Self-storage group Big Yellow (BYG) has raised £37m through an institutional placing at 370p. The cash will allow it both to pay down its debts - paving the way for a more generous dividend policy - and to restart development after a year’s pause.
Last May Big Yellow announced a change of strategy. Instead of using cash flow to grow, chief executive James Gibson wanted to reduce net debt to £245m-£260m in order to contain debt costs at a quarter of pre-interest cash flows. He pledged to increase dividends substantially when that was done. Today’s placing effectively brings forward the timetable on debt reduction by at least a year. The company will now start paying out 80 per cent of adjusted earnings as dividends in the financial year starting this April.
The placing will also fund the construction of self-storage sheds on three vacant lots that already have planning permission. Two are in Greater London - Gypsy Corner and Enfield - and the other is in central Guildford.
The self-storage sector was hit in October by the closure of a loophole that had previously allowed it not to charge VAT. After an unusually strong summer, Big Yellow lost occupiers for 4 per cent of its total space over the quarter to 31 December, compared with 1.7 per cent the previous year (there’s always a seasonal lull). Because its capacity has grown, however, revenues were still 3.7 per cent higher than the previous year.
