Results
The 20% increase in adjusted profit before tax to £13.9 million was principally due to the increased store profitability as illustrated in the table below:
| Movement in adjusted profit before tax | £m |
|---|---|
| Adjusted profit before tax for the six months to 30 September 2011 | 11.6 |
| Increase in gross profit | 3.0 |
| Increase in administrative expenses | (0.6) |
| Decrease in capitalised interest | (0.3) |
| Increase in net interest payable | (0.1) |
| Increase in share of Partnership recurring profit | 0.3 |
| Adjusted profit before tax for the six months to 30 September 2012 | 13.9 |
The table below reconciles the statutory profit before tax to the adjusted profit before tax:
| Profit before tax analysis | Six months ended 30 September 2012 £m |
Six months to 30 September 2011 £m |
Year ended 31 March 2012 £m |
|---|---|---|---|
| Profit/(loss) before tax | 27.2 | 6.4 | (35.6) |
| Adjusted for: | |||
| (Gain)/loss on revaluation of investment properties | (11.5) | (2.6) | 51.4 |
| Change in fair value of interest rate derivatives | – | 9.5 | 8.0 |
| Gains on surplus land | (0.2) | – | (0.5) |
| VAT implementation costs | 0.1 | – | – |
| Share of revaluation and derivative movements in associate | (1.7) | (1.7) | 0.3 |
| Adjusted profit before tax | 13.9 | 11.6 | 23.6 |
Diluted EPRA earnings per share was 10.71 pence (2011: 8.93 pence), an increase of 20%.
Cash flow growth
Cash flows from operating activities (after net finance costs) have increased by 10.8% to £14.9 million for the period (2011: £13.5 million). These operating cash flows are after the ongoing maintenance costs of the stores, which are on average £30,000 per store per annum.
| Six months ended 30 September 2012 £000 |
Six months ended 30 September 2011 £000 |
|
|---|---|---|
| Cash generated from operations (see below) | 21,004 | 19,209 |
| Finance costs (net) (see below) | (6,067) | (5,724) |
| Free cash flow | 14,937 | 13,485 |
| Non-recurring finance costs (see below) | (10,650) | – |
| Capital expenditure | (7,040) | (11,869) |
| Surplus land sales | 12,335 | 912 |
| VAT received on surplus land sales (see below) | 2,430 | – |
| Investment in associate | (1,000) | (1,000) |
| Cash flow after investing activities | 11,012 | 1,528 |
| Dividends | (7,057) | (6,460) |
| Purchase of own shares | – | (3,727) |
| Issue of share capital | 976 | 34 |
| (Decrease)/increase in borrowings | (6,761) | 9,000 |
| Net cash (outflow)/inflow | (1,830) | 375 |
The capital expenditure in the period principally relates to the costs incurred completing the development of our Chiswick store and the hotel at Richmond.
The non-recurring finance costs incurred in the period relate to the cancellation of interest rate swaps (£9.2 million) and arrangement fees and costs incurred in completing the loan from Aviva (£1.5 million). The VAT on asset sales relates to VAT collected on the sale of the surplus sites at Chiswick and Richmond which was paid to HMRC in October 2012. This has been adjusted from the movement on creditors within cash flow from operations as it is distortive to the Group’s free cash flow.
Taxation
The Group is a Real Estate Investment Trust (“REIT”). We benefit from a zero tax rate on our qualifying self storage earnings. We only pay corporation tax on the profits attributable to our residual business, comprising primarily of the sale of packing materials and insurance, and management fees earned by the Group.
There is a nil tax charge in the non-exempt residual business for the period ended 30 September 2012 (2011: £nil), due to tax relief in relation to the restructuring of interest rate derivatives in prior periods.
Dividends
REIT regulatory requirements determine the level of Property Income Dividend (“PID”) payable by the Group. A PID of 5 pence per share is proposed as the total interim dividend, an increase of 11% from 4.5 pence per share PID for the same period last year.
The dividend is 2.1 times covered by our EPRA earnings per share, and 2.3 times covered by our free cash flow for the six month period.
The interim dividend will be paid on 4 January 2013 to shareholders on the Register on 7 December 2012.
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