Business and Financial Review
Pricing and rental yield
Our core proposition remains a high quality product, competitively priced, with excellent customer service, providing value for money to our customers. We offer a headline opening promotion of 50% off for up to the first 8 weeks, and we continue to manage pricing dynamically, taking account of room availability, customer demand and local competition.
Our pricing model reduces promotions and increases asking prices where individual units are in scarce supply. This lowering of promotions, coupled with price increases to existing and new customers, leads to an increase in net achieved rents. With higher occupancy level across the portfolio, the average net achieved rent grew by 3.7% compared to the same period last year. The closing net rent at 30 September 2018 grew by 1.7% from 31 March 2018 and by 3.5% from 30 September 2017.
The table below illustrates the growth in net rent per sq ft for the portfolio by average occupancy over the six months (on a non-weighted basis). The analysis excludes our recent openings in Guildford Central and Wapping.
| Average occupancy in the six months |
Number of stores | Net rent per sq ft growth from 1 April to 30 September 2018 |
|---|---|---|
| 0 to 75% | 5 | (3.1%) |
| 75 to 85% | 46 | 1.5% |
| Above 85% | 22 | 2.8% |
Security of income
Our principal financial aims remain to grow cash flow, earnings and dividend. We believe that self storage income is essentially evergreen income with highly defensive characteristics driven from buildings with very low obsolescence risk. Although our contract with our customers is in theory as short as a week, we do not need to rely on contracts for our income security. At 30 September 2018 the average length of stay for existing customers was 26 months (2017: 24 months). For all customers, including those who have moved out of the business, the average length of stay is 8.5 months (2017: 8.4 months). 32% of our customers by occupied space have been storing with us for over two years (2017: 30%), and a further 17% of customers have been in the business for between one and two years (2017: 17%).
The location of our stores, brand, security, and most importantly customer service, together with the diversity of our 58,000 customers, serve better than any contract in providing income security.
Revenue
Total revenue for the six month period was £62.2 million, an increase of £4.1 million (7%) from £58.1 million in the prior period. Like-for-like revenue (see glossary in note 19) was £62.0 million, an increase of 7% from the prior period driven by growth in both occupancy and rate.
Other sales (included within the above), comprising the selling of packing materials, insurance and storage related charges, represented 14.5% of total store revenue for the period (2017: 14.8%) and generated revenue of £8.8 million for the period, up 4% from £8.4 million in 2017 (see Portfolio Summary).
The other revenue earned is management fee income from the Armadillo Partnerships and tenant income on sites where we have not started development.
Operating costs
Cost of sales comprises principally direct store operating costs, including store staff salaries, utilities, business rates, insurance, a full allocation of the central marketing budget, and repairs and maintenance.
The breakdown of the portfolio’s operating costs compared to the prior period is shown in the table below (see Portfolio Summary):
| Category | Period ended 30 September 2018 £000 |
Period ended 30 September 2017 £000 |
% change |
% of store operating costs in period |
|---|---|---|---|---|
| Cost of sales (insurance and packing materials) | 1,496 | 1,341 | 12 | 9 |
| Staff costs | 4,589 | 4,510 | 2 | 26 |
| General & Admin | 621 | 570 | 9 | 4 |
| Utilities | 644 | 679 | (5) | 4 |
| Property Rates | 5,467 | 5,172 | 6 | 31 |
| Marketing | 2,633 | 2,178 | 21 | 15 |
| Repairs and maintenance | 1,355 | 1,296 | 5 | 8 |
| Insurance | 363 | 404 | (10) | 2 |
| Computer Costs | 261 | 229 | 14 | 1 |
| Irrecoverable VAT | 8 | 8 | – | – |
| Total per portfolio summary | 17,437 | 16,387 | 6 |
Store operating costs have increased by £1.0 million (6%) compared to the same period last year. Of this increase £0.3 million relates to our new stores at Guildford Central and Wapping. The Group’s property rates have increased by £0.3 million from the prior period, with the Group receiving rates rebates on two stores last year, which reduced last year’s expense. The remaining increase of £0.4 million is largely due to an increased investment in marketing some of which is timing related, with the balance tactical to maintain the Group’s online market share and enquiry levels. This investment is marketing is broadly in line with the amount spent in the second half of the last financial year, and we are projecting
to invest approximately £5.3 million in marketing over the full year, most of which is digital execution.
The cost of insurance and packing materials varies with ancillary revenue. Our investment in LED lighting has contributed to a reduction in our utility expenditure, and we have received a profit-share to offset our insurance costs in the period. The other increases in store operating costs are inflationary and offsetting.
The table below reconciles store operating costs per the portfolio summary to cost of sales in the income statement:
| Period ended 30 September 2018 £000 |
Period ended 30 September 2017 £000 |
|
|---|---|---|
| Direct store operating costs per portfolio summary (excluding rent) | 17,437 | 16,387 |
| Rent included in cost of sales (total rent payable is included in portfolio summary) | 570 | 509 |
| Depreciation charged to cost of sales | 213 | 226 |
| Head office operational management costs charged to cost of sales | 308 | 466 |
| Cost of sales per income statement | 18,528 | 17,588 |
Store EBITDA
Store EBITDA for the period was £42.5 million, an increase of £2.8 million (7%) from £39.7 million for the period ended 30 September 2017 (see Portfolio Summary). The overall EBITDA margin for all Big Yellow stores during the period was 69.7%, up from 69.6% in 2017.
All 75 stores open at the period end are trading profitably at the Store EBITDA level, with the exception of Guildford Central which opened in March 2018.
Administrative expenses
Administrative expenses in the income statement have increased by £0.5 million. The increase is due a number of factors; an increase in the IFRS 2 charge (£150,000), an increase in donations to the Big Yellow Foundation (£30,000), increased investment in CSR (£30,000), legal costs associated with GDPR compliance (£15,000), increased staffing levels in IT, marketing and HR (£75,000) with the balance of £200,000 due to inflationary increases.
The non-cash share based payments charge represents £1.3 million of the overall £5.6 million expense.
Interest
The interest on bank borrowings during the period was £5.0 million, £0.1 million higher than the same period last year. Average debt levels were approximately 6% higher than the prior period, however the Group benefited from a lower average cost of borrowing compared to the same period last year following lower margins post refinancing in 2017 and the cancellation of interest rate swaps and associated re-hedging.
Interest capitalised in the period amounted to £0.4 million (2017: £0.2 million), principally arising on the construction of our Manchester, Camberwell and Wapping stores.
Results
The Group’s statutory profit before tax for the period was £61.4 million, a decrease of 22% from £78.7 million for the same period last year. The decrease is due to the lower revaluation surplus in the period, partially offset by the increase in adjusted profit before tax (as explained below).
After adjusting for the gain on the revaluation of investment properties and other matters shown in the table below, the Group made an adjusted profit before tax in the period of £33.3 million, up 9% from £30.6 million in 2017.
| Six months ended 30 September 2018 £m |
Six months ended 30 September 2017 £m |
|
|---|---|---|
| Profit before tax analysis | ||
| Profit before tax | 61.4 | 78.7 |
| Gain on revaluation of investment properties | (27.6) | (47.5) |
| Gain on part disposal of investment property | - | (0.6) |
| Change in fair value of interest rate derivatives | 0.1 | (0.8) |
| Refinancing costs | - | 1.5 |
| Share of non-recurring gains in associates | (0.6) | (0.7) |
| Adjusted profit before tax | 33.3 | 30.6 |
| Tax | (0.3) | (0.3) |
| Adjusted profit after tax | 33.0 | 30.3 |
In the period to 30 September 2017, the Group sold land at its Richmond store to an adjoining landowner for £650,000. The valuation of the store was not impacted by this disposal, hence the full proceeds were recorded as profit on part disposal of investment property and are an adjusting item above.
The movement in the adjusted profit before tax from the prior year is shown in the table below, with the majority of the increase being driven by the improvement in gross profit:
| Movement in adjusted profit before tax | £m |
|---|---|
| Adjusted profit before tax for the six months to 30 September 2017 | 30.6 |
| Increase in gross profit | 3.1 |
| Increase in administrative expenses | (0.5) |
| Increase in net interest payable | (0.1) |
| Increase in capitalised interest | 0.2 |
| Adjusted profit before tax for the six months to 30 September 2018 | 33.3 |
Diluted EPRA earnings per share was 20.9 pence (2017: 19.1 pence), an increase of 9% from the same period last year.
- Go to
- Trading performance
- Customer demand
- Store occupancy
- Pricing and rental yield
- Security of income
- Revenue
- Operating costs
- Store EBITDA
- Administrative expenses
- Interest
- Results
- Cash flow
- Taxation
- Dividends
- Financing and treasury
- Investment property
- Development pipeline
- Capital Goods Scheme receivable
- Net asset value
- Armadillo Self Storage