REG - Lok'nStore Group - Interim Results
RNS Number : 8859KLok'nStore Group PLC27 April 2020
LOK'NSTORE GROUP PLC
("Lok'nStore" or "the Group")
Lok'nStore Group Plc, the AIM listed self-storage company announces interim results for the six months to 31 January 2020
Good growth in the period. Robust capital structure and cash flow will help protect the business during this period of economic turbulence. Increased dividend.
Highlights:
Strong trading
· Group Revenue (continued operations1) £8.97 million up 5.3% (31.1.2019: £8.51 million)
· Group Adjusted EBITDA2 £4.72 million up 6.4% (31.1.2019: £4.44 million)
Cash flow growth supports interim dividend increase
· Cash available for Distribution (CAD) 4 £2.92 million up 4.8% (31.1.2019: £2.78 million)
· Interim dividend 4 pence per share up 9% (31.1.2019: 3.67 pence per share)
Steady increase in asset value
· Adjusted Net Asset Value (NAV) per share6 up 10.1% to £5.32 (31.1.2019: £4.83) (31.7.2019: £5.31 million)
· Adjusted Total assets5 £213.9 million up 6.4% (31.1.2019: £201.1 million) (31.7.2019: £214.0 million)
Secure balance sheet
· Net debt £31.9 million (31.1.2019: £31.2 million) (31.7.2019: £29.3 million)
· Loan to value ratio7 17.2% (31.1.2019: 18.3%) (31.7.2019: 16.1%)
· Average cost of debt 2.21% (31.1.2019: 2.13%) (31.7.2019: 2.11%)
· Capital expenditure £4.7 million (31.1.2019: £8.8 million) (31.7.2019: £15.1 million)
· Cash and committed undrawn credit facilities of £43.0 million
Consistent performance of self-storage business
· Adjusted Store EBITDA9 £4.79 million up 5.5% LFL13 (31.1.2019: £4.66 million)
· Unit Occupancy up 7.9%
· Occupied units pricing flat
Healthy pipeline of new landmark stores8
· New managed store opened in Gloucester (post period-end on 22 February 2020)
· 3 new sites acquired in Chester, Salford and Oldbury
· Site sharing agreement signed with Lidl for new Cheshunt store
· Flexible capital expenditure model can respond to economic circumstances
Coronavirus update - post period-end
As at the date of this Report:
· All stores remain open while maintaining social distancing measures
· Servicing many customers in essential services
· Paying all colleagues as normal - minimal use of government furlough scheme
· Trading to date resilient
· £11m cash at period-end increased to £14.0 million at the date of this report
· March self-storage revenue up 8.5% y-y
Commenting on the Group's results, Andrew Jacobs CEO of Lok'nStore Group said,
"Despite the current deeply unsettled circumstances Lok'nStore has a resilient business model and a flexible and conservative debt structure. Our results for the first half of the financial year are robust. We have created a strong platform with revenue, cash flow and asset values all moving ahead and we are raising the interim dividend by 9.0% to 4 pence per share. We continued to bolster our new store pipeline to 16 sites which will significantly increase operating space over the coming years.
"With a strong balance sheet and low gearing helped by capital recycling, we will adjust to the current turbulence caused by the pandemic and when the economy stabilises we will continue to build more landmark stores in an under-supplied market leading to an exciting period of growth. This positions the Group well for the future".
"Our long term objective is to open more landmark stores while remaining conservatively geared delivering sustainable growth and consistently increasing dividends."
Enquiries:
Lok'nStore:
Andrew Jacobs, CEO
Ray Davies, Finance Director
01252 521 010
finnCap Ltd
Julian Blunt / Giles Rolls, Corporate Finance
Alice Lane, ECM
020 7220 0500
Camarco
Billy Clegg / Tom Huddart
0203 757 4980
Notes - What we mean when we say … (and why we use these key performance indicators (KPIs))
1. Continuing Operations - The Group's document storage business was sold on 31 January 2019 and its disposal constitutes a discontinued operation. Separate reporting of discontinued operations is important in providing users of financial statements with the information necessary to determine the effects of a disposal on the ongoing continuing operations of our business. To ensure a clear separation of the financial performance of Continuing Operations, Discontinued Operations are shown separately on the Statement of Comprehensive Income as a profit on disposal (after tax) which combines operating profit with the profit arising on its disposal. The profit on discontinued operations is then aggregated with profit on continuing operations in determining the Group's total net profit.
2. Group Adjusted EBITDA - Earnings before interest, tax, depreciation and amortisation - This measure strips away non-cash charges, finance charges and tax and now also reflects the removal of operating lease costs from operating expenses as a result of the implementation of IFRS 16.Adjusted EBITDA is defined as EBITDA before losses or profits on disposal, share-based payments, acquisition costs, exceptional items, finance income, finance costs and taxation.
3. Exceptional Items - refers to one-off items of a non-operational nature which arose during the year, often relating to asset disposals, and are unlikely to be recurring. (Refer Note 3(c) of the Interim Financial Statements).
4. CAD - Cash Available for Distribution - is calculated as Adjusted EBITDA less total net finance cost, less capitalised maintenance expenses, New Works Team costs and current tax. This measure is designed to give clarity to the capacity of the business to generate ongoing net operating cash that can be used to pay dividends to shareholders or pay down debt. The calculation of the Cash available for Distribution is set out in the Business and Financial Review on page 15.
5. Adjusted Total Assets - The value of adjusted total assets of £213.9 million (31.01.2019: £201.1 million) (31.07.2019: £214.0 million) is calculated by adding the independent valuation of the leasehold properties of £18.7 million (31.01.2019: £18.2 million) (31.07.2019: £18.7 million) less their corresponding net book value (NBV) £3.8 million (31.01.2019: £3.8 million) (31.07.2019: £4.0 million) to the total assets in the Statement of Financial Position of £199.0 million (31.01.2019: £186.7 million) (31.07.2019: £199.3 million). This provides clarity on the significant value of the leasehold stores as trading businesses which under accounting rules on operating leases are only presented at their book values within the Statement of Financial Position. Total assets now include the Right of Use Assets as a result of the implementation of IFRS16 of £11.75 million. The comparative periods have been adjusted accordingly (31.1.1019: £12.97 million) (31.07.2019: £12.36 million).
6. NAV - Net Asset Value per share - Adjusted net asset value per share is the net assets adjusted for the valuation of leasehold stores (properties held under operating 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 Business and Financial Review on page 17.
7. LTV - Loan to Value Ratio - measures the 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 IFRS 16 lease liabilities) of £31.9 million as set out in note 15 (31.01.2019: £31.2 million) (31.07.2019: £29.3 million) as a percentage of the total properties independently valued by JLL and including development land assets totalling £185.6 million (31.01.2019: £170.0 million) (31.07.2019: £181.2 million) as set out in the Business and Financial Review on page 12.
8. Pipeline Sites - means sites for new stores that we have either exchanged contracts on or have agreed heads of terms and are progressing with our lawyers towards completion. We now have 16 pipeline sites of which 11 are contracted and 5 are currently with lawyers.
9. Adjusted Store EBITDA is Group Adjusted EBITDA (see 2 above) before the deduction of central and head office costs. Unlike Group Adjusted EBITDA this measure excludes the impact of IFRS16 and includes leasing charges as normal operating costs of each store. The measure is designed to give clarity on the recurring operating cash flow of the business and provides important information on the underlying performance of the trading stores and shows the cash generating core of the business. Use of this metric enables us to provide additional information on store EBITDA contributions (after leasing costs) and the margins analysed between freehold and leasehold stores and according to the age of the stores. This analysis is set out in a table in the Business and Financial Review on page 9.
10. Gearing - refers to the level of a company's debt related to its equity capital, usually expressed in percentage form. It is a measure of a company's financial leverage and shows the extent to which its operations are funded by lenders 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 15 of the Interim Financial Statements.
11. Group Adjusted EBITDAR - EBITDAR is Earnings before interest, tax, depreciation amortisation and rent. The measure is designed to give clarity on the effect of the rent payable by leasehold stores and how its elimination enables an analytical comparison between freehold stores operating performance (which do not pay rent) and leasehold stores operating performance. This analysis is set out in a table in the Business and Financial Review on page 10.
12. Cost Ratio - calculates the ratio of the total operating costs of the business as set out on page 13 of the Business and Financial Review, expressed as a percentage of total group revenue (note 2), giving a perspective on the cost efficiency of the business when compared to the cost ratio of the previous year.
13. LFL- Like for Like - This measure is used to give transparency on improvements in the operating business unrelated to the opening of new stores or closure of old stores therefore giving visibility of the true trading picture. The like for like key performance measure is only used where its use is particularly relevant to illustrate a performance metric not otherwise apparent.
See also the glossary on page ●
Chairman's Statement
Before I address the current situation regarding the Covid 19 virus I want to report to you on the excellent first half of the financial year to 31 January 2020. I will return to the current unsettled situation at the end of my statement.
The first half-year results can be summarised as:
· Strong operating performance resulting in turnover and adjusted EBITDA profit growth
· Increase in pipeline to 16 stores
· Growing asset value
· Increased dividend
· Continuing to invest in our landmark store opening programme
This is a solid set of results with Lok'nStore continuing to deliver on our commitment to sustainable growth.
The detail behind these results is discussed further in our Business and Financial Review on pages 9 to 18.
The continued investor interest in this sector together with the corresponding market transactions of self-storage stores underpins the Board's confidence in the value of our assets.
Increased Dividend
Lok'nStore's dividend payments to shareholders reflect the growth in the underlying cash generated from operations as reflected in the cash available for distribution (CAD) which is up 4.8% period to period.
At interim stage we will pay one third of the previous year's total annual dividend which equates to 4 pence per share, up 9% on the 3.67 pence per share interim dividend last year. The increase in the interim dividend follows a consistent pattern of dividend growth reflecting the sustained growth of the Group. The interim dividend will be paid on 12 June 2020 to shareholders on the register on 11 May 2020. The ex-dividend date will be 7 May 2020. The final deadline for Dividend Reinvestment Election by investors is 22 May 2020. The final dividend will be declared when the Group's full year results are announced in late October 2020.
Clearly the dividend is well covered by the cash available for distribution. In addition, the Company has cash reserves that could be used in support of the dividend for some considerable time going forward.
IFRS 16
The Group has applied IFRS 16 for the first time in this period. IFRS 16 introduces new requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset and a corresponding lease liability in the Statement of Financial Position.
The prior period financial comparatives contained within these statements have been restated to reflect the first-time adoption of IFRS 16 which changes previously reported EBITDA, interest and depreciation numbers in the Statement of Comprehensive Income. Further details of these restatements can be found in note 1.
Lok'nStore will continue to report on CAD which aims to look through the statutory accounts and give a clear picture of the ongoing ability of the Company to generate positive cash flow from the operating business that can be used to pay dividends or pay down debt. As mentioned above this was up 4.8% period to period.
Investment in our stores
In the previous financial year, we completed the strategic disposal of our document storage business generating £7.64 million in cash (gross) while the sale and manage back of our Crayford store generated a further £7.42 million in cash. These proceeds are being reinvested back into our pipeline of new faster growth landmark stores.
While we invested £4.7 million in sites and store development in this period, as a result of this recycling of capital we are able to report a period end loan-to-value (LTV) ratio of only 17.2% (31.1.2019: 18.3%) (31.7.2019: 16.1%) and net debt of only £31.9 million (31.1.2019: £31.2 million) (31.7.2019: £29.3 million).
The Group is still finding high quality sites for new landmark stores. Our store development programme has led to an increase in new and purpose built space to 59% of our owned portfolio and will rise to 67% following development of our Current Pipeline8. Trading at our new stores has been reassuring and this underpins our confidence that our strong secured pipeline of eleven more landmark stores will add further momentum to sales and earnings growth. They will add 39.5% more trading space to our owned portfolio. The timing of these developments will become clearer as the situation with the pandemic evolves.
Managed Stores
Our growth strategy includes increasing the number of stores we manage for third party owners. This enables the Company to earn revenue without having to commit our capital, to amortise fixed central costs over a wider operating base and drive further traffic to our website which benefits our entire operation. We generated managed store income of £393,459 this period, up 2% from the previous period. Second half income will be stronger due to additional fees from store opening and planning success.
Managed store income is generated from our existing platform and central management, resulting in an effective margin from this activity of 100%. Our current pipeline includes an additional 3 managed stores which will take the total number of managed stores to 14.
Committed People
We rely on the dedication of our people to deliver these impressive results and even more so now in these difficult circumstances. During the Covid-19 pandemic the dedication of our colleagues has shone through more than ever, allowing us to support our customers during this unprecedented period.
We will continue to invest in training to develop and deepen their skills. We have reviewed our pay levels 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.
We do this because it makes business sense and directly contributes to our strategic and operational objectives which are to:
· Steadily increase cash available for distribution (CAD) per share enabling a predictable growth of the dividend from a strong asset base with conservative levels of debt
· Fill existing stores and improve pricing
· Acquire more sites to build new landmark stores
· Increase the number of stores we manage for third parties
Coronavirus update - post period end
After the period end on 11 March 2020 the World Health Organization declared a global pandemic which has radically altered the business landscape. The Board outlines below the likely effect on the Lok'nStore Group.
Health and Safety of the Lok'nStore team and our Customers
At Lok'nStore the health and safety of our customers and colleagues is our principal priority. To date the majority of our team members have remained well. Of the small number of colleagues who have self-isolated because either they or someone they live with have shown symptoms, all have recovered and are back at work. No colleagues have been hospitalised.
Providing an important service to our Customers
Many of our customers are 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 and we are proud to serve them at this difficult time.
Storage, logistics and transport are important parts of the distribution network and as such have not been selected for closure by the Government. Events are unfolding at a rapid pace but our objective is to keep our stores open so that our business customers in particular can continue to operate. All of our stores remain open at time of writing.
Measures taken
We have taken note of the Self-Storage Association guidelines. Existing customers are still able to access their storage during our temporarily reduced opening hours without any face to face contact with our team members. Customers can still communicate with our friendly teams by telephone, email or live chat. New customers can access our reception area one at a time to ensure strict social distancing guidelines are followed.
Most of our team members come to our stores by car, by bike or walking. For the small number of colleagues who rely on public transport we have worked with them to find alternative methods. We are continuing to pay our team members and directors as normal with minimal use of the government furlough scheme. To date only 8 out of 150 staff have been furloughed.
Self-Storage is a service business but our facilities are not used intensively. Customer footfall is always comparatively low and our stores have few people in them at any given time, even under normal circumstances.
We remain vigilant with our daily cleaning programme and our staff have intensified cleaning of the most commonly touched areas and of shared equipment such as trolleys.
We are in regular communication with our store colleagues, updating them on the latest advice from Public Health England and the Government. We have also put in place contingency plans around reduced staffing levels to cope with increased absences as a result of self isolation or illness.
Recent trading
We have seen some new business customers move in, but this has been modestly outweighed by some businesses directly affected by the closures choosing to move out. We do expect trading to soften as move-ins have tailed off but this will only impact our numbers in the fourth quarter of our financial year. Given the levels of distress in the economy and the uncertainty surrounding what is a fast-moving situation it is too early to make judgements about future trading until we have more visibility.
Where a customer has approached us with a short-term financial burden, we have worked with them to find a mutual solution. To further support our customers from the 20th March 2020 no new storage rate reviews will be issued to customers until further notice.
Robust Capital structure, and cash flow
At 31 January 2020 the Group had cash balances of £11.0 million, which has since increased to £14.0m at the date of this Report. The Group has a £75 million five year revolving credit facility which runs until April 2024. This provides sufficient liquidity for the Group's current needs. Undrawn committed facilities at the period-end amounted to £32.0 million. The Group is not obliged to make any repayments prior to its expiration in April 2024.
Cash inflow from operating activities before investing and financing activities was £6.2 million in the six months to 31 January 2020, and as of March 2020 we continue to trade cash positively. March self-storage turnover was up 8.5% y-y. Despite the challenges of the Covid-19 pandemic the Group has a resilient business model strong cash flows and a flexible and conservative debt structure and is able to continue to trade effectively through this period.
Debt, IFRS 16 and bank covenants
The average cost of bank debt on drawn facilities for the period was 2.2%. All of the Group's total drawn bank debt of £43.0 million is unhedged, which means we have benefited immediately from the recent reductions in base lending rate. Following these reductions, the Group's all-in cost of debt is running at 1.74% with effect from April 2020, an annualised cash saving of approximately £200,000.
The net effect is that proforma interest cover based on the current quarter is in excess of 7 times. The Group banking covenants are set at 2.5 times. At the period end our loan-to-value ratio based on net bank debt was 17.2% versus a covenant of 60% providing a large cushion against any potential falls in the valuation of the portfolio.
Both the Loan to Value and Senior Interest covenants continue to be tested excluding the effects of IFRS 16.
For this purpose, debt / LTV will continue to exclude Right of Use Assets and corresponding lease liabilities created by IFRS 16. Operating 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, when testing the Senior Interest covenant.
Capital Expenditure
Self-storage benefits from the short lead time between breaking ground and store opening of only around 12 months. Despite our expanding pipeline of new stores, we are only on site in two locations and we have high degree of flexibility regarding start dates for further building. The government is encouraging the construction industry to keep working so we are continuing to build at the two sites which are nearing completion in Leicester and Oldbury with a view to them being opened within the next few months. We recognise that this may change should we encounter supply issues with materials. The capital cost to complete these two stores is approximately £1.9 million.
We are also committed to the purchase and fit-out of the new store in Salford for an outlay of around £6.9 million. Subject to planning we will also purchase land in Warrington and Chester for £4.7 million. Our project in Cheshunt requires an additional net expenditure of £1m also subject to planning. Therefore, total anticipated capital expenditure amounts to a maximum of £14.5 million which compares favourably to cash and committed undrawn credit facilities of £43.5 million.
All further capital expenditure is entirely discretionary providing a high degree of optionality. We remain committed to the acquisition of our pipeline of new Landmark sites but will only proceed with future construction when the economic picture is much clearer.
Dividend
In the previous financial year CAD per share was 18.95 pence compared with a dividend level of 12 pence per share. In the interim reporting period the cash available for distribution (CAD) amounted to £2.92 million versus the cash cost of the interim dividend of £1.2 million so there is a comfortable cushion of headroom. In addition to which we have ample liquid resources with which to meet the distribution.
In the light of the Coronavirus pandemic we have undertaken a rigorous and thorough analysis of the business incorporating stress testing based on the current trading performance since the lock down began as well as the Group's experience during the financial crisis of 2008. Even in scenarios where the Company takes no mitigating measures, the output of this process shows the business to be able to continue operating with more than sufficient liquidity and covenant compliance for the foreseeable future.
Whilst acknowledging that the after-effects of the Covid-19 pandemic may prove to be very different to those experienced after the global financial crisis, the Board is confident in the strength of the business and capacity of the management team to trade effectively through this period, and accordingly has felt it appropriate to continue to pursue the Group's progressive dividend policy. Accordingly, we will be paying the interim dividend of 4 pence, an increase of 9% over last year's interim.
Positive Outlook for Growth over medium to long term
Our results for the first half of the financial year are robust. Despite the current deeply unsettled circumstances Lok'nStore has a resilient business model and a flexible and conservative debt structure. We expect the Company to continue to thrive and grow in the medium and long term once the pandemic has passed.
Simon G Thomas
Chairman
24 April 2020
Business and Financial Review
The Performance of our Stores
· Self-storage revenue £8.58 million up 6.1% (31.1.2019: £8.08 million)
· Adjusted Store EBITDA £4.8 million up 5.5% LFL (31.1.2019: £4.66 million)
· Unit occupancy increased 7.9 % year on year LFL
· Occupied units pricing level
With operating costs under control, steady revenue growth translates into healthy profit growth. Total adjusted store EBITDA in the self-storage business, a key performance indicator of profitability and cash flow of the business, increased 2.8% to £4.8 million, and by 5.5% LFL (31.01.2019: £4.66 million). Over the course of the year unit occupancy rose by a healthy 7.9% and unit pricing was level. The overall adjusted EBITDA margin across all stores was 55.8% rising to 57.9% on a like for like basis.
The table below shows that 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 (61.3% and 100% respectively versus 55.8% across all stores). The impact of this will be to continue to increase the average 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 as they become established trading units.
As we build out the Current Pipeline we will be operating from 55.1% freehold space, leasehold space will decline to 18.0% of space and managed stores will increase to 26.9% of total space operated.
At the end of January 2020, 33.4% of Lok'nStore's self-storage revenue was from business customers (31.1.2019: 33.8%) with the remainder from household customers. By number of customers 18% of our customers were business customers (31.1.2019: 18.5%) with the remainder from household customers.
Portfolio Analysis and Performance Breakdown
When Fully Developed
Portfolio Analysis and Performance Breakdown
Number of stores
% of Property
Valuation
% of Adjusted Store EBITDA
Adjusted Store
EBITDA Margin (%)
% lettable space
Lok Owned
Number of stores
Total % lettable space
As at 31 January 2020
Freehold Stores
15
89.9
76.1
61.3
65.6
23
55.1
Operating Leaseholds stores
8
10.1
23.9
43.5
34.4
8
18.0
Managed Stores
11
100
14
26.9
Total stores trading
34
45
Pipeline stores
Owned
8
Managed
3
Total Self Storage
45
100
100
55.8
100
45
100
Operating Performance at a glance (Lok'nStore freehold and leasehold stores only) *
Weeks Old
Contracted
Pipeline
Under 100
100 to 250
over 250
Total
Six months ended 31 January 2020
Sales £000
322
842
7,413
8,577
Stores Adjusted EBITDA £'000
(9)
541
4,257
4,789
Adjusted EBITDA Margin (%)
(2.9%)
64.3%
57.4%
55.8%
Stores Adjusted EBITDAR £'000
322
541
4,978
5,509
Adjusted EBITDAR Margin (%)
(2.9%)
64.3%
67.1%
64.2%
As at 31 July 2019 ('000 sq. ft.)
Maximum Net Area
469
132
110
945
1,656
Freehold ('000 sq. ft.)
469
132
110
537
1,248
Short Leasehold ('000 sq. ft.)
-
-
-
408
408
Number Stores
Freehold
8
3
2
10
23
Short Leasehold
-
-
-
8
8
Total Stores
8
3
2
18
31
*Table excludes Managed Stores.
In respect of the Farnborough Store (over 250 weeks) the total store revenue includes a £50,000 contribution receivable from Group Head Office.
Ancillary Sales
Ancillary sales consisting of boxes, packaging materials, insurance and other sales increased to £957,222 an increase of 8.4% year on year (31.01.19: £883,241) accounting for 11.2% of self-storage revenues.
Store properties and Net Asset Value
· Adjusted total assets £213.9 million up 6.4% (31.1.2019: £201.1 million)
· Net Assets £116.7 million (31.1.2019: £105.5 million)
· Adjusted net asset value £5.32 per share up 10.1% (31.1.2019: £4.83)
· Investment in new stores £4.7 million (31.1.2019: £8.8 million)
At the period-end Lok'nStore had 34 freehold, leasehold and managed stores trading. Of these, 23 stores are owned with 15 freehold, 8 leasehold and 11 further sites operate under management contracts.
The average unexpired term of the Group's operating leaseholds is approximately 10 years and 6 months as at 31 January 2020 (10 years and 7 months: 31 January 2019). All of our leasehold stores are inside the Landlord and Tenant Act providing us with a strong degree of security of tenure.
Growth from new stores and more new landmark stores to come
Lok'nStore's strong operating cash flow, solid asset base, and tactical approach to its store property portfolio provide the Group with opportunities to improve the terms of its property usage in all stages of the economic cycle. Our focus on the trading business gives us many opportunities and our property decisions are always driven by the requirements of the trading business.
· 5 new store opportunities identified and are progressing with lawyers
· Current Pipeline of 11 contracted stores adds 36.4% of extra trading space to the overall portfolio, 39.5% to our owned portfolio and 28.5% to the managed portfolio
Development of new stores
Bedford
The planning process for a 55,000 sq. ft. purpose built store is progressing. The site is in a prominent location next to a retail park on the south east side of Bedford.
Bournemouth
An 80,000 sq. ft. purpose built store has been designed for this site in Castle Lane. The site is in a highly prominent location adjacent to a major food retailer and Bournemouth Hospital. Subject to planning, we aim to open what will be our largest store yet in the late summer of 2021.
Cheshunt
In Cheshunt, Hertfordshire, the Company acquired a 2.2-acre development site in a prominent location facing the busy A10 and in the vicinity of a major retail park. A 60,000 sq. ft. landmark store is schedule for submission to planning shortly with a target opening date of end of 2021. On 16 December 2019 we signed an agreement to share this site with a discount food retailer mitigating our development costs and generating footfall for the site.
Leicester
On 17 August 2018, planning permission for a 60,000 sq. ft. store was granted. The Store is in a highly prominent location opposite a major food retailer in the heart of Leicester's busy retail district. Store development is at advanced stage with fit-out commenced. The store is expected to open in summer 2020.
Stevenage
In December 2018 we exchanged contracts on the site in Gunnels Wood Road in Stevenage, Hertfordshire. The site is in a prominent location in an established commercial and retail area. The 60,000 sq. ft. store is currently proceeding through the planning process. Subject to planning we aim to be onsite in summer 2020 with a target opening date of late summer 2021.
Wolverhampton
Planning permission for a 50,000 sq. ft. store has been granted for a store in Wolverhampton. The site is opposite a busy retail park on the North East of Wolverhampton. We aim to be onsite in summer 2020 with a target opening date of late summer 2021.
Salford - near Manchester
The site sits strategically on the key arterial route of the Regent Road (A57) into the west of Manchester at the end of the M602. The site benefits from its location between the growing residential, business and media hub of Salford Docks and the ever-spreading West Manchester residential expansion.
The Lok'nStore building once developed will be highly prominent from the main road on this busy dual carriageway. Subject to a change of use permission we aim to be onsite in May/June 2020 with a target opening date of end of 2020.
Chester
In December 2019 we exchanged contracts subject to planning on a prominent site fronting the entrance to the main commercial and retail estate of Sealand Road in Chester. Design and planning for a 40,000 sq.ft. storage centre is at an advanced stage before submission and subject to planning we aim to be onsite in October 2020 with a target opening date of winter 2021.
Warrington
In June 2019 we exchanged contracts subject to planning on a landmark site at a key interchange junction on Winwick Road (A49), Warrington. The main route in and out of the town centre to the North and opposite an established supermarket and leisure facility. Planning has been submitted for a striking 55,000 sq. ft. storage centre and is at an advanced stage, subject to planning we aim to be onsite in August 2020 with a target opening date of late summer 2021.
Managed Stores
Our growth strategy includes increasing the number of stores we manage for third party owners. This enables the Company to earn revenue without having to commit our capital, to amortise fixed central costs over a wider operating base and drive further traffic to our website which benefits our entire operation.
We now have fourteen stores under management contracts with eleven of these open at 31 January 2020 and Gloucester having opened post period end in February 2020. Oldbury is currently under development. Chester is in the design stage.
For managed stores Lok'nStore receives a standard monthly management fee, a performance fee based on certain objectives and fees on a successful exit. We also charge acquisition, planning 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 of the stores we both own and manage.
This strategy improves the risk adjusted return of the business by increasing the operating footprint, revenues and profits without committing capital.
We generated managed store income of £393,459 this period, up 2% from the previous period. We expect this to continue increasing steadily over the coming years as more managed stores are opened. Recurring fees increased rapidly by 85.7% over the same period last year. Second half income will be stronger due to additional fees from store opening and planning success. Managed store income is generated from our existing platform and central management, resulting in an effective margin from this activity of 100%.
Management fees
Percentage Increase
Six months ended
31 January 2020
Unaudited
Six months ended
31 January 2019
Unaudited
Year ended
31 July 2019
Audited
%
£
£
£
Recurring fees
Base management fees
237,581
160,898
352,814
Administration and compliance fees
25,000
17,000
40,500
Enhanced Management fees
130,878
33,986
168,362
Sub-total
85.7%
393,459
211,884
561,676
Construction & Advisory fees
-
25,000
55,000
Supplementary fees
-
150,000
200,000
Non-recurring fees
-
175,000
255,000
Total management fees
1.7%
393,459
386,884
816,676
Stores being developed under management contracts
· Oldbury - Scheduled to open Summer 2020
· Gloucester - Opened 22 February 2020 (Post period-end)
Summary - Flexible approach to site acquisition
We continue our strategy of actively managing our portfolio to ensure we are maximising both trading potential and asset value. This includes strengthening our distinctive brand, increasing the size and number of our stores and replacing stores or sites where it will increase shareholder value. We prefer to own freeholds if possible, and where opportunities arise, we will seek to acquire the freehold of our leasehold stores. However, we are happy to take leases on appropriate terms and benefit from the advantages of a lower entry cost, with further options to create value later. Our most important consideration is always the trading potential of the store rather than the type of property tenure.
We have 11 new stores in our secured Current Pipeline8. All are in prominent locations with large catchment areas and little established competition and demonstrate the Company'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.
Financial results
· Group Revenue (continued operations) £8.97 million up 5.3% (31.1.2019: £8.51 million)
· Group Adjusted EBITDA2 £4.72 million up 6.4% (31.1.2019: £4.44 million)
· Loan to value 17.2% (31.1.2019: 17.9%) (31.7.2019: 16.1%)
· Cash available for Distribution (CAD)3 £2.92 million up 4.8% (31.1.2019: £2.78 million)
· Interim dividend up 9% to 4.0 pence per share (31.1.2019: 3.67 pence per share)
· Cash balances £11.0 million (31.1.2019: £11.2 million) (31.7.2019: £13.6 million)
Lok'nStore is a robust business which generates an increasing cash flow from its strong asset base with a low LTV of 17.2% and a low average cost of debt of 2.21%. The value of the Group's property assets underpins a flexible business model with stable and rising cash flows and low credit risk giving the business a firm base for growth.
Management of interest rate risk
· Average cost of debt 2.21% (31.1.2019: 2.13%) (31.7.2019: 2.11%)
With £43.0 million of gross debt currently drawn against the £75 million bank facility the Group is not committed to enter into hedging instruments but will 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.
All of the Group's total drawn debt of £43.0 million is unhedged so the Group has quickly benefited from the recent reductions in base lending rate. Following these reductions, the Group's all-in cost of debt in April 2020 is 1.74%.
Taxation
The Group has made a current tax provision against earnings in this period of £0.40 million (31.1.2019: £0.47 million) based on a corporation tax rate of 19% (31.1.2019: 19%). The deferred tax provision which is calculated at forward corporation tax rates of 17% and is substantially a tax provision against the potential crystallisation (sales) of revalued properties and past 'rolled over' gains amounts to £22.49 million. (31.1.2019: £20.05 million) (31.7.2019: £22.39 million). (See Note 16).
Earnings per share
Basic earnings per share were 5.74 pence (31.1.2019: 14.30 pence per share - restated) and diluted earnings per share were 5.63 pence (31.1.2019: 14.03 pence per share - restated).
On a normalised basis stripping out the contribution from the Saracen business and the corresponding profit on disposal Basic earnings per share for the continuing operations were 5.74 pence (31.1.2019: 6.79 pence per share) and diluted earnings per share were 5.63 pence (31.1.2019: 6.68 pence per share - restated).
Six months
ended
31 January 2020
Unaudited
Six months
ended
31 January 2019
Unaudited
Restated
Year ended
31 July 2019
Audited
Restated
Basic
Continuing operations
5.74p
6.79p
11.12p
Discontinued operations
-
7.51p
7.55p
Total basic earnings per share
5.74p
14.30p
18.67p
Diluted
Continuing operations
5.63p
6.68p
10.93p
Discontinued operations
-
7.35p
7.42p
Total diluted earnings per share
5.63p
14.03p
18.35p
Costs - Continuing Operations
· Group operating costs amounted to £4.16 million for the period (31.1.2019: £3.98 million) up modestly by 1.8% LFL
· Cost ratio12 reduced further to 46.4% (31.1.2019: 46.7%) (31.7.2019: 47.3%)
We have a strong record of disciplined control of our group operating costs. In the period operating costs (stripping out the IFRS 16 effect of the operating lease costs) were up 4.6% year on year as we opened new stores. On a like for like basis stripping out the costs of new stores, Group operating costs amounted to £4.05 million for the period, a 1.8% increase year on year (31.1.2019: £3.98 million) and we provide a breakdown below.
Future cost increases are likely to be driven by the expansion of the business in the areas of rates, staffing and marketing. Overall cost increases are mainly driven by the expansion of the business and we are seeing little other cost pressures.
Property costs which mainly constitute rent and rates have risen in recent years as we felt the effects of higher rates bills and as we opened our new landmark stores. On a LFL basis rents have remained broadly static decreasing by 0.7%.
Staff costs increased by 6.1% (1.6% LFL) as we staffed the new stores and paid performance bonuses to all our store colleagues. We also incurred additional national insurance costs arising on these performance bonuses and the exercise of employee share options.
The principal decrease in overhead costs are due to a lower level of legal and professional costs related to work on rent reviews, corporate tax and compliance work and costs arising on aborted store acquisitions compared to the previous period.
Group- Continuing Operations
Increase (decrease)
in costs %
Six months
ended 31 Jan
2020
£'000
Six months
ended 31 Jan
2019
£'000
Restated
Year
ended 31 July
2019
£'000
Restated
Property costs
9.4%
2,157
1,971
4,022
IFRS 16 restatement - operating leases
11.5%
(720)
(646)
(1,356)
Restated property and premises costs
8.4%
1,437
1,325
2,666
Staff costs
6.1%
2,151
2,027
4,111
Overheads
(8.5%)
572
625
1,244
Total
4.6%
4,160
3,977
8,021
Group-Continuing Operations
Like for Like
Increase (decrease)
in costs %
Six months
ended 31 Jan
2020
£'000
Restated
Six months
ended 31 Jan
2019
£'000
Restated
Property costs
3.7%
2,045
1,971
IFRS 16 restatement - operating leases
(7.2%)
(599)
(646)
Restated property and premises costs
9.1%
1,446
1,325
Staff costs
1.6%
2,059
2,027
Overheads
(12.9%)
545
625
Total
1.8%
4,050
3,977
Cash flow and financing
At 31 January 2020 the Group had cash balances of £11.0 million (31.1.2019: £11.2 million) (31.7.2019: £13.6 million). Cash inflow from operating activities before investing and financing activities was £6.2 million (31.1.2019: £6.0 million).
As well as using cash generated from operations to fund some capital expenditure, the Group has a £75 million five year revolving credit facility which runs until April 2024. This provides sufficient liquidity for the Group's current needs. Undrawn committed facilities at the period-end amounted to £32.0 million (31.1.2019: £7.6 million) (31.7.2019: £32.0 million).
Cash available for Distribution (CAD) up 4.8% from Continuing Operations
Cash available for Distribution (CAD) provides a clear picture of ongoing cash flow available for dividends or debt repayment. The CAD was up 4.8% in the period compared to the corresponding period last year.
Cash available for Distribution (CAD) per share (annualised) was up 4.7% to 20.15 pence (31.1.2019: 19.24 pence).
To illustrate this fully the table below shows the calculation of CAD.
Analysis of Cash Available for Distribution (CAD)
Based on Continued Operations
Period ended
31 January 2020
£'000
Period ended
31 January 2019
Restated
£'000
Year ended
31 July 2019
Restated
£'000
Group Adjusted EBITDA
(per Statement of Comprehensive Income)
4,723
4,441
8,749
IFRS 16 restatement - operating leases
(720)
(646)
(1,356)
Less: Net finance costs paid1
(560)
(439)
(903)
Capitalised maintenance expenses
(80)
(55)
(99)
New Works Team
(41)
(47)
(90)
Current tax (note 7)
(403)
(470)
(811)
Total deductions
(1,804)
(1,657)
(3,259)
Cash Available for Distribution
2,919
2,784
5,490
Increase in CAD over last year
4.8%
4.5%
9.2%
Number
Number Number
Closing shares in issue (less shares held in EBT)
28,970,001
28,927,707
28,960,574
CAD per share (annualised)
20.15p
19.24p
18.95p
Increase in CAD per share over last year
4.7%
3.8%
8.8%
1 Net finance costs represent finance costs paid per the cash flow statement of £0.58 million less bank interest received to give the true cash flow effect.
Gearing10 (excluding IFRS16 lease liabilities)
At 31 January 2020 the Group had £43.0 million of gross bank borrowings (31.1.2019: £42.4 million) representing gearing of 27.2% (31.1.2019: 29.5%) on net debt of £31.9 million (31.1.2019: £31.2 million). After adjusting for the uplift in value of short leaseholds which are stated at depreciated historic cost in the statement of financial position, gearing is 24.2% (31.1.2019: 25.9%). After adjusting for the deferred tax liability carried at period end of £22.5 million gearing drops to 20.7% (31.1.2019: 22.2%).
Gearing10 (including IFRS16 lease liabilities)
At 31 January 2020 the Group had £43.0 million of gross bank borrowings (31.1.2019: £42.4 million) and £12.3 million of lease liabilities (31.1.2019: £13.4 million) representing gearing of 37.9% (31.1.2019: 42.3%) on net debt of £44.2 million (31.1.2019: £44.6 million). After adjusting for the uplift in value of short leaseholds which are stated at depreciated historic cost in the statement of financial position, gearing is 33.6% (31.1.2019: 50.3%). After adjusting for the deferred tax liability carried at period end of £22.5 million gearing drops to 28.7% (31.1.2019: 41.0%).
Capital expenditure
The Group has an active 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 £4.9 million (31.1.2019: £8.8 million). This was primarily the purchase of the Stevenage site and deposits paid on the Salford (Manchester), Warrington and Chester sites, together with ongoing construction and fit out works at our sites in Leicester as well as planning and pre-development works at our Wolverhampton, Oldbury, Bedford, Bournemouth, and Cheshunt sites. The figure includes £0.22 million of capitalised interest.
Clearly, we will carefully evaluate the ongoing economic and trading position before making any further capital commitments.
Market Valuation of Freehold and Operating Leasehold Land and Buildings
On 31 July 2019 professional valuations were prepared by Jones Lang LaSalle (JLL) for fifteen freeholds and eight operating leasehold properties. This valuation has been adopted for the 31 January 2020 period-end after adjusting for additions and disposals since the 31 July 2019 year-end. The valuation was prepared in accordance with the RICS Valuation - Professional Standards, published by The Royal Institute of Chartered Surveyors (the "Red Book"). The valuation has been provided for accounts purposes and, as such, is a Regulated Purpose Valuation as defined in the Red Book.
Although the Board did not commission an external valuation at this interim period-end it is mindful of the need to accord with the measurement principles of International Financial Reporting Standards as adopted by the European Union. Accordingly after consulting with our external valuers, whilst there has been continued market activity in the self-storage sector since July 2019, the Directors considered that there had not been such a material movement in market yields that warranted a modification to the position as at 31 January 2020 in respect of our properties externally valued at 31 July 2019. The Directors therefore consider that it is appropriate to maintain the portfolio's external valuation without modification pending a comprehensive external valuation at our 31 July 2020 year-end.
Novel Coronavirus (COVID-19)
Since the reporting date of 31 January 2020, the outbreak of the Novel Coronavirus (COVID-19) has been declared a "Global Pandemic" by the World Health Organisation on the 11 March 2020. This has impacted global financial markets.
Market activity is being affected in many sectors and Jones Lang LaSalle (JLL) in common with other external valuers have subsequently introduced material uncertainty provisions into their valuation reports for valuations conducted on or after 11 March 2020. For valuations after the 11 March 2020, JLL have confirmed that they are unable to provide an estimate of the financial effect that this event would have on the value of the properties for the time being.
Valuations
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.
It is not the intention of the Directors to make any significant disposals of trading stores, although individual disposals may be considered where it is clear that value can be added by recycling the capital into other opportunities. The Board will continue to commission independent valuations on its trading stores annually to coincide with its year-end reporting.
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 £18.7 million (31.1.2019: £18.2 million). We have reported by way of a note the underlying value of these leasehold stores in future revaluations and adjusted our Net Asset Value (NAV) calculation accordingly to include their value. This ensures comparable NAV calculations which now include the Right of Use Assets as a result of the implementation of IFRS16.
Analysis of Total Property Value
No of stores
/sites
31 Jan 2020 Valuation
£'000
No of stores
/sites
31 Jan 2019 Valuation
£'000
No of stores
/sites
31 July 2019 Valuation
£'000
Freehold and long leasehold3 valued by JLL 1
15
144,000
14
128,000
15
144,000
Leasehold valued by JLL 2
8
18,725
7
18,200
8
18,725
Freehold land and buildings at Director valuation 3
1
2,467
1
3,051
1
2,509
Leasehold land and buildings at Director valuation
-
-
1
1,236
-
-
Subtotal
24
165,192
23
150,487
24
165,234
Sites in development at cost 4
10
22,846
9
23,830
30
18,442
Total
34
188,038
32
174,317
30
183,676
1 Includes related fixtures and fittings (refer note 10a)
2 The eight 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 11 years and 0 months at the date of the 2019 valuation (2018 valuation: 11 years and 1 month).
3 For more details refer note 10a - Directors valuation
4 Includes £223,163 of capitalised interest during the period.
Total freehold properties account for 90.0% of all property values (31.1.2019: 88.9%).
Adjusted Net Asset Value per Share
Adjusted net assets per share is the net assets of the Group adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the period-end. The shares currently held in the Group's employee benefits trust (own shares held) and in treasury are excluded from the number of shares.
At 31 January 2020 the adjusted net asset value per share increased to £5.32 from £4.83 year on year, up 10.1%. This increase is a result of higher property values on our existing stores as well as the maiden valuations at 31 July 2019 on our new stores in Cardiff, Ipswich and Hedge End as the strength of our landmark stores is recognised, combined with cash generated from operations, offset in part by dividend payments and an increase in the shares in issue due to the exercise of share options during the year.
Analysis of net asset value (NAV)
31 Jan
2020
£'000
Unaudited
31 Jan
2019
£'000
Unaudited
Restated
31 July
2019
£'000
Audited
Restated
Net assets
Adjustment to include operating/short leasehold stores at valuation
Add: JLL leasehold valuation
Deduct: leasehold properties and their fixtures and fittings at NBV
116,746
18,725
(3,851)
105,452
18,200
(3,813)
116,657
18,725
(3,905)
131,620
119,839
131,477
Deferred tax arising on revaluation of leasehold properties1
(2,529)
(2,446)
(2,519)
Adjusted net assets
129,091
117,393
128,958
Shares in issue
Number
'000
Number
'000
Number
'000
Opening shares in issue
Shares issued for the exercise of options
29,584
9
29,499
52
29,499
85
Closing shares in issue
Shares held in EBT
29,593
(623)
29,551
(623)
29,584
(623)
Closing shares for NAV purposes
28,970
28,928
28,961
Adjusted net asset value per share after deferred tax provision
£4.46
£4.05
£4.45
Adjusted net asset value per share before deferred tax provision
Adjusted net assets
129,091
117,393
128,958
Deferred tax liabilities and assets recognised by the Group
22,487
20,046
22,385
Deferred tax arising on revaluation of leasehold properties1
2,529
2,446
2,519
Adjusted net assets before deferred tax
154,107
139,885
153,862
Closing shares for NAV purposes
28,970
28,928
28,961
Adjusted net asset value per share before deferred tax provision
£5.32
£4.83
£5.31
1 A deferred tax adjustment in respect of the uplift in the value of the leasehold properties has been included. Although this is a memorandum adjustment as leasehold properties are included in the Group's financial statements at cost and not at valuation, this deferred tax adjustment is included in the adjusted net asset value calculation in order to maintain a consistency of tax treatment between freehold and leasehold properties.
Corporate and Social Responsibilities
Lok'nStore conducts its business in a manner that reflects honesty, integrity and ethical conduct. We believe that the long-term success of the business is best served by respecting the interests of all our stakeholders. Management of social, environmental and ethical issues is of high importance to Lok'nStore. These issues are dealt with on a day-to-day basis by the Group's managers with principal accountability lying with the Board of Directors. We look for opportunities to address our responsibility to the environment, and we pay close attention to our energy use, carbon dioxide emissions, water use and waste production. At each year-end Lok'nStore commissions a full assessment of the Group's environmental impact.
Customers
We believe in clarity and transparency towards our customers. Brochures and literature are written in plain English, explaining clearly our terms of business without hiding anything. We are open and honest about our products and services and do not employ pressure selling techniques or attempt to take advantage of any vulnerable groups. If we make a mistake we acknowledge it, deal with the problem quickly, and learn from our error. We listen to our customers as we know that they can help us improve our service to them.
Covid-19 events continue to move at a fast pace but our objective is to continue to keep our stores open so that our business customers in particular can continue to operate. Many of them are 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. All of our stores remain open.
Andrew Jacobs Ray Davies
Chief Executive Officer Finance Director
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2020
Notes
Six months
ended
31 January 2020
Unaudited
£'000
Six months
ended
31 January 2019
Unaudited
(Restated**)
£'000
Year ended
31 July 2019
Audited
(Restated**)
£'000
Revenue
2
8,966
8,512
16,950
Total property, staff, distribution and general costs
3a
(4,243)
(4,071)
(8,201)
Adjusted EBITDA1
4,723
4,441
8,749
Amortisation of intangible assets
-
(83)
(83)
Depreciation
6
(1,829)
(1,677)
(3,424)
Equity settled share based payments
(41)
(11)
(46)
(1,870)
(1,771)
(3,553)
Profit on sale of land at store
3(c)
-
296
295
Costs of sale & manage-back of Crayford store
3(c)
-
-
(54)
Deferred financing on bank loan written off
3(c)
-
-
(133)
-
296
108
(1,870)
(1,475)
(3,445)
Operating profit
2,853
2,966
5,304
Finance income
4
16
10
31
Finance cost
5
(563)
(408)
(909)
Profit before taxation
2,306
2,568
4,426
Income tax expense
7
(642)
(602)
(1,211)
Profit for the period from continuing operations
1,664
1,966
3,215
Profit for the period from discontinued operations
11
-
2,169
2,182
Profit for the period
1,664
4,135
5,397
Profit attributable to:
Owners of the parent
20
1,664
4,135
5,397
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Increase in property valuation
631
655
13,765
Deferred tax relating to change in property valuation
(107)
(122)
(2,327)
524
533
11,438
Items that may be subsequently reclassified to profit and loss
Other comprehensive income
524
533
11,438
Total comprehensive income for the period
2,188
4,668
16,835
Attributable to:
Owners of the parent
2,188
4,668
16,835
** details of the restatements following the adoption of IFRS 16 are made in note 1 to the financial statements.
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2020
Earnings per share attributable to owners of the Parent
Basic
9
Continuing operations
5.74p
6.79p
11.12p
Discontinued operations
-
7.51p
7.55p
Total basic earnings per share
5.74p
14.30p
18.67p
Diluted
9
Continuing operations
5.63p
6.68p
10.93p
Discontinued operations
-
7.35p
7.42p
Total diluted earnings per share
5.63p
14.03p
18.35p
1 Adjusted EBITDA is defined in the accounting policies section of the notes to the interim report.
Consolidated Statement of Changes in Equity
For the six months ended 31 January 2020
Attributable to owners of the Parent
Share
capital
£'000
Share
premium
£'000
Other
reserves
£'000
Revaluation
reserve
£'000
Retained
earnings
£'000
Restated
Total
equity
£'000
Restated
1 August 2018 - Audited
295
10,350
8,363
64,899
19,344
103,251
Effect of new accounting standard - IFRS 16
-
-
-
-
(336)
(336)
As at 1 August 2018 - Audited restated
295
10,350
8,363
64,899
19,008
102,915
Profit for the period (restated)
-
-
-
-
4,135
4,135
Other comprehensive income:
Increase in property valuation net of deferred tax
-
-
-
533
-
533
Total comprehensive income for the year
-
-
-
533
4,135
4,668
Transactions with Owners
Dividend paid
-
-
-
-
(2,217)
(2,217)
Share based payments
-
-
11
-
-
11
Transfers in relation to share based payments
-
-
(27)
-
27
-
Deferred tax credit relating to share options
-
-
(15)
-
-
(15)
Exercise of share options
1
89
-
-
-
90
Total transactions with owners
1
89
(31)
-
(2,190)
(2,131)
Reserve transfer on disposal of assets
-
-
-
(500)
500
-
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(151)
151
-
31 January 2019 - Unaudited (restated)
296
10,439
8,332
64,781
21,604
105,452
Profit for the period (restated)
-
-
-
-
1,262
1,262
Other comprehensive income
Increase in property valuation net of deferred tax
-
-
-
10,905
-
10,905
Total comprehensive income for the year
-
-
-
10,905
1,262
12,167
Transactions with Owners
Dividend paid
-
-
-
-
(1,062)
(1,062)
Share based payments
-
-
35
-
-
35
Transfers in relation to share based payments
-
-
(24)
-
24
-
Deferred tax credit relating to share options
-
-
14
-
-
14
Exercise of share options
-
51
-
-
-
51
Total transactions with owners
-
51
25
-
(1,038)
(962)
Reserve transfer on disposal of assets
-
-
-
(4,427)
4,427
-
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(153)
153
-
31 July 2019 - Audited (restated)
296
10,490
8,357
71,106
26,408
116,657
Profit for the period
-
-
-
-
1,664
1,664
Other comprehensive income
Increase in property valuation net of deferred tax
-
-
-
524
-
524
Total comprehensive income for the year
-
-
-
524
1,664
2,188
Transactions with Owners
Dividend paid
-
-
-
-
(2,413)
(2,413)
Share based payments
-
-
41
-
-
41
Transfers in relation to share based payments
-
-
(5)
-
5
-
Deferred tax credit relating to share options
-
-
245
-
-
245
Exercise of share options
-
28
-
-
-
28
Total transactions with owners
-
28
281
-
(2,408)
(2,099)
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(154)
154
-
31 January 2020 - Unaudited (restated)
296
10,518
8,638
71,476
25,818
116,746
Consolidated Statement of Financial Position
31 January 2020
Notes
31 January
2020
Unaudited
£'000
31 January
2019
Unaudited
(Restated**)
£'000
31 July
2019
Audited
(Restated**)
£'000
Assets
Non-current assets
Property, plant and equipment
10a
173,245
158,774
168,938
Financial assets
361
361
361
Right of use assets
10b
11,750
12,968
12,359
185,356
172,103
181,658
Current assets
Inventories
12
363
275
298
Trade and other receivables
13
2,301
3,074
3,707
Cash and cash equivalents
11,023
11,236
13,662
Total current assets
13,687
14,585
17,667
Total assets
199,043
186,688
199,325
Liabilities
Current liabilities
Trade and other payables
14
(4,728)
(5,066)
(4,753)
Lease liabilities
(1,257)
(1,138)
(1,161)
Taxation
(402)
(503)
(339)
(6,387)
(6,707)
(6,253)
Non-current liabilities
Borrowings
16a
(42,398)
(42,200)
(42,331)
Lease liabilities
16b
(11,025)
(12,283)
(11,699)
Deferred tax
17
(22,487)
(20,046)
(22,385)
(75,910)
(74,529)
(76,415)
Total liabilities
(82,297)
(81,236)
(82,668)
Net assets
116,746
105,452
116,657
Equity
Equity attributable to owners of the parent
Called up share capital
18
296
296
296
Share premium
10,518
10,439
10,490
Other reserves
19
8,638
8,332
8,357
Retained earnings
20
25,818
21,604
26,408
Revaluation reserve
71,476
64,781
71,106
Total equity
116,746
105,452
116,657
** details of the restatements following the adoption of IFRS 16 are made in note 1 to the financial statements.
Approved by the Board of Directors and authorised for issue on 24 April 2020 and signed on its behalf by:
Andrew Jacobs Ray Davies
Chief Executive Officer Finance Director
Consolidated Statement of Cash Flows
For the six months ended 31 January 2020
Notes
Six months ended
31 January
2020
Unaudited
£'000
Six months
ended
31 January
2019
Unaudited
(Restated**)
£'000
Year
ended
31 July
2019
Audited
(Restated**)
£'000
Operating activities
Cash generated from operations
22a
6,172
6,000
9,545
Income tax paid
(475)
(450)
(955)
Net cash from operating activities
5,697
5,550
8,590
Investing activities
Proceeds from disposal of discontinued operation
(net of disposal costs and cash included in sale)
-
6,866
6,849
Proceeds of sale of land (net of disposal costs)
-
796
796
Proceeds of sale of store
-
-
7,418
Purchase of property, plant and equipment
10a
(4,671)
(7,526)
(14,029
Acquisition of subsidiary (net of cash acquired)
-
(1,136)
(1,069)
Interest received
16
10
31
Net cash used in investing activities
(4,655)
(990)
(4)
Financing activities
Proceeds from drawdown of new bank facility
-
-
42,971
Repayment of bank borrowings on retiring bank facility
-
-
(42,395)
Proceeds of bank borrowings utilised for store development
-
5,030
5,653
Finance costs paid on bank refinancing
-
-
(593)
Finance costs paid
(576)
(449)
(934)
Lease liabilities paid
(720)
(768)
(1,478)
Equity dividends paid
(2,413)
(2,217)
(3,279)
Proceeds from issuance of ordinary shares (net)
28
90
141
Net cash (used in) / from financing activities
(3,681)
1,686
86
Net (decrease) / increase in cash and cash equivalents in the period
(2,639)
6,246
8,672
Cash and cash equivalents at beginning of the period
13,662
4,990
4,990
Cash and cash equivalents at end of the period
11,023
11,236
13,662
** details of the restatements following the adoption of IFRS 16 are made in note 1 to the financial statements.
Accounting Policies
General Information
Lok'nStore Group plc is an AIM listed company incorporated and domiciled in England and Wales. As required, further information is available in the investor section of the Company's website at http://www.loknstore.co.uk.The address of the registered office is One Fleet Place, London, EC4M 7WS, UK. Copies of this Interim Report and Accounts may be obtained from the Company's head office at 112 Hawley Lane, Farnborough, Hants, GU14 8JE or from the investor section of the Company's website at http://www.loknstore.co.uk.
Basis of preparation
The interim results for the six months ended 31 January 2020 have been prepared on the basis of the accounting policies expected to be used in the 2020 Lok'nStore Group Plc Annual Report and Accounts and in accordance with the recognition and measurement principles of International Financial Reporting Standards ('IFRS') and the International Financial Reporting Interpretations Committee ('IFRIC') as adopted by the European Union ('EU').
The 2020 Lok'nStore Group Plc Annual Report and Accounts will cover the implementation of IFRS 16. IFRS 16 represents a significant change to the way that the Group prepares its financial statements. The effective date of adoption is for accounting periods commencing after 1 January 2019. IFRS 16 will therefore apply to Lok'nStore's financial statements for the year ended 31 July 2020 and accordingly IFRS 16 has been applied in these interim condensed set of financial statements.
The interim financial statements present the effects of IFRS 16 on the Statement of Comprehensive Income, Statement of Financial Position, financial performance and cash flows of the Group as a significant lessee in respect of our leased stores. IFRS 16 primarily affects the accounting by lessees and results in the recognition of all leases on the balance sheet. The standard removes the previous distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for virtually all lease contracts. Unless otherwise stated, the prior period financial comparatives contained within these statements have been restated to reflect the first-time adoption of IFRS 16 using the full retrospective method. The implementation and the resulting effects on the financial statements are discussed in detail in note 1 of the financial statements below.
Subject to the implementation of IFRS 16 in these interim financial statements, the same accounting policies, presentation and methods of computation are followed in these interim condensed set of financial statements as have been applied in the Group's latest annual audited financial statements.
The interim results, which were approved by the Directors on 24 April 2020, are unaudited. The interim results do not constitute statutory financial statements within the meaning of section 434A of the Companies Act 2006.
Comparative figures for the year ended 31 July 2019, prior to the restatements for the adoption of IFRS16, have been extracted from the statutory accounts for the Group for that period, which carried an unqualified audit report, did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter, did not contain a statement under section 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (and its subsidiaries). Control is achieved where the Company has power over the investee, exposure or rights to variable returns from the investee and the ability to use its power to vary those returns.
Intra-group transactions, balances, and unrealised gains and losses on transactions between Group companies are eliminated on consolidation, except to the extent that intra-group losses indicate an impairment.
Going concern
The Directors can report that, based on the Group's budgets and financial projections, they have satisfied themselves that the business is a going concern. 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 £11.0 million (31.07.2019: £13.7 million), undrawn committed bank facilities at 31 January 2020 of £32.0 million (31.07.2019: £32.0 million), and cash generated from operations in the period to 31 January 2020 of £6.2 million (31.01.2019: £6.0 million) (31.07.2019: 9.5 million).
The Group currently operates a £75 million five year revolving credit facility with Royal Bank of Scotland plc and Lloyds Bank plc with a further £25 million accordion option taking the facility to £100 million and will provide funding for new landmark site acquisitions and working capital to support the Group's ambitious growth plans.
The Group is fully compliant with all bank covenants and undertakings and is not obliged to make any repayments prior to expiration. The facility expires in April 2024.
The robust capital structure, cash flow and financing and its effect on trading are reported in the Chairman's Statement and provide a great deal of resilience against the impact of COVID-19. The interim financial statements are therefore prepared on a going concern basis.
Adjusted EBITDA
Adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA) is defined as profits from operations before all depreciation and amortisation charges, share-based payments and other non-recurring costs, finance income, finance costs and taxation.
Discontinued operations
The results of discontinued operations are presented in a single line in the Consolidated Statement of Comprehensive Income and the comparative information has been re-stated accordingly.
Notes to the Financial Statements
For the six months ended 31 January 2020
1 Implementation of IFRS 16 - Leases
IFRS 16 represents a significant change to the way that the Group prepares its financial statements. The effective date of adoption is for accounting periods commencing after 1 January 2019 and the standard will therefore apply to Lok'nStore's financial statements for the year ended 31 July 2020 and has been applied in these interim financial statements using the full retrospective approach.
IFRS 16 primarily affects the accounting by lessees and results in the recognition of the value of almost all leases on the balance sheet. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals.
The application of IFRS 16 relates to the Groups property leases. The Group has no leases on any other types of assets.
The Statement of Financial Position: The Group's operating leases on its leased stores are recognised as a 'right of use asset' and as a corresponding liability at the year-end. Each lease payment is allocated between the liability element and the finance cost element. The finance costs are charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining liability for the period. The right-of-use asset is depreciated on a weighted depreciation charge based on the individual lease term of the separate operating leases. Assets and liabilities arising from a lease will initially be measured on a present value basis which will include the fixed rental payments less any lease incentives receivable. If the interest rate implicit in the lease cannot be readily determined the lease payments will be discounted by the Group's incremental borrowing rate (cost of debt) to obtain an asset of similar value over a similar term with similar security. Right of use assets will be measured at cost comprising the initial measurement of the lease liability plus any initial direct costs (if any). The Groups current operating lease commitments are reported in Note 23.
The Statement of Profit or Loss: This is affected because the total expense is typically higher in the earlier years of a lease and lower in later years. Additionally the rent operating expense that would usually be reported in these financial statements at £0.72 million (31.01.2019: £0.72 million) is replaced with interest and depreciation as a consequence of the 'capitalisation effect' of the leases, so the Group's key metric of Adjusted EBITDA increases significantly by the removal of the rent expense from the operating profit and loss. Other performance measures including Operating Profit also increase although reported interest and depreciation will be higher. Accordingly, the key metrics and Alternative Performance Measures (APM's) have been updated for IFRS16 in the KPI's section above.
The Consolidated Statement of Cash Flows: While overall underlying cash flow is unaffected by the changes the presentation within the Consolidated Statement of Cash Flows will change. Reported operating cash flows will be higher as cash payments for the principal portion of the lease liability are classified within financing activities.
The effect on financial ratios such as gearing or leverage causes them to rise as the lease liability now forms part of net debt.
To give a broad overview of the numerical effect on the implementation of IFRS 16 as it would apply to the current period and comparative numbers we have:
Group
31 January
2020
£'000
Group
31 January
2019
£'000
Group
31 July
2019
£'000
Continuing operations
Rents payable under operating leases
720
646
1,356
Discontinued operations
Rents payable under operating leases
-
122
122
Total rents payable under operating leases
720
768
1,478
To ensure consistency and effective comparison with prior periods, the Group has elected to apply the full retrospective implementation approach with reinstatement of the comparative information. The transition date of initial application is therefore 1 August 2018. 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% as an effective cost of debt as the discount rate. This calculates an opening Right of Use Asset (ROU) as at 1 August 2018 of £14.87 million. Correspondingly this is also the opening value of the lease liability following the capitalisation of the leases.
After the application of a weighted depreciation charge based on the individual lease term of the separate operating leases and the imputation of an interest charge at 2.2% as part of the amortisation of the lease liability a reconciliation of the total operating leases to the IFRS lease liability is shown below:
Continuing Operations
Statement of Financial Position (extract)
Group
31 January
2020
£'000
Group
31 January
2019
£'000
Group
31 July
2019
£'000
Group
31 July
2018
transition
£'000
IFRS 16
IFRS 16
IFRS 16
IFRS 16
Restated
Restated
Restated
Restated
Right of Use Asset (ROU)
11,750
12,968
12,359
13,577
Equity - accumulated effect of restatement
532
453
501
336
12,282
13,421
12,860
13,913
Current Lease Liability
Amounts due within one year
1,257
1,138
1,161
1,052
Non-current Lease Liability
Amounts due in one to two years
1,285
1,257
1,257
1,161
Amounts due in three to five years
2,749
3,224
3,224
3,584
Amounts due in more than five years
6,991
7,802
7,218
8,116
Non-current Lease Liability
11,025
12,283
11,699
12,861
Total lease liability
12,282
13,421
12,860
13,913
Statement of Comprehensive Income (extract)
Group
31 January
2020
£'000
Group
31 January
2019
£'000
Group
31 July
2019
£'000
Group
31 July
2018
transition £'000
IFRS 16
IFRS 16
IFRS 16
IFRS 16
Restated
Restated
Restated
Restated
Operating lease expense
720
646
1,356
1,191
Depreciation of Right of Use Asset (ROU)
(609)
(608)
(1,217)
(1,218)
Interest charged on lease liability
(143)
(155)
(304)
(309)
Impact on Comprehensive Income
(32)
(117)
(165)
(336)
Analysis of the effect within the Statement of Comprehensive Income
Group
31 January
2020
£'000
Group
31 January
2019
£'000
Group
31 July
2019
£'000
Group
31 July
2018
transition £'000
IFRS 16
IFRS 16
IFRS 16
IFRS 16
Restated
Restated
Restated
Restated
Increase in EBITDA
720
646
1,356
1,191
Increase / (decrease) in operating profit
111
38
139
(27)
Increase / (decrease) in PBT
(32)
(117)
(165)
(336)
The Group has applied a single discount rate equivalent to its effective cost of debt. For more detailed information on the Groups Commitments under operating leases refer to note 23 (Commitments under operating leases).
Reconciliation of the impact of IFRS16 on the previously reported
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2019
Notes
Six months
ended
31 January
2019Unaudited
£'000
Impact of
IFRS 16
£'000
Six months ended
31 January 2019
Unaudited
(Restated**)
£'000
Revenue
2
8,512
-
8,512
Total property, staff, distribution and general costs
3a
(4,717)
646
(4,071)
Adjusted EBITDA1
3,795
646
4,441
Amortisation of intangible assets
(83)
-
(83)
Depreciation
(1,069)
(608)
(1,677)
Equity settled share based payments
(11)
-
(11)
(1,163)
(608)
(1,771)
Profit on sale of land at store
3(c)
296
-
296
Costs of sale & manage-back of Crayford store
3(c)
-
-
-
Deferred financing on bank loan written off
3(c)
-
-
-
296
-
296
(867)
(608)
(1,475)
Operating profit
2,928
38
2,966
Finance income
4
10
-
10
Finance cost - bank borrowings
5
(253)
-
(253)
Finance cost - lease liabilities
5
-
(155)
(155)
Profit before taxation
2,685
(117)
2,568
Income tax expense
7
(602)
-
(602)
Profit for the period from continuing operations
2,083
(117)
1,966
Profit for the period from discontinued operations
11
2,169
-
2,169
Profit for the period
4,252
(117)
4,135
Profit attributable to:
Owners of the parent
20
4,252
(117)
4,135
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Increase in property valuation
655
-
655
Deferred tax relating to change in property valuation
(122)
-
(122)
533
-
533
Items that may be subsequently reclassified to profit and loss
Other comprehensive income
533
-
533
Total comprehensive income for the period
4,785
-
4,668
Attributable to:
Owners of the parent
4,785
(117)
4,668
Reconciliation of the impact of IFRS16 on the previously reported
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2019
Earnings per share attributable to owners of the Parent
Six months
ended
31 January 2019
Unaudited
£'000
Impact of
IFRS 16
£'000
Six months ended
31 January 2019
Unaudited
(Restated**)
£'000
Basic
9
Continuing operations
7.21p
(0.42p)
6.79p
Discontinued operations
7.51p
-
7.51p
Total basic earnings per share
14.72p
(0.42p)
14.30p
Diluted
9
Continuing operations
7.05p
(0.37p)
6.68p
Discontinued operations
7.35p
-
7.35p
Total diluted earnings per share
14.40p
(0.37p)
14.03p
1 Adjusted EBITDA is defined in the accounting policies section of the notes to the interim report.
Reconciliation of the impact of IFRS16 on the previously reported
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2019
Notes
Year ended
31 July
2019
Unaudited
£'000
Impact of
IFRS 16
£'000
Year ended
31 July 2019
Unaudited
(Restated**)
£'000
Revenue
2
16,950
-
16,950
Total property, staff, distribution and general costs
3a
(9,557)
1,356
(8,201)
Adjusted EBITDA1
7,393
1,356
8,749
Amortisation of intangible assets
(83)
-
(83)
Depreciation
(2,207)
(1,217)
(3,424)
Equity settled share based payments
(46)
-
(46)
(2,336)
(1,217)
(3,553)
Profit on sale of land at store
3(c)
295
-
295
Costs of sale & manage-back of Crayford store
3(c)
(54)
-
(54)
Deferred financing on bank loan written off
3(c)
(133)
-
(133)
108
-
108
(2,228)
(1,217)
(3,445)
Operating profit
5,165
139
5,304
Finance income
4
31
-
31
Finance cost - bank borrowings
5
(605)
-
(605)
Finance cost - lease liabilities
5
-
(304)
(304)
574
(304)
878
Profit before taxation
4,591
(165)
4,426
Income tax expense
7
(1,211)
-
(1,211)
Profit for the period from continuing operations
3,380
(165)
3,215
Profit for the period from discontinued operations
11
2,182
-
2,182
Profit for the period
5,562
(165)
5,397
Profit attributable to:
5,562
(165)
5,397
Owners of the parent
20
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Increase in property valuation
13,765
-
13,765
Deferred tax relating to change in property valuation
(2,327)
-
(2,327)
11,438
-
11,438
Items that may be subsequently reclassified to profit and loss
Other comprehensive income
11,438
-
11,438
Total comprehensive income for the period
17,000
(165)
16,835
Attributable to:
Owners of the parent
17,000
(165)
16,835
Reconciliation of the impact of IFRS16 on the previously reported
Consolidated Statement of Comprehensive Income
For the six months ended 31 July 2019
Earnings per share attributable to owners of the Parent
Year ended
31 July
2019
Unaudited
£'000
Impact of
IFRS 16
£'000
Year ended
31 July 2019
Unaudited
(Restated**)
£'000
Basic
9
Continuing operations
11.69p
(0.57p)
11.12p
Discontinued operations
7.55p
-
7.55p
Total basic earnings per share
19.24p
(0.57p)
18.67p
Diluted
9
Continuing operations
11.50p
(0.57p)
10.93p
Discontinued operations
7.42p
-
7.42p
Total diluted earnings per share
18.92p
(0.57p)
18.35p
1 Adjusted EBITDA is defined in the accounting policies section of the notes to the interim report.
Reconciliation of the impact of IFRS16 on the previously reported
Consolidated Statement of Financial Position
31 January 2019
Notes
31 January
2019
Unaudited
£'000
Impact of
IFRS 16
£'000
31 January
2019
Unaudited
(Restated**)
£'000
Assets
Non-current assets
Property, plant and equipment
10a
158,774
-
158,774
Financial assets
361
-
361
Right of use assets
-
12,968
12,968
159,135
12,968
172,103
Current assets
Inventories
12
275
-
275
Trade and other receivables
13
3,074
-
3,074
Cash and cash equivalents
11,236
-
11,236
Total current assets
14,585
-
14,585
Total assets
173,720
12,968
186,688
Liabilities
Current liabilities
Trade and other payables
14
(5,066)
-
(5,066)
Lease liabilities
-
(1,138)
(1,138)
Taxation
(503)
-
(503)
(5,569)
(1,138)
(6,707)
Non-current liabilities
Borrowings
16a
(42,200)
-
(42,200)
Lease liabilities
16b
-
(12,283)
(12,283)
Deferred tax
17
(20,046)
-
(20,046)
(62,246)
(12,283)
(74,529)
Total liabilities
(67,815)
(13,421)
(81,236)
Net assets
105,905
(453)
105,452
Equity
Equity attributable to owners of the parent
Called up share capital
18
296
-
296
Share premium
10,439
-
10,439
Other reserves
19
8,332
-
8,332
Retained earnings
20
22,057
(453)
21,604
Revaluation reserve
64,781
-
64,781
Total equity
105,905
(453)
105,452
Reconciliation of the impact of IFRS16 on the previously reported
Consolidated Statement of Financial Position
31 July 2019
Notes
31 July
2019
Audited
£'000
Impact of
IFRS 16
£'000
31 July
2019
Audited
(Restated**)
£'000
Assets
Non-current assets
Property, plant and equipment
10a
168,938
-
168,938
Financial assets
361
-
361
Right of use assets
-
12,359
12,359
169,299
12,359
181,658
Current assets
Inventories
12
298
-
298
Trade and other receivables
13
3,707
-
3,707
Cash and cash equivalents
13,662
-
13,662
Total current assets
17,667
-
17,667
Total assets
186,966
12,359
199,325
Liabilities
Current liabilities
Trade and other payables
14
(4,753)
-
(4,753)
Lease liabilities
-
(1,161)
(1,161)
Taxation
(339)
-
(339)
(5,092)
(1,161)
(6,253)
Non-current liabilities
Borrowings
16a
(42,331)
-
(42,331)
Lease liabilities
16b
-
(11,699)
(11,699)
Deferred tax
17
(22,385)
-
(22,385)
(64,716)
(11,699)
(76,415)
Total liabilities
(69,808)
(12,860)
(82,668)
Net assets
117,158
(501)
116,657
Equity
Equity attributable to owners of the parent
Called up share capital
18
296
-
296
Share premium
10,490
-
10,490
Other reserves
19
8,357
-
8,357
Retained earnings
20
26,909
(501)
26,408
Revaluation reserve
71,106
-
71,106
Total equity
117,158
(501)
116,657
Reconciliation of the impact of IFRS16 on the previously reported
Consolidated Statement of Cash Flows
For the six months ended 31 January 2019
Notes
Six months ended
31 January
2019
Unaudited
£'000
Impact of
IFRS 16
£'000
Six months
ended
31 January
2019
Unaudited
(Restated**)
£'000
Cash flows from operating activities
Profit before tax - continuing operations
2,685
(117)
2,568
Profit before tax - discontinued operations
209
(2)
207
Total profit before tax
2,894
(119)
2,775
Depreciation
1,118
710
1,828
Amortisation of intangible assets
83
-
83
Equity settled share based payments
11
-
11
Profit on sale of land at store
(296)
-
(296)
Interest receivable
(10)
-
(10)
Interest payable - bank borrowings
250
-
250
Interest payable - lease liabilities
-
177
177
(Increase) in inventories
(18)
-
(18)
Decrease in receivables
1,402
-
1,402
Decrease in payables
(202)
-
(202)
Cash generated from operations
5,232
768
6,000
Income tax paid
(450)
-
(450)
Net cash from operating activities
4,782
768
5,550
Investing activities
Proceeds from disposal of discontinued operation
(net of disposal costs and cash included in sale)
6,866
-
6,866
Proceeds of sale of land (net of disposal costs)
796
-
796
Purchase of property, plant and equipment
10a
(7,526)
-
(7,526)
Acquisition of subsidiary (net of cash acquired)
(1,136)
-
(1,136)
Interest received
10
-
10
Net cash used in investing activities
(990)
-
(990)
Financing activities
Proceeds of bank borrowings utilised for store development
5,030
-
5,030
Finance costs paid
(449)
-
(449)
Lease liabilities paid
-
(768)
(768)
Equity dividends paid
(2,217)
-
(2,217)
Proceeds from issuance of ordinary shares (net)
90
-
90
Net cash from financing activities
2,454
(768)
1,686
Net (decrease) / increase in cash and cash equivalents in the period
6,246
-
6,246
Cash and cash equivalents at beginning of the period
4,990
-
4,990
Cash and cash equivalents at end of the period
11,236
-
11,236
Reconciliation of the impact of IFRS16 on the previously reported
Consolidated Statement of Cash Flows
For the six months ended 31 July 2019
Cash flows from operating activities
Notes
Year ended 31 July 2019
Audited
£'000
Impact of
IFRS 16
£'000
Year ended
31 July 2019
Audited
(Restated**)
£'000
Profit before tax - continuing operations
4,590
(165)
4,426
Profit before tax - discontinued operations
2,175
(2)
2,173
Total profit before tax
6,765
(167)
6,590
Depreciation
2,256
1,319
3,575
Amortisation of intangible assets
83
-
83
Equity settled share based payments
46
-
46
Profit on sale of land at store
(296)
-
(296)
Profit on disposal of Saracen business
(1,967)
-
(1,967)
Costs of sale and manage-back - Crayford store
54
-
54
Deferred financing on bank loan written off
133
-
133
Interest receivable
(31)
-
(31)
Interest payable - bank borrowings
605
-
605
Interest payable - lease liabilities
-
326
326
(Increase) in inventories
(41)
-
(41)
Decrease in receivables
768
-
768
Decrease in payables
(313)
-
(313)
Cash generated from operations
8,067
1,478
9,545
Income tax paid
(955)
-
(955)
Net cash from operating activities
7,112
1,478
8,590
Investing activities
Proceeds from disposal of discontinued operation
(net of disposal costs and cash included in sale)
6,849
-
6,849
Proceeds of sale of land (net of disposal costs)
796
-
796
Proceeds of sale of store
7,418
-
7,418
Purchase of property, plant and equipment
10a
(14,029)
-
(14,029)
Acquisition of subsidiary (net of cash acquired)
(1,069)
-
(1,069)
Interest received
31
-
31
Net cash used in investing activities
(4)
-
(4)
Financing activities
Proceeds from drawdown of new bank facility
42,971
-
42,971
Repayment of bank borrowings on retiring bank facility
(42,395)
-
(42,395)
Proceeds of bank borrowings utilised for store development
5,653
-
5,653
Finance costs paid on bank refinancing
(593)
-
(593)
Finance costs paid
(934)
-
(934)
Lease liabilities paid
-
(1,478)
(1,478)
Equity dividends paid
(3,279)
-
(3,279)
Proceeds from issuance of ordinary shares (net)
141
-
141
Net cash (used in) / from financing activities
1,564
(1,478)
86
Net (decrease) / increase in cash and cash equivalents in the period
8,672
-
8,672
Cash and cash equivalents at beginning of the period
4,990
-
4,990
Cash and cash equivalents at end of the period
13,662
-
13,662
2 Revenue
Analysis of the Group's revenue from continuing operations is shown below:
Six months
ended
31 January
2020
Unaudited
Six months
ended
31 January
2019
Unaudited
Year
ended
31 July
2019
Audited
Stores trading
£'000
£'000
£'000
Self-storage revenue
7,571
7,146
14,235
Insurance revenue
844
763
1,533
Retail sales
112
118
241
Sub-total - self-storage revenue - owned stores
8,527
8,027
16,009
Ancillary store rental revenue
-
-
44
Management fees - managed stores
393
386
817
Sub-total
8,920
8,413
16,870
Non-storage income
46
99
80
Total revenue per statement of comprehensive income
8,966
8,512
16,950
3a Property, staff, distribution, general costs and
retail cost of sales
Six months ended
31 January
2020
Unaudited
£'000
Six months
ended
31 January
2019
Unaudited
£'000
Year
ended
31 July
2019
Audited
£'000
Restated
Restated
Property and premises costs
2,157
1,971
4,022
IFRS 16 restatement - operating leases
(720)
(646)
(1,356)
Restated property and premises costs
1,437
1,325
2,666
Staff costs
2,151
2,027
4,111
General overheads
572
625
1,244
Sub total - operating costs
4,160
3,977
8,021
Retail products cost of sales
83
94
180
Total property, staff, distribution, general costs and retail cost of sales
4,243
4,071
8,201
3b Cost of sales of retail products
Cost of sales represents the direct costs associated with the sale of retail products such as boxes and packaging and, the ancillary sales of insurance cover for customer goods, all of which fall within the Group's ordinary activities.
Six months ended
31 January
2020
Unaudited
£'000
Six months
ended
31 January
2019
Unaudited
£'000
Year
ended
31 July
2019
Audited
£'000
Retail
54
62
121
Insurance
13
15
26
Other
16
17
33
Total cost of sales of retail products
83
94
180
3c Other Income and costs
Six months ended
31 January
2020
Unaudited
£'000
Six months
ended
31 January
2019
Unaudited
£'000
Year
ended
31 July
2019
Audited
£'000
Profit on sale of land at store 1
-
(295)
(295)
Costs of sale and manage-back - Crayford store 2
-
-
54
Deferred financing on bank loan written off 3
-
-
133
-
(295)
(108)
2019:
1 Profit on sale of land at store: During the year land at the rear of our Southampton store with a fair value of £500,000 was sold for £800,000. There was £4,043 of associated costs of sale.
2 Costs of sale & manage-back Crayford store: On 28th February 2019 the Crayford store was sold at its fair value to an investment fund for £7.52 million in cash. Lok'nStore will continue to manage the store maintaining the operational footprint of the business and will receive management and performance fees. Legal and professional costs associated with this transaction amounted to £54,483.
3 Deferred financing on bank loan written off. In April 2019, the Group executed a new bank facility increasing facilities available by £25 million to £75 million, with a further £25 million accordion option taking the facility to £100 million. The deferred element of the original financing costs of £133,307 was accordingly written off.
4 Finance income
Six months ended
31 January
2020
Unaudited
£'000
Six months ended
31 January
2019
Unaudited
£'000
Year ended
31 July
2019
Audited
£'000
Bank interest
16
7
24
Other interest
-
3
7
Total finance income
16
10
31
Interest receivable arises on cash and cash equivalents (see note ·).
5 Finance costs
Six months ended
31 January
2020
Unaudited
£'000
Six months ended 31 January
2019
Unaudited
£'000
Year ended
31 July
2019
Audited
£'000
Restated
Restated
Bank interest
255
206
452
Non-utilisation fees and amortisation of bank loan arrangement fees
165
47
153
Interest on lease liabilities
143
155
304
Total finance cost
563
408
909
Most interest payable arises on bank loans classified as financial liabilities measured at amortised cost.
6 Profit before taxation
Six months ended
31 January
2020
Unaudited
£'000
Six months
ended 31 January
2019
Unaudited
£'000
Year ended
31 July
2019
Audited
£ '000
Restated
Restated
Profit before taxation is stated after charging:
Depreciation of plant, property and equipment - owned assets (Note 10)
1,220
1,069
2,207
Depreciation of right of use assets (IFRS 16) (Note 1)
609
608
1,217
1,829
1,677
3,424
Amortisation of intangible assets
-
83
83
1,829
1,760
3,507
7 Taxation
Six months ended 31 January
2020
Unaudited
£'000
Six months
ended 31 January
2019
Unaudited
£'000
Year
ended 31 July
2019
Audited
£'000
Current tax:
UK corporation tax
403
470
811
Deferred tax:
Origination and reversal of temporary differences
239
132
400
Total deferred tax charge
239
132
400
Income tax expense for the period/year
642
602
1,211
The charge for the period can be reconciled to the profit for the period as follows:
Six months ended 31 January
2020
Unaudited
£'000
Six months
ended 31 January
2019
Unaudited
£'000
Year
ended 31 July
2019
Audited
£'000
Profit before tax
2,338
2,685
4,591
Tax on ordinary activities at the standard effective rate of corporation tax in the UK of 19%
468
454
880
Expenses not deductible for tax purposes
-
-
18
Depreciation of non-qualifying assets
206
195
355
Share based payment charges in excess of corresponding tax deduction
8
2
2
Impact of change in tax rate on timing differences
(19)
(28)
(17)
Other timing differences
(21)
22
(27)
Small companies Relief
-
(43)
-
Income tax expense for the period/year
642
602
1,211
Effective tax rate
27.5%
22.5%
26 %
8 Dividends
Six months ended 31 January 2020
Unaudited
£'000
Six months ended 31 January 2019
Unaudited
£'000
Year ended 31 July
2019
Audited
£'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2018 (7.67 pence per share)
-
2,217
2,217
Interim dividend for the six months to 31 January 2019 (3.67 pence per share)
-
-
1,062
Final dividend for the year ended 31 July 2019 (8.33 pence per share)
2,413
-
-
2,413
2,217
3,279
In respect of the current period the Directors propose that an interim dividend of 4.0 pence per share will be paid to the shareholders. The total estimated dividend to be paid is £1.16 million based on the number of shares currently in issue as adjusted for shares held in the Employee Benefits Trust. This interim dividend is an on-account payment of a final annual dividend and is ultimately subject to approval by shareholders at the 2020 Annual General Meeting and has not been included as a liability in these financial statements. The ex-dividend date will be 7 May 2020; the record date 11 May 2020 due to the Early May Bank Holiday; with an intended payment date of 12 June 2020. The final deadline for Dividend Reinvestment Election is 22 May 2020.
9 Earnings per share
The calculations of earnings per share are based on the following profits and numbers of shares.
Six months
ended
31 January
2020
Unaudited
£'000
Six months
ended
31 January
2019
Unaudited
£'000
Year
ended
31 July
2019
Audited
£'000
Restated
Restated
Profit for the financial year attributable to continuing operations
1,664
1,966
3,215
Profit for the financial year attributable to discontinued operations
-
2,169
2,182
Total profit for the financial year attributable to owners of the parent
1,664
4,135
5,397
No. of shares
No. of shares
No. of shares
Weighted average number of shares
For basic earnings per share
28,965,672
28,894,795
28,921,229
Dilutive effect of share options
565,846
621,082
481,848
For diluted earnings per share
29,531,518
29,515,877
29,403,077
623,212 shares (31.01.2019: 623,212) are held in the Employee Benefit Trust and are excluded from the above calculation.
Earnings per share attributable to owners of the Parent
Six months
ended
31 January
2020
Unaudited
Six months
ended
31 January
2019
Unaudited
Restated
Year
ended
31 July
2019
Audited
Restated
Earnings per share
Basic
Continuing operations
5.74p
6.79p
11.12p
Discontinued operations
-
7.51p
7.55p
Total basic earnings per share
5.74p
14.30p
18.67p
Earnings per share
Diluted
Continuing operations
5.63p
6.68p
10.93p
Discontinued operations
-
7.35p
7.42p
Total diluted earnings per share
5.63p
14.03p
18.35p
10a) Property, plant and equipment
Group
Development
property assets
at cost
£'000
Land and
buildings
at valuation
£ '000
Long leasehold land and buildings
at valuation
£'000
Short leasehold
improvements
at cost
£'000
Fixtures,
fittings and
equipment
at cost
£'000
Motor
vehicles
at cost
£'000
Total
£'000
Net book value at 31 July 2018 - Audited
16,570
108,486
11,438
669
15,414
3
152,580
Net book value at 31 January 2019 - Unaudited
23,830
108,262
11,475
1,819
13,367
21
158,774
Net book value at 31 July 2019 - Audited
18,442
133,531
-
1,890
15,057
18
168,938
Cost or valuation
1 August 2018
16,570
108,486
11,438
2,648
27,186
17
166,345
Additions
7,254
148
3
-
101
20
7,526
Additions - Acquisition of subsidiary
-
-
-
1,238
-
-
1,238
Disposals
-
(500)
-
-
-
-
(500)
Disposals - discontinued operations
-
-
-
(84)
(2,696)
(7)
(2,787)
Transfers
6
(6)
-
-
-
-
-
Revaluations
-
134
34
-
-
-
168
31 January 2019 Unaudited
23,830
108,262
11,475
3,802
24,591
30
171,990
Depreciation
1 August 2018
-
-
-
1,979
11,772
14
13,765
Depreciation
-
425
63
60
519
2
1,069
Disposals - discontinued operations
-
-
-
(56)
(1,067)
(7)
(1,130)
Revaluations
-
(425)
(63)
-
-
-
(488)
31 January 2019 Unaudited
-
-
-
1,983
11,224
9
13,216
Net book value at 31 January 2019 - Unaudited
23,830
108,262
11,475
1,819
13,367
21
158,774
Cost or valuation
1 February 2019
23,830
108,262
11,475
3,802
24,591
30
171,990
Additions
-
2,656
1,490
162
2,643
-
6,951
Additions - Acquisition of subsidiary
-
-
-
4
-
-
4
Reclassification
(4,185)
17,116
(12,931)
-
-
-
-
Disposals
(1,203)
(7,558)
-
-
(1,109)
-
(9,870)
Disposals - discontinued operations
-
-
-
-
429
-
422
Revaluations
-
13,055
(34)
-
-
-
13,021
31 July 2019 - Audited
18,442
133,531
-
3,968
26,554
30
182,525
Depreciation
1 February 2019
-
-
-
1,983
11,224
9
13,216
Depreciation
-
579
-
95
572
3
1,249
Disposals
-
-
-
-
(726)
-
(726)
Disposals - discontinued operations
-
(428)
-
-
427
-
(1)
Revaluations
-
(151)
-
-
-
-
(151)
31 July 2019 - Audited
-
-
-
2,078
11,497
12
13,587
Net book value at 31 July 2019 - Audited
18,442
133,531
-
1,890
15,057
18
168,938
Cost or valuation
1 August 2019
18,442
133,531
-
3,968
26,554
30
182,525
Additions
4,404
125
-
29
336
-
4,894
Revaluations
-
89
-
-
-
-
89
31 January 2020 Unaudited
22,846
133,745
-
3,997
26,890
30
187,508
Depreciation
1 August 2019
-
-
-
2,078
11,497
12
13,587
Depreciation
-
543
-
95
580
1
1,219
Revaluations
-
(543)
-
-
-
-
(543)
31 January 2020 Unaudited
-
-
-
2,173
12,077
13
14,263
Net book value at 31 January 2020 - Unaudited
22,846
133,745
-
1,824
14,813
17
173,245
The Group has an active store development programme and in accordance with IAS 23 has material qualifying assets that take a substantial period of time to develop from acquisition to ultimate store opening. Accordingly borrowing costs of £223,163 (six months ended 31.1.2019: £217,970 : year ended 31.07.19 £430,321) have been capitalised in the current period that are directly attributable to the acquisition, construction and fit-out of these qualifying store assets. £223,163 of the total amount is carried in development property assets.
Capital expenditure during the period totalled £4.9 million (31.1.2019: £8.8 million). This was primarily the purchase of the Stevenage and exchange contract deposits paid on the Salford (Manchester), Warrington and Chester sites, together with ongoing construction and fit out works at our sites in Leicester as well as planning and pre-development works at our Wolverhampton, Oldbury, Bedford, Bournemouth, and Cheshunt sites.
Property, plant and equipment (non-current assets) with a carrying value of £173.2 million (31.1.2019: £158.8 million) are pledged as security for bank loans (see note 15a).
Market Valuation of Freehold and Operating Leasehold Land and Buildings
Following the comprehensive external valuation at 31 July 2019 by JLL, the freehold and leasehold properties have not been externally valued at 31 January 2020, although in accordance with the Group's established policy it is the intention to do so at the next year end at 31 July 2020.
Although the Board did not commission an external valuation at this interim period-end it is mindful of the need to accord with the measurement principles of International Financial Reporting Standards as adopted by the European Union. Accordingly after consulting with our external valuers, whilst there has been continued market activity in the self-storage sector since July 2019, the Directors considered that there had not been such a material movement in market yields that warranted a modification to the position as at 31 January 2020 in respect of our properties externally valued at 31 July 2019. The Directors therefore consider that it is appropriate to maintain the portfolio's external valuation without modification pending a comprehensive external valuation at our 31 July 2019 year-end.
Events after the reporting date - Novel Coronavirus (COVID-19)
Since the reporting date of 31 January 2020, the outbreak of the Novel Coronavirus (COVID-19) has been declared a "Global Pandemic" by the World Health Organisation on the 11th March 2020. This has impacted global financial markets and travel restrictions have been implemented by many countries.
Market activity is being affected in many sectors and JLL in common with other external valuers have subsequently introduced material uncertainty provisions into their valuation reports for valuations conducted on or after 11th March 2020. For valuations after the 11 March 2020, JLL have confirmed that they are unable to provide an estimate of the financial effect that this event would have on the value of the properties for the time being.
10 b) Right of Use assets (ROU)
Continuing Operations
Group property leases
Group
31 January
2020
£'000
Group
31 January
2019
£'000
Group
31 July
2019
£'000
Group
31 July
2018
transition £'000
IFRS 16
IFRS 16
IFRS 16
IFRS 16
Restated
Restated
Restated
Restated
Right of Use Asset (ROU) - IFRS 16 restatement on transition
-
-
-
14,795
Right of Use Asset (ROU) - opening balance
12,359
13,577
13,577
-
Depreciation of Right of Use Asset (ROU)
(609)
(609)
(1,218)
(1,218)
Right of Use Asset (ROU) - closing balance
11,750
12,968
12,359
13,577
The application of IFRS 16 relates to the Groups property leases. The Group has no leases on any other types of assets.
To ensure consistency and effective comparison with prior periods, the Group has elected to apply the full retrospective implementation approach with reinstatement of the comparative information. The transition date of initial application is therefore 1 August 2018. The Present Value of all future operating lease payments is calculated using 2.2% as an effective cost of debt as the single discount rate. This calculates an opening Right of Use Asset (ROU) as at 1 August 2018 of £14.79 million.
The right-of-use asset is depreciated on a weighted depreciation charge based on the individual lease term of the separate operating leases.
11 Disposal of Saracen Datastore Limited
In the previous year, on 31st January 2019 Lok'nStore disposed of its document storage business Saracen Datastore Limited ("Saracen") for £7.64 million in cash against its Net Book Value as at 31 July 2018 of £5.4 million.
For comparative purposes only, key amounts relating to the discontinued operation are as follows;
31 January
2020
Unaudited
£'000
31 January
2019
Unaudited
£'000
31 July
2019
Audited
£'000
(Restated**)
(Restated**)
Revenue
-
1,156
1,156
Expenses
-
(780)
(780)
EBITDA
-
376
376
Depreciation
-
(150)
(150)
Finance income /costs
-
(19)
(19)
Profit before tax
-
207
207
Tax
-
(27)
8
Profit after tax
-
180
215
Profit on disposal of subsidiary
-
2,009
1,967
After tax disposal profit
-
2,009
1,967
Total profit on discontinued operations
-
2,169
2,182
** details of the restatements following the adoption of IFRS 16 are made in note 1 to the financial statements.
The profit on disposal is included in profit on discontinued operations in the consolidated statement of comprehensive income.
The Group believes that Substantial Shareholder Relief would be available on the gain made on the disposal of the shares. Proceeds from disposal of discontinued operation (net of disposal costs and cash included in sale) is presented as an investing activity in the consolidated statement of cash flow.
12 Inventories
31 January
2020
Unaudited
£'000
31 January
2019
Unaudited
£'000
31 July
2019
Audited
£'000
Consumables and goods for resale
363
275
298
The amount of inventories recognised as an expense during the period was £54,472 (31.1.2018: £62,045).
13 Trade and other receivables
31 January
2020
Unaudited
£'000
31 January
2019
Unaudited
£'000
31 July
2019
Audited
£'000Trade receivables
798
1,664
1,055
Other receivables
1,007
599
2,270
Prepayments and accrued income
496
811
382
2,301
3,074
3,707
Trade receivables
In respect of its self-storage business the Group does not typically offer credit terms to its customers and hence the Group is not exposed to significant credit risk. All customers are required to pay in advance of the storage period. Late charges are applied to a customer's account if they are more than 10 days overdue in their payment.
The Group provides for receivables based upon sales levels and estimated recoverability. There is a right of lien over the customers' goods, so if they have not paid within a certain time frame the Company has the right to sell the items they store to cover the debt owed by the customer. Trade receivables that are overdue are provided for based on estimated irrecoverable amounts, determined by reference to 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, and also to pay a deposit of four weeks' storage income. Before accepting a new business customer who wishes to use a number of the Group's stores, the Group uses an external credit rating to assess the potential customer's credit quality and defines credit limits by customer. There are no customers who represent more than 5% of the total balance of trade receivables.
In respect of its document storage business, customers are invoiced typically monthly in advance for the storage of their boxes, tapes and files. The provision of additional services, such as document boxes or tape collection and retrieval from archive, typically are invoiced monthly in arrears.
There has not been a significant change in credit quality in the Group's trade receivables and the amounts are still considered recoverable. The Group holds a right of lien over its self-storage customers' goods if these debts are not paid.
14 Trade and other payables
31 January
2020
Unaudited
£'000
31 January
2019
Unaudited
£'00031 July
2019
Audited
£'000Trade payables
768
1,519
640
Taxation and social security costs
763
259
388
Other payables
887
1,278
1,115
Accruals and deferred income
2,310
2,010
2,610
4,728
5,066
4,753
The Directors consider that the carrying amount of trade and other payables and accruals approximates fair value.
15 Capital management and gearing
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance.
The gearing ratio at the period-end is as follows:
Gearing - Bank Borrowings
31 January
2020
Unaudited £'000
31 January
2019
Unaudited
£'00031 July
2019
Audited
£'000
Restated
Restated
Gross debt
(42,972)
(42,424)
(42,972)
Cash and cash equivalents
11,023
11,236
13,662
Net debt
(31,949)
(31,188)
(29,310)
Total equity - balance sheet
116,746
105,452
116,657
IFRS restatement
536
453
501
Adjusted total equity
117,282
105,905
117,158
Net debt to equity ratio
27.2%
29.4%
25.0%
Total Gearing - Bank Borrowings and lease liabilities
31 January
2020
Unaudited £'000
31 January
2019
Unaudited £'000
31 July
2019
Audited
£'000
Restated
Restated
Gross debt - bank borrowings
(42,972)
(42,424)
(42,972)
Gross debt - lease liabilities
(12,283)
(13,421)
(12,860)
Cash and cash equivalents
11,023
11,236
13,662
Net debt
(44,232)
(44,609)
(42,170)
Total equity - balance sheet
116,746
105,452
116,657
Net debt to equity ratio
37.9%
42.3%
36.1%
Cash balances held in current accounts attract no interest but surplus cash is transferred daily to a treasury deposit account which earns interest at the prevailing money market rates1. All amounts are denominated in Sterling. The balances at 31 January 2020 are as follows:
31 January
2020
Unaudited £'000
31 January
2019
Unaudited £'000
31 July
2019
Audited
£'000
Variable rate treasury deposits1
9,635
10,256
12,232
SIP trustee deposits
63
60
63
Cash in operating current accounts
1,316
910
1,357
Other cash and cash equivalents
9
10
10
Total cash and cash equivalents
11,023
11,236
13,662
1 Money market rates for the Group's variable rate treasury deposit track Royal Bank of Scotland plc base rate. The rate attributable to the variable rate deposits at 31 July 2019 was 0.3%.
16a) Borrowings
Bank borrowings
31 January
2020 Unaudited
£'000
31 January
2019 Unaudited
£'000
31 July
2019
Audited £'000
Non-current
Bank loans repayable in more than two years
but not more than five years
Gross
42,972
42,424
42,972
Deferred financing costs
(574)
(224)
(641)
Net bank borrowings
42,398
42,200
42,331
Non-current borrowings
42,398
42,200
42,331
The Group has a joint £75 million five year revolving credit facility banking facility with Lloyds Bank and Royal Bank of Scotland plc. The facility provides an accordion £25 million which can take the facility to £100 million and runs to April 2024 with an option of two one year extensions.
The interest rate is set at the London Inter-Bank Offer Rate (LIBOR) plus a 1.50%-1.75% margin based on a loan to value covenant test. The all in debt cost on £43.0 million drawn averaged 2.21% in the period. The Group is not obliged to make any repayments prior to its expiration in April 2024.
The Group currently has £43.0 million drawn against its existing £75 million revolving credit facility which is secured with RBS and Lloyds 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 £173.2 million (31.01.2019: £158.8: / 31.07.2019 £168.9 million) together with cross-company guarantees from Group companies.
16b) Lease liabilities
Lease liabilities attributable to Right of Use assets
31 January
2020 Unaudited
£'000
31 January
2019 Unaudited
£'000
31 July
2019
Audited
£'000
Restated
Restated
Current lease liabilities
Amounts due within one year
1,257
1,138
1,161
Non-current lease Liabilities
Amounts due in one to two years
1,285
1,257
1,257
Amounts due in three to five years
2,749
3,224
3,224
Amounts due in more than five years
6,991
7,802
7,218
Non-current lease liabilities
11,025
12,283
11,699
Total lease liabilities
12,282
13,421
12,860
Lease liabilities attributable to Right of Use assets
31 January
2020 Unaudited
£'000
31 January
2019 Unaudited
£'000
31 July
2019
Audited
£'000
Restated
Restated
Balance B/Fwd
12,860
13,912
13,912
Lease repayments
(720)
(646)
(1,356)
Lease interest (non-cash)
142
155
304
Total lease liabilities
12,282
13,421
12,860
17 Deferred tax
Deferred tax liability
31 January 2020
Unaudited
£'000
31 January 2019
Unaudited
£'000
31 July
2019
Audited
£'000
Liability at start of period/year
22,385
19,735
19,735
Charge to income for the period/year -continued operations
239
132
400
Charge to income for the period/year - discontinued operations
-
18
32
Total charge to income for the year
239
150
432
Tax charged directly to other comprehensive income
(137)
122
2,327
Tax credited - disposal of subsidiary
-
-
(134)
Initial recognition on acquisition of subsidiary
-
24
24
Credit to share based payment reserve
-
15
1
Liability at end of period/year
22,487
20,046
22,385
18 Share capital
31 January 2020
Unaudited
£'000
31 January 2019
Unaudited
£'000
31 July
2019
Audited
£'000
Authorised: 35,000,000 ordinary shares of 1 pence each
350
350
350
Called up,
Called up,
Called up,
allotted and
allotted and
allotted and
fully paid
fully paid
fully paid
Number
Number
Number
Number of shares at start of period/year
29,583,786
29,498,615
29,498,615
Options exercised during period/year
9,427
52,304
85,171
Balance at end of period/year
29,593,213
29,550,919
29,583,786
Allotted, issued and fully paid ordinary shares
£
£
£
Balance at start of period/year
295,838
294,986
294,986
Options exercised during period/year
94
543
852
Balance at end of period/year
295,932
295,509
295,838
The Company has one class of ordinary shares which carry no right to fixed income
19 Other reserves
Other
Capital
Share-based
Merger
reserve
redemption
payment
reserve
reserve
reserve
Total
Group
£'000
£'000
£'000
£'000
£'000
1 August 2018 - Audited
6,295
1,294
34
740
8,363
Equity share based payments
-
-
-
11
11
Transfer to retained earnings in relation to share based payments
-
-
-
(27)
(27)
Tax credit relating to share options
-
-
-
(15)
(15)
31 January 2019 - Unaudited
6,295
1,294
34
709
8,332
Equity share based payments
-
-
-
35
35
Transfer to retained earnings in relation to share based payments
-
-
-
(24)
(24)
Tax credit relating to share options
-
-
-
14
14
31 July 2019 - Audited
6,295
1,294
34
734
8,357
Equity share based payments
-
-
-
41
41
Transfer to retained earnings in relation to share based payments
-
-
-
(5)
(5)
Tax credit relating to share options
-
-
-
245
245
31 January 2020 - Unaudited
6,295
1,294
34
1,015
8,638
The merger reserve represents the excess of the nominal value of the shares issued by Lok'nStore Group plc over the nominal value of the share capital and share premium of Lok'nStore Limited as at 31 July 2001. The other distributable reserve and the capital redemption reserve arose in the year ended 31 July 2004 from the purchase of the Company's own shares and a cancellation of share premium.
Share based payment reserve
Under IFRS 2 there is the option to make transfers from the share based payment reserve to retained earnings in respect of accumulated share option charges where the options have either been exercised or have lapsed post-vesting. The total amounts calculated and accordingly transferred to retained earnings in the period amounted to £5,191 (31.1.2019: £27,140).
20 Retained earnings
Retained earnings before
Retained
deduction of
Own shares
earnings
own shares
(note 20)
Total
Group
£'000
£'000
£'000
Restated
Restated
1 August 2018 - Audited
19,844
(500)
19,344
Effect of new accounting standard - IFRS 16
(336)
-
(336)
As at 1 August 2018 - restated
19,508
(500)
19,008
Profit for the financial period - restated
4,135
-
4,135
Transfer from revaluation reserve
151
-
151
Transfer from share based payment reserve (Note 19)
27
-
27
Asset disposal
500
-
500
Dividend paid
(2,217)
-
(2,217)
31 January 2019 - Unaudited
21,104
(500)
21,604
Profit for the financial period- restated
1,262
-
1,262
Transfer from revaluation reserve
153
-
153
Transfer from share based payment reserve (Note 19)
24
-
24
Reserve transfer on disposal of assets
4,427
-
4,427
Dividend paid
(1,062)
-
(1,062)
1 August 2019 - Audited
25,908
(500)
26,408
Profit for the financial period
1,664
-
1,664
Transfer from revaluation reserve
154
-
154
Transfer from share based payment reserve (Note 19)
5
-
5
Dividend paid
(2,413)
-
(2,413)
31 January 2020 - Unaudited
25,318
(500)
25,818
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.
21 Own shares
ESOP
ESOP
Treasury
Treasury
Own shares
shares
shares
shares
shares
total
Number
£
Number
£
£
1 August 2018 - Audited
623,212
499,910
-
-
499,910
31 January 2019 - Unaudited
623,212
499,910
-
-
499,910
31 July 2019 - Audited
623,212
499,910
-
-
499,910
31 January 2020 - Unaudited
623,212
499,910
-
-
499,910
The Group operates an Employee Benefit Trust (EBT) under a settlement dated 8 July 1999 between Lok'nStore Limited and Lok'nStore Trustee Limited, constituting an employees' share scheme. Funds are placed in the trust by way of deduction from employees' salaries on a monthly basis as they so instruct for purchase of shares in the Company. Shares are allocated to employees at the prevailing market price when the salary deductions are made.
As at 31 January 2020, the Trust held 623,212 (31.01.2019: 623,212) ordinary shares of 1 pence each with a market value of £4,468,430 (31.01.2019: £2,508,428). No shares were transferred out of the scheme during the period (2019: Nil). No options have been granted under the EBT.
22 Cash flows
(a) Reconciliation of profit before tax to cash generated from operations
Six months
ended
31 January
2020
Unaudited
£'000
Six months
ended
31 January
2019
Unaudited
£'000
Year
ended
31 July
2019
Audited
£'000
Restated
Restated
Profit before tax - continuing operations
2,306
2,568
4,426
Profit before tax - discontinued operations
-
207
2,173
Total profit before tax
2,306
2,775
6,590
Depreciation
1,829
1,828
3,575
Amortisation of intangible assets
-
83
83
Equity settled share based payments
41
11
46
Profit on sale of land at store
-
(296)
(296)
Profit on disposal of Saracen business
-
-
(1,967)
Costs of sale and manage-back - Crayford store
-
-
54
Deferred financing on bank loan written off
-
-
133
Interest receivable
(16)
(10)
(31)
Interest payable - bank borrowings
420
250
605
Interest payable
143
177
326
(Increase) in inventories
(66)
(18)
(41)
Decrease in receivables
1,406
1,402
768
Increase / (decrease) in payables
109
(202)
(313)
Cash generated from operations
6,172
6,000
9,545
(b) Reconciliation of net cash flow to movement in net debt
Net debt is defined as non-current and current borrowings, as detailed in note 16 less cash and cash equivalents.
Six months
ended
31 January
2020
Unaudited
£'000
Six months
ended
31 January
2019
Unaudited
£'000
Year
ended
31 July
2019
Audited
£'000
Increase in cash in the period/year
2,639
6,246
8,672
Change in net debt resulting from cash flows
-
(5,089)
(5,637)
Movement in net debt in period
(2,639)
1,157
3,035
Net debt brought forward
(29,310)
(32,345)
(32,345)
Net debt carried forward
(31,949)
(31,188)
(29,310)
23 Commitments under operating leases
At 31 January 2020 the total future minimum lease payments as a lessee under non-cancellable operating leases were as follows:
31 January 2020
Unaudited
£'000
31 January 2019
Unaudited
£'000
31 July
2019
Audited
£'000
Land and buildings
Amounts due:
Within one year
1,517
1,247
1,517
Between two and five years
5,082
4,989
5,358
After five years
7,677
5,550
8,165
14,276
11,786
15,040
Operating lease payments represent rentals payable by the Group for certain of its properties. Typically, leases are negotiated for a term of 20 years and rentals are fixed for an average of five years.
Under the first-time adoption of IFRS 16, the Group's operating leases on its leased stores are now recognised as a 'right of use asset' and as a corresponding liability at the year-end. This is fully explained in Note 1 of the financial statements.
24 Events after the Reporting Date
Events after the reporting date - Novel Coronavirus (COVID-19)
Since the reporting date of 31 January 2020, the outbreak of the Novel Coronavirus (COVID-19) has been declared a "Global Pandemic" by the World Health Organisation on the 11th March 2020.
We have reported comprehensively on the up to date COVID 19 position and this is contained within the Chairman's Statement.
Gloucester
The new managed store in Gloucester opened on 22 February 2020. This prominent store opposite Morrisons is managed by Lok'nStore on behalf of a third party investor under a managed services agreement.
Lok'nStore will receive management and performance fees for managing the store on behalf of its new owners.
Glossary
Abbreviation
APM Alternative performance measures
Adjusted EBITDA Earnings before all depreciation and amortisation charges, losses or profits on disposal, share-based payments, acquisition costs, 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
APD Auditing Practices
Bps Basis Points
CAC Contributory asset charges
CAD Cash available for Distribution
Capex Capital Expenditure
CGU Cash generating units
CO2 e Carbon Dioxide Equivalents
CSOP Company Share Option Plan
EBT Employee Benefit Trust
(eKPIs) Environmental key performance indicators
EMI Enterprise Management Incentive Scheme
ESOP Employee Share Option Plan
EU European Union
GHG Greenhouse gas
HMRC Her Majesty's Revenue & 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
LIBOR London Interbank Offered Rate
LFL Like for like
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
SIP Share Incentive Plan
SME Small and medium sized enterprises
Sq.ft. Square Feet
tCO2e Tonnes of carbon dioxide equivalent
TVR Total voting rights
VAT Value Added Tax
Our Stores
Head Office - Lok'nStore plc
112 Hawley Lane
Farnborough
Hampshire
GU14 8JE
Tel 01252 521010
www.loknstore.co.uk
Central Enquiries
0800 587 3322
info@loknstore.co.uk
Owned Trading Stores
Basingstoke, Hampshire
Crockford Lane
Chineham
Basingstoke
Hampshire
RG24 8NA
Tel 01256 474700
Bristol, Gloucestershire
Longwell Green Trade Park
Aldermoor Way
Bristol
Gloucestershire
BS30 7ET
Tel 0117 967 7055
Cardiff, Wales
234, Penarth Road
Cardiff
Wales
CF11 8LR
Tel 0292 022 1901
Eastbourne, East Sussex
Unit 4, Hawthorn Road
Eastbourne
East Sussex
BN23 6QA
Tel 01323 749222
Fareham, Hampshire
26 + 27 Standard Way
Fareham Industrial Park
Fareham
Hampshire
PO16 8XJ
Tel 01329 283300
Farnborough, Hampshire
112 Hawley Lane
Farnborough
Hampshire
GU14 8JE
Tel 01252 511112
Gillingham, Kent
Courtney Road
Gillingham
Kent
ME8 0RT
Tel 01634 366044
gillingham@loknstore.co.uk
Harlow, Essex
Edinburgh Way
Temple Fields
Harlow
Essex
CM20 2GF
Tel 01279 882366
Hedge End, Southampton
Units 2 & 3
Waterloo Industrial Estate Flanders Rd
Hedge End
Southampton
SO30 2QT
Tel 01489 787005
Horsham, West Sussex
Blatchford Road
Redkiln Estate
Horsham
West Sussex
RH13 5QR
Tel 01403 272001
Ipswich
Part of Site 7
Futura Park
Ipswich
IP3 9QH
Tel 01473 794940
exeter@loknstore.co.uk
Luton, Bedfordshire
27 Brunswick Street
Luton
Bedfordshire
LU2 0HG
Tel 01582 721177
Maidenhead, Berkshire
Stafferton Way
Maidenhead
Berkshire
SL6 1AY
Tel 01628 878870
Milton Keynes, Buckinghamshire
Etheridge Avenue
Brinklow
Milton Keynes
Buckinghamshire
MK10 0BB
Tel 01908 281900
Northampton Central
16 Quorn Way
Grafton Street Industrial Estate
Northampton
Northamptonshire
NN1 2PN
Tel 01604 629928
Northampton Riverside
Units 1-4, Carousel Way
Northampton
Northamptonshire
NN3 9HG
Tel 01604 785522
Poole, Dorset
50 Willis Way
Fleetsbridge
Poole
Dorset
BH15 3SY
Tel 01202 666160
Portsmouth, Hampshire
Rudmore Square
Portsmouth
Hampshire
PO2 8RT
Tel 02392 876783
Reading, Berkshire
251 A33 Relief Road
Reading
Berkshire
RG2 0RR
Tel 01189 588999
Southampton, Hampshire
Third Avenue
Southampton
Hampshire
SO15 0JX
Tel 02380 783388
Sunbury, Middlesex
Unit C, The Sunbury Centre
Hanworth Road
Sunbury on Thames
Middlesex TW16 5DA
Tel 01932 761100
Tonbridge, Kent
Unit 6 Deacon Trading Estate
Vale Road
Tonbridge
Kent
TN9 1SW
Tel 01732 771007
Wellingborough, Northamptonshire
19/21 Whitworth Way
Wellingborough
Northamptonshire
NN8 2EF
Tel 01634 366044
Development locations - LNS Owned Stores
Bedford
69 Cardington Road
Bedford
NK42 0BQ
Bournemouth, Dorset
Land at Wessex Field
Deansleigh Road
Bournemouth
Dorset
BH7 7DU
Cheshunt, Hertfordshire
Land lying on the South Side of Halfhide Lane
Turnford
Hertfordshire
Leicester
Part of land forming part of Freemens Common Road Leicester
LE2 7SL
Stevenage, Hertfordshire
Part of Land at Plot 2000
Stevenage Business Park Gunnels Wood Road
Stevenage
Hertfordshire
SG1 2BL
Warrington, Cheshire
Land at Winwick Road, Warrington
Cheshire
WA2 7PF
Wolverhampton, Staffordshire
Land at Pantheon Park Wednesfield Way
Wolverhampton
Staffordshire
WV11 3DR
Salford, nr. Manchester
A57 Regent Road,
Salford,
Manchester,
M5 4EA
Managed stores - Trading
Aldershot, Hampshire
251, Ash Road
Aldershot
Hampshire
GU12 4DD
Tel 0845 4856415
Ashford, Kent
Wotton Road
Ashford
Kent
TN23 6LL
Tel 01233 645500
Broadstairs, Kent
Unit 2, Pyramid Business Park, Poorhole Lane,
Broadstairs,
Kent
CT10 2PT
Tel 01843 863253
Chichester, West Sussex
17, Terminus Road
Chichester
West Sussex
PO19 8TX
Tel 01243 771840
Crawley, West Sussex
Sussex Manor Business Park
Gatwick Road
Crawley
West Sussex
RH10 9NH
Tel 01293 738530
Crayford, Kent
Block B
Optima Park
Thames Road
Crayford
Kent
DA1 4QX
Tel 01322 525292
Dover, Kent
Honeywood Parkway
Whitfield
Dover
CT16 3FJ
Tel 01304 827353
Exeter
1 Matford Park Road
Exeter
Devon
EX2 8ED
Tel 01392 823989
Hemel Hempstead, Hertfordshire
Fortius Point,
47, Maylands Avenue Hemel Hempstead
Hertfordshire
HP2 7DE
Tel 01442 240768
hemelhempstead@loknstore.co.uk
Swindon, Wiltshire
Kembrey Street
Elgin Industrial Estate
Swindon
Wiltshire
SN2 8UY
Tel 01793 421234
Woking, Surrey
Marlborough Road
Woking
Surrey
GU21 5JG
Tel 01483 378323
Managed stores - Under Development
Gloucester
Land at Triangle Park
Metz Way
Gloucester
GL4
(Opened February 2020)
Oldbury
6 Churchbridge,
Oldbury,
B69 2AP
Chester
58-64 Sealand Road,
Chester
CH1 4LD
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDIR UNVARRVUSUUR
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