REG - Lok'nStore Group - Interim Results
24/04/2023 07:00
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RNS Number : 0937X Lok'nStore Group PLC 24 April 2023
LOK'NSTORE GROUP PLC
("Lok'nStore" or "the Group")
Lok'nStore Group Plc, the AIM quoted self-storage Company announces interim
results for the six months to 31 January 2023
Highlights:
Reminder - We sold four stores on 31 January 2022 adding circa £37 million to
cash, reinforcing our strong financial footing. Our Same Store analysis
strips out the effect of this and of new stores opened
v Excellent growth of same store revenue
v 15% increase in interim dividend
v New store opening schedule driving future growth
v Strong balance sheet with low net debt and LTV
v Growth strategy flexible and adaptive
Strong revenue growth
Same Store
· Same Store Group Revenue £13.22 million up 11.2 % (31.1.2022:
£11.89 million)
· Same Store Group Adjusted EBITDA(1) £7.79 million up 8.9%
(31.1.2022: £7.16 million)
· Same Store Group Operating Profit before non-underlying(2) items
£5.33 million up 7.6% (31.1.2022: £4.95 million)
Headline
· Group Revenue £13.58 million up 1.5% (31.1.2022: £13.38
million)
· Group Adjusted EBITDA(1) £7.93 million down 2.3% (31.1.2022:
£8.12 million)
· Group Operating Profit before non-underlying(2) items £5.24
million down 9.3% (31.1.2022: £5.78 million)
Driven by solid operating metrics
· Move-ins up 13.5% on corresponding period last year
· Same-Store occupied space up 2.6%
· Achieved rate on occupied space up 9.2% to £26.45 per sq. ft
(31.1.2022: £24.22 per sq. ft)
· Managed store revenue £0.82 million up 21.8% (31.1.2022: £0.67
million)
· Trading momentum continues post year end with same-store revenue
up 11.4% for February and March 2023 compared to the same period last year
Management of Costs
· External cost increases experienced in period, specifically in
energy, local rates, and interest
· EBITDA margins remain robust at 60.3% despite these cost
increases
Cash flow (CAD) supports interim dividend increase
· Cash available for Distribution 17.70 pence per share down 6.8%
(31.1.2022: 19.00 pence)
· Interim dividend 5.75 pence per share up 15% (31.1.2022: 5.0
pence per share) - Twelfth consecutive year of interim dividend increase
Operational resilience reflected in net asset value
· Adjusted Net Asset Value (NAV) per share up 8.6% year on year to
£9.15 (31.1.2022: £8.43)
and down 5.9% from 31 July 2022 (£9.72)
· Four new owned stores on site accretive to NAV when they open
Sale of four stores last year leads to strong balance sheet and low net debt
· £40.3 million cash at period-end (31.7.2022: £44.4 million)
· Net debt (excluding lease liabilities and deferred financing
costs) £26.5 million (31.7.2022: £20.3 million)
· Loan to value ratio(6) 8.9% (31.7.2022: 6.6%)
· £18.2 million capex required to complete store development on
site covered by cash
· Bank facility runs until April 2026
New Landmark stores will deliver further growth
· Bedford store opened February 2023 - very early trading has been
excellent
· Peterborough store opening in 2(nd) half
· A further three store openings in FY24
Commenting on the Group's results, Andrew Jacobs, Chair of Lok'nStore Group
said,
"Lok'nStore is reporting excellent results with same-store sales rising 11.2%,
operating margins remaining resilient at 60.3% and same-store EBITDA growth of
8.9%. This is against the background of a more challenging business
environment with increased costs of energy, local rates and interest.
"After the sale-and-manage back of 4 stores on 31 January 2022 for £37.9
million we are focused on same store growth. This transaction puts the Company
in a strong financial position with only 8.9% net loan to value ratio. We are
committed to continuing our disciplined approach to capital allocation.
"We have updated the valuation of our assets resulting in net asset value per
share of £9.15, down 5.9% since July 2022 and 8.6% up from January 2022. This
valuation reflects increased interest rates and our buoyant sales and robust
margins.
"We will open 5 new Landmark stores in the coming year. These will all be
accretive to asset value, revenue and profits as they fill up. Trading since
the period end has remained solid. Our flexible and adaptive business model
gives us confidence about the future, and we are increasing the interim
dividend by 15% to 5.75 pence per share, the twelfth consecutive increase of
the interim dividend."
Enquiries:
Lok'nStore
Andrew Jacobs, Executive Chair
Ray Davies, Finance Director 01252 521 010
finnCap Ltd
Julian Blunt/Seamus Fricker/Fergus Sullivan, Corporate Finance
Alice Lane, Corporate Broking 020 7220 0500
Peel Hunt LLP
Capel Irwin/Carl Gough/Henry Nicholls 020 7418 8900
Camarco
Billy Clegg/Tom Huddart/Letaba Rimell 020 3757 4991
Key Performance Indicators (KPIs))
What we mean when we say… (and why we use these Key Performance Indicators)
In addition to IFRS accounting performance measures we use some Alternative
Performance Measures (APMs) to help us explain how the underlying business is
performing.
Here we identify those measures and explain what we mean when we use them and,
importantly, why we use them: -
1. Group Adjusted Earnings before interest, tax, depreciation and
amortisation - Adjusted EBITDA is defined as EBITDA before losses or profits
on disposal, share-based payments, acquisition costs, non-underlying items and
which demonstrates the cash generative qualities of the business.
2. Non-underlying items - Refers to one-off items of a
non-operational nature which arose during the year, and which may relate to
asset disposals, abortive site acquisition costs, or other costs and which are
likely to be infrequent events. (Refer to note 4 of the Financial Statements).
3. Cash Available for Distribution (CAD) - Is calculated as Adjusted
EBITDA less total net finance cost, less capitalised maintenance expenses, New
Works Team costs and current tax. This measures the capacity of the business
to pay dividends or pay down debt. The Cash Available for Distribution per
share is CAD divided by the number of shares in issue less shares held in the
Employee Benefit Trust (EBT). The calculation of the CAD and the CAD per share
is set out in the Business and Financial Review.
4. Adjusted Total Group Assets - The value of adjusted total assets
of £353.0 million (31.01.2022: £332.3 million) (31.07.2022: £370.9 million)
is calculated by adding the independent valuation of the leasehold properties
of £22.9 million (31.01.2022: £23.1 million) (31.07.2022: £24.2 million)
less their corresponding net book value (NBV) £7.0 million (31.01.2022: £7.3
million) (31.07.2022: £7.2 million) to the total assets in the Statement of
Financial Position of £337.1 million (31.01.2022: £316.5 million)
(31.07.2022: £353.9 million). This provides clarity on the significant value
of the leasehold stores as trading businesses which are only presented at
their book values within the Statement of Financial Position.
5. Adjusted Net Asset Value per share (NAV per share) - Adjusted Net
Asset Value per share is the net assets adjusted for the valuation of
leasehold stores (properties held under leases) and deferred tax divided by
the number of shares at the period-end. The shares held in the Group's
Employee Benefits Trust are excluded from the number of shares. The
calculation of the Net Asset Value per share is set out in the Business and
Financial Review.
6. Loan to Value Ratio (LTV) - measures the debt of the business
expressed as a percentage of total property assets giving a perspective on the
gearing of the business. The LTV calculation of 8.9% is based on (excluding
IFRS 16 lease liabilities) of £26.5 million as set out in note 24b
(31.01.2022: £22.4 million) (31.07.2022: £20.3 million) as a percentage of
the total properties independently valued by JLL, and at 31 January 2023 at
Directors' Valuation and including development land assets all totalling
£297.5 million (31.01.2022: £269.3 million) (31.07.2022: £308.2 million) as
set out in the Business and Financial Review in the Analysis of Total Property
Value table.
7. Average Cost of Debt - The average cost of debt is calculated by
taking the total interest paid on the Group's Revolving Credit Facility in the
monthly/weekly charging periods throughout the period and taking an average
based on the whole financial period. Apart from the Group's Revolving Credit
Facility the Group has no other debt. The average cost of debt in the period
was 4.13% (31.7.2022: 1.71%). Average cost of debt on active loans not yet
'rolled over' is 4.96% (31.7.2022: 2.71%).
8. Pipeline Sites - means sites for new stores that we have either
exchanged contracts on or have agreed heads of terms and are progressing with
our lawyers towards completion. We now have 16 pipeline sites of which 11 are
contracted and 5 are currently with lawyers. We currently have 24 owned stores
trading with an additional 16 managed stores trading. When these 16 sites are
fully developed, we will have a total of 56 stores. (Refer to table of
Analysis of Stores in the Business and Financial Review).
9. Secured Pipeline Sites - means the 11 sites for new stores on
which we have exchanged legal contracts. Of these 10 stores are Lok'nStore
Owned Stores and 1 will be a Managed Store.
10. Adjusted Store EBITDA - is Group Adjusted EBITDA (see 1 above)
before the deduction of central and head office costs. Unlike Group Adjusted
EBITDA this measure excludes the impact of IFRS16 and includes leasing charges
as normal operating costs of each store. The measure is designed to give
clarity on the recurring operating cash flow of the business and provides
important information on the underlying performance of the trading stores and
shows the cash generating core of the business. Use of this metric enables us
to provide additional information on store EBITDA contributions (after leasing
costs) and the margins analysed between freehold and leasehold stores and
according to the age of the stores. This analysis is set out in a table in the
Business and Financial Review.
11. Gearing - refers to the level of a company's debt relative to its
equity (http://www.investopedia.com/terms/e/equity.asp) capital, usually
expressed in percentage form. It is a measure of a company's financial
leverage (http://www.investopedia.com/terms/l/leverage.asp) and shows the
extent to which its operations are funded by lenders
(http://www.investopedia.com/terms/l/lender.asp) versus shareholders. Gearing
can be measured by a number of ratios, and we use the debt-to-equity ratio in
this document. The calculation of the gearing percentage, also referred to as
the net debt to equity ratio, is set out in Note 16 of the Interim Financial
Statements.
12. Group Adjusted EBITDAR - EBITDAR is Earnings before interest, tax,
depreciation amortisation and rent. The measure is designed to give clarity on
the effect of the rent payable by leasehold stores and how its elimination
enables an analytical comparison between freehold stores' operating
performance (which do not pay rent) and leasehold stores' operating
performance. This analysis is set out in a table in the Business and Financial
Review on page.
13. Cost Ratio - calculates the ratio of the total operating costs of the
business as set out in the Business and Financial Review, expressed as a
percentage of total Group Revenue (note 1), giving a perspective on the cost
efficiency of the business when compared to the cost ratio of the previous
year. Cost pressures around energy particularly has increased the Cost Ratio
to 40.7% (31.1.2022: 38.7%)
14. Same Store Analysis - This measure is used to give transparency on
improvements in the operating business in the period unrelated to the opening
of new stores, closure of old stores, and more particularly in this financial
period, the sale and manage-back of four stores which were sold on 31 January
2022, and reporting on stores that were open and trading at both financial
period ends 31 January 2022 and 31 January 2023. This also eliminates two new
stores from the 31 January 2023 calculation. The Same Store key performance
measure helps to illustrate the performance of the underlying business.
Chairman's Statement
I am delighted to be reporting another period of great results for Lok'nStore,
delivering a strong operating and financial performance.
These results can be summarised as:
· Sale of four stores last year reinforces strong balance sheet and
low net debt - with capital released to invest in new stores
· 11.2% increase in Same Store Group Revenue
· Disciplined management of cost increases
· 8.9% growth in Same Store Group Adjusted EBITDA
· Adjusted Net Asset Value (NAV) per share up 8.6% year on year to
£9.15 (31.1.2022: £8.43) and down 5.9% from 31 July 2022
· 15% Increase in interim dividend
· Dynamic new store opening schedule to drive future growth -
o Bedford store opened February 2023
o Four more stores open in next 12 months
The detail behind these results is discussed further in our Business and
Financial Review.
Strengthening the Balance Sheet
In the corresponding period last year to 31 January 2022, the Group completed
the Sale and Manage-Back of four freehold stores. This transaction added sales
proceeds of c. £37 million to cash balances and today puts the Company in an
excellent financial position with low net debt. Our Same Store analysis strips
out the effect of this and of the new stores in order to demonstrate the
strength of the underlying operating performance.
Continued revenue growth driven by strong demand
In the period we have replaced all the revenue generated from the four stores
sold last year which is a great performance and at a headline level we report
a 1.5% increase in Group Revenue. Same-Store Group Revenue remains strong
with growth of 11.2% over the same period last year.
Customer demand remains significantly above pre-pandemic levels with total
move-ins up 13.5% on the corresponding period last year.
Management of costs
At a headline level, total Group Operating Costs amounted to £5.53 million
for the period (31.1.2022: £5.18 million) up by 6.8%. On a Same Store basis
costs have increased by 14.3% against the same period last year.
Historically, overall cost increases have been mainly driven by the expansion
of the business. As previously reported at the full year, we are now seeing
some short term but significant external cost pressures primarily through
energy costs, which have increased in the period by £0.51 million compared to
the same period last year.
The cash costs of bank interest paid (before capitalisation of interest costs,
non-utilisation fees and loan amortisation fees) in the period was £1.34
million compared to £0.53 million in the same period last year. The Group's
current cost of debt is running at 4.96%.
Looking forward, we now have clarity on the revised business rates from April
2023 which will result in our business rates increasing £0.49 million per
annum from April 2023 and by a further £0.2 million per annum from the
following year. This step change in business rates will be offset in part by
the reduction in medium term energy costs we are already starting to see in
the market.
We have robust EBITDA margins which shelter the business against these
external cost increases and supported by our ability to move our own pricing
forward.
Operational resilience reflected in net asset value
Since the year end at July 31(st) 2022 we have seen significant changes in the
debt markets. After consulting with our external valuers Jones Lang LaSalle
(JLL), the Directors consider that the yields and discount rates which were
applied at the July 2022 year end had changed sufficiently that a directors'
valuation was required to give investors clarity on movements in asset
values.
The directors, with the assistance of JLL, have applied a 6.4% reduction to
the fair value of our freehold and leasehold stores which are now stated at
£261.1 million (31.7.22: £279.0 million). Trading store values were 9.8%
higher than at the corresponding period at the end of January 2022.
This movement in asset values is driven by changes in both the Discount rates
and Exit Yields.
There is continued strong institutional investor appetite in the UK
self-storage sector.
JLL comment that "The self-storage market has had strong market activity since
July 2022 which reflects the continued appetite for the sector but the higher
cost of debt in the present finance market is having an impact. The sector's
operational resilience in the current climate is making it a popular asset
class with investors - this is accentuated with its structural undersupply".
Adjusted Total Group Assets(4) of £353.0 moved upwards by 6.2% year on year
(31.1.2022: £332.3 million) and down 4.8% measured against the 31 July 2022
figure of £370.9 million. This results in the Adjusted Net Asset Value (NAV)
per share up 8.6% year on year to £9.15 and down 5.9% from 31 July 2022.
The four new owned stores on site will be accretive to asset values when they
open. Bedford and Peterborough will have their maiden external valuation in
July 2023 with two further owned stores opening in FY24 with their maiden
external valuations at July 2024.
Further details of the director valuation is set out in the Total Property
Value table in the Business and Financial Review and in note 11 of the
financial statements.
Further Dividend Growth
I am pleased to report that the continuing strong cash flow allows us to
continue to increase the dividend.
At this interim stage we will pay one third of the previous year's total
annual dividend which equates to 5.75 pence per share, up 15% on the 5.0 pence
per share interim dividend last year. This is the twelfth year of interim
dividend growth.
The increase in the interim dividend follows a consistent pattern reflecting
the continued growth of the Group. The interim dividend will be paid on 9 June
2023 to shareholders on the register on 5 May 2023. The ex-dividend date
will be 4 May 2023. The final deadline for Dividend Reinvestment Election by
investors is 19 May 2023.
Investment in our stores
In the period we invested £7.6 million (31.1.2022: £7.1 million) in sites
and store development. Loan-to-value (LTV) ratio (net of cash) is only 8.9%
(31.1.2022: 8.3%) (31.7.2022: 6.6%) and net debt is £26.5 million (31.1.2022:
£22.4 million) (31.7.2022: £20.3 million).
Stores on site require capital expenditure over the coming twelve months of
£18.2 million to complete. This will be drawn from the cash on hand at
period-end of £40.3 million without the need to draw down further debt.
Self-storage benefits from the short lead time between breaking ground and
store opening of only around twelve months. Beyond the stores currently on
site, we have a high degree of flexibility regarding start dates for further
building. We can therefore adapt our development programme quickly to react to
changing economic circumstances.
Managed Stores
Our strategy includes growing the number of stores we manage for third party
owners. This enables the Group to earn revenue without having to commit
capital, to amortise fixed central costs over a wider operating base and drive
further traffic to our website which benefits our entire operation.
During the period, we generated total Managed Store income of £0.82 million,
with recurring fees of £0.76 million up 29.5% from the previous corresponding
period. This increase was driven by the four stores we sold on manage back
contracts at 31 January 2022.
Lok'nStore manages 16 stores for third-party owners. Our current new store
pipeline includes one managed store which will take the total number to 17.
Our team
We always rely on our amazing people to deliver these impressive results and I
would like to thank them for all of their hard work and dedication. I am
delighted to say that all our colleagues continue to benefit from the success
of the business through bonuses as well as through our Shares in Partnership
Equity Ownership scheme and the granting of options.
To support our colleagues with the rising cost of living we once again have
brought forward annual pay reviews of our store teams and provided a one-off
cost of living support payment over the winter. We have also recently
introduced life insurance for all colleagues.
We will continue to invest in training to develop and deepen the skills of our
team members through the Lok'nStore Academy and create internal succession as
the business continues to expand.
Board changes
The Board was delighted to announce the appointment of Tom Lampard, the
Group's Property Director, to the Board of Directors of the Group with effect
from 6 February 2023.
Tom Lampard joined Lok'nStore in March 2012, and has worked in a variety of
roles across the Group. Since July 2017, Tom has worked in the Group's
property acquisitions team, most recently as Director of Acquisitions,
sourcing and securing land and buildings to expand the Group's significant new
store pipeline. Tom is an integral member of the management team contributing
to the Group's growth over recent years.
Liquidity and Cash Flow
At 31 January 2023, the Group had cash balances of £40.3 million (31.7.2022:
£46.5 million) and a £100 million five-year revolving credit facility which
runs until April 2026. This provides ample liquidity for the Group's current
needs. Undrawn committed facilities at the period-end amounted to £33.2
million. The Group is not obliged to make any repayments prior to the
facility's expiration in April 2026.
Cash inflow from operating activities before investing and financing
activities was £7.85 million in the period to 31 January up 5.4% on the same
period last year (31.1.2022: £7.45 million).
Debt and Bank Covenants
The average cost of bank debt on drawn facilities for the period was 4.13%
(2022: 1.55%). The Group's total drawn bank debt of £66.8 million is
unhedged. The Board keeps the decision on interest rate hedging under regular
review.
At the period-end interest cover was 4.7 times tested on a 12-month rolling
basis, against a covenant of 2.5 times. At the period end our loan-to-value
ratio (LTV) based on net bank debt was 8.9% versus a bank covenant limit of
60% providing a strong platform for us to develop our pipeline and open new
stores.
Both the Loan to Value and Senior Interest covenants continue to be tested
excluding the effects of IFRS 16.
For this purpose, debt / LTV will continue to exclude Right of Use Assets and
corresponding lease liabilities accounted for under IFRS 16. Property lease
costs (rents) will continue to be a deduction in the calculation of EBITDA, in
accordance with the accounting principles in force prior to 1 January 2019,
when testing the Senior Interest covenant.
Good progress on ESG targets
In recent years, the Lok'nStore Environmental committee, consisting of
colleagues in various roles across the business, including Board members, has
been focused on practical improvements we can make to our environmental
footprint.
We are working hard to create an environmentally sustainable business for all
our customers, our colleagues, local communities and the wider environment. We
are on track to achieve all of our environmental targets for this year which
as reported in our July 2022 Annual Report are;
· To obtain Energy Performance Certificates for all owned stores
· To complete a feasibility study on battery storage to complement
future PV systems
· To increase the number of stores with PV systems
· Complete a feasibility study to retro fit all stores suitable for
PV
· Review the benefit of swapping our vans from diesel to electric
· To trial the retro fitting of LED lighting in place of lower
efficiency fittings
Lok'nStore has been reporting on ESG factors since 2005 and was the first
listed UK self-storage company to do so. Since then, we have been continually
active and our operational GHG emissions are 96.5% lower than if we had taken
no action since 2005.
We will report in full at our year-end the details of our environmental
performance along with our commitments and targets in our Environmental and
Social Report.
Our Objectives
Our strategic and operational objectives remain to:
· Fill existing stores and improve achieved rates
· Steadily increase the dividend from a strong asset base with
conservative levels of debt
· Develop our secured pipeline into new Landmark stores
· Acquire more sites to build new Landmark stores
· Increase the number of stores we manage for third parties
Positive Outlook
After the period-end we opened a new Landmark owned store in Bedford. Early
trading in this store has been excellent. This underpins our confidence that
our pipeline of new stores will add further to sales and earnings growth. We
are managing the current cost increases and expect the rate of growth of costs
to recede in the medium term.
Lok'nStore continues to experience strong year-to-year revenue growth on a
Same Store basis. This will be enhanced by the three stores opened last year,
and immediately after the period-end the opening of our Bedford store. We have
further new stores in Staines, Basildon and Peterborough all opening over the
coming year. We have contracted on a new site in Milton Keynes and our secured
store pipeline of new stores will add 32.5% more trading space over coming
years. We have further sites progressing with lawyers.
Our robust margins, strong balance sheet and flexible business model enables
Lok'nStore to confidently look through the current external market
turbulence. We look to the future with confidence.
Andrew Jacobs
Chair
21 April 2023
Business and Financial Review
Lok'nStore Group has had another very good period successfully increasing our
underlying revenue and profit.
The Performance of our Stores
ü Total Same Store Self-storage revenue £12.34 million up 10.3% (31.1.2022:
£11.19 million)
o Total Self-storage revenue £12.7 million up 0.1% (31.1.2022: £12.69
million)
ü Same Store Adjusted Store EBITDA £7.54 million up 4.6% (31.1.2022: £7.21
million)
o Adjusted Store EBITDA £7.66 million down 6.2% (31.1.2022: £8.17 million)
ü Achieved rate up 9.2%
ü Store EBITDA Margins 60.3% (31.1.2022: 64.4%)
ü Managed store revenue £0.82 million up 21.8%.
Same Store Group Revenue for the six-month period was £13.22 million, up
11.2% year on year (31.1.2022: £11.88 million) driven by good occupancy and
improved pricing across our stores. This revenue growth led to an increase in
Same Store Group Adjusted EBITDA to £7.79 million up 8.9% (31.1.2022: £7.16
million).
Over the course of the year continued strong demand and higher than previous
occupancy levels have allowed us to move pricing forward 9.2% compared to
twelve months ago.
Performance - Same Store Analysis (14)
Headline Performance Same Store Performance
31 January 2023 31 January 2023
31 January 2022
Period end 31 January 2023 £'000 Percentage £'000 Percentage £'000 £'000
Headline Increase Same Store Increase Headline Same Store
% %
Group revenue 13,583 1.5 13,220 11.2 13,384 11,884
Self-storage revenue 12,700 0.1 12,337 10.3 12,689 11,190
Store Adjusted EBITDA 7,658 (6.2) 7,541 4.6 8,168 7,208
Group Adjusted EBITDA 7,931 (2.3) 7,793 8.9 8,116 7,156
Operating profit (before non-underlying items) 4,955
5,243 (9.3) 5,330 7.6 5,783
Operating costs 5,527 6.8 5,307 14.3 5,175 4,643
Total Store EBITDA Margins 60.3% 61.2% 64.4% 64.4%
Freehold Store EBITDA Margins 64.7% 66.2% 68.9% 70.0%
Leasehold Store EBITDA Margins
50.6% 50.6% 53.1% 53.1%
As a result of the external cost increases we have seen in the period,
particularly around energy and local rates, the overall adjusted EBITDA margin
across all stores decreased to 60.3% from 64.4%. Adjusted Store EBITDA
margins of the freehold stores decreased to 64.7% (31.1.2022: 68.9%).
On a Same Store basis, the overall adjusted EBITDA margin across all stores
decreased to 61.2% from 64.4%. The leasehold stores decreased to 50.6%
(31.1.2022: 53.1%). Going forwards, in the absence of more exogenous shocks,
we expect margins to move ahead again over time as new landmark stores
continue to fill and new stores open.
As the business develops the balance of the stores continues to shift towards
landmark freehold stores and managed stores which have a higher-than-average
adjusted store EBITDA margin at 64.7% and 100% respectively versus 60.3%
across all stores. The medium-term impact of this will be to continue to
increase the average EBITDA margin of the Group overall. This effect is
accentuated by operating more stores from a relatively fixed central cost
base. In this context the new stores in the pipeline will make a larger than
average contribution to Group profits as they become established trading
units.
Ancillary Sales
Ancillary sales consisting of boxes, packaging materials, insurance and other
sales were £1.26 million (31.01.2022: £1.33 million) accounting for 9.9%
(31.01.2022: 10.5%) of self-storage revenues.
Portfolio Analysis and Performance Breakdown
In the table below we show how the performance of the stores varies between
freehold and leasehold stores. Currently 43.3% of Lok'nStore owned trading
space is freehold, 20.5% is leasehold and 36.2% is in Managed Stores.
When Fully Developed
Portfolio Analysis and Performance Breakdown Number of stores % of Property % of Adjusted Store EBITDA Adjusted Store % lettable space Number of stores Total % lettable space
Valuation EBITDA Margin (%)
As at 31 January 2023
Freehold Stores 15 80.1 72.1 64.7 43.3 24 52.9
Leasehold Stores 9 7.7 27.9 50.6 20.5 10 15.0
Managed Stores 16 - - 100 36.2 17 32.1
Total stores trading 40 51 100
Pipeline Stores (secured)*
Owned - Freehold 9 12.2 - - - - -
Owned - Leasehold 1 - - - - - -
Managed 1 - - - - - -
Total secured Pipeline Stores 11 - - - - - -
Total Stores 51 100 100 60.3 100 51 100
*Applies to the 11 contracted stores only.
Analysis of Stores No of Pipeline Pipeline Pipeline
Stores Stores
As at 31 Jan 2023 Stores/Sites Trading Trading Total Secured With lawyers
Lok'nStore Managed
Freeholds 15 15
Leaseholds 9 9
Pipeline (Freehold) 14 14 9 5
Pipeline (Leasehold) 1 1 1
Sub-total 'Owned Stores' 39 24 15 10 5
Managed Stores (Trading) 16 16
Managed Stores (Pipeline) 1 1 1
Sub-total 'Managed Stores' 17 16 1 1
Total No. of Stores. 56 24 16 16 11 5
MLA sq. ft. 2,997,596 1,271,873 774,800 950,923 666,523 285,400
The freehold stores produce 72.1% (31.1.2022: 74.1%) of the Adjusted store
EBITDA and account for 92.3% (31.1.2022: 91.5%) of valuations (including
secured pipeline stores). Leaseholds trade on lower margins due to the rent
payable, but nevertheless the 50.6% margin achieved is substantial, and leads
to a higher return on capital than the freehold stores which require much
larger capital expenditure to buy the land and buildings.
Operating Performance at a glance (Lok'nStore freehold and leasehold stores
only)
In the Operating Performance table below, we show how the performance breaks
down across the stores, based on the age of store. Older stores have had more
time to fill-up and produce higher EBITDA returns.
Weeks Old Secured Under 100 100 to 250 over 250 Total
Pipeline
Six months ended 31 January 2023
Sales £000 663 802 11,235 12,700
Stores Adjusted EBITDA £'000 194 484 6,980 7,658
Adjusted EBITDA Margin (%) 29.3% 60.3% 62.1% 60.3%
Stores Adjusted EBITDAR £'000 197 484 7,849 8,530
Adjusted EBITDAR Margin (%) 29.7% 60.3% 69.9% 67.2%
As at 31 January 2023 (sq. ft.)
Maximum Net Area 620 169 216 887 1,892
Freehold / Long leasehold ('000 sq. ft.) 570 169 216 452 1,407
Short Leasehold (sq. ft.) 50 - - 435 485
Number of Stores
Freehold / Long Leasehold 9 3 4 8 24
Short Leasehold 1 - - 9 10
Total Stores 10 3 4 17 34
Director Valuation of Freehold and Leasehold Land and Buildings
Since the year end at July 31 2022 we have seen significant changes in the
debt markets. After consulting with our external valuers Jones Lang LaSalle
(JLL), the Directors considered that the yields and discount rates which were
applied at the July 2022 year end had moved sufficiently that a Directors'
Valuation was required to give investors clarity on movements in asset
values.
The Directors have applied a 6.4% reduction to the fair value of our freehold
and leasehold stores which are now stated at £261.1 million (31.7.22: £279.0
million). Trading store values were still 9.8% higher than at the
corresponding period end of January 2022.
As part of the Directors' valuation process, we commissioned JLL to complete a
review of a representative sample of the portfolio to reflect the key changes
in current market activity, occupancy, achieved rate as well as costs. They
undertook a desktop valuation of three stabilised stores and two stores in
early fill up.
The Directors then prepared a management valuation of all remaining stores
using the following assumptions which were driven by the JLL desktop
valuations inputs consistent with the sample stabilised stores.
Specifically;
· Exit Yield and Discount Rate increased by 50bpts on all freehold
stores from the values applied by JLL at 31(st) July 2022
· Short term EBITDA assumptions were reduced to reflect the
combined output of improved revenue offset by increased costs.
· Longer term EBITDA has improved as JLL assume costs stabilisation
and continued improved trading.
· Leasehold stores had the leasehold term adjusted to reflect the
time passed (6 months) between July 2022 and Jan 2023
In our FY2022 Annual Report we provided some insight on how our stores values
would be affected by a change in exit yields and discount rates and a
reduction in valuation of 6.4% is broadly in line with this sensitivity
analysis.
Further detail is set out in the Total Property Value table below and in note
11 of the financial statements.
It remains the Group's established policy to undertake a comprehensive
external valuation at each year-end and will do so at the next year end at 31
July 2023.
Total Assets and Net Asset Value
· Adjusted Total Assets £353.0 million(4) up 6.2% on last year
(31.1.2022: £332.3) (31.7.2022: £370.9 million)
· Adjusted Net Asset Value (NAV) per share(5) January to January up
8.6% to £9.15 (31.1.2022: £8.43)
· Adjusted Net Asset Value (NAV) per share down 5.9% from 31 July
2022 (£9.72)
· Investment in new stores £8.3 million (including capitalised
interest) (31.1.2022: £7.1 million)
· Value of operating stores £261.1 million up 9.8% on last year
(31.1.2022: £237.7) and down 6.4% from 31 July 2022 (£279.0 million).
· Total property assets £299.0 million up 10.4% on last year
(31.1.2022: £270.8) and down 3.5% from 31 July 2022 (£309.7 million).
The value of adjusted total assets of £353.0 million (31.01.2022: £332.3
million) is calculated by adding the valuation of the leasehold properties
less their corresponding net book value to the other assets in the business.
This provides clarity on the significant value of the leasehold stores as
trading businesses which under accounting rules on leases are only presented
at their book values within the Statement of Financial Position.
At the period-end Lok'nStore had 40 stores trading. Of these, 24 stores are
owned with 15 freeholds, 9 leasehold and 16 under management contracts.
The average unexpired term of the Group's operating leaseholds is
approximately 10 years as at 31 January 2023. All of our leasehold stores
are inside the Landlord and Tenant Act providing us with a strong degree of
security of tenure.
The valuations of our freehold property assets are included in the Statement
of Financial Position at their fair value. The value of our leasehold stores
in the valuation totals £22.95 million (31.1.2022: £23.1 million) but they
are held at cost in the Statement of Financial Position.
A deferred tax liability arises on the revaluation of the properties and on
the rolled-over gain arising from the disposal of some properties. It is not
envisaged that any tax will become payable in the foreseeable future on these
disposals due to the availability of rollover relief.
We have reported by way of a note the underlying value of these leasehold
stores in revaluations and adjusted our Net Asset Value (NAV) calculation
accordingly to include their value. This ensures comparable NAV calculations.
An analysis of the valuations achieved is set out in the table below.
Analysis of Total Property Value No of stores 31 Jan 2023 Valuation No of stores 31 Jan 2022 Valuation No of stores 31 July 2022 Valuation
/sites £'000 /sites £'000 /sites £'000
Freeholds(3) valued by JLL (1) 15 254,775 14 214,600 15 254,775
Directors' Valuation Adjustment (16,650) - -
Fair value of freehold stores 238,125 214,600 254,775
Leaseholds valued by JLL (2) 9 24,250 9 23,075 9 24,250
Directors' Valuation Adjustment (1,300) - -
Fair value of leasehold stores 22,950 23,075 24,250
Subtotal 24 261,075 23 237,675 24 279,025
Sites in development at cost (3) 10 36,393 12 31,643 9 29,215
Subtotal (4) 34 297,468 35 269,318 33 308,240
Freehold land & Buildings at Director valuation 1 1,500 1 1,500 1 1,500
Total 35 298,968 36 270,818 34 309,740
(1) Includes related fixtures and fittings (refer to note 11)
(2 ) The nine leaseholds valued by JLL are all within the terms
of the Landlord and Tenant Act (1954) giving a degree of security of tenure.
The average length of the leases on the leasehold stores valued was 9 years
and 7 months at the date of the 2023 valuation.
(3) Includes £663,658 of capitalised interest during the period.
(31.01.2022: £296,466) (31.07.2022: £440,522).
(4) Loan to value calculation based on these property values.
Total freehold properties account for 92.5% of all property values (31.1.2022:
91.5%).
Growth from new stores and more new landmark stores to come
Post the period end our new store in Bedford opened. Early trading has been
excellent. Today we are on site at four stores, which require capital
expenditure over the coming twelve months of £18.2 million to complete these
projects. This will be drawn from the cash on hand at period end of £40.3
million without the need to draw further debt.
Our total secured pipeline of 10 stores adds 32.5% of extra trading space to
the total portfolio, 48.7% to our owned portfolio and 5.9% to the managed
portfolio. Beyond the secured pipeline we continue to see many exciting
opportunities.
We have invested £7.6 million (31.1.2022: £7.2 million) in new store
development this period and we have a new store pipeline of 10(9) secured
stores which will take the total to 51 stores. These will all be purpose-built
landmark stores in highly prominent locations and will add substantially to
the Group's capacity for revenue, profit and asset growth.
Acquisition of a development site in Milton Keynes
On 4(th) October 2022, we exchanged contracts on a freehold development site
in Watling Street, Milton Keynes subject to planning. This highly visible
roadside location in the north west of the city complements our existing
leasehold store, 7 miles to the south east. Once developed the store will add
c. 60,000 sq. ft. of lettable area.
Bolton Planning permission granted
In January 2023 we were granted planning consent to build a Landmark store in
Bolton, Greater Manchester. We are now in the process of tendering for the
construction of this store which will provide 57,578 sq. ft of new space.
Summary of our contracted pipeline at 31 January 2023:
On-site at On site after
Store Size Status 31 Jan 2023 30 April 2023
sq. ft Size sq. ft Size sq. ft
(Additional)
Bedford 56,445 Opened 17 February 2023 56,445
Peterborough 45,900 On site - target opening July 2023 45,900
Basildon 49,700 On site - target opening Autumn 2023 49,700
Staines 66,500 On site - target opening Autumn 2023 66,500
Kettering 45,900 On site - target opening Spring 2024 45,900
Bolton 57,578 Planning granted 57,578
Bournemouth 75,100 Further Planning application to be submitted 75,100
Altrincham 63,900 Planning appeal submitted 63,900
Barking 84,200 Planning application submitted 84,200
Cheshunt 60,300 Further Planning application submitted 60,300
Milton Keynes 60,000 Planning application submitted 60,000
Total - 11 stores 665,523 264,445 401,078
Store and Portfolio Strategy
Our strategy is to continue to increase the number of stores we operate
without over stretching our balance sheet. The core focus of this strategy is
the acquisition of highly prominent freehold locations in busy towns and
cities in England where we will build well-branded landmark stores.
Lok'nStore's operating cash flow, solid asset base, and tactical approach to
its store property portfolio provide the Group with opportunities to improve
the terms of its property usage in all stages of the economic cycle.
Managed Stores
Lok'nStore manages an increasing number of stores for third-party owners.
Under this model Lok'nStore can provide a turnkey package for investors
wishing to own trading self-storage assets. The investor supplies the capital
for the project which Lok'nStore manages. Lok'nStore will buy, build and
operate the stores under the Lok'nStore brand and within our current
management structure.
We also consider selling established stores on sale and manage-back contracts
in order to recycle capital into new landmark stores. This allows us to
carefully manage our balance sheet as part of our successful growth strategy
and disciplined capital allocation. Indeed, some of our stores have been
freehold, leasehold and managed stores during their operating life cycle.
For managed stores Lok'nStore receives a standard monthly management fee, a
performance fee based on certain objectives and fees on a successful exit. We
also charge acquisition, planning construction and advisory fees and branding
fees.
Although these fees are irregular in nature, this demonstrates the
contractually embedded value in the managed stores income stream. This
allows Lok'nStore to earn revenue from our expertise and knowledge of the
self-storage industry without committing our capital. We can amortise various
fixed central costs over a wider operating base and drive more visits to our
website moving it up the internet search rankings and benefitting all of the
stores we both own and manage.
This strategy improves the risk adjusted return of the business by increasing
the operating footprint, revenues and profits without committing capital.
There is a strong correlation between the total management fee income and the
number of stores under management.
We generated managed store income of £821,607 in this period, compared to
£674,545 for the same period last year driven by the sale-and-manage-back of
four stores last January.
Recurring management fees generated £761,607 an increase of 29.5% over the
same period last year (31.1.2022: £588,014). Non-recurring fees were
£60,000 in the first half (31.01.2022: £86,531).
Managed store income is generated from our existing platform and central
management, resulting in an effective margin from this activity of 100%.
Percentage Increase/ Group Group Group
Management fees (decrease) Period ended Period ended Year ended
31 January 2023 31 January 2022 31 July 2022
% £ £ £
Recurring fees
Base management fees 469,564 294,012 722,084
Administration and compliance fees 52,500 35,000 86,916
Enhanced Management fees 239,543 259,002 504,379
Recurring fees - Sub-total 29.5% 761,607 588,014 1,313,379
Non-recurring fees
Construction & Advisory fees - 12,500 12,500
Supplementary fees 60,000 50,000 1,459,177
Increase in estimated fees receivable - 24,031 -
Non-recurring fees (30.7%) 60,000 86,531 1,471,677
Total management fees 21.8% 821,607 674,545 2,785,056
Financial results
· Same Store Group Revenue £13.22 million up 11.2% (31.1.2022:
£11.89 million)
o Group revenue £13.58 million up 1.5% (31.1.2022: £13.38 million)
· Same Store Group Adjusted EBITDA(1) £7.79 million up 8.9%
(31.1.2022: £7.16 million)
o Group Adjusted EBITDA(1) £7.93 million down 2.3% (31.1.2022: £8.12
million)
· Cash available for Distribution (CAD)(3) £5.21 million down 6.6%
(31.1.2022: £5.58 million)
· Cash available for Distribution (CAD) per share (Annualised)
17.70 pence down 6.8% (31.1.2022: 19.00 pence)
· Loan to Value (net of cash) 8.9% (31.1.2022: 8.3%) (31.7.2022:
6.6%)
· Interim dividend up 15% to 5.75 pence per share (31.1.2022: 5.0
pence per share)
· Cash balance £40.3 million (31.1.2022: £44.4 million)
(31.7.2022: £46.5 million)
Lok'nStore is a robust business which generates cash flow from its strong
asset base with a low LTV net of cash of 8.9% and an average cost of debt of
4.13%. The value of the Group's assets underpins a flexible business model
with stable cash flows and low credit risk giving the business a firm base for
growth.
Operating Costs
· Group operating costs amounted to £5.53 million for the year
(31.1.2022: £5.18 million) up by 6.8%
· Cost ratio(13) 40.7% (31.1.2022: 38.7%) (31.7.2022: 38.5%)
We have a strong record of disciplined control of our costs. Nevertheless, at
a headline level, total Group Operating Costs amounted to £5.53 million for
the period (31.1.2022: £5.18 million) up by 6.8%. On a Same Store basis
costs have increased by 14.8% against the same period last year reflecting the
current "cost of living crisis".
(Refer store analysis of Group operating costs in the table below).
Historically, overall cost increases have been mainly driven by the expansion
of the business. As previously reported at the full year, we are now seeing
some short term but significant external cost increases primarily through
energy costs, which have increased in the period by £0.51 million compared to
the same period last year.
Looking forward, we now have clarity on the revised business rates from April
2023 which will result in our 2023-24 business rates increasing £0.49 million
with transitional relief and by £0.69 million plus future inflationary
increases as we move to a full charge. This step change in business rates
will be offset in part by the reduction in medium term energy costs we are
already starting to see in the market.
Property costs increased by 13.2%. These costs mainly constitute rents on our
property leases, rates, energy and property maintenance and have risen in
recent years as we felt the effects of higher rates and energy bills and as we
opened our new Landmark stores which are generally larger and therefore incur
higher rates bills.
Our largest cost area, staff costs, decreased by 4.3% in the period, driven by
careful management and lower national insurance costs as fewer share options
were exercised by management and staff in the period.
The 11.9% increase in overhead costs is principally due to a stepped increase
in audit fees as the audit profession adjusts its fee rates in response to
higher regulatory and operating costs. Legal and professional costs related to
work on rent reviews, corporate tax, increased valuation costs for additional
work commissioned by the Group for valuation work completed by JLL, and
general compliance work also increased.
Other administrative costs (computer support, telephones, PPS and marketing
etc) show no material cost pressures.
Group Operations Increase (decrease) Six months Six months Year
in costs % ended 31 Jan ended 31 Jan ended 31 July
2023 2022 2022
£'000 £'000 £'000
Property costs 13.2% 3,034 2,681 5,304
Adjustment for property lease rentals (3.5%) (871) (903) (1,746)
Restated property and premises costs 21.7% 2,163 1,778 3,558
Staff costs (4.3%) 2,577 2,694 5,369
Overheads 11.9% 787 703 1,438
Total 6.8% 5,527 5,175 10,365
Same Store Analysis - This measure is used to give transparency on
improvements in the operating business in the period unrelated to the opening
of new stores, closure of old stores, and more particularly in this financial
period, the sale and manage-back of four owned stores which were sold on 31
January 2022, and reporting on stores that were open and trading at both
financial year ends 31 January 2022 and 31 January 2023. This also eliminates
the two new stores from the 31 January 2023 calculation.
The same store key performance measure helps to illustrate the performance of
the underlying business and the same store costs are shown in the table below
which shows the overall Group cost increased by 14.3%.
Group Operations Increase (decrease) Six months Six months Year
Same Store analysis in costs % ended 31 Jan ended 31 Jan ended 31 July
2023 2022 2022
£'000 £'000 £'000
Property costs 23.2% 2,975 2,415 4,881
Adjustment for property lease rentals (3.5%) (871) (903) (1,746)
Restated property and premises costs 39.2% 2,104 1,512 3,135
Staff costs (1.4%) 2,456 2,492 5,062
Overheads 16.9% 747 639 1,325
Total 14.3% 5,307 4,642 9,522
Strong Balance Sheet, Efficient Use of Capital, Low Debt
· Revolving Credit Facility £100 million runs to April
2026
· £8.3* million invested in new store pipeline
(31.1.2022: £7.1 million)
· Net debt (excluding leases) £26.5 million (31.1.2022:
£22.4 million)
· Loan to Value Ratio (LTV) net of cash 8.9% (31.1.2022:
8.3%) (31.7.2022: 6.6%)
· Cost of debt averaged 4.13% in the period (31.1.2022: 1.55%)
on £66.8 million debt (31.1.2022: £66.8 million)
* Includes £0.66 million of capitalised interest
Cash flow and financing
At 31 January 2023 the Group had cash balances of £40.3 million (31.1.2022:
£44.4 million) (31.7.2022: £46.5 million). Cash inflow from operating
activities before investing and financing activities was £7.85 million
(31.1.2022: £7.45 million).
As well as using cash generated from operations to fund some capital
expenditure, the Group has a £100 million five-year revolving credit facility
which runs until April 2026. This provides sufficient liquidity for the
Group's current needs. Undrawn committed facilities at the period-end
amounted to £33.2 million (31.1.2022: £33.2 million) (31.7.2022: £33.2
million). Cash plus undrawn committed facilities amounts to £73.5 million
leaving the business with plenty of headroom.
Strong Cash Flow Supports 15% Increase in Interim Dividend
· Interim dividend 5.75 pence per share up 15% (2022: 5.0 pence per
share)
· Cash available for Distribution (CAD) per share (annualised) was
down 6.8% to 17.70 pence compared to the corresponding period last year
(31.1.2022: 19.00 pence)
At this interim stage we will pay one third of the previous year's total
annual dividend which equates to 5.75 pence per share, up 15% on the 5.0 pence
per share interim dividend paid last year. This is the twelfth year of interim
dividend growth.
The table below shows the calculation of CAD.
Analysis of Cash Available for Distribution (CAD) Period ended Period ended Year ended
31 January 2023 31 January 2022 31 July 2022
£'000 £'000 £'000
Group Adjusted EBITDA 7,931 8,116 16,349
(Per Statement of Comprehensive Income)
Adjustment for property lease rentals (871) (903) (1,746)
Net finance costs paid (1,135) (600) (1,395)
Capitalised maintenance expenses (11) (60) (120)
New Works Team (35) (73) (125)
Current tax (Note 8) (671) (903) (1,572)
Total deductions (2,722) (2,539) (4,958)
Cash Available for Distribution 5,208 5,577 11,391
(Decrease) /increase in CAD over last year £ (369)
(Decrease) / increase in CAD over last period / year %
(6.6%) 59.6% 38.2%
Number Number Number
Closing shares in issue (less shares held in EBT and treasury)
29,422,990 29,354,843 29,380,333
CAD per share (annualised) 17.7p 19.0p 38.7p
(Decrease) / increase in CAD per share over last period / year (6.8%) 57.2% 36.7%
Management of interest rate risk
With £66.8 million of gross debt currently drawn against the £100 million
bank facility the Group is not committed to enter into hedging instruments but
continues to keep the matter under review.
The gross bank interest expense (before capitalisation of interest costs,
non-utilisation fees and loan amortisation fees) for the period was £1.34
million (31.01.2022: £0.53 million), due to higher average debt and higher
average costs of borrowing. These average costs of borrowing have continued to
rise after the period-end and the Group's current cost of debt is running at
4.96%.
The Group continues to monitor closely the effects of rising interest rates on
its senior interest covenant, which is tested on a 12-month rolling basis, and
the Group's flexible business model will enable it to take appropriate steps
to mitigate its effects should it be required.
Capitalised interest in the period on our store development programme was
£663,658 (31.1.2022: £296,466). Total finance costs in the Statement of
Comprehensive income for the period increased to £1.01 million (31.1.2022:
£0.54 million).
Lok'nStore will continue to report on the Cash available for Distribution
(CAD) which aims to look through the statutory accounts and give a clear
picture of the ongoing ability of the Company to generate cash flow from the
operating business that can be used to pay dividends, make investments in new
stores, or pay down debt.
As agreed with the banks, both the Loan to Value and Senior Interest covenants
set out in our bank facility continue to be tested excluding the effects of
IFRS 16. For covenant calculation purposes, debt / LTV will continue to
exclude right of use assets and the corresponding lease liabilities created by
IFRS 16. When testing the Senior Interest Covenant, property lease costs will
continue to be a deduction in the calculation of EBITDA, in accordance with
the accounting principles in force prior to 1 January 2019.
Taxation
The Group has made a current tax provision against earnings in this period of
£0.67 million (31.1.2022: £0.90 million) based on a corporation tax rate of
19% (31.1.2022: 19%). With the increase in corporation tax rate to 25%
effective 1 April 2023, the Group will pay a blended rate of 21% for year
ended 31 July 2023. The deferred tax provision which is calculated at forward
corporation tax rates of 25% is substantially a tax provision against the
potential crystallisation (sales) of revalued properties and past 'rolled
over' gains and amounts to £59.5 million (31.1.2022: £54.2 million)
(31.7.2022: £63.2 million).
The Directors' reconsideration of the valuations of the trading stores at the
period-end has mainly contributed to the reduction in the total deferred tax
provision at the period-end (See Note 19).
Analysis of the underlying business after adjustment for non-underlying
items
When comparing 31 January 2023 with the corresponding period last year, the
Group benefited from a higher than usual level of exceptional gains
principally resulting from the sale of the four sale and manage-back stores
totalling £6.1 million in the prior period.
In the table below we separate these non-underlying items and non-recurring
management fee income to show the performance of the underlying business.
Period Period ended Period Period ended Period ended Period
ended 31 January 2023 ended 31 January 2022 31 January 2022 ended
31 January £'000 31 January 2023 £'000 £'000 31 January 2022
2023 £'000 £'000
£'000
Underlying business Non-underlying items and non-recurring management fee income Total Underlying business Non-underlying items and non-recurring management fee income Total
Revenue
13,522 61(1) 13,583 13,297 87(1) 13,384
Total property, staff, distribution, and general costs
(5,652) - (5,652) (5,268) - (5,268)
Adjusted EBITDA(1) 7,870 61 7,931 8,029 87 8,116
Depreciation (2,463) - (2,463) (2,232) - (2,232)
Equity-settled share-based payments
(225) - (225) (101) - (101)
Non-underlying items - 119(2) 119 - 6,089(2) 6,089
(2,688) 119 (2,569) (2,333) 6,089 3,756
Operating profit 5,182 180 5,362 5,696 6,176 11,872
Finance income 305 - 305 - - -
Finance cost (1,008) - (1,008) (539) - (539)
Profit before taxation 4,479 180 4,659 5,157 6,176 11,333
( )
(1 ) Represents non-recurring
management fees
(2 ) Refer to note 4 of the notes to
the financial statements for the analysis of non-underlying items
Earnings per share
Basic earnings per share were 12.38 pence (31.1.2022: 30.16 pence per share)
and diluted earnings per share were 12.17 pence (31.1.2022: 29.64 pence per
share).
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Total profit for the financial year attributable to owners of the parent 3,651 8,832
12,078
No. of shares
Weighted average number of shares No. of shares No. of shares
For basic earnings per share 29,479,779 29,277,827 29,287,451
Dilutive effect of share options 520,042 520,839 549,321
For diluted earnings per share 29,999,821 29,798,666 29,836,772
623,212 shares (31.01.2022: 623,212) are held in the Employee Benefit Trust,
and these are excluded from the above
calculation.
Earnings per share attributable to owners of the Parent Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
Earnings per share - Basic
Basic earnings per share 12.38p 30.16p 41.24p
Earnings per share - Diluted
Total diluted earnings per share 12.17p 29.64p 40.48p
The significant increase in earnings per share in the previous period is due
in substantial part to the profits generated by the sale and manage-back of
the four stores executed on 31 January 2022 (Refer Statement of Comprehensive
Income).
Gearing(11 ()excluding IFRS16 lease liabilities)
At 31 January 2023 the Group had £66.8 million of gross bank borrowings
(31.1.2022: £66.8 million) (31.7.2022: £66.8 million) representing gearing
of 13.7% (31.1.2022: 12.6%) (31.7.2022: 9.9%) on net assets of £194 million
(31.1.2022: £178 million) (31.7.2022: £205 million).
After adjusting for the uplift in value of short leaseholds which are stated
at depreciated historic cost in the statement of financial position, gearing
is 12.6% (31.1.2022: 11.6%) (31.7.2022: 9.9%).
Gearing(11 ()including IFRS16 lease liabilities)
At 31 January 2023 the Group had £66.8 million of gross bank borrowings
(31.1.2022: £66.8 million) (31.7.2022: £66.8 million) and £10.1 million of
lease liabilities (31.1.2022: £12.45 million) (31.7.2022: £10.9 million)
representing gearing of 18.9% (31.1.2022: 19.7%) (31.7.2022:15.2%) on net
assets of £194 million (31.1.2022: £178 million) (31.7.2022: £205
million).
After adjusting for the uplift in value of short leaseholds which are stated
at depreciated historic cost in the statement of financial position, gearing
is 17.5% (31.1.2022: 18.1%) (31.7.2022: 17%).
Capital expenditure
Capital expenditure during the period totalled £8.3 million (including
capitalised interest during the period). This was primarily the purchase of
the Milton Keynes site, together with ongoing construction and fit out works,
as well as planning and pre-development.
Adjusted Net Asset Value per Share
· Adjusted Net Asset Value per share up 8.6% to £9.15
(31.1.2022: £8.43)
Adjusted Net Assets per Share are the net assets of the Group adjusted for the
valuation of leasehold stores and deferred tax divided by the number of shares
at the year-end. The shares currently held in the Group's employee benefits
trust (own shares held) are excluded from the number of shares.
At 31 January 2023, the Adjusted Net Asset Value per share (before deferred
tax) increased 8.6% to £9.15 from £8.43 last year. This increase is a result
of higher property values on our existing stores as the strength of our
Landmark stores is recognised, combined with cash generated from operations
less dividend payments, offset in part by an increase in the shares in issue
due to the exercise of a small number of share options during the period.
At 31 January 2023, the Adjusted Net Asset Value of £9.15 per share (before
deferred tax) decreased 5.9% from £9.72 per share recorded at 31 July 22 last
year.
31 Jan 31 Jan 31 July
2023 2022 2022
Analysis of net asset value (NAV) £'000 £'000 £'000
Unaudited Unaudited Audited
Net assets 193,674 177,362 205,346
Adjustment to include operating/short leasehold stores at valuation
Add: JLL leasehold valuation 22,950 23,075 24,250
Deduct: leasehold properties and their fixtures and fittings at NBV (7,039) (7,313) (7,224)
209,585 193,124 222,372
Deferred tax arising on revaluation of leasehold properties(1) (3,978) (3,941) (4,256)
Adjusted net assets 205,607 189,183 218,116
Number Number Number
Shares in issue '000 '000 '000
Opening shares in issue 30,004 29,687 29,687
Shares issued for the exercise of options 42 291 317
Closing shares in issue 30,046 29,978 30,004
Shares held in EBT (623) (623) (623)
Closing shares for NAV purposes 29,423 29,355 29,381
Adjusted net asset value per share after deferred tax provision £6.99 £6.45 £7.42
Adjusted net asset value per share before deferred tax provision
Adjusted net assets (see above) 205,607 189,183 218,116
Deferred tax liabilities and assets recognised by the Group 59,535 54,174 63,214
Deferred tax arising on revaluation of leasehold 3,978 3,941 4,256
properties(1 )
Adjusted net assets before deferred tax 269,120 247,298 285,586
Closing shares for NAV purposes 29,423 29,355 29,381
Adjusted net asset value per share before deferred tax provision £9.15 £8.43 £9.72
(1) A deferred tax adjustment in respect of the uplift in the value of the
leasehold properties has been included. Although this is a memorandum
adjustment as leasehold properties are included in the Group's financial
statements at cost and not at valuation, this deferred tax adjustment is
included in the adjusted net asset value calculation in order to maintain a
consistency of tax treatment between freehold and leasehold properties.
Outlook
Lok'nStore Group operates within the UK self-storage industry which is still
an immature sector with strong growth prospects. With a low loan to value
ratio and plenty of headroom on our bank facilities this market presents an
excellent opportunity for further growth of Lok'nStore's business.
Recently opened Landmark stores and our ambitious new store pipeline
demonstrate the Group's ability to use those strengths to exploit the
opportunities available throughout the economic cycle.
Our high margins, strong balance sheet and flexible business model enables
Lok'nStore to confidently look through the current external market
turbulence.
We look to the future with confidence.
Neil Newman Ray Davies
Group Managing Director Group Finance Director
Principal Risks and Uncertainties:
Principal Risks and Uncertainties in Operating our Business
Risk management has been a fundamental part of the successful development of
Lok'nStore. The process is designed to improve the probability of achieving
our strategic objectives, keeping our employees safe, protecting the interests
of our shareholders and key stakeholders, and enhancing the quality of our
decision-making through understanding the risks inherent in both the
day-to-day operations and the strategic direction of the Group as well as
their likely impact.
Management of our risks helps us protect our reputation, which is very
important to the ability of the Group to attract customers, particularly with
the growth of social media. We always try to communicate clearly with our
customers, suppliers, local authorities, communities, employees, and
shareholders, and to listen and take account of their views. We operate strict
Health and Safety policies and procedures as part of our Risk Management
Framework.
Our Risk Management Governance
The Board has overall responsibility for the management of the Group's risks.
As the Group's strategic direction is reviewed and agreed the Board identifies
the associated risks and works to reduce or mitigate them using an established
risk management framework in conjunction with the executive management team.
This is a continuing and evolving process as we review and monitor the
underlying risk elements relevant to the business.
Risk Management Framework
The risk register covers all areas of the business including property,
finance, employees, insurance, customers, strategy, governance, and disaster
recovery. The risks are categorised by risk area and numerically rated based
on a combination of 'likelihood' and 'consequences and impact' on the
business. The combination of these two becomes the 'risk factor' and any
factor with a rating over 15 is reported to the Board.
Risk Management Team
Ray Davies, Finance Director, is the Board member responsible for ensuring
that the risk management and related control systems are effective, and that
the communication channels between the Board and the Executive Management team
are open and working correctly. The Executive Management Team is responsible
for the day-to-day management of the risk factors. Responsibility for
identifying, managing, and controlling the risk is assigned to an individual
as shown on the risk register depending on the business area. Reporting
against the risks forms part of the monthly executive management meeting and
the risk factor may be amended if applicable. There are also sub-committees
for particular risk areas which meet regularly. The Risk Management and
Reporting Structure is shown below.
Our Risk Management and Reporting Structure
The Board
Reviews Risk Register in full twice a year
Considers specific risk areas as raised by the Executive Board
Executive Board Committee
Reviews risks at monthly executive management meetings and if material,
requests the Board consider risk at next scheduled Board Meeting (or earlier
if necessary)
Capex Committee Property Risk Committee
Meets Monthly Meets Periodically
Manages proposed capital expenditure, actual spend, rolling capex requirements Considers:
Risks associated with properties including Health and Safety
Environmental Impact
Principal Risks
The principal risks our business faces, and our key mitigations are outlined
in the table below.
Risk Description Key Mitigation
Interest Rate and Liquidity Risk The main risks arising from the Group's financial instruments are interest § Regular review by the Board.
rate risk and liquidity risk (for details please see note 16).
§ Debt and interest are low relative to assets and earnings. With interest
rates rising, this risk per se is increasing, however the Executive and the
Board monitor this position carefully through the Group's detailed operating
reports produced on a weekly basis and detailed financial and accounting
reports produced on a monthly basis.
§ Could reduce debt, if required, by executing 'Sale and Manage-Back'
arrangements on mature stores or slow the rate of site development.
Tax Risk Changes to tax legislation may impact the level of corporation tax, capital § Regular monitoring of changes in legislation.
gains tax, VAT and stamp duty land tax which would in turn affect the profits
of the Group.
§ Use of appointed professional advisers and trade bodies.
Treasury Risk The Group faces increased costs from adverse interest rate movements. The Bank § The Group has headroom within its Revolving Credit Facility of £100
of England has raised base rates repeatedly since February 2022 and is million.
currently 4.25% up from 0.1% in March 2020.
§ The facility does not expire until April 2026, providing funding for more
Landmark site acquisitions.
§ Lok'nStore is a robust business which generates an increasing cash flow
from its strong asset base with a low LTV net of cash of 8.9% (31.7.2022:
6.6%) and an average cost of debt of 4.13%. The value of the Group's assets
underpins a flexible business model with stable and rising cash flows and low
credit risk giving the business a firm base for growth.
§ Average cost of debt 4.13% (31.7.2022: 1.71%)
§ Average cost of debt (active revolving loans) 4.96% (31.7.2022: 2.71%)
§ With £66.8 million of gross debt currently drawn against the £100 million
bank facility the Group is not committed to enter into hedging instruments but
recognising that these rates are now rising, the Group is regularly monitoring
this risk and continues to keep the matter under review.
§ The Group monitors compliance with its bank covenants closely and during
the year it complied with all of its bank covenants.
Property Valuation Risk The external independent valuations of the stores are sensitive to both § Regular monitoring of any changes in market conditions and transactions
operational trading performance of the stores and also wider market occurring within our marketplace.
conditions. It follows that a reduction in operational performance or a
deterioration of market conditions could have a material adverse impact on the
Net Asset Value (NAV) of the Group.
§ Use of independent professional valuers who are experts in the self-storage
sector. There is regular contact with the current valuer JLL and discussions
around market values and transactions within the sector, including post
year-end.
§ Previous experience of downturns, such as the Dotcom and global financial
crises, has demonstrated that Self Storage has considerable resilience.
§ Stores are predominantly Landmark stores in prime locations and are all UK
based and predominantly located in the affluent South of England. The Group is
therefore not exposed to overseas/international/ currency risks etc.
§ Operational management teams with the skills, experience, and motivation to
continue to drive operational performance.
Environmental Risk Flooding. § Flood risk due diligence undertaken on all prospective site acquisitions.
§ Flood protection measures in place at all stores.
Increased requirement to reduce waste and greenhouse gas emissions and reduce
environmental impact on the environment.
§ Group has been measuring environmental impact since 2005 and is committed
to manage waste effectively and control polluting emissions.
§ All new construction has solar power on the roofs of its buildings.
Property Acquisition Acquiring new sites is a key strategic objective of the business but we face § We hold weekly property meetings to manage the search process and property
significant competition from other uses such as hotels, car showrooms and purchases.
offices as well as from other self-storage operators.
§ Use of property acquisition consultants.
§ Regular communication with agents.
§ Attendance at industry relevant property events.
Planning Permission The process of gaining planning permissions remains challenging. § Where we can we acquire sites subject to planning.
Planning approval is increasingly dependent on Social or Environmental
enhanced features such as BREEAM standards, as well as local planners' demands
for green spaces, cycle, and footpaths etc, all adding cost and complexity to § We work with an established external planning consultant.
a planning project.
§ Our property team has over 20 years' experience in obtaining planning
consents for our stores.
Construction Poor construction may affect the value of the property and/or the efficient § We use a design and build contract with a variety of established
operation of the store. contractors.
Rising costs of developing a store may mean site opportunities which do not
meet management's return on investment criteria may not be taken up.
§ We use external project managers.
§ All projects are overseen by our property team which has over 20 years'
experience.
§ Construction projects are subject to a tender process.
§ Rising costs are factored into our financial modelling to ensure the
required returns are achievable.
Maintenance/Damage Damage to properties through poor maintenance or flood or fire could render a § Regular site checks by team members.
store inoperable.
§ Rolling maintenance plan for all stores.
§ Comprehensive disaster recovery plan.
§ Appropriate insurance cover.
Increased Competition An increasing number of competitors in the industry may negatively impact § Established criteria for site selection including:
Lok'nStore's existing operations (e.g., pricing/available sites).
o Prominent locations
o High visibility
o Distinctive designs and bright orange elevations and signage to attract
customers.
§ Continued investment in the Group's website and internet marketing.
§ Ensure high levels of customer service through training and monitoring.
Employee Retention Loss of employees may affect our ability to operate our stores and provide the § Aim to offer a good work/life balance and career development.
high levels of customer service expected.
§ Regular reviews of remuneration levels against market.
§ Achievable bonus systems.
§ Generous Employee Share Schemes.
§ High-quality training within the Lok'nStore Academy
§ Intranet for improved communications.
§ Established Employee rewards programme.
Cyber security and IT System Breach A breach of our IT systems might adversely affect the operations and income of § Regularly reviewed IT security systems.
the business resulting in potential fines, customer compensation and causing
reputational damage to the Group.
§ Well communicated policies and procedures for handling and managing a
systems breach.
Future Pandemic Risk A spread of the virus and social protection measures which may be introduced § The Group has a well-defined policy and response developed and executed
by Government may adversely affect the operations and financial performance of throughout the recent Covid-19 pandemic.
the business and adversely impact on the health of staff.
§ Our Covid-19 Group Safe Response has been documented in detail in the
Managing Director's Review on page 20 in the 2021 Annual Report and is not
repeated here.
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2023
Notes Six months
Six months ended Year
ended 31 January 2022 ended
31 January 2023 Unaudited 31 July 2022
Unaudited £'000 Audited
£'000 £'000
Revenue
1 13,583 13,384 26,902
Total property, staff, distribution and general costs 2
(5,652) (5,268) (10,553)
Group Adjusted EBITDA(1) 7,931 8,116 16,349
Depreciation 7 (2,463) (2,232) (4,727)
Equity settled share-based payments (225) (101) (201)
Non-underlying items 4 119 6,089 5,739
(2,569) 3,756 811
Operating profit
5,362 11,872 17,160
Finance income 5 305 - 42
Finance cost 6 (1,008) (539) (1,328)
Profit before taxation 4,659 11,333 15,874
Income tax expense 8 (1,008) (2,501) (3,796)
Profit attributable to:
Owners of the parent 22 3,651 8,832 12,078
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Fair value movement in property valuation (16,057) 25,590 60,171
Deferred tax relating to change in property valuation 4,014 (5,816) (14,284)
Other comprehensive income (12,043) 19,774 45,887
Total comprehensive income for the period attributable to Owners of the Parent
(8,392) 28,606 57,965
Earnings per share attributable to owners of the Parent Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Notes Unaudited Unaudited Audited
Earnings per share
Basic
Total basic earnings per share 10 12.38p 30.16p 41.24p
Earnings per share
Diluted
Total diluted earnings per share 10 12.17p 29.64p 40.48p
Consolidated Statement of Changes in Equity
For the six months ended 31 January 2023
Attributable to owners of the Parent
Share Share Other Revaluation Retained Total
capital premium reserves reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000
1 August 2021 - Audited 298 10,815 9,138 104,736 26,272 151,259
Profit for the period - - - - 8,832 8,832
Other comprehensive income
Increase in property valuation net of deferred tax - - - 19,774 - 19,774
Total comprehensive income for the year - - - 19,774 8,832 28,606
Transactions with Owners
Dividend paid - - - - (3,132) (3,132)
Share based payments - - 101 - - 101
Transfers in relation to share based payments - - (166) - 166 -
Exercise of share options 3 526 - - - 529
Reserve transfer on disposal of assets - - - (20,258) 20,258 -
Transfer additional dep'n on revaluation net of deferred tax -
- - (234) 234 -
Total transactions with owners 3 526 (65) (20,492) 17,526 (2,502)
31 January 2022 - Unaudited 301 11,341 9,073 104,018 52,630 177,363
3,246 3,246
Profit for the period (restated) - - - -
Other comprehensive income
Increase in property valuation net of deferred tax - - - 26,113 - 26,113
Total comprehensive income for the year - - - 26,113 3,246 29,359
Transactions with Owners
Dividend paid - - - - (1,469) (1,469)
Share based payments - - 100 - - 100
Transfers in relation to share based payments - - (14) - 14 -
Deferred tax credit relating to share options - - (57) - - (57)
Exercise of share options - 50 - - - 50
Reserve transfer on disposal of assets - - - - - -
Transfer additional dep'n on revaluation net of deferred tax - -
- - (587) 587 -
Total transactions with owners - 50 29 (587) (868) (1,376)
31 July 2022 - Audited 301 11,391 9,102 129,544 55,008 205,346
Profit for the period - - - - 3,651 3,651
Other comprehensive income
Decrease in property valuation net of deferred tax - - - (12,043) - (12,043)
Total comprehensive income for the year - - - (12,043) 3,651 (8,392)
Transactions with Owners
Dividend paid - - - - (3,602) (3,602)
Share based payments - - 225 - - 225
Transfers in relation to share based payments - - (24) - 24 -
Exercise of share options - 97 - - - 97
Reserve transfer on disposal of assets - - - - - -
Transfer additional dep'n on revaluation net of deferred tax -
- - (432) 432 -
Total transactions with owners - 97 201 (432) (3,146) (3,280)
31 January 2023 - Unaudited 301 11,488 9,303 117,069 55,513 193,674
Consolidated Statement of Financial Position
31 January
2023
Notes
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 11 283,240 255,097 292,848
Right of use assets 12 9,712 11,809 10,424
292,952 266,906 303,272
Current assets
Inventories 13 132 252 143
Trade and other receivables 14 3,738 4,481 3,988
Cash and cash equivalents 40,262 44,363 46,465
Financial assets - 533 -
Total current assets 44,132 49,629 50,596
Total assets 337,084 316,535 353,868
Liabilities
Current liabilities
15
Trade and other payables (6,893) (5,450) (7,229)
Lease liabilities 18 (1,295) (1,272) (1,612)
Taxation (580) (1,019) (989)
Total current liabilities (8,768) (7,741) (9,830)
Non-current liabilities
Borrowings 17 (66,314) (66,079) (66,196)
Lease liabilities 18 (8,792) (11,179) (9,282)
Deferred tax 19 (59,536) (54,174) (63,214)
Total non-current liabilities (134,642) (131,432) (138,692)
Total liabilities (143,410) (139,173) (148,522)
Net assets 193,674 177,362 205,346
Equity
Equity attributable to owners of the parent
Called up share capital 20 301 300 301
Share premium 11,488 11,341 11,391
Other reserves 21 9,303 9,073 9,102
Retained earnings 22 55,513 52,630 55,008
Revaluation reserve 117,069 104,018 129,544
Total equity 193,674 177,632 205,346
Approved by the Board of Directors and authorised for issue on 21 April 2023
and signed on its behalf by:
Andrew Jacobs
Ray Davies
Chair
Finance Director
Consolidated Statement of Cash Flows
For the six months ended 31 January 2023
Notes Six months ended Six months Year
31 January ended ended
2023 31 January 31 July
Unaudited 2022 2022
£'000 Unaudited Audited
£'000 £'000
Operating activities
Cash generated from operations 24a 7,847 7,445 18,569
Income tax paid (950) (250) (1,060)
Net cash from operating activities 6,897 7,195 17,509
Investing activities
Proceeds of sale & manage-back stores - 37,922 37,922
Purchase of property, plant and equipment 11 (7,589) (6,793) (11,961)
Interest received 305 - 13
Net cash generated by / used in investing activities (7,284) 31,129 25,974
Financing activities
1,198
Proceeds of bank borrowings utilised for store development
- 1,386
Proceeds of bank borrowings utilised for payment of accordion fees
- 188 -
Finance costs paid (1,440) (946) (1,741)
Lease liabilities paid (871) (903) (1,746)
Equity dividends paid (3,602) (3,132) (4,601)
Proceeds from issuance of ordinary shares (net) 97 529 579
Net cash (used in) / from financing activities (5,816) (3,066) (6,123)
Net (decrease / increase) in cash and cash equivalents in the period
(6,203) 35,258 37,360
Cash and cash equivalents at beginning of the period
46,465 9,105 9,105
Cash and cash equivalents at end of the period 40,262 44,363 46,465
Accounting Policies
General information
Lok'nStore Group plc is an AIM listed company incorporated and domiciled in
England and Wales. As required, further information is available in the
investor section of the Company's website at http://www.loknstore.co.uk.The
address of the registered office is One Fleet Place, London, EC4M 7WS, UK.
Copies of this Interim Report and Accounts may be obtained from the Company's
head office at 112 Hawley Lane, Farnborough, Hants, GU14 8JE or from the
investor section of the Company's website at http://www.loknstore.co.uk
(http://www.loknstore.co.uk) . The principal activities of the Group and
the nature of its operations are described in the Business and Financial
Review.
Basis of Accounting
The interim results for the six months ended 31 January 2023 have been
prepared on the basis of the accounting policies expected to be used in the
2023 Lok'nStore Group Plc Annual Report and Accounts and in accordance with
the recognition and measurement principles of UK adopted International
Accounting Standards.
The statutory accounts for the year ended 31 July 2022 were delivered to the
Registrar of Companies following the Company's Annual General Meeting and will
be available from the investor section of the Company's website at
http://www.loknstore.co.uk (http://www.loknstore.co.uk) .
The same accounting policies, presentation and methods of computation are
followed in these interim condensed set of financial statements as have been
applied in the Group's latest annual audited financial statements and will
also be applied to the next annual audited financial statements.
The interim results, which were approved by the Directors on 21 April 2023,
are unaudited. The interim results do not constitute statutory financial
statements within the meaning of section 434A of the Companies Act 2006.
Comparative figures for the year ended 31 July 2022 have been extracted from
the statutory accounts for the Group for that period, which carried an
unqualified audit report, did not include a reference to any matters to which
the auditor drew attention by way of emphasis of matter, did not contain a
statement under section 498(2) or (3) of the Companies Act 2006 and have been
delivered to the Registrar of Companies.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (and its subsidiaries).
Control is achieved where the Company has power over the investee, exposure or
rights to variable returns from the investee and the ability to use its power
to vary those returns. Intra-group transactions, balances, and unrealised
gains and losses on transactions between Group companies are eliminated on
consolidation, except to the extent that intra-group losses indicate an
impairment.
Going concern
The Directors can report that, based on the Group's budgets and financial
projections, which include a recognition of the inflationary effect of rising
costs, on the Group, they have satisfied themselves that the business is a
going concern. The impact of rising costs and increasing bank interest rates
and the measures the Directors have taken to mitigate its effects are set out
in the Business and Financial Review.
The Group has a Revolving Credit Facility of £100 million which runs until
April 2026.The Board has a reasonable expectation that the Company and the
Group have adequate resources and facilities to continue in operational
existence for the foreseeable future based on Group cash balances and cash
equivalents of £40.3 million (31.07.2022: £46.5 million), undrawn committed
bank facilities at 31 January 2023 of £33.2 million (31.07.2022: £33.2
million), and cash generated from operations in the period of £7.85 million
(31.01.2022: £7.45 million) (31.07.2022: £18.6 million).
With interest rates rising, interest risk per se is increasing, however the
Executive and the Board monitor this position carefully through the Group's
detailed operating reports produced on a weekly basis and detailed financial
and accounting reports produced on a monthly basis. The Group's bank covenant
compliance is reviewed as part of this process. The Bank's senior interest
covenant is tested quarterly on a 12-month rolling basis.
The Group is fully compliant with all bank covenants and undertakings and is
not obliged to make any repayments prior to expiration. The robust capital
structure, cash flow and financing and the performance of the business are
reported in the Chairman's Statement and in the Business and Financial review.
The interim financial statements are therefore prepared on a going concern
basis.
Revenue recognition
The Group recognises revenue when the amount of the revenue can be reliably
measured and when goods are sold and title has passed. Revenue from services
provided is recognised evenly over the period in which the services are
provided.
a) Self-storage revenue
Self-storage services are provided on a time basis. The price at which
customers store their goods is dependent on size of unit and store location.
Customers are invoiced on a four-weekly cycle in advance and revenue is
recognised based on time stored to date within the cycle. When customers
vacate, they are rebated the unexpired portion of their four weekly advance
payment (subject to a seven-day notice requirement). Revenue is recognised
evenly over the period of self-storage.
b) Retail sales
The Group operates a packaging shop within each of its storage centres for
selling storage-related goods such as boxes, tape and bubble-wrap. Sales
include sales to the public at large as well as self-storage customers. Sales
of goods are recognised at point of sale when the product is sold to a
customer.
c) Insurance
Customers may choose to insure their goods in storage. The weekly rate of
insurance charged to customers is calculated based on the tariff per week for
each £1,000 worth of goods stored by the customer. This charge is retained by
Lok'nStore and covers the cost of the block policy and other costs.
Customers are invoiced on a four-weekly basis for the insurance cover they
use, and revenue is recognised based on time stored to date within the cycle.
The Group provides insurance to customers through a block policy purchased
from its insurer. Block policyholders supply VAT exempt insurance transactions
as principals rather than insurance-related services as intermediaries and
accordingly insurance income received from the customer is recognised as
revenue rather than offset against the costs of the block policy. The key
characteristics of a block policy are that:
· There is a contract between the block policyholder and the insurer which
allows the block policyholder to effect insurance cover subject to certain
conditions.
· The Group acting in our own name as the block policyholder procures
insurance cover for third parties from the insurer.
· There is a contractual relationship between the block policyholder and
third parties under which the insurance is procured.
· The block policyholder stands in place of the insurer in effecting the
supply of insurance to the third parties.
· The Group is not exposed to any insured losses arising from its insurance
activity.
d) Management fee income
Management fees earned for managing stores not owned by the Group are
recognised over the period for which the services are provided. Fees are
invoiced monthly based on a percentage of revenue performance. Additional
performance fees may be earned if an individual managed stores' EBITDA
performance exceeds agreed thresholds. Periodic fees may also be earned for
additional specific services provided and are invoiced when that service has
been completed. Revenue is recognised for each performance condition once the
condition has been met.
Critical Accounting Estimates a) and b) and Judgements c) and d)
The preparation of financial statements under IFRS requires management to make
estimates and assumptions that may affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expenses. Actual outcomes may differ from these estimates and assumptions. The
estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
a) Estimate of fair value of trading properties
The Group commissions an external valuation of its self-storage stores. This
valuation uses a discounted cash flow methodology which is based on current
and projected net operating income. Principal assumptions underlying
management's estimation of the fair value are those relating to stabilised
occupancy levels expected future growth in storage fees and operating costs,
maintenance requirements, capitalisation rates and Discount Rates.
The Directors, with the assistance of JLL, undertook a Directors' Valuation as
at 31 January 2023 in respect of our properties externally valued at 31 July
2022. As part of this valuation process, the Directors' commissioned JLL to
complete a review of a representative sample of the portfolio to reflect the
key changes in current market activity, occupancy, rent as well as upcoming
changes in business rates. They undertook a desktop valuation of three
stabilised stores and two stores in early fill up.
The Directors' then prepared a management valuation of all remaining stores
using the following assumptions which were driven by the JLL desktop
valuations inputs consistent with the sample.
As a consequence the Directors have applied a £17.95 million reduction (6.4%)
to the fair value of our freehold and leasehold stores which are now stated at
£261.1 million (31.7.2022: £279.0 million).
A more detailed explanation of the background and methodology adopted in the
valuation of the Group's trading properties is set out in note 11. The
carrying value of land and buildings held at valuation at the reporting date
was £222.8 million (31.07.2022: £239.8 million) as shown in the table in
note 11.
b) Assets in the course of construction and land held for store development
('Development property assets')
The Group's development property assets are held in the statement of financial
position at historic cost and are not valued externally. In acquiring sites
for redevelopment into self-storage facilities, the Group estimates and makes
judgements on the potential lettable storage space that it can achieve in its
planning negotiations, together with the time it will take to achieve
maturity. In addition, assumptions are made on the storage fees that can be
achieved at the store by comparison with other stores within the portfolio and
within the local area.
These judgements, taken together with estimates of operating costs and the
projected construction cost, allow the Group to calculate the potential net
operating income at maturity, projected returns on capital invested and hence
to support the purchase price of the site at acquisition.
Following the acquisition, regular reviews are carried out taking into account
the status of the planning negotiations, and revised construction costs or
capacity of the new facility, for example, to make an assessment of the
recoverable amount of the development property. The Group reviews all
development property assets for impairment at each reporting date in the light
of the results of these reviews. Once a store is opened it is valued as a
trading store.
The carrying value of development property assets at the reporting date was
£36.4 million (31.07.2022: £29.2 million). See note 11 for more details.
c) Classification of self-storage facilities as owner-occupied properties
rather than investment properties
The Directors consider that Lok'nStore Group plc is the Parent Company of a
"Trading business" and is not wholly or mainly engaged in making investments.
The holding of land is not a core activity.
The Group is an integrated storage solutions business offering a range of
services to its customers. We provide services to our customers under
contracts for the provision of storage services which do not give them any
property or tenancy rights and a large number of the stores we operate are
from properties where we do not own the land or the buildings. The assets we
do own are valued on the basis of the trading cash flows that the operating
businesses generate.
The Group continues to develop its managed stores' business where it uses its
operational and logistic expertise to provide a full range of services to
customers in stores we manage for third-party owners. In recent years the
Group has developed many new managed stores all of which are owned by
third-party investors and managed by Lok'nStore.
Historically owned sites at Woking, Ashford, Swindon and Crayford, have been
the subject of sale and manage-back transactions by which Lok'nStore has
retained the management of the business when a third-party owner acquired the
business, land and buildings.
In the previous period ended 31 January 2022, the Group executed on the sale
and Manage-back of a further four trading stores, again retaining the
management of the stores as Lok'nStore branded stores. All of this trading
activity as well as the self-storage income earned from our leasehold stores'
activity demonstrate that the holding of land is not a core activity because
the trading operation is not dependent on the ownership of land.
Furthermore, the Group has always and continues to comply with all of the
usual accounting and tax protocols consistent with a trading business. As at
the period-end, Lok'nStore operates 40 stores mainly in southern England,
although in recent years we have expanded our historically southern England
focused geographic footprint into the South-West (Exeter), Wales (Cardiff) and
the North West (Salford, Warrington and Altrincham).
Lok'nStore owns the freehold interest in 15 stores, 9 of the stores are held
under commercial leases. There are a further 16 managed stores operating under
management contracts for third-party owners making a total of 40 stores
trading under the Lok'nStore brand.
One of the features of Lok'nStore's strategy is to increase the number of
stores we manage for third parties selling our expertise in storage solutions
management, operating systems and marketing, through management fees rather
than retaining a proprietary interest in land and buildings.
The classification of self-storage facilities as owner-occupied properties
rather than investment properties has resulted in the recognition of a
reduction in fair value in the period of £12.0 million (net deferred of tax)
(31.07.2022: Gain £45.9 million) (31.1.2022 Gain: £19.8 million) in Other
Comprehensive Income rather than in the profit or loss.
d) Application of IFRS 16
The Group uses judgement to assess whether the interest rate implicit in the
lease is readily determinable. When the interest rate implicit in the
lease is not readily determinable, the Group makes a judgement on the
incremental borrowing rate based on its external borrowings secured against a
similar asset, adjusted for the term of the lease.
Notes to the Financial Statements
For the six months ended 31 January 2023
1 Revenue
Analysis of the Group's revenue from continuing operations is shown below:
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
Stores trading £'000 £'000 £'000
Self-storage revenue 11,438 11,362 21,585
Insurance revenue 1,138 1,201 2,239
Retail sales 124 126 252
Sub-total - self-storage revenue - owned stores 12,700 12,689 24,076
Management fees - managed stores 822 674 2,785
Sub-total 13,522 13,363 26,861
Non-storage income 61 21 41
Total revenue per statement of comprehensive income 13,583 13,384 26,902
2 Property, staff, distribution, general costs Six months ended Six months Year
and
31 January ended ended
retail cost of sales
2023 31 January 31 July
Unaudited 2022 2022
£'000 Unaudited Audited
£'000 £'000
Property and premises costs 3,034 2,680 5,304
Property lease rental payments (871) (903) (1,746)
Net property and premises costs 2,163 1,777 3,558
Staff costs 2,577 2,695 5,369
General overheads 787 703 1,438
Sub total - operating costs 5,527 5,175 10,365
Retail products cost of sales 125 93 188
Total property, staff, distribution, general costs and retail cost of sales 5,652 5,268 10,553
3 Cost of sales of retail products
Cost of sales represents the direct costs associated with the sale of retail
products such as boxes and packaging and the ancillary sales of insurance
cover for customer goods, all of which fall within the Group's ordinary
activities.
Six months ended Six months Year
31 January ended ended
2023 31 January 31 July
Unaudited 2022 2022
£'000 Unaudited Audited
£'000 £'000
Retail 55 57 113
Insurance 48 12 23
Other 22 24 52
Total cost of sales of retail products 125 93 188
4 Non-underlying items
Six months ended Six months Year
31 January ended ended
2023 31 January 31 July
Unaudited 2022 2022
£'000 Unaudited Audited
£'000 £'000
Profit on sale of trading stores (1) - 6,089 5,936
Liquidated damages received on development (2) 195 - 175
Abortive costs (3) (76) - (372)
119 6,089 5,739
(2022/23)
(1 ) Profit arising on the sale and manage-back of four
trading stores located at Basingstoke, Cardiff, Horsham, and Portsmouth.
(2 ) Liquidated damages received on the late delivery of a
new store development which has subsequently opened.
(3 ) The Group's active search for suitable development sites
for new Landmark stores has resulted in some abortive costs - mainly around
planning and corporate professional costs.
5 Finance
income
Six months ended Six months ended Year ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank interest 305 - 42
Total finance income 305 - 42
6 Finance costs
Six months ended 31 January Six months ended 31 January Year ended
2023 2022 31 July
Unaudited Unaudited 2022
£'000 £'000 Audited
£'000
Bank interest 676 235 707
Non-utilisation fees 100 68 166
Amortisation of bank loan arrangement fees 117 98 216
Interest on lease liabilities 115 138 239
Total finance cost 1,008 539 1,328
Most interest payable arises on bank loans classified as financial liabilities
measured at amortised cost.
7 Profit before
taxation
Six months ended Six months Year ended
31 January ended 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £ '000
Profit before taxation is stated after charging:
Depreciation and amounts written off property, plant and equipment:
Depreciation based on historic cost 1,225 1,176 2,316
Depreciation based on revalued assets 576 311 1,094
Depreciation of property, plant and equipment: 1,801 1,487 3,410
Depreciation of right of use assets 662 744 1,317
2,463 2,231 4,727
8 Taxation
Six months ended 31 January Six months Year
2023 ended 31 January ended 31 July
Unaudited 2022 2022
£'000 Unaudited Audited
£'000 £'000
Current tax:
UK corporation tax 671 903 1,683
Deferred tax:
Origination and reversal of temporary differences 336 1,598 2,113
Total deferred tax charge 336 1,598 2,113
Income tax expense for the period/year 1,008 2,501 3,796
The charge for the period can be reconciled to the profit for the period as
follows:
Six months ended 31 January Six months Year
2023 ended 31 January ended 31 July
Unaudited 2022 2022
£'000 Unaudited Audited
£'000 £'000
Profit before tax 4,659 11,333 15,874
Tax on ordinary activities at the standard effective rate of corporation tax
in the UK of 19%
866 2,153 3,016
Depreciation of non-qualifying assets 225 62 377
Share based payment charges in excess of corresponding tax deduction
(13) (21) (337)
Other non-deductible expenditure 2 - -
Adjustments in respect of prior periods - corporation tax - - 111
Realised gain on sale and manage-back assets subject to 'roll-over relief' (1,157)
- -
Rolled over gain on sale and manage back stores - 1,522 432
Other (72) (58) 197
Income tax expense for the period/year 1,008 2,501 3,796
Effective tax rate 21.6% 22.1% 24%
With the increase in corporation tax rate to 25% effective 1 April 2023, the
Group will pay a blended rate of 21% for year ended 31 July 2023.
9 Dividends
Six months ended 31 January 2023 Six months ended 31 January 2022 Year
Unaudited Unaudited ended 31 July
£'000 £'000 2022
Audited
£'000
Amounts recognised as distributions to equity holders in the year:
Final dividend - year ended 31 July 2021 (10.67 pence per share) - 3,132 3,132
Interim dividend - six months to 31 July 2022 (5.00 pence per share) - - 1,469
Final dividend - year ended 31 July 2022 (12.25 pence per share)
3,602 - -
3,602 3,132 4,601
In respect of the current period the Directors propose that an interim
dividend of 5.75 pence per share will be paid to the shareholders. The total
estimated dividend to be paid is £1.7 million based on the number of shares
currently in issue as adjusted for shares held in the Employee Benefits Trust.
This interim dividend is an on-account payment of a final annual dividend and
is ultimately subject to approval by shareholders at the 2023 Annual General
Meeting and has not been included as a liability in these financial
statements.
The ex-dividend date will be 4 May 2023; the record date 5 May 2023 with an
intended payment date of 9 June 2023. The final deadline for Dividend
Reinvestment Election is 19 May 2023.
10 Earnings per share
The calculations of earnings per share are based on the following profits and
numbers of shares.
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Total profit for the financial year attributable to owners of the parent 3,651 8,832 12,078
No. of shares No. of shares No. of shares
Weighted average number of shares
For basic earnings per share 29,479,779 29,277,827 29,287,451
Dilutive effect of share options 520,042 520,839 549,321
For diluted earnings per share 29,999,821 29,798,666 29,836,772
623,212 shares (31.01.2022: 623,212) are held in the Employee Benefit Trust,
and these are excluded from the above calculation.
Earnings per share attributable to owners of the Parent Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
Earnings per share - Basic
Basic earnings per share 12.38p 30.16p
41.24p
Earnings per share - Diluted
Total diluted earnings per share 12.17p 29.64p 40.48p
11 Property, plant and equipment
Group Development Land and Short leasehold Fixtures, Motor Total
property assets buildings improvements fittings and vehicles £'000
at cost at valuation at cost equipment at cost
£'000 £ '000 £'000 at cost £'000
£'000
Cost or valuation
1 August 2021 33,676 199,617 7,557 30,420 10 271,280
Additions 5,993 649 24 424 - 7,090
Transfers (8,026) 6,212 - 1,814 - -
Disposals - (30,101) - (1,649) - (31,750)
Revaluations - 24,876 - - - 24,876
31 January 2022 Unaudited 31,643 201,253 7,581 31,009 10 271,496
Depreciation
1 August 2021 - - 2,509 13,109 10 15,628
Depreciation - 716 149 622 - 1,487
Revaluations - (716) - - - (716)
31 January 2022 Unaudited - - 2,658 13,731 10 16,399
Net book value at 31 January 2022 - Unaudited
31,643 201,253 4,923 17,278 - 255,097
Cost or valuation
1 February 2022 31,643 201,253 7,581 31,009 10 271,496
Additions 4,618 107 134 239 - 5,098
Transfers (7,046) 5,022 - 2,024 - -
Disposals - - - (1,966) - (1,966)
Revaluations - 33,423 - - - 33,423
31 July 2022 - Audited 29,215 239,805 7,715 31,306 10 308,051
Depreciation
1 February 2022 - - 2,658 13,731 10 16,399
Depreciation - 1,156 147 620 - 1,923
Disposals - - - (1,963) - (1,963)
Revaluations - (1,156) - - - (1,156)
31 July 2022 - Audited - - 2,805 12,388 10 15,203
Net book value at 31 July 2022 - Audited 29,215 239,805 4,910 18,918 - 292,848
Cost or valuation
1 August 2022 29,215 239,805 7,715 31,306 10 308,051
Additions 7,178 50 32 991 8,251
Disposals - - - - - -
Revaluations - (17,016) - - - (17,016)
31 January 2023 - Unaudited 36,393 222,839 7,747 32,297 10 299,286
Depreciation
1 August 2022 - - 2,805 12,388 10 15,203
Depreciation - 958 151 692 - 1,801
Revaluations - (958) - - - (958)
31 January 2023 Unaudited - - 2,956 13,080 10 16,046
Net book value at 31 January 2023 - Unaudited
36,393 222,839 4,791 19,217 - 283,240
The Group has an active store development programme and has material
qualifying assets that take a substantial period of time to develop from
acquisition to store opening. Accordingly, in accordance with IAS 23,
borrowing costs of £663,658 (six months ended 31.1.2022: £296,466: year
ended 31.07.2022 £589,843) have been capitalised in the current period that
are directly attributable to the acquisition, construction and fit-out of
these qualifying store assets.
Capital expenditure during the period totalled £7.6 million. This was
primarily the purchase (exchange of contracts) of the Milton Keynes site,
together with ongoing construction and fit out works at our sites in Bedford
and Peterborough, as well as planning and pre-development works at our
Bournemouth, Altrincham, Barking Cheshunt and Bolton sites.
Property, plant and equipment (non-current assets) with a carrying value of
£283.2 million (31.7.2022: £292.8 million) (31.1.2022: £255.1 million) are
pledged as security for bank loans (see Note 17).
Market Valuation of Freehold and Operating Leasehold Land and Buildings
The Directors, with the assistance of JLL, undertook a Directors' Valuation as
at 31 January 2023 in respect of our properties externally valued at 31 July
2022. As a consequence, the directors have applied a £17.95 million reduction
(6.4%) to the fair value of our freehold and leasehold stores which are now
stated at £261.1 million (31.7.2022: £279.0 million). After this adjustment
store values were 9.8% higher than at 31 January 2022.
As part of the Directors' valuation process, we commissioned JLL to complete a
review of a representative sample of the portfolio to reflect the key changes
in current market activity, occupancy, rent as well as upcoming changes in
business rates. They undertook a desktop valuation of;
· Three stabilised stores
· Two stores in early fill up
The Directors' then prepared a management valuation of all remaining stores
using the following assumptions which were driven by the JLL desktop
valuations inputs consistent with the sample stabilised stores.
Specifically;
· Exit Yield and Discount Rate increased by 50bpts on all freehold
stores from the values applied by JLL at 31(st) July 2022
· Short term EBITDA assumptions were reduced to reflect the
combined output of improved revenue offset by increased costs.
· Longer term EBITDA has improved as JLL assume costs stabilisation
and continued improved trading.
· Leasehold stores had the leasehold term adjusted to reflect the
time passed (6 months) between July 2022 and Jan 2023
Applying the above methodology has resulted in a same store valuation
reduction of £17,950,000 (6.4%).
It remains the Group's established policy to undertake a comprehensive
external valuation at each year-end and we will do so at the next year-end at
31 July 2023.
Directors' valuation of land and property
Land & Buildings at the rear of the new Salford trading store.
Following the opening of the Salford store there is a remainder of land and
building at the rear of the new store which is suitable for rent on commercial
terms to third party users. Based on negotiated rents with third parties the
Directors continue to place a Directors' Valuation of £1.5 million on this
land and building. 31.1.2022: £1.5 million).
12 Right of Use assets (ROU)
The Group accounts for the value of its property leases on the balance sheet
by the recognition of a right of use asset (the right to use the leased item)
and a corresponding financial liability to pay rentals due over the property
lease term. This treatment relates to the Group's property leases. The Group
has no leases on any other types of assets.
The Group recognises right of use (ROU) assets of £9.7 million at 31 January
2023 (31.1.2022: £11.8 million) and total lease liabilities of £10.1
million, (31.1.2022: £10.9 million) with depreciation charges of £0.66
million (31.1.2022: £0.74 million) and lease interest charges of £0.11
million (31.1.2021: £0.14 million).
Detailed analysis is provided in the tables below: -
Group Group Group
Group property leases 31 January 31 January 31 July
2023 2022 2022 £'000
£'000 £'000
Total rents payable under property leases 871 901 1,746
Statement of Financial Position (extract)
Right of Use Asset (ROU) 9,712 11,809 10,424
Group Group Group
31 January 31 January 31 July
2023 2022 2022 £'000
£'000 £'000
Property rentals 871 901 1,746
Depreciation of right of use assets (ROU) (662) (744) (1,314)
Interest charged on lease liability (115) (138) (239)
Impact on Comprehensive Income 94 19 193
The Group has no leases on any other types of assets. The Present Value of all
future operating lease payments is calculated using 2.2% (2022: 2.2%) as an
incremental borrowing rate as the single Discount Rate. The right of use
assets are depreciated based on the individual lease term of the separate
leases.
13 Inventories
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Consumables and goods for resale 132 252 143
The amount of inventories recognised as an expense during the period was
£54,851 (31.1.2022: £56,183).
14 Trade and other receivables
31 January
2023 31 January 31 July
Unaudited 2022 2022
£'000 Unaudited £'000 Audited £'000
Trade receivables 1,960 1,353 1,198
Other receivables 1,252 2,537 2,318
Prepayments and accrued income 526 591 472
3,738 4,481 3,988
Trade receivables
In respect of its self-storage business the Group does not typically offer
credit terms to its customers and hence the Group is not exposed to
significant credit risk. All customers are required to pay in advance of the
storage period. Late charges are applied to a customer's account if they are
more than ten days overdue in their payment. The Group provides for
receivables based upon sales levels and estimated recoverability.
There is a right of lien over the customers' goods, so if they have not paid
within a certain time frame the Group has the right to sell the items they
store to cover the debt owed by the customer. Trade receivables that are
overdue are provided for based on estimated irrecoverable amounts, determined
by reference to expected credit losses.
For individual self-storage customers, the Group does not perform credit
checks. However, this is mitigated by the fact that all customers are required
to pay in advance. Before accepting a new business customer who wishes to use
a number of the Group's stores, the Group uses an external credit rating to
assess the potential customer's credit quality and defines credit limits by
customer. There are no customers who represent more than 5% of the total
balance of trade receivables.
There has not been a significant change in credit quality in the Group's trade
receivables and the amounts are still considered recoverable. The Group holds
a right of lien over its self-storage customers' goods if these debts are not
paid.
15 Trade and other payables
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited £'000 Audited £'000
£'000
Trade payables 2,310 1,141 1,849
Taxation and social security costs 401 552 1,014
Other payables 561 584 588
Accruals and deferred income 3,621 3,173 3,778
6,893 5,450 7,229
The Directors consider that the carrying amount of trade and other payables
and accruals approximates fair value.
16 Capital management and gearing
The Group manages its capital to ensure that entities in the Group will be
able to continue as going concerns while maximising the return to stakeholders
through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt, which includes the
borrowings disclosed in 17, cash and cash equivalents and equity attributable
to the owners of the Parent, comprising issued capital, reserves and retained
earnings as disclosed in the Consolidated Statement of Changes in Equity.
The Group's banking facilities require that management give regular
consideration to interest rate hedging strategy. The Group has complied with
this requirement during the year.
The Group's Board reviews the capital structure on an on-going basis. As part
of this review, the Board considers the cost of capital and the risks
associated with each class of capital.
The Group seeks to have a relatively conservative gearing ratio (the
proportion of net debt to equity) balancing the overall level with the
opportunities for the growth of the business. The Board considers at each
review the appropriateness of the current ratio in light of the above. The
Board is currently satisfied with the Group's gearing ratio.
The gearing ratio at the period-end is as follows:
Gearing - Bank Borrowings 31 January 31 January 31 July
2023 2022 2022
Unaudited £'000 Unaudited £'000 Audited £'000
Gross debt (66,785) (66,785) (66,785)
Cash and cash equivalents 40,262 44,363 46,465
Net debt (26,523) (22,422) (20,320)
Total equity - balance sheet 193,674 177,362 205,346
Net debt to equity ratio 13.7% 12.6% 9.9%
Total Gearing - Bank Borrowings and lease liabilities 31 January 31 January 31 July
2023 2022 2022
Unaudited £'000 Unaudited £'000 Audited £'000
Gross debt - bank borrowings (66,785) (66,785) (66,785)
Gross debt - lease liabilities (10,087) (12,451) (10,894)
Cash and cash equivalents 40,262 44,363 46,465
Net debt (36,610) (34,873) (31,214)
Total equity - balance sheet 193,674 177,362 205,346
Net debt to equity ratio 18.9% 19.7% 15.2%
Cash balances held in current accounts attract no interest, but surplus cash
is transferred daily to a treasury deposit account which earns interest at the
prevailing money market rates. All amounts are denominated in Sterling. The
balances at 31 January 2023 are as follows:
31 January 31 January 31 July
2023 2022 2022
Unaudited £'000 Unaudited £'000 Audited £'000
Variable rate treasury deposits 39,490 4,815 45,371
SIP trustee deposits 63 63 63
Cash in operating current accounts 703 39,223 1,031
Other cash and cash equivalents 6 262 -
Total cash and cash equivalents 40,262 44,363 46,465
The Group reviews the current and forecast projections of cash flow, borrowing
and interest cover as part of its monthly management accounts review. In
addition, an analysis of the impact of significant transactions is carried out
regularly, as well as a sensitivity analysis of the impact of movements in
interest rates on gearing and interest cover.
The Group places its cash deposits not immediately required for store
development activity cash on Treasury Deposit Reserve in tranches based on
fixed monthly deposit periods and executes these on a rolling basis.
17 Borrowings
The Group currently has £66.8 million drawn against its facility which is
secured with RBS and ABN AMRO jointly by legal charges and debentures over the
freehold and leasehold properties and other tangible assets of the business
with a net book value of £283.2 million (31.1.2022: £255.8 million) together
with cross-company guarantees from Group companies.
The interest rate is set under the new Sterling Overnight Index Average
(SONIA) arrangements replacing the London Inter-Bank Offer Rate (LIBOR). The
all-in debt cost on £66.8 million drawn averaged 4.13% (31.7.2022: 1.55%) in
the period with the costs of debt rising to 4.96% on active revolving loans.
The Group is not obliged to make any repayments prior to the facility's
expiration in April 2026.
Bank borrowings 31 January 31 January 31 July
2023 Unaudited 2022 Unaudited 2022
£'000 £'000 Audited £'000
Non-current
Bank loans repayable in more than two years
but not more than five years
Gross 66,785 66,785 66,785
Deferred financing costs (471) (706) (589)
Net bank borrowings 66,314 66,079 66,196
Non-current borrowings 66,314 66,079 66,196
18 Lease liabilities
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the leases. Where this cannot be readily determined the
Present Value of all future operating lease payments is calculated using 2.2%
(2022: 2.2%) as an incremental borrowing rate as the Discount Rate.
After the application of a weighted depreciation charge based on the
individual lease term of the separate leases and the imputation of an interest
charge at 2.2% (2022: 2.2%) as part of the amortisation of the lease liability
the total lease liabilities are shown below.
Lease liabilities attributable to Right of Use assets 31 January 31 January 31 July
2023 Unaudited £'000 2022 Unaudited £'000 2022
Audited
£'000
Current lease liabilities
Amounts due within one year 1,295 1,272 1,612
Non-current lease liabilities
Amounts due in one to two years 1,075 1,044 1,174
Amounts due in three to five years 2,642 2,827 2,774
Amounts due in more than five years 5,075 7,308 5,334
Non-current lease liabilities 8,792 11,179 9,282
Total lease liabilities 10,087 12,451 10,894
Lease liabilities attributable to Right of Use assets 31 January 31 January 31 July
2023 Unaudited £'000 2022 Unaudited 2022
£'000 Audited £'000
Total lease liabilities B/fwd 10,894 11,166 11,166
Increase in lease liabilities - lease extensions (51) 2,050 1,235
Lease repayments (871) (903) (1,746)
Lease interest (non-cash) 115 138 239
Total lease liabilities C/fwd 10,087 12,451 10,894
The portfolio of property leases all have similar characteristics. Subject to
periodic future rent reviews, typically every five years, there are no
variable lease payments. The Group has no leases on any other types of assets.
The total future commitments due under non-cancellable leases is set out in
note 25 (Commitments under Property Leases).
19 Deferred
tax
Deferred tax liability 31 January 2023 31 January 2022 31 July
Unaudited Unaudited 2022
£'000 £'000 Audited
£'000
Liability at start of period/year 63,214 46,760 46,760
Charge to income for the period/year 336 1,598 2,113
Tax charged / credited directly to other comprehensive income (4,014) 5,816 14,284
Credit to share based payment reserve - - 57
Liability at end of period/year 59,536 54,174 63,214
20 Share
capital
31 January 2023 31 January 2022 31 July
Unaudited Unaudited 2022
£'000 £'000 Audited
£'000
Authorised: 35,000,000 ordinary shares of 1 pence each 350 350 350
Called up, Called up, Called up,
allotted and allotted and allotted and
fully paid fully paid fully paid
Number Number Number
Number of shares at start of period/year 30,003,545 29,686,787 29,686,787
Options exercised during period/year 42,657 291,268 316,758
Balance at end of period/year 30,046,202 29,978,055 30,003,545
Allotted, issued and fully paid ordinary shares £ £ £
Balance at start of period/year 301 297 298
Options exercised during period/year - 3 3
Balance at end of period/year 301 300 301
The Company has one class of ordinary shares which carry no right to fixed
income.
21 Other reserves
Share-based
Other Capital
Merger reserve redemption payment
reserve reserve reserve Total
Group £'000 £'000 £'000 £'000 £'000
1 August 2021 - Audited 6,295 1,294 34 1,515 9,138
Equity share based payments - - - 101 101
Tax credit relating to share options - - - (166) (166)
31 January 2022 - Unaudited 6,295 1,294 34 1,450 9,073
Equity share based payments - - - 100 100
Transfer to retained earnings in relation to share based payments
- - - (180) (180)
Tax relating to share options - - - 109 109
31 July 2022 - Audited 6,295 1,294 34 1,479 9,102
Equity share based payments - - - 225 225
Tax credit relating to share options - - - (24) (24)
31 January 2023 - Unaudited 6,295 1,294 34 1,680 9,303
Merger reserve
The merger reserve represents the excess of the nominal value of the shares
issued by Lok'nStore Group plc over the nominal value of the share capital and
share premium of Lok'nStore Limited as at 31 July 2001.
Other reserves
The other distributable reserve and the capital redemption reserve arose in
the year ended 31 July 2004 from the purchase of the Company's own shares and
a cancellation of share premium.
Share based payment reserve
Under IFRS 2 there is the option to make transfers from the share-based
payment reserve to retained earnings in respect of accumulated share option
charges where the options have either been exercised or have lapsed
post-vesting.
22 Retained earnings Retained earnings before
Retained
deduction of Own shares earnings
own shares (Note 23) Total
Group £'000 £'000 £'000
1 August 2021 - Audited 26,772 (500) 26,272
Profit for the financial period- restated 8,832 - 8,832
Transfer from revaluation reserve - additional depreciation on revaluation 234 - 234
Transfer share-based payment reserve 166 - 166
Reserve transfer from disposal of assets 20,258 - 20,258
Dividend paid (3,132) - (3,132)
31 January 2022 - Unaudited 53,130 (500) 52,630
1 February 2022 - Unaudited
Profit for the financial period 3,246 - 3,246
Transfer from revaluation reserve - additional depreciation on revaluation 587 - 587
Transfer share-based payment reserve (Note 21) 14 - 14
Dividend paid (1,469) - (1,469)
31 July 2022 - Audited 55,508 (500) 55,008
1 August 2022 - Audited
Profit for the financial period 3,651 - 3,651
Transfer from revaluation reserve - additional depreciation on revaluation 432 - 432
Transfer share-based payment reserve (Note 21) 24 - 24
Dividend paid (3,602) - (3,602)
31 January 2023 - Unaudited 56,013 (500) 55,513
The transfer from revaluation reserve represents the additional depreciation
charged on revalued assets net of deferred tax. The Own Shares Reserve
represents the cost of shares in Lok'nStore Group plc purchased in the market
and held in the Employee Benefit Trust to satisfy awards made under the
Group's share incentive plan.
The reserve transfer on disposal of assets arises from the disposal of the
four sale and manage-back stores
and represents a transfer from revaluation reserve (an unrealised gain) to
retained earnings (a realised gain).
23 Own shares
EBT EBT Treasury Treasury Own shares
shares shares total
Number £ Number £ £
31 July 2021 - Audited 623,212 499,910 - 499,910
31 January 2022 - Unaudited 623,212 499,910 - - 499,910
31 July 2022 - Audited 623,212 499,910 - - 499,910
31 January 2023 - Unaudited 623,212 499,910 - - 499,910
The Group operates an Employee Benefit Trust (EBT) under a settlement dated 8
July 1999 between Lok'nStore Limited and Lok'nStore Trustee Limited,
constituting an employees' share scheme.
Funds are placed in the trust by way of deduction from employees' salaries on
a monthly basis as they so instruct for purchase of shares in the Company.
Shares are allocated to employees at the prevailing market price when the
salary deductions are made.
As at 31 January 2023, the Trust held 623,212 (31.01.2022: 623,212) ordinary
shares of 1 pence each with a market value of £5,920,514 (31.01.2022:
£6,232,120). No shares were transferred out of the scheme during the period
(2022: Nil). No options have been granted under the EBT.
24 Cash flows
(a) Reconciliation of profit before tax to cash generated from operations
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Group profit before tax 4,659 11,333 15,874
Depreciation and loss on disposal 2,463 2,231 4,727
Equity settled share-based payments 225 101 201
Non-underlying items (119) (6,089) (5,739)
Interest receivable (305) - (42)
Interest payable - bank borrowings 894 401 1,089
Interest payable - lease liabilities 115 138 239
Increase / decrease in financial asset - (24) 509
Decrease in inventories 11 38 148
Decrease / (increase) in receivables 250 (208) 285
(Decrease) / increase in payables (346) (476) 1,278
Cash generated from operations 7,847 7,445 18,569
(b) Reconciliation of net cash flow to movement in net debt
Net debt is defined as non-current and current borrowings, as detailed in note
17 less cash and cash equivalents.
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
(Decrease) / increase in cash in the period/year (6,203) 35,258 37,360
Change in net debt resulting from cash flows - (1,386) (1,386)
Movement in net debt in period (6,203) 33,872 35,974
Net debt brought forward (20,320) (56,294) (56,294)
Net debt carried forward (26,523) (22,422) (20,320)
25 Commitments under property leases
At 31 January 2023 the total future minimum lease payments as a lessee under
non-cancellable property leases were as follows:
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Land and buildings
Amounts due:
Within one year 1,727 1,843 1,727
Between two and five years
4,663 5,352 4,737
After five years 5,693 6,091 6,273
12,083 13,286 12,737
Property lease payments represent rentals payable by the Group for certain of
its properties. Typically, leases are negotiated for a term of 20 years and
rentals are fixed for an average of five years.
26 Related party events
The aggregate remuneration of the Directors, and the other key management
personnel of the Group, is set out below.
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Short-term employee benefits - Directors 374 373 922
Short-term employee benefits - Other key management 105 141 259
Post-employment benefits - Directors 9 9 11
Post-employment benefits - Other key management 4 4 8
Share-based payments 225 101 201
Social security costs - Directors 80 296 370
Social security costs - Other key management 23 24 49
Total 820 948 1,820
The Group recognises a number of management personnel that are important to
retain within the business in order for it to achieve its strategic plan.
Accordingly, these are recognised as key personnel and are participants in the
Long-Term Performance Plan. They are included in the table above.
27 Capital Commitments
The Group has capital expenditure contracted but not provided for in the
financial statements of £18.2 million relating to commitments to complete the
ongoing construction of our sites in Bedford and Peterborough and final
contract commitments on our completed sites at Warrington and Stevenage. We
are also committed on the Staines Store project in respect of the land and
main build contract and the Basildon Store in respect of the lease commitment
which commences when practical completion of the building is delivered to us
at the end of April/May 2023.
On 29 November 2022, the Group signed a letter of intent for the fit-out works
on the Staines store which will commence in May 2023. In addition, on 9
February 2023, after the period end, the Group signed a JCT contract for the
fit-out works at the Basildon store.
28 Events after the Reporting Date
Bedford Opening:
On 17 February 2023, our Landmark Store opened in Bedford. The store is in a
prominent location on the busy western side of the town, directly accessed
from a busy roundabout servicing all arterial routes to Tesco, the town centre
and neighbours Costa, Lidl and other retailers.
Glossary
Abbreviation
APM Alternative performance measure
Adjusted EBITDA Earnings before all depreciation and amortisation charges, losses or profits
on disposal, share-based payments, acquisition costs, non-underlying items and
non-recurring professional costs, finance income, finance costs and taxation
Adjusted Store EBITDA Adjusted EBITDA (see above) but before central and head office costs
AGM Annual General Meeting
Bps Basis Points
CAD Cash available for Distribution
Capex Capital Expenditure
CGU Cash-generating units
CO2 e Carbon Dioxide Equivalents
CSOP Company Share Option Plan
DRIP Dividend Reinvestment Plan
EBT Employee Benefit Trust
EIS Enterprise Investment Scheme
(eKPIs) Environmental key performance indicators
EMI Enterprise Management Incentive Scheme
ESOP Employee Share Option Plan
EU European Union
GHG Greenhouse gas
HMRC His Majesty's Revenue and Customs
IAS International Accounting Standard
IFRIC International Financial Reporting Interpretations Committee
IFRS International Financial Reporting Standards
ISA International Standards on Auditing
JLL Jones Lang LaSalle
KPI Key Performance Indicator
LFL Like for like
LTPPP Long Term Partnership Performance Plan
LTV Loan to Value Ratio
MWh Megawatt Hour
NAV Net Asset Value
NBV Net Book Value
Operating Profit Earnings before interest and tax (EBIT)
PPP Partnership Performance Plan
PV Photovoltaic
QCA Quoted Companies Alliance
RICS Royal Institution of Chartered Surveyors
RNS Regulatory News Service
ROU Right of Use Asset
SIP Share Incentive Plan
SME Small and medium sized enterprises
SONIA Sterling Overnight Index Average
Sq. ft. Square feet
tCO2e Tonnes of carbon dioxide equivalent
TVR Total voting rights
VAT Value Added Tax
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