Safestore Holdings Plc · LSE:SAFE
Safestore — H1 2019 Earnings Presentation
58 slides from Safestore's earnings presentation, Jun 18, 2019
Slide 1: Half Year Results Presentation 18 Jun 2019
11 Half Year Results Presentation 18 Jun 2019
Slide 2: Introduction
Mitcham Store Introduction Frederic Vecchioli Frederic Vecchioli
Slide 3: Strong record of value creation
Strong record of value creation +55% +68% +181% +197% EBITDA and EPRA EPS adjusted for historic share based payment charges and current dilutive shares
Slide 4: Highlights
4 Highlights Robust Financial Performance • Group Revenue up 5.6% (5.9 % at CER¹) • Group like-for-like² revenue at CER¹ up 5.9% with UK up 5.6% and Paris up 6.3% • Adjusted Diluted EPRA EPS up 7.1% at 13.5p • 7.8% increase in the interim dividend to 5.5p Operational and Strategic Progress • Continu
Slide 5: Financials
Birmingham Central Store Financials Andy AndyJones Jones
Slide 6: Financial highlights
6 Financial highlights Change vs Income Statement & Cash flow HY 2019 HY 2018 Absolute CER² Revenue (£’m) like-for-like1 72.1 5.6% 5.9% Underlying EBITDA (£’m) like-for-like1 41.2 6.5% 6.7% Revenue (£’m) 73.1 5.6% 5.9% Underlying EBITDA (£’m) 41.4 5.9% 6.1% 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 1.89 1.73 3.62 0.95 4.57 Average Occupancy LFL1 (sq ft ‘m) YoY 2.2% 3.6% 2.8% 8.0% 3.9% Act 75.3% 69.8% 72.6% 81.7% 74.3% Closing Occupancy LFL1 % YoY 1.4ppts 1.8ppts 1.6ppts 4.7ppts 2.2ppts Act 29.10 1
Slide 8: Group P&L
8 Group P&L HY 2019 HY 2018 UK Paris Total UK Paris Total (£'m) (€'m) (£'m CER) (£'m) (€'m) (£'m CER) Revenue 55.2 20.5 73.3 52.4 19.0 69.2 Underlying Cost of Sales (20.6) (5.8) (25.7) (19.5) (5.5) (24.4) Store EBITDA 34.6 14.7 47.6 32.9 13.5 44.8 Store EBITDA Margin 62.7% 71.7% 64.9% 62.8% 71.1% 64
Slide 9: Revenue increase drives improved EBITDA (after leasehold rent)
9 Revenue increase drives improved EBITDA (after leasehold rent) Facilities & maintenance: 0.5 Like-for-Like revenue: 4.0 Volume related: 0.4 New & closed stores: 0.1 Other: 0.2 New & closed stores: 0.2 CER 7.4% improvement
Slide 10: Strong cash conversion
10 Strong cash conversion HY 2019 HY 2018 (£'m) (£'m) Underlying EBITDA 41.4 39.1 Working Capital/ Exceptionals/ Other (1.4) (2.2) Operating cash inflow 40.0 36.9 Interest payments (4.3) (4.1) Leasehold rent payments (5.3) (5.4) Tax payments (2.8) (4.3) Free cash flow (before investing and financing
Slide 11: Strong and flexible Balance Sheet
11 Strong and flexible Balance Sheet Capital Structure Apr 19 Oct 18 Variance Apr 18 Property valuation (£’m)* 1,238.7 1,220.9 1.5% 1,129.2 UK (£’m)* 936.1 921.1 1.6% 860.2 FR (€’m)* 351.0 337.2 4.1% 306.0 Gross Debt (£’m) 384.5 369.9 £14.6m 368.6 Net Debt (£’m) 365.9 359.4 £6.5m 363.2 Group LTV 31.
Slide 12: Guidance – non trading and one-off items
12 Guidance – non trading and one-off items Item Guidance Foreign exchange impact Weakening of the Euro diluted EBITDA after leasehold rent by £0.1m in HY 2019 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 Effe
Slide 13: Frederic Vecchioli
London Chiswick Store bb: i. fi Frederic Vecchioli
Slide 14: Operations overview
14 Operations overview New let growth +11% in HY 2019 driven by increased conversion • Efficient marketing platform drives better targeted enquiries • Continued investment in pricing and analytics • Key role of store teams training and coaching Like-for-like CER Revenue growth +5.9% • LFL-CER revenu
Slide 15: Leveraging leading marketing platform
15 Leveraging leading marketing platform Marketing efficiency increased further • Search demand stable • Group new let growth +11% • UK: +10% • FR: +15% • Group marketing budget down from 5.5% to sub 5% of revenue • Requires Focus, Innovation and Scale to succeed • Scale allows for investment to opt
Slide 16: Pricing
16 Pricing Rate growth (CER) impacted by new stores and acquisitions: • 2.4% in the UK • 2.6% like-for-like • (1.4%) in Paris • (0.8%) like-for-like • Paris rate impacted by recently opened Combs la Ville store, without this LFL store rate would be +1.1% year to date 2019 Balanced Revenue Management
Slide 17: Balanced occupancy and rate management
17 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 18: Like-for-like group performance last five years
18 Like-for-like group performance last five years Last 5.5 years: Occupancy: +20% Rate: +13% 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
Slide 19: Development
19 Development Pipeline since 2016: MLA Occupancy at FY 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) 569,000 398,300 2017 Lo
Slide 20: 1.7m square feet fully invested available
20 1.7m square feet fully invested available – equivalent of around 40 new stores As at 30 April 2019 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) 4.65 1.94 1.74 0.97 Current Available space (m sq ft) 1.72 0.69 0.75 0.28 Pip
Slide 21: Occupancy and MLA
21 Occupancy and MLA 1.7m sq ft available plus 0.25m sq ft pipeline
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: Flexible investment model
23 Flexible investment model UK Lease regears – demonstrable track record • c. 58% of UK leases regeared since 2012 • Edinburgh Gyle, Edinburgh Ford Kinnaird and Portsmouth regeared in HY 2019 • All leases in England within renewal protection rights of the Landlord and Tenant Act FR lease regularly
Slide 24: Total Shareholder Return
24 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 25: Well positioned for further growth
25 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 26: Appendices
26 Appendices
Slide 27: Index
27 Index: Financial 28 Detailed P&L Portfolio summary: 29 Non-underlying items 50 Geographic 30 Detailed Balance Sheet 51 Freehold / Leasehold 31 Underlying to Statutory Adjustments 52 Freehold / Leasehold (LFL CER) 33 Movement in Cost Base 53 Maturity 34 Group Banking Covenants 54 Maturity (LFL CER
Slide 28: Detailed P&L
28 Detailed P&L Group HY 2019 HY 2018 £’m £’m Revenue 73.1 69.2 Cost of sales (26.4) (25.3) Gross profit 46.7 43.9 Administrative expenses (8.7) (8.4) Underlying EBITDA * 41.4 39.1 Exceptional Items - - Depreciation and contingent rent (0.7) (0.9) Share based payments (2.7) (2.7) Operating profit be
Slide 29: Non-underlying items
29 Non-underlying items HY 2019 HY 2018 (£'m) (£'m) Underlying EBITDA 41.4 39.1 Gain on investment properties 7.9 51.8 Depreciation (0.4) (0.3) Contingent rent (0.3) (0.6) Share-based payments (2.7) (2.7) Exceptional items - - Statutory Operating Profit 45.9 87.3
Slide 30: Detailed Balance Sheet
30 Detailed Balance Sheet Group HY 2019 HY 2018 £’m £’m Assets Non-current assets Investment properties 1,226.5 1,120.8 Investment properties under construction 12.2 8.4 Other non-current assets 63.5 65.4 Non-current assets 1,302.2 1,194.6 Current assets 46.9 32.2 Liabilities Current liabilities (58
Slide 31: HY 2019 Underlying to Statutory adjustments
31 HY 2019 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 73.1 73.1 Revenue Cost of Sales / Adminis
Slide 32: HY 2018 Underlying to Statutory adjustments
32 HY 2018 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 69.2 69.2 Revenue Cost of Sa
Slide 33: Movement in Cost Base
33 Movement in Cost Base Cost of Sales Administrative Expenses HY 2019 HY 2018 HY 2019 HY 2018 (£'m) (£'m) (£'m) (£'m) Reported cost of sales (26.4) (25.3) Reported administrative expenses (8.7) (8.4) Adjusted for: Adjusted for: Depreciation 0.4 0.3 Share based payments 2.7 2.7 Contingent rent 0.3 0
Slide 34: Group Banking Covenants
34 Group Banking Covenants – Apr 2019 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 35: Group Debt position at 30 Apr 2019
35 Group Debt position at 30 Apr 2019 Term Facility Drawn Hedged Hedged Bank Hedged Floating Total £/€/'m £'m £'m % Margin Rate Rate Rate UK Revolver Jun 22/Jun 23 £ 250.0 190.0 135.0 71% 1.25% 0.94% 0.81% 2.15% UK Revolver - non-utilisation £ 60.0 - - - 0.50% - - 0.50% Euro Revolver Jun22/Jun 23 €
Slide 36: Revenue predictability and resilience
36 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 37: National Accounts and Customer Support Centre
37 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 38: Portfolio strength with further potential
38 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 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 – £42.4m of Revenue, £28.9m of Store EBITDA
Slide 40: Paris unique competitive market position
40 Paris unique competitive market position Very solid market fundamentals: • 21 years of uninterrupted growth • Closing occupancy up 7.8% • 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 41: Limited UK Supply
41 Limited UK Supply Growing and fragmented industry: • 1,500 self storage sites (of which 381 are container sites) – 765 storage businesses • Fragmented market with the six largest operators only owning 339 UK stores (119 stores) • c. 30 new stores per annum expected in 2018 - 2020 Immature industr
Slide 42: Property valuation movement
42 Property valuation movement (excluding investment properties under construction) Key assumptions Apr 2019* Oct 2018 Apr 2018* Average Self Storage rate per sq ft £26.30 £25.90 £25.91 Exit Cap rate (Freehold only) 6.8% 6.7% 7.1% Weighted average stabilised occupancy 85.3% 85.3% 83.4% Stabilised oc
Slide 43: New and pipeline stores
43 New and pipeline stores Total MLA Pipeline store / site Estimated opening sq ft Development stores acquired / under contract Birmingham Merry Hill 55,000 2019 London Carshalton 40,000 2019 Peterborough 42,000 2019 Paris Pontoise 65,000 2019 Paris Magenta 50,000 2020 Total sq ft in pipeline 252,00
Slide 44: Development characteristics
44 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 • Ten largest UK operators own just 27% of market* • Only c. 40 traditional
Slide 45: Very strong position in the two best European markets for storage
45 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 46: Une Pièce en Plus – strong market characteristics
46 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 47: Leading market positions in key UK regional conurbations
47 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 48: Paris development characteristics
48 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 49: French Commercial Lease Statute provides security of tenure
49 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 50: Portfolio summary split geographically
50 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) 1.94 1.74 3.68 0.97 4.65 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 33 31 36 32 Average Store Capac
Slide 51: Portfolio summary split between freehold and leasehold
51 Portfolio summary split between freehold and leasehold HY 2019 HY 2018 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 83 37 15 11 98 48 MLA self-storage only (m) 3.6
Slide 52: Portfolio summary split between freehold and leasehold (LFL CER)
52 Portfolio summary split between freehold and leasehold (LFL CER) HY 2019 HY 2018 UK Paris Group UK Paris Group Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Freehold Leasehold Number of stores 82 35 15 11 97 46 82 35 15 11 97 46 MLA self-storage on
Slide 53: Portfolio summary split by maturity
53 Portfolio summary split by maturity HY 2019 HY 2018 Developing Established Mature Total Developing Established Mature Total Number of stores 5 4 137 146 7 0 139 146 MLA self storage only (m) 0.305 0.170 5.894 6.369 0.358 0.000 5.928 6.286 Closing occupancy (m) 0.127 0.118 4.391 4.636 0.156 0.000
Slide 54: Portfolio summary split by maturity (LFL CER)
54 Portfolio summary split by maturity (LFL CER) HY 2019 HY 2018 Developing Established Mature Total Developing Established Mature Total Number of stores 2 4 137 143 2 4 137 143 MLA self storage only (m) 0.134 0.170 5.894 6.198 0.304 0.000 5.894 6.198 Closing occupancy (m) 0.080 0.118 4.392 4.590 0.
Slide 55: Safestore UK historic performance
55 Safestore UK historic performance EBITDA in 2017 and 2018 has been adjusted for Share based payment charge
Slide 56: Customer length of stay
56 Customer length of stay UK Paris Group HY 2019 HY 2018 HY 2019 HY 2018 HY 2019 HY 2018 (mths) (mths) (mths) (mths) (mths) (mths) Business Existing 30.8 30.7 32.8 32.5 31.2 31.1 Vacated 12.5 12.5 13.5 13.2 12.7 12.7 Total 14.5 14.7 15.8 15.6 14.8 14.9 Personal Existing 20.6 21.1 27.0 27.6 22.4 22.
Slide 57: Group customer split as at 30 Apr 2019
57 Group customer split as at 30 Apr 2019
Slide 58: Personal and business customers as at 30 Apr 2019
58 Personal and business customers as at 30 Apr 2019 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) 20.6 27.0 Business Customers Numbers (% of total) 26% 17% Square feet occupied (% of