Chairman’s Statement
Big Yellow is well placed to benefit from growing awareness and improving self storage demand given our market leading brand and operating platform with a focus on London, the South East and large metropolitan cities where barriers to entry are at their highest.
Revenue and earnings Growth
Big Yellow Group PLC the UK’s brand leader in self storage, is pleased to announce its results for the six months and the quarter ended 30 September 2014.
In this seasonally stronger trading period, coupled with the improving demand environment for our product, we are pleased to have delivered a strong performance in the first half. Overall like-for-like closing Group occupancy is up 5.4 percentage points to 75.2% compared to 69.8% at 31 March 2014. The growth in the average net achieved rent per sq ft was 4.5% compared to the same period last year, resulting in period-on-period revenue growth of 11%. Given that our central overhead and operating expense is largely embedded in the business, this revenue growth has dropped through into a 29% increase in adjusted earnings per share and a 30% increase in the interim dividend.
Occupancy growth over the six month period across all our stores was 288,000 sq ft (2013: 232,000 sq ft). Wholly owned store occupancy growth in the six month period was 214,000 sq ft (2013: 188,000 sq ft). The 32 established store portfolio increased in occupancy from 75.2% at the end of March 2014 to 79.8% in September 2014. The 24 lease-up stores grew in occupancy from 62.8% in March 2014 to 68.0% in September 2014.
The 12 stores in Big Yellow Limited Partnership increased in occupancy to 69.2% (March 2014: 59.8%), growth of 74,000 sq ft from March 2014.
We believe Big Yellow is well placed to benefit from growing awareness and improving self storage demand given our market leading brand and operating platform with a focus on London, the South East and large metropolitan cities where barriers to entry are at their highest.
Financial results
Store revenue for the period was £39.1 million, up 12% from £35.1 million in the comparable period last year, and up 10% compared to the previous half year period (six months to 31 March 2014: £35.6 million).
Total store revenue for the second quarter increased by 11% to £20.5 million from £18.4 million for the same quarter last year and was up 10% from the quarter to June 2014 (£18.6 million).
Store EBITDA for the period was £26.2 million, up 15% from £22.9 million for the same period last year (see Portfolio Summary). The overall store margin was 67.0%, up from 65.2% for the same period last year.
The Group made an adjusted profit before tax in the period of £18.4 million, up 29% from £14.2 million for the same period last year (see note 6). Diluted EPRA earnings per share were 13.0 pence (2013: 10.1 pence), an increase of 29%. Adjusted net assets per share are 461.9 pence, an increase of 6% from 436.3 pence at 30 September 2013 and an increase of 3% from 446.5 pence at 31 March 2014. The Group’s statutory profit before tax for the period is £35.3 million, an increase of 2% from £34.5 million for the same period last year.
Investment in new capacity
In July we acquired a freehold store in Oxford from Fort Box Self Storage for £4.1 million. The store has been rebranded as a Big Yellow, and has a current lettable area of 35,000 sq ft, with expansion space for a further 10,000 sq ft. Our existing 33,000 sq ft Oxford store is over 90% occupied and this acquisition will allow us to drive growth in occupancy and rental yield from our operating platform.
We have exchanged contracts to acquire the freehold of a former Royal Mail depot in Cambridge adjacent to the Cambridge Retail Park, Newmarket Road, which we intend to refurbish and convert into a 55,000 sq ft self storage centre, opening in late 2015. We expect the total investment including refurbishment to be approximately £9.3 million.
This is our first new site acquisition for construction in seven years. The acquisition is testament to our confidence in both Cambridge and our business model. It should be noted, however, that the opportunity took 14 years to present itself, despite continual searching over that time. Notwithstanding our desire to grow this business it will remain difficult to procure new sites of sufficient quality. That said, further opportunities will arise and we will exploit them.
In April 2014 we acquired the Armadillo portfolio in a joint venture with an Australian consortium for £19.75 million. Our equity invested in this joint venture is £1.9 million, representing a 20% stake. The business has traded ahead of expectations since April, and in October we received an interim dividend of £89,000, representing a 4.6% yield for the period.
Refinancing
We were pleased to complete the refinancing of our £145 million bank facility during the period with Lloyds and HSBC, extending the maturity to August 2019. We have also further diversified our lending pool by bringing in another insurance company, M&G Investments, who have provided us with a seven year £70 million facility which will be drawn in June 2015. These committed facilities have increased the average unexpired term of our debt facilities to 7.7 years, and reduced our average cost of debt.
The ratio of adjusted Group EBITDA to net interest expense in the period was approximately 4.6 times. Following the refinancing and the growth in operating cash flow over the period, we have achieved our target of greater than five times cover on an annualised basis at 30 September.
Dividends
The Group’s dividend policy is to distribute 80% of full year adjusted earnings per share. The interim dividend declared is 10.4 pence per share. This has all been declared as Property Income Dividend (“PID”). The interim dividend declared represents an increase of 30% from 8 pence per share for the same period last year.
Outlook
Since the onset of the financial crisis 7 years ago, we have been very focused on making improvements to our capital structure, with particular focus on the liability side of the balance sheet. We now have a sensible level of indebtedness, with a spread of credit maturities from a range of borrowing sources, hedged to accommodate both inflationary and deflationary pressures.
The many problems and challenges, economic and political, are well documented, however we are confident that we have a business model and capital structure that allows us to meet them.
Furthermore, the work on the brand, customer service, systems and operational strategy undertaken over the last few years, leaves us primed to take advantage of any improvement in self storage demand. The core task of filling the stores is both achievable and within sight and we believe will deliver attractive growth in earnings and dividend.
Nicholas Vetch
Executive Chairman
18 November 2014
The core task of filling the stores is both achievable and within sight and we believe will deliver attractive growth in earnings and dividend.