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Business and Financial Review

Competitor store openings remain constrained, particularly in London and our other core areas of operation.

Delivering results

Trading performance

We are pleased to report a solid trading performance for the six months with an increase in occupancy of 5.8 ppts from March 2017. Like-for-like revenue growth in the first quarter was 5.0%. This improved to 6.6% in the second quarter, with the average for the half year of 5.7%.

As we have often said, the biggest risk to this business is around competition and new supply in our areas of operation. Competitor store openings remain constrained, particularly in London and our other core areas of operation, due to the scarcity of land and competition from other land users. In the market as a whole, new capacity is increasing at around 1 to 2% per annum. We are aware of only five store openings in London in this financial year, but also three store closures, resulting in a very limited increase in supply.

Customer demand

Demand for self storage is largely driven by need, with security, convenience, quality of product, service and location being key drivers. Awareness remains relatively low compared to commoditised products, such as hotel rooms or airline seats, albeit it is increasing slowly year on year with increased supply, marketing spend and customer use.

We are confident that Big Yellow benefits disproportionately from this improving market for our product, due to our market-leading brand and operating platform with our focus on London, the South East and large metropolitan cities. Our digital platform now accounts for 88% of our prospects, of which over half come through our mobile site.

Customers renting storage space whilst moving within the rental or owner occupied sectors represent 41% of move-ins during the period. 10% of our customers who moved in took storage space as a spare room for decluttering. 38% of our customers used the product because some event has occurred in their lives generating the need for storage; they may be moving abroad for a job, have inherited possessions, are getting married or divorced, are students who need storage during the holidays, or homeowners developing into their lofts or basements. The balance of 11% of our customer demand during the period came from businesses. These demand segments are broadly in line with the same period last year.

There is a growing trend towards self-employment and smaller business start-ups in the UK, dynamics that are positive for self storage. Additionally, businesses in the UK are increasingly seeking flexible office and storage space as a means of operation, shying away from longer inflexible leases. The deindustrialisation of big cities with the conversion of commercial space into residential and other uses, is also a driver for demand from the SME market seeking flexible warehouse space.

Of our occupied space today, customers who are longer stay lifestyle users, decluttering into small rooms as an extension to their accommodation, occupy 10% to 15%; 50% to 55% are using it for less than 12 months largely event driven, which could be inheritance, moving, carrying out building work, and the balance of 35% are businesses, typically SMEs.

Store occupancy

Prospects for the six months were broadly in line with the same period last year, but we converted a higher proportion of those prospects into move-ins, with move-ins up 4% on the prior period.

The table below shows the monthly move-in and move-out activity over the half year:

	Move-ins period ended 30 September 2017	Move-ins period ended 30 September 2016	%	Move-outs period ended 30 September 2017	Move-outs period ended 30 September 2016	%
April	5,530	5,409	2	5,082	5,463	(7)
May	6,470	6,189	5	5,168	5,110	1
June	8,322	7,911	5	4,862	5,052	(4)
July	7,562	7,352	3	6,679	6,559	2
August	6,969	6,848	2	6,622	6,609	–
September	6,932	6,502	7	9,651	9,071	6
Total	41,785	40,211	4	38,064	37,864	1
October	5,989	5,762	4	6,978	7,046	(1)

During the period, we saw improved move-in activity month-on-month. This reflects the occupancy focus over the period, with continued innovation and investment in our digital platform and operations. Move-outs were lower in the first quarter following quieter trading earlier in the year. The increase in move outs in September was largely due to higher levels of student move-ins over the summer.

Occupancy growth over the six month period was 265,000 sq ft (2016: 134,000 sq ft, excluding 76,000 sq ft of occupancy acquired in the Nine Elms and Twickenham 2 stores).

	Net sq ft period ended 30 September 2017	Net sq ft period ended 30 September 2016	Net move-ins period ended 30 September 2017	Net move-ins period ended 30 September 2016
April	30,000	(12,000)	448	(54)
May	48,000	42,000	1,302	1,079
June	105,000	80,000	3,460	2,859
July	78,000	48,000	883	793
August	36,000	6,000	347	239
September	(32,000)	(30,000)	(2,719)	(2,569)
Total	265,000	134,000	3,721	2,347
October	(46,000)	(64,000)	(989)	(1,284)

Our third quarter is historically the weakest trading quarter and in recent years, we have typically lost two to three percentage points of occupancy before a return to growth in the new year. Since the end of September we have lost 86,000 sq ft (1.9% of maximum lettable area “MLA”), compared to 84,000 sq ft (1.8% of MLA) lost at this stage last year. We do expect to return to occupancy growth in our seasonally stronger March quarter.

The 67 mature stores are 84.3% occupied compared to 79.6% at the same time last year. The four established stores have grown in occupancy from 77.9% to 84.1%. The two developing stores added 30,000 sq ft of occupancy in the past 12 months to reach closing occupancy of 69.1%. Overall store occupancy has increased over the 12 months from 78.5% to 83.8%, and by 5.8 ppts from 1 April 2017.

	Occupancy at 30 September 2017 %	Occupancy growth from 31 March 2017 000 sq ft	30 September 2017 000 sq ft	31 March 2017 000 sq ft	30 September 2016 000 sq ft
67 mature stores	84.3%	232	3,503	3,271	3,307
4 established stores	84.1%	15	228	213	211
2 developing stores	69.1%	18	85	67	55
Total – all 73 stores	83.8%	265	3,816	3,551	3,573

All 73 stores open at the period end are trading profitably at the Store EBITDA level.