• •Our Strategy and Business Model
• •Operational and Marketing Review
• •Portfolio Summary
• •Our Stores
• •Store Performance
• •Financial Review
• •Risks and Uncertainties
• •Corporate Social Responsibility Report

Operational and Marketing Review

For unprompted brand awareness, our recall in London is 56%, five times that of our nearest competitor and for the rest of the UK it is 21%, ten times that of our nearest competitor.

Overview

We now have a portfolio of 70 Big Yellow stores and sites of which 67 are currently open. In addition, we operate from 10 Armadillo Self Storage centres which are located in northern cities. We have committed to start construction at Enfield, which will open in April 2015. Our site at Guildford Central has planning consent, and planning negotiations are ongoing at our site in central Manchester.

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. Additionally, in our core markets in London and the South East, very high land values will render the opportunity for creating new self storage centres difficult. We believe that we are in a relatively strong position with our freehold property assets and with the proven ability to access funding when the opportunity presents itself.

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 three to five years to achieve 70% to 80% plus occupancy in the current economic 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 68 sq ft in line with the prior year.

The store is open seven days a week and is initially run by three staff, with a part time member of staff added once the store occupancy justifies the need for the extra administrative and sales workload.

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 4.8 out of 5. At the start of the year we launched a new customer-experience programme which combines the feedback from mystery shopping and customer reviews into the reinforcement of customer focus in our store operations.

We have a team of Area Managers in place who have on average worked for Big Yellow for ten years. They develop and support the stores to drive the growth of the business.

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 consumer-facing branded business it is paramount to maintain the quality of our estate and customer offering. We therefore continue to invest in 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 our rolling programme of store makeovers, which typically take place every four years, at a cost of approximately £15,000 to £20,000 per store.

Demand

Of the customers moving into our stores in the last year, surveys undertaken indicate approximately 50% are linked to the housing market, either customers renting storage space whilst using the rental sector or those 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 29% 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 possessions, are getting married or divorced, are students who need storage during the holidays, or homeowners developing into their lofts or basements. The balance of 10% of our customer demand during the year came from businesses.

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. In smaller towns where we do not have representation, we have negotiated sub-contract arrangements with other operators who meet certain operating standards.

Business customers typically stay longer than domestic customers, and also on average occupy larger rooms. Whilst only representing 10% of new customers during the year, businesses represent 18% of our overall customer numbers, occupying 33% of the space in our stores. The average room size occupied by business customers is 125 sq ft, against 55 sq ft for domestic customers. This compares with the SSA Survey result for the industry as a whole which had 60% of space occupied by domestic customers and 40% of space by businesses, and furthermore it noted an increase in demand for self storage coming from domestic customers. We would expect to have a higher proportion of domestic customers given our focus on London and other large metropolitan cities.

We have seen solid demand from business customers, as they seek a cost effective, flexible solution to their storage requirements, preferring self storage to the commitment of a long lease. We believe there is an opportunity to grow business occupancy and national accounts in the coming year. We have improved our business offer further, we have increased the resource of our national accounts team, and we are increasing our marketing to that space to drive business prospects.

The net rent per sq ft for domestic customers is approximately 40% higher than for business customers, reflecting the smaller average unit size occupied for domestic customers.

Marketing and eCommerce

Our marketing strategy continues to focus on driving customer response through multiple digital platforms whilst keeping customer service at the heart of the business.

Our YouGov surveys, which we have commissioned every year for the last eight years, allow us to monitor our brand awareness. Our most recent survey conducted in April 2014, used a statistically robust sample size of 1,523 respondents in London and 2,360 for the rest of the UK. The survey showed our prompted awareness to be at 80% in London and 41% for the rest of the UK, both approximately three times higher than our nearest competitor.

For unprompted brand awareness, our recall in London is 56%, five times that of our nearest competitor and for the rest of the UK it is 21%, ten times that of our nearest competitor. These surveys continue to prove we are the UK’s brand leader in self storage (source: YouGov, April 2014).

Online

The website, whether accessed by desktop, tablet or smartphone receives the largest share of prospects, accounting for 86% of all sales leads across the year ended 31 March 2014, where details are first recorded on our operating system. Telephone is the first point of contact for 9% of prospects and walk-in enquiries, where we have had no previous contact with a prospect, represent 5%.

We have by far the largest online market share of web visits to self storage company websites in the UK. Across the year ended 31 March 2014, our online market share of web visits ranged from 35% to 40%. Our nearest competitor ranged from 13% to 16% online market share for the same period (source: Experian Hitwise 37 largest UK operators).

We continually monitor and improve the user journey through the website to make the experience as easy as possible. Of all web visits, whether to the Big Yellow mobile or desktop websites, 42% come from tablets and smartphones. Specifically, smartphones accounted for 26% of web visits in April 2014, up from 20% in April 2013.

Whether it is through desktop, tablet or mobile usage, our customers can enjoy a seamless experience whichever digital route they choose to interact with us. We are continually developing useful online tools, like check in online, detailed online FAQs, video guides and online chat. These save our customers time and provide easy to find answers and information about self storage at Big Yellow.

Online customer reviews

Consistent with our strategy of putting the customer at the heart of our business, our online customer reviews generate real-time feedback from customers as well as providing positive word of mouth referral to our web visitors. Through our ‘Big Impressions’ customer feedback programme, we ask our new customers to rate our product and service and with the users permission we then publish these independent reviews on the website. There are currently nearly 10,000 reviews published.

The Big Impressions programme also generates customer feedback on their experience when they move out of a Big Yellow store and also from those prospects who decided not to store with us. In addition, this programme reinforces best practice in customer service at our stores where customer reviews and mystery shop results are transparently accessible at all levels.

In addition, we also gain real-time insight from customers who submit reviews to a third party customer review site. These reviews are currently averaging 9.3 out of 10.

We also regularly monitor Google reviews and mentions of Big Yellow within the social mediums of Twitter, online forums and blogs. We use this insight to continually improve our service offering.

Driving online traffic

Search engines are the most important acquisition tool for us, accounting for the majority of all traffic to the website. We continue to invest in search engine optimisation (“SEO”) techniques both on and off the site. This helps us to maintain our number one positions for the most popular and most searched for terms such as “storage” and “self storage” in the organic listings on Google.

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 targeted to our core audience groups. This activity performs both a direct response and branding role.

Efficiencies in online spend are continuing into the year ending 31 March 2015, ensuring the return on investment is maximised from all of 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. We are very active on Twitter which also allows us to join relevant conversations around self storage and related trends. With over 23,000 ‘likes’, our Facebook channel allows us to keep the brand front of mind and provides an avenue for customer feedback. The Big Yellow YouTube 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. Our recently revamped online blog is updated regularly with tips and advice for homeowners and businesses as well as summaries of our charitable and CSR initiatives.

PR

We have used PR stories in the year to help raise the awareness of Big Yellow and the benefits of self storage to different audience groups. These have focussed on the flexible benefits of using self storage for small businesses and a more light-hearted look at the concept and trends of “man caves” in the home. These stories have generated both national and regional media coverage online and offline and are supported by radio interviews which allow us to talk about the benefits of Big Yellow.

Budget

During the year the Group spent approximately £2.95 million on marketing (4.1% of revenue), a slight increase on the previous year. We have increased the budget for the year ahead to £3.1 million with a focus on driving our revenue through delivering more prospects to the website.

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• Overview
• Operations
• Demand
• Marketing and eCommerce