Safestore Holdings Plc · LSE:SAFE
Safestore — FY2018 Earnings Presentation
59 slides from Safestore's earnings presentation, Jan 8, 2019
Slide 1: Full Year Results Presentation 08 Jan 2019
11 Full Year Results Presentation 08 Jan 2019
Slide 2: Introduction
Mitcham Store Introduction Frederic Vecchioli Frederic Vecchioli
Slide 3: Strong record of value creation
Strong record of value creation +50% +63% +150% +183% EBITDA and EPRA EPS adjusted for historic share based payment charges and current dilutive shares
Slide 4: Highlights
4 Highlights Strong Financial Performance & Cash generation • Group Revenue up 10.4% in CER1 • Underlying EBITDA up 11.0% in CER1 • Adjusted diluted EPRA EPS up 15.5% at 26.8p • 16.1% increase in full year dividend to 16.25p (FY17: 14.0p) Operational Delivery • Continued balanced approach to revenue
Slide 5: Financials
Birmingham Central Store Financials Andy AndyJones Jones
Slide 6: Financial highlights
6 Financial highlights Change vs Income Statement & Cash flow FY 2018 FY 2017 Absolute CER² Revenue (£’m) like-for-like1 134.0 5.6% 5.2% Underlying EBITDA (£’m) like-for-like1 77.6 6.9% 6.5% Revenue (£’m) 143.9 10.8% 10.4% Underlying EBITDA (£’m) 82.9 11.4% 11.0% Underlying EBITDA (post leasehold co
Slide 7: Solid revenue growth across the portfolio
7 Solid revenue growth across the portfolio London / Rest of UK Total Paris Group SE UK Total Act 1.77 1.48 3.25 0.89 4.14 Average Occupancy LFL1 (sq ft ‘m) YoY 3.5% 5.7% 4.5% 6.0% 4.8% Act 75.8% 73.4% 74.7% 84.1% 76.6% Closing Occupancy LFL1 % YoY 2.3%pts 3.6%pts 2.9%pts 1.5%pts 2.7%pts Act 28.89 1
Slide 8: Group P&L
8 Group P&L FY 2018 FY 2017 UK Paris Total UK Paris Total (£'m) (€'m) (£'m CER) (£'m) (€'m) (£'m CER) Revenue 109.0 39.4 143.4 97.5 37.2 129.9 Underlying Cost of Sales (39.6) (11.3) (49.4) (35.6) (10.4) (44.6) Store EBITDA 69.4 28.1 94.0 61.9 26.8 85.3 Store EBITDA Margin 63.7% 71.3% 65.6% 63.5% 72.
Slide 9: Revenue increase drives improved EBITDA (after leasehold rent)
9 Revenue increase drives improved EBITDA (after leasehold rent) Employee cost, business rates and other Like-for-Like revenue: 6.6 cost of sales: 0.5 New & closed stores & Alligator: 6.9 Enquiry generation: 0.8 New & closed stores & Alligator: 3.5 CER 11.4% improvement
Slide 10: Strong cash conversion
10 Strong cash conversion FY 2018 FY 2017 (£'m) (£'m) Underlying EBITDA 82.9 74.4 Working Capital/ Exceptionals/ Other (1.2) (0.8) Operating cash inflow 81.7 73.6 Interest payments (8.7) (10.4) Leasehold rent payments (11.2) (10.3) Tax payments (6.4) (2.6) Free cash flow (before investing and financ
Slide 11: Strong and flexible Balance Sheet
11 Strong and flexible Balance Sheet Capital Structure Oct 18 Oct 17 Variance Property valuation (£’m)* 1,220.9 1,007.0 21.2% UK (£’m)* 921.1 744.4 23.7% FR (€’m)* 337.2 298.6 12.9% Gross Debt (£’m) 369.9 363.6 £6.3m Net Debt (£’m) 359.4 298.0 £61.4m Adjusted Group LTV ** 30% 36% (6%pts) Interest Co
Slide 12: Guidance – non trading and one-off items
12 Guidance – non trading and one-off items Item Guidance Foreign exchange impact Strengthening of Euro contributed £0.3m to EBITDA after leasehold rent in 2018 In the year, each 10c fluctuation from the FY2018 FX rate of 1.13 would equate to c. £2.0m of Group EBITDA and c. £1.0m of Earnings Tax Eff
Slide 13: Operations
London Chiswick Store bb: i. fi Frederic Vecchioli
Slide 14: Operations overview
14 Operations overview Group enquiry growth +8.9% in 2018 (1.8% excluding Alligator) • Group enquiry growth +50% over the last five years • Enquiry growth +4.4% year to date in 2019 • Advantage of scale growing market share – scalable platform Like-for-like CER Revenue growth +5.2% • LFL-CER revenue
Slide 15: Leveraging leading marketing platform
15 Leveraging leading marketing platform Safestore growing market share: Self Storage Association Survey emphasises • 82% of group enquiries generated online the need for search engine efficiency: • Websites delivered 2018 group enquiry growth of • 67% of potential customers would use the internet 8
Slide 16: Marketing
16 Marketing Low brand awareness category search engine visibility a key differentiator • Ranking algorithms differ for each element of search engine results (PPC, “local pack”, organic) • Search results landscape constantly changing with no warnings • Movements in rank impact brand visibility, cl
Slide 17: Pricing
17 Pricing Rate growth (CER) impacted by new stores and acquisitions: • (3.1%) in the UK • 0.5% like-for-like • (2.1%) in Paris • (0.9%) like-for-like • Paris rate impacted by recently opened Emerainville store, without this LFL store rate would be flat YoY in 2018 Balanced Revenue Management approa
Slide 18: Occupancy and MLA
18 Occupancy and MLA 1.7m sq ft available plus 0.2m sq ft pipeline
Slide 19: Like-for-like group occupancy increase last five years: +22%
19 Like-for-like group occupancy increase last five years: +22% Smaller average store size = 44k sq ft • More central locations • Greater barriers to entry • Delivers higher rate per sq ft • Easier to grow to 90%+ occupancy All stores already open at October 2013 at the start of new management team
Slide 20: Balanced occupancy and rate management
20 Balanced occupancy and rate management Like-for-like¹ UK Paris Rate per Closing Sq Revenue in Rate per Sq Closing Sq Revenue in Sq Ft Ft Let CER² Ft Ft Let CER² % YoY % YoY % YoY % YoY % YoY % YoY 2017 Q1 2.2% 2.7% 4.9% 4.5% 1.3% 4.6% 2017 Q2 1.2% 1.1% 3.0% 0.9% 2.5% 1.7% 2017 Q3 0.0% 1.1% 2.3% 2
Slide 21: Revenue predictability and resilience
21 Revenue predictability and resilience Store square feet occupancy- split by year of customer move-in date: • Typically the customers moved in during the year make up 40% to 50% of the year end occupancy, but only between 20% to 30% of revenue (due to the impact of the introductory offers and the
Slide 22: Diversified drivers and business geography generate resilient revenue and profits
22 Diversified drivers and business geography generate resilient revenue and profits c. 8% - 13% owner occupier Diversified business drivers, different business geographies and a stable average customer length of stay and unit mix provides resilient group profits. At the end of 2012, VAT was introdu
Slide 23: 1.7m square feet fully invested available
23 1.7m square feet fully invested available – equivalent of around 40 new stores As at 31 October 2018 Group London & UK Paris SE Regions Current Maximum lettable area (m sq ft) 6.37 2.63 2.49 1.25 Let Square Feet (m sq ft) 4.69 1.96 1.78 0.95 Current Available space (m sq ft) 1.68 0.67 0.71 0.30 P
Slide 24: Development
24 Development Pipeline since 2014: MLA Occupancy at Financial year of purchase purchase / opening Space Maker (12 Stores) 496,000 327,360 2016 London Wandsworth 33,200 0 2016 Birmingham Central 51,000 0 2016 Altrincham 43,500 0 2016 Paris Emerainville 60,000 0 2016 Alligator (12 Stores) 569,000 398
Slide 25: Flexible investment model
25 Flexible investment model UK Lease regears – demonstrable track record • c. 53% of UK leases regeared since 2012 • Edinburgh Gyle regeared in 2018 • All leases in England within renewal protection rights of the Landlord and Tenant Protection Act FR lease regularly renewed • “Commercial Property”
Slide 26: Total Shareholder Return
26 Total Shareholder Return Over both periods, Safestore has provided the highest returns of all stocks in the FTSE350 Real Estate Super Sector index Data supplied by PWC & Investec. FTSE350 Real Estate is the FTSE350 Real Estate Super Sector index
Slide 27: Well positioned for further growth
27 Well positioned for further growth Attractive market • Immature and growing industry • Very constrained supply growth Unique portfolio • Leading presence in London, Paris and key markets • 72% of revenue from London / South East and Paris • Unlet invested space equivalent to around 40 stores Qual
Slide 28: Appendices
28 Appendices
Slide 29: Index
29 Index: Financial Portfolio summary: 30 Detailed P&L 51 Geographic 31 Non-underlying items 52 Freehold / Leasehold 32 Detailed Balance Sheet 53 Freehold / Leasehold (LFL CER) 33 Underlying to Statutory Adjustments 54 Maturity 35 Movement in Cost Base 55 Maturity (LFL CER) 36 Group Banking Covenant
Slide 30: Detailed P&L
30 Detailed P&L Group FY 2018 FY 2017 £’m £’m Revenue 143.9 129.9 Cost of sales (51.7) (45.7) Gross profit 92.2 84.2 Administrative expenses (16.7) (13.8) Underlying EBITDA * 82.9 74.4 Exceptional Items - (1.4) Depreciation and contingent rent (2.1) (1.1) Share based payments (5.3) (1.5) Operating p
Slide 31: Non-underlying items
31 Non-underlying items FY 2018 FY 2017 (£'m) (£'m) Underlying EBITDA 82.9 74.4 Gain on investment properties 122.1 39.2 Depreciation (0.6) (0.5) Contingent rent (1.5) (0.6) Share-based payments (5.3) (1.5) Exceptional items - (1.4) Statutory Operating Profit 197.6 109.6
Slide 32: Detailed Balance Sheet
32 Detailed Balance Sheet Group FY 2018 FY 2017 £’m £’m Assets Non-current assets Investment properties 1,216.2 999.2 Investment properties under construction 4.7 7.8 Other non-current assets 60.4 60.3 Non-current assets 1,281.3 1,067.3 Current assets 33.2 89.3 Liabilities Current liabilities (52.2)
Slide 33: FY 2018 Underlying to Statutory adjustments
33 FY 2018 Underlying to Statutory adjustments Tax / Underlying Share based Derivative Contingent Valuation Finance Dep'n LH Statutory Underlying Headings CGS / Statutory Headings P&L payments Movements Rent / Dep'n Movement Lease Int properties P&L FX Sales 143.9 143.9 Revenue Cost of Sales / Admin
Slide 34: FY 2017 Underlying to Statutory adjustments
34 FY 2017 Underlying to Statutory adjustments Tax / Underlying Share based Derivative Contingent Valuation Finance Dep'n LH Statutory Underlying Headings Exceptionals CGS / Statutory Headings P&L payments Movements Rent / Dep'n Movement Lease Int properties P&L FX Sales 129.9 129.9 Revenue Cost of
Slide 35: Movement in Cost Base
35 Movement in Cost Base Cost of Sales Administrative Expenses FY 2018 FY 2017 FY 2018 FY 2017 (£'m) (£'m) (£'m) (£'m) Reported cost of sales (51.7) (45.7) Reported administrative expenses (16.7) (13.8) Adjusted for: Adjusted for: Depreciation 0.6 0.5 Exceptional items - 1.4 Contingent rent 1.5 0.6
Slide 36: Group Banking Covenants
36 Group Banking Covenants – Oct 2018 reported Covenants Interest Cover Ratio Loan to Value Consolidated level Not less than 2.40:1 Sterling Loan to Value Not more than 0.60:1 Euro Loan to Value Not more than 0.60:1
Slide 37: Group Debt position at 31 Oct 2018
37 Group Debt position at 31 Oct 2018 Term Facility Drawn Hedged Hedged Bank Hedged Floating Total £/€/'m £'m £'m % Margin Rate Rate Rate UK Revolver Jun 22/Jun 23 £ 250.0 171.0 135.0 79% 1.25% 0.94% 0.82% 2.16% UK Revolver - non-utilisation £ 79.0 - - - 0.50% - - 0.50% Euro Revolver Jun22/Jun 23 €
Slide 38: National Accounts and Customer Support Centre
38 National Accounts and Customer Support Centre National Accounts: • Leverage UK platform further and accounts for 12% of all occupancy in the UK • Two-thirds of customers outside London Customer Support Centre: • CSC handled 14% of all enquiries • Supports the sales teams in store
Slide 39: Portfolio strength with further potential
39 Portfolio strength with further potential • 146 store portfolio • 6.4m maximum lettable area • 1.7m sq ft available – 1.0m London, South East and Paris • 44 stores within the M25 • 27 stores in Paris • 23 stores in the South East UK • 52 stores in the UK regions (119 stores) • New stores opened i
Slide 40: Densest network of stores in London and Paris
Densest network of stores in 40 London and Paris Paris and London combined represent 71 stores – £83.4m of Revenue, £57.7m of Store EBITDA
Slide 41: Paris unique competitive market position
41 Paris unique competitive market position Very solid market fundamentals: • 20 years of uninterrupted growth • Closing occupancy up 6.7% • Unique and densest network of stores in central Paris • Opportunity to leverage digital platform • Magenta to open 2020 (50,000 sq ft) • Pontoise to open 2019
Slide 42: Limited UK Supply
42 Limited UK Supply Growing and fragmented industry: • 1,505 self storage sites (of which 345 are container sites) – 723 storage businesses • Fragmented market with the six largest operators only owning 333 UK stores (119 stores) • c. 30 new stores per annum expected in 2018 - 2020 Immature industr
Slide 43: Property valuation movement
43 Property valuation movement (excluding investment properties under construction) Key assumptions Oct 2018 Apr 2018* Oct 2017 Average Self Storage rate per sq ft £25.90 £25.91 £26.67 Exit Cap rate (Freehold only) 6.7% 7.1% 7.1% Weighted average stabilised occupancy 85.3% 83.4% 80.9% Stabilised occ
Slide 44: New and pipeline stores
44 New and pipeline stores Total MLA Pipeline store / site Estimated opening sq ft Stores opened in 2018 London Mitcham 54,000 Paddington Marble Arch 37,000 Paris Poissy 80,000 Total sq ft added in 2018 171,000 Development stores acquired / under contract Birmingham Merry Hill 55,000 2019 London Car
Slide 45: Development characteristics
45 Development characteristics Limited site High land Planning Long lead- availability price restrictions time London / SE Regional City Centres Secondary towns Central Paris Paris 2nd belt • Six largest UK operators own just 22% of market* • Excluding container sto
Slide 46: Very strong position in the two best European markets for storage
46 Very Very strong strong positionposition inEuropean in the two best the two best markets for storage European markets for storage GDP (£'bil) Population GDP (£'bil) Population GDP (£'bil) Population (mil) (mil) (mil) London 372 7.7 Vienna 66 1.7 Lyon 45 2.1 Paris 371 9.9 Berlin 63 3.3 Turin 45 0.
Slide 47: Une Pièce en Plus – strong market characteristics
47 Une Pièce en Plus – strong market characteristics Density of population Density of storage per square mile supply per inhab. 60000 1.2 50000 1 40000 0.8 30000 0.6 20000 0.4 10000 0.2 0 0 Paris London Paris London
Slide 48: Leading market positions in key UK regional conurbations
48 Leading market positions in key UK regional conurbations Data supplied by the UK Self Storage Association - 2015 Safestore also has strong market positions in Newcastle (Pop. Den. 6,343) and Stockport (Pop. Den. 11,937)
Slide 49: Paris development characteristics
49 Paris development characteristics Paris • Paris planning now prohibits mixed use with warehousing • Potential available sites reserved for social housing • First belt town reluctance to accept self storage • Only two storage centres opened inside Paris since 2005 London • Price of land • Long lea
Slide 50: French Commercial Lease Statute provides security of tenure
50 French Commercial Lease Statute provides security of tenure French commercial lease laws highly protective: • Right of renewal • Rent increase normally based on state construction cost index • Compensation for any loss arising in case of Landlord's refusal to renew – equivalent to full business v
Slide 51: Portfolio summary split geographically
51 Portfolio summary split geographically London & Rest of UK UK Paris Group South East Number of stores 67 52 119 27 146 Let Square Feet (m sq ft) 1.96 1.78 3.74 0.95 4.69 Maximum Lettable Area (m sq ft) 2.63 2.49 5.12 1.25 6.37 Let Square Feet per store (k sq ft) 29 34 31 35 32 Average Store Capac
Slide 52: Portfolio summary split between freehold and leasehold
52 Portfolio summary split between freehold and leasehold FY 2018 FY 2017 UK Paris Group UK Paris Group Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Number of stores 83 36 16 11 99 47 73 35 15 11 88 46 MLA self-storage only (m) 3.6
Slide 53: Portfolio summary split between freehold and leasehold (LFL CER)
53 Portfolio summary split between freehold and leasehold (LFL CER) FY 2018 FY 2017 UK Paris Group UK Paris Group Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Number of stores 72 33 14 11 86 44 72 33 14 11 86 44 MLA self-storage on
Slide 54: Portfolio summary split by maturity
54 Portfolio summary split by maturity FY 2018 FY 2017 Developing Established Mature Total Developing Established Mature Total Number of stores 4 5 137 146 6 6 122 134 MLA self storage only (m) 0.245 0.230 5.894 6.369 0.304 0.305 5.095 5.704 Closing occupancy (m) 0.065 0.154 4.444 4.663 0.136 0.248
Slide 55: Portfolio summary split by maturity (LFL CER)
55 Portfolio summary split by maturity (LFL CER) FY 2018 FY 2017 Developing Established Mature Total Developing Established Mature Total Number of stores 0 5 125 130 5 6 119 130 MLA self storage only (m) 0.000 0.230 5.324 5.554 0.230 0.305 4.996 5.531 Closing occupancy (m) 0.000 0.154 4.073 4.227 0.
Slide 56: Safestore UK historic performance
56 Safestore UK historic performance EBITDA in 2017 and 2018 has been adjusted for Share based payment charge
Slide 57: Customer length of stay
57 Customer length of stay UK Paris Group FY 2018 FY 2017 FY 2018 FY 2017 FY 2018 FY 2017 (mths) (mths) (mths) (mths) (mths) (mths) Business Existing 30.5 30.3 32.2 31.9 30.8 30.6 Vacated 12.5 12.6 13.4 13.1 12.7 12.7 Total 14.6 14.7 15.8 15.5 14.8 14.8 Personal Existing 20.2 20.5 26.4 26.6 21.9 22.
Slide 58: Group customer split as at 31 Oct 2018
58 Group customer split as at 31 Oct 2018
Slide 59: Personal and business customers as at 31 Oct 2018
59 Personal and business customers as at 31 Oct 2018 Personal and Business Customers UK Paris Personal Customers Numbers (% of total) 74% 83% Square feet occupied (% of total) 53% 66% Average length of stay (months) 20.2 26.4 Business Customers Numbers (% of total) 26% 17% Square feet occupied (% of