Annual Report • Oct 31, 2012
Annual Report
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Annual report and financial statements 2012
With 123 stores, Safestore and Une Pièce en Plus are the self-storage market leaders in the UK and Paris.
| Overview |
|---|
| Headlines |
| Overview of the year |
| Personal customers |
| Business customers |
| Scale where it matters |
| Business model and demand drivers |
| Strategy |
| Chairman's statement |
12 14 16
| Business review | |
|---|---|
| Chief Executive's review | 20 |
| Financial review | 26 |
| Governance | |
| Corporate social responsibility |
32 |
| Prinicipal risks | 38 |
| Board of Directors | 40 |
| Executive team | 44 |
| Directors' | |
| remuneration report | 46 |
| Audit Committee report | 54 |
| Nomination | |
| Committee report | 55 |
| Corporate governance | 56 |
| Directors' report | 59 |
| Statement of Directors' responsibilities |
61 |
| Independent auditors' report | 62 |
|---|---|
| Consolidated income statement |
63 |
| Consolidated statement of comprehensive income |
64 |
| Consolidated balance sheet | 65 |
| Consolidated statement of changes in shareholders' equity |
66 |
| Consolidated cash flow statement |
67 |
| Notes to the financial statements |
68 |
| Independent auditors' report | 96 |
| Company balance sheet | 97 |
| Notes to the Company financial statements |
98 |
| Notice of Annual General Meeting |
102 |
| Proxy form | 107 |
| Directors and advisers | 109 |
Financial statements
Overall, we have delivered good progress on our strategy and resilient financial performance.
Our total storage capacity at the end of 2012 is enough to fill the Olympic Stadium six times.
2 RevPAF is calculated as total revenue divided by total MLA excluding the five stores opened since 1 May 2011. 3 RevPAF for the year ended 31 October 2011 has been restated from £18.99 because of the exclusion of trading for Gonesse which opened in H2 2011 consistent with the current reporting. 4 EBITDA before exceptional items, contingent rent, fair value movement of derivatives and movement in investment properties ("underlying EBITDA").
5 European Public Real Estate Association ("EPRA"). 6 EPRA adjusted EPS (cash tax only) removes the impact of deferred tax movements leaving only the tax charge which will actually be paid.
7 All figures are stated net of VAT.
Revenue (£m)
We've moved the Company forward in the past year with a new Brand Identity, new stores and rebranded stores.
We've created a new look and feel for our brand with a clearer distinctive identity.
We took the opportunity to rebrand a number of high visibility stores during the year.
We opened four new stores in the year. Two in London at New Southgate, north London and Staines near Heathrow airport. Two are in the Paris market at Gonesse, close to Paris – Charles de Gaulle airport and Velizy to the south-west of the city.
New Southgate November 2011
Gonesse January 2012
Staines February 2012
Velizy July 2012
We're raising the profile of self-storage in the UK.
Watch our new TV ad
www.safestore.co.uk/TV
More than one million people viewed the ad on YouTube
Safestore aired its first TV ad campaign this year.
Moving house? New home not ready yet? Renovating, redecorating or decluttering your home? Relocating abroad? Can't get your car in the garage for hobby or sports equipment? Or having a big clear out? There are dozens of reasons why you might need somewhere to store your personal possessions.
We understand the pressures involved in moving house or relocation especially if your new home is not ready. Our great customer service and expert advice helps to make storing your belongings safe, easy and stress free.
Our storage locations, local to you, offer a wide variety of unit sizes, from lockers to large rooms and are suitable for storing a huge range of items.
Is your business expanding or simply overstocked? Need space for stock, equipment, promotional material or archive documents? Need to free up valuable office or work space? Renovating, relocating or decorating your business? There are dozens of reasons why you might need Safestore.
27%
27%
We have a balanced mix of personal and business customers with 52% of our space occupied by business customers and 48% by personal customers.
During the year we increased the size of our National Accounts sales force to help us reach more large scale national customers across the UK.
Justin works as one of our Store Managers and works closely with our National Accounts team to give our business customers the solution they require.
We provide a flexible and affordable alternative solution to renting commercial space whilst also ensuring that business customers stock is safe and secure, helping to take away the burden of managing multiple storage units, deliveries and other logistical concerns.
Our national network matters – 76% of the National Accounts occupancy is outside London. With our UK network of stores we can deliver business solutions nationally.
We have a market-leading position in the UK and Paris. As at 31 October 2012 our wholly-owned portfolio included 123 stores – 98 in the UK and a further 25 in Paris.
We have 123 stores across the UK and Paris meaning we have more stores than any other storage company in the UK and Paris.
Because of this we can offer great prices in the most convenient locations.
24 Lok'n Store
UK stores only
We have more than 42,000 customers at Safestore.
Business model and demand drivers
Our staff are always on hand to help our customers find the best solutions to their needs.
eg. students, marriage, new baby, divorce, bereavement
"We found space at Safestore because we'd acquired so many possessions over the years that when we moved in together we didn't have enough room. Safestore was extremely useful because it was so local to us and their stores are nationwide so we knew we'd always be near one no matter where we move to next."
eg. rental moves, housing transactions
Business demand eg. small businesses, national accounts, archiving
"I needed help quickly as my house purchase failed and I didn't want to lose my buyer. I contacted Safestore and they were able to provide the amount of space I needed to clear my house the following day. This helped relieve the pressure at a very stressful time while I sorted out some temporary rental accommodation. I don't know what I would have done without them."
"I ran my small online trading business from home, as I expanded and before I knew it my house became so full of stock I was having to climb over things to get around. Safestore was the perfect solution for me, I rented a room at my local store not two miles from home and my stock is delivered directly there, when my stock comes in I am able to increase the space I need and then reduce it again when the stock starts to sell through. I don't know why I didn't do it earlier."
"More Space" focuses the Group on delivering organic growth, by using our scale, marketing power and pricing expertise to drive occupancy, RevPAF and profitability.
As we deliver this organic growth, our intention is to use the free cash flow generated principally to maintain a progressive dividend for our shareholders and progressively reduce our debt as appropriate.
Underpinning our strategy are four strategic priorities that guide action, targetsetting and remuneration across Safestore:
Raise the profile of our brands through
Develop our people so they can deliver great service and maximise their potential.
Deliver efficient service by leveraging our self-storage experience and scale through processes, tools and systems.
We are pleased to report another year of strategic progress and financial resilience during the year ended 31 October 2012.
16 Safestore Holdings plc Annual report and financial statements 2012
Governance
We are pleased to report another year of strategic progress and financial resilience during the year ended 31 October 2012.
In January 2012 we outlined our "More Space" strategy. Early results have been encouraging, with gains in brand awareness, significant growth in business customers and greater occupancy. At the store level, both sales and profitability have improved in constant exchange rates. The Group also completed its planned store expansion programme during the year. We opened two new stores in London and two in Paris, all of which are performing in line with our expectations.
While the strategy has delivered encouraging results, the Group has faced external pressures that have impacted overall financial performance. Economic conditions in both the UK and France remain challenging. While the UK economy essentially remained similar to last year, the unexpected imposition of a new 20% rate of VAT on the entire self-storage industry during the fourth quarter of our financial year placed pressure on new customer conversion. In France, while our underlying business delivered good levels of growth in constant currency, we were negatively impacted by a 10% decline in the value of the Euro against Sterling during the second half of the year.
Overall, we have delivered good progress on our strategy and resilient financial performance. These solid results leave us confident in the fundamentals that underpin our industry, in which we have a leading market position, and in the strength of our business model, the quality of our operational teams and our prospects for the future.
Revenue for the year was £98.8 million, 4.0% higher than last year (FY2011: £95.1 million) and 5.5% higher in CER. The key drivers for revenue growth continue to be movements in self-storage occupancy, rate per sq ft and ancillary revenues:
Store EBITDA increased by 4.3% in the UK and 2.2% in France in constant exchange rates. Underlying EBITDA decreased by 0.4% to £50.3 million (FY2011: £50.5 million) after taking into account movements in foreign exchange rates and our targeted strategic investments in marketing, pricing and sales.
There was a £1.8 million reduction in EPRA defined Group earnings, the standard measure across the Real Estate sector which excludes movements in our property valuation. EPRA Group earnings were £14.3 million compared to £16.1 million for the year ended 31 October 2011. Our underlying performance, measured by EPRA earnings on a cash tax basis, fell by £0.8 million, or 3.9%, to £19.8 million from £20.6 million for FY2011.
Our strategy and operational performance is covered in more detail in the Chief Executive's review on pages 20 to 25. Further details on the results for the FY2012 and FY2011 are included in the Financial review on pages 26 to 31.
As at 31 October 2012, the total value of the Group's property portfolio was £685.8 million, down £28.6 million from £714.4 million at 31 October 2011 and down £4.6 million from the half year valuation of £690.4 million at 30 April 2012. Underlying trading assumptions and capitalisation rates have remained similar to prior year levels. The principal drivers of the valuation change have been the impact of the introduction of 20% VAT on self-storage in the UK and adverse movements in foreign exchange rates. Further details of the property valuation and the movements therein are provided in the Finance report.
The Group successfully re-financed its facilities during the first half of the year, extending maturities and diversifying our lending base. The Group's facilities now include a term loan, a revolving credit facility and a substantial private placement of long-term loan notes in the US. Full details are set out in the Finance report.
The Company intends to convert to REIT status with effect from 1 April 2013.
Safestore is an operational business that derives much of its income from the rental of property in the UK. As our current new store expansion programme comes to an end and the benefit of significant capital allowances begins to reduce, there are meaningful advantages to our shareholders from converting to REIT status. These include reduced UK tax liabilities and a resulting improvement in cash flow and earnings.
Since the passing of the UK Finance Act in 2012, the significant conversion charge for becoming a REIT has been abolished and the Board believes now is an appropriate time to convert to REIT status.
Shareholder approval for the required changes to the Articles of Association of the Company will be sought at an Extraordinary General Meeting to be held following the Annual General Meeting on 20 March 2013. Further details will be circulated to shareholders in due course.
Further details relating to REIT status, its advantages and requirements can be found in the Chief Executive's review on page 25.
Following our intended conversion to REIT status, the Company will be required to distribute 90% of the profits generated from its UK property rental business by way of a Property Income Distribution ("PID"). Safestore's present dividend is more than twice the level of the PID that would currently be required were the Company to be a REIT and is supported by earnings not just from the UK property rental business but also by earnings which lie outside REIT status, including UK ancillary sales and the French business.
The Board remains confident in the prospects for the Group and is pleased to recommend a final dividend of 3.80 pence per share, bringing the total dividend to 5.65 pence per share for the year. This final dividend represents an increase of 7.0% versus FY2011.
Following REIT conversion, the Board intends to maintain its progressive dividend policy, growing the dividend broadly in line with earnings over the economic cycle while maintaining appropriate dividend cover.
During the year, our team members in both the UK and France continued to be the key drivers of the success of the business. I would like to take this opportunity to thank all my colleagues throughout the business for their hard work and dedication this year.
We have announced that after more than a decade with the Group, our Chief Financial Officer, Richard Hodsden, has indicated his intention to step down from the Board and leave the Company. Richard has been instrumental in the Group's development and the Board would like to express its sincere gratitude for the valuable contribution he has made to the success and development of the Company. We wish Richard the best with his future endeavours.
Richard will be succeeded by Andrew Jones, who joins us from Worldpay Limited. Andrew brings a valuable understanding of similar customer-focused and yield-managed operational businesses from his current role and earlier career at TUI Travel plc and Virgin. We are very pleased to welcome Andrew to Safestore.
To ensure a smooth transition, Richard will remain with the Group until his successor is in place, which is expected to be not later than 31 July 2013.
Full details of these changes to the Board are set out in a separate announcement issued today.
The economic environment continues to be challenging. However, self-storage demand remains solid in both the UK and France.
As we forecast, during the first few months of the new financial year, the imposition of VAT on the UK self-storage industry has resulted in lower UK occupancy and rate than last year's record levels. While it remains too early to assess the full effect of VAT, the initial impact is consistent with the original estimates we set out in June 2012. In France customer demand remains solid, although the slowing economy has led to greater growth from personal customers than from businesses in recent months.
We expect the year ahead to remain challenging with slightly lower sales than the prior year. In that context, we retain our tight focus on cost control and expect to deliver further cost efficiencies to mitigate the expected revenue pressure. Overall we expect performance for the current financial year to remain broadly consistent with the level experienced during the last financial year.
With strong underlying demand potential and modest new supply growth, self-storage remains a growing sector. As awareness of the product increases, our clear strategy, market leadership position and scale leave us well positioned to withstand the short-term challenges and capitalise on the opportunities ahead.
Chairman 30 January 2013
We continued to make good progress on the More Space strategy outlined in January 2012, with gains in brand awareness, business customer growth and improved pricing capabilities being delivered during the year.
Peter Gowers Chief Executive Officer
Revenue (£m)
We are pleased to report that Safestore has delivered further strategic progress and financial resilience during the year.
We continued to make good progress on the More SpaceSM strategy outlined in January 2012, with gains in brand awareness, business customer growth and improved pricing capabilities being delivered during the year.
The Group also completed its planned store expansion programme, with the addition of four new stores during the year. This good strategic progress resulted in gains in occupancy, revenue and store level EBITDA.
We tightly controlled administrative costs and made the planned strategic investments in strengthening marketing, National Accounts, yield management and call centre operations during the year. These strategic investments, together with the impact of weaker Euro exchange rates on the translation of our French earnings into Sterling, resulted in Group underlying EBITDA being slightly lower than last year.
The Group completed a full re-financing of its debt facilities in the first half of the year, extending the average maturities of its debt and diversifying its lending base.
Demand for self-storage is fuelled by two principal customer groups:
Personal customers – individuals and families in the process of moving house, undertaking refurbishments or simply needing to free up more space at home as a result of lifestyle changes.
Business customers – companies storing stock and archiving materials as an alternative to having their own warehouse or office and large companies using self-storage as a partner for logistics.
Both segments have remained resilient throughout the recent economic downturn. We estimate that there are more than eight million homes and businesses that may need more space in the UK. With penetration of self-storage in both the UK and France at much lower levels than in the more developed US and Australia markets, we believe there is significant further demand potential.
New supply growth in our chosen markets is modest, with significant planning restrictions on new development, particularly in central London and Paris, and limited access to capital for many of our smaller rivals.
Operationally, customers are increasingly turning to the internet as the start point for researching self-storage. This, together with the opportunities to serve large businesses that use self-storage for nationwide logistics, raises the competitive importance of marketing scale and a widespread store network.
We have a market leading position in the UK and Paris markets. As at 31 October 2012 our wholly-owned portfolio included 123 stores – 98 in the UK and a further 25 in Paris. This network gives us a unique footprint in both the UK and Paris, delivers marketing scale and positions us well to serve the needs of key customers.
During the year we opened four new stores in the key markets of London and Paris. Two are in the London market at New Southgate in North London and Staines near London Heathrow Airport. Two are in the Paris market at Gonesse, close to Paris – Charles de Gaulle airport, and Velizy to the south-west of the city.
The Group also has three development sites in the UK – at Chiswick and Wandsworth in London and Birmingham. We continually review the value of these sites to the Group and while they remain very attractive, in line with our present strategic focus on organic growth, there are no current plans to open stores at these locations.
In January 2012 we set out our "More Space" strategy to deliver value to shareholders.
"More Space" focuses the Group on delivering organic growth, by using our scale, marketing power and pricing expertise to drive occupancy, RevPAF and profitability. As we deliver this organic growth, our intention is to use the free cash flow generated principally to maintain a progressive dividend for our shareholders and progressively reduce our debt as appropriate.
Underpinning our strategy are four strategic priorities that guide action, target-setting and remuneration across Safestore:
Last January we announced our intention to make a planned strategic investment in strengthening our marketing, improving our National Accounts, UK call centre and pricing teams and developing our website. £1.8 million of this investment was introduced during the year. This focus and investment has been delivering tangible benefits and we made good progress on each of our strategic priorities during the year:
Safestore is the UK market leader for self-storage and we have opportunities to build on this position with improvements in our brand image and recognition.
During the year, we introduced a new look and feel for Safestore in the UK to support our positioning as a distinctive, premium, professional and friendly brand.
Governance
Greater prominence is now given to the colour blue, the Safestore name and the padlock symbol in our advertising, point of sale materials, website and in our stores. These changes promote a more consistent appearance and help raise awareness of our brand.
In line with this new look and feel, as part of our planned maintenance programme we took the opportunity to rebrand a number of high visibility stores during the year, including those at Staples Corner, Chingford, Fulham and Holloway in London; Orpington in Kent; and Old Trafford in Greater Manchester.
The new brand look and feel was deployed online with an upgraded website that now allows customers to see online prices for multiple stores. This led to an increase in the percentage of visitors to our website that subsequently choose to enquire and significant growth in online enquiries. Over 80% of all our enquiries now originate on the internet.
During the year Safestore ran its first television advertising campaign, airing principally in the London television regions. The advertisement generated an unprecedented level of interest for the Group online, with more than one million views of the advert on the YouTube internet video site. Taken together, the conventional television airtime and online media presence contributed to a 150% increase in unprompted awareness in the important London region.
Our strategic focus on driving value from business customers has continued. For the first time, business customers now account for more than half of our total space occupied in the UK.
A key driver of our growth has been our National Accounts team. During the year we increased the size of our National Accounts sales force to help us reach more large scale national customers across the UK. By the year end, National Accounts customers occupied more than 200,000 sq ft or almost 7.9% of our total UK occupancy, an increase of 43% on the prior year. Approximately 76% of the space occupied by National Accounts is outside London, indicating the growing importance of our national network.
During the year we strengthened the UK call centre team that supports our stores. The team handles direct enquiries to our free phone number and enquiries made when stores are closed to ensure a rapid response. The team handled almost 29,000 enquiries in the last financial year, helping support store revenue growth.
In operational terms, our main focus was the introduction of a new pricing model with attendant changes to our software systems. In the past, the self-storage industry generally offered a simple model of a fixed price, with a number of weeks free. However, this structurally reduced the attractiveness of the product for highly valuable long-term users and offered limited flexibility in pricing different room sizes and durations of stay. During the second half of the year we launched a new pricing platform that gives us greater flexibility and this will be a key driver of price efficiency during FY2013.
Effective management of our property portfolio remains a key focus for the team. During the year we regeared a number of leases on our properties including those at Sunderland, Croydon, Hanworth and New Malden. We also let under-utilised space unsuitable for self-storage at a number of locations as well as delivering a number of successful rates appeals. A number of our self-storage locations may have alternative use potential and work continues to evaluate and exploit these as appropriate.
During the year the Group completed a successful re-financing of its facilities, which now include a term loan, a revolving credit facility and a long-term US private placement component. The Group was in compliance with the associated covenants to its debt facilities at 31 October 2012. Full details of the new arrangements are set out in the Financial review.
| Number of stores 31 October 2011 |
Occupancy 31 October 2011 |
Number of stores 31 October 2012 |
Occupancy 31 October 2012 |
|
|---|---|---|---|---|
| Developing | 12 | 46.5% | 11 | 48.1% |
| Established | 18 | 53.9% | 20 | 60.4% |
| Mature | 81 | 68.8% | 84 | 66.7% |
| Large | 8 | 67.1% | 8 | 68.4% |
| Total | 119 | 64.4% | 123 | 63.9% |
During the year, our strategic progress contributed to further revenue and store EBITDA growth.
During the first half of the year we saw good revenue growth, driven by a balance of strong occupancy gains and lower rental rates than the prior year. In the second half of the year, we saw slower occupancy performance but improving rental rates up until the introduction of 20% VAT on UK self-storage. The French business, while performing well in constant currency, was affected by the declining value of the Euro during the second half of the year.
Our effective pricing strategy, which balanced rental rates and occupancy throughout the year, led to improvements in the total sq ft let across the business. We delivered steady gains in our developing stores and large stores, while broadly maintaining occupancy levels in the established stores and mature stores, after taking into account the impact of the imposition of VAT. The closing occupancy levels as a percentage of MLA are as shown above.
Performance in each of our trading areas is set out above.
In the UK we have 98 stores and 4.10 million sq ft of MLA. All our owned and leased UK stores are branded as Safestore.
Despite the continuing economic challenges and the imposition of 20% VAT on self-storage from 1 October 2012, we saw a resilient performance during the year. In line with our "More Space" strategy, the focus during the year was on making use of our national scale and marketing power to drive improved levels of occupancy, particularly from businesses, at the optimal rental rate.
Enquiry levels have remained high throughout the year, with continued customer demand for self-storage.
Total sales were up 5.3% to £74.8 million (FY2011: £71.1 million). We saw a 9.8% or 228,000 sq ft increase in average occupancy during the year. Year-end closing occupancy was up 1.8% or 44,000 sq ft on last year's record occupancy level to 2.54 million sq ft (FY2011: 2.50 million sq ft). Business customer occupancy has been particularly strong. As at 31 October 2012, 1.41 million sq ft or 55.5% of all our UK occupied space was filled by business customers and 1.13 million sq ft or 44.5% from personal customers.
In line with our pricing strategy and the mix effect on rate of a growing share of our occupancy being delivered in recently opened stores with lower average price points, our average rental rate decreased by 4.0% to £23.43 (FY2011: £24.40).
Store EBITDA was up 4.3% to £44.2 million and was impacted by the opening costs for the final two stores in our UK expansion programme. RevPAF (excluding the two stores opened since May 2011) was up 6.0% to £18.56 (FY2011: £17.51).
In March 2012, the UK government set out a proposal to introduce a new 20% tax on all self-storage rentals in the UK with effect from 1 October 2012. This represented a significant change, reversing the long-standing exemption from VAT that the UK self-storage sector enjoyed in common with other real estate businesses.
The Company acting together with the UK Self-Storage Association ("SSA") sought to challenge the decision during the formal consultation period. However, the government maintained its position and the measure took effect on 1 October 2012. An exceptional cost of £175,000 is included in the accounts for charges relating directly to the imposition of the new tax as well as our participation in the consultation process and legal review.
Number of customers (Group)
Governance
Since 1 October 2012, the Group has been obliged to charge full 20% VAT on all eligible self-storage rentals in the UK. In effect this increases the total cost of the product to our customers by 20%, although many business customers may have the ability to reclaim the VAT if they are VAT registered.
Our strategy has been to pass on the cost of the VAT increase to our customers wherever possible. We have, however, offered some selective discounts for certain high value customers.
As we forecast, this unplanned and very rapid change in the industry's tax status has impacted performance. During the fourth quarter of the year we saw approximately 51,000 more sq ft vacated than we would have had expected had the VAT measure not been in place. Since the year end, we have seen a reduction in the pace of new let growth although this has been accompanied by a moderate improvement in average move-in rate.
Taken together, the impact of VAT on existing and new business appears within the original estimates we provided in June 2012, which were for an annual revenue impact of £5 million to £6 million and an EBITDA impact in the order of £2 million to £3 million. We will, however, continue to monitor the situation closely.
We now have 25 stores in France, accounting for 1.04 million sq ft of MLA. All our French stores are branded as Une Pièce en Plus ("A Spare Room"). This network gives us a leading presence in the Paris region, a market with close to twelve million people, attractive socio-demographics for self-storage and high barriers to entry due to the lack of available land and the competition with other uses, as well as new planning restrictions.
With a strong brand and unrivalled store network right in the heart of the affluent areas of the city of Paris, we saw strong performance despite the slowing of the French economy. We continued to focus on maintaining performance in our already highly occupied central stores, while benefiting from our recent expansion into strategically located new stores around the suburban markets of the city.
Enquiries remained solid. Total revenue was up 6.3% to €29.3 million (FY2011: €27.6 million). The business delivered a 6.6% or 44,000 sq ft increase in average occupancy, with closing occupancy 5.0% or 35,000 sq ft higher than the prior year at 746,000 sq ft (FY2011: 711,000 sq ft). As at 31 October 2012, 0.30 million sq ft or 39.7% of all our French occupied space was filled by business customers and 0.45 million sq ft or 60.3% from personal customers. Average rental rate was broadly flat at €36.72 per sq ft (FY2011:
€36.64). Store EBITDA was up 2.2% to €20.7 million, reflecting the incremental costs of new stores that opened part way through the year and have yet to reach break-even.
RevPAF (excluding the three stores opened since May 2011) was up 2.5% to €27.59 (equivalent RevPAF at 31 October 2011 was €26.92). This good performance in constant currency was, however, significantly impacted by a negative movement in the Euro Sterling exchange rate, which fell by almost 10% during the second half of the year, compared to the same period last year. As a result, RevPAF, in Sterling, was down 3.5% to £26.01 (FY2011: £26.94).
Operationally, Safestore has a straightforward business model. Each store typically has three–four full-time equivalent team members and the stores are supported by a number of regional managers and the head office teams.
The principal cost of sales items are therefore:
"Under the new rules, the Board believes that REIT status has attractions for the Company and its shareholders. The Company therefore intends to convert to REIT status."
We have tightly controlled cost of sales, with more efficient online marketing and careful control of team costs. After stripping out the impact of new store costs and strategic expenditure, underlying cost of sales have increased by 4.1%. This was principally driven by the increasing costs of utilities and local business taxes. More details are given in the Finance report.
Administrative costs principally include staff costs for head office teams including the Directors, marketing and other public company related costs. During the year, we strengthened the teams for National Accounts, pricing and field support and reduced the costs of our property development team in line with our organic growth focus.
After stripping out the impact of the strategic investment noted above, one off provision releases and the impact of foreign exchange, underlying administrative costs were up by 3.1%. Once again, more detail is given in the Finance report.
Safestore's principal capital expenditure items are the continued provision of safety and security for our customers and team members, store maintenance, reconfiguration of store layouts to drive sales and selective new store openings.
During the year, capital expenditure was £19.2 million, of which £6.2 million was principally safety and security, store improvements and reconfiguration and £13.0 million related to new stores. Following the completion of our four new stores during the year we do not anticipate there to be any
material capital expenditure in relation to new stores during the current financial year.
Safestore generates the majority of its UK profits from the rental of self-storage property. At present, the Company is assessed for UK corporation tax on these profits and then our shareholders may be assessed for income tax on the dividends they receive from the Company.
Over recent years, owing to carried forward tax losses and capital allowances, the Company has not been a cash tax payer in the UK, although we have provided for deferred taxes. However, as the Company concludes its store expansion programme and the capital allowances that presently reduce our UK tax liability begin to wind down, Safestore's UK tax liability would normally begin to rise, raising a potential "double-tax" liability for our shareholders that is greater than the liability if shareholders were to simply invest in the properties directly.
The UK government believes that this "double-tax" situation hinders a healthy property market and therefore created the Real Estate Investment Trust ("REIT") status. REIT status is open to property companies generating the majority of their profits from UK property income and removes the corporation tax liability and some capital gains tax liabilities providing certain conditions are met, including a mandatory requirement to pay a PID of 90% of the distributable UK property profits.
In order to encourage investment in property and the use of REIT status, as part of the Finance Act 2012 the UK government altered the rules relating to eligibility. These changes included the removal of the previous entry charge that was levied to become a REIT, which had been up to 2% of the value of the assets within the REIT.
Under the new rules, the Board believes that REIT status has the following attractions for the Company and its shareholders:
The Company therefore intends to convert to REIT status. As REIT status requires a change to the Company's Articles of Association, principally in order to comply with legal provisions relating to the size of individual shareholdings in the Company, the Board will seek shareholder approval for the changes at an Extraordinary General Meeting on 20 March 2013. Once this approval is obtained, the Company will formally submit its application for REIT status.
Subject to HMRC approval, REIT status is then expected to take effect from 1 April 2013. Following that date, Safestore will cease to provide for corporation tax on its UK property income.
The Company will, however, continue to be assessed for appropriate taxes on its UK ancillary incomes and French property and ancillary income, which are not eligible for UK REIT status as they do not relate to UK property income.
Under REIT status, the Group will be well positioned to create value from its new organic growth strategy.
Chief Executive Officer 30 January 2013
Governance
The Group's revenue increased by £3.8 million (an increase of 4.0%) from £95.1 million in FY2011 to £98.8 million in FY2012.
This report is prepared in accordance with IFRS and details the key performance measures during the year.
Revenue for the Group is primarily derived from the rental of self-storage space and the sale of ancillary products, such as insurance, and merchandise, such as packing and storage products, in both the UK and France.
The table opposite sets out the Group's revenues by geographic segment for FY2012 and FY2011.
The Group's revenue increased by £3.8 million (an increase of 4.0%) from £95.1 million in FY2011 to £98.8 million in FY2012. As covered in the Chief Executive's review, the key drivers for revenue growth have been the increase in average occupancy (272,000 sq ft year on year), the reduction in average rate per sq ft (4.6% year on year) and ancillary revenues (+4.4% year on year).
There has been a significant currency impact during the year with an average exchange rate of €1.223:£1 for FY2012 against an average rate of €1.152:£1 for FY2011 which has impacted revenue adversely by circa £1.3 million.
Richard Hodsden Chief Financial Officer The table below sets out the Group's results of operations for the year ended 31 October 2012 and the year ended 31 October 2011, as well as the year on year change:
| Year ended 31 October | |||
|---|---|---|---|
| 2012 £'000 |
2011 £'000 |
% change | |
| Revenue | 98,836 | 95,060 | +4.0% |
| Cost of sales | (34,665) | (31,222) | |
| Gross profit | 64,171 | 63,838 | +0.5% |
| Administrative expenses | (9,818) | (15,476) | |
| Operating profit before loss on investment properties | 54,353 | 48,362 | +12.4% |
| Loss on investment properties (including exceptional impairment charge in FY2011) | (37,536) | (18,417) | |
| Operating profit | 16,817 | 29,945 | -43.8% |
| Net finance costs (including exceptional items) | (36,280) | (21,398) | |
| (Loss)/profit before income tax | (19,463) | 8,547 | |
| Income tax credit (including exceptional items) | 11,670 | 4,481 | |
| (Loss)/profit for the year | (7,793) | 13,028 |
| Year ended 31 October | |||||
|---|---|---|---|---|---|
| 2012 £'000 |
% of total | 2011 £'000 |
% of total | % change | |
| UK | 74,898 | 75.8% | 71,014 | 74.7% | +5.5% |
| France | 23,938 | 24.2% | 24,046 | 25.3% | -0.4% |
| Total revenue | 98,836 | 100.0% | 95,060 | 100.0% | +4.0% |
Cost of sales consists primarily of our store costs, staff salaries, business rates, utilities, insurance and maintenance. The Group's cost of sales increased by £3.4 million or 11.0% from £31.2 million in FY2011 to £34.7 million in FY2012.
| £'000 | £'000 | |
|---|---|---|
| Cost of Sales ("CoS") FY2011 | (31,222) | |
| Compensation for store relocation | (609) | |
| (609) | ||
| Adjusted like-for-like CoS FY2011 | (31,831) | |
| New store operating costs | (1,170) | |
| Incremental strategic investments | (363) | |
| Underlying costs increased by 4.1% year on year | (1,301) | |
| (2,834) |
There are three key elements to the cost increase:
During the year our underlying administrative expense increased by approximately £0.6 million to £13.9 million in FY2012 from £13.3 million in FY2011 as set out in the table below:
| Financial year | ||
|---|---|---|
| 2012 £'000 |
2011 £'000 |
|
| Reported administrative expenses | (9,818) | (15,476) |
| Adjusted for: | ||
| – exceptional items* | (4,875) | 1,333 |
| – depreciation | 445 | 168 |
| – contingent rent | 758 | 642 |
| – changes in fair value of derivatives | (384) | 8 |
| Underlying administration expenses | (13,874) | (13,325) |
| Underlying administrative expenses for FY2011 | (13,325) | |
| Strategic expenditure | (1,403) | |
| VAT provision released in year | 528 | |
| FX (including currency swaps) | 744 | |
| Other administrative cost movements (3.1%) | (418) | |
| Underlying administrative expenses for FY2012 | (13,874) |
* Exceptional items are detailed below.
Underlying administrative expenses have increased by £0.6 million. The main elements of the increase are:
— the balance of £0.4 million relates to a 3.1% increase in the general underlying administrative expenses of the business.
Underlying EBITDA is calculated as follows for FY2012 and FY2011:
| Financial year | ||
|---|---|---|
| 2012 £'000 |
2011 £'000 |
|
| Operating profit | 16,817 | 29,945 |
| Adjusted for | ||
| – loss on investment properties | 37,536 | 16,187 |
| – impairment of investment property | — | 2,230 |
| – depreciation | 446 | 168 |
| – contingent rent | 757 | 642 |
| – change in fair value of derivatives | (384) | 8 |
| Exceptional Items: | ||
| – insurance proceeds | (5,260) | — |
| – VAT and REIT related costs | 220 | — |
| – impairment of non-current assets | — | 382 |
| – costs relating to retirement of CEO and other restructuring costs | 165 | 702 |
| – costs relating to re-locating French head office | — | 248 |
| Underlying EBITDA | 50,297 | 50,512 |
The Group's Underlying EBITDA decreased by £0.2 million or 0.4% to £50.3 million in FY2012 from £50.5 million in FY2011. This decrease principally reflects the increase in revenues discussed above offset by the higher cost base and strategic investments in FY2012.
The loss on investment properties consists of the fair value revaluation gains and losses with respect to the investment properties under IAS 40, finance lease depreciation for the interests in leaseholds and one off items as detailed below:
| Financial year | ||
|---|---|---|
| 2012 £'000 |
2011 £'000 |
|
| Movement on investment properties | (42,200) | (10,669) |
| Finance lease depreciation | (4,336) | (5,518) |
| Capital Goods Scheme VAT write back | 9,000 | — |
| Exceptional impairment of investment properties — |
(2,230) | |
| (37,536) | (18,417) |
The movement in the investment properties reflects the combination of yield movements within the valuations together with the impact of changes in the cash flow metrics of each store. In a normal year the key variables in the valuations are rate per sq ft, stabilised occupancy, number of months to reach stabilised occupancy and the yields applied. In the current financial year adverse valuation movement is primarily driven by the imposition of VAT on self-storage in the UK which took effect on 1 October 2012. As a direct result of the imposition we will be able to reclaim VAT previously written off under the Capital Goods Scheme. We have estimated that the present value of the amount to be reclaimed is £9.0 million and will be reclaimable over the next ten years.
The valuation of investment properties is covered in more detail in the property section below.
Operating profit decreased by £13.1 million or 43.8% to £16.8 million for FY2012 from £29.9 million in FY2011. This movement predominantly reflects the £19.1 million swing in the investment properties from a loss of £18.4 million last year to a loss of £37.5 million this year partly offset by the £6.0 million positive movement in exceptional items.
Net finance costs consist of interest receivable from bank deposits as well as interest payable and interest on obligations under finance leases as summarised in the table below:
| Financial year | ||
|---|---|---|
| 2012 £'000 |
2011 £'000 |
|
| Bank interest receivable | 43 | 212 |
| Bank and other interest payable | (18,875) | (18,552) |
| Net bank interest | (18,832) | (18,340) |
| Fair value movement of derivatives | (1,805) | 1,825 |
| Exceptional finance expense | (9,969) | — |
| Interest on obligations under finance leases | (5,674) | (4,883) |
| Net finance costs | (36,280) | (21,398) |
The reduced bank interest receivable reflects the lower cash balances held through FY2012.
Bank and other interest payable increased by 1.7% to £18.9 million in FY2012 from £18.6 million in FY2011, although this is after capitalising interest of £0.2 million (FY2010: £0.3 million). The interest costs reflect the higher level of drawn bank debt in FY2012 together with the higher blended interest rate following the re-financing in May 2012.
The exceptional finance expense of £10.0 million (FY2011: £nil) represents the debt issue costs relating to the previous banking facility written off and the new debt issue costs of the new bank facilities. These costs have been expensed as prescribed by IAS 39.
Following the re-financing in May 2012, the Group replaced its existing interest hedge agreements to August 2013 with new hedge agreements to coincide with the new facilities. As a result the Group has interest hedge agreements in place to June 2016 swapping LIBOR on £197 million at an effective rate of 1.710% and EURIBOR on €40 million at an effective rate of 1.361%. The hedge agreements provide cover for 80% of the drawn debt leaving a 20% floating element. Interest payable includes a charge of £1.8 million in respect of the fair value movement of derivatives (FY2011: £1.8 million credit).
Interest on finance leases was £5.7 million (FY2011: £4.9 million) and reflects part of the rental payment under UK GAAP. The balance is charged through the investment loss line and contingent rent in the income statement. Taking the movements as a whole, the UK GAAP rental charge is down by £0.5 million to £10.8 million this year from £11.3 million last year primarily resulting from lease re-gearings in the year and the acquisition of the freehold interest in one store in FY2011.
Net debt at 31 October 2012 stood at £394.2 million up from £384.9 million at 31 October 2011. During the year, total capital decreased by £22.4 million to £637.6 million at 31 October 2012 from £660.0 million at 31 October 2011. The net impact is that the gearing ratio was 62% at 31 October 2012 compared to 58% at 31 October 2011.
Income tax for FY2012 was a credit of £11.7 million against a credit of £4.5 million for FY2011. The actual cash tax payable for FY2012 was £450,000 (FY2011: £365,000), all of which arose in France. The low level of cash tax payable is due to the exceptional financing costs incurred during the year, the availability of capital allowances in both the UK and France and the offset of French tax losses. The utilisation of losses in France is now expected to be annually restricted to €1 million and 50% of the remaining profits following the introduction of recent legislative changes. In respect of deferred tax, an exceptional credit of £6.3 million (FY2011: £6.6 million) arose following re-measurement due to changes in UK corporation tax rates which is explained further in note 8.
Earnings were a loss of £7.8 million compared to a profit of £13.0 million for FY2011.
EPRA adjusted earnings, which is the earnings figure after adding back the loss on investment properties, exceptional items, changes in fair value of derivatives and the tax thereon, decreased by £1.8 million or 10.9% to £14.3 million for FY2012 from £16.1 million for FY2011. Further details of this are given in note 10.
Cushman & Wakefield has again valued the Group's property portfolio. As at 31 October 2012, the total value of the Group's portfolio (including £0.8 million of owner occupied properties) was £685.8 million. This represents a decrease of £28.6 million or 4.0% compared to the £714.4 million valuation as at 31 October 2011. A reconciliation of the movement is set out below:
| Value as at 31 October 2012 | 521.5 | 164.3 | 685.8 | 204.1 |
|---|---|---|---|---|
| Revaluation of UK like-for-like portfolio | (39.2) | — | (39.2) | — |
| Revaluation of French like-for-like portfolio1 | — | — | — | 0.1 |
| Adverse currency translation movement | — | (14.0) | (14.0) | — |
| New stores opened in the year | 14.1 | 10.5 | 24.6 | 12.9 |
| Value as at 1 November 2011 | 546.6 | 167.8 | 714.4 | 191.1 |
| UK £m |
France £m |
Total £m |
France €m |
1 The revaluation fall in the UK like-for-like portfolio is primarily related to the imposition of VAT on self-storage in the UK with effect from 1 October 2012.
The table above summarises the movement in the property valuations:
The weighted average annual discount rate for the whole portfolio has followed a similar trend to exit yields.
The Company's pipeline of expansion stores is valued at £5.4 million as at 31 October 2012.
The property portfolio valuation has declined by £4.6 million from the valuation of £690.4 million at 30 April 2012 which combines the impact of the opening of the new store at Paris – Velizy (+£6.1 million) and a further deterioration in the Euro exchange rate (-£2.1 million) with the balance being mostly attributable to the impact of VAT on the UK portfolio valuations.
In their report to us, our Valuer has drawn attention to valuation uncertainty resulting from exceptional volatility in the financial markets and a lack of any transactions in the property investment market. Please see note 11 for further details.
The adjusted EPRA NAV per share is 188.6 pence, down 10.8% on October 2011. The main contributory factors in this movement are the adverse impacts of the movements in the Euro exchange rate and the impact of the imposition of the VAT of self-storage in the UK.
The following table summarises the Group's cash flow activity during the FY2012 and FY2011 in accordance with IFRS:
| Financial year | ||
|---|---|---|
| 2012 £'000 |
2011 £'000 |
|
| Net cash inflow from operating activities | 30,457 | 25,649 |
| Net cash outflow from investing activities | (21,498) | (36,649) |
| Net cash provided by financing activities | (16,109) | 10,107 |
| Net decrease in cash and cash equivalents | (7,150) | (893) |
There are two main factors influencing the £4.8 million increase in cash from operating activities in FY2012 compared to FY2011. This is made up of a combination of increased cash generated from operations, the movement in exceptional items between FY2012 and FY2011 offset by movements in working capital and increased interest payments.
Cash outflow from investing activities has decreased by £15.2 million to £21.5 million for FY2012 from £36.7 million for FY2011. Whilst there are several contributing factors affecting this movement it is mainly due to the decrease in expenditure on investment and development assets. Expenditure on investment and development properties in FY2012 was £20.2 million, a decrease of £14.8 million from £35.0 million in FY2011. The single biggest movement is the non-recurrence of the acquisition of the freehold interest in our Pentonville Road store for £11.5 million in the previous financial year.
The cash flows from financing activities decreased by £26.2 million in FY2012 to an outflow of £16.1 million from an inflow of £10.1 million in FY2011. This has several key factors which are set out on the face of the cash flow statement but mainly reflects the costs associated with the re-financing.
Borrowings under the existing bank facilities are subject to certain financial covenants and the Group is in compliance with its covenants at 31 October 2012 and, based on forecast projections, for a period in excess of twelve months from the date of this report. The debt facilities do not mature until August 2016 with US private placement facilities running to May 2019 and May 2024 respectively.
In May 2012, the Company re-financed its £385 million debt facilities due to mature in August 2013 with new increased facilities of £400 million. These new facilities comprise bank facilities of £270 million and €70 million and a US private placement of \$115 million. There is no amortisation on the private placement and minimal amortisation on the bank debt. Subsequent to the year end we reduced the UK Revolving Facility by £10 million in line with ending the existing store roll out programme.
The bank facilities have been extended to June 2016 with a bank margin ratchet between 2.5% and 3.5% based on interest cover performance, with an initial bank margin of 3.5% for the first six months of the facilities. For the private placement, \$67 million was issued at 5.52% with 2019 maturity and \$48 million was issued at 6.29% with maturity in 2024. The proceeds of the private placement issue have been fully swapped into fixed Sterling.
The bank facilities and the US Private Placement share interest cover and Loan to Value covenants.
Safestore has a straightforward business model.
We use our scale to market our self-storage facilities to customers and create enquiries. We use our customer insight and operating skill to convert enquiries into occupancy and we manage pricing and business mix to drive the self-storage rental rate and ancillary revenues.
We then tightly control our costs, which are principally staff costs, utilities, local taxes and marketing, to drive operating margin.
The combination of these actions drives growth in free cash flow, which we use to generate dividends, retire debt and selectively invest in improving our store network and its performance.
The Meeting will be held on 20 March 2013 at the Group's registered office, Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT, following which a general meeting to approve certain amendments to the Company's Articles of Associate to enable the Group to elect for REIT status shall be held. Notices for both meetings are expected to be sent to shareholders shortly.
Chief Financial Officer 30 January 2013
Governance
Corporate social responsibility
Throughout the year we have continued to evolve our stakeholder engagement programme based on our commitment to sustainable business practice.
Corporate Responsibility ("CR")
At Safestore we strive to deliver an engaging CR programme supportive of our principal commitments to our four stakeholder groups that is pivotal in how we progress our business.
We continually aspire to improve on our CR standards and commitments and consider this fundamental in our goal to deliver the highest standards of customer satisfaction, whilst making good business sense.
As we have progressed through FY2011/2012 our CR strategy has been fully supported by the Group Board. This ensures that our approach supports both our wider purpose statement and Safestore's values and strategic priorities.
Our Executive Team takes ownership for ensuring that our plan is delivered in every business area. With the support of the Senior Management Team this means our plan is far reaching involving both head office together with regional and store colleagues. By taking this approach we are able to ensure that each and every member of the team is able to participate with and influence how we develop our CR plan for the future delivering maximum stakeholder value.
"At Safestore we strive to deliver an engaging CR programme supportive of our principal commitments to our four stakeholder groups that is pivotal in how we progress our business."
A new state of the art call centre for our Customer Support Centre team.
We support our primary goal of optimising shareholder and investor value by providing clear and easily obtainable information on our business to customers, colleagues, suppliers and the wider community, adopting a consultative approach wherever practical. This ensures that business decisions are made having taken into account stakeholder needs whilst balancing our short and longer-term CR aspirations.
We will:
During the year our Space Specialists programme which sets our standards in customer care has continued to go from strength to strength. Our premium, professional and friendly approach is supported by expert knowledge and advice enabling us to explore our customers' unique reason for storage and delivering a tailored solution. A key measure of our success is customer feedback which was assessed during the year through our mystery shopping scheme. This saw results improve by 2.5% year on year.
Quarter three of FY2012 saw us start to explore real customer feedback as we trialled a text response system across two regions. This method of live customer feedback measures each stage of the customer journey from enquiry through to vacate and can be viewed from a store, regional, CSC and head office perspective. Following the trial's success which saw customer sentiment grow by 5.4%, we plan to launch VOICE across our entire business during FY2013.
During the year we invested in state of the art call centre space for our Customer Support Centre team ("CSC") who helped 28,935 customers during FY2012. This investment will enable us to continue to innovate how we interact with customers and to extend customer reach across both new and emergent channels.
As an "Investors in People" organisation, we aim to be an employer of choice and we believe our success is dependent on a motivated and highly trained team.
Our colleagues play a pivotal role in helping our customers and we are passionate in providing a diverse CR programme that ensures they are truly placed at the heart of our business. This helps our colleagues in achieving their goals and is underpinned by our commitment to attract and retain the very best talent to shape our future success.
We provide a healthy and safe environment for our people, customers, suppliers and contractors. Safestore always complies with current legislation and endeavours to continuously exceed legal requirements and local regulations by:
As an "Investors in People" organisation since 2003 our aim is to be an employer of choice and we passionately believe that our continual success is dependent on our highly motivated, well trained colleagues. We are delighted that for the year FY2012 our people have participated in over 11,000 hours of training time.
"Safestore has supported the disability charity Scope since 2008. Income raised from the partnership enables Scope to run services such as Scope Response, a free information and advice service that supports disabled people and their families. Every ten minutes, a family finds out their child is disabled. Scope's support can make a critical difference in a disabled child's early years.
At a time of unprecedented government funding cuts, demand on Scope's services from disabled people and their families is greater than ever. It is vital that we work with supporters like Safestore to raise funds and save costs. This year Safestore assisted Scope by generously providing free storage and in May collected 1,674 bags of donated stock for our charity shops worth £34,000. Safestore's support is very important to Scope and we would like to thank everyone involved for their generosity."
Richard Hawkes Chief Executive Scope
This training consisted of:
— 61 colleagues progressed their personal development by achieving an award as part of our in-house programme Careerstore.
31 colleagues were successfully promoted to a more senior position; this is a similar level to the prior year.
For the fifth consecutive year we were awarded the Payroll Giving Bronze Award in April 2012. We remain committed to supporting UK charities and payroll giving offers our colleagues an easy way of donating to their charity of choice.
As an employer with a national UK footprint we recognise and embrace the significant opportunity this presents to work with many communities across the UK. We aim to seek out both practical and creative solutions to involve our wider community and continue to do this in ways that deliver support that is wider reaching than that of a cash value or donation. This is achieved by working in partnership with a number of charitable causes at both Group, regional, store, departmental and team level.
For the fourth year running we were delighted to partner with Scope as our 'charity of the year'. In addition to the provision of free storage space we were delighted to work with Scope, our colleagues, our customers and wider community on 'Dash to donate' week where bags of donated stock were collected for Scope charity outlets. This year we collected 1674 bags raising £34,000 which is broadly similar to last year.
Governance
"On behalf of over 3,000 homeless guests, 8,700 volunteers and the Crisis at Christmas team, we would like to thank Safestore for the wonderful support and services you provided for our Crisis' wish-list collections and the Hands on London's "Wrap-up London" campaign. Your help for homeless people has never been more important than it is today. Thank you for giving hope to the thousands of people who have no home this Christmas."
Neil Kennedy Resources Manager Crisis at Christmas
"We are extremely grateful to Safestore for supporting Wrap Up London 2012. Not only did the generously donated storage space at three Safestore locations around London make the storage, sorting and distribution of thousands of coats possible, but the help and enthusiasm of all the Safestore team members at head office and in each of the centres made a massive contribution to the campaign's success. Many thanks to Safestore for helping Wrap Up London to keep thousands of vulnerable Londoners warm this winter!"
Elizabeth Grier CEO and Founder Hands On London
For the third year running we were delighted to partner with Crisis in support of their Crisis at Christmas campaign. This provides centres over the Christmas period offering companionship, hot meals and warmth together with a range of essential services for homeless people. Safestore's support brought together 43 of our stores located in Crisis centre catchments collecting 669 bags and boxes of donated items.
During the year we welcomed a new charity partner, Hands on London, who are committed to community based volunteering. In FY2012 we participated in their Wrap Up London campaign which encouraged Londoners to donate a coat to charity. This year Wrap Up London collected over 10,000 items of clothing and 8,520 coats. Safestore supported the collection and storage of the clothing prior to distribution to shelters, refuges and other charities.
We were delighted to introduce a new CSR award at our annual conference in celebration of our regional team's endeavours supporting their local communities. This year's award went to our Regional team located in the north of the UK who undertook a charity walk on Wednesday 4 July climbing Scafell Pike in the Lake District in support of Cancer Research. The expedition took five and a half hours to complete and raised £2,267.
John Barnes, Regional Manager for the Region, collected the award together with his team and commented that "this initiative not only raised money for a vital cause but drew on hidden team resources as people worked together supporting each other in their goal".
As part of our working together culture the year has seen us make many positive contributions to our local communities.
A Christmas toy run supported by our Eastbourne team together with the East Sussex Advanced Motorcyclists who collected toys for over 300 local families.
A charity sky dive organised by Alex Pitman in our Space Maker Colchester store which took place in July in support of the Cancer Recovery Foundation.
Our Bristol Ashton Gate team organised a charity abseil off the side of our 100ft building in November 2011 which involved 100 members of the local community taking up the challenge in support of five worthy charities raising £15,000.
Sustainable business practice continues to be key to our agenda and we remain focused on delivering a positive net impact on the environment from our business activities wherever practical.
When carrying out our business activities Safestore endeavours to:
support ethical purchasing by minimising the environmental impact of the products we buy and sell;
consider eco design solutions when building new stores and as a minimum always build to BREEAM standard; and
During the year we opened our Staines store and through the deployment of air to air heat source pump technology and photovoltaic roof tiles we are able to produce at least 20% renewable energy. In addition, we have remained focused on the sourcing of new store materials using recycled and sustainably sourced materials, such as chipboard for the mezzanine floors, to minimise environmental impact.
We carefully select packaging partners who share our values and goals to reduce the unnecessary breakdown of our natural climate. An example of this is our packaging supplier (Ecopac) whose operation is 100% solar powered, operating as part of the Westcott Venture Park sustainable energy project.
This year we used 317 tonnes of recycled paper and through the provision of a recycled box range, cardboard recycling points and a box for life scheme, we have saved approximately 5,395 trees from being unnecessarily felled. We are delighted to report that this is an increase of 80% on the prior year.
Governance
The Group regularly reviews the risks within the Group. Risk management is a dynamic and critical business function as it is important to help achieve long-term shareholder value and protect our business, people, assets, capital and reputation. It is a fundamental aspect of the business and is subject to regular and ongoing reviews. We continuously identify and manage those risks and opportunities that could affect Safestore and the achievement of our business plans and strategic objectives. Our approach is aimed at early identification of key risks, reducing or removing those risks and/or responding quickly and effectively when a risk crystallises. In each instance, where possible, we seek to mitigate risks in order to reduce risk to an acceptable level.
For the purposes of Section 417(5)(c) of the Companies Act 2006, the facility agreements with the Group's bankers and Private Placement Note holders are the only contracts or arrangements which the Board considers essential to its business.
The key strategic and operational risks are monitored by the Board and are defined as those which could prevent us from achieving our business goals. Our current strategic and operational risks and key mitigating actions are as follows:
The Group develops business plans based on a wide range of variables. Incorrect assumptions about the self-storage market or changes in the needs of customers, or the activities of customers may adversely affect the returns achieved by the Group
Lack of funding resulting in inability to meet business plans, satisfy liabilities or breach of covenants
Adverse currency or interest rate movements
| Acquisition and development of properties that fail to meet performance expectations |
— Thorough due diligence conducted and detailed analysis undertaken prior to Board approval for property investment and development. |
|---|---|
| — The Group's overall exposure to developments is monitored and projects phased. | |
| Overexposure to developments within a short timeframe |
— The performance of individual properties is benchmarked against target returns. |
| Valuation risk | |
| Value of our properties declining as a result of external market or internal management factors |
— Independent valuations conducted six-monthly by external professionally qualified valuers. |
| — A diversified portfolio let to a large number of customers should help to mitigate any negative impact arising from changing conditions in the financial and property market. |
|
| — Headroom of loan to value banking covenants is maintained and reviewed. | |
| Occupancy risk | |
| A potential loss of income | — Personal and business customers cover a wide range of segments, sectors |
and increased vacancy due to falling demand, oversupply, or customer default
Reductions in energy usage are not achieved resulting in excessive costs
Failure to recruit and retain key staff with appropriate skills and calibre
Major events mean that the Group is unable to carry out its business for a sustained period
Failure to meet customer and external stakeholder expectations
Alan Lewis Non-Executive Director 4
Frederic Vecchioli Executive Director 7
Non-Executive Chairman
Peter Gowers Chief Executive Officer 2
6
Senior Independent Director
Governance
Financial statements Business review Overview
Safestore Holdings plc Annual report and financial statements 2012 41
Richard Grainger joined the Board in February 2007 as a Non-Executive Director and was appointed Chairman in March 2008. He is also currently chairman of Ipes Guernsey (Holdings) Limited. He started at Hill Samuel Bank Limited in 1987 and subsequently joined Close Brothers Corporate Finance Limited ("CBCF") in 1996. In 2001 he was appointed chief executive of CBCF. He departed from CBCF as chairman in June 2009. Mr Grainger graduated from Oxford University and is an associate member of the Institute of Chartered Accountants in England and Wales.
Keith Edelman joined the Group in September 2009 as a Non-Executive Director and was appointed Chairman of the Remuneration Committee in March 2010. He is currently chairman of Connaught Bookmakers and NIRAH Holdings Limited, the senior independent director of Supergroup Plc and Thorntons, non-executive chairman of Beale Plc, and non-executive director of the Olympic Park Legacy. Prior to this, he was managing director of Arsenal Holdings Plc, chief executive of Storehouse Plc, managing director of Carlton Communications Plc and corporate planning director of Ladbroke Plc.
Peter Gowers joined the Group in February 2011 and became Chief Executive on 1 March 2011. Mr Gowers began his career at Arthur D Little before joining the strategy group of Bass PLC in 1999. He joined Bass's hotel division as head of strategy in 2001 and became head of global brand services for InterContinental Hotels Group plc ("IHG") in 2003 before being appointed as IHG's chief marketing officer in 2005 and as chief executive, Asia-Pacific in 2007. Mr Gowers has a First Class BA (Hons) Law Degree from Keble College, University of Oxford.
Richard Hodsden joined the Group in August 2002 as Chief Financial Officer. He previously held the position of finance director at Global Vault plc, Security Printing & Systems Limited and Lifestyle Upholstery Limited. He was also financial controller of Flextronics International Limited and of Parliamentary and Secure Services, the Stationery Office. Richard started his career at KPMG, where he qualified as a chartered accountant in 1991. Mr Hodsden is a fellow of the Institute of Chartered Accountants in England and Wales.
Alan Lewis joined the Group in June 2009 as a Non-Executive Director. He is currently also non-executive chairman of both Leeds Bradford International Airport and Porterbrook as well as chairman of National Friendly. After five years in manufacturing with RTZ and Black & Decker he spent 30 years in the private equity industry. Firstly with 3i, then from 1991–2011 with Bridgepoint, where he was a founding partner. Mr Lewis is a graduate of Liverpool University and holds an MBA from Manchester Business School.
Adrian Martin joined the Group in September 2008 as a Non-Executive Director and Chairman of the Audit Committee. He is also currently non-executive chairman of Morgan Sindall plc, and a non-executive director of M&C Saatchi plc and H R Owen plc. Previously he was a director of RSM Tenon Group plc, managing partner at BDO Stoy Hayward, chief executive at the law firm Reynolds Porter Chamberlain LLP and was a non-executive director of Carphone Warehouse Group plc for eight years until July 2008. Mr Martin is a fellow of the Institute of Chartered Accountants in England and Wales.
Executive Director Frederic Vecchioli joined the Group in 1998 as President and Head of French Operations. Mr Vecchioli has a Master of Finance from the University of Paris Dauphine.
Key
"As an investors in people organisation since 2003 our aim is to be an employer of choice and we passionately believe that our continual success is dependent on our highly motivated, well trained colleagues."
Andy Brandwood joined the Group in March 2010 as Operations Director. He previously held the position of customer and stores director at Carphone Warehouse plc. Prior to that Mr Brandwood was divisional manager at BP Oil plc's retail division. Mr Brandwood began his career in Dixons Stores Group plc where he held a variety of field-based, head office and trading roles, from store manager through to senior operational leadership roles in Dixons, The Link, Dixons airport retail and Currys.
Sam Ahmed has worked for the Group since 2004 and was appointed Company Secretary in May 2008. He was head of corporate compliance for Mentmore plc and has been involved in the industry since 1996. Mr Ahmed qualified as a chartered accountant in 1986 with the Institute of Chartered Accountants in England and Wales. He worked in public practice for 15 years, having trained and qualified with a small London practice, then as an audit manager at Price Waterhouse, followed by five years as a general practitioner with his own accountancy firm in London.
Dave Cox joined Safestore in March 2011 as the Head of Sales and Marketing. Mr Cox began his career in 1997 working for Thomson Holidays holding a range of marketing positions. He then moved to National Express Group in 2001, becoming the head of marketing for their trains division before leaving in 2006 to join AXA Insurance. He held several positions within AXA including head of marketing for both their personal lines insurance and their intermediary partners. Mr Cox holds a Masters Degree in Marketing.
David Davies joined the Group in 2000 as Head of Operations and was appointed a Divisional Director after the Mentmore acquisition. He became Business Development Director in 2009 and his responsibilities include the Space Maker management contract. He is currently the Chairman of the UK Self-Storage Association. Before joining Safestore, Mr Davies, who has 35 years' retail experience across various sectors, was director of trading at Petsmart UK.
Hannah Thomson joined the Group in May 2012 as HR Director. Mrs Thomson was formerly with Avis UK, where she was HR Director for four years. Prior to Avis, she spent 17 years with the John Lewis Partnership in a range of senior HR roles, including HR Manager, Distribution division, Head of the group HR transformation programme and Head of HR for the corporate head office. Mrs Thomson has a 1st class BA in Modern History and Politics and an MA in History. She is a Member of the Chartered Institute of Personnel and Development.
Property Director
David Penniston joined the Group in March 2008. Mr Penniston was formerly with Whitbread where he was UK and Ireland development director having joined the Whitbread group in 2003 as property director of David Lloyd Leisure. Prior to that he was with Waitrose where he was head of development and previous to that was with Sainsbury's for ten years where his last position was head of property and development for the hypermarket division. Mr Penniston is a Member of the Royal Institution of Chartered Surveyors.
This report sets out the remuneration policy for the Directors of Safestore Holdings plc and discloses amounts paid to them over the course of the financial year. In response to the UK government's proposed new legislation regarding the reporting of Directors' remuneration, the Remuneration Committee has agreed to adopt a number of these changes early (Safestore is not expected to be required to report formally under the new legislation until 2014). This report has therefore been divided into the following two sections:
The Remuneration Committee continually reviews the Senior Executive remuneration policy to ensure it promotes the attraction, motivation and retention of the high quality Executives who have been key to delivering the Company's strategy in the past and who will be key to delivering sustainable earnings growth and shareholder return in the future. The Committee's most recent conclusions are that the existing Senior Executive remuneration policy remains appropriate and should continue to operate for FY2013. Specifically, the Committee felt that:
with vesting based on earnings per share (two-thirds) and relative total shareholder return (one-third) performance conditions and continued service provide a strong alignment between the Senior Executive Team and shareholders. Grant levels and performance targets will continue to be reviewed in advance of each award and will reflect changes in market conditions, particularly following the recent imposition of 20% value added tax and its impact on UK pricing opportunities.
In conclusion, the Committee believes that the remuneration policy continues to incentivise the delivery of strong yet sustainable financial results and the creation of shareholder value.
Chairman of the Remuneration Committee
The Directors' remuneration report has been prepared in accordance with the requirements of Schedule 8 of the Companies Act 2006, the principles of the UK Corporate Governance Code and best practice guidelines. Furthermore, in response to the UK government's proposed legislation regarding the reporting of Directors' remuneration and changes to the voting rights, a number of the revised reporting requirements have been incorporated into this year's report.
The Board recognises that the Directors' remuneration is of legitimate concern to shareholders and is committed to following current best practice. The Group operates within a competitive environment; performance depends on the individual contributions of the Directors and employees and the Group believes in rewarding vision and innovation.
When setting Executive Directors' remuneration, the Committee endeavours to ensure that all Directors are provided with appropriate performance related and non-performance related pay to encourage enhanced performance and that they are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group. The Committee also considers pay and conditions elsewhere in the Group, environmental, social and governance issues and risk when reviewing executive pay quantum and structure.
The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain Directors of the calibre necessary to maintain and improve the Group's profitability and effectiveness and to reward them for enhancing shareholder value and return. To do this, it aims to provide a market competitive (but not excessive) package of pay and benefits. The Group's general policy is to set basic salaries around mid-market levels and set performance pay levels which are at the upper quartile of market practice but with stretching goals which accords with the Group's general policy of seeking to make bonuses self-financing wherever possible. Remuneration packages will also reflect the Directors' responsibilities and contain incentives to deliver the Group's objectives.
| Element | Purpose/link to strategy | Operation | Opportunity | Performance metrics and period | Changes in year |
|---|---|---|---|---|---|
| Basic salary | To attract and retain appropriate talent Reflects an individual's responsibilities, experience and role |
Reviewed annually on 1 May Decisions influenced by: — responsibilities, abilities, experience and performance of an individual; and — the Group's salary and pay structures and general workforce increases Salaries are benchmarked periodically against companies of a similar size and complexity |
— | None | Salary review date moved from 1 November 2012 to 1 May 2013 to harmonise with the rest of the workforce Salaries will be frozen at current levels until at least 1 May 2013 |
| Annual bonus | Rewards the achievement of the corporate strategy and success of the Group over the one-year operating cycle |
Targets reviewed annually Bonus level is determined by the Committee after the year end, based on performance against targets Claw-back provision operates |
Maximum: 100% of salary |
Performance period: one year Performance metrics: EBITDA targets and personal objectives EBITDA must be greater than the previous financial year for any bonus to be payable |
None |
| Long Term Incentive Plan |
Incentivises Directors to achieve returns for shareholders over the long term |
Performance Share Plan ("PSP") approved by shareholders in 2009. Awards of nil-cost or conditional shares are made annually with vesting dependent on the achievement of performance conditions over the subsequent three years The Committee reviews the quantum of awards annually and monitors the continuing suitability of the performance measures. Claw-back provision operates |
2013 award level: 115% of salary Normal maximum: 150% of salary Exceptional maximum: 200% of salary |
Performance period: three years Performance metrics: — 2/3rds of award: PBT EPS growth of RPI + 2% p.a. (25% vests) to RPI + 6% p.a. (100% vests), sliding scale between the two points; and — 1/3rd of award: TSR v FTSE SmallCap companies, sliding scale from median (25% vests) to upper quartile (100% vests) Failure to achieve threshold results in the awards lapsing; there is no facility to retest |
None |
| All-employee sharesave |
Encourages long term shareholding in the Company |
Invitations made by the Committee under the Approved Sharesave scheme |
As per HMRC limits | None | None |
| Share ownership | Further aligns Executives with investors |
50% of the net of tax vested PSP shares required to be retained until the shareholding guideline is met |
100% of salary | None | None |
| Benefits | To aid retention and recruitment |
Includes car allowance, life insurance, private medical and dental insurance |
At cost | None | None |
| Pension | Aids retention and rewards sustained contribution |
Defined contribution arrangements for UK executives. Social security contribution for F Vecchioli |
Between 15% and 20% of basic salary |
None | None |
Financial statements Business review Overview
Governance
The charts below show how the composition of each of the Executive Directors' remuneration packages varies at different levels of performance under the policy set out above, as a percentage of total remuneration opportunity and as a total value:
The key components of the remuneration of the Executive Directors are set out in further detail below.
Basic salary is determined by reference to the individual's experience, performance, responsibility and pay levels across the Group more generally. In addition, the Committee reviews periodically basic salary levels within similarly sized listed real estate and pan-sector companies although the Committee is careful not to place excessive reliance on the use of external comparator analysis.
During the year the Remuneration Committee decided to harmonise the Executive Director salary review date with that of the general workforce. Going forward base salaries will be reviewed on 1 May (previously 1 November). Executive Director salaries will be frozen at current levels for the first six months of the FY2013 financial year and will not be compensated for the salary review date deferral.
Current basic salary levels for Executive Directors are presented below:
| From 1 November 2011 |
From 1 November 2012 |
||
|---|---|---|---|
| P D Gowers | Chief Executive Officer | £325,000 | £325,000 |
| R D Hodsden | Chief Financial Officer | £216,000 | £216,000 |
| F Vecchioli | Executive Director | €206,000 | €206,000 |
The Committee operated an annual bonus plan for Executive Directors during FY2012. The maximum bonus was set at 100% of basic salary with measurement based upon sliding scale EBITDA and personal objectives set at the start of each financial year, as set out below:
| Measures | Bonus potential |
|---|---|
| EBITDA | 80% |
| Personal objectives | 20% |
In addition to the above, EBITDA must be greater than the previous financial year for any bonus to be payable. No bonus has been determined payable for FY2012.
The FY2013 annual bonus plan for Executive Directors will be similar in design to the plan for FY2012, based on a combination of EBITDA and personal objectives in the ratio of 80:20 and the requirement to grow absolute EBITDA. The maximum bonus payable will remain at 100% of basic salary. Specific targets for FY2013 have not been disclosed as they are considered to be commercially sensitive, although the Committee is satisfied that they will be demanding and require performance significantly better than budget for full payout.
The 2009 Performance Share Plan ("PSP") is the Group's primary long-term incentive arrangement. The key terms of the PSP are as follows:
The Remuneration Committee is satisfied that the combination of PBT-EPS and TSR targets provides an appropriate balance between: (i) incentivising and rewarding strong financial performance; and (ii) providing a strong and direct alignment with the interests of institutional shareholders by rewarding relative stock market performance.
If at any time following the payment of a bonus or vesting of PSP awards it becomes apparent to the Committee that the calculation of amounts paid or the calculation of the level of vesting was manifestly inaccurate, the Committee may require an individual to repay such amounts as the Committee considers to be appropriate to redress any overpayments made.
Consistent with best practice, the Committee operates shareholding guidelines for Executive Directors at a level equal to 100% of basic salary. Until such time as this level of shareholding is achieved, 50% of the net of tax value of awards which vest under the PSP will be required to be retained.
A Sharesave scheme is open to all employees (including Executive Directors). The Sharesave scheme meets HM Revenue & Customs approval requirements, thereby giving all eligible employees the opportunity to acquire shares in the Company in a tax efficient manner.
Taxable benefits include a car allowance, life insurance, private medical and dental insurance. Benefits in kind are not pensionable and are not taken into account when determining basic salary for performance related remuneration.
The Committee reviews the pension arrangements for the Executive Directors to ensure that the benefits provided are consistent with those provided by other similar companies. The Group does not offer a defined benefit pension scheme and instead it makes contributions to an approved personal pension scheme of the Executive Director's choice, contributions under compulsory legislative pension arrangements, or payments to the Director in lieu of pension contributions because of individual circumstances. The Group contributes 15% of basic salary for the pension arrangements of Peter Gowers and Richard Hodsden and, in line with the compulsory social security contribution requirements in France, an amount for Frederic Vecchioli which equated to 20% of basic salary for the year ended 31 October 2012.
Executive Director service contracts for Peter Gowers and Richard Hodsden contain a notice period of one year and do not contain contractual termination payments. The terms on which Frederic Vecchioli is engaged include a six month notice period and a remunerated non-compete clause on termination. The following table shows details of the service contracts for Executive Directors who held office during the year ended 31 October 2012:
| Director | Date of Current Service Contract | Notice period |
|---|---|---|
| P D Gowers | 17 January 2011 | twelve months |
| R D Hodsden | 9 March 2007 | twelve months |
| F Vecchioli | 25 September 2006 | six months |
The Board allows Executive Directors to accept appropriate outside commercial Non-Executive Director appointments provided the aggregate commitment is compatible with their duties as Executive Directors. The Executive Directors concerned may retain fees paid for these services, which will be subject to approval by the Board. No Non-Executive Directorships were held by the Executive Directors during the year.
The Group's policy is to appoint Non-Executive Directors to the Board with a breadth of skills and experience that is relevant to the Group's business. Appointments are made by the Board upon the recommendations and advice from the Nomination Committee.
Non-Executive Directors receive fixed fees agreed by the Executive Directors after reference to similar roles in an appropriate comparator group of companies and reimbursement of expenses incurred in attending Board and other meetings. It is the Board's policy for Non-Executive Directors to be paid a level of fee that reflects the time commitment and responsibilities of the role and is sufficient to attract individuals with appropriate knowledge and experience. Non-Executive Directors do not receive an annual bonus but may receive additional remuneration where the time commitment required due to unusual circumstances exceeds the normal commitments and responsibilities. The Non-Executive Directors received no other benefits in the year ended 31 October 2012 (FY2011: £nil).
The Non-Executive Directors do not have service contracts but their appointments are subject to review every three years under the rotation provisions of the Company's Articles of Association. They all have notice periods of three months.
As the Company is listed in the FTSE SmallCap Index and FTSE Real Estate Investment & Services Sector, the graph sets out a comparison of the Company's TSR (i.e. share price movement plus dividends reinvested on the ex-dividend date) against the SmallCap and Real Estate Investment & Services Sector indexes over the last five years.
This graph shows the value, by 31 October 2012, of £100 invested in Safestore Holdings plc over the past five years compared with the value of £100 invested in the FTSE SmallCap Index and the FTSE All Share Real Estate Investment & Services Index. The other points plotted are the values at intervening financial year ends.
The Remuneration Committee (the "Committee") comprised independent Non-Executive Directors and the Group Chairman throughout the year ended 31 October 2012, namely:
| Name | From | To |
|---|---|---|
| K G Edelman (Committee Chairman) | 11 December 2009 | To date |
| R S Grainger | 1 February 2007 | To date |
| A S Lewis | 23 March 2011 | To date |
No member of the Committee has any personal financial interest (other than as shareholders), conflicts of interest arising from cross directorships or day-to-day involvement in running the business. No Director plays a part in any discussion about his own remuneration. The remit of the Committee is limited to consideration of the remuneration of the Group Chairman (with the Group Chairman absent from such discussions), Executive Directors and certain members of the Senior Management Team and to approve the long-term incentive awards granted under the schemes operated by the Group. The Committee's terms of reference are available on the Group's website at www.safestore.com.
During the year, New Bridge Street ("NBS"), an Aon plc company, was engaged by the Committee to provide it with remuneration consultancy services. Aon plc provides no other services to the Group. The terms of engagement between the Company and NBS are available from the Company Secretary on request. NBS is a signatory to the Remuneration Consultants' Code of Conduct.
This part of the remuneration report is audited.
| Salary and fees £'000 |
Annual bonus £'000 |
Benefits £'000 |
Total 2012 £'000 |
Total 2011 £'000 |
|
|---|---|---|---|---|---|
| Executive Directors | |||||
| P D Gowers | 325 | — | 22 | 347 | 390 |
| R D Hodsden | 216 | — | 17 | 233 | 342 |
| F Vecchioli | 168 | — | — | 168 | 168 |
| S W Williams | — | — | — | — | 573 |
| Non-Executive Directors | |||||
| R S Grainger | 90 | — | — | 90 | 115 |
| A H Martin | 45 | — | — | 45 | 45 |
| A S Lewis | 35 | — | — | 35 | 33 |
| K G Edelman | 45 | — | — | 45 | 45 |
| Total emoluments | 924 | — | 39 | 963 | 1,711 |
Notes
No annual bonuses were determined to be payable for FY2012.
Company contributions to the money purchase pension arrangements/payments in lieu of pension contributions for individual Executive Directors were as follows:
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| P D Gowers | 43 | 35 |
| R D Hodsden | 32 | 32 |
| F Vecchioli | — | — |
| S W Williams | — | 24 |
| 75 | 91 |
Executive Directors' interests under the PSP are as follows:
| Share price on grant |
As at 1 November |
PSP awards | PSP awards | PSP awards | As at 31 October |
|||
|---|---|---|---|---|---|---|---|---|
| Date of grant | (p) | 2011 | granted | vested | lapsed | 2012 | Vesting date | |
| P D Gowers | ||||||||
| 02/02/2011 | 142 | 439,791 | — | — | — | 439,791 | 02/02/2014 | |
| 02/02/2012 | 111 | — | 336,712 | — | — | 336,712 | 02/02/2015 | |
| 439,791 | 336,712 | — | — | 776,503 | ||||
| R D Hodsden | ||||||||
| 27/03/2009 | 55 | 405,603 | — | 110,275 | 295,328 | — | 27/03/2012 | |
| 24/02/2010 | 136 | 183,823 | — | — | — | 183,823 | 24/02/2013 | |
| 02/02/2011 | 142 | 168,586 | — | — | — | 168,586 | 02/02/2014 | |
| 02/02/2012 | 111 | — | 223,784 | — | — | 223,784 | 02/02/2015 | |
| 758,012 | 223,784 | 110,275 | 295,328 | 576,193 | ||||
| F Vecchioli | ||||||||
| 27/03/2009 | 55 | 326,462 | — | 88,758 | 237,704 | — | 27/03/2012 | |
| 24/02/2010 | 136 | 141,092 | — | — | — | 141,092 | 24/02/2013 | |
| 02/02/2011 | 142 | 137,747 | — | — | — | 137,747 | 02/02/2014 | |
| 02/02/2012 | 111 | — | 178,597 | — | — | 178,589 | 02/02/2015 | |
| 605,301 | 178,597 | 88,758 | 237,704 | 457,428 |
The PSP awards are subject to continued service over three years and the following performance targets:
| EPS (two-thirds) | TSR (one-third) | |
|---|---|---|
| 2009 and 2010 PSP Awards | 25% of this part of an award vests for PBT-EPS growth of RPI+3% per annum with full vesting of this part of an award for PBT-EPS growth of RPI+8% per annum. A sliding scale operates between these points. |
25% of this part of an award vests if Safestore's TSR is at a median of the comparator group (FTSE SmallCap excluding investment trusts), with full vesting of this part of an award for upper quartile performance. |
| 2011 and 2012 Awards 25% of this part of an award vests for PBT-EPS growth of RPI+2% per annum with full vesting of this part of an award for PBT-EPS growth of RPI+6% per annum. A sliding scale operates between these points. |
A sliding scale operates between these points. In addition to the above, no part of the TSR awards will vest unless the Committee is also satisfied that the TSR performance of the Group is reflective of the Group's underlying performance. |
The 2009 PSP award partially vested on 27 June 2012 when the share price was 102 pence per share. The normal vesting date of 27 March 2012 was deferred to 27 June 2012 because of regulatory restrictions arising from the announcement of the Company's re-financing and interim results. The EPS performance condition (66.6% of awards) was not met and 23.7% of the TSR performance condition (33.3% of awards) was met.
| Sharesave | |||||
|---|---|---|---|---|---|
| As at 31 October 2011 |
Granted/lapsed during the year |
As at 31 October 2012 |
Exercise price | Exercise period set at grant | |
| P D Gowers | 8,677 | — | 8,677 | 104.0p | 1 September 2014 to 28 February 2015 |
| R D Hodsden | 8,677 | — | 8,677 | 104.0p | 1 September 2014 to 28 February 2015 |
No consideration was payable in respect of the grant of options under the Sharesave scheme. Options expire at the end of the exercise period shown in the table above.
The mid-market price of the shares at 31 October 2012 was 109.25 pence and the range during the year was 93.5 pence to 128.0 pence.
The interests of the Directors in the shares of the Company were:
| 29 January 2013 |
31 October 2012 |
31 October 2011 |
|
|---|---|---|---|
| The Company – ordinary shares of 1 pence | Number | Number | Number |
| Executive Directors | |||
| P D Gowers | 100,000 | 100,000 | 100,000 |
| R D Hodsden | 3,364,988 | 3,364,988 | 3,364,988 |
| F Vecchioli | 1,151,331 | 1,151,331 | 1,151,331 |
| Non-Executive Directors | |||
| R S Grainger | 100,833 | 100,833 | 100,833 |
| A H Martin | 20,000 | 20,000 | 20,000 |
| A S Lewis | 200,000 | 200,000 | — |
| K G Edelman | — | — | — |
All Directors' interests are beneficially held.
This report was approved by the Remuneration Committee and signed on its behalf by:
K G Edelman
Chairman of the Remuneration Committee 30 January 2013
— Adrian Martin (Chairman)
— Keith Edelman
Meetings of the Audit Committee are also attended when appropriate by the Chief Executive Officer and the Chief Financial Officer as well as the Group's external auditors. The Board has satisfied itself that at least one member of the Committee has recent and relevant financial experience and is confident that the collective experience of Committee members enables it to be effective.
The Audit Committee's principal responsibilities are:
The full terms of reference of the Audit Committee, which comply with the UK Corporate Governance Code, are available on the Group's website at www.safestore.com.
During the year the Audit Committee met three times, the meetings being attended, where appropriate, by the Group Chief Executive Officer, the Group Chief Financial Officer and the Company Secretary, as well as the Group's external auditors.
| Audit |
|---|
| Committee |
| (3 meetings) |
| 3/3 |
| 3/3 |
During the period under review, the Audit Committee has:
The Audit Committee assesses and reviews on a regular basis the independence of the external auditors. In forming their opinion of the independence and objectivity of the external auditors, the Audit Committee takes into account the safeguards operating within PricewaterhouseCoopers LLP in respect of any non-audit services provided.
The Audit Committee considers on a case-by-case basis whether or not the external audit firm should be permitted to carry out other services for the Group.
The two key principles applied are: firstly, whether the provision by the auditors of that service would compromise their independence in any material way; and secondly, whether it would otherwise be inappropriate for them to be engaged, for example in relation to any material accounting irregularities or significant fraud that had previously not been detected during an audit carried out by that firm. Where non-audit services are provided, the fees are based on the work undertaken and are not success related.
Regard is paid to the nature of, and remuneration received for, other services provided by PricewaterhouseCoopers LLP to the Group and, inter alia, confirmation is sought from them that the fee payable for the annual audit is adequate to enable them to perform their obligations in accordance with the scope of the audit.
PricewaterhouseCoopers LLP have been the Company's auditors since 2003. The Audit Committee considers that the relationship with the auditors is working well and remains satisfied with their effectiveness and hence has recommended to the Board that they are proposed for re-appointment. Accordingly, it has not considered it necessary to date to require the firm to tender for the audit work. There are no contractual obligations restricting the Company's choice of external auditors.
In respect of the year ended 31 October 2012, the auditors' remuneration comprised £260,000 for audit work and £157,000 for other work, principally relating to taxation compliance and advisory services.
This report was approved by the Audit Committee and signed on its behalf by:
Chairman of the Audit Committee 30 January 2013
The Nomination Committee ("the Committee") comprises:
The Nomination Committee is appointed by the Board and comprises the Chairman of the Board, two Non-Executive Directors and the Group Chief Executive Officer. The Chairman does not chair when the Committee is considering matters relating to his position, in which circumstances, the Committee is chaired by an independent Non-Executive Director, usually the Senior Independent Director.
The Nomination Committee's principal responsibilities are, amongst other things, to:
During the year under review, the Committee held four formal meetings. In addition, a number of informal meetings and discussions took place.
| Number of meetings held | Nomination Committee (4 meetings) |
|---|---|
| P D Gowers | 4/4 |
| R S Grainger | 4/4 |
| A H Martin | 4/4 |
| A S Lewis | 4/4 |
At the Committee meeting in December 2011, a full review was undertaken on the composition of Board committees. Also, the Committee considered the composition of the Board, Non-Executive Directors, executive positions and succession planning. It was agreed that each Committee meeting should continue to give further consideration to the potential need for and timing for the introduction of a fourth Non-Executive Director.
Gender and diversity is to continue to be given appropriate consideration when future candidates are assessed for knowledge, experience and suitability. During the year, the Committee considered and approved the recruitment of the new Human Resources Director for the UK business. The executive team in both the UK and France was discussed along with recruitment planned during the financial year for strengthening the operational structure. It was agreed that, as the business evolves, the management structure would continue to be reviewed periodically for adequacy.
The full terms of reference of the Nomination Committee are available on the Group's website at www.safestore.com.
This report was approved by the Nomination Committee and signed on its behalf by:
Chairman of the Nomination Committee 30 January 2013
The Group recognises the importance of, and is committed to, high standards of corporate governance. These are set out in the UK Corporate Governance Code issued by the Financial Reporting Council in June 2010 (the "Code"). The Board is accountable to the Company's shareholders for good governance and this report describes how the Board has applied the main principles of good governance set out in the Code during the year under review. Throughout the year the Company has complied with the main principles of the Code (as they apply to a smaller company outside the FTSE 350).
The Code recommends that the Board should include a balance of Executive and Non-Executive Directors, such that no individual or small group of individuals can dominate the Board's decision taking. It further recommends that at least half of the Board, excluding the Chairman, should comprise Non-Executive Directors determined by the Board to be independent and that one Non-Executive Director should be nominated as the Senior Independent Director.
The Company currently has seven Directors, which include the Chairman, three Executive Directors and three independent Non-Executive Directors. As a result, the Directors consider that there is a satisfactory balance of decision-making power on the Board.
UK Corporate Governance Code Board process diagram The Board is aware of the other commitments of its Directors and is satisfied that these do not conflict with their duties as Non-Executive Directors of the Company. The Executive Directors do not hold any Non-Executive Directorships in other companies.
There is a clear division of responsibilities between the Chairman and Chief Executive Officer. Adrian Martin, deemed to be independent upon his appointment in 2008, is the Senior Independent Director. Keith Edelman is deemed to be independent. Alan Lewis was deemed to be independent from January 2011 following the disposal by Bridgepoint, a major shareholder in the Company, of its shareholding in the Company.
The Board recognises the effective performance and commitment of Richard Grainger, Peter Gowers and Keith Edelman and has recommended a resolution for shareholders to re-appoint each of them to the Board at the forthcoming AGM.
A clear division of responsibility at the head of the Group is established, agreed in writing and approved by the Board. The Chairman is responsible for the management of the Board and for aspects of external relations, while the Chief Executive Officer has overall responsibility for the management of the Group's businesses and implementation of the strategy approved by the Board.
The statement of the division of responsibilities between the Chairman and the Chief Executive Officer is available on the Group's website at www.safestore.com.
Appropriate Directors' and officers' insurance cover is arranged by the Group through its insurance brokers and is reviewed annually.
The Board normally schedules at least ten meetings throughout the year, including an extended strategy review. Additional meetings are held as and when required.
It has a formal schedule of matters specifically reserved for its decision, which includes (amongst other things) the approval of strategic plans, annual budgets, interim and full year preliminary results announcements and internal control and risk analysis.
Implementation of agreed plans, budgets and projects in pursuit of the Group's strategy and the actual operation of the Group's system of internal control and risk management are delegated to management.
The Directors are entitled to take independent legal advice if they consider it appropriate and, if the Board is informed in advance, the cost of the advice will be reimbursed by the Group.
In the event that a Non-Executive Director deems it appropriate, upon resignation, to provide a written statement to the Chairman, this would be circulated to the Board.
Board papers are normally issued one week before Board meetings and the quality of content is reviewed continually.
| Number of meetings held | Board (10 meetings) |
Audit Committee (3 meetings) |
Nomination Committee (4 meetings) |
Remuneration Committee (3 meetings) |
|---|---|---|---|---|
| P D Gowers | 10/10 | — | 4/4 | — |
| R D Hodsden | 10/10 | — | — | — |
| F Vecchioli | 10/10 | — | — | — |
| R S Grainger | 10/10 | — | 4/4 | 3/3 |
| A H Martin | 10/10 | 3/3 | 4/4 | — |
| A S Lewis | 10/10 | — | 4/4 | 3/3 |
| K G Edelman | 10/10 | 3/3 | — | 3/3 |
Implementation of agreed plans, budgets and projects in pursuit of the Group's strategy and the actual operation of the Group's system of internal control and risk management are delegated to management.
The services of the Company Secretary are available to all members of the Board. The Directors are entitled to take independent legal advice if they consider it appropriate and, if the Board is informed in advance, the cost of the advice will be reimbursed by the Group. In the event that a Non-Executive Director deems it appropriate, upon resignation, to provide a written statement to the Chairman, this would be circulated to the Board.
Board papers are normally issued one week before Board meetings and the quality of content is reviewed continually. Board minutes are circulated to all Board members. There is also regular informal contact between Executive and Non-Executive Directors to deal with important matters that arise between scheduled Board meetings. A separate meeting for Non-Executive Directors only is held at least once in every year.
The Board has three principal committees, each of whose terms of reference are available from the Investor Relations page of the Group's website at www.safestore.com.
All committees and all Directors have the authority to seek information from any Group Director or employee and to obtain professional advice.
The Audit Committee comprises Adrian Martin (Chairman) and Keith Edelman.
The Remuneration Committee comprises Keith Edelman (Chairman), Richard Grainger and Alan Lewis.
The responsibilities of the Remuneration Committee are set out in the Remuneration report on pages 46 to 53
The Nomination Committee comprises Richard Grainger (Chairman), Adrian Martin, Alan Lewis and Peter Gowers.
The Nomination Commitee's report is set out on page 55
The table above shows the attendance of individual Directors at Board and committee meetings that they were eligible to attend during the year ended 31 October 2012.
During the year, an evaluation of the performance of the Board, its committees, the individual Directors and the Chairman was conducted. The Board and committee evaluation process was led by the Chairman with support from the HR Director of the subsidiary board. Directors completed detailed written questionnaires covering a number of key areas including strategy, succession planning, Board size and composition, risk management and the relationship
between the Board and management. The results of the reviews were then considered by the Chairman and discussed by the Board as a whole.
The review also involved an assessment by the Chairman of individual Directors' own performance. The Chairman's own performance was assessed by the Senior Independent Director.
The Directors have concluded that, following this evaluation, the Board and its committees operate effectively. Recommendations were made to further enhance the performance and effectiveness of the Board and a process of continuous improvement is now being led by the Chairman.
Every decision to appoint further Directors to the Board is taken by the entire Board in a formal meeting based on a recommendation from the Nomination Committee. The Nomination Committee consults with financial and legal advisers and uses the services of external recruitment specialists. New members of the Board are provided with initial and ongoing training appropriate to individual needs in respect of their role and duties as Directors of a listed plc.
The service agreements of the Executive Directors and the letters of appointment of the Non-Executive Directors are available for inspection at the registered office of the Company during normal business hours, including the 15 minutes immediately prior to the AGM. The letters of appointment for Non-Executive Directors are in line with the provisions of the UK Corporate Governance Code relating to expected time commitment.
The Company's Articles of Association provide that one-third of the Directors retire by rotation each year and that each Director will seek re-election by the shareholders at the AGM at least once every three years. Additionally, new Directors are subject to election by shareholders at the first opportunity after their appointment. Details of the Directors seeking re-election at the 2013 AGM are given in the Notice of Annual General Meeting.
The Group places a great deal of importance on communication with its shareholders and maintains a dialogue with them through investor relations programmes. These include formal presentations of the full year and interim results and meetings with institutional investors and analysts as required. To ensure all Board members share a good understanding of the views of major shareholders about the Group, there is a formal process whereby the Board reviews announcements and reports prior to public distribution and are sent summaries of institutional investor comment following meetings on the full year and interim results. The Non-Executive Directors are available to meet major shareholders when requested.
During the latter part of FY2012, the Board engaged a capital markets advisory firm specialising in investor relations to consult with institutional shareholders and analysts. In December 2012, the Board was provided with a briefing on the feedback received and this will be reported further in the Annual Report for FY2013.
The Board considers the Annual Report and financial statements and the AGM to be the primary vehicles for communication with private investors. Resolutions are proposed on each substantially separate issue and the Company indicates the level of proxy voting lodged in respect of each. The AGM gives all shareholders who are able to attend (especially private shareholders) the opportunity to hear about the general development of the business. It also provides an opportunity for shareholders to ask questions of the full Board of Directors, including the Chairmen of the Audit, Nomination and Remuneration Committees.
The Directors are responsible for the Group's system of operational control and risk management. During the year the Group undertook regular quarterly reviews of the formal risk management assessment. Risk management remains an ongoing programme within the Group and is formally considered at regular operational meetings as well as meetings of the Board. This process accords with the Turnbull guidance.
The UK Corporate Governance Code requires that at least annually Directors review the effectiveness of the Group's system of material internal controls including financial, operational and compliance controls and risk management systems. The Board confirms that it carried out a review of the effectiveness of the system of internal control which operated within the Group during the financial year in accordance with the UK Corporate Governance Code. The Board places considerable importance on maintaining a strong control environment but recognises that such systems are designed to manage rather than eliminate risk, providing reasonable but not absolute assurance against material misstatement or loss.
Key features of the Group's systems of internal control include:
a comprehensive system of reporting monthly, half yearly and annual financial results to the Directors and key groups of senior management, focusing on key initiatives reviewing performance and implementing remedial action where necessary;
a robust and detailed process to develop the Group's annual budget and regular revised forecasts;
The Directors believe that the system of internal control is appropriate for the Group. The Group currently employs a risk manager supported by two store auditors who are responsible for reviewing operational and financial control at store level. The risk manager reports to the Chief Executive Officer and Chief Financial Officer. The Group does not have a separate internal audit function although the Board periodically reviews the need for establishing one in addition to the existing store assurance team. An externally facilitated internal audit programme was commissioned for certain specific aspects of financial controls based on the recommendations of the Audit Committee. Upon completion of this project, the Audit Committee reviewed the findings to determine a rolling programme of work to be commissioned periodically until a separate internal audit function is deemed necessary.
The Directors present their Annual Report and the audited Consolidated financial statements for the year ended 31 October 2012.
Safestore Holdings plc is a public limited company incorporated in Great Britain under the Companies Act 2006. The address of the registered office is Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT, United Kingdom.
The Group provides individual, secure self-storage space and related services for business and personal customers in the UK and France. The majority of revenue is generated from the provision of self-storage. However, ancillary products, including insurance and storage accessories, e.g. bubble wrap, boxes and padlocks, provide an additional revenue stream.
The information that fulfils the requirements of the Business review can be found in the following sections, which are incorporated into this report by reference:
Further information on the Group's operations and financial affairs that are in addition to the requirements of the Business review are set out on pages 1 to 67 of this report.
The Directors are required to comment upon the Group's Key Performance Indicators. These are reported within the Financial review on pages 20 to 25 and in the Chief Executive Officer's review on page 26 to 31 for customer enquiries, new lets, vacates, length of stay and other non-financial Key Performance Indicators.
The results for the year are set out on page 63. The Directors recommend a final dividend of 3.80 pence per ordinary share (FY2011: 3.55 pence) totalling £7,125,000 (FY2011: £6,656,000) to be paid on 12 April 2013 to shareholders whose names appear on the register at the close of business on 15 March 2013. An interim dividend of 1.85 pence was paid in the year (FY2011: 1.75 pence) totalling £3,495,000 (FY2011: £3,280,000).
Details of the Directors who served during the year and to the date of approval of the financial statements are set out below:
| R S Grainger | Non-Executive |
|---|---|
| Chairman | |
| P D Gowers | Chief Executive Officer |
| R D Hodsden | Chief Financial Officer |
| F Vecchioli | Executive Director |
| A H Martin | Non-Executive Director |
| A S Lewis | Non-Executive Director |
| K G Edelman | Non-Executive Director |
Biographical details of the Directors are set out on pages 42 to 43.
Details of the interests of the Directors in the shares of the Company are set out in the Remuneration report on page 53. No changes took place in the interests of the Directors between 31 October 2012 and 30 January 2013.
The Company's Articles of Association provide that a Director may be appointed by an ordinary resolution of the shareholders or by the existing Directors, either to fill a vacancy or as an additional Director. Further information on the Company's internal procedures for the appointment of Directors is given in the Corporate governance section on pages 56 to 58.
The Company's Articles of Association require that one-third of Directors retire by rotation each year and that each Director must retire at intervals of not more than three years. Non-Executive Directors must retire
annually once they have been in office for a period of more than eight years. In accordance with these provisions, Richard Grainger, Keith Edelman and Peter Gowers will retire at the forthcoming AGM and, being eligible, offer themselves for re-election.
The Board, which is responsible for the management of the business, may exercise all the powers of the Company subject to the provisions of relevant legislation and the Company's Memorandum and Articles of Association. The powers of the Directors set out in the Articles of Association include those in relation to the issue and buyback of shares.
The Directors have (and during the year ended 31 October 2012 had) the benefit of the qualifying third party indemnity provision contained in the Company's Articles of Association which provides a limited indemnity in respect of liabilities incurred as a Director or other officer of the Company.
The issued share capital of the Company as at 31 October 2012 was £1.88 million divided into 188.1 million ordinary shares of 1 pence each.
The rights and obligations attaching to the Company's shares, as well as the powers of the Company's Directors, are set out in the Company's Articles of Association, a copy of which can be viewed on the Company's website at www.safestore.com.
The Company's Articles of Association can only be amended by special resolution of the shareholders.
There is no restriction on the transfer or limitations on the holding of the Company's shares and there is no requirement for prior approval of a transfer. Under the Company's Articles of Association, the Directors have the power to suspend voting rights and the right to receive dividends in respect of shares where the holder of the shares fails to comply with a notice issued under Section 793 of the Companies Act 2006.
The Group is not party to any significant agreement that takes effect, alters or terminates upon a change of control of the Group following a takeover bid. The Group's employee share schemes contain provisions relating to a change of control. Outstanding options and awards normally vest and become exercisable on a change of control, subject to the satisfaction of any performance conditions at that time.
Governance
The following substantial shareholdings have been notified to the Company:
| At 10 January 2013 | ||
|---|---|---|
| Number | % | |
| Aberforth Partners LLP | 13,384,455 | 7.11 |
| CBRE Global Investors | 12,697,347 | 6.75 |
| BNP Paribas Investment Partners | 12,197,532 | 6.48 |
| APG Investments | 11,079,425 | 5.89 |
| Morgan Stanley Investment Management | 10,954,696 | 5.82 |
| Legal & General Investment | 10,426,089 | 5.54 |
| Schroder Investment Management | 9,704,897 | 5.16 |
| S W Williams | 6,927,579 | 3.68 |
| Henderson Global Investors | 6,350,551 | 3.38 |
On 31 January 2008, the Company allotted 1,051,755 ordinary shares of 1 pence each at par to the Safestore Employee Benefit Trust in satisfaction of awards under the Group's Long Term Incentive Plan. The Employee Benefit Trust retains 639,740 ordinary shares (FY2011: 639,740 ordinary shares) with a cost of £6,397 (FY2011: £6,397). This represents 0.34% (FY2011: 0.34%) of the total issued share capital of the Company.
Information on risk management is provided on pages 38 to 39.
The Group places great value in its employees and their involvement in the business. The Group recognises the importance of good communication with its staff and has designed internal communications channels to ensure that all employees are well informed about the business of the Group. The Group considers the views of employees in its decisions. The Group aims to achieve a common awareness of financial and economic factors that affect the performance of the Group. These include training and staff briefings. It is Group policy to give equal opportunity of employment to disabled and able persons according to their suitability to perform the work required. The services of existing employees who are or who become disabled are retained wherever practicable and the Group is committed to applying the provisions of the Disability Discrimination Act 1995.
Employee incentive arrangements are normally reviewed on an annual basis. Annual bonus payments are triggered on the satisfactory achievement of pre-agreed personal objectives and the financial performance of the business.
The Group made no political or charitable donations during the year (FY2011: £nil). The CR report provides details of the Group's "Charity Room in Every Store" commitment.
The Company is a holding company with very few suppliers. The Group aims to pay all its suppliers within the payment terms negotiated with each individual supplier. The Group had 48 days' purchases (FY2011: 45 days' purchases) outstanding at 31 October 2012, based on the average daily amount invoiced by suppliers during the year ended 31 October 2012.
After making enquiries, taking into account current borrowing facilities and trading prospects, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. In May 2012, new banking facilities were agreed for Sterling and Euro borrowings of £328 million and £72 million of US private placement notes were issued. The re-financed bank facilities run to June 2016 and the secured notes mature in 2019 and 2024. For this reason, the going concern basis has been adopted in preparing the financial statements.
There are no reportable events after the balance sheet date.
In the case of each of the persons who are Directors at the time when the report is approved under Section 418 of the Companies Act 2006 the following applies:
A resolution to re-appoint PricewaterhouseCoopers LLP as auditors to the Company will be proposed at the forthcoming AGM.
The AGM will be held at the Company's registered office at Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT on 20 March 2013 at 12.00, noon.
Shareholders are encouraged to use their vote at this year's AGM either by attending the meeting in person or by completing and returning the enclosed Form of Proxy in accordance with the instructions set out in the form. Completing and returning the Form of Proxy will not prevent shareholders from attending and voting at the meeting.
The Notice of Annual General Meeting on pages 102 to 106 sets out details of the business to be considered at the AGM and contains explanatory notes on such business.
By order of the Board:
Company Secretary 30 January 2013
The Directors are responsible for preparing the Annual Report, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed in the Directors' report, confirm that, to the best of their knowledge:
By order of the Board:
Company Secretary 30 January 2013
We have audited the Group financial statements of Safestore Holdings plc for the year ended 31 October 2012 which comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated statement of changes in shareholders' equity, the Consolidated cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ("IFRS") as adopted by the European Union.
As explained more fully in the Statement of Directors' responsibilities set out on page 61, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
In our opinion the Group financial statements:
In our opinion:
— the information given in the Directors' report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements.
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
We have reported separately on the parent company financial statements of Safestore Holdings plc for the year ended 31 October 2012 and on the information in the Directors' remuneration report that is described as having been audited.
for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Birmingham 30 January 2013
| Group | |||
|---|---|---|---|
| Notes | 2012 £'000 |
2011 £'000 |
|
| Revenue | 3 | 98,836 | 95,060 |
| Cost of sales | (34,665) | (31,222) | |
| Gross profit | 64,171 | 63,838 | |
| Administrative expenses | (9,818) | (15,476) | |
| EBITDA before exceptional items, change in fair value of derivatives, loss on investment properties and contingent rent |
50,297 | 50,512 | |
| Exceptional items | 5 | 4,875 | (1,332) |
| Change in fair value of derivatives | 384 | (8) | |
| Depreciation and contingent rent | (1,203) | (810) | |
| Operating profit before loss on investment properties | 54,353 | 48,362 | |
| Loss on investment property before exceptional item | (37,536) | (16,187) | |
| Impairment of investment property – exceptional | — | (2,230) | |
| Total loss on investment properties | 11 | (37,536) | (18,417) |
| Operating profit | 3,6 | 16,817 | 29,945 |
| Finance income before change in fair value of derivatives | 43 | 212 | |
| Change in fair value of derivatives | — | 1,825 | |
| Total finance income | 4 | 43 | 2,037 |
| Finance expense before exceptional items and change in fair value of derivatives | (24,549) | (23,435) | |
| Exceptional finance expenses | (9,969) | — | |
| Change in fair value of derivatives | (1,805) | — | |
| Total finance expense | 4 | (36,323) | (23,435) |
| (Loss)/profit before income tax | (19,463) | 8,547 | |
| Income tax credit1 | 8 | 11,670 | 4,481 |
| (Loss)/profit for the year | (7,793) | 13,028 | |
| Earnings per share for (loss)/profit attributable to the equity holders – basic (pence) |
10 | (4.16) | 6.95 |
| – diluted (pence) | 10 | (4.16) | 6.92 |
1 Includes an exceptional credit of £6,308,000 (FY2011: £6,597,000) (see note 8).
The financial results for both years relate to continuing activities.
The notes on pages 68 to 95 are an integral part of these Consolidated financial statements.
Governance
for the year ended 31 October 2012
| Group | ||
|---|---|---|
| 2012 £'000 |
2011 £'000 |
|
| (Loss)/profit for the year | (7,793) | 13,028 |
| Other comprehensive income: | ||
| Cash flow hedges | (4,327) | — |
| Recycling of hedge reserve | 1,492 | — |
| Currency translation differences | (12,283) | 1,100 |
| Tax on items taken to other comprehensive income | 1,074 | — |
| Total other comprehensive (expenditure)/income, net of tax | (14,044) | 1,100 |
| Total comprehensive (expenditure)/income for the year | (21,837) | 14,128 |
| 2012 2011 Notes £'000 £'000 Assets Non-current assets Investment properties 11 685,143 713,564 Interests in leasehold properties 11 57,990 62,534 Investment properties under construction 11 5,400 15,059 Property, plant and equipment 12 3,746 2,856 Deferred income tax assets 21 7,084 7,031 Other receivables 6,000 — Derivative financial instruments 19 — 78 765,363 801,122 Current assets Inventories 14 207 242 Trade and other receivables 15 17,586 17,018 Derivative financial instruments 19 3,002 6 Cash and cash equivalents 16 6,897 14,674 27,692 31,940 Total assets 793,055 833,062 Current liabilities Financial liabilities – bank borrowings 18 — (10,143) – derivative financial instruments 19 (2,574) (92) Trade and other payables 17 (32,280) (35,048) Obligations under finance leases 20 (9,598) (10,040) (44,452) (55,323) Non-current liabilities Financial liabilities – bank borrowings 18 (343,117) (326,883) – derivative financial instruments 19 (12,868) (6,164) Trade and other payables 17 — (529) Deferred income tax liabilities 21 (100,841) (116,510) Obligations under finance leases 20 (48,392) (52,494) (505,218) (502,580) Total liabilities (549,670) (557,903) Net assets 243,385 275,159 Equity Ordinary shares 22 1,881 1,881 Share premium 28,349 28,349 Other reserves 24 (2,229) 11,815 Retained earnings 23,24 215,384 233,114 Total equity 24 243,385 275,159 |
Group | ||
|---|---|---|---|
These financial statements on pages 63 to 95 were authorised for issue by the Board of Directors on 30 January 2013 and signed on its behalf by:
Chief Financial Officer Chief Executive Officer
Company registration number: 4726380
| Group | ||||||
|---|---|---|---|---|---|---|
| Share capital £'000 |
Share premium £'000 |
Translation reserve £'000 |
Hedge reserve £'000 |
Retained earnings £'000 |
Total £'000 |
|
| Balance at 1 November 2010 | 1,881 | 28,349 | 10,715 | — | 229,244 | 270,189 |
| Comprehensive income | ||||||
| Profit for the year | — | — | — | — | 13,028 | 13,028 |
| Other comprehensive income | ||||||
| Exchange differences on translation of foreign operations |
— | — | 1,100 | — | — | 1,100 |
| Total other comprehensive income | — | — | 1,100 | — | — | 1,100 |
| Total comprehensive income | — | — | 1,100 | — | 13,028 | 14,128 |
| Transactions with owners | ||||||
| Dividends (note 9) | — | — | — | — | (9,375) | (9,375) |
| Employee share options | — | — | — | — | 217 | 217 |
| Transactions with owners | — | — | — | — | (9,158) | (9,158) |
| Balance at 1 November 2011 | 1,881 | 28,349 | 11,815 | — | 233,114 | 275,159 |
| Comprehensive income | ||||||
| Loss for the year | — | — | — | — | (7,793) | (7,793) |
| Other comprehensive income | ||||||
| Exchange differences on translation of foreign operations |
— | — | (12,283) | — | — | (12,283) |
| Change in fair value | ||||||
| of hedged instruments Recycling of hedge reserve |
— — |
— — |
— — |
(4,327) 1,492 |
— — |
(4,327) 1,492 |
| Tax on items taken to other | ||||||
| comprehensive income | — | — | — | 1,074 | — | 1,074 |
| Total other comprehensive income | — | — | (12,283) | (1,761) | — | (14,044) |
| Total comprehensive income | — | — | (12,283) | (1,761) | (7,793) | (21,837) |
| Transactions with owners | ||||||
| Dividends (note 9) | — | — | — | — | (10,125) | (10,125) |
| Employee share options | — | — | — | — | 188 | 188 |
| Transactions with owners | — | — | — | — | (9,937) | (9,937) |
| Balance at 31 October 2012 | 1,881 | 28,349 | (468) | (1,761) | 215,384 | 243,385 |
for the year ended 31 October 2012
| Group | |||
|---|---|---|---|
| Notes | 2012 £'000 |
2011 £'000 |
|
| Cash flows from operating activities | |||
| Cash generated from operations | 25 | 51,666 | 46,789 |
| Interest paid | (20,560) | (21,528) | |
| Interest received | 125 | 404 | |
| Tax paid | (774) | (16) | |
| Net cash inflow from operating activities | 30,457 | 25,649 | |
| Cash flows from investing activities | |||
| Expenditure on investment properties and development properties | (20,162) | (35,037) | |
| Purchase of property, plant and equipment | (1,336) | (1,612) | |
| Net cash outflow from investing activities | (21,498) | (36,649) | |
| Cash flows from financing activities | |||
| Equity dividends paid | 9 | (10,125) | (9,375) |
| Net proceeds from issue of new borrowings | 357,227 | 25,000 | |
| Debt issue costs | (7,703) | — | |
| Finance lease principal payments | (4,336) | (5,518) | |
| Repayment of borrowings | (351,172) | — | |
| Net cash (outflow)/inflow from financing activities | (16,109) | 10,107 | |
| Net decrease in cash and cash equivalents | (7,150) | (893) | |
| Exchange (loss)/gains on cash and cash equivalents | (627) | 86 | |
| Cash and cash equivalents at 1 November | 14,674 | 15,481 | |
| Cash and cash equivalents at 31 October | 16,26 | 6,897 | 14,674 |
Safestore Holdings plc ("the Company") and its subsidiaries (together, "the Group") provide self-storage facilities to customers throughout the UK and Paris. The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK. The address of its registered office is Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT.
The principal accounting policies of the Group are set out below. These policies have been consistently applied to each of the years presented, unless otherwise stated.
The Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and International Financial Report Interpretations Committee ("IFRIC") interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared on a going concern basis under the historical cost convention as modified by the revaluation of investment properties and the fair value of derivative financial instruments.
The Directors of Safestore are confident that, on the basis of current financial projections and facilities available and after considering sensitivities, the Group has sufficient resources for its operational needs and to enable the Group to remain in compliance with the financial covenants in its bank facilities for at least the next twelve months.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual amounts may differ from those estimates.
Key judgements include the estimation of fair values of investment properties and recognition of deferred tax assets.
The following accounting standards, amendments and interpretations issued by IASB and IFRIC are effective for the Group's accounting period beginning on or after 1 November 2011 but had no material effect on the results or financial position of the Group disclosed in these financial statements:
The following new standards and interpretations have been issued but are not effective for the year ended 31 October 2012 and have not been adopted early:
The Group is assessing the likely effect of these new and amended standards on its future financial statements.
The Consolidated financial statements incorporate the financial statements of the Company and all its subsidiary undertakings made up to 31 October each year. Subsidiaries are entities where the Company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
The results of subsidiaries acquired or disposed of during the year are included in the Consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.
All intra-group transactions, balances and unrealised gains on transactions are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the assets transferred.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement.
The Group's operations are located in the UK and France. The Group's net assets, revenue and profit before tax are attributable to one principal activity, the provision of self-storage. The primary segment is based on geographical location.
Segment results, assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. Unallocated items principally comprise interest-bearing loans and deferred taxation.
Revenue represents amounts derived from the provision of self-storage services (rental space, customer goods insurance and consumables) which fall within the Group's activities provided in the normal course of business, net of discounts, VAT (where applicable) and other sales related taxes.
Rental income is recognised over the period for which the space is occupied by the customer and on a time apportionment basis. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due. Insurance income is recognised over the period for which the space is occupied by the customer and on a time apportionment basis.
The portion of insurance premiums on occupied space that relates to unexpired risks at the balance sheet date is reported as unearned premium liability in other payables. Income earned on the sales of consumable items is recognised at the point of sale.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
Income for the sale of assets is recognised when the significant risks and returns have been transferred to the buyer. For property sales this is at the point of completion. Where any aspect of consideration is conditional then the revenue associated with that conditional item is deferred.
Income from insurance claims is recognised when it is virtually certain of being received. Normally this is when a contractual agreement has been reached.
Where it is considered that items of income or expense are material and are considered "one off" in nature, their nature and amount is disclosed separately on the face of the income statement where this enhances the understanding of the Group's financial performance.
The individual financial statements for each company are measured using the currency of the primary economic environment in which it operates (its functional currency). For the purposes of the Consolidated financial statements, the results and financial position of the Group are expressed in Sterling, which is the presentational currency of the Group.
Foreign currency transactions in currencies other than Sterling are translated into the functional currency at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the income statement for the period, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity.
On consolidation, the assets and liabilities of the Group's overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are classified as equity and are recognised as a separate component of equity (cumulative translation adjustment). Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
for the year ended 31 October 2012
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are included within the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the income statement in the period in which they are incurred.
Investment properties are those properties owned by the Group that are held to earn rental income. Investment properties are initially measured at cost, including related transaction costs and borrowing costs. Borrowing costs are incurred for the purpose of acquiring, constructing or producing a qualifying investment property and are capitalised as part of its cost. Borrowing costs are capitalised while acquisition or construction is actively underway and cease once the asset is substantially complete, or suspended if the development of the asset is suspended. After initial recognition, investment properties are held at fair value based on a market valuation by professionally qualified external valuers at each balance sheet date.
The fair value of investment properties reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property. Some of these outflows are recognised as a liability, including finance lease liabilities in respect of leasehold land classified as investment properties; others, including contingent rent payments, are not recognised in the balance sheet.
For investment properties held under leases that are classified as finance leases, the properties are recognised at the lower of fair value of the property and the present value of the minimum lease payments. An equivalent amount is recognised as a finance lease liability. After initial recognition, leasehold properties classified as investment properties are held at fair value. If a valuation obtained for a property held under a lease is net of all payments expected to be made, any related lease liability recognised separately in the balance sheet is added back to arrive at the carrying value of the investment property for accounting purposes. Depreciation is provided on the minimum lease payment valuation over the lease term.
Gains or losses arising on changes in the fair value of investment properties at the balance sheet date are recognised in the income statement in the period in which they arise.
Gains or losses on sale of investment properties are calculated as the difference between the consideration received and fair value estimated at the previous balance sheet date.
If an investment property or part of an investment property becomes owner occupied, it is reclassified as property, plant and equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes.
If an impairment trigger occurs in relation to an investment property, its value is considered against the criteria in IAS 36, being the higher of fair value less cost to sell and value in use. Impairments are recognised in the income statement in the period they arise.
Property, plant and equipment not classified as investment properties or investment properties under construction is stated at historical cost less accumulated depreciation and any accumulated impairment loss. Historical cost comprises the purchase price and costs directly incurred in bringing the asset into use.
The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. If the carrying amount of an asset is greater than the recoverable amount then the carrying amount is written down immediately to the recoverable amount.
Depreciation is charged so as to write off the cost of an asset less estimated residual value of each asset over its expected useful life using the straight line method. The principal rates are as follows:
| Owner occupied buildings over the shorter of the remaining lease period and occupied period | 2% per annum |
|---|---|
| Motor vehicles | 25% per annum |
| Fixtures, fittings, signs and partitioning | 6.66%–10% per annum |
The gain or loss arising on the retirement or disposal of an asset is determined as the difference between the net sales proceeds and the carrying amount of the asset and is recognised in the income statement on disposal.
At each balance sheet date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is deemed to be the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease to the extent of the related revaluation reserve, with any excess charged to the income statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Inventories are stated at the lower of cost less provisions for any slow-moving or obsolete stock provisions and net realisable value. Cost comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method and does not include any overhead allocation as it is not appropriate. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Provisions for slow-moving or obsolete stock are calculated on the basis of sales made over the last year.
Trade and other receivables are stated at fair value, being cost less provision for impairment where there is evidence that not all amounts will be collectible under the original terms of the receivable. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 28 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement within "administrative expenses". When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
Cash and cash equivalents represent only liquid assets with original maturity of 90 days or less. Bank overdrafts that cannot be offset against other cash balances are shown within borrowings in current liabilities on the balance sheet.
Trade and other payables are initially recognised at fair value. Subsequently they are measured at amortised cost using the effective interest rate method.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and the reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs.
Rentals payable under operating leases are charged to income on a straight line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating lease are spread on a straight line basis over the full lease term.
Interest-bearing bank loans and overdrafts are recorded at fair value, net of directly attributable transaction costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement using the effective interest method and are included within the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Where fees are payable in relation to raising debt the costs are disclosed in the cash flow statement within financing activities. Where payments are made to exit or modify derivative financial instruments, these costs are disclosed in the cash flow statement within financing activities.
Issue costs incurred on re-financing are offset against the carrying value of borrowings in accordance with IAS 39, unless they do not solely relate to the issuance of the new facility, in which case they are recognised as part of the gain or loss on the removal of the original facility from the balance sheet.
The Group uses derivative financial instruments such as interest rate swaps to hedge risks associated with interest rate fluctuations on borrowings. Such derivatives are initially recognised and measured at fair value on the date a derivative contract is entered into and subsequently re-measured at fair value at each reporting date. The gain or loss on re-measurement is taken to finance expense in the income statement except where the derivative is a designated cash flow hedging instrument. Interest costs for the period relating to derivative financial instruments, which economically hedge borrowings, are recognised within interest payable on bank loans and overdraft. Other fair value movements on derivative financial instruments are recognised within fair value movement of derivatives. Designation as part of a hedge relationship occurs at inception of a hedge relationship.
for the year ended 31 October 2012
For the purpose of hedge accounting, hedges are classified as:
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the non-financial asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss.
For an effective hedge of an exposure to changes in the fair value, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding entry in profit or loss. Gains or losses from re-measuring the derivative or, for non-derivatives, the foreign currency component of its carrying amount are recognised in the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement for the period.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the income statement.
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation. Provisions for dilapidations are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to present value where the effect is considered material.
The tax credit represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates for that period that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable timing differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised if the rates have been substantially enacted. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.
Ordinary shares are classified as equity.
Costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
The Company's shares which have been purchased and not cancelled are held as treasury shares and deducted from shareholders' equity, within retained earnings.
Share based incentives are provided to employees under the Group's bonus share plan, performance share plan and employee Sharesave schemes. The Group recognises a compensation cost in respect of these schemes that is based on the fair value of the awards, measured using Black-Scholes, Binomial and Monte Carlo valuation methodologies. For equity-settled schemes, the fair value is determined at the date of grant and is not subsequently re-measured unless the conditions on which the award was granted are modified. For cash-settled schemes, the fair value is determined at the date of grant and is re-measured at each balance sheet date until the liability is settled. Generally, the compensation cost is recognised on a straight line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to the failure to satisfy service conditions or non-market performance conditions.
The preparation of Consolidated financial statements under IFRS requires management to make estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual outcomes may therefore differ from these estimates and assumptions. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
The Group values its self-storage centres using a discounted cash flow methodology which is based on projections of net operating income. Principal assumptions and management's underlying estimation of the fair value of those relate to: stabilised occupancy levels; expected future growth in storage rental income and operating costs; maintenance requirements; capitalisation rate; and discount rates. A more detailed explanation of the background and methodology adopted in the valuation of the investment properties is set out in note 11 to the financial statements.
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which available losses and timing differences can be utilised as set out in note 21.
The carrying value for deferred tax assets is reviewed at each balance sheet date.
Financial risk management is an integral part of the way the Group is managed. In the course of its business, the Group is exposed primarily to foreign exchange risk, interest rate risk, liquidity risk and credit risk. The overall aim of the Group's financial risk management policies is to minimise potential adverse effects on financial performance and net asset values ("NAV"). The Group manages the financial risks within policies and operating parameters approved by the Board of Directors and does not enter into speculative transactions.
Treasury activities are managed centrally under a framework of policies and procedures approved and monitored by the Board. These objectives are to protect the assets of the Group and to identify and then manage financial risk. In applying these policies, the Group will utilise derivative instruments, but only for risk management purposes.
The principal financial risks facing the Group are described below:
The Group finances its operations through a mixture of retained profits and bank borrowings. The Group borrows in Sterling, Euro and US Dollars at floating rates and, where necessary, uses interest rate swaps to convert these to fixed rates (see note 19) to generate the preferred interest rate profile and to manage its exposure to interest rate fluctuations. A 1% change in interest rates would have a £0.4 million (FY2011: £0.9 million) impact on net interest. This sensitivity impact has been prepared by determining average floating interest rates and flexing these against average floating rate deposits and borrowings by major currency area over the course of the year.
The Group's policy on liquidity risk is to ensure that sufficient cash is available to fund ongoing operations without the need to carry significant net debt over the medium term. The Group's principal borrowing facilities are provided by a Group of core relationship banks in the form of term loans and overdrafts. The quantum of committed borrowing facilities available to the Group is reviewed regularly and is designed to exceed forecast peak gross debt levels.
for the year ended 31 October 2012
Credit risk arises on financial instruments such as trade receivables and short-term bank deposits. Policies and procedures exist to ensure that customers have an appropriate credit history and account customers are given credit limits that are monitored. Short-term bank deposits are executed only with A-rated or above authorised counterparties based on ratings issued by the major rating agencies. Counter-party exposure positions are monitored regularly so that credit exposures to any one counter-party are within predetermined limits. Overall, the Group considers that it is not exposed to a significant amount of credit risk. The amount of trade receivables outstanding at the year end does not represent the maximum exposure to operational credit risk due to the normal patterns of supply and payment over the course of a year. Based on management information collected as at month ends the maximum level of net trade receivables at any one point during the year was £10.7 million (FY2011: £7.6 million).
The Group operates internationally and is exposed to foreign exchange risk in respect of the Euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.
To manage foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, the Group uses forward contracts. The Group's treasury risk management policy is to enter into forward contracts for between 60% and 70% of anticipated revenues in Euros for the subsequent 24 months.
The Group has investments in foreign operations in France, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group's foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
At 31 October 2012, if Sterling had weakened by 10% against the Euro with all other variables held constant, post-tax profit for the year would have been £0.9 million higher (FY2011: £2.0 million), mainly as a result of foreign exchange gains/losses on translation of Euro trade receivables and financial assets at fair value through profit or loss.
The Group is not exposed to significant transaction foreign exchange risk as purchases are invoiced in either Sterling or Euros.
Foreign exchange risk relating to the US secured notes has been fully hedged at 31 October 2012.
In order to qualify as a hedge, at inception, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the Group will assess the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated.
Hedges that meet the strict criteria for hedge accounting are accounted for as follows:
Cash flow hedges are a hedge of the exposure to the variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement.
Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when hedged financial income or financial expense is recognised or when a forecast sale or purchase occurs. Where the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken to the income statement.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including "current and non-current borrowings" as shown in the Consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the Consolidated balance sheet plus net debt.
During 2012, the Group's strategy, which was unchanged from 2011, was to maintain the gearing ratio within 50% to 70% and a Dunn & Bradstreet 5A1 credit rating.
Financial risk management continued
Capital risk continued
The gearing ratios at 31 October 2012 and 2011 were as follows:
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Total borrowings (excluding derivatives) Less: cash and cash equivalents (note 16) |
401,107 (6,897) |
399,560 (14,674) |
| Net debt Total equity |
394,210 243,385 |
384,886 275,159 |
| Total capital | 637,595 | 660,045 |
| Gearing ratio | 62% | 58% |
The Group has complied with all of the covenants on its banking facilities during the year.
The segmental information presented has been prepared in accordance with the requirements of IFRS 8. The Group's revenue, profit before income tax and net assets are attributable to one activity: the provision of self-storage accommodation and related services. Segmental information is presented in respect of the Group's geographical segment. This is based on the Group's management and internal reporting structure.
Safestore is organised and managed in two operating segments, based on geographical areas, supported by its central Group functions:
The chief operating decision-maker, being the Executive Directors, identified in accordance with the requirements of IFRS 8, assess the performance of the operating segments on the basis of adjusted EBITDA.
As the above two operating segments comprise 100% of the Group's results and net assets and are both individually greater than 10%, there is no additional segment to be disclosed as the "All other segments" category required under IFRS 8.
The operating profits and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items principally comprise cash, interest-bearing loans, derivatives and current and deferred taxation and these are designated as Central below:
| Year ended 31 October 2012 | UK £'000 |
France £'000 |
Central £'000 |
Group £'000 |
|---|---|---|---|---|
| Continuing operations | ||||
| Revenue | 74,898 | 23,938 | — | 98,836 |
| EBITDA before exceptional items, change in fair values of derivatives, loss on investment properties, depreciation and contingent rent |
37,843 | 12,454 | — | 50,297 |
| Exceptional items | (385) | 5,260 | — | 4,875 |
| Contingent rent and depreciation | (595) | (608) | — | (1,203) |
| Change in fair value of derivative | — | — | 384 | 384 |
| Operating profit before loss on investment properties | 36,863 | 17,106 | 384 | 54,353 |
| Loss on investment properties | (36,479) | (1,057) | — | (37,536) |
| Operating profit | 384 | 16,049 | 384 | 16,817 |
| Finance expense before changes in fair value and exceptional items | — | — | (24,549) | (24,549) |
| Change in fair value of derivative | — | — | (1,805) | (1,805) |
| Exceptional finance expense | — | — | (9,969) | (9,969) |
| Finance income | — | — | 43 | 43 |
| Profit/(loss) before tax | 384 | 16,049 | (35,896) | (19,463) |
| Income tax | — | — | 11,670 | 11,670 |
| Profit/(loss) for the year | 384 | 16,049 | (24,226) | (7,793) |
| Total assets | 597,193 | 185,776 | 10,086 | 793,055 |
for the year ended 31 October 2012
| Year ended 31 October 2011 | UK £'000 |
France £'000 |
Central £'000 |
Group £'000 |
|---|---|---|---|---|
| Continuing operations | ||||
| Revenue | 71,014 | 24,046 | — | 95,060 |
| EBITDA before exceptional items, change in fair values of derivatives, (loss)/ gain on investment properties, depreciation and contingent rent Exceptional items |
38,405 (702) |
12,107 (630) |
— — |
50,512 (1,332) |
| Contingent rent and depreciation | (578) | (232) | — | (810) |
| Change in fair value of derivative | — | — | (8) | (8) |
| Operating profit before gain/(loss) on investment properties (Loss)/gain on investment properties |
37,125 (25,511) |
11,245 7,094 |
(8) — |
48,362 (18,417) |
| Operating profit Finance expense Finance income |
11,614 — — |
18,339 — — |
(8) (23,435) 2,037 |
29,945 (23,435) 2,037 |
| Profit/(loss) before tax Income tax expense |
11,614 — |
18,339 — |
(21,406) 4,481 |
8,547 4,481 |
| Profit/(loss) for the year | 11,614 | 18,339 | (16,925) | 13,028 |
| Total assets | 620,582 | 190,691 | 21,789 | 833,062 |
Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties. There is no material impact from inter-segment transactions on the Group's results.
The result of its revenue from external customers in the UK is £74,898,000 (FY2011: £71,014,000) and the total revenue from external customers in other countries is £23,938,000 (FY2011: £24,046,000). All revenues are generated from the entities provision of self-storage and related services.
| 2012 | 2011 | ||
|---|---|---|---|
| Note | £'000 | £'000 | |
| Finance costs | |||
| Interest payable on bank loans and overdraft | (17,825) | (16,642) | |
| Amortisation of debt issue costs on bank loan | 18 | (1,211) | (2,248) |
| Interest on obligations under finance leases | (5,674) | (4,883) | |
| Capitalised interest | 161 | 338 | |
| Fair value movement of derivatives | (1,805) | — | |
| Exceptional finance expense | (9,969) | — | |
| Total finance cost | (36,323) | (23,435) | |
| Finance income | |||
| Interest receivable from bank deposits | 43 | 212 | |
| Fair value movement of derivatives | — | 1,825 | |
| Net finance costs | (36,280) | (21,398) |
Interest has been capitalised at an average rate of 3.5% for the year (FY2011: 3.5%).
The exceptional finance expense of £10.0 million (FY2011: £nil) represents the debt issue costs relating to the previous banking facility written off and the new debt issue costs of the new facility. These costs have been expensed in accordance with IAS 39 as which do not meet the recognition criteria under IAS 39.
Included within interest payable of £17.8 million (FY2011: £16.6 million) is £2.7 million (FY2011: £4.0 million) of interest relating to derivative financial instruments that are economically hedging the Group's borrowings. The total change in fair value of derivatives for the year is a charge of £1.8 million (FY2011: £1.8 million credit).
| Total exceptional items | 4,875 | (1,332) |
|---|---|---|
| VAT and REIT related costs | (220) | — |
| Insurance proceeds | 5,260 | — |
| Costs relating to re-locating French head office | — | (248) |
| Costs relating to retirement of CEO and other restructuring costs | (165) | (702) |
| Impairment of non-current assets | — | (382) |
| 2012 £'000 |
2011 £'000 |
An amount of £5.3 million was received in the year ended 31 October 2012 relating to the settlement of the insurance claim for building damage arising from the fire at the La Défense store in Paris on 30 December 2010.
Restructuring costs of £165,000 (October 2011: £702,000) were incurred in respect of organisational changes during the year ended 31 October 2012.
Separately disclosed in note 8 are details of an exceptional taxation credit which has arisen as a result of the forecast change in UK corporation tax and in note 4 are details of an exceptional interest charge following the re-financing of the Group in 2012.
Costs of £175,000 were incurred by the Group during the year ended 31 October 2012 in respect of professional and legal fees challenging the changes to VAT legislation on self-storage which was implemented with effect from 1 October 2012.
The following items have been charged in arriving at operating profit:
| Note | 2012 £'000 |
2011 £'000 |
|
|---|---|---|---|
| Staff costs | 27 | 17,452 | 17,247 |
| Inventories: | |||
| – cost of inventories recognised as an expense (included in cost of sales) | 14 | 1,142 | 1,866 |
| Depreciation on property, plant and equipment: | |||
| – owned assets | 12 | 446 | 168 |
| Impairment of property, plant and equipment | 12 | — | 382 |
| Loss on investment properties | 11 | 37,536 | 18,417 |
| Repairs and maintenance expenditure on investment properties | 1,968 | 2,166 | |
| Trade receivables impairment | 15 | 828 | 152 |
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Company's auditors at costs detailed below:
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Audit services | ||
| Fees payable to Company's auditors for the audit of the parent company and Consolidated financial statements | 42 | 40 |
| Fees for other services | ||
| Fees payable to Company's auditors for the audit of the Company's subsidiaries pursuant to legislation | 218 | 193 |
| Audit-related assurance services | 40 | 33 |
| Tax services | 12 | 107 |
| General advisory | 45 | 1 |
| Corporate finance | 60 | 22 |
| Total | 417 | 396 |
Non-audit services for 2012 principally relate to advice on the restructuring of the Group (£60,000), advice on REIT conversion (£45,000) and advice on IT system controls (£40,000).
for the year ended 31 October 2012
Analysis of tax credit in the year:
| Note | 2012 £'000 |
2011 £'000 |
|
|---|---|---|---|
| Current tax: | |||
| – UK corporation tax | — | — | |
| – tax in respect of overseas subsidiaries | (450) | (365) | |
| Deferred tax: | |||
| – current year, including exceptional credit of £6,308,000 (FY2011: £6,597,000) | 21 | 12,040 | 4,784 |
| – adjustment in respect of prior year | 80 | 62 | |
| Tax credit | 11,670 | 4,481 |
The tax on the Group's (loss)/profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to (losses)/profits of the consolidated entities as follows:
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| (Loss)/profit before tax | (19,463) | 8,547 |
| Tax calculated at domestic tax rates applicable in the UK: 24.83% (FY2011: 26.83%) | (4,833) | 2,293 |
| Effect of: | ||
| – income and expenses not taxable or deductable | (933) | (5) |
| – indexation on revaluation of investment properties | (372) | (1,325) |
| – difference from overseas tax rates | 856 | 1,215 |
| – adjustments in respect of prior years | (80) | (62) |
| – re-measurement of deferred tax liability from change in UK rate | (6,308) | (6,597) |
| Tax credit | (11,670) | (4,481) |
The exceptional tax credit of £6,308,000 (FY2011: £6,597,000) arises as a result of the impact on deferred tax of the UK rate change from 25% to 23% (FY2011: 27% to 25%).
In addition to the changes in rates of corporation tax disclosed above, further changes to the UK corporation tax system were announced in the Autumn statement 2012. This includes a further reduction to the main rate of corporation tax to 21% from 1 April 2014. This change had not been substantively enacted at the balance sheet date and, therefore, is not included in these financial statements.
The proposed reduction to the main rate of corporation tax to 21% from 1 April 2014 will be enacted separately. The overall effect of this further change, if it applied to the deferred tax balance at the balance sheet date, would be to further reduce the deferred tax liability by an additional £5,393,000.
The dividend paid in 2012 was £10,125,000 (5.4 pence per share) (FY2011: £9,375,000 (5.0 pence per share)). A dividend in respect of the year ended 31 October 2012 of 3.80 pence (FY2011: 3.55 pence) per share, amounting to a final dividend of £7,125,000 (FY2011: £6,656,000), is to be proposed at the AGM on 20 March 2013. The ex-dividend date will be 13 March 2013 and the record date 15 March 2013 with an intended payment date of 12 April 2013. The final dividend has not been included as a liability at 31 October 2012.
Basic earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares held as treasury shares. Diluted earnings per share is calculated by adjusting the weighted average numbers of ordinary shares to assume conversion of all dilutive potential shares. The Company has one category of dilutive potential ordinary shares: share options. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market price of the Company's shares) based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
| Year ended 31 October 2012 | Year ended 31 October 2011 | |||||
|---|---|---|---|---|---|---|
| Earnings £m |
Shares million |
Pence per share |
Earnings £m |
Shares million |
Pence per share |
|
| Basic | (7.80) | 187.50 | (4.16) | 13.03 | 187.50 | 6.95 |
| Dilutive securities | — | 1.61 | — | — | 0.64 | — |
| Diluted | (7.80) | 189.11 | (4.16) | 13.03 | 188.14 | 6.92 |
As the basic EPS in the current year is a loss per share, the above adjustments would not be dilutive.
Adjusted earnings per share represents (loss)/profit after tax adjusted for the loss on investment properties, exceptional items, change in fair value of derivatives and the associated tax thereon. The Directors consider that these alternative measures provide useful information on the performance of the Group.
| Year ended 31 October 2012 | Year ended 31 October 2011 | |||||
|---|---|---|---|---|---|---|
| Earnings £m |
Shares million |
Pence per share |
Earnings £m |
Shares million |
Pence per share |
|
| Basic | (7.80) | 187.50 | (4.16) | 13.03 | 187.50 | 6.95 |
| Adjustments: | ||||||
| Loss on investment properties | 37.54 | — | 20.02 | 18.42 | — | 9.82 |
| Exceptional operating items | (4.88) | — | (2.60) | 1.33 | — | 0.71 |
| Exceptional finance costs | 9.97 | — | 5.32 | — | — | — |
| Change in fair value of derivatives | 1.43 | — | 0.76 | (1.83) | — | (0.98) |
| Tax in relation to adjustments | (12.51) | — | (6.67) | (4.41) | — | (2.35) |
| Exceptional tax credit | (6.30) | — | (3.36) | (6.60) | — | (3.52) |
| Adjusted | 17.45 | 187.50 | 9.31 | 19.94 | 187.50 | 10.63 |
Loss on investment properties includes depreciation on leasehold properties of £4.3 million (FY2011: £5.5 million) and the related tax thereon of £1.2 million (FY2011: £1.7 million). As an industry standard measure, EPRA earnings are presented. EPRA earnings of £14.3 million (FY2011: £16.1 million) and EPRA earnings per share of 7.65 pence (FY2011: 8.58 pence) are calculated after further adjusting for these items.
| Group | ||||
|---|---|---|---|---|
| EPRA adjusted income statement (non-statutory) | 2012 £m |
2011 £m |
Movement % |
|
| Revenue | 98.8 | 95.1 | +3.9 | |
| Operating expenses (excluding depreciation and contingent rent) | (48.5) | (44.6) | ||
| EBITDA before contingent rent | 50.3 | 50.5 | -0.4 | |
| Depreciation and contingent rent | (1.2) | (0.8) | ||
| Operating profit before depreciation on leasehold properties | 49.1 | 49.7 | -1.2 | |
| Depreciation on leasehold properties | (4.3) | (5.5) | ||
| Operating profit | 44.8 | 44.2 | +1.4 | |
| Net financing costs | (24.5) | (23.2) | ||
| Profit before income tax | 20.3 | 21.0 | ||
| Income tax | (6.0) | (4.9) | ||
| Profit for the year ("EPRA Earnings") | 14.3 | 16.1 | -11.2 | |
| Adjusted EPRA earnings per share | 7.65p | 8.58p | ||
| Final dividend per share | 3.80p | 3.55p |
| Investment property £'000 |
Interests in leasehold properties £'000 |
Investment property under construction £'000 |
Total investment properties £'000 |
|
|---|---|---|---|---|
| As at 1 November 2011 | 713,564 | 62,534 | 15,059 | 791,157 |
| Additions | 7,155 | 955 | 10,889 | 18,999 |
| Reclassifications | 20,666 | — | (20,666) | — |
| Revaluations | (42,454) | — | 254 | (42,200) |
| Depreciation | — | (4,336) | — | (4,336) |
| Exchange movements | (13,788) | (1,163) | (136) | (15,087) |
| As at 31 October 2012 | 685,143 | 57,990 | 5,400 | 748,533 |
Governance
for the year ended 31 October 2012
| Investment property £'000 |
Interests in leasehold properties £'000 |
Investment property under construction £'000 |
Total investment properties £'000 |
|
|---|---|---|---|---|
| As at 1 November 2010 | 686,178 | 69,130 | 18,360 | 773,668 |
| Additions | 16,847 | — | 18,654 | 35,501 |
| Reclassifications | 19,994 | (1,220) | (19,994) | (1,220) |
| Impairments | (2,230) | — | — | (2,230) |
| Revaluations | (8,708) | — | (1,961) | (10,669) |
| Depreciation | — | (5,518) | — | (5,518) |
| Exchange movements | 1,483 | 142 | — | 1,625 |
| As at 31 October 2011 | 713,564 | 62,534 | 15,059 | 791,157 |
Loss on investment properties comprise:
| 2012 £'000 |
2011 £'000 |
||
|---|---|---|---|
| Revaluations | (42,200) | (10,669) | |
| Impairments | — | (2,230) | |
| CGS movement on investment properties | 9,000 | — | |
| Depreciation | (4,336) | (5,518) | |
| (37,536) | (18,417) | ||
| Deemed cost £'000 |
Valuation £'000 |
Revaluation on deemed cost £'000 |
|
| Freehold stores | |||
| As at 1 November 2011 | 332,895 | 575,719 | 242,824 |
| Movement in year | 17,265 | (15,633) | (32,898) |
| As at 31 October 2012 | 350,160 | 560,086 | 209,926 |
| Leasehold stores | |||
| As at 1 November 2011 | 74,954 | 137,845 | 62,891 |
| Movement in year | (3,232) | (12,788) | (9,556) |
| As at 31 October 2012 | 71,722 | 125,057 | 53,335 |
| All stores | |||
| As at 1 November 2011 | 407,849 | 713,564 | 305,715 |
| Movement in year | 14,033 | (28,421) | (42,454) |
| As at 31 October 2012 | 421,882 | 685,143 | 263,261 |
The valuation of £685.1 million (FY2011: £713.6 million) excluded £0.8 million in respect of owner occupied property. Rental income earned from investment properties for the years ended 31 October 2012 and 31 October 2011 was £79.41 million and £77.73 million, respectively.
The freehold and leasehold investment properties have been valued as at 31 October 2012 by external valuers, Cushman & Wakefield LLP ("C&W"). The valuation has been carried out in accordance with the RICS Valuation – Professional Standards, published by The Royal Institution of Chartered Surveyors ("the Red Book"). The valuation of each of the investment properties has been prepared on the basis of Fair Value as a fully equipped operational entity, having regard to trading potential. Two non-trading properties were valued on the basis of Fair Value. The valuation has been provided for accounts purposes and, as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure requirements of the Red Book, C&W has confirmed that:
C&W's valuation report comments on valuation uncertainty resulting from the recent global banking crisis coupled with the economic downturn, which have caused a low number of transactions in the market for self-storage property. C&W note that, although there were a number of self-storage transactions in 2007, the only significant transactions since 2007 are:
Four further smaller transactions took place in 2011 at West Molesey, Cambridge, Dartford and St Albans and there has been one further transaction in 2012 at Bletchley.
C&W state that due to the lack of comparable market information in the self-storage sector, there is greater uncertainty attached to their opinion of value than would be anticipated during more active market conditions.
The valuation of the operational self-storage facilities has been prepared having regard to trading potential. Cash flow projections have been prepared for all of the properties reflecting estimated absorption, revenue growth and expense inflation. A discounted cash flow method of valuation based on these cash flow projections has been used by C&W to arrive at their opinion of Fair Value for these properties.
C&W has adopted different approaches for the valuation of the leasehold and freehold assets as follows:
The valuation is based on a discounted cash flow of the net operating income over a ten year period and notional sale of the asset at the end of the tenth year.
Assumptions:
for the year ended 31 October 2012
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 UK short-term leasehold properties is 11.97 years (31 October 2011: 12.50 years). The average unexpired term excludes the French commercial leases.
In relation to the French commercial leases, C&W has valued the cash flow projections in perpetuity due to the security of tenure arrangements in that market and the potential compensation arrangements in the event of the landlord wishing to take possession. The valuation treatment is therefore the same as for the freehold properties. The capitalisation rates on these stores reflect the risk of the landlord terminating the lease arrangements.
C&W has valued the stores in development adopting the same methodology as set out above but on the basis of the cash flow projection expected for the store at opening and allowing for the outstanding costs to take each store from its current state to completion and full fit out. C&W has allowed for carry costs and construction contingency, as appropriate.
C&W has assessed the value of each property individually. However, ten of the stores in the portfolio are relatively immature and have low initial cash flow. C&W has endeavoured to reflect the nature of the cash flow profile for these properties in their valuation, and the higher associated risks relating to the as yet unproven future cash flow, by adjustment to the capitalisation rates and discount rates adopted. However, immature low cash flow stores of this nature are rarely, if ever, traded individually in the market, unless as part of a distressed sale or similar situation. Although, there is more evidence of immature low cash flow stores being traded as part of a group or portfolio transaction.
Please note C&W's comments in relation to market uncertainty in the self-storage sector due to the lack of comparable market transactions and information. The degree of uncertainty relating to the ten immature stores is greater than in relation to the balance of the properties due to there being even less market evidence that might be available for more mature properties and portfolios.
C&W state that in practice, if an actual sale of the properties were to be contemplated then any immature low cash flow stores would normally be presented to the market for sale lotted or grouped with other more mature assets owned by the same entity, in order to alleviate the issue of negative or low short-term cash flow. This approach would enhance the marketability of the group of assets and assist in achieving the best price available in the market by diluting the cash flow risk.
C&W has not adjusted their opinion of Fair Value to reflect such a grouping of the immature assets with other properties in the portfolio and all stores have been valued individually. However, they highlight the matter to alert the Group to the manner in which the properties might be grouped or lotted in order to maximise their attractiveness to the market place.
C&W consider this approach to be a valuation assumption but not a Special Assumption, the latter being an assumption that assumes facts that differ from the actual facts existing at the valuation date – and which, if not adopted, could produce a material difference in value.
C&W has not assumed that the entire portfolio of properties owned by the Group would be sold as a single lot and the value for the whole portfolio in the context of a sale as a single lot may differ significantly (either higher or lower) from the aggregate of the individual values for each property in the portfolio, reflecting the lotting assumption described above.
The Group's investment property assets have been valued for the purposes of the financial statements after deducting notional purchaser's costs of 5.8% (UK) and 6.2% (France) 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.
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. The Group therefore instructed C&W to prepare additional valuation advice on the basis of purchaser's cost of 2.75% of gross value.
| Owner occupied buildings £'000 |
Motor vehicles £'000 |
Fixtures and fittings £'000 |
Total £'000 |
|
|---|---|---|---|---|
| Cost | ||||
| At 1 November 2011 | 800 | 237 | 2,514 | 3,551 |
| Additions | — | 40 | 1,296 | 1,336 |
| Disposals | — | (8) | (2) | (10) |
| At 31 October 2012 | 800 | 269 | 3,808 | 4,877 |
| Accumulated depreciation | ||||
| At 1 November 2011 | 72 | 98 | 525 | 695 |
| Charge for the year | 15 | 60 | 371 | 446 |
| Disposals | — | (8) | (2) | (10) |
| At 31 October 2012 | 87 | 150 | 894 | 1,131 |
| Net book value | ||||
| At 31 October 2012 | 713 | 119 | 2,914 | 3,746 |
| At 31 October 2011 | 728 | 139 | 1,989 | 2,856 |
| Owner occupied buildings £'000 |
Motor vehicles £'000 |
Fixtures and fittings £'000 |
Total £'000 |
|
| Cost | ||||
| At 1 November 2010 | 1,000 | 269 | 1,272 | 2,541 |
| Additions | — | 99 | 1,513 | 1,612 |
| Disposals | (200) | (131) | (271) | (602) |
| At 31 October 2011 | 800 | 237 | 2,514 | 3,551 |
| Accumulated depreciation | ||||
| At 1 November 2010 | 78 | 191 | 478 | 747 |
| Charge for the year | 10 | 38 | 120 | 168 |
| Impairment | 184 | — | 198 | 382 |
| Eliminated on disposal | (200) | (131) | (271) | (602) |
| At 31 October 2011 | 72 | 98 | 525 | 695 |
| Net book value | ||||
| At 31 October 2011 | 728 | 139 | 1,989 | 2,856 |
| At 31 October 2010 | 922 | 78 | 794 | 1,794 |
Governance
Safestore Holdings plc Annual report and financial statements 2012 83
for the year ended 31 October 2012
| 2012 | 2011 | |
|---|---|---|
| £'000 | £'000 | |
| Analysis of net asset value: | ||
| Basic and diluted net asset value | 243,385 | 275,159 |
| Adjustments: deferred tax liabilities | 100,841 | 116,510 |
| Adjusted net asset value | 344,226 | 391,669 |
| Basic net assets per share (pence) | 129.8 | 146.8 |
| Diluted net assets per share (pence) | 129.3 | 146.3 |
| Adjusted net assets per share (pence) | 183.6 | 208.9 |
| Number | Number | |
| Shares in issue | 187,495,348 | 187,495,348 |
Basic net assets per share is shareholders' funds divided by the number of shares at the year end. Diluted net assets per share is shareholders' funds divided by the number of shares at the year end, adjusted for dilutive share options of 1,161,335 shares (FY2011: 640,834 shares). Adjusted net assets per share excludes deferred tax liabilities. The EPRA NAV, which further excludes fair value adjustments for debt and related derivatives net of tax, was £353.6 million (FY2011: £396.2 million) giving EPRA net assets per share of 188.6 pence (FY2011: 211.3 pence). The Directors consider that these alternative measures provide useful information on the performance of the Group.
| Group | |||
|---|---|---|---|
| 2012 £m |
2011 £m |
Movement % |
|
| Assets | |||
| Non-current assets | 765.4 | 799.4 | -4.2 |
| Current assets | 27.7 | 31.9 | -13.2 |
| Total assets | 793.1 | 831.3 | -4.6 |
| Liabilities | |||
| Current liabilities | (44.5) | (55.3) | -19.5 |
| Non-current liabilities | (395.0) | (379.8) | +4.0 |
| Total liabilities | (439.5) | (435.1) | +1.0 |
| EPRA net asset value | 353.6 | 396.2 | -10.8 |
| EPRA net asset value per share | 188.6p | 211.3p |
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Finished goods and goods held for resale | 336 | 348 |
| Less: provisions for impairment of inventories | (129) | (106) |
| 207 | 242 |
The Group consumed £1,142,000 (FY2011: £1,866,000) of inventories during the year. Inventory write downs were £nil for both the financial years ended 31 October 2012 and 31 October 2011.
Inventories of £207,000 (FY2011: £242,000) are carried at fair value less costs to sell. Provisions are made against slow-moving and obsolete stock lines where considered appropriate.
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Current: | ||
| Trade receivables | 7,830 | 8,118 |
| Less: provision for impairment of receivables | (1,066) | (789) |
| Trade receivables – net | 6,764 | 7,329 |
| Other receivables | 4,981 | 1,476 |
| Prepayments and accrued income | 5,841 | 8,213 |
| 17,586 | 17,018 |
Movements on the Group provision for impairment of trade receivables are as follows:
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Provisions for doubtful debts against trade receivables: | ||
| At 1 November | 789 | 1,248 |
| Provision for receivables impairment | 828 | 152 |
| Receivables written off during the year as uncollectible | (551) | (611) |
| At 31 October | 1,066 | 789 |
The creation and release of provision for impaired receivables have been included in "administrative expenses" in the income statement.
Trade receivables that are less than 28 days overdue are not considered impaired. As of 31 October 2012, trade receivables of £166,000 (FY2011: £180,000) were past due but not impaired. These relate to a number of customers who benefit from an extension to normal terms and for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Up to 28 days overdue | 166 | 180 |
The above balances are short-term (including other receivables) and therefore the difference between the book value and the fair value of the above receivables is not significant. Consequently these have not been discounted.
As of 31 October 2012, trade receivables of £1,066,000 (FY2011: £789,000) were impaired and provided for in full. There is no concentration of credit risk with respect to trade receivables as the Group has a large number of customers.
The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Sterling | 12,146 | 11,196 |
| Euros | 5,440 | 5,822 |
| 17,586 | 17,018 |
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Cash at bank and in hand | 6,897 | 14,674 |
for the year ended 31 October 2012
| 2012 | 2011 | |
|---|---|---|
| £'000 | £'000 | |
| Current: | ||
| Trade payables | 8,261 | 9,442 |
| Other taxes and social security payable | 2,235 | 810 |
| Corporation tax payable | 40 | 365 |
| Other payables | 2,855 | 4,813 |
| Accruals and deferred income | 18,889 | 19,618 |
| 32,280 | 35,048 | |
| Non-current: | ||
| Other payables | — | 529 |
| 18. Financial liabilities – bank borrowings and secured notes Current |
2012 £'000 |
2011 £'000 |
| Bank loans and overdrafts due within one year or on demand: | ||
| Secured – bank loan | — | 12,500 |
| Debt issue costs | — | (2,357) |
| — | 10,143 | |
| 2012 | 2011 | |
| Non-current | £'000 | £'000 |
| Bank loans and secured notes: | ||
| Secured | 343,897 | 328,838 |
| Debt issue costs | (780) | (1,955) |
| 343,117 | 326,883 |
On 9 May 2012, the Group completed a full re-financing of its lending arrangements with total facilities of £400 million to replace the previous facilities of £385 million which were all due to expire in August 2013. The new bank facilities of £270 million and €70 million run to June 2016 and a new £73 million US private placement note issue of seven and twelve years has maturities extending to 2019 and 2024.
The blended cost of interest on the overall debt is expected to be in the order of 5.5% per annum. The bank facilities attract a margin over LIBOR/EURIBOR ratchet operated by reference to the Group's performance against its interest cover covenant. The margin ratchets between 2.5% and 3.5%, with an initial margin of 3.5% for the first six months of the facilities. Approximately two-thirds of the drawn bank facilities have been hedged at 2.08% LIBOR and 1.36% EURIBOR. The Company has issued \$67 million 5.52% Series A Senior Secured Notes due 2019 and 6.29% \$48 million Series B Senior Secured Notes due 2024. The proceeds of the US private placement have been fully hedged by new cross currency swaps converting the US Dollar exchange risk into GBP Sterling. The loan is carried at amortised cost.
The bank loans and overdrafts are secured by a fixed charge over the Group's investment property portfolio. Following the bank re-financing in May 2012, as part of the interest rate management strategy, the Group entered into several interest rate swap contracts, details of which are shown in note 19.
Bank loans and secured notes are stated before unamortised issue costs of £780,000 (FY2011: £4,312,000).
Bank loans and secured notes are repayable as follows:
| Group | ||
|---|---|---|
| 2012 £'000 |
2011 £'000 |
|
| In one year or less | — | 12,500 |
| Between one and two years | — | 328,838 |
| Between two and five years | 272,705 | — |
| After more than five years | 71,192 | — |
| Bank loans and secured notes | 343,897 | 341,338 |
| Unamortised issue costs due within one year | — | (2,357) |
| Unamortised issue costs due after one year | (780) | (1,955) |
| 343,117 | 337,026 |
The effective interest rates at the balance sheet date were as follows:
| 2012 | 2011 | |
|---|---|---|
| Bank loans | Quarterly LIBOR plus 3.5% | Quarterly LIBOR plus 2.75% |
| Quarterly EURIBOR plus 3.5% | Quarterly EURIBOR plus 2.75% |
Secured loan notes bear interest at 5.52% and 6.29%.
The Group has the following undrawn committed borrowing facilities available at 31 October in respect of which all conditions precedent had been met at that date:
| Floating rate | ||
|---|---|---|
| 2012 £'000 |
2011 £'000 |
|
| Expiring beyond one year | 53,698 | 43,778 |
| The carrying amounts of the Group's borrowings are denominated in the following currencies: | ||
| 2012 £'000 |
2011 £'000 |
|
| Sterling | 230,000 | 315,000 |
Euros 42,705 26,338 US Dollar 71,192 —
Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the Financial review.
| 2012 | 2011 | |||
|---|---|---|---|---|
| £'000 Asset |
£'000 Liability |
£'000 Asset |
£'000 Liability |
|
| Interest rate swaps | 2,570 | (11,060) | — | (6,170) |
| Cross currency swaps | — | (4,326) | — | — |
| Foreign exchange contracts | 432 | (56) | 84 | (86) |
| 3,002 | (15,442) | 84 | (6,256) |
The fair value of financial instruments that are not traded in an active market, such as over-the-counter derivatives, is determined using valuation techniques. The Group obtains such valuations from counterparties who use a variety of assumptions based on market conditions existing at each balance sheet date.
The fair values of all financial instruments are equal to their book value, with the exception of bank loans and finance lease obligations which are set out below. The carrying value less impairment provision of trade receivables, other receivables and the carrying value of trade payables and other payables are assumed to approximate their fair value.
The fair values of bank loans and finance leases are calculated as:
| 2012 2011 |
||||
|---|---|---|---|---|
| Book value £'000 |
Fair value £'000 |
Book value £'000 |
Fair value £'000 |
|
| Bank loans | 343,117 | 396,692 | 337,026 | 350,874 |
| Finance lease obligations | 57,990 | 96,231 | 62,534 | 83,684 |
Financial statements Business review Overview
Governance
343,897 341,338
IFRS 7 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the measurements, according to the following levels:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset of liability, either directly or indirectly.
Level 3 – inputs for the asset of liability that are not based on observable market data.
The table below shows the level in the fair value hierarchy into which fair value measurements have been categorised:
| Assets per the balance sheet | 2012 £'000 |
2011 £'000 |
|---|---|---|
| Derivative financial instruments – Level 2 | 3,002 | 84 |
| 2012 | 2011 | |
| Liabilities per the balance sheet | £'000 | £'000 |
| Derivative financial instruments – Level 2 | 15,442 | 6,256 |
There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior year.
Over the life of the Group's derivative financial instruments, the cumulative fair value gain/loss on those instruments will be £nil as it is the Group's intention to hold them to maturity.
The notional principal amount of the outstanding interest rate swap contracts at 31 October 2012 was £196,687,575 and €40,000,000 (FY2011: £233,100,000 and €24,000,000). At 31 October 2012 the fixed interest rates were Sterling at blended 1.710% and Euro at 1.361% (FY2011: Sterling at 2.325% and Euro at 1.67%) and floating rates are at quarterly LIBOR and quarterly EURIBOR. The LIBOR swaps and the EURIBOR swaps expire in June 2016.
In May 2012, the Group entered into a new banking facility agreement which replaced the existing facilities due to mature in August 2013. The existing interest hedge agreements were replaced by new interest hedge agreements to coincide with the new maturity in June 2016. No settlement payments were required to be made to any counterparties and the embedded value of the existing interest hedge agreements were incorporated within the new agreements. The movement in fair value recognised in the income statement was a loss of £1,805,000 (FY2011: gain of £1,825,000).
At 31 October 2012, the Group had foreign currency swap contracts outstanding for a notional principal amount of between €4,500,000 and €6,000,000 every six months commencing November 2012 and terminating on 31 October 2015. The Group will receive the Sterling equivalent of the notional principal amount at an average exchange rate of €1.2198 to the pound and pay the Sterling equivalent of the average monthly spot rates for the six months. The movement in the fair value recognised in the income statement in the period was a gain of £384,000 (FY2011: loss of £8,000).
In May 2012, the Group entered into cross currency swaps to mitigate the foreign exchange risk arising on future interest payments and the principal repayments arising from the \$67 million and \$48 million US Secured Senior Notes. These cross currency swaps commenced in May 2012 and terminate in 2019 and 2024 in line with the maturity of the notes. The movement in fair value recognised in other comprehensive income in the period was a loss of £2,835,000 (pre-tax impact).
| Group | Loans and receivables £'000 |
Assets at fair value through profit and loss £'000 |
Total £'000 |
|---|---|---|---|
| Assets as per balance sheet | |||
| Trade receivables and other receivables excluding prepayments | 11,745 | — | 11,745 |
| Derivative financial instruments | — | 3,002 | 3,002 |
| Cash and cash equivalents | 6,897 | — | 6,897 |
| As at 31 October 2012 | 18,642 | 3,002 | 21,644 |
| Liabilities at fair value through profit and loss |
Other financial liabilities at amortised cost |
Total | |
| Group | £'000 | £'000 | £'000 |
| Liabilities as per balance sheet | |||
| Borrowings (excluding finance lease liabilities) | — | 343,117 | 343,117 |
| Finance lease liabilities | — | 57,990 | 57,990 |
| Derivative financial instruments | 15,442 | — | 15,442 |
| Trade payable and other payables | — | 32,280 | 32,280 |
| As at 31 October 2012 | 15,442 | 433,387 | 448,829 |
| Group assets as per balance sheet | Loans and receivables £'000 |
Assets at fair value through profit and loss £'000 |
Total £'000 |
| Trade receivables and other receivables excluding prepayments | 8,805 | — | 8,805 |
| Derivative financial instruments | — | 84 | 84 |
| Cash and cash equivalents | 14,674 | — | 14,674 |
| As at 31 October 2011 | 23,479 | 84 | 23,563 |
| Group liabilities as per balance sheet | Liabilities at fair value through profit and loss £'000 |
Other financial liabilities at amortised cost £'000 |
Total £'000 |
| Borrowings (excluding finance lease liabilities) | — | 337,026 | 337,026 |
| Finance lease liabilities | — | 62,534 | 62,534 |
| Derivative financial instruments | 6,256 | — | 6,256 |
| Trade payable and other payables | — | 35,577 | 35,577 |
| As at 31 October 2011 | 6,256 | 435,137 | 441,393 |
The interest rate risk profile, after taking account of derivative financial instruments, is as follows:
| 2012 | 2011 | |||||
|---|---|---|---|---|---|---|
| Floating rate £'000 |
Fixed rate £'000 |
Total £'000 |
Floating rate £'000 |
Fixed rate £'000 |
Total £'000 |
|
| Borrowings | 41,516 | 301,601 | 343,117 | 82,857 | 254,169 | 337,026 |
The weighted average interest rate of the fixed rate financial borrowing was 2.757% (FY2011: 2.271%) and the weighted average period for which the rate is fixed was four years for bank borrowings and seven/twelve years for the notes (FY2011: two years for bank debt; nil for notes).
The table below analyses the Group's financial liabilities and non-settled derivative financial instruments into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows.
| Less than one year £'000 |
One to two years £'000 |
Two to five years £'000 |
More than five years £'000 |
|
|---|---|---|---|---|
| 2012 | ||||
| Borrowings | 16,473 | 21,470 | 302,300 | 89,571 |
| Derivative financial instruments | 6,973 | 6,973 | 17,919 | 19,404 |
| Contractual interest payments and finance lease charges | 10,151 | 10,024 | 24,329 | 51,727 |
| Trade and other payables | 32,280 | — | — | — |
| 65,877 | 38,467 | 344,548 | 160,702 | |
| 2011 | ||||
| Borrowings | 25,620 | 341,960 | — | — |
| Derivative financial instruments | 3,384 | 3,384 | — | — |
| Contractual interest payments and finance lease charges | 10,637 | 10,597 | 25,133 | 51,267 |
| Trade and other payables | 35,048 | 529 | — | — |
| 74,689 | 356,470 | 25,133 | 51,267 |
| Minimum lease payments | Present value of minimum lease payments |
|||
|---|---|---|---|---|
| 2012 £'000 |
2011 £'000 |
2012 £'000 |
2011 £'000 |
|
| Within one year | 10,151 | 10,637 | 9,598 | 10,040 |
| Within two to five years | 34,353 | 35,730 | 25,211 | 26,747 |
| Greater than five years | 51,727 | 51,266 | 23,181 | 25,747 |
| 96,231 | 97,633 | 57,990 | 62,534 | |
| Less: future finance charges on finance leases | (38,241) | (35,099) | — | — |
| Present value of finance lease obligations | 57,990 | 62,534 | 57,990 | 62,534 |
| 2012 £'000 |
2011 £'000 |
|||
| Current | 9,598 | 10,040 | ||
| Non-current | 48,392 | 52,494 | ||
| 57,990 | 62,534 |
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 23% (FY2011: 25%) for the UK and 33.33% (FY2011: 33.3%) for France. The movement on the deferred tax account is as shown below:
The gross movement on the deferred income tax account is as follows:
| Note | 2012 £'000 |
2011 £'000 |
|
|---|---|---|---|
| At 1 November | 109,480 | 114,059 | |
| Profit and loss credit | 8 | (12,120) | (4,846) |
| Released to equity | (1,074) | — | |
| Exchange differences | (2,529) | 266 | |
| At 31 October | 93,757 | 109,479 |
At 31 October 2012, the Group had capital losses of £4.0 million (FY2011: losses of £4.0 million) in respect of its UK operations.
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net. The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS12) during the period are shown below.
| Revaluation of | Other | ||
|---|---|---|---|
| investment properties |
timing differences |
Total | |
| Deferred tax liability | £'000 | £'000 | £'000 |
| At 1 November 2010 | 123,422 | (865) | 122,557 |
| Credit to income statement | (6,846) | 480 | (6,366) |
| Released to equity | — | — | — |
| Exchange differences | 319 | — | 319 |
| At 31 October 2011 | 116,895 | (385) | 116,510 |
| At 1 November 2011 | |||
| Credit to income statement | (13,264) | 551 | (12,713) |
| Exchange differences | (2,956) | — | (2,956) |
| At 31 October 2012 | 100,675 | 166 | 100,841 |
| Tax losses | Interest swap | Total | |
| Deferred tax asset | £'000 | £'000 | £'000 |
| At 1 November 2010 | 6,261 | 2,237 | 8,498 |
| Charged to income statement | (885) | (635) | (1,520) |
| Released to equity | — | — | — |
| Exchange differences | 53 | — | 53 |
| At 31 October 2011 | 5,429 | 1,602 | 7,031 |
| At 1 November 2011 | |||
| Charged to income statement | (778) | 181 | (597) |
| Charged to equity | — | 1,074 | 1,074 |
| Exchange differences | (424) | — | (424) |
| At 31 October 2012 | 4,227 | 2,857 | 7,084 |
The deferred tax liability due after more than one year is £100.8 million (FY2011: £116.5 million).
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Called up, allotted and fully paid | ||
| 188,135,088 (FY2011: 188,135,088) ordinary shares of 1 pence each | 1,881 | 1,881 |
The holders of the ordinary shares shall be entitled to one vote for each ordinary share.
Governance
The fair value of the options was assessed by an independent actuary using a Black-Scholes model based on the assumptions set out in the table below:
| Grant date 14 August 2008 |
Grant date 11 August 2011 |
||||
|---|---|---|---|---|---|
| (UK three years) | (UK five years) | (UK three years) | (UK five years) | ||
| Number of options granted | 130,350 | 136,955 | 469,067 | 212,375 | |
| Share price at grant date | (pence) | 141 | 141 | 98.25 | 98.25 |
| Exercise price | (pence) | 118.4 | 118.4 | 104 | 104 |
| Risk-free rate of interest | (% per annum) | 4.50 | 4.55 | 1.56 | 2.58 |
| Expected volatility | (% per annum) | 40 | 40 | 52 | 57 |
| Expected dividend yield | (% per annum) | 3.0 | 3.0 | 5.1 | 5.1 |
| Expected term to exercise | (years) | 3 | 5 | 3 | 5 |
| Value per option | (pence) | 47 | 53 | 25 | 33 |
The fair values of the awards granted in the accounting period were assessed by an independent actuary using a Monte Carlo model based on the assumptions set out in the table below. In determining an appropriate assumption for expected future volatility, the historical volatility of the share price of Safestore Holdings plc has been considered along with the historical volatility of comparator companies.
| Grant date February 2011 | Grant date February 2012 | ||||
|---|---|---|---|---|---|
| (PBT-EPS part) | (TSR part) | (PBT-EPS part) | (TSR part) | ||
| Number of options granted | 745,239 | 372,619 | 820,997 | 410,499 | |
| Share price at grant date | (pence) | 147.25 | 147.25 | 112.0 | 112.0 |
| Exercise price | (pence) | 0 | 0 | 0 | 0 |
| Risk-free rate of interest | (% per annum) | n/a | 1.43 | n/a | 0.52 |
| Expected volatility | (% per annum) | n/a | 53 | 0 | 40 |
| Expected term to exercise | (years) | n/a | 3.0 | n/a | 3.0 |
| Value per option | (pence) | 147.25 | 106.28 | 112.00 | 78.18 |
During the accounting period, there were no new grants or options exercised under the Sharesave schemes and 245,750 awards lapsed as shown in the table below. 1,231,496 awards were granted under the 2009 Performance Share Plan and 1,544,815 awards lapsed under the 2009 Performance Share Plan. At the end of the accounting period, options over 464,447 ordinary shares were outstanding under the Sharesave scheme and 4,032,860 awards in the Performance Share Plan remain unvested. Details of the awards outstanding under all of the Group's share schemes over the accounting years are set out below:
| Date of grant | At 31 October 2011 |
Granted | Exercised | Lapsed | At 31 October 2012 |
Exercise price |
Expiry date |
|---|---|---|---|---|---|---|---|
| Safestore Holdings plc | |||||||
| Sharesave scheme | |||||||
| 09/08/2007 | 15,148 | — | — | 15,148 | — | 147.0p | 09/02/2013 |
| 14/08/2008 | 27,490 | — | — | 27,490 | — | 118.4p | 14/02/2014 |
| 11/08/2011 | 455,184 | — | — | 128,069 | 327,115 | 104.0p | 11/02/2015 |
| 11/08/2011 | 212,375 | — | — | 75,043 | 137,332 | 104.0p | 11/02/2017 |
| Total | 710,197 | — | — | 245,750 | 464,447 | ||
| Safestore 2009 Performance Share Plan |
|||||||
| 27/03/2009 | 2,241,703 | — | — | 1,544,815 | 696,888 | 0.0p | 27/03/2012 |
| 24/02/2010 | 986,618 | — | — | — | 986,618 | 0.0p | 24/02/2013 |
| 01/02/2011 | 1,117,858 | — | — | — | 1,117,858 | 0.0p | 01/04/2015 |
| 01/02/2012 | — | 1,231,496 | — | — | 1,231,496 | 0.0p | 01/02/2015 |
| Total | 4,346,179 | 1,231,496 | — | 1,544,815 | 4,032,860 |
No options have been modified since grant under any of the schemes.
| Notes | £'000 | |
|---|---|---|
| Balance at 1 November 2010 | 229,244 | |
| Profit for the year | 13,028 | |
| Dividend payment | 9 | (9,375) |
| Employee share options | 217 | |
| Balance at 1 November 2011 | 233,114 | |
| Loss for the year | (7,793) | |
| Dividend payment | 9 | (10,125) |
| Employee share options | 188 | |
Included within retained earnings are ordinary shares with a nominal value of £6,397 (FY2011: £6,397) that represent shares allotted to the Safestore Employee Benefit Trust in satisfaction of awards under the Group's Long Term Incentive Plan in 2008 and which remain unvested.
| Notes | Translation reserve £'000 |
Hedge reserve £'000 |
Retained earnings £'000 |
Total £'000 |
|
|---|---|---|---|---|---|
| Balance at 1 November 2010 | 10,715 | — | 229,244 | 239,959 | |
| Profit for the year | — | — | 13,028 | 13,028 | |
| Dividends | 9 | — | — | (9,375) | (9,375) |
| Exchange differences on translation of foreign operations |
1,100 | — | — | 1,100 | |
| Employee share options | — | — | 217 | 217 | |
| Balance at 1 November 2011 | 11,815 | — | 233,114 | 244,929 | |
| Loss for the year | — | — | (7,793) | (7,793) | |
| Dividends | 9 | — | — | (10,125) | (10,125) |
| Exchange differences on translation of foreign operations |
(12,283) | — | — | (12,283) | |
| Change in value of interest rate swaps | — | (4,327) | — | (4,327) | |
| Recycling of hedge reserve | — | 1,492 | — | 1,492 | |
| Tax on items taken to other comprehensive income | — | 1,074 | — | 1,074 | |
| Employee share options | — | — | 188 | 188 | |
| Balance at 31 October 2012 | (468) | (1,761) | 215,384 | 213,155 |
The translation reserve balance of £468,000 adverse (FY2011: £11,815,000) comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The hedge reserve balance of £1,761,000 (FY2011: £nil) comprises the unrealised elements of derivative financial instruments recognised in equity.
Reconciliation of operating profit to net cash inflow from operating activities:
| Cash generated from continuing operations | 2012 £'000 |
2011 £'000 |
|---|---|---|
| Profit before income tax | (19,463) | 8,547 |
| Loss on investment properties | 37,536 | 18,417 |
| Depreciation | 446 | 168 |
| Change in fair value of derivatives | (384) | 8 |
| Impairment of non-current assets | — | 382 |
| Finance income | (43) | (2,037) |
| Finance expense | 36,323 | 23,435 |
| Employee share options | 188 | 217 |
| Changes in working capital: | ||
| Decrease in inventories | 29 | 12 |
| Decrease/(increase) in trade and other receivables | 1,828 | (950) |
| Decrease in trade and other payables | (4,794) | (1,410) |
| Cash generated from continuing operations | 51,666 | 46,789 |
| 2011 £'000 |
Cash flows £'000 |
Non-cash movements £'000 |
2012 £'000 |
|
|---|---|---|---|---|
| Cash in hand | 14,674 | (7,150) | (627) | 6,897 |
| 14,674 | (7,150) | (627) | 6,897 | |
| Debt due within one year | (10,143) | — | 10,143 | — |
| Debt due after one year | (326,883) | (6,055) | (10,179) | (343,117) |
| Total net debt excluding finance leases | (322,352) | (13,205) | (663) | (336,220) |
| Finance leases due within one year | (10,040) | 4,336 | (3,894) | (9,598) |
| Finance leases due after one year | (52,494) | — | 4,102 | (48,392) |
| Total finance leases | (62,534) | 4,336 | 208 | (57,990) |
| Total net debt | (384,886) | (8,869) | (455) | (394,210) |
Non-cash movements relate to reclassification of non-current debt to current debt, amortisation of debt issue costs, foreign exchange movements and unwinding of discount.
| Staff costs (including Directors) for the Group during the year | 2012 £'000 |
2011 £'000 |
|---|---|---|
| Wages and salaries | 14,697 | 14,479 |
| Social security costs | 2,174 | 2,184 |
| Other pension costs | 393 | 367 |
| Share based payments | 188 | 217 |
| 17,452 | 17,247 |
During the period ended 31 October 2012 the Company's equity-settled share based payment arrangements comprised the Safestore Holdings plc Sharesave scheme and the Safestore 2009 Performance Share Plan. The number of awards made under each scheme are detailed in note 22. No options have been modified since grant under any of the schemes.
| Average monthly number of people (including Executive Directors) employed | 2012 Number |
2011 Number |
|---|---|---|
| Sales | 467 | 440 |
| Administration | 102 | 81 |
| 569 | 521 | |
| Key management compensation | 2012 £'000 |
2011 £'000 |
| Wages and salaries | 1,903 | 2,490 |
| Social security costs | 250 | 584 |
| Post-employment benefits | 154 | 207 |
| Compensation for loss of office | — | 393 |
| Share based payments | 188 | 209 |
| 2,495 | 3,883 |
The key management figures given above include Directors.
| Directors | 2012 £'000 |
2011 £'000 |
|---|---|---|
| Aggregate emoluments | 963 | 1,318 |
| Compensation for loss of office | — | 393 |
| Company contributions paid to money purchase pension schemes | 75 | 91 |
| 1,038 | 1,802 |
There were two Directors (FY2011: three) accruing benefits under a money purchase scheme.
As part of the Group banking, the Company has guaranteed the borrowings totalling £343.9 million (FY2011: £341.3 million) of fellow Group undertakings by way of a charge over all of its property and assets. There are similar cross guarantees provided by the Group companies in respect of any bank borrowings which the Company may draw under a Group facility agreement. The financial liability associated with this guarantee is considered remote and therefore no provision has been recorded.
The Group had £2.3 million capital commitments as at 31 October 2012 (FY2011: £17.1 million).
The Group's shares are widely held.
During the year £nil (FY2011: £nil) transactions were carried out with related parties.
Safestore Holdings plc is a limited liability company incorporated in England and Wales and domiciled in the UK. It operates as the ultimate parent company of the Safestore Holdings plc Group.
We have audited the parent company financial statements of Safestore Holdings plc for the year ended 31 October 2012 which comprise the parent company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
As explained more fully in the Statement of Directors' responsibilities set out on page 61, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
In our opinion the parent company financial statements:
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
We have reported separately on the Group financial statements of Safestore Holdings plc for the year ended 31 October 2012.
for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Birmingham 30 January 2013
| Company | |||
|---|---|---|---|
| Notes | 2012 £'000 |
2011 £'000 |
|
| Fixed assets | |||
| Tangible fixed assets | 5 | — | 4 |
| Fixed asset investments | 6 | 979 | 979 |
| 979 | 983 | ||
| Current assets | |||
| Debtors: amounts falling due within one year | 7 | 819 | 724 |
| Debtors: amounts falling due after more than one year | 7 | 116,847 | 41,869 |
| Cash at bank and in hand | 21 | 19 | |
| 117,687 | 42,612 | ||
| Creditors: amounts falling due within one year | 8 | (2,497) | (483) |
| Total assets less current liabilities | 116,169 | 43,112 | |
| Creditors: amounts falling due after more than one year | 9 | (71,904) | — |
| Net assets | 44,265 | 43,112 | |
| Capital and reserves | |||
| Called up share capital | 10 | 1,881 | 1,881 |
| Share premium account | 11 | 28,349 | 28,349 |
| Profit and loss reserve | 11 | 14,035 | 12,882 |
| Total shareholders' funds | 12 | 44,265 | 43,112 |
The Company financial statements on pages 97 to 101 were approved by the Board of Directors on 30 January 2013 and signed on its behalf by:
Chief Financial Officer Chief Executive Officer
Company registration number: 4726380
Safestore Holdings plc Annual report and financial statements 2012 97
for the year ended 31 October 2012
The financial statements are prepared in accordance with applicable accounting standards in the UK and the Companies Act 2006. The particular accounting policies adopted are described below. The financial statements are prepared on a going concern basis under the historical cost convention.
Although the Group consolidated accounts are prepared under IFRS, Safestore Holdings plc's financial statements presented in this section are prepared under UK GAAP.
There have been no new accounting standards adopted during the year.
Investments held as fixed assets are stated at cost less provision for impairment in value.
Fixtures and fittings are stated at historic purchase cost less accumulated depreciation. Costs are all directly attributable costs in bringing the asset into working condition for its intended use. Depreciation has been charged at the rate of 15% per annum on a straight line basis.
The Company has taken advantage of the exemption given in FRS 1 and has consequently not prepared a cash flow statement.
Deferred taxation is provided on timing differences arising from the different treatment for accounts and taxation purposes of event and transactions recognised in the financial statements of the current and previous years. Deferred taxation is calculated at the rates at which it is estimated that taxation will arise.
Deferred taxation is not provided in respect of timing differences arising from the sale or revaluation of fixed assets unless, by the balance sheet date, a binding commitment to sell the asset has been entered into and it is unlikely that any gain will be rolled over.
Deferred taxation assets are recognised to the extent that it is regarded as more likely than not that there will be suitable taxable profits against which the deferred tax asset can be recovered in future years.
Share based incentives are provided to employees under the Company's bonus share plan, performance share plan and employee Sharesave schemes. The Company recognises a compensation cost in respect of these schemes that is based on the fair value of the awards, measured using Black-Scholes, Binomial and Monte Carlo valuation methodologies. For equity-settled schemes, the fair value is determined at the date of grant and is not subsequently re-measured unless the conditions on which the award was granted are modified. For cash-settled schemes, the fair value is determined at the date of grant and is re-measured at each balance sheet date until the liability is settled. Generally, the compensation cost is recognised on a straight line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to the failure to satisfy service conditions or non-market performance conditions.
Interest income is recognised using the effective interest method. Dividend income is recognised when the right to receive payment is established.
The annual final dividend is not provided for until approved at the AGM whilst interim dividends are charged in the period they are paid.
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part of these financial statements. The parent company's profit for the financial year amounted to £11,090,000 (FY2011: £9,909,000).
The Directors' emoluments are disclosed in note 27 of the Annual Report and financial statements of the Group.
The Company does not have any employees (FY2011: none). Auditors' remuneration for the year ended 31 October 2012 was £10,000 (FY2011: £10,000). There were no non-audit services (FY2011: none) provided by the auditors.
| £'000 | |
|---|---|
| Cost | |
| As at 31 October 2011 and at 31 October 2012 | 196 |
| Accumulated depreciation | |
| As at 1 November 2011 | 192 |
| Charge for the year | 4 |
| At 31 October 2012 | 196 |
| Net book amount | |
| At 31 October 2012 | — |
| At 31 October 2011 | 4 |
| 6. Fixed asset investments | |
| £'000 | |
| Cost and net book value |
At 31 October 2011 and 31 October 2012 979
Investments in Group undertakings are stated at cost. The Directors consider that to give full particulars of all subsidiary undertakings would lead to a statement of excessive length. A list of principal subsidiary undertakings is given below. The Directors believe that the carrying value of the investments is supported by their underlying net assets.
The Company has the following wholly-owned subsidiaries, unless stated otherwise:
| Proportion of ordinary shares |
|||
|---|---|---|---|
| Subsidiary | Country of incorporation | Principal activity | held % |
| Safestore Group Limited | England and Wales | Holding company | 100 |
| Safestore Acquisition Limited1 | England and Wales | Holding company | 100 |
| Safestore Limited2 | England and Wales | Provision of self-storage | 100 |
| Spaces Personal Storage Limited2 | England and Wales | Holding company | 100 |
| Mentmore Limited3 | England and Wales | Holding company | 100 |
| Safestore Properties Limited4 | England and Wales | Holding company | 100 |
| Une Pièce en Plus SAS5 | France | Provision of self-storage | 100 |
| Access Storage Holdings (France) S.a.r.l5 | Luxembourg | Holding company | 100 |
Notes
1 Safestore Acquisition Limited is a 100% subsidiary of Safestore Group Limited.
2 Safestore Limited and Spaces Personal Storage Limited are both 100% subsidiaries of Safestore Acquisition Limited.
3 Mentmore Limited is a 100% subsidiary of Safestore Acquisition Limited.
4 Safestore Properties Limited is a 100% subsidiary of Mentmore Limited. 5 Une Pièce en Plus SAS and Access Storage Holdings (France) S.a.r.l are both 100% subsidiaries of Mentmore Limited. Governance
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Amounts owed by Group undertakings | 689 | 534 |
| Trade receivables | 123 | 122 |
| Other receivables | — | 53 |
| Prepayments and accrued income | 7 | 15 |
| Debtors due within one year | 819 | 724 |
| Amounts owed by Group undertakings | 116,799 | 41,821 |
| Deferred tax | 48 | 48 |
| Debtors due after more than one year | 116,847 | 41,869 |
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Trade payables | 201 | 46 |
| Amounts owed to Group undertakings | 1,855 | — |
| Other taxes and social security | 109 | — |
| Accruals and deferred income | 332 | 437 |
| Creditors due within one year | 2,497 | 483 |
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Secured loan notes | 72,684 | — |
| Debt issue costs | (780) | — |
| 71,904 | — |
The Company issued \$67 million 5.52% Series A Senior Secured Notes due 2019 and 6.29% \$48 million Series B Senior Secured notes due 2024.
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Allotted and fully paid | ||
| 188,135,088 (FY2011: 188,135,088) ordinary shares of 1 pence | 1,881 | 1,881 |
| At 31 October | 1,881 | 1,881 |
Ordinary shares
The holders of the ordinary shares shall be entitled to one vote for each ordinary share.
For details of share options see note 22 in the Group financial statements.
| At 31 October 2012 | 28,349 | 14,035 |
|---|---|---|
| Dividends paid | — | (10,125) |
| Employee share options | — | 188 |
| Profit for the year | — | 11,090 |
| At 1 November 2011 | 28,349 | 12,882 |
| Share premium account £'000 |
Profit and loss reserve £'000 |
For details of the dividend paid in the year see note 9 in the Group financial statements.
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Profit for the year | 11,090 | 9,909 |
| Dividends paid | (10,125) | (9,375) |
| Employee share options | 188 | 217 |
| At 1 November 2011/2010 | 43,112 | 42,361 |
| At 31 October 2012/2011 | 44,265 | 43,112 |
The Company has taken advantage of the exemption available under FRS 8, 'Related Party Disclosures' and has not disclosed details of its transactions with related certain parties. This exemption is available as the transactions are with entities that are part of the same group and the consolidated accounts are publicly available.
For details of contingent liabilities see note 28 in the Group financial statements.
This information is important and requires your immediate attention. If you have any doubts about what action you need to take, you should contact your stockbroker, bank manager, solicitor, accountant or other independent professional adviser authorised pursuant to the Financial Services and Markets Act 2000 immediately.
If you have sold or transferred all of your holding of ordinary shares in Safestore Holdings plc you should pass this information and the accompanying documents to the person through whom the sale or transfer was effected, for transmission to the purchaser or transferee.
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of Safestore Holdings plc (the "Company") will be held at Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT on 20 March 2013 at 12.00 noon for the following purposes:
To consider, and if thought fit, pass the following resolutions, of which numbers 1 to 10 will be proposed as ordinary resolutions and numbers 11 to 13 will be proposed as special resolutions:
during the period beginning with the date of the passing of this resolution and ending at the conclusion of the Company's next Annual General Meeting after the date of the passing of this resolution provided that the maximum amounts referred to in (a), (b) and (c) may comprise sums in different currencies which shall be converted at such rate as the Board may in its absolute discretion determine to be appropriate.
so that all previous authorities of the Directors pursuant to the said Section 551 be and are hereby revoked.
11.1 the allotment of equity securities in connection with an issue or offering in favour of holders of equity securities (but in the case of the authority granted under Resolution 10.2 by way of a rights issue only) and any other persons entitled to participate in such issue or offering where the equity securities respectively attributable to the interests of such holders and persons are proportionate (as nearly as may be) to the respective number of equity securities held by or deemed to be held by them on the record date of such allotment, subject only to such exclusions or other arrangements as the Directors may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws or requirements of any recognised regulatory body or stock exchange in any territory; and
11.2 the allotment (otherwise than pursuant to paragraph 11.1 above) of equity securities up to an aggregate nominal value not exceeding £94,067;
and this power, unless renewed, shall expire at the end of the next Annual General Meeting of the Company after the passing of this resolution but shall extend to the making, before such expiry, of an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the authority conferred hereby had not expired.
BY ORDER OF THE BOARD
Company Secretary Registered office: Brittanic House Stirling Way Borehamwood Hertfordshire WD6 2BT Dated: 20 February 2013 Governance
Completion of the Form of Proxy or appointment of a proxy through CREST will not prevent a member from attending and voting in person.
You may submit your vote electronically at www.capitashareportal.com not later than 48 hours before the time fixed for the Annual General Meeting or adjourned meeting at which your proxy proposes to vote.
Governance
Under the Company's Articles of Association, one-third of the Directors are obliged to retire by rotation at each Annual General Meeting. Richard Grainger, Keith Edelman and Peter Gowers, whose biographical details are set out in the Directors' biographies, will retire by rotation this year in accordance with the Articles of Association. Richard Grainger, Keith Edelman and Peter Gowers are offering themselves for re-election and resolutions 5, 6 and 7 propose their re-election as Directors.
Resolution 9 seeks to renew the authority granted at last year's Annual General Meeting for the Company to make political donations to political parties, to other political organisations and to independent election candidates or to incur political expenditure.
It is not the policy of the Company to make political donations of this type and the Directors have no intention of changing that policy. However, as a result of the wide definitions in the Act of matters constituting political donations, normal expenditure (such as expenditure on organisations concerned with matters of public policy, law reform and representation of the business community) and business activities (such as communicating with the government and political parties at local, national and European level) might be construed as political expenditure or as a donation to a political party or other political organisation and fall within the restrictions of the Act.
This resolution does not purport to authorise any particular donation or expenditure but is expressed in general terms as required by the Act and is intended to authorise normal donations and expenditure. If passed, Resolution 9 would allow the Company and its subsidiaries:
during the period up to the conclusion of the next Annual General Meeting of the Company whilst avoiding inadvertent infringement of the statute. Any political donation made or political expenditure incurred which is in excess of £2,000 will be disclosed in the Company's Annual Report for next year, as required by the Act. The authority will not be used to make political donations within the normal meaning of that expression.
Resolution 9 replaces a similar authority put in place at the Annual General Meeting held on 21 March 2012. No payments were made under this authority.
The resolution asks shareholders to grant the Directors authority under Section 551 of the Act to allot shares or grant such subscription or conversion rights as are contemplated by Sections 551(1)(a) and (b) respectively of the Act up to a maximum aggregate nominal value of £1,254,232, being approximately two-thirds of the nominal value of the issued ordinary share capital of the Company as at 19 February 2013. As at 19 February 2013, the Company did not hold any treasury shares. £627,116 of this authority is reserved for a fully pre-emptive rights issue. This is the maximum permitted amount under best practice corporate governance guidelines. The authority will expire at the next Annual General Meeting. The Directors have no present intention of exercising such authority. The resolution replaces a similar resolution passed at the Annual General Meeting of the Company held on 21 March 2012.
If the Directors wish to allot unissued shares or other equity securities for cash, the Act requires that such shares or other equity securities are offered first to existing shareholders in proportion to their existing holding. Resolution 11 asks shareholders to grant the Directors authority to allot equity securities or sell treasury shares for cash up to an aggregate nominal value of £94,067 (being 5% of the Company's issued ordinary share capital as at 19 February 2013) without first offering the securities to existing shareholders. The resolution also disapplies the statutory pre-emption provisions in connection with a rights issue and allows the Directors, in the case of a rights issue, to make appropriate arrangements in relation to fractional entitlements or other legal or practical problems which might arise. The authority will expire at the next Annual General Meeting. The resolution replaces a similar resolution passed at the Annual General Meeting of the Company held on 21 March 2012.
Resolution 12 to be proposed at the Annual General Meeting seeks authority from shareholders for the Company to make market purchases of its own ordinary shares, such authority being limited to the purchase of 10% of the ordinary shares in issue as at 19 February 2013. The maximum price payable for the purchase by the Company of its own ordinary shares will be limited to the higher of 5% above the average of the middle market quotations of the Company's ordinary shares, as derived from the Daily Official List of the London Stock Exchange, for the five business days prior to the purchase and the higher of the price of the last independent trade of an ordinary share and the highest current independent bid for an ordinary shares as derived from the London Stock Exchange Trading System SETS. The minimum price payable by the Company for the purchase of its own ordinary shares will be 1 pence per ordinary shares (being the amount equal to the nominal value of an ordinary share). The authority to purchase the Company's own ordinary shares will only be exercised if the Directors consider that there is likely to be a beneficial impact on earnings per ordinary shares and that it is in the best interest of the Company at the time. Company law has been changed recently to allow the Company to hold in treasury any shares purchased by it using its distributable profits. Such shares will remain in issue and be capable of being resold by the Company or used in connection with certain of its share schemes.
Options to subscribe for up to 5,453,653 ordinary shares have been granted and are outstanding as at 19 February 2013 (being the latest practicable date prior to publication of this document) representing 2.90% of the issued ordinary share capital at that date (excluding shares held in treasury). If the Directors were to exercise in full the power for which they are seeking authority under resolution 12, the options outstanding as at 19 February 2013 would represent 3.22% of the ordinary share capital (excluding shares held in treasury) in issue following such exercise.
Resolution 13 to be proposed at the Annual General Meeting seeks authority from shareholders to hold general meetings (other than Annual General Meetings) on 14 days' clear notice. This is permissible under the existing Articles of Association of the Company and the Act. However, pursuant to the EU Shareholders' Rights Directive and in accordance with published guidance from the Department of Business, Enterprise and Regulatory Reform, specific shareholder approval is required annually in order to retain this ability. The Directors believe that there may be circumstances in which it will be important for the Company to be able to call meetings at such short notice. Accordingly, the Directors believe that it is important for the Company to retain this flexibility.
The Board of Directors considers that each of the resolutions being proposed at the Annual General Meeting are in the best interests of the Company and its shareholders as a whole. Accordingly, the Directors unanimously recommend that shareholders vote in favour of the resolutions as they intend to do in respect of their own beneficial shareholdings.
I/We the undersigned, being a holder of ordinary shares of 1 pence each of the capital of Safestore Holdings plc (the "Company"), hereby appoint the duly appointed Chairman of the meeting (see note 1 below) or
to act as my/our proxy at the Annual General Meeting of the Company to be held at 12.00 noon on 20 March 2013 at Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT and at any adjournment thereof and to vote on my/our behalf as directed below.
Please tick here if this proxy appointment is one of multiple appointments being made
Please indicate with an "X" in the spaces provided how you wish your votes to be cast on a poll. Should this card be returned duly signed, but without specific direction, the proxy will vote or abstain at his/her discretion.
| Ordinary resolutions | For | Against | Abstain | Discretion | |
|---|---|---|---|---|---|
| 1. | To receive and adopt the Annual Report and Accounts for the year ended 31 October 2012 | ||||
| 2. | To re-appoint PricewaterhouseCoopers LLP as auditors | ||||
| 3. | To authorise the Directors to determine the auditors' remuneration | ||||
| 4. | To declare a final dividend of 3.80 pence per ordinary share for the year ended 31 October 2012 | ||||
| 5. | To re-appoint Richard Grainger as a Director of the Company | ||||
| 6. | To re-appoint Keith Edelman as a Director of the Company | ||||
| 7. | To re-appoint Peter Gowers as a Director of the Company | ||||
| 8. | To receive and approve the Directors' remuneration report for the year ended 31 October 2012 | ||||
| 9. | To authorise political donations and political expenditure | ||||
| 10. To authorise the Directors to allot shares subject to the restrictions set out in the resolution | |||||
| Special resolutions | |||||
| 11. To authorise the disapplication of pre-emption rights subject to the limits set out in the resolution | |||||
| 12. To authorise market purchases of shares up to a specified amount | |||||
| 13. To reduce the notice period for general meetings other than an Annual General Meeting |
Unless otherwise instructed, the proxy may vote as he/she thinks fit or abstain from voting in respect of the resolutions specified and also on any other business (including amendments to resolutions) that may properly come before the meeting.
| Signature | Dated |
|---|---|
| Full name of registered holder(s) | |
| Address | |
| Postcode |
Please return this proxy form to Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to arrive by 12.00 noon on 18 March 2013.
As an alternative to completing your hard-copy proxy form, you can appoint a proxy electronically at www.capitashareportal.com.
For an electronic proxy appointment to be valid, your appointment must be received by no later than 12.00 noon on 18 March 2013. You will be asked to enter the investor code shown on your share certificate or dividend tax voucher and agree to certain terms and conditions.
If you hold your shares in uncertificated form, you may appoint a proxy using the CREST electronic proxy appointment service, details of which are set out in notes vi, vii and viii to the Notice of Annual General Meeting.
A member of the Company may appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to different shares. To appoint more than one proxy, you should contact Capita Registrars at the address stated in the information included with this proxy form.
| R S Grainger | (Non-Executive Chairman) |
|---|---|
| P D Gowers | (Chief Executive Officer) |
| R D Hodsden | (Chief Financial Officer) |
| F Vecchioli | (Executive Director) |
| A H Martin | (Non-Executive Director) |
| A S Lewis | (Non-Executive Director) |
| K G Edelman | (Non-Executive Director) |
S Ahmed
Brittanic House Stirling Way Borehamwood Hertfordshire WD6 2BT
Registered company number 4726380
www.safestore.co.uk www.safestore.com
National Westminster Bank Plc HSBC Bank Plc Lloyds TSB Bank Plc Alliance & Leicester Plc BRED BanquePopulaire Bank of Taiwan Cathay United Bank Chang Hwa Commercial Bank
Travers Smith LLP 10 Snow Hill London EC1A 2AL
115 Colmore Row Birmingham B3 3AL
PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Cornwall Court 19 Cornwall Street Birmingham B3 2DT
Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield HD8 0GA
Telephone (in UK) 0871 664 0300 (Calls cost 10 pence per minute plus network extras)
Telephone (from overseas) +44 (0)20 8639 3399
Fax: +44 (0)1484 600 911 E-mail: [email protected] Web: www.capitashareportal.com Share Portal: www.capitashareportal.com
Through the website of our Registrar, Capita Registrars, shareholders are able to manage their shareholding by registering for the Share Portal, a free, secure, online access to their shareholding.
All the latest news and updates for investors at www.safestore.com
This Annual Report has been printed on Revive 50 White Silk, a recycled paper stock containing 50% recycled waste and 50% virgin fibre. This report was printed by The Pureprint Group using their environmental print technology which minimises the impact of printing on the environment. Vegetable based inks have been used and 99% of dry waste is diverted from landfill. The Pureprint Group is a CarbonNeutral® company.
Governance
Safestore Holdings plc
Brittanic House Stirling Way Borehamwood Hertfordshire WD6 2BT Tel: 020 8732 1500 Fax: 020 8732 1510 www.safestore.co.uk www.safestore.com
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