You can access
more information
about us on our website
bigyellow.co.uk
Big Yellow Group PLC
2 The Deans, Bridge Road,
Bagshot, Surrey GU19 5AT
Tel: 01276 470190
Fax: 01276 470191
e-mail: info@bigyellow.co.uk
i
B
g
Y
e
l
l
o
w
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
1
7
Big Yellow Group PLC
Annual Report & Accounts 2017
The UK’s brand leader in
Self Storage
Get some space in your life.™
WE HAVE DELIVERED A
STRONG PERFORMANCE
IN 2017, ANOTHER
YEAR OF REVENUE,
CASH FLOW, EARNINGS
AND DIVIDEND GROWTH.
Big Yellow Group PLC is the UK’s brand leader in self
storage. Big Yellow now operates from a platform of 92 stores,
including 19 stores branded as Armadillo Self Storage, in
which the Group has a 20% interest. We own a further eight
Big Yellow self storage development sites (including two
extensions sites), of which two have planning consent.
The current maximum lettable area of this platform is
5.4 million sq ft. When fully built out the portfolio will provide
approximately 5.8 million sq ft of flexible storage space.
Of the Big Yellow stores and sites, 96% by value are held
freehold and long leasehold; with the remaining 4%
short leasehold.
The Group has pioneered the development of the latest
generation of self storage facilities, which utilise state of the
art technology and are located in high profile, accessible,
main road locations. Our focus on the location and visibility
of our Big Yellow stores, coupled with our excellent customer
service and our market leading online platform, has
created the most recognised brand name in the UK self
storage industry.
WE ARE…
BRITAIN’S FAVOURITE SELF STORAGE COMPANY
ifc1
WELCOME
We continue to deliver year on year growth in all of our key operating
metrics. Since flotation, we have delivered a total shareholder return
with dividends reinvested of 14.7% per annum.
Occupancy
+2.7ppts
Closing net rent
per sq ft (£m)
+1%
Revenue
(£m)
+8%
78.0
75.3
73.2
69.8
64.8
2013 2014 2015 2016 2017
+13.2 ppts
over 5 years
£27.00
£26.00
£25.00
£24.00
£23.00
£22.00
£21.00
£20.00
26.15
25.90
26.03
25.23
24.65
2013 2014 2015 2016 2017
+6%
over 5 years
120.0
110.0
100.0
90.0
80.0
70.0
60.0
50.0
109.1
101.4
84.3
72.2
69.7
2013 2014 2015 2016 2017
+57%
over 5 years
(%)
80%
75%
70%
65%
60%
55%
50%
Adjusted profit
before tax (£m)
+11%
Adjusted earnings
per share (pence)
+11%
Dividend
per share (pence)
+11%
60
55
50
45
40
35
30
25
20
15
54.6
49.0
39.4
29.2
25.5
2013 2014 2015 2016 2017
+114%
over 5 years
40
35
30
25
20
15
10
34.5
31.1
27.1
20.5
19.3
2013 2014 2015 2016 2017
Carbon intensity
(per sq m occupied)
(13%)
Net Promoter
Score
30.0
25.0
20.0
15.0
10.0
5.0
0.0
+79%
over 5 years
+7%
27.6
24.9
21.7
16.4
11.0
2013 2014 2015 2016 2017
+151%
over 5 years
30
25
20
15
10
5
0
26.5
22.6
17.3
14.6
12.7
2013 2014 2015 2016 2017
(52%)
over 5 years
80
75
70
65
60
55
50
76.6
71.6
66.5
60.1
2014 2015 2016 2017
+27%
over 5 years
Over the following pages:
We outline the core
qualities of our business
and explain how we
stay ahead of the game.
1
HIGHLIGHTS
OF THE YEAR
CONTINUED
GROWTH IN OUR
KEY OPERATING
METRICS.
FINANCIAL HIGHLIGHTS
Financial metrics
Revenue
Like-for-like revenue(1)
Adjusted profit before tax(2)
Adjusted diluted EPRA earnings per share(3)
Dividend – final
– total
Free cash flow (after net finance costs and pre working capital)(5)
Store metrics
Occupancy growth(4)
Occupancy – like-for-like stores (%)(1,4)
Average net achieved rent per sq ft(4)
Statutory metrics
Year ended
31 March
2017
£109.1m
£107.3m
£54.6m
34.5p
14.1p
27.6p
£58.3m
Year ended
31 March
2016
£101.4m
£101.4m
£49.0m
31.1p
12.8p
24.9p
£53.3m
%
Growth
8
6
11
11
10
11
10
188,000 sq ft
78.1%
£26.16
185,000 sq ft
75.3%
£25.73
2
2.8 ppts
2
Profit before tax
Cash flow from operating activities (after net finance costs)
Basic earnings per share
£99.8m
£56.0m
63.6p
£112.2m
£55.5m
71.9p
(11)
1
(12)
(1) Like-for-like metrics exclude Nine Elms and Twickenham 2 (acquired April 2016).
(2) See note 10.
(3) See note 12.
(4) See Portfolio Summary and Operating and Financial Review.
(5) See reconciliation in Financial Review.
2
THE MARKET LEADING
BRAND, WITH THE
LARGEST ONLINE
MARKET SHARE.
3
CONTINUED GROWTH
> Like-for-like occupancy increased by 2.8 ppts to 78.1%
> 11% increase in adjusted earnings per share and total dividend
> Free cash flow (after net finance costs and pre working capital movements5)
up 10% to £58.3 million
> Acquisition of four store Lock and Leave portfolio in April 2016 for £21 million
– Nine Elms and Twickenham acquired by Big Yellow (combined
MLA of 87,000 sq ft)
– Canterbury and West Molesey acquired by Armadillo (combined
MLA of 65,000 sq ft)
> Acquisition by Armadillo of three stores from the Quickstore portfolio
(Exeter, Plymouth and Torquay, combined MLA 92,000 sq ft) in April 2017
for £4.75 million
> Acquisition in May 2017 of prime London site on the Highway
in Wapping, just east of the City, for future redevelopment
WE BELIEVE THAT
BIG YELLOW’S MARKET
LEADING BRAND AND
OPERATING PLATFORM
CAN DELIVER
ATTRACTIVE AND
SUSTAINABLE GROWTH
OVER THE MEDIUM TO
LONG TERM FROM ITS
EXISTING PORTFOLIO.
A Year of
Further Achievement
But our focus remains on the Future
Nicholas Vetch, Executive Chairman of Big Yellow, commented:
“Trading over the last few months has been better than we anticipated, and
is encouraging as we head into our seasonally stronger summer trading
period. Nevertheless, these are uncertain times and we remain fully prepared
for any economic reversals which could cause demand to fluctuate.
We can expect to break through 80% occupancy this summer putting us
within touching distance of our (for the time being) long held goal of 85%.
Occupancy gain remains the primary point of focus.
As our vacant capacity reduces, it increases the imperative to create more.
The tight supply of land in our core areas of activity, and a planning regime
broadly focussed on housing, remain very significant barriers for our
competitors and ourselves. We have the required property and planning
skills, an ability to take the necessary risks, a strong balance sheet and we
are prepared to take long term views. These factors work in our favour but
unlocking new opportunities for new stores remains challenging.
That said, we believe that Big Yellow’s market leading brand and operating
platform can deliver attractive and sustainable growth over the medium to
long term from its existing portfolio.”
+2.8PPTS
+2%
Like-For-Like
Closing Occupancy
Average Achieved
Net Rent Per Sq Ft
+8%
Revenue
+11%
Adjusted Profit
Before Tax
+10%
Free Cash Flow (after
net finance costs and
pre working capital)
+11%
Adjusted EPRA
Diluted Earnings
Per Share
DRIVING OCCUPANCY, REVENUE AND CASH FLOW GROWTH
4
BY CREATING
A POWERFUL
NATIONWIDE BRAND,
BIG YELLOW IS FRONT
OF MIND FOR MORE
CUSTOMERS IN OUR
MARKET THAN OUR
COMPETITORS,
WITH SIGNIFICANT
POTENTIAL TO
INCREASE THIS
BRAND AWARENESS.
Our Competitive Advantage
The things that set us apart
> UK industry’s most recognised brand
> Prominent stores on arterial or main roads, with extensive frontage and high visibility
> Largest share of web traffic from mobile and desktop platforms
> Strong customer satisfaction and NPS scores reflecting excellent customer service
> Largest UK self storage footprint by Maximum Lettable Area (“MLA”) capacity
(Big Yellow and Armadillo combined)
> Primarily freehold estate concentrated in London and South East and other large
metropolitan cities
> Larger average store capacity – economies of scale, higher operating margins
> Secure financing structure with strong balance sheet
WE PUT THE CUSTOMER AT THE HEART OF OUR BUSINESS
5
BIG YELLOW IS WELL PLACED
TO BENEFIT FROM THE
GROWING DEMANDS FOR
SELF STORAGE.
Reasons For
Using Big Yellow
Businesses
35%
by space
20%
by customer
numbers
Domestics
65%
by space
80%
by customer
numbers
Overall Occupied Space
31 March 2017
Other
12%
Student
10%
Travelling
6%
Business
12%
Moving
43%
Decluttering
11%
Home
Improvements
6%
Demand Profile of Move-ins only
year ended 31 March 2017
6
HOUSE MOVERS,
EITHER IN THE RENTAL
OR OWNER OCCUPIED
SECTOR, CONTINUE TO
BE A KEY SEGMENT OF
OUR CUSTOMER BASE.
7
Our Marketplace
Demand for self storage comes from
a number of different market segments
House movers, either in the rental or owner occupied sector, continue
to be a key segment of our customer base. Demand also comes from
people decluttering their space constrained homes, treating
Big Yellow as a spare room. Key life events which invariably create
a need for storage are also an important driver of demand; maybe
moving abroad for a job, inheriting possessions, getting married or
separating, homeowners carrying out home improvements or
students needing space during the holidays.
Our business customers range across a number of industry types,
such as retailers, e-tailers, professional service companies,
hospitality companies and importers/exporters. These businesses
store stock, documents, equipment, or promotional materials, all
requiring a convenient flexible solution to their storage, either to
get started or to free up more expensive space.
There is a growing trend towards self-employment and smaller
business start-ups in the UK, dynamics which are positive for self
storage. Additionally, businesses in the UK are increasingly seeking
more flexible lease arrangements for their office and storage space.
The deindustrialisation of big cities also points to a structural growth
in demand for storage for businesses.
STRONG GROWTH OPPORTUNITIES
WE ARE ALWAYS
LOOKING FOR
INNOVATIVE WAYS TO
HELP OUR CUSTOMERS’
LIVES AND MAKE THE
BUSINESS MORE
ENVIRONMENTALLY
SUSTAINABLE.
Innovation
Always looking to the future
We continuously improve our digital channels to provide our website visitors with
an online experience which is quick, user friendly and provides comprehensive
information on how Big Yellow works.
Online FAQs, live chat, video guides, intuitive room size guides and online prices help
guide people through the process when choosing space. The ability to reserve space
online and a speedy online check in service also help provide our customers with a
stress free experience.
Our online BoxShop allows customers to buy boxes and packing materials online
and have them either delivered to their home or pick them up from store with our
Click and Collect service.
Innovative building design is part of our commitment to a more sustainable business.
We incorporate the latest technologies such as energy efficient LED lighting and solar
panels to reduce our carbon footprint and produce our own renewable energy.
CONTINUALLY IMPROVING OUR
DIGITAL PLATFORMS
8
WE PROVIDE THE
HIGHEST LEVELS OF
SECURITY IN THE UK
SELF STORAGE
INDUSTRY.
WE HAVE INVESTED
SIGNIFICANTLY TO
ENSURE OUR
CUSTOMERS ENJOY
PEACE OF MIND.
9
Security
Ensuring our customers have peace of mind
We take security very seriously and are the only major UK operator where
every room is individually alarmed. Customers access the storage areas and
their own rooms using a PIN code which is unique to them.
We have staff on site seven days a week and CCTV which is monitored
24 hours a day. Perimeter fencing and electronic gates provide an additional
layer of security.
All of our stores are modern and brightly lit and are situated in safe locations,
easily accessible from main roads.
Security and vigilance is communicated to all store staff and reinforced
through regular training.
THE HIGHEST LEVELS OF SECURITY IN THE
UK SELF STORAGE INDUSTRY
WE HAVE AN UNRIVALLED
PORTFOLIO OF STORES
ACROSS LONDON, THE
SOUTH EAST AND LARGE
METROPOLITAN CITIES.
5.4 MILLION SQ FT
Current maximum lettable area
450,000 SQ FT
Development pipeline is in excess of 450,000 sq ft
with an estimated cost to complete of £70 million
London
– 44 stores and sites
WATFORD
A1(M)
ENFIELD
EDMONTON
STAPLES CORNER
NORTH FINCHLEY
EAST FINCHLEY
M40
HANGER LANE
EALING
ILFORD
ROMFORD
KINGS CROSS
GYPSY CORNER
BOW
BARKING
DAGENHAM
HOUNSLOW
CHISWICK
NORTH KENSINGTON
KENNINGTON
WAPPING
RICHMOND
TWICKENHAM x2
FULHAM
SHEEN
NINE ELMS
CAMBERWELL
WANDSWORTH
BATTERSEA
NEW CROSS
BALHAM
M4
KINGSTON
NEW MALDEN
TOLWORTH
ELTHAM
MERTON
WEST NORWOOD
BECKENHAM
BROMLEY
M2
WEST MOLESEY
SUTTON
CROYDON
ORPINGTON
BYFLEET
M3
M20
Our Portfolio
An extensive national network
Our customers like our modern, highly visible, purpose built
stores which are situated in easily accessible locations.
In the year, Big Yellow has acquired two stores from Lock and
Leave at Nine Elms and Twickenham. Armadillo purchased
Canterbury and West Molesey from the same operator.
In April 2017, Armadillo acquired three stores in the South West
from QuickStore. In May 2017, Big Yellow acquired a prime
development site in Wapping. This adds to our development
pipeline which also includes Kings Cross, Camberwell,
Battersea and an extension to our Wandsworth site in London
with other sites in Guildford, Manchester and Newcastle.
We have an unrivalled portfolio across London, the South East
and large metropolitan cities, with a network of 92 stores.
HIGHLY VISIBLE STORES
REINFORCE OUR BRAND 24/7
10
KEY
73 Big Yellow stores
6 New Big Yellow stores
under development
19 Armadillo stores
73 EASY TO FIND, HIGH
PROFILE LOCATIONS
PROVIDE CONVENIENCE
FOR CUSTOMERS AND
UNMISSABLE EXPOSURE
FOR THE BIG YELLOW
BRAND. 19 ARMADILLO
STORES FURTHER
BROADEN OUR
NATIONAL COVERAGE.
High profile locations.
DUNDEE
EDINBURGH
NEWCASTLE
STOCKTON
MORECAMBE
Outside London
– 54 stores and sites
LIVERPOOL NORTH
LIVERPOOL
LIVERPOOL SOUTH
CHESTER
LEEDS
HULL
MANCHESTER
WARRINGTON
STOCKPORT
SHEFFIELD HILLSBOROUGH
SHEFFIELD WESTBAR
CHEADLE
SHEFFIELD PARKWAY
SHEFFIELD BRAMALL LANE
MACCLESFIELD
STOKE-ON-TRENT
DERBY
BIRMINGHAM
CHELTENHAM
GLOUCESTER
OXFORD X2
SWINDON
NOTTINGHAM
NORWICH
PETERBOROUGH
CAMBRIDGE
COLCHESTER
MILTON KEYNES
LUTON
HIGH WYCOMBE
CHELMSFORD
CARDIFF
BRISTOL
CENTRAL
READING
BRISTOL
ASHTON GATE
CAMBERLEY
SLOUGH
SOUTHEND
London
CANTERBURY
GUILDFORD
GUILDFORD CENTRAL
PORTSMOUTH
TUNBRIDGE WELLS
POOLE
BRIGHTON
EXETER
TORQUAY
PLYMOUTH
11
ALL OF OUR PEOPLE
SHARE A PASSION
FOR DELIVERING
THE SERVICE OUR
CUSTOMERS DESERVE,
HELPING THEM GET
THROUGH STRESSFUL
LIFE CHANGES SUCH
AS MOVING HOME.
That is our Brand.
Our Unrivalled Service
A Brand based on People
We are about much more than just storage. We are about people and their possessions.
Whether it’s a house move, setting up a business or a DIY project, we understand these
are all key life moments where it can get a bit stressful. At Big Yellow, our people help to
take the stress away. We work hard to understand our customers’ requirements and
give the best service possible whether it is face to face, over the phone or through our
user friendly website, mobile site or online chat. Our customer support centre is also on
hand seven days a week to provide an additional layer of customer service.
Excellent customer service is at the heart of our business. We measure customer
service standards through a programme of mystery shopping and online customer
reviews which are externally managed. Over the year, we have achieved an
average net promoter score of 77 which we believe compares favourably to other
consumer facing businesses.
Customer reviews are published on the website and show an extremely high level of
satisfaction. We also invite customers to submit reviews to a third party review site
which are currently averaging 9.5 out of 10.
OUR PEOPLE ARE OUR MOST IMPORTANT ASSET
12
CONTENTS
14
16
60
61
64
68
70
85
88
89
94
95
96
97
97
Chairman’s Statement
Strategic Report
Our Strategy and Business Model
16
Operational and Marketing Review
18
Portfolio Summary – Big Yellow Stores
22
Our Stores
23
Portfolio Summary – Armadillo Stores
27
Store Performance
28
Financial Review
31
37
Principal Risk and Uncertainties
40 Corporate Social Responsibility Report
58 Independent Assurance Statement on the
Corporate Social Responsibility Report
Directors, Officers and Advisers
Directors’ Report
Corporate Governance Report
Report of the Nominations Committee
Remuneration Report
Audit Committee Report
Statement of Directors’ Responsibilities
Independent Auditors’ Report to the Members of
Big Yellow Group PLC
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Reconciliation of Net Cash Flow to Movement in
Net Debt
98 Notes to the Financial Statements
125 Company Balance Sheet
126 Company Cash Flow Statement
127 Company Statement of Changes in Equity
128 Notes to the Financial Statements
ibc
Ten Year Summary
t a i n ’ s
i
B r
t e
i
f a v o u r
s t o r a g e
f
s e l
c o m p a n y
13
Chairman’s Statement
OUR MAIN FOCUS REMAINS ON DRIVING
EARNINGS THROUGH OCCUPANCY
GROWTH, AS WE TARGET OUR NEXT GOAL
OF AN AVERAGE OF 85% OCCUPANCY
ACROSS THE PORTFOLIO.
Growth
Of Revenue and Earnings
Big Yellow Group PLC (“Big Yellow”, “the Group” or “the Company”), the
UK’s brand leader in self storage, is pleased to announce its results for
the year ended 31 March 2017.
Against a backdrop of increased economic uncertainty, we are pleased
to have delivered another year of occupancy, revenue and adjusted
earnings growth. Our main focus remains on driving earnings through
occupancy growth, as we target our next goal of an average of 85%
occupancy across the portfolio.
Like-for-like closing Group occupancy is up 2.8 percentage points to
78.1% compared to 75.3% at 31 March 2016.
In the quarter to March, with less churn in the business and a more
stable demand environment, we successfully increased occupancy
by 115,000 sq ft, and by a further 54,000 sq ft in the current quarter
to date (2016: quarter to date gain of 7,000 sq ft). As of 22 May 2017,
our occupancy across the portfolio is 79.2%.
Average rental growth over the year was 1.7% with closing net rent
of £26.03, representing an increase of 0.5% from the same time last
year, with our focus remaining on driving occupancy in the stores.
We remain focussed on occupancy gain with 85% (for the time being)
our primary objective. It remains our firm belief that occupancy gains
are hard won and are of significantly more value than short term
increases in average rent. As our occupancy rises the rate growth will
come through driven by our yield management systems.
Financial results
Revenue for the year was £109.1 million (2016: £101.4 million),
an increase of 8%. The like-for-like revenue growth (excluding Nine
Elms and Twickenham 2 acquired in April 2016) was 6%.
Free cash flow (after interest costs and pre working capital
movements) increased by £5.0 million (10%) to £58.3 million for the
year (2016: £53.3 million). The Group’s operating profit before property
revaluations increased by £5.5 million (9%) to £65.3 million.
The Group’s statutory profit before tax was £99.8 million, compared
to £112.2 million in the prior year. The movement is due to a lower gain
in the valuation of the Group’s investment properties in the current
year compared to the prior year.
Given that our central overhead and operating expense is largely
embedded in the business, this revenue growth has delivered
an increase of 11% in the adjusted profit before tax in the year of
£54.6 million (2016: £49.0 million). Adjusted earnings per share
increased by 11% to 34.5p (2016: 31.1p) with an equivalent
11% increase in the dividend per share for the year.
The Group has net bank debt of £298.0 million at 31 March 2017
(2016: £295.0 million). This represents approximately 25% (2016: 26%)
of the Group’s gross property assets totalling £1,190.5 million
(2016: £1,126.2 million) and 31% (2016: 33%) of the adjusted net assets
of £963.4 million (2016: £899.0 million). The Group’s interest cover for the
year, expressed as the ratio of free cash flow pre working capital
movements against interest paid was 6.2 times (2016: 6.0 times). This is
comfortably ahead of our internal minimum interest cover requirement
of 5 times.
Investment in new capacity
Developing stores in our core area of London and the South East
remains challenging. Sites are scarce, and faced with a housing
shortage, policy makers are focussed on residential provision at the
expense of commercial development. Despite the referendum result,
we still expect London’s population to continue to grow, intensifying
these pressures. This makes the creation of new supply difficult and
we are aware of only a handful of stores likely to open in London in the
next few years as legacy sites acquired before the downturn have now
largely been opened. We believe that this leaves our existing platform
almost irreplaceable. We and others are looking to acquire sites but
even if successful, it can take three to four years to open a purpose
built store.
We have commenced construction at Guildford Central in the year, with
a planned store opening of March 2018, and have also started on the
extension to our store at Wandsworth, which is planned to complete
in April 2018.
After lengthy consultations we anticipate submitting planning
applications on Battersea, Kings Cross and Manchester in the next few
months, but as always the process is subject to the vagaries of the
planning system.
We are pleased to announce that in May 2017 we acquired an existing
building on a 0.8 acre site on the Highway in Wapping, just east of
Tower Bridge, with main road frontage, for £10.75 million. This is an
area with very little supply of self storage and significant self storage
drivers given the changes to the built environment over the past two
decades, with high density residential and other mixed use schemes.
A combination of self storage and short term tenancies under our
ownership will provide an interim income while we investigate
refurbishment or redevelopment options.
14
THERE HAS BEEN
A FURTHER IMPROVEMENT
IN OUR CUSTOMER NET
PROMOTER SCORES TO
AN AVERAGE OF 77 OVER
THE YEAR, A VERY
PLEASING RESULT.
Outlook
Trading over the last few months has been better than we anticipated,
and is encouraging as we head into our seasonally stronger summer
trading period. Nevertheless, these are uncertain times and we remain
fully prepared for any economic reversals which could cause demand
to fluctuate.
We can expect to break through 80% occupancy this summer putting
us within touching distance of our (for the time being) long held goal
of 85%. Occupancy gain remains the primary point of focus.
As our vacant capacity reduces, it increases the imperative to create
more. The tight supply of land in our core areas of activity, and a
planning regime broadly focussed on housing, remain very significant
barriers for our competitors and ourselves. We have the required
property and planning skills, an ability to take the necessary risks,
a strong balance sheet and we are prepared to take long term views.
These factors work in our favour but unlocking new opportunities for
new stores remains challenging.
That said, we believe that Big Yellow’s market leading brand and
operating platform can deliver attractive and sustainable growth over
the medium to long term from its existing portfolio.
Nicholas Vetch
Executive Chairman
22 May 2017
The future cost of the current pipeline of eight development sites and
extensions, with a potential capacity of over 450,000 sq ft, six of which
are subject to planning, and including Wapping, acquired post year end,
is provisionally estimated to be approximately £70 million. This
excludes any net proceeds that may be received on the redevelopment
of our Battersea store and adjoining retail units into a mixed use
scheme of residential, retail and self storage.
The acquisitions of the Lock and Leave portfolio in April 2016 and the
Quickstore portfolio since the year end are a continued demonstration
of our willingness to buy existing stores for rebranding as either Big
Yellows or Armadillos, from which we can drive performance through
our market leading operational and digital platform.
Dividends
The Group’s dividend policy is to distribute 80% of full year adjusted
earnings per share. The final dividend declared is 14.1 pence per share.
The dividend declared for the year of 27.6 pence per share represents
an increase of 11% from 24.9 pence per share last year.
Our people
A business will only succeed if it has a fully motivated and engaged
team. From the start we have always aimed to create a culture which
is accessible, apolitical, non-hierarchical, socially responsible, and very
importantly, a fun and enjoyable place to work.
During the year, we appointed an external consultancy to conduct an
engagement survey of our employees, which delivered very pleasing
levels of employee engagement of 90% in the stores and head office.
In addition, we focus on customer service and engagement, measuring
and responding to their feedback. Commensurate with the high levels
of employee engagement, there has been a further improvement in our
customer net promoter scores (“NPS”) to an average of 77 over the
year, a very pleasing result.
I would like to thank all those in the business for their efforts in
contributing to another year of growth.
Board
Mark Richardson has announced that he is stepping down as a
Non-Executive Director at the Group’s next AGM. He joined the Company
in 2008 and over the ensuing nine years has been an excellent Audit
Committee Chair and a source of sound advice and judgement. I and
the Board would like to thank him for his valued contribution to
Big Yellow’s success in his period of tenure. It is our intention to appoint
his replacement as Audit Committee Chairman before the July AGM.
15
Strategic Report (continued)
Our Strategy and Business Model
Our Strategic Report
discusses the following areas:
> Our strategy and business model
> Operational and marketing review
> Store performance
> Financial review
> Principal risks and uncertainties
> Going concern basis and viability statement
> Corporate social responsibility
Approval
This report was approved by the Board of Directors on 22 May 2017 and signed on its behalf by:
James Gibson
Chief Executive Officer
John Trotman
Chief Financial Officer
Our Strategy
Our strategy from the outset has been to develop Big Yellow into the
market leading self storage brand, delivering excellent customer service,
with a great culture and highly motivated employees. We continue to be
the market leading brand, with unprompted awareness of seven times
that of our nearest competitor (source: YouGov survey, April 2017).
We concentrate on developing our stores in main road locations with high
visibility, where our distinctive branding generates high awareness of
Big Yellow. Our accreditation in 2016 for the Best 100 Companies to work
for was pleasing as an independent assessment of our employee
engagement, and our customer satisfaction survey scores remain very
high, with an average customer net promoter score of 77, and average
Trustpilot scores of 9.5 out of 10.
Self storage demand from businesses and individuals at any given store
is linked in part to local economic activity, consumer and business
confidence, all of which are inter-related. Fluctuations in housing activity
whether in the rented or owner occupied sector, are also a factor and in our
view influence the top slice of demand over and above a core occupancy.
This has been demonstrated by the resilience of our like-for-like stores
since September 2007 despite a collapse in housing activity and GDP over
the period 2007 to 2009. As can be seen from the ten year summary, the
performance of our stores was relatively resilient during the downturn, and
within that London and the South East proved to be less volatile.
Local GDP and hence business and housing activity are greatest in the
larger urban conurbations and in particular London and the South East.
Furthermore, people and businesses are space constrained in these
more densely populated areas. Barriers to entry in terms of competition
for land and difficulty around obtaining planning are also highest in
more urbanised locations.
Over the last 18 years we have built a portfolio of 73 Big Yellow self storage
centres, largely freehold, purpose-built and focussed on London, the South
East and large metropolitan cities. We have seen an increase in our
weighting to London and the South East as a result of recent openings
and acquisitions. 66% of our current annualised store revenue derives
from within the M25 (2016: 63%); for London and the South East, the
proportion of current annualised store revenue is 83% (2016: 80%).
Our Big Yellow stores are on average 63,000 sq ft, compared to an
industry average of approximately 43,000 sq ft (source: The Self Storage
Association 2017 UK Annual Survey). The upside from filling our larger
than average sized stores is, in our view, only possible in large
metropolitan markets, where self storage demand from domestic and
business customers is the highest. As the operating costs of our assets
are relatively fixed, larger stores in bigger urban conurbations,
particularly London, drive higher revenues and higher operating margins.
We continue to believe that the medium term opportunity to create
shareholder value will be principally achieved by increasing occupancy
and rental yield in our existing platform to drive revenue, the majority
of which flows through to the bottom line.
Our key objectives remain:
> leveraging our market leading brand position to generate new
prospects, principally from our digital, mobile and desktop platforms;
> focusing on training, selling skills, and customer satisfaction to
maximise prospect conversion and referrals;
> growing occupancy and net rent so as to drive revenue optimally at
each store;
> maintaining a focus on cost control, so revenue growth is transmitted
through to earnings growth;
> selectively adding to the portfolio through new site development and
existing store acquisitions;
> maintaining a conservative capital structure in the business with
Group interest cover of a minimum of five times; and
> producing sustainable returns for shareholders through a low
leverage, low volatility, high distribution REIT.
In the seventeen years since flotation in May 2000, Big Yellow has
delivered a Total Shareholder Return (“TSR”), including dividends
reinvested, of 14.7% per annum, in aggregate 915% at the closing price
of 730.5p on 31 March 2017. This compares to 6.4% per annum for the
FTSE Real Estate Index and 5.2% per annum for the FTSE All Share index
over the same period. This demonstrates the power of compounding
over the longer term.
16
Our Business Model
Tried and Tested...
Attractive
Market
Dynamics
Evergreen
Income
Streams
Our
Proven
Model
Our
Competitive
Advantage
Conversion
Into
Quality
Returns
Strong
Growth
Opportunities
Attractive market dynamics
Our competitive advantage
Evergreen income streams
Strong growth opportunities
Conversion into
quality returns
. UK self storage penetration in key urban conurbations remains relatively low
. Very limited new supply coming onto the market
. Resilient through the downturn
. Sector growth is positive, with increasing domestic demand
. UK industry’s most recognised brand
. Prominent stores on arterial or main roads, with extensive frontage and
high visibility
. Largest share of web traffic from mobile and desktop platforms
. Strong customer satisfaction and NPS scores reflecting excellent customer
service
. Largest UK self storage footprint by Maximum Lettable Area (“MLA”) capacity
(Big Yellow and Armadillo combined)
. Primarily freehold estate concentrated in London and South East and other
large metropolitan cities
. Larger average store capacity – economies of scale, higher operating margins
. Secure financing structure with strong balance sheet
. 52,500 customers from a diverse base – individuals, SMEs and national accounts
. Average length of stay for existing customers of 24 months
. 30% of customers in stores greater than two year length of stay
. Low bad debt expense (0.1% of revenue in the year)
. Opportunities to drive further occupancy growth
. Yield management as occupancy increases
. Densification of living and scarcity of flexible business space drives demand
. Growth in national accounts and business customer base
. Increasing the platform financed from internal resources
. Growth in our Armadillo joint venture platform
. Freehold assets for high operating margins and operational advantage
. Low technology & obsolescence product, maintenance capex fully expensed
. Annual compound adjusted eps growth of 17% since 2004/5
. Annual compound cash flow growth of 16% since 2004/5
. Dividend payout ratio of 80% of adjusted eps
17
Strategic Report (continued)
Our Strategy and Business Model (continued)
The self storage market
In the recently published 2017 Self Storage Association UK Survey, only
42% of those surveyed had a reasonable or good awareness of self
storage, in line with findings from our own research. Furthermore, only
6% of the 2,075 adults surveyed were currently using self storage, or
were thinking of using self storage, in the next year. This indicates a
continued opportunity for growth and with increasing use of self
storage, together with the ongoing marketing efforts of everyone in
the industry, we anticipate awareness will grow.
Growth in new facilities across the industry has been largely in regional
areas of the UK and in particular in smaller towns. In London in the last
year, we believe there were eight new store openings.
The Self Storage Association (“SSA”) estimates that the UK industry is
made up of approximately 1,430 self storage facilities (of which 317 are
purely container operations), providing 42.2 million sq ft of self storage
space, equating to 0.6 sq ft per person in the UK. This compares to
9.1 sq ft per person in the US, 1.8 sq ft per person in Australia and
0.1 sq ft for mainland Europe, where the roll-out of self storage is a more
recent phenomenon (source: FEDESSA European Self Storage Annual
Survey 2016). 390 self storage facilities in the UK are held by large
operators (defined as those managing 10 facilities or more), which
represents 35% of the total number of self storage centres (excluding
container operations), but the SSA estimate approximately 50% of total
capacity. Given the dominance of the larger brands in the South East, we
would expect the proportion of revenue earned by the top five operators
to be in excess of 60% of the annual industry turnover of £500 million.
Big Yellow is well placed to benefit from the growing self storage
market, given the strength of our brand, and our online platform which
delivers 87% of our prospect enquiries. Our portfolio is strategically
focussed on London, the South East and large metropolitan cities,
where barriers to entry and economic activity are at their highest.
KPIs
The key performance indicators of our stores are occupancy and rental
yield, which together drive the revenue of the business. These are three
key measures which are focussed on by the Board, and are reported
on a weekly basis. Over the course of the past five years, both
occupancy and revenue have grown significantly. Rental yield grew by
6.1% in the year to 31 March 2014, but decreased by 3.5%, in 2015
principally reflecting the acquisition of the Big Yellow Limited
Partnership stores, a regional portfolio, with a lower average net rent
per sq ft. In 2016 net rent increased by 2.7%, and has increased by
0.5% in the current year. Our key focus is on continuing to grow
occupancy, with rental yield growth following once the stores have
reached higher occupancy levels.
Adjusted profit before tax, adjusted earnings per share and
distributions to shareholders are also KPIs. The Group focuses on
adjusted profits and earnings measures as they give a clearer
underlying picture of the Group’s trading performance without
distortion from external factors such as property valuations and the
fair value of derivatives. We have delivered compound adjusted eps
growth of 16% over the past five years, and compound dividend growth
of 26% over the same period. Compound adjusted eps growth since
2004/5 is 17%. We have illustrated the Group’s performance in these
measures over the past five years on page 1.
Our non-financial KPIs are the net promoter scores we receive from our
customers and the carbon intensity of the Group’s business. The Group’s
net promoter score received from its customers during the year was 77.
This has increased by 27% over the past four years, when the Group started
to use this measure of customer satisfaction. We believe this overall score
compares very favourably with other consumer facing businesses.
The Group has reduced its carbon intensity (our carbon emissions
divided by our average occupied space) by 52% over the past five
years. This has been achieved through investment in renewable
technology, roof mounted solar photo-voltaic systems, and LED lighting
across the Group’s portfolio.
Operational and Marketing Review
Overview
We now have a portfolio of 73 open and trading Big Yellow stores, with
a further six development sites and two extension opportunities. The
current maximum lettable area of the 73 stores is 4.6 million sq ft.
When fully built out the portfolio will provide approximately
5.0 million sq ft of flexible storage space.
In addition we part-own and manage 19 Armadillo stores which are
principally located in northern towns and cities, and operate from a
platform of 0.8 million sq ft.
Access to capital and bank facilities has improved in the last few years,
however this is mainly for larger well-capitalised groups. Growth in new
store openings over the last six years has averaged 1% to 2% of total
capacity per annum, down significantly from the previous decade.
Additionally, in our core markets in London and the South East, very high
land values driven by competing uses such as residential, is making the
creation of new supply very difficult for all operators. We believe that we
are in a relatively strong position given the strength of our balance sheet
and our proven property development expertise, together with our ability
to access funding to exploit the right opportunity.
18
FOR UNPROMPTED BRAND
AWARENESS, OUR RECALL
ACROSS THE UK AS A
WHOLE IS MORE THAN
SEVEN TIMES THAT OF OUR
NEAREST COMPETITOR.
Operations
The Big Yellow store model is well established. The “typical” store has
60,000 sq ft of net lettable storage area and takes some three to five
years to achieve 80% plus occupancy. The average room size occupied
in the portfolio is currently 68 sq ft, a slight increase from 67 sq ft last
year. The store is open seven days a week and is initially run by three
staff, with a part time member of staff added once the store occupancy
justifies the need for the extra administrative and sales workload.
The drive to improve store operating standards and consistency across
the portfolio remains a key focus for the Group. Excellent customer
service is at the heart of our business objectives, as a satisfied
customer is our best marketing tool. We measure customer service
standards through a programme of mystery shopping and online
customer reviews, which are externally managed. Over the year, we
have achieved an average net promoter score of 77, which we believe
compares favourably to other consumer facing businesses.
We have a team of nine area managers in place who have on average
worked for Big Yellow for twelve years. They develop and support the
stores to drive the growth of the business.
The store bonus structure rewards occupancy performance, sales
growth and cost control through quarterly targets based on occupancy
and store profitability, including the contribution from ancillary sales
of insurance and packing materials. Information on bonus build up is
circulated monthly and stores are consulted in preparing their own
targets and budgets each quarter, leading to improved visibility, a
better understanding of sales lines and control of operating costs.
We believe that as a consumer-facing branded business it is paramount
to maintain the quality of our estate and customer offering. We
therefore continue to invest in preventative maintenance, store
cleaning and the repair and replacement of essential equipment, such
as lifts and gates. The ongoing annual expenditure is approximately
£35,000 per store, which is included within cost of sales. This excludes
our rolling programme of store makeovers, which typically take place
every five years, at a cost of approximately £20,000 per store. Over
the last five years we have invested £11 million in the upkeep and
maintenance of our stores, all of which has been expensed in the
income statement.
Demand
Awareness of self storage and the market generally will continue to grow
as people use the product for the first time and with continued marketing
from all industry players. We are seeing improving levels of referral and
repeat use.
Of our occupied space today, 15% is occupied by customers who are longer
stay lifestyle users decluttering into small rooms as an extension to their
accommodation; 50% are using it for less than 12 months as a result of
an event in their life, which could be inheritance, moving, carrying out
work; and the balance of 35% are businesses, typically SMEs.
Of the customers moving into our stores in the last year, surveys
undertaken indicate approximately 43% are house move related, split
broadly equally across those renting storage space whilst moving
within the rental sector and those moving within the owner occupied
sector. During the year 11% of our customers who moved in took
storage space as a spare room for decluttering and approximately 34%
of our customers used the product because some event has occurred
in their lives generating the need for storage; they may be moving
abroad for a job, have inherited possessions, are getting married or
divorced, are students who need storage during the holidays, or
homeowners developing into their lofts or basements. The balance of
12% of our move-ins during the year came from businesses.
Our business customers range across a number of industry types, such
as retailers, e-tailers, professional service companies, hospitality
companies and importers/exporters. These businesses store stock,
documents, equipment, or promotional materials all requiring a
convenient flexible solution to their storage, either to get started or to free
up more expensive space.
There is a growing trend towards self-employment and smaller
business start-ups in the UK, dynamics which are positive for self
storage. Additionally, businesses in the UK are increasingly seeking
more flexible lease arrangements for their office and storage space.
The deindustrialisation of big cities also points to a structural growth
in demand for storage for businesses.
Business customers typically stay longer than domestic customers,
and also on average occupy larger rooms. Whilst only representing 12%
of new customers during the year, businesses represent 20% of our
overall customer numbers, occupying 35% of the space in our stores
at 31 March 2017, domestic customers occupy 65%. The average room
size occupied by business customers is 121 sq ft, compared to 54 sq ft
for domestic customers. This compares with the 2017 SSA UK Annual
Survey result for the industry as a whole which had 58% of space
occupied by domestic customers and 42% of space by businesses. We
would expect to have a higher proportion of domestic customers given
our focus on London and other large metropolitan cities.
19
Strategic Report (continued)
Our Strategy and Business Model (continued)
We have a dedicated national accounts team for business customers
who wish to occupy space in multiple stores. These accounts are billed
and managed centrally. We have four full time members of staff
working on growing and managing our national account customers.
The national accounts team can arrange storage at short notice at any
location for our customers. In smaller towns where we do not have
representation, we have negotiated sub-contract arrangements with
other operators who meet certain operating standards.
Marketing and ecommerce
Our marketing strategy focuses on driving enquiries and customer
satisfaction through our digital platforms.
For the last eleven years, we have commissioned a YouGov survey to
help us monitor our brand awareness. In our most recent survey,
conducted in April 2017, we used a statistically robust sample size of
1,043 respondents in London and 2,028 for the rest of the UK. The
survey has shown our prompted awareness to be at 74% in London,
two and half times higher than our nearest competitor and 41% for the
rest of the UK, nearly three times higher than our nearest competitor.
For unprompted brand awareness, our recall in London is 47%, nearly six
times higher than our nearest competitor and for the rest of the UK it is
21%, more than eight times higher than our nearest competitor. Across
the UK as a whole it is seven times higher than our nearest competitor.
These surveys continue to prove we are the UK’s brand leader in self
storage (source: YouGov, April 2017). The UK Self Storage Association has
also conducted a brand awareness survey with similar results.
Online
The Big Yellow website, whether accessed by desktop, tablet or
smartphone, delivers the largest share of our prospects, accounting
for 87% of all sales leads across the year ended 31 March 2017.
Telephone is the first point of contact for 9% of our prospects and walk-
in enquiries, where we have had no previous contact with a prospect,
represent 4%.
We have the largest online market share of web visits to self storage
company websites in the UK. Across the year ended 31 March 2017, our
online market share of web visits ranged from 31% to 38%. Our nearest
competitor ranged from 16% to 21% online market share for the same
period (source: Connexity Hitwise 36 largest UK self storage operators).
We monitor and improve the website user journeys on an ongoing
basis. We are committed to making the experience as easy, intuitive
and informative as possible for our customers. Both the mobile specific
website, which itself accounted for 42% of our web visits in the year
and our desktop site are designed with helpful and time saving online
tools such as check-in online, online FAQs, video store tours and online
chat. These all help the customer to make an informed choice about
their self storage requirements. We have also relaunched “Box Shop”,
our online store for boxes and packing materials which also now
includes a Click and Collect service for customers to conveniently pick
up their orders in store.
Online customer reviews
Consistent with our strategy of putting the customer at the heart of our
business, our online customer reviews generate real-time feedback from
customers as well as providing positive word of mouth referral to our web
visitors. Through our ‘Big Impressions’ customer feedback programme,
we ask our new customers to rate our product and service and with the
users’ permission, we then publish these independent reviews on the
website. There are currently over 15,000 reviews published.
The Big Impressions programme also generates customer feedback on
their experience when they move out of a Big Yellow store and also
from those prospects who decided not to store with us. This
programme reinforces best practice of customer service at our stores
where customer reviews and mystery shop results are transparently
accessible at all levels.
We also gain real-time insight from customers who submit reviews to
Trustpilot, the well-known third party customer review site. These
reviews are currently averaging 9.5 out of 10. We also regularly
monitor Google reviews and mentions of Big Yellow within the social
mediums of Twitter, online forums and blogs. We use this insight to
continually improve our service offering.
Driving online traffic
Search engines are the most important acquisition tool for us,
accounting for the majority of traffic to our website. We continue to
invest in search engine optimisation (“SEO”) techniques both on and
off the site. This helps us to maintain our high positions for the most
popular and most searched for terms such as “storage” and “self
storage” in the organic listings on Google.
The sponsored search listings remain the largest source of paid for
traffic and we ensure our prominence in these listings is balanced with
effective landing pages to maximise site conversion.
20
WE HAVE THE LARGEST
ONLINE MARKET SHARE
OF WEB VISITS TO SELF
STORAGE COMPANY
WEBSITES IN THE UK.
21
Efficiencies in online spend are continuing into the year ending
31 March 2018, ensuring the return on investment is maximised from
all of our different online traffic sources. Online marketing budgets
will continue to remain fluid and be directed towards the media with
the best return on investment.
Social media
Social media continues to be complementary to our existing marketing
channels. Our activity is most focussed on Twitter, not only monitoring
and answering queries regarding self storage, but also posting our own
creative tweets, tips and advice. The Big Yellow YouTube channel is used
to showcase our stores to web prospects through a video store tour.
We use both domestic and business versions to help prospects
experience the quality of the product without the need for them to visit
the store in person. Our online blog is updated regularly with tips and
advice for homeowners and businesses, as well as summaries of our
charitable and CSR initiatives.
PR
We have been developing regional PR stories throughout the year to
help raise the awareness of Big Yellow and the benefits of self storage
across the UK. We have been highlighting newsworthy stories of
charitable endeavours from Big Yellow staff or the support we provide
to the local charities through offering free storage.
Budget
During the year the Group spent approximately £4.2 million on
marketing (4% of total store revenue). We have increased the budget
for the year ahead to £4.5 million with a focus on delivering more
prospects to our stores from our digital channels.
Cyber security
The Group receives specialist advice and consultancy in respect of cyber
security and we have dedicated in-house monitoring. We regularly review
our security systems and we limit the retention of customer data to the
minimum requirement.
During the year we have continued to invest in digital security. Some
of the changes include more frequent penetration testing of internet
facing systems, adding components such as anti-ransomware as well
as the maintenance replacement of components (such as firewalls)
to the latest technology and specification. Policies and procedures are
under regular review and benchmarked against industry best practice
by our consultants. These policies also include defend, detect and
response policies. We have also instigated a new working group to
ensure our compliance with the new EU General Data Protection
Regulation (“GDPR”) which comes into effect on 25 May 2018.
Strategic Report (continued)
Portfolio Summary – Big Yellow Stores
2017 2016
Mature(1) Established
Developing
Established
Mature
Total
Developing
Number of stores
64
6
3
73
62
6
3
Total
71
At 31 March:
Total capacity (sq ft)
Occupied space (sq ft)
Percentage occupied
Net rent per sq ft
For the year:
REVPAF(2)
Average occupancy
Average annual rent psf
Self storage income
Other storage related income(3)
Ancillary store rental income
Total store revenue
Direct store operating
costs (excluding depreciation)
Short and long leasehold rent(4)
Store EBITDA(5)
Store EBITDA margin
Deemed cost
To 31 March 2017
Capex to complete
Total
3,955,000
3,111,000
78.7%
£26.32
406,000
315,000
77.6%
£24.50
190,000
125,000
65.8%
£22.40
4,551,000
3,551,000
78.0%
£26.03
3,868,000
2,988,000
77.2%
£26.12
406,000
290,000
71.4%
£24.35
190,000
85,000
44.7%
£22.54
4,464,000
3,363,000
75.3%
£25.90
£24.23
78.3%
£26.43
£000
81,712
13,543
412
95,667
(27,929)
(2,126)
65,612
68.6%
£m
477.2
–
477.2
£21.82
74.4%
£24.83
£14.67
56.3%
£22.33
£23.62
77.1%
£26.16
£23.30
76.4%
£25.92
£19.76
68.0%
£24.58
£11.57
45.4%
£22.07
£000
6,786
1,154
84
8,024
(2,508)
–
5,516
68.7%
£000
1,452
217
9
1,678
(986)
–
692
41.2%
£000
7,499
1,259
102
8,860
(2,510)
–
6,350
71.7%
£m
80.9
–
80.9
£000
2,389
387
12
2,788
(1,278)
–
1,510
54.2%
£m
34.2
0.2
34.4
£000
£000
76,662
13,197
261
90,120
(26,592)
(1,893)
61,635
68.4%
91,600
15,189
526
107,315
(31,717)
(2,126)
73,472
68.5%
£m
592.3
0.2
592.5
£22.59
74.7%
£25.73
£000
84,900
14,568
354
99,822
(30,086)
(1,893)
67,843
68.0%
(1) The mature stores have been open for more than six years at 1 April 2016. The established stores have been open for between three and six years at 1 April 2016 and the
developing stores have been open for fewer three years at 1 April 2016. The Group acquired two stores during the year in Nine Elms and Twickenham. These are shown within
mature stores as they have been open for more than six years. Like-for-like measures presented within this statement exclude these two stores.
(2) Total store revenue divided by the average maximum lettable area in the year.
(3) Packing materials, insurance and other storage related fees.
(4) Rent for seven mature short leasehold properties accounted for as investment properties and finance leases under IFRS with total self storage capacity of 420,000 sq ft, and a
long leasehold lease-up store with a capacity of 64,000 sq ft. The EBITDA margin for the 57 freehold mature stores is 70.5%, and 49.8% for the seven leasehold mature stores.
(5) Store earnings before interest, tax, depreciation and amortisation. See the financial review for a reconciliation of Store EBITDA to gross profit.
22
Our Stores
Our Portfolio
Unrivalled in the UK
AN UNRIVALLED PORTFOLIO
OF STORES ACROSS
LONDON, THE SOUTH EAST
AND OTHER LARGE
METROPOLITAN CITIES.
Twickenham 2, April 2016
MLA – 22,000 sq ft
Nine Elms, April 2016
MLA – 65,000 sq ft
Cambridge, January 2016
MLA – 60,000 sq ft
Enfield, April 2015
MLA – 60,000 sq ft
Chester, February 2015
MLA – 69,000 sq ft
Oxford 2, July 2014
MLA – 35,000 sq ft
Gypsy Corner, April 2014
MLA – 70,000 sq ft
Chiswick, April 2012
MLA – 75,000 sq ft
New Cross, February 2012
MLA – 62,000 sq ft
Stockport, September 2011
MLA – 65,000 sq ft
Eltham, April 2011
MLA – 70,000 sq ft
Camberley, January 2011
MLA – 68,000 sq ft
High Wycombe, June 2010
MLA – 60,000 sq ft
23
Our Stores (continued)
Reading, December 2009
MLA – 62,000 sq ft
Sheffield Bramall Lane,
September 2009 MLA – 60,000 sq ft
Poole, August 2009
MLA – 55,000 sq ft
Nottingham, August 2009
MLA – 67,000 sq ft
Edinburgh, July 2009
MLA – 63,000 sq ft
Twickenham, May 2009
MLA – 73,000 sq ft
Liverpool, March 2009
MLA – 60,000 sq ft
Bromley, March 2009
MLA – 71,000 sq ft
Birmingham, February 2009
MLA – 60,000 sq ft
Sheen, December 2008
MLA – 64,000 sq ft
Sheffield Hillsborough,
October 2008 MLA – 60,000 sq ft
Kennington, May 2008
MLA – 66,000 sq ft
Merton, March 2008
MLA – 70,000 sq ft
Fulham, March 2008
MLA – 139,000 sq ft
Balham, March 2008
MLA – 60,000 sq ft
Barking, November 2007
MLA – 64,000 sq ft
Ealing Southall, November 2007
MLA – 57,000 sq ft
Sutton, July 2007
MLA – 70,000 sq ft
Gloucester, December 2006
MLA – 50,000 sq ft
Edmonton, October 2006
MLA – 75,000 sq ft
24
Kingston, August 2006
MLA – 62,000 sq ft
Bristol Ashton Gate, July 2006
MLA – 61,000 sq ft
Finchley East, May 2006
MLA – 54,000 sq ft
Tunbridge Wells, April 2006
MLA – 57,000 sq ft
Bristol Central, March 2006
MLA – 64,000 sq ft
North Kensington,
December 2005 MLA – 51,000 sq ft
Leeds, July 2005
MLA – 76,000 sq ft
Beckenham, May 2005
MLA – 71,000 sq ft
Tolworth, November 2004
MLA – 56,000 sq ft
Watford, August 2004
MLA – 64,000 sq ft
Swindon, April 2004
MLA – 53,000 sq ft
Orpington, December 2003
MLA – 64,000 sq ft
Byfleet, November 2003
MLA – 48,000 sq ft
Chelmsford, April 2003
MLA – 54 ,000 sq ft
Finchley North, March 2003
MLA – 62,000 sq ft
West Norwood, January 2003
MLA – 57,000 sq ft
Colchester, December 2002
MLA – 54,000 sq ft
Bow, November 2002
MLA – 132,000 sq ft
Brighton, October 2002
MLA – 59,000 sq ft
Guildford, June 2002
MLA – 55,000 sq ft
25
Our Stores (continued)
New Malden, May 2002
MLA – 81,000 sq ft
Hounslow, December 2001
MLA – 54,000 sq ft
Battersea, December 2001
MLA – 34,000 sq ft
Ilford, November 2001
MLA – 58,000 sq ft
Cardiff, October 2001
MLA – 74,000 sq ft
Portsmouth, October 2001
MLA – 61,000 sq ft
Norwich, September 2001
MLA – 47,000 sq ft
Dagenham, July 2001
MLA – 51,000 sq ft
Wandsworth, April 2001
MLA – 47,000 sq ft
Luton, March 2001
MLA – 41,000 sq ft
Southend, March 2001
MLA – 57,000 sq ft
Staples Corner, March 2001
MLA – 112,000 sq ft
Romford, November 2000
MLA – 70,000 sq ft
Milton Keynes, September 2000
MLA – 61,000 sq ft
Cheltenham, April 2000
MLA – 50,000 sq ft
Slough, February 2000
MLA – 67,000 sq ft
Hanger Lane, October 1999
MLA – 66,000 sq ft
Oxford, August 1999
MLA – 33,000 sq ft
Croydon, July 1999
MLA – 80,000 sq ft
Richmond, May 1999
MLA – 35,000 sq ft
26
Strategic Report (continued)
Portfolio Summary – Armadillo Stores
2017
Number of stores(1) 16
At 31 March:
Total capacity (sq ft) 738,000
Occupied space (sq ft) 551,000
Percentage occupied 74.7%
Net rent per sq ft £16.51
For the year:
REVPAF £14.31
Average occupancy 73.3%
Average annual rent psf £16.36
£000
Self storage income 8,781
Other storage related income 1,659
Ancillary store rental income 43
Total store revenue 10,483
Direct store operating costs (excluding depreciation) (4,222)
Leasehold rent (411)
Store EBITDA(2) 5,850
Store EBITDA margin 55.8%
2016
14
673,000
477,000
70.9%
£15.59
£13.33
70.7%
£15.64
£000
7,428
1,531
9
8,968
(3,681)
(411)
4,876
54.4%
Cumulative capital expenditure £m
To 31 March 2017 51.0
To complete 0.5
Total capital expenditure 51.5
(1) Armadillo acquired two stores in April 2016 in Canterbury and West Molesey.
(2) Store earnings before interest, tax, depreciation, amortisation, and management fees charged by Big Yellow to the Armadillo portfolios (see note 26).
P
O
R
T
F
O
L
I
O
S
U
M
M
A
R
Y
27
Strategic Report (continued)
Store Performance
The table below shows the quarterly move-in and move-out activity over the year:
Total move-ins Total move-ins Total move-outs Total move-outs
Year ended Year ended Year ended Year ended
Store move-ins 31 March 2017 31 March 2016 % 31 March 2017 31 March 2016 %
April to June 19,509 20,112 (3) 15,625 15,595 0
July to September 20,702 21,763 (5) 22,239 22,898 (3)
October to December 15,409 16,643 (7) 17,679 18,600 (5)
January to March 16,095 16,920 (5) 14,468 15,450 (6)
Total 71,715 75,438 (5) 70,011 72,543 (3)
In the quarter to June, leading up to the referendum, we saw a modest
year on year reduction in move-in activity of 3%. However, in the six
months following the referendum, year on year move-ins were down
on average 6% across the business with a fall in London of 8% and a fall
of 5% in the regions. Since November, we also saw a further reduction
in year on year move outs, with less churn in the business, resulting
in a loss in occupancy for the December quarter in line with the
previous year. Like-for-like revenue growth for the third quarter was
5%, a slower rate of growth than in the first half of the year, impacted
by the loss of occupancy in the quarter being more front-ended coupled
with slower average rate growth. In the fourth quarter, move-in activity
began to stabilise and for March and April move-ins were up on the
comparative months last year.
In all Big Yellow stores, the occupancy growth in the current year was
188,000 sq ft, against an increase of 185,000 sq ft in the prior year.
The current year figure includes 76,000 sq ft of occupancy acquired
with Nine Elms and Twickenham 2; the net occupancy growth in the
year was therefore 112,000 sq ft.
Quarterly net occupancy
April to June
July to September
October to December
January to March
Total
We had a solid quarter to June with an increase in occupancy of 110,000
sq ft, slightly down on the prior year, partially because of some activity
being front-ended into March 2016 as a result of the stamp duty changes,
coupled with uncertainty in the run-up to the referendum. The second
quarter peaked in August and then many of our students and short term
house movers vacate in September and October, leading to a net loss in
occupied rooms and sq ft occupancy. In the final quarter we have seen
a return to growth in net occupied rooms and increased occupancy in
the stores by 115,000 sq ft.
Since the year end occupancy has grown by 54,000 sq ft to date
(2016: quarter to date gain of 7,000 sq ft). As of 22 May 2017, our
occupancy across the portfolio is 79.2%.
Store capacity
Sq ft occupied per store at 31 March 2017
% occupancy
Revenue per store (£000)
EBITDA per store (£000)
EBITDA margin
Net sq ft
Year ended
31 March 2017
Net sq ft Net move-ins Net move-ins
Year ended Year ended Year ended
31 March 2016 31 March 2017 31 March 2016
110,000
24,000
(137,000)
115,000
146,000 3,884 4,460
54,000 (1,537) (1,183)
(138,000) (2,350) (1,998)
123,000 1,547 1,420
112,000
185,000 1,544 2,699
The 64 mature stores are 78.7% occupied compared to 77.2% at the
same time last year. The 6 established stores have grown in occupancy
from 71.4% to 77.6%. The three developing stores added 40,000 sq ft
of occupancy in the year to reach closing occupancy of 65.8%. Overall
store occupancy has increased in the year from 75.3% to 78.0%. On a
like-for-like basis, closing occupancy was 78.1%, an increase of 2.8
percentage points.
All of the stores open at the year end are trading profitably at the
EBITDA level. The table below shows the average key metrics across
the store portfolio for the year ended 31 March 2017:
Mature
stores
61,800
48,600
78.7%
1,495
1,025
68.6%
Established Developing All
stores stores stores
67,700 63,300 62,300
52,500 41,700 48,650
77.6% 65.8% 78.0%
1,477 929 1,470
1,058 503 1,006
71.7% 54.2% 68.5%
28
Pricing and rental yield
We have continued our sales promotion offer throughout the year of
“50% off for up to your first 8 weeks storage”. We also use our Price
Match if the competitors’ product is comparable. Pricing is dynamically
generated and takes into account room availability and local competition.
Armadillo Self Storage
The Group has a 20% investment in Armadillo Self Storage, with the
balance of 80% held by an Australian consortium. During the year,
Armadillo acquired two stores from Lock and Leave, in Canterbury and
West Molesey, with a combined capacity of 65,000 sq ft.
In April 2017 we acquired a further three stores into the Armadillo
platform in Exeter, Plymouth and Torquay, for £4.75 million. This takes
the Armadillo platform to 19 stores and 830,000 sq ft of MLA. As with
the other existing store acquisitions, the intention will be to upgrade
and reconfigure the stores through additional investment to drive cash
flow growth. In the year to 31 March 2017, £1.3 million of capital
expenditure has been invested in the Armadillo stores.
Armadillo is a lower-frills brand, with largely freehold conversions of
existing buildings. They are located in towns where we would not typically
locate a Big Yellow, and have an average capacity of 44,000 sq ft (lower
than the 62,000 sq ft average for Big Yellow stores). Armadillo provides
a number of operational advantages to the Group, such as a wider
platform to sell to national accounts, more opportunities for staff
promotion, and more efficient use of the Company’s marketing and
central overhead costs. The Group continues to look for opportunities
to add to the Armadillo platform.
Development pipeline
We have commenced construction on our Guildford Central store, which
we anticipate opening in March 2018 and on the extension to our existing
store in Wandsworth, which we anticipate completing in April 2018.
We own a further six development sites for which planning is to be
negotiated, including an existing store where planning is being sought
to extend and redevelop. The status of the Group’s development
pipeline is summarised in the table overleaf.
In the year ended 31 March 2017, the average growth in the net achieved
rent per sq ft was 1.7% compared to 2.5% in the prior year. We remain
focussed on achieving our next occupancy target of 85% across the
portfolio, and to that end we took the decision to be more aggressive in
our promotions over the winter months, resulting in a slight reduction in
average rate over the second half of the year. This is now embedded in the
business, with rate having stabilised, and as occupancy grows from this
level we would expect to see a return to like-for-like rate growth.
For stores at a higher level of occupancy, our pricing model reduces
promotions and increases asking prices where individual units are in
scarce supply. This lowering of promotions, coupled with price increases
to existing and new customers, leads to an increase in achieved net rents.
Rental growth can also be driven through sub-dividing larger rooms into
smaller rooms, which yield a higher net rent per sq ft.
The table below shows the growth in net rent per sq ft for the portfolio
over the period (the table below excludes Cambridge which opened in
January 2016 and Nine Elms and Twickenham 2, which were acquired
in April 2016).
Net rent
per sq ft
Average occupancy Number growth over
in the year of stores the year
0 to 75% 22 (1.0%)
75 to 80% 20 1.7%
80 to 85% 20 2.0%
Above 85% 8 2.1%
Lock and Leave acquisition
In April 2016, we acquired the Lock and Leave portfolio. Big Yellow
acquired two stores in London, at Nine Elms (65,000 sq ft MLA
freehold) and Twickenham (22,000 sq ft MLA, 19 years unexpired
leasehold), for £13.5 million and £1.1 million respectively, totalling
£14.6 million. The Nine Elms store sits neatly between our strong
performing Kennington and Battersea stores, and our aim will be to
drive revenue and cash flow through yield management. The
Twickenham store is adjacent to our existing highly occupied freehold
73,000 sq ft store. The freehold stores in Canterbury (30,000 sq ft MLA)
and West Molesey (35,000 sq ft MLA) were acquired by Armadillo
for £6.4 million, and again we expect to drive operational performance
from these stores under our management.
29
Strategic Report (continued)
Store Performance (continued)
Site
Location
Status
Guildford
Prime location in centre of Guildford on
Woodbridge Meadows
Wandsworth,
London
Extension to existing
47,000 sq ft store
Construction commenced, store
due to open in March 2018, cost to
complete of £4.4 million.
Construction commenced, extension
due to open in April 2018, cost to
complete of £4.2 million.
Anticipated capacity
56,000 sq ft
Additional 25,000 sq ft
Manchester
Prime location on Water Street in
central Manchester
Planning application to be submitted
in June 2017.
60,000 to 65,000 sq ft
Camberwell,
London
Located in prominent location on
Southampton Way
Planning application refused. Appeal
submitted with a decision due by
December 2017.
55,000 to 60,000 sq ft
Prominent location on York Way
Planning application currently being
prepared to be submitted this year.
100,000 to 110,000 sq ft
Kings Cross,
London
Battersea,
London
Prominent location on junction
of Lombard Road and York Road
(South Circular)
Newcastle
Prime location on Scotswood Road
Wapping,
London
Prominent location on The Highway
Potential redevelopment to increase
size of existing 34,000 sq ft Big Yellow
store. Redevelopment of adjoining
retail into a mixed use led residential
scheme. Ongoing detailed planning
discussions with the Borough Council.
Negotiations ongoing with existing
long leasehold tenant to obtain
vacant possession.
Site recently acquired. We will convert
part into self storage and collect income
from the other tenancies with a view to
achieving a more comprehensive self
storage centre in the longer term.
Up to an additional
40,000 sq ft
50,000 to 60,000 sq ft
50,000 sq ft to 90,000 sq ft
The capital expenditure committed for the financial year ended 31 March 2018 is approximately £20 million, which includes the acquisition of
Wapping, the construction of Guildford Central and the extension to Wandsworth.
The Group manages the construction and fit-out of its stores in-house, as we believe it provides both better control and quality, and we have an
excellent record of building stores on time and within budget.
30
Financial Review
Delivering Results
Financial results
Revenue
Total revenue for the year was £109.1 million, an increase of £7.7 million
(8%) from £101.4 million in the prior year. Like-for-like revenue for the
year was £107.3 million, an increase of 6% from the prior year
(2016: £101.4 million). Like-for-like revenue excludes Nine Elms and
Twickenham 2 which were acquired in April 2016.
Other sales (included within the above), comprising the selling of
packing materials, insurance and storage related charges, represented
16.6% of storage income for the year (2016: 17.2%) and generated
revenue of £15.2 million for the year, up 4% from £14.6 million in 2016.
LIKE-FOR-LIKE REVENUE
FOR THE YEAR WAS
£107.3 MILLION,
AN INCREASE OF
6% FROM THE
PRIOR YEAR.
The other revenue earned by the Group is management fee income,
largely from the Armadillo Partnerships, and tenant income on sites
where we have not started development.
Operating costs
Cost of sales is principally comprised of the direct store operating costs,
including store staff salaries, utilities, business rates, insurance, a full
allocation of the central marketing budget and repairs and maintenance.
The breakdown of the portfolio’s operating costs compared to the prior
year is shown in the table below
Year ended Year ended % of store
31 March 2017 31 March 2016 operating
Category £000 £000 % increase costs in 2017
Cost of sales (insurance and packing materials) 2,391 2,149 11% 7%
Staff costs 8,572 8,001 7% 27%
General & Admin 1,196 1,183 1% 4%
Utilities 1,470 1,406 5% 5%
Property Rates 10,044 9,544 5% 32%
Marketing 4,152 3,865 7% 13%
Repairs / Maintenance 2,539 2,240 13% 8%
Insurance 893 992 (10%) 3%
Computer Costs 443 440 1% 1%
Irrecoverable VAT 17 266 (94%) 0%
Total per portfolio summary 31,717 30,086 5%
Following the recent rating review, we have calculated that the impact
on the Group’s rates bill for the year ending 31 March 2018 will increase
by 9% (£0.9 million). We expect rates to increase beyond next year in
line with inflation. The improvement in our VAT position mentioned above
will serve to mitigate part of this increased cost.
Operating costs per the portfolio summary have increased by £1.6 million.
£0.9 million of this increase is due to new stores acquired in the year at
Nine Elms and Twickenham 2, coupled with the full year impact of
Cambridge. The remaining increase of £0.7 million (representing a 2.4%
increase on the prior year on a like-for-like basis) is due to an increased
investment in marketing and increases in property rates and repairs and
maintenance, in part offset by the saving in VAT (see below).
During the year, the Group agreed a new Partial Exemption Special
Method with HMRC. This method increases the Group’s VAT recoverability
from 89.0% to 99.4%. This saves approximately £0.3 million per annum
on the Group’s operating costs, in addition to reducing the irrecoverable
VAT on construction projects. There is a credit in respect of prior years of
£0.3 million from the date the application was submitted, which is an
item in the adjustments to the Group’s recurring profit for the year. This
credit is split between cost of sales (£278,000) and administrative
expenses (£50,000).
31
Strategic Report (continued)
Financial Review (continued)
The table below reconciles store operating costs per the portfolio summary to cost of sales in the income statement:
Year ended Year ended
31 March 2017 31 March 2016
£000 £000
Direct store operating costs per portfolio summary (excluding rent) 31,717 30,086
Rent included in cost of sales (total rent payable is included in portfolio summary) 1,196 967
Depreciation charged to cost of sales 489 478
Prior period VAT recovery (278) –
Head office operational management costs charged to cost of sales 798 672
Other (e.g. void costs of development sites) 153 429
Cost of sales per income statement 34,075 32,632
Store EBITDA
Store EBITDA for the year included in the income statement was £73.5 million, an increase of £5.6 million (8%) from £67.8 million for the year
ended 31 March 2016 (see Portfolio Summary). The overall EBITDA margin for all Big Yellow stores during the year was 68.5% an improvement
from 68.0% last year. The table below reconciles Store EBITDA per the portfolio summary to gross profit in the income statement.
Year ended 31 March 2017 Year ended 31 March 2016
£000 £000
Store EBITDA Gross profit Store EBITDA Gross profit
per portfolio Reconciling per income per portfolio Reconciling per income
summary items statement summary items statement
Revenue(1) 107,315 1,755 109,070 99,822 1,560 101,382
Cost of sales(2) (31,717) (2,358) (34,075) (30,086) (2,546) (32,632)
Rent(3) (2,126) 2,126 – (1,893) 1,893 –
73,472 1,523 74,995 67,843 907 68,750
(1) See note 3, reconciling items include management fees and non-storage income.
(2) See reconciliation in cost of sales section above.
(3) The rent shown above is the cost associated with leasehold stores, only part of which is recognised within gross profit in line with finance lease accounting
principles. The amount included in gross profit is shown in the reconciling items in cost of sales.
Administrative expenses
Administrative expenses in the income statement have increased by
£0.8 million compared to the prior year. £0.3 million of the increase is
as a result of the write-off of the Group’s acquisition costs for the
purchase of Lock and Leave, which has been adjusted from recurring
profit. The remaining difference is due principally to an increased
investment in IT infrastructure and inflationary increases. In addition,
it is important to note that of our total £9.7 million administrative
expense for the year, £2.3 million relates to the non-cash share based
payments charge.
Interest expense on bank borrowings
The gross bank interest expense for the year was £11.0 million, a
reduction of £0.2 million from the prior year. This reflects slightly higher
average debt levels offset by a reduction in the Group’s average cost of
debt. The average cost of borrowing during the year was 3.3% compared
to 3.6% in the prior year.
Capitalised interest decreased by £0.1 million from the prior year. The
interest capitalised in the year is principally on our Guildford Central store
and the Wandsworth extension, but interest was only capitalised on these
developments in the final quarter. During the prior year, interest was
capitalised on our Cambridge development for the majority of the year.
Total interest payable has decreased in the statement of comprehensive
income from £11.9 million to £11.8 million due to the reduction in
interest payable, partly offset by the reduction in capitalised interest.
32
Taxation
There is a tax charge in the current year of £0.3 million. This compares
to a charge in the prior year of £0.2 million. The current year tax charge
reflects an increase in profits in our residual business, in part offset
by deductions allowed for tax purposes from the exercise of share
options.
Dividends
The Board is recommending the payment of a final dividend of
14.1 pence per share in addition to the interim dividend of 13.5 pence,
giving a total dividend for the year of 27.6 pence, an increase of 11%
from the prior year.
REIT regulatory requirements determine the level of Property Income
Dividend (“PID”) payable by the Group. On the basis of the full year
distributable reserves for PID purposes, a PID of 24.0 pence per share
is payable (31 March 2016: 18.1 pence). The balance of the total annual
dividend represents an ordinary dividend declared at the discretion of
the Board, in line with our policy to distribute 80% of our adjusted
earnings per share in each reporting period. The PID for the year to
31 March 2017 accounts for 87% of the total dividend, up from 73% in
the prior year.
The table below summarises the declared dividend for the year:
31 March 31 March
Dividend (pence per share) 2017 2016
Interim dividend – PID 13.5p 12.1p
– discretionary nil p nil p
– total 13.5p 12.1p
Interim dividend – PID 10.5p 6.0p
– discretionary 3.6p 6.8p
– total 14.1p 12.8p
Interim dividend – PID 24.0p 18.1p
– discretionary 3.6p 6.8p
– total 27.6p 24.9p
Subject to approval by shareholders at the Annual General Meeting to
be held on 20 July 2017, the final dividend will be paid on 27 July 2017.
The ex-div date is 22 June 2017 and the record date is 23 June 2017.
Profit before tax
The Group made a profit before tax in the year of £99.8 million,
compared to a profit of £112.2 million in the prior year.
After adjusting for the gain on the revaluation of investment properties
and other matters shown in the table below, the Group made an
adjusted profit before tax in the year of £54.6 million, up 11% from
£49.0 million in 2016.
2017 2016
Profit before tax analysis £m £m
Profit before tax 99.8 112.2
Gain on revaluation of
investment properties (43.7) (58.0)
Movement in fair value on interest
rate derivatives (0.7) –
Acquisition costs written off 0.3 –
Prior year VAT recovery (0.3) –
Gains on surplus land – (4.8)
Share of non-recurring gains and
losses in associates (0.8) (0.4)
Adjusted profit before tax 54.6 49.0
The movement in the adjusted profit before tax from the prior year is
illustrated in the table below:
Adjusted profit before tax –
year ended 31 March 2016
Increase in gross profit
Decrease in net interest payable
Increase in administrative expenses
Increase in share of recurring profit of associates
Decrease in capitalised interest
Adjusted profit before tax –
year ended 31 March 2017
£m
49.0
5.9
0.2
(0.5)
0.1
(0.1)
54.6
Basic earnings per share for the year was 63.6p (2016: 71.9p) and
fully diluted earnings per share was 63.1p (2016: 71.6p). Diluted EPRA
earnings per share based on adjusted profit after tax was up 11% to
34.5p (2016: 31.1p) (see note 12).
REIT status
The Group converted to a Real Estate Investment Trust (“REIT”) in
January 2007. Since then the Group has benefited from a zero tax rate
on the Group’s qualifying self storage earnings. The Group only pays
tax on the profits attributable to our residual business, comprising
primarily of the sale of packing materials and insurance, and fees
earned from the management of the Armadillo portfolio.
REIT status gives the Group exemption from UK corporation tax on
profits and gains from its qualifying portfolio of UK stores. Revaluation
gains on developments and our existing open stores will be exempt
from corporation tax on capital gains, provided certain criteria are met.
The Group has a rigorous internal system in place for monitoring compliance
with criteria set out in the REIT regulations. On a monthly basis, a report on
compliance with these criteria is issued to the Executive. To date, the Group
has complied with all REIT regulations, including forward looking tests.
33
Balance sheet
Property
The Group’s 73 stores and 5 stores under development at 31 March
2017, which are classified as investment properties, have been valued
individually by Cushman & Wakefield (“C&W”) and this has resulted in
an investment property asset value of £1,190.5 million, comprising
£1,110.9 million (93%) for the 66 freehold (including two long
leaseholds) open stores, £43.5 million (4%) for the seven short
leasehold open stores and £36.1 million (3%) for the five freehold
investment properties under construction.
Value at Revaluation
Analysis of property portfolio 31 March 2017 movement in year
Investment property £1,154.4m £44.4m
Investment property
under construction £36.1m (£0.7m)
Total £1,190.5m £43.7m
Investment property
The valuations in the current year have grown from the prior year, with
a revaluation surplus of £44.4 million arising on the open Big Yellow
stores. Of this increase £19.5 million is due to an improvement in the
cap rate used in the valuations. £24.9 million of the increase in value
is due to the growth in cash flow from the assets and the operating
assumptions adopted in the valuations. The growth in cash flow has
been partly offset by the increase in property rates mentioned above.
The valuation is based on an average occupancy over the 10 year cash
flow period of 82.1% across the whole portfolio.
Strategic Report (continued)
Financial Review (continued)
Cash flow growth
The Group is strongly cash generative and draws down from its longer
term committed facilities as required to meet obligations. The Group’s
cash flow from operating activities for the year was £56.0 million, an
increase of 1% from £55.5 million in the prior year. There are distortive
working capital items in both years, and therefore the summary cash
flow below sets out the free cash flow pre working capital movements,
which shows an increase of 10% to £58.3 million in the year.
Year ended Year ended
31 March 2017 31 March 2016
£000 £000
Cash generated from operations
pre working capital movements 69,574 64,023
Net finance costs (11,235) (10,748)
Free cash flow pre working
capital movements 58,339 53,275
Working capital movements (2,365) 2,192
Cash flow from operating
activities 55,974 55,467
Capital expenditure (20,577) (44,575)
Finance lease payments (1,196) (967)
Asset sales 300 7,835
Receipt from Capital Goods Scheme 2,917 184
Dividends received from associates 396 270
Cash flow after investing
activities 37,814 18,214
Ordinary dividends (41,158) (36,443)
Issue of share capital 286 378
(Decrease)/increase in borrowings (7,243) 26,864
Net cash (outflow)/inflow (10,301) 9,013
Opening cash and cash equivalents 17,207 8,194
Closing cash and cash equivalents 6,906 17,207
Closing debt (304,955) (312,198)
Closing net debt (298,049) (294,991)
Net debt is defined as gross bank borrowings less cash and cash
equivalents.
In the year capital expenditure outflows were £20.6 million, down from
£44.6 million in the prior year. The capital expenditure during the year
principally relates to the acquisition of Nine Elms and Twickenham 2
from Lock and Leave. We have commenced construction in our
Guildford Central store and the extension to our existing Wandsworth
store and also continued to invest in fitting out further Phase 2 space
at our existing stores.
The cash flow after investing activities was a net inflow of £37.8 million
in the year, compared to an inflow of £18.2 million in 2016.
34
The valuation is based on an average occupancy over the 10 year cash flow period of 82.1% across the whole portfolio. The table below provides
further analysis of the valuations:
Mature Mature Established Developing
Leasehold Freehold Freehold Freehold Total
Number of stores 7 57 6 3 73
MLA capacity (sq ft) 420,000 3,535,000 406,000 190,000 4,551,000
Valuation at 31 March 2017 £43.5m £957.6m £108.1m £45.2m £1,154.4m
Value per sq ft £104 £271 £266 £238 £254
Occupancy at 31 March 2017 81.6% 78.3% 77.6% 65.8% 78.0%
Stabilised occupancy assumed 84.4% 82.2% 85.6% 85.0% 82.8%
Net initial yield pre-admin expenses 12.2% 6.3% 6.1% 4.8% 6.5%
Stabilised yield assuming no rental growth 12.9% 7.0% 7.0% 7.4% 7.2%
Receivables
At 31 March 2017 we have a receivable of £6.8 million in respect of
payments due back to the Group under the Capital Goods Scheme as a
consequence of the introduction of VAT on self storage from 1 October 2012.
The debtor has been discounted in accordance with International
Accounting Standards to the net present value using the Group’s
average cost of debt, with £0.3 million of the discount being unwound
through interest receivable in the period. The gross value of the debtor
before discounting is £7.2 million.
The Group received £2.9 million under the Scheme in the year.
Movement in adjusted NAV
The year on year movement in adjusted net asset value (see note 12)
is illustrated in the table below:
Equity EPRA
shareholders adjusted
funds NAV per share
Movement in adjusted NAV £m (pence)
1 April 2016 899.0 569.1
Adjusted profit 54.6 34.6
Equity dividends paid (41.1) (26.1)
Revaluation movements
(including share of associate) 44.5 28.2
Movement in purchaser’s cost adjustment 4.0 2.5
Other movements (e.g. share schemes) 2.4 (0.7)
31 March 2017 963.4 607.6
The initial yield pre-administration expenses assuming no rental growth
6.5% (2016: 6.5%) rising to a stabilised yield of 7.2% (2016: 7.2%). The
stores are assumed to grow to stabilised occupancy in 22 months on
average. Note 14 contains more detail on the assumptions underpinning
the valuations.
There is little transaction activity in the prime self storage market,
although there has been some activity for secondary assets. As
referenced in note 14, C&W’s valuation report further confirms that the
properties have been valued individually but that if the portfolio was
to be sold as a single lot or in selected groups of properties, the total value
could differ significantly. C&W state that in current market conditions
they are of the view that there could be a material portfolio premium.
Investment property under construction
The investment property under construction valuation has increased
by £2.1 million in the year. Capital expenditure accounts for £2.8 million
of this increase, notably on Guildford Central. This has been partly offset
by a revaluation deficit of £0.7 million across a couple of the
development sites, where our projected construction costs have
increased due to a change in the planned schemes.
Purchaser’s cost adjustment
As in prior years, we have instructed an alternative valuation on our
assets using a purchaser’s cost assumption of 2.75% (see note 14 for
further details) to be used in the calculation of our adjusted diluted net
asset value. This Red Book valuation on the basis of 2.75% purchaser’s
costs, results in a higher property valuation at 31 March 2017 of
£1,258.5 million (£68.0 million higher than the value recorded in the
financial statements). With the share of uplift on the revaluation of the
Armadillo stores (£0.5 million), this translates to 43.2 pence per share.
The revised valuation translates into an adjusted net asset value per
share of 607.6 pence (2016: 569.1 pence) after the dilutive effect of
outstanding share options.
Surplus land
During the year, the Group sold its remaining piece of land for
£0.3 million, which represented its book value. In the prior year, the
Group sold its surplus site in Central Manchester for £8 million. This
represented a profit over book value, after selling costs, of £4.8 million,
which included the release of a provision previously made against
the land of £2.3 million.
35
Strategic Report (continued)
Financial Review (continued)
Borrowings
We focus on improving our cash flows allied to a relatively conservative debt structure secured principally against the freehold estate. For the year we
had healthy Group interest cover of 6.2 times (2016: 6.0 times) based on free cash flow pre working capital movements against interest paid.
Our financing policy is to fund our current needs through a mix of debt, equity and cash flow to allow us to selectively build out our development
pipeline and achieve our strategic growth objectives, which we believe improves returns for shareholders. We aim to ensure that there are
sufficient medium-term facilities in place to finance our committed development programme, secured against the freehold portfolio, with debt
serviced by our strong operational cash flows. Treasury continues to be closely monitored and its policy approved by the Board. We maintain a
keen watch on medium and long-term rates and the Group’s policy in respect of interest rates is to maintain a balance between flexibility and
hedging of interest rate risk. The table below summarises the Group’s debt facilities at 31 March 2017.
Debt Expiry Facility Drawn Average cost
Aviva Loan April 2027 £90 million £90 million 4.9%
M&G loan June 2022 £70 million £70 million 3.7%
Bank loan (Lloyds & HSBC) October 2021 £190 million £145 million 1.8%
Total Average term 5.9 years £350 million £305 million 3.2%
The Group’s loan with Aviva is at a fixed rate and amortises to £60 million
from the original loan of £100 million over the course of its 15 year term.
The M&G loan is 50% fixed and 50% floating and is for a bullet seven
year term.
During the year the Group extended the term of its bank loan from
October 2020 to October 2021. The revolving element of the bank loan
pays a margin of 125 bps and the term debt 150 bps. The Group has an
option to increase the amount of the revolving loan facility by a further
£60 million during the course of the loan’s term.
During the year, the Group took out an interest rate derivative of £30 million
expiring in October 2021 at a pre-margin cost of 0.4%, replacing an expiring
swap which was at a pre-margin cost of 2.8%. The bank loan requires 45%
of all drawn debt to be hedged or fixed.
The Group was in compliance with its banking covenants at 31 March 2017.
The Group currently has a net debt to gross property assets ratio of 25%,
and a net debt to adjusted net assets ratio of 31%.
At 31 March 2017, the fair value on the Group’s interest rate derivatives
was a liability of £3.0 million. The Group does not hedge account its
interest rate derivatives. As recommended by EPRA (European Public
Real Estate Association), the fair value movements are eliminated from
adjusted profit before tax, diluted EPRA earnings per share, and
adjusted net assets per share.
Cash deposits are only placed with approved financial institutions in
accordance with the Group’s Treasury policy.
Share capital
The share capital of the Company totalled £15.8 million at 31 March
2017 (2016: £15.7 million), consisting of 157,882,867 ordinary shares
of 10p each (2016: 157,369,287 shares).
Shares issued for the exercise of options during the year amounted to
0.5 million at an average exercise price of 738p (2016: 0.7 million
shares at an average price of 704p).
The Group holds 1.1 million shares within an Employee Benefit Trust
(“EBT”). These shares are shown as a debit in reserves and are not
included in calculating net asset value per share.
2017 2016
No. No.
Opening shares 157,369,287 158,055,735
Cancellation of treasury shares – (1,418,750)
Shares issued for the exercise
of options 513,580 732,302
Closing shares in issue 157,882,867 157,369,287
Shares held in EBT (1,122,907) (1,122,907)
Closing shares for NAV purposes 156,759,960 156,246,380
74.9 million shares were traded in the market during the year ended
31 March 2017 (2016: 56.9 million). The average mid-market price of
shares traded during the year was 735.8p with a high of 886.5p and a
low of 635.0p.
Investment in Armadillo
The Group has a 20% investment in Armadillo Storage Holding Company
Limited and a 20% investment in Armadillo Storage Holding Company
2 Limited. In the consolidated accounts of Big Yellow Group PLC, our
investments in the vehicles are treated as associates using the equity
accounting method.
The occupancy of the Armadillo stores at 31 March 2017 was 551,000
sq ft, against a total capacity of 738,000 sq ft, with growth of 74,000
sq ft over the year, including 50,000 sq ft acquired with Canterbury
and West Molesey in April 2016. The stores’ occupancy at 31 March
2017 was 74.7% (31 March 2016: 70.9%). The net rent achieved at
31 March 2017 by the Armadillo stores is £16.51 per sq ft, an increase
of 6% from the same time last year. The 6% increase is in part due to
the acquisition of Canterbury and West Molesey which increased
the average net rent of the portfolio. Revenue increased by 17% to
£10.5 million for the year to 31 March 2017 (2016: £9.0 million); the
like-for-like increase in revenue was 4%.
The Armadillo Partnerships made a combined operating profit of
£5.2 million in the year, of which Big Yellow’s share is £1.0 million. After
net interest costs, the revaluation of investment properties (valued
by Jones Lang Lasalle), deferred tax on the revaluation surplus and
interest rate derivatives, the profit for the year was £7.2 million, of
which the Group’s share was £1.4 million.
36
Big Yellow has a five year management contract in place in each Partnership. For the year to 31 March 2017, the Group earned management fees
of £0.8 million. The Group’s share of the declared dividend for the year is £0.4 million, representing an 11% yield on our investment for
the year.
Principal risks and uncertainties
The Directors have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business
model, future performance, solvency or liquidity.
The section below details the principal risks and uncertainties that are considered to have the most material impact on the Group’s strategy and
objectives. These key risks are monitored on an ongoing basis by the Executive Directors, and considered fully by the Board in its annual risk review.
Risk and impact
Mitigation
Self storage is a relatively immature market in the UK compared to other self storage markets
such as the United States and Australia, and we believe has further opportunity for growth.
The sector have slowed significantly over the past few years.
Our performance during the downturn was relatively resilient, although not immune.
We believe that the resilience of our performance is due to a combination of factors including:
> a prime portfolio of freehold properties;
> a focus on London and the South East and other large metropolitan cities, which have
proved more resilient during the downturn and where the drivers in the self storage
market are at their strongest and the barriers to competition are at their highest;
> the strength of operational and sales management;
> continuing innovation to deliver the highest levels of customer service;
> the UK’s leading self storage brand, with high public awareness and online strength; and
> strong cash flow generation and high operating margins, from a secure
capital structure.
We have a large current storage customer base of approximately 52,500 spread across
the portfolio of stores and many thousands more who have used Big Yellow over the
years. In any month, customers move in and out at the margin resulting in changes in
occupancy. This is a seasonal business and typically we see growth over the spring and
the summer months, with the seasonally weaker periods being the winter months.
Our management has significant experience in the property industry generated over many
years and in particular in acquiring property on main roads in high profile locations and
obtaining planning consents. We do take planning risk where necessary, although the
availability of land, and competition for it makes acquiring new sites challenging.
Our in-house development team and our professional advisers have significant experience
in obtaining planning consents for self storage centres.
We manage the construction of our properties very tightly. The building of each site is
handled through a design and build contract, with the fit out project managed in-house
using an established professional team of external advisers and sub-contractors who have
worked with us for many years to our Big Yellow specification. We carried out an external
benchmarking of our construction costs and tendering programme in the prior year, which
had satisfactory results.
The valuations are carried out by independent, qualified external valuers who value a
significant proportion of the UK self storage industry.
The portfolio is diverse with approximately 52,500 customers currently using our stores
for a wide variety of reasons.
There is significant headroom on our loan to value banking covenants.
Self storage
market risk
There is a risk to the
business that the self
storage market does not
grow in line with our
projections, and that
economic growth in the
UK is below expectations,
which could result in
falling demand and a
loss of income.
Property risk
There is a risk that we will
be unable to acquire new
development sites which
meet management’s criteria.
This would impact on our
ability to grow the overall
store platform.
Valuation risk
The valuations of the Group’s
investment properties
may fall due to external
pressures or the impact
of performance.
Lack of transactional
evidence in the self storage
sector leads to more
subjective valuations.
Change during
the year and outlook
The UK economy is projected to
grow at approximately 1.6% in 2017,
and is ahead of the level of output
last achieved in 2007 before the
global financial crisis. Self storage
proved relatively resilient through
the crisis, with our revenue and
earnings increasing over the last
seven years. As the economy has
recovered in the past few years,
the market risk has fallen in line
with increasing occupancy.
There is increased macroeconomic
uncertainty associated with the
UK’s future exit from the EU, and
this has resulted in a broad range
of opinions on the UK’s future
economic performance.
The Group’s like-for-like occupancy
has increased by 2.8 percentage
points in the year from 75.3 %
to 78.1%.
The planning process remains
difficult and to achieve a
planning consent can take
anything from eighteen months
to three years. Local planning
policy is increasingly favouring
residential development over
other uses, and we don’t expect
this to change given the
shortage of housing in the UK.
The revaluation surplus on the
Group’s open stores investment
properties was £44.4 million in
the year (an uplift of 4%).
There has been an increase
in transactional evidence in
the year, with the Group’s
acquisition of Lock and Leave,
and the acquisition of the Big
Box portfolio by Storage Mart.
37
Strategic Report (continued)
Financial Review (continued)
Risk and impact
Mitigation
Treasury risk
The Group may face
increased costs from
adverse interest rate
movements.
Our financing policy is to fund our current needs through a mix of debt, equity and cash
flow to allow us to selectively build out the remaining development pipeline and achieve
our strategic growth objectives, which we believe improve returns for shareholders.
We have made it clear that we believe optimal leverage for a business such as ours should
be LTV in the range 20% to 30% and this informs our management of treasury risk.
We aim to ensure that there are sufficient medium-term facilities in place to finance our
committed development programme, secured against the freehold portfolio, with debt
serviced by our strong operational cash flows.
We have a fixed rate loan in place from Aviva Commercial Finance Limited, with 10 years
remaining. In the prior year, the Group drew down on a seven year £70 million loan from
M&G Investments, which is 50% fixed and 50% floating. For our bank debt, we borrow at
floating rates of interest and use swaps to hedge our interest rate exposure. Our policy
is to have at least 45% of our total borrowings fixed, with the balance floating.
At 31 March 2017 51% of the Group’s total borrowings were fixed or subject to interest
rate derivatives. The Group reviews its current and forecast projections of cash flow,
borrowing and interest cover as part of its monthly management accounts. In addition,
an analysis of the impact of significant transactions is carried out regularly, as well as
a sensitivity analysis assuming movements in interest rates and store occupancy
on gearing and interest cover. This sensitivity testing underpins the viability
statement below.
The Group regularly monitors its counterparty risk. The Group monitors compliance with
its banking covenants closely. During the year it complied with all its covenants, and is
forecast to do so for the foreseeable future.
Change during
the year and outlook
Interest rates are forecast
to remain low for the foreseeable
future, although following the
reduction in the sterling
exchange rates following the
Brexit referendum, UK inflation
is forecast to increase in 2017.
Debt providers currently remain
supportive to companies with a
strong capital structure. That said,
a weaker macro-economic
performance by the UK economy
could adversely affect liquidity
and pricing.
The Group’s interest cover ratio for
the year to 31 March 2017 was
6.2 times, comfortably ahead of
our internal target of 5 times.
We regularly monitor proposed and actual changes in legislation with the help of our
professional advisers, through direct liaison with HMRC, and through trade bodies to
understand and, if possible, mitigate or benefit from their impact.
HMRC have designated the Group as having a low-risk tax status, and we hold regular
meetings with them. We carry out detailed planning ahead of any future regulatory
and tax changes using our expert advisors.
The Group has internal monitoring procedures in place to ensure that the appropriate
REIT rules and legislation are complied with. To date all REIT regulations have been
complied with, including projected tests.
In addition to the regulatory and
tax uncertainty linked to the UK’s
future exit from the EU, the Group
has experienced an increase in
cost of £0.9 million for the year
ending March 2018 following
the Government’s review of
business rates.
We have developed a professional, lively and enjoyable working environment and
believe our success stems from attracting and retaining the right people. We encourage
all our staff to build on their skills through appropriate training and regular performance
reviews. We believe in an accessible and open culture and everyone at all levels is
encouraged to review and challenge accepted norms, so as to contribute to the
performance of the Group.
We were ranked 80th in the Sunday Times Best 100 Companies to Work For survey
in February 2016.
During the year, an employee
consultancy conducted an
engagement survey of our
employees. The survey results
showed very high levels of
employee engagement (90%),
which was an increase from
86% from our previous survey
in 2014.
Tax and
regulatory risk
The Group is exposed to
changes in the tax regime
affecting the cost of
corporation tax, VAT and
Stamp Duty Land Tax
(“SDLT”), for example
the imposition of VAT
on self storage from
1 October 2012.
The UK’s future exit from
the EU creates uncertainty
over the future UK tax and
regulatory environment.
The Group is exposed to
potential tax penalties or
loss of its REIT status by
failing to comply with
the REIT legislation.
Human
resources risk
Our people are key to our
success and as such we are
exposed to a risk of high
staff turnover, and a risk of
the loss of key personnel.
With unemployment
falling, and a risk of higher
staff turnover, difficulty
in finding the right
employees increases.
38
Risk and impact
Mitigation
Security risk
The Group is exposed to
the risk of the damage or
loss of store due to
vandalism, fire, or natural
incidents such as flooding.
This may also cause
reputational damage.
Cyber risk
High profile cyber-attacks
and data breaches are a
regular staple in today’s
news. The results of any
breach may result in
reputational damage, or
customer compensation,
causing a loss of market
share and income.
The safety and security of our customers, their belongings, and stores remains a key priority.
To achieve this we invest in state of the art access control systems, individual room alarms,
digital CCTV systems, intruder and fire alarm systems and the remote monitoring of all our
stores outside of our trading hours. We are the only major operator in the UK self storage
industry that has every room in every store individually alarmed.
We have implemented customer security procedures in line with advice from the Police
and continue to work with the regulatory authorities on issues of security, reviewing our
operational procedures regularly. The importance of security and the need for vigilance
is communicated to all store staff and reinforced through training and routine
operational procedures.
The Group receives specialist advice and consultancy in respect of cyber security and we
have dedicated in-house monitoring and regular review of our security systems, we also
limit the retention of customer data to the minimum requirement.
Policies and procedures are under regular review and benchmarked against industry
best practice by our consultants. These also include defend, detect and response policies.
We have also instigated a new working group for compliance with the new EU General
Data Protection Regulation (“GDPR”) which comes into effect on 25 May 2018.
Change during the year
and outlook
We have continued to run courses
for all our staff to enhance the
awareness and effectiveness of our
procedures in relation to security.
We regularly review and implement
improvements to our security
processes and procedures.
We don’t consider the risk to
have increased any faster for the
Group than anyone else; however
we consider that the threats in the
entire digital landscape do continue
to increase.
During the year we have continued
to invest in digital security. Some
of the changes include more
frequent penetration testing of
internet facing systems, adding
components such as
anti-ransomware as well as the
maintenance replacement of
components such as firewalls
to the latest technology
and specification.
Internal audit
The Group does not have a formal internal audit function because the
Board has concluded that the internal controls systems are sufficient for
the Group at this time. However, the Group employs a Store Compliance
Manager responsible for reviewing store operational and financial
controls. He reports to the Chief Financial Officer, and also meets with the
Audit Committee at least once a year. This role is supported by an
Assistant Store Compliance Manager, enabling additional work and
support to be carried out across the Group’s store portfolio. The Store
Compliance team visit each operational store at least once a year to carry
out a detailed store audit. These audits are unannounced and the Store
Compliance team carry out detailed tests on financial management,
administrative standards, and operational standards within the stores.
Part of the store staff’s bonus is based on the scores they achieve in
these audits. The results of each audit are reviewed by the Chief Financial
Officer, the Financial Controller and the Head of Store Operations.
GOING CONCERN
A review of the Group’s business activities, together with the factors likely
to affect its future development, performance and position are set out in
the Strategic Report. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are shown in the balance sheet,
cash flow statement and accompanying notes in the financial
statements. Further information concerning the Group’s objectives,
policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity risk can be found
in this Report and in the notes to the financial statements.
After reviewing Group and Company cash balances, borrowing facilities,
forecast valuation movements and projected cash flows, the Directors
believe that the Group and Company have adequate resources to continue
operations for the foreseeable future. In reaching this conclusion the
Directors have had regard to the Group’s operating plan and budget for
the year ending 31 March 2018 and projections contained in the longer-
term business plan which covers the period to March 2021. The Directors
have carefully considered the Group’s trading performance and cash
flows as a result of the uncertain global economic environment and the
other principal risks to the Group’s performance and are satisfied with
the Group’s positioning. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
VIABILITY STATEMENT
The Directors have assessed the Group’s viability over a four year period to
March 2021. This period is selected based on the Group’s long term strategic
plan to give greater certainty over the forecasting assumptions used.
In making their assessment, the Directors took account of the Group’s
current financial position, including committed capital expenditure.
The Directors also assessed the potential financial impact of the
various risks and uncertainties set out in the report above on the
Group’s cash flows, REIT compliance and financial covenants and the
likely effectiveness of the mitigating options detailed. The Directors
have assumed that funding for the business in the form of equity, bank
and insurance debt will be available in all plausible market conditions.
Based on this assessment the Directors have a reasonable expectation
that the Company and the Group will be able to continue operating and
meeting all their liabilities as they fall due to March 2021.
39
Strategic Report (continued)
Corporate Social Responsibility Report
BIG YELLOW RECOGNISES THAT A HIGH LEVEL
OF CORPORATE SOCIAL RESPONSIBILITY
(“CSR”), LINKED TO CLEAR COMMERCIAL
OBJECTIVES, WILL CREATE A MORE
SUSTAINABLE BUSINESS AND INCREASE
SHAREHOLDER AND CUSTOMER VALUE.
1.0 INTRODUCTION
Big Yellow recognises that a high level of Corporate Social Responsibility (“CSR”), linked to clear commercial objectives, will create a more
sustainable business and increase shareholder and customer value. Our CSR Policy covers all of our operations, as a self storage provider,
a property developer, an employer and a participant in our local communities. Big Yellow seeks to meet the demand for self storage from
businesses and private individuals by providing the storage space for their commercial and/or domestic needs, whilst aiding local
employment creation and contributing to local community regeneration.
2.0 CSR EXECUTIVE SUMMARY
Big Yellow is pleased to deliver another year of steady Corporate Responsibility progress across the Group, full details of which can be found
in this CSR Report. Our focus over the last year has delivered the following benefits:
Employee Engagement
We completed an externally managed survey in May 2016 investigating (amongst other factors) our working life, personal development,
teamwork, communication and management style in detail. We received a 90% response rate to the survey – and overall a 90% ‘Engagement
Indicator’ from our employees.
Support for Local Charities
We have continued to recognise and support 14 different charities selected by both our stores and head office teams. Our people undertook
a variety of activities for these (and other) charities and raised £74,000 of funds during the year (up 66% on 2016). At the same time Big
Yellow and Armadillo donated the equivalent of over £940,000 of free storage in the last year (up 25% on 2016).
The Big Yellow Foundation
We registered a new charitable Foundation in January 2017. We are currently piloting the use of the Foundation to raise money from both
Big Yellow and its customers. Following the conclusion of this pilot, we will launch it to the whole business in autumn 2017. The aim of the
Foundation will be to use the funds to support charities working to bring people back into society from disadvantaged backgrounds. We will
also aim to provide them with employment opportunities at Big Yellow and Armadillo.
Health & Safety Record
This has continued at a high standard at both our stores and on our construction projects. Measured by both the number of recorded Minor
Injuries and by RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulation), our high standards of Health & Safety have
protected our customers, staff, contractors and other visitors.
LED Lighting Investment
We have continued to invest in providing LED lighting both inside our stores, and more recently for all of our external lighting. During the
next 12 months we will continue to deliver the benefit of LED lighting to all of our external lighting sources – and to both Big Yellow & Armadillo
stores that still require internal lighting improvement after recent acquisition.
Greenhouse Gas (‘GHG’) Emission
Our store electricity use in absolute terms is now 31.3% lower than our peak use year of 2011. Our ability to continue to reduce our absolute
electrical use will diminish, as we complete our LED investment program and as we open and acquire new stores. However, our relative GHG
Emission (per sq metre occupied) is down 63.8% from our peak year of 2011 and we aim to continue with this relative reduction.
CSR Performance Benchmarking
42% of our stores have EPCs (Energy Performance Certificates) the majority of which are rated A or B. We will also continue to participate
in our sustainable benchmarking initiatives with EPRA, FTSE4Good, the Carbon Disclosure Project (“CDP”) and the Global Real Estate
Sustainability Benchmark (“GRESB”).
40
WE RECOGNISE THE
IMPORTANCE OF SUPPORTING
LOCAL COMMUNITY PROJECTS
AND CHARITIES THROUGH
FUNDRAISING AND DONATING
FREE STORAGE SPACE.
DURING THE YEAR WE DONATED
SPACE IN OUR STORES WORTH
APPROXIMATELY £940,000
TO CHARITIES.
2.1 OUR PEOPLE
Our people are at the heart of Big Yellow’s business, bringing our values to life through the service that they provide and through the energy
and passion that drives us to become an ever more responsible and sustainable business.
We recognise that recruiting, retaining and motivating individuals with talent and integrity, and ensuring that we listen to our people and
maximise their skills and performance, is key to the continued success of our Company.
We encourage a culture of partnership within the business and believe in staff participating in corporate performance through benefits such
as customer feedback rewards, bonus schemes and share incentives. We recognise and reward the exceptional performance, achievements
and ideas of our people through a Points Recognition Scheme, and allocated £53,000 of points for the year ended 31 March 2017.
Wellbeing and Support
We aim to promote employee wellbeing through a range of flexible working options, which include flexitime, staggered working hours, home
working and sabbaticals. We provide Childcare Vouchers along with a comprehensive range of medical support and advice through our
private healthcare scheme and occupational health providers. We have arranged corporate gym membership on a national basis, as well as
a “Cycle to Work” scheme and Employee Assistance Programmes.
Communication and Engagement
We continue to recognise the importance of communication and consultation with an annual Spring Conference, regular formal and informal
meetings, quarterly newsletters and weekly operational updates. In addition, the Directors and Senior Management spend a significant
amount of time in the stores and are always accessible to employees, at all levels.
In May 2016, we ran our second externally managed Employee Engagement Survey which was structured to look at key areas including
our day to day working life, learning and development, team work, communication, management style and leadership. The survey achieved
a response rate of 90% (also 90% in 2014) and an Engagement Indicator of 90% (86% in 2014). Management are now using the feedback
from the Engagement Survey as the focus of their attention to further improve the working environment.
Training and Development
We continue to promote the development of our staff through ongoing training and regular performance appraisals. For the year ended
31 March 2017 a total of 1,267 days training were provided across the Company, comprising of both sales and operational training, and
personal and management development.
We have continued to develop our internal training resources to include e-learning on security, a Health & Safety library, 17 operational and
sales based workshops and 10 centrally run courses covering induction, management training and personal development.
During the year, six team members completed our personal development programme designed specifically for Assistant Store Managers,
with three of those people having subsequently been promoted to the position of Store Manager. 13 Assistant Store Managers are currently
participating in the new programme, to prepare them for their future progression within the Company as opportunities arise.
During the year a new development programme for our Sales Advisors was also introduced, the aim of which is to prepare them for promotion
to the position of Assistant Manager. The programme will run on an annual basis with 14 Sales Advisors currently participating.
As a result of our other internal training and development programmes, 53% of our store based staff have been promoted to their current
position from a more junior position.
41
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
2.1 OUR PEOPLE (continued)
Community
We continue to recognise the importance of contributing to the local community and we encourage our people to develop close links with
charities, schools and other institutions, both locally and nationally, to help to build more economically sustainable environments.
For the year ended 31 March 2017, we recognised and supported 14 different charities which were selected by our store and head office
teams. Our people undertook a variety of activities for both these – and other charities – with donations also being made by the Company.
Throughout the year a total of £74,000 was raised for our recognised charities and examples of our fundraising activities and charitable
giving have included:
The Phyllis Tuckwell Hospice, Surrey
Team members have participated in various charity runs and other events to raise a total of £4,000 across the year for this Surrey-based hospice.
“Phyllis Tuckwell Hospice Care is delighted to have worked with Big Yellow Self Storage over the last year and would like to thank the
Directors and staff for their fundraising. Their events have been creative and good fun, from sweepstakes, raffles and walks to a
Halloween chilli lunch. They have also supported us through sponsorship, taking the yellow colour stand at our annual Dash of Colour
Run. Without the help of corporate partners like Big Yellow we simply couldn’t provide the compassionate end of life care that we do.”
Vanessa Beech, Corporate Partnerships Fundraiser, Phyllis Tuckwell Hospice Care
British Heart Foundation
Nine of our stores have acted as “Donation Stations” for the British Heart Foundation, raising a total of just under £20,000 for the year from
collecting bags of unwanted clothes and household goods. The funds raised will support the charity’s pioneering heart research, as well as
the care of people living with heart disease.
Dorothy Stringer School, Brighton
Big Yellow has donated £8,500 as lead sponsor of this Brighton-based school’s planned football tour of South Africa during 2017. 20 students
will be given the opportunity to participate in the tour, during which they will take part in scheduled games, as well as visiting various schools
and township charities to enable them to fully appreciate the culture of the country.
“Two years ago we set out to create a once-in-a-lifetime experience for the current Year 10 football team; a tour to South Africa. It soon
became clear that the trip was going to cost around £50,000 and it was great to receive a donation of £8,500 towards the cost from
Big Yellow. This will enable us to offer the students an eye opening experience, as well as kitting them out in tour attire. We are very
grateful to Big Yellow Self Storage for their support in helping to make this life changing event happen.”
Charlotte Young, Teacher of Physical Education, Dorothy Stringer School
Go Dad Run
Big Yellow has provided sponsorship of £20,000 for the Go Dad Run in June 2016, the aim of which is to raise awareness of, and funds for,
Prostate Cancer UK through a series of 5k and 10k runs in different cities around the UK.
“For a small but growing project like Go Dad Run, the relationship with our sponsors is absolutely crucial and in 2016 we were, once
again, enormously grateful for the wonderful support from Big Yellow Storage. It was the third year of our partnership and we staged
5K and 10K runs in Sunderland, London, Worcester, Cardiff, Bristol and the Isle of Man, where many hundreds of men and boys pulled
their giant Go Dad Run Y-fronts on over their shorts, to take part and raise funds for Prostate Cancer UK - and to raise awareness of
important men's health issues. Our friends and colleagues at Big Yellow Self Storage were essential to helping us to make that happen”.
Colin Jackson, CBE, Founder of Go Dad Run
Southwark Tigers Rugby Club, London
During the last year, Big Yellow has provided sponsorship of £2,500 to this inner city junior rugby club, whose aim is to benefit young people
through the skills learnt in the game of rugby and to make it affordable and attractive to them all.
Caius House, Battersea, London
Caius House is a charity and a youth club based in Battersea, which aims to provide young people within the local community with a safe
place to go to where their skills and talents can be progressed to fulfil their potential. During the last year, Big Yellow has provided the Caius
House football team with sponsorship of £10,000.
42
Free Storage Space
In addition to our fundraising activities, we have also provided charities with free storage space. For the year ended 31 March 2017, the
space occupied by charities in Big Yellow and Armadillo stores was 45,500 sq ft, worth approximately £940,000 per annum at current rents.
Some of the many charities that have benefited from this storage include Cancer Research, Macmillan Cancer Support, the National Childbirth
Trust, the British Heart Foundation and a number of food bank and children’s charities local to our stores.
The Big Yellow Foundation
Big Yellow registered “The Big Yellow Foundation” in January 2017. This Foundation will help highly innovative charities transform the lives
of vulnerable people across the UK. Big Yellow will donate £1 every time a customer moves into one of our stores. We will also ask customers
if they would like to join us in supporting our mission at either the point of move in or move out.
The Foundation, which will be launched formally in autumn 2017, will focus its support on charities that have developed effective approaches
to help the reintegration, training and employment of ex-offenders and of those fleeing persecution, who have been granted asylum by the
UK Government. Together we believe we can help vulnerable people across the UK to build brighter lives. Three initial charities that we are
working with currently, as part of a soft launch, are Bounce Back, Breaking Barriers and the St Giles Trust.
2.2 OUR HEALTH & SAFETY
Big Yellow recognises the importance of maintaining high standards of Health & Safety for our customers, staff, contractors and any visitors
to our stores. The Group’s Health & Safety Committee reviews its Policy, Risk Assessments, performance and records on a quarterly basis.
The Policy covers two distinct areas – our construction activities and our routine store operations.
The Health & Safety Committee discuss and review any issues reported from our regular meetings held at our head office, Maidenhead (our
distribution warehouse), the stores and our construction sites. Our Health & Safety Policy states that all employees have a responsibility
for Health & Safety, but that managers have special responsibilities. The responsibilities of Adrian Lee, Operations Director, are to keep the
Board advised on Health & Safety issues and to ensure compliance with the Policy in respect of Construction (via the Construction Director)
and store operations (via the Facilities Manager and Head of Store Operations).
The Health & Safety Committee minutes are copied to the CEO, the CSR Manager, the Head of Human Resources, the Facilities Manager and
our external Health & Safety consultant. Externally, other interested stakeholders include the Health & Safety Executive (HSE) and Local
Government Authorities.
Our external Health & Safety consultant reviews our Policy and performs audits of our stores on a rolling programme, to ensure the
implementation of the Group’s Health & Safety policies and to ensure compliance with the latest Health & Safety standards. Actions
recommended by our consultant are reviewed by the Health & Safety Committee, and if required are then implemented into the operations
or construction systems. External Health & Safety audits are carried out by our consultants on a regular basis on each construction site
during the construction process.
Our Health & Safety reporting covers all of our stores, our head office, Maidenhead (our distribution warehouse) and our construction sites.
Incidents are recorded for staff, customers, contractors and visitors. The Board receives reports that monitor Health & Safety performance
in all these areas. Annual Store Health & Safety Meetings take place for all stores and Maidenhead. Meeting agendas are provided for all
meetings by the Facilities Team and the minutes are reviewed by Area Managers to raise any issues with our Facilities or Human Resources
Teams, where necessary.
Health & Safety performance and incidents are reported and are displayed in the tables below:
2.2.1 Big Yellow Store Customer, Contractor and Visitor Health and Safety
Store Customer, Contractor and Visitor Health & Safety
Year ended 31 March 2013 2014 2015 2016 2017
Number of customer move-ins 65,807 72,772 75,097 75,438 71,715
Number of minor injuries 34 31 50 58 41+
Number of reportable injuries (RIDDOR)* 3 3 4 4 1+
RIDDOR* per 100,000 staff 4.6 4.1 5.3 5.3 0
+
*
Indicates data reviewed by Deloitte LLP as part of their assurance work. See page 58 for the independent assurance report.
RIDDOR – Reporting of Injuries, Diseases and Dangerous Occurrences.
43
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
2.2.1 Big Yellow Store Customer, Contractor and Visitor Health and Safety (continued)
The number of customer ‘move-ins’ during the last year reduced from 75,438 to 71,715 (a 5.0% reduction) and this has in part contributed
to the reporting of fewer minor injuries from 58 to 41 (down 29%) in 2017. One ‘reportable injury’ to a customer at Finchley North was recorded
during the year. Customer minor injuries were mainly cuts, grazes and strains relating to the handling of their goods. Most of these injuries
and those of ‘visitors’ could have been avoided by personal protective gloves and foot-wear. Visitor injuries were due to cuts from their
containers, vehicles or business equipment.
2.2.2 Big Yellow Staff Health & Safety (Stores & Head Office)
Year ended 31 March 2013 2014 2015 2016 2017
Average number of staff 286 289 300 318 329+
Number of Minor Injuries 15 13 15 10 9+
Number of Reportable Injuries (“RIDDOR”) 3 1 1 1 0+
AIIR* per 100,000 staff 1,049 346 333 314 0+
+
*
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Annual Injury Incident Rate is the number of staff reportable injuries / average number of staff (x100,000).
Nine staff injuries reported as minor injuries were related to hand or arm injuries. There were no “Fatal Injuries, Notices or Prosecutions”
during the year ended 31 March 2017. This year our staff training schedules enabled us to provide customers with Fire Health & Safety Risk
Assessments, where necessary, which raised their awareness of the potential for personal injuries while they used self storage.
Two new stores, at Nine Elms and Twickenham 2, were acquired in the year and our Cambridge store was open for the full financial year.
These changes have increased our average number of staff employed to 329 for the year. Against this increase we have achieved a reduction
in Minor Injuries from 2016. Minor Injuries were mainly cuts, grazes and bruises relating to safety when using stairwells, doors and pallets.
There were no “reportable injuries” for staff in the year, so the Annual Injury Incidence Rate (AIIR) decreased to zero against an average
store staff increase of 3.5%. There were no “Fatal Injuries, Notices or Prosecutions” during the year ended 31 March 2017.
Total minor injuries for staff, customers, contractors and visitors was 50 and were recorded as follows: 34 to customers, nine to staff, six to
visitors and one to a contractor.
2.2.3 Big Yellow Construction ‘Fit Out’ Health & Safety
Construction Fit-out Contractors and Visitor Health & Safety
Year ended 31 March 2013 2014 2015 2016 2017
Number of Total Man Days 610 3,315 3,005 6,560 1,111
Number of Minor Injuries 0 2 1 3 0
Number of Reportable Injuries (RIDDOR) 0 0 0 0 0
There were no ‘Man Days’ worked on construction ‘Fit Out’ projects for new stores in 2017. However, our storage partitioning contractors
recorded 1,111 man days of work for fitting out storage partitioning in our existing stores. No Minor Injuries or Reportable Injuries were
recorded during these works.
Our ground works contractor at the new Guildford Central store was in the ‘early piling phase’ and was assessed by the independent
Considerate Constructors Scheme (“CCS”) in February 2017. This scheme monitors and reports on the Health & Safety management and
environmental aspects of our construction projects. High scores of 7/10 were achieved for ‘Securing everyone’s Safety’ and ‘Care about
Appearance’. Good scores of 6/10 were achieved for ‘Respecting the Community’, ‘Valuing the Workforce’ and ‘Protecting the Environment’.
There were no ‘Fatal Injuries, Notices, or Prosecutions’ during the year ended 31 March 2017.
44
3.0 ENVIRONMENTAL RESPONSIBILITY
Our CSR Policy sets out how we manage the impact of our business on society and the local environment, to control our risks and
manage our opportunities in a sustainable manner. We participated in the FTSE4Good Annual Index Series survey and achieved a “low
environmental impact”. We also use the detail in this CSR Report to participate in other benchmarks, such as the annual Carbon Disclosure
Project (“CDP”) and Global Real Estate Sustainability Benchmark (“GRESB”) to engage with our other Ethical Investors. Notwithstanding this
and in order to maintain an efficient and sustainable business for our stakeholders, we have continued to commit significant resources to
the environmental and social aspects of our storage operations, property portfolio, new store developments and site acquisitions.
In this report we state our energy use and carbon emissions in compliance with the Companies Act and the Climate Change Regulation on
Reporting Greenhouse Gas (“GHG”) Emissions for listed companies. For more details on our applications for the above benchmarks please
go to the ‘Basis of Reporting’ section of the CSR section of our Investor Relations website.
In this report we have provided a summary of our Scope 1 ‘onsite’ gas use, solar electricity generation and refrigerant use, and Scope 2
‘off site’ supplied electricity for our carbon dioxide equivalent (CO2e) emissions. We have used the DEFRA Department Environmental Reporting
Guidelines 2013 Version 1.0 (Standard Set 2016; expiring 30 June 2017) conversion factors for our annual GHG Emission calculations and
reporting. Also we are reporting using the UK Government GHG conversion factors for company reporting (expiring 30 June 2017).
Finally, we also report on our environmental key performance indicators and identify them using the codes from the Global Reporting
Initiative (“GRI”), as applied by the European Public Real Estate Association (“EPRA”) at the request of some of our stakeholders. Annual
‘same store’ portfolio electricity use and carbon emission comparisons are shown. Our materiality threshold for energy use is 5% and for
carbon emissions is >1%. A limited level of assurance for our Scope 1 and 2 energy use and GHG emissions is independently applied. This
assurance is undertaken by Deloitte LLP in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised).
Long Term Electricity Use – 2008 to 2017
190
139.0
140
139.3
136.8
138.5
128.7
127.3
116.9
90
40
96.5
93.8
95.7
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Linear (Electric GWh)
Electric GWh
Between 2008 and 2010 we installed motion sensor lighting in many of our stores and renewable energy initiatives were included in our
new store openings, such as solar panels (on 10 stores); wind turbines (on two stores); and ground source heat pumps (in five stores)
and these achieved both electricity use reduction and sustainable electricity generation across our store portfolio.
From 2010 to 2013 there was an increase in our total electricity use as a result of our new store openings and increases in our customer
occupancy. Customers increase electricity use by more regular activation of our motion sensor lighting and the increased use of electrical
socket supply in our stores. 2011 was our peak year (benchmarking year) for electricity use.
From 2013, our investment in energy efficiency programmes such as internal and external LED re-lamping across the store portfolio and
the installation of larger capacity (50kWp) solar panels (at seven of our stores) reduced our electricity use and increased our own electricity
generation to 2016.
45
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
3.0 ENVIRONMENTAL RESPONSIBILITY (continued)
In the last 12 months our customer occupancy has continued to grow and some stores have required further internal partitioning works
(the fit out of second phases of storage space) which has increased our electricity use. In addition store acquisitions at Nine Elms and
Twickenham 2 have further added to our total electricity use. Electricity use has therefore increased our linear trend and total use in 2017
was 9,568,862 kWh / year. The acquired stores will be re-lamped with energy efficient LED lamps in the future years.
Electricity Use from Peak Energy Year 2011 (GRI Elec-Abs / G4-ENS3)
Year ended 31 March 2013 2014 2015 2016 2017
Electricity Use (kWh)+ 13,153,960 11,688,629 9,643,341 9,376,085 9,568,862
Reductions from 2011 Peak (%) (5.5%) (16.1%) (30.7%) (32.7%) (31.3%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: 2011 was our peak electricity use (13,925,217 kWh).
From 2017, we no longer including Bagshot and Maidenhead in the Group energy totals, and the consumption at these stores is now reported
in a separate table. This approach is explained in the Basis of Reporting.
New Store Acquisitions and ‘Same Store Portfolio’ Electricity Use (2016 v 2017)
Two newly acquired stores in 2017 increased our total electricity use by 99,673 kWh. On an annual ‘same store’ basis, the 2017 total electricity
use would have been 9,469,189+ kWh, without the acquisitions, 32.0% below our peak.
Store Portfolio Electricity Use and Climate Change Levy (“CCL”)
Scope 2 Electricity Use and Climate Change Levy % change
Year ended 31 March 2013 2014 2015 2016 2017 from peak
Electricity Use (kWh)+ 13,153,960 11,688,629 9,643,341 9,376,085 9,568,862 (31.3%)
CCL (£/kWh) 0.00509 0.00524 0.00541 0.00554 0.00559 30.0 %
CCL (£) £66,954 £61,248 £52,171 £51,944 £53,490 (10.7%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for independent assurance report.
Note: 2011 is our peak electricity use (13,925,217 kWh). 2011 Grid electricity cost (excluding VAT) but including CCL (at 0.0043 £ / kWh)
was £59,878.
From 2017, we no longer including Bagshot and Maidenhead in the Group energy totals, and the consumption at these stores is now reported
in a separate table. This approach is explained in the Basis of Reporting.
Our UK network electricity supply provides 94% of our total energy use. We continue to seek reductions in our kWh use, costs and taxes
through investment in our energy efficient technology and from our solar electricity ‘self supply’. Our electricity use has reduced 31.3% since
our peak use year in 2011, notwithstanding which the Climate Change Levy has increased by 30%. The CCL for 2017 (£53,490)
has been reduced by 20.1% from its peak in 2013, due to our investment in our energy efficient internal and external LED re-lamping
programmes. In 2017 there has been an increase of 3% in the CCL due to an increase in the CCL rate and more electricity use, as a result of
growing customer numbers and the acquisition of the two additional stores.
46
Store Portfolio Long Term Solar Electricity Generation (2009 to 2017) (MWh)
400
300
200
100
0
358.3
342.7
314.1
285.8
208.8
93.6
112.9
134.3
40.5
2009
2010
2011
2012
2013
2014
2015
2016
2017
Linear (Solar MWh)
Solar MWh
Our portfolio of stores with roof-mounted solar PV installations generate low carbon electricity that is monitored for performance and receives
financial payments from the energy companies that we export to. There are 17 stores with PV installations and the ‘Feed-in Tariff’ payments
for generation and ‘Deemed Export’ of electricity apply to all these installations.
Solar generation performance in the first quarter of 2017 reduced due to our PV systems at Fulham and Merton requiring inverter replacement
and maintenance, respectively. In June 2016, solar generation also under-performed due to unseasonal cloud cover. In the second and third
quarters of 2017 our Sheen and Bromley solar installations lost generation data communication; these were repaired during annual
maintenance visits and payments then continued to be received.
Renewable Energy Generation, Savings and Materiality
Onsite Solar ‘Self Supply’ Generation
Year ended 31 March 2013 2014 2015 2016 2017
Solar Generation (kWh) 208,807 285,832 314,068 358,279 342,670+
Total Grid Use (kWh) 13,153,960 11,688,629 9,643,341 9,376,085 9,568,862
Total Grid Savings (£)* 74,724 100,468 106,607 115,216 113,652
Solar % of Grid Use (kWh) 1.6% 2.4% 3.3% 3.8% 3.6%
+
*
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Solar Payments from Energy Companies are Feed in Tariff plus Deemed Export kWh payments amounting to £82,812;
Supplied UK Network displaced electricity savings; 342,670 solar kWh x 9p Grid kWh displaced amounting to £30,840.
Note: 2011 is our first significant (107,074 kWh/y) solar electricity ‘Self Supply’ generation.
In total our solar portfolio generated 342,670 kWh in 2017, a reduction of 4.4% compared to the previous year. This was mainly due to
maintenance issues and less sunshine hours in June 2016. Solar electricity generation represents a saving of approximately 9 pence per
kWh for displaced UK network supplied electricity, a saving of £30,840 over the year. The total payments from EDF and Good Energy for
solar generation ‘Feed in Tariff’ and ‘Deemed Export’ payments was £82,812, providing us with a total saving of £113,652 for 2017.
Solar electricity contributed 3.6% of our total supplied store electricity use or 14.2% of the electricity use in the 17 stores with solar PV
systems. Our larger capacity 50 kWh installations (such as the system at Gypsy Corner) generate approximately 40,000 kWh/year. This
can equate to nearly 30% of the stores annual kWh demand. During the first three years of a stores trading (from new build) we can export
more electricity (up to 60% of the electricity generated) back to the Grid. In later years, when customer occupancy rises to store ‘maturity’
(85% occupancy) more solar electricity is used by the store and export to the national network diminishes.
Customer Gas Use in Stores for Flexi Office Heating
GRI Absolute Gas Use Reductions (‘Fuels-Abs’ F4-EN3)
Year ended 31 March 2013 2014 2015 2016 2017
Gas Use (kWh) 716,508 652,181 602,563 592,257 630,463+
Gas Use Reductions from 2012 Peak Use (%) (3.4%) (12.1%) (18.8%) (20.2%) (15.0%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: 2012 is our peak gas use benchmark (742,086 kWh).
47
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
3.0 ENVIRONMENTAL RESPONSIBILITY (continued)
Gas use for the heating of our flexi offices at eight stores reached a peak benchmark in December 2012, due to the coldest winter since our
records began. The increase in gas use in 2017 was 6.5% and is predominantly due to higher flexi office occupancy compared to the previous
two years.
Total Energy Use (Electricity and Gas) and Materiality
Total Electricity and Gas (kWh) Use and Gas Use Materiality (%)
Year ended 31 March 2013 2014 2015 2016 2017
Total Energy Use (kWh) 13,870,468 12,340,810 10,245,904 9,968,342 10,199,325
Total Reductions from 2011 Peak (%) (4.9%) (15.4%) (29.7%) (31.6%) (30.1%)
Gas Materiality % 5.2% 5.3% 5.8% 5.9% 6.2%
Note: 2011 was our peak energy use year (14,581,234 kWh)
In 2017, our combined UK network supplied energy (electricity and gas) reduced by 30.0% from our peak energy use in 2011, mainly due to
electricity efficiency reductions after our LED re-lamping programmes and reduced gas use due to new boiler efficiency and less demand
in the warmer winters since 2012. In 2017 there was a 2.3% increase in energy use due to higher levels of customer occupancy in our stores
and the acquisition of two new stores.
Our gas use ‘materiality’ compared to total gas and electricity use increased to 6.2% in 2017, 1.2% above the materiality threshold level of 5%
for reporting gas data.
UK Network Supplied Energy Intensity (Electricity and Gas)
Energy Intensity per Annual Average Occupancy and per Gross Internal Floor Area (Energy-INT/CRE1) % change
Year ended 31 March 2013 2014 2015 2016 2017 from 2011 peak
Total Energy Use (kWh) 13,870,468 12,340,810 10,245,904 9,968,342 10,199,325 (30.1%)
Annual Average Occupancy (m2) 244,521 263,101 283,732 304,964 325,537 64.5%
kWh/Annual Average Occupancy 56.7 46.9 36.1 32.7 31.3 (57.5%)
Gross Internal Floor Area (m2) 582,872 582,872 605,419 621,050 629,686 15.4%
KWh / GIFA (m2) 23.8 21.2 16.9 16.1 16.2 (39.3%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: 2011 is our Peak Energy Use of 14,581,234 kWh; Annual Average Occupancy was 197,884 m2;
Intensity was 73.7 kWh / occupancy m2; Intensity was 26.7 kWh / m2 of GIFA .
Since 2011 customer occupancy has increased by 64.5% and energy use intensity (per annual average occupancy) has reduced by 57.5%.
Our total store portfolio gross internal floor area (‘GIFA’) increased between 2011 and 2017 by 15.4% through new store openings and store
acquisitions. This has helped us to achieve a 39.3% reduction in kWh use per GIFA from 2011.
Energy (Electricity and Gas) Use / Revenue Intensity (Energy-INT/CRE1) % change
Year ended 31 March 2013 2014 2015 2016 2017 from 2011 peak
Total Energy Use (kWh) 13,870,468 12,340,810 10,245,904 9,968,342 10,199,325 (30.1%)
Revenue (£000) 69,671 72,196 84,276 101,382 109,070 76.3%
kWh / £ Revenue 0.20 0.17 0.12 0.10 0.09 (62.5%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: 2011 is our Peak Energy Use 14,581,234 kWh; Revenue was £61,885,000; kWh / £ Revenue was 0.24;
Group revenue has increased by 76.3% since 2012. Our energy use intensity (kWh per revenue) has reduced by 62.5% in the same time
period. Revenue intensity reduction represents all of the self storage activities and services from our 73 store portfolio. A reduction of 10%
in our energy use by revenue intensity was achieved in 2017, maintaining our annual reductions in intensity since 2011.
48
‘Non-Store’ Portfolio (Head Office and Maidenhead) Energy Use (Electricity) kWh
Head Office and Maidenhead Electricity Use
Year ended 31 March 2012 2013 2014 2015 2016 2017
Head Office (kWh) 115,515 110,829 104,366 98,585 89,078 89,448
Maidenhead (kWh) 15,934 16,133 17,813 16,927 19,182 18,747
Total (kWh) 131,449 126,962 122,179 115,511 108,260 108,195
Reductions* (11.2%) (14.2%) (17.4%) (22.0%) (26.9%) (14.2%)
Annual Reductions (11.2%) (3.4%) (3.8%) (5.5%) (6.3%) (0.1%)
Reductions from Peak year 2011: Head Office GIFA was 524 m2; Energy use was 126,050 kWh;
*
Note: Maidenhead GIFA was 889 m2; Energy use was 21,942 kWh; 2011 Total Portfolio GIFA 1,413 m2; Total energy use was 147,992 kWh.
Our non-store portfolio consists of two business administration centres; our head office at Bagshot, Surrey and our warehouse depot for the
storage and distribution of our packing materials at Maidenhead, Berkshire. They both provide services to the store portfolio. The head office
electricity use is more intense due to higher staff occupancy. Electricity is mainly used for lighting, heating or cooling and computer equipment
in the office areas. The total electricity reductions for both the head office and Maidenhead from the benchmark year 2011 was 14.2%. The
reductions were mainly due to energy efficient LED re-lamping and more efficient air conditioning and IT equipment investment programmes.
Mandatory Greenhouse Gas (GHG) Emissions Statement
The ISAE 3000 Standard provides an evaluation methodology for both the quantitative and qualitative aspects of our carbon management
and our energy use. We report our ‘self storage’ portfolio emissions and the ‘absolute’ emissions that include our ‘non store portfolio’.
Our key carbon emission performance indicators use the GRI and the EPRA codes, at the request of our investors and other stakeholders,
for real estate investment trust (REIT) benchmarking purposes.
We report energy use and carbon emissions in compliance with the Companies Act and Climate Change Regulation on Reporting Greenhouse
Gas (“GHG”) Emissions for listed companies. For more details on our applications for the above benchmarks see the ‘Basis of Reporting’ section
of the CSR section of our Investor Relations website.
In this Report we have provided a summary of our Scope 1 ‘onsite’ heating gas use, solar electricity generation and refrigerant use, and
Scope 2 ‘off site’ UK supplied electricity, for GHG equivalent (CO2e) emissions. We have used the DEFRA DECC Version 1.0 (Standard Set 2016;
expiry on 30 June 2017) conversion factors for our annual emission calculations and reporting.
UK Government GHG Emission Conversion Factors For Company Reporting
Standard Set From 30/06/2016 To 30/06/2017
Scope Fuels Unit Conversion Factors
1 Natural Gas (Gross CV) kWh 0.18400
1 R410A Refrigerant* KgCO2e 2,088
2 Electricity Grid Supply kWh 0.41205
3 Electricity Transmission & Distribution kWh losses 0.03727
3 Commercial Refuse / Waste Disposal kgCO2e 199.0
*
Kyoto Protocol air conditioning Refrigerant ‘top up’ / ‘global warming fugitive emissions’.
Annual ‘same store’ portfolio electricity use and carbon emission comparisons are used. Our materiality threshold for energy use is 5% and for
carbon emissions is > 1 %. A limited level of assurance for our Scope 1 and 2 energy use and GHG emissions is independently applied. This
assurance is undertaken by Deloitte LLP in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised).
49
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
3.0 ENVIRONMENTAL RESPONSIBILITY (continued)
Scope 1 Real Estate Portfolio – Direct GHG Emissions
Eight of our stores provide flexi office services with gas heating for customers.
Scope 1 Flexi Office Stores Gas Heating Emissions (GHG-Dir-Abs) % change
Year ended 31 March 2013 2014 2015 2016 2017 from 2012 peak
Gas Use (kWh) 716,508 652,181 602,563 592,257 630,463 (15.0%)
GHG Emission (tCO2e) 133.0 120.0 111.5 109.2 116.0+ (15.8%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: 2012 is our peak benchmark year for gas use (742,086 kWh) and emissions (137.8 tCO2e).
The financial year 2017 heating gas conversion factor was kWh x 0.18400 (kgCO2e).
From 2012 milder winters have reduced gas use and GHG emissions by 15.8%. In 2017 our GHG emissions have increased by 6.2% due to
increased customer occupancy of our flexi-offices with gas heating.
Scope 1 Refrigerant (R410A) Replacement and GHG Emissions % change
Year ended 31 March 2013 2014 2015 2016 2017 from 2014 peak
Refrigerant Use (Kg) 66.5 112.4 11.9 11.3 32.5* (71.1%)
Emissions (tCO2e) 286.3 354.8 20.6 21.9 67.9+ (80.9%)
+
*
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
The Scope 1 Refrigerant R410A, 2017 Kg:tCO2e conversion factor was 2,088;
Note: 2014 was our peak year for refrigerant replacement and related GHG emissions.
This year seven stores had refrigerant ‘top up’ totalling 32.5 kg. Refrigerant use has reduced from our peak use in 2014 by 71.1% and tCO2e
emissions have reduced by 80.9%. Scope 1 Refrigerant emissions from our store portfolio air conditioners occur when small quantities of
Refrigerant require ‘topping up’. The Refrigerant we use (R410A) is a ‘Kyoto Protocol Blend’ that maintains an efficient working environment.
Refrigerant use has a direct global warming impact and is required to be recorded for local and national reporting purposes over a 100 year
period, by the Intergovernmental Panel on Climate Change.
Scope 1 Total Direct Gas and Refrigerant GHG Emissions % change
Year ended 31 March 2013 2014 2015 2016 2017 from 2014 peak
Scope 1 Gas (tCO2e) 133.0 120.0 111.5 109.2 116.0+ (3.3%)
Scope 1 Refrigerant (tCO2e) 286.3 354.8 20.6 13.5 67.9+ (81.0%)
Total Scope 1 (tCO2e) 419.3 474.8 132.1 122.7 183.9+ (61.3%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: 2014 was the peak year for Total Scope 1 ‘Direct’ GHG emissions.
The 2017 total Scope 1 ‘Direct’ GHG emissions from gas and coolant emissions is 183.9 tCO2e. This represents a significant 61.3% reduction
in GHG emissions from our peak emissions year in 2014 and was partly due to our choice of Refrigerant, which is now an efficient Kyoto
Protocol Blend.
Scope 2 National Network Supplied Electricity and GHG Emission
Scope 2 Electricity GHG Emission % change
Year ended 31 March 2013 2014 2015 2016 2017 from 2011 peak
Electricity (kWh) 13,153,960 11,688,629 9,643,341 9,376,085 9,568,862+ (31.3%)
Scope 2 (tCO2e) 6,470 5,682 5,908 4,456 3,943 (41.7%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: 2011 was the peak electricity use (13,925,217 kWh and 6,758 tCO2e).
Our Scope 2 UK Network Supplied Electricity use has reduced by 31.3% from our peak in 2011 due to our energy efficiency programmes;
these have reduced GHG emissions by 41.7% over the same time period. Our Scope 2 supplied electricity has had a variable fuel mix over the
last decade. In recent years we have estimated that low carbon renewables and nuclear generated supplied electricity have contributed to
reducing our GHG emissions by around 1% per year over the last 5 years, based on DEFRA DECC UK Scope 2 electricity conversion factors.
50
GHG Emission Reductions
Since 2011 our carbon reduction programme has focused on the most significant Scope 2 Grid supplied electricity use and we have achieved
reductions based on investment in efficient lighting and maintaining our renewable electricity generation. We continue to monitor future
improvements in replacement LED lamp efficiency to meet the long-term ‘climate change science-based targets’.
Our electricity supply from power stations provided 95% of our total annual energy in the year ended 31 March 2017.
Our annual average carbon emission reductions from 2011 is approximately 7% per annum; more than double the target set for the
commercial property sector to meet the UK Government’s GHG emission target of a 34% reduction by 2020 (or a 3.5% reduction per annum
to 2050). Apart from these savings, our electricity efficiency investment programmes have achieved proportional cost savings on our CCL
bills and our annual CRC Taxes.
Store Portfolio ‘Like-for-Like’ Electricity and tCO2e Reductions
GRI and EPRA ‘Like-for-Like’ Standards (G4-EN3 / Elec-LFL)
Year ended 31 March Portfolio 2016 Portfolio 2017 % change
Total Electricity Use (kWh) 9,376,085+ 9,568,862 2.1%
2016 Acquired Store Use (kWh) (108,260 ) (99,673)** –
LFL Electric Use (kWh) 9,267,825 9,469,189 2.2%
LFL tCO2e 4,581 3,903+ (14.8%)
*
**
Excluding non-store portfolio electricity use (Head Office and Maidenhead) 2016.
Excluding our acquisitions at Nine Elms and Twickenham 2 kWh use in financial year 2017.
kWh conversion factor in 2016 is 0.49426; and conversion factor in 2017 is 0.41205
The ‘Like-for-Like’ store portfolio over the last two financial years, excluding our two administrative buildings and the two store acquisitions,
indicate that electricity use in 2017 increased by 2.2% compared to the previous year. However, the ‘Like-for-Like’ stores have delivered GHG
emission reductions of 14.8% in 2017.
Climate Change Act 2008 - ‘Carbon Reduction Commitment’ (“CRC”) Tax
The Department of Energy and Climate Change (“DECC”) and the Environment Agency (“EA”) are stakeholders in the policy for reducing
carbon dioxide emissions from large private sector organisations.
CRC Carbon and Tax Reductions (2013 to 2017)
Year ended 31 March 2013 2014 2015 2016 2017*
Total tCO2 Emissions* 7,598 6,415 5,408 4,926 –
Reduction in tCO2 (%) from 2011 Peak (0.1%) (15.7%) (28.9%) (35.3%) –
Tax Rates (£/tCO2) £12.00 £12.00 £16.40 £16.90 £17.20
Tax Payments (£) £91,176 £76,980 £88,691 £83,249 –
Tax Reductions from 2011 Peak (%)* (0.1%) (15.7%) (2.9%) (8.8%) –
*
Annual CRC Tax reporting occurs after the CSR Report publication and we provide the numbers later in 2017.
Note: 2011 was the peak CRC Tax Payment of £91,296 (7,608 tCO2) at £12.00/tCO2.
tCO2 emissions from Grid supplied electricity, gas and self-supplied solar panel electricity.
The CRC Tax Rate on carbon emissions from our use of network electricity and gas and from self supplied solar electricity rose from £16.90
per tonne in 2016, to £17.20 per tonne in 2017. Under the CRC Tax scheme our total tCO2 emissions reduced by 35.3% in 2016 (from our peak
emissions in 2011). Our CRC Tax reduction from 2011 to 2016 was 8.8%.
51
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
3.0 ENVIRONMENTAL RESPONSIBILITY (continued)
Total Scope 1 and 2 GHG Emissions
In 2017 total Scope 1 and Scope 2 GHG Emissions achieved a reduction of 40.0% from our peak in 2011. This reduction is partly due to
decreases in Scope 1 refrigerant efficiency. Reductions in Scope 2 were achieved due to contributions from our solar PV investments.
Total GHG Emission Reductions (tCO2e) (GHG-Dir-Abs and GHG-Indirect-Abs) % change
Year ended 31 March 2013 2014 * 2015 2016 2017 from peak
Scope 1 Emissions 419.0 474.8 132.1 122.7 183.9+ (61.3%)
Scope 2 Emissions 6,051.0 5,207.0 4,776.0 4,333.5 3,943+ (42.7%)
Total (tCO2e) 6,470.0 5,681.8 4,908.0 4,456.2+ 4,126.9+ n/a
+
*
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report
2014 was the peak Scope 1 emissions (474.8 tCO2e) benchmark.
Note: 2011 was the peak Scope 2 emissions (6,879.5 tCO2e) benchmark .
Scope 1 emissions from our stores represent only 4.5% of our combined Scope 1 and 2 emissions in 2017. Last year less refrigerant replacement
was required for the third year from our peak use in 2014.
Scope 1 and 2 GHG Emission Intensity
Our GHG Emissions ‘intensity’ indicators are based on average customer occupancy (m2), total Group revenue (£) and gross internal floor
area (“GIFA” per m2).
Scope 1 and 2 GHG Emission Intensity / Occupancy, Revenue & GIFA (GHG-Int.) % change
Year ended 31 March 2013 2014 2015 2016 2017 from 2011 peak
Total (tCO2e) 6,470.0 5,681.8 4,908.0 4,456.2 4,126.9+ (40.0%)
Average Occupancy (m2) 244,521 263,101 283,732 304,964 325,537 64.5%
kgCO2e /Occupancy 26.5 21.6 17.3 14.6 12.7+ (63.5%)
Revenue (£000) 69,671 72,196 84,276 101,382 109,070 76.3%
kgCO2e / Revenue (£) 0.09 0.08 0.06 0.04 0.04+ (63.6%)
GIFA (m2) 582,872 582,872 605,419 621,050 629,686 15.4%
kgCO2e / GIFA (m2) 11.1 9.7 8.1 7.2 6.6+ (47.6%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: Peak GHG emissions benchmark was 6,879.5 tCO2e in 2011; Occupancy was 197,884 m2; kgCO2e / Occupancy was 34.8. Revenue was
£61,885,000; kgCO2e / £ Revenue was 0.11. GIFA was 545,490; kgCO2e / GIFA m2 was 12.6.
GHG Emission per average occupied space have reduced by 63.5% and GHG emissions per revenue have reduced by 63.6%. GHG emission
intensity per GIFA has reduced by 47.6% from our peak. Our future GHG Emission reduction programme is to continue to invest in energy
efficiencies and renewable energy, where viable, on new build and acquired stores.
Long Term Energy Scope 1 and Scope 2 GHG Emission Target Review (2008 – 2020)
The Kyoto Protocol Reduction Target (2008 to 2012)
From 2008 to 2010 we achieved store electricity use reductions by investment in our motion sensor lighting and low carbon renewable energy
‘self- supply’. From 2010 to 2013 we had an increase in electricity use as a result of our new store openings and increased customer occupancy.
This increase in our emissions delayed the achievement of our 2008 to 2012 Kyoto Protocol Reduction Target of 12.5% until 2014.
The UK Climate Change Act (2008)
The Climate Change Act was made legally binding in the 2009 Budget. It has an interim target of GHG Emission reduction of 34% by 2020.
The longer-term target is to reduce GHG Emission by 80% by 2050 (or by approximately 3.5% per year).
52
Our Target is to Reduce Scope 1 & Scope 2 GHG Emissions by 34% by 2020
Our annual GHG Emission since peak energy use in 2011 has reduced by 35.2% or approximately 5% per year on average.
In order to commit to long-term climate change ‘science-based’ targets we will commit to investing in improved LED technology as they
become more efficient, and renewable solar energy on new build stores. This year we acquired two stores at Nine Elms and Twickenham 2,
and these stores will be part of our internal and external LED re-lamping programmes in the future. These technologies will achieve levels
of decarbonisation required to keep global temperatures on a pathway to 2oC above global pre-industrial levels, by 2100.
Scope 1 and 2 GHG Emission Intensity / Occupancy, Revenue & GIFA (GHG-Int.)
Year ended 31 March 2011 2012 2013 2014 2015 2016 2017 2020 Target
tCO2e 6,880 6,284 6,470 5,682 4,908 4,456 4,127 4,281*
% Reduction 6.1% 3.1% 0.3% 12.4% 24.3% 31.3% 36.4% 34.0%
+
*
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
2008 (Scope 1 and 2) GHG emission (6,487 tCO2e) to reduce by 34% (4,281 tCO2e target).
In 2017, we have achieved a 36.4% reduction in Scope 1 and Scope 2 GHG Emission from 2008, which is an annual average reduction of
approximately 4% per year. In 2017 we also reviewed the longer term UK ‘Real Estate Environmental’ target of a 3.5% reduction in GHG
Emission, which is now aligned to the Government’s 2050 goal.
Managing the Non-Physical, Physical and Financial Risks of GHG Emission and Climate Change for our
Customers, Investors and Other Stakeholders.
Managing the Non-Physical Risks and Opportunities
Over the long term, Big Yellow’s ‘non-physical risks and opportunities’ have been governed by EU and UK regulation and ‘best practice’ within
the real estate investment sector. The significance of GHG emission and ‘climate change’ have been reviewed since 2008 within Board
Reports and CSR Meetings. Building certifications such as Energy Performance Certificates (“EPCs”), the Building Research Establishment
Assessment Methodology (“BREEAM”) and the Considerate Constructors Scheme (“CCS”) are all used in annual investor benchmarks, such
as the FTSE4Good; the Carbon Disclosure Project (“CDP”); the Global Real Estate Sustainability Benchmark (“GRESB”).
Financial Risks and Opportunities of Climate Change
The financial risks and opportunities of Climate Change are within the cost of sustainable planning, designing and constructing of our new
store developments, which can be more sustainable and resilient in the longer term. The financial risks involve reviewing the existing and
acquired stores against extreme weather events such as seasonal storms and flooding. Our investors also appreciate disclosures and
performance benchmarks of our portfolio set against sustainable development and energy efficiency benchmarks to assess our annual
reduction in carbon emissions and taxes. Internal regulatory briefs on compliance and high standards within real estate benchmarks, makes
Big Yellow an efficient and low risk investment.
Physical Risks and Opportunities
The physical risks from increased GHG emission is climate change, global warming, and the consequences of higher risk weather systems
that can increase temperatures, storm frequency, flooding and/or droughts.
Big Yellow has physically invested in energy efficiency in order to reduce electricity use and GHG emission. Our solar stores have customer
facing electronic screens displaying real time ‘solar generation’ (kWh) and ‘carbon emissions (tCO2) saved’ in customer reception areas.
Big Yellow has also trialled and invested in ‘green roofs’ and ‘green walls’ on several of our stores (Barking, Chiswick, Fulham, High Wycombe
and Sutton) in the urban areas of our towns and cities. These investments provide shade to our stores in the summer that are susceptible
to the ‘urban heat island effect’. Green roofs can store moisture after rainfall that evaporates in the spring and summer seasons and cools
the upper floor levels. ‘Rainwater Harvesting Systems’ are also installed (Barking, Chiswick, Liverpool, Merton, Sheffield and Sutton) in order
to provide landscape irrigation in the summer months. Several stores have ‘sustainable urban drainage systems’ that provide permeable
car park surfaces or peripheral soft landscaping that can regulate surface water to ground waters and local rivers.
53
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
3.0 ENVIRONMENTAL RESPONSIBILITY (continued)
Big Yellow Store Portfolio Asset Certifications
This year we are reporting some of our CSR KPIs and identifying them using the codes from the GRI and EPRA. This is at the request of some
of our stakeholders, to assess sustainable development performance.
Certified Assets (EPRA ‘Cert-Tot’ and GRI ‘CRE8’)
Other Solar Gross Internal
“BREEAM” Environmental (kWh) Floor Area
No. Store EPCs Certification Investments Capacity m2
1 Balham B GSHP 4kWp 10 kWp 8,361
2 Barking A Green Roof RWH 50 kWp 8,360
3 Birmingham C - - 8,361
4 Bromley B GSHP 15kWp 7 kWp 9,867
5 Camberley A - SUDS 10 kWp 8,849
6 Cambridge B - - 7,264
7 Chiswick B Green Roof 50 kWp 10,678
8 Chester E - - 8,179
9 Ealing B - - 7,887
10 Edinburgh D+ - 26 kWp 8,779
11 Eltham C - - 9,793
12 Enfield B ‘Excellent’ 50 kWp 8,367
13 Fulham B Green Roof; GSHP 28 kWp 19,370
14 Gypsy Corner B - 50 kWp 9,707
15 High Wycombe B Green Roof - 8,431
16 Kennington B GSHP 4 kWp 9,339
17 Liverpool C - RWH - 8,361
18 Merton B GSHP RWH 9 kWp 9,755
19 New Cross B - 50 kWp 8,623
20 Nottingham C - 50 kWp 9,058
21 Oxford 2 D - - 4,266
22 Poole C - - 7,386
23 Reading A ‘Excellent’ SUDS 9 kWp 8,640
24 Richmond B - 18 kWp 4,855
25 Sheen B ‘Excellent’; GSHP 7 kWp 8,919
26 Sheffield Bramall Lane B - RWH - 8,361
27 Sheffield Hillsborough B - - 8,361
28 Stockport B - - 8,288
29 Sutton B Green Roof RWH - 9,755
30 Twickenham A+ - SUDS 16 kWp 10,591
“Green” stores 30 25,926 m2 258,924 m2
73 Total Stores 41% 4.1% 629,686 m2
All stores have energy efficient LED lighting; motion sensor lighting; and automatic electricity meter readers.
GSHP: Ground Source Heat Pump, SUDS: Sustainable Urban Drainage System, RWH: Rainwater Harvesting
Energy Performance Certification (“EPC”) Legislation
As owners of property who lease space to members of the public, we are required to display EPCs to our customers from 1 October 2008.
Certification is required at new store openings, store acquisitions and when solar panels are retrofitted onto older stores. We have provided 30
EPCs to date in our stores, representing 41% of the portfolio. Of the stores certified 73% have high ‘A’ or ‘B’ ratings, mainly due to energy efficient
internal LED re-lamping and investment in low carbon electricity ‘self-supply’, such as solar and ground source heat pump installations. Considering
that the whole portfolio has internal energy efficient LED lighting, apart from the two most recent acquisitions, we are comfortable that the
pre-October 2008 stores will at least achieve the EPC ‘B’ rating in the future, when the opportunity to rate them arises.
Building Research Establishment Environmental Assessment Methodology (“BREEAM”)
BREEAM certification is a local planning requirement for our stores, especially for new developments in high-density urban environments.
The methodology assesses impacts and opportunities for enhancing the design and construction environmental aspects. The certification includes
a review of new store energy, sustainable building materials, water efficiency, waste recycling and ecology. The review also includes social aspects
of the building life including its resource management, health, well-being, modes of transport and pollution reduction. Our BREEAM ratings are
mainly ‘Excellent’ scoring in the 75 – 76% range and highest in the areas of land use and ecology; transport; waste; pollution; and energy efficiency.
54
4.0 SCOPE 3 – VOLUNTARY SUPPLY CHAIN GHG EMISSION
Scope 3 supply chain emissions are ‘Greenhouse gases’ from electricity supplier losses during transmission and distribution of electricity
to our stores.
Scope 3 – Electricity Supply and Distribution GHG Emission Losses % change
Year ended 31 March 2013 2014 2015 2016 2017 from 2011 peak
Total Electricity Use (kWh) 13,153,960 11,688,629 9,643,341 9,376,085 9,568,862+ (31.3%)
Scope 2 (tCO2e) 6,051 5,207 4,776 4,333 3,943+ (41.7%)
Scope 3 (tCO2e) 501 445 417 355 357 (34.4%)
Total (tCO2e) 6,552 5,652 5,193 4,688 4,300 (41.1%)
+
Indicates data reviewed by Deloitte LLP. See page 58 for their independent assurance report.
Note: Peak energy use was 2011 (13,925,217 kWh); total CO2e Scope 2 tonnage was 6,758 tCO2e; Scope 3 was 544 tCO2e; and total tonnage
was 7,302 tCO2e).
The Transmission and Distribution Conversion Factor for 2017 was 0.03727.
The energy efficiency investment programmes within our stores have reduced electricity demand from our supplier’s power stations. Total
transmission and distribution losses (Scope 3 losses) have therefore reduced by 34.4% since 2011.
Scope 3 Store Waste Supply Chain (Recycling & Emissions)
Waste Sources and Segregation
Our main source of waste is from the operational activities of our stores, mainly retail and office activities that have a relatively low
environmental impact. Our store staff apply best practice waste segregation for general and mixed dry recyclable materials.
Waste Recycling Contractor
Our recycling contractor provides further segregation and recycling of our waste. Since our ‘total waste’ benchmark of 2011 (244 t) our
store portfolio has increased from 62 to 73 stores, and total waste has increased to 325.1 t in 2017, an increase of 33% from 2011. The
percentage of waste recycled has reduced from 73% in 2013 to 59% in 2017. This reduction in our contractors recycling is an increasing trend
due to a reduction in the supply price of some mixed dry recycled materials, such as paper and cardboard.
Waste to Landfill and Landfill Tax
An increasing amount of ‘General waste’, 130 tonnes (41% of general waste) went to landfill in 2017, as compared to 69 tonnes (28% of
general waste) in 2011, an increase of 53% over six years. Landfill Tax is an environmental tax paid in addition to normal landfill costs.
Reducing, re-using and recycling waste can reduce the Landfill Tax rate to £2.65 per ton (for more inert waste). If no segregation or recycling
occurs, an increase in the tax to £84.40 per ton can apply to more active waste. These changes have increased our landfill tax by 32%,
mainly due to the reduction in the market value of our recyclate that is now sent to landfill due to its low price.
Scope 3 – Store Waste Supply Chain Recycling and Landfill Emissions (Waste-Abs)
Year ended 31 March 2013 2014 2015 2016 2017
Total Waste (tonnage) 258.5 264.5 272.7 296.2 325.1
Mixed Dry Recycled (t) 189 (73%) 187 (72%) 170 (63%) 176 (60%) 193 (59%)
General Waste (t) 69 (27%) 74 (28%) 101 (37%) 118 (40%) 130 (41%)
Recycled Mixed Glass (t) – 1.1 1.4 1.4 1.4
Recycled Board/Paper (t) – 2.0 – 1.4 0.7
Waste to Landfill (t) 34.6 37.0 38.2 58.9 130.0
Landfill Tax (£) 6,684 7,054 7,054 9,822 12,913
Landfill GHG (tCO2e)* 10.0 10.7 11.0 17.0 37.5
*
The landfill gas conversion factor is 0.289.
Note: 2011 Waste was 244 t; mixed dry recycling was 172 t (70.5%); Landfill was 69 t; GHG emission was 10.8 tCO2e
55
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
4.0 SCOPE 3 – VOLUNTARY SUPPLY CHAIN GHG EMISSION (continued)
Landfill Gas Emissions
Our scope 3, ‘supply chain’ landfill-gas emissions have increased by 35% since 2011 (10.8 tCO2e benchmark), to our highest landfill
emissions of 37.5 tCO2e in 2017. This year our landfill Greenhouse gas emissions have increased from 17.0 tCO2e (2016) to 37.5 tCO2e (2017).
Although these emission levels represent a negligible percentage of our total internal combined Scope 1 and 2 emissions (4,126.9 tCO2e),
they will be monitored for future efficiencies.
Scope 3 – Store Waste Supply Chain Costs
Year ended 31 March 2013 2014 2015 2016 2017
Mixed Recycling (£) 27,817 28,195 29,897 29,305 43,925
General Waste (£) 20,051 21,163 29,829 30,537 38,740
Total Waste Cost (£) 47,868 49,358 60,040 60,351 83,227
Store generated waste is sorted into four categories of: ‘mixed dry recyclable materials’; ‘general waste’; ‘mixed glass’; ‘paper and cardboard’.
The cardboard sector includes our contractor DS Smith with mills in Kent, Birmingham and Manchester.
New Store Construction ‘Fit-Out’ Waste Management Performance (Waste-Abs)
Year ended 31 March 2011 2012 2013 2014 2015 2016 2017
Tonnage 147.5 152.3 12.9 78.9 14.5 13.6 0
Waste Recycled (%) 93.2 96.0 100 95 100 92.8 –
Plasterboard Recycled (%) 100 34.0 – 100 100 100 –
In 2017, there were no new store construction ‘Fit Out’ phases that generated site waste. All of our new stores sign up to the CCS and achieve
an EPC ‘B’ rating with LED lighting as standard and roof top solar installations installed where viable.
5.0 STAKEHOLDERS
Big Yellow engages with all of its main stakeholders to provide information and to gain useful feedback from a variety of groups, as
described below.
Government Legislation and Standards
EU Energy Efficiency Directive; ‘The UK Energy Savings Opportunities Scheme’ (“ESOS”)
We appointed an accredited ESOS Assessor, who measured all of our energy consumption and determined significant areas of use. ESOS
was enforced by the Environment Agency and involved the audit of four representative stores from our portfolio. We assessed future potential
energy savings from the report, other than the technologies that we had already programmed and invested in. We completed the audits in
November 2015, before the December 2015 deadline, and have considered changes to our future budget for investing in viable energy saving
technologies as a result.
Investor Communications
The Carbon Disclosure Project (“CDP”) 2016
The CDP is a global initiative by investors designed to encourage companies (and their suppliers) to publish information on their carbon
emissions and climate change strategies, as a measure of their energy use efficiency. The annual disclosures are in June each year and so
we report our 2016 performance in this 2017 CSR Report. The CDP changed its scoring system in 2016 to combine its ‘Disclosure’ score
within the ‘Performance’ score as recorded in the table below.
The CDP Performance and Number of Investors
Year 2013 2014 2015 2016 2017
Disclosure Score 65/100 67/100 85/100 93/100 –
Performance Score B C B C B
Number of Investors 534 655 799 884 884
Annual increase in investors – – 10.7% 10.6% –
We commit annually to respond to the CDP ‘Investor’ Programme as a benchmark for the ‘Financials’ and ‘Real Estate’ sectors. We have a
combined ‘B’ rated score for Disclosure and Performance in 2016, for ‘taking coordinated action on climate change issues’ and ‘implementing
current best practice’. Our best performance areas, in descending order, are ‘Management’, ‘Leadership’, ‘Awareness’ and ‘Disclosure’. The ‘C’
Band performance is an average for ‘Financials’ energy efficiency, reductions and targets. Big Yellow’s ‘number of investors’ increased year on
year by approximately 10% in 2014 and 2015, but have remained constant in 2016.
56
The Global Real Estate Sustainability Benchmark (“GRESB”) ‘Green Star Status’
GRESB collects information regarding the sustainability performance of property owning companies and funds. This includes information
on performance indicators, such as energy efficiency, GHG emission, water and waste reductions. The Survey also covers broader issues
such as sustainability risk assessments, performance improvement, and engagement with employees, customers, suppliers and local
communities. GRESB rated Big Yellow with a two ‘Green Star Status’ in 2016. In Europe (and globally) we were scored 79% for ‘management
and policy’ and 48% for ‘implementation and measurement’. Our Environmental and Social Governance (“ESG”) was ranked 84% against a
peer group average of 54%. The benchmark results ranked Big Yellow as in 1st position out of 8 storage companies and 20th out of 25 UK
Listed Real Estate Companies, which allows us to identify the areas where we can improve, both in absolute terms and relative to our peers.
We are able to provide our existing and potential investors with information regarding our environmental and social governance performance,
in the current real estate investment market.
6.0 CSR PROGRAMME FOR THE YEAR ENDING 31 MARCH 2018
Big Yellow will continue to focus on its most significant environmental and financial aspects of its business impact, energy use and carbon
emissions. Energy efficiency and low carbon supply programmes have been trialled and have been implemented since 2008. We will review
and consider further energy reduction strategies within our store operations for carbon and financial savings. For the year ahead our
programmes, objectives and targets are highlighted in the table below.
CSR Strategy
Programme
Objectives From 2011 Benchmark
GHG Emission Reduction
CRC
Increase Solar Energy
Generation
FTSE4 Good
Investor Governance
CDP Communications
GRESB
Health and Safety
Staff CSR Awareness
Assess new and acquired stores within the
portfolio for efficient LED re-lamping
internally and externally.
External store lighting programmed for LED
re-lamping in the year ending 31 March 2018.
Review potential tax reduction as tCO2 tax
rate increases.
Implement more specific ESOS advice from
our surveys.
Solar installations to increase with new
build portfolio growth, acquisitions and
existing retro-fit stores.
Solar installation on new build Guildford store
and two retro-fit installations on Colchester
and Eltham stores.
Provided data on the Big Yellow web site to
update research requests on our supply
chain, labour standards and the ‘Modern
Slavery Act’.
Use our annual carbon performance data in
the CDP survey 2017 to improve our ratings.
Maintain our ranking scores in
‘management and policy’ and
‘implementation and measurement’.
Continually maintain and improve high
standards of recording and reporting
customer, staff, visitor, and contractor
incidents.
Maintain membership within the FTSE4 Good
Index series ratings and engaging with
researchers.
To increase and maintain our high
performance and interest from a wider range
of investors.
Strengthen and maintain the leading ‘Green
Star’ position in the GRESB upper quadrant.
Invest in continued training and awareness
of staff in routine health and safety policy,
procedures, management and reporting.
Continue raising CSR awareness through
area staff presentations and internal
communications.
Regular staff meetings and information
bulletins on CSR progress and ‘Climate
Change’.
More details of CSR policies, previous reports and awards can be found on our investor relations web site.
57
Strategic Report (continued)
Corporate Social Responsibility Report (continued)
Independent assurance statement by Deloitte LLP (“Deloitte” or “we”) to Big Yellow Group PLC (“Big Yellow”) on selected
indicators disclosed within their Corporate Social Responsibility Report 2017 (“Report”)
What we looked at: scope of our work
We have been engaged by Big Yellow to perform limited assurance procedures on selected Group level Corporate Social Responsibility
(CSR) performance indicators (“the Subject Matter”) for the year ended 31 March 2017. The assured data are indicated by the + symbol
in the Report.
Carbon footprint indicators:
> Store electricity (tCO2e)
> Store flexi-office gas emissions (tCO2e)
> Refrigerant emissions (tCO2e)
> Absolute carbon dioxide emissions (tCO2e)
Store electricity use, CO2 emissions and carbon intensity:
> Electricity use (kWh)
> Like-for-like electricity use (tCO2e)
> Absolute carbon emissions (tCO2e)
> Carbon intensity (kgCO2e/m2 gross internal area)
> Carbon intensity (kgCO2e/m2 occupied space)
> Carbon intensity (kgCO2e/£ revenue)
Renewable energy generation and CO2 emissions reductions:
> Total renewable energy (kWh)
> Renewable energy percentage of total store use (%)
Staff health and safety:
> Average number of employees
> Minor Injuries
> Reportable injuries (RIDDOR)
> Annual Injury Incidence rate (AIIR) per 100,000 staff
> Notices
What we found: our assurance opinion
Based on the assurance work we performed, nothing has come to our attention that causes us to believe that the selected CSR performance
indicators, as noted above, have not been prepared, in all material respects, in accordance with Big Yellow’s reporting criteria.
What standards we used: basis of our work and level of assurance
We carried out limited assurance in accordance with the International Standard on Assurance Engagements 3000 Revised (ISAE 3000).
To achieve limited assurance ISAE 3000 requires that we review the processes and systems used to compile the areas on which we
provide assurance. This standard requires that we comply with the independence and ethical requirements and to plan and perform our
assurance engagement to obtain sufficient appropriate evidence on which to base our limited assurance conclusion. It does not include
detailed testing of source data or the operating effectiveness of processes and internal controls. This is designed to give a similar level of
assurance to that obtained in the review of interim financial information.
The evaluation criteria used for our assurance are the Big Yellow Group definitions and basis of reporting as described at:
http://corporate.bigyellow.co.uk/csr.aspx
58
What we did: our key assurance procedures
Considering the risk of material error, our multi-disciplinary team of CSR assurance specialists planned and performed our work to
obtain all the information and explanations we considered necessary to provide sufficient evidence to support our assurance
conclusion. Our work was planned to mirror Big Yellow’s own group level compilation processes, tracing how data for each indicator
within our assurance scope was collected, collated and validated by corporate head office and included in the Report.
Key procedures we carried out included:
> Making inquiries of management to obtain an understanding of the overall governance and internal control environment
relevant to management and reporting of the subject matter;
> Understanding, analysing, and testing on a sample basis the key structures, systems, processes, procedures, and controls
relating to the aggregation, validation and reporting of the subject matter set out above; and
> Reviewing the content of the 2017 CSR Report against the findings of our work and making recommendations for improvement
where necessary.
Big Yellow’s responsibilities
The Directors are responsible for the preparation of the Report and for the information and statements contained within it.
They are responsible for determining the CSR goals, performance and for establishing and maintaining appropriate performance
management and internal control systems from which the reported information is derived.
Deloitte’s responsibilities, independence and team competencies
Our responsibility is to independently express a conclusion on the performance data for the year ended 31 March 2017. We
performed the engagement in accordance with Deloitte’s independence policies, which cover all of the requirements of the
International Federation of Accountants Code of Ethics and in some cases are more restrictive. The firm applies the International
Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies
and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory
requirements. We confirm to Big Yellow that we have maintained our independence and objectivity throughout the year, including
the fact that there were no events or prohibited services provided which could impair that independence and objectivity in the
provision of this engagement.
This report is made solely to Big Yellow in accordance with our engagement letter. Our work has been undertaken so that we might
state to the company those matters we are required to state to them in an assurance report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than Big Yellow for our work, for this report, or
for the conclusions we have formed.
Deloitte LLP
London, United Kingdom
22 May 2017
59
Governance
Directors, Officers and Advisers
Executive Directors
Nicholas Vetch, Executive Chairman, is a co-founder of Big Yellow in September 1998. Prior to that, he was joint Chief Executive of Edge Properties plc, which
he co-founded in 1989 which was subsequently listed on the Official List of the London Stock Exchange in 1996 and then sold to Grantchester Properties plc
in 1998. He is also a Non-Executive Director of Local Shopping REIT plc, a Trustee of Bedales School and a Trustee of Global Human Rights and Global Human
Rights UK.
James Gibson, Chief Executive Officer and co-founder of Big Yellow Group PLC in September 1998. He is a Chartered Accountant by background having trained
with Arthur Andersen & Co. where he specialised in the property and construction sectors, before leaving in 1989. He was Finance Director of Heron Property
Corporation Limited and then Edge Properties plc which he joined in 1994. Edge Properties was listed on the Official List of the London Stock Exchange in 1996
and then sold to Grantchester Properties plc in 1998. He is also a Non-Executive Director and shareholder of AnyJunk Limited, a Non-Executive Director and
shareholder of CityStasher Limited, a Non-Executive Director and investor in Moby Self Storage, a Brazilian Self Storage start-up, and a Trustee of the London
Children’s Ballet.
Adrian Lee, Operations Director, was previously a Senior Executive at Edge Properties plc, which he joined in 1996. Prior to that he was a corporate financier
at Lazard for five years, having previously qualified as a surveyor at Knight Frank. He was appointed to the Board in May 2000.
John Trotman, Chief Financial Officer, is a Chartered Accountant having trained with Deloitte LLP, where he specialised in the real estate sector and self storage.
On leaving Deloitte in 2005, John worked for a subsidiary of the Kajima Corporation. He joined Big Yellow in June 2007, and was appointed to the Board in
September 2007. He is Chairman of the UK Self Storage Association.
Non-Executive Directors
Tim Clark, Non-Executive Director. He was a partner in Slaughter and May, one of the leading international law firms in the world, for 25 years; initially working
as a corporate and M&A adviser to a range of companies and institutions and then for the last seven years as senior partner (before retiring in April 2008).
He is the Chair of Water Aid UK, and a Senior Adviser to G3, and to Chatham House. He is also a member of the International Chamber of Commerce UK Governing
Body, the Advisory Board of Uria Menendez, and the Board of the HighTide Theatre and the Development Committee of the National Gallery. He is Chairman of
the trustees of the Economist Trust and a member of the Audit Committee of the Wellcome Trust. He was appointed to the Board in August 2008, is the Senior
Independent Director and is Chairman of the Remuneration and Nomination Committees.
Richard Cotton, Non-Executive Director, headed the real estate corporate finance team at JP Morgan Cazenove until April 2009, and subsequent to that was
a Managing Director of Forum Partners. Richard is currently the Chairman of Centurion Properties and a Non-Executive Director of Helical Bar plc as well as a
Member of the Commercial Development Advisory Group of Transport for London. Richard joined the Board in July 2012.
Georgina Harvey, Non-Executive Director, started her media career at Express Newspapers plc where she was appointed Advertising Director in 1994. She
joined IPC Media Ltd in 1995 and went on to form IPC Advertising in 1998, where she was Managing Director. She was a member of the Board of IPC Media from
2000 and was Managing Director of the Regionals division of Trinity Mirror from 2005 to 2012, overseeing its transition to a digital platform. She is currently
a Non-Executive Director of William Hill plc and the Senior Independent Non-Executive Director and Chair of the Remuneration Committee of McColl's Retail
Group plc. She joined the Board in July 2013.
Steve Johnson, Non-Executive Director, started his career at Bain in the 1980s before joining Asda in 1993, where he carried out a number of roles, culminating
in Marketing Director. He left Asda in 2000, to join GUS as a Sales & Marketing Director, departing in 2002 to take up his first CEO role at Focus DIY, where he
remained until 2007. He joined Woolworths as part of the final turnaround team in late 2008. He has most recently been working as an operating executive
for TPG, and was also the Executive Chairman of Dreams plc between July 2011 and October 2012. He is currently Executive Chairman of Poundworld.
He joined the Board in September 2010.
Mark Richardson, Non-Executive Director, retired from Deloitte in 2008 after a career there of 29 years, the last 19 as an audit partner specialising in clients
in the real estate and construction sectors. Mark is Chairman and trustee of the Natural History Museum Development Trust and a trustee and Chairman of
the Audit Committee of WWF-UK. He was appointed to the Board in July 2008 and is chairman of the Audit Committee.
Company Secretary and Registered office
Shauna Beavis
2 The Deans
Bridge Road
Bagshot
Surrey
GU19 5AT
Company Registration No. 03625199
Bankers
Lloyds Bank plc
HSBC Bank plc
Aviva Commercial Finance Limited
M&G Investments Limited
60
Solicitors
CMS Cameron McKenna Nabarro Olswang LLP
Lester Aldridge LLP
Slaughter and May
Financial advisers and stockbrokers
J P Morgan Cazenove
Independent Auditor
Deloitte LLP
Chartered Accountant and Statutory Auditors
Valuers
Cushman & Wakefield LLP
Jones Lang LaSalle
Directors’ Report
The Directors present their annual report on the affairs of the Group, together with the audited financial statements and auditor’s report for the year ended
31 March 2017. The Report on Corporate Governance on pages 64 to 67 forms part of this report.
Details of significant events since the balance sheet date are included in note 25 to the financial statements. An indication of likely future developments in
the business of the Company is included in the strategic report.
Information about the use of financial instruments by the Company and its subsidiaries is given in note 18 to the financial statements.
Dividends
The Directors are recommending the payment of a final dividend of 14.1 pence per share for the year (2016: 12.8 pence per ordinary share). An interim dividend
of 13.5 pence per share was paid in the year (2016: 12.1 pence per share).
A property income dividend of 24.0 pence is payable for the year, of which 13.5 pence per share was paid with the interim dividend, and 10.5 pence per share
was proposed for the final dividend.
Subject to approval by shareholders at the Annual General Meeting to be held on 20 July 2017, the final dividend will be paid on 27 July 2017. The Ex-div date
is 22 June 2017 and the Record date is 23 June 2017.
From April 2016 dividend tax credits will be replaced by an annual £5,000 tax-free allowance on dividend income across an individual’s entire share portfolio.
Above this amount, individuals will pay tax on their dividend income at a rate dependent on their income tax bracket and personal circumstances. The Company
will continue to provide registered shareholders with a confirmation of the dividends paid by Big Yellow Group PLC and this should be included with any other
dividend income received when calculating and reporting total dividend income received. It is the shareholder’s responsibility to include all dividend income
when calculating any tax liability. This change was announced by the Chancellor, as part of the UK government Budget, in July 2015.
Disclosure of Greenhouse Gas (“GHG”) Emissions
Companies Act 2006; Climate Change, the GHG Emissions Director’s Reports Regulations 2013
From October 2013, all listed companies are required to report annual quantities of GHG emissions (measured as Carbon Dioxide Equivalent (CO2e)) as follows:
> Scope 1 – significant direct emission sources, such as our flexi-office gas heating and air conditioner coolant replacement – currently fit out ‘gas oil’ use
emissions and one Company van diesel fuel use emissions are assessed as ‘not material’;
> Scope 2 – significant indirect or offsite power station electricity supply emissions to our stores; and
> Scope 3 – Electricity supplier ‘transmission and distribution’ emissions – currently, voluntary GHG emissions, from our waste and water supply chains
are assessed as ‘not material’.
Summary of Scope 1 and 2 Total Carbon Footprint (GHG carbon equivalent emissions (tCO2e))
Including store electricity, gas, coolant, generator gas oil and van diesel
Year
2012
2013
2014
2015
2016
2017
Total Scope 1 and 2 GHG Emissions (tCO2e)
Scope 3 Electricity Transmission Losses
Kg CO2e / Annual Revenue (£)
Kg CO2e / Customer Occupancy (m2)
Kg CO2e / GIFA m2
Note: Our materiality threshold for carbon emissions is > 1%
6,283.6
525
0.10
26.0
11.0
6,470.0
501
0.09
26.5
11.1
5,681.8
445
0.08
22.6
9.8
4,908.0
417
0.06
17.3
7.7
4,456.2
355
0.04
14.6
7.2
4,126.9
147
0.04
12.7
6.6
Further information on GHG emissions and on other sustainability initiatives at Big Yellow is provided in our Corporate Social Responsibility Report.
Capital structure
Details of the authorised and issued share capital, together with details of the movements in the Company's issued share capital during the year are shown
in note 22. The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the right to one vote at general meetings
of the Company.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of
Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company's shares that may result in restrictions
on the transfer of securities or on voting rights.
Details of employee share schemes are set out in note 23, and details of shares held by the Company’s Employee Benefit Trust are set out in note 22.
No person has any special rights of control over the Company's share capital and all issued shares are fully paid.
With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the Corporate Governance Code, the
Companies Acts and related legislation. The Articles themselves may be amended by special resolution of the shareholders. The powers of Directors are
described in the Report on Corporate Governance from page 64.
There are a number of agreements that take effect, alter or terminate upon a change of control of the Company such as commercial contracts, bank loan
agreements, property lease arrangements and employee share plans. Furthermore, the Directors are not aware of any agreements between the Company
and its Directors or employees that provide for compensation for loss of office or employment that occurs because of a takeover bid.
During the year the Company issued 513,580 shares to satisfy the exercise of share options (2016: 732,302).
61
Directors’ Report (continued)
Directors
The Directors of the Company who served throughout the year and to the date of approval of the financial statements were as follows:
Tim Clark Senior Independent Director
Richard Cotton Non-Executive Director
James Gibson Chief Executive Officer
Georgina Harvey Non-Executive Director
Steve Johnson Non-Executive Director
Adrian Lee Operations Director
Mark Richardson Non-Executive Director
John Trotman Chief Financial Officer
Nicholas Vetch Executive Chairman
Biographical details of the Executive and Non-Executive Directors standing for re-election are set out on page 60.
Directors’ indemnities
The Company purchases liability insurance covering the Directors and officers of the Company and its subsidiaries.
Political contributions
No political donations were made by the Company in either the current or preceding financial year.
Substantial shareholdings
The Company had been notified, in accordance with Chapter 5 of the Disclosure and Transparency rules, of the following voting rights as a shareholder of the
Company at 31 March 2017 and 22 May 2017.
Cohen & Steers Inc
Blackrock Inc
Old Mutual Plc
Ameriprise Financial Inc
PGGM Investments
LaSalle Investment Management
State Street Global Advisors Limited
No. of
ordinary shares
31 March 2017
13,659,535
11,271,724
8,983,009
6,169,744
5,380,776
5,055,933
4,811,518
Percentage of
voting rights
and issued
share capital
31 March 2017
No. of
ordinary shares
22 May 2017
Percentage of
voting rights
and issued
share capital
22 May 2017
8.7% 12,651,583
7.1% 12,785,828
8,921,666
5.7%
6,667,121
3.9%
5,435,069
3.4%
4,890,538
3.2%
n/a
3.0%
8.0%
8.1%
5.7%
4.2%
3.4%
3.1%
n/a
State Street Global Advisors Limited holding at 22 May 2017 was below 3%, The interest of the Directors in the share capital of the Company is shown on page 82
of the Remuneration Report.
Purchase of own shares
The Company was granted authority at the AGM in 2016 to purchase its own shares up to a total aggregate value of 10% of the issued nominal capital. That
authority expires at this year’s AGM and a resolution will be proposed for its renewal. During the year the Company made no purchases of its own shares.
Employee consultation
The Group seeks to ensure employee commitment to its objectives in a number of ways. Strategic changes are communicated directly to all staff who are
encouraged to address queries to the Executive Directors. The Directors’ executive meetings are frequently held in stores and in addition Directors and senior
management visit the stores on a regular basis. Furthermore, there are regular team briefings at store level to provide employees with information about the
performance of and initiatives in their store. A wide range of information is also communicated across the Group’s Intranet, including the e-publication of the
Group’s financial results and all press releases, the publication of a quarterly newsletter, and the publication of a weekly operations bulletin.
Employees are encouraged to participate in the Group’s performance through Employee Share Schemes and performance related bonuses. 46% of eligible
employees participate in the Group’s Sharesave Scheme.
The Group’s recruitment policy is committed to promote equality, judging neither by race, nationality, religion, age, gender, disability, sexual orientation, nor
political opinion and to treat all stakeholders fairly.
Disabled employees
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of
members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged.
It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.
62
Human Rights
Big Yellow respects Human Rights and aims to provide assurance to internal and external stakeholders that we are committed to human rights and the
principles of the Universal Declaration of Human Rights.
We are committed to creating and maintaining a positive and professional work environment that reflects and respects the basic rights of freedom to lead a
dignified life, free from fear or want, and where stakeholders are free to express their independent beliefs. Our employment policies and practices reflect a
culture where decisions are made solely on the basis of individual capability and potential in relation to the needs of the business.
Modern Slavery Act
The Group is committed to ensuring that there is no modern slavery or human trafficking in our supply chains or in any part of our business. Our Anti-slavery
Policy reflects our commitment to acting ethically and with integrity in all our business relationships and to implementing and enforcing effective systems
and controls to ensure slavery and human trafficking is not taking place anywhere in our supply chains. Our policy is published in full on our website.
Auditor
In respect of each Director of the Company, at the date when this report was approved, to the best of their knowledge and belief:
> so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
> each Director has taken all the steps that he/she might have reasonably been expected to take as a Director in order to make himself/herself aware of
any relevant audit information and to establish that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with s418 of the Companies Act 2006.
Approved by the Board of Directors and signed on behalf of the Board
Shauna Beavis
Company Secretary
22 May 2017
63
Corporate Governance Report
INTRODUCTION
The Company is committed to the principles of corporate governance contained in the UK Corporate Governance Code that was issued in 2014 by the Financial
Reporting Council (“the Code”) for which the Board is accountable to shareholders. The Board also takes account of the corporate governance guidelines of
institutional shareholders and their representative bodies.
At Big Yellow, we aim to create a culture in which integrity, openness and fairness are rewarded.
We continue to review the composition of the Board to ensure that it has the appropriate skills, knowledge and balance for the effective stewardship of the
Company. There have been no changes to the composition of the Board in the year.
The Board has overall responsibility for the manner in which the Company runs its affairs.
Statement of compliance with the Code
Throughout the year ended 31 March 2017, the Company has been in compliance with the Code provisions set out in section 1 of the 2014 UK Corporate
Governance Code.
Statement about applying the principles of the Code
The Company has applied the principles set out in the Code, including both the main principles and the supporting principles, by complying with the Code as
reported above. Further explanation of how the principles and supporting principles have been applied is set out below and in the Nominations Committee
Report, the Remuneration Report and the Audit Committee Report.
LEADERSHIP
The Board’s role is to provide entrepreneurial leadership of the Company within a framework of prudent and effective controls which enables risk to be assessed
and managed.
Chairman and Chief Executive
The division of responsibilities between the Chairman and the Chief Executive has been agreed by the Board and encompasses the following parameters:
> the Chairman’s role is to provide continuity, experience, governance and strategic advice, while the Chief Executive provides leadership, drives the day-to-day
operations of the business and works with the Chairman on overall strategy;
> the Chairman, working with the Senior Independent Non-Executive Director, is viewed by investors as the ultimate steward of the business and the guardian
of the interests of all the shareholders;
> the Board believes that the Chairman and the Chief Executive work together to provide effective and complementary stewardship;
> the Chairman:
> takes overall responsibility for the composition and capability of the Board;
> takes overall responsibility for the property development team; and
> consults regularly with the Chief Executive and is available on a flexible basis for providing advice, counsel and support to the Chief Executive.
> the Chief Executive:
> manages the Executive Directors and the Group’s day-to-day activities;
> prepares and presents to the Board strategic options for growth in shareholder value;
> sets the operating plans and budgets required to deliver agreed strategy; and
> ensures that the Group has in place appropriate risk management and control mechanisms.
The Directors believe it is essential for the Group to be led and controlled by an effective Board that provides entrepreneurial leadership within a framework of
sound controls which enables risk to be assessed and managed. The Board is responsible for setting the Group’s strategic aims, its values and standards and
ensuring the necessary financial and human resources are in place to achieve its goals. The Board ensures that its obligations to shareholders and other
stakeholders are understood and met. The Board also regularly reviews the performance of management.
EFFECTIVENESS
Composition of the Board
The Nominations Committee is responsible for reviewing the Board Composition, and makes recommendations to the Board on the appointment of Directors.
There are five independent Non-Executive Directors on the Board, with Tim Clark being the Senior Independent Director. The Company complies with the
Combined Code in that at least half of The Board is comprised of independent Non-Executive Directors.
All of the Non-Executive Directors bring considerable knowledge, judgement and experience to Board deliberations. Non-Executive Directors do not participate
in any of the Company’s share option or bonus schemes and their service is non-pensionable. The Non-Executive Directors are encouraged to communicate
directly with Executive Directors between formal Board meetings. The Non-Executive Directors meet at least once a year without the Executive Directors
being present.
The Non-Executive Directors scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.
They are required to satisfy themselves on the integrity of the financial information and that financial controls and systems of risk management are robust
and defensible. They are responsible for determining appropriate levels of remuneration for Executive Directors and have a prime role in appointing and, where
necessary, removing Executive Directors, and in succession planning.
64
EFFECTIVENESS (continued)
Composition of the Board (continued)
The tenure of the independent Non-Executive Directors at 31 March 2017 is set out below:
Georgina Harvey
Richard Cotton
Steve Johnson
Tim Clark
Mark Richardson
3.8
4.8
6.6
8.7
8.8
0
1
2
3
5
4
years
6
7
8
9
Changes to the Board and its Committees
Mark Richardson has informed the Board of his intention to retire from the Board at the forthcoming Annual General Meeting. The Board is currently recruiting
for his replacement as a Non-Executive Director and Audit Committee Chair. It is anticipated that the replacement will be announced before the Company’s
Annual General Meeting.
Tim Clark is to stand down as the Senior Independent Director with effect from the Annual General Meeting. He will remain as a Non-Executive Director for a
further year, to provide continuity in light of Mark Richardson’s retirement, after which he has indicated he will retire from the Board. The Board will commence
recruitment for Tim’s replacement during the forthcoming financial year, with a view to a new independent Non-Executive Director being in place by March
2018. Notwithstanding this, the Board believes that Tim Clark should be considered an independent Non-Executive, even though he has served on the Board
for nine years exceeding the Combined Code recommended limit. This was concluded after considering his integrity and the effectiveness with which he
carries out his responsibilities to the Company.
Richard Cotton will replace Tim Clark as the Senior Independent Director and also as Chair of the Nominations Committee with effect from the forthcoming
Annual General Meeting. Georgina Harvey will replace Tim Clark as Chair of the Remuneration Committee with effect from the forthcoming Annual General Meeting.
THE BOARD AND ITS COMMITTEES
Standing committees of the Board
The Board has Audit, Remuneration and Nominations Committees, each of which has written terms of reference. They deal clearly with the authorities and
duties of each Committee and are formally reviewed annually. Copies of these terms of reference are available on the Company’s website. Each of these
Committees is comprised of Independent Non-Executive Directors of the Company who are appointed by the Board on the recommendation of the
Nominations Committee.
All of the Committees are authorised to obtain legal or other professional advice as necessary; to secure, where appropriate, the attendance of external advisers
at its meetings and to seek information required from any employee of the Company in order to perform its duties.
The Chairman of each Committee reports the outcome of the meetings to the Board. The Company Secretary is secretary to each Committee.
Attendance at meetings of the individual Directors at the Board Meetings that they were eligible to attend is shown in the table below:
Director Position Number of meetings attended
Tim Clark Non-Executive Director
Richard Cotton Non-Executive Director
James Gibson Chief Executive Officer
Georgina Harvey Non-Executive Director
Steve Johnson Non-Executive Director
Adrian Lee Operations Director
Mark Richardson Non-Executive Director
John Trotman Chief Financial Officer
Nicholas Vetch Executive Chairman
attended
absent
Adrian Lee, Mark Richardson and Steve Johnson each missed one meeting due to unavoidable business commitments.
65
Corporate Governance Report (continued)
THE BOARD AND ITS COMMITTEES (continued)
Standing committees of the Board (continued)
The Board meets approximately once every two months to discuss a whole range of significant matters including strategic decisions, major asset acquisitions
and performance. A procedure to enable Directors to take independent professional advice if required has been agreed by the Board and formally confirmed
by all Directors.
There is a formal schedule of matters reserved for the Board’s attention including the approval of Group strategy and policies; major acquisitions and disposals,
major capital projects and financing, Group budgets and material contracts entered into other than in the normal course of business. The Board also considers
matters of non-financial risk as part of its review of the Group’s risk register.
At each Board meeting, the latest available financial information is produced which consists of detailed management accounts with the relevant comparisons
to budget. A current trading appraisal is given by the Executive Directors.
Information and professional development
All Directors are provided with detailed financial information throughout the year. On a weekly basis they receive a detailed occupancy report showing the
performance of each of the Group’s open stores. Management accounts are circulated to the Executive monthly and a detailed Board pack is distributed a
week prior to each Board meeting.
All Directors are kept informed of changes in relevant legislation and changing commercial risks with the assistance of the Company’s legal advisers and
auditor where appropriate. The professional development requirements of Executive Directors are identified and progressed as part of each individual’s annual
appraisal. All new Directors are provided with a full induction programme on joining the Board.
Non-Executive Directors are encouraged to attend seminars and undertake external training at the Company’s expense in areas they consider to be appropriate
for their own professional development. Each year, the programme of senior management meetings is tailored to enable meetings to be held at the Company’s
properties. During the year, the Executive Directors made visits to all of the Group’s stores.
ACCOUNTABILITY
Risk management and internal control
The Group operates a rigorous system of risk management and internal control, which is designed to ensure that the possibility of misstatement or loss is
kept to a minimum. There is a comprehensive system in place for financial reporting and the Board receives a number of reports to enable it to carry out these
functions in the most efficient manner. These procedures include the preparation of management accounts, forecast variance analysis and other ad hoc
reports. There are clearly defined authority limits throughout the Group, including those matters which are reserved specifically for the Board.
The Board has applied principle C.2 of the UK Corporate Governance Code by establishing a continuous process for identifying, evaluating and managing the
significant risks the Group faces and for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The
Board regularly reviews the process, which has been in place from the start of the year to the date of approval of this report and which is in accordance with
revised guidance on internal control published in October 2005 (the Turnbull Guidance). The Board is also responsible for the Group's system of internal control
and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only
provide reasonable and not absolute assurance against material misstatement or loss.
In compliance with provision C.2.1 of the Code, the Board regularly reviews the effectiveness of the Group's risk management and internal control systems.
The Board's monitoring covers all controls, including financial, operational and compliance controls and risk management. It is based principally on reviewing
reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses
are promptly remedied and indicate a need for more extensive monitoring. The Board has also performed a specific assessment for the purpose of this annual
report. This assessment considers all significant aspects of risk management and internal control arising during the period covered by the report, including
the work carried out by the Group’s Store Compliance team. The Audit Committee assists the Board in discharging its review responsibilities.
A formal risk identification and assessment exercise has been carried out resulting in a risk framework document summarising the key risks, potential impact
and the mitigating factors or controls in place. The Board have a stated policy of reviewing this risk framework at least once a year or in the event of a material
change. The risk identification process also considered significant non-financial risks.
During the reviews, the Directors:
> challenged the framework to ensure that the list of significant risks to business objectives is still valid and complete;
> considered new and emerging risks to business objectives and included them in the framework if significant;
> ensured that any changes in the impact or likelihood of the risks are reflected in the risk framework; and
> ensured that there are appropriate action plans in place to address unacceptable risks.
The results of the exercise have been communicated to the Board and the Audit Committee. This was in the form of a summary report which included:
> a prioritised summary of the key risks and their significance;
> any changes in the list of significant risks or their impact and likelihood since the last assessment;
> new or emerging risks that may become significant to business objectives in the future;
> progress on action plans to address significant risks; and
> any actual or potential control failures or weaknesses during the period (including “near misses”).
66
ACCOUNTABILITY (continued)
Risk management and internal control (continued)
During the course of its review of the risk management and internal control systems, the Board has not identified, nor been advised of any failings or
weaknesses which it has determined to be significant, consistent with the prior year. Therefore, a confirmation in respect of necessary actions has not been
considered appropriate.
GOING CONCERN
The Group’s activities, and a fair review of the business, are included in the Strategic Report on pages 16 to 30. The financial position of the Group, including
its cash flow, liquidity, and committed debt facilities are discussed in the Financial Review on pages 31 to 39.
The Directors have a reasonable expectation that the Group and Company have adequate resources to continue operations for the foreseeable future. They
have therefore continued to adopt the going concern basis in preparing the financial statements.
SHAREHOLDER RELATIONS
The Board aims to achieve clear reporting of financial performance to all shareholders and acknowledges the importance of an open dialogue by both Executive
and Non-Executive Directors with its institutional shareholders. The Board believes that the Annual Report and Accounts play an important part in presenting
all shareholders with an assessment of the Group’s position and prospects.
The Company has an active dialogue with its shareholders through a programme of investor meetings which include formal presentation of the full and half
year results. The Executive Directors have participated in investor conferences and meetings during the year throughout the United Kingdom, and also in the
United States, South Africa and the Netherlands. During the year ended 31 March 2017, the Chief Executive and other Executive Directors carried out 237
meetings with UK and overseas institutional shareholders and potential investors. These meetings comprised group and individual presentations and tours
of our stores.
The Board also welcomes the interest of private investors and believes that, in addition to the Annual Report and the Company’s website, the Annual General
Meeting is an ideal forum at which to communicate with investors and the Board encourages their participation. At each Board Meeting, the Board is updated
on any shareholding meetings that have taken place, and any views expressed or issues raised by the shareholders in these meetings.
Any queries raised by a shareholder, either verbally or in writing, are answered immediately by whoever is best placed on the Board to do so. Directors are
introduced to shareholders at the AGM, including the identification of Non-Executive Directors and Committee Chairmen. The number of proxy votes cast in
the resolution is announced at the AGM.
67
Report of the Nominations Committee
Introduction
The Committee is responsible for reviewing the Composition of the Board. It also makes recommendations for membership of the Board and considers
succession planning for Directors. The Committee is also responsible for evaluating Board and Committee performance.
Committee members and attendance
Member Position Number of meetings attended
Tim Clark Chairman and Senior Independent Director
Richard Cotton Member
Georgina Harvey Member
Steve Johnson Member
Mark Richardson Member
attended
absent
Steve Johnson missed one meeting due to an unavoidable business commitment.
Richard Cotton will replace Tim Clark as the Senior Independent Director and the Chairman of the Nominations Committee with effect from the Company’s
2017 AGM.
The Nominations Committee is responsible for reviewing the structure, size and composition of the Board and giving consideration to succession planning for
Directors and other senior Executives. Where changes are required, it is also responsible for the identification, selection and proposal to the Board for approval
of persons suitable for appointment or reappointment to the Board, whether as Executive or Non-Executive Directors and to seek approval from the Remuneration
Committee to the remuneration and terms and conditions of service of any proposed Executive Director appointment. The Chairman of the Committee reports
to the Board as appropriate to enable the Board as a whole to agree the appointments of new Directors. The Committee meets at least once a year and otherwise
as required and as determined by its members.
The terms and conditions of appointment for the Non-Executive Directors is available for inspection at the Company’s Head Office during normal working hours.
They are also available for inspection at the Company’s AGM.
Board performance evaluation
During the year the Board engaged Lomond Consulting to undertake an evaluation of the performance of the Board and its Committees. The aim was to seek
to identify areas where the performance and the procedures of the Board may be improved. The scope of the review was agreed between the Chairman of the
Committee and the Chief Executive.
Each Director completed a questionnaire on the performance of the Board, its Committees and the Chairman. Each Director was then interviewed in person
by Lomond Consulting. The responses were anonymous to enable an open and honest sharing of views. Lomond Consulting then produced a report showing
the results of the review.
The key topic discussed as part of the review was succession planning, which is further discussed in the section below, albeit the Committee considered no
further action was necessary.
During the current year, the Executive Chairman evaluated the performance of the other Executive Directors, and the performance of the Chairman was
evaluated by the Senior Independent Non-Executive Director. It was considered that the individuals, the Committees and the Board as a whole were operating
effectively, with appropriate procedures put in place for minor areas identified for improvement.
Succession planning
The Board comprises a team of four Executive Directors, two of whom were co-founders of the Company, complemented by Non-Executive Directors who have
wide business experience and skills as well as a detailed understanding of the Group’s philosophy and strategy. Continuity of experience and knowledge,
particularly of self storage, within the executive team is particularly important in a focussed long-term business such as Big Yellow.
It is a key responsibility of the Committee to advise the Board on succession planning. The Committee ensures that any future changes in the Board’s
composition are foreseen and effectively managed. In the event of unforeseen changes, the Committee ensures that management and oversight of the Group’s
business and long-term strategy will not be affected.
The Committee also addresses the development and continuity of the Senior Management team below Board level.
68
Policy on diversity
All aspects of diversity, including gender are considered at every level of recruitment. All appointments to the Board are made on merit. The Board’s policy
states that the Board seeks a composition with the right balance of skills and diversity to meet the demands of the business. The Board considers it is important
to increase the representation of women on the Board, and intends to increase the proportion of women on the Board in the medium term, but does not
consider that quotas are appropriate and has therefore chosen not to set targets. That said, the Board will look to recruit a female Non-Executive Director to
replace Tim Clark when he retires from the Board next year.
Gender diversity of the Board and Company is set out below (senior management are defined to be Heads of Department):
Male
8
6
211
Female
1
5
150
Total
9
11
361
Board
Senior Management
All employees
100%
11%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
45%
42%
89%
55%
58%
Female
Male
Board
Senior
Management
All
employees
Directors standing for re-election
All of the Directors will retire in accordance with the UK Corporate Governance Code and, with the exception of Mark Richardson, will offer themselves for
re-election at the Annual General Meeting.
Following a performance appraisal process, the Board has concluded that the Directors retiring by rotation are effective, committed to their roles and operate
as effective members of the Board.
The Board, on the advice of the Committee, therefore recommends the re-election of each Director standing for re-election. Full biographical details of each
Director are available on page 60.
Tim Clark
Nominations Committee Chairman
69
Remuneration Report
Year ended 31 March 2017
INTRODUCTION
This report describes the activities of the Remuneration Committee for the period from 1 April 2016 to 31 March 2017. It sets out a summary of the Directors’
Remuneration Policy (“the Remuneration Policy”), which was approved by shareholders in July 2015, and remuneration details for the Executive and
Non-Executive Directors of the Company. It has been prepared in accordance with Schedule 8 of the Large and Medium-size Companies and Groups (Accounts
and Report) Regulations 2013 (the “Regulations”).
The report is divided into three main areas:
> the annual statement by the Remuneration Committee Chairman;
> the summary of the approved Remuneration Policy; and
> the annual report on Directors’ remuneration.
The Companies Act 2006 requires the auditor to report to the shareholders on certain parts of the Remuneration Report and to state whether, in their opinion,
those parts of the report have been properly prepared in accordance with the Regulations. The parts of the annual report on Directors’ remuneration which
are subject to audit are indicated in the report. The annual statement by the Remuneration Committee Chairman and the summary of the approved Remuneration
Policy are not subject to audit.
ANNUAL STATEMENT BY THE REMUNERATION COMMITTEE CHAIRMAN
Dear Shareholder,
I am very pleased to present the Directors’ Remuneration Report for the year ended 31 March 2017. This report has been prepared by the Remuneration
Committee and approved by the Board.
Business conditions and Group performance in the year ended 31 March 2017
The business conditions and performance of the Group in the year ended 31 March 2017 are described more fully in the Chairman's Statement and
the Operating and Financial Review of this Annual Report. In summary:
> the business of the Group performed strongly;
> in an improving economic environment, Big Yellow remained the clear UK brand leader in self storage and delivered occupancy, cash flow and
earnings growth for the eighth year in a row;
> revenue, cash flow and adjusted profit before tax increased by 8%, 10% and 11% respectively;
> like-for-like occupancy was increased by 2.8 ppts;
> the capital structure remains robust with interest cover of 6.2 times; and
> dividends are being increased by 11%.
Policy on executive remuneration
The Committee is keenly aware of the sensitivity of the public, shareholders and the government regarding executive remuneration currently.
The Committee is also mindful of the concerns beings raised by these parties around the effectiveness of remuneration structures and the alignment
of remuneration with shareholder interests and business outcomes. The Committee continues to closely monitor the latest developments in the
executive remuneration space to ensure that our remuneration policy and its operation continues to remain fit-for-purpose for the Company.
The policy of the Company is to ensure that the executive remuneration packages are designed to attract, motivate and retain Directors of high calibre
and reward the Executive Directors for protecting and enhancing value for shareholders. The Policy aims to provide:
> remuneration to the Directors which is fair to the Directors both generally and in the context of the remuneration of other staff of the Company
and the returns to shareholders; and
> a balance of short and long term incentives which provide a strong link between reward of individual and Group performance to align the interests
of the Executive Directors with the interests of shareholders.
The Committee believes that the success of the remuneration policy is reflected in the length of service, stability and strong performance of the
Executive Director team. Two of the Executive Directors were founders of the Company while the other two have been Executive Directors for 18 years
and ten years respectively. The Executive Directors have significant interests in the shares of the Company, each in excess of two times base salary,
which is the Company’s shareholding guideline for Executive Directors. The Executive Directors are interested in shares comprising approximately
9% of the share capital of the Company (including unvested share incentives held).
The Committee does not intend to make any revisions at the 2017 AGM to the Policy approved in 2015. The Committee will be putting a new policy to
a shareholder vote at the AGM in 2018 (as the current policy expires at that time).
A summary of the approved Policy is provided in the Directors’ Remuneration Policy section of the Directors’ Remuneration Report and the full Policy
is available online (http://corporate.bigyellow.co.uk/investors).
70
Remuneration changes during the year
All of the changes in remuneration in the year ended 31 March 2017 were within the Policy. In summary, the changes related to an increase in base
salary of 2%, in line with the Group’s staff.
Within the aggregate figure for Executive Director remuneration, the changes during the year were:
> Base salary: increased by £20,000 (2%) – in line with increases provided to staff
> Taxable benefits: increased by £4,000 (25%)
> Annual bonus: was 10% of salary for the year – in line with the average for all staff of the Company (compared to 12% in the prior year) a reduction
of £18,000 (15%).
> Pension contributions: remained at 15% of base salary, and therefore increased in line with the increase in base salaries by 2% (£3,000).
> Sharesave Scheme: there were no gains from Sharesave schemes in the year (2016: one Director’s Sharesave Scheme vested producing a gain
of £14,000 in total)
> Long term incentives:
> the 2013 award of shares granted under the LTIP vested at 100% (representing a total gain for all of the Executive Directors of £1,566,000).
As in the previous year, each of the Executive Directors was granted an award equal to 100% of base salary subject to performance conditions.
The value of these awards was £1,004,000 – an increase of £20,000 (2% in line with the increase in base salary); and
> no awards were made under the Long Term Bonus Performance Plan (“LTBPP”) in the year (2016: total awards of £4.43 million were made to
the four Executive Directors). The Remuneration Committee reviewed the performance targets for the year and concluded that, based on
the relative achievement of those targets, the awards under the Plan have provisionally vested at 90% in respect of the year ended 31 March
2017. The provisional vesting for the year ended 31 March 2016 was 90%. There is a further year’s performance on which the LTBPP is assessed
and a final assessment of the whole three year period to March 2017 is then made. This final assessment will determine the extent to which
the awards vest.
> Salaries for the Executive Directors for the year ending 31 March 2018 have been increased by 2%, in line with the increase applied to all Group
staff. There are no other changes to the remuneration structure for the year ending 31 March 2018.
In considering the relative importance of the spend on pay (see page 84):
> Total employee pay: increased by 3%, (and amounted to £15.6 million)
> Profit distributed by way of dividend: increased by 13% (and amounted to £41.2 million)
> Retained profit for the year: reduced by 23% (and amounted to £58.4 million)
As part of the remuneration package for our employees, we operate an Employee Share Save Scheme (“SAYE”) which allows any employee who has
more than six months’ service to save annually up to £6,000, over a three year savings contract with the ability under the scheme to purchase shares
at a 20% discount to the average quoted market price of the Group shares at the date of grant of the SAYE option. In addition, our annual bonus scheme
provides an opportunity for all our employees to earn a bonus based on the performance of the store they are based in against their store KPIs and
targets for the year.
More details of the remuneration of the Directors in the year ended 31 March 2017 are set out in the Annual Report on Remuneration section of the
Remuneration Report.
AGM
I hope that, at the Annual General Meeting in July, you will support the advisory resolution on the remuneration paid to the Directors in the last financial
year set out in the Annual Remuneration Report section of this Remuneration Report.
Tim Clark
Chairman of the Remuneration Committee
71
Remuneration Report (continued)
Year ended 31 March 2017
REPORT ON DIRECTORS’ REMUNERATION POLICY
This section of the Remuneration Report contains a summary of the Company’s Directors’ Remuneration Policy (“the Policy”) which governs the Company’s
approach to remuneration. The Policy was approved by shareholders at the Company’s AGM in July 2015 and is applicable for a period of three years, unless
shareholder approval is sought within that period to amend the Policy.
It is the policy of the Company to ensure that the executive remuneration packages are designed to attract, motivate and retain Directors of a high calibre and
reward the executives for enhancing value to shareholders.
The Committee deals with all aspects of remuneration of the Executive Directors, including:
> setting salaries;
> agreeing conditions and coverage of annual incentive schemes and long term incentives;
> policy for and scope of pension arrangements;
> determining targets for performance-related schemes;
> scope and content of service contracts; and
> deciding the extent of compensation (if any) on termination of service contracts.
The Committee’s members are currently Tim Clark (Committee Chairman), Richard Cotton, Georgina Harvey, Steve Johnson and Mark Richardson. Georgina
Harvey will replace Tim Clark as Chairman of the Committee at the 2017 AGM.
The Remuneration Committee’s Terms of Reference are available on the Company website. The Committee met three times during the year.
Summary of the Directors’ Remuneration Policy (“the Policy”)
The main components of the Policy and how they are linked to, and support, the Company’s business strategy are summarised below.
The full policy which was approved by shareholders in July 2015 is available on the Company’s website at www.corporate.bigyellow.co.uk/investors.aspx. This
includes details of the policy regarding target-setting; remuneration arrangements for new appointments; payments for loss of office and other matters.
Element
Operation of element
Salary, Benefits
and Pension
Salaries are reviewed annually and typically set on 1 April after considering the salary levels in companies of a similar size and
complexity in the FTSE 250.
To provide a level of
fixed compensation
that can attract and
retain talent required
to successfully
deliver on our
business strategy.
When considering any increases to base salaries in the normal course (as opposed to a change in role or responsibility),
the Committee will take into consideration:
> level of skill, experience, scope of responsibilities and performance;
> business performance, economic climate and market conditions;
> increases provided to Executive Directors in comparable companies;
> pay and employment conditions of employees throughout the Group, including increases provided to staff; and
> inflation.
Our overall policy is normally to target salaries at close to (but generally below) median levels.
Base salaries are intended to increase in line with inflation and general employee increases in salary; higher increases may be
applicable if there is a change in role, level of responsibility or experience or if the individual is new to the role.
The level of benefits provided is reviewed annually to ensure they remain market competitive. Benefits currently include:
private fuel, private medical insurance, permanent health insurance and life assurance.
The maximum contribution to an Executive Director’s pension or salary supplement is 20% of gross basic salary. Executive
Directors currently receive a contribution of 15% of salary.
Annual bonus
Maximum opportunity of 25% of salary with 10% of salary payable at target and 0% payable at threshold.
Awards are directly aligned to the level of staff bonus and therefore linked to store performance, which is measured based on
occupancy growth and net contribution, customer satisfaction and store standards.
To provide cash
awards which aligns
reward to key Group
strategic objectives
and drives short-
term performance.
Long Term Incentive
Plan (“LTIP”)
LTIP maximum grant is 100% of salary per annum with grants normally made at the maximum. Awards (granted from 2015
onwards) will vest at the end of a three year performance period subject to:
> EPS (70% of award) which provides a link to earnings growth and value creation in the Company; and
> Relative TSR (30% of award) which provides a link to delivering returns in excess of companies in the FTSE Real Estate Index.
The LTIP contains clawback and malus provisions.
To align Executive
Directors’ interests
with those of
shareholders and
rewards value
creation.
72
Summary of the Directors’ Remuneration Policy (“the Policy”) (continued)
Element
Operation of element
The total maximum incentive value awarded across all four Executive Directors will not exceed 4 x 450% of base salary (over a
three year performance period); however each individual will have the potential to be awarded a maximum of 675% of base
salary (so long as the total maximum is not exceeded).
Vesting depends on an assessment of performance (over three years but reviewed annually) against a series of financial and
non-financial targets aligned with the annual business plan.
The value accrued to participants may be subject to clawback if subsequent performance reflects adversely on achievement of
the targets. The LTBPP also contains malus provisions.
A further holding period will apply to 50% of the award, such that 25% will be released one year after vesting and the remaining
25% will be released two years after vesting, so that the full release of vested entitlements takes place over five years.
Within the constraints of business confidentiality, performance measures for each year are disclosed in the corresponding
Annual Report on Remuneration – the information for this year can be found on pages 78 and 79.
This HMRC approved scheme allows employees to align their interests with those of investors and also to share in the long-term
success of the Company. The annual allowance for investing in the Sharesave scheme is £6,000.
Each Executive Director is required to build and maintain a holding of at least two times base salary in shares of the Company,
through retaining at least 50% of shares vesting in share plans if this guideline has not been met.
Long Term Bonus
Performance Plan
To ensure that the
total remuneration
package is more
competitive,
supports the
Company’s strategy
and its ability to
react to changing
economic and
business
circumstances.
Sharesave Scheme
To encourage share
ownership by all
employees.
Shareholding
Ensures that
Executive Directors’
interests are aligned
with shareholders’
over a longer time
period.
Non-Executive
Director Fees
Fee levels are normally reviewed annually in March and are set at broadly median levels for comparable roles at companies of a
similar size and complexity within the FTSE250.
Fees are intended to rise in line with inflation.
The fees may be paid in the form of shares.
Provides a level
of fees to support
recruitment and
retention of Non-
Executive Directors
with the necessary
experience to advise
and assist with
establishing and
monitoring the
Group’s strategic
objectives.
73
Remuneration Report (continued)
Year ended 31 March 2017
Illustrations of application of the Policy
The graph below seeks to demonstrate how pay varies with performance for the Executive Directors based on the Policy approved by shareholders. This is
based on pay for the year ending 31 March 2018.
Element
Fixed
Annual variable
Multiple period
variable
Description
Total amount of salary, pension and benefits.
Money or other assets received or receivable for the reporting period as a result of the achievement of performance conditions
that relate to that period (i.e. annual bonus payments).
Money or other assets received or receivable for multiple reporting periods as a result of the achievement of performance
conditions over a given period under the LTIP and LTBPP. For the purposes of these charts, the LTBPP is represented by one-third
of the potential vesting as it is granted once every three years. This provides a better comparison from year to year and against
other companies.
Assumptions used in determining the level of pay out under given scenarios are as follows:
Element
Minimum
On-target
Maximum
Description
Fixed pay only (no variable payments under annual bonus and Company’s LTIP or LTBPP).
40% of annual bonus award being paid (i.e. 10% of basic salary), 50% vesting of the LTIP and 50% vesting of the annualised value
of the three year LTBPP.
100% of annual bonus award being paid (i.e. 25% of basic salary) and 100% vesting of the LTIP, one-third of 100% vesting of the
three year LTBPP.
Executive Chairman
CEO
£1,200,000
£1,000,000
£800,000
£600,000
£1,001,000
£656,000
61%
£400,000
£325,000
£200,000
100%
46%
4%
50%
7%
32%
£0
Minimum
Median
Maximum
Operations Director
£1,000,000
£800,000
£600,000
£400,000
£264,000
£200,000
100%
£876,000
£564,000
49%
4%
47%
64%
6%
30%
£0
Minimum
Median
Maximum
Multi-period variable
Annual variable
Fixed elements
Multi-period variable
Annual variable
Fixed elements
£1,400,000
£1,200,000
£1,000,000
£800,000
£600,000
£400,000
£200,000
£0
£1,214,000
£778,000
£356,000
100%
50%
4%
46%
65%
6%
29%
Minimum
Median
Maximum
CFO
£1,000,000
£800,000
£600,000
£876,000
£564,000
64%
£400,000
£264,000
£200,000
100%
49%
4%
47%
6%
30%
£0
Minimum
Median
Maximum
Multi-period variable
Annual variable
Fixed elements
Multi-period variable
Annual variable
Fixed elements
74
ANNUAL REPORT ON REMUNERATION
This section of the Remuneration Report contains details of how the Directors’ Remuneration Policy (“the Remuneration Policy”) was implemented during the
year ended 31 March 2017. The individual sections of this report which are required by the Regulators to be subject to audit are:
> Single figure table and notes;
> Scheme interests awarded during the financial year;
> Payments to past Directors;
> Payments for loss of office; and
> Statement of Directors’ shareholding and share interests.
Single total figure of remuneration
The table below sets out the single total figure of remuneration and breakdown for each Executive Director paid in the year ended 31 March 2017. The figures
have been calculated in accordance with the remuneration disclosure regulations.
Salary Taxable benefits1 Annual bonus Long term incentives Pensions2 Sharesave Scheme Total
£ £ £ £ £ £ £
Year ended
31 March 2017 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Nicholas Vetch 269,800 264,500 5,313 4,081 26,980 31,740 433,011 548,680 40,470 39,675 – – 775,574 888,676
James Gibson 296,000 290,100 5,713 4,681 29,600 34,812 474,914 601,738 44,400 43,515 – 13,965 850,627 988,811
Adrian Lee 219,300 215,000 4,806 4,041 21,930 25,800 329,102 404,353 32,895 32,250 – – 608,033 681,444
John Trotman 219,300 215,000 2,061 2,227 21,930 25,800 329,102 404,353 32,895 32,250 – – 605,288 679,630
Total 1,004,400 984,600 17,893 15,030 100,440 118,152 1,566,129 1,959,124 150,660 147,690 – 13,965 2,839,522 3,238,561
Taxable benefits comprise medical cover, permanent health insurance, life insurance and private fuel usage.
(1)
(2) Nicholas Vetch and James Gibson receive a cash supplement in lieu of their full pension contributions. Adrian Lee and John Trotman receive cash supplements in lieu of pension
contributions above £10,000.
The value shown in long term incentives in the current year is the LTIP award granted in 2013 which vested on 22 July 2016 to 100% of its maximum value
and is valued using the share price on that date of 718.5p. The award granted for 2017 is 100% of salary for each Executive Director.
The average salary increase across the Group in the year was 2%; this increase was also applied to the Executive Directors for the year.
The value shown for the Sharesave Scheme in the prior year is the value of the shares under option at vesting less each Director’s contributions to the scheme.
Annual Bonus Plan awards
The policy of the Company is that the bonus paid to the Executive Directors is the same as the average of the bonus awards (as a % of salary) paid to all the
Group’s stores on achieving their targets during the course of the year. It is an important part of the Group’s culture that the Executive team are rewarded with
the same level of annual bonus as the average for all staff.
In respect of the year under review, the Executive Directors’ performance was carefully reviewed by the Committee, in consultation with the Executive Chairman
in respect of the other Executive Directors, and it was determined that the performance in the year by the Executive Directors results in a bonus of 10% of
salary in line with the average bonus as a percentage of salary paid across the stores.
Overview of the staff bonus scheme
The staff bonus scheme is designed, on a quarterly basis, to reward each store with a bonus of up to 25% of their quarterly salary, made up of the following
four key elements set out below:
Occupancy performance against target
Each store is set a quarterly target for occupancy growth. The weighting of the contribution of these metrics to the bonus varies based on store occupancy,
with higher occupied stores having a lower weighting towards their performance against their occupancy target.
The bonus awarded to each store increases as the store moves further ahead of target. No bonus is awarded if the store fails to meet its target. The individual
store targets have not been disclosed as it would be impractical and commercially sensitive to disclose the targets for every one of our 73 stores in this report.
However following feedback received from our shareholders on last year’s report to increase the disclosure around the annual bonus, we have shown the
average annual distribution of performance against target for each of the bonus measures across our stores and the corresponding average pay-out as a
percentage of salary which directly corresponds to the bonus percentage pay-out for the Executive Directors.
75
Remuneration Report (continued)
Year ended 31 March 2017
Annual Bonus Plan awards (continued)
The average performance against the four key targets and the associated reward for the stores were as follows:
1. Occupancy
Performance
against target
Below target
0 to 10% ahead
of target
10 to 20% ahead
of target
20 to 30% ahead
of target
30 to 40% ahead
of target
> 40% ahead
of target
No of stores
Average bonus paid
39
0%
2
0.7%
3
2.0%
3
4.5%
3
5.9%
23
8.7%
Total
73
3.1%
Additionally, eight stores were awarded bonuses for averaging 85% occupancy and above earning a total weighted average bonus of 0.2%. The weighted average
bonus paid to stores for performance against occupancy targets is therefore 3.3% of salary for the year.
2. Profitability
Each store is set a quarterly target for profitability. The weighting of the contribution of these metrics to the bonus varies based on store occupancy, with
higher occupied stores having a higher weighting towards their performance against their profitability target.
The bonus awarded to each store increases as the store moves further ahead of target. No bonus is awarded if the store fails to meet its target. The performance
distribution of the store’s performance against their individual targets are provided below.
Performance
against target
No of stores
Average bonus paid
Below target
0 to 1% ahead
of target
1 to 2% ahead
of target
2 to 3% ahead
of target
>3% ahead
of target
37
0%
14
3.3%
11
4.2%
7
9.2%
4
9.7%
Total
73
2.7%
The weighted average bonus paid to stores for performance against profitability targets is therefore 2.7% of salary for the year.
3. Store audits
Stores receive a bonus if they receive an audit score of in excess of 85% based on visits carried out by the Group’s store compliance team. There were
31 instances of stores receiving an audit score of 85% and above across the year, leading to a weighted average bonus paid to the stores of 0.7% of salary.
4. Customer satisfaction
Stores are rewarded based on two elements of customer satisfaction, net promoter scores and individual customer service awards. The awards based on net
promoter scores are summarised in the table below.
NPS score
No of stores
Average bonus paid
<65
9
0%
65 to 75
75 to 80
20
1.3%
15
2.3%
>80
29
2.9%
Total
73
1.9%
The weighted average bonus paid to stores for performance against net promoter scores is therefore 1.9% of salary for the year.
The bonus paid to stores for individual customer service awards amounted to a further 1.4% of salary, which, combined with the net promoter score, amounted
to a weighted average bonus paid to the stores for Customer satisfaction of 3.3% of salary.
Summary
The bonus received by the stores against their targets in the year is summarised as follows.
Category
Actual % weighting for category
Average % of salary bonus paid across stores
1. Occupancy 33% 3.3%
2. Profitability 27% 2.7%
3. Store audits 7% 0.7%
4. Customer satisfaction 33% 3.3%
Total 100% 10%
76
Annual Bonus Plan awards (continued)
In line with the Remuneration Policy an award at this level has therefore also been paid to the Executive Directors for the year.
The performance in the year resulted in a bonus of 10% of salary, which equated to the following payments for the Executive Directors:
> Nicholas Vetch – £26,980
> James Gibson – £29,600
> Adrian Lee – £21,930
> John Trotman – £21,930
Long Term Incentive Plan (“LTIP”) awards
The awards granted under the LTIP are subject to performance conditions to be met over a performance period of three years. There is no retesting of
performance conditions and, if they are not satisfied, the awards will lapse.
The performance conditions applicable to the LTIP which vested in the year, which relate to EPS and TSR, are set out below.
Vesting is conditional on the achievement of EPS growth of an average of 3% above RPI per annum. This hurdle was met for the 2013 awards, with average
annual growth in EPS of 20%, compared to RPI plus 3% of 6% per annum.
The Committee assessed the extent to which the TSR performance condition has been satisfied for the 2013 award which vested in 2016, with the following
results:
Condition
Relative TSR
Weighting
100%
Total
100%
Threshold
performance
required
Median of
comparator group
of real estate
companies
Maximum
performance
required
Upper quartile of
the comparator
group
LTIP value for meeting
threshold and maximum
performance (% salary)
Performance
achieved
25% – 100%
4 out of 34 in
comparator group
of companies in
the FTSE Real
Estate Index
Vesting %
100%
100%
The full vesting of the 2013 LTIP award in 2016, equated to the following value for the Executive Directors based on the share price at the date of vesting:
> Nicholas Vetch – £433,011 (60,266 shares)
> James Gibson – £474,914 (66,098 shares)
> Adrian Lee – £329,102 (45,804 shares)
> John Trotman – £329,102 (45,804 shares)
LTIP awards granted in year ended 31 March 2017
The table below sets out the details of the long term incentive awards granted in the year ended 31 March 2017 where vesting will be determined according
to the achievement of performance conditions that will be tested in future reporting periods.
Director
Award type
Awards as
a % of salary
Nicholas Vetch
James Gibson
Adrian Lee
John Trotman
Annual cycle of
awards over nil
cost options
100% of salary
Face value
of award(1)
£269,800
£296,000
£219,300
£219,300
Percentage of award
vesting at threshold
performance
Maximum
percentage of face
value that could vest
Performance
period end date
Performance
conditions
25%
100%
22 July 2019
Adjusted EPS
growth and
relative TSR
(1)
The face value of the award is calculated using the average share price three days prior to the grant date of 22 July 2016 (average share price of 721 pence).
77
Remuneration Report (continued)
Year ended 31 March 2017
LTIP awards granted in year ended 31 March 2017 (continued)
The performance conditions applicable to the awards granted in the year ended 31 March 2017 are set out below:
Condition
Weighting
Relative TSR
30%
Threshold
performance
required
Median of
comparator group
of real estate
companies
Maximum
performance
required
Upper quartile of
the comparator
group
LTIP value for meeting
threshold and maximum
performance (% salary)
25% to 100%
Adjusted EPS
70%
Adjusted EPS
growth of RPI+3%
per annum
Adjusted EPS
growth of RPI+8%
per annum
25% to 100%
Basis for measurement
The average of the Group’s closing mid-
market share price over the three months
preceding the start of the performance
period and preceding the end of the
performance period will be used,
including dividends re-invested.
The adjusted EPS figure reported in the
audited results of the Group for the last
complete financial year ending before the
start of the performance period and the last
complete financial year ending before the
end of the performance period will be used.
Total
100%
Between threshold and maximum performance, vesting will take place on a straight-line basis.
Long Term Bonus Performance Plan
No awards were granted under the LTBPP during the year.
The following awards were made during the prior year (year ended 31 March 2016) under the LTBPP:
Director
Award type
Awards as a %
of salary at the
time of grant
Nicholas Vetch
James Gibson
Adrian Lee
John Trotman
Granted every
three years,
award converts
to nil cost
options on
vesting.
377%
496%
464%
464%
Face value
of award
£996,900
£1,440,000
£996,900
£996,900
Percentage of award
vesting at threshold
performance
Maximum
percentage of face
value that could vest
Performance
period end date
Performance
conditions
0%
100%
31 March 2018
Assessed
annually on
a basket of
measures
The performance targets for the LTBPP are not disclosed for the year ahead, given the commercially sensitive nature of a number of the targets (which are
derived from the Group’s business plan). Shortly after the end of each year, the Committee assesses the key targets and the extent to which management
has been able to meet these targets for that year and reports on this assessment (excluding any that are still commercially sensitive). The targets are only
adjusted during the year if material events occur that necessitate a change to the business plan. The report on the targets for the year ended 31 March 2017
(other than those which remain commercially sensitive) is summarised in the table below:
Objective
Committee Comment
Grow the Group’s annual free cash flow by £5 million (pre working capital
movements) for the year to 31 March 2017 compared to the year to
31 March 2016.
The Group’s free cash flow for the year to 31 March 2017 was £58.3 million,
an increase of £5.0 million from the prior year.
Comply with all banking covenants and maintain a net worth in excess of
£750 million.
All banking covenants were complied with during the year. Net worth has
grown by £61 million to £890.4 million.
Grow the occupancy of the like-for-like stores open at 31 March 2016 from
75.3% to 77.8% by 30 September 2016, and following the seasonal
occupancy loss in the third quarter, recover to this level by 31 March 2017.
The occupancy of these stores at 30 September 2016 was 78.5%. At the end
of March 2017, the like-for-like occupancy was 78.1%.
Grow the average net rent per square foot across the stores from £25.90 per
square foot by 2.5% to £26.55 by 31 March 2017.
The closing net rent per sq ft at 31 March 2017 was £26.03, an increase of
0.5%. Management’s focus remains on driving occupancy performance
across the stores.
Meet budgeted revenue (£109.3 million) and profit before tax
(£54.5 million) targets.
Revenue for the full year was £109.1 million, and adjusted PBT was
£54.6 million, slightly behind and slightly ahead of budget respectively.
78
Long Term Bonus Performance Plan (continued)
Objective
Committee Comment
Maintain the Group’s online market share measured against the top 35
self storage operators by Connexity Hitwise, at 35% to 38%.
The Group’s average market share ranged between 31% and 38% over the
course of the financial year. The nearest competitor had a market share of
16% to 21% for the year.
Review potential sites (in London and key target towns outside of London)
for store acquisition with a view of acquiring at least one new site in the year.
The Group has continued to investigate opportunities for land acquisitions in
London and a number of key towns outside.
In May 2017 the Group exchanged contracts to acquire a site in Wapping,
East London – a key target location.
The Group continues to monitor other opportunities.
Complete the acquisition of the Lock and Leave portfolio into Big Yellow and
Armadillo.
The Lock and Leave portfolio acquisition completed in April 2016, in line with
the original timetable.
Submit a planning application for the development at Camberwell by the
end of the financial year.
Obtain planning consent for the extension of the Wandsworth store.
The planning application for Camberwell was submitted in November 2016.
The application was rejected in February 2017, and the Group has subsequently
submitted an appeal.
Planning consent was obtained for the Wandsworth extension in December
2016. Construction has commenced on the extension with the work due to
complete in April 2018.
Obtain revised planning consent for Guildford Central, and commence
construction of the store in the year.
The revised planning consent for Guildford Central was obtained in July 2016.
Construction has commenced on the store with a view to a March 2018 opening.
Maintain the net promoter score for customer satisfaction from the
Customer Experience programme in excess of 65 for move in and move out
surveys.
The move in NPS score for the year was 83, a significant increase from 75 in
the prior year. The move out NPS score for the year was 67, an increase from
66 in the prior year.
Maintain the Group’s brand leadership of unprompted and prompted
awareness throughout the UK, to be measured by third party survey in
the year.
Reduce the carbon intensity for the year to 31 March 2017 (KgCO2/m2 of
occupied space) by 5% from the year to 31 March 2016.
The You Gov survey commissioned in April 2017 has shown our prompted
awareness to be at 74% in London, two and half times higher than our nearest
competitor and 41% for the rest of the UK, nearly three times higher than our
nearest competitor. This compares to 74% and 38% respectively last year.
For unprompted brand awareness, our recall in London is 47%, nearly six times
higher than our nearest competitor and for the rest of the UK it is 21%, more
than eight times higher than our nearest competitor.
Carbon intensity was reduced by 13% for the year to 31 March 2017.
The other targets, covering areas such as real estate, staffing and certain financial targets, were met in the majority of cases.
Following careful consideration of the performance targets and actual performance of the Group and the Executive Directors, the Committee has concluded
that the award in respect of the financial year ended 31 March 2017 has provisionally vested at 90% of its potential amount for the year. For the year ended
31 March 2016, the Committee concluded that the award had provisionally vested as to 90% of its potential amount for the year. There is a further year’s
performance on which the LTBPP is assessed before any awards vest. Part of the award will then be subject to a holding period in line with the Remuneration Policy.
Sharesave Scheme
The Group’s Sharesave Scheme is open to all UK employees (including Executive Directors) with a minimum of six months’ service and meets UK HMRC
approval requirements, thus giving all eligible employees the opportunity to acquire shares in the Company in a tax efficient manner. Three of the Executive
Directors participated in the scheme during the financial year. The details of the Sharesave scheme options are shown on page 82.
Pension entitlements
The Company pays pension contributions into the Executive Directors’ personal pension plans or makes a cash contribution in lieu of pension contributions.
They do not participate in any defined benefit scheme. For the year ended 31 March 2017, the Company contribution was 15% of salary for the Executive Directors.
79
Remuneration Report (continued)
Year ended 31 March 2017
Payments to past Directors
No payments of money or any other assets were made to any former Director of the Company in the financial year ended 31 March 2017 (2016: no payments).
Payments on loss of office
No payments were made to any Directors in respect of loss of office during the financial year ended 31 March 2017 (2016: no payments).
Non-Executive Directors
The table below sets out the single total figure of remuneration and breakdown for each Non-Executive Director paid in the year ended 31 March 2017.
Fees
£
Tim Clark
Richard Cotton
Georgina Harvey
Steve Johnson
Mark Richardson
Total
2017
2016
43,700
41,000
38,400
38,400
41,000
42,800
40,100
37,600
37,600
40,100
202,500
198,200
Non-Executive Director fees were increased by 2% for the year ended 31 March 2017. Non-Executive Directors received no taxable benefits for the year ended
31 March 2017.
Implementation of the Policy in coming year
The main elements of Executive Director remuneration for the year ended 31 March 2017 and the forthcoming financial year are summarised below:
Element
Base salary
Implementation in 2016/17
Implementation in 2017/18
Salary levels for Executive Directors:
> Executive Chairman: £269,800
> Chief Executive: £296,000
> Operations Director: £219,300
> Chief Financial Officer: £219,300
Salary levels for Executive Directors:
> Executive Chairman: £275,200
> Chief Executive: £302,000
> Operations Director: £223,700
> Chief Financial Officer: £223,700
Salaries were increased by 2% from the 2015/16 salaries.
Increases for the wider employee population were 2%.
Salaries were increased by 2% from the 2016/17 salaries.
Increases were made in accordance with the Policy.
Increases for the wider employee population were 2%.
Benefits and Pension
Contribution of 15% of salary made into Executive Directors
personal pension plan, or a cash supplement of equivalent
value paid in lieu of pension contribution.
No change
Annual bonus
Maximum opportunity of 25% of salary.
No change
Assessed on stores’ performance against our Key Performance
Indicators:
> Occupancy and net contribution together represented
60% of the bonus
> Customer satisfaction (33% of the bonus)
> Store standards (7% of the bonus)
80
Implementation of the Policy (continued)
Element
Implementation in 2016/17
Implementation in 2017/18
Long Term
Incentive Plan
Maximum opportunity of 100% of salary, with grants of 100% of
salary for each of the Executive Directors.
No change
These awards were granted with the following performance
conditions:
> 70% adjusted EPS – adjusted EPS growth of RPI+3% for 25%
of this element of the award to vest with full vesting
occurring for adjusted EPS growth of RPI+8% p.a.;
> 30% – relative TSR performance vs. FTSE Real Estate Index
with 25% of this element of the award vesting for median
TSR comparative performance and full vesting at upper
quartile.
Long Term Bonus
Performance Plan
> No awards were made under the scheme this year
as awards are granted every three years.
No awards will be made this year as awards are granted every
three years.
The assessment of targets for the year ended 31 March 2017
can be found on page 78 and 79.
Non-Executive Directors
During the year, fees for Non-Executive Directors have been reassessed for the year ending 31 March 2018.
The Company reviewed the Non-Executive Director base fee and decided to adjust it from £38,400 to £39,200 (2.1% increase) and to harmonise the additional
fee provided for Committee Chairs and the Senior Independent Director to £5,000.
Non-Executive 2016/17 fee 2017/18 fee
Richard Cotton £41,000 £44,200
Tim Clark £43,700 £44,200
Georgina Harvey £38,400 £44,200
Mark Richardson £41,000 £44,200
Steve Johnson £38,400 £39,200
Fees retained for external non-executive directorships
The Executive Directors’ contracts do not allow them to engage in any other business outside the Group except where prior written consent from the Board is
received. The Company recognises that Executive Directors may be invited to become Non-Executive Directors of other companies and that this can help
broaden the skills and experience of a Director. Executive Directors are normally permitted to accept external appointments with the approval of the Board
and may retain the fees for the appointment.
Nicholas Vetch is a Non-Executive Director of The Local Shopping REIT plc for which he receives a fee of £30,000 per annum. James Gibson is a Non-Executive
Director of AnyJunk Limited and of Moby Self Storage in Brazil; he does not receive any fees for his services.
Statement of Directors’ shareholding
The Executive Directors are required to build and maintain a holding of two times base salary. These requirements have been met by all Executive Directors
throughout the year. Non-Executive Directors are not subject to a shareholding requirement. Details of the Directors’ interests in shares are set out below
(all interests are beneficial interests).
No changes took place in the interests of the Directors in the shares of the Company between 31 March 2017 and the date of this report.
81
Remuneration Report (continued)
Year ended 31 March 2017
Statement of Directors’ shareholding (continued)
The table below shows, in relation to each Director, the total number of shares and share options in which they have an interest. LTBPP awards are not shown
in the table below as the number of shares awarded is calculated by reference to the total vested award value divided by the Company’s share price at the
vesting date.
Director
Nicholas Vetch
James Gibson
Adrian Lee
John Trotman
Richard Cotton
Mark Richardson
Tim Clark
Steve Johnson
Georgina Harvey
Share
ownership
requirement
(multiple of
salary)
Share
ownership
requirements
met
2x
2x
2x
2x
N/a
N/a
N/a
N/a
N/a
Yes
Yes
Yes
Yes
N/a
N/a
N/a
N/a
N/a
Holding as
multiple of
salary
240.6x
60.0x
27.9x
5.1x
N/a
N/a
N/a
N/a
N/a
Beneficially
owned
shares
9,062,663
2,479,700
854,643
154,658
73,485
27,225
20,615
10,000
13,013
LTIP
awards
subject to
performance
conditions
125,999
138,207
102,385
100,322
–
–
–
–
–
Unexercised
Sharesave
options
Options
exercised in the
financial year
–
1,480
2,960
3,639
–
–
–
–
–
60,266
66,098
45,804
45,804
–
–
–
–
–
Directors’ share options
To provide further context on the shareholding of the Executive Directors, options in respect of ordinary shares for Directors who served in the year are
as below:
No. of No. of
shares shares
under under Market
option at Granted Exercised Lapsed option at price at Date from
Date option 31 March during the during the during the 31 March Exercise date of which first
Name granted Scheme 2016 year year year 2017 price exercise exercisable Expiry Date
Nicholas Vetch 22 July 2013 LTIP 60,266 – (60,266) – – nil p 696.0 p 22 July 2016 21 July 2023
29 July 2014 LTIP 50,467 – – – 50,467 nil p – 29 July 2017 28 July 2024
21 July 2015 LTIP 38,112 – – – 38,112 nil p – 21 July 2018 20 July 2025
22 July 2016 LTIP – 37,420 – – 37,420 nil p – 22 July 2019 21 July 2026
James Gibson 22 July 2013 LTIP 66,098 – (66,098) – – nil p 766.7 p 22 July 2016 21 July 2023
29 July 2014 LTIP 55,352 – – – 55,352 nil p – 29 July 2017 28 July 2024
21 July 2015 LTIP 41,801 – – – 41,801 nil p – 21 July 2018 20 July 2025
14 March 2016 SAYE 1,480 – – – 1,480 608.0p – 31 March 2019 1 October 2019
22 July 2016 LTIP – 41,054 – – 41,054 nil p – 22 July 2019 21 July 2026
Adrian Lee 22 July 2013 LTIP 45,804 – (45,804) – – nil p 766.7 p 22 July 2016 21 July 2023
29 July 2014 LTIP 40,989 – – – 40,989 nil p – 29 July 2017 28 July 2024
21 July 2015 LTIP 30,980 – 30.980 nil p – 21 July 2018 20 July 2025
14 March 2016 SAYE 2,960 – – – 2,960 608.0p – 31 March 2019 1 October 2019
22 July 2016 LTIP – 30,416 – – 30,416 nil p – 22 July 2019 21 July 2026
John Trotman 22 July 2013 LTIP 45,804 – (45,804) – – nil p 766.7 p 22 July 2016 21 July 2023
29 July 2014 LTIP 38,926 – – – 38,926 nil p – 29 July 2017 28 July 2024
16 March 2015 SAYE 3,639 – – – 3,639 494.6p – 31 March 2018 1 October 2018
21 July 2015 LTIP 30,980 – – – 30,980 nil p – 21 July 2018 20 July 2025
22 July 2016 LTIP – 30,416 – – 30,416 nil p – 22 July 2019 21 July 2026
82
Performance and pay
The graph below shows the Group’s performance, measured by TSR, compared with the performance of the FTSE All Share Real Estate Index and the FTSE All
Share Index since 2000. The FTSE All Share Real Estate Index is used for the assessment of the Company’s LTIP.
TSR Performance from flotation
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
08 May
2000
Big Yellow Group
FTSE 350 Real Estate Index
FTSE All Share Index
15 Jan
2002
24 Sep
2003
02 Jun
2005
09Feb
2007
18 Oct
2008
27 Jun
2010
05 Mar
2012
12 Nov
2013
22 Jul
2015
31 Mar
2017
Source: Datastream as at 31 March 2017
CEO Remuneration
The table below sets out the details of remuneration of the CEO over the past eight financial years.
Year
2017
2016
2015
2014
2013
2012
2011
2010
CEO single figure of
total remuneration
(£)
Annual bonus pay out
% against maximum
of 25% of salary
Long term incentive
weighted average vesting rates
against maximum opportunity
%
850,619
988,811
1,756,290
536,262
335,891
1,400,570
325,968
875,593
40% (10% of salary)
48% (12% of salary)
50% (12.5% of salary)
40% (10% of salary)
40% (10% of salary)
40% (10% of salary)
40% (10% of salary)
40% (10% of salary)
100%
100%
98%
53%
0%
89%
0%
100%
The single figure of remuneration for 2015 and 2012 are higher than in other years due to the vesting of the three year Long Term Bonus Performance Plan in
those years delivering a reward of £945,750 (97% vesting) and £900,000 (90% vesting) respectively for the three year period ended in that year.
Percentage increase in the CEO’s remuneration
The table below compares the percentage increase in the CEO’s remuneration (including salary, fees, benefits and annual bonus) with the remuneration of
Big Yellow Group employees.
Salary and fees
All taxable benefits
Annual bonuses
% increase in remuneration in
2017 compared with 2016
CEO
Employees
2%
22%
(15%)
2%
2%
(15%)
Statement of consideration of employment conditions elsewhere in the Group
The Committee reviews the reward and retention of the whole employee population periodically throughout the year to ensure that it can attract and retain
top talent. Particular consideration is given to the general basic salary increase, remuneration arrangements and employment conditions. Furthermore, the
Annual Bonus Plan awarded to Executive Directors is directly linked to the bonuses awarded to all staff.
The Directors are invited to be present at this review of the proposals for salary increase for the employee population generally and on any other changes to
remuneration policy within the Company. The information presented at this review is taken into consideration when setting the pay levels of the executive
population. Additionally, the Committee has guidelines for the grant of all LTIP awards across the Company and responsibility for approving the total annual
bonus cost of the Company. The Company does not invite employees to comment on the remuneration of Directors.
83
Remuneration Report (continued)
Year ended 31 March 2017
Relative importance of spend on pay
The graph sets out the relative importance of spend on pay in the year ended
31 March 2017 and 31 March 2016 compared with other disbursements from
profit, being the distributions to shareholders and retained earnings
(comprehensive gain for the year less dividends).
(23%)
13%
3%
2016
2017
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Total employee pay
(including Directors)
Profit distributed
by way of dividend
Retained
earnings
Advisers to the Remuneration Committee
The Committee consults with the Executive Chairman, Nicholas Vetch, about proposals on a range of matters relating to the remuneration of the Executive
Directors including the levels of overall remuneration, salary and bonus and awards and distributions under the share incentive and bonus plans.
The Committee relies upon remuneration data provided by PwC. In addition, PwC has provided advice to the Committee on the preparation of this report as
well as on market practice and trends. PwC is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the Code of Conduct
in relation to executive remuneration consulting in the UK.
The Committee is satisfied that advice received from PwC during the year was objective and independent.
Adviser
PwC
Appointed by
Services provided to the Committee in 2016/17
Remuneration
Committee in 2008
Remuneration market practice, governance updates and support in the drafting
of the Directors’ Remuneration Report.
Fees in relation to
remuneration advice
£6,000
Attendance at Remuneration Committee meetings
Attendance at meetings of the individual Directors at the Remuneration Committee Meetings that they were eligible to attend is shown in the table below:
Director Number of meetings attended
Tim Clark
Richard Cotton
Georgina Harvey
Steve Johnson
Mark Richardson
attended
absent
Steve Johnson missed one meeting due to an unavoidable business commitment.
Consideration of shareholders’ views
The Group is committed to ongoing shareholder dialogue and monitors and reviews voting outcomes. Where there are substantial votes against resolutions
in relation to Directors’ remuneration, the reasons for that voting will be sought and any actions in response will be detailed here. Following feedback from
shareholders, we have enhanced the disclosures surrounding the annual bonus paid to the Executive Directors in this report.
The table below shows the advisory vote on the 2016 Remuneration Report at the AGM held on 22 July 2016.
Votes for
% Votes Against
% Votes withheld
2016 Remuneration Report
125,349,939
99.25
944,742
0.75
239,135
The views of our shareholders are very important to us and the Remuneration Committee considers shareholder feedback received in relation to the AGM each
year at its first meeting following the AGM. This feedback, as well as any additional feedback received during any other meetings with shareholders throughout
the year, is then considered as part of the Company’s annual review of remuneration policy.
The Remuneration Committee notes that shareholders do not speak with a single voice, but we engage with our largest shareholders to ensure we understand
the range of views which exist on remuneration issues. When any material changes are proposed to the Policy, the Remuneration Committee Chairman will
inform major shareholders in advance, and will offer a meeting to discuss these.
Tim Clark
Chairman of the Remuneration Committee
22 May 2017
84
Audit Committee Report
INTRODUCTION
The Audit Committee is appointed by the Board from the Non-Executive Directors of the Group. The Audit Committee’s terms of reference include all matters
indicated by Disclosure and Transparency Rule 7.1 and the UK Corporate Governance Code. The terms of reference are considered annually by the Audit
Committee and are then referred to the Board for approval.
The Audit Committee is responsible for:
> monitoring the integrity of the financial statements of the Group and any formal announcements relating to the Group’s financial performance and reviewing
significant financial reporting judgements contained therein;
> reviewing the Group’s internal financial controls and the Group’s internal control and risk management systems, including consideration of the need for
an internal audit function;
> making recommendations to the Board for a resolution to be put to the shareholders for their approval in general meetings, on the appointment of the
external auditor and the approval of the remuneration and terms of engagement of the external auditor;
> reviewing and monitoring the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant
UK professional and regulatory requirements; and
> developing and implementing a policy on the engagement of the external auditor to supply non-audit services, taking into account relevant guidance
regarding the provision of non-audit services by the external audit firm.
The Audit Committee is required to report its findings to the Board, identifying any matters on which it considers that action or improvement is needed, and
make recommendations on the steps to be taken.
This year, the Committee has tendered the Group’s external audit and continued to focus on the narrative reporting and corporate governance disclosures in
the Annual Report. The Committee was asked by the Board to review the statement by the Directors that the Annual report presents a fair, balanced and
understandable view of the Group’s performance, strategy and business model.
Mark Richardson
Audit Committee Chairman
Committee Members and Attendance
Member
Position
Number of meetings attended
Tim Clark Member
Richard Cotton Member
Georgina Harvey Member
Steve Johnson Member
Mark Richardson Chairman
attended
absent
Richard Cotton and Steve Johnson both missed one Audit Committee meeting during the year due to unavoidable business commitments.
All Audit Committee members are expected to be financially literate. Furthermore, the Audit Committee structure requires the inclusion of one financially
qualified member (as recognised by the Consultative Committee of Accountancy Bodies). Currently Mark Richardson, as a Fellow of the Institute of Chartered
Accountants of England and Wales, fulfils this requirement.
Mark Richardson has announced his intention to retire from the Board at the 2017 Annual General Meeting. The Board has commenced recruitment for his
successor as Audit Committee Chairman and anticipates announcing his successor before the AGM. It is the Board’s intention that his successor will be a
financially qualified member.
The Group provides an induction programme for new Audit Committee members and ongoing training to enable all of the Committee members to carry out
their duties. The induction programme covers the role of the Audit Committee, its terms of reference and expected time commitment by members and an
overview of the Group’s business, including the main business and financial dynamics and risks. New Committee members also meet some of the Group’s
staff. Ongoing training includes attendance at formal conferences, internal company seminars and briefings by external advisers.
Meetings
The Audit Committee is required to meet three times per year and has an agenda linked to events in the Group’s financial calendar. The agenda is predominantly
cyclical and is therefore approved by the Audit Committee Chairman on behalf of his fellow members. Each Audit Committee member has the right to require
reports on matters of interest in addition to the cyclical items.
The Audit Committee invites the Chief Executive, Chief Financial Officer, Financial Controller, and senior representatives of the external auditor to attend all of
its meetings in full, although it reserves the right to request any of these individuals to withdraw. Other senior management are invited to present such reports
as are required for the Committee to discharge its duties.
85
Audit Committee Report (continued)
Overview of the actions taken by the Audit Committee to discharge its duties
Since the beginning of the financial year the Audit Committee has:
> reviewed published financial information including the year end results, Annual Report, half year results and the Interim Management Statements;
> considered whether the Annual Report provides a fair, balanced and understandable view of the Group’s performance, strategy and business model;
> assessed and concluded on the Group’s viability statement;
> considered the output from the Group-wide process used to identify, evaluate and mitigate risks;
> reviewed the effectiveness of the Group’s internal controls and disclosures made in the annual report and financial statements on this matter;
> reviewed and agreed the scope of the audit work to be undertaken by the external auditor;
> agreed the fees to be paid to the external auditor for their audit of the March 2017 financial statements and September half-yearly report;
> considered and agreed the approach of performing Directors’ valuations of investment properties for the half-year report;
> undertaken an assessment of the qualification, expertise and resources, and independence of the external auditor and the effectiveness of the audit
process;
> considered the audit partner and audit firm rotation;
> having considered audit firm rotation, the Committee conducted a tender for the appointment of a new external auditor during the year;
> undertaken an evaluation of the performance of the external auditor;
> considered the need for an internal audit function;
> reviewed the arrangements for “whistleblowing” by employees to ensure that there is a consistent policy in the Group to enable employees to voice
concerns particularly in respect of possible financial reporting improprieties. A whistleblowing policy is included in the employee handbook;
> met the Group’s external valuers;
> met the Group’s Store Compliance Manager;
> reviewed the Audit Committee’s Report; and
> reviewed its own effectiveness.
Financial reporting and significant financial judgements
The Committee reviews all financial information published by the Group in year end and half-year financial statements, including the presentation and disclosure
of the financial information. It also considers the appropriateness of the accounting policies adopted by the Group and the accounting judgements made by
management in the preparation of the financial information.
The Committee has considered whether the Annual Report for the year ended 31 March 2017 provides a fair, balanced and understandable view of the Group’s
performance, strategy and business model and whether it provides the necessary information to enable shareholders and prospective shareholders to assess
the Group’s performance, strategy and business model. The Committee is satisfied that the Annual Report for the year ended 31 March 2017 provides a fair,
balanced and understandable view and includes the necessary information as set out above. The Committee has confirmed this to the Board, whose statement
is included in the Statement of Directors’ Responsibilities on page 88.
The Committee focuses on matters it considers important in their impact on the reported results of the Group, and on matters where there is a high degree of
complexity and/or judgement.
The key area of judgement that the Committee focuses on at the reporting date is the valuation of the investment property portfolio. This is carried out by
independent external valuers, but by its nature it is subjective, with significant judgement applied to the valuation, particularly given the lack of transactional
evidence for prime self storage assets. Members of the Committee met the external valuers to discuss the valuations, review the key judgements and discussed
whether there were any disagreements with management. This year the Committee reviewed and challenged the valuers on the cap rates, rental growth
assumptions and stabilised occupancy levels, to agree on the appropriateness of the assumptions adopted. The Committee also challenged the valuers, and
satisfied itself on, their independence, their quality control processes (including peer partner review) and qualifications to carry out the valuations. Management
also have processes in place to review the external valuations. In addition, the external auditors use specialists to review the valuations and report their
findings and conclusions to the Audit Committee.
The Committee has also considered a number of other judgements made by management in the preparation of the financial statements. It has concluded that
there is not a significant level of judgements involved.
Management have reported to the Audit Committee that they are satisfied that they are not aware of any material misstatements in the financial statements.
The auditors confirmed in their report to the Audit Committee that they had not found any material misstatements during their audit work.
Based on the above, the Committee concluded that the financial statements appropriately apply the key estimates and critical judgements, in respect of the
disclosures and the amounts reported. The Committee also concluded that the annual report and financial statements, taken as a whole, are fair, balanced
and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.
External auditor
The Audit Committee is responsible for the development, implementation and monitoring of the Group’s policy on external audit. The policy assigns oversight
responsibility for monitoring the independence, objectivity and compliance with ethical and regulatory requirements to the Audit Committee, and day-to-day
responsibility to the Chief Financial Officer. The policy states that the external auditor is jointly responsible to the Board and the Audit Committee and that the
Audit Committee is the primary contact.
86
To fulfil its responsibility regarding the independence of the external auditor, the Audit Committee reviewed:
> the external auditor’s plan for the current year, noting the role of the senior statutory audit partner, who signs the audit report and who, in accordance
with professional rules, has not held office for more than five years, and any changes in the key audit staff;
> the arrangements for day-to-day management of the audit relationship;
> a report from the external auditor describing their arrangements to identify, report and manage any conflicts of interest;
> the overall extent of non-audit services provided by the external auditor, in addition to its case-by-case approval of the position of non-audit services by
the external auditor; and
> the past service of the auditor who was first appointed in 2000.
Annual auditor assessment
The Audit Committee has adopted a formal framework in its review of the effectiveness of the external audit process and audit quality which include the
following areas:
> the arrangements for ensuring the external auditor’s independence and objectivity;
> the lead audit engagement partner and the audit team;
> the external auditor’s fulfilment of the agreed audit plan and variations from the plan;
> the quality of the formal audit report to shareholders;
> the robustness and perceptiveness of the auditor in his handling of the key accounting and audit judgements; and
> the content of the external auditor’s comments on control improvement recommendations.
Regard is paid to the nature of, and remuneration received, for other services provided by Deloitte 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. Where
non-audit services are provided, the fees are based on the work undertaken and are not success related.
Non-audit work
The Group’s policy on external audit sets out the categories of non-audit services which the external auditor will and will not be allowed to provide to the Group,
including those that are pre-approved by the Audit Committee and those which require specific approval before they are contracted for, subject to de minimis
levels. They may not provide a service which places them in a position where they may be required to audit their own work. Specifically, they are precluded
from providing services relating to bookkeeping, financial information system design and implementation, appraisal or evaluation services, actuarial services,
any management functions, investment banking services, legal services unrelated to the audit or advocacy services.
In respect of the year ended 31 March 2017, the auditor’s remuneration comprised £186,000 for audit work and £85,000 for other work, principally relating to
the interim review, VAT work, and the assurance of the CSR report. In addition, over a three year rolling period, the level of non-audit fees is below the audit fee.
Audit rotation
The Group’s current auditor, Deloitte LLP, has been in tenure since 2000 and the current audit partner has been in place since the audit of the 2013 financial
statements. During the year the Committee tendered the external audit with a view to changing auditors given this year marked the end of the five year term
of the current audit partner.
Following a robust tender process, the Committee appointed KPMG LLP as auditors. As part of the tender process, the Committee reviewed KPMG’s proposals
for the audit and determined that they had an appropriate plan in place to carry out an effective audit. KPMG confirmed to the Committee that it maintained
appropriate internal safeguards to ensure its independence and objectivity.
The Company is in compliance with the requirements of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities) Order 2014 and the Code.
Risk management and internal control
The Committee and the Board reviewed the internal control processes of the business and the Group’s risk register during the year. The risks and uncertainties
facing the Group, and its internal control processes are considered in the Strategic Report on pages 37 to 39.
Internal audit
The Committee has considered the Board’s view that, given the relatively straightforward nature of the Group’s business and the control environment in place,
no formal internal audit function is required. The Committee concurs with management’s view.
Overview
As a result of its work during the year, the Audit Committee has concluded that it has acted in accordance with its terms of reference and has ensured the
independence and objectivity of the external auditor.
The Chairman of the Audit Committee will be available at the Annual General Meeting to answer any questions about the work of the Committee.
Approved by the Audit Committee and signed on its behalf by:
Mark Richardson
Audit Committee Chairman
22 May 2017
87
Statement of Directors’ Responsibilities
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations.
Company law requires the Directors to prepare such financial statements for each financial year. Under that law the Directors are required to prepare the Group
financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation
and have also chosen to prepare the parent Company financial statements under IFRSs as adopted by the European Union. Under Company law the Directors
must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of
the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that the Directors:
> properly select and apply accounting policies;
> present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
> provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the entity’s financial position and financial performance; and
> make an assessment of the Company’s ability to continue as a going concern.
The Directors are responsible for keeping proper 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 comply with
the Companies Act 2006. They are also responsible for safeguarding the assets of the Company 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 corporate and financial information included on the Company’s website. Legislation in
the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' responsibility statement
We confirm that to the best of our knowledge:
1.
2.
3.
the financial statements, prepared in accordance with International Financial Reporting Standards give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders
to assess the Company’s performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 22 May 2017 and is signed on its behalf by:
James Gibson John Trotman
Chief Executive Officer Chief Financial Officer
88
Independent auditor’s report to the members of Big Yellow Group PLC
Opinion on financial
statements of
Big Yellow Group PLC
In our opinion:
> the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s
affairs as at 31 March 2017 and of the Group’s profit for the year then ended;
> the Group financial statements have been properly prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union;
> the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
> the financial statements have been prepared in accordance with the requirements of the Companies Act
2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
The financial statements that we have audited comprise:
> the Consolidated Statement of Comprehensive Income;
> the Consolidated and Parent Company Balance Sheets;
> the Consolidated and Parent Company Cash Flow Statements;
> the Consolidated and Parent Company Statements of Changes in Equity; and
> the related notes 1 to 34.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by
the European Union and, as regards the parent Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Summary of our
audit approach
Key risks
The key risk identified in the current year relates to the key assumptions implicit in the valuations of the investment
property portfolio.
Materiality
The materiality that we used in the current year was £8.9m (2016: £7.9m) which was determined on the basis of 1%
of net assets.
Scoping
We performed full scope audits on all components of the Group which account for 100% of the Group’s revenue and
net assets. We also performed specified procedures on the Group’s associates.
Significant changes in our approach
There have been no material changes to the scope of our audit in the current year.
Going concern and the
Directors’ assessment of the
principal risks that would
threaten the solvency or
liquidity of the Group
As required by the Listing Rules we have reviewed the Directors’ statement
regarding the appropriateness of the going concern basis of accounting and the
Directors’ statement on the longer-term viability of the Group on page 39.
We are required to state whether we have anything material to add or draw
attention to in relation to:
> the Directors’ confirmation on page 37 that they have carried out a robust
assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency or liquidity;
> the disclosures on pages 37 to 39 that describe those risks and explain how
they are being managed or mitigated;
> the Directors’ statement in note 2 to the financial statements about whether
they considered it appropriate to adopt the going concern basis of accounting
in preparing them and their identification of any material uncertainties to the
Group’s ability to continue to do so over a period of at least twelve months
from the date of approval of the financial statements; and
> the Directors’ explanation on page 39 as to how they have assessed the
prospects of the Group, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We confirm that we have
nothing material to add or
draw attention to in respect
of these matters.
We agreed with the Directors’
adoption of the going concern
basis of accounting and we
did not identify any such
material uncertainties.
However, because not all
future events or conditions
can be predicted, this
statement is not a guarantee
as to the Group’s ability to
continue as a going concern.
89
Independent auditor’s report to the members of Big Yellow Group PLC (continued)
Independence
We are required to comply with the Financial Reporting Council’s Ethical Standards
for Auditors and confirm that we are independent of the Group and we have
fulfilled our other ethical responsibilities in accordance with those standards.
We confirm that we are
independent of the Group and
we have fulfilled our other
ethical responsibilities in
accordance with those
standards. We also confirm
we have not provided any of
the prohibited non-audit
services referred to in those
standards.
Our assessment of risks of
material misstatement
The assessed risk of material misstatement described below is the risk that had the greatest effect on our audit
strategy, the allocation of resources in the audit and directing the efforts of the engagement team.
Investment property valuation
Risk description
As at 31 March 2017, the Group held wholly-owned investment properties and investment properties under
construction valued at £1,190.5 million (2015: £1,126.2 million) all located within the United Kingdom.
The Group also has minority investments in two associate entities (Armadillo Storage Holding Company Limited and
Armadillo Storage Company 2 Limited”), together ‘the Associates’ for which equity accounting is applied. The
Associates control a combined gross value of £69.3 million (2016: £57.7 million) in self storage assets, of which 20%
is recognised by the Group.
Investment properties are held at fair value on the Consolidated Balance Sheet. The net valuation gain in the year
relating to Group held wholly-owned investment properties was £43.7 million (2016: £58.0 million), which was
recognised through the Consolidated Income Statement.
The net valuation gain, included within the share of profit of associates, relating to the properties held by the
Associates was £4.0 million (2016: £3.5 million) on a gross basis and therefore £0.8 million (2016: £0.7 million)
on a Group share basis.
Fair values are calculated using actual and forecast inputs such as: occupancy, capitalisation rates, maximum
lettable area, operating expenses and net rent per square foot by property as at 31 March 2017. In addition, external
valuers apply professional judgement concerning market conditions and factors impacting individual properties.
We consider investment property valuation to be a significant and key risk of material misstatement as the valuation
process is subjective and inherently judgemental in nature. The investment market for prime self storage, in
particular, is subject to market uncertainty due to the low volume of transactions.
Refer to the accounting policies of the Group set out on page 101 and 103 for the Group’s investment property
valuation policy and the associated critical accounting judgement for determining fair value.
See also note 14 to the financial statements, and the Audit Committee’s Report on pages 85 to 87.
How the scope of our audit
responded to the risk
> We assessed the design and implementation of the key internal controls around the property valuation process;
> We tested the integrity of the information provided to the external valuers by management by agreeing key inputs
such as actual occupancy and net rent per square foot to underlying records and source evidence;
> We modelled ten years of valuations and key valuation inputs of the investment properties subject to audit, to
understand the historical trends of key inputs and compared these against the key forecast assumptions included in
the property valuation;
> We met with the external valuers covering both the Group and Associate portfolios and assessed their independence,
the scope of the work they were requested to perform by management, quality control procedures in place internally
and the valuation methodology applied;
> We challenged the external valuers on the key assumptions applied and focussed on properties we identified as
having significant or unusual valuation movements (compared to market data or previous periods). Our challenge
was informed by input from our internal valuation specialists, utilising their knowledge and expertise in the market at
a macro level and the relevant geographies to challenge the key judgmental inputs. We also researched comparable
transactions and understood trends in analogous industries and utilised this information in our audit challenge.
We understood the rationale for outlying valuations or movements and obtained corroborative evidence. We also
assessed the valuations for a sample of other properties; and
> We visited a sample of properties to assess the condition of the buildings and validate a sample of occupancy
data inputs.
90
Investment property valuation
Key observations
> We concluded that the underlying assumptions included in the valuation are reasonable;
> At a property level, no exceptions were identified that required reporting to the Audit Committee; and
> The valuation, as a whole, is a reasonable reflection of the fair value of the portfolio
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that
the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality
both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group materiality
£8.9 million (2016: £7.9 million)
Basis for determining materiality
1% of Net Assets
Rationale for the benchmark applied
Net assets is the measure of principal interest of investors when measuring return on investment. Furthermore,
the property valuation is the source of most subjectivity and judgment in the financial statements.
Net Assets £890.4m
Net Assets
Group materiality
Group materiality
£8.9m
Component
materiality range
£0.1m to £8.4m
Audit Committee
reporting threshold
£0.4m
We applied a lower threshold of £2.7 million (2016: £2.3 million) for scoping the testing of all balances and classes
of transactions impacting adjusted profit before tax. We consider adjusted profit before tax to be a critical financial
performance measure for the Group on the basis that it is a key metric to analysts and investors and has
substantial prominence in the Annual Report. Adjusted profit before tax is £54.6 million (2016: £49.0 million),
which is reconciled to profit before tax of £99.8 million (2016: £112.3 million) in accordance with IFRS in note 10
of the financial statements. This lower threshold was based on 5% (2016: 5%) of adjusted profit before tax.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of
£0.4 million (2016: £0.4 million), as well as differences below that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
91
Independent auditor’s report to the members of Big Yellow Group PLC (continued)
The Group is entirely UK based and wholly owned by Big Yellow Group PLC, with the exception of the 20% interests in the
Associates. Our audit was scoped by obtaining an understanding of the Group and its control environment, including
Group-wide controls, and assessing the risks of material misstatement.
As in previous years, the audit team performed full scope audits at a materiality lower than Group materiality for all
entities within the Group. The scope of our audit covered 100% of both consolidated profit before tax and consolidated net
assets. Component materiality adopted for subsidiaries companies ranged from between £0.1 million and £8.4 million.
The Group continues to hold 20% of the equity of the Associates and continues to manage these portfolios. The Group
applies equity accounting for these interests and the equity interest in Armadillo Holdings 1 Limited and Armadillo
Holdings 2 Limited amounts to £5.0 million and £2.4 million respectively. We have performed specified audit
procedures on all balances and transactions material to these entities for the purposes of supporting the Group audit
opinion.
The Group audit team continued to follow a programme of planned site visits during March 2017. At each site visited we
undertook an inventory count, performed design and implementation testing of key controls, verified a sample of fixed
assets and occupancy data, agreed cash balances to bank reconciliations and held discussions with key store staff.
In our opinion:
> the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006;
> the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
> the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the
audit, we have not identified any material misstatements in the Strategic Report and the Directors’ Report.
An overview of the scope
of our audit
Opinion on other matters prescribed
by the Companies Act 2006
Matters on which we are required to
report by exception
Adequacy of explanations received
and accounting records
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion:
> we have not received all the information and explanations we require for our audit; or
> adequate accounting records have not been kept by the parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
> the parent Company financial statements are not in agreement with the accounting
records and returns.
Under the Companies Act 2006 we are also required to report if in our opinion certain
disclosures of Directors’ remuneration have not been made or the part of the Directors’
Remuneration Report to be audited is not in agreement with the accounting records and
returns.
Corporate Governance Statement
Under the Listing Rules we are also required to review part of the Corporate Governance
Statement relating to the Company’s compliance with certain provisions of the UK Corporate
Governance Code.
Our duty to read other information
in the Annual Report
Under International Standards on Auditing (UK and Ireland), we are required to report to you
if, in our opinion, information in the annual report is:
> materially inconsistent with the information in the audited financial statements; or
> apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or
> otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies
between our knowledge acquired during the audit and the Directors’ statement that they
consider the annual report is fair, balanced and understandable and whether the annual
report appropriately discloses those matters that we communicated to the audit committee
which we consider should have been disclosed.
92
We have nothing
to report in
respect of these
matters.
We have nothing
to report arising
from these
matters.
We have nothing
to report arising
from our review.
We confirm
that we have
not identified
any such
inconsistencies
or misleading
statements.
Respective responsibilities of
Directors and auditor
Scope of the audit of the financial
statements
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the
preparation of the 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 financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). We also comply with International Standard on Quality Control 1 (UK and
Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective,
understood and applied. Our quality controls and systems include our dedicated professional standards review
team and independent partner reviews.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
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 and
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 and to identify any information that is
apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
Darren Longley FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
22 May 2017
93
Consolidated Statement of Comprehensive Income
Year ended 31 March 2017
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit before gains on property assets
Gain on the revaluation of investment properties
Profit on disposal of surplus land
Operating profit
Share of profit of associates
Investment income – interest receivable
– fair value movement on derivatives
Finance costs – interest payable
– fair value movement of derivatives
Profit before taxation
Taxation
Profit for the year (attributable to equity shareholders)
Total comprehensive income for the year (attributable to equity shareholders)
Basic earnings per share
Diluted earnings per share
EPRA earnings per share are shown in Note 12.
All items in the consolidated statement of comprehensive income relate to continuing operations.
Note
3
2017
£000
2016
£000
109,070
(34,075)
101,382
(32,632)
74,995
(9,679)
65,316
43,706
–
109,022
1,442
356
719
(11,756)
–
99,783
(272)
68,750
(8,896)
59,854
58,001
4,754
122,609
1,104
403
–
(11,866)
(4)
112,246
(247)
99,511
111,999
99,511
111,999
63.6p
71.9p
63.1p
71.6p
13a,14
15
13d
7
7, 18
8
8, 18
9
5
12
12
94
Consolidated Balance Sheet
Year ended 31 March 2017
Non-current assets
Investment property
Investment property under construction
Interests in leasehold property
Plant, equipment and owner-occupied property
Goodwill
Investment in associates
Capital Goods Scheme receivable
Current assets
Surplus land
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Borrowings
Obligations under finance leases
Non-current liabilities
Derivative financial instruments
Borrowings
Obligations under finance leases
Total liabilities
Net assets
Equity
Share capital
Share premium account
Reserves
Equity shareholders’ funds
Note
13a
13a
13a
13b
13c
13d
16
15
16
17
19
21
2017
£000
2016
£000
1,154,390
36,115
23,601
3,216
1,433
7,452
4,091
1,092,210
33,945
20,165
3,405
1,433
6,406
6,561
1,230,298
1,164,125
–
283
18,042
6,906
25,231
300
266
16,222
17,207
33,995
1,255,529
1,198,120
(36,935)
(2,356)
(2,005)
(36,122)
(2,243)
(1,722)
(41,296)
(40,087)
18c
19
21
(2,964)
(299,323)
(21,596)
(3,683)
(306,520)
(18,443)
(323,883)
(328,646)
(365,179)
(368,733)
890,350
829,387
22
15,788
45,462
829,100
15,737
45,227
768,423
890,350
829,387
The financial statements were approved by the Board of Directors and authorised for issue on 22 May 2017. They were signed on its behalf by:
James Gibson John Trotman
Director Director
Company Registration No. 03625199
95
Consolidated Statement of Changes in Equity
Year ended 31 March 2017
At 1 April 2016
Total comprehensive gain for the year
Issue of share capital
Dividend
Credit to equity for equity-settled
share based payments
Share
capital
£000
15,737
–
51
–
Share
premium
account
£000
45,227
–
235
–
Other non-
distributable
reserve
£000
Capital
redemption
reserve
£000
74,950
–
–
–
1,795
–
–
–
Retained
earnings
£000
692,697
99,511
–
(41,158)
Own
shares
£000
(1,019)
–
–
–
Total
£000
829,387
99,511
286
(41,158)
–
–
–
–
2,324
–
2,324
At 31 March 2017
15,788
45,462
74,950
1,795
753,374
(1,019)
890,350
The other non-distributable reserve arose in the year ended 31 March 2015 following the placing of 14.35 million ordinary shares.
Year ended 31 March 2016
At 1 April 2015
Total comprehensive gain for the year
Issue of share capital
Cancellation of treasury shares
Use of own shares to satisfy share options
Dividend
Credit to equity for equity-settled
share based payments
Share
capital
£000
15,806
–
73
(142)
–
–
Share
premium
account
£000
44,922
–
305
–
–
–
Other non-
distributable
reserve
£000
Capital
redemption
reserve
£000
74,950
–
–
–
–
–
1,653
–
–
142
–
–
Retained
earnings
£000
619,206
111,999
–
(3,727)
(877)
(36,443)
Own
shares
£000
(5,623)
–
3,727
877
–
Total
£000
750,914
111,999
378
–
(36,443)
–
–
–
–
2,539
–
2,539
At 31 March 2016
15,737
45,227
74,950
1,795
692,697
(1,019)
829,387
96
Consolidated Cash Flow Statement
Year ended 31 March 2017
Operating profit
Gain on the revaluation of investment properties
Profit on disposal of surplus land
Depreciation
Depreciation of finance lease capital obligations
Employee share options
Cash generated from operations pre working capital movements
(Increase)/decrease in inventories
(Increase)/decrease in receivables
(Decrease)/increase in payables
Cash generated from operations
Interest paid
Interest received
Tax paid
Cash flows from operating activities
Investing activities
Sale of surplus land
Acquisition of Lock and Leave (net of cash acquired)
Purchase of non-current assets
Additions to surplus land
Receipts from Capital Goods Scheme
Dividend received from associates
Cash flows from investing activities
Financing activities
Issue of share capital
Payment of finance lease liabilities
Equity dividends paid
Drawing of M&G loan
Repayment of Lloyds short term loan
(Decrease)/increase in borrowings
Cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
Reconciliation of Net Cash Flow to Movement in Net Debt
Year ended 31 March 2017
Net (decrease)/increase in cash and cash equivalents in the year
Cash flow from decrease/(increase) in debt financing
Change in net debt resulting from cash flows
Movement in net debt in the year
Net debt at the start of the year
Net debt at the end of the year
Note
13a, 14
15
13b
13a
6
13a
13d
11
Note
2017
£000
109,022
(43,706)
–
738
1,196
2,324
69,574
(17)
(1,456)
(892)
67,209
(10,980)
16
(271)
2016
£000
122,609
(58,001)
(4,754)
663
967
2,539
64,023
38
369
1,785
66,215
(10,763)
15
–
55,974
55,467
300
(14,239)
(6,338)
–
2,917
396
7,835
–
(44,509)
(66)
184
270
(16,964)
(36,286)
286
(1,196)
(41,158)
–
–
(7,243)
378
(967)
(36,443)
70,000
(70,000)
26,864
(49,311)
(10,168)
(10,301)
17,207
9,013
8,194
6,906
17,207
2017
£000
(10,301)
7,243
2016
£000
9,013
(26,864)
(3,058)
(17,851)
(3,058)
(294,991)
(17,851)
(277,140)
18
(298,049)
(294,991)
97
Notes to the Financial Statements
Year ended 31 March 2017
1. GENERAL INFORMATION
Big Yellow Group PLC is a Company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 2 The Deans,
Bridge Road, Bagshot, Surrey, GU19 5AT. The nature of the Group’s operations and its principal activities are set out in note 4 and in the Strategic Report
on pages 16 to 30.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation of financial statements
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted for use in the European
Union in accordance with EU law (IAS regulation EC1606/2002) and those parts of the Companies Act 2006 applicable to companies reporting under IFRS,
and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.
The financial statements are presented in Sterling, being the currency of the primary economic environment in which the Group operates. Unless otherwise
stated, figures are rounded to the nearest thousand.
The accounting policies adopted are consistent with those of the previous financial year, except as described in the following sections.
Amendments to IFRSs that are mandatorily effective for the current year
In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are
mandatorily effective for an accounting period that begins on or after 1 January 2016. Their adoption has not had any material impact on the disclosures
or on the amounts reported in these financial statements.
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations
Amendments to IAS 1 Disclosure Initiative
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation
Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants
Amendments to IAS 27 Equity Method in Separate Financial Statements
Annual Improvements to IFRSs: 2012-2014 Annual Improvements to IFRSs
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRSs that have been issued but are
not yet effective:
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 2 (amendments) Classification and Measurement of Share-based Payment Transactions
IAS 7 (amendments) Disclosure Initiative
IAS 12 (amendments) Recognition of Deferred Tax Assets for Unrealised Losses
IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in
future periods.
Basis of accounting
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain investment properties and financial
instruments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies
adopted, which have been applied consistently to the results, other gains and losses, assets, liabilities and cash flows of entities included in the
consolidated financial statements in the current and preceding year, are set out below:
Going concern
A review of the Group’s business activities, together with the factors likely to affect its future development, performance and position are set out on in the
Strategic Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are shown in the balance sheet, cash flow
statement and accompanying notes to the financial statements. Further information concerning the Group’s objectives, policies and processes for managing
its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity
risk can be found in the Strategic Report and in the notes to the financial statements.
After reviewing Group and Company cash balances, borrowing facilities, forecast valuation movements and projected cash flows, the Directors believe
that the Group and Company have adequate resources to continue operations for the foreseeable future. In reaching this conclusion the Directors have
had regard to the Group’s operating plan and budget for the year ending 31 March 2018 and projections contained in the longer term business plan which
covers the period to March 2021. The Directors have carefully considered the Group’s trading performance and cash flows as a result of the uncertain
global economic environment and the other principal risks to the Group’s performance, and are satisfied with the Group’s positioning. For this reason,
they continue to adopt the going concern basis in preparing the financial statements.
98
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made up to 31 March
each year. Control is achieved where the Company has the power to direct the relevant activities of an investee entity so as to obtain benefits from
its activities.
The Group consolidates the financial results and balance sheets of Big Yellow Group PLC and all of its subsidiaries at the year end using acquisition
accounting principles. All intra-group transactions, balances, income and expenses are eliminated on consolidation. 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. The results of subsidiaries
acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up
to the effective date of disposal, as appropriate.
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values,
at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.
Any costs directly attributable to the business combination are recognised in the income statement. The acquiree’s identifiable assets, liabilities and
contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations,
which are recognised and measured at the lower of their carrying amount and fair value less costs to sell.
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 statement of comprehensive income.
Investment in subsidiaries
These are recognised at cost less provision for any impairment.
Investment in associates
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the
financial and operating policy decisions of the investee. Significant influence is the power to participate in the financial and operating policy decisions of
the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting except when
classified as held for sale. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share
of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in
that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate) are recognised only
to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Where necessary, adjustments
are made to the financial statements of associates to bring the accounting policies used into line with those used by the Group.
Where a Group Company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant
associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and
liabilities of a subsidiary at the date of acquisition.
Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the statement of
comprehensive income and is not subsequently reversed. The goodwill in the balance sheet has an indefinite useful economic life.
Revenue recognition
Revenue represents amounts derived from the provision of services which fall within the Group’s ordinary activities after deduction of trade discounts
and any applicable value added tax. Income is recognised over the period for which the storage room is occupied by the customer on a straight-line basis.
The Group recognises non-storage income on a straight-line basis over the period in which it is earned.
Interest income is accrued on a time basis, by reference to the principal outstanding and 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.
Management fees earned are recognised on a straight-line basis over the period for which the services are provided. Fees earned from associates are
recognised in full in the income statement through revenue with the proportionate debit shown in the share of profit of associate.
99
Notes to the Financial Statements (continued)
Year ended 31 March 2017
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Operating leases
Rentals payable under operating leases are charged to the statement of comprehensive income on a straight-line basis over the term of the relevant lease.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of
incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the
time pattern in which economic benefits from the leased asset are consumed.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.
Borrowings
Interest-bearing loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Premiums payable on settlement or redemption
and direct issue costs are accounted for on an accruals basis in the statement of comprehensive income using the effective interest rate method and
are added to the carrying value amount of the instrument to the extent that they are not settled in the period in which they arise.
Finance costs
All borrowing costs are recognised in the statement of comprehensive income in the period in which they are incurred, unless the costs are incurred as
part of the development of a qualifying asset, when they will be capitalised. Commencement of capitalisation is the date when the Group incurs expenditure
for the qualifying asset, incurs borrowing costs and undertakes activities that are necessary to prepare the assets for their intended use when it is
probable that they will result in future economic benefits to the entity and the costs can be measured reliably. In the case of suspension of activities
during extended periods, the Group suspends capitalisation. The Group ceases capitalisation of borrowing costs when substantially all of the activities
necessary to prepare the asset for use are complete.
Operating profit
Operating profit is stated after gains and losses on surplus land, movements on the revaluation of investment properties and before the share of results
of associates, investment income and finance costs.
Taxation
The tax expense 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 the net profit as reported in the statement of comprehensive
income 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 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 temporary 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 differences arise 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 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 substantively enacted at the balance sheet date that are expected to apply in the period when the liability is
settled or the asset is realised. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when
they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
100
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Plant, equipment and owner occupied property
All property, plant and equipment, not classified as investment property, is carried at historic cost less depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets, other than land and investment properties, over their estimated useful lives,
using the straight-line method, on the following bases:
Freehold property 50 years
Leasehold improvements Over period of the lease
Plant and machinery 10 years
Motor vehicles 4 years
Fixtures and fittings 5 years
Computer equipment 3 to 5 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of
the asset and is recognised in income.
Investment property
The criteria used to distinguish investment property from owner-occupied property is to consider whether the property is held for rental income and for
capital appreciation. Where this is the case, the Group recognises these owned or leased properties as investment properties. Investment property is
initially recognised at cost and revalued at the balance sheet date to fair value as determined by professionally qualified external valuers. In accordance
with IAS 40, investment property held as a leasehold is stated gross of the recognised finance lease liability.
Gains or losses arising from the changes in fair value of investment property are included in the statement of comprehensive income of the period in
which they arise. In accordance with IAS 40, as the Group uses the fair value model, no depreciation is provided in respect of investment properties
including integral plant.
Leasehold properties that are leased under operating leases are classified as investment properties and included in the balance sheet at fair value. The
obligation to the lessor for the buildings element of the leasehold is included in the balance sheet at the present value of the minimum lease payments
at inception, and is shown within note 21. Lease payments are apportioned between finance charges and a reduction of the outstanding lease obligation
so as to achieve a constant rate of interest on the remaining balance of the liability.
Investment property under construction
Investment property under construction is initially recognised at cost and revalued at the balance sheet date to fair value as determined by professionally
qualified external valuers.
Gains or losses arising from the changes in fair value of investment property under construction are included in the statement of comprehensive income
in the period in which they arise.
Surplus land
Surplus land, which can include assets held for development and future sale, is recognised at the lower of cost and net realisable value. Any gains and
losses on surplus land are recognised through the statement of comprehensive income.
Impairment of assets
At each balance sheet date, the Group reviews the carrying amounts of its 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). The recoverable amount is the higher of an asset’s net selling price and its value-in-use (i.e. the net present value of its future
cash flows discounted at the Group’s average pre-tax interest rate that reflects the borrowing costs and risk for the asset).
Inventories
Inventories, representing the cost of packing materials, are stated at the lower of cost and net realisable value.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of
the instrument. Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net
gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘other gains and losses’
line item in the income statement.
101
Notes to the Financial Statements (continued)
Year ended 31 March 2017
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
A – Derivative financial instruments and hedge accounting
The Group’s activities expose it primarily to the financial risks of interest rates. The Group uses interest rate swap contracts to hedge these exposures.
The Group does not use derivative financial instruments for speculative purposes. The use of financial derivatives is governed by the Group’s policies
approved by the Board of Directors. The policy in respect of interest rates is to maintain a balance between flexibility and the hedging of interest rate risk.
Derivatives are initially recognised at fair value and are subsequently reviewed at each balance sheet date. The fair value of interest rate derivatives at
the reporting date is determined by discounting the future cash flows using the forward curves at the reporting date and the credit risk inherent in
the contract.
Changes in the fair value of derivative financial instruments are recognised in the statement of comprehensive income as they arise. The Group has not
adopted hedge accounting. 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 statement of comprehensive income.
B – Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans
and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is
recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
C – Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been impacted. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of
trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible,
it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account.
Changes in the carrying amount of the allowance account are recognised in profit or loss.
D – Cash and cash equivalents
Cash and cash equivalents comprises cash on hand and demand deposits, and other short term highly liquid investments that are readily convertible to
a known amount of cash and are subject to an insignificant risk of changes in value. The carrying amounts of these assets approximates to the fair value.
E – Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
F – Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
G – Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Retirement benefit costs
Pension costs represent contributions payable to defined contribution schemes and are charged as an expense to the statement of comprehensive income
as they fall due. The assets of the schemes are held separately from those of the Group.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. These are measured at fair value at the date of grant. The fair value
determined at the grant date of the share-based payment is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of
shares that will eventually vest.
Fair value is measured by use of the Black-Scholes model and excludes the effect of non-market based vesting conditions. The expected life used in the
model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market
based vesting conditions. The impact of the revision of the original estimates, if any, is recovered in profit and loss such that the cumulative expenses
reflects the revised estimate with a corresponding adjustment to equity reserves.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability.
At each balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is re-measured, with any changes in fair
value recognised in profit or loss for the year.
102
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Critical accounting estimates and judgements
In the application of the Group’s accounting policies, which are described above, the Directors are required to make judgements, estimates and assumptions
about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and
future periods.
Estimate of fair value of Investment Properties and Investment Property under Construction (critical accounting estimate)
The Group’s self storage centres and stores under development are valued using a discounted cash flow methodology which is based on projections of
net operating income. The Group employs expert external valuers, Cushman & Wakefield LLP, who report on the values of the Group’s stores on an annual
basis. The stores within the Armadillo Partnerships are valued by Jones Lang LaSalle. The principal assumptions underlying the estimation of the fair
value are those related to: stabilised occupancy levels; expected future growth in storage rents, capitalisation rates and discount rates. A more detailed
explanation of the background and methodology adopted in the valuation of the Group’s investment properties is set out in note 14 to the accounts.
3. REVENUE
Analysis of the Group’s operating revenue can be found below and in the Portfolio Summary on page 22.
Open stores
Self storage income
Other storage related income
Ancillary store rental income
Other revenue
Non-storage income
Management fees earned
Revenue per statement of comprehensive income
Interest receivable on bank deposits (see note 7)
Total revenue per IAS 18
2017
£000
2016
£000
91,600
15,189
526
107,315
885
870
84,900
14,568
354
99,822
808
752
109,070
101,382
16
15
109,086
101,397
Non-storage income derives principally from rental income earned from tenants of properties awaiting development.
4. SEGMENTAL INFORMATION
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the
Chief Executive to allocate resources to the segments and to assess their performance. Given the nature of the Group’s business, there is one segment,
which is the provision of self storage and related services.
Revenue represents amounts derived from the provision of self storage and related services which fall within the Group's ordinary activities after deduction
of trade discounts and value added tax. The Group’s net assets, revenue and profit before tax are attributable to one activity, the provision of self storage
and related services. These all arise in the United Kingdom in the current year and prior year.
103
Notes to the Financial Statements (continued)
Year ended 31 March 2017
5. PROFIT FOR THE YEAR
a) Profit for the year has been arrived at after charging/(crediting):
Depreciation of plant, equipment and owner-occupied property
Leasehold property depreciation
Gain on the revaluation of investment property
Profit on disposal of surplus land
Cost of inventories recognised as an expense
Employee costs (see note 6)
Operating lease rentals
Auditor’s remuneration for audit services (see below)
b) Analysis of auditor’s remuneration:
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fess payable to the Company’s auditor for the subsidiaries’ annual accounts
Total audit fees
Audit related assurance services – interim review
Tax advisory services
Other assurance services – assurance of CSR report
Other services – planning consultancy
Other services
Total non-audit fees
2017
£000
738
1,196
(43,706)
–
1,035
15,622
133
186
2016
£000
663
967
(58,001)
(4,754)
1,095
15,094
78
186
2017
£000
156
30
186
31
19
22
11
2
85
2016
£000
156
30
186
31
60
22
–
–
113
Fees payable to Deloitte LLP and their associates for non-audit services to the Company are not required to be disclosed because the consolidated
financial statements are required to disclose such fees on a consolidated basis. Fees charged by Deloitte LLP to the Group’s associates, Armadillo
Storage Holding Company Limited and Armadillo Storage Holding Company 2 Limited in the year amounted to £49,000 (2016: £43,000), which all
related to audit services.
6. EMPLOYEE COSTS
The average monthly number of full-time equivalent employees (including Executive Directors) was:
Sales
Administration
At 31 March 2017 the total number of Group employees was 361 (2016: 358).
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Details of Directors’ Remuneration is given on pages 70 to 84.
104
2017
Number
2016
Number
279
50
329
271
47
318
2017
£000
2016
£000
10,990
1,783
525
2,324
15,622
10,443
1,634
478
2,539
15,094
7.
INVESTMENT INCOME
Bank interest receivable
Unwinding of discount on Capital Goods Scheme receivable
Total interest receivable
Change in fair value of interest rate derivatives
Total investment income
8. FINANCE COSTS
Interest on bank borrowings
Capitalised interest
Interest on obligations under finance leases
Total interest payable
Change in fair value of interest rate derivatives
Total finance costs
2017
£000
16
340
356
719
1,075
2016
£000
15
388
403
–
403
2017
£000
10,953
(128)
931
2016
£000
11,187
(247)
926
11,756
11,866
–
4
11,756
11,870
9. TAXATION
The Group converted to a REIT in January 2007. As a result the Group does not pay UK corporation tax on the profits and gains from its qualifying rental
business in the UK provided that it meets certain conditions. Non-qualifying profits and gains of the Group are subject to corporation tax as normal.
The Group monitors its compliance with the REIT conditions. There have been no breaches of the conditions to date.
Finance (No.2) Bill 2015 provides that the rate of corporation tax for the 2017 Financial Year (commencing 1 April 2017) will be 19% and that the rate from
1 April 2020 would be 18%. At Budget 2016, the government announced a further reduction to the Corporation Tax main rate (for all profits except ring
fence profits) for the year starting 1 April 2020, setting the rate at 17%. This rate was incorporated in Finance Act 2016 which was fully enacted on
15 September 2016.
UK current tax
Current tax:
– Current year
– Prior year
2017
£000
417
(145)
272
2016
£000
247
–
247
105
Notes to the Financial Statements (continued)
Year ended 31 March 2017
9. TAXATION (continued)
A reconciliation of the tax charge is shown below:
Profit before tax
Tax charge at 20% (2016 – 20%) thereon
Effects of:
Revaluation of investment properties
Share of profit of associates
Other permanent differences
Profits from the tax exempt business
Profit on disposal of surplus land
Utilisation of brought forward losses
Movement on other unrecognised deferred tax assets
Current year tax charge
Prior year adjustment
Total tax charge
2017
£000
2016
£000
99,783
112,246
19,957
22,449
(8,741)
(288)
(1,242)
(8,791)
–
–
(478)
417
(145)
272
(11,600)
(220)
(930)
(7,725)
(951)
(51)
(725)
247
–
247
At 31 March 2017 the Group has unutilised tax losses of £32.6 million (2016: £32.3 million) available for offset against certain types of future taxable
profits. All losses can be carried forward indefinitely.
10. ADJUSTED PROFIT
Profit before tax
Gain on revaluation of investment properties – wholly owned
– in associate (net of deferred tax)
Change in fair value of interest rate derivatives – Group
– in associate
Profit on disposal of surplus land
Prior period VAT recovery
Acquisition costs written off
Share of associate acquisition costs written off
Adjusted profit before tax
Tax
Adjusted profit after tax
2017
£000
99,783
(43,706)
(756)
(719)
8
–
(328)
296
63
2016
£000
112,246
(58,001)
(566)
4
23
(4,754)
–
–
–
54,641
48,952
(272)
(247)
54,369
48,705
Adjusted profit before tax which excludes gains and losses on the revaluation of investment properties, changes in fair value of interest rate derivatives,
net gains and losses on surplus land, and non-recurring items of income and expenditure have been disclosed to give a clearer understanding of the
Group’s underlying trading performance.
106
11. DIVIDENDS
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2016 of 12.8p (2015: 11.3p) per share.
Interim dividend for the year ended 31 March 2017 of 13.5p (2016: 12.1p) per share.
Proposed final dividend for the year ended 31 March 2017 of 14.1p (2016: 12.8p) per share.
2017
£000
2016
£000
20,003
21,155
41,158
22,107
17,541
18,902
36,443
20,003
Subject to approval by shareholders at the Annual General Meeting to be held on 20 July 2017, the final dividend will be paid on 27 July 2017. The ex-div
date is 22 June 2017 and the record date is 23 June 2017.
The Property Income Dividend (“PID”) payable for the year is 24.0 pence per share (2016: 18.1 pence per share).
12. EARNINGS AND NET ASSETS PER SHARE
Earnings per ordinary share
Year ended 31 March 2017 Year ended 31 March 2016
Earnings
£m
Shares
million
Pence per
share
Earnings
£m
Shares
million
Pence per
share
Basic 99.5 156.5 63.6 112.0 155.8
Dilutive share options – 1.2 (0.5) – 0.7
Diluted 99.5 157.7 63.1 112.0 156.5
Adjustments:
Gain on revaluation of investment properties (43.7) – (27.7) (58.0) –
Change in fair value of interest rate derivatives (0.7) – (0.4) – –
Profit on disposal of surplus land – – – (4.8) –
Acquisition costs written off 0.3 – 0.2 – –
Prior period VAT recovery (0.3) – (0.2) – –
Share of associate non-recurring gains (0.7) – (0.5) (0.5) –
EPRA – diluted 54.4 157.7 34.5 48.7 156.5
EPRA – basic 54.4 156.5 34.8 48.7 155.8
71.9
(0.3)
71.6
(37.1)
–
(3.1)
–
–
(0.3)
31.1
31.3
The calculation of basic earnings is based on profit after tax for the year. The weighted average number of shares used to calculate diluted earnings per
share has been adjusted for the conversion of share options.
EPRA earnings and earnings per ordinary share before non-recurring items, movements on revaluation of investment properties, gains on surplus land,
the change in fair value of interest rate derivatives, and share of associate non-recurring gains and losses (including deferred tax on revaluation surpluses)
have been disclosed to give a clearer understanding of the Group’s underlying trading performance.
107
Notes to the Financial Statements (continued)
Year ended 31 March 2017
12. EARNINGS AND NET ASSETS PER SHARE (continued)
Net assets per share
The European Public Real Estate Association (“EPRA”) has issued recommended bases for the calculation of net assets per share information and this is
shown in the table below:
Basic net asset value
Exercise of share options
EPRA NNNAV
Adjustments:
Fair value of derivatives
Fair value of derivatives – share of associate
Share of deferred tax in associates
EPRA NAV
Basic net assets per share (pence)
EPRA NNNAV per share (pence)
EPRA NAV per share (pence)
EPRA NAV (as above) (£000)
Valuation methodology assumption (see note 14) (£000)
Adjusted net asset value (£000)
Adjusted net assets per share (pence)
Shares in issue
Own shares held in EBT
Basic shares in issue used for calculation
Exercise of share options
Diluted shares used for calculation
31 March
2017
£000
890,350
820
31 March
2016
£000
829,387
700
891,170
830,087
2,964
77
626
3,683
69
573
894,837
834,412
568.0
562.1
564.4
894,837
68,530
963,367
607.6
530.8
525.5
528.3
834,412
64,560
898,972
569.1
No. of shares
No. of shares
157,882,867 157,369,287
(1,122,907)
(1,122,907)
156,759,960 156,246,380
1,707,743
1,781,652
158,541,612 157,954,123
Net assets per share are equity shareholders’ funds divided by the number of shares at the year end. The shares currently held in the Group’s Employee
Benefit Trust are excluded from both net assets and the number of shares. Adjusted net assets per share include the effect of those shares issuable
under employee share option schemes and the effect of alternative valuation methodology assumptions (see note 14).
108
13. NON-CURRENT ASSETS
a) Investment property, investment property under construction and interests in leasehold property
Investment
property
under
construction
£000
Interests in
leasehold
property
£000
Investment
property
£000
At 31 March 2015 1,007,110 15,681 20,829
Additions 3,668 41,695 –
Reclassification 19,437 (19,437) –
Adjustment to present value – – 303
Revaluation (see note 14) 61,995 (3,994) –
Depreciation – – (967)
At 31 March 2016 1,092,210 33,945 20,165
Additions 17,817 2,827 1,871
Adjustment to present value – – 2,761
Revaluation (see note 14) 44,363 (657) –
Depreciation – – (1,196)
Total
£000
1,043,620
45,363
–
303
58,001
(967)
1,146,320
22,515
2,761
43,706
(1,196)
At 31 March 2017 1,154,390 36,115 23,601
1,214,106
Additions to the interests in leasehold properties relate to the lease at Twickenham 2, acquired from Lock and Leave during the year.
The income from self storage accommodation earned by the Group from its investment property is disclosed in note 3. Direct operating expenses,
which are all applied to generating rental income, arising on the investment property in the year are disclosed in the Portfolio Summary on page 22.
Included within additions is £0.1 million of capitalised interest (2016: £0.2 million), calculated at the Group’s average borrowing cost for the year of
3.3%. 55 of the Group’s investment properties are pledged as security for loans, with a total external value of £951.8 million.
Acquisition of Lock and Leave
On 28 April 2016 the Group acquired the entire share capital and control of three companies from the Lock and Leave Group – Lock and Leave Limited,
Kator Storage Limited and Lock and Leave (Twickenham) Limited (“the Companies”), for a consideration of £14.6 million. The net consideration is
shown below. The Companies owned two self storage centres in London.
To determine the assets and liabilities acquired at the date of completion of the Companies, the Group has used the balance sheet at the date of
acquisition. The following provides a breakdown of the fair value of the assets and liabilities acquired. The investment property was carried at cost in
the companies’ balance sheets, and hence the fair value adjustment shown below is to increase the carrying amount to open market valuation.
Non-current assets 5,792 8,808
Current assets 950 –
Current liabilities (697) –
Non-current liabilities (176) –
Book value
£000
Adjustments
£000
Fair value
£000
14,600
950
(697)
(176)
Net assets (100%) 5,869 8,808
14,677
Purchase consideration
Purchase consideration paid
Cash held in Companies acquired
Cash outflow on acquisition
£000
14,677
14,677
(438)
14,239
From the date of acquisition of the Companies on 28 April 2016 to 31 March 2017, the revenue of the Companies was £1.8 million, and the statutory profit
before tax was £4.4 million. The costs of acquisition amounted to £0.3 million. These are included in administrative expenses in the income statement.
109
Notes to the Financial Statements (continued)
Year ended 31 March 2017
13. NON-CURRENT ASSETS (continued)
b) Plant, equipment and owner occupied property
Freehold
property
£000
Leasehold
improvements
£000
Plant and
machinery
£000
Motor
vehicles
£000
Fixtures,
fittings & office
equipment
£000
Cost
At 31 March 2015 1,885 53 544 25 1,416
Retirement of fully depreciated assets – – (103) – (439)
Additions 298 48 151 – 521
At 31 March 2016 2,183 101 592 25 1,498
Retirement of fully depreciated assets – (4) (34) – (489)
Additions 6 – 91 30 422
Disposals – – – (23) –
At 31 March 2017 2,189 97 649 32 1,431
Depreciation
At 31 March 2015 (328) (50) (219) (25) (251)
Retirement of fully depreciated assets – – 103 – 439
Charge for the year (39) (2) (81) – (541)
At 31 March 2016 (367) (52) (197) (25) (353)
Retirement of fully depreciated assets – 4 34 – 489
Charge for the year (42) (2) (102) (5) (587)
Disposals – – – 23 –
Total
£000
3,923
(542)
1,018
4,399
(527)
549
(23)
4,398
(873)
542
(663)
(994)
527
(738)
23
At 31 March 2017 (409) (50) (265) (7) (451)
(1,182)
Net book value
At 31 March 2017 1,780 47 384 25 980
At 31 March 2016 1,816 49 395 – 1,145
3,216
3,405
c) Goodwill
The goodwill relates to the purchase of Big Yellow Self Storage Company Limited in 1999. The asset is tested bi-annually for impairment. The carrying
value remains unchanged from the prior year as there is considered to be no impairment in the value of the asset.
d) Investment in associates
Armadillo
The Group has a 20% interest in Armadillo Storage Holding Company Limited (“Armadillo 1”) and a 20% interest in Armadillo Storage Holding Company
2 Limited (“Armadillo 2”). Both interests are accounted for as associates, using the equity method of accounting.
Armadillo 1 Armadillo 2
31 March
2017
£000
31 March
2016
£000
31 March
2017
£000
At the beginning of the year 4,173 3,638 2,233
Share of results (see below) 1,093 718 349
Dividends (218) (183) (178)
Share of net assets 5,048 4,173 2,404
The Group’s total subscription for partnership capital and advances in Armadillo 1 is £1,920,000 and £1,789,000 in Armadillo 2.
The investment properties owned by Armadillo 1 and Armadillo 2 have been valued at 31 March 2017 by Jones Lang LaSalle.
31 March
2016
£000
1,934
386
(87)
2,233
110
13. NON-CURRENT ASSETS (continued)
d) Investment in associates (continued)
The figures below show the trading results of the Armadillo Partnerships, and the Group’s share of the results and the net assets of the Armadillo
Partnerships.
Armadillo 1 Armadillo 2
Year ended
31 March
2017
£000
Year ended
31 March
2016
£000
Year ended
31 March
2017
£000
Year ended
31 March
2016
£000
Income statement (100%)
Revenue 6,324 4,829 4,159
Cost of sales (3,270) (2,560) (1,763)
Administrative expenses (207) (77) (88)
Operating profit 2,847 2,192 2,308
Gain on the revaluation of investment properties 3,725 2,340 322
Net interest payable (718) (514) (729)
Acquisition costs written off (316) – –
Fair value movement of interest rate derivatives 8 (9) (49)
Deferred and current tax (78) (421) (109)
Profit attributable to shareholders 5,468 3,588 1,743
Dividends paid (1,091) (916) (890)
Retained profit 4,377 2,672 853
Balance sheet (100%)
Investment property 43,375 32,825 25,900
Interest in leasehold properties – – 3,526
Other non-current assets 1,125 1,015 1,487
Current assets 1,177 888 867
Current liabilities (1,895) (1,193) (1,821)
Derivative financial instruments (199) (207) (188)
Non-current liabilities (18,341) (12,463) (17,753)
4,139
(1,954)
(97)
2,088
1,111
(688)
–
(104)
(478)
1,929
(434)
1,495
24,825
3,809
1,490
845
(1,840)
(139)
(17,825)
Net assets (100%) 25,242 20,865 12,018
11,165
Group share (20%)
Operating profit 569 439 462
Gain on the revaluation of investment properties 745 468 64
Net interest payable (144) (103) (146)
Acquisition costs written off (63) – –
Fair value movement of interest rate derivatives 2 (2) (10)
Deferred and current tax (16) (84) (21)
Profit attributable to shareholders 1,093 718 349
Dividends paid (218) (183) (178)
Retained profit 875 535 171
418
222
(138)
–
(21)
(95)
386
(87)
299
Associates’ net assets 5,048 4,173 2,404
2,233
111
Notes to the Financial Statements (continued)
Year ended 31 March 2017
14. VALUATION OF INVESTMENT PROPERTY
Deemed cost
£000
Revaluation on
deemed cost
£000
Valuation
£000
Freehold stores
At 31 March 2016 566,913 483,367
Movement in year 16,384 44,246
1,050,280
60,630
At 31 March 2017 583,297 527,613
1,110,910
Leasehold stores
At 31 March 2016 14,777 27,153
Movement in year 1,433 117
At 31 March 2017 16,210 27,270
41,930
1,550
43,480
Total of open stores
At 31 March 2016 581,690 510,520
Movement in year 17,817 44,363
1,092,210
62,180
At 31 March 2017 599,507 554,883
1,154,390
Investment property under construction
At 31 March 2016 42,650 (8,705)
Movement in year 2,827 (657)
33,945
2,170
At 31 March 2017 45,477 (9,362)
36,115
Valuation of all investment property
At 31 March 2016 624,340 501,815
Movement in year 20,644 43,706
1,126,155
64,350
At 31 March 2017 644,984 545,521
1,190,505
The Group has classified the fair value investment property and the investment property under construction within Level 3 of the fair value hierarchy.
There has been no transfer to or from Level 3 in the year.
The wholly owned freehold and leasehold investment properties have been valued at 31 March 2017 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 and the investment properties under construction has been prepared on
the basis of either Fair Value or Fair Value as a fully equipped operational entity, having regard to trading potential, as appropriate.
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 have confirmed that:
> one of the members of the RICS who has been a signatory to the valuations provided to the Group for the same purposes as this valuation, has done
so since September 2004. This is the second occasion on which the other member has been a signatory;
> C&W have been carrying out this annual valuation for the same purposes as this valuation on behalf of the Group since September 2004;
> C&W do not provide other significant professional or agency services to the Group;
> in relation to the preceding financial year of C&W, the proportion of the total fees payable by the Group to the total fee income of the firm is less than
5%; and
> the fee payable to C&W is a fixed amount per store, and is not contingent on the appraised value.
Market uncertainty
C&W’s valuation report comments on valuation uncertainty resulting from low liquidity in the market for self storage property. C&W note that in the UK
since Q1 2013 there have only been nine transactions involving multiple assets and 13 single asset transactions. 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.
Portfolio Premium
C&W’s valuation report further confirms that the properties have been valued individually but that if the portfolio was to be sold as a single lot or in
selected groups of properties, the total value could differ significantly. C&W state that in current market conditions they are of the view that there could
be a material portfolio premium.
112
14. VALUATION OF INVESTMENT PROPERTY (continued)
Valuation methodology
C&W have adopted different approaches for the valuation of the leasehold and freehold assets as follows:
Freehold and long leasehold
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
A. Net operating income is based on projected revenue received less projected operating costs together with a central administration charge of 6% of
the estimated annual revenue subject to a cap and a collar. The initial net operating income is calculated by estimating the net operating income in
the first 12 months following the valuation date.
B.
C.
The net operating income in future years is calculated assuming either straight-line absorption from day one actual occupancy or variable absorption
over years one to four of the cash flow period, to an estimated stabilised/mature occupancy level. In the valuation the assumed stabilised occupancy
level for the 73 trading stores (both freeholds and leaseholds) open at 31 March 2017 averages 82.8% (31 March 2016: 81.9%). The projected revenues
and costs have been adjusted for estimated cost inflation and revenue growth. The average time assumed for the 73 stores to trade at their maturity
levels is 22 months (31 March 2016: 20 months).
The capitalisation rates applied to existing and future net cash flow have been estimated by reference to underlying yields for industrial and retail
warehouse property, yields for other trading property types such as student housing and hotels, bank base rates, ten year money rates, inflation and
the available evidence of transactions in the sector. The valuation included in the accounts assumes rental growth in future periods. If an assumption
of no rental growth is applied to the external valuation, the net initial yield pre-administration expenses for the 73 stores is 6.5% (31 March 2016:
6.5%) rising to a stabilised net yield pre-administration expenses of 7.2% (31 March 2016: 7.2%).
D.
The future net cash flow projections (including revenue growth and cost inflation) have been discounted at a rate that reflects the risk associated
with each asset. The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 9.7% (31 March 2016: 9.9%).
E. Purchaser’s costs in the range of 6.1% to circa 6.8% (see below) have been assumed initially, reflecting the progressive SLDT rates brought into
force in March 2016 and sale plus purchaser’s costs totalling circa 7.1% to 7.8% are assumed on the notional sales in the tenth year in relation to the
freehold stores.
Short leasehold
The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the discounted cash flow is
extended to the expiry of the lease. The average unexpired term of the Group’s seven short leasehold properties is 15.0 years (31 March 2016: 15.5 years
unexpired).
Sensitivities
As noted in ‘Significant judgements and key estimates’ on page 103, self storage valuations are complex, derived from data which is not widely publicly
available and involve a degree of judgement. For these reasons we have classified the valuations of our property portfolio as Level 3 as defined by IFRS
13. Inputs to the valuations, some of which are ‘unobservable’ as defined by IFRS 13, include capitalisation yields, stable occupancy rates, and rental
growth rates. The existence of an increase of more than one unobservable input would augment the impact on valuation. The impact on the valuation
would be mitigated by the interrelationship between unobservable inputs moving in opposite directions. For example, an increase in stable occupancy
may be offset by an increase in yield, resulting in no net impact on the valuation. A sensitivity analysis showing the impact on valuations of changes in
yields and stable occupancy is shown below.
Impact of a change
Impact of a change in in stabilised
capitalisation rates occupancy assumption
25 bps decrease 25 bps increase
(£m)
(£m)
1% increase
(£m)
1% decrease
(£m)
Reported group £1,154.4m £43.3m (£40.1m) £16.7m
(£17.2m)
Investment properties under construction
C&W have 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 after allowing for the outstanding costs to take each scheme from its current state to completion and full fit-out. C&W have
allowed for holding costs and construction contingency, as appropriate. Four schemes do not yet have planning consent and C&W have reflected the
planning risk in their valuation.
113
Notes to the Financial Statements (continued)
Year ended 31 March 2017
14. VALUATION OF INVESTMENT PROPERTY (continued)
Immature stores: value uncertainty
C&W have assessed the value of each property individually. However, one of the Group’s stores is relatively immature and has low initial cash flows. C&W
have endeavoured to reflect the nature of the cash flow profile for this property in their valuation, and the higher associated risks relating to the as yet
unproven future cash flows, 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 immature store 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 have not adjusted their opinion of Fair Value to reflect such a grouping of the immature asset 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. As noted above, C&W have not assumed that the entire portfolio of properties owned by the entity 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 from the aggregate of the individual values for each
property in the portfolio, reflecting the lotting assumption described above.
Valuation assumption for purchaser’s costs
The Group’s investment property assets have been valued for the purposes of the financial statements after deducting notional purchaser’s cost of circa
6.1% to 6.8% 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. The assets 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 carry out a Red Book valuation on the above basis,
and this results in a higher property valuation at 31 March 2017 of £1,258.5 million (£68.0 million higher than the value recorded in the financial
statements). The total valuations in the two Armadillo Partnerships performed by Jones Lang LaSalle are £2.5 million higher than the value recorded in
the financial statements, of which the Group’s share is £0.5 million. The sum of these is £68.5 million and translates to 43.2 pence per share. We have
included this revised valuation in the adjusted diluted net asset calculation (see note 14).
15. SURPLUS LAND
At 31 March 2016
Disposal
At 31 March 2017
£000
300
(300)
–
During the year the remaining surplus land was sold at book value. During the prior year a gain of £4,754,000 arose on the disposal of surplus land at one
site during the year (including the release of a prior year impairment).
114
16. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Capital Goods Scheme receivable
Other receivables
Prepayments and accrued income
Non-current
Capital Goods Scheme receivable
31 March
2017
£000
3,174
2,725
266
11,877
18,042
31 March
2016
£000
3,050
2,866
241
10,065
16,222
4,091
6,561
Trade receivables are net of a bad debt provision of £7,000 (2016: £11,000). The Directors consider that the carrying amount of trade and other receivables
approximates their fair value.
The Financial Review contains commentary on the Capital Goods Scheme receivable.
Trade receivables
The Group does not typically offer credit terms to its customers, requiring them to pay in advance of their storage period and hence the Group is not
exposed to significant credit risk. A late charge of 10% is applied to a customer’s account if they are greater than 10 days overdue in their payment. The
Group provides for receivables on a specific basis. There is a right of lien over the customers’ goods, so if they have not paid within a certain time frame,
we have the right to sell the items they store to recoup the debt owed. Trade receivables that are overdue are provided for based on estimated irrecoverable
amounts determined by reference to past default experience.
For individual storage customers, the Group does not perform credit checks, however this is mitigated by the fact that these customers are required to
pay in advance, and also to pay a deposit ranging from between one week to four weeks’ storage income. Before accepting a new business customer
who wishes to use a number of the Group’s stores, the Group uses an external credit rating to assess the potential customer’s credit quality and defines
credit limits by customer. There are no customers who represent more than 5% of the total balance of trade receivables.
Included in the Group’s trade receivable balance are debtors with a carrying amount of £250,000 (2016: £353,000) which are past due at the reporting
date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable.
The average age of these receivables is 19 days past due (2016: 19 days past due).
Ageing of past due but not impaired receivables
1 – 30 days
30 – 60 days
60 + days
Total
Movement in the allowance for doubtful debts
Balance at the beginning of the year
Amounts provided in year
Amounts written off as uncollectible
Balance at the end of the year
2017
£000
214
23
13
250
2017
£000
11
63
(67)
7
2016
£000
285
45
23
353
2016
£000
19
76
(84)
11
The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further
credit provision required in excess of the allowance for doubtful debts.
115
Notes to the Financial Statements (continued)
Year ended 31 March 2017
16. TRADE AND OTHER RECEIVABLES (continued)
Ageing of impaired trade receivables
1 – 30 days
30 – 60 days
60 + days
Total
17. TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables
Accruals and deferred income
2017
£000
–
2
5
7
31 March
2017
£000
13,279
8,352
15,304
36,935
2016
£000
–
4
7
11
31 March
2016
£000
10,453
10,592
15,077
36,122
The Group has financial risk management policies in place to ensure that all payables are paid within the credit terms. The Directors consider the carrying
amount of trade and other payables and accruals and deferred income approximates fair value.
18. FINANCIAL INSTRUMENTS
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders
through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in
note 19, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.
The Group’s debt facilities require 45% of total drawn debt to be fixed. The Group has complied with this during the year.
With the exception of derivative instruments which are classified as a financial liability at fair value through the profit and loss (“FVTPL”), financial liabilities
are categorised under amortised cost. All financial assets are categorised as loans and receivables.
Exposure to credit, interest rate and currency risks arises in the normal course of the Group’s business. Derivative financial instruments are used to
manage exposure to fluctuations in interest rates, but are not employed for speculative purposes.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to
the financial statements.
A. Balance sheet management
The Group’s Board reviews the capital structure on an ongoing basis. As part of this review, the Board considers the cost of capital and the risks
associated with each class of capital. The Group seeks to have a conservative gearing ratio (the proportion of net debt to equity). The Board considers
at each review the appropriateness of the current ratio in light of the above. The Board is currently satisfied with the Group’s gearing ratio.
The gearing ratio at the year end is as follows:
Debt
Cash and cash equivalents
Net debt
Balance sheet equity
Net debt to equity ratio
2017
£000
(304,955)
6,906
(298,049)
890,350
33.5%
2016
£000
(312,198)
17,207
(294,991)
829,387
35.6%
Debt is defined as long-term and short-term borrowings, as detailed in note 19, excluding finance leases and debt issue costs. Equity includes all
capital and reserves of the Group attributable to equity holders of the Company. Net debt is defined as gross bank borrowings less cash and cash
equivalents.
116
18. FINANCIAL INSTRUMENTS (continued)
B. Debt management
The Group currently borrows through a senior term loan, secured on 25 self storage assets and sites, a 15 year loan with Aviva Commercial Finance
Limited secured on a portfolio of 15 self storage assets, and a £70 million seven year loan from M&G Investments Limited secured on a portfolio of
15 self storage assets. Borrowings are arranged to ensure an appropriate maturity profile and to maintain short term liquidity. Funding is arranged
through banks and financial institutions with whom the Group has a strong working relationship.
C. Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the
Group by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts. Hedging activities
are evaluated regularly to align with interest rate views and defined risk appetite; ensuring optimal hedging strategies are applied, by either positioning
the balance sheet or protecting interest expense through different interest rate cycles.
At 31 March 2017 the Group had two interest rate derivatives in place; £30 million fixed at 0.4% (excluding the margin on the underlying debt
instrument) until October 2021, and £35 million fixed at 2.635% (excluding the margin on the underlying debt instrument) until June 2022.
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on
agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed
rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined
by discounting the future cash flows using the curves at the reporting date and the credit risk inherent in the contract, and is disclosed below. The
average interest rate is based on the outstanding balances at the end of the financial year.
The £30 million interest rate swap settles on a monthly basis. The floating rate on the interest rate swap is one month LIBOR. The Group settles the
difference between the fixed and floating interest rate on a net basis.
The £35 million interest rate swap settles on a three-monthly basis. The floating rate on the interest rate swap is three month LIBOR. The Group settles
the difference between the fixed and floating interest rate on a net basis.
The Group does not hedge account for its interest rate swaps and states them at fair value, with changes in fair value included in the statement of
comprehensive income. The gain in the statement of comprehensive income for the year on the fair value of interest rate derivatives was £719,000
(2016: loss of £4,000).
The fair value of the above derivatives at 31 March 2017 was a liability of £2,964,000 (2016: liability of £3,683,000).
D. Interest rate sensitivity analysis
In managing interest rate risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings, without jeopardising its
flexibility. Over the longer term, permanent changes in interest rates may have an impact on consolidated earnings.
At 31 March 2017, it is estimated that an increase of 0.25 percentage points in interest rates would have reduced the Group’s adjusted profit before
tax and net equity by £375,000 (2016: reduced adjusted profit before tax by £388,000) and a decrease of 0.25 percentage points in interest rates
would have increased the Group’s adjusted profit before tax and net equity by £375,000 (2016: increased adjusted profit before tax by £388,000).
The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings, net of interest rate swaps, at the year end.
The Group’s sensitivity to interest rates has decreased during the year, with a slight reduction in the amount of floating rate debt. The Board monitors
closely the exposure to the floating rate element of our debt.
E. Cash management and liquidity
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management
framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages
liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual
cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 19 is a description of additional undrawn facilities
that the Group has at its disposal to further reduce liquidity risk.
Short term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources, giving due consideration to risk.
F. Foreign currency management
The Group does not have any foreign currency exposure.
G. Credit risk
The credit risk management policies of the Group with respect to trade receivables are discussed in note 16. The Group has no significant concentration
of credit risk, with exposure spread over 52,500 customers in our stores.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
117
Notes to the Financial Statements (continued)
Year ended 31 March 2017
18. FINANCIAL INSTRUMENTS (continued)
H. Financial maturity analysis
In respect of interest-bearing financial liabilities, the following table provides a maturity analysis for individual elements.
2017 maturity
Total
£000
Less than
one year
£000
One to
two years
£000
Two to
five years
£000
Aviva loan 89,955 2,356 2,474 8,190
M&G loan payable at variable rate 35,000 – – –
M&G loan fixed by interest rate derivatives 35,000 – – –
Bank loan payable at variable rate 115,000 – – 115,000
Debt fixed by interest rate derivatives 30,000 – – 30,000
More than
five years
£000
76,935
35,000
35,000
–
–
Total 304,955 2,356 2,474 153,190
146,935
2016 maturity
Total
£000
Less than
one year
£000
One to
two years
£000
Two to
five years
£000
Aviva loan 92,198 2,243 2,356 7,799
M&G loan payable at variable rate 35,000 – – –
M&G loan fixed by interest rate derivatives 35,000 – – –
Bank loan payable at variable rate 120,000 – – 120,000
Debt fixed by interest rate derivatives 30,000 – – 30,000
More than
five years
£000
79,800
35,000
35,000
–
–
Total 312,198 2,243 2,356 157,799
149,800
I. Fair values of financial instruments
The fair values of the Group’s cash and short term deposits and those of other financial assets equate to their book values. Details of the Group’s
receivables at amortised cost are set out in note 16. The amounts are presented net of provisions for doubtful receivables, and allowances for
impairment are made where appropriate. Trade and other payables, including bank borrowings, are carried at amortised cost. Finance lease liabilities
are included at the fair value of their minimum lease payments. Derivatives are carried at fair value.
For those financial instruments held at valuation, the Group has categorised them into a three level fair value hierarchy based on the priority of the
inputs to the valuation technique in accordance with IFRS 7. The hierarchy gives the highest priority to quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different
levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument
in its entirety. The fair value of the Group’s outstanding interest rate derivative, as detailed in note 18C, has been estimated by calculating the present
value of future cash flows, using appropriate market discount rates, representing Level 2 fair value measurements as defined by IFRS 7. There are no
financial instruments which have been categorised as Level 1 or Level 3.
118
18. FINANCIAL INSTRUMENTS (continued)
J. Maturity analysis of financial liabilities
The contractual maturities based on market conditions and expected yield curves prevailing at the year end date are as follows:
2017
Trade
and other
payables
£000
Interest rate
swaps
£000
Borrowings
and interest
£000
Finance
leases
£000
From five to twenty years – 127 166,652 25,556
From two to five years – 1,493 180,928 6,116
From one to two years – 692 11,930 2,039
Due after more than one year – 2,312 359,510 33,711
Due within one year 21,631 816 11,930 2,039
Total
£000
192,335
188,537
14,661
395,533
36,416
Total 21,631 3,128 371,440 35,750
431,949
2016
Trade
and other
payables
£000
Interest rate
swaps
£000
Borrowings
and interest
£000
Finance
leases
£000
From five to twenty years – 506 176,296 22,894
From two to five years – 1,684 188,517 5,255
From one to two years – 675 12,982 1,752
Due after more than one year – 2,865 377,795 29,901
Due within one year 21,045 1,055 12,982 1,752
Total
£000
199,696
195,456
15,409
410,561
36,834
Total 21,045 3,920 390,777 31,653
447,395
K. Reconciliation of maturity analyses
The maturity analysis in note 18J shows non-discounted cash flows for all financial liabilities including interest payments. The table below reconciles
the borrowings column in note 19 with the borrowings and interest column in the maturity analysis presented in note 18J.
2017
Borrowings
£000
Interest
£000
Unamortised
borrowing
costs
£000
From five to twenty years 146,935 17,806 1,911
From two to five years 153,190 26,373 1,365
From one to two years 2,474 9,456 –
Due after more than one year 302,599 53,635 3,276
Due within one year 2,356 9,574 –
Borrowings
and interest
£000
166,652
180,928
11,930
359,510
11,930
Total 304,955 63,209 3,276
371,440
2016
Borrowings
£000
Interest
£000
Unamortised
borrowing
costs
£000
From five to twenty years 149,800 24,306 2,190
From two to five years 157,799 29,473 1,245
From one to two years 2,356 10,626 –
Due after more than one year 309,955 64,405 3,435
Due within one year 2,243 10,739 –
Borrowings
and interest
£000
176,296
188,517
12,982
377,795
12,982
Total 312,198 75,144 3,435
390,777
119
Notes to the Financial Statements (continued)
Year ended 31 March 2017
19. BORROWINGS
Secured borrowings at amortised cost
Current liabilities
Aviva loan
Non-current liabilities
Bank borrowings
Aviva loan
M&G loan
Unamortised loan arrangement costs
Total non-current borrowings
Total borrowings
31 March
2017
£000
2,356
2,356
145,000
87,599
70,000
(3,276)
31 March
2016
£000
2,243
2,243
150,000
89,955
70,000
(3,435)
299,323
306,520
301,679
308,763
The weighted average interest rate paid on the borrowings during the year was 3.3% (2016: 3.6%).
The Group has £45,000,000 in undrawn committed bank borrowing facilities at 31 March 2017, which expire between four and five years (2016: £20,000,000
expiring between four and five years).
The Group has a £100 million 15 year fixed rate loan with Aviva Commercial Finance Limited. The loan is secured over a portfolio of 15 freehold self storage
centres. The annual fixed interest rate on the loan is 4.9%. The loan amortises to £60 million over the course of the 15 years. The debt service is payable
monthly based on fixed annual amounts. The loan outstanding on the fifth anniversary will be £89.8 million; £76.7 million outstanding on the tenth
anniversary, with £60 million remaining at expiry in April 2027.
The Group has a £190 million five year bank facility with Lloyds and HSBC expiring in October 2021. £85 million of the facility is term loan with £105 million
revolving. The blended margin on the facility when fully drawn is 1.36%. During the year, the Group exercised an option to extend this loan’s term by a further
year. The Group also has an option to increase the amount of the revolving loan facility by a further £60 million during the course of the loan’s term.
The Group has a £70 million seven year loan with M&G Investments Limited, with a bullet repayment in June 2022. The loan is secured over a portfolio of
15 freehold self storage centres. Half of the loan is variable and half is subject to an interest rate derivative for the seven years.
The Group was in compliance with its banking covenants at 31 March 2017 and throughout the year. The main covenants are summarised in the table below:
Covenant
Consolidated EBITDA
Consolidated net tangible assets (less goodwill)
Bank loan income cover
Aviva loan interest service cover ratio
Aviva loan debt service cover ratio
M&G income cover
Covenant level
Minimum 1.5x
Minimum £250m
Minimum 1.75x
Minimum 1.5x
Minimum 1.2x
Minimum 1.5x
At 31 March 2017
6.5x
£888.9m
10.8x
3.8x
2.5x
5.9x
120
19. BORROWINGS (continued)
Interest rate profile of financial liabilities
Total
£000
Floating
rate
£000
Fixed
rate
£000
Weighted
average
interest
rate
Period for
which the
rate is
fixed
At 31 March 2017
Gross financial liabilities 304,955 150,000 154,955 3.2% 7.0 years
At 31 March 2016
Gross financial liabilities 312,198 155,000 157,198 3.5% 7.3 years
Weighted
average
period
until
maturity
5.9 years
6.3 years
All monetary liabilities, including short term receivables and payables are denominated in sterling. The weighted average interest rate includes the effect
of the Group’s interest rate derivatives. The Directors have concluded that the carrying value of borrowings approximates to its fair value.
Narrative disclosures on the Group’s policy for financial instruments are included within the Strategic Report and in note 18.
20. DEFERRED TAX
Deferred tax assets in respect of share based payments (£0.1 million), interest rate swaps (£0.5 million), corporation tax losses (£4.5 million), capital
allowances in excess of depreciation (£0.3 million) and capital losses (£1.0 million) in respect of the non-REIT taxable business have not been recognised
due to uncertainty over the projected tax liabilities arising in the short term within the non-REIT taxable business.
21. OBLIGATIONS UNDER FINANCE LEASES
Present value of
Minimum lease payments minimum lease payments
2017
£000
2016
£000
2017
£000
2016
£000
Amounts payable under finance leases:
Within one year 2,039 1,752 2,005
Within two to five years inclusive 8,155 7,007 7,193
Greater than five years 25,556 22,894 14,403
35,750 31,653 23,601
1,722
6,136
12,307
20,165
Less: future finance charges (12,149) (11,488)
Present value of lease obligations 23,601 20,165
All lease obligations are denominated in sterling. Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements
have been entered into for contingent rental payments. The carrying amount of the Group’s lease obligations approximates their fair value.
121
Notes to the Financial Statements (continued)
Year ended 31 March 2017
22. SHARE CAPITAL
Called up,
Authorised allotted and fully paid
2017
£000
2016
£000
2017
£000
2016
£000
Ordinary shares of 10 pence each 20,000 20,000 15,788
15,737
Movement in issued share capital
Number of shares at 31 March 2015 158,055,735
(1,418,750)
Cancellation of treasury shares
732,302
Exercise of share options – Share option schemes
Number of shares at 31 March 2016 157,369,287
513,580
Exercise of share options – Share option schemes
Number of shares at 31 March 2017 157,882,867
The Company has one class of ordinary shares which carry no right to fixed income.
At 31 March 2017 options in issue to Directors and employees were as follows:
Option Number of Number of
price per ordinary ordinary
Date option ordinary Date first Date on which the shares shares
Granted share exercisable exercise period expires 2017 2016
3 August 2009 nil p** 3 August 2012 2 August 2019 – 2,075
12 July 2010 nil p ** 12 July 2013 11 July 2020 – 4,781
19 July 2011 nil p ** 19 July 2013 19 July 2021 2,400 7,112
11 July 2012 nil p ** 11 July 2015 10 July 2022 8,559 15,724
12 March 2013 305.5p * 1 April 2016 1 October 2016 – 31,365
19 July 2013 nil p ** 19 July 2016 19 July 2023 78,469 511,821
25 February 2014 442.6p* 1 April 2017 1 October 2017 21,624 23,655
29 July 2014 nil p** 29 July 2017 29 July 2024 485,032 503,591
16 March 2015 494.6p* 1 April 2018 1 October 2018 95,016 101,014
21 July 2015 nil p** 21 July 2018 21 July 2025 379,293 399,117
14 March 2016 608.0p* 1 April 2019 1 October 2019 41,809 49,296
22 July 2016 nil p** 22 July 2019 21 July 2026 402,225 –
15 March 2017 580.0p 1 April 2020 1 October 2020 65,374 –
1,579,801 1,649,551
* SAYE (see note 23) ** LTIP (see note 23)
OWN SHARES
The own shares reserve represents the cost of shares in Big Yellow Group PLC purchased in the market, and held by the Big Yellow Group PLC Employee
Benefit Trust, along with shares issued directly to the Employee Benefit Trust. 1,122,907 shares are held in the Employee Benefit Trust (2016: 1,122,907),
and no shares are held in treasury.
122
23. SHARE-BASED PAYMENTS
The Company has three equity share-based payment arrangements, namely an LTIP scheme (with approved and unapproved components), an Employee
Share Save Scheme (“SAYE”) and a Long Term Bonus Performance Plan. The Group recognised a total expense in the year related to equity-settled share-
based payment transactions of £2,324,000 (2016: £2,539,000).
Equity-settled share option plans
Since 2004 the Group has operated an Employee Share Save Scheme (“SAYE”) which allows any employee who has more than six months service to
purchase shares at a 20% discount to the average quoted market price of the Group shares at the date of grant. The associated savings contracts are
three years at which point the employee can exercise their option to purchase the shares or take the amount saved, including interest, in cash. The scheme
is administered by Yorkshire Building Society.
On an annual basis since 2004 the Group awarded nil-paid options to senior management under the Group’s Long Term Incentive Plan (“LTIP”). The awards
are conditional on the achievement of challenging performance targets as described on page 78 of the Remuneration Report. The awards granted in 2004,
2005 and 2006 vested in full. The awards granted in 2007 and 2009 lapsed, and the awards granted in 2008 and 2010 partially vested. The awards granted
in 2011, 2012 and 2013 fully vested. The weighted average share price at the date of exercise for options exercised in the year was £7.38 (2016: £7.04).
LTIP scheme
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
No. of options
2016
No. of options
1,444,221
455,331
(59,094)
(484,480)
1,662,358
468,546
(46,728)
(639,955)
1,355,978
1,444,221
89,428
29,692
The weighted average fair value of options granted during the year was £1,017,000 (2016: £976,000).
Employee Share Save Scheme (“SAYE”)
2017
Weighted
average
exercise price
(£)
2017
No. of
options
2016
Weighted
average
exercise price
(£)
2016
No. of
options
Outstanding at beginning of year 205,330 4.87 255,853
Granted during the year 65,374 6.08 49,296
Forfeited during the year (17,781) 4.65 (7,472)
Exercised during the year (29,100) 2.40 (92,347)
Outstanding at the end of the year 223,823 4.87 205,330
Exercisable at the end of the year – – –
3.74
6.08
4.65
2.40
4.87
–
Options outstanding at 31 March 2017 had a weighted average contractual life of 2.1 years (2016: 2.2 years).
The inputs into the Black-Scholes model for the options granted during the year are as follows:
Expected volatility 30%
Expected life 3 years
Risk-free rate 0.1%
Expected dividends 3.9%
26%
3 years
0.1%
3.9%
LTIP
SAYE
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the year prior to grant.
Long Term bonus performance plan
The Executive Directors receive awards under the Long Term Bonus Performance Plan. This is accounted for as an equity instrument. The plan was set up
in July 2015. The vesting criteria and scheme mechanics are set out in the Directors’ Remuneration Report. At 31 March 2017 the weighted average
contractual life was 1.3 years.
123
Notes to the Financial Statements (continued)
Year ended 31 March 2017
24. CAPITAL COMMITMENTS
At 31 March 2017 the Group had £8.6 million of amounts contracted but not provided in respect of the Group’s properties (2016: £0.4 million of
capital commitments).
25. EVENTS AFTER THE BALANCE SHEET DATE
On 19 May 2017, the Group acquired a property in Wapping, London for £10.75 million.
26. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Transactions with Armadillo Storage Holding Company Limited
As described in note 13, the Group has a 20% interest in Armadillo Storage Holding Company Limited (“Armadillo 1”), and entered into transactions with
Armadillo 1 during the period on normal commercial terms as shown in the table below.
Transactions with Armadillo Storage Holding Company 2 Limited
As described in note 13, the Group has a 20% interest in Armadillo Storage Holding Company 2 Limited (“Armadillo 2”), and entered into transactions with
Armadillo 2 during the period on normal commercial terms as shown in the table below.
31 March
2017
£000
31 March
2016
£000
Fees earned from Armadillo 1 574
Fees earned from Armadillo 2 253
Balance due from Armadillo 1 86
Balance due from Armadillo 2 48
414
291
103
89
The remuneration of the Executive and Non-Executive Directors, who are the key management personnel of the Group, is set out below in aggregate.
Further information on the remuneration of individual Directors is found in the audited part of the Directors’ Remuneration Report on pages 75 to 83.
Short term employee benefits 1,325
Post-employment benefits 151
1,566
Share based payments
3,042
31 March
2017
£000
31 March
2016
£000
1,316
148
1,973
3,437
AnyJunk Limited
James Gibson is a Non-Executive Director and shareholder in AnyJunk Limited and Adrian Lee is a shareholder in AnyJunk Limited. During the year
AnyJunk Limited provided waste disposal services to the Group on normal commercial terms, amounting to £36,000 (2016: £24,000).
No other related party transactions took place during the years ended 31 March 2017 and 31 March 2016.
124
Company Balance Sheet
Year ended 31 March 2017
Non-current assets
Plant, equipment and owner-occupied property
Investment in subsidiary companies
Current assets
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Derivative financial instruments
Bank borrowings
Total liabilities
Net assets
Equity
Share capital
Share premium account
Reserves
Equity shareholders’ funds
Note
29a
29b
30
32
31
2017
£000
2016
£000
1,840
18,020
19,860
1,890
15,696
17,586
481,294
297
1
528,125
–
1
481,592
528,126
501,452
545,712
(3,137)
(3,137)
(3,075)
(3,075)
32
32
–
(143,635)
(315)
(148,755)
(143,635)
(149,070)
(146,772)
(152,145)
354,680
393,567
22
27
15,788
45,462
293,430
15,737
45,227
332,603
354,680
393,567
The Company reported a loss for the financial year ended 31 March 2017 of £0.3 million (2016: loss of £0.3 million). The financial statements were approved
by the Board of Directors and authorised for issue on 22 May 2017. They were signed on its behalf by:
James Gibson John Trotman
Director
Director
Company Registration No. 03625199
125
Company Cash Flow Statement
Year ended 31 March 2017
Operating loss
Depreciation
Decrease in receivables
(Increase)/decrease in payables
Cash generated by operations
Interest paid
Interest received
Cash flows from operating activities
Purchase of non-current assets
Cash flows from investing activities
Financing activities
Issue of share capital
Equity dividends paid
Repayment of Lloyds short term loan
(Decrease)/increase in borrowings
Cash flows from financing activities
Net movement in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
2017
£000
(949)
53
46,831
(73)
2016
£000
(939)
41
77,979
370
45,862
77,451
(3,572)
3,585
(4,293)
4,249
45,875
77,407
(3)
(3)
(374)
(374)
286
(41,158)
–
(5,000)
378
(36,443)
(70,000)
29,000
(45,872)
(77,065)
–
1
1
(32)
33
1
126
Company Statement of Changes in Equity
Year ended 31 March 2017
At 1 April 2016
Total comprehensive loss for the year
Dividend
Issue of share capital
Credit to equity for equity-settled
share based payments
Share
capital
£000
15,737
–
–
51
Share
premium
account
£000
45,227
–
–
235
Other non-
distributable
reserve
£000
Capital
redemption
reserve
£000
74,950
–
–
–
1,795
–
–
–
Retained
earnings
£000
256,877
(339)
(41,158)
–
Own
shares
£000
(1,019)
–
–
–
Total
£000
393,567
(339)
(41,158)
286
–
–
–
–
2,324
–
2,324
At 31 March 2017
15,788
45,462
74,950
1,795
217,704
(1,019)
354,680
The Company’s share capital is disclosed in note 22.
The own shares balance represents amounts held by the Employee Benefit Trust (see note 22).
Year ended 31 March 2016
At 1 April 2015
Total comprehensive loss for the year
Dividend
Issue of share capital
Cancellation of treasury shares
Use of own shares to satisfy share options
Credit to equity for equity-settled
share based payments
Share
capital
£000
15,806
–
–
73
(142)
–
Share
premium
account
£000
44,922
–
–
305
–
–
Other non-
distributable
reserve
£000
Capital
redemption
reserve
£000
74,950
–
–
–
–
–
1,653
–
–
–
142
–
Retained
earnings
£000
295,684
(299)
(36,443)
–
(3,727)
(877)
Own
shares
£000
(5,623)
–
–
–
3,727
877
Total
£000
427,392
(299)
(36,443)
378
–
–
–
–
–
–
2,539
–
2,539
At 31 March 2016
15,737
45,227
74,950
1,795
256,877
(1,019)
393,567
127
Notes to the Financial Statements
Year ended 31 March 2017
27. LOSS FOR THE YEAR
As permitted by section 408 of the Companies Act 2006, the statement of comprehensive income of the Company is not presented as part of these
financial statements. The loss for the year attributable to equity shareholders dealt with in the financial statements of the Company was £0.3 million
(2016: loss of £0.3 million).
28. BASIS OF ACCOUNTING
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial
statements have been prepared in accordance with International Financial Reporting Standards.
The financial statements have been prepared on the historic cost basis except that derivative financial instruments are stated at fair value.
The Company’s principal accounting policies are the same as those applied in the Group financial statements. See note 23 for details of share based
payments affecting the Company.
Going concern
See note 2 for the review of going concern for the Group and the Company.
IFRIC 11, IFRS 2 Group and Treasury Share Transactions
The Company makes equity settled share based payments to certain employees of certain subsidiary undertakings. Equity settled share based payments
that are made to the employees of the Company’s subsidiaries are treated as increases in equity over the vesting period of the award, with a corresponding
increase in the Company’s investments in subsidiaries, based on an estimate of the number of shares that will eventually vest. This is the only addition
to investment in subsidiaries in the current year. The Company does not have any employees.
29. NON-CURRENT ASSETS
a) Plant, equipment and owner occupied property
Freehold
property
£000
Leasehold
improvements
£000
Fixtures,
fittings
& office
equipment
£000
Cost
At 31 March 2016 2,183 64 30
Additions 3 – –
At 31 March 2017 2,186 64 30
Accumulated depreciation
At 31 March 2016 (367) (18) (2)
Charge for the year (41) (2) (10)
At 31 March 2017 (408) (20) (12)
Net book value
At 31 March 2017 1,778 44 18
At 31 March 2016 1,816 46 28
b) Investments in subsidiary companies
Cost
At 31 March 2016
Additions
At 31 March 2017
128
Total
£000
2,277
3
2,280
(387)
(53)
(440)
1,840
1,890
Investment in
subsidiary
undertakings
£000
15,696
2,324
18,020
29. NON-CURRENT ASSETS (continued)
b) Investments in subsidiary companies (continued)
The Group subsidiaries are all wholly-owned, the Group holds 100% of the voting power and the companies are incorporated, registered and operate
in England and Wales. The registered office of all subsidiaries is 2 The Deans, Bridge Road, Bagshot, Surrey, GU19 5AT. The subsidiaries at 31 March
2017 are listed below:
Name of subsidiary
.Big Yellow Self Storage (GP) Limited
.Big Yellow Self Storage Company Limited
Big Yellow (Battersea) Limited
Big Yellow Construction Company Limited
Big Yellow Holding Company Limited
Big Yellow Limited Partnership
Big Yellow Nominee No 1 Limited
Big Yellow Nominee No 2 Limited
Big Yellow Self Storage (Chester) Limited
Big Yellow Self Storage Company 1 Limited
Big Yellow Self Storage Company 2 Limited
Big Yellow Self Storage Company 3 Limited
Big Yellow Self Storage Company 4 Limited
Big Yellow Self Storage Company 6 Limited
Big Yellow Self Storage Company 8 Limited
Big Yellow Self Storage Company A Limited
Big Yellow Self Storage Company M Limited
BYRCo Limited
BYSSCo A Limited
BYSSCo Limited
Kator Storage Limited
Last Mile Company Limited
Lock and Leave Limited
Lock and Leave (Twickenham) Limited
Principal activity
General Partner
Self storage
Self storage
Construction management
Holding Company
Self storage
Dormant
Dormant
Self storage
Dormant
Dormant
Dormant
Dormant
Dormant
Self storage
Self storage
Self storage
Property management
Dormant
Self storage
Self storage
Holding Company
Self storage
Self storage
In addition the Group has a 100% interest in Pramerica Bell Investment Trust Jersey, a trust registered in Jersey.
The Group has a 20% interest in two associates, and the companies are incorporated, registered and operate in England and Wales. The Company’s
associates at 31 March 2017 are listed below:
Name of associate
Armadillo Storage Holding Company Limited
Armadillo Storage Holding Company 2 Limited
Principal activity
Self Storage
Self Storage
Audit exemption statement
For its most recent year end the companies listed below were entitled to exemption from audit under section 479A of the Companies Act 2006 relating
to subsidiary companies. The members of these companies have not required them to obtain an audit of their financial statements for the year ended
31 March 2017.
.Big Yellow Self Storage (GP) Limited
Big Yellow Construction Company Limited
Big Yellow Holding Company Limited
Big Yellow Self Storage (Chester) Limited
Big Yellow Self Storage Company 8 Limited
BYRCo Limited
BYSSCo Limited
Kator Storage Limited
Last Mile Company Limited
Lock and Leave Limited
Lock and Leave (Twickenham) Limited
129
Notes to the Financial Statements (continued)
Year ended 31 March 2017
30. TRADE AND OTHER RECEIVABLES
Amounts owed by Group undertakings
Prepayments and accrued income
31. TRADE AND OTHER PAYABLES
Current
Other payables
Accruals and deferred income
31 March
2017
£000
481,188
106
31 March
2016
£000
528,015
110
481,294
528,125
31 March
2017
£000
31 March
2016
£000
2,992
145
3,137
2,675
400
3,075
32. BANK BORROWINGS AND FINANCIAL INSTRUMENTS
Interest rate derivatives
The Company has one interest rate swap in place at the year end; £30 million fixed at 0.4% (excluding the margin on the underlying debt instrument)
until October 2021. The floating rate at 31 March 2017 was paying a weighted average margin of 1.37% above one month LIBOR, the fixed rate debt was
paying a margin of 1.5%. The Group’s policy on risk management is set out in the Report on Corporate Governance on page 66 and in note 18.
Bank borrowings
Unamortised loan arrangement fees
Maturity profile of financial liabilities
Between one and two years
Between two and five years
Gross financial liabilities
31 March
2017
£000
145,000
(1,365)
31 March
2016
£000
150,000
(1,245)
143,635
148,755
2017
Financial
liabilities
£000
–
145,000
2016
Financial
liabilities
£000
–
150,000
145,000
150,000
The fair value of interest rate derivatives at 31 March 2017 was an asset of £297,000 (2016: liability of £315,000). See note 18 for detail of the interest
rate profile of financial liabilities.
33. FINANCIAL INSTRUMENTS
The disclosure relating to the Company’s financial instruments are detailed in note 18 to the Group financial statements. These disclosures are relevant
to the Company’s bank borrowings and derivative financial instruments. In addition, the Company has trade and other payables of £3,137,000 in the
current year (2016: £3,075,000), which are held at amortised cost in the financial statements.
34. RELATED PARTY TRANSACTIONS
Included within these financial statements are amounts owing from Group undertakings of £481,188,000 (2016: £528,015,000), including intercompany
interest receivable of £3,585,000 (2016: £4,249,000).
130
Ten Year Summary
Year ended 31 March 2017
2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
Results £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 109,070 101,382 84,276 72,196 69,671 65,663 61,885 57,995 58,487 56,870
Operating profit before
gains and losses
on property assets 65,316 59,854 48,420 39,537 37,454 35,079 32,058 29,068 30,946 29,342
Cash flow from
operating activities 55,974 55,467 42,397 32,752 30,186 27,388 23,534 19,063 10,203 14,388
Profit/(loss) before
taxation 99,783 112,246 105,236 59,848 31,876 (35,551) 6,901 10,209 (71,489) 102,618
Adjusted profit
before taxation 54,641 48,952 39,405 29,221 25,471 23,643 20,207 16,514 13,791 15,006
Net assets 890,350 829,387 750,914 594,064 552,628 494,500 544,949 547,285 502,317 580,886
EPRA earnings
per share 34.5p 31.1p 27.1p 20.5p 19.3p 18.2p 15.5p 13.0p 11.9p 11.7p
Declared total
dividend per share 27.6p 24.9p 21.7p 16.4p 11.0p 10.0p 9.0p 4.0p 0p 9.5p
Key statistics
Number of stores open 73 71 69 66 66 65 62 60 54 48
Sq ft occupied (000) 3,551 3,363 3,178 2,832 2,632 2,458 2,130 1,915 1,775 1,850
Occupancy increase
in year 000 sq ft) 188 185 346 200 174 328 215 140 (75) 15
Number of customers 52,500 50,000 47,250 41,800 38,500 36,300 32,800 30,500 28,500 30,500
Average number
of employees
during the year 329 318 300 289 286 279 273 252 239 218
The paper used in this report is produced with FSC® mixed sources pulp which is partially recyclable, biodegradable,
pH Neutral, heavy metal absence and acid-free. It is manufactured within a mill which complies with the international
environmental ISO 14001 standard.
Pureprint Ltd is FSC certified, PEFC certified and ISO 14001 certified showing that it is committed to all round
excellence and improving environmental performance is an important part of this strategy. We aim to reduce
at source the effect our operations have on the environment, and are committed to continual improvement,
prevention of pollution and compliance with any legislation or industry standards.
Pureprint Ltd is a Carbon Neutral® Printing Company.
Designed and produced by MAGEE
www.magee.co.uk
Printed by Pureprint Ltd
You can access
more information
about us on our website
bigyellow.co.uk
Big Yellow Group PLC
2 The Deans, Bridge Road,
Bagshot, Surrey GU19 5AT
Tel: 01276 470190
Fax: 01276 470191
e-mail: info@bigyellow.co.uk
i
B
g
Y
e
l
l
o
w
G
r
o
u
p
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
1
7
Big Yellow Group PLC
Annual Report & Accounts 2017
The UK’s brand leader in
Self Storage
Get some space in your life.™