TIDMSAFE
RNS Number : 9144Z
Safestore Holdings plc
17 January 2024
17 January 2024
Safestore Holdings plc
("Safestore", "the Company" or "the Group")
Results for the year ended 31 October 2023
A year of significant strategic progress
Key measures
Key Measures - Total Year ended Year ended Change Change
31 October 31 October CER(1)
2023 2022
--------------------------------- ------------ ------------ ------- --------
Group
Revenue (GBP'm) 224.2 212.5 5.5% 4.8%
Underlying EBITDA(2) (GBP'm) 142.2 135.1 5.3% 4.5%
Closing Occupancy (let sq
ft- million) 6.231 6.317 -1.4% n/a
Closing Occupancy (% of MLA) 77.0% 82.1% -5.1% n/a
Maximum Lettable Area (MLA)(4) 8.09 7.70 5.1% n/a
Average Storage Rate (GBP) 30.26 29.25 3.5% 2.7%
Adjusted Diluted EPRA EPS(6)
(pence) 47.9 47.5 0.8% n/a
Free Cash Flow (GBP'm) 89.2 101.4 -12.0% n/a
EPRA Basic NTA per Share(13)
(pence) 952 908 4.8% n/a
REVPAF (GBP)(10) 27.70 27.59 0.4% -0.2%
--------------------------------- ------------ ------------ ------- --------
Key Measures - Like-For-Like(8) Year ended Year ended Change Change
31 October 31 October CER(1)
2023 2022
--------------------------------- ------------ ------------ ------- --------
Group
Revenue (GBP'm) 209.9 205.3 2.2% 1.7%
Underlying EBITDA(2) (GBP'm) 136.1 131.7 3.3% 2.8%
Closing Occupancy (let sq
ft- million) 5.583 5.793 -3.6% n/a
Closing Occupancy (% of MLA) 79.6% 82.8% -3.2% n/a
Average Occupancy (let sq
ft- million) 5.586 5.779 -3.3% n/a
Maximum Lettable Area (MLA)(4) 7.02 7.00 0.3% n/a
Average Storage Rate (GBP) 31.57 29.89 5.6% 5.0%
REVPAF (GBP)(10) 29.91 29.34 1.9% 1.4%
--------------------------------- ------------ ------------ ------- --------
Statutory Metrics Year ended Year ended Change Change
31 October 31 October CER
2023 2022
--------------------------------- ------------ ------------ ------- --------
Operating Profit(9) (GBP'm) 230.4 514.5 -55.2% n/a
Profit Before Tax (GBP'm) 207.8 498.8 -58.3% n/a
Diluted Earnings per Share
(pence) 91.8 212.4 -56.8% n/a
Dividends per Share (pence) 30.1 29.8 1.0% n/a
Cash Inflow from Operating
Activities (GBP'm) 98.0 109.8 -10.7% n/a
Basic Net Assets per Share
(pence) 888 848 4.7% n/a
--------------------------------- ------------ ------------ ------- --------
Highlights
Financial Performance
-- Group revenue for the year up 5.5% (up 4.8% in CER(1) )
-- Like-for-like(8) Group revenue for the year in CER(1) up 1.7%
-- Underlying EBITDA(2) up 4.5% in CER(1) which, combined with a
reduced gain on investment properties of GBP93.8 million (FY2022:
GBP381.6 million), resulted in statutory operating profit(9) of
GBP230.4 million (FY2022: GBP514.5 million)
-- Strong cost control with like-for-like costs increasing 0.3% on a CER basis
-- Adjusted Diluted EPRA Earnings per Share(6) up 0.8% at 47.9 pence (FY2022: 47.5 pence)
-- 1% increase in the dividend for the year to 30.1 pence
(FY2022: 29.8 pence) in line with our progressive policy
Strategic Progress
-- New stores or acquisitions adding c. 500,000 sq ft of new
MLA(4) across thirteen projects in the financial year (five in the
UK, six in Spain and two in Netherlands)
-- Total Group development and extension pipeline increased to
30 projects and 1.5 million sq ft representing c. 18% of the
existing portfolio providing GBP25-GBP30 million of future EBITDA
at stabilisation
-- Purchases of the freehold interests of two stores in Barcelona and West Birmingham
-- Lease extensions completed for four stores in Edinburgh,
London- Charlton, London- Slough and Burnley
-- Successful integration of Benelux acquisition
-- Entry into German market via a new Joint Venture(15) ("JV")
with Carlyle which has acquired the seven-store myStorage business
with 326,000 sq ft of MLA(4)
Strong and Flexible Balance Sheet
-- 9.3% increase in property valuation (including investment properties under construction)
-- 4.8% increase in EPRA basic NTA per share to GBP9.52 (FY2022: GBP9.08)
-- New ESG linked Revolving Credit Facilities (RCFs) completed
in November 2022 with an increased GBP400 million unsecured
multi-currency four-year facility (with two, one-year extension
options, the first of which has been completed recently). Margins
remain at 1.25% in line with previous RCFs and all facilities,
including private placement notes, are unsecured
-- Approximately GBP200 million of headroom under the RCF plus
GBP100 million accordion facility
-- 73% of debt at fixed interest rates with tenors from 2024 to 2033
-- Group loan-to-value ratio ("LTV"(11) ) at 25.4%, calculated
on net debt (31 October 2022: 23.6%) and interest cover ratio
("ICR"(12) ) at 6.7x (31 October 2022: 10.4x)
Frederic Vecchioli, Chief Executive Officer commented:
"I am pleased that 2023 has been a resilient year of significant
strategic and operational progress building on two years of
out-performance in which we delivered total like-for-like(8)
revenue growth of over 30.3% and Adjusted Diluted EPRA EPS growth
of 57.3% .
The Group's industry leading REVPAF(10) grew by 1.9% on a
like-for-like(8) basis whilst Total Group revenue grew by 5.5%
reflecting recently added new stores and the annualisation effect
of our acquisition of the Benelux business.
We have made excellent strategic progress during the year having
opened, acquired, or extended thirteen stores across three
countries adding c. 500,000 sq ft of MLA to the portfolio. In
addition, we have grown the development pipeline to a further 1.5
million sq ft across 30 projects which represents 18% of the
existing MLA of the business and will contribute GBP25-30 million
upside to EBITDA upon stabilisation. Following our previous
successful JV with Carlyle, we partnered again to facilitate the
Group's entry into the under-penetrated German market and the
integration of our Benelux business, acquired in 2022, is now
complete.
Our strong and flexible balance sheet was significantly enhanced
by the agreement of an unsecured four-year GBP400 million
multi-currency RCF at the beginning of the year which increases
funding capacity, allowing us to continue to consider strategic,
value-accretive investments as and when they arise.
Importantly, the underlying fundamentals of the European self
storage industry with limited supply, strong barriers to entry and
a steadily growing product awareness are as strong as ever. We
believe that the COVID period has acted as an accelerator of growth
for the still relatively immature self storage industry. Whilst
demand (as measured by enquiry growth) stabilised during the year
at a level that is below 2022, we are still seeing enquiry levels
that are ahead of the pre-COVID period.
Over the last ten years, Safestore has delivered an industry
leading 16% CAGR of its adjusted diluted EPRA EPS. During that
period, we expanded our geographical reach to six European
countries leveraging and improving our platform and central
functions while carefully managing investment risk. I'm confident
that Safestore will continue to play a leading role in the
development of the self storage industry across Europe, delivering
significant further value to its stakeholders.
Our industry leading business model remains unchanged and we
have substantial EPS growth to deliver both from filling the 1.9
million sq ft of fully invested, currently unlet space, and from
the new sites and expansion of existing sites in our pipeline,
across major cities in the UK and continental Europe. Safestore has
a proven track record, and as the returns we deliver are
significantly ahead of our cost of debt, we look to the future with
confidence.
Finally, I would like to thank all our colleagues in the UK,
France, Spain, the Netherlands and Belgium for their commitment and
loyalty in 2023. We are appreciative of their efforts."
Notes
We prepare our financial statements using IFRS. However, we also
use a number of adjusted measures in assessing and managing the
performance of the business. These measures are not defined under
IFRS and they may not be directly comparable with other companies'
adjusted measures and are not intended to be a substitute for, or
superior to, any IFRS measures of performance. These include
like-for-like figures to aid in the comparability of the underlying
business as they exclude the impact on results of purchased, sold,
opened or closed stores and constant exchange rate ("CER") figures
are provided in order to present results on a more comparable
basis, removing FX movements. These metrics have been disclosed
because management reviews and monitors performance of the business
on this basis. We have also included a number of measures defined
by EPRA, which are designed to enhance transparency and
comparability across the European Real Estate sector; see notes 6
and 13 below and "Non-GAAP financial information" in the notes to
the financial statements.
1 - CER is Constant Exchange Rates (Euro denominated results for
the current period have been retranslated at the exchange rate
effective for the comparative period. Euro denominated results for
the comparative period are translated at the exchange rates
effective in that period. This is performed in order to present the
reported results for the current period on a more comparable
basis).
2 - Underlying EBITDA is defined as Operating Profit before
exceptional items, share-based payments, corporate transaction
costs, change in fair value of derivatives, gain/loss on investment
properties, variable lease payments, depreciation and the share of
associate's depreciation, interest and tax. Underlying EBITDA
therefore excludes all leasehold cost charges. Underlying profit
before tax is defined as Underlying EBITDA less leasehold cost,
depreciation charged on property, plant and equipment and net
finance charges relating to bank loans and cash.
3 - Occupancy excludes offices but includes bulk tenancy. As at
31 October 2023, closing occupancy includes 18,000 sq ft of bulk
tenancy (31 October 2022: 24,000 sq ft).
4 - MLA is Maximum Lettable Area. At 31 October 2023, Group MLA
was c. 8.09 million sq ft (FY2022: c. 7.70 million sq ft).
5 - Average Storage Rate is calculated as the revenue generated
from self storage revenues divided by the average square footage
occupied during the period in question.
6 - Adjusted Diluted EPRA EPS is based on the European Public
Real Estate Association's definition of Earnings and is defined as
profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts. The
Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional
tax items and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore neither the Company's ability to
distribute nor pay dividends is impacted (with the exception of the
associated National Insurance element). The financial statements
will disclose earnings on a statutory, EPRA and Adjusted Diluted
EPRA basis and will provide a full reconciliation of the
differences in the financial year in which any LTIP awards may
vest.
7 - Free cash flow is defined as cash flow before investing and
financing activities but after leasehold cost payments.
8 - Like-for-like adjustments remove the impact of the 2023
acquisition of Apeldoorn, the 2023 openings of Wigan,
London-Morden, Ellesmere Port, North Barcelona, South Barcelona,
Central Barcelona 3, South Madrid, North Madrid, East Madrid,
Nijmegen, and Amersfoort, the 2022 acquisition of the Netherlands
and Belgium Joint Venture, the 2022 acquisition of Christchurch,
and the 2022 openings of London-Bow and Central Barcelona
9 - Operating profit decreased by GBP284.1 million to GBP230.4
million (FY2022: GBP514.5 million) principally as a result of a
decrease in the gain on investment properties of GBP287.8 million
to GBP93.8 million (FY2022: GBP381.6 million), as well as an
increase of GBP7.1 million or 5.3% in Underlying EBITDA as a result
of stronger trading performance. Profit before income tax in FY2022
additionally included exceptional items of GBP10.8m, being other
exceptional gains. This included GBP5.5 million relating to the
valuation gain of the 20% equity investment held in the Joint
Venture with CERF, when the Group acquired the remaining 80% on 30
March 2022 and GBP5.1 million relating to the net gain on disposal
of the Paris Nanterre site in November 2021.
10 - REVPAF is an alternative performance measure used by the
business. REVPAF stands for Revenue per Available Square Foot and
is calculated by dividing revenue for the period by weighted
average available square feet for the same period
11 - LTV ratio is Loan-to-Value ratio, which is defined as gross
debt (excluding lease liabilities) as a proportion of the valuation
of investment properties and investment properties under
construction (excluding lease liabilities). At 31 October 2023, the
Group LTV ratio was 25.4%, calculated on a net debt basis.
12 - ICR is interest cover ratio and is calculated as the ratio
of Underlying EBITDA after leasehold costs to net interest
payable.
13 - EPRA basic NAV was superseded and transitioned to three new
measures: EPRA Net Reinstatement Value ("NRV"), EPRA Net Tangible
Assets ("NTA") and EPRA Net Disposal Value ("NDV") for periods
commencing 1 January 2020 or thereafter. Safestore considers EPRA
NTA to be the most consistent with the nature of the Group's
business. The basis of calculation, including a reconciliation to
reported net assets, is set out in note 11 of the Financial
Statements.
14 - In 2019, Safestore entered a strategic arrangement with
Carlyle to enter the Benelux market, with an investment of 20%.
This arrangement represented a joint venture and has been referred
to as such. On 30 March 2022, the Group acquired the remaining 80%
of the Joint Venture with CERF. Prior to acquiring the 80%, the
Joint Venture with CERF, which represented a 20% investment, was
accounted for as an associate using the equity method of
accounting, as described in the "Investment in associates" note to
the financial statements..
15 - On 1 December 2022, the Group made an initial investment
into a new joint venture with Carlyle, to enter the German self
storage market, of c. EUR2.2 million for a 10% share. The Group
will also earn a fee for providing management services to the joint
venture.
16 - Store Protect has replaced our customer goods insurance
programme from 1 November 2023, attracting VAT rather than
Insurance Premium Tax (IPT). When comparing the first two months of
the 2024 financial year, the 2023 comparative included revenue of
GBP0.4 million representing 12% IPT on insurance sales for the two
months. For 2024, VAT is not included in the revenue. The overall
impact of these changes is neutral at EBITDA. With the LFL revenue
figure adjusted to remove the IPT from the prior year, LFL revenue
is down 0.6%. Including the IPT in revenue in the PY would result
in a variance of -1.6%.
Summary
The Group has delivered a resilient performance in 2023 and has
made significant strategic and operational progress.
In 2023, the Group delivered 0.8% growth in Adjusted Diluted
EPRA Earnings per Share, which, if calculated on a like-for-like
basis, grew by 3.3%. Total Group revenue increased by 5.5% (4.8%
CER(1) ) with the UK up 2.1%, Paris up 3.5%, Spain up 19.4%,
Netherlands up 100% and Belgium up 78.3%. Resilient performances in
the UK and Paris were complemented by new store driven growth in
Spain and the annualisation of our ownership of the Netherlands and
Belgium businesses. On a like-for-like(8) basis in CER(1) , Group
revenue increased by 1.7% with the UK up 1.2%, Paris up 3.5% and
Spain flat. The Group's like-for-like average storage rate(5) was
up 5.0% at CER(1) with average occupancy down 3.3%, whilst
like-for-like(8) closing occupancy decreased by 3.2ppts to
79.6%.
The Group has traded solidly over the year despite strong
comparable performances in the record 2021 and 2022 financial years
over which c. 25% like-for-like revenue growth was delivered. Our
digital marketing platform has driven good enquiry generation and
conversion despite a slightly weaker overall market such that
enquiry levels remain ahead of the pre-COVID period.
The like-for-like average storage rate growth drove the UK
revenue performance and increased by 5.1% in the year whilst
average occupancy declined by 4.1% and closing occupancy was down
3.8ppts at 79.2%.
In Paris, our performance was resilient with like-for-like(8)
revenue growing by 3.5% at CER(1) driven by a like-for-like growth
in average storage rate of 3.9% with like-for-like average storage
occupancy broadly flat. Like-for-like(8) closing occupancy ended
the year at a similar level to the prior year at 81.3% (FY2022:
81.7%). This is the 25(th) consecutive year of revenue growth in
Paris with average growth over the last eight years of
approximately 6.2%.
Our Spanish business saw flat like-for-like revenue for the year
with an increase in the like-for-like average storage rate of 7.4%
offsetting a decline in average occupancy of 7.4% which reflects
the impact of opening new stores in catchment areas of existing
stores increasing overall revenue but impacting like-for-like
occupancy. Ancillary sales were also strong. Spain opened six
stores in the year and now has eleven stores open and a pipeline of
a further five sites. Total revenue growth was 19.4%.
Our Netherlands and Belgium businesses performed well in their
first full financial years as fully owned subsidiaries of the
Group. The businesses were not treated as like-for-like in the year
but, over the two quarters (Q3 and Q4) for which comparable revenue
figures are available, like-for-like growth would have been 11.0%
and 9.7% respectively.
The Group's current pipeline of 30 new developments and store
extensions has been replenished over the last year and now
constitutes c. 1.5 million sq ft of future MLA (equivalent to 18%
of the existing portfolio) with associated outstanding capital
expenditure of GBP128 million. 29 of the 30 projects are in London,
Paris, Spain, the Randstad region of the Netherlands and Brussels
with just one in the UK outside of London, in the South-East of
England.
Group Underlying EBITDA(2) of GBP142.2 million increased by 4.5%
at CER(1) on the prior year. The Group's Underlying EBITDA(2)
performance, offset by a 9.6% increase in leasehold cost and a
GBP5.0 million or 45.9% increase in finance costs, resulted in a
0.8% increase in Adjusted Diluted EPRA EPS(6) in the period to 47.9
pence (FY2022: 47.5 pence). The increase in finance costs was
driven by higher debt levels to fund the development pipeline and
an increase in the marginal cost of borrowing. On a like-for-like
basis the increase Adjusted Diluted EPRA EPS(6) in the period, as
mentioned above, would have been 3.3%. Statutory operating profit
decreased by 55.2% to GBP230.4 million (FY2022: GBP514.5 million)
as a result of the gain on investment properties of GBP93.8 million
being lower than the record gain experienced in 2022 of GBP381.6
million.
Our property portfolio valuation, including investment
properties under construction, increased in the year by 9.3%,
driven by the underlying performance of the stores, new stores,
acquisitions and exchange rate movements. After exchange rate
movements, the portfolio valuation increased to GBP2,789.7 million
with the UK portfolio up GBP118.6 million to a total UK value of
GBP1,934.0 million and the French portfolio increasing by EUR50.8
million to EUR676.7 million.
Reflecting the Group's dividend policy, the Board is pleased to
recommend a final dividend of 20.2 pence per share (FY2022: 20.4
pence) resulting in a full year dividend up 1.0% to 30.1 pence per
share (FY2022: 29.8 pence). Over the last ten years, the Group has
grown the annual dividend by 419% or 24.3 pence per share.
Outlook
We remain focused on further optimising the Group's operational
performance and continuing to grow in all of our geographies. Our
development pipeline represents 18% of our existing MLA and our
balance sheet strength and flexibility provide us with the
opportunity to consider further selective development and
acquisition opportunities in all of our markets.
As disclosed in our 2023 half year results we expect the
development pipeline and associated financing to be dilutive to
earnings in the 2024 financial year before becoming highly
accretive in future years as the stores stabilise. We believe that,
on stabilisation, an incremental GBP25-GBP30 million of EBITDA will
be added by the 30 projects in the pipeline.
For the first two months of the 2024 financial year total Group
revenue is broadly flat with like-for-like revenue down 0.6%(16) on
the prior year. Regionally, we have seen strong like-for-like
growth in the Netherlands and Belgium, solid improvements in Paris
and Spain and a modest decline in the UK.
Further, in the first two months of the 2024 financial year, the
Group took limited promotional actions that resulted in
year-on-year UK like-for-like occupancy improving from -3.8ppts as
at 31 October 2023 to -1.4ppts at 31 December 2023, and similarly
from -0.4ppts to +0.3ppts in Paris. The immediate impact on rates
is expected to gradually reduce over the next few months,
particularly as the Group will annualise the discounting activity
that took place later last year in spring.
Whilst we are fully aware of the current macro-economic
environment, our business model has proven to be highly resilient
with multiple drivers of demand. We believe the Group is strongly
positioned to withstand pressures from challenging market
conditions .
Enquiries
Safestore Holdings plc 020 8732 1500
Frederic Vecchioli, Chief Executive
Officer
Andy Jones, Chief Financial Officer
www.safestore.com
Instinctif Partners 020 7457 2020
Guy Scarborough
Bryn Woodward
Analyst and investor presentation
A presentation will be held at 09:30am today at the offices of
Instinctif Partners.
A live-webcast facility will also be available and to register
please use the following link:
https://storm-virtual-uk.zoom.us/webinar/register/WN_X5npmDXhTyilRoS8yh0qgA
Notes to Editors
-- Safestore is the UK's largest self storage group with 190
stores on 31 October 2023, comprising 133 wholly owned stores in
the UK (including 73 in London and the South East with the
remainder in key metropolitan areas such as Manchester, Birmingham,
Glasgow, Edinburgh, Liverpool, Sheffield, Leeds, Newcastle, and
Bristol), 29 wholly owned stores in the Paris region, 11 stores in
Spain, 11 stores in the Netherlands and 6 stores in Belgium. In
addition, the Group operates 7 stores in Germany under a Joint
Venture agreement with Carlyle.
-- Safestore operates more self storage sites inside the M25 and
in central Paris than any competitor providing more proximity to
customers in the wealthiest and more densely populated UK and
French markets.
-- Safestore was founded in the UK in 1998. It acquired the
French business "Une Pièce en Plus" ("UPP") in 2004 which was
founded in 1998 by the current Safestore Group CEO Frederic
Vecchioli.
-- Safestore has been listed on the London Stock Exchange since
2007. It entered the FTSE 250 index in October 2015.
-- The Group provides storage to around 90,000 personal and business customers.
-- As of 31 October 2023, Safestore had a maximum lettable area
("MLA") of 8.090 million sq ft (excluding the expansion pipeline
stores) of which 6.231 million sq ft was occupied.
-- Safestore employs around 750 people in the UK, Paris, Spain, the Netherlands, and Belgium.
Chairman's Statement
Our purpose remains simple - to add stakeholder value by
developing profitable and sustainable spaces that allow
individuals, businesses and local communities to thrive.
The last year has demonstrated Safestore's resilience and
significant strategic and operational progress, after two
exceptional years over which the Group delivered 57% growth in
Earnings per Share. After four years in the role, I continue to be
impressed by the dedication and resilience of the store, property
development and Head Office teams which have been instrumental in
delivering this progress.
Our purpose remains simple, to continue to add stakeholder value
by developing profitable and sustainable spaces that allow
individuals, businesses and local communities to thrive. Our
strategy is underpinned by our values, our behaviours and our
governance structure which shape our culture and remain central to
the way we conduct our business.
I would like to take this opportunity to congratulate all my
colleagues throughout the Group for their exceptional contributions
this year.
Strategic progress
Management's first priority remains to maximise the economic
return on our existing store portfolio and its 1.9 million sq ft of
fully invested unlet space, building on the significant operational
improvements made over the current management team's tenure.
In addition to improving returns from our existing portfolio,
the Group has continued to make significant strategic progress in
expanding its presence across Europe through a combination of new
store openings and acquisitions. The Group has now acquired 47 and
opened 31 stores over the last seven years and all are performing
in line with or better than their original business cases. Our
Spanish business, acquired as a four store portfolio in 2019, now
has eleven open stores and a further five in the pipeline. Our
Benelux businesses which was acquired in 2022 is now fully
integrated into the business and has a pipeline of a further five
stores. Overall, we have a development property pipeline of an
additional 1.5 million sq ft of MLA, which provides significant
future opportunity for the business and underpins our continued
growth.
Our joint venture(15) with Carlyle in Germany provides us an
exciting platform to gain exposure to a new attractive geography
and I believe that Safestore's highly scalable platform will allow
us to take advantage of further opportunities in due course.
The establishment, in November 2022, of a GBP400 million
unsecured multi-currency RCF at attractive margins offers us
significantly greater strategic flexibility to support these growth
plans.
Financial results
Revenue for the year was GBP224.2 million, 5.5% ahead of last
year (FY2022: GBP212.5 million), or 4.8% ahead on a constant
currency basis. Like-for-like(8) revenue was up 1.7% in constant
currency.
The growth in like-for-like revenue, combined with strong cost
control despite the challenging inflationary environment was
particularly encouraging, delivering a further improvement in
like-for-like margins. On a total basis, underlying EBITDA(2)
increased by 5.3% to GBP142.2 million (FY2022: GBP135.1 million)
and on a constant currency basis by 4.5%.
Statutory operating profit reduced by GBP284.1 million to
GBP230.4 million in 2023 (FY2022: GBP514.5 million), reflecting a
lower investment property gain in 2023 combined with the increase
in Underlying EBITDA(2) and a reduction in the share-based payments
charge.
Adjusted Diluted EPRA Earnings per Share(6) grew by 0.8% to 47.9
pence (FY2022: 47.5 pence). Adjusted Diluted EPRA Earnings per
Share(6) has grown by 37.2 pence or 348% over the last ten years.
Statutory diluted Earnings per Share decreased to 91.8 pence
(FY2022: 212.4 pence) as a result of the reduced gain on valuation
of investment properties, offset by an increase in Adjusted Diluted
EPRA Earnings per Share(6) .
The Group's balance sheet remains robust with a Group LTV(11)
ratio of 25.4%, calculated on net debt (FY2022: 23.6%) and an
ICR(12) of 6.7x (FY2022: 10.4x) leaving considerable headroom
against our banking covenants and internal thresholds. This
represents a level of gearing we consider appropriate for the
business to enable the Group to increase returns on equity,
maintain financial flexibility and achieve our medium term
strategic objectives.
Finally, this year's results consolidated a sustained period of
excellent performance by the Group. Over the last ten years, the
management and store teams have delivered a Total Shareholder
Return of 607.9%, ranking at number one in the UK property sector.
Since flotation in 2007, Safestore has also delivered the highest
Total Shareholder Return of any UK listed self storage
operator.
ESG (Environmental, Social and Governance)
Away from the financial results, I am pleased with the progress
the Group has made with its ESG strategy.
Even though Safestore already has one of the lowest
environmental impact profiles of any company within the overall
property sector, we have continued to focus on our environmental
agenda, with year-on-year reductions in greenhouse gas emissions
and enhanced disclosures in recognition of the recommendations of
the TCFD. I am pleased to report that we have retained a Silver
rating in the 2023 EPRA sustainability awards, an 'A' rating for
public disclosures by GRESB, an 'AA' rating for ESG by MSCI and the
highest rating of five stars by Support the Goals.
In addition, we have demonstrated our commitment to our ESG
agenda by linking the margin on our GBP400 million bank facility to
ESG related KPIs agreed with our lending group. Details of these
achievements are covered more fully in the Chief Executive's report
and the sustainability section of our Annual Report.
Board changes
During the year, Ian Krieger, our Senior Independent Director
and Audit Committee Chair, has confirmed his intention to step down
at the 2024 AGM. I would like to thank Ian for his excellent
contribution over the last ten years. Jane Bentall will take over
as Chair of the Audit Committee.
I have also been pleased to welcome Avis Darzins to the Board in
the period. Avis has over 20 years of senior executive level and
management consulting experience in the retail, entertainment and
media sectors, specialising in customer experience, strategy and
business transformation and I look forward to working with her.
Finally, Andy Jones, our CFO, notified the Board of his
intention to retire from his role as Chief Financial Officer and as
a director of the Company. Andy will continue in his role until the
transition to his successor is complete and an external search for
Andy's replacement is underway. For over ten years, Andy has been
instrumental in helping deliver the Company's strategy,
significantly expanding its store portfolio and entering four
additional geographies. During his career with Safestore, he has
overseen a period of sector leading growth and shareholder returns
and I'd like to thank Andy for his outstanding contribution and to
wish him well for the future.
Dividend
Reflecting the Group's progressive dividend policy, the Board is
pleased to recommend a final dividend of 20.2 pence per share
(FY2022: 20.4 pence) resulting in a full year dividend up 1% to
30.1 pence per share (FY2022: 29.8 pence).
Over the last ten years, the Group has grown the dividend by
423% or 24.4 pence per share during which period the Group has
returned to shareholders a total of 180.1 pence per share. The
total dividend for the year is covered 1.59 times by Adjusted EPRA
Diluted Earnings (1.59 times in 2022). Shareholders will be asked
to approve the dividend at the Company's Annual General Meeting on
13 March 2024 and, if approved, the final dividend will be payable
on 9 April 2024 to Shareholders on the register at close of
business on 7 March 2024.
Summary
In conclusion, the Board remains confident in the future growth
prospects for the Group and will continue its progressive dividend
policy in 2024 and beyond. In the medium term it is anticipated
that the Group's dividend will grow at least in line with Adjusted
Diluted EPRA Earnings per Share(6) .
David Hearn
16 January 2024
Our Strategy
The Group intends to continue to deliver on its proven strategy
of leveraging its well-located asset base, management expertise,
infrastructure, scale and balance sheet strength and further
increase its Earnings per Share by:
-- Optimising the trading performance of the existing portfolio;
-- Maintaining a strong and flexible capital structure; and
-- Taking advantage of selective portfolio management and
expansion opportunities in our existing markets and, if
appropriate, in attractive new geographies either through a joint
venture or in our own right.
In addition, the Group's strategy is pursued whilst maintaining
a strong focus on Environmental, Social and Governance ("ESG")
matters and a summary of our ESG strategy is provided further
on.
Optimisation of Existing Portfolio
With the opening of 31 new stores since August 2016 in addition
to the acquisitions of 47 existing trading stores we have
established and strengthened our market-leading portfolio in the UK
and Paris and have entered the Spanish, Netherlands and Belgium
markets. We have a high quality, fully invested estate in all
geographies and, of our 190 stores as at 31 October 2023, 102 are
in London and the South East of England or in Paris, with 60 in the
other major UK cities and 28 in Barcelona and the Benelux region.
In the UK, we now operate 50 stores within the M25, which
represents a higher number of stores than any other competitor.
Our MLA(4) has increased to 8.1 million sq ft at 31 October 2023
(FY2022: 7.7 million sq ft). At the current occupancy level of 77%
we have 1.9 million sq ft of fully invested unoccupied space (3.4
million sq ft including the development pipeline), of which 1.2
million sq ft is in our UK stores, 0.2 million sq ft is in Paris
and 0.5 million sq ft is in Barcelona and Benelux. In total, unlet
space at our existing stores is the equivalent of c. 47 empty
stores located across the estate and provides the Group with
significant opportunity to grow further. We have a proven track
record of filling our vacant space so we view this availability of
space with considerable optimism. We will also benefit from
operational leverage from the fact that this available space is
fully invested and the related operating costs are essentially
fixed and already included in the Group cost base. Our continued
focus will be on ensuring that we drive occupancy to utilise this
capacity at carefully managed rates. Between the full financial
years 2013 and 2023, occupancy of the stores in the portfolio in
2013 that remain in the Group today has increased from 63.1% to
80.7%, i.e. an average of 1.8ppts per year and equivalent to a
total of 0.9 million sq ft.
One of the key measures of operational success for a self
storage asset is the Revenue per available foot (REVPAF) and
Safestore's priority will remain to maximise its leading REVPAF
with a sustainable combination of occupancy and rate. Between the
full financial years 2013 and 2023, the company's REVPAF has
maintained industry leading levels increasing 46.5% for the Group,
66.4% for the UK (60.5% for London and the South East; and 84.2%
for regional UK) and 32.1% for Paris.
There are three elements that are critical to the optimisation
of our existing portfolio:
-- Enquiry generation through an effective and efficient marketing operation;
-- Strong conversion of enquiries into new lets; and
-- Disciplined central revenue management and cost control.
Digital Marketing Expertise- UK Number 1 Self Storage Brand
Awareness of self storage remains relatively low with half of
the UK population either knowing very little or nothing about the
product (source: SSA Annual Report 2023). In the UK, many of our
new customers are using self storage for the first time and it is
largely a brand-blind purchase. Typically, customers requiring
storage start their journey by conducting online research using
generic keywords in their locality (e.g., "storage in Borehamwood",
"self storage near me") which means that geographic coverage and
search engine prominence remain key competitive advantages.
We believe there is a clear benefit of scale in digital
capability in the generation of customer enquiries. The Group has
continued to invest in technology and in-house expertise which has
resulted in the development of a leading digital marketing platform
that has generated 43% enquiry growth for the Group over the last
five years, an annual growth of over 7%. Our in-house expertise and
significant annual budget have enabled us to deliver strong
results. Safestore is the UK number 1 self storage brand as it has
more new lets per year than any other brand.
Online marketing remains the predominant channel for customer
acquisition. Online enquiries made up 89% of all our enquiries in
the UK (FY2022: 90%), with 84% in France (FY2022: 85%). The
majority of our online enquiries now originate from a mobile device
highlighting the need for continual investment in our responsive
web platform for a "mobile-first" world. We continue to invest in
activities that promote a strong search engine presence to grow
enquiry volume whilst managing efficiency in terms of overall cost
per enquiry and cost per new let. Group marketing costs for the
full year as a percentage of revenue were broadly in line with the
previous year at 3.8% (FY2022: 3.6%).
During 2023, the Group demonstrated its ability to integrate
newly developed and acquired stores into its marketing platform
with successful new openings in the UK (Morden, Wigan, Ellesmere
Port), Spain (Barcelona, Madrid) and the Netherlands (Apeldoorn,
Amersfoort). We have clearly demonstrated that our marketing
platform is transferrable into multiple overseas geographies.
Motivated and effective store teams benefiting from investment
in training and development
Training, People and Performance Management
Our enthusiastic, well-trained, and customer-centric sales team
remains a key differentiator and a strength of our business.
Understanding the needs of our customers and using this knowledge
to develop trusted in-store advisors is a fundamental part of
driving revenue growth and market share.
Safestore has been an Investors in People ("IIP") accredited
organisation since 2003 and we passionately believe that our
continued success is dependent on our highly motivated and
well-trained colleagues. Following the award of a Bronze
accreditation in 2015 and a Gold accreditation in 2018, we were
delighted to be awarded the "we invest in people" Platinum
accreditation in February 2021. This is the highest accolade in the
Investors in People scale and positions us as an employer of
choice. Shortly after our Platinum accreditation, we were
shortlisted for the Platinum Employer of the Year (250+) category
in the Investors in People Awards 2021. This further endorses the
high standard of our teams and the people development programmes
that drive our skill and talent retention.
We are committed to growing and rewarding our people and we
tailor our development, reward and recognition programmes to
reflect this. Our IIP recognised coaching programme, launched in
2018 and upgraded every year since, continues to be a driving force
behind the continuous performance improvement demonstrated by our
store colleagues.
Our online learning portal, combined with the energy and
flexibility of our store colleagues, allows us to not only continue
to deliver our award-winning development programmes but also to
capitalise on the strength of our IT platforms. We have been able
to combine our technology communication skills with our tried and
tested face-to-face training sessions in a newly created "impact"
sales refresher.
We have always aimed to recognise the changing needs and demands
of our customers. Combining new, along with tried and tested,
solutions and systems, we are further able to support our store
colleagues, allowing them to fulfil the needs of our customers over
and above that of our competitors. Our flexible contract types and
enhanced digital contract completion further enhance our customer
offer and experience.
All new recruits to the business benefit from enhanced induction
and training tools that have been developed in-house and enable us
to quickly identify high-potential individuals and increase their
speed to competency. They receive individual performance targets
within four weeks of joining the business and are placed on the
"pay-for-skills" programme that allows accelerated basic pay
increases dependent on success in demonstrating specific and
defined skills. The key target of our programme remains that we
grow our talent through our Store Manager Development programme,
and we are pleased with our progress to date.
Our internal Store Manager Development programme has been in
place since 2016 and is a key part of succession planning for
future Store Managers. Funded by the Apprenticeship Levy this
programme provides the opportunity to complete a Level 3 Management
and Leadership apprenticeship, with the additional opportunity to
complete an Institute of Leadership and Management ("ILM")
qualification. In 2023, of the eleven delegates who successfully
completed the program ten of them did so with distinction.
Our Store Manager Development programme demonstrates the
effectiveness of our learning tools. In a spirit of constant
improvement, our content and delivery process is dynamically
enhanced through our 360-degree feedback process utilising the
learnings from not only the candidates but also from our training
Store Managers and senior business leaders. This allows our people
to be trained with the knowledge and skills to sell effectively in
today's marketplace.
Further development opportunities are available through our
Senior Manager Development programme ("LEAD") focusing on
developing our high performing store managers. This program is
aimed at preparing candidates for more senior roles within the
business in addition to attaining a Level 5 Management and
Leadership apprenticeship. The relaunch of our graduate program, in
October 2022, provides an opportunity for newly qualified graduates
to build their skillset and experience resulting in a career with
Safestore.
Our performance dashboard allows our store and field teams to
focus on the key operating metrics of the business providing an
appropriate level of management information to enable swift
decision making. Reporting performance down to individual colleague
level enhances our competitive approach to team and individual
performance. We continue to reward our people for their performance
with bonuses of up to 50% of basic salary based on their
achievements against individual targets for new lets, occupancy,
and ancillary sales. In addition, our Values and Behaviours
framework is overlaid on individuals' performance in order to
assess performance and development needs on a quarterly basis.
Our "Make the Difference" people forum, launched in 2018, which
is a formal workplace advisory panel, enables frequent
opportunities for us to hear and respond to our colleagues. Our
network of 15 "People Champions" collect questions and feedback
from their peers across the business and put them to members of the
Executive Committee. We drive change and continuous improvement in
responding to the feedback we receive for "Our Business, Our
Customers and Our Colleagues".
People Champions:
-- Consult and collect the views and suggestions of all colleagues that they represent;
-- Engage in the bi-annual "Make the Difference" people forum,
raising and representing the views of their colleagues; and
-- Consult with and discuss feedback with management and the leadership team at Safestore.
Our values are authentic, having been created by our people.
They are core to the employment life cycle and bring consistency to
our culture. Our leaders have high values alignment enabling us to
make the right decisions for our colleagues and our customers.
Our customers continue to be at the heart of everything we do,
whether it be in store, online or in their communities. Our
commitment to our customers mirrors that of our commitment to our
colleagues.
Technological Developments
After delivering the appropriate technology the Group recently
opened its first fully automated, unmanned, satellite self storage
centre in Christchurch shortly followed by its second in Eastleigh.
Utilising industry leading automated technology, along with
in-house created communication and control technologies, customers
can securely enter the building and their storage unit from a
simple app on their mobile phone Several additional unmanned
satellite stores are currently under various stages of development
in the UK.
Our customers also have the option to complete a booking and
contract for a self storage unit online for any UK store location.
The Group's belief is that its multi-channel sales strategy
utilising, full automation, colleague interaction through our store
sales teams or our specialist call centre and National Accounts
team provide each type of customer with the most tailored and easy
way to buy self storage at Safestore.
Customer Satisfaction
In February 2023, Safestore UK won the Feefo Platinum Trusted
Service award for the fourth year running. The award is given to
businesses which have achieved Gold standard for three consecutive
years. It is an independent mark of excellence that recognises
businesses for delivering exceptional experiences, as rated by real
customers. In addition to using Feefo, Safestore invites customers
to leave a review on a number of review platforms, including Google
and Trustpilot. Our ratings for each of these three providers in
the UK is 4.8 out of 5. In France, Une Pièce en Plus uses
Trustpilot to obtain independent customer reviews with a
"TrustScore" of 4.6 out of 5. In Spain, OMB collects customer
feedback via Google reviews and has maintained a score of 4.8 out
of 5.
Central Revenue Management and Cost Control
We continue to pursue a balanced approach to revenue management.
We aim to optimise revenue by improving the utilisation of the
available space in our portfolio at carefully managed rates. Our
central pricing team is responsible for the management of our
dynamic pricing policy, the implementation of promotional offers
and the identification of additional ancillary revenue
opportunities. Whilst price lists are managed centrally and are
adjusted on a real-time basis, the store sales teams have, from
time to time, the ability to offer a Lowest Price Guarantee in the
event that a local competitor is offering a lower price, or the
ability to offer discretionary discounts. The Lowest Price
Guarantee and discretionary discount are centrally controlled and
activated on a store by store and unit by unit basis.
Average rates are predominantly influenced by:
-- The store location and catchment area;
-- The volume of enquiries generated online;
-- The store team skills at converting these enquiries into new
lets at the expected price; and
-- The very granular pricing policy and the confidence provided
by analytical capabilities and systems that smaller players might
lack.
We believe that Safestore has a very strong proposition in each
of these areas.
Costs are managed centrally with a lean structure maintained at
Head Office. Enhancements to cost control are continually
considered and the cost base is challenged on an ongoing basis.
Strong and Flexible Capital Structure
Since 2014 we have refinanced the business on seven occasions,
each time optimising our debt structure and improving terms; and
believe we have maintained a capital structure that is appropriate
for our business and which provides us with the flexibility to take
advantage of carefully evaluated development and acquisition
opportunities.
At 31 October 2023, based on the current level of borrowings and
interest rates, the Group's weighted average cost of debt, after
adjusting for capitalised interest costs, was 2.97% (FY2022:
2.23%). The weighted average maturity of the Group's drawn debt is
4.7 years at the current period end and the Group's LTV ratio is
25.4% as at 31 October 2023.
The Group has GBP528m of fixed rate US private placement notes
which constitute 72% of the total drawn debt. The tenors of the
notes are from 2024 to 2033 with EUR51m of notes expiring in May
2024.
This LTV of 25.4% and interest cover ratio of 6.7x for the
rolling twelve-month period ended 31 October 2023 provides us with
significant headroom compared to our banking covenants (LTV of 60%
and ICR of 2.4:1). The reduction in ICR(12) reflects the increased
interest costs from funding the development pipeline. We had c.
GBP200 million of undrawn bank facilities at 31 October 2023 before
taking into consideration the additional GBP100 million uncommitted
accordion facility.
Taking into account the improvements we have made in the
performance of the business, the Group is capable of generating
free cash after dividends sufficient to fund the building of three
to four new stores per annum depending on location and availability
of land.
The Group evaluates development and acquisition opportunities in
a careful and disciplined manner against rigorous investment
criteria. Our investment policy requires certain Board-approved
hurdle rates to be considered achievable prior to progressing an
investment opportunity. In addition, the Group aims to maintain a
Group LTV(11) ratio below 40% which the Board considers to be
appropriate for the Group.
November 2022 refinancing
In November 2022, the Group completed the refinancing of its
Revolving Credit Facilities ("RCFs") which were due to expire in
June 2023.
The previous GBP250 million Sterling and EUR70 million Euro
secured RCFs have been replaced with a single multi-currency
unsecured GBP400 million facility. In addition, a further GBP100
million uncommitted accordion facility is incorporated into the
facility agreement.
The facility is for a four-year term with two one-year extension
options exercisable after the first and second years of the
agreement. The first extension has recently been completed.
The Group pays interest at a margin of 1.25% plus SONIA or
Euribor depending on whether the borrowings are drawn in Sterling
or Euros. The margin is at the same level as the previous facility
agreements.
Environmental, Social and Governance ("ESG") KPIs have been
agreed with the Group's lenders. The margin under the facility is
now linked to ESG targets, which could enable a reduction in the
margin of up to 5bps to 120bps.
A commitment fee of 35% of the margin is payable on undrawn
amounts under the facility. This has reduced from 40% under the
previous facility agreements.
Reflecting the Group's improved credit profile, the banking
group and existing US Private Placement Noteholders have agreed
that all of the Group's previously secured borrowings move to an
unsecured basis, thus reducing administrative and legal costs
associated with the facilities.
ESG Strategy
ESG: Sustainable Self Storage
Our purpose - to add stakeholder value by developing profitable
and sustainable spaces that allow individuals, businesses and local
communities to thrive - is supported by the "pillars" of our
sustainability strategy: our people, our customers, our community
and our environment. In addition, the Group and its stakeholders
recognise that its efforts are part of a broader movement and we
have, therefore, aligned our objectives with the UN Sustainable
Development Goals ("SDGs"). We reviewed the significance of each
goal to our business and the importance of each goal to our
stakeholders and assessed our ability to contribute to each goal.
Following this materiality exercise, we have chosen to focus our
efforts in the areas where we can have a meaningful impact. These
are "Decent work and economic growth" (goal 8), "Sustainable cities
and communities" (goal 11), "Responsible consumption and
production" (goal 12) and "Climate action" (goal 13).
Sustainability is embedded into day-to-day responsibilities at
Safestore and, accordingly, we have opted for a governance
structure which reflects this. Two members of the Executive
Management team co-chair a cross-functional sustainability group
consisting of the functional leads responsible for each area of the
business.
In 2018, the Group established medium-term targets in each of
the "pillars" towards which the Group continued to progress in
FY2023.
Our people: Safestore was awarded the prestigious Investors in
People ("IIP") Platinum accreditation and was in the final top ten
shortlist for Platinum Employer of the Year (250+) category in The
Investors in People Awards 2021. The Group's response during the
pandemic lockdowns and aftermath has had a profound impact on trust
in leadership and colleague engagement and motivation.
Our customers : The Group's brands continue to deliver a
high-quality experience, from online enquiry to move-in. This is
reflected in customer satisfaction scores on independent review
platforms (Trustpilot, Feefo, Google) of over 90% in each market.
The introduction of digital contracts during the pandemic offers
both customer convenience and a reduction in printing, saving an
estimated 44,000 pieces of paper each month.
Our community: Safestore remains committed to being a
responsible business by making a positive contribution within the
local communities wherever our stores are based. We continue to do
this by developing brownfield sites and actively engaging with
local communities when we establish a new store, identifying and
implementing greener approaches in the way we build and operate our
stores, helping charities and communities to make better use of
limited space, and creating and sustaining local employment
opportunities directly and indirectly through the many small and
medium-sized enterprises which use our space. During FY2023, the
space occupied by local charities in 184 units across 104 stores
was 21,000 sq ft and worth GBP0.9 million.
Our environment: Safestore is committed to ensuring our
buildings are constructed responsibly and that their ongoing
operation has a minimal impact on local communities and the
environment. It should be noted that the self storage sector is not
a significant consumer of energy when compared with other real
estate sub-sectors. As a result, operational emissions intensity
tends to be far lower. According to a 2023 report by KPMG and EPRA,
self storage generates the lowest greenhouse gas emissions
intensity (4 kg/m(2) for scope 1 and 2) of all European real estate
sub-sectors. Reflecting the considerable progress made on energy
mix, efficiency measures and waste reduction to date, Safestore's
emissions intensity (3.4 kg/m(2) in 2022) is considerably lower
than the self storage sub-sector average. In FY2023, the Group
continued to progress with a further 17% decline in absolute market
based emissions despite continued portfolio growth . Emissions
intensity has reduced 19% to below 1.0 kgCO(2) e/ m(2) . Per our
commitments, our new stores in the UK, Spain and Netherlands have
all achieved a minimum energy performance rating of B. Moving
forward, the Group has a commitment to be operationally carbon
neutral by 2035 with a medium-term target to reduce operational
emissions (market-based) by 34% compared to the level in FY2021 by
2025. The total investment to achieve carbon neutrality should be
around GBP3 million.
In addition to the IIP award and the customer satisfaction
ratings, the Group has received recognition for its sustainability
progress and disclosures in the last twelve months. Safestore has
been given a Silver rating in the 2023 EPRA Sustainability BPR
awards. The Global ESG Benchmark for Real Assets ("GRESB") has once
again awarded Safestore an "A" rating in its 2023 Public
Disclosures assessment. MSCI has awarded Safestore its
second-highest rating of "AA" for ESG in 2023. The Group has also
been awarded the highest rating of five stars by "Support the
Goals".
Finally, the Group has worked with its banking lenders to agree
ESG related KPIs which are linked to the margin payable under its
new GBP400 million facility. Two KPIs have been agreed, which, when
achieved, result in a reduction in margin of up to 5bps.
Portfolio Management
Our approach to store development and acquisitions in the UK,
Paris and Spain and now the Netherlands and Belgium, continues to
be pragmatic, flexible and focused on the return on capital.
Our property teams continue to seek investment opportunities in
new sites to add to the store pipeline. However, investments will
only be made if they comply with our disciplined and strict
investment criteria. Our preference is to acquire sites that are
capable of being fully operational within 18-24 months from
completion.
Since 2016, the Group has opened 31 new stores including seven
in London, five in Paris, seven in Barcelona and Madrid, six in
major UK cities, four in UK conurbations and two in the Netherlands
adding 1,446,000 sq ft of MLA.
In addition, the Group has acquired 47 existing stores through
the acquisitions of Space Maker, Alligator, Fort Box, Salus and
Your Room in the UK, OhMyBox! in Barcelona, the Lokabox and M3
group from our Benelux JV acquisition and a store in Apeldoorn in
the Netherlands. These acquisitions added a further 1,890,000 sq ft
of MLA and revenue performance has been enhanced in all cases under
the Group's ownership.
We have also completed the extensions and refurbishments of
twelve stores across the portfolio adding a net 140,000 sq ft of
fully invested space to the estate. All of these stores are
performing in line with or ahead of their business plans.
Despite thirteen stores being opened, extended or acquired and
c. 500,000 sq ft of new MLA in the period, the Group's current
pipeline of new developments and store extensions (see below) has
grown over the last year and now constitutes c. 1,454,000 sq ft of
future MLA. The pipeline is equivalent to c. 18% of the existing
portfolio. The outstanding capital expenditure of GBP128 million is
expected to be funded from the Group's existing resources. The
total capital expenditure on stores opened in the 2022/23 financial
year-to-date as well as the outstanding pipeline is estimated to be
c. GBP251 million. Our industry leading level of REVPAF typically
allows us to deliver returns above our cash on cash hurdle of at
least 10%. Our current average portfolio cash on cash return is
15%. On a 10% return basis, a further GBP25-GBP30m of EBITDA will
be generated at stabilisation (c. four years after opening).
Property Pipeline
Openings of New Stores and Extensions in the period
Open 2023 FH/LH MLA Other
------------------------- -------- ------- -----------
Redevelopments and Extensions
---------------------------------------------------------
London- Crayford LH 9,400 Extension
London- Paddington LH 8,400 Extension
Marble Arch
New Developments
---------------------------------------------------------
London- Morden FH 52,000 New build
Madrid- North FH 53,000 Conversion
Madrid- South FH 32,000 Conversion
Madrid- East FH 50,000 Conversion
Barcelona- South FH 30,600 Conversion
Barcelona- North FH 42,000 Conversion
Barcelona- Central LH 14,700 Conversion
3
Netherlands- Amersfoort FH 58,000 New build
Wigan FH 42,700 Conversion
Ellesmere Port FH 55,000 New build
Total MLA 447,800
----------------------------------- --------------------
Open 2023 (post-year FH/LH MLA Other
end)
--------------------- -------- ------- ----------------------
New Developments
----------------------------------------------------------------
Eastleigh LH 14,000 Conversion, Satellite
Lease Extensions
During the period we completed the extensions of our leases at
Edinburgh Fort Kinnaird, London- Charlton, London- Slough and
Burnley stores.
The Edinburgh lease has been extended by a further 10 years to
2040.
At London- Charlton we have extended the lease term to 2038. In
doing so we have agreed a three-month rent-free period.
In Burnley we have also extended the lease to 2038 with tenant
break options every five years.
At London- Slough the lease was re-geared to extend by 15 years,
the total lease length at the end of the current financial year is
18 years.
As part of our ongoing asset management programme, we have now
extended the leases on 31 stores or 84% of our leased store
portfolio in the UK since 2012. As a result, since 2012 the
remaining lease length of our UK stores has remained at c. 11-13
years.
Freehold Purchases
In Barcelona, the Group has been leasing its Valencia store
since 2013. During the period, the freehold of the site was
acquired for EUR3.6m.
In addition, the freehold of our Oldbury store in West
Birmingham was acquired for GBP5.7m.
Property Pipeline Summary
Our pipeline of c. 1.5 million sq ft represents c. 18% of our
existing property portfolio.
Opening 2024 FH/LH Status* MLA Other
------------------------- ------- -------- ------- ----------------------
Redevelopments and Extensions
-----------------------------------------------------------------------------
London- Holloway FH C, STP 9,500 Extension
Paris- Poissy FH C, UC 12,000 Extension
Paris- Pyrenees LH C, UC 22,200 Extension
New Developments
-----------------------------------------------------------------------------
London- Paddington FH C, UC 13,000 Conversion, Satellite
Park West
London- Lea Bridge FH C, UC 80,900 New build
Paris- South Paris FH C, UC 55,000 New build
Paris- West 3 FH C, UC 58,000 New build
Paris- East 1 FH C, PG 60,000 Conversion
Paris- North West FH C, PG 54,000 Conversion
1
Paris- West 4 FH CE, PG 53,000 New Build
Madrid- South West FH C, UC 46,800 Conversion
Madrid- South 2 FH C, UC 68,800 Conversion
Madrid- North East FH C, STP 57,000 Conversion
Barcelona- Central LH C, PG 20,400 Conversion
2
Randstad- Almere FH C, UC 44,500 Conversion
Randstad- Aalsmeer FH C, UC 48,400 New build
Randstad- Rotterdam FH C, UC 71,000 New build
Opening 2025
-----------------------------------------------------------------------------
New Developments
-----------------------------------------------------------------------------
London- Woodford FH C, PG 68,700 New build
London- Walton FH C, PG 20,700 Conversion
London- Watford FH CE, PG 46,750 New build
London- Wembley FH C, STP 49,000 New build
Paris- West 1 FH C, PG 56,000 New build
Paris- La Défense FH C, UC 44,000 Mixed use facility
Randstad- Amsterdam FH CE, PG 61,400 New build
Brussels- Zaventem FH CE, PG 47,400 New build
Pamplona FH C, PG 64,500 Conversion
Opening Beyond 2025
-----------------------------------------------------------------------------
New Developments
-----------------------------------------------------------------------------
London- Old Kent FH C, STP 76,500 New build
Road
London- Bermondsey FH C, STP 50,000 New build
London- Romford FH C, STP 41,000 New build
Shoreham FH CE, PG 54,000 New build
Total Pipeline MLA (let sq ft- million) c. 1.454
-------------------------------------------- -------------------------------
Total Outstanding CAPEX (GBP'm) c. 128.0
-------------------------------------------- -------------------------------
*C = completed, CE = contracts exchanged, STP = subject
to planning, PG = planning granted, UC = under construction
The pipeline of 1,454,000 sq ft of future MLA includes;
-- ten projects with c. 456,000 sq ft of MLA in London (31% of the pipeline),
-- one project with c. 54,000 sq ft of MLA in the South East of the UK (4% of the pipeline)
-- nine projects with c. 414,000 sq ft of MLA in Paris (29% of the pipeline),
-- five projects with c. 258,000 sq ft of MLA in Spain (18% of the pipeline),
-- four projects with c. 225,000 sq ft of MLA in the Netherlands (15% of the pipeline)
-- one project in Belgium with c. 47,000 sq ft of MLA (3% of the pipeline)
Since our fourth quarter announcement in November 2023, three
sites have had planning granted. Of the 30 projects in the pipeline
only six are now subject to planning.
Acquisitions
Acquisition of Apeldoorn Self Storage Facility in the
Netherlands
During the period, the Group completed the acquisition of an
existing 58,000 sq ft self storage facility in Apeldoorn in the
Netherlands. The store was operating under the Stoor brand and is
situated in an easily accessible commercial district on the north
side of the city, which has a population of 165,000.
New Joint Venture with Carlyle and Investment in myStorage in
Germany
In December 2022 Safestore entered the German self storage
market via a new Joint Venture with Carlyle, which has acquired the
myStorage business.
Safestore has developed a multi-country highly scalable platform
with leading marketing and operational expertise in self storage,
with a proven track record for developing its platform in new
markets.
The acquisition of myStorage represents an excellent opportunity
to develop our platform into the attractive German self storage
market. The Joint Venture builds upon our previous successful
relationship with Carlyle having entered the Benelux market in
2019. Our common intention is to target development and acquisition
opportunities through the Joint Venture, providing the opportunity
to achieve operational scale and to develop local market knowledge,
whilst also retaining the option for Safestore to develop its own
wholly owned self storage sites in Germany. We look forward to
continuing our working relationship with Carlyle, and to developing
a long and mutually beneficial relationship.
The German market is one of Europe's more under-penetrated
markets with just 0.21 sq ft of storage space per capita which
compares to 0.82 sq ft in the UK, 0.35 sq ft in France, 0.32 sq ft
in Spain, 0.50 sq ft in the Netherlands and 0.20 sq ft in Belgium.
According to the 2023 FEDESSA report, there are just 530 facilities
in Germany and 17.6 million sq ft of lettable space.
myStorage has seven medium to long-term leasehold stores and
326,000 sq ft of MLA in Berlin, Heidelburg, Mannheim, Fürth,
Nuremburg, Neu-Ulm and Reutlingen.
Safestore's initial investment in the Joint Venture was a c.
EUR2.2 million equity investment for a 10% share of the Joint
Venture. Safestore will also earn a fee for providing management
services to the Joint Venture. The Group expects to earn an initial
return on investment of c. 15% for the first full year before
transaction related costs reflecting its share of expected Joint
Venture profits and fees for management services.
Portfolio Summary
The self storage market has been growing consistently for over
20 years across many European countries but few regions offer the
unique characteristics of London and Paris, both of which consist
of large, wealthy and densely populated markets. In the London
region, the population is 13 million inhabitants with a density of
5,200 inhabitants per square mile, 11,000 per square mile in
Central London and up to 32,000 per square mile in the densest
boroughs.
The population of the Paris urban area is 10.7 million
inhabitants with a density of 9,300 inhabitants per square mile in
the urban area but 54,000 per square mile in the City of Paris and
first belt, where 69% of our French stores are located and which
has one of the highest population densities in the western world.
85% of the Paris region population live in central parts of the
city versus the rest of the urban area, which compares with 60% in
the London region. There are currently c. 245 storage centres
within the M25 as compared to only c. 122 in the Paris urban
area.
In addition, barriers to entry in these two important city
markets are high, due to land values and limited availability of
sites as well as planning regulation. This is the case for Paris
and its first belt in particular, which inhibits new development
possibilities.
Over the last four years the Group has expanded into further
attractive, under-penetrated markets in Spain, the Netherlands and
Belgium with a focus on the conurbations of Barcelona, Madrid, the
Randstad area and Brussels.
As at 31 October 2023, 97% of our Group Revenue, 94% of our
stores and 95% of our available capacity are in London, Paris,
South East England, major UK cities, Spain, Amsterdam and the
Randstad area and Brussels. These major population areas deliver
97% of the Group's store EBITDA from 95% of our MLA, highlighting
the attractiveness of being present in these major cities and
conurbations. The current pipeline includes 30 further developments
in these areas which will increase the number of stores to 95% of
our portfolio.
Owned Store Portfolio UK France Spain Nether' Belgium Group
by Region lands
Total
Number of Stores 133 29 11 11 6 190
Let Square Feet (m sq
ft) 4.472 1.107 0.135 0.352 0.164 6.231
Maximum Lettable Area
(m sq ft) 5.730 1.360 0.340 0.440 0.220 8.090
Average Let Square Feet
per store (k sq ft) 34 38 12 32 27 33
Average Store Capacity
(k sq ft) 43 47 31 40 37 43
Closing Occupancy % 78.1% 81.3% 39.5% 80.7% 74.1% 77.0%
Average Rate (GBP per
sq ft) 30.25 36.59 28.82 16.20 18.67 30.26
Revenue (GBP'm) 166.5 43.9 3.8 6.4 3.6 224.2
Average Revenue per Store
(GBP'm) 1.25 1.51 0.35 0.58 0.60 1.18
The reported totals have not been adjusted for the impact of
rounding
We have a strong position in both the UK and Paris markets,
operating 133 stores in the UK, 73 of which are in London and the
South East, and 29 stores in Paris.
In the UK, 63% of our revenue is generated by our stores in
London and the South East. On average, our stores in London and the
South East are smaller than in the rest of the UK but the rental
rates achieved are materially higher, enabling these stores to
typically achieve similar or better margins than the larger stores.
In London we operate 50 stores within the M25, more than any other
competitor.
In France, we have a leading position in the heart of the
affluent City of Paris market with ten stores branded as Une Pièce
en Plus ("UPP") ("A spare room"). Over 60% of the UPP stores are
located in a cluster within a five-mile radius of the city centre,
which facilitates strong operational and marketing synergies as
well as options to differentiate and channel customers to the right
store subject to their preference for convenience or price
affordability. The Parisian market has attractive socio-demographic
characteristics for self storage and we believe that UPP enjoys
unique strategic strength in such an attractive market.
In Spain the Group has eleven stores open in Barcelona and
Madrid with a further five stores in the pipeline in these two
cities and in Pamplona in the Basque Country, a region with a
dynamic and healthy economy.
In the Benelux Region the Group has eleven stores open in the
Netherlands and six in Belgium. The pipeline contains a further
four stores in the Netherlands and one in Belgium.
In addition, Safestore has the benefit of a leading national
presence in the UK outside of London where the stores are
predominantly located in the centre of key metropolitan areas such
as Birmingham, Manchester, Liverpool, Bristol, Newcastle, Glasgow
and Edinburgh.
Market
The self storage market in the UK, France, Spain, the
Netherlands and Belgium remains relatively immature compared to
geographies such as the USA and Australia. The SSA Annual Survey
(May 2023) confirmed that self storage capacity stands at 0.82 sq
ft per head of population in the UK. The most recent report
relating to Europe (FEDESSA's 2023 report) showed that capacity in
France is 0.35 sq ft per capita. Whilst the Paris market density is
greater than France, we estimate it to be significantly lower than
the UK at around 0.4 sq ft per inhabitant. This compares with
closer to 10 sq ft per inhabitant in the USA and 2 sq ft in
Australia. In the UK, in order to reach the US density of supply,
it would require the addition of around another 17,000 stores as
compared to c. 1,500 currently. In the Paris region, it would
require around 2,400 new facilities versus c. 122 currently
opened.
In Spain, the Netherlands and Belgium, geographies the Group has
recently entered, penetration is similarly low. In Spain capacity
is around 0.32 sq ft per head of population and the consumer is
serviced by just 585 stores. In the Netherlands penetration is 0.50
sq ft per head of population (320 stores) and in Belgium 0.20 sq ft
per head of population (96 stores).
The Group recently entered a JV with Carlyle in Germany. The
German market is one of Europe's more under-penetrated markets with
just 0.21 sq ft of storage space per capita and, according to the
2023 FEDESSA report, there are just 530 facilities in the country
and 17.4 million sq ft of lettable space.
Our interpretation of the most recent 2023 SSA report is that
operators remain optimistic about expansion and the future growth
of the industry. The level of development estimated for the next
three years is similar to that witnessed in recent years and we do
not consider this level of new supply growth to be of concern,
especially as we believe new supply helps to create increased
awareness of what is a relatively immature product on Europe. We
estimate new supply to represent around 2% to 3% of the traditional
self storage industry in the UK. These figures represent gross
openings and do not consider storage facilities closing or being
converted for alternative uses. We estimate that a small proportion
of these sites compete with existing Safestore stores.
New supply in London and Paris is likely to continue to be
limited in the short and medium term as a result of planning
restrictions, competition from a variety of other uses and the
availability of suitable land.
The supply in the UK market, according to the SSA Survey,
remains relatively fragmented despite a number of acquisitions in
the sector in recent years. The SSA's estimates of the scale of the
UK industry are finessed each year and changes from one year to the
next represent improved data in addition to new supply. In the 2023
report the SSA estimates that 2,231 self storage facilities exist
in the UK market including around 739 container-based operations.
At the point in time that the 2023 survey was written, Safestore is
the industry leader by number of stores with 129 wholly owned sites
followed by Big Yellow with 108 stores (including Armadillo),
Access with 60 stores, Shurgard with 41 stores, Lok'n Store with 40
stores, Storage King with 38 stores and Ready Steady Store with 27
stores. In aggregate, the top seven leading operators account for
around 20% of the UK store portfolio. The remaining c. 1,780 self
storage outlets (including 739 container-based operations) are
independently owned in small chains or single units. In total there
are 1,086 storage brands operating in the UK.
Safestore's French business, UPP, is mainly present in the core
wealthier and more densely populated inner Paris and first belt
areas, whereas our two main competitors, Shurgard and Homebox, have
a greater presence in the outskirts and second belt of Paris.
Our Spanish business currently operates in Barcelona and Madrid.
The metropolitan areas of Barcelona and Madrid have combined
growing high-density populations of twelve million inhabitants and
significant barriers to entry.
Our focus in the Netherlands market is on the densely populated
Amsterdam and Randstad conurbations. The Netherlands is the second
most developed self storage market in Europe (after the UK) but
still remains under-penetrated with approximately 320 stores and
0.50 sq ft per capita of storage space.
Belgium is one of the more under-penetrated markets in Europe
with just 96 stores and 0.20 sq ft per capita of self storage
space. In Belgium our presence is focused on Brussels and the
significant urban conurbations of Liege, Charleroi and
Nivelles.
Consumer awareness of self storage appears to be increasing but
at a relatively slow rate, providing an opportunity for future
industry growth. The SSA survey indicates that approximately half
of consumers have low awareness about the service offered by self
storage operators or had not heard of self storage at all. Since
2014, this statistic has only fallen 6ppts from 62%. Therefore, the
opportunity to grow awareness, combined with limited new industry
supply, makes for an attractive industry backdrop.
Self storage is a brand-blind product. 66% of respondents were
unable to name a self storage business in their local area (64% in
2022). The lack of relevance of brand in the process of purchasing
a self storage product emphasises the need for operators to have a
strong online presence. This requirement for a strong online
presence was also reiterated by the SSA Survey where 76% of those
surveyed (73% in 2022) confirmed that an internet search would be
their chosen means of finding a self storage unit to contact,
whilst knowledge of a physical location of a store as reason for
enquiry was only c. 30% of respondents (c. 26% in 2022).
There are numerous drivers of self storage growth. Most private
and business customers need storage either temporarily or
permanently for different reasons at any point in the economic
cycle, resulting in a market depth that is, in our view, the reason
for its exceptional resilience. The growth of the market is driven
both by the fluctuation of economic conditions, which has an impact
on the mix of demand, and by growing awareness of the product.
Safestore's domestic customers' need for storage is often driven
by life events such as births, marriages, bereavements, divorces or
by the housing market including house moves and developments and
moves between rental properties. Safestore has estimated that UK
owner-occupied housing transactions drive around 8-13% of the
Group's new lets.
The Group's business customer base includes a range of
businesses from start-up online retailers through to multi-national
corporates utilising our national coverage to store in multiple
locations while maintaining flexibility in their cost base.
Business and Personal Group UK Paris Spain Benelux
Customers
Personal Customers
Numbers (% of total) 79% 77% 81% 90% 84%
Square feet occupied
(% of total) 61% 58% 64% 84% 76%
Average Length of Stay
(months) 20.9 17.5 26.7 23.2 30.9
Business Customers
Numbers (% of total) 21% 23% 19% 10% 16%
Square feet occupied
(% of total) 39% 42% 36% 16% 24%
Average Length of Stay
(months) 26.7 25.7 28.2 27.0 31.5
Safestore's customer base is resilient and diverse and consists
of around 90,000 domestic, business and National Accounts customers
across London, Paris, Spain, major UK cities, the Netherlands and
Belgium.
Business Model
The Group operates in a market with relatively low consumer
awareness. It is anticipated that this will increase over time as
the industry matures. To date, despite the financial crisis in
2007/08, the implementation of VAT in the UK on self storage in
2012, Brexit and the Covid-19 pandemic, the industry has been
exceptionally resilient. In the context of uncertain economic
conditions, driven by inflation and the war in Ukraine, the
industry remains well positioned with limited new supply coming
into the self storage market.
With more stores inside London's M25 than any other operator and
a strong position in central Paris, Safestore has leading positions
in the two most important and demographically favourable markets in
Europe. In addition, our presence in major cities in the UK is
unsurpassed and contributes to the success of our industry-leading
National Accounts business. In the UK, Safestore is the leading
operator by number of wholly owned stores. With 62% of customers
travelling for less than 15 minutes to their storage facility (2023
SSA Survey) Safestore's national store footprint represents a
competitive advantage.
The Group's capital-efficient portfolio of 190 wholly owned
stores in the UK, Paris, Spain, the Netherlands and Belgium
consists of a mix of freehold and leasehold stores. In order to
grow the business and secure the best locations for our facilities
we have maintained a flexible approach to leasehold and freehold
developments as well as being comfortable with a range of building
types, from new builds to conversions of warehouses and underground
car parks.
Currently, around a quarter of our stores in the UK are
leaseholds with an average remaining lease length at 31 October
2023 of 12.4 years (FY2022: 12.7 years). Although our property
valuation for leaseholds is conservatively based on future cash
flows until the next contractual lease renewal date, Safestore has
a demonstrable track record of successfully re-gearing leases
several years before renewal whilst at the same time achieving
concessions from landlords.
In England, we benefit from the Landlord and Tenant Act that
protects our rights for renewal except in case of redevelopment.
The vast majority of our leasehold stores have building
characteristics or locations in retail parks that make current
usage either the optimal and best use of the property or the only
one authorised by planning. We observe that our landlords, who are
property investors, value the quality of Safestore as a tenant and
typically prefer to extend the length of the leases that they have
in their portfolio, enabling Safestore to maintain favourable
terms.
In Paris, where 41% of stores are leaseholds, our leases
typically benefit from the well-enshrined Commercial Lease statute
that provides that tenants own the commercial property of the
premises and that they are entitled to renew their lease at a rent
that is indexed to the Indice des Loyers Commerciaux (Commercial
Rental Index) published by the state. Taking into account this
context, the valuer values the French leaseholds based on an
indefinite property tenure, similar to freeholds but at a
significantly higher exit cap rate.
The Group believes there is an opportunity to leverage its
highly scalable marketing and operational expertise in new
geographies outside the UK and Paris. During 2019, a Joint
Venture(14) was established with Carlyle, which acquired the M3
Self Storage business in the Netherlands which had six stores in
Amsterdam and Haarlem. In June 2020, the Joint Venture(14) added
the Lokabox business, a portfolio of six stores in Brussels (2),
Liege (2), Charleroi and Nivelles. In December 2020, the Joint
Venture(14) acquired the Opslag XL portfolio adding a further three
stores in Amsterdam, The Hague and Hilversum and opened a store in
Nijmegen in the Netherlands in January 2022. The Amsterdam store
has subsequently been closed as planned following lease expiry.
After three years of learning about and understanding these
markets, the Group acquired the remaining 80% of equity in the
Joint Venture(14) owned by Carlyle in March 2022 and subsequently
added a further two stores.
In 2019, the Group entered the Spanish market with the
acquisition of OhMyBox. Our Spanish portfolio currently consists of
eight stores in Barcelona, and three Madrid stores. We have a
further five stores in our development pipeline situated in Madrid,
Barcelona and Pamplona. We consider these cities to have attractive
characteristics in relation to self storage and intend to continue
to seek further expansion opportunities.
In late 2022, Safestore entered the German self storage market
via a new Joint Venture(15) with Carlyle, which has acquired the
myStorage business. myStorage has seven medium to long-term
leasehold stores and 326,000 sq ft of MLA in Berlin, Heidelburg,
Mannheim, Fürth, Nuremburg, Neu-Ulm and Reutlingen.
Our experience is that being flexible in its approach has
enabled Safestore to operate from properties and in markets that
would have been otherwise unavailable and to generate strong
cash-on-cash returns.
Safestore excels in the generation of customer enquiries which
are received through a variety of channels including the internet,
telephone and "walk-ins". In the early days of the industry, local
directories and store visibility were key drivers of enquiries.
However, the internet is now by far the dominant channel,
accounting for 89% (FY2022: 90%) of our enquiries in the UK and 84%
(FY2022: 85%) in France. This dynamic is a clear benefit to the
leading national operators that possess the budget and the
management skills necessary to generate a commanding presence in
the major search engines. Safestore has developed and continues to
invest in a leading digital marketing platform that has generated
43% enquiry growth over the last five years.
Although mostly generated online, our enquiries are
predominantly handled directly by the stores and, in the UK, we
have a Customer Support Centre ("CSC") which handles customer
service issues in addition to enquiries, in particular when the
store colleagues are busy handling calls or outside of normal store
opening hours.
Our pricing platform provides the store and CSC colleagues with
system-generated real-time prices managed by our centrally based
yield-management team. Local colleagues have certain levels of
discretion to flex the system-generated prices but this is
continually monitored.
Customer service standards are high and customer satisfaction
feedback is consistently very positive. Safestore invites customers
to leave a review on a number of review platforms, including Feefo,
Google and Trustpilot. Our ratings for each of these three
providers in the UK is 4.8 out of 5. In France, Une Pièce en Plus
uses Trustpilot to obtain independent customer reviews with a
"TrustScore" of 4.6 out of 5. In Spain, OMB collects customer
feedback via Google reviews and has maintained a score of 4.7 out
of 5. The key drivers of sales success are the capacity to generate
enquiries in a digital world, the capacity to provide storage
locations that are conveniently located close to the customers'
requirements and the ability to maintain a consistently high
quality, motivated retail team that is able to secure customer
sales at an appropriate storage rate, all of which can be better
provided by larger, more efficient organisations.
We remain focused on business as well as domestic customers. Our
national network means that we are uniquely placed to further grow
the business customer market and in particular National Accounts.
Business customers in the UK now constitute 42% of our total space
let and have an average length of stay of 26 months. Within our
business customer category, our National Accounts business
represents around 487,000 sq ft of occupied space (around 8% of the
UK's occupancy). Approximately two-thirds of the space occupied by
National Accounts customers is outside London, demonstrating the
importance and quality of our well invested national estate.
The business now has in excess of c. 90,000 business and
domestic customers with an average length of stay of 27 months and
21 months respectively.
The cost base of the business is relatively fixed. Each store
typically employs three staff. Our Group Head Office comprises
business support functions such as Yield Management, Property,
Marketing, HR, IT and Finance.
With the establishment of a GBP400 million unsecured
multi-currency Revolving Credit Facility, Safestore has secure
financing, a strong balance sheet and significant covenant
headroom. This provides the Group with financial flexibility and
the ability to grow organically and via carefully selected new
development or acquisition opportunities.
At 31 October 2023, we had 1.2 million sq ft of unoccupied space
in the UK, 0.2 million sq ft in France and 0.5 million sq ft in
Spain and Benelux, equivalent to c. 47 full new stores. Our
continued focus is on filling the spare capacity in our stores at
optimally yield-managed rates. The operational leverage of our
business model will ensure that the bulk of the incremental revenue
converts to profit given the relatively fixed nature of our cost
base.
Trading Performance
Trading Data- Total
Key Measures - Total Year ended Year ended Change
31 October 31 October
2023 2022
---------------------------------- ------------ ------------ -------
Revenue
UK (GBP'm) 166.5 163.0 2.1%
Paris (EUR'm) 50.5 48.8 3.5%
Spain (EUR'm) 4.3 3.6 19.4%
Netherlands (EUR'm) 7.2 3.6 100.0%
Belgium (EUR'm) 4.1 2.3 78.3%
---------------------------------- ------------ ------------ -------
Underlying EBITDA
UK (GBP'm) 106.2 103.6 2.5%
Paris (EUR'm) 35.0 33.0 6.1%
Spain (EUR'm) 1.2 1.8 -33.3%
Netherlands (EUR'm) 3.6 1.3 176.9%
Belgium (EUR'm) 1.4 0.9 55.6%
---------------------------------- ------------ ------------ -------
Maximum Lettable Area (MLA)
UK (let sq ft- million) 5.730 5.620 2.0%
Paris (let sq ft- million) 1.360 1.360 0.0%
Spain (let sq ft- million) 0.340 0.120 183.3%
Netherlands (let sq ft- million) 0.440 0.380 15.8%
Belgium (let sq ft- million) 0.220 0.220 0.0%
---------------------------------- ------------ ------------ -------
Closing Occupancy
UK (let sq ft- million) 4.473 4.637 -3.5%
Paris (let sq ft- million) 1.107 1.112 -0.4%
Spain (let sq ft- million) 0.135 0.095 42.1%
Netherlands (let sq ft- million) 0.352 0.298 18.1%
Belgium(let sq ft- million) 0.164 0.175 -6.3%
---------------------------------- ------------ ------------ -------
Closing Occupancy (% of MLA)
UK 78.1% 82.6% -4.5%
Paris 81.3% 81.7% -0.4%
Spain 39.5% 78.9% -39.4%
Netherlands 80.7% 78.8% 1.9%
Belgium 74.1% 78.8% -4.7%
---------------------------------- ------------ ------------ -------
Average Rate
UK (GBP) 30.25 28.79 5.1%
Paris (EUR) 42.05 40.47 3.9%
Spain (EUR) 33.12 34.07 -2.8%
Netherlands (EUR) 18.61 19.18 -3.0%
Belgium (EUR) 21.45 18.79 14.2%
---------------------------------- ------------ ------------ -------
REVPAF
UK (GBP) 29.07 29.02 0.2%
Paris (EUR) 37.10 35.81 3.6%
Spain (EUR) 12.64 29.78 -57.6%
Netherlands (EUR) 16.53 16.20 2.0%
Belgium (EUR) 18.68 17.43 7.2%
---------------------------------- ------------ ------------ -------
Trading Data- Like-For-Like
Key Measures - Like-For-Like Year ended Year ended Change
31 October 31 October
2023 2022
------------------------------ ------------ ------------ -------
Revenue
UK (GBP'm) 162.8 160.9 1.2%
Paris (EUR'm) 50.5 48.8 3.5%
Spain (EUR'm) 3.6 3.6 0.0%
Underlying EBITDA
UK (GBP'm) 104.3 101.9 2.4%
Paris (EUR'm) 35.0 33.0 6.1%
Spain (EUR'm) 1.6 2.0 -20.0%
Underlying EBITDA Margin %
UK (%) 64.1% 63.3% 0.8%
Paris (%) 69.3% 67.6% 1.7%
Spain (%) 44.4% 55.6% -11.2%
Closing Occupancy
UK (let sq ft- million) 4.392 4.587 -4.3%
Paris (let sq ft- million) 1.107 1.112 -0.4%
Spain (let sq ft- million) 0.084 0.093 -9.7%
Closing Occupancy (% of MLA)
UK 79.2% 83.0% -3.8%
Paris 81.3% 81.7% -0.4%
Spain 77.9% 85.9% -8.0%
Average Occupancy
UK (let sq ft- million) 4.396 4.582 -4.1%
Paris (let sq ft- million) 1.103 1.103 0.0%
Spain (let sq ft- million) 0.087 0.094 -7.4%
Average Rate
UK (GBP) 30.31 28.83 5.1%
Paris (EUR) 42.05 40.47 3.9%
Spain (EUR) 36.64 34.11 7.4%
REVPAF
UK (GBP) 29.35 29.10 0.9%
Paris (EUR) 37.10 35.81 3.6%
Spain (EUR) 33.33 33.05 0.8%
------------------------------ ------------ ------------ -------
Details of trading operating KPIs are included in the tables
above.
UK
UK revenue was up 2.1% for the year in total and 1.2% on a
like-for-like(8) basis.
Demand, measured by enquiry levels, was down on the previous
year but ahead of pre-COVID levels.
We believe that our REVPAF(10) , a measure of how effectively we
yield manage our assets, is the strongest in the industry and
materially above some of our competitors. REVPAF(10) grew by 0.9%
for the year on a like-for-like(8) basis.
Like-for-like EBITDA(2) grew by 2.4% with EBITDA margins
improving by 0.8ppts to 64.1% reflecting strong cost control in the
business. Like-for-like costs declined by 1.0% in the year.
Paris
Our Paris business did not experience the same surge in demand
that we saw in the UK during the COVID period but continued to grow
steadily.
Paris revenue grew 3.5% in total for the year on a total and
like-for-like(8) basis. Like-for-like(8) revenue growth in the
fourth quarter was 3.2%.
Our REVPAF(10) , which we believe is materially ahead of the
local competition, grew by a further 3.6% for the year.
Enquiry levels in Paris were marginally down compared to the
same period last year but ahead of pre-COVID levels.
Like-for-like EBITDA grew by 6.1% with EBITDA margins improving
by 1.7ppts to 64.1% reflecting tight cost control in the business.
Like-for-like costs reduced by 2% in the year.
Spain
Since acquiring our Spanish business in 2019 we have opened a
further seven stores. We now have eleven open stores and a pipeline
of a further five stores in Madrid, Barcelona and one in
Pamplona.
Over the year our Spanish business grew revenue by 19.4% and by
44.4% in the fourth quarter. Like-for-like(8) revenue was flat over
the year.
In line with our expectations, like-for-like(8) occupancy in
Barcelona has initially been diluted by the new Barcelona stores
which have opened in close proximity and within the same catchment
area as an existing store. Management believes that, given the
limited supply in central Barcelona, once the absorption phase has
been passed, the stores will generate higher revenue and profits
and provide significant long-term value.
Like-for-like EBITDA was broadly flat at store level but
declined by GBP0.4million after professional fees.
Netherlands
Our Netherlands business, acquired on 30 March 2022, contributed
EUR7.2 million revenue for the year and EUR3.6 million of
EBITDA.
During the year, a new store in Amersfoort has opened and an
additional store in Apeldoorn was acquired. We now have eleven
stores open in the Netherlands and a pipeline of a further four
sites located in the Randstad area.
The Netherlands business is not treated as like-for-like(8)
during the 2023 financial year. However, the stores that were in
the Group for the whole of the fourth quarter in 2022 delivered
10.7% growth in Q4 2023.
Belgium
Our Belgium business, acquired with our Netherlands business on
30 March 2022, contributed EUR4.1 million revenue for the year and
EUR1.4 million of EBITDA.
We have six stores open in Belgium and a pipeline of one
additional site located in Brussels.
The Belgian business is not treated as like-for-like(8) during
the 2023 financial year. However, the stores that were in the Group
for the whole of the fourth quarter in 2022 delivered 10.0% growth
in Q4 2023.
Frederic Vecchioli
16 January 2024
Financial Review
EPS(1) has grown by 348% over the last ten years
Underlying income statement
The table below sets out the Group's underlying results of
operations for the year ended 31 October 2023 and the year ended 31
October 2022. To calculate the underlying performance metrics,
adjustments are made for the impact of exceptional items,
share-based payments, corporate transaction costs, change in fair
value of derivatives, gain or loss on investment properties and the
associated tax impacts, as well as exceptional tax items and
deferred tax. Although not superseding IFRS, management considers
this presentation of earnings to be representative of the
underlying performance of the business, as it removes the income
statement impact of items not fully controllable by management,
such as the revaluation of derivatives and investment properties,
and the impact of exceptional credits, costs and finance
charges.
2023 2022 Mvmt
GBP'm GBP'm %
Revenue 224.2 212.5 5.5%
Underlying costs (82.0) (77.5) 5.8%
Share of associate's Underlying
EBITDA - 0.1 (100.0%)
------- -------
Underlying
EBITDA 142.2 135.1 5.3%
Leasehold costs (14.9) (13.6) 9.6%
------- -------
Underlying EBITDA after
leasehold costs 127.3 121.5 4.8%
Depreciation (1.3) (1.0) 30.0%
Finance charges (15.9) (10.9) 45.9%
Share of associate's finance
charges - (0.4) (100.0%)
------- -------
Underlying profit
before tax 110.1 109.2 0.8%
Current tax (5.1) (5.2) (1.9%)
Adjusted EPRA earnings 105.0 104.0 1.0%
Share-based payments
charge (3.5) (11.2) (68.8%)
EPRA basic
earnings 101.5 92.8 9.4%
------- -------
Average shares in issue
(m) 217.2 210.9
Diluted shares (for
ADE EPS) (m) 219.1 218.9
Adjusted Diluted EPRA EPS(1)
(p) 47.9 47.5 0.8%
Note:
1. Adjusted EPRA earnings excludes share-based payment charges
and, accordingly, the Underlying EBITDA, Underlying EBITDA after
leasehold costs and Underlying profit before tax measures have been
adjusted to exclude share-based payment charges for
consistency.
The table below reconciles statutory profit before tax in the
income statement to underlying profit before tax in the previous
table.
2023 2022
GBP'm GBP'm
Statutory profit before tax 207.8 498.8
Adjusted for:
- Gain on investment properties
and investment property under
construction (102.6) (389.9)
- Change in fair value of derivatives 1.7 0.3
- Net exchange loss (0.3) -
- Share-based payments 3.5 11.2
- Exceptional items and other
exceptional gains - (10.7)
- Exceptional finance income - (0.5)
Underlying profit before tax 110.1 109.2
-------- --------
Underlying EBITDA increased by 5.3% to GBP142.2 million (FY2022:
GBP135.1 million), reflecting a 5.5% increase in revenue and a 5.8%
increase to the underlying cost base. This performance reflects the
growth in average rate of 3.5% to GBP30.26 in 2023 from GBP29.25 in
2022 offset by a reduction in occupancy of 5.1ppts to 77.0% in 2023
from 82.1% in 2022, whilst maintaining control over costs.
Like-for-like revenue grew by 2.2% with the like-for-like cost base
broadly flat compared to 2022.
Leasehold costs increased by 9.6% from GBP13.6 million to
GBP14.9 million, principally due to the impact of rent reviews
across the portfolio in addition to the Netherlands leaseholds now
forming part of the Group.
Underlying finance charges increased by 45.9% from GBP10.9
million to GBP15.9 million. This principally reflects interest
charges which increased from GBP11.9 million in 2022 to GBP15.1
million in 2023 driven by higher debt levels and higher rates on
borrowing to fund the Group's acquisition and development activity,
offset by the gains made on financial instruments of GBP0.4 million
in 2023 (FY2022: GBP1.3 million).
As a result, we achieved a 0.8% increase in underlying profit
before tax of GBP110.1 million (FY2022: GBP109.2 million). The main
movement in statutory profit before tax in the year is the GBP287.3
million decrease in the gain on investment and development property
to GBP102.6 million (FY 2022: GBP389.9 million) partially offset by
the reduction in the share-based payment charge of GBP7.7 million
to GBP3.5 million (FY2022: GBP11.2 million).
Included within statutory profit before tax in 2022 were other
exceptional gains of GBP10.7 million. GBP5.5 million related to the
valuation gain of Safestore's 20% investment in the Joint Venture
formed in 2019 with Carlyle that arose on acquisition of the
remaining 80%, with GBP5.1 million related to the profit on the
sale of the Nanterre land in Paris in November 2021.
Given the Group's REIT status in the UK, tax is normally only
payable in France, Spain, the Netherlands and Belgium. The
underlying tax charge for the year was GBP5.1 million (FY2022:
GBP5.2 million), calculated by applying the effective underlying
tax rate of 22.5% to the respective underlying profits earned by
the non-UK businesses.
As explained in note 2 to the financial statements, management
considers that the most representative Earnings per Share ("EPS")
measure is Adjusted Diluted EPRA EPS which has increased by 0.8% to
47.9 pence (FY2022: 47.5 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the
income statement to Underlying EBITDA.
2023 2022
GBP'm GBP'm
Statutory Operating profit 230.4 514.5
Adjusted for:
- Gain on investment
properties (93.8) (381.6)
- Share of associate's Underlying
EBITDA - 0.4
- Depreciation 1.3 1.0
- Variable lease payments 0.8 0.3
- Share-based payments 3.5 11.2
Exceptional
items:
- Costs incurred relating to corporate
restructuring and
exceptional taxation costs - 0.1
Other exceptional gains:
- Profit on sale of land - (5.1)
- Profit on disposal of investment
property - (0.2)
- Net gain on deemed disposal of
investment in associate - (5.5)
Underlying EBITDA 142.2 135.1
------- --------
The main reconciling items between statutory operating profit
and Underlying EBITDA are the gain on investment properties as well
as adjustments for depreciation, variable lease payments,
share-based payment charges, exceptional gains and the share of
associate's Underlying EBITDA. The gain on investment properties
was GBP93.8 million, as compared to GBP381.6 million in 2022
primarily due to the stable performance of the stores over the
period, against a period of outperformance in 2021 and 2022. The
Group's approach to the valuation of its investment property
portfolio at 31 October 2023 is discussed below.
Underlying profit by geographical region
The Group is organised and managed in four operating segments
based on geographical region. The table below details the
underlying profitability of each region.
2023 2022
Total Total
UK Paris Spain Benelux (CER) UK Paris Spain Benelux (CER)
GBP'm EUR'm EUR'm EUR'm GBP'm GBP'm EUR'm EUR'm EUR'm GBP'm
Revenue 166.5 50.5 4.3 11.3 222.7 163.0 48.8 3.6 5.9 212.5
Underlying
cost of sales (51.1) (12.1) (1.9) (5.0) (67.3) (48.2) (12.2) (1.2) (2.5) (61.7)
------- ------- ------ -------- ------- ------- ------- ------ -------- -------
Store EBITDA 115.4 38.4 2.4 6.3 155.4 114.8 36.6 2.4 3.4 150.8
Store EBITDA
margin 69.3% 76.0% 55.8% 55.8% 69.8% 70.4% 75.0% 66.7% 57.6% 71.0%
LFL store
EBITDA margin 69.3% 76.0% 75.0% n/a 70.7% 70.3% 75.0% 75.0% n/a 71.3%
Underlying
administrative
expenses (9.2) (3.4) (1.2) (1.3) (14.2) (11.2) (3.6) (0.6) (1.2) (15.8)
Underlying
EBITDA 106.2 35.0 1.2 5.0 141.2 103.6 33.0 1.8 2.2 135.0
EBITDA margin 63.8% 69.3% 27.9% 44.2% 63.4% 63.6% 67.6% 50.0% 37.3% 63.5%
LFL EBITDA
margin 64.1% 69.3% 44.4% n/a 64.8% 63.3% 67.6% 55.6% n/a 64.1%
Leasehold costs (8.6) (6.3) (0.5) (0.3) (14.7) (8.0) (5.9) (0.5) (0.1) (13.6)
Underlying
EBITDA after
leasehold costs 97.6 28.7 0.7 4.7 126.5 95.6 27.1 1.3 2.1 121.4
------- ------- ------ -------- ------- ------- ------- ------ -------- -------
EBITDA after
leasehold costs
margin 58.6% 56.8% 16.3% 41.6% 56.8% 58.7% 55.5% 36.1% 35.6% 57.1%
UK Paris Spain Benelux Total UK Paris Spain Benelux Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Underlying EBITDA
after leasehold
costs (CER) 97.6 24.3 0.6 4.0 126.5 95.6 22.9 1.1 1.8 121.4
Adjustment to
actual exchange
rate - 0.6 0.1 0.1 0.8 - - - - -
Reported
underlying
EBITDA after
leasehold costs 97.6 24.9 0.7 4.1 127.3 95.6 22.9 1.1 1.8 121.4
------- ------- ------ -------- ------- ------- ------- ------ -------- -------
Note: CER is Constant Exchange Rates (Euro denominated results
for the current period have been retranslated at the exchange rate
effective for the comparative period in order to present the
reported results on a more comparable basis).
Underlying EBITDA in the UK increased by GBP2.6 million, or
2.5%, to GBP106.2 million (FY2022: GBP103.6 million), underpinned
by a 2.1% or GBP3.5 million increase in revenue, which was driven
by an increase in average rate of 5.1%, offset by a decrease in
average occupancy of 3.3% and an increase of 1.5% n the underlying
cost base, with like-for-like underlying costs decreasing 0.8%. The
UK also reflected steady like-for-like revenue growth of 1.2%. The
underlying UK EBITDA margin was slightly up at 63.8% compared to
2022 at 63.6% whilst the like-for-like EBITDA margin saw a 0.8ppt
increase to 64.1% from 63.3% in 2022.
In Paris, underlying EBITDA increased by EUR2.0m, or 6.1%, to
EUR35m (FY2022: EUR33.0m), reflecting a EUR1.7m increase in
revenue, arising from a 3.9% increase in the average storage rate
coupled with average occupancy remaining constant. The EBITDA after
leasehold costs margin in Paris increased from 55.5% in 2022 to
56.8% in 2023, reflecting the control over the underlying cost base
of the portfolio, with a reduction in underlying cost of sales of
0.8% and administrative costs of 5.6%, offset by underlying
leasehold costs increasing by 6.8%. Underlying EBITDA after
leasehold rent in Paris increased by 5.9% to EUR28.7m (FY2022:
EUR27.1m).
In Spain, revenue increased to EUR4.3m (FY2022: EUR3.6m),
arising from the opening of six new stores and a 7.4% increase in
like-for-like average storage rate, offset by a decrease in
like-for-like average occupancy of 7.4%. Underlying EBITDA
decreased by EUR0.6m to EUR1.2m, due to an increase in the
underlying cost base and administrative expenses resulting from
additional employment costs to support the new stores as well as
their dilutive impact whilst they achieve stabilisation.
On 30 March 2022, Safestore acquired the remaining 80% of the
equity owned by Carlyle Europe Realty in the Joint Venture formed
in 2019. The Joint Venture was set up in 2019 to acquire and
develop assets in The Netherlands and Belgium in order to leverage
Safestore's operating platform outside our core markets. The
contribution to revenue for the period was EUR11.3m and EUR4.7m
EBITDA after leasehold costs. In 2022, the businesses contributed
seven months' revenue which equated to EUR5.9 million.
The combined results of the UK, Paris, Spain and Benelux
delivered a 4.2% increase in Underlying EBITDA after leasehold
costs at constant exchange rates at Group level. Adjusting for a
favourable exchange impact of GBP0.8 million, the combined results
of the UK, Paris, Spain and Benelux reported an Underlying EBITDA
after leasehold costs increase of 4.9% or GBP5.9 million to
GBP127.3 million (FY2022: GBP121.4 million).
Revenue
Revenue for the Group is primarily derived from the rental of
self storage space and the sale of ancillary products such as
insurance and merchandise (e.g. packing materials and
padlocks).
The split of the Group's revenues by geographical segment is set
out below for 2023 and 2022.
% of % of
2023 total 2022 total % change
UK GBP'm 166.5 73% 163.0 76% 2.1%
Paris
Local currency EUR'm 50.5 48.8 3.5%
Paris in Sterling GBP'm 43.9 20% 41.4 19% 6.0%
Spain
Local currency EUR'm 4.3 3.6 19.4%
Spain in Sterling GBP'm 3.8 2% 3.0 2% 26.7%
Benelux
Local currency EUR'm 11.3 5.9 91.5%
Benelux in Sterling GBP'm 10.0 5% 5.1 3% 94.1%
Average exchange
rate 1.149 1.178 2.5%
Total revenue GBP'm 224.2 100% 212.5 100% 5.5%
------ ------- ------ ------- ---------
The Group's revenue increased by 5.5% or GBP11.7 million in the
year. The average storage rate per sq ft for the Group was, at
GBP30.26, 3.5% higher than in 2022 (GBP29.25) offset by occupied
space which was 86,000 sq ft lower at 31 October 2023 (6.231
million sq ft) than at 31 October 2022 (6.317 million sq ft).
Adjusting the Group's revenue for the impact of new stores to a
like-for-like basis, revenue has increased by 2.2%. Adjusting for
the exchange rate impact in the current year, Group like-for-like
revenue at constant exchange rates has increased by 1.7%.
In the UK, revenue grew by GBP3.5 million or 2.1%, and on a
like-for-like basis it increased by 1.2%. Occupancy was 164,000 sq
ft lower at 31 October 2023 than at 31 October 2022, at 4.473
million sq ft (FY2022: 4.637 million sq ft). The average storage
rate for the year grew 5.1%, from GBP28.79 in 2022 to GBP30.25 in
2023. On a like-for-like basis, the average storage rate in the UK
also increased by 5.1% to GBP30.31 (FY2022: GBP28.83).
In Paris, revenue grew by EUR1.7 million or 3.5% and on a
like-for-like basis it increased by 3.5% to EUR50.52 million
(FY2022: EUR48.76 million). This was driven by an increase in the
average storage rate of 3.9% to EUR42.05 for the year (FY2022:
EUR40.47), with average occupancy being flat, with closing
occupancy decreasing to 1.107 million sq ft (FY2022: 1.112 million
sq ft).
For Spain, revenue was EUR4.3 million (FY2022: EUR3.6 million),
reflecting the growth in new stores, with like-for-like revenue
being flat at EUR3.6 million. On a like-for-like basis, average
rate increased 6.1% to EUR36.64 (FY2022: EUR34.11), with a closing
occupancy of 0.084 million sq ft (77.9%, on a like for like
basis).
Our Netherlands and Belgium businesses, acquired on 30 March
2022 from the buyout of the remaining 80% of the equity owned by
Carlyle in the Joint Venture formed in 2019, contributed EUR11.3
million revenue (FY2022: EUR5.9m, representing seven months'
revenue since acquisition date). Collectively, the businesses saw
43,000 sq ft of occupancy inflows over the year and our Netherlands
and Belgium businesses ended the period with a closing occupancy of
78.5% (FY 2022: 78.8%). The average rate for the period was
EUR18.61 and EUR21.45 for the Netherlands and Belgium respectively.
(FY2022: EUR19.18 and EUR18.79 respectively for the seven month
period).
Analysis of cost base
Cost of sales
The table below details the key movements in cost of sales
between 2022 and 2023.
Cost of
sales 2023 2022
GBP'm GBP'm
Statutory cost of sales (69.9) (63.0)
Adjusted
for:
Depreciation 1.3 1.0
Variable lease payments 0.8 0.3
Underlying cost of sales (67.8) (61.7)
-------- -------
Underlying cost of sales
for FY2022 (61.7)
New developments cost of sales 2.7
Underlying cost of sales for FY2022
(Like-for-like) (59.0)
Volume related cost of sales 0.9
Employee remuneration, recruitment
and training (1.1)
Facilities and rates (1.4)
Enquiry generation (0.5)
Underlying cost of sales for FY2023
(Like-for-like; CER) (61.1)
New developments cost of sales (6.2)
Underlying cost of sales
for FY2023 (CER) (67.3)
Foreign exchange (0.5)
Underlying cost of sales
for FY2023 (67.8)
-------
In order to arrive at underlying cost of sales, adjustments are
made to remove the impact of depreciation, which does not form part
of Underlying EBITDA, and variable lease payments, which forms part
of our leasehold costs in the presentation of our underlying income
statement.
Underlying cost of sales increased by GBP6.1 million in the
year, from GBP61.7 million in 2022 to GBP67.8 million in 2023. On a
like-for-like basis and at constant exchange rates, cost of sales
increased by GBP2.1 million or 3.6%, with a GBP1.4 million increase
in facilities and business rates due to business rates reviews, and
increases in utilities and store maintenance charges as well as a
GBP1.1 million increase in employee costs offset by a reduction in
volume related costs of sales of GBP0.9 million. The investment in
marketing during the year represented 3.8% of revenue (FY2022:
3.6%).
Administrative expenses
The table below reconciles reported administrative expenses to
underlying administrative expenses and details the key movements in
underlying administrative expenses between 2022 and 2023.
Administrative expenses 2023 2022
GBP'm GBP'm
Statutory administrative expenses (17.7) (27.1)
Adjusted for:
Share-based payments 3.5 11.2
Exceptional items - 0.1
Underlying administrative
expenses (14.2) (15.8)
------- -------
Underlying administrative expenses
for FY2022 (15.8)
New developments administration
costs 1.1
Underlying administrative expenses for
FY2022 (Like-for-like) (14.7)
Employee related costs 2.7
Professional fees and administration
costs (0.4)
Underlying administrative expenses for
FY2023 (Like-for-like; CER) (12.4)
New developments administration
costs (1.8)
Underlying administrative expenses
for FY2023 (CER) (14.2)
Foreign exchange -
Underlying administrative expenses
for FY2023 (14.2)
-------
In order to arrive at underlying administrative expenses,
adjustments are made to remove the impact of exceptional items,
share-based payments and other non-underlying items.
Underlying administrative expenses decreased by GBP1.6 million
in the year, from GBP15.8 million in 2022 to GBP14.2 million in
2023. Like-for-like administrative expenses at constant exchange
rates decreased by GBP2.3 million. This is the result of a
reduction in expected variable employee remuneration and other
employee related costs.
Therefore, total underlying costs (cost of sales plus
administrative expenses) on a like-for-like basis and at constant
exchange rates have remained relatively constant at GBP73.5 million
(FY2022: GBP73.7 million).
Exceptional items and other exceptional gains
In 2022, included within exceptional items and other exceptional
gains of GBP10.7 million are GBP5.5 million relating to the
valuation gain of Safestore's 20% investment in the Joint Venture
and GBP5.1 million relating to the profit on the sale of the
Nanterre land in Paris in November 2021.
In France, the basis on which property taxes have been assessed
has been challenged by the tax authority for financial years 2011
onwards. In November 2022 the French Supreme Court delivered a
final judgement in respect of litigation for years 2011 to 2013,
which resulted in a partial success for the Group. The Group is
separately pursuing litigation in respect of years since 2013 and
has lodged an appeal with the French administrative tribunal
against the issues included in assessments for 2013 onwards on
which it was ultimately unsuccessful in the French Supreme Court
for the earlier years. A provision is included in the consolidated
financial accounts of GBP2.6 million at 31 October 2023 (31 October
2022: GBP2.4 million), to reflect the increased uncertainty
surrounding the likelihood of a successful outcome. Of the total
provided, GBP0.2m has been charged in relation to the year ended 31
October 2023 within cost of sales (Underlying EBITDA) (31 October
2022: GBP0.3 million within cost of sales (underlying EBITDA) and
GBP1.9 million recorded as an exceptional charge in respect of
financial years 2012 to 2020).
It is possible that the French tax authority may appeal the
decisions of the French Court of Appeal on which the Group was
successful to the French Supreme Court. The maximum potential
exposure in relation to these issues at 31 October 2023 is GBP3.0
million (31 October 2022: GBP3.0 million). No provision for any
further potential exposure has been recorded in the consolidated
financial statements since the Group believes it is more likely
than not that a successful outcome will be achieved, resulting in
no additional liabilities.
Gain on investment properties
The gain on investment properties consists of the revaluation
gains and losses with respect to investment properties under IAS 40
and the fair value re-measurement of lease liabilities add-back and
other items as detailed below.
2023 2022
GBP'm GBP'm
Revaluation of investment
properties 103.5 394.1
Revaluation of investment properties
under construction (0.9) (4.2)
Fair value re-measurement of lease
liabilities add-back (8.8) (8.3)
Statutory gain on investment
properties 93.8 381.6
------ ------
In the current financial year, the UK business contributed
GBP75.8 million to the positive valuation movement, the Paris
business contributed GBP20.5 million and Benelux contributing
GBP7.5 million. Spain showed a flat valuation movement over the
period as the stores start to generate income, growing toward
stabilised occupancy. The gain on investment properties principally
reflects the continuing progress in the performance of the
businesses, which has driven further positive changes in the cash
flow metrics that are used to assess the value of the store
portfolio which are predominantly based on trading potential,
underpinned by average rate, which has increased by 3.5% to
GBP30.26 in 2023 from GBP29.25 in 2022; and capitalisation rates
and stabilised occupancy which have remained constant at 5.72% and
89.33% respectively.
Operating profit
Operating profit decreased by GBP284.1 million from GBP514.5
million in 2022 to GBP230.4 million in 2023, comprising a GBP7.1
million increase in Underlying EBITDA, a GBP287.8 million reduction
in the gain on investment properties and investment properties
under construction primarily due to the stable performance of the
stores over the period, against a period of outperformance in 2021
and 2022, a reduction in the share-based payments charge of GBP7.7
million as well as the one-off other exceptional gains and
exceptional items of GBP10.7 million in 2022
Net finance costs
Net finance costs include interest payable, interest on lease
liabilities, fair value movements on derivatives, exchange gains or
losses, unwinding of discounts and exceptional refinancing costs.
Net finance costs increased by GBP6.9 million in 2023 to GBP22.6
million from GBP15.7 million in 2022, principally due to the
increased interest charges associated with borrowing to fund the
Group's acquisition and development activity and the amortisation
of debt issuance costs associated with the refinancing of the
existing revolving credit facility in November 2022, offset by the
gains made on financial instruments.
2023 2022
GBP'm GBP'm
Net bank interest payable (15.1) (11.9)
Amortisation of debt issuance costs
on bank loans (1.3) (0.5)
Interest from loan to associates - 0.1
Financial instruments income 0.4 1.3
Other interest received 0.1 0.1
------- -------
Underlying finance charges (15.9) (10.9)
Interest on lease liabilities (5.3) (5.0)
Fair value movement on derivatives (1.7) (0.3)
Net exchange gains 0.3 -
Exceptional finance income - 0.5
------- -------
Net finance costs (22.6) (15.7)
------- -------
Net bank interest payable 15.1 11.9
Capitalised interest 4.4 1.1
------- -------
Total interest paid 19.5 13.0
Underlying finance charge
The underlying finance charge (net bank interest payable
reflecting term loan, swap and USPP interest costs) increased by
GBP5.0 million to GBP15.9 million, principally reflecting the
increased interest charge associated with the Group's additional
borrowings in the year, drawn to fund the Group's acquisition and
development activity and the amortisation of debt issuance costs
associated with the refinancing. The underlying finance charge
represents the finance expense before exceptional items and changes
in fair value of derivatives, amortisation of debt issuance costs
and interest on lease liabilities and is disclosed because
management reviews and monitors performance of the business on this
basis.
During the year, the Group capitalised interest of GBP4.4
million (FY2022: GBP1.1 million) associated with borrowings to fund
the acquisition of properties. Interest is capitalised from the
point of acquiring the site until the store opens.
Financial instruments income in the year of GBP0.4 million
(FY2022: GBP1.3 million) related to the gains made on the
expiration of interest rate swaps that matured in June 2023.
Based on the year-end drawn debt position the effective interest
rate is analysed as follows:
Facility Drawn Hedged Hedged Bank Hedged Floating Total
Margin Rate Rate Rate
GBP/EUR'm GBP'm GBP'm % % % % %
UK Revolver -
GBP drawn GBP400.0 GBP162.0 - - 1.25% - 5.19% 6.44%
UK Revolver -
EUR drawn GBP41.0 - - 1.25% - 3.88% 5.13%
UK Revolver-
non-utilisation GBP197.0 - - - 0.50% - - 0.50%
US Private
Placement
2024 EUR50.9 GBP44.6 GBP44.6 100% 1.59% - - 1.59%
US Private
Placement
2026 EUR70.0 GBP61.1 GBP61.1 100% 1.26% - - 1.26%
US Private
Placement
2026 GBP35.0 GBP35.0 GBP35.0 100% 2.59% - - 2.59%
US Private
Placement
2027 EUR74.1 GBP64.6 GBP64.6 100% 2.00% - - 2.00%
US Private
Placement
2028 GBP20.0 GBP20.0 GBP20.0 100% 1.96% - - 1.96%
US Private
Placement
2028 EUR29.0 GBP25.3 GBP25.3 100% 0.93% - - 0.93%
US Private
Placement
2029 GBP50.5 GBP50.5 GBP50.5 100% 2.92% - - 2.92%
US Private
Placement
2029 GBP30.0 GBP30.0 GBP30.0 100% 2.69% - - 2.69%
US Private
Placement
2029 EUR105.0 GBP91.6 GBP91.6 100% 2.45% - - 2.45%
US Private
Placement
2031 GBP80.0 GBP80.0 GBP80.0 100% 2.39% - - 2.39%
US Private
Placement
2033 EUR29.0 GBP25.3 GBP25.3 100% 1.42% - - 1.42%
Unamortised
finance
costs - (GBP5.0) - - - - - -
Total GBP927.8 GBP725.8 GBP527.8 73% 3.58%
---------- --------- --------- ------- ----------
Capitalised
interest
costs (GBP4.4m)
Effective Interest Rate
after capitalised interest
costs 2.97%
----------
On 11 November 2022, the Group completed the refinancing of its
RCFs which were due to expire in June 2023. The previous GBP250.0
million Sterling and EUR70.0 million Euro RCFs were replaced with a
single multi-currency GBP400 million facility. In addition, a
further GBP100 million uncommitted accordion facility is
incorporated in the facility agreement. The facility is for a
four-year term with two one-year extension options exercisable
after the first and second years of the agreement, with the first
one-year extension being granted in October 2023.
The margin is at the same level as the previous facility
agreements, with the Group paying interest at a margin of 1.25%
plus SONIA or Euribor depending on whether the borrowings are drawn
in Sterling or Euros. This margin is now linked to ESG targets,
which where met enable a reduction in the margin of up to 5bps to
120bps.
As at 31 October 2023, GBP203.0m of the GBP400.0m UK revolver
was drawn as GBP162.0m and EUR47.0m (GBP41.0m). The drawn amounts
attract a bank margin of 1.25%, and the Group pays a
non-utilisation fee of 0.4375% on the undrawn balance of GBP197.0m.
The Group had interest rate hedge agreements in place to June 2023,
swapping SONIA on GBP55.0m at a weighted average effective rate of
0.69%. Upon maturity, the group recognised GBP0.4m gain
The 2024, 2026, 2027, 2028, 2029 and 2033 US Private Placement
Notes are denominated in Euros and attract fixed interest rates of
1.59% (on EUR50.9 million), 1.26% (on EUR70.0 million), 2.00% (on
EUR74.1 million), 0.93% (on EUR29.0 million), 2.45% (on EUR105.0
million) and 1.42% (on EUR29.0 million) respectively. The Euro
denominated borrowings provide a natural hedge against the Group's
investment in the Paris and Spain businesses.
The 2026 (GBP35.0 million), 2028 (GBP20.0 million), 2029
(GBP50.5 million), 2029 (GBP30.0 million) and 2031 (GBP80.0
million) US Private Placement Notes are denominated in Sterling and
attract a fixed interest rate of 2.59%, 1.96%, 2.92%, 2.69% and
2.39% respectively.
Predominantly, as a result of the fixed interest loan notes,
effectively 73% of the Group's drawn debt is at fixed rates of
interest. Overall, the Group has an effective interest rate on its
borrowings of 3.58% as at 31 October 2023, compared with 2.41% at
the previous year end. After adjusting for capitalised interest
costs the Group has an effective interest rate on its borrowings of
2.97%.
Non-underlying finance charge
Interest on lease liabilities was GBP5.3 million (FY2022: GBP5.0
million) and reflects part of the leasehold rent costs. The balance
of the leasehold payment is charged through the gain or loss on
investment properties line and variable lease payments in the
income statement. Overall, the leasehold rent costs charge
increased from GBP13.6 million in 2022 to GBP14.9 million in 2023,
principally reflecting the increase rent costs across the portfolio
in addition to the Netherlands leaseholds now forming part of the
Group.
The Group undertakes net investment hedge accounting for its
Euro denominated loan notes.
Tax
The tax charge for the year is analysed below:
Tax charge 2023 2022
GBP'm GBP'm
Underlying current
tax (5.1) (5.2)
Current year - exceptional - (0.9)
Current tax charge (5.1) (6.1)
------ -------
Tax on investment properties
movement (8.3) (29.9)
Deferred tax asset 5.8 -
Other - 0.1
Deferred tax charge (2.5) (29.8)
------ -------
Net tax charge (7.6) (35.9)
------ -------
The net income tax charge for the year is GBP7.6 million
(FY2022: GBP35.9 million). In the UK, the Group is a REIT and
benefits from a zero rate of tax on its qualifying earnings. The
underlying current tax charge relating to the European businesses
amounted to GBP5.1 million (FY2022: GBP5.2 million), calculated by
applying the effective overall underlying tax rate of 22.5% to the
underlying profits arising earned by the non-UK businesses.
The deferred tax charge relating to Paris, Spain and Benelux was
GBP8.3 million (FY2022: GBP29.9 million).
A deferred tax asset of GBP5.8 million (FY2022: GBPnil) relates
to the recognition of carried forward losses in the UK business,
recognising the extent to which the Group believes these losses
will be utilised in future to reduce income tax liabilities.
In 2022, an exceptional current year tax charge of GBP0.9
million arose on the disposal of the Nanterre land.
All deferred tax movements are non-underlying.
Earnings per Share
As a result of the movements explained above, profit after tax
for 2023 was GBP200.2 million as compared with GBP462.9 million in
2022. Basic EPS was 92.2 pence (FY2022: 219.5 pence) and diluted
EPS was 91.8 pence (FY2022: 212.4 pence).
Adjusted Diluted EPRA EPS is based on the European Public Real
Estate Association's definition of earnings and is defined as
profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss
on investment properties and the associated tax impacts. The
Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional
tax items and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore, neither the Company's ability to
distribute nor pay dividends is impacted (with the exception of the
associated National Insurance element). The financial statements
disclose earnings on a statutory, EPRA and Adjusted Diluted EPRA
basis and provide a full reconciliation of the differences in the
financial year in which any Long Term Incentive Plan ("LTIP")
awards may vest.
Management introduced Adjusted Diluted EPRA EPS as a measure of
EPS following the implementation of the Group's LTIP schemes,
Management considers that the real cost to existing shareholders is
the dilution that they will experience from the LTIP schemes;
therefore, earnings has been adjusted for the IFRS 2 share-based
payment charge, and the number of shares used in the EPS
calculation has been adjusted for the dilutive effect of the LTIP
scheme.
The Group has exposure to the movement in the Euro/Sterling
exchange rate. Based on the FY2023 results, for every 10 cents
variance to the average exchange rate of 1.149, there would be an
impact of GBP1.3 million to Adjusted EPRA Earnings.
Adjusted Diluted EPRA EPS for the year was 47.9 pence (FY2022:
47.5 pence), calculated on a pro forma basis, as if the dilutive
LTIP shares were in issue throughout both the current and prior
years, as follows:
2023 2022
Earnings Shares Pence Earnings Shares Pence
per per
GBP'm million share GBP'm million share
Basic earnings 200.2 217.2 92.2 462.9 210.9 219.5
Adjustments:
Gain on investment
properties (93.8) - (43.2) (381.6) - (180.9)
Exceptional items - - 0.1 - -
Other exceptional
gains - - (10.8) - (5.1)
Exceptional finance
income - - (0.5) - (0.2)
Net exchange loss (0.3) - (0.1) - - -
Change in fair value
of derivatives 1.7 - 0.8 0.3 - 0.1
Tax on adjustments/exceptional
tax 1.4 - 0.6 29.7 - 14.1
Adjusted 109.2 217.2 50.3 100.1 210.9 47.5
EPRA adjusted:
Fair value re-measurement
of lease liabilities
add-back (8.8) - (4.1) (8.3) - (3.9)
Tax on lease liabilities
add-back adjustment 1.1 - 0.5 1.0 - 0.5
EPRA basic EPS 101.5 217.2 46.7 92.8 210.9 44.1
Share-based payments
charge 3.5 - 1.6 11.2 - 5.3
Dilutive shares - 1.9 (0.4) - 8.0 (1.9)
Adjusted Diluted
EPRA EPS 105.0 219.1 47.9 104.0 218.9 47.5
--------- -------- ------- --------- -------- --------
Dividends
The Directors are recommending a final dividend of 20.2 pence
(FY2022: 20.4 pence) which Shareholders will be asked to approve at
the Company's Annual General Meeting on 13 March 2024. If approved
by Shareholders, the final dividend will be payable on 9 April 2024
to Shareholders on the register at close of business on 7 March
2024.
Reflective of the Group's improved performance, the Group's full
year dividend of 30.1 pence is 1.0% up on the prior year dividend
of 29.8 pence. The Property Income Distribution ("PID") element of
the full year dividend is 17.62 pence (FY2022: 22.75 pence).
Property valuation and Net Asset Value ("NAV")
Cushman & Wakefield Debenham Tie Leung Limited LLP
("C&W") has valued the Group's property portfolio. As at 31
October 2023, the total value of the Group's property portfolio was
GBP2,681.1 million (excluding investment properties under
construction of GBP108.6 million and net of lease liabilities of
GBP101.2 million). This represents an increase of GBP223.3 million
compared with the GBP2,457.8 million valuation as at 31 October
2022. A reconciliation of the movement is set out below:
UK Paris Spain Benelux Total Paris Spain Benelux
GBP'm GBP'm GBP'm GBP'm GBP'm EUR'm EUR'm EUR'm
Value as at 1 November
2022 1,756.8 538.1 27.3 135.6 2,457.8 625.9 31.9 157.7
Currency translation
movement 8.0 0.5 1.7 10.2 - - -
Additions 32.6 7.3 12.1 15.6 67.6 8.4 13.9 17.9
Reclassifications 7.2 - 30.6 4.2 42.0 35.2 4.8
Revaluation 75.8 20.5 (0.3) 7.5 103.5 23.6 (0.4) 8.5
Value at 31 October
2023 1,872.4 573.9 70.2 164.6 2,681.1 657.9 80.6 188.9
-------- ------ ------ -------- -------- ------ ------ --------
As described in note 13 of the financial statements, the
valuation is based on a discounted cash flow of the net operating
income over a ten-year period and a notional sale of the asset at
the end of the tenth year. Accordingly, the gain on investment
properties principally reflects the continuing progress in the
performance of the business and the strong underlying trading of
the store, underpinned by average rate which has increased by 3.5%
to GBP30.26 in 2023 from GBP29.25 in 2022 with a reduction in
occupancy, which is down 5.1ppts to 77.0% in 2023 from 82.1% in
2022. The valuation assumptions for capitalisation rates and
stabilised occupancy remaining fairly constant, as explained
further below.
The exchange rate at 31 October 2023 was EUR1.146:GBP1 compared
with EUR1.163:GBP1 at 31 October 2022. This movement in the foreign
exchange rate has resulted in a GBP10.4 million favourable currency
translation movement in the year. This has slightly improved the
Group Net Asset Value ("NAV") but had no impact on the
loan-to-value ("LTV") covenant as the assets are tested in their
functional currency.
The Group's property portfolio valuation excluding investment
properties under construction has increased by GBP223.3 million
from the valuation of GBP2,457.8 million at 31 October 2022. This
reflects the gain on valuation of GBP103.5m, which is explained
above, GBP109.6m relating to additions, store refurbishments and
reclassifications as well as GBP10.2m of favourable foreign
exchange movements on the translation of the European portfolios.
On a like for like basis the portfolio increased 6.2%.
The value of the UK investment property portfolio including
investment properties under construction has increased by GBP118.6
million (comprising GBP115.6 million in investment properties and
GBP3.0 million in investment properties under construction)
compared with 31 October 2022. This includes a GBP74.9 million
valuation gain and GBP43.7 million of capital additions.
In Paris, the value of the property portfolio including
investment properties under construction increased by EUR50.8
million, of which EUR23.6 million was valuation gain and capital
additions were EUR27.2 million. The net increase in investment
properties, when translated into Sterling, amounted to GBP52.2
million, reflecting the foreign exchange impact described
above.
In Spain, the value of the property portfolio including
investment properties under construction increased by EUR28.6
million, of which EUR29.0 million were additions, with the
valuation remaining flat over the period as the stores start to
generate income, growing toward stabilised occupancy where we would
expect to see the benefits in the future. The net increase in
investment properties including investment properties under
construction when translated into Sterling amounted to GBP25.8
million, reflecting the foreign exchange impact described
above.
In Benelux, the value of the property portfolio including
investment properties under construction was EUR208.7 million,
representing an increase of EUR44.5 million from 2022, This
increase is predominantly made up of EUR36.0 million of additions
as well as a EUR8.5 million valuation increase.
Our pipeline of future development opportunities remains strong
and gives us further confidence in our future growth plans, The
pipeline of c. 1.5m sq ft representing c. 18% of our existing
property portfolio is estimated, on stabilisation, to deliver in
the range of GBP25-GBP30m of incremental EBITDA.
The Group's freehold exit yield for the valuation at 31 October
2023 reduced to 5.72%, from 5.78% at 31 October 2022, and the
weighted average annual discount rate for the whole portfolio has
increased from 8.48% at 31 October 2022 to 8.54% at 31 October
2023.
C&W's valuation report confirms that the properties have
been valued individually but that if the portfolio were to be sold
as a single lot or in selected groups of properties, the total
value could be different. C&W states that in current market
conditions it is of the view that there could be a material
portfolio premium.
EPRA's Best Practices Recommendations guidelines for Net Asset
Value ("NAV") metrics are EPRA Net Tangible Assets ("NTA"), EPRA
Net Reinstatement Value ("NRV") and EPRA Net Disposal Value
("NDV"). Safestore considers EPRA NTA to be most consistent with
the nature of the Group's business.
The EPRA Basic NTA per Share, as reconciled to IFRS net assets
per share in note 15 of the financial statements, was 952 pence
(FY2022: 908 pence) at 31 October 2023, up 4.7% since 31 October
2022, and the IFRS reported diluted NAV per share was 884 pence
(FY2022: 820 pence), reflecting a GBP153.6 million increase in
reported net assets during the year.
Gearing and capital structure
As at 31 October 2023, the Group's borrowings comprised bank
borrowing facilities, made up of revolving facilities in the UK as
well as US Private Placements.
Net debt (including lease liabilities and cash) stood at
GBP810.3 million at 31 October 2023, an increase of GBP112.0
million from the 2022 position of GBP698.3 million, reflecting
funding for the continued expansion of the Group portfolio. Total
capital (net debt plus equity) increased from GBP2,491.7 million at
31 October 2022 to GBP2,745.4 million at 31 October 2023. The net
impact is that the gearing ratio has increased from 28.0% to 29.5%
in the year.
Management also measures gearing with reference to its
loan-to-value ("LTV") ratio defined as net debt (excluding lease
liabilities) as a proportion of the valuation of investment
properties and investment properties under construction (excluding
lease liabilities). At 31 October 2023 the Group LTV ratio was
25.4% as compared to 23.6% at 31 October 2022. The Board considers
the current level of gearing is appropriate for the business to
enable the Group to increase returns on equity, maintain financial
flexibility and achieve our medium term strategic objectives.
Borrowings at 31 October 2023
As at 31 October 2023, GBP203.0 million of the GBP400.0 million
Revolver was drawn. Including the US Private Placement debt of
EUR358.0 million (GBP312.3 million) and GBP215.5 million, the
Group's borrowings totalled GBP730.8 million (after adjustment for
unamortised finance costs).
As at 31 October 2023, the weighted average remaining term for
the Group's available borrowing facilities is 4.5 years (FY2022:
4.0 years). If we take into consideration the second 1 year
extension available under the revolving credit facility, the
weighted average remaining term for the Group's available borrowing
facilities is 5.0 years.
Borrowings under the existing loan facilities are subject to
certain financial covenants. The UK bank facilities and the US
Private Placement share interest cover and LTV covenants. The
interest cover requirement of EBITDA: interest is 2.4:1, where it
will remain until the end of the facilities' terms. Interest cover
for the year ended 31 October 2023 is 6.7x (FY2022: 10.4x).
The LTV covenant is 60% under the current facility. As at 31
October 2023, there is significant headroom in both the UK LTV and
the French LTV covenant calculations.
The Group is in compliance with its covenants at 31 October 2023
and, based on forecast projections, is expected to be in compliance
for a period in excess of twelve months from the date of this
report.
Cash flow
The table below sets out the underlying cash flow of the
business in 2023 and 2022. For statutory reporting purposes,
leasehold costs cash flows are allocated between finance costs,
principal repayments and variable lease payments. However,
management considers a presentation of cash flows that reflects
leasehold costs as a single line item to be representative of the
underlying cash flow performance of the business.
2023 2022
GBP'm GBP'm
Underlying EBITDA 142.2 135.1
Working capital/exceptionals/other (13.0) (2.7)
Adjusted operating
cash inflow 129.2 132.4
Interest payments (19.6) (11.8)
Leasehold rent payments (14.9) (13.6)
Tax payments (5.5) (5.6)
Free cash flow (before investing
and financing activities) 89.2 101.4
Acquisition of subsidiary,
net of cash acquired - (111.5)
Investment in associates (2.3) (0.8)
Capital expenditure - investment
properties (119.0) (95.2)
Capital expenditure - property,
plant and equipment (2.9) (1.0)
Net proceeds from disposal
of land - 1.0
Net proceeds from disposal
of investment properties - 6.4
Proceeds from disposal - property,
plant and equipment - 0.2
Net cash flow after investing
activities (35.0) (99.5)
Issue of share capital 0.2 0.5
Dividends paid (65.9) (56.9)
Net drawdown of borrowings 101.3 132.1
Debt issuance costs (4.9) (0.1)
Financial instruments 0.4 1.3
Swap termination - 0.5
Net (decrease)/increase
in cash (3.9) (22.1)
-------- --------
Note:
Free cash flow is a non-GAAP measure, defined as cash flow
before investing and financing activities but after leasehold rent
payments.
The first table below reconciles free cash flow (before
investing and financing activities) in the table above to net cash
inflow from operating activities in the consolidated cash flow
statement. The second table below reconciles adjusted net cash flow
after investing activities in the table above to the consolidated
cash flow statement. The third table below reconciles adjusted
operating cash inflow to the cash generated from operations in the
consolidated cash flow statement.
2023 2022
GBP'm GBP'm
Free cash flow (before investing and
financing activities) 89.2 101.4
Add back: principal payment of
lease liabilities 8.8 8.4
Net cash flow from operating
activities 98.0 109.8
2023 2022
GBP'm GBP'm
From table above:
Adjusted net cash flow after investing
activities (35.0) (99.5)
Add back: principal payment of
lease liabilities 8.8 8.4
Net cash flow after investing
activities (26.2) (91.1)
-------- --------
From consolidated cash flow:
Net cash inflow from operating activities 98.0 109.8
Net cash outflow from investing
activities (124.2) (200.9)
Net cash flow after investing
activities (26.2) (91.1)
-------- --------
2023 2022
GBP'm GBP'm
Adjusted operating cash inflow 129.2 132.4
Cash outflow on variable lease
payments (0.8) (0.2)
Cash flow from operations 128.4 132.2
Adjusted operating cash flow decreased by GBP3.2 million in the
year. The movement in working capital is primarily associated with
settlement of employment related taxes connected with the maturity
of the five and three-year share based payment schemes at the end
of 2022 and early 2023 respectively, and other trade receivable and
payables timings. These are offset by the GBP7.1m increase in
underlying EBITDA.
Free cash flow (before investing and financing activities)
decreased by 12.0% to GBP89.2 million (FY2022: GBP101.4 million).
The free cash flow benefited from the increase in Underlying EBITDA
which was offset by interest payments and working capital
movements.
Investing activities experienced a net outflow of GBP124.2
million (FY2022: GBP200.9 million outflow), which included GBP123.4
million of capital expenditure on our investment property
portfolio. In 2022, the acquisition of the remaining 80% in the
Joint Venture as well as the acquisition of the new site at
Christchurch resulted in an outflow of GBP111.5 million. Of the
GBP123.4 million capital expenditure on investment properties,
GBP43.3 million related to the UK, GBP23.5 million related to
France, GBP25.2 million related to Spain and GBP31.4 million
related to Benelux. Of the GBP123.4 million, GBP6.7 million related
to maintenance, GBP95.4 million to new stores and GBP21.3 million
to developments and property, plant and equipment.
Adjusted financing activities generated a net cash inflow of
GBP31.1 million (FY2022: GBP77.4 million inflow). Dividend payments
totalled GBP65.9 million (FY2022: GBP56.9 million). The net
drawdown of borrowings was GBP101.3 million (FY2022: GBP132.1
million), in order to finance the acquisition of development and
pipeline stores.
Andy Jones
16 January 2024
Consolidated income statement
for the year ended 31 October 2023
Group
--------------
2023 2022
Notes GBP'm GBP'm
-------------------------------------------------- ----- ------ ------
Revenue 2, 3 224.2 212.5
Cost of sales (69.9) (63.0)
-------------------------------------------------- ----- ------ ------
Gross profit 154.3 149.5
Administrative expenses (17.7) (27.1)
Share of loss in associate 9 - (0.3)
-------------------------------------------------- ----- ------ ------
Underlying EBITDA 142.2 135.1
Exceptional items 4 - (0.1)
Share-based payments (3.5) (11.2)
Depreciation and variable lease payments (2.1) (1.3)
Share of associate's depreciation, interest
and tax - (0.4)
-------------------------------------------------- ----- ------ ------
Operating profit before gains on investment properties
and other exceptional gains 136.6 122.1
Gain on investment properties 10 93.8 381.6
Other exceptional gains 4 - 10.8
-------------------------------------------------- ----- ------ ------
Operating profit 3 230.4 514.5
Finance income 5 0.8 2.0
Finance expense 5 (23.4) (17.7)
-------------------------------------------------- ----- ------ ------
Profit before income tax 207.8 498.8
Income tax charge 6 (7.6) (35.9)
-------------------------------------------------- ----- ------ ------
Profit for the year 200.2 462.9
-------------------------------------------------- ----- ------ ------
Earnings per share for profit attributable
to the equity holders
- basic (pence) 8 92.2 219.5
- diluted (pence) 8 91.8 212.4
-------------------------------------------------- ----- ------ ------
The financial results for both years relate to continuing
operations.
Underlying EBITDA is an Alternative Performance Measure and is
defined as operating profit before exceptional items, share-based
payments, corporate transaction costs, gain/loss on investment
properties, depreciation and variable lease payments and the share
of associate's depreciation, interest and tax.
Consolidated statement of comprehensive income
for the year ended 31 October 2023
Group
--------------
2023 2022
GBP'm GBP'm
------------------------------------------------------ ------ ------
Profit for the year 200.2 462.9
------------------------------------------------------ ------ ------
Other comprehensive income
Items that may be reclassified subsequently to profit
or loss:
Currency translation differences 7.1 8.0
Net investment hedge (2.9) (4.6)
------------------------------------------------------ ------ ------
Other comprehensive income, net of tax 4.2 3.4
------------------------------------------------------ ------ ------
Total comprehensive income for the year 204.4 466.3
------------------------------------------------------ ------ ------
Consolidated balance sheet
as at 31 October 2023
Group
------------------
2023 2022
Notes GBP'm GBP'm
--------------------------------------------- ------ --------- -------
Assets
Non-current assets
Investment in associates 9 4.1 1.8
--------------------------------------------- ------ --------- -------
External valuation of investment properties,
net of lease liabilities 2,681.1 2,457.8
Add-back of lease liabilities 101.2 95.1
Investment properties under construction 108.6 94.5
--------------------------------------------- ------ --------- -------
Total investment properties 10 2,890.9 2,647.4
Property, plant and equipment 5.2 3.4
Deferred tax assets 6.6 0.8
--------------------------------------------- ------ --------- -------
2,906.8 2,653.4
--------------------------------------------- ------ --------- -------
Current assets
Inventories 0.4 0.3
Derivative financial instruments 14 - 1.7
Trade and other receivables 32.7 31.2
Amounts due from associates 0.1 -
Cash and cash equivalents 12, 18 16.9 20.9
--------------------------------------------- ------ --------- -------
50.1 54.1
--------------------------------------------- ------ --------- -------
Total assets 2,956.9 2,707.5
--------------------------------------------- ------ --------- -------
Current liabilities
Bank borrowings 13, 18 (44.5) (101.7)
Trade and other payables (52.4) (62.7)
Current income tax liabilities (0.4) (0.8)
Lease liabilities 15 (13.1) (13.2)
--------------------------------------------- ------ --------- -------
(110.4) (178.4)
--------------------------------------------- ------ --------- -------
Non-current liabilities
Bank borrowings 13, 18 (681.3) (522.1)
Deferred income tax liabilities (139.2) (129.0)
Lease liabilities 15 (88.3) (82.2)
Provisions 19 (2.6) (2.4)
--------------------------------------------- ------ --------- -------
(911.4) (735.7)
--------------------------------------------- ------ --------- -------
Total liabilities (1,021.8) (914.1)
--------------------------------------------- ------ --------- -------
Net assets 1,935.1 1,793.4
--------------------------------------------- ------ --------- -------
Equity
Ordinary share capital 16 2.2 2.1
Share premium 62.0 61.8
Translation reserve 12.7 8.5
Retained earnings 1,858.2 1,721.0
--------------------------------------------- ------ --------- -------
Total equity 1,935.1 1,793.4
--------------------------------------------- ------ --------- -------
These financial statements were authorised for issue by the
Board of Directors on 16 January 2024 and signed on its behalf
by:
A Jones F Vecchioli
Chief Financial Officer Chief Executive Officer
Company registration number: 04726380
Consolidated statement of changes in shareholders' equity
for the year ended 31 October 2023
Group
---------------------------------------------------
Share Share Translation Retained
capital premium reserve earnings Total
GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------------------- -------- -------- ----------- --------- -------
Balance at 1 November 2021 2.1 61.3 5.1 1,306.4 1,374.9
Comprehensive income
Profit for the year - - - 462.9 462.9
Other comprehensive income
Currency translation differences - - 8.0 - 8.0
Net investment hedge - - (4.6) - (4.6)
--------------------------------- -------- -------- ----------- --------- -------
Total other comprehensive income - - 3.4 - 3.4
--------------------------------- -------- -------- ----------- --------- -------
Total comprehensive income - - 3.4 462.9 466.3
--------------------------------- -------- -------- ----------- --------- -------
Transactions with owners
Dividends (note 7) - - - (56.9) (56.9)
Increase in share capital - 0.5 - - 0.5
Employee share options - - - 8.6 8.6
--------------------------------- -------- -------- ----------- --------- -------
Transactions with owners - 0.5 - (48.3) (47.8)
--------------------------------- -------- -------- ----------- --------- -------
Balance at 1 November 2022 2.1 61.8 8.5 1,721.0 1,793.4
Comprehensive income
Profit for the year - - - 200.2 200.2
Other comprehensive income
Currency translation differences - - 7.1 - 7.1
Net investment hedge - - (2.9) - (2.9)
--------------------------------- -------- -------- ----------- --------- -------
Total other comprehensive income - - 4.2 - 4.2
--------------------------------- -------- -------- ----------- --------- -------
Total comprehensive income - - 4.2 200.2 204.4
--------------------------------- -------- -------- ----------- --------- -------
Transactions with owners
Dividends (note 7) - - - (65.9) (65.9)
Increase in share capital and
share premium 0.1 0.2 - - 0.3
Employee share options - - - 2.9 2.9
--------------------------------- -------- -------- ----------- --------- -------
Transactions with owners 0.1 0.2 - (63.0) (62.7)
--------------------------------- -------- -------- ----------- --------- -------
Balance at 31 October 2023 2.2 62.0 12.7 1,858.2 1,935.1
--------------------------------- -------- -------- ----------- --------- -------
Consolidated cash flow statement
for the year ended 31 October 2023
Group
----------------------------
2023 2022
Notes GBP'm GBP'm
----------------------------------------------------- ------ ------------------- -------
Cash flows from operating activities
Cash generated from operations 17 128.4 132.2
Interest received - 0.1
Interest paid (24.9) (16.9)
Tax paid (5.5) (5.6)
----------------------------------------------------- ------ ------------------- -------
Net cash inflow from operating activities 98.0 109.8
----------------------------------------------------- ------ ------------------- -------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired 9 - (111.5)
Investment in associates 9 (2.3) (0.8)
Expenditure on investment properties and development
properties (119.0) (95.2)
Proceeds from disposal of investment properties - 6.4
Proceeds from disposal of land - 1.0
Purchase of property, plant and equipment (2.9) (1.0)
Proceeds from sale of property, plant and equipment - 0.2
----------------------------------------------------- ------ ------------------- -------
Net cash (outflow) from investing activities (124.2) (200.9)
----------------------------------------------------- ------ ------------------- -------
Cash flows from financing activities
Issue of share capital 0.2 0.5
Equity dividends paid 7 (65.9) (56.9)
Proceeds from borrowings 108.4 266.1
Repayment of borrowings (7.1) (134.0)
Exceptional swap termination 5 - 0.5
Financial instruments income 5 0.4 1.3
Debt issuance costs (4.9) (0.1)
Principal payment of lease liabilities (8.8) (8.4)
----------------------------------------------------- ------ ------------------- -------
Net cash inflow from financing activities 22.3 69.0
----------------------------------------------------- ------ ------------------- -------
Net (decrease) in cash and cash equivalents (3.9) (22.1)
Exchange loss on cash and cash equivalents (0.1) (0.2)
Cash and cash equivalents at 1 November 20.9 43.2
----------------------------------------------------- ------ ------------------- -------
Cash and cash equivalents at 31 October 12, 18 16.9 20.9
----------------------------------------------------- ------ ------------------- -------
Notes to the financial statements
for the year ended 31 October 2023
The Board approved this preliminary announcement on 16 January
2024.
The financial information included in this preliminary
announcement does not constitute the Group's statutory accounts for
the years ended 31 October 2022 or 31 October 2023. Statutory
accounts for the year ended 31 October 2022 have been delivered to
the Registrar of Companies. The statutory accounts for the year
ended 31 October 2023 will be delivered to the Registrar of
Companies following the Company's annual general meeting.
The auditor has reported on the 2023 and 2022 accounts; their
report was unqualified, did not include any references to any
matters by way of emphasis and did not contain statements under
section 498 (2) or (3) of the Companies Act 2006.
These financial statements for the year ended 31 October 2023
have been prepared under the historical cost convention except for
the following assets and liabilities, which are stated at their
fair value: investment property, derivative financial instruments
and financial interest in property assets. The accounting policies
used are consistent with those contained in the Group's last annual
report and accounts for the year ended 31 October 2022, except for
items as described below. All amounts are presented in Sterling and
are rounded to the nearest GBP0.1 million, unless otherwise
stated.
The financial information included in this preliminary
announcement has been prepared in accordance with United Kingdom
adopted International Financial Reporting Standards ("IFRS"),
International Financial Reporting Interpretations Committee
("IFRIC") interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than twelve months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing this consolidated financial information.
In assessing the Group's going concern position as at 31 October
2023, the Directors have considered a number of factors, including
the current balance sheet position, the principal and emerging
risks which could impact the performance of the Group and the
Group's strategic and financial plan. Consideration has been given
to compliance with borrowing covenants along with the uncertainty
inherent in future financial forecasts. The Directors considered
the most recent three-year outlook approved by the Board. In the
context of the current environment, four plausible scenarios were
applied to the plan, including a reverse stress test scenario.
These were based on the potential financial impact of the Group's
principal risks and uncertainties and the specific risks associated
with the cost of living crisis and the conflict in Ukraine. These
scenarios are differentiated by the impact of demand and enquiry
levels, average rate growth and the level of cost savings. A
scenario was also performed where we have carried out a reverse
stress test to model what would be required to breach ICR and LTV
covenants which indicated highly improbable changes would be needed
before any issues were to arise. In November 2022, the Group
completed the refinancing of its Revolving Credit Facilities
("RCF") which were due to expire in June 2023. The previous GBP250
million and EUR70 million revolving credit facilities have been
replaced with a single multi-currency unsecured GBP400 million
facility, with a four-year term with two one-year extension options
(available headroom GBP197m). One tranche of Private Placement
notes matures in 2024 and it has been assumed this will be renewed
at market rates. The impact of these scenarios has been reviewed
against the Group's projected cash flow position and financial
covenants over a three-year period. Should any of these scenarios,
which are differentiated by the impact of demand and enquiry
levels, average rate growth and the level of cost savings, occur,
clear mitigating actions are available to ensure that the Group
remains liquid and able to meet its liabilities as they fall due.
The financial position of the Group, including details of its
financing and capital structure, is set out in the financial review
section of this announcement.
Standards, amendments to standards and interpretations issued
and applied
The following new or revised accounting standards or IFRIC
interpretations are applicable for the first time in the year ended
31 October 2023:
-- Amendments to IFRS 3 References to the Conceptual Framework in IFRS Standards
-- Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use
-- Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
-- Annual Improvements to IFRS Standards 2018-2020 Cycle
The adoption of the standards and interpretations has not
significantly impacted these financial statements and any changes
to our accounting policies as a result of their adoption have been
reflected in this note.
Critical accounting judgements and key sources of estimation
uncertainty
The following key source of estimation uncertainty has
significant risk of causing a material adjustment, within the next
financial year, to the carrying amounts of assets and liabilities
within the consolidated financial statements:
Estimate of fair value of investment properties and investment
properties under construction
The Group values its investment properties using a discounted
cash flow methodology which is based on projections of net
operating income. Principal assumptions and management's underlying
estimation of the fair value of those relate to: stabilised
occupancy levels; expected future growth in storage rental income
and operating costs; maintenance requirements; capitalisation rate;
and discount rates. There are inter--relationships between the
valuation inputs and they are primarily determined by market
conditions. The effect of an increase in more than one input could
be to magnify the impact on the valuation. However, the impact on
the valuation could be offset by the inter-relationship of two
inputs moving in opposite directions, e.g. an increase in rent may
be offset by a decrease in occupancy, resulting in minimal net
impact on the valuation. For immature stores, these underlying
estimates hold a higher risk of uncertainty, due to the unproven
nature of their cash flows. A more detailed explanation of the
background, methodology and estimates made by management that are
adopted in the valuation of the investment properties as well as
detailed sensitivity analysis is set out in note 10 to the
financial statements.
Non-GAAP financial information/Alternative Performance
Measures
The Directors have identified certain measures that they believe
will assist the understanding of the performance of the business.
The measures are not defined under IFRS and they may not be
directly comparable with other companies' adjusted measures. The
non-GAAP/Alternative Performance Measures are not intended to be a
substitute for, or superior to, any IFRS measures of performance
but they have been included as the Directors consider them to be
important comparables and key measures used within the business for
assessing performance. The following are the key
non-GAAP/Alternative Performance Measures identified by the
Group:
-- The Group defines exceptional items to be those that warrant,
by virtue of their nature, size or frequency, separate disclosure
on the face of the income statement where, in the opinion of the
Directors, this enhances the understanding of the Group's financial
performance.
-- Underlying EBITDA is an Alternative Performance Measure and
is defined as operating profit before exceptional items,
share-based payments, corporate transaction costs, gain/loss on
investment properties, depreciation and variable lease payments and
the share of associate's depreciation, interest and tax. Management
considers this presentation to be representative of the underlying
performance of the business, as it removes the income statement
impact of items not fully controllable by management, such as the
revaluation of derivatives and investment properties, and the
impact of exceptional credits, costs and finance charges. A
reconciliation of statutory operating profit to Underlying EBITDA
can be found in the financial review section of this
announcement.
-- Adjusted Diluted EPRA Earnings per Share is based on the
European Public Real Estate Association's definition of earnings
and is defined as profit or loss for the period after tax but
excluding corporate transaction costs, change in fair value of
derivatives, gain/loss on investment properties and the associated
tax impacts. The Company then makes further company-specific
adjustments for the impact of exceptional items, net exchange
gains/losses recognised in net finance costs, exceptional tax
items, and deferred and current tax in respect of these
adjustments. The Company also adjusts for IFRS 2 share-based
payment charges. This adjusted earnings is divided by the diluted
number of shares. The IFRS 2 cost is excluded as it is written back
to distributable reserves and is a non-cash item (with the
exception of the associated National Insurance element). Therefore,
neither the Company's ability to distribute nor pay dividends are
impacted (with the exception of the associated National Insurance
element). The financial statements disclose earnings on a
statutory, EPRA and Adjusted Diluted EPRA basis and will provide a
full reconciliation of the differences in the financial year in
which any LTIP awards may vest. A reconciliation of statutory basic
Earnings per Share to Adjusted Diluted EPRA Earnings per Share can
be found in note 8.
-- EPRA's Best Practices Recommendations guidelines for Net
Asset Value ("NAV") metrics are EPRA Net Tangible Assets ("NTA"),
EPRA Net Reinstatement Value ("NRV") and EPRA Net Disposal Value
("NDV"). EPRA NTA is considered to be the most relevant measure for
the Group's business which provides sustainable long term
progressive returns and is now the primary measure of net assets.
The basis of calculation, including a reconciliation to reported
net assets, is set out in note 11.
-- Like-for-like figures are presented to aid in the
comparability of the underlying business as they exclude the impact
on results of purchased, sold, opened or closed stores.
-- Constant exchange rate ("CER") figures are provided in order
to present results on a more comparable basis, removing foreign
exchange movements.
Forward-looking statements
Certain statements in this preliminary announcement are
forward-looking. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. We undertake no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise.
2. Revenue
Analysis of the Group's operating revenue can be found
below:
2023 2022
GBP'm GBP'm
------------------------- ------ ------
Self storage income 187.2 178.0
Insurance income 25.5 23.9
Other non-storage income 11.5 10.6
------------------------- ------ ------
Total revenue 224.2 212.5
------------------------- ------ ------
3. Segmental analysis
The segmental information presented has been prepared in
accordance with the requirements of IFRS 8. The Group's revenue,
profit before income tax and net assets are attributable to one
activity: the provision of self storage accommodation and related
services. This is based on the Group's management and internal
reporting structure.
Safestore is organised and managed in four operating segments,
based on geographical areas, being the United Kingdom, Paris in
France, Spain, and the Netherlands and Belgium in Benelux.
The chief operating decision maker, being the Executive
Directors, identified in accordance with the requirements of IFRS
8, assesses the performance of the operating segments on the basis
of Underlying EBITDA, which is defined as operating profit before
exceptional items, share-based payments, corporate transaction
costs, gain/loss on investment properties, depreciation and
variable lease payments, and the share of associate's depreciation,
interest and tax.
The operating profits and assets include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis.
UK Paris Spain Benelux Group
Year ended 31 October 2023 GBP'm GBP'm GBP'm GBP'm GBP'm
----------------------------------------- ------- ------ ------ ------- -------
Continuing operations
Revenue 166.5 43.9 3.8 10.0 224.2
----------------------------------------- ------- ------ ------ ------- -------
Underlying EBITDA 106.2 30.5 1.1 4.4 142.2
Share-based payments (3.1) (0.3) (0.1) - (3.5)
Variable lease payments and depreciation (1.9) (0.2) - - (2.1)
----------------------------------------- ------- ------ ------ ------- -------
Operating profit before gain
on investment properties and
other exceptional gains 101.2 30.0 1.0 4.4 136.6
Gain/(loss) on investment properties 70.9 16.3 (0.7) 7.3 93.8
----------------------------------------- ------- ------ ------ ------- -------
Operating profit 172.1 46.3 0.3 11.7 230.4
Net finance expense (13.8) (2.2) (1.1) (5.5) (22.6)
----------------------------------------- ------- ------ ------ ------- -------
Profit before tax 158.3 44.1 (0.8) 6.2 207.8
----------------------------------------- ------- ------ ------ ------- -------
Total assets 2,298.2 606.6 28.0 24.1 2,956.9
----------------------------------------- ------- ------ ------ ------- -------
UK Paris Spain Benelux Group
Year ended 31 October 2022 GBP'm GBP'm GBP'm GBP'm GBP'm
----------------------------------------- ------- ------ ------ ------- -------
Continuing operations
Revenue 163.0 41.4 3.0 5.1 212.5
Share of loss in associates (0.3) - - - (0.3)
----------------------------------------- ------- ------ ------ ------- -------
Underlying EBITDA 103.5 28.0 1.5 2.1 135.1
Exceptional items - (0.1) - - (0.1)
Share-based payments (10.2) (1.0) - - (11.2)
Variable lease payments and depreciation (1.2) (0.1) - - (1.3)
Share of associate's depreciation,
interest and tax (0.4) - - - (0.4)
----------------------------------------- ------- ------ ------ ------- -------
Operating profit before gain
on investment properties and other
exceptional gains 91.7 26.8 1.5 2.1 122.1
Gain/ on investment properties 295.7 78.5 1.3 6.1 381.6
Other exceptional gains 5.7 5.1 - - 10.8
----------------------------------------- ------- ------ ------ ------- -------
Operating profit 393.1 110.4 2.8 8.2 514.5
Net finance (expense)/income (14.4) (1.6) (0.1) 0.4 (15.7)
----------------------------------------- ------- ------ ------ ------- -------
Profit before tax 378.7 108.8 2.7 8.6 498.8
----------------------------------------- ------- ------ ------ ------- -------
Total assets 2,024.8 581.7 28.2 72.8 2,707.5
----------------------------------------- ------- ------ ------ ------- -------
Inter-segment transactions are entered into under the normal
commercial terms and conditions that would also be available to
unrelated third parties. There is no material impact from
inter-segment transactions on the Group's results. The segmental
results exclude intercompany transactions.
4. Exceptional items and other exceptional gains
2023 2022
GBP'm GBP'm
--------------------------------------------------------- ------ ------
Costs relating to corporate transactions and exceptional
property taxation - (0.1)
--------------------------------------------------------- ------ ------
Exceptional items - (0.1)
--------------------------------------------------------- ------ ------
2023 2022
GBP'm GBP'm
------------------------------------------- ------ ------
Valuation gain on associate buy-out - 5.5
Gain on disposals of investment properties - 0.2
Gain on disposal of land - 5.1
------------------------------------------- ------ ------
Other exceptional gains - 10.8
------------------------------------------- ------ ------
Exceptional items of GBPnil were incurred in the year (FY2022:
GBP0.1 million relating to fees associated with the Group's
corporate restructuring).
In the prior year, the Group sold the Nanterre site to the Joint
Venture partner of Nanterre FOCD 92 for a total price of EUR7.6
million excluding VAT and including demolition cost reimbursement,
where the settlement was done partially in cash of GBP1.0 million
(EUR1.1 million excluding tax), and partially in kind through the
delivery of the new building at the end of the operation (estimated
at EUR6.5 million). This resulted in a net gain on disposal of
GBP5.1 million (EUR5.9 million) included within other exceptional
gains in 2022.
In addition, the Group acquired the remaining 80% equity of
Safestore Storage Benelux B.V. from its previous Joint Venture
partner for EUR53.6 million (GBP45.3 million) and became a wholly
owned subsidiary (note 9). The original 20% equity investment was
effectively de-recognised and re-recognised back at the fair value
based on the revised equity value effective at the 30 March 2022
transaction. This resulted in a valuation gain on the associate
buy-out of GBP5.5 million included within other exceptional gains
in 2022.
Finally, the Group sold its Birmingham Digbeth store to a third
party for GBP6.5 million and incurred a 1% agent fee on the sale
price. The carrying value of this store included within investment
properties prior to disposal was GBP6.2 million, resulting in a
gain on disposal of investment properties of GBP0.2 million
included within other exceptional gains in 2022.
5. Finance income and costs
2023 2022
GBP'm GBP'm
------------------------------------------------- ------ ------
Finance income
Other interest and similar income 0.1 0.1
Interest receivable from loan to associates - 0.1
Financial instruments income 0.4 1.3
------------------------------------------------- ------ ------
Underlying finance income 0.5 1.5
Net exchange gains 0.3 -
Exceptional finance income - 0.5
------------------------------------------------- ------ ------
Total finance income 0.8 2.0
------------------------------------------------- ------ ------
Finance costs
Interest payable on bank loans and overdraft (15.1) (11.9)
Amortisation of debt issuance costs on bank loan (1.3) (0.5)
------------------------------------------------- ------ ------
Underlying finance charges (16.4) (12.4)
Interest on lease liabilities (5.3) (5.0)
Fair value (loss) of derivatives (1.7) (0.3)
Net exchange losses - -
------------------------------------------------- ------ ------
Total finance costs (23.4) (17.7)
------------------------------------------------- ------ ------
Net finance costs (22.6) (15.7)
------------------------------------------------- ------ ------
The total change in fair value of derivatives reported within
net finance costs for the year is a GBP1.7 million net loss
(FY2022: GBP0.3 million net loss). Included within finance income
is GBP0.4 million relating to swaps settled in June 2023. In the
prior year (FY2022: GBP1.3 million) received on settlement of two
EUR8.0 million average rate contracts acquired in March 2020 and
settled in April 2022 for GBP0.7 million and October 2022 for
GBP0.6 million respectively.
6. Income tax charge
Analysis of tax charge in the year:
2023 2022
Note GBP'm GBP'm
--------------- ---- ------ ------
Current tax:
- current year 5.1 6.1
- prior year - -
--------------- ---- ------ ------
5.1 6.1
--------------- ---- ------ ------
Deferred tax:
- current year 5.3 29.8
- prior year (2.8) -
--------------- ---- ------ ------
22 2.5 29.8
--------------- ---- ------ ------
Tax charge 7.6 35.9
--------------- ---- ------ ------
Reconciliation of income tax charge
The tax for the period is lower (FY2022: lower) than the
standard rate of corporation tax in the UK for the year ended 31
October 2023 of 22.5% (FY2022: 19%). The differences are explained
below:
2023 2022
GBP'm GBP'm
------------------------------------------------------------- ------ ------
Profit before tax 207.8 498.8
------------------------------------------------------------- ------ ------
Profit on ordinary activities multiplied by the standard
rate of corporation tax in the UK of 22.5% (FY2022:
19%) 46.8 94.8
Effect of:
- permanent differences (6.3) -
- profits from the tax exempt business (32.4) (71.5)
- deferred tax arising on acquisition of overseas subsidiary - 4.5
- difference from overseas tax rates 0.9 8.6
- potential deferred tax assets not recognised 1.4 0.4
- utilisation of unrecognised brought forward tax losses - (0.9)
------------------------------------------------------------- ------ ------
- prior year adjustment (2.8) -
------------------------------------------------------------- ------ ------
Tax charge 7.6 35.9
------------------------------------------------------------- ------ ------
The Group is a UK real estate investment trust ("REIT"). As a
result, the Group is exempt from UK corporation tax on the profits
and gains from its qualifying property rental business in the UK,
providing it meets certain conditions. Non-qualifying profits and
gains of the Group remain subject to corporation tax as normal. The
Group monitors its compliance with the REIT conditions. There have
been no breaches of the conditions to date.
The main rate of corporation tax in the UK increased from 19% to
25% with effect from 1 April 2023. Accordingly, the Group's results
for this accounting period are taxed at a blended effective rate of
22.5% (FY2022: 19%).
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
7. Dividends per share
The dividend paid in 2023 was GBP65.9 million (30.30 pence per
share) (FY2022: GBP56.9 million (27.00 pence per share)). A final
dividend in respect of the year ended 31 October 2023 of 20.20
pence (FY2022: 20.40 pence) per share, amounting to a total final
dividend of GBP44.1 million (FY2022: GBP42.8 million), is to be
proposed at the AGM on 13(th) March 2024. The ex-dividend date will
be 7(th) March 2024 and the record date will be 8(th) March 2024
with an intended payment date of 9(th) April 2024. The final
dividend has not been included as a liability at 31 October
2023.
The Property Income Distribution ("PID") element of the final
dividend is 15.15 pence (FY2022: 20.4 pence), making the PID
payable for the year 17.62 pence (FY2022: 22.75 pence) per
share.
8. Earnings per Share
Basic Earnings per Share ("EPS") is calculated by dividing the
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year
excluding ordinary shares held as treasury shares. Diluted EPS is
calculated by adjusting the weighted average number of ordinary
shares to assume conversion of all dilutive potential shares. The
Company has one category of dilutive potential ordinary shares:
share options. For the share options, a calculation is performed to
determine the number of shares that could have been acquired at
fair value (determined as the average annual market price of the
Company's shares) based on the monetary value of the subscription
rights attached to the outstanding share options. The number of
shares calculated as above is compared with the number of shares
that would have been issued assuming the exercise of the share
options.
Year ended 31 October Year ended 31 October
2023 2022
-------------------------- ------------------------------
Pence
Earnings Shares per Earnings Shares Pence
GBP'm million share GBP'm million per share
-------------------- -------- -------- ------ -------- -------- ----------
Basic 200.2 217.2 92.2 462.9 210.9 219.5
Dilutive securities - 0.9 (0.4) - 7.0 (7.1)
-------------------- -------- -------- ------ -------- -------- ----------
Diluted 200.2 218.1 91.8 462.9 217.9 212.4
-------------------- -------- -------- ------ -------- -------- ----------
Adjusted Earnings per Share
Explanations related to the adjusted earnings measures adopted
by the Group are set out in note 2 under the heading Non-GAAP
financial information/Alternative Performance Measures. Adjusted
EPS represents profit after tax adjusted for the valuation movement
on investment properties, exceptional items, change in fair value
of derivatives, exchange gains/losses, unwinding of the discount on
the CGS receivable and the associated tax thereon. The Directors
consider that these alternative measures provide useful information
on the performance of the Group.
EPRA earnings and Earnings per Share before non-recurring items,
movements on revaluations of investment properties and changes in
the fair value of derivatives have been disclosed to give a clearer
understanding of the Group's underlying trading performance.
Year ended 31 October Year ended 31 October
2023 2022
---------------------------------------- ------------------------------
Earnings Shares Pence Earnings Shares Pence
GBP'm million per share GBP'm million per share
------------------------------ -------- ------------------ ---------- -------- -------- ----------
Basic 200.2 217.2 92.2 462.9 210.9 219.5
Adjustments:
Gain on investment properties (93.8) - (43.2) (381.6) - (180.9)
Exceptional items - - - 0.1 - -
Other exceptional gains - - - (10.8) - (5.1)
Exceptional finance income - - - (0.5) - (0.2)
Net exchange gain (0.3) - (0.1) - - -
Change in fair value
of derivatives 1.7 - 0.8 0.3 - 0.1
Tax on adjustments 1.4 - 0.6 29.7 - 14.1
------------------------------ -------- ------------------ ---------- -------- -------- ----------
Adjusted 109.2 217.2 50.3 100.1 210.9 47.5
EPRA adjusted:
Fair value re-measurement
of lease liabilities
add-back (8.8) - (4.1) (8.3) - (3.9)
Tax on lease liabilities
add-back adjustment 1.1 - 0.5 1.0 - 0.5
------------------------------ -------- ------------------ ---------- -------- -------- ----------
Adjusted EPRA basic EPS 101.5 217.2 46.7 92.8 210.9 44.1
Share-based payments
charge 3.5 1.6 11.2 - 5.3
Dilutive shares - 1.9 (0.4) - 8.0 (1.9)
------------------------------ -------- ------------------ ---------- -------- -------- ----------
Adjusted Diluted EPRA
EPS(1) 105.0 219.1 47.9 104.0 218.9 47.5
------------------------------ -------- ------------------ ---------- -------- -------- ----------
Note 1: Adjusted Diluted EPRA EPS is based on the European
Public Real Estate Association's definition of earnings and is
defined as profit or loss for the period after tax but excluding
corporate transaction costs, change in fair value of derivatives,
gain/loss on investment properties and the associated tax impacts.
The Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share based payment charges, exceptional
tax items, and deferred tax charges. This adjusted earnings is
divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a
non-cash item (with the exception of the associated National
Insurance element). Therefore neither the company's ability to
distribute nor pay dividends are impacted (with the exception of
the associated National Insurance element). The financial
statements disclose earnings both on a statutory, EPRA and Adjusted
Diluted EPRA basis and will provide a full reconciliation of the
differences in the financial year in which any LTIP awards may
vest.
Gain on investment properties includes the fair value
re-measurement of lease liabilities add-back of GBP8.8 million
(FY2022: GBP8.3 million) and the related tax thereon of GBP1.1
million (FY2022: GBP1.0 million). As an industry standard measure,
EPRA earnings is presented. EPRA earnings of GBP101.5 million
(FY2022: GBP92.8 million) and EPRA Earnings per Share of 46.7 pence
(FY2022: 44.1 pence) are calculated after further adjusting for
these items.
2023 2022 Movement
EPRA adjusted income statement (non-statutory) GBP'm GBP'm %
------------------------------------------------------ ---------- ----------- --------
Revenue 224.2 212.5 5.5%
Underlying operating expenses (excluding depreciation
and variable lease payments) (82.0) (77.5) 5.8%
Share of associate's Underlying EBITDA - 0.1 (100%)
------------------------------------------------------ ---------- ----------- --------
Underlying EBITDA before variable lease payments 142.2 135.1 5.3%
Share-based payments charge (3.5) (11.2) (68.8%)
Depreciation and variable lease payments (2.1) (1.3) 61.5%
------------------------------------------------------ ---------- ----------- --------
Operating profit before fair value re-measurement
lease liabilities add-back 136.6 122.6 11.4%
Fair value re-measurement of lease liabilities
add-back (8.8) (8.3) 6.0%
------------------------------------------------------ ---------- ----------- --------
Operating profit 127.8 114.3 11.8%
Net financing costs (21.2) (15.9) 33.3%
Share of associate's finance charges - (0.4) (100%)
------------------------------------------------------ ---------- ----------- --------
Profit before income tax 106.6 98.0 8.8%
Income tax (5.1) (5.2) (1.9)
------------------------------------------------------ ---------- ----------- --------
Profit for the year ("Adjusted EPRA basic earnings") 101.5 92.8 9.4%
------------------------------------------------------ ---------- ----------- --------
Adjusted EPRA basic EPS 46.7 pence 44.1 pence 5.9%
20.20
Final dividend per share pence 20.40 pence (0.98%)
------------------------------------------------------ ---------- ----------- --------
9. Investment in associates
2023 2022
GBP'm GBP'm
-------------------------------------- ------ ------
PBC Les Groues SAS 1.8 1.8
CERF II German Storage Topco S.a.r.l. 2.3 -
-------------------------------------- ------ ------
4.1 1.8
-------------------------------------- ------ ------
Safestore Storage Benelux B.V. (formerly CERF Storage JV
B.V.
Until 30 March 2022, the Group had a 20% interest in Safestore
Storage Benelux B.V. ("SSB") (formerly CERF Storage JV B.V.), a
company registered and operating in the Netherlands. SSB was
accounted for using the equity method of accounting. SSB invests in
carefully selected self storage opportunities in Europe. The Group
earned a fee for providing management services to SSB. This
investment as an associate was considered immaterial relative to
the Group's underlying operations. On 30 March 2022, the Group
acquired the remaining 80% equity from its previous Joint Venture
partner for EUR53.6 million (GBP45.3 million) and SSB became a
wholly owned subsidiary. Under IFRS 3 this transaction, where
properties were acquired through the purchase of a corporate
vehicle in the year, has been judged to meet the accounting
definition of an asset purchase.
PBC Les Groues SAS
The Group has a 24.9% interest in PBC Les Groues SAS ("PBC"), a
company registered and operating in France. PBC is accounted for
using the equity method of accounting. PBC is the parent company of
Nanterre FOCD 92, a company also registered and operating in
France, which is developing a new store as part of a wider
development programme located in Paris. The development project is
managed by its joint venture partners, therefore the Group has no
operational liability during this phase. During the current period
there has been no material investment in the company (31 October
2022: GBP0.8m). The investment is considered immaterial relative to
the Group's underlying operations. The aggregate carrying value of
the Group's interest in PBC was GBP1.8m (31 October 2022: GBP1.8m),
made up of an investment of GBP1.8m (31 October 2022: GBP1.8m). The
Group's share of profits from continuing operations for the period
was GBPnil (30 October 2022: GBPnil). The Group's share of total
comprehensive income of associates for the period was GBPnil (31
October 2022: GBPnil).
CERF II German Storage Topco S.a.r.l.
On 1 December 2022 the Group acquired a 10.0% interest in CERF
II German Storage Topco S.a.r.l. (CERF II), a company registered in
Luxembourg for which the Group has board representation. The
reporting date of the financial statements for the company is 31
December. CERF II is accounted for using the equity method of
accounting. Safestore entered the German Self Storage market via a
new investment with Carlyle which acquired the myStorage business.
The aggregate carrying value of the Group's interest in CERF II was
GBP2.3m (31 October 2022: GBPnil), made up of an investment of
GBP2.3m (31 October 2022: GBPnil). The Group's share of profits
from continuing operations for the period was GBPnil (31 October
2022: GBPnil). The Group's share of total comprehensive income of
associates for the period was GBPnil (31 October 2022: GBPnil).
10. Investment properties
External
valuation
of investment Investment
properties, Add-back property Total
net of of under investment
lease liabilities lease liabilities construction properties
GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 1 November 2022 2,457.8 95.1 94.5 2,647.4
Additions 67.6 17.5 56.4 141.5
Disposals - (3.1) - (3.1)
Reclassifications 42.0 - (42.0) -
Revaluations 103.5 - (0.9) 102.6
Fair value re-measurement of lease liabilities
add-back - (8.8) - (8.8)
Exchange movements 10.2 0.5 0.6 11.3
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 31 October 2023 2,681.1 101.2 108.6 2,890.9
----------------------------------------------- ------------------ ------------------ ------------- -----------
The Group acquired the freehold of the Oldbury property on 22
February 2023 and Valencia property in January 2023. This resulted
in the disposal of lease liabilities with a carrying value of
GBP2.2m and GBP0.9m respectively.
External
valuation
of investment Investment
properties, Add-back property Total
net of of under investment
lease liabilities lease liabilities construction properties
GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 1 November 2021 1,881.8 82.1 67.4 2,031.3
Acquisition of subsidiaries 128.2 0.6 - 128.8
Additions 31.8 20.2 47.4 99.4
Disposals (6.2) - - (6.2)
Reclassifications 16.5 - (16.5) -
Revaluations 394.1 - (4.2) 389.9
Fair value re-measurement of lease liabilities
add-back - (8.3) - (8.3)
Exchange movements 11.6 0.5 0.4 12.5
----------------------------------------------- ------------------ ------------------ ------------- -----------
At 31 October 2022 2,457.8 95.1 94.5 2,647.4
----------------------------------------------- ------------------ ------------------ ------------- -----------
Revaluation
Cost on cost Valuation
GBP'm GBP'm GBP'm
------------------- ------- ----------- ---------
Freehold stores
At 1 November 2022 892.7 1,142.4 2,035.1
Movement in year 126.1 75.7 201.8
------------------- ------- ----------- ---------
At 31 October 2023 1,018.8 1,218.1 2,236.9
------------------- ------- ----------- ---------
Leasehold stores
At 1 November 2022 133.7 289.0 422.7
Movement in year 5.5 16.0 21.5
------------------- ------- ----------- ---------
At 31 October 2023 139.2 305.0 444.2
------------------- ------- ----------- ---------
All stores
At 1 November 2022 1,026.4 1,431.4 2,457.8
Movement in year 131.6 91.7 223.3
------------------- ------- ----------- ---------
At 31 October 2023 1,158.0 1,523.1 2,681.1
------------------- ------- ----------- ---------
The gain on investment properties comprises:
2023 2022
GBP'm GBP'm
------------------------------------------------------------ ------ ------
Revaluations of investment property and investment property
under construction 102.6 389.9
Fair value re-measurement of lease liabilities add-back (8.8) (8.3)
------------------------------------------------------------ ------ ------
93.8 381.6
------------------------------------------------------------ ------ ------
The valuation of GBP2,681.1 million (FY2022: GBP2,457.8 million)
excludes GBP0.6 million in respect of owner-occupied property,
which is included within property, plant and equipment. Rental
income earned from investment properties for the year ended 31
October 2023 was GBP188.5 million (FY2022: GBP179.3 million).
The Group has classified the investment property and investment
property under construction, held at fair value, within Level 3 of
the fair value hierarchy. There were no transfers to or from Level
3 during the year.
As described in note 2 summary of significant accounting
policies, where the valuation obtained for investment property is
net of all payments to be made, it is necessary to add back the
lease liability to arrive at the carrying amount of investment
property at fair value. The lease liability of GBP101.4 million
(FY2022: GBP95.4 million) per note 21 differs to the GBP101.2
million (FY2022: GBP95.1 million) disclosed above as a result of
accounting for the French Head Office lease under IFRS 16. This
lease is included as part of property, plant and equipment, and has
a net book value of GBP0.2 million as at 31 October 2023 (FY2022:
GBP0.3 million) (note 14).
All direct operating expenses arising from investment property
that generated rental income as outlined in note 3 were GBP82.0
million (FY2022: GBP75.3 million).
The freehold and leasehold investment properties have been
valued as at 31 October 2023 by external valuer, Cushman &
Wakefield Debenham Tie Leung Limited ("C&W"). The valuation has
been carried out in accordance with the current edition of the RICS
Valuation - Global Standards, which incorporates the International
Valuation Standards and the RICS Valuation UK National Supplement
(the "RICS Red Book"). The valuation of each of the investment
properties has been prepared on the basis of fair value as a fully
equipped operational entity, having regard to trading potential.
Two non-trading properties were valued on the basis of fair value.
The valuation has been provided for accounts purposes and, as such,
is a Regulated Purpose Valuation as defined in the RICS Red Book.
In compliance with the disclosure requirements of the RICS Red
Book, C&W has confirmed that:
-- the member of the RICS who has been the signatory to the
valuations provided to the Group for the same purposes as this
valuation has done so since April 2020.The valuations have been
reviewed by an internal investment committee comprising two
valuation partners and an investment partner, all unconnected with
the assignment;
-- C&W has been carrying out regular valuations for the same
purpose as this valuation on behalf of the Group since October
2006;
-- C&W does not provide other significant professional or agency services to the Group;
-- in relation to the preceding financial year of C&W, the
proportion of total fees payable by the Group to the total fee
income of the firm is less than 5%; and
-- the fee payable to C&W is a fixed amount per property and
is not contingent on the appraised value.
Valuation method and assumptions
The valuation of the operational self storage facilities has
been prepared having regard to trading potential. Cash flow
projections have been prepared for all of the properties reflecting
estimated absorption, revenue growth and expense inflation. A
discounted cash flow method of valuation based on these cash flow
projections has been used by C&W to arrive at its opinion of
fair value for these properties.
C&W has adopted different approaches for the valuation of
the leasehold and freehold assets as follows:
Freehold and long leasehold (UK, Paris, Spain, the Netherlands,
and Belgium)
The valuation is based on a discounted cash flow of the net
operating income over a ten-year period and a notional sale of the
asset at the end of the tenth year.
Assumptions:
-- Net operating income is based on projected revenue received
less projected operating costs together with a central
administration charge of 6% of the estimated annual revenue,
subject to a cap and collar. The initial net operating income is
calculated by estimating the net operating income in the first
twelve months following the valuation date.
-- The net operating income in future years is calculated
assuming either straight-line absorption from day one actual
occupancy or variable absorption over years one to four of the cash
flow period, to an estimated stabilised/mature occupancy level. In
the valuation the assumed stabilised occupancy level for the
trading stores (both freeholds and all leaseholds) open at 31
October 2023 averages 89.33% (FY2022: 89.18%). The projected
revenues and costs have been adjusted for estimated cost inflation
and revenue growth. The average time assumed for stores to trade at
their maturity levels is 13.44 months (FY2022: 18.51 months).
-- The capitalisation rates applied to existing and future net
cash flows have been estimated by reference to underlying yields
for industrial and retail warehouse property, yields for other
trading property types such as purpose-built student housing and
hotels, bank base rates, ten-year money rates, inflation and the
available evidence of transactions in the sector. The valuation
included in the accounts assumes rental growth in future periods.
If an assumption of no rental growth is applied to the external
valuation, the net initial yield pre-administration expenses for
mature stores (i.e. excluding those stores categorised as
'developing') is 5.92% (FY2022: 6.08%), rising to a stabilised net
yield pre-administration expenses of 6.71% (FY2022: 6.74%).
-- The weighted average freehold exit yield on UK freeholds is
5.75% (FY2022: 5.74%), on France freeholds is 5.61% (FY2022:
5.96%), on Spain freeholds is 5.50% (FY2022: 5.50%), on the
Netherlands freeholds is 5.15% (FY2022: 5.05%) and on Belgium
freeholds is 5.00% (FY2022: 5.02%). The weighted average freehold
exit yield for all freeholds adopted is 5.72% (FY2022: 5.78%).
-- The future net cash flow projections (including revenue
growth and cost inflation) have been discounted at a rate that
reflects the risk associated with each asset. The weighted average
annual discount rate adopted (for both freeholds and leaseholds) in
the UK portfolio is 8.59% (FY2022: 8.40%), in the France portfolio
is 8.38% (FY2022: 8.58%), in the Spain portfolio is 8.39% (FY2022:
8.29%), in the Netherlands portfolio is 7.74% (FY2022: 7.49%) and
in the Belgium portfolio is 7.99% (FY2022: 7.62%). The weighted
average annual discount rate adopted (for both freeholds and all
leaseholds) is 8.54% (FY2022: 8.49%).
-- Purchaser's costs in the range of approximately 3.3% to 6.8%
for the UK, 7.5% for Paris, 2.5% for Spain, 7.5% for the
Netherlands and 7.5% for Belgium have been assumed initially,
reflecting the progressive SDLT rates brought into force in March
2016 in the UK, and sales plus purchaser's costs totalling
approximately 5.3% to 8.8% (UK), 9.5% (Paris), 4.5% (Spain), 7.5%
(the Netherlands) and 7.5% (Belgium) are assumed on the notional
sales in the tenth year in relation to freehold and long leasehold
stores.
Short leaseholds (UK)
The same methodology has been used as for freeholds, except that
no sale of the assets in the tenth year is assumed but the
discounted cash flow is extended to the expiry of the lease. The
average unexpired term of the Group's UK short term leasehold
properties is 13.2 years (FY2022: 13.0 years). The average
unexpired term excludes the commercial leases in France and
Spain.
Short leaseholds (Paris)
In relation to the commercial leases in Paris, C&W has
valued the cash flow projections in perpetuity due to the security
of tenure arrangements in that market and the potential
compensation arrangements in the event of the landlord wishing to
take possession. The valuation treatment is therefore the same as
for the freehold properties. The capitalisation rates on these
stores reflect the risk of the landlord terminating the lease
arrangements.
Short leaseholds (Spain)
In relation to the commercial leases in Spain, C&W has
valued the cash flow projections in perpetuity due to the nature of
the lease agreements which allows the tenant to renew the lease
year-on-year into perpetuity. The valuation treatment is therefore
the same as for the freehold properties. The capitalisation rates
on these stores reflect the risk of the rolling lease
arrangements.
In relation to one other short leasehold in Spain, the lease
allows for a five-year automatic extension beyond the initial lease
expiry date subject to neither party serving notice stating it does
not wish to do so. This allows the landlord to terminate the lease
at the original expiry date if it so wishes. The same methodology
has been used as for freeholds, except that no sale of the asset in
the tenth year is assumed but the discounted cash flow is extended
to the expiry of the lease.
Short leaseholds (the Netherlands)
The same methodology has been used as for freeholds, except that
no sale of the assets in the tenth year is assumed but the
discounted cash flow is extended to the expiry of the lease.
Short leaseholds (Belgium)
There are no short term leaseholds in Belgium.
Investment properties under construction
C&W has valued the stores in development adopting the same
methodology as set out above but on the basis of the cash flow
projection expected for the store at opening and allowing for the
outstanding costs to take each store from its current state to
completion and full fit out, except several recently acquired
stores which have been valued at acquisition costs. C&W has
allowed for carry costs and construction contingency, as
appropriate.
Immature stores: value uncertainty
C&W has assessed the value of each property individually.
Where the stores in the portfolio are relatively immature and have
low initial cash flow, C&W has endeavoured to reflect the
nature of the cash flow profile for these properties in its
valuation, and the higher associated risks relating to the as yet
unproven future cash flow, by adjustment to the capitalisation
rates and discount rates adopted. However, immature low cash flow
stores of this nature are rarely, if ever, traded individually in
the market, unless as part of a distressed sale or similar
situation, although there is more evidence of such stores being
traded as part of a group or portfolio transaction.
C&W states that, in practice, if an actual sale of the
properties was to be contemplated then any immature low cash flow
stores would normally be presented to the market for sale lotted or
grouped with other more mature assets owned by the same entity, in
order to alleviate the issue of negative or low short term cash
flow. This approach would enhance the marketability of the group of
assets and assist in achieving the best price available in the
market by diluting the cash flow risk.
C&W has not adjusted its opinion of fair value to reflect
such a grouping of the immature assets with other properties in the
portfolio and all stores have been valued individually. However,
C&W highlights the matter to alert the Group to the manner in
which the properties might be grouped or lotted in order to
maximise their attractiveness to the marketplace.
C&W considers this approach to be a valuation assumption but
not a special assumption, the latter being an assumption that
assumes facts that differ from the actual facts existing at the
valuation date and which, if not adopted, could produce a material
difference in value.
Valuation assumption for purchaser's costs
The Group's investment property assets have been valued for the
purposes of the financial statements after adjusting for notional
purchaser's costs in the range of approximately 3.3% to 6.8% (UK),
7.5% (Paris), 2.5% (Spain), 7.5% (the Netherlands) and 7.5%
(Belgium), as if they were sold directly as property assets. The
valuation is an asset valuation which is strongly linked to the
operating performance of the business. They would have to be sold
with the benefit of operational contracts, employment contracts and
customer contracts, which would be difficult to achieve except in a
corporate structure.
This approach follows the logic of the valuation methodology in
that the valuation is based on a capitalisation of the net
operating income after allowing a deduction for operational cost
and an allowance for central administration costs. A sale in a
corporate structure would result in a reduction in the assumed
stamp duty land tax but an increase in other transaction costs
reflecting additional due diligence resulting in a reduced notional
purchaser's cost of c.2.75% of gross value. All the significant
sized transactions that have been concluded in the UK in recent
years were completed in a corporate structure. The Group therefore
instructed C&W to prepare additional valuation advice on the
basis of purchaser's cost of 2.75% of gross value which is used for
internal management purposes.
Sensitivity of the valuation to assumptions
As noted in 'Key sources of estimation uncertainty', self
storage valuations are complex, derived from data which is not
widely publicly available and involves a degree of judgement. All
other factors being equal, higher net operating income would lead
to an increase in the valuation of a store and an increase in the
capitalisation rate or discount rate would result in a lower
valuation, and vice versa. Higher assumptions for stabilised
occupancy, absorption rate, rental rate and other revenue, and a
lower assumption for operating costs, would result in an increase
in projected net operating income, and thus an increase in
valuation.
There are inter-relationships between the valuation inputs, and
they are primarily determined by market conditions. The effect of
an increase in more than one input could be to magnify the impact
on the valuation. However, the impact on the valuation could be
offset by the inter-relationship of two inputs moving in opposite
directions, e.g. an increase in rent may be offset by a decrease in
occupancy, resulting in no net impact on the valuation.
As noted in 'Key sources of estimation uncertainty', self
storage valuations are complex, derived from data which is not
widely available and involve a degree of judgement. For these
reasons we have classified the valuation of our property portfolio
as Level 3 as defined by IFRS 13. Inputs to the valuation, some of
which are 'unobservable' as defined by IFRS 13, include
capitalisation yields, stable occupancy rates, and time to
stabilised occupancy. The existence of an increase of more than one
unobservable input would augment the impact on the valuation. The
impact on the valuation would be mitigated by the
inter-relationship between unobservable inputs moving in opposite
directions. For example, an increase in stable occupancy may be
offset by an increase in yield, resulting in no net impact on the
valuation. A sensitivity analysis showing the impact on valuations
of changes in capitalisation rates and stable occupancy is shown
below:
Impact
Impact of change of a delay
in Impact of a change in stabilised
capitalisation in stabilised occupancy occupancy
rates assumption assumption
GBP'm GBP'm GBP'm
-------------------- -------------------------- --------------
25 bps 25 bps 24-month
decrease increase 1% increase 1% decrease delay
--------------- --------- --------- ------------ ------------ --------------
Reported Group 129.1 (88.1) 53.5 (31.9) (16.22)
--------------- --------- --------- ------------ ------------ --------------
11. Net assets per share
EPRA's Best Practices Recommendations guidelines for Net Asset
Value ("NAV") metrics are EPRA Net Tangible Assets ("NTA"), EPRA
Net Reinstatement Value ("NRV") and EPRA Net Disposal Value
("NDV").
EPRA NTA is considered to be the most relevant measure for the
Group's business which provides sustainable long term progressive
returns and is now the primary measure of net assets, replacing the
previously reported EPRA NAV metric. EPRA NTA assumes that entities
buy and sell assets, thereby crystallising certain levels of
unavoidable deferred tax. Due to the Group's REIT status, deferred
tax is only provided at each balance sheet date on properties
outside the REIT regime. As a result, deferred taxes are excluded
from EPRA NTA for properties within the REIT regime. For properties
outside of the REIT regime, deferred tax is included to the extent
that it is expected to crystallise, based on the Group's track
record and tax structuring.
There are no reconciling items between EPRA NTA and the
previously reported EPRA NAV metric. EPRA NTA is shown in the table
below:
2023 2022
------------------- -------------------
Diluted Diluted
pence pence
GBP'm per share GBP'm per share
----------------------------------------------- ------- ---------- ------- ----------
Balance sheet net assets 1,935.1 884 1,793.4 820
Adjustments to exclude:
Fair value of derivative financial instruments
(net of deferred tax) - (1.7)
Deferred tax liabilities on the revaluation
of investment properties 139.2 129.0
----------------------------------------------- ------- ---------- ------- ----------
EPRA NTA 2,074.3 948 1,920.7 879
----------------------------------------------- ------- ---------- ------- ----------
Basic net assets per share 888 848
----------------------------------------------- ------- ---------- ------- ----------
EPRA basic NTA per share 952 908
----------------------------------------------- ------- ---------- ------- ----------
The basic and diluted net assets per share have been calculated
based on the following number of shares:
2023 2022
Number Number
-------------------------------------------------------- ----------- -----------
Shares in issue
At year end 218,039,419 211,927,497
Adjustment for Employee Benefit Trust (treasury) shares (64,363) (359,795)
-------------------------------------------------------- ----------- -----------
IFRS/EPRA number of shares (basic) 217,975,056 211,567,702
Dilutive effect of Save As You Earn shares 39,269 87,562
Dilutive effect of Long Term Incentive Plan shares 860,328 6,956,633
-------------------------------------------------------- ----------- -----------
IFRS/EPRA number of shares (diluted) 218,874,653 218,611,897
-------------------------------------------------------- ----------- -----------
Basic net assets per share is shareholders' funds divided by the
number of shares at the year end. Diluted net assets per share is
shareholders' funds divided by the number of shares at the year
end, adjusted for dilutive share options of 899,597 shares (FY2022:
7,044,195 shares). EPRA diluted net assets per share excludes
deferred tax liabilities arising on the revaluation of investment
properties. The EPRA NAV, which further excludes fair value
adjustments for debt and related derivatives net of deferred tax,
was GBP2,074.3 million (FY2022: GBP1,920.7 million), giving EPRA
NTA per share of 948 pence (FY2022: 879 pence). The Directors
consider that these alternative measures provide useful information
on the performance of the Group.
EPRA adjusted balance sheet (non-statutory)
2023 2022
GBP'm GBP'm
----------------------------------------- --------- ---------
Assets
Non-current assets 2,906.8 2,653.4
Current assets 50.1 52.4
----------------------------------------- --------- ---------
Total assets 2,956.9 2,705.8
----------------------------------------- --------- ---------
Liabilities
Current liabilities (110.4) (178.4)
Non-current liabilities (772.2) (606.7)
----------------------------------------- --------- ---------
Total liabilities (882.6) (785.1)
----------------------------------------- --------- ---------
EPRA adjusted Net Asset Value 2,074.3 1,920.7
----------------------------------------- --------- ---------
EPRA adjusted basic net assets per share 952 pence 908 pence
----------------------------------------- --------- ---------
12. Cash and cash equivalents
2023 2022
GBP'm GBP'm
------------------------- ------ ------
Cash at bank and in hand 16.9 20.9
------------------------- ------ ------
The carrying amounts of the Group's cash and cash equivalents
are denominated in the following currencies:
2023 2022
GBP'm GBP'm
--------- ------ ------
Sterling 4.9 6.4
Euros 12.0 14.5
--------- ------ ------
16.9 20.9
--------- ------ ------
13. Financial liabilities - bank borrowings and notes
2023 2022
GBP'm GBP'm
--------------------- ------ ------
Bank loans and notes
Secured - 625.1
Unsecured 730.8 -
Debt issue costs (5.0) (1.3)
--------------------- ------ ------
725.8 623.8
--------------------- ------ ------
On 11 November 2022, the Group completed the refinancing of its
RCFs which were due to expire in June 2023. The previous GBP250.0
million Sterling and EUR70.0 million Euro RCFs have been replaced
with a single multi-currency GBP400 million facility. In addition,
a further GBP100 million uncommitted accordion facility is
incorporated in the facility agreement. The facility is for a
four-year term with two one-year extension options exercisable
after the first and second years of the agreement, the first of
which was completed in October.
The Group has US Private Placement Notes of EUR 358 million
(FY2022: EUR358 million) which have maturities extending to 2024,
2026, 2027, 2028, 2029 and 2033 and GBP212.5 million (FY2022:
GBP215.5 million) which have maturities extending to 2026, 2028,
2029 and 2031. The blended cost of interest on the overall debt at
31 October 2023 was 3.58% per annum. Since the year end the Group
has successfully refinanced its bank facilities borrowings (note
32). On 11 November 2022, the Group completed the refinancing of
its RCF which were due to expire in June 2023. The previous
GBP250.0 million Sterling and EUR70.0 million Euro RCF's were
replaced with a single multi-currency GBP400 million facility. In
addition, a further GBP100 million uncommitted accordion facility
is incorporated in the facility agreement. The facility is for a
four-year term with two one-year extension options exercisable
after the first and second years of the agreement, with the first
one-year extension being granted in October 2023.
The bank facilities attract a margin over SONIA/EURIBOR. The
margin ratchets between 1.25% and 2.50%, by reference to the
Group's performance against its interest cover covenant The Company
has in issue EUR50.9 million (FY2022: EUR50.9 million) 1.59% Series
A Senior Notes due 2024, EUR70.0 million (FY2022: EUR70.0 million)
1.26% Series A Notes due 2026, GBP35.0 million (FY2022: GBP35.0
million) 2.59% Series B Senior Notes due 2026, EUR74.1 million
(FY2022: EUR74.1 million) 2.00% Series B Senior Notes due 2027,
GBP20.0 million (FY2022: GBP20.0 million) 1.96% Series A Notes due
2028, EUR29.0 million (FY2022: EUR29.0 million) 0.93% Series B
Notes due 2028, GBP50.5 million (FY2022: GBP50.5 million) 2.92%
Series C Senior Notes due 2029, GBP30.0 million (FY2022: GBP30.0
million) 2.69% Series C Senior Notes due 2029, EUR105.0 million
(FY2022: EUR105.0 million) 2.45% Private Shelf Senior Notes due
2029, GBP80.0 million (FY2022: GBP80.0 million) 2.39% Series C
Notes due 2031 and EUR29.0 million (FY2022: EUR29.0 million) 1.42%
Series D Notes due 2033.
The EUR358.0 million of Euro denominated borrowings provides a
natural hedge against the Group's investment in the France, Spain,
Netherlands and Belgium businesses, so the Group has applied net
investment hedge accounting and the retranslation of these
borrowings is recognised directly in the translation reserve.
Bank loans and unsecured notes are stated before unamortised
issue costs of GBP5.0 million (FY2022: GBP1.3 million).
Bank loans and unsecured notes are repayable as follows:
Group
--------------
2023 2022
GBP'm GBP'm
----------------------------- ------ ------
Within one year 44.5 101.8
Between one and two years - 43.8
Between two and five years 409.0 158.9
After more than five years 277.3 320.6
----------------------------- ------ ------
Bank loans and notes 730.8 625.1
Unamortised debt issue costs (5.0) (1.3)
----------------------------- ------ ------
725.8 623.8
----------------------------- ------ ------
The effective interest rates at the balance sheet date were as
follows:
2023 2022
------------------------ ------------------------- --------------------------
Monthly, quarterly or
Bank loans (UK term six monthly SONIA plus Quarterly or monthly SONIA
loan) 1.25% plus 1.25%
Monthly, quarterly or
Bank loans (Euro term six monthly EURIBOR plus Quarterly EURIBOR plus
loan) 1.25% 1.25%
Private Placement Notes
(Euros) 1.80% 1.80%
Private Placement Notes
(Sterling) 2.55% 2.55%
------------------------ ------------------------- --------------------------
Borrowing facilities
The Group has the following undrawn committed borrowing
facilities available at 31 October 2023 in respect of which all
conditions precedent had been met at that date:
Floating rate
---------------
2023 2022
GBP'm GBP'm
------------------------- ------- ------
Expiring within one year - 208.4
Expiring beyond one year 297.0 -
------------------------- ------- ------
297.0 208.4
------------------------- ------- ------
The carrying amounts of the Group's borrowings are denominated
in the following currencies:
2023 2022
GBP'm GBP'm
--------- ------ ------
Sterling 377.5 291.5
Euros 353.3 333.6
--------- ------ ------
730.8 625.1
--------- ------ ------
14. Financial instruments
Financial instruments disclosures are set out below:
2023 2022
------------------- -----------------
Asset Liability Asset Liability
GBP'm GBP'm GBP'm GBP'm
-------------------------- ------- ---------- ------ ---------
Interest rate swaps - - 1.2 -
Foreign currency forwards - - 0.5 -
-------------------------- ------- ----------- ------ ---------
The fair value of financial instruments that are not traded in
an active market, such as over the counter derivatives, is
determined using valuation techniques. The Group obtains such
valuations from counterparties which use a variety of assumptions
based on market conditions existing at each balance sheet date.
The fair values of all financial instruments are equal to their
book value, with the exception of bank loans, which are set out
below. The fair value of loan notes is determined using a
discounted cash flow, while the fair value of bank loans drawn from
the Group's bank facilities equates to book value. The carrying
value less impairment provision of trade receivables, other
receivables and the carrying value of trade payables and other
payables approximates to their fair value.
The fair value of bank loans is calculated as:
2023 2022
---------------------- ----------------------
Book value Fair value Book value Fair value
GBP'm GBP'm GBP'm GBP'm
----------- ---------- ---------- ---------- ----------
Bank loans 725.8 789.3 623.8 694.1
----------- ---------- ---------- ---------- ----------
Fair value hierarchy
IFRS 13 requires fair value measurements to be recognised using
a fair value hierarchy that reflects the significance of the inputs
used in the measurements, according to the following levels:
Level 1 - unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly.
Level 3 - inputs for the asset or liability that are not based
on observable market data.
The table below shows the level in the fair value hierarchy into
which fair value measurements have been categorised:
2023 2022
Assets per the balance sheet GBP'm GBP'm
------------------------------------------- ------ ------
Derivative financial instruments - Level 2 - 1.7
Amounts due from associates - Level 2 0.1 -
------------------------------------------- ------ ------
2023 2022
Liabilities per the balance sheet GBP'm GBP'm
------------------------------------------- ------ ------
Derivative financial instruments - Level 2 - -
Bank loans - Level 2 725.8 694.1
------------------------------------------- ------ ------
There were no transfers between Level 1, 2 and 3 fair value
measurements during the current or prior year.
Over the life of the Group's derivative financial instruments,
the cumulative fair value gain/loss on those instruments will be
GBPnil as it is the Group's intention to hold them to maturity.
Interest rate swaps not designated as part of a hedging
arrangement
The notional principal amounts of the outstanding interest rate
swap contracts at 31 October 2023 were GBPnil million and EURnil
million (FY2022: GBP55.0 million and EURnil). At 31 October 2023
the weighted average fixed interest rates were Sterling %nil as the
swaps were expired in June 2023 (FY2022: Sterling at 0.6885%), and
floating rates are at quarterly SONIA and the quarterly EURIBOR.
The movement in fair value recognised in the income statement was a
net loss of GBP1.2 million (FY2022: net gain of GBP1.0
million).
Foreign currency forwards not designated as part of a hedging
arrangement
As at 31 October 2023, all average rate forward contracts had
matured for the Group (FY2022: one tranche totalling EUR8.5
million). The movement in the fair value recognised in the income
statement in the period was a net loss of GBP0.5 million (FY2022:
net loss of GBP1.3 million). The EUR8.5 million tranche previously
held matured and was settled in April 2023, resulting in a fair
value disposal of GBP0.5 million and a receipt of GBP0.4 million.
This resulted in GBP0.4 million recognised as finance income and
GBP0.5 million expense as part of the GBP1.7 million expense
recognised in fair value movement of derivatives within finance
costs in the income statement.
Financial instruments by category
Assets
Financial at fair
assets value through
at amortised profit
cost and loss Total
Assets per the balance sheet GBP'm GBP'm GBP'm
-------------------------------------------------- ------------- -------------- ------
Trade receivables and other receivables excluding
prepayments 22.5 - 22.5
Derivative financial instruments - - -
Cash and cash equivalents 16.9 - 16.9
-------------------------------------------------- ------------- -------------- ------
At 31 October 2023 39.4 - 39.4
-------------------------------------------------- ------------- -------------- ------
Other financial Liabilities
liabilities at fair
at value through
amortised profit
cost and loss Total
Liabilities per the balance sheet GBP'm GBP'm GBP'm
----------------------------------------- --------------- -------------- ------
Borrowings (excluding lease liabilities) 725.8 - 725.8
Lease liabilities 101.4 - 101.4
Payables and accruals 27.2 - 27.2
----------------------------------------- --------------- -------------- ------
At 31 October 2023 854.4 - 854.4
----------------------------------------- --------------- -------------- ------
Assets
Financial at fair
assets value through
at amortised profit
cost and loss Total
Assets per the balance sheet GBP'm GBP'm GBP'm
-------------------------------------------------- ------------- -------------- ------
Trade receivables and other receivables excluding
prepayments 24.0 - 24.0
Derivative financial instruments - 1.7 1.7
Cash and cash equivalents 20.9 - 20.9
-------------------------------------------------- ------------- -------------- ------
At 31 October 2022 44.9 1.7 46.6
-------------------------------------------------- ------------- -------------- ------
Other financial Liabilities
liabilities at fair
at value through
amortised profit
cost and loss Total
Liabilities per the balance sheet GBP'm GBP'm GBP'm
----------------------------------------- --------------- -------------- ------
Borrowings (excluding lease liabilities) 623.8 - 623.8
Lease liabilities 95.4 - 95.4
Payables and accruals 37.7* - 37.7
----------------------------------------- --------------- -------------- ------
At 31 October 2022 756.9 - 756.9
----------------------------------------- --------------- -------------- ------
* The financial liabilities exclude other taxes and social
security payable in FY 2023: GBP6.3 million (FY 2022: GBP6.2
million) as they do not meet the definition of a financial
liability
The interest rate risk profile, after taking account of
derivative financial instruments, was as follows:
2023 2022
------------------------ ----------------------------
Floating Fixed Floating
rate rate Total rate Fixed rate Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
----------- -------- ------ ------ -------- ---------- ------
Borrowings 203.0 522.8 725.8 46.8 577.0 623.8
----------- -------- ------ ------ -------- ---------- ------
The weighted average interest rate of the fixed rate financial
borrowing was 2.10% (FY2022: 2.05%) and the weighted average
remaining period for which the rate is fixed was five years
(FY2022: five years).
Maturity analysis
The table below analyses the Group's financial liabilities and
non-settled derivative financial instruments into relevant maturity
groupings based on the remaining period at the balance sheet date
to the contractual maturity dates. The amounts disclosed in the
table are the contractual undiscounted cash flows.
One to Two to
Less than two five More than
one year years years five years
GBP'm GBP'm GBP'm GBP'm
-------------------------------- --------- ------ ------ -----------
2023
Borrowings 54.6 10.2 436.0 297.0
Derivative financial instruments - - - -
Lease liabilities 13.8 13.7 36.4 77.0
Payables and accruals 29.4 - - -
-------------------------------- --------- ------ ------ -----------
97.8 23.9 472.4 374.0
-------------------------------- --------- ------ ------ -----------
One to Two to
Less than two five More than
one year years years five years
GBP'm GBP'm GBP'm GBP'm
-------------------------------- --------- ------ ------ -----------
2022
Borrowings 114.7 53.9 187.8 348.3
Derivative financial instruments 1.0 - - -
Lease liabilities 13.8 12.9 35.9 74.7
Payables and accruals 43.9 - - -
-------------------------------- --------- ------ ------ -----------
173.4 66.8 223.7 423.0
-------------------------------- --------- ------ ------ -----------
15. Lease liabilities
The Group leases certain of its investment properties under
lease liabilities. The average remaining lease term is 10.7 years
(FY2022: 10.9 years).
Present value of
minimum
Minimum lease payments lease payments
------------------------ ------------------
2023 2022 2023 2022
GBP'm GBP'm GBP'm GBP'm
-------------------------------------- ----------- ----------- -------- --------
Within one year 13.8 13.8 13.1 13.2
Within two to five years 50.1 48.8 42.0 40.6
Greater than five years 77.0 74.7 46.3 41.6
-------------------------------------- ----------- ----------- -------- --------
140.9 137.3 101.4 95.4
Less: future finance charges on lease
liabilities (39.5) (41.9) - -
-------------------------------------- ----------- ----------- -------- --------
Present value of lease liabilities 101.4 95.4 101.4 95.4
-------------------------------------- ----------- ----------- -------- --------
2023 2022
GBP'm GBP'm
------------ ------ ------
Current 13.1 13.2
Non-current 88.3 82.2
------------ ------ ------
101.4 95.4
------------ ------ ------
Amounts recognised within the consolidated income statement
include interest on lease liabilities of GBP5.3 million and
variable lease payments not included in the measurement of the
lease liabilities of GBP0.8 million. Amounts recognised in the
consolidated statement of cash flows include lease liabilities
principal payments of GBP8.8 million and interest on lease
liabilities of GBP5.3 million. The maturity analysis for lease
liabilities under contractual undiscounted cash flows is included
in note 14.
16. Called up share capital
2023 2022
GBP'm GBP'm
----------------------------------------------------- ------ ------
Called up, allotted, and fully paid
218,039,419 (FY2022: 211,927,497) ordinary shares of
1 pence each 2.2 2.1
----------------------------------------------------- ------ ------
17. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from
operating activities:
2023 2022
Cash generated from continuing operations Notes GBP'm GBP'm
--------------------------------------------------- ----- ------ -------
Profit before income tax 207.8 498.8
Gain on investment properties 10 (93.8) (381.6)
Other exceptional gains 4 - (10.8)
Share of loss in associates - 0.3
Depreciation 1.3 1.0
Net finance expense 22.6 15.7
Employee share options 2.9 8.6
Changes in working capital:
Decrease in inventories - 0.2
Decrease/(increase) in trade and other receivables (1.4) 0.1
(Decrease) in trade and other payables (11.2) (0.4)
Increase in provisions 0.2 0.3
--------------------------------------------------- ----- ------ -------
Cash generated from continuing operations 128.4 132.2
--------------------------------------------------- ----- ------ -------
18. Analysis of movement in gross and net debt
Non-cash
2022 Cash flows movements 2023
GBP'm GBP'm GBP'm GBP'm
--------------------------------------------- ------- ---------- ---------- -------
Bank loans (623.8) (96.4) (5.6) (725.8)
Lease liabilities (95.4) 8.8 (14.8) (101.4)
--------------------------------------------- ------- ---------- ---------- -------
Total gross debt (liabilities from financing
activities) (719.2) (87.6) (20.4) (827.2)
Cash in hand 20.9 (3.9) (0.1) 16.9
--------------------------------------------- ------- ---------- ---------- -------
Total net debt (698.3) (91.5) (20.5) (810.3)
--------------------------------------------- ------- ---------- ---------- -------
The table above details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's consolidated cash flow statement as cash flows from
financing activities.
The cash flows from bank loans make up the net amount of
proceeds from borrowings, repayment of borrowings and debt issuance
costs.
Non-cash movements relate to the amortisation of debt issue
costs of GBP1.3 million (FY2022: GBP0.5 million), foreign exchange
movements of GBP4.3 million (FY2022: GBP6.8 million) and unwinding
of discount to lease liabilities of GBP14.8 million (FY2022:
GBP21.5 million).
19. Provisions
In France, the basis on which property taxes have been assessed
has been challenged by the tax authority for financial years 2011
onwards. In November 2022 the French Supreme Court delivered a
final judgement in respect of litigation for years 2011 to 2013,
which resulted in a partial success for the Group. The Group is
separately pursuing litigation in respect of years since 2013 and
has lodged an appeal with the French administrative tribunal
against the issues included in assessments for 2013 onwards on
which it was ultimately unsuccessful in the French Supreme Court
for the earlier years. A provision is included in the consolidated
financial accounts of GBP2.6 million at 31 October 2023 (31 October
2022: GBP2.4 million), to reflect the increased uncertainty
surrounding the likelihood of a successful outcome. Of the total
provided, GBP0.2m has been charged in relation to the year ended 31
October 2023 within cost of sales (Underlying EBITDA) (31 October
2022: GBP0.2 million within cost of sales (underlying EBITDA) and
GBP1.9 million recorded as an exceptional charge in respect of
financial years 2012 to 2020). The litigation is expected to be
resolved over the next few years.
It is possible that the French tax authority may appeal the
decisions of the French Court of Appeal on which the Group was
successful to the French Supreme Court. The maximum potential
exposure in relation to these issues at 31 October 2023 is GBP3.0
million (31 October 2022: GBP3.0 million). No provision for any
further potential exposure has been recorded in the consolidated
financial statements since the Group believes it is more likely
than not that a successful outcome will be achieved, resulting in
no additional liabilities.
20. Contingent liabilities
As part of the Group banking facility, the Company has
guaranteed the borrowings totalling GBP730.8 million (FY2022:
GBP625.1 million) of fellow Group undertakings by way of a charge
over all of its property and assets. There are similar
cross-guarantees provided by the Group companies in respect of any
bank borrowings which the Company may draw under a Group facility
agreement. The financial liability associated with this guarantee
is considered remote and therefore no provision has been
recorded.
The Group also has a contingent liability in respect of property
taxation in the French subsidiary as disclosed in note 19.
21. Capital commitments
The Group had GBP128 million of capital commitments as at 31
October 2023 (FY2022: GBP146.0 million).
22. Related party transactions
The Group's shares are widely held. Transactions between the
Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
Transactions with PBC Les Groues SAS
As described in note 12, the Group has a 24.9% interest in PBC
Les Groues SAS ("PBC"). During the period, the Group made no
transactions with PBC (FY2022: GBP0.8 million (EUR0.9 million). The
total amount invested is included as part of its non-current
investments in associates. The total amount outstanding at 31
October 2023 included within trade and other receivables was GBPnil
(FY2022: GBPnil).
Transactions with CERF II German Storage Topco S a r l (CERF
II)
As described in note 12, the Group has a 10.0% interest in CERF
II German Storage Topco S a r l (CERF II). During the period, the
Group recharged GBP0.4 million.
23. Post balance sheet events
There are no post balance sheet events.
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END
FR QKABPKBKBBDD
(END) Dow Jones Newswires
January 17, 2024 02:00 ET (07:00 GMT)
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