Self Storage Group — Interim / Quarterly Report 2017

Nov 16, 2017

Interim Report Q3 2017

Contents

Highlights	3
Key figures group	3
Subsequent events	4
Financial development	5
Strategy	7
Corporate developments	9
Risks and uncertainty	9
Outlook	10
Financials	11

Highlights

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*The figures for Q3 2016 includes only the company OK Minilager. CSS was acquired 28 September 2016 and Minilageret AS was acquired 30 June 2017.

Key figures

KEY FIGURES	2017	2017	2016	2017	2016	2016
(Unaudited figures in NOK million)	Q 3	O 2	O 3	YTD	YTD	FY
Revenue	55,6	51,4	10,6	156,8	30,0	80,9
Total operating costs 1	38,2	39,6	4,8	117,8	13,0	54,9
Underlying EBITDA	17,4	11,8	5,8	39,1	17,0	26,0
Underlying EBIT	15,2	9,6	4,8	28,8	14,4	21,8
Underlying Pre-tax profit	14,6	9,4	4,4	45,3	14,3	38,6
Underlying Net profit	7,6	7,0	3,3	30,4	10,8	28,8
Current lettable area (in thousands m 2 )	101,0	100,2	93,2	101,0	93,2	93,8
ettable area under development (in thousand $m2$ )	11.8	93	N/A	11.8	N/A	N/A

Subsequent events

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Financial development

The analysis of the financial development in SSG is highly affected by the acquisition of the City Self-Storage companies 28 September 2016 and the acquisition of Minilageret AS 30 June 2017.

Revenue

Revenue for the third quarter was NOK 55.6 million, which is NOK 4.3 million up from second quarter 2017. NOK 3 million of the increase relates to income from Minilageret AS, acquired 30 June 2017. The remaining increase relates to growth in existing portfolio of rentals in the Norwegian market, due to opening of new sites and expansions on existing sites earlier this year.

The growth of NOK 45 million from the third quarter 2016 to the third quarter 2017 relates largely to the acquisition of CSS on 28 September 2016 in addition to the acquisition of Minilageret AS.

Property-related expenses

Property related expenses in the third quarter was NOK 23.4 million, an increase of NOK 0.3 million from second quarter 2017. This increase is related to Minilageret AS. Property related expenses consists of lease expenses, maintenance and other operating costs.

Property-related expenses increased from NOK 3.3 million in the third quarter 2016 to NOK 23.4 million for the third quarter 2017. This increase is attributable to the City Self-Storage segment with mainly leasehold properties, while OK Minilager has a mix of freehold and leasehold properties. The two new City Self-Storage sites opened in third quarter 2017 are both freehold.

Salary and other employee benefits

Salary and other employee benefits in the third quarter was NOK 8.4 million, an increase of NOK 0.1 million from second quarter 2017.

Salary and other employee benefits increased by NOK 7.4 million from NOK 1.0 million in the third quarter 2016 to NOK 8.4 million in the third quarter 2017. This increase is partly due to the impact of the acquisition of City Self-Storage with staffed operating facilities, representing NOK 5.5 million, and partly due to new management and administrative roles, given the growth of the Group.

Depreciation

The depreciation in the third quarter was in line with depreciation costs in Q2, and is mainly related to fitout of facilities and other equipment.

Other operating expenses

Other operating expenses consist of IT and related costs, sales and advertising, audit and consultancy fees, office and travel costs and cost of goods sold.

Other operating expenses in the third quarter was NOK 10.9 million, an increase of NOK 2.0 million from second quarter 2017.

The operating earnings in the third quarter of 2017 was impacted by transaction costs related to the acquisition of Minilageret AS and extraordinary costs related to the IPO. In total extraordinary costs amounted to NOK 4.6 million in the quarter, resulting in an adjusted EBITDA of NOK 17.4 million.

		MNOK
Non-recurring items	Q3	YTD Q3
IPO- costs
Transaction costs acquisition of Minilageret	1 Q
Total non-recurring items

Change in fair value of investment property

The fair value of investment property is based on external valuations in combination with management estimates and judgments. The value increase during third quarter is NOK 0.8 million.

Profit before tax

Reported profit before tax in third quarter was NOK 10 million, an increase of NOK 0.6 million from second quarter 2017. Adjusted for extraordinary costs in the third quarter, profit before tax is NOK 14.6 million.

Statement of financial position

Total assets were NOK 503 million at the end of the third quarter of 2017, compared to NOK 322 million at the end of 2016, following the acquisition of investment properties and balance sheet consolidation. Total equity was NOK 281 million. Thus, the equity ratio was 56%. Net interest-bearing debt was NOK 78.5 million.

Strategy

OK Minilager

City Self-Storage

Corporate developments

Risks and uncertainty factors

Outlook

(Amounts in NOK 1 000)		Unaudited For the three months ended 30 September	Unaudited For the three months ended 30 September	Unaudited For the nine months ended 30 September	Unaudited For the nine months ended 30 September
	Note	2017	2016	2017	2016
Revenue	3	55 648	10 575	156 834	30 001
Other operating income		٠			56
Property-related expenses	3	23 4 48	3 3 3 9	71 531	9656
Salary and other employee benefits		8 4 3 4	1 0 0 9	25 447	2449
Depreciation		2 2 1 7	1 0 0 1	4779	2582
Other operating expenses		10 934	464	26 310	902
Operating profit before fair value adjustments		10 615	4762	28 767	14 4 68
Change in fair value of investment properties		755	٠	13 928	440
Operating profit after fair value adjustments		11 370	4762	42 695	14 908
Finance income	3	$-102$	3	385	9
Finance expense	3	1 263	414	3 3 0 8	574
Profit before tax		10 005	4 3 5 1	39 772	14 343
Income tax expense		2 2 8 3	1 0 5 0	9757	3536
Profit for the period		7722	3 3 0 1	30 015	10807
Earnings per share
Basic and diluted (in NOK)	4	0,16	0,14	0,63	0,46
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss - currency translation difference		$-160$	$\blacksquare$	428	$\qquad \qquad =$
Other comprehensive income for the period, net of income tax		$-160$		428
Total comprehensive income for the period		7 5 6 2	3 3 0 1	30 443	10 807

(Amounts in NOK 1 000)		Unaudited
	Note	30 September	31 December
ASSETS		2017	2016
Non-current assets
Investment property	5	323 893	163 738
Property, plant and equipment		45 551	45 291
Goodwill		61 547	51 985
Total non-current assets		430 991	261 014
Current assets
Inventories		1 3 8 3	1623
Trade and other receivables		11 018	10 577
Other current assets		12819	15 078
Cash and bank deposits		47 053	34 115
Total current assets		72 273	61 393
TOTAL ASSETS		503 264	322 407
EQUITY AND LIABILITIES
Equity
Issued share capital	6	4792	395
Share premium		189779	89 863
Other reserves		295	$-114$
Retained earnings		86470	64 903
Total equity		281 336	155 047
Liabilities
Non-current liabilities
Long-term interest-bearing debt	7	118 182	23 179
Deferred tax liabilities		18 2 26	4 3 8 3
Obligations under finance leases		341	526
Total non-current liabilities		136 749	28 088
Current liabilities
Short-term interest-bearing debt	7	7423	86 169
Trade and other payables		10 524	8743
Income tax payable		6 80 6	8 1 7 1
Other taxes and withholdings		3834	3912
Obligations under finance leases		372	384
Other current liabilities		56 220	31893
Total current liabilities		85 179	139 272
Total liabilities		221928	167 360
TOTAL EQUITY AND LIABILITIES		503 264	322 407

(Amounts in NOK 1 000)	Issued Share capital	Share premium	Currency translation reserve	Retained earnings	Total equity
Balance at 1 January 2016	227	30		35879	36 136
Profit (loss) for the period				10 807	10 807
Other comprehensive income (loss) for the period net of income tax			394		394
Total comprehensive income for the period			394	10807	11 201
Issue of ordinary shares	122	59 878			60 000
Balance at 30 September 2016 (Unaudited)	349	59 908	394	46 686	107 337
Balance at 1 January 2017	395	89 863	$-114$	64 903	155 047
Profit (loss) for the period				30 015	30 015
Other comprehensive income (loss) for the period net of income tax			409		409
Total comprehensive income for the period			409	30 015	30 424
Issue of ordinary shares	84	99 916		-4 135	95 865
Issue of share capital - transfer from retained earnings	4 3 1 3			$-4313$
Balance at 30 September 2017 (Unaudited)	4792	189 779	295	86 470	281 336

		Unaudited For the nine	Unaudited
(Amounts in NOK 1000)	Note	months ended 30 September 2017	For the nine months ended 30 September 2016
Cash flows from operating activities
Profit before tax		39772	14 343
Income tax paid		$-7701$
Interest paid		490	$\overline{a}$
Interest received		$-201$	$-186$
Depreciation		4779	2 5 8 2
Gain/loss on disposal of property, plant and equipment		144
Change in fair value of investment property	5	$-13928$	$-440$
Change in trade and other receivables		1 2 7 1	$-263$
Change in trade and other payables		1811	$-778$
Change in other current assets		5052	÷,
Change in other current liabilities		$-49$	$-2676$
Net cash flows from operating activities		31 440	12 581
Cash flows from investing activities
Payments for investment property		$-32890$	$-32911$
Payments for property, plant and equipment		$-6629$	$-830$
Net cash outflow on acquisition of subsidiaries		$-62265$	$-75721$
Net cash flows from investing activities		$-101784$	$-109462$
Cash flows from financing activities
Proceeds from issue of equity instruments of the Company		95 865	60 000
Proceeds from borrowings	$\overline{7}$	95 000	91 728
Repayment of borrowings		$-107790$	$-1319$
Net cash flows from financing activities		83 075	150 409
Net change in cash and cash equivalents		12731	53 528
Cash and cash equivalents at beginning of the period		34 115	6661
Effect of foreign currency rate changes on cash and cash equivalents		207
Cash and equivalents at end of the period		47 053	60 190

Note 1 Basis of preparation

These condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting. The condensed consolidated financial statements have been prepared on the historical cost basis except for investment property, which is measured at fair value with gains and losses recognised in profit or loss. The interim financial statements were approved by the Board of Directors on 15 november 2017.

Note 2 Significant accounting policies

The same accounting policies, presentation and methods of computation have been followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2016, and must be read in conjunction with these. The interim financial statements are unaudited.

The implementation of Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses and Amendments to IAS 7 Disclosure Initiative, both applicable to accounting period commencing on 1 January 2017 and later, have not had any effect on the recognition, measurement or notes disclosures in these condensed consolidated financial statements.

Note 3 Segment information

Management has determined the operating segments based on reports reviewed by the CEO and management group and Board, and which are used to make strategic and resource allocation decisions. During the fourth quarter of 2016, after the acquisition of the City Self-Storage companies, the Group decided to report management information based on the two concepts offered by the Group, City Self-Storage (CSS) and OK Minilager (OKM). Following the establishment of OK Property AS (OKP) at the start of 2017, the Group's property business is reported as Other/eliminations. The Other/elimination column also includes eliminations of intercompany transactions and balances. Adjustments necessary to reconcile management information with the Group's accounting principles (IFRS compliant) have been made on a total level, reconciling the total of the operating segment's EBITDA to the Group's consolidated profit before tax under IFRS.

The total of Sales income and Other income in the segment reporting corresponds with the addition of Gain from disposal of property, plant and equipment to the total of the line items Revenue and Other operating income as recognised under IFRS. The financial information included for the operating segments for the period is presented in accordance with principles in Norwegian financial reporting standards (NGAAP).

OK Minilager (OKM)	Nationwide presence in Norway offering climate controlled storage units and container based storage
City Self-Storage (CSS)	Climate controlled facilities in all Scandinavian countries, with a primary focus on the capital cities of Oslo, Stockholm and Copenhagen
Other/eliminations	The ownership and development of property and the remainder of the Group's activities, including

For the three months ended 30 Sept 2017	CSS	OKM	Other/eliminations	Total
Sales income	35 996	15 180		51 176
Other income	4 1 2 9	553	$-210$	4472
Operating costs	$-31809$	$-7249$	$-3758$	$-42816$
EBITDA	8 3 1 6	8 4 8 4	$-3968$	12832
Reconciliation to profit before tax as reported under IFRS
Depreciation				$-2217$
Change in fair value of investment property				755
Finance lease expense
Finance income				$-102$
Finance expense				$-1263$
Profit before tax				10 005
For the nine months ended 30 September 2017	CSS	OKM	Other/eliminations	Total
Sales income	106 580	36 306		142 886
Other income	12 5 26	1081	341	13 948
Operating costs	$-98728$	$-19868$	$-4692$	$-123288$
EBITDA	20 378	17519	$-4351$	33 546
Reconciliation to profit before tax as reported under IFRS
Depreciation				$-4779$
Change in fair value of investment property				13928
Finance lease expense				$\Omega$
Finance income				385
Finance expense			٠	$-3308$
Profit before tax				39772
For the nine months ended 30 September 2016	CSS	OKM	Other/eliminations	Total
Sales income	٠	30 015		30 015
Other income	٠	$\mathbf{0}$	42	42
Operating costs		$-14051$	732	$-13319$
EBITDA		15 965	468	16738
Reconciliation to profit before tax as reported under IFRS
Depreciation				$-2582$
Change in fair value of investment property				440
Finance lease expense				312
Finance income				9
Finance expense				$-574$
Profit before tax	×			14 3 4 3

Note 4 Earnings per share

(Amounts in NOK)

	For the three months ended 30 September 2017	For the three months ended 30 September 2016	For the nine months ended 30 30 September September 2017	For the nine months ended 2016
Profit (loss) for the year	7722000	3 301 000	30 015 000	10 807 000
Weighted average number of outstanding shares during the period	47 850 000	23 906 593	47 788 007	23 300 000
Earnings (loss) per share - basic and diluted in NOK	0.16	0.14	0.63	0,46

Basic and diluted earnings per share are identical as there have been no dilutive effects during the periods presented.

On 29 September 2017, the holding company's shares were split in the ratio of 1:10, so that one share with nominal value of NOK 1 is replaced with 10 new shares, each with a nominal value of NOK 0.10. Earnings per share have been calculated as if the proportionate change in the number of shares outstanding had taken place at the start of the earliest period for which earnings per share is presented to ensure comparability

Note 5 Investment property

(Amounts in NOK 1 000)

During the nine month period ended 30 September 2017, the following changes have occurred in the Group's portfolio of investment properties:

Balance as at 31 December 2016		163738
Godøygata 8 AS	Company acquired as asset acquisition	8954
Minilageret AS	Business combination	89721
Sverdrupsgate 23	Asset acquisition in OK Property AS	7898
Trondheimsveien 436 AS	Company acquired as asset acquisition	15 845
Fabrikkveien 8	Asset acquisition in OK Property AS	9739
Stormåsan 22	Asset acquisition in OK Property AS	1428
Ulaveien 9	Asset acquisition in OK Property AS	5997
Additions to existing properties		6645
Fair value adjustments recognised in profit or loss		13 928
Balance as at 30 September 2017		323 893

		Amounts due in less than
		1 year	1-5 years
For the nine month period ended
30 September 2017
Debt to financial institutions		7423	118 182
Specification of loans		2017 Currency
Handelsbanken	75 000	NOK
Handelsbanken	20 000	NOK
Santander Consumer Bank AS	147	NOK
DnB	19872	NOK
DnB	5918	NOK
Handelsbanken	4 6 6 8	NOK
Total bank borrowings at amortised cost	125 605

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Alternative performance measures (APMs)

Operating profit before fair value adjustments

SSG's financial APMs

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NOK million	Third	Second	First 9
	quarter	quarter	months
	2017	2017	2017
Costs related to IPO	2,7	0.9	3,6
Transaction costs acq. Of Minilageret	1.9	$\Omega$	1.9
Items excluded from underlying EBITDA	4,6	0.9	5,5