Interim Results

Big Yellow Group PLC 15 November 2005 15 November 2005 Big Yellow Group PLC ("Big Yellow", "the Group" or "the Company") Results for the Six Months and Second Quarter ended 30 September 2005 Big Yellow Group PLC, the self storage company, is pleased to announce results for the six months and for the second quarter ended 30 September 2005. The Group is reporting for the first time under International Reporting Standards ("IFRS"). Under IFRS the Group is required to include revaluation changes on investment properties in the income statement and to assume that the full amount of tax would be payable in the event of a sale of all properties. Second First quarter quarter Six months Six months ended ended ended ended 30 Sept 30 June 30 Sept 30 Sept 2005 2005 2005 2004 Annualised revenue £42.7m £39.8m +7% £42.7m £35.0m 22% Revenue £10.7m £9.6m +11% £20.3m £15.6m 30% Profit before tax £42.2m £33.2m 27% Adjusted profit before tax (1) £6.0m £3.4m 76% Basic earnings per share 30.14p 23.15p 30% Adjusted earnings per share (2) 4.13p 2.14p 93% Adjusted NAV per share (3) 227.7p 179.6p 27% Interim dividend 2.0p 0.5p Number of customers 27,500 26,400 +4% 27,500 23,300 18% Occupied space 1,649,000 sq ft 1,545,000 sq ft +7% 1,649,000 sq ft 1,403,000 sq ft 18% 1 See note 5 2 See note 7 3 See note 13 • Profit before tax of £42.2 million for the half year (2004: £33.2 million) • Adjusted profit before tax (1) £6.0 million up 76% (2004: £3.4 million) • Adjusted net assets per share (3) of 227.7 pence as at 30 September 2005 (2004: 179.6 pence) • Interim dividend increased to 2.0 pence per ordinary share (2004: 0.5 pence) • 35 stores currently open with a further 12 committed, providing 2.9 million sq ft of self storage space when completed • Acquired freehold sites in Richmond, Balham and Twickenham Commenting on the Group's interim results, Nicholas Vetch, Chairman, said: "We are pleased with the Group's trading performance over the first half of this financial year, despite a slow start in April. Trading from May through to September has exceeded our expectations. "The Group continues to enjoy a strong financial position with a largely prime freehold portfolio, strong cashflow, relatively low levels of gearing with the capacity to fund new stores. "In the light of this we intend to continue our expansion by acquiring six to eight new sites per annum and look forward to opening the twelve stores in our development pipeline." - Ends- For further information, please contact: Big Yellow Group PLC 01276 470190 Nicholas Vetch, Chairman James Gibson, Chief Executive Officer Weber Shandwick Square Mile 020 7067 0700 Louise Robson or Yvonne Alexander 15 November 2005 Big Yellow Group PLC ("Big Yellow", "the Group" or "the Company") Results for the Six Months and Second Quarter ended 30 September 2005 Chairman's Statement The Board of Big Yellow Group PLC, the self storage company, is pleased to announce results for the six months and for the second quarter ended 30 September 2005. We are pleased with the Group's trading performance over the first half of this financial year, despite a slow start in April. Trading from May through to September has exceeded our expectations. International Financial Reporting Standards ("IFRS") Big Yellow Group PLC adopted IFRS with effect from 1 April 2005 this year and announced the restatement of its 2005 full year results under IFRS on 27 September 2005. That announcement, which includes reconciliations and explanations of differences from reported key numbers under UK GAAP, together with the accompanying presentation, is available on the Company's website, www.bigyellow.co.uk. The main change resulting from the introduction of IFRS is that Big Yellow has changed its classification and accounting for the majority of its properties to "investment properties" and its trading stores are now held in the balance sheet at fair value, having previously been held at net historical cost. Furthermore, these investment properties are no longer depreciated and are subject to an external valuation bi-annually with movements on revaluation recognised separately in the income statement. This interim report is prepared in accordance with IFRS and includes the Group's IFRS accounting policies together with further details on key performance measures in the notes to the accounts. Whilst the adoption of IFRS has significantly changed the presentation of the financial results in this interim report, it has no impact on the underlying business or cashflow. Financial Results Revenue for the period was £20.3 million, up 30% from the £15.6 million achieved in the comparable period last year. Revenue for the second quarter of £10.7 million was 11% up on the £9.6 million reported for the quarter to 30 June. Underlying revenue on an annualised basis increased at the period end to £42.7 million, up 22% (2004: £35.0 million). Profit before tax in the period was £42.2 million up from £33.2 million in the same period last year. After adjusting for the gain on the revaluation of investment properties and other matters shown in the table below the Group made an adjusted profit before tax in the period of £6.0 million, up 76% from £3.4 million for the same period last year. -------------------------------------------------------------------------------- Profit before Tax Analysis Six months to Six months to Year ended 30 Sept 2005 30 Sept 2004 31 March 2005 £m £m £m -------------------------------------------------------------------------------- Profit before tax 42.2 33.2 42.8 Less gain on revaluation of investment properties (36.8) (29.8) (34.9) Add fair value movement on interest rate swaps 0.6 - (0.1) -------------------------------------------------------------------------------- Adjusted profit before tax 6.0 3.4 7.8 -------------------------------------------------------------------------------- Cash generated from operations rose to £11.6 million in the period, an increase of 71% (2004: £6.8 million). Net bank debt of £111.5 million at the period end represents 31% of the Group's investment property and development property assets totalling £363.5 million and 45% of adjusted net assets of £247.0 million as indicated in the table below. Dividend The Board has reviewed its dividend policy and concluded that an interim dividend of 2.0 pence per share (2004: 0.5 pence) be paid in the current year, reflecting the Board's confidence in the Group's cashflow. The ex-dividend date will be 23 November 2005 and the record date 25 November 2005, with an intended payment date of 19 December 2005. Stores and the Market Following the acquisition of three properties in Twickenham, Richmond and Balham, all in South-West London, the Group now has thirty five stores trading, with the total number of stores open or in planning and development rising to forty seven. The twelve stores in development and planning are anticipated to provide 785,000 sq ft, taking the total when fully opened and fitted out to 2.9 million sq ft. Eight of the stores to be opened are located in Greater London which we believe will improve the overall quality of our portfolio and re-enforce our dominant position in London where we currently have twenty stores open. Thirty seven of our properties are owned freehold, one long-leasehold of 103 years un-expired and the average remaining lease term of our short leaseholds is 20 years. We now have planning permission on six of the twelve pipeline stores. In the summer of this year, we opened our first store in the North of England in Leeds, and we are pleased to report that the store is trading well and this has encouraged us to continue our expansion into the Midlands, the North of England and Scotland. However, we caution that the availability of high quality property at affordable prices is as limited as it is in Southern England. We have as usual included a table summarising the trading performance of all our stores over the year, together with a comparison of the prior period. This can be found on page 4. We have seen a further increase in customers to 27,500 from 23,300 at the same time last year, a rise of 18%. Valuation and Net Asset Value The Group's trading stores, which are classified as investment properties, have been re-valued by Cushman & Wakefield, Healey & Baker (C&W/H&B) and this has resulted in a gross asset value of £363.5 million, comprising £274.8 million (76%) for freehold and long leasehold trading stores, £54.5 million (15%) for short leasehold trading stores and £34.2 million (9%) for freehold sites held for development. The properties held for development have not been valued and have been included at cost. The valuation translates into an adjusted net asset value per share of 227.7 pence after the dilutive effect of outstanding share options. -------------------------------------------------------------------------------- Analysis of Net Asset Value As at As at As at 30 Sept 2005 30 Sept 2004 31 March 2005 £'000 £'000 £'000 -------------------------------------------------------------------------------- Basic net asset value 188.7 147.8 159.2 Exercise of share options 7.0 7.1 7.3 -------------------------------------------------------------------------------- Diluted net asset value 195.7 154.9 166.5 Adjustments: Deferred tax on revaluation surpluses 51.2 38.6 40.2 tax on fair value of interest rate swaps 0.1 (0.1) - -------------------------------------------------------------------------------- Adjusted net asset value 247.0 193.4 206.7 -------------------------------------------------------------------------------- Diluted net assets per share (pence) 180.4 143.8 154.0 Adjusted net assets per share (pence) 227.7 179.6 191.1 Diluted shares used for calculation (million) 108.5 107.7 108.1 The value of the investment property portfolio at 30 September 2005 was £329.4 million up £54.2 million from £275.2 million at 31 March 2005. £31.3 million is the increase in the valuation of the same store portfolio representing an 11% total uplift, of which 5% is a function of capital growth and 6% operational performance. The balance of £22.9 million is the valuation of new stores, comprising capital expenditure of £16.8 million and a revaluation uplift of £6.1m on Beckenham and Leeds. The trading store acquired at Richmond was valued in line with its book value. The anticipated initial yield on the portfolio in the following year, as represented by net operating income at store level, is 7.09%, rising to 8.37% in the year following stabilisation of each store. The reduction in the stabilised yield from 8.83% at 31 March 2005 to 8.37% represents a 5.0% capital value increase. This yield reduction reflects a number of factors, including significant yield compression on other real estate assets in the UK and elsewhere and more specifically, a growing institutionalisation of self storage assets, particularly in the US. Self storage in the United Kingdom has not yet materially benefited from these trends to date. The Group has recently acquired a virtual freehold in its Head Office building for £1.25 million plus irrecoverable VAT, now held as a freehold property in the balance sheet at cost. Outlook Whilst the Group has enjoyed relatively encouraging trading conditions in the last six months, we still remain cautious with regard to the current state of the housing market and the more subdued consumer. We believe that the relative under supply of high quality self storage centres and the Group's growing brand and operational strength is counteracting these negative effects. The Group continues to enjoy a strong financial position with a largely prime freehold portfolio, a strong and growing cashflow and relatively low levels of gearing with the capacity to fund new stores. In the light of this we intend to continue our expansion by acquiring six to eight new sites per annum and look forward to opening the twelve stores in our development pipeline. Nicholas Vetch Chairman - Ends - For further information, please contact: Big Yellow Group PLC 01276 470190 Nicholas Vetch, Chairman James Gibson, Chief Executive Officer Weber Shandwick Square Mile 020 7067 0700 Louise Robson or Yvonne Alexander Trading Summary Years since opening September 2005 September 2005 September 2005 September 2004 September 2004 September 2004 as at 1 April 2005 > 2 years < 2 years Total > 2 years < 2 years Total Number of stores 27 8 35 27 4 31 ========== ========= ========= ========= ======== ========= As at 30 September 2005 Total capacity (sq ft) 1,663,000 448,000 2,111,000 1,650,000 223,000 1,873,000 Occupied space (sq ft) 1,432,000 217,000 1,649,000 1,320,000 83,000 1,403,000 Percentage occupied 86% 48% 78% 80% 37% 75% £'000 £'000 £'000 £'000 £'000 £'000 Annualised revenue 37,123 5,605 42,728 32,813 2,161 34,974 For the 6 month period: Average occupancy 83% 40% 74% 78% 27% 72% Average annual rent psf £22.58 £21.22 £22.49 £19.77 £19.76 £19.77 Self storage sales 15,581 1,901 17,482 12,719 595 13,314 Other storage related income(1) 2,226 363 2,589 1,922 150 2,072 Development/tenant income 139 66 205 74 116 190 --------- --------- --------- --------- --------- --------- Total Revenue 17,946 2,330 20,276 14,715 861 15,576 Direct store operating costs (excluding depreciation) (5,830) (1,209) (7,039) (5,395) (542) (5,937) Leasehold rent(2) (1,093) - (1,093) (1,044) - (1,044) --------- --------- --------- --------- --------- --------- Store EBITDA(3) 11,023 1,121 12,144 8,276 319 8,595 EBITDA Margin(4) 61% 48% 60% 56% 37% 55% Central overhead(5) (1,093) (248) (1,341) (946) (86) (1,032) --------- --------- --------- --------- --------- --------- Store Net Operating Income 9,930 873 10,803 7,330 233 7,563 NOI Margin 55% 37% 53% 50% 27% 49% --------- --------- --------- --------- --------- --------- Capital expenditure £m £m £m to 30 September 2005 119.7 46.6 166.3 to complete - 1.5 1.5 --------- --------- --------- Total cost 119.7 48.1 167.8 --------- --------- --------- (1) Packing materials, insurance and other storage related fees. (2) Rent for 9 leasehold properties accounted for as investment properties and finance leases under IFRS with total self storage capacity of 535,000 sq ft. (3) Earnings before interest, tax, depreciation and amortisation. (4) Of stores open more than 2 years, 9 leaseholds achieved a store EBITDA of £3.24 million and EBITDA margin of 51%. 18 freeholds achieved a store EBITDA of £7.78 million and EBITDA margin of 67%. (5) Allocation of overhead based on 6% of estimated stabilised income. Consolidated Income Statement Six months ended 30 September 2005 Six months Six months Year ended ended ended 31 March 30 Sept 2005 30 Sept 2004* 2005* (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 REVENUE 2 20,276 15,576 33,375 Cost of sales (7,660) (6,359) (12,924) --------- --------- --------- GROSS PROFIT 12,616 9,217 20,451 Administrative expenses (2,261) (2,588) (5,421) --------- --------- --------- Operating profit before gains on investment properties 10,355 6,629 15,030 Gain on the revaluation of investment properties 36,789 29,770 34,976 --------- --------- --------- OPERATING PROFIT 47,144 36,399 50,006 Gains and losses on non-current assets 8 - 2 Finance income 102 55 142 Finance costs 3 (5,058) (3,255) (7,314) --------- --------- --------- PROFIT BEFORE TAX 42,196 33,199 42,836 Tax 4 (11,815) (10,164) (12,695) --------- --------- --------- PROFIT FOR THE PERIOD 30,381 23,035 30,141 ========= ========= ========= Attributable to: Equity Shareholders 30,381 23,035 30,141 ========= ========= ========= Basic earnings per share 7 30.14p 23.15p 30.15p ========= ========= ========= Diluted earnings per share 7 29.65p 22.71p 29.69p ========= ========= ========= * Restated under IFRS (see note 16). Adjusted earnings per share are shown in note 7. All items in the income statement relate to continuing operations. Consolidated Balance Sheet 30 September 2005 30 Sept 30 Sept 31 March 2005 2004* 2005* (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 NON-CURRENT ASSETS Investment property 8 329,370 259,690 275,230 Development property 8 34,164 26,669 36,076 Finance lease asset 8 25,355 25,951 25,659 Plant, equipment and owner-occupied property 8 2,768 1,610 1,314 Goodwill 1,433 1,433 1,433 --------- --------- --------- 393,090 315,353 339,712 --------- --------- --------- Non-current assets held for sale 3,757 8,626 2,867 CURRENT ASSETS Inventories 322 275 254 Trade and other receivables 9 4,322 4,253 8,896 Cash and deposits 3,081 5,157 6,379 --------- --------- --------- 7,725 9,685 15,529 --------- --------- --------- TOTAL ASSETS 404,572 333,664 358,108 ========= ========= ========= CURRENT LIABILITIES Trade and other payables 10 (14,961) (17,748) (13,584) Tax liabilities (352) - (32) --------- --------- --------- (15,313) (17,748) (13,616) --------- --------- --------- NON-CURRENT LIABILITIES Bank borrowings 12a (114,031) (90,550) (108,501) Deferred tax 11 (50,520) (37,654) (39,026) Obligations under finance leases 12b (25,355) (25,951) (25,659) Other payables (10,670) (14,021) (12,138) --------- --------- --------- (200,576) (168,176) (185,324) --------- --------- --------- TOTAL LIABILITIES (215,889) (185,924) (198,940) ========= ========= ========= TOTAL NET ASSETS 188,683 147,740 159,168 ========= ========= ========= CAPITAL AND RESERVES Called up share capital 15 10,191 10,000 10,073 Share premium account 15 2,796 2,171 2,390 Reserves 15 175,696 135,569 146,705 --------- --------- --------- EQUITY SHAREHOLDERS' FUNDS 188,683 147,740 159,168 ========= ========= ========= * Restated under IFRS (see note 16). Consolidated Statement of Changes in Equity Six months ended 30 September 2005 Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2005 2004* 2005* (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit for the period 30,381 23,035 30,141 Dividends (1,502) (1,044) (1,545) Issue of shares (net of issue costs) 524 272 564 Employee share options 112 54 109 Purchase of treasury shares - (812) (812) --------- --------- --------- Net addition to equity shareholders'funds 29,515 21,505 28,457 Opening equity shareholders' funds 159,168 126,235 130,711 --------- --------- --------- Closing equity shareholders' funds 188,683 147,740 159,168 ========= ========= ========= * Restated under IFRS (see note 16). Consolidated Cash Flow Statement Six months edned 30 September 2005 Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2005 2004* 2005* (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash generated from operations B 11,555 6,827 16,392 Interest paid (5,533) (3,042) (6,857) Interest received 113 45 129 --------- --------- --------- Cash flows from operating activities 6,135 3,830 9,664 --------- --------- --------- Investing activities Purchase of non-current assets (18,688) (19,578) (45,710) Sale of non-current assets 4,490 - 3,729 --------- --------- --------- Cash flows from investing activities (14,198) (19,578) (41,981) --------- --------- --------- Financing activities Issue of share capital (net of expenses) 524 272 564 Purchase of treasury shares - (812) (812) Dividends paid (1,502) (1,044) (1,545) Increase in borrowings 5,743 22,000 40,000 --------- --------- --------- Cash flows from financing activities 4,765 20,416 38,207 --------- --------- --------- Net (decrease)/increase in cash and deposits in the period A (3,298) 4,668 5,890 Opening cash and deposits 6,379 489 489 --------- --------- --------- Closing cash and deposits 3,081 5,157 6,379 ========= ========= ========= * Restated under IFRS (see note 16). A. Reconciliation of net cash flow to movement in net debt Six months ended 30 September 2005 Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net (decrease)/increase) in cash and deposits in the period (3,298) 4,668 5,890 Cash inflow from increase in debt financing (5,743) (22,000) (40,000) --------- --------- --------- Change in net debt resulting from cash flows (9,041) (17,332) (34,110) --------- --------- --------- Movement in net debt in the period (9,041) (17,332) (34,110) Net debt at start of period (102,514) (68,404) (68,404) --------- --------- --------- Net debt at end of period (111,555) (85,736) (102,514) B. Reconciliation of operating profit to net cash inflow from operating activities Six months ended 30 September 2005 Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Operating profit 47,144 36,399 50,006 Gain on the revaluation of investment properties (36,789) (29,770) (34,976) Depreciation 622 616 1,236 Employee share options 112 54 108 (Increase)/decrease in inventories (68) 13 34 Decrease/(increase) in receivables 863 381 (561) (Decrease)/increase in payables (329) (866) 545 --------- --------- --------- Cash generated from operations 11,555 6,827 16,392 ========= ========= ========= Notes To The Interim Report Six months ended 30 September 2005 1. ACCOUNTING POLICIES Basis of preparation The financial information contained in this report does not constitute statutory accounts with the meaning of the section 240 of the Companies Act 1985. The full accounts for the year ended 31 March 2005, which were prepared under UK GAAP and which received an unqualified report from the auditors, and did not contain a statement under S237(2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies. The unaudited information in the interim financial statements has been prepared in accordance with International Financial Reporting Standards ("IFRS") for the first time. The disclosures required by the IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 16. The next annual financial statements of the Group will be prepared in accordance with IFRS as adopted for use in the EU. The interim financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The accounting policies used in the interim financial statements are consistent with those that the Directors intend to use in the annual financial statements. Basis of consolidation The Group accounts consolidate the accounts of Big Yellow Group PLC and all its subsidiaries at the year end using acquisition accounting principles. All intra-group transactions, balances, income and expenses are eliminated on consolidation. On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e discount on acquisition) is credited to profit and loss in the period of acquisition. Revenue recognition Revenue represents amounts derived from the provision of services which fall within the Group's ordinary activities after deduction of trade discounts and any applicable value added tax. Income is recognised over the period for which the storage unit is occupied by the customer. Profit from operations Profit from operations is stated after gains on revaluation of investment properties and before gains and losses on non-current assets, finance income and finance costs. Finance Costs All borrowing costs are recognised in profit or loss in the period in which they are incurred. Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from the net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Investment property Investment properties are properties owned or leased by the group which are held for rental income and for capital appreciation. Investment property is initially recognised at cost and revalued at the balance sheet date to fair value as determined by professionally qualified external valuers. In accordance with IAS40, investment property held under leases is stated gross of the recognised finance lease liability. Development property Gains or losses arising from the changes in fair value of investment property are included in the income statement of the period in which they arise. In accordance with IAS40, as the Group uses the fair value model, no depreciation is provided in respect of investment properties including integral plant. Properties and land under development are recognised at historic cost less any provision for impairment. The assets are transferred to investment properties once the store has commenced trade. Property, plant & equipment All property, plant and equipment are carried at historical cost less depreciation and any recognised impairment loss. Depreciation is provided on cost in equal annual instalments over the estimated useful lives of the assets. The useful economic lives of the assets are as follows: Freehold property 50 years Leasehold improvements Over period of the lease Plant and machinery 10 years Motor vehicles 4 years Fixtures and fittings 5 years Computer equipment 3 years The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. Leases Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. Non current assets held for sale Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Impairment of assets At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Inventories Inventories are stated at the lower of cost and net realisable value. Financial instruments Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Trade receivables Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. The bank loans are disclosed net of unamortised loan issue costs. Costs relating to the raising of general corporate loan facilities are amortised over the estimated life of the loan and charged to the income statement as part of the interest expense. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Derivative financial instruments and hedge accounting The Group's activities expose it primarily to the financial risks of interest rates. The Group uses interest rate swap contracts to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes. The use of financial derivatives is governed by the Group's policies approved by the Board of Directors. The policy in respect of interest rates is to maintain a balance between flexibility and the hedging of interest rate risk. Changes in the fair value of derivative financial instruments are recognised in the income statement as they arise. The Group has not adopted hedge accounting. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the income statement. Retirement benefit costs Pension costs represent contributions payable to defined contribution schemes and are charged to as an expense to the income statement as they fall due. The assets of which are held separately from those of the Group. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs Share-based payments The Group has applied the requirements of IFRS 2 Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 April 2005. The Group issues equity-settled share-based payments to certain employees. These are measured at fair value at the date of grant. The fair value determined at the grant date of the share-based payment is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of an option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. 2. SEGMENTAL INFORMATION Revenue represents amounts derived from the provision of services which fall within the Group's ordinary activities after deduction of trade discounts and value added tax. The Group's net assets, revenue and profit before tax are attributable to one activity, the provision of self storage and related services. These all arise in the United Kingdom. 3. FINANCE COSTS Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Interest on bank loans 3,695 2,459 5,747 Interest on finance lease obligations 789 807 1,605 Other interest payable 1 23 29 Fair value adjustment on interest rate swaps 573 (34) (67) --------- --------- --------- Finance Costs 5,058 3,255 7,314 ========= ========= ========= 4. TAX Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Current tax - UK corporation tax at 30% 320 - 32 Deferred tax (see note 11) 11,495 10,164 12,663 --------- --------- --------- 11,815 10,164 12,695 --------- --------- --------- Corporation tax for the interim period is charged at 28%, representing the best estimate of the weighted average annual tax rate expected for the full financial year. 5. ADJUSTED PROFIT BEFORE TAX Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit before tax 42,196 33,199 42,836 --------- --------- --------- Gain on revaluation of investment properties (36,789) (29,770) (34,976) Fair value adjustment on interest rate swaps 573 (34) (67) Gains and losses on sale of assets (8) - (2) --------- --------- --------- Adjusted profit before tax 5,972 3,395 7,791 --------- --------- --------- 6. DIVIDENDS An interim dividend of 2.0 pence per ordinary share has been declared (30 September 2004: 0.5 pence). The ex-dividend date will be 23 November 2005 and the record date 25 November 2005 with an intended payment date of 19 December 2005. The interim dividend has not been included as a liability at 30 September 2005. The 2005 final dividend of £1,504,000 representing 1.5 pence per ordinary share was paid on 6th July 2005 and is included in the consolidated statement of changes in equity. 7. EARNINGS PER ORDINARY SHARE Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 Earnings Shares Pence Earnings Shares Pence Earnings Shares Pence £m million per share £m million per share £m million per share Basic 30.38 100.79 30.14 23.03 99.47 23.15 30.14 99.97 30.15 Adjustments: Dilutive share options 1.68 (0.49) 1.92 (0.44) 1.53 (0.46) ------ ------ ------ ------ ------ ------ ------ ------ ------ Diluted 30.38 102.47 29.65 23.03 101.39 22.71 30.14 101.50 29.69 ------ ------ ------ ------ ------ ------ ------ ------ ------ Adjustments: Gain on investment properties (36.79) (35.90) (29.77) (29.36) (34.98) (34.46) Change in fair value of interest rate swaps (0.57) (0.55) (0.03) (0.03) (0.07) (0.07) Tax 11.21 10.93 8.94 8.82 10.52 10.37 ------ ------ ------ ------ ------ ------ ------ ------ ------ Adjusted 4.23 102.47 4.13 2.17 101.39 2.14 5.61 101.50 5.53 ------ ------ ------ ------ ------ ------ ------ ------ ------ 8. NON-CURRENT ASSETS Investment Development Finance lease property property asset £'000 £'000 £'000 At 1 April 2005 275,230 36,076 26,234 Additions 8,587 6,852 - Reclassifications 8,764 (8,764) - Revaluation 36,789 - - --------- --------- --------- At 30 September 2005 329,370 34,164 26,234 --------- --------- --------- Accumulated depreciation At 1 April 2005 575 Charge for the year 304 --------- At 30 September 2005 879 --------- Net book value At 30 September 2005 25,355 ========= At 31 March 2005 25,659 ========= Fixtures, fittings and Freehold Leasehold Plant and Motor office property improvements machinery vehicles equipment Total £'000 £'000 £'000 £'000 £'000 £000 Cost At 1 April 2005 - 37 389 19 2,834 3,279 Additions 1,472 - 25 - 275 1,772 ------- ------- ------- ------- ------- ------- At 30 September 2005 1,472 37 414 19 3,109 5,051 Accumulated Depreciation At 1 April 2005 - 14 120 16 1,815 1,965 Charge for the year - 3 21 2 292 318 ------- ------- ------- ------- ------- ------- At 30 September 2005 - 17 141 18 2,107 2,283 ------- ------- ------- ------- ------- ------- Net book value At 30 September 2005 1,472 20 273 1 1,002 2,768 ======= ======= ======= ======= ====== ======= At 31 March 2005 - 23 269 3 1,019 1,314 ======= ======= ======= ======= ====== ======= 9. RECEIVABLES 30 Sept 2005 30 Sept 2004 31 March2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Trade receivables 710 480 756 Other receivables 282 456 3,986 Prepayments and accrued income 3,330 3,317 4,154 ------ ------- ------- 4,322 4,253 8,896 ======= ======= ======= 10. TRADE AND OTHER PAYABLES 30 Sept 2005 30 Sept 2004 31 March2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Trade payables 2,635 2,887 3,623 Other taxation and social security 1,031 125 - Other payables 2,139 1,151 1,914 Accruals and deferred income 7,662 11,106 6,161 VAT repayable under Capital Goods Scheme (see note 12) 1,494 2,479 1,886 ------ ------- ------- 14,961 17,748 13,584 ======= ======= ======= 11. DEFERRED TAX 30 Sept 2005 30 Sept 2004 31 March2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 The amounts provided in the accounts are: Revaluation of investment properties 51,224 38,632 40,194 Capital allowances in advance of depreciation 2,608 753 1,424 Deduction for share options (2,625) (1,050) (2,100) Other items (687) (681) (492) ------ ------- ------- 50,520 37,654 39,026 ======= ======= ======= 12a. BANK BORROWINGS 30 Sept 2005 30 Sept 2004 31 March2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Bank borrowings 114,534 91,080 109,046 Unamortised loan arrangement costs (503) (530) (545) ------ ------- ------- 114,031 90,550 108,501 ======= ======= ======= The bank loans are secured on certain of the Group's properties. 12b. OTHER PAYABLES The Group has VAT repayable under the Capital Goods Scheme which is estimated at £12.2 million. The projected annual repayment schedule is set out below: Total £'000 Year ended 31 March 2006 1,494 Years ended 31 March 2007 to 31 March 2015 (9 years) 10,670 ------- Total 12,164 ======= 13. ADJUSTED NET ASSETS PER SHARE Analysis of net asset value As at As at As at 30 Sept 2005 30 Sept 2004 31 March 2005 £'000 £'000 £'000 Basic net asset value 188,683 147,740 159,168 Exercise of share options 6,996 7,131 7,331 ---------- ---------- ---------- Diluted net asset value 195,679 154,871 166,499 ---------- ---------- ---------- Adjustments: Deferred tax on revaluation 51,224 38,632 40,194 Tax on fair value of interest rate swaps 149 (56) (46) ---------- ---------- ---------- Adjusted net asset value 247,052 193,447 206,647 ---------- ---------- ---------- Basic net assets per share (pence) 186.8 148.7 159.0 Diluted net assets per share (pence) 180.4 143.8 154.0 Adjusted net assets per share (pence) 227.7 179.6 191.1 Shares in issue 101,639,987 100,001,506 100,725,537 Own shares held (615,000) (615,000) (615,000) Basic shares in issue used for calculation 101,024,987 99,386,506 100,110,537 Exercise of share options 7,455,422 8,340,744 8,010,329 Diluted shares used for calculation 108,480,409 107,727,250 108,120,866 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 (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; • deferred tax on the revaluation uplift on freehold and leasehold properties; and • tax on the fair value adjustment on interest rate swaps 14. VALUATIONS Historical Accumulated Net book Revaluation on cost depreciation value Valuation net book value Freehold Stores As at 1 April 2005 128,037 5,136 122,901 223,760 100,859 Movement in period 17,482 - 17,482 51,060 33,578 ------- ------- ------- ------- ------- As at 30 Sept 2005 145,519 5,136 140,383 274,820 134,437 Leasehold Stores As at 1 April 2005 20,912 2,562 18,350 51,470 33,120 Movement in period (131) - (131) 3,080 3,211 ------- ------- ------- ------- ------- As at 30 Sept 2005 20,781 2,562 18,219 54,550 36,331 All Stores As at 1 April 2005 148,949 7,698 141,251 275,230 133,979 Movement in period 17,351 - 17,351 54,140 36,789 ------- ------- ------- ------- ------- As at 30 Sept 2005 166,300 7,698 158,602 329,370 170,768 The freehold and leasehold trading properties have been valued as at 30 September 2005 by External Valuers, Cushman & Wakefield Healey & Baker, Real Estate Consultants ("C&W/H&B"). The valuation has been carried out in accordance with the RICS Appraisal and Valuation Standards 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/H&B have confirmed that: • The members of the RICS who have been the signatories to the valuations provided to the Company for the same purposes as this valuation have done so since September 2004. • C&W/H&B have continuously been carrying out this valuation for the same purposes as this valuation on behalf of the Company since September 2004. • C&W/H&B do not provide other significant professional or agency services to the Company. • In relation to the preceding financial year of C&W/H&B, the proportion of the total fees payable by the Company to the total fee income of the firm is less than 5%. 15. MOVEMENT ON RESERVES Share Share premium capital account Reserves Total £'000 £'000 £'000 £'000 Balance at 1 April 2005 10,073 2,390 146,705 159,168 Profit for the period - - 30,381 30,381 Dividend - - (1,502) (1,502) Issue of share capital 118 406 - 524 Equity share options - - 112 112 ------- ------- ------- ------- Balance at 30 September 2005 10,191 2,796 175,696 188,683 ======= ====== ====== ======= 16. EXPLANATION OF THE TRANSITION TO IFRS The year ending 31 March 2006 is the first year that the Group is presenting its financial statements under IFRS. The last financial statements presented under UK GAAP were for the year ended 31 March 2005. As IFRS comparative figures must be prepared for the year ended 31 March 2005, the date of transition to IFRS was 1 April 2004. Reconciliations of equity at 31 March 2005 and profit for the year ended 31 March 2005 reported under UK GAAP and IFRS, and explanations of the main adjustments have previously been published and are available on the Company's website, www.bigyellow.co.uk. Reconciliations are presented below between previously reported interim and full year UK GAAP figures and restated figures under IFRS. IFRS1 'First-time Adoption of International Financial Reporting Standards' requires an explanation of major adjustments to cash flows under IFRS. Whilst the format of the cash flow statement is different from UK GAAP, there are no material changes to cash flow from operations, investment or financing. 16a. Reconciliation of equity previously reported under UK GAAP to equity under IFRS 30 Sept 31 March 2004 2005 (unaudited) (audited) £'000 £'000 Equity shareholders' funds under UK GAAP 58,338 58,679 IFRS adjustments: Goodwill amortisation 49 97 Proposed dividend 500 1,512 Deferred tax (38,139) (38,727) Fair value adjustment on interest rate swaps (187) (153) Investment property 127,179 137,760 ------- ------- Net IFRS adjustments 89,402 100,489 ------- ------- Equity shareholders' funds under IFRS 147,740 159,168 ======= ======= 16b. RECONCILIATION OF PROFIT PREVIOUSLY REPORTED UNDER UK GAAP TO PROFIT UNDER IFRS 30 Sept 31 March 2004 2005 (unaudited) (audited) £'000 £'000 Profit for the period under UK GAAP 987 2,522 IFRS adjustments: Share options (40) (82) Goodwill amortisation 49 97 Deferred tax (9,436) (11,164) Fair value adjustment on interest rate swaps 23 67 Investment property 31,452 38,701 ------- ------- Net IFRS adjustments 22,048 27,619 ------- ------- Profit for the period under IFRS 23,035 30,141 ======= ======= This information is provided by RNS The company news service from the London Stock Exchange LLFEFBXFBZ

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