Big Yellow Finances Improve Despite Downturn

Big Yellow Self Storage’s financial performance improved in the second half of 2010 despite the persistent problems in the economy, according to their recently released half year report.

Growing profits from self storage

Big Yellow’s most striking achievement was managing to make a profit of £8.6 million (before tax), a dramatic turnaround from the loss of £3.4 million they registered in the same period last year. This created a better result for investors, as basic earnings per share in the company grew by 6.65p from the 2.71p loss they had recorded twelve months before; and an interim dividend of 4p per share was paid, having been suspended in 2009.

Occupancy increased by a total of 209,000 square feet, a big improvement over the 96,000 sq ft they managed last year. This means all their stores on average had an extra 3,400 sq ft of occupied space.

What makes Big Yellow’s achievements really stand out, however, is that they accomplished this without opening any new stores in the twelve months between September 2009 and 2010. Instead, they just concentrated on trying to increase average occupancy across all the existing Big Yellow storage centres (which went up by 4%) and strategically increasing average rental rates. To this end, the average price per square foot customers were charged by Big Yellow went from £25.95 to £26.78 during the period.

Self storage and the housing market

Growth in the self storage sector is impressive under the present conditions, given that fewer people are moving house while the housing market stagnates and mortgages remain hard to come by. The self storage industry depends on the housing market for much of its business, as people store belongings while they move, meaning the two industries often follow a similar economic trajectory.

Nicholas Vetch, Big Yellow’s Chairman, puts some of their growth down to improvements in the housing market, while also emphasizing that the economy as a whole remains sluggish.

While many consumers may be looking to cut back during the recession, it’s possible of course that the economic problems have created new customers for self storage, or at least kept existing ones in place for longer. The difficulty in obtaining mortgages, for example, may have pushed back a few years the age at which young careerists move from small rented apartments to larger houses, meaning they need the extra space that self storage provides for longer.

General growth in self storage

Big Yellow self storage is not actually alone in having defied the recession. Lok’nStore, its smaller British rival, also turned its finances around from a £598,000 net loss in 2009 to record a £221,000 net profit twelve months later (years ending in July).

Big Yellow also clearly remains optimistic about the future, having merely put on hold further plans for expansion. The company owns an additional nine sites it intends to develop, eight of which already having planning permission.