Safestore Holdings Plc · LSE:SAFE
Safestore — H1 2015 Earnings Presentation
65 slides from Safestore's earnings presentation, Jun 18, 2015
Slide 1: Half Year Results Presentation 18 Jun 2015
1 Half Year Results Presentation 18 Jun 2015
Slide 2: Introduction
Introduction Frederic Vecchioli 2
Slide 3: Continued progress across the business
3 Continued progress across the business Operational Delivery • 12% enquiry growth in the period with improving conversion, continued new lets momentum (up 31%) and closing occupancy up 5.5% (3.4 ppts) in the UK • UK average rate up 7.5% in period with move-in rates strong • National Accounts UK bus
Slide 4: Financials
Financials 4 Andy Jones
Slide 5: Financial Highlights
5 Financial Highlights Income Statement & Cash flow H1 2015 Change vs H1 2014 Absolute CER Revenue (£’m) Like for Like 50.4 +8.6% +11.2% Revenue (£’m) 50.4 +7.5% +10.1% Underlying EBITDA (pre Leasehold rent) (£’m) 26.9 +7.2% +8.3% Underlying EBITDA (post Leasehold costs) (£’m) 22.4 +11.4% +11.9% Cas
Slide 6: Trading Update
6 Trading Update London / Rest of UK Total Paris Group SE UK Total Act 26.4 11.8 38.2 13.4 51.6 Revenue £m (L4L1 in CER2) YoY 13.8% 12.4% 13.4% 5.9% 11.2% Act 1.55 1.14 2.69 0.78 3.47 Occupancy (SqFt ‘m) YoY 4.7% 6.5% 5.5% 2.6% 4.5% Act 27.72 17.50 23.51 32.37 25.54 Rate (£ per SqFt) (in CER2) YoY 6
Slide 7: Summary Group P&L
7 Summary Group P&L H1 2015 H1 2014 UK Paris Total UK Paris Total (£'m) (£'m) (£'m) (£'m) (£'m) (£'m) Revenue 38.2 12.2 50.4 33.9 13.0 46.9 Costs (19.4) (4.1) (23.5) (17.3) (4.5) (21.8) Underlying EBITDA 18.8 8.1 26.9 16.6 8.5 25.1 EBITDA Margin 49% 66% 53% 49% 65% 54% Leasehold Rent (2.6) (1.9) (4.
Slide 8: Operational initiatives drive improved EBITDA performance
8 Operational initiatives drive improved EBITDA¹ performance Revenue (£1.2m) Employees £0.6m Costs +£0.5m Marketing £0.5m Swap +£0.5m Other £0.1m Employees £0.5m Other £0.7m CER 1 EBITDA post leasehold rent
Slide 9: Cash flow
9 Cash flow Financial Year H1 2015 H1 2014 (£'m) (£'m) Underlying EBITDA 26.9 25.1 Working Capital/ Exceptionals/ Other 0.2 (2.7) Operating Cash inflow 27.1 22.4 Interest payments (6.7) (9.1) Leasehold rent payments (4.5) (5.0) Tax Payments (0.2) (1.1) Free cash flow (before investing and financing
Slide 10: Strong and flexible Balance sheet
10 Strong and flexible Balance sheet Capital Structure Apr 15 Apr 14 Gross Debt (£’m) 261 265 Group LTV 35% 39% UK LTV 39% 44% Interest Cover Ratio 3.9x 2.7x Underlying Interest Charge (£’m) 5.8 7.5 Term Facility Drawn Hedged Hedged Bank Hedged Floating Total £/€/$'m £'m £'m % Margin Rate Rate Rate
Slide 11: Full year guidance – non trading and one-off items
11 Full year guidance – non trading and one-off items Item Guidance Foreign exchange impact €12m of French profits hedged at 1.234 €:£ Tax French tax losses fully utilised in 2015. Effective underlying cash tax rate in France to increase from 15% (of French PBT) in 2015 to c.28% in 2016. No tax is p
Slide 12: Operational Delivery
12 Operational Delivery Frederic Vecchioli
Slide 13: Operational strategy delivering in the UK
13 Operational strategy delivering in the UK Strategy to balance Rate and Occupancy growth driving revenue
Slide 14: Operational strategy delivering in the UK
14 Operational strategy delivering in the UK • UK enquiries and conversion improvements continuing to drive new let growth over prior year • Improvement in New lets have continued even as we pass the one year anniversary of the start of the operational improvement programme • Average length of stay
Slide 15: Operational strategy delivering in the UK
15 Operational strategy delivering in the UK • Pricing policy factors are very local • No straightforward relationship between rates and sales volumes – depends on: • Store location – proximity to customers • Staff sales skills and discounting discipline • Number of enquiries • Store size • Local co
Slide 16: Operational Platform now in place
16 Operations Delivering Business 2015 2013 Focus Strengths: Areas: Strong Portfolio Closer Store 3 More Regional Closer Store management positions management Enquiry generating • 50% of Store platform Consistent Consistent Managers new sales skills • Sales consultant sales skills Customer service r
Slide 17: Increasing enquiry generation - benefits from scale
17 Increasing enquiry generation - benefits from scale • Safestore year-on-year UK enquiry growth 12% in 2015 and 10% in 2014 • Budgeted investment equal to 5% of turnover • Leading UK multi-channel digital platform • Critical area of investment – significant further opportunities with technical imp
Slide 18: Une Pièce en Plus: years of continuous growth
18 Une Pièce en Plus: 17 years of continuous growth
Slide 19: Portfolio Management
19 Portfolio Management
Slide 20: Densest network of stores in London and Paris
20 Densest network of stores in London and Paris Two new freehold stores being developed – Chiswick & Wandsworth
Slide 21: New stores being developed
21 New stores being developed Chiswick: New store in prime location 43k sq.ft MLA Opening in 2016 Wandsworth: Redevelopment of store including adjacent site Will add 25k sq.ft of capacity Anticipated opening in 2017 Birmingham: Under review – Planning application resubmitted
Slide 22: Asset Management
22 Asset Management • Purchased High Wycombe freehold for £1.8m - £2.5m added to valuation • Lease regears: • Camden, 8 Year extension, £0.8m valuation uplift • Guildford, 18 Year extension, 9 Months rent free period, £1.1m valuation uplift • Swanley, 10 Year extension, 12 Months rent free period, £
Slide 23: UK Asset management – Leasehold / Freehold
23 UK Asset management – Leasehold / Freehold • Track record of unexpired lease terms maintained through lease re-gears several years in advance • 16 re-gears completed since FY2012 (50% of all leaseholds) • Safestore signature is sought after for portfolio asset managers – renewal typically trigger
Slide 24: Outlook
24 Outlook
Slide 25: Demand Drivers
25 Demand Drivers c.35% • Est. 10%-15% exposure to UK housing market Owner Occupier / Rental • Home ownership rates: customers • UK 67% e.g. rental moves, housing • London 50% transactions • Paris 33% c.25% Lifestyle customers • Divorces / Marriages e.g. students, marriage, • Bereavements new baby,
Slide 26: Outlook – well positioned for further growth
26 Outlook – well positioned for further growth • Strategy to optimize operational improvements to maximise revenue growth • Primary focus: • Leverage our scale and strong market positions in the UK and Paris • Organic growth through the 1.6m square feet of space to fill • Realise selective developm
Slide 27: Appendices
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Slide 28: Index
28 Index: 29 Drivers of success 49 UK regional market position 50 Barriers to entry Financial 51 French leases 31 Detailed P&L 52 Portfolio summary: 32 Non-underlying items Geographic 33 Balance sheet Maturity 34 Underlying to Statutory Adjustments Freehold / Leasehold 36 Movement in cost base 37 Gr
Slide 29: The drivers of success of Safestore
29 The drivers of success of Safestore Store portfolio • Presence in densely populated and good income catchment areas • Greater numbers of stores provide more convenience and proximity to where customers live • Barriers to entry for competition in Safestore’s main markets • Sizeable capacities avai
Slide 30: Financial
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Slide 31: Detailed P&L
31 Detailed P&L Group H1 2015 H1 2014 £’m £’m Revenue 50.4 46.9 Cost of sales (16.5) (16.0) Gross profit 33.9 30.9 Administrative expenses (7.5) (6.3) EBITDA (operating profit before exceptional items, change in fair value of derivatives, gain/loss 26.9 25.1 on investment properties, contingent rent
Slide 32: Non-underlying Items
32 Non-underlying Items H1 2015 2014 (£'m) (£'m) Underlying EBITDA 26.9 25.1 Gain/(loss) on investment properties 43.9 (6.8) Depreciation (0.2) (0.2) Contingent rent (0.5) (0.4) Change in fair value of derivatives 0.2 0.7 Exceptional Items - restructuring costs - (0.4) - other - (0.2) Statutory Oper
Slide 33: Detailed Balance Sheet
33 Detailed Balance Sheet Group H1 2015 H1 2014 £’m £’m Assets Non-current assets Investment properties 737.6 674.3 Investment properties under construction 5.9 5.6 Other non-current assets 57.2 63.7 Non-current assets 800.7 743.6 Current assets 36.1 28.6 Liabilities Current liabilities (56.0) (45.4
Slide 34: H1 13/14 Underlying to Statutory Adjustments
34 H1 13/14 Underlying to Statutory Adjustments H1 13/14 Underlying to Statutory Adjustments Underlying Derivative Contingent Valuation Finance Dep'n LH Tax / Statutory Underlying Headings Exceptionals Statutory Headings P&L Movements Rent/ Dep'n Movement Lease Int properties CGS P&L Sales 46.9 46.9
Slide 35: H1 14/15 Underlying to Statutory Adjustments
35 H1 14/15 Underlying to Statutory Adjustments H1 14/15 Underlying to Statutory Adjustments Tax / Underlying Derivative Contingent Valuation Finance Dep'n LH Statutory Underlying Headings Exceptionals CGS / Statutory Headings P&L Movements Rent/ Dep'n Movement Lease Int properties P&L FX Sales 50.4
Slide 36: Movement in Cost Base
36 Movement in Cost Base Cost of Sales H1 Administrative Expenses H1 2015 2014 2015 2014 (£'m) (£'m) (£'m) (£'m) Reported cost of sales (16.5) (16.0) Reported administrative expenses (7.5) (6.3) Adjusted for: Adjusted for: Depreciation 0.2 0.2 Exceptional expense - 0.6 Contingent rent 0.5 0.4 Change
Slide 37: Group Exceptional Items – April 2015 Reported
37 Group Exceptional Items – April 2015 Reported H1 2015 H1 2014 Exceptional Costs (£m) (£m) Restructuring costs - (0.4) Other Exceptional items - (0.2) Total exceptional costs - (0.6)
Slide 38: Group Banking Covenants – April 2015 Reported
38 Group Banking Covenants – April 2015 Reported New Facility Covenants Interest Cover Ratio Loan to Value Consolidated level Sterling Loan to Value Quarterly to Apr 2013 Not less than 1.80:1 Quarterly to Apr 2015 Not more than 0.625:1 Quarterly to Apr 2014 Not less than 2.00:1 Thereafter Not more t
Slide 39: Group has hedged approximately two-thirds of its French profit exposure
39 The Group has hedged approximately two-thirds of its French profit exposure and partially mitigated the negative currency impact Actual € cover Swapped Rate Actual Rate Gain/(loss) €'000 € € £'000 H1 FY13 6,000 1.1392 1.1921 233 H2 FY13 4,500 1.2393 1.1700 (216) H1 FY14 5,250 1.2364 1.2086 (98) H
Slide 40: Operational Delivery
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Slide 41: National Accounts
41 National Accounts • National Accounts leverage UK platform further and now accounts for 11% of all occupancy in the UK • 65% of occupancy outside London • Sq.ft let up 25% over prior year • Storage revenue up 27% up on prior year.
Slide 42: Head office functions supporting revenue growth
42 Head office functions supporting revenue growth: • Customer support centre: Customer • CSC handled 14% of all enquiries IT & support • Supports the sales teams in store Systems centre • Industry leading IT solutions: • Automated contracts for seamless HR & Pricing & customer experience Training F
Slide 43: Portfolio Management
43 Portfolio Management
Slide 44: Portfolio strength with further potential
44 Portfolio strength with further potential • 121 Store portfolio • 5.0m maximum lettable area • 1.6m SqFt available Paris – 0.9m London, SE and Paris • 43 stores within the M25 UK • 24 stores in Paris • 15 stores in the South-east • 39 stores in the UK regions London • New store in London (Chiswic
Slide 45: Property valuation movement
45 Property valuation movement Key assumptions Apr 2015 Oct 2014 Average Self Storage Rate per Sq Ft £24.86 £24.24 Exit Cap Rate 7.37% 7.73% Weighted average stabilised occupancy 77.66% 77.81% Stabilised Occupancy in Sq Ft 3.99m 3.99m Average number of months to stabilised occupancy 31.6 29.7
Slide 46: No new stores opened in H1 2015. Pipeline unchanged
46 No new stores opened in H1 2015. Pipeline unchanged MLA Opened / estimated Pipeline store / site Full planning sq ft opening Stores opened in H1 2015 No openings Total sq ft added in FY 0 Development stores acquired / under contract Chiswick 43,000 2016 Wandsworth * 25,000 2017 Birmingham * ×
Slide 47: Very strong position in the two best European markets for storage
47 Very strong position in the two best 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 0.9 Madrid 151 5.2 Birmingham 59 2.3 Warsaw 45 1.7 Barcelona 116 4
Slide 48: Une Pièce en Plus – High potential demand and limited supply
48 Une Pièce en Plus – High potential demand and limited supply 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 49: Leading market positions in key UK regional conurbations
49 Leading market positions in key UK regional conurbations Data supplied by the UK Self Storage association - 2013 Safestore also has strong market positions in Newcastle (Pop. Den. 6,343) and Stockport (Pop. Den. 11,937)
Slide 50: High barriers to entry in major markets
50 High barriers to entry in major markets 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 2 storage centre opening inside Paris since 2005 – no known projects London •
Slide 51: French commercial lease statute provides security of tenure
51 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
Slide 52: Portfolio summary split geographically
52 Portfolio summary split geographically London & Rest of UK UK Paris Group South East Number of Stores 58 39 97 24 121 Let Square Feet (m SqFt) 1.55 1.14 2.69 0.78 3.47 Maximum Lettable Area (m SqFt) 2.22 1.80 4.02 1.01 5.03 Let Square Feet per store (k SqFt) 27 29 28 33 29 Average Store Capacity
Slide 53: Portfolio summary split by store maturity
53 Portfolio summary split by store maturity 2015 2014 Total Total Developing Established Mature Large Developing Established Mature Large (Sq ft (Sq ft (Sq ft ‘000) (Sq ft ‘000) (Sq ft ‘000) (Sq ft ‘000) (Sq ft ‘000) (Sq ft ‘000) (Sq ft ‘000) (Sq ft ‘000) ‘000) ‘000) Number of Stores 8 17 88 8 121
Slide 54: Portfolio summary split between freehold & leasehold
54 Portfolio summary split between freehold & leasehold 2015 2014 UK Paris Group UK Paris Group Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Number of Stores 65 32 13 11 78 43 64 33 12 13 76 46 Self storage income £m 19.5 10.5 5.4
Slide 55: Resilient business model
55 Resilient business model
Slide 56: Robust business
56 Robust business • Group Revenue has been growing steadily • The self storage model is attractive as a result of: • Longevity of customers (Average stay of existing customer is 110 weeks) • Value of individual customer is small (Largest customer only 0.2% of Revenue) • Demand drivers are varied
Slide 57: Safestore UK historical performance
57 Safestore UK historical performance
Slide 58: Safestore UK historical performance
58 Safestore UK historical performance
Slide 59: Customers
59 Customers
Slide 60: Customer average length of stay – Group
60 Customer average length of stay – Group Portfolio at Portfolio at Age of Store 1-2 Years 2-5 Years > 5 Years Apr 2014 Apr 2014 No of Stores 16 103 119 120 (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) Business Existing - - 81 18.8 144 33.3 137 31.7 136 31.3 Vacated - - 30 6.9 5
Slide 61: Customer average length of stay in the UK
61 Customer average length of stay in the UK Portfolio at Portfolio at Age of Store 1-2 Years 2-5 Years > 5 Years Apr 2015 Apr 2014 No of Stores - 10 85 95 95 (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) Business Existing - - 84 19.4 139 32.0 134 30.8 134 30.9 Vacated - - 29 6.7
Slide 62: Customer average length of stay in France
62 Customer average length of stay in France Portfolio at Portfolio at Age of Store 1-2 Years 2-5 Years > 5 Years Apr 2015 Apr 2014 No of Stores - 5 19 24 25 (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) Business Existing - - 77 17.8 156 36.1 141 32.5 135 31.2 Vacated - - 31 7.2 5
Slide 63: Length of stay based on H1 customers
63 Length of stay based on H1 customers UK FR Group H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) Business Existing 131 30 134 31 126 29 135 31 130 30 136 31 Vacated 56 13 55 13 62 14 70 16 57 13 58 13 Total 109 25 110 2
Slide 64: Group Customer split as at Apr 2015
64 Group Customer split as at 30 Apr 2015
Slide 65: Business and domestic numbers
65 Business and domestic numbers Business and Personal Customers UK Paris Personal Customers Numbers (% of total) 70% 80% Square feet occupied (% of total) 47% 63% Average Length of Stay (months) 21.5 26.8 Business Customers Numbers (% of total) 30% 20% Square feet occupied (% of total) 53% 37% Aver