Property
Our landmark store on the A4 in Chiswick, West London opened in April 2012. We have a pipeline of four wholly owned development sites; all have planning consent, bar our site in Central Manchester.
The three development sites with planning consent at Enfield, Guildford Central and Gypsy Corner, have an estimated cost to complete of £14.3 million excluding VAT. We have committed to the construction of Gypsy Corner, which we anticipate opening in April 2014. The remaining two sites with planning will be constructed on a phased basis.
During the year we sold our surplus one acre site adjacent to our new flagship Chiswick store for £4.8 million. We also sold our surplus site at South Bow for £3.6 million, and received the further consideration of £7.4 million from the disposal of the Premier Inn hotel we developed at Richmond. The proceeds were deployed to reduce the Group’s debt. These sales have largely completed our surplus asset disposals, with the Group owning £4.6 million of land surplus to our requirements across two sites at 31 March 2013. We aim to sell this remaining surplus land once we have maximised its value through planning.
We continue to monitor site acquisition opportunities, principally focussed in London.
Dividend
The Board is recommending the payment of a final dividend of 6 pence per share, taking the total dividend declared for the year to 11 pence per share (31 March 2012: 10 pence per share).
The cash dividend payment is two times covered by our free cash flow.
Our people
Our strong performance during the year was driven by the continued efforts and loyalty of the Big Yellow team, both at head office and in the stores, and they remain pivotal to the achievement of our key medium term objectives of driving occupancy, revenue, and cash flow growth.
Board
Philip Burks, a co-founder of the business in September 1998, will be retiring from his current role as a Non-Executive Director at the Group’s next Annual General Meeting on 19 July 2013. Georgina Harvey will be appointed to the Board as an independent Non-Executive Director from 1 July 2013.
Philip and I started work together in 1986 and have been in partnership now for over 25 years. It has been the best of partnerships. Without Philip’s property skills and tenacity, Big Yellow could not have achieved a fraction of its successes. The Board joins me in wishing him the best for the future.
We are delighted to welcome Georgina to the Board. Georgina brings extensive and diverse experience from the worlds of traditional and digital media, retail and leisure. As Big Yellow’s fortunes increasingly lie with the internet, her experience will be of great value.
Outlook
We believe that REITs should enjoy similar characteristics to property as an investment medium, with the defensive qualities of fixed income, and the upside benefits of equity. Those intrinsic features of property have been distorted in the recent past by excessive debt, which by definition has over-accentuated the equity characteristics, the cause of much of the volatility in the direct and indirect property market.
It is clear to us that lower geared businesses, both operationally and financially, outperform over the longer term. Accordingly, one of the key tasks for your management since 2007 has been to create a capital structure reflective of those views.
Although we think that ideally Big Yellow would benefit from still lower proportionate levels of debt, we are satisfied that as a minimum our core ambition in this respect has been achieved, following the growth in cash flows, the two refinancings, and the equity raise.
This improved capital structure allows us to fully focus on the upside potential in our business. In that respect much has been achieved since 2007; 23 new purpose-built stores have been opened, significant operational improvements have been made, and the brand has emerged as the unquestionable market leader.
This makes us confident that, on a medium to long term view, we will deliver substantially more of our full potential as we build occupancy and yield in our stores. The pace at which this will be achieved will depend in part on external factors, including the wider economy, housing transactions, new business formation and investment. Whilst there remain challenges around these factors, we allow ourselves for the first time in a few years, to enjoy a little more optimism.
Nicholas Vetch
Chairman
20 May 2013