Big Yellow posts decent growth as store estate expands

Big Yellow reported revenue growth of 2.3% in its first half on Tuesday, to £65.8m, with like-for-like store revenue up by 2.4%.

The FTSE 250 storage provider said that was primarily driven by average rate growth, with average occupied space slightly up on the same period last year for the six months ended 30 September.

It said occupancy was expected to be the main driver of year-on-year revenue growth in the second half.

Cash flow from operating activities, after net finance costs, increased 17.5% to £42.3m, with the board saying the figure benefitted from favourable working capital movements.

Its adjusted profit before tax was ahead 3.4% at £36.5m, with earnings per share down slightly, impacted by the dilutive effect of the April placing.

The board declared an interim dividend of 17p per share, down 0.6% from the 17.1p per share it distributed for the first half of the 2020 financial year.

Operationally, Big Yellow said like-for-like occupancy increased 6.6 percentage points from 1 April, and was ahead 3.9 percentage points from the same time last year, to 87.3%.

Average achieved net rent per square foot rose 2.2% period-on-period, with closing net rent up by 0.1% from September 2019.

The company opened new stores in Camberwell in July, Bracknell in September and Battersea in November, adding 205,000 square feet of maximum lettable area, with all three expected to make a positive contribution to earnings next year.

It also acquired a new development site in Wapping, taking its pipeline to 11 development sites of approximately 780,000 square feet, or 16% of the current maximum lettable area.

Planning consent was granted for new stores in Hayes, North Kingston, Wembley, Harrow and Kings Cross, with eight of the 11 sites in the pipeline now with planning consent.

Big Yellow said the placing of 8.3 million shares in April raised £79.9m net of expenses to grow its development pipeline, leading to current net debt £290.3m, with available liquidity of £135.9m.

“This pandemic has accelerated many structural changes that were already occurring, such as the move to online retailing and an increase in working from home facilitated by technological advances,” said executive chairman Nicholas Vetch.

“These developments combined with the shortage of quality flexible mini-warehousing space, particularly in London, is helping to drive our demand, and we believe these are long-term trends.

“If we look back on our trading over the last six months, and indeed since the period end, it is reasonable to say that to date the structural tailwinds have been significantly stronger than the headwinds generated by the pandemic.”

Vetch said the current outlook for both the economy and the pandemic remained uncertain, with Big Yellow’s management “constantly alert” to the threats and challenges generated by the crisis.

“The momentum we have seen from June relative to last year is continuing, however our visibility of future demand is limited to two to four weeks.

“Further challenges will no doubt present themselves, but Big Yellow is relatively well placed to meet them.”

The company’s stores were approaching 90% occupancy, which Vetch said gave it pricing power.

“We have the potential for further external growth with a significant pipeline, which has largely been de-risked by the securing of planning consents.

“Our capital structure is conservative, with interest cover of just under 10 times, providing both downside protection and upside opportunity to acquire new development sites.”

At 0835 GMT, shares in Big Yellow were up 0.79% at 1,151p.