Final Results
22 May 2012
Big Yellow Group PLC
("Big Yellow", "the Group" or "the Company")
audited Results for the YEAR and FOURTH Quarter ended 31 MARCH 2012
Big Yellow Group PLC, the UK's leading self storage brand, is pleased to announce results for the year and for the fourth quarter ended 31 March 2012.
Highlights
· Occupancy growth of 328,000 sq ft across all stores (2011: growth of 215,000 sq ft)
· The 51 wholly owned stores open at 1 April 2011 have grown in occupancy from 59.3% to 64.9% at 31 March 2012
· Store revenue for the year up 8% to £64.3 million (2011: £59.6 million)
· Store revenue for the fourth quarter increased by 10% to £16.1 million from £14.6 million for the same quarter last year
· Store revenue for the second half of the year of £32.4 million up 9% compared to the second half of the prior year of £29.7 million
· Revenue of £65.7 million, an increase of £3.8 million (6%) compared to £61.9 million for the prior year
· Store REVPAF1 up 5% to £19.43 (2011: £18.47)
· Store EBITDA up 10% to £40.8 million (2011: £37.1 million)
· Adjusted profit before tax2 of £23.6 million up 17% (2011: £20.2 million)
· Adjusted EPRA earnings per share3 up 18% to 18.22 pence (2011: 15.49 pence)
· Cash flows from operating activities (post interest) increased by 17% to £27.4 million (2011: £23.5 million)
· Group net debt increased by £7.9 million to £273.9 million (31 March 2011: £266.0 million)
· Final dividend of 5.5 pence per share declared (2011: 5 pence per share), full year dividend of 10 pence per share (2011: 9 pence per share)
· New £100 million 15 year loan facility secured with Aviva Commercial Finance Limited
· In August 2011, we acquired 1.4 million shares in the Company at an average price of 260p. These are currently being held in treasury
There has been a £51.4 million (6%) fall in the valuation of our store portfolio compared to 31 March 2011, principally caused by the impact of the proposed introduction of VAT on self storage from 1 October 2012. The following results reflect this valuation fall:
· Loss before tax for the year of £35.6 million (2011: profit of £6.9 million)
· Basic loss per share of 27.68 pence (2011: earnings per share of 5.34 pence)
· Adjusted net assets per share4 down 4.6% to 429.2 pence (31 March 2011: 449.8 pence)
1 See Portfolio Summary 2 See note 10 3See note 12 4See notes 12 and 14
Nicholas Vetch, Executive Chairman of Big Yellow, commenting said:
"I am pleased to report that the Group's occupancy, revenue and cash flow growth measures well against the weak macroeconomic background. Occupancy across all of our 65 stores increased by 328,000 sq ft during the financial year, compared to an increase of 215,000 sq ft across 62 stores in the prior year. The occupancy of the 51 wholly owned stores that were open at 31 March 2011 has grown to 64.9% from 59.3% at the same time last year.
The Big Yellow Self Storage business model has proved to be resilient during the downturn, in line with the experience in the more established US self storage market. Over the last five years the Group has reported a 12% compound annual adjusted eps growth. The free cash flow pre capital expenditure reported in the current year of £27.4 million is almost double that reported in the year to 31 March 2008 of £14.4 million, an annual compound increase of 17%. This performance is a reflection of the growing awareness of, and demand for, self storage at a time when new openings have slowed to a trickle. We are also seeing the benefits of our leading brand, strong market share online and our focus on London and the South East and other large metropolitan cities."
- Ends -
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For further information, please contact: |
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Big Yellow Group PLC Nicholas Vetch, Executive Chairman James Gibson, Chief Executive Officer John Trotman, Chief Financial Officer |
01276 477811 |
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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 66 stores, 58 in London and the South, two in Sheffield, and one each in Birmingham, Edinburgh, Leeds, Liverpool, Nottingham and Stockport. We own a further four development sites, of which three have planning. 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. The Group currently operates from a platform of 4.2 million sq ft. 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. Our focus on the location and visibility of our buildings, coupled with our excellent customer service, has created the most recognised brand name in the UK self storage industry.
Big Yellow Group PLC
Chairman's Statement
Big Yellow Group PLC ("Big Yellow", "the Group" or "the Company"), the UK's leading self storage brand, is pleased to announce results for the fourth quarter and the year ended 31 March 2012.
The Group's occupancy, revenue and cash flow growth measures well against the weak macroeconomic background. Occupancy across all of our 65 stores increased by 328,000 sq ft during the financial year, compared to an increase of 215,000 sq ft across 62 stores in the prior year. The occupancy of the 51 wholly owned stores that were open at 31 March 2011 has grown to 64.9% from 59.3% at the same time last year.
The average net rent per sq ft achieved during the year, after all discounts and promotional offers, was in line with the prior year at £26.81. Since the year end the Group's net rent has grown by 1.5%.
The Big Yellow Self Storage business model has proved to be relatively resilient during the downturn, in line with the experience in the more established US self storage market. Over the last five years the Group has reported a 12% compound annual adjusted eps growth. The free cash flow pre capital expenditure reported in the current year of £27.4 million is almost double that reported in the year to 31 March 2008 of £14.4 million, an annual compound increase of 17%. This performance is a reflection of the growing awareness of, and demand for, self storage at a time when new openings have slowed to a trickle. We are also seeing the benefits of our leading brand, strong online market share and our focus on London and the South East and other large metropolitan cities.
Financial results
Revenue for the year was £65.7 million (2011: £61.9 million), an increase of 6%; store revenue increased by 8% to £64.3 million (2011: £59.6 million). The lower % increase in total revenue reflects a fall in construction fees earned from Big Yellow Limited Partnership and a reduction in tenant income on sites where we have started development. EBITDA for the 53 wholly owned stores increased by £3.7 million (10%) to £40.8 million.
Store revenue for the fourth quarter increased by 10% to £16.1 million from £14.6 million for the same quarter last year. Store revenue in the second half of the year was £32.4 million, up 9% from £29.7 million for the second half of the year ended 31 March 2011.
Cash inflows from operating activities (after finance costs) increased by £3.9 million (17%) to £27.4 million for the year (2011: £23.5 million).
The Group made an adjusted profit before tax in the year of £23.6 million (2011: £20.2 million). This translated into an 18% increase in adjusted earnings per share to 18.22p (2011: 15.49p).
The Group made a statutory loss before tax for the year of £35.6 million, compared to a profit of £6.9 million last year. This reduction reflects the decrease in the valuation of the Group's open stores, partially offset by the improved adjusted profit. The Financial Review contains more detail on the operating assumptions underpinning the ten year cash flow which have led to a 6% valuation fall of the store portfolio from the same time last year, principally caused by the valuer's assessment of the impact of the proposed imposition of VAT on self storage from 1 October 2012.
The Group remains relatively conservatively geared with net bank debt of £273.9 million at 31 March 2012 (2011: £266.0 million). This represents approximately 35% (2011: 33%) of the Group's gross property assets totalling £778.3 million (2011: £809.7 million) and 49% (2011: 45%) of the adjusted net assets of £561.0 million (2011: £591.4 million).
The Group's income cover for the year expressed as the ratio of Group's adjusted EBITDA post administrative expenses to net interest payable was 3.1 times (2011: 2.8 times).
Property
Our landmark store on the A4 in Chiswick, West London opened shortly after the year end. We have a pipeline of four wholly owned development sites; all bar our site in Central Manchester have planning consent.
The three development sites with planning consent at Enfield, Guildford Central and Gypsy Corner have an estimated cost to complete of £14.3 million excluding VAT. At this stage we have not committed to their construction, but we will keep this under review, particularly in light of the potential change to the Group's VAT status.
During the year we sold our surplus land at Blackheath to a social housing developer for £4.5 million. As we have previously reported, the Premier Inn hotel we are developing at Richmond is due for completion this summer with further consideration of £7.4 million to be received on the sale of the building. At 31 March 2012 there was a further £2.8 million of costs to complete the development. During the year we have exchanged contracts on the sale of the surplus one acre site adjacent to our new flagship Chiswick store for £4.75 million, with completion expected in July 2012.
At 31 March 2012, the Group owned approximately a further £7.6 million of land surplus to our requirements across three further sites. We aim to sell this remaining surplus land once we have maximised its value through planning.
We continue to monitor site acquisition opportunities, principally focussed on London.
VAT change
The rental of self storage units is currently exempt from VAT as a licence to occupy land in the same way as the rental of commercial property. The March 2012 Budget included a proposed change of legislation which would require VAT to be applied to storage rent from 1 October 2012.
HMRC have invited consultation on this proposed change and we, with the help of our tax advisors are actively engaged in discussions with them. This is an industry wide issue, and affects around 70% of the total self storage market, including all of our major competitors.
Should the change come into force we would be able to recover VAT on our ongoing operating expenses, and would be entitled to a refund of previously irrecoverable VAT on capital expenditure under the Capital Goods Scheme, amounting to approximately £18 million across the Group and our Partnership with Pramerica. Our business customers would be largely unaffected by the proposed change as the majority are able to recover VAT. In addition, we would be passing on a minimum of half of the VAT to our domestic customers. We have a flexible yield management system and our licence agreement allows us to move customers' rents at 28 days' notice. Notice of the VAT change would be sent out to all customers at the beginning of September, and take effect from 1 October.
Self evidently, the precise impact will not be clear until after the event, but we anticipate that the combination of these factors will substantially mitigate the impact of the VAT change on the Group's cash flow in the second half of the year.
Delivering growth
73% of our current revenue derives from within the M25; for London and the South East, the proportion of current revenue rises to 89%. We would expect the proportion of revenue from London to increase over time as 74% of the current available vacant capacity in the wholly owned stores is in London, where the average net rent per sq ft is also higher.
We believe that the value creation opportunity in this business for shareholders in the medium term will be driven mainly from leasing up stores to drive revenue, the majority of which flows through to the bottom line given that our operating costs are already largely embedded. We have increased occupancy of the wholly owned stores that were open at 1 April 2011 from 59.3% to 64.9% in the year. Store revenue has increased by £4.7 million in the year and the Group's operating cash flow after finance costs has increased by £3.9 million.
Share buy back
During the year, we acquired 1.4 million shares in the Company at an average price of 260 pence. These shares are currently being held as treasury shares. This was a tactical, not strategic decision. We will keep this under review as we have the flexibility to either sell them back into the market in due course, use them for share based remuneration or cancel them.
Dividend
The Board is recommending the payment of a final dividend of 5.5 pence per share, taking the total dividend declared for the year to 10 pence per share (31 March 2011: 9 pence per share).
The cash dividend payment is over two times covered by our free cash flow.
Financing strategy
We were delighted to complete the ground-breaking 15 year £100 million loan with Aviva in April 2012 at a fixed cost of 4.9%, which provides a stable core of long term financing for the Group from a new debt provider to the business. This is Aviva's first loan to a self storage company, reflecting their confidence in the Big Yellow business model. Importantly, it opens up a new source of medium and long term finance for the Group and is the first step in diversifying away from a reliance on the senior bank debt market.
We will now enter into discussions with our banking group, who continue to be supportive, and other potential insurance debt providers, with a view to refinancing the remaining £225 million bank debt facility in this calendar year. Once complete, this will inform the total blended interest rate on the drawn debt, which in turn will define the amount of debt the Board is confident carrying on the Balance Sheet. The Board's ambition is that the interest paid on the debt should be at least 4 times covered by pre-interest cash flow within a 2 to 3 year period. To achieve this will require a reduction in the level of debt held on the balance sheet to between £245m and £260m, from the current net debt of £283 million.
Following the opening of our new Chiswick store, capital expenditure has largely stopped and therefore we can achieve that debt reduction by the retention of undistributed cash flow and the proceeds of the sale of surplus land. It is anticipated that the desired level of debt will be achieved by 2014-15.
Thereafter, subject to no material factors changing, the Board would intend to move to a higher dividend payout ratio. This ratio would be calculated by reference to maintaining 125% earnings cover to dividend payout.
The remainder of the cash flow will be retained in the business for future investment, including the possibility of a modest store expansion programme and/or further debt amortisation.
Quality of earnings
Given Big Yellow's status as a REIT, inevitably some third party commentary centres around the characteristics relevant to property companies. The Group however is profoundly different in that it is not a recycler of assets, but rather owns its property principally to give it operational advantage and to allow it to enjoy high operating margins.
The Board and management's principal financial aims therefore centre around cash flow, earnings and dividend growth. As well as the quantum of those metrics the nature of the income is also important. We believe that self storage income is essentially evergreen income with highly defensive characteristics driven from buildings with very low obsolescence risk. Although its form of contract with its customers is in theory as short as a week, it does not need to rely on contract for its income security. At 31 March 2012 the average length of stay for existing customers was 19 months. For all customers, including those who have moved out of the business, the average length of stay has remained at 8.5 months. In our established store portfolio, 37% of our customers by occupied space have been storing with us for over three years, and a further 15% of customers in these stores have been in the business for between one and three years.
The location of its stores, brand, security and most importantly customer service together with the diversity of its 36,000 customers will serve better than any contract. It is for these reasons that self storage income is so highly prized in the US where the industry has enjoyed a near 50 year growth track record.
It is instructive that the Group has secured 15 year term financing recently, a testament to the resilience of our cash flows.
Our people
The continued efforts and loyalty of the Big Yellow team, both at head office and in the stores, have delivered this performance and they remain pivotal to the achievement of our key medium term objectives of driving occupancy, revenue, and cash flow growth.
Board
Jonathan Short has announced that he is stepping down as a Non-Executive Director at the Group's next AGM. He joined the Company in 2000 and over the ensuing 12 years has been a source of excellent advice and sound judgement. I and the Board will miss his good humour and good counsel. I have no doubt however that we will remain in regular contact. He will be replaced by Richard Cotton, formerly at JP Morgan Cazenove, which he left in April 2009. Richard is currently a Managing Director of Forum Partners, a Non-Executive Director of Hansteen Holdings plc, and has an unparalleled track record in advising publically quoted real estate orientated companies and I look forward to his presence on the Board.
Outlook
Financial headlines continue to be dominated by ongoing difficulties in the Eurozone. The core issue however is the deleveraging by sovereigns, banks and individuals which will continue for some years to come. This will have a depressing effect on UK macroeconomic performance and may of course have an impact on the trading of Big Yellow. There is however nothing new in this as this is the environment we have operated in for approaching five years now.
From time to time and at moments of heightened economic fear, we can expect to see fluctuations in demand, but we have considerable confidence in the long term resilience of our income. The proposition for investors is therefore a defensive income flow, with long term earnings growth potential, from a branded, London-centric, high margin, asset backed, internet dominant business with a conservative capital structure. UK economic activity as measured by GDP, although recovering from its low point in 2009, remains some 4% below its peak, whilst Big Yellow's cash flow has nearly doubled from that reported for the year ended 31 March 2008.
Nicholas Vetch
Chairman
21 May 2012
Business Review
Introduction
We have seen another year of steady occupancy growth against a backdrop of muted economic growth. Store revenue for the year grew by 8%, feeding through to a 17% improvement in adjusted profit and a 17% increase in operating cash flow.
Store performance
In all Big Yellow stores, the occupancy growth in the current year was 328,000 sq ft, against an increase of 215,000 sq ft in the prior year. This growth across the 53 wholly owned and 12 stores in the Partnership represents an average of 5,046 sq ft per store (2011: 3,468 sq ft per store).
During the year we opened three stores, two wholly owned stores in New Cross and Eltham, both in South East London and a store in Stockport within Big Yellow Limited Partnership. Since the year end, we have opened a wholly owned flagship store in Chiswick, West London. These openings bring the number now trading in the Group and the Partnership to 66 stores.
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Store occupancy summary |
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Occupancy growth for year to 31 March 2012 |
Occupancy growth for year to 31 March 2011 |
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32 established stores 21 lease-up stores Total - 53 wholly owned stores 12 Partnership lease-up stores Total - all 65 stores |
1,442 |
1,381 |
61 |
31 |
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691 |
534 |
157 |
86 |
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2,133 |
1,915 |
218 |
117 |
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325 |
215 |
110 |
98 |
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2,458 |
2,130 |
328 |
215 |
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The 53 wholly owned stores had a net gain in occupancy of 218,000 sq ft, representing an average of 4,113 sq ft per store. This compares to an overall gain in the wholly owned stores of 117,000 sq ft in the year to 31 March 2011, and a gain of 66,000 sq ft in the year to 31 March 2010. The 12 stores in the Partnership, which are at an earlier stage of lease-up, increased their occupancy by 110,000 sq ft, representing average growth of 9,167 sq ft per store.
The 32 established stores are 74.3% occupied compared to 71.1% at the same time last year. The 21 lease-up stores have grown in occupancy from 41.5% to 48.8%, and overall store occupancy has increased in the year from 59.3% to 63.5%. Like for like occupancy, excluding Eltham and New Cross which opened in the year, increased from 59.3% to 64.9%.
For the first time since the onset of the economic downturn in 2007, the occupancy in the Group's wholly owned store portfolio at March was above the high enjoyed in the previous September, thus recouping all the normal seasonal occupancy losses incurred in the December quarter.
We saw an increase in move-in activity during the year, moving in over 54,000 customers into all stores (including those in the Partnership) taking 3.43 million sq ft compared to 47,000 customers taking 2.95 million sq ft last year. Move-out activity also increased in the year, reflecting a higher level of churn in the business, with 51,000 customers moving out from 3.10 million sq ft compared to 45,000 customers moving out from 2.73 million sq ft last year.
The table below illustrates the seasonality of the business with move-ins to the like-for-like portfolio of 51 wholly owned stores, which were up 9% on the prior year.
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Move-ins |
Year ended 31 March 2012 |
Year ended 31 March 2011 |
Increase |
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April to June |
11,081 |
10,991 |
1% |
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July to September |
12,661 |
11,981 |
6% |
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October to December |
10,195 |
8,845 |
15% |
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January to March |
10,149 |
8,685 |
17% |
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Total |
44,086 |
40,502 |
9% |
Move-ins in April 2012 were up 17% on April 2011.
Of the 53 wholly owned stores open at the year end all are trading profitably at the EBITDA level, with the exception of New Cross, which opened in February 2012. Eleven of the twelve stores within Big Yellow Limited Partnership are trading profitably at the EBITDA level, with the exception of Stockport, which opened in September 2011.
73% of our current revenue derives from within the M25; for London and the South East, the proportion of current revenue rises to 89%. The performance of our stores in London has been more resilient over the past five years than those outside London.
The average net rental achieved across the 53 wholly owned stores was £26.81 per sq ft per annum (the average rent in London is higher at £28.80 per sq ft per annum). The stores in lease-up achieved a higher average rental (£27.49 per sq ft) than the 32 established stores (£26.52 per sq ft), reflecting the greater London weighting of the lease-up store portfolio.
Our key focus over the next two to three years is to drive occupancy and hence revenue in the stores. During the downturn we increased the level of promotional offers in the business, resulting in more muted rental growth over the past couple of years. As the stores lease-up, and the number of vacant rooms in particular sizes reduce, our pricing model will automatically reduce the level of discounts offered, leading to an increase in net achieved rents. In our higher occupancy stores within the established portfolio, we have seen net rental growth of 4-5% in the current year. We have a rolling programme of price increases to existing storage customers, in most cases providing an annual increase in storage rents of 6%.
Store operations
The Big Yellow store model is well established. The "typical" store has 60,000 sq ft of net lettable storage area and takes some 3 to 5 years to achieve 75% to 80% plus occupancy in the current macroeconomic environment. Some stores have taken longer than this given they opened just before or during the downturn. The average room size occupied in the portfolio is currently 66 sq ft, an increase from 65 sq ft in the prior year.
The store is open seven days a week and is initially run by three staff, adding a part time member of staff once the store occupancy justifies the need for the extra administrative and sales workload.
Given that the operating costs of these assets are relatively fixed, larger stores in bigger urban conurbations, particularly London, drive higher revenues and higher operating margins. The table below illustrates the average key metrics across the store portfolio for the year ended 31 March 2012:
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Established stores |
Lease-up stores |
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Number of stores |
32 |
21 |
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Store capacity |
60,656 |
67,476 |
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Sq ft occupied per store at 31 March 2012 |
45,063 |
32,905 |
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% occupancy |
74.3% |
48.8% |
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Revenue per store |
£1,369,000 |
£975,000 |
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EBITDA per store |
£887,000 |
£589,000 |
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EBITDA margin |
65% |
60% |
Revenue per available square foot (REVPAF) across the wholly owned portfolio, including the 69,000 sq ft store at Eltham, London, which opened in April 2011, and the 60,000 sq ft store at New Cross, London, which opened in February 2012, increased from the last year by 5.2% to £19.43 (2011: £18.47).
The average store size in the UK market is approximately 40,000 sq ft according to the 2012 Self Storage Association Survey. The upside from filling our larger than average sized stores is, in our view, only possible in large metropolitan markets, where self storage drivers from domestic and business customers are highest.
Of the customers moving into the business in the last year, our surveys indicate approximately 58% are linked to the housing market, of which 18% are customers renting storage space whilst using the rental sector, and 40% moving within the owner occupied sector. During the year 11% of our customers who moved in took storage space as a spare room for decluttering and approximately 22% of our customers used the product because some event has occurred in their lives generating the need for storage; they may be moving abroad for a job, have inherited furniture, are getting married or divorced, are students who need storage during the holidays, or homeowners developing into their lofts or basements. The balance of 9% of our customer demand in the year came from businesses. These proportions of demand are in line with last year.
Our business customers range across a number of industry types, such as retailers, professional service companies, hospitality companies and importers/exporters. These businesses store stock, documents, equipment, or promotional materials all requiring a convenient flexible solution to their storage, either to get started or to free up more expensive space.
We have a dedicated national accounts team for business customers who wish to occupy space in multiple stores. These accounts are billed and managed centrally. We have three full time members of staff working on growing and managing our national account customers. The national accounts team can arrange storage at short notice at any location for our customers.
Business customers typically stay longer than domestic customers, and also on average occupy larger rooms. Whilst only representing 9% of new customers during the year, businesses represent 19% of our overall customer numbers, occupying 35% of the space in our stores. The average room size occupied by business customers is 123 sq ft, against 53 sq ft for domestic customers.
The demand from business customers has been relatively robust, as they seek a cost effective, flexible solution to their storage requirements, preferring self storage to the commitment of a long lease.
The split between business and domestic customers for the 53 wholly owned stores is as follows:
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Sq ft occupied at 31 March 2012 |
% |
No of customers at 31 March 2012 |
% |
% of storage revenue for the year |
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Business customers |
752,000 |
35% |
6,116 |
19% |
30% |
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Domestic customers |
1,381,000 |
65% |
26,220 |
81% |
70% |
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Total |
2,133,000 |
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32,336 |
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100% |
The net rent per sq ft for domestic customers is approximately 46% higher than for business customers, reflecting the smaller average unit size occupied for domestic customers.
For the 32 established stores, the average split between business and domestic customers is shown in the table below.
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Domestic |
Business |
Total |
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% of occupied space |
64.9% |
35.1% |
100% |
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Sq ft occupied per store at 31 March |
29,246 |
15,817 |
45,063 |
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Revenue per store for the year |
£958,000 |
£411,000 |
£1,369,000 |
At 31 March 2012 the average length of stay for existing customers was 18.9 months in line with the prior year. For the stores that have been open more than five years, the average length of stay increases to 21.7 months. For all customers, including those who have moved out of the business, the average length of stay has remained at 8.5 months. This translates into a loyal customer base. In our 32 established store portfolio, 37% of our customers by occupied space have been storing with us for over three years. A further 15% of customers in these stores have been in the business for between one and three years.
The drive to improve store operating standards and consistency across the portfolio remains a key focus for the Group. Excellent customer service is at the heart of our business objectives, as a satisfied customer is our best marketing tool. We measure customer service standards through a programme of mystery shoppers and online customer reviews, which give an average customer service score of 4.7 out of 5. We have in place a team of Area Managers who have on average worked for Big Yellow for nine years. They develop and support the stores to drive the growth of the business. Adrian Lee, Operations Director, is the Board member responsible for dealing with all customer issues.
The store bonus structure rewards occupancy growth, sales growth and cost control through setting quarterly targets based on occupancy and store profitability, including the contribution from ancillary sales of insurance and packing materials. Information on bonus build up is circulated monthly and stores are consulted in preparing their own targets and budgets each quarter, leading to improved visibility, a better understanding of sales lines and control of operating costs.
We believe that as a customer-facing branded business it is paramount to maintain the quality of our estate and customer offering. We therefore continue to invest in a rolling programme of store makeovers, preventative maintenance, store cleaning and the repair and replacement of essential equipment, such as lifts and gates. The ongoing annual expenditure is approximately £30,000 per store, which is included within cost of sales. This excludes makeovers, which typically take place every four years, at a cost of approximately £15,000 to £20,000 per store.
We have continued to manage the ten freehold stores branded as Armadillo Self Storage alongside our Big Yellow stores using the same operating model. The management contract expires in February 2014 and our key objective within the Armadillo portfolio remains driving occupancy, revenue and cash flow.
Sales and marketing
This year our strategy has focussed on driving customer response through our online platforms. Our You Gov surveys conducted in recent years show our national brand awareness remaining at three times the level of our nearest competitor, and awareness levels of 80% in London and 42% outside of London. Although Big Yellow leads the industry in terms of brand preference, there is still an opportunity to improve our brand awareness, in particular in regional cities outside London where we have recently opened stores.
(Source YouGov: September 2011)
Online
The website continues to grow in strength, with online prospects now accounting for 80% of all sales leads where details are first recorded on our operating system. Telephone is the first point of contact for 12% of prospects and walk-in enquiries, where we have had no previous contact with a prospect, represent 8%.
The Big Yellow website continues to evolve and we are constantly improving the user journey and prospect conversion throughout the site. Web analytics allow us to remove barriers to conversion in the web journey and to test new web page design to help increase conversion.
Mobile
With the huge growth in the use of smart phones and web browsing on mobile devices, we launched a dedicated mobile site in October 2011. This site is optimised for mobile phone use and presents the user with a simpler version of the main website. Conversion from a web visit to prospect through the mobile platform has exceeded the main website. The mobile site accounted for 23% of our total web traffic in April 2012.
Online customer reviews
Consistent with our strategy of putting the customer at the heart of our business, our online customer reviews continue to generate real-time feedback from customers as well as providing positive word of mouth to prospective customers. We ask our new customers to rate our product and service. These reviews are published on the website.
The reviews published indicate we are consistently delivering a very high standard of service:
· Over 6,300 reviews have been published
· Over 60% have awarded a score of 5 out of 5
· Our average overall rating is 4.6 out of 5
· Our average customer service score is 4.7 out of 5
In our view, real time customer reviews which have been independently and externally obtained are much more persuasive to prospects than scripted testimonials. We also gain real time insight from customers publishing Google reviews and from monitoring mentions of Big Yellow with the social mediums of Twitter and general online forums.
Driving online traffic
Search engines continue to be the most important acquisition tool for us, accounting for nearly 70% of all traffic to the website. We continue to make ongoing investment into search engine optimisation ("SEO") techniques both on and off the site. This helps us maintain the number one position for the popular and high volume search terms "storage" and "self storage" in the organic listings on Google. We have also been optimising our business pages and now appear high on Google's listings for the most popular business storage related search terms providing a good source of business prospects into the site at low cost.
The sponsored search listings remain the largest source of paid for traffic and we ensure our prominence in these listings is balanced with effective landing pages to maximise site conversion.
This year, we have also continued with online display advertising on websites which are contextually and geographically targeted to our core audience groups. This activity performs both a direct response and branding role.
Efficiencies in all online spend are continuing into 2012/13, ensuring return on investment is maximised from all our different online traffic sources.
Online marketing budgets will continue to remain fluid and be directed towards the media with the best return on investment.
Social media
Social media continues to be complementary to our existing marketing channels.
With over 24,000 'likes', our Facebook channel allows us to keep engaged with our target audiences, keeping the brand front of mind and allowing a forum for their feedback and dialogue. The Big Yellow You Tube channel is being used to showcase our stores to web prospects through a video store tour. We use both domestic and business versions to help prospects experience the quality of the product without the need for them to visit the store in person.
We also continue to develop a substantial amount of online blog content. Advice and tips for packing, storage and de-cluttering are published weekly on the site and posted through our Facebook and Twitter channels. This provides useful and engaging content for visitors.
Sales promotion
We have continued our sales promotion offer throughout the year of "50% off for up to your first 8 weeks storage" across all stores, coupled with a Price Promise for comparable local competition. We continue to manage pricing dynamically, taking account of customer demand and local competition.
Budget
During the year the Group spent approximately £2.8 million (4.3% of revenue) on marketing, the same as the previous year. We have held the budget for the year ended 31 March 2013 at £2.8 million with a focus on driving our revenue through delivering more prospects to the website.
People
At Big Yellow we aim to provide a lively, fun and enjoyable working environment, without losing our commitment to delivering the very best standards of customer service.
We encourage a culture of partnership within the business and believe in staff participating in corporate performance through bonus schemes and share incentives. Many employees benefit from an HMRC approved Sharesave Scheme, which provides an opportunity to invest in the future success of Big Yellow at a discount to the prevailing share price at the date of each invitation. Our stakeholder pension scheme has been taken up by over two thirds of employees eligible to join and a voucher awards scheme is used extensively across the business to recognise and reward our staff's efforts and achievements.
We aim to promote employee wellbeing through a range of flexible working options which include flexitime, staggered hours, home working and sabbaticals. We provide a comprehensive range of medical support and advice though our occupational health providers and have arranged corporate gym membership on a national basis, as well as a Cycle to Work Scheme.
We continue to recognise the importance of communication and consultation with an annual spring conference, regular formal and informal meetings, quarterly newsletters and weekly operational updates. In addition, the Directors and senior management spend a significant amount of time in the stores and are accessible to employees at all levels. A bi-annual Employee Attitude Survey provides management with key feedback and guidance as to where to focus their attention to further improve the working environment.
In March of this year we were delighted to have been recognised as one of the Sunday Times 100 Best Companies to Work For 2012 and also to have achieved "Two Star Status" for the Best Companies Accreditation.
We had 310 full-time, part-time and casual employees in the business at the year end (2011: 301 employees) and recruiting and retaining the right calibre people remains critical to the continued success of the Company.
We promote the individual development of staff through training and regular performance appraisals and delivered just over 745 days training to employees in the last year, equating to an average of approximately 2.4 days training per employee. In the stores, two thirds of the managerial posts have been filled by internal promotions.
Property and development
During the year our property team has focussed on building out selected sites within our development pipeline, and selling surplus land held in our balance sheet.
We believe the continuing difficulties in the banking and capital markets make access to capital required to fund growth more difficult and will slow down the growth in self storage store openings in the market generally. We believe that we are in a relatively strong position with our freehold property assets, with the proven ability to access more funding when the opportunity presents itself.
We now have a portfolio of 70 stores and sites of which 66 are currently open and a further 3 have planning consents, with planning negotiations ongoing at our site in central Manchester.
Development pipeline
There are three freehold sites with planning for Big Yellow stores to be developed. We also own a 4.5 acre development site in central Manchester where we are in planning discussions for a mixed use scheme incorporating a new Big Yellow store. The status of the development pipeline is summarised in the table below:
|
Wholly owned sites |
Location |
Status |
Anticipated capacity |
|
Gypsy Corner, West London |
Highly visible site on A40 in Acton, West London
|
Consent granted |
70,000 sq ft |
|
Enfield, North London |
Prominent site on the A10 Great Cambridge Road, London
|
Consent granted |
60,000 sq ft |
|
Guildford Central |
Prime location in centre of Guildford on Woodbridge Meadows
|
Consent granted |
56,000 sq ft |
|
Manchester Central |
Prime location on Water Street in central Manchester
|
Planning under negotiation |
50,000 sq ft to 70,000 sq ft |
Our landmark wholly owned store at Chiswick, with strong visibility from the M4 flyover, opened in April. Chiswick is our only planned store opening for the financial year ending 31 March 2013.
The Group manages the construction and fit-out of its stores in-house, as we believe it provides both better control and quality, and we have an excellent record of building stores on time and within budget. The total construction spend in the year was £23.3 million, of which £20.1 million was in the wholly owned Group, including £4.4 million in relation to the Richmond hotel development.
Corporate Social Responsibility
The Board employs a Corporate Social Responsibility Manager, who reports to the Board through the Operations Director. Our policy on Corporate Social Responsibility is set out on our website bigyellow.co.uk/csr.
Our CSR programme for 2012 committed to focus on our most significant environmental challenge of energy efficiency and carbon reduction. In order to achieve these twin objectives we:
· Continued our lighting efficiency programmes to gain an absolute carbon (CO2 ) emission reduction of 5.5%;
· Reduced carbon intensity emissions by 10.1% per store gross internal area and by 18.6% per customer occupied space, with three new stores opening and an increase of 16.1% in occupied space;
· Increased our annual solar electricity generation 15.3% to 123,489 kWh and saved carbon emissions equivalent to 64.4 tCO2 in the year ended 31 March 2012;
· Generated cumulative solar PV electricity of 374 MWh since the first installation in March 2008, an increase of 49.4% on last year's cumulative total; and
· Generated total Feed in Tariff income, displaced electricity costs and carbon tax reductions of £90,000 since 1 April 2010.
During the year we were awarded a Queen's Award for Enterprise in 'Sustainable Development', and also obtained a place in the Sunday Times Best 60 Green Companies to Work for.
Financial Review
Financial results
Revenue for the year was £65.7 million, an increase of £3.8 million (6%) from £61.9 million in the prior year. Store revenue increased by 8% in the year to £64.3 million (2011: £59.6 million). The overall increase in revenue was lower due to a fall in construction fees earned from Big Yellow Limited Partnership and a reduction in tenant income on sites where we have started development. Other sales (included within the above), comprising the selling of packing materials, insurance and storage related charges, represented 17.1% of storage income for the year (2011: 17.4%) and generated revenue of £9.4 million for the year, up 7% from £8.8 million in 2011.
Store revenue for the fourth quarter increased by 10% to £16.1 million from £14.6 million for the same quarter last year. Store revenue in the seasonally weaker second half of the year was £32.4 million, compared to £31.9 million for the first half of the year, and up 9% from £29.7 million for the second half of the year ended 31 March 2011. Annualised store revenue at 31 March 2012 was £66.1 million, an increase of 10% from £60.0 million at 31 March 2011.
There was an increase in revenue of 3% for the 32 established stores and 20% for the 21 lease-up stores. The EBITDA margin for the 32 established stores was 65% (2011: 65%), the EBITDA margin for the 21 lease-up stores grew from 56% to 60%. The table below illustrates the performance of the 32 established stores and the lease-up stores during the year.
|
Wholly owned store performance |
Capacity |
Occupancy |
Revenue |
EBITDA |
|||
|
|
000 sq ft |
31 Mar 12 000 sq ft |
31 Mar 11 000 sq ft |
31 Mar 12 £000 |
31 Mar 11 £000 |
31 Mar 12 £000 |
31 Mar 11 £000 |
|
32 established stores |
1,941 |
1,442 |
1,381 |
43,793 |
42,558 |
28,388 |
27,522 |
|
21 lease-up stores |
1,417 |
691 |
534 |
20,480 |
17,064 |
12,371 |
9,604 |
|
Total |
3,358 |
2,133 |
1,915 |
64,273 |
59,622 |
40,759 |
37,126 |
The Group made a loss before tax in the year of £35.6 million, compared to a profit of £6.9 million in the prior year. This reduction in Group profitability reflects the decrease in the valuation of the Group's open stores following the valuer's assessment of the impact of VAT, partially offset by the improved adjusted profit.
After adjusting for the loss on the revaluation of investment properties and other matters shown in the table below the Group made an adjusted profit before tax in the year of £23.6 million, up 17% from £20.2 million in 2011.
|
(Loss)/profit before tax analysis |
2012 £m |
2011 £m |
|
(Loss)/profit before tax |
(35.6) |
6.9 |
|
Loss on revaluation of investment properties |
51.4 |
16.0 |
|
Movement in fair value on interest rate derivatives |
8.0 |
(0.2) |
|
Gains on surplus land |
(0.5) |
(0.1) |
|
Share of non-recurring losses/(gains) in associate |
0.3 |
(2.4) |
|
Adjusted profit before tax |
23.6 |
20.2 |
The movement in the adjusted profit before tax from the prior year is illustrated in the table below:
|
|
£m |
|
Adjusted profit before tax - year ended 31 March 2011 |
20.2 |
|
Increase in gross profit |
3.0 |
|
Increase in net interest payable |
(0.1) |
|
Reduction in share of recurring loss of associate |
0.3 |
|
Increase in capitalised interest |
0.2 |
|
Adjusted profit before tax - year ended 31 March 2012 |
23.6 |
Diluted EPRA earnings per share based on adjusted profit after tax was up 18% to 18.22p (2011: 15.49p) (see note 12). Basic loss per share for the year was 27.68p (2011: earnings per share of 5.34p) and fully diluted loss per share was 27.40p (2011: earnings per share of 5.29p).
Operating costs
Cost of sales comprise principally of the direct store operating costs, including store staff salaries, utilities, business rates, insurance, an allocation of the central marketing budget, and repairs and maintenance. We have continued with our programme of cost control in the Group. Administrative expenses were held flat in the year. £1.5 million of the £7.1 million administrative expense is non-cash IFRS 2 share based payment charges.
Direct store operating costs for the established portfolio, including leasehold rent, have increased by 2% reflecting general inflationary pressures, notably from business rates. The operating costs in the lease-up stores have increased mainly due to the additional operating costs of Eltham and New Cross, both of which opened in the current financial year.
Interest expense on bank borrowings
The gross bank interest expense for the year was in line with the prior year at £11.1 million reflecting a broadly consistent level of average drawn debt in the year. The average cost of borrowing during the year was 3.7%, in line with the prior year.
Total interest payable has decreased in the statement of comprehensive income from £11.3 million to £11.2 million following a £0.2 million increase in the level of capitalised interest in the year, with construction taking place on three sites during the year. The capitalised interest in the forthcoming financial year will be minimal, with no planned construction projects beyond Chiswick, which opened in April 2012. This will increase the interest payable in the statement of comprehensive income, which will flow through to the Group's adjusted earnings.
VAT impact
In addition to the commentary contained in the Chairman's Statement about the impact of the proposed introduction of VAT on self storage and the actions we would take to mitigate it, we have provided further details on the capital goods scheme repayment due to us below.
Over the last ten years we have not been recovering VAT on our capital expenditure given that self storage is exempt. Any future implementation of this change would require the reimbursement of a significant sum to the Group under the Capital Goods Scheme which would be subject to agreement with HMRC. We estimate that this amounts to £12.3 million in the Group and a total of £5.3 million in Big Yellow Limited Partnership. The reimbursement would be spread over ten years, however the majority of the amount would be received within five years. This has not been recognised as an asset at the balance sheet date as the legislation to introduce VAT had not been substantially enacted at 31 March 2012, but has been included in our calculation of adjusted net assets per share (see note 12).
REIT status
The Group converted to a Real Estate Investment Trust ("REIT") in January 2007. Since then the Group has benefited from a zero tax rate on the Group's qualifying self storage earnings. The Group only pays tax on the profits attributable to our residual business, comprising primarily of the sale of packing materials and insurance, and fees earned from Big Yellow Limited Partnership and from the management of the Armadillo portfolio.
REIT status gives the Group exemption from UK corporation tax on profits and gains from its qualifying portfolio of UK stores. Future revaluation gains on these developments and our existing open stores will be exempt from corporation tax on capital gains, provided certain criteria are met.
The Group has a rigorous internal system in place for monitoring compliance with criteria set out in the REIT regulations. On a monthly basis, a report to the Board on compliance with these criteria is carried out. To date, the Group has complied with all REIT regulations, including forward looking tests.
Taxation
There is no cash tax payable for the year, due to tax relief arising from the restructuring of interest rate derivatives in 2009. There is no tax charge for the year ended 31 March 2012 (2011: £nil).
Dividends
REIT regulatory requirements determine the level of Property Income Dividend ("PID") payable by the Group. On the basis of the full year distributable reserves for PID purposes, a PID of 9 pence per share is payable (31 March 2011: 4 pence per share PID).
The Board is recommending the payment of a final dividend of 5.5 pence per share. The table below summarises the declared dividend for the year:
|
Dividend (pence per share) |
31 March 2012 |
31 March 2011 |
|
Interim dividend - PID |
4.5p |
2p |
|
- discretionary |
nil p |
2p |
|
- total |
4.5p |
4p |
|
|
|
|
|
Final dividend - PID |
4.5p |
2p |
|
- discretionary |
1p |
3p |
|
- total |
5.5p |
5p |
|
|
|
|
|
Total dividend - PID |
9p |
4p |
|
- discretionary |
1p |
5p |
|
- total |
10p |
9p |
Subject to approval by shareholders at the Annual General Meeting to be held on 10 July 2012, the final dividend will be paid on 20 July 2012 to shareholders on the Register on 8 June 2012.
Cash flow growth
The Group is strongly cash generative and draws down from its longer term committed facilities as required to meet obligations.
A summary of the cash flow for the year is set out in the table below:
|
|
Year ended 31 March 2012 £000 |
Year ended 31 March 2011 £000 |
|
|
|
|
|
Cash generated from operations |
38,877 |
34,925 |
|
Finance costs (net) |
(11,489) |
(11,391) |
|
Free cash flow |
27,388 |
23,534 |
|
Capital expenditure |
(23,630) |
(13,395) |
|
Asset sales |
5,404 |
4,497 |
|
Investment in associate |
(1,167) |
(1,000) |
|
Cash flow after investing activities |
7,995 |
13,636 |
|
|
|
|
|
Ordinary dividends |
(12,223) |
(10,328) |
|
Share buy back |
(3,727) |
- |
|
Issue of share capital |
61 |
27 |
|
Increase/(decrease) in borrowings |
9,000 |
(25,000) |
|
|
|
|
|
Net cash inflow/(outflow) |
1,106 |
(21,665) |
|
|
|
|
|
Opening cash and cash equivalents |
8,954 |
30,619 |
|
Closing cash and cash equivalents |
10,060 |
8,954 |
|
Debt |
(284,000) |
(275,000) |
|
Net debt |
(273,940) |
(266,046) |
Free cash flow pre-capital expenditure increased by 17% to £27.4 million for the year (2011: £23.5 million). In the year capital expenditure outflows were £23.6 million, up from £13.4 million in the prior year, with the construction of Chiswick, New Cross (combined expenditure of £15.5 million) and the Richmond hotel (£4.4 million) the significant amounts. The cash flow after investing activities was a net inflow of £8.0 million in the year, compared to an inflow of £13.6 million in 2011.
Balance sheet
Property
The Group's 53 wholly owned stores and five stores under development at 31 March 2012, which are classified as investment properties, have been revalued by Cushman & Wakefield ("C&W") and this has resulted in an investment property asset value of £760.3 million, comprising £682.9 million (90%) for the 46 freehold (including one long leasehold) open stores, £43.5 million (6%) for the seven short leasehold open stores and £33.9 million (4%) for the five investment properties under construction, including Chiswick.
|
Analysis of property portfolio |
|
Value at 31 March 2012 £m |
Revaluation movement in year |
|
Investment property |
53 |
726.4 |
(49.5) |
|
Investment property under construction |
5 |
33.9 |
(1.9) |
|
Investment property total |
58 |
760.3 |
(51.4) |
|
Surplus land |
5 |
18.0 |
- |
|
Total |
64 |
778.3 |
(51.4) |
Investment property
Each store is reviewed and valued individually by Cushman & Wakefield LLP, who are the valuers to a significant proportion of the UK and European self storage market.
The valuer has taken into account its estimate of the proposed introduction of VAT from 1 October 2012 on the asset valuation. This has led to a revaluation fall of the investment property portfolio in the year of £51.4 million.
The valuer also reported to us on the valuation of the portfolio assuming the VAT change was not implemented. The valuation of the 53 wholly owned open stores under this valuation is £773.0 million, £46.6 million higher than the value recorded in the financial statements, which would represent a revaluation deficit of only £2.9 million in the year.
As can be seen above the majority of the 6% fall is following adjustments made due to VAT. The movement in the valuations before the impact of VAT is largely due to the net effect of the following operational factors:
- an increase in operating costs assumed in the cash flows, principally down to business rates;
- a reduction in the long term rental growth assumptions to reflect the current trading patterns;
- a reduction in the stabilised occupancy level assumed in the valuations from 83.1% to 82.4%; and
- improved current cash flow following the occupancy growth recorded in the year.
The valuation is based on an average occupancy over the 10 year cash flow period of 78.9% across the whole portfolio. Between April 2004 and March 2008, the 32 established stores had an average occupancy of 83%.
|
|
Established store portfolio |
Lease-up store portfolio |
All wholly owned stores |
|
Valuation at 31 March 2012 |
£401.8m |
£324.6m |
£726.4m |
|
Occupancy at 31 March 2012 |
74.3% |
48.8% |
63.5% |
|
Stabilised occupancy assumed in valuations |
83.0% |
81.6% |
82.4% |
|
Net initial yield pre admin expenses |
6.8% |
4.4% |
5.7% |
|
Stabilised yield assuming no rental growth |
8.1% |
8.6% |
8.3% |
The initial yield pre-administration expenses assuming no rental growth is 5.7% rising to a stabilised yield of 8.3% (2011: 8.4%). The 32 established stores that were mature in 2007 are assumed to return to stabilised occupancy in 32 months on average (2011: 36 months). The 21 lease-up stores, the majority of which have opened in the past four years, are assumed to reach stabilised occupancy in 44 months on average from 1 April 2012 (2011: 49 months). Note 14 contains more detail on the assumptions underpinning the valuations.
Investment property under construction
The five wholly owned development sites have increased in value by £8.3 million, £10.2 million relating to capital expenditure incurred (principally on Chiswick), with the balance of £1.9 million a revaluation deficit. C&W's forecast valuations for when the Group 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 £45 million on the four wholly owned development sites with planning consent, including Chiswick, which opened in April 2012.
In their report to us, our valuers, Cushman and Wakefield have drawn attention to valuation uncertainty resulting from a lack of transactions in the self storage investment market. Please see note 14 for further details.
Purchaser's cost adjustment
As in prior years, we have instructed an alternative valuation on our assets using a purchaser's cost assumption of 2.75% (see note 14 for further details) to be used in the calculation of our adjusted diluted net asset value. This Red Book valuation on the basis of 2.75% purchaser's costs, results in a higher property valuation at 31 March 2012 of £794.2 million (£33.9 million higher than the value recorded in the financial statements). The valuations in Big Yellow Limited Partnership are £4.9 million higher than the value recorded in the financial statements, of which the Group's share is £1.6 million. The sum of these is £35.5 million and translates to 27.2 pence per share.
The adjusted net asset per share calculation has also been adjusted for the Group's estimate of capital goods scheme repayments due to it following the proposed introduction of VAT on self storage from 1 October 2012. As described in note 14, the investment property valuations have been adjusted to reflect the impact of VAT being introduced, and the Board consider it appropriate to reflect the estimated amounts due back to the Group from HMRC following the introduction of VAT in the calculation of adjusted net assets per share. This cannot be recognised as an asset at the balance sheet date as the legislation to introduce VAT had not been substantially enacted at 31 March 2012.
The revised valuation translates into an adjusted net asset value per share of 429.2 pence (2011: 449.8 pence) after the dilutive effect of outstanding share options.
Surplus land
These are sites which the Directors do not intend to develop into self storage centres. 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. The Group received £5.5 million gross sales proceeds during the year from the disposal of surplus land; £4.5 million from the disposal of our surplus site in Blackheath; and £1 million initial consideration on the disposal of our surplus land at Richmond.
Movement in adjusted NAV
The year on year movement is illustrated in the table below:
|
Movement in adjusted net asset value |
Equity shareholders' funds £m |
EPRA adjusted NAV per share |
|
1 April 2011 |
591.4 |
449.8 |
|
Adjusted profit |
23.6 |
18.1 |
|
Equity dividends paid |
(12.2) |
(9.3) |
|
Revaluation movements (including share of BYLP) |
(51.9) |
(39.7) |
|
Share buy back |
(3.7) |
2.0 |
|
Capital goods scheme adjustment (including share of BYLP) |
14.0 |
10.7 |
|
Movement in purchaser's cost adjustment |
(2.0) |
(1.5) |
|
Other movements (eg share options) |
1.8 |
(0.9) |
|
31 March 2012 |
561.0 |
429.2 |
Borrowings
We focus on improving our cash flows and we currently have healthy Group interest cover of 3.1 times (2011: 2.8 times) based on adjusted Group EBITDA against existing interest costs, allied to a relatively conservative debt structure secured principally against the freehold estate.
On 26 April 2012, we announced the completion of a £100 million 15 year fixed rate loan with Aviva Commercial Finance Limited. The loan is secured over a portfolio of 15 freehold self storage centres which were valued at £242.1 million at 29 February 2012 for the purposes of the drawdown. The annual fixed interest rate on the loan is 4.90%.
The loan amortises to £60 million over the course of the 15 years, consistent with the Group's medium term debt reduction strategy. The debt service is payable monthly based on fixed annual amounts. The loan outstanding on the fifth anniversary will be £89.8 million; £76.7 million outstanding on the tenth anniversary, with £60 million remaining at expiry in April 2027.
The new 15 year term loan has been deployed to repay and cancel £100 million of the Group's core bank debt facility, reducing it to £225 million, of which £190 million is currently drawn. At the same time as repaying the bank debt, we cancelled £100 million of interest rate derivatives at a cost of £9.2 million. In addition to the Aviva fixed rate loan, there is a residual £90 million interest rate swap in the core bank debt facility at 2.99% plus margin to September 2015, with the remaining £100 million of the core bank debt paying at floating rates plus margin. As a result of this transaction, we have repaid £100 million of bank debt which was costing 4.8% per annum, with a 15 year loan fixed at 4.9% per annum. The Group's proforma average cost of debt is 3.7%.
The Group's existing bank facility, which is secured on the remainder of the Group's self storage centres, carries a margin of 1.125%, and expires in September 2013. The £100 million repayment and cancellation has been disproportionately applied against HSH Nordbank's commitment which has been reduced from £150 million to £65 million. The remainder of the loan is held by Lloyds TBS Bank plc, HSBC Bank plc and Santander. We intend to enter into discussions with our banking group, who continue to be supportive, with a view to refinancing the core bank debt facility in the current year.
The Group was comfortably in compliance with its banking covenants at 31 March 2012; see note 19 for details.
The Group wide covenants on the Aviva loan are in line with the covenants on the existing loan. There is also a minimum income cover covenant of 1.5x on the charged assets and a minimum debt service cover of 1.2x, and a loan to value covenant of 65% based on the valuation of the 15 assets charged to Aviva.
The Group has £51 million of cash and undrawn bank facilities and relatively conservative levels of gearing. The Group currently has a net debt to gross property assets ratio of 35%, and a net debt to adjusted net assets ratio of 49%.
Following the drawdown of the Aviva fixed rate loan, £90 million of the Group's debt is hedged by way of interest rate swaps fixed at 2.99% (excluding margin), to September 2015, two years beyond the expiry of the current debt facility. The Group also has floating rate debt of £100 million, on which we are paying one month LIBOR plus applicable margin. The interest rate profile of the Group's debt following the drawdown of the Aviva loan is shown in the table below:
|
|
Proforma amount of debt £m |
Proforma weighted average interest cost |
Weighted average interest cost at 31 March 2011 |
|
|
|
|
|
|
Aviva loan |
100 |
4.9% |
- |
|
Fixed bank debt |
90 |
4.1% |
4.5% |
|
Variable bank debt |
100 |
1.9% |
1.7% |
|
Total |
290 |
3.7% |
3.6% |
At 31 March 2012, the fair value on the Group's interest rate derivatives was a liability of £15.7 million. A loss of £8.0 million has been charged to the statement of comprehensive income to reflect the movement from the prior year. On a proforma basis, the liability has fallen to £6.5 million following the cancellation of the interest rate derivatives referred to above. The Group does not hedge account its interest rate derivatives. As recommended by EPRA (European Public Real Estate Association), the fair value movements are eliminated from adjusted profit before tax, diluted EPRA earnings per share, and adjusted net assets per share.
Treasury continues to be closely monitored and its policy approved by the Board. We maintain a keen watch on medium and long term rates and the Group's policy in respect of interest rates is to maintain a balance between flexibility and hedging of interest rate risk.
Cash deposits are only placed with approved financial institutions in accordance with the Group's Treasury policy.
Share capital
The share capital of the Company totalled £13.1 million at 31 March 2012 (2011: £13.1 million), consisting of 131,393,041 ordinary shares of 10p each (2011: 131,060,522 shares).
Shares issued for the exercise of options during the year amounted to 332,519 at an average exercise price of 287p.
During the year, we acquired 1,418,750 shares in the Company at an average price of 260 pence. The Group holds these shares in treasury and 1,885,117 of its shares within an Employee Benefit Trust ("EBT"). These shares are shown as a debit in reserves and are not included in calculating net asset value per share.
|
|
|
|
|
2012 No. |
2011 No. |
|
|
|
|
|
|
|
|
Opening shares |
|
|
|
131,060,522 |
130,990,837 |
|
Shares issued for the exercise of options |
|
|
|
332,519 |
69,685 |
|
|
|
|
|
|
|
|
Closing shares in issue |
|
|
|
131,393,041 |
131,060,522 |
|
Shares held in EBT |
|
|
|
(1,885,117) |
(1,905,000) |
|
Shares held in treasury |
|
|
|
(1,418,750) |
- |
|
|
|
|
|
|
|
|
Closing shares for NAV purposes |
|
|
|
128,089,174 |
129,155,522 |
|
|
|
|
|
|
|
63,054,535 shares were traded in the market during the year ended 31 March 2012 (2011: 71,869,364). The average mid-market price of shares traded during the year was 284.9p with a high of 344.4p and a low of 218.0p.
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 locations in the South. In the consolidated accounts of Big Yellow Group PLC, the Partnership is treated as an associate. We have adopted equity accounting for the Partnership, so that our share of the Partnership's results are disclosed in operating profit and our net investment is shown in the balance sheet within "Investment in Associate". We have provided in note 13d the balance sheet and income statement of the Partnership, along with the Group's share of the income statement captions.
Structure
The Group and Pramerica have committed equity in a one third, two thirds split respectively. The Board of the Partnership comprises two representatives of both Pramerica and Big Yellow. Pramerica have the casting vote over the approval of the Partnership's annual business plan.
The Partners have resolved not to develop any further stores. Our total further commitment required to fund both the capital expenditure required for Phase II developments is estimated at £1.5 million.
The Group earns certain property acquisition, planning, construction and operational fees from the Partnership. For the year to 31 March 2012, these fees amounted to £0.7 million (2011: £0.9 million).
Funding
A five year term development loan of £62.7 million is in place from the Royal Bank of Scotland plc and HSBC Bank plc to further fund the Partnership.
The Partnership's policy is to fix the interest rate on at least 50% of drawn amounts to 30 June 2013 (as required in its facility agreement), and to leave the balance benefiting from the currently low levels of short term interest rates. £31.8 million of the £62.7 million drawn down at 31 March 2012 has been fixed to 30 June 2013 at a weighted average interest cost post margin of 5.5%. The weighted average interest cost of the overall facility at 31 March 2012 was 3.9% including margin. Following the year end the partners reduced the outstanding debt drawn to £60 million, through repaying and cancelling £2.7 million of the facility.
Results
For the year ended 31 March 2012, the Partnership made a loss of £1.8 million (2011: profit of £5.5 million). This loss arose following the valuer's assessment of the impact of the proposed imposition of VAT on self storage. Big Yellow's share of this loss was £0.6 million (2011: share of profit of £1.8 million).
The operating profit of the Partnership was £1.8 million (2011: £0.2 million), with the majority of the stores being profitable at the operating level. After adjusting for non-recurring items (revaluation losses of £1.4 million, and fair value gain on interest rate derivatives of £0.4 million), the Partnership made an adjusted loss of £0.8 million (2011: adjusted loss of £1.9 million), of which the Group's share is £0.3 million (2011: share of loss of £0.6 million). The Group earned management fees from the Partnership of £0.7 million in the year (2011: £0.9 million). The Partnership is tax transparent, so the limited partners are taxed on any profits.
Big Yellow has an option to purchase the assets contained within the Partnership or the interest in the Partnership which it does not own exercisable from 31 March 2013. On exit, whether by way of exercise of the option or a sale to a third party, Big Yellow is entitled to certain promotes, which could result in Big Yellow sharing in the surplus created in the Partnership ahead of its equity participation.
PORTFOLIO SUMMARY - WHOLLY OWNED STORES
|
Wholly owned stores |
March 2012 Established (1) |
March 2012 Lease-up |
March 2012 Total |
March 2011 Established |
March 2011 Lease-up |
March 2011 Total |
|
Number of stores |
32 |
21 |
53 |
32 |
19 |
51 |
|
At 31 March |
|
|
|
|
|
|
|
Total capacity (sq ft) |
1,941,000 |
1,417,000 |
3,358,000 |
1,941,000 |
1,288,000 |
3,229,000 |
|
Occupied space (sq ft) |
1,442,000 |
691,000 |
2,133,000 |
1,381,000 |
534,000 |
1,915,000 |
|
Percentage occupied |
74.3% |
48.8% |
63.5% |
71.1% |
41.5% |
59.3% |
|
Net rent per sq ft |
£26.44 |
£26.78 |
£26.49 |
£26.34 |
£27.92 |
£26.78 |
|
Annualised revenue (£000) |
44,062 |
22,077 |
66,139 |
42,154 |
17,801 |
59,955 |
|
For the year |
|
|
|
|
|
|
|
REVPAF(2) |
£22.56 |
£14.99 |
£19.43 |
£21.93 |
£13.26 |
£18.47 |
|
Average occupancy |
73.3% |
43.7% |
60.8% |
71.6% |
38.8% |
58.5% |
|
Average annual rent psf |
£26.52 |
£27.49 |
£26.81 |
£26.32 |
£28.22 |
£26.82 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Self storage income |
37,729 |
17,005 |
54,734 |
36,589 |
14,101 |
50,690 |
|
Other storage related income (3) |
5,995 |
3,368 |
9,363 |
5,908 |
2,936 |
8,844 |
|
Ancillary store rental income |
69 |
107 |
176 |
61 |
27 |
88 |
|
Total store revenue |
43,793 |
20,480 |
64,273 |
42,558 |
17,064 |
59,622 |
|
Direct store operating costs (excluding depreciation) |
(13,366) |
(8,064) |
(21,430) |
(13,046) |
(7,415) |
(20,461) |
|
Short and long leasehold rent(4) |
(2,039) |
(45) |
(2,084) |
(1,990) |
(45) |
(2,035) |
|
Store EBITDA(5) |
28,388 |
12,371 |
40,759 |
27,522 |
9,604 |
37,126 |
|
Store EBITDA margin(6) |
64.8% |
60.4% |
63.4% |
64.7% |
56.3% |
62.3% |
|
Cumulative capital expenditure |
£m |
£m |
£m |
|
|
|
|
To 31 March 2012 |
164.5 |
217.1 |
381.6 |
|
|
|
|
To complete |
- |
3.7 |
3.7 |
|
|
|
|
Total capital expenditure |
164.5 |
220.8 |
385.3 |
|
|
|
(1) The 32 established 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. Of the 21 lease-up stores, three stores opened before 31 March 2006, six stores opened in the year ended 31 March 2007, six stores opened in the year ended 31 March 2008 and six have opened since 1 April 2008.
(2) Total store revenue divided by the average maximum lettable area in the year.
(3) Packing materials, insurance and other storage related fees.
(4) Rent for seven established short leasehold properties accounted for as investment properties and finance leases under IFRS with total self storage capacity of 431,000 sq ft, and a long leasehold lease-up store with a capacity of 64,000 sq ft.
(5) Earnings before interest, tax, depreciation and amortisation.
(6) Of the established stores, the seven leasehold stores achieved a store EBITDA of £4.5 million and EBITDA margin of 44%. The 25 freehold stores achieved a store EBITDA of £23.9 million and EBITDA margin of 71%.
PORTFOLIO SUMMARY - BIG YELLOW LIMITED PARTNERSHIP STORES
|
|
March 2012 |
March 2011 |
|
|
|
|
|
Number of stores |
12 |
11 |
|
At 31 March |
|
|
|
Total capacity (sq ft) |
743,000 |
683,000 |
|
Occupied space (sq ft) |
325,000 |
215,000 |
|
Percentage occupied |
43.7% |
31.5% |
|
Net rent per sq ft |
£18.12 |
£18.70 |
|
Annualised revenue (£000) |
7,308 |
5,066 |
|
For the year |
|
|
|
REVPAF |
£9.11 |
£6.64 |
|
Average occupancy |
38% |
25% |
|
Average annual rent psf |
£18.42 |
£19.01 |
|
|
£000 |
£000 |
|
Self storage income |
5,189 |
3,211 |
|
Other storage related income |
1,315 |
919 |
|
Ancillary store rental income |
35 |
4 |
|
Total store revenue |
6,539 |
4,134 |
|
Direct store operating costs (excluding depreciation) |
(3,937) |
(3,181) |
|
Store EBITDA |
2,602 |
953 |
|
Store EBITDA Margin |
39.8% |
23.1% |
|
Cumulative capital expenditure (1) |
|
|
|
To 31 March 2012 |
102.3 |
|
|
To complete |
3.7 |
|
|
Total capital expenditure |
106.0 |
|
(1) This cost includes Leeds which was acquired by the Partnership as an open store in November 2007.
|
Big Yellow Group PLC
Consolidated Statement of Comprehensive Income Year ended 31 March 2012
|
||||
|
|
Note |
|
2012 £000 |
2011 £000 |
|
|
|
|
|
|
|
Revenue |
3 |
|
65,663 |
61,885 |
|
Cost of sales |
|
|
(23,436) |
(22,669) |
|
|
|
|
|
|
|
Gross profit |
|
|
42,227 |
39,216 |
|
|
|
|
|
|
|
Administrative expenses |
|
|
(7,148) |
(7,158) |
|
|
|
|
|
|
|
Operating profit before gains and losses on property assets |
|
|
35,079 |
32,058 |
|
Loss on the revaluation of investment properties |
13a,14 |
|
(51,381) |
(16,039) |
|
Gains on surplus land |
15 |
|
497 |
71 |
|
|
|
|
|
|
|
Operating (loss)/profit |
|
|
(15,805) |
16,090 |
|
Share of (loss)/profit of associate |
13d |
|
(602) |
1,826 |
|
Investment income - interest receivable |
7 |
|
20 |
114 |
|
- fair value movement of derivatives |
7,18 |
|
- |
197 |
|
Finance costs - interest payable |
8 |
|
(11,199) |
(11,326) |
|
- fair value movement of derivatives |
8, 18 |
|
(7,965) |
- |
|
|
|
|
|
|
|
(Loss)/profit before taxation |
|
|
(35,551) |
6,901 |
|
Taxation |
9 |
|
- |
- |
|
|
|
|
|
|
|
(Loss)/profit for the year (attributable to equity shareholders) |
5 |
|
(35,551) |
6,901 |
|
|
|
|
|
|
|
Total comprehensive (loss)/income for the year attributable to equity shareholders |
|
|
(35,551) |
6,901 |
|
|
|
|
|
|
|
Basic (loss)/earnings per share |
12 |
|
(27.68)p |
5.34p |
|
|
|
|
|
|
|
Diluted (loss)/earnings per share |
12 |
|
(27.40)p |
5.29p |
|
|
|
|
|
|
EPRA earnings per share are shown in Note 12.
All items in the consolidated statement of comprehensive income relate to continuing operations.
|
Big Yellow Group PLC
Consolidated Balance Sheet 31 March 2012
|
||||
|
|
Note
|
2012 £000 |
2011 £000 |
|
|
Non-current assets |
|
|
||
|
Investment property |
13a
|
726,390 |
745,840 |
|
|
Investment property under construction |
13a
|
33,905 |
46,310 |
|
|
Interests in leasehold property |
13a
|
22,394 |
21,244 |
|
|
Plant, equipment and owner-occupied property |
13b
|
2,637 |
2,674 |
|
|
Goodwill |
13c
|
1,433 |
1,433 |
|
|
Investment in associate |
13d
|
15,496 |
14,931 |
|
|
|
|
|
||
|
|
802,255 |
832,432 |
||
|
Current assets |
|
|
||
|
Surplus land |
15
|
18,035 |
17,633 |
|
|
Inventories |
299 |
319 |
||
|
Trade and other receivables |
16
|
10,943 |
11,540 |
|
|
Cash and cash equivalents |
10,060 |
8,954 |
||
|
|
|
|
||
|
|
39,337 |
38,446 |
||
|
|
|
|
||
|
Total assets |
841,592 |
870,878 |
||
|
|
|
|
||
|
Current liabilities |
|
|
||
|
Trade and other payables |
17
|
(25,675) |
(22,718) |
|
|
Obligations under finance leases |
21
|
(1,946) |
(1,947) |
|
|
|
|
|
||
|
|
(27,621) |
(24,665) |
||
|
|
|
|
||
|
Net current assets |
11,716 |
13,781 |
||
|
|
|
|
||
|
Non-current liabilities |
|
|
||
|
Derivative financial instruments |
18
|
(15,748) |
(7,783) |
|
|
Bank borrowings |
19
|
(282,960) |
(273,230) |
|
|
Obligations under finance leases |
21
|
(20,448) |
(19,297) |
|
|
Other payables |
17
|
(315) |
(954) |
|
|
|
|
|
||
|
|
(319,471) |
(301,264) |
||
|
|
|
|
||
|
Total liabilities |
(347,092) |
(325,929) |
||
|
|
|
|
||
|
Net assets |
494,500 |
544,949 |
||
|
|
|
|
||
|
Equity |
|
|
||
|
Called up share capital |
22
|
13,139 |
13,106 |
|
|
Share premium account |
43,432 |
43,404 |
||
|
Reserves |
437,929 |
488,439 |
||
|
|
|
|
||
|
Equity shareholders' funds |
494,500 |
544,949 |
||
|
|
|
|
||
The financial statements were approved by the Board of Directors and authorised for issue on 21 May 2012. They were signed on its behalf by:
James Gibson, Director John Trotman, Director
Company Registration No. 03625199
Big Yellow Group PLC
Consolidated Statement of Changes in Equity
Year ended 31 March 2012
|
|
Share capital £000 |
Share Premium account £000 |
Capital Redemption reserve £000 |
Retained earnings £000 |
Own shares £000 |
Total £000 |
|
|
|
|
|
|
|
|
|
At 1 April 2011 |
13,106 |
43,404 |
1,653 |
488,682 |
(1,896) |
544,949 |
|
Total comprehensive loss for the year |
- |
- |
- |
(35,551) |
- |
(35,551) |
|
Issue of share capital |
33 |
28 |
- |
- |
- |
61 |
|
Dividend |
- |
- |
- |
(12,223) |
- |
(12,223) |
|
Purchase of own shares |
- |
- |
- |
- |
(3,727) |
(3,727) |
|
Credit to equity for equity-settled share based payments |
- |
- |
- |
991 |
- |
991 |
|
|
|
|
|
|
|
|
|
At 31 March 2012 |
13,139 |
43,432 |
1,653 |
441,899 |
(5,623) |
494,500 |
|
|
|
|
|
|
|
|
Year ended 31 March 2011
|
|
Share capital £000 |
Share Premium account £000 |
Capital Redemption reserve £000 |
Retained earnings £000 |
Own shares £000 |
Total £000 |
|
|
|
|
|
|
|
|
|
At 1 April 2010 |
13,099 |
43,384 |
1,653 |
491,045 |
(1,896) |
547,285 |
|
Total comprehensive income for the year |
- |
- |
- |
6,901 |
- |
6,901 |
|
Issue of share capital |
7 |
20 |
- |
- |
- |
27 |
|
Dividend |
- |
- |
- |
(10,328) |
- |
(10,328) |
|
Credit to equity for equity-settled share based payments |
- |
- |
- |
1,064 |
- |
1,064 |
|
|
|
|
|
|
|
|
|
At 31 March 2011 |
13,106 |
43,404 |
1,653 |
488,682 |
(1,896) |
544,949 |
|
|
|
|
|
|
|
|
|
|||||
|
|
Note |
2012 |
2011 |
||
|
Operating (loss)/profit |
|
|
(15,805) |
16,090 |
|
|
Loss on the revaluation of investment properties |
|
13a, 14 |
51,381 |
16,039 |
|
|
Gains on surplus land |
|
15 |
(497) |
(71) |
|
|
Depreciation |
|
13b |
550 |
611 |
|
|
Depreciation of finance lease capital obligations |
|
13a |
853 |
910 |
|
|
Employee share options |
|
6 |
1,532 |
1,641 |
|
|
Decrease/(increase) in inventories |
|
|
20 |
(24) |
|
|
Decrease/(increase) in receivables |
|
|
887 |
(1,945) |
|
|
(Decrease)/increase in payables |
|
|
(44) |
1,674 |
|
|
|
|
|
|
|
|
|
Cash generated from operations |
|
|
38,877 |
34,925 |
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
(11,508) |
(11,806) |
|
|
Interest received |
|
|
19 |
415 |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
27,388 |
23,534 |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of surplus land |
|
|
5,404 |
4,497 |
|
|
Purchase of non-current assets |
|
|
(18,130) |
(11,864) |
|
|
Additions to surplus land |
|
|
(4,647) |
(621) |
|
|
Investment in associate |
|
13d |
(1,167) |
(1,000) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
(18,540) |
(8,988) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Issue of share capital |
|
|
61 |
27 |
|
|
Purchase of own shares |
|
|
(3,727) |
- |
|
|
Payment of finance lease liabilities |
|
13a |
(853) |
(910) |
|
|
Equity dividends paid |
|
11 |
(12,223) |
(10,328) |
|
|
Increase/(reduction) in borrowings |
|
|
9,000 |
(25,000) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
(7,742) |
(36,211) |
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
|
1,106 |
(21,665) |
|
|
|
|
|
|
|
|
|
Opening cash and cash equivalents |
|
|
8,954 |
30,619 |
|
|
|
|
|
|
|
|
|
Closing cash and cash equivalents |
|
|
10,060 |
8,954 |
|
|
|
|
|
|
|
|
|
Big Yellow Group PLC
Reconcilliation of Net Cash Flow to Movement in Net Debt Year ended 31 March 2012
|
|||||
|
|
Note |
2012 |
2011 |
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents in the year |
|
|
1,106 |
(21,665) |
|
|
Cash (inflow)/outflow from (increase)/decrease in debt financing |
|
|
(9,000) |
25,000 |
|
|
|
|
|
|
|
|
|
Change in net debt resulting from cash flows |
|
|
(7,894) |
3,335 |
|
|
|
|
|
|
|
|
|
Movement in net debt in the year |
|
|
(7,894) |
3,335 |
|
|
Net debt at the start of the year |
|
|
(266,046) |
(269,381) |
|
|
|
|
|
|
|
|
|
Net debt at the end of the year |
|
18 |
(273,940) |
(266,046) |
|
|
|
|
|
|
|
|
Big Yellow Group PLC
Notes to the financial statements
Year ended 31 march 2012
1. General information
Big Yellow Group PLC is a Company incorporated in Great Britain under the Companies Act 2006. The address of the registered office is 2 The Deans, Bridge Road, Bagshot, Surrey, GU19 5AT. The nature of the Group's operations and its principal activities are set out in note 4 and in the Business Review.
These financial statements are presented in pounds sterling because that is the currency of the economic environment in which the Group operates.
2. BASIS OF PREPARATION
The condensed set of financial statements set out above (which was approved by the Board on 21 May 2012) has been compiled based on the Company's financial statements which are prepared in accordance with International Financial Reporting Standards, but does not contain sufficient information to constitute a full set of IFRS financial statements. This financial information does not constitute the Company's statutory accounts for the years ended 31 March 2011 and 31 March 2012, but is derived from those accounts. Those accounts give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole. The Company's statutory accounts for the year ended 31 March 2011 have been filed with the Registrar of Companies. The Company's statutory accounts for the year ended 31 March 2012 will be filed with the Registrar of Companies following the Annual General Meeting. The auditors' reports on both the 2011 and 2012 accounts were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under s498(2) or (3) Companies Act 2006 or preceding legislation.
The statutory accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation and with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretations Committee relevant to its operations and effective for accounting periods beginning on 1 April 2011. The same accounting policies as applied in the Group's statutory accounts for the year ended 31 March 2011 have been applied in this condensed set of financial statements.
3. Revenue
Analysis of the Group's operating revenue can be found below and in the Portfolio Summary.
|
|
2012 £000 |
2012 £000 |
2011 |
2011 |
|
|
|
|
|
|
|
Open stores |
|
|
|
|
|
Self storage income |
54,734 |
|
50,690 |
|
|
Other storage related income |
9,363 |
|
8,844 |
|
|
Ancillary store rental income |
176 |
|
88 |
|
|
|
|
|
|
|
|
|
|
64,273 |
|
59,622 |
|
Stores under development |
|
|
|
|
|
Non-storage income |
270 |
|
937 |
|
|
|
|
|
|
|
|
|
|
270 |
|
937 |
|
Fee income |
|
|
|
|
|
Fees earned from Big Yellow Limited Partnership |
714 |
|
920 |
|
|
Other management fees earned |
406 |
|
406 |
|
|
|
|
|
|
|
|
|
|
1,120 |
|
1,326 |
|
|
|
|
|
|
|
Revenue per statement of comprehensive income |
|
65,663 |
|
61,885 |
|
|
|
|
|
|
|
Interest receivable on bank deposits (see note 7) |
|
20 |
|
114 |
|
|
|
|
|
|
|
Total revenue per IAS 18 |
|
65,683 |
|
61,999 |
|
|
|
|
|
|
Non-storage income derives principally from rental income earned from tenants of properties awaiting development.
4. Segmental Information
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. Given the nature of the Group's business, there is one segment, which is the provision of self storage and related services.
Revenue represents amounts derived from the provision of self storage and related services which fall within the Group's ordinary activities after deduction of trade discounts and value added tax. The Group's net assets, revenue and profit before tax are attributable to one activity, the provision of self storage and related services. These all arise in the United Kingdom in the current year and prior year.
5. (LOSS)/Profit for the year
a) (Loss)/profit for the year has been arrived at after charging/(crediting):
|
|
|
2012 |
2011 £000 |
|
|
|
|
|
|
Depreciation of plant, equipment and owner-occupied property |
|
550 |
611 |
|
Leasehold property depreciation |
|
853 |
910 |
|
Decrease in fair value of investment property |
|
51,381 |
16,039 |
|
Gains on surplus land |
|
(497) |
(71) |
|
Cost of inventories recognised as an expense |
|
914 |
822 |
|
Employee costs (see note 6) |
|
10,255 |
9,867 |
|
Operating lease rentals |
|
164 |
162 |
|
Auditors' remuneration for audit services (see below) |
|
167 |
165 |
|
|
|
|
|
b) Analysis of auditors' remuneration:
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
|
Fees payable to the Company's auditors for the audit of the Company's annual accounts |
|
|
160 |
158 |
|
Other services - audit of the Company's subsidiaries' annual accounts |
|
|
7 |
7 |
|
|
|
|
|
|
|
Total audit fees |
|
|
167 |
165 |
|
|
|
|
|
|
|
Tax services - compliance |
|
|
30 |
30 |
|
Tax services - advisory |
|
|
60 |
62 |
|
Other services |
|
|
50 |
50 |
|
Drivers Jonas Deloitte real estate advice |
|
|
12 |
16 |
|
|
|
|
|
|
|
Total non-audit fees |
|
|
152 |
158 |
|
|
|
|
|
|
Fees payable to Deloitte LLP and their associates for non-audit services to the Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis.
6. Employee costs
The average monthly number of full-time equivalent employees (including Executive Directors) was:
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
|
Sales |
|
|
235 |
229 |
|
Administration |
|
|
44 |
44 |
|
|
|
|
|
|
|
|
|
|
279 |
273 |
|
|
|
|
|
|
|
At 31 March 2012 the total number of Group employees was 310 (2011: 301).
|
||||
|
|
|
|
2012 £000 |
2011 £000 |
|
Their aggregate remuneration comprised: |
|
|
|
|
|
Wages and salaries |
|
|
7,605 |
7,133 |
|
Social security costs |
|
|
791 |
768 |
|
Other pension costs |
|
|
327 |
325 |
|
Share-based payments |
|
|
1,532 |
1,641 |
|
|
|
|
|
|
|
|
|
|
10,255 |
9,867 |
|
|
|
|
|
|
7. INVESTMENT income
|
|
|
2012 |
2011 |
|
|
|
|
|
|
Interest receivable on bank deposits |
|
20 |
114 |
|
Change in the fair value of interest rate derivatives |
|
- |
197 |
|
|
|
|
|
|
|
|
20 |
311 |
|
|
|
|
|
8. Finance costs
|
|
|
2012 |
2011 |
|
|
|
|
|
|
Interest on bank borrowings |
|
11,097 |
11,074 |
|
Capitalised interest |
|
(1,035) |
(878) |
|
Interest on obligations under finance leases |
|
1,130 |
1,123 |
|
Other interest payable |
|
7 |
7 |
|
|
|
|
|
|
Total interest payable |
|
11,199 |
11,326 |
|
|
|
|
|
|
Change in fair value of interest rate derivatives |
|
7,965 |
- |
|
|
|
|
|
|
Total finance costs |
|
19,164 |
11,326 |
|
|
|
|
|
9. TaxATION
The Group converted to a REIT in January 2007. As a result the Group does not pay UK corporation tax on the profits and gains from qualifying rental business in the UK provided that it meets certain conditions. Non-qualifying profits and gains of the Group are subject to corporation tax as normal. The Group monitors its compliance with the REIT conditions. There have been no breaches of the conditions to date.
|
UK current tax |
|
|
2012 |
2011 |
|
|
|
|
|
|
|
Current tax: |
|
|
|
|
|
- Current year |
|
|
- |
- |
|
|
|
|
|
|
|
Deferred tax (see note 20): |
|
|
|
|
|
- Current year |
|
|
- |
- |
|
|
|
|
|
|
|
|
|
|
- |
- |
|
|
|
|
|
|
A reconciliation of the tax charge is shown below:
|
|
|
|
2012 |
2011 £000 |
|
|
|
|
|
|
|
(Loss)/profit before tax |
|
|
(35,551) |
6,901 |
|
|
|
|
|
|
|
Tax (credit)/charge at 26% (2011 - 28%) thereon |
|
|
(9,243) |
1,932 |
|
|
|
|
|
|
|
Effects of: |
|
|
|
|
|
Revaluation of investment properties |
|
|
13,484 |
4,491 |
|
Share of results of associate |
|
|
- |
(48) |
|
Permanent differences |
|
|
37 |
(1,511) |
|
Profits from the tax exempt business |
|
|
(5,759) |
(5,294) |
|
Losses not utilised in the year |
|
|
685 |
387 |
|
Utilisation of brought forward losses |
|
|
(370) |
- |
|
Temporary timing differences |
|
|
1,166 |
43 |
|
|
|
|
|
|
|
Total tax charge |
|
|
- |
- |
|
|
|
|
|
|
10. Adjusted Profit before tax AND ADJUSTED EBITDA
|
|
|
2012 |
2011 |
|
|
|
|
|
|
(Loss)/profit before tax |
|
(35,551) |
6,901 |
|
Loss/(gain) on revaluation of investment properties - wholly owned |
|
51,381 |
16,039 |
|
- in associate |
|
480 |
(2,241) |
|
Change in fair value of interest rate derivatives - Group |
|
7,965 |
(197) |
|
- in associate |
|
(135) |
(191) |
|
Gains on surplus land - wholly owned |
|
(497) |
(71) |
|
- in associate |
|
- |
(33) |
|
|
|
|
|
|
Adjusted profit before tax |
|
23,643 |
20,207 |
|
|
|
|
|
|
Net bank and other interest |
|
10,049 |
10,089 |
|
Depreciation |
|
550 |
611 |
|
|
|
|
|
|
Adjusted EBITDA |
|
34,242 |
30,907 |
|
|
|
|
|
Adjusted profit before tax which excludes gains and losses on the revaluation of investment properties, changes in fair value of interest rate derivatives, net gains and losses on surplus land, and non-recurring items of income and expenditure have been disclosed to give a clearer understanding of the Group's underlying trading performance. The adjusted profit before tax of £23,643,000 (2011: £20,207,000) equates to EPRA earnings, as there is no tax charge in the year.
11. Dividends
|
|
|
2012 |
2011 |
|
Amounts recognised as distributions to equity holders in the year: |
|
|
|
|
Final dividend for the year ended 31 March 2011 of 5p |
|
6,460 |
5,163 |
|
Interim dividend for the year ended 31 March 2012 of 4.5p (2011: 4p) per share. |
|
5,763 |
5,165 |
|
|
|
|
|
|
|
|
12,223 |
10,328 |
|
|
|
|
|
|
Proposed final dividend for the year ended 31 March 2012 of |
|
7,057 |
6,460 |
|
|
|
|
|
Subject to approval by shareholders at the Annual General Meeting to be held on 10 July 2012, the final dividend will be paid on 20 July 2012 to shareholders on the Register on 8 June 2012.
The Property Income Dividend ("PID") payable for the current year is 9 pence per share.
12. (LOSS)/Earnings AND NET ASSETS per share
(Loss)/earnings per ordinary share
|
|
Year ended 31 March 2012
|
Year ended 31 March 2011
|
||||
|
|
Earnings
£m
|
Shares
million
|
Pence per share
|
Earnings
£m
|
Shares
million
|
Pence per share
|
|
Basic
|
(35.55)
|
128.44
|
(27.68)
|
6.90
|
129.11
|
5.34
|
|
Dilutive share options
|
-
|
1.29
|
0.28
|
-
|
1.38
|
(0.05)
|
|
|
|
|
|
|
|
|
|
Diluted
|
(35.55)
|
129.73
|
(27.40)
|
6.90
|
130.49
|
5.29
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
Loss on revaluation of investment properties
|
51.38
|
-
|
39.61
|
16.04
|
-
|
12.29
|
|
Change in fair value of interest rate derivatives
|
7.97
|
-
|
6.14
|
(0.20)
|
-
|
(0.15)
|
|
Gains on surplus land
|
(0.50)
|
-
|
(0.39)
|
(0.07)
|
-
|
(0.05)
|
|
Share of associate non-recurring losses/(gains)
|
0.34
|
-
|
0.26
|
(2.46)
|
-
|
(1.89)
|
|
|
|
|
|
|
|
|
|
EPRA – diluted
|
23.64
|
129.73
|
18.22
|
20.21
|
130.49
|
15.49
|
|
|
|
|
|
|
|
|
|
EPRA – basic
|
23.64
|
128.44
|
18.41
|
20.21
|
129.11
|
15.65
|
|
|
|
|
|
|
|
|
The calculation of basic (loss)/earnings is based on (loss)/profit after tax for the year. The weighted average number of shares used to calculate diluted (loss)/earnings per share has been adjusted for the conversion of share options.
EPRA earnings and earnings per ordinary share before non-recurring items, movements on revaluation of investment properties, gains and losses on surplus land, the change in fair value of interest rate swaps, and share of associate non-recurring gains have been disclosed to give a clearer understanding of the Group's underlying trading performance.
The European Public Real Estate Association ("EPRA") has issued recommended bases for the calculation of net assets per share information and this is shown in the table below:
|
|
As at £000 |
As at 31 March 2011 £000 |
|
Basic net asset value |
494,500 |
544,949 |
|
Exercise of share options |
746 |
603 |
|
EPRA NNNAV |
495,246 |
545,552 |
|
|
|
|
|
Adjustments: |
|
|
|
Fair value of derivatives |
15,748 |
7,783 |
|
Fair value of derivatives - share of associate |
443 |
579 |
|
|
|
|
|
EPRA NAV |
511,437 |
553,914 |
|
|
|
|
|
Basic net assets per share (pence) |
386.1 |
421.9 |
|
EPRA NNNAV per share (pence) |
378.9 |
415.0 |
|
EPRA NAV per share (pence) |
391.3 |
421.3 |
|
|
|
|
|
EPRA NAV (as above) (£000) |
511,437 |
553,914 |
|
Valuation methodology assumption (see note 14) (£000) |
35,514 |
37,483 |
|
Capital goods scheme adjustment - group (£000) |
12,282 |
- |
|
Capital goods scheme adjustment - share of associate (£000) |
1,765 |
- |
|
|
|
|
|
Adjusted net asset value (£000) |
560,998 |
591,397 |
|
Adjusted net assets per share (pence) |
429.2 |
449.8 |
|
|
|
|
|
|
No. of shares |
No. of shares |
|
Shares in issue |
131,393,041 |
131,060,522 |
|
Own shares held in treasury |
(1,418,750) |
- |
|
Own shares held in EBT |
(1,885,117) |
(1,905,000) |
|
Basic shares in issue used for calculation |
128,089,174 |
129,155,522 |
|
Exercise of share options |
2,623,172 |
2,312,475 |
|
Diluted shares used for calculation |
130,712,346 |
131,467,997 |
|
|
|
|
Net assets per share are shareholders' funds divided by the number of shares at the year end. The shares currently held in the Group's Employee Benefit Trust and in treasury are excluded from both net assets and the number of shares.
Adjusted net assets per share include the effect of those shares issuable under employee share option schemes and the effect of alternative valuation methodology assumptions (see note 14). It has also been adjusted for the Group's estimate of capital goods scheme repayments due to it following the proposed introduction of VAT on self storage from 1 October 2012. As described in note 14, the investment property valuations have been adjusted to reflect the impact of VAT being introduced, and the Board consider it appropriate to reflect the estimated amounts due back to the Group from HMRC following the introduction of VAT in the calculation of adjusted net assets per share. This amount, which is subject to agreement with HMRC, cannot be recognised as an asset at the balance sheet date as the legislation to introduce VAT had not been substantially enacted at 31 March 2012.
13. Non-Current Assets
a) Investment property, development property and interests in leasehold property
|
|
Investment property £000 |
Investment property under construction £000 |
Interests in leasehold property £000 |
Total £000 |
|||
|
|
|
|
|
|
|||
|
At 31 March 2010 |
761,570 |
33,960 |
21,998 |
817,528 |
|||
|
Additions |
1,617 |
11,037 |
- |
12,654 |
|||
|
Adjustment to present value |
- |
- |
156 |
156 |
|||
|
Reclassification from plant, equipment and freehold property |
5 |
- |
- |
5 |
|||
|
Revaluation (see note 14) |
(17,352) |
1,313 |
- |
(16,039) |
|||
|
Depreciation |
- |
- |
(910) |
(910) |
|||
|
|
|
|
|
|
|||
|
At 31 March 2011 |
745,840 |
46,310 |
21,244 |
813,394 |
|||
|
Additions |
2,723 |
16,803 |
- |
19,526 |
|||
|
Reclassification |
27,371 |
(27,371) |
- |
- |
|||
|
Adjustment to present value |
- |
- |
2,003 |
2,003 |
|||
|
Revaluation (see note 14) |
(49,544) |
(1,837) |
- |
(51,381) |
|||
|
Depreciation |
- |
- |
(853) |
(853) |
|||
|
|
|
|
|
|
|||
|
At 31 March 2012 |
726,390 |
33,905 |
22,394 |
782,689 |
|||
|
|
|
|
|
|
|||
The income from self storage accommodation earned by the Group from its investment property is disclosed in note 3. Direct operating expenses arising on the investment property in the year are disclosed in the Portfolio Summary.
Included within additions is £1.0 million of capitalised interest, calculated at the Group's average borrowing cost of 3.7%.
b) Plant, equipment and owner occupied property
|
|
|
Freehold property £000 |
Leasehold improve-ments £000 |
Plant and machinery £000 |
Motor vehicles £000 |
Fixtures, fittings & office equipment £000 |
Total £000 |
|||||
|
Cost |
|
|
|
|
|
|
|
|||||
|
At 31 March 2010 |
|
1,875 |
44 |
683 |
- |
5,457 |
8,059 |
|||||
|
Reclassifications |
|
(8) |
- |
3 |
- |
- |
(5) |
|||||
|
Additions |
|
- |
- |
58 |
25 |
374 |
457 |
|||||
|
|
|
|
|
|
|
|
|
|||||
|
At 31 March 2011 |
|
1,867 |
44 |
744 |
25 |
5,831 |
8,511 |
|||||
|
Additions |
|
- |
- |
36 |
- |
477 |
513 |
|||||
|
|
|
|
|
|
|
|
|
|||||
|
At 31 March 2012 |
|
1,867 |
44 |
780 |
25 |
6,308 |
9,024 |
|||||
|
|
|
|
|
|
|
|
|
|||||
|
Depreciation |
|
|
|
|
|
|
|
|||||
|
At 31 March 2010 |
|
(159) |
(37) |
(455) |
- |
(4,575) |
(5,226) |
|||||
|
Charge for the year |
|
(32) |
(4) |
(60) |
(3) |
(512) |
(611) |
|||||
|
|
|
|
|
|
|
|
|
|||||
|
At 31 March 2011 |
|
(191) |
(41) |
(515) |
(3) |
(5,087) |
(5,837) |
|||||
|
Charge for the year |
|
(35) |
(3) |
(48) |
(6) |
(458) |
(550) |
|||||
|
|
|
|
|
|
|
|
|
|||||
|
At 31 March 2012 |
|
(226) |
(44) |
(563) |
(9) |
(5,545) |
(6,387) |
|||||
|
|
|
|
|
|
|
|
|
|||||
|
Net book value |
|
|
|
|
|
|
|
|||||
|
At 31 March 2012 |
|
1,641 |
- |
217 |
16 |
763 |
2,637 |
|||||
|
|
|
|
|
|
|
|
|
|||||
|
At 31 March 2011 |
|
1,676 |
3 |
229 |
22 |
744 |
2,674 |
|||||
|
|
|
|
|
|
|
|
|
|||||
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 £1,433,000 remains unchanged from the prior year as there is considered to be no impairment in the value of the asset.
d) Investment in associate
The Group has a 33.3% interest in Big Yellow Limited Partnership. This interest is accounted for as an associate, using equity accounting. The Partnership commenced trading on 1 December 2007.
|
|
31 March 2012 £000 |
31 March 2011 £000 |
|
At the beginning of the year |
14,931 |
12,105 |
|
Subscription for partnership capital and advances |
1,167 |
1,000 |
|
Share of results (see below) |
(602) |
1,826 |
|
|
|
|
|
|
15,496 |
14,931 |
|
|
|
|
The Group has subscribed for cumulative partnership capital and advances of £14,799,000 to 31 March 2012 (2011: £13,632,000).
The figures below show the trading results of Big Yellow Limited Partnership, and the Group's share of the results and the net assets of the Partnership.
|
Big Yellow Limited Partnership |
|
Year ended 31 March 2012 £000 |
Year ended 31 March 2011 £000 |
|
|
|
|
|
|
Income statement (100%) |
|
|
|
|
Revenue |
|
6,539 |
4,134 |
|
Cost of sales |
|
(4,660) |
(3,836) |
|
Administrative expenses |
|
(77) |
(75) |
|
|
|
|
|
|
Operating profit |
|
1,802 |
223 |
|
(Loss)/gain on the revaluation of investment properties |
|
(1,441) |
6,725 |
|
Gain on the disposal of surplus land |
|
- |
99 |
|
Net interest payable |
|
(2,572) |
(2,141) |
|
Fair value movement of interest rate derivatives |
|
406 |
574 |
|
|
|
|
|
|
(Loss)/profit before and after tax |
|
(1,805) |
5,480 |
|
|
|
|
|
|
Balance sheet (100%) |
|
|
|
|
Investment property |
|
110,460 |
105,450 |
|
Investment property under construction |
|
- |
2,730 |
|
Other fixed assets |
|
641 |
725 |
|
Current assets |
|
1,548 |
1,981 |
|
Current liabilities |
|
(2,463) |
(2,160) |
|
Derivative financial instruments |
|
(1,330) |
(1,736) |
|
Non-current liabilities |
|
(62,367) |
(62,195) |
|
|
|
|
|
|
Net assets (100%) |
|
46,489 |
44,795 |
|
|
|
|
|
|
Group share of (33.3%) |
|
Year ended 31 March 2012 £000 |
Year ended 31 March 2011 £000 |
|
Operating profit |
|
601 |
74 |
|
(Loss)/gain on the revaluation of investment properties |
|
(480) |
2,241 |
|
Gain on the disposal of surplus land |
|
- |
33 |
|
Net interest payable |
|
(858) |
(713) |
|
Fair value movement of interest rate derivatives |
|
135 |
191 |
|
|
|
|
|
|
(Loss)/profit for the year |
|
(602) |
1,826 |
|
|
|
|
|
|
Associate net assets |
|
15,496 |
14,931 |
|
|
|
|
|
The Partnership has in place a fully drawn loan of £62.7 million, secured from Royal Bank of Scotland plc and HSBC Bank plc.
The loan has a five year term and expires in September 2013. £31.8 million of the £62.7 million drawn down at 31 March 2012 has been fixed to 30 June 2013 at a weighted average interest cost post margin of 5.5%. The balance of the drawn debt is currently paying one month LIBOR plus applicable margin. The weighted average interest cost post margin at 31 March 2012 of the facility was 3.9%. Following the year end the partners reduced the outstanding debt drawn to £60 million, through repaying and cancelling £2.7 million of the facility.
The Partnership loan has a loan to value covenant which requires the gross loan to the value of the Partnership's investment property assets to be no more than 55%. The loan is non-recourse to the Group.
The Group has an option to acquire the assets within the Partnership or the remaining interest in the Partnership not held by the Group, which is first exercisable at 31 March 2013, but can be deferred to March 2014 and March 2015, subject to Internal Rate of Return ("IRR") hurdles. The price payable is based on the market value of the Partnership's assets and liabilities, and is subject to certain promotes, dependent on the IRR achieved.
14. VALUATION OF INVESTMENT PROPERTY
|
|
Deemed cost £000 |
|
Revaluation on deemed cost £000 |
|
Valuation £000 |
|
Freehold stores* |
|
|
|
|
|
|
As at 1 April 2011 |
325,353 |
|
373,177 |
|
698,530 |
|
Transfer from investment property under construction |
30,650 |
|
(3,279) |
|
27,371 |
|
Movement in year |
2,564 |
|
(45,575) |
|
(43,011) |
|
As at 31 March 2012 |
358,567 |
|
324,323 |
|
682,890 |
|
|
|
|
|
|
|
|
Leasehold stores |
|
|
|
|
|
|
As at 1 April 2011 |
15,692 |
|
31,618 |
|
47,310 |
|
Movement in year |
159 |
|
(3,969) |
|
(3,810) |
|
As at 31 March 2012 |
15,851 |
|
27,649 |
|
43,500 |
|
|
|
|
|
|
|
|
Total of open stores |
|
|
|
|
|
|
As at 1 April 2011 |
341,045 |
|
404,795 |
|
745,840 |
|
Transfer from investment property under construction |
30,650 |
|
(3,279) |
|
27,371 |
|
Movement in year |
2,723 |
|
(49,544) |
|
(46,821) |
|
As at 31 March 2012 |
374,418 |
|
351,972 |
|
726,390 |
|
|
|
|
|
|
|
|
Investment property under construction |
|
|
|
|
|
|
As at 1 April 2011 |
58,260 |
|
(11,950) |
|
46,310 |
|
Transfer to investment property |
(30,650) |
|
3,279 |
|
(27,371) |
|
Movement in year |
16,803 |
|
(1,837) |
|
14,966 |
|
As at 31 March 2012 |
44,413 |
|
(10,508) |
|
33,905 |
|
|
|
|
|
|
|
|
Valuation of all investment property |
|
|
|
|
|
|
As at 1 April 2011 |
399,305 |
|
392,845 |
|
792,150 |
|
Movement in year |
19,526 |
|
(51,381) |
|
(31,855) |
|
As at 31 March 2012 |
418,831 |
|
341,464 |
|
760,295 |
|
|
|
|
|
|
|
* Includes one long leasehold property
The freehold and leasehold investment properties have been valued at 31 March 2012 by external valuers, Cushman & Wakefield LLP ("C&W"). The valuation has been carried out in accordance with the RICS Valuation - Professional Standards, published by The Royal Institution of Chartered Surveyors ("the Red Book"). The valuation of each of the investment properties and the investment properties under construction has been prepared on the basis of either Fair Value or Fair Value as a fully equipped operational entity, having regard to trading potential, as appropriate.
The valuation has been provided for accounts purposes and as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure requirements of the Red Book, C&W have confirmed that:
· 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 this bi-annual valuation for the same purposes as this valuation on behalf of the Group since September 2004.
· C&W do not provide other significant professional or agency services to the Group.
· In relation to the preceding financial year of C&W, the proportion of the total fees payable by the Group to the total fee income of the firm is less than 5%.
· The fee payable to C&W is a fixed amount per store, and is not contingent on the appraised value.
Market uncertainty
C&W's valuation report comments on valuation uncertainty resulting from the recent global banking crisis coupled with the economic downturn, which have caused a low number of transactions in the market for self storage property. C&W note that, although there were a number of self storage transactions in 2007, the only significant transactions since 2007 are:
1. The sale of a 51% share in Shurgard Europe which was announced in January 2008 and completed on 31 March 2008.
2. The sale of the former Keepsafe portfolio by Macquarie to Alligator Self Storage which was completed in January 2010; and
3. The purchase by Shurgard Europe of the 80% interests held by its joint venture partner (Arcapita) in its two European joint venture vehicles, First Shurgard and Second Shurgard. The price paid was 172 million Euros and the transaction was announced in March 2011. The two joint ventures owned 72 self storage properties.
Four further smaller transactions took place in 2011 at West Molesey, Cambridge, Dartford and St Albans.
C&W state that due to the lack of comparable market information in the self storage sector, there is greater uncertainty attached to their opinion of value than would be anticipated during more active market conditions.
Valuation methodology
C&W have adopted different approaches for the valuation of the leasehold and freehold 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 53 trading stores (both freeholds and leaseholds) open at 31 March 2012 averages 82.4% (31 March 2011: 83.1%). The projected revenues and costs have been adjusted for estimated cost inflation and revenue growth. The average time assumed for the 32 established stores to trade at their maturity levels is 32 months (31 March 2011: 36 months); for the 21 lease-up stores, the period to maturity is 44 months (31 March 2011: 49 months).
C. The capitalisation rates applied to existing and future net cash flow have been estimated by reference to underlying yields for industrial and retail warehouse property, yields for other trading property types such as student housing and hotels, bank base rates, ten year money rates, inflation and the available evidence of transactions in the sector. The valuation included in the accounts assumes rental growth in future periods. If an assumption of no rental growth is applied to the external valuation, the net initial yield pre administration expenses for the 32 established stores is 6.8% (31 March 2011: 6.3%) rising to a stabilised net yield pre administration expenses of 8.1% (31 March 2011: 8.2%). Also on a no growth and pre administration expenses basis the 21 lease-up stores have a net initial yield of 4.4% (31 March 2011: 3.6%) rising to 8.6% (31 March 2011: 8.7%) on stabilisation.
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 11.23% (31 March 2011: 11.29%).
E. Purchaser's costs of 5.8% (see below) have been assumed initially and sale plus purchaser's costs totalling 6.8% 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 seven short leasehold properties is 16.7 years (31 March 2011: 16.2 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 after allowing for the outstanding costs to take each scheme from its current state to completion and full fit-out. C&W have allowed for holding costs and construction contingency, as appropriate. One scheme does not yet have planning consent and C&W have reflected the planning risk in their valuation.
Proposed VAT change
The Government has announced in the Budget Statement a proposed change to the VAT status of self storage from 1 October 2012. The rental of self storage units is currently exempt from VAT as a licence to occupy land in the same way as the rental of commercial property. The Government are proposing that self storage will be subject to standard rate VAT (20%).
C&W have prepared their valuation reflecting the potential impact of the proposed VAT Change. We also instructed C&W to prepare a valuation on the Special Assumption that the proposed VAT change is not reflected in the valuation.
Immature stores: value uncertainty
C&W have assessed the value of each property individually. However, four of the stores in the portfolio are relatively immature and have low initial cash flow. C&W have endeavoured to reflect the nature of the cash flow profile for these properties in their valuation, and the higher associated risks relating to the as yet unproven future cash flow, by adjustment to the capitalisation rates and discount rates adopted. However, immature low cash flow stores of this nature are rarely, if ever, traded individually in the market, unless as part of a distressed sale or similar situation. Although, there is more evidence of immature low cash flow stores being traded as part of a group or portfolio transaction.
Please note C&W's comments in relation to market uncertainty in the self storage sector due to the lack of comparable market transactions and information. The degree of uncertainty relating to the four immature stores is greater than in relation to the balance of the properties due to there being even less market evidence that might be available for more mature properties and portfolios.
C&W state that in practice, if an actual sale of the properties were to be contemplated then any immature low cash flow stores would normally be presented to the market for sale lotted or grouped with other more mature assets owned by the same entity, in order to alleviate the issue of negative or low short term cash flow. This approach would enhance the marketability of the group of assets and assist in achieving the best price available in the market by diluting the cash flow risk.
C&W have not adjusted their opinion of Fair Value to reflect such a grouping of the immature assets with other properties in the portfolio and all stores have been valued individually. However, they highlight the matter to alert the Group to the manner in which the properties might be grouped or lotted in order maximise their attractiveness to the market place.
C&W consider this approach to be a valuation assumption but not a Special Assumption, the latter being an assumption that assumes facts that differ from the actual facts existing at the valuation date - and which, if not adopted, could produce a material difference in value.
C&W have not assumed that the entire portfolio of properties owned by the Entity would be sold as a single lot and the value for the whole portfolio in the context of a sale as a single lot may differ significantly (either higher or lower) from the aggregate of the individual values for each property in the portfolio, reflecting the lotting assumption described above.
Valuation assumption for purchaser's costs
The Group's investment property assets have been valued for the purposes of the financial statements after deducting notional purchaser's cost of 5.8% of gross value, as if they were sold directly as property assets. The valuation is an asset valuation which is entirely linked to the operating performance of the business. They would have to be sold with the benefit of operational contracts, employment contracts and customer contracts, which would be very difficult to achieve except in a corporate structure.
This approach follows the logic of the valuation methodology in that the valuation is based on a capitalisation of the net operating income after allowing a deduction for operational cost and an allowance for central administration costs. Sale in a corporate structure would result in a reduction in the assumed Stamp Duty Land Tax but an increase in other transaction costs reflecting additional due diligence resulting in a reduced notional purchaser's cost of 2.75% of gross value. All the significant sized transactions that have been concluded in the UK in recent years were completed in a corporate structure. The Group therefore instructed C&W to carry out a Red Book valuation on the above basis, and this results in a higher property valuation at 31 March 2012 of £794,169,000 (£33,874,000 higher than the value recorded in the financial statements). The valuations in Big Yellow Limited Partnership are £4,920,000 higher than the value recorded in the financial statements, of which the Group's share is £1,640,000. The sum of these is £35,514,000 and translates to 27.2 pence per share. We have included this revised valuation in the adjusted diluted net asset calculation (see note 14).
15. SURPLUS LAND
|
|
|
|
£000 |
|
|
|
|
|
|
At 1 April 2011 |
|
|
17,633 |
|
Additions |
|
|
4,647 |
|
Disposals |
|
|
(4,245) |
|
|
|
|
|
|
At 31 March 2012 |
|
|
18,035 |
|
|
|
|
|
In the current year, a gain of £497,000 was recorded following the disposal of a site.
The prior year gain of £71,000 was comprised of a write back of a prior year impairment on a site of £500,000, offset by a loss on disposal of £429,000.
16. TRADE AND OTHER RECEIVABLES
|
|
|
|
31 March 2012 £000 |
31 March 2011 £000 |
|
|
|
|
|
|
|
Trade receivables |
|
|
1,559 |
1,776 |
|
Other receivables |
|
|
1,316 |
274 |
|
Prepayments and accrued income |
|
|
8,068 |
9,490 |
|
|
|
|
|
|
|
|
|
|
10,943 |
11,540 |
|
|
|
|
|
|
Trade receivables are net of a bad debt provision of £24,000 (2011: £25,000). The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Trade receivables
The Group does not typically offer credit terms to its customers, requiring them to pay in advance of their storage period and hence the Group is not exposed to significant credit risk. A late charge of 10% is applied to a customer's account if they are greater than 10 days overdue in their payment. The Group provides for receivables on a specific basis. There is a right of lien over the customers' goods, so if they have not paid within a certain time frame, we have the right to sell the items they store to recoup the debt owed by the customer. Trade receivables that are overdue are provided for based on estimated irrecoverable amounts determined by reference to past default experience.
For individual storage customers, the Group does not perform credit checks, however this is mitigated by the fact that these customers are required to pay in advance, and also to pay a deposit ranging from between 1 week to 4 weeks' storage income. Before accepting a new business customer who wishes to use a number of the Group's stores, the Group uses an external credit rating to assess the potential customer's credit quality and defines credit limits by customer. There are no customers who represent more than 5 per cent of the total balance of trade receivables.
Included in the Group's trade receivable balance are debtors with a carrying amount of £173,000 (2011: £155,000) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The average age of these receivables is 31 days past due (2011: 34 days past due).
Ageing of past due but not impaired receivables
|
|
|
|
2012 |
2011 £000 |
|
1 - 30 days |
|
|
117 |
99 |
|
30 - 60 days |
|
|
16 |
33 |
|
60 + days |
|
|
40 |
23 |
|
|
|
|
|
|
|
Total |
|
|
173 |
155 |
|
|
|
|
|
|
Movement in the allowance for doubtful debts
|
|
|
|
2012 |
2011 £000 |
|
Balance at the beginning of the year |
|
|
25 |
29 |
|
Amounts provided in year |
|
|
39 |
69 |
|
Amounts written off as uncollectible |
|
|
(40) |
(73) |
|
|
|
|
|
|
|
Balance at the end of the year |
|
|
24 |
25 |
|
|
|
|
|
|
The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
Ageing of impaired trade receivables
|
|
|
|
2012 |
2011 £000 |
|
1 - 30 days |
|
|
2 |
- |
|
30 - 60 days |
|
|
3 |
4 |
|
60 + days |
|
|
19 |
21 |
|
|
|
|
|
|
|
Total |
|
|
24 |
25 |
|
|
|
|
|
|
17. TRADE AND OTHER PAYABLES
|
|
|
31 March 2012 £000 |
31 March 2011 £000 |
|
Current |
|
|
|
|
Trade payables |
|
9,159 |
9,885 |
|
Other payables |
|
2,957 |
2,075 |
|
Accruals and deferred income |
|
12,916 |
9,663 |
|
Amounts owed to associate |
|
2 |
177 |
|
VAT repayable under Capital Goods Scheme |
|
641 |
918 |
|
|
|
|
|
|
|
|
25,675 |
22,718 |
|
|
|
|
|
|
Non-current |
|
|
|
|
VAT repayable under Capital Goods Scheme |
|
315 |
954 |
|
|
|
|
|
The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. The Directors consider the carrying amount of trade and other payables and accruals and deferred income approximates fair value. Included within accruals and deferred income is £1,656,000 in respect of the Long Term Bonus Performance Plan.
The Directors estimate the fair value of the Group's VAT payable under the capital goods scheme as follows:
|
|
2012 |
2011 |
||
|
|
Carrying amount £000 |
Estimated fair value £000 |
Carrying amount £000 |
Estimated fair value £000 |
|
|
|
|
|
|
|
VAT payable under the capital goods scheme |
956 |
913 |
1,872 |
1,791 |
|
|
|
|
|
|
The fair values have been calculated by discounting expected cash flows at interest rates prevailing at the year end.
18. Financial Instruments
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 19, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings. The Group's banking facilities at the year end required hedging of 70% of the funds drawn under the investment tranche of its core banking facility. The Group has complied with this during the year.
With the exception of derivative instruments which are classified as a financial liability at fair value through the profit and loss ("FVTPL"), financial liabilities are categorised under amortised cost. All financial assets are categorised as loans and receivables.
Exposure to credit, interest rate and currency risks arises in the normal course of the Group's business. Derivative financial instruments are used to manage exposure to fluctuations in interest rates, but are not employed for speculative purposes.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements.
A. Balance sheet management
The Group's Board reviews the capital structure on an ongoing basis. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital. The Group seeks to have a conservative gearing ratio (the proportion of net debt to equity). The Board considers at each review the appropriateness of the current ratio in light of the above. The Board is currently satisfied with the Group's gearing ratio.
The gearing ratio at the year end is as follows:
|
|
2012 |
2011 |
|
|
|
|
|
Debt |
(284,000) |
(275,000) |
|
Cash and cash equivalents |
10,060 |
8,954 |
|
|
|
|
|
Net debt |
273,940 |
266,046 |
|
Balance sheet equity |
494,500 |
544,949 |
|
Net debt to equity ratio |
55.4% |
48.8% |
|
|
|
|
Debt is defined as long-term and short-term bank borrowings, as detailed in note 19. Equity includes all capital and reserves of the Group attributable to equity holders of the Company. Net debt is defined as gross bank borrowings less cash and cash equivalents.
B. Debt management
The Group borrows through a senior term loan, secured on its existing store portfolio, and in addition since the year end has arranged a 15 year loan with Aviva Commercial Finance Limited secured on a portfolio of 15 self storage assets. Borrowings are arranged to ensure an appropriate maturity profile and to maintain short term liquidity. Funding is arranged in the Group and in Big Yellow Limited Partnership through banks and financial institutions with whom the Group has a strong working relationship.
C. Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite; ensuring optimal hedging strategies are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles.
At 31 March 2012 the Group had two interest rate derivatives in place; £120 million fixed at 2.99% (excluding the margin on the underlying debt instrument) until September 2015 and £70 million fixed at 3.93% (excluding the margin on the underlying debt instrument) also until September 2015.
In April 2012, the Group announced the completion of a £100 million 15 year term fixed rate loan with Aviva Commercial Finance Limited, which was deployed to repay £100 million of existing bank debt. At the same time, the Group also cancelled £100 million of the above interest rate derivatives at a cost of £9.2 million. This left a £90 million interest rate swap in the core bank debt facility at 2.99% plus margin to September 2015, with the remaining £100 million of the core bank debt paying at floating rates plus margin, in addition to the Aviva fixed rate loan.
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the curves at the reporting date and the credit risk inherent in the contract, and is disclosed below. The average interest rate is based on the outstanding balances at the end of the financial year. The interest rate swaps settle on a monthly basis. The floating rate on the interest rate swaps is one month LIBOR. The Group will settle the difference between the fixed and floating interest rate on a net basis.
The Group does not hedge account for its interest rate swaps and states them at fair value, with changes in fair value included in the statement of comprehensive income. The loss in the statement of comprehensive income for the year of these interest rate swaps was £7,965,000 (2011: gain of £197,000).
The fair value of the above derivatives at 31 March 2012 was a liability of £15,748,000 (2011: liability of £7,783,000).
D. Interest rate sensitivity analysis
In managing interest rate risks the Group aims to reduce the impact of short-term fluctuations on the Group's earnings, without jeopardising its flexibility. Over the longer term, permanent changes in interest rates may have an impact on consolidated earnings.
At 31 March 2012, it is estimated that an increase of 0.5 percentage points in interest rates would have reduced the Group's adjusted profit before tax by £470,000 (2011: reduced adjusted profit before tax by £425,000) and a decrease of 0.5 percentage points in interest rates would have increased the Group's adjusted profit before tax by £470,000 (2011: increased adjusted profit before tax by £425,000). There would have been no effect on amounts recognised directly in equity. The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings, net of interest rate swaps, at the year end.
The Group's sensitivity to interest rates has increased during the year, following the drawing of additional floating rate debt from cash resources. The Board monitors closely the exposure to the floating rate element of our debt.
E. Cash management and liquidity
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 19 is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.
Short term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources, giving due consideration to risk.
F. Foreign currency management
The Group does not have any foreign currency exposure.
G. Credit risk
The credit risk management policies of the Group with respect to trade receivables are discussed in note 16. The Group has no significant concentration of credit risk, with exposure spread over 36,000 customers in our stores.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
H. Financial maturity analysis
In respect of interest-bearing financial liabilities, the following table provides a maturity analysis for individual elements.
|
2012 Maturity |
|||||
|
|
Total £000 |
Less than one year £000 |
One to two years £000 |
Two to five years £000 |
More than five years £000 |
|
|
|
|
|
|
|
|
Debt |
|
|
|
|
|
|
Bank loan payable at variable rate |
94,000 |
- |
94,000 |
- |
- |
|
Debt fixed by interest rate derivatives |
190,000 |
- |
190,000 |
- |
- |
|
|
|
|
|
|
|
|
Total |
284,000 |
- |
284,000 |
- |
- |
|
|
|
|
|
|
|
|
2011 Maturity |
|||||
|
|
Total £000 |
Less than one year £000 |
One to two years £000 |
Two to five years £000 |
More than five years £000 |
|
|
|
|
|
|
|
|
Debt |
|
|
|
|
|
|
Bank loan payable at variable rate |
85,000 |
- |
- |
85,000 |
- |
|
Debt fixed by interest rate derivatives |
190,000 |
- |
- |
190,000 |
- |
|
|
|
|
|
|
|
|
Total |
275,000 |
- |
- |
275,000 |
- |
|
|
|
|
|
|
|
I. Fair values of financial instruments
The fair values of the Group's cash and short term deposits and those of other financial assets equate to their book values. Details of the Group's receivables at amortised cost are set out in note 16. The amounts are presented net of provisions for doubtful receivables, and allowances for impairment are made where appropriate. Trade and other payables, including bank borrowings, are carried at amortised cost. Finance lease liabilities are included at the fair value of their minimum lease payments. Derivatives are carried at fair value.
For those financial instruments held at valuation, the Group has categorised them into a three level fair value hierarchy based on the priority of the inputs to the valuation technique in accordance with IFRS 7.
The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety. The fair values of the Group's outstanding interest rate swaps, as detailed in note 18J, have been estimated by calculating the present value of future cash flows, using appropriate market discount rates, representing Level 2 fair value measurements as defined by IFRS 7. There are no financial instruments which have been categorised as Level 1 or Level 3.
J. Maturity analysis of financial liabilities
The contractual maturities based on market conditions and expected yield curves prevailing at the year end date are as follows:
|
2012 |
Trade and other payables £000 |
Interest rate swaps £000 |
Borrowings and interest £000 |
Finance leases £000 |
Total £000 |
|
|
|
|
|
|
|
|
From five to twenty years |
- |
- |
- |
25,436 |
25,436 |
|
From two to five years |
- |
4,854 |
- |
5,953 |
10,807 |
|
From one to two years |
315 |
4,235 |
288,680 |
1,984 |
295,214 |
|
|
|
|
|
|
|
|
Due after more than one year |
315 |
9,089 |
288,680 |
33,373 |
331,457 |
|
Due within one year |
25,675 |
4,860 |
10,228 |
1,984 |
42,747 |
|
|
|
|
|
|
|
|
Total |
25,990 |
13,949 |
298,908 |
35,357 |
374,204 |
|
|
|
|
|
|
|
|
2011 |
Trade and other payables £000 |
Interest rate swaps £000 |
Borrowings and interest £000 |
Finance leases £000 |
Total £000 |
|
|
|
|
|
|
|
|
From five to twenty years |
- |
- |
- |
23,189 |
23,189 |
|
From two to five years |
- |
482 |
279,566 |
5,959 |
286,007 |
|
From one to two years |
954 |
2,682 |
9,980 |
1,987 |
15,603 |
|
|
|
|
|
|
|
|
Due after more than one year |
954 |
3,164 |
289,546 |
31,135 |
324,799 |
|
Due within one year |
22,718 |
4,444 |
9,980 |
1,987 |
39,129 |
|
|
|
|
|
|
|
|
Total |
23,672 |
7,608 |
299,526 |
33,122 |
363,928 |
|
|
|
|
|
|
|
K. Reconciliation of maturity analyses
The maturity analysis in note 18J shows non-discounted cash flows for all financial liabilities including interest payments. The table below reconciles the borrowings column in note 19 with the borrowings and interest column in the maturity analysis presented in note 18J.
|
2012 |
|
Borrowings £000 |
Interest £000 |
Unamortised borrowing costs £000 |
Borrowings and interest £000 |
|
|
|
|
|
|
|
|
From two to five years |
|
- |
- |
- |
- |
|
From one to two years |
|
282,960 |
4,680 |
1,040 |
288,680 |
|
|
|
|
|
|
|
|
Due after more than one year |
|
282,960 |
4,680 |
1,040 |
288,680 |
|
Due within one year |
|
- |
10,228 |
- |
10,228 |
|
|
|
|
|
|
|
|
Total |
|
282,960 |
14,908 |
1,040 |
298,908 |
|
|
|
|
|
|
|
|
2011 |
|
Borrowings £000 |
Interest £000 |
Unamortised borrowing costs £000 |
Borrowings and interest £000 |
|
|
|
|
|
|
|
|
From two to five years |
|
273,230 |
4,566 |
1,770 |
279,566 |
|
From one to two years |
|
- |
9,980 |
- |
9,980 |
|
|
|
|
|
|
|
|
Due after more than one year |
|
273,230 |
14,546 |
1,770 |
289,546 |
|
Due within one year |
|
- |
9,980 |
- |
9,980 |
|
|
|
|
|
|
|
|
Total |
|
273,230 |
24,526 |
1,770 |
299,526 |
|
|
|
|
|
|
|
19. BANK BORROWINGS
|
Secured borrowings at amortised cost |
|
31 March 2012 £000 |
31 March 2011 £000 |
|
|
|
|
|
|
|
|
Bank borrowings |
|
|
284,000 |
275,000 |
|
Unamortised loan arrangement costs |
|
|
(1,040) |
(1,770) |
|
|
|
|
|
|
|
|
|
|
282,960 |
273,230 |
|
|
|
|
|
|
The weighted average interest rate paid on the bank borrowings during the year was 3.7% (2011: 3.6%).
The Group has £41,000,000 in undrawn committed borrowing facilities at 31 March 2012 which expire between one and two years (2011: £50,000,000 expiring between two and three years).
On 26 April 2012, the Group announced the completion of a £100 million 15 year fixed rate loan with Aviva Commercial Finance Limited. The loan is secured over a portfolio of 15 freehold self storage centres which were valued at £242.1 million at 29 February 2012 for the purposes of the drawdown. The annual fixed interest rate on the loan is 4.9%.
The loan amortises to £60 million over the course of the 15 years, consistent with the Group's medium term debt reduction strategy. The debt service is payable monthly based on fixed annual amounts. The loan outstanding on the fifth anniversary will be £89.8 million; £76.7 million outstanding on the tenth anniversary, with £60 million remaining at expiry in April 2027.
The new 15 year term loan has been deployed to repay and cancel £100 million of the Group's core bank debt facility, reducing it to £225 million of which £190 million is drawn. This facility expires in September 2013 and is secured on the remainder of the Group's self storage centres. The repayment and cancellation has been disproportionately applied against HSH Nordbank's commitment which has been reduced from £150 million to £65 million. The remainder of the loan is held by Lloyds TBS Bank plc, HSBC Bank plc and Santander.
The Group was comfortably in compliance with its banking covenants at 31 March 2012, as illustrated in the table below.
|
|
Covenant |
At 31 March 2012 |
|
Minimum income cover on charged assets |
1.5x |
3.67x |
|
Minimum net assets (excluding goodwill) |
£250 million |
£493.1m |
|
Maximum gross loan to net assets gearing |
1.3:1 |
0.58:1 |
The minimum net asset and gearing covenants on the Aviva loan are in line with the covenants on the existing loan. There is also a minimum income cover covenant of 1.5x on the charged assets and a minimum debt service cover of 1.2x, and a loan to value covenant of 65% based on the valuation of the 15 assets charged to Aviva.
Interest rate profile of financial liabilities
|
|
Total £000 |
Floating rate £000 |
Fixed rate £000 |
Weighted average interest rate |
Period for which the rate is fixed |
Weighted average period until maturity |
|
|
|
|
|
|
|
|
|
At 31 March 2012 |
|
|
|
|
|
|
|
Gross financial liabilities |
284,000 |
94,000 |
190,000 |
3.7% |
6.0 years |
3.5 years |
|
|
|
|
|
|
|
|
|
At 31 March 2011 |
|
|
|
|
|
|
|
Gross financial liabilities |
275,000 |
85,000 |
190,000 |
3.6% |
6.0 years |
4.7 years |
|
|
|
|
|
|
|
|
The floating rate at 31 March 2012 was paying a margin of 1.125% above one month LIBOR, the fixed rate debt was paying a weighted average margin of 1.16%. All monetary liabilities, including short term receivables and payables are denominated in sterling. The weighted average interest rate includes the effect of the Group's interest rate derivatives.
Narrative disclosures on the Group's policy for financial instruments are included within the Report on Corporate Governance and in note 18.
20. Deferred tax
Deferred tax assets in respect of share based payments (£0.1 million), interest rate swaps (£5.0 million), losses (£1.7 million), capital allowances in excess of depreciation (£0.3 million) and capital losses (£1.1 million) in respect of the non-REIT taxable business have not been recognised due to uncertainty over the projected tax liabilities arising in the short term within the non-REIT taxable business.
21. obligations under finance leases
|
|
Minimum lease payments |
Present value minimum of lease payments |
||
|
|
2012 |
2011 £000 |
2012 |
2011 |
|
|
|
|
|
|
|
Amounts payable under finance leases: |
|
|
|
|
|
Within one year |
1,984 |
1,987 |
1,946 |
1,947 |
|
Within two to five years inclusive |
7,937 |
7,946 |
6,857 |
6,828 |
|
Greater than five years |
25,436 |
23,189 |
13,591 |
12,469 |
|
|
|
|
|
|
|
|
35,357 |
33,122 |
22,394 |
21,244 |
|
|
|
|
|
|
|
Less: future finance charges |
(12,963) |
(11,878) |
|
|
|
|
|
|
|
|
|
Present value of lease obligations |
22,394 |
21,244 |
|
|
|
|
|
|
|
|
All lease obligations are denominated in sterling. Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The carrying amount of the Group's lease obligations approximates their fair value.
22. Share capital
|
|
Authorised |
Called up, allotted and fully paid |
||
|
|
2012 |
2011 £000 |
2012 |
2011 |
|
|
|
|
|
|
|
Ordinary shares of 10 pence each |
20,000 |
20,000 |
13,139 |
13,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Movement in issued share capital |
|
|
|
|
|
Number of shares at 31 March 2010 |
|
|
|
130,990,837 |
|
Exercise of share options - Share option schemes |
|
|
|
69,685 |
|
|
|
|
|
|
|
Number of shares at 31 March 2011 |
|
|
|
131,060,522 |
|
Exercise of share options - Share option schemes |
|
|
|
332,519 |
|
|
|
|
|
|
|
Number of shares at 31 March 2012 |
|
|
|
131,393,041 |
|
|
|
|
|
|
The Company has one class of ordinary shares which carry no right to fixed income.
At 31 March 2012 options in issue to Directors and employees were as follows:
|
Date option granted |
Option price per ordinary share |
Date first exercisable |
Date on which the exercise period expires |
Number of ordinary shares 2012 |
Number of ordinary shares |
|
|
|
|
|
|
|
|
8 November 2001 |
98p |
8 November 2004 |
7 November 2011 |
- |
18,359 |
|
15 May 2002 |
102p |
15 May 2005 |
14 May 2012 |
8,000 |
20,200 |
|
16 December 2002 |
81.5p |
16 December 2005 |
15 December 2012 |
8,150 |
14,830 |
|
2 July 2003 |
82.5p |
2 July 2006 |
1 July 2013 |
18,613 |
22,112 |
|
11 November 2003 |
96p |
11 November 2006 |
10 November 2013 |
7,650 |
10,850 |
|
27 September 2004 |
nil p** |
27 September 2007 |
26 September 2014 |
- |
6,500 |
|
6 June 2005 |
nil p** |
6 June 2008 |
5 June 2015 |
74,765 |
94,165 |
|
9 June 2006 |
nil p** |
9 June 2009 |
8 June 2016 |
91,665 |
101,665 |
|
6 March 2008 |
310p* |
1 April 2011 |
1 October 2011 |
- |
11,019 |
|
9 July 2008 |
Nil p** |
9 July 2011 |
8 July 2018 |
57,620 |
343,000 |
|
22 August 2008 |
249p* |
22 August 2011 |
21 February 2012 |
- |
13,439 |
|
24 February 2009 |
141p* |
1 April 2012 |
1 October 2012 |
215,650 |
224,690 |
|
3 August 2009 |
Nil p** |
3 August 2012 |
2 August 2019 |
372,967 |
375,167 |
|
23 February 2010 |
255p* |
1 April 2013 |
1 October 2013 |
11,263 |
19,319 |
|
12 July 2010 |
Nil p ** |
12 July 2013 |
11 July 2020 |
457,212 |
457,212 |
|
28 February 2011 |
263p * |
28 February 2014 |
29 August 2014 |
29,060 |
34,132 |
|
19 July 2011 |
Nil p ** |
19 July 2013 |
19 July 2021 |
493,582 |
- |
|
12 March 2012 |
240p * |
1 April 2015 |
1 October 2015 |
124,702 |
- |
|
|
|
|
|
1,970,899 |
1,766,659 |
* SAYE (see note 23)
** LTIP (see note 23)
Own shares
The own shares reserve represents the cost of shares in Big Yellow Group PLC purchased in the market, and held by the Big Yellow Group PLC Employee Benefit, along with shares issued directly to the Employee Benefit Trust. 1,885,117 shares are held in the Employee Benefit Trust (2011: 1,905,000), and 1,418,750 shares are held in treasury.
23. Share based payments
The Company has four equity share-based payment arrangements, namely approved and unapproved share option schemes, an LTIP scheme, an Employee Share Save Scheme ("SAYE") and a Long Term Bonus Performance Plan. The Group recognised a total expense in the year related to equity-settled share-based payment transactions of £1,532,000 (2011: £1,641,000).
Equity-settled share option plans
The Group granted options to employees under Approved and Unapproved Inland Revenue Share option schemes between November 1999 and November 2003. The Group's schemes provided for a grant price equal to the average quoted market price of the Group shares on the date of grant. The vesting period is three to ten years. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Furthermore, options are forfeited if the employee leaves the Group before the options vest.
Since 2004 the Group has operated an Employee Share Save Scheme ("SAYE") which allows any employee who has more than six months service to purchase shares at a 20% discount to the average quoted market price of the Group shares at the date of grant. The associated savings contracts are 3 years at which point the employee can exercise their option to purchase the shares or take the amount saved, including interest, in cash. The scheme is administered by Yorkshire Building Society.
On an annual basis since 2004 the Group awarded nil-paid options to senior management under the Group's Long Term Incentive Plan ("LTIP"). The awards are conditional on the achievement of challenging performance targets. The awards granted in 2004, 2005 and 2006 vested in full. The awards granted in 2007 lapsed, and the awards granted in 2008 partially vested.
The weighted average share price at the date of exercise for options exercised in the year was 287 pence (2011: 327 pence).
|
Share option scheme "ESO" |
2012 No. of options |
2012 Weighted average exercise price |
2011 No. of options |
2011 Weighted average exercise price |
|
|
|
|
|
|
|
Outstanding at beginning of year |
86,351 |
0.92 |
107,501 |
0.94 |
|
Exercised during the year |
(43,938) |
0.95 |
(21,150) |
0.85 |
|
|
|
|
|
|
|
Outstanding at the end of the year |
42,413 |
0.85 |
86,351 |
0.92 |
|
|
|
|
|
|
|
Exercisable at the end of the year |
42,413 |
0.85 |
86,351 |
0.92 |
|
|
|
|
|
|
Options outstanding at 31 March 2012 had a weighted average contractual life of 1.2 years (2011: 1.6 years).
|
LTIP scheme |
2012 No. of options |
2011 No. of options |
|
|
|
|
|
Outstanding at beginning of year |
1,377,709 |
1,488,780 |
|
Granted during the year |
495,582 |
471,062 |
|
Forfeited during the year |
(48,300) |
(537,383) |
|
Exercised during the year |
(277,180) |
(44,750) |
|
|
|
|
|
Outstanding at the end of the year |
1,547,811 |
1,377,709 |
|
|
|
|
|
Exercisable at the end of the year |
220,550 |
202,330 |
|
|
|
|
The weighted average fair value of options granted during the year was £433,000 (2011: £453,000).
Options outstanding at 31 March 2012 had a weighted average contractual life of 7.8 years (2011: 7.8 years).
|
Employee Share Save Scheme ("SAYE") |
2012 No. of options |
2012 Weighted average exercise price |
2011 No of options |
2011 Weighted average exercise price |
|
|
|
|
|
|
|
Outstanding at beginning of year |
302,599 |
1.73 |
304,176 |
1.66 |
|
Granted during the year |
124,702 |
2.40 |
34,132 |
2.63 |
|
Forfeited during the year |
(35,225) |
2.38 |
(31,924) |
2.04 |
|
Exercised during the year |
(11,401) |
2.66 |
(3,785) |
1.41 |
|
|
|
|
|
|
|
Outstanding at the end of the year |
380,675 |
1.86 |
302,599 |
1.73 |
|
|
|
|
|
|
|
Exercisable at the end of the year |
- |
- |
- |
- |
|
|
|
|
|
|
Options outstanding at 31 March 2012 had a weighted average contractual life of 1.6 years (2011:1.6 years).
The inputs into the Black-Scholes model are as follows:
|
|
ESO |
LTIP |
SAYE |
|
|
|
|
|
|
Expected volatility |
24% |
41% |
45% |
|
Expected life |
3 years |
3 years |
3 years |
|
Risk-free rate |
4.7% |
2.2% |
1.9% |
|
Expected dividends |
3.2% |
4.4% |
4.9% |
|
|
|
|
|
Expected volatility was determined by calculating the historical volatility of the Group's share price over the year prior to grant.
Long term bonus performance plan
The Group has a joint share ownership plan in place. This is accounted for as a compound instrument, with 50% accrued as a liability as this proportion of the award may be cash settled. The balance is recognised as a credit to equity, recognising the equity settled element. The plan was set up in August 2009. Directors and senior employees have a partial interest in 1,885,117 shares with the Group's Employee Benefit Trust. The fair value of each award is £2 subject to the vesting criteria as set out in the Directors' Remuneration Report. At 31 March 2012 the weighted average contractual life was 0.4 years.
24. capital commitments
Amounts contracted but not provided in respect of the Group's properties as at 31 March 2012 were £4.9 million (2011: £3.4 million).
25. Events after the balance sheet date
As disclosed in note 18, in April 2012 the Group entered into a £100 million 15 year loan with Aviva Commercial Finance Limited. At the same time the Group spent £9.2 million to cancel £100 million of the Group's interest rate derivatives.
26. 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 13, the Group has a 33.3% interest in Big Yellow Limited Partnership ("the Partnership"), and entered into transactions with the Partnership during the year on normal commercial terms.
In the current year the Group earned fees from the Partnership of £714,000 (2011: £920,000). At 31 March 2012, the Partnership owed £294,000 to the Group (2011: Group owed £177,000 to the Partnership).
Dreams plc
Steve Johnson, a Non-Executive Director of the Group was appointed as Executive Chairman of Dreams plc in July 2011. During the year, the Group entered into a lease over a retail unit at its Eltham store with Dreams plc on normal commercial terms. The contracted rent is £127,000 per annum.
AnyJunk Limited
James Gibson is a Non-Executive Director and shareholder in AnyJunk Limited and Adrian Lee is a shareholder in AnyJunk Limited. During the year AnyJunk Limited provided waste disposal services to the Group on normal commercial terms, amounting to £12,000.
No other related party transactions took place during the years ended 31 March 2012 and 31 March 2011.
Ten Year Summary
|
2012 £000 |
2011 £000 |
2010 £000 |
2009 £000 |
2008 |
2007 £000 |
2006 £000 |
2005 £000 |
2004 £000 |
2003 £000 |
|
|
Results |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
65,663 |
61,885 |
57,995 |
58,487 |
56,870 |
51,248 |
41,889 |
33,375 |
23,830 |
15,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) before gains and losses on property assets |
35,079 |
32,058 |
29,068 |
30,946 |
29,342 |
27,067 |
21,645 |
15,030 |
4,719 |
(449) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities |
27,388 |
23,534 |
19,063 |
10,203 |
14,388 |
16,726 |
16,125 |
9,664 |
5,761 |
2,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before taxation |
(35,551) |
6,901 |
10,209 |
(71,489) |
102,618 |
152,837 |
118,547 |
42,836 |
1,243 |
(2,294) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted profit before taxation |
23,643 |
20,207 |
16,514 |
13,791 |
15,006 |
14,233 |
12,601 |
7,791 |
n/d |
n/d |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
494,500 |
544,949 |
547,285 |
502,317 |
580,886 |
487,979 |
244,139 |
159,168 |
58,391 |
58,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EPRA earnings per share |
18.22p |
15.49p |
12.99p |
11.89p |
11.72p |
10.01p |
8.86p |
5.53p |
n/d |
n/d |
|
Declared total dividend per share |
10.0p |
9.0p |
4.0p |
0p |
9.5p |
9.0p |
5.0p |
2.0p |
1.05p |
1.0p |
|
|
|
|
|
|
|
|
|
|
|
|
|
Key statistics |
|
|
|
|
|
|
|
|
|
|
|
Number of stores open* |
65 |
62 |
60 |
54 |
48 |
43 |
37 |
32 |
29 |
26 |
|
Sq ft occupied (000)* |
2,458 |
2,130 |
1,915 |
1,775 |
1,850 |
1,835 |
1,672 |
1,470 |
1,268 |
875 |
|
Occupancy growth in year 000 sq ft)* |
328 |
215 |
140 |
(75) |
15 |
163 |
202 |
202 |
393 |
325 |
|
Number of customers* |
36,300 |
32,800 |
30,500 |
28,500 |
30,500 |
30,100 |
27,800 |
24,600 |
20,400 |
13,800 |
|
Average no. of employees during the year |
279 |
273 |
252 |
239 |
218 |
191 |
178 |
160 |
140 |
116 |
* - includes stores operating in Big Yellow Limited Partnership
Results to 2004 under UK GAAP, 2005 onwards under IFRS.
n/d - measure not disclosed in that year
This information is provided by RNS
COMPANIES COVERED:
Latest directors dealings
- 2 days ago FRP Advisory Group
- 2 days ago Marks Electrical Group
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