Store Performance
We had a very strong quarter to June with good net move-in growth. The second quarter peaked in August and then we saw many of our students and short term house moves starting to vacate in September, leading to a relatively flat quarter.
The third quarter saw student and house move vacations leading to a significant net loss in units occupied and sq ft. In the final quarter we have seen a return to growth in net occupied rooms and increased occupancy in the wholly owned stores by 73,000 sq ft. The table below illustrates the move-in performance in the year.
| Wholly owned store move-ins | Year ended 31 March 2014 |
Year ended 31 March 2013 |
% | Net move-ins 31 March 2014 |
|---|---|---|---|---|
| April to June | 14,752 | 13,844 | 7% | 3,609 |
| July to September | 16,129 | 14,973 | 8% | (168) |
| October to December | 12,247 | 10,738 | 14% | (1,680) |
| January to March | 12,873 | 11,047 | 17% | 962 |
| Total | 56,001 | 50,602 | 11% | 2,723 |
Store revenue for the year grew by 3.5%, feeding through to a 15% improvement in adjusted profit and a 9% increase in operating cash flow.
In all Big Yellow stores, the occupancy growth in the current year was 200,000 sq ft, against an increase of 174,000 sq ft in the prior year. This growth across the 54 wholly owned and 12 stores in the Partnership represents an average of 3,030 sq ft per store (2013: 2,636 sq ft per store).
| Store occupancy summary | Occupancy 31 March 2014 000 sq ft |
Occupancy 31 March 2013 000 sq ft |
Growth for year to 31 March 2014 000 sq ft |
Growth for year to 31 March 2013 000 sq ft |
|---|---|---|---|---|
| 32 established stores | 1,452 | 1,413 | 39 | (29) |
| 22 lease-up stores | 936 | 810 | 126 | 119 |
| Total – 54 wholly owned stores | 2,388 | 2,223 | 165 | 90 |
| 12 Partnership lease-up stores | 444 | 409 | 35 | 84 |
| Total – all 66 stores | 2,832 | 2,632 | 200 | 174 |
The 54 wholly owned stores had a net gain in occupancy of 165,000 sq ft, representing an average of 3,056 sq ft per store. This compares to an overall gain in the wholly owned stores of 90,000 sq ft in the year to 31 March 2013. The 12 stores in the Partnership increased their occupancy by 35,000 sq ft, representing average growth of 2,917 sq ft per store.
The 32 established stores are 75.2% occupied compared to 72.8% at the same time last year. The 22 lease-up stores have grown in occupancy from 54.3% to 62.8%, and overall store occupancy has increased in the year from 64.8% to 69.8%.
All 54 wholly owned stores, and all 12 stores within Big Yellow Limited Partnership, open at the year end are trading profitably at the EBITDA level.
Pricing and rental yield
We have continued our sales promotion offer throughout the year of “50% off for up to your first 8 weeks storage”. Our Price Promise is also used to match competitors’ prices if the product is comparable. Pricing is dynamically generated and takes into account customer demand and local competition.
In the year ended 31 March 2014, net rent in the wholly owned stores grew by 6.1%. This has been a combination of reducing discounts to new customers and retaining price increases from existing customers; overall scheduled rents remained broadly unchanged. This growth has recouped the majority of the fall in net rent suffered following the introduction of VAT. We would expect rental growth to be lower in the forthcoming financial year given our focus remains on growing occupancy.
As the stores lease-up, our pricing model reduces the level of promotional discounts offered in individual stores. This squeezing out of promotions leads to an increase in net achieved rents. The table below illustrates this, showing the growth in net rent per sq ft for the portfolio over the year.
| Average occupancy in the year | Net rent per sq ft growth over the year |
|---|---|
| 0 to 60% | 4.4% |
| 60 to 70% | 4.7% |
| 70 to 80% | 6.4% |
| Above 80% | 8.2% |
The table below shows the average key metrics across the store portfolio for the year ended 31 March 2014:
| 32 Established stores |
22 Lease-up stores |
|
|---|---|---|
| Store capacity | 60,312 | 67,773 |
| Sq ft occupied per store at 31 March 2014 | 45,375 | 42,545 |
| % occupancy | 75.2% | 62.8% |
| Revenue per store | £1,363,000 | £1,231,000 |
| EBITDA per store | £893,000 | £777,000 |
| EBITDA margin | 65.5% | 63.1% |
Like-for-like revenue per available square foot (“REVPAF") across the wholly owned portfolio increased from the last year by 4% to £20.64 (2013: £19.94).
Armadillo
During the year we continued to manage the ten freehold stores branded as Armadillo Self Storage alongside our Big Yellow stores using the same operating model.
The portfolio forms part of our operating platform, and in order to safeguard our management fee income and to receive an earnings enhancing dividend yield, we acquired the portfolio in April 2014 in a joint venture with an Australian consortium for a total price of £19.75 million. The Group has invested £3.6 million representing an initial stake of 38% in the business. Our joint venture partners have a right to increase their share from 62% to 80%, which expires in July 2014.
We have agreed a new five year management contract. The portfolio is currently 60% occupied and our aim is to maximise occupancy and revenue over the coming years.
The first year dividend yield is estimated at 6.7% which together, with our management fees of £400,000 per annum, will give a cash return of approximately 17% on the initial investment.
Development pipeline
There are two 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 | |||
|---|---|---|---|---|---|---|
| Enfield, North London |
Prominent site on the A10 Great Cambridge Road, London |
Construction due to start shortly, planned opening April 2015 | 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 |
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.