Safestore Holdings plc

Annual Financial Report and AGM documents

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9 February 2018

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Safestore Holdings plc ("the Company" or "the Group")

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Publication of Annual Report and Accounts 2017, Notice of 2018 Annual General Meeting and Form of Proxy

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Safestore Holdings plc ("the Company") announces, in accordance Listing Rules 9.6.1 and 9.6.3, that copies of the above documents have been submitted to the Financial Conduct Authority and will shortly be available for inspection on the national storage mechanism at www.morningstar.co.uk/uk/nsm .

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These documents have been posted to those shareholders who have elected to receive hard copy communications or have otherwise been made available to shareholders today.ï¿½

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The Company's 2018 Annual General Meeting will be held at Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT at 12 noon on Wednesday, 21 March 2018. Full details of the proposed resolutions are set out in the Notice of Meeting.

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The Annual Report and Accounts for the year ended 31 October 2017 is now available for download from the Company's website at:

https://www.safestore.co.uk/corporate/investors/report-and-presentations/

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The Notice of Notice of 2018 Annual General Meeting and Form of Proxy are also available for download from the Group's website at:ï¿½

https://www.safestore.co.uk/corporate/investors/report-and-presentations/

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The information included in the appendix to this announcement has been extracted from the Annual Report and is reproduced here solely for the purpose of complying with Disclosure Guidance and Transparency Rule ("DTR") 6.3.5 on respect of how to make annual financial reports available to the public.

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The content of this announcement, including the appendix, should be read in conjunction with the preliminary announcement of annual results, released on 9 January 2018, which is available on the Company's website at:

https://www.safestore.co.uk/corporate/investors/report-and-presentations/

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Together these announcements constitute the material required by DTR 6.3.5 to be communicated in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report.ï¿½ Defined terms used in the appendix refer to terms as defined in the Annual Report. Page numbers in the appendix refer to pages in the Annual Report.

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For further information, please contact:

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Safestore Holdings plc

Nicholas Jennings, Interim Company Secretaryï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ Tel: 020 8732 1500

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Appendix

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Statement of Directors' responsibilities

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Page 66 of the Annual Report contains the following statement regarding responsibility for the financial statements and the management report included in the Annual Report.

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The Directors, who are named on pages 34 and 35, are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare such financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework'. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the parent company and of the profit or loss of the Group for that period.

In preparing the parent company financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether Financial Reporting Standard 101 'Reduced Disclosure Framework' has been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· make an assessment of the Group's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the parent company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website at www.safestore.com. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' responsibility statement

We confirm that, to the best of our knowledge:

· the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole;

· the strategic report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

Principal risks and risk management

Pages 13 to 16 of the Annual Report contain the following statement on principal risks and uncertainties faced by the Group.

Risks and risk management

The Board recognises that effective risk management requires awareness and engagement at all levels of our organisation.

Risk management process

The Group faces a number of risks which, if they arise, could affect its ability to achieve its strategic objectives. The Board is responsible for determining the nature of these risks and ensuring appropriate mitigating actions are in place for managing them.

Effective risk management requires awareness and engagement at all levels of our organisation. It is for this reason that risk management is incorporated into the day-to-day management of our business, as well as being reflected in the Group's core processes and controls. The Board has defined the Group's risk appetite and oversees the risk management strategy and the effectiveness of the Group's internal control framework. Risks are considered at every business level and are assessed, discussed and taken into account when deciding upon future strategy, approving transactions and monitoring performance.

Strategic risks are identified, assessed and managed by the Board and the Audit Committee, with support from the Risk Committee. Strategic risks are reviewed at Board level to ensure they are valid and that they represent the key risks associated with the current strategic direction of the Group. Operational risks are identified, assessed and managed by the Risk Committee and Executive Team members, and reported

to the Board and the Audit Committee. These risks cover all areas of the business, such as finance, operations, investment, development and corporate risks.

The risk management process commences with rigorous risk identification sessions incorporating contributions from functional managers and Executive Team members. The output is reviewed and discussed by the Risk Committee, supported by members of senior management from across the business. The Risk Committee identifies and prioritises the top business risks, which are then challenged by the Board. The process focuses on the identification of key strategic, financial and operational risks. The potential impact and likelihood of the risks occurring are determined, key risk mitigations are identified and the current level of risk is assessed against the Board's risk appetite. These top business risks form the basis for the principal risks and uncertainties detailed in the section below.

Principal risks and uncertainties

The principal risks and uncertainties described are considered to have the most significant effect on Safestore's strategic objectives. This list is not intended to be exhaustive. Some risks, however, remain outside of the Group's full control, for example macro-economic issues, changes in government regulation and acts of terrorism.

The key strategic and operational risks are monitored by the Board and are defined as those which could prevent us from achieving our business goals. Our current strategic and operational risks and key mitigating actions are as follows:

Risk

Current mitigation activities

Developments since 2016

Strategy

The Group develops business plans based on a wide range of variables. Incorrect assumptions about the self-storage market, or changes in the needs of customers, or the activities of customers may adversely affect the returns achieved by the Group, potentially resulting in loss of shareholder value.

· The strategy development process draws on internal and external analysis of the self-storage market, emerging customer trends and a range of other factors.

· Continuing focus on yield management with regular review of demand levels and pricing at each individual store.

· The portfolio is geographically diversified with performance monitoring covering the personal and business customers by segments.

The Group's strategy is regularly reviewed through the annual planning and budgeting process, and regular reforecasts are prepared during the year.

This year has seen the twelve Space Maker stores and five development stores acquired or opened during 2016 successfully integrated into the Group's store portfolio. Further developments during FY2017, including the acquisition of the twelve Alligator stores and four new sites, strengthen the Group's portfolio and develop its geographical diversification.

However, no business strategy is without risk, and the level of this risk is considered to have remained broadly similar to last year.

Finance risk

Lack of funding resulting in inability to meet business plans, satisfy liabilities or breach of covenants.

· Funding requirements for business plans and the timing for commitments are reviewed regularly as part of the monthly management accounts.

· The Group manages liquidity in accordance with Board-approved policies designed to ensure that the Group has adequate funds for its ongoing needs.

· The Board regularly monitors financial covenant ratios and headroom.

· The Group's banking facilities run to 30 June 2022 with an option to extend for a further year. The new US private placement notes mature in seven, ten and twelve years.

In May 2017, the Group refinanced its borrowing arrangements, which resulted in an increase of the weighted average maturity of the Group's debt by more than three years and, along with the subsequent restructuring of our interest hedging arrangements, has reduced the overall cost of debt to 2.14% (FY2016: 3.58%).

Subsequently, in October 2017, the Group increased its committed borrowing facilities by the exercise of a £60 million accordion facility in anticipation of the acquisition of the Alligator portfolio, which completed after the year end on 1 November 2017.

Although the Group's loan-to-value ratio ("LTV") has increased due

to the Alligator acquisition, this risk is considered to have decreased as a result of the refinancing.

Treasury risk

Adverse currency or interest rate movements could see the cost of debt rise, or impact the Sterling value of income flows or investments.

· Guidelines are set for our exposure to fixed and floating interest rates and use of interest rate and currency swaps to manage this risk.

· Foreign currency denominated assets are financed by borrowings in the same currency where appropriate.

We repaid our US Dollar-denominated borrowings during the year, and replaced them with additional Euro-denominated borrowings to provide a natural hedge against the Euro-denominated net assets of our French business.

Following the refinancing of our borrowing arrangements, we cancelled all our existing interest rate swaps and replaced them with new interest rate swaps at more competitive interest rates.

Despite the increase in the UK base rate shortly after the year end, it remains low; however, current forecasts suggest it may increase further over coming months. Therefore, despite the mitigation provided by our interest rate swaps and fixed interest borrowings, the risk of adverse interest rate fluctuations has increased during the year.

Property investment and development

Acquisition and development of properties that fail to meet performance expectations or overexposure to developments within a short timeframe may have an adverse impact on the portfolio valuation, resulting in loss of shareholder value.

· Thorough due diligence conducted and detailed analysis undertaken prior to Board approval for property investment and development.

· The Group's overall exposure to developments is monitored and controlled, with projects phased to avoid overcommitment.

· The performance of individual properties is benchmarked against target returns.

A robust due diligence process was undertaken prior to the Alligator acquisition. Other projects were considered during the year, but were not pursued when they failed to meet our rigorous investment criteria.

The capital requirements of development projects undertaken during the year have been carefully forecast and monitored.

We continue to pursue investment and development opportunities,

and consider our recent track record to have been successful. Therefore, the Board considers that there has been no significant change to this risk since last year.

Valuation risk

Value of our properties declining as a result of external market or internal management factors.

In the absence of relevant transactional evidence, valuations can be inherently subjective leading to a degree of uncertainty.

· Independent valuations conducted regularly by experienced, independent, professionally qualified valuers.

· A diversified portfolio which is let to a large number of customers helps to mitigate any negative impact arising from changing conditions in the financial and property markets.

· Headroom of LTV banking covenants is maintained and reviewed.

· Current gearing levels provide sizeable headroom on our portfolio valuation and mitigate the likelihood of covenants being endangered.

The valuation of the Group's portfolio has continued to grow during the year, reflecting both valuation gains arising from the increasing profitability of our portfolio and additions to our portfolio through corporate acquisitions and the opening of new development

stores over the last two financial years.

In addition, there has been an increase in relevant transactional evidence recently.

As a result of the continuing strengthening of the Group's balance sheet, the level of this risk is viewed as having decreased slightly since last year.

Occupancy risk

A potential loss of income and increased vacancy due to falling demand, oversupply or customer default, which could also adversely impact the portfolio valuation.

· Personal and business customers cover a wide range of segments, sectors and geographic territories with limited exposure to any single customer.

· Dedicated support for enquiry capture.

· Weekly monitoring of occupancy levels and close management of stores.

· Management of pricing to stimulate demand, when appropriate.

· Monitoring of reasons for customers vacating and exit interviews conducted.

· Independent feedback facility for customer experience.

· The like-for-like occupancy rate across the portfolio has continued to grow due to flexibility offered on deals by in-house marketing and the customer support centre.

We have continued to grow like-for-like occupancy during the year, and the newly opened stores are performing well.

The new stores which have been acquired or opened over the last two financial years have diversified the potential impact of underperformance of an individual store.

As a result, the level of this risk has reduced since last year.

Real estate investment trust ("REIT") risk

Failure to comply with the REIT legislation could expose the Group to potential tax penalties or loss of its REIT status.

· Internal monitoring procedures are in place to ensure that the appropriate rules and legislation are complied with and this is formally reported to the Board.

The Group has remained compliant with all REIT legislation throughout the year.

There has been no significant change to this risk since last year.

Catastrophic event

Major events mean that the Group is unable to carry out its business for a sustained period, health and safety issues put customers, staff or property at risk, or the Group suffers a cyber-attack, hacking or malicious infiltration of websites. These may result in reputational damage, injury or property damage, or customer compensation, causing a loss of market share and income.

· Business continuity plans are in place and tested.

· Back-up systems at offsite locations and remote working capabilities.

· Reviews and assessments are undertaken periodically for enhancements to supplement the existing compliant aspects of buildings and processes.

· Monitoring and review by the Health and Safety Committee.

· Robust operational procedures, including health and safety policies, and a specific focus on fire prevention and safety procedures.

· Fire risk assessments in stores.

· Specialist cyber-security advice and consultancy; dedicated in-house monitoring and security review; and external penetration testing.

· Limited retention of customer data.

Continuing focus from the Risk Committee, with particular attention to specific issues. For example, a review of our store fire strategy was undertaken following the tragic fire at Grenfell Tower in London during the year.

The threat from cyber-attacks continues to grow, so this risk has increased since last year, and the risk management and mitigation actions have been developed accordingly.

Consequences of the UK's decision to leave the EU ("Brexit")

The UK is expected to leave the EU by March 2019. The terms of the UK's departure remain unclear, which has generated uncertainty in the economy and also with regard to legislation changes both before and after Brexit.

Potential changes to UK legislation or regulations may include changes to the right of EU citizens to work in the UK, changes to direct or indirect tax legislation or other legislation changes such as health and safety.

· Economic uncertainty is not a new risk for the Group, but increases the likelihood of previously recognised risks, and is addressed under the finance risk, treasury risk and valuation risk categories above.

· Self-storage is a localised industry, with a broad and diversified customer base, so demand is unlikely to be significantly impacted by Brexit related changes.

The UK has now triggered Article 50, which sets the expected date of the UK's departure from the EU for March 2019. We are developing contingency plans; however, until the terms of Brexit become clearer, limited progress can be made.

A review has identified that the UK workforce includes a low proportion of employees whose right to work in the UK may be impacted by potential Brexit related legislation changes.

The level of this risk has not changed since last year.

25. Employees and Directors

Key management compensation	2017	2016
	£'m	£'m
Wages and salaries	3.0	2.9
Social security costs	1.4	1.1
Post-employment benefits	0.2	0.1
Share-based payments	1.2	1.2
	5.8	5.3

About Safestore:

· Safestore is the UK's largest self-storage group with 146 stores, comprising 120 wholly owned stores in the UK (including 67 in London and the South East with the remainder in key metropolitan areas such as Manchester, Birmingham, Glasgow, Edinburgh, Liverpool and Bristol) and 26 wholly owned stores in the Paris region.

· Safestore operates more self-storage sites inside the M25 and in central Paris than any competitor providing more proximity to customers in the wealthiest and densest UK and Parisian markets.

· Safestore was founded in the UK in 1998. It acquired the French business "Une Pièce en Plus" ("UPP") in 2004 which was founded in 1998 by the current Safestore Group CEO Frederic Vecchioli.

· Safestore has been listed on the London Stock Exchange since 2007. It entered the FTSE 250 index in October 2015.

· The Group provides storage to around 60,000 personal and business customers.

· Safestore has a maximum lettable area ("MLA") of 6.28 million sq ft (excluding expansion pipeline stores).

· Safestore employs around 600 people in the UK and France.