Last checked at 18 May 2009 07:00
BIG YELLOW GROUP PLC
18 May 2009
Big Yellow Group PLC
("Big Yellow", "the Group" or "the Company")
audited Results for the YEAR and FOURTH Quarter ended 31 MARCH 2009
Big Yellow Group PLC, the UK's leading self storage brand, is pleased to announce results for the year and for the fourth quarter ended 31 March 2009.
| | Year ended 31 Mar 2009 | Year ended 31 Mar 2008* | % | |
| | | | | |
| Revenue | £58.5m | £56.9m | 3 | |
| Adjusted EBITDA (1) | £30.3m | £29.6m | 2 | |
| (Loss)/profit before tax | (£71.5m) | £102.6m | (170) | |
| Adjusted profit before tax(1) | £13.8m | £15.0m | (8) | |
| Basic (loss)/earnings per share | (62.86p) | 89.88p | (170) | |
| Adjusted earnings per share(2) | 11.89p | 11.72p | 1 | |
| Dividend | – final | nil p | 5.5p | (100) |
| | – total | nil p | 9.5p | (100) |
| Adjusted NAV per share(3) | 457.0p | 522.0p | (12) | |
| Cash flow from operations | £33.3m | £30.8m | 8 | |
| Wholly owned stores occupied space at year end (4) | 1,732k sq ft | 1,817k sq ft | (5) | |
1 See note 10 2 See note 12 3 See notes 12 and 14 4 See Portfolio summary * - restated see note 2
| • | Revenue increase of 3% in the year, with same store revenue reduction of 4% 4 |
| • | Adjusted EBITDA up 2% to £30.3 million1 |
| • | Adjusted profit before tax of £13.8 million (2008: £15.0 million) 1 |
| • | Cash generated from operations increased by 8% to £33.3 million |
| • | Loss before tax of £71.5 million, down from a profit of £102.6 million in the prior year principally due to the reversal of some of the revaluation gains booked in the prior year; and the cost of derivative positions that were closed out in the year |
| • | Rehedging of interest rate derivatives, saving an estimated £5.4 million per annum at current monthly variable rates |
| • | Adjusted net assets per share of 457.0p (2008: 522.0p) |
| • | 54 stores open at 31 March 2009 providing 3.4 million sq ft of self storage space |
| • | Refinancing of £325 million core banking facility with HSH Nordbank, expiring in September 2013 |
| • | Nine planning consents obtained since 1 April 2008 |
Nicholas Vetch, Chairman of Big Yellow commenting on the outlook said:
"Lead indicators including improved customer reservations, the volume of telephone and web enquiries together with higher internet traffic give us cautious grounds for more optimism. This would appear to be consistent with recent survey evidence showing a slowly improving picture in relation to housing transactions, albeit that these are coming off very low levels. We have however no doubt that the recovery of trading to more normalised levels will take some time, given the continued restricted supply of credit and rising unemployment levels. We therefore remain highly focussed on risk and the downside but are beginning to turn our attention, and increasingly so, to the next phase of growth and our strategy for continuing to build on Big Yellow's position as the market leader and the most recognised brand in our industry.
We anticipate that, providing conditions continue to improve, we will over time migrate from a highly defensive stance to a more ambitious and offensive strategy."
| For further information, please contact: | |
| Big Yellow Group PLC | 01276 477 811 |
| Nicholas Vetch | |
| James Gibson | |
| John Trotman | |
| Weber Shandwick Financial | 020 7067 0700 |
| Nick Oborne/ John Moriarty |
Notes to Editors
Big Yellow Group PLC is one of the leading and most dynamic self-storage groups in the UK. It was founded in 1998 by Nicholas Vetch, Philip Burks and James Gibson and listed on AIM in May 2000, moving to the Official List of the London Stock Exchange in 2002.
Big Yellow has expanded rapidly and now operates (both directly and within Big Yellow Limited Partnership) from 55 stores, 51 in London and the South, and one each in Leeds, Sheffield, Birmingham and Liverpool with a further 15 stores in development. Of the 70, 60 are held freehold and three long leasehold, together representing more than 90% of the portfolio. All the stores have the distinct yellow branding, in accessible main road locations, with the majority being within the M25 or in strong urban conurbations. When fully built out the portfolio will provide approximately 4.5 million sq ft of flexible storage space.
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, main road locations. Its focus on the location and visibility of its buildings, coupled with excellent customer service, has created the most recognised brand name in the UK self-storage industry.
Big Yellow Group PLC, the UK's leading self storage brand ("Big Yellow", "the Group" or "the Company"), is pleased to announce results for the year ended 31 March 2009.
Trading conditions and lead indicators over the past two months have shown a noticeable improvement, although activity levels remain below those enjoyed prior to August 2007, the beginning of the financial crisis.
Financial Results
Revenue for the year was £58.5 million (2008: £56.9 million), an increase of 3%. Revenue for the fourth quarter was £13.9 million in line with the same quarter last year.
Adjusted EBITDA increased by 2% in the year to £30.3 million.
The Group made an adjusted profit before tax in the period of £13.8 million (down from £15.0 million in 2008). The decline was primarily due to an increase in interest costs in the period, caused by higher debt levels.
The Group made a loss before tax for the year of £71.5 million, compared to a profit of £102.6 million last year. This loss is principally due to the reversal of some of the revaluation gains booked in the prior year; and the one off cost of unwinding various interest rate hedging arrangements in March.
Cash generated from operations rose to £33.3 million in the year (2008: £30.8 million), an increase of 8%.
Net bank debt of £308.1 million at 31 March 2009 (2008: £282.3 million) represents approximately 38% (2008: 33%) of the Group's investment property and development property assets totalling £808.7 million (2008: £855.0 million) and 57% (2008: 46%) of the adjusted net assets of £543.8 million (2008: £618.6 million).
In March of this year the Group settled its outstanding derivative positions (with a weighted average expiry of 2.8 years on £190 million of its debt) at a cost of £14.9 million. Simultaneously the Group rehedged £120 million for seven years at 2.99% (excluding margin). A further £70 million is hedged for four and a half years with the remainder of the Group's debt floating. The Group's current average cost of borrowing is now 3.7% reduced from 6.2% at March 2008. This reduces the Group's current annualised interest bill by approximately £5.4 million at current monthly LIBOR.
Dividend
No Property Income Dividend is payable for the year, due to shadow capital allowances offsetting the Group's tax exempt profits. The Board recommended suspension of the discretionary interim dividend in November 2008. The reason for the suspension was to allow the Group to retain operating cash surpluses to build out its existing pipeline of London stores without increasing debt levels. The Board has therefore not proposed a final discretionary dividend.
The dividend policy will be reviewed and the discretionary ordinary dividend reinstated when that objective has been met and the Board feels it is prudent to do so.
Valuation and Net Asset Value
The value of the investment property portfolio at 31 March 2009 was £735.1 million, down from £750.9 million at 31 March 2008.
The investment property valuation of the 47 stores open at 31 March 2008 fell by £58.9 million, a fall of 8%. This is offset by the increase to the portfolio of £43.1 million as a result of two new stores opening and Sheen reopening, after redevelopment.
The £52.8 million net revaluation deficit recorded in the income statement was principally caused by an increase in implied stabilised post administration yields which have moved from 7.67% to 8.64%. The stabilised yield on a pre administration basis is 9.09%. Encouragingly £53.4 million of the deficit occurred in the first half of the year with a gain of £0.6 million in the second half of the year, helped by new store openings.
Whilst we recognise that yields on commercial real estate assets more generally have increased significantly, we are sceptical that assets of this high quality in this sub-sector, where there is a scarcity of prime product, could be acquired at these levels. We estimate that there are approximately 117 self storage assets of this quality in the UK of which we own or part own 54. The remainder are owned by multi site competitors, who we doubt are sellers of their assets, in line with ourselves.
Land held for redevelopment or sale has been written down by £12.4 million over the year, offset by a small gain realised on the disposal of three pieces of surplus land.
The decrease in value of the property portfolio together with the cost of restructuring our interest rate swaps results in an adjusted fully diluted net asset value of 457.0p, a decrease of 12% over the prior year. See note 14 for detailed valuation assumptions and adjustment to purchasers' cost assumptions.
92% by value of the Group's 50 wholly owned open stores are freehold (including one long leasehold). The freehold proportion will increase as the Group opens stores in the development pipeline, all of which are freehold.
Stores and the Brand
Over the last 10 years Big Yellow has established itself as the UK's leading self storage brand with customer recognition exceeding our nearest rival by three times. We believe that this will have a significant impact as activity levels improve in coming years.
At the year end, occupied space in wholly owned stores represented 1,732,000 sq ft, down 5% from 1,817,000 sq ft at the same time last year. This represents a 55% occupancy rate across all 50 stores open at the period end (2008: 62%). The opening of three wholly owned stores in the year adding capacity of 206,000 sq ft, coupled with some occupancy loss in the same stores, has caused this reduction in the average occupancy across the portfolio.
A table summarising the performance of these 50 directly owned stores over the year can be found in the portfolio summary.
The portfolio of 32 same stores was 71% occupied at the end of the year (2008: 79%), with an average occupancy during the year of 75% (2008: 82%). In addition these 32 stores achieved EBITDA margins of 65% (2008: 65%). The 25 freehold stores within the 32 achieved EBITDA margins of 70% in the year (2008: 71%).
Same store revenue for these 32 stores decreased 4% year on year, 9% caused by the decline in average occupancy year on year, offset by a 5% increase in average storage rents. From May 2009, we have put through an annual storage rent increase of approximately 4.25% to existing customers across the whole store portfolio, which will come through in the first half of the current year. In addition, we increased empty room rates by approximately 5% on average across all stores at the end of March.
Big Yellow Limited Partnership ("The Partnership" or Joint Venture")
Our joint venture with Pramerica Real Estate Investors Limited is performing well. Planning consents have been obtained on all but two of the sites. The Partnership has enjoyed considerable benefits from falling construction prices and interest costs, reducing the capital requirements. It is too early to make a definitive judgement but initial trading performance of the stores in the North and Midlands has been relatively encouraging.
Armadillo Management Agreement
We were pleased to be appointed by HSBC Specialist Investments Limited to manage a portfolio of ten freehold stores in the North, under a five year management agreement, with the stores branded as Armadillo Self Storage. The Group will be entitled to certain management and incentive fees payable over the life of the agreement. By the end of this calendar year, we will either part-own or manage 17 stores in the Midlands and the North, giving us greater operational scale and efficiencies.
Property
We now have 16 stores in the pipeline, which when fully developed will represent an additional 1.05 million sq ft and when open will provide the Group with a total of 70 stores and 4.45 million sq ft. 9 stores (0.55 million sq ft) in the pipeline are held in the Joint Venture and 7 (0.5 million sq ft) are wholly owned.
The anticipated remaining capital expenditure on the nine stores in the Joint Venture is £49.2 million, which is fully funded through equity provided two thirds by Pramerica Real Estate Investors and a third by the Group, with the balance provided from a committed development finance facility.
The seven freehold stores in the core Group consist of six prime sites in London (Chiswick, Eltham, Enfield Gypsy Corner, New Cross and Twickenham), and one in central Guildford. The capital expenditure that would be required to complete the seven wholly owned development sites, (including Twickenham which opened in May and the completion of the purchase of Enfield) is approximately £53 million.
Approximately 60% of our total stores and sites by area are located within the M25 and 63 are freehold or long leasehold. In the year we have opened six stores, including three within the Partnership.
We have obtained planning consents on nine stores since 1 April 2008, including at Eltham where we have recently had our planning appeal allowed. In addition on a further two sites applications have been submitted. We now have consent on all but three of our development pipeline of sites.
During the year we sold £3.8 million of surplus land, and sold five sites to the Partnership for £22.8 million. We now have £25 million of surplus land which we are seeking to sell over the next 18 months.
Our People
As we have consistently reported over the last seven years, the Big Yellow team has remained largely stable, both at Head Office and within the stores. Never complacent on this issue however, we are constantly investing in our people, which we believe is reflected in the very high customer satisfaction responses that we receive. I am delighted that this year we will be celebrating the 10th anniversaries of 17 valued members of our team, who have been with us from the very early days of the business.
We are very pleased to have been included in the Sunday Times "Best 100 Companies to Work For" list for 2009. As a consumer facing business the wellbeing of our staff is of paramount importance and therefore my thanks and congratulations go to all who made it possible, notably our Human Resources team.
In the year, David Ross resigned from the Board as a Non-Executive Director much to my regret. He remains a significant and supportive shareholder.
I would like to welcome two new Non-Executive Directors to the Board. Tim Clark joined in August and Mark Richardson in July as Senior Non-Executive and Chairman of the Audit Committee respectively. Tim Clark has recently retired from a long career at Slaughter and May, the last seven years of which were as senior partner. Mark Richardson was a senior audit partner, working in the real estate practice at Deloitte LLP, from which he retired in 2008. Already they have made a significant contribution to the Boardroom.
I would like to take the opportunity of thanking all the people who work at Big Yellow for their continued efforts, loyalty and hard work which, at the risk of repetition, really does make the difference between success and failure in our business.
Outlook
Lead indicators including improved customer reservations, the volume of telephone and web enquiries together with higher internet traffic give us cautious grounds for more optimism. This would appear to be consistent with recent survey evidence showing a slowly improving picture in relation to housing transactions, albeit that these are coming off very low levels. We have however no doubt that the recovery of trading to more normalised levels will take some time, given the continued restricted supply of credit and rising unemployment levels. We therefore remain highly focussed on risk and the downside but are beginning to turn our attention, and increasingly so, to the next phase of growth and our strategy for continuing to build on Big Yellow's position as the market leader and the most recognised brand in our industry.
We anticipate that, providing conditions continue to improve, we will over time migrate from a highly defensive stance to a more ambitious and offensive strategy.
Our four main objectives over the medium term are:
| • | Fill the vacant capacity of our existing store portfolio |
| • | Build out the sites which we currently own |
| • | Expand the store portfolio beyond the current commitment, with particular emphasis on London |
| • | Reinforce and improve our already market leading brand position |
Nicholas Vetch
Chairman
15 May 2009
Introduction
This has been a challenging year for the Group, as the financial crisis which started in August 2007 has turned into a deep economic downturn. Nevertheless, our performance has been relatively resilient, although not immune. We believe that resilience is owing to a combination of factors including:
| - | a prime portfolio of freehold self storage properties |
| - | successful acquisition and development of new stores |
| - | the strength of operational management |
| - | the UK's leading self storage brand, with high public awareness |
| - | strong cash flow generation and high operating margins |
| - | flexible and conservative financing, with a senior debt facility in place until 2013, and partial hedging in place to 2015 |
Business Objectives
In recent years, Big Yellow has established itself as the leading self storage brand in the UK (YouGov Survey, September 2008), a key objective set at flotation. The Group continues to invest in developing quality assets at the premium end of the self storage market and to build on our brand leadership nationally. We intend to measure our progress by commissioning quantitative research each year. We opened our first store outside our core area, in Leeds in 2005 and have opened sites this year in Birmingham, Liverpool and Sheffield. We have further sites under development in Manchester, Stockport, Nottingham, Edinburgh and a second site in Sheffield.
The main elements of our strategy remain:
| - | the selective build out of freehold stores in major urban conurbations throughout the UK |
| - | retaining a focus on London and the South East in the core Group |
| - | financing using flexible bank borrowings secured against a prime freehold portfolio, and more recently the Partnership with Pramerica |
| - | locating stores in visible, convenient and accessible locations |
| - | an unwavering focus on customer service |
| - | excellent operational and financial management generating strong cash-flow growth |
| - | innovative and creative marketing |
| - | an entrepreneurial and passionate culture, with accessible senior management encouraging innovation and dialogue throughout the business |
| - | recruiting and retaining quality people into the business |
Financing Objectives
Big Yellow's financing policy is to fund its current needs through a mix of debt and equity in building out the existing portfolio and achieving 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 level of bank debt in the business is closely monitored against the Board's policy guidelines, which currently require that the ratio of net debt to gross property assets is no greater than 50% and interest cover not less than 2 times based on net operating income, comfortably ahead of its banking covenants. However, it is acknowledged that there may be limited periods where income cover temporarily falls slightly below 2 as a result of known factors, for example a number of new store openings, as new freehold stores typically make a loss for the first three to six months before breaking even at the net operating income level.
Risk Management
The management of risk is a fundamental part of how we have controlled the development of Big Yellow since its formation in September 1998, and the opening of our first purpose built store in Richmond, London in May 1999.
Self Storage Market Risk
We noted last year that the credit crunch which started in August 2007 impacted the availability of mortgages to home owners which in turn has caused a significant reduction in housing market activity. We have now entered a deep recessive cycle in the global economy. Demand for self storage has slowed since the start of the credit crunch, however we believe that the structural need for self storage remains, and we are pleased at the relative resilience that has been shown to date by the sector. We have increased storage rents to customers by on average 4.25% from May 2009. Over the last six years average net storage rental growth has been 4.5% per annum.
Of the customers moving into the business in the last year, our surveys indicate approximately 54% is in some way linked to the housing market of which 26% are customers renting storage space whilst moving within the rental sector, and the balance moving within the owner occupied sector. We have seen an increase in demand from customers within the rental sector during the year, in part caused by the decline in the housing market and availability of credit. Customers within the rental sector will typically stay longer in the stores than the shorter demand profile of house move customers. 12% of our customers who moved in during the year rent storage space as a spare room for lifestyle purposes and approximately 20% of 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 furniture, are getting married or divorced, are students who need storage during the holidays, or homeowners developing into their lofts or basements. The balance of 14% of our customers are businesses ranging from start ups and market traders to retailers and larger multinationals storing 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. The demand from business customers, who typically occupy larger rooms, has been relatively robust, as they seek a cost effective, flexible solution to their storage requirements, preferring self storage to the commitment of a long lease.
Self storage is an immature market in the UK compared to other markets such as the United States and Australia, and we believe has further opportunity for growth. Awareness of self storage and how it can be used by domestic and business customers is relatively low throughout the UK, although higher in London. The rate of growth in branded self storage on main roads in good locations has historically been limited by the difficulty of acquiring sites at affordable prices and obtaining planning consent. The lack of availability of credit within the economy has further reduced this rate of growth in recent months.
Big Yellow only invests in prime locations, developing high quality self storage centres in the large urban conurbations where the drivers in the self storage market are at their strongest and the barriers to competition exist.
We have a large current storage customer base of approximately 28,500 spread across the portfolio of open stores and many thousands more have used Big Yellow over the years. In any month, customers move in and out at the margin resulting in changes in occupancy. Despite the current environment, this has remained a seasonal business and typically one sees growth over the spring and the summer months, with the seasonally weaker periods being the winter months. The performance in terms of occupancy, revenue and EBITDA of our stores can be seen from the Portfolio Summary.
The average length of stay in Big Yellow's stores is increasing. At 31 March 2009 the average length of stay for existing customers was 18.0 months; a marked increase on 15.6 months in the prior year. For all customers, including those who have moved out of the business, the average length of stay has increased from 8.0 months to 8.4 months. This translates into a loyal customer base. In our 32 same store portfolio, 36% of our customers have been storing with us for over three years. A further 19% in these stores have been in the business for between one and three years.
Property Risk
We have slowed down our real estate acquisition programme; focussing during the year on building out selected sites within our development pipeline, and conserving available facilities within the business. We believe the current difficulties in the banking and capital markets make access to capital required to fund growth more difficult and will slow down the growth in self storage store openings in the market generally. We believe that we are in a relatively strong position with our freehold property assets, with the proven ability to access more funding when the opportunity presents itself.
The planning process remains difficult with some planning consents taking in excess of twelve months to achieve. We do take planning risk where necessary, although the more distressed property market will in our view provide more opportunity to buy sites on a conditional basis.
Big Yellow's management has significant experience in the property industry generated over many years and in particular in acquiring property on main roads in high profile locations and obtaining planning consents.
In the year under review we acquired just one site, in Stockport, within Big Yellow Limited Partnership. We now have a portfolio of 70 stores and sites of which 54 are currently open and a further 13 have planning consents. We have surplus land of £25 million which we are seeking to sell in the next 18 months.
We manage the construction of our properties very tightly. The building of each site is handled through a design and build contract, with the fit out project managed in-house using an established professional team of external advisors and sub-contractors who have worked with us for many years to our Big Yellow specification.
We achieved two significant sustainability milestones during the year. Our Sheen store achieved the highest 'Excellent' rating on the Building Research Establishment's Environmental Assessment Methodology (BREEAM), in the industrial buildings category, and our new store at Twickenham achieved an A+ rating on carbon emissions, indicating that it has net zero CO2 emissions.
Treasury Risk
The Group borrows in sterling at floating rates of interest and uses swaps to hedge its interest rate exposure. The Group has derivatives in place to ensure at least 50% of our bank borrowings are hedged, the balance is left floating paying margin over LIBOR. At 31 March 2009, we had hedging instruments in place over 61% of our outstanding bank borrowings, including hedging of at least 70% of the investment tranche of our senior debt facility, as required by our loan documentation. The Group does not hedge account its interest rate derivatives, all movements in fair value are taken through the income statement.
The Group monitors compliance with its banking covenants closely. During the year it complied with all its covenants, and is forecast to do so for the foreseeable future.
Our portfolio is relatively high yielding and we believe a flexible approach to our hedging is appropriate for our strategic aims, given our conservative balance sheet.
Interest Cover and Balance Sheet Risk
The Group reviews its current and forecast projections of cash flow, borrowing and interest cover as part of its monthly management accounts. In addition, an analysis of the impact of significant transactions is carried out regularly, as well as a sensitivity analysis assuming movements in interest rates and occupancy in the stores on gearing and interest cover.
Credit Risk
Our customers are required to pay a deposit when they start to rent a self storage unit and are also required to pay in advance for their four-weekly storage charges. The Group is therefore not exposed to a significant credit risk. 70% of our customers pay by direct debit. Since the commencement of the credit and liquidity issues in August 2007, we have not seen an increase in the levels of bad debts and arrears.
Taxation Risk
The Group is exposed to changes in the tax regime affecting the cost of corporation tax, VAT and Stamp Duty Land Tax ("SDLT"). We regularly monitor proposed and actual changes in legislation with the help of our professional advisors and through trade bodies to understand and, if possible, mitigate or benefit from their impact.
Real Estate Investment Trust ("REIT") Risk
The Group converted to a REIT with effect from 15 January 2007. The Group is therefore exposed to potential tax penalties or loss of its REIT status by failing to comply with the REIT legislation. The Group has internal monitoring procedures in place to ensure that the appropriate rules and legislation are complied with. To date all REIT regulations have been complied with.
Human Resources Risk
At Big Yellow we have developed a professional, lively and enjoyable working environment and believe our success stems from attracting and retaining the right people. We encourage all our staff to build on their skills through appropriate training and regular performance reviews. We believe in an accessible and open culture and everyone at all levels is encouraged to review and challenge accepted norms, so as to contribute to the performance of the Group.
Reputational Risk
Big Yellow's reputation with all its stakeholders is something we value highly and will always look to protect and enhance. We aim to communicate clearly with our customers, suppliers, local authorities and communities, employees and shareholders and to listen to and take account of their views. Big Yellow's Intranet and Website (bigyellow.co.uk) are important avenues of communication for both employees and shareholders.
Stores
During the year we opened six stores, three wholly owned stores in London (at Kennington, Sheen and Bromley), and three within Big Yellow Limited Partnership at Sheffield, Birmingham and Liverpool. These store openings bring the number now trading in the Group and the Partnership to 54. The available net lettable space increased by 380,000 sq ft over the year to 3.4 million sq ft with the opening of these six stores.
The maturity profile across the 50 wholly owned stores open at the end of the year is set out in the Portfolio Summary and shows a blended occupancy for the portfolio of 55% (1.7 million sq ft occupied), with the same stores at an average occupancy of 75% (2008: 82%). The fall in average occupancy reflects the more difficult trading conditions experienced through the year, and is primarily as a result of weakness in our mid-range room sizes typically used by owner-occupiers staying relatively short periods and moving within the housing market. Our ability to manage rental yields through price increases has meant that despite the impact of a 9% occupancy fall on the same store portfolio, the reduction in revenue year on year was limited to 4%.
There are a further 16 freehold sites (including nine sites within Big Yellow Limited Partnership). These sites are at various stages of planning and construction which, when fully developed, will increase the total capacity of the portfolio to 4.5 million sq ft.
6 of the 16 sites in the development pipeline are located in Greater London, including Twickenham which opened in May, which we believe will continue to improve the quality of our store portfolio. There are five sites currently under construction in the Partnership and the trading results from recently opened stores in the north are encouraging.
We continue to work on obtaining planning consents for all future stores. We expect to open six stores in the current financial year, one within the core Group, and five within the Partnership.
During the year we moved in over 34,000 customers taking 2.1 million sq ft compared to 40,000 customers taking 2.4 million sq ft last year. This resulted in the wholly owned stores reducing in occupancy by 85,000 sq ft (37,000 sq ft increase last year). Of the 50 wholly owned stores open at the year end 47 are now trading profitably with the other 3 being recent openings.
The Big Yellow store model is now well established. The "typical" store contains 60,000 sq ft and takes some 3 to 4 years to achieve 85% occupancy. The average room size is 60 sq ft and the average net rental achieved last year across the 50 wholly owned stores was £26.53 per sq ft per annum (the average rent in London is higher at £28.75 per sq ft per annum). The stores in lease-up achieved a higher average rental (£27.00 per sq ft) than the mature stores (£26.42 per sq ft), reflecting the greater London weighting of the lease-up stores.
The store is initially run by three staff - adding a part time member of staff once the store occupancy justifies the need for the extra administrative and sales workload. Given that the operating costs of these assets are relatively fixed, larger stores in bigger urban conurbations, particularly London, drive higher revenues and higher operating margins.
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 shoppers and ex-customer surveys. We have in place a team of Area Managers who have on average been with Big Yellow for six years. They develop and support the stores to drive the growth of the business. Adrian Lee, Operations Director, is the Board member responsible for dealing with all customer issues.
The store bonus structure rewards occupancy growth, sales growth and cost control through setting 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 involved in preparing their own targets and budgets each quarter, leading to improved visibility, a better understanding of sales lines and control of operating costs.
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. The total construction spend in the year was £36 million. We currently have six new stores on site, all of which will open in the financial year 2009/10.
We believe that as a customer facing real estate business it is paramount to maintain the quality of our estate and customer offering. We therefore continue to invest in a rolling programme of store makeovers, preventative maintenance, store cleaning and the repair and replacement of essential equipment, such as lifts and gates.
During the year we were pleased to sign a management agreement with a subsidiary of HSBC Bank plc to manage a portfolio of ten freehold stores, branded as Armadillo Self Storage. We have been operating the stores for two months. Our initial activity has consisted of moving the staff onto our centralised systems and training the staff on our way of working. We are currently working on rebranding all the stores with a new Armadillo Self Storage livery. The portfolio will shortly be integrated on our website and we look forward to working with HSBC to maximise value over the five year term of our management contract.
Sales and Marketing
This year we have reinforced our position as the clear brand leader in the UK self storage industry.
We are at the forefront of online innovation, and during the year we launched our new website, building on our unique online reservation and real-time pricing system. The new website is structured around educating browsers and communicating our best quality facilities and value for money. As a result of this, our conversion rate of online enquiries has doubled. Traffic to the website has grown by 59% year-on year, and all our advertising budget is now dedicated to online activity. During 2008, we invested in new tools to help us measure and continually optimise our online marketing. We are constantly looking to improve our e-commerce proposition and we will continue to lead the industry in this area.
We commission annual awareness surveys and our Brand continues to grow strongly. Highlights from this year's survey include:
| • | Brand awareness across the UK has grown by 30% this year |
| • | We have achieved Brand awareness of 82% in London, an increase of 30% over the previous year |
| • | Our Brand awareness is still three times the level of our nearest competitor |
| • | 80% of our customer base continues to fall within the top three ACORN customer categories |
| • | Big Yellow leads the industry in terms of Brand preference, with more potential customers expecting to use Big Yellow than any other Brand |
Source: YouGov, September 2008
A thorough understanding of self storage (ie a full awareness of the service provided and its benefits) grew more rapidly this year, with 50% of the UK population having at least a reasonable knowledge of the product. In spite of this growth, educating the public about our top quality service and facilities continues to be at the core of our marketing programme.
We continually monitor local market conditions and review our promotions regularly. Our strategy is to offer targeted promotions to ensure we are offering the best value available to our customers, whilst ensuring that we achieve our rental yield objectives.
Local marketing, selling standards and customer service at store level are also critical to building the brand and achieving customer loyalty and recommendations. We invest significantly in training and have a reward structure and performance monitoring systems which focus specifically on achieving sales and customer service objectives.
During the year the Group spent approximately £2.6 million (4.5% of our revenue) on marketing, in line with the previous year. It is our intention to continue to invest 4.25% to 4.5% of our revenue to increase awareness of Big Yellow in existing and new markets, particularly as we expand into new cities across the country.
Security
The safety and security of our customers and stores remains a key priority. To achieve this we invest in state of the art access control systems, individual room alarms, digital CCTV systems, intruder and fire alarm systems and the remote monitoring of all our stores out of our trading hours.
We have implemented customer security procedures in line with advice from the Metropolitan Police and continue to work with the regulatory authorities on issues of security, reviewing our operational procedures regularly. The importance of security and the need for vigilance is communicated to all store staff and reinforced through training and we have continued to run courses to enhance the awareness and effectiveness of our procedures in relation to security, entitled "You and Your Customer".
People
At Big Yellow we aim to provide a lively, fun and enjoyable working environment, without losing our commitment to delivering the very best standards of customer service.
We encourage a culture of partnership within the business and believe in staff participating in corporate performance through bonus schemes and share incentives. Many employees benefit from an HMRC approved Sharesave Scheme, which provides an opportunity to invest in the future success of Big Yellow at a discount to the prevailing share price at the date of each invitation. Our stakeholder pension scheme managed by Friends Provident, has been taken up by nearly 70% of employees eligible to join and a voucher awards scheme is used extensively across the business to recognise and reward our staff.
We aim to promote employee wellbeing through a range of flexible working options to include flexitime, staggered hours, home working and sabbaticals. We provide a comprehensive range of medical support and advice though our occupational health providers and have arranged corporate gym membership on a national basis.
We continue to recognise the importance of communication and consultation with an annual conference, regular formal and informal meetings and bi-monthly newsletters and operational updates. In addition, our Directors and senior management spend significant time in the stores and are accessible to employees at all levels. An annual Employee Attitude Survey provides management with key feedback and guidance as to where to focus its attention to further improve the working environment.
We had 273 full, part time and casual employees in the business at the year end (2008: 226 employees), and recruiting and retaining the right calibre people remains critical to the continued success of the Company.
We promote the individual development of staff through training and regular performance appraisals and delivered nearly 900 days training to employees in the last year, equating to an average of approximately 3.5 days training per employee. In the stores, nearly 60% of the managerial posts have been filled by internal promotions.
The Remuneration Committee has been conducting a benchmark review of the Executives' remuneration with a view to developing a long term share based bonus plan for next three to five years. Further details are included in the Remuneration Report and will be included in the Notice of the Annual General Meeting.
In March of this year, we were delighted to have been recognised as one of the Sunday Times 100 Best Companies To Work for 2009 and also to have achieved Two Star Status for the Best Companies Accreditation.
Financial Results
Revenue for the year was £58.5 million, up 3% from £56.9 million for 2008. Other sales (included within the above), comprising the selling of packaging materials, insurance and storage related charges represented 17% of storage income for the year (2008: 17%) and generated revenue of £8.0 million for the year, up 1% from £7.9 million in 2008.
The EBITDA margin remained consistent at 65% for the 32 same stores (see Portfolio Summary). There was a reduction in revenue of 4% for the 32 same stores, but the effect of this on the margin was offset by a reduction in same store operating costs of 4%.
The Group made a loss before tax in the year of £71.5 million, down from a profit of £102.6 million in the prior year. The main difference is due to the revaluation of the open store portfolio being a deficit of £52.8 million against a £92.8 million surplus last year. This has principally been caused by unfavourable yield shifts.
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 £13.8 million, down 8% from £15.0 million in 2008. This was principally caused by higher interest costs in the year.
| (Loss)/profit before tax analysis | 2009 £m | 2008 £m |
| (Loss)/profit before tax | (71.5) | 102.6 |
| Loss/(gain) on revaluation of investment properties | 52.8 | (92.8) |
| Movement in fair value on interest rate derivatives* | 18.0 | 3.4 |
| Net losses on non-current assets | 11.6 | 0.5 |
| Prior year non-recurring costs | - | 1.1 |
| Refinancing costs | 1.3 | - |
| Share of non-recurring costs in associate | 1.6 | 0.2 |
| Adjusted profit before tax | 13.8 | 15.0 |
* - included within the £18.0 million is £14.9 million in respect of derivative positions that were closed out in the year.
The basic loss per share for the year was 62.86p (2008 earnings per share: 89.88p) and the fully diluted loss per share was 62.34p (2008 earnings per share: 89.20p). The reversal is principally due to the revaluation deficits as described above. Adjusted earnings per share based on adjusted profit after tax was 11.89p (2008: 11.72p) (see note 12).
Administrative Expenses were lower at £5.8 million compared to £6.7 million in 2008, which after adjusting for exceptional items incurred in the year ended 31 March 2008 of £0.75 million, represents a fall of £0.15 million on the prior year, or 3%. This is as a result of tight cost control in the Group. Salaries for all staff have been frozen for the year ended 31 March 2010, no Directors' bonus has been paid for the year and we have sought to reduce cost in the Group where possible.
From 1 April 2008, in accordance with changes to International Accounting Standards, we have capitalised interest against our development pipeline. This necessitated a restatement of the prior year comparatives of the Group, please see note 2 for further details. In the year ended 31 March 2009 interest capitalised amounted to £1.9 million (2008: £1.7 million).
Interest Expense on Bank Borrowings net of capitalised interest for the year increased to £16.2 million up from £14.2 million in 2008 reflecting the increase in net borrowing over the period. The average cost of borrowing during the year was 5.9% against 6.3% in the prior year.
Interest payable has increased in the income statement from £15.7 million to £17.5 million because of the increase in interest costs as above, offset by a lower interest cost on finance leases, due to the purchase of two store freeholds in the prior year.
The costs of refinancing the core debt during the year amounted to £1.3 million. This included the break costs of the previous facility, and the costs to novate the existing financial instruments to the new facility. These have been expensed in the year, and are added back in arriving at the adjusted profit before tax figure.
In March of this year the Group settled its outstanding derivative positions at a cost of £14.9 million. This cost is included in the income statement, but is added back to the adjusted profit before tax calculation.
REIT Status
The Group converted to a Real Estate Investment Trust ("REIT") on 15 January 2007. Since then we have benefited from a zero tax rate on our qualifying self storage earnings. We only pay tax on the profits attributable to our residual business, comprising primarily of the sale of packing materials and insurance, and fees earned from Big Yellow Limited Partnership, from the management of the Armadillo portfolio and franchise fees earned.
REIT status gives the Group exemption from UK corporation tax on profits and gains from its qualifying portfolio of UK stores. Future revaluation gains on these 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 Board on compliance with these criteria is carried out. To date, the Group has complied with all REIT regulations, including forward looking tests.
Taxation
The current year tax charge for the Group of £1.2 million arises principally from the release of a deferred tax asset arising in respect of the negative fair value adjustment from our derivatives which relates to the residual business (2008: credit of £0.8 million, arising principally from the recognition of a deferred tax asset). This has been released in the year, as following the close out of the Group's interest rate derivatives in March, the payment made gives us taxable losses available which can be offset over the next four years within the residual business.
The Group's actual cash tax liability for the year is £nil. We have submitted a claim for £146,000 for land remediation relief following work we carried out at our sites at Bromley, Sheen and Barking. This receivable is recorded as a debtor, with the credit applied to the taxation line of the income statement.
Dividends
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, no PID is payable due to the level of shadow capital allowances available to the Group (31 March 2008: PID of 0.15 pence per share).
The Board recommended suspension of the discretionary interim dividend in November 2008. The reason for the suspension was to allow the Group to retain operating cash surpluses to build out its existing pipeline of London stores without increasing debt levels. The Board has therefore not proposed a final discretionary dividend.
The dividend policy will be reviewed and the discretionary ordinary dividend reinstated when that objective has been met and the Board feels it is prudent to do so.
Balance Sheet
The Group's 50 wholly owned stores at 31 March 2009, which are classified as investment properties, have been revalued by Cushman & Wakefield ("C&W") and this has resulted in a property asset value of £808.7 million, comprising £679.3 million (84%) for the 43 freehold (including one long leasehold) open stores, £55.8 million (7%) for the seven short leasehold open stores and £73.6 million (9%) for development properties. The properties held for development have not been externally valued and have been included in the balance sheet at historical cost less provision for impairment. We have provided a total of £12.4 million against the development sites in the year, principally against land that we are seeking to sell, and sites where there is a concern that planning consent for self storage may not be obtained.
As in the prior year, 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 2009 of £767.2 million (£32.7 million higher (including £0.5 million for the share of the uplift in Big Yellow Limited Partnership) than the value recorded in the financial statements or 27.5 pence per share).
The revised valuation translates into an adjusted net asset value per share of 457.0 pence (2008: 522.0 pence) after the dilutive effect of outstanding share options (see table below).
| Analysis of Net Asset Value | 2009 | 2008 |
| Basic net asset value (£m) | 502.3 | 580.9 |
| Exercise of share options (£m) | 2.6 | 2.7 |
| Diluted net asset value (£m) | 504.9 | 583.6 |
| Basic net assets per share (pence) | 437.6 | 506.4 |
| Diluted net assets per share (pence) | 424.3 | 492.4 |
| Diluted shares used for calculation (million) | 119.0 | 118.5 |
| Diluted net asset value (as above) (£m) | 504.9 | 583.6 |
| Fair value of derivatives and deferred tax (see note 12) | 6.3 | 1.4 |
| EPRA net assets (£m) | 511.2 | 585.0 |
| EPRA net asset value per share (pence) | 429.5 | 493.6 |
| Valuation methodology assumption (see note 14) (£m) | 32.7 | 33.6 |
| Adjusted net asset value (£m) | 543.8 | 618.6 |
| Adjusted net assets per share (pence) | 457.0 | 522.0 |
Valuation
The value of the investment property portfolio at 31 March 2009 was £735.1 million, down £15.8 million from £750.9 million at 31 March 2008. The investment property valuation of the 47 stores open at 31 March 2008 fell by £58.9 million, a fall of 8%. This is offset by the increase to the portfolio of £43.1 million as a result of two new stores opening and Sheen reopening, after redevelopment. The 32 same store portfolio fell in value over the year by 8.5%.
The £52.8 million net revaluation deficit recorded in the income statement was principally caused by an increase in implied stabilised post administration yields which have moved from 7.67% to 8.64%. The stabilised yield on a pre administration basis is 9.09%.
In their report to us, our valuers, Cushman & Wakefield, have drawn attention to valuation uncertainty resulting from exceptional volatility in the financial markets and a lack of transactions in the property investment market. Please see note 14 for further details.
Financing and Treasury
The Group is strongly cash generative operationally 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:
| Year ended 31 March 2009 £000 | Year ended 31 March 2008 £000 | |
| Cash flow from operations | 33,301 | 30,752 |
| Finance costs (net)* | (21,871) | (16,364) |
| Free cash flow pre non-recurring items within finance costs | 11,430 | 14,388 |
| Non-recurring items paid within finance costs | (16,239) | - |
| Free cash flow | (4,809) | 14,388 |
| Capital expenditure | (35,780) | (110,886) |
| Asset sales | 26,603 | 30,827 |
| Investment in associate | (5,429) | (5,703) |
| Ordinary dividends | (6,309) | (10,860) |
| REIT conversion charge paid | (90) | (11,997) |
| Issue of share capital | 26 | 876 |
| Purchase of own shares | - | (1,084) |
| Increase in borrowings (net) | 27,339 | 94,000 |
| Net cash inflow/(outflow) | 1,551 | (439) |
| Opening cash and cash equivalents | 1,671 | 2,110 |
| Closing cash and cash equivalents | 3,222 | 1,671 |
* included in finance costs paid in the current year is £2.4 million in respect of the arrangement of our new banking facilities during the year.
Borrowings
We focus on improving our cash flows and we currently have healthy interest cover of three times, based on existing interest costs, with a relatively conservative debt structure secured principally against the freehold estate.
During the year, the Group completed a refinancing of its core debt facilities, replacing the existing £325 million loan provided by a syndicate led by Royal Bank of Scotland plc, with a new £325 million facility provided by HSH Nordbank AG. The bank loan is secured on 47 of the Group's properties. The loan is due to expire on 15 September 2013.
The new facility is divided into two tranches, Tranche A, up to a maximum of £50 million is used to finance non-stabilised properties within the Group and carries a margin of 150 bps. Tranche B is used to finance stabilised Group properties, and carries a margin of between 112.5 bps and 150 bps dependent on the Tranche B income cover. The Group is currently paying a margin of 112.5 bps on this Tranche. As the properties within Tranche A stabilise, they can be transferred to Tranche B, reducing the margin payable.
The facility's principal covenant is an income cover covenant that requires Tranche B EBITDA to be greater than 1.25 times the interest cost in Tranche B. There are no loan to value covenants. The Group is also required to retain consolidated net assets of £350 million, and a net bank borrowings to consolidated net assets ratio of not more than 100%.
The Group was in compliance with its bank covenants at 31 March 2009, and we forecast to be in compliance with our banking covenants in the foreseeable future.
At the end of the year, the Group had net debt of £308.1 million, an increase of £25.8 million over last year following £41.2 million of capital expenditure, £21.9 million of net interest paid (including finance lease costs), £16.2 million of refinancing costs, including the close out of interest rate derivatives, dividend payments of £6.3 million and a REIT conversion charge paid of £0.1 million, offset by operating cash flow of £33.3 million, and land disposal proceeds of £26.6 million.
The Group has £16.9 million of available facilities with over £125 million of unsecured assets and relatively conservative levels of gearing. The Group currently has a net debt to gross property assets ratio of 38%, and a net debt to total equity ratio of 61%.
£190 million is hedged at maturities expiring between 2013 and 2015. £120 million of this relates to a swap fixed at 2.99% (plus margin) with a maturity of September 2015. The remaining £70 million is fixed at 3.93% (excluding margin) until September 2013. We currently have floating rate debt of £121.3 million, on which we are currently paying one month LIBOR plus margin. The interest rate profile of the Group's debt is shown in the table below.
| Amount of debt 2009 | Weighted average interest cost at 31 March 2009 | Weighted average interest cost at 31 March 2008 | |
| Fixed rate debt | £190.0 million | 4.5% | 6.1% |
| Variable rate debt | £121.3 million | 2.3% | 6.4% |
| Total debt | £311.3 million | 3.7% | 6.2% |
At 31 March 2009, the fair value on the Group's interest rate derivatives was a liability of £5.6 million. 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.
The Group does not hedge account its interest rate derivatives. Therefore movements in the fair value are taken to the income statement, but as recommended by EPRA (European Public Real Estate Association), these are eliminated from adjusted profit before tax, adjusted earnings per share, and adjusted net assets per share.
Cash deposits are only placed with approved financial institutions in accordance with the Group's policy.
Share Capital
The share capital of the Company totalled £11.6 million at 31 March 2009 (2008: £11.6 million), consisting of 115,592,541 ordinary shares of 10p each (2008: 115,514,119 shares).
Shares issued for the exercise of options during the period amounted to 78,422 at an average exercise price of 297p.
The Group holds 100,000 of its shares in treasury and a further 715,000 within an Employee Benefit Trust ("EBT"). These shares are shown as a debit in reserves and are not included in calculating earnings and net asset value per share.
| 2009 No. | 2008 No. | ||||
| Opening shares | 115,514,119 | 114,559,534 | |||
| Shares issued for the exercise of options | 78,422 | 954,585 | |||
| Closing shares in issue | 115,592,541 | 115,514,119 | |||
| Shares held in EBT and Treasury | (815,000) | (815,000) | |||
| Closing shares for NAV purposes | 114,777,541 | 114,699,119 | |||
128,892,785 shares were traded in the market during the year ended 31 March 2009 (2008: 201,144,905). The average mid market price of shares traded during the year was 285.4p with a high of 448.5p and a low of 158p.
At 31 March 2009 there were 2,072,795 shares subject to share option awards to employees of the Group at a weighted average strike price of 106p. In addition there are 1,885,914 nil paid options, granted under the Group's LTIP scheme and 303,939 share options granted under the Group's SAYE scheme at a weighted average strike price of 162p.
Big Yellow Limited Partnership
In November 2007 we established Big Yellow Limited Partnership with Pramerica Real Estate Investors Limited ("Pramerica") to develop self storage centres in the Midlands, the North and Scotland. In the consolidated accounts of Big Yellow Group PLC, the Partnership is treated as an associate. We have adopted equity accounting for the Partnership, so that our share of the Partnership's results are disclosed in operating profit and our net investment is shown in the balance sheet within "Investment in Associate". We have provided in note 13e the balance sheet and income statement of the Partnership.
For clarity we have included a table below showing the split of stores and development sites between the Group and the Partnership.
| Big Yellow (wholly owned) | Big Yellow Limited Partnership | Total | |
| At 31 March 2009 | |||
| No of stores trading | 50 | 4 | 54 |
| No of stores under development | 7 | 9 | 16 |
| Total number of stores and sites | 57 | 13 | 70 |
| Development sites with planning consent | 6 | 7 | 13 |
| Open store capacity (sq ft) | 3.15 million sq ft | 0.25 million sq ft | 3.40 million sq ft |
| Development site capacity (sq ft) | 0.50 million sq ft | 0.55 million sq ft | 1.05 million sq ft |
| Total planned capacity (sq ft) | 3.70 million sq ft | 0.80 million sq ft | 4.45 million sq ft |
Structure
The Group has committed £25 million to the venture, and Pramerica £50 million, resulting in a one third, two thirds equity split respectively. The Board of the Partnership comprises two representatives of both Pramerica and Big Yellow. Pramerica have the casting vote over the approval of the Partnership's annual business plan.
During the year, the Group sold four development sites to the Partnership for £14.9 million. These development sites are in Camberley, High Wycombe, Poole and Reading and will provide additional self storage space for the Partnership of 235,000 sq ft. Subsequently in January 2009, prior to signing an agreement with HSBC Bank plc to manage the Armadillo stores, it was mutually agreed between the Group and Pramerica that there would be no further restriction on the Group's ability to open and manage sites outside the M25.
In January, the Group also completed the transfer of the Birmingham store to the Partnership, resulting in a net receipt of £7.9 million to the Group.
We had previously reported that the Group had a conditional agreement with Crosby Homes (North West) Limited ("Crosby"), for the development of a significant sized mixed use scheme, at our site in Manchester, to include the shell of an 80,000 sq ft self storage centre to be developed at the expense of Crosby, with the store to be transferred to the Partnership at the then open market value. The Group's agreement with Crosby has lapsed, and we are therefore reconsidering the scheme to be developed on this site. The Partnership has a conditional agreement in place to acquire the completed store. This agreement has a long stop date of 31 December 2010.
To date the Group has reinvested £11.1 million into the Partnership. The balance required of the £25 million commitment equity will be contributed over the development life of the Partnership, although if only the sites currently owned by the Partnership are developed, it is unlikely the Group would have to contribute the full £25 million.
The Group earns certain property acquisition, planning, construction and operational fees from the Partnership. For the year to 31 March 2009, these fees amounted to £1.4 million (2008: £0.1 million).
Funding
A five year term development loan of £75 million has been secured from the Royal Bank of Scotland plc to further fund the Partnership. £30 million of this loan has been syndicated to HSBC Bank plc and HSH Nordbank AG. £36.6 million of this loan had been drawn at 31 March 2009.
The Partnership has decided to fix 50% of drawn amounts to 30 June 2013 (as required in its facility agreement), and to leave the balance benefiting from the currently low levels of short term interest rates. The weighted average interest cost of the facility at 31 March 2009 was 4.5% including margin.
Results
For the year ended 31 March 2009, the Partnership made a loss of £4.8 million (2008: loss of £0.7 million), of which Big Yellow's share was £1.6 million (2008: £0.2 million). After adjusting for non-recurring items (revaluation deficit of £2.7 million, and fair value movement on interest rate derivatives of £1.9 million), the Partnership made an adjusted loss of £0.2 million, of which the Group's share is £0.1 million.
The Partnership is tax transparent, so the limited partners are taxed on any profits.
Big Yellow has an option to purchase the assets contained within the Partnership or the interest in the Partnership which it does not own exercisable from 31 March 2013. On exit whether by way of exercise of the option or a sale to a third party, Big Yellow is entitled to certain promotes, which would result in Big Yellow sharing in the surplus created in the Partnership.
| | March 2009 Same store(1) | March 2009 Lease-up | March 2009 Total | March 2008 Same store | March 2008 Lease-up | March 2008 Total |
| | | | | | | |
| Number of stores (2) | 32 | 18 | 50 | 32 | 15 | 47 |
| | | | | | | |
| As at 31 March 2009 | | | | | | |
| Total capacity (sq ft) | 1,944,000 | 1,208,000 | 3,152,000 | 1,944,000 | 1,002,000 | 2,946,000 |
| Occupied space (sq ft) | 1,379,000 | 353,000 | 1,732,000 | 1,537,000 | 280,000 | 1,817,000 |
| Percentage occupied | 71% | 29% | 55% | 79% | 28% | 62% |
| | | | | | | |
| For the year: | | | | | | |
| Average occupancy | 75% | 27% | 57% | 82% | 25% | 62% |
| Average annual rent psf | £26.42 | £27.00 | £26.53 | £25.07 | £26.07 | £25.38 |
| | | | | | | |
| | £000 | £000 | £000 | £000 | £000 | £000 |
| Self storage revenue | 38,422 | 8,784 | 47,206 | 39,956 | 6,530 | 46,486 |
| Other storage related revenue(3) | 6,066 | 1,898 | 7,964 | 6,445 | 1,424 | 7,869 |
| Ancillary store rental revenue | 67 | 29 | 96 | 93 | 21 | 114 |
| | | | | | | |
| Store revenue | 44,555 | 10,711 | 55,266 | 46,494 | 7,975 | 54,469 |
| Direct store operating costs (excluding depreciation) | (13,700) | (6,601) | (20,301) | (14,088) | (3,967) | (18,055) |
| Leasehold rent(4) | (1,968) | (42) | (2,010) | (2,184) | (43) | (2,227) |
| | | | | | | |
| Store EBITDA(5) | 28,887 | 4,068 | 32,955 | 30,222 | 3,965 | 34,187 |
| EBITDA Margin(6) | 65% | 38% | 60% | 65% | 50% | 63% |
| | | | | | | |
| Cumulative capital expenditure | £m | £m | £m | | | |
| | | | | | | |
| to 31 March 2009 | 160.1 | 169.9 | 330.0 | | | |
| to complete | - | 4.9 | 4.9 | | | |
| | | | | | | |
| Total cost | 160.1 | 174.8 | 334.9 | | | |
(1) Same stores are those that the Group manages on a mature basis; lease-up stores have yet to trade at their mature occupancy levels. These are wholly owned stores. Stores owned by Big Yellow Limited Partnership are not included in this summary.
(2) The results above for both years exclude the trading and occupancy of Leeds (sold to Big Yellow Limited Partnership in November 2007) and Sheen (closed for refurbishment in July 2007). The revenue earned from these two stores is shown in Note 3 of the financial statements, other than the revenue for Sheen from its date of reopening (December 2008), which in the current year is shown in lease up stores.
(3) Packing materials, insurance and other storage related fees.
(4) Rent for 7 short and one long leasehold property accounted for as investment properties and finance leases under IFRS with total self storage capacity of 496,000 sq ft, plus rent for Chelmsford and Cheltenham until the dates that their freeholds were acquired (29 August 2007 and 15 January 2008 respectively).
(5) Earnings before interest, tax, depreciation and amortisation.
(6) Of the same stores, the leaseholds achieved a store EBITDA of £5.2 million and EBITDA margin of 48%. The freeholds achieved a store EBITDA of £23.7 million and EBITDA margin of 70%.
Consolidated income statement Year ended 31 March 2009
| | Note | | 2009 £000 | 2008 £000 (restated) | |
| | | | | | |
| Revenue | 3 | | 58,487 | 56,870 | |
| Cost of sales | | | (21,781) | (20,792) | |
| | | | | | |
| Gross profit | | | 36,706 | 36,078 | |
| | | | | | |
| Administrative expenses | | | (5,760) | (6,736) | |
| | | | | | |
| Operating profit before gains and losses on property assets | | | 30,946 | 29,342 | |
| (Loss)/gain on the revaluation of investment properties | 13a | | (52,848) | 92,777 | |
| Net losses on non-current assets | 10 | | (11,583) | (463) | |
| | | | | | |
| Operating (loss)/profit | | | (33,485) | 121,656 | |
| Share of loss of associate | 13e | | (1,598) | (249) | |
| Investment income | 7 | | 381 | 289 | |
| Finance costs | - interest payable | 8 | | (17,473) | (15,696) |
| | - refinancing costs | 8 | | (1,347) | - |
| | - fair value movement of derivatives | 8 | | (17,967) | (3,382) |
| | | | | | |
| (Loss)/profit before taxation | | | (71,489) | 102,618 | |
| Taxation | 9 | | (1,150) | 770 | |
| | | | | | |
| (Loss)/profit for the year (attributable to equity shareholders) | 5, 22 | | (72,639) | 103,388 | |
| | | | | | |
| | | | | | |
| Basic (loss)/earnings per share | 12 | | (62.86)p | 89.88p | |
| | | | | | |
| Diluted (loss)/earnings per share | 12 | | (62.34)p | 89.20p | |
| | | | | | |
Adjusted earnings per share are shown in Note 12.
All items in the income statement relate to continuing operations.
Please see note 2 for details of the restatement.
Consolidated balance sheet 31 March 2009
| | Note | | 2009 £000 | 2008 £000 (restated) |
| Non-current assets | | | | |
| Investment property | 13a | | 735,060 | 750,910 |
| Development property | 13a | | 73,618 | 104,139 |
| Interests in leasehold property | 13a | | 21,852 | 22,274 |
| Plant, equipment and owner-occupied property | 13b | | 3,095 | 3,256 |
| Goodwill | 13c | | 1,433 | 1,433 |
| Investment in associate | 13e | | 9,285 | 5,454 |
| Deferred tax asset | 19 | | - | 1,535 |
| | | | | |
| | | | 844,343 | 889,001 |
| Current assets | | | | |
| Inventories | | | 338 | 331 |
| Trade and other receivables | 15 | | 8,362 | 7,465 |
| Cash and cash equivalents | | | 3,222 | 1,671 |
| Assets classified as held for sale | 13d | | 3,200 | 16,336 |
| | | | | |
| | | | 15,122 | 25,803 |
| | | | | |
| Total assets | | | 859,465 | 914,804 |
| | | | | |
| Current liabilities | | | | |
| Trade and other payables | 16 | | (18,413) | (21,898) |
| Current tax liabilities | | | - | (90) |
| Obligations under finance leases | 20 | | (1,984) | (1,958) |
| Derivative financial instruments | 17 | | (5,550) | (2,870) |
| | | | | |
| | | | (25,947) | (26,816) |
| Non-current liabilities | | | | |
| Bank borrowings | 18 | | (308,672) | (282,897) |
| Obligations under finance leases | 20 | | (19,868) | (20,316) |
| Other payables | 16 | | (2,661) | (3,889) |
| | | | | |
| | | | (331,201) | (307,102) |
| | | | | |
| Total liabilities | | | (357,148) | (333,918) |
| Net assets | | | 502,317 | 580,886 |
| | | | | |
| Equity | | | | |
| Called up share capital | 21 | | 11,559 | 11,551 |
| Share premium account | 22 | | 41,663 | 41,645 |
| Reserves | 22 | | 449,095 | 527,690 |
| | | | | |
| Equity shareholders’ funds | | | 502,317 | 580,886 |
| | | | | |
Please see note 2 for details of the restatement.
The financial statements were approved by the Board of Directors and authorised for issue on 15 May 2009. They were signed on its behalf by:
James Gibson, Director
John Trotman, Director
| 2009 £000 | 2008 £000 (restated) | ||
| Current and deferred tax recognised in equity | (240) | 96 | |
| Net (expense)/income recognised directly in equity for the year | (240) | 96 | |
| (Loss)/profit for the year | (72,639) | 103,388 | |
| Total recognised income and expense for the period attributable to equity shareholders | (72,879) | 103,484 | |
Please see note 2 for details of the restatement
| 2009 £000 | 2008 £000 (restated) | |||
| Operating (loss)/profit | (33,485) | 121,656 | ||
| Loss/(gain) on the revaluation of investment properties | 52,848 | (92,777) | ||
| Loss on non-current assets | 11,583 | 463 | ||
| Depreciation | 729 | 650 | ||
| Repayment of finance lease capital obligations | 690 | 719 | ||
| Employee share options | 593 | 491 | ||
| (Increase)/decrease in inventories | (7) | 106 | ||
| Increase in receivables | (1,013) | (433) | ||
| Increase/(decrease) in payables | 1,363 | (123) | ||
| Cash generated from operations | 33,301 | 30,752 | ||
| Interest paid | (38,606) | (16,604) | ||
| Interest received | 496 | 240 | ||
| REIT conversion charge | (90) | (11,997) | ||
| Cash flows from operating activities | (4,899) | 2,391 | ||
| Investing activities | ||||
| Sale of non-current assets | 3,825 | 10,500 | ||
| Purchase of non-current assets | (35,780) | (110,886) | ||
| Sale of assets to associate | 22,778 | 20,327 | ||
| Investment in associate | (5,429) | (5,703) | ||
| Cash flows from investing activities | (14,606) | (85,762) | ||
| Financing activities | ||||
| Issue of share capital | 26 | 876 | ||
| Purchase of own shares | - | (1,084) | ||
| Equity dividends paid | (6,309) | (10,860) | ||
| Increase in borrowings - RBS facility | 7,000 | 94,000 | ||
| Repayment of RBS loan | (291,000) | - | ||
| Increase in borrowings - HSH facility | 311,339 | - | ||
| Cash flows from financing activities | 21,056 | 82,932 | ||
| Net increase/(decrease) in cash and cash equivalents | 1,551 | (439) | ||
| Opening cash and cash equivalents | 1,671 | 2,110 | ||
| Closing cash and cash equivalents | 3,222 | 1,671 | ||
Please see note 2 for details of the restatement
| Note | 2009 £000 | 2008 £000 | ||
| Net increase/(decrease) in cash and cash equivalents in the year | 1,551 | (439) | ||
| Cash inflow from increase in debt financing | (27,339) | (94,000) | ||
| Change in net debt resulting from cash flows | (25,788) | (94,439) | ||
| Movement in net debt in the year | (25,788) | (94,439) | ||
| Net debt at the start of the year | (282,329) | (187,890) | ||
| Net debt at the end of the year | 17 | (308,117) | (282,329) | |
Year ended 31 March 2009
| 1. | General information |
| Big Yellow Group PLC is a company incorporated in Great Britain under the Companies Act 1985. 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 Business Review. These financial statements are presented in pounds sterling because that is the currency of the economic environment in which the Group operates. | |
| 2. | BASIS OF PREPARATION |
| The condensed set of financial statements set out above (which was approved by the Board on 15 May 2009) 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 year ended 31 March 2009 for the purpose of Section 240 of the Companies Act 1985 which comply with IFRS, but is extracted from those accounts. The Company's statutory accounts for the year ended 31 March 2009 will be filed with the Registrar of Companies following the Annual General Meeting. The independent auditors' report on those accounts was unqualified and did not contain any statement under Section 237(2) or (3) of the Companies Act 1985. The Company's statutory accounts for the year ended 31 March 2008 have been filed with the Registrar of Companies. The independent auditors' report on those accounts was unqualified and did not contain any statement under Section 237(2) or (3) of the Companies Act 1985. 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 1985 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 as endorsed by the EU relevant to its operations and effective for accounting periods beginning on 1 April 2008. The same accounting policies as applied in the Group's latest statutory accounts have been applied in this condensed set of financial statements, except for a change in accounting policy in respect of IAS 23 "Borrowing Costs". The Group's revised finance costs accounting policy for the year ended 31 March 2009 is as follows: "All borrowing costs are recognised in the income statement in the period in which they are incurred, unless the costs are incurred as part of the development of a qualifying asset, when they will be capitalised. Commencement of capitalisation is the date when the Group incurs expenditure for the qualifying asset, incurs borrowing costs and undertakes activities that are necessary to prepare the assets for their intended use when it is probable that they will result in future economic benefits to the entity and the costs can be measured reliably. In the case of suspension of activities during extended periods, the Group suspends capitalisation. The Group ceases capitalisation of borrowing costs when substantially all of the activities necessary to prepare the asset for use are complete." The prior year comparatives have been restated to reflect this change in accounting policy. The impact on the current and prior periods is shown in the table below: |
| 2009 £000 | 2008 £000 | ||
| Income statement | |||
| Decrease in interest payable | 1,924 | 1,691 | |
| Increase/decrease in revaluation deficit/surplus | (1,810) | (910) | |
| Decrease/increase in (loss)/profit after tax | 114 | 781 | |
| Balance sheet | |||
| Increase in development assets | 895 | 781 | |
| Increase in net assets | 895 | 781 | |
| Impact on earnings per share | |||
| Decrease/increase in (loss)/earnings per share - basic | 0.10p | 0.68p | |
| Decrease/increase in (loss)/earnings per share - diluted | 0.10p | 0.67p | |
Other than as discussed above, the financial statements have been prepared using accounting policies which have been applied consistently throughout the year and the preceding year.
.
| 3. | Revenue |
| Analysis of the Group's operating revenue can be found below and in the Portfolio Summary. |
| 2009 £000 | 2009 £000 | 2008£000 | 2008£000 | |
| Open stores | ||||
| Self storage revenue | 47,206 | 46,486 | ||
| Other storage related revenue | 7,964 | 7,869 | ||
| Ancillary store rental revenue | 96 | 114 | ||
| Revenue from stores closed for refurbishment and transferred to associate | - | 690 | ||
| 55,266 | 55,159 | |||
| Stores under development | ||||
| Non-storage income | 1,636 | 1,473 | ||
| 1,636 | 1,473 | |||
| Fee income | ||||
| Fees earned from Big Yellow Limited Partnership | 1,368 | 138 | ||
| Other management fees earned | 67 | - | ||
| 1,435 | 138 | |||
| Franchise income | ||||
| Franchise fees received | 150 | 100 | ||
| 150 | 100 | |||
| Revenue per income statement | 58,487 | 56,870 | ||
| Investment income (see note 7) | 381 | 289 | ||
| Total revenue per IAS 18 | 58,868 | 57,159 | ||
| Non-storage income derives principally from rental income earned from tenants of properties awaiting development. | |
| 4. | SEGMENTAL INFORMATION |
| Revenue represents amounts derived from the provision of self storage accommodation 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 accommodation and related services. These all arise in the United Kingdom, with the exception of £150,000 of income which arose in the Emirate of Dubai (2008: £100,000 of income which arose in the Kingdom of Bahrain). |
| 5. | (LOSS)/PROFIT FOR THE YEAR |
a) (Loss)/profit for the year has been arrived at after:
| | | 2009 £000 | 2008 (restated) £000 |
| | | | |
| Depreciation of plant, equipment and owner-occupied property | | 729 | 650 |
| Finance lease depreciation | | 690 | 719 |
| Decrease/(increase) in fair value of investment property | | 52,848 | (92,777) |
| Cost of inventories recognised as an expense | | 751 | 921 |
| Employee costs (see note 6) | | 8,333 | 7,562 |
| Operating lease rentals | | 80 | 75 |
| Auditors’ remuneration for audit services (see below) | | 142 | 140 |
| | | | |
b) Analysis of auditors' remuneration:
| | | 2009 £000 | 2008 £000 | |
| | | | | |
| Fees payable to the Company’s auditors for the audit of the Company’s annual accounts | | 135 | 133 | |
| Other services – audit of the Company’s subsidiaries’ annual accounts | | 7 | 7 | |
| | | | | |
| Total audit fees | | 142 | 140 | |
| | | | | |
| Tax services – compliance | | 40 | - | |
| Tax services – advisory | | 78 | 46 | |
| Other services | – establishment of Big Yellow LP | | - | 169 |
| | – independent review of interim report | | 28 | 27 |
| | – other | | - | 3 |
| | | | | |
| Total non-audit fees | | 146 | 245 | |
| | | | | |
| 6. | EMPLOYEE COSTS |
The average monthly number of employees (including Executive Directors) was:
| 2009 Number | 2008 Number | |||
| Sales | 194 | 176 | ||
| Administration | 45 | 42 | ||
| 239 | 218 | |||
| At 31 March 2009 the total number of Group employees was 273 (2008: 226) | ||||
| 2009 £000 | 2008 £000 | |||
| Their aggregate remuneration comprised: | ||||
| Wages and salaries | 6,727 | 6,102 | ||
| Social security costs | 709 | 707 | ||
| Other pension costs | 304 | 262 | ||
| Share-based payments | 593 | 491 | ||
| 8,333 | 7,562 | |||
| 7. | INVESTMENT INCOME |
| 2009 £000 | 2008 £000 | ||
| Interest receivable | 381 | 289 | |
| 381 | 289 | ||
| 8. | FINANCE COSTS |
| 2009 £000 | 2008 £000 (restated) | ||
| Interest on bank borrowings | 18,075 | 15,846 | |
| Capitalised interest | (1,924) | (1,691) | |
| Interest on obligations under finance leases | 1,319 | 1,508 | |
| Change in fair value of interest rate derivatives (see below) | 17,967 | 3,382 | |
| Other interest payable | 3 | 33 | |
| Refinancing costs | 1,347 | - | |
| 36,787 | 19,078 | ||
Included within the £17,967,000 reported above, is £14,892,000 in respect of derivative positions that were closed out in March 2009.
Please see note 2 for details of the restatement. Interest is capitalised based on the prevailing average interest cost to the Group in each month.
| 9. | TAXATION |
| UK current tax | 2009 £000 | 2008 £000 | ||
| Current tax: | ||||
| - Current year | 1 | 302 | ||
| - Adjustment in respect of prior year | (146) | (71) | ||
| - REIT conversion charge | - | 90 | ||
| Deferred tax (see note 19): | ||||
| - Current year | 1,091 | (1,322) | ||
| - Adjustment in respect of prior year | 204 | 154 | ||
| - Adjustment in respect of change in tax rate | - | 77 | ||
| 1,150 | (770) | |||
A reconciliation of the tax charge/(credit) is shown below:
| 2009 £000 | 2008 (restated)£000 | |||
| (Loss)/profit before tax | (71,489) | 102,618 | ||
| Tax (credit)/charge at 28% (2008 - 30%) thereon | (20,017) | 30,785 | ||
| Effects of: | ||||
| Adjustment in respect of prior year | 204 | 83 | ||
| REIT conversion charge | - | 90 | ||
| Revaluation of investment properties post-REIT | 14,798 | (27,833) | ||
| Permanent differences | 4,930 | (204) | ||
| Profits from the tax exempt business | 478 | (3,615) | ||
| Losses utilised in the year | (105) | (153) | ||
| Adjustment in respect of change in tax rate | - | 77 | ||
| Release of deferred tax | 1,091 | - | ||
| Land remediation relief | (146) | - | ||
| Temporary timing differences | (83) | - | ||
| Total tax charge/(credit) | 1,150 | (770) | ||
| Analysis of deferred tax charge/(credit) | 2009 £000 | 2008 £000 | ||
| On losses and interest rate derivatives | 1,295 | (1,091) | ||
| Deferred tax charge/(credit) | 1,295 | (1,091) | ||
In addition to the current year income statement tax charge of £1.2 million, there is a debit to reserves of £0.2 million in respect of the current tax deduction and the deferred tax arising on potential future deductions under Schedule 23, in respect of the exercise of employee share options.
On 15 January 2007, the Group converted to a REIT. As a result the Group no longer pays UK corporation tax on the profits and gains from qualifying rental business in the UK provided that it meets certain conditions. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal. On entering the REIT regime a conversion charge equal to 2% of the aggregate market value of the properties associated with the qualifying rental business was paid. The Group monitors its compliance with the REIT conditions. There have been no breaches of the conditions to date.
| 10. | ADJUSTED PROFIT BEFORE TAX |
| 2009 £000 | 2008 £000 (restated) | ||
| (Loss)/profit before tax | (71,489) | 102,618 | |
| Loss/(gain) on revaluation of investment properties - wholly owned | 52,848 | (92,777) | |
| - in associate | 885 | 187 | |
| Change in fair value of interest rate derivatives - group (see below) | 17,967 | 3,382 | |
| - in associate | 650 | 55 | |
| Loss on non-current assets | 11,583 | 463 | |
| Prior year non-recurring costs | - | 1,078 | |
| Refinancing costs | 1,347 | - | |
| Adjusted profit before tax | 13,791 | 15,006 | |
| Net bank and other interest | 15,773 | 13,899 | |
| Depreciation | 729 | 650 | |
| Adjusted EBITDA | 30,293 | 29,555 | |
Please see note 2 for details of the restatement
Included within the £17,967,000 reported above, is £14,892,000 in respect of derivative positions that were closed out in March 2009.
Adjusted profit before tax which excludes gains on revaluation of investment properties, changes in fair value of interest rate derivatives, net losses on non-current assets and non-recurring items of income and expenditure has been disclosed to give a clearer understanding of the Group's underlying trading performance.
The net losses on non-current assets in 2009 are £11,583,000 comprised of a provision against development property of £11,588,000 and a provision against non-current assets held for sale of £800,000, offset by an £805,000 profit on the disposal of other development assets. (2008: loss of £463,000 comprising a provision against non-current assets held for sale of £1.0 million and a £537,000 profit on disposal of other development sites).
| 11. | DIVIDENDS |
| 2009£000 | 2008£000 | ||
| Amounts recognised as distributions to equity holders in the period: | |||
| Final dividend for the year ended 31 March 2008 of 5.5p (2007: 5.5p) per share. | 6,309 | 6,278 | |
| Interim dividend for the year ended 31 March 2009 of 0p (2007: 4p) per share. | - | 4,582 | |
| 6,309 | 10,860 | ||
| Proposed final dividend for the year ended 31 March 2009 of nil p (2008: 5.5p) per share. | - | 6,309 | |
There is no Property Income Dividend ("PID") payable for the current year. Included in the final dividend paid for the year ended 31 March 2008 is a PID of 0.15 pence per share (2007 final dividend: PID of 0.4 pence per share).
| 12. | (LOSS)/EARNINGS AND NET ASSETS PER SHARE |
| (Loss)/earnings per ordinary share |
| Year ended 31 March 2009 | Year ended 31 March 2008 (restated) | |||||
| (Loss)/ earnings £m | Shares million | Pence per Share | Earnings £m | Shares million | Pence per Share | |
| Basic | (72.64) | 115.55 | (62.86) | 103.39 | 115.03 | 89.88 |
| Adjustments: | ||||||
| Dilutive share options | - | 0.96 | 0.52 | - | 0.87 | (0.68) |
| Diluted | (72.64) | 116.51 | (62.34) | 103.39 | 115.90 | 89.20 |
| Adjustments: | ||||||
| Loss/(gain) on revaluation of investment properties | 52.85 | - | 45.36 | (92.78) | - | (80.05) |
| Change in fair value of interest rate derivatives | 17.97 | - | 15.42 | 3.38 | - | 2.92 |
| Loss on non-current assets | 11.58 | - | 9.94 | 0.46 | - | 0.40 |
| Prior year non-recurring costs | - | - | - | 1.17 | - | 1.01 |
| Refinancing costs | 1.35 | - | 1.16 | - | - | - |
| Share of associate non-recurring costs | 1.54 | - | 1.32 | 0.24 | - | 0.21 |
| Deferred tax | 1.30 | - | 1.11 | (1.09) | - | (0.94) |
| Tax effect of non- recurring items* | (0.09) | - | (0.08) | (1.19) | - | (1.03) |
| Adjusted - diluted | 13.86 | 116.51 | 11.89 | 13.58 | 115.90 | 11.72 |
| Adjusted - basic | 13.86 | 115.55 | 11.99 | 13.58 | 115.03 | 11.81 |
Please see note 2 for details of the restatement.
* This takes into account the tax effect of the change in fair value of derivatives and the refinancing costs.
The calculation of basic (loss)/earnings is based on (loss)/profit after tax for the year. The weighted average number of shares used to calculate diluted (loss)/earnings per share has been adjusted for the conversion of share options.
Adjusted earnings per ordinary share before non-recurring items, losses/(gains) on revaluation of investment properties, the change in fair value of interest rate swaps and associated tax, and deferred tax movements 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.
| Analysis of net asset value | As at 31 March 2009 £'000 | As at 31 March 2008 £'000 |
| | | |
| Basic net asset value | 502,317 | 580,886 |
| Exercise of share options | 2,584 | 2,692 |
| | | |
| Diluted net asset value | 504,901 | 583,578 |
| | | |
| Adjustments: | | |
| Fair value on derivatives | 5,550 | 2,870 |
| Fair value on derivatives - share of associate | 705 | 55 |
| Deferred tax | - | (1,535) |
| | | |
| EPRA net asset value | 511,156 | 584,968 |
| | | |
| Basic net assets per share (pence) | 437.6 | 506.4 |
| Diluted net assets per share (pence) | 424.3 | 492.4 |
| EPRA net assets per share (pence) | 429.5 | 493.6 |
| | | |
| EPRA net asset value (as above) (£'000) | 511,156 | 584,968 |
| Valuation methodology assumption (see note 14) (£'000) | 32,660 | 33,640 |
| | | |
| Adjusted net asset value (£'000) | 543,816 | 618,608 |
| Adjusted net assets per share (pence) | 457.0 | 522.0 |
| | | |
| Shares in issue | 115,592,541 | 115,514,119 |
| Own shares held | (815,000) | (815,000) |
| Basic shares in issue used for calculation | 114,777,541 | 114,699,119 |
| Exercise of share options | 4,221,550 | 3,808,591 |
| Diluted shares used for calculation | 118,999,091 | 118,507,710 |
Please see note 2 for details of the restatement.
Net assets per share are shareholders' funds divided by the number of shares at the period end. The shares currently held in the Group's employee benefits trust and treasury shares (own shares held) are excluded from both net assets and the number of shares.
Adjusted net assets per share include:
| • | the effect of those shares issuable under employee share option schemes; | ||
| • | the effect of alternative valuation methodology assumptions (see note 14); and | ||
| 13. | NON CURRENT ASSETS | |
| a) | Investment property, development property and interests in leasehold property | |
| Investment property (restated) £000 | Development property (restated) £000 | Interests in leasehold property £000 | |
| At 31 March 2007 | 590,060 | 96,393 | 27,038 |
| Additions | 6,952 | 89,041 | - |
| Purchase of freeholds | 8,128 | - | (3,753) |
| Adjustment to present value | - | - | (292) |
| Reclassifications | 65,093 | (65,093) | - |
| Transfer to assets held for sale | - | (8,506) | - |
| Revaluation (see note 14) | 92,777 | - | - |
| Disposal | (12,100) | (7,696) | - |
| Depreciation | - | - | (719) |
| At 31 March 2008 | 750,910 | 104,139 | 22,274 |
| Additions | 8,423 | 22,947 | - |
| Adjustment to present value | - | - | 268 |
| Reclassifications | 28,575 | (28,575) | - |
| Transfer from assets held for sale | - | 9,432 | - |
| Revaluation (see note 14) | (52,848) | - | - |
| Impairment | - | (11,588) | - |
| Disposals | - | (475) | - |
| Disposal to associate | - | (22,262) | |
| Depreciation | - | - | (690) |
| At 31 March 2009 | 735,060 | 73,618 | 21,852 |
Please see note 2 for details of the restatement.
The income from self storage accommodation earned by the Group from its investment property is disclosed in note 3. Direct operating expenses arising on the investment property in the year are disclosed in the Portfolio Summary.
The total investment property balance per IAS 40 amounts to £756,912,000 (2008: £773,189,000), being the sum of investment property and interests in leasehold property shown above.
b) Plant equipment and owner occupied property
| Freehold Property £000 | Leasehold improvements £000 | Plant and machinery £000 | Fixtures, fittings & office equipment £000 | Total £000 | ||
| Cost | ||||||
| At 31 March 2007 | 1,796 | 17 | 563 | 4,044 | 6,420 | |
| Additions | 62 | 27 | 44 | 647 | 780 | |
| Disposal to associate | - | - | - | (78) | (78) | |
| At 31 March 2008 | 1,858 | 44 | 607 | 4,613 | 7,122 | |
| Additions | - | - | 58 | 577 | 635 | |
| Disposals | - | - | (14) | (53) | (67) | |
| At 31 March 2009 | 1,858 | 44 | 651 | 5,137 | 7,690 | |
| Depreciation | ||||||
| At 31 March 2007 | (50) | (17) | (215) | (2,968) | (3,250) | |
| Charge for the year | (40) | (15) | (61) | (534) | (650) | |
| Disposal to associate | - | - | - | 34 | 34 | |
| At 31 March 2008 | (90) | (32) | (276) | (3,468) | (3,866) | |
| Charge for the year | (35) | (2) | (116) | (576) | (729) | |
| At 31 March 2009 | (125) | (34) | (392) | (4,044) | (4,595) | |
| Net book value | ||||||
| At 31 March 2009 | 1,733 | 10 | 259 | 1,093 | 3,095 | |
| At 31 March 2008 | 1,768 | 12 | 331 | 1,145 | 3,256 | |
c) Goodwill
Goodwill relates to the purchase of Big Yellow Self Storage Company Limited in 1999. The asset is tested bi-annually for impairment. The carrying value of £1,433,000 remains unchanged from the prior year as there is considered to be no impairment in the value of the asset.
d) Assets classified as held for sale
The Group has land at one site with a total historic cost of £4 million, which is carried at £3.2 million, after a provision for impairment in the current year of £0.8 million against the site. Land at this site is surplus to requirements and the Group is currently marketing the asset for sale; it is ready for sale and completion is expected within the next 12 months. At 31 March 2008 the assets classified as held for sale were £16.3 million, comprised of cost of £18.0 million and an impairment of £1.7 million. Of this balance £2.9 million has been sold during the year, and £9.4 million was transferred back to development property, as the land no longer met the criteria required to be held for sale.
e) Investment in associate
| The Group has a 33.3% interest in Big Yellow Limited Partnership. This interest is accounted for as an associate, using equity accounting. The Partnership commenced trading on 1 December 2007. | ||
| 31 March 2009 £000 | 31 March 2008 £000 | |
| At the beginning of the year/period | 5,454 | - |
| Subscription for partnership capital and advances | 5,429 | 5,703 |
| Share of results (see below) | (1,598) | (249) |
| 9,285 | 5,454 | |
The figures below show the trading results of Big Yellow Limited Partnership, and the Group's share of the results and the net assets.
| Big Yellow Limited Partnership | Year ended 31 March 2009 £000 | Period ended 31 March 2008 £000 | |
| Income statement (100%) | |||
| Revenue | 892 | 252 | |
| Cost of sales | (843) | (190) | |
| Administrative expenses | (135) | (24) | |
| Operating (loss)/profit | (86) | 38 | |
| Loss on the revaluation of investment properties | (2,656) | (562) | |
| Net interest payable | (103) | (59) | |
| Fair value movement of interest rate derivatives | (1,949) | (165) | |
| Loss before and after tax | (4,794) | (748) | |
| Balance sheet (100%) | |||
| Investment property | 32,650 | 11,830 | |
| Development property (including land held for resale) | 35,016 | 10,909 | |
| Other fixed assets | 208 | 50 | |
| Current assets | 94 | 3,531 | |
| Current liabilities | (4,289) | (1,317) | |
| Non-current liabilities | (35,825) | (8,642) | |
| Net assets (100%) | 27,854 | 16,361 | |
| Group share of (33.3%) | |||
| Operating (loss)/profit | (29) | 13 | |
| Loss on the revaluation of investment properties | (885) | (187) | |
| Net interest payable | (34) | (20) | |
| Fair value movement of interest rate derivatives | (650) | (55) | |
| Loss for the year/period | (1,598) | (249) | |
| Associate net assets | 9,285 | 5,454 | |
| The Partnership has in place a loan of £75 million, secured from a syndicate of banks, involving Royal Bank of Scotland plc, HSBC Bank plc and HSH Nordbank AG. The loan has a five year term and expires in 2013. £18.4 million of the £36.6 million drawn down at 31 March 2009 has been fixed to 30 June 2013 at a weighted average interest cost post margin of 6.57%. The balance of the drawn debt is currently paying one month LIBOR plus applicable margin. The Group has an option at 31 March 2013, and certain dates thereafter provided certain Internal Rate of Return ("IRR") hurdles are met to acquire the assets within the Partnership or the remaining interest in the Partnership not held by the Group. The price payable is based on the market value of the Partnership's assets and liabilities, and is subject to certain promotes, dependent on the IRR achieved. | ||
| 14. | VALUATION OF INVESTMENT PROPERTY | |
| Deemed cost | Revaluation on deemed cost | Valuation | |
| £000 | £000 | £000 | |
| Freehold stores * | |||
| As at 31 March 2008 as previously reported | 269,548 | 422,722 | 692,270 |
| Prior year adjustment (see note 2) | 910 | (910) | - |
| As at 31 March 2008 restated | 270,458 | 421,812 | 692,270 |
| Movement in period | 36,764 | (49,714) | (12,950) |
| As at 31 March 2009 | 307,222 | 372,098 | 679,320 |
| Leasehold stores | |||
| As at 31 March 2008 | 15,162 | 43,478 | 58,640 |
| Movement in period | 234 | (3,134) | (2,900) |
| As at 31 March 2009 | 15,396 | 40,344 | 55,740 |
| All stores | |||
| As at 31 March 2008 | 285,620 | 465,290 | 750,910 |
| Movement in period | 36,998 | (52,848) | (15,850) |
| As at 31 March 2009 | 322,618 | 412,442 | 735,060 |
* Includes one long leasehold property
The freehold and leasehold investment properties have been valued as at 31 March 2009 by external valuers, Cushman & Wakefield LLP, ("C&W"). The valuation has been carried out in accordance with the RICS Valuation Standards, 6th Edition as amended published by The Royal Institution of Chartered Surveyors ("the Red Book"). The valuation of each of the trading properties has been prepared on the basis of Market Value as a fully equipped operational entity, having regard to trading potential.
The valuation has been provided for accounts purposes and as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure requirements of the Red Book, C&W have confirmed that:
| • | The members of the RICS who have been the signatories to the valuations provided to the Group for the same purposes as this valuation have done so since September 2004. | |
| • | C&W have been carrying out this bi-annual valuation for the same purposes as this valuation on behalf of the Group since September 2004. | |
| • | C&W do not provide other significant professional or agency services to the Group. | |
| • | In relation to the preceding financial year of C&W, the proportion of the total fees payable by the Group to the total fee income of the firm is less than 5%. |
Market uncertainty
C&W's valuation report comments on valuation uncertainty resulting from exceptional volatility in the financial markets and a lack of transactions in the property investment market. C&W note that although there were a number of self storage transactions in 2007, the only significant transaction in the past 18 months was the sale of a 51% share in Shurgard Europe which was announced in January and completed on 31 March 2008. C&W observe that in order to provide a rational opinion of value at the present time it is necessary to assume that the property market will continue to trade in an orderly fashion. Accordingly, they have assumed that the self storage sector will continue to perform in a way not greatly different from that being anticipated prior to the "credit crunch", however they have reflected negative sentiment in their capitalisation rates and they have reflected current trading conditions in their cash flow projections for each property. C&W state that there is therefore greater uncertainty attached to their opinion of value than would be anticipated during more normal market conditions.
Valuation methodology
C&W have adopted different approaches for the valuation of the leasehold and freehold assets as follows:
Freehold and long leasehold
The valuation is based on a discounted cash flow of the net operating income over a ten year period and notional sale of the asset at the end of the tenth year.
Assumptions
| A. | Net operating income is based on projected revenue received less projected operating costs together with a central administration charge of 6% of the estimated annual revenue subject to a cap and a collar. The initial net operating income is calculated by estimating the net operating income in the first 12 months following the valuation date. |
| | |
| B. | The net operating income in future years is calculated assuming straight line absorption from day one actual occupancy to an estimated stabilised/mature occupancy level. In the valuation the assumed stabilised occupancy level for the 50 stores (both freeholds and leaseholds) averages 85.04% (2008: 85.80%). The projected revenues and costs have been adjusted for estimated cost inflation and revenue growth. |
| | |
| C. | The capitalisation rates applied to existing and future net cash flow have been estimated by reference to underlying yields for industrial and retail warehouse property, bank base rates, ten year money rates, inflation and the available evidence of transactions in the sector. For the 50 stores, the weighted average net stabilised yield of the net cash flow projection is 8.64% (2008: 7.67%). |
| | |
| D. | The future net cash flow projections (including revenue growth and cost inflation) have been discounted at a rate that reflects the risk associated with each asset. The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 11.41% (2008: 10.36%). |
| | |
| E. | Purchaser's costs of 5.75% (see below) have been assumed initially and sale plus purchaser's costs totalling 6.75% are assumed on the notional sales in the tenth year in relation to the freehold stores. |
Short leasehold
The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the discounted cash flow is extended to the expiry of the lease. The average unexpired term of the Group's seven short leasehold properties is 16.8 years (March 2008: seven short leaseholds is 17.8 years).
Prudent lotting
C&W have assessed the value of each property individually. However, with regard to six recently opened loss making stores (three wholly owned and three in the Partnership) C&W have prepared their valuation on the assumption that were these properties to be brought to the market then they would be lotted or grouped for sale with other more mature assets of a similar type owned by the Company in such a manner as would most likely be adopted in the case of an actual sale of the interests valued. This lotting assumption has been made in order to alleviate the issue of negative short term cashflow. C&W have not assumed that the entire portfolio of properties owned by the Group would be sold as a single lot and the value for the whole portfolio in the context of a sale as a single lot may differ significantly from the aggregate of the individual values for each property in the portfolio, reflecting prudent lotting as described above.
Valuation assumption for purchaser's costs
The Group's investment property assets have been valued for the purposes of the financial statements after deducting notional purchaser's cost of 5.75% of gross value, as if they were sold directly as property assets. The valuation is an asset valuation which is entirely linked to the operating performance of the business. They would have to be sold with the benefit of operational contracts, employment contracts and customer contracts, which would be very difficult to achieve except in a corporate structure.
This approach follows the logic of the valuation methodology in that the valuation is based on a capitalisation of the net operating income after allowing a deduction for operational cost and an allowance for central administration costs. Sale in a corporate structure would result in a reduction in the assumed Stamp Duty Land Tax but an increase in other transaction costs reflecting additional due diligence resulting in a reduced notional purchaser's cost of 2.75% of gross value. All the significant sized transactions that have been concluded in the UK in recent years were completed in a corporate structure. We therefore instructed C&W to carry out a Red Book valuation on the above basis, and this results in a higher property valuation at 31 March 2009 of £767,220,000 (£32,660,000 higher than the value recorded in the financial statements or 27.5 pence per share. This includes £500,000 as the share of uplift within Big Yellow Limited Partnership). We have included this revised valuation in the adjusted diluted net asset calculation (see note 12).
| 15. | TRADE AND OTHER RECEIVABLES |
| 31 March 2009 £000 | 31 March 2008 £000 | |||
| Trade receivables | 1,546 | 1,604 | ||
| Other receivables | 154 | 483 | ||
| Prepayments and accrued income | 6,662 | 5,378 | ||
| 8,362 | 7,465 | |||
Trade receivables are net of a bad debt provision of £21,000 (2008: £4,000). The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Trade receivables
The Group does not typically offer credit terms to its customers and hence the Group is not exposed to significant credit risk. All customers are required to pay in advance of the storage period. A late charge of 10% is applied to a customers' account if they are greater than 10 days overdue in their payment. The Group provides for receivables on a specific basis. There is a right of lien over the customers' goods, so if they have not paid within a certain time frame, we have the right to sell the items they store to recoup the debt owed by the customer. Trade receivables that are overdue are provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience.
| 2009 £000 | 2008 £000 | |||
| 0 - 30 days | 108 | 112 | ||
| 30 - 60 days | 30 | 26 | ||
| 60 +days | 17 | 29 | ||
| Total | 155 | 167 | ||
Movement in the allowance for doubtful debts
| 2009 £000 | 2008 £000 | |||
| Balance at the beginning of the year | 4 | 33 | ||
| Amounts provided in year | 21 | - | ||
| Amounts written off as uncollectible | (4) | (29) | ||
| Balance at the end of the year | 21 | 4 | ||
| 2009 £000 | 2008 £000 | |||
| 0 - 30 days | - | - | ||
| 30 - 60 days | 3 | 2 | ||
| 60 + days | 18 | 2 | ||
| Total | 21 | 4 | ||
| 16. | TRADE AND OTHER PAYABLES |
| 31 March 2009 £000 | 31 March 2008 £000 | ||
| Current | |||
| Trade payables | 7,460 | 8,738 | |
| Other payables | 1,891 | 2,241 | |
| Accruals and deferred income | 7,834 | 9,614 | |
| Amounts owed to associate | - | 77 | |
| VAT repayable under Capital Goods Scheme | 1,228 | 1,228 | |
| 18,413 | 21,898 | ||
| Non current | |||
| VAT repayable under Capital Goods Scheme | 2,661 | 3,889 | |
The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. The Directors consider the carrying amount of trade and other payables and accruals and deferred income approximates fair value. See note 18 for details of VAT repayable under Capital Goods Scheme.
| 17. | FINANCIAL INSTRUMENTS |
Significant accounting policies
A. Balance sheet management
The gearing ratio at the year end is as follows:
| 2009 £000 | 2008 £000 | |
| Debt | (311,339) | (284,000) |
| Cash and cash equivalents | 3,222 | 1,671 |
| Net debt | 308,117 | 282,329 |
| Balance sheet equity | 502,317 | 580,105 |
| Net debt to equity ratio | 61.3% | 48.7% |
B. Debt management
The Group borrows through a senior term loan, secured on its existing store portfolio. Borrowings are arranged to ensure an appropriate maturity profile and to maintain short term liquidity. Funding is arranged in the Group and in Big Yellow Limited Partnership through banks and financial institutions with whom the Group has a strong working relationship.
C. Interest rate risk management
D. Interest rate sensitivity analysis
E. Cash management and liquidity
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 18 is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.
Short term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources, giving due consideration to risk.
F. Foreign currency management
The Group does not have any foreign currency exposure.
G. Credit risk
H. Financial maturity analysis
In respect of interest-bearing financial liabilities, the following table provides a maturity analysis for individual elements.
| 2009 Maturity | |||||
| Total £000 | Less than one year £000 | One to two years £000 | Two to five years £000 | More than five years £000 | |
| Debt | |||||
| Bank loan payable at variable rate | 121,339 | - | - | 121,339 | - |
| Debt fixed by interest rate derivatives | 190,000 | - | - | 190,000 | - |
| Total | 311,339 | - | - | 311,339 | - |
| 2008 Maturity | |||||
| Total £000 | Less than one year £000 | One to two years £000 | Two to five years £000 | More than five years £000 | |
| Debt | |||||
| Bank loan payable at variable rate | 144,000 | - | - | 144,000 | - |
| Debt fixed by interest rate derivatives | 140,000 | - | - | 140,000 | - |
| Total | 284,000 | - | - | 284,000 | - |
| 2009 | Trade and other payables £000 | Interest rate swaps £000 | Borrowings and interest £000 | Finance leases £000 | Total £000 |
| From five to twenty years | - | (2,099) | - | 27,348 | 25,249 |
| From two to five years | 1,610 | (1,696) | 339,654 | 6,029 | 345,597 |
| From one to two years | 1,051 | 2,256 | 11,522 | 2,028 | 16,857 |
| Due after more than one year | 2,661 | (1,539) | 351,176 | 35,405 | 387,703 |
| Due within one year | 18,413 | 4,392 | 11,522 | 2,028 | 36,355 |
| Total | 21,074 | 2,853 | 362,698 | 37,433 | 424,058 |
| 2008 | Trade payables £000 | Interest rate swaps £000 | Borrowings and interest £000 | Finance leases £000 | Total £000 |
| From five to twenty years | 15 | - | - | 29,116 | 29,131 |
| From two to five years | 2,645 | 1,306 | 284,193 | 6,007 | 294,151 |
| From one to two years | 1,227 | 1,146 | 17,608 | 2,002 | 21,983 |
| Due after more than one year | 3,887 | 2,452 | 301,801 | 37,125 | 345,265 |
| Due within one year | 12,207 | (93) | 17,608 | 2,002 | 31,724 |
| Total | 16,094 | 2,359 | 319,409 | 39,127 | 376,989 |
| 2009 | Borrowings £000 | Interest £000 | Unamortised Borrowing costs £000 | Borrowings and interest £000 | |
| From two to five years | 308,672 | 28,315 | 2,667 | 339,654 | |
| From one to two years | - | 11,522 | - | 11,522 | |
| Due after more than one year | 308,672 | 39,837 | 2,667 | 351,176 | |
| Due within one year | - | 11,522 | - | 11,522 | |
| Total | 308,672 | 51,359 | 2,667 | 362,698 | |
| 2008 | Borrowings £000 | Interest £000 | Unamortised Borrowing costs £000 | Borrowings and interest £000 | |
| From two to five years | 282,897 | 193 | 1,103 | 284,193 | |
| From one to two years | - | 17,608 | - | 17,608 | |
| Due after more than one year | 282,897 | 17,801 | 1,103 | 301,801 | |
| Due within one year | - | 17,608 | - | 17,608 | |
| Total | 282,897 | 35,409 | 1,103 | 319,409 | |
| 18. | BANK BORROWINGS |
| Secured borrowings at amortised cost | 31 March 2009 £000 | 31 March 2008 £000 | ||
| Bank borrowings | 311,339 | 284,000 | ||
| Unamortised loan arrangement costs | (2,667) | (1,103) | ||
| 308,672 | 282,897 | |||
During the year, the Group completed a refinancing of its core debt facilities, replacing the existing £325 million loan provided by a syndicate led by Royal Bank of Scotland plc, with a new £325 million senior debt facility provided by HSH Nordbank AG. The loan is due to expire on 15 September 2013.
The facility is secured on a first charge of 47 of the Group's properties and is subject to certain covenants. The facility is divided into two tranches, Tranche A, up to a maximum of £50 million is used to finance non-stabilised properties within the Group and carries a margin of 150 bps. Tranche B is used to finance stabilised Group properties, and carries a margin of between 112.5 bps and 150 bps dependent on the Tranche B income cover. The Group is currently paying a margin of 112.5 bps on this Tranche. As the properties within Tranche A stabilise, they can be transferred to Tranche B, reducing the margin payable.
The facility's principal covenant is an income cover covenant that requires Tranche B EBITDA to be greater than 1.25 times the interest cost in Tranche B. The Group is also required to retain consolidated net assets of £350 million; and a net debt to net assets ratio of less than 1. There is no loan to value covenant.
The weighted average interest rate paid on the bank borrowings during the year was 5.9% (2008: 6.3%).
The Group has £13,661,000 in undrawn committed borrowing facilities at 31 March 2009 which expire between four and five years (2008: £41,000,000 expiring between one and two years).
Interest rate profile of financial liabilities
| Total £000 | Floating rate £000 | Fixed rate £000 | Weighted average interest rate | Period for which the rate is fixed | Weighted average period until maturity | |
| At 31 March 2009 | ||||||
| Gross financial liabilities | 311,339 | 121,339 | 190,000 | 3.7% | 5.5 years | 5.2 years |
| At 31 March 2008 | ||||||
| Gross financial liabilities | 284,000 | 144,000 | 140,000 | 6.2% | 4.5 years | 3.2 years |
The floating rate at 31 March 2009 was paying a weighted average margin of 1.135% above one month LIBOR, the fixed rate debt was paying a weighted average margin of 1.20%. All monetary liabilities, including short term receivables and payables are denominated in sterling. The weighted average interest rate includes the effect of the Group's interest rate derivatives.
The Directors estimate the fair value of the Group's VAT payable under capital goods scheme as follows:
| 2009 | 2008 | |||
| Carrying amount £000 | Estimated fair value £000 | Carrying amount £000 | Estimated fair value £000 | |
| VAT payable under capital goods scheme | 3,889 | 3,578 | 5,117 | 4,331 |
The fair values have been calculated by discounting expected cash flows at interest rates prevailing at the year end.
Narrative disclosures on the Group's policy for financial instruments are included within the Business Review and note 17.
| 19. | DEFERRED TAX |
The movement and major deferred tax items are set out below:
| Deduction for share options | Other | Total | |||
| £000 | £000 | £000 | |||
| At 31 March 2007 | (650) | - | (650) | ||
| Recognised in income | - | (1,091) | (1,091) | ||
| Recognised in equity | 206 | - | 206 | ||
| At 31 March 2008 | (444) | (1,091) | (1,535) | ||
| Recognised in income | - | 1,091 | 1,091 | ||
| Recognised in equity | 444 | - | 444 | ||
| At 31 March 2009 | - | - | - | ||
Other deferred tax relates to an asset in relation to the fair value of derivatives of £nil (2008: £804,000) and losses carried forward within the residual business of £nil (2008: £287,000).
Temporary differences arising in connection with interests in associate are insignificant.
| 20. | obligations under finance leases |
| Minimum lease payments | Present value minimum of lease payments | |||
| 2009 £000 | 2008 £000 | 2009£000 | 2008 £000 | |
| Amounts payable under finance leases: | ||||
| Within one year | 2,028 | 2,002 | 1,984 | 1,958 |
| Within two to five years inclusive | 8,057 | 8,009 | 6,805 | 6,753 |
| Greater than five years | 27,348 | 29,116 | 13,063 | 13,563 |
| 37,433 | 39,127 | 21,852 | 22,274 | |
| Less: Future finance charges | (15,581) | (16,853) | ||
| Present value of lease obligations | 21,852 | 22,274 | ||
All lease obligations are denominated in sterling.
The carrying amount of the Group's lease obligations approximates their fair value .
| 21. | SHARE CAPITAL |
| | Authorised | Called up, allotted and fully paid | ||
| | 2009 £000 | 2008 £000 | 2009 £000 | 2008 £000 |
| | | | | |
| Ordinary shares at 10 pence each | 20,000 | 20,000 | 11,559 | 11,551 |
| | | | | |
| | | | | No. |
| Movement in issued share capital | | | | |
| Number of shares at 1 April 2007 | | | | 114,559,534 |
| Exercise of share options – Share option scheme | | | | 954,585 |
| | | | | |
| Number of shares at 31 March 2008 | | | | 115,514,119 |
| Exercise of share options – Share option schemes | | | | 78,422 |
| | | | | |
| Number of shares at 31 March 2009 | | | | 115,592,541 |
| | | | | |
The Company has one class of ordinary shares which carry no right to fixed income.
| Date option granted | Option price per ordinary share | Date first exercisable | Date on which the exercise period expires | Number of ordinary shares 2009 | Number of ordinary shares 2008 |
| | | | | | |
| 5 May 2000 | 100p | 5 May 2003 | 4 May 2010 | 278,400 | 278,400 |
| 30 November 2000 | 137.5p | 30 November 2003 | 29 November 2010 | 2,500 | 2,500 |
| 1 June 2001 | 125.5p | 1 June 2004 | 31 May 2011 | 165,000 | 165,000 |
| 4 June 2001 | 131.5p | 4 June 2004 | 4 June 2011 | 521,000 | 521,000 |
| 8 November 2001 | 98p | 8 November 2004 | 7 November 2011 | 122,192 | 125,492 |
| 15 May 2002 | 102p | 15 May 2005 | 14 May 2012 | 511,789 | 511,789 |
| 16 December 2002 | 81.5p | 16 December 2005 | 15 December 2012 | 355,301 | 356,381 |
| 2 July 2003 | 82.5p | 2 July 2006 | 1 July 2013 | 100,612 | 110,512 |
| 11 November 2003 | 96p | 11 November 2006 | 10 November 2013 | 16,000 | 20,000 |
| 27 September 2004 | nil p** | 27 September 2007 | 26 September 2014 | 118,000 | 138,000 |
| 6 June 2005 | nil p** | 6 June 2008 | 5 June 2015 | 438,332 | 443,332 |
| 21 July 2005 | 156p* | 21 July 2008 | 20 January 2009 | - | 16,326 |
| 21 December 2005 | 225p* | 21 December 2008 | 20 June 2009 | 831 | 12,796 |
| 9 June 2006 | nil p** | 9 June 2009 | 8 June 2016 | 460,832 | 470,832 |
| 18 August 2006 | 347p* | 18 August 2009 | 17 February 2010 | 6,407 | 6,191 |
| 12 March 2007 | 554p* | 12 March 2010 | 11 September 2011 | - | 317 |
| 13 July 2007 | nil p** | 13 July 2010 | 12 July 2017 | 495,750 | 507,750 |
| 30 August 2007 | 409p* | 30 August 2010 | 28 February 2011 | 3,049 | 7,066 |
| 6 March 2008 | 310p* | 6 March 2011 | 5 September 2011 | 13,371 | 115,224 |
| 9 July 2008 | Nil p** | 9 July 2011 | 8 July 2018 | 373,000 | - |
| 22 August 2008 | 249p* | 22 August 2011 | 21 February 2012 | 17,440 | - |
| 24 February 2009 | 141p* | 24 February 2012 | 23 August 2012 | 262,842 | - |
| | | | | | |
| | | | | 4,262,648 | 3,808,908 |
| | | | | | |
* SAYE (see note 23)
** LTIP (see note 23)
Own shares
| £000 | ||
| Balance at 1 April 2008 and 31 March 2009 | 1,896 | |
The own shares reserve represents the cost of shares in Big Yellow Group PLC purchased in the market and held by the Big Yellow Group PLC Employee Benefit Trust to satisfy options under the Group's share options schemes. 715,000 shares are held in the Employee Benefit Trust (2008: 715,000) and 100,000 are held in Treasury (2008: 100,000).
| 22. | MOVEMENTS IN EQUITY |
| Group | Share capital £000 | Share premium account £000 | Capital redemption reserve £000 | Retained earnings £000 | Own shares £000 | Total £000 |
|
| ||||||
| At 31 March 2007 | 11,456 | 40,864 | 1,653 | 434,818 | (812) | 487,979 |
| Profit for the year | - | - | - | 102,607 | - | 102,607 |
| Taxation | - | - | - | 96 | - | 96 |
| Dividends | - | - | - | (10,860) | - | (10,860) |
| Purchase of own shares | - | - | - | - | (1,084) | (1,084) |
| Issue of shares | 95 | 781 | - | - | - | 876 |
| Share options | - | - | - | 491 | - | 491 |
| At 31 March 2008 | 11,551 | 41,645 | 1,653 | 527,152 | (1,896) | 580,105 |
| Restatement (see note 2) | - | - | - | 781 | - | 781 |
| At 31 March 2008 (restated) | 11,551 | 41,645 | 1,653 | 527,933 | (1,896) | 580,886 |
| Loss for the year | - | - | - | (72,639) | - | (72,639) |
| Taxation | - | - | - | (240) | - | (240) |
| Dividends | - | - | - | (6,309) | - | (6,309) |
| Issue of shares | 8 | 18 | - | - | - | 26 |
| Share options | - | - | - | 593 | - | 593 |
|
| ||||||
| At 31 March 2009 | 11,559 | 41,663 | 1,653 | 449,338 | (1,896) | 502,317 |
The capital redemption reserve arose on the buy back of the Company's shares in the years ended 31 March 2003 and 31 March 2004.
The own shares balance is amounts held by the Employee Benefit Trust and in Treasury (see note 21).
| 23. | SHARE based payments |
The Company has three equity share-based payment arrangements, namely approved and unapproved share option schemes, an LTIP scheme, and an Employee Share Save Scheme ("SAYE"). The Group recognised a total expense in the year related to equity-settled share-based payment transactions since 7 November 2002 of £593,000 (2008: £491,000).
Equity-settled share option plans
The Group granted options to employees under Approved and Unapproved Inland Revenue Share option schemes between 16 November 1999 and 11 November 2003. The Group's schemes provided for a grant price equal to the average quoted market price of the Group shares on the date of grant. The vesting period is three to ten years. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Furthermore, options are forfeited if the employee leaves the Group before the options vest.
Since 3 September 2004 the Group has operated an Employee Share Save Scheme ("SAYE") which allows any employee who has more than six months service to purchase shares at a 20% discount to the average quoted market price of the Group shares at the date of grant. The associated savings contracts are 3 years at which point the employee can exercise their option to purchase the shares or take the amount saved, including interest, in cash. The scheme is administered by Yorkshire Building Society.
On 27 September 2004, 6 June 2005, 9 June 2006, 13 July 2007 and 9 July 2008 the Group awarded nil-paid options to senior management under the Group's Long Term Incentive Plan ("LTIP"). The awards are conditional on the achievement of challenging performance targets as described in the remuneration report. The awards granted on 27 September 2004 and 6 June 2005 vested in full.
The weighted average share price at the date of exercise for options exercised in the year was 297 pence (2008: 502 pence).
| Share option scheme "ESO" | 2009 No. of Options | 2009 Weighted average exercise price (in £) | 2008 No. of Options | 2008 weighted average exercise price (in £) |
| Outstanding at beginning of year | 2,091,075 | 1.06 | 2,880,867 | 1.02 |
| Exercised during the year | (18,280) | 0.88 | (789,792) | 0.88 |
| Outstanding at the end of the year | 2,072,795 | 1.06 | 2,091,075 | 1.06 |
| Exercisable at the end of the year | 2,072,795 | 1.06 | 2,091,075 | 1.06 |
Options outstanding at 31 March 2009 had a weighted average contractual life of 2.7 (2008: 3.7) years.
| LTIP scheme | 2009 No. of Options | 2008 No. of Options |
| Outstanding at beginning of year | 1,559,914 | 1,052,164 |
| Granted during the year | 373,000 | 507,750 |
| Forfeited during the year | (9,277) | - |
| Exercised during the year | (37,723) | - |
| Outstanding at the end of the year | 1,885,914 | 1,559,914 |
| Exercisable at the end of the year | 556,332 | 138,000 |
The weighted average fair value of options granted during the period was £298,813 (2008: £882,265).
Options outstanding at 31 March 2009 had a weighted average contractual life of 7.5 years (2008: 8.1 years).
| Employee Share Save Scheme ("SAYE"). | 2009 No. of Options | 2009 Weighted average exercise price (in £) | 2008 No of Options | 2008 Weighted average exercise price (in £) |
| Outstanding at beginning of year | 157,919 | 2.94 | 234,858 | 1.65 |
| Granted during the year | 387,943 | 1.76 | 187,976 | 3.31 |
| Forfeited during the year | (219,504) | 2.82 | (100,122) | 4.16 |
| Exercised during the year | (22,419) | 1.56 | (164,793) | 1.13 |
| Outstanding at the end of the year | 303,939 | 1.62 | 157,919 | 2.94 |
| Exercisable at the end of the year | 831 | 2.25 | - | - |
Options outstanding at 31 March 2009 had a weighted average contractual life of 2.3 years (2008: 2.9 years).
The inputs into the Black-Scholes model are as follows:
| ESO | LTIP | SAYE | |
| Expected volatility | 24% | 29% | 34% |
| Expected life | 3 | 3 | 3 |
| Risk-free rate | 4.7% | 4.7% | 4.4% |
| Expected dividends | 3.2% | 3.8% | 4.1% |
Expected volatility was determined by calculating the historical volatility of the Group's share price over the year prior to grant.
| 24. | capital commitments |
| Amounts contracted but not provided in respect of the Group's properties as at 31 March 2009 were £6.6 million (2008: £20.7 million). | |
| 25. | Events after the balance sheet date |
| There are no reportable events after the balance sheet date. | |
| 26. | Related party transactions |
| Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions with Big Yellow Limited Partnership As described in note 13, the Group has a 33% interest in Big Yellow Limited Partnership ("the Partnership"), and entered into transactions with the Partnership during the year on normal commercial terms. During the year, the Group sold property with a book value of £22.3 million to the Partnership, a related party of the Group, for a total profit of £0.4m (2008, the Group sold property with a book value of £19.8 million to the Partnership, for a total profit of £0.5m). The Group earned fees from the Partnership of £1,368,000 (2008: £138,000). At 31 March 2009, the Group was owed £14,000 by the Partnership (2008: Group owed £77,000 to the Partnership). No other related party transactions took place during the years ended 31 March 2009 and 31 March 2008. | |
IFRS Five Year Summary
| 2009 £000 | 2008 (restated) £000 | 2007 £000 | 2006 £000 | 2005£000 | |
| Results | |||||
| Revenue | 58,487 | 56,870 | 51,248 | 41,889 | 33,375 |
| Operating profit before gains and losses on property assets | 30,278 | 29,342 | 27,067 | 21,645 | 15,030 |
| (Loss)/profit before taxation | (71,489) | 102,618 | 152,837 | 118,547 | 42,836 |
| Adjusted profit before taxation | 13,792 | 15,006 | 14,233 | 12,601 | 7,791 |
| Declared total dividend per share | 0p | 9.5p | 9.0p | 5.0p | 2.0p |
| Key statistics | |||||
| Number of stores open* | 54 | 48 | 43 | 37 | 32 |
| Square footage occupied* | 1,772,000 | 1,850,000 | 1,835,000 | 1,672,000 | 1,470,000 |
| Number of customers* | 28,500 | 30,500 | 30,100 | 27,800 | 24,600 |
| Average number of employees during the year | 239 | 218 | 191 | 178 | 160 |
* - includes stores trading in Big Yellow Limited Partnership