REG - Lok'nStore Group - Preliminary Results
31/10/2022 07:01
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RNS Number : 5535E Lok'nStore Group PLC 31 October 2022
LOK'NSTORE GROUP PLC
("Lok'nStore" or "the Group")
Preliminary Results for the year ended 31 July 2021
Lok'nStore, the fast-growing AIM listed self-storage company, is pleased to
announce its Preliminary Results for the year ended 31 July 2022.
Highlights
v Record revenue and profits
v Significant increase in net asset value per share
v 15% increase in dividend
v Dynamic new store opening schedule driving future growth
v Low debt and LTV
Strong revenue and profit growth
ü Group Revenue £26.9 million up 22.9% (2021: £21.9 million)
ü Group Adjusted EBITDA(1) £16.4 million up 37.5% (2021: £11.9 million)
ü Operating Profit before non-underlying items £11.4 million up 49.8% (2021:
£7.6 million)
ü Operating Profit after non-underlying items £17.2 million up 130.0% (2021:
£7.5 million)
Driven by solid operating metrics
ü Achieved rate on occupied space up 13% to £25.6 per sq. ft (2021: £22.7
per sq. ft)
ü Managed store revenue £2.8 million up 107%
ü Cost Ratio(13) reduced to 38.5% (2021: 44.9%)
Cash flow growth drives eleventh consecutive year of dividend increase
ü Cash Available for Distribution (CAD) (3) per share up 36.6% to 38.7 pence
(2021: 28.4 pence)
ü Annual dividend increased by 2.25 pence to 17.25 pence per share up 15%
(2021: 15 pence per share) - covered 2.24 times by CAD
Significant increase in net asset value
ü Adjusted Net Asset Value(5) per share up 33% to £9.72 per share (2021:
£7.31 per share)
Disciplined use of capital leads to strong balance sheet and low debt
ü Sale and manage back of four stores at a 22.8% premium to 31 July 2021
valuations delivering £37.9 million of net sale proceeds in cash
ü £46.5 million cash at year-end (2021: £9.1 million)
ü Net debt (excluding lease liabilities and deferred finance costs) reduced
to £20.3 million (2021: £56.3 million)
ü Loan to value ratio(6) down to 6.6% (2021: 21.0%)
ü £25 million accordion executed - increases bank facility to £100 million
ü Bank facility extended by one year to April 2026
Dynamic pipeline(8) of new Landmark stores will deliver further growth
ü 4 new stores currently on site will add over 218,000 sq. ft of new trading
space
ü Secured store pipeline(9) total of 10 sites will add 44.1% to owned new
space over the coming years
Well positioned for the future
ü New store openings and rate increases will lead to further revenue and
profit growth
ü Trading momentum continues post year end with same-store revenue up 13.6%
for August and September 2022 compared to the same period last year.
ü Strategy unchanged - increase revenue from existing stores and open more
new Landmark stores
ü Flexibility to respond to market circumstances
For all of the definitions of the terms used in the highlights above refer to
the notes section below.
Commenting on the Group's results, Andrew Jacobs, Executive Chairman of
Lok'nStore Group said,
"Lok'nStore's business has moved ahead significantly with revenue up 22.9% and
EBITDA up 37.5% on last year. Demand for UK self-storage assets remains
strong, and this has driven our Net Asset Value per share up by 33% to £9.72.
Trading since the year-end has been good.
"We are on site at four new Landmark stores which will open within the next 12
months and can be completed using cash on hand. At 31 July 2022, our secured
pipeline of ten new sites increases owned space by 44.1%. This pipeline of new
stores will add further momentum to sales and earnings growth. We have reduced
our net debt to £20.3 million and our business model enables us to build out
the pipeline as market circumstances dictate.
"We aim to build more Landmark stores in the under-supplied UK market. We are
growing the business from a strong financial platform that gives us great
flexibility to respond to market circumstances. We have multiple levers to
allocate our capital in ways which are most accretive to our shareholders
through the economic cycle, and we are confident that we will continue to
increase net assets, cash flows and dividends."
Enquiries:
Lok'nStore: 01252 521 010
Andrew Jacobs, Executive Chairman
Ray Davies, Finance Director
finnCap Ltd 020 7220 0500
Julian Blunt / Seamus Fricker, Corporate Finance
Alice Lane, ECM
Peel Hunt 020 7418 8900
Carl Gough, Capel Irwin, Henry Nicholls
Camarco 0203 757 4980
Billy Clegg / Tom Huddart
Notes - What we mean when we say … (and why we use these key performance
indicators (KPIs))
In addition to IFRS accounting performance measures we use some Alternative
Performance Measures (APMs) to help us explain how the underlying business is
performing.
Here we identify those measures and explain what we mean when we use them and,
importantly, why we use them: -
1. Group Adjusted Earnings before interest, tax, depreciation
and amortisation Adjusted EBITDA is defined as EBITDA before losses or profits
on disposal, share-based payments, acquisition costs, non-underlying items and
which demonstrates the cash generative qualities of the business.
2. Non-underlying items Refers to one-off items of a
non-operational nature which arose during the year, and which may relate to
asset disposals, abortive site acquisition costs, or other costs and which are
likely to be infrequent events. (Refer to note 4 of the Financial Statements).
3. Cash Available for Distribution (CAD) Is calculated as
Adjusted EBITDA less total net finance cost, less capitalised maintenance
expenses, New Works Team costs and current tax. This measures the capacity
of the business to pay dividends or pay down debt. The Cash Available for
Distribution per share is CAD divided by the number of shares in issue less
shares held in the Employee Benefit Trust (EBT). The calculation of the CAD
and the CAD per share is set out in the Financial Review.
4. Adjusted Total Group Assets - The value of adjusted total
assets of £370.9 million (2021: £294.8 million) is calculated by adding the
independent valuation of the leasehold properties of £24.2 million (2021:
£22.1 million) less their corresponding net book value (NBV) £7.2 million
(2021: £7.6 million) to the total assets in the Statement of Financial
Position of £353.9 million (2021: £280.3 million). This provides clarity on
the significant value of the leasehold stores as trading businesses which,
under the Group's accounting policy on leases, are only presented at their
book values within the Statement of Financial Position.
5. Adjusted Net Asset Value per share (NAV per share) -
Adjusted Net Asset Value per share is the net assets adjusted for the
valuation of leasehold stores (properties held under leases) and deferred tax
divided by the number of shares at the year-end. The shares held in the
Group's employee benefits trust and treasury shares are excluded from the
number of shares. The calculation of the Net Asset Value per share is set out
in the Financial Review.
6. Loan to Value ratio (LTV) Measures the net debt of the
business expressed as a percentage of total property assets giving a
perspective on the gearing of the business. The calculation is based on net
debt (excluding deferred finance costs) of £20.3 million expressed as a
percentage of the total properties independently valued by JLL of £279.0
million (2021: £234.9 million) and development land assets of £29.2 million
(2021: £33.7 million) totalling £308.2 million (2021: £268.6 million) as
set out in the Financial Review in the Analysis of Total Property Value table.
7. Average Cost of Debt - The average cost of debt is
calculated by taking the total interest paid on the Group's Revolving Credit
Facility in the quarterly/weekly charging periods throughout the year and
taking an average based on the whole financial year. Apart from the Group's
Revolving Credit Facility the Group has no other bank debt. The average cost
of debt 1.71% (2021: 1.54%).
8. Pipeline Sites - Sites for new stores that either we have
exchanged contracts on or have agreed heads of terms and are progressing with
our lawyers towards completion. We have 14 pipeline sites of which ten are
contracted and four are progressing with lawyers. We currently have 24 owned
stores trading with an additional 16 managed stores trading. When these 14
sites are fully developed, we will have a total of 54 stores.
9. Secured Pipeline Sites The ten sites for new stores on
which we have exchanged legal contracts. Of these nine stores are Lok'nStore
owned Stores and one will be a managed store. When these ten sites are fully
developed, we will have a total of 50 stores.
10. Adjusted Store EBITDA is Group Adjusted EBITDA (see 1 over)
before the deduction of central and head office costs. Unlike Group Adjusted
EBITDA this measure excludes the impact of IFRS 16 and includes leasing
charges as normal operating costs of each store. The measure is designed to
give clarity on the recurring operating cash flow of the business and provides
important information on the underlying performance of the trading stores and
shows the cash-generating core of the business. Use of this metric enables us
to provide additional information on store EBITDA contributions (after leasing
costs) and the margins analysed between freehold and leasehold stores and
according to the age of the stores. This analysis is set out in a table in the
Financial Review.
11. Gearing refers to the level of debt compared to equity
(http://www.investopedia.com/terms/e/equity.asp) capital, usually expressed in
percentage form. It is a measure of a company's financial leverage
(http://www.investopedia.com/terms/l/leverage.asp) and shows the extent to
which its operations are funded by lenders
(http://www.investopedia.com/terms/l/lender.asp) versus shareholders. Gearing
can be measured by a number of ratios, and we use the debt-to-equity ratio in
this document. The calculation of the gearing percentage, also referred to as
the net debt to equity ratio is set out in note 17 of the Financial
Statements.
12. Group Adjusted EBITDAR is Group Adjusted EBITDA before the
deduction of rent. The measure is designed to give clarity on the effect of
the rent payable by leasehold stores and how its elimination enables a
comparison between the operating performance of freehold stores (which do not
pay rent) and leasehold stores which pay rent. This analysis is set out in a
table in the Financial Review.
13. Cost Ratio calculates the ratio of the total operating costs
of the business as set out in the Financial Review, expressed as a
percentage of total Group revenue (note 1), giving a perspective on the cost
efficiency of the business when compared to the cost ratio of the previous
year. The Cost Ratio has been reduced further to 38.5% (2021: 44.9 %)
14. Same Store Analysis - This measure is used to give
transparency on improvements in the operating business in the year unrelated
to the opening of new stores, closure of old stores, and more particularly in
this financial year, the sale and manage-back of previously owned stores
(Basingstoke, Cardiff, Horsham and Portsmouth stores) commenting on stores
that were open and trading at both financial year ends 31 July 2021 and 31
July 2022. The same store key performance measure helps to illustrate the
performance of the underlying business.
See also the glossary
Chairman's Statement
I am delighted to be reporting another year of great results for Lok'nStore,
delivering a strong operating and financial performance. We have seen
significant growth in revenue, profits, and asset values, enabling the Group
to increase the dividend.
These excellent results can be summarised as:
· 22.9% increase in Group Revenue
· 37.5% growth in Group Adjusted EBITDA
· Sale and manage back of four stores at a 22.8% premium to July 2021
valuations
· Low debt and LTV
· 33% increase in Adjusted Net Asset Value per share
· Dynamic new store opening schedule
· Increase of 15% in annual dividend
· Operational GHG emissions down 92.5% since 2005
These results demonstrate Lok'nStore's delivery of our commitment to deliver
sustainable growth through all stages of the economic cycle. Continued
investor interest in the UK self-storage sector demonstrated by market
transactions underpins the increased value of our assets and our strategy to
open more Landmark stores.
The detail behind these results is discussed further in our Financial Review.
Significant Increase in Net Asset Value
Adjusted Total Group Assets(4) have moved upwards sharply in the year by 27.3%
to £375.2 million mainly due to the trading strength of our business, as well
as investor interest in self-storage assets and our investment in new stores.
Our trading assets are independently valued by Jones Lang La Salle (JLL) on 31
July each year and this year produced a total valuation of £279.0 million
(2021: £234.9 million), an uplift in the value of our freehold and leasehold
trading stores of £44.1 million. £30 million of this uplift comes from the
maiden valuations of our new stores in Warrington and Stevenage.
The Same Store uplift in the value of our freehold and leasehold trading
stores (adjusting for the disposal of the four trading stores and the new
stores in Warrington and Stevenage) is £45.9 million.
£15.5 million of the same store uplift comes from the impact of improved cash
flows of the same store portfolio that was valued last year. This demonstrates
the impact operating performance has on asset values and why one of our key
objectives remains to fill existing stores and continue improving pricing.
The balance of the same-store uplift of £30.4 million comes from improvements
in the Discount Rate and Exit Yield applied to the valuations. On our owned
freehold trading stores we have seen exit yields improving on average by 68
basis points, with discount rates improving by 116 basis points. This
demonstrates that the UK Self-Storage Market is attracting significant
interest from institutional investors.
The Exit Yield and Discount Rates applied in the valuations are validated by
transactional evidence. We are well positioned to benefit from future changes
with our high-quality portfolio of stores, and Landmark store development
pipeline. As we enter a new interest rate cycle, rising yields and discount
rates may reduce the value of the stores, but we expect any reductions will
soon be offset by new store openings and the continued revenue growth of the
business.
More details on the valuation of our trading stores can be found in the
Property Review and in note 12(a) of the financial statements.
Further Dividend Growth
The Directors are proposing a final dividend of 12.25 pence per share (2021:
10.67 pence) following the interim dividend payment of 5.0 pence per share in
June 2022, bringing the total distribution for the year to 17.25 pence per
share, an increase of 2.25 pence per share up 15% (2021: 15 pence per share)
and our eleventh year of increase in a row.
As announced last year, the Board has reviewed the Company's dividend policy
in the context of its disciplined approach to capital allocation. Considering
the cash-generative qualities of the business and noting the requirement to
invest in the Landmark store opening programme, Lok'nStore will pursue a
progressive dividend policy which reflects the strong long-term underlying
cash flow growth of the business.
Subject to approval at the Company's AGM on 8 December 2022 the final dividend
will be paid on 6 January 2023 to shareholders on the register on 25 November
2022. The ex-dividend date will be 24 November 2022. The final deadline for
Dividend Reinvestment Election by investors is 9 December 2022.
Sale and Manage-Back of four stores
On 31 January 2022, the Group completed the Sale and Manage-Back of four
stores for a total gross consideration of £39.0 million representing a 22.8%
uplift on the independent external valuation of the stores at 31 July 2021.
Sale and manage-back of stores, when appropriate, demonstrate how the Group
can manage its cash generation and control its debt. At the same time, we can
increase the quality of our portfolio by investing in new more environmentally
efficient Landmark stores.
This transaction was immediately accretive to Group net asset value and has
provided net sales proceeds of c.£37.9 million for reinvestment into new,
faster growing Landmark stores. Further detail is set out in the Financial
Review.
Due to the sale of four trading stores half-way through the financial year and
the opening of two new stores it has been necessary this year to provide some
'Same Store Analysis'. This quantifies the improvement in the core business in
the year unrelated to the opening of new stores, and more particularly in this
financial year, the sale and manage-back of previously owned stores. The same
store analysis is set out in the Managing Director's Report.
Investment in new Stores
This year we invested £12.2 million in new store development.
Following the receipt of £37.9 million from the Sale and Manage-Back
transaction reported above we can report a year-end LTV ratio (net of cash) of
only 6.6% (2021: 21.0%) and a very low level of net debt of only £20.3
million, down from £56.3 million in the previous year (Refer to note 29b).
During the year we opened two new owned stores in Warrington and Stevenage.
Early trading in these two stores has been excellent. Trading at our new
stores continues to exceed expectations and this underpins our confidence that
our pipeline will add further to sales and earnings growth. The Group
continues to find high-quality sites for new Landmark stores. The current
secured pipeline adds 44.1% more trading space to our total owned portfolio.
We are on site at four Stores, in Basildon, Bedford, Staines and Peterborough
which will all open in 2023. This will mean increased capital expenditure in
the coming twelve months. We are also due to go on site shortly at Kettering
on behalf of a third-party Managed Store client.
Capital Expenditure
It is generally our intention to commence the construction and fit out of all
our pipeline stores as soon as all planning and enabling works have been
completed. Self-storage benefits from the short lead time between breaking
ground and store opening of only around twelve months. We have only committed
future capital expenditure at the four stores where we are on site all of
which will be open and producing cash within the next 18 months. We have a
high degree of flexibility regarding start dates for further building at other
sites. We can therefore adapt our development programme quickly to react to
changing economic circumstances.
We are seeing material cost inflation in building costs which we continue to
monitor closely, particularly for future buildouts as the four developments
currently on site are on fixed cost contracts. Because our own pricing
achieved increased at 13% over the past year, we are not seeing input costs
increase at such a level that would impact the viability of the projects we
have currently under review.
We report more generally on operating/trading costs in the Financial Review.
Planning permissions
The planning process remains challenging. The system is complex, successful
outcomes can take considerable time to achieve, and the process consumes a
significant amount of management time. Despite its challenges, during the year
we secured planning consents on the Kettering and Peterborough sites.
Managed Stores
Our strategy to grow the number of stores we manage for third party owners,
enables the Group to earn revenue without having to commit capital, to
amortise fixed central costs over a wider operating base and drive further
traffic to our website which benefits our entire operation.
We had a particularly good year with managed stores generating managed store
income of £2.79 million, up 107% from the previous year (2021: £1.35
million). In the management fees table in the Managing Director's Review, we
separate recurring management fees from non-recurring fees. Recuring
management fees increased by 49% in the year with non-recurring fees
(planning, store opening and supplementary fees) increasing by a spectacular
217%.
Lok'nStore manages 16 trading stores for third-party owners with a property
value approaching £150 million. Our current pipeline includes an additional
managed store which will take the total number of managed stores to 17.
Our People
We always rely on our amazing people to deliver these impressive results. I am
delighted to say that all of our colleagues continue to benefit from the
success of the business with significant bonuses paid to all staff members.
We will continue to invest in training to develop and deepen the skills of our
team members and create internal succession as the business continues to
expand. To support our colleagues with the rising cost of living we brought
forward annual pay reviews of our store teams and ensured all colleagues in
the business received an annual salary review. We continue to keep salary
levels under review to ensure that all of our employees are paid fairly, and
we continue to promote equity ownership to our colleagues via our Share
Investment Plan and the granting of options.
Board changes
At the Company Annual General Meeting in December 2021, Edward Luker retired
from the board. I would like to personally thank Edward for his support,
wisdom and challenge over many years.
Jeff Woyda joined the board as a Non-Executive Director in September 2021 and
has now replaced Edward Luker as Senior Non-Executive Director. Jeff also now
chairs the Remuneration Committee and is a member of the Audit Committee.
Liquidity and Cash Flow
At 31 July 2022, the Group had cash balances of £46.5 million, a significant
increase on last year's £9.1 million following the sale-and-manage-back of
four stores and strong operating cash generation. The Group has a £100
million five-year revolving credit facility which together with cash provides
all the financing needs for the current secured pipeline. Following the
execution of a one-year extension the facility now runs until April 2026. The
Group is not obliged to make any repayments on its loan facility prior to its
expiration in April 2026.
Cash inflow from operating activities before investing and financing
activities was £18.6 million in the year to 31 July 2022 up 52.4% (2021:
£12.2 million).
Debt and Bank Covenants
The average cost of bank debt on drawn facilities for the year was 1.71%
(2021: 1.54%). All of the Group's total drawn bank debt of £66.8 million
(2021: £65.4 million) is unhedged. At the date of this Report the Group's
current cost of debt is running at 3.72% as rates have moved higher since the
year-end.
At the year-end interest cover was ten times tested on a 12-month rolling
basis, against a covenant of 2.5 times. At the year-end our loan-to-value
ratio based on net bank debt was 6.6% versus a bank covenant of 60% providing
a large cushion of comfort. Both the LTV and Interest covenants exclude the
gearing effects of IFRS 16 as agreed with our banks.
Environmental, Social and Governance
We are working hard to create an environmentally sustainable business for all
our customers, our colleagues, local communities and the wider environment.
Lok'nStore have been reporting on ESG factors since 2005 and was the first
listed UK self-storage company to do so. Since then, we have been continually
active and our operational GHG emissions are 96.5% lower than if we had taken
no action since 2005.
In recent years, the Lok'nStore Environmental committee, consisting of
colleagues in various roles across the business and including three Board
members have been focused on practical improvements we can make to our
environmental footprint.
Details of our environmental performance along with our commitments and
targets can be found in our ESG report.
Our business model provides strength and adapts quickly in an uncertain world
Looking forward during this period of economic and market uncertainty, it is
worth emphasising Lok'nStore's robust business model.
We operate with a high EBITDA margin, sheltering the business from cost
increases. Debt and leverage are low, and we have considerable cash on hand.
Importantly the Company can pause capital expenditure quickly if market
conditions dictate and the ongoing business requires little maintenance
capital expenditure. At the year-end, we are onsite at four stores where the
capex required to complete these projects is £22.3 million, compared to the
£46.5 million of cash on hand.
The Company has 17,000 customers who come from a diverse social and economic
background and whose reasons for storing are widely diverse. Customers pay on
a rolling four weekly up front basis. As a result, bad debt continues to be
low at 0.21% of revenue. Each customer is relatively small with no
self-storage customer accounting for more than 0.3% of revenue. Additionally,
the UK self-storage market remains under-supplied, and demand remains strong.
We are experiencing some cost increases in the short term, but these are
largely or wholly balanced by our ability to increase our own achieved rate.
We have also taken steps to mitigate the energy cost increases, for instance
we now use 88% of the electricity generated in stores that have PV installed.
Our Objectives
Our objectives remain to:
· Steadily increase cash available for distribution (CAD) per share
enabling a predictable growth of the dividend
· Fill existing stores and improve achieved rates
· Develop our secured pipeline of sites into new Landmark stores
· Acquire more sites and build more new Landmark stores
· Increase the number of stores we manage for third parties
Outlook
This year's results are excellent with all metrics sharply higher, and trading
since the period end is good. The continued strong demand and high occupancy
levels across our stores give us pricing opportunities in the coming year.
Lok'nStore continues to experience strong year to year revenue growth on a
same store basis and this will be enhanced by the three stores opened this
year and the opening of four new stores opening over the coming year. Our new
secured store pipeline of new stores will add 44.1% more owned trading space
over coming years. Over the medium to long term these factors will continue to
increase revenue, profits and asset value substantially. This strength enables
Lok'nStore to confidently look through the current external market turbulence.
We have an exciting period of growth ahead. With Lok'nStore's resilient and
flexible business model enabling the business to manage its conservative debt
structure the Board is confident the Group will continue to thrive.
Andrew Jacobs
Executive Chairman
28 October 2022
The UK Self-Storage Market
The UK Self-Storage Market at a Glance
The Self-Storage Association UK Annual Industry Survey 2022 reports that the
UK self-storage industry is made up of 2050 sites offering 52 million sq. ft.
of space.
Market Overview
As reported in the Self-Storage Association UK (SSA UK) Annual Industry Survey
2022 the UK self-storage market continues to grow but remains under-developed
relative to Australia and the US. In the UK there are an estimated 1,429
self-storage facilities plus an additional 621 containerised sites, providing
a total of 52 million sq. ft. of storage space. With a population of 68
million people in the UK this equates to only 0.76 sq. ft. per person.
Occupancy rates across the UK industry at 31 December 2021 of built space was
83.3%. This has increased from 76.2% at the start of the pandemic.
The structure of the UK industry is changing. When the industry first emerged
companies were predominately single owner sites often located in industrial
areas, but larger operators (defined as operators managing ten or more sites),
such as Lok'nStore, have recently been developing purpose-built stores in
retail-facing locations offering customers a higher standard of product and
service.
The main barriers to entry to the market remain the difficulty in finding and
securing suitable sites as well as gaining the appropriate planning consents.
As a result, larger operators now own or manage around a third of all
facilities which translates to 45% of market share in terms of revenue and
space. Currently Lok'nStore is the fifth largest operator in the UK by number
of stores.
Drivers of Demand for Self-Storage
Demand for self-storage by both household and business customers is driven by
a specific need based on changing circumstances as well as economic activity
and business confidence.
For household customers their need is often linked to a life event where they
will need space temporarily, for example, to turn a box room into a home
office, but increasingly householders are using storage on a semi-permanent
basis to free up space at home or store belongings they don't have room for.
Business customers use self-storage for a variety of purposes including
storage of goods, excess or seasonal stock, document archiving or storage of
equipment and tools. Businesses tend to store for longer than household
customers and take larger units, although they also take advantage of
self-storage for temporary periods to support seasonal sales or office moves
or refurbishments.
During the pandemic many of our customers were providing critical services
distributing medical and other essential supplies. We include the NHS, GP
surgeries, care and home support services and government departments amongst
our customers.
Lok'nStore's Opportunity in the Market
The SSA UK Annual Industry Survey 2022 notes that public awareness of and
demand for self-storage is increasing. We know that on average customers chose
a store within five miles of their home or business. With a secured pipeline
of ten stores, a further four stores at lawyers and a continuing programme of
evaluating further site opportunities, Lok'nStore is well placed to attract
new customers and add further momentum to the growth of our sales and profits.
Combining the Group's competitive strengths (recognised brand, excellent
customer service, rigorous cost control) and the attractive market dynamics of
the storage sector (growing sector, under supply, resilience during economic
downturn) with our strong balance sheet and flexible operating and ownership
model (see our portfolio strategy), we believe Lok'nStore can take advantage
of the opportunities presented and continue its growth without significantly
increasing risk.
Our Business Model:
Our overriding objective is to increase the Cash Available for Distribution
(CAD) enabling a predictable growth of the dividend from a rising asset base
while maintaining a conservatively geared balance sheet.
What we do How we create value Sharing value with our stakeholders
· Buy or lease prominent sites · Take a strategic and tactical approach to site selection Shareholders
· Build highly visible orange Landmark storage centres · Increase our asset base · High-quality earnings
· Offer clean, dry, secure storage to business and household customers · Careful cost control · Growing NAV per share
· Offer managed storage services to third-party owners · Drive store EBITDA growth through a closely managed occupancy and · Progressive dividend policy
pricing strategy
· Earn fees from managing stores on behalf of others
Customers
· Carefully balanced use of leverage
· Easy to locate stores
· Friendly and high-quality customer service
· Wide range of storage solutions
· Transparent and open contracts
Our people
· Personal development through the Lok'nStore Academy
· Regular opportunities for career progression through our expanding
store portfolio
· Uncapped bonus scheme
· Share ownership plans
· Regular gifts and rewards for all colleagues
40 UK Stores currently trading £26.9 million Group revenue · Rated excellent on Google with an average score of 4.7 out of 5 from
over 3,500 reviews
(Including 16 Managed Stores) (2021: £21.9 million)
· £0.73 million paid out in bonuses to store teams (2021: £1.0 million)
Our strategy:
Our objectives Achievements in 2022 Strategy in action
Steadily increase cash available for distribution (CAD) per share CAD per share up 36.7% to 38.7 pence (2021: 28.4 pence) Annual dividend 17.25 pence per share up 15% (2021: 15 pence per share)
Fill existing stores and improve pricing We continued to improve our online visibility through evolution of our search · 16 freehold stores over 80% occupied at year end
engine strategy
We focused on developing our teams' sales and customer service through the
Lok'nStore Academy · Self-storage pricing up 13%
·
Acquire more sites to build new Landmark stores 3 landmark stores opened during the year. · We acquired one new site in this financial year: Bolton
· Four sites currently at lawyers
10 stores secured in planning or development.
Planning permissions achieved at Peterborough and Kettering.
Increase the number of stores we manage for third parties 1 managed store in development and 1 opened during the year. · Recurring managed store fees up 107%
· Kettering Site acquired by third party investor
Managing Director's Review:
Lok'nStore Group has had another successful year delivering against all of our
strategic objectives. Once again revenue, profits and asset values have all
moved sharply ahead. In coming years our pipeline of new stores will
substantially increase the proportion of our store space which is new or
purpose-built and will add further momentum to the growth of sales and
profits.
Trading
Group revenue for the year was £26.9 million, up 22.9% year on year (2021:
£21.9 million) driven by occupancy increases and improved pricing across our
stores. This revenue growth led to a 37.5% increase in Group Adjusted EBITDA.
ü Total self-storage revenue £24.1 million up 17.3%
ü Adjusted Store EBITDA £14.9 million up 23.7%
ü Unit pricing up 13.0%
ü Managed store revenue £2.8 million up 107%.
ü Recurring management revenue £1.31 million up 49%.
ü £12.2 million invested in our portfolio of stores this year
Total Adjusted Store EBITDA, a key performance indicator of profitability and
cash flow of the business, increased 23.7% to £14.88 million (2021: £12.03
million). The overall Adjusted EBITDA margin across all stores was higher
again at 61.6% (2021: 58.3%) with the Adjusted Store EBITDA margins of the
freehold stores at 65.5% (2021: 63.1%) and the leasehold stores at 53.3%
(2021: 46.5%).
As the business develops the balance of the stores continues to shift towards
Landmark freehold stores and managed stores which have a higher-than-average
Adjusted Store EBITDA margin at 65.5% and 100% respectively versus 61.6%
across all stores. The impact of this will be to continue to increase the
average Adjusted Store EBITDA margin of the Group overall, and this effect is
accentuated by operating more stores from a relatively fixed central cost
base. In this context the new stores in the pipeline will make a larger than
average contribution to Group profits and asset values as they become
established trading units.
In the tables below, we show how the performance of the stores varies between
freehold and leasehold stores. Currently 43.3% of Lok'nStore branded trading
space is owned freehold, 20.5% is leasehold and 36.2% is managed stores.
The freehold stores produce 71.8% (2021: 76.9%) of the Adjusted Store EBITDA
and account for 91.4% (2021: 91.8%) of valuations (including secured pipeline
stores). Leaseholds trade on lower margins due to the rent payable, but
nevertheless the 53.3% margin achieved is substantial, and leads to a higher
return on capital than the freehold stores which require much larger capital
expenditure to buy the land and buildings.
This mix of tenures with their different risk and return characteristics
provides flexibility in the balance sheet and opportunities to create value
throughout the property and economic cycle.
Performance - Same Store Analysis (14)
Headline Store Performance
Same Store Performance
31 July
2022
31 July 2022
FYE 31 July 2022 £'000 Percentage £'000 Percentage
Increase Increase
% %
Group revenue 26,902 22.9 25,299 30.7
Self-storage revenue 24,076 17.3 22,473 24.9
Store Adjusted EBITDA 14,884 23.7 14,137 34.8
Group EBITDA 16,349 37.5 14,390 39.1
Operating profit (before non-underlying) 11,421 49.8 10,889 71.7
Operating profit (after non-underlying) 17,160 130.0 16,628 168.9
Operating costs 10,365 5.4 9,522 7.5
Profit before tax 15,874 146.2 15,343 197.0
Store EBITDA Margins 61.6% 62.9%
Portfolio Analysis and Performance Breakdown
As at 31 July 2022 When fully Developed
Portfolio Analysis and Performance Breakdown Number of % of Valuation % of Adjusted Store EBITDA Adjusted Store EBITDA margin (%) % lettable space Number of Stores Total % lettable space
stores
Freehold 15 80.4 71.8 65.5 43.3 23 51.8
Leaseholds 9 8.6 28.2 53.3 20.5 10 15.4
Managed Stores 16 - - 100.0 36.2 17 32.8
Total Stores Trading 40 - - - - 50 -
Pipeline Stores *
Owned - Freehold 8 11.0 - - - - -
Owned - Leasehold 1 -
Managed Stores 1 - - - - - -
Total Stores 50 100 100 61.6 100 50 100
*Applies to the ten contracted stores only
In the table below we show how the performance breaks down across the stores
based on age. Clearly older stores have had more time to fill up and produced
72.8% EBITDAR margins. Over time as new stores and pipeline sites go through
their life cycle they will progress towards similar margins, adding
substantially to revenues and profits.
Operating Performance by age of store (Lok'nStore owned stores only)
Weeks Old Pipeline Under 100 100 to 250 over 250 Total
Year Ended 31 July 2022
Sales £000 481 3,734 19,961 24,176(1)
Stores Adjusted EBITDA £'000 (400) 2,504 12,780 14,884
EBITDA Margin (%) (83.2%) 67.1% 64.0% 61.6%
Store Adjusted EBITDAR £'000 (395) 2,504 14,523 16,632
EBITDAR Margin (%) (82.2%) 67.1% 72.8% 68.8%
As at 31 July 2022 ('000 sq. ft.)
Maximum Net Area 561 169 285 1,018 2,033
Freehold / Long Leasehold 511 169 285 583 1,548
('000 sq. ft.)
Short Leasehold ('000 sq. ft.) 50 - - 435 485
Number of Stores
Freehold 8 3 5 11 27
Short Leasehold 1 - - 9 10
Total Stores 9 3 5 20 37(2)
(1) In respect of the Farnborough Store (over 250 weeks) the total store
revenue includes a £100,000 contribution receivable from Group Head Office.
(2) The 37 stores include performance of the four sale and manage-back stores
up to 31 January 2022 prior to their disposal. At the year-end the total
number of owned stores was 33.
Marketing
New customers are typically drawn to Lok'nStore by three key drivers:
· Our distinctive Landmark stores
· Google and other search engines
· Existing or previous customers and customer referrals
Store visibility remains pivotal to our marketing efforts. With their
prominent positions, distinctive design, and bright orange elevations our
stores raise the profile of the Lok'nStore brand and help to generate a
substantial proportion of our business. Our Landmark stores are in highly
prominent locations, and we continually invest in new signage and lighting at
our existing stores as well as creating striking designs for our new Landmark
stores, to promote and enhance their visual prominence and engage the local
community.
The internet continues to be the main media channel for our advertising. Our
website at www.loknstore.co.uk (http://www.loknstore.co.uk) is one of the most
established self-storage websites in the UK. The website delivers a high
level of customer experience across desktop and mobile devices. Any new
development of the website begins with a mobile first focus. 60% of visits to
the website in the year were from a mobile device, consistent with last year.
This is a very dynamic area, and we are committed to its continued
development. We believe the internet provides a strong competitive advantage
for the major operators such as Lok'nStore with relatively large marketing
budgets.
Pipeline of New Stores
Against this background of ever improving operating performance, we have
invested £12.2 million (2021: £26.9 million) in new store development this
year and we have a new store pipeline of ten secured stores by the reporting
date, which will take the total to 50 stores. These will all be purpose-built
Landmark stores in highly prominent locations and will add substantially to
the Group's capacity for revenue, profit and asset growth.
We believe that the UK self-storage market is still in its infancy with low
penetration and increased consumer awareness leading to faster fill up rates.
Sale and Manage-Back of four of our freehold stores
On 31 January 2022, the Group executed the Sale and Manage-Back of four of its
freehold stores for a total gross consideration of £39.0 million realising a
significant premium of 22.8% to the stores valuation at 31 July 2021. The
purchaser was an existing institutional managed-store client wholly
independent of Lok'nStore and its Directors.
Lok'nStore continue to manage the stores located in Basingstoke, Cardiff,
Horsham, and Portsmouth, as branded Lok'nStore operations maintaining the
operational footprint of the business. Lok'nStore will receive management and
performance fees for managing them on behalf of their new owner. The total
consideration of £39 million receivable was subject to a £1.8 million
downward adjustment in respect of certain committed works to be completed by
Lok'nStore at two of the sites. The net proceeds of the sale will be recycled
into new, fast-growing Landmark stores.
In the year to 31 July 2021, the four stores generated revenue of £2.54
million and contributed £1.54 million to Group EBITDA. In the six months to
31 January 2022, the four stores generated revenue of £1.50 million and
contributed £0.97 million to Group EBITDA. In the six months post the sale in
January 2022, the Group has received management fees of £0.151 million in
respect of the manage-back arrangement which flow directly to Group EBITDA.
The historic cost of the four stores was £13.75 million and their stated fair
value at 31 July 2021 was £31.75 million.
This transaction does not impact the Group's ability to grow its annual
dividend in line with market expectations and which is well covered by
projected CAD profit levels of the business going forward.
Managed stores revenue increasing
Total managed store revenue in the year was up by 107% to £2.79 million.
Recurring management fees were up by 49% to £1.31 million as we increased the
number of stores under management, including opening the new Landmark store in
Wolverhampton in March 2022 as well as the four stores transacted to a managed
store client in January 2022. At the year-end we had 16 Managed Stores
operating with the Kettering store due to go on site in the coming months.
Income from non-recurring fees was up dramatically in the year to £1.47
million. Although these fees are irregular in nature, this demonstrates the
contractually embedded value in the managed stores income stream.
Non-recurring fees come from various sources such as including planning
success fees, construction and advisory fees and fees crystallised when an
asset transaction occurs.
Percentage Increase Group Group
Management fees Year ended Year ended
31 July 2022 31 July 2021
% £ £
Recurring fees
Base management fees 722,084 515,940
Administration and compliance fees 86,916 59,500
Management performance fees 504,379 307,184
Recurring fees - Sub-total 49% 1,313,379 882,624
Construction & Advisory fees 12,500 12,500
Supplementary fees 1,459,177 451,140
Non-recurring fees -sub total 217% 1,471,677 463,640
Total management fees 107% 2,785,056 1,346,264
The graph below shows how our historical management fees have grown and
indicates a strong correlation between the total management fee income and the
number of stores under management.
Future
Lok'nStore has had an excellent year, with all our trading and financial
metrics moving ahead briskly, demonstrating the strength of the self-storage
business model throughout the economic cycle. Trading has remained good since
the year-end.
We are currently experiencing some cost pressure, but the business is
sheltered from this effect by high EBITDA margins and our ability to raise
rates charged.
Against the background of a strong performance from our existing stores, we
have a secured pipeline of ten new stores plus a further four at lawyers all
of which will add considerable momentum to sales and earnings growth in the
future. Our flexible model allows us to develop these new stores when market
circumstances dictate.
Neil Newman-Shepherd
Managing Director
28 October 2022
Property review
40 stores now trading 10 new Landmark stores secured New stores will add 29.6% to total trading space
Store and Portfolio Strategy
Our strategy is to continue to increase the number of stores we operate
without stretching our balance sheet. The core focus of this strategy is the
acquisition of highly prominent freehold locations in busy towns and cities in
England where we will build well-branded Landmark stores.
Lok'nStore's rising 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.
Flexible Approach to Site Acquisition
All the projects noted below are part of our strategy of actively managing our
operating portfolio to ensure we are maximising both trading potential and
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 are focused on allocating capital in the most efficient
manner to achieve our objectives.
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 store's life
cycle.
Sale and Manage-Back of Stores
We also consider selling established stores on sale and manage-back contracts
in order to recycle the capital into the development of new Landmark stores
and manage the balance sheet as part of our successful growth strategy and
disciplined capital allocation. Indeed, some of our stores have been freehold,
leasehold, and managed stores during their operating life cycle.
In the period we successfully completed on the sale and manage back of four
older stores which raised net proceeds of £37.9 million to be recycled into
new Landmark stores.
Our most important consideration is always the trading potential of the store
rather than the property tenure and sale and manage-backs have the additional
advantages: -
i) The critical mass of store numbers benefits the business
(e.g. through Google search and sharing of other marketing costs)
ii) It spreads the central management costs
iii) Through the performance and exit fees we are exposed to
the trading and capital upside without committing capital
The table below illustrates the rapid growth of store numbers and the changing
tenure mix over time including the growth of managed stores over recent years.
At 31 July 2022, Lok'nStore operated 24 of its own stores. Of these Lok'nStore
owns 15 freehold and nine leasehold stores. All nine leasehold stores are all
inside the Landlord and Tenant Act providing us with security of tenure. The
average unexpired term of the Group's leaseholds is 10 years and one month as
at 31 July 2022. We operate 16 further stores under management contracts.
The lease on the Sunbury store expired on the 30/07/2022. We are in dialogue
with the landlord regarding a new lease on the existing site or in a new site.
In the meantime, we continue to trade from the current store which benefits
from being inside the Landlord and Tenant Act.
Our Exciting Landmark Store Pipeline
· We have ten stores in our current Secured Pipeline of which eight are
freehold, one is leasehold and one managed
· We are on site at four stores that will open during 2023 with a fifth
site due to commence shortly
· Four new store opportunities are progressing with lawyers
· Current Pipeline of ten contracted stores adds 29.6% of extra trading
space to the overall portfolio, 44.1% to our owned portfolio and 5.9% to the
managed portfolio
All ten stores in our Secured Pipeline(9) are in prominent locations with
large catchment areas and little established competition and demonstrate the
Group's ability to source high-quality sites adding to future sales and
earnings growth. These eye-catching buildings, with their distinctive orange
Lok'nStore branded livery and prominent signage, create highly visible
landmarks, which continue to be a big source of new customers.
Summary of our current pipeline at 31 July 2022:
Total On site at On site at On site after
Store Size Status 31 July 2022 31 October 2022 31 October 2022
sq. ft sq. ft sq. ft sq. ft
(Additional) (Additional)
Bedford 55,978 On site - 55,978
opening early 2023
Peterborough 45,900 On site - opening spring 2023 45,900
Staines 66,500 On site - 66,500
opening summer 2023
Basildon 49,700 On site - 49,700
opening summer 2023
Kettering 45,900 On site autumn 2022 - opening autumn 2023 45,900
Bournemouth 75,100 Planning consent granted 75,100
Cheshunt 60,300 Planning consent granted 60,300
Altrincham 63,900 Planning application submitted 63,900
Barking 84,200 Design 84,200
Bolton 59,100 Design 59,100
Total 10 stores 606,578 218,078 45,900 342,600
Total On site at 31 July 2022 218,078
Sq. ft. Trading (including Managed Stores) at 31 July 2022 2,046,673
Trading + On site at 31 July 2022 2,264,751
% Increase from on-site sq. ft 10.60%
Total secured pipeline 606,578
Sq. ft. Trading (including Managed Stores) at 31 July 2022 2,046,673
Trading + secured pipeline at 31 July 2022 2,653,251
% Increase from secured pipeline sq. ft 29.64%
During the year we opened three new stores in Warrington, Stevenage, and
Wolverhampton. Early trading in all new stores has been very encouraging. We
acquired one new site during the year and have a further four sites
progressing with lawyers.
Store opening programme by year
Financial Year Store Opening Pipeline (secured) Lok'nStore Capital Expenditure Remaining (million) % Growth lettable area Owned Portfolio % Cumulative growth lettable area Owned portfolio % Growth lettable area total portfolio % Cumulative growth lettable area Total portfolio
2023 4 £28.0 17.1% 17.1% 10.7% 10.7%
2024 3 £18.1 10.7% 27.8% 8.8% 19.5%
2025 3 £26.0 16.3% 44.1% 10.1% 29.6%
10 £72.1 44.1% 29.6%
Portfolio breakdown
When the contracted development pipeline of ten sites has been completed
Lok'nStore will operate from 50 stores including 17 managed stores. In
addition, four further new store opportunities are progressing with lawyers.
The secured pipeline sites represent a combination of nine owned and one
managed store. These will add 606,578 sq. ft. of new capacity adding 44.1% to
freehold and leasehold owned trading space and 5.9% to the managed store
portfolio delivering a 29.6% increase in overall trading space.
Portfolio Breakdown
As at 31 July 2022 No of Trading Trading Pipeline Secured With
Stores/Sites Lok'nStore Managed Lawyers
Freehold & Long Leasehold
15 15
Leaseholds 9 9
Pipeline (Freehold) 12 12 8 4
Pipeline (Leasehold) 1 1 1
Managed Stores (Trading) 16
16
Managed Stores (Pipeline) 1 1 1
Total 54 24 16 14 10 4
MLA sq. ft. 2,888,251 1,271,873 774,800 841,578 606,578 235,000
Managed Stores
· Circa £150 million of Store assets under management
· 49% increase in recurring management fees earned
Lok'nStore manages an increasing number of stores for third-party owners.
Under this model Lok'nStore can provide a turnkey package for investors
wishing to own trading self-storage assets. The investor supplies the capital
for the project which Lok'nStore manages. Lok'nStore will buy, build and
operate the stores under the Lok'nStore brand and within our current
management structure.
During the period the Group opened the Wolverhampton Managed Store on 25 March
2022. The new Kettering store will be on site autumn 2022 and open in 2023.
For managed stores Lok'nStore receives a standard monthly management fee, a
performance fee based on certain return hurdles and fees on a successful exit.
We also charge acquisition, planning and branding fees. This allows Lok'nStore
to earn revenue from our expertise and knowledge of the self-storage industry
without committing our capital. We can amortise various fixed central costs
over a wider operating base and drive more visits to our website, moving it up
the internet search rankings and benefitting all the stores we both own and
manage.
This strategy improves the risk adjusted return of the business by increasing
the operating footprint, revenues and profits without committing capital.
There is a strong correlation between the total management fee income and the
number of stores under management.
We now manage approaching £150 million of assets under this structure on
which we generated managed store income of £2,785,056 this year, up 107%
(2021: £1,346,264) from the previous year. We expect this to continue
increasing steadily over the coming years as more managed stores are opened.
Second half income was stronger and includes additional fees from store
openings and non-recurring fees contributed to benefit additional
supplementary fees (Initial branding fees etc). Managed store income is
generated from our existing platform and central management, resulting in an
effective margin from this activity of 100%.
Growing Store Property Assets and Net Asset Value
ü Adjusted Total Assets £370.9 million(4) up 25.8% on last year (2021:
£294.8 million)
ü Adjusted Net Asset Value of £9.72 pence per share up 33% on last year
(2021: £7.31 per share)
ü Value of operating stores £279.0 million up 18.8% on last year (2021:
£234.9 million)
ü Total property assets £309.7 million up 14.7% on last year (2021: £270.1
million)
Our freehold and leasehold stores have been independently valued by Jones Lang
LaSalle (JLL) at £279.0 million as at 31 July 2022 (2021: £234.9 million).
Adding our stores under development at cost, and land and buildings held at
director valuation, our total property valuation is up 14.7% to £309.7
million (2021: £270.1 million). The increase in the values of properties
which were also valued by JLL last year was 22.6% (2021: 22.8%).
The significant change in property valuation is referred to further in the
Financial Review section of the Strategic Report and is detailed in note 12(a)
of the notes to the financial statements. The principal drivers for this
increase are: -
· The trading stores have continued to trade at high occupancy. The
stabilised occupancy assumed by JLL is materially unchanged at 88.23% (2021:
88.85%)
· Discount Rates and Exit Yields applied by JLL have also
compressed this year
· Transactional activity in the UK and across Europe remains strong
· There is an increasing amount of capital looking to access the
self-storage market, with a real step change in the interest in the sector,
with major private equity and institutions either having entered the market,
(Schroders, Legal and General and the Carlyle Group) or are looking to enter
the market. More recently, Angelo Gordon, GIC and Heitman have committed
significant capital to the sector, with other institutions looking to enter
the market either through direct acquisition or by funding new store
developments.
JLL reported in their 2022 Valuation report…."Self-storage is widely viewed
as an inflation hedge. The sector has proved itself as a resilient asset class
that generally performs well during economic stress events as was seen during
the Global Financial Crisis and the COVID-19 pandemic".
Post year-end we have seen considerable market turbulence which may have an
effect on the future valuations of our stores but which may be offset to some
degree by improvements in trading and trading outlook. In note 11 we set out
the likely effects of a 50 bps and a 100 bps increase / decrease in Discount
Rate and Exit Yield.
Financial Review:
Group Revenue Group Adjusted EBITDA £16.4 million up 37.5% Operating profit £17.2 million
£26.9 million up 22.9% up 130%
"Disciplined capital allocation and investment into fast-growing Landmark
assets"
Ray Davies
Finance Director
The Group has reported record revenue and profits with all KPi metrics up on
the previous year.
Financial results
ü Group Revenue £26.9 million up 22.9% (2021: £21.9 million)
ü Group Adjusted EBITDA(1) £16.4 million up 37.5% (2021: £11.9 million)
ü Profit before Tax £15.9** million up 146.3% (2021: £6.5 million)
ü Operating Profit £17.2 million up 130.0% (2021: £7.5 million)
ü Cash available for Distribution (CAD) per share up 36.6% to 38.7 pence
(2021: 28.4 pence)
ü Final dividend up 14.8% to 12.25 pence per share (2021: 10.67 pence per
share)
ü Cash balance £46.5 million (2021: £9.1 million)
ü Bank facility extended by one year to April 2026
** A significant part of this increase in profit before tax is due to the
profit of £5.94 million arising on the sale of four trading stores, which is
"non-recurring" and separately disclosed in the Income Statement below
"adjusted EBITDA" and in note 4 to the financial statements (non-underlying
costs). Operating profit is therefore increased by this amount.
On 20 October 2021, the Group executed the accordion arrangement embedded
within the Revolving Credit Facility which increases the loan facilities
available to the Group from £75 million to £100 million. In addition, the
Group has also agreed a one-year extension on its existing joint banking
facility. The facility is a joint agreement with ABN AMRO NV and NatWest Bank
plc participating equally and is closely aligned to the terms of the Group's
previous facility. ABN AMRO NV replaced Lloyds Bank plc in June 2021 as one of
the Group's banking partners.
The facility, which was due to expire in April 2025, will now run until April
2026 providing funding for more Landmark site acquisitions. The two principal
bank covenants (LTV and Senior Interest) and margin are unaffected by the
execution of the accordion and this extension of term.
Amendments to the Facility Agreement dealing with the transition from LIBOR to
SONIA (Sterling Over Night Indexed Average) have also been made, fulfilling
the UK regulator's requirements ahead of LIBOR's phasing out after 31 December
2021.
Management of Interest Rate Risk
Lok'nStore generates an increasing cash flow from its strong asset base with a
low LTV net of cash of 6.6% and a low average cost of debt of 1.71%. The value
of the Group's assets underpins a resilient business model with stable and
rising cash flows and low credit risk giving the business a firm base to fund
future growth.
Interest expense and bank borrowings
· Average cost of debt 1.71% (2021: 1.54%)
· Average cost of debt (on active revolving loans at 31 July 2022)
2.71% (2021: 1.55%)
With £66.8 million of gross debt currently drawn against the £100 million
bank facility the Group is not committed to enter into interest rate hedged
instruments but continues to keep the matter under review. It is not the
current intention of the Group to do so at this time given our low level of
net debt, low loan to value ratio and high interest cover. During the year the
Group has continued to benefit from relatively low lending rates although it
is recognised that interest rates are now rising.
The gross bank interest expense (before capitalisation of interest costs,
non-utilisation fees and loan amortisation fees) for the year was £1.30
million (2021: £0.85 million), due to higher average debt and higher average
costs of borrowing. These average costs of borrowing have continued to rise
after the year-end and the Group's current cost of debt is running at 3.72%.
The Group continues to monitor closely the effects of rising interest rates on
its senior interest covenant, which is tested on a 12-month rolling basis, and
the Group's flexible business model will enable it to take appropriate steps
to mitigate its effects should it be required.
Capitalised interest in the year on our store development programme was
£589,983 (2021: £380,193). Total finance costs in the Statement of
Comprehensive income increased to £1.33 million (2021: £1.02 million).
Lok'nStore will continue to report on the Cash available for Distribution
(CAD) which aims to look through the statutory accounts and give a clear
picture of the ongoing ability of the Company to generate cash flow from the
operating business that can be used to pay dividends, make investments in new
stores, or pay down debt. CAD was up 38.1% for the year.
As agreed with the banks, both the Loan to Value and Senior Interest covenants
set out in our bank facility continue to be tested excluding the effects of
IFRS 16. For covenant calculation purposes, debt / LTV will continue to
exclude right of use assets and the corresponding lease liabilities created by
IFRS 16. When testing the Senior Interest Covenant, property lease costs will
continue to be a deduction in the calculation of EBITDA, in accordance with
the accounting principles in force prior to 1 January 2019.
Earnings Per Share
The calculations of earnings per share are based on the following profits and
numbers of shares.
Group Group
Year ended Year ended
31 July 31 July
2022 2021
£'000 £'000
Total profit for the financial year attributable to owners of the parent 12,077 3,283
2022 2021
No. of Shares No. of shares
Weighted average number of shares
For basic earnings per share 29,287,451 29,035,104
Dilutive effect of share options(1) 549,321 527,846
For diluted earnings per share 29,836,772 29,562,950
(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 notes 21 to 25.
Earnings per share Group Group
2022 2021
pence pence
Basic
Total basic earnings per share
41.24p 11.33p
Diluted
Total diluted earnings per share 40.48p 11.10p
Basic earnings per share were 41.24 pence (2021: 11.33 pence per share) and
diluted earnings per share were 40.48 pence (2021: 11.10 pence per share).
Operating Costs
Cost Ratio
ü Group operating costs amounted to £10.4 million for the year (2021: £9.8
million) up by 5.4%
ü Cost ratio(13) reduced further to 38.5% (2021: 44.9%)
We have a strong record of disciplined control of our Group operating costs
with same store costs increasing by 7.5% (Refer to same store analysis of
Group operating costs in the table below).
In the year Group operating costs at a headline level were up 5.4% year on
year as we opened new Landmark stores in Warrington and Stevenage. We provide
a breakdown below. Overall, the cost ratio continues to decrease as we grow
revenue and continue to bear down on costs.
Future cost increases are likely to be driven by the expansion of the business
in the areas of rates, staffing and marketing. Historically, overall cost
increases have been mainly driven by the expansion of the business, however we
are now seeing some other cost pressures through energy (significant) and some
wage costs (moderate), and the insurance market has hardened considerably as
it re-rates its risk/premium positions in the light of store fires in the
wider self-storage sector.
Property costs increased by 10.9%. These costs mainly constitute rates, light
and heat and property maintenance and have risen in recent years as we felt
the effects of higher rates and energy bills and as we opened our new Landmark
stores which are generally larger and therefore incur higher rates bills.
Staff costs increased by 1.9% as we staffed the new stores which was offset by
lower performance bonuses to our store colleagues.
The 7.3% increase in overhead costs is principally due to a stepped increase
in audit fees as the audit profession adjusts its fee rates in response to
higher regulatory costs. Legal and professional costs related to work on rent
reviews, corporate tax, increased valuation costs for additional work
commissioned by the Group for valuation work completed by JLL, and general
compliance work also increased. Peel Hunt were appointed joint broker during
the year adding to the overall brokerage costs.
Bank charges which now contain a full year amortisation charge (non-cash) in
respect of bank fees charged for the £25 million accordion and the one-year
RCF extension also increased. Amortisation charges for 2022 were £215,845
(2021: £158,216). Other administrative costs (computer support, telephones,
PPS and marketing etc) show no material cost pressures.
Group Operations Increase Year ended 31 July Year ended
in costs % 2022 31 July
£'000 2021
£'000
Property costs 10.9 5,304 4,783
Adjustment for property lease rentals 12.0 (1,746) (1,559)
Property and premises costs 10.4 3,558 3,224
Staff costs 1.9 5,369 5,269
Overheads 7.3 1,438 1,341
Total 5.4 10,365 9,834
On a same store basis, excluding the financial effects of the four trading
stores sold and the new stores opened in Warrington and Stevenage, the table
below shows the overall Group cost increased by 7.5%.
Group Operations Increase (decrease) Year ended 31 July Year ended
Same Store analysis in costs % 2022 31 July
£'000 2021
£'000
Property costs 11.6 3,135 2,808
Staff costs 4.3 5,062 4,853
Overheads 10.8 1,325 1,195
Total 7.5 9,522 8,856
Cash Flow and Financing
At 31 July 2022, the Group had cash balances of £46.5 million (2021: £9.1
million) the large increase from the previous year was due to the successful
sale-and-manage-back of four stores during the year for net cash proceeds of
£37.9 million.
Cash inflow from operating activities before investing and financing
activities was £18.57 million in the year to 31 July 2022 up 52.4% (2021:
£12.19 million).
Increasing Cash Flow Supports 15% Annual Dividend Increase
ü Annual dividend 17.25 pence per share up 15% (2021: 15 pence per share)
ü Cash Available for Distribution (CAD) of 38.7 pence per share (2021: 28.4
pence per share)
ü Cash Available for Distribution (CAD) up 38.2%
CAD provides a clear picture of ongoing cash flow available for dividends, new
store development or debt repayment.
Analysis of Cash Available for Distribution (CAD) Group Group
Year ended Year ended
31 July 2022 31 July 2021
£'000 £'000
Group Adjusted EBITDA
(Per Statement of Comprehensive Income) 16,349 11,890
Property lease rents (1,746) (1,559)
Net finance costs paid (excluding re-financing costs) (1,395) (969)
Capitalised maintenance expenses (120) (193)
New Works Team (125) (129)
Current tax (note 9) (1,572) (798)
(4,958) (3,648)
Cash Available for Distribution 11,391 8,242
Increase in CAD over last year £ 3,149 2,069
Increase in CAD over last year % 38.2% 33.5%
Number Number
Closing shares in issue (less shares held in EBT) 29,380,333 29,063,575
CAD per share 38.7p 28.4p
Increase in CAD per share over last year 36.7% 33.3%
Analysis of the underlying business after adjustment for non-underlying items
During the year the Group has benefited from a higher than usual level of
non-recurring management fees of £1.47 million and exceptional gains
principally resulting from the sale of the four sale and manage-back stores
totalling £5.74 million. In the table below we separate these non-underlying
items and non-recurring management fee income to show the performance of the
underlying business.
2022 2022 2022 2021 2021 2021
£'000 £'000 £'000 £'000 £'000 £'000
Underlying business Non-underlying items and non-recurring management fee income Total Underlying business Non-underlying items and non-recurring management fee income Total
Revenue
25,430 1,472(1) 26,902 21,428 464(1) 21,892
Total property, staff, distribution, and general costs
(10,553) - (10,553) (10,001) - (10,001)
Adjusted EBITDA(1) 14,877 1,472 16,349 11,427 464 11,891
Depreciation (4,727) - (4,727) (4,149) - (4,149)
Equity-settled share-based payments
(201) - (201) (118) - (118)
Non-underlying items - 5,739(2) 5,739 - (160)(2) (160)
(4,928) 5,739 811 (4,267) (160) (4,427)
Operating profit 9,949 7,211 17,160 7,160 304 7,464
Finance income 42 - 42 1 - 1
Finance cost (1,328) - (1,328) (1,017) - (1,017)
Profit before taxation 8,663 7,211 15,874 6,144 304 6,448
( )
(1 ) Represents non-recurring
management fees
(2 ) Refer note 4 of the notes to the
financial statements for the analysis of non-underlying items
Analysis of Cash Available for Distribution (CAD) 2022 2021
(after after adjustment for non-underlying items £'000 £'000
Cash Available for Distribution 11,391 8,242
Adjustment for non-recurring management fees (1,472) (464)
Cash Available for Distribution on the underlying business 9,919 7,778
Increase in CAD over last year £ 2,141
Increase in CAD over last year % 27.5%
Number Number
Closing shares in issue (less shares held in EBT) 29,380,333 29,063,575
CAD per share 33.8p 26.8p
Increase in CAD per share over last year 26.1%
Taxation
The Group has made a current tax provision against earnings in this period of
£1.7 million (2021: £0.8 million) based on a corporation tax rate of 19%
(2021: 19%). The deferred tax provision which is calculated at forward
corporation tax rates of 25% is substantially a tax provision against the
potential crystallisation (sales) of revalued properties and past 'rolled
over' gains and amounts to £63.2 million (2021: £46.8 million).
The external revaluation of the trading stores and the rolled over gains made
on the sale and manage-back of the four stores during the period have both
contributed to the uplift in the total deferred tax provision at the year-end
(See note 20).
Gearing(11) (excluding IFRS16 lease liabilities)
At 31 July 2022 the Group had £66.8 million of gross bank borrowings (2021:
£65.4 million) representing gearing of 9.9% (2021: 37.2%) on net debt of
£20.3 million (2021: £56.3 million). After adjusting for the uplift in
value of short leaseholds which are stated at depreciated historic cost in the
statement of financial position at £7.2 million (2021: £7.6 million),
gearing is 9.1% (2021: 33.8%). After adjusting for the deferred tax liability
carried at year-end of £54.2 million gearing drops to 7.1% (2021: 26.4%).
Gearing(11) (including IFRS16 lease liabilities)
At 31 July 2022 the Group had £66.8 million of gross bank borrowings (2021:
£65.4 million) and £10.9 million of lease liabilities (2021: £11.2 million)
representing gearing of 15.2% (2021: 44.6%) on net debt of £35.5 million
(2021: £67.5 million). After adjusting for the uplift in value of short
leaseholds which are stated at depreciated historic cost in the statement of
financial position at £7.2 million (2021: £7.6 million), gearing is 17.0%
(2021: 40.7%). After adjusting for the deferred tax liability carried at
year-end of £63.2 million gearing drops to 12.6% (2021: 31.7%).
Capital expenditure
The Group has an active new store development programme. The Group has grown
through a combination of building new stores, existing store improvements and
relocations. We have concentrated on extracting value from existing assets and
developing through collaborative projects and management contracts.
Capital expenditure during the period totalled £12.2 million. This was
primarily the purchase of the Peterborough site, together with ongoing
construction and fit out works at our sites in Stevenage, final costs on
Warrington prior to opening, as well as planning and pre-development works at
our Bedford, Bournemouth, Peterborough, Altrincham, Barking and Cheshunt
sites.
The Group has capital expenditure contracted but not provided for in the
financial statements of £11.21 million (2021: £6.16 million). We carefully
evaluate the ongoing economic and trading position before making any further
capital commitments and can reduce capex quickly if the market deteriorates.
Strong Balance Sheet, Efficient Use of Capital, Low Debt
ü Revolving Credit Facility (RCF) increased to £100 million
ü £12.2 million invested in new store pipeline (2021: £26.9 million)
ü Net debt (excluding leases) £20.3 million (2021: £56.3 million)
ü Loan to Value Ratio (LTV) net of cash 6.6% (2021: 21.0%)
ü Cost of debt averaged 1.71% in the year (2021: 1.54%) on £66.8 million
debt (2021: £65.4 million)
Lok'nStore has a good credit model, with low debt and gearing and which is
strongly cash generative from an increasing asset base. Increased bank
facilities, on competitive margins, and extended to April 2026, positions the
business well for the future.
Statement of Financial Position
Group net assets at the year-end were £205.3 million, up 35.7% (2021: £151.3
million). Freehold properties were independently valued at 31 July 2022 at
£254.8 million up 19.7% (2021: £212.8 million). Please refer to the table of
property values below.
The Parent Company's net assets have increased because of the £6.0 million
dividend paid up from Lok'nStore Limited, the principal operating business of
the Group.
Market Valuation of Freehold and Leasehold Land and Buildings
It is the Group's policy to commission an independent external valuation of
its properties at each financial year-end.
Our freehold stores have been independently valued by Jones Lang LaSalle (JLL)
at £254.8 million (2021: £212.8 million).
Accordingly, Adjusted Total Group Assets(4) have moved upwards sharply in the
year to £370.9 million up 25.8% on 31 July (2021: £294.8 million). A
significant contributor to this increase was the uplift from the external
valuation at 31 July 2022 combined with the trading strength of our business,
as well as our investment in new stores.
In this twelve-month period, we saw a same-store uplift in valuations of
£43.7 million in our freehold and leasehold trading stores, a 24.1% increase.
The like for like comparison excludes the Sale and Manage-Back of four stores
located in Basingstoke, Cardiff, Horsham and Portsmouth, and the maiden
valuations on our new stores in Warrington and Stevenage.
£30.4 million of this valuation uplift comes from improvements in both the
Discount Rate and Exit Yield applied to the valuations. On our owned freehold
trading stores, we have seen exit yields compress on average from 6.15% at 31
July 2021 to 5.47% at 31 July 2022, with Average Discount rates at 7.02%
compared to an average of 8.18% at 31 July 2021. These improving metrics
reflect the increasing investor demand for UK Self Storage assets.
The remaining £15.5 million of valuation uplift comes from the impact of
improved cash flows of the same store portfolio that were valued last year. At
the full year-end in July 2021, we saw significant improvements in the cash
flow assumptions applied by JLL and these have been improved further in this
2022 valuation demonstrating the impact operating performance has on asset
values and why one of our key objectives remains to fill existing stores and
continue improving pricing. We are well positioned to benefit from future
changes with our high-quality portfolio of stores. The Exit Yield and Discount
Rates applied are validated by transactional evidence.
It remains the Group's established policy to undertake a comprehensive
external valuation at each year-end and we will do so at the next year end at
31 July 2023.
Valuations
It is not the intention of the Directors to make any further significant
disposals of trading stores, although individual disposals may be considered
where value can more easily be added by recycling the capital into new stores.
The valuations of our freehold property assets are included in the Statement
of Financial Position at their fair value. The value of our leasehold stores
in the valuation totals £24.3 million (2021: £22.1 million) but they are
held at cost less accumulated depreciation in the Statement of Financial
Position.
A deferred tax liability arises on the revaluation of the properties and on
the rolled-over gain arising from the disposal of some properties. It is not
envisaged that any tax will become payable in the foreseeable future on these
disposals due to the availability of rollover relief.
We have reported by way of a note, the underlying value of these leasehold
stores in revaluations and adjusted our Net Asset Value (NAV) calculation
accordingly to include their value. This ensures comparable NAV calculations.
An analysis of the valuations achieved is set out in the table below.
Analysis of Total Property Value No of stores 31 July 2022 Valuation No of stores 31 July 2021 Valuation
/sites £'000 /sites £'000
Freeholds(1) valued by JLL (2) 15 254,775 17 212,800
Leaseholds valued by JLL (3) 9 24,250 9 22,100
Subtotal 24 279,025 26 234,900
Sites in development at cost (1) 9 29,215 12 33,675
Subtotal (4) 33 308,240 38 268,575
Freehold land & Buildings at Director valuation 1 1,500 1 1,500
Total 34 309,740 39 270,075
(1 ) Includes £440,522 of capitalised interest during the year (2021:
£314,891).
(2) Includes related fixtures and fittings (refer note 12).
(3 ) The nine leaseholds valued by JLL are all within the terms of the
Landlord and Tenant Act (1954) giving a degree of security of tenure. The
average length of the leases on the leasehold stores valued was ten years and
one month at the date of the 2022 valuation.
(4) Loan to value calculation based on these property values.
Total freehold properties account for 92.2% of all property values (2021:
91.8%).
Increase in Adjusted Net Asset Value per Share
ü Adjusted Net Asset Value per share up 33% to £9.72 (2021: £7.31)
Adjusted Net Assets per Share are the net assets of the Group adjusted for the
valuation of leasehold stores and deferred tax divided by the number of shares
at the year-end. The shares currently held in the Group's employee benefits
trust (own shares held) and in treasury (zero) are excluded from the number of
shares.
At July 2022, the Adjusted Net Asset Value per share (before deferred tax)
increased 33% to £9.72 from £7.31 last year. This increase is a result of
higher property values on our existing stores as the strength of our Landmark
stores is recognised, combined with cash generated from operations less
dividend payments, offset in part by an increase in the shares in issue due to
the exercise of a small number of share options during the year.
31 July 31 July
2022 2021
Analysis of net asset value (NAV) £'000 £'000
Net assets 205,346 151,259
Adjustment to include operating/short leasehold stores at valuation
Add: JLL leasehold valuation 24,250 22,100
Deduct: leasehold properties and their fixtures and fittings at NBV (7,224) (7,630)
222,372 165,729
Deferred tax arising on revaluation of leasehold properties(1) (4,256) (3,618)
Adjusted net assets 218,116 162,111
Number Number
Shares in issue '000 '000
Opening shares in issue 29,687 29,633
Shares issued for the exercise of options 317 54
Closing shares in issue 30,004 29,687
Shares held in EBT (623) (623)
Closing shares for NAV purposes 29,381 29,064
Adjusted net asset value per share after deferred tax provision £7.42 £5.58
Adjusted net asset value per share before deferred tax provision
Adjusted net assets (see above) 218,116 162,111
Deferred tax liabilities and assets recognised by the Group 63,214 46,760
Deferred tax arising on revaluation of leasehold 4,256 3,618
properties(1 )
Adjusted net assets before deferred tax 285,586 212,489
Closing shares for NAV purposes 29,381 29,064
Adjusted net asset value per share before deferred tax provision
£9.72 £7.31
(1 ) A deferred tax adjustment in respect of the uplift in the value
of the leasehold properties has been included, calculated by applying the
substantively enacted corporation tax rate of 25% (2021: 25%). 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.
Post Balance Sheet:
Acquisition of a development site in Milton Keynes
On 4(th) October 2022, we exchanged contracts on a freehold development
opportunity in Watling Street, Milton Keynes subject to planning. This highly
visible roadside location in the north west of the city complements our
existing leasehold store, 7 miles to the south east. Once developed the store
will add c. 60,000 sq. ft. of lettable area.
Summary
Lok'nStore Group operates within the UK self-storage industry which is still
an immature sector with strong growth prospects. With a low loan to value
ratio and plenty of headroom on our bank facilities this market presents an
excellent opportunity for further growth of Lok'nStore's business. Recently
opened Landmark stores and our ambitious new store pipeline demonstrate the
Group's ability to use those strengths to exploit the opportunities available
throughout the economic cycle.
Ray Davies
Finance Director
Principal Risks and Uncertainties:
Principal Risks and Uncertainties in Operating our Business
Risk management has been a fundamental part of the successful development of
Lok'nStore. The process is designed to improve the probability of achieving
our strategic objectives, keeping our employees safe, protecting the interests
of our shareholders and key stakeholders, and enhancing the quality of our
decision-making through understanding the risks inherent in both the
day-to-day operations and the strategic direction of the Group as well as
their likely impact.
Management of our risks helps us protect our reputation, which is very
important to the ability of the Group to attract customers, particularly with
the growth of social media. We always try to communicate clearly with our
customers, suppliers, local authorities, communities, employees, and
shareholders, and to listen and take account of their views. We operate strict
Health and Safety policies and procedures.
Our Risk Management Governance
The Board has overall responsibility for the management of the Group's risks.
As the Group's strategic direction is reviewed and agreed the Board identifies
the associated risks and works to reduce or mitigate them using an established
risk management framework in conjunction with the executive management team.
This is a continuing and evolving process as we review and monitor the
underlying risk elements relevant to the business.
Risk Management Framework
The risk register covers all areas of the business including property,
finance, employees, insurance, customers, strategy, governance, and disaster
recovery. The risks are categorised by risk area and numerically rated based
on a combination of 'likelihood' and 'consequences and impact' on the
business. The combination of these two becomes the 'risk factor' and any
factor with a rating over 15 is reported to the Board.
Risk Management Team
Ray Davies, Finance Director, is the Board member responsible for ensuring
that the risk management and related control systems are effective, and that
the communication channels between the Board and the Executive Management team
are open and working correctly. The Executive Management Team is responsible
for the day-to-day management of the risk factors. Responsibility for
identifying, managing, and controlling the risk is assigned to an individual
as shown on the risk register depending on the business area. Reporting
against the risks forms part of the monthly executive management meeting and
the risk factor may be amended if applicable. There are also sub-committees
for particular risk areas which meet regularly. The Risk Management and
Reporting Structure is shown below.
Our Risk Management and Reporting Structure
The Board
Reviews Risk Register in full twice a year
Considers specific risk areas as raised by the Executive Board
Executive Board Committee
Reviews risks at monthly executive management meetings and if material,
requests the Board consider risk at next scheduled Board Meeting (or earlier
if necessary)
Capex Committee Property Risk Committee
Meets Monthly Meets Periodically
Manages proposed capital expenditure, actual spend, rolling capex requirements Considers:
Risks associated with properties including Health and Safety
Environmental Impact
Principal Risks
The principal risks our business faces, and our key mitigations are outlined
in the table below.
Risk Description Key Mitigation
Interest Rate and Liquidity Risk The main risks arising from the Group's financial instruments are interest § Regular review by the Board (full details are set out in the Financial
rate risk and liquidity risk (for details please see note 17). Review.
§ Debt and interest are low relative to assets and earnings. With interest
rates rising, this risk per se is increasing, however the Executive and the
Board monitor this position carefully through the Group's detailed operating
reports produced on a weekly basis and detailed financial and accounting
reports produced on a monthly basis.
§ Could reduce debt, if required, by executing 'Sale and Manage-Back'
arrangements on mature stores or slow the rate of site development.
Tax Risk Changes to tax legislation may impact the level of corporation tax, capital § Regular monitoring of changes in legislation.
gains tax, VAT and stamp duty land tax which would in turn affect the profits
of the Group.
§ Use of appointed professional advisers and trade bodies.
Treasury Risk The Group may face increased costs from adverse interest rate movements. The § On 20 October 2021, the Group executed the accordion arrangement embedded
Bank of England has raised base rates six times since February 2022 and is within the Revolving Credit Facility which increases the facilities available
currently 2.25% up from 0.1% in March 2020. to the Group from £75 million to £100 million. In addition, the Group has
also agreed a one-year extension on its existing joint banking facility.
§ The facility, which was due to expire in April 2025, will now run until
April 2026 providing funding for more Landmark site acquisitions. The two
principal bank covenants (LTV and Senior Interest) and margin are unaffected
by the execution of the accordion and this extension of term.
§ Lok'nStore is a robust business which generates an increasing cash flow
from its strong asset base with a low LTV net of cash of 6.6% (2021: 21.0%)
and a low average cost of debt of 1.71%. The value of the Group's assets
underpins a flexible business model with stable and rising cash flows and low
credit risk giving the business a firm base for growth.
§ Average cost of debt 1.71% (2021: 1.54%)
§ Average cost of debt (active revolving loans) 2.71% (2021: 1.55%)
§ With £66.8 million of gross debt currently drawn against the £100 million
bank facility the Group is not committed to enter into hedging instruments but
continues to keep the matter under review.
§ It is not the intention of the Group to enter into an interest rate hedging
arrangement at this time given our low level of net debt, low loan to value
ratio and high interest cover and the Group has continued to benefit from
relatively low lending rates although recognising that these rates are now
rising, and the group is regularly monitoring this risk.
§ The Group monitors compliance with its bank covenants closely and during
the year it complied with all of its bank covenants.
Property Valuation Risk The external independent valuations of the stores are sensitive to both § Regular monitoring of any changes in market conditions and transactions
operational trading performance of the stores and also wider market occurring within our marketplace.
conditions. It follows that a reduction in operational performance or a
deterioration of market conditions could have a material adverse impact on the
Net Asset Value (NAV) of the Group.
§ Use of independent professional valuers who are experts in the self-storage
sector. There is regular contact with the current valuer JLL and discussions
around market values and transactions within the sector, including post
year-end.
§ Previous experience of downturns, such as the Dotcom and global financial
crises, has demonstrated that Self Storage has considerable resilience.
§ Stores are predominantly Landmark stores in prime locations and are all UK
based and predominantly located in the affluent South of England. The Group is
therefore not exposed to overseas/international/ currency risks etc.
§ Operational management teams with the skills, experience, and motivation to
continue to drive operational performance.
Environmental Risk Flooding. § Flood risk due diligence undertaken on all prospective site acquisitions.
§ Flood protection measures in place at all stores.
Increased requirement to reduce waste and greenhouse gas emissions and reduce
environmental impact on the environment.
§ Group has been measuring environmental impact since 2005 and is committed
to manage waste effectively and control polluting emissions.
§ All new construction has solar power on the roofs of its buildings.
Property Acquisition Acquiring new sites is a key strategic objective of the business but we face § We hold weekly property meetings to manage the search process and property
significant competition from other uses such as hotels, car showrooms and purchases.
offices as well as from other self-storage operators.
§ Use of property acquisition consultants.
§ Regular communication with agents.
§ Attendance at industry relevant property events.
Planning Permission The process of gaining planning permissions remains challenging. § Where we can we acquire sites subject to planning.
Planning approval is increasingly dependent on Social or Environmental
enhanced features such as BREEAM standards, as well as local planners demands
for green spaces, cycle, and footpaths etc, all adding cost and complexity to § We work with an established external planning consultant.
a planning project.
§ Our property team has over 20 years' experience in obtaining planning
consents for our stores.
Construction Poor construction may affect the value of the property and/or the efficient § We use a design and build contract with a variety of established
operation of the store. contractors.
Rising costs of developing a store may mean site opportunities which do not
meet management's return on investment criteria may not be taken up.
§ We use external project managers.
§ All projects are overseen by our property team which has over 20 years'
experience.
§ Construction projects are subject to a tender process
§ Rising costs are factored into our financial modelling to ensure the
required returns are achievable.
Maintenance/Damage Damage to properties through poor maintenance or flood or fire could render a § Regular site checks by team members.
store inoperable.
§ Rolling maintenance plan for all stores.
§ Comprehensive disaster recovery plan.
§ Appropriate insurance cover.
Increased Competition An increasing number of competitors in the industry may negatively impact § Established criteria for site selection including:
Lok'nStore's existing operations (e.g. pricing/available sites).
o Prominent locations
o High visibility
o Distinctive designs and bright orange elevations and signage to attract
customers.
§ Continued investment in the Group's website and internet marketing.
§ Ensure high levels of customer service through training and monitoring.
Employee Retention Loss of employees may affect our ability to operate our stores and provide the § Aim to offer a good work/life balance and career development.
high levels of customer service expected.
§ Regular reviews of remuneration levels against market.
§ Achievable bonus systems.
§ Generous Employee Share Schemes.
§ High-quality training within the Lok'nStore Academy.
§ Intranet for improved communications.
§ Established Employee rewards programme.
Cyber security and IT System Breach A breach of our IT systems might adversely affect the operations and income of § Regularly reviewed IT security systems.
the business resulting in potential fines, customer compensation and causing
reputational damage to the Group.
§ Well communicated policies and procedures for handling and managing a
systems breach.
Future Pandemic Risk A spread of the virus and social protection measures which may be introduced § The Group has a well-defined policy and response developed and executed
by Government may adversely affect the operations and financial performance of throughout the recent Covid-19 pandemic.
the business and adversely impact on the health of staff.
§ Our Covid-19 Group Safe Response has been documented in detail in the
Managing Director's Review in the 2021 Annual Report and is not repeated here.
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2022
Notes Group Group
Year ended Year ended
31 July 2022 31 July 2021
£'000 £'000
Revenue 1 26,902 21,892
Total property, staff, distribution, and general costs 2 (10,553) (10,001)
Adjusted EBITDA(1) 16,349 11,891
Depreciation 7 (4,727) (4,149)
Equity-settled share-based payments (201) (118)
Non-underlying items 4 5,739 (160)
811 (4,427)
Operating profit 17,160 7,464
Finance income 5 42 1
Finance cost 6 (1,328) (1,017)
Profit before taxation 15,874 6,448
Income tax expense 9 (3,796) (3,165)
Profit for the year attributable to Owners of the 27a 12,078 3,283
Parent
Other comprehensive income
Items that will not be reclassified to profit and loss
Fair value movement in property valuation 12 60,171 47,718
Deferred tax relating to change in property valuation 20 (14,284) (18,224)
Other comprehensive income 45,887 29,494
Total comprehensive income for the year attributable to Owners of the Parent 57,965 32,777
Earnings per share attributable to owners of the Parent Group Group
Year ended Year ended
31 July 2022 31 July 2021
£'000 £'000
Basic 11
Total basic earnings per share 41.24p 11.33p
Diluted 11
Total diluted earnings per share 40.48p 11.10p
(1) Adjusted EBITDA is defined in the accounting policies section of the
notes to this Report.
Consolidated Statement of Changes in Equity
For the year ended 31 July 2022
Attributable to
owners of the Parent
Share Share Other Revaluation Retained Total
Capital Premium Reserves Reserve Earnings Equity
£'000 £'000 £'000 £'000 £'000 £'000
297 10,560 8,455 75,975 26,095 121,382
31 July 2020
Profit for the year - - - - 3,283 3,283
Other comprehensive income:
Increase in property valuation net of deferred tax - - - -
29,494 29,494
Total comprehensive income for the year - - - 3,283
29,494 32,777
Transactions with owners:
Dividend paid - - - - (3,865) (3,865)
Share-based payments - - 118 - - 118
Transfers in relation to share-based payments -
- - (26) 26 -
Deferred tax relating to share options - - 591 - - 591
Exercise of share options 1 255 - - - 256
Reserve transfer on disposal of assets - - - (165) 165 -
Transfer additional depreciation on revaluation net of deferred tax - - - -
(568) 568
Total transactions with owners 1 255 683 (733) (3,106) (2,900)
31 July 2021 298 10,815 9,138 104,736 26,272 151,259
Profit for the year - - - - 12,078 12,078
Other comprehensive income:
Increase in property valuation net of deferred tax - - - -
45,887 45,887
Total comprehensive income for the year - - - 12,078
45,887 57,965
Transactions with owners:
Dividend paid - - - - (4,601) (4,601)
Share-based payments - - 201 - - 201
Transfers in relation to share-based payments -
- - (180) 180 -
Deferred tax relating to share options - - (57) - - (57)
Exercise of share options 3 576 - - - 579
Reserve transfer on disposal of assets - - - (20,258) 20,258 -
Transfer additional depreciation on revaluation net of deferred tax - - - (821) 821 -
Total transactions with owners 3 576 (36) (21,079) 16,658 (3,878)
31 July 2022 301 11,391 9,102 129,544 55,008 205,346
Company Statement of Changes in Equity
For the year ended 31 July 2022
Share Share Retained Other Total
Capital Premium Earnings Reserves Equity
£'000 £'000 £'000 £'000 £'000
297 10,560 15,650 1,912 28,419
31 July 2020
Profit and total comprehensive income for the year - - 4,793 -
4,793
Transactions with owners:
Equity settled share-based payments - - -
118 118
Transfer in relation to share- based payments - - 26
(26) -
Exercise of share options 1 255 - 256
Dividends paid - - (3,865) - (3,865)
Total transactions with owners 1 255 (3,839) 92 (3,491)
31 July 2021 298 10,815 16,604 2,004 29,721
Profit and total comprehensive income for the year - - 5,756 -
5,756
Transactions with owners:
Equity settled share-based payments - - -
201 201
Transfer in relation to share-based payments - -
180 (180) -
Exercise of share options 3 576 - 579
Dividends paid - - (4,601) - (4,601)
Total transactions with owners 3 576 (4,421) 21 (3,821)
31 July 2022 301 11,391 17,939 2,025 31,656
Consolidated and Company Statements of Financial Position
31 July
2022
Company Registration No. 04007169
Notes Group Group Company Company
31 July 31 July 31 July 31 July
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Assets
Non-current assets
Property, plant, and equipment 12a 292,848 255,652 - -
Investments 13 - - 2,871 2,670
Right of use assets 12b 10,424 10,503 - -
303,272 266,155 2,871 2,670
Current assets
Inventories 14 143 290 - -
Trade and other receivables 15 3,988 4,273 28,785 27,051
Cash and cash equivalents 17c 46,465 9,105 - -
Financial assets - 509 - -
Total current assets 50,596 14,177 28,785 27,051
Total assets 353,868 280,332 31,656 29,721
Liabilities
Current liabilities
Trade and other payables 16 (7,229) (5,841) - -
Lease liabilities 19 (1,612) (1,258) - -
Taxation (989) (365) - -
(9,830) (7,464) - -
Non-current liabilities
Borrowings 18 (66,196) (64,941) - -
Lease liabilities 19 (9,282) (9,908) - -
Deferred tax 20 (63,214) (46,760) - -
(138,692) (121,609) - -
Total liabilities (148,522) (129,073) - -
Net assets 205,346 151,259 31,656 29,721
Equity
Equity attributable to owners of the Parent
Called up share capital 21 301 298 301 298
Share premium 11,391 10,815 11,391 10,815
Other reserves 23a 9,102 9,138 2,025 2,004
Retained earnings 24 55,008 26,272 17,939 16,604
Revaluation reserve 129,544 104,736 - -
Total equity 205,346 151,259 31,656 29,721
As permitted by section 408 Companies Act 2006, the Parent Company's statement
of comprehensive income has not been included in these financial statements.
The profit and comprehensive income for the year ended 31 July 2022 was £5.8
million (2021: £4.8 million).
Consolidated Statement of Cash Flows
For the year ended 31 July 2022
Notes Group Group
Year ended Year ended
31 July 31 July
2022 2021
£'000 £'000
Operating activities
Cash generated from operations 26a 18,569 12,187
Income tax paid (1,060) (800)
11,387
Net cash inflow from operating activities 17,509
Investing activities
Proceeds of sale & manage-back stores 37,922 -
Proceeds of sale of land (net of disposal costs) - Wolverhampton - 1,509
Proceeds of sale of land (net of disposal costs) - Southampton - 1,676
Purchase of property, plant, and equipment 12a (11,961) (26,474)
Interest received 13 1
Net cash generated by / (used in) in investing activities 25,974 (23,288)
Financing activities
Proceeds of bank borrowings utilised for store development and bank
refinancing
1,386 14,077
Finance costs paid including bank refinancing (1,741) (969)
Lease liabilities paid (1,746) (1,559)
Equity shares purchased for treasury (net of costs) - (693)
Equity shares sold from treasury (net of costs) - 846
Equity dividends paid (4,601) (3,865)
Proceeds from issuance of Ordinary Shares (net) 579 103
Net cash (used in) / generated from financing activities (6,123) 7,940
Net increase / (decrease) in cash and cash equivalents in the year
37,360 (3,961)
Cash and cash equivalents at beginning of the year
9,105 13,066
Cash and cash equivalents at end of the year 46,465 9,105
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 Fleet Place,
London, EC4M 7WS, UK. Copies of this Annual Report and Accounts may be
obtained from the Company's head office at 112 Hawley Lane, Farnborough,
Hants, GU14 8JE or the investor section of the Company's website at
http://www.loknstore.co.uk (http://www.loknstore.co.uk) . The principal
activities of the Group and the nature of its operations are described in the
Strategic Report.
Basis of Accounting
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 2022 and 31 July
2021, both of which are audited. The report of the auditor on the statutory
financial statements for the year ended 31 July 2021 was (i) unqualified; (ii)
did not include references to any matters to which the auditor drew attention
by way of emphasis without qualifying their report; and (iii) did not contain
statements under S 498(2) or (3) of the Companies Act 2006. The statutory
financial statements for the year ended 31 July 2022 will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
The Preliminary Announcement is prepared on the same basis as set out in the
statutory accounts for the year ended 31 July 2022. While the financial
information included in this Preliminary Announcement has been prepared in
accordance with the recognition and measurement criteria of UK-adopted
International Financial Reporting Standards (IFRS), this announcement does not
in itself contain sufficient information to comply with IFRSs.
The financial statements for the year ended 31 July 2021 were prepared in
accordance with international accounting standards in conformity with the
requirements of the Companies act 2006. The financial statements for the year
ended 31 July 2022 have been prepared in accordance with UK-adopted
International Accounting Standards (IFRS) as adopted by the UK Endorsement
Board. This change in the basis of preparation is required by UK company Law
for the purpose of financial reporting as a result of the UK's exit from the
European Union on 31 January 2020. This change does not constitute a change in
accounting policy, rather a change in framework which is required to group the
use of IFRS into company law. There is no impact on the recognition,
measurement or disclosure between the two frameworks in the year reported.
The Group has applied all accounting standards and interpretations issued by
the International Accounting Standards Board and International Financial
Reporting Interpretation Committee applicable to companies reporting under UK
adopted IFRS relevant to its operations and effective for accounting periods
beginning on or after 1 August 2021. There was no material impact on the
adoption of these.
The statutory accounts for the year ended 31 July 2022 will be delivered to
the Registrar of Companies following the Company's Annual General Meeting and
will be available from the investor section of the Company's website at
http://www.loknstore.co.uk (http://www.loknstore.co.uk) .
The financial statements have been prepared on the historic cost basis except
that certain trading properties and non-current financial assets are stated at
fair value.
Standards, Amendments, Improvements & Interpretations applicable (1)
At the date of authorisation of these financial statements the following
standards, which have not been applied in these financial statements, were in
issue but not yet effective.
Effective Date - P/c on or after
Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9 (issued on 25 1 January 2021
June 2020)
Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 1 April 2021
2021 (issued on 31 March 2021)
(1) The above standards have been endorsed by both the EU and the UK. EU-IFRS
at 31 December 2020 were adopted for use within the UK (from 1 January 2021)
by Regulation 4 of Statutory Instrument 2019/685.
Endorsed Standards, Amendments, Improvements & Interpretations available
for early adoption in the UK
Effective Date - P/c on or after Endorsed in the UK? Endorsed in the EU?
Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and 1 January 2022 Y Y
Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets;
and Annual Improvements 2018-2020 (All issued 14 May 2020)
IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments to 1 January 2023 Y Y
IFRS 17 (issued on 25 June 2020)
Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and 1 January 2023 Y N
IFRS 9 - Comparative Information (issued on 9 December 2021)
Not endorsed
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and 1 January 2023 N Y
Errors: Definition of Accounting Estimates (issued on 12 February 2021)
Not endorsed
Amendments to IAS 1 Presentation of Financial Statements and IFRS 1 January 2023 N Y
Practice Statement 2: Disclosure of Accounting policies (issued on 12
February 2021) Not endorsed
The Directors do not anticipate that the adoption of these revised standards,
amendments and interpretations will have a significant impact on the figures
included in the financial statements in the period of initial application.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (and 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.
Going Concern
The Directors can report that, based on the Group's budgets and financial
projections, which include a recognition of the inflationary effect on rising
costs, on the Group, they have satisfied themselves that the business is a
going concern. The impact of rising costs and increasing bank interest rates
and the measures the Directors have taken to mitigate its effects are set out
in the Managing Director's Review.
The Board has a reasonable expectation that the Company and the Group have
adequate resources and facilities to continue in operational existence for the
foreseeable future based on Group cash balances and cash equivalents of £46.5
million (2021: £9.1 million), undrawn committed bank facilities at 31 July
2022, based on the Group's facility of £100 million, of £33.2 million (2021:
£9.6 million - based on £75 million facility), and cash generated from
operations in the year ended 31 July 2022 of £18.6 million (2021: £12.2
million).
In October 2021, the Group executed the accordion arrangement embedded within
the Revolving Credit Facility which increases the facilities available to the
Group to £100 million. In addition, the Group has also agreed a one-year
extension on its existing joint banking facility with National Westminster
Bank/Royal Bank of Scotland plc and ABN AMRO Bank N.V. The facility, which was
due to expire in April 2025, will now run until April 2026 providing funding
for more Landmark site acquisitions to support the Group's ambitious growth
plans.
With interest rates rising, interest risk per se is increasing, however the
Executive and the Board monitor this position carefully through the Group's
detailed operating reports produced on a weekly basis and detailed financial
and accounting reports produced on a monthly basis. The Group's bank covenant
compliance is reviewed as part of this process. The Bank's senior interest
covenant is tested quarterly on a 12-month rolling basis.
The Group is fully compliant with all bank covenants and undertakings and is
not obliged to make any repayments prior to expiration. The financial
statements are therefore prepared on a going concern basis.
Revenue Recognition
The Group recognises revenue when the amount of the revenue can be reliably
measured and when goods are sold, and title has passed. Revenue from services
provided is recognised evenly over the period in which the services are
provided.
a) Self-storage revenue
Self-storage revenue is recognised over the period for which the space is
occupied by the customer on a time apportionment basis. The price at which
customers store their goods is dependent on size of unit and store location.
Customers are invoiced on a four-weekly cycle in advance and revenue is
recognised based on time stored to date within the cycle. When customers
vacate, they are rebated the unexpired portion of their four weekly advance
payment (subject to a seven-day notice requirement). Revenue is recognised
evenly over the period of self-storage.
b) Retail sales
The Group operates a packaging shop within each of its storage centres for
selling storage-related goods such as boxes, tape and bubble-wrap. Sales
include sales to the public at large as well as self-storage customers. Sales
of goods are recognised at point of sale when the product is sold to a
customer.
c) Insurance
Customers may choose to insure their goods in storage. The weekly rate of
insurance charged to customers is calculated based on the tariff per week for
each £1,000 worth of goods stored by the customer. This charge is retained by
Lok'nStore and covers the cost of the block policy and other costs. Customers
are invoiced on a four-weekly basis for the insurance cover they use, and
revenue is recognised based on time stored to date within the cycle.
The Group provides insurance to customers through a block policy purchased
from its insurer. Block policyholders supply VAT exempt insurance transactions
as principals rather than insurance-related services as intermediaries and
accordingly insurance income received from the customer is recognised as
revenue rather than offset against the costs of the block policy. The key
characteristics of a block policy are that:
· There is a contract between the block policyholder and the insurer which
allows the block policyholder to effect insurance cover subject to certain
conditions.
· The Group acting in our own name as the block policyholder procures
insurance cover for third parties from the insurer.
· There is a contractual relationship between the block policyholder and
third parties under which the insurance is procured.
· The block policyholder stands in place of the insurer in effecting the
supply of insurance to the third parties.
· The Group is not exposed to any insured losses arising from its insurance
activity and therefore insurance risk.
d) Management fee income
Management fees earned for managing stores not owned by the Group are
recognised over the period for which the services are provided. Fees are
invoiced monthly based on revenue performance. Additional performance fees may
be earned if an individual Managed Store's EBITDA performance exceeds agreed
thresholds. Periodic fees may also be earned for additional specific services
provided and are invoiced when that service has been completed. Revenue is
recognised for each performance condition once the condition has been met.
Critical Accounting Estimates a) and b) and Judgements c) and d)
The preparation of financial statements under IFRS requires management to make
estimates and assumptions that may affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expenses. Actual outcomes may differ from these estimates and assumptions. The
estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
a) Estimate of fair value of trading properties
The Group commissions an external valuation of its self-storage stores. This
valuation uses a discounted cash flow methodology which is based on current
and projected net operating income. Principal assumptions underlying
management's estimation of the fair value are those relating to stabilised
occupancy levels expected future growth in storage fees and operating costs,
maintenance requirements, capitalisation rates and Discount Rates.
A more detailed explanation of the background and methodology adopted in the
valuation of the Group's trading properties is set out in note 12(a) together
with estimation sensitivities undertaken. The carrying value of land and
buildings held at valuation at the reporting date was £239.8 million (2021:
£199.6 million) as shown in the table in note 12(a).
b) Assets in the course of construction and land held for store development
('Development property assets')
The Group's development property assets are held in the statement of financial
position at historic cost and are not valued externally. In acquiring sites
for redevelopment into self-storage facilities, the Group estimates and makes
judgements on the potential lettable storage space that it can achieve in its
planning negotiations, together with the time it will take to achieve
maturity. In addition, assumptions are made on the storage fees that can be
achieved at the store by comparison with other stores within the portfolio and
within the local area. These judgements, taken together with estimates of
operating costs and the projected construction cost, allow the Group to
calculate the potential net operating income at maturity, projected returns on
capital invested and therefore justify the proposed 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
£29.2 million (2021: £33.7 million). Please see note 12(a) for more details.
c) Classification of self-storage facilities as owner-occupied properties
rather than investment properties
The Directors consider that Lok'nStore Group plc is the Parent Company of a
'Trading business' and is not wholly or mainly engaged in making investments.
The Group is an integrated storage solutions business offering a range of
services to its customers. We provide services to our customers under
contracts for the provision of storage services which do not give them any
property or tenancy rights and a large number of the stores we operate are
from properties where we do not own the land or the buildings. The assets we
do own are valued on the basis of the trading cash flows that the operating
businesses generate.
The Group continues to develop its managed stores' business where it uses its
operational and logistic expertise to provide a full range of services to
customers in stores we manage for third-party owners. In recent years the
Group has developed many new managed stores all of which are owned by
third-party investors and managed by Lok'nStore.
Previously owned sites at Woking, Ashford, Swindon, and Crayford, have been
the subject of sale and manage-back transactions by which Lok'nStore has
retained the management of the business when a third-party owner acquired the
business, land and buildings. In this year another four trading stores were
the subject of sale and manage-back transactions by which Lok'nStore has
retained the management of the business.
All of this trading activity, including active management and marketing
activity, as well as the self-storage income earned from our leasehold stores'
activity, demonstrate that the holding of land is not a core activity because
the trading operation is not dependent on the ownership of land. See the chart
in the Property Review for the changing ownership structure of the stores.
The Group has always and continues to comply with all of the usual accounting
and tax protocols consistent with a trading business. As at the year-end,
Lok'nStore operates 24 owned stores mainly in southern England, although in
recent years we have expanded our historically southern England focused
geographic footprint into the Southwest (Exeter), Wales (Cardiff) and the
Northwest (Salford, Warrington, and Altrincham). Of the 24 stores, Lok'nStore
owns the freehold interest in 15 stores, nine of the stores are held under
commercial leases. There are a further 16 managed stores operating under
management contracts for third-party owners making a total of 40 stores
trading under the Lok'nStore brand.
One of the features of Lok'nStore's strategy is to increase the number of
stores we manage for third parties selling our expertise in storage solutions
management, operating systems and marketing, through management fees rather
than retaining a proprietary interest in land and buildings.
The classification of self-storage facilities as owner-occupied properties
rather than investment properties has resulted in the recognition of fair
value gains in 2022 (net deferred of tax) of £45.9 million (2021: £29.5
million) in Other Comprehensive Income rather than the Income Statement.
d) Application of IFRS 16
The Group uses judgement to assess whether the interest rate implicit in the
lease is readily determinable. When the interest rate implicit in the lease
is not readily determinable, the Group estimates the incremental borrowing
rate based on its external borrowings secured against a similar asset,
adjusted for the term of the lease.
Notes to the Financial Statements
For the year ended 31 July 2022
1 Revenue
Analysis of the Group's revenue is shown below:
Group Group
Stores trading 2022 2021
£'000 £'000
Self-storage revenue 21,585 18,165
Insurance revenue 2,239 2,079
Retail sales (packing materials etc) 252 285
Total self-storage revenue - owned stores 24,076 20,529
Management fees - managed stores 2,785 1,346
Sub-total 26,861 21,875
Non-storage income 41 17
Total revenue per statement of comprehensive income 26,902 21,892
The Group has one operating segment, being self-storage in the UK.
2 Property, Staff and General Costs Group
Group
2022
2021
£'000
£'000
Property and premises costs 5,304 4,783
Property rentals (1,746) (1,559)
Net property and premises costs 3,558 3,224
Staff costs 5,369 5,269
General overheads 1,438 1,341
Sub-total operating costs 10,365 9,834
Retail products cost of sales (see note 3) 188 167
10,553 10,001
3 Cost of Sales of Retail Products
Cost of sales represents the direct costs associated with the sale of retail
products (boxes, packaging etc.), and the ancillary sales of insurance cover
for customer goods, all of which fall within the Group's ordinary activities.
Group Group
2022 2021
£'000 £'000
Retail 113 125
Insurance 23 14
Other 52 28
188 167
4 Non-underlying items Group Group
2022 2021
£'000 £'000
Profit on sale of trading stores (1) 5,936 -
Liquidated damages received on development (2) 175 -
Abortive site costs (3) (372) -
Profit on sale of land at Wolverhampton (4) - 265
Loss on sale of vacant property at Southampton (5) - (425)
5,739 (160)
(2022)
(1 ) Profit arising on the sale and manage-back of four
trading stores located at Basingstoke, Cardiff, Horsham, and Portsmouth.
(2 ) Liquidated damages received on the late delivery of a
new store development which has subsequently opened.
(3 ) The Group's active search for suitable development sites
for new Landmark stores has resulted in some abortive costs - mainly around
planning and associated professional costs.
( 2021)
(4) ( )Profit on sale of land at Wolverhampton: During the period
development land with the benefit of planning permission was sold on a sale
and manage-back basis.
(5) In December 2020, we completed the sale of our vacant property in
Southampton, Hampshire for £1.6 million (net of disposal costs) (Net Book
Value c. £2 million) eliminating over £150,000 p.a. of residual costs.
( )
5 Finance
Income
Group Group
2022 2021
£'000 £'000
Bank interest 42 1
Interest receivable arises on cash and cash equivalents (see note 17).
6 Finance Costs
Group Group
2022 2021
£'000 £'000
Bank interest 707 469
Non-utilisation fees 166 120
Bank loan arrangement fees 216 158
Interest on lease liabilities 239 270
1,328 1,017
7 Profit before
Taxation
Group Group
Profit before taxation is stated after charging: 2022 2021
£'000 £'000
Depreciation and amounts written off property, plant and equipment:
Depreciation based on historic cost 2,316 2,178
Depreciation based on revalued assets 1,094 710
Depreciation of property, plant and equipment (note 12a) 3,410 2,888
Depreciation of right of use assets 1,314 1,261
Loss on disposal of fixed assets 3 -
4,727 4,149
Amounts payable to RSM UK Audit LLP and their associates for audit and
non-audit services:
Group Group
2022 2021
£'000 £'000
Audit services
- UK statutory audit of the Company and consolidated accounts 125 80
Other services
- interim agreed upon procedures 9 9
134 89
Comprising:
Audit services 125 80
Non-audit services 9 9
134 89
8 Employees
Group Group
2022 2021
No. No.
The average monthly number of persons (including Directors) employed by the
Group during the year was:
Store management 151 145
Administration 27 26
178 171
Costs for the above persons: Group Group
2022 2021
£'000 £'000
Wages and salaries 4,174 4,369
Social security costs 819 555
Pension costs 135 130
5,128 5,054
Share-based remuneration (options) 201 118
5,329 5,172
Share-based remuneration is separately disclosed in the statement of
comprehensive income. Wages and salaries of £154,920 (2021: £107,304) 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 £32,807 (2021: £14,292)
outstanding at the year-end. There were no employees employed by Lok'nStore
Group plc in the year other than the Directors (2021: nil).
Directors' Remuneration Emoluments Bonuses Benefits Pension Gains on Total
2022 £ £ £ Sub Total £ Share Options £
£ £
Executive:
A Jacobs 223,842 146,500 7,387 377,729 - 1,360,277 1,738,006
RA Davies 174,087 49,287 5,587 228,961 6,963 456,995 692,919
N Newman-Shepherd 97,521 100,523 2,793 200,837 3,901 11,058 215,796
Non-Executive:
J Woyda 27,364 - - 27,364 - - 27,364
SG Thomas 23,881 - 5,570 29,451 - - 29,451
RJ Holmes 23,881 - - 23,881 - - 23,881
ETD Luker 9,950 - - 9,950 - - 9,950
CP Peal 23,881 - - 23,881 - - 23,881
604,407 296,310 21,337 922,054 10,864 1,828,330 2,761,248
Directors' Remuneration Emoluments Bonuses Benefits Pension Gains on Total
2021 £ £ £ Sub Total £ Share Options £
£ £
Executive:
A Jacobs 215,233 132,500 6,568 354,301 - - 354,301
RA Davies 165,797 45,946 5,434 217,177 6,631 - 223,808
N Newman-Shepherd 91,210 179,545 2,571 273,326 3,648 - 276,974
Non-Executive:
SG Thomas 22,743 - 5,087 27,830 - 14,436 42,266
RJ Holmes 22,743 - - 22,743 - - 22,743
ETD Luker 28,430 - - 28,430 - - 28,430
CP Peal 22,743 - - 22,743 - - 22,743
J Woyda 20,848 - - 20,848 - - 20,848
589,747 357,991 19,660 967,398 10,279 14,436 992,113
Details of the Directors' remuneration are shown 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 two (2021: two).
9 Taxation
Group Group
2022 2021
£'000 £'000
Current tax:
UK corporation tax - current year 1,572 798
UK corporation tax - adjustment in respect of prior period 111 -
Total UK corporation tax 1,683 798
Deferred tax:
Origination and reversal of temporary differences 2,113 260
Impact of change of rate on closing balance - 2,107
Total deferred tax 2,113 2,367
Total Income tax expense for the year 3,796 3,165
The charge for the year can be reconciled to the profit for the year as
follows:
2022 2021
£'000 £'000
Profit before tax 15,874 6,448
Tax on ordinary activities at the effective standard rate of corporation tax
in the UK of 19% (2021: 19%)
3,016 1,225
Depreciation of non-qualifying assets 377 263
Share-based payment charges in excess of corresponding tax deduction (337) (20)
Impact of change in tax rate on closing deferred tax balances - 2,107
Adjustments in respect of prior periods - corporation tax 111 (375)
Tax effect of rolled over gains on sale of property 432 -
Other 197 (35)
Income tax expense for the year 3,796 3,165
Effective tax rate 24% 49%
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 £14.3 million (2021:
£18.2 million) has been recognised as a debit/credit directly in other
comprehensive income (see note 20 on deferred tax).
The current rates of corporation tax are calculated at a rate of 19%. The
deferred tax balances are measured at the substantively enacted rates of
corporation tax being 19% until 31 March 2023 and a rate of 25% thereafter.
10 Dividends
2022 2021
Amounts recognised as distributions to equity holders in the year: £'000 £'000
Final dividend for the year ended 31 July 2021 (10.67 pence per share) 3,132 -
Interim dividend for the year to 31 July 2022 (5.00 pence per share) 1,469 -
Final dividend for the year ended 31 July 2020 (9.00 pence per share) - 2,612
Interim dividend for the year to 31 July 2021 (4.33 pence per share) - 1,253
4,601 3,865
In respect of the current year the Directors paid an interim dividend of 5.00
pence per share to shareholders on 10 June 2022. The Directors propose that a
final dividend of 12.25 pence per share will be paid to the shareholders. The
total estimated final dividend to be paid is approximately £3.6 million based
on the number of shares in issue at 14 October 2022 as adjusted for shares
held in the Employee Benefits Trust.
This is subject to approval by shareholders at the Annual General Meeting on 8
December 2022 and has not been included as a liability in these financial
statements. The ex-dividend date will be 24 November 2022; the record date 25
November 2022; with an intended payment date of 6 January 2023. The final
deadline for Dividend Reinvestment Election (DRIP) is 9 December 2022.
11 Earnings per Share
The calculations of earnings per share are based on the following profits and
numbers of shares.
Group Group
2022 2021
£'000 £'000
Total profit for the financial year attributable to owners of the parent 12,078 3,283
2022 2021
No. of shares No. of shares
Weighted average number of shares
For basic earnings per share 29,287,451 29,035,104
Dilutive effect of share options(1) 549,321 527,846
For diluted earnings per share 29,836,772 29,562,950
(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 notes 22 to 25.
Earnings per share Group Group
2022 2021
pence pence
Basic
Total basic earnings per share
41.24p 11.33p
Diluted
Total diluted earnings per share 40.48p 11.10p
12a) Property, Plant and Equipment
Group Development Land and Short Leasehold Fixtures, Motor Total
Property Assets Buildings Improvements Fittings and Vehicles £'000
at Cost at Valuation at Cost Equipment at Cost
£'000 £'000 £'000 at Cost £'000
£'000
Cost or valuation
1 August 2020 29,885 141,366 3,997 26,943 10 202,201
Additions 21,688 325 3,560 1,281 - 26,854
Transfers (16,654) 13,157 - 3,497 - -
Disposals (1,243) (1,497) - (1,301) - (4,041)
Revaluations - 46,266 - - - 46,266
31 July 2021 33,676 199,617 7,557 30,420 10 271,280
Depreciation
1 August 2020 - - 2,269 12,664 10 14,943
Depreciation - 1,453 240 1,195 - 2,888
Disposals - - - (750) - (750)
Revaluations - (1,453) - - - (1,453)
31 July 2021 - - 2,509 13,109 10 15,628
Net book value at 31 July 2021
33,676 199,617 5,048 17,311 - 255,652
Cost or valuation
1 August 2021 33,676 199,617 7,557 30,420 10 271,280
Additions 10,611 756 158 663 - 12,188*
Transfers (15,072) 11,234 - 3,838 - -
Disposals - (30,101) - (3,615) - (33,716)
Revaluations - 58,299 - - - 58,299
31 July 2022 29,215 239,805 7,715 31,306 10 308,051
Depreciation
1 August 2021 - - 2,509 13,109 10 15,628
Depreciation - 1,872 296 1,242 - 3,410
Disposals - - - (1,963) - (1,963)
Revaluations - (1,872) - - - (1,872)
31 July 2022 - - 2,805 12,388 10 15,203
Net book value at 31 July 2022
29,215 239,805 4,910 18,918 - 292,848
* including capitalised interest costs of £589,843 (2021: £380,193).
The Group has an active store development programme and in accordance with IAS
23 (Borrowing costs) has material assets that take a substantial period of
time to develop from acquisition to ultimate store opening. Accordingly
borrowing costs of £589,843 (2021: £380,193) have been capitalised that are
directly attributable to the acquisition, construction and fit-out of these
qualifying store assets. £149,321 of this amount relates to development
stores which opened during the year leaving a balance of £440,522 carried in
development property assets. If all property, plant and equipment were stated
at historic cost the carrying value would be £111.4 million (2021: £113.0
million).
Capital expenditure during the year totalled £12.2 million (2021: £26.9
million). This was primarily the purchase of the Peterborough site, together
with ongoing planning, construction and fit out works at other sites,
principally at our Warrington and Stevenage stores and the completion of
construction works at our Leicester and Salford stores. Disposals during the
period relate to the sale and manage-back of four trading stores. Costs
relating to the planning and pre-development works on our Bournemouth,
Cheshunt, Peterborough and Staines sites also featured.
Property, plant and equipment (non-current assets) with a carrying value of
£292.8 million (2021: £255.7 million) are pledged as security for bank
loans.
Independent External Market Valuation of Freehold and Leasehold Land and
Buildings
Fair Value Measurement
The fair value hierarchy within which the fair value measurements are
categorised is level 3, in accordance with IFRS 13 (Fair value measurement).
On 31 July 2022, an independent professional valuation was prepared by Jones
Lang LaSalle Limited (JLL) in respect of 15 freehold, and nine leasehold
stores operated by Lok'nStore. The valuation was prepared in accordance with
the RICS Valuation - Global Standards 2021 - UK national supplement, published
by The Royal Institution of Chartered Surveyors (the RICS Red Book) and the
valuation methodology is explained in more detail below. 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 RICS Red Book JLL
have confirmed that:
· This is the seventh year that JLL has been appointed to value the
properties.
· The valuers who prepared the valuation have the necessary skills and
experience having been significantly involved in the sector.
· JLL do not provide other significant professional or agency services
to the Company.
· In relation to the preceding financial year of JLL the proportion of
the total fees payable by the Company to the total fee income of the firm is
less than 5% and is minimal.
The valuation report indicates a total valuation for all properties valued of
£279.0 million (2021: £234.9 million) of which £254.8 million (2021:
£212.8 million) relates to freehold properties, and £24.2 million (2021:
£22.1 million) relates to properties held under leases.
Freehold land and buildings are carried at valuation in the statement of
financial position. Short leasehold improvements at properties held under
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 £254.8 million (2021: £212.8 million)
valuation of the freehold properties £16.6 million (2021: £14.7 million)
relates to the net book value of fixtures, fittings and equipment, and the
remaining £238.2 million (2021: £198.1 million) relates to freehold
properties.
The 2022 valuation includes and reflects movements in value which have
resulted from the operational performance of the stores and market movements
in the investment environment.
Valuation Methodology
Jones Lang LaSalle Limited (JLL) have adopted the profits method of valuation
and cross-checked with the direct comparison method based on recent
transactions in the sector, which is the main method of pricing adopted by
purchasers of self-storage properties. The carrying value of freehold land and
buildings of £239.8 million also includes £1.5 million of assets held at
directors' valuation (see below).
JLL have valued the assets on an individual basis and have disregarded any
portfolio effect.
The profits method of valuation considers the cash flow generated by the
trading potential of the self-storage facility. Due to the specialised design
and use of the buildings, the value is typically based on their ability to
generate a net income from operating as self-storage facilities.
JLL have constructed a discounted cash flow model. This sets out their
explicit assumptions on the underlying cash flow that they believe could be
generated by a Reasonably Efficient Operator at each of the properties, both
at the valuation date and in the near future as the properties increase their
occupancy and rates charged to customers. Judgements are made as to the
trading potential and likely long-term sustainable occupancy.
Stable occupancy depends upon the nature of demand, size of property and
nearby competition, and allows for a reasonable vacancy rate to enable the
operator to contract units to new customers. In the valuation the assumed
stabilised occupancy level for the 24 trading stores (both freeholds and
leaseholds) averages 88.23% (2021: 88.5%).
Expenditure is deducted (such as business rates, staff costs, repair and
maintenance, utilities, marketing and bad debts) as well as an operator's
charge which takes account of central costs. JLL also make an allowance for
long- term capex requirements where applicable. The assumptions used by JLL
include: -
· The cash flow for freeholds runs for an explicit period of ten years,
after which it is capitalised at an all risks yield which reflects the
implicit future growth of the business, or a hypothetical sale.
· The cash flow for leaseholds continues for the unexpired term of the
lease.
· The Discount Rate applied has had regard to recent transactions,
weighted average costs of capital and target return in other asset types with
adjustments made to reflect differences in the risk and liquidity profile.
· The weighted average annual Discount Rate adopted (for both freeholds
and leaseholds) is 7.21% (2021: 9.24%).
· The Discount Rates used in the freehold valuation ranges from 6.50% to
8.75% (2021: 7.5% to 9.25%).
· The yield arising from the first year of the projected cash flow is
5.30% (2021: 6.49%), rising to 6.79% (2021: 7.61%) in year five.
· JLL have assumed purchasers' costs of 6.80% (2021: 6.80%).
· The average assumed stabilised occupancy is 88.23% (2021: 88.85%).
· The average Exit Yield assumed is 6.16% (2021: 6.73%).
The comparison method considers recent transactions where self-storage
properties have sold, and then adjusts them based on a multiple of current
earnings, and a capital value per square foot. They are adjusted to reflect
differences in location, physical characteristics, local supply and demand,
tenure and trading levels.
The Group has reported that the Lok'nStore trading stores have performed very
well in terms of increasing pricing while maintaining occupancy over the
course of the year.
For leaseholds, the same methodology has been used as for freehold property,
except that no sale of the assets in the tenth 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 ten years
and one month as at 31 July 2022 (11 years and one month: 31 July 2021).
Valuations for stores held under 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 was 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 JLL valuation on this store is
based on this Special Assumption that the option to extend the lease for ten
years is exercised. This is consistent with the approach taken in previous
years.
Self-storage valuations are complex and involve a degree of judgement. As a
guide and assuming all other factors or constant, improvements in a store's
EBITDA would lead to an increase in that store's valuation. Conversely, an
increase in Exit Yield and Discount Rate would result in a lower valuation and
vice-versa.
The effect of a change in more than one input would magnify the impact on the
valuation. Inputs moving in opposite directions, such as price and occupancy
improving but capitalisation rates increasing could result in no net impact on
valuations.
As an example of the sensitivity of capitalisation rates;
· A 50bpts decrease in the Exit Yields and Discount Rate would result
in a £27.75 million increase in this year's valuation.
· A 100bpts decrease in the Exit Yields and Discount Rate would result
in a £62.0 million increase in this year's valuation.
· A 50bpts increase in the Exit Yield and Discount Rate would result in
a £23.1 million decrease in this year's valuation.
· A 100bpts increase in the Exit Yield and Discount Rate would result
in a £42.5 million decrease in this year's valuation.
It is the Company's policy to conduct independent valuations of all trading
assets at the end of each financial year. At the interim half year stage,
the directors will consult with JLL to consider whether there has been any
material change in market conditions. If there has been then the Directors
will instruct an Independent Valuation at this point.
Directors' valuation of land and property
Land & Buildings at the rear of the new Salford trading store
Following the opening of the new Salford store in 2021, there is available
land and building at the rear of the new store which is suitable for rent on
commercial terms to third party users. Based on negotiated rents with tenants,
the Directors continue to place a Directors' Valuation of £1.5 million (2021:
£1.5 million) on this land and building.
The total value of land and property carried at Directors' Valuation at 31
July 2022 is £1.5 million (2021: £1.5 million).
12b) Right of use assets (ROU)
The Group accounts for the value of its property leases on the balance sheet
by the recognition of a right of use asset (the right to use the leased item)
and a corresponding financial liability to pay rentals due over the property
lease term. This treatment relates to the Group's property leases. The Group
has no leases on any other types of assets.
The Group recognises right of use assets (ROU) of £10.4 million at 31 July
2022 (2021: £10.5 million) and total lease liabilities of £10.9 million,
(2021: £11.17 million) with depreciation charges of £1.31 million (2021:
£1.26 million) and lease interest charges of £0.2 million (2021: £0.3
million).
Detailed analysis is provided in the tables below: -
Group Group
31 July 2022 31 July 2021
£'000 £'000
Total annual rents payable under property leases 1,746 1,559
Group Group
31 July 2022 £'000 31 July 2021
£'000
Right of use asset (ROU) 10,424 10,503
Current Lease Liability
Amounts due within one year 1,612 1,258
Non-current Lease Liability
Amounts due in one to two years 1,174 1,085
Amounts due in three to five years 2,774 2,585
Amounts due in more than five years 5,334 6,238
Non-current Lease Liability 9,282 9,908
Total lease liability 10,894 11,166
Group Group
31 July 2022 31 July 2021
£'000 £'000
Property rentals 1,746 1,559
Depreciation of right of use asset (ROU) (1,314) (1,261)
Interest charged on lease liability (239) (270)
Impact on Comprehensive Income 193 28
The Group has no leases on any other types of assets. The Present Value of all
future operating lease payments is calculated using 2.2% (2021: 2.2%) as an
incremental borrowing rate as the single Discount Rate. The right of use
assets are depreciated based on the individual lease term of the separate
leases.
13 Investments
Company investments in subsidiary undertakings £'000
31 July 2020 2,552
Capital contributions arising from share-based payments 118
31 July 2021 2,670
Capital contributions arising from share-based payments 201
31 July 2022 2,871
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
Company Name Company Class of Shareholding Directly Indirectly Nature of Entity
Registration No.
Lok'nStore Limited * # 02902717 Ordinary 100 - Self-storage
Lok'nStore Trustee Limited ¥( ) ♦ 03788705 Ordinary - 100 Trustee
Southern Engineering and Machinery Company Ltd ¥ (*) ( )# 00381670 Ordinary - 100 Self-storage
Semco Machine Tools Limited ≠ ( )# 01025573 Ordinary - 100 Dormant
Semco Engineering Limited ≠( ) # 01164294 Ordinary - 100 Dormant
ParknCruise Limited( ) ¥ ♦ 10329934 Ordinary - 100 Dormant
The Box Room (Self-storage) Limited ¥ (*) ♦ 06840417 Ordinary - 100 Self-storage
¥ These companies are subsidiaries of Lok'nStore Limited.
≠ ( )These companies are subsidiaries of Southern Engineering and
Machinery Company Limited and did not trade during the year.
(* ) These companies have taken the exemption from audit under Section 479A
of the Companies Act 2006.
♦ The address of these companies is 112, Hawley Lane, Farnborough, Hants.
GU14 8JE.
# The address of these companies is 1, Fleet Place, London. EC4M 7WS.
14 Inventories
Group Group
2022 2021
£'000 £'000
Consumables and goods for resale 143 290
The amount of inventories recognised in Group cost of sales as an expense
during the year was £112,887 (2021: £124,656) (See note 3). The Company had
no inventory in either year.
15 Trade and Other Receivables
Group Group
2022 2021
£'000 £'000
Trade receivables 1,198 1,451
Other receivables 2,318 881
Taxation - 1,497
Prepayments and accrued income 472 444
3,988 4,273
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
Other receivables include monies receivable from the managed stores for
services provided by the Group. The 2021 taxation debtor of £1.497 million
was a VAT repayment owed to the Group by HMRC which was received post
year-end.
The following balances existed between the Company and its subsidiaries at 31
July:
Company Company
2022 2021
£'000 £'000
Net amount due from Lok'nStore Limited 28,785 27,051
The amount due from Lok'nStore Limited is interest free. The balance is
repayable on demand.
Trade receivables
In respect of its self-storage business the Group does not typically offer
credit terms to its customers and hence the Group is not exposed to
significant credit risk. All customers are required to pay in advance of the
storage period. Late charges are applied to a customer's account if they are
more than ten days overdue in their payment. The Group provides for
receivables based upon sales levels and estimated recoverability. There is a
right of lien over the customers' goods, so if they have not paid within a
certain time frame the Group has the right to sell the items they store to
cover the debt owed by the customer. Trade receivables that are overdue are
provided for based on estimated irrecoverable amounts, determined by reference
to expected credit losses.
For individual self-storage customers, the Group does not perform credit
checks. However, this is mitigated by the fact that all customers are required
to pay in advance. Before accepting a new business customer who wishes to use
a number of the Group's stores, the Group uses an external credit rating to
assess the potential customer's credit quality and defines credit limits by
customer. There are no customers who represent more than 5% of the total
balance of trade receivables.
Included in the Group's trade receivables balance are receivables with a
carrying amount of £100,214 (2021: £89,329) 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 53
days past due (2021: 55 days past due). The Group does not expect credit
losses on intra-group balances.
Ageing of past due but not impaired receivables
Group Group
2022 2021
£'000 £'000
0-30 days 22 14
30-60 days 8 4
60+ days 70 71
Total 100 89
Movement in the allowance for credit losses
2022 2021
£'000 £'000
Balance at the beginning of the year 147 189
Impairment losses recognised 30 22
Amounts written off as uncollectible (77) (64)
Balance at the end of the year 100 147
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 Group
2022 2021
£'000 £'000
0-30 days - -
30-60 days - -
60+ days 100 147
Total 100 147
16 Trade and Other Payables
Group Group
2022 2021
£'000 £'000
Trade payables 1,849 1,385
Taxation and social security costs 1,014 370
Other payables 588 690
Accruals and deferred income 3,778 3,397
7,229 5,842
The Directors consider that the carrying amount of trade and other payables
approximates fair value. The Company had no trade and other payables in either
year.
17 Financial Instruments
Capital management and gearing
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
shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt, which include the
borrowings disclosed in note 18, 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 with hedging forming a Board agenda item for discussion
at each Board meeting.
The Group's Board reviews the capital structure on an on-going basis. As part
of this review, the Board considers the cost of capital and the risks
associated with each class of capital.
The Group seeks to have a relatively conservative gearing ratio (the
proportion of net debt to equity) balancing the overall level with the
opportunities for the growth of the business. The Board considers at each
review the appropriateness of the current ratio in light of the above. The
Board is currently satisfied with the Group's gearing ratio.
The gearing ratio at the year-end is as follows:
Gearing - Bank borrowings Group Group
2022 2021
£'000 £'000
Gross debt - bank borrowings * (66,785) (65,399)
Cash and cash equivalents 46,465 9,105
Net debt (20,320) (56,294)
Total equity - balance sheet 205,346 151,259
Net debt to equity ratio 9.9% 37.2%
Total Gearing - Bank borrowings and lease liabilities Group Group
2022 2021
£'000 £'000
Gross debt - bank borrowings * (66,785) (65,399)
Gross debt - lease liabilities (10,894) (11,166)
Cash and cash equivalents 46,465 9,105
Net debt (31,214) (67,460)
Total equity - balance sheet 205,346 151,259
Net debt to equity ratio 15.2% 44.6%
* Gross debt is the total amount of bank debt drawn before any amortisation of
bank arrangement fees.
The movement of the Group's gearing ratio arises principally through the
combined effect of an increase in the value of its trading properties, and the
cash generated from operations, offset primarily by drawdown of debt to fund
the acquisition of the development site in Peterborough. The Group's gearing
ratio was also enhanced by the profitable disposals during the year relating
to the sale and manage-back of four trading stores.
The Group's operating cash was also applied to ongoing planning, construction
and fit out works at other sites, principally at our Warrington and Stevenage
stores and the completion of construction works at our Leicester and Salford
stores. Costs relating to the planning and pre-development works on our
Bournemouth, Cheshunt, Peterborough and Staines sites also featured.
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 previously has hedged through the deployment of interest rate
swaps although the Group had no such instruments in place at 31 July 2021 or
31 July 2022. The Board continues to keep its hedging policy under periodic
review.
B Debt management
Debt is defined as non-current and current borrowings, as detailed in note 18.
Equity includes all capital and reserves of the Group. The Group is not
subject to externally imposed capital requirements.
The Group borrows through a joint revolving credit facility with Royal Bank of
Scotland/NatWest Bank plc and ABN AMRO Bank secured on its store portfolio and
other Group assets, excluding intangibles, with a net book value of £292.8
million (2021: £255.7 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 £100
million (2021: £75 million) providing undrawn committed facilities at 31 July
2022 of £33.2 million. This facility runs to April 2026, and details are
provided in note 18 (Borrowings).
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 17. 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 SONIA
rate. With the rising level of interest rates, the Board monitors closely its
effect on the business and has levers in place to mitigate the effects.
Cash balances held in current accounts attract no interest, but surplus cash
is transferred daily to a treasury deposit account which earns interest at the
prevailing money market rates. All amounts are denominated in Sterling. The
balances at 31 July 2022 are as follows:
Group Group
2022 2021
£'000 £'000
Variable rate treasury deposits (#) 45,371 7,604
SIP trustee deposits 63 63
Cash in operating current accounts 1,031 1,430
Other cash and cash equivalents - 8
Total cash and cash equivalents 46,465 9,105
# On 7 July 2022, the Group placed £15.0 million on Treasury Deposit Reserve
on a 3-month fixed rate at 1.36% which ended on 7 October 2022. On its
maturity date this amount was rolled over into a 4-month fixed rate on
Treasury Deposit Reserve at 2%.
Also, on 7 July 2022, the Group placed £15.0 million on Treasury Deposit
Reserve on a 4-month fixed rate at 1.55% which ends on 7 November 2022.
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
Over the longer term, significant changes in interest rates may have an impact
on consolidated earnings.
At 31 July 2022, it is estimated that an increase of one percentage point in
interest rates would have reduced the Group's annual profit before tax by
£667,846 (2021: £653,989) and conversely a decrease of one percentage point
in interest rates would have increased the Group's annual profit before tax by
£667,846 (2021: £653,989). 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 1.71% and
applying to the variable rate borrowings of £68.8 million in the year (2021:
£65.4 million/1.54%).
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 15 . There has not been a significant
change in credit quality.
The Group has a strong credit model with customers paying four-weekly in
advance for their storage. The Group has no significant concentration of
credit risk, with exposure spread across 17,000 customers (2021: 16,000) and
with no individual self-storage customer accounting for more than 1% of total
revenue and no entities under common control (e.g., Government) accounting for
more than 5% of total revenues.
The Group holds a right of lien over its self-storage customers' goods if
customer debts are not paid although this is used relatively infrequently
within the context of overall customer numbers and only ever as a final stage
in the debt recovery process.
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 2022 was £2.26 million
(2021: £1.48 million) on receivables and £46.5 million (2021: £9.1 million)
on cash and cash equivalents.
H Maturity analysis of financial liabilities
The undiscounted contractual cash flow maturities are as follows:
2022 - Group Trade Borrowings Interest on
and Other £'000 Borrowings
Payables £'000
£'000
Over five years - - -
From two to five years - 66,785 3,131
From one to two years - - 1,809
Due after more than one year - 66,785 4,940
Due within one year 4,207 - 1,809
Total contractual undiscounted cash flows 4,207 66,785 6,749
2021 - Group Trade Borrowings Interest on
and Other £'000 Borrowings
Payables £'000
£'000
Over five years - - -
From two to five years - 65,399 2,248
From one to two years - - 1,010
Due after more than one year - 65,399 3,258
Due within one year 2,856 - 1,010
Total contractual undiscounted cash flows 2,856 65,399 4,268
Lease liabilities are separately disclosed in note 19.
I Fair values of financial
instruments
Group Group
2022 2021
£'000 £'000
Categories of financial assets and financial liabilities
Financial assets measured at amortised cost
Trade and other receivables (1) 3,516 2,824
Cash and cash equivalents 46,465 9,105
Financial liabilities measured at amortised cost
Trade and other payables (4,207) (2,856)
Lease liabilities (10,894) (11,166)
Bank loans (66,196) (64,941)
( )
(1 Includes £1.0 million (gross) relating to fees receivable from the
Aldershot managed Store classified in Other Debtors, plus Trade Receivables of
£1.2 million plus Other Receivables of £1.3 million)
( )
( )
The fair values of the Group's cash and short-term deposits and those of other
financial assets equate to their carrying amounts. The amounts are presented
net of provisions for doubtful receivables and allowances for impairment are
made where appropriate.
J Company's financial instruments
The Company's financial assets are amounts owed by subsidiary undertakings
amounting to £28.8 million (2021: £27.1 million) which are classified as
loans and receivables, and the investment in its subsidiary undertaking of
£2.87 million (2021: £2.67 million). These amounts are denominated in
Sterling. The Company has no financial liabilities.
18 Borrowings
Bank borrowings Group Group
2022 2021 £'000
£'000
Non-current
Bank loans repayable in more than two years
but not more than five years
Gross 66,785 65,399
Deferred financing costs (589) (458)
Net bank borrowings 66,196 64,941
Non-current borrowings 66,196 64,941
· £25 million accordion executed and increases bank facility from £75
million to £100 million
· Bank facility extended by one year to April 2026
· Migration from LIBOR to an alternative risk-free reference rate
(SONIA)
On 20 October 2021, the Group executed the accordion arrangement embedded
within the Revolving Credit Facility which increases the facilities available
to the Group from £75 million to £100 million.
In addition, the Group has also agreed a one-year extension on its existing
joint banking facility with National Westminster Bank/Royal Bank of Scotland
plc and ABN AMRO Bank N.V. The facility, which was due to expire in April
2025, will now run until April 2026 providing funding for more Landmark site
acquisitions.
The two principal bank covenants (LTV and Senior interest) and margin are
unaffected by the execution of the accordion and this extension of term.
Margin/pricing is also unaffected.
Amendments to the Facility Agreement dealing with the transition from LIBOR to
SONIA (Sterling Over Night Indexed Average) have also been made, fulfilling UK
regulators' requirements ahead of LIBOR's phasing out after 31 December 2021.
The Group currently has £66.8 million drawn against its facility, which is
secured with National Westminster Bank/ RBS and ABN AMRO jointly by legal
charges and debentures over the freehold and leasehold properties and other
tangible assets of the business with a net book value of £292.8 million
(2021: £255.7 million) together with cross-company guarantees from Group
companies.
With current facility utilisation at £66.8 million and combined with cash
balances of £46.5 million the £100 million facility provides around £79.7
million of available cash headroom.
19 Lease Liabilities
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the leases. Where this cannot be readily determined the
Present Value of all future operating lease payments is calculated using 2.2%
(2021: 2.2%) as an incremental borrowing rate as the Discount Rate.
After the application of a weighted depreciation charge based on the
individual lease term of the separate leases and the imputation of an interest
charge at 2.2% (2021: 2.2%) as part of the amortisation of the lease liability
the total lease liabilities are shown below.
Lease liabilities attributable to right of use assets Group Group
2022 2021 £'000
£'000
Current lease liabilities
Amounts due within one year 1,612 1,258
Non-current lease liabilities
Amounts due in one to two years 1,174 1,085
Amounts due in three to five years 2,774 2,585
Amounts due in more than five years 5,334 6,238
Non-current lease liabilities 9,282 9,908
Total lease liabilities 10,894 11,166
Lease liabilities attributable to right of use assets Group Group
2022 2021
£'000 £'000
Balance brought forward 11,166 12,455
Increase in property rentals 1,235 -
Lease repayments (1,746) (1,559)
Lease interest (non-cash) 239 270
Total lease liabilities 10,894 11,166
The portfolio of property leases all have similar characteristics. Subject to
periodic future rent reviews, typically every five years, there are no
variable lease payments. The Group has no leases on any other types of assets.
The total future commitments due under non-cancellable leases is set out in
note 30 (Commitments under Property Leases).
20 Deferred
Tax
Deferred tax liability Group Group
2022 2021
£'000 £'000
Liability at start of year 46,760 26,760
Total charge to income for the year 2,113 2,367
48,873 29,127
Tax charged directly to other comprehensive income 14,284 18,224
Charge / (credit) to share-based payment reserve 57 (591)
Liability at end of year 63,214 46,760
The following are the major deferred tax liabilities and assets recognised by
the Group and the movements during the year:
Accelerated Other Revaluation of Rolled Total
Capital Temporary Properties over Gain £'000
Allowances Differences £'000 on Disposal Share
£'000 £'000 £'000 Options
£'000
At 31 July 2020 3,649 479 19,939 2,956 (263) 26,760
Charge to income for the year 1,479 130 - 758 - 2,367
Charge to other comprehensive income
- - 18,224 - - 18,224
Credit to share-based payment reserve - - - -
(591) (591)
At 31 July 2021 5,128 609 38,163 3,714 (854) 46,760
Charge to income for the year 591 - - 1,522 - 2,113
Charge to other comprehensive income
- - 9,978 4,306 - 14,284
Credit to share-based payment reserve - - - -
57 57
At 31 July 2022 5,719 609 48,141 9,542 (797) 63,214
The increase in the deferred tax liability arises substantially from a
combination of an increase in the valuation of the Group's stores and a
provision for the gain arising on the sale of the four sale and manage-back
stores which will in due course be subject to a roll-over relief claim.
The deferred tax provision is substantially a tax provision against the
potential crystallisation (sales) of revalued properties and past 'rolled
over' gains and amounts to £63.2 million (2021: £46.8 million), the
crystallisation of which is within the Board's control.
21 Share Capital
2022 2021
Authorised: £'000 £'000
35,000,000 ordinary shares of 1 pence each (2021: 35,000,000) 350 350
Allotted, issued and fully paid ordinary shares £'000 £'000
Balance at start of year 298 297
Options exercised during the year 3 1
Balance at end of year 301 298
Called up, Called up,
Allotted and Allotted and
Fully Paid Fully Paid
Number Number
Number of shares at start of the year 29,686,787 29,633,290
Options exercised during the year 316,758 53,497
Number of shares at end of the year 30,003,545 29,686,787
The Company has one class of Ordinary Shares which carry no right to fixed
income.
22 Equity-Settled Share-Based Payment Plans
The Group operates three equity-settled share-based payment plans: one
approved and two unapproved share option schemes.
The Company has granted the following share options:
2022 As at As at
Summary 31 July 2021 31 July 2022
Lapsed/
No. of Options Granted Exercised Surrendered No. of Options
Unapproved Share Options (refer note 24(a)) 683,950 1,163 (280,323) - 404,790
Unapproved Share Options (PPP Scheme) - refer note 24(b)) 990,000 277,658 - - 1,267,658
Approved CSOP Share Options (refer note 25) 86,476 12,542 (36,435) - 62,583
Total 1,760,426 291,363 (316,758) - 1,735,031
2021 As at As at
Summary 31 July 2020 31 July 2021
Lapsed/
No. of Options Granted Exercised Surrendered No of Options
Unapproved Share Options (refer note 24(a)) 715,104 8,608 (39,762) - 683,950
Unapproved Share Options (PPP Scheme) - refer note 24(b)) 830,000 280,000 - (120,000) 990,000
Approved CSOP Share Options (refer note 25) 97,935 2,276 (13,735) - 86,476
Total 1,643,039 290,884 (53,497) (120,000) 1,760,426
The following table shows options held by Directors under all schemes.
Total Options Granted Unapproved Scheme Approved Total
at 31 July 2021 Options Exercised CSOP Share Options at 31 July 2022
2022
Executive Directors
A Jacobs - Unapproved 206,087 - (206,087)- - - -
A Jacobs - PPP 160,000 40,000 - 200,000 - 200,000
A Jacobs - total 366,087 40,000 (206,087) 200,000 - 200,000
RA Davies - Unapproved 246,977 - (65,000) 181,977 - 181,977
RA Davies - CSOP 7,742 (7,742) - 2,941 2,941
RA Davies - PPP 160,000 38,236 - 198,236 - 198,236
RA Davies total 414,719 38,236 (72,742) 380,213 2,941 383,154
N Newman-Shepherd - Unapproved 135,599 - - 135,599 - 135,599
N Newman-Shepherd - CSOP 8,618 (1,400) 7,218 964 8,182
N Newman-Shepherd - PPP 240,000 59,422 - 299,422 - 299,422
N Newman-Shepherd total 384,217 59,422 (1,400) 442,239 964 443,203
All Directors total 1,165,023 137,658 (280,229) 1,022,452 3,905 1,026,357
Total Options Granted Options Unapproved Scheme Approved Total
at 31 July 2020 Exercised CSOP Share Options at 31 July 2021
2021
Executive Directors
A Jacobs - Unapproved 206,087 - - 206,087 - 206,087
A Jacobs - PPP 80,000 40,000 - 120,000 - 120,000
A Jacobs - total 286,087 40,000 - 326,087 - 326,087
RA Davies - Unapproved 246,977 - - 246,977 - 246,977
RA Davies - CSOP 7,742 - - - 7,742 7,742
RA Davies - PPP 80,000 40,000 - 120,000 - 120,000
RA Davies total 334,719 40,000 - 366,977 7,742 374,719
N Newman-Shepherd - Unapproved 172,421 - (36,822) 135,599 - 135,599
N Newman-Shepherd - CSOP 10,661 - (2,043) - 8,618 8,618
N Newman-Shepherd - PPP 120,000 60,000 - 180,000 - 180,000
N Newman-Shepherd total 303,082 60,000 (38,865) 315,599 8,618 324,217
Non-Executive Directors
SG Thomas - Unapproved 5,217 - - 5,217 - 5,217
All Directors total 929,105 140,000 (38,865) 1,013,880 16,360 1,030,240
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, three or five
years, subject to the performance criteria attached to the options.
Under the CSOP Approved Share Option scheme (note 25) and the Unapproved Share
Options scheme (note 24(a)), 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. Exercise of an option is subject to continued employment or in
the case of unapproved options at the discretion of the Board. The life of
each option granted is six and a half to seven years. There are no cash
settlement alternatives.
The rules governing the PPP scheme are disclosed in note 24b.
Under the CSOP Approved Share Option scheme (note 25) and the Unapproved Share
Options scheme (note 24a), 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 and a half years which is part way between vesting (two and
a half to three years after grant) and lapse (ten 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 and a half years).
Under the Partnership Performance Plan (note 24(b)), 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. For options granted on 31 July 2022, the expected term is assumed to be
10.34 years (2021: 11.76 years), which is halfway between vesting and lapse.
The vesting date is based upon the assumption that the CAD and/or NAV targets
are met at the same time as the share price target is met, and the lapse date
is the fifteenth anniversary of the grant. The risk-free rate of return is the
UK gilt rate at date of grant commensurate with the expected term (i.e.10.34
years).
The total charge for the year relating to employer share-based payment schemes
was £201,385 (2021: £117,586), all of which relates to equity-settled
share-based payment transactions.
23(a) Other Reserves
Capital Share-based
Merger Other Redemption Payment
Reserve Reserve Reserve Reserve Total
Group £'000 £'000 £'000 £'000 £'000
31 July 2020 6,295 1,294 34 832 8,455
Share-based remuneration (options) - - - 118 118
IFRS 2 - transfer retained earnings - - - (26) (26)
Tax charge relating to share options - - - 591 591
31 July 2021 6,295 1,294 34 1,515 9,138
Share-based remuneration (options) - - - 201 201
IFRS 2 - transfer retained earnings - - - (180) (180)
Tax charge relating to share options - - - (57) (57)
31 July 2022 6,295 1,294 34 1,479 9,102
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. The revaluation reserve is a non-cash
non-distributable reserve that reflects the uplift between market (fair) value
of the Group's store assets and their historic book value.
Share-based payment reserve
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 £180,391 (2021: £26,419).
23(b) Other Reserves
Other Share-based
Reserve Payment
Reserve Total
Company £'000 £'000 £'000
31 July 2020 1,114 798 1,912
Share-based remuneration (options) - 118 118
IFRS 2 - transfer to/from retained earnings - (26) (26)
31 July 2021 1,114 890 2,004
Share-based remuneration (options) - 201 201
IFRS 2 - transfer to/from retained earnings - (180) (180)
31 July 2022 1,114 912 2,026
24(a) Retained Earnings
Retained Earnings
before Deduction Retained Earnings
Own Shares
of Own Shares (note 25) Total
Group £'000 £'000 £'000
31 July 2020 26,595 (500) 26,095
Profit attributable to owners of
Parent for the financial year 3,283 - 3,283
Transfer from revaluation reserve
Additional depreciation on revaluation 568 - 568
Transfer from share-based payment reserve (note 23a) 26 - 26
Reserve transfer on disposal of assets 165 - 165
Dividend paid (3,865) - (3,865)
31 July 2021 26,772 (500) 26,272
Profit attributable to owners of
Parent for the financial year 12,078 - 12,078
Transfer from revaluation reserve
Additional depreciation on revaluation 821 - 821
Transfer from share-based payment reserve (note 23a) 180 - 180
Reserve transfer on disposal of assets 20,258 - 20,258
Dividend paid (4,601) - (4,601)
31 July 2022 55,508 (500) 55,008
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.
24(b) Retained Earnings
Retained Earnings
Retained
before Deduction Earnings
Own Shares
of Own Shares (note 25) Total
Company £'000 £'000 £'000
31 July 2020 15,650 - 15,650
Profit attributable to owners of
Company for the financial year 4,793 - 4,793
Transfer from share-based payment reserve (note 23b)
26 - 26
Dividend paid (3,865) - (3,865)
31 July 2021 16,604 - 16,604
Profit attributable to owners of
Company for the financial year 5,756 - 5,756
Transfer from share-based payment reserve (note 23b)
180 - 180
Dividend paid (4,601) - (4,601)
31 July 2022 17,939 - 17,939
25 Own Shares
EBT EBT Treasury Treasury Own Shares
Shares Shares Shares Shares total
Number £ Number £ £
31 July 2021 and 31 July 2022 623,212 499,910 - - 499,910
The Group operates an Employee Benefit Trust (EBT) under a settlement dated 8
July 1999 between Lok'nStore Limited and Lok'nStore Trustee Limited,
constituting an employees' share scheme.
Funds are placed in the Trust by way of deduction from employees' salaries on
a monthly basis as they so instruct for purchase of shares in the Company.
Shares are allocated to employees at the prevailing market price when the
salary deductions are made.
As at 31 July 2022, the Trust held 623,212 (2021: 623,212) Ordinary Shares of
1 pence each with a market value of £6,356,762 (2021: £4,580,608). No shares
were transferred out of the scheme during the year (2021: nil).
No options have been granted under the EBT. The EBT waived its dividends in
full. No other dividends were waived during the year.
26 Cash flows
(a) Reconciliation of profit before tax to cash generated from operations
Year Year
ended ended
31 July 31 July
2022 2021
£'000 £'000
Profit before tax 15,874 6,448
Depreciation and loss on disposal 4,727 4,149
Equity-settled share-based payments 201 118
Non-underlying items (note 4) (5,739) 160
Interest receivable (42) (1)
Interest payable - bank borrowings 1,089 747
Interest payable - lease liabilities 239 270
Decrease / (increase) in financial asset 509 (148)
Decrease / (increase) in inventories 148 (20)
Decrease (increase) in receivables 285 (645)
Increase / (decrease) in payables 1,278 1,109
Cash generated from operations 18,569 12,187
(b) Reconciliation of net cash flow to movement in net bank debt
Net bank debt is defined as non-current and current borrowings, as detailed in
note 18, less cash and cash equivalents.
Group Group
2022 2021
£'000 £'000
Increase / (decrease) in cash in the year 37,360 (3,961)
Change in net debt resulting from cash flows (1,386) (14,077)
Movement in net debt in year 35,974 (18,038)
Net bank debt brought forward (56,294) (38,256)
Net bank debt carried forward (20,320) (56,294)
27 Commitments Under Property Leases
At 31 July 2022 the total future minimum lease payments as a lessee under
non-cancellable leases were as follows:
Group Group
2022 2021
Land and Buildings £'000 £'000
Amounts due:
Within one year 1,727 1,612
Between two and five years 4,737 4,583
After five years 6,273 6,863
12,737 13,058
Property lease payments represent rentals payable by the Group for certain of
its properties. Typically, leases are negotiated for a term of 20 years and
rentals are fixed for an average of five years.
The Group's property leases on its leased stores are recognised as a right of
use asset and as a corresponding liability at the year-end.
28 Related Party Transactions
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 13.
The aggregate remuneration of the Directors, and the other key management
personnel of the Group, is set out below. Further information on the
remuneration of individual Directors is found in note 8.
Group Group
2022 2021
£'000 £'000
Short-term employee benefits - Directors 922 968
Short-term employee benefits - Other key management 373 469
Post-employment benefits - Directors 11 10
Post-employment benefits - Other key management 8 18
Share-based payments 201 118
Social security costs -Directors 370 120
Social security costs -Other key management 49 56
Total 1,934 1,759
The Group recognises a number of management personnel that are important to
retain within the business in order for it to achieve its strategic plan.
Accordingly, these are recognised as key personnel and are participants in the
Long-Term Performance Plan. They are included in the table above.
Group Director shareholdings - dividends received
In respect of the total dividends paid during the year of £4.6 million (2021:
£3.87 million), the Group Directors received the amounts set out in the table
below: -
Director's Dividend Income Holding Final 2021 Interim 2022 Total 2022 Total 2021
10.67 pence per Share 5.0 pence per
Share
Executive: No. £ £ £ £
864,036 658,776
A Jacobs * 5,513,950 588,338 275,698
R Davies 73,832 7,878 3,692 11,570 8,400
N Newman-Shepherd 30,739 3,280 1,537 4,817 4,098
Non-Executive:
SG Thomas * 1,691,190 180,450 84,560 265,010 203,733
RJ Holmes 289,606 30,901 14,480 45,381 41,004
CP Peal 600,629 64,087 30,031 94,118 84,797
J Woyda 2,419 258 121 379 105
8,202,365 875,192 410,119 1,285,311 1,005,579
* Andrew Jacobs and Simon Thomas dividend income above includes their
respective holdings in their individual pension funds.
Managed Stores - Group Director shareholdings
The relationship between Lok'nStore Group plc and the Managed Stores which it
manages have been reported in detail in last year's financial statements and
is not repeated here.
Although the Director holdings in Managed Stores falls outside of the
definition of related party transactions they are disclosed here, as in
previous years, for transparency and are set out in the table below: -
Director Wolverhampton Broadstairs Exeter
No. of Shares No. of Shares No. of Shares
36,800
Andrew Jacobs 38,160 240,000
Charles Peal - - 500,000
Simon Thomas - - 160,000
36,800 38,160
Total shareholding 900,000
189,341 189,690
Issued Share Capital 3,970,000
% of Issued Share Capital 19.4% 20.1% 22.7%
· These shareholdings relate to three Managed Stores, each in separate
corporate vehicles, which have very specific EIS tax advantages. The
Directors' respective shareholdings in these companies have remained unchanged
since their initial investment.
· The Lok'nStore Directors have no other shareholdings in any other
Managed Stores.
· Changes in UK Tax legislation mean that these EIS tax advantages no
longer exist, and these reliefs are no longer available for Managed Store
opportunities that may be undertaken in the future.
· Under UK Takeover Panel protocols in relation to the Rule 9 Waiver
agreed each year with Lok'nStore Group plc, necessary to preserve the Group's
share buyback authority, Andrew Jacobs cannot, by agreement with the Panel,
purchase any more Lok'nStore shares. As such the three EIS investment vehicles
represented an opportunity for Mr Jacobs to hold additional self-storage
assets in tax efficient vehicles.
· Lok'nStore Group operate 16 Managed Stores, currently trading, and
have a further one secured Managed Stores in the pipeline making a total of
17 Managed Stores. The Managed Store strategy is a well-developed one which
enables the Group to increase the operational footprint of Lok'nStore branded
stores without the balance sheet risk of ownership.
· At 31 July 2022, Lok'nStore has a total of 50 stores (40 currently
trading and a pipeline of ten secured stores).
· The terms of the Management Services Agreements executed between
Lok'nStore and with Wolverhampton, Broadstairs and Exeter were executed at
arm's length on normal commercial terms with independent Director(s) who were
not directors of Lok'nStore and therefore unconnected. The commercial terms
are all similar to, and consistent with, those agreed with other third-party
Managed Store owners.
· The Board of Lok'nStore Group plc have governance protocols in place
to ensure that there are no conflicts of interest between the Group and the
shareholders of the Wolverhampton, Broadstairs and Exeter stores.
Specifically, Mr Jacobs could not hold a disproportionate holding in the EIS
Managed Stores not commensurate with his shareholding in Lok'nStore Group plc.
29 Capital Commitments
The Group has capital expenditure contracted but not provided for in the
financial statements of £11.21 million (2021: £6.16 million) relating to
commitments to complete the ongoing construction of our sites in Bedford and
Peterborough and final contract commitments on our completed sites at
Warrington and Stevenage. We are also committed on the Staines Store project
in respect of the land and main build contract and the Basildon Store in
respect of the lease commitment which commences when practical completion of
the building is delivered to us at the end of March 2023.
30 Guarantees
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 £66.8 million (2021: £65.4 million).
31 Events after the Reporting Date
Acquisition of a development site in Milton Keynes
On 4 October 2022, we exchanged contracts, subject to planning, on a freehold
development opportunity in Watling Street, Milton Keynes. This new highly
visible roadside location in the north west of the city complements our
existing leasehold store, seven miles to the south east. Once developed the
store will add circa 60,000 sq. ft. of lettable area.
Glossary
Abbreviation
APM Alternative performance measure
Adjusted EBITDA Earnings before all depreciation and amortisation charges, losses or profits
on disposal, share-based payments, acquisition costs, non-underlying items and
non-recurring professional costs, finance income, finance costs and taxation
Adjusted Store EBITDA Adjusted EBITDA (see above) but before central and head office costs
AGM Annual General Meeting
Bps Basis Points
CAD Cash available for Distribution
Capex Capital Expenditure
CGU Cash-generating units
CO2 e Carbon Dioxide Equivalents
CSOP Company Share Option Plan
DRIP Dividend Reinvestment Plan
EBT Employee Benefit Trust
EIS Enterprise Investment Scheme
(eKPIs) Environmental key performance indicators
EMI Enterprise Management Incentive Scheme
ESOP Employee Share Option Plan
EU European Union
GHG Greenhouse gas
HMRC His Majesty's Revenue and Customs
IAS International Accounting Standard
IFRIC International Financial Reporting Interpretations Committee
IFRS International Financial Reporting Standards
ISA International Standards on Auditing
JLL Jones Lang LaSalle
KPI Key Performance Indicator
LFL Like for like
LTPPP Long Term Partnership Performance Plan
LTV Loan to Value Ratio
MWh Megawatt Hour
NAV Net Asset Value
NBV Net Book Value
Operating Profit Earnings before interest and tax (EBIT)
PPP Partnership Performance Plan
PV Photovoltaic
QCA Quoted Companies Alliance
RICS Royal Institution of Chartered Surveyors
RNS Regulatory News Service
ROU Right of Use Asset
SIP Share Incentive Plan
SME Small and medium sized enterprises
SONIA Sterling Overnight Index Average
Sq. ft. Square feet
tCO2e Tonnes of carbon dioxide equivalent
TVR Total voting rights
VAT Value Added Tax
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. END FR BUBDGCSDDGDIRecent news on Lok'n Store
See all newsREG - Barclays PLC Lok'nStore Group - Form 8.3 - Lok’n Store Group plc
AnnouncementREG - Goldman Sachs (EPT) Lok'nStore Group - Form 8.5 (EPT/RI) - Lok 'n store
AnnouncementREG - Peel Hunt LLP Lok'nStore Group - Form 8.5 (EPT/RI) - Lok'nStore Group PLC
AnnouncementREG - JPMorgan Sec.Plc Lok'nStore Group - Form 8.5 (EPT/RI)-Lok’n Store Group plc
AnnouncementREG - City Asset Mngt PLC Lok'nStore Group - Form 8.3 - Lok'nStore Group plc
Announcement