The impact of the United Kingdom’s value-added tax (VAT) on self-storage facilities was illustrated this week by operator Safestore Holdings PLC, which announced a pre-tax loss of £19.5 million ($30.9 million) for the 2012 fiscal year ended Oct. 31. The loss was in contrast to a £8.5 million ($13.5 million) pre-tax profit the previous year. Profit loss experienced by the company’s French facilities was attributed to the British pound’s 10 percent decline against the euro.
“Retail chief executives complained when VAT went from 17.5 percent to 20 percent; we’ve gone from 0 percent to 20 percent overnight,” said CEO Peter Gowers. The VAT went into effect on Oct. 1, 2012. Company officials estimate the tax was responsible for £2 million ($3.2 million) in lost revenue last year.
“We have sought to pass on the full additional costs of VAT wherever possible, with targeted discounts provided to a relatively small number of key or high-value customers,” company officials said in November. “This has resulted in a higher vacate rate and moderation in the rate of new let growth. While it will take more than one month's data to fully assess the impact on our business, early indications suggest that it remains in line with previous guidance.”
To help combat the VAT, Safestore will convert to real estate investment trust status in April. The move to a more tax-efficient classification will save the company £3 million ($4.8 million) annually, officials said.
The company also announced the resignation of Richard Hodsden, chief financial officer. Hodsden served as CFO for 10 years and will remain with the company until July. He will be replaced by Andy Jones, currently director of group finance at Worldpay, a payment-processing company.
"The board would like to express its sincere gratitude to Richard for his valuable contribution to the success and development of the company, including its successful listing and subsequent growth,” said Richard Grainger, Safestore’s chairman.
Safestore operates 135 self-storage facilities, including 98 wholly owned U.K. locations and 25 wholly owned facilities in France. The company also has 12 locations under management in the U.K. It serves approximately 43,700 total customers and employs about 550 people.