27th Nov 2007 07:01
Big Yellow Group PLC27 November 2007 27 November 2007 Big Yellow Group PLC ("Big Yellow", "the Group" or "the Company") Results for the Six Months and Second Quarter ended 30 September 2007 Big Yellow Group PLC, the self storage company, is pleased to announce resultsfor the six months and for the second quarter ended 30 September 2007. Second First quarter quarter Six months Six months ended ended ended ended 30 Sept 30 Jun 30 Sept 30 Sept 2007 2007 2007 2006 Annualised revenue * £57.8m £55.3m +5% £57.8m £50.0m +16% Revenue £15.1m £13.5m +12% £28.6m £24.4m +17% Profit before tax £46.3m £58.8m -21% Adjusted profit beforetax (1) £7.2m £7.0m +3% Basic earnings per share 40.10p 38.37p +5% Adjusted earnings per share (2) 5.89p 4.47p +32% Adjusted NAV per share (3) 471.9p 347.3p +36% Interim dividend 4.0p 3.5p +14% Occupied space 1,918,000 sq ft 1,931,000 sq ft -1% 1,918,000 sq ft 1,792,000 sq ft +7% (1) See note 5 (2) See note 7 (3) See note 13 * Based on revenue at the end of the period in respect of storage and other related income • Revenue increase of 17% to £28.6 million over same period last year (2006: £24.4 million) • Adjusted profit before tax(1) of £7.2 million up 3% (2006: £7.0 million) • Adjusted net assets per share(3) up 8% to 471.9 pence as at 30 September 2007 from 437.8 pence as at 31 March 2007 • Interim dividend up 14% to 4.0 pence per ordinary share (2006: 3.5 pence) • 45 stores now open with a further 27 committed, providing 4.5 million sq ft of self storage space when completed; Sutton opened in the period, Sheen closed for redevelopment and Ealing and Barking Central stores opened after period end • Acquired nine freehold sites for redevelopment as self storage centres to provide 550,000 sq ft of storage space • Three in London at Enfield, Gypsy Corner and New Cross • One each in Reading, Birmingham, Camberley, Sheffield, Edinburgh and Guildford • Six planning consents granted since April 2007 • Formation of £150 million partnership with Pramerica Real Estate Investors Limited to develop Big Yellow stores in the Midlands, the North of England and Scotland • Banking facility increased by £50 million to £325 million, with Lloyds TSB joining the syndicate Commenting on the outlook, Nicholas Vetch, Chairman, said: "We are currently experiencing more testing trading conditions. That said thisis a seasonally weak trading period, and we hope to see the usual pick up earlyin the new year. The group enjoys high operating margins, strong cash flow,relatively low debt gearing and owns 90% of its property assets freehold. Thiswe believe will provide resilience to outside influences, although not completeimmunity. Historically, the lack of available sites has acted as a significant barrier tothe creation of new purpose built storage centres. We believe that morechallenging financial markets will add a further significant barrier except forthe most well capitalised companies with well established track records. We believe our £287 million, (1.9 million sq ft) development programme, which iscarried at cost, will create significant valuation surpluses over the comingyears, starting with the five London stores opening in the second half of thisyear. The equity and debt available in our newly formed partnership with Pramerica,together with the undrawn debt in our core facility, results in cash resourcescurrently available of approximately £200 million. We feel we are ideallypositioned to take advantages of opportunities which may present themselves inthe year ahead." - Ends - For further information, please contact: Big Yellow Group PLC 01276 477811Nicholas Vetch, ChairmanJames Gibson, Chief Executive Officer Weber Shandwick Financial 020 7067 0700Louise Robson, John Moriarty or Charlie Hooper Notes to Editors Big Yellow Group PLC is one of the leading and most dynamic self-storage groupsin the UK. It was founded in 1998 by Nicholas Vetch, Philip Burks and JamesGibson and listed on AIM in May 2000, moving to the Official List of the LondonStock Exchange in 2002. Big Yellow has expanded rapidly and now operates from 45 stores, 44 in Londonand the South, and one in Leeds, with a further 27 stores in development and ofthe 72, 61 are held freehold and three long leasehold (approximately 90%). Allthe stores have the distinct yellow branding, in accessible main road locations,with the majority being within the M25 or in strong urban conurbations. Whenfully built out the portfolio will provide approximately 4.5 million sq ft offlexible storage space. The Group has pioneered the development of the latest generation of self-storagefacilities, which utilise state of the art technology and are located in highprofile, main road locations. Its focus on the location and visibility of itsbuildings, coupled with excellent customer service, has created the mostrecognised brand name in the UK self-storage industry. Big Yellow Group PLC ("Big Yellow", "the Group" or "the Company") Results for the Six Months and Second Quarter ended 30 September 2007 Chairman's Statement The Board of Big Yellow Group PLC, the self storage company, is pleased toannounce results for the six months and for the second quarter ended 30September 2007. FINANCIAL RESULTS Revenue for the period was £28.6 million, up 17% from the £24.4 million achievedin the comparable period last year. Revenue for the second quarter of £15.1million was 12% up on the £13.5 million reported for the quarter to 30 June. Profit before tax in the period was £46.3 million, down from £58.8 million,largely resultant from lower revaluation surpluses following the opening offewer stores in the period when compared to the same period last year. Afteradjusting for the gain on the revaluation of investment properties and othermatters shown in the table below, the Group made an adjusted profit before taxin the period of £7.2 million, up 3% from £7.0 million for the same period lastyear. The increase in adjusted profit before tax was held back by rising net interestcosts in the period (£1.9 million higher than in the comparable period lastyear), due to a combination of increased debt drawn down to fund the acquisitionand development of new sites, and higher interest rates. We expect the impact ofhigher interest rates will be less going forward as we take advantage of lowermedium term rates. Profit before Tax Analysis Six months Six months to Year ended to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m_____________________________________________________________________________Profit before tax 46.3 58.8 152.8Gain on revaluation ofinvestment properties (39.8) (51.5) (138.3)Change in fair value ofinterest rate derivatives 0.3 (0.3) (0.7)(Gains)/losses on sale ofnon-current assets (0.1) - 1.1REIT conversion costs 0.2 - 0.5Non-recurring indirect tax costs 0.3 - -Tenant surrender premium - - (1.2)_____________________________________________________________________________Adjusted profit before tax 7.2 7.0 14.2_____________________________________________________________________________ STORES AND THE MARKET At the period end occupied space represented 1,918,000 sq ft, up 7% from1,792,000 sq ft at the same time last year. This represents a 73% occupancy rateacross all 43 stores open at the period end, unchanged from the same period lastyear. During the period we opened a store in Sutton, with further centres openedin Ealing and Barking Central since the period end. We are intending to open afurther three stores in the financial year, in Balham, Merton, and our flagship139,000 sq ft store in Fulham. We have included, as usual, a table summarising the trading performance of allour stores over the year. The portfolio of 32 stores that were open for more than two years at thebeginning of the period was 83% occupied at the end of the period, with anaverage occupancy during the period of 84%. In addition, these 32 storesachieved EBITDA margins of 63% and after an allocation of central overhead, netoperating income margins of 57%, unchanged from the same period last year. Same store revenue for these 32 stores increased 7% year-on-year, of which 6% isa result of yield improvement and the balance is occupancy growth. Total packing materials, insurance and other sales were £4.2 million (2006: £3.2million), an increase of 31%. TAXATION The Group converted to a Real Estate Investment Trust ("REIT") on 15 January2007. Since then we have benefited from a zero tax rate on our qualifying selfstorage earnings. We only pay tax on the profits attributable to our residualbusiness, comprising primarily of the sale of packing materials and insurance. The tax charge for the period ended 30 September 2007 is £327,000. This arisesdue to taxation on the residual business on the exercise of share options and a£90,000 conversion charge payable on the market value of a property acquiredthrough a corporate structure in the period. Furthermore, Big Yellow has a significant development pipeline of self storageassets within the REIT ringfence and any development profits arising on theseassets will generally be tax free. DIVIDENDS Interim Interim Dividend Dividend 2007 2006 p p_________________________________________________________Property income dividend - n/aOrdinary dividend 4.0 3.5_________________________________________________________Total 4.0 3.5_________________________________________________________ Our dividend policy is governed by our REIT regulatory requirements whichdetermine the level of property income dividend ("PID"), with any ordinarydividend in excess of this assessed by the Board based on prevailingcircumstances and the outlook for the Group. As announced previously, theBoard's intention in a REIT regime is to pay a total dividend in excess of theminimum PID required under the regulations. Dividends will be set based on 90%of qualifying post depreciation earnings. On the basis of the full yearforecasted distributable reserves for PID purposes, no PID will be required.This position will continue to be monitored. Accordingly the Board is recommending an interim dividend of 4.0 pence pershare, an increase of 14% from the prior half year dividend of 3.5 pence. The ex-dividend date will be 5 December 2007 and the record date 7 December 2007with an intended payment date of 28 December 2007. VALUATION AND NET ASSET VALUE The Group's investment properties have been valued by Cushman and Wakefield (C&W). At 30 September 2007 the total value of the Group's properties was £788.7million, comprising £649.4 million for the 43 storage centres which were open atthe period end (and one store which has been closed for redevelopment), £131.4million for sites held for development and £7.9 million of surplus land held forsale. The properties held for development and sale are held at historical costless provision for impairment and have not been externally valued. The valuation translates into an adjusted net asset value of 471.9 pence pershare (see note 13), up 36% from 347.3 pence per share last year and 8% from437.8 pence per share at 31 March 2007. The value of the investment property portfolio at 30 September 2007 was £649.4million (2006: £489.8 million), up £59.3 million from £590.1 million at 31 March2007. The increase in valuation of the same store portfolio is £32.0 million,representing a 5.5% total uplift, of which we estimate 0.5% is a function ofcapital growth and 5.0% operational performance. Capital expenditure on existingstores was £8.5 million, including the cost of acquiring the freehold of ourChelmsford store. The balance of £18.8 million is the valuation of the new storeopened in the period, Sutton, which comprised capital expenditure of £10.9million and a revaluation uplift of £7.9 million. The net yield on the portfolio based on the net operating income at store levelin the first year after the projected stabilisation of each store is 6.75%(March 2007: 6.80%; September 2006: 7.34%). These yields are taken as beingafter an allocation of overhead. As a comparison with conventional propertyyields, the commensurate yield pre overhead allocation is 7.37%. Valuations on self storage assets have been difficult to establish to date dueto the lack of transactions. Clearer evidence is now emerging as a number oftransactions have been completed recently and importantly in two instances sincethe current dislocation in financial markets started. Those stores that weresold were for the most part not prime freehold purpose built centres but,notwithstanding that achieved healthy prices. As at As at As at 30 Sept 30 Sept 31 March 2007 2006 2007Analysis of Net Asset Value £'000 £'000 £'000____________________________________________________________________________Basic net asset value 527.5 319.4 488.0Exercise of share options 2.9 3.3 3.3____________________________________________________________________________Diluted net asset value 530.4 322.7 491.3Adjustments:Deferred tax on revaluation surpluses - 87.5 -Tax on fair value of interest rate swaps - - (0.1)____________________________________________________________________________Balance sheet adjusted net asset value 530.4 410.2 491.2____________________________________________________________________________Diluted net assets per share (pence) 447.7 273.2 416.0Balance sheet adjusted net assets pershare (pence) 447.7 347.3 415.8Diluted shares used for calculation (million) 118.5 118.1 118.1 Balance sheet adjusted net asset value(as above) (£m) 530.4 410.2 491.2Valuation methodology assumption(see note 14) (£m) 28.8 - 25.9Adjusted net asset value (£m) 559.2 410.2 517.1Adjusted net assets per share (pence) 471.9 347.3 437.8____________________________________________________________________________ PROPERTY AND CONSTRUCTION We have had an active first half of the year with seven sites acquired in theperiod and a further two sites since the period end, three in London atEnfield, Gypsy Corner and New Cross and a further six in Reading, Birmingham,Camberley, Edinburgh, a second site in Sheffield and Guildford. We have alsoacquired the freehold of our store in Chelmsford. There are now 27 stores in the pipeline which when fully developed willrepresent an additional 1.7 million square feet and when open will provide theGroup with a total of 72 stores and 4.5 million square feet. We have planningpermission on ten of the 27 pipeline stores and are in negotiations on theremaining 17. 57% of our total stores and sites are located within the M25 and64 (over 90% by value) are freehold or long leasehold. A further three stores,in Balham, Merton and Fulham, are expected to open in this financial year. We believe the current correction in the property market will inevitably impactthe market for raw land. We are seeing signs of this and expect there to be moreopportunities to acquire sites for our store development programme. ESTABLISHMENT OF PARTNERSHIP Yesterday we announced the establishment of a £150 million partnership, the BigYellow Limited Partnership, with Pramerica Real Estate Investors Limited("Pramerica") to develop up to 25 stores in the Midlands, the North of Englandand Scotland. Big Yellow is committing £25 million to the venture, and Pramerica £50 million,resulting in a one third, two thirds equity split. Big Yellow is contributingfive of its development sites and its existing store in Leeds to the jointventure for a cash payment. The initial value of the sites to be transferredinto the venture is £20.3 million. Big Yellow has also entered into conditionalcontracts to sell two more of its development properties in Birmingham andManchester to the partnership, when they are substantially complete. A five year term development loan of £75 million has been secured from the RoyalBank of Scotland plc to further fund the Partnership. Big Yellow has the option to buy the assets or Pramerica's share of the equityin the Partnership, exercisable from 31 March 2013. In addition the Group has a right to a promote at the exit date of thepartnership. Big Yellow has had an excellent eight year relationship with Pramerica sincetheir initial investment in Big Yellow in 1999. We are pleased to haveestablished this investment with such a prestigious institution. The Partnership will allow us to continue to expand with confidence into thenorthern part of the UK, whilst at the same time improving the financialperformance of the group. Further it will release funds for deployment into theSouth of England where we expect to see more opportunities in a less competitiveproperty market. Lastly, we will earn certain property related and operational fees from thepartnership which should increase the profitability of the group in the short tomedium term. FINANCING AND TREASURY The Group is strongly cash generative and draws down from its longer termcommitted facilities as required to meet obligations. Adjusted cash generatedfrom operations (see note 16) increased by 15% to £16.4 million (2006: £14.3million) for the period. Net bank debt of £250.1 million at the period end represents 32% of the Group'sinvestment and development property assets, totalling £780.8 million, and 45% ofadjusted net assets of £559.2 million. We focus on improving our cash flows and we currently have healthy interestcover of approximately 2.3 times with a relatively conservative debt structuresecured principally against the freehold estate. The Group was comfortably incompliance with its bank covenants at 30 September 2007, and we forecast to bein compliance with our banking covenants in the foreseeable future. At the period end the Group had a syndicated bank facility with the Royal Bankof Scotland, Bank of Ireland and Barclays of £275 million, secured on 33freehold and leasehold assets. Since the period end the Group has increased thisfacility by a further £50 million, with the addition of Lloyds TSB Bank plc tothe syndicate. The net debt at the end of September of £250.1 million gives us £74.9 million,with the new facility, of available funds to expand the business withsignificant balance sheet space given the relatively low level of gearing. As stated we have incurred higher interest charges in the period but we expectthat to diminish as medium term interest rates fall and we take the opportunityto lock in at lower levels. We have recently entered into a five year interestrate swap on £50 million at 6.2% (including margin). This will result in asignificant reduction on the floating rate cost. Whilst credit markets are difficult we have demonstrated that we are able tosecure debt on sensible terms from high quality lenders. Accordingly, alongsidethe downstream partnership funding discussed above, we are reasonably confidentthat we can continue to finance our planned expansion. INTERNATIONAL FRANCHISE I am pleased to announce that in May we signed our second InternationalFranchise Agreement in the Kingdom of Bahrain with Big Yellow FZ LLC, aprivately backed business set up to exploit the opportunities for development ofa network of Big Yellow stores in the Gulf Cooperation Council states. BigYellow FZ LLC also hold our franchise in Dubai, and the site for their 280,000sq ft store is under construction and is expected to open in Spring 2008. As is typical of franchise structures, we are not investing capital in thisbusiness but providing operating know-how and the licensing of the Big Yellowbrand for an upfront fee and a share of future revenues. RISKS AND UNCERTAINTIES The operational risks facing the Group for the remaining six months of thefinancial year are consistent with those outlined in the Annual Report for theyear ended 31 March 2007. The outlook for the housing market and the economy isweaker than in March 2007, but the risk mitigating factors listed in the 2007Annual Report are still appropriate. OUTLOOK We are currently experiencing more testing trading conditions. That said this isa seasonally weak trading period, and we hope to see the usual pick up early inthe new year. The group enjoys high operating margins, strong cash flow,relatively low debt gearing and owns 90% of its property assets freehold. Thiswe believe will provide resilience to outside influences, although not completeimmunity. Historically, the lack of available sites has acted as a significant barrier tothe creation of new purpose built storage centres. We believe that morechallenging financial markets will add a further significant barrier except forthe most well capitalised companies with well established track records. We believe our £287 million, (1.9 million sq ft) development programme, which iscarried at cost, will create significant valuation surpluses over the comingyears, starting with the five London stores opening in the second half of thisyear. The equity and debt available in our newly formed partnership with Pramerica,together with the undrawn debt in our core facility, results in cash resourcescurrently available of approximately £200 million. We feel we are ideallypositioned to take advantages of opportunities which may present themselves inthe year ahead. Nicholas VetchChairman26 November 2007 - Ends - RESPONSIBILITY STATEMENT We confirm to the best of our knowledge: (a) the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting"; (b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and (c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). By order of the Board James GibsonChief Executive Officer26 November 2007 BIG YELLOW GROUP PLC PORTFOLIO SUMMARY Years since September September September September September Septemberopening as at 1 2007 2007 2007 2006 2006 2006April 2007 > 2 years < 2 years Total > 2 years < 2 years Total Number of stores* 32 11 43 32 9 41 ========= ========= ========= ========= ========= =========As at 30 September 2007Total capacity (sq ft) 1,949,000 684,000 2,633,000 1,949,000 503,000 2,452,000Occupied space(sq ft) 1,625,000 293,000 1,918,000 1,625,000 167,000 1,792,000Percentage occupied 83% 43% 73% 83% 33% 73% £'000 £'000 £'000 £'000 £'000 £'000Annualised revenue 48,372 9,416 57,788 45,100 4,923 50,023 For the 6 month period:Av. Occupancy 84% 43% 73% 83% 33% 72%Av. annual rent psf £24.68 £23.10 £24.54 £23.86 £17.74 £23.54Self storage income 20,203 3,384 23,587 19,298 1,481 20,779Other storage relatedincome(1) 3,379 869 4,248 2,845 405 3,250Ancillary store rentalincome 41 7 48 27 20 47 _________ _________ _________ _________ _________ _________Total revenue 23,623 4,260 27,883 22,170 1,906 24,076 Direct store operatingcosts (excludingdepreciation) (7,704) (2,254) (9,958) (7,091) (1,484) (8,575)Short leaseholdrent(2) (1,134) (21) (1,155) (1,113) - (1,113) _________ _________ _________ _________ _________ _________Store EBITDA(3) 14,785 1,985 16,770 13,966 422 14,388EBITDA Margin(4) 63% 47% 60% 63% 22% 60% Central overhead(5) (1,418) (248) (1,666) (1,330) (254) (1,584) _________ _________ _________ _________ _________ _________Store Net OperatingIncome 13,367 1,737 15,104 12,636 168 12,804NOI margin 57% 41% 54% 57% 9% 53% _________ _________ _________ Capital expenditure £m £m £m To 30 September 2007 158.4 77.1 235.5Cost to complete - 2.4 2.4 _________ _________ _________ Total projected cost 158.4 79.5 237.9 _________ * - trading results for our Sheen store, which was closed for redevelopment in June 2007 are shown in stores less than 2 years. (1) Packing materials, insurance and other storage related fees. (2) Rent for 8 short leasehold properties accounted for as investment properties and finance leases under IFRS with total self storage capacity of 482,000 sq ft, plus rent for the Chelmsford store to 29 August 2007 whose Freehold was purchased at that date. The EBITDA for Chelmsford is classed within Freehold stores from 29 August. (3) Earnings before interest, tax, depreciation and amortisation. (4) Of stores open more than 2 years, the leaseholds achieved a store EBITDA of £3.22 million and EBITDA margin of 46%. The freehold stores achieved a store EBITDA of £11.56 million and EBITDA margin of 69%. (5) Allocation of overhead based on 6% of estimated stabilised income. BIG YELLOW GROUP PLC CONSOLIDATED INCOME STATEMENTSix months ended 30 September 2007 Year Six months Six months ended ended ended 31 March 30 Sept 2007 30 Sept 2006 2007 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 Revenue 2 28,635 24,448 51,248 Cost of sales (11,114) (9,008) (18,536) _________ _________ _________Gross profit 17,521 15,440 32,712 Administrative expenses (3,024) (2,608) (5,645) _________ _________ _________Operating profit before gains and losses on property assets 14,497 12,832 27,067 Gain on the revaluation of investment properties 39,826 51,447 138,349Gains/(losses) on the sale of non-current assets 60 23 (1,078) _________ _________ _________Operating profit 54,383 64,302 164,338 Investment income 218 733 1,250Finance costs 3 (8,286) (6,229) (12,751) _________ _________ _________Profit before taxation 46,315 58,806 152,837 Taxation 4 (327) (17,698) 60,391 _________ _________ _________Profit for the period(attributable to equityshareholders) 45,988 41,108 213,228 ========= ========= =========Basic earnings per share 7 40.10p 38.37p 192.97p ========= ========= =========Diluted earnings per share 7 39.72p 37.81p 190.31p ========= ========= ========= Adjusted earnings per share are shown in note 7. All items in the income statement relate to continuing operations. BIG YELLOW GROUP PLC CONSOLIDATED BALANCE SHEET30 September 2007 Note 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000Non-current assetsInvestment property 8a 649,420 489,850 590,060Development property 8a 131,428 72,171 96,393Interest in leasehold properties 8a 24,027 26,259 27,038Plant, equipment and owner-occupied property 8b 3,070 3,136 3,170Goodwill 8c 1,433 1,433 1,433 _________ _________ _________ 809,378 592,849 718,094 _________ _________ _________Current assets Inventories 362 363 437Trade and other receivables 9 7,743 7,638 6,982Derivative financial instruments 151 178 512Cash and cash equivalents 919 35,960 2,110Deferred tax asset 11 530 - 650Non-current assets classified asheld for sale 8d 7,891 19,000 18,227 _________ _________ _________ 17,596 63,139 28,918 _________ _________ _________Total assets 826,974 655,988 747,012 ========= ========= =========Current liabilitiesTrade and other payables 10 (20,138) (21,488) (25,586)Obligations under finance leases (2,094) (2,219) (2,306)Current tax liabilities - REIT conversion charge (90) - (11,997) - Corporation tax liability (85) - (71) _________ _________ _________ (22,407) (23,707) (39,960) _________ _________ _________Non-current liabilitiesBank borrowings 12 (250,015) (191,429) (189,225)Deferred tax liabilities 11 - (89,766) -Obligations under finance leases (21,933) (24,040) (24,732)Other payables 10 (5,116) (7,674) (5,116) _________ _________ _________ (277,064) (312,909) (219,073) _________ _________ _________Total liabilities (299,471) (336,616) (259,033) ========= ========= =========Net assets 527,503 319,372 487,979 ========= ========= =========Equity Called up share capital 15 11,525 11,443 11,456Share premium account 15 41,393 40,824 40,864Reserves 15 474,585 267,105 435,659 _________ _________ _________Equity shareholders' funds 527,503 319,372 487,979 ========= ========= ========= BIG YELLOW GROUP PLC CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSESix months ended 30 September 2007 Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Current and deferred tax recognised inequity 103 (1,461) (1,230) _________ _________ _________Net income/(expense) recogniseddirectly in equity for the period 103 (1,461) (1,230)Profit for the year 45,988 41,108 213,228 _________ _________ _________Total recognised income and expense forthe period attributable to equityshareholders 46,091 39,647 211,998 ========= ========= ========= BIG YELLOW GROUP PLC CONSOLIDATED CASH FLOW STATEMENTSix months ended 30 September 2007 Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 Operating profit 54,383 64,302 164,338Gain on the revaluation of investmentproperties (39,826) (51,447) (138,349)(Gain)/loss on non-current assets (60) (23) 1,078Depreciation 702 703 1,349Employee share options 196 148 336Decrease/(increase) in inventories 75 (25) (99)(Increase)/decrease in receivables (647) 685 (978)Increase in payables 1,137 2,589 2,523 _________ _________ _________Cash generated from operations 16 15,960 16,932 30,198Interest paid (8,127) (5,492) (14,073)Interest received 104 264 601REIT conversion charge paid (11,997) - - _________ _________ _________Cash flows from operating activities (4,060) 11,704 16,726 _________ _________ _________Investing activitiesSale of non-current assets 10,500 - 2,165Purchase of non-current assets (61,868) (61,195) (96,006) _________ _________ _________Cash flows from investing activities (51,368) (61,195) (93,841) _________ _________ _________Financing activitiesIssue of share capital 598 38,324 38,376Purchase of own shares (1,084) - -Equity dividends paid (6,277) (3,066) (7,051)Increase in borrowings 61,000 36,000 33,707 _________ _________ _________Cash flows from financing activities 54,237 71,258 65,032 _________ _________ _________Net (decrease)/increase in cash and cash equivalents A (1,191) 21,767 (12,083)Opening cash and cash equivalents 2,110 14,193 14,193 _________ _________ _________Closing cash and cash equivalents 919 35,960 2,110 ========= ========= ========= BIG YELLOW GROUP PLC A. Reconciliation of net cash flow to movement in net debt Six months ended 30 September 2007 Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net (decrease)/increase in cashand cash equivalents in the period (1,191) 21,767 (12,083) Cash inflow from increase in debtfinancing (61,000) (36,000) (33,707) _________ _________ _________Change in net debt resultingfrom cash flows (62,191) (14,233) (45,790) Movement in net debt in the period (62,191) (14,233) (45,790) Net debt at start of period (187,890) (142,100) (142,100) _________ _________ _________Net debt at end of period (250,081) (156,333) (187,890) ========= ========= ========= BIG YELLOW GROUP PLCNotes to the Interim Review 1. ACCOUNTING POLICIES Basis of preparation The results for the half-year ended 30 September 2007 are unaudited and wereapproved by the Board on 26 November 2007. The financial information containedin this report does not constitute statutory accounts within the meaning of thesection 240 of the Companies Act 1985. The full accounts for the year ended 31March 2007, which received an unqualified report from the auditors, and did notcontain a statement under S.237(2) or (3) of the Companies Act 1985, have beenfiled with the Registrar of Companies. The interim report has been prepared in accordance with IAS 34 "InterimFinancial Reporting". The unaudited information in the interim financial statements has been preparedin accordance with International Financial Reporting Standards ("IFRS") and onthe basis of the accounting policies set out in the 2007 Big Yellow Group PLCAnnual Report and Accounts. 2. SEGMENTAL INFORMATION Revenue represents amounts derived from the provision of self storageaccommodation and related services which fall within the Group's ordinaryactivities after deduction of trade discounts and value added tax. The Group'snet assets, revenue and profit before tax are attributable to one activity, theprovision of self storage accommodation and related services. These all arise inthe United Kingdom with the exception of £100,000 of income which arose inBahrain. Six months Six months ended ended Year ended 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Open storesSelf storage income 23,587 20,779 42,222Other storage related income 4,248 3,250 6,741Ancillary store rental income 48 47 86 _________ _________ _________ 27,883 24,076 49,049Stores under developmentNon-storage income 652 372 927Surrender premiums received - - 1,172 _________ _________ _________ 652 372 2,099Franchise income Franchise fee received 100 - 100 _________ _________ _________ 100 - 100 _________ _________ _________Total revenue 28,635 24,448 51,248 ========= ========= ========= Further analysis of the Group's operating revenue and costs can be found in thePortfolio Summary. 3. FINANCE COSTS Six months Six months ended ended Year ended 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Interest on bank borrowings 7,133 5,413 11,124Other interest payable 3 19 20Interest on finance lease obligations 789 797 1,607Change in fair value of interest rate swaps 361 - - _________ _________ _________Finance Costs 8,286 6,229 12,751 ========= ========= ========= 4. TAX Six months Six months ended ended Year ended 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Current tax - UK corporation tax at 30% 237 2,605 2,739Current tax - REIT conversion charge 90 - 11,997Deferred tax - 15,093 (75,127) _________ _________ _________ 327 17,698 (60,391) ========= ========= ========= In addition to the current period income statement tax charge of £327,000, thereis an overall credit to reserves of £103,000. This consists of a credit for thecurrent tax deduction of £223,000 and a charge of £120,000 in respect of thereduction in the deferred tax asset arising on potential future deductions fromthe exercise of share options. 5. ADJUSTED PROFIT BEFORE TAX Six months Six months ended ended Year ended 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit before tax 46,315 58,806 152,837 _________ _________ _________Gain on revaluation of investment properties (39,826) (51,447) (138,349)Change in fair value of interest rate swaps 361 (320) (654)(Gains)/losses on sale of non-current assets (60) (23) 1,078REIT conversion costs 153 - 493Non-recurring indirect tax cost 304 - -Tenant surrender premium - - (1,172) _________ _________ _________Adjusted profit before tax 7,247 7,016 14,233 ========= ========= ========= Adjusted profit before tax, excluding gains on revaluation of investmentproperties, changes in fair value of interest rate swaps, non recurring items ofincome and expenditure, and gains or losses on the sale of non-current assets,has been disclosed to give a clearer understanding of the Group's underlyingtrading performance. 6. DIVIDENDS An interim dividend of 4.0 pence per ordinary share has been declared (2006: 3.5pence). The ex-dividend date will be 5 December 2007 and the record date 7December 2007 with an intended payment date of 28 December 2007. The interimdividend has not been included as a liability at 30 September 2007. The 2007final dividend of £6,277,000 representing 5.5 pence per ordinary share was paidon 18 July 2007 and is included in Note 15, Movements in Equity. 7. EARNINGS PER ORDINARY SHARE Six months ended Six months ended Year ended 30 September 2007 30 September 2006 31 March 2007 (unaudited) (unaudited) (audited) Pence Pence Pence Earnings Shares per Earnings Shares per Earnings Shares per £m Million share £m Million share £m million share Basic 45.99 114.68 40.10 41.11 107.15 38.37 213.23 110.50 192.97Adjustments:Dilutive share options 1.09 (0.38) 1.57 (0.56) 1.54 (2.66) _______ _______ _______ _______ _______ _______ _______ _______ _______Diluted 45.99 115.77 39.72 41.11 108.72 37.81 213.23 112.04 190.31 _______ _______ _______ _______ _______ _______ _______ _______ _______ Adjustments:Gain on investmentproperties (39.83) (34.40) (51.45) (47.32) (138.35) (123.48)Change in fair value of interest rate swaps 0.36 0.31 (0.32) (0.29) (0.65) (0.58)(Gain)/loss on sale of non-current assets (0.06) (0.05) (0.02) (0.02) 1.08 0.96Tenant surrenderpremium - - - - (1.17) (1.04)REIT conversioncosts 0.15 0.13 - - 0.49 0.44Non-recurringindirect tax cost 0.30 0.26 - - - -REIT conversioncharge - - - - 12.00 10.71Deferred tax - - - - (75.13) (67.06)Tax effect ofnon- recurringitems* (0.09) (0.08) 15.54 14.29 (0.28) (0.25) _______ _______ _______ _______ _______ _______ _______ _______ _______Adjusted 6.82 115.77 5.89 4.86 108.72 4.47 11.22 112.04 10.01 _______ _______ _______ _______ _______ _______ _______ _______ _______ The adjustment for gains and losses on sale of non-current assets has beenincluded for consistency with the calculation of adjusted profit before tax (seenote 5). * - this takes into account the tax effect of the change in fair value of derivatives, the losses on non-current assets and the non-recurring indirect tax cost to the extent that they fall outside the exempt business. 8. NON-CURRENT ASSETS a) Investment property, Development property and Interests in leasehold properties Interest in Investment Development leasehold property property properties £'000 £'000 £'000 At 1 April 2007 590,060 96,393 27,038Additions 3,431 45,974 -Purchase of freehold 5,164 - (2,459)Adjustment to present value - - (183)Reclassifications 10,939 (10,939) -Revaluation 39,826 - -Depreciation - - (369) ________ ________ ________At 30 September 2007 649,420 131,428 24,027 ======== ======== ======== b) Plant equipment and owner occupied property Fixtures, fittings Freehold Leasehold Plant and and office property improvements machinery equipment Total £'000 £000 £'000 £'000 £'000CostAt 1 April 2007 1,796 17 563 4,044 6,420Additions 5 18 23 187 233 ________ ________ ________ _______ _______At 30 September 2007 1,801 35 586 4,231 6,653 ________ ________ ________ _______ _______ Accumulated DepreciationAt 1 April 2007 (50) (17) (215) (2,968) (3,250)Charge for the period (22) (2) (35) (274) (333) ________ ________ ________ _______ _______At 30 September 2007 (72) (19) (250) (3,242) (3,583) ________ ________ ________ _______ _______Net book valueAt 30 September 2007 1,729 16 336 989 3,070 ======== ======== ======== ======= =======At 31 March 2007 1,746 - 348 1,076 3,170 ======== ======== ======== ======= ======= c) Goodwill Goodwill relates to the purchase of Big Yellow Self Storage Company Limited in1999. The asset is tested annually for impairment. The carrying value of £1.4million remains unchanged from the prior year as there is considered to be noimpairment in the value of the asset. d) Non-current assets classified as held for saleThe Group has land at one site with a total book value of £7.9 million. Land atthis site is surplus to requirements and the Group intends to sell it within thenext 12 months. 9. TRADE AND OTHER RECEIVABLES 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Trade receivables 1,839 1,322 1,449Other receivables 1,456 2,499 267Prepayments and accrued income 4,448 3,817 5,266 ________ ________ ________ 7,743 7,638 6,982 ======== ======== ======== 10. TRADE AND OTHER PAYABLES 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000CurrentTrade payables 5,743 2,822 5,283Other payables 3,966 5,393 2,584Accruals and deferred income 7,872 11,778 15,162VAT repayable under CapitalGoods Scheme 2,557 1,495 2,557 ________ ________ ________ 20,138 21,488 25,586 ======== ======== ========Non-currentVAT repayable under Capital Goods Scheme 5,116 7,674 5,116 ======== ======== ======== 11. DEFERRED TAX 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000The amounts provided in the accounts are:Revaluation of investment properties - 87,493 -Capital allowances in advance of depreciation - 3,579 -Deduction for share options (530) (454) (650)Other items - (852) - ________ ________ ________ (530) 89,766 (650) ======== ======== ======== 12. BANK BORROWINGS 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Bank borrowings 251,000 192,259 190,000Unamortised loan arrangement costs (985) (830) (775) ________ ________ ________ 250,015 191,429 189,225 ======== ======== ======== The bank loans are secured on certain of the Group's properties. The loan is dueto expire on 4 April 2010. Subsequent to the period end, the facility has beenextended from £275 million to £325 million. 13. ADJUSTED NET ASSETS PER SHARE Analysis of net asset value As at As at As at 30 Sept 2007 30 Sept 2006 31 March 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Basic net asset value 527,503 319,372 487,979Exercise of share options 2,943 3,346 3,345 _______________________________________Diluted net asset value 530,446 322,718 491,324 _______________________________________ Adjustments:Deferred tax on revaluation - 87,493 -Tax on fair value of interest rate swaps (7) (53) (154) _______________________________________Adjusted net asset value 530,439 410,158 491,170 _______________________________________ Basic net assets per share (pence) 461.0 280.6 428.3Diluted net assets per share (pence) 447.7 273.2 416.0Balance sheet adjusted net assets pershare (pence) 447.7 347.3 415.8 Balance sheet adjusted net asset value 530,439 491,170Valuation methodology assumption(see note 14) 28,750 * 25,890 ___________ ___________Adjusted net asset value (£'000) 559,189 517,060Adjusted net assets per share (pence) 471.9 437.8 Shares in issue 115,251,181 114,437,110 114,559,534Own shares held (815,000) (615,000) (615,000) Basic shares in issue used forcalculation 114,436,181 113,822,110 113,944,534Exercise of share options 4,053,196 4,282,645 4,167,888Diluted shares used for calculation 118,489,377 118,104,755 118,112,422 * - there was no valuation carried out on the basis of a sale in a corporate structure at 30 September 2006. Net assets per share are shareholders' funds divided by the number of shares atthe period end. The shares currently held in the Group's employee benefits trustand treasury shares (own shares held) are excluded from both net assets and thenumber of shares. Adjusted net assets per share include: • the effect of those shares issuable under employee share option schemes; • deferred tax on the revaluation uplift on freehold and leasehold properties; • tax on the fair value adjustment on interest rate swaps; and • the effect of the revised valuation methodology assumptions (see note 14) 14. VALUATIONS Revaluation on deemed£'000 Deemed Cost Valuation costFreehold Stores*As at 1 April 2007 192,951 521,420 328,469Movement in period 19,392 57,970 38,578Transfer on purchase of freehold 1,649 4,050 2,401 ________ ________ ________As at 30 Sept 2007 213,992 583,440 369,448 Leasehold StoresAs at 1 April 2007 18,563 68,640 50,077Movement in period 142 1,390 1,248Transfer on purchase of freehold (1,649) (4,050) (2,401) ________ ________ ________As at 30 Sept 2007 17,056 65,980 48,924 All StoresAs at 1 April 2007 211,514 590,060 378,546Movement in period 19,534 59,360 39,826 ________ ________ ________As at 30 Sept 2007 231,048 649,420 418,372 ======== ======== ======== * Includes one long leasehold property The freehold and leasehold investment properties have been valued as at 30September 2007 by external valuers, Cushman & Wakefield ("C&W"). The valuationhas been carried out in accordance with the RICS Appraisal and ValuationStandards published by The Royal Institution of Chartered Surveyors ("the RedBook"). The valuation of each of the trading properties has been prepared on thebasis of Market Value as a fully equipped operational entity, having regard totrading potential. The valuation has been provided for accounts purposes and assuch, is a Regulated Purpose Valuation as defined in the Red Book. In compliancewith the disclosure requirements of the Red Book, C&W have confirmed that: • The members of the RICS who have been the signatories to the valuations provided to the Group for the same purposes as this valuation have done so since September 2004. • C&W have continuously been carrying out this valuation for the same purposes as this valuation on behalf of the Group since September 2004. • C&W do not provide other significant professional or agency services to the Group. • In relation to the preceding financial year of C&W, the proportion of the total fees payable by the Group to the total fee income of the firm is less than 5%. Methodology C&W have adopted different approaches for the valuation of the leasehold andfreehold assets as follows: Freehold The valuation is based on a discounted cash flow of the net operating incomeover a ten year period and notional sale of the asset at the end of the tenthyear. Assumptions A. Net operating income is based on projected revenue received less projected operating costs together with a central administration charge representing 6% of the estimated annual revenue. The initial net operating income is calculated by estimating the net operating income in the first 12 months following the valuation date. B. The net operating income in future years is calculated assuming straight-line absorption from day one actual occupancy to an estimated stabilised/mature occupancy level. In the valuation the assumed stabilised occupancy level for the 43 trading stores (both freeholds and leaseholds) open at 30 September 2007 averages 86.07% (March 2007: 86.06%; September 2006: 86.06%). The projected revenues and costs have been adjusted for estimated cost inflation and revenue growth. C. The capitalisation rates applied to existing and future net cash flow have been estimated by reference to underlying yields for industrial and retail warehouse property, bank base rates, ten year money rates, inflation and the available evidence of transactions in the sector. On average, for all 43 trading stores, the yield (net of purchaser's costs) arising from the first year of the projected cash flow is 5.39% (March 2007: 5.24%; September 2006: 5.77%). This rises to 6.75% (March 2007: 6.8%; September 2006: 7.34%) based on the projected cash flow for the first year following estimated stabilisation in respect of each property. D. The future net cash flow projections (including revenue growth and cost inflation) have been discounted at a rate that reflects the risk associated with each asset. The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 10.22% (March 2007: 10.19%; September 2006: 10.39%). E. Purchaser's costs of 5.75% have been assumed initially and sale plus purchaser's costs totalling 6.75% are assumed on the notional sales in the tenth year in relation to the freehold stores. Leasehold The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the discounted cash flow is extended to the expiry of the lease. The average unexpired term of the Group's leaseholds is 18.0 years (March 2007: 18.8 years; September 2006: 19.3 years). Valuation assumption for purchaser's costs The Group's investment property assets have been valued for the purposes of the financial statements after deducting notional purchaser's cost of 5.75% of gross value, as if they were sold directly as property assets. The valuation is an asset valuation which is entirely linked to the operating performance of the business. They would have to be sold with the benefit of operational contracts, employment contracts and customer contracts, which would be very difficult to achieve except in a corporate structure. We believe therefore that the valuation assumptions should be adjusted to reflect the reality. This approach follows the logic of the valuation methodology in that the valuation is based on a capitalisation of the net operating income after allowing a deduction for operational cost and an allowance for central administration costs. Sale in a corporate structure would result in a reduction in the assumed Stamp Duty Land Tax but an increase in other transaction costs reflecting additional due diligence resulting in a reduced notional purchaser's cost of 2.75% of gross value. All the significant sized transactions that have been concluded in the UK in recent years were completed in a corporate structure. We therefore instructed C&W to carry out a Red Book valuation on the above basis, and this results in a higher property valuation at 30 September 2007 of £678,170,000 (£28,750,000 higher than the value recorded in the financial statements or 24.2 pence per share). We have included this revised valuation in the adjusted diluted net asset calculation (see note 13). 15. MOVEMENT IN EQUITY Share Capital Share premium redemption Retained Own capital account reserve earnings Shares Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2007 11,456 40,864 1,653 434,818 (812) 487,979 Profit for the period - - - 45,988 - 45,988Current/deferred tax - - - 103 - 103Dividend - - - (6,277) - (6,277)Issue of shares 69 529 - - - 598Equity share options - - - 196 - 196Purchase of own shares - - - - (1,084) (1,084) _______ _______ _______ _______ _______ ________At 30 September 2007 11,525 41,393 1,653 474,828 (1,896) 527,503 ======= ======= ======= ======= ======= ======== 16. ADJUSTED CASH GENERATED FROM OPERATIONS Six months Six months Year ended ended ended 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash generated from operations 15,960 16,932 30,198Movement in debtors from excludingeffects of share options 1,141 - -Movement in creditors from excludingeffects of share options (666) (2,643) - ________ ________ ________Adjusted cash generated from operations 16,435 14,289 30,198 ======== ======== ======== 17. RELATED PARTY TRANSACTIONS There were no related party transactions during the period. 18. JOINT VENTURE Big Yellow Group PLC (BYG) is pleased to announce the establishment of a £150 millioninvestment partnership ("the Partnership") with funds managed by Pramerica RealEstate Investors Limited ("Pramerica") to develop up to 25 stores in theMidlands and North of England and Scotland. The Partnership will have a fouryear exclusivity period on the defined territory. BYG and Pramerica are investing up to £25 million and £50 million respectively intothe Partnership, of which £4.5 million and £9 million respectively, will be investedon 30 November 2007, the completion date. All further investments into the Partnershipby Big Yellow and Pramerica will be in the ratio of one third and two thirdsrespectively. A five year term non recourse loan of £75 million has been secured by the Partnershipfrom the Royal Bank of Scotland PLC to provide investment and developmentfunding. BYG has initially agreed to sell five of its development sites together with itsexisting store in Leeds to the Partnership. The consideration for the sites andthe store to be transferred into the Partnership, is £20.3 million in cash,representing a small surplus on book value. BYG has also entered intoconditional contracts to sell two more of its development sites at Manchesterand Birmingham to the Partnership. In the case of Birmingham it is intended thatBYG will develop the store which will be transferred to the Partnership shortlyprior to its completion at cost plus a small surplus. In the case of Manchester,BYG has previously entered into a conditional agreement with Crosby Homes (NorthWest) Limited, ("Crosby") for the development of a significant sized mixed usescheme to include the shell of an 80,000 sq ft self storage centre to bedeveloped at the expense of Crosby. In the event that the conditions of thatagreement are satisfied, then BYG will fit out the store at its own cost andshortly prior to its completion transfer the store, to the Partnership at thethen open market value. The initial proceeds received by BYG from the sale of the development sites andthe Leeds store to the Partnership will be used to further the Group's southernUK business, and also to finance its contributions to the Partnership. In the year ended 31 March 2007, the profits before tax attributable to thedevelopment sites and the Leeds store being sold to the Partnership, amounted to£0.3 million. BYG has further entered into agreements with the Partnership to provide bothdevelopment and operational management services on the initial sites and futuresites and stores. In consideration for these services, BYG will receive certainacquisition, planning, construction management and operating fees. BYG has an option to purchase the assets contained within the Partnership or theinterest in the Partnership which it does not own exercisable from the 31 March2013. On exit whether by way of exercise of the options as set out above or asale to a third party, BYG is entitled to certain promotes, which would resultin BYG sharing in the surplus created in the partnership. The Board of the Partnership will comprise two representatives of both Pramericaand BYG. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Big Yellow