Investing.com -- Shares of Safestore (LSE:SAFE) tumbled by 8% following the company’s latest earnings report, which revealed an earnings shortfall and concerns over near-term profitability.
The self-storage provider reported EPRA earnings of £92.7 million, falling short of Barclays (LON:BARC)’ forecast by 1.7%, due to higher general and administrative (G&A) and finance costs.
The company pre-announced revenue of £223.4 million, with like-for-like (LFL) revenue remaining flat. This was attributed to contrasting performances across its markets; the UK saw a decline of 1.2%, while Paris experienced a modest increase of 1.4%, and expansion markets, including Spain and Benelux, grew by 12.9%.
The LFL average rate decreased by 0.4%, although it slightly increased by 0.2% in constant currency terms. The UK’s LFL rate rose by 0.2%, while Paris and expansion markets saw movements of -0.6% and +5.6%, respectively.
Occupancy levels also presented a mixed picture, with LFL closing occupancy down 50 basis points year-over-year (YoY) to 78.8%, and total occupancy falling 240 basis points YoY to 74.6%. Paris was notably weak, with a 2.0 percentage point decrease in LFL occupancy, while the UK saw a smaller decline of 0.4 percentage points. Expansion markets, however, reported a positive change of 2.9 percentage points.
Revenue per available foot (RevPAF) was down 0.2% LFL and 3.6% across the total portfolio, with the UK lagging with a 1.5% YoY decrease LFL. Conversely, Paris and expansion markets showed gains of 1.3% and 11.5%, respectively.
Barclays analysts commented on the earnings, stating, "As revenue was pre-announced, surprises came from G&A and finance costs being slightly higher. However, management note an improvement in LFL post FY. Guidance for FY25E however points to inflationary costs pressures and negative effect of store openings as well."
The company is currently working on 31 development projects, which, while expected to drive future revenue and earnings growth, are currently impacting profitability. This, combined with recent economic headwinds in the UK and Continental Europe, is anticipated to pose challenges for the self-storage sector.
Despite this, Safestore has noted an improvement in occupancy following the fiscal year-end, with group LFL trending at +2.4%, led by expansion markets at +21.4%.
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