2015 Annual Report and Notice of 2016 AGM

RNS Number : 4891P
Safestore Holdings plc
18 February 2016
 

 

 

 

 

 

 

Safestore Holding plc

 

2015 Annual Report and Notice of 2016 AGM

 

18 February 2016

 

Safestore Holdings plc ("the Company")

Publication of Annual Report and Accounts 2015 and Notice of 2016 AGM

 

Safestore Holdings plc ("the Company") released its preliminary announcement of annual results on 21 January 2016 ("Preliminary Results Announcement").

 

Further to that announcement, the Company can now confirm that it has submitted to the Financial Conduct Authority's national storage mechanism its Annual Report and Accounts for the year ended 31 October 2015 and the Notice of AGM (as required by Listing Rules 9.6.1 and 9.6.3).

 

The Safestore Holdings plc 2016 Annual General Meeting will be held at Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT at 12'noon on Wednesday, 23 March 2016. In connection with the AGM, the following documents have been posted to those shareholders who have elected to receive hard copy communications, or have otherwise been made available to shareholders today:

 

·      2015 Annual Report and Accounts

·      Notice of the 2016 AGM

·      Form of Proxy for the 2016 AGM

 

The 2015 Annual Report and Accounts and the Notice of AGM are available to view on the Company's website: www.safestore.com (in compliance with Disclosure and Transparency Rule 6.3.5(3)).

 

The Company's Annual Report and Accounts for the year ended 31 October 2015 and the Notice of AGM will also shortly be available for inspection at the Financial Conduct Authority's national storage mechanism at www.morningstar.co.uk/uk/nsm.

 

The Appendix to this announcement contains additional information for the purposes of compliance with the Disclosure and Transparency Rules and should be read together with the Preliminary Results Announcement which included, inter alia, a condensed set of the Company's financial statements and extracts from the management report. Together these constitute the information required by DTR 6.3.5 to be communicated to media in full unedited text. This announcement should be read in conjunction with and is not a substitute for reading the full Annual Report and Accounts 2015.

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Appendix

 

Page and note references in the text below refer to page numbers in the 2015 Annual Report and Accounts.

 

Statement of Directors' responsibilities

 

The following responsibility statement is extracted from the Statement of Directors' Responsibilities on page 49 of the 2015 Annual Report and Accounts and is repeated here solely for the purpose of complying with DTR 6.3.5. The statement relates to the full 2015 Annual Report and Accounts and not the extracted information presented in this announcement or the Preliminary Results Announcement.

 

The Directors are responsible for preparing the Annual Report, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

 

·    

Select suitable accounting policies and then apply them consistently;

·    

Make judgements and accounting estimates that are reasonable and prudent;

·    

State whether IFRS as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent company financial statements respectively; and

·    

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

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Having taken all matters considered by the Board and brought to the attention of the Board during the year into account, the Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

Each of the Directors, whose names and functions are listed on page 29 confirm that, to the best of their knowledge:

 

·    

The Group financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·    

The Strategic report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

 

In accordance with Section 418 of the Companies Act 2006, Directors' reports shall include a statement, in the case of each Director in office at the date the Directors' report is approved, that:

 

·    

So far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

·    

He has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

 

The Annual Report on pages 1 to 91 was approved by the Board of Directors and authorised for issue on 21 January 2016.

 

The Directors of Safestore Holdings plc are listed in the annual report and accounts for the year ended 31 October 2015 and are listed on the Safestore group's corporate website: www.safestore.com. The Directors of Safestore Holdings plc as at the date of this announcement are as follows:

 

Alan Lewis;

Frederic Vecchioli;

Andy Jones;

Ian Krieger;

Keith Edelman;

Jo Kenrick;

 

Principal risks and risk management

 

The risks and uncertainties set out below are extracted from pages 12 to 14 of the 2015 Annual Report and Accounts and are repeated here solely for the purpose of complying with DTR 6.3.5.

 

Risks and risk management

 

Risk management process

The Group faces a number of risks which, if they arise, could affect its ability to achieve its strategic objectives. The Board is responsible for determining the nature of these risks and ensuring appropriate mitigating actions are in place for managing them.

 

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

 

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

 

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

 

Principal risks and uncertainties

The principal risks and uncertainties described are considered to have the most significant effect on Safestore's strategic objectives. This list is not intended to be exhaustive. Some risks, however, remain outside of the Group's full control, for example macro-economic issues, changes in government regulation and acts of terrorism.

 

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

 

Risk

Current mitigation activities

Developments since 2014

Strategy

The Group develops business plans based on a wide range of variables. Incorrect assumptions about the self-storage market, or changes in the needs of customers, or the activities of customers may adversely affect the returns achieved by the Group, potentially resulting in loss of shareholder value.

·     The strategy development process draws on internal and external analysis of the self-storage market, emerging customer trends and a range of other factors.

·     Strengthened focus on yield management with regular review of demand levels and pricing at each individual store.

·     The portfolio is geographically diversified with performance monitoring covering the personal and business customers by segments.

During the year, the Group has continued its programme of operational improvements and maintained good trading momentum.

 

The Group's strategy is regularly reviewed through the annual planning and budgeting process, and regular reforecasts during the year.

 

The level of this risk is broadly the same as last year.

 

Finance Risk

Lack of funding resulting in inability to meet business plans, satisfy liabilities or breach of covenants.

 

·     Funding requirements for business plans and the timing for commitments are reviewed regularly as part of the monthly management accounts.

·     The Group manages liquidity in accordance with Board approved policies designed to ensure that the Group has adequate funds for its ongoing needs.

·     The Board regularly monitors financial covenant ratios and headroom.

·     The refinanced banking facilities were extended to 30 June 2020 during FY15 and the US private placement notes mature in four and nine years.

In August 2015, the Group extended its bank borrowing facilities by a further two years, at lower rates of interest.

 

During the year, the Group has repaid £13 million of debt out of cash generated from operations. In addition, the strengthening of the Group's balance sheet, in particular from increases in the portfolio valuation, has resulted in reductions to both gearing and LTV.

 

The level of this risk has reduced since last year.

Treasury risk

Adverse currency or interest rate movements could see the cost of debt rise, or impact the Sterling value of income flows or investments.

 

·     Guidelines are set for our exposure to fixed and floating interest rates and use of interest rate and currency swaps to manage this risk.

·     Foreign currency denominated assets are financed by borrowings in the same currency where appropriate.

·     Use of derivative contracts to fix the exchange rate applicable to principal and interest payments on the US private placement debt.

The Group has realigned its derivative contracts to correspond to maturity and quantum of the refinanced bank facilities.

 

Foreign currency hedging arrangements were historically in place to protect the headroom for interest cover covenant purposes. Following a review of these arrangements, it was concluded that forward currency hedging is no longer necessary.

 

The exposure to foreign currency fluctuations has increased as a result of the curtailment of hedging arrangements for trading items.

Property investment and development

Acquisition and development of properties that fail to meet

performance expectations or overexposure to developments within a short timeframe may have an adverse impact on the portfolio valuation, resulting in loss

of shareholder value.

·     Thorough due diligence conducted and detailed analysis undertaken prior to Board approval for property investment and development.

·     The Group's overall exposure to developments is monitored and projects phased.

·     The performance of individual properties is benchmarked against target returns.

The Group's investment appraisal policy was reviewed and updated during the year.

 

For the three development projects announced during the year, advice was received from third party planning consultants and robust tendering processes were undertaken.

 

There has been no significant change to the risk since last year.

Valuation risk

Value of our properties declining as a result of external market or internal management factors.

 

In the absence of relevant transactional evidence, valuations can be inherently subjective leading to a degree of uncertainty.

 

Breach of our LTV borrowing covenant could arise in the event of declining property values, possibly triggering

default and/or repayment of the facilities.

·     Independent valuations conducted by experienced, independent, professionally qualified valuers.

·     A diversified portfolio let to a large number of customers should help to mitigate any negative impact arising from changing conditions in the financial and property market.

·     Headroom of loan-to-value banking covenants is maintained and reviewed.

·     The lowered gearing levels during FY15 provide enhanced headroom on valuations and significantly reduce the likelihood of covenants being endangered.

The Group's continuing operational improvements, which are generating increases to both rate and occupancy, and our ongoing lease re-gear programme are both contributing to increases in the Group's property valuation.

 

The level of this risk has reduced since last year.

 

 

Occupancy risk

A potential loss of income and increased vacancy due to falling demand, oversupply, or customer default, which could also adversely impact the portfolio valuation.

·     Personal and business customers cover a wide range of segments, sectors and geographic territories with limited exposure to any single customer.

·     Dedicated support for improved enquiry capture.

·     Weekly monitoring of occupancy levels and close management of stores.

·     Monitoring of reasons for customers vacating and exit interviews conducted.

·     Independent feedback facility for customer experience.

·     The occupancy rate across the portfolio has been grown through FY15 due to flexibility offered on deals by in-house marketing and the customer support centre.

Operational improvements, including focus on enquiry generation and conversion, marketing initiatives and yield management, have generated

increased occupancy during the year.

 

As a result of increases to occupancy, the level of this risk has reduced since last year.

 

Real estate investment trust ("REIT") risk

Failure to comply with the REIT legislation could expose the Group to potential tax penalties or loss of its REIT status.

·     Internal monitoring procedures in place to ensure that the appropriate rules and legislation are complied with and this is formally reported to the Board.

The Group has remained compliant with all REIT legislation throughout the year.

 

There has been no significant change to this risk since last year.

Catastrophic event

Major events mean that the Group is unable to carry out its business for a sustained period, health and safety issues put customers, staff or property at risk, or the Group suffers a cyber-attack, hacking or malicious infiltration of websites. These may result in reputational damage, injury or property damage, or customer compensation, causing a loss of market share and income.

·     Business continuity plans are in place and tested.

·     Back-up systems at remote places and remote working capabilities.

·     Reviews and assessments are undertaken periodically for enhancements to supplement the existing compliant aspects of buildings and processes.

·     Monitoring and review by the Health and Safety Committee.

·     Fire risk assessments in stores.

·     Specialist advice and consultancy; dedicated in-house monitoring and security review.

·     Limited retention of customer data.

Review of the Group's business continuity plans.

 

Updated IT policy, new firewalls and 24/7 monitoring of systems for vulnerabilities.

 

Ongoing focus from the newly formed Risk Committee.

 

This risk is seen to have increased over the year, primarily due to the number of well publicised cyberattacks suffered by UK companies in recent months.

 

 

END

 

For further information, please contact:

 

Safestore Holdings plc

Sam Ahmed, Company Secretary    

Tel: 020 8732 1500

 

 

About Safestore:

·     Safestore is the UK's largest self-storage group with 119 stores, comprising 95 wholly owned stores in the UK (including 56 in London and the South East with the remainder in key metropolitan areas such as Manchester, Birmingham, Glasgow, Edinburgh, Liverpool and Bristol) and 24 wholly owned stores in the Paris region. In addition, Safestore has 12 Space Maker stores under management in the UK.

·     Safestore operates more self-storage sites inside the M25 and in central Paris than any competitor providing more proximity to customers in the wealthiest and densest UK and French markets.

·     Safestore was founded in the UK in 1998. It acquired the French business "Une Pièce en Plus" ("UPP") in 2004 which was founded in 1998 by the current Safestore Group CEO Frederic Vecchioli.

·     Safestore has been listed on the London Stock Exchange since 2007. It entered the FTSE 250 index in October 2015.

·     The Group provides storage to around 49,000 personal and business customers.

·     Safestore (excluding Space Maker) has a maximum lettable area ("MLA") of 4.93 million sq ft (excluding the expansion pipeline stores) of which 3.58 million sq ft is currently occupied.

·     Safestore employs around 525 people in the UK and France.

 

 

 

 

 


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