

 

 

 

 

 

 

 

 

 

Deemed cost

£000

£000

£000

£000

 

 

 

 

To 31 March 2018

531,198

55,300

32,919

619,417

 

 

 

 

Capex to complete

1,700

-

800

2,500

 

 

 

 

Total

532,898

55,300

33,719

621,917

 

 

 

 

(1)  The mature stores have been open for more than six years at 1 April 2017. The established stores have been open for between three and six years at 1 April 2017 and the developing stores have been open for fewer than three years at 1 April 2017.

(2)   See glossary in note 28.

(3)   Packing materials, insurance and other storage related fees.

(4)   Rent for seven mature short leasehold properties accounted for as investment properties and finance leases under IFRS with total self storage capacity of 420,000 sq ft, and a long leasehold lease-up store with a capacity of 64,000 sq ft.  The EBITDA margin for the 60 freehold mature stores is 72%, and 49% for the seven leasehold mature stores.

(5)   The table below reconciles Store EBITDA to gross profit in the income statement.

 

 

Year ended 31 March 2018

£000

Year ended 31 March 2017

£000

 

Store EBITDA

Reconciling items

Gross profit per income statement

Store EBITDA

Reconciling items

Gross profit per income statement

Store revenue/Revenue(1)

114,735

1,925

 

116,660

107,315

1,755

 

109,070

Cost of sales(2)

(33,159)

(2,515)

(35,674)

(31,717)

(2,358)

(34,075)

Rent(3)

(2,101)

2,101

-

(2,126)

2,126

-

 

79,475

1,511

80,986

73,472

1,523

74,995

(1)   See note 3 of the financial statements, reconciling items are management fees and non-storage income.

(2)   See reconciliation in cost of sales section in Financial Review.

(3)             The rent shown above is the cost associated with leasehold stores, only part of which is recognised within gross profit in line with finance lease accounting principles.  The amount included in gross profit is shown in the reconciling items in cost of sales.

 

PORTFOLIO SUMMARY - ARMADILLO STORES

 

 

 

2018

2017

 

 

 

 

 

Number of stores(1)

 

 

22

16

 

 

 

 

 

At 31 March:

 

 

 

 

Total capacity (sq ft)

 

 

963,000

738,000

Occupied space (sq ft)

 

 

712,000

551,000

Percentage occupied

 

 

73.9%

74.7%

Net rent per sq ft

 

 

£16.97

£16.51

 

 

 

 

 

For the year:

 

 

 

 

REVPAF

 

 

£15.09

£14.31

Average occupancy

 

 

76.0%

73.3%

Average annual rent psf 

 

 

£16.61

£16.36

 

 

 

 

 

 

 

 

£000

£000

Self storage income

 

 

10,677

8,781

Other storage related income

 

 

2,015

1,659

Ancillary store rental income

 

 

72

43

Total store revenue

 

 

12,764

10,483

Direct store operating costs (excluding depreciation)

 

 

(5,003)

(4,222)

Leasehold rent

 

 

(497)

(411)

Store EBITDA(2)

 

 

7,264

5,850

Store EBITDA margin

 

 

56.9%

55.8%

 

Cumulative capital expenditure

 

 

 

 

 

 

 

£m

 

To 31 March 2018

 

 

69.1

 

To complete

 

 

0.5

 

 

 

 

 

 

Total capital expenditure

 

 

69.6

 

 

(1)  Armadillo acquired three stores in April 2017 from Quickstore in Exeter, Torquay and Plymouth, one store in December 2017 from Store it 4U in Stockton, and two stores in March 2018 from 1st Storage Centres in Newcastle and Gateshead.

(2)  Store earnings before interest, tax, depreciation, amortisation, and management fees charged by Big Yellow to the Armadillo portfolios (see note 27).

Prospects for the year were broadly in line with last year, but we converted a higher proportion of those prospects into customers, with move-ins up 3% on the prior year.  This reflects the occupancy focus over the period, with continued innovation and investment in our digital platform and operations.    

The table below shows the quarterly move-in and move-out activity over the year. 

 

Total move-ins

Year ended
31 March 2018

Total move-ins

Year ended
31 March 2017

 

 

%

Total move-outs

Year ended

31 March 2018

Total move-outs

Year ended

31 March 2017

 

%

April to June

20,332

19,509

4

15,112

15,625

(3)

July to September

21,463

20,702

4

22,952

22,239

3

October to December

16,000

15,409

4

18,190

17,679

3

January to March

16,133

16,095

-

15,273

14,468

6

Total

73,928

71,715

3

71,527

70,011

2

In the quarter to June, we saw a solid increase in move-in activity of 4%.  Move-outs were down year on year, following lower activity levels in the second half of the year ended 31 March 2017.  Move-ins continued to outperform year-on-year in the second and third quarters, although move-outs also increased following the earlier improvement in move-in activity, with a high volume of student move-outs in September and October.  In the fourth quarter, move-in activity was impacted by the poor weather coupled with an early Easter delaying some activity into April.

In all Big Yellow stores, the occupancy growth in the current year was 179,000 sq ft, against an increase of 112,000 sq ft in the prior year. 

Quarterly net occupancy movement

Net sq ft

Year ended

31 March 2018

Net sq ft

Year ended

31 March 2017

Net move-ins Year ended

31 March 2018

Net move-ins Year ended

31 March 2017

April to June

183,000

110,000

5,220

3,884

July to September

82,000

24,000

(1,489)

(1,537)

October to December

(170,000)

(137,000)

(2,190)

(2,350)

January to March

84,000

115,000

860

1,547

Total

179,000

112,000

2,401

1,544

We had a strong quarter to June with an increase in occupancy of 183,000 sq ft, significantly up on the prior year, which had been affected by uncertainty in the run-up to the Brexit referendum.  The second quarter peaked in August and then many of our students and short term house movers vacated in September and October, leading to a net loss in occupied rooms and sq ft occupancy.  The third quarter showed a higher loss in occupancy than the prior year due to the strong summer's trading which led to an increase in move-out numbers.  In the final quarter we have seen a return to growth in net occupied rooms and increased occupancy in the stores by 84,000 sq ft, which was slightly softer than the prior year for the reasons explained above. 

The 67 mature stores are 82.2% occupied compared to 78.7% at the same time last year.  The four established stores have grown in occupancy from 78.6% to 82.3%.  The three developing stores added 23,000 sq ft of occupancy in the year to reach closing occupancy of 50.6%.  Overall store occupancy has increased in the year from 78.0% to 81.0%.    On a like-for-like basis, excluding Guildford Central, which opened in March 2018, closing occupancy was 81.9%, an increase of 3.9 percentage points.

With the exception of Guildford Central (which opened in March 2018), all of the stores open at the year end are trading profitably at the EBITDA level. The table below shows the average key metrics across the store portfolio (from the Portfolio Summary) for the year ended 31 March 2018:

 

Mature

stores

Established stores

Developing stores

All

stores

Average store capacity

62,040

67,750

59,330

62,240

Average sq ft occupied per store at 31 March 2018

51,000

55,750

30,000

50,400

Average % occupancy

82.2%

82.3%

50.6%

81.0%

Average revenue per store (£000)

1,585

1,674

622

1,550

Average EBITDA per store (£000)

1,099

1,187

369

1,074

Average EBITDA margin

69.3%

70.9%

59.3%

69.3%

Pricing and net rent per sq ft

Our core proposition remains a high quality product, competitively priced, with excellent customer service, providing value for money to our customers.  We offer a headline opening promotion of 50% off for up to the first 8 weeks, and we continue to manage pricing dynamically, taking account of room availability, customer demand and local competition. 

Over the past eighteen months we have been more aggressive with our pricing strategy to drive occupancy growth, which led to a reduction in net achieved rent per sq ft in the second half of the prior financial year.  Following this fall in the period to March 2017, and hence a lower starting point in this financial year, rate stabilised in the first half of the financial year with no average rate growth.  In the second half, we achieved period on period average rate growth of 1.5% and as a result the average increase for the financial year was 0.8%.  Net achieved rent per sq ft at 31 March 2018 grew by 2.7% over the financial year.

Our pricing model reduces promotions and increases asking prices where individual units are in scarce supply.  This lowering of promotions, coupled with price increases to existing and new customers, leads to an increase in achieved net rents.  Rental growth can also be driven through sub-dividing larger rooms into smaller rooms, which yield a higher net rent per sq ft.  The table below shows the growth in net rent per sq ft for the portfolio over the year (excluding Guildford Central).

 

Average occupancy in

the year


 

Number of stores

Net rent per sq ft growth from 1 April to 31 March 2018

0 to 75%

10

0.8%

75 to 80%

20

3.2%

80 to 85%

29

3.5%

Above 85%

14

3.5%

Armadillo Self Storage

The Group has a 20% investment in Armadillo Self Storage, with the balance of 80% held by an Australian consortium.   During the year Armadillo acquired six stores, three stores in April 2017 from Quickstore in Exeter, Torquay and Plymouth, one store in December 2017 from Store it 4U in Stockton, and two stores in March 2018 from 1st Storage Centres in Newcastle and Gateshead.

This takes the Armadillo platform to 22 stores and 963,000 sq ft of MLA.  As with the other existing store acquisitions, the intention will be to upgrade and reconfigure the stores through additional investment to drive cash flow growth.  In the year to 31 March 2018, £1.5 million of capital expenditure has been invested to upgrade and fit out additional capacity in the Armadillo stores.

Armadillo is a lower-frills brand, with largely freehold conversions of existing buildings.  They are located in towns where we would not typically locate a Big Yellow, and have an average capacity of 44,000 sq ft (lower than the 62,000 sq ft average for Big Yellow stores).  Armadillo provides a number of operational advantages to the Group, such as a wider platform to sell to national accounts, more opportunities for staff promotion, and more efficient use of the Company's marketing and central overhead costs.  The Group continues to look for opportunities to add to the Armadillo platform.

Development pipeline

We opened our 55,000 sq ft Guildford Central store in March 2018, and the 25,000 sq ft extension to our Wandsworth store has recently opened.  We own a further ten development sites for which planning is to be negotiated, including an existing store where planning is being sought to extend and redevelop.  The status of the Group's development pipeline is summarised in the table below:

Site

Location

Status

Anticipated capacity

Manchester

Prime location on Water Street, central Manchester

Planning consent granted in September 2017.  Store construction started in March 2018, with a view to opening in Spring 2019.

60,000 sq ft

Camberwell, London

Prominent location on Southampton Way

Planning consent recently granted.  Construction due to start in November 2018 with a view to opening in Spring 2020.

72,000 sq ft

Kings Cross, London

Prominent location on York Way

Planning application currently being prepared to be submitted in Summer 2018.

115,000 to 120,000 sq ft

Bracknell

Prime location on Ellesfield Avenue

Site acquired in February 2018.  Application to be submitted in late summer to incorporate self storage and other occupiers.

60,000 to 65,000 sq ft

Slough

Prominent location on Bath Road

Site acquired in November 2017. Planning application to be submitted in late 2018.

50,000 sq ft

Battersea, London

 

Prominent location on junction of Lombard Road and York Road (South Circular)

Potential redevelopment to increase size of existing 34,000 sq ft Big Yellow store.  Redevelopment of adjoining retail into a mixed use residential led scheme.  Ongoing detailed planning discussions with the Borough Council with the aim of submitting an application later this year.

Up to an additional 40,000 sq ft

Wapping, London

Prominent location on The Highway

Site acquired in May 2017.  We are currently converting the vacant units into a 25,000 sq ft self storage centre, and collecting income from the remaining short-let tenancies.  The store will open in summer 2018.

50,000 to 75,000 sq ft

Uxbridge, London

Prominent location on Oxford Road

Site acquired in April 2018.  Planning application to be submitted in Autumn 2018.

55,000 sq ft

Hove

Prominent location on Old Shoreham Road

Site acquired in April 2018.  Planning application to be submitted in 2019.

55,000 sq ft to 60,000 sq ft

Newcastle

Prime location on Scotswood Road

Planning application to be submitted in Autumn 2019.

60,000 sq ft

Total

 

 

617,000 sq ft to 657,000 sq ft

The capital expenditure currently committed for the financial year ended 31 March 2019 is approximately £22 million, which includes the completion of the acquisitions of Hove and Uxbridge, and construction costs on Manchester, Camberwell and Wapping.

The Group manages the construction and fit-out of its stores in-house, as we believe it provides both better control and quality, and we have an excellent record of building stores on time and within budget.  

 

Financial Review

 

Financial results

Revenue

Total revenue for the year was £116.7 million, an increase of £7.6 million (7%) from £109.1 million in the prior year.   Like-for-like revenue for the year was £114.7 million, an increase of 7% from the prior year (2017: £107.3 million), principally driven by an increase in the average occupancy of the Group's stores.  Like-for-like revenue excludes Nine Elms and Twickenham 2, which were acquired in April 2016 and Guildford Central, which opened in March 2018.    

Other sales (included within the above), comprising the selling of packing materials, insurance and storage related charges, represented 16.9% of storage income for the year (2017: 16.6%) and generated revenue of £16.5 million for the year, up 9% from £15.2 million in 2017.   

The other revenue earned by the Group is management fee income from the Armadillo Partnerships, and tenant income on sites where we have not started development.

Operating costs

Cost of sales principally comprise the direct store operating costs, including store staff salaries, utilities, business rates, insurance, a full allocation of the central marketing budget and repairs and maintenance. 

The breakdown of the portfolio's operating costs compared to the prior year is shown in the table below:

 

 

Category

Year ended 31 March 2018

£000

Year ended 31 March 2017

£000

 

 

% change

% of store operating costs in 2018

Cost of sales (insurance and packing materials)

2,663

2,391

11%

8%

Staff costs

8,740

8,572

2%

26%

General & Admin

1,187

1,196

-1%

4%

Utilities

1,447

1,470

-2%

4%

Property rates

10,438

10,044

4%

32%

Marketing

4,656

4,152

12%

14%

Repairs / Maintenance

2,595

2,539

2%

8%

Insurance

921

893

3%

3%

Computer costs

494

443

12%

1%

Irrecoverable VAT

18

17

6%

0%

Total per portfolio summary

33,159

31,717

5%

 

Operating costs per the portfolio summary have increased by £1.4 million (5%), £0.5 million of which relates to our continued investment in marketing to maintain the Group's online market share and enquiry levels.  Following the 2017 rating review, we calculated in May 2017 that the impact on the Group's rates bill for the year ending 31 March 2018 would be an increase of 9% (£0.9 million).  The actual increase for the year at 4% is lower as a result of rates rebates received at two of our stores in respect of the previous rating period to March 2017.

The cost of insurance and packing materials varies with sales and has increased by 11%, 9% of which is the increase in sales volume, with the balance due to an increase in IPT, and some cost inflation.    Our investment in LED lighting has contributed to a reduction in our utility expenditure.  The other increases in store operating costs are inflationary.

The table below reconciles store operating costs per the portfolio summary to cost of sales in the income statement:

 

Year ended 31 March 2018

£000

Year ended 31 March 2017

£000

Direct store operating costs per portfolio summary (excluding rent)

33,159

31,717

Rent included in cost of sales (total rent payable is included in portfolio summary)

1,109

1,196

Depreciation charged to cost of sales

439

489

Prior year VAT recovery

-

(278)

Head office and other operational management costs charged to cost of sales

967

951

Cost of sales per income statement

35,674

34,075

Store EBITDA

Store EBITDA for the year was £79.5 million, an increase of £6.0 million (8%) from £73.5 million for the year ended 31 March 2017 (see Portfolio Summary).  The overall EBITDA margin for all Big Yellow stores during the year was 69.3%, an improvement from 68.5% last year. 

Administrative expenses

Administrative expenses in the income statement have increased by £0.4 million compared to the prior year.  The prior year administrative expenses contained non-recurring costs of £0.2 million (the write-off of the Group's acquisition costs for the purchase of Lock and Leave in part offset by prior year VAT recovery), hence the like-for-like increase is £0.6 million.  £0.4 million of this increase relates to an increase in the share based payments charge and an increase in national insurance contributions on the vesting of share options (following the increase in the Company's share price).  The remaining difference is due principally to an increased investment in IT and other inflationary increases.  Of our total £10.1 million administrative expense for the year, £2.5 million relates to the non-cash share based payments charge. 

Interest expense on bank borrowings

The gross bank interest expense for the year was £9.8 million, a reduction of £1.1 million from the prior year.  This reflects the Group's lower average cost of debt for the year, following an amendment to the bank loan to change the term debt to variable debt at a lower margin, coupled with the cancellation of an interest rate derivative over half of the M&G loan, which was extended during the year, and its subsequent re-hedging at a lower cost.  The lower average cost was in part offset by slightly higher average debt levels.  The average cost of borrowing during the year was 2.9% compared to 3.3% in the prior year.

Capitalised interest increased by £0.2 million from the prior year.  The interest capitalised in the year is on our Guildford Central store and the Wandsworth extension.  In the prior year interest was only capitalised on these developments in the final quarter. 

Total finance costs in the income statement increased to £12.0 million from £11.8 million in the prior year, despite the reduction in interest payable, with refinancing costs incurred in the year of £1.5 million (see Borrowings section below).

Profit before tax

The Group made a profit before tax in the year of £134.1 million, compared to a profit of £99.8 million in the prior year. 

After adjusting for the gain on the revaluation of investment properties and other matters shown in the table below, the Group made an adjusted profit before tax in the year of £61.4 million, up 12% from £54.6 million in 2017. 

Profit before tax analysis

2018

£m

2017

£m

Profit before tax

134.1

99.8

Gain on revaluation of investment properties

(71.6)

(43.7)

Movement in fair value on interest rate derivatives

(1.3)

(0.7)

Acquisition costs written off

-

0.3

Prior year VAT recovery

-

(0.3)

Gain on part disposal of investment property

(0.6)

-

Refinancing costs

1.5

-

Share of non-recurring gains and losses in associates

(0.7)

(0.8)

Adjusted profit before tax

61.4

54.6

The movement in the adjusted profit before tax from the prior year is illustrated in the table below:

 

£m

Adjusted profit before tax - year ended 31 March 2017

54.6

Increase in gross profit

6.2

Decrease in net interest payable

1.0

Increase in administrative expenses

(0.6)

Increase in capitalised interest

0.2

Adjusted profit before tax - year ended 31 March 2018

61.4

The share of adjusted profit in the associates was in line with the prior year.  The Group's share of adjusted profit before tax of the associates was up £0.2 million, however there was an increase in the current tax charge as tax losses have now been fully utilised.

Basic earnings per share for the year was 85.0p (2017: 63.6p) and fully diluted earnings per share was 84.4p (2017: 63.1p).   Diluted EPRA earnings per share based on adjusted profit after tax was up 12% to 38.5p (2017: 34.5p) (see note 12).  EPRA earnings per share equates to the Company's adjusted earnings per share in the current year. 

REIT status

The Group converted to a Real Estate Investment Trust ("REIT") in January 2007.  Since then the Group has benefited from a zero tax rate on the Group's qualifying self storage earnings.  The Group only pays tax on the profits attributable to our residual business, comprising primarily of the sale of packing materials and insurance, and fees earned from the management of the Armadillo portfolio.

REIT status gives the Group exemption from UK corporation tax on profits and gains from its qualifying portfolio of UK stores.  Revaluation gains on developments and our existing open stores will be exempt from corporation tax on chargeable gains, provided certain criteria are met.

The Group has a rigorous internal system in place for monitoring compliance with criteria set out in the REIT regulations.  On a monthly basis, a report on compliance with these criteria is issued to the Executive.  To date, the Group has complied with all REIT regulations, including forward looking tests. 

Taxation

There is a tax charge in the current year of £0.6 million.  This compares to a charge in the prior year of £0.3 million.  The current year tax charge reflects an increase in profits in our residual business, in part offset by deductions allowed for tax purposes from the exercise of share options.

Dividends

The Board is recommending the payment of a final dividend of 15.5 pence per share in addition to the interim dividend of 15.3 pence, giving a total dividend for the year of 30.8 pence, an increase of 12% from the prior year. 

REIT regulatory requirements determine the level of Property Income Dividend ("PID") payable by the Group.  On the basis of the full year distributable reserves for PID purposes, a PID of 27.5 pence per share is payable (31 March 2017: 24.0 pence).  The balance of the total annual dividend represents an ordinary dividend declared at the discretion of the Board, in line with our policy to distribute 80% of our adjusted earnings per share in each reporting period.  The PID for the year to 31 March 2018 accounts for 89% of the total dividend, up from 87% in the prior year.  The table below summarises the declared dividend for the year:

Dividend (pence per share)

31 March 2018

31 March 2017

Interim dividend - PID

15.3p

13.5p

                            - discretionary

nil p

nil p

                            - total

15.3p

13.5p

 

 

 

Final dividend     - PID

12.2p

10.5p

                            - discretionary

3.3p

3.6p

                            - total

15.5p

14.1p

 

 

 

Total dividend     - PID

27.5p

24.0p

                            - discretionary

3.3p

3.6p

                            - total

30.8p

27.6p

Subject to approval by shareholders at the Annual General Meeting to be held on 19 July 2018, the final dividend will be paid on 27 July 2018.  The ex-div date is 21 June 2018 and the record date is 22 June 2018.

Cash flow growth

The Group is strongly cash generative and draws down from its longer term committed facilities as required to meet its obligations.  The Group's cash flow from operating activities for the year was £63.0 million, an increase of 13% from £56.0 million in the prior year. 

 

Year ended
31 March 2018

£000

Year ended
31 March 2017

£000

Cash generated from operations

73,457

67,209

Net finance costs

(9,711)

(10,964)

Tax

(769)

(271)

Cash flow from operating activities

62,977

55,974

Capital expenditure

(41,959)

(20,577)

Asset sales

650

300

Receipt from Capital Goods Scheme

2,786

2,917

Investment in associate

(900)

-

Dividends received from associates

446

396

Cash flow after investing activities

24,000

39,010

Ordinary dividends

(46,183)

(41,158)

Issue of share capital

969

286

Finance lease payments

(1,109)

(1,196)

Payment to cancel interest rate derivatives

(3,374)

-

Increase/(decrease) in borrowings

25,644

(7,243)

Net cash outflow

(53)

(10,301)

Opening cash and cash equivalents

6,906

17,207

Closing cash and cash equivalents

6,853

6,906

Closing debt

(330,599)

(304,955)

Closing net debt

(323,746)

(298,049)

In the year capital expenditure outflows were £42.0 million, up from £20.6 million in the prior year.  The capital expenditure during the year principally relates to the acquisition of sites in Wapping, Bracknell and Slough, coupled with construction costs on Guildford Central and the extension to our existing Wandsworth store. 

The cash flow after investing activities was a net inflow of £24.0 million in the year, down from an inflow of £39.0 million in 2017, with the growth in operating cash flow being more than offset by the increased investment in capital expenditure.

Balance sheet

Property

The Group's 74 stores and seven stores under development owned at 31 March 2018, which are classified as investment properties, have been valued individually by Cushman & Wakefield ("C&W") and this has resulted in an investment property asset value of £1,303.3 million, comprising £1,201.8 million (92%) for the 67 freehold (including three long leaseholds) open stores, £43.3 million (3%) for the seven short leasehold open stores and £58.2 million (5%) for the seven freehold investment properties under construction.

 

Analysis of property portfolio

Value at

31 March 2018

Revaluation movement in year

Investment property

£1,245.1m

£72.9m

Investment property under construction

£58.2m

(£1.3m)

Total

£1,303.3m

£71.6m

 

Investment property

The valuations in the current year have grown from the prior year, with a revaluation surplus of £72.9 million arising on the open Big Yellow stores (see note 15 for the detailed valuation methodology).  Of this increase 69% is due to an improvement in the cap rate used in the valuations.  The average exit capitalisation rate used in the valuations was 6.3% in the current year, compared to 6.6% in the prior year, with the discount rate adopted also reducing from 9.7% to 9.4%.  The remaining 31% of the increase in value is due to the growth in cash flow from the assets and changes to the operating assumptions adopted in the valuations.   

The valuation is based on an average occupancy over the 10 year cash flow period of 83.1% across the whole portfolio. 

 

Mature

Established

Developing

 

 

Leasehold

Freehold

Freehold

Freehold

Total

Number of stores

7

60

4

3

74

MLA capacity (sq ft)

420,000

3,737,000

271,000

178,000

4,606,000

Valuation at 31 March 2018

£43.3m

£1,080.8m

£82.9m

£38.1m

£1,245.1m

Value per sq ft

£103

£289

£306

£214

£270

Occupancy at 31 March 2018

83.8%

82.0%

82.3%

50.6%

81.0%

Stabilised occupancy assumed

84.9%

83.3%

85.4%

85.0%

83.6%

Net initial yield pre-admin expenses

12.9%

6.4%

5.9%

3.5%

6.5%

Stabilised yield assuming no rental growth

13.2%

6.7%

6.4%

8.5%

6.9%

               

The initial yield pre-administration expenses assuming no rental growth is 6.5% (2017: 6.5%) rising to a stabilised yield of 6.9% (2017: 7.2%).  The stores are assumed to grow to stabilised occupancy in 16 months on average.   Note 15 contains more detail on the assumptions underpinning the valuations.

As referred to in note 15 C&W observe that there is less transaction activity in the prime self storage market compared to other property markets, although there has been some activity for secondary assets.  The capitalisation rates are therefore subject to higher levels of uncertainty than for other property sectors.     

C&W's valuation report further confirms that the properties have been valued individually but that if the portfolio were to be sold as a single lot or in selected groups of properties, the total value could differ significantly.  C&W state that in current market conditions they are of the view that there could be a material portfolio premium.

Investment property under construction

The investment property under construction valuation has increased by £22.0 million in the year.  Capital expenditure accounts for £33.0 million of this increase, notably on Bracknell, Slough, Wapping and Hove.  This has been partly offset by Guildford Central transferring to open stores and a revaluation deficit of £1.3 million, where our projected construction costs have increased due to a change in the planned schemes on a couple of sites which are subject to planning.  

Purchaser's cost adjustment

As in prior years, we have instructed an alternative valuation on our assets using a purchaser's cost assumption of 2.75% (see note 15 for further details) to be used in the calculation of our adjusted diluted net asset value.  This Red Book valuation on the basis of the special assumption of 2.75% purchaser's costs, results in a higher property valuation at 31 March 2018 of £1,380.3 million (£77.0 million higher than the value recorded in the financial statements).  With the share of uplift on the revaluation of the Armadillo stores (£0.7 million), this translates to 48.8 pence per share. 

This revised valuation translates into an adjusted net asset value per share of 665.0 pence (2017: 607.6 pence) after the dilutive effect of outstanding share options. 

Receivables

At 31 March 2018 we have a receivable of £4.3 million in respect of payments due back to the Group under the Capital Goods Scheme, as a consequence of the introduction of VAT on self storage from 1 October 2012.  The receivable relates to VAT to be recovered on historic store development expenditure.   

The debtor has been discounted in accordance with International Accounting Standards to the net present value using the Group's average cost of debt, with £0.2 million of the discount being unwound through interest receivable in the period.  The gross value of the debtor before discounting is £4.6 million. 

The Group received has received £11.3 million to date under the Scheme, of which £2.8 million was received in the year. 

Net asset value

The adjusted net asset value is 665.0 pence per share (see note 13), up 9% from 607.6 pence per share at 31 March 2017.  The table below reconciles the movement from 31 March 2017:

 

 

 

Movement in adjusted net asset value

 

 

 

£m

EPRA adjusted NAV pence per share

1 April 2017

963.4

607.6

Adjusted profit after tax

60.8

38.4

Equity dividends paid

(46.2)

(29.1)

Cancellation of interest rate derivative

(3.4)

(2.1)

Revaluation movements (including share of associate)

72.4

45.6

Movement in purchaser's cost adjustment

9.2

5.8

Other movements (e.g. share schemes)

2.9

(1.2)

31 March 2018

1,059.1

665.0

Borrowings

Our financing policy is to fund our current needs through a mix of debt, equity and cash flow to allow us to build out our development pipeline and achieve our strategic growth objectives, which we believe improve returns for shareholders.  We aim to ensure that there are sufficient medium-term facilities in place to finance our committed development programme, secured against the freehold portfolio, with debt serviced by our strong operational cash flows.  We maintain a keen watch on medium and long-term rates and the Group's policy in respect of interest rates is to maintain a balance between flexibility and hedging of interest rate risk.

During the year, the Group further reduced its average cost of debt, whilst increasing the available facilities and extending the average term of its debt.

The Group extended its £70 million loan with M&G by a year, pushing its expiry out to June 2023.  All other terms and conditions of the loan remained the same, hence it was not a material modification of the loan under IAS 39.  At the same time, the Group cancelled the existing interest rate derivative that was in place over half of the M&G loan (2.64% expiring in June 2022) at a cost of £3.4 million and replaced it with a new derivative until June 2023 at a pre-margin rate of 0.76%.

The Group also amended the terms of its existing £190 million bank facility, which was treated as an extinguishment of the loan under IAS 39.  The £85 million term loan, which attracted a margin of 150bps, was converted to revolving loan at a lower margin of 125 bps.  The term of the loan was extended to October 2022 with an option in place to extend the loan by a further two years.  The Group also has an option to increase the amount of revolving loan by a further £80 million during the course of the loan's term.  The Group exercised its option over £20 million of this debt in March 2018, resulting in the overall bank facility being £210 million at the balance sheet date.

The refinancing costs of £1.5 million shown in the income statement relate to the unamortised loan arrangement costs of the previous bank facility, and the write-off of the costs of the new bank facility in accordance with IAS 39.   

The table below summarises the Group's debt facilities at 31 March 2018.  The average cost of debt has reduced to 2.9% from 3.2% at 31 March 2017:

Debt

Expiry

Facility

Drawn

Average interest cost

Aviva Loan

April 2027

£87.6 million

£87.6 million

4.9%

M&G loan

June 2023

£70 million

£70 million

2.8%

Bank loan (Lloyds & HSBC)

October 2022

£210 million

£173 million

1.8%

Total

Average term 5.5 years

£367.6 million

£330.6 million

2.9%

The Group was comfortably in compliance with its banking covenants at 31 March 2018.  For the year we had Group interest cover of 7.6 times (2017: 6.1 times) based on pre-interest operating cash flow against interest paid.  The net debt to gross property assets ratio is 25% (2017: 25%) and the net debt to adjusted net assets ratio (see net asset value section above) is 31% (2017: 31%). 

At 31 March 2018, the fair value on the Group's interest rate derivatives was an asset of £1.7 million.  The Group does not hedge account its interest rate derivatives.  As recommended by EPRA, the fair value movements are eliminated from adjusted profit before tax, diluted EPRA earnings per share, and adjusted net assets per share.

Cash deposits are only placed with approved financial institutions in accordance with the Group's Treasury policy.

Share capital

The share capital of the Company totalled £15.9 million at 31 March 2018 (2017: £15.8 million), consisting of 158,570,574 ordinary shares of 10p each (2017: 157,882,867 shares).  0.7 million shares were issued for the exercise of options during the year at an average exercise price of 725p (2017: 0.5 million shares at an average price of 738p).

The Group holds 1.1 million shares within an Employee Benefit Trust ("EBT").  These shares are shown as a debit in reserves and are not included in calculating net asset value per share.

 

 

 

 

2018

No.

2017

No.

Opening shares

 

 

 

157,882,867

157,369,287

Shares issued for the exercise of options

 

 

 

687,707

513,580

Closing shares in issue

 

 

 

158,570,574

157,882,867

Shares held in EBT

 

 

 

(1,122,907)

(1,122,907)

Closing shares for NAV purposes

 

 

 

157,447,667

156,759,960

77.4 million shares were traded in the market during the year ended 31 March 2018 (2017: 74.9 million).  The average mid-market price of shares traded during the year was 801.5p with a high of 900p and a low of 722p.

Investment in Armadillo

The Group has a 20% investment in Armadillo Storage Holding Company Limited and a 20% investment in Armadillo Storage Holding Company 2 Limited.  In the consolidated accounts of Big Yellow Group PLC, our investments in the vehicles are treated as associates using the equity accounting method.   In March 2018, Armadillo 2 raised £4.5 million of equity, which alongside additional debt from Lloyds, funded the acquisition of 1st Storage Centres.  Big Yellow's equity invested was £0.9 million (20% of the total raised), with the balance funded by our partners. 

The occupancy of the Armadillo stores at 31 March 2018 was 73.9% (31 March 2017: 74.7%).  The occupancy growth in the year was 161,000 sq ft, including 141,000 sq ft of occupancy acquired in the six store purchases made in the year.  The net rent achieved at 31 March 2018 by the Armadillo stores is £16.97 per sq ft, an increase of 2.8% from the same time last year.  Revenue increased by 22% to £12.8 million for the year to 31 March 2018 (2017: £10.5 million); the like-for-like increase in revenue was 10%.  

The Armadillo Partnerships made a combined operating profit of £6.2 million in the year, of which Big Yellow's share is £1.2 million.  After net interest costs, the revaluation of investment properties (valued by Jones Lang LaSalle), deferred tax on the revaluation surplus and movement in interest rate derivatives, the profit for the year was £4.6 million, of which the Group's share was £0.9 million. 

Big Yellow has a five year management contract in place in each Partnership.  For the year to 31 March 2018 the Group earned management fees of £1.0 million.  The Group's share of the declared dividend for the year is £0.4 million, representing a 12% yield on our original equity invested.

Principal risks and uncertainties

The Directors have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

The section below details the principal risks and uncertainties that are considered to have the most material impact on the Group's strategy and objectives.  These key risks are monitored on an ongoing basis by the Executive Directors, and considered fully by the Board in its annual risk review.

Risk and impact

Mitigation

Change during the year and outlook

Self storage market risk

There is a risk to the business that the self storage market does not grow in line with our projections, and that economic growth in the UK is below expectations, which could result in falling demand and a loss of income.

 

 

Self storage is a relatively immature market in the UK compared to other self storage markets such as the United States and Australia, and we believe has further opportunity for growth. Awareness of self storage and how it can be used by domestic and business customers is relatively low throughout the UK, although higher in London. The rate of growth of branded self storage on main roads in good locations has historically been limited by the difficulty of acquiring sites at affordable prices and obtaining planning consent. New store openings within the sector have slowed significantly over the past few years. 

Our performance during the Global Financial Crisis ("GFC") was relatively resilient, although not immune.  We believe that the resilience of our performance is due to a combination of factors including:

-    a prime portfolio of freehold properties;

-   a focus on London and the South East and other large metropolitan cities, which proved more resilient during the GFC and where the drivers in the self storage market are at their strongest and the barriers to competition are at their highest;

-  the strength of operational and sales management;

-    continuing innovation to deliver the highest levels of customer service;

-   the UK's leading self storage brand, with high public awareness and online strength; and

strong cash flow generation and high operating margins, from a secure capital structure.

We have a large current storage customer base of approximately 55,000 spread across the portfolio of stores and hundreds of thousands more who have used Big Yellow over the years. In any month, customers move in and out at the margin resulting in changes in occupancy.  This is a seasonal business and typically we see growth over the spring and the summer months, with the seasonally weaker periods being the winter months.  

 

The UK economy is projected to grow at approximately 1.5% in 2018.  Self storage proved relatively resilient through the GFC, with our revenue and earnings increasing over the last eight years.  As the economy has recovered in the past few years, the market risk has fallen in line with increasing occupancy.

There is increased macroeconomic uncertainty associated with the UK's future exit from the EU, and this has resulted in a broad range of opinions on the UK's future economic performance.

The Group's like-for-like occupancy has increased by 3.9 percentage points in the year from 78.0% to 81.9%.

Property risk

There is a risk that we will be unable to acquire new development sites which meet management's criteria.  This would impact on our ability to grow the overall store platform.  The Group is also subject to the risk of failing to obtain planning consents on its development sites, and the risk of a rising cost of development.

 

 

Our management has significant experience in the property industry generated over many years and in particular in acquiring property on main roads in high profile locations and obtaining planning consents.  We do take planning risk where necessary, although the availability of land, and competition for it makes acquiring new sites challenging.

Our in-house development team and our professional advisers have significant experience in obtaining planning consents for self storage centres.

We manage the construction of our properties very tightly. The building of each site is handled through a design and build contract, with the fit out project managed in-house using an established professional team of external advisers and sub-contractors who have worked with us for many years to our Big Yellow specification.  We carried out an external benchmarking of our construction costs and tendering programme in 2016, which had satisfactory results.

 

The planning process remains difficult and to achieve a planning consent can take anything from eighteen months to three years.  Local planning policy is increasingly favouring residential development over other uses, and we don't expect this to change given the shortage of housing in the UK.

Valuation risk

The valuations of the Group's investment properties may fall due to external pressures or the impact of performance.

Lack of transactional evidence in the self storage sector leads to more subjective valuations.

 

The valuations are carried out by independent, qualified external valuers who value a significant proportion of the UK self storage industry.

The portfolio is diverse with approximately 55,000 customers currently using our stores for a wide variety of reasons.

There is significant headroom on our loan to value banking covenants.

 

The revaluation surplus on the Group's open stores investment properties was £72.9 million in the year (an uplift of 6%), due to an improvement in cash flows and the capitalisation rates used in the valuations. 

There continues to be an increase in transactional evidence in the sector, with a number of portfolio transactions taking place in the current year.

Treasury risk

The Group may face increased costs from adverse interest rate movements.

 

Our financing policy is to fund our current needs through a mix of debt, equity and cash flow to allow us to selectively build out the remaining development pipeline and achieve our strategic growth objectives, which we believe improve returns for shareholders.  We have made it clear that we believe optimal leverage for a business such as ours should be LTV in the range 20% to 30% and this informs our management of treasury risk.

We aim to ensure that there are sufficient medium-term facilities in place to finance our committed development programme, secured against the freehold portfolio, with debt serviced by our strong operational cash flows.

We have a fixed rate loan in place from Aviva Commercial Finance Limited, with nine years remaining.  The Group has a £70 million loan from M&G Investments, which is 50% fixed and 50% floating, repayable in 2023.  For our bank debt, we borrow at floating rates of interest and use swaps to hedge our interest rate exposure. Our policy is to have at least 40% of our total borrowings fixed, with the balance floating.  At 31 March 2018 46% of the Group's total borrowings were fixed or subject to interest rate derivatives.  The Group reviews its current and forecast projections of cash flow, borrowing and interest cover as part of its monthly management accounts. In addition, an analysis of the impact of significant transactions is carried out regularly, as well as a sensitivity analysis assuming movements in interest rates and store occupancy on gearing and interest cover.  This sensitivity testing underpins the viability statement below. 

The Group regularly monitors its counterparty risk. The Group monitors compliance with its banking covenants closely.  During the year it complied with all its covenants, and is forecast to do so for the foreseeable future.

 

Interest rates were increased during the year, and the forecast is for further moderate increases, albeit they are expected to remain at relatively low levels for the foreseeable future. UK inflation reached 3% in 2017, but is forecast to moderate slightly in 2018.

Debt providers currently remain supportive to companies with a strong capital structure.  That said, a weaker macro-economic performance by the UK economy could adversely affect liquidity and pricing.

The Group's interest cover ratio for the year to 31 March 2018 was 7.6 times, comfortably ahead of our internal target of 5 times.

 

Tax and regulatory risk

The Group is exposed to changes in the tax regime affecting the cost of corporation tax, VAT Stamp Duty and Stamp Duty Land Tax ("SDLT"), for example the imposition of VAT on self storage from 1 October 2012.

The UK's future exit from the EU creates uncertainty over the future UK tax and regulatory environment.

The Group is exposed to potential tax penalties or loss of its REIT status by failing to comply with the REIT legislation.

 

We regularly monitor proposed and actual changes in legislation with the help of our professional advisers, through direct liaison with HMRC, and through trade bodies to understand and, if possible, mitigate or benefit from their impact.  

HMRC have designated the Group as having a low-risk tax status, and we hold regular meetings with them.  We carry out detailed planning ahead of any future regulatory and tax changes using our expert advisers.

The Group has internal monitoring procedures in place to ensure that the appropriate REIT rules and legislation are complied with.  To date all REIT regulations have been complied with, including projected tests.

 

 

In addition to the regulatory and tax uncertainty linked to the UK's future exit from the EU, the Group has experienced an increase in cost in the year following the Government's review of business rates.

 

Human resources risk

Our people are key to our success and as such we are exposed to a risk of high staff turnover, and a risk of the loss of key personnel. 

With low unemployment, and a risk of higher staff turnover, difficulty in finding the right employees increases.

 

We have developed a professional, lively and enjoyable working environment and believe our success stems from attracting and retaining the right people. We encourage all our staff to build on their skills through appropriate training and regular performance reviews. We believe in an accessible and open culture and everyone at all levels is encouraged to review and challenge accepted norms, so as to contribute to the performance of the Group. 

We were ranked 80th in the Sunday Times Best 100 Companies to Work For survey in February 2016.

 

During the prior year, an employee consultancy conducted an engagement survey of our employees.  The survey results showed very high levels of employee engagement (90%), which was an increase from 86% from our previous survey in 2014.

Brand and reputation risk

The Group is exposed to the risk of a single serious incident materially affecting our customers, people, financial performance and hence our brand and reputation.

 


We have always aimed to run this business in a professional way, which has involved strict adherence with all regulations that affect our business, such as health and safety legislation, building regulations in relation to the construction of our buildings, anti-slavery, anti-bribery and data regulations.

We also invest in cyber security (discussed below), and make an ongoing investment in staff training, facilities management and the maintenance of our stores.

To ensure consistency of service and to understand the needs of our customers, we send surveys to every customer who moves in and moves out of the business.  The results of the surveys and mystery shops are reviewed to continuously improve and deliver consistent performance throughout the business.

We maintain regular communication with our key stakeholders, customers, employees, shareholders and debt providers. 

 


During the year, we developed a crisis response plan with external consultants to ensure the Group is well placed to deal with a major incident more effectively.

Security risk

The Group is exposed to the risk of the damage or loss of store due to vandalism, fire, or natural incidents such as flooding.  This may also cause reputational damage.

 

 

The safety and security of our customers, their belongings, and stores remains a key priority. To achieve this we invest in state of the art access control systems, individual room alarms, digital CCTV systems, intruder and fire alarm systems and the remote monitoring of all our stores outside of our trading hours.  We are the only major operator in the UK self storage industry that has every room in every store individually alarmed.

We have implemented customer security procedures in line with advice from the Police and continue to work with the regulatory authorities on issues of security, reviewing our operational procedures regularly. The importance of security and the need for vigilance is communicated to all store staff and reinforced through training and routine operational procedures. 

 

We have continued to run courses for all our staff to enhance the awareness and effectiveness of our procedures in relation to security.

We regularly review and implement improvements to our security processes and procedures.

Cyber risk

High profile cyber-attacks and data breaches are a regular staple in today's news.  The results of any breach may result in reputational damage, fines, or customer compensation, causing a loss of market share and income.

 

The Group receives specialist advice and consultancy in respect of cyber security and we have dedicated in-house monitoring and regular review of our security systems, we also limit the retention of customer data to the minimum requirement. 

Policies and procedures are under regular review and benchmarked against industry best practice by our consultants.  These policies also include defend, detect and response policies. 

We have also instigated a new working group for compliance with the new EU General Data Protection Regulation ("GDPR") which comes into effect on 25 May 2018.

 

 

 

We don't consider the risk to have increased any faster for the Group than anyone else; however we consider that the threats in the entire digital landscape do continue to increase. 

During the year we have continued to invest in digital security.  Some of the changes include more frequent penetration testing of internet facing systems, adding components such as anti-ransomware as well as the maintenance replacement of components such as firewalls to the latest technology and specification. 

The introduction of GDPR legislation from May 2018 places additional regulatory burdens onto the Group and carries significant penalties for non-compliance.

 

GOING CONCERN

A review of the Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are shown in the balance sheet, cash flow statement and accompanying notes in the financial statements. Further information concerning the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk can be found in this Report and in the notes to the financial statements.

After reviewing Group and Company cash balances, borrowing facilities, forecast valuation movements and projected cash flows, the Directors believe that the Group and Company have adequate resources to continue operations for the foreseeable future.  In reaching this conclusion the Directors have had regard to the Group's operating plan and budget for the year ending 31 March 2019 and projections contained in the longer-term business plan which covers the period to March 2022.  The Directors have carefully considered the Group's trading performance and cash flows as a result of the uncertain global economic environment and the other principal risks to the Group's performance and are satisfied with the Group's positioning.  For this reason, they continue to adopt the going concern basis in preparing the financial statements.

VIABILITY STATEMENT

The Directors have assessed the Group's viability over a four year period to March 2022.  This period is selected based on the Group's long term strategic plan to give greater certainty over the forecasting assumptions used.

In making their assessment, the Directors took account of the Group's current financial position, including committed capital expenditure.  The Directors carried out a robust assessment of the principal risks and uncertainties facing the business and their potential financial impact on the Group's cash flows, REIT compliance and financial covenants and the likely effectiveness of the mitigating options detailed.  The Directors have assumed that funding for the business in the form of equity, bank and insurance debt will be available in all reasonably plausible market conditions.

Based on this assessment the Directors have a reasonable expectation that the Company and the Group will be able to continue operating and meeting all their liabilities as they fall due to March 2022.

 

Statement of Directors' Responsibilities

 

Directors' responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations.

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year.  Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial statements on the same basis. 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period.  In preparing each of the Group and parent Company financial statements, the Directors are required to: 

·      select suitable accounting policies and then apply them consistently; 

·      make judgements and estimates that are reasonable, relevant and reliable; 

·      state whether they have been prepared in accordance with IFRSs as adopted by the EU; 

·    assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and 

·     use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006.  They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.  Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge: 

·     the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and 

·     the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. 

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy. 

This responsibility statement was approved by the Board of Directors on 21 May 2018 and is signed on its behalf by:

 

James Gibson

John Trotman

Chief Executive Officer

Chief Financial Officer

 

Consolidated Statement of Comprehensive Income

Year ended 31 March 2018

 

 

Note

 

2018

£000

2017

£000

 

 

 

 

 

Revenue

3

 

116,660

109,070

Cost of sales

 

 

(35,674)

(34,075)

 

 

 

 

 

Gross profit

 

 

80,986

74,995

 

 

 

 

 

Administrative expenses

 

 

(10,065)

(9,679)

 

 

 

 

 

Operating profit before gains on property assets

 

 

70,921

65,316

Gain on the revaluation of investment properties

14a,15

 

71,635

43,706

Gain on part disposal of investment property

14a

 

650

-

 

 

 

 

 

Operating profit

 

 

143,206

109,022

Share of profit of associates

14d

 

1,370

1,442

Investment income - interest receivable

7

 

244

356

- fair value movement on derivatives

7, 18

 

1,294

719

Finance costs

8

 

(11,975)

(11,756)

 

 

 

 

 

Profit before taxation

 

 

134,139

99,783

Taxation

9

 

(597)

(272)

 

 

 

 

 

Profit for the year (attributable to equity shareholders)

5

 

133,542

99,511

 

 

 

 

 

Total comprehensive income for the year (attributable to equity shareholders)

 

 

133,542

99,511

 

 

 

 

 

Basic earnings per share

12

 

85.0p

63.6p

 

 

 

 

 

Diluted earnings per share

12

 

84.4p

63.1p

 

 

 

 

 

 

EPRA earnings per share are shown in Note 12.

All items in the consolidated statement of comprehensive income relate to continuing operations.

 

Consolidated Balance Sheet

31 March 2018

 

 

Note

 

2018

£000

2017

£000

Non-current assets

 

 

 

 

Investment property

14a

 

1,245,142

1,154,390

Investment property under construction

14a

 

58,157

36,115

Interests in leasehold property

14a

 

22,929

23,601

Plant, equipment and owner-occupied property

14b

 

3,092

3,216

Intangible assets

14c

 

1,433

1,433

Investment in associates

14d

 

9,276

7,452

Capital Goods Scheme receivable

16

 

2,385

4,091

Derivative financial instruments

18c

 

1,704

-

 

 

 

 

 

 

 

 

1,344,118

1,230,298

Current assets

 

 

 

 

Inventories

 

 

283

283

Trade and other receivables

16

 

18,586

18,042

Cash and cash equivalents

 

 

6,853

6,906

 

 

 

 

 

 

 

 

25,722

25,231

 

 

 

 

 

Total assets

 

 

1,369,840

1,255,529

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

17

 

(36,828)

(36,935)

Borrowings

19

 

(2,474)

(2,356)

Obligations under finance leases

21

 

(2,061)

(2,005)

 

 

 

 

 

 

 

 

(41,363)

(41,296)

 

 

 

 

 

Non-current liabilities

 

 

 

 

Derivative financial instruments

18c

 

-

(2,964)

Borrowings

19

 

(326,461)

(299,323)

Obligations under finance leases

21

 

(20,868)

(21,596)

 

 

 

 

 

 

 

 

(347,329)

(323,883)

 

 

 

 

 

Total liabilities

 

 

(388,692)

(365,179)

 

 

 

 

 

Net assets

 

 

981,148

890,350

 

 

 

 

 

Equity

 

 

 

 

Share capital

22

 

15,857

15,788

Share premium account

 

 

46,362

45,462

Reserves

 

 

918,929

829,100

 

 

 

 

 

Equity shareholders' funds

 

 

981,148

890,350

 

 

 

 

 

The financial statements were approved by the Board of Directors and authorised for issue on 21 May 2018.  They were signed on its behalf by:

                               

James Gibson, Director                                                John Trotman, Director

 

Company Registration No. 03625199

 

Consolidated Statement of Changes in Equity

 

Year ended 31 March 2018

 

Share capital

£000

Share premium account

£000

Other non-distributable reserve

£000

Capital redemption reserve

£000

 Retained earnings

£000

 

Own shares

£000

Total

£000

 

 

 

 

 

 

 

 

At 1 April 2017

15,788

45,462

74,950

1,795

753,374

(1,019)

890,350

Total comprehensive income for the year

-

-

 

-

 

-

133,542

 

-

133,542

Issue of share capital

69

900

-

-

-

-

969

Dividend

-

-

-

-

(46,183)

-

(46,183)

Credit to equity for equity-settled share based payments

-

-

 

 

-

 

 

-

2,470

 

 

-

2,470

 

 

 

 

 

 

 

 

At 31 March 2018

15,857

46,362

74,950

1,795

843,203

(1,019)

981,148

 

 

 

 

 

 

 

 

The other non-distributable reserve arose in the year ended 31 March 2015 following the placing of 14.35 million ordinary shares.

Year ended 31 March 2017

 

Share capital

£000

Share premium account

£000

Other non-distributable reserve

£000

Capital redemption reserve

£000

 Retained earnings

£000

 

Own shares

£000

Total

£000

 

 

 

 

 

 

 

 

At 1 April 2016

15,737

45,227

74,950

1,795

692,697

(1,019)

829,387

Total comprehensive income for the year

-

-

 

-

 

-

99,511

 

-

99,511

Issue of share capital

51

235

-

-

-

-

286

Dividend

-

-

-

-

(41,158)

-

(41,158)

Credit to equity for equity-settled share based payments

-

-

 

 

-

 

 

-

2,324

 

 

-

2,324

 

 

 

 

 

 

 

 

At 31 March 2017

15,788

45,462

74,950

1,795

753,374

(1,019)

890,350

 

 

 

 

 

 

 

 

 

Consolidated Cash Flow Statement

Year ended 31 March 2018

 

 

 

Note

2018

£000

2017

£000

Cash generated from operations

 

26

73,457

67,209

Interest paid

 

 

(9,724)

(10,980)

Interest received

 

 

13

16

Tax paid

 

 

(769)

(271)

 

 

 

 

 

Cash flows from operating activities

 

 

62,977

55,974

 

 

 

 

 

Investing activities

 

 

 

 

Sale of surplus land

 

 

-

300

Acquisition of Lock and Leave (net of cash acquired)

 

 

-

(14,239)

Purchase of non-current assets

 

 

(41,959)

(6,338)

Proceeds on part disposal of investment property

 

 

650

-

Receipts from Capital Goods Scheme

 

 

2,786

2,917

Investment in associate

 

14d

(900)

-

Dividend received from associates

 

14d

446

396

 

 

 

 

 

Cash flows from investing activities

 

 

(38,977)

(16,964)

 

 

 

 

 

Financing activities

 

 

 

 

Issue of share capital

 

 

969

286

Payment of finance lease liabilities

 

 

(1,109)

(1,196)

Equity dividends paid

 

11

(46,183)

(41,158)

Payment to cancel interest rate derivative

 

 

(3,374)

-

Increase/(decrease) in borrowings

 

 

25,644

(7,243)

 

 

 

 

 

Cash flows from financing activities

 

 

(24,053)

(49,311)

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(53)

(10,301)

 

 

 

 

 

Opening cash and cash equivalents

 

 

6,906

17,207

 

 

 

 

 

Closing cash and cash equivalents

 

 

6,853

6,906

 

 

 

 

 

 

Notes to the financial statements       

Year ended 31 March 2018

 

1.         General information

Big Yellow Group PLC is a Company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 2 The Deans, Bridge Road, Bagshot, Surrey, GU19 5AT. The nature of the Group's operations and its principal activities are set out in note 4.

2.         BASIS OF PREPARATIOn

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2018 or 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the registrar of companies, and those for 2018 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The statutory accounts  have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation and with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS.  The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretations Committee relevant to its operations and effective for accounting periods beginning on 1 April 2017.   The same accounting policies as applied in the Group's statutory accounts for the year ended 31 March 2017 have been applied in this condensed set of financial statements. 

Going concern

A review of the Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Operating and Financial Review.  The financial position of the Group, its cash flows, liquidity position and borrowing facilities are shown in the balance sheet, cash flow statement and accompanying notes to the financial statements.  Further information concerning the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk can be found in the Strategic Report and in the notes to the financial statements.

After reviewing Group and Company cash balances, borrowing facilities, forecast valuation movements and projected cash flows, the Directors believe that the Group and Company have adequate resources to continue operations for the foreseeable future.  In reaching this conclusion the Directors have had regard to the Group's operating plan and budget for the year ending 31 March 2019 and projections contained in the longer term business plan which covers the period to March 2022.  The Directors have carefully considered the Group's trading performance and cash flows as a result of the uncertain global economic environment and the other principal risks to the Group's performance, and are satisfied with the Group's positioning.  For this reason, they continue to adopt the going concern basis in preparing the financial statements.

3.         Revenue

Analysis of the Group's operating revenue can be found below and in the Portfolio Summary.

 

 

 

2018

£000

2017

£000

 

 

 

 

 

Open stores

 

 

 

 

Self storage income

 

 

97,717

91,600

Other storage related income

 

 

16,494

15,189

Ancillary store rental income

 

 

524

526

 

 

 

114,735

107,315

Other revenue

 

 

 

 

Non-storage income

 

 

950

885

Management fees earned

 

 

975

870

 

 

 

 

 

Total revenue

 

 

116,660

109,070

Non-storage income derives principally from rental income earned from tenants of properties awaiting development.

4.         Segmental Information

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance.  Given the nature of the Group's business, there is one segment, which is the provision of self storage and related services.

Revenue represents amounts derived from the provision of self storage and related services which fall within the Group's ordinary activities after deduction of trade discounts and value added tax.  The Group's net assets, revenue and profit before tax are attributable to one activity, the provision of self storage and related services.  These all arise in the United Kingdom in the current year and prior year.

5.         PROFIT for the year

 

a) Profit for the year has been arrived at after charging/(crediting):

 

 

2018

£000

2017

£000

 

 

 

 

Depreciation of plant, equipment and owner-occupied property

 

729

738

Depreciation of finance lease capital obligations

 

1,109

1,196

Gain on the revaluation of investment property

 

(71,635)

(43,706)

Profit on part disposal of investment property

 

(650)

-

Cost of inventories recognised as an expense

 

1,043

1,035

Employee costs (see note 6)

 

16,306

15,622

Operating lease rentals

 

127

133

b) Analysis of auditor's remuneration:

 

 

 

2018

£000

2017

£000

 

 

 

 

 

Fees payable to the Company's auditor for the audit of the Company's annual accounts

 

 

156

156

Fess payable to the Company's auditor for the subsidiaries' annual accounts

 

 

32

30

 

 

 

 

 

Total audit fees

 

 

188

186

 

 

 

 

 

Audit related assurance services - interim review

 

 

30

31

Tax advisory services

 

 

-

19

Other assurance services - assurance of CSR report

 

 

-

22

Other services - planning consultancy

 

 

-

11

Other services

 

 

-

2

 

 

 

 

 

Total non-audit fees

 

 

30

85

 

 

 

 

 

Fees payable to KPMG LLP and their associates for non-audit services to the Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis.  Fees charged by KPMG LLP to the Group's associates, Armadillo Storage Holding Company Limited and Armadillo Storage Holding Company 2 Limited in the year amounted to £45,000 which all related to audit services.  The prior year audit fees and non-audit fees disclosed were payable to Deloitte LLP.

6.         Employee costs

The average monthly number of full-time equivalent employees (including Executive Directors) was:

 

 

 

2018

Number

2017

Number

 

 

 

 

 

Sales

 

 

284

279

Administration

 

 

51

50

 

 

 

 

 

 

 

 

335

329  

 

 

 

 

 

At 31 March 2018 the total number of Group employees was 375 (2017: 361).

 

 

 

2018

£000

2017

£000

Their aggregate remuneration comprised:

 

 

 

 

Wages and salaries

 

 

11,377

10,990

Social security costs

 

 

1,913

1,783

Other pension costs

 

 

546

525

Share-based payments

 

 

2,470

2,324

 

 

 

 

 

 

 

 

16,306

15,622

7.         INVESTMENT income

 

 

2018

£000

2017

£000

 

 

 

 

Bank interest receivable

 

13

16

Unwinding of discount on Capital Goods Scheme receivable

 

231

340

Total interest receivable

 

244

356

 

 

 

 

Change in fair value of interest rate derivatives

 

1,294

719

Total investment income

 

1,538

1,075

 

8.         Finance costs

 

 

2018

£000

2017

£000

 

 

 

 

Interest on bank borrowings

 

9,817

10,953

Capitalised interest

 

(360)

(128)

Interest on obligations under finance leases

 

992

931

 

 

 

 

Total interest payable

 

10,449

11,756

 

 

 

 

Refinancing costs

 

1,526

-

Total finance costs

 

11,975

11,756

The refinancing costs relate to the unamortised loan arrangement costs of the previous bank facility which was extinguished, and the write-off of the costs of the new bank facility in accordance with IAS 39.

9.         TaxATION

The Group converted to a REIT in January 2007. As a result the Group does not pay 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 are 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.

Finance (No.2) Bill 2015 provides that the rate of corporation tax for the 2017 Financial Year (commencing 1 April 2017) would be 19% and that the rate from 1 April 2020 will be 18%.  At Budget 2016, the government announced a further reduction to the Corporation Tax main rate (for all profits except ring fence profits) for the year starting 1 April 2020, setting the rate at 17%.  This rate was incorporated in Finance Act 2016 which was fully enacted on 15 September 2016.

UK current tax

 

 

2018

£000

2017

£000

Current tax:

 

 

 

 

- Current year

 

 

546

417

- Prior year

 

 

51

(145)

 

 

 

597

272

A reconciliation of the tax charge is shown below:

 

 

 

2018

£000

2017

£000

 

 

 

 

 

Profit before tax

 

 

134,139

99,783

Tax charge at 19% (2017 - 20%) thereon

 

 

25,486

19,957

Effects of:

 

 

 

 

Revaluation of investment properties

 

 

(13,734)

(8,741)

Share of profit of associates

 

 

(260)

(288)

Other permanent differences

 

 

(1,374)

(1,242)

Profits from the tax exempt business

 

 

(9,176)

(8,791)

Utilisation of brought forward losses

 

 

(11)

-

Movement on other unrecognised deferred tax assets

 

 

(385)

(478)

Current year tax charge

 

 

546

417

Prior year adjustment

 

 

51

(145)

Total tax charge

 

 

597

272

At 31 March 2018 the Group has unutilised tax losses of £32.1 million (2017: £32.6 million) available for offset against certain types of future taxable profits. All losses can be carried forward indefinitely.

10.       Adjusted Profit

 

 

2018

£000

2017

£000

 

 

 

 

Profit before tax

 

134,139

99,783

Gain on revaluation of investment properties - wholly owned

 

(71,635)

(43,706)

                                                                                    - in associate (net of deferred tax)

(724)

(756)

Change in fair value of interest rate derivatives - Group

 

(1,294)

(719)

                                                                            - in associate

 

(60)

8

Gain on part disposal of investment property

 

(650)

-

Prior period VAT recovery

 

-

(328)

Acquisition costs written off

 

-

296

Refinancing costs

 

1,526

-

Share of associate acquisition costs written off

 

120

63

 

 

 

 

Adjusted profit before tax

 

61,422

54,641

Tax

 

(597)

(272)

Adjusted profit after tax

 

60,825

54,369

Adjusted profit before tax which excludes gains and losses on the revaluation of investment properties, changes in fair value of interest rate derivatives, net gains and losses on disposal of investment property, and non-recurring items of income and expenditure have been disclosed as, in the Board's view, this provides a clearer understanding of the Group's underlying trading performance.  

The refinancing costs of £1.5 million relate to the unamortised loan arrangement costs of the previous bank facility, and the write-off of the costs of the new bank facility in accordance with IAS 39.   

11.       Dividends

 

 

2018

£000

2017

£000

Amounts recognised as distributions to equity holders in the year:

 

 

 

Final dividend for the year ended 31 March 2017 of 14.1p
(2016: 12.8p) per share.

 

22,107

20,003

Interim dividend for the year ended 31 March 2018 of 15.3p

   (2017: 13.5p) per share.

 

24,076

21,155

 

 

46,183

41,158

Proposed final dividend for the year ended 31 March 2018 of
15.5p (2017: 14.1p) per share.

 

24,417

22,107

Subject to approval by shareholders at the Annual General Meeting to be held on 19 July 2018, the final dividend will be paid on 27 July 2018.  The ex-div date is 21 June 2018 and the record date is 22 June 2018.

The Property Income Dividend ("PID") payable for the year is 27.5 pence per share (2017: 24.0 pence per share). 

12.       Earnings per share

 

Year ended 31 March 2018

Year ended 31 March 2017

 

Earnings

£m

Shares

million

Pence per share

Earnings

£m

Shares

million

Pence per share

Basic

133.5

157.1

85.0

99.5

156.5

63.6

Dilutive share options

-

1.0

(0.6)

-

1.2

(0.5)

 

 

 

 

 

 

 

Diluted

133.5

158.1

84.4

99.5

157.7

63.1

Adjustments:

 

 

 

 

 

 

Gain on revaluation of investment properties

(71.6)

-

(45.3)

(43.7)

-

(27.7)

Change in fair value of interest rate derivatives

(1.3)

-

(0.8)

(0.7)

-

(0.4)

Gain on part disposal of investment property

 

(0.6)

 

-

 

(0.4)

 

-

 

-

 

-

Acquisition costs written off

-

-

-

0.3

-

0.2

Prior period VAT recovery

-

-

-

(0.3)

-

(0.2)

Refinancing costs

1.5

-

1.0

-

-

-

Share of associate non-recurring gains and losses

 

(0.7)

 

-

 

(0.4)

 

(0.7)

 

-

 

(0.5)

 

 

 

 

 

 

 

EPRA - diluted

60.8

158.1

38.5

54.4

157.7

34.5

 

 

 

 

 

 

 

EPRA - basic

60.8

157.1

38.7

54.4

156.5

34.8

The calculation of basic earnings is based on profit after tax for the year. The weighted average number of shares used to calculate diluted earnings per share has been adjusted for the conversion of share options.

EPRA earnings and earnings per ordinary share have been disclosed to give a clearer understanding of the Group's underlying trading performance.

13.       NET ASSETS PER SHARE

The European Public Real Estate Association ("EPRA") has issued recommended bases for the calculation of net assets per share information and this is shown in the table below:

 

31 March 2018

£000

31 March 2017

£000

Basic net asset value

981,148

890,350

Exercise of share options

1,105

820

EPRA NNNAV

982,253

891,170

 

 

 

Adjustments:

 

 

Fair value of derivatives

(1,704)

2,964

Fair value of derivatives - share of associate

17

77

Share of deferred tax in associates

794

626

 

 

 

EPRA NAV

981,360

894,837

 

 

 

Basic net assets per share (pence)

623.2

568.0

EPRA NNNAV per share (pence)

616.8

562.1

EPRA NAV per share (pence)

616.2

564.4

 

 

 

EPRA NAV (as above) (£000)

981,360

894,837

Valuation methodology assumption (see note 15) (£000)

77,706

68,530

 

 

 

Adjusted net asset value (£000)

1,059,066

963,367

Adjusted net assets per share (pence)

665.0

607.6

 

 

 

 

No. of shares

No. of shares

Shares in issue

158,570,574

157,882,867

Own shares held in EBT

(1,122,907)

(1,122,907)

Basic shares in issue used for calculation

157,447,667

156,759,960

Exercise of share options

1,798,494

1,781,652

Diluted shares used for calculation

159,246,161

158,541,612

Net assets per share are equity shareholders' funds divided by the number of shares at the year end.  The shares currently held in the Group's Employee Benefit Trust are excluded from both net assets and the number of shares.  Adjusted net assets per share include the effect of those shares issuable under employee share option schemes and the effect of alternative valuation methodology assumptions (see note 15).  

14.       Non-Current Assets

a)     Investment property, investment property under construction and interests in leasehold property

 

 

 

 

 

 

Investment

property

£000

Investment property under construction

£000

 

Interests in leasehold property

£000

 

 

 

Total

£000

 

 

 

 

 

At 31 March 2016

1,092,210

33,945

20,165

1,146,320

Additions

17,817

2,827

1,871

22,515

Adjustment to present value

-

-

2,761

2,761

Revaluation (see note 15)

44,363

(657)

-

43,706

Depreciation

-

-

(1,196)

(1,196)

 

 

 

 

At 31 March 2017

1,154,390

36,115

23,601

1,214,106

Additions

8,147

33,012

-

41,159

Adjustment to present value

-

-

437

437

Transfer on opening of store

9,710

(9,710)

-

-

Revaluation (see note 15)

72,895

(1,260)

-

71,635

Depreciation

-

-

(1,109)

(1,109)

 

 

 

 

 

At 31 March 2018

1,245,142

58,157

22,929

1,326,228

During the year the Group sold land at its Richmond store to an adjoining landowner for £650,000.  The valuation of the store was not impacted by this disposal, hence the full proceeds have been recorded as profit on part disposal of investment property.  This has been eliminated from the Group's adjusted profit for the year.

Additions to the interests in leasehold properties in the prior year relate to the lease at Twickenham 2, acquired from Lock and Leave in April 2016.

The income from self storage accommodation earned by the Group from its investment property is disclosed in note 3.  Direct operating expenses, which are all applied to generating rental income, arising on the investment property in the year are disclosed in the Portfolio Summary.  Included within additions is £0.4 million of capitalised interest (2017: £0.1 million), calculated at the Group's average borrowing cost for the year of 2.9%.  55 of the Group's investment properties are pledged as security for loans, with a total external value of £1,076.2 million.

b) Plant, equipment and owner occupied property

 

 

Freehold property

£000

Leasehold improve-ments

£000

Plant and machinery

£000

 

 

Motor vehicles

£000

Fixtures, fittings & office equipment

£000

Total

£000

Cost

 

 

 

 

 

 

 

At 31 March 2016

 

2,183

101

592

25

1,498

4,399

Retirement of fully depreciated assets

 

 

-

 

(4)

(34)

 

-

(489)

 

(527)

Additions

 

6

-

91

30

422

549

Disposals

 

-

-

-

(23)

-

(23)

 

 

 

 

 

 

 

 

At 31 March 2017

 

2,189

97

649

32

1,431

4,398

Retirement of fully depreciated assets

 

 

-

 

(30)

(79)

 

-

(584)

 

(693)

Additions

 

8

7

121

-

469

605

 

 

 

 

 

 

 

 

At 31 March 2018

 

2,197

74

691

32

1,316

4,310

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

 

At 31 March 2016

 

(367)

(52)

(197)

(25)

(353)

(994)

Retirement of fully depreciated assets

 

 

-

 

4

34

 

-

489

 

527

Charge for the year

 

(42)

(2)

(102)

(5)

(587)

(738)

Disposals

 

-

-

-

23

-

23

 

 

 

 

 

 

 

 

At 31 March 2017

 

(409)

(50)

(265)

(7)

(451)

(1,182)

Retirement of fully depreciated assets

 

 

-

 

30

79

 

-

584

 

693

Charge for the year

 

(42)

(2)

(123)

(7)

(555)

(729)

 

 

 

 

 

 

 

 

At 31 March 2018

 

(451)

(22)

(309)

(14)

(422)

(1,218)

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2018

 

1,746

52

382

18

894

3,092

 

 

 

 

 

 

 

 

At 31 March 2017

 

1,780

47

384

25

980

3,216

 

c) Intangible assets

The intangible asset relates to the Big Yellow brand, which was acquired through the acquisition of Big Yellow Self Storage Company Limited in 1999.  The carrying value remains unchanged from the prior year as there is considered to be no impairment in the value of the asset.  The asset has an indefinite life and is tested annually for impairment or more frequently if there are indicators of impairment.

This was shown as goodwill in the prior year, but this has been restated to treat it as an intangible asset in both years, as this more fairly reflects the nature of the asset.

d) Investment in associates

Armadillo

The Group has a 20% interest in Armadillo Storage Holding Company Limited ("Armadillo 1") and a 20% interest in Armadillo Storage Holding Company 2 Limited ("Armadillo 2").  Both interests are accounted for as associates, using the equity method of accounting.  Both companies are incorporated, registered and operate in England and Wales.

 

Armadillo 1

Armadillo 2

Total

 

 

31 March 2018

£000

31 March 2017

£000

31 March 2018

£000

31 March 2017

£000

31 March 2018

£000

31 March 2017

£000

At the beginning of the year

5,048

4,173

2,404

2,233

7,452

6,406

Subscription for capital

-

-

900

-

900

-

Share of results (see below)

937

1,093

433

349

1,370

1,442

Dividends

(255)

(218)

(191)

(178)

(446)

(396)

 

 

 

 

 

 

 

Share of net assets

5,730

5,048

3,546

2,404

9,276

7,452

In March 2018, Armadillo 2 raised £4.5 million of equity, which alongside additional debt from Lloyds, funded the acquisition of 1st Storage Centres.  Big Yellow's equity invested was £0.9 million (20% of the total raised), with the balance funded by our partners.  The Group's total subscription for partnership capital and advances in Armadillo 1 is £1,920,000 and £2,689,000 in Armadillo 2.

The investment properties owned by Armadillo 1 and Armadillo 2 have been valued at 31 March 2018 by Jones Lang LaSalle.

The figures below show the trading results of the Armadillo Partnerships, and the Group's share of the results and the net assets of the Armadillo Partnerships.

 

Armadillo 1

Armadillo 2

 

 

 

Year ended

31 March

2018

£000

Year ended

31 March

2017

£000

Year ended

31 March

2018

£000

Year ended

31 March 2017

£000

Income statement (100%)

 

 

 

 

Revenue

8,188

6,324

4,576

4,159

Cost of sales

(4,247)

(3,270)

(1,919)

(1,763)

Administrative expenses

(282)

(207)

(136)

(88)

Operating profit

3,659

2,847

2,521

2,308

Gain on the revaluation of investment properties

 

3,264

 

3,725

 

1,196

 

322

Net interest payable

(938)

(718)

(813)

(729)

Acquisition costs written off

(375)

(316)

(227)

-

Fair value movement of interest rate derivatives

 

147

 

8

 

154

 

(49)

Deferred and current tax

(1,074)

(78)

(664)

(109)

Profit attributable to shareholders

4,683

5,468

2,167

1,743

Dividends paid

(1,275)

(1,091)

(957)

(890)

Retained profit

3,408

4,377

1,210

853

Balance sheet (100%)

 

 

 

 

Investment property

53,176

43,375

38,205

25,900

Interest in leasehold properties

1,403

-

3,233

3,526

Other non-current assets

1,149

1,125

1,989

1,487

Current assets

1,177

1,177

1,480

867

Current liabilities

(2,842)

(1,895)

(2,367)

(1,821)

Derivative financial instruments

(52)

(199)

(34)

(188)

Non-current liabilities

(25,361)

(18,341)

(24,778)

(17,753)

 

 

 

 

 

Net assets (100%)

28,650

25,242

17,728

12,018

 

 

 

 

 

Group share

 

 

 

 

Operating profit

732

569

504

462

Gain on the revaluation of investment properties

 

653

 

745

 

239

 

64

Net interest payable

(187)

(144)

(163)

(146)

Acquisition costs written off

(75)

(63)

(45)

-

Fair value movement of interest rate derivatives

 

29

 

2

 

31

 

(10)

Deferred and current tax

(215)

(16)

(133)

(21)

Profit attributable to shareholders

937

1,093

433

349

Dividends paid

(255)

(218)

(191)

(178)

Retained profit

682

875

242

171

Associates' net assets

5,730

5,048

3,546

2,404

 

15.       VALUATION OF INVESTMENT PROPERTY

 

 

Deemed cost

£000

 

Revaluation on deemed cost

£000

 

 Valuation

£000

Freehold stores

 

 

 

 

 

At 31 March 2017

583,297

 

527,613

 

1,110,910

Transfer from investment property under construction

11,763

 

(2,053)

 

9,710

Movement in year

7,780

 

73,452

 

81,232

At 31 March 2018

602,840

 

599,012

 

1,201,852

 

 

 

 

 

 

Leasehold stores

 

 

 

 

 

At 31 March 2017

16,210

 

27,270

 

43,480

Movement in year

367

 

(557)

 

(190)

At 31 March 2018

16,577

 

26,713

 

43,290

 

 

 

 

 

 

Total of open stores

 

 

 

 

 

At 31 March 2017

599,507

 

554,883

 

1,154,390

Transfer from investment property under construction

11,763

 

(2,053)

 

9,710

Movement in year

8,147

 

72,895

 

81,042

At 31 March 2018

619,417

 

625,725

 

1,245,142

 

 

 

 

 

 

Investment property under construction

 

 

 

 

 

At 31 March 2017

45,477

 

(9,362)

 

36,115

Transfer to investment property

(11,763)

 

2,053

 

(9,710)

Movement in year

33,012

 

(1,260)

 

31,752

At 31 March 2018

66,726

 

(8,569)

 

58,157

 

 

 

 

 

 

Valuation of all investment property

 

 

 

 

 

At 31 March 2017

644,984

 

545,521

 

1,190,505

Movement in year

41,159

 

71,635

 

112,794

At 31 March 2018

686,143

 

617,156

 

1,303,299

The Group has classified the fair value investment property and the investment property under construction within Level 3 of the fair value hierarchy. There has been no transfer to or from Level 3 in the year.

The wholly owned freehold and leasehold investment properties have been valued at 31 March 2018 by external valuers, Cushman & Wakefield ("C&W").  The valuation has been carried out in accordance with the RICS Valuation - Global Standards, published by The Royal Institution of Chartered Surveyors ("the Red Book").  The valuation of each of the investment properties and the investment properties under construction has been prepared on the basis of either Fair Value or Fair Value as a fully equipped operational entity, having regard to trading potential, as appropriate.

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 have 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 done so since September 2004.  This is the third occasion on which the other member has been a signatory;

·     C&W have been carrying out this annual valuation for the same purposes as this valuation on behalf of the Group since September 2004;

·     C&W do not provide other significant professional or agency services to the Group;

·     in relation to the preceding financial year of C&W, the proportion of the 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 store, 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 note that in the UK since Q1 2015 there have only been thirteen transactions involving multiple assets and ten single asset transactions. C&W state that due to the lack of comparable market information in the self storage sector, there is greater uncertainty attached to their opinion of value than would be anticipated during more active market conditions.

Portfolio Premium

C&W's valuation report further 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 differ significantly. C&W state that in current market conditions they are of the view that there could be a material portfolio premium.

Assumptions

A.  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 a collar. The initial net operating income is calculated by estimating the net operating income in the first 12 months following the valuation date.

B.  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 74 trading stores (both freeholds and leaseholds) open at 31 March 2018 averages 83.6% (31 March 2017: 82.8%). The projected revenues and costs have been adjusted for estimated cost inflation and revenue growth.  The average time assumed for the 74 stores to trade at their maturity levels is 16 months (31 March 2017: 22 months).

C.  The capitalisation rates applied to existing and future net cash flow 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 74 stores is 6.5% (31 March 2017: 6.5%) rising to a stabilised net yield pre-administration expenses of 6.9% (31 March 2017: 7.2%).  The weighted average exit capitalisation rate adopted (for both freeholds and leaseholds) is 6.3% (31 March 2017: 6.6%).

D.  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) is 9.4% (31 March 2017: 9.7%).

E.   Purchaser's costs in the range of circa 6.1% to circa 6.8% (see below) have been assumed initially, reflecting the progressive SLDT rates brought into force in March 2016 and sale plus purchaser's costs totalling circa 7.1% to 7.8% are assumed on the notional sales in the tenth year in relation to the freehold and long leasehold stores.

Short leasehold

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 seven short leasehold properties is 14.0 years (31 March 2017: 15.0 years unexpired).

Sensitivities

Self storage valuations are complex, derived from data which is not widely publicly available and involve a degree of judgement.  For these reasons we have classified the valuations of our property portfolio as Level 3 as defined by IFRS 13.  Inputs to the valuations, some of which are 'unobservable' as defined by IFRS 13, include capitalisation yields, stable occupancy rates, and rental growth rates.  The existence of an increase of more than one unobservable input would augment the impact on valuation.  The impact on the valuation would be mitigated by the inter-relationship between unobservable inputs moving in opposite directions.  For example, an increase in stable occupancy may be offset by an increase in yield, resulting in no net impact on the valuation.  A sensitivity analysis showing the impact on valuations of changes in yields and stable occupancy is shown below. 

 

 

Impact of a change in capitalisation rates

Impact of a change in stabilised occupancy assumption

 

 

25 bps decrease

25 bps increase

1% increase

1% decrease

Reported Group

 

£48.6m

(£44.9m)

£18.3m

(£19.1m)

A sensitivity analysis has not been provided for a change in the rental growth rate adopted as there is a relationship between this measure and the discount rate adopted.  So, in theory, an increase in the rental growth rate would give rise to a corresponding increase in the discount rate and the resulting value impact would be limited.

Investment properties under construction

C&W have 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 after allowing for the outstanding costs to take each scheme from its current state to completion and full fit-out.  C&W have allowed for holding costs and construction contingency, as appropriate.  Four schemes do not yet have planning consent and C&W have reflected the planning risk in their valuation.

Immature stores: value uncertainty

C&W have assessed the value of each property individually. However, two of the Group's stores are relatively immature and have low initial cash flows.  C&W have endeavoured to reflect the nature of the cash flow profile for these properties in their valuation, and the higher associated risks relating to the as yet unproven future cash flows, 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. Please note C&W's comments in relation to market uncertainty in the self storage sector due to the lack of comparable market transactions and information.  The degree of uncertainty relating to the 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 state 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 have not adjusted their 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, they highlight 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 consider 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.  As noted above, C&W have not assumed that the entire portfolio of properties owned by the entity 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 from the aggregate of the individual values for each property in the portfolio, reflecting the lotting assumption described above.

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 cost of circa 6.1% to 6.8% of gross value, as if they were sold directly as property assets. The valuation is an asset valuation which is entirely linked to the operating performance of the business. The assets 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 carry out an additional valuation on the above basis, and this results in a higher property valuation at 31 March 2018 of £1,380.3 million (£77.0 million higher than the value recorded in the financial statements).  The total valuations in the two Armadillo Partnerships performed by Jones Lang LaSalle are £3.3 million higher than the value recorded in the financial statements, of which the Group's share is £0.7 million.  The sum of these is £77.7 million and translates to 48.8 pence per share.  We have included this revised valuation in the adjusted diluted net asset calculation (see note 13). 

 

 

16.       TRADE AND OTHER RECEIVABLES

 

 

 

 

31 March

 2018

£000

31 March

2017

£000

Current

 

 

 

 

Trade receivables

 

 

3,684

3,174

Capital Goods Scheme receivable

 

 

1,876

2,725

Other receivables

 

 

287

266

Prepayments and accrued income

 

 

12,739

11,877

 

 

 

 

 

 

 

 

18,586

18,042

Non-current

 

 

 

 

Capital Goods Scheme receivable

 

 

2,385

4,091

Trade receivables are net of a bad debt provision of £14,000 (2017: £7,000).  The Directors consider that the carrying amount of trade and other receivables approximates their fair value. 

The Financial Review contains commentary on the Capital Goods Scheme receivable.

Trade receivables

The Group does not typically offer credit terms to its customers, requiring them to pay in advance of their storage period and hence the Group is not exposed to significant credit risk. A late charge of 10% is applied to a customer's account if they are greater than 10 days overdue in their payment.  The Group provides for receivables on a specific basis. There is a right of lien over the customers' goods, so if they have not paid within a certain time frame, we have the right to sell the items they store to recoup the debt owed.  Trade receivables that are overdue are provided for based on estimated irrecoverable amounts determined by reference to past default experience.

For individual storage customers, the Group does not perform credit checks, however this is mitigated by the fact that these customers are required to pay in advance, and also to pay a deposit ranging between one week to four weeks' storage income.  Before accepting a new business customer who wishes to use a number of the Group's stores, the Group uses an external credit rating to assess the potential customer's credit quality and defines credit limits by customer. There are no customers who represent more than 5% of the total balance of trade receivables.

Included in the Group's trade receivable balance are debtors with a carrying amount of £329,000 (2017: £250,000) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The average age of these receivables is 21 days past due (2017: 19 days past due).

Ageing of past due but not impaired receivables

 

 

 

2018

£000

2017

£000

1 - 30 days

 

 

264

214

30 - 60 days

 

 

30

23

           60 + days

 

 

35

13

 

 

 

 

 

Total

 

 

329

250

 

 

 

 

 

Movement in the allowance for doubtful debts

 

 

 

2018

£000

2017

£000

Balance at the beginning of the year

 

 

7

11

Amounts provided in year

 

 

114

63

Amounts written off as uncollectible

 

 

(107)

(67)

 

 

 

 

 

Balance at the end of the year

 

 

14

7

 

 

 

 

 

The concentration of credit risk is limited due to the customer base being large and unrelated.  Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

Ageing of impaired trade receivables

 

 

 

2018
£000

2017

£000

1 - 30 days

 

 

-

-

30 - 60 days

 

 

2

2

60 + days

 

 

12

5

 

 

 

 

 

Total

 

 

14

7

 

 

 

 

 

 

17.       TRADE AND OTHER PAYABLES

 

 

31 March

2018

£000

31 March

 2017

£000

Current

 

 

 

Trade payables

 

12,739

13,279

Other payables

 

7,710

8,352

Accruals and deferred income

 

16,379

15,304

 

 

 

 

 

 

36,828

36,935

The Group has financial risk management policies in place to ensure that all payables are paid within the credit terms.  The Directors consider the carrying amount of trade and other payables and accruals and deferred income approximates fair value. 

18.       Financial Instruments

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 19, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.  The Group's debt facilities require 40% of total drawn debt to be fixed.  The Group has complied with this during the year.

With the exception of derivative instruments which are classified as a financial liability at fair value through the income statement ("FVTPL"), financial liabilities are categorised under amortised cost.  All financial assets are categorised as loans and receivables.

Exposure to credit, interest rate and currency risks arises in the normal course of the Group's business.  Derivative financial instruments are used to manage exposure to fluctuations in interest rates, but are not employed for speculative purposes.

A.  Balance sheet management

The Group's Board reviews the capital structure on an ongoing basis. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital. The Group seeks to have a conservative gearing ratio (the proportion of net debt to equity).  The Board considers at each review the appropriateness of the current ratio in light of the above.  The Board is currently satisfied with the Group's gearing ratio.

The gearing ratio at the year end is as follows:

  

2018

£000

2017

£000

 

 

 

Debt

(330,599)

(304,955)

Cash and cash equivalents

6,853

6,906

Net debt

(323,746)

(298,049)

Balance sheet equity

981,148

890,350

Net debt to equity ratio

33.0%

33.5%

B.  Debt management

The Group currently borrows through a senior term loan, secured on 25 self storage assets and sites, a 15 year loan with Aviva Commercial Finance Limited secured on a portfolio of 15 self storage assets, and a £70 million seven year loan from M&G Investments Limited secured on a portfolio of 15 self storage assets.  Borrowings are arranged to ensure an appropriate maturity profile and to maintain short term liquidity.  Funding is arranged through banks and financial institutions with whom the Group has a strong working relationship.

C.  Interest rate risk management

The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite; ensuring optimal hedging strategies are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles.

At 31 March 2018 the Group had two interest rate derivatives in place; £30 million fixed at 0.4% (excluding the margin on the underlying debt instrument) until October 2021, and £35 million fixed at 0.76% (excluding the margin on the underlying debt instrument) until June 2023.

Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the curves at the reporting date and the credit risk inherent in the contract, and is disclosed below. The average interest rate is based on the outstanding balances at the end of the financial year.

The £30 million interest rate swap settles on a monthly basis. The floating rate on the interest rate swap is one month LIBOR. The Group settles the difference between the fixed and floating interest rate on a net basis.

The £35 million interest rate swap settles on a three-monthly basis. The floating rate on the interest rate swap is three month LIBOR. The Group settles the difference between the fixed and floating interest rate on a net basis.

The Group does not hedge account for its interest rate swaps and states them at fair value, with changes in fair value included in the statement of comprehensive income.   A reconciliation of the movement in derivatives is provided in the table below:

  

2018

£000

2017

£000

 

 

 

At 1 April

(2,964)

(3,683)

Fair value movement in the year

1,294

719

Cancellation of interest rate derivative

3,374

-

At 31 March

1,704

(2,964)

The table below reconciles the opening and closing balances of the Group's finance related liabilities.

  

Loans

Finance leases

Interest rate derivatives

 

Total

 

 

 

 

 

At 1 April 2017

(304,955)

(23,601)

(2,964)

(331,520)

Cash movement in the year

(25,644)

1,109

3,374

(21,161)

Non-cash movements

-

(437)

1,294

857

At 31 March 2018

(330,599)

(22,929)

1,704

(351,824)

D.  Interest rate sensitivity analysis

In managing interest rate risks the Group aims to reduce the impact of short-term fluctuations on the Group's earnings, without jeopardising its flexibility.  Over the longer term, permanent changes in interest rates may have an impact on consolidated earnings. 

At 31 March 2018, it is estimated that an increase of 0.25 percentage points in interest rates would have reduced the Group's adjusted profit before tax and net equity by £445,000 (2017: reduced adjusted profit before tax by £375,000) and a decrease of 0.25 percentage points in interest rates would have increased the Group's adjusted profit before tax and net equity by £445,000 (2017: increased adjusted profit before tax by £375,000).  The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings, net of interest rate swaps, at the year end. 

The Group's sensitivity to interest rates has increased during the year, following the increase in the amount of floating rate debt.  The Board monitors closely the exposure to the floating rate element of our debt.

E.  Cash management and liquidity

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.  Included in note 19 is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.

Short term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources, giving due consideration to risk.

F.    Foreign currency management

The Group does not have any foreign currency exposure.

G.   Credit risk

The credit risk management policies of the Group with respect to trade receivables are discussed in note 16.   The Group has no significant concentration of credit risk, with exposure spread over 55,000 customers in our stores.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

H.  Financial maturity analysis

In respect of interest-bearing financial liabilities, the following table provides a maturity analysis for individual elements.

2018 Maturity

 

 

Total

£000

Less than one year

£000

One to two years

£000

Two to five years

£000

More than five years

£000

 

 

 

 

 

 

Debt

 

 

 

 

 

Aviva loan

87,599

2,474

2,598

8,601

73,926

M&G loan payable at variable rate

35,000

-

-

-

35,000

M&G loan fixed by interest rate derivatives

35,000

 

-

-

-

35,000

Bank loan payable at variable rate

143,000

-

-

143,000

-

Debt fixed by interest rate derivatives

30,000

 

-

-

30,000

-

 

 

 

 

 

 

Total

330,599

2,474

2,598

181,601

143,926

 

2017 Maturity

 

 

Total

£000

Less than one year

£000

One to two years

£000

Two to five years

£000

More than five years

£000

Debt

 

 

 

 

 

Aviva loan

89,955

2,356

2,474

8,190

76,935

M&G loan payable at variable rate

35,000

-

-

-

35,000

M&G loan fixed by interest rate derivatives

35,000

 

-

-

-

35,000

Bank loan payable at variable rate

115,000

-

-

115,000

-

Debt fixed by interest rate derivatives

30,000

 

-

-

30,000

-

 

 

 

 

 

 

Total

304,955

2,356

2,474

153,190

146,935

 

I.     Fair values of financial instruments

The fair values of the Group's cash and short term deposits and those of other financial assets equate to their book values.  Details of the Group's receivables at amortised cost are set out in note 16.  The amounts are presented net of provisions for doubtful receivables, and allowances for impairment are made where appropriate.  Trade and other payables, including bank borrowings, are carried at amortised cost.  Finance lease liabilities are included at the fair value of their minimum lease payments.  Derivatives are carried at fair value.

For those financial instruments held at valuation, the Group has categorised them into a three level fair value hierarchy based on the priority of the inputs to the valuation technique in accordance with IFRS 7.  The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.  The fair value of the Group's outstanding interest rate derivative, as detailed in note 18C, has been estimated by calculating the present value of future cash flows, using appropriate market discount rates, representing Level 2 fair value measurements as defined by IFRS 7.  There are no financial instruments which have been categorised as Level 1 or Level 3.  The fair value of the Group's debt equates to its book value.

J.     Maturity analysis of financial liabilities

The contractual maturities based on market conditions and expected yield curves prevailing at the year end date are as follows:

2018

Trade and other payables

£000

 

Interest rate swaps

£000

Borrowings and

interest

£000

Finance leases

£000

Total

£000

From five to twenty years

-

(63)

159,548

23,709

183,194

From two to five years

-

(1,139)

207,092

6,285

212,238

From one to two years

-

(381)

11,855

2,095

13,569

 

 

 

 

 

 

Due after more than one year

-

(1,583)

378,495

32,089

409,001

Due within one year

20,449

(195)

11,855

2,095

34,204

 

 

 

 

 

 

Total

20,449

(1,778)

390,350

34,184

443,205

 

 

 

 

 

 

 

2017

Trade and other payables

£000

 

Interest rate swaps

£000

Borrowings and

interest

£000

Finance leases

£000

Total

£000

 

 

 

 

 

 

From five to twenty years

-

127

166,652

25,556

192,335

From two to five years

-

1,493

180,928

6,116

188,537

From one to two years

-

692

11,930

2,039

14,661

 

 

 

 

 

 

Due after more than one year

-

2,312

359,510

33,711

395,533

Due within one year

21,631

816

11,930

2,039

36,416

 

 

 

 

 

 

Total

21,631

3,128

371,440

35,750

431,949

 

 

 

 

 

 

 

K.    Reconciliation of maturity analyses

The maturity analysis in note 18J shows non-discounted cash flows for all financial liabilities including interest payments.  The table below reconciles the borrowings column in note 19 with the borrowings and interest column in the maturity analysis presented in note 18J.

2018

 

 

 

Borrowings

£000

 

 

Interest

£000

Unamortised borrowing costs

£000

Borrowings and

interest

£000

From five to twenty years

 

143,926

13,958

1,664

159,548

From two to five years

 

181,601

25,491

-

207,092

From one to two years

 

2,598

9,257

-

11,855

 

 

 

 

 

 

Due after more than one year

 

328,125

48,706

1,664

378,495

Due within one year

 

2,474

9,381

-

11,855

 

 

 

 

 

 

Total

 

330,599

58,087

1,664

390,350

 

 

 

 

 

 

 

2017

 

 

 

Borrowings

£000

 

 

Interest

£000

Unamortised borrowing costs

£000

Borrowings and

interest

£000

 

 

 

 

 

 

From five to twenty years

 

146,935

17,806

1,911

166,652

From two to five years

 

153,190

26,373

1,365

180,928

From one to two years

 

2,474

9,456

-

11,930

 

 

 

 

 

 

Due after more than one year

 

302,599

53,635

3,276

359,510

Due within one year

 

2,356

9,574

-

11,930

 

 

 

 

 

 

Total

 

304,955

63,209

3,276

371,440

 

 

 

 

 

 

 

19.       BORROWINGS

 

 

Secured borrowings at amortised cost

 

31 March

 2018

£000

31 March

2017

£000

 

 

 

 

 

Current liabilities

 

 

 

 

Aviva loan

 

 

2,474

2,356

 

 

 

2,474

2,356

Non-current liabilities

 

 

 

 

Bank borrowings

 

 

173,000

145,000

Aviva loan

 

 

85,125

87,599

M&G loan

 

 

70,000

70,000

Unamortised loan arrangement costs

 

 

(1,664)

(3,276)

 

 

 

 

 

Total non-current borrowings

 

 

326,461

299,323

 

 

 

 

 

Total borrowings

 

 

328,935

301,679

 

 

 

 

 

The weighted average interest rate paid on the borrowings during the year was 2.9% (2017: 3.3%). 

The Group has £37,000,000 in undrawn committed bank borrowing facilities at 31 March 2018, which expire between four and five years (2017: £45,000,000 expiring between four and five years). 

The Group has a £100 million 15 year fixed rate loan with Aviva Commercial Finance Limited. The loan is secured over a portfolio of 15 freehold self storage centres.  The annual fixed interest rate on the loan is 4.9%.   The loan amortises to £60 million over the course of the 15 years.  The debt service is payable monthly based on fixed annual amounts. 

The Group has a £210 million five year revolving bank facility with Lloyds and HSBC expiring in October 2022, with a margin of 1.25%.  The Group has an option to increase the amount of the loan facility by a further £60 million during the course of the loan's term, and an option to increase the term of the loan by a further two years. 

The Group has a £70 million seven year loan with M&G Investments Limited, with a bullet repayment in June 2023.  The loan is secured over a portfolio of 15 freehold self storage centres.  Half of the loan is variable and half is subject to an interest rate derivative.

The Group was in compliance with its banking covenants at 31 March 2018 and throughout the year.  The main covenants are summarised in the table below:

Covenant

Covenant level

At 31 March 2018

Consolidated EBITDA

Minimum 1.5x

7.9x

Consolidated net tangible assets

Minimum £250m

£981.1m

Bank loan income cover

Minimum 1.75x

14.2x

Aviva loan interest service cover ratio

Minimum 1.5x

4.1x

Aviva loan debt service cover ratio

Minimum 1.2x

2.7x

M&G income cover

Minimum 1.5x

7.5x

 

Interest rate profile of financial liabilities

 

 

Total

£000

Floating rate

£000

 

Fixed rate

£000

Weighted average interest rate

Period for which the rate is fixed

Weighted average period until maturity

 

 

 

 

 

 

 

At 31 March 2018

 

 

 

 

 

 

Gross financial liabilities

330,599

178,000

152,599

2.9%

6.5 years

5.5 years

 

 

 

 

 

 

 

At  31 March 2017

 

 

 

 

 

 

Gross financial liabilities

304,955

150,000

154,955

3.2%

7.0 years

5.9 years

 

 

 

 

 

 

 

All monetary liabilities, including short term receivables and payables are denominated in sterling.  The weighted average interest rate includes the effect of the Group's interest rate derivatives. The Directors have concluded that the carrying value of borrowings approximates to its fair value.

Narrative disclosures on the Group's policy for financial instruments are included within the Strategic Report and in note 18.

20.       Deferred tax

Deferred tax assets in respect of share based payments (£0.1 million), corporation tax losses (£4.5 million), capital allowances in excess of depreciation (£0.3 million) and capital losses (£1.4 million) in respect of the non-REIT taxable business have not been recognised due to uncertainty over the projected tax liabilities arising in the short term within the non-REIT taxable business.  A deferred tax liability in respect of interest rate swaps (£0.3 million)  arising in the non-REIT taxable business has also not been recognised as the relevant entity has the legal right to settle the potential tax amounts on a net basis and these taxes are levied by the same taxing authority.

21.       obligations under finance leases

 

 

Minimum lease payments

Present value minimum of lease payments

 

2018

£000

2017

£000

2018

£000

2017

£000

 

 

 

 

 

Amounts payable under finance leases:

 

 

 

 

Within one year

2,095

2,039

2,061

2,005

Within two to five years inclusive

8,380

8,155

7,390

7,193

Greater than five years

23,709

25,556

13,478

14,403

 

 

 

 

 

 

34,184

35,750

22,929

23,601

 

 

 

 

 

Less: future finance charges

(11,255)

(12,149)

 

 

 

 

 

 

 

Present value of lease obligations

22,929

23,601

 

 

All lease obligations are denominated in sterling.  Interest rates are fixed at the contract date.  All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.  The carrying amount of the Group's lease obligations approximates their fair value.

22.       Share capital

 

 

Called up, allotted and fully paid

 

 

 

2018

£000

2017

£000

 

 

 

 

 

Ordinary shares of 10 pence each

 

 

15,857

15,788

 

 

 

 

 

Movement in issued share capital

 

 

 

 

Number of shares at 31 March 2016

 

 

 

157,369,287

Exercise of share options - Share option schemes

 

 

 

513,580

Number of shares at 31 March 2017

 

 

 

157,882,867

Exercise of share options - Share option schemes

 

 

 

687,707

Number of shares at 31 March 2018

 

 

 

158,570,574

             The Company has one class of ordinary shares which carry no right to fixed income.

At 31 March 2018 options in issue to Directors and employees were as follows:

 

 

Date option

Granted

Option price per ordinary share

Date first exercisable

 

Date on which the exercise period expires

Number of ordinary shares

2018

Number of ordinary shares
2017

19 July 2011

nil p **

19 July 2013

19 July 2021

-

2,400

11 July 2012

nil p **

11 July 2015

10 July 2022

5,359

8,559

19 July 2013

nil p **

19 July 2016

19 July 2023

7,059

78,469

25 February 2014

442.6p*

1 April 2017

1 October 2017

-

21,624

29 July 2014

nil p**

29 July 2017

29 July 2024

10,155

485,032

16 March 2015

494.6p*

1 April 2018

1 October 2018

94,654

95,016

21 July 2015

nil p**

21 July 2018

21 July 2025

373,093

379,293

14 March 2016

608.0p*

1 April 2019

1 October 2019

37,489

41,809

22 July 2016

nil p**

22 July 2019

21 July 2026

398,825

402,225

15 March 2017

580.0p*

1 April 2020

1 October 2020

59,550

65,374

2 August 2017

nil p**

2 August 2020

1 August 2027

407,311

-

13 March 2018

675.4p*

1 April 2021

1 October 2021

108,335

-

 

 

 

 

 

 

 

 

 

 

1,501,830

1,579,801

* SAYE (see note 23) ** LTIP (see note 23)

             Own shares

The own shares reserve represents the cost of shares in Big Yellow Group PLC purchased in the market, and held by the Big Yellow Group PLC Employee Benefit Trust, along with shares issued directly to the Employee Benefit Trust.  1,122,907 shares are held in the Employee Benefit Trust (2017: 1,122,907), and no shares are held in treasury.

23.             Share-based payments

The Company has three equity share-based payment arrangements, namely an LTIP scheme (with approved and unapproved components), an Employee Share Save Scheme ("SAYE") and a Long Term Bonus Performance Plan. The Group recognised a total expense in the year related to equity-settled share-based payment transactions of £2,470,000 (2017: £2,324,000).

Equity-settled share option plans

Since 2004 the Group has operated an Employee Share Save Scheme ("SAYE") which allows any employee who has more than six months service to purchase shares at a 20% discount to the average quoted market price of the Group shares at the date of grant.  The associated savings contracts are three years at which point the employee can exercise their option to purchase the shares or take the amount saved, including interest, in cash. The scheme is administered by Yorkshire Building Society. 

On an annual basis since 2004 the Group awarded nil-paid options to senior management under the Group's Long Term Incentive Plan ("LTIP").  The awards are conditional on the achievement of challenging performance targets.  The awards granted in 2004, 2005 and 2006 vested in full.  The awards granted in 2007 and 2009 lapsed, and the awards granted in 2008 and 2010 partially vested.  The awards granted in 2011, 2012, 2013 and 2014 fully vested.  The weighted average share price at the date of exercise for options exercised in the year was £7.25 (2017: £7.38).

LTIP scheme

2018

No. of options

2017

No. of options

 

 

 

Outstanding at beginning of year

1,355,978

1,444,221

Granted during the year

582,341

455,331

Lapsed during the year

(70,434)

(59,094)

Exercised during the year

(666,083)

(484,480)

 

 

 

Outstanding at the end of the year

1,201,802

1,355,978

 

 

 

Exercisable at the end of the year

22,573

89,428

 

 

 

The weighted average fair value of options granted during the year was £1,219,000 (2017: £1,017,000).

 

Employee Share Save Scheme ("SAYE")

2018

No. of options

2018

Weighted average exercise price
(£)

2017

No of options

2017

Weighted average exercise price

(£)

 

 

 

 

 

Outstanding at beginning of year

223,823

5.36

205,330

4.87

Granted during the year

108,335

6.75

65,374

5.80

Forfeited during the year

(10,506)

5.89

(17,781)

5.07

Exercised during the year

(21,624)

4.43

(29,100)

3.07

Outstanding at the end of the year

300,028

5.91

223,823

5.36

 

 

 

 

 

Exercisable at the end of the year

-

-

-

-

 

Options outstanding at 31 March 2018 had a weighted average contractual life of 2.0 years (2017: 2.1 years).

The inputs into the Black-Scholes model for the options granted during the year are as follows:

 

LTIP

SAYE

Expected volatility

n/a

27%

Expected life

3 years

3 years

Risk-free rate

0.1%

0.1%

Expected dividends

4.6%

4.6%

Expected volatility was determined by calculating the historical volatility of the Group's share price over the year prior to grant. 

Long Term bonus performance plan

The Executive Directors receive awards under the Long Term Bonus Performance Plan.  This is accounted for as an equity instrument. The plan was set up in July 2015.  The vesting criteria and scheme mechanics are set out in the Directors' Remuneration Report.  At 31 March 2018 the weighted average contractual life was 0.3 years.  

24.       capital commitments

At 31 March 2018 the Group had £13.7 million of amounts contracted but not provided in respect of the Group's properties (2017: £8.6 million of capital commitments).

25.       Events after the balance sheet date

On 5 April 2018, the Group exchanged contracts to acquire a property in Uxbridge for a new 55,000 sq ft store.

26.       CASH FLOW NOTES

a) Reconciliation of profit after tax to cash generated from operations

 

 

Note

2018

£000

2017

£000

Profit after tax

 

 

133,542

99,511

Taxation

 

 

597

272

Share of profit of associates

 

 

(1,370)

(1,442)

Investment income

 

 

(1,538)

(1,075)

Finance costs

 

 

11,975

11,756

Operating profit

 

 

143,206

109,022

 

 

 

 

 

Gain on the revaluation of investment properties

 

14a, 15

(71,635)

(43,706)

Gain on part disposal of investment property

 

 

(650)

-

Depreciation of plant, equipment and owner-occupied property

 

14b

729

738

Depreciation of finance lease capital obligations

 

14a

1,109

1,196

Employee share options

 

6

2,470

2,324

Cash generated from operations pre working capital movements

 

 

75,229

69,574

 

 

 

 

 

Increase in inventories

 

 

-

(17)

Increase in receivables

 

 

(1,352)

(1,456)

Decrease in payables

 

 

(420)

(892)

Cash generated from operations

 

 

73,457

67,209

 

b) Reconciliation of net cash flow movement to net debt

 

 

Note

2018

£000

2017

£000

 

 

 

 

 

Net decrease in cash and cash equivalents in the year

 

 

(53)

(10,301)

Cash flow from (increase)/decrease in debt financing

 

 

(25,644)

7,243

 

 

 

 

 

Change in net debt resulting from cash flows

 

 

(25,697)

(3,058)

 

 

 

 

 

Movement in net debt in the year

 

 

(25,697)

(3,058)

Net debt at the start of the year

 

 

(298,049)

(294,991)

 

 

 

 

 

Net debt at the end of the year

 

18A

(323,746)

(298,049)

 

 

 

 

 

 

27.       Related party transactions

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 Armadillo Storage Holding Company Limited

As described in note 14, the Group has a 20% interest in Armadillo Storage Holding Company Limited ("Armadillo 1"), and entered into transactions with Armadillo 1 during the period on normal commercial terms as shown in the table below.   

Transactions with Armadillo Storage Holding Company 2 Limited

As described in note 14, the Group has a 20% interest in Armadillo Storage Holding Company 2 Limited ("Armadillo 2"), and entered into transactions with Armadillo 2 during the year on normal commercial terms as shown in the table below. 

 

31 March 2018

£000

31 March 2017

£000

Fees earned from Armadillo 1

705

574

Fees earned from Armadillo 2

270

253

Balance due from Armadillo 1

89

86

Balance due from Armadillo 2

33

48

AnyJunk Limited

James Gibson is a Non-Executive Director and shareholder in AnyJunk Limited and Adrian Lee is a shareholder in AnyJunk Limited.  During the year AnyJunk Limited provided waste disposal services to the Group on normal commercial terms, amounting to £37,000 (2017: £36,000). 

No other related party transactions took place during the years ended 31 March 2018 and 31 March 2017.

28.       GLOSSARY

Adjusted eps

Adjusted profit after tax divided by the diluted weighted average number of shares in issue during the period.

Adjusted NAV

EPRA NAV adjusted for an investment property valuation carried out at purchasers' costs of 2.75%.

Adjusted Profit Before Tax

The Company's pre-tax EPRA earnings measure with additional Company adjustments.

Average net achieved rent per sq ft

Storage revenue divided by average occupied space over a defined period.

BREEAM

An environmental rating assessed under the Building Research Establishment's Environmental Assessment Method.

Carbon intensity

Carbon emissions divided by the Group's average occupied space.

Closing net rent per sq ft

Annual storage revenue generated from in-place customers divided by occupied space at the balance sheet date.

Debt

Long-term and short-term borrowings, as detailed in note 19, excluding finance leases and debt issue costs. 

Earnings per share (eps)

 

Profit for the period attributable to equity shareholders divided by the average number of shares in issue during the period.

EBITDA

Earnings before interest, tax, depreciation and amortisation.

EPRA

The European Public Real Estate Association, a real estate industry body. This organisation has issued Best Practice Recommendations with the intention of improving the transparency, comparability and relevance of the published results of listed real estate companies in Europe.

EPRA earnings

The IFRS profit after taxation attributable to shareholders of the Company excluding investment property revaluations, gains/losses on investment property disposals and changes in the fair value of financial instruments.

EPRA earnings per share

EPRA earnings divided by the average number of shares in issue during the period.

EPRA NAV per share

EPRA NAV divided by the diluted number of shares at the period end.

EPRA net asset value

IFRS net assets excluding the mark-to-market on interest rate derivatives effective cash flow as deferred taxation on property valuations where it arises.  It is adjusted for the dilutive impact of share options.

EPRA NNNAV

The EPRA NAV adjusted to reflect the fair value of debt and derivatives and to include deferred taxation on revaluations.

Equity

All capital and reserves of the Group attributable to equity holders of the Company.

Gross property assets

The sum of investment property and investment property under construction.

Gross value added

The measure of the value of goods and services produced in an area, industry or sector of an economy.

Income statement

Statement of Comprehensive Income.

Interest cover

 

The ratio of operating cash flow excluding working capital movements divided by interest paid (before exceptional finance costs, capitalised interest and changes in fair value of interest rate derivatives).  This metric is provided to give readers a clear view of the Group's financial position.

Like-for-like occupancy

Excludes the closing occupancy of new stores acquired or opened in the current period.

Like-for-like revenue

Excludes the impact of new stores acquired or opened in the current or preceding financial year in both the current year and comparative figures.  This excludes Nine Elms and Twickenham 2 (both acquired in April 2016) and Guildford Central (opened in March 2018).

LTV (loan to value)

Net debt expressed as a percentage of the external valuation of the Group's investment properties.

Maximum lettable area (MLA)

The total square foot (sq ft) available to rent to customers.

Move-ins

The number of customers taking a storage room in the defined period.

Move-outs

The number of customers vacating a storage room in the defined period.

NAV

Net asset value.

Net debt

Gross borrowings less cash and cash equivalents. 

Net initial yield

The forthcoming year's net operating income expressed as a percentage of capital value, after adding notional purchaser's costs.

Net promoter score (NPS)

The Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company's products or services to others.  The Company measures NPS based on surveys sent to all of its move-ins and move-outs.

Net rent per sq ft

Storage revenue generated from in place customers divided by occupancy.

Occupancy

The space occupied by customers divided by the MLA expressed as a %.

Occupied space

The space occupied by customers in sq ft.

Pipeline

The Group's development sites.

Property Income Distribution (PID)

 

A dividend, generally subject to withholding tax, that a UK REIT is required to pay from its tax exempt property rental business and which is taxable for UK-resident shareholders at their marginal tax rate.

REIT

Real Estate Investment Trust. A tax regime which in the UK exempts participants from corporation tax both on UK rental income and gains arising on UK investment property sales, subject to certain conditions.

REVPAF

Total store revenue divided by the average maximum lettable area in the year.

Store EBITDA

Store earnings before interest, tax, depreciation and amortisation. 

Total shareholder return (TSR)

The growth in value of a shareholding over a specified period, assuming dividends are reinvested to purchase additional units of shares.

 

Ten Year Summary

 

2018

£000

2017

£000

2016

£000

2015

£000

2014

£000

2013
£000

2012

£000

2011

£000

2010

£000

2009

£000

Results

 

 

 

 

 

 

 

 

 

 

Revenue

116,660

109,070

101,382

84,276

72,196

69,671

65,663

61,885

57,995

58,487

 

 

 

 

 

 

 

 

 

 

 

Operating profit before gains and losses on property assets

 

 

70,921

 

 

65,316

 

 

59,854

 

 

48,420

 

 

39,537

 

 

37,454

35,079

32,058

29,068

30,946

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operating activities

 

62,977

 

55,974

 

55,467

 

42,397

 

32,752

 

30,186

27,388

23,534

19,063

10,203

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before taxation

134,139

99,783

112,246

105,236

59,848

31,876

(35,551)

6,901

10,209

(71,489)

 

 

 

 

 

 

 

 

 

 

 

Adjusted profit before taxation

 

61,422

 

54,641

 

48,952

 

39,405

 

29,221

 

25,471

23,643

20,207

16,514

13,791

 

 

 

 

 

 

 

 

 

 

 

Net assets

981,148

890,350

829,387

750,914

594,064

552,628

494,500

544,949

547,285

502,317

 

 

 

 

 

 

 

 

 

 

 

EPRA earnings per share

38.5p

34.5p

31.1p

27.1p

20.5p

19.3p

18.2p

15.5p

13.0p

11.9p

Declared total dividend per share

 

30.8p

 

27.6p

 

24.9p

 

21.7p

 

16.4p

 

11.0p

10.0p

9.0p

4.0p

0p

 

 

 

 

 

 

 

 

 

 

 

Key statistics

 

 

 

 

 

 

 

 

 

 

Number of stores open

74

73

71

69

66

66

65

62

60

54

Sq ft occupied (000)

3,730

3,551

3,363

3,178

2,832

2,632

2,458

2,130

1,915

1,775

Occupancy increase in year 000 sq ft)*

 

179

 

188

 

185

 

346

 

200

 

174

328

215

140

(75)

Number of customers

55,000

52,500

50,000

47,250

41,800

38,500

36,300

32,800

30,500

28,500

Average number of employees during the year

 

335

 

329

 

318

 

300

 

289

 

286

279

273

252

239

 

* - the occupancy growth in 2015 and 2017 includes the acquisition of existing stores


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Results for the year ended 31 March 2018 - RNS