Big Yellow Regulatory News (BYG)

19 November 2013

Results for the Six Months and Second Quarter ended 30 September 2013

VAT IMPACT OFFSET BY UNDERLYING GROWTH

Highlights

· Revenue performance in line with guidance following introduction of VAT on 1 October 2012

· Net rent per sq ft increased by 2.9% from 1 April 2013

· Adjusted profit before tax up 2% to £14.2 million

· 60% increase in interim dividend, in line with new dividend policy to distribute 80% of full year adjusted earnings per share

· Reduction of Group net debt by £1.8 million to £228.6 million

· Prominent 70,000 sq ft MLA Gypsy Corner store on A40 in West London is under construction and expected to open 1 April 2014 on time and on budget

· Seasonal loss of occupancy in seven weeks since period end significantly down on last year at 32,000 sq ft (2012: loss of 91,000 sq ft)

· Revenue in October 2013 up 5.1% from October 2012

1 see note 6; 2 see note 8; 3 see note 14; 4 see Business and Financial Review; 5 see Portfolio Summary

Commenting, Nicholas Vetch, Executive Chairman, said:

"We have delivered a good performance with occupancy growth across the wholly owned portfolio in line with the same period last year. This occupancy growth, combined with an improvement in yield, has offset the adverse impact, particularly within the established portfolio, from the introduction of VAT in the second half of last year. We achieved like for like revenue growth of 5.1% in October (the first month following the anniversary of the VAT introduction), demonstrating that the VAT impact is firmly in the past and we are now returning to more normal growth.

In our final statement earlier this year we expressed some cautious grounds for optimism which currently looks justified, given the improving economic picture and current trading. We have significant belief in London reinforcing its position as one of the world's leading cities, if not the pre-eminent one. The weighting of our portfolio to the Greater London area will benefit from the capital's growth.

We believe that the Company will continue to deliver attractive sustainable returns, on a relatively low risk and limited volatility basis on a long term view. The total returns set out in the statement well illustrate the power of compounding.

Our confidence in this outlook is reinforced by the power of our brand, our market leading operating platform and critically in our exposure to London and the South East."

- Ends -

For further information, please contact:

Big Yellow Group PLC 01276 477811

Nicholas Vetch, Executive Chairman

James Gibson, Chief Executive Officer

John Trotman, Chief Financial Officer

Pendomer Communications 020 3603 5220 

Ben Foster Rosie Oddy

Notes to Editors

Big Yellow Group PLC is the best known and one of the most dynamic self storage groups in the UK. It was founded in September 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 June 2002. 

Big Yellow has expanded rapidly and now operates from 66 stores, 58 in London and the South, two in Sheffield, and one each in Birmingham, Edinburgh, Leeds, Liverpool, Nottingham and Stockport. We own a further four development sites, of which three have planning. Of the 70 total stores and sites, 59 are held freehold and four long leasehold (together representing approximately 94% by value of the total property assets); seven stores are held short leasehold. All the stores have distinct yellow branding, with the majority being within the M25 or in strong urban conurbations. The Group currently operates from a platform of 4.2 million sq ft. When fully built out the portfolio will provide approximately 4.4 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, accessible, main road locations. Our focus on the location and visibility of our buildings, coupled with our excellent customer service and our market leading online platform, has created the most recognised brand name in the UK self storage industry.

Chairman's Statement

Big Yellow Group PLC the UK's brand leader in self storage, is pleased to announce its results for the six months and the quarter ended 30 September 2013.

We have delivered a good performance with occupancy growth across the wholly owned portfolio in line with the same period last year. This occupancy growth, combined with an improvement in yield, has offset the adverse impact, particularly within the established portfolio, from the introduction of VAT in the second half of last year. We achieved like for like revenue growth of 5.1% in October (the first month following the anniversary of the VAT introduction), demonstrating that the VAT impact is firmly in the past and we are now returning to more normal growth.

Occupancy growth over the six month period across all our stores was 232,000 sq ft (2012: 243,000 sq ft). Wholly owned store occupancy growth in the six month period was 188,000 sq ft (2012: 177,000 sq ft). The 32 established store portfolio increased in occupancy from 72.8% at the end of March 2013 to 77.1% in September 2013. The 22 lease-up stores grew in occupancy from 54.3% in March 2013 to 61.9% in September 2013. Overall like-for-like closing occupancy for the Group is 70.5% compared to 64.8% at 31 March 2013.

The 12 stores in Big Yellow Limited Partnership increased in occupancy to 60.5% (March 2013: 54.6%), a growth of 44,000 sq ft from March 2013.

Financial results

Store revenue for the period was £35.1 million, down 1% from £35.5 million in the comparable period last year, and up 7% compared to the previous half year period (six months to 31 March 2013: £32.8 million). This is in line with the guidance given at our full year results, and is the result of the reduction in the average rental yield following the introduction of VAT offset in part by growth in occupancy.

Total store revenue for the second quarter decreased by 1% to £18.4 million from £18.6 million for the same quarter last year and was up 10% from the quarter to June 2013 (£16.7 million).

Store EBITDA was £22.9 million, down 1% from £23.2 million for the same period last year. The overall store margin was 65.2%, down slightly from 65.4% for the same period last year.

The Group made an adjusted profit before tax in the period of £14.2 million, up 2% from £13.9 million for the same period last year (see note 6), and up 22% from the six months to 31 March 2013 (£11.6 million). Diluted EPRA earnings per share were 10.1 pence (2012: 10.7 pence), a decrease of 6%, and an increase of 17% from the six months to 31 March 2013 (8.6 pence). Adjusted net assets per share are 436.3 pence, an increase of 4% from 419.2 pence at 31 March 2013.

Leverage study of optimal capital structure

The Company has carried out a study of debt leverage and its impact on the long term share performance of businesses, with the help of an external consultant. The study covered 40 publically quoted companies in the REIT space together with other consumer facing businesses for the period from 2000 to 2013.

The main objective was to see if the results supported our long held view that lower geared businesses outperform in the long term.

Evidently different business models with varying operating margins might have, at the margin, different optimum levels of debt. However a consistent theme emerged that excessive levels of debt have been universally value destructive. In a narrow window between 2003 and 2006 higher levels of debt would have delivered higher returns, but even during that period optimum levels of debt were lower than might be expected, and would have required pinpoint accuracy in timing.

Transmission of this value destruction did result in significant underperformance and marked increases in share price volatility.

Optimum levels of gearing (expressed as net debt to gross asset value) ranged from 10% in moments of extreme fear (2008 to 2009) to 43% in periods of exuberance (2003 to 2006). Using 2009 to 2013 as a base, being more representative of the long term norm, albeit on a conservative basis, the optimum level of debt was found to be 23%.

We have previously said that we believe that the Group would benefit from lower leverage and the Board has a long term target of Group income cover of over 5 times. The relationship of this metric to capital leverage is not perfectly correlated but making long term assumptions on values and interest is reasonably correlated. We believe that the optimum level of debt for Big Yellow is 20% to 30% with a target of mid 20s from the current level of 29%. Given the subjective nature of valuation we prefer to express this target as net operating income over debt costs.

Shareholder returns since flotation and dividends

In the thirteen years since flotation in May 2000, Big Yellow has delivered a Total Shareholder Return ("TSR"), including dividends reinvested, of 13.9% per annum, in aggregate 479.5% at the closing price of 470p on 14 November 2013. This compares to 6.4% per annum for the FTSE Real Estate Index and 4.7% per annum for the FTSE All Share index over the same period.

At the time of the placing in January of this year, the Board committed to pay a dividend of 80% of full year adjusted earnings per share from this financial year. The interim dividend declared is 8 pence per share. This has all been declared as Property Income Dividend ("PID"). The interim dividend declared represents an increase of 60% from 5 pence per share for the same period last year.

Outlook

In our final statement earlier this year we expressed some cautious grounds for optimism which currently looks justified, given the improving economic picture and current trading. We have significant belief in London reinforcing its position as one of the world's leading cities, if not the pre-eminent one. The weighting of our portfolio to the Greater London area will benefit from the capital's growth.

We believe that the Company will continue to deliver attractive sustainable returns, on a relatively low risk and limited volatility basis on a long term view. The total returns set out above well illustrate the power of compounding.

Our confidence in this outlook is reinforced by the power of our brand, our market leading operating platform and critically in our exposure to London and the South East.

Nicholas Vetch

Executive Chairman

18 November 2013

Business and Financial Review

Trading performance

Since we reported in May, the macroeconomic performance of the UK and in particular London and the South East has beaten expectations, with downbeat forecasts earlier in the year now being revised upwards. Self storage reacts to economic and housing activity, which are linked, and both of which have been improving gradually over the summer. This improved sentiment will incrementally feed through to our business, resulting in growing occupancy, earnings and cash flow. This is against a backdrop of limited new supply with very few new store openings committed in our core area of operation. Additionally, awareness of self storage continues to grow with the majority of our new customers using self storage for the first time.

Our third quarter is historically the weakest trading quarter and in recent years we have typically lost two to three percentage points of occupancy before a return to growth in the new year. Since the end of September we have seen an improvement, with 32,000 sq ft (0.9% of maximum lettable area "MLA") lost since the end of September, compared to 91,000 sq ft (2.6% of MLA) lost at this stage last year. The move outs have been in line with our expectations following the strong summer trading. This improved performance is largely driven by an increase in move-ins of 14% compared to the same period last year, coupled with the impact of VAT in the prior year.

Store occupancy

The level of enquiries across all our stores increased by 10% compared to the same six months last year. Conversion rates of these enquiries have remained strong, meaning total move-ins, including the stores in Big Yellow Limited Partnership, were up 7.5% on the same period last year. We are experiencing a higher level of churn in the business, with move-outs increasing by a similar amount when compared to the same period last year.

We achieved occupancy growth of 232,000 sq ft across all stores in the period (2012: occupancy growth of 243,000 sq ft).

At the period end, wholly owned store occupied space was 2,411,000 sq ft, up 4.4% from 2,310,000 sq ft at the same time last year and up 188,000 sq ft from 31 March 2013. We saw encouraging growth from domestic, student and business customers during the six month period, with the overall split by space being 68% domestic and 32% business at 30 September 2013. The improving domestic and student occupancy has slightly changed the mix from the same time last year, which was 67% domestic and 33% business.

The 32 established stores are those that had reached stabilisation as a portfolio in 2007 prior to the economic downturn; 18 of these stores are in London, with the other 14 in large metropolitan cities in the South. The occupancy of the stores in the established portfolio was impacted by the introduction of VAT in the second half of last year, with occupancy falling from 77.0% at September 2012 to 72.8% at 31 March 2013. This portfolio of stores (with an average net lettable area of 60,300 sq ft) recovered to 77.1% occupied at the end of the period. This occupancy represents an average of 46,500 sq ft occupied per store.

The closing occupancy of the 18 established stores inside London was 77.9% (an average of 50,400 sq ft occupied per store); for the 14 established stores outside London, closing occupancy was 75.3% (an average of 41,400 sq ft occupied per store).

Pricing and rental yield

Our core proposition remains a high quality product, competitively priced, with excellent customer service, providing value for money to our customers. Our stores offer a headline opening promotion of 50% off for up to the first 8 weeks, and we continue to manage pricing dynamically, taking account of customer demand and local competition.

Net rent at 30 September 2013 was up 2.9% from 31 March 2013. Our key aim over the next two to three years is to drive occupancy in the stores. As the stores lease-up, our pricing model reduces the level of promotional discounts offered in individual stores. This squeezing out of promotions leads to an increase in net achieved rents. The table below illustrates this, showing the growth in net rent per sq ft for the portfolio over the six month period.

Security of income

Our principal financial aims remain growing cash flow, earnings and dividend. We believe that self storage income is essentially evergreen income with highly defensive characteristics driven from buildings with very low obsolescence risk. Although its form of contract with its customers is in theory as short as a week, it does not need to rely on contract for its income security. At 30 September 2013 the average length of stay for existing customers was 20 months. For all customers, including those who have moved out of the business, the average length of stay has remained at 8 months. In our established store portfolio, 34% of our customers by occupied space have been storing with us for over three years, and a further 14% of customers in these stores have been in the business for between one and three years.

The location of our stores, brand, security, and most importantly customer service, together with the diversity of our 43,000 customers, will serve better than any contract.

Revenue

Revenue for the established stores decreased 5.8% compared to the same period last year, but was up 4.3% compared to the six months to 31 March 2013. The fall compared to the same period last year was due to the decrease in average occupancy and the 5.8% decrease in the average net rent achieved over the period, offset by an increase in other storage related income. The revenue for the 32 established stores in October 2013 was up 0.3% on October 2012. EBITDA margins for the 32 established stores decreased from 67.4% for the period to 30 September 2012 to 66.0% for the current period.

The lease-up stores have grown in occupancy by 108,000 sq ft from the same time last year, and by 113,000 sq in the six months from 31 March 2013. Revenue growth in the lease-up portfolio was 7.2% compared to the same period last year and up 11.6% from the six months to 31 March 2013. The revenue for the 22 lease-up stores in October 2013 was up 14% on October 2012. The EBITDA margin on the lease-up stores has increased from 61.7% for the period to 30 September 2012 to 63.7% for the current period. The overall store EBITDA margin decreased from 65.4% to 65.2%.

Like-for-like revenue per available foot ("REVPAF") was £20.39 for the six months, a decrease of 1.9% from £20.78 for the six months to 30 September 2012 and an increase of 6.4% from £19.17 for the six months ended 31 March 2013.

We continue to improve sales of insurance, packing materials and other ancillary items, with revenue from these areas growing by 3.4% to £5.5 million in the period (2012: £5.3 million).

Operating costs

Store operating costs have reduced by £0.2 million from the prior period, due to the increased recoverability of VAT compared to the prior year, in part offset by an increase in operating costs, notably property rates.

Total cost of sales in the income statement are in line with the prior period, with the reduction in store costs offset by the prior period containing a write back of an accrual for a rental uplift at one of our leasehold stores, which was settled lower than budgeted.

Administrative expenses in the income statement have decreased by £0.3 million. The prior year contained a couple of one-off items including the costs incurred in challenging and implementing the imposition of VAT on self storage, which was adjusted from the Group's recurring profit for that six month period. The administrative expenses cost in the current period has also reduced due to the increased recoverability of input VAT.

Interest

Following the placing in January of this year and land sales in the last financial year, we repaid £45 million of variable bank debt, at a lower all in cost of 2.9%. This coupled with the refinancing during the prior year at higher margins, has led to an increase in the Group's average cost of borrowing during the period to 30 September 2013 of 4.5%, compared to 3.8% for the six months to 30 September 2012. The loan interest expense during the period was £0.1 million lower than the same period last year, due to the lower average debt levels in part offset by the higher average cost of debt. Capitalised interest in the period was £0.2 million, in line with the same period last year, as a result of capital expenditure on Gypsy Corner.

Results

The 2% increase in adjusted profit before tax to £14.2 million is reconciled in the table below:

The share of the Partnership's recurring profit was in line with the same period last year.

The table below reconciles the statutory profit before tax to the adjusted profit before tax:

Diluted EPRA earnings per share was 10.1 pence (2012: 10.7 pence), a decrease of 6% from the same period last year, and an increase of 17% from the six months to 31 March 2013 (8.6 pence).

Cash flow growth

Cash flows from operating activities (after net finance costs) have decreased by 6% to £14.0 million for the period (2012: £14.9 million), largely due to working capital movements. These operating cash flows are after the ongoing maintenance costs of the stores, which are on average £35,000 per store per annum.

The capital expenditure in the period principally relates to the construction costs of our Gypsy Corner store.

The non-recurring finance costs incurred in the prior period relate to the cancellation of interest rate swaps (£9.2 million) and arrangement fees and costs incurred in completing the loan from Aviva (£1.5 million).

Taxation

The Group is a Real Estate Investment Trust ("REIT"). We benefit from a zero tax rate on our qualifying self storage earnings. We only pay corporation tax on the profits attributable to our residual business, comprising primarily of the sale of packing materials and insurance, and management fees earned by the Group.

There is a nil tax charge in the non-exempt residual business for the period ended 30 September 2013 (2012: £nil), due to tax relief in relation to the restructuring of interest rate derivatives in prior periods and the utilisation of other brought forward tax losses.

Dividends

REIT regulatory requirements determine the level of Property Income Dividend ("PID") payable by the Group. A PID of 8 pence per share is proposed as the total interim dividend, an increase of 60% from 5 pence per share PID for the same period last year.

The interim dividend will be paid on 9 January 2014, the ex-div date is 11 December 2013 and the record date is 13 December 2013.

Financing and treasury

In April 2012 the Group agreed a £100 million 15 year loan with Aviva Commercial Finance Limited, secured over a portfolio of 15 freehold self storage centres. The annual fixed interest rate on the loan is 4.9%. The loan amortises to £60 million over the course of the 15 years, consistent with the Group's medium term debt reduction strategy. The debt service is payable monthly based on fixed annual amounts. The loan outstanding on the fifth anniversary will be £89.8 million; £76.7 million on the tenth anniversary, with £60 million at expiry in April 2027.

The Group also has a £155 million 4 year bank facility with Lloyds, HSBC and Santander, expiring in September 2016. £120 million of the facility is term loan with the balance of £35 million revolving. £70 million of this debt is fixed through an interest rate swap expiring in September 2016 at a fixed rate of 2.8% plus margin. The £63 million balance of the bank debt drawn accrues interest at variable rates based on one month LIBOR plus margin.

The facilities attract a ratcheted margin over LIBOR based on interest cover. The Group is currently paying a blended 2.4% margin, the lowest margin on the ratchet, which is effective for income cover of greater than 3 times. 

The Group's cost of funding is summarised in the table below:

The Group was comfortably in compliance with its banking covenants at 30 September 2013.

Group net debt was reduced in the period by £1.8 million to £228.6 million. The net debt to gross property assets ratio is 29% and the net debt to equity ratio is 39%.

Property

We have a pipeline of four wholly owned development sites; all except our site in Central Manchester have planning consent. The three development sites with planning consent are on the A10 in Enfield, London, in Central Guildford and on the A40 at Gypsy Corner, London. We are constructing the store at Gypsy Corner, which will open in April 2014. We are commencing detailed design works on the Enfield store, and anticipate that construction will commence in June 2014, with a planned opening in April 2015. The three sites with planning consent have an aggregate estimated cost to complete of £13.1 million.

The Group's investment properties have been valued by Cushman and Wakefield LLP ("C&W"). At 30 September 2013 the total value of the Group's wholly owned properties is shown in the table below:

Investment property

The valuation uplift for the open stores in the period, before an adjustment for the Capital Goods Scheme, was £18.9 million, as the growth in cash flows feed through to the valuation, coupled with a reduction in cap rate for a number of the London stores. The recognition of the Capital Goods Scheme receivable in the prior period reduced the book cost of the investment properties, and produced a revaluation surplus in the period. The revaluation uplift in the prior period, before adjusting for the impact of the Capital Goods Scheme, was £0.7 million. The table below summarises the key outputs of the valuations for the wholly owned open store portfolio.

The initial yield on the established portfolio of 32 stores before administration expenses and assuming no rental growth, is 7.1% rising to a stabilised yield of 7.8% (March 2013: 6.8% rising to 8.1%). Including the 22 lease-up stores, the initial yield pre-administration expenses is 6.3% rising to 7.8% (March 2013: 5.9% rising to 8.2%).

Investment property under construction

The four wholly owned development sites have increased in value by £1.7 million in line with capital expenditure incurred at Gypsy Corner. C&W's forecast valuations for when the assets have reached stabilised occupancy, including assumptions in relation to revenue and operating cost growth within these assets, are currently pointing to a revaluation surplus on total development cost of £30.9 million on the three wholly owned development sites with planning consent.

In their report, C&W have drawn attention to valuation uncertainty resulting from a lack of transactions in the self storage investment market. Please see note 15 for further details.

Surplus land

At 30 September 2013 the Group owned £6.0 million of land surplus to our requirements across three sites. We aim to sell this surplus land once we have maximised its realisable value through planning improvements. In the period a tenant vacated an office attached to one of our stores. We are looking at the options for redeveloping this office, which has been transferred to surplus land from investment property. The sites are held at the lower of cost and net realisable value and have not been externally valued.

Capital Goods Scheme receivable

We have a receivable of £9.9 million in respect of payments due back to the Group under the Capital Goods Scheme as a consequence of the introduction of VAT on self storage from 1 October 2012. The debtor has been reduced in the period by £0.6 million following the identification of some trapped Capital Goods Scheme recovery. We have also made revisions to the timing of the payments due back to the Group. The final amount is subject to agreement with HMRC. The debtor has been discounted in accordance with International Accounting Standards to the net present value using the Group's average cost of debt, with £0.2 million of the discount being unwound through interest receivable in the period. The gross value of the debtor before discounting is £11.3 million. The first payment under the Capital Goods Scheme of £0.8 million was received in October 2013.

Net asset value

The adjusted net asset value is 436.3 pence per share (see note 14), up 4% from 419.2 pence per share at 31 March 2013. The table below reconciles the movement from 31 March 2013.

Big Yellow Limited Partnership

Big Yellow Limited Partnership, a joint investment with Pramerica Real Estate Investors Limited, owns self storage centres outside London. In the consolidated accounts of Big Yellow Group PLC, the Partnership is treated as an associate using the equity accounting method. The Partnership is currently trading from twelve stores. There are no further stores under development.

The occupancy of the stores is 453,000 sq ft, against a total capacity of 749,000 sq ft, with growth of 62,000 sq ft in the last twelve months, of which 44,000 sq ft has been since 31 March. The stores' occupancy at 30 September 2013 was 60.5% (March 2013: 54.6%). The net rent achieved at 30 September 2013 by the Partnership stores is £17.31 per sq ft, a decrease of 4.7% from the same time last year, and an increase of 3.5% from 31 March 2013. The REVPAF of the portfolio increased by 11% to £12.63 for the six months to 30 September 2013 compared to the same period last year (£11.33) and by 16% from £10.90 for the six months to 31 March 2013.

The Partnership made an operating profit of £2.3 million in the period, of which Big Yellow's share is a third. After net interest costs and the revaluation of investment properties and interest rate derivatives, the profit for the period for the Partnership was £2.6 million, of which the Group's share was £0.9 million.

The Group earns certain construction and operational fees from the Partnership. For the period to 30 September 2013, these fees amounted to £0.3 million (2012: £0.3 million).

The Partnership has a receivable of £4.3 million in the period in respect of payments due back to the Partnership under the Capital Goods Scheme. This amount is subject to agreement with HMRC. The receivable has been discounted; the gross value of the receivable before discounting is £4.9 million. The first payment under the Capital Goods Scheme of £0.4 million was received by the Partnership in October 2013.

The Partnership has a £60 million bank facility with RBS and HSBC expiring in September 2016. Interest rate swaps are in place covering £30 million of the debt at a pre-margin cost of 1.05%. These swaps commenced in July 2013 following the expiry of legacy swaps at a higher pre-margin cost. The balance of the drawn debt pays interest based on three month LIBOR plus margin. There is a margin ratchet based on the Partnership's income cover which ranges between 250 bps and 400 bps. The facility's weighted average interest cost is 4.8%. £1 million of the bank facility was repaid in the period reducing it to £59 million.

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. The option was deferred in March 2013, and is next exercisable in March 2014 (subject to meeting certain return hurdles) and again in March 2015. 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 could result in Big Yellow sharing in the surplus created in the Partnership ahead of its equity participation.

James Gibson John Trotman

Chief Executive Officer Chief Financial Officer

18 November 2013 18 November 2013

RESPONSIBILITY STATEMENT

We confirm to the best of our knowledge:

1. the condensed set of Interim Financial Statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union;

2. the Interim Management Report herein includes a fair review of the important events during the first six months and description of the principal risks and uncertainties for the remaining six months of the year, as required by Rule 4.2.7R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority; and

3. the Interim Management Report includes as applicable, a fair review of disclosure of related party transactions and changes therein, as required by Rule 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

By order of the Board

James Gibson John Trotman

Director Director

18 November 2013

BIG YELLOW GROUP PLC

PORTFOLIO SUMMARY - WHOLLY OWNED STORES

(1) The 32 established stores are those that had reached stabilisation as a portfolio in 2007 prior to the economic downturn. The lease-up stores have yet to trade at their stabilised occupancy levels. Of the 22 lease-up stores, three stores opened before 31 March 2006, six stores opened in the year ended 31 March 2007, six stores opened in the year ended 31 March 2008 and seven have opened since 1 April 2008.

(2) The capacity of the established stores has fallen as space at one store has been earmarked for redevelopment.

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

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

(5) Rent for seven established short leasehold properties accounted for as investment properties and finance leases under IFRS with total self storage capacity of 431,000 sq ft, and one long leasehold lease-up store with a capacity of 64,000 sq ft.

(6) Earnings before interest, tax, depreciation, amortisation and allocation of central overhead.

(7) Of the established stores, the seven leaseholds achieved a store EBITDA of £2.6 million and an EBITDA margin of 50%. The freehold stores achieved a store EBITDA of £11.8 million and an EBITDA margin of 71%.

PORTFOLIO SUMMARY - BIG YELLOW LIMITED PARTNERSHIP STORES

Adjusted profit before taxation is shown in note 6 and EPRA earnings per share is shown in note 8.

All items in the income statement relate to continuing operations.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 September 2013 (unaudited)

Six months ended 30 September 2012 (unaudited)

Year ended 31 March 2013 (audited)

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Six months ended 30 September 2013 (unaudited)

A. Reconciliation of net cash flow to movement in net debt

Six months ended 30 September 2013

Net debt is defined as gross bank borrowings less cash and cash equivalents.

Notes to the Interim Review

1. ACCOUNTING POLICIES

Basis of preparation

The results for the period ended 30 September 2013 are unaudited and were approved by the Board on 18 November 2013. The financial information contained in this report in respect of the year ended 31 March 2013 does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

The annual financial statements of Big Yellow Group PLC are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standards 34 "Interim Financial Reporting", as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

Valuation of assets and liabilities held at fair value

For those financial instruments held at valuation, the Group has categorised them into a three level fair value hierarchy based on the priority of the inputs to the valuation technique in accordance with IFRS 13. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety. The fair value of the Group's outstanding interest rate derivative has been estimated by calculating the present value of future cash flows, using appropriate market discount rates, representing Level 2 fair value measurements as defined by IFRS 13. Investment Property and Investment Property and Investment Property under Construction have been classified as Level 3. This is discussed further in note 15.

Going concern

A review of the Group's business activities, together with the factors likely to affect its future development, performance and position, is set out in the Chairman's Statement and the Business and Financial Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are shown in the balance sheet, cash flow statement and accompanying notes to the interim statement. Further information concerning the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk can be found in the Business and Financial Review of the Group's Annual Report for the year ended 31 March 2013.

The Directors have considered carefully the Group's trading performance and cash flows in the context of the uncertain global economic environment and the other principal risks to the Group's performance. After reviewing Group and Company cash balances, projected cash flows, and the borrowing facilities available to the Group, the Directors believe that the Group and Company have adequate resources to continue operations for the foreseeable future. In reaching this conclusion the Directors have had regard to the Group's operating plan and budget and projections contained in the detailed longer term business plan. For this reason, they continue to adopt the going concern basis in preparing the half year report.

2. 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.

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

Further analysis of the Group's operating revenue and costs can be found in the Portfolio Summary.

The seasonality of the business is discussed in note 17.

3. INVESTMENT INCOME

£203,000 of the interest receivable in the current period relates to the unwinding of the discount of the Capital Goods Scheme receivable in accordance with IFRS 7 (prior periods: £nil).

4. FINANCE COSTS

5. TAX

There is no tax charge in the residual business in the period due to tax relief in relation to the restructuring of interest rate derivatives in prior periods and the utilisation of other brought forward tax losses.

6. ADJUSTED PROFIT BEFORE TAX

Adjusted profit before tax which excludes the revaluation of investment properties, changes in fair value of interest rate derivatives, net gains and losses on surplus land, and any non-recurring items of income and expenditure, has been disclosed to give a clearer understanding of the Group's underlying trading performance.

7. DIVIDENDS

The proposed interim dividend of 8 pence per ordinary share will be paid on 8 January 2014 to shareholders on the Register on 13 December 2013. The interim dividend is all Property Income Dividend.

8. EARNINGS PER ORDINARY SHARE

The European Public Real Estate Association ("EPRA") has issued recommended bases for the calculation of certain per share information and these are included in the following table.

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

EPRA earnings per ordinary share before the revaluation of investment properties, gains and losses on surplus land, the change in fair value of interest rate derivatives, one-off items of expenditure, and the Group's share of its associate's derivative and revaluation movements has been disclosed to give a clearer understanding of the Group's underlying trading performance.

9. NON-CURRENT ASSETS

a) Investment property