Third Quarter Trading Update

RNS Number : 1393M

Safestore Holdings plc

13 September 2012

 



FOR IMMEDIATE RELEASE                                                                                             13 September 2012

Safestore Holdings plc
Third quarter trading update for the period 1 May 2012 to 31 July 2012

Further growth and progress on our strategic plan

Safestore Holdings plc ("Safestore" or "the Company"), the largest self storage retailer in the UK and Paris, is pleased to report on its trading progress (unaudited) for the quarter ended 31 July 2012 ("Q3 2012").

	In Sterling			In CER1
	Q3 2012	Q3 20112	Growth	Growth
	£ million	£ million	%	%
Q3 revenue	24.9	24.1	+3.4%	+5.7%
YTD revenue	73.4	69.6	+5.4%	+6.5%
	£	£	%	%
Q3 RevPAF3	19.93	19.25	+3.5%	+5.9%
Q3 average self storage rental rate	24.37	25.91	-5.9%	-3.6%

Highlights

·      Continued strong revenue and RevPAF growth in constant exchange rates

·      Further occupancy gains, building on last year's record levels, with closing occupancy⁴ up 8.8%, at 67.2% of Maximum Lettable Area ("MLA") or 3.43 million square feet ("sq ft")

·      National accounts occupancy up 48%, further strengthening our corporate customer base

·      49,500 sq ft store opened at Paris-Vélizy in August, with no further new builds currently planned. 

Peter Gowers, Chief Executive Officer commented:

"While macro-economic conditions remain challenging, we are making good progress as we implement the 'More Space' strategy outlined in January 2012.  During the quarter, we delivered strong constant currency revenue growth, as well as further progress on our strategic priorities to strengthen the brand, drive operational excellence, build a powerful team and create value.   As we progress through the fourth quarter, our scale and strong competitive position leave us well positioned to withstand the short-term headwinds of adverse foreign currency movements and the introduction of VAT on UK self-storage."

Operational highlights

In line with our 'More Space' strategy, we continue to focus on driving organic growth by striking the right balance between occupancy and rate growth to maximise RevPAF.

UK - responding well to strategic investments and pricing change

Trading in the UK is responding well to our strategy of driving performance through enhanced sales and marketing and a focus on yield management.  Total revenue in the UK for Q3 2012 was up 5.8% compared to Q3 2011. Major contributing factors included strengthened brand awareness following our advertising campaign launched in May 2012, which has received more than one million views on the internet; further pricing strategy refinements and further growth in national accounts, with total occupied space from these now almost 188,000 sq ft., up 48% on the same period last year.   

UK RevPAF was £18.71, up 6.0% on the same period last year.  Occupancy across all stores in the UK was 2.69 million sq ft or 65.5% at 31 July 2012, up 4.5 percentage points compared to 31 July 2011. Occupancy in the UK mature store portfolio stands at 67.6%.  The average self storage rate per sq ft for Q3 in the UK was £22.99, 4.4% lower than Q3 than last year, reflecting our pricing strategy and the changing mix effect as we deliver higher growth from long-term customers and in lower priced new and regional stores.

France - further growth from mature stores and new suburban markets

Trading in Paris remains robust, reflecting our strong competitive position amid the challenges of the Eurozone economy.  Total revenue for Q3 2012 was up 5.6% over the prior year in constant exchange rates but down 3.4% in sterling, reflecting the significant fall in Euro exchange rates.  

Paris RevPAF was €31.87 up 7.2% on the same period last year.  Occupancy in Paris was 0.74 million sq ft or 74.4% at 31 July 2012, up 1.9 percentage points compared to 31 July 2011.  Occupancy in the Parisian mature store portfolio now stands at 77.6%. The average self storage rate per sq ft for Q3 2012 in Paris was €36.48, 1.0% lower than the same period last year.  The blended average rate reduction is largely driven by the rapid growth in our recently opened suburban stores, which trade at a lower price point than their central Parisian counterparts.

Finance Expense

Gross debt remains broadly unchanged from the half year at approximately £353 million.  Following our successful refinancing earlier in the year, the terms of which were announced on 9^th May 2012, this is expected to result in a full year net bank interest expense of approximately £19.5 million. This excludes the exceptional items arising from our refinancing and interest on finance lease obligations.

Tax

The company's total reported tax, using the EPRA⁶ measure which includes deferred taxes, is expected to be approximately £5.1 million for the full year.   However, we expect the company's cash tax for the full year to be approximately £0.5 million.

Outlook

We have seen a slower start to the fourth quarter in terms of new lets, particularly during the London 2012 events. However, this is traditionally one of our softer trading periods and revenue growth remains solid, with August revenues up 5.4% on last year in constant exchange rates and up 2.7% in sterling.

As we progress through the fourth quarter, macro-economic conditions remain challenging and the Euro exchange rate remains weak. The Euro exchange rate for Q3 2012 was 10.4% lower than Q3 2011 and we estimate this negatively impacted group revenue by around £600,000⁵ in the quarter.  With Euro rates remaining at similar levels, we would expect a similar impact in the fourth quarter.

In the UK, the Government intends to impose standard rate VAT on all self-storage with effect from 1 October 2012.  We continue to actively pursue all options available to us to challenge this decision on behalf of our customers and shareholders.  However, as the majority of Safestore customers pay in advance for their storage, to comply with anti-forestalling legislation we have already been required to inform customers of the increase in VAT.  We therefore estimate a potential negative revenue impact in the final month of this financial year of approximately £500,000, consistent with the assumptions for the estimated full year impact we set out in our results in June 2012. 

Despite these challenges, trading for the full year remains in line with the board's expectations. Adjusted EPRA earnings for the full year will be impacted by the changes in interest expense and slightly higher EPRA tax levels outlined above.

Looking beyond the short-term headwinds of foreign exchange movements and the introduction of VAT, the company remains well positioned to drive further RevPAF and growth.

Ends

1 - 'CER' is Constant Exchange Rate

2 - 'Q3 2011' is the three months ended 31 July 2011

3 - RevPAF is calculated as Total Revenue divided by total MLA excluding the four stores opened since 1 May 2011

4 - Closing occupancy excludes offices but includes 78,200 sq ft of bulk tenancy as at 31 July 2012 (31 July 2011 -78,600 sq ft)

5 - Each 1% movement in the Euro exchange rate relative to last year's level affects sterling reported revenues by approximately £250,000 in the year.

6 - 'EPRA' is the European Public Real Estate Association

Enquiries

Safestore Holdings plc	020 8732 1500
Peter Gowers, Chief Executive Officer
Richard Hodsden, Chief Financial Officer
www.safestore.com
Hudson Sandler	020 7796 4133
Nick Lyon / Wendy Baker

Notes to editors:

·	Safestore is the UK's largest self storage group with 135 stores. They include 98 wholly owned stores in the UK and 25 wholly owned stores in the Paris region together with 12 stores under management in the UK.
·	The Company provides storage to around 49,500 personal and business customers.
·	Safestore (excluding Space Maker) has a maximum lettable area ("MLA") of 5.24 million sq ft (including the expansion pipeline stores) of which 3.43 million sq ft is currently occupied.
·	A strong balance sheet and operational cash flow allow Safestore to invest in continual improvements in the operational performance of its stores, in new store development and acquisitions where appropriate.
·	Safestore employs around 550 people.

 

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