BIG YELLOW POSTS 29% JUMP IN PRE-TAX PROFIT
ON BOOM IN SELF-STORAGE
Big Yellow Group, the UK’s largest publicly-traded self-storage company by market value, posted a 29% growth in full-year pre-tax profit as it opened new units, raised prices and increased its profit margins. The company said trading conditions since the end of its fiscal year on 31 March remained good and were expected to remain so ‘into the summer’, as consumer awareness and use of self-storage grows.
Adjusted pre-tax profit rose to £152.8 million, or 190.31p a share, from £118.5 million, or 80.47p in the year to the end of March. Revenue climbed 22% to £51.2 million. Adjusted net asset value per share leapt 47% to 437.8p from 297p, Big Yellow said. Analysts said the results were largely in line with expectations or slightly better. The shares rose in early trading, up 23.75p or 4% to 614p, making them the day's second-biggest FTSE 250 gainer. At this price the company has a market value of about £700 million. Bagshot-based Big Yellow said it registered a tax gain as a result of its conversion to a real estate investment trust on 15 January that helped it to boost its full-year dividend by 80% to 9p from 5p. REIT status allows companies to pay lower corporate tax rates provided they return 90% of their profits to shareholders through dividends.
The cost of REIT conversion, estimated to be about £12 million calculated as a percentage of assets, is due to be paid in July, Big Yellow said. Big Yellow has projected it will deliver a full-year dividend next year, its first full year as a REIT, of slightly more than 11p a share. With 2.6 million square feet of self-storage capacity across 43 stores and another 1.5 million square feet in its development pipeline, Big Yellow is well-positioned for growth, chief executive James Gibson said. The founder of Big Yellow in 1998 with three other former executives of Edge Properties, a retail warehouse company, said high barriers to entry into the market have kept competitors at bay. ‘Ninety percent of the business is freehold, we’re improving our operating margins, and trading in the (most recent) quarter was our second-best ever,’ Gibson said.
Big Yellow is not in the market for acquisitions, according to Gibson, but previously it expressed interest in the UK self-storage units of Shurgard, a company with 150 self-storage facilities across Europe. Shurgard was acquired in August by Public Storage, a publicly traded US storage company, and has 19 self-storage facilities within the M25 and in the Thames Valley, according to its Web site. Big Yellow first traded its shares on AIM in May 2000, and moved to the main exchange in 2002, where it’s listed on the FTSE 250.
Today, most of Big Yellow’s 43 self-storage facilities are located in and around London and southern England. Gibson said the company intends to continue to focus on this region because it has the most transient population, the greatest concentration of people living in housing with inadequate storage capacity, such as recently-built flats, and the country’s greatest awareness of self-storage. Of the nine sites Big Yellow acquired during the financial year just ended, five were in London and four in Sheffield, Nottingham, Poole and High Wycombe. However, the company has recently signed a licensing agreement with a United Arab Emirates company to open sites in the Mideast, beginning with a facility in Dubai scheduled to open next spring. 'We are now reviewing other opportunities to expand the business internationally using this franchise model and have taken steps to protect the trademark in selected territories,' the company said in a statement.
Courtesy of CityWire