REG - Lok'nStore Group - Preliminary Results <Origin Href="QuoteRef">LOK.L</Origin> - Part 1
RNS Number : 5935CLok'nStore Group PLC19 October 2015LOK'NSTORE GROUP PLC
("Lok'nStore" or "the Group")
Preliminary results
for the year ended 31 July 2015
Lok'nStore Group Plc, a leading company in the UK self-storage market announces results for the year ended 31 July 2015.
Highlights
"Full year results up strongly - more growth from new stores and more new stores to come"
Record financial results ahead of expectations on all measures
Revenue 15.42 million up 10.9% (2014: 13.91 million)
Adjusted EBITDA1 5.68 million up 23.1% (2014: 4.62 million)
Operating profit2 3.66 million up 18.7% (2014 normalised: 3.08m)
Profit before taxation2 2.65 million up 34.6% (2014 normalised: 1.97 million)
Cost ratio reduced to 61.2%3 (2014: 64.7%).
Strong cash flow supports 14.3% dividend increase - progressive dividend policy
Annual dividend 8 pence per share up 14.3% (2014: 7 pence per share)
Funds from Operations (FFO) 4 4.98 million up 25.2% (2014: 3.97 million)
FFO per share of 19.6 pence per share up 22.1% (2014: 16.1 pence per share)
Asset backed: Adjusted Net Asset Value per share5 up 11.4% to 3.02 (2014: 2.71)
Total assets now circa 100 million
Strong balance sheet, efficient use of capital, low debt
Net debt down to 25.3 million (2014: 25.5 million)
Loan to value ratio down to 25.8%6 (2014: 28.2%)
Self-storage business performing strongly
Store EBITDA 7.197 million up 18.6% (2014: 6.06 million)
Store EBITDA margins up 3 percentage points to 53.7% (2014: 50.7%)
Unit Pricing up 4.2%
Total occupancy up 0.6% with 57,203 sq. ft. of new units fitted
Ancillary sales up 6.3%
Document storageshowing good volume growth
Year-end boxes stored up 36.2%
Revenue 1.96 million up 6.5% (2014: 1.84 million)
Growth from new stores and more new stores to come
New and purpose built stores lettable space will represent 59% of owned store portfolio
New Reading store opened October 2014
New Aldershot store opened May 2015
New Chichester store due to open by end 2015
New Southampton and Bristol stores due to open spring 2016
Constantly reviewing new store opportunities
Post Balance sheet
Additional 2 million received on sale of old Reading store
Sale of Swindon store for 3.5 million (2014 NBV 1.4 million)
1 Adjusted EBITDA is defined as profits before depreciation, amortisation, losses or profits on disposal, share-based payments, acquisition costs, non-recurring professional costs, finance income, finance costs and taxation
2 2014 comparatives normalised for 2014 property impairment charge of 1.6 m
3 Group operating costs as a percentage of Group revenue
4 Funds from Operations (FFO) calculated as EBITDA minus net finance cost on operating assets
5 Adjusted net asset value per share is the net assets adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the year end. The shares held in the Group's employee benefits trust and treasury are excluded from the number of shares.
6 Calculation based on net debt of 25.3 million (2014: 25.5 million) and total property value of 97.8 million (2014: 90.5 million) set out in the Financial Review section of the Strategic Report.
7StoreadjustedEBITDA is AdjustedEBITDA(seeabove1)beforecentralandheadofficecosts
Commenting on the Group's results, Andrew Jacobs CEO of Lok'nStore Group said,
"Trading this year has been strong with turnover, profits and assets increasing rapidly.
Our new store development programme continues to change the balance of our store portfolio. New and purpose built stores will account for around 59% of the portfolio once this is completed. We opened new stores in Reading in October 2014 and Aldershot in May 2015. Both are trading well. New stores in Chichester, Southampton and Bristol opening in the coming year will add further impetus to sales and earnings growth.
The strong growth of the business and Lok'nStore's low level of debt means that this rapid development programme can be financed from cash flow and existing bank facilities, while progressively increasing the dividend."
Press Enquiries
Andrew Jacobs, CEO
Lok'nStore Group plc
Tel: 01252 521010
Ray Davies, CFO
Lok'nStore Group plc
Billy Clegg / Tom Huddart
Camarco
Tel: 0203 757 4980
Julian Blunt, Corporate Finance
Alice Lane, Corporate Broking
finnCap Ltd
Tel: 020 7220 0500
Chairman's Review
Strong growth and robust capital structure
Lok'nStore Group has traded strongly over the last year with turnover, profits and assets moving ahead rapidly. This has been and will continue to be reinforced by improvements to our existing stores combined with our programme of opening new, modern, purpose-built stores. This will result in a substantial increase in the proportion of our store space which is new or purpose built and will add further momentum to the growth of sales and profits with plenty of new capacity contributing to growth over the coming years.
The growth of sales, profit and asset values combined with innovative asset management has combined to achieve a reduction in the loan-to-value (LTV) ratio from 28.2% to 25.8% while we invested 3.6 million in stores this year and are proposing to increase the annual dividend pay-out by 14.3%.
Two other key performance indicators (KPI's), Funds from Operations (FFO) per share which guides the dividend pay-out and Net Asset Value (NAV) per share which demonstrates the underlying asset value have moved smartly ahead.
Trading positive
Revenue for the year was 15.42 million, up 10.9% year on year (2014: 13.91 million) driven by prices achieved for rented self-storage units which are up 4.2%. This strong turnover growth led to a 23.1% increase in Group Adjusted EBITDA. With low debt and interest costs this translates intoFunds from Operations (FFO) per share growing by 22.1%. Tight control over operating costs has pushed the Group's margins and profits to record levels.
Properties and Net Asset Value
The year-end property valuation equates to a total value of properties held of 97.8 million (2014: 90.5 million) an 8% increase in value. (Note that these values are not fully reflected in the statement of financial position which states the operating leasehold stores at cost less accumulated depreciation).
Dividend
It is intended that the Company's future dividend payments will reflect the growth in the underlying cash generated by the business as reflected in the FFO. The interim dividend will represent approximately one-third of the total for the year and final dividend two-thirds. This year we are recommending a full year dividend of 8 pence per share. This is up 14.3% from 7 pence for the full year last year. The Group will therefore pay a final dividend of 5.67 pence per share on 21 December 2015 following the payment of an interim dividend of 2.33 pence per share in June 2015.
Outlook
The objective of our strategy is to continue to increase EBITDA per share over the coming years. We have created a strong platform for significant further growth and continue to focus our efforts on five key areas:
Filling existing stores and improving pricing
Developing new stores on a self-funded basis
New site acquisitions
Increasing the number of stores we manage for third parties
Growing our document storage business
Lok'nStore is a progressive business with a record of consistent profit growth and cash generation and has built a firm base for the coming years. Recent strong trading has been, and will continue to be, reinforced by our programme of new, modern, purpose-built store openings and upgrades. This will result in a substantial increase in the proportion of our stores which are new or purpose built combined with a significant increase in our trading space.
Given the strong growth of sales, profits and asset values combined with the benefits of innovative asset management we believe we can achieve this without significantly increasing the loan-to-value (LTV) ratio or borrowings while continuing to increase the dividend pay-out.
Our dedicated and dynamic executive management team have capitalised on the improved economy and are well placed to continue our growth over the coming years. With the high barriers to entry created by the strong demand for property in South-East England and the difficulties of the local planning process, Lok'nStore's growing portfolio of high quality self-storage assets is set to deliver solid and increasing returns to investors over the coming years.
Simon G Thomas
Chairman
16 October 2015
The Strategic Report
The Strategic Report covers the following areas of our business:-
Our Strategy and business model
The UK Self-Storage Market
The Performance of our Stores
An Operational and Marketing Review
A Property Review
A Financial Review
Principal Risks and Uncertainties in operating our Business
Our Strategy and business model
Introduction
Lok'nStore Group Plc is one of the leading companies in the fast growing UK self-storage market. We opened our first self-storage centre in Horsham, Sussex in February 1995 and have grown consistently over the last 20 years, currently operating 24 self-storage centres and two serviced document stores in Southern England. One replacement store and another new store will open in the coming year. We have been listed on the AlM Market since June 2000 and the board accounts for 35% of the Total Voting Rights (TVR) in the ordinary shares of the Company.
We offer self-storage, serviced document storage and management services to third party self-storage owners. Self-storage is available to both household and business customers at our highly branded Lok'nStore centres. Each centre is prominently located mainly in the affluent South-East of England in large towns and cities.
Our serviced document storage service offers businesses anything from secure storage of one media tape to full management of their business documentation with 24 hour retrieval. We excel in offering the best customer service at competitive prices for our customers.
Strategy
We develop and operate self-storage centres in prominent locations broadly in South-East England. Our eye-catching buildings with their distinctive orange livery create highly visible landmarks which continue to be a big contributor of new business for Lok'nStore.
Demand for self-storage by both business and domestic customers is driven by a combination of specific need based on changing circumstances but also linked to local economic activity and prevailing consumer and business confidence.
People and business are more space constrained in the relatively expensive areas of the South East. Barriers to entry in terms of competition for suitable sites and the difficulties in securing appropriate planning consents are also correspondingly higher.
The strengths of our business model are summarised in table form below:
The UK self-storage market
There remains significant opportunity in the UK self-storage market where there are an estimated 863 self-storage facilities providing approximately 35.7 million square feet of storage space. With a population estimated at 64.1 million people in the UK this equates to 0.56 square feet per person, compared to 7.3 square feet per person in the USA (Self-Storage Association 2015 UK Annual Survey).
The sector remains in good health. The Cushman & Wakefield 2015 Report for the Self-Storage Association says, "After a period of limited new store openings following the recession the self-storage sector is definitely beginning to grow, putting on around 1.3 million sq. ft. of space in 2014."The Report estimates that." total annual turnover for the UK self-storage industry in 2014 was around 402 million from approximately 440 different operators, and they employed in excess of 2,100 staff (full time equivalent) As awareness of self-storage continues to grow, more businesses and individuals will use self-storage in a market that is supply constrained. The Report also states that the five largest operators (which includes Lok'nStore) manage 29.5% of the self-storage stores while in the US the top five own or manage only 11.5%.
Our Business Model
Attractive market dynamics
UK self-storage penetration in key urban conurbations remains relatively low
Limited new supply coming onto the market - Lok'nStore is bucking the trend with significant new store development - Reading, Aldershot, Southampton, Bristol and Chichester
The specific property requirements of self-storage coupled with challenging local planning regimes create significant barriers to entry, especially in Southern England where Lok'nStore operates
Resilient through economic downturns
Sector is growing
Our competitive strength
Recognised brand
Newer stores are prominent on arterial or main roads, with extensive frontage and high visibility
Strong internet marketing delivering:-
- traffic from mobile phones and desktop computers
- online booking and reservation; click and collect for retail boxes and packaging
Excellent customer service, customer feedback programme with store level customer satisfaction surveys, mystery shopper programme and quality control procedures
Stores concentrated in the affluent South East England
Newer stores have larger average store capacity - economies of scale, higher operating margins
Secure financing structure with strong balance sheet
Strong and increasing store asset base
Experienced and committed board and executive management team with clear strategic direction, operational skills and a proven and robust business model
Stable and rising income streams and strong credit risk model
Over 8,100 customers
Mix of business and domestic customers
High profit margins
Low bad debt expense (0.25% of revenue in the year)
Strong credit risk model (security deposits; customers pay in advance; lien on goods)
Limited local competition
Strong growth opportunities
Yield management as occupancy increases
Demand increasing
Site development out of strong operational cash flow and innovative financing solutions
Translation of the business model into high quality earnings
The self-storage business is strongly cash generative with high profit margins on established stores and all customers paying on a rolling 28 day basis
Low technology & product obsolescence
Maintenance fully expensed through profit and loss
Lok'nStore has a track record of strong and growing cash generation driving a progressive dividend policy
The objective of our strategy is to continue to increase adjusted EBITDA per share over the coming years and we believe there is the opportunity for significant further growth.
Strategic Report (continued)
The Performance of our Stores
Growing Sales and Profits, Increasing Margins
Self-storage revenue for the year was 13.47 million up 11.6% (2014: 12.07 million).
Our total self-storage occupancy was up 0.6% and this was combined with strong unit price increases of 4.2%. During the year we fitted 57,203 sq. ft. of new self-storage units.
With costs firmly under control this revenue growth translates into rapid profit growth. We again managed to increase the overall adjusted EBITDA margin across all stores by 3 percentage points from 50.7% to 53.7%. The adjusted Store EBITDA margins of the freehold stores were 63.4% (2014: 62.7%) and the leasehold stores 40.7% (2014: 36.6%).
Total store EBITDA in the self-storage business, a key performance indicator of profitability and cash flow of the business, increased 18.6% to 7.19 million (2014: 6.06 million).
At the end of July 2015 33.5% of Lok'nStore's self-storage revenue was from business customers (2014: 33.3%) and 66.5% was from household customers, (2014: 66.7%). By number of customers 18.9% of our customers were business customers (2014: 19.0%) and 81.1% household customers (2014: 81.0%).
Portfolio Analysis and Performance Breakdown
Number of stores
% of Valuation
% of Store EBITDA
Store EBITDA margin (%)
% lettable space
Lok Owned
Total % lettable space
As at 31 July 2015
Freehold and long leasehold
12
79.4
67.9
63.4
60.6
53.5
Operating Leaseholds 1
8
15.8
32.1
40.7
39.4
34.8
Pipeline (Freehold)
2
4.8
-
-
-
-
Managed Stores (trading)
4
-
-
-
-
11.7
Managed Stores (under development)
1
-
-
-
-
-
Total
27
100
100
53.7
100
100
1 The average unexpired term of the Group's operating leaseholds is approximately 12 years and 8 months as at 31 July 2015
(13 years and 8 months: 31 July 2014).
Ancillary Sales
Ancillary sales which consist of boxes and packaging materials, insurance and other sales increased 6.3% over the year accounting for 10.8% of self-storage revenues (2014: 11.4%).
We continue to promote our insurance to new customers with the result that 92% (2014: 93%). of our new customers purchased our insurance over the year and this has resulted in an increase in the percentage of our customers who are insured through Lok'nStore to 81% (2014: 78%).
Document storage business
Revenue and adjusted EBITDA have increased in our document storage business as operating metrics improve in response to the Company's more customer facing marketing stance. This approach has resulted in excellent customer feedback and puts us in a good position to win new business, with boxes stored increasing 36.2% and tapes stored up 12.4%. Revenue and profit will follow these volume metrics upwards.
Last year we consolidated our serviced document warehouse capacity, closing one of the three storage sites. This year we have undertaken a further fit-out of new warehouse racking in our site in Olney and we now have the capacity to significantly increase the number of boxes stored within our existing premises. As part of this strategy, additions of 0.46 million were made in the current year to fixtures, fittings and equipment (2014: 0.21 million).
Security
The safety and security of our customers and their goods remains our highest priority. We invest in CCTV, intruder and fire alarm systems and the remote monitoring of our stores out of hours. Importantly all of our stores are manned during opening hours.
Strategic Report (continued)
Operational and Marketing Review
Marketing
During the year our marketing efforts have been focused on the internet and the presentation of our buildings to attract passing traffic.
Printed directories account for a decreasing proportion of business over recent years and are now at a de minimis level. For the year total internet enquiries were up 31.4% on last year and total enquiries were up 0.4% across all stores. We will continue to manage our marketing budget with a strong focus on cost control and value for money.
The internet has rapidly taken over as the main media channel for our advertising and Lok'nStore has adapted to accommodate this change. Our website at www.loknstore.co.ukis one of the most established self-storage websites in the UK, having been operational since 2001. The website wassignificantly upgraded in February 2012 and has been extremely successful in driving online traffic. We continue to improve our work in search optimisation and are using social networks to reinforce our various messages.
This is a very dynamic area and we are committed to its continued development.New features this year include an online chat facility and a 'click and collect' box shop. We believe the internet provides a strong competitive advantage for the major operators such as Lok'nStore with large marketing budgets compared with those of the smaller self-storage operators.
Despite the inexorable rise of internet marketing, around 37% of our business still comes from passing traffic and signage, so the visibility of our stores remains very important to our marketing efforts. With their prominent positions, distinctive design and bright orange elevations, our stores raise the profile of the Lok'nStore brand. We continue to invest in new signage and lighting at our existing stores as well as creating striking designs for our new stores to promote and enhance their visual prominence.
During the year we spent 5.2% of self-storage revenue on marketing.
Stores Property Review
Strong cash flows and solid asset base create opportunities
Lok'nStore's strong 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. Our focus on the trading business gives us many opportunities and our property decisions are always driven by the requirements of the trading business. Lok'nStore has 24 freehold, leasehold and managed stores trading. Of these, 20 stores are owned with 12 freehold or long leasehold, 8 leasehold and 4 further sites operate under management contracts following the opening of Aldershot in May 2015 Lok'nStore is attracting a steady stream of investment partners to help drive the growth of the operating business.
Bristol
In January 2014 Lok'nStore acquired a site in Longwell Green, Bristol. The site of approximately 0.9 acres is in a busy retail park and has planning permission to build a 50,000 sq. feet self-storage centre in Lok'nStore's modern and distinctive design. The total cost of the store when built and fitted-out, will be around 4 million and will add to Lok'nStore's high-quality portfolio of freehold, purpose built self-storage centres in prominent trading locations.
Sale of previous Reading store and opening new Reading store
In October 2014 Lok'nStore completed the sale of its store in Reading for an initial consideration of 2.9 million. After the year-end, on 2 August 2015, Lok'nStore also received an additional 2 million taking the total consideration to 4.9m. Refer Note 28a -Events after the Reporting Date. These additional proceeds will be recycled into the Group's opening programme of highly visible purpose-built new stores.
In October 2014 Lok'nStore completed the building, the transfer of its customers and opened its new Reading store on the site opposite the old store. The new store has 48,000 square feet of self-storage space, a 20% increase. The highly prominent location is directly accessible from the busy main road which connects Reading town centre to the M4 motorway. The cost of constructing and fitting the new store was funded from the sale proceeds of the old store demonstrating the Group's ability to expand its operating footprint out of existing financial resources.
Management contract - Aldershot
In May 2015 Lok'nStore opened a new managed store in Aldershot, Hampshire. The store is located in a prominent location on the main Aldershot roundabout above the A331, is visually striking and benefits from significant levels of passing traffic.
The store is managed for outside investors under the Lok'nStore brand. Lok'nStore has managed the building and subsequent operation of the store. Lok'nStore will generate a return on 2.5 million of the total development capital committed to the project, and a management fee for the construction, operation and branding of the store. This project is consistent with Lok'nStore's strategy of expanding the operating footprint of the business while maintaining its strong balance sheet.
Chichester
Lok'nStore has also signed a Management Services Agreement with an external investor to manage a new storage facility in Chichester, West Sussex which will open at the end of 2015. Lok'nStore will manage the construction, operation and branding of the store. Construction and refitting of the building is currently underway.
Stores Property Review (continued)
Portsmouth North
On 24 November 2014 the Company announced thesale of the Company's undeveloped site at Portsmouth North Harbour for 3 million. The disposal is conditional on the buyer achieving appropriate planning permission. The planning application has been filed and validated on 28 July 2015. If a planning determination is made as expected within the statutory period a decision should be expected by the end of 2015.
Sale and manage back of Swindon store
After the year-end, on 30 September 2015, Lok'nStore completed the sale of its Swindon store for 3.5 million in cash to an investment fund. Historically, Lok'nStore has operated two stores in Swindon, one leasehold and one freehold. Following the completion of 0.5m of capital expenditure to increase capacity the two stores were consolidated into one. This freehold store has now been sold. The two stores were valued at a total of 1.4 million at 31 July 2014. Lok'nStore will continue to manage the store as a branded Lok'nStore operation on behalf of the investor, and will receive management and performance fees. Refer Note 28b - Events after the Reporting Date.
Store portfolio
These projects are part of our strategy of actively managing our store operating portfolio to ensure we are maximising both trading potential and asset value. This includes strengthening our distinctive brand, increasing the size and number of our stores and replacing stores or sites where it will increase shareholder value. We prefer to own freeholds if possible, and where opportunities arise we will seek to acquire the freehold of our leasehold stores. However we are happy to take leases on appropriate terms and benefit from the advantages of a lower entry cost, with further options to create value later in the site's development. Our most important consideration is always the trading potential of the store rather than the type of property tenure.
We currently have 24 stores trading. Of these 20 stores are owned with 12 freehold or long leasehold and 8 leasehold and 4 further sites operating under individual management contracts. With Chichester and Bristol opening in 2016 this will increase the number of stores we operate to 26 and will capitalise on our efficient operating systems and growing internet marketing presence. These arrangements demonstrate Lok'nStore's ability to attract investment partners and create innovative ownership to drive the growth of the operating business.
At the year end the average length of the 7 leases which were valued at July 2015 decreased by 12 months to 12 years and 8 months (2014: 13 years and 8 months). 7 out of 8 of our leasehold stores are inside the Landlord and Tenant Act providing us with a strong security of tenure. The leasehold sites produced 32.1% of the store EBITDA in the year (2014: 33.1%).
Store property assets and Net Asset Value
Lok'nStore's freehold and operating leasehold stores have been independently valued by Cushman & Wakefield (C&W) at 88.9 million (NBV 28.1 million) as at 31 July 2015 (2014: 79.1 million: NBV 30.1 million). Property valuation is referred to further in the Financial Review section of the Strategic Report and is detailed in note 10b of the notes to the financial statements.
Adding our stores under development at cost, our total property valuation is 97.8 million (2014: 90.5 million). This translates into an adjusted net asset value of 3.02 per share up 11.4% on last year (2014: 2.71 per share).
Strategic Report (continued)
Financial Review
Trading
Total revenue for the year grew 10.9% to 15.42 million (2014: 13.91 million). Group operating profit for the year is up 18.7% to 3.66 million (2014: 3.08 million) after adjusting 2014 by adding back last year's impairment of a development land asset charged to the Income Statement. Document storage revenue was up 6.5% to 1.96 million (2014: 1.84 million). Document storage adjusted EBITDA, before inter-company management charges, was 0.26 million (2014: 0.24 million).
Taxation
The Group will pay tax on the majority of its earnings this year and has made a tax provision of 0.54 million.
Earnings per share
Basic earnings per share (EPS) were 7.84 pence (2014: 0.81 pence per share). Diluted earnings per share were 7.64 pence (2014: 0.79 pence per share).If 2014 comparatives are normalised for the 2014 property impairment charge of 1.6 million added back to earnings, the 2014 EPS is adjusted to 7.39 pence per share and the 2014 diluted EPS to 7.21 pence per share.
Treasury shares
Although the Group did not purchase any Treasury shares during the year we are proposing to renew our on-going authority to buy back shares at this year's AGM to ensure the Group continues to have flexibility to make further purchases should it be considered to be in the best interests of shareholders to do so.
Management of interest rate risk
Lok'nStore has 27.7 million of debt currently drawn against its 40 million revolving credit facility. 20 million is at a fixed interest rate with 10 million fixed rate swap at a fixed 1 month sterling LIBOR rate of 1.2% and 10 million swap at a fixed 1 month sterling LIBOR rate of 1.15%. With 1 month LIBOR around 0.5%, this leaves a balance of 7.7 million floating at a current all-in rate of around 2.85% and results in an overall weighted average rate of 3.34%. The 20 million fixed rate is treated as an effective cash flow hedge and its fair value on a mark-to-market basis has fluctuated historically. Its current fair value of 0.12 million is currently stated as a non-current liability (2014: non-current asset: 0.05 million). (See Note 16).
Operating costs
This year through disciplined management we have again reduced overhead costs and contained overall cost growth to 4.8% despite staff costs increasing by 5.5% through a combination of strong sales bonuses and additional national insurance costs arising on the exercise of employee share options. Group operating costs amounted to 9.4 million for the year, a 4.8% increase from last year (2014: 9.0 million). Overall operating costs as a percentage of revenue have decreased and represent 61.2% as a cost ratio. (2014: 64.7%). This disciplined approach to costs ensures that as much as possible of the revenue growth contributes to increasing our profits.
Group
Increase/
(Decrease) in costs %
2015
'000
2014
'000
Property costs
8.7
4,010
3,689
Staff costs
5.5
4,188
3,971
Overheads
(9.1)
1,049
1,153
Distribution costs
0.7
190
189
Total
4.8
9,437
9,002
Cash flow and financing
At 31 July 2015 the Group had cash balances of 2.4 million (2014: 2.2 million). Cash inflow from operating activities before investing and financing activities was up 17.0% to 6.1 million (2014: 5.2 million). As well as using cash generated from operations to fund some capital expenditure, the Group has a five year revolving credit facility. This provides sufficient liquidity for the Group's current needs. Undrawn committed facilities at the year-end amounted to 12.3 million (2014: 12.3 million).
Gearing
There was 27.7 million of gross borrowings (2014: 27.7 million) representing gearing of 47.7% (2014: 56.5%) on net debt of 25.3 million (2014: 25.5 million). If leaseholds, which are stated at depreciated historic cost in the statement of financial position, are stated at their C&W valuation, gearing drops to 39.2% (2014: 45.4%). If the deferred tax liability carried at year- end of 12.2 million is ignored gearing drops further to 33.0% (2014: 38.0%).
Funds from Operations (FFO)
By excluding 0.3 million (2014: 0.5 million) of the interest costs of carrying the development sites from the total net interest charge of 1.0 million (2014: 1.1 million) the interest on the operating portfolio is 0.7 million for the year (2014: 0.6 million). Funds from operations (FFO) represented by adjusted EBITDA minus interest on the operating portfolio is therefore 4.98 million (2014: 3.97 million) up 25.2% equating to 19.6 pence per share, up 22.1% on last year (2014: 16.1 pence per share).
A component of the interest cost incurred by the Group arises from the 8.9 million (2014: 11.4 million) of development sites that the Group is currently carrying. The interest against this cost has not been capitalised but if it was the Group's adjusted profit would have been approximately 0.3 million higher for the year (2014: 0.5 million) on the assumption that the 8.9 million is fully funded by borrowings.
Analysis of Funds from Operations (FFO)
Year
ended 31 July
2015
Year
ended 31 July
2014
'000
Group adjusted EBITDA
5,682
4,616
Net finance Costs
1,003
1,110
Interest costs relating to holding development assets
(297)
(467)
Net finance cost based on operations
706
643
Funds from Operations
4,976
3,973
Increase in Funds from Operations
25.2%
17.5%
Adjusted shares in issue
No.
25,356,668
No.
24,719,027
FFO per share (annualised)
19.6pence
16.1 pence
Increase in FFO per share
22.1%
14.4%
Capital expenditure and capital commitments
The Group has grown through a combination of new site acquisition, existing store improvements and relocations, and has concentrated on extracting value from its existing assets and developing through collaborative projects and management contracts. Capital expenditure during the year totalled 3.58 million (2014: 6.5 million). This was primarily the building at Bristol and Southampton, the expansion of capacity at our Swindon East Store and also limited expenditures at our other existing stores. Further expenditure on racking at the Saracen Olney store also increased capacity in our document storage business.
The Group has capital expenditure contracted but not provided for in the financial statements of 3.03 million (2014: 3.85 million) relating to new commitments on the Bristol and Southampton sites now under construction, remaining commitments on the fitting at Reading and various other minor works.
Statement of Financial Position
Net assets at the year-end were 53.0 million (2014: 45.2 million). Freehold and long leasehold property values at 31 July 2015 were 74.1 million (2014: 64.5 million). Refer to the table of property values below.
Market Valuation of Freehold and Operating Leasehold Land and Buildings
Our eleven freehold properties and one long leasehold are held in the statement of financial position at fair value and have been valued by Cushman and Wakefield LLP (C&W). Refer to note 10b) - property, plant and equipment and also to the accounting policies for details of the fair value of trading properties. The valuations of the leasehold stores held as 'operating leases' are not taken onto the statement of financial position. However seven of these have also been valued and these valuations have been used to calculate the adjusted net asset value position of the Group.
A deferred tax liability arises on the revaluation of the properties and on the rolled-over gain arising from the disposal of the Kingston and Woking sites in 2007 and Reading this year. It is not envisaged that any tax will become payable in the foreseeable future on these disposals due to the availability of rollover relief. The proceeds from the sale of the Reading store sold with the benefit of its permission for residential development have been reinvested into new store development. It is not the intention of the Directors to make any other significant disposals of operational stores, although individual disposals may be considered where it is clear that added value can be created by recycling the capital into other opportunities. (refer Note 28b - events after the reporting date)
The Board will continue to commission independent valuations on its trading stores annually to coincide with its year-end reporting.
Under IFRS the valuations of our freehold property assets are included in the Statement of Financial Position at their fair value, but the IFRS rules do not permit the inclusion of any valuation in respect of our leasehold stores to the extent that they are classified as operating leases. The value of our operating leases in the valuation totals 14.8 million (2014: 14.6 million). Instead we have reported by way of a note the underlying value of these leasehold stores in future revaluations and adjusted our Net Asset Value (NAV) calculation accordingly to include their value. This ensures comparable NAV calculations.
Analysis of Total Property Value
No of stores/sites
31 July 2015 Valuation
'000
No of stores/sites
31 July 2014 Valuation
'000
Freehold & Long Leasehold valued by C & W1 *
12
74,110
12
64,510
Short Leasehold valued by C & W2
7
14,760
7
14,570
Subtotal
19
88,870
19
79,080
Sites in development at cost1
3
8,888
4
11,409
Total
22
97,758
23
90,489
1Total freeholds account for 84.9% of property values (2014:83.9%).
* Includes related fixtures and fittings (refer note 10b)
Adjusted Net Asset Value per Share
Adjusted net assets per share is the net assets of the Group business 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) and in treasury are excluded from the number of shares.
At July 2015 the adjusted net asset value per share increased 11.4% to 3.02 from 2.71 last year. This increase is a result of higher property values, cash generated from operations, offset in part by an increase in the shares in issue due to the exercise of share options by management and staff during the year.
Analysis of net asset value (NAV)
31 July
2015
'000
31 July
2014
'000
Net assets
Adjustment to include operating/short leasehold stores at valuation
Add: C & W leasehold valuation2
Deduct: leasehold properties and their fixtures and fittings at NBV
52,969
14,760
(3,339)
45,210
14,570
(3,555)
64,390
56,225
Deferred tax arising on revaluation of leasehold properties3
(2,284)
(2,203)
Adjusted net assets
62,106
54,022
Shares in issue
Number
Number
Opening shares
Shares issued for the exercise of options
27,809
638
27,141
668
Closing shares in issue
Shares held in treasury
Shares held in EBT
28,447
(2,467)
(623)
27,809
(2,467)
(623)
Closing shares for NAV purposes
25,357
24,719
Adjusted net asset value per share after deferred tax provision
2.45
2.18
Adjusted net asset value per share before deferred tax provision
Adjusted net assets
62,106
54,022
Deferred tax liabilities and assets recognised by the Group
12,252
10,870
Deferred tax arising on revaluation of leasehold properties3
2,284
2,203
Adjusted net assets before deferred tax
76,642
67,095
Closing shares for NAV purposes
25,357
24,719
Adjusted net asset value per share before deferred tax provision
3.02
2.71
2 The seven leaseholds valued by Cushman & Wakefield 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 12 years and 8 months at the date of the 2015 valuation (2014 valuation: 13 years and 8 months). One leasehold store is not valued by C&W due to the relatively short unexpired period of its lease.
3 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.
Summary
Lok'nStore is a progressive business which generates a rapidly growing cash flow from its strong asset base. With a low LTV of 25.8% and strong cash flow we have a firm base for growth. The value of the Group's property assets continue to increase underpinning a flexible trading model with low credit risk and tightly controlled operating costs.
Strategic Report (continued)
Principal Risks and Uncertainties in operating our Business
Finance
Lok'nStore finances its current needs through a combination of strong operational cash flows and debt.
Cash deposits are placed with Lloyds Bank plc on a no-notice treasury deposit account which tracks base rate and currently yields 0.5% p.a. on all deposited balances. The Group's cash position is reviewed daily and cash is transferred daily between these accounts and the Group's operational current accounts as required.
The main risks arising from the Group's financial instruments are interest rate risk and liquidity risk. The policies for managing these risks are regularly reviewed and agreed by the Board. Historically, no trading in financial instruments had been undertaken but during 2012 the Group entered into two separate swap arrangements. Full details are set out in the Financial Review. Further information on our treasury arrangements is set out in note 16.
The financial risk management objectives and policies of the Group, along with details of exposure to liquidity and cash flow risk are set out below and in note 16 (Financial Instruments) to the financial statements.
Risk Management
Risk management has been a fundamental part of the development of Lok'nStore. We maintain a risk register which identifies and categorises our risks and provides an assessment of risk based on a combination of 'likelihood' and 'consequences and impact' on the business. This is reviewed regularly by management and the Board and underpins our structured approach to identifying, assessing and controlling risks that emerge during the course of operating the business. Its purpose is to support better decision-making through understanding the risks inherent in both the day-to-day operations and the strategic direction of the Group and their likely impact. This is a continuing and evolving process as we review and monitor the underlying risk elements relevant to the business.
Market Risk
Self-storage is a developing market with further opportunities for significant growth. Awareness of self-storage and how it can be used by customers is well understood in the United States, but historically has been relatively low throughout the UK. Survey and anecdotal evidence suggest this awareness is now rising in the UK. The rate of growth in branded self-storage operations in good trading locations continues to be limited by the challenge of acquiring sites at appropriate prices and obtaining planning permission.
Lok'nStore invests in prime locations where its criteria for site selection are met and which will enable it to develop high quality stores which are prominent with high visibility and strong branding. We believe this will place us in a strong trading position and may discourage competitors from entering that local market. However it is possible that Lok'nStore may be unable to execute this strategy which will inhibit its growth. Further it is possible that an increasing number of competitors in the industry may negatively impact Lok'nStore's existing operations.
We have a large customer base spread across 24 stores including those customers who have used Lok'nStore regularly over the years. Many of these periodically return as their circumstances and their storage needs change. Our self-storage customers are a broad mix of both domestic and business, generating around 66.5% and 33.5% respectively of our revenue (2014: 66.7% :33.3%).
Property Risk
The acquisition of new sites for development into self-storage centres is a key strategic objective of the business. We will continue to face significant competition for site locations from other uses such as hotels, car showrooms and offices as well as from the other self-storage operators.
The process of gaining planning permissions remains challenging. Lok'nStore may take on the risk of obtaining planning permission when acquiring sites in the face of competitive bids. In these cases we are obliged to undertake the planning, environmental and other property due diligence under tight timescales which creates greater risk in the process.
Nevertheless Lok'nStore's management has gained significant experience in operating in this property environment, acquiring sites on main roads in prominent locations and obtaining appropriate planning permissions.
We manage the construction of our properties carefully. The building of each store is handled through a design and build contract with established contractors. We employ an external team of professionals to monitor the progress of each development. The fitting of mezzanine floors and steel units is generally managed in-house using an established external professional team of sub-contractors who understand Lok'nStore's particular specifications.
Credit Risk
Lok'nStore's self-storage credit model is strong with customers paying four weekly in advance in addition to an initial four weeks rental deposit. We retain a legal lien over customers' goods which can be sold to cover their unpaid bills. Credit control remains tight with only 38,891 (2014: 34,692) of bad debts recognised during the year representing around 0.25% of revenue (2014: 0.20%). There was 8,714 of additional costs associated with recovery (2014: 5,603). Given the tight credit conditions in the wider economy our own credit control indicators are resilient, showing no appreciable signs of weakening during the year with the number of 'late letters' issued declining year-on-year and bad debts remaining at low levels.
Tax Risk
We regularly monitor proposed and actual changes in legislation in the tax regime affecting principally corporation tax, capital gains tax, VAT and Stamp Duty Land Tax (SDLT). We work with our professional advisors and through trade bodies to understand and mitigate or benefit from their effects.
Corporate Social Responsibility and Employee Risk
The Corporate Social Responsibility and Employee Risk within the business are discussed within the Corporate Responsibility Report.
Reputational Risk
Lok'nStore's business reputation is very important to the Group. Our management and staff work hard to protect and develop it. We always try to communicate clearly with our customers, suppliers, local authorities and communities, employees and shareholders and to listen and take account of their views. The Lok'nStore Group websites (www.loknstore.co.uk www.loknstore.com and www.saracendatastore.co.uk) are important avenues of communication and a source of information for employees, customers and investors. Employee communication is augmented by quarterly staff newsletters.
Approved by the Board of Directors and authorised for issue on 16 October 2015 and signed on its behalf by:
Andrew Jacobs
Ray Davies
Chief Executive Officer
Finance Director
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2015
Notes
2015
'000
2014
'000
Revenue
1a
15,424
13,910
Total property, staff, distribution and general costs
2a
(9,742)
(9,294)
Adjusted EBITDA1
5,682
4,616
Amortisation of intangible assets
(165)
(165)
Depreciation and loss on sale of motor vehicles
(1,440)
(1,251)
Equity settled share based payments
(211)
(119)
Impairment of development land asset
10b
-
(1,604)
Irrecoverable property costs
(209)
-
(2,025)
(3,139)
Operating profit1
3,657
1,477
Finance income
3
141
26
Finance cost
4
(1,144)
(1,136)
Profit before taxation
5
2,654
367
Income tax expense
7
(686)
(170)
Profit for the year
1,968
197
Profit attributable to:
Owners of the parent
22
1,968
197
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Increase in property valuation
8,009
6,281
Deferred tax relating to change in property valuation
(1,578)
(1,261)
6,431
5,020
Items that may be subsequently reclassified to profit and loss
(Decrease)/increase in fair value of cash flow hedges
(170)
322
Deferred tax relating to cash flow hedges
38
(72)
(132)
250
Other comprehensive income
6,299
5,270
Total comprehensive income for the year
Attributable to:
8,267
5,467
Owners of the parent
8,267
5,467
Earnings per share
Basic
9
7.84p
0.81p
Diluted
9
7.64p
0.79p
1 Adjusted EBITDA and operating profit are defined in the accounting policies section of the notes to the financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 July 2015
Share
capital
'000
Share
premium
'000
Other
reserves
'000
Revaluation
reserve
'000
Retained
earnings
'000
Attributable
to owners of
the parent
'000
Non
controlling
interest
'000
Total
equity
'000
1 August 2013
272
1,013
10,511
21,665
6,631
40,092
280
40,372
Profit for the year
-
-
-
-
197
197
-
197
Other comprehensive income:
Increase in property valuation net of deferred tax
-
-
-
5,020
-
5,020
-
5,020
Increase in fair value of cash flow hedges net of deferred tax
-
-
250
-
-
250
-
250
Total comprehensive income for the year
-
-
250
5,020
197
5,467
-
5,467
Transactions with owners:
Dividend paid
-
-
(1,543)
-
-
(1,543)
-
(1,543)
Share based payments
-
-
119
-
-
119
-
119
Transfers in relation to share based payments
-
-
(742)
-
742
-
-
-
Acquisition of non-controlling interests
-
-
-
-
280
280
(280)
-
Exercise of share options
7
788
-
-
-
795
-
795
Total transactions with owners
7
788
(2,166)
-
1,022
(349)
(280)
(629)
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(207)
207
-
-
-
1 August 2014
279
1,801
8,595
26,478
8,057
45,210
-
45,210
Profit for the year
-
-
-
-
1,968
1,968
-
1,968
Other comprehensive income:
Increase in property valuation net of deferred tax
-
-
-
6,431
-
6,431
-
6,431
Increase in fair value of cash flow hedges net of deferred tax
-
-
(132)
-
-
(132)
-
(132)
Total comprehensive income for the year
-
-
(132)
6,431
1,968
8,267
-
8,267
Transactions with owners:
Dividend paid
-
-
-
-
(1,847)
(1,847)
-
(1,847)
Share based payments
-
-
211
-
-
211
-
211
Transfers in relation to share based payments
-
-
(298)
-
298
-
-
-
Deferred tax credit relating to share options1
-
-
309
-
-
309
-
309
Exercise of share options
6
813
-
-
-
819
-
819
Total transactions with owners
6
813
222
-
(1,549)
(508)
-
(508)
Transfer realised gain on asset disposal
-
-
-
(421)
421
-
-
-
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(249)
249
-
-
-
31 July 2015
285
2,614
8,685
32,239
9,146
52,969
-
52,969
Company Statement of Changes in Equity
For the year ended 31 July 2015
Share
capital
'000
Share
premium
'000
Retained
deficit
'000
Other
reserves
'000
Total
'000
1 August 2013
272
1,013
(735)
4,433
4,983
Total comprehensive income
-
-
(174)
-
(174)
Dividend paid
-
-
-
(1,543)
(1,543)
Share based payments
-
-
-
119
119
Transfers in relation to share based payments
-
-
742
(742)
-
Exercise of share options
7
788
-
-
795
31 July 2014
279
1,801
(167)
2,267
4,180
Total comprehensive income
-
-
(139)
-
(139)
Share based payments
-
-
-
211
211
Transfers in relation to share based payments
-
-
298
(298)
-
Exercise of share options
6
813
-
-
819
31 July 2015
285
2,614
(8)
2,180
5,071
Statements of Financial Position
31 July 2015 Company Registration No. 04007169
Notes
Group
2015
'000
Group
2014
'000
Company
2015
'000
Company
2014
'000
Assets
Non-current assets
Intangible assets
10a
3,758
3,923
-
-
Property, plant and equipment
10b
87,802
77,679
-
-
Investments
11
-
-
2,106
1,895
Development loan capital
12
2,779
-
-
-
Amounts due from subsidiary undertakings
26
-
-
2,965
2,285
Derivative financial instruments
17b
-
51
-
-
94,339
81,653
5,071
4,180
Current assets
Inventories
13
141
131
-
-
Trade and other receivables
14
2,479
2,901
-
-
Cash and cash equivalents
16
2,435
2,178
-
-
Total current assets (excluding non-current assets classified as held for sale)
5,055
5,210
-
-
Non-current assets classified as held for sale
10d
-
2,900
-
-
Total assets
99,394
89,763
5,071
4,180
Liabilities
Current liabilities
Trade and other payables
15
(5,971)
(5,900)
-
-
Current tax liabilities
7
(535)
(338)
-
-
(6,506)
(6,238)
-
-
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax
17a
17b
18
(27,548)
(119)
(12,252)
(27,445)
-
(10,870)
-
-
-
-
-
-
(39,919)
(38,315)
-
-
Total liabilities
(46,425)
(44,553)
-
-
Net assets
52,969
45,210
5,071
4,180
Equity
Equity attributable to owners of the parent
Called up share capital
19
285
279
285
279
Share premium
2,614
1,801
2,614
1,801
Other reserves
21
8,685
8,595
2,180
2,267
Retained earnings / (deficit)
22
9,146
8,057
(8)
(167)
Revaluation reserve
32,239
26,478
-
-
Total equity attributable to owners of the parent
52,969
45,210
5,071
4,180
Approved by the Board of Directors and authorised for issue on 16 October 2015 and signed on its behalf by:
Andrew Jacobs
Ray Davies
Chief Executive Officer
Finance Director
Consolidated Statement of Cash Flows
For the year ended 31 July 2015
Notes
2015
'000
2014
'000
Operating activities
Cash generated from operations
24a
5,984
5,241
Income tax paid
(338)
-
Net cash generated from operations
5,646
5,241
Investing activities
Development loan capital
(2,650)
-
Purchase of property, plant and equipment
(3,583)
(6,485)
Proceeds from disposal of property, plant and equipment
2,901
19
Interest received
12
26
Net cash used in investing activities
(3,320)
(6,440)
Financing activities
Proceeds from new borrowings
Repayment of borrowings
-
-
919
(5)
Finance costs paid
(1,041)
(1,033)
Equity dividends paid
(1,847)
(1,543)
Proceeds from issue of ordinary shares (net)
819
795
Net cash used in financing activities
(2,069)
(867)
Net increase/(decrease)in cash and cash equivalents in the year
257
(2,066)
Cash and cash equivalents at beginning of the year
2,178
4,244
Cash and cash equivalents at end of the year
2,435
2,178
No statement of cash flows is presented for the Company as it had no cash flows in either year.
Accounting Policies
General Information
Lok'nStore Group plc is an AIM listed company incorporated and domiciled in England and Wales. The address of the registered office is One London Wall, London EC2Y 5AB, UK.
The preliminary financial information does not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 but is derived from statutory accounts for the years ended 31 July 2015 and 31 July 2014, both of which are audited. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 31 July 2015. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRSs.
The statutory accounts for the year ended 31 July 2015 will be delivered to the Registrar of Companies following the Company's Annual General Meeting and can be obtained from the investor section of the Company's website at http://www.loknstore.co.uk. Statutory accounts for the year ended 31 July 2014 have been filed with the Registrar of Companies. The auditor's report for the year ended 31 July 2015 was unqualified, did not include a reference to any matter to which the auditor drew attention by way of emphasis without qualifying their report and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.
Basis of accounting
The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) Interpretations as adopted by the European Union and comply with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretation Committee relevant to its operations and effective for accounting periods beginning on or after 1 August 2014.
The financial statements have been prepared on the historic cost basis except that certain trading properties and derivative financial instruments are stated at fair value.
Adoption of new and revised standards
The following relevant new standards, interpretations and amendments have been adopted in the year but have no significant impact.
IFRS 10: Consolidated Financial Statements
IFRS 11: Joint Arrangements
IFRS 12: Disclosure of Interest in Other Entities
Amendment to IAS 19: Employee Benefits
Amendment to IAS 27: Separate Financial Statements
Amendment to IAS 28: Investments in Associates and Joint Ventures
Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities
Amendment to IAS 36: Impairment of Assets
Amendment to IAS 39: Financial Instruments: Recognition and Measurement
Standards in issue but not yet effective
At the date of approval of these financial statements, the following principal standards and interpretations which were in issue but not yet effective:
Standards, interpretations and amendments
NotYetEndorsed
Effectivedate: Periods commencing onorafter
IFRS9
FinancialInstruments
1Jan 18
IFRS
10 and
IAS 28
Sale or Contribution of AssetsbetweenanInvestoranditsAssociate orJoint Venture
1Jan 16
IFRS11
AccountingforAcquisitionsofInterests inJointOperations
1Jan 16
IFRS15
Revenue fromContracts withCustomers
1Jan 18
IAS16 and IAS 38
Clarification ofAcceptable Methodsof Depreciation and Amortisation
1Jan 16
IAS 27
EquityMethod inSeparateFinancial Statements
1Jan 16
IAS 1
Disclosure Initiative
1 Jan 16
The Directors do not anticipate that the adoption of these Standards will have a significant impact on the financial statements of the Group.
There were no other Standards or Interpretations, which were in issue but not yet effective at the date of authorisation of these financial statements, that the Directors anticipate will have a material impact on the financial statements of the Group.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 July each year. 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.
Critical accounting estimates and judgements
The preparation of consolidated financial statements under EU-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 values its self-storage stores using 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 rents and operating costs, maintenance requirements, capitalisation rates and discount rates. A more detailed explanation of the background and methodology adopted in the valuation of the Group's trading properties is set out in note 10b. The carrying value of land and buildings held at valuation at the reporting date was 61.0 million (2014: 51.4 million) as shown in the table in note 10b.
b) Assets in the course of construction and land held for pipeline 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 net lettable storage space that it can achieve in its planning negotiations, together with the time it will take to achieve maturity occupancy level. In addition, assumptions are made on the storage rent 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 8.9 million (2014: 11.4 million). Please see note 10b for more details.
c) Estimate of fair value of intangible assets acquired in business combination
The relative size of the Group's intangible assets, excluding goodwill, makes the judgements surrounding the estimated useful lives important to the Group's financial position and performance. At 31 July 2015 intangible assets, excluding goodwill, amounted to 2.65 million (2014: 2.81 million). The valuation method used and key assumptions are described in note 10a.
The useful life used to amortise intangible assets relates to the expected future performance of the assets acquired and management's judgement of the period over which economic benefit will be derived from the asset. The estimated useful life of customer relationships principally reflects management's view of the average economic life of the customer base and is assessed by reference to customer churn rates. Typically, the customer base for a serviced archive business is relatively inert. Corporate customers do not tend to switch service providers and indeed they incur box withdrawal charges should they do so. An increase in churn rates may lead to a reduction in the estimated useful life and an increase in the amortisation charge.
d) Non-current assets held for sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Notes to the Financial Statements
For the year ended 31 July 2015
1a Revenue
Analysis of the Group's revenue is shown below:
2015
2014
Stores trading
'000
'000
Self-storage revenue
11,851
10,510
Other storage related revenue
1,434
1,349
Ancillary store rental revenue
4
4
Management fees
176
128
Sub-total
13,465
11,991
Stores under development
Non-storage income
3
79
Sub-total
13,468
12,070
Document storage revenue
1,956
1,840
Total revenue
15,424
13,910
1b Segmental information
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board to allocate resources to the segments and to assess their performance. All of the Group's activities occur in the United Kingdom.
Financial information is reported to the Board with revenue and profit analysed between self-storage activity and serviced document storageactivity.
Segment revenue comprises of sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the Board represents the profit earned by each segment before acquisition costs and other non-recurring set-up costs, finance income, finance costs and tax. For the purposes of assessing segment performance and for determining the allocation of resources between segments, the Board uses a measure of adjusted EBITDA (as defined in the accounting policies) and reviews the non-current assets attributable to each segment as well as the financial resources available. All assets are allocated to reportable segments. Assets that are used jointly by segments are allocated to the individual segments on a basis of revenues earned. All liabilities are allocated to individual segments other than borrowings and tax. Information is reported to the Board of Directors on a product basis as management believe that the activity of self-storage and the activity of serviced document storage expose the Group to differing levels of risk and rewards due to the length, nature, seasonality and customer base of their respective operating cycles.
The segment information for the year ended 31 July 2015 is as follows:
2015
Self-storage
2015
'000
Serviced archive &
records management
2015
'000
Total
2015
'000
Revenue
13,468
1,956
15,424
Adjusted EBITDA
5,420
262
5,682
Management charges
25
(25)
-
Segment Adjusted EBITDA
5,445
237
5,682
Depreciation
Amortisation of intangible assets
(1,340)
-
(100)
(165)
(1,440)
(165)
Equity settled share based payments
(211)
-
(211)
Irrecoverable property costs
(209)
-
(209)
Segment profit/(loss)
3,685
(28)
3,657
Central costs not allocated to segments:
Finance income
141
Finance costs
(1,144)
Profit before taxation
2,654
Income tax expense
(686)
Consolidated profit for the financial year
1,968
2014
Self-storage
2014
'000
Serviced archive &
records management
2014
'000
Total
2014
'000
Revenue
12,070
1,840
13,910
Adjusted EBITDA
4,378
238
4,616
Management charges
25
(25)
-
Segment Adjusted EBITDA
4,403
213
4,616
Depreciation and loss on sale
Amortisation of intangible assets
(1,135)
-
(116)
(165)
(1,251)
(165)
Equity settled share based payments
(119)
-
(119)
Impairment of development land asset
(1,604)
-
(1,604)
Segment profit/(loss)
1,545
(68)
1,477
Central costs not allocated to segments:
Finance income
26
Finance costs
(1,136)
Profit before taxation
367
Income tax expense
(170)
Consolidated profit for the financial year
197
Corporate transactions and the treasury function are managed centrally and therefore are not allocated to segments. Sales between segments are carried out at arm's length. The serviced archive segment with over 360 customers has a greater customer concentration with its ten largest corporate customers accounting for 34.6% (2014: 31.4%) of revenue, its top 50 customers accounting for 63.3% (2014: 59.3%) and its top 100 customers accounting for 79.9% (2014: 74.7%) of revenue. The self-storage segment with over 7,750 customers has no individual self-storage customer accounting for more than 1% of total revenue and no group of entities under common control (e.g. Government) accounts for more than 10% of total revenues.
2015
Self-storage
2015
'000
Serviced archive &
records management
2015
'000
Total
2015
'000
Segment assets
93,296
6,098
99,394
Segment liabilities
(18,341)
(536)
(18,877)
Borrowings
(27,548)
Total liabilities
(46,425)
Capital expenditure
3,126
457
3,583
2014
Self-storage
2014
'000
Serviced archive &
records management
2014
'000
Total
2014
'000
Segment assets
83,803
5,960
89,763
Segment liabilities
(16,379)
(729)
(17,108)
Borrowings
(27,445)
Total liabilities
(44,553)
Capital expenditure1
6,269
215
6,484
1 Capital expenditure includes fixed asset additions (note 10b) and additions to property lease premiums (note 10c)
The amounts presented to the Board with respect to total assets and total liabilities are measured in a manner consistent with the financial statements and are allocated based on the operations of the segment. Borrowings are managed centrally on a Group basis and are therefore not allocated to segments.
2a Property, staff, distribution and general costs
2015
'000
2014
'000
Property and premises costs
4,010
3,689
Staff costs
4,188
3,971
General overheads
1,049
1,153
Distribution costs
190
189
Retail products cost of sales (see note 2b)
305
292
9,742
9,294
2b Cost of sales of retail products
Cost of sales represents the direct costs associated with the sale of retail products (boxes, packaging etc.), the ancillary sales of insurance cover for customer goods and the provision of van hire services, all of which fall within the Group's ordinary activities.
2015
'000
2014
'000
Retail
130
149
Insurance
33
32
Van hire/other
2
6
165
187
Serviced archive consumables and direct costs
140
105
305
292
2c Other costs
2015
'000
2014
'000
Impairment of development land asset (see note 10b)
-
1,604
Irrecoverable property costs1
209
-
209
1,604
1 Site demolition costs not recoverable from the prospective purchaser of the Portsmouth North site.
3 Finance income
2015
'000
2014
'000
Bank interest
141
26
All interest receivable arises on cash and cash equivalents (see note 16).
4 Finance costs
2015
'000
2014
,000
Bank interest
925
912
Non-utilisation fees and amortisation of bank loan arrangement fees
219
223
Other interest
-
1
1,144
1,136
5 Profit before taxation
2015
'000
2014
'000
Profit before taxation is stated after charging:
Depreciation and amounts written off property, plant and equipment
1,440
1,224
Amortisation of intangible assets
165
165
Operating lease rentals - land and buildings
1,562
1,529
Amounts payable to Baker Tilly UK Audit LLP and their associates for audit and non-audit services:
Audit services
- UK statutory audit of the Company and consolidated accounts
45
43
Other services
-the auditing of accounts of associates of the Company pursuant to legislation
14
17
Other services supplied pursuant to such legislation
- interim review
7
8
Tax services
- compliance services
26
48
- advisory services
13
16
105
132
Comprising:
Audit services
59
60
Non-audit services
46
72
105
132
6 Employees
2015
No.
2014
No.
The average monthly number of persons (including Directors) employed by the Group during the year was:
Store management
113
107
Administration
30
30
143
137
2015
'000
2014
'000
Costs for the above persons:
Wages and salaries
3,451
3,336
Social security costs
443
426
Pension costs
87
54
3,981
3,816
Share based remuneration (options)
211
119
4,192
3,935
Share based remuneration is separately disclosed in the statement of comprehensive income. Wages and salaries of 132,543 (2014: 129,068) have been capitalised as additions to property, plant and equipment as they are directly attributable to the acquisition of these assets. All other employee costs are included in staff costs in the statement of comprehensive income.
In relation to pension contributions, there was 9,260 (2014: 3,913) outstanding at the year-end.
Directors' remuneration
2015
Emoluments
Bonuses
Benefits
Sub total
Gains on
share options
Total
Executive:
A Jacobs
204,000
38,000
4,055
246,055
156,399
402,454
SG Thomas
51,000
9,500
3,724
64,224
50,975
115,199
RA Davies
110,000
15,500
3,063
128,563
55,437
184,000
CM Jacobs
57,834
6,500
3,177
67,511
152,865
220,376
Non-Executive:
RJ Holmes
20,033
-
-
20,033
-
20,033
ETD Luker
25,500
-
-
25,500
-
25,500
CP Peal
20,400
-
-
20,400
-
20,400
488,767
69,500
14,019
572,286
415,676
987,962
2014
Emoluments
Bonuses
Benefits
Sub total
Gains on
share options
Total
Executive:
A Jacobs
200,000
34,000
3,328
237,328
-
237,328
SG Thomas
50,000
8,500
3,702
62,202
222,773
284,975
RA Davies
100,000
18,250
2,789
121,039
19,822
140,861
CM Jacobs
56,700
7,701
3,143
67,544
879
68,423
Non-Executive:
RJ Holmes
20,000
-
-
20,000
13,286
33,286
ETD Luker
25,000
-
-
25,000
-
25,000
CP Peal
20,000
-
-
20,000
-
20,000
D Hampson
11,667
-
-
11,667
-
11,667
483,367
68,451
12,962
564,780
256,760
821,540
Pension contributions of 30,475 (2014: 30,475) were paid by the Group on behalf of RA Davies and are not included in the Directors' emoluments table above. The highest paid Director did not accrue any pension rights during the year. The benefits in kind all relate to medical insurance premiums paid on behalf of the Directors.
The number of Directors to whom retirement benefits are accruing under money purchase pension schemes in respect of qualifying service is one (2014: one).
7 Taxation
2015
'000
2014
'000
Current tax:
UK corporation tax at 20.7% (2014: 22.4%)
535
338
Deferred tax:
Origination and reversal of temporary differences
100
(311)
Adjustments in respect of prior periods
51
143
Total deferred tax charge / (credit)
151
(168)
Income tax expense for the year
686
170
The charge for the year can be reconciled to the profit for the year as follows:
2015
'000
2014
'000
Profit before tax
2,654
368
Tax on ordinary activities at the standard rate of corporation tax in the UK of 20.7% (2014: 22.4%)
549
82
Expenses not deductible for tax purposes
2
3
Depreciation of non-qualifying assets
85
41
Share based payment charges in excess of corresponding tax deduction
-
26
Adjustments in respect of prior periods - deferred tax
Other timing differences
51
(1)
143
-
Impact of change in rate on timing differences
-
7
Sale of Reading recognised for tax purposes
-
(132)
Income tax expense for the year
686
170
Effective tax rate
26%
46%
The UK's main rate of corporation tax has reduced to 20% from 1 April 2015. The applicable rate for this period is 20.7%.
In addition to the amount charged to profit or loss for the year, deferred tax relating to the revaluation of the Group's properties of 1,577,896 (2014: 1,261,062) and the movement in the fair value of cash flow hedges of (37,549) (2014: 72,051) has been recognised as a debit/credit directly in other comprehensive income (see note 18 on deferred tax).
8 Dividends
2015
'000
2014
,000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2013 (4.33 pence per share)
-
1,053
Interim dividend for the six months to 31 January 2014 (2.00 pence per share)
-
490
Final dividend for the year ended 31 July 2014 (5.0 pence per share)
1,258
-
Interim dividend for the six months to 31 January 2015 (2.33 pence per share)
589
-
1,847
1,543
In respect of the current year the Directors propose that a final dividend of 5.67 pence per share will be paid to the shareholders. The total estimated dividend to be paid is 1,444,693 based on the number of shares in issue at 6 October 2015 as adjusted for shares held in the Employee Benefits Trust and for shares held on treasury. This is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The ex-dividend date will be 29 November 2015; the record date 30November 2015; with an intended payment date of 21 December 2015.
9 Earnings per share
The calculations of earnings per share are based on the following profits and numbers of shares.
2015
'000
2014
,000
Profit for the financial year attributable to owners of the parent
1,968
197
2015
No. of shares
2014
No. of shares
Weighted average number of shares
For basic earnings per share
25,102,032
24,392,144
Dilutive effect of share options1
654,598
589,427
For diluted earnings per share
25,756,630
24,981,571
623,212 (2014: 623,212) shares held in the Employee Benefit Trust and 2,466,869 (2014: 2,466,869) Treasury shares are excluded from the above (see note 23).
2015
2014
Earnings per share
Basic
7.84p
7.39p2
Diluted
7.64p
7.21p2
1 Further options that could potentially dilute EPS in the future are excluded from the above because they are not dilutive in the period presented. Full details of share options are included in note 20.
2 2014 comparatives normalised for 2014 property impairment charge of 1.6 m added back to earnings
10a Intangible assets
Group
Goodwill
'000
Contractual
customer
relationships
'000
Total
'000
Cost at 1 August 2013
1,110
3,309
4,419
Amortisation at 1 August 2013
-
(331)
(331)
Amortisation charge
-
(165)
(165)
Amortisation at 31 July 2014
-
(496)
(496)
Net book value at 31 July 2014
1,110
2,813
3,923
Cost at 1 August 2014
1,110
3,309
4,419
Amortisation at 1 August 2014
-
(496)
(496)
Amortisation charge
-
(165)
(165)
Amortisation at 31 July 2015
-
(661)
(661)
Net book value at 31 July 2015
1,110
2,648
3,758
All goodwill and customer relationships are allocated to the serviced document storage cash-generating unit (CGU) identified as a separate business segment.
The remaining amortisation period of the contractual customer relationships at 31 July 2015 is 15 years and 11 months (2014: 16 years 11 months).
The values for impairment purposes are based on past and current experience of trading, estimated future cash flows and external information where relevant and derived from the following key assumptions:
a discount rate of 11%
estimated useful lives of customer relationships (20 years)
short term sustainable growth rates of 5% (next 5 years)
thereafter long term sustainable growth rates of 2.0%
sensitivity: the Group has conducted a sensitivity analysis on the impairment test of each CGU's carrying value. A cut in projected sales growth by around 7% would result in the carrying value of goodwill being reduced to its recoverable amount.
10b Property, plant and equipment
Group
Development
Property
assets
at cost
'000
Land and
buildings
at valuation
'000
Long
Leasehold
land and
buildings
at valuation
'000
Short leasehold
improvements
at cost
'000
Fixtures,
fittings and
equipment
at cost
'000
Motor
vehicles
at cost
'000
Total
'000
Cost or valuation
1 August 2013
8,716
50,774
-
2,544
16,148
145
78,327
Additions
4,297
17
148
16
2,007
-
6,485
Transfer from lease premium (note 10c)
-
-
2,800
-
-
-
2,800
Non-current assets classified as held for sale
-
(2,900)
-
-
-
-
(2,900)
Disposals
-
-
-
-
-
(154)
(154)
Reclassification
-
-
(87)
-
87
-
-
Revaluations
-
3,521
2,260
-
-
-
5,781
31 July 2014
13,013
51,412
5,121
2,560
18,242
(9)
90,339
Depreciation
1 August 2013
-
-
-
1,509
8,855
77
10,441
Depreciation
-
487
13
90
623
11
1,224
Impairment
1,604
-
-
-
-
-
1,604
Disposals
-
-
-
-
-
(109)
(109)
Revaluations
(487)
(13)
-
-
-
(500)
31 July 2014
1,604
-
-
1,599
9,478
(21)
12,660
Net book value at 31 July 2014
11,409
51,412
5,121
961
8,764
12
77,679
Cost or valuation
1 August 2014
13,013
51,412
5,121
2,560
18,242
32
90,380
Additions
1,504
525
-
3
1,551
-
3,583
Disposals
-
-
-
-
(289)
(2)
(291)
Reclassification
(4,025)
2,958
-
-
1,067
-
-
Revaluations
-
6,140
1,304
-
-
-
7,444
31 July 2015
10,492
61,035
6,425
2,563
20,571
30
101,116
Depreciation
1 August 2014
1,604
-
-
1,599
9,478
19
12,700
Depreciation
-
572
23
91
751
3
1,440
Disposals
-
-
-
-
(230)
(1)
(231)
Revaluations
-
(572)
(23)
-
-
-
(595)
31 July 2015
1,604
-
-
1,690
9,999
21
13,314
Net book value at 31 July 2015
8,888
61,035
6,425
873
10,572
9
87,802
If all property, plant and equipment were stated at historic cost the carrying value would be 47.5 million (2014: 44.5 million).
Capital expenditure during the year related to the ongoing building at Bristol and Southampton, the expansion of capacity at our Swindon East Store and also limited expenditures at our other existing stores. Further expenditure on racking at the Saracen Olney store also increased capacity in our serviced document storage business.
Property, plant and equipment (non-current assets) with a carrying value of 87.8 million (2014: 77.7 million) are pledged as security for bank loans.
Market Valuation of Freehold and Operating Leasehold Land and Buildings
On 31 July 2015, a professional valuation was prepared by Cushman & Wakefield LLP (C&W) in respect of eleven freehold, one long leasehold and seven operating leasehold properties. The valuation was prepared in accordance with the RICS Valuation - Professional Standards, published by The Royal Institution of Chartered Surveyors ("the Red Book"). The valuations were prepared on the basis of Fair Value as a fully equipped operational entity having regard to trading potential. The valuation was provided for accounts purposes and as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure requirements of the Red Book C&W have confirmed that:
One of the members of the RICS who has been a signatory to the valuation provided to the Company for the same purposes as this valuation have been a signatory since January 2004. The second member has been a signatory since 2014.
C&W have prepared eleven previous valuations for the same purpose as this valuation on behalf of the Company.
C&W do not provide other significant professional or agency services to the Company.
In relation to the preceding financial year of C&W the proportion of the total fees payable by the Company to the total fee income of the firm is less than 5%.
The valuation report indicates a total valuation for all properties valued of 88.9 million (2014: 79.1 million) of which 74.1 million (2014: 64.5 million) relates to freehold and long leasehold properties, and 14.8 million (2014: 14.6 million) relates to properties held under operating leases.
Freehold and long leasehold land and buildings are carried at valuation in the statement of financial position. Short leasehold improvements at properties held under operating leases are carried at cost rather than valuation in accordance with IFRS.
For the trading properties the valuation methodology explained in more detail below is based on fair value as fully equipped operational entities, having regard to trading potential. Of the 74.1 million valuation of the freehold and long leasehold properties 6.7 million (2014: 5.1 million) relates to the net book value of fixtures, fittings and equipment, and the remaining 67.4 million (2014: 59.4 million) relates to freehold and long leasehold properties.
The 2015 valuation includes and reflects movements in value which have resulted from the operational performance of the stores and movements in the investment environment.
Market uncertainty
C&W's valuation report comments on valuation uncertainty resulting from low liquidity in the market for self-storage property. C&W note that in the UK since Q1 2013 there have only been four transactions involving multiple assets and 10 single asset transactions. C&W state that due to the lack of comparable market information in the self-storage sector, there is greater uncertainty attached to their opinion of value than would be anticipated during more active market conditions.
Valuation Methodology
C&W have adopted different approaches for the valuation of the leasehold and freehold assets as follows:
Freehold and long leasehold property
The valuation is based on a discounted cash flow of the net operating income projected over a 10-year period and a notional sale of the asset at the end of the 10th year.
Assumptions
a. Net operating income is based on projected revenue received less projected operating costs together with a central administration charge representing 6% of the estimated annual revenue subject to a cap and a collar. The initial net operating income is calculated by estimating the net operating income in the first 12 months following the valuation date.
b. The net operating income in future years is calculated assuming either straight-line absorption from day one actual occupancy or variable absorption over years 1 to 4 of the cash flow period, to an estimated stabilised/mature occupancy level. In the valuation the assumed stabilised occupancy level for the 19 trading stores (both freeholds and leaseholds) averages 68.4% (2014: 67.9%). The projected revenues and costs have been adjusted for estimated cost inflation and revenue growth.
c. The capitalisation rates applied to existing and future net cash flows have been estimated by reference to underlying yields for industrial and retail warehouse property, yields for other trading property types such as hotels and student housing, bank base rates, 10-year money rates, inflation and the available evidence of transactions in the sector. On average for the 19 stores the yield (net of purchaser's costs) arising from the first year of the projected cash flow is 7.76% (2014: 8.11%). This rises to 10.02% (2014: 10.64%) based on the projected cash flow for the first year following estimated stabilisation in respect of each property.
d. The future net cash flow projections (including revenue growth and cost inflation) have been discounted at a rate that reflects the risk associated with each asset. The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 11.25% (2014: 12.0%).
e. Purchaser's costs of 5.8% have been assumed initially and sale plus purchaser's costs totalling 7.8% are assumed on the notional sales in the 10th year in relation to the freehold and long leasehold stores.
The fair value hierarchy within which the Fair Value Measurements are categorised is level 3, in accordance with IFRS 13 fair value measurements.
Property held under Operating Leaseholds
The same methodology has been used as for freehold property, except that no sale of the assets in the 10th year is assumed, but the discounted cash flow is extended to the expiry of the lease. The average unexpired term of the Group's operating leaseholds is approximately 12 years and 8 months as at 31 July 2015 (13 years and 8 months: 31 July 2014). Valuations for stores held under operating leases are not reflected in the statement of financial position and the assets in relation to these stores are carried at cost less accumulated depreciation.
In 2011, one of the Group store's leases were renegotiated and includes a ten year option to renew the leases from March 2026 to March 2036. The option to extend is only operable in the event that all four of the leases applicable to this store are extended and this option is personal to Lok'nStore or another "major self-storage operator", to be approved by the landlord (approval not to be unreasonably withheld). The C&W valuation on this store is based on this Special Assumption that the option to extend the lease for 10 years is exercised. This is consistent with the approach taken in previous years.
10c Property lease premiums
The Maidenhead site opened as a new trading store in December 2013. Following the opening of this store the amounts being held under lease premium were transferred in 2014 to property plant and equipment in order to keep all costs associated with the store in one asset category.
Group
2015
'000
2014
'000
Balance at start of year
-
2,800
Transfer to property plant and equipment
-
(2,800)
Balance 31 July
-
-
10d Non-current assets held for sale
2.9 million of the asset relating to the existing trading store at Reading was presented as held for sale in the comparative figures. This follows the agreement to sell the site for residential development for 2.9 million. The sale completed in this financial year on 31 October 2014.
11 Investments
Company Investments in subsidiary undertakings
'000
31 July 2012
1,682
Capital contributions arising from share-based payments
94
31 July 2013
1,776
Capital contributions arising from share-based payments
119
31 July 2014
1,895
Capital contributions arising from share-based payments
211
31 July 2015
2,106
The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in England and Wales:
% of shares and voting rights held
Class of
shareholding
Directly
Indirectly
Nature of
entity
Lok'nStore Limited *
Ordinary
100
-
Self-storage
Lok'nStore Trustee Limited1 *
Ordinary
-
100
Trustee
Southern Engineering and Machinery Company Limited1 *
Ordinary
-
100
Land
Semco Machine Tools Limited2 *
Ordinary
-
100
Dormant
Semco Engineering Limited2 *
Ordinary
-
100
Dormant
Saracen Datastore Limited1
Ordinary
-
100
Serviced
Document
Storage
1These companies are subsidiaries of Lok'nStore Limited.
2 These companies are subsidiaries of Southern Engineering and Machinery Company Limited and did not trade during the year.
* The company has taken the exemption from audit under Section 479A of the Companies Act 2006
The fair value of these investments has not been disclosed because it cannot be measured reliably as there is no active market for these equity instruments. The Company currently has no plans to dispose of these investments.
12 Development capital
In May 2015 Lok'nStore opened a new managed store in Aldershot, Hampshire. The store is managed for outside investors under the Lok'nStore brand. Lok'nStore has managed the building and subsequent operation of the store. Lok'nStore will generate a return on 2.5 million of the total development capital committed to the project, and a management fee for the construction, operation and branding of the store.
Group
2015
'000
Group
2014
'000
Development capital
2,779
-
13 Inventories
Group
2015
'000
Group
2014
'000
Consumables and goods for resale
141
131
The amount of inventories recognised as an expense during the year was 184,716 (2014: 208,587) and is included as an expense in cost of sales.
14 Trade and other receivables
Group
2015
'000
Group
2014
'000
Trade receivables
1,302
1,542
Other receivables
640
666
Prepayments and accrued income
537
693
2,479
2,901
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
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 10 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 Company 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 past default experience.
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, and also to pay a deposit of four weeks' storage income. 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.
In respect of its document storage business, customers are invoiced typically monthly in advance for the storage of their boxes, tapes and files. The provision of additional services, such as document boxes or tape collection and retrieval from archive, typically are invoiced monthly in arrears. The serviced archive segment with over 360 customers has a greater customer concentration - refer note 1(b) segmental analysis.
Included in the Group's trade receivables balance are receivables with a carrying amount of 202,546 (2014: 235,470) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality 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. The average age of these receivables is 39 days past due (2014: 39 days past due).
Ageing of past due but not impaired receivables
Group
2015
'000
Group
2014
'000
0-30 days
119
132
30-60 days
43
63
60+ days
41
40
Total
203
235
Movement in the allowance for bad debts
Group
Group
2015
2014
'000
'000
Balance at the beginning of the year
163
149
Impairment losses recognised
39
34
Amounts written off as uncollectible
(28)
(20)
Balance at the end of the year
174
163
The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further provision required.
Ageing of impaired trade receivables
Group
2015
'000
Group
2014
'000
0-30 days
-
-
30-60 days
-
-
60+ days
174
163
Total
174
163
15 Trade and other payables
Group
2015
'000
Group
2014
'000
Trade payables
1,901
2,031
Taxation and social security costs
464
149
Other payables
1,173
1,139
Accruals and deferred income
2,433
2,581
5,971
5,900
The Directors consider that the carrying amount of trade and other payables and accruals and deferred income approximates fair value.
16 Financial instruments
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debts, which include the borrowings disclosed in note 17a, 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 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 conservative gearing ratio (the proportion of net debt to equity). 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 year-end is as follows:
Capital Management
Group
2015
'000
Group
2014
'000
Gross borrowings
(27,701)
(27,701)
Cash and cash equivalents
2,435
2,178
Net debt
(25,266)
(25,523)
Total equity
52,968
45,210
Net debt to equity ratio
47.7%
56.4%
The decrease in the Group's gearing ratio arises principally through the combined effect of an increase in the C&W valuation of its properties, and cash generated from operations.
Exposure to credit and interest rate risk arises in the normal course of the Group's business.
A Derivative financial instruments and hedge accounting
The Group's activities expose it primarily to the financial risks of interest rates. The Group currently has two interest rate swaps with Lloyds Bank plc which run until October 2016. These have been maintained and are reported fully in the Financial Review and in note 17(b).
BDebt management
Debt is defined as non-current and current borrowings, as detailed in note 17a. Equity includes all capital and reserves of the Group. The Group is not subject to externally imposed capital requirements.
The Group borrows through a senior five year term revolving credit facility, arranged through Lloyds Bank Group plc secured on its store portfolio and other Group assets with a net book value of 99.4million (2014: 89.8 million). Borrowings are arranged to ensure the Group fulfils its strategy of growth and development of its stores and to maintain short-term liquidity. As at the reporting date the Group has a committed revolving credit facility of 40 million (2014: 40 million). This facility expires on 19 October 2016. Undrawn committed facilities at the year-end amounted to 12.3 million (2014: 12.3 million).
C Interest rate risk management
The Group's policy on interest rate management is agreed at Board level and is reviewed on an on-going basis. All borrowings are denominated in Sterling and are detailed in note 17a. The Group has a number of revolving loans within its overall revolving credit facility and as such is exposed to interest rate risks at the time of renewal arising from any upward movement in the LIBOR rate. The Group continues its two cash flow hedging interest rate swap arrangements in order to reduce the risk of such upward movements in LIBOR rate. These instruments and the movement in their fair values are detailed in note 17b.
The following interest rates applied during the financial year:
a) London Inter-Bank Offer Rate (LIBOR) plus 2.35%-2.65% Lloyds Bank plc margin based on a loan to value covenant test for the revolving advances amounting to 27.7 million (2014: 27.7 million).
b) 40% of the applicable margin in 1 above for non-utilisation (i.e. that part of the facility which remains undrawn from time to time). As at 31 July 2015 the prevailing non-utilisation charge is calculated at a rate of 0.94%.
c) Rates prevailing on the Group's Interest rate swaps. See note 17b.
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 rates1.All amounts are denominated in Sterling. The balances at 31 July 2015 are as follows:
Group
2015
'000
Group
2014
'000
Variable rate treasury deposits1
1,744
1,927
SIP trustee deposits
46
56
Cash in operating current accounts
602
113
Other cash and cash equivalents
43
82
Total cash and cash equivalents
2,435
2,178
1 Money market rates for the Group's variable rate treasury deposit track Lloyds Bank plc base rate. The rate attributable to the variable rate deposits at 31 July 2015 was 0.5%.
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.
D Interest rate sensitivity analysis
In managing interest rate risk the Group aims to reduce the impact of short-term fluctuations on the Group's earnings, without jeopardising its flexibility. Over the longer term, permanent changes in interest rates may have an impact on consolidated earnings.
At 31 July 2015, it is estimated that an increase of one percentage point in interest rates would have reduced the Group's annual profit before tax by 77,005 (2014: 77,005) and conversely a decrease of one percentage point in interest rates would have increased the Group's annual profit before tax by 77,005 (2014: 77,005). There would have been no effect on amounts recognised directly in other comprehensive income. The sensitivity has been calculated by increasing by 1% the average variable interest rate of 2.85% applying to the variable rate borrowings of 7.7 million in the year (2014: 7.7 million / 2.84%).
E Cash management and liquidity
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note B above is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.
Short-term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources, giving due consideration to risk.
F Foreign currency management
The Group operates solely in the United Kingdom and as such all of the Group's financial assets and liabilities are denominated in Sterling and there is no exposure to exchange risk.
G Credit risk
The credit risk management policies of the Group with respect to trade receivables are discussed in note 14.
The credit risk on liquid funds is limited because the counterparty is a bank with high credit ratings assigned by international credit-rating agencies, in line with the Group's policy which is to borrow from major institutional banks when arranging finance.
The Group's maximum exposure to credit risk at 31 July 2015 was 1,468,261 (2014: 1,711,258) on receivables and 2,435,399 (2014: 2,177,630) on cash and cash equivalents. Additionally, the Group has provided development loan capital in respect of the Aldershot store development, a managed contract. The current balance outstanding at 31 July 2015 was 2,778,824. These amounts are secured by way of a fixed priority first charge and a debenture over all of the Aldershot assets.
H Maturity analysis of financial liabilities
The undiscounted contractual cash flow maturities are as follows:
2015 - Group
Trade
and other
payables
'000
Borrowings
'000
Interest on
borrowings
'000
From two to five years
-
-
-
From one to two years
-
27,701
205
Due after more than one year
-
-
205
Due within one year
3,857
-
925
Total contractual undiscounted cash flows
3,857
27,701
1,130
2014 - Group
Trade
and other
payables
'000
Borrowings
'000
Interest on
borrowings
'000
From two to five years
-
27,701
205
From one to two years
-
-
924
Due after more than one year
-
-
1,129
Due within one year
3,656
-
923
Total contractual undiscounted cash flows
3,656
27,701
2,052
I Fair values of financial instruments
2015
'000
2014
'000
Categories of financial assets and financial liabilities
Financial assets
Trade and other receivables
1,468
1,711
Cash and cash equivalents
2,435
2,178
Development loan capital
2,779
-
Financial liabilities
Trade and other payables
(3,857)
(3,656)
Bank loans
(27,548)
(27,445)
The fair values of the Group's cash and short-term deposits and those of other financial assets equate to their carrying amounts. The Group's receivables and cash and cash equivalents are all classified as loans and receivables and carried at amortised cost. The amounts are presented net of provisions for doubtful receivables and allowances for impairment are made where appropriate. Trade and other payables and bank borrowings are all classified as financial liabilities measured at amortised cost.
J Company's financial instruments
The Company's financial assets are amounts owed by subsidiary undertakings amounting to 3.0 million (2014: 2.3 million) which are classified as loans and receivables, and the investment in its subsidiary undertaking of 0.2 million (excluding capital contributions). These amounts are denominated in Sterling, are non-interest bearing, are unsecured and fall due for repayment within one year. No amounts are past due or impaired. The Company has no financial liabilities.
17a Borrowings
Group
2015
'000
Group
2014
'000
Non-current
Bank loans repayable in one to two years - Gross
27,701
-
Bank loans repayable in more than two years but not more than five years - Gross
-
27,701
Deferred financing costs
(153)
(256)
Net bank borrowings
27,548
27,445
Non-current borrowings
27,548
27,445
The 40 million revolving credit facility with Lloyds Bank plc is secured by legal charges and debentures over the freehold and leasehold properties and other tangible assets of the business with a net book value of 95.6 million together with cross-company guarantees from Group companies. The revolving credit facility is for a five-year term and expires on 19 October 2016. The Group is not obliged to make any repayments prior to expiration. The loans bear interest at the London Inter-Bank Offer Rate (LIBOR) plus 2.35%-2.65% Lloyds Bank plc margin based on a loan to value covenant test.
17b Derivative financial instruments
The Group continues to operate two separate 10 million interest rate swaps as a cash flow hedge with Lloyds Bank plc, both effective from 31 May 2012, the first at a fixed 1 month sterling LIBOR rate of 1.2% and the second at a fixed one-month sterling LIBOR rate of 1.15%. Both swaps run up to the expiration of the current banking facility in October 2016. The balance of the drawn facility of 7.7 million (2014: 7.7 million) remains at a floating rate.
Currency
Principal
Maturity
date
Fair value
2015
'000
Fair value
2014
'000
3032816LS Interest rate swap
GBP
10,000,000
20/10/2016
(63)
20
3047549LS Interest rate swap
GBP
10,000,000
20/10/2016
(56)
31
20,000,000
(119)
51
The movement in fair value of the interest rate swaps of 169,925 (2014: 321,654) has been recognised in other comprehensive income in the year.
18 Deferred tax
Deferred tax liability
Group
2015
'000
Group
2014
'000
Liability at start of year
10,870
9,705
Charged / (credited) to income for the year
151
(168)
Tax debited directly to other comprehensive income
1,540
1,333
Credit to share based payment reserve
(309)
-
Liability at end of year
12,252
10,870
The following are the major deferred tax liabilities and assets recognised by the Group and the movements during the year:
Accelerated
Capital
Allowances
'000
Tax
losses
'000
Intangible
assets
'000
Other
temporary
differences
'000
Revaluation
of
properties
'000
Rolled
over gain
on
disposal
'000
Share
options
'000
Total
'000
At 1 August 2013
1,075
(6)
596
(35)
6,242
1,833
-
9,705
Charge/ (credit) to income for the year
366
6
(33)
(8)
(495)
(4)
-
(168)
Charge to other comprehensive income
-
-
-
72
1,261
-
-
1,333
At 31 July 2014
1,441
-
563
29
7,008
1,829
-
10,870
Charge/ (credit) to income for the year
267
-
(33)
1
-
(42)
(42)
151
Charge /(credit) to other comprehensive income
-
-
-
(38)
1,578
-
-
1,540
Credit to share based payment reserve
-
-
-
-
-
-
(309)
(309)
At 31 July 2015
1,708
-
530
(8)
8,586
1,787
(351)
12,252
A deferred tax asset of 350,706 arises in respect of the share options in existence at 31 July 2015 and due to its material size has now been recognised in the accounts. No deferred tax asset arises in relation to the remainder of the share options as at 31 July 2015 as the share price at the year-end is below the exercise price of the options.
19 Share capital
2015
2014
Authorised:
'000
'000
35,000,000 ordinary shares of 1 pence each (2014: 35,000,000)
350
350
Allotted, issued and fully paid ordinary shares
'000
'000
Balance 1 August
279
272
Options exercised 637,641 shares (2014: 667,915 shares)
6
7
Balance 31 July
285
279
Called up,
Called up,
allotted and
allotted and
fully paid
fully paid
Number
Number
Number of shares at 31 July
28,446,749
27,809,108
The Company has one class of ordinary shares which carry no right to fixed income.
20 Equity settled share-based payment plans
The Group operates two equity-settled share-based payment plans, an approved and an unapproved share option scheme, the rules of which are similar in all material respects. The Enterprise Management Initiative Scheme (EMI) is closed to new grants of options as the Company no longer meets the HMRC small company criteria.
The Company has the following share options:
2015
As At
As at
Summary
31 July 2014
Lapsed/
31 July 2015
No of options
Granted
Exercised
surrendered
No of options
Enterprise Management Initiative Scheme
41,414
-
(41,414)
-
-
Unapproved Share Options
2,276,111
-
(535,321)
(23,611)
1,717,179
Approved CSOP Share Options
246,286
18,653
(60,906)
(26,389)
177,644
Total
2,563,811
18,653
(637,641)
(50,000)
1,894,823
2014
As At
As at
Summary
31 July 2013
Lapsed/
31 July 2014
No of options
Granted
Exercised
surrendered
No of options
Enterprise Management Initiative Scheme
163,368
-
(121,954)
-
41,414
Unapproved Share Options
2,156,583
587,939
(468,411)
-
2,276,111
Approved CSOP Share Options
233,775
93,061
(77,550)
(3,000)
246,286
Total
2,553,726
681,000
(667,915)
(3,000)
2,563,811
The following table shows options held by Directors under all schemes.
At 31 July 2015
Total
at 31 July
2014
Options
granted
Options
exercised
EMI
Scheme
Unapproved
Scheme
Approved
CSOP
Share
options
Total
at 31 July
2015
2015
Executive Directors
A Jacobs - Unapproved
580,000
-
(200,000)
-
380,000
-
380,000
SG Thomas - Unapproved
220,000
-
(50,000)
-
170,000
-
170,000
RA Davies - Unapproved
581,977
-
(50,000)
-
531,977
-
531,977
RA Davies - CSOP
14,493
-
-
-
-
14,493
14,493
RA Davies total
596,470
-
(50,000)
-
531,977
14,493
546,470
CM Jacobs - EMI
31,414
-
(31,414)
-
-
-
-
CM Jacobs - Unapproved
259,509
-
(113,841)
-
145,668
-
145,668
CM Jacobs - CSOP
29,077
-
(8,500)
-
-
20,577
20,577
CM Jacobs total
320,000
-
(153,755)
-
145,668
20,577
166,245
Non-Executive Directors
ETD Luker - Unapproved
15,000
-
-
-
15,000
-
15,000
C P Peal - Unapproved
10,000
-
-
-
10,000
-
10,000
Non-Executive total
25,000
-
-
-
25,000
-
25,000
All Directors total
1,741,470
-
(453,755)
-
1,252,645
35,070
1,287,715
The grant of options to Executive Directors and senior management is recommended by the Remuneration Committee on the basis of their contribution to the Group's success. The options vest after two and a half or three years. No options have been granted under the EMI approved scheme in the year (2014: nil) and no options remain in this scheme.
The exercise price of the options is equal to the closing mid-market price of the shares on the trading day previous to the date of the grant. The exercise of options awarded has been subject to a key non-market performance condition being the achievement of an annual revenue target of 10 million. This condition has now been achieved. Exercise of an option is subject to continued employment. The life of each option granted is six and a half to seven years. There are no cash settlement alternatives.
The expected volatility is based on a historical review of share price movements over a period of time, prior to the date of grant, commensurate with the expected term of each award. The expected term is assumed to be six years which is part way between vesting (two and a half to three years after grant) and lapse (10 years after grant). The risk free rate of return is the UK gilt rate at date of grant commensurate with the expected term (i.e. six years).
The total charge for the year relating to employer share-based payment schemes was 210,558 (2014: 118,586), all of which relates to equity-settled share-based payment transactions.
21a Other reserves
Cash flow
Other
Capital
Share-based
hedge
Merger
reserve
redemption
payment
reserve
reserve
reserve
reserve
Total
Group
'000
'000
'000
'000
'000
'000
1 August 2013
(217)
6,295
2,837
34
1,562
10,511
Share based payments
-
-
-
-
119
119
Transfer to retained earnings in relation to share based payments
-
-
-
-
(742)
(742)
Cash flow hedge reserve net of tax
250
-
-
-
-
250
Dividends paid
-
-
(1,543)
-
-
(1,543)
31 July 2014
33
6,295
1,294
34
939
8,595
Share based payments
-
-
-
-
211
211
Transfer to retained earnings in relation to share based payments
-
-
-
-
(298)
(298)
Cash flow hedge reserve net of tax
(132)
-
-
-
-
(132)
Tax credit relating to share options
-
-
-
-
309
309
31 July 2015
(99)
6,295
1,294
34
1,161
8,685
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.
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 IFRS2 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. The total amounts calculated and accordingly transferred to retained earnings amounted to 298,268 (2014: 741,806).
21b Other reserves
Other
Share-based
reserve
payment
reserve
Total
Company
'000
'000
'000
1 August 2013
2,657
1,776
4,433
Share based payments
-
119
119
Transfer to retained earnings in relation to share based payments
-
(742)
(742)
Dividends paid
(1,543)
-
(1,543)
31 July 2014
1,114
1,153
2,267
Share based payments
-
211
211
Transfer to retained earnings in relation to share based payments
-
(298)
(298)
31 July 2015
1,114
1,066
2,180
22 Retained earnings
Retained
earnings before
Retained
deduction of
Own shares
earnings
own shares
(note 23)
Total
Group
'000
'000
'000
1 August 2013
10,872
(4,241)
6,631
Profit attributable to owners of
Parent for the financial year
197
-
197
Transfer from revaluation reserve
(Additional depreciation on revaluation)
207
-
207
Transfer from share based payment reserve (Note 21a)
742
-
742
Transfer from non-controlling interest
280
-
280
31 July 2014
12,298
(4,241)
8,057
Profit attributable to owners of
Parent for the financial year
1,968
-
1,968
Transfer from revaluation reserve
(Additional depreciation on revaluation)
249
-
249
Transfer from share based payment reserve (Note 21a)
298
-
298
Transfer realised gain on asset disposal
421
-
421
Dividend paid
(1,847)
-
(1,847)
31 July 2015
13,387
(4,241)
9,146
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 and shares purchased separately by Lok'nStore Limited for Treasury Account. These treasury shares have not been cancelled and were purchased at an average price considerably lower than the Group's adjusted net asset value. These shares may in due course be released back into the market to assist liquidity of the Company's stock and to provide availability of a reasonable line of stock to satisfy investor demand as and when required.
The Company has taken advantage of the exemption available under the Companies Act 2006 not to present the Company income statement of Lok'nStore Group plc. The Company loss for the year was 139,354 (2014: 173,882).
23 Own shares
ESOP
ESOP
Treasury
Treasury
Own shares
shares
shares
shares
shares
total
Number
Number
31 July 2014 and 31 July 2015
623,212
499,910
2,466,869
3,741,036
4,240,946
Lok'nStore Limited holds a total of 2,466,869 of Lok'nStore Group plc ordinary shares of 1p each for treasury with an aggregate nominal value of 24,669 purchased for an aggregate cost of 3,741,036 at an average price of 1.503 per share. These shares represent 8.7% (2014: 8.9%) of the Parent Company's called-up share capital. The maximum number of shares held by Lok'nStore Limited in the year was 2,466,869. No shares were disposed of or cancelled in the year.
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 July 2015, the Trust held 623,212 (2014: 623,212) ordinary shares of 1 pence each with a market value of 1,791,735 (2014: 1,290,049). No shares were transferred out of the scheme during the year (2014: nil).
No dividends were waived during the year. No options have been granted under the EBT.
24 Cash flows
(a) Reconciliation of profit before tax to cash generated from operations
2015
2014
'000
'000
Profit before tax
2,654
367
Depreciation
1,440
1,224
Amortisation of intangible assets
Impairment of development land asset
165
-
165
1,604
Equity settled share based payments
211
119
Interest receivable
(141)
(27)
Interest payable
1,144
1,136
(Increase) / decrease in inventories
(10)
7
Decrease / (increase) in receivables
423
(484)
Increase in payables
98
1,102
Cash generated from operations
5,984
5,241
(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 17a less cash and cash equivalents.
2015
2014
'000
'000
Increase / (decrease) in cash in the year
257
(2,066)
Change in net debt resulting from cash flows
-
(914)
Movement in net debt in year
257
(2,980)
Net debt brought forward
(25,523)
(22,543)
Net debt carried forward
(25,266)
(25,523)
25 Commitments under operating leases
At 31 July 2015 the total future minimum lease payments as a lessee under non-cancellable operating leases were as follows:
Group
Group
2015
2014
'000
'000
Land and buildings
Amounts due:
Within one year
1,546
1,543
Between two and five years
5,725
5,732
After five years
8,054
8,740
15,325
16,015
Operating 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 transactions
The following balances existed between the Company and its subsidiaries at 31 July:
2015
2014
'000
,000
Net amount due from Lok'nStore Limited
2,965
2,285
The amount due from Lok'nStore Limited is interest free. The balance is repayable on demand, however the Company has no present intention to demand repayment within one year and so the amount has been presented as a non-current asset as at 31 July 2015.
The Company provides share options for the employees of Lok'nStore Limited. The capital contributions arising from these share-based payments are separately disclosed under investments in note 11.
The aggregate remuneration of the Directors, who are the key management personnel of the Group, is set out below. Further information on the remuneration of individual Directors is found in note 6.
2015
2014
'000
'000
Short term employee benefits
988
822
Post-employment benefits
30
30
Share-based payments
211
68
Total
1,229
920
The Group uses Trucost plc, an environmental research company, to provide information and undertake performance assessment of the environmental effect of its business activities. Trucost plc is a company in which Andrew Jacobs and Simon Thomas have a beneficial interest. The total fees payable to Trucost plc in respect of its environmental assessment and reporting for the year was 6,000 (2014: 6,000). The balance outstanding to Trucost plc at year-end was nil (2014: nil).
During the year the Group had an agreement with Keith Jacobs, a brother of Andrew Jacobs and Colin Jacobs, for the provision of marketing services and support on a consultancy basis. The fees payable to Keith Jacobs during the year under this arrangement were 25,663 (2014: 23,256). This agreement has now been terminated. There were no amounts outstanding due to Keith Jacobs at the year-end (2014: nil). The maximum balance outstanding at any time during the year is 4,774 (ex VAT) (2014: 3,789).
27a Capital commitments and guarantees
The Group has capital expenditure contracted but not provided for in the financial statements of 3.03 million (2014: 3.85 million) relating to commitments on the Bristol and Southampton stores now under construction, remaining commitments on the fitting at Reading and various other minor works.
27b Bank borrowings
The Company has guaranteed the bank borrowings of Lok'nStore Limited, a subsidiary company. As at the year-end, that company had gross bank borrowings of 27.7 million (2014: 27.7 million).
28 Events after the reporting date
a) Additional 2 million received for sale of Reading site
The Group has received an additional 2 million from the purchaser of the original Reading store site in return for relinquishing any remaining rights to receive further payments in connection with the sale of the property. This sum is in addition to the 2.9 million received from the purchaser on 31 October 2014, taking the total consideration to 4.9m.
These additional proceeds will be recycled into the Group's opening programme of highly visible purpose-built new stores.
b) Sale and manage back of Swindon store
On 30 September 2015 the Group completed the sale of its Swindon East store for 3.5 million in cash to an investment fund. Historically, the Group has operated two stores in Swindon, one leasehold and one freehold. Following the completion of 0.5m of capital expenditure to increase capacity at its freehold store the two stores were consolidated into one. The Swindon East store has now been sold. The two stores were valued at a total of 1.4 million at 31 July 2014.
The Group will continue to manage the store as a branded Lok'nStore operation on behalf of the investor, and will receive management and performance fees.
The proceeds of this transaction will be recycled into projects such as the new stores currently under construction in Southampton and Bristol.
Our Stores
Head office
Lok'nStore plc
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel 01252 521010
www.loknstore.co.uk
Central Enquiries
0800 587 3322
Basingstoke, Hampshire
Crockford Lane
Chineham
Basingstoke
Hampshire RG24 8NA
Tel 01256 474700
Fax 01256 477377
Crayford, Kent
Block B
Optima Park
Thames Road
Crayford
Kent DA1 4QX
Tel 01322 525292
Fax 01322 521333
Eastbourne, East Sussex
Unit 4, Hawthorn Road
Eastbourne
East Sussex BN23 6QA
Tel 01323 749222
Fax 01323 648555
Fareham, Hampshire
26 + 27 Standard Way
Fareham Industrial Park
Fareham
Hampshire PO16 8XJ
Tel 01329 283300
Fax 01329 284400
Farnborough, Hampshire
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel 01252 511112
Fax 01252 744475
Harlow, Essex
Unit 1 Dukes Park
Edinburgh Way
Harlow
Essex CM20 2GF
Tel 01279 454238
Fax 01279 443750
Horsham, West Sussex
Blatchford Road
Redkiln Estate
Horsham
West Sussex RH13 5QR
Tel 01403 272001
Fax 01403 274001
Luton, Bedfordshire
27 Brunswick Street
Luton
Bedfordshire LU2 0HG
Tel 01582 721177
Fax 01582 721188
Maidenhead, Berkshire
Stafferton Way
Maidenhead
Berkshire
SL6 1AY
Tel 01628 878870
Fax 01628 620136
Milton Keynes, Buckinghamshire
Etheridge Avenue
Brinklow
Milton Keynes
Buckinghamshire MK10 0BB
Tel 01908 281900
Fax 01908 281700
Northampton Central
16 Quorn Way
Grafton Street Industrial Estate
Northampton NN1 2PN
Tel 01604 629928
Fax 01604 627531
Northampton Riverside
Units 1-4
Carousel Way
Northampton
Northamptonshire NN3 9HG
Tel 01604 785522
Fax 01604 785511
Poole, Dorset
50 Willis Way
Fleetsbridge
Poole
Dorset BH15 3SY
Tel 01202 666160
Fax 01202 666806
Portsmouth, Hampshire
Rudmore Square
Portsmouth PO2 8RT
Tel 02392 876783
Fax 02392 821941
Reading, Berkshire
251 A33 Relief Road
Reading
RG2 0RR
Southampton, Hampshire
Manor House Avenue
Millbrook
Southampton
Hampshire SO15 0LF
Tel 02380 783388
Fax 02380 783383
Staines, Middlesex
The Causeway
Staines
Middlesex TW18 3AY
Tel 01784 464611
Fax 01784 464608
Sunbury on Thames, Middlesex
Unit C, The Sunbury Centre
Hanworth Road
Sunbury
Middlesex TW16 5DA
Tel 01932 761100
Fax 01932 781188
Swindon Kembrey Park, Wiltshire
Kembrey Street
Elgin Industrial Estate
Swindon
Wiltshire SN2 8UY
Tel 01793 421234
Fax 01793 422888
Tonbridge, Kent
Unit 6 Deacon Trading Estate
Vale Road
Tonbridge
Kent TN9 1SW
Tel 01732 771007
Fax 01732 773350
Development locations
Southampton, Hampshire
Third Avenue
Millbrook
Southampton
SO15 0JX
North Harbour, Port Solent, Hampshire
Southampton Road
Portsmouth
PO6 4RH
Bristol
Gallagher Trade Park
Longwell Green
Bristol
BS30
Managed stores
Aldershot, Hampshire
251, Ash Road
Aldershot
GU12 4DD
Tel 0845 4856415
Ashford, Kent
Wotton Road
Ashford
Kent TN23 6LL
Tel 01233 645500
Fax 01233 646000
Crawley, West Sussex
Sussex Manor Business Park
Gatwick Road
Crawley
RH10 9NH
Tel 01293 738530
Woking
Marlborough Road
Woking
GU21 5JG
Tel 01483 378323
Fax 01483 722444
Under Development
Chichester
(Plot) 17, Terminus Road,
Chichester,
PO19 8TX
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR QQLFFEBFBFBZ
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