Big Yellow walking in winter wonderland

Big Yellow Group, still reeling from last week's Budget bombshell that the government is contemplating obliging self-storage firms to charge value added tax (VAT), cheered shareholders with news of the continued recovery of occupancy levels at its units.

Growth so far in 2012 in its 53 wholly owned stores is 86,000 square feet (sq. ft), compared to 41,000 sq. ft for the same quarter last year.

The occupancy level at its established portfolio of 32 stores is currently 74%, and, excluding the newly opened store at New Cross, wholly owned store occupancy is 64%, compared to 63.4% at September 30th 2011 and 59.3% at March 31st 2011.

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The group has not seen end-March occupancy levels top the preceding year's end-Setpember level since before the recession in 2007.

The company expects full year earnings to be in line with market expectations.

"We now look forward to our traditionally busiest trading period from a new all-time high of occupied space," the firm said.

Referring to last week's Budget, the company added: "The proposed changes to the VAT status is an industry wide issue and this, together with the current levels of demand we are experiencing, gives us increased confidence that our previously articulated strategy of wholly or substantially mitigating the impact of those changes has a reasonable chance of success."

Last week the firm announced its intention to "actively engage in the consultation process with HMRC [Her Majesty's Revenue and Customs]".

The announcement has led the company to rethink its current strategy, and said: "The proposed VAT change would see a significant reduction in the cost of construction of new stores given that VAT on the construction costs would be recoverable.

"Furthermore the group would be entitled to a repayment of previously unrecovered VAT on past construction expenditure, which we believe would be sufficient to fund the £14.3m construction cost of new stores on three sites that the group currently owns. This would have the desirable effect of turning fallow assets into income producing contributors to the group."

NR