Good day everyone, and welcome to today's Shurgard Self Storage SA H1 2022 Results Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star one on your touchtone phone. Please note this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn today's call over to Caroline Thirifay. Please go ahead, Caroline.
Thank you, Ashley. Good morning, everyone. Thank you for joining us for the H1 2022 results. I'm here with Marc Oursin and Jean Kreusch. Before we begin, we want to remind you that all statements other than statements of historical facts included on this call are forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected by the statement. These risks and other factors could adversely affect our business and future results that are described in our earnings call, earnings release, and in our publicly reported information. You can find our press release and an audio webcast replay of this conference call on our shurgard.eu website. With that, I will turn the call over to Marc.
Thank you, Caroline, and welcome everybody to this earnings call. I'm happy, I'm very happy to share with you these numbers that are great. Starting with our first slide, our strong results are coming first from the growth of the revenue. We have been able to reach 12.3% growth of the total company, and this is mainly fueled by the rate growth and slightly by occupancy. I will come back to that later. On the margin side, we've been able to grow for the half year by 16%, and this is due mainly to this growth of revenue and the good grip we have on the costs.
If you look at more precisely the same-store pool, here you have actually a growth of revenue of 9.1%, which is definitely coming from a very strong growth of our rates for this pool of stores and slightly from occupancy. It's really a value effect versus a volume effect. Knowing that, by the way, our same store pool is 95% of our revenue. Well, all of that translated into a significant increase of our margin, 2.5 percentage points, which is quite logical. I mean, strong growth on the revenue, cost under control, so mechanically margin is growing. We had a growth also of 15.3% for our adjusted EBITDA earnings, reaching EUR 64.5 million for the half year.
This is excluding a non-current income that we had in 2021 coming from an insurance reimbursement. As we said during our last calls, our dividend per share for the year will be EUR 1.70 a year, and therefore for the half year it will be half of that, so EUR 0.58 per share for this payment that will take place at the end of September this year. Let's go to the next page. Let's talk about the pipeline. The pipeline is strong and is growing, which is exactly what we have said, and this is what we are doing with the teams, and that's great. 2022 started with the opening of a property in Paris called Lagny on the east side of Paris region.
We have five others that will take place mainly at the end of this quarter in Q4 in North Rhine-Westphalia. For the one we were using these three letters quite often. For the non-German speakers, it's mainly the west side of Germany, Cologne and Düsseldorf area, to make it simple. Randstad, we are talking about the Netherlands here, which is mainly the square of Amsterdam, Rotterdam, Utrecht, and then The Hague, and also Paris. These properties will take place there. We are expecting at maturity a rate and a return, a yield of 7%-8%, knowing that maturity for us is usually four years-six years, depending the size of the property.
We have also acquired in Central London one property, early this year in Q2, for EUR 7 million, with same thing, an attractive return of 7%-8%. 2023, 2024, starting to fill strongly the pipeline, where we have five projects, 12,000 square meters that are actually in the pipeline redevelopment. In Munich, Randstad again, Stockholm and London. On the top of that, we have nine projects, which is already 46,000 square meters in the same areas on the top of what I said, so plus Paris and also Berlin and Stuttgart, where we have also other projects. What is interesting to note is that, the acceleration of the growth of this pipeline, it was 6% at the end of Q1.
Now it is 7% of the total net rentable of the company, and this is a short-term pipeline. We are talking about the years 2022, 2023. Let's go to the balance sheet. You know that we have a very strong and robust balance sheet and that's great. Starting with the cash that we have on hand, more than EUR 175 million at the end of June. In terms of capacity of borrowing, we still have a revolving credit facility of EUR 250 million that expiring in 2025 and that has not been undrawn. And we still have also an uncommitted EUR 250 million, so another EUR 250 million of shelf note facility for a three-year period.
On top of that, in terms of debt, we have EUR 800 million of senior notes through USPP, so very long term, pretty well scattered. The next maturity to reimburse will be not before 2024, and it will be EUR 100 million. If you look at the main ratios of debt, so LTV has reached 16.8% for June. This is mainly due to the fact that the NTAs increased, so therefore the ratio went down or has been stabilized. If you look at the more leverage ratio of the debt, which is net debt to EBITDA, we are almost at 4%, which was by the way the bottom of our guidance at EUR 28 million, which is 4%-5% in terms of net ratio for the debt.
The ICR is at 8.5% at the end of June. If you look at the valuation of the company coming from the valuers. The NTA, the net tangible asset per share has reached EUR 38.46. More importantly, compared to a year ago, it is 24.6%. This is mainly coming, I would say 50/50 between compression of the exit cap rate and the improvement of the performance of our properties globally. The adjusted profit per share has reached EUR 0.72 at the end of the semester, which is a growth of 4.6% versus the same period of last year. As a reminder, we are clearly a freeholder company.
94% of our portfolio is in a freehold situation. Q2 will be pretty flat because Q2 is exactly more or less what Q1 was. It's very stable in terms of performance. If you look at the revenue growth, total company, the NOI growth, and the other metrics, it's much more or less a copy-paste of Q1. Let's go to the outlook for 2022. You've seen in the press releases that we have disclosed in our half year report this morning that we have decided to raise up the outlook for the year. As a reminder, we started the year with a 7%, and we were cautious, obviously. It's not bad. I would say it's pretty good.
Therefore today, based on what we have done in Q1, and then the repetition of that in Q2, and also the fact that the half Q3 is behind us. We are mid-August, which is six weeks, over 13 weeks for Q3, where we see the same trend as the Q1 and Q2. We reiterate the fact that the guidance should be between 10%-12% for our total revenue growth for the year 2022 versus the whole year 2021. On top of that, we are pretty confident to develop 49,000 square meters. As usual, via the three levers that we have. Expanding existing properties, what we call redevelopment, opening new properties, and on top of that, acquisitions that will still take place before the end of the year.
Regarding the income tax rate, we expect to be still below 20% for the year 2022, based on the adjusted earnings, which was perfectly in line with the guidance that we have given at the beginning of the year. On that, I will turn to Jean for more details and more financial specifications.
Thank you, Marc. Looking back at our financial performance for the first half of the year, we continue to show a very strong and steady growth. Our real estate operating revenue for the second quarter and half year grew by slightly over 12% at constant exchange rates. NOI grew by 15.1% for the quarter and by 15.7% for the half year, leading to a margin improvement of 2 percentage points. Our EBITDA grew by 16.6% for the quarter and 15.7% for the half year, demonstrating once more the scalability and continuous digitalization of our operating platform.
Finally, if we exclude the impact of a one-off insurance income we recorded in the first half of 2021, our adjusted EPRA earnings grew by 17.7% in the second quarter and by 15.3% in the first half at constant exchange rate compared to the prior year periods. On page 8, our income from property by segment at constant exchange rate demonstrate a strong growth of our same and new stores. In our same-store segment, we have a strong six months with an average occupancy at 90.3%, up 0.7 percentage points versus last year. As demand remains strong, we have been able to increase contract rates for existing customers and raise our rates for new customers, leading to an increase of our same-store average in place rent of 8.7% over 2021.
In light of inflationary pressures, we manage our expenses with caution. In the first half of 2022, our same-store operating expenses increased only by 1.9% versus last year, significantly lower than our same-store revenue growth of 9.1%. This was partly due to staffing recruitment delays. However, our e-rental solution has helped us to mitigate any impact on the top line of the staffing shortages that lowered our cost basis in the period. Same-store NOI margin improved by 2.5 percentage points to 64.6%. On page nine, o ur three levers of growth are contributing to the 15% increase in NOI, with the same stores growing by 13.5% at constant exchange rate and contributing EUR 11.8 million to the growth. While the development and acquisition added another EUR 2.2 million.
Now, moving on to our cash flow. On the next page, our operating cash flow was impacted by an unfavorable movement in our working capital, mainly driven by lower construction accruals. We invested EUR 57.1 million in development and acquisition, paid dividend and interest. At June 30, our cash balance was EUR 175.8 million. On page eleven, our balance sheet remained robust and geared for growth. Our EPRA Net Tangible Assets grew by 11.7% to EUR 3.5 billion, mainly as a result of the positive impact of higher rates and a further compression of the cap rate. On the debt side, no change. The next slide illustrate the strong growth of our EPRA NTA, a 62% increase since 2018.
While LTV, Net Debt to EBITDA and interest coverage ratios underpin our conservative and robust balance sheet. Finally, as Marc elaborated earlier on, we have a very significant pipeline. 7% of our net rentable square meters, up 1% versus Q1, has been acquired, developed, is under construction or under permit. I will now let Marc conclude.
Thank you, Jean. Regarding our conclusions, the first thing I would like to say is the numbers are really good. Second, the platform that we have is still unique in the sense that the geographical spread of it, mainly Northern Europe, the leadership and the size we have, then the quality of the real estate, the buildings, again, the three I mentioned to you, and the capacity to adding the leverage we have on this platform is really unique. Secondly, the runway of the company. We are in a market which is still clearly underdeveloped. There's an unbalanced situation between demand and supply in favor of the operators and specifically Shurgard. The fact that our density of population, the cities where we are, it continues to grow. Our strong H1 2022 performance, I will not come back on that.
Same thing with expansion portfolio. We are the one expanding the fastest and the largest. To give you an idea, we in terms of square meters opened and developed or acquired, we are more than the sum of the two others. If you take the active M&A, I mentioned that to you. ESG, the good news were that we got a great score with GRESB last year. This year in April, we have been able from MSCI to be granted a double A, which is really fantastic for the first time. All of that supported or embedded within a very robust balance sheet.
In this, clearly the fact that we have a low level of debt, plus the fact that we have a strong position in cash are really good for us. I thank you for the listening, and then I will let Caroline introduce, I think, the questions.
Thank you, Marc and Jean. Now we open the line to your questions.
At this time, if you would like to ask a question, please press star one on your touch-tone phone. Once again, as a reminder, to ask a question that is star and one, and we will pause a moment to allow any questions to queue. All right, we'll take our first question from Thomas Oversberg with HSBC. Please go ahead. Your line is open.
Yeah. Good morning, gentlemen. Congratulations to these strong results. I have two questions basically. First, regarding the operating costs, you mentioned that revenue growth was much stronger in the first half than your increase in the cost side. What's your expectation here in terms of cost? Is there any catch-up effect we can expect in the coming months or quarters? Do you expect or do you see signs or signals that the cost will rise above the level you have shown in the H1 results? The second question is regarding your debt maturity profile. Can you remind us about your debt which is due in the coming two years and how you plan to manage that? Thank you.
Hi, this is Marc speaking. I would take the first part of your question, Thomas, and then Jean will go on the debt. For the operating cost expectations used for the second half of the year. You know, when you look at the P&L of the company, the first line is what we call the labor cost. People in the properties with the management line, we're managing these staff. And we are looking more or less about 10% of our revenues. And then the second line is real estate taxes. And then you have marketing around 2.5%-3%.
You have other lines like energy, which is only 1%. I gave you these proportions in order for you to understand what we are talking about and how we approach that. Regarding the first line, the operational labor cost, if you prefer, we don't expect in the second half of the year of a major catch up with what we had in the first half of the year. We'll have probably some people that will be hired, others that will leave. All in all, we should not have a major change with the trend that we have currently. Secondly, regarding the real estate taxes, here we know them.
It's pretty straightforward, so we should not have bad surprises, except if any government is deciding to overtax suddenly real estate and right away, which is really probably not the case. On the marketing side, we have maybe a bit more on the second half than the first half, but maybe a maximum of 50 basis points around that level regarding the share of the revenues. On the energy, I don't know if you have this information, but what we have done in 2020, which looks to be already a century ago for many people. If you recall, at that time, the price of a liter of gas was less than EUR 1. Pretty far off what it is now.
We took the benefit of that to renegotiate all our utilities contracts, and to go for green, actually, so in terms of electricity and also gas. All the contracts are with fixed prices for the years 2021, 2022, 2023. We are on the safe side on that, and we don't expect to see any increases coming from that. Knowing that, as I mentioned to you, utilities today are 1% of our revenue, more or less. That's the way at least I approach this topic.
Thanks.
Jean?
Yeah. Hi, Thomas. On the debt side, our next maturity is in July 2024. It's EUR 100 million that's due to be refinanced at that time. It represents about 12% of our total debt. Currently that debt has a coupon of slightly above 3%. We feel relatively comfortable that, you know, the impact is not gonna be major on our interest cost.
Yeah, indeed.
Okay. Thank you.
Okay. Thank you, Thomas. We have a similar question from the webcast, Christian from UBS. What are your expectation of cost development over 2022, 2023? Expenses were well managed this half year, but what would it look like once hiring is ramped up and once inflation comes through in the numbers?
Chris, regarding the first part of the question regarding the cost of development, here we are talking about how the market of developers, you know, the builders, the vendors, the guy who was selling the partition, the concrete foundations, all of that. Yes, there is an increase. Clearly, what we see is it looks like that we have reached the peak in certain markets. We don't see an acceleration of the increases that we experienced at the beginning of this year. It's more stabilizing. It's not yet decreasing, but it's not continuing to inflate, which is good on the development side. Secondly, back to the OpEx. It's more or less what I explained before.
I would say that for 2023, the difference than the second half of the year, which was the question of Thomas, I think. Here, again on the marketing I cannot guess, but I would say that we'll be probably more or less on the same trend than the H2 that we'll have for 2023. As I mentioned, on the utilities we are safe till the end of 2023, so here no bad surprises. We are working hard actually to prepare 2024 on that front. Regarding the labor cost, which is the major one, 10%. Here, clearly the fact that we have to increase our people more than the past, let's say five or 10 years on average, because you had in certain countries indexation that are mandatory.
I would take Belgium as an example. Sweden also has this kind of thing. For the other markets, it's more negotiation at the level of the companies. Here, clearly, we will have more increases than we had in the past. Having said that, you know that we have set up what we call e-rental, which means that where customers are having an end-to-end, actually, fully digital experience. They go on the website and they browse on that, and then they get their unit, more or less, and the contract is done online and paid and all of that. Which means that we are more efficient at the property level.
I believe that the gains of optimization that we will have will mitigate this increase of salaries. Not completely for the time being, we'll see, but we are working on that. It will clearly help a lot.
Once again, to ask a question, that is star one on your touch-tone phone.
Okay, we have a question from webcast from Marios Stasinopoulos, Société Générale. Good morning. Thank you for the detailed update. A couple of questions from my side. What is your current pipeline of potential acquisition and how has the increased cost of capital impacted appetite? That's the first question.
Okay, fine. Thank you, Caroline. Hi, Marios. Regarding acquisition, the pipeline, you know that still we have not done yet the deals. We don't disclose what we are negotiating, because you never know, of course. I mean, till it's not signed, what could happen. Globally, we have a pipeline that is pretty active, that is in line with our objectives for the year, and this is what I just repeated. We are comfortable with the objective that we have said we should deliver every year 20,000 square meters, coming from M&A, which is on average more or less five to six properties that we're able to buy from competitors and to integrate into the platform. That's one.
Secondly, in your question regarding the cost of capital and how this is impacting or not, I would say the number of transaction or the appetite of sellers and buyers. Well, for the time being, I would say it's still. Because you know that most of the properties in the, let's say, on the market, are privately owned. For the time being, sellers are still expecting, let's say, the price of yesterday, and we are looking for the price of today. There are, of course, negotiation and tough moments. Globally, the market, I would say, is quite active, and in all the countries.
We have also a second part, a second question. Slide 24 of the presentation shows property yield on new developments.
Uh.
Have been impacted by between 0.3%-0.8%.
Mm-hmm.
Due to inflation.
Mm-hmm.
What level of inflation is this based on? Is this already included in your target stabilized NOI yield?
Jean, do you want to answer to this one?
Sure. It's based on what, as Marc said, we have seen today on current construction costs. It's based on current experience. Yes, it is already included in our target yield. We don't estimate based on those property yields an impact on our guidance. We're still remaining at 7%-8% yield as a guidance. It hasn't changed. We've been able to absorb that in our results. Obviously, it has been also helped by the fact that, as you have seen, we've been able to raise our rental rates, so that's compensating some of the construction cost increase.
Yes.
Allowing us to maintain our guidance.
To add on what Jean said, Chris, is the fact that we have been still very reasonable, we believe, in our assumptions regarding the increase of the rates in the future. Because when we are saying that the targeted yield would be 7%-8%, it's within, as I said, four years-six years down the road. What are we experiencing now in terms of global inflation, call it CPI if you want, and clearly it's been very high in 2022 versus 2021, but will it decelerate in the coming years? Will it stay at that kind of level? No one really knows. At least, what we know is that in the model that we have, we have been extremely conservative on the top line.
That's why, as Jean said, we are comfortable with the 7%-8% return.
We can go next to our next question from Daniela Lungu with First Sentier Investors. Please go ahead. Your line is open.
Yes. Thank you, and good morning, everybody. I see the rental growth has been very strong. You've captured more demand. I wonder if you are seeing some trends potentially of, you know, that high inflation, filtering into potentially future lower demand, maybe in inquiries. I mean, do you look at inquiries and how that are coming through or maybe the best guess in terms that that could, you know, turn a little bit more negative?
Well, Daniela, well, thank you for the question. Regarding the demand, is inflation, because the line was not very good, so I'm not sure that everybody has understood you. What I understood at least is inflation and what we are experiencing in more or less all the markets today where we are in Europe. Do we see due to this high level global inflation a change in a way in the pace of demand? Do we have less people, prospects interested in going to self-storage and therefore being also converted into customers? First, we don't see that.
If I take recently the month of July, we had, I mean, a great month, not great, a fantastic month of July last year, and of the comps we had to beat, but it was negative in terms of move-in same store in July this year, which is to me very normal on the move-in side, same store in July. What we see in August is now we are positive. So globally, I don't see a change in the demand side. We don't see a change between this half year and the beginning of Q3. Secondly, on the conversion, because it's nice to have a same stabilized level of demand, but do you convert still?
We don't see a change in the conversion, so within our capacity to convert a need into a contract.
Okay, thank you. Apologies if my line was bad.
No, it's not you. It's, you know, it's fine.
Okay.
First, did you get what you were looking for in terms of answer?
Yep. Yeah, I think that's fine. Thank you.
Good. You're welcome.
Perfect. Thanks. We have a question from the webcast. Andrea Gavilanes from CIC Securities. Good morning, all. How far do you think you can go with contract rate increase for existing customers? Do you see competitors in certain regions pushing offers to gain market share? Thank you.
We continue to attract customers as we have done in the past, so we don't really see a change in the trend from that point of view. Pressure on price obviously is lower. As we are quite full, our competitors and, you know, the industry is doing quite well as a whole, which means that we need less promotion to attract customers, as you know, if you're 90+ occupied, you don't need to replace as many customers as if you are less occupied. Promotions are decreasing and rate increases on existing customers are continuing as before. We see retention that's actually improving, so we don't see any impact on the retention at the current moment.
I don't know if anyone has additional questions. Do you have any additional questions that you want to raise? No. Okay. Thank you all for joining us today. We look forward to reconnecting in this venue soon.
Thank you to all of you, and have a good day. Bye-bye.
Bye-bye.
This does conclude today's program. Thank you for your participation. You may disconnect at any time.