Annual
Report
2022
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Safestore Holdings plc
Annual report and financial statements 2022
O V E R V I E W
Overview
1
Highlights
2
3
4
Financial highlights
About us
Investment case
Strategic report
5
Chairman’s statement
7
Chief Executive’s statement
22
Financial review
34 Engaging with our stakeholders
and our Section 172(1) statement
37 Principal risks
44 Viability statement
45 Compliance with Task Force on
Climate-related Financial Disclosures
(“TCFD”)
46 Sustainability
Governance report
74
Introduction
76 Board of Directors
78 Corporate governance
83 Nomination Committee report
85 Audit Committee report
89 Directors’ remuneration report
117 Directors’ report
121 Statement of Directors’
responsibilities
Financial statements
122
Independent auditor’s report
129 Consolidated income statement
129 Consolidated statement
of comprehensive income
130 Consolidated balance sheet
131 Consolidated statement of changes
in shareholders’ equity
132 Consolidated cash flow statement
133 Notes to the financial statements
166 Company balance sheet
167 Company statement of changes
in equity
168 Notes to the Company
financial statements
171 Glossary
IBC Directors and advisers
A strong trading
performance in a
year of significant
strategic progress and
geographic expansion
“I am pleased to report another excellent year in
which we delivered significant strategic progress,
having enhanced our funding capacity, doubled
our development pipeline to c.1.4m sq ft of
MLA and extended our geographical footprint.
The strong trading performance for the year is
especially pleasing as it follows a record year
in 2021. Our 2022 result was achieved through
strong revenue growth in the UK market, good
performances in our Parisian and Spanish
businesses, and seven months’ contribution
from our Benelux business, which was acquired
in March 2022.
Early trading in the new financial year shows
broadly stable levels of demand compared to
last year (but significantly ahead of pre-pandemic
levels) with rates paid by new customers
continuing to grow.
Over the last seven years, the Group has
developed or acquired 68 stores and expanded
into four new countries (Netherlands, Belgium,
Spain and now Germany). In addition, our
development pipeline of 29 new stores, extensions,
and projects represents a further c.18% of our
existing portfolio’s MLA. Throughout this period
of expansion, the Group has maintained its
disciplined approach to return on capital.
In March 2022, the Group completed the
acquisition of our partner Carlyle’s 80% stake in
our Benelux JV. Over the last three years we have
learnt much about the Netherlands and Belgian
markets and feel confident about the ongoing
development of our presence in these attractive
geographies. It is our intention to gradually
increase our footprint in these two markets and
our development pipeline now includes five stores
and c.283,000 sq ft of MLA in the Netherlands.
Following this successful JV with Carlyle,
we established a new German JV which has
acquired the seven-store myStorage business.
Germany is one of Europe’s most under-penetrated
self storage markets and I look forward to
growing our presence there.
Our strong and flexible balance sheet has been
significantly enhanced by the agreement of a new
unsecured four-year £400 million multi-currency
RCF which increases funding capacity, allowing us
to continue to consider strategic, value-accretive
investments as and when they arise.
We have delivered a strong occupancy
performance over recent years and, after a
significant level of acquisition and development
activity over the last six years, we still have
1.4m sq ft of fully invested currently unlet space
in our UK, Paris, Spain, and Benelux markets
in addition to 1.4m sq ft of pipeline space. Our
most significant upside opportunity is from filling
our existing unlet space and that remains our
priority. The business has demonstrated its
inherent resilience in recent times and, despite
the challenging macro-economic environment,
we are confident in the future of the business.
The underlying fundamentals of the European
self storage industry with limited supply, strong
barriers to entry and a steadily growing product
awareness are as strong as ever. Over the last
nine years, Safestore has delivered a market
leading 18% CAGR of its EPRA group adjusted
EPS. During that period, we have gradually
expanded our geographical reach to six
European countries leveraging and improving
our platform and central functions while
managing investment risk very carefully.
I’m confident that Safestore will continue to
play a leading role in the development of the
self storage industry across Europe, delivering
significant further value to its stakeholders.
None of this would be possible without the
dedication and skills of our teams and I would like
to thank all our colleagues in the UK, France,
Spain, the Netherlands and Belgium for their
performance in 2022 as well as their commitment
and loyalty. We are appreciative of their efforts.”
Frederic Vecchioli
Chief Executive Officer
Highlights
Strong financial performance
• Group revenue for the year up 13.8%
(up 14.3% in CER1)
• Like-for-like8 Group revenue for the year
in CER1 up 10.7%
• Underlying EBITDA2 up 15.1% in CER1
which, combined with an increased gain
on investment properties of £381.6 million
(FY2021: £321.1 million), resulted in statutory
operating profit9 of £514.5 million
(FY2021: £417.0 million)
• Adjusted Diluted EPRA Earnings per Share6
up 17.3% at 47.5 pence (FY2021: 40.5 pence).
Diluted Earnings per Share was 212.4 pence
(FY2021: 176.4 pence) largely due to the higher
property valuation gain in FY2022
• Eleven UK projects to add c.512,000 sq ft
Revenue (£’m)
• Six developments in Barcelona and Madrid
to add c.262,000 sq ft (an additional two
developments opened since year end,
adding a further 85,000 sq ft)
£212.5m
• Seven Paris projects to add c.349,000 sq ft
+13.8%
• Five Netherlands sites to add
c.283,000 sq ft
• Completed EPS accretive acquisition of
remaining 80% of equity owned by Carlyle
in the Benelux Joint Venture14 in March
2022 at an Enterprise Value of €146 million.
The Benelux business now consists of
15 high quality stores with an MLA4 of
600,000 sq ft in the Netherlands
and Belgium
22
21
20
19
18
17
212.5
186.8
162.3
151.8
143.9
129.9
• 15.9% increase in the final dividend to
20.4 pence (FY2021: 17.6 pence) giving
a total 18.7% increase for the year to
29.8 pence (FY2021: 25.1 pence)
• Entry into German market via a new Joint
Venture15 (“JV”) with Carlyle which has
acquired the seven-store myStorage
business with 326,000 sq ft of MLA4
Continued operational delivery
• Continued balanced approach to revenue
management together with an efficient
marketing platform driving returns and
record occupancy performance:
• Like-for-like8 average storage rate5 for the
year up 11.5% in CER1
• Like-for-like8 average occupancy for the
year up 0.7%
• Like-for-like8 closing occupancy of 83.1%
down 2.1ppts on 2021 (FY2021: 85.2%)
• New and recently opened stores trading
well and in line with business plans
• Investment in our digital marketing platform
continuing to deliver for the business:
• Online enquiries in FY2022 rose to 90%
of our total enquiries in the UK (FY2021:
89%) and 85% in France (FY2021: 84%)
• Marketing cost as a percentage of
revenue reduced to 3.6% (FY2021: 3.7%)
Strategic progress
• Store openings in London Bow, Barcelona,
and Nijmegen in the Netherlands added
c.126,000 sq ft of MLA4 with a further two
Madrid stores opened post year end in
November 2022, adding a further 85,000
sq ft of MLA4
• Lease extensions signed in Exeter, London
Crayford and Sunderland
• Five store extensions adding c.38,000 sq ft
of MLA in London Paddington Marble Arch,
Southend, London Edgware, London
Wimbledon, and Winchester
• Acquired a 14,000 sq ft MLA freehold store
in Christchurch10, Dorset, from Your Room
Self Storage
• Development pipeline expanded by c.0.7m
sq ft of future MLA and eleven projects to
c.1.4m sq ft and 29 projects (equivalent to
c.18% of existing portfolio):
ESG
• Continued development of Environmental,
Social and Governance (“ESG”) strategy:
• Linkage of new £400 million refinancing
to ESG targets
• Group commitment to be operationally
carbon neutral by 2035
• ESG progress illustrated by awards of:
• GRESB ‘A’ rating for public disclosures
• EPRA Silver rating for sustainability
• MSCI ‘AA’ rating for ESG
• Highest rating of five stars from Support
The Goals
Strong and flexible balance sheet
• 30.9% increase in property valuation
(including investment properties under
construction) driven by improved trading
performance, new stores, acquisitions,
revisions to exit cap rates and stabilised
occupancy assumptions
• Revolving Credit Facilities (“RCF’s”) refinanced
with a new increased £400 million unsecured
multi-currency four-year facility (with two
one-year extension options). Margins remain
at 1.25% in line with previous RCF’s and all
facilities, including private placement notes,
are now unsecured
• Group loan-to-value ratio (“LTV”11) at 23.6%,
calculated on net debt (31 October 2021: 22.7%)
and interest cover ratio (“ICR”12) at 11.4x
(31 October 2021: 10.5x)
• In addition to strong free cash flow, significant
financing in place to fund pipeline including
unutilised bank facilities of £208.4 million
at 31 October 2022 and no borrowings to
refinance before May 2024. In addition,
a further uncommitted £100 million
accordion facility incorporated into the
new bank facilities
• 93% of drawn debt at fixed rates or hedged
at 31 October 2022
Underlying EBITDA2 (£’m)
£135.1m
+14.5%
22
21
20
19
18
17
135.1
118.0
93.9
87.5
82.9
74.4
Dividend (pence per share)
29.80p
+18.7%
29.80
25.10
22
21
20
19
18
17
18.60
17.50
16.25
14.00
Learn more about our Sustainability
from page 46
Learn more about our Corporate
Governance from page 74
Safestore Holdings plc Annual report and financial statements 2022
1
OVERVIEWSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTS Financial highlights
Key measures
Underlying and operating metrics – total
Revenue
Underlying EBITDA2
Closing Occupancy (let sq ft- million)3
Closing Occupancy (% of MLA)4
Average Storage Rate5
Adjusted Diluted EPRA Earnings per Share6
Free Cash Flow7
EPRA Basic NTA per Share13
Underlying and operating metrics – like-for-like8
Revenue
Underlying EBITDA2
Closing Occupancy (let sq ft- million)3
Closing Occupancy (% of MLA)4
Average Occupancy (let sq ft- million)3
Average Storage Rate5
Statutory metrics
Operating profit9
Profit before tax9
Diluted Earnings per Share
Dividend per Share
Cash inflow from operating activities
Diluted net assets per share13
Year ended
31 October
2022
Year ended
31 October
2021
Change
Change – CER 1
£212.5m
£135.1m
6.317
82.1%
£29.25
47.5p
£101.4m
£9.08
£204.3m
£131.6m
5.725
83.1%
5.723
£29.99
£514.5m
£498.8m
212.4p
29.8p
£109.8m
£8.20
£186.8m
£118.0m
5.883
84.5%
£26.95
40.5p
£89.5m
£6.97
£185.5m
£117.0m
5.838
85.2%
5.685
£27.03
£417.0m
£404.6m
176.4p
25.1p
£97.0m
£6.35
13.8%
14.5%
7.4%
-2.4ppts
8.5%
17.3%
13.3%
30.3%
10.1%
12.5%
-1.9%
-2.1ppts
0.7%
11.0%
23.4%
23.3%
20.4%
18.7%
13.2%
29.1%
14.3%
15.1%
n/a
n/a
9.2%
n/a
n/a
n/a
10.7%
13.0%
n/a
n/a
n/a
11.5%
n/a
n/a
n/a
n/a
n/a
n/a
Notes to Highlights, Financial highlights, Chairman’s statement & Chief Executive’s statement
We prepare our financial statements using IFRS. However, we also use a number of adjusted measures in assessing and managing the performance of the business. These measures are
not defined under IFRS and they may not be directly comparable with other companies’ adjusted measures and are not intended to be a substitute for, or superior to, any IFRS measures of
performance. These include like-for-like figures to aid in the comparability of the underlying business as they exclude the impact on results of purchased, sold, opened or closed stores
and constant exchange rate (“CER”) figures are provided in order to present results on a more comparable basis, removing FX movements. These metrics have been disclosed because
management reviews and monitors performance of the business on this basis. We have also included a number of measures defined by EPRA, which are designed to enhance transparency
and comparability across the European Real Estate sector; see notes 6 and 13 below and “Non-GAAP financial information” in the notes to the financial statements.
1
2
CER is Constant Exchange Rates (Euro denominated results for the current period have been retranslated at the exchange rate effective for the comparative period. Euro denominated
results for the comparative period are translated at the exchange rates effective in that period. This is performed in order to present the reported results for the current period on a more
comparable basis).
Underlying EBITDA is defined as Operating Profit before exceptional items, share-based payments, corporate transaction costs, change in fair value of derivatives, gain/loss on investment
properties, variable lease payments, depreciation and the share of associate’s depreciation, interest and tax. Underlying EBITDA therefore excludes all leasehold rent charges. Underlying
profit before tax is defined as Underlying EBITDA less leasehold rent, depreciation charged on property, plant and equipment and net finance charges relating to bank loans and cash.
3 Occupancy excludes offices but includes bulk tenancy. As at 31 October 2022, closing occupancy includes 24,000 sq ft of bulk tenancy (31 October 2021: 14,000 sq ft).
4 MLA is Maximum Lettable Area. At 31 October 2022, Group MLA was c.7.70m sq ft (FY2021: c.6.96m sq ft).
5 Average Storage Rate is calculated as the revenue generated from self storage revenues divided by the average square footage occupied during the period in question.
6
Adjusted Diluted EPRA EPS is based on the European Public Real Estate Association’s definition of Earnings and is defined as profit or loss for the period after tax but excluding corporate
transaction costs, change in fair value of derivatives, gain/loss on investment properties and the associated tax impacts. The Company then makes further adjustments for the impact of
exceptional items, IFRS 2 share-based payment charges, exceptional tax items and deferred tax charges. This adjusted earnings is divided by the diluted number of shares. The IFRS 2
cost is excluded as it is written back to distributable reserves and is a non-cash item (with the exception of the associated National Insurance element). Therefore neither the Company’s
ability to distribute nor pay dividends is impacted (with the exception of the associated National Insurance element). The financial statements will disclose earnings on a statutory, EPRA
and Adjusted Diluted EPRA basis and will provide a full reconciliation of the differences in the financial year in which any LTIP awards may vest.
7 Free cash flow is defined as cash flow before investing and financing activities but after leasehold rent payments.
8
9
Like-for-like adjustments remove the impact of the 2022 acquisition of the Netherlands and Belgium Joint Venture, the 2022 acquisition of Christchurch, the 2022 openings of Bow,
Nijmegen (Netherlands), and Barcelona, the 2021 openings of Birmingham Middleway and Magenta in Paris and the 2021 closure of Birmingham South.
Operating profit increased by £97.5 million to £514.5 million (FY2021: £417.0 million) principally as a result of an increase in the gain on investment properties of £60.5 million to £381.6 million
(FY2021: £321.1 million), as well as an increase of £17.1 million or 14.5% in Underlying EBITDA as a result of stronger trading performance. Profit before income tax additionally included
exceptional items of £10.8 million, being other exceptional gains. This included £5.5 million relating to the valuation gain recognised of the 20% equity investment held in the Joint Venture
with CERF, when the Group acquired the remaining 80% on 30 March 2022 and £5.1 million relating to the net gain on disposal of the Paris Nanterre site in November 2021.
10 The enterprise value paid for Your Room Self Storage in Christchurch, Dorset, on 7 December 2021 was £2.45 million.
11
LTV ratio is Loan-to-Value ratio, which is defined as gross debt (excluding lease liabilities) as a proportion of the valuation of investment properties and investment properties under
construction (excluding lease liabilities). At 31 October 2022, the Group LTV ratio was 24.4%. Under the new revolving credit facility, signed 11 November 2022, LTV is to be calculated
against net debt which equates to an LTV of 23.6%.
12 ICR is interest cover ratio, and is calculated as the ratio of Underlying EBITDA after leasehold rent to underlying finance charges.
13 EPRA basic NAV was superseded and transitioned to three new measures: EPRA Net Reinstatement Value (“NRV”), EPRA Net Tangible Assets (“NTA”) and EPRA Net Disposal Value
(“NDV”) for periods commencing 1 January 2020 or thereafter. Safestore considers EPRA NTA to be the most consistent with the nature of the Group’s business. The basis of calculation,
including a reconciliation to reported net assets, is set out in note 15 of the Financial Statements.
14 On 30 March 2022, the Group acquired the remaining 80% of the Joint Venture with CERF. Prior to acquiring the 80%, the Joint Venture with CERF, which represented a 20% investment,
was accounted for as an associate using the equity method of accounting, as described in the “Investment in associates” note to the financial statements.
15 On 1 December 2022, the Group made an initial investment into a new Joint Venture with Carlyle, to enter the German self storage market, of c.€2.2 million for a 10% share. The Group will
also earn a fee for providing management services to the Joint Venture.
2
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEW
About us
Who we are, what we do
5
countries
751
colleagues
179
stores
7.7m
sq ft maximum
lettable area
Wholly owned business
Managed on behalf of Joint Venture
Our purpose
To add stakeholder value by developing profitable and sustainable spaces that allow individuals, businesses, and local communities to thrive
Read more on page 78
Our business model
We acquire, develop, and operate sustainable self storage assets in attractive European markets
Optimising trading performance
of existing portfolio
Read more on page 18
Our strategy
Maintaining a strong and
flexible capital structure
Read more on page 8
Selective portfolio management
and expansion opportunities
How we ensure sustainability
Our people
Provide a great place to work
Our customers
Deliver a great customer
experience and help customers
live and grow sustainably
Our community
Benefit local communities
Our environment
Protect the planet from our
activities; managing risks to our
business from climate change
Read more on page 46
Our values
Our values, created by our store teams, are the foundation of everything we do
See page 53 for more details
We love
customers
We lead
the way
We have
great people
We dare to
be different
We get it
Having strong relationships with our key stakeholders
We have a wide range of stakeholders. What matters to each, how we engage and how decision-making considers their expectations,
are set out in our Section 172 statement
Read more on pages 34 to 36
3
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Investment case
How we create value
Safestore has a proven track record in long term value creation. The business
model remained resilient during the global financial crisis and the Covid-19
pandemic, with a leading presence in London, Paris, and key markets within the
self storage sector. This is underpinned by developing profitable and sustainable
spaces that allow individuals, businesses, and local communities to thrive.
1. Attractive market
• Under-supplied and growing industry
2. Unique portfolio
• European leading platform
• Significant barriers to entry –
constrained supply of
attractive locations
• Leading positions in key
“space-constrained” European cities
• Unlet invested space equivalent to
around 35 stores including pipeline
with further development
• Growth potential in UK/France and
further expansion in the Netherlands,
Belgium, German, and Spanish markets
3. People
• A diverse community of well-trained,
motivated and engaged colleagues
• Investors in People Platinum
accreditation awarded
4. Strategic
benefits of scale
• In-house expertise and scalable
marketing technology
• Systems and pricing analytical capacities
• UK Leading National Accounts offering
5. Strong cash generation
• Scalable platform able to finance
6. Quality of earnings
• Diversified income stream from
development and acquisition opportunities
90,000 customers
• Intelligent use of working capital,
• Existing customers from prior years
positive operating cash flow, strong
and flexible capital structure, and
quality income-generating assets
• Strong dividend growth
driving 70% to 80% of revenue
• High margins – low break-even
• Low maintenance CAPEX
4
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEW Chairman’s statement
Our purpose remains simple – to
add stakeholder value by developing
profitable and sustainable spaces
that allow individuals, businesses,
and local communities to thrive
David Hearn
Chairman
The last year has been one of considerable strategic and financial
progress for the Group which is especially impressive on the back
of an exceptionally strong year in 2021. After three years in the role,
I continue to be impressed by the dedication and resilience of the
store and Head Office teams which have been instrumental in
delivering this progress.
Our purpose remains simple, to continue to add stakeholder value
by developing profitable and sustainable spaces that allow individuals,
businesses, and local communities to thrive. Our strategy is underpinned
by our values, our behaviours and our governance structure which shape
our culture and remain central to the way we conduct our business.
I would like to take this opportunity to congratulate all my colleagues
throughout the Group for their exceptional contributions this year.
Financial and strategic progress
In the last year, the quality, resilience, and importantly, the scalability of
the business model at Safestore have again been demonstrated and I
am delighted to announce, on behalf of the Board of the Group, an excellent
set of results for the financial year ended 31 October 2022.
Management’s first priority remains to maximise the economic return
on our existing store portfolio and its 1.4m sq ft of fully invested unlet
space, building on the significant operational improvements made over
the current management team’s tenure.
In addition to improving returns from our existing portfolio, the Group
has continued to make significant strategic progress in expanding its
footprint through a combination of new store openings and acquisitions.
The Group has now acquired 46 and opened 20 stores over the last
six years and all are performing well. The acquisition of OhMyBox! in
Barcelona in 2019 is now fully integrated into the business and has an
exciting pipeline, with two stores opening in November 2022, and a
further six stores over the next two financial years. Our EPS accretive
acquisition of the 80% share in the Benelux Joint Venture owned by
Carlyle means that the Group now fully owns the operations of 15 stores in
the Netherlands and Belgium with a further five in the pipeline. Overall,
we have a development property pipeline of an additional 1.4m sq ft of
MLA, which provides significant future opportunity for the business
and underpins our continued growth.
The recent establishment of a new £400 million unsecured multi-currency
RCF at attractive margins offers us significantly greater strategic flexibility
to support these growth plans.
Our new Joint Venture15 with Carlyle in Germany and recent
acquisitions in Spain, the Netherlands, and Belgium provide us with
exciting platforms in new attractive geographies. I believe that
Safestore’s highly scalable platform will allow us to take advantage of
further opportunities in due course.
Financial results
Revenue for the year was £212.5 million, 13.8% ahead of last year
(FY2021: £186.8 million), or 14.3% ahead on a constant currency basis.
Like-for-like8 revenue was up 10.7% in constant currency. This result
was driven by an exceptional performance in the UK which grew
like-for-like8 revenue by 12.2%, combined with another strong performance
by Une Pièce en Plus, our Parisian business, which grew like-for-like8
revenue by 5.3%.
Particularly encouragingly, this significant growth in revenue delivered
a further improvement in margins. Underlying EBITDA2 increased by
14.5% to £135.1 million (FY2021: £118.0 million) and on a constant
currency basis by 15.1%.
Operating profit increased by £97.5 million from £417.0 million in 2021
to £514.5 million in 2022, reflecting a higher investment property gain
in 2022 combined with the increase in Underlying EBITDA2, a reduction
in the share-based payments charge, as well as other exceptional gains.
Adjusted Diluted EPRA Earnings per Share6 grew by 17.3% to 47.5 pence
(FY2021: 40.5 pence). Adjusted Diluted EPRA Earnings per Share6 has
grown by 36.8 pence or 344% over the last nine years. Statutory diluted
Earnings per Share increased to 212.4 pence (FY2021: 176.4 pence) as
a result of the increase in Adjusted Diluted EPRA Earnings per Share6
combined with an increased gain on valuation of investment properties.
Finally, the Group’s balance sheet remains robust with a Group LTV11
ratio of 24.4%, calculated on gross debt (FY2021: 24.9%) and an ICR12
of 11.4x (FY2021: 10.5x). This represents a level of gearing we consider
appropriate for the business to enable the Group to increase returns on
equity, maintain financial flexibility and achieve our medium term
strategic objectives.
This year’s results continue a sustained period of excellent performance
by the Group. Over the last nine years, the management and store teams
have delivered a Total Shareholder Return of 779.4%, ranking at number
one in the UK property sector. Since flotation in 2007, Safestore has
also delivered the highest Total Shareholder Return of any UK listed
self storage operator.
5
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Chairman’s statement continued
Dividend
Finally, reflecting the Group’s strong trading performance and in line
with our progressive dividend policy, the Board is pleased to recommend
a 15.9% increase in the final dividend to 20.4 pence per share
(FY2021: 17.6 pence) resulting in a full year dividend up 18.7% to
29.8 pence per share (FY2021: 25.1 pence).
Over the last nine years, the Group has grown the dividend by 418%
or 24.1 pence per share, during which period the Group has returned
to shareholders a total of 155.8 pence per share. The total dividend for
the year is covered 1.59 times by Adjusted EPRA Diluted Earnings
(1.61 times in 2021). Shareholders will be asked to approve the dividend
at the Company’s Annual General Meeting on 15 March 2023 and,
if approved, the final dividend will be payable on 7 April 2023 to
shareholders, on the register at close of business on 3 March 2023.
Summary
In conclusion, the Board remains confident in the future growth prospects
for the Group and will continue its progressive dividend policy in 2023
and beyond. In the medium term it is anticipated that the Group’s
dividend will grow at least in line with Adjusted Diluted EPRA Earnings
per Share6.
David Hearn
Chairman
16 January 2023
ESG
Away from the financial results, I am pleased with the progress the
Group has made with its ESG strategy.
Even though Safestore already has one of the lowest environmental
impact profiles of any company within the overall property sector,
we have continued to focus on our environmental agenda, with
year-on-year reductions in greenhouse gas emissions and enhanced
disclosures in recognition of the recommendations of the TCFD. I am
pleased to report that we have retained a Silver rating in the 2022
EPRA sustainability awards, an ‘A’ rating for public disclosures by
GRESB, an ‘AA’ rating for ESG by MSCI, and the highest rating of
five stars by Support the Goals.
In addition, we have demonstrated our commitment to our ESG
agenda by linking the margin on our new £400 million bank facility to
ESG related KPI’s agreed with our lending group. Details of these
achievements are covered more fully in the Chief Executive’s report
and the sustainability section of our Annual Report.
Non-Executive Board changes
During the financial year Claire Balmforth stepped down from the
Board. Claire has served on the Safestore Board for six years and
has chaired the Remuneration Committee for all of that time. As both
a Director and Chair of the Remuneration Committee, Claire has served
the business outstandingly throughout the last six years and both
personally and on behalf of the Board, I would like to thank her for her
contribution.
I am also delighted to welcome Jane Bentall to the Board. Jane has
extensive experience and understanding of operating multi-site,
consumer-led businesses. Most recently, Jane was Managing Director
of Haven, the UK holiday parks chain and largest business division of
Bourne Leisure. Prior to becoming Managing Director of Haven, she
was the Group Chief Financial Officer for twelve years and previously
spent six years as Operations Director. In her career she has also held
senior financial roles at the Rank Group.
6
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Chief Executive’s statement
The Group has delivered an
excellent performance in 2022
building on a record 2021
Frederic Vecchioli
Chief Executive Officer
Summary
In 2022, the Group delivered 17.3% growth in Adjusted Diluted
EPRA Earnings per Share largely driven by organic growth. Total
Group revenue increased by 13.8% (14.3% CER1) with a particularly
strong performance in the UK (+13.1%) and continued strength in
Paris (+6.1%) and Spain (+9.1%). On a like-for-like8 basis in CER1,
Group revenue increased by 10.7% with the UK up 12.2%, Paris
up 5.3% and Spain up 8.5% reflecting the strategy to balance rate
growth and occupancy performance to maximise revenue, the Group’s
like-for-like average storage rate5 was up 11.5% at CER1 and average
occupancy was up 0.7%, whilst like-for-like8 closing occupancy
decreased by 2.1ppts to 83.1%.
The Group has traded well throughout the year despite a difficult
comparable performance in the record 2021 financial year. Our digital
marketing platform has driven good enquiry generation and conversion,
and our ongoing commitment to investing in and supporting the
development of our colleagues has resulted in like-for-like8 revenue
in the UK growing by 12.2%. The like-for-like average rate growth
drove the UK revenue performance and increased by 13.9% in the
year. After an exceptionally strong 2021, average occupancy grew
by 0.6% and closing occupancy was down 2.6ppts at 83.0%.
In Paris, our performance has also been strong with like-for-like8
revenue growing by 5.3% at CER1 driven by a like-for-like growth in
average occupancy of 1.4% and like-for-like average storage rate
growing by 4.3% at CER1. Like-for-like8 closing occupancy ended
the year at a similar level to the prior year at 83.4% (FY2021: 83.6%).
This is the 24th consecutive year of revenue growth in Paris with
average growth over the last seven years of approximately 5%.
Our Spanish business saw a strong 8.5% growth in like-for-like revenue
for the year driven by an increase in the like-for-like average rate of
5.8%. Ancillary sales were also strong. A fifth Spanish store opened
in the year and total revenue growth was 9.1%.
The Group’s current pipeline of new developments and store
extensions has grown significantly over the last year and now
constitutes c.1.4m sq ft of future MLA (equivalent to 18% of the
existing portfolio) and associated outstanding capital expenditure
of £146 million. The pipeline consists of eleven projects in the UK,
seven in Paris, six in Spain, and five in the Netherlands.
The Group completed the EPS accretive acquisition of the remaining
80% of equity owned by Carlyle in the Benelux JV14 in March 2022
at an Enterprise Value of €146 million. The Benelux business consists
of 15 high quality stores with an MLA of 600,000 sq ft in the
Netherlands and Belgium.
Group Underlying EBITDA2 of £135.1 million increased by 15.1%
at CER1 on the prior year. The Group’s EBITDA2 performance, offset
by a modest increase in leasehold rent and an increase in finance
costs, resulted in a 17.3% increase in Adjusted Diluted EPRA EPS6
in the period to 47.5 pence (FY2021: 40.5 pence). Statutory operating
profit increased by £97.5 million to £514.5 million (FY2021: £417.0
million) principally as a result of an increase in the gain on investment
properties of £60.5 million to £381.6 million (FY2021: £321.1 million),
along with an increase of £17.1 million or 14.5% in Underlying EBITDA2
as a result of stronger trading performance.
Our property portfolio valuation, including investment properties
under construction, increased in the year by 30.9%, driven by the
stronger underlying performance of the stores, modest revisions to
exit cap rates and stabilised occupancy assumptions, new stores,
acquisitions, and FX. After exchange rate movements, the portfolio
valuation increased to £2,552.3 million with the UK portfolio up
£340.7 million to a total UK value of £1,815.5 million and the
French portfolio increasing by €104.3 million to €625.9 million.
Reflecting the Group’s strong trading performance, the Board is
pleased to recommend a 15.9% increase in the final dividend to
20.4 pence per share (FY2021: 17.6 pence) resulting in a full year
dividend up 18.7% to 29.8 pence per share (FY2021: 25.1 pence).
Over the last nine years, the Group has grown the annual dividend
by 418% or 24.1 pence per share.
7
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Chief Executive’s statement continued
Outlook
In the last seven financial years, Safestore has strengthened its
market-leading positions in the UK and Paris with the acquisitions of
Space Maker, Alligator, Fort Box, and our stores at Heathrow and
Christchurch10, as well as opening 20 new stores, with a further two
Madrid stores opening in November 2022, and establishing a pipeline
of c.1.4m sq ft of MLA. In addition, the Group has entered new markets
in Spain together with Belgium and the Netherlands, and more recently
Germany through our new Joint Venture15 with Carlyle. Excluding the
Joint Venture and the development pipeline, there is 1.4m sq ft of fully
invested unlet space available, offering significant operational upside
within the existing portfolio.
We remain focused on further optimising the Group’s operational
performance and continuing to grow in all of our geographies. Our
development pipeline represents 18% of our existing MLA and our
balance sheet strength and flexibility provide us with the opportunity
to consider further selective development and acquisition opportunities
in all of our markets.
Whilst we are aware of the current macro-economic challenges, our
business model has proven to be highly resilient with multiple drivers
of demand and we believe the Group, whilst not entirely immune from
any cost of living or inflationary issues, is strongly positioned to
withstand any downturn.
In the first two months of the 2022/23 financial year we have seen
broadly stable levels of demand compared to last year (but significantly
ahead of pre-pandemic levels) with like-for-like Group revenue (at
CER1) up 3.5% and total revenue (at CER1) up 8.7%.
Our strategy
The Group intends to continue to deliver on its proven strategy of
leveraging its well-located asset base, management expertise,
infrastructure, scale and balance sheet strength and further increase
its Earnings per Share by:
• Optimising the trading performance of the existing portfolio;
• Maintaining a strong and flexible capital structure; and
• Taking advantage of selective portfolio management and expansion
opportunities in our existing markets and, if appropriate, in attractive
new geographies either through a Joint Venture or in our own right.
In addition, the Group’s strategy is pursued whilst maintaining a strong
focus on Environmental, Social and Governance (“ESG”) matters, and
a summary of our ESG strategy is provided further on.
Optimisation of existing portfolio
With the opening of 22 new stores since August 2016, and the
acquisitions of 46 stores through the purchases of Space Maker in
July 2016, Alligator in November 2017, our Heathrow store, Fort Box
in London and OhMyBox! in Barcelona in 2019, Your Room in 2021
and the Benelux JV in 2022, we have established and strengthened
our market-leading portfolio in the UK and Paris, and have entered the
Spanish, Netherlands, and Belgium markets. We have a high quality,
fully invested estate in all geographies and, of our 179 stores as at
31 October 2022, 101 are in London and the South East of England
or in Paris, with 58 in the other major UK cities and 20 in Barcelona
and the Benelux region. In the UK, we now operate 49 stores within
the M25, which represents a higher number of stores than any
other competitor.
Our MLA4 has increased to 7.7m sq ft at 31 October 2022 (FY2021:
6.96m sq ft). At the current occupancy level of 82.1% we have
1.4m sq ft of fully invested unoccupied space (2.9m sq ft including
the development pipeline), of which 1.0m sq ft is in our UK stores,
0.2m sq ft is in Paris and 0.2m sq ft is in Barcelona and Benelux.
In total, unlet space at our existing stores is the equivalent of c.35
empty stores located across the estate and provides the Group with
significant opportunity to grow further. We have a proven track record
of filling our vacant space so we view this availability of space with
considerable optimism. We will also benefit from the operational
leverage from the fact that this available space is fully invested and
the related operating costs are essentially fixed and already included
in the Group cost base. Our continued focus will be on ensuring that
we drive occupancy to utilise this capacity at carefully managed rates.
Between the full financial years 2013 and 2022, occupancy of the
stores in the portfolio in 2013 that remain in the Group today has
increased from 63.1% to 84.2%, i.e. an average of 2.3ppts per year
and equivalent to a total of 1.1m sq ft.
There are three elements that are critical to the optimisation of our
existing portfolio:
• Enquiry generation through an effective and efficient marketing operation;
• Strong conversion of enquiries into new lets; and
• Disciplined central revenue management and cost control.
Digital Marketing expertise – UK Number 1
Self Storage Brand
Awareness of self storage remains relatively low with half of the UK
population either knowing very little or nothing about self storage
(source: SSA Annual Report). In the UK, many of our new customers
are using self storage for the first time. It is largely a brand-blind
purchase. Typically, customers requiring storage start their journey by
conducting online research using generic keywords in their locality
(e.g. “storage in Borehamwood”, “self storage near me”) which means
that geographic coverage and search engine prominence remain key
competitive advantages.
We believe there is a clear benefit of scale in the generation of
customer enquiries. The Group has continued to invest in technology
and in-house expertise which has resulted in the development of a
leading digital marketing platform that has generated 54% enquiry
growth for the Group over the last five years. Our in-house expertise
and significant annual budget have enabled us to deliver strong
results. Safestore is the UK number 1 self storage brand as it has
more new lets per year than any other brand.
The Group’s online strength came to the fore during the various
Covid-19 lockdowns and has since continued to support customer
acquisition growth. Online enquiries in FY2022 rose to 90% of our
enquiries in the UK (FY2021: 89%) and 85% in France (FY2021: 84%).
The majority of our online enquiries now originate from a mobile device
(65% share in FY2022), highlighting the need for continual investment
in our responsive web platform for a “mobile-first” world. We continue
to invest in activities that promote a strong search engine presence
to grow enquiry volume whilst managing efficiency in terms of overall
cost per enquiry and cost per new let. Group marketing costs as a
percentage of revenue were 3.6% for the full year (FY2021: 3.7%).
This percentage has constantly reduced over the last eight years
and is now at its lowest level in that period.
8
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT During the 2021/22 trading year, the Group demonstrated its ability
to integrate newly developed and acquired stores into its marketing
platform with successful new openings at Bow (London, UK),
Christchurch (Dorset, UK), Nijmegen (Netherlands), and an additional
store in Barcelona. We have now clearly demonstrated that our marketing
platform is transferable into multiple overseas geographies.
In February 2022, Safestore UK won the Feefo Platinum Trusted
Service award for the third time. The award is given to businesses
which have achieved Gold standard for three consecutive years. It is
an independent mark of excellence that recognises businesses for
delivering exceptional experiences, as rated by real customers. In addition
to using Feefo, Safestore invites customers to leave a review on a
number of review platforms, including Google and Trustpilot. Our ratings
for each of these three providers in the UK are between 4.6 and
4.8 out of 5. In France, Une Pièce en Plus uses Trustpilot to obtain
independent customer reviews and in FY2022 achieved a TrustScore
of 4.6 out of 5. In Spain, OhMyBox! collects customer feedback via
Google reviews and has maintained a score of 4.6 out of 5.
Motivated and effective store teams benefiting
from investment in training and development
In what is still a relatively immature and poorly understood product,
customer service and selling skills at the point of sale remain essential
in earning the trust of the customer and in driving the appropriate
balance of volumes and unit price in order to optimise revenue growth
in each store.
In the first half of our 2021/22 trading year, we moved away from
Covid-19 based restrictions to a business-as-usual operating model
in stores, removing all screens and signage, although we continue
to display advisory mask and distancing messages along with safe
working protocols for both our customers and colleagues.
Our enthusiastic, well-trained, and customer-centric sales team remains
a key differentiator and a strength of our business. Understanding the
needs of our customers and using this knowledge to develop in-store
trusted advisers is a fundamental part of driving revenue growth and
market share.
Safestore has been an Investors in People (“IIP”) accredited
organisation since 2003 and we passionately believe that our continued
success is dependent on our highly motivated and well-trained colleagues.
Following the award of a Bronze accreditation in 2015 and a Gold
accreditation in 2018, we were delighted to be awarded the “we invest
in people” Platinum accreditation in February 2021. This is the highest
accolade in the Investors in People scale and positions us as an employer
of choice. Shortly after our Platinum accreditation, we were shortlisted
for the Platinum Employer of the Year (250+) category in the Investors
in People Awards 2021. This further endorses the high standard of our
teams and the people development programmes that drive our skill
and talent retention.
IIP is the international standard for people management, defining
what it takes to lead, support and engage people effectively to achieve
sustainable results. Underpinning the standard is the Investors in
People framework, reflecting the latest workplace trends, essential
skills and effective structures required to outperform in any industry.
Investors in People enables organisations to benchmark against the
best in the business on an international scale. We are proud to have
our colleagues recognised to such a high standard, not only in our
industry, but also across over 50,000 organisations in 66 countries.
This sustained people engagement focus is an essential component
of our continuous improvement mentality.
We are committed to growing and rewarding our people and we tailor our
development, reward and recognition programmes to reflect this. Our IIP
recognised coaching programme, launched in 2018 and upgraded every
year since, continues to be a driving force behind the continuous
performance improvement demonstrated by our store colleagues.
The Covid-19 pandemic provided a challenging environment requiring
us to operate in some new and innovative ways. Our online learning
portal, combined with the energy and flexibility of our store colleagues,
allowed us to not only continue to deliver our award-winning development
programmes but also to capitalise on the strength of our IT platforms.
As the restrictions in the UK relaxed through the second half of 2021,
we were able to combine our newly created technology communication
skills with our tried and tested face-to-face training sessions in a newly
created “impact” sales refresher.
Following our late 2021 sales refreshers, we took the opportunity to
review many of our training, coaching and compliance tools to take
advantage of our higher performance levels and skilled colleagues. The
integration of flexible contract types and enhanced digital contracts have
all been included in our updated version of QUEST, our sales framework.
This two-day programme has been delivered, face-to-face, to every
colleague in our store and field teams in the first half of 2022.
We recognised the changing needs and demands of our customers,
not only through the challenging times of 2020/21, but also through the
newly emerging demands and requirements in late 2021. Combining
new, along with tried and tested, solutions and systems, we are further
able to support our store colleagues, allowing them to fulfil the needs
of our customers over and above that of our competitors. Our flexible
contract types and enhanced digital contract completion further
enhance our customer offer and experience. These enhancements
have combined to help us create our 2023 QUEST programme which
commenced roll-out in late September 2022 focusing on the new
contract types and technologies available to us.
All new recruits to the business benefit from enhanced induction and
training tools that have been developed in-house and enable us to quickly
identify high-potential individuals and increase their speed to competency.
They receive individual performance targets within four weeks of joining
the business and are placed on the ‘pay-for-skills’ programme that allows
accelerated basic pay increases dependent on success in demonstrating
specific and defined skills. The key target of our programme remains that
we grow our talent through our Store Manager Development programme,
and we are pleased with our progress to date.
Our internal Store Manager Development programme (“SMD”) has
been in place since 2016 and is a key part of succession planning
for future Store Managers. In May 2022, we began our assessment
process for the sixth intake of the SMD with a first-class group of
candidates ready to learn the necessary skills and attributes they need
to become a Safestore Store Manager. Funded by the Apprenticeship
Levy this programme provides the opportunity to complete a Level 3
Management and Leadership apprenticeship, with the additional
opportunity to complete an Institute of Leadership and Management
(“ILM”) qualification.
Our Store Manager Development programme demonstrates the
effectiveness of our learning tools. In a spirit of constant improvement,
our content and delivery process is dynamically enhanced through
our 360-degree feedback process utilising the learnings from not only
the candidates but also from our training Store Managers and senior
business leaders. This allows our people to be trained with the
knowledge and skills to sell effectively in today’s marketplace.
9
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Chief Executive’s statement continued
Motivated and effective store teams benefiting
from investment in training and development
continued
Our Senior Manager Development programme (“LEAD”) focuses on
developing our high performing store managers, aimed at preparing
them for more senior roles within the business. This programme is built
on the foundations of our Store Manager Development programme
and included delegates delivering performance-enhancing projects
to our wider business. We are proud that all nine participants of our
Senior Leadership Development programme ‘LEAD Academy’
successfully completed their Level 5 Management and Leadership
apprenticeship; six of those participants were awarded Distinctions.
Furthermore, we have re-launched our Graduate Programme, with our
first intake commencing in October 2022, providing an opportunity
for newly qualified graduates to build their skillset and experience,
resulting in a career with Safestore.
Our performance dashboard allows our store and field teams to focus
on the key operating metrics of the business providing an appropriate
level of management information to enable swift decision-making.
Reporting performance down to individual colleague level enhances
our competitive approach to team and individual performance.
We continue to reward our people for their performance with bonuses
of up to 50% of basic salary based on their achievements against
individual targets for new lets, occupancy, and ancillary sales.
In addition, our Values and Behaviours framework is overlaid on
individuals’ performance in order to assess performance and
development needs on a quarterly basis.
Our ‘Make the Difference’ people forum, launched in 2018, enables
frequent opportunities for us to hear and respond to our colleagues.
Our network of 15 ‘People Champions’ collect questions and feedback
from their peers across the business and put them to members of the
Executive Committee. We drive change and continuous improvement
in responding to the feedback we receive for; ‘Our Business,
Our Customers, and Our Colleagues’.
People Champions:
• consult and collect the views and suggestions of all colleagues that
they represent;
• engage in the bi-annual ‘Make the Difference’ people forum, raising
and representing the views of their colleagues; and
• consult with and discuss feedback with management and the
leadership team at Safestore.
Our values are authentic, having been created by our people. They are
core to the employment life cycle and bring consistency to our culture.
Our leaders have high values alignment enabling us to make the right
decisions for our colleagues and our customers. Our customers continue
to be at the heart of everything we do, whether it be in store, online
or in their communities. In 2022 we maintained our industry-leading
independent customer ratings, with a Feefo Platinum Trusted Service
award and a 5-star Trustpilot rating, with over twice the reviews of
our nearest competitor. Along with our strong Google ratings, these
independent assessments further reflect our ongoing commitment to
customer satisfaction as the number one storage provider in the UK.
Central revenue management and cost control
We continue to pursue a balanced approach to revenue management.
We aim to optimise revenue by improving the utilisation of the available
space in our portfolio at carefully managed rates. Our central pricing
team is responsible for the management of our dynamic pricing policy,
the implementation of promotional offers and the identification of
additional ancillary revenue opportunities. Whilst price lists are
managed centrally and are adjusted on a real-time basis, the store
sales teams have, from time to time, the ability to offer a ‘Lowest Price
Guarantee’ in the event that a local competitor is offering a lower price,
or the ability to offer discretionary discounts. The Lowest Price
Guarantee and discretionary discount are centrally controlled and
activated on a store by store and unit by unit basis.
Average rates are predominantly influenced by:
• the store location and catchment area;
• the volume of enquiries generated online;
• the store team skills at converting these enquiries into new lets at
the expected price; and
• the very granular pricing policy and the confidence provided by
analytical capabilities and systems that smaller players might lack.
We believe that Safestore has a very strong proposition in each of
these areas.
Costs are managed centrally with a lean structure maintained at Head
Office. Enhancements to cost control are continually considered and
the cost base is challenged on an ongoing basis.
Strong and flexible capital structure
Since 2014 we have refinanced the business on seven occasions,
each time optimising our debt structure and improving terms, and
believe we have maintained a capital structure that is appropriate for
our business and which provides us with the flexibility to take advantage
of carefully evaluated development and acquisition opportunities.
At 31 October 2022, based on the current level of borrowings and
interest swap rates, the Group’s weighted average cost of debt was
2.41% and 93% of our drawn debt was at fixed rate or hedged.
The weighted average maturity of the Group’s drawn debt is 5.1 years
at the current period end and the Group’s LTV ratio is 24.4% as at
31 October 2022.
Based on our current development pipeline and our internal
assumptions on how SONIA and EURIBOR will grow over the coming
months, we anticipate that our weighted average cost of debt will
increase to c.2.6% to 2.8% by the end of 2023.
This LTV of 24.4% and interest cover ratio of 11.4x for the rolling
twelve-month period ended 31 October 2022 provides us with
significant headroom compared to our banking covenants. We had
£208.4 million of undrawn bank facilities at 31 October 2022 before
taking into consideration the additional £100 million uncommitted
accordion facility.
Taking into account the improvements we have made in the
performance of the business, the Group is capable of generating free
cash after dividends sufficient to fund the building of three to four new
stores per annum depending on location and availability of land.
The Group evaluates development and acquisition opportunities in
a careful and disciplined manner against rigorous investment criteria.
Our investment policy requires certain Board-approved hurdle rates
to be considered achievable prior to progressing an investment
opportunity. In addition, the Group aims to maintain a Group LTV11
ratio below 40% which the Board considers to be appropriate for
the Group.
New financing
In April 2022, Safestore drew its existing uncommitted $115 million
Shelf Facility. The facility was drawn in Euros for a seven-year term
at an interest rate of 2.45% in order to partially fund the acquisition
of Carlyle’s 80% share of the Benelux JV.
Since the end of the financial year, the Group has completed the
refinancing of its Revolving Credit Facilities (“RCF’s”) which were due
to expire in June 2023.
10
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT The previous £250 million Sterling and €70 million Euro secured RCF’s
have been replaced with a single multi-currency unsecured £400 million
facility. In addition, a further £100 million uncommitted accordion
facility is incorporated into the facility agreement.
The facility is for a four-year term with two one-year extension options
exercisable after the first and second years of the agreement.
The Group will pay interest at a margin of 1.25% plus SONIA or
EURIBOR depending on whether the borrowings are drawn in Sterling
or Euros. The margin is at the same level as the previous facility
agreements.
A commitment fee of 35% of the margin is payable on undrawn
amounts under the facility. This has reduced from 40% under the
previous facility agreements.
Reflecting the Group’s improved credit profile, the banking group
and existing US Private Placement Noteholders have agreed that all
of the Group’s previously secured borrowings move to an unsecured
basis, thus reducing administrative and legal costs associated with
the facilities.
The main covenants under all of the Group’s borrowings are a Group
loan-to-value (“LTV”) covenant of 60% (replacing separate UK and
French LTV covenants) which is based on net debt rather than gross
debt and an Interest Cover Ratio covenant of 2.4x.
The hedging arrangements under the previous facility agreements
have been continued under the new agreements. Therefore, the Group
benefits from £55 million of Interest Rate Swaps until 30 June 2023 at
a rate of 0.6885%.
Environmental, Social and Governance (“ESG”) KPI’s have been
agreed with the Group’s lenders. The margin under the facility is now
linked to ESG targets, where met enable a reduction in the margin
of up to 5bps.
ESG strategy
ESG: Sustainable Self Storage
Our purpose – to add stakeholder value by developing profitable and
sustainable spaces that allow individuals, businesses, and local
communities to thrive – is supported by the ‘pillars’ of our sustainability
strategy: our people, our customers, our community, and our
environment. In addition, the Group and its stakeholders recognise
that its efforts are part of a broader movement and we have, therefore,
aligned our objectives with the UN Sustainable Development Goals
(“SDGs”). We reviewed the significance of each goal to our business
and the importance of each goal to our stakeholders and assessed
our ability to contribute to each goal. Following this materiality exercise,
we have chosen to focus our efforts in the areas where we can have
a meaningful impact. These are “Decent work and economic growth”
(goal 8), “Sustainable cities and communities” (goal 11), “Responsible
consumption and production” (goal 12), and “Climate action” (goal 13).
Sustainability is embedded into day-to-day responsibilities at Safestore
and, accordingly, we have opted for a governance structure which
reflects this. Two members of the Executive Management team
co-chair a cross-functional sustainability group consisting of the
functional leads responsible for each area of the business.
In 2018, the Group established medium term targets in each of the
‘pillars’ towards which the Group continued to progress in FY2022.
Our people: Safestore was awarded the prestigious Investors in
People (“IIP”) Platinum accreditation and was in the final top ten
shortlist for Platinum Employer of the Year (250+) category in The
Investors in People Awards 2021. The Group’s response during the
pandemic lockdowns and aftermath has had a profound impact
on trust in leadership and colleague engagement and motivation.
Our customers: The Group’s brands continue to deliver a high quality
experience, from online enquiry to move-in. This is reflected in customer
satisfaction scores on independent review platforms (Trustpilot,
Feefo, Google) of over 90% in each market. The introduction of digital
contracts during the pandemic offers both customer convenience and
a reduction in printing, saving an estimated 44,000 pieces of paper
each month.
Our community: Safestore remains committed to being a responsible
business by making a positive contribution within the local communities
wherever our stores are based. We continue to do this by developing
brownfield sites and actively engaging with local communities when
we establish a new store, identifying and implementing greener
approaches in the way we build and operate our stores, helping charities
and communities to make better use of limited space, and creating
and sustaining local employment opportunities directly and indirectly
through the many small and medium-sized enterprises which use our
space. During FY2022, the space occupied by local charities in 222
units across 103 stores was 18,903 sq ft and worth £0.7 million.
Our environment: Safestore is committed to ensuring our buildings
are constructed responsibly and their ongoing operation has a minimal
impact on local communities and the environment. It should be noted
that the self storage sector is not a significant consumer of energy
when compared with other real estate subsectors. As a result,
operational emissions intensity tends to be far lower. According to a
2021 report by KPMG and EPRA, self storage generates the lowest
greenhouse gas emissions intensity (5.75 kg/m2 for Scope 1 and 2) of
all European real estate sub-sectors, with emissions per m2 less than
30% of the European listed real estate average (19.5 kg/m2) and
notably 21% of the emissions intensity of the residential sub-sector
(27.0 kg/m2). Reflecting the considerable progress made on energy
mix, efficiency measures and waste reduction to date, Safestore’s
emissions intensity (3.9 kg/m2 in 2020) is considerably lower (-32%)
than the self storage subsector average. In FY2022, the Group
continued to progress with a further 2.7% decline in absolute emissions
despite continued portfolio growth and greater utilisation of stores
compared to 2021. Safestore’s absolute (location-based) emissions
are now 54% below, and emissions intensity 68% below the 2013
baseline level despite significant growth in portfolio floor space.
Moving forward, the Group has a commitment to be operationally
carbon neutral by 2035 with a medium term target to reduce operational
emissions (market-based) by 50% compared to the level in FY2021
by 2025. The total investment to achieve carbon neutrality should be
around £3 million.
In addition to the IIP award and the customer satisfaction ratings, the
Group has received recognition for its sustainability progress and
disclosures in the last twelve months. Safestore has been given a
Silver rating in the 2022 EPRA Sustainability BPR awards. The Global
ESG Benchmark for Real Assets (“GRESB”) has once again awarded
Safestore an “A” rating in its 2022 Public Disclosures assessment.
MSCI has awarded Safestore its second-highest rating of ‘AA’ for ESG
in 2022. The Group has also been awarded the highest rating of five
stars by Support the Goals.
Finally, the Group has worked with its banking lenders to agree ESG
related KPI’s which are linked to the margin payable under its new
£400 million facility. Two KPI’s have been agreed, which, when
achieved, result in a reduction in margin of up 5bps.
The total capital expenditure on stores opened in the 2022/23 financial
year-to-date as well as the outstanding pipeline is estimated to be
c.£245 million. At our usual Cash on Cash Return hurdles of c.10% we
would estimate that these stores will add c. £24.5 million of EBITDA
at stabilisation (c.four years after opening).
11
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Chief Executive’s statement continued
Portfolio management
Our approach to store development and acquisitions in the UK, Paris
and Spain, and now the Netherlands and Belgium, continues to be
pragmatic, flexible and focused on the return on capital.
Our property teams continue to seek investment opportunities in new
sites to add to the store pipeline. However, investments will only be
made if they comply with our disciplined and strict investment criteria.
Our preference is to acquire sites that are capable of being fully
operational within 18-24 months from completion.
Since 2016, the Group has opened 22 new stores: Chiswick, Wandsworth,
Mitcham, Paddington Marble Arch, Carshalton, Bow (all in London),
Birmingham Central, Birmingham Merry Hill, Birmingham Middleway,
Altrincham, Peterborough, Gateshead and Sheffield in the UK, and
Emerainville, Combs-la-Ville, Poissy, Pontoise and Magenta in Paris,
Nijmegen in the Netherlands, and Pronvenca in Barcelona, with a
further two stores opening in Madrid in November 2022 adding
1,093,000 sq ft of MLA.
In addition, the Group has acquired 46 existing stores through the
acquisitions of Space Maker, Alligator, Fort Box, Salus and Your Room
in the UK, OhMyBox! in Barcelona, and the Lokabox and M3 group
from our Benelux JV acquisition. These acquisitions added a further
1,844,000 sq ft of MLA and revenue performance has been enhanced
in all cases under the Group’s ownership.
We have also completed the extensions and refurbishments of our
Acton, Barking, Bedford, Chingford, Wimbledon, Edgware, Southend,
Paddington Marble Arch, Winchester and Longpont (Paris) stores
adding a net 122,000 sq ft of fully invested space to the estate.
All of these stores are performing in line with or ahead of their
business plans.
The Group’s current pipeline of new developments and store extensions
(see below) has grown significantly over the last year and now constitutes
c.1,407,000 sq ft of future MLA. The pipeline and store openings since
the end of the 2022 financial year is equivalent to c.19% of the existing
portfolio. The outstanding capital expenditure of £146 million is expected
to be funded from the Group’s existing resources. The total capital
expenditure on stores opened in the 2022/23 financial year-to-date
as well as the outstanding pipeline, is estimated to be c.£245 million.
At our usual Cash on Cash Return hurdles of c.10% we would estimate
that these stores will add c.£24.5 million of EBITDA at stabilisation
(c.four years after opening).
Property pipeline
Openings of new stores and extensions in the period
Open 2022
FH/LH
Opening Date
MLA
Other
Redevelopments and extensions
London – Paddington
Marble Arch
Southend
London – Edgware
London – Wimbledon
Winchester
New developments
London – Bow
Central Barcelona
Nijmegen –
Netherlands
Open 2023
New developments
Northern Madrid
Southern Madrid
LH
FH
FH
FH
FH
FH
FH
FH
FH
FH
Q1 2022
Q1 2022
Q1 2022
Q1 2022
Q4 2022
8,500
10,100
22,900
9,000
11,000
Extension
Extension
Extension
Extension
Extension
Q1 2022
Q1 2022
74,000
12,500
Conversion
Conversion
Q1 2022
40,000
Conversion
Q1 2023
53,000
Conversion
Q1 2023
32,000
Conversion
In September 2020 the Group received planning permission to extend
its Southend store by 10,100 sq ft. The existing store has an MLA of
49,400 sq ft and was 86% occupied at the end of September 2020.
The extension opened in December 2021.
In January 2021, the Group exchanged contracts on a freehold building
in a densely populated area in Central Barcelona. The conversion of
the existing building into a 12,500 sq ft MLA self storage facility is
complete and the store is now open.
In March 2021 and April 2021, the Group exchanged contracts on
two freehold buildings in Southern Madrid and Northern Madrid
respectively. Both acquisitions have been completed with planning
granted and the existing buildings have been converted into 32,000
and 53,000 sq ft MLA self storage facilities. Both sites opened
post-year end in November 2022.
In April 2021, we exchanged contracts on the acquisition of a 0.5-acre
site adjacent to our existing London Wimbledon store (MLA 58,800 sq
ft). We completed this transaction in December 2021 and construction
was completed just after the period end. The existing reception area
has been relocated to a more prominent and visible roadside location
and a further 9,000 sq ft of storage capacity and 1,000 sq ft of offices
have been added. The Wimbledon store’s peak occupancy, prior to
the Covid-19 pandemic, was 92%.
In May 2021, the Group completed the freehold acquisition of an
0.8-acre site with a 108,000 sq ft warehouse to the east of London
in a prominent position on the A12 in Bow. The building had existing
consent for storage and we only required planning consents for some
external modifications to the building. Otherwise, the building was suitable
for immediate conversion to self storage. The 74,000 sq ft store opened
in December 2021.
12
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT In Romford in London, we have secured a freehold site with an existing
warehouse which will be converted, subject to planning permission,
to a 41,000 sq ft store, opening in 2024.
In Crayford, we have secured a leasehold site on which we will convert
an existing warehouse to a 9,400 sq ft extension to our existing
Crayford site. We hope to open the satellite store in 2023.
In Walton-on-Thames in London, we have secured a freehold site with
an existing warehouse which will be converted, subject to planning
permission, to a 20,700 sq ft store. We hope to open the store in 2025.
Our total UK development pipeline now amounts to c.511,800 sq ft
of which c.415,100 sq ft is in London.
Paris
Safestore has for many years owned a vacant freehold site in the town
of Nanterre on the edge of La Défense, Paris’ main business district.
This area of Paris is undergoing significant development and Safestore
has invested a 24.9% stake in a Joint Venture development company,
PBC Les Groues SAS, which is constructing a c.300,000 sq ft
development of offices, retail, a school and residential properties.
Safestore has contributed its Nanterre site into the project, receiving
cash of €1.0 million in addition to the delivery of an underground
storage area and reception within the complex, ready to be fitted out
into a 44,000 sq ft self storage facility. Planning for the project has
been received and construction has commenced.
It is anticipated that the project will be completed in 2025 when the
self storage facility will open.
In August 2021, the Group exchanged contracts on a freehold site
in Southern Paris with a significant frontage onto the N104 motorway.
The site includes an existing building which will be demolished and
replaced by a 55,000 sq ft MLA store. We expect the store to open
in 2023.
Over the first half of 2022 we exchanged contracts on three freehold
development sites to the west of Paris. All sites required planning
permission and newly built stores of 56,000 sq ft, 20,000 sq ft, and
58,000 sq ft were planned to be constructed by the end of 2023.
Our Paris West 2 site (20,000 sq ft) did not receive planning permission
and has been removed from the pipeline.
Paris East 1 and Paris North West 1 are freehold sites on which we
will convert existing buildings, subject to planning, to 60,000 sq ft and
54,000 sq ft stores respectively. We expect the stores to open in 2023.
Our Paris pipeline now amounts to c.349,200 sq ft.
In addition, in May 2021, the Group exchanged contracts on a
leasehold basement car park adjacent to our existing London
Paddington Marble Arch store. The occupancy of the Paddington
Marble Arch store on 31 March 2021 was 80%. The extension opened
in December 2021, adding 8,500 sq ft of MLA.
The Group has also received planning permission to extend its
Edgware store by a further 22,900 sq ft. The existing store has MLA of
24,000 sq ft and reached a peak occupancy of 91% prior to extension
works commencing. The extension opened in December 2021.
An 11,000 sq ft extension to our existing Winchester store opened in
the quarter. The existing store has an MLA of 42,000 sq ft and has
peaked at more than 90% occupancy.
In January 2022, the Netherlands business opened a new store in
Nijmegen. The store is freehold with an MLA of 40,000 sq ft and is
a conversion of an existing building. Nijmegen has a population of
177,000 and the site is well located on a main road with good visibility
and access.
Development sites
UK
In June 2018, Safestore opened its Paddington Marble Arch store.
A separate satellite store at Paddington Park West Place, with MLA
of 13,000 sq ft, will open during 2024.
In April 2021, the Group exchanged contracts on a freehold 1.3-acre
site at Lea Bridge in Northeast London. The acquisition of the site has
now been completed and we plan to open a 76,500 sq ft MLA store in
2024 as the leases for existing tenants on the site have up to two years
to run. Rental income of approximately £170k per annum is currently
received on this site.
In addition, in April 2021, the Group exchanged contracts on a freehold
site in Woodford in Northeast London. Subject to planning, we will
open a 76,000 sq ft MLA store in 2025.
In July 2021, the Group exchanged contracts on a freehold 0.8-acre
site in Shoreham, West Sussex. Shoreham is situated between
Brighton and Worthing on the south coast of England. Subject to
planning, we will open a purpose built 54,000 sq ft MLA store in 2024.
In November 2021, the Group completed the acquisition of a 1.2-acre
freehold site off Old Kent Road in the London Borough of Southwark
in Southeast London. Subject to planning, we hope to open a c.76,500
sq ft MLA store in due course. Existing tenants on the site will provide
a rental income in the meantime.
In May 2022, the Group completed the acquisition of a 2.1-acre freehold
site including an existing warehouse in Wigan in Greater Manchester.
Subject to minor planning approvals for elevations and signage, we
plan to convert the existing building and open a c.42,700 sq ft MLA
store in 2023.
The Group has also previously acquired two additional sites in London
at Morden and Bermondsey. Morden is a freehold 0.9-acre site in an
established industrial location. Planning permission for a 52,000 sq ft
self storage facility has now been granted and construction on this site
is underway with a view to opening in 2023. Bermondsey is a 0.5-acre
freehold site with income from existing tenants and is adjacent to our
existing leasehold store. Our medium term aim, subject to planning
permission, is to extend our existing Bermondsey operations with the
addition of a new self storage facility to complement our existing store.
13
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Chief Executive’s statement continued
Development sites continued
Spain
In December 2019, the Group completed the acquisition of OMB Self
Storage S.L.U. which operates three leasehold properties and one
freehold property, all very well located in the centre of Barcelona. The four
locations (Valencia, Calabria, Glories, and Marina) have an MLA
totalling 108,000 sq ft. A fifth store, in Central Barcelona, was opened
during 2022. The occupancy of the business at the end of October
2022 was 78.9% and 85.9% on a like-for-like basis.
The Group is continuing its expansion of the business in Barcelona
and its entry into the Madrid market with the acquisition of the
following sites.
In April 2021, the Group exchanged contracts on a freehold building in
Northern Barcelona. Subject to planning, we will convert the existing
building into a 42,000 sq ft MLA. It is anticipated that the site will open
in the 2022/23 financial year.
In June 2021, the Group exchanged contracts on a freehold property
in South Barcelona. The site includes an existing industrial building
which will be converted into a 30,000 sq ft MLA self storage facility.
Planning has been granted and we expect to open the site in the
2022/23 financial year.
In August 2021, the Group exchanged contracts on a leasehold site
in Central Barcelona. The site is a former car dealership which will be
converted to a 24,700 sq ft MLA store which, subject to planning, should
open in 2024.
In December 2021, the Group exchanged contracts on a freehold
building in a commercial and industrial area of Eastern Madrid. Subject
to completion, we will convert the existing building into a 50,000 sq ft
MLA self storage facility. It is anticipated that the site will open in 2023.
In August 2022, the Group exchanged contracts on a freehold building
in a commercial and industrial area of South West Madrid. Subject to
planning and completion, we will convert the existing building into a
46,800 sq ft MLA self storage facility. It is anticipated that the site will
open in 2024.
A new freehold site has been secured in Southern Madrid (Southern
Madrid 2) on which we will convert an existing building, subject to
planning permission, into a 68,800 sq ft storage facility. It is anticipated
that the site will open in 2024.
Our Spanish pipeline now amounts to c.262,300 sq ft including
165,600 sq ft across three stores in Madrid and 96,700 sq ft over
three stores in Barcelona.
The Spanish business now has seven open stores and a pipeline consisting
of a further six stores amounting to c.262,300 sq ft of MLA.
Netherlands
During the year we exchanged contracts on a freehold site at
Amersfoort, 40 minutes east of Amsterdam. The acquisition is
subject to planning permission and we anticipate that the new store,
which will have an MLA of 58,000 sq ft, will be opened in 2023.
The Group completed the acquisition of a freehold site in Almere,
a city with a population of 214,000 which is 20 minutes’ drive from
Amsterdam. Subject to planning, we will convert the two existing
buildings on the site into a 44,500 sq ft MLA self storage facility.
It is anticipated that the site will open in 2023.
New freehold sites have been secured in Amsterdam and Aalsmeer
where we will build new stores, subject to planning, of 61,400 sq ft
and 48,400 sq ft respectively. The two stores should open in 2024.
Since the year end, the Group has secured a freehold site in Rotterdam
for construction of a 71,000 sq ft MLA store subject to planning.
Rotterdam is one of the major cities in the Netherlands with a population
of 588,000 and forms part of the larger Randstad area. The new site
forms part of a larger re-development within the heart of an affluent
district of the city.
In the Netherlands, our pipeline now consists of 283,300 sq ft of space
in five stores.
Store extensions
The Group plans to redevelop and extend its Pyrénées store in Paris.
The extension will add 22,200 sq ft and is planned to open in 2023.
As of September 2022, the store occupancy was 94%.
Lease extensions and assignments
During the period we extended the lease on our Exeter store in the UK.
The lease will now continue until February 2045 with tenant-only break
clauses in 2035 and 2040. A six-month rent-free period was agreed as
part of the renegotiation.
In Crayford, we have extended the lease on our existing store to 2042,
with a tenant-only break option in 2032. A rent-free period of four
months was agreed as part of this agreement. The lease on the new
satellite store reported above also terminates in 2042.
In Sunderland, we have extended the lease on our store to 2047 with
a tenant break option in 2037. A six-month rent-free period was agreed
as part of this lease extension.
As part of our ongoing asset management programme, we have now
extended the leases on 27 stores or 70% of our leased store portfolio
in the UK since 2012. As a result, since 2012 the remaining lease
length of our UK stores has remained at c.11-13 years.
Site disposal
In April 2021 we opened our Birmingham Middleway store (58,000
sq ft MLA) and closed our Digbeth store (44,500 sq ft MLA) shortly
thereafter. Customers were relocated to the bigger, better located new
store. At the time, we stated that we intended to sell the Digbeth site.
We are pleased to confirm that the Digbeth site sale was completed
in August 2022. The proceeds received funded the entire acquisition
and construction of the Middleway site. As of September 2022, the
Middleway site was 83% occupied.
14
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Property pipeline summary
Our pipeline of c.1.4m sq ft represents c.18% of our existing property portfolio.
Opening 2023
FH/LH
Status*
MLA
Other
Redevelopments and extensions
London – Crayford
Paris – Pyrénées
New developments
London – Morden
Wigan
Paris – South Paris
Paris – West 1
Paris – West 3
Paris – East 1
Paris – North West 1
Eastern Madrid
Northern Barcelona
South Barcelona
Amersfoort – Netherlands
Almere – Netherlands
Opening 2024
Redevelopments and extensions
New developments
London – Paddington Park West
London – Lea Bridge
London – Romford
Shoreham
South West Madrid
Southern Madrid 2
Central Barcelona 2
Amsterdam – Netherlands
Aalsmeer – Netherlands
Rotterdam – Netherlands
Opening Beyond 2024
New developments
London – Old Kent Road
London – Woodford
London – Bermondsey
London – Walton
Paris – La Défense
LH
LH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
FH
LH
FH
FH
FH
FH
FH
FH
FH
FH
C, UC
C, UC
C, PG, UC
C, UC
C, PG
CE, STP
CE, STP
CE, STP
CE, STP
C, PG
C, PG
C, PG
CE, STP
C, STP
C, PG
C, PG
C, STP
CE, STP
CE, STP
CE, STP
CE, STP
CE, STP
CE, STP
CE, PG
C, STP
CE, PG
C, STP
C, STP
C, PG
Total Pipeline MLA (let sq ft- million)
Total Outstanding CAPEX (£’m)
* C = completed, CE = contracts exchanged, STP = subject to planning, PG = planning granted, UC = under construction
9,400
22,200
52,000
42,700
55,000
56,000
58,000
60,000
54,000
50,000
42,000
30,000
58,000
44,500
Extension
Extension
New build
Conversion
New build
New build
New build
Conversion
Conversion
Conversion
Conversion
Conversion
New build
Conversion
13,000
Conversion,Satellite
76,500
41,000
54,000
46,800
68,800
24,700
61,400
48,400
71,000
76,500
76,000
50,000
20,700
44,000
c.1.407
c.146.0
New build
New build
New build
Conversion
Conversion
Conversion
New build
New build
New build
New build
New build
New build
Conversion
Mixed use facility
15
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Chief Executive’s statement continued
Acquisitions
Acquisition of Your Room Self Storage, Christchurch10
In December 2021, Safestore acquired Your Room Self Storage in
Christchurch, Dorset, for £2.45 million. The freehold Christchurch store
has an MLA of 14,000 sq ft and the Group anticipates that the initial
yield in the first year will be in excess of 6%.
The German market is one of Europe’s more under-penetrated markets
with just 0.09 sq ft of storage space per capita which compares to
0.76 sq ft in the UK, 0.24 sq ft in France, 0.24 sq ft in Spain, 0.60 sq ft
in the Netherlands and 0.20 sq ft in Belgium. According to the 2022
FEDESSA report, there are just 320 facilities in Germany and 7.6m sq ft
of lettable space.
myStorage has seven medium to long term leasehold stores and
326,000 sq ft of MLA in Berlin, Heidelburg, Mannheim, Fürth,
Nuremburg, Neu-Ulm and Reutlingen.
The occupancy of the portfolio is 67% with two of the stores having
opened in 2021.
Safestore’s initial investment in the Joint Venture was a c.€2.2 million
equity investment for a 10% share of the Joint Venture. Safestore will
also earn a fee for providing management services to the Joint Venture.
The Group expects to earn an initial return on investment of c.15% for
the first full year before transaction related costs reflecting its share of
expected Joint Venture profits and fees for management services.
Portfolio summary
The self storage market has been growing consistently for over 20
years across many European countries but few regions offer the unique
characteristics of London and Paris, both of which consist of large,
wealthy and densely populated markets. In the London region, the
population is 13 million inhabitants with a density of 5,200 inhabitants
per square mile, 11,000 per square mile in Central London and up to
32,000 per square mile in the densest boroughs.
The population of the Paris urban area is 10.7 million inhabitants with
a density of 9,300 inhabitants per square mile in the urban area but
54,000 per square mile in the City of Paris and first belt, where 69%
of our French stores are located and which has one of the highest
population densities in the western world. 85% of the Paris region
population live in central parts of the city versus the rest of the urban
area, which compares with 60% in the London region. There are
currently c.245 storage centres within the M25 as compared to only
c.95 in the Paris urban area.
In addition, barriers to entry in these two important city markets are
high, due to land values and limited availability of sites as well as
planning regulation. This is the case for Paris and its first belt in
particular, which inhibits new development possibilities.
Our combined operations in London and Paris, with 78 stores, contributed
£113.2 million of revenue and £82.3 million of store EBITDA for the
financial year and offer a unique exposure to the two most attractive
European self storage markets.
The Group will rebrand the store and has taken over operation of the
site with immediate effect. The store will operate as a satellite store to
our two existing Bournemouth stores.
Acquisition of remaining 80% of Carlyle JV14
As announced on 31 March 2022, Safestore acquired the remaining
80% of the equity owned by Carlyle in the Joint Venture14 formed
in 2019 (the “Joint Venture”). The total consideration paid to Carlyle
was €67 million. The total initial cash outflow was €135.3 million and
included the share purchase (€53.6 million), debt purchase (€13.4 million),
and refinancing of the existing borrowings (€68.3 million) and was funded
from the Group’s existing loan facilities. The Joint Venture was acquired
based on an enterprise value of €146 million.
The Joint Venture14 was set up in 2019 to acquire and develop assets
in the Netherlands and Belgium in order to leverage Safestore’s
operating platform outside our core markets. Since then, the Joint
Venture has grown to a portfolio of 55,000 sq m (600,000 sq ft) of MLA.
The portfolio is made up of 15 high quality properties (twelve freehold
properties, two ground leases and one leasehold property). Nine
properties are located in the Netherlands, six of which are concentrated
in the Haarlem/Amsterdam area with additional properties in The Hague,
Het Gooi and the recently opened Nijmegen store. In Belgium, two
stores are located in the Brussels area, two in the city of Liege and
further properties in Nivelles and Charleroi. Safestore has managed
the properties since acquisition by the Joint Venture.
The Group’s investment was marginally accretive to Group Earnings
per Share in FY2021/22 and supports the Group’s future dividend
capacity. The expected initial yield based on total enterprise value was
3.9% which we expect to grow to Safestore’s normal returns hurdles
as the portfolio matures.
New Joint Venture with Carlyle and Investment in myStorage15
in Germany
Safestore has entered the German self storage market via a new Joint
Venture15 with Carlyle, which has acquired the myStorage business.
Safestore has developed a multi-country highly scalable platform
with leading marketing and operational expertise in self storage, with
a proven track record for developing its platform in new markets.
The acquisition of myStorage represents an excellent opportunity to
develop our platform into the attractive German self storage market.
The Joint Venture builds upon our previous successful relationship
with Carlyle having entered the Benelux market in 2019. Our common
intention is to target development and acquisition opportunities
through the Joint Venture, providing the opportunity to achieve operational
scale and to develop local market knowledge, whilst also retaining the
option for Safestore to develop its own wholly owned self storage sites
in Germany. We look forward to continuing our working relationship with
Carlyle, and to developing a long and mutually beneficial relationship.
16
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Owned store portfolio by region
Number of stores
Let square feet (m sq ft)
Maximum lettable area (m sq ft)
Average let square feet per store (k sq ft)
Average store capacity (k sq ft)
Closing occupancy (%)
Average rate (£ per sq ft)
Revenue (£’m)
Average revenue per store (£’m)
London and
South East
Rest of UK
72
2.42
2.92
34
41
83.1%
34.76
101.1
1.40
58
2.22
2.70
38
47
82.0%
22.38
61.9
1.07
UK
Total
130
4.64
5.62
36
43
82.6%
28.79
163.0
1.25
Paris
29
1.11
1.36
38
47
81.7%
34.36
41.4
1.43
Spain
5
0.10
0.12
19
24
78.9%
28.92
3.0
0.60
Benelux
15
0.47
0.60
32
40
78.8%
16.61
5.1
0.34
Group
Total
179
6.32
7.70
35
43
82.1%
29.25
212.5
1.19
Note
The reported totals have not been adjusted for the impact of rounding.
We have a strong position in both the UK and Paris markets, operating
130 stores in the UK, 72 of which are in London and the South East,
and 29 stores in Paris.
In the UK, 62% of our revenue is generated by our stores in London
and the South East. On average, our stores in London and the South
East are smaller than in the rest of the UK but the rental rates achieved
are materially higher, enabling these stores to typically achieve similar
or better margins than the larger stores. In London we operate 49 stores
within the M25, more than any other competitor.
In France, we have a leading position in the heart of the affluent City
of Paris market with ten stores branded as Une Pièce en Plus (“UPP”)
(“A spare room”). Over 60% of the UPP stores are located in a cluster
within a five-mile radius of the city centre, which facilitates strong
operational and marketing synergies as well as options to differentiate
and channel customers to the right store subject to their preference for
convenience or price affordability. The Parisian market has attractive
socio-demographic characteristics for self storage and we believe that
UPP enjoys unique strategic strength in such an attractive market.
As at 31 October 2022, 70% of our Group Revenue, 65% of our
stores and 58% of our available capacity are in London, South East
England, Paris, Amsterdam and the Randstad area, Brussels and
Barcelona. These major population areas deliver 71% of the Group’s
store EBITDA from 62% of our MLA, highlighting the attractiveness
of being present in these major cities and conurbations. The current
pipeline includes 26 further developments in these areas which will
increase the number of stores to 68% of our portfolio.
In addition, Safestore has the benefit of a leading national presence in the
UK regions where the stores are predominantly located in the centre of key
metropolitan areas such as Birmingham, Manchester, Liverpool, Bristol,
Newcastle, Glasgow and Edinburgh. Our 2019 acquisition of OhMyBox! in
Barcelona and our 2022 Benelux JV acquisition represents a platform into
the Spanish, Netherlands and Belgium markets where we hope to take
advantage of further development and acquisition opportunities.
Market
The Self Storage Association (“SSA”) noted in its May 2022 report that,
“despite two record years, inflationary pressures, escalating costs of
construction and a war in Europe, operators remain optimistic about
the future.” Previous downturns have presented opportunities for self
storage and the pandemic seems to have once again demonstrated the
resilience of the self storage industry and the broad range of demand drivers.
The self storage market in the UK, France, Spain and Benelux remains
relatively immature compared to geographies such as the USA and
Australia. The SSA Annual Survey (May 2022) confirmed that self
storage capacity stands at 0.76 sq ft per head of population in the UK.
The most recent report relating to Europe (FEDESSA’s 2022 report)
showed that capacity in France is 0.24 sq ft per capita. Whilst the Paris
market density is greater than France, we estimate it to be significantly
lower than the UK at around 0.4 sq ft per inhabitant. This compares
with closer to 10 sq ft per inhabitant in the USA and 2 sq ft in Australia.
In the UK, in order to reach the US density of supply, it would require
the addition of around another 17,000 stores as compared to c.1,400
currently. In the Paris region, it would require around 2,400 new
facilities versus c.95 currently opened.
In Spain, the Netherlands and Belgium, geographies the Group has
recently entered, penetration is similarly low. In Spain, capacity is around
0.24 sq ft per head of population and the consumer is serviced by just
580 stores. In the Netherlands, penetration is 0.6 sq ft per head of
population (355 stores) and in Belgium 0.2 sq ft per head of population
(101 stores).
The Group recently entered a JV with Carlyle in Germany. The German
market is one of Europe’s more under-penetrated markets with just
0.09 sq ft of storage space per capita and, according to the 2022
FEDESSA report, there are just 320 facilities in the country and 7.6m
sq ft of lettable space.
Our interpretation of the most recent 2022 SSA report is that similar
levels of capacity are likely to be developed in 2022 and 2023 at around
30-40 stores per annum. We do not consider this level of new supply
growth to be of concern.
The 30-40 comparable sites represent between 2% and 3% of the
traditional self storage industry in the UK. These figures represent
gross openings and do not take into account storage facilities closing
or being converted for alternative uses. We estimate that only a small
proportion of these sites compete with existing Safestore stores.
New supply in London and Paris is likely to continue to be limited in the
short and medium term as a result of planning restrictions, competition
from a variety of other uses and the availability of suitable land.
The supply in the UK market, according to the SSA Survey, remains
relatively fragmented despite a number of acquisitions in the sector
in the last four years. The SSA’s estimates of the scale of the UK
industry are finessed each year and changes from one year to the next
represent improved data rather than new supply. In the 2022 report the
SSA estimates that 2,050 self storage facilities exist in the UK market
including around 621 container-based operations. According to the
2022 survey, Safestore is the industry leader by number of stores
with 130 wholly owned sites followed by Big Yellow with 105 stores
(including Armadillo), Access with 60 stores, Shurgard with 40 stores,
Lok’n Store with 39 stores, Storage King with 37 stores and Ready
Steady Store with 27 stores. In aggregate, the top seven leading
operators account for almost 21% of the UK store portfolio. The
remaining c.1,613 self storage outlets (including 621 container-based
operations) are independently owned in small chains or single units.
In total there are 1,015 storage brands operating in the UK.
Safestore’s French business, UPP, is mainly present in the core
wealthier and more densely populated inner Paris and first belt areas,
whereas our two main competitors, Shurgard and Homebox, have a
greater presence in the outskirts and second belt of Paris.
17
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Chief Executive’s statement continued
Market continued
Our Spanish business operates in Barcelona and has a pipeline of future
store openings in both Barcelona and Madrid. The metropolitan areas of
Barcelona and Madrid have combined growing high-density populations
of 12 million inhabitants and significant barriers to entry.
Consumer awareness of self storage is increasing but remains relatively
low, providing an opportunity for future industry growth. The SSA
survey consistently indicates that approximately half of consumers
either knew nothing about the service offered by self storage operators
or had not heard of self storage at all. Since 2016, this statistic has only
fallen 10ppts from 59%. Therefore, the opportunity to grow awareness,
combined with limited new industry supply, makes for an attractive
industry backdrop.
Self storage is a brand-blind product. 64% of respondents were unable
to name a self storage business in their local area (56% in 2021). The
lack of relevance of brand in the process of purchasing a self storage
product emphasises the need for operators to have a strong online
presence. This requirement for a strong online presence was also
reiterated by the SSA Survey where 73% of those surveyed (77% in
2021) confirmed that an internet search would be their chosen means
of finding a self storage unit to contact, whilst knowledge of a physical
location of a store as reason for enquiry was only c.26% of
respondents (c.25% in 2021).
There are numerous drivers of self storage growth. Most private and
business customers need storage either temporarily or permanently
for different reasons at any point in the economic cycle, resulting in a
market depth that is, in our view, the reason for its exceptional resilience.
The growth of the market is driven both by the fluctuation of economic
conditions, which has an impact on the mix of demand, and by
growing awareness of the product.
Safestore’s domestic customers’ need for storage is often driven by
life events such as births, marriages, bereavements, divorces or by
the housing market including house moves and developments and
moves between rental properties. Safestore has estimated that UK
owner-occupied housing transactions drive around 8-13% of the
Group’s new lets.
The Group’s business customer base includes a range of businesses,
from start-up online retailers through to multi-national corporates,
utilising our national coverage to store in multiple locations while
maintaining flexibility in their cost base.
Business and personal customers
UK
Paris
Spain
Benelux
Personal customers
Numbers (% of total)
Square feet occupied (% of total)
Average length of stay (months)
Business customers
Numbers (% of total)
Square feet occupied (% of total)
Average length of stay (months)
77%
58%
17.4
23%
42%
26.4
82%
65%
28.7
18%
35%
32.0
89%
83%
23.2
11%
17%
31.2
85%
77%
28.4
15%
23%
30.2
Safestore’s customer base is resilient and diverse and consists of around
90,000 domestic, business and National Accounts customers across
London, Paris, Spain, the UK regions, the Netherlands and Belgium.
Business model
The Group operates in a market with relatively low consumer
awareness. It is anticipated that this will increase over time as the
industry matures. To date, despite the financial crisis in 2007/08, the
implementation of VAT in the UK on self storage in 2012, Brexit and the
Covid-19 pandemic, the industry has been exceptionally resilient. In the
context of uncertain economic conditions, driven by inflation and the
18
war in Ukraine, the industry remains well positioned with limited new
supply coming into the self storage market.
With more stores inside London’s M25 than any other operator and
a strong position in central Paris, Safestore has leading positions in
the two most important and demographically favourable markets in
Europe. In addition, our regional presence in the UK is unsurpassed
and contributes to the success of our industry-leading National
Accounts business. In the UK, Safestore is the leading operator by
number of wholly owned stores. With 85% of customers travelling
for less than 30 minutes to their storage facility (2022 SSA Survey)
Safestore’s national store footprint represents a competitive advantage.
The Group’s capital-efficient portfolio of 179 wholly owned stores in
the UK, Paris, Spain, the Netherlands and Belgium consists of a mix
of freehold and leasehold stores. In order to grow the business and
secure the best locations for our facilities we have maintained a flexible
approach to leasehold and freehold developments as well as being
comfortable with a range of building types, from new builds to
conversions of warehouses and underground car parks.
Currently, around a quarter of our stores in the UK are leaseholds with
an average remaining lease length at 31 October 2022 of 12.7 years
(FY2021: 11.8 years). Although our property valuation for leaseholds
is conservatively based on future cash flows until the next contractual
lease renewal date, Safestore has a demonstrable track record of
successfully re-gearing leases several years before renewal whilst
at the same time achieving concessions from landlords.
In England, we benefit from the Landlord and Tenant Act that protects
our rights for renewal except in case of redevelopment. The vast majority
of our leasehold stores have building characteristics or locations in retail
parks that make current usage either the optimal and best use of the
property or the only one authorised by planning. We observe that our
landlords, who are property investors, value the quality of Safestore as
a tenant and typically prefer to extend the length of the leases that they
have in their portfolio, enabling Safestore to maintain favourable terms.
In Paris, where 41% of stores are leaseholds, our leases typically benefit
from the well-enshrined Commercial Lease statute that provides that
tenants own the commercial property of the premises and that they
are entitled to renew their lease at a rent that is indexed to the Indice
des Loyers Commerciaux (“Commercial Rental Index”) published by
the state. Taking into account this context, the valuer values the French
leaseholds based on an indefinite property tenure, similar to freeholds
but at a significantly higher exit cap rate.
The Group believes there is an opportunity to leverage its highly
scalable marketing and operational expertise in new geographies
outside the UK and Paris. During 2019, a Joint Venture14 was established
with Carlyle, which acquired the M3 Self Storage business in the
Netherlands which had six stores in Amsterdam and Haarlem. In June
2020, the Joint Venture14 added the Lokabox business, a portfolio of
six stores in Brussels (2), Liege (2), Charleroi and Nivelles. In December
2020, the Joint Venture14 acquired the Opslag XL portfolio adding a
further three stores in Amsterdam, The Hague and Hilversum and
opened a store in Nijmegen in the Netherlands in January 2022. The
Amsterdam store has subsequently been closed as planned following
lease expiry. After three years of learning about and understanding
these markets, the Group acquired the remaining 80% of equity in
the Joint Venture14 owned by Carlyle in March 2022.
In 2019 the Group entered the Spanish market with the acquisition of
OhMyBox!. Our Spanish portfolio currently consists of five stores in
Barcelona, and two recently opened Madrid stores. We have a further
six stores in our development pipeline situated in both Madrid and
Barcelona. We consider both of these cities to have attractive
characteristics in relation to self storage and intend to continue
to seek further expansion opportunities.
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Our experience is that being flexible in its approach has enabled
Safestore to operate from properties and in markets that would have
been otherwise unavailable and to generate strong Cash on Cash Returns.
Safestore excels in the generation of customer enquiries which are
received through a variety of channels including the internet, telephone
and ‘walk-ins’. In the early days of the industry, local directories and
store visibility were key drivers of enquiries. However, the internet is
now by far the dominant channel, accounting for 90% (2021: 89%) of
our enquiries in the UK and 85% (2021: 84%) in France. This dynamic
is a clear benefit to the leading national operators that possess the
budget and the management skills necessary to generate a commanding
presence in the major search engines. Safestore has developed and
continues to invest in a leading digital marketing platform that has
generated 54% enquiry growth over the last five years.
Although mostly generated online, our enquiries are predominantly
handled directly by the stores and, in the UK, we have a Customer
Support Centre (“CSC”) which handles customer service issues in
addition to enquiries, in particular when the store colleagues are
busy handling calls or outside of normal store opening hours.
Our pricing platform provides the store and CSC colleagues with
system-generated real-time prices managed by our centrally based
yield-management team. Local colleagues have certain levels of discretion
to flex the system-generated prices but this is continually monitored.
Customer service standards are high and customer satisfaction
feedback is consistently very positive. Safestore invites customers
to leave a review on a number of review platforms, including Feefo,
Google and Trustpilot. Our ratings for each of these three providers in
the UK are between 4.6 and 4.8 out of 5. In France, Une Pièce en Plus
uses Trustpilot to obtain independent customer reviews and In HY2022,
achieved a TrustScore of 4.6 out of 5. In Spain, OhMyBox! collects
customer feedback via Google reviews and has maintained a score of
4.6 out of 5. The key drivers of sales success are the capacity to generate
enquiries in a digital world, the capacity to provide storage locations
that are conveniently located close to the customers’ requirements and
the ability to maintain a consistently high quality, motivated retail team
that is able to secure customer sales at an appropriate storage rate, all
of which can be better provided by larger, more efficient organisations.
We remain focused on business as well as domestic customers. Our
national network means that we are uniquely placed to further grow
the business customer market and in particular National Accounts.
Business customers in the UK now constitute 42% of our total space
let and have an average length of stay of 26 months. Within our business
customer category, our National Accounts business represents around
623,000 sq ft of occupied space (around 13% of the UK’s occupancy).
Approximately two-thirds of the space occupied by National Accounts
customers is outside London, demonstrating the importance and quality
of our well invested national estate.
The business now has in excess of c.90,000 business and domestic
customers with an average length of stay of 28 months and 22
months respectively.
The cost base of the business is relatively fixed. Each store typically
employs three colleagues. Our Group Head Office comprises business
support functions such as Yield Management, Property, Marketing,
HR, IT, and Finance.
Since the completion of the rebalancing of our capital structure in early
2014, the subsequent amendment and extension of our banking facilities
in summer 2015, the refinancing of all facilities in May 2017 and the
issuances of a further £125 million of US Private Placement Notes in
2019, £150 million in 2021 and £89 million in 2022, as well as the recent
establishment of a new £400 million unsecured multi-currency Revolving
Credit Facility, Safestore has secure financing, a strong balance sheet
and significant covenant headroom. This provides the Group with
financial flexibility and the ability to grow organically and via carefully
selected new development or acquisition opportunities.
At 31 October 2022 we had 1.0m sq ft of unoccupied space in the UK,
0.2m sq ft in France and 0.2m in Spain and Benelux, equivalent to c.35
full new stores. Our main focus is on filling the spare capacity in our
stores at optimally yield-managed rates. The operational leverage of our
business model will ensure that the bulk of the incremental revenue
converts to profit given the relatively fixed nature of our cost base.
Trading performance
UK – an excellent year
UK operating performance – total
Revenue (£’m)
Underlying EBITDA (£’m)2
Underlying EBITDA
(after leasehold costs) (£’m)
Closing occupancy
(let sq ft – million)3
Maximum lettable area (MLA)4
Closing occupancy (% of MLA)
Average storage rate (£)5
UK operating performance –
like-for-like8
Revenue (£’m)
Underlying EBITDA (£’m)2
Closing occupancy
(let sq ft – million)3
Closing occupancy (% of MLA)
Average occupancy
(let sq ft – million)3
Average storage rate (£)5
UK statutory metrics
Operating profit (£’m)
Profit before tax (£’m)
2022
2021
Change
163.0
103.6
144.1
88.6
13.1%
16.9%
95.6
80.9
18.2%
4.637
5.62
82.6%
28.79
4.690
5.49
-1.1%
2.4%
85.4% -2.8ppts
13.7%
25.32
160.2
101.7
142.8
87.9
12.2%
15.7%
4.538
83.0%
4.648
-2.4%
85.6% -2.6ppts
4.537
28.94
4.512
25.40
0.6%
13.9%
393.1
378.7
331.9
321.4
18.4%
17.8%
The UK’s revenue performance was excellent in the year with the
business growing total revenue by 13.1% and like-for-like8 revenue
by 12.2%. Performance was strong in both Regional UK as well as
London and the South East where like-for-like8 revenue was up 13.0%
and 11.7% respectively.
The UK’s performance was driven by strong rate growth in the year
with like-for-like average rates up 13.9% for the year. Rate momentum
was strong in the final quarter with like-for-like storage rates up 3.8%
compared to the third quarter. Average like-for-like occupancy was up
0.6% over the course of the year.
19
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Chief Executive’s statement continued
Trading performance continued
UK – an excellent year continued
Like-for-like closing occupancy, at 83.0%, decreased by 2.6ppts
compared to the prior year. The addition of extensions in four of the
like-for-like stores had the impact of diluting MLA by 0.7ppts. In addition,
the volume of like-for-like new lets was up 6% in the year but the average
new let unit size was lower than in 2021 resulting in a lower new let sq ft.
Total revenue grew by 13.1% for the full year. This reflected like-for-like
growth of 12.2%, the 2021 opening of our Birmingham Middleway and
subsequent closure of our Birmingham South store and the 2022 opening
of our London Bow store. All acquisitions and new store developments
are performing in line with or ahead of their business cases.
We remain focused on our cost base. During the year, our UK cost base, on
a like-for-like8 basis, increased by 6.6% or £3.6 million. Inflationary pressures
on utilities, staff costs and insurance contributed to this increase. Our
total reported underlying UK cost base grew by £3.9 million or 7.0%
reflecting the cost bases relating to newly and recently opened stores.
As a result, Underlying EBITDA2 for the UK business was £103.6 million
(FY2021: £88.6 million), an increase of £15.0 million or 16.9%. Despite
the increase in costs, the excellent revenue performance resulted in a
2.1ppt increase in EBITDA margins from 61.5% to 63.6%.
For the two months to December 2022 trading continued to be robust
and stable through the period. Like-for-like average rate was up 7.3%,
offset by a reduction in closing occupancy which was down 3.6ppts at
78.6% (2021: 82.2%). Overall, like-for-like revenue increased by 3.7%
and total revenue grew by 4.6%.
Operating profit for the UK business was £393.1 million (FY2021:
£331.9 million), an increase of £61.2 million or 18.4%, largely driven
by the increase in the gain on investment properties of £35.2 million
to £295.7 million (FY2021: £260.5 million). Profit before tax was
£378.7 million (FY2021: £321.4 million), an increase of £57.3 million or 17.8%.
Paris – another strong year
Paris operating performance – total
Revenue (€’m)
Underlying EBITDA (€’m)2
Underlying EBITDA
(after leasehold costs) (€’m)
Closing occupancy
(let sq ft – million)3
Maximum lettable area (MLA)4
Closing occupancy (% of MLA)
Average storage rate (€)5
Revenue (£’m)
Paris operating performance –
like-for-like8
Revenue (€’m)
Underlying EBITDA (€’m)2
Closing occupancy
(let sq ft – million)3
Closing occupancy (% of MLA)
Average occupancy
(let sq ft – million)3
Average storage rate (€)5
Paris statutory metrics
Operating profit (£’m)
Operating profit (€’m)
Profit before tax (£’m)
Profit before tax (€’m)
2022
2021
Change
48.8
33.0
46.0
31.4
6.1%
5.1%
27.1
25.7
5.4%
1.112
1.36
81.7%
40.47
41.4
1.100
1.36
1.1%
—
80.7% +1.0ppts
4.0%
38.90
3.8%
39.9
48.37
33.0
45.94
31.3
5.3%
5.4%
1.094
83.4%
1.097
-0.3%
83.6% -0.2ppts
1.092
40.56
110.4
130.0
108.8
128.2
1.077
38.90
1.4%
4.3%
78.8
90.7
77.0
88.7
40.1%
43.3%
41.3%
44.5%
On a like-for-like8 basis, the business grew revenue by 5.3% for the full
year. This was driven by average occupancy growth of 1.4% for the
year and an average rate improvement of 4.3%.
Like-for-like8 closing occupancy was 83.4%, down 0.2ppts compared
to the prior year.
The average Sterling-Euro exchange rate for the year was 1.1778, 2.3%
stronger than the prior year (FY2021: 1.1516). As a result, there was
a small foreign exchange impact on the translation of Paris revenues
which were up 3.8% for the year in Sterling.
After cost reductions in 2021, like-for-like8 costs grew by 5.5% or
€0.8 million compared to the prior year in local currency as a result of
increases in employee costs and utilities. As a result, like-for-like8
underlying EBITDA2 in Paris grew by €1.7 million and Underlying
EBITDA2 grew by €1.6 million to €33.0 million (FY2021: €31.4 million).
For the two months to December 2022 trading has been robust and
improving as the period progressed. Like-for-like closing occupancy
was up 2.0ppts at 80.8% (2021: 78.8%) and like-for-like average rate
was up 1.0%, which resulted in a 2.5% increase in like-for-like revenue.
Operating profit for the Paris business was €130.0 million (FY2021:
€90.7 million), an increase of €39.3 million or 43.3%, largely driven
by the increase in the gain on investment properties of €28.0 million
to €92.5 million (FY2021: €64.5 million). Profit before tax was
€128.2 million (FY2021: €88.7 million), an increase of €39.5 million
or 44.5%.
20
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Benelux trading performance
Our Netherlands and Belgium businesses were acquired on 30 March 2022
and, therefore, contributed seven months’ revenue (€5.9 million) in
the period.
The Benelux businesses grew revenue by 5.3% compared to the third
quarter of 2022 and the businesses ended the period with a combined
closing occupancy of 78.8%.
The business was originally established in 2019 with the acquisition of
six stores and it has been subsequently developed into a fifteen-store
portfolio with a pipeline of five additional stores.
Frederic Vecchioli
Chief Executive Officer
16 January 2023
Spain trading performance
Spain operating performance – total
Revenue (€’m)
Underlying EBITDA (€’m)2
Underlying EBITDA
(after leasehold costs) (€’m)
Closing occupancy
(let sq ft – million)3
Maximum lettable area (MLA)4
Closing occupancy (% of MLA)
Average storage rate (€)5
Revenue (£’m)
Spain operating performance –
like-for-like8
Revenue (€’m)
Underlying EBITDA (€’m)2
Closing occupancy
(let sq ft – million)3
Closing occupancy (% of MLA)
Average occupancy
(let sq ft – million)3
Average storage rate (€)5
Spain statutory metrics
Operating profit (£’m)
Operating profit (€’m)
Profit before tax (£’m)
Profit before tax (€’m)
2022
2021
Change
3.59
1.8
3.29
2.0
9.1%
(10.0%)
1.3
1.5
(13.3%)
0.095
0.12
2.2%
0.093
9.1%
0.11
78.9% 86.0% -7.1ppts
5.6%
32.25
34.07
7.1%
2.8
3.0
3.57
2.1
3.29
2.0
8.5%
5.0%
0.093
—
0.093
85.9% 86.0% -0.1ppts
0.094
34.11
0.096
32.25
-2.1%
5.8%
2.8
3.3
2.7
3.2
6.3
7.2
6.2
7.1
(55.6%)
(54.2%)
(56.5%)
(54.9%)
Our Spanish business was acquired in December 2019. The original
four stores are, therefore, now considered like-for-like and grew
like-for-like revenue by 8.5% in the year to €3.57 million (FY2021:
€3.29 million). A deliberate strategy of improving average rate
and ancillary revenues has continued to be pursued in the period.
Closing occupancy in sq ft was consequently flat compared to 2021
whilst like-for-like average rate in the year grew by 5.8% to €34.11
(FY2021: €32.25) with ancillary revenues improving strongly.
Like-for-like underlying EBITDA grew by 5.0% in the period after
investment in additional Head Office resource dedicated to growing
the development pipeline.
The Spanish business opened an additional store in Barcelona in the
period. As a result, total revenue increased by 9.1%.
For the two months to December 2022 trading continued to be robust
and stable through the period. Like-for-like occupancy was down
3.0ppts at 81.8% (2021: 84.8%) but like-for-like average rate was up
7.6%, which, combined with strong ancillary revenues, resulted in a
7.4% increase in like-for-like revenue. Total revenue was up 11.5% for
the period.
Operating profit for the Spanish business was €3.3 million (FY2021:
€7.2 million). 2021 included an increase in the gain on investment
properties of €5.3 million, against an increase in 2022 of €2.0 million.
Accordingly, profit before tax was €3.2 million (FY2021: €7.1 million).
21
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Financial review
EPS1 has grown by 344%
over the last nine years
Andy Jones
Chief Financial Officer
Underlying income statement
The table below sets out the Group’s underlying results of operations for the year ended 31 October 2022 and the year ended 31 October 2021.
To calculate the underlying performance metrics, adjustments are made for the impact of exceptional items, share-based payments, corporate
transaction costs, change in fair value of derivatives, gain or loss on investment properties and the associated tax impacts, as well as exceptional
tax items and deferred tax. Management considers this presentation of earnings to be representative of the underlying performance of the
business, as it removes the income statement impact of items not fully controllable by management, such as the revaluation of derivatives and
investment properties, and the impact of exceptional credits, costs and finance charges.
Revenue
Underlying costs
Share of associate’s Underlying EBITDA
Underlying EBITDA
Leasehold costs
Underlying EBITDA after leasehold costs
Depreciation
Finance charges
Share of associate’s finance charges
Underlying profit before tax
Current tax
Adjusted EPRA earnings
Share-based payments charge
EPRA basic earnings
Average shares in issue (m)
Diluted shares (for ADE EPS) (m)
Adjusted Diluted EPRA EPS1 (pro forma) (p)
2022
£’m
212.5
(77.5)
0.1
135.1
(13.6)
121.5
(1.0)
(10.9)
(0.4)
109.2
(5.2)
104.0
(11.2)
92.8
210.9
218.9
47.5
2021
£’m
186.8
(69.3)
0.5
118.0
(13.0)
105.0
(1.0)
(9.5)
(0.5)
94.0
(5.5)
88.5
(18.3)
70.2
210.8
218.3
40.5
Movement
%
13.8%
11.8%
(80.0%)
14.5%
4.6%
15.7%
—
14.7%
(20.0%)
16.2%
(5.5%)
17.5%
(38.8%)
32.2%
17.3%
Note
1
Adjusted EPRA earnings excludes share-based payment charges and, accordingly, the Underlying EBITDA, Underlying EBITDA after leasehold rent, and Underlying profit before tax
measures have been restated to exclude share-based payment charges for consistency.
The table below reconciles statutory profit before tax in the income statement to underlying profit before tax in the previous table.
Statutory profit before tax
Adjusted for:
– Gain on investment properties and investment properties under construction
– Change in fair value of derivatives
– Net exchange losses
– Share-based payments
– Exceptional items and other exceptional gains
– Exceptional finance income
Underlying profit before tax
2022
£’m
498.8
(389.9)
0.3
—
11.2
(10.7)
(0.5)
109.2
2021
£’m
404.6
(328.5)
(2.9)
0.6
18.3
1.9
—
94.0
Management considers the above presentation of earnings to be representative of the underlying performance of the business.
22
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Underlying EBITDA increased by 14.5% to £135.1 million (FY2021: £118.0 million), reflecting a 13.8% increase in revenue and a 11.8% increase
to the underlying cost base. This performance reflects the strong growth in average rate of 8.5% to £29.25 in 2022 from £26.95 in 2021 offset
by a slight reduction in occupancy of 2.4ppts to 82.1% in 2022 from 84.5% in 2021, whilst maintaining control over costs.
Leasehold costs increased by 4.6% from £13.0 million to £13.6 million, principally due to reflecting the impact of rent reviews across the portfolio
in addition to the Netherlands leaseholds now forming part of the Group.
Underlying finance charges increased by 14.7% from £9.5 million to £10.9 million. This principally reflects interest charges which increased from
£9.7 million in 2021 to £11.9 million in 2022 driven by higher USPP borrowing to fund the Group’s acquisition and development activity, offset by
the gains made on financial instruments of £1.3 million in 2022 (FY2021: £0.5 million).
As a result, we achieved a 16.2% increase in underlying profit before tax of £109.2 million (FY2021: £94.0 million). The main contributing factor in
the increase in statutory profit before tax in the year is the £61.4 million increase in the gain on investment and development property, primarily
due to the stronger underlying performance of the stores, as mentioned above, as well as a reduction in the share-based payment charge by
£7.1 million to £11.2 million (FY2021: £18.3 million).
Included within statutory profit before tax are other exceptional gains of £10.7 million. £5.5 million relates to the valuation gain of Safestore’s 20%
investment in the Joint Venture formed in 2019 with Carlyle that arose on acquisition of the remaining 80%, with £5.1 million relating to the profit
on the sale of the Nanterre land in Paris in November 2021. The exceptional finance income relates to the profit made on the termination of
interest rate swaps associated with the Joint Venture.
Given the Group’s REIT status in the UK, tax is normally only payable in France, Spain, the Netherlands and Belgium. The underlying tax charge
for the year was £5.2 million (FY2021: £5.5 million), calculated by applying the effective underlying tax rate of 20.9% to the respective underlying
profits earned by the non-UK businesses.
As explained in note 2 to the financial statements, management considers that the most representative Earnings per Share (“EPS”) measure
is Adjusted Diluted EPRA EPS which has increased by 17.3% to 47.5 pence (FY2021: 40.5 pence).
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the income statement to Underlying EBITDA.
Statutory operating profit
Adjusted for:
– Gain on investment properties
– Share of associate’s Underlying EBITDA
– Depreciation
– Variable lease payments
– Share-based payments
Exceptional items:
– Costs incurred relating to corporate restructuring and exceptional taxation costs
Other exceptional gains:
– Profit on sale of land
– Profit on disposal of investment property
– Valuation gain on associate buy-out
Underlying EBITDA
2022
£’m
514.5
2021
£’m
417.0
(381.6)
(321.1)
0.4
1.0
0.3
11.2
0.1
(5.1)
(0.2)
(5.5)
0.5
1.0
0.4
18.3
1.9
—
—
—
135.1
118.0
The main reconciling items between statutory operating profit and Underlying EBITDA are the gain on investment properties as well as adjustments
for depreciation, variable lease payments, share-based payment charges, exceptional gains and the share of associate’s Underlying EBITDA.
The gain on investment properties was £381.6 million, as compared to £321.1 million in 2021 primarily due to the stronger underlying performance
of the stores. The Group’s approach to the valuation of its investment property portfolio at 31 October 2022 is discussed further on.
23
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Financial review continued
Underlying profit by geographical region
The Group is organised and managed in four operating segments based on geographical region. The table below details the underlying
profitability of each region.
2022
2021
Revenue
Underlying cost of sales
Store EBITDA
Store EBITDA margin
LFL Store EBITDA margin
Underlying administrative expenses
Underlying EBITDA
EBITDA margin
LFL EBITDA margin
Leasehold costs
Underlying EBITDA after leasehold costs
UK
£’m
163.0
(48.2)
Paris
€’m
48.8
(12.2)
114.8
36.6
Spain
€’m
Benelux
€’m
5.9
(2.5)
3.6
(1.2)
2.4
3.4
151.6
Total
(CER)
£’m
213.5
(61.9)
70.4% 75.0% 66.7% 57.6% 71.0%
70.5% 75.6% 75.0%
(11.2)
103.6
(3.6)
33.0
(0.6)
1.8
n/a
(1.2)
71.6%
(15.9)
2.2
135.7
63.6% 67.6% 50.0% 37.3% 63.6%
63.5% 68.2% 58.3%
(8.0)
95.6
(5.9)
27.1
(0.5)
1.3
n/a
(0.1)
64.4%
(13.7)
2.1
122.0
UK
£’m
144.1
(45.2)
98.9
68.6%
68.8%
Paris
€’m
46.0
(11.2)
34.8
75.7%
75.8%
(10.3)
(3.4)
88.6
61.5%
61.6%
(7.7)
80.9
31.4
68.3%
68.2%
(5.7)
25.7
Spain
€’m
Total (CER)
£’m
3.3
(0.7)
2.6
78.8%
78.8%
(0.6)
2.0
60.6%
60.6%
(0.5)
1.5
186.8
(55.5)
131.3
70.3%
70.5%
(13.8)
117.5
62.9%
63.1%
(13.0)
104.5
EBITDA after leasehold costs margin
58.7% 55.5% 36.1% 35.6% 57.1%
56.1%
55.9%
45.5%
55.9%
Underlying EBITDA after leasehold costs
(CER)
Adjustment to actual exchange rate
Reported Underlying EBITDA after
leasehold costs
UK
£’m
Paris
£’m
Spain
£’m
Benelux
£’m
Total
£’m
95.6
—
23.4
(0.5)
1.2
(0.1)
1.8
—
122.0
(0.6)
UK
£’m
80.9
—
Paris
£’m
22.3
—
Spain
£’m
Total
£’m
1.3
—
104.5
—
95.6
22.9
1.1
1.8
121.4
80.9
22.3
1.3
104.5
Note
CER is Constant Exchange Rates (Euro denominated results for the current period have been retranslated at the exchange rate effective for the comparative period in order to present the
reported results on a more comparable basis).
Underlying EBITDA in the UK increased by £15.0 million, or 16.9%, to £103.6 million (FY2021: £88.6 million), underpinned by a 13.1% or £18.9 million
increase in revenue, which was driven by an increase in average occupancy levels and rate improvements in the like-for-like portfolio as well as
the impact of the 2021 store opening in Birmingham Middleway (offset by the closure of Birmingham Digbeth), the December 2021 acquisition of
Christchurch, and the December 2021 opening of our London Bow store. Underlying UK EBITDA after leasehold costs increased by 18.2% to
£95.6 million (FY2021: £80.9 million).
In Paris, Underlying EBITDA increased by €1.6 million, or 5.1%, to €33.0 million (FY2021: €31.4 million), primarily driven by a €2.8 million increase
in revenue. Underlying EBITDA after leasehold costs in Paris increased by 5.4% to €27.1 million (FY2021: €25.7 million).
In Spain, Underlying EBITDA decreased slightly by €0.2 million, from €2.0 million in 2021 to €1.8 million in 2022. This directly translated into a
decrease in Underlying EBITDA after leasehold costs from €1.5 million in 2021 to €1.3 million in 2022.
Our Netherlands and Belgium businesses were acquired on 30 March 2022 and, therefore, contributed seven months’ revenue (€5.9 million)
in the period.
The combined results of the UK, Paris, Spain and Benelux delivered a 16.3% increase in Underlying EBITDA after leasehold costs at constant
exchange rates at Group level. Adjusting for an unfavourable exchange impact of £0.6 million, the combined results of the UK, Paris and Spain
reported an Underlying EBITDA after leasehold costs increase of 16.2% or £16.9 million to £121.4 million (FY2021: £104.5 million).
24
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Revenue
Revenue for the Group is primarily derived from the rental of self storage space and the sale of ancillary products such as insurance and
merchandise (e.g. packing materials and padlocks).
The split of the Group’s revenues by geographical segment is set out below for 2022 and 2021.
UK
Paris
Local currency
Paris in Sterling
Spain
Local currency
Spain in Sterling
Benelux
Local currency
Benelux in Sterling
Average exchange rate
Total revenue
£’m
€’m
£’m
€’m
£’m
€’m
£’m
£’m
2022
163.0
% of total
76%
48.8
41.4
3.6
3.0
5.9
5.1
1.178
212.5
19%
2%
3%
100%
2021
144.1
46.0
39.9
3.3
2.8
—
—
1.152
186.8
% of total
% change
77%
13.1%
21%
2%
—
—
100%
6.1%
3.8%
9.1%
7.1%
—
—
(2.3%)
13.8%
The Group’s revenue increased by 13.8% or £25.7 million in the year. The Group’s occupied space was 434,000 sq ft higher at 31 October 2022
(6.317m sq ft) than at 31 October 2021 (5.883m sq ft), and the average storage rate per sq ft for the Group was, at £29.25, 8.5% higher than in
2021 (£26.95).
Adjusting the Group’s revenue to a like-for-like basis (adjusting for the Benelux acquisition in 2022, adjusting the UK for the 2021 opening of our
Birmingham Middleway store and the sale of Birmingham Digbeth, the December 2021 acquisition of Christchurch, and the December 2021
opening of our London Bow store, and in Paris for the opening of our Magenta store), revenue has increased by 10.1%. There was minimal
exchange rate movement in the year so Group like-for-like revenue at constant exchange rates has increased by 10.7%.
In the UK, revenue grew by £18.9 million or 13.1%, and on a like-for-like basis it increased by 12.2%. Occupancy was 53,000 sq ft lower at
31 October 2022 than at 31 October 2021, at 4.637m sq ft (FY2021: 4.690m sq ft). The average storage rate for the year grew 13.7%, from
£25.32 in 2021 to £28.79 in 2022. On a like-for-like basis, the average storage rate in the UK also increased by 13.9% to £28.94 (FY2021: £25.40).
In Paris, revenue grew by €2.8 million or 6.1% and on a like-for-like basis it increased by 5.3% to €48.37 million (FY2021: €45.94 million). This was
driven by an increase in the average storage rate of 4.0% to €40.47 for the year (FY2021: €38.90), and an increase in average occupancy growth
of 2.3%, with closing occupancy growing to 1.112m sq ft (FY2021: 1.100m sq ft).
For Spain, revenue was €3.6 million, reflecting the growth in average rate of 5.6% to €34.07 (FY2021: €32.25), with a closing occupancy of
0.095m sq ft (78.9%).
Our Netherlands and Belgium businesses, acquired on 30 March 2022 from the buyout of the remaining 80% of the equity owned by Carlyle
in the Joint Venture formed in 2019, contributed seven months’ revenue, €5.9 million in the period. Collectively, the businesses saw 6,000 sq ft
of occupancy inflows in the fourth quarter and our Netherlands and Belgium businesses ended the period with a closing occupancy of 78.8%.
The average rate for the seven-month period was €19.18 and €18.79 for the Netherlands and Belgium respectively.
25
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Financial review continued
Analysis of cost base
Cost of sales
The table below details the key movements in cost of sales between 2021 and 2022.
Statutory cost of sales
Adjusted for:
– Depreciation
– Variable lease payments
Underlying cost of sales
Underlying cost of sales for FY2021
– New developments cost of sales
Underlying cost of sales for FY2021 (like-for-like)
– Volume related cost of sales
– Employee remuneration, recruitment and training
– Facilities and rates
– Enquiry generation
Underlying cost of sales for FY2022 (like-for-like; CER)
– New developments cost of sales
Underlying cost of sales for FY2022 (CER)
– Foreign exchange
Underlying cost of sales for FY2022
2022
£’m
(63.0)
1.0
0.3
(61.7)
2021
£’m
(56.9)
1.0
0.4
(55.5)
(55.5)
0.7
(54.8)
(1.0)
(0.2)
(2.0)
(0.3)
(58.3)
(3.6)
(61.9)
0.2
(61.7)
In order to arrive at underlying cost of sales, adjustments are made to remove the impact of depreciation, which does not form part of Underlying
EBITDA, and variable lease payments, which forms part of our leasehold costs in the presentation of our underlying income statement.
Underlying cost of sales increased by £6.2 million in the year, from £55.5 million in 2021 to £61.7 million in 2022. On a like-for-like basis and
at constant exchange rates, cost of sales increased by £3.5 million or 6.4%, with a £2.0 million increase in facilities and business rates due
to business rates reviews, and increases in utilities and store maintenance charges as well as a £1.0 million increase in volume related costs
of sales attributed to the stronger store performance. The investment in marketing during the year represented 3.6% of revenue (FY2021: 3.7%).
Administrative expenses
The table below reconciles reported administrative expenses to underlying administrative expenses and details the key movements in underlying
administrative expenses between 2021 and 2022.
Statutory administrative expenses
Adjusted for:
– Share-based payments
– Exceptional items
Underlying administrative expenses
Underlying administrative expenses for FY2021
– New developments administration costs
Underlying administrative expenses for FY2021 (like-for-like)
– Employee remuneration
– Other employee related costs
Underlying administrative expenses for FY2022 (like-for-like; CER)
– New developments administration costs
Underlying administrative expenses for FY2022 (CER)
– Foreign exchange
Underlying administrative expenses for FY2022
26
2022
£’m
(27.1)
11.2
0.1
(15.8)
2021
£’m
(34.0)
18.3
1.9
(13.8)
(13.8)
0.1
(13.7)
(0.7)
(0.4)
(14.8)
(1.1)
(15.9)
0.1
(15.8)
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT In order to arrive at underlying administrative expenses, adjustments are made to remove the impact of exceptional items, share-based payments
and other non-underlying items. The decrease in share-based payments relates to the prior year recognising full performance of the Earnings per
Share criteria of the five-year scheme, which was measured over a five-year period from 1 November 2016 to 31 October 2021. As the performance
period completed in 2021, measurement of this performance criteria and the associated National Insurance charge was able to be measured
accurately and in full. The current year charge reflects the charge associated with the remaining schemes.
Underlying administrative expenses increased by £2.0 million in the year, from £13.8 million in 2021 to £15.8 million in 2022. Like-for-like
administrative expenses at constant exchange rates grew by 8.0% to £14.8 million. This is the result of year-on-year increases in employee
remuneration and other employee related costs, which are associated with the strong business performance.
Therefore, total underlying costs (cost of sales plus administrative expenses) on a like-for-like basis and at constant exchange rates have
increased by £4.6 million to £73.1 million (FY2021: £68.5 million).
Exceptional items and other exceptional gains
Included within exceptional items and other exceptional gains of £10.7 million are £5.5 million relating to the valuation gain of Safestore’s 20%
investment in the Joint Venture and £5.1 million relating to the profit on the sale of the Nanterre land in Paris in November 2021.
In France, the basis on which property taxes have been assessed has been challenged by the tax authority for financial years 2011 onwards.
In March 2021 the French Court of Appeal delivered a judgement, which resulted in a partial success for the Group; however, a further appeal
has been lodged with the French Supreme Court against those decisions on which the Group was unsuccessful. A provision is included in the
consolidated financial accounts of £2.4 million at 31 October 2022 (31 October 2021: £2.1 million), to reflect the increased uncertainty surrounding
the likelihood of a successful outcome. Of the total provided, £0.3 million has been charged in relation to the year ended 31 October 2022 within
cost of sales (Underlying EBITDA) (31 October 2021: £0.2 million within cost of sales (Underlying EBITDA) and £1.9 million recorded as an
exceptional charge in respect of financial years 2012 to 2020).
It is possible that the French tax authority may appeal the decisions of the French Court of Appeal on which the Group was successful to
the French Supreme Court. The maximum potential exposure in relation to these issues at 31 October 2022 is £3.0 million (31 October 2021:
£2.7 million). No provision for any further potential exposure has been recorded in the consolidated financial statements since the Group
believes it is more likely than not that a successful outcome will be achieved, resulting in no additional liabilities.
Gain on investment properties
The gain on investment properties consists of the revaluation gains and losses with respect to investment properties under IAS 40 and the fair
value re-measurement of lease liabilities add-back and other items as detailed below.
Revaluation of investment properties
Revaluation of investment properties under construction
Fair value re-measurement of lease liabilities add-back
Statutory gain on investment properties
2022
£’m
394.1
(4.2)
(8.3)
381.6
2021
£’m
329.0
(0.5)
(7.4)
321.1
In the current financial year, the UK business contributed £299.8 million to the positive valuation movement, the Paris business contributed
£82.3 million, Spain contributing £1.6 million, with the remaining £6.2 million in Benelux. The gain on investment properties principally reflects
the continuing progress in the performance of the businesses, which has driven further positive changes in the cash flow metrics that are used
to assess the value of the store portfolio which are predominantly based on trading potential, underpinned by average rate, which has increased
by 8.5% to £29.25 in 2022 from £26.95 in 2021, capitalisation rates and stabilised occupancy.
Operating profit
Operating profit increased by £97.5 million from £417.0 million in 2021 to £514.5 million in 2022, comprising a £17.1 million increase in
Underlying EBITDA, a £61.4 million higher investment properties and investment properties under construction gain primarily due to significant
improvement in store performance and a reduction in the share-based payments charge of £7.1 million as well as other exceptional gains and
exceptional items of £10.7 million, of which £5.5 million relates to the valuation gain of Safestore’s 20% investment in the Joint Venture formed
in 2019 with Carlyle that arose on acquisition of the remaining 80%, with £5.1 million relating to the profit on the sale of the Nanterre land in
Paris in November 2021.
27
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Financial review continued
Net finance costs
Net finance costs include interest payable, interest on lease liabilities, fair value movements on derivatives, exchange gains or losses, unwinding
of discounts and exceptional refinancing costs. Net finance costs increased by £3.3 million in 2022 to £15.7 million from £12.4 million in 2021,
principally due to the increased interest charges associated with the USPP’s to fund the Group’s acquisition and development activity, offset by
the gains made on financial instruments.
Net bank interest payable
Amortisation of debt issuance costs on bank loans
Interest from loan to associates
Financial instruments income
Other interest received
Underlying finance charges
Interest on lease liabilities
Fair value movement on derivatives
Net exchange losses
Exceptional finance income
Net finance costs
2022
£’m
(11.9)
(0.5)
0.1
1.3
0.1
(10.9)
(5.0)
(0.3)
—
0.5
(15.7)
2021
£’m
(9.7)
(0.4)
0.1
0.5
—
(9.5)
(5.2)
2.9
(0.6)
—
(12.4)
Underlying finance charge
The underlying finance charge (net bank interest payable reflecting term loan, swap and USPP interest costs) increased by £1.4 million to
£10.9 million, principally reflecting the increased interest charge associated with the Group’s additional borrowings in the year, drawn to fund
the Group’s acquisition and development activity. The underlying finance charge represents the finance expense before exceptional items and
changes in fair value of derivatives, amortisation of debt issuance costs and interest on lease liabilities and is disclosed because management
reviews and monitors performance of the business on this basis.
Financial instruments income in the year of £1.3 million (FY2021: £0.5 million) related to the gains made on the expiration of average rate forwards
which matured in April 2022 and October 2022.
Based on the year-end drawn debt position the effective interest rate is analysed as follows:
UK Revolver
UK Revolver – non-utilisation
Euro Revolver
Euro Revolver – non-utilisation
US Private Placement 2024
US Private Placement 2026
US Private Placement 2026
US Private Placement 2027
US Private Placement 2028
US Private Placement 2028
US Private Placement 2029
US Private Placement 2029
US Private Placement 2029
US Private Placement 2031
US Private Placement 2033
Unamortised finance costs
Facility
£/€’m
£250.0
£174.0
€70.0
€40.0
€50.9
€70.0
£35.0
€74.1
£20.0
€29.0
£50.5
£30.0
€105.0
£80.0
€29.0
—
Drawn
£’m
£76.0
—
£25.8
—
£43.8
£60.2
£35.0
£63.7
£20.0
£24.9
£50.5
£30.0
£90.3
£80.0
£24.9
(£1.3)
Hedged
£’m
£55.0
—
—
—
£43.8
£60.2
£35.0
£63.7
£20.0
£24.9
£50.5
£30.0
£90.3
£80.0
£24.9
—
Total
£833.5
£623.8
£578.3
Hedged
%
72%
—
—
—
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
—
93%
Bank
margin
%
1.25%
0.50%
1.25%
0.50%
1.59%
1.26%
2.59%
2.00%
1.96%
0.93%
2.92%
2.69%
2.45%
2.39%
1.42%
—
Hedged
rate
%
0.69%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Floating
rate
%
2.19%
—
1.38%
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
rate
%
2.35%
0.50%
2.63%
0.50%
1.59%
1.26%
2.59%
2.00%
1.96%
0.93%
2.92%
2.69%
2.45%
2.39%
1.42%
—
2.41%
As at 31 October 2022, £76.0 million of the £250.0 million UK Revolver and €30.0 million (£25.8 million) of the €70.0 million Euro Revolver were
drawn. The drawn amounts attract a bank margin of 1.25%, and the Group pays a non-utilisation fee of 0.50% on the undrawn balances of
£174.0 million and €40.0 million.
The Group has £55.0 million of interest rate swaps in place to June 2023, swapping SONIA at a weighted average effective rate of 0.69%.
These interest rate swaps are in place to hedge the UK Revolver floating SONIA rate.
On 21 April 2022, Safestore extended its borrowing facilities with the issuance of €105.0 million denominated US Private Placement (“USPP”).
Notes with the following coupon and tenor:
• €105.0 million seven-year notes at a coupon of 2.45% (credit spread of 120 bps)
28
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT The funds were received in April 2022 and were used to pay down Revolving Credit Facilities (“RCF’s”) utilised to acquire the remaining 80%
owned by Carlyle in the Joint Venture formed in 2019. The Joint Venture was set up in 2019 to acquire and develop assets in the Netherlands
and Belgium in order to leverage Safestore’s operating platform outside our core markets. Since then, the Joint Venture has grown to a portfolio
of 600,000 sq ft of MLA which is currently 78.8% occupied.
The 2024, 2026, 2027, 2028, 2029 and 2033 US Private Placement Notes are denominated in Euros and attract fixed interest rates of 1.59%
(on €50.9 million), 1.26% (on €70.0 million), 2.00% (on €74.1 million), 0.93% (on €29.0 million), 2.45% (on €105.0 million) and 1.42% (on €29.0 million)
respectively. The Euro denominated borrowings provide a natural hedge against the Group’s investment in the Paris and Spain businesses.
The 2026 (£35.0 million), 2028 (£20.0 million), 2029 (£50.5 million), 2029 (£30.0 million) and 2031 (£80.0 million) US Private Placement Notes are
denominated in Sterling and attract a fixed interest rate of 2.59%, 1.96%, 2.92%, 2.69% and 2.39% respectively.
As a result of the hedging arrangements and fixed interest loan notes, effectively 93% of the Group’s drawn debt is at fixed rates of interest.
Overall, the Group has an effective interest rate on its borrowings of 2.41% as at 31 October 2022, consistent with 2.36% at the previous year end.
On 11 November 2022, the Group completed the refinancing of its RCF’s which were due to expire in June 2023.
The previous £250.0 million Sterling and €70.0 million Euro RCF’s have been replaced with a single multi-currency £400 million facility. In addition,
a further £100 million uncommitted accordion facility is incorporated in the facility agreement. The facility is for a four-year term with two one-year
extension options exercisable after the first and second years of the agreement.
The Group will pay interest at a margin of 1.25% plus SONIA or EURIBOR depending on whether the borrowings are drawn in Sterling or Euros.
The margin is at the same level as the previous facility agreements.
Non-underlying finance charge
Interest on lease liabilities was £5.0 million (FY2021: £5.2 million) and reflects part of the leasehold rent costs. The balance of the leasehold
payment is charged through the gain or loss on investment properties line and variable lease payments in the income statement. Overall, the
leasehold rent costs charge increased from £13.0 million in 2021 to £13.6 million in 2022, principally reflecting the increase rent costs across the
portfolio in addition to the Netherlands leaseholds now forming part of the Group.
A net loss of £0.3 million was recognised on fair valuation of derivatives (FY2021: net gain of £2.9 million). The prior year gain was primarily driven
by the movement in the unexpired interest rate swaps year-on-year due to future market expectations around rising inflation and interest rates.
The Group undertakes net investment hedge accounting for its Euro denominated loan notes.
Tax
The tax charge for the year is analysed below:
Underlying current tax
Current year – exceptional
Current tax charge
Tax on investment properties movement
Tax on revaluation of interest rate swaps
Other
Deferred tax charge
Net tax charge
2022
£’m
(5.2)
(0.9)
(6.1)
(29.9)
—
0.1
(29.8)
(35.9)
2021
£’m
(5.5)
—
(5.5)
(17.8)
(0.1)
0.8
(17.1)
(22.6)
The net income tax charge for the year is £35.9 million (FY2021: £22.6 million), which relates solely to the Group’s non-UK European businesses.
In the UK, the Group is a REIT and benefits from a zero rate of tax on its qualifying earnings. The underlying current tax charge relating to the
European businesses amounted to £5.2 million (FY2021: £5.5 million), calculated by applying the effective overall underlying tax rate of 20.9%
to the underlying profits arising earned by the non-UK businesses.
The deferred tax charge relating to Paris, Spain and Benelux was £29.8 million (FY2021: Paris and Spain £17.1 million charge).
In 2022, an exceptional current year tax charge of £0.9 million arose on the disposal of the Nanterre land.
All deferred tax movements are non-underlying. The deferred tax impact of the revaluation gain on investment properties was a charge
of £29.9 million (FY2021: £17.8 million charge).
29
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Financial review continued
Earnings per Share
As a result of the movements explained above, profit after tax for 2022 was £462.9 million as compared with £382.0 million in 2021. Basic EPS
was 219.5 pence (FY2021: 181.2 pence) and diluted EPS was 212.4 pence (FY2021: 176.4 pence).
Adjusted Diluted EPRA EPS is based on the European Public Real Estate Association’s definition of earnings and is defined as profit or loss for
the period after tax but excluding corporate transaction costs, change in fair value of derivatives, gain/loss on investment properties and the
associated tax impacts. The Company then makes further adjustments for the impact of exceptional items, IFRS 2 share-based payment
charges, exceptional tax items and deferred tax charges. This adjusted earnings is divided by the diluted number of shares. The IFRS 2 cost is
excluded as it is written back to distributable reserves and is a non-cash item (with the exception of the associated National Insurance element).
Therefore, neither the Company’s ability to distribute nor pay dividends is impacted (with the exception of the associated National Insurance
element). The financial statements disclose earnings on a statutory, EPRA and Adjusted Diluted EPRA basis and provide a full reconciliation
of the differences in the financial year in which any Long Term Incentive Plan (“LTIP”) awards may vest.
Management introduced Adjusted Diluted EPRA EPS as a measure of EPS following the implementation of the Group’s LTIP schemes.
Management considers that the real cost to existing shareholders is the dilution that they will experience from the LTIP schemes; therefore,
earnings has been adjusted for the IFRS 2 share-based payment charge, and the number of shares used in the EPS calculation has been
adjusted for the dilutive effect of the LTIP scheme.
The Group has exposure to the movement in the Euro/Sterling exchange rate. Based on the FY2022 results, for every 10 cents variance to the
average exchange rate of 1.178, there would be an impact of £1.5 million to Adjusted EPRA Earnings.
Adjusted Diluted EPRA EPS for the year was 47.5 pence (FY2021: 40.5 pence), calculated on a pro forma basis, as if the dilutive LTIP shares were
in issue throughout both the current and prior years, as follows:
Basic earnings
Adjustments:
Gain on investment properties
Exceptional items
Other exceptional gains
Exceptional finance income
Net exchange losses
Change in fair value of derivatives
Tax on adjustments/exceptional tax
Adjusted
EPRA adjusted:
Fair value re-measurement of lease liabilities
add-back
Tax on lease liabilities add-back adjustment
EPRA basic EPS
Share-based payments charge
Dilutive shares
Adjusted Diluted EPRA EPS
Earnings
£’m
462.9
(381.6)
0.1
(10.8)
(0.5)
—
0.3
29.7
2022
Shares
million
210.9
—
—
—
—
—
—
—
100.1
210.9
(8.3)
1.0
92.8
11.2
—
104.0
—
—
210.9
—
8.0
218.9
Pence
per share
219.5
Earnings
£’m
382.0
(180.9)
(321.1)
—
(5.1)
(0.2)
—
0.1
14.1
47.5
(3.9)
0.5
44.1
5.3
(1.9)
47.5
1.9
—
—
0.6
(2.9)
16.2
76.7
(7.4)
0.9
70.2
18.3
—
88.5
2021
Shares
million
210.8
—
—
—
—
—
—
—
Pence
per share
181.2
(152.3)
0.9
—
—
0.3
(1.4)
7.7
210.8
36.4
—
—
210.8
—
7.5
218.3
(3.5)
0.4
33.3
8.7
(1.5)
40.5
Dividends
The Directors are recommending a final dividend of 20.4 pence (FY2021: 17.6 pence) which shareholders will be asked to approve at the
Company’s Annual General Meeting on 15 March 2023. If approved by shareholders, the final dividend will be payable on 7 April 2023 to
shareholders on the register at close of business on 3 March 2023.
Reflective of the Group’s improved performance, the Group’s full year dividend of 29.8 pence is 18.7% up on the prior year dividend of
25.1 pence. The Property Income Distribution (“PID”) element of the full year dividend is 22.75 pence (FY2021: 25.1 pence).
30
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Property valuation and Net Asset Value (“NAV”)
Cushman & Wakefield Debenham Tie Leung Limited LLP (“C&W”) has valued the Group’s property portfolio. As at 31 October 2022, the total
value of the Group’s property portfolio was £2,457.8 million (excluding investment properties under construction of £94.5 million and net of lease
liabilities of £95.1 million). This represents an increase of £576.0 million compared with the £1,881.8 million valuation as at 31 October 2021.
A reconciliation of the movement is set out below:
Value as at 1 November 2021
Currency translation movement
Additions
Acquisition of subsidiaries
Disposals
Reclassifications
Revaluation
UK
£’m
Paris
£’m
1,416.2
440.4
—
19.7
2.6
(6.2)
16.5
308.0
9.1
6.3
—
—
—
82.3
Spain
£’m
25.2
0.4
0.1
—
—
—
1.6
Benelux
£’m
Total
£’m
Paris
€’m
— 1,881.8
521.6
2.1
5.7
125.6
—
—
2.2
11.6
31.8
128.2
(6.2)
16.5
394.1
—
7.4
—
—
—
96.9
Spain
€’m
29.8
—
0.1
—
—
—
2.0
Benelux
€’m
—
—
6.8
148.4
—
—
2.5
Value at 31 October 2022
1,756.8
538.1
27.3
135.6
2,457.8
625.9
31.9
157.7
As described in note 13 of the financial statements, the valuation is based on a discounted cash flow of the net operating income over a ten-year
period and a notional sale of the asset at the end of the tenth year. Accordingly, the gain on investment properties principally reflects the
continuing progress in the performance of the business and the strong underlying trading of the store, underpinned by average rate which has
increased by 8.5% to £29.25 in 2022 from £26.95 in 2021 with a slight reduction in occupancy, which is down 2.4ppts to 82.1% in 2022 from
84.5% in 2021, capitalisation rates and stabilised occupancy, as explained further below.
The exchange rate at 31 October 2022 was €1.16:£1 compared with €1.18:£1 at 31 October 2021. This movement in the foreign exchange rate
has resulted in a £11.6 million favourable currency translation movement in the year. This has slightly improved the Group Net Asset Value (“NAV”)
but had no impact on the loan-to-value (“LTV”) covenant as the assets in Paris are tested in Euros.
The Group’s property portfolio valuation excluding investment properties under construction has increased by £576.0 million from the valuation
of £1,881.8 million at 31 October 2021. This reflects the gain on valuation of £394.1 million, which is explained above, plus £128.2 million relating
to the acquisition of the remaining 80% in the Joint Venture and the UK Christchurch store as well as £42.1 million relating to additions, store
refurbishments, reclassifications and disposals together with £11.6 million of favourable foreign exchange movements on the translation of the
European portfolios.
The value of the UK investment property portfolio including investment properties under construction has increased by £340.7 million (comprising
£324.1 million in investment properties and £16.6 million in investment properties under construction) compared with 31 October 2021. This includes
a £299.8 million valuation gain, £44.5 million of capital additions, £2.6 million of acquisitions, offset by £6.2 million of disposals.
In Paris, the value of the property portfolio including investment properties under construction increased by €104.3 million, of which €96.9 million
was valuation gain and capital additions were €7.4 million. The net increase in investment properties when translated into Sterling amounted to
£97.7 million, reflecting the foreign exchange impact described above.
In Spain, the value of the property portfolio including investment properties under construction increased by €26.9 million, of which €2.0 million
was valuation gain and capital additions were €24.9 million. The net increase in investment properties including investment properties under
construction when translated into Sterling amounted to £23.6 million, reflecting the foreign exchange impact described above.
In Benelux, the value of the property portfolio including investment properties under construction was £141.1 million.
Our pipeline of future development opportunities remains strong and gives us further confidence in our future growth plans, comprising eleven
stores or store extensions in the UK, seven in France, six in Spain, and five in Benelux.
The Group’s freehold exit yield for the valuation at 31 October 2022 reduced to 5.66%, from 6.03% at 31 October 2021, and the weighted
average annual discount rate for the whole portfolio has reduced from 8.72% at 31 October 2021 to 8.49% at 31 October 2022.
C&W’s valuation report confirms that the properties have been valued individually but that if the portfolio were to be sold as a single lot or in
selected groups of properties, the total value could be different. C&W states that in current market conditions it is of the view that there could
be a material portfolio premium.
EPRA’s Best Practices Recommendations guidelines for Net Asset Value (“NAV”) metrics are EPRA Net Tangible Assets (“NTA”), EPRA Net
Reinstatement Value (“NRV”) and EPRA Net Disposal Value (“NDV”). Safestore considers EPRA NTA to be most consistent with the nature of the
Group’s business.
The EPRA Basic NTA per Share, as reconciled to IFRS net assets per share in note 15 of the financial statements, was 908 pence at 31 October 2022
(FY2021: 697 pence), up 30.3% since 31 October 2021, and the IFRS reported diluted NAV per share was 820 pence (FY2021: 635 pence),
reflecting a £418.5 million increase in reported net assets during the year.
31
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Financial review continued
Gearing and capital structure
The Group’s borrowings comprise revolving bank borrowing facilities in the UK and France and US Private Placement Notes.
Net debt (including lease liabilities and cash) stood at £698.3 million at 31 October 2022, an increase of £174.5 million from the 2021 position
of £523.8 million, reflecting funding for the continued expansion of the Group portfolio. Total capital (net debt plus equity) increased from £1,898.7 million
at 31 October 2021 to £2,491.7 million at 31 October 2022. The net impact is that the gearing ratio has increased from 27.6% to 28.0% in the year.
Management also measures gearing with reference to its loan-to-value (“LTV”) ratio defined as gross debt (excluding lease liabilities) as a
proportion of the valuation of investment properties and investment properties under construction (excluding lease liabilities). At 31 October 2022
the Group LTV ratio was 24.4% as compared to 24.9% at 31 October 2021. It should be noted, under the new facility, signed 11 November 2022,
LTV is to be calculated against net debt which equates to an LTV of 23.6%. The Board considers the current level of gearing is appropriate for
the business to enable the Group to increase returns on equity, maintain financial flexibility and achieve our medium term strategic objectives.
Borrowings at 31 October 2022
As at 31 October 2022, £76.0 million of the £250.0 million UK Revolver and €30.0 million (£25.8 million) of the €70.0 million Euro Revolver
were drawn. Including the US Private Placement debt of €358.0 million (£307.8 million) and £215.5 million, the Group’s borrowings totalled
£623.8 million (after adjustment for unamortised finance costs).
As at 31 October 2022, the weighted average remaining term for the Group’s available borrowing facilities is 4.0 years (FY2021: 4.6 years). If
we take into consideration the new financing completed on 11 November 2022, with a four-year term to November 2026, the weighted average
remaining term for the Group’s available borrowing facilities is 5.1 years.
Borrowings under the existing loan facilities are subject to certain financial covenants. The UK bank facilities and the US Private Placement share
interest cover and LTV covenants. The interest cover requirement of EBITDA: interest is 2.4:1, where it will remain until the end of the facilities’
terms. Interest cover for the year ended 31 October 2022 is 11.4x (FY2021: 10.5x).
The LTV covenant is 60% in both the UK and France under the current facility. As at 31 October 2022, there is significant headroom in both
the UK LTV and the French LTV covenant calculations.
The Group is in compliance with its covenants at 31 October 2022 and, based on forecast projections, is expected to be in compliance for
a period in excess of twelve months from the date of this report.
Cash flow
The table below sets out the underlying cash flow of the business in 2022 and 2021. For statutory reporting purposes, leasehold costs cash
flows are allocated between finance costs, principal repayments and variable lease payments. However, management considers a presentation
of cash flows that reflects leasehold costs as a single line item to be representative of the underlying cash flow performance of the business.
Underlying EBITDA
Working capital/exceptionals/other
Adjusted operating cash inflow
Interest payments
Leasehold rent payments
Tax payments
Free cash flow (before investing and financing activities)
Acquisition of subsidiary, net of cash acquired
Loan to associates
Investment in associates
Capital expenditure – investment properties
Capital expenditure – property, plant and equipment
Net proceeds from disposal of land
Net proceeds from disposal of investment properties
Proceeds from disposal – property, plant and equipment
Net cash flow after investing activities
Issue of share capital
Dividends paid
Net drawdown of borrowings
Debt issuance costs
Financial instruments
Swap termination
Net (decrease)/increase in cash
Note
Free cash flow is a non-GAAP measure, defined as cash flow before investing and financing activities but after leasehold rent payments.
32
2022
£’m
135.1
(2.7)
132.4
(11.8)
(13.6)
(5.6)
101.4
(111.5)
—
(0.8)
(95.2)
(1.0)
1.0
6.4
0.2
(99.5)
0.5
(56.9)
132.1
(0.1)
1.3
0.5
(22.1)
2021
£’m
118.0
(2.1)
115.9
(8.0)
(13.0)
(5.4)
89.5
—
(0.9)
(1.9)
(62.4)
(1.0)
—
—
—
23.3
0.7
(42.6)
43.8
(0.7)
—
—
24.5
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT The first table below reconciles free cash flow (before investing and financing activities) in the table above to net cash inflow from operating
activities in the consolidated cash flow statement. The second table below reconciles adjusted net cash flow after investing activities in the table
above to the consolidated cash flow statement. The third table below reconciles adjusted operating cash inflow to the cash generated from
operations in the consolidated cash flow statement.
Free cash flow (before investing and financing activities)
Add back: principal payment of lease liabilities
Net cash flow from operating activities
From table above:
Adjusted net cash flow after investing activities
Add back: principal payment of lease liabilities
Net cash flow after investing activities
From consolidated cash flow:
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash flow after investing activities
Adjusted operating cash inflow
Cash outflow on variable lease payments
Cash flow from operations
2022
£’m
101.4
8.4
109.8
2022
£’m
(99.5)
8.4
(91.1)
109.8
(200.9)
(91.1)
2022
£’m
132.4
(0.2)
132.2
2021
£’m
89.5
7.5
97.0
2021
£’m
23.3
7.5
30.8
97.0
(66.2)
30.8
2021
£’m
115.9
(0.3)
115.6
Adjusted operating cash flow increased by £16.5 million in the year, principally due to the £17.1 million improvement in Underlying EBITDA.
Working capital, exceptional items and other movements resulted in a net £2.7 million outflow (FY2021: £2.1 million outflow), principally relating
to movements in trade receivables and trade payables.
Free cash flow (before investing and financing activities) grew by 13.3% to £101.4 million (FY2021: £89.5 million). The free cash flow benefited
from the increase in Underlying EBITDA and the increase in adjusted operating cash flow.
Investing activities experienced a net outflow of £200.9 million (FY2021: £66.2 million outflow), which included £111.5 million relating to the
acquisition of the remaining 80% in the Joint Venture as well as the acquisition of the new site at Christchurch and £95.2 million of capital expenditure
on our investment property portfolio as well as cash generated from the sale of our Birmingham – Digbeth store. Of the £95.2 million capital
expenditure on investment properties, £60.2 million related to the UK, £6.4 million related to France, £21.3 million related to Spain and £7.3 million
related to Benelux. Of the £95.2 million, £7.5 million related to maintenance, £68.4 million to new stores and £19.3 million to developments and
property, plant and equipment.
Adjusted financing activities generated a net cash inflow of £77.4 million (FY2021: £1.2 million inflow). Dividend payments totalled £56.9 million
(FY2021: £42.6 million). The net drawdown of borrowings was £132.1 million (FY2021: £43.8 million), in order to finance the acquisition of the
remaining 80% in the Joint Venture as well as development and pipeline stores.
The strategic report, including pages 5 to 73, was approved by a duly authorised Committee of the Board of Directors on 16 January 2023
and signed on its behalf by:
Andy Jones
Chief Financial Officer
16 January 2023
33
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Engaging with our stakeholders and our Section 172(1) statement
Our purpose: to add stakeholder value
by developing profitable and sustainable
spaces that allow individuals, businesses,
and local communities to thrive
This section provides further insight into how we engage with
key stakeholders. Building and maintaining effective stakeholder
relationships informs how we create value in the long term.
Our formal Section 172(1) statement is set out on page 36.
The principles that underpin Section 172 of the Companies Act 2006
are considered by the Board within its decision-making processes. Our
Section 172 statement on page 36 provides examples of Board decisions
taken during the year. These examples seek to demonstrate how Board
decision-making aligns to our strategic priorities and purpose and are
informed by stakeholder considerations and expectations. The Section
172 principles are part of our culture, are embedded in all that we do
and are strengthened by our Board setting the right tone from the top.
The Company seeks to act fairly with its stakeholders and maintain its
reputation for high standards of business and ethical conduct which
contribute to Safestore’s success in the long term. Pages 34 to 36 are
incorporated by cross-reference into our governance report.
Engaging with our stakeholders
The Board is committed to effective engagement with all our key
stakeholders. The Board has identified a number of key stakeholders
which it seeks to engage with on a regular basis. A summary of our key
stakeholders, why they are important to us, what matters to them, and
where further information can be found summarising how we engage
with stakeholders, is set out below.
What matters to our key stakeholders is determined by the Board and
by management and has been informed by feedback received from the
ongoing engagement process itself and from a deep understanding
of our operating model. How we engage is led by either the Board or
by management. Not all information is reported directly to the Board,
however it informs management decisions and the Board continues to
receive regular stakeholder updates at Board meetings and a summary
of these updates are set out in the key matters considered by the Board
during the year on page 80.
Key stakeholders
Why our key stakeholders are important
to us and what matters to them
Further information: how the Board:
• engages with our key stakeholders; and
• measures the outcome of our engagement
Our people
Why our people are important to Safestore:
• Our people are the foundation of our customer-focused
culture and deliver our strategy and operate our business
model. Our people drive and deliver our strategic priorities.
For further information on how we engage with
our people see:
• Directors’ remuneration report – Communication with
colleagues on page 103.
What matters to our people includes:
• Fair pay and reward.
• Strategic report – Our people section on pages 9 to 10.
• Sustainability report – Our people section on
• Health and wellbeing and a safe working environment.
pages 49 to 53.
• Colleague engagement.
• Open and honest communication.
• Training and development opportunities and an opportunity
for our colleagues to reach their full potential.
• A diverse and inclusive workplace.
Safestore measures the outcome of
our engagement by:
• Colleague retention, particularly within its senior team.
• Feedback from our ‘Make the Difference’ people forum.
• High colleague response rate to the Investors in People
(“IIP”) 2021 accreditation process.
• The adoption of our wellbeing initiatives.
• Completion of our comprehensive learning and
development tools.
Why our customers are important to Safestore:
• Our customers are the mainstay of our business and their
views and their satisfaction are important to us and drive
our financial performance.
For further information on how we engage with
our customers:
• Strategic report – Our customer section on page 11.
• Sustainability report – Our customer section on
What matters to our customers includes:
• Great customer service and the provision of safe and
secure storage sites.
• Well-located and accessible stores.
• Expertise in providing self storage solutions and
understanding our customers’ requirements.
pages 54 to 55.
Safestore measures the outcome of our
engagement by:
• Receiving customer reviews and feedback collected from
our website, third party platforms and social media
channels as explained on page 9 and on page 55.
• Reliable communication channels, which include face-to-
face communication in store, a Customer Support Centre
and online communications via our website, email and social
media channels, as well as through our LiveChat service.
• Customer occupancy rates – see pages 19 to 21.
• External recognition and awards. In February 2022,
Safestore won the Feefo Platinum Trusted Service Award
for the third time.
• Flexible contractual arrangements.
Our customers
34
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Key stakeholders
Why our key stakeholders are important
to us and what matters to them
Further information: how the Board:
• engages with our key stakeholders; and
• measures the outcome of our engagement
Why our shareholders and investors are important
to Safestore:
• A strong and flexible capital structure is fundamental
For further information on how we engage with
our shareholders and investors:
• Governance report – Investor relations and Shareholder
Our
shareholders
and investors
Many of our
colleagues are
shareholders.
to our strategy.
What matters to our shareholders and
investors includes:
• That the Company maximises long term value,
which means:
• Sustainable current and future financial performance
and returns.
• A clear strategy and business model.
• Strong leadership.
• Maintaining our reputation.
• Managing and reporting our ESG performance with clear
and transparent disclosures.
and Investor Engagement on page 82.
• Directors’ remuneration report on page 103.
How we measure the outcome of our engagement:
• Safestore was shortlisted in The Investor Relations
Society Best Practice Awards 2022 in the Best Overall
IR Company category. Safestore was nominated
for this award by the external analysts and the
investor community.
Our partners
These include our
Joint Venture partner,
Carlyle, our landlords
at our leasehold sites,
our contractors and
our suppliers of goods
and services.
Our
communities
Our
environment
Why our partners are important to Safestore:
• Strong, stable and long term relationships support
the Group in delivering its strategy, by optimising and
managing our property portfolio.
For further information on how we engage with
our partners:
• Strategic report – Our communities section on page 11.
• Regular meetings and communication with our partners.
What matters to our partners includes:
• Building strong relationships.
• Quarterly meetings with our construction
management partner.
• Maintaining sustainable business practices.
• Supplier forums held bi-annually, which facilitate an open
• Our current and future financial performance.
• Our operational excellence.
• Clear communication, fair engagement and
prompt payment.
• Corporate governance.
Why our communities are important to Safestore:
• Safestore is committed to making a positive contribution
within the local communities around its stores. We are keen
to deliver long term benefits to society and the
local economy consistent with our alignment with the
Sustainable Development Goals and our
sustainability strategy.
What matters to our communities:
• That our business operations seek to minimise any negative
impact and, any local disruption, on our local communities.
• Create local employment opportunities.
• Support community projects and providing support to local
and national charities.
exchange of feedback.
How we measure the outcome of our engagement:
• The establishment of successful long term relationships
with our partners.
For further information on how we engage with
our communities:
• ESG strategy – On page 11.
• Sustainability report – Our communities on
pages 55 to 57.
How we measure the outcome of our engagement:
• Space occupied by local charities on pages 11 and 55.
Why our environment is important to Safestore:
• Safestore’s long-standing commitment is to provide both
a long term sustainable investment and a pleasant and safe
environment for our customers and colleagues and the
delivery of our sustainability strategy.
For further information on how we engage with
our environment:
• ESG strategy – On page 11.
• Sustainability report – Our environment on
pages 58 to 61.
To protect the planet from our activities means:
• Awareness of the environmental impact of our activities and
seeking to ensure that any negative impact is minimised.
• Reducing our absolute emissions and energy and
water consumption.
• Reducing waste, in particular plastic waste, and diverting
waste from landfill.
• Sustainable development of new stores.
How we measure the outcome of our engagement:
• By measuring our reductions in absolute emissions,
energy and water consumption and waste.
• External recognition and awards on pages 6, 11, and 46.
35
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Engaging with our stakeholders and our Section 172(1) statement
continued
Our Section 172(1) statement
The Board has regard to the matters set out in Section 172(1) of the Companies Act 2006 when performing its duties under Section 172 to act
in a way it considers, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole,
and in doing so have regard to a range of matters when making decisions for the long term. Key decisions and matters that are of strategic
importance to the Company are appropriately informed by Section 172 factors.
The following provides examples of decisions approved by the Board during the year ended 31 October 2022 and how Section 172 factors have
informed the Board’s decision-making. The summary seeks to provide further insight into how these decisions align to our purpose and strategic
priorities, and our stakeholders’ expectations, whilst also demonstrating Safestore’s corporate culture to act fairly and maintain its reputation for
high standards of business and ethical conduct. Taken together these factors enable the Group to progress towards its purpose and long term success.
The following Board decisions are aligned to our Purpose and our strategic priorities.
Our strategic
priority
Optimising trading
performance of
existing portfolio
Board decision
Investing in colleagues
Further investment in
our Store and Senior
Management Development
and Graduate Programmes.
Stakeholder factors – expectations and considerations –
that inform Board decision-making:
Further information
Our people: Provides personal development opportunities which will
improve colleague skills and prepare colleagues for more senior roles
within our business.
Our customers: Training and development programmes are aligned
to support our customers and meet their needs and expectations.
Our investors: The interests of our colleagues and our investors are
aligned, to deliver the long term success of the business.
Read more about the
Board’s decision to invest
in our colleagues: pages 9
to 10 and pages 52 to 53.
Read more about the
outcomes from investing
in colleagues: pages 9 to
10 and 51.
Our partners: A well-trained workforce is able to engage more
effectively with our partners.
Our communities: A well-trained and engaged workforce is
committed to our social initiatives.
Our environment: A well-trained and engaged workforce are
committed to our initiatives that support our climate goals.
Maintaining a
strong and flexible
capital structure
New $115 million
Shelf Facility
The new financing
arrangement aligns to our
strategic priorities and
provides the capital to invest
in new sustainable spaces.
The facility partially funded
the Group’s acquisition
of Carlyle’s 80% share of
the Benelux Joint Venture.
Our people: New property investments provide new development
opportunities for our colleagues with the opportunity to manage
assets in new geographies and adopt best practice across
the Group.
Our customers: Enables the Group to expand its services to new
customers in new geographies.
Our investors: The facility was arranged for a seven-year term at
an interest rate of 2.45% pa. Investors have the confidence that the
Group manages its debt structure efficiently, pursues high yielding
assets and minimises financing costs in line with the Group’s objectives.
Read more about the
Board’s decision to
arrange this new financing
facility: page 10.
Read more about the
outcomes of this financing
decision: page 21.
Our partners: Can be confident that Safestore has the financial
foundation for long term growth.
Our communities: Cost-effective financing enables local
communities to directly benefit from new stores.
Our environment: Financing at a cost-effective rate provides
financing for investment in store sustainability.
Our people: Clear Board decision-making enables colleagues to
deliver property developments in line with the Board’s disciplined and
strict investment criteria.
Our customers: Providing well-located and accessible stores.
Our investors: Expect a robust investment appraisal process
considering key risks and appropriate environmental and sustainable
development considerations.
Our partners: New property developments support stable and
long term relationships with our suppliers.
Our communities: Expect new stores to make a positive
contribution within their local communities.
Our environment: Enables the Group to develop sustainable
spaces that minimise the impact of our business operations on
our environment.
Read more about the
Board’s investment
decisions: pages 12
to 17, which include
a summary of our
property pipeline.
Read more about the
outcomes of the Boards
property investments:
pages 12 to 17.
Selective portfolio
management
and expansion
opportunities in
our existing markets
and in attractive
new geographies
Investment in our
property pipeline
Property acquisitions align
to our strategic priorities
and our purpose, to add
stakeholder value by
expanding our property
portfolio to provide
new profitable and
sustainable spaces.
36
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Principal risks
Strategic, operational, and emerging risks are
considered at every business level and are
assessed, discussed, and taken into account
when deciding upon future strategy, approving
transactions, and monitoring performance
Risks and risk management
The Board recognises that effective risk management requires
awareness and engagement at all levels of our organisation.
Executive Committee team members, and reported to the Board and
the Audit Committee. These risks cover all areas of the business, such
as finance, operations, investment, development, and corporate risks.
Risk management process
The Board is responsible for determining the nature of the risks the
Group faces, and for ensuring that appropriate mitigating actions are
in place to manage them in a manner that enables the Group to achieve
its strategic objectives.
Effective risk management requires awareness and engagement at all
levels of our organisation. It is for this reason that the risk management
process is incorporated into the day-to-day management of our
business, as well as being reflected in the Group’s core processes and
controls. The Board has defined the Group’s risk appetite and
oversees the risk management strategy and the effectiveness of the
Group’s internal control framework. Risks are considered at every
business level and are assessed, discussed and taken into account
when deciding upon future strategy, approving transactions and
monitoring performance.
Strategic risks are identified, assessed and managed by the Board, with
support from the Audit Committee, which in turn is supported by the
Risk Committee. Strategic risks are reviewed by the Audit Committee
to ensure they are valid and that they represent the key risks associated
with the current strategic direction of the Group. Operational risks
are identified, assessed and managed by the Risk Committee and
The risk management process commences with rigorous risk
identification sessions incorporating contributions from functional
managers and Executive Committee team members.
The output is reviewed and discussed by the Risk Committee,
supported by members of senior management from across the
business. The Board, supported by the Risk Committee, identifies and
prioritises the top business risks, with a focus on the identification of
key strategic, financial and operational risks. The potential impact and
likelihood of the risks occurring are determined, key risk mitigations are
identified and the current level of risk is assessed against the Board’s
risk appetite. These top business risks form the basis for the principal
risks and uncertainties detailed in the section below.
Principal risks and uncertainties
The principal risks and uncertainties described could have the future
potential to have the most significant effect on Safestore’s strategic objectives.
The key strategic and operational risks are monitored by the Board
and are defined as those which could prevent us from achieving our
business goals. Our current strategic and operational risks and key
mitigating actions are as follows:
Risk
Current mitigation activities
Developments since 2021
Strategic risks
The Group develops business plans
based on a wide range of variables.
Incorrect assumptions about the
economic environment, the self
storage market, or changes in the
needs of customers or the activities
of customers may adversely affect
the returns achieved by the Group,
potentially resulting in loss of
shareholder value or loss of the
Group’s status as the UK’s largest
self storage provider.
• The strategy development process draws
on internal and external analysis of the self
storage market, emerging customer trends
and a range of other factors.
• Continuing focus on yield-management with
regular review of demand levels and pricing
at each individual store.
• Continuing focus on building the Safestore
brand, acquisitions and development projects.
• The portfolio is geographically diversified
with performance monitoring covering
the personal and business customers
by segments.
• Detailed and comprehensive sensitivity and
scenario modelling taking into consideration
variable assumptions.
• Monitoring of key data points helping to
understand and minimise uncertainty
around the economic environment.
• Robust cost management.
The Group’s strategy is regularly reviewed through the
annual planning and budgeting process, and regular
reforecasts are prepared during the year.
The Group expanded its interests in the Benelux region
acquiring the remaining 80% of the equity owned by Carlyle
Europe Realty in the Joint Venture formed in 2019. The Joint
Venture was set up in 2019 to acquire and develop assets
in the Netherlands and Belgium in order to leverage
Safestore’s operating platform outside our core markets.
The acquisition of new stores together with new store
openings have been fully integrated in the Group’s
store portfolio.
The current macro-economic pressures arising from both
the supply chain issues associated with the rebound in
demand post global restrictions and the conflict in Ukraine
as well as the cost of living increases have caused
significant global uncertainty and the impact this will have
on economic growth is unclear. Both pressures have led to
higher inflation which has had a direct impact on consumer
spending that may impact the self storage market.
Therefore, the level of risk is considered to have increased
from the 31 October 2021 assessment.
37
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Principal risks continued
Principal risks and uncertainties continued
Risk
Current mitigation activities
Developments since 2021
Pandemic risk
The Covid-19 outbreak was an
unprecedented global event whose
impacts and duration are now more
widely understood. While the Group
now more clearly understands the
impacts of the pandemic on the
business, we need to be adaptable in
ensuring our business resilience and
maintaining our strong performance
against future pandemics.
• The resilient nature of the Group’s
businesses, our robust balance sheet, and
the market fundamentals that underpin our
businesses inherently provide mitigation
to the Group from pandemic risk.
• Our Group strategic plans and forecasts
provided an additional layer of mitigation
through the Covid-19 crisis.
• The Group continues to monitor and
assess the potential and realised impacts
of Covid-19.
The Covid-19 pandemic resulted in a significant reduction
in the economic growth of the UK and Europe in 2020
and 2021.
The implications of Covid-19 were thoroughly considered
with respect to the Group’s strategy through the annual
planning and budgeting process.
Pandemic risk will continue to be monitored through the
Group’s Risk framework.
The level of risk is considered to have reduced compared
to the 31 October 2021 assessment.
Finance risk
Lack of funding resulting in an inability
to meet business plans, satisfy
liabilities or a breach of covenants.
• Funding requirements for business plans
and the timing for commitments are
reviewed regularly as part of the monthly
management accounts.
• The Group manages liquidity in
accordance with Board-approved policies
designed to ensure that the Group has
adequate funds for its ongoing needs.
• The Board regularly monitors financial
covenant ratios and headroom.
• All of the Group’s banking facilities
now run to 30 June 2023. The US Private
Placement Notes mature in five, seven,
eight, ten and twelve years.
• New US Private Placement Notes secured
during the year, utilising the Shelf Facility,
with a maturity of seven years (2029).
Since the end of 2021, there have been significant opportunities
to invest in new stores, in both the UK and throughout Europe,
and as a result the Group secured additional US Private
Placement Note funding for €105 million, utilising the Shelf
Facility. The funds were received in April 2022 and were used to
pay down Revolving Credit Facilities (“RCF’s”) utilised to acquire
the remaining 80% of the equity owned by Carlyle Europe Realty.
Further, on 11 November 2022, the Group completed the
refinancing of its RCF’s which were due to expire in June
2023. The previous £250 million Sterling and €70 million
Euro RCF’s have been replaced
with a single multi-currency £400 million facility. In addition,
a further £100 million uncommitted accordion facility is
incorporated in the facility agreement. The facility is for
a four-year term with two one-year extension options
exercisable after the first and second years of the agreement.
The Group’s loan-to-value (“LTV”) ratio has broadly remained
constant during 2022, at 24.4% compared to 24.9% at the
prior financial year end.
Therefore, this risk continues to remain low and broadly
unchanged from the 31 October 2021 assessment.
Treasury risk
Adverse currency or interest rate
movements could see the cost of
debt rise, or impact the Sterling value
of income flows or investments.
• Guidelines are set for our exposure to fixed
and floating interest rates and use of
interest rate swaps to manage this risk.
Euro denominated borrowings continue to provide an effective,
natural hedge against the Euro denominated net assets of
our French and Spanish businesses.
• Foreign currency denominated assets
are financed by borrowings in the same
currency where appropriate.
Although the Bank of England base rate has increased,
with 93% of the Group’s debt at fixed rates, the Group’s
exposure to interest rate shocks is mitigated.
• The Group has entered into FX forwards
to reduce the volatility associated with the
translation risk of the Euro.
Although 93% of the Group’s debt is at fixed rates at
31 October 2022, removing much of the volatility of interest
rate fluctuations, as we move into 2023 and fund the new
store pipeline from incremental drawings on our Revolving
Credit Facility, we are likely to see modest increases in the
cost of debt. Therefore, this risk has increased from the
31 October 2021 assessment.
38
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Risk
Current mitigation activities
Developments since 2021
Property investment and
development risk
Acquisition and development of
properties that fail to meet performance
expectations, overexposure to
developments within a short timeframe
or the inability to find and open new
stores may have an adverse impact
on the portfolio valuation, resulting in
loss of shareholder value.
Corporate transactions may be at risk of
competition referral or post-transaction
legal or banking formalities.
Building cost inflation makes it difficult
to estimate accurate cost assumptions
when considering new investments
and developments.
Valuation risk
Value of our properties declining as
a result of external market or internal
management factors could result in
a breach of borrowing covenants.
In the absence of relevant
transactional evidence, valuations
can be inherently subjective leading
to a degree of uncertainty.
Occupancy risk
A potential loss of income and
increased vacancy due to falling
demand, oversupply or customer
default, which could also adversely
impact the portfolio valuation.
• Thorough due diligence is conducted and detailed
analysis is undertaken prior to Board approval for
property investment and development.
• Execution of targeted acquisitions and disposals.
• The Group’s overall exposure to developments is
monitored and controlled, with projects phased
to avoid over-commitment.
• The performance of individual properties
is benchmarked against target returns and
post-investment reviews are undertaken.
• Independent valuations are conducted regularly
by experienced, independent, professionally
qualified valuers.
• A diversified portfolio which is let to a large number
of customers helps to mitigate any negative impact
arising from changing conditions in the financial and
property markets.
• Headroom of LTV banking covenants is maintained
and reviewed.
• Current gearing levels provide sizeable headroom
on our portfolio valuation and mitigate the likelihood
of covenants being endangered.
• Personal and business customers cover a wide
range of segments, sectors and geographic
territories with limited exposure to any
single customer.
• Dedicated support for enquiry capture.
• Weekly monitoring of occupancy levels and
close management of stores.
• Management of pricing to stimulate demand,
when appropriate.
• Monitoring of reasons for customers vacating
and exit interviews conducted.
• Independent feedback facility for
customer experience.
• The like-for-like occupancy rate across the portfolio
has continued to grow partly due to flexibility offered
on deals by in-house marketing and the Customer
Support Centre.
Projects are not pursued when they fail
to meet our rigorous investment criteria, and
post-investment reviews indicate that sound and
appropriate investment decisions have been made.
The capital requirements of development projects
undertaken during the year have been carefully
forecasted and monitored, and we continue to
maintain significant capacity within our financing
arrangements.
We continue to pursue investment and development
opportunities, and consider our recent track record
to have been successful.
With the current economic uncertainty and
building cost inflation, the Board considers that
there has been an increase to this risk since the
31 October 2021 assessment.
The valuation of the Group’s portfolio has
continued to grow during the year, reflecting
both valuation gains arising from the increasing
profitability of our portfolio and additions to our
portfolio through corporate acquisitions and the
opening of new development stores.
However, the pressures which have led to higher
inflation which in turn is having a direct impact on
consumer spending may impact the self storage
market. Therefore, the key assumptions that
underpin the investment property valuation are
subject to greater volatility.
This has resulted in the level of risk increasing
with respect to valuation risk compared to the
31 October 2021 assessment.
The Covid-19 pandemic resulted in a contraction
in economic growth. However, over the past year
the economy has recovered and recent like-for-like
occupancy trends have been strong and the newly
opened stores are performing well.
Growth in our store portfolio diversifies the potential
impact of underperformance of an individual store.
With the economic outlook remaining uncertain,
with significant inflationary pressures in the
economy, and an associated impact on the cost
of living, this may lead to pressure on occupancy
in the next year.
Therefore, the risk has increased compared
with the assessment for the year ended
31 October 2021.
39
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Principal risks continued
Principal risks and uncertainties continued
Risk
Current mitigation activities
Developments since 2021
Real estate investment
trust (“REIT”) risk
Failure to comply with the REIT
legislation could expose the Group
to potential tax penalties or loss of
its REIT status.
• Internal monitoring procedures are in place to
ensure that the appropriate rules and legislation
are complied with and this is formally reported
to the Board.
Catastrophic event
A major catastrophic event could mean
that the Group is unable to carry out
its business for a sustained period or
health and safety issues put customers,
colleagues or property at risk. These
may result in reputational damage,
injury or property damage, or customer
compensation, causing a loss of
market share and/or income.
• Business continuity plans are in place and tested.
• Back-up systems at offsite locations and remote
working capabilities.
• Reviews and assessments are undertaken
periodically for enhancements to supplement
the existing compliant aspects of buildings
and processes.
• Monitoring and review by the Health and
Safety Committee.
The Group has remained compliant with all REIT
legislation throughout the year.
There has been no significant change to this
risk since the 31 October 2021 assessment.
In addition, we have also reviewed the recent
amendments to the UK REIT rules, taking
effect from 1 April 2022, which do not affect
this assessment.
Continuing focus from the Risk Committee,
with particular attention to specific issues.
The level of risk is considered similar to the
31 October 2021 assessment.
• Robust operational procedures, including health and
safety policies, and a specific focus on fire prevention
and safety procedures.
• Fire risk assessments in stores.
• Periodic security review of all systems supported
by external monitoring and penetration testing.
• Limited retention of customer data.
• Online colleague training modules.
• Monitoring and review by the Risk Committee.
• Project-specific steering committees to address
the implementation of new regulatory requirements.
• Liaison with relevant authorities and
trade associations.
• Where a store is at risk of compulsory purchase,
contingency plans are developed.
• Legal and professional advice.
• Online training modules.
The framework of tax controls has been reviewed
during the year, ensuring key tax risks are in line
with the Group’s obligations. All regulatory
compliance risks have been monitored during
the year.
The level of risk is considered similar to the
31 October 2021 assessment.
• Constant measuring and monitoring of our web
presence and ensuring compliance with rules
and regulations.
We continue to build functional expertise at Group
level in performance marketing, organic and local
searches and analytics.
• Market-leading website.
• Use of online techniques to drive brand visibility.
• Our pricing strategy monitors and adapts to
evolving customer behaviour.
The Group marketing forum continues to review
performance, market developments and our
ongoing improvement plan.
We have implemented a new value and quality
focused performance marketing strategy.
The level of risk is considered similar to the
31 October 2021 assessment.
Regulatory
compliance risk
The regulatory landscape for UK listed
companies is constantly developing
and becoming more demanding,
with new reporting and compliance
requirements arising frequently.
Non-compliance with these regulations
can lead to penalties, fines or
reputational damage.
Changes in tax regimes could impact
tax expenditure.
The Group is also subject to the risk
of compulsory purchases of property,
which could result in a loss of income
and impact the portfolio valuation.
Marketing risk
Our marketing strategy is critical to
the success of the business. This
includes maintaining web leadership
and our relationship with Google.
A lack of effective strategy would
result in loss of income and market
share and adversely impact the
portfolio valuation.
40
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Risk
Current mitigation activities
Developments since 2021
IT security/GDPR
Cyber-attacks and data security
breaches are becoming more
prominent with a greater level of
sophistication of attacks. This has
the potential to result in reputational
damage, fines or customer
compensation, causing a loss
of market share and income.
• Constant monitoring by the IT department and
consultation with specialist advice firms ensure
we have the most up-to-date security available.
• Twice yearly formal IT security review at Group
Audit Committee.
• We minimise the retention of customer and colleague
data in accordance with GDPR best practice.
• The policies and procedures are under constant
review and benchmarked against industry best
practice. These policies also include defend, detect
and response policies.
During 2021 and continuing into 2022, the
Group 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 replacement of components
such as firewalls to the latest technology
and specification.
The risk is not considered to have increased for
the Group nor is the Group considered to be at
a greater risk than the wider industry; however,
we consider that digital threats on the whole
are increasing.
The level of risk is considered similar to the
31 October 2021 assessment.
• Constant involvement by the Retail Service team to
engage with customers and address their concerns.
The Retail Service function always engages
with customers to resolve any issues or complaints.
• Constant training of the store teams to provide a
clear and concise communication strategy to customers.
• Our understanding of and engagement with all our
Our Sustainability report on pages 55 to 57 of
our Annual Report provides insight into how we
engage with our customers and the community.
stakeholders enables early visibility and identification
of stakeholder dissatisfaction.
The level of risk is considered similar to the
31 October 2021 assessment.
The level of risk is considered similar to the
31 October 2021 assessment.
• Large portfolio of potential new sites, prioritised
based on detailed research into areas most likely
to be successful.
• Strong operational knowledge and experience
in integrating new business.
• We have well documented procedures for the
integration of new acquisitions and a good track
record of recent success.
Brand and
Reputational risk
Our reputation, with Safestore’s
growth and the increased awareness
of self storage, including increased
demand driving higher prices, may
potentially attract greater social media
attention and scrutiny.
Geographical expansion
The Group has invested in expanding
the overseas operations of the
business through both subsidiaries
and the Joint Venture with Carlyle over
the last two years.
Suitable new sites may become more
difficult to find, with new sites failing
to achieve the required occupancy
and therefore deliver the required
sales and profitability within an
acceptable timeframe.
Integration of smaller acquisitions may
be challenging where the infrastructure
of the acquired business is not of
a level required by the Group.
41
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Principal risks continued
Principal risks and uncertainties continued
Risk
Current mitigation activities
Developments since 2021
Human Resource Risk
Fundamental to the Group’s success
are our people. As such, due to
market competitiveness and cost
of living increases we are exposed
to a risk of colleague turnover, and
subsequent loss of key personnel
and knowledge.
Climate change
related risk
The Group could be exposed to
climate change in the future through
the related transition and physical
risks. Physical risks could affect the
Group’s stores and may result in
higher maintenance, repair and
insurance costs. Failing to transition
to a low carbon economy may cause
an increase in taxation, decrease
in access to loan facilities and
reputational damage.
• The Group embarked upon its five-year strategic plan
in 2017 and during this period has had an efficient,
high performing and stable management team in
place. Our retention strategy aims to ensure we
achieve long term engagement, through a
combination of motivating factors.
• We continue to consult regularly with our
management team and monitor involuntary turnover.
We maintain adequate succession for our key talent.
• The Board and Remuneration Committee regularly
review colleague feedback provided through surveys,
our workforce advisory panel and CEO town hall
events. These mechanisms enable colleagues to
raise questions, discuss wider business issues and
provide feedback on subjects including wider
workforce remuneration.
• In early 2021, Safestore received the Investors in
People Platinum Accreditation. This demonstrates
that our colleagues are happy, healthy, safe and
engaged in supporting Safestore to deliver
sustainable business performance.
• The good working order of our stores is of critical
importance to our business model with our standing
commitment to provide long term sustainable real
estate investment.
• Physical climate risk of new developments is
evaluated as part of the investment appraisal process
for new developments.
• We have a proactive maintenance programme in
place with a regular programme of store inspection,
with our maintenance teams following sustainable
principles and, wherever practicable, using materials
that have recycled content or are from
sustainable sources.
• If we choose to develop a store in a high risk area,
we usually proactively deploy flood
mitigation measures.
• We are committed to building to a minimum
standard of BREEAM ‘Very Good’ on all of our
new store developments.
• All new store developments are registered with the
Considerate Constructors Scheme, which considers
the public, the workforce and the environment.
The level of risk is considered similar to the
31 October 2021 assessment.
As part of our journey to enhance our disclosures
along the recommendations of the TCFD, the
Group is continuing to develop its understanding
of its exposure and vulnerability to climate change
risk and the direct impact on the business. The
Group has identified that the exposure will be
isolated to specific areas of the business, such
as a specific store potentially flooding rather than
a multiple store event.
Further, our Sustainability Committee, with
representation from across all levels of the
business, continues to assess the impact of
climate change related risks and is working
with the Board and its suppliers to develop
an ambitious plan to reduce carbon emissions.
Our investment appraisal process has been
updated to consider climate change related
risks of new investments and will continue to
be evolved as we continue on the TCFD journey.
As we start to fully understand the exposure to
the Group, as outlined in TCFD statement, we
have a much clearer understanding of the risk.
Therefore, the level of risk is considered less
than the 31 October 2021 assessment and will
continued to be assessed to determine whether
this remains a principal risk throughout the
2022/23 financial year.
42
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Non-financial information statement
We aim to comply with the non-financial reporting requirements contained in Sections 414CA and 414CB of the Companies Act 2006. The below
table, and information it refers to, is intended to help stakeholders understand our position on key non-financial matters.
Reporting requirement
Some of our relevant policies
Where to read more about our policies
Environmental matters
Employees
Code of conduct (page 82)
Equality, diversity and inclusion policy
(page 50)
Bullying and harassment policy
Disciplinary and grievance policies
Health and safety manual (page 51)
Human rights
Code of conduct (page 82)
Equality, diversity and inclusion policy
(page 50)
Data privacy policies
Anti-slavery statement
Whistleblowing (‘Speak Out’) policy
(page 82)
IT policy
Social matters
The Company’s sustainability strategy has as one of its four ‘pillars’
to mitigate the environmental effects of its activities to reduce its
carbon footprint, improve recycling, reduce reliance on packaging,
minimise waste and improve efficiencies on finite natural resources
in all parts of the Company’s operations. How the Company seeks
to implement its sustainability strategy is set out in Our Environment
on pages 58 to 73 of the Sustainability report.
The Company’s approach to environmental matters is overseen
by the Company’s sustainability leadership team.
The pivotal role of our colleagues is reported within the Our People
section of the Sustainability report on pages 50 to 53 and within
the Chief Executive’s statement on pages 9 and 10.
Further commentary for individual policies is set out on the pages
as detailed in the previous column and/or on the Company’s
website. These policies are made available to all colleagues within
the Company’s Colleague Handbook, an internal document
available to all colleagues on the Company’s intranet.
The Company’s approach to pay fairness throughout the Group is
set out on pages 98 to 101 of the Directors’ remuneration report.
Further commentary for individual policies is set out on the pages
as detailed in the previous column and/or on the Company’s website.
These policies are monitored as part of our risk management
processes, overseen by the Audit Committee.
The Company’s approach to social matters is set out in
Our Community on pages 55 to 57 of the Sustainability report.
The Company’s approach to social matters is set out in the Company’s
Colleague Handbook and Operations Manual, which are internal
documents available to all colleagues on the Company’s intranet.
The Company’s approach to social matters is overseen by the
Company’s sustainability leadership team.
Anti-corruption and
anti-bribery
Anti-corruption and bribery statement
and policy (page 82)
Further commentary for individual policies is set out on the pages
detailed in the previous column.
Gifts, tips and hospitality policy
(page 82)
These policies are monitored as part of our risk management
processes, overseen by the Audit Committee.
Description of principal
risks and impact on
business activity
Description of the
business model
Non-financial key
performance indicators
Risk overview (pages 37 to 42 of the
strategic report)
The Company’s approach to risk management and internal control
is set out in the governance report on page 81.
The Company’s market and business model are reported on pages
18 and 19 in the Chief Executive’s review of the strategic report.
KPIs are summarised in the Chief Executive’s statement and
reported in the financial highlights section of page 2 and within
the trading performance section of the strategic report on pages
19 to 21.
Certain Group policies and internal standards and guidelines are not published externally, but are available to all colleagues on the Company’s
intranet and publicly within the Governance section of the Company’s website.
43
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Viability statement
The UK Corporate Governance Code requires us to issue a “viability
statement” declaring whether we believe Safestore can continue to
operate and meet its liabilities, taking into account its current position
and principal risks. The overriding aim is to encourage Directors
to focus on the longer term and be more actively involved in risk
management and internal controls. In assessing viability, the Board
considered a number of key factors, including our strategy (see page 8),
our business model (see pages 18 and 19), our risk appetite and
our principal risks and uncertainties (see pages 37 to 42 of the
strategic report).
The Board is required to assess the Company’s viability over a period
greater than twelve months, and in keeping with the way that the
Board views the development of our business over the long term a
period of three years is considered appropriate, and is consistent
with the timeframes incorporated into the Group’s strategic planning
cycle, with the review considering the Group’s cash flows, dividend
cover, REIT compliance, financial covenants and other key financial
performance metrics over the period. Our assessment of viability
therefore continues to align with this three-year outlook.
In assessing viability, the Directors considered the position presented
in the budget and three-year outlook recently approved by the Board.
In the context of the current environment, four plausible sensitivities
were applied to the plan, including a stress test scenario. These were
based on the potential financial impact of the Group’s principal
risks and uncertainties and the specific risks associated with the
recent pandemic and geopolitical pressures. These scenarios are
differentiated by the impact of demand and enquiry levels, average
rate growth and the level of cost savings, representing the assumption
variations, which can be summarised as follows:
• Base scenario – positive year-on-year enquiries and demand growth
in all countries;
• Upside scenario – representing stronger revenue growth than the
base scenario in the UK and France with some slight cost Savings;
• Downside scenario – which assumes a decline in year-on-year
enquiries and demand in the UK and France; and
• Stress test scenario – representing a reverse stress test to model
what would be required to breach ICR and LTV covenants which
indicated highly improbable changes would be needed before any
issues were to arise.
Since the end of the financial year, the Group has completed the
refinancing of its Revolving Credit Facilities (“RCF’s”) which were
due to expire in June 2023. The previous £250 million Sterling and
€70 million Euro RCF’s have been replaced with a single multi-currency
£400 million facility, with a four-year term with extension options and
an uncommitted accordion facility incorporated in the facility agreement.
Further in April 2022, Safestore extended its borrowing facilities, with
the issuance of the equivalent of €105 million denominated US Private
Placement (“USPP”) Notes.
The impact of the above scenarios and sensitivities has been reviewed
against the Group’s projected cash flow position and financial covenants
over the three-year viability period. Should any of these scenarios occur,
clear mitigating actions are available to ensure that the Group remains
liquid and financially viable.
Such mitigating actions available include, but are not limited to,
reducing planned capital and marketing spend, pay and recruitment
measures, making technology and operating expenditure cuts and
utilisation of available headroom on existing debt facilities.
Further, the recent pandemic and geopolitical pressures have resulted
in significant pressure on the economic growth for the UK and Europe
in 2022–23. These potential implications have been thoroughly
considered with respect to the Group’s strategy through the annual
planning and budgeting process. They will continue to be monitored
through regular and periodic reforecasts and scenario analysis over the
next twelve months and align with the three-year outlook of this review
during the 2023 financial year.
The Audit Committee reviews the output of the viability assessment
in advance of final evaluation by the Board. The Directors have also
satisfied themselves that they have the evidence necessary to support
the statement in terms of the effectiveness of the internal control
environment in place to mitigate risk.
Having reviewed the current performance, forecasts, debt servicing
requirements, total facilities and risks, the Board has a reasonable
expectation that the Group has adequate resources to continue in
operation, meet its liabilities as they fall due, retain sufficient available
cash across all three years of the assessment period and not breach
any covenant under the debt facilities. The Board therefore has a
reasonable expectation that the Group will remain commercially viable
over the three-year period of assessment.
44
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Compliance with Task Force on Climate-related Financial
Disclosures (“TCFD”)
We set out in the following section our climate-related financial disclosures consistent with all of the TCFD recommendations and recommended
disclosures. By this we mean the four TCFD recommendations and the 11 recommended disclosures set out in Figure 4 of Section C of the
report entitled “Recommendations of the Task Force on Climate-related Financial Disclosures” published in June 2017 by the TCFD.
TCFD recommendation
Governance
Included in
FY2022 disclosures?
Reference/comment
a)
Describe the Board’s oversight of climate-related risks and opportunities
Yes
Strategic report page 62
b)
Describe management’s role in assessing and managing climate-related
risks and opportunities
Yes
Strategic report page 62
Strategy
a)
b)
c)
Describe the climate-related risks and opportunities the organisation has
identified over the short, medium, and long term
Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning
Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C
or lower scenario
Risk management
a)
Describe the organisation’s processes for identifying and assessing
climate-related risks
Yes
Yes
Yes
Yes
Strategic report pages 62 to 65
Strategic report pages 62 to 65
Strategic report pages 64 to 65
Strategic report page 62
b)
Describe the organisation’s processes for managing climate-related risks
Yes
Strategic report pages 37 and 62
c)
Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overall
risk management
Metrics and targets
a)
b)
c)
Disclose the metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk management process
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas
(“GHG”) emissions, and the related risks
Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets
Yes
Yes
Yes
Yes
Strategic report page 62,
Governance report pages 81 to 82
Strategic report page 66
Strategic report (GHG reporting)
pages 67 to 73
Strategic report pages 48 and 66
45
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS
Sustainability
Our sustainability strategy
Our material sustainability issues, as identified by internal and external
stakeholder engagement (with colleagues, investors, customers,
and partners), fall within four areas, which we call the ‘pillars’ of our
sustainability strategy: our people, our customers, our community, and
our environment. Although these ‘pillars’ do not fundamentally change,
we periodically review our activities to ensure we are focusing clearly
on material areas and are aligned with not only our corporate goals but
also the principles of the UN Global Compact. We track progress against
medium term targets set in 2019 using appropriate key performance
indicators (“KPIs”).
We report in accordance with the European Public Real Estate
Association’s (“EPRA’s”) latest recommendations: EPRA Sustainability
Best Practices Recommendations (“sBPR”), third version September 2017.
These recommendations are also aligned with the latest
Global Reporting Initiative (“GRI”) standards.
Sustainability highlights
40%
4.5+
100%
proportion of female
applications reached
for the first time
customer satisfaction
in all markets
of 2021 stores powered
by renewable electricity
by 31 October 2022
Once finalised, these indicators and supplemental information can
be downloaded from the relevant section of our website:
www.safestore.co.uk/corporate/investors/report-and-presentations/.
27
In recognition of the strides made in our
sustainability disclosures, Safestore has
been given a Silver rating in the 2022 EPRA
Sustainability BPR awards. In addition, the
Global ESG Benchmark for Real Assets (“GRESB”)
has once again awarded Safestore an ‘A’ rating
in its 2022 Public Disclosures assessment and
MSCI has awarded Safestore its second-highest
rating of ‘AA’ for ESG.
-11%
-12.4%
gas appliances
removed from
UK stores
market-based
GHG emissions
GHG intensity
Our purpose
To add stakeholder value by developing
profitable and sustainable spaces that allow individuals,
businesses, and local communities to thrive
Our people
Provide a great place to work
Our customers
Deliver a great customer
experience and help customers
live and grow sustainably
Our community
Benefit local communities
Our environment
Protect the planet from our
activities; managing risks to our
business from climate change
Our values
Our values, created by our store teams, are the foundation of everything we do
See page 53 for more details
We love
customers
We lead
the way
We have
great people
We dare to
be different
We get it
46
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Alignment to the UN Sustainable Development Goals
As a Group, we have continued to align our sustainability priorities
with the United Nations Sustainable Development Goals (“SDGs”)
so that our actions can contribute to a greater collective impact. By
striving to achieve our business goals, we will help solve a large set
of societal challenges ranging from climate change to decent work
and economic growth, and responsible consumption and production.
The SDGs or Global Goals are a call to action for stakeholders
across all nations to unite and address the environmental,
economic and social imbalances that affect the world’s population
and society.
These goals can only be achieved with the support of governments,
businesses and individuals and, as the role businesses must play
becomes clearer, the goals have developed into an increasingly
important tool for assessing the impact of companies on society.
Our stakeholders increasingly expect us to demonstrate how we
are contributing to the SDGs, specifically our investors, our customers
and our current and prospective colleagues. Safestore is now one
of a growing number of global organisations which are committed
to supporting the SDGs and we continue to focus the bulk of our
efforts in the priority areas where we can have meaningful impact.
Sustainability governance
Sustainability is embedded into the day-to-day responsibilities
at Safestore and, accordingly, we have opted for a governance
structure which reflects this. Two members of the Executive
Management team co-chair a cross-functional sustainability
group consisting of the functional leads responsible for each
area of the business. This group reports on its activities directly
to the Board.
PLC Board
HR Director
Executive sponsor
Marketing Director
Executive sponsor
Sustainability group
Property/
construction
Functional lead
Operations
Functional lead
Customer
marketing
Functional lead
Risk
Functional lead
HR
Functional lead
These are:
• Goal 8: Decent work and economic growth
• Goal 11: Sustainable cities and communities
• Goal 12: Responsible consumption and production
• Goal 13: Climate action
We will also seek to progress towards specific aspects of the
other SDGs where relevant to our business.
Our suppliers
We realise that our suppliers play an important role in our business,
and we expect them to act ethically, and share in our commitments to
maintain sustainable business practices using the SDGs as a shared
framework for defining the way we work together (SDG 17: Partnership
for the Goals, which refers to the need for collaboration in pursuit of all
the goals by the year 2030).
In 2021, we were proud to have been awarded
the highest rating of five stars by Support
the Goals, a global initiative that rates and
recognises businesses that support the United
Nations Global Goals. This rating is awarded
to businesses which are publicly engaging
suppliers in their efforts towards reaching the
Global Goals.
Given that a significant amount of our environmental impact comes
from our third party suppliers, we have worked hard to ensure a
consistent evaluation of our supply chain in relation to internationally
recognised Environmental, Social, and Governance (“ESG”) standards.
From our uniform providers and point of sale print and fulfilment to our
merchandise partners and more, we have taken steps to co-ordinate,
collaborate and convene with our suppliers and business associates
as we work together towards achieving the SDGs most relevant to
our business.
Our focus remains on:
• creating decent workplaces and treating our colleagues fairly and
with respect
• conducting business lawfully, ethically, and with integrity
• responsible sourcing, consumption, and production
As we are only as strong as our weakest supplier, our intention is
to continue to demonstrate our commitment, actions and progress
towards the SDGs, and encourage our suppliers to work towards
achieving similar goals.
47
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Alignment to the UN Sustainable Development Goals continued
Sustainability targets and KPIs
The table below outlines the targets we set ourselves in each of the four ‘pillar’ areas. We are pleased to have met the majority of the 2022
targets set in 2019 and our near term focus now shifts to the 2025 targets. In light of our plan to achieve operational Net Zero according to the
market-based method for Scope 2, and the acquisition of store portfolios in the Benelux, the 2025 emissions targets have been revised this year.
Sustainability
strategy ‘pillar’
Sustainable
business goals
Corporate
business
goals
UN Sustainable
Development Goals
Performance
measures (“KPIs”)
Targets
2022
2025
The fairest places
to work
Our
people
A safe working
environment
Deliver a great
customer experience
Our
customers
Help customers live
and grow sustainably
A great
place to
work
Storage
provider
of choice
Percentage of females
applying for roles at
Safestore
40%
42%
Engagement score
Maintain score >80%
Number of reportable
injuries (RIDDOR)
Zero
Zero
Investors in People
n/a
Maintain IIP
Platinum
Customer satisfaction
score
>4.5
>4.5
Benefit to local
communities
Help local
economies
thrive
Pro bono value of space
occupied by local
community groups
Opportunity
led
Opportunity
led
Our
community
Reduce our waste
Our
environment
Reduce our emissions
Achieve
optimal
operational
efficiency
% of construction waste
diverted from landfill in
the UK
% of operations waste to
landfill
% of renewables in
owned store electricity
(Group)
98%
99%
1.75%
1%
100%
100%
Abs. operational GHG
emissions (tonnes CO2e)
3,917
(LB)
3,400 (LB)
1,014 (MB)
Operational GHG
emissions, MB vs 2021
(25%)*
(20%)
Operational GHG
intensity (kg CO2e/sq m2)
4.5 (LB)
3.5 (LB)
0.93 (MB)
Total emissions vs 2013
baseline – LB
Emissions intensity vs
2013 – LB
(50%)
(58%)
n/a
n/a
Key:
Target achieved
Target nearly achieved
Target not met
Note:
* MB emissions 25% lower for UK, France, and Spain vs 2021.
48
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Our people
Target
Engagement score
Maintain score >80%
Performance 2021/22
90%
We know our people as individuals, and show respect for each other,
enabling everyone to have a voice so that they can bring their full,
unique selves to work.
Our leaders are role models who build high trust. We recognise that
great people management takes time and therefore we have kept
colleague-to-manager ratios low to enable our leaders to invest their
time in our people.
We have built an environment where it’s natural for us to give regular,
honest feedback and to coach in the moment. And formally, we go
beyond mandatory training to promote life-enhancing learning where
everyone can continually evolve.
We are exceptionally proud to have been awarded the prestigious
Investors in People (“IIP”) Platinum accreditation. We also made the
final top ten shortlist for the Platinum Employer of the Year (250+)
category in The Investors in People Awards 2021. We see our
colleagues as an asset, and we understand that it’s our people
who truly make the difference.
We endeavour to operate employment practices that support SDG 3
(Good health and wellbeing), SDG 8 (Decent work and economic growth)
and SDG 10 (Reduced inequalities) through building, improving, and
maintaining safe and secure working environments and advocating
a diverse and inclusive workforce, free from harassment and victimisation.
Our Wellbeing Strategy and People Principles documents further expand
on how we seek to achieve this.
Build, improve and
maintain safe and
secure working
environments
Advocate and improve
labour rights for all
our colleagues
e en v i r o n m ent
v
i
t
i
s
o
P
Great life
s
t
y
l
e
c
h
o
i
c
e
s
Facilitate and
drive internal
development
Provide
lifelong learning
P
e
a
r
n
s
d
o
n
e
a
d
u
c
l growth
ation
Safestore
wellbeing
strategy
A c t i v
an d e n
s
r
e
s
m
a
e lead
a g ed te
g
Help our colleagues
to help themselves
Promote physical,
mental and
financial wellbeing
Role model a
values-based approach
through our leaders
Advocate a
diverse and
inclusive workforce
More details about the progress we have made in each section of our wellbeing strategy can be found on pages 51 to 53.
49
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS
Sustainability continued
Our people continued
Equality, diversity, and inclusion
We are committed to providing an inclusive workplace, encouraging,
and welcoming diversity with zero tolerance of harassment and
discrimination. More detail can be found in our People Principles
document (online in the Governance section).
Our strong wellbeing foundation has enabled us to develop a strategy
setting out our approach to further support diversity and inclusion
at Safestore.
We are proud of Safestore’s diverse workforce; in our 2021 IIP survey,
89% of colleagues agreed that Safestore values and respects individual
differences. Our new Diversity and Inclusion Strategy is about embedding
and continuing the important work we’ve already done to enable all our
colleagues to feel confident to bring their full unique selves to work.
Colleague journey. This is about ensuring our culture is friendly
and welcoming to all. We want people to be themselves at work,
and initiatives such as our Values and Behaviours framework, health,
and wellbeing support from day one, and improving the accessibility
of our learning and development opportunities support our culture.
Safestore Diversity and Inclusion Strategy
Purpose
Enable colleagues to feel confident to bring their full unique selves to work
Colleague journey
Provide an inclusive onboarding
experience so colleagues feel
welcome from day one
Integrate inclusion into culture
through our behaviours
and policies
Ensure learning and development
opportunities
are accessible for all
Colleague data
and analytics
Improve data quality
to understand our
workforce diversity
Invest in data development
and analytics
Use diversity data to inform
positive action
Positive action
Target recruitment at
under-represented groups
Introduce targeted colleague
support networks and
mentoring schemes
Enable community affinity groups
Continue awareness-raising
activities and communications
Leadership and
management
Equip and educate leaders to
encourage and welcome diversity
Actively remove bias
Create a safe space for open and
inclusive discussion
Colleague data and analytics. In 2022 we have continued to collect
ethnicity data to better understand the ethnic mix of our workforce.
To date, over 70% of UK colleagues have volunteered their ethnicity
data. This data indicates that 31% of Safestore colleagues belong to
a Black, Asian, Mixed or other ethnic group, compared with 18.3%
of people who make up this group in the UK (2021 census data).
We are really proud of the ethnic diversity of our colleagues. We want
to collect more people data to further understand our diverse
communities such as the LGBTQ+ and neurodiverse communities,
to inform even more beneficial and tangible action.
Positive action. This is about recruiting from under-represented
groups, and building campaigns and opportunities for networks
to meet, be listened to and feel supported.
For example, we have improved our female applicant percentage
and refreshed our careers website to ensure it is representative.
Our awareness-raising activity on our internal communications
platform, Yapster, such as our ‘Christmas Around the World’ and
International Women’s Day campaigns have generated lots of
energy and engagement.
Leadership and management. This is about how we support our
leaders to encourage and welcome diversity. For example, we have
introduced an updated equality, diversity and inclusion e-Learning
module which was completed by all colleagues in 2022 and is now
part of the induction for all new colleagues joining Safestore.
We want Safestore to be a safe space for discussion and curiosity
to enable colleagues at all levels to continually learn from each other.
Gender equality
The ratio of male to female colleagues at Safestore is outlined in the
table below. Further analysis of our gender pay gap can be found in
the 2021 gender pay gap report on our website. The report also sets
out a range of actions we are taking to help close the gap.
Group gender split at 31 October 2022
Board Directors
Executive Committee and direct reports
All colleagues (excl. NEDs)
Male
5
34
478
Female
3
9
267
50
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT
Positive environment
Colleague engagement
We believe that engaged colleagues, who feel valued by our business,
are the foundation of our customer-focused culture.
Our ‘Make the Difference’ people forum, launched in 2018, is a formal
workforce advisory panel, which enables frequent opportunities for us
to hear and respond to our colleagues.
Our network of 15 ‘People Champions’ collate questions and feedback
from their peers across the business and put them to members of the
Executive Committee.
Our people forum provides a listening culture, enabling high levels
of consultation. Innovation and ideas now come from every level.
We drive change and continuous improvement in responding to the
feedback we receive, via our internal communication channels and
back through our network of People Champions.
Recently, our People Champions have helped us to continue our
awareness-raising activities and communication through a selection
of a broad range of topics for discussion on Yapster, our internal social
media platform. The aim is to appreciate our diversity, by recognising
and celebrating festivals and events, as well as individuals, and to
create a safe space for sharing and discussion. In addition, we use
Yapster to highlight local successes and recognition between stores
and regions with strong links made to Safestore’s alignment to the SDGs.
Group health and safety statistics
Customer, contractor, and visitor (“CCV”) health and safety
Summary:
• 38 minor injuries were recorded over the past year, none of which
were reportable under RIDDOR*.
• 3 minor injuries were recorded to contractors and 35 to customers.
No injuries were recorded to visitors.
• Injuries were recorded as 29 minor cuts, 7 bumps and bruises and
2 strains mainly relating to customers handling their goods.
Year ended 31 October
Number of stores
Customer, contractor,
and visitor movements
Number of minor injuries
Number of reportable
injuries (RIDDOR)
RIDDOR per 100,000
CCV movements
Colleague health and safety
Summary:
2020
155
2021
161
2022
179
120,995
206,871
242,559
36
0
0.0
46
0
0.0
Health and safety
Safestore strives to meet and, wherever possible, exceed best
practice through:
• 26 minor injuries were recorded over the past year.
• No accident/incident was reportable under RIDDOR*.
• regular and robust health and safety checks across our portfolio
Year ended 31 October
• regular independent audits of sites, performed by our external health
Number of colleagues
Number of minor injuries
Number of reportable injuries
(RIDDOR)
AIIR** per 100,000 colleagues
2020
658
21
2
303
2021
648
19
1
154
Notes
* RIDDOR = Reporting of Injuries, Diseases and Dangerous Occurrences.
**
Annual injury incident rate = the number of reportable injuries ÷ average number
of colleagues (x100,000).
and safety consultants on a rolling programme, to ensure that
procedures are followed and that appropriate standards are maintained
• ensuring all colleagues understand their responsibility for health and
safety at Safestore. If a site is highlighted as falling below our health
and safety standards, colleagues on site are urgently required to
make improvements
• comprehensive compulsory health and safety training programmes
for all colleagues
• regular Health and Safety Committee meetings to review issues,
processes, policies, and actions. The Health and Safety Committee
minutes are shared with both our Risk and Audit Committees
• accident reports to identify, prevent, and mitigate against potential
risks managed using our online incident reporting systems. All
reports are reviewed by the Health and Safety Committee to
consider what preventative measures can be implemented
There were no fatal injuries, notices or prosecutions during the year
ended 31 October 2022 in any part of Safestore operations.
38
1
0.4
2022
751
26
0
0
51
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Our people continued
Great lifestyle choices
We focus on offering simple, practical wellbeing initiatives, to support
our colleagues to lead healthier and happier lives. We recognise that
it is more important than ever for our colleagues to take care of
themselves and their loved ones.
Personal growth and education
Learning and development
At Safestore, we have a strong focus on learning and development for
all our colleagues, with a genuine commitment to building a culture
of developing talent.
• Our new cash plan, provided by Medicash, provides colleagues with
everyday reassurance on their health and wellbeing from top to toe,
inside and out, from GP appointments to skin health checks and
physiotherapy to counselling services.
• We have further promoted our Employee Assistance Programme
(“EAP”) and other external support organisations such as Mind and
Mental Health UK, providing our colleagues with expert guidance
and support on everyday matters whenever they need it.
• We continue to work closely with our occupational health provider
including provision of private counselling for colleagues in crisis
requiring immediate support.
• We have increased the voucher limit on our popular Cycle to
Work scheme.
• In addition to our ‘My Wellbeing’ webpage (our internal wellbeing
resource hub), we have also communicated a number of wellbeing
events and offers using our internal platform, Yapster. We believe
good wellbeing communications promote and embed our positive
and supportive working environment.
Health and wellbeing initiatives are
being given more attention and
people are positive about the
commitment to wellbeing.
Matthew Filbee,
IIP Practitioner
The overall culture of the
organisation very much projects
the message that learning and
development are valuable.
Matthew Filbee,
IIP Practitioner
We use innovative methods of learning as well as traditional routes,
with lots of support from our managers at all levels. The survey
revealed that 93% of respondents knew how Safestore invests in
learning and development. In 2022, we delivered over 30,000 hours
of training.
All learning is evaluated, with skills development and practice gained
through on-the-job supervision, regular coaching sessions, module
sign-off, observation, feedback, and overall evaluation of how effective
a programme of learning has been.
Across the Group, there are plenty of opportunities to put skills and
knowledge into practice, with colleagues being given extra
responsibilities to enable this to happen.
Our leaders understand the importance of succession planning.
Talent management is sophisticated and transparent, with performance
management channelled through our Values and Behaviours framework,
to identify and support high potential individuals.
In the UK, both our Sales Consultant and Store Manager Development
programmes continue to grow and upskill our colleagues. Everyone
has the opportunity to discuss and agree their learning and development
pathways with their line manager, and this is executed effectively.
In our latest IIP survey, 88% of respondents stated that they have
opportunities to learn at work.
We were also delighted that our Store Manager Development
programme, now in its sixth year, has a record of 18 new participants
for 2022. Funded by the Apprenticeship Levy this programme provides
the opportunity to complete a Level 3 Management and Leadership
apprenticeship, with the additional opportunity to complete an Institute
of Leadership and Management (“ILM”) qualification.
In addition, all nine participants of our Senior Leadership Development
programme (‘LEAD Academy’) successfully completed their Level 5
Management and Leadership apprenticeship; six of those participants
were awarded Distinctions.
Furthermore, we have re-launched our Graduate Programme, with
our first intake commencing in October 2022, providing an opportunity
for newly qualified graduates to build their skill set and experience,
resulting in a career with Safestore.
52
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Financial wellbeing
We understand that the current cost of living crisis is having a
significant impact on personal finances. As part of Safestore’s wider
wellbeing strategy, we are committed to doing what we can to ensure
the financial wellbeing of our colleagues.
• During the Covid-19 pandemic, we enhanced Company sick pay
(“CSP”) to alleviate the financial burden. We have taken the decision
to make this enhancement permanent and all colleagues are now
entitled to CSP from day one of employment.
• We applied our annual pay increase to all eligible colleagues a
month early in March.
• We made exceptional payments totalling £1,000 to every colleague:
£500 in December 2021 as a thank you for their contribution during
the pandemic; and a further £500 cost of living payment in October
2022 to ease financial hardship over the winter period.
• We launched a ‘benefits portal’ on our intranet, creating a one-stop-
shop for all colleagues to access information about which benefits
are available to them and how to access them. Following feedback
through our ‘Make the Difference’ people forum, we introduced an
annual uniform allowance for all store colleagues.
Our workplace pension is provided by Scottish Widows, one of the
UK’s leading workplace pension providers. We are pleased to offer
eligible colleagues the opportunity to make their pension contributions
through a salary sacrifice arrangement, recognised as the most
tax-efficient way of making pension contributions.
In August, we opened entry into our 2022 Sharesave scheme, and are
delighted that 48% of our colleagues now share in our success by
being a member of at least one of our Sharesave schemes. This is
further evidence of high levels of colleague engagement across
the business.
Active leaders and engaged teams
Leadership
Our leaders bring out the best in our colleagues, motivating them to
work together to achieve our shared goals and objectives.
We achieve this by keeping colleague-to-manager ratios low, enabling our
leaders to invest time in encouraging and engaging our colleagues, forming
genuine connections with their teams. This is evidenced by the exceptionally
high leadership engagement score of 90%, achieved in our IIP survey.
Our active leaders are energetic and passionate, engaging in honest,
open communication to connect with their colleagues. Our coaching
culture encourages two-way feedback supporting both personal and
professional growth, which is formalised through the setting of clear
goals and expectations, reviewed bi-annually.
Many people said how much they
love working at Safestore and the
pride in the service delivered came
across loud and clear. Everyone
described a friendly, supportive
place to work.
Matthew Filbee,
IIP Practitioner
Values and Behaviours
Our values are authentic, having been created by our colleagues.
They are core to the employment life cycle and bring consistency to
our culture. Our leaders have high values alignment enabling us to
make the right decisions and maintain morale at all times, and this
has been proven especially during the pandemic.
We are empowered to do the right thing, not necessarily the easiest.
This enables us to feel comfortable challenging behaviours that are
not in line with our values.
We love customers – we deliver much more than
storage; we provide solutions that exceed our customers’
expectations, and we expect our people to show
appreciation of our customers and their businesses.
We lead the way – we want people who talk with pride
about Safestore, set themselves high standards and
demonstrate passion for what they do.
We have great people – everyone has a key role to play
within Safestore and we need people who show respect
for everyone, no matter their position. Our people drive
their own performance and are keen to learn from others.
We dare to be different – we want people that adapt to
change and are willing to try new things. Part of daring to
be different involves actively seeking feedback to develop
new and existing skills.
We get it – we want people to be clear on our vision and
goals and, in turn, know what part they play in achieving
them. ‘We get it’ is also about communicating in a clear,
open, and honest way to enable sound decision-making.
53
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Our customers
Target
4.5
Maintain 4.5+ satisfaction scores in each market
Performance 2021/22
UK: 4.7 Feefo and 4.8 Trustpilot
France: 4.6 Trustpilot
Spain: 4.7 Google
Belgium: 4.7 Feefo
The Netherlands: 4.9 Trustpilot
Listening to and engaging with our customers
As a Group, we serve many customers across the UK and Europe
through face-to-face communication in store, directly through our
Customer Support Centre, and online via our website, email, and
social media channels, as well as through our LiveChat service.
By offering these different channels, our customers can get in touch
with us through their preferred mode of communication.
We believe in providing a great customer service, and responding
positively to our customers’ ever-changing needs, expectations
and behaviours. We are always keen to hear from our customers
to maintain the high standards of service that we pride ourselves on.
We invest in customer service training, tools, coaching and evaluation
to provide a service that is professional, efficient, and helpful.
Our aim is to exceed our customers’ expectations from initial enquiry
through to move-in, and this is evident through the way our colleagues
handle customer enquiries, claims, and issues. For this reason, we
collect, monitor, review, and respond to customer feedback collected
on our website, third party platforms, and social media, to gauge
customer satisfaction, raise service standards, and manage our
brand reputation online.
We aim to communicate with customers and prospects in a creative
and consistent way across the various communication channels.
We see our social media channels on Facebook, Twitter, Instagram,
and LinkedIn as a ‘shop window’ to our brand that can help to reach
new audiences, both in the UK and Europe. These channels are
also helpful to gauge customer feedback and public sentiment, and
thus we regularly monitor them, responding to any comments and
enquiries. We frequently post content to our social media channels
such as tips and advice for homeowners and businesses, profiles of
charity organisations we support, recruitment opportunities within the
Group, any sustainable or green business initiatives, and links to our
blog pages as well as regular Facebook advertising across the Group.
Delivering a great customer experience
Our core business is to provide well-located, accessible, safe, and
secure storage sites operated by colleagues who are experts in the
self storage business. We endeavour to make each customer
touchpoint as stress-free as possible, for example by:
• the use of SafePay links giving customers the ability to pay by direct
debit or to pay invoices online
• accepting deliveries on our customers’ behalf where delivery drivers
can take items direct to store saving indirectly on customer travel
time, cost, and associated carbon emissions
54
• offering our customers three types of contracts giving them the
opportunity to choose the one which best suits their needs
Our website – a user-centric re-structure
Our industry-leading multilingual and dynamic website continues
to play an important part of the enquiry mix with enhanced search
engine performance, optimisation for mobile devices, and bespoke
management of rich website content.
As most of our enquiries are generated online, we continue to work
to provide the customer with an even clearer, more efficient onsite
experience. Consequently, we have acknowledged the importance
of answering user queries with well-positioned and relevant information
as soon as they arrive at the website. This has been at the heart of the
initiative. By using analytical data and re-structuring the page format,
we can see the content most in-demand which has enabled us to help
users locate key information about our stores and the storage offering.
Website technical performance
60% of our web visitors start their journey with a storage related
search on Google so we’ve also focused our rebuild of the 129
Safestore UK pages with specific guidance from Google. For example,
we have technically improved the pages to ensure they are quicker to
load on slower internet and mobile connections. This is following
ongoing recommendations from Google as to improve user experience
and strengthen positions in Google search results. We also aim to
continue making pages simpler to read and easily accessible by users
on the whole range of mobile devices.
The new store pages are in a test phase and will be released to
non-UK markets early in 2023.
Helping our customers to live and grow sustainably
We also remain focused on delivering against our sustainability agenda
by encouraging our customers to make more sustainable choices.
This is in addition to making a positive social and economic contribution
to our communities, and reducing the environmental impact of our
operations. We want to support our customers with products and
solutions that help improve their lives such as:
• digital contracts, offering both convenience and a 16% reduction
in the number of pages printed this year versus last (equal to a
reduction of 528,236 pages or over 1,000 reams of paper)
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT • Refill, a scheme available in 122 Safestore stores across the UK
offering free tap water to make it easy for the public to refill reusable
water bottles instead of buying new plastic ones
• provision of sustainably packaged merchandise and eco-friendly
Our community
Target
box products
• cardboard recycling for some customers
Customer reviews
We have retained Feefo, an independent review and insight platform,
to collect real-time and 100% genuine feedback from our customers.
Our stores in the UK receive regular feedback allowing customers to
view reviews and ratings. In 2022, Safestore UK achieved a customer
service rating of 4.7 with 94% rating their experience as ‘Excellent’
or ‘Good’.
Safestore UK also won the Feefo Platinum Trusted Service award
for the fourth year running – an award that is given to businesses that
have achieved Gold standard for three consecutive years. This independent
mark of excellence recognises businesses for delivering exceptional
experiences, as rated by real customers. It is a highly valued award and
as all reviews are verified as genuine, the accreditation is a true reflection
of Safestore’s commitment to delivering the best service possible.
In addition to using Feefo, our customers are able to leave reviews
on a number of other platforms, including Google and Trustpilot. As
a result, wherever customers look for trust and reputational signals
about Safestore, they will see an impartial view of our excellent
customer satisfaction.
Trustpilot is a well-recognised and authoritative third party review
platform and this year, Safestore has maintained a TrustScore of
4.8 out of 5 in the UK from 2,349 reviews, illustrating our experience
in delivering a high level of customer service.
Une Pièce en Plus also continues to use Trustpilot to obtain
independent customer reviews. During the year, Une Pièce en Plus
maintained a TrustScore service rating of 4.6 with 90% of customers
rating their service experience as ‘Excellent’ or ‘Great’. Additionally, in
Spain, OhMyBox! achieved a 4.7 out of 5 rating for customer feedback
collected from Google Reviews. In Belgium, our customer service was
rated 4.7 out of 5 on Feefo, whilst we achieved a high scoring 4.9 out
of 5 on Trustpilot in the Netherlands.
We are pleased that our colleagues across all markets continue to
be recognised for their hard work in delivering a consistently high
level of customer service.
Provision of free/discounted space
and additional support to high impact
local community groups
Opportunity led
Performance 2021/22
18,903 sq ft provided
£727,356 worth
Safestore is committed to making a positive contribution within the
local communities around our stores. We are keen to deliver long term
benefits to society and the local economy consistent with our alignment
with SDG 11 (Sustainable cities and communities). Moreover, we are
committed to being a brand that our current and prospective colleagues
are proud to work for as well as one that our customers can trust.
We continue to do this by:
• developing brownfield sites
• actively engaging with local communities when we establish a new store
• identifying and implementing greener approaches in the way we
build and operate our stores
• helping charities and communities to make better use of limited space
• creating and sustaining local employment opportunities directly and
indirectly through the many small and medium-sized enterprises
which use our space
We aim to create long-standing relationships with charities and
organisations that drive positive change within our local communities.
We know that we can build trust by operating responsibly and partnering
with local and national charities which means that we can support
causes that are important to our colleagues, customers and communities.
This enables us to address issues such as rising homelessness, enhancing
social mobility and creating opportunities for people living and working
in the local area.
In 127 stores across the UK we continue to:
• provide fundraising support to existing and new local
charity partners
• offer free or discounted storage space to local communities through
our ‘charity room in every store’ scheme
• actively seek out practical and creative solutions by working with
and supporting a number of charitable causes
• leverage social media and our blog platform to promote our charity
partners and raise awareness of their cause
During the year, the space occupied by local charities in 222 units across
103 stores was 18,903 sq ft and worth £727,356 (FY2021: £636,945).
Our aspiration is to have at least one charity room in every store.
We regularly monitor the free and discounted space occupied by
charities, ensuring that the partnerships are running smoothly. In
addition, we encourage our colleagues to maintain relationships
with the charities we support and we continually review the scheme
to ensure that it is beneficial for all involved.
55
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Our community continued
HandsOn London
For the eleventh year in a row, Safestore UK teamed up with the
WrapUp London campaign to support their annual coat drive to help
those in need during the winter of 2021.
Over the years, and in partnership with WrapUp London, Human
Appeal and Rotary Club International, the campaign has extended
outside of London to 18 other collections in major towns and cities
across the UK including Glasgow, Manchester, Birmingham, Bath,
Bristol, Leicester, and Cardiff.
More than 23,700 coats were collected during the campaign, which
began in early November and ran through December. Coats were
distributed to the homeless, refugee families, the elderly, those fleeing
domestic violence, and others living in crisis through a network of over
100 London charities and community groups.
Several Safestore UK centres were used as local drop-off points for
the public due to ongoing Covid-19 restrictions at the time. Our colleagues
also offered their support by marketing the campaign via social media,
donating their own coats, and offering extra storage space to facilitate
the sorting, distribution and packing of the coat donations.
Since the campaign was launched in 2010, volunteers have collected,
sorted, and distributed a total of 197,245 winter coats which has made
a real positive difference in the lives of the city’s most vulnerable people.
This year, Safestore’s involvement included:
• providing storage space across 15 stores in London, six stores in
Greater Manchester, two in Birmingham, and one each in Bristol,
Glasgow, Leicester, and Bath
• provision of 5,908 sq ft of storage space enabling 913 campaign
volunteers to spend 3,924 hours sorting and packing up coats
for distribution whilst maintaining social distancing
• the stores acting as drop-off points beyond the campaign period
and receiving numerous donations from other businesses,
community organisations and the general public
• using our internal and external communications platforms to raise
awareness of the WrapUp London cause and inspiring our colleagues
to get involved locally
Jon Meech, CEO, HandsOn London, said:
With the country lurching from one crisis to the next, our work with the poor,
needy and vulnerable has never been more critical. From people losing their jobs
following the Covid-19 pandemic or becoming homeless, to those being forced
to flee domestic abuse or war-torn countries, the desperate need for warm coats
and jackets for all ages keeps growing.
Now at over ten years old, WrapUp London has
become one of the largest winter volunteering
campaigns in the city. Whilst its tough that this is still
required after all this time, it’s been amazing to see
just what can be achieved when people are willing to
volunteer their time and efforts. Sadly, the number of
people living in challenging circumstances in the city
is rising, and now more than ever as we face a cost of
living crisis, donations from the public are required to
help those in need.
We, alongside our partners Human Appeal and Rotary Club
International, are eternally grateful to Safestore for the donation
of storage space for the WrapUp campaign now held nationwide.
This has meant that coat collections can take place across
multiple locations in the UK, and our volunteers also have the
space to sort and package up the donations received so we
can ensure they get to the right place. Safestore’s support has
enabled the collection and distribution of over 197,000 warm
coats to date. It’s been great to work with Safestore and we look
forward to continuing our partnership for years to come.”
56
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Gem Porter, Founder of Streets Kitchen, said:
The team at Streets Kitchen is grateful to
Safestore for supplying much needed free
storage space. The space means that we
can continue to take in donations from our
supporters allowing us to better care for
those in need in the local area.
The last few years have been challenging, particularly
for those living on the streets, and our services are
needed more than ever as we head towards a cost of
living crisis. This free space means that we can divert
the funds we would have spent on storage to be used
in other areas which make the most difference to the
vulnerable people we serve.”
Local charity support
Making a difference to the communities within which we operate,
through partnerships with charities and not-for-profit organisations,
is an integral part of our sustainability strategy. These partnerships
are a source of pride for our store colleagues and drive ongoing
engagement with our purpose. In order to achieve this, we provide
financial support to local and national charities, and encourage our
colleagues to get involved in fundraising and volunteering.
Our Head Office colleagues were able to collate boxes of groceries
and treats at Christmas time which were donated to a local foodbank
during a lockdown period. We believe it is important for our colleagues
to recognise how our activities can have an impact on those around us
and it is our hope that any volunteering and fundraising opportunities
would inspire and encourage them to get involved and provide
hands-on help where it matters.
The provision of free and discounted storage space has helped our
charity partners provide immediate support to people facing challenges
in our local communities. These include charities supporting the homeless,
families struggling with food poverty, and organisations offering mental
health services. We are continuing to work collaboratively with our
colleagues in store locally as we support our charity partners in helping
the communities in the areas within which we operate.
Streets Kitchen is a UK-based grassroots organisation working to
support the homeless community with food outreach programmes,
distributing clothing to those in need, and connecting those who want
to help with those who need help. Safestore currently provide Streets
Kitchen with free storage space enabling
the charity, which is run and organised by
volunteers, to continue its invaluable work
in the London area.
Safestore holds a charitable fund with
Quartet Community Foundation, dedicated
to supporting local organisations that help
people in need in Bristol, Bath and North East Somerset, North
Somerset and South Gloucestershire. Between April 2021 and March
2022 Quartet awarded over £4.8 million in grants to 888 local charitable
organisations, with a third of the funding spent on improving people’s
mental health and wellbeing, and a quarter on increasing people’s
access to vital services.
Construction and the community
We strive to minimise any negative impact of our business operations
on our local communities as well as on our environment. We register
all our new store developments with the Considerate Constructors
Scheme, and we engage with our immediate neighbours on all
projects by sending out regular newsletters about what we are doing
or if we have any noisy work planned that may create a nuisance.
When we tender for various construction projects, we always look
to give local companies the opportunity to tender for the various
construction packages.
In the summer of 2022, Safestore joined forces with construction
partner UC Build to sponsor the Great Merton Mencap Art Competition,
an accessible competition for children, young people, and adults with a
learning disability. After a public exhibition, the winner’s artwork in each
category was printed onto greetings cards and sold to the public to
raise funds for Merton Mencap.
In the run up to our new Morden store opening, we established the
location as a drop-off point for members of the public to drop off
groceries and other essentials for a local foodbank providing
emergency food and support to people in crisis.
A key part of the work last year, in the aftermath of the pandemic, has
been to strengthen the voluntary sector organisations which have played
a crucial role in supporting the most vulnerable in our communities.
It is our ongoing commitment to ensure that we act responsibly and
ethically wherever we construct our storage sites across all the
markets in which we operate.
57
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Our environment
Target
100%
UK owned stores powered by 100% renewable electricity
Reduce
UK store waste to landfill by 50% by 2025 vs 2016/17 level
Improve
construction waste diversion from landfill to 98%
Reduce
carbon emissions by 50% of 2012/13 baseline by 2022
(2018 store portfolio)
Performance 2021/22
100%
Completed
1.7%
On track – we have achieved 100% diversion from
landfill for UK operational waste since May 2022
98.5%
On track – 98.5% diversion of construction waste
from landfill
54%
On track – total emissions 54% below baseline
despite 50% portfolio growth; intensity 70% below
In this section, we explain how we are reducing our impact on the
planet through ongoing improvements in construction standards and
our store operations. We also include our Task Force on Climate-related
Financial Disclosures (“TCFD”) through which we seek to understand
and manage the potential risks (and opportunities) to our business
associated from a changing environment.
Our net zero commitment
We are pleased to share our commitment to become an operationally net
zero Group by 2035. This commitment covers Scope 1 and 2 emissions
plus Scope 3 emissions, which relate to ongoing operations (water,
waste, electricity, transmission and distribution, and business travel).
We aim to achieve this through a combination of consumption reduction
initiatives as outlined later in this section such as phasing out of gas heating
in the UK portfolio, and ensuring all energy consumed is self-generated
(where viable) or purchased from certified renewable sources.
We also intend to work with our construction partners to understand
the baseline of embodied carbon in our new developments and explore
ways of reducing this where viable. Our sustainable construction
standards (see below) already seek to maximise the use of recycled
material and minimise waste whilst building to Building Research
Establishment Environmental Assessment Methodology (“BREEAM”)
‘Very Good’ standards. Based on research by the London Energy
Transformation Initiative (“LETI”) redevelopment projects have an
embodied carbon footprint of approximately 50% of new-build
developments. As such, the Group’s flexible model is likely to generate
less embodied carbon than operators which develop new build
structures exclusively.
58
Safe, sustainable construction
Safestore is committed to ensuring our buildings are constructed
responsibly and their ongoing operation has a minimal impact on local
communities and the environment. This is how we can make a meaningful
contribution towards achieving SDG 12 (Responsible consumption and
production) and SDG 13 (Climate action).
• Our construction teams in the UK and across Europe follow sustainable
construction principles and, wherever practicable, we use materials
that have recycled content or are from sustainable sources.
• We monitor the waste and energy usage on every site and introduce
efficiencies identified into future building projects.
• We design our stores to provide a safe, secure home for our
customers’ possessions and we build them with consideration given
to our people, our customers, our communities, our investors, and
the environment.
• 50% of our last twelve new store openings have been conversions
of existing buildings. Our Bow store, which opened in December
2021, was also a converted building and our new store in Wigan
will also be a conversion.
Building Research Establishment Environmental Assessment
Methodology (“BREEAM”)
BREEAM certification is a local planning requirement for some of our
new stores. The methodology assesses impact and opportunity for
enhancing the environmental aspects of design and construction.
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 resource management,
health, wellbeing, modes of transport and pollution reduction.
Regardless of whether a site is BREEAM certified, we are committed
to build to a minimum standard of BREEAM ‘Very Good’ on all of our
new store developments.
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT 2021/22 highlights
REGO
All electricity used in UK owned stores is
renewable and backed by REGO certification
21.6%
reduction of our year-on-year UK operational
waste production
27
UK stores now have gas use removed, reducing
overall usage year-on-year by 37%
100%
of our UK operational waste has been
diverted from landfill since May 2022
3
plug-in hybrid electric cars have been purchased to
replace one diesel and two petrol vehicles this year
Safestore construction standards
We have a long-standing commitment to providing both a long term
sustainable investment and a pleasant and safe environment for our
customers and colleagues.
Our stores are built or converted to achieve similarly high standards;
however, the configuration of an individual store may vary.
Safestore commitments from 2019/20 onwards are:
Best practice – internal/
external expectation
Safestore commitment
Applicability
BREEAM
BREEAM
Sustainable
drainage systems
Solar photovoltaic
Equivalent to
‘Very Good’
Very Good
Included
Roof-mounted
photovoltaic
Across all new
build stores
Where part of
local planning
Across all new
build stores
Where part of
local planning
Considerate
Constructors Scheme
Score 36 or higher
All new stores
Ecology
Energy
Security
Energy Performance
Certificate
Protect existing and
improve biodiversity
Across all new
build stores
Efficient LED lighting with
built-in motion sensors
Across all existing
and new stores
Operate safe and
secure facility
Across all existing
and new stores
Rated B or higher
All new stores
Construction material: recycled content
Typically, the construction of one of our stores may include the following:
Building material
% of build cost
% recycled content
Steel (main frame)
Concrete
4%–5%
3%–4%
Minimum 56%
29%–37%
Cladding (walls and roof)
7%–9%
3% but Kingspan target
improvement using
recycled bottles by 2030
Particle board
(mezzanine floors)
2%
85%
Brick and block walls
3%–5%
9%–55%
Glazing
2%
Glass 25%, aluminium
frames 60%
Hardcore (piling mat)
1%
100%
Construction waste and recycling
We carefully monitor our new store construction waste and ensure
we separate waste for recycling where possible.
In the UK, we are already diverting 98.5% of our construction waste
away from landfill, ahead of our target of 2025. Across Europe, in
Holland and Spain, we aim to meet and exceed legislative targets.
Across our new store projects this year, we are committed to recycling
or recovering 100% of all soft and hard plastics. We continue to work
with our suppliers to minimise plastic packaging arriving on site and
to cut its usage over the coming years. We aim to remove all such
products from our sites by 2030.
Considerate Constructors Scheme
In the UK construction sites, companies and suppliers voluntarily
register with the Considerate Constructors Scheme (“CCS”) and agree
to abide by the Code of Considerate Practice, designed to encourage
best practice beyond statutory requirements.
The scheme’s purview is any area of construction activity that may
have a direct or indirect impact on the image of the industry. The main
areas of concern fall into three categories: the public, the workforce,
and the environment.
We register all our new UK store developments with the CCS setting a
target score of 36 points for both the shell construction and fitting out
of the facility with our construction management partners.
Our new store in Morden scored an average of 42 out of 45 over the
course of its two visits putting it in the top bracket of scoring. The
inspector highlighted all areas of the inspections as ‘Excellent’ which
highlights the exceptional effort and commitment that our construction
team makes in raising standards of our new store developments.
Construction health and safety
Our health and safety record is excellent. We register all of our new
store schemes with the CCS and we are constantly challenging our
colleagues to exceed minimum standards. Safestore has a robust
health and safety policy, and we have very low incident levels
compared with our peers. This year, the number of reportable
incidents on our construction sites was zero.
Consultation process
We build our stores with our key stakeholders in mind. As part of the
town planning process, we consult widely amongst the community
and those most likely to be affected by any development.
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OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Our environment continued
Safe, sustainable operations
Merchandise
Our 100% recycled and recyclable boxes are available across the UK,
Belgium, the Netherlands, and Spain. We continue to offer our ‘box for
life promise’, ensuring our boxes can be recycled in a responsible way.
The use of fully recycled papers across our range, including boxes, has
resulted in the equivalent of 624 trees being saved from felling this year.
In addition, Safestore is committed to ensuring our merchandise
packaging contains no single-use or non-biodegradable plastics.
Working with our suppliers we endeavour to minimise the carbon footprint
of deliveries with items despatched from local depots and distribution
centres, including one in the Netherlands for European distribution.
Uniform
Our uniform supplier processes are accredited by the International
Register of Certificated Auditors (“IRCA”) which audits and inspects
their factories. In addition, their processes are compliant with the
Ethical Trading Initiative (“ETI”).
Electricity
We continue to make progress towards our environmental targets
through efficiency initiatives and transitions to renewable electricity
across the portfolio.
We are contracted to the supply of REGO certified renewable energy in
the UK until the end of next year and committed to continuing thereafter.
The electricity for our UK owned portfolio is supplied by multiple
renewable sources. The two largest contributors are Kilbraur Wind
Farm and Cullisse Wind Farm which are both located in Scotland.
Like-for-like usage (UK)
Electricity (MWh)
Last year
11,063
This year
11,943
% change
8%
We have seen an incremental increase in electricity usage as our
heating solutions are changed from gas to high efficiency electric
solutions. Following the removal of coronavirus restrictions, we
reinstated the use of electric hand dryers in our stores. We continue
to monitor advances in technology and any viable solutions for the
future to reduce our electricity usage.
60
Voltage optimisation
Voltage optimisation is a transformer-based technology which optimises
incoming supply from the national grid to match the voltage required by
equipment at an organisation’s premises. Optimising voltage reduces
commercial energy use and costs as well as lowering carbon emissions.
During September 2022, we installed voltage optimisation at our largest
location, the Battersea Park store and Business Centre. The return on
investment for Battersea will be calculated after twelve months, with
a predicted decrease in electricity demand and a more stable supply
to the critical infrastructure at the site. We also plan to install this at
our Liverpool facility, which also features a storage centre co-located
with a business centre.
Gas
In 2020 we committed to eliminating gas usage by 2030 from our
UK stores; this was done by installing high output low energy electric
heaters, which are more efficient than water radiators with timed
starting, reducing consumption and demand on electricity.
At the end of October 2022, we eliminated gas usage in 27 stores.
We will work towards our 2030 target by removing gas in at least
an additional five stores per year as laid out in our net zero plan.
The benefits of removing gas from our stores are wide ranging
and include:
• a reduction in the CO2 output attributed to Safestore
• lower maintenance costs as electric heating systems are
more reliable
• no requirement for carbon monoxide testing
• protection from the inevitable material price rises with the upcoming
ban on gas boilers in new homes in 2025
This has resulted in a year-on-year reduction in total gas usage in the
UK by 37%.
Like-for-like usage (UK)
Gas (MWh)
3,649
2,300
(37%)
Last year
This year
% change
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT
Water
Our stores consume very low volumes of water, and we strive to
further minimise our consumption of water wherever possible through
the installation of efficiency schemes such as flow rate restrictors
and aerators.
Like-for-like usage (UK)
Water (cubic metres)
Last year
35,963
This year
41,570
% change
15.6%
Whilst we have registered an increase in water consumption on a
like-for-like basis, this can be attributed to a leak on the incoming
water supply pipe at our Winchester site. Safestore carried out urgent
remedial works once this was established; the leak was responsible
for c.6,429m3 of the above ‘usage’. Without this leak, Safestore would
have seen an overall reduction in water usage.
Operational waste
We changed our waste service partner in mid-April 2022 following
a review of our waste production and a subsequent tender exercise
in the UK. With our new supplier, we have implemented scheduled
services ensuring 100% diversion from landfill for all operational
waste, resulting in:
• overall reduction in total waste of 21.6% year-on-year 278.72 tonnes
• full year average of 96.59% diversion from landfill with 100%
achieved since the start of May 2022
We will continue to review the scale and impact of operational waste
in the UK and other territories, working to minimise the footprint of
Safestore’s operational waste disposal.
Like-for-like usage (UK)
Waste to landfill (tonnes)
43
37
14.0%
Last year
This year
% change
As our new supplier is able to support us in maximising diversion from
landfill, we expect to achieve zero operational waste to landfill from
next year in the UK with options for other territories under review.
Energy Savings Opportunity Scheme (“ESOS”) Phase 2
Safestore UK remains 100% compliant following the ESOS
assessment in 2019 and is working towards completing Phase 3
due in 2023.
Minimum Energy Efficiency Standards (“MEES”)
The Energy Efficiency (Private Rented Property) (England and Wales)
Regulations 2015 prohibit landlords from letting a property with an
EPC rating of below E unless an exemption applies. This is relevant
to our UK locations with lettable offices.
The prohibition has applied to new tenancies for residential properties
since 1 April 2020 and will apply to commercial properties from
1 April 2023. This will be extended to landlords continuing to let properties
that fall below the required EPC rating. It is currently unlawful for landlords
to grant a new tenancy of commercial property with an EPC rating of
‘F’ or ‘G’. This applies to both new leases and renewals (unless an
exemption applies, and the landlord has registered that exemption).
MEES does not apply to lettings of six months or less, or to lettings
of 99 years or more. From April 2027, the minimum standard will rise
to a ‘C’ rating as an interim step to a minimum standard of ‘B’ from
1 April 2030.
Safestore identified 38 locations (storage centres which include lettable
offices) where we would have the requirement to have a MEES energy
performance survey conducted.
Since 2021/22, these stores have been surveyed by external independent
assessors and the findings are that the majority are already compliant
with the 2027 requirements of a ‘C’ rating. Just seven properties were
identified as needing improvements to meet the 2027 standard, and
we are confident that this can be achieved with modest capital investment.
The readiness of the portfolio for the 2027 standard is a consequence
of the work undertaken to date in the form of LED lighting upgrades,
window and insulation enhancements, and the recent drive to install
high efficiency electric heating.
61
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS
Sustainability continued
Our environment continued
Task Force on Climate-related Financial
Disclosures (“TCFD”)
We are committed to implementing the relevant recommendations of
the TCFD, providing our stakeholders and investors with insight into
the key climate-related risks and opportunities that are relevant to
our business, and how these are identified and managed. We report
against the eleven recommendations of the TCFD in this year’s disclosures.
Governance
Our Chief Executive has overall responsibility for climate-related risks
and opportunities. Day-to-day management of climate-related issues
is carried out by our Sustainability Group and is co-chaired by two
members of the Executive Management team (see sustainability
governance section). The Group meets quarterly and is the forum
for determining our sustainability strategy, reviewing performance,
identifying emerging sustainability issues, and determining their
materiality for reporting and escalation via the Group risk
management process.
The Board has oversight of climate-related risk via the Group risk
management process. The Board takes climate issues into consideration
during the investment appraisal process where it scrutinises major
investments including acquisition, development and refurbishment
plans which may include climate-related aspects of design. Ongoing
risk identification and management are through the relevant functional
teams, for example through proposed or actual response to changes
in regulation such as the Minimum Energy Efficiency Standards
(“MEES”) in the UK.
Our commitment to address climate-related risks is embedded across
the business, through a carbon intensity KPI. The performance against
this KPI is linked to executive remuneration, aiming to incentivise
progress against carbon emissions reduction targets. The Board
reviews progress on carbon reduction alongside other strategic initiatives
annually as part of the annual targets and remuneration cycle.
Risk management
The Sustainability Group is responsible for identifying general
climate-related risks that are managed by the Board via our corporate
risk management process (see the Audit Committee report for details
of our approach to risk management). In addition, the Property function
is responsible for identifying risks specific to new development projects
as part of the investment appraisal process. The Sustainability Group
has conducted workshops incorporating inputs from internal and
external experts and climate model data to explore the relevance and
potential financial impact of the six risk themes identified in the TCFD
framework over the short (to 2030), medium (to 2050), and long
(beyond 2050) term.
These themes remain under review, particularly the physical risks to
the Group portfolio as we expand into new markets, climate models
evolve, and governments and municipal authorities develop their own
mitigation strategies.
The completed climate-related risk register is reviewed and approved
by the Audit Committee during the financial year such that the significance
of climate-related risks is considered in relation to risks identified in the
standard risk management process. This ensures the management of
climate-related risks is integrated into the Group’s overall risk management
framework. The climate-related register is reviewed annually to incorporate
ongoing refinement and quantification of risks and to ensure the register
reflects any material changes in the operating environment and business
strategy. Once identified, further details related to each key risk and
opportunity, such as a quantification of the financial impact, the
appropriate strategic response and cost of response and the variance
of key risks in relation to climate-related scenarios, are developed where
possible. These details help to determine the materiality of each risk
and, alongside the impact assessment outlined above, this allows
the Group to prioritise resources in managing the most material
climate-related impacts, determine the best management response
or highlight areas requiring further investigation.
An example of day-to-day management of risks would be the incorporation
of mitigations for high exposure sites into construction designs before
submission for planning approval.
Strategy
Our business is exposed to both risk and opportunity from climate
change primarily as a consequence of owning and operating real
estate assets in the UK and Western Europe. We seek to understand
and mitigate the physical and financial risks that could be material to
the business. Our analysis currently focuses on the UK which accounts
for most of the Group property portfolio by value and floor area. These
findings can likely be generalised for Northern European markets which
will experience similar physical consequences.
Climate-related risks and opportunities are assessed over multiple
time horizons because we expect that transitional risks are likely to
be ‘front-loaded’ as the international community attempts to meet the
goal of keeping warming to 1.5 degrees Celsius or below. Physical
risks to our assets are likely to increase over time, particularly if the
global economy does not decarbonise at the rate required to keep
warming below the target level. Accordingly, we assess climate-related
risks and opportunities over the short (to 2030), medium (to 2050) and
long (beyond 2050) term. Risks were deemed to be low impact where
the potential annual EBITDA impact is estimated to be below £100k,
and high impact where either the potential EBITDA impact is greater
than £150k, or a balance sheet (valuation) impact would exceed
£20 million (1% of property valuation).
The assessment of resilience of the business, specifically the asset
portfolio, was guided by a range of scenarios published by external
agencies, such as the UK Met Office UKCP18, and looked at both
physical and transitional risks under two climate warming scenarios:
one within 1.5 to 2.0 degrees Celsius (RCP 2.6); and one up to
4.0 degrees Celsius (RCP 8.5).
62
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Risk type
Description
Potential impact Timeframe
Physical risks
Chronic
Acute
Transition risks
Policy and legal
Regulation relating to
stricter environmental
standards
Physical disruption as a result of longer term shifts in climate patterns
(e.g. sustained higher temperatures or rainfall) that may cause sea level
rise or chronic heat waves
Primarily flooding risks (Northern Europe markets) triggered by changes in frequency of
extreme rainfall events (based on mm/day thresholds) which are projected to increase
in all warming scenarios, especially in summer and late autumn. Costs that may be
incurred for the few stores exposed include mitigation capex, operational disruption,
physical repairs, clean-up, insurance premia increases, and reduced customer
demand as a result of reputational damage
Low
Medium–long
Medium
Medium–long
Increased stringency of building and planning requirements in support of national
net zero targets. Local authorities will seek to use planning systems to deliver progress
against climate goals which will impact on build specification and associated costs.
MEES standards also increasing for commercial lettings (office locations only) which
will drive upgrade expenditure
Medium
Short
Climate change litigation
Claims brought by stakeholders (e.g. investors, public interest organisations)
perhaps due to failure to mitigate impacts of climate change, failure to adapt, or
the insufficiency of disclosure around material financial risks
Reporting obligations
Additional reporting burden on carbon emissions, including Scope 3
Technology
Electric vehicles
Market
To deliver net zero targets, electric vehicle use will increase and drive demand for
charging point infrastructure for customers and colleagues. May be mandated by
some local authorities as part of planning process. This will impact capital budgets
for new builds and retrofits. However, this could also be a revenue opportunity in
high traffic locations with an appropriate commercial arrangement
Low
Low
Low
Medium
Short
Short
Valuation of properties with
lower efficiency rating
Risk of valuation impairment of assets with low efficiency ratings. Only heated
areas of storage facilities are rated – these can usually be cost-effectively improved
Low
Medium
Supply chain resilience/
cost of materials
Risk to development costs due to demand versus supply of key materials such as
insulation and cost of inputs which may incur carbon premium (steel and cement)
Medium
Short–medium
Cost and availability
of capital
Risk of downgrading/cost premium as ESG considerations are incorporated into
credit ratings and other lender/investor screening
Low
Short
Reputation
Stakeholder risk
Employee risk
Increasing public awareness of and appetite to tackle climate change could
create reputational risk if there is failure to reduce operational and embodied
carbon. This could manifest in delays to planning processes
As colleagues become increasingly engaged with climate change issues,
perceived failure to make progress on decarbonisation could impact talent
recruitment and retention
Low
Low
Short–medium
Short–medium
We expect some physical climate-related risks to have an impact on
our business. Specifically, the impact of more frequent intense precipitation
events is deemed as relevant in the medium to long term. We also
expect the transition to a low carbon economy poses some limited
financial risks in the short term as we respond to changes in regulation
and incur costs associated with decarbonising our building development
and operations. However, there may also be opportunities that arise
from the transition as well as the physical impacts of extreme weather.
Regardless of the scenario we believe the Group and its assets have
limited exposure and vulnerability to climate-related risk and accordingly
there are limited implications for its strategy and financial plans in its
current markets. The Group will therefore continue to grow its portfolio,
assessing each investment for climate risk in addition to financial
considerations and making necessary physical and financial allowances
for mitigations where appropriate as it already does today. The Group
will continue to work with local authorities and its development partners
to ensure any new buildings and conversions are built to a high operating
efficiency standard that meets current and likely future regulations
and supports the Group’s effort to achieve net zero emissions from
its operations.
63
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS
Sustainability continued
Our environment continued
Physical risks
The primary physical risk to our business relates to the increasing
likelihood of extreme weather events (particularly intense precipitation
and flooding). Based on current data, our insurer’s flood assessment
at the last renewal indicates that 91% of the Safestore portfolio by floor
area (90% by insured value) has little to no exposure to river/coastal
flood risk (the chance of a flooding event occurring annually is less
than 0.5%). This corresponds to just twelve current locations in the
UK with an elevated risk. There is a slightly higher exposure to surface
water flood risk - 71% of floor area and value is in stores with less than
0.5% Annual Exceedance Probability.
Accordingly, overall the portfolio has low exposure to acute flooding
risk, and whilst the frequency of extreme precipitation events is
projected to increase in all warming scenarios, the number of medium
and high impact rainfall days (defined by the UK Met Office’s National
Severe Weather Warning Service as 24 hour precipitation thresholds
in mm/day which are designed to be used for identifying prolonged
rainfall which may lead to flooding) are still projected to be relatively
rare events1.
Flood risk of UK portfolio 2022
(% of insured value excl. customer goods)
100%
80%
60%
40%
20%
0%
River/coastal %
Surface water %
Low/medium (<0.5% AEP)
High (>0.5% AEP)
Research focused on the physical climate risk posed to Edinburgh’s
World Heritage sites2 using the most recent granular climate models
confirms this projection of extreme rainfall events and demonstrates
the elevated risks are in the autumn and summer seasons specifically.
Spring and winter events are rarely projected to exceed any impact
threshold out to 2080 even in the low mitigation (RCP 8.5) scenario.
This pattern is expected to be similar across the UK. This research
implies that the probability of these extreme events will rise in autumn
by 5-10% by 2040 and by 20-40% by 2080. The summer season
shows the largest change, especially towards the end of the century,
with probability close to 50% higher for a 1-in-200 year event, i.e.
despite overall summer drying trends in the future, increases in the
intensity of summer rainfall events are projected. It should be noted,
however, that projections for rare events have a high degree of
uncertainty, especially in the outer years of a projection period.
Notes
1
Hanlon, H.M., Bernie, D., Carigi, G. et al. Future changes to high impact weather in the
UK. Climatic Change 166, 50 (2021). https://doi.org/10.1007/s10584-021-03100-5).
2
Shane O’Neill, Simon F.B. Tett, Kate Donovan. Extreme rainfall risk and climate change
impact assessment for Edinburgh World Heritage sites, Weather and Climate Extremes,
Volume 38, 2022.
64
Projections of low, medium, and high impact
rainfall days in the UK per year under different
warming scenarios1
r
y
/
s
y
a
d
l
l
a
f
i
n
a
R
t
c
a
p
m
I
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o
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r
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/
s
y
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d
l
l
a
f
i
n
a
R
t
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a
p
m
I
i
m
u
d
e
M
r
y
/
s
y
a
d
l
l
a
f
i
n
a
R
t
c
a
p
m
I
h
g
H
i
160
140
120
100
80
60
40
20
0
50
40
30
20
10
0
20.0
17.5
15.0
12.5
10.0
7.5
5.0
2.5
0.0
England and Wales
NE Scotland
NW Scotland
Northern Ireland
SW Scotland
SandE Scotland
61-90
81-00
00-17
1.5
2.0
2.5
3.0
4.0
Global Warming Level
England and Wales
NE Scotland
NW Scotland
Northern Ireland
SW Scotland
SandE Scotland
61-90
81-00
00-17
1.5
2.0
2.5
3.0
4.0
Global Warming Level
England and Wales
NE Scotland
NW Scotland
Northern Ireland
SW Scotland
SandE Scotland
61-90
81-00
00-17
1.5
2.0
2.5
3.0
4.0
Global Warming Level
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT
From prior experience, the main consequences of these intense
precipitation events are clean-up, repairs and maintenance costs, and
short term impact on asset availability (temporary closures preventing
new move-ins). Costs are usually recovered from insurers so over time
it is reasonable to expect insurance premia and flood-related excesses
will increase if extreme events occur more frequently. There is also the
longer term risk of lower occupancies in exposed stores – although
customer goods are also insured to their declared value there is the
possibility of a reputational impact. A reasonable assumption for the
cost (P&L impact) of remediation after an extreme precipitation event
is £100k per event regardless of the warming scenario.
It should be noted that where Safestore does invest in property in
higher risk areas, risk mitigation measures are usually proactively
deployed. As such, even in extreme weather scenarios the majority of
the UK portfolio is not likely to be impacted from an ongoing operation,
insurance risk premium or valuation basis. Mitigation measures (where
deployed) should minimise disruption at higher risk sites and these
locations may in fact experience increased demand from impacted
local communities as they seek temporary storage for their belongings.
Transitional risks
Our primary transition risks are policy and regulatory changes which
may increase building specifications in an effort to meet net zero
objectives. Local authorities will continue to use planning processes
to deliver against their own objectives and policies such as Minimum
Energy Efficiency Standards (“MEES”) will impact landlords in the
residential and commercial sectors. Requirements for new projects to
meet more stringent energy efficiency standards and include features
such as solar photovoltaic panels and electric vehicle charging facilities
will add to the capital costs of new developments; however, these
would represent a small portion (1–2%) of a new development project
and would be likely be recovered through lower ongoing operating
costs over the lifetime of the building. A related market risk of carbon
taxes on core building materials such as steel could have a larger
impact; however, where possible, Safestore will convert existing
structures and is therefore less exposed to these increases in cost
and embodied carbon.
To ensure relevant UK assets meet MEES minimum standards by 2030
an estimated capital investment of £650k will be required. To ensure
readiness with MEES, we identified UK locations with offices that
would fall under the new regulations. We have conducted energy
efficiency assessments on these locations. At 31 October 2022,
38 relevant UK stores have been assessed with seven properties
requiring improvements before 2027 and a further fourteen requiring
action by 2030. Should any of our facilities with offices be unable to
cost effectively meet MEES standards by 2030, we would likely convert
the office spaces into storage which does not have the same requirement.
Opportunities
The transition to a low carbon economy is likely to present
opportunities as well as risks. In general, businesses that build and
operate sustainable facilities are well-positioned in a world where both
local planning departments and end consumers are making decisions
with climate change in mind. In addition, reducing the energy intensity
of the business and reliance on gas is financially advantageous,
particularly in an era of volatile energy prices. Removing gas-burning
appliances from facilities also reduces associated fire and carbon
monoxide exposure risk. However, it should be noted that the business
is not an intensive user of energy (energy costs were 1.5% of revenue
in FY2022) unlike other more intensive usage sectors, so the variability
of power prices is not considered a significant risk. Nevertheless, it is
likely that buildings with lower operating costs and carbon emissions
intensity will attract a valuation premium and lower cost of funding.
Sales of excess power generated from rooftop solar installations
could over time become a revenue stream in addition to supporting
decarbonisation in our communities and the wider economy.
Provision of electric vehicle charging facilities could deliver a customer
benefit whilst also reducing associated Scope 1 (business travel) and
Scope 3 emissions (customer travel to/from stores) and provide
another ancillary revenue stream.
It should also be noted that well-positioned self storage facilities could
be seen as adding ‘system resilience’ to supply chain disruptions and
facilitating recovery post-extreme weather events via temporary storage
of business or consumer goods.
65
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Our environment continued
Metrics and targets
To assess climate risk we internally record and monitor a range of
construction and operational impact metrics such as development cost
trends, unit availability (offline units) and damage claims relating to water
damage. We also monitor and report our absolute and like-for-like energy
consumption and greenhouse gas (“GHG”) emissions in line with the
EPRA sBPR recommendations. In addition, we monitor our use of water,
generation of waste including the proportion diverted to landfill and the
emissions associated with business travel. These are disclosed in
following sections of this report on pages 67 to 73. Supplementary data
can be found on our corporate website, www.safestore.co.uk/corporate.
Scope 3 emissions which relate to ongoing operations (water, waste,
electricity transmission and distribution and business travel) are measured
and actively managed. Scope 3 relating to purchased goods, capital
expenditure and downstream use of our products (primarily customer
journeys to our stores) are not measured but we actively engage with
our suppliers to ensure these are being considered, for example, through
consolidation of deliveries to our stores or the proportion of recycled
material used in development projects.
Through a range of energy efficiency initiatives and a switch to 100%
renewable electricity, we have reduced our absolute carbon emissions
versus 2013 baseline by 54%. This progress in absolute emissions
reduction is despite a c.50% increase in portfolio floor space. As a result,
emissions intensity is currently 70% below 2013 levels (calculated
according to the location-based methodology) which is significantly
ahead of the 2022 target of 58% below the 2013 baseline.
The self storage sector is not a significant consumer of energy when
compared with other segments of the real estate landscape.
As a result, operational emissions intensity per unit of floor area tends
to be far lower versus other real estate sectors. According to a 2021
report by KPMG and EPRA1, self storage generates the lowest greenhouse
gas emissions intensity of all European real estate subsectors, with
emissions per m2 less than 30% of the European listed real estate
average. Reflecting the considerable progress made on efficiency
measures and waste reduction to date, Safestore’s emissions intensity
(3.9 kg/m2) for that year is considerably lower (-32%) than the self
storage subsector average.
Strategy for operational net zero
We will achieve operational net zero by 2035, through:
Nevertheless, as part of our commitment to SDG 13 (Climate action)
we have been working towards a previously set near term carbon
reduction target to 2022 (see sustainability targets and KPIs). In addition,
we have a commitment to work towards operational net zero by 2035.
This commitment covers Scope 1 and 2 emissions plus Scope 3
emissions which relate to ongoing operations (water, waste, electricity
transmission and distribution and business travel). We aim to achieve
this through a combination of consumption reduction initiatives such
as phasing out of gas heating in the portfolio and ensuring all energy
consumed is self-generated (where viable) or purchased from certified
renewable sources. Some residual emissions may require the purchase
of carbon offsets from a credible scheme(s). We estimate that the
roadmap to operational net zero will require a total investment of
c.£3 million to 2035, with investments in later years subject to detailed
business case evaluation.
GHG intensity (Scope 1 and 2) by REIT sector
kg CO2e/m2 per year (2020)1
38.0
27.0
22.1
20.2
19.2
11.8
Healthcare
Residential
Diversified
Office
Retail
Mixed office/
industrial
Industrial
6.6
Self storage
5.8
Safestore
3.9
Note
1
KPMG/EPRA: Overview of real estate companies’ environmental performance, October
2021 (based on EPRA sBPR data sets for 88 listed companies).
a) Reducing and optimising what we use
• Completion of lighting efficiency programme (external signage
b) Using only zero carbon energy
• Installation of solar photovoltaic on new-build stores where viable
and customer unit lighting)
• Securing certificated green electricity through PPAs and/or
• Voltage optimisation at selected sites
‘high quality’ tariffs
• Decommissioning of gas appliances
• Transition of company car fleet to PHEVs* and BEVs*
• Installation of building management
• Systems for remote monitoring and power
management (business case dependent)
and introducing charging points
• Retrofit of rooftop solar photovoltaic to selected stores
(business case dependent)
Total investment of
c.£3m spread until 2035
*
PHEV = Plug-in Hybrid Electric Vehicles; BEV = Battery Electric Vehicles.
66
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Mandatory greenhouse gas (“GHG”) emissions reporting (wholly owned stores only)
This report was undertaken in accordance with the mandatory
greenhouse gas (“GHG”) emissions reporting requirements outlined
under the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 (the “2013 Regulations”) and the Companies
(Directors’ Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018 (the “2018 Regulations”). This requires
Safestore Holdings plc (“Safestore”) to produce a Streamlined Energy
and Carbon Report. This report contains our GHG disclosure for the
2021/22 reporting period.
We have 130 stores in the UK, 29 stores in France, 9 stores in the
Netherlands, 6 stores in Belgium, and 5 stores in Spain. During the
2021/22 reporting period we acquired a store in Christchurch (UK),
opened a new store in Bow (London, UK). We also acquired 15 stores
located across the Netherlands and Belgium in April.
This report contains the following environmental data for all our stores
which were operational at the beginning of the financial year: GHG
emissions, electricity consumption, electricity transmission and
distribution, gas consumption, water consumption, waste generation,
and business travel.
Methodology
Scope of analysis and data collection
Over 2021/22 we have collected primary data for all of our stores,
including: building size (sq ft), electricity consumption (MWh), electricity
transmission and distribution (“T&D”) (MWh losses), gas consumption
(MWh), water consumption (m3), waste generation (tonnes by waste
disposal method) and business travel (mileage). We do not have any
refrigerant leakage to report for any of our stores in the UK, France,
Spain, the Netherlands or Belgium. All primary data used within this
report is from 1 September 2021 to 31 August 2022, covering the
same reporting period as last year. Where electricity, gas or water
consumption data is not available or incomplete, we have estimated
consumption based on a combination of pro-rata methods as per
Environmental reporting guidelines 2019 including:
• pro-rata extrapolation from known reliable data
• average consumption per sq ft of lettable area of the stores where
we have reliable data
• direct comparison using a corresponding period
KPI selection and calculation
For the purposes of this report stationary energy use (electricity and gas
consumption), water consumption, waste generation, and business
travel have been selected as the most appropriate key performance
indicators (“KPIs”) for the Group. To ensure consistency in our reporting,
particularly where there are differences between the UK, France, Spain,
the Netherlands, and Belgium, we are reporting all GHG emissions in
units of tonnes of CO2e. We have used the 2022 GHG conversion factors
published annually by the Department for Environment, Food and Rural
Affairs (“Defra”) and Business, Energy and Industrial Strategy (“BEIS”)
with the exception of the French, Spanish, Dutch, and Belgian CO2e
conversion factors associated with electricity consumption and T&D,
which are no longer published by BEIS. These were sourced from the
International Energy Agency (‘IEA’) and Carbon Footprint country specific
grid electricity factors.
GHG emissions scope
The Greenhouse Gas Protocol (the “GHG Protocol”) differentiates
between direct and indirect emissions using a classification system
across three different scopes:
• Scope 1 emissions: includes direct emissions from sources which
Safestore owns or controls. This includes direct emissions from fuel
combustion and industrial processes.
• Scope 2 emissions: covers indirect emissions relating solely to the
generation of purchased electricity that is consumed by the owned
or controlled equipment or operations of Safestore.
• Scope 3 emissions: covers other indirect emissions including
third party-provided business travel.
GHG emissions – scopes included in this report
• Scope 1 emissions: we are reporting our gas consumption and
business mileage.
• Scope 2 emissions: we are reporting our electricity consumption.
• Scope 3 emissions: we are reporting our electricity transmission
and distribution, waste generation and water consumption.
Group environmental performance
We recognise the importance of taking a proactive, strategic approach
to environmental management and we aim to ensure that good
environmental practices are applied throughout our stores, and that
those working for or on behalf of Safestore are aware of the need to
act responsibly and sustainably. Our most significant environmental
impacts arise from the construction of new stores and the operational
energy consumption of our existing stores.
Safestore is committed to the protection of the environment, the
prevention of pollution, and continually improving its environmental
performance. We will comply with all relevant legislation and strive to
exceed legal requirements where possible in order to avoid or minimise
any potential environmental impacts.
The following table displays our total Group performance for electricity,
gas and water consumption, waste generation (recycling, landfill,
Energy from Waste), and business travel against the previous years.
67
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Mandatory greenhouse gas (“GHG”) emissions reporting (wholly owned stores only)
continued
Breakdown of Consumption by source (2016–2022)
Emissions source
Natural gas
Electricity
Purchased water
Recycling
Landfill
Energy from Waste
Business travel
Units
MWh
MWh
m3
tonnes
tonnes
tonnes
miles
2016/17
(Sep–Aug)
2,349
22,005
45,129
787
49
721
2017/18
(Sep–Aug)
4,358
17,416
61,655
1,211
57
730
602,240
628,822
2018/19
(Sep–Aug)
4,136
15,372
55,113
586
44
1,320
396,088
2019/20
(Sep–Aug)
2020/21
(Sep–Aug)
2021/22
(Sep–Aug)
3,572
14,435
43,372
1,448
58
1,124
3,686
13,506
47,503
1,487
57
831
2,742
14,755
53,024
1,517
43
696
346,076
421,829
469,324
Breakdown of associated GHG emissions by source (2021/22)
1.0% 2.0% 3.0% 14.0% 80.0%
Purchased water
Waste
Business travel
Natural gas
Electricity
Group environmental performance – analysis
We have analysed the year-on-year change in our performance and provided commentary on our Group environmental performance, as below:
Gas performance
We are continually seeking opportunities to reduce energy consumption to the lowest practicable levels appropriate with the operational needs
of the business and to satisfy the needs of our customers. We are phasing out the use of gas in our stores wherever possible. Some of our stores
still consume low volumes of gas for heating in reception and office locations. We seek opportunities to design efficient, low consuming working
environments, ensuring that all new stores are built to rely solely on electricity.
Year ended 31 August
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
% change
Gas use
Scope 1 emissions
MWh
tCO2e
2,349.3
434.0
4,358.3
801.8
4,136.2
760.4
3,572.0
656.8
3,685.5
675.0
2,742.0
500.5
(25.6%)
(25.9%)
Total gas consumption across all our stores was 2,742 MWh, which is a 25.6% decrease compared with the previous financial year.
Note
0.1% of the 2021 consumption data has been estimated for stores where consumption data was incomplete.
68
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT
Electricity performance
We are continuing to identify opportunities to reduce electricity consumption across our stores.
Recognising that our electricity consumption is predominantly due to our lighting requirements, we have completed a portfolio-wide LED lighting
upgrade programme across all UK stores and are working on projects such as voltage optimisation to improve our efficiency.
Year ended 31 August
Electricity use
Scope 2 emissions (LB)
Scope 2 emissions (MB)
Scope 3 emissions
MWh
tCO2e
tCO2e
tCO2e
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
% change
22,005.2
6,563.3
17,416.0
4,376.7
15,373.0
3,527.0
14,435.0
13,506.0
14,755.0
3,022.0
2,555.0
2,620.0
Not reported Not reported Not reported
613.6
371.4
299.0
171.0
261.0
153.0
228.0
178.0
237.0
9.2%
2.5%
16.5%
3.8%
Total electricity consumption across all of our stores was 14,755 MWh which is a 9.2% increase in consumption compared to previous year.
Water performance
Our stores consume very low volumes of water, and we strive to minimise our consumption of water wherever possible through the installation
of efficiency schemes.
Year ended 31 August
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
% change
Water use
Scope 3 emissions
m3
tCO2e
45,129
47.5
61,655
64.9
55,113
58.0
43,372
45.6
47,503
20.0
53,024
22.0
11.6%
11.6%
Between September 2021 and August 2022, the total water consumption across all our stores was 53,024m3, which is an increase of 12%
compared to the previous financial year.
Waste performance
We produce a relatively small amount of waste and are seeking opportunities to reduce or avoid the use of natural resources and minimise waste
production, by promoting recycling where possible. We continue to improve waste segregation and are enhancing recycling facilities to divert
waste from landfill.
Year ended 31 August
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
% change
Waste – recycling
tonnes
787.7
1,211.2
585.6
1,447.9
1,487.5
1,517.0
2.0%
Waste – Energy from
Waste
Waste – landfill
Scope 3 emissions
tonnes
tonnes
tCO2e
721.6
49.2
37.8
730.0
57.3
47.2
1,320.5
1,124.1
44.2
45.1
57.7
81.2
831.1
56.5
90.0
696.0
46.0
68.0
(16.2%)
(24.2%)
(9.7%)
In the last twelve months to August 2022, a total of 2,325 tonnes of waste has been generated (recycling, Energy from Waste and landfill) which is
a decrease of 9.7% compared with the previous year.
Following the commencement of a new supplier contract in April 2022, we expect to achieve 100% diversion from landfill across our UK stores
next year and continue to review our option in other territories to minimise the impact of our operational waste.
Business travel performance
We report on our business mileage in both Company-owned and personal vehicles. We continue to promote public transport and car sharing
where possible.
Year ended 31 August
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
% change
Business travel
Business travel
Scope 1 emissions
miles
MWh
tCO2e
602,240
628,822
396,088
346,076
421,829
469,324
n/a
168.5
n/a
175.6
440.7
108.8
395.4
96.4
484.3
117.7
518.0
124.0
11.3%
6.9%
5.7%
In our business we travelled 469,324 miles in the twelve months to 31 August 2022, resulting in an 11.3% increase compared with the previous
year. Following the removal of travel restrictions we have seen travel return to pre-pandemic levels with the additional territories added to our
portfolio contributing to the increase in business travel.
Vehicle fleet
This year we have purchased three plug-in hybrid electric vehicles, replacing one diesel and two petrol cars.
As we continue to modernise our fleet, we are actively reducing our emissions and going forward, we are purchasing a minimum of plug-in hybrid
vehicles. Longer term we are looking to replace our existing company car fleet with full electric cars subject to practicability and vehicle availability.
69
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS
Sustainability continued
Mandatory greenhouse gas (“GHG”) emissions reporting (wholly owned stores only)
continued
Group GHG performance (mandatory GHG reporting)
We have used the Environmental Reporting Guidelines: Including Streamlined Energy and Carbon Reporting Guidance1 and Greenhouse Gas
Protocol2 methodology for compiling this GHG data and, for UK energy consumption and emissions, included the following material GHGs: CO2,
N2O and CH4. In accordance with the BEIS reporting guidelines and data conversion factors for GHG emissions, the equivalent reports on our
France, Spain, the Netherlands, and Belgium properties used the CO2e factors provided by the International Energy Agency (“IEA”)3 for emissions
associated with electricity T&D loss and Carbon Footprint Emission Factors March 2022 edition for grid electricity both for location based and
residual fuel mix for market based4. Our GHG emissions for 2021/22 covered 100% of gross floor space. The business travel miles reported
cover Company owned or operated vehicles throughout the UK, Spain, the Netherlands, and Belgium travelling for business. No data associated
with business travel has been provided for France.
Notes
1 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/850130/Env-reporting-guidance_inc_SECR_31March.pdf
2 https://ghgprotocol.org/
3 Source: IEA (2019) Emission Factors (https://www.iea.org/t_c/termsandconditions/)
4 Source: Carbon Footprint March 2022 Emission Factors (https://www.carbonfootprint.com/docs/2022_03_emissions_factors_sources_for_2021_electricity_v11.pdf)
UK government GHG emission conversion factors for company reporting
Standard set for 2022 (this set covers the greatest proportion of the current GHG reporting year)
Source: BEIS 2022/Carbon Footprint/IEA
Scope
Emissions source
Unit
Conversion factors
1
1
1
1
2
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
3
Natural gas (gross CV)
Business travel (petrol)
Business travel (diesel)
Business travel (plug-in hybrid)
UK electricity grid supply
France electricity grid supply (LB)
Spain electricity grid supply (LB)
Belgium electricity grid supply (LB)
The Netherlands electricity grid supply (LB)
UK electricity grid supply (MB)
France electricity grid supply (MB)
Spain electricity grid supply (MB)
Belgium electricity grid supply (MB)
The Netherlands electricity grid supply (MB)
UK electricity transmission and distribution
France electricity transmission and distribution
Spain electricity transmission and distribution
Belgium electricity transmission and distribution
The Netherlands electricity transmission and distribution
Water supply
Water treatment
Commercial waste – recycling
Commercial waste – Energy from Waste
Commercial waste – landfill
kWh
miles
miles
miles
kWh
kWh
kWh
kWh
kWh
kWh
kWh
kWh
kWh
kWh
kWh
kWh
kWh
kWh
kWh
m3
m3
tonnes
tonnes
tonnes
0.18254
0.27436
0.27492
0.11007
0.19338
0.05128
0.17103
0.16189
0.37434
0.00000
0.05852
0.28653
0.20478
0.45172
0.01769
0.00480
0.02730
0.00660
0.01740
0.14900
0.27200
21.28019
21.28019
467.00838
Note
The conversion factors for electricity (both location based and market based) emission factors were sourced from Carbon Footprint country specific electricity grid GHG Emission Factors,
residual mixes and production mix conversion factor. (Note: Defra no longer provides overseas electricity generation conversion factors. The conversion factors are obtained directly from the
“IEA” 2019 for transmission and distribution losses.
70
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Streamlined Energy and Carbon Report (“SECR”) summary
In accordance with the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 (the “2013 Regulations”) and the
Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (the “2018 Regulations”) we have
reported our Streamlined Energy and Carbon Report disclosure for the previous year 2020/21 and the current year 2021/22.
UK – GHG emissions (tCO2e)
Units
2020/21
2021/22 *
Scope 1
Scope 2 (LB)
Scope 2 (MB)
Scope 3
Total GHG CO2e (LB)
Total GHG CO2e (MB)
GHG CO2e intensity (LB)
GHG CO2e intensity (LB)
GHG CO2e intensity (MB)
GHG CO2e intensity (MB)
tonnes CO2e (UK)
tonnes CO2e (UK)
tonnes CO2e (UK)
tonnes CO2e (UK)
total tonnes CO2e (UK)
total tonnes CO2e (UK)
tonnes CO2e/floor space (UK – thousand sq ft)
tonnes CO2e/floor space (UK – thousand sq m)
tonnes CO2e/floor space (UK – thousand sq ft)
tonnes CO2e/floor space (UK – thousand sq m)
786
2,437
12
281.0
3,504
1,079
0.40
4.50
0.13
1.38
557
2,415
0
279.8
3,252
837
0.38
4.08
0.10
1.05
Europe – GHG emissions (tCO2e)
Units
2020/21
2021/22 *
Scope 1
Scope 2 (LB)
Scope 2 (MB)
Scope 3
Total GHG CO2e (LB)
Total GHG CO2e (MB)
GHG CO2e intensity (LB)
GHG CO2e intensity (LB)
GHG CO2e intensity (MB)
GHG CO2e intensity (MB)
UK – underlying energy use (MWh)
Scope 1
Scope 2
Total Scope 1 and 2
MWh intensity
MWh intensity
tonnes CO2e (Europe)
tonnes CO2e (Europe)
tonnes CO2e (Europe)
tonnes CO2e (Europe)
total tonnes CO2e (Europe)
total tonnes CO2e (Europe)
tonnes CO2e/floor space (Europe – thousand sq ft)
tonnes CO2e/floor space (Europe – thousand sq m)
tonnes CO2e/floor space (Europe – thousand sq ft)
tonnes CO2e/floor space (Europe – thousand sq m)
Units
MWh (UK)
MWh (UK)
MWh (UK)
MWh/floor space (UK – thousand sq ft)
MWh/floor space (UK – thousand sq m)
7
118
141
42
167
190
0.08
0.82
0.09
0.93
2020/21
4,133
11,476
15,609
1.86
20.01
68
205
178
48
320
293
0.10
1.08
0.09
0.99
2021/22 *
2,918
12,490
15,408
1.80
19.34
Europe – underlying energy use (MWh)
Units
2020/21
2021/22 *
Scope 1
Scope 2
Total Scope 1 and 2
MWh intensity
MWh intensity
MWh (Europe)
MWh (Europe)
MWh (Europe)
MWh/floor space (Europe – thousand sq ft)
MWh/floor space (Europe – thousand sq m)
37
2,030
2,067
0.94
10.11
341
2,266
2,606
0.82
8.80
71
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Sustainability continued
Mandatory greenhouse gas (“GHG”) emissions reporting (wholly owned stores only)
continued
Streamlined Energy and Carbon Report (“SECR”) summary continued
GHG emissions
Units
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22 * % change
Scope 1
Scope 2 (LB)
Scope 2 (MB)
Scope 3
Total GHG CO2e (LB)
Total GHG CO2e (MB)
GHG CO2e intensity
GHG CO2e intensity
GHG CO2e intensity
(MB)
GHG CO2e intensity
(MB)
tonnes CO2e (UK, Europe)
tonnes CO2e (UK, Europe)
tonnes CO2e (UK, Europe)
tonnes CO2e (UK, Europe)
total tonnes CO2e
(UK, Europe)
total tonnes CO2e
(UK, Europe)
tonnes CO2e/floor space
(thousand sq ft)
tonnes CO2e/floor space
(thousand sq m)
tonnes CO2e/floor space
(thousand sq ft)
tonnes CO2e/floor space
(thousand sq m)
602
6,563
n/a
699
977
4,376
n/a
483
869
3,527
n/a
402
753
3,022
171
396
7,864
5,836
4,798
4,171
793
2,555
153
324
3,671
625
2,620
178
327
(21.2%)
2.5%
16.5%
1.1%
3,572
(2.7%)
n/a
0.9
—
n/a
0.6
9.8
n/a
0.5
6.6
1,320
1,269
1,130
(11.0%)
0.4
4.9
0.4
3.7
0.12
1.29
0.3
(12.4%)
3.3
(12.4%)
0.10
(19.8%)
1.03
(19.8%)
Energy consumed
Units
2018/19
2019/20
2020/21
2021/22 * % change
Scope 1
Scope 2
MWh (UK, Europe)
MWh (UK, Europe)
Total Scope 1 and 2
total MWh (UK, Europe)
MWh intensity
MWh intensity
MWh/floor space (thousand sq ft)
MWh/floor space (thousand sq m)
4,577
15,373
19,950
1.99
21.46
3,967
14,435
18,402
1.76
18.95
4,170
13,506
17,676
1.67
17.95
3,259
14,755
18,015
1.53
16.48
(21.8%)
9.2%
1.9%
(8.2%)
(8.2%)
Note
*
The financial reporting year 2021/22 for Europe includes energy and emission figures for Belgium and the Netherlands which were acquired by Safestore in April 2022.
Energy efficiency narrative
Through a range of energy efficiency initiatives and a switch to 100% renewable electricity we have reduced our absolute energy use, with
carbon emissions versus 2013 baseline reduced by 54%.
We have now been using renewable energy for three years. In our UK wholly owned stores, 100% of our electricity is from certified renewable
energy sources. The electricity for our UK owned portfolio is supplied by multiple renewable sources. The two largest contributors are Kilbraur
Wind Farm and Cullisse Wind Farm which are both located in Scotland.
Our overall electricity usage in the UK has increased year-on-year. This is largely an intended consequence of our ongoing effort to replace gas
appliances with higher efficiency electric solution powered by renewable electricity. Accordingly, overall energy usage (and intensity of use per
unit of floor area) in the UK is lower versus the prior year. In FY2022 we removed gas appliances from nine of our UK stores, bringing the total
number of stores where gas has been removed to 27. We continue to benefit from our previously completed works on LED lighting with built in
motion sensors across all existing and new stores. In FY2022, the lighting efficiency programme continued with a focus on upgrades to lighting
in customer units.
We are continuing with our plans to remove gas boilers in remaining stores. As we switch to high efficiency electric heating solutions, we are also
looking to minimise our usage of electricity through initiatives such as voltage optimisation at out largest sites. In FY2022, voltage optimisation
technology was installed at Battersea Park and this will be deployed in other stores subject to the findings of this first installation.
Procurement of renewable energy
We are actively pursuing renewable energy within our purchasing decisions. During 2021/22, (128 stores across UK) 100% of our UK electricity
consumption in our 117 wholly owned stores was purchased from Ofgem accredited renewable sources and is covered with associated renewable
energy certificates. The energy sources that we use include onshore wind farms and solar fields. Our objective here is to help meet our
sustainability goals and to reduce our market based GHG emissions.
72
Safestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Group GHG performance (mandatory GHG reporting) analysis
Total GHG emissions for Scope 1, Scope 2, and Scope 3 for the twelve-month period to 31 August 2022 have decreased by 2.7% (or reduced
by 99 tonnes CO2e) to 3,572 tonnes CO2e. Of the total GHG emissions Scope 1 accounts for 17%, Scope 2 accounts for 73%, and Scope 3
accounts for 9%.
Breakdown of emissions scopes 2021/22
Our overall floor space has increased from 10,008,172 sq ft (2018/19) to 11,763,815 sq ft (2021/22).
Our GHG emissions CO2e intensity has decreased from 0.35 tonnes CO2e per 1,000 sq ft in 2020/21 to 0.30 tonnes CO2e per 1,000 sq ft in
2021/22, which is a decrease of 12.1%.
17%
73%
9%
Scope 1
Scope 2
Scope 3
Our GHG emissions in kg CO2e per sq ft floor area since 2015
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
0.60
0.50
0.40
0.35
0.30
0.90
0.90
0
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
GHG emissions intensity (kg CO2e/sq ft)
Sustainable Energy First (formerly “BiU”) has collated the data set covering Scope 1–3 emissions for the period 1 September 2021 to 31 August 2022.
Sustainable Energy First has direct visibility of the raw data used to calculate ~94% of the total global Scope 1–3 emissions and as such can
provide confirmation on the completeness and accuracy of these emissions as well as around the emissions factors applied, their relevance and
source; reference to these has been provided within this report. Where estimations have been made these have been noted within this report
and efforts continue to be made to improve the quality of the data used within our annual energy and emissions report.
73
OVERVIEWSTRATEGIC REPORTSafestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORTFINANCIAL STATEMENTS Introduction
The Board is committed to high standards
of corporate governance and decisions are
based on what the Board believes is likely
to be for the benefit of all stakeholders by
promoting and maintaining the long term
success of the Company and its reputation.
We continue to appoint only the most appropriate candidates to the
Board and our recruitment process in selecting and appointing Board
members is explained in more detail in the Nomination Committee
report on page 83.
Diversity
The Board supports the FTSE Women Leaders Review, which seeks
to improve board and senior leadership gender diversity across FTSE
350 companies, and the Parker Review on Ethnic Diversity. As at the
financial year end, the Board comprised five male and three female
Directors, meaning that 38% of our Board is female. Although no
Board member was from a minority ethnic background during the year,
the Board is mindful of the recommendations of the Parker Review and
is committed to increasing the ethnic diversity of the Board as soon as
reasonably practicable. Our colleague engagement shows that people
enjoy working at Safestore, but high retention, particularly in more
senior roles, means the pace of change for gender diversity in the
senior leadership team is slower than we would like. The Board would
like to see more women at Safestore, at all levels, and our aim is to
attract 40% female applicants for every role. In addition, we are
working hard on attracting, retaining, and supporting women in our
workforce. For more information on gender diversity across the Group
please refer to page 50.
Evaluating the Board’s effectiveness
Each year, the Board undertakes a formal evaluation of its effectiveness.
This year we carried out an externally facilitated evaluation to assist in
the development of the Board, in conjunction with external facilitator
Gould Consulting Limited. The results of the Board evaluation
confirmed that the Board continues to function effectively to a high
standard. The Board members were seen as engaged and committed
while the Board’s culture remains open, respectful and constructive.
Notwithstanding that the report considered that the Board’s performance
was strong, a number of actions were identified to further enhance the
Board’s effectiveness, and further details of these may be found on
pages 79 and 80.
Dear shareholder
On behalf of the Board, I am pleased to present the Company’s
governance report for the year ended 31 October 2022. The Board is
committed to high standards of corporate governance, and decisions
are based on what the Board believes is likely to be for the benefit of
all stakeholders by promoting and maintaining the long term success
of the Company and its reputation. The Board is responsible for
establishing the Group’s purpose, its values and strategy and satisfying
itself that these are aligned with the overall culture of the Group. The
Board is also responsible for setting appropriate performance targets
for management and monitoring the business’s performance against
those targets. This review and the reports of the Nomination, Audit and
Remuneration Committees that follow, summarise the key matters
considered by the Board during the year and how it discharges its
responsibilities. Our strategy is explained on pages 8 to 18.
Compliance statement
The Company is reporting against the UK Corporate Governance
Code 2018 (the “Code”). Throughout the year ended 31 October 2022,
and up to the date of this report, the Company has been in compliance
with the principles and provisions of the Code. However, going into
2023 the Board is mindful of Provision 10 of the Code, as Ian Krieger
will have served as a Non-Executive Director for more than nine years.
After careful consideration, however, the Board has determined that
Ian continues to be independent and has agreed to extend Ian’s tenure
until the 2024 AGM. Further explanation relating to Ian’s tenure is
provided on pages 78 and 79. I have also engaged with key
shareholders to explain the Company’s rationale for extending Ian’s
tenure. The Code is available on the Financial Reporting Council
(“FRC”) website at: www.frc.org.uk.
Board and Committee composition
There were a number of changes to the composition of the Board and
its Committees during the year. On 31 May 2022, Claire Balmforth
stepped down from the Board. Claire served the business outstandingly
during her tenure and on behalf of the entire Board, I would like to
thank Claire for her significant contribution.
Following a search process involving search firm Russell Reynolds,
we were pleased to welcome Jane Bentall to the Board in May 2022
as a Non-Executive Director and as a member of the Audit and
Remuneration Committees. Jane’s extensive experience and
understanding of operating multi-site, consumer-led businesses will be
valuable to the Board. The Board was also pleased to appoint Laure
Duhot as the new Chair of the Remuneration Committee. Further
changes to the composition of the Board’s Committees are
summarised on page 83.
74
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT We are also very pleased to report on the continuing external recognition
we have received during the year for our sustainability reporting as
highlighted on pages 6, 11, and 46. We continue to keep under review
the evolution of our sustainability strategy and continue to work towards
our commitment to operational carbon neutrality (net zero) by 2035,
which is explained on pages 58 to 66.
2023 Annual General Meeting (“AGM”)
The AGM of the Company will take place at 12 noon on Wednesday
15 March 2023 at Brittanic House, Stirling Way, Borehamwood,
Hertfordshire WD6 2BT. All Directors will attend the AGM, which
will provide an opportunity for shareholders to hear more about
our performance during the year and to ask questions of the Board.
We will again broadcast the meeting using teleconference facilities
and invite shareholders to submit their written questions on the
business of the 2023 AGM. You will find details of the conference
facility and how to submit written questions on our investor website
at https://www.safestore.co.uk/corporate and in the Notice of the
2023 AGM.
David Hearn
Non-Executive Chairman
16 January 2023
2023 Directors’ Remuneration Policy
The current Directors’ Remuneration Policy (the “Policy”) was approved
by shareholders at the 2020 Annual General Meeting and was designed
to operate for three years. The Remuneration Committee commenced
a remuneration review during 2022 to determine the guiding principles
and design of a new Policy to be presented for shareholder vote during
2023. However, at the date of drafting this report, the Committee is still
in discussions with key shareholders around the details of the new Policy.
As a result, the new Policy will be presented for shareholder approval,
as soon as practicably possible, during the 2023 financial year at a
General Meeting, i.e. before 31 October 2023.
Our stakeholder engagement, our values and
our culture
Our colleague and stakeholder engagement has been fundamental to
our success and is integral to and aligned with our values and corporate
culture. Our colleague and stakeholder engagement arrangements are
set out on pages 34 to 35 and in the Sustainability report. Our successful
performance is only possible due to the hard work and commitment
of our colleagues, who continue to be engaged with our strategy, and
aligned with our values and our culture. Our high level of colleague
engagement was evidenced by Safestore being awarded the prestigious
Investors in People (“IIP”) Platinum accreditation and making the final
top ten shortlist for the Platinum Employer of the Year (250+) category
in The IIP Awards 2021. This award is explained more fully on page 49.
Compliance with Task Force on Climate-related
Financial Disclosures (“TCFD”) and
sustainability reporting
The Board is committed to implementing the relevant recommendations
of the TCFD, providing our stakeholders and investors with insight into
the key climate-related risks and opportunities that are relevant to
our business, and explaining how these are identified and managed.
This year is the second year we are reporting against the TCFD
framework and we have built on our prior year reporting. We have
made climate-related financial disclosures consistent with all eleven
of the TCFD recommendations and further details are set out on
pages 45 and 62 to 66.
75
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Board of Directors as at 16 January 2023
David Hearn
Non-Executive Chairman
Commenced role
1 January 2020 (appointed to the
Board and as a member of the
Remuneration Committee on
1 December 2019 and appointed
as Nomination Committee Chair on
1 January 2020).
N R
Skills and experience
David Hearn is an experienced chair
and brings a wealth of international
board and senior executive experience
in public companies, having previously
been CEO of leading consumer goods
businesses Goodman Fielder in
Australasia, United Biscuits in Europe
and Asia, Cordiant plc in the US and
the UK and also international private
equity and advisory firm
Committed Capital.
External appointments
David is currently chair of The a2 Milk
Company and a director of Lovat
Partners, Committed Capital and the
architectural firm Robin Partington
& Partners.
Other listed directorships
The a2 Milk Company is listed on the
New Zealand Stock Exchange and
dual listed on the Australian
Stock Exchange.
Frederic Vecchioli
Chief Executive Officer
Commenced role
September 2013
Andy Jones
Chief Financial Officer
Commenced role
May 2013
Ian Krieger
Senior Independent Director
Commenced role
March 2015 as Senior
Independent Director
A N R
Skills and experience
Frederic Vecchioli founded our French
business in 1998 and has overseen its
growth to 29 stores in Paris operating
under the “Une Pièce en Plus” brand.
He joined the Group as President and
Head of French Operations following
the Mentmore acquisition in 2004.
Frederic was appointed to the Board
in March 2011 and became Chief
Executive Officer of the Group in
September 2013.
Skills and experience
Andy Jones joined the Group in May
2013 as Chief Financial Officer. Andy’s
previous role was director of group
finance at Worldpay Limited, prior to
which he held the positions of director
of finance and investor relations at TUI
Travel plc, and chief financial officer at
Virgin Entertainment Group in the US.
Andy began his career at Ernst & Young,
where he qualified as a chartered
accountant in 1992. Andy is a graduate
of the University of Birmingham.
Skills and experience
Ian Krieger joined the Board in October
2013 as a Non-Executive Director and
was appointed Chair of the Audit
Committee in April 2014 and Senior
Independent Director in March 2015.
Ian is a chartered accountant and was
a senior partner and vice-chair at
Deloitte until his retirement in 2012.
Ian brings a wealth of recent financial
experience to the Board as well as his
experience as senior independent
director and audit committee chair
for two other UK-listed companies
in the property sector.
External appointments and
other listed directorships
None.
External appointments and
other listed directorships
None.
External appointments
Ian is a non-executive director, senior
independent director and audit committee
chair of Capital & Regional plc and
Primary Health Properties plc.
Other listed directorships
Capital & Regional plc and Primary
Health Properties plc.
Committee membership
Chair of Committee
A Audit Committee
N Nomination Committee
R Remuneration Committee
76
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Laure Duhot
Non-Executive Director
Commenced role
November 2021
R
Skills and experience
Laure Duhot joined the Board in
November 2021 as a Non-Executive
Director and was appointed as a
member of the Audit and Remuneration
Committees. Following Laure’s
Gert van de Weerdhof
Non-Executive Director
Commenced role
June 2020
A R N
Delphine Mousseau
Non-Executive Director
Commenced role
November 2021
R
Jane Bentall
Non-Executive Director
Commenced role
May 2022
A R
appointment as Chair of the
Remuneration Committee in June
2022, Laure stepped down from the
Safestore Audit Committee. Laure
brings over 30 years of senior executive
level experience in the investment
banking and property sectors,
specialising in alternative real estate
assets, and has been a non-executive
director at a number of funds and
property companies.
Laure started her career in the
investment banking sector and has
developed a focus on the property
sector. She has held senior roles at
Lehman Brothers, Macquarie Capital
Partners, Sunrise Senior Living Inc.,
Pradera Limited and Grainger plc, and
latterly was head of investment and
capital markets – Europe at Lendlease.
External appointments
Laure is currently a non-executive
director of Primary Health Properties
plc, NB Global Monthly Income Fund
Limited, a premium-listed Guernsey
registered fund, and ORPEA SA, a
company listed on Euronext Paris.
Laure also acts as the independent
member on CBRE-IM’s UK investment
committee. Formerly Laure was a
non-executive director of Inland
Homes plc and MedicX Fund,
which merged with Primary Health
Properties plc in March 2019.
Other listed directorships
Primary Health Properties plc, NB
Global Monthly Income Fund Limited,
a premium-listed Guernsey registered
fund, and ORPEA SA, a company
listed on Euronext Paris.
Skills and experience
During his extensive and varied career,
Gert van de Weerdhof has held a
number of senior executive positions
including as CEO of GrandVision Europe
BV before progressing to become chief
retail officer for Esprit Holdings Ltd and
latterly as CEO of RFS Holland Holdings
BV and its subsidiary Wehkamp BV.
Until recently Gert was also a
non-executive director, vice-chair and
chair of the remuneration and nomination
committees for Wereldhave NV, chair of
CTAC NV, and a non-executive director
and vice-chair of Accell Group NV. Gert
brings a wealth of international expertise
to the Board having held roles across
multi-site retail, e-commerce, consumer
goods and real estate.
External appointments
Gert is currently non-executive director
of Sligro Food Group NV and CEO of
Mercy Ships.
Other listed directorships
Sligro Food Group NV is listed on
Euronext Amsterdam.
Skills and experience
Delphine Mousseau brings over 25
years of senior executive level and
consultancy experience in e-commerce
and customer engagement across
Europe, specialising in retail.
Delphine began her career as a project
manager at the Boston Consulting
Group before moving on to join
Plantes-et-Jardins.com where she
became head of operations. Between
2007 and 2011, she was director of
e-commerce for Europe at Tommy Hilfiger
and then became an independent
consultant, primarily for the former
Primondo Specialty Group which was
Carlyle owned. Latterly Delphine was
a VP markets at Zalando and a
non-executive director of Fnac-Darty SA.
External appointments
Based in Germany, Delphine is
currently non-executive director at
Aramis Group SAS, listed on Euronext
Paris, and a member of the Holland
& Barrett UK Board and chair of the
Refurbed Board in Austria.
Other listed directorships
Aramis Group SAS, a company listed
on Euronext Paris.
a director of Resident Hotels Limited,
a consultant for Blackstone, and a
member of Pilotlight.
Jane is an ACA qualified accountant
and a fellow of the Institute of
Chartered Accountants.
External appointments
Oakman Inns plc.
Resident Hotels Limited
Other listed directorships
None.
Skills and experience
Jane Bentall has extensive experience
and understanding of operating
multi-site, consumer-led businesses.
Most recently, Jane was managing
director of Haven, the UK holiday
parks chain and largest business
division of Bourne Leisure. Prior to
becoming managing director of
Haven, she was the group chief
financial officer for twelve years and
previously spent six years as
operations director. In her career she
has also held senior financial roles
at the Rank Group.
Jane is a director and chair of the
remuneration committee of Oakman
Inns plc, and a non-executive director
and chair of the audit and finance
committee of The Royal Marsden
NHS Foundation Trust. Jane is also
77
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Corporate governance
Our purpose: To add stakeholder value
by developing profitable and sustainable
spaces that allow individuals, businesses,
and local communities to thrive
Leadership
The role of the Board
The Board is collectively responsible for the long term sustainable
success of the Company.
opportunities, to develop our colleagues and to implement the Group’s
sustainability strategy. Sustainability governance is explained more fully
on page 47.
The Board sets:
• the Company’s purpose, values and strategy, and ensures that
these are aligned with the overall culture of the Group;
• appropriate performance targets for management and monitors the
performance of the business against those targets;
• the Group’s risk appetite and satisfies itself that financial controls
and risk management systems are robust, while ensuring the Group
is adequately resourced; and
• ensures there is appropriate dialogue with shareholders on strategy
and remuneration.
The Board’s activities during the year and how it discharges its
responsibilities can be found on page 80. The Group’s established
strategy has evolved to embed sustainability within its purpose. Our
strategy is underpinned by our values, as defined on pages 3 and 53,
our behaviours and our governance structure, which shape our culture
and remain central to the way we conduct our business. The culture
of the business is a key part of our success.
The Non-Executive Directors are responsible for providing constructive
challenge to the Executive Directors, assisting in developing proposals
on the Group’s strategy and monitoring the performance of the Executive
Directors against strategic and operational objectives.
The Board has delegated certain responsibilities to its Audit, Remuneration
and Nomination Committees. Each Board Committee has defined terms of
reference, which can be found online within the Governance section of the
Company’s website: www.safestore.com. The activities of each Board
Committee are set out in separate sections of this report. The Audit
Committee is, in turn, supported by the Risk Committee, which is a
management committee, chaired by the Chief Financial Officer.
The Board also has an established Standing Committee and a Disclosure
Committee, which are sub-committees of the Board and meet as required.
The Standing Committee has delegated authority to approve routine
matters such as matters relating to the operation of the Company’s share
scheme arrangements, and any other matters, which may be expressly
delegated to it by the Board from time to time. The Disclosure Committee
has delegated responsibility for overseeing the disclosure of information by
the Company to meet its obligations under the Market Abuse Regulation.
All Committees and all Directors have the authority to seek information
from any Group colleague and to obtain professional external advice if
they feel necessary.
Implementation of agreed plans, budgets and projects in pursuit of the
Group’s strategy and the actual operation of the Group’s system of internal
control and risk management are delegated to the Executive Directors,
who are supported by an Executive Committee. This includes implementing
Group strategy to optimise the trading performance of the existing store
portfolio, to monitor financial performance and maintain a strong and
flexible capital structure, to identify selective portfolio and expansion
78
The Board and its independence
At the date of this report, the Board consists of eight Directors, the
Chairman, two Executive Directors and five independent Non-Executive
Directors, with Ian Krieger appointed as the Senior Independent Director.
The Chairman was considered to be independent on appointment. The
skills and experience of each of the Directors, along with the dates they
commenced their role, are set out on pages 76 and 77.
Both on an individual and collective basis, the Directors have the skills,
understanding, experience and expertise necessary to ensure the effective
leadership of the Group. At least half of the Board, excluding the Chair, are
independent. The Board monitors the independence of its Non-Executive
Directors. The Board is aware of the other commitments of its Directors
and is satisfied that these neither conflict with their duties, nor impact
their independence or time commitment as Non-Executive Directors of
the Company.
The Board is mindful that the Code lists that where non-executive directors
hold cross-directorships or have significant links with other directors through
involvement in other companies or bodies, this is likely to impair, or could
appear to impair, a non-executive director’s independence. Accordingly
when assessing the independence of Laure Duhot and Ian Krieger, it
was noted that both Laure and Ian serve as independent non-executive
directors of Primary Health Properties plc (“PHP”), a UK listed company.
They are not involved in executive duties for PHP and each has a similar
obligation to be independent for PHP as they do for the Company. The
Board does not consider that Laure’s and Ian’s positions as independent
Non-Executive Directors of the Company are adversely impacted by their
roles on the board of PHP and is satisfied that, notwithstanding these
appointments, they are therefore regarded as independent.
The Board is also mindful that non-executive director tenure that exceeds
nine years is also listed by the Code as a circumstance that is likely to impair,
or could appear to impair, a non-executive director’s independence. Ian
Krieger was appointed to the Board in October 2013.
However, the Board has recently undergone a significant period of renewal:
three of our longer serving Non-Executive Directors have stepped down
during the last 18 months and we now have four recently appointed
Non-Executive Directors. Ian has played a particularly important role as
Safestore’s most experienced Non-Executive Director, serving as both
Chair of the Audit Committee and as our Senior Independent Director.
His contribution and experience are invaluable to the Board.
As a result of Ian Krieger having served on the Board for over nine years,
the Board has carried out a robust assessment of Ian’s contribution and
independence. In doing so, the Board assessed the degree of objective
judgement and constructive challenge demonstrated by Ian. Having
undertaken a rigorous review of Ian’s performance as a Non-Executive
Director and having taken into account other relevant factors that might
be considered likely to impair, or could appear to impair, independence
including as set out in Provision 10 of the Code, the Board considers Ian
to be independent. The Board has also concluded that, following the
recent changes in Board composition and given Ian’s in-depth knowledge
of the Company and the property sector, his exceptional contributions to
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT the Board and its Committees continue to be invaluable and that it would
be in the best interests of the Company to extend Ian’s tenure, for a further
year, until the AGM in 2024, subject to shareholder support. This is not only
because of his experience and skill set but also due to the continuity and
corporate knowledge his presence will bring which the Board considers
vital as the newer directors continue to come up to speed fully in their
new roles.
Each Non-Executive Director continues to bring independent judgement
to the Board’s decision-making process. Frederic Vecchioli is also a
director of myStorage GmbH, a company incorporated in Germany and
an associated company of the Group; apart from this appointment the
Executive Directors do not hold any executive or non-executive directorships
in other companies.
Key roles and responsibilities
The roles of Chairman, Chief Executive Officer and Senior Independent
Director are separate and clearly defined, with the division of responsibilities
set out in writing and agreed by the Board. The Chairman is responsible for
the management of the Board and for aspects of external relations, while
the Chief Executive Officer has overall responsibility for the management
of the Group’s businesses and implementation of the strategy approved by
the Board. The Senior Independent Director is also responsible for supporting
the Chairman on all governance issues. The statement of the division of
responsibilities between the Chairman, the Chief Executive Officer and the
Senior Independent Director is available on the Governance section of the
Company’s website: www.safestore.com.
Formal Workforce Advisory Panel
Our ‘Make the Difference’ people forum, launched in 2018, is a formal
workforce advisory panel. The Board approved the establishment of the
advisory panel to facilitate engagement between colleagues from different
areas of the business and provide a two-way feedback process between
the Board and our colleagues. The panel has terms of reference that define
it’s purpose and has a mechanism for appointing colleague representatives,
known as people champions. Further information relating to the panel and
our ‘People Champions’ can be found on page 10. The Board receives
regular feedback from the panel which has resulted in the Board approving
outcomes as detailed in the Sustainability report on page 51 and Directors’
remuneration report on pages 93, 98, and 101. The Chief Executive Officer
attends panel meetings twice a year to report the views of the Board and to
provide regular updates covering the Group’s performance and the delivery
of our strategy. The Board considers the formal workforce advisory panel
to be effective.
Effectiveness
Activities of the Board
The Board scheduled eight meetings during the financial year, and
additional Board meetings are held as and when required. During this
financial year, an additional meeting was arranged to discuss the
acquisition of Carlyle’s interest in the Benelux Joint Venture The Board has
held a mix of in-person meetings and meetings held by video conference.
The Board has a formal schedule of matters specifically reserved for its
decision, which includes (amongst other things) various strategic, financial,
operational and governance responsibilities. A summary of the key
activities of the Board during the year, in accordance with the formal
schedule of reserved matters, can be found on page 80.
The services of the Company Secretary are available to all members of the
Board. Board minutes are circulated to all Board members. There is also regular
informal contact between Executive and Non-Executive Directors to deal with
important matters that arise between scheduled Board meetings. A separate
meeting for Non-Executive Directors is held at least once in every year.
Appropriate directors’ and officers’ insurance cover is arranged by the
Group through its insurance brokers and is reviewed annually.
Board meetings held in 2021/22
Attendance of the individual Directors of the Board at meetings that they
were eligible to attend during the financial year is shown in the table below:
Director who served during the year
ended 31 October 2022
No. of
meetings held
during tenure
during the year
Number of
meetings
attended
David Hearn
Frederic Vecchioli
Andy Jones
Ian Krieger
Claire Balmforth*
Gert van de Weerdhof
Laure Duhot
Delphine Mousseau
Jane Bentall*
9
9
9
9
6
9
9
9
3
9
9
9
9
6
9
9
9
3
Note
*
On 31 May 2022, Claire Balmforth stepped down from the Board and on 18 May 2022,
Jane Bentall was appointed as an independent Non-Executive Director. In addition to
the three meetings Jane attended as a member of the Board, Jane also attended a
Board meeting in May as an observer, rather than as a member of the Board.
In addition to the scheduled Board meetings, the Standing Committee
met on 13 occasions and was granted express delegation by the Board
to approve the full year and half year results announcements and ancillary
matters. The Standing Committee also approved routine administrative
matters which related to the maturity of the Company’s 2019 (three-year)
Sharesave scheme, the vesting of the Company’s 2017 Long Term
Incentive Plan, the grant of new options under the 2022 (three-year)
Sharesave scheme and intercompany funding arrangements. The
Disclosure Committee has met once during the year.
2022 Board effectiveness review
The Board recognises that it continually needs to monitor and improve its
performance. This is achieved through annual Board effectiveness reviews,
full induction of new Board members and ongoing Board development
activities. Each year the Board conducts an effectiveness review and
every three years the review is carried out externally. This year the Board
instructed Gould Consulting Limited, to conduct an external review of the
effectiveness of the Board and its Committees. Gould Consulting Limited
have no other business relationship with the Group or any of the
Company’s Directors.
The scope for the Board performance evaluation was agreed with the
Chairman. Gould Consulting Limited conducted individual interviews with
the Chairman, the Chief Executive Officer and the Senior Independent
Director and used an online survey tool to gather feedback from each
Director and the Executive Committee. Gould Consulting Limited
summarised its findings for the Chairman’s consideration. A final report
was shared with the Board and Gould Consulting attended a meeting
of the Board, to summarise its findings and facilitate further debate.
The anonymity of respondents was ensured throughout the evaluation
process in order to promote an open and frank exchange of views.
The key findings arising from the review were reviewed by the Board
and recommendations were made to:
• to continue to develop succession plans below Board level;
• following Covid-19 restrictions being lifted, to resume Board meetings
at the Group’s European locations;
• make time available within the Board calendar for Board training
on matters of interest to the Board and relevant to the Company.
• review Board packs, with an aim to reduce Board pack size, and
management’s workload in providing regular Board papers.
79
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Corporate governance continued
Effectiveness continued
2022 Board effectiveness review continued
Following the outcome of the 2022 Board effectiveness review, the Board
concluded that the Board and its Committees continue to function
effectively to a high standard.
The content for any subsequent effectiveness reviews will be designed to
build upon insights gained in the previous exercise to ensure that the
recommendations agreed in the review have been implemented and that
year-on-year progress is measured.
The Chairman reviewed the performance of the Chief Executive Officer
and the Non-Executive Directors. The Chief Executive Officer reviewed
the performance of the Chief Financial Officer, and this year, the
Chairman’s own performance was assessed as part of the 2022
external Board evaluation process, and the SID fed back the
comments directly to the Chairman.
A summary of the key matters considered by the Board during the year
Responsibilities Activities
Strategy
• The development and implementation of the Company’s strategy has included general updates from the CEO and CFO.
Performance
and operational
matters
• Presentations from members of the management team on strategy implementation in their operations.
• Considering selective portfolio management and expansion opportunities, which included the acquisition of Carlyle’s 80% share
of our Benelux Joint Venture the expansion of our Spanish operation and site acquisitions in the UK, France and Benelux.
• Approving a new German Joint Venture arrangement with Carlyle, and Safestore management of the myStorage business.
• Reviewed the 2022 performance against budget and updated forecasts for the UK, French, Spanish and Benelux operations.
• Reviewed customer performance data.
• Maintained a detailed focus on full year earnings guidance.
• Approved the 2023 Board budget.
• Reviewed and approved the Group’s investment appraisal policy.
• Received regular operational updates from members of the management team, relating to property, colleagues,
marketing, IT, store operations, company secretarial and legal matters.
Finance
and capital
• Reviewed the Group’s capital structure and approved the arrangements for the Group’s new unsecured four-year
£400 million multi-currency Revolving Credit Facility.
• Monitored the Company’s going concern and long term viability statements.
• Reviewed cash flow, dividend policy (in line with the UK REIT requirements) and shareholder returns.
People, culture
and values
• Received regular updates on colleague wellbeing and HR matters, including updates on colleague engagement and
updates from our ‘Make the Difference’ people forum, our formal Workforce Advisory Panel.
• Reviewed and approved the Group’s key policies including the Company’s Modern Slavery Act Statement, anti-corruption and
bribery (statement and policy), the whistleblowing (‘Speak Out’) policy and the health and safety policy statement.
• Considered and reviewed the gender pay gap report for 2021.
• Reviewed the Company’s sustainability strategy, including the Company’s commitment to work towards operational
carbon neutrality (net zero) by 2035.
• Reviewed colleague engagement arrangements.
Governance
and risk
• Approved changes to Board composition, Director independence, and succession planning.
• Considered Board composition, Director independence, and succession planning.
• Approved an increase in Non-Executive Director fees, in line with overall general increases to all colleagues.
• Approved an increase in the Chairman’s fee.
• Reviewed reports on governance and legal issues.
• Considered the Company’s risk appetite in relation to its strategy.
• Reviewed the outcome of the Board and its Committees’ 2022 Board effectiveness review.
• Reviewed the Directors’ Conflict of Interests Register.
Shareholder
and stakeholder
engagement
• Discussed feedback from investors’ and analysts’ meetings following the release of our full year and half year results
announcements and interim management statements and meetings with existing and potential shareholders.
• Discussed feedback following the Chairman and the Senior Independent Director’s engagement with major shareholders
ahead of the 2022 AGM.
• Received regular updates from brokers and advisers on the market perception of Safestore.
• Received updates from the CEO and CFO on stakeholder engagement in relation to investor and partner engagement.
Other
• Approved the Annual Report and Financial Statements and recommended the final dividend in line with the Company’s
dividend policy for shareholder consideration.
• Approved the 2022 half year results announcement and declared the interim dividend in line with the Company’s
dividend policy.
• Approved the interim management statements in January and September 2022 regarding trading updates.
• Received and reviewed monthly shareholder analysis reports.
80
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Diversity
The Board supports the FTSE Women Leaders Review, which seeks
to improve board and senior leadership gender diversity across FTSE
350 companies, and the Parker Review on Ethnic Diversity. The
Company has an equality, diversity and inclusion policy, which includes
the Company’s policy on diversity and the Board’s diversity policy.
Details of the Company’s equality, diversity and inclusion policy are
provided on page 50.
At the date of this report, the Board comprises 38% women (FY2021:
25%). No member of the Board is from a minority ethnic background.
However, the Board is mindful of the recommendations of the Parker
Review and is committed to increasing the ethnic diversity of the Board
as soon as reasonably practicable in line with the recommendations.
The Board is also mindful of the Investment Association’s guidelines in
relation to the gender balance for the Executive Committee and its direct
reports. The gender balance for this cohort of colleagues is set out
on page 50. This cohort of colleagues is fundamental to our success.
However, high colleague retention in these roles, means that gender
diversity in the senior leadership team has not changed during the year,
although we anticipate that it will do so gradually in the future. For more
information on gender and ethnic diversity across the Group please
refer to page 50.
Accountability
Risk management and internal control
A summary of the principal risks and uncertainties within the business
is set out on pages 37 to 42.
The Board retains overall responsibility for setting Safestore’s risk
appetite and establishing, monitoring and maintaining the Group’s
risk management and internal control systems. These systems are
designed to enable the Board to be confident that such risks are
mitigated or controlled as far as possible, although no system can
eliminate risk entirely.
The Board has established a number of ongoing processes to identify,
evaluate and manage the strategic, financial, operating and compliance
risks faced by the Group and for determining the appropriate course
of action to manage and mitigate those risks. The Board delegates the
monitoring of these internal control and risk management processes to
the Audit Committee. These measures have been in place throughout
the year and up to the date of this report.
The Risk Committee supports the Group’s risk management strategy
and undertakes regular reviews of the formal risk assessments and
reports regularly to the Audit Committee of the Board. The Risk
Committee is chaired by the Chief Financial Officer and comprises
representatives from the operations, finance, human resources and
property functions. Risk management remains an ongoing programme
within the Group and is formally considered at operational meetings
as well as at meetings of the Board.
Board development
The Chairman is responsible for ensuring that all Non-Executive
Directors receive ongoing training and development. Our Non-Executive
Directors are conscious of the need to keep themselves properly briefed
and informed about current issues. Specific and tailored updates are
provided at Board meetings and to members of the Audit Committee
and have included presentations from the Company’s advisers.
There is a procedure to enable Directors to take independent legal
and/or financial advice at the Company’s expense, managed by the
Company Secretary, if they feel necessary to carry out their duties
as a director fully. No such independent advice was sought in 2022.
During the year the Company has delivered an induction programme
for Laure Duhot, Delphine Mousseau and Jane Bentall which has been
led by the Chief Executive Officer. The induction programme has been
prepared to ensure that it provides a comprehensive introduction to
the Group as a whole.
Board appointments
Each decision to appoint further Directors to the Board is taken by the
entire Board in a formal meeting based on a recommendation from
the Nomination Committee. The Nomination Committee consults with
financial and legal advisers and uses the services of external recruitment
specialists. New members of the Board are provided with initial and
ongoing training appropriate to individual needs in respect of their role
and duties as Directors of a listed company.
During the year the Nomination Committee engaged in a rigorous
search for a new Non-Executive Director. The process for identifying
and overseeing the appointment of the new Non-Executive Director
has been explained in the Nomination Committee report on page 83.
Chairman’s fees
Following a detailed benchmarking process, the Non-Executive
Directors recommended to the Board that the Chairman’s fees should
be increased. The fee increase is set out in the Directors’ remuneration
report on page 93. No Director was involved in any decision as to their
own remuneration.
Appointment terms and elections of Directors
All Directors have service agreements or letters of appointment and
the details of their terms are set out in the Directors’ remuneration
report on page 116. The service agreements of the Executive Directors
and letters of appointment of the Non-Executive Directors are available
for inspection at the Company’s registered office during normal
business hours, including the 15 minutes immediately prior to the AGM.
The letters of appointment for Non-Executive Directors are in line with
the provisions of the Code relating to expected time commitment. At
each AGM of the Company, all Directors will stand for re-election in
accordance with the Code and the Company’s Articles of Association.
The Company’s Articles of Association require that a Director appointed
during the preceding year should be subject to election at the
Company’s next AGM.
Directors’ conflicts of interest
The Company’s Articles of Association give the Directors the power
to consider and, if appropriate, authorise conflict situations where
a Director’s declared interest may conflict or does conflict with the
interests of the Company.
Procedures are in place at every meeting for individual Directors to
report and record any potential or actual conflicts which arise. The
register of reported conflicts is reviewed by the Board at least annually.
The Board has complied with these procedures during the year.
81
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Corporate governance continued
Accountability continued
Risk management and internal control continued
At 31 October 2022, the Group employed a risk manager in the UK
supported by two store auditors responsible for reviewing operational
and financial controls at store level in the UK. The store assurance team
operates with a mandate to provide assurance that the stores’ risk
management and control processes are operating effectively and to
the expected and required standard. The Group also employs an Audit
Manager in France who is responsible for arranging a combination of
external safety audits and internal audits for measuring and developing
quality, process and safety. The UK Risk Manager reports to the Chief
Financial Officer; the French Risk Manager reports to the President of
the French business. The arrangements in the Netherlands and Belgium
are within the auspices of the UK and French risk teams respectively
and the arrangements in Spain are supported by a third party service
provider. For the 2023 financial year, the Board has determined that
value would be added through the establishment of a new internal
audit function. Further details are provided on pages 88 and in the
Audit Committee report.
During the financial year, the Board has directly, and through delegated
authority to the Audit and Risk Committees, overseen and reviewed
the performance and evolution of risk management activities and
practices and internal control systems within the Group. Through both
its ongoing involvement and overview in risk management and internal
control activities, the Board is satisfied that there have been no significant
failings or weaknesses identified and the Directors believe that during
2022 the system of internal control has been appropriate for the Group.
Budgetary process
A comprehensive budgeting process is in place, with an annual budget
prepared and validated at a country and functional level. The budget
is subject to significant consideration and approval by the Board.
The Directors are provided with relevant and timely information
required to monitor financial performance.
Investment appraisal (including acquisitions)
Budgetary approval and defined authorisation levels regulate capital
expenditure. Acquisition activity is subject to internal guidelines
governing investment appraisal criteria, financial targets, negotiation,
execution and post-acquisition management.
Company ethics and whistleblowing
The Company is committed to the highest standards of integrity and
honesty and expects all colleagues to maintain the same standards in
everything they do at work. The Company recognises that effective and
honest communication is essential to maintain its business values and
to ensure that any instances of malpractice are detected and dealt with.
The Company has a number of policies available online for its colleagues.
These include a code of conduct, an anti-bribery and corruption policy,
a receipt of gifts and corporate hospitality policy and a whistleblowing
(‘Speak Out’) policy. The anti-bribery and corruption policy reinforces
the Group’s commitment to countering bribery, tax evasion and
corruption as it seeks to comply with the Bribery Act 2010 and the
Criminal Finances Act 2017.
The Speak Out policy has procedures for disclosing malpractice and,
together with the code of conduct, is intended to act as a deterrent
to fraud or other corruption or serious malpractice. It is also intended
to protect the Group’s business and reputation.
No whistleblowing issues were reported during the year.
82
The Board considers the payment of taxes as a responsibility that
brings positive socio-economic impacts through its presence and
employment creation in the countries it operates in. A Group tax strategy
has been in place since 2016, which is approved by the Board and
reviewed annually by the Audit Committee and is available on the Group’s
website: www.safestore.com. It is the Group’s policy to pay the right
amount of tax wherever it does business, based on a fair and sound
application of local tax laws to the economic substance of its business
transactions. Safestore does not use artificial tax avoidance schemes
or tax havens to reduce the Group’s tax liabilities.
Investor relations and shareholder
and investor engagement
We are committed to proactive and constructive engagement with all
our shareholders and consider all shareholders’ views as part of the
Board’s decision-making process. The Group places a great deal of
importance on communication with its shareholders and maintains a
dialogue with the investment community. Engagement is maintained
through a comprehensive investor relations programme, which includes
formal presentations of the full year and half year results and meetings
with institutional investors and analysts as required and attendance at
Investor conferences. The presentation slides used at these meetings
are made available on the Company’s website and accessible for all
shareholders. The Board ensures that our shareholders, investors
and investor community have a strong understanding of our strategy,
performance and culture.
Earlier this year, the Chairman, together with the Senior Independent
Director, met several shareholders, to understand their views on governance
and performance against strategy. At the time of our 2022 AGM, the
Chairman engaged further with some specific shareholders to understand
their vote against the 2021 Directors’ remuneration report. It was clear
that the vote against did not reflect a vote against either the management
or the Board, but instead was a legacy vote against our 2017
Remuneration Policy and the subsequent execution of it during 2021.
To ensure all Board members share a good understanding of the views
of all our shareholders, the Board receives regular updates on the views
of our shareholders and receives summaries of institutional investor
comments following meetings on the full year and half year results.
In the event that shareholders have any concerns, which the normal
channels of communication through the Chief Executive Officer or
Chief Financial Officer have failed to resolve or for which such contact
is inappropriate, our Chairman or Senior Independent Director are
available to address such concerns. Both make themselves available
when requested for meetings with shareholders on issues relating to
the Company’s governance and strategy.
The Board considers the Annual Report and Financial Statements,
the AGM and its website to be the primary vehicles for communication
with private investors. Resolutions at the Company’s AGM are proposed
on each substantially separate issue and the Company indicates the
level of proxy voting lodged in respect of each resolution. The AGM
gives all shareholders who are able to attend (especially private shareholders)
the opportunity to hear about the general development of the business.
It also provides an opportunity for shareholders to ask questions of the
full Board of Directors, including the Chairs of the Audit, Nomination
and Remuneration Committees.
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Nomination Committee report
The Board, on the advice of
the Committee, recommends
the re‑election of each Director
David Hearn
Chair of the Nomination Committee
Meetings held in 2021/22
Members of the Committee during the year
ended 31 October 2022
No. of meetings
held during tenure
during the year
Number of
meetings
attended
David Hearn (Chair)
Ian Krieger
Claire Balmforth
Gert van de Weerdhof
3
3
2
2
3
3
2
2
Membership
The Nomination Committee comprises Non-Executive Directors and is
chaired by David Hearn. On 15 December 2021, Gert van de Weerdhof
and Claire Balmforth were appointed as members of the Committee
and on 31 May 2022, Claire Balmforth stepped down from the
Committee. Other Directors and management are invited to attend
meetings as appropriate.
Key objectives
To ensure the Board and executive leadership comprises individuals
with the necessary skills, knowledge and experience and to ensure
that the Board is effective in discharging its responsibilities.
Responsibilities
The Board has approved terms of reference for the Nomination
Committee which are available on the Governance pages of the
Group’s website, www.safestore.com, within “Governance Documents”.
These provide the framework for the Committee’s work in the year and
can be summarised as:
• assessing the composition of the Board and making
recommendations on appointments to the Board and senior
executive succession planning; and
• overseeing the performance evaluation of the Board, its Committees
and individual Directors.
How the Committee operates
The Nomination Committee met as necessary and each meeting had
full attendance.
Activities of the Committee during the year
Appointment of new Non-Executive Director
In March 2022, the Company announced Claire Balmforth’s intention to
step down from the Board. Following Claire’s decision, the Committee
reviewed the Board’s size, skill set and diversity and agreed to undertake
a search for a new additional Non-Executive Director. Claire agreed to
remain on the Board until a suitable replacement was found.
Following the successful executive search for Laure Duhot and
Delphine Mousseau in 2021, the Committee decided to re-engage
Russell Reynolds Associates to facilitate and advise on the executive
search for a new Non-Executive Director.
Russell Reynolds Associates has signed up to the voluntary code
of conduct on gender diversity and best practice, and is accredited
under the enhanced code of conduct for executive search firms,
which specifically acknowledges those firms with a strong track
record in and promotion of gender diversity in FTSE 350 companies.
Russell Reynolds Associates has no other connection with the Group
or any of the Company’s Directors.
The Nomination Committee prepared a job specification and agreed
a candidate profile for Russell Reynolds Associates to undertake an
executive search. The Committee also asked Russell Reynolds to revisit
the shortlisted candidates from the 2021 selection process and have
regard to both gender and ethnic diversity in its search. Jane Bentall
emerged from this process and the members of the Committee
unanimously recommended Jane Bentall to the Board. The Board
approved Jane’s appointment as a Non-Executive Director on
18 May 2022.
Committee composition
In December 2021, the Committee recommended to the Board that
Claire Balmforth and Gert van de Weerdhof be appointed as members
of the Nomination Committee and that Laure Duhot and Delphine
Mousseau be appointed as members of the Audit Committee and
Remuneration Committee respectively.
Following Claire’s decision to step down as a Non-Executive Director,
as a member of the Committee and as Chair of the Remuneration
Committee, the Committee recommended to the Board that Laure
Duhot step down as a member of the Audit Committee and be
appointed as Chair of the Remuneration Committee. The Committee
also recommended that Jane Bentall be appointed as a member of
the Audit and Remuneration Committees. The Board approved these
appointments on 18 May 2022, although changes relating to Laure’s
appointments were effective from 1 June 2022.
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OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Nomination Committee report continued
Activities of the Committee during the year continued
Committee composition continued
A significant amount of the Committee’s time in 2022 was spent on Board composition; other activities of the Nomination Committee included:
Responsibilities
Activities
Board and Committee
composition
• Assessed the diversity, skill set and composition of the existing Board and its Committees, following Claire
Balmforth’s decision to step down as a Non-Executive Director.
• Oversaw the process for appointing an additional Non-Executive Director.
• Considered Committee composition and recommended new appointments to each Committee.
• Considered the performance of the Chief Executive Officer and the Chief Financial Officer.
Succession planning
• Discussed succession planning in respect of both Board members and senior management within the Group.
Board development
• Reviewed the programme for Non-Executive Director development.
Governance
• Reviewed the Group’s culture, values and behaviours.
• Discussed the remit and role of the Committee and reviewed its terms of reference.
Succession planning
It is a key responsibility of the Committee to advise the Board on succession planning. The Committee ensures that future changes in the
Board’s membership are anticipated and properly managed and that, in the event of unforeseen changes, management and oversight of the
Group’s business and long term strategy will not be disrupted. The Committee also addresses continuity in, and development of, the Executive
Committee below Board level.
Diversity
The Company’s diversity policy recognises the benefit and value of diversity across the Group. We are committed to the creation of an inclusive
culture where our colleagues reflect the diverse communities we serve and where each person is given the opportunity to contribute and use their
talents and abilities, experiences and skills to participate in developing sustainable commercial opportunities. The Board recognises that a diverse
Board, with an appropriate balance through a diverse mix of experience, backgrounds, skills and deep knowledge and insight, is a key driver of an
effective Board. The Chairman leads the Safestore Board diversity agenda with the aim of continuously improving diversity generally, including, but
not limited to, the gender balance and ethnic diversity, which ultimately leads to better Board debate and decision. The Board’s diversity policy
seeks to ensure that diversity in its broadest sense, continues to remain a significant feature of the Board. The Board must continue to provide
strong leadership at Safestore and therefore continues to appoint only the most appropriate candidates to the Board.
For details of diversity and inclusion as it applies to the Group’s wider workforce and the gender balance of senior managers and direct reports,
please see page 50.
Board and Committee performance evaluation
The Committee’s performance was reviewed as part of the 2022 externally facilitated Board and Committee evaluation process, which is explained
on pages 79 and 80. The review found that the Committee functions effectively and should continue to develop succession plans below Board level.
Directors standing for election and re-election
In accordance with the Company’s Articles of Association, Jane will be subject to election at the Company’s 2023 AGM. In accordance with the
Code provisions the remaining Directors will stand for re-election at the 2023 AGM. Following the annual Board performance review and the
outcome of performance reviews of individual Directors, I can confirm that each Director subject to either election or re-election:
• continues to operate as an effective member of the Board;
• remains committed to their roles and have sufficient time available to perform their duties; and
• has the skills, knowledge and experience that enables them to discharge their duties properly and contribute to the effective operation of
the Board.
The Board, on the advice of the Committee, recommends the election or the re-election of each Director. Further information on the Directors,
including their skills and experience, can be found in the Directors’ biographies on pages 76 and 77.
I will be available at the Annual General Meeting to answer any questions on the work of the Nomination Committee.
David Hearn
Chair of the Nomination Committee
16 January 2023
84
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Audit Committee report
The Company’s control
environment remains robust
Ian Krieger
Chair of the Audit Committee
Meetings held in 2021/22
Members of the Committee during the year
ended 31 October 2022
No. of meetings
held during tenure
during the year
Number of
meetings
attended
Ian Krieger (Chair)
Gert van de Weerdhof
Laure Duhot*
Jane Bentall
5
5
2
2
5
5
2
2
Membership
The Audit Committee comprises solely independent Non-Executive
Directors. Laure Duhot joined the Committee on 15 December 2021
and stepped down on 1 June 2022. Jane Bentall was appointed as a
member of the Committee on 18 May 2022. The members of the
Committee have been selected to provide the wide range of financial
and commercial expertise necessary to fulfil the Committee’s duties
and responsibilities and I am the Committee’s designated financial
expert for the purposes of the Code.
In order to ensure that the Committee continues to have experience
and knowledge relevant to the sector in which the Company
operates, all of the Non-Executive Directors receive regular updates
on business, regulatory, financial reporting and accounting matters.
The Committee’s performance was reviewed as part of the 2022
externally facilitated Board evaluation, which is explained on pages 79
and 80. The review found that the Committee functions effectively and
that issues are dealt with in a thoughtful, clear and rigorous manner.
Key objectives
The provision of effective governance over the appropriateness of the
Company’s financial reporting, the performance of both the store
assurance arrangements and the external auditor and oversight over
the Company’s system of internal control.
Responsibilities
The Board has approved terms of reference for the Audit Committee,
which are available on the Governance pages of the Group’s website,
www.safestore.com, within “Governance Documents”. These provide
the framework for the Committee’s work in the year and can be
summarised as providing oversight of the:
• appropriateness of the Company’s external financial reporting;
• relationship with, and performance of, the external auditor;
• Group’s store assurance arrangements and the risk management
framework; and
• Group’s internal control framework.
How the Committee operates
The Audit Committee met five times during the year, and has an
agenda linked to the events in the Group’s financial calendar. In
addition to the Committee members, the following individuals attend
by invitation:
• the Chief Financial Officer and the Group Financial Controller;
• the Chair and the Chief Executive Officer;
• other senior managers, as appropriate, including those responsible
for IT security and risk management;
• the audit partner, directors and senior managers from Deloitte; and
• the valuation team from the Company’s property valuers, Cushman
& Wakefield.
This year, during two Audit Committee meetings, the Committee met
separately with Deloitte without any other member of management
being present.
85
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Audit Committee report continued
Main activities of the Committee during the year
A summary of the Audit Committee’s main activities during the year included the following items:
Responsibilities
The Audit Committee has:
Financial reporting
• reviewed the Annual Report and Financial Statements and that, taken as a whole, it is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company’s
performance, business model and strategy;
• assessed and concluded on the Group’s viability statement and the appropriateness of adopting the going
concern basis of accounting for the full and half year financial results;
• reviewed the significant issues and material judgements which were made in preparing the 2022 half year
results and the Annual Report and Financial Statements;
• considered and agreed the approach for performing the valuations of investment properties for the Annual
Report and Financial Statements and interim results;
• challenged the valuers findings and judgements in relation to the property valuation;
• reviewed the integrity of the financial statements and announcements relating to the financial performance and
governance of the Group at year end and half year;
• reviewed the principal judgemental accounting matters affecting the Group based on reports from both the
Group’s management and the external auditor;
• challenged the technical provisions relating to the accounting for share-based payments under IFRS 2,
including disclosure and narrative, and considered the significance of the share-based payments charge
on this year’s financial statements; and
• considered alternative performance measures, not defined under IFRS or “non-GAAP” measures, ensuring
consistency with how management measures and judges the Group’s financial performance.
External auditor
• reviewed and approved the audit plan with the external auditor, and that it was appropriate for the Group,
including in respect of scope and materiality and aligned to the key risks of the business;
• considered external audit effectiveness, independence and re-appointment;
• challenged the auditor’s findings and judgements in relation to the property valuation;
• approved auditor remuneration; and
• considered the requirement to tender for audit services, in line with the Statutory Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Responsibilities) Order 2014.
Internal audit
arrangements
• reviewed the effectiveness of the Group’s internal controls and disclosures made in the Annual Report and
Financial Statements;
• challenged the effectiveness of the Group’s store audit arrangements; and
• assessed the effectiveness and independence of the store assurance team and considered whether there was
a need for the Company to establish a broader internal audit function.
Governance and risk
• monitored the adequacy and the effectiveness of the Group’s ongoing risk management systems and
processes, through risk and assurance plans and reports, including:
• store assurance audit reports;
• internal financial control assessments;
• fraud and loss prevention reports; and
• operational risk updates, including IT security, health and safety and customer complaints;
• reviewed the Company’s anti-corruption and bribery (statement and policy) and whistleblowing (‘Speak Out’)
policy and procedures;
• monitored the effectiveness of the Company’s information security and business continuity arrangements; and
• reviewed the Company’s REIT compliance and tax strategy.
86
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Appropriateness of the Company’s external
financial reporting
Financial reporting and significant financial judgements
The Committee assessed whether suitable accounting policies had
been adopted and whether management had made appropriate
estimates and judgements. The Committee reviewed accounting
papers prepared by management which provided details on the main
financial reporting judgements.
The Audit Committee reviewed the assumptions associated with the
accounting for share-based payments to ensure that they were
accurately measured and disclosed appropriately in the Annual Report
and Financial Statements in accordance with IFRS 2 “Share-based
Payments”, with particular focus on the assessment of the performance
conditions under which the share-based payments vest.
The Committee also reviewed reports by the external auditor on the
full year and half year results which highlighted any issues with respect
to the work undertaken on the year end audit and half year review.
The Committee paid particular attention to matters it considered
important by virtue of their impact on the Group’s results and
remuneration, and particularly those which involved a high level of
complexity, judgement or estimation by management.
The Committee has concluded that there were not significant levels
of judgements included in the financial statements, other than for the
property valuation as described below.
Property valuations
The key area of judgement that the Committee considered in reviewing
the financial statements was the valuation of the investment property
portfolio. Whilst this is conducted by independent external valuers, it
is one of the key components of the financial results and is inherently
complex and subject to a high degree of judgement and estimation.
As well as detailed management procedures and reviews of the process,
the Committee met the Group’s valuers to discuss the valuations,
review the key judgements and discuss whether there were any
significant disagreements with management. This year the Committee
reviewed and challenged the valuers on the cap rates, rental growth
assumptions and stabilised occupancy levels, and also the considerations
made around the macro-economic and inflationary environment, in
order to agree 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 has processes in place to review the external valuations. In
addition, the external auditor uses valuation experts to conduct a
detailed review of the key assumptions that underpin the investment
property valuations and reports their findings to the Committee.
A more detailed explanation of the background, methodology and
judgements that are adopted in the valuation of the investment
properties is set out in note 13 to the financial statements.
Financial statements
The Committee considered and was satisfied with management’s
presentation of the financial statements.
Management confirmed to the Committee that it was not aware of any
material misstatements and the auditor confirmed that it had found
no material misstatements during the course of its work.
The Committee is satisfied that the judgements and estimates made
by management are reasonable and that appropriate disclosures have
been included in the financial results. After reviewing the reports from
management and following its discussions with the valuers and
auditor, the Committee is satisfied that the financial statements
appropriately address the critical judgements and key estimates, both
in respect of the amounts reported and the disclosures. The Committee
is also satisfied that the processes used for determining the value of
the assets and liabilities have been appropriately reviewed and challenged
and are sufficiently robust.
Fair, balanced and understandable assessment
At the request of the Board, the Committee also considered whether
the Annual Report and Financial Statements was fair, balanced and
understandable and whether it provided the necessary information for
shareholders to assess the Company’s performance, business model
and strategy.
The Committee has advised the Board that in its view, taken as a
whole, the Annual Report and Financial Statements is fair, balanced
and understandable. In reaching this conclusion, the Committee
considered the overall review and confirmation process around the
Annual Report and Financial Statements, going concern and viability.
The Committee was provided with, and commented on, a draft copy
of the Annual Report and Financial Statements. In carrying out the
above processes, key considerations included ensuring that there was
consistency between the financial results and the narrative provided
in the front half of the Annual Report. The Committee is satisfied that
alternative performance measures, not defined under IFRS or “non-GAAP”
measures, are consistent with how management measures and judges
the Group’s financial performance.
Going concern and viability statement
The Committee has reviewed the Group’s assessment of viability over
a period of three years. The Committee’s approach in assessing going
concern and the viability statement is set out on page 44.
Relationship with, and performance of,
the external auditor
Annual auditor assessment
During the year, the Committee conducted a review of the
effectiveness of the external audit process and the audit quality.
In considering the effectiveness of the external audit, the Committee
considered:
• the arrangements for ensuring the external auditor’s independence
and objectivity;
• the quality of the audit team and their expertise;
• the quality and scope of the audit plan and reporting;
• the quality of the formal audit report to shareholders;
• the robustness and perceptiveness of the auditor in its handling
of the key accounting and audit judgements; and
• the content of the external auditor’s comments on control
improvement recommendations.
The Committee also sought the views of key members of the finance
team, senior management and Directors on the audit process and
the quality and experience of the audit partner engaged in the audit.
Their feedback confirmed that the auditor continues to perform well
and provide an appropriate level of challenge to management.
It is standard practice for the external auditor to meet privately with
the Audit Committee, without any member of management or the
Executive Directors being present, at least once a year.
87
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Re-appointment of auditor
In reviewing the effectiveness, independence, objectivity and expertise
of the external auditor, the Audit Committee has concluded that overall
Deloitte has carried out the audit effectively and efficiently and recommended
to the Board that the auditor be proposed for re-appointment as external
auditor for 2023.
Resolutions to re-appoint Deloitte as auditor and to authorise the
Directors to agree its remuneration will be put to shareholders at
the Annual General Meeting that will take place on Wednesday
15 March 2023.
Group’s risk management and internal
control framework
The Board, as a whole, including the Audit Committee members,
considered whether the nature and extent of Safestore’s risk management
framework and risk profile were acceptable in order to achieve the
Company’s strategic objectives. As a result, the Committee considered
that the Board has fulfilled its obligations under the Code.
Safestore’s internal controls, along with its design and operating
effectiveness, remain a key priority for the Group and are subject to
ongoing monitoring by the Audit Committee through reports received
from management, along with those from the external auditor. The
Committee, together with management, has continued to maintain
its comprehensive review of the controls across the business. The
Committee is satisfied that the Company’s control environment remains
robust. The risks and uncertainties facing the Group, and its internal
control processes are considered in the strategic report on pages 37
to 42 and on pages 81 to 82.
Internal audit
The Audit Committee has oversight responsibilities for the store
assurance team, which is responsible for reviewing operational and
financial controls at store level, which effectively carries out an internal
audit role for the Group’s stores. The Committee has also reviewed an
analysis of how the key risks in the business are mitigated by existing
controls and has reviewed the Group’s risk management framework.
The Committee considers that this provides a robust internal audit
assessment for the Group. However, given the increasing expansion of
the Group’s geographical presence, it has determined that value would
be added through the establishment of a new internal audit function.
I will be available at the Annual General Meeting to answer any
questions on the work of the Audit Committee.
Ian Krieger
Chair of the Audit Committee
16 January 2023
Audit Committee report continued
Relationship with, and performance of,
the external auditor continued
External auditor objectivity, independence and non-audit work
The Audit Committee’s terms of reference set out that it is responsible
for the formal policy on the award of non-audit work to the auditor.
The Committee has formalised procedures for the approval of
non-audit services which stipulate the services for which the auditor
will not be used. The policy also stipulates projects where the auditor
may be used subject to certain conditions and pre-approval requirements.
In order to preserve auditor objectivity and independence, the external
auditor is not asked to carry out non-audit work. A report of all audit
and non-audit fees payable to the external auditor is provided to the
Committee at each meeting, including both actual fees for the year
to date and a forecast for the full year, analysed by project and into
pre-defined categories. In the current financial year, Deloitte LLP provided
non-audit services, amounting to £4,000 covering covenant compliance
work, for the Company’s lenders. It was determined that the nature of
the work would not impact auditor objectivity and independence given
the safeguards in place.
It is the Committee’s policy to ensure that there is audit partner rotation
every five years to safeguard the external auditor’s independence and
objectivity. Deloitte was appointed as external auditor to conduct the
audit for the 2014 financial year. The first lead audit partner retired
following the 2017 audit and Darren Longley was appointed as the new
lead audit partner with effect from 1 May 2018 and has completed his
fifth year in office. A new lead audit partner will be appointed for the
2023 audit.
The auditor is asked on an annual basis to articulate the steps that it
has taken to ensure objectivity and independence, including where the
auditor provides non-audit services. As part of the 2022 audit, Deloitte
confirmed that it was independent within the meaning of applicable
regulatory and professional requirements. Taking this into account
and having considered the steps taken by Deloitte to preserve its
independence, the Committee concluded that Deloitte’s independence
had not been compromised notwithstanding the level of non-audit
fees incurred during the year.
Audit tendering
Deloitte was appointed by shareholders as the Group’s statutory
auditor in 2014 following a formal tender process. There are no
contractual obligations that restrict the choice of external auditor. It is
a requirement of the Statutory Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes and
Audit Responsibilities) Order 2014 (the “Order”):
• to formally tender for audit services every ten years;
• to rotate the partner every five years; and
• if a competitive tender process has not been completed for five
consecutive financial years, that the Company states when it intends
to complete such a tender process.
The Order became effective for financial years beginning on or after
1 January 2015 and applies to the Company with effect from the financial
year ended 31 October 2016. To comply with the Order the Company
intends to conduct a formal tender process for audit services during the
financial year ending 2024. The Committee considers this timing to be in
the best interests of the Company, as it allows for a new lead audit
partner to be appointed (in accordance with the Order) and conduct
a full year audit ahead of the formal audit tender process.
88
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Directors’ remuneration report
for the year ended 31 October 2022
The Company has continued to deliver
excellent financial and operating
performance during 2021/22
Laure Duhot
Chair of the Remuneration Committee
2020 LTIP
EPS growth targets have been exceeded under the 2020 award. Full
vesting will be determined based on an assessment of the Company’s
relative TSR performance in March 2023.
Further details of the business performance and the resulting incentive
payouts are set out within this annual statement.
2023 Policy
The Committee commenced a remuneration review during 2022 to
determine the guiding principles and design of the proposed Policy to
be presented for shareholder vote during 2023. This is an important
exercise and the committee is now in the process of determining a
competitive package to retain a management team whose fixed
compensation is significantly below its peers. At the date of drafting
this report, the Committee is still in discussions around the details of the
new Policy. As a result, the new Policy will be presented for shareholder
approval during the 2023 financial year, i.e. before 31 October 2023
at a General Meeting, in line with the relevant regulations.
In undertaking its review, the Committee concluded that the positioning
of the current remuneration packages, being significantly below
Safestore’s peers in terms of quantum and which in fact places the
CEO in the lower quartile of the FTSE 250, is not in the best interests of
all stakeholders. It also noted that the 2017 LTIP had now vested and
paid out in full. Therefore, changes to the LTIP are likely to be proposed
as part of the new Policy, although the Committee is keen that the LTIP
structure should continue to be aligned with standard market practice in
terms of vesting profiles and be subject to the achievement of stretching
performance targets. On this basis, LTIP awards will be delayed until
shareholder approval of the new Policy has been gained.
I look forward to engaging with you and hearing your feedback on
proposals during 2023 and hope that shareholders will support our
new Policy at the General Meeting to be held in 2023.
Part A: annual statement
Dear shareholder
As the recently appointed Chair of the Remuneration Committee
(the “Committee”), on behalf of the Committee, I am pleased to
provide an overview of our work in relation to both Director and
wider workforce remuneration for the year ended 31 October 2022.
Firstly, I would like to take this opportunity to draw your attention to
the two key matters in this report:
• the 2017 LTIP vesting and the Board’s shareholder engagement; and
• the Committee’s approach to the 2023 Directors’ Remuneration
Policy (the “Policy”).
2017 LTIP vesting and incentive payouts
during the year
The Committee is delighted that Safestore has delivered exceptional
performance this year which is reflected in the achievement of another
solid set of financial results for the year ended 31 October 2022. This
is testament to the excellent performance of the management team
and all colleagues who have delivered strong performance against
our business goals.
Annual bonus
In relation to the annual bonus, financial and strategic/operational
targets have been significantly exceeded leading to maximum payout.
2017 LTIP
As highlighted in last year’s report, the Committee measured the
Company’s EPS growth over the five-year period ending on
31 October 2021 and disclosed the value of this element in the single
figure table, which accounted for two-thirds of the award. However,
final vesting could only be determined after taking into account the
relative TSR element which accounts for the remaining one-third of the
award. The Committee is pleased to confirm that TSR targets have
been significantly exceeded, even considering the material fall in share
prices in the real estate sector during 2022, resulting in full vesting of
the awards. The Committee noted the significant vote against the 2021
annual report on remuneration. We understand from our engagement
with major investors that the main reason for the voting outcome on
our 2021 Directors remuneration report was that some shareholders
who voted against the 2017 remuneration policy at its inception have
a policy to vote against all future remuneration reports that reflect their
subsequent execution and therefore this is unlikely to change for 2022.
However, the Committee is of the view that the remuneration earned
this year reflects the Company’s excellent performance over a sustained
period and that this is consistent with the views of our shareholders,
many of whom fully accepted that the 2017 LTIP awards reflected the
outstanding value created for all shareholders which has been of significant
benefit to all our stakeholders.
89
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
• reviewed the gender pay gap analysis results and signed off actions;
• reviewed and approved the Directors’ remuneration report for
2021/22; and
• reviewed the Committee’s terms of reference.
Planned activities for 2023
We set out below the activities which the Committee expects to
undertake next year:
• engaging with investors in relation to the new Policy, refining and
finalising proposals in light of feedback received, and presenting
the Policy for approval by shareholders at a General Meeting to be
held in 2023;
• implementing the new Policy, on the basis it is approved by
shareholders;
• our normal oversight of the annual remuneration cycle including
approving Company-wide salary increases, approving the annual
bonus and LTIP targets for 2023, measuring performance against
the bonus targets and determining the vesting outcomes of the
relative TSR element of the 2020 LTIP award and the EPS element
of the 2021 LTIP award;
• review of Executive Director and senior manager salaries; and
• review of wider workforce pay policies and practices and feedback
from the workforce panel.
Remuneration outcomes for 2022
How we have performed in 2022
It has been another strong year for Safestore, and we are proud of
everything the Executive and wider team has achieved. We exceeded
both our own and investor expectations and this is reflected in our 2022
performance outcomes. Highlights for 2022 performance include:
• Group revenue up 13.8% to £212.5 million;
• Underlying EBITDA up 14.5% to £135.1 million;
• Adjusted Diluted EPRA Earnings per Share up 17.3% to 47.5 pence
resulting in 66.7% growth over the three years to 31 October 2022;
• proposed total dividend in respect of the year to 31 October 2022
up 18.7% to 29.8 pence per share;
• expansion of the property pipeline to over 1.4m sq ft of MLA through
securing a combination of freehold and leasehold sites;
• Group occupancy at 31 October 2022 stood at 82.1%, down
2.4ppts on 2021, and total occupancy was 6.317m sq ft, up
7.4% on 2021;
• strong contribution from our recently acquired Benelux business
of seven months’ revenue of €5.9 million;
• continued progress made in relation to sustainability including
further reductions in our emissions and exceeding our target
whereby 98.5% of construction waste is diverted away from
landfill; and
• maintained EPRA Silver award status.
Part A: annual statement continued
Overview of business performance
As set out in this Annual Report, the Board is proud of Safestore’s
achievements this year, with excellent business performance, driven by
strong revenue growth in the UK market, strong performances in our
Parisian and Spanish businesses, and seven months’ contribution
from our recently acquired Benelux business. Our new store pipeline
represents c.18% of our existing portfolio’s MLA, which we anticipate
will continue to grow. Our strong and flexible balance sheet has
significant funding capacity, allowing us to continue to consider
strategic, value-accretive investments as and when they arise. We have
delivered a strong occupancy performance over recent years and, after
a significant level of acquisition and development activity over the last
six years, we still have 1.4m sq ft of fully invested currently unlet space
in our UK, Paris, Spain and Benelux markets in addition to 1.4m sq ft
of pipeline space. Our most significant upside opportunity is from filling
this space at optimised rates and that remains our priority.
The consequence of the above is that we achieved another record set
of financial results, significantly ahead of budget, and can continue
with our progressive dividend policy. The business has demonstrated
its inherent resilience which, alongside our recent excellent results and
current trading, allows the Board to look forward with confidence.
Over the past year, our priority has continued to be the health and
wellbeing of our colleagues and our customers. We are exceptionally
proud that our commitment to colleagues was recognised externally
last year by the award of the prestigious Investors in People (“IIP”)
Platinum accreditation. I was also particularly pleased that the number
of hours spent on training across the business has increased following
the removal of Covid-restrictions.
The Company continues to increase base salaries for all colleagues
and Board Directors. I am pleased to report that an average increase
of 6.9% was provided to colleagues during 2022. In addition, to show
our appreciation for the commitment and resilience of all our colleagues
we made exceptional payments totalling £1,000 to every colleague:
£500 in December 2021 as a thank you for their contribution during
the pandemic; and a further £500 cost of living payment in October
2022 to ease financial hardship.
Committee activities in 2022
Despite taking the decision to postpone the Policy renewal, a
significant amount of the Committee’s time in 2022 was spent
undertaking a remuneration review to support the design of the
new Policy. In addition, we also did the following:
• proactively responded to the 72% votes in favour of the 2021
remuneration report as set out above;
• considered wider workforce pay policies and practices and
feedback from the workforce panel;
• approved the salary increase for Executive Directors and senior
managers alongside the wider workforce salary budget;
• review Chairman fees to reflect market competitive levels and
time commitment;
• agreed annual bonus targets for 2022;
• reviewed and approved the 2022 LTIP grant and the associated
performance conditions;
• discussed and approved Executive Director and senior manager
remuneration outcomes for 2022 including measuring the
performance outcomes of the relative TSR element of the 2017 LTIP
award and the EPS element of the 2020 LTIP;
90
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT The results for 2022 are a continuation of the strong performance of the business since 2013, when the current team took over the management
of Safestore. Like many companies in the real estate sector, our share price has fallen since the start of 2022; however, £100 invested in
Safestore in September 2013 would still be worth about £845 as at 31 October 2022, taking account of share price growth and reinvested
dividends. This represents outperformance against key competitors and industry benchmarks as shown below.
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01/09/2013
01/09/2014
01/09/2015
01/09/2016
01/09/2017
01/09/2018
01/09/2019
01/09/2020
01/09/2021
01/09/2022
Safestore
FTSE 250
FTSE 350 Supersector Real Estate
Big Yellow
Lok’nStore
Base salary increases
The Committee determined, as part of the annual pay review, to increase the Executive Directors’ salaries by 3% from 1 May 2022 resulting in
salaries of £454,578 and £323,887 for the CEO and CFO respectively. This increase was in line with that provided to senior management, but
significantly below that of the average for the general workforce (6.9%).
Pension
Executive Directors’ pension contribution rates continue to be aligned with the average workforce rate of 4.1% of salary.
Annual bonus outcome
Targets for the 2022 annual bonus set by the Committee were based on adjusted EBITDA (two-thirds) and strategic/operational measures
(one-third) with a maximum opportunity of 150% of salary. The Committee confirms that no performance target has been adjusted in the year
for any reason.
Notwithstanding the challenging targets and the tough operating environment, the adjusted EBITDA measure was achieved in full as the adjusted
EBITDA (adjusted for budgeted exchange rates) of £134.9 million exceeded the maximum EBITDA target of £126.8 million.
The Committee also assessed that 100% of maximum for the strategic/operational measures would pay out reflecting the strong strategic
progress made during 2022 (full details of this assessment are set out on pages 106 to 109.
In total, the overall bonus payout was 100% of maximum and 150% of salary for both Executive Directors, versus a maximum opportunity of
150% of base salary. In line with Policy, 100% of salary will be paid in cash and 50% of salary will be deferred into shares on a net of tax basis.
91
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT
Directors’ remuneration report continued
for the year ended 31 October 2022
Part A: annual statement continued
Remuneration outcomes for 2022 continued
Annual bonus outcome continued
In determining the payouts under the annual bonus plan for the
Executive Directors, the Committee has been mindful not only of the
formulaic outcome against the targets set, but also of the underlying
performance of the business. Specifically, the Committee took account
of the following factors:
• The Company achieved another outstanding set of financial results
with substantial year-on-year growth in all its financial KPIs.
• The Company paid its final dividend for 2021 to shareholders.
The full year dividend for the year ended 31 October 2022 increased
by 18.7% from 25.1 pence to 29.8 pence.
• The Company-wide bonus pool has increased by 8.8%, including
the £500 cost of living payment in October 2022 to ease
financial hardship.
On this basis, the Committee felt comfortable that the formulaic bonus
outcome reflected the individual Executive Director and Company
performance. As a result, the Committee determined that no overriding
discretion will be applied to the bonus outcome. The Committee noted
that, in recent months, Safestore’s share price has fallen, but that corporate
performance continues to be excellent, and the value of its real estate
portfolio remains stable.
Long Term Incentive Plans
2017 LTIP – Relative TSR element performance measurement
The five-year performance period of the relative TSR element of the
2017 LTIP ended on 28 September 2022; relative TSR performance
accounts for one-third of the award with 50% of the element measured
against the constituents of the FTSE 250 Index excluding Investment
Trusts and the remaining 50% is measured against the FTSE 350
Supersector Real Estate Index.
Safestore’s TSR growth was 189.2% over the five-year performance
period to 28 September 2022 and was significantly in excess of the upper
quartile of both peer groups (32.8% and 54.2% for the FTSE 250 Index
excluding Investment Trusts and FTSE 350 Supersector Real Estate
Index respectively), which equates to maximum vesting. Given that the
Committee confirmed that the Cash on Cash Return underpin had been
satisfied as at 31 October 2021, the performance targets under the
relative TSR element were met in full. Therefore, taking account of the
EPS element which represented two-thirds of the award, and under
which 100% of the awards were earned in the year ended 31 October
2021, the final vesting level for the 2017 LTIP was determined by the
Committee to be 100%.
The purpose of the introduction of the 2017 LTIP was to focus 56
colleagues to drive sustainable growth over a five-year period. The
Committee believes that the awards which vested in September 2022
for the Executive Directors and their colleagues are commensurate
with the corporate success of the Company achieved over this period
as follows:
• The Company’s financial success has flowed through to shareholder
returns such that since the start of the EPS performance period on
1 November 2016 the Company’s market capitalisation has increased
by £1.162 billion, with £229 million of dividend payments made.
• The successful execution of strategy has created a unique business
model that combines advanced digital marketing and pricing analytics,
a well-located portfolio with extensive pipeline, and a focus on store
team sales skills.
• The management team has successfully built a larger and more
diversified business, expanding operations into Spain and Benelux,
and ensuring that all parts of the Company are run in a
sustainable manner.
• Financial success has been achieved in parallel with the Company
receiving several accolades in relation to its colleague initiatives,
ESG performance, and consistently outstanding customer
feedback scores.
On this basis, a further 666,667 and 446,667 shares vested for the CEO
and CFO in respect of the relative TSR element, meaning that in total 2
million shares for the CEO and 1.34 million shares for the CFO vested
under the 2017 LTIP and became exercisable on 29 September 2022.
The Executive Directors also became entitled to dividend equivalents
on these shares when they vested based on the value of dividends
paid between the grant and vesting dates of the award. The share
price at the date of vesting was £7.94, representing an increase of
82% since the date of grant. The value of the shares vesting under
the relative TSR element and the associated dividend equivalents has
been included in the single figure of remuneration table for the year
ended 31 October 2022. The value of the awards vested under the
EPS element of the 2017 LTIP included in the single figure of remuneration
table for the year ended 31 October 2021 has been restated to include
the actual dividend equivalents paid between the grant date and the
vest date and the share price on vesting.
I am delighted that the wider team of 56 colleagues who participated
in the 2017 LTIP will also benefit from the awards in line with their
exceptional performance.
2020 LTIP – EPS and Relative TSR element
performance measurement
The performance period of the EPS element of the 2020 LTIP ended
on 31 October 2022; EPS performance accounts for two-thirds of the
award. On that basis, the Committee measured the Company’s EPS
growth and Cash on Cash Return in relation to the underpin over the
three-year performance period. Adjusted Diluted EPRA EPS increased
by 18.6% p.a., significantly ahead of the 8% p.a. growth required for
maximum vesting. The average Cash on Cash Return over the same
period was 11.9% which also exceeded the 8% underpin target
resulting in 100% of the awards being earned under the EPS element
of the 2020 LTIP.
The final vesting level for the 2020 LTIP will not be determined by the
Committee until the vesting date of 18 March 2023, with the balance
of awards subject to the Company’s relative TSR performance
measured over the three-year period ending on 17 March 2023. As at
31 October 2022, Safestore’s TSR growth is in excess of the upper
quartile of both the FTSE 250 excluding Investment Trusts and FTSE 350
Supersector Real Estate Index peer groups which would equate to
maximum vesting. Therefore, the Committee confirms that it expects the
awards to vest in full and will consider whether the formulaic outcome
is in line with underlying Company performance at the vesting date.
The value of the 2020 LTIP awards expected to vest in March 2023,
plus an estimate of the value of dividend equivalents accrued to
31 October 2022, has been included in the single figure of remuneration
table for 2022 on the basis that the relative TSR performance period
has been substantially completed.
Annual bonus deferred shares
Deferred bonus award nil-cost options granted in respect of annual
bonus earned in the year to 31 October 2019 under our previous
remuneration policy vested on 1 November 2021. This amounted to
22,982 nil-cost options for the CEO and 16,375 nil-cost options for
the CFO, including dividend equivalents.
92
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT 2022 LTIP grant
The Committee made a grant of nil-cost option awards under the 2020
LTIP on 25 January 2022. In line with Policy the awards had a face
value of 200% of base salary, vesting over three years subject to
Adjusted Diluted EPRA Earnings per Share growth (two-thirds of the
weighting) and relative TSR (one-third of the weighting) performance
criteria, together with a Cash on Cash Return underpin. The awards
were also subject to a two-year post-vesting holding period. The
Committee will have overriding discretion to change the formulaic
outcome (both downwards and upwards) if it is out of line with the
underlying performance of the Company.
Full details of the performance conditions attached to the awards can
be found in the annual report on remuneration on pages 111 and 112.
Non-Executive Directors’ fees
The Executive Directors recommended to the Board that Non-Executive
fees should rise by 3% from 1 May 2022, with base fees increasing to
£57,680 and Committee Chair fees increasing to £10,815. The Chairman’s
fee has been increased by 18.6% to £220,000. The Committee deemed
this level of increase necessary given that the fee was significantly below
market competitive levels and was not reflective of the significant time
commitment required for the role. The fee remains below the median
Chairman fee of both the FTSE 250 and FTSE 350 Supersector Real
Estate Index peer groups and is now positioned in a consistent manner
with our other non-executive fees.
Wider workforce pay
Safestore’s pay principles were reviewed during the year and continue
to set out a framework for making decisions on colleagues’ pay. Reward
packages consist of a combination of fixed and variable elements,
including base pay, a pay-for-skills model, performance related pay,
bonus and pension. In the UK, we also operate an annual all-colleague
share plan to foster the culture of ownership, reflecting our remuneration
principles by rewarding colleagues for the successful execution of
strategy over a multi-year horizon. We are delighted that many UK
colleagues are enrolled in our Sharesave plan, with 48% participating
in our most recent scheme.
The Committee receives remuneration information from across the
Group regarding annual salary reviews, bonus, gender pay gap and
CEO pay ratios, together with the principles that are applied in relation
to broader incentive schemes, and how these align with culture. We
recognise that it is critical for our colleagues to feel valued as well as
to be paid fairly.
I am pleased that we have continued to invest in our reward offering for
the wider workforce through a higher average workforce salary increase,
on average 6.9%, with targeted above market increases for selected
roles and a £500 cost of living payment to ease financial hardship over
the winter period. We also introduced our new healthcare cash plan,
provided by Medicash, providing colleagues with everyday
reassurance on their health and wellbeing.
Our approach to colleague engagement through our formal workforce
advisory panel is now fully embedded. Our 15 People Champions
continue to engage directly with the CEO on a wide range of subjects
including remuneration.
In addition, the CEO also ran two virtual town hall sessions where
colleagues had the opportunity to raise questions, discuss business
issues and provide feedback. As a result of the aforementioned
Sharesave plan, a significant portion of colleagues are shareholders
meaning that they are also able to express their views in the same way
as other shareholders. Please see the section on our communication
with colleagues for more information.
Our 2021 median gender pay gap of 5.2% remains significantly below
the UK average* (15.1%), but we know we still have work to do. Our
colleague engagement levels show that people enjoy working at Safestore,
but high retention, particularly in more senior roles, means the pace of
change is slower than we would like. We would like to see more women
at Safestore; our aim is to attract 40% female applicants, and we are
working hard on attracting, retaining and supporting women in our
workforce. However, in the short term, this does negatively impact our
gender pay gap and therefore we know we must combine this with
working hard to support the development of all women at Safestore.
We have also published our CEO pay ratio for the fourth time in line
with the reporting regulations. The Committee acknowledges that the
ratio is significantly higher in 2021 and 2022 versus 2019 and 2020,
given that the value of the 2017 LTIP EPS element is included in 2021
and the value of the 2017 LTIP relative TSR element is included in 2022,
compared to 2019 and 2020 when no long term incentives were earned.
I am also exceptionally proud that we were awarded the prestigious
Investors in People (“IIP”) Platinum accreditation last year and we
continue to strive for excellence in this area.
Note
* Office for National Statistics, Gender Pay Gap 2021 Dataset, ons.gov.uk.
Summary
Overall, the Company has continued to deliver excellent performance
during 2021/22. The Committee believes that the 2022 remuneration
outcomes are appropriate and reflective of the business performance
and the wider economic and social context.
We will continue to work on the design of the new Policy to ensure it
will be fit for purpose for the next three years as it is fundamental to
helping us achieve continued strong business performance. The new
Policy will therefore be recommended to shareholders at a General
Meeting to be held in 2023. We will also be asking shareholders to
vote in favour of our Directors’ remuneration report at our 2023 AGM;
I would welcome any feedback or comments on this report or our
remuneration principles and look forward to receiving any written
questions ahead of our AGM. You will find details of the conference
facility and how to submit written questions on our website at
www.safestore.co.uk/corporate.
The Board would like to thank the shareholders that took part in our
engagement around the time of the 2022 AGM and values the process,
feedback and insights it has gained. We will continue to engage with
shareholders and their representative bodies on remuneration and
other governance matters, and thank all our shareholders for their
continued support on remuneration matters.
I would also like to take this opportunity to thank my predecessor as
Remuneration Committee Chair, Claire Balmforth, for her leadership
and for steering the Committee with a strong set of policies and
practices upon which our decisions can be made.
Finally, I want to recognise that the Company’s performance would
not be possible without the resilience shown by our colleagues. To all
colleagues – thank you for your hard work and commitment to making
Safestore the strong business it remains today.
Approved by the Board on 16 January 2023 and signed on its
behalf by:
Laure Duhot
Chair of the Remuneration Committee
16 January 2023
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OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part B: Our remuneration at a glance
Ahead of the annual report on remuneration, we have summarised below the key elements of our current Policy approved at the AGM held on
18 March 2020. At the date of drafting this report, the Committee is still in discussions around the details of the new Policy. Despite this, we set
out below, where possible, a summary of how we intend to implement Policy in 2023. Further details will be included with the full Policy to be
circulated ahead of the General Meeting later in 2023. We also summarise the key remuneration outcomes for 2022.
Our full Policy can be found on the Safestore website at www.safestore.co.uk.
Summary of our Directors’ Remuneration Policy and planned implementation of Policy for 2023
Element
Key features of Policy approved at 2020 AGM
Implementation for 2023
Executive Directors
Base salary
Frederic Vecchioli
Andy Jones
Reflects an individual’s responsibilities, experience and role.
Base salary of £454,579.
Base salary of £323,887.
It is anticipated that salary increases will generally be in line with
the colleague population.
In certain circumstances the Committee has discretion to make
appropriate adjustments to salary levels. Such circumstances
could include where an Executive Director is paid significantly
below the market rate or there is a change in role or responsibilities.
(3% increase in May 2022).
(3% increase in May 2022).
The increases were significantly below the average for
the general workforce (6.9%). Both salaries remain below
both the FTSE 250 and FTSE 350 Supersector Real
Estate Index lower quartiles.
Executive Directors will receive a pension cash
supplement of 4.1% of salary in line with the average
workforce contribution level.
Benefits in line with Policy.
No planned change to maximum opportunity of 150%
of salary.
Performance measures, deferral, their weighting and the
payout curve are as described in the column to the left.
Specific targets and their achievement, where not
deemed commercially sensitive, will be disclosed in the
2023 annual report on remuneration. To be confirmed
at the time that approval is sought for the new Policy.
As described in the Annual Statement of the Chair of
the Remuneration Committee on page 89, we are
undergoing a review of the new Directors’ Remuneration
Policy. To the extent that there are any changes, these
are expected to relate to the long term incentive
arrangements only.
Benefits
and pension
Maximum contribution to pension scheme or cash in lieu is
equal to 10% of salary.
New hires will receive the pension contribution received by the
majority of the workforce (the average employer contribution
rate is currently 4.1% of salary).
Market-competitive benefits package provided.
Annual bonus
Maximum award equal to 150% of salary per annum.
Performance measures are two-thirds financial and one-third
strategic/operational, with a financial underpin ensuring no
payout for strategic/operational element if financial performance
is below threshold.
Payout for threshold performance is 20% of maximum and for
target performance is 50% of maximum.
Any bonus in excess of 100% of salary will be held in shares
on a net of tax basis (referred to hereinafter as restricted shares).
The restricted shares will be held by the Executive Directors by
agreement and are subject to a two-year holding period that
expires on the second anniversary of the end of the financial
year in which the bonus was earned. Malus provisions apply
during the holding period and claw-back provisions apply for
three years thereafter.
Dividend equivalents are payable on restricted shares.
The Committee will continue to have overriding discretion to
change formulaic outcomes (both downwards and upwards) if
they are out of line with underlying performance of the Company.
LTIP
Annual award of nil-cost options of up to 200% of salary.
Vesting period of three years followed by a holding period of
two years, via an agreement with the Executive (during which
any vested and exercised awards cannot be sold except for
tax withholding purposes on exercise).
Two-thirds of award subject to Adjusted Diluted EPRA Earnings
per Share growth and one-third subject to relative TSR
balanced equally against the FTSE 250 (excluding Investment
Trusts) and the FTSE 350 Supersector Real Estate Index. 8%
p.a. Cash on Cash Return underpin.
25% vesting for threshold performance increasing on a straight
line to 100% for maximum performance.
Dividend equivalents are payable on vested shares.
The Committee will have overriding discretion to change
formulaic outcomes (both downwards and upwards) if they
are out of line with underlying performance of the Company.
94
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Element
Key features of Policy approved at 2020 AGM
Implementation for 2023
Executive Directors
Frederic Vecchioli
Andy Jones
Shareholding
guidelines
Executive Directors are expected to meet the guidelines by
29 September 2022 (the vesting date of the 2017 LTIP) or five
years after joining, if later.
Currently 350% of salary for the CEO and CFO, however,
shareholding guidelines are being reviewed as part of
the new Directors’ Remuneration Policy.
Vested but unexercised awards on a net of tax basis and
beneficially owned and restricted shares would count towards the
shareholding guidelines.
These guidelines will continue to apply for two years post cessation
of employment. For the avoidance of doubt shares beneficially
owned at the date of adoption (18 March 2020) of the current
Policy and the 2017 LTIP award will be exempt from this post
cessation of employment guidelines but all share-based awards
granted under the current Policy approved by shareholders at the
2020 AGM would be captured.
Chairman and Non-Executive Directors
Fees
Non-Executive Directors may receive a base fee and
additional fees for chairing a Committee or being the
Senior Independent Director.
The Chairman’s fee: £220,000.
Non-Executive base fee: £57,680.
Committee Chair and SID fee: £10,815.
Non-Executive Director fees were increased below the
general workforce increase in May 2022.
Following the benchmarking review for the Non-Executive
Directors’ fees completed in 2021, this year we completed
a similar benchmarking exercise for the Chairman’s fee.
The Chairman’s fee was increased by 18.6% to £220,000.
The Committee deemed this level of increase necessary
given that the fee was significantly below market
competitive levels and was not reflective of the significant
time commitment required for the role. The fee remains
below the median Chairman fee of both the FTSE 250
and FTSE 350 Supersector Real Estate Index peer groups.
Executive Directors are eligible to receive payment under any award made prior to the approval and implementation of the current Policy
summarised in this report including under the existing 2017 LTIP. For the avoidance of doubt, it is noted that the Company will honour any
commitments entered into that have been disclosed previously to shareholders.
95
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part B: Our remuneration at a glance continued
Business performance and incentive outcomes in 2022
KPI
Measured in
2022 performance
2022 incentive outcome
Underlying EBITDA growth
in 2022
Adjusted Diluted EPRA
Earnings per Share growth
over three years to
31 October 2022
TSR growth over five years
to 28 September 2022
Annual bonus
14.5%.
2020 LTIP
66.7%, i.e. 18.6% per annum.
2017 LTIP
Safestore 189.2%.
Upper quartile of:
Optimisation of performance
of existing portfolio
Annual bonus
Strong and flexible
capital structure
Annual bonus
Take advantage of
selective portfolio management
and expansion opportunities
Annual bonus
ESG
Annual bonus
• FTSE 250 Index excluding Investment Trusts = 32.8%; and
• FTSE 350 Supersector Real Estate Index = 54.2%.
As an Investors in People Platinum accredited organisation, our
focus on our colleagues and culture has enabled us to continue
to deliver sustainable business performance.
With the removal of Covid-restrictions, the time spent on training
across the business has increased to over 30,000 hours.
Delivered technical and content improvements to website platforms:
• finalised migration of all EU websites to one unified web
platform; and
• implemented new Google Analytics (GA4) across all
Group sites.
Enriched pricing and contracting solutions allowing standardisation
and improvement across the Group. In addition, completed data
centre consolidation from five to two Group locations.
The Company’s strong capital structure continued to allow it to
take advantage of opportunities across the Group in order to
deliver incremental earnings growth over the longer term.
The Group’s free cash flow (before investing and financing
activities) increased from £89.5 million to £101.4 million for the
year ended 31 October 2022.
During Q3, the Group commenced the refinancing of our existing
Revolving Credit Facilities (“RCF’s”) which were due to expire in
June 2023. The Group completed this refinancing just after year
end in early November 2022. The previous £250 million Sterling
and €70 million Euro RCF’s have been replaced with a single
multi-currency £400 million facility, with a further £100 million
uncommitted accordion facility, providing further capacity for
medium term growth.
Completed EPS accretive acquisition of remaining 80% of equity
owned by Carlyle in the Benelux Joint Venture Acquired new
development opportunities in the UK, France, Spain and the
Netherlands, in addition to opening new stores and completing
store extensions in various locations.
Continued external recognition of ESG achievements and
disclosures through the following:
• EPRA Sustainability BPR Silver Award
• GRESB Public Disclosure A
• MSCI ESG ‘AA’
• Support the Goals – 5*
Developed a strategy setting out our approach to further support
diversity and inclusion.
Key:
Threshold or below
Threshold to target
Target to maximum
96
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT This resulted in the following incentive outcomes:
• Based on the performance levels set out above, 100% of maximum was achieved in relation to the EBITDA measure and 100% of maximum
for the strategic/operational element, noting that the EBITDA threshold financial gateway had been met.
• The Committee determined that this formulaic outcome was representative of overall performance; as a result, the 2022 annual bonus payout
for the Executive Directors was 100% of maximum. The factors considered by the Committee are set out on pages 90 to 93 of the
Remuneration Committee Chair’s annual statement and the annual report on remuneration.
• In line with the approved Directors’ Remuneration Policy, any bonus payment above 100% of salary will be held in shares for two years on a
net of tax basis.
• The performance period of the relative TSR element of the 2017 LTIP, which accounts for one-third of the award, ended on 28 September
2022. Safestore’s performance in excess of the upper quartile of both peer groups, combined with satisfying the Cash on Cash Return
underpin, resulted in the performance targets under this element being met in full. Therefore, taking account of the EPS element which also
fully vested representing two-thirds of the award, the final vesting level for the 2017 LTIP was determined by the Committee to be 100%.
• The Committee believes that the awards that vested in September 2022 for the Executive Directors and their colleagues are commensurate
with the corporate success that the Company achieved over the five-year performance period (as set out on pages 91 and 92 of the
Remuneration Committee Chair’s annual statement and the annual report on remuneration).
• The performance period of the EPS element of the 2020 LTIP ended on 31 October 2022 which accounts for two-thirds of the award. Adjusted
Diluted EPRA EPS increased by 18.6% p.a., significantly ahead of the 8% p.a. growth required for maximum vesting and the average Cash on
Cash Return over the same period was 11.9% which also exceeded the 8% underpin target. Therefore, the formulaic outcome of this element
is that 100% of the awards have been earned.
• The final vesting outcome for the 2020 LTIP will not be determined by the Committee until the vesting date of 18 March 2023, with the balance
of awards subject to the Company’s relative TSR performance measured over the three-year period ending on 17 March 2023 being earned.
As at 31 October 2022, Safestore’s TSR growth is in excess of the upper quartile of both peer groups which would equate to maximum vesting.
Therefore, the Committee confirms that it expects the awards to vest in full and will consider whether the formulaic outcome is in line with
underlying Company performance at the vesting date.
• The Committee is comfortable that the current Policy operated as intended and that the overall 2022 remuneration earned by the Executive
Directors was appropriate.
Remuneration in the wider context
Context to our Executive Director remuneration in light of wider workforce considerations:
• The wider workforce predominantly has access to competitive bonus arrangements, can participate in all-colleague share plans and/or
recognition schemes and is eligible to be auto-enrolled into the Safestore Group Personal Pension Plan.
• The wider workforce pay principles have been reviewed, leading to further increases in salaries and benefits, including an average workforce
salary increase of 6.9% during the year.
• Alignment of Executive Director and general workforce pension contributions from May 2021.
• The Company-wide bonus pool has increased by 8.8%, including a further £500 cost of living payment in October 2022 to ease
financial hardship.
• Participation in our SAYE remained well above typical levels at 48%.
• Following the removal of Covid-restrictions, the wider workforce has benefited from an increase in training hours.
• Safestore’s 2021 UK median gender pay gap is 5.2%.
97
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration
The 2022 annual report on remuneration contains the details of how the Company’s Policy was implemented during the financial year ended
31 October 2022. An advisory resolution to approve this report and the Remuneration Committee Chair’s annual statement will be put to
shareholders at the 2023 AGM.
Pay fairness
To attract and retain the highest calibre individuals, we aspire to become the employer of choice within our sector, maintaining a competitive
reward package that balances fairness to the colleague with the responsible use of shareholders’ funds.
The colleague value proposition
We review our pay principles, which set out a framework for making decisions on colleagues’ pay, annually. The aim is to:
• support the recruitment and retention of high quality colleagues;
• enable us to recognise and reward colleagues appropriately for their contribution;
• help to ensure that decisions on pay are managed in a fair, just and transparent way; and
• create a direct alignment between Company culture and our reward strategy.
As part of our commitment to fairness, we have set out further information about our colleague offering. The various factors which make up our
colleague value proposition are set out below:
Pay and benefits
• We pay all our colleagues above the over-23 National Living Wage
• Under the 2022 LTIP 70 key colleagues were invited to participate,
rate, regardless of their age. The average annual salary for our store
sales colleagues is £23,904, over £4,140 above the current National
Living Wage for an over-23 year old on a 40-hour contract.
allowing them to share in the success of the Company. The
performance conditions for below Board-level colleagues are the
same as those for the Executive Directors.
• All our sales colleagues are eligible for our performance-based
monthly bonus scheme and can earn up to 50% of their monthly
salary. Our Head Office colleagues are eligible to receive a
discretionary annual bonus, which is calculated against business
targets and objectives.
• For 2022, the bonus pool increased by 8.8% and bonus payouts were
increased for all roles commensurate with Company performance.
• Colleagues can join our Sharesave scheme on an annual basis for a
fixed three-year term. Membership for our 2022 offering was 48% of
the eligible population.
• All eligible colleagues are auto-enrolled into the Safestore Group
Personal Pension Plan provided through Scottish Widows with a
minimum employer contribution rate of 4% of salary.
• Additional benefits include private healthcare cover, healthcare cash
plan, discounted gym membership, life insurance from day one of
employment, paid holiday allocation and a Cycle to Work scheme.
• Our family friendly policy means we offer new mothers twelve weeks’
full pay and new fathers two weeks’ full pay, as well as sending new
parents a beautiful gift when their child is born.
Working environment
• Our leadership teams have created an environment where our
managers and leaders are provided with the skills, tools and,
crucially, time to dedicate to their teams. This has been achieved
through maintaining good colleague–manager ratios; for example,
no Regional Manager oversees more than twelve stores.
• Our ‘Make the Difference’ people forum, launched in 2018, is a
formal workforce advisory panel which enables frequent opportunities
for us to hear and respond to our colleague voice. We drive change
and continuous improvement in responding to the feedback we
receive, via our internal communications channels and through our
network of People Champions.
• We have a comprehensive Colleague Assistance Programme where
our teams can find guidance on coping strategies. They can speak
to a professional who is ready to support and guide them through
any concerns they have; in addition, for those who need it, they can
access up to five counselling sessions.
• We support a healthy work–life balance through offering a Company
sick pay scheme and encouraging all team members to take their rest
breaks. We welcome and consider all requests for flexible working
and at-home working, where appropriate.
• We know our people as individuals, and show respect for each other,
enabling everyone to have a voice so that they can bring their full,
unique selves to work.
• We are committed to providing an inclusive workplace and
encouraging and welcoming diversity with a zero tolerance of
harassment and discrimination. More detail can be found in our
People Principles document online.
• Our strong wellbeing foundation has enabled us to develop a strategy
setting out our approach to further support diversity and inclusion
at Safestore.
98
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Development opportunities
• We have built an environment where it’s natural for us to give regular,
honest feedback and to coach in the moment. We go beyond
mandatory training to promote life-enhancing learning where
everyone can continually evolve.
• Our Store Manager Development programmes offer the opportunity
to gain a nationally recognised qualification from either the Institute
of Leadership & Management (“ILM”) or the Chartered Management
Institute (“CMI”) utilising the Apprenticeship Levy.
• In 2022 we invested over 30,000 hours into developing our people.
From online learning modules to face-to-face sales training, every
one of our colleagues can take part in structured learning.
• We offer health and safety training including first aid, forklift and
fire safety.
Recognition
• We recognise great performance and behaviours through our
annual appraisal process.
• Our values, created by our store teams, are at the heart of
everything the organisation does.
• The values are accompanied by a set of behaviours and everyone
is assessed against these every six months.
• Our Senior Leadership Development programme ‘LEAD Academy’)
supports a Level 5 Management and Leadership apprenticeship.
• Furthermore, we have relaunched our Graduate Programme, with our
first intake commencing in October 2022, providing an opportunity for
newly qualified graduates to build their skill set and experience into a
career with Safestore.
• To show our appreciation for the commitment and performance of our
colleagues, we made exceptional payments totalling £1,000 to every
colleague: £500 in December 2021 as a thank you for their contribution
during the pandemic; and a further £500 cost of living payment in
October 2022 to ease financial hardship.
• Our annual pay review/bonus schemes are based on individual
performance ratings.
• We also reward our sales consultants for completion of training
modules through a pay-for-skills approach.
Informing the Committee on the wider workforce
To build the Remuneration Committee’s understanding of reward arrangements applicable to the wider workforce, the Committee is provided
with data on the remuneration structure for management level tiers below the Executive Directors and pay outcomes for these roles. The
Committee has also been provided with feedback from the formal workforce advisory panel, in addition to the Investors in People survey, which
provides further context for the Committee in making decisions on future pay outcomes in line with Policy. The Committee uses this information
to ensure consistency and fairness of approach throughout the Company in relation to remuneration.
99
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
Pay fairness continued
Alignment with Provision 40 of the Corporate Governance Code and Company strategy
The table below sets out how the current Policy addresses the factors in Provision 40 of the Corporate Governance Code, the objective of which
is to ensure that the remuneration arrangements operated by the Company are aligned to all stakeholder interests including those of shareholders.
Factor
How this was addressed in the Remuneration Policy
Clarity
Remuneration arrangements should be transparent and promote
effective engagement with shareholders and the workforce.
This was addressed through our commitment to full transparency and
engagement with our shareholders in relation to the Policy.
The Company engages directly with the broader colleague population on
their remuneration through a variety of methods including the workforce
advisory panel and town hall events led by the CEO.
Simplicity
Remuneration structures should avoid complexity and their rationale
and operation should be easy to understand.
Taking on board shareholder feedback, we reverted to a traditional LTIP
construct in 2020, which is well understood by shareholders and
participants alike.
Risk
Remuneration arrangements should ensure reputational and other
risks from excessive rewards, and behavioural risks that can arise
from target-based incentive plans, are identified and mitigated.
Identified risks have been mitigated as follows:
• deferring an element of bonus into shares and requiring a two-year
holding period for LTIP share awards helps ensure that the performance
related awards are sustainable and thereby discourages short term
behaviours;
• aligning any reward to the agreed strategy of the Company;
• reducing the awards or cancelling them through malus and claw-back
provisions if the behaviours giving rise to the awards are
inappropriate; and
• reducing annual bonus or LTIP awards (made under the current
Policy) or cancelling them, if it appears that the criteria on which the
awards were based do not reflect the underlying performance of
the Company.
Predictability
The range of possible values of rewards to individual Directors and any
other limits or discretions should be identified and explained at the time
of approving the Policy.
The Committee undertook external benchmarking of the current Policy
(see page 92 of the 2021 DRR) which determined that current packages
would pay out below the median for FTSE 250 companies on a
reasonable range of performance outcomes.
Proportionality
The link between individual awards, the delivery of strategy and the long
term performance of the Company should be clear. Outcomes should
not reward poor performance.
The Remuneration Policy in the 2019 DRR sets out the potential
remuneration available in several performance scenarios.
The Committee is comfortable that the discretions available to it as set
out in the current Policy are sufficient.
One of the key strengths of the current approach of the Company to
remuneration is the direct link between strategy and the value received
by Executive Directors.
Please see the schematic below which sets out in detail the link between
Company strategy and the performance measures in the current
incentive arrangements.
Alignment to culture
Incentive schemes should drive behaviours consistent with Company
purpose, values and strategy.
The 2020 LTIP rewards long term sustainable performance which is a key
tenet of the Company’s strategy, purpose and values as set out in our
Sustainability report on page 46.
100
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT In line with the proportionality factor from Provision 40 of the Corporate Governance Code set out above, the Committee designed the incentive
arrangements such that they were closely aligned with Company strategy as set out in the schematic below:
Optimising the trading
performance of existing portfolio
Maintaining a strong and
flexible capital structure
Selective portfolio management
and expansion opportunities
What does success look like?
• First class digital marketing expertise
• A capital structure appropriate
• Motivated and effective store teams
benefiting from improved training
and coaching
• Central revenue management
and cost control
for our business
• Flexibility to take advantage
of carefully evaluated development
and acquisition opportunities
• Successful store openings
• Strong pipeline for future openings
• External recognition of ESG efforts
How do we measure progress against our objectives?
Annual
bonus
Strategic and
operational
Financial
• Independent customer
service survey
• People engagement survey results
• Assessment of online
marketing enhancement
• Occupancy management
enhancement
• Free cash flow
• Key capital cover ratios
• Increased ability to pay dividends
• Successful store openings
on time/budget
• Strong pipeline for future openings
• Increased portfolio valuation
All feed through to KPI = EBITDA growth
LTIP
• Continued successful execution of strategy should lead to shareholder value creation measured over three years by
Adjusted EPRA EPS growth and TSR relative to FTSE 250 and sector peers
101
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
Pay relativities
Internal – CEO pay ratio
Our CEO to colleague pay ratios for 2022 are set out in the table below. We also provide the 2019–2021 data for comparison purposes.
Financial year Method used
25th percentile pay ratio
50th percentile pay ratio
75th percentile pay ratio
2019
2020
Option B (gender
pay gap data)
Option B (gender pay
gap data)
60:1
55:1
37:1
Total pay and benefits: £19,067
Total pay and benefits: £20,669
Total pay and benefits: £31,278
Salary: £17,197
Salary: £18,175
Salary: £25,029
49:1
41:1
32:1
Total pay and benefits: £22,820
Total pay and benefits: £27,244
Total pay and benefits: £34,857
Salary: £18,500
Salary: £24,240
Salary: £30,852
2021*
Option A
554:1
500:1
365:1
Total pay and benefits: £23,502
Total pay and benefits: £26,019
Total pay and benefits: £35,686
Salary: £19,540
Salary: £19,540
Salary: £28,829
2022
Option A
350:1
313:1
228:1
Total pay and benefits: £24,031
Total pay and benefits: £26,849
Total pay and benefits: £36,939
Salary: £20,300
Salary: £21,100
Salary: £30,556
Note
*
2021 ratios have been updated in line with the restated CEO single figure of remuneration for 2021.
For 2021 and 2022, the Company has chosen methodology Option A for the calculation, which takes into consideration the full-time equivalent basis of all UK
employees and provides a representative result of employee pay conditions across the Company. In 2019 and 2020, the Company used methodology option
B. However, given the guidance by several shareholders that option A is preferred, we updated our methodology to maintain market best practice disclosures.
The CEO remuneration figure is as shown in the Executive Directors’ remuneration table on page 105. The remuneration figures for the employee
at each quartile were determined as at 31 October 2022. Each colleague’s pay and benefits were calculated using each element of employee
remuneration, consistent with the CEO, on a full-time equivalent basis. This therefore included the following elements of pay:
• base salary;
• private medical insurance;
• car/car allowance;
• fuel allowance;
• employer pension contribution;
• annual bonus;
• overtime and extra pay;
• 2017 LTIP relative TSR element and 2020 LTIP; and
• Sharesave.
No components of pay have been omitted. The following estimates and adjustments were made:
• For new joiners, salary and benefits were annualised and bonus was calculated based on average payout for the relevant store.
• For colleagues on the annual bonus scheme, which pays out in January 2023, awards were estimated based on expected outcomes.
• Adjustments were made to achieve full-time equivalent rates.
As our Sales Consultants represent around 50% of our workforce, the 50th percentile employee may vary annually between a Sales Consultant
and a Store Manager. In 2021 and 2022, the 50th percentile employee was a Sales Consultant, resulting in similar pay and benefits, whereas in
2020 the 50th percentile employee was a Store Manager, and as a result the total pay and benefits were slightly higher.
The Committee recognises that the increased ratios in 2021 and 2022 result from the CEO’s single figure of remuneration increasing due to the
inclusion of outcomes from the 2017 LTIP. The 2022 ratio also includes an estimated value for the 2020 LTIP. In 2019 and 2020 no long term
incentives completed their performance period, so none featured in the comparative figures. Therefore, the pay ratios for 2021 and 2022 do not
represent the fact that the 2017 LTIP is a one-off award which is measured over a five-year performance period. The Committee notes that the
75th percentile employee is below the seniority to receive a 2017 or 2020 LTIP award.
The above analysis demonstrates that the ratio is driven by the different structure of our CEO’s pay versus that of our colleagues, as well as the
composition of our workforce. This ratio varies between businesses even in the same sector. What is important from our perspective is that this
ratio is influenced only by the differences in structure, and not by divergence in fixed pay between the CEO and the wider workforce.
The Committee considers the 50th percentile pay ratio to be consistent with pay and progression policies for UK colleagues.
102
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Gender pay gap reporting and diversity
We are committed to providing an inclusive workplace and encouraging and welcoming diversity with a zero tolerance of harassment and
discrimination. More detail can be found in our People Principles document (online in the Governance section).
Advocating a diverse and inclusive workforce is a key part of our wellbeing strategy. We know our people as individuals, and show respect for
each other, enabling everyone to have a voice so that they can bring their full, unique selves to work.
At Safestore, men and women are paid equally for doing the same or similar work. Our bonus schemes are open to all job levels and colleagues
at the same level have the same bonus opportunity.
There has been a slight increase in our 2021 mean (average) gender pay gap. However, we are encouraged by the broader improvements:
• We have further improved our median gender pay gap by 3ppts.
• Our median gender pay gap is significantly below the UK average1 of 15.1% at 5.2%.
• Levels of female representation within the upper pay quartile increased by 1.7ppts.
• Levels of female representation within the lower pay quartile decreased by 3.3ppts.
• We have improved our median bonus gap by 14ppts.
This year, we published our first Diversity and Inclusion Strategy, setting out our commitment to a fully inclusive culture. In addition, we obtained
further insight into our workforce diversity, using this data to inform beneficial action.
Note
1 2020 Office for National Statistics, Gender Pay Gap 2021 Dataset, ons.gov.uk.
Remuneration justification
The Committee is comfortable that the internal and external pay relativity reference points (set out in the 2021 DRR) provide justification that
the current Policy is appropriate and notes that the new Policy will be presented for shareholder approval later in the 2023 financial year.
The Committee believes that the 2017 LTIP awards which vested for the Executive Directors and their colleagues in 2022 were commensurate
with the corporate success of the Company achieved over the performance period.
Communication with colleagues
During the year we communicated with colleagues and gathered their feedback in a number of ways as set out below:
Workforce Advisory Panel: As set out in the Committee Chair’s statement, in 2018 the Company established a formal workforce advisory panel
to facilitate engagement with colleagues. The panel has now been successfully embedded in the business. Our 15 People Champions have
continued to engage directly with the CEO across a wide range of subjects including remuneration. Appropriate feedback from these sessions
was presented to the Remuneration Committee, which the Committee considered when determining the remuneration levels for Executive
Directors in 2022. In addition, over the past few years feedback from the panel has resulted in the Remuneration Committee and Board approving
colleague benefits such as enhanced Company sick pay, improved healthcare provision, and more frequent opportunities to participate in
all-colleague share schemes.
CEO town hall events: The CEO also ran two virtual town hall sessions where colleagues had the opportunity to raise questions, discuss
business issues, and provide feedback on subjects including remuneration. As part of these events, colleagues were engaged on how the
Executive Directors’ remuneration policy aligned with the wider Company pay policy.
Colleague survey: Our management team and the workforce advisory panel reviewed the recommendations from our 2021 Investors in People
colleague survey, establishing improvements made and agreeing further actions with the aim of maintaining our leadership engagement score
of over 90%.
Communication with shareholders
The table below shows the results of the latest shareholder votes on the Directors’ remuneration report and Policy resolutions:
Votes for
%
Votes against
%
Votes withheld
2020 AGM vote on Remuneration Policy
167,676,057
97.89
3,615,427
2.11
87,100
2022 AGM vote on annual report on remuneration
129,213,061
72.15
49,876,689
27.85
1,422,562
Following this year’s AGM, the Board acknowledged that whilst we received strong support for the Director’s remuneration report from the
majority of our shareholders, it was only at 72.15%. The Chairman of the Board and the Senior Independent Director engaged with major
shareholders around the time of the 2022 AGM to understand the reason for the votes against. They concluded that the main reason was that
some shareholders who voted against the 2017 remuneration policy at its inception have a policy to vote against all future remuneration reports
that reflect its subsequent execution. From specific conversations it was clear that their vote against the report did not reflect a vote against either
the management or the Board and that they fully accept that the payouts reflect the outstanding value creation for all shareholders over the past
five years which has been of significant benefit to all our stakeholders.
As set out above, the Committee commenced a remuneration review during 2022 to determine the guiding principles and design of the proposed
Policy to be presented for shareholder vote during 2023. However, at the date of drafting this report, the Committee is still in discussions around
the details of the new Policy. Therefore, the new Policy will be presented for shareholder approval in the 2023 financial year, i.e. before 31 October 2023
at a General Meeting, in line with the relevant regulations.
103
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
Pay relativities continued
Chief Executive Officer and colleague pay
Total shareholder return and Chief Executive Officer pay over the last ten years
The chart shows the performance of a hypothetical investment of £100 in ordinary shares (as measured by the TSR for the Company) against
the FTSE 250 and FTSE 350 Supersector Real Estate indices over a period of ten financial years starting from 31 October 2012 through to
31 October 2022. The FTSE 250 has been selected as an appropriate comparison index due to Safestore’s ranking within the FTSE in terms
of market capitalisation. The FTSE 350 Supersector Real Estate Index has been selected as an appropriate comparator group as its major
sector competitors are constituents of this index.
The chart also shows the increase in Adjusted Diluted EPRA (“ADE”) Earnings per Share from 31 October 2013 onwards as this figure was not
calculated by the Company before that date (see right-hand scale).
Total shareholder return and Adjusted Diluted EPRA (“ADE”) Earnings per Share (pence)
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
)
£
(
l
e
u
a
V
R
S
T
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
)
e
c
n
e
p
(
S
P
E
E
D
A
31/10/2012
31/10/2013
31/10/2014
31/10/2015
31/10/2016
31/10/2017
31/10/2018
31/10/2019
31/10/2020
31/10/2021
31/10/2022
Safestore Holdings plc
FTSE 250 Index
FTSE 350 Supersector Real Estate Index
ADE EPS
The chart also illustrates that the sustained EPS growth has resulted in significant TSR outperformance which is reflected in the bonus payouts
and vesting of the long term incentive awards over several years.
Oct 2013
Oct 2013
Oct 2014
Oct 2015
Oct 2016
Oct 2017
Oct 2018
Oct 2019
Oct 2020
Oct 2021
Oct 2022
Role
Single figure of total
remuneration (£’000)
Annual bonus
payout (% of max)
LTIP earned
(% of max)
P D Gowers 1
CEO
F Vecchioli 2
CEO
F Vecchioli
CEO
F Vecchioli
CEO
F Vecchioli
CEO
F Vecchioli
CEO
F Vecchioli
CEO
F Vecchioli
CEO
F Vecchioli
CEO
F Vecchioli
CEO
F Vecchioli
CEO
910
359
973
1,224
1,481
1,728
1,719
1,134
1,108
13,020
8,408
70%
70%
76%
100%
100%
82%
81%
91%
100%
100%
100%
—
—
96%
100%
100%
100%
100%
n/a
n/a
100%
100%
Notes
1 Stepped down as Chief Executive Officer on 4 September 2013 and left the Company on 31 October 2013.
2 Appointed as Chief Executive Officer on 4 September 2013.
104
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT
Percentage change in Executive Director, Non-Executive Director and colleague remuneration
The table below shows the percentage change in remuneration of the Directors undertaking the roles of Chief Executive Officer, Chief Financial
Officer and Non-Executive Directors, together with average pay of the Company’s colleagues in the listed entity on a full-time equivalent basis.
F Vecchioli (CEO)
A Jones (CFO)
D Hearn (NE Chair)2
I S Krieger (NED)
C Balmforth (NED)3
G van de Weerdhof (NED)4
L Duhot (NED)5
D Mousseau (NED)6
J Bentall (NED)7
Colleague pay
% change from 2021 to 2022
% change from 2020 to 2021
% change from 2019 to 2020
Base salary/
fees
4%
4%
10%
19%
(35%)
14%
n/a
n/a
n/a
6.9%
Benefits8
(3%)
2%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0%
Annual
bonus
Base salary/
fees1
Benefits
Annual
bonus
Base salary/
fees
Benefits
3%
3%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
3%
3%
19%
22%
12%
175%
n/a
n/a
n/a
8.8%
4.2%
0%
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0%
5%
5%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1%
1%
n/a
1%
1%
n/a
n/a
n/a
n/a
20%
2.3%
0%
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0%
Annual
bonus
11%
11%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
19%
Notes
1
The increases in 2021 to Non-Executive Director fees are a result of the increase to the base fee and Committee chairmanship fees and the Company starting to pay a Senior Independent
Director fee of £10,500. All increases were effective 1 May 2021.
2 The Chairman was appointed on 1 December 2019 so received a pro-rated fee for 2020.
3 C Balmforth stepped down as an independent Non-Executive Director on 31 May 2022 so received a pro-rated fee for 2022.
4 G van de Weerdhof was appointed on 1 June 2020 so received a pro-rated fee for 2020.
5 L Duhot was appointed as an independent Non-Executive Director on 1 November 2021.
6 D Mousseau was appointed as a Non-Executive Director on 1 November 2021.
7
J Bentall was appointed as an independent Non-Executive Director on 18 May 2022 so received a pro-rated fee for 2022.
8 F Vecchioli dental insurance for two-twelfths only.
Relative importance of spend on pay
The table below sets out the overall spend on pay for all colleagues compared with the returns distributed to shareholders.
Significant distributions1
Colleague costs (£’m)
Distributions to shareholders (£’m)
Notes
1. The above figures are taken from notes 10 and 26 to the financial statements.
2. The reduction is due to a lower share-based payment charge in 2022.
2022
38.1
56.9
2021
43.8
42.6
% change
-13% 2
34%
Executive Director remuneration for the year ended 31 October 2022
Single figure remuneration table (audited)
The remuneration of Executive Directors showing the breakdown between components with comparative figures for the prior financial year is
shown below.
Base salary
£’000
Taxable
benefits1
£’000
Annual
bonus2
£’000
Long term
incentives 3,4
£’000
Pension5
£’000
Other6
£’000
F Vecchioli (Chief
Executive Officer)
A Jones (Chief
Financial Officer)
2022
2021
2022
2021
448
431
319
307
23
24
19
19
682
662
486
472
7,218
11,875
4,877
7,929
18
28
13
20
19
—
19
—
Total
£’000
8,408
13,020
5,733
8,747
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
489
483
351
346
7,919
12,537
5,382
8,401
Notes
1 Taxable benefits comprise a car allowance, private medical and dental insurance.
2 The 2021 and 2022 annual bonus figures include the portion subject to deferral.
3
4
5
The 2022 figure is the aggregate of the outcomes under the 2017 LTIP relative TSR element and the 2020 LTIP. The 2017 LTIP relative TSR element is valued as at the vesting date, i.e.
based on the closing share price on 29 September 2022 of £7.94, and includes dividend equivalents of £0.9665 per share accrued from the date of grant to the date of vest. The 2020
LTIP outcome has been valued based on the three month average share price to 31 October 2022 of £9.81 and includes dividend equivalents accrued from the date of grant to date.
Please see page 111 for further detail on the amount of the LTIP values attributable to share price appreciation.
The 2021 figure is the 2017 LTIP EPS element which has been restated. The figure shown has been valued as at the vesting date, i.e. based on the closing share price on 29 September 2022
of £7.94, and includes dividend equivalents of £0.9665 per share accrued from the date of grant to the date of vest.
Until 30 April 2021, the Executive Directors were provided pension payments in the form of a cash allowance of 10% of salary reduced by the associated employer’s National Insurance
contribution. From 1 May 2021, the pension cash allowance was reduced to 4.1% of salary in line with the average workforce pension contribution. No Executive Directors participate in
a Group defined benefit or final salary pension scheme.
6
The other column refers to maturity of the 2019 (3YR) Sharesave. The value has been calculated as the gain at the maturity date, 1 September 2022, in excess of the 510 pence exercise price.
105
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
Annual bonus outcomes for the financial year ended 31 October 2022 (audited)
For 2022, the Executive Directors had a maximum annual bonus opportunity of 150% of salary. For each Executive Director, the 2022 annual
bonus determination measures were weighted two-thirds for adjusted EBITDA and one-third for strategic/operational measures. The achievement
of the strategic/operational measures was assessed by the Remuneration Committee as the financial gateway of outperforming the threshold
adjusted EBITDA target was met. The table below provides information on the targets for each measure, actual performance and resulting bonus
payment for each Executive Director:
Measure
Weighting
Threshold
(20% payout)
On target
(50% payout)
Maximum
(100% payout)
% of element
Actual
payable
Achievement as
% salary
Bonus value
£’000
Achievement as
% salary
Bonus value
£’000
Performance required
Actual performance
CEO
CFO
Adjusted
EBITDA
before
non-recurring
items1
Strategic/
operational
measures
Two-
thirds
£120.6m
£124.4m
£126.8m
£135.1m
100.0%
100.0%
455
100.0%
324
One-
third
Objectives based on
strategic/operational
See below
100.0%
50.0%
227
50.0%
162
Total bonus achieved in 2022
150.0%
682
150.0%
486
Note
1 Adjusted EBITDA before non-recurring items is equivalent to the reported EBITDA in the financial statements with French results translated at the budget rate of 1.18.
2022 annual bonus outcomes: strategic objectives
The Group’s proven strategy remains unchanged. We believe that the Group has a well-located asset base, management expertise, infrastructure,
scale and balance sheet strength to exploit the current industry dynamics. As we look forward, we consider that the Group has the potential to
further increase its EPS by: optimising the trading performance of the existing portfolio; maintaining a strong and flexible capital structure; and
taking advantage of selective portfolio management and expansion opportunities. Therefore, the Executive Directors’ strategic/operational
objectives reflect the Company’s priorities in these areas for 2022 as well as the Company’s ESG performance.
In line with our commitment to fully transparent disclosure of remuneration outcomes, the Executive Directors’ strategic/operational objectives
and their achievement are fully disclosed in detail below. The maximum opportunity under this element of the annual bonus is 50% of salary.
Objective
Achievement
Outcome
Committee assessment
Optimisation of performance of existing portfolio (20% of salary)
The Committee assessed
that the achievements of
the year were exceptional
and warranted full payout
for this element.
(20% out of 20% of salary).
Enhancing people
performance through
engagement and
improved capabilities
in order to increase
conversion of enquiries
into new lets.
Enhance search
visibility and website
performance to drive
new lets and marketing
spend in line with
budgeted expectations.
As an Investors in People Platinum accredited organisation, our focus
on our colleagues and culture has enabled us to continue to deliver
sustainable business performance.
Highlights included:
• continuing to prioritise the health and wellbeing of our colleagues and
our customers;
• the number of hours spent on training across the business has
increased to over 30,000 hours following the removal of Covid-19
restrictions;
• established appropriate functional structures in order to support the
business for future growth; and
• 16 internal promotions from 2021 to 2022.
Delivered technical and content improvements to website platforms:
• finalised migration of all EU websites to one unified web platform; and
• implemented new Google Analytics (GA4) across all Group sites.
• Further evolution of paid marketing strategy driving efficiency across
the Group delivered through the implementation of best practices in
new territories;
• continued to develop PPC bidding strategies; and
• testing PPC account structures and implementing best practices.
indicates that the objective was exceeded,
indicates that it was met,
indicates that it was partially achieved and
shows that the
objective was not achieved.
106
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT
Objective
Achievement
Outcome
Committee assessment
Optimisation of performance of existing portfolio (20% of salary) continued
Leverage Group
knowledge, experience
and resources to
improve productivity
and drive efficiencies.
• Enriched pricing and contracting solutions allowing standardisation
and improvement across the Group.
• Automation of operational and financial data transfer between
our systems.
• Data centre consolidation from five to two Group locations.
Strong and flexible capital structure (9% of salary)
Ensure the financial
flexibility exists to
deliver selected
development and
acquisition opportunities
whilst maintaining
conservative leverage
and a progressive
dividend policy.
The Company’s strong capital structure continued to allow it to take
advantage of opportunities across the Group in order to deliver
incremental earnings growth over the longer term.
Highlights included:
• the Group’s free cash flow (before investing and financing activities)
increased from £89.5 million to £101.4 million for the year ended
31 October 2022;
• during Q3, the Group commenced the refinancing of our existing
Revolving Credit Facilities (“RCF’s”) which were due to expire in June
2023. The Group completed this refinancing just after year end in early
November 2022. The previous £250 million Sterling and €70 million
Euro RCF’s have been replaced with a single multi-currency £400
million facility, with a further £100 million uncommitted accordion
facility, providing further capacity for medium term growth;
• Group leverage was below the Group’s strategic targeted level of an
LTV ratio between 30–40% (24% for 2022); and
• the full year dividend for the year ended 31 October 2022 increased
by 18.7% demonstrating a continued progressive dividend policy.
The Committee noted that
the free cash flow target
has been exceeded and
that Group LTV was well
below the bottom of the
targeted range as at
31 October 2022, which
enabled the Company to
pay an above target full
year dividend of 29.8
pence and warranted full
payout for this element.
(9% out of 9% of salary).
indicates that the objective was exceeded,
indicates that it was met,
indicates that it was partially achieved and
shows that the
objective was not achieved.
107
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
2022 annual bonus outcomes: strategic objectives continued
Objective
Achievement
Outcome
Committee assessment
Take advantage of selective portfolio management and expansion opportunities (15% of salary)
Overall, the Committee
determined that targets
were significantly
exceeded, and recognised
the revenue generated
from both refurbished and
acquired businesses was
above target.
(15% out of 15% of salary).
Grow store portfolio
through development
or acquisition by at
least two stores per
year within the
Board-approved
ROI guidelines.
Improve property
valuations of the stores
in the refurbishment and
extension programme
by more than the
capital investment.
Completed EPS accretive acquisition of remaining 80% of equity owned
by Carlyle in the Benelux Joint Venture Acquired new development
opportunities in the UK, France; Spain and the Netherlands, in addition to
opening new stores and completing store extensions in various locations.
Highlights included:
Redevelopments and extensions:
• London Crayford
• Paris Pyrénées
New developments:
• London Morden – New build
• Wigan – Conversion
• Paris South – New build
• Paris West 1 – New build
• Paris West 3 – New build
• Paris East 1 – Conversion
• Paris North West 1 – Conversion
• Madrid North – Conversion
• Madrid South – Conversion
• Madrid East – Conversion
• Barcelona North – Conversion
• Barcelona South – Conversion
• Netherlands Amersfoort – New build
• Netherlands Almere – Conversion
Property pipeline summary of c.1.4m sq ft representing c.18% of our
existing property portfolio can be found on page 15.
indicates that the objective was exceeded,
indicates that it was met,
indicates that it was partially achieved and
shows that the
objective was not achieved.
108
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Objective
Achievement
Outcome
Committee assessment
Given the continued efforts
across the Company and
the external recognition
with regard to sustainability
activities, the Committee
determined that this
warranted full payout.
(6% out of 6% of salary).
ESG (6% of salary)
Improve the Group’s
ESG activities in order
to deliver real value to
all our stakeholders by:
• year-on-year
carbon footprint
reduction; and
• customer satisfaction
initiatives.
Align sustainability
reporting with
appropriate
framework(s).
Continued progress on our commitment to responsible and sustainable
business practices.
Highlights included:
• delivered year-on-year carbon emissions intensity reduction through
efficiency and electrification initiatives versus 2021 excluding newly
acquired Benelux portfolio; market-based absolute emissions 25%
lower year-on-year (2022 milestone target achieved). Emissions
intensity also below 2022 target;
• gas removed from a further five UK stores;
• installed voltage optimisation technology at largest site, Battersea
Park – outcomes under review, energy savings over 10% expected;
• 100% diversion of UK operational waste from landfill since May 2022
following change of supplier; and
• 98.5% diversion of construction waste from landfill.
• Maintained positive ratings on all relevant customer service platforms:
• Feefo Platinum Trusted Service award for Safestore UK;
• Trustpilot “Excellent” rating achieved in the UK with a Trustpilot
“Great” rating maintained in France;
• average Google rating of 4.7 achieved in Spain; and
• in the Netherlands, a high score of 4.9 was achieved on Trustpilot,
whilst in Belgium, customer service was rated 4.7 on Feefo.
• external recognition of ESG efforts and disclosures: EPRA
Sustainability BPR Silver Award, GRESB Public Disclosure A,
MSCI ESG ‘AA’ and Support the Goals – 5*.
Our strong wellbeing foundation has enabled us to develop a strategy
setting out our approach to further support diversity and inclusion at
Safestore. Our new Diversity and Inclusion Strategy is about embedding
and continuing the important work we’ve already done to enable all our
colleagues to feel confident to bring their full unique selves to work.
Overall strategic/operational objective performance
50% of salary (out of 50% of salary)
indicates that the objective was exceeded,
indicates that it was met,
indicates that it was partially achieved and
shows that the
objective was not achieved.
The Committee assessed that 50% of base salary (or 100% of maximum) of the strategic/operational objectives had been achieved for 2022.
In total, the overall bonus payout was 100% of maximum and 150% of salary for both Executive Directors, versus a maximum opportunity of
150% of base salary. In line with Policy, 100% of salary will be paid in cash and 50% of salary will be deferred into shares on a net of tax basis.
In determining the payouts under the annual bonus plan for the Executive Directors, the Committee has been mindful not only of the formulaic
outcome against the targets set, but also of the underlying performance of the business. Specifically, the Committee took account of the
following factors:
• The Company achieved another strong set of financial results.
• The Company paid its final dividend for 2021 to shareholders. The full year dividend for the year ended 31 October 2022 increased by 18.7%
from 25.1 pence to 29.8 pence.
• The Company-wide bonus pool has increased by 8.8%, including the £500 cost of living payment in October 2022 to ease financial hardship.
On this basis, the Committee felt comfortable that the formulaic bonus outcome reflected the individual Executive Director and Company
performance. As a result, the Committee determined that no overriding discretion will be applied to the bonus outcome. The Committee noted
that in recent months, Safestore’s share price has fallen, but that corporate performance continues to be excellent. The 2022 bonuses for
Executive Directors will be 150% of salary and will be paid 100% of salary in cash, with the remainder of 50% of salary held in shares on a net of
tax basis, via an agreement with the Executive, until 1 November 2024 with malus applying for this period and clawback for three years thereafter.
109
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
2022 annual bonus outcomes: strategic objectives continued
LTIP awards included in single figure for the year ended 31 October 2022 (audited)
2017 LTIP – Relative TSR element performance measurement
The five-year performance period for the relative TSR element of the 2017 LTIP ended on 28 September 2022; relative TSR accounts for one-third
of the award with 50% of the element measured against the constituents of the FTSE 250 Index excluding Investments Trusts and the remaining
50% is measured against the FTSE 350 Supersector Real Estate Index.
Safestore’s TSR growth was 189.2% over the five-year performance period to 28 September 2022 and was significantly in excess of the upper
quartile of both peer groups (32.8% and 54.2% for the FTSE 250 Index excluding Investment Trusts and FTSE 350 Supersector Real Estate Index
respectively), which equates to maximum vesting. Given that the Committee confirmed that the Cash on Cash Return underpin had been satisfied
as at 31 October 2021, the performance targets under the relative TSR element of the 2017 LTIP were met in full. This is summarised in the
table below:
TSR vs FTSE 250 excluding Investment Trust Index
TSR vs FTSE 350 Supersector Real Estate Index
Threshold
performance –
median TSR1
(25% vesting)
Maximum
performance –
upper quartile TSR
(100% vesting)
Safestore’s TSR
performance
% of awards vested
Threshold
performance –
median TSR1
(25% vesting)
Maximum
performance –
upper quartile TSR
(100% vesting)
Safestore’s TSR
performance
% of awards vested
-7.1%
32.8%
189.2%
100%
7.7%
54.2%
189.2%
100%
Note
1
For the Executive Directors, the Committee determined in 2018 that there will be zero vesting for TSR performance between median (the 50th percentile), and the 55th percentile unless
there are exceptional circumstances justifying some payout for this level of corporate performance.
On this basis, a further 666,667 and 446,667 shares vested for the CEO and CFO in respect of the relative TSR element. In total 2 million shares
for the CEO and 1.34 million shares for the CFO vested under the 2017 LTIP and became exercisable on 29 September 2022. The Executive
Directors also became entitled to dividend equivalents on these shares when they vested based on dividends paid between the grant and
vesting date of the award. In line with previous disclosures, the CEO’s dividend was paid in cash to ensure the total award remained within the
plan’s 2 million share limit.
The value of the shares vesting under the relative TSR element and the associated dividend equivalents have been included in the single figure
of remuneration table for the year ended 31 October 2022 in line with relevant regulations. The value of the awards that vested under the EPS
element of the 2017 LTIP included in the single figure of remuneration table for the year ended 31 October 2021 has been restated to include
the actual dividend equivalents earned during the vesting period, valued at the share price on vesting.
The Committee believes that the awards that vested in September 2022 for the Executive Directors and 56 colleagues are commensurate with
the corporate success of the Company achieved over this period as follows:
• The Company’s financial success has flowed through to shareholder returns such that over the period since the start of the EPS performance
period on 1 November 2016 the Company’s market capitalisation has increased by £1.162 billion, with £229 million of dividend payments made.
• The successful execution of strategy has created a unique business model that combines advanced digital marketing and pricing analytics,
a well-located portfolio with extensive pipeline, and a focus on store team sales skills.
• The management team has successfully built a larger and more diversified business, expanding operations into Spain and Benelux and
ensuring that all parts of the Company are run in a sustainable manner.
• Financial success has been achieved in parallel with the Company receiving several accolades in relation to its colleague initiatives, ESG
performance and consistently outstanding customer feedback scores.
2020 LTIP – EPS and Relative TSR element performance measurement
The performance period of the EPS element of the 2020 LTIP ended on 31 October 2022; EPS performance accounts for two-thirds of the
award. On that basis, the Committee measured the Company’s EPS growth and Cash on Cash Return in relation to the underpin over the
three-year performance period. Adjusted Diluted EPRA EPS increased by 18.6% p.a., significantly ahead of the 8% p.a. growth required for
maximum vesting. The average Cash on Cash Return over the same period was 11.9% which also exceeded the 8% underpin target resulting
in 100% of the awards being earned under the EPS element of the 2020 LTIP.
This is summarised in the table below:
Adjusted Diluted EPRA EPS growth2
Threshold performance1
(25% vesting)
Maximum performance
(100% vesting)
Actual performance
% of awards earned
Underpin performance required Actual performance
Overall % of
awards earned
Cash on Cash Return underpin3
5% p.a.
8% p.a.
18.6% p.a.
100%
8%
11.9%
100%
Notes
1 Vesting between the threshold and maximum based on a sliding scale.
2
Adjusted Diluted EPRA Earnings per Share is based on the European Public Real Estate Association’s definition of earnings and is defined as profit or loss for the period after tax but
excluding corporate transaction costs, change in fair value of derivatives, gain/loss on investment properties and the associated tax impacts. The Company then makes further
adjustments for the impact of exceptional items, IFRS 2 share-based payment charges, exceptional tax items and deferred tax charges. This adjusted earnings is divided by the
diluted number of shares. The IFRS 2 cost is excluded as it is written back to distributable reserves and is a non-cash item (with the exception of the associated National Insurance
element). Therefore, neither the Company’s ability to distribute nor pay dividends are impacted (with the exception of the associated National Insurance element).
3
Cash on Cash return p.a. is the average Cash on Cash return over the performance period, where Cash on Cash return is Underlying EBITDA after leasehold rent divided by original cost
of investments calculated for each financial year in the performance period.
110
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT The final vesting level for the 2020 LTIP will not be determined by the Committee until the vesting date of 18 March 2023, with the balance of awards
subject to the Company’s relative TSR performance measured over the three-year period ending on 17 March 2023. As at 31 October 2022,
Safestore’s TSR growth is in excess of the upper quartile of both the FTSE 250 excluding Investment Trusts and FTSE 350 Supersector Real
Estate Index peer groups, which would equate to maximum vesting. Therefore, the Committee confirms that it expects the awards to vest in full
and will consider whether the formulaic outcome is in line with underlying Company performance at the vesting date.
The value of the 2020 LTIP awards expected to vest on 18 March 2023, plus an estimate of the value of dividend equivalents accrued to 31 October 2022,
has been included in the single figure of remuneration table for 2022 on the basis that the relative TSR performance period has been
substantially completed.
On the assumption that the relative TSR element vests in full, the CEO and CFO will earn 123,489 and 87,986 shares respectively which will
become exercisable on or after the vesting date of 18 March 2023. Dividend equivalents will also be awarded on vested shares; however, their
value is yet to be determined as it will be based on dividends paid between the grant and vesting date of the award. In line with the reporting
regulations, the value of dividend equivalents paid between the grant date and 31 October 2022 has been included in the value of the awards
in the single figure of remuneration table as set out below:
2021 figures (restated)
2022 figures
Number of
2017 LTIP
EPS
element
awards
vested
Number of
2017 LTIP
awards
granted
Name
Value of
2017 EPS
element
awards
vested1
Value
attributable to
share price
growth 2
Number of
2017 LTIP
TSR element
awards
vested
Value of
2017 LTIP
TSR element
awards vested1
Value
attributable
to share
price growth 2
Number
of
2020 LTIP
award
granted
Number of
2020 LTIP
awards
estimated
to vest
Value of 2020
LTIP awards
estimated
to vest 3
Value
attributable
to share
price
growth4
F Vecchioli (Chief
Executive Officer) 2,000,000 1,333,333 £11,875,331 £4,763,999
666,667 £5,937,669 £2,382,001
123,489
123,489
£1,280,344
£442,671
A Jones (Chief
Financial Officer)
1,340,000
893,333
£7,928,580 £3,191,879
446,667 £3,964,294 £1,595,941
87,986
87,986
£912,246
£315,403
Notes
1 Based on the closing share price on 29 September 2022 of £7.94 and includes dividend equivalents of £0.9665 per share accrued from the date of grant to the date of vest.
2 Based on growth in share price from date of grant (£4.367 – 29 September 2017) to the closing share price on the date of vest (£7.94 – 29 September 2022).
3 Based on three-month average share price to 31 October 2022 of £9.81 and includes dividend equivalents accrued from the date of grant to 31 October 2022.
4 Based on growth in share price from date of grant (£6.23 – 18 March 2020) to three-month average share price to 31 October 2022 (£9.81).
LTIP awards granted in the year ended 31 October 2022 (audited)
The third LTIP award under the current Remuneration Policy was granted on 25 January 2022. In line with Policy the awards had a face value of
200% of base salary and no consideration was paid for the grant which was structured as a nil-cost option. The normal vesting date of the LTIP
awards will be 25 January 2025, being the third anniversary of the award date. Once vested, the LTIP award will normally be exercisable until the
day before the tenth anniversary of the award date and is subject to a two-year holding period commencing on vesting.
Name
F Vecchioli
A Jones
Note
* Dividend equivalents will be payable on vested shares.
Role
CEO
CFO
Base salary at
date of grant
£441,338
£314,453
Face value
of 2022
LTIP award
(% of base salary)
Face value
of 2022
LTIP award
Face value
at minimum
vesting of 25%
Number of shares
granted under
nil-cost option *
200%
200%
£882,676
£220,669
£628,906
£157,227
71,645
51,047
The number of shares granted under the award was calculated using a share price of £12.32, being the closing share price on the dealing day
immediately before the date of grant.
The LTIP awards will vest based on the satisfaction of the following performance conditions which are each measured over three-year periods:
i.
ii.
two-thirds based on Adjusted Diluted EPRA Earnings per Share growth: 5% p.a. growth (threshold) and 8% p.a. growth (maximum);
one-sixth based on relative TSR against the FTSE 250 Index excluding Investment Trusts: median performance (threshold) and upper quartile
performance (maximum); and
iii.
one-sixth based on relative TSR against the FTSE 350 Supersector Real Estate Index: median performance (threshold) and upper quartile
performance (maximum).
25% of the relevant element of the award will vest for threshold performance, with straight-line vesting beyond threshold to full vesting for the
achievement of maximum performance. In addition, no award will vest unless a minimum level of Cash on Cash Return (“CoCR”3) of 8% p.a.has
been met. The Committee will have overriding discretion to change formulaic outcomes (both downwards and upwards) if they are out of line
with underlying performance of the Company.
111
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
2022 annual bonus outcomes: strategic objectives continued
LTIP awards granted in the year ended 31 October 2022 (audited) continued
Full details of the performance conditions attached to the awards can be found in the table below.
Measure
Performance period
Performance target
Vesting1 (% of award)
Adjusted Diluted EPRA Earnings per Share2
growth (two-thirds weighting)
Three financial years ending
31 October 2024
Relative TSR vs FTSE 250 (excluding Investment
Trusts) (one-sixth weighting)
Three years from grant date ending
24 January 2025
Relative TSR vs FTSE 350 Supersector Real
Estate Index (one-sixth weighting)
Three years from grant date ending
24 January 2025
Less than 5% p.a. growth
Threshold: 5% p.a. growth
Maximum: 8% p.a. growth
Below median TSR
Threshold: Median TSR
Maximum: Upper quartile TSR
Below median TSR
Threshold: Median TSR
Maximum: Upper quartile TSR
0%
25%
100%
0%
25%
100%
0%
25%
100%
Notes
1 Vesting between the threshold and maximum based on a sliding scale.
2
Adjusted Diluted EPRA Earnings per Share is based on the European Public Real Estate Association’s definition of earnings and is defined as profit or loss for the period after tax
but excluding corporate transaction costs, change in fair value of derivatives, gain/loss on investment properties and the associated tax impacts. The Company then makes further
adjustments for the impact of exceptional items, IFRS 2 share-based payment charges, exceptional tax items and deferred tax charges. This adjusted earnings is divided by the diluted
number of shares. The IFRS 2 cost is excluded as it is written back to distributable reserves and is a non-cash item (with the exception of the associated National Insurance element).
Therefore, neither the Company’s ability to distribute nor pay dividends are impacted (with the exception of the associated National Insurance element). The financial statements will
disclose earnings on a statutory, EPRA and Adjusted Diluted EPRA basis and will provide a full reconciliation of the differences in the financial year in which any LTIP awards may vest.
3
Cash on Cash Return p.a. is the average Cash on Cash Return over the performance period, where Cash on Cash Return is Underlying EBITDA after leasehold rent divided by original
cost of investments calculated for each financial year in the performance period.
Annual bonus – deferred bonus awards made in the year ended 31 October 2022
In line with Policy, the bonus awarded in excess of 100% of salary in respect of the year ended 31 October 2021 is held in shares by the
Executive Directors on a net of tax basis (referred to as restricted shares). The restricted shares are subject to a two-year holding period that
expires on 1 November 2023. Malus provisions apply during the holding period and claw-back provisions apply for three years thereafter.
The restricted shares were acquired by the Executive Directors on 28 January 2022 at market value (£12.4055).
Name
F Vecchioli
A Jones
Note
* Dividends will be payable.
Role
CEO
CFO
Face value of
restricted shares
Number of
restricted shares *
£116,140
£82,757
9,362
6,671
Operation of Policy
The Committee is comfortable that the current Policy operated as intended in 2022 and that the overall remuneration paid to Executive Directors
for 2022, as set out above, was appropriate.
Payments to past Directors or for loss of office (audited)
During the year there were no payments to past Directors or for loss of office.
Implementation of the Remuneration Policy for the year ending 31 October 2023
Full details of how the new Remuneration Policy will be implemented for the year ending 31 October 2023 will be included alongside the details
of the new Policy itself in the supporting documentation for the General Meeting at which the Policy will be presented for approval.
As noted earlier in this report, in undertaking its review, the Committee concluded that the positioning of the current remuneration packages
being significantly below Safestore’s peers in terms of quantum, and which in fact places the CEO in the lower quartile of the FTSE 250, is not in
the best interests of all stakeholders. It also noted that the 2017 LTIP had now vested and paid out in full. Therefore, changes to the LTIP are likely
to be proposed as part of the new Policy, although the Committee is keen that the LTIP structure should continue to be aligned with standard
market practice in terms of vesting profiles and being subject to the achievement of stretching performance targets. On this basis, LTIP awards
will be delayed until shareholder approval of the new Policy has been gained.
Please see the at a glance section on pages 94 to 97 of this report for details of how we expect to implement the Policy for those elements
of remuneration where it is possible to provide a view at this stage.
112
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Non-Executive Directors
Single figure remuneration table (audited)
The remuneration of Non-Executive Directors showing the breakdown between components, together with comparative figures for the prior year,
is shown below.
Director
D Hearn
I S Krieger
C Balmforth1
G van de Weerdhof
L Duhot2
D Mousseau3
J Bentall4
Fees
£’000
203
184
78
66
39
60
57
50
61
n/a
57
n/a
26
n/a
Other
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Notes
1 C Balmforth stepped down as an independent Non-Executive Director on 31 May 2022 so received a pro-rated fee for 2022.
2 L Duhot was appointed as an independent Non-Executive Director on 1 November 2021.
3 D Mousseau was appointed as a Non-Executive Director on 1 November 2021.
4
J Bentall was appointed as an independent Non-Executive Director on 18 May 2022 so received a pro-rated fee for 2022.
Fees to be provided in 2023 to the Non-Executive Directors
The following table sets out the annual fee rates for the Non-Executive Directors from 1 May 2022:
Fee component
Chairman fee
Non-Executive Director base fee
Additional fee for SID and Committee chairmanship
Total
£’000
203
184
78
66
39
60
57
50
61
n/a
57
n/a
26
n/a
2023
£220,000
£57,680
£10,815
Statement of Directors’ shareholding and share interests
Shareholding and other interests at 31 October 2022 (audited)
Directors’ share interests are set out below. As per the current Remuneration Policy, in order that the Executive Directors’ interests are aligned
with those of shareholders, Executive Directors are encouraged to build up and maintain a personal shareholding equal to 350% of salary. The
shareholding guidelines take account of beneficially owned shares, restricted shares from bonus deferral and vested but unexercised awards at
their net of tax value. The Executive Directors had five years from the grant of the 2017 LTIP award (29 September 2022) to achieve this guideline.
As shown in the table below, both Executive Directors meet the in-employment guidelines under the Policy.
The shareholding guidelines for Executive Directors will continue to apply for two years post cessation of employment. For the avoidance of
doubt shares beneficially owned at the date of adoption of the current Policy (18 March 2020) and the 2017 LTIP award are exempt from this
guideline but share-based awards granted under the Policy approved by shareholders at the 2020 AGM are captured.
113
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT
Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
Statement of Directors’ shareholding and share interests continued
Shareholding and other interests 31 October 2022 (audited) continued
As at 31 October 2022
Director
F Vecchioli
A Jones
D Hearn
I S Krieger
G van de Weerdhof
L Duhot
D Mousseau
J Bentall
Number of
beneficially
owned
shares 1
2,093,466
462,471
15,000
60,000
Nil
1,711
1,460
9,300
% of
salary
held 2
4,161
1,290
n/a
n/a
n/a
n/a
n/a
n/a
Shareholding
requirement
(% of salary)
Shareholding
requirement met
350
350
n/a
n/a
n/a
n/a
n/a
n/a
Yes
Yes
n/a
n/a
n/a
n/a
n/a
n/a
Total interests
subject to
conditions
(LTIP nil-cost
awards)
296,599
211,327
Outstanding
2020 Sharesave
awards
Vested
unexercised
nil-cost option
awards
Total
interests at
31 October 2022
2,008
2,008
2,000,000
1,497,843
4,392,073
2,173,649
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
15,000
60,000
Nil
1,711
1,460
9,300
Notes
1 Beneficial interests include shares held directly or indirectly by connected persons and restricted shares acquired on 4 February 2022.
2 Based on the 31 October 2022 share price of 903.5 pence per share and beneficially owned shares only.
Between 31 October 2022 and 25 January 2023 (being the latest practicable date prior to the publication of this report), the Executive Directors
exercised their vested 2017 LTIP nil-cost options on 2 December 2022. This increased beneficially owned shares by 1,058,115 to 3,151,581 for
Frederic Vecchioli and by 781,489 to 1,243,960 for Andy Jones. There were no other changes to the Directors’ interests between 31 October 2022
and 25 January 2023.
2017 LTIP awards – awards exercised on 2 December 2022
The Executive Directors exercised their 2017 LTIP vested nil-cost options on 2 December 2022 as set out in the table below:
Director
F Vecchioli
A Jones
Number
of nil-cost
options
granted
Dividend
equivalents
Total number of
shares exercised
Retained shares
2,000,000
1,340,000
Nil
157,843
2,000,000
1,497,843
1,058,115
781,489
Role
CEO
CFO
Annual bonus – deferred bonus awards called during the year ended 31 October 2022
In the year ended 31 October 2022, the Executive Directors were entitled to call upon the deferred shares awarded to them in relation to the
deferred element of their annual bonus earned in the financial year ended 31 October 2019. These awards were granted on 7 February 2020 and
in line with the previous Policy vested on 1 November 2021 subject to continued employment.
Director
F Vecchioli
A Jones
Number
of nil-cost
options
granted
22,276
15,872
Role
CEO
CFO
Dividend
equivalents
Total number
of shares called
706
503
22,982
16,375
The Remuneration Committee determined the dividend equivalent share entitlement as the number of shares equal in value to the net dividends
of 38.10 pence that had been paid on the nil-cost options from the date of grant to the date of vesting by the Executive Directors, divided by the
closing share price preceding the date of vesting, of £12.02.
114
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Outstanding LTIP awards at 31 October 2022
The following LTIP awards remain outstanding and unvested at 31 October 2022:
Director
F Vecchioli
A Jones
Awards granted
Maximum award
Awards vested
Awards lapsed
18/03/2020 LTIP
28/01/2021 LTIP
25/01/2022 LTIP
18/03/2020 LTIP
28/01/2021 LTIP
25/01/2022 LTIP
123,489
101,465
71,645
87,986
72,294
51,047
—
—
—
—
—
—
—
—
—
—
—
—
Note
1 Figures shown exclude dividend equivalents.
Maximum
outstanding
awards1 at
31 October
2022
123,489
101,465
71,645
87,986
72,294
51,047
Market
price at
date of
vesting (p)
Normal
vesting date
— 18/03/2023
— 28/01/2024
— 25/01/2025
— 18/03/2023
— 28/01/2024
— 25/01/2025
The 2020, 2021 and 2022 awards are subject to performance measures and a continued service condition over a three-year period.
The performance measures and targets for the 2020 LTIP awards are set out on page 90 of the 2020 Annual Report, for the 2021 LTIP awards
are set out on page 100 of the 2021 Annual Report, and for the 2022 LTIP awards are set out on pages 111 and 112 of this report.
Consideration of shareholder views
Please see page 103 for details.
Consideration of conditions elsewhere in the Group
Please see page 103 for details.
Considerations by the Committee of matters relating to Directors’ remuneration for 2022
The Committee is responsible for recommending to the Board the remuneration policy for Executive Directors and senior management and for
setting the remuneration packages for each Executive Director. The Committee also has oversight of the remuneration policy for all colleagues.
The written terms of reference of the Committee are available on the Company’s website and from the Company on request.
Members of the Committee in the year to 31 October 2022
C Balmforth (Chair)1
L Duhot (Chair)2
D Hearn
I S Krieger
G van de Weerdhof
D Mousseau
J Bentall3
Notes
1 C Balmforth stepped down as an independent Non-Executive Director on 31 May 2022.
2 L Duhot was appointed as Chair of the Remuneration Committee with effect from 1 June 2022.
3
J Bentall was appointed as an independent Non-Executive Director on 18 May 2022.
Independent
Meetings held
during tenure
during the year
Number of
meetings
attended
Yes
Yes
Yes
Yes
Yes
Yes
Yes
5
1
6
6
6
6
1
5
1
6
6
6
6
1
115
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT
Directors’ remuneration report continued
for the year ended 31 October 2022
Part C: Annual report on remuneration continued
Considerations by the Committee of matters relating to Directors’ remuneration for 2022 continued
Despite taking the decision to postpone the Policy renewal, a significant amount of the Committee’s time in 2022 was spent undertaking
a remuneration review to support the design of the new Policy. In addition, we also did the following:
• considered wider workforce pay policies and practices and feedback from the workforce panel;
• proactively responded to the 72% votes in favour of the 2021 remuneration report;
• approved the salary increases for Executive Directors and senior managers alongside the wider workforce salary budget;
• agreed annual bonus targets for 2022;
• reviewed and approved the 2022 LTIP grant and the associated performance conditions;
• discussed and approved Executive Director and senior manager remuneration outcomes for 2022, including measuring the performance
outcomes of the relative TSR element of the 2017 LTIP award and the EPS element of the 2020 LTIP;
• reviewed the gender pay gap analysis results and signed off actions;
• reviewed and approved the Directors’ remuneration report for 2021/22; and
• reviewed the Committee’s terms of reference.
None of the Committee members have any personal financial interest (other than as shareholders) in the decisions made by the Committee,
conflicts of interest arising from cross-directorships or day-to-day involvement in running the business.
The Chief Executive Officer, the Chief Financial Officer, the HR Director and the Company Secretary may attend meetings at the invitation of the
Committee but are not present when their own remuneration outcomes are being discussed. The HR Director acts as the secretary to the Committee.
The Committee received external advice in 2022 from PricewaterhouseCoopers LLP (“PwC”) in connection with remuneration matters, including
the provision of general guidance on market and best practice. PwC was appointed by the Committee after a competitive tender process in
August 2016. PwC is considered by the Committee to be objective and independent. 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. PwC also provided the
Company with reward, tax, and consulting advice. The Committee reviewed the nature of all the services provided during the year by PwC and
was satisfied that no conflict of interest exists or existed in the provision of these services.
The total fees paid to PwC in respect of services to the Committee during the year were £131,400. Fees were determined based on the scope
and nature of the projects undertaken for the Committee.
Executive Director service contracts
The service agreements of the Executive Directors are not fixed term and are terminable by either the Company or the Director on the
following basis:
Director
F Vecchioli
A Jones
Date of current service contract
3 September 2013
29 January 2013
Notice period
Twelve months
Twelve months
Non-Executive Director letters of appointment
The Non-Executive Directors were appointed for an initial three-year term and their appointment continues, subject to annual re-election at the
Company’s AGM up to a maximum term of nine years.
The table below sets out the dates that each Non-Executive Director was first appointed and the notice period by which their appointment may
be terminated early by either party:
Director
D Hearn
I S Krieger
C Balmforth (resigned 31 May 2022)1
G van de Weerdhof
L Duhot2
D Mousseau2
J Bentall3
Date of appointment
1 December 2019
3 October 2013
1 August 2016
1 June 2020
1 November 2021
1 November 2021
18 May 2022
Notice period by Company or Director
Three months
Three months
Three months
Three months
Three months
Three months
Three months
Notes
1 C Balmforth stepped down as an independent Non-Executive Director on 31 May 2022.
2 L Duhot and D Mousseau were appointed as independent Non-Executive Directors with effect from 1 November 2021.
3
J Bentall was appointed as an independent Non-Executive Director on 18 May 2022.
116
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Directors’ report
Safestore Holdings plc is a public limited liability company incorporated
under the laws of England and Wales with the registered number
04726380. It has a premium listing on the London Stock Exchange
Main Market for listed securities (LON:SAFE) and is a constituent
member of the FTSE 250 Index. The Company is a real estate
investment trust (“REIT”). It is expected that the Company, which has
no branches, will continue to operate as the holding company of the
Group. The address of the registered office is Brittanic House, Stirling
Way, Borehamwood, Hertfordshire WD6 2BT.
Going concern and viability statement
After making enquiries, the Directors of Safestore are confident that,
on the basis of current financial projections and facilities available
and after considering sensitivities, and stress testing, the Group has
sufficient resources for its operational needs and to enable the Group
to remain in compliance with the financial covenants in its bank facilities
for the foreseeable future, a period of not less than twelve months.
The Directors have assessed Safestore’s viability over a three-year
period to 31 October 2025.
The principal activity of the Group is to provide storage solutions and
related goods and services to commercial and domestic customers.
The principal activity of the Company is that of a holding company.
The Directors present their report and the audited consolidated financial
statements for the year ended 31 October 2022. References to Safestore,
“the Group”, “the Company”, “we” or “our” are to Safestore Holdings
plc, and its subsidiary companies where appropriate.
Disclosures incorporated by reference
The following disclosures required to be included in the Directors’
report have been incorporated by way of reference to other sections
of this report and should be read in conjunction with this report:
• corporate governance report on pages 74 to 116;
• strategy and relevant future developments – refer to pages 7 to 21
of the strategic report;
• financial risk management, policies and objectives of the Group, along
with any details of exposure to any liability and cash flow risk, are set
out on pages 37 to 42 and in note 20 to the financial statements;
• details of the Group’s going concern assessment and viability
statement on pages 44 and 133; and
• employee matters and carbon emission disclosures are set out
in the Sustainability report on pages 49 to 53 and pages 58 to
73 respectively.
Results for the year and dividends
The results for the year ended 31 October 2022 are set out in the
consolidated statement of comprehensive income on page 129 and
a review of the Group’s results is explained further on pages 1 to 33.
An interim dividend of 9.40 pence (FY2021: 7.50 pence) was paid on
11 August 2022, comprised of a Property Income Distribution (“PID”) of
2.35 pence (FY2021: 7.50 pence) and a non-PID dividend of 7.05 pence
(FY2021: £nil). The Directors recommend a final dividend in respect of
the year ended 31 October 2022 of 20.40 pence per ordinary share
(FY2021: 17.60 pence), of which the PID element will be 20.40 pence
(FY2021: 17.60 pence). If authorised at the 2023 AGM, the dividend
will be paid on 7 April 2023 to members on the register at close of
business on 3 March 2023.
PIDs are paid after the deduction of withholding tax at the basic rate
(currently 20%). However, certain categories of shareholder may be
entitled to receive payment of a gross PID if they are UK resident
companies, UK public bodies, UK pension funds and managers
of ISAs, PEPs and child trust funds. Information, together with the
relevant forms which must be completed and submitted to the
Company’s Registrar, for shareholders who are eligible to receive
gross PIDs is available in the Investor Relations section of the
Company’s website at www.safestore.com. Non-PID dividends
are not subject to withholding tax.
This is based on modelling over a three-year period, which gives greater
certainty over the forecasting assumptions used. The viability statement
is set out on page 44.
Financial instruments
The financial risk management objectives and policies of the Group,
along with any details of exposure to any liability and cash flow risk, are
set out on pages 37 to 42, and in note 20 to the financial statements.
Disclosures required under Listing Rule 9.8.4R
For the purposes of LR 9.8.4R, the information required to be disclosed
by LR 9.8.4R can be found in the following locations within the Annual
Report:
(1) Amount of interest capitalised and tax relief
(2) Publication of unaudited financial information
Page
n/a
n/a
(4) Details of long term incentive schemes
161 and 162
(5) Waiver of emoluments by a Director
(6) Waiver of future emoluments by a Director
(7) Non-pre-emptive issues of equity for cash
(8)
Item (7) in relation to major subsidiary undertakings
Parent company participation in a placing by a
listed subsidiary
(9)
(10) Contracts of significance
(11) Provision of services by a controlling shareholder
(12) Shareholder waiver of dividends
(13) Shareholder waiver of future dividends
(14) Agreements with controlling shareholders
n/a
n/a
161
n/a
n/a
120
n/a
118
n/a
n/a
All the information referenced above is incorporated by reference into
the Directors’ report.
Management report
The strategic report and the Directors’ report collectively comprise
the “management report” for the purposes of the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules (DTR 4.1.5R).
Corporate Governance Statement
In compliance with the Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules, the disclosures required by DTR
7.2.6 are set out in this Directors’ Report.
Post-balance sheet events
On 11 November 2022 the Group completed its refinancing exercise
obtaining a new increased unsecured £400 million multi-currency
four-year Revolving Credit Facility (with two one-year extension
options). In addition, a further £100 million uncommitted accordion
facility is incorporated into the facility agreement.
On 1 December 2022 the Group acquired a 10.0% interest in CERF II
German Storage Topco S.à r.l., a company registered in Luxembourg,
and the indirect holder myStorage GmbH, a company registered and
operating in Germany.
117
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ report continued
Directors
The Directors of the Company who served during the year and to
the date of this report were as follows:
Claire Balmforth
Jane Bentall
Laure Duhot
David Hearn
Andy Jones
Ian Krieger
Delphine Mousseau
Non-Executive Director
(stepped down 31 May 2022)
Non-Executive Director
(appointed 18 May 2022)
Non-Executive Director
(appointed 1 November 2021)
Non-Executive Chairman
Chief Financial Officer
Senior Independent Director
Non-Executive Director
(appointed 1 November 2021)
Frederic Vecchioli
Chief Executive Officer
Gert van de Weerdhof
Non-Executive Director
The skills and experience of the serving Directors are set out on pages
76 and 77, and their interests in the ordinary share capital of the
Company, and details of options granted to Executive Directors under
the Group’s share schemes are set out in the Directors’ remuneration
report on pages 111 to 114.
Appointment and removal of Directors
The Company’s rules governing the appointment and removal of
Directors are contained in its Articles of Association. Changes to the
Articles of Association are only permitted in accordance with legislation
and must be approved by a special resolution of shareholders. The
Company’s Articles of Association provide that a Director may be
appointed by an ordinary resolution of the shareholders or by the
existing Directors, either to fill a vacancy or as an additional Director.
Further information on the Company’s internal procedures for the
appointment of Directors is given in the corporate governance section
on pages 81 and 83.
A Director may be removed by the Company in certain circumstances
set out in the Articles of Association or by an ordinary resolution of the
Company’s shareholders.
Vacation of office
The office of a Director shall be vacated if (amongst other circumstances)
a Director: (i) resigns; (ii) has been appointed for a fixed term and the term
expires; (iii) ceases to be a Director by virtue of the Companies Acts, is
removed from office pursuant to the Articles of Association or becomes
prohibited by law from being a Director; (iv) becomes bankrupt or the
subject of an interim receiving order or compounds with creditors
generally or applies to the court for an interim order under section 253
of the Insolvency Act 1986 (as amended) in connection with a voluntary
arrangement under that act or any analogous event occurs in relation to
the Director in another jurisdiction; (v) has been suffering from mental
or physical ill health and may remain so for more than three months;
(vi) both a Director and his or her alternate Director (if any) are absent,
without the permission of the Board from meetings of the Board for
six consecutive months and the Board resolves that his or her office
is vacated; or (vii) is removed from office by notice addressed to the
Director at their last-known address and signed by all co-Directors.
Directors’ powers
The Board, which is responsible for the management of the business,
may exercise all the powers of the Company subject to the provisions
of relevant legislation, the Company’s Articles of Association and
directions given by special resolution of the Company. The powers
of the Directors set out in the Articles of Association include those in
relation to the issue and buyback of shares.
118
Annual re-election of Directors
The Company’s Articles of Association require that all Directors retire
by rotation each year. In accordance with the Company’s Articles of
Association and with the Code, all Directors will retire at the Annual
General Meeting (“AGM”) to be held on Wednesday 15 March 2023
and will offer themselves for re-election.
Directors’ indemnities
The Company maintains directors’ and officers’ liability insurance
which provides appropriate cover for legal action brought against its
Directors. The Company has also granted indemnities to each of its
Directors to the extent permitted by law. The Directors also have
(and during the year ended 31 October 2022 had) the benefit of the
qualifying third party indemnity provision contained in the Company’s
Articles of Association, which provides a limited indemnity in respect
of liabilities incurred as a Director or other officer of the Company.
Directors’ interests in contracts and conflicts
of interest
No member of the Board had a material interest in any contract of
significance with the Company, or any of its subsidiaries, at any time
during the year. Directors are required to notify the Company of any
conflict or potential conflict of interest.
The Company’s policy is that Directors notify the Chairman and the
Company Secretary of all new outside interests and actual or potential
conflicts of interest as and when they arise. The Board confirms that
no actual or potential conflicts have been identified or notified to the
Company during the year and, accordingly, the Board has not
authorised any conflicts of interest as permitted by the Company’s
Articles of Association.
Share capital
At 31 October 2022, the Company’s issued share capital comprised
211,927,497 ordinary shares of 1 pence each. The rights and obligations
attached to the Company’s ordinary shares are set out in its Articles of
Association and note 11 of the Company’s financial statements. Details
of movements in the share capital during the year are provided in note
23 of the financial statements. The issued share capital has been
increased by 1,103,794 ordinary shares during the year by fully paid
issues as follows:
Date
Share scheme
11 March 2022
Exercise of options under the 2017
(five-year) Sharesave scheme
Number of
ordinary shares
of 1 pence
3,401
2 September 2022
to 31 October 2022
Exercise of options under the 2019
(three-year) Sharesave scheme
100,393
5 October 2022
Issue of new share to the Trustee
of the Safestore Employee Benefit
Trust to satisfy share awards
granted by the Company under
its 2017 Long Term Incentive Plan
1,000,000
No person holds securities in the Company carrying special rights with
regard to control of the Company.
Own shares – Employee Benefit Trust
At 31 October 2022, the Employee Benefit Trust retains 359,795
ordinary shares (FY2021: 41,259) with a nominal value of £3,598
(FY2021: £413) to satisfy awards under the Group’s share scheme
arrangements. This represents less than 0.17% (FY2021: 0.02%) of
the total issued share capital of the Company. The Trustee of the
Employee Benefit Trust has elected not to receive dividends on its
retained ordinary shares.
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT
Purchase of own shares
The Company was granted authority at the 2022 AGM to make market
purchases of its own ordinary shares. This authority will expire at the
conclusion of the 2023 AGM and a resolution will be proposed to seek
further authority. No ordinary shares were purchased under this authority
during the year or in the period from 1 November 2022 to 16 January 2023.
Restrictions on transfers of shares and/or
voting rights
The Company is not aware of any agreements between shareholders that
may result in restrictions on the transfer of securities and/or voting rights
and apart from the matters described below, there are no restrictions
on the transfer of the Company’s ordinary shares and/or voting rights:
• Certain restrictions on transfers of shares may from time to time be
imposed by laws and regulations (such as the Market Abuse Regulation).
The Company’s Securities Dealing Code provides that all Directors
and employees are required to seek the Company’s approval to deal
in its shares.
• Some share-based employee incentive plans include restrictions on the
transfer of shares, while the shares are subject to the plan concerned.
• The Directors’ Remuneration Policy provides that annual bonus
awards in excess of 100% of salary be deferred into shares. The
annual bonus plan rules include restrictions on the transfer of such
shares, while the shares are subject to the plan concerned.
• The transferor of a share is deemed to remain the holder until the
transferee’s name is entered in the register of shareholders. The
Board can refuse to register any transfer of any share which is not
a fully paid share. The Company does not currently have any partly
paid shares.
• Unless the Directors determine otherwise, members are not entitled
to vote personally or by proxy at a shareholders’ meeting, or to
exercise any other member’s right in relation to shareholders’
meetings, in respect of any share for which any call or other sum
payable to the Company remains unpaid.
• Unless the Directors determine otherwise, no transfer of shares shall
be registered and members are not entitled to vote personally or by
proxy at a shareholders’ meeting, or to exercise any other member’s
right in relation to shareholders’ meetings if the member fails to
provide the Company with the required information concerning
interests in those shares within the prescribed period after being
served with a notice under Section 793 of the Companies Act 2006.
• The shareholding guidelines set out in the Directors’ Remuneration
Policy provide that Executive Directors are expected to build up their
shareholding over a five-year period. Executive Directors would be
expected to retain any shares vesting (post-tax) under in-flight awards
until they have acquired the necessary shares to meet their
shareholding requirements.
Details of deadlines in respect of voting for the 2023 AGM are
contained in the Notice of Meeting that has been circulated to
shareholders and can be viewed on the Company’s website at
www.safestore.com.
Substantial shareholdings
The table below sets out the names of those persons who, insofar as the Company is aware, as at 10 November 2022 (being the nearest date of
the Company’s internal analysis to 31 October 2022), are interested directly or indirectly in 3% or more of the issued share capital of the Company.
Name of shareholder
BlackRock Inc (Combined)
abrdn plc (Combined)
Cohen and Steers (Combined)
The Vanguard Group, Inc (Combined)
Principal Financial Group (Combined)
State Street Corporation (Combined)
Ameriprise Financial (Combined)
Legal & General Investment Mgt (London)
Number of
ordinary shares
Percentage of issued
share capital
18,986,683
14,788,929
11,455,723
10,529,194
10,314,165
7,579,381
7,177,366
6,625,474
8.87
6.91
5.35
4.92
4.82
3.54
3.35
3.10
Information provided to the Company pursuant to Rule 5 of the Disclosure Guidance and Transparency Rules (“DTR”) is published on a
Regulatory Information Service and on the Company’s website.
During the current financial year and as at 31 October 2022, the Company received the following notifications in accordance with DTR 5
disclosing changes to voting interests in its issued share capital. The information provided includes the percentage of issued capital as at the
date of the notifications.
Name of shareholder
PGGM Vermogensbeheer B.V.
Cohen and Steers, Inc
Date of latest notification
17 October 2022
31 October 2022
Number of
ordinary shares
Percentage of
issued share capital
Nature of holding
(direct/indirect)
7,705,623
10,459,541
3.65%
4.96%
Direct
Indirect
Between 1 November 2022 and 25 January 2023, being a date not more than one month prior to the date of the Company’s Notice of Annual
General Meeting 2023, the Company received the following notification(s) in accordance with DTR 5 disclosing changes to voting interests in its
issued share capital. The information provided includes the percentage of issued capital as at the date of the notification(s).
Name of shareholder
Cohen & Steers, Inc.
Date of
notification of interest
Number of
ordinary shares
Percentage of
issued share capital
(excluding treasury shares)
Nature of holding
(direct/indirect)
17 November 2022
11,028,787
5.20%
Indirect
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OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT Directors’ report continued
Substantial shareholdings continued
All interests disclosed to the Company in accordance with DTR 5 that
have occurred since 16 January 2023 can be found on the Company’s
website www.safestore.com.
Significant agreements and change of control
The Group’s bank facilities agreement and US Private Placement Note
agreements contain provisions entitling the counterparty to terminate
the contractual agreements in the event of a change of control of the
Group. The rules governing the Group’s share scheme arrangements
also contain provisions relating to the vesting and exercising of options
in the event of a change of control of the Group.
There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or employment
(whether through resignation, purported redundancy or otherwise) that
occurs because of a takeover bid.
Employment and environmental matters
Information in respect of the Group’s employment and environmental
policies, including the policies regarding the employment of disabled
persons and greenhouse gas reporting, is summarised in the
sustainability section on pages 46 to 73.
Amendment of the Articles of Association
The Company’s Articles of Association may only be amended by
special resolution at a general meeting of the shareholders.
Political donations
The Company made no political donations and incurred no political
expenditure during the year (FY2021: £nil). It remains the Company’s
policy not to make political donations or to incur political expenditure;
however, the application of the relevant provisions of the Companies
Act is potentially very broad in nature and, as with last year, the Board
is seeking shareholder authority to ensure that the Company does not
inadvertently breach these provisions as a result of the breadth of its
business activities. It is not the policy of the Company or its
subsidiaries to make political donations.
Disclosure of information to auditor
Each of the persons who is a Director at the date of approval of this
report confirms that:
• so far as the 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 a Director might reasonably
ought to have taken in order to make themself 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 the provisions of Section 418 of the Companies Act 2006.
Independent auditor
Deloitte LLP has indicated its willingness to continue in office and the
Audit Committee has recommended resolutions at the 2023 AGM to
re-appoint Deloitte LLP as the Company’s auditor and to authorise the
Audit Committee to agree the auditor’s remuneration.
In order to comply with the requirements of the Statutory Services for
Large Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Responsibilities) Order 2014 (the “Order”),
the Company intends to conduct a formal tender process for audit
services during the financial year ending 2024. The Audit Committee
considers this timing to be in the best interests of the Company, as it
allows for a new lead audit partner to be appointed (in accordance
with the Order) and conduct a full year audit ahead of the formal audit
tender process.
Annual General Meeting (“AGM”)
The AGM will be held at the Company’s registered office at Brittanic
House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT, on
Wednesday 15 March 2023 at 12.00 noon and will also be broadcast
using teleconference facilities.
The 2023 AGM will include, as special business, resolutions dealing
with authority to issue shares, disapplication of pre-emption rights,
authority to purchase the Company’s own shares, and authority to call
a general meeting on not less than 14 days’ notice. The Notice of AGM
sets out details of the business to be considered at the AGM and contains
explanatory notes on such business. This has been dispatched to
shareholders and can be found on the Company’s website at
www.safestore.com.
Shareholders are encouraged to use their vote at this year’s AGM by casting
their votes online by using our electronic proxy appointment service offered
by the Company’s Registrar, Link Group, at www.signalshares.com or
via the Link Group shareholder app, LinkVote+.
This report was approved by the Board for release on 16 January 2023
and signed on its behalf by:
Helen Bramall
Company Secretary
16 January 2023
120
Safestore Holdings plc | Annual report and financial statements 2022GOVERNANCE REPORT Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the
Group and parent company financial statements in accordance with
applicable law 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 United
Kingdom adopted international accounting standards. The financial
statements also comply with International Financial Reporting Standards
(“IFRS”) as issued by the IASB. The Directors have chosen to prepare
the parent company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law), including Financial Reporting
Standard 101 “Reduced Disclosure Framework”. Under company law
the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs
of the Group and the parent company and of the profit or loss of the
Group for that period.
In preparing the parent company financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained
in the financial statements;
• state whether Financial Reporting Standard 101 “Reduced Disclosure
Framework” has been followed, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue
in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s transactions and
disclose with reasonable accuracy at any time the financial position of
the parent company and the Group to enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the parent company
and the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Group’s website at
www.safestore.com. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement
We confirm that, to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group 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 Group 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 Group’s position and
performance, business model and strategy.
This responsibility statement was approved by the Board of Directors
on 16 January 2023 and is signed on its behalf by:
In preparing the Group financial statements, International Accounting
Standard 1 requires that Directors:
Frederic Vecchioli
Chief Executive Officer
Andy Jones
Chief Financial Officer
• 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 of the financial reporting framework 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 Group’s ability to continue as a
going concern.
121
OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSafestore Holdings plc | Annual report and financial statements 2022STRATEGIC REPORT
Independent auditor’s report
to the members of Safestore Holdings plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of Safestore Holdings plc (the “parent company”) and its subsidiaries (the “Group”) give a true and fair view of the state
of the Group’s and of the parent company’s affairs as at 31 October 2022 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting standards;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and parent company balance sheets;
• the consolidated and parent company statements of changes in equity;
• the consolidated cash flow statement; and
• the Group related notes 1 to 32 and parent company related notes 1 to 12.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and United
Kingdom adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”
(United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the Financial Reporting Council’s (“FRC’s”) Ethical Standard as applied to listed public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that we have not provided any
non-audit services prohibited by the FRC’s Ethical Standard to the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current year was the valuation of investment properties, which is consistent
with the key audit matter identified in the prior year.
Within this report, the key audit matter is identified as follows:
Similar level of risk
Materiality
Scoping
The materiality that we used for the Group financial statements was £32.1 million which was determined as 2% of net
assets. For testing items affecting profit before tax we have applied a lower threshold amounting to £6.0 million which was
determined as 5% of profit before income tax, adjusted for investment property and derivative fair value movements.
We have identified four components within the Group: United Kingdom (“UK”), France, Spain and Benelux operations.
The Group audit team has performed a full scope audit of the UK component and a French component audit team has
performed a full scope audit of the French component. In addition, the Group team has performed specified procedures
at the Group level in respect of the Spanish and Benelux components.
Significant changes in
our approach
The Benelux entity represents a new wholly owned component to the Group, after the Group acquired the remaining 80%
equity stake in the business during the financial year.
122
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS 4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going concern basis
of accounting included:
• obtaining an understanding of the relevant controls relating to the going concern process;
• an assessment of the Group’s financing facilities including nature of facilities, repayment terms and covenants. This included an assessment
of the new facility entered into by the Group post year end;
• a challenge of the range of scenarios modelled by management through our understanding of sector performance and sentiment and
historical forecasting accuracy of management;
• testing the mathematical accuracy of the model used to prepare the going concern forecast;
• an assessment of the level of headroom arising in each scenario;
• an assessment of the sophistication of the model used to prepare the forecasts;
• an assessment of the outcome of the reverse stress testing performed by management; and
• an evaluation of the appropriateness of the going concern disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s and parent company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention
to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit and directing the
efforts of the engagement team.
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.
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Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT Independent auditor’s report continued
to the members of Safestore Holdings plc
Report on the audit of the financial statements continued
5. Key audit matters continued
5.1. Valuation of investment properties
Key audit matter
description
Investment properties are held at a fair value of £2,647.4 million at 31 October 2022 (FY2021: £2,031.3 million).
This is the most quantitatively material balance in the financial statements.
Property valuation, which is performed by an external valuer, is by its nature subjective with significant estimation
being applied in the assumption. We consider the key assumptions to comprise stabilised occupancy, capitalisation
rate, discount rate and net rental growth. These estimates drive a cash flow model that is used as the basis of the
valuation of each individual property. Additionally, there are specific judgements pertaining to “immature” stores which
were defined as stores open for five years or less and UK assets under leasehold with an unexpired lease term
of ten years or less.
Through our risk assessment procedures, we have identified the valuation of the properties as the area where
climate change could have the greatest impact, specifically the capital expenditure that will be required to bring
buildings up to required energy efficiency standards and the external valuer’s approach to including future capital
expenditure relating to climate change in the valuation.
For key sources of estimation uncertainty disclosures and further details of the Group’s valuation method and
assumptions, refer to notes 2 and 13 of the financial statements. The valuation of investment properties is also
discussed in the Audit Committee report on page 87.
How the scope of our
audit responded to the
key audit matter
In response to the risk of valuation of investment properties, we performed the following audit procedures:
We gained an understanding of and tested the key controls relevant to the property valuation process.
We met with the external valuer, assessed the appropriateness of the valuer’s scope and evaluated the
competence, objectivity, independence, and capability of the valuer.
We obtained the source data provided by management to the valuer (e.g. historical revenue, occupancy, average
rental rates and lettable area on a store by store basis) and tested a sample of the source data for completeness
and integrity.
We identified individual properties through analysis against the following criteria:
immature stores, defined as stores open for five years or less;
UK leasehold stores with a term of ten years or less; and
properties which display characteristics of audit interest through analysis of key assumptions, namely stabilised
occupancy, capitalisation rate, discount rate and net rent growth.
We investigated the properties identified and challenged the key estimates by assessing the appropriateness
through comparison with the market and our expectation.
With the involvement of our internal real estate specialists (who are members of the Royal Institution of Chartered
Surveyors or RICS), we performed an independent assessment of the assumptions that underpin the valuations,
based on their knowledge of the self storage industry and wider real estate market.
We evaluated whether the Group’s valuation methodology remains appropriate and assessed whether indicative
rents and yields achieved in recent comparable transactions were consistent with the assumptions used in the
Group’s valuations.
We have also challenged the valuer and management around the impact of climate change on the portfolio
valuation, if any.
We tested the accuracy and integrity of key elements of the valuer’s model. We also recalculated the valuation for
a sample of property assets, obtained contradictory evidence where available and performed a “stand-back” review
to assess the sufficiency of audit evidence.
We assessed the associated financial statement disclosures, including the appropriateness of the key sources
of estimation uncertainty sensitivity analysis.
We consider the assumptions applied in arriving at the fair value of the Group’s investment property to be reasonable,
albeit the discount rates applied were at the lower end of our acceptable range. The sensitivity disclosures are
considered appropriate given the level of estimation involved and the valuations are suitable for inclusion in the
financial statements at 31 October 2022.
Key observations
124
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS 6. Our application of materiality
6.1. 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 financial statements
Parent company financial statements
Materiality
£32.1 million (FY2021: £27.4 million).
£6.2 million (FY2021: £5.1 million).
Basis for determining
materiality
Rationale for the
benchmark applied
2% of net assets (FY2021: 2% of net assets).
Parent company materiality represents 3% of net assets
(FY2021: 3% of net assets).
We considered net assets to be a critical financial
performance measure for the Group on the basis that
it is a key metric used by management, investors,
analysts and lenders.
We considered net assets to be a critical financial
performance measure for the Company on the basis
that it is a key metric used by management, investors,
analysts and lenders.
In addition to net assets, we also consider profit before income tax, adjusted for investment property and derivative fair value movements, to
be a critical financial performance measure for the Group, which aligns closely with EPRA earnings. We applied a lower threshold of £6.0 million
(FY2021: £4.0 million) for testing of balances impacting that measure, which has been determined as 5% (FY2021: 5%) of profit before income
tax adjusted for investment property and derivative fair value movements.
materiality range £5.6m to £17.4m98+22
Audit Committee reporting
threshold £1.6m
Group materiality £32.1m
Net assets
£1,793.4m
Component
Net assets
Group materiality
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole.
Performance materiality
70% (FY2021: 70%) of Group materiality.
70% (FY2021: 70%) of parent company materiality.
Group financial statements
Parent company financial statements
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered the following factors:
a. the quality of the control environment and whether we were able to rely on controls;
b. the low volume of uncorrected misstatements in the previous audit; and
c. turnover of management or key accounting personnel, and prior period adjustments.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.6 million (FY2021: £1.3 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.
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Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT Independent auditor’s report continued
to the members of Safestore Holdings plc
Report on the audit of the financial statements continued
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the
risks of material misstatement at the Group level.
We have determined that there are four components within the Group: United Kingdom, France, Spain and Benelux operations. The group audit
team have performed a full scope audit of the UK component and a French component audit team have performed a full scope audit of the French
component. In addition, the group audit team have performed specified procedures at group level in respect of the Spanish and Benelux components.
We instructed the French component auditors to perform the audit of the France component and supervised their work through regular communication.
We attended their local audit close meeting with the local management team as well as evaluated the outputs of their work in person and challenged
their conclusions as part of our component oversight role.
Our component audit work was executed at levels of materiality applicable to each individual component which were lower than Group
materiality, ranging from £5.6 million to £17.4 million (FY2021: £4.8 million to £15.4 million). In addition, for the lower materiality threshold
described above, our component thresholds ranged from £1.1 million to £3.4 million (FY2021: £0.7 million to £2.2 million).
7.2. Our consideration of the control environment
We have obtained an understanding of the relevant controls such as those relating to the financial reporting cycle, and those in relation to our key
audit matter. Together with our IT specialists we tested certain controls over the financial reporting systems.
We have decided not to rely on controls as the control environment is predominantly manual in nature.
7.3. Our consideration of climate-related risks
We have made enquiries of management to understand the processes in place to assess the potential impact of climate change on the business
and the financial statements. Management considers climate change to be a principal risk which particularly impacts the cost of retrofitting stores
to improve their sustainability credentials and comply with future regulations. These risks are consistent with those identified through our own risk
assessment process.
As part of our identification of key audit matters, we consider there to be a risk in relation to climate change as part of the valuation of investment
properties. There is a risk that the valuation does not include the relevant assumptions around climate change, principally, capital expenditure
required to bring the stores up to a certain environmental standard, to the extent assumed by a third party when determining fair value.
As detailed in our procedures in section 5.1 above, we challenged the valuer and management as to the assumptions included, and considered
their reasonableness with the assistance of our internal real estate specialists. We have reviewed the disclosures in the principal risk section and
page 45 of the Annual Report and consider that management has appropriately disclosed the current risk that has been identified.
8. Other information
The other information comprises the information included in the Annual Report, other than the financial
statements and our auditor’s report thereon. The Directors are responsible for the other information contained
within the Annual Report.
We have nothing to report
in this regard.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
9. Responsibilities of Directors
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, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
126
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS 11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration
policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit and the Audit Committee about their own identification and assessment of the risks
of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
-
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
- detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
-
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
• the matters discussed among the audit engagement team including significant component audit teams and relevant internal specialists,
including tax, IT and property valuation specialists regarding how and where fraud might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud in the assumptions used in the valuation of investment properties as they are subject to management bias. In
common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions of those laws
and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws
and regulations we considered in this context included the UK Companies Act, Listing Rules and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance
with which may be fundamental to the Group’s ability to operate or to avoid a material penalty.
11.2. Audit response to risks identified
As a result of performing the above, we identified the valuation of investment properties as a key audit matter related to the potential risk of fraud.
The key audit matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response
to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws
and regulations described as having a direct effect on the financial statements;
• enquiring of management, the Audit Committee and external legal counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence
with HMRC; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• 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 light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course of the audit,
we have not identified any material misstatements in the strategic report or the Directors’ report.
127
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT Independent auditor’s report continued
to the members of Safestore Holdings plc
Report on other legal and regulatory requirements continued
13. Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer term viability and that part of the corporate
governance statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• the Directors’ statement with regard to the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on page 117;
• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate
set out on page 44;
• the Directors’ statement on fair, balanced and understandable set out on page 121;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 37 to 42;
• the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on
page 79; and
• the section describing the work of the Audit Committee set out on page 86.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
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
We have nothing to report in
respect of these matters.
• 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.
14.2. Directors’ remuneration
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.
We have nothing to report in
respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the shareholders on 12 October 2014 to audit the financial
statements for the year ending 31 October 2014 and subsequent financial periods. The period of total uninterrupted engagement including
previous renewals and re-appointments of the firm is nine years, covering the years ending 31 October 2014 to 31 October 2022.
15.2. Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
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.
As required by the Financial Conduct Authority (“FCA”) Disclosure Guidance and Transparency Rule (“DTR”) 4.1.14R, these financial statements
form part of the European Single Electronic Format (“ESEF”) prepared Annual Financial Report filed on the National Storage Mechanism of the
UK FCA in accordance with the ESEF Regulatory Technical Standard (“ESEF RTS”). This auditor’s report provides no assurance over whether the
annual financial report has been prepared using the single electronic format specified in the ESEF RTS.
Darren Longley FCA (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
16 January 2023
128
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS Consolidated income statement
for the year ended 31 October 2022
Revenue
Cost of sales
Gross profit
Administrative expenses
Share of loss in associate
Underlying EBITDA
Exceptional items
Share-based payments
Depreciation and variable lease payments
Share of associate’s depreciation, interest and tax
Operating profit before gains on investment properties and other exceptional gains
Gain on investment properties
Other exceptional gains
Operating profit
Finance income
Finance expense
Profit before income tax
Income tax charge
Profit for the year
Earnings per share for profit attributable to the equity holders
– basic (pence)
– diluted (pence)
The financial results for both years relate to continuing operations.
Group
2022
£’m
212.5
(63.0)
149.5
(27.1)
(0.3)
135.1
(0.1)
(11.2)
(1.3)
(0.4)
122.1
381.6
10.8
514.5
2.0
(17.7)
498.8
(35.9)
462.9
219.5
212.4
2021
£’m
186.8
(56.9)
129.9
(34.0)
—
118.0
(1.9)
(18.3)
(1.4)
(0.5)
95.9
321.1
—
417.0
0.6
(13.0)
404.6
(22.6)
382.0
181.2
176.4
Notes
3, 4
12
5
13
5
4, 6
8
8
9
11
11
Underlying EBITDA is an Alternative Performance Measure and is defined as operating profit before exceptional items, share-based payments,
corporate transaction costs, gain/loss on investment properties, depreciation and variable lease payments and the share of associate’s
depreciation, interest and tax.
The notes on pages 133 to 165 are an integral part of these consolidated financial statements.
Consolidated statement of comprehensive income
for the year ended 31 October 2022
Profit for the year
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences
Net investment hedge
Other comprehensive income/(expense), net of tax
Total comprehensive income for the year
Group
2022
£’m
462.9
8.0
(4.6)
3.4
466.3
2021
£’m
382.0
(20.3)
10.9
(9.4)
372.6
129
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
Consolidated balance sheet
as at 31 October 2022
Assets
Non-current assets
Investment in associates
External valuation of investment properties, net of lease liabilities
Add-back of lease liabilities
Investment properties under construction
Total investment properties
Property, plant and equipment
Derivative financial instruments
Deferred income tax assets
Current assets
Inventories
Derivative financial instruments
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Financial liabilities:
– bank borrowings
– derivative financial instruments
Trade and other payables
Current income tax liabilities
Lease liabilities
Non-current liabilities
Financial liabilities:
– bank borrowings
Deferred income tax liabilities
Lease liabilities
Provisions
Total liabilities
Net assets
Equity
Ordinary shares
Share premium
Translation reserve
Retained earnings
Total equity
Group
2022
£’m
2021
£’m
Notes
12
1.8
7.2
13
14
20
22
20
16
17
19
20
18
21
19
22
21
27
23
2,457.8
1,881.8
95.1
94.5
82.1
67.4
2,647.4
2,031.3
3.4
—
0.8
3.2
0.9
0.8
2,653.4
2,043.4
0.3
1.7
31.2
20.9
54.1
0.5
1.3
28.9
43.2
73.9
2,707.5
2,117.3
(101.7)
—
(62.7)
(0.8)
(13.2)
(178.4)
(522.1)
(129.0)
(82.2)
(2.4)
(735.7)
(914.1)
—
(0.2)
(75.8)
(0.3)
(12.3)
(88.6)
(484.7)
(97.0)
(70.0)
(2.1)
(653.8)
(742.4)
1,793.4
1,374.9
2.1
61.8
8.5
1,721.0
1,793.4
2.1
61.3
5.1
1,306.4
1,374.9
These financial statements were authorised for issue by the Board of Directors on 16 January 2023 and signed on its behalf by:
A Jones
Chief Financial Officer
F Vecchioli
Chief Executive Officer
Company registration number: 04726380
130
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS
Consolidated statement of changes in shareholders’ equity
for the year ended 31 October 2022
Balance at 1 November 2020
Comprehensive income
Profit for the year
Other comprehensive (expense)/income
Currency translation differences
Net investment hedge
Total other comprehensive expense
Total comprehensive (expense)/income
Transactions with owners
Dividends (note 10)
Increase in share capital
Employee share options
Transactions with owners
Balance at 1 November 2021
Comprehensive income
Profit for the year
Other comprehensive income/(expense)
Currency translation differences
Net investment hedge
Total other comprehensive income
Total comprehensive income
Transactions with owners
Dividends (note 10)
Increase in share capital
Employee share options
Transactions with owners
Balance at 31 October 2022
Share
capital
£’m
2.1
Share
premium
£’m
60.6
Group
Translation
reserve
£’m
14.5
Retained
earnings
£’m
958.4
Total
£’m
1,035.6
—
—
—
—
—
—
—
—
—
2.1
—
—
—
—
—
—
—
—
—
2.1
—
—
—
—
—
—
0.7
—
0.7
61.3
—
—
—
—
—
—
0.5
—
0.5
61.8
—
382.0
382.0
(20.3)
10.9
(9.4)
(9.4)
—
—
—
—
5.1
—
8.0
(4.6)
3.4
3.4
—
—
—
—
8.5
—
—
—
382.0
(42.6)
—
8.6
(34.0)
(20.3)
10.9
(9.4)
372.6
(42.6)
0.7
8.6
(33.3)
1,306.4
1,374.9
462.9
462.9
—
—
—
8.0
(4.6)
3.4
462.9
466.3
(56.9)
—
8.6
(48.3)
(56.9)
0.5
8.6
(47.8)
1,721.0
1,793.4
The translation reserve balance of £8.5 million (FY2021: £5.1 million) comprises all foreign exchange differences arising from the translation of
the financial statements of foreign operations and the impact of the net investment hedge. The cumulative impact of the net investment hedge
included within this reserve is a net expense of £0.1 million (FY2021: £4.7 million).
131
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
Consolidated cash flow statement
for the year ended 31 October 2022
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Investment in associates
Loans to associates
Expenditure on investment properties and development properties
Proceeds from disposal of investment properties
Proceeds from disposal of land
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Issue of share capital
Equity dividends paid
Proceeds from borrowings
Repayment of borrowings
Exceptional swap termination
Financial instruments income
Debt issuance costs
Principal payment of lease liabilities
Net cash inflow/(outflow) from financing activities
Net (decrease)/increase in cash and cash equivalents
Exchange loss on cash and cash equivalents
Cash and cash equivalents at 1 November
Cash and cash equivalents at 31 October
Group
2022
£’m
132.2
0.1
(16.9)
(5.6)
109.8
(111.5)
(0.8)
—
(95.2)
6.4
1.0
(1.0)
0.2
(200.9)
0.5
(56.9)
266.1
(134.0)
0.5
1.3
(0.1)
(8.4)
69.0
(22.1)
(0.2)
43.2
20.9
2021
£’m
115.6
0.9
(14.1)
(5.4)
97.0
—
(1.9)
(0.9)
(62.4)
—
—
(1.0)
—
(66.2)
0.7
(42.6)
196.8
(153.0)
—
—
(0.7)
(7.5)
(6.3)
24.5
(0.9)
19.6
43.2
Notes
24
10
8
8
17, 25
132
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS
Notes to the financial statements
for the year ended 31 October 2022
1. General information
Safestore Holdings plc (the “Company”) and its subsidiaries (together, the “Group”) provide self storage facilities to customers throughout the UK, Paris,
Spain, the Netherlands, and Belgium. The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and
domiciled in the UK, England and Wales. The address of its registered office is Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT.
2. Summary of significant accounting policies
The principal accounting policies of the Group are set out below. These policies have been consistently applied to each of the years presented,
unless otherwise stated.
Basis of preparation
The consolidated financial statements have been prepared in accordance with United Kingdom adopted International Financial Reporting
Standards (“IFRS”) and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations. They also comply with those parts
of the Companies Act 2006 applicable to companies reporting under IFRS.
The Group consolidated financial statements are presented in Sterling and are rounded to the nearest £0.1 million, unless otherwise stated. They
are prepared on a going concern basis under the historical cost convention as modified by the revaluation of investment properties and the fair
value of derivative financial instruments.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual
amounts may differ from those estimates.
Going concern
The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than twelve
months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing this consolidated financial information.
In assessing the Group’s going concern position as at 31 October 2022, the Directors have considered a number of factors, including the current
balance sheet position, the principal and emerging risks which could impact the performance of the Group and the Group’s strategic and financial
plan. Consideration has been given to compliance with borrowing covenants along with the uncertainty inherent in future financial forecasts.
The Directors considered the most recent three-year outlook approved by the Board. In the context of the current environment, four plausible
scenarios were applied to the plan, including a stress test scenario. These were based on the potential financial impact of the Group’s principal
risks and uncertainties and the specific risks associated with the continued pandemics and the conflict in Ukraine. These scenarios are
differentiated by the impact of demand and enquiry levels, average rate growth and the level of cost savings. A scenario was also performed
where we have carried out a reverse stress test to model what would be required to breach ICR and LTV covenants which indicated highly
improbable changes would be needed before any issues were to arise. Since the end of the financial year, the Group has completed the
refinancing of its Revolving Credit Facilities (“RCF’s”) which were due to expire in June 2023. The previous £250 million and €70 million RCF’s
have been replaced with a single multi-currency £400 million facility, with a four-year term with two one-year extension options (note 32).
The impact of these scenarios has been reviewed against the Group’s projected cash flow position and financial covenants over a three-year
period. Should any of these scenarios, which are differentiated by the impact of demand and enquiry levels, average rate growth and the level
of cost savings, occur, clear mitigating actions are available to ensure that the Group remains liquid and able to meet its liabilities as they fall due.
The financial position of the Group, including details of its financing and capital structure, is set out in the financial review section of this report.
Further details of the Group’s viability statement are set out on page 44.
Standards, amendments to standards and interpretations issued and applied
The following new or revised accounting standards or IFRIC interpretations are applicable for the first time in the year ended 31 October 2022:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2
• Amendment to IFRS 16 Covid-19–Related Rent Concessions beyond 30 June 2021
The adoption of the standards and interpretations has not significantly impacted these financial statements and any changes to our accounting
policies as a result of their adoption have been reflected in this note.
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these financial statements, a number of new standards and amendments to standards and interpretations have
been issued but are not yet effective for the current accounting period. The Directors do not expect these standards to have a material impact
on the financial statements of the Group or Company.
• Amendments to IFRS 3 References to the Conceptual Framework in IFRS Standards
• Amendments to IAS 16 Property, Plant and Equipment – Proceeds before Intended Use
• Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract
• Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 Annual Improvements to IFRS Standards 2018–2020
• IFRS 17 Insurance Contracts
• Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policy
• Amendments to IAS 8 Definition of Accounting Estimate
• Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction
• Amendments to IAS 1 Classification of Liabilities as Current or Non-current
133
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT 2. Summary of significant accounting policies continued
Basis of consolidation and business combinations
The consolidated financial statements incorporate the financial statements of the Company and all its subsidiary undertakings made up to
31 October each year. Subsidiaries are entities controlled by the Company. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date
of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those
used by the Group.
All intra-group transactions, balances and unrealised gains on transactions are eliminated on consolidation. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the assets transferred.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The consideration transferred for the
acquisition is measured as the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity
instruments issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the date of acquisition. Any excess of the cost of an acquisition over the fair value of the Group’s share of
net identifiable assets including intangible assets of the acquired entity at the date of acquisition is recognised as goodwill. Any discount received
is credited to the income statement in the year of acquisition as negative goodwill on acquisition of subsidiary. Costs attributable to an acquisition
are expensed in the consolidated income statement under the heading “administrative expenses”.
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.
Segmental reporting
IFRS 8 “Operating Segments” (“IFRS 8”) requires operating segments to be identified based upon the Group’s internal reporting to the chief
operating decision maker (“CODM”) to make decisions about resources to be allocated to segments and to assess their performance. The
CODM is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The Group
has determined that its CODM are the Executive Directors.
An operating segment is a component of an entity:
(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to
transactions with other components of the same entity);
(b) whose operating results are regularly reviewed by the entity’s CODM to make decisions about resources to be allocated to the segment
and assess its performance; and
(c) for which discrete financial information is available.
The Group’s net assets, revenue and profit before tax are attributable to one principal activity, the provision of self storage, in four geographical
reporting segments, the United Kingdom, Paris in France, Spain, and the Netherlands and Belgium in Benelux.
Segment results, assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis.
Revenue recognition
Revenue represents amounts derived from the provision of self storage services (rental space, customer goods insurance and consumables) which
fall within the Group’s activities provided in the normal course of business, net of discounts, VAT (where applicable) and other sales related taxes.
Rental income is recognised over the period for which the space is occupied by the customer on a time apportionment basis. No revenue is
recognised if there are significant uncertainties regarding recovery of the consideration due. Insurance income is recognised over the period for
which the space is occupied by the customer on a time apportionment basis.
The Group has put in place insurance arrangements whereby the Group purchases block policies from third party insurers that customers can
access, for which it pays annual premiums at the beginning of the insurance year. The Group allows customers to benefit from the policies and
charges a fee for the level of cover that the customer needs. The block policies purchased and the income earned from charging customers are
independent transactions. Although Safestore is involved in the initial handling of any customers’ insurance claims, these are passed on to the
third party insurance providers, who are responsible for all insurance payments. The Group is not exposed to insurance risk.
134
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022 2. Summary of significant accounting policies continued
Revenue recognition continued
The Group bears the inventory risk and pricing risk associated with these contracts and as such the Group acts as principal in the provision
of the access to insurance services for its customers who elect to access that insurance, and therefore revenue from insurance premiums is
reported on a gross basis. The portion of insurance premiums receivable from customers on occupied space that relates to unexpired risks
at the balance sheet date is reported as unearned premium liability in other payables.
Income for the sale of assets and consumables is recognised when the significant risks and rewards have been transferred to the buyer.
For property sales this is generally at the point of completion. Where any aspect of consideration is conditional then the revenue associated
with that conditional item is deferred. Income earned on the sales of consumable items is recognised at the point of sale.
Income from insurance claims is recognised when it is virtually certain of being received.
Foreign currency translation
Functional and presentation currency
The individual financial statements for each company are measured using the currency of the primary economic environment in which it operates
(its functional currency). For the purposes of the consolidated financial statements, the results and financial position of the Group are expressed
in Sterling, which is the presentational currency of the Group.
Transactions and balances
Foreign currency transactions are translated into the functional currency at the rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on
the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the income statement for
the period, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly
in equity.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated into the Group’s presentational currency at
exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising are classified as equity and are recognised as a separate component of equity, within the translation reserve.
Such translation differences are recognised as income or expense in the period in which the operation is disposed of.
Borrowing 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, typically when a store opens.
Investment properties and investment properties under construction
Investment properties are those properties owned by the Group that are held to earn rental income, or for capital growth, or both. Investment
properties and investment properties under construction are initially measured at cost, including related transaction and borrowing costs. After
initial recognition, investment properties and investment properties under construction are held at fair value based on a market valuation by
professionally qualified external valuers at each balance sheet date.
The fair value of investment properties and investment properties under construction reflects, among other things, rental income from current
leases and assumptions about rental income from future leases in light of current market conditions. The fair value also reflects, on a similar
basis, any cash outflows that could be expected in respect of the property. Some of these outflows are recognised as a liability, including lease
liabilities in respect of leasehold land and buildings classified as investment properties; others, including variable lease payments not based on
an index or rate, are not recognised in the balance sheet.
In accordance with IAS 40, investment property held as a leasehold is stated gross of the recognised lease liability. Leasehold properties are
classified as investment properties and included in the balance sheet at fair value. The obligation to the lessor for the leasehold is included in the
balance sheet at the present value of the minimum lease payments. The minimum lease payment valuation is re-measured at the point of lease
modification and the value of the Group’s right-of-use assets is adjusted accordingly over the lease term. Gains or losses arising on changes in
the fair values of investment properties and investment properties under construction at the balance sheet date are recognised in the income
statement in the period in which they arise.
Gains or losses on sale of investment properties are calculated as the difference between the consideration received and fair value estimated
at the previous balance sheet date.
If an investment property or part of an investment property becomes owner-occupied, it is reclassified as property, plant and equipment, and
its fair value at the date of reclassification becomes its cost for accounting purposes.
Property, plant and equipment
Property, plant and equipment not classified as investment properties or investment properties under construction are stated at historical cost
less accumulated depreciation and any accumulated impairment loss. Historical cost comprises the purchase price and costs directly incurred
in bringing the asset into use.
Assets’ residual values and useful lives are reviewed and, if appropriate, adjusted at each balance sheet date. If the carrying amount of an asset
is greater than the recoverable amount then the carrying amount is written down immediately to the recoverable amount.
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Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT 2. Summary of significant accounting policies continued
Property, plant and equipment continued
Depreciation is charged so as to write off the cost of an asset less estimated residual value of each asset over its expected useful life using the
straight-line method. The principal rates are as follows:
Owner-occupied freehold buildings
2% per annum
Motor vehicles
20–25% per annum
Computer hardware and software
15–33% per annum
Fixtures, fittings, signs and partitioning
10–15% per annum
The gain or loss arising on the retirement or disposal of an asset is determined as the difference between the net sales proceeds and the
carrying amount of the asset and is recognised in the income statement on disposal.
Impairment of tangible assets (excluding investment property)
At each balance sheet date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is deemed to be the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset
(or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
A reversal of an impairment loss is recognised as income immediately.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises all costs of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the
estimated selling price less directly associated costs. Provision is made for slow-moving or obsolete stock, calculated on the basis of sales
trends observed in the year.
As at 31 October 2022 the Group held finished goods and goods held for resale of £0.3 million (FY2021: £0.5 million). The Group consumed
£0.7 million (FY2021: £1.0 million) of inventories during the year. Inventory write downs were £nil for the financial year ended 31 October 2022
(FY2021: £0.1 million). Inventories of £nil (FY2021: £nil) are carried at fair value less costs to sell.
Leases
A right-of-use asset and corresponding lease liability are recognised at commencement of the lease. The lease liability is measured at the
present value of the lease payments, discounted at the rate implicit in the lease, or if that cannot be readily determined, at the lessee’s
incremental borrowing rate specific to the term, country, currency and start date of the lease. Lease payments include: fixed payments; variable
lease payments dependent on an index or rate, initially measured using the index or rate at commencement; the exercise price under a purchase
option if the Group is reasonably certain to exercise; penalties for early termination if the lease term reflects the Group exercising a break option;
and payments in an optional renewal period if the Group is reasonably certain to exercise an extension option or not exercise a break option.
The lease liability is subsequently measured at amortised cost using the effective interest rate method. It is re-measured at the point of lease
modification, with a corresponding adjustment to the right-of-use asset, when there is a change in future lease payments resulting from a rent
review, change in an index or rate such as inflation, or change in the Group’s assessment of whether it is reasonably certain to exercise a
purchase, extension or break option.
The corresponding asset is initially measured at cost, comprising: the initial lease liability; any lease payments already made less any lease
incentives received; initial direct costs; and any dilapidation or restoration costs. The Group has two categories of assets in respect of leases:
those in respect of leases related to its leasehold properties, classified as investment property, and an occupational lease for its Head Office in
France, classified as a right-of-use asset under IFRS 16. The right-of-use assets classified as investment property are subsequently measured
at fair value, gross of the lease liability. The right-of-use asset in respect of its occupational leases is classified as property, plant and equipment
and is subsequently depreciated over the length of the lease.
Leases of low value assets and short term leases of twelve months or less are expensed to the Group consolidated income statement.
Variable lease payments, being the difference between the rent review accruals that will become payable but not yet finalised and the minimum
lease payments of the lease liability on current actual rent paid, are charged as expenses in the years in which they are payable.
Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised
in accordance with the Group’s general policy on borrowing costs.
136
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
2. Summary of significant accounting policies continued
Financial instruments
(a) Financial assets
Financial assets are classified as financial assets at fair value through profit or loss (“FVTPL”) or at amortised cost as appropriate. The Group
determines the classification of its assets at initial recognition.
Financial assets are de-recognised only when the contractual right to the cash flows from the financial asset expires or the Group transfers
substantially all risks and rewards of ownership.
A financial asset is measured at amortised cost if it meets both of the following conditions:
• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• its contractual terms give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All financial assets not classified as measured at amortised cost as described above are measured through FVTPL. This includes all derivative
financial assets.
Financial assets at FVTPL – these assets are subsequently measured at fair value. Net gains and losses, including any interest, are recognised
in profit or loss.
Financial assets at amortised cost – these assets are subsequently measured at amortised cost using the effective interest method. The
amortised cost is reduced by impairment losses (expected losses). Interest income, foreign exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on de-recognition is recognised in profit or loss.
The Group has the following classes of financial assets:
• Trade and other receivables – trade receivables are initially recognised at transaction price. Other receivables are initially recognised at fair
value. Subsequently, these assets are measured at amortised cost using the effective interest method, less provision for expected
credit losses.
• Cash and cash equivalents – cash and cash equivalents represent only liquid assets with original maturity of 90 days or less. Bank overdrafts
that cannot be offset against other cash balances are shown within borrowings in current liabilities on the balance sheet. Cash and cash
equivalents are also classified as amortised cost. They are subsequently measured at amortised cost. Cash and cash equivalents include
cash in hand, deposits at call with banks, and other short term highly liquid investments with original maturities of three months or less.
(b) Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses (“ECLs”) which uses a lifetime expected loss allowance
on trade receivables. The expected credit losses are estimated using a provisions matrix based upon the Group’s historical credit loss
experience and geographic business unit, adjusted for factors that are specific to the debtors, general economic conditions, and an assessment
of both the current and forecast direction of conditions at the reporting date, including time value of money where appropriate.
Loss allowances for other receivables are initially measured at an amount equal to twelve months’ expected credit losses (“ECLs”) and subsequently
it is assessed whether the credit risk has increased significantly since initial recognition. When determining whether the credit risk of a financial
asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information
that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the
Company’s historical experience and informed credit assessment and including forward-looking information. If the credit risk increased significantly,
the loss allowance is then measured using the lifetime ECL. The Group considers a financial asset to be in default when the borrower is unlikely
to pay its credit obligations to the Group in full.
(c) Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for
trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains
and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost
using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss
on de-recognition is also recognised in profit or loss.
The Group has the following classes of financial liabilities:
• Trade and other payables – trade and other payables are initially recognised at fair value. Subsequently they are measured at amortised
cost using the effective interest rate method.
• Borrowings – interest-bearing bank loans and overdrafts are initially recognised at fair value, net of directly attributable transaction costs.
Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in
the income statement using the effective interest method and are included within the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise. Where fees are payable in relation to raising debt the costs are disclosed in the cash flow
statement within financing activities.
Where existing borrowings are replaced by others from the same lenders on substantially different terms, or the terms of existing borrowings are
substantially modified, such an exchange or modification is treated as a de-recognition of the original borrowings and the recognition of new
borrowings, and the difference in the respective carrying amounts, including issuance costs, is recognised in the income statement. Otherwise,
issuance costs incurred on refinancing are offset against the carrying value of borrowings.
137
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT 2. Summary of significant accounting policies continued
Financial instruments continued
(d) Derivative financial instruments
The Group uses derivative financial instruments such as interest rate swaps, cross-currency swaps, and foreign exchange swaps, to hedge risks
associated with fluctuations on borrowings and foreign operations transactions. Such derivatives are initially recognised and measured at fair
value on the date a derivative contract is entered into and subsequently re-measured at fair value at each reporting date. The gain or loss on
re-measurement is taken to finance expense in the income statement. Interest costs for the period relating to derivative financial instruments,
which economically hedge borrowings, are recognised within interest payable on bank loans and overdrafts. Other fair value movements on
derivative financial instruments are recognised within fair value movement of derivatives. Designation as part of an effective hedge relationship
occurs at inception of a hedge relationship. Currently, the Group does not have any cash flow hedges or fair value hedges.
The borrowings denominated in foreign currency are used to hedge net assets. The effective part of any gain or loss on borrowings that are
designated as a hedge of a net investment in a foreign operation is recognised in other comprehensive income and presented in the translation
reserve in equity and is subsequently recognised in the Group income statement as part of the profit or loss on disposal of the net investment.
The ineffective portion of the gain or loss is recognised immediately within trading profit in the Group income statement.
Taxation including deferred tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable
or deductible. The Group’s liability for current tax is calculated using tax rates for that period that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax is provided on items that may become taxable at a later date, on the difference between the balance sheet value and the tax base
value, on an undiscounted basis. 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.
Employee benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed
retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are
equivalent to those arising in a defined contribution retirement benefit scheme.
Share capital
Ordinary shares are classified as equity.
Costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
Share-based payments
Share-based incentives are provided to employees under the Group’s Long Term Incentive Plan and employee Sharesave schemes. The Group
recognises a compensation cost in respect of these schemes that is based on the fair value of the awards, measured using Black-Scholes or
Monte Carlo valuation methodologies. For equity-settled schemes, the fair value is determined at the date of grant and is not subsequently
re-measured unless the conditions on which the award was granted are modified. For cash-settled schemes, the fair value is determined at
the date of grant and is re-measured at each balance sheet date until the liability is settled. Generally, the compensation cost is recognised
on a straight-line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due
to the failure to satisfy service conditions or non-market performance conditions.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of consolidated financial statements under IFRS requires the Directors to make judgements, estimates and assumptions that
may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual outcomes
may therefore differ from these judgements, estimates and assumptions.
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.
Key sources of estimation uncertainty
The following key source of estimation uncertainty has significant risk of causing a material adjustment, within the next financial year, to the carrying
amounts of assets and liabilities within the consolidated financial statements:
Estimate of fair value of investment properties and investment properties under construction
The Group values its investment properties using a discounted cash flow methodology which is based on projections of net operating income.
Principal assumptions and management’s underlying estimation of the fair value of those relate to: stabilised occupancy levels; expected future
growth in storage rental income and operating costs; maintenance requirements; capitalisation rate; and discount rates. There are inter-relationships
between the valuation inputs and they are primarily determined by market conditions. The effect of an increase in more than one input could be
to magnify the impact on the valuation. However, the impact on the valuation could be offset by the inter-relationship of two inputs moving in
opposite directions, e.g. an increase in rent may be offset by a decrease in occupancy, resulting in minimal net impact on the valuation. For immature
stores, these underlying estimates hold a higher risk of uncertainty, due to the unproven nature of its cash flows. A more detailed explanation of
the background, methodology and estimates made by management that are adopted in the valuation of the investment properties, as well as
detailed sensitivity analysis, is set out in note 13 to the financial statements.
138
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022 2. Summary of significant accounting policies continued
Critical accounting judgements and key sources of estimation uncertainty continued
Critical accounting judgements
Critical accounting judgement of business combinations
The Directors assessed whether the acquisition of property through the purchase of a corporate vehicle should be accounted for as an asset
purchase or a business combination. Where the acquired vehicle is an integrated set of activities and assets that is capable of being conducted
and managed to provide a return to investors, the transaction is accounted for as a business combination. Where this is not the case, or where
the transaction meets the requirements of the Concentration of Fair Value test, the transaction is treated as an asset purchase. The Directors also
have to assess when the Group has gained control of the acquired corporate vehicle. There have been two transactions where properties were
acquired through the purchase of corporate vehicles in the year, both judged to meet the accounting definition of an asset purchase. The most
significant of the two transactions was whereby the Group acquired the remaining interest in Safestore Storage Benelux B.V. (note 12) that was
previously accounted for as a 20% associate. Upon gaining control, the total consideration price was allocated across the group of assets being
acquired and the increased carrying values recognised within the now subsidiary investment.
Non-GAAP financial information/Alternative Performance Measures
The Directors have identified certain measures that they believe will assist the understanding of the performance of the business. The measures are
not defined under IFRS and they may not be directly comparable with other companies’ adjusted measures. The non-GAAP/Alternative Performance
Measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but they have been included as the Directors
consider them to be important comparables and key measures used within the business for assessing performance. The following are the key
non-GAAP/Alternative Performance Measures identified by the Group:
• The Group defines exceptional items to be those that warrant, by virtue of their nature, size or frequency, separate disclosure on the face of
the income statement where, in the opinion of the Directors, this enhances the understanding of the Group’s financial performance.
• Underlying EBITDA is an Alternative Performance Measure and is defined as operating profit before exceptional items, share-based payments,
corporate transaction costs, gain/loss on investment properties, depreciation and variable lease payments and the share of associate’s
depreciation, interest and tax. Management considers this presentation to be representative of the underlying performance of the business,
as it removes the income statement impact of items not fully controllable by management, such as the revaluation of derivatives and
investment properties, and the impact of exceptional credits, costs and finance charges. A reconciliation of statutory operating profit to
Underlying EBITDA can be found in the financial review on page 23.
• Adjusted Diluted EPRA Earnings per Share is based on the European Public Real Estate Association’s definition of earnings and is defined
as profit or loss for the period after tax but excluding corporate transaction costs, change in fair value of derivatives, gain/loss on investment
properties and the associated tax impacts. The Company then makes further company-specific adjustments for the impact of exceptional
items, net exchange gains/losses recognised in net finance costs, exceptional tax items, and deferred and current tax in respect of these
adjustments. The Company also adjusts for IFRS 2 share-based payment charges. This adjusted earnings is divided by the diluted number of
shares. The IFRS 2 cost is excluded as it is written back to distributable reserves and is a non-cash item (with the exception of the associated
National Insurance element). Therefore, neither the Company’s ability to distribute nor pay dividends are impacted (with the exception of the
associated National Insurance element). The financial statements disclose earnings on a statutory, EPRA and Adjusted Diluted EPRA basis
and will provide a full reconciliation of the differences in the financial year in which any LTIP awards may vest. A reconciliation of statutory basic
Earnings per Share to Adjusted Diluted EPRA Earnings per Share can be found in note 11.
• EPRA’s Best Practices Recommendations guidelines for Net Asset Value (“NAV”) metrics are EPRA Net Tangible Assets (“NTA”), EPRA Net
Reinstatement Value (“NRV”) and EPRA Net Disposal Value (“NDV”). EPRA NTA is considered to be the most relevant measure for the Group’s
business which provides sustainable long term progressive returns and is now the primary measure of net assets. The basis of calculation,
including a reconciliation to reported net assets, is set out in note 15.
• Like-for-like figures are presented to aid in the comparability of the underlying business as they exclude the impact on results of purchased,
sold, opened or closed stores.
• Constant exchange rate (“CER”) figures are provided in order to present results on a more comparable basis, removing foreign exchange movements.
3. Revenue
Analysis of the Group’s operating revenue can be found below:
Self storage income
Insurance income
Other non-storage income
Total revenue
2022
£’m
178.0
23.9
10.6
212.5
2021
£’m
154.3
22.3
10.2
186.8
139
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT 4. Segmental analysis
The segmental information presented has been prepared in accordance with the requirements of IFRS 8. The Group’s revenue, profit before
income tax and net assets are attributable to one activity: the provision of self storage accommodation and related services. This is based on
the Group’s management and internal reporting structure.
Safestore is organised and managed in four operating segments, based on geographical areas, being the United Kingdom, Paris in France,
Spain, and the Netherlands and Belgium in Benelux.
The chief operating decision maker, being the Executive Directors, identified in accordance with the requirements of IFRS 8, assesses the
performance of the operating segments on the basis of Underlying EBITDA, which is defined as operating profit before exceptional items,
share-based payments, corporate transaction costs, gain/loss on investment properties, depreciation and variable lease payments, and the
share of associate’s depreciation, interest and tax.
The operating profits and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Spain
£’m
Benelux
£’m
Year ended 31 October 2022
Continuing operations
Revenue
Share of loss in associates
Underlying EBITDA
Exceptional items
Share-based payments
Variable lease payments and depreciation
Share of associate’s depreciation, interest and tax
Operating profit before gain on investment properties
and other exceptional gains
Gain on investment properties
Other exceptional gains
Operating profit
Net finance (expense)/income
Profit before tax
Total assets
Year ended 31 October 2021
Continuing operations
Revenue
Share of profit in associates
Underlying EBITDA
Exceptional items
Share-based payments
Variable lease payments and depreciation
Share of associate’s depreciation, interest and tax
Operating profit before gain on investment properties
Gain on investment properties
Operating profit
Net finance expense
Profit before tax
Total assets
UK
£’m
163.0
(0.3)
103.5
—
(10.2)
(1.2)
(0.4)
91.7
295.7
5.7
393.1
(14.4)
378.7
2,024.8
Paris
£’m
41.4
—
28.0
(0.1)
(1.0)
(0.1)
—
26.8
78.5
5.1
110.4
(1.6)
108.8
581.7
UK
£’m
144.1
—
89.1
—
(16.1)
(1.1)
(0.5)
71.4
260.5
331.9
(10.5)
321.4
3.0
—
1.5
—
—
—
—
1.5
1.3
—
2.8
(0.1)
2.7
28.2
Paris
£’m
39.9
—
27.2
(1.9)
(2.2)
(0.3)
—
22.8
56.0
78.8
(1.8)
77.0
Group
£’m
212.5
(0.3)
135.1
(0.1)
(11.2)
(1.3)
(0.4)
122.1
381.6
10.8
514.5
(15.7)
498.8
5.1
—
2.1
—
—
—
—
2.1
6.1
—
8.2
0.4
8.6
72.8
2,707.5
Spain
£’m
2.8
—
1.7
—
—
—
—
1.7
4.6
6.3
(0.1)
6.2
25.3
Group
£’m
186.8
—
118.0
(1.9)
(18.3)
(1.4)
(0.5)
95.9
321.1
417.0
(12.4)
404.6
2,117.3
1,617.9
474.1
Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third
parties. There is no material impact from inter-segment transactions on the Group’s results.
140
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022 5. Exceptional items and other exceptional gains
Costs relating to corporate transactions and exceptional property taxation
Exceptional items
Valuation gain on associate buy-out
Gain on disposals of investment properties
Gain on disposal of land
Other exceptional gains
2022
£’m
(0.1)
(0.1)
2022
£’m
5.5
0.2
5.1
10.8
2021
£’m
(1.9)
(1.9)
2021
£’m
—
—
—
—
Exceptional items of £0.1 million were incurred in the year, relating to fees associated with the Group’s corporate restructuring (FY2021: £1.9 million
in relation to a provision for potential liabilities in respect of the French commercial tax audit of financial years 2012 to 2020).
On 10 November 2021, the Group sold the Nanterre site to the Joint Venture partner of Nanterre FOCD 92 for a total price of €7.6 million
excluding VAT and including demolition cost reimbursement, where the settlement is done partially in cash of £1.0 million (€1.1 million excluding
tax), and partially in kind through the delivery of the new building at the end of the operation (estimated at €6.5 million). This resulted in a net gain on
disposal of £5.1 million (€5.9 million) included within other exceptional gains.
On 30 March 2022, the Group acquired the remaining 80% equity of Safestore Storage Benelux B.V. from its previous Joint Venture partner for
€53.6 million (£45.3 million) and became a wholly owned subsidiary (note 12). The original 20% equity investment was effectively de-recognised
and re-recognised back at the fair value based on the revised equity value effective at the 30 March 2022 transaction. This resulted in a valuation
gain on the associate buy-out of £5.5 million included within other exceptional gains.
On 16 August 2022, the Group sold its Birmingham Digbeth store to a third party for £6.5 million and incurred a 1% agent fee on the sale price.
The carrying value of this store included within investment properties prior to disposal was £6.2 million, resulting in a gain on disposal of investment
properties of £0.2 million included within other exceptional gains.
6. Operating profit
The following items have been charged/(credited) in arriving at operating profit:
Staff costs
Inventories: cost of inventories recognised as an expense (included in cost of sales)
Depreciation on property, plant and equipment
Gain on investment properties
Variable lease payments payable under lease liabilities
Notes
26
2
14
13
2022
£’m
38.1
0.7
1.0
(381.6)
0.3
2021
£’m
43.8
1.0
1.0
(321.1)
0.4
7. Fees paid to auditor
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor at costs detailed below:
Audit services
Fees payable to the Company’s auditor and its associates for the audit of the parent company and consolidated
financial statements
Fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries pursuant
to legislation
Total audit fees
Fees for other services
Total
2022
£’m
2021
£’m
0.2
0.2
0.4
0.1
0.5
0.3
0.1
0.4
—
0.4
141
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
8. Finance income and costs
Finance income
Other interest and similar income
Interest receivable from loan to associates
Financial instruments income
Underlying finance income
Exceptional finance income
Total finance income
Finance costs
Interest payable on bank loans and overdraft
Amortisation of debt issuance costs on bank loan
Underlying finance charges
Interest on lease liabilities
Fair value (loss)/gain of derivatives
Net exchange losses
Total finance costs
Net finance costs
2022
£’m
0.1
0.1
1.3
1.5
0.5
2.0
(11.9)
(0.5)
(12.4)
(5.0)
(0.3)
—
(17.7)
(15.7)
2021
£’m
—
0.1
0.5
0.6
—
0.6
(9.7)
(0.4)
(10.1)
(5.2)
2.9
(0.6)
(13.0)
(12.4)
Included within interest payable of £11.9 million (FY2021: £9.7 million) is £nil (FY2021: £0.6 million) of interest relating to derivative financial
instruments that are economically hedging the Group’s borrowings. The total change in fair value of derivatives reported within net finance
costs for the year is a £0.3 million net loss (FY2021: £2.9 million net gain). Included within finance income is £1.3 million, received on settlement
of two €8.0 million average rate forward contracts acquired in March 2020 and settled in April 2022 for £0.7 million and October 2022 for
£0.6 million, respectively. The fair value of these two forward contracts held at 31 October 2021 was a £1.3 million asset now disposed and
included as part of the net fair value gain of derivatives within finance costs. Further, included within finance income is £0.5 million (FY2021: £nil)
in relation to the swaps held in the subsidiary acquired during the period, Safestore Storage Benelux B.V., and terminated post acquisition in order
to utilise the Group’s existing debt facilities and financial instruments held.
9. Income tax charge
Analysis of tax charge in the year:
Note
22
2022
£’m
6.1
—
6.1
29.8
—
29.8
35.9
2021
£’m
5.5
—
5.5
17.1
—
17.1
22.6
Current tax:
– current year
– prior year
Deferred tax:
– current year
– prior year
Tax charge
142
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
9. Income tax charge continued
Reconciliation of income tax charge
The tax for the period is lower (FY2021: lower) than the standard rate of corporation tax in the UK for the year ended 31 October 2022 of 19%
(FY2021: 19%). The differences are explained below:
Profit before tax
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (FY2021: 19%)
Effect of:
– permanent differences
– profits from the tax exempt business
– deferred tax arising on acquisition of overseas subsidiary
– difference from overseas tax rates
– potential deferred tax assets not recognised
– utilisation of unrecognised brought forward tax losses
Tax charge
2022
£’m
498.8
94.8
—
(71.5)
4.5
8.6
0.4
(0.9)
35.9
2021
£’m
404.6
76.9
3.6
(63.5)
—
6.4
—
(0.8)
22.6
The Group is a UK real estate investment trust (“REIT”). As a result, the Group is exempt from UK corporation tax on the profits and gains from its
qualifying property rental business in the UK, providing it meets certain conditions. Non-qualifying profits and gains of the Group remain 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.
The main rate of corporation tax in the UK is 19%. Accordingly, the Group’s results for this accounting period are taxed at an effective rate of 19%
(FY2021: 19%). Following the Finance Bill 2021, the main rate of corporation tax will increase from 19% to 25% from 1 April 2023. There will be no
deferred taxation impact in respect of this change in taxation rates.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
10. Dividends per share
The dividend paid in 2022 was £56.9 million (27.00 pence per share) (FY2021: £42.6 million (20.20 pence per share)). A final dividend in
respect of the year ended 31 October 2022 of 20.40 pence (FY2021: 17.60 pence) per share, amounting to a total final dividend of £42.8 million
(FY2021: £37.0 million), is to be proposed at the AGM on 15 March 2023. The ex-dividend date will be 2 March 2023 and the record date will be
3 March 2023 with an intended payment date of 7 April 2023. The final dividend has not been included as a liability at 31 October 2022.
The Property Income Distribution (“PID”) element of the final dividend is 22.75 pence (FY2021: 17.60 pence), making the PID payable for the year
22.75 pence (FY2021: 25.10 pence) per share.
11. Earnings per Share
Basic Earnings per Share (“EPS”) is calculated by dividing the profit attributable to equity holders of the Company by the weighted average
number of ordinary shares in issue during the year excluding ordinary shares held as treasury shares. Diluted EPS is calculated by adjusting the
weighted average number of ordinary shares to assume conversion of all dilutive potential shares. The Company has one category of dilutive
potential ordinary shares: share options. For the share options, a calculation is performed to determine the number of shares that could have
been acquired at fair value (determined as the average annual market price of the Company’s shares) based on the monetary value of the subscription
rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of shares that would
have been issued assuming the exercise of the share options.
Basic
Dilutive securities
Diluted
Year ended 31 October 2022
Year ended 31 October 2021
Earnings
£’m
462.9
—
462.9
Shares
million
210.9
7.0
217.9
Pence
per share
219.5
(7.1)
212.4
Earnings
£’m
382.0
—
382.0
Shares
million
210.8
5.8
216.6
Pence
per share
181.2
(4.8)
176.4
143
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
11. Earnings per Share continued
Adjusted Earnings per Share
Explanations related to the adjusted earnings measures adopted by the Group are set out in note 2 under the heading Non-GAAP financial
information/Alternative Performance Measures on page 139. Adjusted EPS represents profit after tax adjusted for the valuation movement
on investment properties, exceptional items, change in fair value of derivatives, exchange gains/losses, unwinding of the discount on the CGS
receivable and the associated tax thereon. The Directors consider that these alternative measures provide useful information on the performance
of the Group.
EPRA earnings and Earnings per Share before non-recurring items, movements on revaluations of investment properties and changes in the
fair value of derivatives have been disclosed to give a clearer understanding of the Group’s underlying trading performance.
Year ended 31 October 2022
Year ended 31 October 2021
Shares
million
210.9
Pence
per share
219.5
Earnings
£’m
382.0
Shares
million
210.8
Basic
Adjustments:
Gain on investment properties
Exceptional items
Other exceptional gains
Exceptional finance income
Net exchange loss
Change in fair value of derivatives
Tax on adjustments
Adjusted
EPRA adjusted:
Fair value re-measurement of lease liabilities
add-back
Tax on lease liabilities add-back adjustment
Adjusted EPRA basic EPS
Share-based payments charge
Dilutive shares
Adjusted Diluted EPRA EPS1
Earnings
£’m
462.9
(381.6)
0.1
(10.8)
(0.5)
—
0.3
29.7
—
—
—
—
—
—
—
100.1
210.9
(8.3)
1.0
92.8
11.2
—
104.0
—
—
210.9
—
8.0
218.9
(180.9)
(321.1)
—
(5.1)
(0.2)
—
0.1
14.1
47.5
(3.9)
0.5
44.1
5.3
(1.9)
47.5
1.9
—
—
0.6
(2.9)
16.2
76.7
(7.4)
0.9
70.2
18.3
—
88.5
—
—
—
—
—
—
—
210.8
—
—
210.8
—
7.5
218.3
Pence
per share
181.2
(152.3)
0.9
—
—
0.3
(1.4)
7.7
36.4
(3.5)
0.4
33.3
8.7
(1.5)
40.5
Note
1 Adjusted Diluted EPRA EPS is defined in note 2 under Non-GAAP financial information/Alternative Performance Measures on page 139.
Gain on investment properties includes the fair value re-measurement of lease liabilities add-back of £8.3 million (FY2021: £7.4 million) and the related
tax thereon of £1.0 million (FY2021: £0.9 million). As an industry standard measure, EPRA earnings is presented. EPRA earnings of £92.8 million
(FY2021: £70.2 million) and EPRA Earnings per Share of 44.1 pence (FY2021: 33.3 pence) are calculated after further adjusting for these items.
EPRA adjusted income statement (non-statutory)
Revenue
Underlying operating expenses (excluding depreciation and variable lease payments)
Share of associate’s Underlying EBITDA
Underlying EBITDA before variable lease payments
Share-based payments charge
Depreciation and variable lease payments
Operating profit before fair value re-measurement lease liabilities add-back
Fair value re-measurement of lease liabilities add-back
Operating profit
Net financing costs
Share of associate’s finance charges
Profit before income tax
Income tax
Profit for the year (“Adjusted EPRA basic earnings”)
Adjusted EPRA basic EPS
Final dividend per share
144
2022
£’m
212.5
(77.5)
0.1
135.1
(11.2)
(1.3)
122.6
(8.3)
114.3
(15.9)
(0.4)
98.0
(5.2)
92.8
2021
£’m
186.8
(69.3)
0.5
118.0
(18.3)
(1.4)
98.3
(7.4)
90.9
(14.7)
(0.5)
75.7
(5.5)
70.2
44.1 pence
33.3 pence
20.40 pence
17.60 pence
Movement
%
13.8
11.8
(80.0)
14.5
(38.8)
(7.1)
24.7
12.2
25.7
8.2
(20.0)
29.5
(5.5)
32.2
32.4
15.9
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
12. Investment in associates
Safestore Storage Benelux B.V.
PBC Les Groues SAS
2022
£’m
—
1.8
1.8
2021
£’m
6.2
1.0
7.2
Safestore Storage Benelux B.V. (formerly CERF Storage JV B.V.)
Until 30 March 2022, the Group had a 20% interest in Safestore Storage Benelux B.V. (“SSB”) (formerly CERF Storage JV B.V.), a company registered
and operating in the Netherlands. SSB was accounted for using the equity method of accounting. SSB invests in carefully selected self storage
opportunities in Europe. The Group earned a fee for providing management services to SSB. This investment as an associate was considered
immaterial relative to the Group’s underlying operations. On 30 March 2022, the Group acquired the remaining 80% equity from its previous Joint
Venture partner for €53.6 million (£45.3 million) and SSB became a wholly owned subsidiary. IFRS 3 requires the consideration price be allocated
across the assets being acquired. On 30 March 2022 when the Group gained control, the equity accounting of SSB ceased. The difference
between the equity accounted carrying value of the investment immediately prior to acquisition and the fair value of the increased investment
is a valuation gain of £5.5 million (note 5).
The aggregate carrying value of the Group’s 20% interest in SSB at 30 March 2022 was £8.7 million (FY2021: £8.9 million), made up of an
investment of £5.9 million (FY2021: £6.2 million), and a loan to the associate including interest accrued of £2.8 million (FY2021: £2.7 million)
(note 30). The Group’s share of losses from continuing operations for the period was £0.3 million (FY2021: £nil). The Group’s share of total
comprehensive income of associates in the year was £0.3 million (FY2021: £nil).
Initial 20% investment in SSB
At 31 October 2021
Share of loss in associate
Revised fair value of 20% investment in SSB at 30 March 2022
Net assets of SSB (100%)
Net assets of SSB (80%)
Note
Difference: valuation gain on acquisition of additional 80% investment in SSB
5
2022
£’m
6.2
(0.3)
5.9
56.7
(45.3)
11.4
5.5
2022
€’m
7.1
(0.4)
6.7
67.0
(53.6)
13.4
6.7
The following provides a breakdown of the 80% share of fair value of the assets and liabilities acquired on 30 March 2022. Under IFRS 3 this
transaction, where properties were acquired through the purchase of a corporate vehicle in the year, has been judged to meet the accounting
definition of an asset purchase.
Assets
Investment properties net of lease liabilities
Add-back of lease liabilities
Inventories
Trade and other receivables
Cash and cash equivalents
Liabilities
Trade and other payables
Lease liabilities
Amounts owed to Joint Venture partner
Bank borrowings
Net assets (80%)
2022
£’m
2022
€’m
100.5
118.7
0.5
0.1
0.5
4.4
0.6
0.1
0.6
5.2
106.0
125.2
(2.6)
(0.5)
(11.4)
(46.2)
(60.7)
45.3
(3.0)
(0.6)
(13.4)
(54.6)
(71.6)
53.6
145
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
12. Investment in associates continued
Safestore Storage Benelux B.V. (formerly CERF Storage JV B.V.) continued
The cash outflow classified as investing activities (excluding acquisition costs) from this buy-out is summarised as follows:
Net assets acquired (remaining 80%)
Non-Safestore debt settled on acquisition
Less: cash and cash equivalents acquired
2022
£’m
45.3
69.2
(5.5)
2022
€’m
53.6
81.7
(6.5)
Acquisition of subsidiary, net of cash acquired
109.0
128.8
The Group incurred acquisition related costs of £5.1 million on legal fees and real estate transfer tax (“RETT”). These costs have been capitalised
in accordance with IFRS 3, asset purchase.
PBC Les Groues SAS
During the period the Group acquired a 24.9% interest in PBC Les Groues SAS (“PBC”), a company registered and operating in France. PBC is
accounted for using the equity method of accounting. PBC is the parent company of Nanterre FOCD 92, a company also registered and operating
in France, which will be developing a new store as part of a wider development programme located in Paris. The development project will be
managed by its Joint Venture partners; therefore, the Group will have no operational liability during this phase. During the period the Group has
invested £0.8 million (€0.9 million) into this investment. The investment is considered immaterial relative to the Group’s underlying operations.
The aggregate carrying value of the Group’s interest in PBC was £1.8 million (FY2021: £1.0 million), made up of an investment of £1.8 million
(FY2021: £1.0 million) (note 30). The Group’s share of profits from continuing operations for the period was £nil (FY2021: £nil). The Group’s share
of total comprehensive income of associates for the year was £nil (FY2021: £nil). The Group’s share of total comprehensive income of associates
in the year was £nil (FY2021: £nil).
13. Investment properties
At 1 November 2021
Acquisition of subsidiaries
Additions
Disposals
Reclassifications
Revaluations
Fair value re-measurement of lease liabilities add-back
Exchange movements
At 31 October 2022
External valuation
of investment
properties, net of
lease liabilities
£’m
Add-back of
lease liabilities
£’m
Investment
property
under
construction
£’m
1,881.8
128.2
31.8
(6.2)
16.5
394.1
—
11.6
2,457.8
82.1
0.6
20.2
—
—
—
(8.3)
0.5
95.1
67.4
—
47.4
—
(16.5)
(4.2)
—
0.4
94.5
Total
investment
properties
£’m
2,031.3
128.8
99.4
(6.2)
—
389.9
(8.3)
12.5
2,647.4
On 7 December 2021, the Group completed the acquisition of Your Room Self Storage Limited, which included a freehold store located in
Christchurch, Dorset. Under IFRS 3 this transaction was treated as an asset acquisition, with a fair value of the investment property of £2.6 million.
On 30 March 2022, the Group completed the buy-out of Safestore Storage Benelux B.V., which included a portfolio made up of twelve freehold
properties, two ground leases and one leasehold property. Nine properties are located in the Netherlands and six properties are located in
Belgium. Under IFRS 3 this transaction was treated as an asset acquisition, where the fair value of a 100% share of the investment properties
amounted to £125.6 million.
On 16 August 2022, the Group sold its Birmingham Digbeth store to a third party for £6.5 million. The carrying value of this store included within
investment properties prior to disposal was £6.2 million, resulting in a gain on disposal of investment properties of £0.2 million included within
other exceptional gains (note 5).
146
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022 13. Investment properties continued
At 1 November 2020
Additions
Reclassifications
Revaluations
Fair value re-measurement of lease liabilities add-back
Exchange movements
At 31 October 2021
The gain on investment properties comprises:
Revaluations of investment property and investment property under construction
Fair value re-measurement of lease liabilities add-back
Freehold stores
At 1 November 2021
Movement in year
At 31 October 2022
Leasehold stores
At 1 November 2021
Movement in year
At 31 October 2022
All stores
At 1 November 2021
Movement in year
At 31 October 2022
External valuation
of investment
properties, net of
lease liabilities
£’m
Add-back of
lease liabilities
£’m
Investment
property
under
construction
£’m
1,557.5
19.5
3.7
329.0
—
(27.9)
1,881.8
76.9
14.1
—
—
(7.4)
(1.5)
82.1
14.0
57.9
(3.7)
(0.5)
—
(0.3)
67.4
2022
£’m
389.9
(8.3)
381.6
Cost
£’m
Revaluation
on cost
£’m
684.8
207.9
892.7
127.6
6.1
133.7
812.4
214.0
1,026.4
846.8
295.6
1,142.4
222.6
66.4
289.0
1,069.4
362.0
1,431.4
Total
investment
properties
£’m
1,648.4
91.5
—
328.5
(7.4)
(29.7)
2,031.3
2021
£’m
328.5
(7.4)
321.1
Valuation
£’m
1,531.6
503.5
2,035.1
350.2
72.5
422.7
1,881.8
576.0
2,457.8
The valuation of £2,457.8 million (FY2021: £1,881.8 million) excludes £0.6 million in respect of owner-occupied property, which is included within
property, plant and equipment. Rental income earned from investment properties for the year ended 31 October 2022 was £179.3 million
(FY2021: £155.5 million).
The Group has classified the investment property and investment property under construction, held at fair value, within Level 3 of the fair value
hierarchy. There were no transfers to or from Level 3 during the year.
As described in note 2 summary of significant accounting policies, where the valuation obtained for investment property is net of all payments
to be made, it is necessary to add back the lease liability to arrive at the carrying amount of investment property at fair value. The lease liability
of £95.4 million (FY2021: £82.3 million) per note 21 differs to the £95.1 million (FY2021: £82.1 million) disclosed above as a result of accounting
for the French Head Office lease under IFRS 16. This lease is included as part of property, plant and equipment, and has a net book value of
£0.3 million as at 31 October 2022 (FY2021: £0.2 million) (note 14).
All direct operating expenses arising from investment property that generated rental income as outlined in note 3 were £75.3 million
(FY2021: £68.5 million).
147
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
13. Investment properties continued
The freehold and leasehold investment properties have been valued as at 31 October 2022 by external valuer, Cushman & Wakefield Debenham
Tie Leung Limited (“C&W”). The valuation has been carried out in accordance with the current edition of the RICS Valuation – Global Standards,
which incorporates the International Valuation Standards and the RICS Valuation UK National Supplement (the “RICS Red Book”). The valuation
of each of the investment properties has been prepared on the basis of fair value as a fully equipped operational entity, having regard to trading
potential. Two non-trading properties were valued on the basis of fair value. The valuation has been provided for accounts purposes and, as
such, is a Regulated Purpose Valuation as defined in the RICS Red Book. In compliance with the disclosure requirements
of the RICS Red Book, C&W has confirmed that:
• the member of the RICS who has been the signatory to the valuations provided to the Group for the same purposes as this valuation has
done so since April 2020. The valuations have been reviewed by an internal investment committee comprising two valuation partners and
an investment partner, all unconnected with the assignment;
• C&W has been carrying out regular valuations for the same purpose as this valuation on behalf of the Group since October 2006;
• C&W does not provide other significant professional or agency services to the Group;
• in relation to the preceding financial year of C&W, the proportion of 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 property and is not contingent on the appraised value.
Portfolio premium
C&W’s valuation report 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 be different. C&W states that in current market conditions it is of the view that there could
be a material portfolio premium.
Valuation method and assumptions
The valuation of the operational self storage facilities has been prepared having regard to trading potential. Cash flow projections have been
prepared for all of the properties reflecting estimated absorption, revenue growth and expense inflation. A discounted cash flow method of
valuation based on these cash flow projections has been used by C&W to arrive at its opinion of fair value for these properties.
C&W has adopted different approaches for the valuation of the leasehold and freehold assets as follows:
Freehold and long leasehold (UK, Paris, Spain, the Netherlands, and Belgium)
The valuation is based on a discounted cash flow of the net operating income over a ten-year period and a notional sale of the asset at the end
of the tenth year.
Assumptions:
• 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 collar. The initial net operating income is calculated by estimating the net operating
income in the first twelve months following the valuation date.
• 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 trading stores (both freeholds and all leaseholds) open at 31 October 2022 averages 89.18% (FY2021:
89.10%). The projected revenues and costs have been adjusted for estimated cost inflation and revenue growth. The average time assumed
for stores to trade at their maturity levels is 18.51 months (FY2021: 18.27 months).
• The capitalisation rates applied to existing and future net cash flows have been estimated by reference to underlying yields for industrial and
retail warehouse property, yields for other trading property types such as purpose-built 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
mature stores (i.e. excluding those stores categorised as “developing”) is 6.30% (FY2021: 6.73%), rising to a stabilised net yield pre-administration
expenses of 6.74% (FY2021: 6.90%).
• The weighted average freehold exit yield on UK freeholds is 5.83% (FY2021: 6.07%), on France freeholds is 5.49% (FY2021: 5.88%), on Spain
freeholds is 5.50% (FY2021: 5.38%), on the Netherlands freeholds is 5.08% and on Belgium freeholds is 5.02%. The weighted average
freehold exit yield for all freeholds adopted is 5.66% (FY2021: 6.03%).
• 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) in the UK portfolio is
8.40% (FY2021: 8.62%), in the France portfolio is 8.78% (FY2021: 8.98%), in the Spain portfolio is 8.00% (FY2021: 7.87%), in the Netherlands
portfolio is 7.33% and in the Belgium portfolio is 7.62%. The weighted average annual discount rate adopted (for both freeholds and all
leaseholds) is 8.49% (FY2021: 8.72%).
• Purchaser’s costs in the range of approximately 3.3% to 6.8% for the UK, 7.5% for Paris, 2.5% for Spain, 7.5% for the Netherlands and 7.5%
for Belgium have been assumed initially, reflecting the progressive SDLT rates brought into force in March 2016 in the UK, and sales plus
purchaser’s costs totalling approximately 5.3% to 8.8% (UK), 9.5% (Paris), 4.5% (Spain), 7.5% (the Netherlands) and 7.5% (Belgium) are
assumed on the notional sales in the tenth year in relation to freehold and long leasehold stores.
148
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022 13. Investment properties continued
Valuation method and assumptions continued
Short leaseholds (UK)
The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the discounted
cash flow is extended to the expiry of the lease. The average unexpired term of the Group’s UK short term leasehold properties is 13.0 years
(FY2021: 12.2 years). The average unexpired term excludes the commercial leases in France and Spain.
Short leaseholds (Paris)
In relation to the commercial leases in Paris, C&W has valued the cash flow projections in perpetuity due to the security of tenure arrangements
in that market and the potential compensation arrangements in the event of the landlord wishing to take possession. The valuation treatment
is therefore the same as for the freehold properties. The capitalisation rates on these stores reflect the risk of the landlord terminating the
lease arrangements.
Short leaseholds (Spain)
In relation to the two commercial leases in Spain, C&W has valued the cash flow projections in perpetuity due to the nature of the lease
agreements which allows the tenant to renew the lease year-on-year into perpetuity. The valuation treatment is therefore the same as for the
freehold properties. The capitalisation rates on these stores reflect the risk of the rolling lease arrangements.
In relation to one other short leasehold in Spain, the lease allows for a five-year automatic extension beyond the initial lease expiry date subject
to neither party serving notice stating it does not wish to do so. This allows the landlord to terminate the lease at the original expiry date if it so
wishes. The same methodology has been used as for freeholds, except that no sale of the asset in the tenth year is assumed but the discounted
cash flow is extended to the expiry of the lease.
Short leaseholds (the Netherlands)
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.
Short leaseholds (Belgium)
There are no short term leaseholds in Belgium.
Investment properties under construction
C&W has valued the stores in development adopting the same methodology as set out above but on the basis of the cash flow projection
expected for the store at opening and allowing for the outstanding costs to take each store from its current state to completion and full fit out,
except several recently acquired stores which have been valued at acquisition costs. C&W has allowed for carry costs and construction
contingency, as appropriate.
Immature stores: value uncertainty
C&W has assessed the value of each property individually. However, three of the stores in the portfolio are relatively immature and have low initial
cash flow. C&W has endeavoured to reflect the nature of the cash flow profile for these properties in its valuation, and the higher associated risks
relating to the as yet unproven future cash flow, by adjustment to the capitalisation rates and discount rates adopted. However, immature low
cash flow stores of this nature are rarely, if ever, traded individually in the market, unless as part of a distressed sale or similar situation, although
there is more evidence of such stores being traded as part of a group or portfolio transaction.
C&W considers there to be market uncertainty in the self storage sector due to the lack of comparable market transactions and information.
The degree of uncertainty relating to the three immature stores is greater than in relation to the balance of the properties due to there being even
less market evidence than might be available for more mature properties and portfolios.
C&W states that, in practice, if an actual sale of the properties was to be contemplated then any immature low cash flow stores would normally
be presented to the market for sale lotted or grouped with other more mature assets owned by the same entity, in order to alleviate the issue of
negative or low short term cash flow. This approach would enhance the marketability of the group of assets and assist in achieving the best price
available in the market by diluting the cash flow risk.
C&W has not adjusted its opinion of fair value to reflect such a grouping of the immature assets with other properties in the portfolio and all stores
have been valued individually. However, C&W highlights 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 marketplace.
C&W considers 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.
Valuation assumption for purchaser’s costs
The Group’s investment property assets have been valued for the purposes of the financial statements after adjusting for notional purchaser’s
costs in the range of approximately 3.3% to 6.8% (UK), 7.5% (Paris), 2.5% (Spain), 7.5% (the Netherlands) and 7.5% (Belgium), as if they were sold
directly as property assets. The valuation is an asset valuation which is strongly linked to the operating performance of the business. They would
have to be sold with the benefit of operational contracts, employment contracts and customer contracts, which would be 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. A 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 c.2.75% of gross value. All the significant sized transactions that have been concluded in the UK in recent years were
completed in a corporate structure. The Group therefore instructed C&W to prepare additional valuation advice on the basis of purchaser’s cost
of 2.75% of gross value which is used for internal management purposes.
149
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT 13. Investment properties continued
Valuation method and assumptions continued
Sensitivity of the valuation to assumptions
As noted in “Key sources of estimation uncertainty” on page 138, self storage valuations are complex, derived from data which is not widely
publicly available and involves a degree of judgement. All other factors being equal, higher net operating income would lead to an increase
in the valuation of a store and an increase in the capitalisation rate or discount rate would result in a lower valuation, and vice versa. Higher
assumptions for stabilised occupancy, absorption rate, rental rate and other revenue, and a lower assumption for operating costs, would
result in an increase in projected net operating income, and thus an increase in valuation.
There are inter-relationships between the valuation inputs, and they are primarily determined by market conditions. The effect of an increase in
more than one input could be to magnify the impact on the valuation. However, the impact on the valuation could be offset by the inter-relationship
of two inputs moving in opposite directions, e.g. an increase in rent may be offset by a decrease in occupancy, resulting in no net impact on
the valuation.
As noted in “Key sources of estimation uncertainty”, self storage valuations are complex, derived from data which is not widely available and
involve a degree of judgement. For these reasons we have classified the valuation of our property portfolio as Level 3 as defined by IFRS 13.
Inputs to the valuation, some of which are “unobservable” as defined by IFRS 13, include capitalisation yields, stable occupancy rates, and time
to stabilised occupancy. The existence of an increase of more than one unobservable input would augment the impact on the valuation. The impact
on the valuation would be mitigated by the inter-relationship 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 capitalisation rates and stable occupancy is shown below:
Impact of change in
capitalisation rates
£’m
Impact of a change in stabilised
occupancy assumption
£’m
Impact of a delay
in stabilised
occupancy
assumption
£’m
25 bps decrease
25 bps increase
1% increase
1% decrease
24-month delay
Reported Group
107.0
(90.2)
40.0
(32.0)
(10.6)
14. Property, plant and equipment
Cost
At 1 November 2021
Additions
Disposals
At 31 October 2022
Accumulated depreciation
At 1 November 2021
Charge for the year
Disposals
At 31 October 2022
Net book value
At 31 October 2022
At 31 October 2021
Owner-
occupied
buildings
£’m
Motor
vehicles
£’m
Fixtures
and fittings
£’m
IFRS 16
leases
£’m
0.8
0.2
—
1.0
0.2
—
—
0.2
0.8
0.6
1.0
0.2
(0.3)
0.9
0.5
0.1
(0.1)
0.5
0.4
0.5
7.0
0.8
—
7.8
5.1
0.8
—
5.9
1.9
1.9
0.4
0.2
—
0.6
0.2
0.1
—
0.3
0.3
0.2
Total
£’m
9.2
1.4
(0.3)
10.3
6.0
1.0
(0.1)
6.9
3.4
3.2
As a result of adopting IFRS 16, the Group initially recognised a right-of-use asset of £0.4 million in property, plant and equipment and a lease
liability of £0.4 million at the transition date of 1 November 2019. Due to a lease extension for this asset, this has subsequently been re-measured
by an additional £0.2 million. The additional depreciation charge for the right-of-use asset recognised during the year was £0.1 million. The reduction
in the lease liability in respect of principal repayments and interest was £0.1 million.
150
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
14. Property, plant and equipment continued
Cost
At 1 November 2020
Additions
Disposals
At 31 October 2021
Accumulated depreciation
At 1 November 2020
Charge for the year
Disposals
At 31 October 2021
Net book value
At 31 October 2021
At 31 October 2020
Owner-
occupied
buildings
£’m
Motor
vehicles
£’m
Fixtures
and fittings
£’m
IFRS 16
leases
£’m
0.8
—
—
0.8
0.2
—
—
0.2
0.6
0.6
0.9
0.2
(0.1)
1.0
0.4
0.2
(0.1)
0.5
0.5
0.5
6.2
0.8
—
7.0
4.4
0.7
—
5.1
1.9
1.8
0.4
—
—
0.4
0.1
0.1
—
0.2
0.2
0.3
Total
£’m
8.3
1.0
(0.1)
9.2
5.1
1.0
(0.1)
6.0
3.2
3.2
15. Net assets per share
EPRA’s Best Practices Recommendations guidelines for Net Asset Value (“NAV”) metrics are EPRA Net Tangible Assets (“NTA”), EPRA Net
Reinstatement Value (“NRV”) and EPRA Net Disposal Value (“NDV”).
EPRA NTA is considered to be the most relevant measure for the Group’s business which provides sustainable long term progressive returns
and is now the primary measure of net assets, replacing the previously reported EPRA NAV metric. EPRA NTA assumes that entities buy and
sell assets, thereby crystallising certain levels of unavoidable deferred tax. Due to the Group’s REIT status, deferred tax is only provided at each
balance sheet date on properties outside the REIT regime. As a result, deferred taxes are excluded from EPRA NTA for properties within the REIT
regime. For properties outside of the REIT regime, deferred tax is included to the extent that it is expected to crystallise, based on the Group’s
track record and tax structuring.
There are no reconciling items between EPRA NTA and the previously reported EPRA NAV metric. EPRA NTA is shown in the table below:
Balance sheet net assets
Adjustments to exclude:
Fair value of derivative financial instruments (net of deferred tax)
Deferred tax liabilities on the revaluation of investment properties
EPRA NTA
Basic net assets per share
EPRA basic NTA per share
2022
2021
£’m
Diluted pence
per share
£’m
Diluted pence
per share
1,793.4
820
1,374.9
635
(1.7)
129.0
1,920.7
(2.0)
96.9
1,469.8
879
848
908
679
652
697
The basic and diluted net assets per share have been calculated based on the following number of shares:
Shares in issue
At year end
Adjustment for Employee Benefit Trust (treasury) shares
IFRS/EPRA number of shares (basic)
Dilutive effect of Save As You Earn shares
Dilutive effect of Long Term Incentive Plan shares
IFRS/EPRA number of shares (diluted)
2022
Number
2021
Number
211,927,497
210,823,703
(359,795)
(41,259)
211,567,702
210,782,444
87,562
109,100
6,956,633
5,706,061
218,611,897
216,597,605
151
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
15. Net assets per share continued
Basic net assets per share is shareholders’ funds divided by the number of shares at the year end. Diluted net assets per share is shareholders’
funds divided by the number of shares at the year end, adjusted for dilutive share options of 7,044,195 shares (FY2021: 5,815,161 shares). EPRA
diluted net assets per share excludes deferred tax liabilities arising on the revaluation of investment properties. The EPRA NAV, which further
excludes fair value adjustments for debt and related derivatives net of deferred tax, was £1,920.7 million (FY2021: £1,469.8 million), giving EPRA
NTA per share of 879 pence (FY2021: 679 pence). The Directors consider that these alternative measures provide useful information on the
performance of the Group.
EPRA adjusted balance sheet (non-statutory)
Assets
Non-current assets
Current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
EPRA adjusted Net Asset Value
EPRA adjusted basic net assets per share
16. Trade and other receivables
Current
Trade receivables
Less: credit loss allowance
Trade receivables – net
Other receivables
Amounts due from associates (note 30)
Prepayments
2022
£’m
2021
£’m
2,653.4
52.4
2,705.8
(178.4)
(606.7)
(785.1)
2,042.5
72.6
2,115.1
(88.4)
(557.0)
(645.4)
1,920.7
1,469.7
908 pence
697 pence
2022
£’m
20.6
(5.5)
15.1
8.9
—
7.2
31.2
2021
£’m
17.8
(4.3)
13.5
7.4
2.7
5.3
28.9
The creation and release of credit loss allowances have been included in cost of sales in the income statement.
The Group always measures the loss allowance for the trade receivables at an amount equal to lifetime expected credit loss. The expected credit
losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the
debtor’s current financial position, adjusted for factors that are specific to the debtor and an analysis of the debtors, general economic conditions
of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting
date. The Group provides in full against all receivables due over six months past due because historical experience has indicated that these
receivables are generally not recoverable.
There has been no change in the estimation techniques or significant assumptions made during the current reporting period.
The Group writes off a trade receivable when there is information indicating that the debtors are in severe financial difficulty and there is no
realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings.
152
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
16. Trade and other receivables continued
The following table details the risk profile of trade receivables based on the Group’s provision matrix:
UK
Expected credit loss rate (%)
Estimated total gross carrying amount at default (£’m)
Lifetime ECL (£’m)
Net trade receivables as at 31 October 2022
France
Expected credit loss rate (%)
Estimated total gross carrying amount at default (£’m)
Lifetime ECL (£’m)
Net trade receivables as at 31 October 2022
UK
Expected credit loss rate (%)
Estimated total gross carrying amount at default (£’m)
Lifetime ECL (£’m)
Net trade receivables as at 31 October 2021
France
Expected credit loss rate (%)
Estimated total gross carrying amount at default (£’m)
Lifetime ECL (£’m)
Net trade receivables as at 31 October 2021
Not past due
<28 days
29–60 days
>60 days
—
7.5
—
7.5
7.1%
25.0%
57.1%
2.8
(0.2)
2.6
1.2
(0.3)
0.9
1.4
(0.8)
0.6
Not past due
<28 days
29–60 days
>60 days
—
1.4
—
1.4
14.3%
20.0%
85.1%
0.7
(0.1)
0.6
0.5
(0.1)
0.4
4.7
(4.0)
0.7
Not past due
<28 days
29–60 days
>60 days
—
7.4
—
7.4
4.0%
16.7%
100.0%
2.5
(0.1)
2.4
1.2
(0.2)
1.0
0.7
(0.7)
—
Not past due
<28 days
29–60 days
>60 days
—
2.0
—
2.0
—
0.4
—
0.4
50.0%
94.1%
0.2
(0.1)
0.1
3.4
(3.2)
0.2
Total
10.1%
12.9
(1.3)
11.6
Total
57.5%
7.3
(4.2)
3.1
Total
8.5%
11.8
(1.0)
10.8
Total
55.0%
6.0
(3.3)
2.7
Outstanding trade receivables in Spain, the Netherlands, and Belgium totalled £0.4 million (FY2021: £nil); therefore, the risk profile for this
geography has been excluded.
The difference between expected credit loss rates in the UK and France is largely due to the differing processes for collecting overdue debt,
with legal proceedings in France typically taking significantly longer than in the UK.
The above balances are short term (including other receivables) and therefore the difference between the book value and the fair value is not
significant. Consequently, these have not been discounted.
Movement in the credit loss allowance:
Balance at the beginning of the year
Acquisition of subsidiaries
Amounts provided in the year
Amounts written off as uncollectable
Balance at the end of the year
2022
£’m
4.3
0.1
2.5
(1.4)
5.5
2021
£’m
3.8
—
1.6
(1.1)
4.3
153
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT 16. Trade and other receivables continued
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Sterling
Euros
2022
£’m
19.0
12.2
31.2
2021
£’m
16.3
12.6
28.9
Amounts due from associates of £nil (FY2021: £2.7 million) relate to the Joint Venture arrangement (note 12), made up of a loan and accrued
interest to the associate of £nil (FY2021: £2.7 million). These amounts are considered to be fully recoverable and have not been impaired (FY2021: £nil).
17. Cash and cash equivalents
Cash at bank and in hand
The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies:
Sterling
Euros
18. Trade and other payables
Current
Trade payables
Other taxes and social security payable
Other payables
Accruals
Deferred income
2022
£’m
20.9
2022
£’m
6.4
14.5
20.9
2022
£’m
8.0
6.2
4.9
24.8
18.8
62.7
2021
£’m
43.2
2021
£’m
22.7
20.5
43.2
2021
£’m
22.7
5.4
6.5
23.6
17.6
75.8
As at 31 October 2021, included within trade and other payables was £15.4 million in relation to the acquisition of a freehold development site in
Old Kent Road, London.
The carrying amounts of the Group’s trade and other payables are denominated in the following currencies:
Sterling
Euros
19. Financial liabilities – bank borrowings and secured notes
Non-current
Bank loans and secured notes
Secured
Debt issue costs
2022
£’m
47.4
15.3
62.7
2022
£’m
625.1
(1.3)
623.8
2021
£’m
61.6
14.2
75.8
2021
£’m
486.5
(1.8)
484.7
The Group’s borrowings consist of bank facilities of £250 million and €70 million maturing in June 2023. Further in April 2022, the Group extended
its borrowing facilities, with the issuance of a €105 million US Private Shelf Placement Note from a group of existing investors. The Group now
has US Private Placement Notes of €358 million (FY2021: €253 million) which have maturities extending to 2024, 2026, 2027, 2028, 2029 and
2033 and £215.5 million (FY2021: £215.5 million) which have maturities extending to 2026, 2028, 2029 and 2031. The blended cost of interest
on the overall debt at 31 October 2022 was 2.41% per annum. Since the year end the Group has successfully refinanced its bank facilities
borrowings (note 32).
154
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
19. Financial liabilities – bank borrowings and secured notes continued
The bank facilities attract a margin over SONIA/EURIBOR. The margin ratchets between 1.25% and 2.50%, by reference to the Group’s
performance against its interest cover covenant. Approximately 54% of the drawn bank facilities have been hedged at an effective rate of
0.6885% (SONIA).
The Company has in issue €50.9 million (FY2021: €50.9 million) 1.59% Series A Senior Secured Notes due 2024, €70.0 million (FY2021:
€70.0 million) 1.26% Series A Secured Notes due 2026, £35.0 million (FY2021: £35.0 million) 2.59% Series B Senior Secured Notes due 2026,
€74.1 million (FY2021: €74.1 million) 2.00% Series B Senior Secured Notes due 2027, £20.0 million (FY2021: £20.0 million) 1.96% Series A
Secured Notes due 2028, €29.0 million (FY2021: €29.0 million) 0.93% Series B Secured Notes due 2028, £50.5 million (FY2021: £50.5 million)
2.92% Series C Senior Secured Notes due 2029, £30.0 million (FY2021: £30.0 million) 2.69% Series C Senior Secured Notes due 2029,
€105.0 million (FY2021: €nil) 2.45% Private Shelf Senior Secured Notes due 2029, £80.0 million (FY2021: £80.0 million) 2.39% Series C Secured
Notes due 2031 and €29.0 million (FY2021: €29.0 million) 1.42% Series D Secured Notes due 2033. The €358.0 million of Euro denominated
borrowings provides a natural hedge against the Group’s investment in the France, Spain, Netherlands and Belgium businesses, so the Group
has applied net investment hedge accounting and the retranslation of these borrowings is recognised directly in the translation reserve.
The bank loans and overdrafts are secured by a fixed charge over the Group’s investment property portfolio. As part of the Group’s interest rate
management strategy, the Group has entered into several interest rate swap contracts, details of which are shown in note 20.
Bank loans and secured notes are stated before unamortised issue costs of £1.3 million (FY2021: £1.8 million).
Bank loans and secured notes are repayable as follows:
Within one year
Between one and two years
Between two and five years
After more than five years
Bank loans and secured notes
Unamortised debt issue costs
The effective interest rates at the balance sheet date were as follows:
2022
Group
2022
£’m
101.8
43.8
158.9
320.6
625.1
(1.3)
623.8
2021
£’m
—
57.3
137.1
292.1
486.5
(1.8)
484.7
2021
Bank loans (UK term loan)
Bank loans (Euro term loan)
Private Placement Notes (Euros)
Private Placement Notes (Sterling)
Quarterly or monthly SONIA plus 1.25%
Quarterly or monthly SONIA plus 1.25%
Quarterly EURIBOR plus 1.25%
1.80%
2.55%
Quarterly EURIBOR plus 1.25%
Weighted average rate of 1.52%
Weighted average rate of 2.55%
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 31 October in respect of which all conditions precedent had
been met at that date:
Expiring within one year
Expiring beyond one year
As described above the Group’s bank facilities mature in June 2023.
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
Sterling
Euros
Floating rate
2022
£’m
208.4
—
208.4
2022
£’m
291.5
333.6
625.1
2021
£’m
—
251.8
251.8
2021
£’m
247.5
239.0
486.5
155
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
20. Financial instruments
Financial risk management
Financial risk management is an integral part of the way the Group is managed. In the course of its business, the Group is exposed primarily
to foreign exchange risk, interest rate risk, liquidity risk, and credit risk. The overall aim of the Group’s financial risk management policies is to
minimise potential adverse effects on financial performance and Net Asset Values (“NAV”). The Group manages the financial risks within policies
and operating parameters approved by the Board of Directors and does not enter into speculative transactions. Treasury activities are managed
centrally under a framework of policies and procedures approved and monitored by the Board. These objectives are to protect the assets of the
Group and to identify and then manage financial risk. In applying these policies, the Group will utilise derivative instruments, but only for risk
management purposes.
The principal financial risks facing the Group are described below.
Interest rate risk
The Group finances its operations through a mixture of retained profits, issued share capital, bank borrowings, and secured notes. The Group
borrows in Sterling and Euros at floating rates and, where necessary, uses interest rate swaps to convert these to fixed rates to generate the
preferred interest rate profile and to manage its exposure to interest rate fluctuations. A 1ppt change in interest rates would have a £0.5 million
(FY2021: £nil) impact on net interest. This sensitivity impact has been prepared by determining average floating interest rates and flexing these
against average floating rate deposits and borrowings by major currency area over the course of the year.
Liquidity risk
The Group’s policy on liquidity risk is to ensure that sufficient cash is available to fund ongoing operations without the need to carry significant
net debt over the medium term. The Group’s principal borrowing facilities are provided by a group of core relationship banks in the form of term
loans and overdrafts, revolving credit facilities and secured notes. The quantum of committed borrowing facilities available to the Group is reviewed
regularly and is designed to exceed forecast peak gross debt levels. Further details of the Group’s borrowing facilities, including the repayment
profile of existing borrowings and the amount of undrawn committed borrowing facilities, are set out in note 19.
Credit risk
Credit risk arises on financial instruments such as trade and other receivables and short term bank deposits. Policies and procedures exist to
ensure that customers have an appropriate credit history and account customers are given credit limits that are monitored. Short term bank
deposits are executed only with A-rated or above authorised counterparties based on ratings issued by the major rating agencies. Counterparty
exposure positions are monitored regularly so that credit exposures to any one counterparty are within predetermined limits. Overall, the Group
considers that it is not exposed to a significant amount of credit risk. The amount of trade receivables outstanding at the year end does not
represent the maximum exposure to operational credit risk due to the normal patterns of supply and payment over the course of a year. Based
on management information collected as at month ends the maximum level of net trade receivables at any one point during the year was
£18.3 million (FY2021: £14.6 million).
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk in respect of the Euro. Foreign exchange risk arises from future
commercial transactions, recognised assets and liabilities and net investments in foreign operations.
The Group has investments in foreign operations in France, Spain, the Netherlands and Belgium, whose net assets are exposed to foreign currency
translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated
in the relevant foreign currencies.
The Group holds Euro denominated loan notes totalling €358 million (FY2021: €253 million) and as such is exposed to foreign exchange risk on
these notes. The foreign exchange risk relating to the notes provides a natural hedge against the Euro denominated assets of its operations in
France, Spain, the Netherlands and Belgium and were 100% effective. As a result, the Group applies net investment hedging in respect of these
loan notes and the change in fair value during the year of £4.6 million (FY2021: £10.9 million) was recognised in other comprehensive income.
The Group holds average rate forward contracts to mainly hedge against the investment exposure of subsidiaries denominated in Euros and the
future earnings generated by these foreign subsidiaries. The hedge rate of these forwards was 1.0751 and they mature in six tranches bi-annually
commencing from October 2020 as detailed further within this note.
At 31 October 2022, if Sterling had weakened by 10% against the Euro with all other variables held constant, pre-tax profit for the year would
have been £0.1 million lower (FY2021: £1.0 million higher). Equity (translation reserve) would have been £19.0 million higher (FY2021: £13.8 million
higher), arising primarily on translation of Euro denominated net assets held by subsidiary companies with a Euro functional currency less the
Euro denominated loan notes.
The Group is not exposed to significant transaction foreign exchange risk as purchases are invoiced in either Sterling or Euros.
156
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022 20. Financial instruments continued
Financial risk management continued
Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt. Being a REIT, the Group is required to distribute as a dividend a minimum of 90% of its property
rental income to shareholders. This is factored into the Group’s capital risk management.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total
capital. Net debt is calculated as total borrowings (including “current and non-current borrowings and lease liabilities” as shown in the consolidated
balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated balance sheet plus net debt.
The gearing ratios at 31 October 2022 and 2021 were as follows:
Total borrowings (excluding derivatives)
Less: cash and cash equivalents (note 17)
Net debt
Total equity
Total capital
Gearing ratio
2022
£’m
719.2
(20.9)
698.3
1,793.4
2,491.7
28%
2021
£’m
567.0
(43.2)
523.8
1,374.9
1,898.7
28%
The Group considers that a loan-to-value (“LTV”) ratio, defined as gross debt (excluding lease liabilities) as a proportion of the valuation of
investment properties and investment properties under construction (excluding lease liabilities), below 40% represents an appropriate medium
term capital structure objective. The Group’s LTV ratio was 24% at 31 October 2022 (FY2021: 25%).
The Group has complied with all of the covenants on its banking facilities during the year.
Financial instruments
Financial instruments disclosures are set out below:
Interest rate swaps
Foreign currency forwards
2022
2021
Asset
£’m
1.2
0.5
Liability
£’m
—
—
Asset
£’m
0.3
1.9
Liability
£’m
(0.2)
—
The fair value of financial instruments that are not traded in an active market, such as over the counter derivatives, is determined using valuation
techniques. The Group obtains such valuations from counterparties which use a variety of assumptions based on market conditions existing at
each balance sheet date.
The fair values of all financial instruments are equal to their book value, with the exception of bank loans, which are set out below. The fair value
of secured loan notes is determined using a discounted cash flow, while the fair value of bank loans drawn from the Group’s bank facilities
equates to book value. The carrying value less impairment provision of trade receivables, other receivables and the carrying value of trade
payables and other payables approximates to their fair value.
The fair value of bank loans is calculated as:
Bank loans
2022
2021
Book value
£’m
Fair value
£’m
623.8
694.1
Book value
£’m
484.7
Fair value
£’m
543.9
157
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT 20. Financial instruments continued
Financial instruments continued
Fair value hierarchy
IFRS 13 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the
measurements, according to the following levels:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – inputs for the asset or liability that are not based on observable market data.
The table below shows the level in the fair value hierarchy into which fair value measurements have been categorised:
Assets per the balance sheet
Derivative financial instruments – Level 2
Amounts due from associates – Level 2
Liabilities per the balance sheet
Derivative financial instruments – Level 2
Bank loans – Level 2
2022
£’m
1.7
—
2022
£’m
—
2021
£’m
2.2
2.7
2021
£’m
0.2
694.1
543.9
There were no transfers between Level 1, 2 and 3 fair value measurements during the current or prior year.
Over the life of the Group’s derivative financial instruments, the cumulative fair value gain/loss on those instruments will be £nil as it is the Group’s
intention to hold them to maturity.
Interest rate swaps not designated as part of a hedging arrangement
The notional principal amounts of the outstanding interest rate swap contracts at 31 October 2022 were £55.0 million and €nil (FY2021: £55.0 million
and €30.0 million). At 31 October 2022 the weighted average fixed interest rates were Sterling at 0.6885% (FY2021: Sterling at 0.8152% and Euro
at 0.1656%), and floating rates are at quarterly SONIA. The £55.0 million SONIA swaps expire in June 2023. The movement in fair value recognised
in the income statement was a net gain of £1.0 million (FY2021: net gain of £1.5 million).
Foreign currency forwards not designated as part of a hedging arrangement
As at 31 October 2022, the Group has one tranche of average rate forward contracts for a notional amount totalling €8.5 million at a rate of €1.0751
to the Pound (FY2021: three tranches totalling €24.5 million). The Group will receive the Sterling equivalent at this average exchange rate and pay
the Sterling equivalent of the average monthly spot rates on the Euro notional amounts, which has a maturity date of 28 April 2023. The movement
in the fair value recognised in the income statement in the period was a net loss of £1.3 million (FY2021: net gain of £1.4 million). The €8.0 million
tranche previously held matured and was settled in April 2022, resulting in a fair value disposal of £0.7 million and a receipt of £0.7 million. The
€8.0 million tranche previously held matured and was settled in October 2022, resulting in a fair value disposal of £0.6 million and a receipt of
£0.6 million. This resulted in £1.3 million recognised as finance income and £1.3 million expense as part of the £0.3 million expense recognised
in fair value movement of derivatives within finance costs in the income statement.
Financial instruments by category
Assets per the balance sheet
Trade receivables and other receivables excluding prepayments
Derivative financial instruments
Cash and cash equivalents
At 31 October 2022
Liabilities per the balance sheet
Borrowings (excluding lease liabilities)
Lease liabilities
Payables and accruals
At 31 October 2022
158
Financial assets
at amortised cost
£’m
Assets at fair
value through
profit and loss
£’m
24.0
—
20.9
44.9
—
1.7
—
1.7
Other financial
liabilities at
amortised cost
£’m
Liabilities at fair
value through
profit and loss
£’m
623.8
95.4
43.9
763.1
—
—
—
—
Total
£’m
24.0
1.7
20.9
46.6
Total
£’m
623.8
95.4
43.9
763.1
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022 20. Financial instruments continued
Financial instruments continued
Financial instruments by category continued
Assets per the balance sheet
Trade receivables and other receivables excluding prepayments
Amounts due from associates
Derivative financial instruments
Cash and cash equivalents
At 31 October 2021
Liabilities per the balance sheet
Borrowings (excluding lease liabilities)
Lease liabilities
Derivative financial instruments
Payables and accruals
At 31 October 2021
Financial assets
at amortised cost
£’m
Assets at fair
value through
profit and loss
£’m
20.9
2.7
—
43.2
66.8
—
—
2.2
—
2.2
Other financial
liabilities at
amortised cost
£’m
Liabilities at fair
value through
profit and loss
£’m
484.7
82.3
—
58.2
625.2
—
—
0.2
—
0.2
The interest rate risk profile, after taking account of derivative financial instruments, was as follows:
Borrowings
Floating rate
£’m
2022
Fixed rate
£’m
46.8
577.0
Total
£’m
623.8
Floating rate
£’m
2021
Fixed rate
£’m
—
484.7
Total
£’m
20.9
2.7
2.2
43.2
69.0
Total
£’m
484.7
82.3
0.2
58.2
625.4
Total
£’m
484.7
The weighted average interest rate of the fixed rate financial borrowing was 2.05% (FY2021: 2.01%) and the weighted average remaining period
for which the rate is fixed was five years (FY2021: six years).
Maturity analysis
The table below analyses the Group’s financial liabilities and non-settled derivative financial instruments into relevant maturity groupings based
on the remaining period at the balance sheet date to the contractual maturity dates. The amounts disclosed in the table are the contractual
undiscounted cash flows.
2022
Borrowings
Derivative financial instruments
Lease liabilities
Payables and accruals
2021
Borrowings
Derivative financial instruments
Lease liabilities
Payables and accruals
Less than
one year
£’m
One to two
years
£’m
Two to five
years
£’m
More than
five years
£’m
114.7
1.0
13.8
43.9
173.4
53.9
—
12.9
—
66.8
187.8
—
35.9
—
223.7
348.3
—
74.7
—
423.0
Less than
one year
£’m
One to two
years
£’m
Two to five
years
£’m
More than
five years
£’m
10.6
0.3
12.9
58.2
82.0
67.4
0.3
11.5
—
79.2
162.1
—
30.9
—
193.0
313.4
—
58.8
—
372.2
159
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
21. Lease liabilities
The Group leases certain of its investment properties under lease liabilities. The average remaining lease term is 10.9 years (FY2021: 10.3 years).
Minimum lease payments
Present value of minimum
lease payments
Within one year
Within two to five years
Greater than five years
Less: future finance charges on lease liabilities
Present value of lease liabilities
Current
Non-current
2022
£’m
13.8
48.8
74.7
137.3
(41.9)
95.4
2021
£’m
12.9
42.4
58.8
114.1
(31.8)
82.3
2022
£’m
13.2
40.6
41.6
95.4
—
95.4
2022
£’m
13.2
82.2
95.4
2021
£’m
12.3
35.3
34.7
82.3
—
82.3
2021
£’m
12.3
70.0
82.3
Amounts recognised within the consolidated income statement include interest on lease liabilities of £5.0 million and variable lease payments not
included in the measurement of the lease liabilities of £0.3 million. Amounts recognised in the consolidated statement of cash flows include lease
liabilities principal payments of £8.4 million and interest on lease liabilities of £5.0 million. The maturity analysis for lease liabilities under contractual
undiscounted cash flows is included in note 20.
22. Deferred income tax
Deferred tax is calculated in full on temporary differences under the liability method using tax rates enacted in each respective jurisdiction
corresponding to when they are expected to reverse. The movement on the deferred tax account was as shown below.
At 1 November
Charge to income statement
Exchange differences
At 31 October
Note
9
2022
£’m
96.2
29.8
2.2
128.2
2021
£’m
84.8
17.1
(5.7)
96.2
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction where permitted by IAS 12)
during the period are shown below.
Revaluation of
investment
properties
£’m
Other
timing
differences
£’m
84.8
17.8
(5.7)
96.9
96.9
29.9
2.2
129.0
0.2
(0.1)
—
0.1
0.1
(0.1)
—
—
Total
£’m
85.0
17.7
(5.7)
97.0
97.0
29.8
2.2
129.0
Deferred tax liability
At 1 November 2020
Charge/(credit) to income statement
Exchange differences
At 31 October 2021
At 1 November 2021
Charge/(credit) to income statement
Exchange differences
At 31 October 2022
160
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
22. Deferred income tax continued
Deferred tax asset
At 1 November 2020
Credit/(charge) to income statement
At 31 October 2021
At 1 November 2021
Credit to income statement
At 31 October 2022
Other
timing
differences
£’m
0.1
0.7
0.8
0.8
—
0.8
Interest
swap
£’m
0.1
(0.1)
—
—
—
—
The deferred tax liability due after more than one year is £129.0 million (FY2021: £97.0 million).
As at 31 October 2022, the Group had trading losses of £16.7 million (FY2021: £21.8 million) and capital losses of £36.5 million
(FY2021: £39.4 million) in respect of its UK operations.
As at 31 October 2022, the Group had trading losses of £4.6 million (FY2021: £nil) in respect of its Netherlands and Belgium operations.
All losses can be carried forward indefinitely. No deferred tax asset has been recognised in respect of these losses due to the uncertainty
of recoverability against future taxable profits.
23. Called up share capital
Called up, allotted, and fully paid
211,927,497 (FY2021: 210,823,703) ordinary shares of 1 pence each
Ordinary shares
The holders of the ordinary shares shall be entitled to one vote for each ordinary share.
During the year the Company issued 1,103,794 ordinary shares (FY2021: 212,496 ordinary shares).
2022
£’m
2.1
Total
£’m
0.2
0.6
0.8
0.8
—
0.8
2021
£’m
2.1
Safestore Holdings plc Sharesave scheme
The Sharesave awards are a savings related award accruing over a three-year period. There are no performance conditions attached to the
awards; as such, the sole condition for vesting is continued service. The fair value of the Sharesave options granted during the year was
assessed by an independent actuary using a Black-Scholes model based on the assumptions set out in the table below:
Number of options granted
Share price at grant date
Exercise price
Risk-free rate of interest
Expected volatility
Expected dividend yield
Expected term to exercise
Value per option
Grant date
22 August 2022
(UK three years)
94,346
1,115
896
2.42
30.2
2.42
3.20
315
(pence)
(pence)
(% per annum)
(% per annum)
(% per annum)
(years)
(pence)
Safestore Long Term Incentive Plan
The fair values of the awards granted in the accounting period were assessed by an independent actuary using a Monte Carlo model based on
the assumptions set out in the table below. In determining an appropriate assumption for expected future volatility, the historical volatility of the
share price of Safestore Holdings plc has been considered along with the historical volatility of comparator companies.
Number of options granted
Weighted average share price at grant date
Exercise price
Weighted average risk-free rate of interest
Expected volatility
Weighted average expected term to exercise
Weighted average value per option
Grant date January 2022
(PBT-EPS part)
(TSR part)
(pence)
(pence)
(% per annum)
(% per annum)
(years)
(pence)
164,556
1,243
—
n/a
n/a
3.00
1,379
82,277
1,243
—
0.89
29.6
3.00
714
161
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
23. Called up share capital continued
Safestore Long Term Incentive Plan continued
Details of the awards outstanding under all of the Group’s share schemes are set out below:
Date of grant
Safestore Holdings plc
Sharesave scheme
24/10/2017
14/08/2019
26/08/2020
20/08/2021
20/08/2022
Total
Safestore Long Term
Incentive Plan – 2017
29/09/2017
09/10/2017
15/06/2018
05/02/2019
05/07/2019
23/01/2020
Total
Safestore Long Term
Incentive Plan – 2020
18/03/2020
Total
Safestore Long Term
Incentive Plan – 2021
28/01/2021
Total
Safestore Long Term
Incentive Plan – 2022
25/01/2022
Total
At
31 October
2021
40,285
122,512
149,814
62,053
—
374,664
5,665,000
150,000
33,000
85,000
12,000
195,000
6,140,000
406,191
406,191
347,422
347,422
Granted
Exercised
Lapsed
At
31 October
2022
Exercise
price
Expiry
date
—
—
—
—
94,346
94,346
(3,401)
(100,393)
—
—
—
(1,701)
(5,993)
(16,314)
(16,976)
—
35,183
16,126
133,500
45,077
94,346
(103,794)
(40,984)
324,232
352.8p
510.0p
600.0p
824.0p
896.0p
01/05/2023
01/03/2023
01/05/2024
01/05/2025
01/05/2026
—
—
—
—
—
—
—
—
—
—
—
(570,786)
—
(20,000)
(3,450)
(12,000)
(45,871)
(652,107)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,094,214
150,000
13,000
81,550
—
149,129
5,487,893
406,191
406,191
347,422
347,422
246,833
246,833
1.0p
0.0p
1.0p
1.0p
1.0p
1.0p
28/09/2027
28/09/2027
28/09/2027
28/09/2027
28/09/2027
28/09/2027
0.0p
18/03/2023
0.0p
28/01/2024
0.0p
25/01/2025
—
—
246,833
246,833
In addition, gross amounts totalling £378,000 (FY2021: £378,000) in respect of bonuses awarded to Executive Directors for the year ended 31 October 2022
will be deferred into shares which will vest at the end of two years following the financial year in which the bonus is earned. The grant date is the last day
of the financial year in which the performance stage is assessed. The share entitlement is expected to be determined in January 2022.
The weighted average exercise price of outstanding options under the Sharesave scheme is 698.6 pence (FY2021: 581.1 pence). The weighted
average exercise price of options exercised under the Sharesave scheme was 400.4 pence. No shares were exercised under the Sharesave
scheme during 2020.
Own shares
Included within retained earnings are ordinary shares with a nominal value of £3,598 (FY2021: £413) that represent shares held by the Safestore
Employee Benefit Trust in satisfaction of awards under the Group’s Long Term Incentive Plan and which remain unvested.
162
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
24. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from operating activities:
Cash generated from continuing operations
Profit before income tax
Gain on investment properties
Other exceptional gains
Share of loss in associates
Depreciation
Net finance expense
Employee share options
Changes in working capital:
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Increase in provisions
Cash generated from continuing operations
Notes
13
5
14
8
2022
£’m
498.8
(381.6)
(10.8)
0.3
1.0
15.7
8.6
0.2
0.1
(0.4)
0.3
2021
£’m
404.6
(321.1)
—
—
1.0
12.4
8.6
(0.2)
(5.4)
13.6
2.1
132.2
115.6
25. Analysis of movement in gross and net debt
Bank loans
Lease liabilities
Total gross debt (liabilities from financing activities)
Cash in hand
Total net debt
2021
£’m
(484.7)
(82.3)
(567.0)
43.2
(523.8)
Cash flows
£’m
Non-cash
movements
£’m
(132.0)
8.4
(123.6)
(22.1)
(145.7)
(7.1)
(21.5)
(28.6)
(0.2)
(28.8)
2022
£’m
(623.8)
(95.4)
(719.2)
20.9
(698.3)
The table above details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated cash flow
statement as cash flows from financing activities.
The cash flows from bank loans make up the net amount of proceeds from borrowings, repayment of borrowings and debt issuance costs.
Non-cash movements relate to the amortisation of debt issue costs of £0.5 million (FY2021: £0.4 million), foreign exchange movements
of £6.8 million (FY2021: £12.4 million) and unwinding of discount to lease liabilities of £21.5 million (FY2021: £12.6 million).
163
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
26. Employees and Directors
Staff costs (including Directors) for the Group during the year
Wages and salaries
Social security costs
Other pension costs
Share-based payments
2022
£’m
25.1
3.8
0.6
8.6
38.1
2021
£’m
23.3
11.3
0.6
8.6
43.8
During the period ended 31 October 2022 the Company’s equity-settled share-based payment arrangements comprised the Safestore Holdings
plc Sharesave scheme and the Safestore Long Term Incentive Plans. The number of awards made under each scheme is detailed in note 23.
No options have been modified since grant under any of the schemes, other than the modification in respect of the LTIP awards for Executive
Directors described in note 23.
Average monthly number of people (including Executive Directors) employed
2022
Number
2021
Number
Sales
Administration
Key management compensation
Wages and salaries
Social security costs
Post-employment benefits
Share-based payments
The key management figures given above include Directors.
Directors
Aggregate emoluments
Company contributions paid to money purchase pension schemes
604
123
727
2022
£’m
4.4
(0.3)
0.1
4.5
8.7
2022
£’m
5.7
—
5.7
557
93
650
2021
£’m
4.2
2.6
0.1
5.2
12.1
2021
£’m
8.3
—
8.3
There were two Directors (FY2021: two) accruing benefits under a money purchase scheme.
27. Provisions
In France, the basis on which property taxes have been assessed has been challenged by the tax authority for financial years 2011 onwards.
In March 2021 the French Court of Appeal delivered a judgement, which resulted in a partial success for the Group; however, a further appeal
has been lodged with the French Supreme Court against those decisions on which the Group was unsuccessful. A provision is included in the
consolidated financial accounts of £2.4 million at 31 October 2022 (FY2021: £2.1 million), to reflect the increased uncertainty surrounding the
likelihood of a successful outcome. Of the total provided, £0.3 million has been charged in relation to the twelve months to 31 October 2022
within cost of sales (Underlying EBITDA) (FY2021: £1.9 million was recorded as an exceptional charge in respect of financial years 2012 to 2020
and £0.2 million was charged in relation to the twelve months to 31 October 2021 within underlying cost of sales).
It is possible that the French tax authority may appeal the decisions of the French Court of Appeal on which the Group was successful to the
French Supreme Court. The maximum potential further exposure in relation to these issues at 31 October 2022 is £3.0 million (FY2021: £2.7 million).
No provision for any potential further exposure has been recorded in the consolidated financial statements since the Group believes it is more likely
than not that a successful outcome will be achieved, resulting in no additional liabilities.
Bank guarantees to cover any potential additional tax assessment are currently being put in place, of which guarantees totalling £1.2 million
have been put in place as at 31 October 2022 (FY2021: £1.3 million).
164
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTSNotes to the financial statements continuedfor the year ended 31 October 2022
28. Contingent liabilities
As part of the Group banking facility, the Company has guaranteed the borrowings totalling £625.1 million (FY2021: £486.5 million) of fellow Group
undertakings by way of a charge over all of its property and assets. There are similar cross-guarantees provided by the Group companies in
respect of any bank borrowings which the Company may draw under a Group facility agreement. The financial liability associated with this guarantee
is considered remote and therefore no provision has been recorded.
The Group also has a contingent liability in respect of property taxation in the French subsidiary as disclosed in note 27.
29. Capital commitments
The Group had £146.0 million of capital commitments as at 31 October 2022 (FY2021: £98.6 million).
30. Related party transactions
The Group’s shares are widely held. 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 Safestore Storage Benelux B.V. (formerly CERF Storage JV B.V.)
As described in note 12, the Group had a 20% interest in Safestore Storage Benelux B.V. (“SSB”) up until 30 March 2022 and was classified as
an investment in associate. From 30 March 2022, SSB became a wholly owned subsidiary of the Group, from which point all intra-group
transactions and balances are eliminated on consolidation.
During the period to 30 March 2022 the Group recharged £0.2 million (FY2021: £nil) to SSB for operational costs paid on behalf of SSB and was
repaid £0.2 million (FY2021: £0.2 million) of cumulative outstanding balances during the year. Unpaid interest of £0.1 million (FY2021: £0.1 million)
was accrued and charged during the year on the €3.0 million (£2.7 million) principal loan note outstanding. The total amount outstanding at
30 March 2022 included within current trade and other receivables was £2.8 million (FY2021: £2.7 million). Management fees charged and settled
during the year amounted to £0.3 million (FY2021: £1.0 million).
Transactions with PBC Les Groues SAS
As described in note 12, the Group has a 24.9% interest in PBC Les Groues SAS (“PBC”). During the period, the Group made a further
investment of £0.8 million (€0.9 million) into PBC to fund the development of a new store in France, taking the total investment to £1.8 million
(€2.1 million) (FY2021: £1.0 million (€1.2 million)). The total amount invested is included as part of its non-current investments in associates.
The total amount outstanding at 31 October 2022 included within trade and other receivables was £nil (FY2021: £nil).
As described in note 5, during the period, the Group sold the Nanterre site to the Joint Venture partner of Nanterre FOCD 92 for a total price
of €7.6 million excluding VAT and including demolition cost reimbursement, where the settlement is done partially in cash of £1.0 million
(€1.1 million excluding tax), and partially in kind through the delivery of the new building at the end of the operation (estimated at €6.5 million).
31. Parent company
Safestore Holdings plc is a limited liability company incorporated in England and Wales and domiciled in the UK. It operates as the ultimate
parent company of the Safestore Holdings plc Group.
32. Post balance sheet events
On 11 November 2022 the Group completed its refinancing exercise obtaining a new increased unsecured £400 million multi-currency four-year
Revolving Credit Facility (with two one-year extension options). In addition, a further £100 million uncommitted accordion facility is incorporated
into the facility agreement.
On 1 December 2022 the Group acquired a 10.0% interest in CERF II German Storage Topco S.à r.l., a company registered in Luxembourg,
and the indirect holder myStorage GmbH, a company registered and operating in Germany.
165
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT Company balance sheet
as at 31 October 2022
Company registration number: 04726380
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Loans to Group undertakings
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Total assets less current liabilities
Non-current liabilities
Net assets
Equity
Called up share capital
Share premium account
Retained earnings
Total equity
Notes
5
6
7
8
9
10
11
Company
2022
£’m
—
1.0
835.7
836.7
0.2
1.2
1.4
838.1
(108.7)
729.4
(523.3)
206.1
2.1
61.8
142.2
206.1
2021
£’m
—
1.0
585.8
586.8
0.6
—
0.6
587.4
(42.2)
545.2
(429.1)
116.1
2.1
61.3
52.7
116.1
The Company’s profit for the financial year amounted to £137.8 million (FY2021: £14.3 million loss).
The Company financial statements were approved by the Board of Directors on 16 January 2023 and signed on its behalf by:
A Jones
Chief Financial Officer
F Vecchioli
Chief Executive Officer
166
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS
Company statement of changes in equity
for the year ended 31 October 2022
Balance at 1 November 2020
Comprehensive income
Loss for the year
Total comprehensive income
Transactions with owners
Dividends
Increase in share capital
Employee share options
Transactions with owners
Balance at 1 November 2021
Comprehensive income
Profit for the year
Total comprehensive income
Transactions with owners
Dividends
Increase in share capital
Employee share options
Transactions with owners
Balance at 31 October 2022
Company
Called up
share capital
£’m
Share premium
account
£’m
2.1
—
2.1
—
—
—
—
2.1
—
2.1
—
—
—
—
2.1
60.6
—
60.6
—
0.7
—
0.7
61.3
—
61.3
—
0.5
—
0.5
61.8
Retained
earnings
£’m
101.0
(14.3)
86.7
(42.6)
—
8.6
(34.0)
52.7
137.8
190.5
(56.9)
—
8.6
(48.3)
142.2
Total
£’m
163.7
(14.3)
149.4
(42.6)
0.7
8.6
(33.3)
116.1
137.8
253.9
(56.9)
0.5
8.6
(47.8)
206.1
For details of the dividend paid in the year see note 10 in the Group financial statements.
167
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
Notes to the Company financial statements
for the year ended 31 October 2022
1. Accounting policies and basis of preparation
The Company financial statements are prepared in accordance with Financial Reporting Standard 101 “Reduced Disclosure Framework”
(“FRS 101”). In preparing these financial statements the Company applies the recognition, measurement and disclosure requirements of
United Kingdom adopted International Financial Reporting Standards (“IFRS”) but makes amendments where necessary in order to comply
with the Companies Act 2006 and sets out below where advantage of the FRS 101 disclosure exemptions has been taken.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• a cash flow statement and related notes;
• comparative period reconciliations for tangible fixed assets;
• disclosures in respect of transactions with wholly owned subsidiaries;
• disclosures in respect of capital management;
• the effects of new but not yet effective IFRSs;
• IFRS 2 “Share-based Payment” in respect of Group-settled share-based payments; and
• certain disclosures required by IFRS 13 “Fair Value Measurement” and the disclosures required by IFRS 7 “Financial Instruments: Disclosures”.
The above disclosure exemptions are permitted because equivalent disclosures are included in the Group consolidated financial statements.
The financial statements are prepared on a going concern basis under the historical cost convention. The Company’s principal accounting
policies are the same as those applied in the Group financial statements, except as described below:
Investments
Investments held as fixed assets are stated at cost less provision for impairment in value.
2. Results of parent company
As permitted by Section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss account as part
of these financial statements. The Company’s profit for the financial year amounted to £137.8 million (FY2021: £14.3 million loss).
3. Directors’ emoluments
The Directors’ emoluments are disclosed in note 26 of the Group financial statements.
4. Operating profit
The Company does not have any employees (FY2021: none). Details of the Company’s share-based payments are set out in note 23 to the
Group financial statements.
Auditor’s remuneration for the year ended 31 October 2022 was £17,000 (FY2021: £16,000). There were no non-audit services (FY2021: none)
provided by the auditor.
5. Property, plant and equipment
Cost
At 1 November 2021 and at 31 October 2022
Accumulated depreciation
At 1 November 2021
Charge for the year
At 31 October 2022
Net book value
At 31 October 2022
At 31 October 2021
168
£’m
0.2
0.2
—
0.2
—
—
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS
6. Investments in subsidiaries
Cost and net book value
At 1 November 2021
At 31 October 2022
£’m
1.0
1.0
Investments in subsidiaries are stated at cost. A list of interests in subsidiary undertakings is given below. The Directors believe that the carrying
value of the investments is supported by their underlying net assets.
Interests in subsidiary undertakings
The entities listed below are subsidiaries of the Company or the Group. The Group percentage of equity capital and voting rights is 100% for all
subsidiaries listed. The results of all of the subsidiaries have been consolidated within these financial statements. The registered address of each
subsidiary is Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT, except where indicated below by a footnote.
Subsidiary
Safestore Investments 2018 Limited1
Safestore Investments Limited
Safestore Group Limited
Safestore Acquisition Limited
Safestore Limited
Safestore Properties Limited
Spaces Personal Storage Limited
Safestore Trading Limited
Mentmore Limited
Invest Holding2
Une Pièce en Plus SAS12
Compagnie de Libre Entreposage France SAS12
Assay Services Limited11
OMB Self Storage S.L.U.
Safestore Netherlands B.V.
Walnut Tree Self Storage Limited11
Fort Box Self Storage Limited11
Fort Box Limited11
USIFB Storage Company Limited11
Your Room Self Storage Limited
Safestore Storage Benelux B.V.
Safestore Storage B.V.
M3 Self-Storage B.V.
Safestore Storage Properties 1 B.V.
Safestore Storage Properties 2 B.V.
Safestore Storage Properties 3 B.V.
Lokabox SA
Safestore Europe SAS10
Investimmo SAS10
Notes
1 Held directly by the Company.
Country of incorporation
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Luxembourg3
France5
France5
Guernsey4
Spain6
Netherlands7
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Netherlands8
Netherlands8
Netherlands8
Netherlands8
Netherlands8
Netherlands8
Belgium9
France5
France5
2 Formerly named Access Storage Holdings (France) S.à r.l.
3 Registered address: 412F, route d’Esch, L-2086 Luxembourg.
4 UK tax resident; registered address prior to liquidation: St Martin’s House, Le Bordage, St Peter Port, Guernsey.
5 Registered address: 1, rue François Jacob, 92500 Rueil Malmaison, France.
6 Registered address: Calle Marina 153, 08013 Barcelona, Spain.
7 Registered address: Herikerbergwerg 88, 1101CM Amsterdam, 1077ZX Amsterdam, Netherlands.
8 Registered address: Beijnesweg 19, 2031BB Haarlem, Netherlands.
9 Registered address: Chaussée de Bruxelles 151-155, 6040 Charleroi, Belgium.
10 Incorporated in July 2022.
11 Companies liquidated during the year ended 31 October 2022.
12 Merged under the EU Merger Directive on 31 October 2022 resulting in the cessation of Compagnie de Libre Entreposage France SAS.
Principal activity
Holding company
Holding company
Holding company
Holding company
Provision of self storage
Provision of self storage
Provision of self storage
Non-trading
Holding company
Holding company
Provision of self storage
Holding company
Insurance services
Provision of self storage
Holding company
Provision of self storage
Provision of self storage
Non-trading
Provision of self storage
Provision of self storage
Holding company
Provision of self storage
Provision of self storage
Provision of self storage
Provision of self storage
Provision of self storage
Provision of self storage
Provision of self storage
Provision of self storage
169
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT
Notes to the Company financial statements continued
for the year ended 31 October 2022
7. Fixed assets – loans to Group undertakings
Loans to Group undertakings
2022
£’m
835.7
835.7
2021
£’m
585.8
585.8
Amounts owed by Group undertakings are unsecured and repayable on demand; however, the Directors consider it unlikely that repayment will
arise in the short term and in practice amounts owed by Group undertakings are used to meet the capital requirements of the borrower with no
realistic repayment in the near future. It is for this reason that the amounts are classified as fixed assets.
Interest is charged to Group undertakings on amounts totalling £523.3 million (FY2021: £429.1 million). The remaining amounts owed by Group
undertakings are interest free. The movement in loans to Group undertakings relates to interest charged of £9.9 million (FY2021: £6.7 million) and
additional amounts loaned and recharged of £240.0 million (FY2021: £82.5 million).
8. Trade and other receivables
Trade receivables
Other receivables
2022
£’m
—
0.2
0.2
2021
£’m
0.5
0.1
0.6
Trade and other receivables due within one year were tested for impairment in line with the Group as described in note 2. As at 31 October 2022
these amounts due are considered fully recoverable and no provision has been made (FY2021: £nil).
9. Current liabilities
Amounts owed to Group undertakings
Trade payables
Accruals and deferred income
2022
£’m
98.6
0.2
9.9
108.7
2021
£’m
30.8
0.1
11.3
42.2
Amounts owed to Group undertakings are unsecured, interest free and repayable on demand. The Directors have received assurance that
repayment of amounts owed to Group undertakings will not arise in the short term.
10. Non-current liabilities
Secured loan notes
2022
£’m
523.3
523.3
2021
£’m
429.1
429.1
Of the above, £320.6 million (FY2021: £292.1 million) is due after more than five years.
The Company has in issue €50.9 million (FY2021: €50.9 million) 1.59% Series A Senior Secured Notes due 2024, €70.0 million (FY2021: €70.0 million)
1.26% Series A Secured Notes due 2026, £35.0 million (FY2021: £35.0 million) 2.59% Series B Senior Secured Notes due 2026, €74.1 million
(FY2021: €74.1 million) 2.00% Series B Senior Secured Notes due 2027, £20.0 million (FY2021: £20.0 million) 1.96% Series A Secured Notes due
2028, €29.0 million (FY2021: €29.0 million) 0.93% Series B Secured Notes due 2028, £50.5 million (FY2021: £50.5 million) 2.92% Series C Senior
Secured Notes due 2029, £30.0 million (FY2021: £30.0 million) 2.69% Series C Senior Secured Notes due 2029, €105.0 million (FY2021: €nil)
2.45% Private Shelf Senior Secured Notes due 2029, £80.0 million (FY2021: £80.0 million) 2.39% Series C Secured Notes due 2031 and
€29.0 million (FY2021: €29.0 million) 1.42% Series D Secured Notes due 2033.
11. Called up share capital
Called up, allotted, and fully paid
211,927,497 (FY2021: 210,823,703) ordinary shares of 1 pence
Ordinary shares
The holders of the ordinary shares shall be entitled to one vote for each ordinary share.
For details of share options see note 23 in the Group financial statements.
12. Contingent liabilities
For details of contingent liabilities see note 28 in the Group financial statements.
170
2022
£’m
2.1
2021
£’m
2.1
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS Glossary
Absorption rate
The rate at which rentable space is filled.
Adjusted Diluted EPRA
Earnings per Share
Based on the European Public Real Estate Association’s definition of earnings and is defined as
profit or loss for the period after tax but excluding corporate transaction costs, change in fair value
of derivatives, gain/loss on investment properties and the associated tax impacts. The Company
then makes further adjustments for the impact of exceptional items, net exchange gains/losses
recognised in net finance costs, exceptional tax items, and deferred and current tax in respect of
these adjustments. The Company also adjusts for IFRS 2 share-based payment charges.
Adjusted earnings growth
The increase in adjusted EPS year-on-year.
Adjusted EPS
Adjusted profit after tax divided by the diluted weighted average number of shares in issue during
the financial year.
Adjusted profit before tax
The Company’s pre-tax EPRA earnings measure with additional Company adjustments.
Average net achieved rent per sq ft
Storage revenue divided by average occupied space over the financial year.
Average rental growth
The growth in average net achieved rent per sq ft year-on-year.
Average storage rate
BREEAM
Cap and collar
Revenue generated from self storage revenues divided by the average square footage occupied
during the period in question.
An environmental rating assessed under the Building Research Establishment’s Environmental
Assessment Method.
Term used in connection with interest rates. A cap is an upper limit or maximum interest rate that
will apply, while a collar is the minimum interest rate.
Capitalisation rate
The ratio of net operating income to property asset value.
Compound Annual Growth Rate (“CAGR”)
The annual rate of return over a specified period of time longer than one year.
CER
Closing net rent per sq ft
Earnings per Share (“EPS”)
EBITDA
EPRA
EPRA earnings
Constant Exchange Rates (Euro denominated results for the current period have been retranslated
at the exchange rate effective for the comparative period, in order to present the reported results on
a more comparable basis).
Annual storage revenue generated from in-place customers divided by occupied space at the
balance sheet date.
Profit for the financial year attributable to equity shareholders divided by the average number of
shares in issue during the financial year.
Earnings before interest, tax, depreciation and amortisation.
The European Public Real Estate Association, a real estate industry body. This organisation
has issued Best Practices Recommendations with the intention of improving the transparency,
comparability and relevance of the published results of listed real estate companies in Europe.
The IFRS profit after taxation attributable to shareholders of the Company excluding investment
property revaluations, gains/losses on investment property disposals and changes in the fair value
of financial instruments.
EPRA Earnings per Share
EPRA earnings divided by the average number of shares in issue during the financial year.
EPRA Net Asset Value (“NAV”)
IFRS net assets excluding the mark-to-market on interest rate derivatives effective cash flow
and deferred taxation on property valuations where it arises. It is adjusted for the dilutive impact
of share options.
EPRA NAV per share
EPRA NAV divided by the diluted number of shares at the year end.
EPRA Net Tangible Assets (“NTA”)
A proportionally consolidated measure, representing the IFRS net assets excluding the mark-to-market
on derivatives and related debt adjustments, the mark-to-market on the convertible bonds, the carrying
value of intangibles and deferred taxation on property and derivative valuations. It includes the valuation
surplus on trading properties and is adjusted for the dilutive impact of share options.
EPRA NTA per share
EPRA NTA divided by the diluted number of shares held at the year end.
Equity
All capital and reserves of the Group attributable to equity holders of the Company.
Euro Interbank Offered Rate (“EURIBOR”) The average benchmark interest rate at which Eurozone banks offer unsecured short term lending
on the inter-bank market.
Exit yield
Represents the capital value of an investment property at the end of the investment term expressed
in percentage terms.
Free cash flow
Cash flow before investing and financing activities but after leasehold rent payments.
Gross property assets
The sum of investment property and investment property under construction.
171
Safestore Holdings plc | Annual report and financial statements 2022OVERVIEWGOVERNANCE REPORTFINANCIAL STATEMENTSSTRATEGIC REPORT Glossary continued
Gross value added
The measure of the value of goods and services produced in an area, industry or sector of an economy.
ICR
Joint Venture
Like-for-like occupancy
Like-for-like revenue
Loan to value (“LTV”)
ICR is interest cover ratio and is calculated as the ratio of Underlying EBITDA after leasehold rent to
underlying finance charges.
A business arrangement in which two or more parties agree to pool their resources for the purpose
of accomplishing a specific task.
Excludes the closing occupancy of new stores acquired, opened and closed in the current financial
year in both the current financial year and comparative figures.
Excludes the impact of new stores acquired, opened and closed in the current or preceding
financial year in both the current year and comparative figures.
Gross debt (excluding lease liabilities) as a proportion of the valuation of investment properties and
investment properties under construction (excluding lease liabilities).
Maximum lettable area (“MLA”)
The total square feet (“sq ft”) available to be fitted out to rent to customers.
Net debt
Net initial yield
Net promoter score (“NPS”)
Net rent per sq ft
Occupancy
Occupied space
Pipeline
Total borrowings (including “current and non-current borrowings and lease liabilities” as shown in the
consolidated balance sheet) less cash and cash equivalents.
The forthcoming financial year’s net operating income expressed as a percentage of capital value,
after adding notional purchaser’s costs.
An index ranging from -100 to 100 that measures the willingness of customers to recommend a
company’s products or services to others. The Company measures NPS based on surveys sent to
all of its move-ins and move-outs.
Storage revenue generated from in-place customers divided by occupancy.
The space occupied by customers divided by the MLA expressed as a %.
The space occupied by customers in sq ft.
The Group’s development sites.
Property Income Distribution (“PID”)
A dividend, generally subject to withholding tax, that a UK REIT is required to pay from its tax
exempt property rental business and which is taxable for UK-resident shareholders at their
marginal tax rate.
Real Estate Investment Trust (“REIT”)
A tax regime which in the UK exempts participants from corporation tax both on UK rental income
and gains arising on UK investment property sales, subject to certain conditions.
Real Estate Transfer Tax (“RETT”)
RETT is levied in respect of the acquisition of the legal and/or beneficial ownership of real estate
located in the Netherlands; certain rights concerning such Dutch real estate; and shares in entities
that qualify as a real estate entity.
Sterling Overnight Index Average
(“SONIA”)
The effective overnight interest rate paid by banks for unsecured transactions in the British
Sterling market.
Store EBITDA
Store earnings before interest, tax, depreciation and amortisation.
Task Force on Climate-related Financial
Disclosures (“TCFD”)
The Financial Stability Board created the TCFD to improve and increase reporting of climate-related
financial information.
Total shareholder return (“TSR”)
The growth in value of a shareholding over a specified period, assuming dividends are reinvested
to purchase additional units of shares.
Underlying EBITDA
Operating profit before exceptional items, share-based payments, corporate transaction costs,
gain/loss on investment properties, depreciation and variable lease payments and the share of
associate’s depreciation, interest and tax. Underlying EBITDA therefore excludes all leasehold
rent charges.
Underlying profit before tax
Underlying EBITDA less leasehold rent, depreciation charged on property, plant and equipment and
net finance charges relating to bank loans and cash.
172
Safestore Holdings plc | Annual report and financial statements 2022FINANCIAL STATEMENTS Legal advisers
Travers Smith LLP
10 Snow Hill
London EC1A 2AL
Eversheds LLP
115 Colmore Row
Birmingham B3 3AL
Brokers and financial advisers
Investec Bank Plc
30 Gresham Street
London EC2V 7QP
Citigroup Global Markets Limited
Citigroup Centre
33 Canada Square
London E14 5LB
Financial PR advisers
Instinctif Partners
65 Gresham Street
London EC2V 7NQ
Shareholder information
Registrar
Link Group
The Registry
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Telephone: +44 (0)371 664 0300
(Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the
applicable international rate).
Lines are open between 9.00am and 5.30pm Monday to Friday,
excluding public holidays in England and Wales.
Email: shareholderenquiries@linkgroup.co.uk
Share Portal Enquiries: shareholderenquiries@linkgroup.co.uk
Share Portal: www.signalshares.com
Through the website of our Registrar, Link Group, shareholders are
able to manage their shareholding by registering for the Share Portal,
a free, secure, online access to their shareholding.
Please visit our investor relations website
For all the latest news and updates at www.safestore.com.
Directors and advisers
Directors
David Hearn
(Non-Executive Chairman)
Frederic Vecchioli
(Chief Executive Officer)
Andy Jones
Ian Krieger
(Chief Financial Officer)
(Non-Executive Director)
Gert van de Weerdhof
(Non-Executive Director)
Laure Duhot
(Non-Executive Director)
Delphine Mousseau
(Non-Executive Director)
Jane Bentall
(Non-Executive Director)
Company Secretary
Helen Bramall
Registered office
Brittanic House
Stirling Way
Borehamwood
Hertfordshire WD6 2BT
Registered company number
04726380
Websites
www.safestore.co.uk
www.safestore.com
Bankers
National Westminster Bank plc
ABN Amro Bank N.V.
Crédit Industriel et Commercial
Bank of China
Citibank N.A.
Banco de Sabadell S.A.
Independent auditor
Deloitte LLP
Statutory Auditor
2 New Street Square
London EC4A 3TR
CBP016885
Safestore Holding plc’s commitment to environmental issues
is reflected in this Annual Report, which has been printed on
Magno Satin, an FSC® certified material. This document was
printed by Park Communications using its environmental print
technology, which minimises the impact of printing on the
environment, with 99% of dry waste diverted from landfill.
Both the printer and the paper mill are registered to ISO 14001.
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Safestore Holdings plc
Brittanic House
Stirling Way
Borehamwood
Hertfordshire WD6 2BT
Tel: 020 8732 1500
Fax: 020 8732 1510
www.safestore.co.uk
www.safestore.com
Further information and investor
updates can be found on our website at
www.safestore.co.uk/corporate