Underlying pre-tax profits grew by 20 per cent to £11.6m thanks to rising occupancy, which hit 75 per cent across the group's 32 mature stores, up from 71.1 per cent at the March financial year-end. And for the 18 established stores inside London the closing occupancy was 77 per cent at the September period end. In turn, this supported the generous 13 per cent hike in the interim dividend.
Chief executive James Gibson stresses that revenue per available square foot - a key measure of yield in the self storage market - is now back at its mid-2007 level for the group's mature portfolio. Occupancy levels have yet to return to those highs, but that has been offset by rate increases and extra ancillary income from selling insurance and cardboard boxes. Cash profit margins are stable at around 64 per cent on the 32 established stores with the customer mix split 65 per cent domestic and 35 per cent business.
Big Yellow will open two more stores next spring, one in New Cross and the other in Chiswick. It has planning permission to build on three further sites, two in other parts of Greater London and a third in Guildford. But Mr Gibson has not pushed the button on those schemes yet and says paying down debt is a higher priority than development. Debt interest payments are the company’s single largest cost, despite an unusually low cost of debt, at 3.7 per cent. The group's £325m borrowing facilities run until September 2013 and analysts do not foresee any issues with refinancing.
Brokerage Peel Hunt expects adjusted EPS of 18p for the full year (2011: 15.5p) and year-end adjusted NAV of 463p (458p at the half-year).
|BIG YELLOW GROUP (BYG)|
|ORD PRICE:||229p||MARKET VALUE:||£298m|
|TOUCH:||228-229p||12-MONTH HIGH:||360p||LOW: 218p|
|DIVIDEND YIELD:||4.1%||DEVELOPMENT PROP:||39.1m|
|DISCOUNT TO NAV:||46%|
|INVEST PROPERTIES:||£765m||NET DEBT:||51%|
|Half-year to 30 Sep||Net asset value (p)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 7 Dec
Payment: 5 Jan
Big Yellow is a resilient company, and trading this autumn is up on last year. However, the shares have been under pressure and have now lost 35 per cent of their value since the start of June, massively underperforming the wider market which is only down 12 per cent. Trading on 13 times earnings and roughly half of adjusted book value, at this level they now offer value on a medium-term view. Good value.
Last IC view: Fairly priced, 336p, 24 May 2011