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Big Yellow edging towards ambitious 90% occupancy target

The group's pipeline now spans ~620,000sqft ... and should add a further 13% to group revenues, at current prices, with high drop-through to profits, Liberum Capital Markets said
Big Yellow storage place
The company usually can't find buildings of the size it wants so it tends to construct them itself

Self-storage group Big Yellow Group PLC (LON:BYG) boasted of continued growth in all of its key metrics in the financial year just ended.

Revenue in the year to the end of March rose 7% to £116.76lm from £109.1mln, while like-for-like revenue growth was also 7%.

READ: Big Yellow Group closes in on target occupancy rate of 85%

Revenue growth was driven by an increase in the occupancy rate, which stood at 81.0% at the end of March, up from 78.0% a year earlier. Excluding stores open less than a year, the occupancy rate stood at 81.9%.

Liberum Capital Markets had expected the occupancy rate to rise to 83.8%.

Adjusted profit before tax rose 12% to £61.4mln from £54.6mln the previous year.

A final dividend of 15.5p, up 10% on the previous year, made the full-year pay-out 30.8p, up 12% from the 27.6p paid out last year.

"We remain focussed on our core objective of increasing occupancy to 90%. As we have previously indicated, higher levels of occupancy deliver more traction on pricing and drive rate growth and indeed we have seen that materialise in the second half of the year,” said Nicholas Vetch, the executive chairman of Big Yellow.

“As our vacant capacity has reduced we have been more aggressively pursuing an expansion strategy. There are very few existing stores that are of sufficient quality available to purchase and brand as Big Yellow. We continue therefore to acquire raw land and develop our own stores, and are pleased to have secured a number of quality sites during the year. The development process however, of which we have unparalleled experience, remains long, does carry risk, and is increasingly complex,” he cautioned.

“Risks external to our business remain, and there will no doubt be setbacks in economic growth. It is for that reason that we keep the business very conservatively financed thus enabling us to plan and execute the next phase of growth,” he concluded.

Liberum, which has a target price of 860p for Big Yellow, said the storage specialist had delivered good profit growth again that reflected the benefit of strong occupancy progression, while it is also beginning to see growth in the rates it can charge.

“Big Yellow’s purpose built portfolio has accrued significant scale benefits, which aids confidence in the opportunity for the business to continue to generate long-term growth with an irreplaceable portfolio and an established online presence which is becoming increasingly critical for new enquiries. This combines with an operationally geared model, which is highly cash generative and a portfolio which has very low maintenance capex requirement and risk of obsolescence,” the broker said.

Nevertheless, with the shares trading about a pound above the broker’s target price, Liberum left its rating at ‘hold’.

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