TIDMSAFE
RNS Number : 9070M
Safestore Holdings plc
17 January 2023
17 January 2023
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Results for the year ended 31 October 2022
A strong trading performance in a year of significant strategic
progress and geographic expansion
Key measures
Year Year Change
Ended Ended Change-CER
31 October 31 October (1)
2022 2021
-------------------------------- ------------ ------------ --------- -------------
Underlying and Operating
Metrics- total
Revenue GBP212.5m GBP186.8m 13.8% 14.3%
Underlying EBITDA(2) GBP135.1m GBP118.0m 14.5% 15.1%
Closing Occupancy (let sq
ft- million)(3) 6.317 5.883 7.4% n/a
Closing Occupancy (% of
MLA)(4) 82.1% 84.5% -2.4ppts n/a
Average Storage Rate(5) GBP29.25 GBP26.95 8.5% 9.2%
Adjusted Diluted EPRA Earnings
per Share(6) 47.5 p 40.5p 17.3% n/a
Free Cash Flow(7) GBP101.4m GBP89.5m 13.3% n/a
EPRA Basic NTA per Share(13) GBP9.08 GBP6.97 30.3% n/a
Underlying and Operating
Metrics- like-for-like (8)
Revenue GBP204.3m GBP185.5m 10.1% 10.7%
Underlying EBITDA(2) GBP131.6m GBP117.0m 12.5% 13.0%
Closing Occupancy (let sq
ft- million)(3) 5.725 5.838 -1.9% n/a
Closing Occupancy (% of
MLA)(4) 83.1% 85.2% -2.1ppts n/a
Average Occupancy (let sq
ft- million)(3) 5.723 5.685 0.7% n/a
Average Storage Rate(5) GBP29.99 GBP27.03 11.0% 11.5%
Statutory Metrics
Operating profit(9) GBP514.5m GBP417.0m 23.4% n/a
Profit before tax(9) GBP498.8m GBP404.6m 23.3% n/a
Diluted Earnings per Share 212.4 p 176.4p 20.4% n/a
Dividend per Share 29.8 p 25.1p 18.7% n/a
Cash inflow from operating GBP109.8 GBP97.0m 13.2% n/a
activities m
Diluted net assets per share(13) GBP8.20 GBP6.35 29.1% n/a
Highlights
Strong Financial Performance
-- Group revenue for the year up 13.8% (up 14.3% in CER(1) )
-- Like-for-like(8) Group revenue for the year in CER(1) up 10.7%:
-- Underlying EBITDA(2) up 15.1% in CER(1) which, combined with
an increased gain on investment properties of GBP381.6m (FY2021:
GBP321.1m), resulted in statutory operating profit(9) of GBP514.5m
(FY2021: GBP417.0m)
-- Adjusted Diluted EPRA Earnings per Share(6) up 17.3% at 47.5
pence (FY2021: 40.5 pence). Diluted Earnings per Share was 212.4
pence (FY2021: 176.4 pence) largely due to the higher property
valuation gain in FY2022
-- 15.9 % increase in the final dividend to 20.4 pence (FY2021:
17.6 pence) giving a total 18.7% increase for the year to 29.8
pence (FY2021: 25.1 pence)
Continued Operational Delivery
-- Continued balanced approach to revenue management together
with an efficient marketing platform driving returns and record
occupancy performance:
-- Like-for-like(8) average storage rate(5) for the year up 11.5% in CER(1)
-- Like-for-like(8) average occupancy for the year up 0.7%
-- Like-for-like(8) closing occupancy of 83.1% down 2.1ppts on 2021 (FY2021: 85.2%)
-- New and recently opened stores trading well and in line with business plans
-- Investment in our digital marketing platform continuing to deliver for the business:
-- Online enquiries in FY2022 rose to 90% of our total enquiries
in the UK (FY2021: 89%) and 85% in France (FY2021: 84%)
-- Marketing cost as a percentage of revenue reduced to 3.6% (FY2021: 3.7%)
Strategic Progress
-- Store openings in London Bow, Barcelona and Nijmegen in the
Netherlands added c.126,000 sq ft of MLA(4) with a further two
Madrid stores opened post year end in November 2022, adding a
further 85,000 sq ft of MLA(4) .
-- Lease extensions signed in Exeter, London Crayford and Sunderland.
-- Five store extensions adding c.38,000 sq ft of MLA(4) in
London Paddington Marble Arch, Southend, London Edgware, London
Wimbledon and Winchester
-- Acquired a 14,000 sq ft MLA(4) freehold store in
Christchurch(10) , Dorset, from Your Room Self Storage
-- Development pipeline expanded by c.0.7m sq ft of future
MLA(4) and eleven projects to c.1.4m sq ft and 29 projects
(equivalent to c.18% of existing portfolio):
-- Eleven UK projects to add c.512,000 sq ft
-- Six developments in Barcelona and Madrid to add c.262,000 sq
ft (an additional two developments opened since year-end, adding a
further 85,000 sq ft)
-- Seven Paris projects to add c.349,000 sq ft
-- Five Netherlands sites to add c.283,000 sq ft
-- Completed EPS accretive acquisition of remaining 80% of
equity owned by Carlyle in the Benelux JV(14) in March 2022 at an
Enterprise Value of EUR146m. The Benelux business now consists of
15 high quality stores with an MLA (4) of 600,000 sq ft in the
Netherlands and Belgium
-- Entry into German market via a new joint venture ("JV") with
Carlyle which has acquired the seven-store myStorage business with
326,000 sq ft of MLA(4)
ESG
-- Continued development of Environmental, Social and Governance ("ESG") strategy:
-- Linkage of new GBP400m refinancing to ESG targets
-- Group commitment to be operationally carbon neutral by 2035
-- ESG progress illustrated by awards of:
-- GRESB "A" rating for public disclosures
-- EPRA Silver rating for sustainability
-- MSCI AA rating for ESG
-- Highest rating of five stars from Support The Goals
Strong and Flexible Balance Sheet
-- 30.9% increase in property valuation (including investment
properties under construction) driven by improved trading
performance, new stores, acquisitions, revisions to exit cap rates
and stabilised occupancy assumptions
-- Revolving Credit Facilities (RCF's) refinanced with a new
increased GBP400m unsecured multi-currency four-year facility (with
two one-year extension options). Margins remain at 1.25% in line
with previous RCF's and all facilities, including private placement
notes, are now unsecured
-- Group loan-to-value ratio ("LTV"(11) ) at 23.6%, calculated
on net debt (31 October 2021: 22.7%) and interest cover ratio
("ICR"(12) ) at 11.4x (31 October 2021: 10.5x)
-- In addition to strong free cash flow, significant financing
in place to fund pipeline including unutilised bank facilities of
GBP208.4m at October 2022 and no borrowings to refinance before May
2024. In addition, a further uncommitted GBP100m accordion facility
incorporated into the new bank facilities
-- 93% of drawn debt at fixed rates or hedged at 31 October 2022
Frederic Vecchioli, Chief Executive Officer commented:
"I am pleased to report another excellent year in which we
delivered significant strategic progress, having enhanced our
funding capacity, doubled our development pipeline to c.1.4m sq ft
of MLA and extended our geographical footprint. The strong trading
performance for the year is especially pleasing as it follows a
record year in 2021. Our 2022 result was achieved through strong
revenue growth in the UK market, good performances in our Parisian
and Spanish businesses, and seven months' contribution from our
Benelux business, which was acquired in March 2022.
Early trading in the new financial year shows broadly stable
levels of demand compared to last year (but significantly ahead of
pre-pandemic levels) with rates paid by new customers continuing to
grow.
Over the last seven years, the Group has developed or acquired
68 stores and expanded into four new countries (Netherlands,
Belgium, Spain and now Germany). In addition, our development
pipeline of 29 new stores, extensions, and projects represents a
further c.18% of our existing portfolio's MLA. Throughout this
period of expansion, the Group has maintained its disciplined
approach to return on capital.
In March 2022, the Group completed the acquisition of our
partner Carlyle's 80% stake in our Benelux JV. Over the last three
years we have learnt much about the Netherlands and Belgian markets
and feel confident about the ongoing development of our presence in
these attractive geographies. It is our intention to gradually
increase our footprint in these two markets and our development
pipeline now includes five stores and c.283,000 sq ft of MLA in the
Netherlands.
Following this successful JV with Carlyle, we established a new
German JV which has acquired the seven-store myStorage business.
Germany is one of Europe's most under-penetrated self storage
markets and I look forward to growing our presence there.
Our strong and flexible balance sheet has been significantly
enhanced by the agreement of a new unsecured four-year GBP400
million multi-currency RCF which increases funding capacity,
allowing us to continue to consider strategic, value-accretive
investments as and when they arise.
We have delivered a strong occupancy performance over recent
years and, after a significant level of acquisition and development
activity over the last six years, we still have 1.4m sq ft of fully
invested currently unlet space in our UK, Paris, Spain and Benelux
markets in addition to 1.4m sq ft of pipeline space. Our most
significant upside opportunity is from filling our existing unlet
space and that remains our priority. The business has demonstrated
its inherent resilience in recent times and, despite the
challenging macroeconomic environment, we are confident in the
future of the business.
The underlying fundamentals of the European self storage
industry with limited supply, strong barriers to entry and a
steadily growing product awareness are as strong as ever. Over the
last nine years, Safestore has delivered a market leading 18% CAGR
of its adjusted diluted EPRA EPS. During that period, we have
gradually expanded our geographical reach to six European countries
leveraging and improving our platform and central functions while
managing investment risk very carefully. I'm confident that
Safestore will continue to play a leading role in the development
of the self storage industry across Europe, delivering significant
further value to its stakeholders.
None of this would be possible without the dedication and skills
of our teams and I would like to thank all our colleagues in the
UK, France, Spain, the Netherlands and Belgium for their
performance in 2022 as well as their commitment and loyalty. We are
appreciative of their efforts."
Notes
We prepare our financial statements using IFRS. However, we also
use a number of adjusted measures in assessing and managing the
performance of the business. These measures are not defined under
IFRS and they may not be directly comparable with other companies'
adjusted measures and are not intended to be a substitute for, or
superior to, any IFRS measures of performance. These include
like-for-like figures to aid in the comparability of the underlying
business as they exclude the impact on results of purchased, sold,
opened or closed stores and constant exchange rate ("CER") figures
are provided in order to present results on a more comparable
basis, removing FX movements. These metrics have been disclosed
because management reviews and monitors performance of the business
on this basis. We have also included a number of measures defined
by EPRA, which are designed to enhance transparency and
comparability across the European Real Estate sector; see notes 6
and 13 below and "Non-GAAP financial information" in the notes to
the financial statements.
1 - CER is Constant Exchange Rates (Euro denominated results for
the current period have been retranslated at the exchange rate
effective for the comparative period. Euro denominated results for
the comparative period are translated at the exchange rates
effective in that period. This is performed in order to present the
reported results for the current period on a more comparable
basis).
2 - Underlying EBITDA is defined as Operating Profit before
exceptional items, share-based payments, corporate transaction
costs, change in fair value of derivatives, gain/loss on investment
properties, variable lease payments, depreciation and the share of
associate's depreciation, interest and tax. Underlying EBITDA
therefore excludes all leasehold rent charges. Underlying profit
before tax is defined as Underlying EBITDA less leasehold rent,
depreciation charged on property, plant and equipment and net
finance charges relating to bank loans and cash.
3 - Occupancy excludes offices but includes bulk tenancy. As at
31 October 2022, closing occupancy includes 24,000 sq ft of bulk
tenancy (31 October 2021: 14,000 sq ft).
4 - MLA is Maximum Lettable Area. At 31 October 2022, Group MLA
was c.7.70m sq ft (FY2021: c.6.96m sq ft).
5 - Average Storage Rate is calculated as the revenue generated
from self storage revenues divided by the average square footage
occupied during the period in question.
6 - Adjusted Diluted EPRA EPS is based on the European Public
Real Estate Association's definition of Earnings and is defined as
profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts. The
Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional
tax items and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore neither the Company's ability to
distribute nor pay dividends is impacted (with the exception of the
associated National Insurance element). The financial statements
will disclose earnings on a statutory, EPRA and Adjusted Diluted
EPRA basis and will provide a full reconciliation of the
differences in the financial year in which any LTIP awards may
vest.
7 - Free cash flow is defined as cash flow before investing and
financing activities but after leasehold rent payments.
8 - Like-for-like adjustments remove the impact of the 2022
acquisition of the Netherlands and Belgium Joint Venture, the 2022
acquisition of Christchurch, the 2022 openings of Bow, Nijmegen
(Netherlands) and Barcelona, the 2021 openings of Birmingham
Middleway and Magenta in Paris and the 2021 closure of Birmingham
South.
9 - Operating profit increased by GBP97.5 million to GBP514.5
million (FY2021: GBP417.0 million) principally as a result of an
increase in the gain on investment properties of GBP60.5 million to
GBP381.6 million (FY2021: GBP321.1 million), as well as an increase
of GBP17.1 million or 14.5% in Underlying EBITDA as a result of
stronger trading performance. Profit before income tax additionally
included exceptional items of GBP10.8m, being other exceptional
gains. This included GBP5.5m relating to the valuation gain of the
20% equity investment held in the Joint Venture with CERF, when the
Group acquired the remaining 80% on 30 March 2022 and GBP5.1m
relating to the net gain on disposal of the Paris Nanterre site in
November 2021.
10 - The enterprise value paid for Your Room Self Storage in
Christchurch, Dorset, on 7 December 2021 was GBP2.45 million.
11 - LTV ratio is Loan-to-Value ratio, which is defined as gross
debt (excluding lease liabilities) as a proportion of the valuation
of investment properties and investment properties under
construction (excluding lease liabilities). At 31 October 2022, the
Group LTV ratio was 24.4%. Under the new revolving credit facility,
signed 11 November 2022, LTV is to be calculated against net debt
which equates to an LTV of 23.6%.
12 - ICR is interest cover ratio, and is calculated as the ratio
of Underlying EBITDA after leasehold rent to underlying finance
charges.
13 - EPRA basic NAV was superseded and transitioned to three new
measures: EPRA Net Reinstatement Value ("NRV"), EPRA Net Tangible
Assets ("NTA") and EPRA Net Disposal Value ("NDV") for periods
commencing 1 January 2020 or thereafter. Safestore considers EPRA
NTA to be the most consistent with the nature of the Group's
business. The basis of calculation, including a reconciliation to
reported net assets, is set out in note 11 of the Financial
Statements.
14 - On 30 March 2022, the Group acquired the remaining 80% of
the Joint Venture with CERF. Prior to acquiring the 80%, the Joint
Venture with CERF, which represented a 20% investment, was
accounted for as an associate using the equity method of
accounting, as described in the "Investment in associates" note to
the financial statements..
15 - On 1 December 2022, the Group made an initial investment
into a new joint venture with Carlyle, to enter the German self
storage market, of c.EUR2.2 million for a 10% share. The Group will
also earn a fee for providing management services to the joint
venture.
Summary
The Group has delivered an excellent performance in 2022
building on a record 2021.
In 2022, the Group delivered 17.3% growth in Adjusted Diluted
EPRA Earnings per Share largely driven by organic growth. Total
Group revenue increased by 13.8% (14.3% CER(1) ) with a
particularly strong performance in the UK (+13.1%) and continued
strength in Paris (+6.1%) and Spain (+9.1%). On a like-for-like(8)
basis in CER(1) , Group revenue increased by 10.7% with the UK up
12.2%, Paris up 5.3% and Spain up 8.5% reflecting the strategy to
balance rate growth and occupancy performance to maximise revenue;
the Group's like-for-like average storage rate(5) was up 11.5% at
CER(1) and average occupancy was up 0.7%, whilst like-for-like(8)
closing occupancy decreased by 2.1ppts to 83.1%.
The Group has traded well throughout the year despite a
difficult comparable performance in the record 2021 financial year.
Our digital marketing platform has driven good enquiry generation
and conversion, and our ongoing commitment to investing in and
supporting the development of our staff has resulted in
like-for-like(8) revenue in the UK growing by 12.2%. The
like-for-like average rate growth drove the UK revenue performance
and increased by 13.9% in the year. After an exceptionally strong
2021, average occupancy grew by 0.6% and closing occupancy was down
2.6ppts at 83.0%.
In Paris, our performance has also been strong with
like-for-like(8) revenue growing by 5.3% at CER(1) driven by a
like-for-like growth in average occupancy of 1.4% and like-for-like
average storage rate growing by 4.3% at CER(1) . Like-for-like(8)
closing occupancy ended the year at a similar level to the prior
year at 83.4% (FY2021: 83.6%). This is the 24(th) consecutive year
of revenue growth in Paris with average growth over the last seven
years of approximately 5%.
Our Spanish business saw a strong 8.5% growth in like-for-like
revenue for the year driven by an increase in the like-for-like
average rate of 5.8%. Ancillary sales were also strong. A fifth
Spanish store opened in the year and total revenue growth was
9.1%.
The Group's current pipeline of new developments and store
extensions has grown significantly over the last year and now
constitutes c.1.4m sq ft of future MLA (equivalent to 18% of the
existing portfolio) and associated outstanding capital expenditure
of GBP146 million. The pipeline consists of eleven projects in the
UK, seven in Paris, six in Spain and five in the Netherlands.
The Group completed the EPS accretive acquisition of the
remaining 80% of equity owned by Carlyle in the Benelux JV(14) in
March 2022 at an Enterprise Value of EUR146 million. The Benelux
business consists of 15 high quality stores with an MLA of 600,000
sq ft in the Netherlands and Belgium.
Group Underlying EBITDA(2) of GBP135.1 million increased by
15.1% at CER(1) on the prior year. The Group's EBITDA(2)
performance, offset by a modest increase in leasehold rent and an
increase in finance costs, resulted in a 17.3% increase in Adjusted
Diluted EPRA EPS(6) in the period to 47.5 pence (FY2021: 40.5
pence). Statutory operating profit increased by GBP97.5 million to
GBP514.5 million (FY2021: GBP417.0 million) principally as a result
of an increase in the gain on investment properties of GBP60.5
million to GBP381.6 million (FY2021: GBP321.1 million), along with
an increase of GBP17.1 million or 14.5% in Underlying EBITDA(2) as
a result of stronger trading performance.
Our property portfolio valuation, including investment
properties under construction, increased in the year by 30.9%,
driven by the stronger underlying performance of the stores, modest
revisions to exit cap rates and stabilised occupancy assumptions,
new stores, acquisitions and FX. After exchange rate movements, the
portfolio valuation increased to GBP2,552.3 million with the UK
portfolio up GBP340.7 million to a total UK value of GBP1,815.5
million and the French portfolio increasing by EUR104.3 million to
EUR625.9 million.
Reflecting the Group's strong trading performance, the Board is
pleased to recommend a 15.9% increase in the final dividend to 20.4
pence per share (FY2021: 17.6 pence) resulting in a full year
dividend up 18.7% to 29.8 pence per share (FY2021: 25.1 pence).
Over the last nine years, the Group has grown the annual dividend
by 418% or 24.1 pence per share.
Outlook
In the last seven financial years, Safestore has strengthened
its market-leading positions in the UK and Paris with the
acquisitions of Space Maker, Alligator, Fort Box and our stores at
Heathrow and Christchurch(10) , as well as opening 20 new stores,
with a further two Madrid stores opening in November 2022, and
establishing a pipeline of c.1.4m sq ft of MLA. In addition, the
Group has entered new markets in Spain together with Belgium and
the Netherlands and more recently Germany through our new joint
venture with Carlyle. Excluding the joint venture and the
development pipeline, there is 1.4m sq ft of fully invested unlet
space available, offering significant operational upside within the
existing portfolio.
We remain focused on further optimising the Group's operational
performance and continuing to grow in all of our geographies. Our
development pipeline represents 18% of our existing MLA and our
balance sheet strength and flexibility provide us with the
opportunity to consider further selective development and
acquisition opportunities in all of our markets.
Whilst we are aware of the current macro-economic challenges,
our business model has proven to be highly resilient with multiple
drivers of demand and we believe the Group, whilst not entirely
immune from any cost of living or inflationary issues, is strongly
positioned to withstand any downturn.
In the first two months of the 2022/23 financial year we have
seen broadly stable levels of demand compared to last year (but
significantly ahead of pre-pandemic levels) with like-for-like
Group revenue (at CER) up 3.5% and total revenue (at CER) up
8.7%.
Enquiries
Safestore Holdings plc 020 8732 1500
Frederic Vecchioli, Chief Executive
Officer
Andy Jones, Chief Financial Officer
www.safestore.com
Instinctif Partners 020 7457 2020
Guy Scarborough
Bryn Woodward
A conference call for analysts will be held at 09:30am
today.
For dial-in details of the presentation please contact:
Guy Scarborough (guy.scarborough@instinctif.com or telephone on
07917 178920).
Notes to Editors:
-- Safestore is the UK's largest self storage group with 179
stores on 31 October 2022, comprising 130 wholly owned stores in
the UK (including 72 in London and the South East with the
remainder in key metropolitan areas such as Manchester, Birmingham,
Glasgow, Edinburgh, Liverpool, Sheffield, Leeds, Newcastle, and
Bristol), 29 wholly owned stores in the Paris region, 5 stores in
Spain, 9 stores in the Netherlands and 6 stores in Belgium.
-- Safestore operates more self storage sites inside the M25 and
in central Paris than any competitor providing more proximity to
customers in the wealthiest and more densely populated UK and
French markets.
-- Safestore was founded in the UK in 1998. It acquired the
French business "Une Pièce en Plus" ("UPP") in 2004 which was
founded in 1998 by the current Safestore Group CEO Frederic
Vecchioli.
-- Safestore has been listed on the London Stock Exchange since
2007. It entered the FTSE 250 index in October 2015.
-- The Group provides storage to around 90,000 personal and business customers.
-- As of 31 October 2022, Safestore had a maximum lettable area
("MLA") of 7.698 million sq ft (excluding the expansion pipeline
stores) of which 6.317 million sq ft was occupied.
-- Safestore employs around 750 people in the UK, Paris, Spain, the Netherlands and Belgium.
Chairman's Statement
Our purpose remains simple - to add stakeholder value by
developing profitable and sustainable spaces that allow
individuals, businesses and local communities to thrive
The last year has been one of considerable strategic and
financial progress for the Group which is especially impressive on
the back of an exceptionally strong year in 2021. After three years
in the role, I continue to be impressed by the dedication and
resilience of the store and Head Office teams which have been
instrumental in delivering this progress.
Our purpose remains simple, to continue to add stakeholder value
by developing profitable and sustainable spaces that allow
individuals, businesses and local communities to thrive. Our
strategy is underpinned by our values, our behaviours and our
governance structure which shape our culture and remain central to
the way we conduct our business. I would like to take this
opportunity to congratulate all my colleagues throughout the Group
for their exceptional contributions this year.
Financial and strategic progress
In the last year the quality, resilience and, importantly, the
scalability of the business model at Safestore have again been
demonstrated and I am delighted to announce, on behalf of the Board
of the Group, an excellent set of results for the financial year
ended 31 October 2022.
Management's first priority remains to maximise the economic
return on our existing store portfolio and its 1.4 million sq ft of
fully invested unlet space, building on the significant operational
improvements made over the current management team's tenure.
In addition to improving returns from our existing portfolio,
the Group has continued to make significant strategic progress in
expanding its footprint through a combination of new store openings
and acquisitions. The Group has now acquired 46 and opened 20
stores over the last six years and all are performing well. The
acquisition of OMB in Barcelona in 2019 is now fully integrated
into the business and has an exciting pipeline, with two stores
opening in November 2022, and a further six stores over the next
two financial years. Our EPS accretive acquisition of the 80% share
in the Benelux joint venture owned by Carlyle means that the Group
now fully owns the operations of fifteen stores in the Netherlands
and Belgium with a further five in the pipeline. Overall, we have a
development property pipeline of an additional 1.4m sq ft of MLA,
which provides significant future opportunity for the business and
underpins our continued growth.
The recent establishment of a new GBP400 million unsecured
multi-currency RCF at attractive margins offers us significantly
greater strategic flexibility to support these growth plans.
Our new joint venture(14) with Carlyle in Germany and recent
acquisitions in Spain, the Netherlands and Belgium provide us with
exciting platforms in new attractive geographies. I believe that
Safestore's highly scalable platform will allow us to take
advantage of further opportunities in due course.
Financial results
Revenue for the year was GBP212.5 million, 13.8% ahead of last
year (FY2021: GBP186.8 million), or 14.3% ahead on a constant
currency basis. Like-for-like(8) revenue was up 10.7% in constant
currency. This result was driven by an exceptional performance in
the UK which grew like-for-like(8) revenue by 12.2%, combined with
another strong performance by Une Pièce en Plus, our Parisian
business, which grew like-for-like(8) revenue by 5.3%.
Particularly encouragingly, this significant growth in revenue
delivered a further improvement in margins. Underlying EBITDA(2)
increased by 14.5% to GBP135.1 million (FY2021: GBP118.0 million)
and on a constant currency basis by 15.1%.
Operating profit increased by GBP97.5 million from GBP417.0
million in 2021 to GBP514.5 million in 2022, reflecting a higher
investment property gain in 2022 combined with the increase in
Underlying EBITDA(2) , a reduction in the share-based payments
charge, as well as other exceptional gains.
Adjusted Diluted EPRA Earnings per Share(6) grew by 17.3% to
47.5 pence (FY2021: 40.5 pence). Adjusted Diluted EPRA Earnings per
Share(6) has grown by 36.8 pence or 344% over the last nine years.
Statutory diluted Earnings per Share increased to 212.4 pence
(FY2021: 176.4 pence) as a result of the increase in Adjusted
Diluted EPRA Earnings per Share(6) combined with an increased gain
on valuation of investment properties.
Finally, the Group's balance sheet remains robust with a Group
LTV(11) ratio of 24.4%, calculated on gross debt (FY2021: 24.9%)
and an ICR(12) of 11.4x (FY2021: 10.5x). This represents a level of
gearing we consider appropriate for the business to enable the
Group to increase returns on equity, maintain financial flexibility
and achieve our medium term strategic objectives.
This year's results continue a sustained period of excellent
performance by the Group. Over the last nine years, the management
and store teams have delivered a Total Shareholder Return of
779.4%, ranking at number one in the UK property sector. Since
flotation in 2007, Safestore has also delivered the highest Total
Shareholder Return of any UK listed self storage operator.
ESG
Away from the financial results, I am pleased with the progress
the Group has made with its ESG strategy.
Even though Safestore already has one of the lowest
environmental impact profiles of any company within the overall
property sector, we have continued to focus on our environmental
agenda, with year-on-year reductions in greenhouse gas emissions
and enhanced disclosures in recognition of the recommendations of
the TCFD. I am pleased to report that we have retained a Silver
rating in the 2022 EPRA sustainability awards, an 'A' rating for
public disclosures by GRESB, an 'AA' rating for ESG by MSCI and the
highest rating of five stars by Support the Goals.
In addition, we have demonstrated our commitment to our ESG
agenda by linking the margin on our new GBP400 million bank
facility to ESG related KPI's agreed with our lending group.
Details of these achievements are covered more fully in the Chief
Executive's report and the sustainability section of our Annual
Report.
Non-Executive Board changes
During the financial year Claire Balmforth stepped down from the
Board. Claire has served on the Safestore Board for six years and
has chaired the Remuneration Committee for all that time. As both a
Director and Chair of the Remuneration Committee, Claire has served
the business outstandingly throughout the last six years and both
personally and on behalf of the Board I would like to thank her for
her contribution.
I am also delighted to welcome Jane Bentall to the Board. Jane
has extensive experience and understanding of operating multi-site,
consumer-led businesses. Most recently, Jane was Managing Director
of Haven, the UK holiday parks chain and largest business division
of Bourne Leisure. Prior to becoming Managing Director of Haven,
she was the Group Chief Financial Officer for twelve years and
previously spent six years as Operations Director. In her career
she has also held senior financial roles at the Rank Group.
Dividend
Finally, reflecting the Group's strong trading performance and
in line with our progressive dividend policy, the Board is pleased
to recommend a 15.9% increase in the final dividend to 20.4 pence
per share (FY2021: 17.6 pence) resulting in a full year dividend up
18.7% to 29.8 pence per share (FY2021: 25.1 pence).
Over the last nine years, the Group has grown the dividend by
418% or 24.1 pence per share during which period the Group has
returned to shareholders a total of 155.8 pence per share. The
total dividend for the year is covered 1.59 times by Adjusted EPRA
Diluted Earnings (1.61 times in 2021). Shareholders will be asked
to approve the dividend at the Company's Annual General Meeting on
15 March 2023 and, if approved, the final dividend will be payable
on 7 April 2023 to Shareholders on the register at close of
business on 3 March 2023.
Summary
In conclusion, the Board remains confident in the future growth
prospects for the Group and will continue its progressive dividend
policy in 2023 and beyond. In the medium term it is anticipated
that the Group's dividend will grow at least in line with Adjusted
Diluted EPRA Earnings per Share(6) .
David Hearn
16 January 2023
Our Strategy
The Group intends to continue to deliver on its proven strategy
of leveraging its well-located asset base, management expertise,
infrastructure, scale and balance sheet strength and further
increase its Earnings per Share by:
-- Optimising the trading performance of the existing portfolio;
-- Maintaining a strong and flexible capital structure; and
-- Taking advantage of selective portfolio management and
expansion opportunities in our existing markets and, if
appropriate, in attractive new geographies either through a joint
venture(14) or in our own right.
In addition, the Group's strategy is pursued whilst maintaining
a strong focus on Environmental, Social and Governance ("ESG")
matters and a summary of our ESG strategy is provided further
on.
Optimisation of Existing Portfolio
With the opening of 22 new stores since August 2016, and the
acquisitions of 46 stores through the purchases of Space Maker in
July 2016, Alligator in November 2017, our Heathrow store, Fort Box
in London and OMB in Barcelona in 2019, Your Room in 2021 and the
Benelux JV in 2022, we have established and strengthened our
market-leading portfolio in the UK and Paris and have entered the
Spanish, Netherlands and Belgium markets. We have a high quality,
fully invested estate in all geographies and, of our 179 stores as
at 31 October 2022, 101 are in London and the South East of England
or in Paris, with 58 in the other major UK cities and 20 in
Barcelona and the Benelux region. In the UK, we now operate 49
stores within the M25, which represents a higher number of stores
than any other competitor.
Our MLA(4) has increased to 7.7m sq ft at 31 October 2022
(FY2021: 6.96m sq ft). At the current occupancy level of 82.1% we
have 1.4m sq ft of fully invested unoccupied space (2.8m sq ft
including the development pipeline), of which 1.0m sq ft is in our
UK stores, 0.2m sq ft is in Paris and 0.2m sq ft is in Barcelona
and Benelux. In total, unlet space at our existing stores is the
equivalent of c.35 empty stores located across the estate and
provides the Group with significant opportunity to grow further. We
have a proven track record of filling our vacant space so we view
this availability of space with considerable optimism. We will also
benefit from the operational leverage from the fact that this
available space is fully invested and the related operating costs
are essentially fixed and already included in the Group cost base.
Our continued focus will be on ensuring that we drive occupancy to
utilise this capacity at carefully managed rates. Between the full
financial years 2013 and 2022, occupancy of the stores in the
portfolio in 2013 that remain in the Group today has increased from
63.1% to 84.2%, i.e. an average of 2.3ppts per year and equivalent
to a total of 1.1m sq ft.
There are three elements that are critical to the optimisation
of our existing portfolio:
-- Enquiry generation through an effective and efficient marketing operation;
-- Strong conversion of enquiries into new lets; and
-- Disciplined central revenue management and cost control.
Digital Marketing Expertise- UK Number 1 Self Storage Brand
Awareness of self storage remains relatively low with half of
the UK population either knowing very little or nothing about self
storage (source: SSA Annual Report). In the UK, many of our new
customers are using self storage for the first time. It is largely
a brand-blind purchase. Typically, customers requiring storage
start their journey by conducting online research using generic
keywords in their locality (e.g. "storage in Borehamwood", "self
storage near me") which means that geographic coverage and search
engine prominence remain key competitive advantages.
We believe there is a clear benefit of scale in the generation
of customer enquiries. The Group has continued to invest in
technology and in-house expertise which has resulted in the
development of a leading digital marketing platform that has
generated 54% enquiry growth for the Group over the last five
years. Our in-house expertise and significant annual budget have
enabled us to deliver strong results. Safestore is the UK number 1
self storage brand as it has more new lets per year than any other
brand.
The Group's online strength came to the fore during the various
Covid-19 lockdowns and has since continued to support customer
acquisition growth. Online enquiries in FY2022 rose to 90% of our
enquiries in the UK (FY2021: 89%) and 85% in France (FY2021: 84%).
The majority of our online enquiries now originate from a mobile
device (65% share in FY2022), highlighting the need for continual
investment in our responsive web platform for a "mobile-first"
world. We continue to invest in activities that promote a strong
search engine presence to grow enquiry volume whilst managing
efficiency in terms of overall cost per enquiry and cost per new
let. Group marketing costs as a percentage of revenue were 3.6% for
the full year (FY2021: 3.7%). This percentage has constantly
reduced over the last eight years and is now at its lowest level in
that period.
During the 2021/22 trading year, the Group demonstrated its
ability to integrate newly developed and acquired stores into its
marketing platform with successful new openings at Bow (London,
UK), Christchurch (Dorset, UK), Nijmegen (Netherlands), and an
additional store in Barcelona. We have now clearly demonstrated
that our marketing platform is transferrable into multiple overseas
geographies.
In February 2022, Safestore UK won the Feefo Platinum Trusted
Service award for the third time. The award is given to businesses
which have achieved Gold standard for three consecutive years. It
is an independent mark of excellence that recognises businesses for
delivering exceptional experiences, as rated by real customers. In
addition to using Feefo, Safestore invites customers to leave a
review on a number of review platforms, including Google and
Trustpilot. Our ratings for each of these three providers in the UK
are between 4.6 and 4.8 out of 5. In France, Une Pièce en Plus uses
Trustpilot to obtain independent customer reviews and in FY2022
achieved a "TrustScore" of 4.6 out of 5. In Spain, OMB collects
customer feedback via Google reviews and has maintained a score of
4.6 out of 5.
Motivated and effective store teams benefiting from investment
in training and development
In what is still a relatively immature and poorly understood
product, customer service and selling skills at the point of sale
remain essential in earning the trust of the customer and in
driving the appropriate balance of volumes and unit price in order
to optimise revenue growth in each store.
In the first half of our 2021/22 trading year, we moved away
from Covid-based restrictions to a business-as-usual operating
model in stores removing all screens and signage, although we
continue to display advisory mask and distancing messages along
with safe working protocols for both our customers and
colleagues.
Our enthusiastic, well-trained, and customer-centric sales team
remains a key differentiator and a strength of our business.
Understanding the needs of our customers and using this knowledge
to develop in-store trusted advisers is a fundamental part of
driving revenue growth and market share.
Safestore has been an Investors in People ("IIP") accredited
organisation since 2003 and we passionately believe that our
continued success is dependent on our highly motivated and
well-trained colleagues. Following the award of a Bronze
accreditation in 2015 and a Gold accreditation in 2018, we were
delighted to be awarded the "we invest in people" Platinum
accreditation in February 2021. This is the highest accolade in the
Investors in People scale and positions us as an employer of
choice. Shortly after our Platinum accreditation, we were
shortlisted for the Platinum Employer of the Year (250+) category
in the Investors in People Awards 2021. This further endorses the
high standard of our teams and the people development programmes
that drive our skill and talent retention.
IIP is the international standard for people management,
defining what it takes to lead, support, and engage people
effectively to achieve sustainable results. Underpinning the
standard is the Investors in People framework, reflecting the
latest workplace trends, essential skills and effective structures
required to outperform in any industry. Investors in People enables
organisations to benchmark against the best in the business on an
international scale. We are proud to have our colleagues recognised
to such a high standard, not only in our industry, but also across
over 50,000 organisations in 66 countries. This sustained people
engagement focus is an essential component of our continuous
improvement mentality.
We are committed to growing and rewarding our people and we
tailor our development, reward and recognition programmes to
reflect this. Our IIP recognised coaching programme, launched in
2018 and upgraded every year since, continues to be a driving force
behind the continuous performance improvement demonstrated by our
store colleagues.
The Covid-19 pandemic provided a challenging environment
requiring us to operate in some new and innovative ways. Our online
learning portal, combined with the energy and flexibility of our
store colleagues, allowed us to not only continue to deliver our
award-winning development programmes but also to capitalise on the
strength of our IT platforms. As the restrictions in the UK relaxed
through the second half of 2021, we were able to combine our newly
created technology communication skills with our tried and tested
face-to-face training sessions in a newly created "impact" sales
refresher.
Following our late 2021 sales refreshers, we took the
opportunity to review many of our training, coaching and compliance
tools to take advantage of our higher performance levels and
skilled colleagues. The integration of flexible contract types and
enhanced digital contracts have all been included in our updated
version of QUEST, our sales framework. This two-day programme has
been delivered, face-to-face, to every colleague in our store and
field teams in the first half of 2022.
We recognised the changing needs and demands of our customers,
not only through the challenging times of 2020/21, but also through
the newly emerging demands and requirements in late 2021. Combining
new, along with tried and tested, solutions and systems, we are
further able to support our store colleagues, allowing them to
fulfil the needs of our customers over and above that of our
competitors. Our flexible contract types and enhanced digital
contract completion further enhance our customer offer and
experience. These enhancements have combined to help us create our
2023 QUEST programme which commenced roll-out in late September
2022 focusing on the new contract types and technologies available
to us.
All new recruits to the business benefit from enhanced induction
and training tools that have been developed in-house and enable us
to quickly identify high-potential individuals and increase their
speed to competency. They receive individual performance targets
within four weeks of joining the business and are placed on the
"pay-for-skills" programme that allows accelerated basic pay
increases dependent on success in demonstrating specific and
defined skills. The key target of our programme remains that we
grow our talent through our Store Manager Development programme,
and we are pleased with our progress to date.
Our internal Store Manager Development programme has been in
place since 2016 and is a key part of succession planning for
future Store Managers. In May 2022, we began our assessment process
for the sixth intake of the SMD (Store Manager Development
programme) with a first-class group of candidates ready to learn
the necessary skills and attributes they need to become a Safestore
Store Manager. Funded by the Apprenticeship Levy this programme
provides the opportunity to complete a Level 3 Management and
Leadership apprenticeship, with the additional opportunity to
complete an Institute of Leadership and Management ("ILM")
qualification.
Our Store Manager Development programme demonstrates the
effectiveness of our learning tools. In a spirit of constant
improvement, our content and delivery process is dynamically
enhanced through our 360-degree feedback process utilising the
learnings from not only the candidates but also from our training
Store Managers and senior business leaders. This allows our people
to be trained with the knowledge and skills to sell effectively in
today's marketplace.
Our Senior Manager Development programme ("LEAD") focuses on
developing our high performing store managers, aimed at preparing
them for more senior roles within the business. This programme is
built on the foundations of our Store Manager Development programme
and included delegates delivering performance-enhancing projects to
our wider business. We are proud that all nine participants of our
Senior Leadership Development programme (LEAD Academy) successfully
completed their Level 5 Management and Leadership apprenticeship;
six of those participants were awarded Distinctions.
Furthermore, we have re-launched our Graduate programme, with
our first intake commencing in October 2022, providing an
opportunity for newly qualified graduates to build their skillset
and experience resulting in a career with Safestore.
Our performance dashboard allows our store and field teams to
focus on the key operating metrics of the business providing an
appropriate level of management information to enable swift
decision making. Reporting performance down to individual colleague
level enhances our competitive approach to team and individual
performance. We continue to reward our people for their performance
with bonuses of up to 50% of basic salary based on their
achievements against individual targets for new lets, occupancy,
and ancillary sales. In addition, our Values and Behaviours
framework is overlaid on individuals' performance in order to
assess performance and development needs on a quarterly basis.
Our "Make the Difference" people forum, launched in 2018,
enables frequent opportunities for us to hear and respond to our
colleagues. Our network of 15 "People Champions" collect questions
and feedback from their peers across the business and put them to
members of the Executive Committee. We drive change and continuous
improvement in responding to the feedback we receive for "Our
Business, Our Customers and Our Colleagues".
People Champions:
-- Consult and collect the views and suggestions of all colleagues that they represent;
-- Engage in the bi-annual "Make the Difference" people forum,
raising and representing the views of their colleagues; and
-- Consult with and discuss feedback with management and the leadership team at Safestore.
Our values are authentic, having been created by our people.
They are core to the employment life cycle and bring consistency to
our culture. Our leaders have high values alignment enabling us to
make the right decisions for our colleagues and our customers. Our
customers continue to be at the heart of everything we do, whether
it be in store, online or in their communities. In 2022 we
maintained our industry-leading independent customer ratings, with
a Feefo Platinum Trusted Service award and a 5-star Trustpilot
rating, with over twice the reviews of our nearest competitor.
Along with our strong Google ratings, these independent assessments
further reflect our ongoing commitment to customer satisfaction as
the number one storage provider in the UK.
Central Revenue Management and Cost Control
We continue to pursue a balanced approach to revenue management.
We aim to optimise revenue by improving the utilisation of the
available space in our portfolio at carefully managed rates. Our
central pricing team is responsible for the management of our
dynamic pricing policy, the implementation of promotional offers
and the identification of additional ancillary revenue
opportunities. Whilst price lists are managed centrally and are
adjusted on a real-time basis, the store sales teams have, from
time to time, the ability to offer a Lowest Price Guarantee in the
event that a local competitor is offering a lower price, or the
ability to offer discretionary discounts. The Lowest Price
Guarantee and discretionary discount are centrally controlled and
activated on a store by store and unit by unit basis.
Average rates are predominantly influenced by:
-- The store location and catchment area;
-- The volume of enquiries generated online;
-- The store team skills at converting these enquiries into new
lets at the expected price; and
-- The very granular pricing policy and the confidence provided
by analytical capabilities and systems that smaller players might
lack.
We believe that Safestore has a very strong proposition in each
of these areas.
Costs are managed centrally with a lean structure maintained at
Head Office. Enhancements to cost control are continually
considered and the cost base is challenged on an ongoing basis.
Strong and Flexible Capital Structure
Since 2014 we have refinanced the business on seven occasions,
each time optimising our debt structure and improving terms; and
believe we have maintained a capital structure that is appropriate
for our business and which provides us with the flexibility to take
advantage of carefully evaluated development and acquisition
opportunities.
At 31 October 2022, based on the current level of borrowings and
interest swap rates, the Group's weighted average cost of debt was
2.41% and 93% of our drawn debt was at fixed rate or hedged. The
weighted average maturity of the Group's drawn debt is 5.1 years at
the current period end and the Group's LTV ratio is 24.4% as at 31
October 2022.
Based on our current development pipeline and our internal
assumptions on how SONIA and Euribor will grow over the coming
months, we anticipate that our weighted average cost of debt will
increase to c.2.6% to 2.8% by the end of 2023.
This LTV of 24.4% and interest cover ratio of 11.4x for the
rolling twelve-month period ended 31 October 2022 provides us with
significant headroom compared to our banking covenants. We had
GBP208.4 million of undrawn bank facilities at 31 October 2022
before taking into consideration the additional GBP100 million
uncommitted accordion facility.
Taking into account the improvements we have made in the
performance of the business, the Group is capable of generating
free cash after dividends sufficient to fund the building of three
to four new stores per annum depending on location and availability
of land.
The Group evaluates development and acquisition opportunities in
a careful and disciplined manner against rigorous investment
criteria. Our investment policy requires certain Board-approved
hurdle rates to be considered achievable prior to progressing an
investment opportunity. In addition, the Group aims to maintain a
Group LTV(11) ratio below 40% which the Board considers to be
appropriate for the Group.
New Financing
In April 2022, Safestore drew its existing uncommitted $115
million Shelf Facility. The facility was drawn in Euros for a 7-
year term at an interest rate of 2.45% in order to partially fund
the acquisition of Carlyle's 80% share of the Benelux JV.
Since the end of the financial year, the Group has completed the
refinancing of its Revolving Credit Facilities ("RCF's") which were
due to expire in June 2023.
The previous GBP250 million Sterling and EUR70 million Euro
secured RCFs have been replaced with a single multi-currency
unsecured GBP400 million facility. In addition, a further GBP100
million uncommitted accordion facility is incorporated into the
facility agreement.
The facility is for a four-year term with two one-year extension
options exercisable after the first and second years of the
agreement.
The Group will pay interest at a margin of 1.25% plus SONIA or
Euribor depending on whether the borrowings are drawn in Sterling
or Euros. The margin is at the same level as the previous facility
agreements.
A commitment fee of 35% of the margin is payable on undrawn
amounts under the facility. This has reduced from 40% under the
previous facility agreements.
Reflecting the Group's improved credit profile, the banking
group and existing US Private Placement Noteholders have agreed
that all of the Group's previously secured borrowings move to an
unsecured basis, thus reducing administrative and legal costs
associated with the facilities.
The main covenants under all of the Group's borrowings are a
Group Loan-to-value ("LTV") covenant of 60% (replacing separate UK
and French LTV covenants) which is based on net debt rather than
gross debt and an Interest Cover Ratio covenant of 2.4x.
The hedging arrangements under the previous facility agreements
have been continued under the new agreements. Therefore, the Group
benefits from GBP55 million of Interest Rate Swaps until 30 June
2023 at a rate of 0.6885%
Environmental, Social and Governance ("ESG") KPI's have been
agreed with the Group's lenders. The margin under the facility is
now linked to ESG targets, where met enable a reduction in the
margin of up to 5bps.
ESG Strategy
ESG: Sustainable Self Storage
Our purpose - to add stakeholder value by developing profitable
and sustainable spaces that allow individuals, businesses and local
communities to thrive - is supported by the "pillars" of our
sustainability strategy: our people, our customers, our community
and our environment. In addition, the Group and its stakeholders
recognise that its efforts are part of a broader movement and we
have, therefore, aligned our objectives with the UN Sustainable
Development Goals ("SDGs"). We reviewed the significance of each
goal to our business and the importance of each goal to our
stakeholders and assessed our ability to contribute to each goal.
Following this materiality exercise, we have chosen to focus our
efforts in the areas where we can have a meaningful impact. These
are "Decent work and economic growth" (goal 8), "Sustainable cities
and communities" (goal 11), "Responsible consumption and
production" (goal 12) and "Climate action" (goal 13).
Sustainability is embedded into day-to-day responsibilities at
Safestore and, accordingly, we have opted for a governance
structure which reflects this. Two members of the Executive
Management team co-chair a cross-functional sustainability group
consisting of the functional leads responsible for each area of the
business.
In 2018, the Group established medium-term targets in each of
the "pillars" towards which the Group continued to progress in
FY2022.
Our people: Safestore was awarded the prestigious Investors in
People ("IIP") Platinum accreditation and was in the final top ten
shortlist for Platinum Employer of the Year (250+) category in The
Investors in People Awards 2021. The Group's response during the
pandemic lockdowns and aftermath has had a profound impact on trust
in leadership and colleague engagement and motivation.
Our customers: The Group's brands continue to deliver a
high-quality experience, from online enquiry to move-in. This is
reflected in customer satisfaction scores on independent review
platforms (Trustpilot, Feefo, Google) of over 90% in each market.
The introduction of digital contracts during the pandemic offers
both customer convenience and a reduction in printing, saving an
estimated 44,000 pieces of paper each month.
Our community: Safestore remains committed to being a
responsible business by making a positive contribution within the
local communities wherever our stores are based. We continue to do
this by developing brownfield sites and actively engaging with
local communities when we establish a new store, identifying and
implementing greener approaches in the way we build and operate our
stores, helping charities and communities to make better use of
limited space, and creating and sustaining local employment
opportunities directly and indirectly through the many small and
medium-sized enterprises which use our space. During FY2022, the
space occupied by local charities in 222 units across 103 stores
was 18,903 sq ft and worth GBP0.7 million.
Our environment: Safestore is committed to ensuring our
buildings are constructed responsibly and their ongoing operation
has a minimal impact on local communities and the environment. It
should be noted that the self storage sector is not a significant
consumer of energy when compared with other real estate subsectors.
As a result, operational emissions intensity tends to be far lower.
According to a 2021 report by KPMG and EPRA, self storage generates
the lowest greenhouse gas emissions intensity (5.75 kg/m(2) for
scope 1 and 2) of all European real estate sub-sectors, with
emissions per m(2) less than 30% of the European listed real estate
average (19.5 kg/m(2) ) and notably 21% of the emissions intensity
of the residential sub-sector (27.0 kg/m(2) ). Reflecting the
considerable progress made on energy mix, efficiency measures and
waste reduction to date, Safestore's emissions intensity (3.9
kg/m(2) in 2020) is considerably lower (-32%) than the self storage
subsector average. In FY2022, the Group continued to progress with
a further 2.7% decline in absolute emissions despite continued
portfolio growth and greater utilisation of stores compared to
2021. Safestore's absolute (location-based) emissions are now 54%
below, and emissions intensity 68% below the 2013 baseline level
despite significant growth in portfolio floor space. Moving
forward, the Group has a commitment to be operationally carbon
neutral by 2035 with a medium term target to reduce operational
emissions (market-based) by 50% compared to the level in FY2021 by
2025. The total investment to achieve carbon neutrality should be
around GBP3 million.
In addition to the IIP award and the customer satisfaction
ratings, the Group has received recognition for its sustainability
progress and disclosures in the last twelve months. Safestore has
been given a Silver rating in the 2022 EPRA Sustainability BPR
awards. The Global ESG Benchmark for Real Assets ("GRESB") has once
again awarded Safestore an "A" rating in its 2022 Public
Disclosures assessment. MSCI has awarded Safestore its
second-highest rating of "AA" for ESG in 2022. The Group has also
been awarded the highest rating of five stars by Support the
Goals.
Finally, the Group has worked with its banking lenders to agree
ESG related KPI's which are linked to the margin payable under its
new GBP400 million facility. Two KPI's have been agreed, which,
when achieved, result in a reduction in margin of up 5bps.
Portfolio Management
Our approach to store development and acquisitions in the UK,
Paris and Spain and now the Netherlands and Belgium, continues to
be pragmatic, flexible and focused on the return on capital.
Our property teams continue to seek investment opportunities in
new sites to add to the store pipeline. However, investments will
only be made if they comply with our disciplined and strict
investment criteria. Our preference is to acquire sites that are
capable of being fully operational within 18-24 months from
completion.
Since 2016, the Group has opened 22 new stores: Chiswick,
Wandsworth, Mitcham, Paddington Marble Arch, Carshalton, Bow (all
in London), Birmingham Central, Birmingham Merry Hill, Birmingham
Middleway, Altrincham, Peterborough, Gateshead and Sheffield in the
UK, and Emerainville, Combs-la-Ville, Poissy, Pontoise and Magenta
in Paris, Nijmegen in the Netherlands and Pronvenca in Barcelona,
with a further two stores opening in Madrid in November 2022 adding
1,093,000 sq ft of MLA.
In addition, the Group has acquired 46 existing stores through
the acquisitions of Space Maker, Alligator, Fort Box, Salus and
Your Room in the UK, OhMyBox! in Barcelona, and the Lokabox and M3
group from our Benelux JV acquisition. These acquisitions added a
further 1,844,000 sq ft of MLA and revenue performance has been
enhanced in all cases under the Group's ownership.
We have also completed the extensions and refurbishments of our
Acton, Barking, Bedford, Chingford, Wimbledon, Edgware, Southend,
Paddington Marble Arch, Winchester and Longpont (Paris) stores
adding a net 122,000 sq ft of fully invested space to the estate.
All of these stores are performing in line with or ahead of their
business plans.
The Group's current pipeline of new developments and store
extensions (see below) has grown significantly over the last year
and now constitutes c.1,407,000 sq ft of future MLA. The pipeline
and store openings since the end of the 2022 financial year is
equivalent to c.19% of the existing portfolio. The outstanding
capital expenditure of GBP146 million is expected to be funded from
the Group's existing resources. The total capital expenditure on
stores opened in the 2022/23 financial year-to-date as well as the
outstanding pipeline is estimated to be c. GBP245m. At our usual
cash on cash return hurdles of c.10% we would estimate that these
stores will add c. GBP24.5m of EBITDA at stabilisation (c. 4 years
after opening).
Property Pipeline
Openings of New Stores and Extensions in the period
Open 2022 FH/LH Opening Date MLA Other
---------------------- ------ ------------- ------- -----------
Redevelopments and Extensions
-------------------------------------------------------------------
London- Paddington LH Q1 2022 8,500 Extension
Marble Arch
Southend FH Q1 2022 10,100 Extension
London- Edgware FH Q1 2022 22,900 Extension
London- Wimbledon FH Q1 2022 9,000 Extension
Winchester FH Q4 2022 11,000 Extension
New Developments
-------------------------------------------------------------------
London- Bow FH Q1 2022 74,000 Conversion
Central Barcelona FH Q1 2022 12,500 Conversion
Nijmegen- Netherlands FH Q1 2022 40,000 Conversion
Open 2023
-------------------------------------------------------------------
New Developments
-------------------------------------------------------------------
Northern Madrid FH Q1 2023 53,000 Conversion
Southern Madrid FH Q1 2023 32,000 Conversion
In September 2020 the Group received planning permission to
extend its Southend store by 10,100 sq ft. The existing store has
an MLA of 49,400 sq ft and was 86% occupied at the end of September
2020. The extension opened in December 2021.
In January 2021, the Group exchanged contracts on a freehold
building in a densely populated area in Central Barcelona. The
conversion of the existing building into a 12,500 sq ft MLA self
storage facility is complete and the store is now open.
In March 2021 and April 2021, the Group exchanged contracts on
two freehold buildings in Southern Madrid and Northern Madrid
respectively. Both acquisitions have been completed with planning
granted and the existing buildings have been converted into 32,000
and 53,000 sq ft MLA self storage facilities. Both sites opened
post-year end in November 2022.
In April 2021, we exchanged contracts on the acquisition of a
0.5-acre site adjacent to our existing London Wimbledon store (MLA
58,800 sq ft). We completed this transaction in December 2021 and
construction was completed just after the period end. The existing
reception area has been relocated to a more prominent and visible
roadside location and a further 9,000 sq ft of storage capacity and
1,000 sq ft of offices have been added. The Wimbledon store's peak
occupancy, prior to the Covid-19 pandemic, was 92%.
In May 2021, the Group completed the freehold acquisition of a
0.8-acre site with a 108,000 sq ft warehouse to the east of London
in a prominent position on the A12 in Bow. The building had
existing consent for storage and we only required planning consents
for some external modifications to the building. Otherwise, the
building was suitable for immediate conversion to self storage. The
74,000 sq ft store opened in December 2021.
In addition, in May 2021, the Group exchanged contracts on a
leasehold basement car park adjacent to our existing London
Paddington Marble Arch store. The occupancy of the Paddington
Marble Arch store on 31 March 2021 was 80%. The extension opened in
December 2021, adding 8,500 sq ft of MLA.
The Group has also received planning permission to extend its
Edgware store by a further 22,900 sq ft. The existing store has MLA
of 24,000 sq ft and reached a peak occupancy of 91% prior to
extension works commencing. The extension opened in December
2021.
An 11,000 sq ft extension to our existing Winchester store
opened in the quarter. The existing store has an MLA of 42,000 sq
ft and has peaked at more than 90% occupancy.
In January 2022, the Netherlands business opened a new store in
Nijmegen. The store is freehold with an MLA of 40,000 sq ft and is
a conversion of an existing building. Nijmegen has a population of
177,000 and the site is well located on a main road with good
visibility and access.
Development Sites
UK
In June 2018, Safestore opened its Paddington Marble Arch store.
A separate satellite store at Paddington Park West Place, with MLA
of 13,000 sq ft, will open during 2024.
In April 2021, the Group exchanged contracts on a freehold
1.3-acre site at Lea Bridge in Northeast London. The acquisition of
the site has now been completed and we plan to open a 76,500 sq ft
MLA store in 2024 as the leases for existing tenants on the site
have up to two years to run. Rental income of approximately GBP170k
per annum is currently received on this site.
In addition, in April 2021, the Group exchanged contracts on a
freehold site in Woodford in Northeast London. Subject to planning,
we will open a 76,000 sq ft MLA store in 2025.
In July 2021, the Group exchanged contracts on a freehold
0.8-acre site in Shoreham, West Sussex. Shoreham is situated
between Brighton and Worthing on the south coast of England.
Subject to planning, we will open a purpose built 54,000 sq ft MLA
store in 2024.
In November 2021, the Group completed the acquisition of a
1.2-acre freehold site off Old Kent Road in the London Borough of
Southwark in Southeast London. Subject to planning, we hope to open
a c.76,500 sq ft MLA store in due course. Existing tenants on the
site will provide a rental income in the meantime.
In May 2022, the Group completed the acquisition of a 2.1-acre
freehold site including an existing warehouse in Wigan in Greater
Manchester. Subject to minor planning approvals for elevations and
signage, we plan to convert the existing building and open a
c.42,700 sq ft MLA store in 2023.
The Group has also previously acquired two additional sites in
London at Morden and Bermondsey. Morden is a freehold 0.9-acre site
in an established industrial location. Planning permission for a
52,000 sq ft self storage facility has now been granted and
construction on this site is underway with a view to opening in
2023. Bermondsey is a 0.5-acre freehold site with income from
existing tenants and is adjacent to our existing leasehold store.
Our medium term aim, subject to planning permission, is to extend
our existing Bermondsey operations with the addition of a new self
storage facility to complement our existing store.
In Romford in London, we have secured a freehold site with an
existing warehouse which will be converted, subject to planning
permission, to a 41,000 sq ft store, opening in 2024.
In Crayford, we have secured a leasehold site on which we will
convert an existing warehouse to a 9,400 sq ft extension to our
existing Crayford site. We hope to open the satellite store in
2023.
In Walton-on-Thames in London, we have secured a freehold site
with an existing warehouse which will be converted, subject to
planning permission, to a 20,700 sq ft store. We hope to open the
store in 2025.
Our total UK development pipeline now amounts to c.511,800 sq ft
of which c.415,100 sq ft is in London.
Paris
Safestore has for many years owned a vacant freehold site in the
town of Nanterre on the edge of La Défense, Paris' main business
district. This area of Paris is undergoing significant development
and Safestore has invested a 24.9% stake in a joint venture
development company, PBC Les Groues SAS, which is constructing a
c.300,000 sq ft development of offices, retail, a school and
residential properties.
Safestore has contributed its Nanterre site into the project,
receiving cash of EUR1.0 million in addition to the delivery of an
underground storage area and reception within the complex, ready to
be fitted out into a 44,000 sq ft self storage facility. Planning
for the project has been received and construction has
commenced.
It is anticipated that the project will be completed in 2025
when the self storage facility will open.
In August 2021, the Group exchanged contracts on a freehold site
in Southern Paris with a significant frontage onto the N104
motorway. The site includes an existing building which will be
demolished and replaced by a 55,000 sq ft MLA store. We expect the
store to open in 2023.
Over the first half of 2022 we exchanged contracts on three
freehold development sites to the west of Paris. All sites required
planning permission and newly built stores of 56,000 sq ft, 20,000
sq ft and 58,000 sq ft were planned to be constructed by the end of
2023. Our Paris West 2 site (20,000 sq ft) did not receive planning
permission and has been removed from the pipeline.
Paris East 1 and Paris North West 1 are freehold sites on which
we will convert existing buildings, subject to planning, to 60,000
sq ft and 54,000 sq ft stores respectively. We expect the stores to
open in 2023.
Our Paris pipeline now amounts to c.349,200 sq ft.
Spain
In December 2019, the Group completed the acquisition of OMB
Self Storage which operates three leasehold properties and one
freehold property, all very well located in the centre of
Barcelona. The four locations (Valencia, Calabria, Glories and
Marina) have an MLA totalling 108,000 sq ft. A fifth store, in
Central Barcelona, was opened during 2022. The occupancy of the
business at the end of October 2022 was 78.9% and 85.9% on a
like-for-like basis.
The Group is continuing its expansion of the business in
Barcelona and its entry into the Madrid market with the acquisition
of the following sites.
In April 2021, the Group exchanged contracts on a freehold
building in Northern Barcelona. Subject to planning, we will
convert the existing building into a 42,000 sq ft MLA . It is
anticipated that the site will open in the 2022/23 financial
year.
In June 2021, the Group exchanged contracts on a freehold
property in South Barcelona. The site includes an existing
industrial building which will be converted into a 30,000 sq ft MLA
self storage facility. Planning has been granted and we expect to
open the site in the 2022/23 financial year.
In August 2021, the Group exchanged contracts on a leasehold
site in Central Barcelona. The site is a former car dealership
which will be converted to a 24,700 sq ft MLA store which, subject
to planning, should open in 2024.
In December 2021, the Group exchanged contracts on a freehold
building in a commercial and industrial area of Eastern Madrid.
Subject to completion, we will convert the existing building into a
50,000 sq ft MLA self storage facility. It is anticipated that the
site will open in 2023.
In August 2022, the Group exchanged contracts on a freehold
building in a commercial and industrial area of South West Madrid.
Subject to planning and completion, we will convert the existing
building into a 46,800 sq ft MLA self storage facility. It is
anticipated that the site will open in 2024.
A new freehold site has been secured in Southern Madrid
(Southern Madrid 2) on which we will convert an existing building,
subject to planning permission, into a 68,800 sq ft storage
facility. It is anticipated that the site will open in 2024.
Our Spanish pipeline now amounts to c.262,300 sq ft including
165,600 sq ft across three stores in Madrid and 96,700 sq ft over
three stores in Barcelona.
The Spanish business now has seven open stores and a pipeline
consisting of a further six stores amounting to c.262,300 sq ft of
MLA.
Netherlands
During the year we exchanged contracts on a freehold site at
Amersfoort, 40 minutes east of Amsterdam. The acquisition is
subject to planning permission and we anticipate that the new
store, which will have an MLA of 58,000 sq ft, will be opened in
2023.
The Group completed the acquisition of a freehold site in
Almere, a city with a population of 214,000 which is 20 minutes'
drive from Amsterdam. Subject to planning, we will convert the two
existing buildings on the site into a 44,500 sq ft MLA self storage
facility. It is anticipated that the site will open in 2023.
New freehold sites have been secured in Amsterdam and Aalsmeer
where we will build new stores, subject to planning, of 61,400 sq
ft and 48,400 sq ft respectively. The two stores should open in
2024.
Since the year end, the Group has secured a freehold site in
Rotterdam for construction of a 71,000 sq ft MLA store subject to
planning. Rotterdam is one of the major cities in the Netherlands
with a population of 588,000 and forms part of the larger Randstad
area. The new site forms part of a larger re-development within the
heart of an affluent district of the city.
In the Netherlands, our pipeline now consists of 283,300 sq ft
of space in five stores.
Store Extensions
The Group plans to redevelop and extend its Pyrénées store in
Paris. The extension will add 22,200 sq ft and is planned to open
in 2023. As of September 2022, the store occupancy was 94%.
Lease Extensions and Assignments
During the period we extended the lease on our Exeter store in
the UK. The lease will now continue until February 2045 with
tenant-only break clauses in 2035 and 2040. A six-month rent-free
period was agreed as part of the renegotiation.
In Crayford, we have extended the lease on our existing store to
2042, with a tenant-only break option in 2032. A rent-free period
of four months was agreed as part of this agreement. The lease on
the new satellite store reported above also terminates in 2042.
In Sunderland, we have extended the lease on our store to 2047
with a tenant break option in 2037. A six-month rent-free period
was agreed as part of this lease extension.
As part of our ongoing asset management programme, we have now
extended the leases on 27 stores or 70% of our leased store
portfolio in the UK since 2012. As a result, since 2012 the
remaining lease length of our UK stores has remained at c.11-13
years.
Site Disposal
In April 2021 we opened our Birmingham Middleway store (58,000
sq ft MLA) and closed our Digbeth store (44,500 sq ft MLA) shortly
thereafter. Customers were relocated to the bigger, better located
new store. At the time, we stated that we intended to sell the
Digbeth site.
We are pleased to confirm that the Digbeth site sale was
completed in August 2022. The proceeds received funded the entire
acquisition and construction of the Middleway site. As of September
2022, the Middleway site was 83% occupied.
Property Pipeline Summary
Our pipeline of c.1.4m sq ft represents c.18% of our existing
property portfolio.
Opening 2023 FH/LH Status* MLA Other
------------------------ ------ ---------- ------- ----------------------
Redevelopments and Extensions
-----------------------------------------------------------------------------
London- Crayford LH C, UC 9,400 Extension
Paris- Pyrenees LH C, UC 22,200 Extension
New Developments
-----------------------------------------------------------------------------
London- Morden FH C, PG, UC 52,000 New build
Wigan FH C, UC 42,700 Conversion
Paris- South Paris FH C, PG 55,000 New build
Paris- West 1 FH CE, STP 56,000 New build
Paris- West 3 FH CE, STP 58,000 New build
Paris- East 1 FH CE, STP 60,000 Conversion
Paris- North West 1 FH CE, STP 54,000 Conversion
Eastern Madrid FH C, PG 50,000 Conversion
Northern Barcelona FH C, PG 42,000 Conversion
South Barcelona FH C, PG 30,000 Conversion
Amersfoort- Netherlands FH CE, STP 58,000 New build
Almere- Netherlands FH C, STP 44,500 Conversion
Opening 2024
------------------------ ------ ---------- ------- ----------------------
Redevelopments and Extensions
-----------------------------------------------------------------------------
New Developments
-----------------------------------------------------------------------------
London- Paddington FH C, PG 13,000 Conversion, Satellite
Park West
London- Lea Bridge FH C, PG 76,500 New build
London- Romford FH C, STP 41,000 New build
Shoreham FH CE, STP 54,000 New build
South West Madrid FH CE, STP 46,800 Conversion
Southern Madrid 2 FH CE, STP 68,800 Conversion
Central Barcelona 2 LH CE, STP 24,700 Conversion
Amsterdam- Netherlands FH CE, STP 61,400 New build
Aalsmeer- Netherlands FH CE, STP 48,400 New build
Rotterdam- Netherlands FH CE, PG 71,000 New build
Opening Beyond 2024
-----------------------------------------------------------------------------
New Developments
-----------------------------------------------------------------------------
London- Old Kent Road FH C, STP 76,500 New build
London- Woodford FH CE, PG 76,000 New build
London- Bermondsey FH C, STP 50,000 New build
London- Walton FH C, STP 20,700 Conversion
Paris- La Défense FH C, PG 44,000 Mixed use facility
Total Pipeline MLA (let sq ft- million) c.1.407
-------------------------------------------- -------------------------------
Total Outstanding CAPEX (GBP'm) c.146.0
-------------------------------------------- -------------------------------
*C = completed, CE = contracts exchanged, STP = subject to
planning, PG = planning granted, UC = under construction
Acquisitions
Acquisition of Your Room Self Storage, Christchurch(10)
In December 2021, Safestore acquired Your Room Self Storage in
Christchurch, Dorset, for GBP2.45 million. The freehold
Christchurch store has an MLA of 14,000 sq ft and the Group
anticipates that the initial yield in the first year will be in
excess of 6%.
The Group will rebrand the store and has taken over operation of
the site with immediate effect. The store will operate as a
satellite store to our two existing Bournemouth stores.
Acquisition of remaining 80% of Carlyle JV(14)
As announced on 31 March 2022, Safestore acquired the remaining
80% of the equity owned by Carlyle in the Joint Venture(14) formed
in 2019 (the "Joint Venture"). The total consideration paid to
Carlyle was EUR67 million. The total initial cash outflow was
EUR135.3 million and included the share purchase (EUR53.6 million),
debt purchase (EUR13.4 million), and refinancing of the existing
borrowings (EUR68.3 million) and was funded from the Group's
existing loan facilities. The Joint Venture was acquired based on
an enterprise value of EUR146 million.
The Joint Venture(14) was set up in 2019 to acquire and develop
assets in the Netherlands and Belgium in order to leverage
Safestore's operating platform outside our core markets. Since
then, the Joint Venture has grown to a portfolio of 55,000 sq m
(600,000 sq ft) of MLA.
The portfolio is made up of 15 high quality properties (twelve
freehold properties, two ground leases and one leasehold property).
Nine properties are located in the Netherlands, six of which are
concentrated in the Haarlem/Amsterdam area with additional
properties in The Hague, Het Gooi and the recently opened Nijmegen
store. In Belgium, two stores are located in the Brussels area, two
in the city of Liege and further properties in Nivelles and
Charleroi. Safestore has managed the properties since acquisition
by the Joint Venture.
The Group's investment was marginally accretive to Group
Earnings per Share in FY2021/22 and supports the Group's future
dividend capacity. The expected initial yield based on total
enterprise value was 3.9% which we expect to grow to Safestore's
normal returns hurdles as the portfolio matures.
New Joint Venture with Carlyle and Investment in myStorage in
Germany
Safestore has entered the German self storage market via a new
joint venture with Carlyle, which has acquired the myStorage
business.
Safestore has developed a multi-country highly scalable platform
with leading marketing and operational expertise in self storage,
with a proven track record for developing its platform in new
markets.
The acquisition of myStorage represents an excellent opportunity
to develop our platform into the attractive German self storage
market. The Joint Venture builds upon our previous successful
relationship with Carlyle having entered the Benelux market in
2019. Our common intention is to target development and acquisition
opportunities through the Joint Venture, providing the opportunity
to achieve operational scale and to develop local market knowledge,
whilst also retaining the option for Safestore to develop its own
wholly owned self storage sites in Germany. We look forward to
continuing our working relationship with Carlyle, and to developing
a long and mutually beneficial relationship.
The German market is one of Europe's more under-penetrated
markets with just 0.09 sq ft of storage space per capita which
compares to 0.76 sq ft in the UK, 0.24 sq ft in France, 0.24 sq ft
in Spain, 0.60 sq ft in the Netherlands and 0.20 sq ft in Belgium.
According to the 2022 FEDESSA report, there are just 320 facilities
in Germany and 7.6m sq ft of lettable space.
myStorage has seven medium to long-term leasehold stores and
326,000 sq ft of MLA in Berlin, Heidelburg, Mannheim, Fürth,
Nuremburg, Neu-Ulm and Reutlingen.
The occupancy of the portfolio is 67% with two of the stores
having opened in 2021.
Safestore's initial investment in the Joint Venture was a
c.EUR2.2 million equity investment for a 10% share of the Joint
Venture. Safestore will also earn a fee for providing management
services to the Joint Venture. The Group expects to earn an initial
return on investment of c.15% for the first full year before
transaction related costs reflecting its share of expected joint
venture profits and fees for management services.
Portfolio Summary
The self storage market has been growing consistently for over
20 years across many European countries but few regions offer the
unique characteristics of London and Paris, both of which consist
of large, wealthy and densely populated markets. In the London
region, the population is 13 million inhabitants with a density of
5,200 inhabitants per square mile, 11,000 per square mile in
Central London and up to 32,000 per square mile in the densest
boroughs.
The population of the Paris urban area is 10.7 million
inhabitants with a density of 9,300 inhabitants per square mile in
the urban area but 54,000 per square mile in the City of Paris and
first belt, where 69% of our French stores are located and which
has one of the highest population densities in the western world.
85% of the Paris region population live in central parts of the
city versus the rest of the urban area, which compares with 60% in
the London region. There are currently c.245 storage centres within
the M25 as compared to only c.95 in the Paris urban area.
In addition, barriers to entry in these two important city
markets are high, due to land values and limited availability of
sites as well as planning regulation. This is the case for Paris
and its first belt in particular, which inhibits new development
possibilities.
Our combined operations in London and Paris, with 78 stores,
contributed GBP113.2 million of revenue and GBP82.3 million of
store EBITDA for the financial year and offer a unique exposure to
the two most attractive European self storage markets.
Owned Store Portfolio London Rest
by Region & of UK Paris Spain Benelux Group
South
East UK Total Total
Number of Stores 72 58 130 29 5 15 179
Let Square Feet (m sq ft) 2.42 2.22 4.64 1.11 0.10 0.47 6.32
Maximum Lettable Area (m
sq ft) 2.92 2.70 5.62 1.36 0.12 0.60 7.70
Average Let Square Feet
per store (k sq ft) 34 38 36 38 19 32 35
Average Store Capacity
(k sq ft) 41 47 43 47 24 40 43
Closing Occupancy % 83.1% 82.0% 82.6% 81.7% 78.9% 78.8% 82.1%
Average Rate (GBP per sq
ft) 34.76 22.38 28.79 34.36 28.92 16.61 29.25
Revenue (GBP'm) 101.1 61.9 163.0 41.4 3.0 5.1 212.5
Average Revenue per Store
(GBP'm) 1.40 1.07 1.25 1.43 0.60 0.34 1.19
The reported totals have not been adjusted for the impact of rounding
We have a strong position in both the UK and Paris markets,
operating 130 stores in the UK, 72 of which are in London and the
South East, and 29 stores in Paris.
In the UK, 62% of our revenue is generated by our stores in
London and the South East. On average, our stores in London and the
South East are smaller than in the rest of the UK but the rental
rates achieved are materially higher, enabling these stores to
typically achieve similar or better margins than the larger stores.
In London we operate 49 stores within the M25, more than any other
competitor.
In France, we have a leading position in the heart of the
affluent City of Paris market with ten stores branded as Une Pièce
en Plus ("UPP") ("A spare room"). Over 60% of the UPP stores are
located in a cluster within a five-mile radius of the city centre,
which facilitates strong operational and marketing synergies as
well as options to differentiate and channel customers to the right
store subject to their preference for convenience or price
affordability. The Parisian market has attractive socio-demographic
characteristics for self storage and we believe that UPP enjoys
unique strategic strength in such an attractive market.
As at 31 October 2022, 70% of our Group Revenue, 65% of our
stores and 58% of our available capacity are in London, South East
England, Paris, Amsterdam and the Randstad area, Brussels and
Barcelona. These major population areas deliver 71% of the Group's
store EBITDA from 62% of our MLA, highlighting the attractiveness
of being present in these major cities and conurbations. The
current pipeline includes 26 further developments in these areas
which will increase the number of stores to 68% of our
portfolio.
In addition, Safestore has the benefit of a leading national
presence in the UK regions where the stores are predominantly
located in the centre of key metropolitan areas such as Birmingham,
Manchester, Liverpool, Bristol, Newcastle, Glasgow and Edinburgh.
Our 2019 acquisition of OMB in Barcelona and our 2022 Benelux JV
acquisition represents a platform into the Spanish, Netherlands and
Belgium markets where we hope to take advantage of further
development and acquisition opportunities.
Market
The Self Storage Association ("SSA") noted in its May 2022
report that, "despite two record years, inflationary pressures,
escalating costs of construction and a war in Europe, operators
remain optimistic about the future.". Previous downturns have
presented opportunities for self storage and the pandemic seems to
have once again demonstrated the resilience of the self storage
industry and the broad range of demand drivers.
The self storage market in the UK, France, Spain and Benelux
remains relatively immature compared to geographies such as the USA
and Australia. The SSA Annual Survey (May 2022) confirmed that self
storage capacity stands at 0.76 sq ft per head of population in the
UK. The most recent report relating to Europe (FEDESSA's 2022
report) showed that capacity in France is 0.24 sq ft per capita.
Whilst the Paris market density is greater than France, we estimate
it to be significantly lower than the UK at around 0.4 sq ft per
inhabitant. This compares with closer to 10 sq ft per inhabitant in
the USA and 2 sq ft in Australia. In the UK, in order to reach the
US density of supply, it would require the addition of around
another 17,000 stores as compared to c.1,400 currently. In the
Paris region, it would require around 2,400 new facilities versus
c.95 currently opened.
In Spain, the Netherlands and Belgium, geographies the Group has
recently entered, penetration is similarly low. In Spain capacity
is around 0.24 sq ft per head of population and the consumer is
serviced by just 580 stores. In the Netherlands penetration is 0.6
sq ft per head of population (355 stores) and in Belgium 0.2 sq ft
per head of population (101 stores).
The Group recently entered a JV with Carlyle in Germany. The
German market is one of Europe's more under-penetrated markets with
just 0.09 sq ft of storage space per capita and, according to the
2022 FEDESSA report, there are just 320 facilities in the country
and 7.6m sq ft of lettable space.
Our interpretation of the most recent 2022 SSA report is that
similar levels of capacity are likely to be developed in 2022 and
2023 at around 30-40 stores per annum. We do not consider this
level of new supply growth to be of concern.
The 30-40 comparable sites represent between 2% and 3% of the
traditional self storage industry in the UK. These figures
represent gross openings and do not take into account storage
facilities closing or being converted for alternative uses. We
estimate that only a small proportion of these sites compete with
existing Safestore stores.
New supply in London and Paris is likely to continue to be
limited in the short and medium term as a result of planning
restrictions, competition from a variety of other uses and the
availability of suitable land.
The supply in the UK market, according to the SSA Survey,
remains relatively fragmented despite a number of acquisitions in
the sector in the last four years. The SSA's estimates of the scale
of the UK industry are finessed each year and changes from one year
to the next represent improved data rather than new supply. In the
2022 report the SSA estimates that 2,050 self storage facilities
exist in the UK market including around 621 container-based
operations. According to the 2022 survey, Safestore is the industry
leader by number of stores with 130 wholly owned sites followed by
Big Yellow with 105 stores (including Armadillo), Access with 60
stores, Shurgard with 40 stores, Lok'n Store with 39 stores,
Storage King with 37 stores and Ready Steady Store with 27 stores.
In aggregate, the top seven leading operators account for almost
21% of the UK store portfolio. The remaining c.1,613 self storage
outlets (including 621 container-based operations) are
independently owned in small chains or single units. In total there
are 1,015 storage brands operating in the UK.
Safestore's French business, UPP, is mainly present in the core
wealthier and more densely populated inner Paris and first belt
areas, whereas our two main competitors, Shurgard and Homebox, have
a greater presence in the outskirts and second belt of Paris.
Our Spanish business operates in Barcelona and has a pipeline of
future store openings in both Barcelona and Madrid. The
metropolitan areas of Barcelona and Madrid have combined growing
high-density populations of twelve million inhabitants and
significant barriers to entry.
Consumer awareness of self storage is increasing but remains
relatively low, providing an opportunity for future industry
growth. The SSA survey consistently indicates that approximately
half of consumers either knew nothing about the service offered by
self storage operators or had not heard of self storage at all.
Since 2016, this statistic has only fallen 10ppts from 59%.
Therefore, the opportunity to grow awareness, combined with limited
new industry supply, makes for an attractive industry backdrop.
Self storage is a brand-blind product. 64% of respondents were
unable to name a self storage business in their local area (56% in
2021). The lack of relevance of brand in the process of purchasing
a self storage product emphasises the need for operators to have a
strong online presence. This requirement for a strong online
presence was also reiterated by the SSA Survey where 73% of those
surveyed (77% in 2021) confirmed that an internet search would be
their chosen means of finding a self storage unit to contact,
whilst knowledge of a physical location of a store as reason for
enquiry was only c.26% of respondents (c.25% in 2021).
There are numerous drivers of self storage growth. Most private
and business customers need storage either temporarily or
permanently for different reasons at any point in the economic
cycle, resulting in a market depth that is, in our view, the reason
for its exceptional resilience. The growth of the market is driven
both by the fluctuation of economic conditions, which has an impact
on the mix of demand, and by growing awareness of the product.
Safestore's domestic customers' need for storage is often driven
by life events such as births, marriages, bereavements, divorces or
by the housing market including house moves and developments and
moves between rental properties. Safestore has estimated that UK
owner-occupied housing transactions drive around 8-13% of the
Group's new lets.
The Group's business customer base includes a range of
businesses from start-up online retailers through to multi-national
corporates utilising our national coverage to store in multiple
locations while maintaining flexibility in their cost base.
Business and Personal Customers UK Paris Spain Benelux
Personal Customers
Numbers (% of total) 77% 82% 89% 85%
Square feet occupied (%
of total) 58% 65% 83% 77%
Average Length of Stay (months) 17.4 28.7 23.2 28.4
Business Customers
Numbers (% of total) 23% 18% 11% 15%
Square feet occupied (%
of total) 42% 35% 17% 23%
Average Length of Stay (months) 26.4 32.0 31.2 30.2
Safestore's customer base is resilient and diverse and consists
of around 90,000 domestic, business and National Accounts customers
across London, Paris, Spain, the UK regions, the Netherlands and
Belgium.
Business Model
The Group operates in a market with relatively low consumer
awareness. It is anticipated that this will increase over time as
the industry matures. To date, despite the financial crisis in
2007/08, the implementation of VAT in the UK on self storage in
2012, Brexit and the Covid-19 pandemic, the industry has been
exceptionally resilient. In the context of uncertain economic
conditions, driven by inflation and the war in Ukraine, the
industry remains well positioned with limited new supply coming
into the self storage market.
With more stores inside London's M25 than any other operator and
a strong position in central Paris, Safestore has leading positions
in the two most important and demographically favourable markets in
Europe. In addition, our regional presence in the UK is unsurpassed
and contributes to the success of our industry-leading National
Accounts business. In the UK, Safestore is the leading operator by
number of wholly owned stores. With 85% of customers travelling for
less than 30 minutes to their storage facility (2022 SSA Survey)
Safestore's national store footprint represents a competitive
advantage.
The Group's capital-efficient portfolio of 179 wholly owned
stores in the UK, Paris, Spain, the Netherlands and Belgium
consists of a mix of freehold and leasehold stores. In order to
grow the business and secure the best locations for our facilities
we have maintained a flexible approach to leasehold and freehold
developments as well as being comfortable with a range of building
types, from new builds to conversions of warehouses and underground
car parks.
Currently, around a quarter of our stores in the UK are
leaseholds with an average remaining lease length at 31 October
2022 of 12.7 years (FY2021: 11.8 years). Although our property
valuation for leaseholds is conservatively based on future cash
flows until the next contractual lease renewal date, Safestore has
a demonstrable track record of successfully re-gearing leases
several years before renewal whilst at the same time achieving
concessions from landlords.
In England, we benefit from the Landlord and Tenant Act that
protects our rights for renewal except in case of redevelopment.
The vast majority of our leasehold stores have building
characteristics or locations in retail parks that make current
usage either the optimal and best use of the property or the only
one authorised by planning. We observe that our landlords, who are
property investors, value the quality of Safestore as a tenant and
typically prefer to extend the length of the leases that they have
in their portfolio, enabling Safestore to maintain favourable
terms.
In Paris, where 41% of stores are leaseholds, our leases
typically benefit from the well-enshrined Commercial Lease statute
that provides that tenants own the commercial property of the
premises and that they are entitled to renew their lease at a rent
that is indexed to the Indice des Loyers Commerciaux (Commercial
Rental Index) published by the state. Taking into account this
context, the valuer values the French leaseholds based on an
indefinite property tenure, similar to freeholds but at a
significantly higher exit cap rate.
The Group believes there is an opportunity to leverage its
highly scalable marketing and operational expertise in new
geographies outside the UK and Paris. During 2019, a Joint
Venture(14) was established with Carlyle, which acquired the M3
Self Storage business in the Netherlands which had six stores in
Amsterdam and Haarlem. In June 2020, the Joint Venture(14) added
the Lokabox business, a portfolio of six stores in Brussels (2),
Liege (2), Charleroi and Nivelles. In December 2020, the Joint
Venture(14) acquired the Opslag XL portfolio adding a further three
stores in Amsterdam, The Hague and Hilversum and opened a store in
Nijmegen in the Netherlands in January 2022. The Amsterdam store
has subsequently been closed as planned following lease expiry.
After three years of learning about and understanding these
markets, the Group acquired the remaining 80% of equity in the
Joint Venture(14) owned by Carlyle in March 2022.
In 2019 the Group entered the Spanish market with the
acquisition of OhMyBox. Our Spanish portfolio currently consists of
five stores in Barcelona, and two recently opened Madrid stores. We
have a further six stores in our development pipeline situated in
both Madrid and Barcelona. We consider both of these cities to have
attractive characteristics in relation to self storage and intend
to continue to seek further expansion opportunities.
Our experience is that being flexible in its approach has
enabled Safestore to operate from properties and in markets that
would have been otherwise unavailable and to generate strong
cash-on-cash returns.
Safestore excels in the generation of customer enquiries which
are received through a variety of channels including the internet,
telephone and "walk-ins". In the early days of the industry, local
directories and store visibility were key drivers of enquiries.
However, the internet is now by far the dominant channel,
accounting for 90% (2021: 89%) of our enquiries in the UK and 85%
(2021: 84%) in France. This dynamic is a clear benefit to the
leading national operators that possess the budget and the
management skills necessary to generate a commanding presence in
the major search engines. Safestore has developed and continues to
invest in a leading digital marketing platform that has generated
54% enquiry growth over the last five years.
Although mostly generated online, our enquiries are
predominantly handled directly by the stores and, in the UK, we
have a Customer Support Centre ("CSC") which handles customer
service issues in addition to enquiries, in particular when the
store colleagues are busy handling calls or outside of normal store
opening hours.
Our pricing platform provides the store and CSC colleagues with
system-generated real-time prices managed by our centrally based
yield-management team. Local colleagues have certain levels of
discretion to flex the system-generated prices but this is
continually monitored.
Customer service standards are high and customer satisfaction
feedback is consistently very positive. Safestore invites customers
to leave a review on a number of review platforms, including Feefo,
Google and Trustpilot. Our ratings for each of these three
providers in the UK are between 4.6 and 4.8 out of 5. In France,
Une Pièce en Plus uses Trustpilot to obtain independent customer
reviews and In HY2022, achieved a "TrustScore" of 4.6 out of 5. In
Spain, OMB collects customer feedback via Google reviews and has
maintained a score of 4.6 out of 5. The key drivers of sales
success are the capacity to generate enquiries in a digital world,
the capacity to provide storage locations that are conveniently
located close to the customers' requirements and the ability to
maintain a consistently high quality, motivated retail team that is
able to secure customer sales at an appropriate storage rate, all
of which can be better provided by larger, more efficient
organisations.
We remain focused on business as well as domestic customers. Our
national network means that we are uniquely placed to further grow
the business customer market and in particular National Accounts.
Business customers in the UK now constitute 42% of our total space
let and have an average length of stay of 26 months. Within our
business customer category, our National Accounts business
represents around 623,000 sq ft of occupied space (around 13% of
the UK's occupancy). Approximately two-thirds of the space occupied
by National Accounts customers is outside London, demonstrating the
importance and quality of our well invested national estate.
The business now has in excess of c.90,000 business and domestic
customers with an average length of stay of 28 months and 22 months
respectively.
The cost base of the business is relatively fixed. Each store
typically employs three staff. Our Group Head Office comprises
business support functions such as Yield Management, Property,
Marketing, HR, IT and Finance.
Since the completion of the rebalancing of our capital structure
in early 2014, the subsequent amendment and extension of our
banking facilities in summer 2015, the refinancing of all
facilities in May 2017 and the issuances of a further GBP125
million of US Private Placement Notes in 2019, GBP150 million in
2021 and GBP89 million in 2022, as well as the recent establishment
of a new GBP400 million unsecured multi-currency Revolving Credit
Facility, Safestore has secure financing, a strong balance sheet
and significant covenant headroom. This provides the Group with
financial flexibility and the ability to grow organically and via
carefully selected new development or acquisition
opportunities.
At 31 October 2022 we had 1.0m sq ft of unoccupied space in the
UK, 0.2m sq ft in France and 0.2m in Spain and Benelux, equivalent
to c.35 full new stores. Our main focus is on filling the spare
capacity in our stores at optimally yield-managed rates. The
operational leverage of our business model will ensure that the
bulk of the incremental revenue converts to profit given the
relatively fixed nature of our cost base.
Trading Performance
UK - an excellent year
UK Operating Performance- total 2022 2021 Change
------------------------------------ ------ ------ ---------
Revenue (GBP'm) 163.0 144.1 13.1%
Underlying EBITDA (GBP'm)(2) 103.6 88.6 16.9%
Underlying EBITDA (after leasehold
costs) (GBP'm) 95.6 80.9 18.2%
Closing Occupancy (let sq ft
- million)(3) 4.637 4.690 -1.1%
Maximum Lettable Area (MLA)(4) 5.62 5.49 2.4%
Closing Occupancy (% of MLA) 82.6% 85.4% -2.8ppts
Average Storage Rate (GBP)(5) 28.79 25.32 13.7%
UK Operating Performance- like-for-like(8) 2022 2021 Change
-------------------------------------------- ------ ------ ---------
Revenue (GBP'm) 160.2 142.8 12.2%
Underlying EBITDA (GBP'm)(2) 101.7 87.9 15.7%
Closing Occupancy (let sq ft-
million)(3) 4.538 4.648 -2.4%
Closing Occupancy (% of MLA) 83.0% 85.6% -2.6ppts
Average Occupancy (let sq ft-
million)(3) 4.537 4.512 0.6%
Average Storage Rate (GBP)(5) 28.94 25.40 13.9%
UK statutory metrics 2022 2021 Change
--------------------------- ------ ------ -------
Operating Profit (GBP'm) 393.1 331.9 18.4%
Profit before Tax (GBP'm) 378.7 321.4 17.8%
The UK's revenue performance was excellent in the year with the
business growing total revenue by 13.1% and like-for-like(8)
revenue by 12.2%. Performance was strong in both Regional UK as
well as London and the South East where like-for-like(8) revenue
was up 13.0% and 11.7% respectively.
The UK's performance was driven by strong rate growth in the
year with like-for-like average rates up 13.9% for the year. Rate
momentum was strong in the final quarter with like-for-like storage
rates up 3.8% compared to the third quarter. Average like-for-like
occupancy was up 0.6% over the course of the year.
Like-for-like closing occupancy, at 83.0%, decreased by 2.6ppts
compared to the prior year. The addition of extensions in four of
the like-for-like stores had the impact of diluting MLA by 0.7ppts.
In addition, the volume of like-for-like new lets was up 6% in the
year but the average new let unit size was lower than in 2021
resulting in a lower new let sq ft.
Total revenue grew by 13.1% for the full year. This reflected
like-for-like growth of 12.2%, the 2021 opening of our Birmingham
Middleway and subsequent closure of our Birmingham South store and
the 2022 opening of our London Bow store. All acquisitions and new
store developments are performing in line with or ahead of their
business cases.
We remain focused on our cost base. During the year, our UK cost
base, on a like-for-like(8) basis, increased by 6.6% or GBP3.6
million. Inflationary pressures on utilities, staff costs and
insurance contributed to this increase. Our total reported
underlying UK cost base grew by GBP3.9 million or 7.0% reflecting
the cost bases relating to newly and recently opened stores.
As a result, Underlying EBITDA(2) for the UK business was
GBP103.6 million (FY2021: GBP88.6 million), an increase of GBP15.0
million or 16.9%. Despite the increase in costs, the excellent
revenue performance resulted in a 2.1ppt increase in EBITDA margins
from 61.5% to 63.6%.
For the two months to December 2022 trading continued to be
robust and stable through the period. Like-for-like average rate
was up 7.3%, offset by a reduction in closing occupancy which was
down 3.6ppts at 78.6% (FY2021: 82.2%). Overall, like-for-like
revenue increased by 3.7% and total revenue grew by 4.6%.
Operating profit for the UK business was GBP393.1 million
(FY2021: GBP331.9 million), an increase of GBP61.2 million or
18.4%, largely driven by the increase in the gain on investment
properties of GBP35.2 million to GBP295.7 million (FY2021: GBP260.5
million). Profit before tax was GBP378.7 million (FY2021: GBP321.4
million), an increase of GBP57.3 million or 17.8%.
Paris - another strong year
Paris Operating Performance-
total 2022 2021 Change
------------------------------------ ------ ------ ---------
Revenue (EUR'm) 48.8 46.0 6.1%
Underlying EBITDA (EUR'm)(2) 33.0 31.4 5.1%
Underlying EBITDA (after leasehold
costs) (EUR'm) 27.1 25.7 5.4%
Closing Occupancy (let sq ft
- million)(3) 1.112 1.100 1.1%
Maximum Lettable Area (MLA)(4) 1.36 1.36 -
Closing Occupancy (% of MLA) 81.7% 80.7% +1.0ppts
Average Storage Rate (EUR)(5) 40.47 38.90 4.0%
Revenue (GBP'm) 41.4 39.9 3.8%
Paris Operating Performance-
like-for-like(8) 2022 2021 Change
------------------------------- ------ ------ ---------
Revenue (EUR'm) 48.37 45.94 5.3%
Underlying EBITDA (EUR'm)(2) 33.0 31.3 5.4%
Closing Occupancy (let sq ft-
million)(3) 1.094 1.097 -0.3%
Closing Occupancy (% of MLA) 83.4% 83.6% -0.2ppts
Average Occupancy (let sq ft-
million)(3) 1.092 1.077 1.4%
Average Storage Rate (EUR)(5) 40.56 38.90 4.3%
Paris statutory metrics 2022 2021 Change
--------------------------- ------ ----- -------
Operating Profit (GBP'm) 110.4 78.8 40.1%
Operating Profit (EUR'm) 130.0 90.7 43.3%
Profit before Tax (GBP'm) 108.8 77.0 41.3%
Profit before Tax (EUR'm) 128.2 88.7 44.5%
On a like-for-like(8) basis, the business grew revenue by 5.3%
for the full year. This was driven by average occupancy growth of
1.4% for the year and an average rate improvement of 4.3%.
Like-for-like(8) closing occupancy was 83.4%, down 0.2ppts
compared to the prior year.
The average Sterling-Euro exchange rate for the year was 1.1778,
2.3% stronger than the prior year (FY2021: 1.1516). As a result,
there was a small foreign exchange impact on the translation of
Paris revenues which were up 3.8% for the year in Sterling.
After cost reductions in 2021, like-for-like(8) costs grew by
5.5% or EUR0.8 million compared to the prior year in local currency
as a result of increases in employee costs and utilities. As a
result, like-for-like(8) underlying EBITDA(2) in Paris grew by
EUR1.7 million and Underlying EBITDA(2) grew by EUR1.6 million to
EUR33.0 million (FY2021: EUR31.4 million).
For the two months to December 2022 trading has been robust and
improving as the period progressed. Like-for-like closing occupancy
was up 2.0ppts at 80.8% (FY2021: 78.8%) and like-for-like average
rate was up 1.0%, which resulted in a 2.5% increase in
like-for-like revenue.
Operating profit for the Paris business was EUR130.0 million
(FY2021: EUR90.7 million), an increase of EUR39.3 million or 43.3%,
largely driven by the increase in the gain on investment properties
of EUR28.0 million to EUR92.5 million (FY 2021: EUR64.5 million).
Profit before tax was EUR128.2 million (FY2021: EUR88.7 million),
an increase of EUR39.5 million or 44.5%.
Spain Trading Performance
Spain Operating Performance-
total 2022 2021 Change
------------------------------------ ------ ------ ---------
Revenue (EUR'm) 3.59 3.29 9.1%
Underlying EBITDA (EUR'm)(2) 1.8 2.0 (10.0%)
Underlying EBITDA (after leasehold
costs) (EUR'm) 1.3 1.5 (13.3%)
Closing Occupancy (let sq ft
- million)(3) 0.095 0.093 2.2%
Maximum Lettable Area (MLA)(4) 0.12 0.11 9.1%
Closing Occupancy (% of MLA) 78.9% 86.0% -7.1ppts
Average Storage Rate (EUR)(5) 34.07 32.25 5.6%
Revenue (GBP'm) 3.0 2.8 7.1%
Spain Operating Performance-
like-for-like(8) 2022 2021 Change
------------------------------- ------ ------ ---------
Revenue (EUR'm) 3.57 3.29 8.5%
Underlying EBITDA (EUR'm)(2) 2.1 2.0 5.0%
Closing Occupancy (let sq ft-
million)(3) 0.093 0.093 -
Closing Occupancy (% of MLA) 85.9% 86.0% -0.1ppts
Average Occupancy (let sq ft-
million)(3) 0.094 0.096 -2.1%
Average Storage Rate (EUR)(5) 34.11 32.25 5.8%
Spain statutory metrics 2022 2021 Change
--------------------------- ----- ----- --------
Operating Profit (GBP'm) 2.8 6.3 (55.6%)
Operating Profit (EUR'm) 3.3 7.2 (54.2%)
Profit before Tax (GBP'm) 2.7 6.2 (56.5%)
Profit before Tax (EUR'm) 3.2 7.1 (54.9%)
Our Spanish business was acquired in December 2019. The original
four stores are, therefore, now considered like-for-like and grew
like-for-like revenue by 8.5% in the year to EUR3.57 million
(FY2021: EUR3.29 million). A deliberate strategy of improving
average rate and ancillary revenues has continued to be pursued in
the period. Closing occupancy in sq ft was consequently flat
compared to 2021 whilst like-for-like average rate in the year grew
by 5.8% to EUR34.11 (FY2021: EUR32.25) with ancillary revenues
improving strongly.
Like-for-like Underlying EBITDA grew by 5.0% in the period after
investment in additional Head Office resource dedicated to growing
the development pipeline.
The Spanish business opened an additional store in Barcelona in
the period. As a result, total revenue increased by 9.1%.
For the two months to December 2022 trading continued to be
robust and stable through the period. Like-for-like occupancy was
down 3.0ppts at 81.8% (FY2021: 84.8%) but like-for-like average
rate was up 7.6%, which, combined with strong ancillary revenues,
resulted in a 7.4% increase in like-for-like revenue. Total revenue
was up 11.5% for the period.
Operating profit for the Spanish business was EUR3.3 million
(FY2021: EUR7.2 million). 2021 included an increase in the gain on
investment properties of EUR5.3 million, against an increase in
2022 of EUR2.0 million. Accordingly, profit before tax was EUR3.2
million (FY2021: EUR7.1 million).
Benelux Trading Performance
Our Netherlands and Belgium businesses were acquired on 30 March
2022 and, therefore, contributed seven months' revenue (EUR5.9
million) in the period.
The Benelux businesses grew revenue by 5.3% compared to the
third quarter of 2022 and the businesses ended the period with a
combined closing occupancy of 78.8%.
The business was originally established in 2019 with the
acquisition of six stores and it has been subsequently developed
into a 15-store portfolio with a pipeline of five additional
stores.
Frederic Vecchioli
16 January 2023
Financial Review
EPS(1) has grown by 344% over the last nine years
Underlying income statement
The table below sets out the Group's underlying results of
operations for the year ended 31 October 2022 and the year ended 31
October 2021. To calculate the underlying performance metrics,
adjustments are made for the impact of exceptional items,
share-based payments, corporate transaction costs, change in fair
value of derivatives, gain or loss on investment properties and the
associated tax impacts, as well as exceptional tax items and
deferred tax. Management considers this presentation of earnings to
be representative of the underlying performance of the business, as
it removes the income statement impact of items not fully
controllable by management, such as the revaluation of derivatives
and investment properties, and the impact of exceptional credits,
costs and finance charges .
2022 2021 Mvmt
GBP'm GBP'm %
Revenue 212.5 186.8 13.8%
Underlying costs (77.5) (69.3) 11.8%
Share of associate's Underlying
EBITDA 0.1 0.5 (80.0%)
------- -------
Underlying
EBITDA 135.1 118.0 14.5%
Leasehold costs (13.6) (13.0) 4.6%
------- -------
Underlying EBITDA after
leasehold costs 121.5 105.0 15.7%
Depreciation (1.0) (1.0) 0.0%
Finance charges (10.9) (9.5) 14.7%
Share of associate's finance
charges (0.4) (0.5) (20.0%)
------- -------
Underlying profit
before tax 109.2 94.0 16.2%
Current tax (5.2) (5.5) (5.5%)
Adjusted EPRA earnings 104.0 88.5 17.5%
Share-based payments
charge (11.2) (18.3) (38.8%)
EPRA basic
earnings 92.8 70.2 32.2%
------- -------
Average shares in issue
(m) 210.9 210.8
Diluted shares (for
ADE EPS) (m) 218.9 218.3
Adjusted Diluted EPRA EPS(1)
(pro forma) (p) 47.5 40.5 17.3%
Note:
1. Adjusted EPRA earnings excludes share-based payment charges
and, accordingly, the Underlying EBITDA, Underlying EBITDA after
leasehold rent and Underlying profit before tax measures have been
restated to exclude share-based payment charges for
consistency.
The table below reconciles statutory profit before tax in the
income statement to underlying profit before tax in the previous
table .
2022 2021
GBP'm GBP'm
Statutory profit before tax 498.8 404.6
Adjusted for:
- Gain on investment properties
and investment property under
construction (389.9) (328.5)
- Change in fair value of derivatives 0.3 (2.9)
- Net exchange loss - 0.6
- Share-based payments 11.2 18.3
- Exceptional items and other
exceptional gains (10.7) 1.9
- Exceptional finance income (0.5) -
Underlying profit before tax 109.2 94.0
-------- --------
Management considers the above presentation of earnings to be
representative of the underlying performance of the business.
Underlying EBITDA increased by 14.5% to GBP135.1 million
(FY2021: GBP118.0 million), reflecting a 13.8% increase in revenue
and a 11.8% increase to the underlying cost base. This performance
reflects the strong growth in average rate of 8.5% to GBP29.25 in
2022 from GBP26.95 in 2021 offset by a slight reduction in
occupancy of 2.4ppts to 82.1% in 2022 from 84.5% in 2021, whilst
maintaining control over costs.
Leasehold costs increased by 4.6% from GBP13.0 million to
GBP13.6 million, principally due to reflecting the impact of rent
reviews across the portfolio in addition to the Netherlands
leaseholds now forming part of the Group.
Underlying finance charges increased by 14.7% from GBP9.5
million to GBP10.9 million. This principally reflects interest
charges which increased from GBP9.7 million in 2021 to GBP11.9
million in 2022 driven by higher USPP borrowing to fund the Group's
acquisition and development activity, offset by the gains made on
financial instruments of GBP1.3 million in 2022 (FY2021: GBP0.5
million).
As a result, we achieved a 16.2% increase in underlying profit
before tax of GBP109.2 million (FY2021: GBP94.0 million). The main
contributing factor in the increase in statutory profit before tax
in the year is the GBP61.4 million increase in the gain on
investment and development property, primarily due to the stronger
underlying performance of the stores, as mentioned above, as well
as a reduction in the share-based payment charge by GBP7.1 million
to GBP11.2 million (FY2021: GBP18.3 million).
Included within statutory profit before tax are other
exceptional gains of GBP10.7 million. GBP5.5 million relates to the
valuation gain of Safestore's 20% investment in the Joint Venture
formed in 2019 with Carlyle that arose on acquisition of the
remaining 80%, with GBP5.1 million relating to the profit on the
sale of the Nanterre land in Paris in November 2021. The
exceptional finance income relates to the profit made on the
termination of interest rate swaps associated with the Joint
Venture.
Given the Group's REIT status in the UK, tax is normally only
payable in France, Spain, the Netherlands and Belgium. The
underlying tax charge for the year was GBP5.2 million (FY2021:
GBP5.5 million), calculated by applying the effective underlying
tax rate of 20.9% to the respective underlying profits earned by
the non-UK businesses.
As explained in note 2 to the financial statements, management
considers that the most representative Earnings per Share ("EPS")
measure is Adjusted Diluted EPRA EPS which has increased by 17.3%
to 47.5 pence (FY2021: 40.5 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the
income statement to Underlying EBITDA.
2022 2021
GBP'm GBP'm
Statutory Operating profit 514.5 4 17.0
Adjusted for:
- Gain on investment
properties (381.6) (3 21.1)
- Share of associate's Underlying
EBITDA 0.4 0.5
- Depreciation 1.0 1 .0
- Variable lease payments 0.3 0.4
- Share-based payments 11.2 1 8.3
Exceptional
items:
- Costs incurred relating to corporate
restructuring and
exceptional taxation costs 0.1 1 .9
Other exceptional gains:
- Profit on sale of land (5.1) -
- Profit on disposal of investment
property (0.2) -
- Valuation gain on associate buy-out (5.5) -
Underlying EBITDA 135.1 1 18.0
-------- ---------
The main reconciling items between statutory operating profit
and Underlying EBITDA are the gain on investment properties as well
as adjustments for depreciation, variable lease payments,
share-based payment charges, exceptional gains and the share of
associate's Underlying EBITDA. The gain on investment properties
was GBP381.6 million, as compared to GBP321.1 million in 2021
primarily due to the stronger underlying performance of the stores.
The Group's approach to the valuation of its investment property
portfolio at 31 October 2022 is discussed below.
Underlying profit by geographical region
The Group is organised and managed in four operating segments
based on geographical region. The table below details the
underlying profitability of each region.
2022 2021
Total Total
UK Paris Spain Benelux (CER) UK Paris Spain (CER)
GBP'm EUR'm EUR'm EUR'm GBP'm GBP'm EUR'm EUR'm GBP'm
Revenue 163.0 48.8 3.6 5.9 213.5 144.1 46.0 3.3 186.8
Underlying cost
of sales (48.2) (12.2) (1.2) (2.5) (61.9) (45.2) (11.2) (0.7) (55.5)
------- ------- ------ -------- ------- ------- ------- ------ -------
Store EBITDA 114.8 36.6 2.4 3.4 151.6 98.9 34.8 2.6 131.3
Store EBITDA
margin 70.4% 75.0% 66.7% 57.6% 71.0% 68.6% 75.7% 78.8% 70.3%
LFL Store EBITDA
margin 70.5% 75.6% 75.0% n/a 71.6% 68.8% 75.8% 78.8% 70.5%
Underlying
administrative
expenses (11.2) (3.6) (0.6) (1.2) (15.9) (10.3) (3.4) (0.6) (13.8)
Underlying EBITDA 103.6 33.0 1.8 2.2 135.7 88.6 31.4 2.0 117.5
EBITDA margin 63.6% 67.6% 50.0% 37.3% 63.6% 61.5% 68.3% 60.6% 62.9%
LFL EBITDA margin 63.5% 68.2% 58.3% n/a 64.4% 61.6% 68.2% 60.6% 63.1%
Leasehold costs (8.0) (5.9) (0.5) (0.1) (13.7) (7.7) (5.7) (0.5) (13.0)
Underlying EBITDA
after leasehold
costs 95.6 27.1 1.3 2.1 122.0 80.9 25.7 1.5 104.5
------- ------- ------ -------- ------- ------- ------- ------ -------
EBITDA after
leasehold costs
margin 58.7% 55.5% 36.1% 35.6% 57.1% 56.1% 55.9% 45.5% 55.9%
UK Paris Spain Benelux Total UK Paris Spain Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Underlying EBITDA
after leasehold
costs (CER) 95.6 23.4 1.2 1.8 122.0 80.9 22.3 1.3 104.5
Adjustment to
actual exchange
rate - (0.5) (0.1) - (0.6) - - - -
Reported
Underlying
EBITDA after
leasehold
costs 95.6 22.9 1.1 1.8 121.4 80.9 22.3 1.3 104.5
------- ------- ------ -------- ------- ------- ------- ------ -------
Note: CER is Constant Exchange Rates (Euro denominated results
for the current period have been retranslated at the exchange rate
effective for the comparative period in order to present the
reported results on a more comparable basis).
Underlying EBITDA in the UK increased by GBP15.0 million, or
16.9%, to GBP103.6 million (FY2021: GBP88.6 million), underpinned
by a 13.1% or GBP18.9 million increase in revenue, which was driven
by an increase in average occupancy levels and rate improvements in
the like-for-like portfolio as well as the impact of the 2021 store
opening in Birmingham Middleway (offset by the closure of
Birmingham Digbeth), the December 2021 acquisition of Christchurch,
and the December 2021 opening of our London Bow store. Underlying
UK EBITDA after leasehold costs increased by 18.2% to GBP95.6
million (FY2021: GBP80.9 million).
In Paris, Underlying EBITDA increased by EUR1.6 million, or
5.1%, to EUR33.0 million (FY2021: EUR31.4 million), primarily
driven by a EUR2.8 million increase in revenue. Underlying EBITDA
after leasehold costs in Paris increased by 5.4% to EUR27.1 million
(FY2021: EUR25.7 million).
In Spain, Underlying EBITDA decreased slightly by EUR0.2
million, from EUR2.0 million in 2021 to EUR1.8 million in 2022.
This directly translated into a decrease in Underlying EBITDA after
leasehold costs from EUR1.5 million in 2021 to EUR1.3 million in
2022.
Our Netherlands and Belgium businesses were acquired on 30 March
2022 and, therefore, contributed seven months' revenue (EUR5.9
million) in the period.
The combined results of the UK, Paris, Spain and Benelux
delivered a 16.3% increase in Underlying EBITDA after leasehold
costs at constant exchange rates at Group level. Adjusting for an
unfavourable exchange impact of GBP0.6 million, the combined
results of the UK, Paris and Spain reported an Underlying EBITDA
after leasehold costs increase of 16.2% or GBP16.9 million to
GBP121.4 million (FY2021: GBP104.5 million).
Revenue
Revenue for the Group is primarily derived from the rental of
self storage space and the sale of ancillary products such as
insurance and merchandise (e.g. packing materials and
padlocks).
The split of the Group's revenues by geographical segment is set
out below for 2022 and 2021.
% of % of
2022 total 2021 total % change
UK GBP'm 163.0 76% 144.1 77% 13.1%
Paris
Local currency EUR'm 48.8 46.0 6.1%
Paris in Sterling GBP'm 41.4 19% 39.9 21% 3.8%
Spain
Local currency EUR'm 3.6 3.3 9.1%
Spain in Sterling GBP'm 3.0 2% 2.8 2% 7.1%
Benelux
Local currency EUR'm 5.9 - - -
Benelux in Sterling GBP'm 5.1 3% - - -
Average exchange
rate 1.178 1.152 (2.3%)
Total revenue GBP'm 212.5 100% 186.8 100% 13.8%
------ ------- ------ ------- ---------
The Group's revenue increased by 13.8% or GBP25.7 million in the
year. The Group's occupied space was 434,000 sq ft higher at 31
October 2022 (6.317 million sq ft) than at 31 October 2021 (5.883
million sq ft), and the average storage rate per sq ft for the
Group was, at GBP29.25, 8.5% higher than in 2021 (GBP26.95).
Adjusting the Group's revenue to a like-for-like basis
(adjusting for the Benelux acquisition in 2022, adjusting the UK
for the 2021 opening of our Birmingham Middleway store and the sale
of Birmingham Digbeth, the December 2021 acquisition of
Christchurch, and the December 2021 opening of our London Bow
store, and in Paris for the opening of our Magenta store), revenue
has increased by 10.1%. There was minimal exchange rate movement in
the year so Group like-for-like revenue at constant exchange rates
has increased by 10.7%.
In the UK, revenue grew by GBP18.9 million or 13.1%, and on a
like-for-like basis it increased by 12.2%. Occupancy was 53,000 sq
ft lower at 31 October 2022 than at 31 October 2021, at 4.637
million sq ft (FY2021: 4.690 million sq ft). The average storage
rate for the year grew 13.7%, from GBP25.32 in 2021 to GBP28.79 in
2022. On a like-for-like basis, the average storage rate in the UK
also increased by 13.9% to GBP28.94 (FY2021: GBP25.40).
In Paris, revenue grew by EUR2.8 million or 6.1% and on a
like-for-like basis it increased by 5.3% to EUR48.37 million
(FY2021: EUR45.94 million). This was driven by an increase in the
average storage rate of 4.0% to EUR40.47 for the year (FY2021:
EUR38.90), and an increase in average occupancy growth of 2.3%,
with closing occupancy growing to 1.112 million sq ft (FY2021:
1.100 million sq ft).
For Spain, revenue was EUR3.6 million, reflecting the growth in
average rate of 5.6% to EUR34.07 (FY2021: EUR32.25), with a closing
occupancy of 0.095 million sq ft (78.9%).
Our Netherlands and Belgium businesses, acquired on 30 March
2022 from the buyout of the remaining 80% of the equity owned by
Carlyle in the Joint Venture formed in 2019, contributed seven
months' revenue, EUR5.9 million in the period. Collectively, the
businesses saw 6,000 sq ft of occupancy inflows in the fourth
quarter and our Netherlands and Belgium businesses ended the period
with a closing occupancy of 78.8%. The average rate for the
seven-month period was EUR19.18 and EUR18.79 for the Netherlands
and Belgium respectively.
Analysis of cost base
Cost of sales
The table below details the key movements in cost of sales
between 2021 and 2022.
Cost of
sales 2022 2021
GBP'm GBP'm
Statutory cost of sales (63.0) (56.9)
Adjusted
for:
Depreciation 1.0 1.0
Variable lease payments 0.3 0.4
Underlying cost of sales (61.7) (55.5)
-------- -------
Underlying cost of sales
for FY2021 (55.5)
New developments cost of sales 0.7
Underlying cost of sales for FY2021
(Like-for-like) (54.8)
Volume related cost of sales (1.0)
Employee remuneration, recruitment
and training (0.2)
Facilities and rates (2.0)
Enquiry generation (0.3)
Underlying cost of sales for FY2022
(Like-for-like; CER) (58.3)
New developments cost of sales (3.6)
Underlying cost of sales
for FY2022 (CER) (61.9)
Foreign exchange 0.2
Underlying cost of sales
for FY2022 (61.7)
-------
In order to arrive at underlying cost of sales, adjustments are
made to remove the impact of depreciation, which does not form part
of Underlying EBITDA, and variable lease payments, which forms part
of our leasehold costs in the presentation of our underlying income
statement.
Underlying cost of sales increased by GBP6.2 million in the
year, from GBP55.5 million in 2021 to GBP61.7 million in 2022. On a
like-for-like basis and at constant exchange rates, cost of sales
increased by GBP3.5 million or 6.4%, with a GBP2.0 million increase
in facilities and business rates due to business rates reviews, and
increases in utilities and store maintenance charges as well as a
GBP1.0 million increase in volume related costs of sales attributed
to the stronger store performance. The investment in marketing
during the year represented 3.6% of revenue (FY2021: 3.7%).
Administrative expenses
The table below reconciles reported administrative expenses to
underlying administrative expenses and details the key movements in
underlying administrative expenses between 2021 and 2022.
Administrative expenses 2022 2021
GBP'm GBP'm
Statutory administrative expenses (27.1) (34.0)
Adjusted for:
Share-based payments 11.2 18.3
Exceptional items 0.1 1.9
Underlying administrative
expenses (15.8) (13.8)
------- -------
Underlying administrative expenses
for FY2021 (13.8)
New developments administration
costs 0.1
Underlying administrative expenses for
FY2021 (Like-for-like) (13.7)
Employee remuneration (0.7)
Other employee related costs (0.4)
Underlying administrative expenses for
FY2022 (Like-for-like; CER) (14.8)
New developments administration
costs (1.1)
Underlying administrative expenses
for FY2022 (CER) (15.9)
Foreign exchange 0.1
Underlying administrative expenses
for FY2022 (15.8)
-------
In order to arrive at underlying administrative expenses,
adjustments are made to remove the impact of exceptional items,
share-based payments and other non-underlying items. The decrease
in share-based payments relates to the prior year recognising full
performance of the Earnings per Share criteria of the 5 year
scheme, which was measured over a 5 year period from 1 November
2016 to 31 October 2021. As the performance period completed in
2021, measurement of this performance criteria and the associated
National Insurance charge was able to be measured accurately and in
full. The current year charge reflects the charge associated with
the remaining schemes.
Underlying administrative expenses increased by GBP2.0 million
in the year, from GBP13.8 million in 2021 to GBP15.8 million in
2022. Like-for-like administrative expenses at constant exchange
rates grew by 8.0% to GBP14.8 million. This is the result of
year-on-year increases in employee remuneration and other employee
related costs, which are associated with the strong business
performance.
Therefore, total underlying costs (cost of sales plus
administrative expenses) on a like-for-like basis and at constant
exchange rates have increased by GBP4.6 million to GBP73.1 million
(FY2021: GBP68.5 million).
Exceptional items and other exceptional gains
Included within exceptional items and other exceptional gains of
GBP10.7 million are GBP5.5 million relating to the valuation gain
of Safestore's 20% investment in the Joint Venture and GBP5.1
million relating to the profit on the sale of the Nanterre land in
Paris in November 2021.
In France, the basis on which property taxes have been assessed
has been challenged by the tax authority for financial years 2011
onwards. In March 2021 the French Court of Appeal delivered a
judgement, which resulted in a partial success for the Group;
however, a further appeal has been lodged with the French Supreme
Court against those decisions on which the Group was unsuccessful.
A provision is included in the consolidated financial accounts of
GBP2.4 million at 31 October 2022 (31 October 2021: GBP2.1
million), to reflect the increased uncertainty surrounding the
likelihood of a successful outcome. Of the total provided, GBP0.3
million has been charged in relation to the year ended 31 October
2022 within cost of sales (Underlying EBITDA) (31 October 2021:
GBP0.2 million within cost of sales (underlying EBITDA) and GBP1.9
million recorded as an exceptional charge in respect of financial
years 2012 to 2020).
It is possible that the French tax authority may appeal the
decisions of the French Court of Appeal on which the Group was
successful to the French Supreme Court. The maximum potential
exposure in relation to these issues at 31 October 2022 is GBP3.0
million (31 October 2021: GBP2.7 million). No provision for any
further potential exposure has been recorded in the consolidated
financial statements since the Group believes it is more likely
than not that a successful outcome will be achieved, resulting in
no additional liabilities.
Gain on investment properties
The gain on investment properties consists of the revaluation
gains and losses with respect to investment properties under IAS 40
and the fair value re-measurement of lease liabilities add-back and
other items as detailed below.
2022 2021
GBP'm GBP'm
Revaluation of investment
properties 39 4.1 329.0
Revaluation of investment properties
under construction (4.2) (0.5)
Fair value re-measurement of lease
liabilities add-back (8.3) (7.4)
Statutory gain on investment
properties 381 .6 321.1
------- ------
In the current financial year, the UK business contributed
GBP299.8 million to the positive valuation movement, the Paris
business contributed GBP82.3 million, Spain contributing GBP1.6
million, with the remaining GBP6.2 million in Benelux. The gain on
investment properties principally reflects the continuing progress
in the performance of the businesses, which has driven further
positive changes in the cash flow metrics that are used to assess
the value of the store portfolio which are predominantly based on
trading potential, underpinned by average rate, which has increased
by 8.5% to GBP29.25 in 2022 from GBP26.95 in 2021, capitalisation
rates and stabilised occupancy.
Operating profit
Operating profit increased by GBP97.5 million from GBP417.0
million in 2021 to GBP514.5 million in 2022, comprising a GBP17.1
million increase in Underlying EBITDA, a GBP61.4 million higher
investment properties and investment properties under construction
gain primarily due to significant improvement in store performance
and a reduction in the share-based payments charge of GBP7.1
million as well as other exceptional gains and exceptional items of
GBP10.7 million, of which GBP5.5 million relates to the valuation
gain of Safestore's 20% investment in the Joint Venture formed in
2019 with Carlyle that arose on acquisition of the remaining 80%,
with GBP5.1 million relating to the profit on the sale of the
Nanterre land in Paris in November 2021.
Net finance costs
Net finance costs include interest payable, interest on lease
liabilities, fair value movements on derivatives, exchange gains or
losses, unwinding of discounts and exceptional refinancing costs.
Net finance costs increased by GBP3.3 million in 2022 to GBP15.7
million from GBP12.4 million in 2021, principally due to the
increased interest charges associated with the USPP's to fund the
Group's acquisition and development activity, offset by the gains
made on financial instruments.
2022 2021
GBP'm GBP'm
Net bank interest payable (11.9) (9.7)
Amortisation of debt issuance costs
on bank loans (0.5) (0.4)
Interest from loan to associates 0.1 0.1
Financial instruments income 1.3 0.5
Other interest received 0.1 -
------- -------
Underlying finance charges (10.9) (9.5)
Interest on lease liabilities (5.0) (5.2)
Fair value movement on derivatives (0.3) 2.9
Net exchange losses - (0.6)
Exceptional finance income 0.5 -
------- -------
Net finance costs (15.7) (12.4)
------- -------
Underlying finance charge
The underlying finance charge (net bank interest payable
reflecting term loan, swap and USPP interest costs) increased by
GBP1.4 million to GBP10.9 million, principally reflecting the
increased interest charge associated with the Group's additional
borrowings in the year, drawn to fund the Group's acquisition and
development activity. The underlying finance charge represents the
finance expense before exceptional items and changes in fair value
of derivatives, amortisation of debt issuance costs and interest on
lease liabilities and is disclosed because management reviews and
monitors performance of the business on this basis.
Financial instruments income in the year of GBP1.3 million
(FY2021: GBP0.5 million) related to the gains made on the
expiration of average rate forwards which matured in April 2022 and
October 2022.
Based on the year-end drawn debt position the effective interest
rate is analysed as follows:
Facility Drawn Hedged Hedged Bank Hedged Floating Total
Margin Rate Rate Rate
GBP/EUR'm GBP'm GBP'm % % % % %
UK Revolver GBP250.0 GBP76.0 GBP55.0 72% 1.25% 0.69% 2.19% 2.35%
UK Revolver- non-utilisation GBP174.0 - - - 0.50% - - 0.50%
Euro Revolver EUR70.0 GBP25.8 - - 1.25% - 1.38% 2.63%
Euro Revolver-
non-utilisation EUR40.0 - - - 0.50% - - 0.50%
US Private Placement
2024 EUR50.9 GBP43.8 GBP43.8 100% 1.59% - - 1.59%
US Private Placement
2026 EUR70.0 GBP60.2 GBP60.2 100% 1.26% - - 1.26%
US Private Placement
2026 GBP35.0 GBP35.0 GBP35.0 100% 2.59% - - 2.59%
US Private Placement
2027 EUR74.1 GBP63.7 GBP63.7 100% 2.00% - - 2.00%
US Private Placement
2028 GBP20.0 GBP20.0 GBP20.0 100% 1.96% - - 1.96%
US Private Placement
2028 EUR29.0 GBP24.9 GBP24.9 100% 0.93% - - 0.93%
US Private Placement
2029 GBP50.5 GBP50.5 GBP50.5 100% 2.92% - - 2.92%
US Private Placement
2029 GBP30.0 GBP30.0 GBP30.0 100% 2.69% - - 2.69%
US Private Placement
2029 EUR105.0 GBP90.3 GBP90.3 100% 2.45% - - 2.45%
US Private Placement
2031 GBP80.0 GBP80.0 GBP80.0 100% 2.39% - - 2.39%
US Private Placement
2033 EUR29.0 GBP24.9 GBP24.9 100% 1.42% - - 1.42%
Unamortised finance
costs - (GBP1.3) - - - - - -
Total GBP833.5 GBP623.8 GBP578.3 93% 2.41%
---------- --------- --------- ------- ------
As at 31 October 2022, GBP76.0 million of the GBP250.0 million
UK Revolver and EUR30.0 million (GBP25.8 million) of the EUR70.0
million Euro Revolver were drawn. The drawn amounts attract a bank
margin of 1.25%, and the Group pays a non-utilisation fee of 0.50%
on the undrawn balances of GBP174.0 million and EUR40.0
million.
The Group has GBP55.0 million of interest rate swaps in place to
June 2023, swapping SONIA at a weighted average effective rate of
0.69%. These interest rate swaps are in place to hedge the UK
Revolver floating SONIA rate.
On 21 April 2022, Safestore extended its borrowing facilities
with the issuance of EUR105.0 million denominated US Private
Placement ("USPP") Notes with the following coupon and tenor:
-- EUR105.0 million seven-year notes at a coupon of 2.45% (credit spread of 120 bps)
The funds were received in April 2022 and were used to pay down
Revolving Credit Facilities ("RCF") utilised to acquire the
remaining 80% owned by Carlyle in the Joint Venture formed in 2019.
The Joint Venture was set up in 2019 to acquire and develop assets
in the Netherlands and Belgium in order to leverage Safestore's
operating platform outside our core markets. Since then, the Joint
Venture has grown to a portfolio of 600,000 sq ft of MLA which is
currently 78.8% occupied.
The 2024, 2026, 2027, 2028, 2029 and 2033 US Private Placement
Notes are denominated in Euros and attract fixed interest rates of
1.59% (on EUR50.9 million), 1.26% (on EUR70.0 million), 2.00% (on
EUR74.1 million), 0.93% (on EUR29.0 million), 2.45% (on EUR105.0
million) and 1.42% (on EUR29.0 million) respectively. The Euro
denominated borrowings provide a natural hedge against the Group's
investment in the Paris and Spain businesses.
The 2026 (GBP35.0 million), 2028 (GBP20.0 million), 2029
(GBP50.5 million), 2029 (GBP30.0 million) and 2031 (GBP80.0
million) US Private Placement Notes are denominated in Sterling and
attract a fixed interest rate of 2.59%, 1.96%, 2.92%, 2.69% and
2.39% respectively.
As a result of the hedging arrangements and fixed interest loan
notes, effectively 93% of the Group's drawn debt is at fixed rates
of interest. Overall, the Group has an effective interest rate on
its borrowings of 2.41% as at 31 October 2022, consistent with
2.36% at the previous year end.
On 11 November 2022, the Group completed the refinancing of its
RCF which were due to expire in June 2023.
The previous GBP250.0 million Sterling and EUR70.0 million Euro
RCF's have been replaced with a single multi-currency GBP400
million facility. In addition, a further GBP100 million uncommitted
accordion facility is incorporated in the facility agreement. The
facility is for a four-year term with two one-year extension
options exercisable after the first and second years of the
agreement.
The Group will pay interest at a margin of 1.25% plus SONIA or
Euribor depending on whether the borrowings are drawn in Sterling
or Euros. The margin is at the same level as the previous facility
agreements.
Non-underlying finance charge
Interest on lease liabilities was GBP5.0 million (FY2021: GBP5.2
million) and reflects part of the leasehold rent costs. The balance
of the leasehold payment is charged through the gain or loss on
investment properties line and variable lease payments in the
income statement. Overall, the leasehold rent costs charge
increased from GBP13.0 million in 2021 to GBP13.6 million in 2022,
principally reflecting the increase rent costs across the portfolio
in addition to the Netherlands leaseholds now forming part of the
Group.
A net loss of GBP0.3 million was recognised on fair valuation of
derivatives (FY2021: net gain of GBP2.9 million). The prior year
gain was primarily driven by the movement in the unexpired interest
rate swaps year on year due to future market expectations around
rising inflation and interest rates.
The Group undertakes net investment hedge accounting for its
Euro denominated loan notes.
Tax
The tax charge for the year is analysed below:
Tax charge 2022 2021
GBP'm GBP'm
Underlying current
tax (5.2) (5.5)
Current year - exceptional (0.9) -
Current tax charge (6.1) (5.5)
------- -------
Tax on investment properties
movement (29.9) (17.8)
Tax on revaluation of interest
rate swaps - (0.1)
Other 0.1 0.8
Deferred tax charge (29.8) (17.1)
------- -------
Net tax charge (35.9) (22.6)
------- -------
The net income tax charge for the year is GBP35.9 million
(FY2021: GBP22.6 million), which relates solely to the Group's
non-UK European businesses. In the UK, the Group is a REIT and
benefits from a zero rate of tax on its qualifying earnings. The
underlying current tax charge relating to the European businesses
amounted to GBP 5.2 million (FY2021: GBP5.5 million), calculated by
applying the effective overall underlying tax rate of 20.9% to the
underlying profits arising earned by the non-UK businesses.
The deferred tax charge relating to Paris, Spain and Benelux was
GBP29.8 million (FY2021: Paris and Spain GBP17.1 million
charge).
In 2022, an exceptional current year tax charge of GBP0.9
million arose on the disposal of the Nanterre land.
All deferred tax movements are non-underlying. The deferred tax
impact of the revaluation gain on investment properties was a
charge of GBP29.9 million (FY2021: GBP17.8 million charge).
Earnings per Share
As a result of the movements explained above, profit after tax
for 2022 was GBP462.9 million as compared with GBP382.0 million in
2021. Basic EPS was 219.5 pence (FY2021: 181.2 pence) and diluted
EPS was 212.4 pence (FY2021: 176.4 pence).
Adjusted Diluted EPRA EPS is based on the European Public Real
Estate Association's definition of earnings and is defined as
profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts. The
Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional
tax items and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore, neither the Company's ability to
distribute nor pay dividends is impacted (with the exception of the
associated National Insurance element). The financial statements
disclose earnings on a statutory, EPRA and Adjusted Diluted EPRA
basis and provide a full reconciliation of the differences in the
financial year in which any Long Term Incentive Plan ("LTIP")
awards may vest.
Management introduced Adjusted Diluted EPRA EPS as a measure of
EPS following the implementation of the Group's LTIP schemes,
Management considers that the real cost to existing shareholders is
the dilution that they will experience from the LTIP schemes;
therefore, earnings has been adjusted for the IFRS 2 share-based
payment charge, and the number of shares used in the EPS
calculation has been adjusted for the dilutive effect of the LTIP
scheme.
The Group has exposure to the movement in the Euro/Sterling
exchange rate. Based on the FY2022 results, for every 10 cents
variance to the average exchange rate of 1.178, there would be an
impact of GBP1.5 million to Adjusted EPRA Earnings.
Adjusted Diluted EPRA EPS for the year was 47.5 pence (FY2021:
40.5 pence), calculated on a pro forma basis, as if the dilutive
LTIP shares were in issue throughout both the current and prior
years, as follows:
2022 2021
Earnings Shares Pence Earnings Shares Pence
per per
GBP'm million share GBP'm million share
Basic earnings 462 .9 210.9 21 9.5 382.0 210.8 181.2
Adjustments:
Gain on investment (381 (180
properties .6) - .9) (321.1) - (152.3)
Exceptional items 0.1 - - 1.9 - 0.9
Other exceptional
gains (10.8) - (5.1) - - -
Exceptional finance
income (0.5) - (0.2) - - -
Net exchange loss - - - 0.6 - 0.3
Change in fair value
of derivatives 0.3 - 0.1 (2.9) - (1.4)
Tax on adjustments/exceptional
tax 29.7 - 14.1 16.2 - 7.7
Adjusted 100.1 210.9 47.5 76.7 210.8 36.4
EPRA adjusted:
Fair value re-measurement
of lease liabilities
add-back (8.3) - (3.9) (7.4) - (3.5)
Tax on lease liabilities
add-back adjustment 1.0 - 0.5 0.9 - 0.4
EPRA basic EPS 92.8 210.9 44.1 70.2 210.8 33.3
Share-based payments
charge 11.2 - 5.3 18.3 - 8.7
Dilutive shares - 8.0 (1.9) - 7.5 (1.5)
Adjusted Diluted
EPRA EPS 104.0 218.9 47.5 88.5 218.3 40.5
--------- -------- ------- --------- -------- --------
Dividends
The Directors are recommending a final dividend of 20.4 pence
(FY2021: 17.6 pence) which Shareholders will be asked to approve at
the Company's Annual General Meeting on 15 March 2023. If approved
by Shareholders, the final dividend will be payable on 7 April 2023
to Shareholders on the register at close of business on 3 March
2023.
Reflective of the Group's improved performance, the Group's full
year dividend of 29.8 pence is 18.7% up on the prior year dividend
of 25.1 pence. The Property Income Distribution ("PID") element of
the full year dividend is 22.75 pence (FY2021: 25.1 pence).
Property valuation and Net Asset Value ("NAV")
Cushman & Wakefield Debenham Tie Leung Limited LLP
("C&W") has valued the Group's property portfolio. As at 31
October 2022, the total value of the Group's property portfolio was
GBP2,457.8 million (excluding investment properties under
construction of GBP94.5 million and net of lease liabilities of
GBP95.1 million). This represents an increase of GBP576.0 million
compared with the GBP1,881.8 million valuation as at 31 October
2021. A reconciliation of the movement is set out below:
UK Paris Spain Benelux Total Paris Spain Benelux
GBP'm GBP'm GBP'm GBP'm GBP'm EUR'm EUR'm EUR'm
Value as at 1 November
2021 1,416.2 440.4 25.2 - 1,881.8 521.6 29.8 -
Currency translation
movement - 9.1 0.4 2.1 11.6 - - -
Additions 19.7 6.3 0.1 5.7 31.8 7.4 0.1 6.8
On acquisition of
subsidiary 2.6 - - 125.6 128.2 - - 148.4
Disposals (6.2) - - - (6.2) - - -
Reclassifications 16.5 - - - 16.5 - - -
Revaluation 308.0 82.3 1.6 2.2 394.1 96.9 2.0 2.5
Value at 31 October
2022 1,756.8 538.1 27.3 135.6 2,457.8 625.9 31.9 157.7
-------- ------ ------ -------- -------- ------ ------ --------
As described in note 13 of the financial statements, the
valuation is based on a discounted cash flow of the net operating
income over a ten-year period and a notional sale of the asset at
the end of the tenth year. Accordingly, the gain on investment
properties principally reflects the continuing progress in the
performance of the business and the strong underlying trading of
the store, underpinned by average rate which has increased by 8.5%
to GBP29.25 in 2022 from GBP26.95 in 2021 with a slight reduction
in occupancy, which is down 2.4ppts to 82.1% in 2022 from 84.5% in
2021, capitalisation rates and stabilised occupancy, as explained
further below.
The exchange rate at 31 October 2022 was EUR1.16:GBP1 compared
with EUR1.18:GBP1 at 31 October 2021. This movement in the foreign
exchange rate has resulted in a GBP11.6 million favourable currency
translation movement in the year. This has slightly improved the
Group Net Asset Value ("NAV") but had no impact on the
loan-to-value ("LTV") covenant as the assets in Paris are tested in
Euros.
The Group's property portfolio valuation excluding investment
properties under construction has increased by GBP576.0 million
from the valuation of GBP1,881.8 million at 31 October 2021. This
reflects the gain on valuation of GBP394.1 million, which is
explained above, plus GBP128.2 million relating to the acquisition
of the remaining 80% in the Joint Venture and the UK Christchurch
store as well as GBP42.1 million relating to additions, store
refurbishments, reclassifications and disposals together with
GBP11.6 million of favourable foreign exchange movements on the
translation of the European portfolios.
The value of the UK investment property portfolio including
investment properties under construction has increased by GBP340.7
million (comprising GBP324.1 million in investment properties and
GBP16.6 million in investment properties under construction)
compared with 31 October 2021. This includes a GBP299.8 million
valuation gain, GBP44.5 million of capital additions, GBP2.6
million of acquisitions, offset by GBP6.2 million of disposals.
In Paris, the value of the property portfolio including
investment properties under construction increased by EUR104.3
million, of which EUR96.9 million was valuation gain and capital
additions were EUR7.4 million. The net increase in investment
properties when translated into Sterling amounted to GBP97.7
million, reflecting the foreign exchange impact described
above.
In Spain, the value of the property portfolio including
investment properties under construction increased by EUR26.9
million, of which EUR2.0 million was valuation gain and capital
additions were EUR24.9 million. The net increase in investment
properties including investment properties under construction when
translated into Sterling amounted to GBP23.6 million, reflecting
the foreign exchange impact described above.
In Benelux, the value of the property portfolio including
investment properties under construction was GBP141.1 million.
Our pipeline of future development opportunities remains strong
and gives us further confidence in our future growth plans,
comprising eleven stores or store extensions in the UK, seven in
France, six in Spain and five in Benelux.
The Group's freehold exit yield for the valuation at 31 October
2022 reduced to 5.66%, from 6.03% at 31 October 2021, and the
weighted average annual discount rate for the whole portfolio has
reduced from 8.72% at 31 October 2021 to 8.49% at 31 October
2022.
C&W's valuation report confirms that the properties have
been valued individually but that if the portfolio were to be sold
as a single lot or in selected groups of properties, the total
value could be different. C&W states that in current market
conditions it is of the view that there could be a material
portfolio premium.
EPRA's Best Practices Recommendations guidelines for Net Asset
Value ("NAV") metrics are EPRA Net Tangible Assets ("NTA"), EPRA
Net Reinstatement Value ("NRV") and EPRA Net Disposal Value
("NDV"). Safestore considers EPRA NTA to be most consistent with
the nature of the Group's business.
The EPRA Basic NTA per Share, as reconciled to IFRS net assets
per share in note 15 of the financial statements, was 908 pence
(FY2021: 697 pence) at 31 October 2022, up 30.3% since 31 October
2021, and the IFRS reported diluted NAV per share was 820 pence
(FY2021: 635 pence), reflecting a GBP418.5 million increase in
reported net assets during the year.
Gearing and capital structure
The Group's borrowings comprise revolving bank borrowing
facilities in the UK and France and US Private Placement Notes.
Net debt (including lease liabilities and cash) stood at
GBP698.3 million at 31 October 2022, an increase of GBP174.5
million from the 2021 position of GBP523.8 million, reflecting
funding for the continued expansion of the Group portfolio. Total
capital (net debt plus equity) increased from GBP1,898.7 million at
31 October 2021 to GBP2,491.7 million at 31 October 2022. The net
impact is that the gearing ratio has increased from 27.6% to 28.0%
in the year.
Management also measures gearing with reference to its
loan-to-value ("LTV") ratio defined as gross debt (excluding lease
liabilities) as a proportion of the valuation of investment
properties and investment properties under construction (excluding
lease liabilities). At 31 October 2022 the Group LTV ratio was
24.4% as compared to 24.9% at 31 October 2021. It should be noted,
under the new facility, signed 11 November 2022, LTV is to be
calculated against net debt which equates to an LTV of 23.6%. The
Board considers the current level of gearing is appropriate for the
business to enable the Group to increase returns on equity,
maintain financial flexibility and achieve our medium term
strategic objectives.
Borrowings at 31 October 2022
As at 31 October 2022, GBP76.0 million of the GBP250.0 million
UK Revolver and EUR30.0 million (GBP25.8 million) of the EUR70.0
million Euro Revolver were drawn. Including the US Private
Placement debt of EUR358.0 million (GBP307.8 million) and GBP215.5
million, the Group's borrowings totalled GBP623.8 million (after
adjustment for unamortised finance costs).
As at 31 October 2022, the weighted average remaining term for
the Group's available borrowing facilities is 4.0 years (FY2021:
4.6 years). If we take into consideration the new financing
completed on 11 November 2022, with a four-year term to November
2026, the weighted average remaining term for the Group's available
borrowing facilities is 5.1 years.
Borrowings under the existing loan facilities are subject to
certain financial covenants. The UK bank facilities and the US
Private Placement share interest cover and LTV covenants. The
interest cover requirement of EBITDA: interest is 2.4:1, where it
will remain until the end of the facilities' terms. Interest cover
for the year ended 31 October 2022 is 11.4x (FY2021: 10.5x).
The LTV covenant is 60% in both the UK and France under the
current facility. As at 31 October 2022, there is significant
headroom in both the UK LTV and the French LTV covenant
calculations.
The Group is in compliance with its covenants at 31 October 2022
and, based on forecast projections, is expected to be in compliance
for a period in excess of twelve months from the date of this
report.
Cash flow
The table below sets out the underlying cash flow of the
business in 2022 and 2021. For statutory reporting purposes,
leasehold costs cash flows are allocated between finance costs,
principal repayments and variable lease payments. However,
management considers a presentation of cash flows that reflects
leasehold costs as a single line item to be representative of the
underlying cash flow performance of the business.
2022 2021
GBP'm GBP'm
Underlying EBITDA 135.1 118.0
Working capital/exceptionals/other (2.7) (2.1)
Adjusted operating
cash inflow 132.4 115.9
Interest payments (11.8) (8.0)
Leasehold rent payments (13.6) (13.0)
Tax payments (5.6) (5.4)
Free cash flow (before investing
and financing activities) 101.4 89.5
Acquisition of subsidiary,
net of cash acquired (111.5) -
Loan to associates - (0.9)
Investment in associates (0.8) (1.9)
Capital expenditure - investment
properties (95.2) (62.4)
Capital expenditure - property,
plant and equipment (1.0) (1.0)
Net proceeds from disposal
of land 1.0 -
Net proceeds from disposal of
investment properties 6.4 -
Proceeds from disposal - property,
plant and equipment 0.2 -
Net cash flow after investing
activities (99.5) 23.3
Issue of share capital 0.5 0.7
Dividends paid (56.9) (42.6)
Net drawdown of borrowings 132.1 43.8
Debt issuance costs (0.1) (0.7)
Financial instruments 1.3 -
Swap termination 0.5 -
Net (decrease)/increase
in cash (22.1) 24.5
-------- -------
Note: Free cash flow is a non-GAAP measure, defined as cash flow
before investing and financing activities but after leasehold rent
payments.
The first table below reconciles free cash flow (before
investing and financing activities) in the table above to net cash
inflow from operating activities in the consolidated cash flow
statement. The second table below reconciles adjusted net cash flow
after investing activities in the table above to the consolidated
cash flow statement. The third table below reconciles adjusted
operating cash inflow to the cash generated from operations in the
consolidated cash flow statement.
2022 2021
GBP'm GBP'm
Free cash flow (before investing and
financing activities) 101.4 89.5
Add back: principal payment of
lease liabilities 8.4 7.5
Net cash flow from operating
activities 109.8 97.0
2022 2021
GBP'm GBP'm
From table above:
Adjusted net cash flow after investing
activities (99.5) 23.3
Add back: principal payment of
lease liabilities 8.4 7.5
Net cash flow after investing
activities (91.1) 30.8
-------- -------
From consolidated cash flow:
Net cash inflow from operating activities 109.8 97.0
Net cash outflow from investing
activities (200.9) (66.2)
Net cash flow after investing
activities (91.1) 30.8
-------- -------
2022 2021
GBP'm GBP'm
Adjusted operating cash inflow 132.4 115.9
Cash outflow on variable lease
payments (0.2) (0.3)
Cash flow from operations 132.2 115.6
Adjusted operating cash flow increased by GBP16.5 million in the
year, principally due to the GBP17.1 million improvement in
Underlying EBITDA.
Working capital, exceptional items and other movements resulted
in a net GBP2.7 million outflow (FY2021: GBP2.1 million outflow),
principally relating to movements in trade receivables and trade
payables.
Free cash flow (before investing and financing activities) grew
by 13.3% to GBP101.4 million (FY2021: GBP89.5 million). The free
cash flow benefited from the increase in Underlying EBITDA and the
increase in adjusted operating cash flow.
Investing activities experienced a net outflow of GBP200.9
million (FY2021: GBP66.2 million outflow), which included GBP111.5
million relating to the acquisition of the remaining 80% in the
Joint Venture as well as the acquisition of the new site at
Christchurch and GBP95.2 million of capital expenditure on our
investment property portfolio as well as cash generated from the
sale of our Birmingham - Digbeth store. Of the GBP95.2 million
capital expenditure on investment properties, GBP60.2 million
related to the UK, GBP6.4 million related to France, GBP21.3
million related to Spain and GBP7.3 million related to Benelux. Of
the GBP95.2 million, GBP7.5 million related to maintenance, GBP68.4
million to new stores and GBP19.3 million to developments and
property, plant and equipment.
Adjusted financing activities generated a net cash inflow of
GBP77.4 million (FY2021: GBP1.2 million inflow). Dividend payments
totalled GBP56.9 million (FY2021: GBP42.6 million). The net
drawdown of borrowings was GBP132.1 million (FY2021: GBP43.8
million), in order to finance the acquisition of the remaining 80%
in the Joint Venture as well as development and pipeline
stores.
Andy Jones
16 January 2023
Consolidated income statement
for the year ended 31 October 2022
Group
--------------
2022 2021
Notes GBP'm GBP'm
------------------------------------------------------- ----- ------ ------
Revenue 2,3 212.5 186.8
Cost of sales (63.0) (56.9)
------------------------------------------------------- ----- ------ ------
Gross profit 149.5 129.9
Administrative expenses (27.1) (34.0)
Share of loss in associate 9 (0.3) -
------------------------------------------------------- ----- ------ ------
Underlying EBITDA 135.1 118.0
Exceptional items 4 (0.1) (1.9)
Share-based payments (11.2) (18.3)
Depreciation and variable lease payments (1.3) (1.4)
Share of associate's depreciation, interest and
tax (0.4) (0.5)
------------------------------------------------------- ----- ------ ------
Operating profit before gains on investment properties
and other exceptional gains 122.1 95.9
Gain on investment properties 10 381.6 321.1
Other exceptional gains 4 10.8 -
------------------------------------------------------- ----- ------ ------
Operating profit 3 514.5 417.0
Finance income 5 2.0 0.6
Finance expense 5 (17.7) (13.0)
------------------------------------------------------- ----- ------ ------
Profit before income tax 498.8 404.6
Income tax charge 6 (35.9) (22.6)
------------------------------------------------------- ----- ------ ------
Profit for the year 462.9 382.0
------------------------------------------------------- ----- ------ ------
Earnings per share for profit attributable to
the equity holders
- basic (pence) 8 219.5 181.2
- diluted (pence) 8 212.4 176.4
------------------------------------------------------- ----- ------ ------
The financial results for both years relate to continuing
operations.
Underlying EBITDA is an Alternative Performance Measure and is
defined as operating profit before exceptional items, share-based
payments, corporate transaction costs, gain/loss on investment
properties, depreciation and variable lease payments and the share
of associate's depreciation, interest and tax.
Consolidated statement of comprehensive income
for the year ended 31 October 2022
Group
--------------
2022 2021
GBP'm GBP'm
------------------------------------------------------ ------ ------
Profit for the year 462.9 382.0
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit
or loss:
Currency translation differences 8.0 (20.3)
Net investment hedge (4.6) 10.9
------------------------------------------------------ ------ ------
Other comprehensive income/(expense), net of tax 3.4 (9.4)
------------------------------------------------------ ------ ------
Total comprehensive income for the year 466.3 372.6
------------------------------------------------------ ------ ------
Consolidated balance sheet
as at 31 October 2022
Group
----------------
2022 2021
Notes GBP'm GBP'm
--------------------------------------------- ------ ------- -------
Assets
Non-current assets
Investment in associates 9 1.8 7.2
--------------------------------------------- ------ ------- -------
External valuation of investment properties,
net of lease liabilities 2,457.8 1,881.8
Add-back of lease liabilities 95.1 82.1
Investment properties under construction 94.5 67.4
--------------------------------------------- ------ ------- -------
Total investment properties 10 2,647.4 2,031.3
Property, plant and equipment 3.4 3.2
Derivative financial instruments 14 - 0.9
Deferred income tax assets 0.8 0.8
--------------------------------------------- ------ ------- -------
2,653.4 2,043.4
--------------------------------------------- ------ ------- -------
Current assets
Inventories 0.3 0.5
Derivative financial instruments 14 1.7 1.3
Trade and other receivables 31.2 28.9
Cash and cash equivalents 12, 18 20.9 43.2
--------------------------------------------- ------ ------- -------
54.1 73.9
--------------------------------------------- ------ ------- -------
Total assets 2,707.5 2,117.3
--------------------------------------------- ------ ------- -------
Current liabilities
Financial liabilities
- bank borrowings 13, 18 (101.7) -
- derivative financial instruments 14 - (0.2)
Trade and other payables (62.7) (75.8)
Current income tax liabilities (0.8) (0.3)
Lease liabilities 15 (13.2) (12.3)
--------------------------------------------- ------ ------- -------
(178.4) (88.6)
--------------------------------------------- ------ ------- -------
Non-current liabilities
Financial liabilities
- bank borrowings 13, 18 (522.1) (484.7)
Deferred income tax liabilities (129.0) (97.0)
Lease liabilities 15 (82.2) (70.0)
Provisions 19 (2.4) (2.1)
--------------------------------------------- ------ ------- -------
(735.7) (653.8)
--------------------------------------------- ------ ------- -------
Total liabilities (914.1) (742.4)
--------------------------------------------- ------ ------- -------
Net assets 1,793.4 1,374.9
--------------------------------------------- ------ ------- -------
Equity
Ordinary shares 16 2.1 2.1
Share premium 61.8 61.3
Translation reserve 8.5 5.1
Retained earnings 1,721.0 1,306.4
--------------------------------------------- ------ ------- -------
Total equity 1,793.4 1,374.9
--------------------------------------------- ------ ------- -------
These financial statements were authorised for issue by the
Board of Directors on 16 January 2023 and signed on its behalf
by:
A Jones F Vecchioli
Chief Financial Officer Chief Executive Officer
Company registration number: 04726380
Consolidated statement of changes in shareholders' equity
for the year ended 31 October 2022
Group
---------------------------------------------------
Share Share Translation Retained
capital premium reserve earnings Total
GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------------------- -------- -------- ----------- --------- -------
Balance at 1 November 2020 2.1 60.6 14.5 958.4 1,035.6
Comprehensive income
Profit for the year - - - 382.0 382.0
Other comprehensive income/(expense)
Currency translation differences - - (20.3) - (20.3)
Net investment hedge - - 10.9 - 10.9
------------------------------------- -------- -------- ----------- --------- -------
Total other comprehensive expense - - (9.4) - (9.4)
------------------------------------- -------- -------- ----------- --------- -------
Total comprehensive income - - (9.4) 382.0 372.6
------------------------------------- -------- -------- ----------- --------- -------
Transactions with owners
Dividends (note 7) - - - (42.6) (42.6)
Increase in share capital - 0.7 - - 0.7
Employee share options - - - 8.6 8.6
------------------------------------- -------- -------- ----------- --------- -------
Transactions with owners - 0.7 - (34.0) (33.3)
------------------------------------- -------- -------- ----------- --------- -------
Balance at 1 November 2021 2.1 61.3 5.1 1,306.4 1,374.9
Comprehensive income
Profit for the year - - - 462.9 462.9
Other comprehensive income/(expense)
Currency translation differences - - 8.0 - 8.0
Net investment hedge - - (4.6) - (4.6)
------------------------------------- -------- -------- ----------- --------- -------
Total other comprehensive income - - 3.4 - 3.4
------------------------------------- -------- -------- ----------- --------- -------
Total comprehensive income - - 3.4 462.9 466.3
------------------------------------- -------- -------- ----------- --------- -------
Transactions with owners
Dividends (note 7) - - - (56.9) (56.9)
Increase in share capital - 0.5 - - 0.5
Employee share options - - - 8.6 8.6
------------------------------------- -------- -------- ----------- --------- -------
Transactions with owners - 0.5 - (48.3) (47.8)
------------------------------------- -------- -------- ----------- --------- -------
Balance at 31 October 2022 2.1 61.8 8.5 1,721.0 1,793.4
------------------------------------- -------- -------- ----------- --------- -------
Consolidated cash flow statement
for the year ended 31 October 2022
Group
----------------
2022 2021
Notes GBP'm GBP'm
----------------------------------------------------- ------ ------- -------
Cash flows from operating activities
Cash generated from operations 17 132.2 115.6
Interest received 0.1 0.9
Interest paid (16.9) (14.1)
Tax paid (5.6) (5.4)
----------------------------------------------------- ------ ------- -------
Net cash inflow from operating activities 109.8 97.0
----------------------------------------------------- ------ ------- -------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (111.5) -
Investment in associates (0.8) (1.9)
Loans to associates - (0.9)
Expenditure on investment properties and development
properties (95.2) (62.4)
Proceeds from disposal of investment properties 6.4 -
Proceeds from disposal of land 1.0 -
Purchase of property, plant and equipment (1.0) (1.0)
Proceeds from sale of property, plant and equipment 0.2 -
----------------------------------------------------- ------ ------- -------
Net cash outflow from investing activities (200.9) (66.2)
----------------------------------------------------- ------ ------- -------
Cash flows from financing activities
Issue of share capital 0.5 0.7
Equity dividends paid 7 (56.9) (42.6)
Proceeds from borrowings 266.1 196.8
Repayment of borrowings (134.0) (153.0)
Exceptional swap termination 5 0.5 -
Financial instruments income 5 1.3 -
Debt issuance costs (0.1) (0.7)
Principal payment of lease liabilities (8.4) (7.5)
----------------------------------------------------- ------ ------- -------
Net cash inflow/(outflow) from financing activities 69.0 (6.3)
----------------------------------------------------- ------ ------- -------
Net (decrease)/increase in cash and cash equivalents (22.1) 24.5
Exchange loss on cash and cash equivalents (0.2) (0.9)
Cash and cash equivalents at 1 November 43.2 19.6
----------------------------------------------------- ------ ------- -------
Cash and cash equivalents at 31 October 12, 18 20.9 43.2
----------------------------------------------------- ------ ------- -------
Notes to the financial statements
for the year ended 31 October 2022
The Board approved this preliminary announcement on 16 January
2023.
The financial information included in this preliminary
announcement does not constitute the Group's statutory accounts for
the years ended 31 October 2021 or 31 October 2022. Statutory
accounts for the year ended 31 October 2021 have been delivered to
the Registrar of Companies. The statutory accounts for the year
ended 31 October 2022 will be delivered to the Registrar of
Companies following the Company's annual general meeting.
The auditor has reported on the 2022 and 2021 accounts; their
report was unqualified, did not include any references to any
matters by way of emphasis and did not contain statements under
section 498 (2) or (3) of the Companies Act 2006.
These financial statements for the year ended 31 October 2022
have been prepared under the historical cost convention except for
the following assets and liabilities, which are stated at their
fair value: investment property, derivative financial instruments
and financial interest in property assets. The accounting policies
used are consistent with those contained in the Group's last annual
report and accounts for the year ended 31 October 2021, except for
items as described below. All amounts are presented in Sterling and
are rounded to the nearest GBP0.1 million, unless otherwise
stated.
The financial information included in this preliminary
announcement has been prepared in accordance with United Kingdom
adopted International Financial Reporting Standards ("IFRS"),
International Financial Reporting Interpretations Committee
("IFRIC") interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than twelve months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing this consolidated financial information.
In assessing the Group's going concern position as at 31 October
2022, the Directors have considered a number of factors, including
the current balance sheet position, the principal and emerging
risks which could impact the performance of the Group and the
Group's strategic and financial plan. Consideration has been given
to compliance with borrowing covenants along with the uncertainty
inherent in future financial forecasts. The Directors considered
the most recent three-year outlook approved by the Board. In the
context of the current environment, four plausible scenarios were
applied to the plan, including a stress test scenario. These were
based on the potential financial impact of the Group's principal
risks and uncertainties and the specific risks associated with the
continued pandemics and the conflict in Ukraine. These scenarios
are differentiated by the impact of demand and enquiry levels,
average rate growth and the level of cost savings. A scenario was
also performed where we have carried out a reverse stress test to
model what would be required to breach ICR and LTV covenants which
indicated highly improbable changes would be needed before any
issues were to arise. Since the end of the financial year, the
Group has completed the refinancing of its Revolving Credit
Facilities ("RCF") which were due to expire in June 2023. The
previous GBP250 million and EUR70 million revolving credit
facilities have been replaced with a single multi-currency GBP400
million facility, with a four-year term with two one-year extension
options (note 23). The impact of these scenarios has been reviewed
against the Group's projected cash flow position and financial
covenants over a three-year period. Should any of these scenarios,
which are differentiated by the impact of demand and enquiry
levels, average rate growth and the level of cost savings occur,
clear mitigating actions are available to ensure that the Group
remains liquid and able to meet its liabilities as they fall due.
The financial position of the Group, including details of its
financing and capital structure, is set out in the financial review
section of this announcement.
Standards, amendments to standards and interpretations issued
and applied
The following new or revised accounting standards or IFRIC
interpretations are applicable for the first time in the year ended
31 October 2022:
-- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform - Phase 2
-- Amendment to IFRS 16 Covid-19 - Related Rent Concessions beyond 30 June 2021
The adoption of the standards and interpretations has not
significantly impacted these financial statements and any changes
to our accounting policies as a result of their adoption have been
reflected in this note.
Critical accounting judgements and key sources of estimation
uncertainty
The following key source of estimation uncertainty has
significant risk of causing a material adjustment, within the next
financial year, to the carrying amounts of assets and liabilities
within the consolidated financial statements:
Estimate of fair value of investment properties and investment
properties under construction
The Group values its investment properties using a discounted
cash flow methodology which is based on projections of net
operating income. Principal assumptions and management's underlying
estimation of the fair value of those relate to: stabilised
occupancy levels; expected future growth in storage rental income
and operating costs; maintenance requirements; capitalisation rate;
and discount rates. There are inter--relationships between the
valuation inputs and they are primarily determined by market
conditions. The effect of an increase in more than one input could
be to magnify the impact on the valuation. However, the impact on
the valuation could be offset by the inter-relationship of two
inputs moving in opposite directions, e.g. an increase in rent may
be offset by a decrease in occupancy, resulting in minimal net
impact on the valuation. For immature stores, these underlying
estimates hold a higher risk of uncertainty, due to the unproven
nature of its cash flows. A more detailed explanation of the
background, methodology and estimates made by management that are
adopted in the valuation of the investment properties as well as
detailed sensitivity analysis is set out in note 10 to the
financial statements.
Critical accounting judgement of business combinations
The Directors assess whether the acquisition of property through
the purchase of a corporate vehicle should be accounted for as an
asset purchase or a business combination. Where the acquired
vehicle is an integrated set of activities and assets that is
capable of being conducted and managed to provide a return to
investors, the transaction is accounted for as a business
combination. Where this is not the case, or where the transaction
meets the requirements of the Concentration of Fair Value test, the
transaction is treated as an asset purchase. The Directors also
have to assess when the Group has gained control of the acquired
corporate vehicle. There have been two transactions where
properties were acquired through the purchase of corporate vehicles
in the year, both judged to meet the accounting definition of an
asset purchase. The most significant of the two transactions was
whereby the Group acquired the remaining interest in Safestore
Storage Benelux B.V. (note 9) that was previously accounted for as
a 20% associate. Upon gaining control, the total consideration
price was allocated across the group of assets being acquired and
the increased carrying values recognised within the now subsidiary
investment.
Non-GAAP financial information/Alternative Performance
Measures
The Directors have identified certain measures that they believe
will assist the understanding of the performance of the business.
The measures are not defined under IFRS and they may not be
directly comparable with other companies' adjusted measures. The
non-GAAP/Alternative Performance Measures are not intended to be a
substitute for, or superior to, any IFRS measures of performance
but they have been included as the Directors consider them to be
important comparables and key measures used within the business for
assessing performance. The following are the key
non-GAAP/Alternative Performance Measures identified by the
Group:
-- The Group defines exceptional items to be those that warrant,
by virtue of their nature, size or frequency, separate disclosure
on the face of the income statement where, in the opinion of the
Directors, this enhances the understanding of the Group's financial
performance.
-- Underlying EBITDA is an Alternative Performance Measure and
is defined as operating profit before exceptional items,
share-based payments, corporate transaction costs, gain/loss on
investment properties, depreciation and variable lease payments and
the share of associate's depreciation, interest and tax. Management
considers this presentation to be representative of the underlying
performance of the business, as it removes the income statement
impact of items not fully controllable by management, such as the
revaluation of derivatives and investment properties, and the
impact of exceptional credits, costs and finance charges. A
reconciliation of statutory operating profit to Underlying EBITDA
can be found in the financial review section of this
announcement.
-- Adjusted Diluted EPRA Earnings per Share is based on the
European Public Real Estate Association's definition of earnings
and is defined as profit or loss for the period after tax but
excluding corporate transaction costs, change in fair value of
derivatives, gain/loss on investment properties and the associated
tax impacts. The Company then makes further company-specific
adjustments for the impact of exceptional items, net exchange
gains/losses recognised in net finance costs, exceptional tax
items, and deferred and current tax in respect of these
adjustments. The Company also adjusts for IFRS 2 share-based
payment charges. This adjusted earnings is divided by the diluted
number of shares. The IFRS 2 cost is excluded as it is written back
to distributable reserves and is a non-cash item (with the
exception of the associated National Insurance element). Therefore,
neither the Company's ability to distribute nor pay dividends are
impacted (with the exception of the associated National Insurance
element). The financial statements disclose earnings on a
statutory, EPRA and Adjusted Diluted EPRA basis and will provide a
full reconciliation of the differences in the financial year in
which any LTIP awards may vest. A reconciliation of statutory basic
Earnings per Share to Adjusted Diluted EPRA Earnings per Share can
be found in note 8.
-- EPRA's Best Practices Recommendations guidelines for Net
Asset Value ("NAV") metrics are EPRA Net Tangible Assets ("NTA"),
EPRA Net Reinstatement Value ("NRV") and EPRA Net Disposal Value
("NDV"). EPRA NTA is considered to be the most relevant measure for
the Group's business which provides sustainable long term
progressive returns and is now the primary measure of net assets.
The basis of calculation, including a reconciliation to reported
net assets, is set out in note 11.
-- Like-for-like figures are presented to aid in the
comparability of the underlying business as they exclude the impact
on results of purchased, sold, opened or closed stores.
-- Constant exchange rate ("CER") figures are provided in order
to present results on a more comparable basis, removing foreign
exchange movements.
Forward-looking statements
Certain statements in this preliminary announcement are
forward-looking. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. We undertake no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise.
2. Revenue
Analysis of the Group's operating revenue can be found
below:
2022 2021
GBP'm GBP'm
------------------------- ------ ------
Self storage income 178.0 154.3
Insurance income 23.9 22.3
Other non-storage income 10.6 10.2
------------------------- ------ ------
Total revenue 212.5 186.8
------------------------- ------ ------
3. Segmental analysis
The segmental information presented has been prepared in
accordance with the requirements of IFRS 8. The Group's revenue,
profit before income tax and net assets are attributable to one
activity: the provision of self storage accommodation and related
services. This is based on the Group's management and internal
reporting structure.
Safestore is organised and managed in four operating segments,
based on geographical areas, being the United Kingdom, Paris in
France, Spain, and the Netherlands and Belgium in Benelux.
The chief operating decision maker, being the Executive
Directors, identified in accordance with the requirements of IFRS
8, assesses the performance of the operating segments on the basis
of Underlying EBITDA, which is defined as operating profit before
exceptional items, share-based payments, corporate transaction
costs, gain/loss on investment properties, depreciation and
variable lease payments, and the share of associate's depreciation,
interest and tax.
The operating profits and assets include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis.
UK Paris Spain Benelux Group
Year ended 31 October 2022 GBP'm GBP'm GBP'm GBP'm GBP'm
----------------------------------------- ------- ------ ------ ------- -------
Continuing operations
Revenue 163.0 41.4 3.0 5.1 212.5
Share of loss in associates (0.3) - - - (0.3)
------------------------------------------ ------- ------ ------ ------- -------
Underlying EBITDA 103.5 28.0 1.5 2.1 135.1
Exceptional items - (0.1) - - (0.1)
Share-based payments (10.2) (1.0) - - (11.2)
Variable lease payments and depreciation (1.2) (0.1) - - (1.3)
Share of associate's depreciation,
interest and tax (0.4) - - - (0.4)
------------------------------------------ ------- ------ ------ ------- -------
Operating profit before gain on
investment properties and other
exceptional gains 91.7 26.8 1.5 2.1 122.1
Gain on investment properties 295.7 78.5 1.3 6.1 381.6
Other exceptional gains 5.7 5.1 - - 10.8
------------------------------------------ ------- ------ ------ ------- -------
Operating profit 393.1 110.4 2.8 8.2 514.5
Net finance (expense)/ income (14.4) (1.6) (0.1) 0.4 (15.7)
------------------------------------------ ------- ------ ------ ------- -------
Profit before tax 378.7 108.8 2.7 8.6 498.8
------------------------------------------ ------- ------ ------ ------- -------
Total assets 2,024.8 581.7 28.2 72.8 2,707.5
------------------------------------------ ------- ------ ------ ------- -------
UK Paris Spain Group
Year ended 31 October 2021 GBP'm GBP'm GBP'm GBP'm
----------------------------------------- ------- ------ ------ -------
Continuing operations
Revenue 144.1 39.9 2.8 186.8
Share of profit in associates - - - -
----------------------------------------- ------- ------ ------ -------
Underlying EBITDA 89.1 27.2 1.7 118.0
Exceptional items - (1.9) - (1.9)
Share-based payments (16.1) (2.2) - (18.3)
Variable lease payments and depreciation (1.1) (0.3) - (1.4)
Share of associate's depreciation,
interest and tax (0.5) - - (0.5)
------------------------------------------ ------- ------ ------ -------
Operating profit before gain
on investment properties 71.4 22.8 1.7 95.9
Gain on investment properties 260.5 56.0 4.6 321.1
------------------------------------------ ------- ------ ------ -------
Operating profit 331.9 78.8 6.3 417.0
Net finance expense (10.5) (1.8) (0.1) (12.4)
------------------------------------------ ------- ------ ------ -------
Profit before tax 321.4 77.0 6.2 404.6
------------------------------------------ ------- ------ ------ -------
Total assets 1,617.9 474.1 25.3 2,117.3
------------------------------------------ ------- ------ ------ -------
Inter-segment transactions are entered into under the normal
commercial terms and conditions that would also be available to
unrelated third parties. There is no material impact from
inter-segment transactions on the Group's results.
4. Exceptional items and other exceptional gains
2022 2021
GBP'm GBP'm
--------------------------------------------------------- ------ ------
Costs relating to corporate transactions and exceptional
property taxation (0.1) (1.9)
--------------------------------------------------------- ------ ------
Exceptional items (0.1) (1.9)
--------------------------------------------------------- ------ ------
2022 2021
GBP'm GBP'm
------------------------------------------- ------ ------
Valuation gain on associate buy-out 5.5 -
Gain on disposals of investment properties 0.2 -
Gain on disposal of land 5.1 -
------------------------------------------- ------ ------
Other exceptional gains 10.8 -
------------------------------------------- ------ ------
Exceptional items of GBP0.1 million were incurred in the year,
relating to fees associated with the Group's corporate
restructuring (FY2021: GBP1.9 million in relation to a provision
for potential liabilities in respect of the French commercial tax
audit of financial years 2012 to 2020).
On 10 November 2021, the Group sold the Nanterre site to the
joint venture partner of Nanterre FOCD 92 for a total price of
EUR7.6 million excluding VAT and including demolition cost
reimbursement, where the settlement is done partially in cash
GBP1.0 million (EUR1.1 million excluding tax), and partially in
kind through the delivery of the new building at the end of the
operation (estimated at EUR6.5 million). This resulted in a net
gain on disposal of GBP5.1 million (EUR5.9 million) included within
other exceptional gains.
On 30 March 2022, the Group acquired the remaining 80% equity of
Safestore Storage Benelux B.V., from its previous joint venture
partner for EUR53.6 million (GBP45.3 million) and became a wholly
owned subsidiary (note 9). The original 20% equity investment was
effectively derecognised and re-recognised back at the fair value
based on the revised equity value effective at the 30 March 2022
transaction. This resulted in a valuation gain on the associate
buy-out of GBP5.5 million included within other exceptional
gains.
On 16 August 2022, the Group sold their Birmingham Digbeth store
to a third party for GBP6.5 million and incurred a 1% agent fee on
the sale price. The carrying value of this store included within
investment properties prior to disposal was GBP6.2 million,
resulting in a gain on disposal of investment properties of GBP0.2
million included within other exceptional gains.
5. Finance income and costs
2022 2021
GBP'm GBP'm
------------------------------------------------- ------ ------
Finance income
Other interest and similar income 0.1 -
Interest receivable from loan to associates 0.1 0.1
Financial instruments income 1.3 0.5
------------------------------------------------- ------ ------
Underlying finance income 1.5 0.6
Exceptional finance income 0.5 -
------------------------------------------------- ------ ------
Total finance income 2.0 0.6
------------------------------------------------- ------ ------
Finance costs
Interest payable on bank loans and overdraft (11.9) (9.7)
Amortisation of debt issuance costs on bank loan (0.5) (0.4)
------------------------------------------------- ------ ------
Underlying finance charges (12.4) (10.1)
Interest on lease liabilities (5.0) (5.2)
Fair value (loss)/gain of derivatives (0.3) 2.9
Net exchange losses - (0.6)
------------------------------------------------- ------ ------
Total finance costs (17.7) (13.0)
------------------------------------------------- ------ ------
Net finance costs (15.7) (12.4)
------------------------------------------------- ------ ------
Included within interest payable of GBP11.9 million (FY2021:
GBP9.7 million) is GBPnil (FY2021: GBP0.6 million) of interest
relating to derivative financial instruments that are economically
hedging the Group's borrowings. The total change in fair value of
derivatives reported within net finance costs for the year is a
GBP0.3 million net loss (FY2021: GBP2.9 million net gain). Included
within finance income is GBP1.3 million, received on settlement of
two EUR8.0 million average rate forward contracts acquired in March
2020 and settled in April 2022, GBP0.7 million, and October 2022,
GBP0.6 million, respectively. The fair value of these two forward
contracts held at 31 October 2021 was GBP1.3 million asset now
disposed and included as part of the net fair value gain of
derivatives within finance costs. Further, included within finance
income is GBP0.5 million (FY2021: GBPnil) in relation to the swaps
held in the subsidiary acquired during the period, Safestore
Storage Benelux B.V., and terminated post acquisition in order to
utilise the Group's existing debt facilities and financial
instruments held.
6. Income tax charge
Analysis of tax charge in the year:
2022 2021
GBP'm GBP'm
--------------- ------ ------
Current tax:
- current year 6.1 5.5
- prior year - -
--------------- ------ ------
6.1 5.5
--------------- ------ ------
Deferred tax:
- current year 29.8 17.1
- prior year - -
--------------- ------ ------
29.8 17.1
--------------- ------ ------
Tax charge 35.9 22.6
---------------- ------ ------
Reconciliation of income tax charge
The tax for the period is lower (FY2021: lower) than the
standard rate of corporation tax in the UK for the year ended 31
October 2022 of 19.0% (FY2021: 19.0%). The differences are
explained below:
2022 2021
GBP'm GBP'm
------------------------------------------------------------- ------ ------
Profit before tax 498.8 404.6
------------------------------------------------------------- ------ ------
Profit on ordinary activities multiplied by standard
rate of corporation tax in the UK of 19.0% (FY2021:
19.0%) 94.8 76.9
Effect of:
- permanent differences - 3.6
- profits from the tax exempt business (71.5) (63.5)
- deferred tax arising on acquisition of overseas subsidiary 4.5 -
- difference from overseas tax rates 8.6 6.4
- potential deferred tax assets not recognised 0.4 -
- utilisation of unrecognised brought forward tax losses (0.9) (0.8)
------------------------------------------------------------- ------ ------
Tax charge 35.9 22.6
------------------------------------------------------------- ------ ------
The Group is a UK real estate investment trust ("REIT"). As a
result, the Group is exempt from UK corporation tax on the profits
and gains from its qualifying property rental business in the UK,
providing it meets certain conditions. Non-qualifying profits and
gains of the Group remain subject to corporation tax as normal. The
Group monitors its compliance with the REIT conditions. There have
been no breaches of the conditions to date.
The main rate of corporation tax in the UK is 19%. Accordingly,
the Group's results for this accounting period are taxed at an
effective rate of 19% (FY2021: 19%). Following the Finance Bill
2021, the main rate of corporation tax will increase from 19% to
25% from 1 April 2023. There will be no deferred taxation impact in
respect of this change in taxation rates.
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
7. Dividends per share
The dividend paid in 2022 was GBP56.9 million (27.00 pence per
share) (FY2021: GBP42.6 million (20.20 pence per share)). A final
dividend in respect of the year ended 31 October 2022 of 20.40
pence (FY2021: 17.60 pence) per share, amounting to a total final
dividend of GBP42.8 million (FY2021: GBP37.0 million), is to be
proposed at the AGM on 15March 2023. The ex-dividend date will be 2
March 2023 and the record date will be 3 March 2023 with an
intended payment date of 7 April 2023. The final dividend has not
been included as a liability at 31 October 2022.
The Property Income Distribution ("PID") element of the final
dividend is 20.40 pence (FY2021: 17.60 pence), making the PID
payable for the year 22.75 pence (FY2021: 25.10 pence) per
share.
8. Earnings per Share
Basic Earnings per Share ("EPS") is calculated by dividing the
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year
excluding ordinary shares held as treasury shares. Diluted EPS is
calculated by adjusting the weighted average number of ordinary
shares to assume conversion of all dilutive potential shares. The
Company has one category of dilutive potential ordinary shares:
share options. For the share options, a calculation is performed to
determine the number of shares that could have been acquired at
fair value (determined as the average annual market price of the
Company's shares) based on the monetary value of the subscription
rights attached to the outstanding share options. The number of
shares calculated as above is compared with the number of shares
that would have been issued assuming the exercise of the share
options.
Year ended 31 October Year ended 31 October
2022 2021
---------------------------- ----------------------------
Earnings Shares Pence Earnings Shares Pence
GBP'm m per share GBP'm m per share
-------------------- -------- ------ ---------- -------- ------ ----------
Basic 462.9 210.9 219.5 382.0 210.8 181.2
Dilutive securities - 7.0 (7.1) - 5.8 (4.8)
-------------------- -------- ------ ---------- -------- ------ ----------
Diluted 462.9 217.9 212.4 382.0 216.6 176.4
-------------------- -------- ------ ---------- -------- ------ ----------
Adjusted Earnings per Share
Explanations related to the adjusted earnings measures adopted
by the Group are set out in note 2 under the heading Non-GAAP
financial information/Alternative Performance Measures. Adjusted
EPS represents profit after tax adjusted for the valuation movement
on investment properties, exceptional items, change in fair value
of derivatives, exchange gains/losses, unwinding of the discount on
the CGS receivable and the associated tax thereon. The Directors
consider that these alternative measures provide useful information
on the performance of the Group.
EPRA earnings and Earnings per Share before non-recurring items,
movements on revaluations of investment properties and changes in
the fair value of derivatives have been disclosed to give a clearer
understanding of the Group's underlying trading performance.
Year ended 31 October Year ended 31 October
2022 2021
---------------------------- ----------------------------
Earnings Shares Pence Earnings Shares Pence
GBP'm m per share GBP'm m per share
------------------------------ -------- ------ ---------- -------- ------ ----------
Basic 462.9 210.9 219.5 382.0 210.8 181.2
Adjustments:
Gain on investment properties (381.6) - (180.9) (321.1) - (152.3)
Exceptional items 0.1 - - 1.9 - 0.9
Other exceptional gains (10.8) - (5.1) - - -
Exceptional finance income (0.5) - (0.2) - - -
Net exchange loss - - - 0.6 - 0.3
Change in fair value
of derivatives 0.3 - 0.1 (2.9) - (1.4)
Tax on adjustments 29.7 - 14.1 16.2 - 7.7
------------------------------ -------- ------ ---------- -------- ------ ----------
Adjusted 100.1 210.9 47.5 76.7 210.8 36.4
EPRA adjusted:
Fair value re-measurement
of lease liabilities
add-back (8.3) - (3.9) (7.4) - (3.5)
Tax on lease liabilities
add-back adjustment 1.0 - 0.5 0.9 - 0.4
------------------------------ -------- ------ ---------- -------- ------ ----------
Adjusted EPRA basic EPS 92.8 210.9 44.1 70.2 210.8 33.3
Share-based payments
charge 11.2 - 5.3 18.3 - 8.7
Dilutive shares - 8.0 (1.9) - 7.5 (1.5)
------------------------------ -------- ------ ---------- -------- ------ ----------
Adjusted Diluted EPRA
EPS(1) 104.0 218.9 47.5 88.5 218.3 40.5
------------------------------ -------- ------ ---------- -------- ------ ----------
Note
1 Adjusted Diluted EPRA EPS is based on the European Public Real
Estate Association's definition of earnings and is defined as
profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts. The
Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share based payment charges, exceptional
tax items, and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore neither the company's ability to
distribute nor pay dividends are impacted (with the exception of
the associated National Insurance element). The financial
statements disclose earnings both on a statutory, EPRA and Adjusted
Diluted EPRA basis and will provide a full reconciliation of the
differences in the financial year in which any LTIP awards may
vest.
Gain on investment properties includes the fair value
re-measurement of lease liabilities add-back of GBP8.3 million
(FY2021: GBP7.4 million) and the related tax thereon of GBP1.0
million (FY2021: GBP0.9 million). As an industry standard measure,
EPRA earnings is presented. EPRA earnings of GBP92.8 million
(FY2021: GBP70.2 million) and EPRA Earnings per Share of 44.1 pence
(FY2021: 33.3 pence) are calculated after further adjusting for
these items.
2022 2021 Movement
EPRA adjusted income statement (non-statutory) GBP'm GBP'm %
------------------------------------------------------ ---------- ----------- --------
Revenue 212.5 186.8 13.8
Underlying operating expenses (excluding depreciation
and variable lease payments) (77.5) (69.3) 11.8
Share of associate's underlying EBITDA 0.1 0.5 (80.0)
------------------------------------------------------ ---------- ----------- --------
Underlying EBITDA before variable lease payments 135.1 118.0 14.5
Share-based payments charge (11.2) (18.3) (38.8)
Depreciation and variable lease payments (1.3) (1.4) (7.1)
------------------------------------------------------ ---------- ----------- --------
Operating profit before fair value re-measurement
lease liabilities add-back 122.6 98.3 24.7
Fair value re-measurement of lease liabilities
add-back (8.3) (7.4) 12.2
------------------------------------------------------ ---------- ----------- --------
Operating profit 114.3 90.9 25.7
Net financing costs (15.9) (14.7) 8.2
Share of associate's finance charges (0.4) (0.5) (20.0)
------------------------------------------------------ ---------- ----------- --------
Profit before income tax 98.0 75.7 29.5
Income tax (5.2) (5.5) (5.5)
------------------------------------------------------ ---------- ----------- --------
Profit for the year ("Adjusted EPRA basic earnings") 92.8 70.2 32.2
------------------------------------------------------ ---------- ----------- --------
Adjusted EPRA basic EPS 44.1 pence 33.3 pence 32.4
20.40
Final dividend per share pence 17.60 pence 15.9
------------------------------------------------------ ---------- ----------- --------
9. Investment in associates
2022 2021
GBP'm GBP'm
------------------------------- ------ ------
Safestore Storage Benelux B.V. - 6.2
PBC Les Groues SAS 1.8 1.0
------------------------------- ------ ------
1.8 7.2
------------------------------- ------ ------
Safestore Storage Benelux B.V. (formerly CERF Storage JV
B.V.)
Until 30 March 2022, the Group had a 20% interest in Safestore
Storage Benelux B.V. ("SSB") (formerly CERF Storage JV B.V.), a
company registered and operating in the Netherlands. SSB was
accounted for using the equity method of accounting. SSB invests in
carefully selected self-storage opportunities in Europe. The Group
earned a fee for providing management services to SSB. This
investment as an associate was considered immaterial relative to
the Group's underlying operations. On 30 March 2022, the Group
acquired the remaining 80% equity from its previous joint venture
partner for EUR53.6 million (GBP45.3 million) and SSB became a
wholly owned subsidiary. IFRS 3 requires the consideration price be
allocated across the assets being acquired. On 30 March 2022 when
the Group gained control, the equity accounting of SSB ceased. The
difference between the equity accounted carrying value of the
investment immediately prior to acquisition and the fair value of
increased investment is a valuation gain of GBP5.5 million (note
4).
The aggregate carrying value of the Group's 20% interest in SSB
at 30 March 2022 was GBP8.7 million (FY2021: GBP8.9 million), made
up of an investment of GBP5.9 million (FY2021: GBP6.2 million), a
loan to the associate including interest accrued of GBP2.8 million
(FY2021: GBP2.7 million) (note 22). The Group's share of losses
from continuing operations for the period was GBP0.3 million
(FY2021: GBPnil). The Group's share of total comprehensive income
of associates in the year was GBP0.3 million (FY2021: GBPnil).
2022 2022
Note GBP'm EUR'm
--------------------------------------------- ---- ------ ------
Initial 20% investment in SSB:
At 31 October 2021 6.2 7.1
Share of loss in associate (0.3) (0.4)
--------------------------------------------- ---- ------ ------
5.9 6.7
--------------------------------------------- ---- ------ ------
Revised fair value of 20% investment in SSB
at 30 March 2022 :
Net assets of SSB (100%) 56.7 67.0
Net assets of SSB (80%) (45.3) (53.6)
--------------------------------------------- ---- ------ ------
11.4 13.4
--------------------------------------------- ---- ------ ------
Difference: Valuation gain on acquisition of
additional 80% investment in SSB 4 5.5 6.7
--------------------------------------------- ---- ------ ------
The following provides a breakdown of the 80% share of fair
value of the assets and liabilities acquired on 30 March 2022.
Under IFRS 3 this transaction where properties were acquired
through the purchase of a corporate vehicle in the year, has been
judged to meet the accounting definition of an asset purchase.
2022 2022
GBP'm EUR'm
----------------------------------------------- ------ ------
Assets:
Investment properties net of lease liabilities 100.5 118.7
Add-back of lease liabilities 0.5 0.6
Inventories 0.1 0.1
Trade and other receivables 0.5 0.6
Cash and cash equivalents 4.4 5.2
------------------------------------------------ ------ ------
106.0 125.2
----------------------------------------------- ------ ------
Liabilities:
Trade and other payables (2.6) (3.0)
Lease liabilities (0.5) (0.6)
Amounts owed to joint venture partner (11.4) (13.4)
Bank borrowings (46.2) (54.6)
------------------------------------------------ ------ ------
(60.7) (71.6)
----------------------------------------------- ------ ------
Net assets (80%) 45.3 53.6
------------------------------------------------ ------ ------
The cash outflow classified as investing activities (excluding
acquisition costs) from this buy-out is summarised as follows:
2022 2022
GBP'm EUR'm
------------------------------------------------ ------ ------
Net assets acquired (remaining 80%) 45.3 53.6
Non-Safestore debt acquired settled with third
parties 69.2 81.7
Less: cash and cash equivalents acquired (5.5) (6.5)
------------------------------------------------- ------ ------
Acquisition of subsidiary, net of cash acquired 109.0 128.8
------------------------------------------------- ------ ------
The Group incurred acquisition related costs of GBP5.1 million
on legal fees and real estate transfer tax ("RETT"). These costs
have been capitalised in accordance with IFRS 3, asset
purchase.
PBC Les Groues SAS
During the period the Group acquired a 24.9% interest in PBC Les
Groues SAS ("PBC"), a company registered and operating in France.
PBC is accounted for using the equity method of accounting. PBC is
the parent company of Nanterre FOCD 92, a company also registered
and operating in France, which will be developing a new store as
part of a wider development programme located in Paris. The
development project will be managed by its joint venture partners;
therefore, the Group will have no operational liability during this
phase. During the period the Group has invested GBP0.8 million
(EUR0.9 million) into this investment. The investment is considered
immaterial relative to the Group's underlying operations.
The aggregate carrying value of the Group's interest in PBC was
GBP1.8 million (FY2021: GBP1.0 million), made up of an investment
of GBP1.8 million (FY2021: GBP1.0 million) (note 22). The Group's
share of profits from continuing operations for the period was
GBPnil (FY2021: GBPnil). The Group's share of total comprehensive
income of associates for the year was GBPnil (FY2021: GBPnil). The
Group's share of total comprehensive income of associates in the
year was GBPnil (FY2021: GBPnil).
10. Investment properties
External
valuation
of investment Investment
properties, Add-back property Total
net of of under investment
lease liabilities lease liabilities construction properties
GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 1 November 2021 1,881.8 82.1 67.4 2,031.3
Acquisition of subsidiaries 128.2 0.6 - 128.8
Additions 31.8 20.2 47.4 99.4
Disposals (6.2) - - (6.2)
Reclassifications 16.5 - (16.5) -
Revaluations 394.1 - (4.2) 389.9
Fair value re-measurement of lease liabilities
add-back - (8.3) - (8.3)
Exchange movements 11.6 0.5 0.4 12.5
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 31 October 2022 2,457.8 95.1 94.5 2,647.4
----------------------------------------------- ------------------ ------------------ ------------- -----------
On 7 December 2021, the Group completed the acquisition of Your
Room Self Storage Limited, which included a freehold store located
in Christchurch, Dorset. Under IFRS 3 this transaction was treated
as an asset acquisition, with a fair value of the investment
property of GBP2.6 million.
On 30 March 2022, the Group completed the buy-out of Safestore
Storage Benelux B.V., which included a portfolio made of twelve
freehold properties, two ground leases and one leasehold property.
Nine properties are located in the Netherlands and six properties
are located in Belgium. Under IFRS 3 this transaction was treated
as an asset acquisition, where the fair value of 100% share of the
investment properties amounting to GBP125.6 million.
On 16 August 2022, the Group sold their Birmingham Digbeth store
to a third party for GBP6.5 million. The carrying value of this
store included within investment properties prior to disposal was
GBP6.2 million, resulting in a gain on disposal of investment
properties of GBP0.2 million included within other exceptional
gains (note 4).
External
valuation
of investment Investment
properties, Add-back property Total
net of of under investment
lease liabilities lease liabilities construction properties
GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 1 November 2020 1,557.5 76.9 14.0 1,648.4
Additions 19.5 14.1 57.9 91.5
Reclassifications 3.7 - (3.7) -
Revaluations 329.0 - (0.5) 328.5
Fair value re-measurement of lease liabilities
add-back - (7.4) - (7.4)
Exchange movements (27.9) (1.5) (0.3) (29.7)
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 31 October 2021 1,881.8 82.1 67.4 2,031.3
----------------------------------------------- ------------------ ------------------ ------------- -----------
The gain on investment properties comprises:
2022 2021
GBP'm GBP'm
------------------------------------------------------------ ------ ------
Revaluations of investment property and investment property
under construction 389.9 328.5
Fair value re-measurement of lease liabilities add-back (8.3) (7.4)
------------------------------------------------------------ ------ ------
381.6 321.1
------------------------------------------------------------ ------ ------
Revaluation
Cost on cost Valuation
GBP'm GBP'm GBP'm
------------------- ------- ----------- ---------
Freehold stores
At 1 November 2021 684.8 846.8 1,531.6
Movement in year 207.9 295.6 503.5
------------------- ------- ----------- ---------
At 31 October 2022 892.7 1,142.4 2,035.1
------------------- ------- ----------- ---------
Leasehold stores
At 1 November 2021 127.6 222.6 350.2
Movement in year 6.1 66.4 72.5
------------------- ------- ----------- ---------
At 31 October 2022 133.7 289.0 422.7
------------------- ------- ----------- ---------
All stores
At 1 November 2021 812.4 1,069.4 1,881.8
Movement in year 214.0 362.0 576.0
------------------- ------- ----------- ---------
At 31 October 2022 1,026.4 1,431.4 2,457.8
------------------- ------- ----------- ---------
The valuation of GBP2,457.8 million (FY2021: GBP1,881.8 million)
excludes GBP0.6 million in respect of owner-occupied property,
which is included within property, plant and equipment. Rental
income earned from investment properties for the year ended 31
October 2022 was GBP179.3 million (FY2021: GBP155.5 million).
The Group has classified the investment property and investment
property under construction, held at fair value, within Level 3 of
the fair value hierarchy. There were no transfers to or from Level
3 during the year.
As described in note 2 summary of significant accounting
policies, where the valuation obtained for investment property is
net of all payments to be made, it is necessary to add back the
lease liability to arrive at the carrying amount of investment
property at fair value. The lease liability of GBP95.4 million
(FY2021: GBP82.3 million) per note 21 differs to the GBP95.1
million (FY2021: GBP82.1 million) disclosed above as a result of
accounting for the French Head Office lease under IFRS 16. This
lease is included as part of property, plant and equipment, and has
a net book value of GBP0.3 million as at 31 October 2022 (FY2021:
GBP0.2 million).
All direct operating expenses arising from investment property
that generated rental income as outlined in note 3 were GBP75.3
million (FY2021: GBP68.5 million).
The freehold and leasehold investment properties have been
valued as at 31 October 2022 by external valuers, Cushman &
Wakefield Debenham Tie Leung Limited ("C&W"). The valuation has
been carried out in accordance with the current edition of the RICS
Valuation - Global Standards, which incorporates the International
Valuation Standards and the RICS Valuation UK National Supplement
(the "RICS Red Book"). The valuation of each of the investment
properties has been prepared on the basis of fair value as a fully
equipped operational entity, having regard to trading potential.
Two non-trading properties were valued on the basis of fair value.
The valuation has been provided for accounts purposes and, as such,
is a Regulated Purpose Valuation as defined in the RICS Red Book.
In compliance with the disclosure requirements of the RICS Red
Book, C&W has confirmed that:
-- the member of the RICS who has been the signatory to the
valuations provided to the Group for the same purposes as this
valuation has done so since April 2020. The valuations have been
reviewed by an internal investment committee comprising two
valuation partners and an investment partner, all unconnected with
the assignment;
-- C&W has been carrying out regular valuations for the same
purpose as this valuation on behalf of the Group since October
2006;
-- C&W does not provide other significant professional or agency services to the Group;
-- in relation to the preceding financial year of C&W, the
proportion of total fees payable by the Group to the total fee
income of the firm is less than 5%; and
-- the fee payable to C&W is a fixed amount per property and
is not contingent on the appraised value.
Portfolio premium
C&W's valuation report confirms that the properties have
been valued individually but that if the portfolio was to be sold
as a single lot or in selected groups of properties, the total
value could be different. C&W states that in current market
conditions it is of the view that there could be a material
portfolio premium.
Valuation method and assumptions
The valuation of the operational self storage facilities has
been prepared having regard to trading potential. Cash flow
projections have been prepared for all of the properties reflecting
estimated absorption, revenue growth and expense inflation. A
discounted cash flow method of valuation based on these cash flow
projections has been used by C&W to arrive at its opinion of
fair value for these properties.
C&W has adopted different approaches for the valuation of
the leasehold and freehold assets as follows:
Freehold and long leasehold (UK, Paris, Spain, the Netherlands
and Belgium)
The valuation is based on a discounted cash flow of the net
operating income over a ten-year period and a notional sale of the
asset at the end of the tenth year.
Assumptions:
-- Net operating income is based on projected revenue received
less projected operating costs together with a central
administration charge of 6% of the estimated annual revenue,
subject to a cap and collar. The initial net operating income is
calculated by estimating the net operating income in the first
twelve months following the valuation date.
-- The net operating income in future years is calculated
assuming either straight-line absorption from day one actual
occupancy or variable absorption over years one to four of the cash
flow period, to an estimated stabilised/mature occupancy level. In
the valuation the assumed stabilised occupancy level for the
trading stores (both freeholds and all leaseholds) open at 31
October 2022 averages 89.18% (FY2021: 89.10%). The projected
revenues and costs have been adjusted for estimated cost inflation
and revenue growth. The average time assumed for stores to trade at
their maturity levels is 18.51 months (FY2021: 18.27 months).
-- The capitalisation rates applied to existing and future net
cash flows have been estimated by reference to underlying yields
for industrial and retail warehouse property, yields for other
trading property types such as purpose-built student housing and
hotels, bank base rates, ten-year money rates, inflation and the
available evidence of transactions in the sector. The valuation
included in the accounts assumes rental growth in future periods.
If an assumption of no rental growth is applied to the external
valuation, the net initial yield pre-administration expenses for
mature stores (i.e. excluding those stores categorised as
"developing") is 6.30% (FY2021: 6.73%), rising to a stabilised net
yield pre-administration expenses of 6.74% (FY2021: 6.90%).
-- The weighted average freehold exit yield on UK freeholds is
5.83% (FY2021: 6.07%), on France freeholds is 5.49% (FY2021:
5.88%), on Spain freeholds is 5.50% (FY2021: 5.38%), on the
Netherlands freeholds is 5.08% and Belgium freeholds is 5.02%. The
weighted average freehold exit yield for all freeholds adopted is
5.66% (FY2021: 6.03%).
-- The future net cash flow projections (including revenue
growth and cost inflation) have been discounted at a rate that
reflects the risk associated with each asset. The weighted average
annual discount rate adopted (for both freeholds and leaseholds) in
the UK portfolio is 8.40% (FY2021: 8.62%), in the France portfolio
is 8.78% (FY2021: 8.98%), in the Spain portfolio is 8.00% (FY2021:
7.87%), in the Netherlands portfolio is 7.33% and in the Belgium
portfolio 7.62%. The weighted average annual discount rate adopted
(for both freeholds and all leaseholds) is 8.49% (FY2021:
8.72%).
-- Purchaser's costs in the range of approximately 3.3% to 6.8%
for the UK, 7.5% for Paris, 2.5% for Spain, 7.5% for the
Netherlands and 7.5% for Belgium, have been assumed initially,
reflecting the progressive SDLT rates brought into force in March
2016 in the UK, and sales plus purchaser's costs totalling
approximately 5.3% to 8.8% (UK), 9.5% (Paris),4.5% (Spain), 7.5%
(the Netherlands) and 7.5% (Belgium) are assumed on the notional
sales in the tenth year in relation to freehold and long leasehold
stores.
Short leaseholds (UK)
The same methodology has been used as for freeholds, except that
no sale of the assets in the tenth year is assumed but the
discounted cash flow is extended to the expiry of the lease. The
average unexpired term of the Group's UK short term leasehold
properties is 13.0 years (FY2021: 12.2 years). The average
unexpired term excludes the commercial leases in France and
Spain.
Short leaseholds (Paris)
In relation to the commercial leases in Paris, C&W has
valued the cash flow projections in perpetuity due to the security
of tenure arrangements in that market and the potential
compensation arrangements in the event of the landlord wishing to
take possession. The valuation treatment is therefore the same as
for the freehold properties. The capitalisation rates on these
stores reflect the risk of the landlord terminating the lease
arrangements.
Short leaseholds (Spain)
In relation to the two commercial leases in Spain, C&W has
valued the cash flow projections in perpetuity due to the nature of
the lease agreements which allows the tenant to renew the lease
year on year into perpetuity. The valuation treatment is therefore
the same as for the freehold properties. The capitalisation rates
on these stores reflect the risk of the rolling lease
arrangements.
In relation to one other short leasehold in Spain, the lease
allows for a five-year automatic extension beyond the initial lease
expiry date subject to neither party serving notice stating it does
not wish to do so. This allows the landlord to terminate the lease
at the original expiry date if it so wishes. The same methodology
has been used as for freeholds, except that no sale of the asset in
the tenth year is assumed but the discounted cash flow is extended
to the expiry of the lease.
Short leaseholds (the Netherlands)
The same methodology has been used as for freeholds, except that
no sale of the assets in the tenth year is assumed but the
discounted cash flow is extended to the expiry of the lease.
Short leaseholds (Belgium)
There are no short term leaseholds in Belgium.
Investment properties under construction
C&W has valued the stores in development adopting the same
methodology as set out above but on the basis of the cash flow
projection expected for the store at opening and allowing for the
outstanding costs to take each store from its current state to
completion and full fit out, except several recently acquired
stores which have been valued at acquisition costs. C&W has
allowed for carry costs and construction contingency, as
appropriate.
Immature stores: value uncertainty
C&W has assessed the value of each property individually.
However, three of the stores in the portfolio are relatively
immature and have low initial cash flow. C&W has endeavoured to
reflect the nature of the cash flow profile for these properties in
its valuation, and the higher associated risks relating to the as
yet unproven future cash flow, by adjustment to the capitalisation
rates and discount rates adopted. However, immature low cash flow
stores of this nature are rarely, if ever, traded individually in
the market, unless as part of a distressed sale or similar
situation, although, there is more evidence of such stores being
traded as part of a group or portfolio transaction.
C&W considers there to be market uncertainty in the self
storage sector due to the lack of comparable market transactions
and information. The degree of uncertainty relating to the three
immature stores is greater than in relation to the balance of the
properties due to there being even less market evidence than might
be available for more mature properties and portfolios.
C&W states that, in practice, if an actual sale of the
properties was to be contemplated then any immature low cash flow
stores would normally be presented to the market for sale lotted or
grouped with other more mature assets owned by the same entity, in
order to alleviate the issue of negative or low short term cash
flow. This approach would enhance the marketability of the group of
assets and assist in achieving the best price available in the
market by diluting the cash flow risk.
C&W has not adjusted its opinion of fair value to reflect
such a grouping of the immature assets with other properties in the
portfolio and all stores have been valued individually. However,
C&W highlights the matter to alert the Group to the manner in
which the properties might be grouped or lotted in order to
maximise their attractiveness to the marketplace.
C&W considers this approach to be a valuation assumption but
not a special assumption, the latter being an assumption that
assumes facts that differ from the actual facts existing at the
valuation date and which, if not adopted, could produce a material
difference in value.
Valuation assumption for purchaser's costs
The Group's investment property assets have been valued for the
purposes of the financial statements after adjusting for notional
purchaser's costs in the range of approximately 3.3% to 6.8% (UK),
7.5% (Paris), 2.5% (Spain), 7.5% (the Netherlands) and 7.5%
(Belgium), as if they were sold directly as property assets. The
valuation is an asset valuation which is strongly linked to the
operating performance of the business. They would have to be sold
with the benefit of operational contracts, employment contracts and
customer contracts, which would be difficult to achieve except in a
corporate structure.
This approach follows the logic of the valuation methodology in
that the valuation is based on a capitalisation of the net
operating income after allowing a deduction for operational cost
and an allowance for central administration costs. A sale in a
corporate structure would result in a reduction in the assumed
stamp duty land tax but an increase in other transaction costs
reflecting additional due diligence resulting in a reduced notional
purchaser's cost of c. 2.75% of gross value. All the significant
sized transactions that have been concluded in the UK in recent
years were completed in a corporate structure. The Group therefore
instructed C&W to prepare additional valuation advice on the
basis of purchaser's cost of 2.75% of gross value which is used for
internal management purposes.
Sensitivity of the valuation to assumptions
As noted in "Key sources of estimation uncertainty", self
storage valuations are complex, derived from data which is not
widely publicly available and involves a degree of judgement. All
other factors being equal, higher net operating income would lead
to an increase in the valuation of a store and an increase in the
capitalisation rate or discount rate would result in a lower
valuation, and vice versa. Higher assumptions for stabilised
occupancy, absorption rate, rental rate and other revenue, and a
lower assumption for operating costs, would result in an increase
in projected net operating income, and thus an increase in
valuation.
There are inter-relationships between the valuation inputs, and
they are primarily determined by market conditions. The effect of
an increase in more than one input could be to magnify the impact
on the valuation. However, the impact on the valuation could be
offset by the inter-relationship of two inputs moving in opposite
directions, e.g. an increase in rent may be offset by a decrease in
occupancy, resulting in no net impact on the valuation.
As noted in "Key sources of estimation uncertainty", self
storage valuations are complex, derived from data which is not
widely available and involve a degree of judgement. For these
reasons we have classified the valuation of our property portfolio
as Level 3 as defined by IFRS 13. Inputs to the valuation, some of
which are "unobservable" as defined by IFRS 13, include
capitalisation yields, stable occupancy rates, and time to
stabilised occupancy. The existence of an increase of more than one
unobservable input would augment the impact on the valuation. The
impact on the valuation would be mitigated by the
inter-relationship between unobservable inputs moving in opposite
directions. For example, an increase in stable occupancy may be
offset by an increase in yield, resulting in no net impact on the
valuation. A sensitivity analysis showing the impact on valuations
of changes in capitalisation rates and stable occupancy is shown
below:
Impact
Impact of change of a delay
in Impact of a change in stabilised
capitalisation in stabilised occupancy occupancy
rates assumption assumption
GBP'm GBP'm GBP'm
-------------------- -------------------------- --------------
25 bps 25 bps 24-month
decrease increase 1% increase 1% decrease delay
--------------- --------- --------- ------------ ------------ --------------
Reported Group 107.0 (90.2) 40.0 (32.0) (10.6)
--------------- --------- --------- ------------ ------------ --------------
11. Net assets per share
EPRA's Best Practices Recommendations guidelines for Net Asset
Value ("NAV") metrics are EPRA Net Tangible Assets ("NTA"), EPRA
Net Reinstatement Value ("NRV") and EPRA Net Disposal Value
("NDV").
EPRA NTA is considered to be the most relevant measure for the
Group's business which provides sustainable long term progressive
returns and is now the primary measure of net assets, replacing the
previously reported EPRA NAV metric. EPRA NTA assumes that entities
buy and sell assets, thereby crystallising certain levels of
unavoidable deferred tax. Due to the Group's REIT status, deferred
tax is only provided at each balance sheet date on properties
outside the REIT regime. As a result, deferred taxes are excluded
from EPRA NTA for properties within the REIT regime. For properties
outside of the REIT regime, deferred tax is included to the extent
that it is expected to crystallise, based on the Group's track
record and tax structuring.
There are no reconciling items between EPRA NTA and the
previously reported EPRA NAV metric. EPRA NTA is shown in the table
below:
2022 2021
------------------- -------------------
Diluted Diluted
GBP'm pence GBP'm pence
per share per share
----------------------------------------------- ------- ---------- ------- ----------
Balance sheet net assets 1,793.4 820 1,374.9 635
Adjustments to exclude:
Fair value of derivative financial instruments
(net of deferred tax) (1.7) (2.0)
Deferred tax liabilities on the revaluation
of investment properties 129.0 96.9
----------------------------------------------- ------- ---------- ------- ----------
EPRA NTA 1,920.7 879 1,469.8 679
----------------------------------------------- ------- ---------- ------- ----------
Basic net assets per share 848 652
----------------------------------------------- ------- ---------- ------- ----------
EPRA basic NTA per share 908 697
----------------------------------------------- ------- ---------- ------- ----------
The basic and diluted net assets per share have been calculated
based on the following number of shares:
2022 2021
Number Number
-------------------------------------------------------- ----------- -----------
Shares in issue
At year end 211,927,497 210,823,703
Adjustment for Employee Benefit Trust (treasury) shares (359,795) (41,259)
-------------------------------------------------------- ----------- -----------
IFRS/EPRA number of shares (basic) 211,567,702 210,782,444
-------------------------------------------------------- ----------- -----------
Dilutive effect of Save As You Earn shares 87,562 109,100
Dilutive effect of Long Term Incentive Plan shares 6,956,633 5,706,061
-------------------------------------------------------- ----------- -----------
IFRS/EPRA number of shares (diluted) 218,611,897 216,597,605
-------------------------------------------------------- ----------- -----------
Basic net assets per share is shareholders' funds divided by the
number of shares at the year end. Diluted net assets per share is
shareholders' funds divided by the number of shares at the year
end, adjusted for dilutive share options of 7,044,195 shares
(FY2021: 5,815,161 shares). EPRA diluted net assets per share
excludes deferred tax liabilities arising on the revaluation of
investment properties. The EPRA NAV, which further excludes fair
value adjustments for debt and related derivatives net of deferred
tax, was GBP1,920.7 million (FY2021: GBP1,469.8 million), giving
EPRA NTA per share of 879 pence (FY2021: 679 pence). The Directors
consider that these alternative measures provide useful information
on the performance of the Group.
EPRA adjusted balance sheet (non-statutory)
2022 2021
GBP'm GBP'm
----------------------------------------- --------- ---------
Assets
Non-current assets 2,653.4 2,042.5
Current assets 52.4 72.6
----------------------------------------- --------- ---------
Total assets 2,705.8 2,115.1
----------------------------------------- --------- ---------
Liabilities
Current liabilities (178.4) (88.4)
Non-current liabilities (606.7) (557.0)
----------------------------------------- --------- ---------
Total liabilities (785.1) (645.4)
----------------------------------------- --------- ---------
EPRA adjusted Net Asset Value 1,920.7 1,469.7
----------------------------------------- --------- ---------
EPRA adjusted basic net assets per share 908 pence 697 pence
----------------------------------------- --------- ---------
12. Cash and cash equivalents
2022 2021
GBP'm GBP'm
------------------------- ------ ------
Cash at bank and in hand 20.9 43.2
------------------------- ------ ------
13. Financial liabilities - bank borrowings and secured
notes
2022 2021
Non-current GBP'm GBP'm
----------------------------- ------ ------
Bank loans and secured notes
Secured 625.1 486.5
Debt issue costs (1.3) (1.8)
----------------------------- ------ ------
623.8 484.7
----------------------------- ------ ------
The Group's borrowings consist of bank facilities of GBP250
million and EUR70 million maturing in June 2023. Further in April
2022, the Group extended its borrowing facilities, with the
issuance of a EUR105 million US Private Shelf Placement Note from a
group of existing investors. The Group now has US Private Placement
Notes of EUR 358 million (FY2021: EUR253 million) which have
maturities extending to 2024, 2026, 2027, 2028, 2029 and 2033 and
GBP215.5 million (FY2021: GBP215.5 million) which have maturities
extending to 2026, 2028, 2029 and 2031. The blended cost of
interest on the overall debt at 31 October 2022 was 2.41% per
annum. Since the year end the Group has successfully refinanced
their bank facilities borrowings (note 23).
The bank facilities attract a margin over SONIA/EURIBOR. The
margin ratchets between 1.25% and 2.50%, by reference to the
Group's performance against its interest cover covenant.
Approximately 54% of the drawn bank facilities have been hedged at
an effective rate of 0.6885% (SONIA).
The Company has in issue EUR50.9 million (FY2021: EUR50.9
million) 1.59% Series A Senior Secured Notes due 2024, EUR70.0
million (FY2021: EUR70.0 million) 1.26% Series A Secured Notes due
2026, GBP35.0 million (FY2021: GBP35.0 million) 2.59% Series B
Senior Secured Notes due 2026, EUR74.1 million (FY2021: EUR74.1
million) 2.00% Series B Senior Secured Notes due 2027, GBP20.0
million (FY2021: GBP20.0 million) 1.96% Series A Secured Notes due
2028, EUR29.0 million (FY2021: EUR29.0 million) 0.93% Series B
Secured Notes due 2028, GBP50.5 million (FY2021: GBP50.5 million)
2.92% Series C Senior Secured Notes due 2029, GBP30.0 million
(FY2021: GBP30.0 million) 2.69% Series C Senior Secured Notes due
2029, EUR105.0 million (FY2021: EURnil) 2.45% Private Shelf Senior
Secured Notes due 2029, GBP80.0 million (FY2021: GBP80.0 million)
2.39% Series C Secured Notes due 2031 and EUR29.0 million (FY2021:
EUR29.0 million) 1.42% Series D Secured Notes due 2033. The
EUR358.0 million of Euro denominated borrowings provides a natural
hedge against the Group's investment in the France, Spain, the
Netherlands and Belgium businesses, so the Group has applied net
investment hedge accounting and the retranslation of these
borrowings is recognised directly in the translation reserve.
The bank loans and overdrafts are secured by a fixed charge over
the Group's investment property portfolio. As part of the Group's
interest rate management strategy, the Group has entered into
several interest rate swap contracts, details of which are shown in
note 14.
Bank loans and secured notes are stated before unamortised issue
costs of GBP1.3 million (FY2021: GBP1.8 million).
Bank loans and secured notes are repayable as follows:
Group
--------------
2022 2021
GBP'm GBP'm
----------------------------- ------ ------
Within one year 101.8 -
Between one and two years 43.8 57.3
Between two and five years 158.9 137.1
After more than five years 320.6 292.1
----------------------------- ------ ------
Bank loans and secured notes 625.1 486.5
Unamortised debt issue costs (1.3) (1.8)
----------------------------- ------ ------
623.8 484.7
----------------------------- ------ ------
The effective interest rates at the balance sheet date were as
follows:
2022 2021
----------------------- -------------------------- --------------------------
Bank loans (UK term Quarterly or monthly SONIA Quarterly or monthly SONIA
loan) plus 1.25% plus 1.25%
Bank loans (Euro term Quarterly EURIBOR plus Quarterly EURIBOR plus
loan) 1.25% 1.25%
Private Placement Notes Weighted average rate
(Euros) 1.80% of 1.52%
Private Placement Notes Weighted average rate
(Sterling) 2.55% of 2.55%
----------------------- -------------------------- --------------------------
Borrowing facilities
The Group has the following undrawn committed borrowing
facilities available at 31 October in respect of which all
conditions precedent had been met at that date:
Floating rate
---------------
2022 2021
GBP'm GBP'm
------------------------- ------- ------
Expiring within one year 208.4 -
Expiring beyond one year - 251.8
------------------------- ------- ------
208.4 251.8
------------------------- ------- ------
As described above the Group's bank facilities mature in June
2023.
The carrying amounts of the Group's borrowings are denominated
in the following currencies:
2022 2021
GBP'm GBP'm
--------- ------ ------
Sterling 295.1 247.5
Euros 333.6 239.0
--------- ------ ------
625.1 486.5
--------- ------ ------
14. Financial instruments
Financial instruments disclosures are set out below:
2022 2021
----------------- -----------------
Asset Liability Asset Liability
GBP'm GBP'm GBP'm GBP'm
-------------------------- ------ --------- ------ ---------
Interest rate swaps 1.2 - 0.3 (0.2)
Foreign currency forwards 0.5 - 1.9 -
-------------------------- ------ --------- ------ ---------
The fair value of financial instruments that are not traded in
an active market, such as over the counter derivatives, is
determined using valuation techniques. The Group obtains such
valuations from counterparties which use a variety of assumptions
based on market conditions existing at each balance sheet date.
The fair values of all financial instruments are equal to their
book value, with the exception of bank loans, which are set out
below. The fair value of secured loan notes is determined using a
discounted cash flow, while the fair value of bank loans drawn from
the Group's bank facilities equates to book value. The carrying
value less impairment provision of trade receivables, other
receivables and the carrying value of trade payables and other
payables approximates to their fair value.
The fair value of bank loans is calculated as:
2022 2021
---------------------- ----------------------
Book value Fair value Book value Fair value
GBP'm GBP'm GBP'm GBP'm
----------- ---------- ---------- ---------- ----------
Bank loans 623.8 694.1 484.7 543.9
----------- ---------- ---------- ---------- ----------
Fair value hierarchy
IFRS 13 requires fair value measurements to be recognised using
a fair value hierarchy that reflects the significance of the inputs
used in the measurements, according to the following levels:
Level 1 - unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly.
Level 3 - inputs for the asset or liability that are not based
on observable market data.
The table below shows the level in the fair value hierarchy into
which fair value measurements have been categorised:
2022 2021
Assets per the balance sheet GBP'm GBP'm
------------------------------------------- ------ ------
Derivative financial instruments - Level 2 1.7 2.2
Amounts due from associates - Level 2 - 2.7
------------------------------------------- ------ ------
2022 2021
Liabilities per the balance sheet GBP'm GBP'm
------------------------------------------- ------ ------
Derivative financial instruments - Level 2 - 0.2
Bank loans - Level 2 694.1 543.9
------------------------------------------- ------ ------
There were no transfers between Level 1, 2 and 3 fair value
measurements during the current or prior year.
Over the life of the Group's derivative financial instruments,
the cumulative fair value gain/loss on those instruments will be
GBPnil as it is the Group's intention to hold them to maturity.
Interest rate swaps not designated as part of a hedging
arrangement
The notional principal amounts of the outstanding interest rate
swap contracts at 31 October 2022 were GBP55.0 million and EURnil
(FY2021: GBP55.0 million and EUR30.0 million). At 31 October 2022
the weighted average fixed interest rates were Sterling at 0.6885%
(FY2021: Sterling at 0.8152% and Euro at 0.1656%), and floating
rates are at quarterly SONIA. The GBP55.0 million SONIA swaps
expire in June 2023. The movement in fair value recognised in the
income statement was a net gain of GBP1.0 million (FY2021: net gain
of GBP1.5 million).
Foreign currency forwards not designated as part of a hedging
arrangement
As at 31 October 2022, the Group has one tranche of average rate
forward contracts for a notional amount totalling EUR8.5 million at
a rate of EUR1.0751 to the Pound (FY2021: three tranches totalling
EUR24.5 million). The Group will receive the Sterling equivalent at
this average exchange rate and pay the Sterling equivalent of the
average monthly spot rates on the Euro notional amounts, which has
a maturity date of 28 April 2023. The movement in the fair value
recognised in the income statement in the period was a net loss of
GBP1.3 million (FY2021: net gain of GBP1.4 million). The EUR8.0
million tranche previously held matured and was settled in April
2022, resulting in a fair value disposal of GBP0.7 million and a
receipt of GBP0.7 million. The EUR8.0 million tranche previously
held matured and was settled in October 2022, resulting in a fair
value disposal of GBP0.6 million and a receipt of GBP0.6 million.
This resulted in GBP1.3 million recognised as finance income and
GBP1.3 million expense as part of the GBP0.3 million expense
recognised in fair value movement of derivatives within finance
costs in the income statement.
Financial instruments by category
Assets
Financial at fair
assets value through
at amortised profit
cost and loss Total
Assets per the balance sheet GBP'm GBP'm GBP'm
-------------------------------------------------- ------------- -------------- ------
Trade receivables and other receivables excluding
prepayments 24.0 - 24.0
Derivative financial instruments - 1.7 1.7
Cash and cash equivalents 20.9 - 20.9
-------------------------------------------------- ------------- -------------- ------
At 31 October 2022 44.9 1.7 46.6
-------------------------------------------------- ------------- -------------- ------
Other financial Liabilities
liabilities at fair
at value through
amortised profit
cost and loss Total
Liabilities per the balance sheet GBP'm GBP'm GBP'm
----------------------------------------- --------------- -------------- ------
Borrowings (excluding lease liabilities) 623.8 - 623.8
Lease liabilities 95.4 - 95.4
Payables and accruals 43.9 - 43.9
----------------------------------------- --------------- -------------- ------
At 31 October 2022 763.1 - 763.1
----------------------------------------- --------------- -------------- ------
Assets
Financial at fair
assets value through
at amortised profit
cost and loss Total
Assets per the balance sheet GBP'm GBP'm GBP'm
-------------------------------------------------- ------------- -------------- ------
Trade receivables and other receivables excluding
prepayments 20.9 - 20.9
Amounts due from associates 2.7 - 2.7
Derivative financial instruments - 2.2 2.2
Cash and cash equivalents 43.2 - 43.2
-------------------------------------------------- ------------- -------------- ------
At 31 October 2021 66.8 2.2 69.0
-------------------------------------------------- ------------- -------------- ------
Other financial Liabilities
liabilities at fair
at value through
amortised profit
cost and loss Total
Liabilities per the balance sheet GBP'm GBP'm GBP'm
----------------------------------------- --------------- -------------- ------
Borrowings (excluding lease liabilities) 484.7 - 484.7
Lease liabilities 82.3 - 82.3
Derivative financial instruments - 0.2 0.2
Payables and accruals 58.2 - 58.2
----------------------------------------- --------------- -------------- ------
At 31 October 2021 625.2 0.2 625.4
----------------------------------------- --------------- -------------- ------
The interest rate risk profile, after taking account of
derivative financial instruments, was as follows:
2022 2021
------------------------ ----------------------------
Floating Fixed Floating
rate rate Total rate Fixed rate Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
----------- -------- ------ ------ -------- ---------- ------
Borrowings 46.8 577.0 623.8 - 484.7 484.7
----------- -------- ------ ------ -------- ---------- ------
The weighted average interest rate of the fixed rate financial
borrowing was 2.05% (FY2021: 2.01%) and the weighted average
remaining period for which the rate is fixed was five years
(FY2021: six years).
Maturity analysis
The table below analyses the Group's financial liabilities and
non-settled derivative financial instruments into relevant maturity
groupings based on the remaining period at the balance sheet date
to the contractual maturity dates. The amounts disclosed in the
table are the contractual undiscounted cash flows.
One to Two to
Less than two five More than
one year years years five years
GBP'm GBP'm GBP'm GBP'm
-------------------------------- --------- ------ ------ -----------
2022
Borrowings 114.7 53.9 187.8 348.3
Derivative financial instruments 1.0 - - -
Lease liabilities 13.8 12.9 35.9 74.7
Payables and accruals 43.9 - - -
-------------------------------- --------- ------ ------ -----------
173.4 66.8 223.7 423.0
-------------------------------- --------- ------ ------ -----------
One to Two to
Less than two five More than
one year years years five years
GBP'm GBP'm GBP'm GBP'm
-------------------------------- --------- ------ ------ -----------
2021
Borrowings 10.6 67.4 162.1 313.4
Derivative financial instruments 0.3 0.3 - -
Lease liabilities 12.9 11.5 30.9 58.8
Payables and accruals 58.2 - - -
-------------------------------- --------- ------ ------ -----------
82.0 79.2 193.0 372.2
-------------------------------- --------- ------ ------ -----------
15. Lease liabilities
The Group leases certain of its investment properties under
lease liabilities. The average remaining lease term is 10.9 years
(FY2021: 10.3 years).
Present value of
minimum
Minimum lease payments lease payments
------------------------ ------------------
2022 2021 2022 2021
GBP'm GBP'm GBP'm GBP'm
-------------------------------------- ----------- ----------- -------- --------
Within one year 13.8 12.9 13.2 12.3
Within two to five years 48.8 42.4 40.6 35.3
Greater than five years 74.7 58.8 41.6 34.7
-------------------------------------- ----------- ----------- -------- --------
137.3 114.1 95.4 82.3
Less: future finance charges on lease
liabilities (41.9) (31.8) - -
-------------------------------------- ----------- ----------- -------- --------
Present value of lease liabilities 95.4 82.3 95.4 82.3
-------------------------------------- ----------- ----------- -------- --------
2022 2021
GBP'm GBP'm
------------ ------ ------
Current 13.2 12.3
Non-current 82.2 70.0
------------ ------ ------
95.4 82.3
------------ ------ ------
Amounts recognised within the consolidated income statement
include interest on lease liabilities of GBP5.0 million and
variable lease payments not included in the measurement of the
lease liabilities of GBP0.3 million. Amounts recognised in the
consolidated statement of cash flows include lease liabilities
principal payments of GBP8.4 million and interest on lease
liabilities of GBP5.0 million. The maturity analysis for lease
liabilities under contractual undiscounted cash flows is included
in note 14.
16. Called up share capital
2022 2021
GBP'm GBP'm
----------------------------------------------------- ------ ------
Called up, allotted and fully paid
211,927,497 (FY2021: 210,823,703) ordinary shares of
1 pence each 2.1 2.1
----------------------------------------------------- ------ ------
17. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from
operating activities:
2022 2021
Cash generated from continuing operations Notes GBP'm GBP'm
--------------------------------------------------- ----- ------- -------
Profit before income tax 498.8 404.6
Gain on investment properties 10 (381.6) (321.1)
Other exceptional gains 4 (10.8) -
Share of loss in associates 0.3 -
Depreciation 1.0 1.0
Net finance expense 15.7 12.4
Employee share options 8.6 8.6
Changes in working capital:
Decrease/(increase) in inventories 0.2 (0.2)
Decrease/(increase) in trade and other receivables 0.1 (5.4)
(Decrease)/increase in trade and other payables (0.4) 13.6
Increase in provisions 0.3 2.1
--------------------------------------------------- ----- ------- -------
Cash generated from continuing operations 132.2 115.6
--------------------------------------------------- ----- ------- -------
18. Analysis of movement in gross and net debt
Non-cash
2021 Cash flows movements 2022
GBP'm GBP'm GBP'm GBP'm
--------------------------------------------- ------- ---------- ---------- -------
Bank loans (484.7) (132.0) (7.1) (623.8)
Lease liabilities (82.3) 8.4 (21.5) (95.4)
--------------------------------------------- ------- ---------- ---------- -------
Total gross debt (liabilities from financing
activities) (567.0) (123.6) (28.6) (719.2)
--------------------------------------------- ------- ---------- ---------- -------
Cash in hand 43.2 (22.1) (0.2) 20.9
--------------------------------------------- ------- ---------- ---------- -------
Total net debt (523.8) (145.7) (28.8) (698.3)
--------------------------------------------- ------- ---------- ---------- -------
The table above details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's consolidated cash flow statement as cash flows from
financing activities.
The cash flows from bank loans make up the net amount of
proceeds from borrowings, repayment of borrowings and debt issuance
costs.
Non-cash movements relate to the amortisation of debt issue
costs of GBP0.5 million (FY2021: GBP0.4 million), foreign exchange
movements of GBP6.8 million (FY2021: GBP12.4 million) and unwinding
of discount to lease liabilities of GBP21.5 million (FY2021:
GBP12.6 million).
19. Provisions
In France, the basis on which property taxes have been assessed
has been challenged by the tax authority for financial years 2011
onwards. In March 2021 the French Court of Appeal delivered a
judgement, which resulted in a partial success for the Group;
however, a further appeal has been lodged with the French Supreme
Court against those decisions on which the Group was unsuccessful.
A provision is included in the consolidated financial accounts of
GBP2.4 million at 31 October 2022 (FY2021: GBP2.1 million), to
reflect the increased uncertainty surrounding the likelihood of a
successful outcome. Of the total provided, GBP0.3 million has been
charged in relation to twelve months to 31 October 2022 within cost
of sales (Underlying EBITDA) (FY2021: GBP1.9 million was recorded
as an exceptional charge in respect of financial years 2012 to 2020
and GBP0.2 million was charged in relation to twelve months to 31
October 2021 within underlying cost of sales).
It is possible that the French tax authority may appeal the
decisions of the French Court of Appeal on which the Group was
successful to the French Supreme Court. The maximum potential
further exposure in relation to these issues at 31 October 2022 is
GBP3.0 million (FY2021: GBP2.7 million). No provision for any
potential further exposure has been recorded in the consolidated
financial statements since the Group believes it is more likely
than not that a successful outcome will be achieved, resulting in
no additional liabilities.
Bank guarantees to cover any potential additional tax assessment
are currently being put in place, of which guarantees totalling
GBP1.2 million have been put in place as at 31 October 2022
(FY2021: GBP1.3 million).
20. Contingent liabilities
As part of the Group banking facility, the Company has
guaranteed the borrowings totalling GBP625.1 million (FY2021:
GBP486.5 million) of fellow Group undertakings by way of a charge
over all of its property and assets. There are similar
cross-guarantees provided by the Group companies in respect of any
bank borrowings which the Company may draw under a Group facility
agreement. The financial liability associated with this guarantee
is considered remote and therefore no provision has been
recorded.
The Group also has a contingent liability in respect of property
taxation in the French subsidiary as disclosed in note 19.
21. Capital commitments
The Group had GBP146.0 million of capital commitments as at 31
October 2022 (FY2021: GBP98.6 million).
22. Related party transactions
The Group's shares are widely held. Transactions between the
Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
Transactions with Safestore Storage Benelux B.V. (formerly CERF
Storage JV B.V.)
As described in note 9, the Group had a 20% interest in
Safestore Storage Benelux B.V. ("SSB") up until 30 March 2022 and
was classified as an investment in associate. From 30 March 2022,
SSB became a wholly owned subsidiary of the Group, from which point
all intra-group transactions and balances are eliminated on
consolidation.
During the period to 30 March 2022 the Group recharged GBP0.2
million (FY2021: GBPnil) to SSB for operational costs paid on
behalf of SSB and was repaid GBP0.2 million (FY2021: GBP0.2
million) of cumulative outstanding balances during the year. Unpaid
interest of GBP0.1 million (FY2021: GBP0.1 million) was accrued and
charged during the year on the EUR3.0 million (GBP2.7 million)
principal loan note outstanding. The total amount outstanding at 30
March 2022 included within current trade and other receivables was
GBP2.8 million (FY2021: GBP2.7 million). Management fees charged
and settled during the year amounted to GBP0.3 million (FY2021:
GBP1.0 million).
Transactions with PBC Les Groues SAS
As described in note 9, the Group has a 24.9% interest in PBC
Les Groues SAS ("PBC"). During the period, the Group made a further
investment GBP0.8 million (EUR0.9 million) into PBC to fund the
development of a new store in France, taking the total investment
to GBP1.8 million (EUR2.1 million) (FY2021: GBP1.0 million (EUR1.2
million)). The total amount invested is included as part of its
noncurrent investments in associates. The total amount outstanding
at 31 October 2022 included within trade and other receivables was
GBPnil (FY2021: GBPnil).
As described in note 4, during the period, the Group sold the
Nanterre site to the joint venture partner of Nanterre FOCD 92 for
a total price of EUR7.6 million excluding VAT and including
demolition cost reimbursement, where the settlement is done
partially in cash GBP1.0 million (EUR1.1 million excluding tax),
and partially in kind through the delivery of the new building at
the end of the operation (estimated at EUR6.5 million).
23. Post balance sheet events
On 11 November 2022 the Group completed their refinancing
exercise obtaining a new increased unsecured GBP400 million
multi-currency four-year Revolving Credit Facility (with two
one-year extension options). In addition, a further GBP100 million
uncommitted accordion facility is incorporated into the facility
agreement.
On 1 December 2022 the Group acquired a 10.0% interest in CERF
II German Storage Topco S.à r.l, a company registered in Luxembourg
and the indirect holder of myStorage GmbH, a company registered and
operating in Germany.
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END
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