- £120 million debt refinancing reduces group cost of debt to 3.4%
- Year to date shares down 26.9%
- Recessionary fears impact investor sentiment despite strong pipeline
Shares in FTSE 250 listed self storage company Big Yellow Group (BYG) edged 1.1% higher to 1248p following news that it has refinanced its £120 million debt facility with M&G for a seven-year term expiring in 2029.
The current financing was due to expire in June 2023. The margin on the new facility has fallen by 20 basis points. This reflects the investment in sustainability made by the group over the past few years and improved portfolio performance.
Commenting on the debt refinancing chief financial officer John Trotman said: ‘We are pleased to have continued our long-standing relationship with M&G, and this refinancing is an important step in us extending the maturities of our overall debt facilities. Following this refinancing, the current average cost of our drawn debt across all of our facilities is 3.4%.’
HIGH QUALITY BUSINESS WITH SIGNIFICANT DEVELOPMENT PIPELINE
Big Yellow is the largest self storage company in the UK by market capitalisaition, and the second largest by lettable area.
It is the market leader in a structurally growing sector with steep barriers to entry. This is reflected in the group’s 60% margins and its ability to generate significant levels of cash.
The group has a significant number of new developments opening in the next year. As a rule of thumb new sites typically break event at a 25% occupancy level.
This is significant because the group has demonstrated that new centres including Kensington and Fulham that opened during previous economic downturns are able to generate attractive returns.
MACROECONOMIC HEADWINDS HOLD BACK SHARES
Year to date shares have fallen by 26.9%. This in part reflects concerns that a slowing economy will disproportionately affect small and medium sized enterprises. This will have a negative impact on the demand for storage companies.
Another concern is that the rising interest rates may result in a decline in home buying transactions that would impact earnings for the group.
The shares trade on a current PE (price-to-earnings) multiple of 22.5 and a dividend yield of 3.5%.
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