- Revenue Growth: 8.2% increase in H1 2024.
- Same Store Property Revenue: 4.5% growth.
- Average Rate Increase: 5.1%.
- Occupancy Rate: 89.5%, with a 0.2% increase in average net rented square meter.
- All Store Margin: Stable at 62.9%.
- Expenses Increase: 4.4%.
- Same Store NOI Margin: Stable at 64.7%.
- NOI Growth: 7.5% total company.
- Adjusted EPRA Earnings: EUR78 million, a growth of 7.7%.
- Adjusted EPRA Earnings per Share: EUR0.01 lower than last year.
- Pipeline Capacity: 365,000 square meters for 2024-2026.
- Pipeline Project Costs: EUR1.047 billion.
- Expected Yield at Maturity: 8% to 9%, translating to an additional NOI of EUR90 million per year.
- Q2 2024 Revenue Growth: 9.2%.
- Q2 2024 NOI Growth: 8.8%.
- Q2 2024 Same Store Pool Growth: 4.9%.
- Q2 2024 Occupancy Rate: 89.8%, with a 0.4% increase in average square meter rented.
- Q2 2024 Average Rental Growth: 5.4%.
- Q2 2024 Adjusted EPRA Earnings Growth: 4.2%.
- Upgraded Revenue Growth Guidance for 2024: At least 8%.
- EPRA NTA per Share Increase: 4.4%.
- Cash Balance (End of June): EUR209.6 million.
- Loan to Value (LTV): 15.4%.
- Net Debt to Underlying EBITDA: 3.8 times.
- Interest Coverage Ratio (ICR): 13 times.
- Post Lok'nStore Acquisition LTV: Around 24%.
- Post Lok'nStore Acquisition Net Debt to Underlying EBITDA: Around 6 times.
- Half Year Dividend: EUR0.15 per share, payable in September.
- Lok'nStore Acquisition Cost: EUR613 million.
- Lok'nStore Expected Yield at Maturity: 8%.
- Lok'nStore Additional Square Meters: 171,000 square meters.
- Lok'nStore Portfolio Characteristics: 82% freehold, 76% purpose-built, 43% built since January 2022.
- Lok'nStore Occupancy Target: Increase from 67% to 90% within two years.
- Lok'nStore Revenue Growth Target: 2% CAGR over five to six years.
- Cost Reduction Target: EUR4 million to EUR5 million in the first full years.
- BBB+ Credit Rating: Awarded by S&P with a stable outlook.
Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shurgard Self Storage Ltd (XBRU:SHUR, Financial) reported a revenue increase of 8.2% in H1 2024, driven by strong growth in Germany, the UK, the Netherlands, and Belgium.
- The company maintained a high occupancy rate of 89.5%, with a slight increase in average net rented square meters.
- Digitalization efforts have led to a stable NOI margin at 64.7%, with 50% of move-ins now conducted through e-rental.
- The acquisition of Lok'nStore adds 171,000 square meters of storage space, doubling Shurgard's annual expansion target.
- Shurgard received a BBB+ credit rating from S&P, enhancing its access to debt capital markets and reducing credit spread on its banking facility.
Negative Points
- Despite revenue growth, the adjusted EPRA earnings per share decreased by EUR0.01 due to equity raise in 2023.
- The company's average occupancy rate showed a slight decrease, raising concerns about long-term sustainability.
- NOI margin was reported as flat but actually decreased by 40 basis points year-on-year.
- The integration of Lok'nStore is still in early stages, with full financial impact yet to be determined.
- The company faces potential challenges in maintaining pricing power amidst competition in certain markets, such as Sweden.
Q & A Highlights
Q: What are your expectations for same store revenues in the second half based on the trends you've already started to see through the third quarter? And can you provide any high-level assumptions around what you expect the Lok'nStore acquisitions to add on top of this in terms of the top line for 2024?
A: The trends have been very stable over the last couple of quarters, so we're expecting to remain around that trend for same store occupancy. As for Lok'nStore, we will have a more detailed view with our Q3 results. It's going to take us the next couple of months to have a better understanding of where we believe we'll be landing.
Q: Are you starting to see potential customers more willing to agree deals? And have you seen any stabilization in the level of discounting you've been required to offer to secure those occupiers?
A: The start of Q3 is perfectly in line with H1, and therefore, we were confident to increase the guidance. We still have a good level of demand with high occupancy in all markets and are able to put through our pricing power, so we don't see any changes here.
Q: What are your current thoughts around the financing plans of Lok'nStore currently financed with the Bridge facility?
A: We have a two-year bridge loan, so we have plenty of time. The BBB+ rating will increase our optionality in terms of ways to refinance such a bridge loan, including access to the rated public-bonds market, which was not available to us before.
Q: Is the script dividend policy something that you're intending to keep for future years?
A: It will be up to the Board to decide, but it's an optionality we have to keep our leverage under control. Our two main shareholders have declared their intention to participate through shares, covering 70% of our payout.
Q: Did you already make large changes in terms of approach to the Lok'nStore acquisition?
A: The integration was immediate. Day two, day three after the integration, everything was on our system, on our platform, with our methodology, and our people. So it is happening as we speak.
Q: How sustainable is your pricing power given the competition in some countries?
A: We have been able to keep a high occupancy during major negative macro events, and we don't see why we will not be able to continue so. The customer base is stable, and we are continuing to be able to increase the people the way we are looking for.
Q: How do you reconsider the way you will finance the Lok'nStore deal given your BBB+ rating?
A: The BBB+ rating combined with the script dividend is clearly the way we are planning to finance the opportunities to finance this acquisition.
Q: Any signs of rate growth ramping up in Sweden going forward?
A: Sweden was negative the past year, but we are now positive. We expect Sweden to continue to grow positively in terms of sales per revenue, depending on the intensity of the competition we are facing.
Q: Why exclude Lok'nStore in the guidance for year-on-year growth through FY24?
A: We decided to exclude it because we only have less than two weeks of operation here. In Q3, our outlook for '24 will take into account Lok'nStore.
Q: Any positive or negative surprises on Lok'nStore since the full takeover in August compared to your expectations?
A: The positive surprise is that Shurgard has demonstrated its capacity to roll out its system within a couple of days. The properties and people are motivated and happy to wear the Shurgard uniform, and the systems are in place and working.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
