Half Yearly Report

RNS Number : 6017C

Big Yellow Group PLC

17 November 2009

 

17 November 2009

Big Yellow Group PLC

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

Results for the Six Months and Second Quarter ended 30 September 2009 

Big Yellow Group PLC, the UK's leading self storage brand, is pleased to announce results for the six months and for the second quarter ended 30 September 2009.

Financial Highlights

•	Revenue for the second quarter increased by 7% to £15.1 million from the first quarter (£14.1 million)
•	Revenue decrease of 3% to £29.2 million over same period last year (2008: £30.1 million)
•	Revenue for the six months up 3% compared to the six months to 31 March 2009 (£28.4 million)
•	EBITDA pre non-recurring items and valuation movements1 £13.7 million (2008: £15.5 million)
•	Adjusted profit before tax1 of £7.7 million up 12% (2008: £6.9 million)
•	Cash flows from operating activities (after finance costs) more than doubled to £7.9 million for the period (2008: £2.3 million)
•	Adjusted earnings per share2 of 6.19 pence (2008: 5.76 pence)
•	Group net debt fallen to £272.8 million from £308.1 million at 31 March 2009
•	Adjusted net assets per share3 down 4% to 436.6 pence as at 30 September 2009 from 457.0 pence as at 31 March 2009 and down 7% from 467.0 pence as at 30 September 2008

Statutory

•	Loss before tax for the period £3.4 million (2008: loss of £54.3 million)
•	Basic loss per share 2.71 pence (2008: loss of 47.46 pence)

Achievements

•	Successful placing of 11.5 million shares in May 2009 raising £31.5 million net of expenses
•	We opened 5 stores in the period: Twickenham in the wholly owned Group and Edinburgh, Nottingham, Poole and Sheffield Bramall Lane in Big Yellow Limited Partnership. 59 stores are now open with a further 11 committed, providing 4.4 million sq ft of self storage space when completed
•	Lloyds TSB Bank plc have joined the core banking facility, taking a participation of £75 million.

1 see note 6; 2 see note 8; 3 see note 15 

Commenting on the outlook, Nicholas Vetch, Executive Chairman, said:

"Occupancy growth over the six month period showed a noticeable improvement on the same period last year with growth across the wholly owned portfolio of 62,000 sq ft against a decline of 10,000 sq ft in the same period last year. We saw an improvement in yield per sq ft from a low point of £25.25 in April 2009 to £26.72 at 30 September 2009.  

We are experiencing the usual seasonal slow-down in trading, however our cautious optimism at the time we last reported, that the business was at least stabilising, appears to have been broadly well founded. We expect the improvement in the economy to be slow and patchy, and the performance of this business will reflect that.  

That said, the brand and our store locations will be a considerable help in achieving our principal ambition of raising our occupancy levels from currently 55% to 85% in the medium term, an absorption of approximately one million sq ft, which at today's rent represents revenue in excess of £25 million (excluding ancillary sales), which comes at minimal marginal cost."

- Ends -

For further information, please contact:
Big Yellow Group PLC  Nicholas Vetch, Executive Chairman James Gibson, Chief Executive Officer John Trotman, Chief Financial Officer	01276 477811
Weber Shandwick Financial  Nick Oborne, John Moriarty	020 7067 0700

Notes to Editors

Big Yellow Group PLC is the best known and one of the most dynamic self storage groups in the UK. It was founded in September 1998 by Nicholas Vetch, Philip Burks, and James Gibson and listed on AIM in May 2000, moving to the Official List of the London Stock Exchange in June 2002.  

Big Yellow has expanded rapidly and now operates from 59 stores, 52 in London and the South, two in Sheffield, and one each in Birmingham, Edinburgh, Leeds, Liverpool, and Nottingham. There are a further 11 stores in development. Of the 70 total stores and sites, 59 are held freehold and four long leasehold (together representing approximately 94% by value of the total property assets); seven stores are held short leasehold. All the stores have distinct yellow branding, with the majority being within the M25 or in strong urban conurbations. When fully built out the portfolio will provide approximately 4.4 million sq ft of flexible storage space.  

The Group has pioneered the development of the latest generation of self storage facilities, which utilise state of the art technology and are located in high profile, accessible, main road locations. Its focus on the location and visibility of its buildings, coupled with excellent customer service, has created the most recognised brand name in the UK self storage industry.

Big Yellow Group PLC

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

Results for the Six Months and Second Quarter ended 30 September 2009

Chairman's Statement

The Board of Big Yellow Group PLC, the UK's leading self storage brand, is pleased to announce results for the six months and for the second quarter ended 30 September 2009.  

Occupancy growth over the six month period showed a noticeable improvement on the same period last year with growth across the wholly owned portfolio of 62,000 sq ft against a decline of 10,000 sq ft in the same period last year. We saw an improvement in yield per sq ft from a low point of £25.25 in April 2009 to £26.72 at 30 September 2009.  This is in line with a slowly improving picture in relation to housing transactions, consumer confidence and the economy generally.  

By way of illustration, a recent housing market survey showed that many fewer properties are being bought and sold than in "normal" market conditions. The first nine months of 2009 have registered just over half a million transactions, an annualised turnover rate of only 3.6% of the housing stock, well below the 20-year average of 8.5%. In September mortgage approvals for house purchases were 56,000, up 68% on a year earlier, but still significantly below the 10-year average of 100,000. 

Financial results

Revenue for the period was £29.2 million, down 3% from the £30.1 million achieved in the comparable period last year. Revenue for the second quarter was £15.1 million, up 7% on the £14.1 million reported for the quarter to 30 June 2009.   Revenue for the half year was up 3% compared to the previous half year period (six months to 31 March 2009: £28.4 million)

Group EBITDA pre non-recurring items and valuation movements was £13.7 million, down 12% from £15.5 million for the same period last year.  

As a result of a revaluation write-down of £14.2 million in the value of our wholly owned investment property assets, the Group made a pre-tax loss of £3.4 million.  £13.0 million of the write-down was as a result of valuing six sites as investment property under construction for the first time to comply with the IAS 40 (revised) accounting requirement for periods commencing after 1 January 2009 (see Operating and Financial Review for more detail). The stabilised valuations of these six assets are currently pointing to a revaluation surplus on total development cost of £85.6 million (118%). 

After adjusting for the loss on the revaluation of investment properties and other non-recurring items, the Group made an adjusted profit before tax in the period of £7.7 million, up 12% from £6.9 million for the same period last year.  Adjusted earnings per share was 6.19 pence (2008: 5.76 pence). 

Placing to fund future growth

We were pleased to receive strong support from our shareholders in May 2009 to enable us to raise £31.5 million (net of expenses). 11.5 million shares were issued at £2.85, which represented a 6% premium to the previous day's closing share price.  

The net proceeds of the placing, together with cash generated from operations and the net proceeds of the future sale of surplus land, will be used to provide the Company with the financial flexibility to fund its planned medium term organic growth. 

Big Yellow has six committed sites for development, five of which are located in London and one in central Guildford, with the potential for an additional 395,000 sq ft of self storage space. The total capital expenditure required to build out these stores is £51 million. 

We have started on site at Eltham, and since the period end, have completed the acquisition of a site at Enfield, which had been a conditional purchase agreed in 2007.  Our current intention is to construct the existing development sites on a phased basis so they are all open and trading by March 2012.

At 30 September, the Group owned approximately £24 million of land surplus to our requirements. It is anticipated that the surplus land will be sold over the next 18 to 24 months as we are looking to maximise value through planning.  Subsequent to the period end the Group completed the sale of surplus land adjacent to our Twickenham store for £3.2 million.

In addition, we have been monitoring selective site acquisition opportunities in London and other key UK cities for our next development phase to increase our footprint over the medium term.

Dividends

No Property Income Dividend is payable for the six month period. The Board has continued with the suspension of the discretionary ordinary dividend for the period.  The reason for the suspension was to allow the Group to retain operating cash surpluses to fund part of the build out of its existing pipeline of London stores during the economic downturn. The dividend policy will be reviewed during the next financial year in the light of trading conditions and the economic outlook.  

Banking

Lloyds TSB Bank plc have joined our core banking facility during the period, taking £75 million of the £325 million facility.  I would like to thank them for their support, and we look forward to developing our relationship further with them in the future.  

Outlook

We are experiencing the usual seasonal slow-down in trading, however our cautious optimism at the time we last reported, that the business was at least stabilising, appears to have been broadly well founded. We expect the improvement in the economy to be slow and patchy, and the performance of this business will reflect that.  

That said, the brand and our store locations will be a considerable help in achieving our principal ambition of raising our occupancy levels from currently 55% to 85% in the medium term, an absorption of approximately one million sq ft, which at today's rent represents revenue in excess of £25 million (excluding ancillary sales), which comes at minimal marginal cost.  

Nicholas Vetch

Executive Chairman

16 November 2009

Operating and Financial Review

Stores and the market

We have included, as usual, the Portfolio Summary showing the trading performance of all our wholly owned stores over the period. 

During the period we opened a store in Twickenham, with further stores opening in Nottingham, Edinburgh, Poole and Sheffield (within Big Yellow Limited Partnership).  Our Reading store opens in December, and will trade within Big Yellow Limited Partnership.

At the period end occupied space was 1,794,000 sq ft, down 1% from 1,807,000 sq ft at the same time last year and up 62,000 sq ft from 31 March 2009. The 32 same stores are those that had reached stabilisation as a portfolio in 2007 prior to the economic downturn. The lease-up stores have yet to trade at their stabilised occupancy levels, and most have opened in the last three years. The portfolio of 32 same stores (with an average net lettable area of 60,750 sq ft) was 71% occupied at the end of the period, with an average occupancy during the period of 71%, down from 78% for the same period last year. 

Revenue for these 32 stores decreased 10% compared to the same period last year. This was caused by the reduction in average occupancy referred to above, and also a fall in average net rents achieved of 3% in the same store portfolio compared to the same six month period in 2008.  

Over the winter months, following the collapse of Lehman Brothers and the resultant anticipated consumer downturn, we used aggressive promotions in all of our stores to combat the weak trading environment. Net rents for the Group fell to a low of £25.25 per sq ft in April 2009.  In the second half of the last financial year, we lost 75,000 sq ft of occupancy. From May, given the improved trading performance and outlook, we reduced the promotions offered in the stores. We have successfully increased net rents back to their September 2008 levels through a combination of increasing rents and managing promotions to new customers, coupled with existing customer price increases. At 30 September 2009, the net rent for the Group was £26.72 per sq ft, and £26.40 per sq ft for the same store portfolio. The net rent per sq ft in the lease-up stores is higher, at £27.30, due to their relative London weighting.  

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

The 32 same stores achieved EBITDA margins of 64% (2008: 65%). Despite the revenue reduction in the same store portfolio we have mitigated part of the impact on profitability in these stores through cost savings. Same store costs have reduced by 7.5% from the same period last year. Staffing levels in the stores have been reduced from on average 3.6 staff per store to 3.1 staff per store. We have implemented a salary freeze across all levels in the Group, and have sought to take cost out of the business where practicable. These cost savings have in part been offset by higher utility costs and increases in business rates.

The lease-up stores have grown in occupancy by 87,000 sq ft from the same time last year, encouragingly 70,000 sq ft of this growth has been in the six months from 1 April 2009. Revenue for the lease-up stores which were open pre 30 September 2008 has increased by 21% from the same period last year, as illustrated in the table below.  The occupancy of these 16 stores has increased from 31% at September 2008 to 36% in September 2009.

Store performance	Occupancy		Revenue		EBITDA
	30 Sep 09 000 sq ft	30 Sep 08 000 sq ft	30 Sep 09 £000	30 Sep 08 £000	30 Sep 09  £000	30 Sep 08 £000
32 Same stores	1,371	1,471	20,892	23,335	13,309	15,198
16 Lease-up stores opened pre 30 September 2008	391	336	6,196	5,123	2,848	1,761
3 Lease-up stores opened post 30 September 2008	32	-	332	-	(226)	-
Total	1,794	1,807	27,420	28,458	15,931	16,959

In the Autumn, we typically see a seasonal net reduction in occupancy, caused by student and house movers vacating, no longer requiring storage after the summer. In the seven weeks following the period end, we have lost 30,000 sq ft (1.6% of occupancy) across the whole portfolio. This compares to a loss in the same period in 2008 of 20,500 sq ft (1.1% of occupancy) and in 2007 of 64,000 sq ft (3.4% of occupancy).

Total packing materials, insurance and other sales were £4.2 million in the period (2008: £4.1 million).  

Administrative expenses

In the period, the cash administrative expenses have reduced by £0.1 million, following head office cost savings. Overall administrative expenses have increased by £0.4 million, following a £0.5 million increase in the non-cash IFRS 2 charge, principally arising from the Long Term Bonus Plan approved at the AGM in July 2009.  

Interest

The Group used £15 million of liquidity in March 2009 to restructure our interest rate hedging arrangements. £190 million of the Group's debt is now fixed over the medium term, whilst the balance of the debt is paying one month LIBOR plus applicable margin. We have seen the benefit of this strategy in the current period, with a materially lower interest cost. The Group's average cost of borrowing during the period to 30 September 2009 was 3.7%, compared to 6.5% for the six months to 30 September 2008.  The loan interest expense during the period was £3.6 million lower compared to the same period last year.  Capitalised interest was £0.9 million lower in the period, due to fewer developments on site; this reduces the effect of the lower interest expense on adjusted profit.      

Results

The 12% increase in adjusted profit before tax to £7.7 million was principally due to the reduced interest cost, offsetting lower EBITDA.  The table below reconciles the statutory loss before tax to the adjusted profit before tax.

Profit/(loss) before tax analysis	Six months to  30 September  2009  £m	Six months to  30 September  2008  £m	Year ended  31 March  2009  £m
Loss before tax	(3.4)	(54.3)	(71.5)
Adjusted for:
Loss on revaluation of investment properties	14.2	53.4	52.8
Change in fair value of interest rate derivatives	(3.7)	(1.4)	18.0
Losses on non-current assets	-	7.2	11.6
Losses on surplus land	2.0	-	-
Non-recurring (gains)/losses in associate	(1.4)	0.7	1.6
Loan refinancing costs	-	1.3	1.3
Adjusted profit before tax	7.7	6.9	13.8

Cash flow growth

Cash flows from operating activities have more than doubled to £7.9 million for the period (2008: £2.3 million).  This has been increasing over the period, in line with growing occupancy and rental yield.

In the six month period capital expenditure cash outflows were £3.9 million, a reduction of £15.5 million from £19.4 million in the same period last year.  

After taking account of capital expenditure the Group had a net cash inflow of £2.7 million (2008: net cash outflow of £7.1 million) in the period. This, coupled with the placing proceeds, led to a reduction in net debt in the period of £35.4 million.  

Taxation

The Group is a Real Estate Investment Trust ("REIT"). We benefit from a zero tax rate on our qualifying self storage earnings. We only pay tax on the profits attributable to our residual business, comprising primarily of the sale of packing materials and insurance, and management fees earned by the Group. Furthermore, Big Yellow has a development pipeline of self storage assets within the REIT ringfence and any development profits arising on these assets will generally be tax free.

There is no cash tax payable for the period. There is no tax charge for the period ended 30 September 2009 (2008: £546,000). 

Dividends

REIT regulatory requirements determine the level of Property Income Dividend ("PID") payable by the Group. On the basis of the full year forecasted distributable reserves for PID purposes, no PID is payable due to the level of shadow capital allowances available to the Group (30 September 2008: PID of nil pence per share).  No discretionary ordinary dividend is proposed.

Financing and Treasury

The Group has a £325 million senior debt facility refinanced in September 2008 with HSH Nordbank AG. During the period, Lloyds TSB Bank plc took a participation of £75 million in the facility.  

Certain of the covenants of the core facility were amended during the period (at no cost to the Group) to give the Group more financial flexibility and to facilitate the syndication. The Group was comfortably in compliance with these revised covenants at 30 September 2009, as illustrated in the table below.  

	Previous covenant	Revised Covenant	At 30 September 2009
Minimum income cover	1.25x	1.4 x	2.69x*
Minimum net assets	£350 million	£250 million	£531.9 million
Maximum gross loan to net assets gearing	1:1	1.3:1	0.59:1

* the annualised income cover for the quarter to 30 September 2009 was 3.97x.   The income cover covenant rises to 1.5x from September 2011, as per the original agreement, and there has been no change in this covenant.  

Cash at 30 September 2009 was £38.6 million, held with Royal Bank of Scotland plc. We have paid back £5 million of the revolving element of the loan facility subsequent to the period end.  The remainder of the cash is held on medium term deposits; as they mature we will consider paying back additional amounts of the revolving facility, dependent on the Group's cash requirements at that point in time. 

The net debt at the end of September was £272.8 million leaving us £52.2 million of available funds.  The net debt to gross property assets ratio is 34% and the net debt to equity ratio is 51%.

Valuations

The Group's investment properties have been valued by Cushman and Wakefield (C&W).  At 30 September 2009 the total value of the Group's wholly owned properties is shown in the table below:

Analysis of property portfolio	No of  locations	Value at 30 September  2009 £m	Revaluation   movement in   period  £m
Investment property	51	749.9	(1.2)
Investment property under construction	6	25.0	(13.0)
Investment property total	57	774.9	(14.2)
Surplus land (including land held for sale of £3.2 million)	9*	23.9	(2.0)
Total	66	798.8	(16.2)

* includes Enfield, the acquisition of which completed post period end, this will be classified as investment property under construction at 31 March 2010.  

The disposal of the land held for sale completed in October. The Group has received £2 million of the proceeds, with a further £1.2 million to be paid unconditionally in October 2010.

Investment property

The total value of the investment property open store portfolio at 30 September 2009 of £749.9 million (2008: £717.7 million), was up £14.8 million from £735.1 million at 31 March 2009. 

The increase in valuation of the 50 stores open at 31 March is £1.0 million, representing a 0.1% total increase, of which we estimate 0.7% is a function of capital reduction offset by an improvement of 0.8% due to operational performance. The balance of £13.8 million is the valuation of our Twickenham store which opened in May.

Yields appear to have stabilised for prime product in the wider real estate market, this is based on thin transactional evidence and applies to well let highly sought after assets. In relation to self storage there has been no transactional evidence of prime self storage assets in the period; indeed no material transactions have been completed in the secondary self storage sector. The valuation included in the accounts assumes rental growth in future periods, as described in note 16. If an assumption of no rental growth is applied to the external valuation, the stabilised yield pre administration expenses is 8.59% (March 2009: 8.55%). This is based on an average occupancy over the 10 year cash flow period of 78.6% across the whole portfolio. The mature occupancy assumed is 84.7%, achieved on average in 41 months from 30 September 2009.  

Investment property under construction 

The Group adopted compulsory amendments to IAS 40, Investment Property, during the period. These changes require investment property under construction to be valued, rather than carried at the lower of cost and value in use, as had been the case when they were accounted for under IAS 16.  In accordance with IAS 40 the prior year comparatives have not been restated to reflect this change in accounting policy.  C&W have therefore valued six wholly owned sites (four with planning consent), and four within Big Yellow Limited Partnership (all with planning consents), in addition to the open store portfolio.  It should be noted that Enfield, the acquisition of which completed in October 2009, will be valued on this basis at the year end.  

In the past, where the Group had assets in the course of construction, these had been held at cost, and an assessment made of the anticipated surplus to be achieved on the opening and leasing up of a Big Yellow self storage facility within the branded portfolio. If this supported the existing book cost, taking account of projected costs to complete, no provision was made against the cost.   The external valuation takes a different approach, and in effect is assuming a sale to a third party of an asset in the course of construction, assuming contingencies on construction costs, assessment of alternative use where planning risk remains and a level of developer's profit.  An external valuation also has to consider market evidence, which is clearly limited in the current economic climate.  

As a result, and given this is the first time this standard has been applied by the Group, we have booked a deficit of £13.0 million against the Group assets, and have included a £0.3 million uplift as our share of the surplus in Big Yellow Limited Partnership.  It should be noted that C&W's forecast valuations for when the assets have reached stabilised occupancy, including assumptions in relation to revenue and operating cost growth within these assets, are currently pointing to a revaluation surplus on total development cost of £85.6 million (118%) on the six wholly owned development sites and £34.8 million (99%) on the four sites within Big Yellow Limited Partnership. 

In their report to us, our valuers, Cushman and Wakefield, have drawn attention to valuation uncertainty resulting from exceptional volatility in the financial markets and a lack of transactions in the property investment market. Please see note 16 for further details.

Surplus land 

These sites are those which the Directors do not intend to develop into self storage centres (with the exception of the site at Enfield, the acquisition of which completed post period end).  The sites are held at the lower of cost and net realisable value and have not been externally valued. The Directors have assessed the carrying value of these sites. In the prior year, a provision of £11.6 million was made against these sites, representing approximately a third of the cost of the land.  The Directors have made a further provision of £2.0 million against a site where the planning outcome is currently uncertain.

Net asset value

The valuation translates into an adjusted net asset value of 436.6 pence per share (see note 15), down 7% from 467.0 pence per share last year and down 4% from 457.0 pence per share at 31 March 2009.

Analysis of Net Asset Value	As at 30 September 2009	As at 30 September 2008	As at 31 March 2009
Basic net asset value (£m)	531.9	519.9	502.3
Exercise of share options (£m)	1.5	2.6	2.6
Diluted net asset value (£m)	533.4	522.5	504.9
Basic net assets per share (pence)	417.0	453.1	437.6
Diluted net assets per share (pence)	407.5	439.4	424.3
Diluted shares used for calculation (million)	130.9	118.9	119.0
Diluted net asset value (as above) (£m)	533.4	522.5	504.9
Fair value of derivatives	2.5	1.4	6.3
EPRA net assets (£m)	535.9	523.9	511.2
EPRA net asset value per share (pence)	409.3	440.5	429.5
Valuation methodology assumption (see note 16) (£m)	35.7	31.5	32.6
Adjusted net asset value (£m)	571.6	555.4	543.8
Adjusted net assets per share (pence)	436.6	467.0	457.0

Big Yellow Limited Partnership

Big Yellow Limited Partnership, a joint venture with Pramerica Real Estate Investors Limited, owns self storage centres and development sites in the Midlands, the North, Scotland and four southern towns.

The Partnership is currently trading from eight open stores.  Of the eight stores, seven have opened in the past year.  Whilst the stores are still in the early stages of their lease-up profile we have been encouraged by their performance to date.  The occupancy of the stores is 77,000 sq ft, against a total capacity of 490,000 sq ft, a growth of 34,000 sq ft in the period from 1 April 2009.  In the early stages of lease-up, net rent is suppressed by promotions extended to new customers who form the majority of the customer base. The average net rent achieved at 30 September 2009 at these stores is £17.73 per sq ft, which is expected to increase as the stores lease-up over time with the expiry of opening promotions.  

The Partnership made an operating loss of £0.4 million in the period, of which Big Yellow's share is £0.1 million.  This loss is to be expected, as the stores take approximately 12 months on average to break even.  After revaluation of investment properties and interest rate derivatives, the profit for the period for the Partnership was £3.7 million, of which the Group's share was £1.2 million.

Big Yellow has the option to buy the assets or Pramerica's share of the equity in the Partnership, exercisable from 31 March 2013.

The table below shows the split of stores and development sites between the Group and the Partnership.

	Big Yellow  (wholly owned)	Big Yellow  Limited Partnership	Total
At 30 September 2009
No of stores trading	51	8	59
No of stores under development	7*	4	11
Total number of stores and sites	58	12	70
Development sites with planning consent	5	4	9
Open store capacity (sq ft)	3,228,000	490,000	3,718,000
Development site capacity (sq ft)	465,000	241,000	706,000
Total planned capacity (sq ft)	3,693,000	731,000	4,424,000

* this includes our site in central Manchester which has a sale contract to Big Yellow Limited Partnership, conditional on the building being completed by 31 December 2010.  Given that we are still in planning discussions for the 4.5 acre site, it is likely that this facility will be developed within the Group in due course.

Corporate Social Responsibility

During the period, the Group participated in an Environmental Real Estate Survey carried out by Maastricht University, commissioned by APG Asset Management, PGGM Investments and USS. 80% of the listed European property market took part in the survey. The survey compiled an "Environmental Real Estate Index" that awards points to reflect the presence of corporate environmental policies and management, as well as the presence of specific measurement mechanisms and the implementation of these policies in each company. We were delighted to be ranked as the number one European real estate company in their Environmental Real Estate Index.

The Group has also been a member of the FTSE4 Good Index series for several years and has previously engaged in the International Carbon Disclosure Project (CDP 2008). These ethical indices are used by analysts to identify low risk sustainable businesses investments.  

RESPONSIBILITY STATEMENT

We confirm to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting", gives a true and fair view of assets, liabilities, financial position and the loss of the issuer and the undertakings included in the consolidation as a whole as required by DTR 4.2.4R;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board 

James Gibson

Chief Executive Officer

16 November 2009

BIG YELLOW GROUP PLC

PORTFOLIO SUMMARY

Wholly owned stores	September  2009  Same store (1)			September  2009  Lease-up	September  2009  Total	September  2008  Same store	September  2008  Lease-up	September  2008  Total
Number of stores	32			19	51	32	16	48
At 30 September
Total capacity (sq ft)	1,944,000			1,284,000	3,228,000	1,944,000	1,073,000	3,017,000
Occupied space (sq ft)	1,371,000			423,000	1,794,000	1,471,000	336,000	1,807,000
Percentage occupied	71%			33%	56%	76%	31%	60%
For the 6 month period:
Average occupancy			71%	31%	55%	78%	28%	60%
Average annual rent psf			£25.85	£26.83	£25.95	£26.53	£27.83	£26.84
Net rent psf at 30 September			£26.40	£27.30	£26.72	£26.73	£27.66	£26.89
			£000	£000	£000	£000	£000	£000
Self storage income			17,889	5,271	23,160	20,115	4,181	24,296
Other storage related income (2)			2,967	1,248	4,215	3,184	923	4,107
Ancillary store rental income			36	9	45	36	19	55
Total storage revenue			20,892	6,528	27,420	23,335	5,123	28,458
Direct store operating costs (excluding depreciation)			(6,611)	(3,885)	(10,496)	(7,147)	(3,341)	(10,488)
Short and long leasehold rent(3)			(972)	(21)	(993)	(990)	(21)	(1,011)
Store EBITDA(4)			13,309	2,622	15,931	15,198	1,761	16,959
Store EBITDA Margin(5)			64%	40%	58%	65%	34%	60%
Cumulative capital expenditure			£m	£m	£m
To 30 September 2009			160.6	185.4	346.0
To complete			-	4.5	4.5
Total capital expenditure			160.6	189.9	350.5

(1) The 32 same stores are those that had reached stabilisation as a portfolio in 2007 prior to the economic downturn. The lease-up stores have yet to trade at their stabilised occupancy levels, and most have opened in the last three years. 

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

(3) Rent for seven short leasehold properties accounted for as investment properties and finance leases under IFRS with total self storage capacity of 431,000 sq ft.  Within the lease-up stores, is a long leasehold store with a self storage capacity of 64,000 sq ft

(4) Earnings before interest, tax, depreciation and amortisation.

(5) Of the same stores, the seven leasehold stores achieved a store EBITDA of £2.28 million and EBITDA margin of 46%. The freehold stores achieved a store EBITDA of £11.03 million and EBITDA margin of 69%.

CONDENSED CONSOLIDATED INCOME STATEMENT Six months ended 30 September 2009
	Six months ended  30 September  2009  (unaudited)				Six months ended  30 September 2008  (unaudited)		Year ended   31 March 2009   (audited)
	Note		£000		£000		£000
Revenue	2		29,162		30,080		58,487
Cost of sales			(11,688)		(11,248)		(21,781)
Gross profit			17,474		18,832		36,706
Administrative expenses			(3,428)		(3,073)		(5,760)
Operating profit before gains and losses on property assets			14,046		15,759		30,946
Loss on the revaluation of investment properties		16	(14,216)		(53,396)		(52,848)
Net losses on non-current assets			-		(7,219)		(11,583)
Losses on surplus land	10		(2,000)		-		-
Operating loss			(2,170)		(44,856)		(33,485)
Share of profit/(loss) of associate	9e		1,235		(622)		(1,598)
Investment income	3		183		170		381
Finance costs - interest payable	4		(6,288)		(10,393)		(17,473)
- refinancing costs	4		-		-		(1,347)
- fair value movement of derivatives	4		3,671		1,418		(17,967)
Loss before taxation			(3,369)		(54,283)		(71,489)
Taxation	5		-		(546)		(1,150)
Loss for the period (attributable to equity shareholders)			(3,369)		(54,829)		(72,639)
Basic loss per share	8		(2.71p)		(47.46p)		(62.86)p
Diluted loss per share	8		(2.71p)		(47.21p)		(62.34)p

Adjusted profit before taxation is shown in note 6.

Adjusted earnings per share is shown in note 8.  

All items in the income statement relate to continuing operations.

CONDENSED CONSOLIDATED BALANCE SHEET 30 September 2009
	Note	30 September  2009  (unaudited) £000		30 September  2008  (unaudited) £000		31   March  2009  (audited) £000
Non-current assets
Investment property	9a	749,890		717,700		735,060
Investment property under construction	9a	24,990		-		-
Development property	9a	-		83,610		73,618
Interest in leasehold properties	9a	21,494		21,982		21,852
Plant, equipment and owner-occupied property	9b	2,762		3,119		3,095
Goodwill	9c	1,433		1,433		1,433
Investment in associate	9e	11,520		9,637		9,285
Deferred tax asset	13	-		768		-
		812,089		838,249		844,343
Current assets
Surplus land	10	20,693		-		-
Inventories		308		344		338
Trade and other receivables	11	7,363		6,307		8,362
Cash and cash equivalents		38,575		1,264		3,222
Assets classified as held for sale	9d	3,200		11,975		3,200
		70,139		19,890		15,122
Total assets		882,228		858,139		859,465
Current liabilities Trade and other payables	12	(15,405)		(17,205)		(18,413)
Obligations under finance leases		(1,984)		(1,958)		(1,984)
Current tax liabilities		-		(90)		-
		(17,389)		(19,253)		(20,397)
Non-current liabilities
Derivative financial instruments		(1,879)		(1,057)		(5,550)
Bank borrowings	14	(308,870)		(294,051)		(308,672)
Obligations under finance leases		(19,510)		(20,024)		(19,868)
Other payables	12	(2,661)		(3,889)		(2,661)
		(332,920)		(319,021)		(336,751)
Total liabilities		(350,309)		(338,274)		(357,148)
Net assets		531,919		519,865		502,317
Equity
Called up share capital		12,947		11,555		11,559
Share premium account		42,586		41,676		41,663
Reserves		476,386		466,634		449,095
Equity shareholders' funds		531,919		519,865		502,317

CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months ended 30 September 2009
		Six months  ended  30 September  2009   (unaudited) £000		Six months  ended  30 September  2008  (unaudited) £000		Year  ended  31 March  2009   (audited) £000
Current and deferred tax recognised in equity		-		(222)		(240)
Net expense recognised directly in equity for the period		-		(222)		(240)
Loss for the period/year		(3,369)		(54,829)		(72,639)
Total recognised income and expense for the period attributable to equity shareholders		(3,369)		(55,051)		(72,879)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 September 2009 (unaudited)

	Share capital £000	Share premium account £000	Capital redemption reserve £000	Retained  earnings  £000	Other distributable reserve £000	Own   shares  £000	Total  £000
At 1 April 2009	11,559	41,663	1,653	449,338	-	(1,896)	502,317
Total comprehensive income for the period	-	-	-	(3,369)	-	-	(3,369)
Issue of share capital	1,388	923	-	-	30,373	-	32,684
Credit to equity for equity-settled share based payments	-	-	-	287	-	-	287
At 30 September 2009	12,947	42,586	1,653	446,256	30,373	(1,896)	531,919

The other distributable reserve arose from merger relief under S612 of Companies Act 2006, following the Group's placing of 11.5 million shares in the period.

Six months ended 30 September 2008 (unaudited)

	Share  capital £000	Share  premium  account £000	Capital  redemption  reserve £000	Retained  earnings  £000	Own  shares  £000	Total  £000
At 1 April 2008	11,551	41,645	1,653	527,933	(1,896)	580,886
Total comprehensive income for the period	-	-	-	(54,829)	-	(54,829)
Issue of share capital	4	31	-	-	-	35
Dividends	-	-	-	(6,309)	-	(6,309)
Credit to equity for equity-settled share based payments	-	-	-	304	-	304
Deferred tax on share-based payment transactions	-	-	-	(222)	-	(222)
At 30 September 2008	11,555	41,676	1,653	466,877	(1,896)	519,865

Year ended 31 March 2009

	Share capital £000	Share premium account £000	Capital  redemption reserve £000	Retained  earnings  £000	Own  shares  £000	Total  £000
At 1 April 2008	11,551	41,645	1,653	527,933	(1,896)	580,886
Total comprehensive income for the period	-	-	-	(72,639)	-	(72,639)
Issue of share capital	8	18	-	-	-	26
Dividends	-	-	-	(6,309)	-	(6,309)
Credit to equity for equity-settled share based payments	-	-	-	593	-	593
Deferred tax on share-based payment transactions	-	-	-	(240)	-	(240)
At 31 March 2009	11,559	41,663	1,653	449,338	(1,896)	502,317

CONDENSED CONSOLIDATED CASH FLOW STATEMENT Six months ended 30 September 2009
	Note	Six months  ended  30 September  2009   (unaudited) £000		Six months  ended  30 September  2008  (unaudited) £000		Year  ended   31 March  2009  (audited) £000
Operating loss		(2,170)		(44,856)		(33,485)
Loss on the revaluation of investment properties		14,216		53,396		52,848
Loss on non-current assets		-		7,219		11,583
Losses on surplus land		2,000		-		-
Depreciation		483		374		729
Depreciation of finance lease obligations		358		342		690
Employee share options		762		304		593
Decrease/(increase) in inventories		30		(13)		(7)
Decrease/(increase) in receivables		1,150		1,274		(1,013)
(Decrease)/increase in payables		(2,675)		(1,518)		1,363
Cash generated from operations		14,154		16,522		33,301
Interest paid		(6,277)		(14,280)		(38,606)
Interest received		30		53		496
REIT conversion charge paid		-		-		(90)
Cash flows from operating activities		7,907		2,295		(4,899)
Investing activities
Sale of non-current assets		-		-		3,825
Purchase of non-current assets		(3,702)		(19,378)		(35,090)
Additions to surplus land		(178)		-		-
Sale of assets to associate		-		15,097		22,778
Investment in associate		(1,000)		(4,805)		(5,429)
Cash flows from investing activities		(4,880)		(9,086)		(13,916)
Financing activities
Issue of share capital		32,684		35		26
Payment of finance lease liabilities		(358)		(342)		(690)
Equity dividends paid		-		(6,309)		(6,309)
Increase in borrowings - RBS facility		-		7,000		7,000
Repayment of RBS loan		-		(291,000)		(291,000)
Increase in borrowings - drawing of HSH facility		-		297,000		311,339
Cash flows from financing activities		32,326		6,384		20,366
Net increase/(decrease) in cash and cash equivalents	A	35,353		(407)		1,551
Opening cash and cash equivalents		3,222		1,671		1,671
Closing cash and cash equivalents		38,575		1,264		3,222

A.  Reconciliation of net cash flow to movement in net debt Six months ended 30 September 2009
		Six months  ended  30  September  2009  (unaudited) £000		Six months   ended  30 September  2008  (unaudited) £000		Year   ended   31 March  2009  (audited) £000
Net increase/(decrease) in cash and cash equivalents in the period		35,353		(407)		1,551
Cash inflow from increase in debt financing		-		(13,000)		(27,339)
Movement in net debt in the period		35,353		(13,407)		(25,788)
Net debt at start of period		(308,117)		(282,329)		(282,329)
Net debt at end of period		(272,764)		(295,736)		(308,117)

Net debt is defined as gross bank borrowings less cash and cash equivalents.

  Notes to the Interim Review

1.    ACCOUNTING POLICIES

Basis of preparation

The results for the period ended 30 September 2009 are unaudited and were approved by the Board on 16 November 2009. The financial information contained in this report in respect of the year ended 31 March 2009 does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

The annual financial statements of Big Yellow Group PLC are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standards 34 "Interim Financial Reporting", as adopted by the European Union.  The same accounting policies, presentation methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements, except for the adoption of IAS 40 (revised) in respect of Investment Property under Construction (for periods commencing 1 January 2009 or after), IAS 1 (revised), IFRS 8 and IFRIC 15.

The impact of the adoption of IAS 40 (revised) was a) the reclassification of property under construction into investment property (previously held within development property), and b) the reclassification of surplus land elements into surplus land current assets (previously held within development property). The Group's date of adoption was 1 April 2009. In accordance with IAS 40 the prior year comparatives have not been restated to reflect this change in accounting policy.

There was no impact of the adoption of IFRIC 15 or IFRS 8. 

The Group's investment property under construction, and surplus land accounting policies are as follows:

Investment property under construction

Investment property under construction is initially recognised at cost and revalued at the balance sheet date to fair value as determined by professionally qualified external valuers. 

Gains or losses arising from the changes in fair value of investment property under construction are included in the income statement in the period in which they arise. In accordance with IAS 40, as the Group uses the fair value model, no depreciation is provided in respect of investment properties including integral plant.

Surplus land

Surplus land is recognised at the lower of cost and net realisable value. Any gains and losses on surplus land are recognised through the income statement.

Derivatives presentation

The outstanding derivative financial instruments mature between 2013 and 2015, accordingly they have been transferred to non-current liabilities and the comparative amounts restated. 

Going concern

A review of the Group's business activities, together with the factors likely to affect its future development, performance and position, is set out in the Chairman's Statement and the Operating and Financial Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are shown in the balance sheet, cash flow statement and accompanying notes to the interim statement. Further information concerning the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk can be found in the Operating and Financial Review of the Group's Annual Report for the year ended 31 March 2009. 

The Directors have considered carefully the Group's trading performance and cash flows as a result of the uncertain global economic environment, the shortage of credit available in the bank finance market in particular and the other principal risks to the Group's performance.  After reviewing Group and Company cash balances, borrowing facilities and projected cash flows, the Directors believe that the Group and Company have adequate resources to continue operations for the foreseeable future. In reaching this conclusion the Directors have had regard to the Group's operating plan and budget and projections contained in the detailed longer term business plan. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

2.    SEGMENTAL INFORMATION

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

	Six months  ended 30 September  2009  (unaudited) £000		Six months  ended 30 September  2008  (unaudited) £000		Year ended 31 March 2009 (audited) £000
Open stores
Self storage income	23,160		24,296		47,206
Other storage related income	4,215		4,107		7,964
Ancillary store rental income	45		55		96
	27,420		28,458		55,266
Stores under development
Non-storage income	691		822		1,636
Fee income
Fees earned from Big Yellow Limited Partnership	826		650		1,368
Other management fees earned	200		-		67
Franchise income
Franchise fee received	25		150		150
Revenue per income statement	29,162		30,080		58,487
Investment income (see note 3)	183		170		381
Total revenue per IAS 18	29,345		30,250		58,868

Further analysis of the Group's operating revenue and costs can be found in the Portfolio Summary.

The seasonality of our business is discussed in note 18.

3.   INVESTMENT INCOME

	Six months  ended  30 September  2009   (unaudited) £000		Six months   ended  30 September  2008  (unaudited) £000		Year   ended   31 March  2009  (audited) £000
Interest receivable on bank deposit	183		170		381
	183		170		381

4.   FINANCE COSTS

	Six months  ended  30 September  2009   (unaudited) £000		Six months   ended  30 September  2008  (unaudited) £000		Year   ended   31 March  2009  (audited) £000
Interest on bank borrowings	5,765		9,344		18,075
Capitalised interest	(113)		(968)		(1,924)
Other interest payable	-		1		3
Interest on finance lease obligations	636		669		1,319
Change in fair value of interest rate derivatives	(3,671)		(1,418)		17,967
Refinancing costs	-		1,347		1,347
	2,617		8,975		36,787

5.   TAX

	Six months ended 30 September 2009  (unaudited) £000		Six months  ended 30 September  2008 (unaudited) £000		Year  ended  31 March  2009 (audited) £000
Current tax - UK corporation tax at 28%	-		-		(145)
	-		-		(145)
Deferred tax movement	-		546		1,295
Total tax charge	-		546		1,150

6.   ADJUSTED PROFIT BEFORE TAX

	Six months  ended  30 September  2009   (unaudited) £000		Six months   ended  30 September  2008  (unaudited) £000		Year   ended   31 March  2009  (audited) £000
Loss before tax	(3,369)		(54,283)		(71,489)
Adjusted for
Losses on revaluation of investment properties - wholly owned	14,216		53,396		52,848
(Gain)/loss on revaluation of investment properties - associate	(1,356)		602		885
Change in fair value of interest rate swaps - Group	(3,671)		(1,418)		17,967
Change in fair value of interest rate swaps - associate	(122)		39		650
Loss on non-current assets	-		7,219		11,583
Losses on surplus land	2,000		-		-
Loan refinancing costs	-		1,347		1,347
Adjusted profit before tax	7,698		6,902		13,791
Net bank and other interest	5,469		8,207		15,773
Depreciation	483		374		729
EBITDA pre non-recurring items and valuation movements	13,650		15,483		30,293

Adjusted profit before tax which excludes movements on revaluation of investment properties, changes in fair value of interest rate derivatives, net gains/losses on non-current assets and other non-recurring items of income and expenditure has been disclosed to give a clearer understanding of the Group's underlying trading performance.

7.    DIVIDENDS

No interim ordinary dividend has been declared (2008: nil pence).  

8.    EARNINGS/(LOSS) PER ORDINARY SHARE

	Six months ended 30 September 2009 (unaudited)			Six months ended 30 September 2008 (unaudited)			Year ended 31 March 2009 (audited)
	Earnings	Shares	Pence	Earnings	Shares	Pence	Earnings	Shares	Pence
	£m	Million	per share	£m	million	per share	£m	million	per share
Basic	(3.37)	124.41	(2.71)	(54.83)	115.53	(47.46)	(72.64)	115.55	(62.86)
Adjustments:
Dilutive share options	-	0.07	-	-	0.62	0.25	-	0.96	0.52
Diluted	(3.37)	124.48	(2.71)	(54.83)	116.15	(47.21)	(72.64)	116.51	(62.34)
Adjustments:
Loss on investment properties	14.22	-	11.43	53.40	-	45.98	52.85	-	45.36
Change in fair value of interest rate derivatives	(3.67)	-	(2.95)	(1.42)	-	(1.22)	17.97	-	15.42
Loss on sale of non-current assets	-	-	-	7.22	-	6.22	11.58	-	9.94
Losses on surplus land	2.00	-	1.61	-	-	-	-	-	-
Loan refinancing costs	-	-	-	1.35	-	1.16	1.35	-	1.16
Share of associate non-recurring costs	(1.48)	-	(1.19)	0.64	-	0.55	1.54	-	1.32
Deferred tax	-	-	-	-	-	-	1.30	-	1.11
Tax effect of non- recurring items*	-	-	-	0.33	-	0.28	(0.09)	-	(0.08)
Adjusted - diluted	7.70	124.48	6.19	6.69	116.15	5.76	13.86	116.51	11.89
Adjusted - basic	7.70	124.41	6.19	6.69	115.53	5.79	13.86	115.55	11.99

* This takes into account the tax effect, where applicable, of the change in fair value of derivatives and the refinancing costs.

The calculation of basic loss per share is based on loss after tax for the period/year. The weighted average number of shares used to calculate diluted loss per share has been adjusted for the potential conversion of dilutive share options and shares held in the Employee Benefit Trust. 

Adjusted earnings per ordinary share before non-recurring items, losses on revaluation of investment properties, the change in fair value of interest rate derivatives, and deferred tax movements have been disclosed to give a clearer understanding of the Group's underlying trading performance.

9.    NON-CURRENT ASSETS

a) Investment property, Development property and Interests in leasehold properties

	Investment  property  £000		Investment   property   under   construction  £000		Development  Property  £000		Interest in  leasehold  properties  £000
At 1 April 2009	735,060		-		73,618		21,852
Reclassification to investment property under construction	-		51,103		(51,103)		-
Reclassification to surplus land	-		-		(22,515)		-
Additions	1,166		1,767		-		-
Transfer to investment property	14,878		(14,878)		-		-
Revaluation	(1,214)		(13,002)		-		-
Depreciation	-		-		-		(358)
At 30 September 2009	749,890		24,990		-		21,494

Capital commitments at 30 September 2009 were £5.8 million (2008: £18.6 million).

b) Plant, equipment and owner-occupied property

	Freehold   property  £000		Leasehold  improvements  £000		Plant and  machinery  £000		Fixtures,   fittings and   office   equipment  £000		Total  £000
Cost
At 1 April 2009	1,858		44		651		5,137		7,690
Additions	9		-		27		114		150
At 30 September 2009	1,867		44		678		5,251		7,840
Accumulated depreciation
At 1 April 2009	(125)		(34)		(392)		(4,044)		(4,595)
Charge for the period	(16)		(1)		(107)		(359)		(483)
At 30 September 2009	(141)		(35)		(499)		(4,403)		(5,078)
Net book value
At 30 September 2009	1,726		9		179		848		2,762
At 31 March 2009	1,733		10		259		1,093		3,095

c) Goodwill

Goodwill relates to the purchase of Big Yellow Self Storage Company Limited in 1999. The asset is tested bi-annually for impairment. The carrying value of £1.4 million remains unchanged from the prior year as there is considered to be no impairment in the value of the asset.

d) Assets classified as held for sale

The Group has land at one site with a total historic cost of £4 million, which is carried at £3.2 million, after a provision for impairment in the prior year of £0.8 million against the site. The disposal of the land completed in October 2009. The Group received £2 million in October 2009, with a further unconditional £1.2 million to be received in October 2010.

e) Investment in associate

The Group has a 33.3% interest in Big Yellow Limited Partnership. This interest is accounted for as an associate, using the equity method of consolidation.

	30 September  2009  (unaudited) £000		30 September  2008  (unaudited) £000		31 March  2009  (audited) £000
At the beginning of the year	9,285		5,454		5,454
Subscription for partnership capital and advances	1,000		4,805		5,429
Share of results (see below)	1,235		(622)		(1,598)
	11,520		9,637		9,285

The figures below show the trading results of Big Yellow Limited Partnership, and the Group's share of the results and the net assets.

Big Yellow Limited Partnership	30 September   2009  (unaudited) £000		30 September  2008  (unaudited) £000		31 March  2009  (audited) £000
Income statement (100%)
Revenue	732		426		892
Cost of sales	(1,126)		(259)		(843)
Administrative expenses	(33)		(87)		(135)
Operating (loss)/profit	(427)		80		(86)
Gain/(loss) on the revaluation of investment properties	4,069		(1,806)		(2,656)
Net interest payable	(304)		(22)		(103)
Fair value movement of interest rate derivatives	365		(117)		(1,949)
Profit/(loss) before and after tax	3,703		(1,865)		(4,794)
Balance sheet (100%)
Investment property	65,550		10,060		32,650
Investment property under construction	20,520		-		-
Development property	-		36,243		35,016
Other fixed assets	670		59		208
Current assets	666		160		94
Current liabilities	(3,344)		(2,334)		(4,289)
Non-current liabilities	(49,505)		(15,278)		(35,825)
Net assets (100%)	34,557		28,910		27,854
Group share (33.3%)
Operating (loss)/profit	(142)		26		(29)
Net interest payable	(101)		(7)		(34)
Gain/(loss) on the revaluation of investment properties	1,356		(602)		(885)
Fair value movement of interest rate derivatives	122		(39)		(650)
Profit/(loss) for the period	1,235		(622)		(1,598)
Associate net assets	11,520		9,637		9,285

 10. SURPLUS LAND

							(unaudited) £000
At 1 April 2009							-
Reclassifications from development property							22,515
Additions							178
Impairment							(2,000)
At 30 September 2009							20,693

 11.    TRADE AND OTHER RECEIVABLES

	30 September 2009 (unaudited) £000		30 September  2008 (unaudited) £000		31 March 2009 (audited) £000
Trade receivables	1,611		1,545		1,546
Other receivables	253		52		154
Amounts owed by associate	539		262		-
Prepayments and accrued income	4,960		4,448		6,662
	7,363		6,307		8,362

 12.    TRADE AND OTHER PAYABLES

	30 September 2009 (unaudited) £000		30 September  2008 (unaudited) £000		31 March 2009 (audited) £000
Current
Trade payables	3,963		4,827		7,460
Other payables	1,987		3,278		1,891
Accruals and deferred income	8,227		7,872		7,834
VAT repayable under Capital Goods Scheme	1,228		1,228		1,228
	15,405		17,205		18,413
Non-current
VAT repayable under Capital Goods Scheme	2,661		3,889		2,661
13.    DEFERRED TAX
	30 September 2009 (unaudited) £000		30 September  2008 (unaudited) £000		31 March 2009 (audited) £000
The amounts provided in the accounts are:
Deduction for share options	-		(222)		-
Other items	-		(546)		-
	-		(768)		-
14.    BANK BORROWINGS
	30 September 2009 (unaudited) £000		30 September  2008 (unaudited) £000		31 March 2009 (audited) £000
Bank borrowings	311,339		297,000		311,339
Unamortised loan arrangement costs	(2,469)		(2,949)		(2,667)
	308,870		294,051		308,672

The Group's £325 million facility is currently provided by HSH Nordbank AG and Lloyds TSB Bank plc.  The bank loan is secured on 51 of the Group's properties. The loan is due to expire on 15 September 2013. 

The facility is divided into two tranches, Tranche A, up to a maximum of £50 million is used to finance non-stabilised properties within the Group and carries a margin of 150 bps. Tranche B is used to finance stabilised Group properties, and bears interest between 112.5 bps and 150 bps dependent on the Tranche B income cover. The Group is currently paying a margin of 112.5 bps on this Tranche.  As the properties within Tranche A stabilise, they can be transferred to Tranche B, reducing the margin payable.

At 30 September 2009 the Group was in compliance with all of its banking covenants.

15.   ADJUSTED NET ASSETS PER SHARE

Analysis of net asset value	30 September  2009  (unaudited) £000		30 September   2008  (unaudited) £000		31 March  2009  (audited) £000
Basic net asset value	531,919		519,865		502,317
Exercise of share options	1,516		2,653		2,584
Diluted net asset value	533,435		522,518		504,901
Adjustments:
Fair value of derivatives	1,879		1,057		5,550
Fair value of derivatives - share of associate	583		282		705
EPRA net asset value	535,897		523,857		511,156
Basic net assets per share (pence)	417.0		453.1		437.6
Diluted net assets per share (pence)	407.5		439.4		424.3
EPRA net assets per share (pence)	409.3		440.5		429.5
EPRA net asset value	535,897		523,857		511,156
Valuation methodology assumption (see note 16)	35,747		31,540		32,660
Adjusted net asset value (£000)	571,644		555,397		543,816
Adjusted net assets per share (pence)	436.6		467.0		457.0
Shares in issue	129,469,021		115,553,818		115,592,541
Own shares held	(1,905,000)		(815,000)		(815,000)
Basic shares in issue used for calculation	127,564,021		114,738,818		114,777,541
Exercise of share options	3,353,670		4,179,020		4,221,550
Diluted shares used for calculation	130,917,691		118,917,838		118,999,091

Net assets per share are shareholders' funds divided by the number of shares at the period end. The shares currently held in the Group's employee benefits trust (own shares held) are excluded from both net assets and the number of shares. The increase in own shares held in the period arises following the issue of shares to the Group's Employee Benefit Trust, as part of the establishment of the Long Term Bonus Plan for senior management.  

Adjusted net assets per share include:
		the effect of those shares issuable under employee share option schemes; and
		the effect of alternative valuation methodology assumptions (see note 16).

16.   VALUATIONS

		Deemed cost £000		Revaluation on  deemed cost  £000		Valuation  £000
Freehold stores*
As at 1 April 2009		307,222		372,098		679,320
Movement in period		15,974		956		16,930
As at 30 September 2009		323,196		373,054		696,250
Leasehold stores
As at 1 April 2009		15,396		40,344		55,740
Movement in period		70		(2,170)		(2,100)
As at 30 September 2009		15,466		38,174		53,640
Total of open stores
As at 1 April 2009		322,618		412,442		735,060
Movement in period		16,044		(1,214)		14,830
As at 30 September 2009		338,662		411,228		749,890
Investment property under construction
As at 1 April 2009		-		-		-
Movement in period		37,992		(13,002)		24,990
As at 30 September 2009		37,992		(13,002)		24,990
Total of all investment property
As at 1 April 2009		322,618		412,442		735,060
Movement in period		54,036		(14,216)		39,820
As at 30 September 2009		376,654		398,226		774,880

* Includes one long leasehold property

The freehold and leasehold investment properties have been valued at 30 September 2009 by external valuers, Cushman & Wakefield LLP ("C&W"). The valuation has been carried out in accordance with the RICS Valuation Standards published by The Royal Institution of Chartered Surveyors ("the Red Book"). The valuation of each of the investment properties and the investment properties under construction has been prepared on the basis of Market Value as a fully equipped operational entity, having regard to trading potential.  The valuation has been provided for accounts purposes and as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure requirements of the Red Book, C&W have confirmed that: 

•	The members of the RICS who have been the signatories to the valuations provided to the Group for the same purposes as this valuation have done so since September 2004.
•	C&W have been carrying out biannual valuations for accounts purposes on behalf of the Group since September 2004.
•	C&W do not provide other significant professional or agency services to the Group.
•	In relation to the preceding financial year of C&W, the proportion of the total fees payable by the Group to the total fee income of the firm is less than 5%.

Market uncertainty

C&W's valuation report comments on valuation uncertainty resulting from the recent global banking crisis and consequent reduction in the availability of debt, coupled with the economic downturn, which have caused the UK commercial property market to experience sharp falls in value and liquidity since mid 2007, with fewer transactions being completed. C&W note that, although there were a number of self storage transactions in 2007, the only significant transaction since 2007 was the sale of a 51% share in Shurgard Europe which was announced in January 2008 and completed on 31 March 2008. C&W observe that in order to provide a rational opinion of value at the present time it is necessary to assume that the self storage sector will continue to perform in a way not greatly different from that being anticipated prior to the "credit crunch", however they have reflected negative sentiment in their capitalisation rates and they have reflected current trading conditions in their cash flow projections for each property. C&W state that there is therefore greater uncertainty attached to their opinion of value than would be anticipated during more normal market conditions. 

Methodology

C&W have adopted different approaches for the valuation of the freehold and leasehold assets as follows:

Freehold and long leasehold

The valuation is based on a discounted cash flow of the net operating income over a ten year period and notional sale of the asset at the end of the tenth year. 

Assumptions

A.  Net operating income is based on projected revenue received less projected operating costs together with a central administration charge of 6% of the estimated annual revenue subject to a cap and a collar. The initial net operating income is calculated by estimating the net operating income in the first 12 months following the valuation date.

B. The net operating income in future years is calculated assuming straight-line absorption from day one actual occupancy to an estimated stabilised/mature occupancy level. In the valuation the assumed stabilised occupancy level for the 51 trading stores (both freeholds and leaseholds) open at 30 September 2009 averages 84.70% (March 2009: 85.04%; September 2008: 85.43%). The projected revenues and costs have been adjusted for estimated cost inflation and revenue growth.  The average time assumed for the stores to trade at their maturity levels across the portfolio is 41 months; for the 32 same stores, the period to maturity is 36 months (March 2009: 34 months).

C. The capitalisation rates applied to existing and future net cash flow have been estimated by reference to underlying yields for industrial and retail warehouse property, 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 stabilised yield for the 51 stores pre administration expenses is 8.59% (March 2009: 8.55%).  

D. The future net cash flow projections (including revenue growth and cost inflation) have been discounted at a rate that reflects the risk associated with each asset. The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 11.49% (March 2009: 11.41%; September 2008: 10.89%).

E. Purchaser's costs of 5.75% have been assumed initially and sale plus purchaser's costs totalling 6.75% are assumed on the notional sales in the tenth year in relation to the freehold stores.

Short leasehold

The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the discounted cash flow is extended to the expiry of the lease. The average unexpired term of the Group's leaseholds is 16.3 years (March 2009: 16.8 years; September 2008: 17.3 years).

Investment properties under construction

C&W have valued the stores in development adopting the same methodology as set out above but on the basis of the cash flow projection expected for the store at opening and allowing for the outstanding costs to take each scheme from its current state to completion and full fit out. C&W have allowed for holding costs and construction contingency, as appropriate. For the schemes where planning consent has not yet been granted C&W have reflected the planning risk in their valuation.

Prudent lotting

C&W have assessed the value of each property individually. However, with regard to nine recently opened stores which are loss making or have low cashflow (three wholly owned and six in the Partnership) (March 2009: six stores, three wholly owned and three in the Partnership; September 2008: the assumption was not applied to the valuations).  C&W have prepared their valuation on the assumption that were these properties to be brought to the market then they would be lotted or grouped for sale with other more mature assets of a similar type owned by the Company in such a manner as would most likely be adopted in the case of an actual sale of the interests valued. This lotting assumption has been made in order to alleviate the issue of negative or low short term cash flow. C&W have not assumed that the entire portfolio of properties owned by the Group would be sold as a single lot and the value for the whole portfolio in the context of a sale as a single lot may differ significantly from the aggregate of the individual values for each property in the portfolio, reflecting prudent lotting as described above.

Valuation assumption for purchaser's costs

The Group's investment property assets have been valued for the purposes of the financial statements after deducting notional purchaser's cost of 5.75% of gross value, as if they were sold directly as property assets. The valuation is an asset valuation which is entirely linked to the operating performance of the business. The assets would have to be sold with the benefit of operational contracts, employment contracts and customer contracts, which would be very difficult to achieve except in a corporate structure. We believe therefore that the valuation assumptions should be adjusted to reflect the reality.

This approach follows the logic of the valuation methodology in that the valuation is based on a capitalisation of the net operating income after allowing a deduction for operational cost and an allowance for central administration costs. Sale in a corporate structure would result in a reduction in the assumed Stamp Duty Land Tax but an increase in other transaction costs reflecting additional due diligence resulting in a reduced notional purchaser's cost of 2.75% of gross value. All the significant sized transactions that have been concluded in the UK in recent years were completed in a corporate structure. We therefore instructed C&W to carry out a Red Book valuation on the above basis, and this results in a higher property valuation at 30 September 2009 of £809,220,000 (£34,340,000 higher than the value recorded in the financial statements). The valuations in Big Yellow Limited Partnership are £1,407,000 higher than the value recorded in the financial statements. The sum of these is £35,747,000 and translates to 27.3 pence per share. We have included this revised valuation in the adjusted diluted net asset calculation (see note 15).  

17. RELATED PARTY TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Transactions with Big Yellow Limited Partnership

As described in note 9e, the Group has a 33.3% interest in Big Yellow Limited Partnership, and entered into transactions with the Partnership during the year on normal commercial terms as shown in the table below.  

	30 September 2009 £000	30 September 2008 £000	31 March 2009 £000
Fees earned from Big Yellow Limited Partnership	826	650	1,368
Book value of assets sold to the Partnership	-	15,048	22,300
Profit on disposal of assets sold to the Partnership	-	49	400
Balance due from the Partnership	539	262	14

No other related party transactions took place during the year ended 31 March 2009 and the periods ended 30 September 2009 and 30 September 2008.

18.  RISKS AND UNCERTAINTIES

The operational risks facing the Group for the remaining six months of the financial year are consistent with those outlined in the Annual Report for the year ended 31 March 2009. The outlook for the housing market and the economy are marginally improved from March 2009, and the risk mitigating factors listed in the 2009 Annual Report are still appropriate.  

The value of Big Yellow's property portfolio is affected by the conditions prevailing in the property investment market and the general economic environment. Accordingly, the Group's net asset value can rise and fall due to external factors beyond management's control. The uncertainties in global financial markets look set to continue and investors remain cautious about property investment in the short-term. We have a high quality prime portfolio of assets which should help to mitigate the impact of this on the Group. 

Self storage is a seasonal business, and over the last three years we have seen losses in occupancy of c 2-4% in the December quarter, followed in the New Year by an increase in activity, occupancy and revenue growth. The visibility we have on the business is relatively limited at three to four weeks and is based on the net reservations we have in hand, which are currently in line with our expectations.

Our customers are facing more difficult financial conditions and there is therefore an increased risk that they may default on their rent payments, however since the start of the current economic difficulties, we have not seen an increase in bad debts. We have 30,000 customers and this, coupled with the diversity of their reasons for using storage mean the risk of individual tenant default to Big Yellow is low. 75% of our customers pay by direct debit and we take a deposit from all customers. Furthermore, we have a right of lien over customers' goods, so in the ultimate event of default, we are able to auction the goods to recover the debts.

INDEPENDENT REVIEW REPORT TO BIG YELLOW GROUP PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2009 which comprises the income statement, the balance sheet, the statement of changes in equity, statement of recognised income and expense, the cash flow statement and related notes 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditors

16 November 2009

Reading

 

END

 

 

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