Self-storage group Safestore (SAFE) is expected to earn forecast upgrades after pleasing with news last year's consensus-beating performance has continued into fiscal 2014. Shares in the £323 million cap skip 5.8% higher to 181.75p as investors also respond positively to a refinancing.
For the year ended 31 October, Safestore turned losses of £19.5 million into £48.6 million taxable profits despite revenues dropping 2.7% to £96.1 million. This positive swing was driven by an improving economy and lower costs, leading to a 383% jump in free cashflow to £22.7 million.
Safestore’s improved earnings per share figure of 11.1p (2012: 10.6p) was 14% ahead of Liberum Capital's 9.7p EPS forecast, due to an 8% fall in the cost of sales, while the company's 1.8% dividend hike to 5.7p also beat the broker's forecasts. Furthermore, the positive momentum experienced in the final quarter of fiscal 2013 has continued into the current year, with Safestore flagging both lettings and reservations up year-on-year.
Another catalyst for upgrades is the announcement Safestore is placing some 18.6 million new ordinary shares, representing 9.9% of the company. The proceeds will reduce its loan-to-value by 10% to around 40%. It has also extended the maturities on its borrowings until 2018, reducing its financing costs by £4 million. Liberum notes this is the equivalent to an 18% upgrade to adjusted pre-tax profit before the placing.
The fully-listed group, which serves some 46,000 customers through its 134 stores in major UK cities, saw its occupancy rise slightly during the year by 1.5%, while its average rental rate was down 2.1% due to the VAT introduction.