Interim Results

Safestore Holdings PLC 10 July 2007 FOR IMMEDIATE RELEASE 10 JULY 2007 Safestore Holdings plc ('Safestore' or 'the Company') Interim Results Announcement for the six months ended 30 April 2007 Safestore Holdings plc, the largest self storage retailer in the UK and Paris, is pleased to report its interim results for the six months ended 30 April 2007. The Company was admitted to the London Stock Exchange on 9 March 2007. Highlights: Six months Six months % increase ended ended 30 April 2007 30 April 2006 Â£'000 Â£'000 Revenue 34,608 30,123 14.9% EBITDA* before exceptional items and gain on investment properties 18,992 15,141 25.4% Profit after Tax ('Earnings') 23,249 416 Adjusted Profit after Tax (note 8) 6,568 3,086 112.8% Basic Earnings Per Share ('EPS') (note 8) 13.18p 0.24p Adjusted EPS (note 8) 3.72p 1.81p 105.5% Net Asset Value ('NAV') per share 103.1p 53.1p 94.2% Adjusted NAV ('NAV') per Share (note 11) 157.4p 101.7p 54.8% Interim Dividend per share 1.5p - * EBITDA - Earnings before interest, taxation, depreciation and amortisation â€¢ Strong financial performance o Revenue up 14.9% to Â£34.6m, with ancillary revenue increased by 26% to Â£4.8 million o Pre-exceptional EBITDA up 25.4% to Â£19.0 million o Adjusted NAV per share up 54.8% to 157.4p o Maiden interim dividend of 1.5p per share â€¢ Strong operational performance o Average rate per square foot ('sq ft') for the 6 month period ended 30 April 2007 increased by 8.0% to Â£20.95 (like-for-like increase of 8.3% to Â£21.14) o Closing occupancy for the 6 month period ended 30 April 2007 increased by 6.3% to 2.8 million sq ft (like-for-like increase of 4.2% to 2.7 million sq ft) o Successful completion of the re-branding of all Group stores under the name 'Safestore' in the UK and 'Une Piece en Plus' in France â€¢ As at 30 April 2007, Safestore's property portfolio was valued at Â£498 million, an increase of 28.4%, or Â£110 million, since 30 April 2006 (an increase of 6.0%, or Â£28 million, since October 2006) â€¢ Recently opened 100th store with additional 16 stores in the pipeline, 12 of which have planning permission â€¢ Total Maximum Lettable Area ('MLA'), combined with the expansion stores will increase to 5.1 million sq ft â€¢ Trading in H2 has begun positively with healthy increases in both occupancy and rates Safestore Chief Executive, Steve Williams, said: 'We are pleased to report continued progress which reflects the success of our customer led retail focus and the strength of our property asset base. As the market leader in the UK and Paris, we are well placed to benefit from the continued growth forecast for the sector. The Board remains confident of the outcome for the full year.' For further information, please contact: Safestore Holdings PLC T: 020 8732 1500 Steve Williams, Chief Executive Richard Hodsden, Chief Financial Officer Cardew Group T: 020 7930 0777 Tim Robertson / Sofia Rehman A presentation for analysts will be held at 9.30am today at Merrill Lynch, The Conference Centre, 6th Floor, 2 King Edward Street, London, EC1A 1HQ. A dial-in facility is also available for analysts to access the meeting via conference call Telephone: 020 8996 3920 Passcode: 859 755 The analyst presentation document will be available for download on Safestore's investor relations website: www.safestore.com Certain statements in this announcement are forward looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement. Information in this announcement relating to the price at which investments have been bought or sold in the past or the yield on investments cannot be relied upon as a guide to future performance. Except as required by law, the Company is under no obligation to update or keep current the forward-looking statements contained in this announcement or to correct any inaccuracies which may become apparent in such forward-looking statements. Safestore Holdings plc Interim Results Announcement for the six months ended 30 April 2007 Chief Executive's Review Introduction We are very pleased to present Safestore's results for the six months ended 30 April 2007. The business has performed strongly, generating significant increases in revenue and earnings which reflects the Company's success in driving occupancy levels and increasing rental growth across the portfolio. We have today announced a maiden interim dividend and firmly believe the Company is in an ideal position to continue its established track record for growth. Since the end of the period under review, we have opened our 100th store in Guildford and contracted a further six stores. We currently operate 100 stores (81 in the UK and 19 in France) with a self storage MLA of 4.1 million sq ft and an overall MLA of 4.3 million sq ft. A further 16 expansion stores (potential new stores on which contracts have been completed or exchanged), of which 12 have planning permission, will add around 770,000 sq ft by the end of 2008. As announced in the trading update released on 8 May 2007, we will also be delivering around 67,000 sq ft of additional MLA through store extensions and satellite stores. The property portfolio includes a mix of freehold and leasehold sites appropriate to the specific markets in which we operate. This flexibility in our approach enables us to draw from a much wider selection of potential properties, a significant advantage given competition for new sites. The combination of a customer led retail focused business with a structured property asset base gives us confidence that we can maintain and grow our leading UK market position and expand our European portfolio both in terms of store numbers and operational efficiency. Financial Review For the six months ended 30 April 2007, revenue grew strongly to Â£34.6 million (2006: Â£30.1 million), an increase of 14.9%. Going forward, we expect to gain more from the Company's unified branding which was only completed in 2006. On a like-for-like basis revenues grew by 13.7% to Â£34.0 million of which approximately 50% was attributed to rate improvement, 26% due to increases in occupancy with the balance stemming from increases in ancillary and other revenues. Revenues for the period in the UK increased by 14.9% to Â£28.6 million (2006: Â£24.8 million), with revenues for the same period from France rising by 14.8% to Â£6.1 million (2006: Â£5.3 million). Ancillary revenues derived from the sale of contents insurance, storage accessories and miscellaneous items equated to Â£4.8 million (2006: Â£3.8 million), equivalent to 16.8% of self storage revenues and representing a 26% increase over the corresponding period last year. A positive market environment and continued focus on marketing initiatives saw occupancy increase during the period by 6.3% to approximately 2.8 million sq ft. Store occupancy increased by 4.2% to approximately 2.7 million sq ft on a like-for-like basis. Average annual rate per sq ft increased by 8.0% to Â£20.95, whilst like-for-like rates increased by 8.3% to Â£21.14. As a consequence of increased revenue combined with tight cost control the Company generated pre-exceptional EBITDA of Â£19.0 million, an increase of 25.4% (2006: Â£15.1 million). Pre-exceptional EBITDA margins also improved to 54.9% from 50.3%. Exceptional costs for the period ended 30 April 2007 of circa Â£2.4 million includes approximately Â£2.0 million of IPO fees with the balance comprising pension scheme and group restructuring costs. It should be noted that, in addition to the exceptional charge, around Â£5.3 million of IPO fees have been written off against share premium in the period. The exceptional costs of Â£3.6 million in the comparative period last year related entirely to IFRS 2 shares issuance costs. Profit after tax was Â£23.2 million compared to Â£0.4 million in the comparative period last year. After adjusting for the gain on the revaluation of property portfolio, exceptional items, goodwill and the associated tax charges, the Company made an adjusted profit before tax in the period of Â£6.6 million compared to Â£3.1 million for the same period last year. Basic and adjusted EPS were 13.18p and 3.72p respectively for the period ended 30 April 2007 (2006: 0.24p and 1.81p respectively). As at 30 April 2007, the Group's net borrowings totalled Â£215 million. At this date approximately 82% of the net debt was covered by an interest rate swap at approximately 5.24%, which protects the Group from the effects of further interest rate rises. The swap exists for a period up until June 2011 in line with the existing facilities. As part of the IPO, the Company raised net proceeds of Â£29.7 million, which together with current banking facilities provides the necessary funding to meet the costs associated with the Company's present expansion plans and development pipeline. Retail Store Portfolio Safestore has the largest number of stores in the UK and central Paris. At the end of the half year, we had 80 stores tactically grouped across the UK (61% freehold / long leasehold and 39% short leasehold). In France, we have 19 stores (21% freehold, 79% short leasehold) which are well located in and around the central Paris area. Our strategy remains to 'cluster' stores in specific geographic locations ensuring that they are located in tight formations, facilitating management efficiency and accelerating local awareness. London and Paris represent the best examples of this approach, creating market leading positions in both centres. Store Location No of Stores Occupancy of Average Rate MLA per Sq Ft % Â£ London 35 75.1% 26.00 Rest of UK 45 61.4% 17.32 Paris 19 71.9% 20.54 Group 99 67.6% 20.95 Safestore's strategy is to maintain a balanced property portfolio including a mix of freehold and leasehold sites appropriate to the specific markets in which we operate. One of our key objectives is to secure new stores in locations that we believe will enable us to drive earnings and generate value. The flexibility in our approach is a significant advantage given competition for new sites and underpins our confidence in maintaining our leading UK market position and expanding our European portfolio. Leasehold sites offer highly attractive return on capital, EBITDA and cash flow. Safestore also has an excellent track record of achieving lease extensions and converting leaseholds to freeholds and these significant factors are not reflected in the property valuation. We believe as familiarity with European self storage increases, yields will continue to compress and move closer to those prevailing in more mature markets rather than being connected to the commercial property market. If, as we believe, commercial property yields continue to rise, additional development sites are likely to become available and we will continue to apply our proven ability to drive occupancy levels and rental growth. This is evident in the results to 30 April 2007 and in the trading since the period end. At the period end, the Group's portfolio of 99 stores comprised a self storage MLA of 4.1 million sq ft with 3.75 million sq ft currently built out. In the period under review, we successfully added a further 112,000 sq ft of self storage space through the opening of a new facility in Slough, a satellite store in Burnley and extending the Staples Corner store. Initial trading within these new stores has been encouraging. Retail Store Expansion programme We are confident of meeting our stated target of expanding our store portfolio by 7-10 stores each year. At any one time the Company typically has between 30-40 stores at various stages of negotiation within which there is a pipeline of 'expansion stores' on which contracts have been completed or exchanged. We currently have 16 expansion stores in the UK and France, 12 of which have planning permission, all of which are due to open by the end of 2008, adding approximately a further 770,000 sq ft of self storage space. We have an established track record in sourcing and securing suitable sites. Where planning consent does not exist, our professionals are experienced in working alongside local authorities to gain the necessary approvals. Our model of progressing sites from planning to development through to trading ensures that we have an achievable and realistic pipeline of expansion stores which allows us to maintain our competitive edge as a leading self storage provider in the UK and Paris. In addition, we are adding highly experienced individuals to both our UK and European property teams which will further enhance our ability to source excellent locations. Our primary focus is on opening new stores within our current markets, but we will also continue to evaluate opportunities to acquire self storage businesses in these markets and certain other markets within Europe. Retail Strategy The strength of our property portfolio enables our management team to operate as an asset backed business with a strong customer led retail focus. This approach has been instrumental in delivering the 8.0% increase in average annual rate per sq ft for the period under review. Our customer led retail focus is embedded within all areas of the business from site selection and design through to the management of our stores. Retail techniques have further informed our marketing - Safestore was the first self storage company to offer 'The Lowest Price Guarantee' together with other innovative special promotions. Supporting this activity, in 2002 the Company set the benchmark within the industry by introducing an IT system that allowed for the exchange of real time information. These IT facilities have been constantly upgraded to remain state of the art and capable of meeting the evolving needs of the business. We have recently completed the re-branding of all Group stores under the name of 'Safestore' in the UK and 'Une Piece en Plus' in France. We believe the effect of this unified national brand presence is ongoing and combined with our marketing programmes across all media will result in increasing brand awareness reflecting the Group's market leading positions. A further growing segment of our business is our ability to provide a nationwide service for business customers using storage facilities at multiple sites, who benefit from one relationship manager and a centralised billing system. Property Portfolio Valuation The Company's property portfolio has been valued by Cushman and Wakefield ('C& W'). As at 30 April 2007, the total value of the Company's property portfolio was Â£498 million, up Â£110 million (28.4%) from Â£388 million at 30 April 2006. Â£94 million of the overall uplift is derived from the like for like store portfolio from which we estimate that Â£59 million (53.6% of the overall uplift) stems from operational performance such as increased occupancy and higher achievable rents and Â£35 million (31.8% of the overall uplift) is attributable to yield shift. The remaining approximately Â£16 million (14.6%) of the overall valuation uplift is attributable to the impact of new stores opened in the period. Location Tenure MLA (including Valuation Uplift Offices) (30 April 2007) Sq Ft '000 Â£ million Â£ million UK Freehold & Long Leasehold 2,260 372 78 Short leasehold 1,248 76 21 France Freehold & Long Leasehold 178 21 4 Short leasehold 644 29 7 Total 4,330 498 110 At the half year end, the Group's property portfolio comprised 99 trading stores; the freehold/long leasehold properties were valued at just over Â£393 million and the short leasehold were valued at just under Â£105 million. Freehold /long leasehold stores account for 79% of the most recent valuation with the remaining 21% being attributable to the short leasehold portfolio. The Group's current pipeline of 16 expansion stores is currently held at cost, amounting to just over Â£21 million. Since April 2006 the Group has acquired the freeholds of Bury and Oldham and extended the lease at Stoke Newington. The valuations of these three stores have increased by Â£7.3 million against the associated cost of restructuring these assets of Â£3.6 million. The effect of the valuation has led to an adjusted NAV per share of 157.4p, representing an increase of 54.7% from 101.7p per share as at 30 April 2006, and an increase of 13.1% from 139.2p as at 31 October 2006. Self storage is a relatively new asset class in the UK and this is reflected in the level of our property valuations. We believe that over time familiarity with the assets and their performance will increase and result in a re-rating of the yields applied to self storage businesses closer to those prevailing in more mature markets or alternative uses. This, together with our proven ability to drive occupancy levels and rental growth, provides investors in the self storage sector with a combination of growth dynamics which should continue to deliver attractive returns. Dividend As set out at the time of the IPO, it is the Board's intention to adopt a progressive dividend policy. The Company expects to pay interim and full year dividends based on a ratio of approximately one third and two thirds, respectively, of the total annual dividend. The Board is therefore pleased to announce a maiden interim dividend of 1.5p per share. The dividend will be paid on 10 August 2007 to shareholders who are on the Company's Register at the close of business on 20 July 2007. The ex-dividend date will be 18 July 2007. REIT's As set out at the time of the IPO, Safestore currently has the benefit of significant tax losses and capital allowances, particularly in France. This has the effect of minimising potential future tax payments as a non REIT company. However, the Board of Safestore is giving full consideration to converting to REIT status for our UK business, but will proceed only when it is satisfied that it does not detract from our ability to grow the business. Outlook Self storage is still an immature market which is growing rapidly, driven by a mix of socio-economic factors. These include workforce mobility, an ageing population, higher divorce rates, housing stock pressure and changing lifestyle trends, which all contribute to a lack of space for individuals and businesses to store goods. While the individual effect of these factors on the self storage market may alter from year to year, we are confident that overall demand will continue to support our growth strategy. We believe we are in a strong position to continue to acquire new stores. If commercial property yields rise, additional development sites are likely to be brought to the market providing more opportunities to acquire high quality property assets. By contrast, we believe that self storage yields will be relatively strong, underpinned by the strong growth in the cash flow in the sector. In spite of rising interest rates, trading in the second half of the year has begun positively and we have continued to see increases in both occupancy rates and rates per square foot. The Board remains confident of the outcome for the full year. S W Williams 10 July 2007 Consolidated income statement for the six months ended 30 April 2007 Six months Six months Year ended 30 April ended 30 ended 31 2007 April 2006 October 2006 Note Â£'000 Â£'000 Â£'000 ------------------ ------- ---------- ---------- ---------- Revenue 2 34,608 30,123 64,313 Cost of sales (13,255) (12,154) (21,853) ------------------ ------- ---------- ---------- ---------- Gross profit 21,353 17,969 42,460 Administrative expenses (4,780) (7,224) (16,112) ------------------ ------- ---------- ---------- ---------- EBITDA before exceptional items and gain on investment properties 18,992 15,141 33,452 Depreciation (55) (40) (103) Exceptional items 7 (2,364) (3,600) (6,245) Goodwill impairment - (756) (756) ------------------ ------- ---------- ---------- ---------- Operating profit before gain on investment properties 16,573 10,745 26,348 Gain on the revaluation of investment properties 17,315 868 63,631 ------------------ ------- ---------- ---------- ---------- Operating profit 33,888 11,613 89,979 Finance income 684 138 572 Finance expense 3 (10,347) (10,802) (29,565) ------------------ ------- ---------- ---------- ---------- Profit before taxation 24,225 949 60,986 Income tax expense 4 (976) (533) (15,849) ------------------ ------- ---------- ---------- ---------- Profit for the period (attributable to equity shareholders) 23,249 416 45,137 ------------------ ------- ---------- ---------- ---------- Basic and diluted earnings per share 8 13.18p 0.24p 26.31p ------------------ ------- ---------- ---------- ---------- All items in the income statement relate to continuing operations. A maiden dividend of 1.5 pence per ordinary share has been proposed for the period ended 30th April 2007. Consolidated balance sheet as at 30 April 2007 30 April 30 April 31 October 2007 2006 2006 Note Â£'000 Â£'000 Â£'000 ---------------------- -------- -------- -------- -------- Non-current assets Investment property 9 554,130 440,289 519,291 Development property 9 21,025 12,564 7,921 Plant, equipment and owner-occupied property 1,462 1,501 1,408 Deferred tax asset 5 8,028 7,017 9,633 ---------------------- -------- -------- -------- -------- 584,645 461,371 538,253 ---------------------- -------- -------- -------- -------- Non-current assets classified as held for sale - 691 670 Current assets Inventories 176 154 172 Trade and other receivables 14,332 14,092 10,421 Other financial assets 11,209 7,756 8,397 Derivative financial instruments 3,300 - - Cash and cash equivalents 21,954 8,928 9,478 ---------------------- -------- -------- -------- -------- 50,971 30,930 28,468 ---------------------- -------- -------- -------- -------- Total assets 635,616 492,992 567,391 ---------------------- -------- -------- -------- -------- Current liabilities Financial liabilities - borrowings (5,348) (6,648) (5,947) - derivative financial instruments - - (203) Trade and other payables (42,798) (47,179) (36,673) Obligations under finance leases (7,863) (8,344) (7,719) Provisions - - (5) ---------------------- -------- -------- -------- -------- (56,009) (62,171) (50,547) ---------------------- -------- -------- -------- -------- Non-current liabilities Bank borrowings (234,083) (211,649) (234,586) Trade and other payables (1,605) (1,900) (1,822) Deferred tax liabilities 5 (102,453) (82,938) (101,614) Obligations under finance leases (48,321) (44,025) (41,882) Provisions (175) (204) (175) Pension liability - (195) (247) ---------------------- -------- -------- -------- -------- (386,637) (340,911) (380,326) ---------------------- -------- -------- -------- -------- Total liabilities (442,646) (403,082) (430,873) ---------------------- -------- -------- -------- -------- Net assets 192,970 89,910 136,518 ---------------------- -------- -------- -------- -------- Equity Called up share capital 13 1,871 4 4 Share premium account 12 28,903 341 368 Reserves 12 162,196 89,565 136,146 ---------------------- -------- -------- -------- -------- Equity shareholders' funds 14 192,970 89,910 136,518 ---------------------- -------- -------- -------- -------- Consolidated statement of recognised income and expense for the six months ended 30 April 2007 Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- Profit for the financial period/year 23,249 416 45,137 Net exchange adjustment offset in reserves net of tax 445 (187) (368) Cash flow hedge: net fair value gains net of tax 2,430 - - Movement on deferred tax relating to pension deficit (74) - (8) Actuarial gain recognised in the pension scheme - - 3 ---------------------------- -------- -------- -------- Total recognised income in period/year 26,050 229 44,764 ---------------------------- -------- -------- -------- Consolidated cash flow statement for the six months ended 30 April 2007 Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- Profit before income tax 24,225 949 60,986 Gain on the revaluation of investment properties (17,315) (868) (63,631) Depreciation 55 40 103 Goodwill impairment - 756 756 Finance income (684) (138) (572) Finance expense 10,347 10,802 29,565 Increase in inventories (4) (17) (35) (Decrease)/increase in receivables (3,248) (2,503) 702 Increase in payables 4,751 10,680 5,390 Decrease in provisions (5) (24) (48) Decrease in pension scheme liabilities (321) (65) (124) ---------------------------- -------- -------- -------- Cash generated from operations 17,801 19,612 33,092 Interest paid (10,207) (6,783) (33,509) Interest received 589 138 399 Tax paid (22) (21) (17) ---------------------------- -------- -------- -------- Cash flows from operating activities 8,161 12,946 (35) ---------------------------- -------- -------- -------- Investing activities Acquisition of subsidiaries (net of cash acquired) - (1,622) (4,111) Expenditure on investment and development properties (19,342) (11,510) (27,278) Net proceeds from disposal of investment properties - - 6,492 Net proceeds from disposal of assets held for resale - 5,070 5,070 Purchase of property, plant and equipment (109) (10) (17) Proceeds from sale of property, plant and equipment - - 40 Purchase of available for sale financial assets (2,812) (216) (857) ---------------------------- -------- -------- -------- Cash flows from investing activities (22,263) (8,288) (20,661) ---------------------------- -------- -------- -------- Financing activities Issue of share capital 29,736 47 75 Net proceeds from issue of new borrowings 9,146 - 237,000 Finance lease principal payments (2,559) (2,027) (4,873) Repayment of borrowings (9,276) (4,991) (213,738) ---------------------------- -------- -------- -------- Cash flows from financing activities 27,047 (6,971) 18,464 ---------------------------- -------- -------- -------- Net increase/(decrease) in cash and cash equivalents 12,945 (2,313) (2,232) Opening cash and cash equivalents 9,009 11,241 11,241 ---------------------------- -------- -------- -------- Closing cash and cash equivalents 21,954 8,928 9,009 ---------------------------- -------- -------- -------- Reconciliation of net cash flow to movement in net debt for the six months ended 30 April 2007 Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- Net increase/(decrease) in cash and cash equivalents in the period 12,945 (2,313) (2,232) Cash (outflow)/inflow from increase/(decrease) in debt financing (5,950) 3,987 (14,346) ---------------------------- -------- -------- -------- Movement in net debt in the period 6,995 1,674 (16,578) Net debt at start of period (280,656) (264,078) (264,078) ---------------------------- -------- -------- -------- Net debt at end of period (273,661) (262,404) (280,656) ---------------------------- -------- -------- -------- Notes to the interim report for the six months ended 30 April 2007 1 Accounting policies Basis of preparation The results for the half-year ended 30 April 2007 are unaudited and were approved by the Board on 9 July 2007. The financial information contained in this report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The full accounts of Safetstore Holdings Limited (prior to re-registration) for the year ended 31 October 2006, which received an unqualified report from the auditors, and did not contain a statement under S.237(2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies. These financial statements have been prepared on the basis of the accounting policies expected to apply for the financial year to 31 October 2007 applicable to companies under IFRS. The IFRS standards and IFRIC interpretations as adopted by the European Union that will be applicable at 31 October 2007, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these interim financial statements. Thus the accounting policies adopted in these interim financial statements may be subject to revision to reflect further IFRS standards, IFRIC interpretations and pronouncement issued between 10 July 2007 and publication of the annual IFRS financial statements for the year ending 31 October 2007. IAS 34 has not been adopted for the preparation of these interim statements. The financial statements have been prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated interim financial statements are disclosed within the Group's accounting policies as disclosed in the IFRS financial statements for the year ending 31 October 2007. 2 Segmental information Revenue represents amounts derived from the provision of self storage accommodation and related services which fall within the Group's ordinary activities after deduction of trade discounts and value added tax. The Group's net assets, revenue and profit before tax are attributable to one activity, the provision of self storage accommodation and related services. These all arise in the United Kingdom and France. The primary segment is based on geographic location and an analysis of revenues is shown below. Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- United Kingdom 28,552 24,848 52,932 France 6,056 5,275 11,381 ---------------------------- -------- -------- -------- 34,608 30,123 64,313 ---------------------------- -------- -------- -------- Notes to the interim report for the six months ended 30 April 2007 (continued) 3 Finance expense Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- Interest payable on bank loans and overdrafts (7,756) (3,782) (10,852) Amortisation of debt issue costs on bank loan (330) (540) (1,105) Interest payable on other loans (126) (4,281) (8,951) Interest payable on pension scheme - - (9) Interest on finance lease obligations (2,135) (2,199) (3,947) Change in fair value of interest rate swaps - - (203) Exceptional write off of debt issue costs on refinancing - - (4,498) ---------------------------- -------- -------- -------- Finance costs (10,347) (10,802) (29,565) ---------------------------- -------- -------- -------- 4 Income tax expense Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- Current tax - UK corporation tax at 30% 523 (31) (13) Deferred tax (1,499) (502) (15,836) ---------------------------- -------- -------- -------- (976) (533) (15,849) ---------------------------- -------- -------- -------- Notes to the interim report for the six months ended 30 April 2007 (continued) 5 Deferred tax Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- The amounts provided in the accounts are: Revaluation of investment properties and tax depreciation 101,508 82,938 101,614 Interest rate swap instrument 945 - - ---------------------------- -------- -------- -------- 102,453 82,938 101,614 Tax losses (8,028) (7,017) (9,559) Other - - (74) ---------------------------- -------- -------- -------- 94,425 75,921 91,981 ---------------------------- -------- -------- -------- Deferred tax assets/liabilities have been calculated using an effective rate of 28% (2006: 30%) which is the rate expected to be applied for the 2006/07 full year. 6 Dividends An interim dividend of 1.5 pence per ordinary share has been declared. The ex-dividend date will be 18 July 2007 and the record date 20 July 2007, with an intended payment date of 10 August 2007. The interim dividend has not been included as a liability at 30 April 2007. 7 Exceptional items Exceptional costs of Â£2,364,000 includes Â£2.0 million of professional fees as part of the IPO process which concluded in March 2007. Exceptional costs of Â£3,600,000 for the period ended 30 April 2006 resulted from an exceptional IFRS 2 charge in relation to shares issued to employees in November 2005 at below market value and related tax costs. Notes to the interim report for the six months ended 30 April 2007 (continued) 8 Earnings per ordinary share Six months ended Six months ended Year ended 30 April 2007 30 April 2006 31 October 2006 --------- ------- ------ ------ ------ ------- ------ ------ ------ ------ Earnings Shares Pence Earnings Shares Pence per Earnings Shares Pence Â£m million per share Â£m million share Â£m million per share --------- ------- ------ ------ ------ ------- ------ ------ ------ ------ Basic and Diluted 23.25 176.37 13.18 0.42 170.58 0.24 45.14 171.55 26.31 --------- ------- ------ ------ ------ ------- ------ ------ ------ ------ Adjustments: Gain on investment properties (17.31) (9.81) (0.87) (0.51) (63.63) (37.09) Exceptional items 2.36 1.33 3.60 2.11 6.25 3.64 Goodwill - - 0.76 0.45 0.76 0.44 Exceptional finance costs - - - - 4.50 2.62 Tax rate (6.58) (3.73) - - - - change Tax on adjustments 4.85 2.75 (0.82) (0.48) 13.75 8.02 --------- ------- ------ ------ ------ ------- ------ ------ ------ ------ Adjusted 6.57 176.37 3.72 3.09 170.58 1.81 6.77 171.55 3.95 --------- ------- ------ ------ ------ ------- ------ ------ ------ ------ Notes to the interim report for the six months ended 30 April 2007 (continued) 9 Property portfolio Investment property, development property and interest in leasehold properties Interest in Total Investment leasehold Investment Development property properties property property Â£'000 Â£'000 Â£'000 Â£'000 ----------------------- -------- -------- -------- -------- At 1 November 2006 469,690 49,601 519,291 7,921 Additions 5,337 9,142 14,479 14,806 Reclassifications 2,384 - 2,384 (1,702) Revaluation 19,874 (2,559) 17,315 - Exchange movements 661 - 661 - ----------------------- -------- -------- -------- -------- At 30 April 2007 497,946 56,184 554,130 21,025 ----------------------- -------- -------- -------- -------- 10 Valuations Revaluation on deemed Deemed cost Valuation cost Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- Freehold stores As at 1 November 2006 195,252 356,690 161,438 Movement in period 5,475 36,402 30,927 ---------------------------- -------- -------- -------- As at 30 April 2007 200,727 393,092 192,365 ---------------------------- -------- -------- -------- Leasehold stores As at 1 November 2006 47,702 113,000 65,298 Movement in period 2,907 (8,146) (11,053) ---------------------------- -------- -------- -------- As at 30 April 2007 50,609 104,854 54,245 ---------------------------- -------- -------- -------- All stores As at 1 November 2006 242,954 469,690 226,736 Movement in period 8,382 28,256 19,874 ---------------------------- -------- -------- -------- As at 30 April 2007 251,336 497,946 246,610 ---------------------------- -------- -------- -------- Notes to the interim report for the six months ended 30 April 2007 (continued) 10 Valuations (continued) The freehold and leasehold investment properties have been valued as at 30 April 2007 by external valuers, Cushman & Wakefield, Real Estate Consultants ('C&W'). The valuation has been carried out in accordance with the RICS Appraisal and Valuation Standards published by The Royal Institution of Chartered Surveyors ('the Red Book'). The valuation of each of the investment properties has been prepared on the basis of Market Value as a fully equipped operational entity, having regard to trading potential. The valuation has been provided for accounts purposes and as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure requirements of the Red Book, C&W have confirmed that: â€¢ The members of the RICS who have been the signatories to the valuations provided to the Company for the same purposes as this valuation have been so since October 2004. â€¢ C&W have continuously been carrying out this valuation for the same purposes as this valuation on behalf of the Company since October 2004. â€¢ C&W do not provide other significant professional or agency services to the Company. â€¢ In relation to the preceding financial year of C&W, the proportion of the total fees payable by the Company to the total fee income of the firm is less than 5%. Valuation method and assumptions The valuation of the operational self-storage facilities has been prepared having regard to trading potential. Cashflow projections have been prepared for all of the properties reflecting estimated absorption, revenue growth and expense inflation. A discounted cash flow method of valuation based on these cash flow projections has been used to arrive at Market Value for these properties. C&W have adopted different approaches for the valuation of the leasehold and freehold assets as follows: Freehold (UK and France) 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. Leasehold (UK) The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the discounted cash flow is extended to the expiry of the lease. Leasehold (France) In relation to the French commercial leases C&W have valued the cash flow projections in perpetuity due to the security of tenure arrangements in that market and the potential compensation arrangements in the event of the landlord wishing to take possession. The valuation treatment is therefore the same as for the freehold properties. Our capitalisation rates on these stores reflect the risk of the landlord terminating the lease arrangements. Notes to the interim report for the six months ended 30 April 2007 (continued) 11 Adjusted net assets per share Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 Analysis of net asset value Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- Net asset value 192,970 89,910 136,518 Redesignation of preferred share capital - 666 666 ---------------------------- -------- -------- -------- Basic and diluted net asset value 192,970 90,576 137,184 ---------------------------- -------- -------- -------- Adjustments: Deferred tax on revaluation 101,508 82,938 101,614 ---------------------------- -------- -------- -------- Adjusted net asset value 294,478 173,514 238,798 ---------------------------- -------- -------- -------- Basic net assets per share (pence) 103.1 53.1 79.5 Diluted net assets per share (pence) 103.1 53.1 79.5 Adjusted net assets per share (pence) 157.4 101.7 138.4 ---------------------------- -------- -------- -------- Shares in issue 187,083,333 23,960,250 25,875,000 Redesignation of preferred share capital - 146,625,000 146,625,000 ---------------------------- -------- -------- -------- Basic and diluted shares used for calculation 187,083,333 170,585,250 172,500,000 ---------------------------- -------- -------- -------- Net assets per share are shareholders' funds divided by the number of shares at the period end. Adjusted net assets per share excludes deferred tax on the revaluation uplift on freehold and leasehold properties. Notes to the interim report for the six months ended 30 April 2007 (continued) 12 Reserves Share premium account Reserves Total Â£'000 Â£'000 Â£'000 ------------------------- --------- --------- --------- At 1 November 2006 368 136,146 136,518 Profit for the period - 23,249 23,249 Change in value of interest rate swap - 3,375 3,375 Deferred tax on interest rate swap movement - (945) (945) Exchange difference on translation of foreign operations - 445 445 Deferred tax relating to pension deficit - (74) (74) Redesignation of preferred share capital 645 - 666 Bonus issue of shares (1,700) - - Issue of shares (net of issue costs) 29,590 - 29,736 ------------------------- --------- --------- --------- At 30 April 2007 28,903 162,196 192,970 ------------------------- --------- --------- --------- 13 Share capital Six months Year ended ended 31 30 April October 2007 2006 Â£'000 Â£'000 ------------------------- --------- --------- Authorised 300,000,000 (2006: 375,000) ordinary shares of 1p each 3,000 4 Called up, issued and fully paid 187,083,333 (2006: 375,000) ordinary shares of 1p each 1,871 4 ------------------------- --------- --------- Notes to the interim report for the six months ended 30 April 2007 (continued) 13 Share capital (continued) On 21 February 2007, a two for one bonus issue was made for the preferred ordinary shares and ordinary shares. This reduced the share premium account by Â£50,000 accordingly. On 14 March 2007, 2,150,000 preferred ordinary shares were re-designated as ordinary shares. A bonus issue was then made for 22 for one ordinary shares. This reduced the share premium account by Â£1,650,000 accordingly. 14 Consolidated statement of changes in equity ---------------------------- -------- -------- -------- Six months Six months Year ended ended ended 31 30 April 30 April October 2007 2006 2006 ---------------------------- -------- -------- -------- Â£'000 Â£'000 Â£'000 ---------------------------- -------- -------- -------- Opening equity shareholders' funds 136,518 89,634 89,634 Issue of shares 29,736 47 75 Share-based employee remuneration - - 2,045 Exchange differences on translation of foreign operations 445 (187) (368) Profit for the period 23,249 416 45,137 Change in value of interest rate swap 3,375 - - Movement in deferred tax relating to interest rate swap (945) - - Actuarial gain recognised in the pension scheme - - 3 Movement on deferred tax relating to pension deficit (74) - (8) Redesignation of preferred share capital 666 - - ---------------------------- -------- -------- -------- Closing equity shareholders' funds 192,970 89,910 136,518 ---------------------------- -------- -------- -------- Independent review report to Safestore Holdings plc Introduction We have been instructed by the Company to review the financial information for the six months ended 30 April 2007 which comprises the consolidated balance sheet as at 30 April 2007 and the related consolidated interim statements of income, cash flows and statement of recognised income and expense for the six months then ended and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out in Note 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 April 2007. PricewaterhouseCoopers LLP Chartered Accountants Birmingham 10 July 2007 Notes: (a) The maintenance and integrity of the Safestore Holdings Plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange

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