Chairman’s Statement
As the Big Yellow portfolio is approaching 80%, we remain relentlessly focussed on occupancy gain at this stage, but in addition we have intensified our efforts to develop new capacity.
Growth / Of Revenue and Earnings
Big Yellow Group PLC, the UK’s brand leader in self storage, is pleased to announce its results for the six months ended 30 September 2015.
In this seasonally stronger trading period like-for-like closing Group occupancy is up 4.1 percentage points to 77.3% compared to 73.2% at 31 March 2015. Occupancy growth over the six month period was 200,000 sq ft (2014: 288,000 sq ft). The growth of 4.1 percentage points is at the top end of the guidance given in May.
The growth in the closing net rent per sq ft on a like-for-like basis was 3.5% compared to 30 September last year. The like-for-like revenue growth in the Group was 9% compared to the same period last year, this excludes the 12 Partnership stores, existing store acquisitions made last year and new store openings in 2015. Given that our central overhead and operating expense is largely embedded in the business, this revenue growth has dropped through into a 16% increase in adjusted earnings per share and in the interim dividend.
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
Revenue for the period was £50.2 million (2014: £39.9 million), an increase of 26%, which includes the new and acquired stores. Cash inflows from operating activities (after finance costs) increased by £7.9 million (44%) to £25.7 million for the year (2014: £17.8 million).
The Group made an adjusted profit before tax in the period of £23.9 million, up 30% from £18.4 million for the same period last year (see note 6). Diluted EPRA earnings per share were 15.1 pence (2014: 13.0 pence), an increase of 16%. The Group’s statutory profit before tax for the period was £59.6 million, an increase of 69% from £35.3 million for the same period last year. The growth in profit benefited from a higher revaluation gain in the period.
The Group has net bank debt of £276.7 million at 30 September 2015 (31 March 2015: £277.1 million). This represents approximately 26% (31 March 2015: 27%) of the Group’s gross property assets totalling £1,069.5 million (31 March 2015: £1,022.8 million) and 33% (31 March 2015: 35%) of the adjusted net assets of £847.0 million (31 March 2015: £801.4 million).
The Group’s income cover for the period (expressed as the ratio of cash generated from operations against interest paid) was 6.2 times (2014: 4.5 times).
Investment in new capacity
Given the competition for land in central London we are very pleased to have acquired two prime sites at Kings Cross and Camberwell. Kings Cross is a one acre site on which we intend to develop a new build store of 85,000 to 90,000 sq ft, subject to planning. Camberwell is in Zone 2 to the south of London Bridge, and we intend to develop a new build store of 55,000 to 60,000 sq ft, subject to planning.
These sites, together with Enfield, (which opened in April 2015), Cambridge (opening in January 2016), Guildford Central (opening in April 2017), extensions at our existing Battersea and Wandsworth stores, and development sites in Newcastle and Manchester (the last four all subject to planning) will provide in total approximately 500,000 to 520,000 sq ft of additional capacity.
At 30 September, the future cost of the current pipeline of eight development sites and extensions, six of which are subject to planning, is provisionally estimated to be approximately £81 million. This excludes any net proceeds that may be received on the redevelopment of our Battersea store and adjoining retail units into a mixed use scheme of residential, retail and self storage.
These acquisitions are being funded through our bank facilities. There is interim rental income on the sites while we pursue planning which will in part mitigate the increased interest cost. We do expect our interest cover to come down slightly, but on a proforma basis, based on today’s average cost of debt, it will remain greater than 5.5 times for the current year and certainly comfortably ahead of our stated minimum interest cover level of 5 times.
Dividends
The Group’s dividend policy is to distribute 80% of adjusted earnings per share. The interim dividend declared is 12.1 pence per share. This has all been declared as Property Income Dividend (“PID”). The interim dividend declared represents an increase of 16% from 10.4 pence per share for the same period last year.
Outlook
As we have stated previously, we make no attempt to judge economic or asset cycles. We believe Big Yellow is well placed to withstand future headwinds, given the security of our capital structure and market leading brand. As the Big Yellow portfolio is approaching 80%, we remain relentlessly focussed on occupancy gain at this stage, but in addition we have intensified our efforts to develop new capacity.
Our principal capital allocation and property strategy has always been to target London and the South East where there is population growth, scarcity of available development land, increasing pressure for housing, and densification. This results in a compelling investment proposition, particularly in London and the South East, which represents 80% of our business by revenue. In the longer term, as awareness grows and these factors intensify, demand from business and domestic customers in our big cities is likely to outstrip the available supply of self storage.
Big Yellow is well positioned to enjoy both the benefits of scarcity and exploit any new opportunities.
Nicholas Vetch
Executive Chairman
16 November 2015
Demand from business and domestic customers in our big cities is likely to outstrip the available supply of self storage.