Annual Financial Report and AGM documents

RNS Number : 4998P

Safestore Holdings plc

08 February 2019

 

Safestore Holding plc

Annual Financial Report and AGM documents

8 February 2019

Safestore Holdings plc ("the Company" or "the Group")

Publication of Annual Report and Accounts 2018, Notice of 2019 Annual General Meeting and Form of Proxy

Safestore Holdings plc ("the Company") announces, in accordance Listing Rules 9.6.1 and 9.6.3, that copies of the above documents have been submitted to the Financial Conduct Authority and will shortly be available for inspection on the national storage mechanism at www.morningstar.co.uk/uk/nsm.

These documents have been posted to those shareholders who have elected to receive hard copy communications or have otherwise been made available to shareholders today. 

The Company's 2019 Annual General Meeting will be held at Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT at 12 noon on Wednesday, 20 March 2019. Full details of the proposed resolutions are set out in the Notice of Meeting.

The Annual Report and Accounts for the year ended 31 October 2018 is now available for download from the Company's website at: 

https://www.safestore.co.uk/corporate/investors/report-and-presentations/

The Notice of 2019 Annual General Meeting and Form of Proxy are also available for download from the Group's website at: 

https://www.safestore.co.uk/corporate/investors/report-and-presentations/

The information included in the appendix to this announcement has been extracted from the Annual Report and is reproduced here solely for the purpose of complying with Disclosure Guidance and Transparency Rule ("DTR") 6.3.5 on respect of how to make annual financial reports available to the public.

The content of this announcement, including the appendix, should be read in conjunction with the preliminary announcement of annual results, released on 8 January 2019, which is available on the Company's website at: 

https://www.safestore.co.uk/corporate/investors/report-and-presentations/

Together these announcements constitute the material required by DTR 6.3.5 to be communicated in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report.  Defined terms used in the appendix refer to terms as defined in the Annual Report. Page numbers in the appendix refer to pages in the Annual Report.

For further information, please contact:

Safestore Holdings plc

Helen Bramall, Interim Company Secretary                                  Tel: [phone]

LEI Code:  213800WGA3YSJC1YOH73

Appendix

Statement of Directors' responsibilities

Page 71 of the Annual Report contains the following statement regarding responsibility for the financial statements and the management report included in the Annual Report.

The Directors, who are named on pages 40 and 41, are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare such financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework'. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the parent company and of the profit or loss of the Group for that period.

In preparing the parent company financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·   state whether Financial Reporting Standard 101 'Reduced Disclosure Framework' has been followed, subject to any material departures disclosed and explained in the financial statements; and

·     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:

·      properly select and apply accounting policies;

·    present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·  provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

·      make an assessment of the Group's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the parent company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website at www.safestore.co.uk. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' responsibility statement

We confirm that, to the best of our knowledge:

·      the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole;

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

·  the Annual Report and Financial Statements, taken as a whole, are fair, balanced  and understandable and provide the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

Principal risks and risk management

Pages 12 to 15 of the Annual Report contain the following statement on principal risks and uncertainties faced by the Group.

Risks and risk management

The Board recognises that effective risk management requires awareness and engagement at all levels of our organisation.

Risk management process

The Board is responsible for determining the nature of the risks the Group faces, and for ensuring that appropriate mitigating actions are in place to manage them in a manner that enables the Group to achieve its strategic objectives.

Effective risk management requires awareness and engagement at all levels of our organisation. It is for this reason that risk management process is incorporated into the day-to-day management of our business, as well as being reflected in the Group's core processes and controls. The Board has defined the Group's risk appetite and oversees the risk management strategy and the effectiveness of the Group's internal control framework. Risks are considered at every business level and are assessed, discussed and taken into account when deciding upon future strategy, approving transactions and monitoring performance.

Strategic risks are identified, assessed and managed by the Board, with support from the Audit Committee, which in turn is supported by the Risk Committee. Strategic risks are reviewed by the Audit Committee to ensure they are valid and that they represent the key risks associated with the current strategic direction of the Group. Operational risks are identified, assessed and managed by the Risk Committee and Executive Team members, and reported to the Board and the Audit Committee. These risks cover all areas of the business, such as finance, operations, investment, development and corporate risks.

The risk management process commences with rigorous risk identification sessions incorporating contributions from functional managers and Executive Team members. The output is reviewed and discussed by the Risk Committee, supported by members of senior management from across the business. The Board, supported by the Risk Committee, identifies and prioritises the top business risks, with a focus on the identification of key strategic, financial and operational risks. The potential impact and likelihood of the risks occurring are determined, key risk mitigations are identified and the current level of risk is assessed against the Board's risk appetite. These top business risks form the basis for the principal risks and uncertainties detailed in the section below.

Principal risks and uncertainties

The principal risks and uncertainties described are considered to have the most significant effect on Safestore's strategic objectives.

The key strategic and operational risks are monitored by the Board and are defined as those which could prevent us from achieving our business goals. Our current strategic and operational risks and key mitigating actions are as follows:

Risk	Current mitigation activities	Developments since 2017
Strategy
The Group develops business plans based on a wide range of variables. Incorrect assumptions about the economic environment, the self-storage market, or changes in the needs of customers, or changes in the needs of customers or the activities of customers may adversely affect the returns achieved by the Group, potentially resulting in loss of shareholder value.	·     The strategy development process draws on internal and external analysis of the self-storage market, emerging customer trends and a range of other factors. ·      Continuing focus on yield management with regular review of demand levels and pricing at each individual store. ·      The portfolio is geographically diversified with performance monitoring covering the personal and business customers by segments. ·      Robust cost management.	The Group's strategy is regularly reviewed through the annual planning and budgeting process, and regular reforecasts are prepared during the year. The acquisition of the twelve-store Alligator portfolio was completed at the start of the year and three new stores have been opened, all successfully integrated into the Group's store portfolio. However, no business strategy is without risk, and the level of this risk is considered to have remained broadly similar to last year.
Finance risk
Lack of funding resulting in inability to meet business plans or satisfy liabilities or a breach of covenants.	·      Funding requirements for business plans and the timing for commitments are reviewed regularly as part of the monthly management accounts. ·     The Group manages liquidity in accordance with Board-approved policies designed to ensure that the Group has adequate funds for its ongoing needs. ·     The Board regularly monitors financial covenant ratios and headroom. ·      88% of the Group's banking facilities run to 30 June 2023 with the remaining 12% to 30 June 2022.  The US private placement notes mature in six, nine and eleven years.	In June 2018, the Group extended 88% of its banking facilities by a year, which provides more certainty for our loan financing. The Group's loan-to-value ratio ("LTV") has reduced during the year, from 36% to 30%, reflecting the valuation increase in the store portfolio. This risk is considered to have remained broadly unchanged since last year.
Treasury risk
Adverse currency or interest rate movements could see the cost of debt rise, or impact the Sterling value of income flows or investments.	·      Guidelines are set for our exposure to fixed and floating interest rates and use of interest rate swaps to manage this risk. ·      Foreign currency denominated assets are financed by borrowings in the same currency where appropriate.	Euro-denominated borrowings continue to provide an effective, natural hedge against the Euro-denominated net assets of our French business. During the year, we took out a further £35 million of interest rate swaps to hedge an increase in borrowings, which principally arose due to the Alligator acquisition. Despite recent increases in the UK base rate, this risk remains low. Mitigation of future rate increases is provided by our interest rate swaps and fixed interest borrowings, so the risk of adverse interest rate fluctuations remains broadly unchanged since the prior year.
Property investment and development
Acquisition and development of properties that fail to meet performance expectations,  overexposure to developments within a short timeframe or the inability to find and open new stores may have an adverse impact on the portfolio valuation, resulting in loss of shareholder value.	·      Thorough due diligence is conducted and detailed analysis is undertaken prior to Board approval for property investment and development. ·      Execution of targeted acquisitions and disposals. ·      The Group's overall exposure to developments is monitored and controlled, with projects phased to avoid over-commitment. ·      The performance of individual properties is benchmarked against target returns and post-investment reviews are undertaken.	A robust due diligence process was undertaken prior to the Alligator acquisition. Projects are not pursued when they fail to meet our rigorous investment criteria and post-investment reviews indicate that sound and appropriate investment decisions have been made The capital requirements of development projects undertaken during the year have been carefully forecast and monitored, and we continue to maintain significant capacity within our financing arrangements. We continue to pursue investment and development opportunities, and consider our recent track record to have been successful. Therefore, the Board considers that there has been no significant change to this risk since last year.
Valuation risk
Value of our properties declining as a result of external market or internal management factors. In the absence of relevant transactional evidence, valuations can be inherently subjective leading to a degree of uncertainty.	·      Independent valuations are conducted regularly by experienced, independent, professionally qualified valuers. ·      A diversified portfolio which is let to a large number of customers helps to mitigate any negative impact arising from changing conditions in the financial and property markets. ·      Headroom of LTV banking covenants is maintained and reviewed. ·      Current gearing levels provide sizeable headroom on our portfolio valuation and mitigate the likelihood of covenants being endangered.	The valuation of the Group's portfolio has continued to grow during the year, reflecting both valuation gains arising from the increasing profitability of our portfolio and additions to our portfolio through corporate acquisitions and the opening of new development Stores. In addition, the availability of recent relevant transactional evidence continues to increase; nevertheless, the level of this risk is viewed as broadly similar to last year.
Occupancy risk
A potential loss of income and increased vacancy due to falling demand, oversupply or customer default, which could also adversely impact the portfolio valuation.	·      Personal and business customers cover a wide range of segments, sectors and geographic territories with limited exposure to any single customer. ·      Dedicated support for enquiry capture. ·      Weekly monitoring of occupancy levels and close management of stores. ·      Management of pricing to stimulate demand, when appropriate. ·      Monitoring of reasons for customers vacating and exit interviews conducted. ·      Independent feedback facility for customer experience. ·      The like-for-like occupancy rate across the portfolio has continued to grow due to flexibility offered on deals by in-house marketing and the customer support centre.	We have continued to grow like-for-like occupancy during the year, and the newly opened stores are performing well. Growth in our store portfolio diversifies the potential impact of underperformance of an individual store; however, the level of this risk is similar to last year.
Real estate investment trust ("REIT") risk
Failure to comply with the REIT legislation could expose the Group to potential tax penalties or loss of its REIT status.	·      Internal monitoring procedures are in place to ensure that the appropriate rules and legislation are complied with and this is formally reported to the Board.	The Group has remained compliant with all REIT legislation throughout the year. There has been no significant change to this risk since last year.
Catastrophic event
Major events mean that the Group is unable to carry out its business for a sustained period;  health and safety issues put customers, staff or property at risk; or the Group suffers a cyber-attack, hacking or malicious infiltration of websites. These may result in reputational damage, injury or property damage, or customer compensation, causing a loss of market share and income.	·      Business continuity plans are in place and tested. ·      Back-up systems at offsite locations and remote working capabilities. ·      Reviews and assessments are undertaken periodically for enhancements to supplement the existing compliant aspects of buildings and processes. ·      Monitoring and review by the Health and Safety Committee. ·      Robust operational procedures, including health and safety policies, and a specific focus on fire prevention and safety procedures. ·      Fire risk assessments in stores. ·      Periodic security review of all systems supported by external monitoring and penetration testing. ·      Limited retention of customer data. ·      Online colleague training modules.	Continuing focus from the Risk Committee, with particular attention to specific issues.  Implementation of GDPR during the year prompted a thorough review of our data management and retention processes. The threat from cyber-attacks continues to grow.  The risk management and mitigation actions have been developed accordingly.
Regulatory compliance risk
The regulatory landscape for UK listed companies is constantly developing and becoming more demanding, with new reporting and compliance requirements arising frequently.	·     Monitoring and review at the Risk Committee. ·     Project-specific steering committees to address  the implementation of new regulatory requirements. ·     Legal and professional advice. ·     Online colleague training modules.	Whilst this risk is not new, the increase in regulatory and compliance requirements is such that this risk now warrants reporting separately. All regulatory compliance risks have been monitored during the year. In particular, a steering committee ensured an effective and compliant implementation of GDPR, and continues to monitor ongoing compliance.
Marketing risk
Our marketing strategy is critical to the success of the business, including maintaining web leadership, including our relationship with Google	·     Constant measuring and monitoring of our web presence. ·     Market-leading website. ·     Our pricing strategy monitors and adapts to evolving customer behaviour.	We have on-boarded a new Digital and Marketing Director with deep experience in performance marketing and web optimisation. We have built functional expertise at Group level in performance marketing, organic and local searches and analytics. We have established a Group marketing forum to review performance, market developments and our ongoing improvement plan. We have defined and begun execution of a new value and quality-focused performance marketing strategy. The level of risk is considered similar to last year.
Consequences of the UK's decision to leave the EU ("Brexit")
The UK is expected to leave the EU by March 2019. The terms of the UK's departure remain unclear, which has generated uncertainty in the economy and also with regard to legislation changes both before and after Brexit. Potential changes to UK legislation or regulations may include changes to the right of EU citizens to work in the UK, changes to direct or indirect tax legislation or other legislation changes such as health and safety.	·      Economic uncertainty is not a new risk for the Group, but increases the likelihood of previously recognised risks, and is addressed under the finance risk, treasury risk and valuation risk categories above. ·      Self-storage is a localised industry, with a broad and diversified customer base, so demand is unlikely to be significantly impacted by Brexit related changes. ·      The Group's workforce in the UK includes a low proportion of employees whose right to work in the UK may be impacted by potential Brexit related legislation changes.	The terms of Brexit are still to be approved by the UK Parliament, and the risk of a "no deal" Brexit remains. Whilst the Group has only limited exposure to the direct risks arising from Brexit, the continuing risk of a "no deal" Brexit increases economic uncertainty, so the level of this risk is considered to have increased since last year.

About Safestore:

·     Safestore is the UK's largest self-storage group with 146 stores at 31 October 2018, comprising 119 wholly owned stores in the UK (including 67 in London and the South East with the remainder in key metropolitan areas such as Manchester, Birmingham, Glasgow, Edinburgh, Liverpool and Bristol) and 27 wholly owned stores in the Paris region.

·    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 densest 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 64,000 personal and business customers.

·    As at 31 October 2018, Safestore has a maximum lettable area ("MLA") of 6.37 million sq ft (excluding the expansion pipeline stores) of which 4.69 million sq ft was occupied.

·      Safestore employs around 650 people in the UK and France.

 

END

 

 

ACSTPMMTMBMMBJL