Safestore Holdings Plc · LSE:SAFE
Safestore — FY2017 Earnings Presentation
65 slides from Safestore's earnings presentation, Jan 9, 2018
Slide 1: Full Year Results Presentation 09 Jan 2018
11 Full Year Results Presentation 09 Jan 2018
Slide 2: Frederic Vecchioli
New London Wandsworth Store Frederic Vecchioli
Slide 3: Strong record of value creation
Strong record of value creation +35% +44% +110% +141%
Slide 4: Highlights
4 Highlights Strong Financial Performance & Cash generation • Group Revenue up 10.0% at CER1 • Underlying EBITDA up 10.7% in CER1 • Cash Tax Adjusted Earnings per Share up 17.7% at 23.3p • 21.7% increase in final dividend to 9.8p (FY16: 8.05p) Operational Delivery • Group enquiry growth of 5.2% with
Slide 5: Andy Jones
New Birmingham Store Andy Jones
Slide 6: Financial highlights
6 Financial highlights Change vs Income Statement & Cash flow FY2017 FY2016 Absolute CER² Revenue (£’m) like-for-like1 117.7 5.9% 3.3% Underlying EBITDA (£’m) like-for-like1 66.6 8.3% 5.2% Revenue (£’m) 129.9 12.6% 10.0% Underlying EBITDA (£’m) 72.9 13.6% 10.7% Underlying EBITDA (post leasehold cost
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 1.53 1.22 2.75 0.82 3.57 Average Occupancy LFL 1 (sq ft ‘m) YoY = 3.4% 1.5% 1.2% 1.4% Act 74.5% 70.1% 72.5% 84.7% 75.0% Closing Occupancy LFL1 % YoY (0.8%pts) 2.2%pts 0.6%pts 4.0%pts 1.3%pts Act 29.80 1
Slide 8: Group P&L
8 Group P&L FY2017 FY2016 UK Paris Total UK Paris Total (£'m) (€'m) (£'m CER) (£'m) (€'m) (£'m CER) Revenue 97.5 37.2 126.9 87.4 35.4 115.4 Underlying Cost of Sales (35.6) (10.4) (43.8) (32.4) (9.7) (40.0) Store EBITDA 61.9 26.8 83.1 55.0 25.7 75.4 Store EBITDA Margin 63.5% 72.0% 65.5% 62.9% 72.6% 6
Slide 9: Revenue increase drives improved underlying EBITDA (after leasehold rent)
9 Revenue increase drives improved underlying EBITDA (after leasehold rent) Like-for-Like revenue: 3.7 New stores & Space Maker: 7.8 Employee remuneration: 0.3 Like-for-Like rent: 0.4 Other admin costs: 0.5 Closed stores and Space Maker: 0.7 Business rates & maintenance: (0.5) Volume related & emplo
Slide 10: Strong cash flow financing dividend
10 Strong cash flow financing dividend FY2017 FY2016 (£'m) (£'m) Underlying EBITDA 72.9 64.2 Working Capital/ Exceptionals/ Other 0.7 (1.8) Operating cash inflow 73.6 62.4 Interest payments (10.4) (9.5) Leasehold rent payments (10.3) (8.8) Tax payments (2.6) (1.7) Free cash flow (before investing an
Slide 11: Strong and flexible Balance Sheet
11 Strong and flexible Balance Sheet Capital Structure Oct 17 Oct 16 Variance Property valuation (£’m)* 1,007.0 954.2 5.5% UK (£’m)* 744.4 710.6 4.8% FR (€’m)* 298.6 270.9 10.2% Gross Debt (£’m) 363.6 315.7 £47.9m Adjusted Gross Debt (£’m) ** 363.6 294.9 £68.7m Net Debt (£’m) 298.0 310.3 (£12.3m) Ad
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 £1.4m to EBITDA in FY2017 The average EURO:GBP rate for 2017 was 1.1483 The earnings impact of every 1 cent movement in the FX rate is c. £100k Tax Effective underlying cash tax rate i
Slide 13: Adjusted Diluted EPRA EPS
13 Adjusted Diluted EPRA EPS • Going forward we will use the new EPS metric – Adjusted Diluted EPRA Earnings per share • Better reflects the underlying trading • Consistent with management remuneration • Limited difference to historic Cash Tax Adjusted EPS as set out in the table below: Earnings per
Slide 14: Frederic Vecchioli
14 Frederic Vecchioli
Slide 15: Overview
15 Overview All of the numbers include Space Maker on a pro-forma basis Favourable market dynamics: • Diversified demand drivers and geography generates resilient revenue • Limited new supply, c. 2% to 3% expected in 2018 • Very fragmented market Proven operational strategy: Leveraging leading platf
Slide 16: Diversified drivers and business geography generate resilient revenue and profits
16 Diversified drivers and business geography generate resilient revenue and profits c. 8% - 13% owner occupier UK moving owner occupier represent close to 20% group new lets but c. 10% of revenue due The end of 2012 VAT was introduced on self storage to shorter stay and smaller size All prior years
Slide 17: Limited Supply
17 Limited Supply Growing and fragmented industry: • 1,430 self storage sites (of which 317 are container sites) – 693 storage businesses • Fragmented market with the six UK largest operators only owning (123 stores) 327 stores Paris • 25 new store openings in 2016 (27 stores) • c. 25 – 40 new store
Slide 18: Paris unique competitive market position
18 Paris unique competitive market position Unique position in central Paris Density of storage facilities is low, to reach US density would equate to 1,800 new stores Significant barriers to entry UPP Stores Competitors
Slide 19: Leveraging leading marketing platform
19 Leveraging leading marketing platform Safestore capturing growing market share: Self Storage Association 2017 Survey • 81% of group enquiries generated online emphasizes the need for search engine • Website delivered FY2017 UK enquiry growth of efficiency: 4.7% with Space Maker on pro forma basis
Slide 20: Balanced occupancy and rate management
20 Balanced occupancy and rate management UK Paris Group LFL1 CER2 Revenue YoY +3.1% +4.0% +3.3% New let square feet (Space Maker pro forma): • +3.1% in the UK in FY2017 • Stronger growth in the UK regions (+5.4%) versus London / South East (+1.2%) • +8.2% in Paris in FY2017 Group occupancy movement
Slide 21: Paris: 19 years of uninterrupted growth
21 Paris: 19 years of uninterrupted growth Very solid market fundamentals: • MLA increased by 9.3% - Closing occupancy up 8.5% • Unique and densest network of stores in central Paris • Opportunity to leverage digital platform • Rare development opportunities mainly in second belt • New store in Comb
Slide 22: Alligator
22 Alligator • Acquisition of Alligator for £56m (Subject to working capital adjustment) • 12 well invested stores (11th largest portfolio in the UK) – 10 freeholds & long leasehold – 2 short leaseholds (15.3 years remaining) • Maximum lettable area of 569k sq ft • 70% occupied at time of acquisitio
Slide 23: Property
23 Property Net new space of c. 1.5m sq ft added in last two years or in pipeline Six new stores completed Two extensions +263,000 sq ft MLA: +27,500 sq ft MLA: • London Chiswick • London Acton • Birmingham • Paris Longpont • London Wandsworth • Paris Emerainville Acquisitions • Altrincham +1,065,00
Slide 24: Asset Management
24 Asset Management Portfolio Management • Deptford Lease regears – demonstrable track record • Oldbury • c. 51% of UK leases regeared since 2012 (including Space Maker) Flexible ownership model and disciplined acquisition strategy provide attractive return on investments
Slide 25: Primary focus on existing assets
25 Primary focus on existing assets Group London & UK Paris SE Regions Maximum lettable area (m sq ft) 6.28 2.58 2.53 1.17 Let Square Feet (m sq ft) 4.54 1.91 1.74 0.89 Available space (m sq ft) 1.74 0.67 0.79 0.28 Fully invested portfolio of 6.28m square feet including Alligator 1.7m available – eq
Slide 26: Well positioned for further growth
26 Well positioned for further growth Attractive market • Young and growing industry • Secure and diversified income stream from 60,000 customers • Customers staying on average 9.6 months (existing customers 24.4 months) • Resilient during downturn Unique portfolio • Leading presence in key markets
Slide 27: Appendices
27 Appendices
Slide 28: Index
28 Index: Financial 52 French leases 30 Detailed P&L 31 Non-underlying items Portfolio summary: 32 Detailed Balance Sheet 53 Geographic 33 Underlying to Statutory Adjustments 55 Freehold / Leasehold 35 Movement in Cost Base 56 Freehold / Leasehold (LFL CER) 36 Refinance 57 Maturity 37 Group Banking
Slide 29: Financial
W) t Financial
Slide 30: Detailed P&L
30 Detailed P&L Group FY2017 FY2016 £’m £’m Revenue 129.9 115.4 Cost of sales (45.7) (40.9) Gross profit 84.2 74.5 Administrative expenses (13.8) (12.5) Negative goodwill on acquisition of subsidiary - 5.6 Underlying EBITDA * 72.9 64.2 Exceptional Items (1.4) 4.3 Depreciation and contingent rent (1.
Slide 31: Non-underlying items
31 Non-underlying items FY2017 FY2016 (£'m) (£'m) Underlying EBITDA 72.9 64.2 Gain on investment properties 39.2 41.7 Depreciation (0.5) (0.4) Contingent rent (0.6) (0.5) Costs incurred relating to corporate transactions (1.4) (1.3) Negative goodwill on acquisition of subsidiary - 5.6 Statutory Oper
Slide 32: Detailed Balance Sheet
32 Detailed Balance Sheet Group FY2017 FY2016 £’m £’m Assets Non-current assets Investment properties 999.2 943.3 Investment properties under construction 7.8 10.9 Other non-current assets 60.3 84.1 Non-current assets 1,067.3 1,038.3 Current assets 89.3 28.6 Liabilities Current liabilities (55.6) (5
Slide 33: FY2017 Underlying to Statutory Adjustments
33 FY2017 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 129.9 129.9 Revenue Cost of Sales / Administrative
Slide 34: FY2016 Underlying to Statutory Adjustments
34 FY2016 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 115.4 115.4 Revenue Cost of Sales / Administrative
Slide 35: Movement in Cost Base
35 Movement in Cost Base Cost of Sales Administrative Expenses FY2017 FY2016 FY2017 FY2016 (£'m) (£'m) (£'m) (£'m) Reported cost of sales (45.7) (40.9) Reported administrative expenses (13.8) (12.5) Adjusted for: Adjusted for: Depreciation 0.5 0.4 Exceptional and non-underlying items 1.4 1.3 Conting
Slide 36: Refinancing completed 2017
36 Refinancing completed 2017 Previous New Facilities 2020 UK Term Loan £126m 2022 UK Revolver £250m 2020 UK Revolver £125m 2022 Euro Revolver €70m 2020 Euro Revolver €70m 2024 USPP €51m (1.59%) 2019 USPP $66m (5.83%) 2027 USPP €74m (2.00%) 2024 USPP $47m (6.74%) 2029 USPP £51m (2.92%) UK Accordion
Slide 37: Group Banking Covenants – Oct 2017
37 Group Banking Covenants – Oct 2017 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 38: Group Debt position at 31 Oct 2017
38 Group Debt position at 31 Oct 2017 Term Facility Drawn Hedged Hedged Bank Hedged Floating Total £/€'m £'m £'m % Margin Rate Rate Rate UK Term Loan Jun-22 £ 250.0 166.0 100.0 60% 1.25% 0.81% 0.44% 1.91% UK Revolver - non-utilisation £ 84.0 - - - 0.50% - - 0.50% Euro Revolver Jun-22 € 70.0 37.8 26.
Slide 39: Operational Delivery
Poe] Operational Delivery
Slide 40: Growing National Accounts platform
40 Growing National Accounts platform • National Accounts leverage UK platform further and now accounts for 12% of all occupancy in the UK • Two-thirds of customers outside London • Storage revenue up 17% on prior year
Slide 41: Head Office Functions supporting revenue growth
41 Head Office Functions supporting revenue growth: • Customer Support Centre: Customer IT & • CSC handled 18% of all Support enquiries Systems Centre • Supports the sales teams in store HR & Pricing & • Industry leading IT solutions: Training Finance • Automated contracts for seamless customer expe
Slide 42: Portfolio Management
; Portfolio Management :
Slide 43: Portfolio strength with further potential
43 Portfolio strength with further potential Total Portfolio (Including Alligator and Pipeline stores): • 150 store portfolio • 6.3m maximum lettable area • 1.7m sq ft available – 0.9m London, South East and Paris Current Portfolio (As 31 Oct 17) UK (123 stores) • 43 stores within the M25 • 26 store
Slide 44: Densest network of stores in London and Paris
Densest network of stores in 44 London and Paris Paris and London combined represent 69 stores – £79.4m of Revenue, £55.1m of Store EBITDA and 43% of currently unoccupied square feet
Slide 45: Property valuation movement
45 Property valuation movement (excluding investment properties under construction) Key assumptions Oct 2017 Apr 2017* Oct 2016 Average Self Storage rate per sq ft £26.67 £26.85 £26.17 Exit Cap rate (Freehold only) 7.1% 7.2% 7.2% Weighted average stabilised occupancy 80.9% 80.8% 80.2% Stabilised occ
Slide 46: New stores and Pipeline
46 New stores and Pipeline Total MLA Pipeline store / site Planning Estimated opening sq ft Stores opened in FY2017 London Chiswick 42,500 Paris Combs-la-Ville (opened June 2017) 73,500 Total sq ft added in FY2017 116,000 Development stores acquired / under contract London Mitcham 54,000 2018 Birmin
Slide 47: Development characteristics
47 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 23% of market* • Excluding container sto
Slide 48: Very strong position in the two best European markets for storage
48 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 49: Une Pièce en Plus – strong market characteristics
49 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 50: Leading market positions in key UK regional conurbations
50 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 51: Paris development characteristics
51 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 52: French Commercial Lease Statute provides security of tenure
52 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 53: Portfolio summary split geographically
53 Portfolio summary split geographically London & Rest of UK UK Paris Group South East Number of stores 62 46 108 26 134 Let Square Feet (m sq ft) 1.78 1.47 3.25 0.89 4.14 Maximum Lettable Area (m sq ft) 2.42 2.12 4.54 1.17 5.71 Let Square Feet per store (k sq ft) 29 32 30 34 31 Average Store Capac
Slide 54: Portfolio summary split geographically (Including Alligator)
54 Portfolio summary split geographically (Including Alligator) London & Rest of UK UK Paris Group South East Number of stores 67 53 120 26 146 Let Square Feet (m sq ft) 1.91 1.74 3.65 0.89 4.54 Maximum Lettable Area (m sq ft) 2.58 2.53 5.11 1.17 6.28 Let Square Feet per store (k sq ft) 28 33 30 34
Slide 55: Portfolio summary split between freehold & leasehold
55 Portfolio summary split between freehold & leasehold FY 2017 FY 2016 UK Paris Group UK Paris Group Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Number of stores 73 35 15 11 88 46 72 36 14 11 86 47 MLA self-storage only (m) 3.133
Slide 56: Portfolio summary split between freehold & leasehold (LFL CER)
56 Portfolio summary split between freehold & leasehold (LFL CER) FY 2017 FY 2016 UK Paris Group UK Paris Group Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Number of stores 63 29 13 11 76 40 63 29 13 11 76 40 MLA self storage only
Slide 57: Portfolio summary split by maturity
57 Portfolio summary split by maturity FY 2017 FY 2016 Developing Established Mature Total Developing Established Mature Total Number of stores 6 6 122 134 4 6 123 133 MLA self storage only (m) 0.304 0.305 5.095 5.704 0.183 03.05 5.106 5.594 Closing Occupancy (m) 0.136 0.248 3.731 4.115 0.030 0.244
Slide 58: Portfolio summary split by maturity (LFL CER)
58 Portfolio summary split by maturity (LFL CER) FY 2017 FY 2016 Established Mature Total Established Mature Total Number of stores 6 110 116 6 110 116 MLA self storage only (m) 0.305 4.560 4.865 0.305 4.560 4.865 Closing Occupancy (m) 0.248 3.374 3.622 0.244 3.305 3.549 Occupancy (%) 81.3% 74.0% 74
Slide 59: Resilient business model
Slide 60: Safestore UK historic performance
60 Safestore UK historic performance
Slide 61: Safestore UK historical performance
61 Safestore UK historical performance
Slide 62: Customers
Customers
Slide 63: Customer length of stay
63 Customer length of stay UK Paris Group FY2017 FY2016 FY2017 FY2016 FY2017 FY2016 (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) (wks) (mths) Business Existing 132 30.4 131 30.1 138 31.9 136 31.3 133 30.7 132 30.3 Vacated 55 12.6 55 12.6 57 13.1 55 12.7 55 12.7 55 12.6 Total 64 1
Slide 64: Group customer split as at 31 Oct 2017
64 Group customer split as at 31 Oct 2017
Slide 65: Personal and business customers as at 31 Oct 2017
65 Personal and business customers as at 31 Oct 2017 Personal and Business Customers UK Paris Personal Customers Numbers (% of total) 72% 82% Square feet occupied (% of total) 51% 67% Average length of stay (months) 20.5 26.6 Business Customers Numbers (% of total) 28% 18% Square feet occupied (% of