Big Yellow Regulatory News (BYG)

Highlights

Results for the YEAR ended 31 MARCH 2016

STRONG OPERATING PERFORMANCE DELIVERS 15% EARNINGS GROWTH(2) 

1Like-for-like revenue excludes the 12 Partnership stores (acquired December 2014), Chester (acquired January 2015), Enfield (opened April 2015) and Cambridge (opened January 2016), and management fees earned from the Partnership in the prior year. 2See note 10 3Adjusted earnings per share - see note 12 4See Portfolio Summary and Operating and Financial Review

Highlights

• Another year of growth in all our key operating metrics

• Strong revenue performance driving 15% increase in adjusted earnings per share and total dividend

• Store platform expanded by 282,000 sq ft:

o Two new freehold stores opened at Enfield and Cambridge

o Acquisition of four store Lock and Leave portfolio in April 2016 for £21 million

- Nine Elms and Twickenham acquired by Big Yellow

- Canterbury and West Molesey acquired by Armadillo

• Acquisition of prime London development sites in Kings Cross and Camberwell

Nicholas Vetch, Executive Chairman of Big Yellow, commented:

"Against a backdrop of slower economic activity compared to the prior year, we are pleased to have delivered another year of occupancy, revenue and earnings growth. Our main focus remains on driving earnings through occupancy growth over the next few years as we target our next goal of 85% across the portfolio.

We will continue to innovate, by improving our digital platform and operations to grow our market share and leverage our market leading brand. In addition, our focus will remain on London and the South East (80% of revenue) and large regional cities where barriers to entry are at their highest, and supply remains very constrained. 

The Big Yellow investment proposition is simple; sustainable earnings and dividend growth from a secure capital structure. There will inevitably be setbacks but as management we will continue to focus on the long term achievement of these objectives whilst managing risk to minimise mistakes. The much-overlooked power of compounding should do the rest." 

ABOUT US

Big Yellow Group PLC is the UK's brand leader in self storage. Big Yellow now operates from a platform of 89 stores, including 16 stores branded as Armadillo Self Storage, in which the Group has a 20% interest. We own a further seven Big Yellow self storage development sites (including two extensions sites), of which two have planning consent. The current maximum lettable area of this platform is 5.3 million sq ft. When fully built out the portfolio will provide approximately 5.7 million sq ft of flexible storage space. Of the Big Yellow stores and sites, 96% by value are held freehold and long leasehold; with the remaining 4% short leasehold. 

The Group has pioneered the development of the latest generation of self storage facilities, which utilise state of the art technology and are located in high profile, accessible, main road locations. Our focus on the location and visibility of our Big Yellow stores, coupled with our excellent customer service and our market leading online platform, has created the most recognised brand name in the UK self storage industry.

For further information, please contact:

Big Yellow Group PLC 01276 477811

Nicholas Vetch, Executive Chairman

James Gibson, Chief Executive Officer

John Trotman, Chief Financial Officer

Teneo Strategy 020 7240 2486

Ben Foster

Chloe Maier

Chairman's Statement

Big Yellow Group PLC ("Big Yellow", "the Group" or "the Company"), the UK's brand leader in self storage, is pleased to announce results for the year ended 31 March 2016.

Against a backdrop of slower economic activity compared to the prior year, we are pleased to have delivered another year of occupancy, revenue and earnings growth. Our main focus remains on driving earnings through occupancy growth over the next few years as we target our next goal of 85% across the portfolio.

Like-for-like closing Group occupancy is up 3.5 percentage points to 76.7% compared to 73.2% at 31 March 2015, in line with the guidance given in May 2015. 

Average rental growth over the year was 2.5% with closing net rent of £25.90, representing an increase of 2.7% from the same time last year. The like-for-like revenue growth in the Group was 10% compared to last year, this excludes the 12 Partnership stores, existing store acquisitions made last year and new store openings in the year. Given that our central overhead and operating expense is largely embedded in the business, this revenue growth has dropped through into a 15% increase in adjusted earnings per share and in the dividend per share for the year.

Awareness of self storage and the market generally is growing year on year, as more people use the product, and with continued marketing from all industry players; we are seeing improving levels of referral and repeat use.

We will continue to innovate, by improving our digital platform and operations to grow our market share and leverage our market leading brand. In addition, our focus will remain on London and the South East (80% of revenue) and large regional cities where barriers to entry are highest, and supply remains very constrained. 

Financial results

Revenue for the year was £101.4 million (2015: £84.3 million), an increase of 20%. Cash inflows from operating activities (after interest costs) increased by £13.1 million (31%) to £55.5 million for the year (2015: £42.4 million). 

The Group made an adjusted profit before tax in the year of £49.0 million (2015: £39.4 million), up 24%. This translated into a 15% increase in adjusted earnings per share to 31.1p (2015: 27.1p), the growth of which is lower as a result of the placing of an additional 14.4 million shares in November 2014 to part fund the acquisition of the remaining interest in the 12 Big Yellow Limited Partnership stores.

The Group has net bank debt of £295.0 million at 31 March 2016 (2015: £277.1 million). This represents approximately 26% (2015: 27%) of the Group's gross property assets totalling £1,126.2 million (2015: £1,022.8 million) and 33% (2015: 35%) of the adjusted net assets of £899.0 million (2015: £801.4 million).

The Group's interest cover for the year, expressed as the ratio of cash generated from operations against interest paid (per the cash flow statement) was 6.2 times (2015: 5.4 times). 

Investment in new capacity

Creating new capacity in our core area of London and the South East is increasingly challenging. Sites are scarce, and faced with a housing emergency, policy makers are focussed on residential provision at the expense of commercial. As London's population grows, these pressures are likely to intensify. The bad news is that it makes it difficult to build new stores for Big Yellow, but conversely leaves our existing platform near irreplaceable.

We opened our 60,000 sq ft store in Enfield in April 2015, on a prominent location on the A10. Our 60,000 sq ft store in central Cambridge opened in January 2016. We intend to commence construction of our store in central Guildford in the second half of the year, and anticipate it opening in Autumn 2017.

Given the competition for land in central London we are very pleased to have acquired two prime sites at Kings Cross and Camberwell. Kings Cross is a one acre site on which we intend to develop a new build store of in excess of 90,000 sq ft, subject to planning. Camberwell is in Zone 2 to the south of London Bridge, and we intend to develop a new build store of 65,000 to 70,000 sq ft, subject to planning. There is interim rental income on these two sites while we pursue planning, which will mitigate the increase in our variable rate interest expense.

These sites, together with Guildford Central, extensions at our existing Battersea and Wandsworth stores, and development sites in Newcastle and Manchester (the last four all subject to planning) will provide in excess of an additional 400,000 sq ft of capacity. 

During the year we have successfully re-geared our existing 125 year, long leasehold interest on our proposed self storage site at Water Street, Manchester to 250 years, and in addition sold the surplus industrial land to Manchester City Council for £8 million.

At 31 March 2016, the future cost of the current pipeline of seven development sites and extensions, six of which are subject to planning, is provisionally estimated to be approximately £55 million. This excludes any net proceeds that may be received on the redevelopment of our Battersea store and adjoining retail units into a mixed use scheme of residential, retail and self storage.

In April 2016, we acquired the Lock and Leave portfolio. Big Yellow acquired two stores in London, at Nine Elms (65,000 sq ft MLA freehold) and Twickenham (25,000 sq ft MLA, 19 years unexpired leasehold), for £13.5 million and £1.1 million respectively, totalling £14.6 million. The Nine Elms store is approximately 85% occupied and sits neatly between our strong performing Kennington and Battersea stores, and our aim will be to drive revenue and cash flow through yield management. The Twickenham store is adjacent to our existing freehold 73,000 sq ft highly occupied store. The freehold stores in Canterbury (37,000 sq ft MLA) and West Molesey (35,000 sq ft MLA) were acquired by Armadillo for £6.4 million, and again we expect to drive operational performance under our management. 

Dividends

The Group's dividend policy is to distribute 80% of full year adjusted earnings per share. The final dividend declared is 12.8 pence per share. The dividend declared for the year of 24.9 pence per share represents an increase of 15% from 21.7 pence per share last year. 

Our people

In February of this year, we were included in the Sunday Times Best 100 Companies to work for in the mid-size category, an independent assessment of our employee engagement and culture. This is particularly pleasing, as from the inception of the business we have tried to create a culture which is accessible, apolitical, non-hierarchical, socially responsible, and very importantly a fun and enjoyable place to work. No business can succeed without motivated and hardworking people.

Outlook

External forces are complex and are unlikely to be assisted by comment from us, so we concentrate on matters that we can influence. 

The Big Yellow investment proposition is simple; sustainable earnings and dividend growth from a secure capital structure. There will inevitably be setbacks but as management we will continue to focus on the long term achievement of these objectives whilst managing risk to minimise mistakes. The much-overlooked power of compounding should do the rest.

Nicholas Vetch

Chairman

23 May 2016

Strategic Report

OUR STRATEGY AND BUSINESS MODEL

Our Strategy

Our strategy from the outset has been to develop Big Yellow into the market leading self storage brand, delivering excellent customer service, with a great culture and highly motivated employees. We continue to be the market leading brand, with unprompted awareness of over six times that of our nearest competitor (source: YouGov survey, April 2016). We concentrate on developing our stores in main road locations with high visibility, where our distinctive branding generates high awareness of Big Yellow. Our recent accreditation in the Best 100 Companies to work for is pleasing as an independent assessment of our employee engagement, and our customer satisfaction survey scores remain very high, with an average net promoter score of over 70%, and average customer satisfaction scores of 9.2 out of 10. 

Self storage demand from businesses and individuals at any given store is linked in part to local economic activity, consumer and business confidence, all of which are inter-related. Fluctuations in housing activity whether in the rented or owner occupied sector, are also a factor and in our view influence the top slice of demand over and above a core occupancy. This has been demonstrated by the resilience of our like-for-like stores since September 2007 despite a collapse in housing activity and GDP over the period 2007 to 2009. As can be seen from the ten year summary, the performance of our stores was relatively resilient during the downturn, and within that London and the South East proved to be less volatile.

Local GDP and hence business and housing activity are greatest in the larger urban conurbations and in particular London and the South East, from where we derive 80% of our revenue. Furthermore, people and businesses are space constrained in these more densely populated areas. Barriers to entry in terms of competition for land and difficulty around obtaining planning are also highest in more urbanised locations. 

Over the last 17 years we have built a portfolio of 73 Big Yellow self storage centres, largely freehold, purpose-built and focussed on London, the South East and large metropolitan cities. 63% of our current store revenue derives from within the M25; for London and the South East, the proportion of current store revenue is 80%. 

Our Big Yellow stores are on average 63,000 sq ft, compared to an industry average of approximately 43,000 sq ft (source: The Self Storage Association 2016 UK Annual Survey). The upside from filling our larger than average sized stores is, in our view, only possible in large metropolitan markets, where self storage demand from domestic and business customers is the highest. As the operating costs of our assets are relatively fixed, larger stores in bigger urban conurbations, particularly London, drive higher revenues and higher operating margins.

We continue to believe that the medium term opportunity to create shareholder value will be principally achieved by increasing occupancy and rental yield in our existing platform to drive revenue, the majority of which flows through to the bottom line. 

Our key objectives remain:

- leveraging our market leading brand position to generate new prospects, principally from our digital, mobile and desktop platforms;

- focusing on training, selling skills, and customer satisfaction to maximise prospect conversion and referrals;

- growing occupancy and net rent so as to drive revenue optimally at each store;

- maintaining a focus on cost control, so revenue growth is transmitted through to earnings growth;

- selectively adding to the portfolio through new site development and existing store acquisitions;

- maintaining a conservative capital structure in the business with Group interest cover of a minimum of five times; and

- producing sustainable returns for shareholders through a low leverage, low volatility, high distribution REIT.

In the sixteen years since flotation in May 2000, Big Yellow has delivered a Total Shareholder Return ("TSR"), including dividends reinvested, of 15.9% per annum, in aggregate 938% at the closing price of 774.5p on 31 March 2016. This compares to 6.9% per annum for the FTSE Real Estate Index and 4.3% per annum for the FTSE All Share index over the same period. This demonstrates the power of compounding over the longer term.

Our business model

The self storage market

In the recently published 2016 Self Storage Association UK Survey, only 41% of those surveyed had a reasonable or good awareness of self storage, in line with findings from our own research. Furthermore, only 7% of the 2,075 adults surveyed were currently using self storage or were thinking of using self storage in the next year. This indicates a continued opportunity for growth and with increasing use, together with the ongoing marketing efforts of everyone in the industry, we anticipate awareness will grow.

Growth in new facilities across the industry has been largely in regional areas of the UK and in particular in smaller towns. In London in 2015, we believe there were six new store openings last year (including our Enfield store), and three closures of stores for redevelopment into alternative uses. Between 2010 and 2015 average industry openings have been approximately 11 per year, which compares to an average of 34 per year in the preceding four years.

The Self Storage Association ("SSA") estimates that the UK industry is made up of approximately 1,077 self storage facilities (of which 195 are purely container operations), providing 37.6 million sq ft of self storage space, equating to 0.6 sq ft per person in the UK. This compares to 7.8 sq ft per person in the US, 1.8 sq ft per person in Australia and 0.1 sq ft for mainland Europe, where the roll-out of self storage is a more recent phenomenon (source: Fedessa European Self Storage Annual Survey 2015). 357 self storage facilities in the UK are held by large operators (defined as those managing 10 facilities or more), which represents 40% of the total number of self storage centres, but we would estimate approximately 50% to 60% of total capacity.

Big Yellow is well placed to benefit from the growing self storage market, given the strength of our brand, and online platform which delivers approximately 86% of our prospect enquiries. Our portfolio is strategically focussed on London, the South East and large metropolitan cities, where barriers to entry and economic activity are at their highest.

KPIs

The key performance indicators of our stores are occupancy and rental yield, which together drive the revenue of the business. These are three key measures which are focussed on by the Board, and are reported on a weekly basis. Over the course of past five years, both occupancy and revenue have grown significantly. Rental yield was relatively stable between 2011 and 2012, reduced following the introduction of VAT in 2013, grew by 6.1% in the year to 31 March 2014, and decreased by 3.5% in 2015 principally reflecting the acquisition of the Big Yellow Limited Partnership stores, a regional portfolio, at a lower average net rent per sq ft. In the current year, net rent has increased by 2.7%. Our key focus is on continuing to grow occupancy, with rental yield growth following once the stores have reached higher occupancy levels. 

Adjusted profit before tax, adjusted earnings per share and distributions to shareholders are our other KPIs. We have delivered compound eps growth of 14% over the past five years, and compound dividend growth of 26% over the same period. Compound adjusted eps growth since 2004/5 is 17%. 

Operational and Marketing Review

Overview

We now have a portfolio of 73 open and trading Big Yellow stores, with a further five development sites and two extension opportunities. The current maximum lettable area of this platform is 4.6 million sq ft. When fully built out the portfolio will provide approximately 5.0 million sq ft of flexible storage space.

In addition we operate from 16 Armadillo stores which are principally located in northern towns and cities, and operate from a platform of 0.7 million sq ft.

Access to capital and bank facilities has improved in the last couple of years, however this is mainly for larger well-capitalised groups, rather than necessarily the smaller, independent operators. Growth in new openings over the last five years has averaged just over 1% of total capacity per annum, down significantly from the previous decade. Additionally, in our core markets in London and the South East, very high land values driven by competing uses such as residential, is making the creation of new supply very difficult for all operators. We believe that we are in a relatively strong position given the strength of our balance sheet and our proven property development expertise, together with our ability to access funding to exploit the right opportunity.

Operations

The Big Yellow store model is well established. The "typical" store has 60,000 sq ft of net lettable storage area and takes some three to five years to achieve 80% plus occupancy. Some stores have taken longer than this given they opened just before or during the downturn. The average room size occupied in the portfolio is currently 67 sq ft, in line with last year.

The store is open seven days a week and is initially run by three staff, with a part time member of staff added once the store occupancy justifies the need for the extra administrative and sales workload.

The drive to improve store operating standards and consistency across the portfolio remains a key focus for the Group. Excellent customer service is at the heart of our business objectives, as a satisfied customer is our best marketing tool. We measure customer service standards through a programme of mystery shopping and online customer reviews, all externally managed. Over the year, we have achieved an average net promoter score of over 70%, and average customer satisfaction scores of 9.2 out of 10. 

We have a team of nine Area Managers in place who have on average worked for Big Yellow for twelve years. They develop and support the stores to drive the growth of the business.

The store bonus structure rewards occupancy growth, sales growth and cost control through quarterly targets based on occupancy and store profitability, including the contribution from ancillary sales of insurance and packing materials. Information on bonus build up is circulated monthly and stores are consulted in preparing their own targets and budgets each quarter, leading to improved visibility, a better understanding of sales lines and control of operating costs.

We believe that as a consumer-facing branded business it is paramount to maintain the quality of our estate and customer offering. We therefore continue to invest in preventative maintenance, store cleaning and the repair and replacement of essential equipment, such as lifts and gates. The ongoing annual expenditure is approximately £30,000 per store, which is included within cost of sales. This excludes our rolling programme of store makeovers, which typically take place every five years, at a cost of approximately £20,000 per store.

Demand

Of the customers moving into our stores in the last year, surveys undertaken indicate approximately 46% are house move related, either customers renting storage space whilst moving within the rental sector or the owner occupied sector. During the year 11% of our customers who moved in took storage space as a spare room for decluttering and approximately 32% 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 year came from businesses. 

Our business customers range across a number of industry types, such as retailers, e-tailers, professional service companies, hospitality companies and importers/exporters. These businesses store stock, documents, equipment, or promotional materials all requiring a convenient flexible solution to their storage, either to get started or to free up more expensive space. 

We have seen solid demand from business customers, as they seek a cost effective, flexible, convenient solution to their storage requirements, preferring self storage to the commitment of a longer lease, and given the difficulty of renting alternative mini-warehousing space in urban areas, particularly London. 

Business customers typically stay longer than domestic customers, and also on average occupy larger rooms. Whilst only representing 11% of new customers during the year, businesses represent 19% of our overall customer numbers, occupying 35% of the space in our stores at 31 March 2016, domestic customers occupy 65%. The average room size occupied by business customers is 121 sq ft, compared to 54 sq ft for domestic customers. This compares with the 2016 SSA UK Annual Survey result for the industry as a whole which had 59% of space occupied by domestic customers and 41% of space by businesses. We would expect to have a higher proportion of domestic customers given our focus on London and other large metropolitan cities.

We have a dedicated national accounts team for business customers who wish to occupy space in multiple stores. These accounts are billed and managed centrally. We have four full time members of staff working on growing and managing our national account customers. The national accounts team can arrange storage at short notice at any location for our customers. In smaller towns where we do not have representation, we have negotiated sub-contract arrangements with other operators who meet certain operating standards. 

Marketing and eCommerce

Our marketing strategy continues to focus on driving customer satisfaction and response through our multiple digital platforms.

For the last ten years, we have commissioned a YouGov survey to help us monitor our brand awareness. In our most recent survey, conducted in April 2016, we used a statistically robust sample size of 1,044 respondents in London and 2,084 for the rest of the UK. The survey has shown our prompted awareness to be at 74% in London, two and half times higher than our nearest competitor and 38% for the rest of the UK, over three times higher than our nearest competitor.

For unprompted brand awareness, our recall in London is 49%, more than five times higher than our nearest competitor and for the rest of the UK it is 20%, more than six times higher than our nearest competitor; across the UK as a whole it is more than six times our nearest competitor. These surveys continue to prove we are the UK's brand leader in self storage (source: YouGov, April 2016). The UK Self Storage Association has also conducted a brand awareness survey with similar results. 

Online

The Big Yellow website, whether accessed by desktop, tablet or smartphone, delivers the largest share of prospects, accounting for 86% of all sales leads across the year ended 31 March 2016. Telephone is the first point of contact for 9% of prospects and walk-in enquiries, where we have had no previous contact with a prospect, represent 5%.

We have the largest online market share of web visits to self storage company websites in the UK. Across the year ended 31 March 2016, our online market share of web visits ranged from 34% to 40%. Our nearest competitor ranged from 14% to 19% online market share for the same period (source: Connexity Hitwise 36 largest UK operators).

We continually monitor and improve the website user journey to make the experience as informative, customer focussed and intuitive as possible. Our mobile strategy is central to this. By the end of March 2016, smartphones and tablets accounted for 50% of all web visits. Specifically, smartphones alone accounted for 35% of web visits in March 2016, up from 32% in March 2015. The rate of growth in the use of mobiles and tablets is slowing, which may be an indication of a maturing market for these devices, and many of our customers continue to access our digital platforms through desktop computers and laptops.

Whether it is through desktop, tablet or mobile, our customers enjoy a seamless experience whichever digital route they choose. Our latest mobile optimised website was launched in May 2015 with enhanced usability and features. We are continually developing helpful and time saving online tools such as check-in online, online FAQs, video store tours and online chat. These all help the customer to make an informed choice about their self storage requirements.

Online customer reviews

Consistent with our strategy of putting the customer at the heart of our business, our online customer reviews generate real-time feedback from customers as well as providing positive word of mouth referral to our web visitors. Through our 'Big Impressions' customer feedback programme, we ask our new customers to rate our product and service and with the users permission, we then publish these independent reviews on the website. There are currently over 13,200 reviews published. 

The Big Impressions programme also generates customer feedback on their experience when they move out of a Big Yellow store and also from those prospects who decided not to store with us. In addition, this programme reinforces best practice of customer service at our stores where customer reviews and mystery shop results are transparently accessible at all levels.

In addition, we also gain real-time insight from customers who submit reviews to TrustPilot, the well-known third party customer review site. These reviews are currently averaging 9.2 out of 10.

We also regularly monitor Google reviews and mentions of Big Yellow within the social mediums of Twitter, online forums and blogs. We use this insight to continually improve our service offering.

Driving online traffic

Search engines are the most important acquisition tool for us, accounting for the majority of traffic to our website. We continue to invest in search engine optimisation ("SEO") techniques both on and off the site. This helps us to maintain our high positions for the most popular and most searched for terms such as "storage" and "self storage" in the organic listings on Google.

The sponsored search listings remain the largest source of paid for traffic and we ensure our prominence in these listings is balanced with effective landing pages to maximise site conversion. 

This year, we have also continued with online display advertising on websites which are targeted to our core audience groups. This activity performs both a direct response and branding role.

Efficiencies in online spend are continuing into the year ending 31 March 2017, ensuring the return on investment is maximised from all of our different online traffic sources. Online marketing budgets will continue to remain fluid and be directed towards the media with the best return on investment.

Social media

Social media continues to be complementary to our existing marketing channels. Our activity is most focussed on Twitter, not only monitoring and answering queries regarding self storage, but also posting our own creative tweets, tips and advice. The Big Yellow YouTube channel is used to showcase our stores to web prospects through a video store tour. We use both domestic and business versions to help prospects experience the quality of the product without the need for them to visit the store in person. Our online blog is updated regularly with tips and advice for homeowners and businesses as well as summaries of our charitable and CSR initiatives.

PR

We have used PR stories in the year to help raise the awareness of Big Yellow and the benefits of self storage to different audience groups. These have focussed on the flexible benefits of using self storage at different key life events such as having a baby and dealing with divorce and separation. These stories help to promote the wider uses of Big Yellow Self Storage and have generated both national and regional media coverage online and offline. They are also supported by radio interviews which allow us to talk about the benefits of Big Yellow.

Budget

During the year the Group spent approximately £4.0 million on marketing (4% of total store revenue). We have increased the budget for the year ahead to £4.2 million with a focus on delivering more prospects to our stores from our digital channels.

Cyber security

The Group receives specialist advice and consultancy in respect of cyber security and we have dedicated in-house monitoring and regular review of our security systems, we also limit the retention of customer data to the minimum requirement. 

During the year we have continued to invest in digital security, implementing new intrusion detection systems as well as replacement of existing systems such as firewalls. Policies and procedures are under regular review and benchmarked against industry best practice by our consultants. These policies also include defend, detect and response policies.

PROFORMA PORTFOLIO SUMMARY - BIG YELLOW STORES

(1) The mature stores have been open for more than six years at 1 April 2015. The established stores have been open for between three and six years at 1 April 2015 and the developing stores have been open for fewer three years at 1 April 2015. 

(2) The Group acquired the 66.7% of Big Yellow Limited Partnership that it did not previously own on 1 December 2014. The results of the stores in the Partnership have been included in the results above in full for the prior year to give a clearer understanding of the underlying performance of all Big Yellow stores. The table below shows the results for the prior year excluding the period when the stores were not wholly owned, reconciled with the reported statutory results for the year ended 31 March 2015.

(3) Total store revenue divided by the average maximum lettable area in the year.

(4) Packing materials, insurance and other storage related fees.

(5) Rent for six mature short leasehold properties accounted for as investment properties and finance leases under IFRS with total self storage capacity of 398,000 sq ft, and a long leasehold lease-up store with a capacity of 64,000 sq ft. 

(6) Store earnings before interest, tax, depreciation, amortisation, and an allocation of central overhead.

PORTFOLIO SUMMARY - ARMADILLO STORES (1)

(1) Please note the Group acquired an interest in Armadillo 1 on 16 April 2014 and in Armadillo 2 on 3 February 2015. The results shown for the comparative period are to provide readers with a clearer understanding of the performance of the portfolios. Please see note 13d for further details. 

(2) Store earnings before interest, tax, depreciation, amortisation, and management fees charged by Big Yellow to the Armadillo portfolios (see note 26).

Store Performance

We had a strong quarter to June with good net move-in growth. The second quarter peaked in August and then many of our students and short term house moves vacate in September and October, leading to a net loss in occupied rooms and sq ft occupancy. In the final quarter we have seen a return to growth in net occupied rooms and increased occupancy in the stores by 123,000 sq ft. The table below illustrates the move-in performance in the year. Given the weaker economic backdrop to deliver broadly the same number of move-ins was a satisfactory performance.

In all Big Yellow stores, the occupancy growth in the current year was 185,000 sq ft, against an increase of 267,000 sq ft in the prior year (the prior year figure excludes 79,000 sq ft of occupancy acquired with the acquisitions of Chester and Oxford 2). This growth represents an average of 2,606 sq ft per store (2015: 3,870 sq ft per store). The prior year increase included a one-off short term national account move-in of 25,000 sq ft who vacated in April 2015. Adjusting this out of both years would show current year occupancy growth of 210,000 sq ft compared to 242,000 sq ft in the prior year.

The 56 mature stores are 76.9% occupied compared to 74.1% at the same time last year. The 11 established stores have grown in occupancy from 71.4% to 76.4%. The four developing stores added 50,000 sq ft of occupancy in the year to reach closing occupancy of 51.3%. Overall store occupancy has increased in the year from 73.2% to 75.3%. On a like-for-like basis, closing occupancy was 76.7%, an increase of 3.5 percentage points.

70 of the stores open at the year end are trading profitably at the EBITDA level, with Cambridge the exception, having opened in January 2016, and expected to break even in summer 2016.

Pricing and rental yield

We have continued our sales promotion offer throughout the year of "50% off for up to your first 8 weeks storage". Our Price Promise is also used to match competitors' prices if the product is comparable. Pricing is dynamically generated and takes into account customer demand and local competition.

In the year ended 31 March 2016, the average growth in the net achieved rent per sq ft was 2.5% compared to 2.6% in the prior year. We remain focussed on occupancy and the outcome on portfolio average rental growth is merely a by-product of the yield management at each store.

As our portfolio is now at a higher level of occupancy, our pricing model is increasingly reducing promotions and is raising 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. The table below illustrates this, showing the growth in net rent per sq ft for the portfolio over the period (the table below excludes Enfield and Cambridge which opened in the year).

The table below shows the average key metrics across the store portfolio for the year ended 31 March 2016:

Armadillo Self Storage

In April 2014 we acquired the portfolio of 10 Armadillo stores, which we have been managing since 2009, with an Australian consortium. The Armadillo platform was grown in February 2015 with the acquisition of a further four stores following the purchase of Big Storage by the Group and its subsequent disposal to a company in which the Group has a 20% interest, with the balance held by an Australian consortium.

In April 2016 we acquired a further two stores into the Armadillo platform in Canterbury and West Molesey, for £6.4 million. This takes the Armadillo platform to 16 stores and 745,000 sq ft of MLA.

Armadillo is a lower-frills brand, with largely freehold conversions of existing buildings, with a minimum capacity of 30,000 sq ft, in towns where we would not typically locate a Big Yellow. Armadillo provides a number of operational advantages to the Group, such as a wider platform to sell to national accounts, more opportunities for staff promotion, and more efficient use of the Company's marketing and central overhead costs. The Group will consider other opportunities to add to the Armadillo platform if the right stores or portfolios become available.

Development pipeline

We have planning consent to construct a new store in central Guildford, which we anticipate opening in Autumn 2017. We own a further six development sites for which planning is to be negotiated, including two existing stores where planning is being sought to extend and redevelop.

We recently surrendered our 125 year lease in Manchester to the City Council for £8 million and took a new 250 year lease on a site of 0.8 acres for which planning for a self storage centre will be sought. We also have an option to re-acquire an additional 0.7 acres if our planning application is unsuccessful.

Included within our development programme are London sites at Kings Cross and Camberwell, acquired during the year. Kings Cross is a one acre site on which we intend to develop a new build store of in excess of 90,000 sq ft, subject to planning. Camberwell is in Zone 2 to the south of London Bridge, and we intend to develop a new build store of 65,000 to 70,000 sq ft, subject to planning. 

In December 2014 we acquired the freehold interest of our existing 34,000 sq ft store in Battersea, which had 12 years remaining on the occupational lease together with a 14,100 sq ft retail unit let to Halfords on an annual rent of £458,000 with 6 years unexpired, part of which is sublet to Pets at Home. This increased the freehold ownership of our portfolio and protected our position in this important central London location. In the medium term, we will redevelop the 1.5 acre site to include a larger Big Yellow store together with other uses.

The status of the Group's development pipeline is summarised in the table below:

The Group acquired trading stores from Lock and Leave at Nine Elms and Twickenham in April 2016 for £14.6 million. Beyond this acquisition, there is currently no committed capital expenditure for the next financial year, although the Group intends to start the construction of Guildford in the second half of the year. 

The Group manages the construction and fit-out of its stores in-house, as we believe it provides both better control and quality, and we have an excellent record of building stores on time and within budget.

Financial Review

Financial results

Revenue

Total revenue for the year was £101.4 million, an increase of £17.1 million (20%) from £84.3 million in the prior year. Like-for-like revenue for the year was £87.6 million, an increase of 10% from the prior year (2015: £79.9 million). Like-for-like revenue excludes the 12 Partnership stores (acquired December 2014), Chester (acquired January 2015), Enfield (opened April 2015) and Cambridge (opened January 2016); the prior period figure also excludes management fees earned from Big Yellow Limited Partnership.

Other sales (included within the above), comprising the selling of packing materials, insurance and storage related charges, represented 17.2% of storage income for the year (2015: 16.8%) and generated revenue of £14.6 million for the year, up 24% from £11.8 million in 2015. On a like-for-like basis, the increase in other sales was 9%.

The other revenue earned by the Group is management fee income, largely from the Armadillo Partnerships, and tenant income on sites where we have not started development.

Operating costs

Cost of sales comprises principally of the 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 on a proforma basis (with the Partnership stores in full in both years) compared to the prior year is shown in the table below (see Portfolio Summary):

Cost of sales in the income statement has increased by £5.2 million (19%) to £32.6 million (2015: £27.4 million). Of this increase £2.9 million arises as a result of including a full year of the operating costs of the Partnership stores acquired on 1 December 2014.

In the table above which shows the Partnership stores as if they had been owned for a full year, the operating costs have increased by £1.7 million. £0.8 million of this increase is due to new stores at Enfield, Cambridge and the full year impact of Chester. The remaining increase of £0.9 million (representing a 3% increase on the prior year on a like for like basis) is due to an increased investment in marketing, inflationary increases, coupled with the prior year figure being reduced by rates rebates at couple of stores. 

Administrative expenses in the income statement have increased by £0.4 million compared to the prior year. This is due principally to an increase of £0.5 million in the share based payment charge offset by a reduction in legal and professional fees. In addition, it is important to note that of our total £8.9 million administrative expense for the year, £2.5 million relates to the non-cash share based payments charge. 

Store EBITDA

Store EBITDA for the year included in the income statement was £67.8 million, an increase of £12.5 million (23%) from £55.3 million for the year ended 31 March 2015. The increase including the Partnership stores on a proforma basis in the prior year is 13% (2015: £59.9 million) (see Portfolio Summary).

The overall EBITDA margin for all Big Yellow stores during the year was 68.0%, compared to 66.4% last year.

Interest expense on bank borrowings

The gross bank interest expense for the year was £11.2 million, an increase of £1.1 million from the prior year. This reflects the higher debt levels following the acquisition of the Partnership stores in December 2014 and capital expenditure in the current year, partly offset by a reduction in the Group's average cost of debt. The average cost of borrowing during the year was 3.6% compared to 3.9% in the prior year.

Total interest payable has increased in the statement of comprehensive income from £10.7 million to £11.9 million principally due to the increase in the gross bank interest expense mentioned above. Capitalised interest decreased by £0.2 million from the prior year. The interest capitalised in the year is principally on our Cambridge development. 

Profit before tax

The Group made a profit before tax in the year of £112.2 million, compared to a profit of £105.2 million in the prior year. 

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 year of £49.0 million, up 24% from £39.4 million in 2015. 

The movement in the adjusted profit before tax from the prior year is illustrated in the table below:

Basic earnings per share for the year was 71.9p (2015: 72.5p) and fully diluted earnings per share was 71.6 p (2015: 71.9p). Diluted EPRA earnings per share based on adjusted profit after tax was up 15% to 31.1p (2015: 27.1p) (see note 12). The percentage increase is lower than that reported for adjusted profit before tax due to the impact of placing an additional 14.4 million shares on 19 November 2014 to part fund the acquisition of the Big Yellow Limited Partnership stores.

REIT status

The Group converted to a Real Estate Investment Trust ("REIT") in January 2007. Since then the Group has benefited from a zero tax rate on the Group's qualifying self storage earnings. The Group only pays tax on the profits attributable to our residual business, comprising primarily of the sale of packing materials and insurance, and fees earned from the management of the Armadillo portfolio.

REIT status gives the Group exemption from UK corporation tax on profits and gains from its qualifying portfolio of UK stores. Revaluation gains on developments and our existing open stores will be exempt from corporation tax on capital gains, provided certain criteria are met.

The Group has a rigorous internal system in place for monitoring compliance with criteria set out in the REIT regulations. On a monthly basis, a report to the Executive on compliance with these criteria is carried out. To date, the Group has complied with all REIT regulations, including forward looking tests. 

Taxation

There is a tax charge in the current year of £0.2 million. This compares to a tax credit in the prior year of £0.4 million. In the prior year the Group received a refund of £0.2 million in relation to the REIT conversion charge for two properties and there was a £0.3 million credit due to a favourable difference between the tax provision and actual tax liability. 

The current year tax charge reflects an increase in profits in our residual business, in part offset by deductions allowed for tax purposes from the exercise of share options.

Dividends

The Board is recommending the payment of a final dividend of 12.8 pence per share in addition to the interim dividend of 12.1 pence, giving a total dividend for the year of 24.9 pence, an increase of 15% from the prior year. 

REIT regulatory requirements determine the level of Property Income Dividend ("PID") payable by the Group. On the basis of the full year distributable reserves for PID purposes, a PID of 18.1 pence per share is payable (31 March 2015: 16.1 pence). The balance of the total annual dividend represents an ordinary dividend declared at the discretion of the Board, in line with our policy to distribute 80% of our adjusted earnings per share in each reporting period.

The table below summarises the declared dividend for the year:

Subject to approval by shareholders at the Annual General Meeting to be held on 22 July 2016, the final dividend will be paid on 28 July 2016. The ex-div date is 16 June 2016 and the record date is 17 June 2016.

Cash flow growth

The Group is strongly cash generative and draws down from its longer term committed facilities as required to meet obligations.

A summary of the cash flow for the year is set out in the table below:

Free cash flow pre-capital expenditure increased by 31% to £55.5 million for the year (2015: £42.4 million). In the year capital expenditure outflows were £44.6 million, down from £95.3 million in the prior year (including acquisitions). 

The capital expenditure during the year principally relates to the acquisition and construction of our new store in Cambridge and the acquisition of development sites at Kings Cross and Camberwell. We have also continued to invest in fitting out further Phase 2 space at our existing stores.

During the prior year we acquired an existing store in Oxford, the freehold of Chester, the freehold of our store in Battersea and paid the deposit on acquiring a site in Cambridge. We also constructed our Enfield store and invested in Phase 2 fit outs. Additionally, we acquired the two thirds share of Big Yellow Limited Partnership and acquired, and subsequently disposed of the share capital of Big Storage Limited with four stores excluding the leasehold interest in Chester.

The cash flow after investing activities was a net inflow of £18.2 million in the year, compared to an outflow of £43.5 million in 2015; the improvement being due to one off acquisitions in the prior year as explained above. The non-recurring finance costs in the prior year relate to £1.4 million of payments made to cancel interest rate derivatives and £2.6 million relating to arrangement fees paid for the M&G and senior debt loans. 

Balance sheet

Property

The Group's 71 stores and 5 stores under development at 31 March 2016, which are classified as investment properties, have been valued individually by Cushman & Wakefield ("C&W") and this has resulted in an investment property asset value of £1,126.2 million, comprising £1,050.3 million (93%) for the 65 freehold (including two long leaseholds) open stores, £41.9 million (4%) for the six short leasehold open stores and £34.0 million (3%) for the five freehold investment properties under construction.

Investment property

The valuations in the current year have grown from the prior year, with a revaluation surplus of £62.0 million on the open Big Yellow stores. Of this increase £12.4 million is due to an improvement in the cap rate used in the valuations. £64.0 million of the increase in value is due to the growth in cash flow from the assets and the operating assumptions adopted in the valuations. These factors are in part offset by an increase in the purchasers' costs assumed in the valuation from 5.8% to a range of 6.1% to 6.8% reflecting the new progressive SDLT rates brought into force in March 2016, which reduced the valuation by £14.4 million.

The valuation is based on an average occupancy over the 10 year cash flow period of 80.9% across the whole portfolio. 

The initial yield pre-administration expenses assuming no rental growth is 6.5% (2015: 6.4%) rising to a stabilised yield of 7.2% (2015: 7.4%). The stores are assumed to grow to stabilised occupancy in 20 months on average. Note 14 contains more detail on the assumptions underpinning the valuations.

There is very little transaction activity in the prime self storage market, although there has been some activity for secondary assets. As referenced in note 14, C&W's valuation report further confirms that the properties have been valued individually but that if the portfolio was to be sold as a single lot or in selected groups of properties, the total value could differ significantly. C&W state that in current market conditions they are of the view that there could be a material portfolio premium.

Investment property under construction

The investment property under construction has increased significantly since the prior year, with the acquisitions of development sites at Kings Cross and Camberwell. This has been offset by the transfers of Enfield and Cambridge to investment property on the opening of the stores. There is a revaluation deficit of £4.0 million in relation to the investment property under construction in the year. This in part relates to Manchester, where the projected construction costs have increased; additionally, the valuation of Kings Cross does not reflect the larger scheme being planned on site, as the proposed land exchange to facilitate this has not yet been contracted.

Purchaser's cost adjustment

As in prior years, we have instructed an alternative valuation on our assets using a purchaser's cost assumption of 2.75% (see note 14 for further details) to be used in the calculation of our adjusted diluted net asset value. This Red Book valuation on the basis of 2.75% purchaser's costs, results in a higher property valuation at 31 March 2016 of £1,190.4 million (£64.2 million higher than the value recorded in the financial statements). With the share of uplift on the revaluation of the Armadillo stores, this translates to 40.8 pence per share. 

The revised valuation translates into an adjusted net asset value per share of 569.1 pence (2015: 510.4 pence) after the dilutive effect of outstanding share options. 

Surplus land

During the year, the Group sold its surplus site in Central Manchester for £8 million. This represented a profit over book value, after selling costs, of £4.8 million, which included the release of a provision previously made against the land of £2.3 million. In the prior year, the Group sold its surplus site at Guildford Central for £2.8 million, representing a profit over book value of £1.3 million. 

At 31 March 2016 the Group owned £0.3 million of land surplus to our requirements at one site. The site is held at the lower of cost and net realisable value and has not been externally valued; it is contracted to be sold for £0.3 million in the year ended 31 March 2017. 

Receivables

At 31 March 2016 we have a receivable of £9.4 million in respect of payments due back to the Group under the Capital Goods Scheme as a consequence of the introduction of VAT on self storage from 1 October 2012. 

The debtor has been discounted in accordance with International Accounting Standards to the net present value using the Group's average cost of debt, with £0.4 million of the discount being unwound through interest receivable in the period. The gross value of the debtor before discounting is £10.1 million. 

The Group received £0.2 million under the Scheme in the year, with £3.6 million received during the prior year, with the majority of the October 2015 receipt accelerated to January 2015 following the merger of the Group's two VAT groups. 

Movement in adjusted NAV

The year on year movement in adjusted net asset value (see note 12) is illustrated in the table below:

Borrowings

We focus on improving our cash flows allied to a relatively conservative debt structure secured principally against the freehold estate. For the year we had healthy Group interest cover of 6.2 times (2015: 5.4 times) based on cash generated from operations against interest paid.

Our financing policy is to fund our current needs through a mix of debt, equity and cash flow to allow us to selectively build out our development pipeline and achieve our strategic growth objectives, which we believe improve returns for shareholders. We aim to ensure that there are sufficient medium-term facilities in place to finance our committed development programme, secured against the freehold portfolio, with debt serviced by our strong operational cash flows.

The table below summarises the Group's debt facilities:

The Group's loan with Aviva is at a fixed rate and amortises to £60 million over the course of its 15 year term. 

During the year, the Group drew down the seven year £70 million M&G loan, repaying simultaneously a £70 million bridging loan that had been provided by Lloyds. The M&G loan is 50% fixed and 50% floating.

In October 2015, the Group extended the term of its bank loan from August 2019 to October 2020, with an option to extend for a further year to October 2021. The margin payable on the interest cover ratchet was also reduced by 25 bps on both the term and the revolving debt. The revolving debt now pays a margin of 125 bps and the term debt 150 bps. Were the term and the revolver to be fully drawn, the weighted average margin would be 137.5 bps. The Group has an option to increase the amount of the revolving loan facility by a further £80 million during the course of the loan's term. £20 million of this option was taken up subsequent to the year end, and hence at the date of signing the Group's bank loan facility was £190 million, and total facilities were £352 million.

The Group has an interest rate derivative of £30 million expiring in September 2016 at a pre-margin cost of 2.8%. The bank loan currently requires 45% of all drawn debt to be hedged or fixed. 

The Group was in compliance with its banking covenants at 31 March 2016. The Group currently has a net debt to gross property assets ratio of 26%, and a net debt to adjusted net assets ratio of 33%.

At 31 March 2016, the fair value on the Group's interest rate derivatives was a liability of £3.7 million. The Group does not hedge account its interest rate derivatives. As recommended by EPRA (European Public Real Estate Association), the fair value movements are eliminated from adjusted profit before tax, diluted EPRA earnings per share, and adjusted net assets per share.

Treasury continues to be closely monitored and its policy approved by the Board. We maintain a keen watch on medium and long-term rates and the Group's policy in respect of interest rates is to maintain a balance between flexibility and hedging of interest rate risk.

Cash deposits are only placed with approved financial institutions in accordance with the Group's Treasury policy.

Share capital

The share capital of the Company totalled £15.7 million at 31 March 2016 (2015: £15.8 million), consisting of 157,369,287 ordinary shares of 10p each (2015: 158,055,735 shares). During the period, the Group cancelled the 1.4 million treasury shares in issue. 

Shares issued for the exercise of options during the year amounted to 0.7 million at an average exercise price of 704p (2015: 0.6 million shares at an average price of 540p).

The Group holds 1.1 million shares within an Employee Benefit Trust ("EBT"). These shares are shown as a debit in reserves and are not included in calculating net asset value per share.

56.9 million shares were traded in the market during the year ended 31 March 2016 (2015: 73.1 million). The average mid-market price of shares traded during the year was 716.3p with a high of 847.0p and a low of 618.5p.

Armadillo Self Storage

The Group has a 20% investment in Armadillo Storage Holding Company Limited and a 20% investment in Armadillo Storage Holding Company 2 Limited. In the consolidated accounts of Big Yellow Group PLC, our investments in the vehicles are treated as associates using the equity accounting method. 

The combined occupancy of the portfolios is 477,000 sq ft, against a total capacity of 673,000 sq ft, with growth of 14,000 sq ft over the year. The stores' occupancy at 31 March 2016 was 70.9% (31 March 2015: 68.8%). The net rent achieved at 31 March 2016 by the Armadillo stores is £15.59 per sq ft, an increase of 3% from the same time last year. Revenue increased by 5% to £9.0 million for the year to 31 March 2016 (2015: £8.6 million).

The Armadillo Partnerships made a combined operating profit of £4.3 million in the year, of which Big Yellow's share is £0.9 million. After net interest costs, the revaluation of investment properties (valued by Jones Lang Lasalle), deferred tax on the revaluation surplus and interest rate derivatives, the profit for the year was £5.6 million, of which the Group's share was £1.1 million. 

Big Yellow has a five year management contract in place in each Partnership. For the year to 31 March 2016, the Group earned management fees of £0.7 million. The Group's share of the declared dividend for the year is £0.4 million, representing a 10% yield on our investment for the year.

Responsibility statement of the Directors on the annual report 

The responsibility statement below has been prepared in connection with the Company's full annual report for the year ended 31 March 2016. Certain parts thereof are not included within this announcement.

We confirm to the best of our knowledge:

· the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;

· the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face; and

· the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

This responsibility statement was approved by the board of Directors on 23 May 2016 and is signed on its behalf by:

Independent auditors' report to the shareholders of Big Yellow Group PLC on the Preliminary Announcement of Big Yellow Group PLC

We confirm that we have issued an unqualified opinion on the full financial statements of Big Yellow Group PLC.

Our audit report on the full financial statements sets out the following risks of material misstatement which had the greatest effect on our audit strategy; the allocation of resources in our audit; and directing the efforts of the engagement team, together with how our audit responded to this risk and the key observations arising from our work:

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we did not provide a separate opinion on these matters.

Our liability for this report, and for our full audit report on the financial statements is to the company's members as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for our audit report or this report, or for the opinions we have formed.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Consolidated Statement of Comprehensive Income

Year ended 31 March 2016

EPRA earnings per share are shown in Note 12.

All items in the consolidated statement of comprehensive income relate to continuing operations.

Consolidated Balance Sheet

31 March 2016

The financial statements were approved by the Board of Directors and authorised for issue on 23 May 2016. They were signed on its behalf by:

James Gibson, Director John Trotman, Director

Company Registration No. 03625199

Consolidated Statement of Changes in Equity

Year ended 31 March 2016

Year ended 31 March 2015

The other non-distributable reserve arose in the year ended 31 March 2015 following the placing of 14.35 million ordinary shares.

Consolidated Cash Flow Statement

Year ended 31 March 2016

Reconciliation of Net Cash Flow to Movement in Net Debt

Year ended 31 March 2016

Notes to the financial statements

Year ended 31 March 2016

1. General information

Big Yellow Group PLC is a Company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 2 The Deans, Bridge Road, Bagshot, Surrey, GU19 5AT. The nature of the Group's operations and its principal activities are set out in note 4 and in the Strategic Report.

2. BASIS OF PREPARATIOn

The condensed set of financial statements set out above (which was approved by the Board on 23 May 2016) has been compiled in accordance with IFRS, but does not contain sufficient information to constitute a full set of IFRS financial statements. This financial information does not constitute the Company's statutory accounts for the years ended 31 March 2015 and 31 March 2016, but is derived from those accounts. Those accounts give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole. The Company's statutory accounts for the year ended 31 March 2015 have been filed with the Registrar of Companies. The Company's statutory accounts for the year ended 31 March 2016 will be filed with the Registrar of Companies following the Annual General Meeting. The auditors' reports on both the 2015 and 2016 accounts were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under s498(2) or (3) Companies Act 2006 or preceding legislation. 

The statutory accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation and with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretations Committee relevant to its operations and effective for accounting periods beginning on 1 April 2015. The same accounting policies as applied in the Group's statutory accounts for the year ended 31 March 2015 have been applied in this condensed set of financial statements. 

Going concern

A review of the Group's business activities, together with the factors likely to affect its future development, performance and position are set out on in the Strategic Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are shown in the balance sheet, cash flow statement and accompanying notes to the financial statements. Further information concerning the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk can be found in the Strategic Report and in the notes to the financial statements.

After reviewing Group and Company cash balances, borrowing facilities, forecast valuation movements and projected cash flows, the Directors believe that the Group and Company have adequate resources to continue operations for the foreseeable future. In reaching this conclusion the Directors have had regard to the Group's operating plan and budget for the year ending 31 March 2017 and projections contained in the longer term business plan which covers the period to March 2020. The Directors have considered carefully the Group's trading performance and cash flows as a result of the uncertain global economic environment and the other principal risks to the Group's performance, and are satisfied with the Group's positioning. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

 3. Revenue

Analysis of the Group's operating revenue can be found below and in the Portfolio Summary.

Non-storage income derives principally from rental income earned from tenants of properties awaiting development.

4. Segmental Information

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. Given the nature of the Group's business, there is one segment, which is the provision of self storage and related services.

Revenue represents amounts derived from the provision of self storage and related services which fall within the Group's ordinary activities after deduction of trade discounts and value added tax. The Group's net assets, revenue and profit before tax are attributable to one activity, the provision of self storage and related services. These all arise in the United Kingdom in the current year and prior year.

5. PROFIT for the year

a) Profit for the year has been arrived at after charging/(crediting):

b) Analysis of auditor's remuneration:

Fees payable to Deloitte LLP and their associates for non-audit services to the Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis. Fees charged by Deloitte LLP to Armadillo Storage Holding Company Limited and Armadillo Storage Holding Company 2 Limited in the year amounted to £43,000, which all related to audit services.

6. Employee costs

The average monthly number of full-time equivalent employees (including Executive Directors) was:

7. INVESTMENT income

8. Finance costs

9. TaxATION

The Group converted to a REIT in January 2007. As a result the Group does not pay UK corporation tax on the profits and gains from its qualifying rental business in the UK provided that it meets certain conditions. Non-qualifying profits and gains of the Group are 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.

Finance (No.2) Bill 2015 provides that the rate of corporation tax for the 2017 Financial Year (commencing 1 April 2017) will be 19% and that the rate from 1 April 2020 would be 18%. At Budget 2016, the government announced a further reduction to the Corporation Tax main rate (for all profits except ring fence profits) for the year starting 1 April 2020, setting the rate at 17%, however this rate is yet to be substantially enacted.

A reconciliation of the tax charge/(credit) is shown below:

At 31 March 2016 the Group has unutilised tax losses of £32.4 million (2015: £32.8 million) available for offset against certain types of future taxable profits. All losses can be carried forward indefinitely.

10. Adjusted Profit before tax AND ADJUSTED EBITDA

Adjusted profit before tax which excludes gains and losses on the revaluation of investment properties, changes in fair value of interest rate derivatives, net gains and losses on surplus land, and non-recurring items of income and expenditure have been disclosed to give a clearer understanding of the Group's underlying trading performance. EPRA earnings are £48,705,000 for the year after the tax charge of £247,000 (2015: £39,756,000 after a tax credit of £351,000). 

11. Dividends

Subject to approval by shareholders at the Annual General Meeting to be held on 22 July 2016, the final dividend will be paid on 28 July 2016. The ex-div date is 16 June 2016 and the record date is 17 June 2016.

The Property Income Dividend ("PID") payable for the year is 18.1 pence per share (2015: 16.1 pence per share). 

12. Earnings AND NET ASSETS per share

Earnings per ordinary share

The calculation of basic earnings is based on profit after tax for the year. The weighted average number of shares used to calculate diluted earnings per share has been adjusted for the conversion of share options.

EPRA earnings and earnings per ordinary share before non-recurring items, movements on revaluation of investment properties, gains on surplus land, the change in fair value of interest rate derivatives, and share of associate non-recurring gains and losses (including deferred tax on revaluation surpluses) have been disclosed to give a clearer understanding of the Group's underlying trading performance.

The European Public Real Estate Association ("EPRA") has issued recommended bases for the calculation of net assets per share information and this is shown in the table below: