REG - Lok'nStore Group - Preliminary results for the year ended 31 July 17 <Origin Href="QuoteRef">LOK.L</Origin> - Part 3
30/10/2017 07:05
- Part 3: For the preceding part double click ID:nRSd8962Ub
26,530
CP Peal 21,224 - - 21,224 - 21,224
644,994 55,704 14,601 715,299 284,486 999,785
1 Includes director's retirement costs of £60,100 relating to the retirement of CM Jacobs on 4 July 2017.
2016 Emoluments£ Bonuses£ Benefits£ Sub total£ Gains onshare options£ Total£
Executive:
A Jacobs 208,080 24,000 3,460 235,540 408,600 644,140
SG Thomas 52,020 - 3,315 55,335 132,146 187,481
RA Davies 116,750 12,000 3,492 132,242 409,245 541,487
CM JacobsN Newman-Shepherd 59,02142,556 14,00021,154 2,7111,299 75,73265,009 43,601- 119,33365,009
Non-Executive:
RJ Holmes 20,808 - - 20,808 - 20,808
ETD Luker 26,010 - - 26,010 - 26,010
CP Peal 20,808 - - 20,808 22,900 43,708
546,053 71,154 14,277 631,484 1,016,492 1,647,976
Key management personnel are defined as Directors of the Group. Details of their remuneration is shown above.
Pension contributions of £30,977 (2016: £30,775) were paid by the Group on behalf of R A Davies and are not included in the
Directors' emoluments table above. The highest paid Director did not accrue any pension rights during the year. The
benefits in kind all relate to medical insurance premiums paid on behalf of the Directors. The number of Directors to whom
retirement benefits are accruing under money purchase pension schemes in respect of qualifying service is one (2016: one).
Retirement of C M Jacobs:
On 5 July 2017 the Company announced the retirement of Colin Jacobs as an Executive Director of the Company. The amounts
settled to Mr Jacobs on his retirement are included within his 2017 emoluments in the table above.
7 Taxation
Group2017£'000 Group2016£'000
Current tax:
UK corporation tax at 20% (2016: 20%) 792 606
Deferred tax:
Origination and reversal of temporary differences 204 976
Adjustments in respect of prior periods 173 75
Impact of change in tax rate on closing balance (265) (446)
Total deferred tax 112 605
Income tax expense for the year 904 1,211
The charge for the year can be reconciled to the profit for the year as follows:
2017£'000 2016£'000
Profit before tax 3,965 5,493
Tax on ordinary activities at the effective standard rate of corporation tax in the UK of 20% (2015: 20%) 793 1,099
Expenses not deductible for tax purposes 2 3
Depreciation of non-qualifying assets 104 85
Share based payment charges in excess of corresponding tax deduction 19 36
Impact of change in tax rate on closing deferred tax balance (264) (69)
Adjustments in respect of prior periods - deferred tax 173 75
Other 72 4
Share option scheme 5 (22)
Income tax expense for the year 904 1,211
Effective tax rate 23% 22%
In addition to the amount charged to profit or loss for the year, deferred tax relating to the revaluation of the Group's
properties of £932,089 (2016: £2,387,114) and the movement in the fair value of cash flow hedges of £nil (2016:(£20,834))
has been recognised as a debit/credit directly in other comprehensive income (see note 18 on deferred tax).
8 Dividends
2017£'000 2016£'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2015 (5.67 pence per share) - 1,456
Interim dividend for the six months to 31 January 2016 (2.67 pence per share) - 691
Final dividend for the year ended 31 July 2016 (6.33 pence per share) 1,777 -
Interim dividend for the six months to 31 January 2017 (3 pence per share) 860 -
2,637 2,147
In respect of the current year the Directors propose that a final dividend of 7 pence per share will be paid to the
shareholders. The total estimated dividend to be paid is £2 million based on the number of shares in issue at 13 October
2017 as adjusted for shares held in the Employee Benefits Trust and for shares held on treasury. This is subject to
approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial
statements. The ex-dividend date will be 30 November 2017; the record date 1 December 2017; with an intended payment date
of 10 January 2018.
9 Earnings per share
The calculations of earnings per share are based on the following profits and numbers of shares.
Group2017£'000 Group2016 £'000
Profit for the financial year attributable to owners of the parent 3,061 4,282
2017No. of shares 2016No. of shares
Weighted average number of shares
For basic earnings per share 27,780,676 25,791,821
Dilutive effect of share options1 999,657 577,822
For diluted earnings per share 28,780,333 26,369,643
1 Further options that could potentially dilute EPS in the future are excluded from the above because they are not dilutive
in the period presented. Full details of share options are included in notes 20 to 23
623,212 (2016: 623,212) shares held in the Employee Benefit Trust and Nil (2016: 2,466,869) Treasury shares are excluded
from the above (see note 23).
Group2017 Group2016
Earnings per share
Basic 11.02p 16.60p
Diluted 10.64p 16.24p
10a Intangible assets
Group Goodwill£'000 Contractualcustomerrelationships £'000 Total£'000
Cost at 1 August 2015 1,110 3,309 4,419
Amortisation at 1 August 2015 - (661) (661)
Amortisation charge - (165) (165)
Amortisation at 31 July 2016 - (826) (826)
Net book value at 31 July 2016 1,110 2,483 3,593
Cost at 1 August 2016 1,110 3,309 4,419
Amortisation at 1 August 2016 - (826) (826)
Amortisation charge - (165) (165)
Amortisation at 31 July 2017 - (991) (991)
Net book value at 31 July 2017 1,110 2,318 3,428
All goodwill and customer relationships are allocated to the serviced document storage cash-generating unit (CGU)
identified as a separate business segment.
The remaining amortisation period of the contractual customer relationships at 31 July 2017 is 13 years and 11 months
(2016: 14 years 11 months).
The values for impairment purposes are based on past and current experience of trading, estimated future cash flows and
external information where relevant and derived from the following key assumptions:
· a discount rate of 11%
· estimated useful lives of customer relationships (20 years)
· short term sustainable growth rates of 5% (next 5 years)
· thereafter long term sustainable growth rates of 2.0%
· sensitivity: the Group has conducted a sensitivity analysis on the impairment test of each CGU's carrying value. A
cut in projected sales growth by around 7% would result in the carrying value of goodwill being reduced to its recoverable
amount.
10b Property, plant and equipment
Group Developmentproperty assetsat cost£'000 Land and buildings at valuation£'000 Long leasehold land and buildings at valuation£'000 Short leasehold improvementsat cost£'000 Fixtures, fittings and equipmentat cost£'000 Motorvehiclesat cost £'000 Total£'000
Cost or valuation
1 August 2015 10,492 61,035 6,425 2,563 20,571 30 101,116
Additions 3,281 152 1 - 3,554 - 6,988
Disposals (4,604) (3,228) - - (701) (13) (8,546)
Reclassification (8,711) 9,377 - - (666) - -
Revaluations - 13,617 2,837 - - - 16,454
31 July 2016 458 80,953 9,263 2,563 22,758 17 116,012
Depreciation
1 August 2015 1,604 - - 1,690 9,999 21 13,314
Depreciation - 606 100 91 736 2 1,535
Disposals (1,604) - - - (389) (11) (2,004)
Reclassification - 490 - - (490) - -
Revaluations - (1,096) (100) - - - (1,196)
31 July 2016 - - - 1,781 9,856 12 11,649
Net book value at 31 July 2016 458 80,953 9,263 782 12,902 5 104,363
Cost or valuation
1 August 2016 458 80,953 9,263 2,563 22,758 17 116,012
Additions 4,666 685 - 36 1,241 - 6,628
Disposals - - - - (15) - (15)
Reclassification - - - - - - -
Revaluations - 5,910 1,030 - - - 6,940
31 July 2017 5,124 87,548 10,293 2,599 23,984 17 129,565
Depreciation
1 August 2016 - - - 1,781 9,856 12 11,649
Depreciation - 705 125 99 926 1 1,856
Disposals - - - - (11) - (11)
Reclassification - - - - - - -
Revaluations - (705) (125) - - - (830)
31 July 2017 - - - 1,880 10,771 13 12,664
Net book value at 31 July 2017 5,124 87,548 10,293 719 13,213 4 116,901
If all property, plant and equipment were stated at historic cost the carrying value would be £53.9 million (2016: £49.5
million).
Capital expenditure during the year totalled £6.6 million (2016: £7.0 million). This was primarily the construction works
at our development sites in Gillingham and Wellingborough as well as completing fitting-out works at our Bristol store.
£1.22 million was also spent on completing the initial phase of the refurbishment of the Old Southampton store for the
ParknCruise operations.
Property, plant and equipment (non-current assets) with a carrying value of £116.9 million (2016: £104.4 million) are
pledged as security for bank loans.
Market Valuation of Freehold, Long Leasehold and Operating Leasehold Land and Buildings
On 31 July 2017, a professional valuation was prepared by Jones Lang LaSalle Limited (JLL) in respect of eleven freehold,
one long leasehold and seven operating leasehold properties. The valuation was prepared in accordance with the RICS
Valuation - Global Standards 2017, published by The Royal Institution of Chartered Surveyors ("the RICS Red Book") and the
valuation methodology is explained in more detail below. The valuations were prepared on the basis of Fair Value as a
fully equipped operational entity having regard to trading potential. The valuation was provided for accounts purposes and
as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure requirements of the
RICS Red Book JLL have confirmed that:
· This is the second year that JLL has been appointed to value the properties
· The valuers who prepared the valuation have the necessary skills and experience having been significantly involved
in the sector
· JLL do not provide other significant professional or agency services to the Company
· In relation to the preceding financial year of JLL the proportion of the total fees payable by the Company to the
total fee income of the firm is less than 5% and is minimal.
The valuation report indicates a total valuation for all properties valued of £119.6 million (2016: £112.7 million) of
which £102.9 million (2016: £96.1 million) relates to freehold and long leasehold properties, and £16.7 million (2016:
£16.6 million) relates to properties held under operating leases.
Freehold and long leasehold land and buildings are carried at valuation in the statement of financial position. Short
leasehold improvements at properties held under operating leases are carried at cost rather than valuation in accordance
with IFRS.
For the trading properties the valuation methodology explained in more detail below is based on fair value as fully
equipped operational entities, having regard to trading potential. Of the £102.9 million valuation of the freehold and long
leasehold properties £9.3 million (2016: £9.0 million) relates to the net book value of fixtures, fittings and equipment,
and the remaining £93.6 million (2016: £ 87.1 million) relates to freehold and long leasehold properties.
The 2017 valuation includes and reflects movements in value which have resulted from the operational performance of the
stores and movements in the investment environment.
Valuation Methodology
Jones Lang LaSalle Limited (JLL) have adopted the profits method of valuation, and cross checked with the direct comparison
method based on recent transactions in the sector, which is the main method of pricing adopted by purchasers of self
storage properties.
JLL have valued the assets on an individual basis and have disregarded any portfolio effect.
The profits method of valuation considers the cash flow generated by the trading potential of the self storage facility.
Due to the specialised design and use of the buildings, the value is typically based on their ability to generate a net
income from operating as self storage facilities.
JLL have constructed a discounted cash flow model. This sets out their explicit assumptions on the underlying cash flow
that they believe could be generated by a Reasonably Efficient Operator at each of the properties, both at the valuation
date and in the near future as the properties increase their occupancy and rates charged to customers. Judgements are made
as to the trading potential and likely long term sustainable occupancy.
Stable occupancy depends upon the nature of demand, size of property and nearby competition, and allows for a reasonable
vacancy rate to enable the operator to sell units to new customers. In the valuation the assumed stabilised occupancy level
for the 19 trading stores (both freeholds and leaseholds) averages 81.2% (2016: 80.1%).
Expenditure is deducted (such as business rates, staff costs, repair and maintenance, utilities, marketing and bad debts)
as well as an operator's charge which takes account of central costs. JLL also make an allowance for long term capex
requirements where applicable.
· The cash flow for freeholds runs for an explicit period of 10 years, after which it is capitalised at an all risks
yield which reflects the implicit future growth of the business, or a hypothetical sale.
· The cash flow for leaseholds continues for the unexpired term of the lease.
· The discount rate applied has had regard to recent transactions, weighted average costs of capital and target return
in other asset types with adjustments made to reflect differences in the risk and liquidity profile.
· The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 11.09% (2016: 11.32%). The
yield arising from the first year of the projected cash flow is 7.19% (2016: 7.43%), rising to 10.49% (2016: 10.86%), in
year five.
· JLL have assumed purchasers costs of 6.8% (2016: 6.8%).
· The average stabilised occupancy is 81.2% (2016: 80.1%).
· The average exit yield assumed is 7.67% (2016: 7.9%).
The comparison method considers recent transactions where self storage properties have sold, and then adjusts them based on
a multiple of current earnings, and a capital value per square foot. They are adjusted to reflect differences in location,
physical characteristics, local supply and demand, tenure and trading levels.
For leaseholds the same methodology has been used as for freehold property, except that no sale of the assets in the 10th
year is assumed, but the discounted cash flow is extended to the expiry of the lease. The average unexpired term of the
Group's operating leaseholds is approximately 10 years and 8 months as at 31 July 2017 (11 years and 8 months: 31 July
2016). Valuations for stores held under operating leases are not reflected in the statement of financial position and the
assets in relation to these stores are carried at cost less accumulated depreciation.
In 2011, one of the Group store's leases was renegotiated and includes a ten year option to renew the leases from March
2026 to March 2036. The option to extend is only operable in the event that all four of the leases applicable to this
store are extended and this option is personal to Lok'nStore or another "major self-storage operator", to be approved by
the landlord (approval not to be unreasonably withheld). The JLL valuation on this store is based on this Special
Assumption that the option to extend the lease for 10 years is exercised. This is consistent with the approach taken in
previous years.
The fair value hierarchy within which the Fair Value measurements are categorised is level 3, in accordance with IFRS 13
fair value measurements.
Directors' valuation of land and property
The Old Southampton Store: Following the opening of the new Southampton store with the corresponding transfer of all
customers from the old Southampton store, the vacant building has been redeveloped for cruise parking. Market evidence
suggested that there is a substantial market in Southampton for car parking for cruise liner passengers and that this
property was appropriate to this use. The Directors placed their valuation on the undeveloped site at the 2016 year-end at
£2.5 million. The building has now been converted to this use costing £1.195 million and started trading as "ParknCruise"
in May 2017. Early bookings are encouraging. Accordingly the Directors placed their valuation on the current developed
site at the 2017 year-end at £3.695 million.
The New Southampton Store: Following the development and opening of the new Southampton store there remains surplus land to
the rear of the building which may be ultimately utilised for an expansion of the store or could be sold or used for
alternative use. The Directors have considered the advice given and recommendations of value obtained by local agents and
in weighing this with their own view are satisfied to continue to place a value at year-end on this land of £0.5 million.
The total value of land and property carried at Director Valuation at 31 July 2017 is £4.195 million (2016: £3 million).
11 Investments
Company Investments in subsidiary undertakings £'000
31 July 2013 1,776
Capital contributions arising from share-based payments 119
31 July 2014 1,895
Capital contributions arising from share-based payments 211
31 July 2015 2,106
Capital contributions arising from share-based payments 182
31 July 2016 2,288
Capital contributions arising from share-based payments 97
31 July 2017 2,385
The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in England
and Wales:
% of shares and voting rights held
Class of shareholding Directly Indirectly Nature of entity
Lok'nStore Limited * # Ordinary 100 - Self-storage
Lok'nStore Trustee Limited1 *♦ Ordinary - 100 Trustee
Southern Engineering and Machinery Company Limited1 *# Ordinary - 100 Land
Semco Machine Tools Limited2 *# Ordinary - 100 Dormant
Semco Engineering Limited2 *# Ordinary - 100 Dormant
Saracen Datastore Limited1# Ordinary - 100 Serviced Document Storage
ParknCruise Limited1♦ Ordinary - 100 Car parking for cruise passengers
1 These companies are subsidiaries of Lok'nStore Limited.
2 These companies are subsidiaries of Southern Engineering and Machinery Company Limited and did not trade during the
year.
* These companies have taken the exemption from audit under Section 479A of the Companies Act 2006.
♦ The address of these companies is 112, Hawley Lane, Farnborough, Hants. GU14 8JE
# The address of these companies is 1, Fleet Place London EC4M 7WS.
The fair value of these investments has not been disclosed because it cannot be measured reliably as there is no active
market for these equity instruments. The Company currently has no plans to dispose of these investments.
12 Development capital
In May 2015 Lok'nStore opened a managed store in Aldershot, Hampshire. The store is managed for third party investors under
the Lok'nStore brand. Lok'nStore managed the construction and subsequent operation of the store and generates a 10% annual
return on £2.5 million of the total development capital committed to the project, and a management fee for the
construction, operation and branding of the store. The capital provided is fully secured by a first fixed charge on the
property.
Group2017£'000 Group2016£'000
Development capital 3,463 3,159
Contingent Asset
When the Aldershot Store is sold by its owners Lok'nStore is entitled to receive a fee of 5% of the proceeds of the sale
(less reasonable selling costs).
Due to the uncertainty of the property market and the timing of the ultimate sale the directors believe that it would not
be appropriate to recognise this as an asset at this time. There is a backstop date of 2022 at which time a realisation (or
a payment based on an independent valuation) must be made to Lok'nStore and as this date gets nearer, the directors will
give due consideration as to when the value of the property can be reliably measured, at which point it will be appropriate
to recognise the asset in the financial statements.
13 Inventories
Group2017£'000 Group2016£'000
Consumables and goods for resale 203 165
The amount of inventories recognised in cost of sales as an expense during the year was £164,225 (2016: £156,121).
14 Trade and other receivables
Group2017£'000 Group2016£'000
Trade receivables 1,693 2,027
Other receivables 1,822 1,910
Prepayments and accrued income 751 1,015
4,266 4,952
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
The following balances existed between the Company and its subsidiaries at 31 July:
Company2017 Company2016
£'000 £'000
Net amount due from Lok'nStore Limited 13,021 3,648
The amount due from Lok'nStore Limited is interest free. The balance is repayable on demand.
Trade receivables
In respect of its self-storage business the Group does not typically offer credit terms to its customers and hence the
Group is not exposed to significant credit risk. All customers are required to pay in advance of the storage period. Late
charges are applied to a customer's account if they are more than 10 days overdue in their payment. The Group provides for
receivables based upon sales levels and estimated recoverability. There is a right of lien over the customers' goods, so if
they have not paid within a certain time frame, the Company has the right to sell the items they store to cover the debt
owed by the customer. Trade receivables that are overdue are provided for based on estimated irrecoverable amounts,
determined by reference to past default experience.
For individual self-storage customers the Group does not perform credit checks. However this is mitigated by the fact that
all customers are required to pay in advance, and also to pay a deposit of four weeks' storage income. Before accepting a
new business customer who wishes to use a number of the Group's stores, the Group uses an external credit rating to assess
the potential customer's credit quality and defines credit limits by customer. There are no customers who represent more
than 5% of the total balance of trade receivables.
In respect of its document storage business, customers are invoiced typically monthly in advance for the storage of their
boxes, tapes and files. The provision of additional services, such as document boxes or tape collection and retrieval from
archive, typically are invoiced monthly in arrears. The serviced archive segment with over 450 customers has a greater
customer concentration - refer note 1(b) segmental analysis.
Included in the Group's trade receivables balance are receivables with a carrying amount of £268,252 (2016: £269,153) which
are past due at the reporting date for which the Group has not provided as there has not been a significant change in
credit quality and the amounts are still considered recoverable. The Group holds a right of lien over its self-storage
customers' goods if these debts are not paid. The average age of these receivables is 43 days past due (2016: 40 days past
due).
Ageing of past due but not impaired receivables
Group2017£'000 Group2016£'000
0-30 days 97 147
30-60 days 121 72
60+ days 50 50
Total 268 269
Movement in the allowance for bad debts
Group Group
2017 2016
£'000 £'000
Balance at the beginning of the year 186 174
Impairment losses recognised 34 34
Amounts written off as uncollectible (32) (22)
Balance at the end of the year 188 186
The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors
believe that there is no further provision required.
Ageing of impaired trade receivables Group2017 £'000 Group2016£'000
0-30 days - -
30-60 days - -
60+ days 188 186
Total 188 186
15 Trade and other payables
Group2017£'000 Group2016£'000
Trade payables 818 887
Taxation and social security costs 288 1,369
Other payables 1,692 1,197
Accruals and deferred income 2,234 2,341
5,032 5,794
The Directors consider that the carrying amount of trade and other payables approximates fair value.
16 Financial instruments
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the
Group consists of debts, which include the borrowings disclosed in note 17a, cash and cash equivalents and equity
attributable to the owners of the parent, comprising issued capital, reserves and retained earnings as disclosed in the
Consolidated Statement of Changes in Equity. The Group's banking facilities require that management give regular
consideration to interest rate hedging strategy. The Group has complied with this during the year.
The Group's Board reviews the capital structure on an on-going basis. As part of this review, the Board considers the cost
of capital and the risks associated with each class of capital. The Group seeks to have a conservative gearing ratio (the
proportion of net debt to equity). The Board considers at each review the appropriateness of the current ratio in light of
the above. The Board is currently satisfied with the Group's gearing ratio.
The gearing ratio at the year-end is as follows:
Capital Management Group2017£'000 Group2016£'000
Gross borrowings (28,816) (28,816)
Cash and cash equivalents 11,386 5,335
Net debt (17,430) (23,481)
Total equity 89,119 71,475
Net debt to equity ratio 19.6 % 32.8%
The decrease in the Group's gearing ratio arises principally through the combined effect of an increase in the value of its
properties, the sale of the Group's treasury shares and the cash generated from operations.
Exposure to credit and interest rate risk arises in the normal course of the Group's business.
A Derivative financial instruments and hedge accounting
The Group's activities expose it primarily to the financial risks of interest rates. The Group currently had two interest
rate swaps with Lloyds Bank plc which ran until 20 October 2016. These have now expired and are reported fully in the
Financial Review and in note 17b.
BDebt management
Debt is defined as non-current and current borrowings, as detailed in note 17a. Equity includes all capital and reserves of
the Group. The Group is not subject to externally imposed capital requirements.
The Group borrows through a senior six year term revolving credit facility with Royal Bank of Scotland plc secured on its
store portfolio and other Group assets, excluding intangibles, with a net book value of £136.2 million (2016: £118.0
million). Borrowings are arranged to ensure the Group fulfils its strategy of growth and development of its stores and to
maintain short-term liquidity. As at the reporting date the Group has a committed revolving credit facility of £40 million
(2016: £40 million). This facility expires on 15 January 2023. Undrawn committed facilities at the year-end amounted to
£11.2 million (2016: £11.2 million).
C Interest rate risk management
The Group's policy on interest rate management is agreed at Board level and is reviewed on an on-going basis. All
borrowings are denominated in Sterling and are detailed in note 17a. The Group has a number of revolving loans within its
overall revolving credit facility and as such is exposed to interest rate risks at the time of renewal arising from any
upward movement in the LIBOR rate. The Group had two cash flow hedging interest rate swap arrangements and these expired
during the year. These instruments and the movement in their fair values are detailed in note 17b.
Cash balances held in current accounts attract no interest but surplus cash is transferred daily to a treasury deposit
account which earns interest at the prevailing money market rates1. All amounts are denominated in Sterling. The balances
at 31 July 2017 are as follows:
Group2017£'000 Group2016£'000
Variable rate treasury deposits1 11,048 4,915
SIP trustee deposits 5 34
Cash in operating current accounts 285 339
Other cash and cash equivalents 48 47
Total cash and cash equivalents 11,386 5,335
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 2017 was 0.1%.
The Group reviews the current and forecast projections of cash flow, borrowing and interest cover as part of its monthly
management accounts review. In addition, an analysis of the impact of significant transactions is carried out regularly, as
well as a sensitivity analysis of the impact of movements in interest rates on gearing and interest cover.
D Interest rate sensitivity analysis
In managing interest rate risk the Group aims to reduce the impact of short-term fluctuations on the Group's earnings,
without jeopardising its flexibility. Over the longer term, permanent changes in interest rates may have an impact on
consolidated earnings.
At 31 July 2017, it is estimated that an increase of one percentage point in interest rates would have reduced the Group's
annual profit before tax by £288,156 (2016: £88,156) and conversely a decrease of one percentage point in interest rates
would have increased the Group's annual profit before tax by £288,156 (2016: £88,156). There would have been no effect on
amounts recognised directly in other comprehensive income. The sensitivity has been calculated by increasing by 1% the
average variable interest rate of 1.66% applying to the variable rate borrowings of £28.8 million in the year (2016: £8.8
million / 2.56%).
E Cash management and liquidity
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. Included in note B above is a description of additional undrawn facilities that the Group
has at its disposal to further reduce liquidity risk.
Short-term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources,
giving due consideration to risk.
F Foreign currency management
The Group operates solely in the United Kingdom and as such all of the Group's financial assets and liabilities are
denominated in Sterling and there is no exposure to exchange risk.
G Credit risk
The credit risk management policies of the Group with respect to trade receivables are discussed in note 14. The credit
risk on liquid funds is limited because the counterparty is a bank with high credit ratings assigned by international
credit-rating agencies, in line with the Group's policy which is to borrow from major institutional banks when arranging
finance.
The Group's maximum exposure to credit risk at 31 July 2017 was £2.34 million (2016: £3.70 million) on receivables and
£11.39 million (2016: £5.33 million) on cash and cash equivalents. Additionally, the Group has provided development loan
capital in respect of the Aldershot store development, a managed contract. The current balance outstanding at 31 July 2017
was £3.46 million (2016: £3.16 million). These amounts are secured by way of a fixed priority first charge and a debenture
over all of the Aldershot assets.
H Maturity analysis of financial liabilities
The undiscounted contractual cash flow maturities are as follows:
2017 - Group Tradeand otherpayables£'000 Borrowings£'000 Interest onborrowings£'000
Over five years - 28,816 219
From two to five years - - 1,438
From one to two years - - 479
Due after more than one year - 28,816 2,136
Due within one year 2,934 - 479
Total contractual undiscounted cash flows 2,934 28,816 2,615
2016 - Group Tradeand otherpayables£'000 Borrowings£'000 Interest onborrowings£'000
From two to five years - 28,816 1,814
From one to two years - - 738
Due after more than one year - 28,816 2,552
Due within one year 2,359 - 831
Total contractual undiscounted cash flows 2,359 28,816 3,383
I Fair values of financial instruments
Group2017£'000 Group2016£'000
Categories of financial assets and financial liabilities
Financial assets - loans and receivables
Trade and other receivables 3,967 3,700
Cash and cash equivalents 11,386 5,335
Development loan capital 3,463 3,159
Financial liabilities - other financial liabilities at amortised cost
Trade and other payables (2,934) (2,359)
Bank loans (28,670) (28,727)
The fair values of the Group's cash and short-term deposits and those of other financial assets equate to their carrying
amounts. The Group's receivables and cash and cash equivalents are all classified as loans and receivables and carried at
amortised cost. The amounts are presented net of provisions for doubtful receivables and allowances for impairment are made
where appropriate. Trade and other payables and bank borrowings are all classified as financial liabilities measured at
amortised cost.
J Company's financial instruments
The Company's financial assets are amounts owed by subsidiary undertakings amounting to £9.9 million (2016: £3.8 million)
which are classified as trade and other receivables, and the investment in its subsidiary undertaking of £0.1 million
(excluding capital contributions). These amounts are denominated in Sterling, are non-interest bearing, are unsecured and
fall due for repayment within one year. No amounts are past due or impaired. The Company has no financial liabilities.
17a Borrowings
Group2017£'000 Group2016£'000
Non-current
Bank loans repayable in more than five years (Gross) 28,816 -
Bank loans repayable in more than two years
but not more than five years (Gross) - 28,816
Deferred financing costs (146) (89)
Net bank borrowings 28,670 28,727
Non-current borrowings 28,670 28,727
The Group has agreed a two year extension on its existing banking facility with Royal Bank of Scotland plc (RBS). The £40
million five year revolving credit facility which was executed last year included an extension option which has now been
implemented. The facility which was due to expire in January 2021 will now run until January 2023 providing funding for
more landmark site acquisitions and working capital.
The £40 million five year revolving credit facility set the interest rate margin at the London Inter-Bank Offer Rate
(LIBOR) plus 1.40%-1.65% based on a loan to value covenant test. This rate is 1.40% currently and the all in debt cost on
£28.8 million drawn averaged 1.66% in the period. Bank covenants and margin are unaffected by this extension of term.
The facility also provides for the possibility of an additional accordion of up to £10 million which if taken up during the
term of the facility will increase facilities available to £50 million.
The Group currently has £28.8 million drawn against its existing £40 million facility. The margin on the new facility is at
the London Inter-Bank Offer Rate (LIBOR) plus 1.40%-1.65% margin based on a loan to value covenant test (1.40% at
Lok'nStore's current LTV level).
The £40 million revolving credit facility with RBS is secured by legal charges and debentures over the freehold and
leasehold properties and other tangible assets of the business with a net book value of £120.4 million (2016: £118.0)
million together with cross-company guarantees from Group companies.
17b Derivative financial instruments
During the year the Group continued to operate two separate £10 million interest rate swaps with Lloyds Bank plc, both
effective from 31 May 2012, the first at a fixed 1 month sterling LIBOR rate of 1.2% and the second at a fixed one-month
sterling LIBOR rate of 1.15%. Both swaps ran up to 20 October 2016 whereupon they lapsed.
The £20 million fixed rate was treated as an effective cash flow hedge and its fair value on a mark-to-market basis has
fluctuated historically. Under current facility arrangements with Royal Bank of Scotland plc the Group is not committed to
enter into hedging instruments going forwards but rather to keep such matters under periodic review.
As the fixed interest swaps expired on 20 October 2016, the Groups entire £28.8 million of gross debt reverted to variable
rate and results in an overall weighted average rate over the financial period of 2.06% (2016: 2.88%). At the balance sheet
date the effective cost of debt is 1.65%.
Currency Principal£ Maturity date Fair value 2017 £'000 Fair value 2016£'000
3032816LS Interest rate swap GBP 10,000,000 20/10/2016 - (19)
3047549LS Interest rate swap GBP 10,000,000 20/10/2016 - (18)
20,000,000 - (37)
The movement in fair value of the interest rate swaps of £37,850 (2016: £82,675) has been recognised in other comprehensive
income in the year.
18 Deferred tax
Deferred tax liability Group2017£'000 Group2016£'000
Liability at start of year 15,361 12,252
Credited to income for the year 112 605
Tax credited directly to other comprehensive income 932 2,408
Debit / (credit) to share based payment reserve (42) 96
Liability at end of year 16,363 15,361
The following are the major deferred tax liabilities and assets recognised by the Group and the movements during the year:
AcceleratedCapitalAllowances£'000 Intangibleassets£'000 Othertemporarydifferences£'000 Revaluation ofproperties£'000 Rolledover gainon disposal£'000 Shareoptions£'000 Total£'000
At 1 August 2015 1,708 530 (8) 8,586 1,787 (351) 12,252
Charge/ (credit) to income for the year 147 (83) 11 - 524 6 605
Charge to other comprehensive income - - 21 2,375 12 - 2,408
Charge to share based payment reserve - - - - - 96 96
At 31 July 2016 1,855 447 24 10,961 2,323 (249) 15,361
Charge/ (credit) to income for the year 341 (53) (7) - (189) 20 112
Charge to other comprehensive income - - - 920 12 - 932
Charge to share based payment reserve - - - - - (42) (42)
At 31 July 2017 2,196 394 17 11,881 2,146 (271) 16,363
19 Share capital
2017 2016
Authorised: £'000 £'000
35,000,000 ordinary shares of 1 pence each (2016: 35,000,000) 350 350
Allotted, issued and fully paid ordinary shares £'000 £'000
Balance 1 August 291 285
Options exercised 193,601 shares (2016: 662,573 shares) 2 6
Balance 31 July 293 291
Called up, Called up,
allotted and allotted and
fully paid fully paid
Number Number
Number of shares at 31 July 29,302,923 29,109,322
The Company has one class of ordinary shares which carry no right to fixed income.
20 Equity settled share-based payment plans
The Group operates two equity-settled share-based payment plans, an approved and an unapproved share option scheme, the
rules of which are similar in all material respects.
The Company has the following share options:
2017 As At As at
Summary 31 July 2016 Lapsed/ 31 July 2017
No of options Granted Exercised surrendered No of options
Unapproved Share Options 1,094,482 44,031 (150,408) (23,997) 964,108
Approved CSOP Share Options 166,011 20,486 (43,193) (7,926) 135,378
Total 1,260,493 64,517 (193,601) (31,923) 1,099,486
2016 As At As at
Summary 31 July 2015 Lapsed/ 31 July 2016
No of options Granted Exercised surrendered No of options
Unapproved Share Options 1,722,361 59,858 (643,894) (43,841) 1,094,484
Approved CSOP Share Options 172,462 23,137 (18,679) (10,909) 166,011
Total 1,894,823 82,995 (662,573) (54,750) 1,260,495
The following table shows options held by Directors under all schemes.
Total at 31 July 2016 Options granted Options Exercised/lapsed Unapproved Scheme Approved CSOP share options Total at 31 July 2017
2017
Executive Directors
A Jacobs - Unapproved 206,087 - - - - 206,087
SG Thomas - Unapproved 75,217 - (50,000) (50,000) - 25,217
RA Davies - Unapproved 281,977 - (25,000) (25,000) 256,977
RA Davies - CSOP 14,493 7,742 (14,493) - (14,493) 7,742
RA Davies total 296,470 7,742 (39,493) (25,000) (14,493) 264,719
N Newman-Shepherd - Unapproved 187,742 19,679 (10,000) (10,000) - 197,421
N Newman-Shepherd - CSOP 16,195 966 (3,500)
- More to follow, for following part double click ID:nRSd8962UdRecent news on Lok'n Store
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