Big Yellow warns on VAT impact

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Self-storage specialist Big Yellow has reported a 20 per cent rise in half-year profits but warned that the addition of VAT to storage costs will hamper earnings growth in the short term.

The firm, which operates 66 facilities – including one in Edinburgh – said adjusted pre-tax profits rose to £13.9 million in the six months to 30 September, up from £11.6m a year earlier, as store revenues grew 11.5 per cent to £35.5m.

Shareholders will receive an interim property income dividend of 5p per share, up from last year’s payout of 4.5p.

Executive chairman Nicholas Vetch said: “This is a strong revenue and earnings performance in a challenging environment for consumer-facing businesses such as ours.

“The impact of higher interest costs and the imposition of VAT on storage will create a drag on the pace of earnings growth in the short term. Additionally, we believe the economy will remain subdued for some years to come.”

However, Vetch said the firm was well placed to meet these challenges thanks to growing market awareness and the fact that the bulk of the firm’s storage facilities were in London and the south-east of England.

Investec analyst Alan Carter said today’s figures showed a “strong” first-half performance from Big Yellow, driven by an increase in occupancy and the rates achieved.

He added: “There is some uncertainty over the impact of VAT, which did not commence until after the period-end, but we do not think the ultimate effect will derail the robust business model.”