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Big Yellow Group PLC

Big Yellow

IFRS 2005 Restatement

September 2005

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Big Yellow and IFRS

• Overview

• Key changes

• IFRS & UK GAAP

• Year ended 31 March 2005 restatement impact

• Performance measures

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Overview

• First time adoption is for the year ended 31 March 2006

• Interims 2005 under IFRS

• No changes to cash-flow, banking covenants unaffected

• Income statement– Profit re-defined– 2005 profit before tax increased by £38.7m

• Balance Sheet– Big Yellow centres are investment properties and

revalued at fair value−Full provision for deferred tax−Net assets up by £100.5m

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Key Changes

• Property classification

• Leaseholds

• Deferred tax

• Fair valuation of debt

• Share based payments

• Final dividend accounted for on cash basis

• Goodwill – annual impairment review

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Investment Properties IAS 40

• Summary Definition– Property held by owner to earn rentals or for capital appreciation or

both rather than for the supply of goods or services or for administration purpose; or for sale in ordinary course of business

– Ancillary services to occupants of property must be minor in relation to arrangements as a whole

• Self Storage Centres– All customers sign rental agreements for their specific unit and can

stay for a minimum period or for as long as they like– The customer rental agreements qualify as operating leases– Customers have a lock on their unit and can come and go as they

please– Packing material sales and services such as forklift etc. are 5-6% of

turnover– Centres are held for capital appreciation– Defined real estate class with accepted valuation methodology

• Conclusion– Big Yellow self storage centres are investment properties under IAS 40

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Property Accounting• Before

– Open storage centres held at cost and depreciated– Properties in course of development held at cost– Surplus land for sale held in properties in course of development– No capitalisation of interest

• IFRS– Open storage centres held at fair value and valuation changes

through income statement– Property assets integral to the self storage centres no longer

depreciated and restated for year ended 31 March 2005 but not previous years

– Properties in course of development held at cost until open– Surplus land held for sale classified as non-current assets held

for sale– No capitalisation of interest

• 2005 Impact– Profit before tax increased by £38.7m for the year ended 31

March 2005, reflecting the revaluation uplift in the year and adjustment to depreciation

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Finance & Operating Leases

• Properties held leasehold

– 9 centres – average unexpired terms 21 years at 31 March 2005– No intention for property to be sold to tenant (Big Yellow) by landlord– Valuation risk remains with landlords– Market value of properties greater than finance lease receivable– Repair and insurance obligation with Big Yellow

Accounting Treatment

– Under IAS 17 these leases would be operating leases– However, properties to be treated as investment properties under IAS 40

and therefore accounted for as finance leases and fair valued

• Customer rental agreements

– Reviewed under IAS 17 and confirmed as operating leases

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Deferred Tax Liability

• UK GAAP

– Deferred tax on investment properties held at valuation disclosed but not on balance sheet

• IFRS

– Full provision for deferred tax on balance sheet changes in deferred tax go through income statement comprising of three elements.

– Deferred tax liability on revaluation of investment properties £40.2m

– Deferred tax liability on capital allowances arising from depreciation adjustment £0.6m

– Deferred tax asset on IFRS deduction for share options £2.1m

• Financial impact

– Net assets at 31 March 2005 reduced by £38.7m

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Financial Instruments

• UK GAAP

– Debt in balance sheet at amortised cost– Interest rate swaps in balance sheet at book value– Fair value adjustment disclosed

• IFRS

– Debt in balance sheet at amortised cost– Interest rate swaps held at fair value in balance sheet– Changes in values go through income statement– Hedge accounting for interest swaps not adopted– No embedded derivatives requiring valuation

• 2005 Impact

– Profit before tax increased by £0.1m

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Share Based Payments

• Post November 2002 share options

• Valued using Black-Scholes model

• Volatility

• 2005 impact – profit before tax down by £0.1m

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Profit Before Tax - 2005

£m

2005

As reported UK GAAP 4.1

Share based payments (0.1)

Goodwill adjustment 0.1

Fair value movement on interest rate swaps 0.1

Depreciation adjustment on investment properties

3.6

Leasehold property rents 2.2

Finance charge – leasehold investment properties

(1.6)

Depreciation on finance lease asset (0.6)

7.8

Gain on revaluation of investment properties 35.0

IFRS Restated 42.8

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Profit After Tax - 2005

£m

UK GAAP IFRS

Profit before tax 4.1 42.8

Current tax (0.1) (0.1)

Deferred tax (1.5) (12.6)

Profit after tax 2.5 30.1

Effective tax rate 38% 30%

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Total Assets – 31 March 2005£m

UK GAAP IFRS

Intangible Assets 1.3 1.4

Investment Property 300.9

Development Property 38.9 36.0

Plant, equipment and other property

139.0 1.4

Non current assets held for sale179.2

-339.7 2.9

Non current assets 179.2 342.6

Current assets

Inventories 0.2 0.2

Trade and other receivables 8.9 8.9

Cash 6.4 6.4

Total Assets 194.7 358.1

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Total Liabilities – 31 March 2005

£m

UK GAAP IFRS

Current liabilities

Trade and other payables 3.6 3.6

Current tax liabilities 0.1 0.1

Band overdrafts and loans - -

Short term provisions 11.5 9.9

Non current liabilities 15.2 13.6

Bank loans 108.4 108.5

Finance lease creditor - 25.7

Deferred tax liabilities 0.3 39.0

Long term provision 12.1 12.1

Total Liabilities 136.0 198.9

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Equity – 31 March 2005£m

UK GAAP IFRS

Total assets 194.7 358.1

Total liabilities (136.0) (198.9)

Net assets 58.7 159.2

Adjustments:

IAS40 Revaluation gain and depreciation adjustment

137.7

Deferred tax (net) (38.7)

Share based payments -

Goodwill 0.1

Fair value of interest rate swaps

(0.1)

2005 final dividend 1.5

IFRS Restated 159.2

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Adjusted Earnings Per Share – 31 March 2005

UK GAAP IFRS

£’000 £’000

Earnings per share 2,522 30,141

Less gain on revaluation of investment properties (34,976)

Add back deferred tax in respect of investment properties

10,493

Add back fair value movement on interest rate swaps

(47)

Earnings used for calculation of adjusted earnings per share

2,522 5,611

No of shares

Adjusted earnings per share 2.52p 5.61p

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Adjusted Earnings Per Share – 31 March 2005

Pence

UK GAAP 2.52

Reversal of depreciation 3.68

Leases – rent free periods 0.04

Income taxes (0.65)

Share based payments (0.08)

Goodwill 0.10

IFRS 5.61p

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Adjusted Net Assets per Share – 31 March 2005

UK GAAP IFRS

£’000 £’000

Net assets at 31 March 2005 58,679 159,168

Fair value movement of interest rate swaps (154)

Exercise of share options 7,331 7,331

Revaluation uplift on properties 134,983

Add back deferred tax on revaluation surplus 40,194

Add back deferred tax on fair value of interest rate swaps

(46)

Adjusted net assets at 31 March 2005 200,839 206,647

No of shares 108,120,866 108,120,866

Adjusted net assets per share 185.8p 191.1p

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Adjusted Net Assets per Share – 31 March 2005

Pence

As previously reported 185.8

Final dividend 1.4

Deferred tax asset re share options 1.9

Deferred tax liability re depreciation adjustment (0.5)

Goodwill / Plant held separately 2.5

IFRS 191.1p

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Key Performance Measures

UK GAAP IFRS

Earnings per share 2.52p 30.15p

Adjusted earnings per share 2.52p 5.61p

Net assets per share 58.6p 159.0p

Adjusted net assets per share 185.8p 191.1p

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Summary

• Year ended 31 March 2006 under IFRS

• Self storage centres revalued on balance sheet

• Enhanced reported earnings, no change in cash-flow

• But more volatile

• Business as usual

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Disclaimer

This presentation contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements.

Many of these risks and uncertainties relate to factors that are beyond Big Yellow's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company Operates or in economic technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Big Yellow does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials. Information contained in this presentation relating to the Company or its share price, or the yield on its shares, should not be relied upon as a guide to future performance.