Safestore Holdings Plc · LSE:SAFE
Safestore — H1 2018 Earnings Presentation
58 slides from Safestore's earnings presentation, Jun 14, 2018
Slide 1: Half Year Results Presentation 14 June 2018
11 Half Year Results Presentation 14 June 2018
Slide 2: Introduction
Mitcham Store Introduction Frederic Vecchioli Frederic Vecchioli
Slide 3: Strong record of value creation
Strong record of value creation +48% +53% +110% +132% EBITDA and EPRA EPS adjusted for historic share based payment charges and current dilutive shares
Slide 4: Highlights
4 Highlights Good Financial Performance • Group Revenue up 10.5% (9.7% at CER¹) • Group like-for-like² revenue at CER¹ up 4.6%, UK +4.3% and Paris +5.6% • Adjusted Diluted EPRA EPS up 21.2% at 12.6p • 21.4% increase in the interim dividend to 5.1p Operational delivery • Group like-for-like² occupanc
Slide 5: Financials
Birmingham Central Store Financials Andy AndyJones Jones
Slide 6: Financial highlights
6 Financial highlights Change vs Income Statement & Cash flow H1 2018 H1 2017 Absolute CER² Revenue (£’m) like-for-like1 64.7 5.4% 4.6% Underlying EBITDA (£’m) like-for-like1 36.7 7.6% 6.7% Revenue (£’m) 69.2 10.5% 9.7% Underlying EBITDA (£’m) 39.1 12.0% 11.2% Underlying EBITDA (post leasehold costs
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 1.75 1.41 3.16 0.87 4.03 Average Occupancy LFL1 (sq ft ‘m) YoY 3.6% 5.2% 4.3% 7.4% 4.9% Act 73.8% 69.4% 71.7% 80.4% 73.4% Closing Occupancy LFL1 % YoY 3.4%pts 3.9%pts 3.5%pts 3.1%pts 3.5%pts Act 28.85 1
Slide 8: Group P&L
8 Group P&L H1 2018 H1 2017 UK Paris Total UK Paris Total (£'m) (€'m) (£'m CER) (£'m) (€'m) (£'m CER) Revenue 52.4 19.0 68.7 47.3 17.9 62.6 Underlying Cost of Sales (19.5) (5.5) (24.3) (17.9) (5.0) (22.1) Store EBITDA 32.9 13.5 44.4 29.4 12.9 40.5 Store EBITDA Margin 62.8% 71.1% 64.6% 62.2% 72.1% 64
Slide 9: Revenue increase drives improved EBITDA (after leasehold rent)
9 Revenue increase drives improved EBITDA (after leasehold rent) Like-for-Like revenue: 2.8 New & closed stores & Alligator: 3.3 Facilities & maintenance: (0.3) Volume related & employee: 0.7 New & closed stores & Alligator: 1.8 CER 12.0% improvement
Slide 10: Strong cash conversion
10 Strong cash conversion H1 2018 H1 2017 (£'m) (£'m) Underlying EBITDA 39.1 34.9 Working Capital/ Other (2.2) 0.7 Operating cash inflow 36.9 35.6 Interest payments (4.1) (5.8) Leasehold rent payments (5.4) (5.0) Tax payments (4.3) (1.6) Free cash flow (before investing and financing activities) 23.
Slide 11: Strong and flexible Balance Sheet
11 Strong and flexible Balance Sheet Capital Structure Apr 18 Oct 17 Variance Apr 17 Property valuation (£’m)* 1,129.2 1,007.0 12.1% 980.3 UK (£’m)* 860.2 744.4 15.6% 738.2 FR (€’m)* 306.0 298.6 2.5% 287.8 Gross Debt (£’m) 368.6 363.6 £5.0m 311.4 Adjusted Gross Debt (£’m) ** 368.6 363.6 £5.0m 298.5
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 £0.2m to EBITDA after leasehold rent in H1 2018 In the half year, each 10c fluctuation from last year’s H1 FX rate of 1.17 would equate to c. £0.8m of Group EBITDA and £0.4m of Earning
Slide 13: Operations
London Chiswick Store bb: i. fi Frederic Vecchioli
Slide 14: Operations overview
14 Operations overview Continuing delivery through proven operational strategy: Leveraging leading marketing platform: • Competitive advantage of scale – growing market share • Group enquiry growth +8.8% in H1 2018 (including Alligator) and 1.5% excluding Alligator. • Group enquiry growth +39.7% ove
Slide 15: Leveraging leading marketing platform
15 Leveraging leading marketing platform Safestore growing market share: Self Storage Association Survey emphasizes • 82% of group enquiries generated online the need for search engine efficiency: • Websites delivered H1 2018 group enquiry growth • 67% of potential customers would use the of 8.8% in
Slide 16: Balanced occupancy and rate management
16 Balanced occupancy and rate management Like-for-like¹ UK Paris Rate per Closing Revenue Rate per Closing Revenue Sq Ft Sq Ft Let in CER² Sq Ft Sq Ft Let in 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 17: Diversified drivers and business geography generate resilient revenue and profits
17 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 18: Occupancy and MLA
18 Occupancy and MLA 1.8m sq ft available plus 0.3m sq ft pipeline
Slide 19: Primary focus on existing assets
19 Primary focus on existing assets As at 30 April 2018 Group London & UK Paris SE Regions Maximum lettable area (m sq ft) 6.29 2.63 2.49 1.17 Pipeline MLA (m sq ft) 0.26 0.08 0.06 0.13 Paddington closure (0.02) (0.02) - - Total MLA (m sq ft) 6.53 2.69 2.55 1.30 Let Square Feet (m sq ft) 4.50 1.90 1
Slide 20: Paris unique competitive market position
20 Paris unique competitive market position Very solid market fundamentals: • 20 years of uninterrupted growth • Closing occupancy up 8.4% • Unique and densest network of stores in central Paris • Opportunity to leverage digital platform • Poissy to open in 2018 (80,000 sq ft) • Magenta to open 2019
Slide 21: Limited UK Supply
21 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 334 UK stores (120 stores) • c. 30 new comparable store openings in 2017 • c. 25 – 40 new stores
Slide 22: Asset Management
22 Asset Management Portfolio Management • Plan to redevelop and extend a small number of older stores Lease regears – demonstrable track record • c. 51% of UK leases regeared since 2012 (excluding Alligator) Flexible ownership model and disciplined acquisition strategy provides attractive return on
Slide 23: Well positioned for further growth
23 Well positioned for further growth Attractive market • Immature and growing industry • Growing demand, very limited supply growth • Secure and diversified income stream from 60,000 customers • Customers staying on average 9.7 months (existing customers 24.9 months) • Resilient during downturn Uni
Slide 24: Appendices
24 Appendices
Slide 25: Index
25 Index: Financial Portfolio summary: 27 Detailed P&L 48 Geographic 28 Non-underlying items 49 Freehold / Leasehold 29 Detailed Balance Sheet 50 Freehold / Leasehold (LFL CER) 30 Underlying to Statutory Adjustments 51 Maturity 32 Movement in Cost Base 52 Maturity (LFL CER) 33 Group Banking Covenant
Slide 26: Financial
W) t Financial
Slide 27: Detailed P&L
27 Detailed P&L Group H1 2018 H1 2017 £’m £’m Revenue 69.2 62.6 Cost of sales (25.3) (22.5) Gross profit 43.9 40.1 Administrative expenses (8.4) (6.3) Underlying EBITDA * 39.1 34.9 Share based payments (2.7) (0.7) Depreciation and contingent rent (0.9) (0.4) Operating profit before gain on investmen
Slide 28: Non-underlying items
28 Non-underlying items H1 2018 H1 2017 (£'m) (£'m) Underlying EBITDA 39.1 34.9 Gain on investment properties 51.8 30.8 Depreciation (0.3) (0.2) Contingent rent (0.6) (0.2) Share-based payments (2.7) (0.7) Statutory Operating Profit 87.3 64.6
Slide 29: Detailed Balance Sheet
29 Detailed Balance Sheet Group H1 2018 H1 2017 £’m £’m Assets Non-current assets Investment properties 1,120.8 972.0 Investment properties under construction 8.4 8.3 Other non-current assets 65.4 72.8 Non-current assets 1,194.6 1,053.1 Current assets 32.2 32.9 Liabilities Current liabilities (57.6)
Slide 30: H1 2018 Underlying to Statutory adjustments
30 H1 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 69.2 69.2 Revenue Cost of Sales / Adminis
Slide 31: H1 2017 Underlying to Statutory adjustments
31 H1 2017 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 62.6 62.6 Revenue Cost of Sales / Adminis
Slide 32: Movement in Cost Base
32 Movement in Cost Base Cost of Sales Administrative Expenses H1 2018 H1 2017 H1 2018 H1 2017 (£'m) (£'m) (£'m) (£'m) Reported cost of sales (25.3) (22.5) Reported administrative expenses (8.4) (6.3) Adjusted for: Adjusted for: Depreciation 0.3 0.2 Share based payments 2.7 0.7 Contingent rent 0.6 0
Slide 33: Group Banking Covenants
33 Group Banking Covenants – Apr 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 34: Group Debt position at 30 Apr 2018
34 Group Debt position at 30 Apr 2018 Term Facility Drawn Hedged Hedged Bank Hedged Floating Total £/€/$'m £'m £'m % Margin Rate Rate Rate UK Revolver Jun 22 £ 250.0 171.0 135.0 79% 1.25% 0.94% 0.71% 2.14% UK Revolver - non-utilisation £ 79.0 - - - 0.50% - - 0.50% Euro Revolver Jun 22 € 70.0 37.8 26
Slide 35: Operational Delivery
Poe] Operational Delivery
Slide 36: National Accounts and Customer Support Centre
36 National Accounts and Customer Support Centre National Accounts: • Leverage UK platform further and accounts for 11% of all occupancy in the UK • Two-thirds of customers outside London Customer Support Centre: • CSC handled 13% of all enquiries • Supports the sales teams in store
Slide 37: Portfolio Management
; Portfolio Management :
Slide 38: Portfolio strength with further potential
38 Portfolio strength with further potential • 146 store portfolio • 6.3m maximum lettable area • 1.8m sq ft available – 1.0m London, South East and Paris • 45 stores within the M25 • 26 stores in Paris • 23 stores in the South East UK • 52 stores in the UK regions (120 stores) • New stores opened i
Slide 39: Densest network of stores in London and Paris
Densest network of stores in 39 London and Paris Paris and London combined represent 71 stores – £40.3m of Revenue, £27.6m of Store EBITDA
Slide 40: Property valuation movement
40 Property valuation movement (excluding investment properties under construction) Key assumptions Apr 2018* Oct 2017 Apr 2017* Average Self Storage rate per sq ft £25.91 £26.67 £26.85 Exit Cap rate (Freehold only) 7.1% 7.1% 7.2% Weighted average stabilised occupancy 83.4% 80.9% 80.8% Stabilised oc
Slide 41: New and pipeline stores
41 New and pipeline stores Total MLA Pipeline store / site Estimated opening sq ft Stores opened in H1 2018 London Mitcham 54,000 Total sq ft added in H1 2018 54,000 Development stores acquired / under contract Birmingham Merry Hill 55,000 2019 London Paddington Marble Arch (Opened Jun 18) 37,000 20
Slide 42: Development characteristics
42 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 43: Very strong position in the two best European markets for storage
43 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 44: Une Pièce en Plus – strong market characteristics
44 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 45: Leading market positions in key UK regional conurbations
45 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 46: Paris development characteristics
46 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 47: French Commercial Lease Statute provides security of tenure
47 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 48: Portfolio summary split geographically
48 Portfolio summary split geographically London & Rest of UK UK Paris Group South East Number of stores 68 52 120 26 146 Let Square Feet (m sq ft) 1.90 1.70 3.60 0.90 4.50 Maximum Lettable Area (m sq ft) 2.63 2.49 5.12 1.17 6.29 Let Square Feet per store (k sq ft) 28 33 30 35 31 Average Store Capac
Slide 49: Portfolio summary split between freehold and leasehold
49 Portfolio summary split between freehold and leasehold H1 2018 H1 2017 UK Paris Group UK Paris Group Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Number of stores 83 37 15 11 98 48 73 36 14 11 87 47 MLA self-storage only (m) 3.6
Slide 50: Portfolio summary split between freehold and leasehold (LFL CER)
50 Portfolio summary split between freehold and leasehold (LFL CER) H1 2018 H1 2017 UK Paris Group UK Paris Group Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Number of stores 72 34 14 11 86 45 72 34 14 11 86 45 MLA self storage on
Slide 51: Portfolio summary split by maturity
51 Portfolio summary split by maturity H1 2018 H1 2017 Developing Established Mature Total Developing Established Mature Total Number of stores 7 0 139 146 5 6 123 134 MLA self storage only (m) 0.358 0.000 5.928 6.286 0.230 0.305 5.107 5.642 Closing Occupancy (m) 0.156 0.000 4.312 4.468 0.072 0.244
Slide 52: Portfolio summary split by maturity (LFL CER)
52 Portfolio summary split by maturity (LFL CER) H1 2018 H1 2017 Developing Established Mature Total Developing Established Mature Total Number of stores 5 0 126 131 5 6 120 131 MLA self storage only (m) 0.230 0.000 5.344 5.574 0.230 0.305 5.016 5.551 Closing Occupancy (m) 0.136 0.000 3.929 4.065 0.
Slide 53: Resilient business model
Slide 54: Safestore UK historic performance
54 Safestore UK historic performance EBITDA in 2017 and 2018 has been adjusted for Share based payment charge
Slide 55: Customers
Customers
Slide 56: Customer length of stay
56 Customer length of stay UK Paris Group H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 (mths) (mths) (mths) (mths) (mths) (mths) Business Existing 30.7 30.7 32.5 31.5 31.1 30.8 Vacated 12.5 12.6 13.2 13.0 12.7 12.7 Total 14.7 14.8 15.6 15.4 14.9 14.9 Personal Existing 21.1 21.0 27.6 27.1 22.9 22.
Slide 57: Group customer split as at 30 Apr 2018
57 Group customer split as at 30 Apr 2018
Slide 58: Personal and business customers as at 30 April 2018
58 Personal and business customers as at 30 April 2018 Personal and Business Customers UK Paris Personal Customers Numbers (% of total) 73% 82% Square feet occupied (% of total) 52% 66% Average length of stay (months) 21.1 27.6 Business Customers Numbers (% of total) 27% 18% Square feet occupied (%