Dividend lift as Big Yellow enjoys a return to the black

The group, which has six stores in Yorkshire but is mainly concentrated around London, said the profits uplift in the six months to the end of September compared with 3.4m losses a year earlier, when it was hit by slumping property values.

"The business is experiencing the usual seasonal slowdown, but as in previous years, we look forward to an improvement in demand from early 2011 as we enter our more buoyant spring and summer trading periods," said executive chairman Nicholas Vetch.

The company, which has 61 stores and a further nine in development, said it would pay an interim dividend of 4p per share. The company last paid an interim dividend in 2007.

Big Yellow said it saw occupancy growth of 209,000 sq ft during the period, compared with 96,000 sq ft a year earlier. Revenues were up seven per cent in the six months to 31.1m.

The group added the average occupancy rate at its 32 established stores was 72 per cent during the period, compared with 71 per cent a year earlier. These sites increased revenues by three per cent, thanks to being more full and a two per cent increase in average rents.

"Big Yellow continues to make steady progress in its key ambition of increasing occupancy across its store portfolio," added Mr Vetch. "The commensurate increase in revenue largely feeds through to cash flow, profit and dividend growth."

Big Yellow, which has a 325m senior debt facility, said it ended the period with net debt of 269.5m. During the period HSBC increased its participation in the facility to 50m.

The group has exchanged contracts to sell surplus land in Blackheath, London. It has also obtained planning permission for a 92-bedroom Premier Inn hotel to be built on surplus land in Richmond, London.

Analyst John Cahill at Evolution Securities said "more lettings (are) needed" and maintained a 'neutral' recommendation.

"The income potential of Big Yellow is considerable," he said. "Rents on wholly-owned stabilised units rose 3.2 per cent over the period, and with 72 per cent of available capacity in London where rents are higher there is significant upside – but management need to increase occupancy."