Store Performance
The table below shows the quarterly move-in and move-out activity over the year:
| Store move-ins | Total move-ins Year ended 31 March 2017 |
Total move-ins Year ended 31 March 2016 |
% | Total move-outs Year ended 31 March 2017 |
Total move-outs Year ended 31 March 2016 |
% |
|---|---|---|---|---|---|---|
| April to June | 19,509 | 20,112 | (3) | 15,625 | 15,595 | 0 |
| July to September | 20,702 | 21,763 | (5) | 22,239 | 22,898 | (3) |
| October to December | 15,409 | 16,643 | (7) | 17,679 | 18,600 | (5) |
| January to March | 16,095 | 16,920 | (5) | 14,468 | 15,450 | (6) |
| Total | 71,715 | 75,438 | (5) | 70,011 | 72,543 | (3) |
In the quarter to June, leading up to the referendum, we saw a modest year on year reduction in move-in activity of 3%. However, in the six months following the referendum, year on year move-ins were down on average 6% across the business with a fall in London of 8% and a fall of 5% in the regions. Since November, we also saw a further reduction in year on year move outs, with less churn in the business, resulting in a loss in occupancy for the December quarter in line with the previous year. Like-for-like revenue growth for the third quarter was 5%, a slower rate of growth than in the first half of the year, impacted by the loss of occupancy in the quarter being more front-ended coupled with slower average rate growth. In the fourth quarter, move-in activity began to stabilise and for March and April move-ins were up on the comparative months last year.
In all Big Yellow stores, the occupancy growth in the current year was 188,000 sq ft, against an increase of 185,000 sq ft in the prior year. The current year figure includes 76,000 sq ft of occupancy acquired with Nine Elms and Twickenham 2; the net occupancy growth in the year was therefore 112,000 sq ft.
| Quarterly net occupancy | Net sq ft Year ended 31 March 2017 |
Net sq ft Year ended 31 March 2016 |
Net move-ins Year ended 31 March 2017 |
Net move-ins Year ended 31 March 2016 |
|---|---|---|---|---|
| April to June | 110,000 | 146,000 | 3,884 | 4,460 |
| July to September | 24,000 | 54,000 | (1,537) | (1,183) |
| October to December | (137,000) | (138,000) | (2,350) | (1,998) |
| January to March | 115,000 | 123,000 | 1,547 | 1,420 |
| Total | 112,000 | 185,000 | 1,544 | 2,699 |
We had a solid quarter to June with an increase in occupancy of 110,000 sq ft, slightly down on the prior year, partially because of some activity being front-ended into March 2016 as a result of the stamp duty changes, coupled with uncertainty in the run-up to the referendum. The second quarter peaked in August and then many of our students and short term house movers vacate in September and October, leading to a net loss in occupied rooms and sq ft occupancy. In the final quarter we have seen a return to growth in net occupied rooms and increased occupancy in the stores by 115,000 sq ft.
Since the year end occupancy has grown by 54,000 sq ft to date (2016: quarter to date gain of 7,000 sq ft). As of 22 May 2017, our occupancy across the portfolio is 79.2%.
The 64 mature stores are 78.7% occupied compared to 77.2% at the same time last year. The 6 established stores have grown in occupancy from 71.4% to 77.6%. The three developing stores added 40,000 sq ft of occupancy in the year to reach closing occupancy of 65.8%. Overall store occupancy has increased in the year from 75.3% to 78.0%. On a like-for-like basis, closing occupancy was 78.1%, an increase of 2.8 percentage points.
All of the stores open at the year end are trading profitably at the EBITDA level. The table below shows the average key metrics across the store portfolio for the year ended 31 March 2017:
| Mature stores |
Established stores |
Developing stores |
All stores |
|
|---|---|---|---|---|
| Store capacity | 61,800 | 67,700 | 63,300 | 62,300 |
| Sq ft occupied per store at 31 March 2017 | 48,600 | 52,500 | 41,700 | 48,650 |
| % occupancy | 78.7% | 77.6% | 65.8% | 78.0% |
| Revenue per store (£000) | 1,495 | 1,477 | 929 | 1,470 |
| EBITDA per store (£000) | 1,025 | 1,058 | 503 | 1,006 |
| EBITDA margin | 68.6% | 71.7% | 54.2% | 68.5% |
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”. We also use our Price Match if the competitors’ product is comparable. Pricing is dynamically generated and takes into account room availability and local competition.
In the year ended 31 March 2017, the average growth in the net achieved rent per sq ft was 1.7% compared to 2.5% in the prior year. We remain focussed on achieving our next occupancy target of 85% across the portfolio, and to that end we took the decision to be more aggressive in our promotions over the winter months, resulting in a slight reduction in average rate over the second half of the year. This is now embedded in the business, with rate having stabilised, and as occupancy grows from this level we would expect to see a return to like-for-like rate growth.
For stores at a higher level of occupancy, our pricing model reduces promotions and increases asking prices where individual units are in scarce supply. This lowering of promotions, coupled with price increases to existing and new customers, leads to an increase in achieved net rents. Rental growth can also be driven through sub-dividing larger rooms into smaller rooms, which yield a higher net rent per sq ft.
The table below shows the growth in net rent per sq ft for the portfolio over the period (the table below excludes Cambridge which opened in January 2016 and Nine Elms and Twickenham 2, which were acquired in April 2016).
| Average occupancy in the year |
Number of stores |
Net rent per sq ft growth over the year |
|---|---|---|
| 0 to 75% | 22 | (1.0%) |
| 75 to 80% | 20 | 1.7% |
| 80 to 85% | 20 | 2.0% |
| Above 85% | 8 | 2.1% |
Lock and Leave acquisition
In April 2016, we acquired the Lock and Leave portfolio. Big Yellow acquired two stores in London, at Nine Elms (65,000 sq ft MLA freehold) and Twickenham (22,000 sq ft MLA, 19 years unexpired leasehold), for £13.5 million and £1.1 million respectively, totalling £14.6 million. The Nine Elms store sits neatly between our strong performing Kennington and Battersea stores, and our aim will be to drive revenue and cash flow through yield management. The Twickenham store is adjacent to our existing highly occupied freehold 73,000 sq ft store. The freehold stores in Canterbury (30,000 sq ft MLA) and West Molesey (35,000 sq ft MLA) were acquired by Armadillo for £6.4 million, and again we expect to drive operational performance from these stores under our management.
Armadillo Self Storage
The Group has a 20% investment in Armadillo Self Storage, with the balance of 80% held by an Australian consortium. During the year, Armadillo acquired two stores from Lock and Leave, in Canterbury and West Molesey, with a combined capacity of 65,000 sq ft.
In April 2017 we acquired a further three stores into the Armadillo platform in Exeter, Plymouth and Torquay, for £4.75 million. This takes the Armadillo platform to 19 stores and 830,000 sq ft of MLA. As with the other existing store acquisitions, the intention will be to upgrade and reconfigure the stores through additional investment to drive cash flow growth. In the year to 31 March 2017, £1.3 million of capital expenditure has been invested in the Armadillo stores.
Armadillo is a lower-frills brand, with largely freehold conversions of existing buildings. They are located in towns where we would not typically locate a Big Yellow, and have an average capacity of 44,000 sq ft (lower than the 62,000 sq ft average for Big Yellow stores). Armadillo provides a number of operational advantages to the Group, such as a wider platform to sell to national accounts, more opportunities for staff promotion, and more efficient use of the Company’s marketing and central overhead costs. The Group continues to look for opportunities to add to the Armadillo platform.
Development pipeline
We have commenced construction on our Guildford Central store, which we anticipate opening in March 2018 and on the extension to our existing store in Wandsworth, which we anticipate completing in April 2018. We own a further six development sites for which planning is to be negotiated, including an existing store where planning is being sought to extend and redevelop. The status of the Group’s development pipeline is summarised in the table overleaf.
| Site | Location | Status | Anticipated capacity | |||
|---|---|---|---|---|---|---|
| Guildford | Prime location in centre of Guildford on Woodbridge Meadows | Construction commenced, store due to open in March 2018, cost to complete of £4.4 million. | 56,000 sq ft | |||
| Wandsworth, London | Extension to existing 47,000 sq ft store | Construction commenced, extension due to open in April 2018, cost to complete of £4.2 million. | Additional 25,000 sq ft | |||
| Manchester | Prime location on Water Street in central Manchester | Planning application to be submitted in June 2017. | 60,000 to 65,000 sq ft | |||
| Camberwell, London | Located in prominent location on Southampton Way | Planning application refused. Appeal submitted with a decision due by December 2017. | 55,000 to 60,000 sq ft | |||
| Kings Cross, London | Prominent location on York Way | Planning application currently being prepared to be submitted this year. | 100,000 to 110,000 sq ft | |||
| Battersea, London | Prominent location on junction of Lombard Road and York Road (South Circular) | Potential redevelopment to increase size of existing 34,000 sq ft Big Yellow store. Redevelopment of adjoining retail into a mixed use led residential scheme. Ongoing detailed planning discussions with the Borough Council. | Up to an additional 40,000 sq ft | |||
| Newcastle | Prime location on Scotswood Road | Negotiations ongoing with existing long leasehold tenant to obtain vacant possession. | 50,000 to 60,000 sq ft | |||
| Wapping, London | Prominent location on The Highway | Site recently acquired. We will convert part into self storage and collect income from the other tenancies with a view to achieving a more comprehensive self storage centre in the longer term. | 50,000 sq ft to 90,000 sq ft |
The capital expenditure committed for the financial year ended 31 March 2018 is approximately £20 million, which includes the acquisition of Wapping, the construction of Guildford Central and the extension to Wandsworth.
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.