REG - Lok'nStore Group - Interim results for the 6 months to 31 January 16 <Origin Href="QuoteRef">LOK.L</Origin> - Part 1
RNS Number : 1296WLok'nStore Group PLC25 April 2016LOK'NSTORE GROUP PLC
("Lok'nStore" or "the Group")
Lok'nStore Group Plc, the fast growing self-storage company announces great interim results
for the six months to 31 January 2016 - growth from new stores and more new stores to come
Highlights:
Record financial results ahead of expectations on all measures
Revenue 7.99 million up 4.7% (31.1.2015: 7.63 million) - like for like (LFL) 1 up 8%
Operating Costs down 0.6%
Adjusted EBITDA2 3.30million up 13.1% (31.1.2015: 2.92 million)
Operating profit (pre-exceptionals3) 2.39 million up 17.4% (31.1.2015: 2.03 million)
Operating profit (post-exceptionals) 4.20 million up 106.8% (31.1.2015: 2.03 million)
Profit before taxation 3.79 million up 155.5% (31.01.15: 1.48 million)
Strong cash flow supports 14.6% dividend increase - progressive dividend policy
Funds from Operations (FFO) 4 3.1 million up 22.7% (31.1.2015: 2.52 million)
Annualised FFO of 24 pence per share up 19.3% (31.1.2015: 20.1 pence per share)
Interim dividend 2.67 pence per share up 14.6% (31.1.2015: 2.33 pence per share)
Asset backed: Adjusted Net Asset Value per share5 up 14.1% to 3.07 (31.1.2015: 2.69)
Total assets now up to 113 million
Strong balance sheet, efficient use of capital, low debt
New 40 million Bank facility on lower interest margin
Additional 2 million received for sale of old Reading store
Sale and manage-back of Swindon store for 3.5 million (NBV 1.4 million)
Net debt 25.8 million (31.1.2015: 24.3 million)
Loan to value ratio down to 26.2%6(31.1.2015: 27.5%)
Self-storage business performing strongly
Self-storage revenue 6.93 million up 3.3% (31.1.2015: 6.71 million) - LFL up 7.1%
Store EBITDA 3.847million up 5.4% (31.1.2015: 3.65 million)
Occupied units pricing up 3.3%
Occupancy up 2.4% LFL
Document storageprofit more than doubles
Revenue 1.06 million up 14.7% (31.1.2015: 0.92 million)
Adjusted EBITDA 0.25million up 134% (31.1.2015: 0.11 million)
Growth from new stores and more new stores to come
New Chichester store opened January 2016 - early trading strong
New Southampton and Bristol stores due to open early May 2016
Constantly reviewing new store opportunities - pipeline of 4 new stores
1 On 30 September 2015, Lok'nStore sold its store in Swindon on a sale and manage-back basis. Like-for-like (LFL) growth figures for the period strip out the effect of this sale
2 Adjusted EBITDA is defined as profits before depreciation, amortisation, losses or profits on disposal, share-based payments, acquisition costs, non-recurring professional costs, finance income, finance costs and taxation
3 Exceptionals include an additional 2 million received for the sale of the old Reading site
4 Funds from Operations (FFO) calculated as EBITDA minus net finance cost on operating assets
5 Adjusted net asset value per share is the net assets adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the year end. The shares held in the Group's employee benefits trust and treasury are excluded from the number of shares
6 Calculation based on net debt of 25.8 million (31.1.2015: 24.3 million) and total property value of 98.5 million (21.1.2015: 88.4 million) set out in the Business and Financial Review section of the Strategic Report
7StoreadjustedEBITDA is AdjustedEBITDA(seeabove2)beforecentralandheadofficecosts
Commenting on the Group's results, Andrew Jacobs CEO of Lok'nStore Group said,
"With revenue upandcosts down Lok'nStore's profits have continued to grow robustly. We are investingin the future growth of the business with more new landmark stores.Our low level of debt means that this rapid development programme can be financed from cash flow and existing bank facilities, while progressively increasing the dividend.
"Our new store development programme continues to change the balance of our store portfolio with new and purpose built stores accounting for 59% of our portfolio. New stores in Chichester, Southampton and Bristol will add impetus to sales and earnings growth, and our pipeline of 4 new stores will reinforce this further."
Enquiries:
Lok'nStore
Andrew Jacobs, CEO
Ray Davies, Finance Director
01252 521 010
finnCap Ltd
Julian Blunt / Giles Rolls, Corporate Finance
Alice Lane, Corporate Broking
020 7220 0500
Camarco
Billy Clegg / Tom Huddart
0203 757 4980
Chairman's Statement
Healthy growth, increased dividend and active store opening programme
Lok'nStore's focus is opening more landmark self-storage centres while remaining conservatively leveraged to deliver robust, predictable and growing cash flow and dividends.
For the half year period to January 2016 trading has been strong with revenue, profits and assets all increasing rapidly. This has been and will continue to be reinforced by improvements to our existing stores combined with our programme of opening new, landmark, purpose-built stores. This will result in a substantial increase in the proportion of our store space which is new or purpose built and will add further momentum to the growth of sales and profits.
An increase in revenue of 4.7% to 7.99 million (31.1.2015: 7.63 million) resulted from both occupancy and price growth and with operating and finance costs reduced in the period profit margins have increased both at the store level and the group level. As a result profits have grown sharply with Adjusted EBITDA up 13.1%.
The growth of sales, profit and asset values combined with innovative asset management has allowed us to achieve a reduction in the loan-to-value (LTV) ratio from 27.5% to 26.2% while we invested 4.6 million in stores this period.
Funds from Operations (FFO) per share which guides the dividend pay-out has moved smartly ahead and we are proposing to increase the interim dividend by 14.6%. Net Asset Value (NAV) per share which demonstrates the underlying asset value has also improved sharply.
Our rapid store development programme has led to an increase in new and purpose built space to 59% of our owned portfolio. Stores in Maidenhead, Reading, Aldershot and recently opened Chichester have plenty of capacity to continue contributing to growth during the coming years. The development programme will also continue with the new stores in Southampton and Bristol opening in early May 2016 and further store openings in 2017 and 2018. This new store growth will build on a robust performance from the existing portfolio.
In the period we also received an extra 2 million for our Reading site which we originally sold in 2014 and a further 3.5 million for the sale and manage-back of our Swindon store. These proceeds will be used to pay down debt and finance new landmark store developments.
Our innovative approach to financing, our strong balance sheet and our growing cash flows means we are achieving all this while also reducing our gearing from its existing modest level and continually increasing dividends.
New 40 million Banking Facility reflects financial strength of business
In January 2016 the Group agreed a new banking facility with Royal Bank of Scotland plc on significantly improved terms. The new 40 million five year revolving credit facility replaces the existing facility which was due to expire in October 2016 and will provide funding for site acquisitions and working capital. The interest margin, non-utilisation fee and arrangement fee have all been significantly reduced leading to a large cash saving over the life of the facility. Further details are provided in the Business and Financial Review.
Appointment of Director demonstrates operational focus
The Group is pleased to announce the appointment of Neil Newman (38) to the Board as an Executive Director. Neil brings significant managerial and operational experience having worked in the business since 2006. Neil is currently Group Sales Director and will retain this title. Neil's contribution to Lok'nStore over the recent years has been significant and we look forward to his continuing involvement in our future growth.
Properties and Net Asset Value
The period-end property valuation equates to a total value of properties held of 98.5 million (31.1.2015: 88.4 million) an 11.5% increase in value. (Note that these values are not fully reflected in the statement of financial position which states the operating leasehold stores at cost less accumulated depreciation). An update of the progress on store properties is detailed in the Business and Financial Review.
Progressive Dividend
It is intended that the Company's future dividend payments will reflect the growth in the underlying cash generated by the business. At the interim stage we intend to pay approximately one third of the previous year's total annual dividend which equates to 2.67 pence per share, up 14.6% on the 2.33 pence per share interim dividend last year. This interim dividend will be paid on 10 June 2016. The final dividend will be declared when the Group's full year results are announced.
Positive Outlook
Lok'nStore is a dynamic business with a record of consistent profit growth and cash generation and is well positioned for the coming years. Recent strong trading will be reinforced by our programme of new landmark store openings.
With the high barriers to entry to the self-storage industry created by the strong demand for property in South-East England and the difficulties of the local planning process, we believe that the increased capacity which Lok'nStore has already and will continue to create will provide the opportunity for significant further growth. We will continue to focus our efforts on four key areas:
Filling existing stores and improving pricing further
Site acquisitions for new landmark stores
Increasing the number of stores we manage for third parties
Developing our document storage offering through organic growth
Simon G Thomas
Chairman
22 April 2016
Business and Financial Review
The Performance of our Stores
Sales, Profits and Occupancy growing
Trading
Total group revenue for the period grew 4.7% to 7.99 million (31.1.2015: 7.63 million) with Group operating profit up 106.8% to 4.2 million (31.1.2015: 2.03 million). On 30 September 2015 we sold our store in Swindon on a sale and manage-back basis. For clarity we include a table below to show all the headline growth figures and like-for-like growth figures for the period stripping out the effect of this transaction to improve the transparency of operating performance. Revenue growth on this basis rises to 8%. Document storage revenue was 1.06 million up 14.7% (31.1.2015: 0.92 million).
Like-for-like 31 Jan 2016
Headline 31 January 2016
Financials:
Self-storage
Growth
%
Group
Growth
%
Self-storage Growth
%
Group
Growth
%
Revenue
7.1
8.0
3.3
4.7
Group Adjusted EBITDA
4.5
15.1
4.4
13.1
Operating profit (pre- exceptionals)
7.6
20.3
7.4
17.4
FFO per share (Annualised)
-
24 pence
-
24 pence
FFO growth
n/a
22.1
n/a
19.3
Operating:
Store Adjusted EBITDA
6.8
-
5.4
-
Occupancy increased 2.4% year on year on a like for like basis to 63.6% of current lettable area (CLA). This was combined with a healthy year on year price increase of 3.3%. Self-storage revenue for the period was 6.93 million up 3.3% (31.1.2015: 6.71 million), and 7.1% on a like-for-like basis.
Operating costs for the period were down 0.6% so with costs firmly under control this revenue growth translates into rapid profit growth. Total store EBITDA in the self-storage business, a key performance indicator of profitability and cash flow of the business, increased 5.4% to 3.84 million (31.1.2015: 3.65 million), and 6.8% on a like-for-like basis.
We again managed to increase the overall adjusted EBITDA margin across all stores by 1.9 percentage points from 54.6% to 56.5%. The adjusted EBITDA margins of the freehold stores were 66.3% (31.1.2015: 63.9%) and the leasehold store margins remained at 42.2% (31.1.2015: 42.2%).
At the end of January 2016 33.1% of Lok'nStore's self-storage revenue was from business customers (31.1.2015: 33.4%) with the remainder from household customers. By number of customers 19.6% of our customers were business customers (31.1.2015: 20.0%).
When fully developed
Portfolio Analysis and Performance Breakdown
Number of stores
% of Valuation
% of Store EBITDA
Store
EBITDA Margin (%)
Number of stores
% lettable space
Lok Owned
Total % lettable space
Total lettable space
(Sq.ft)
As at 31 January 2016
Freehold and long leasehold stores
11
77.9
69.7
66.3
12
60.6
51.1
659,632
Operating Leaseholds stores
8
15.5
30.3
42.2
8
39.4
30.6
394,926
Pipeline stores (Freehold)
2
6.6
-
-
-
-
-
Managed Stores (trading)
6
-
-
-
6
-
18.3
235,567
Total
27
100
100
56.5
26
100
100
1,290,125
The average unexpired term of the Group's operating leaseholds is approximately 12 years and 2 months as at 31 January 2016 (13 years and 2 months: 31 January 2015). Total freeholds and long leasehold stores account for 85% of total property values. (Long leaseholds are those with over 50 years remaining term)
Ancillary Sales
Ancillary sales consisting of boxes and packaging materials, insurance and other sales increased 3.5% over the year accounting for 10.9% of self-storage revenues (31.1.2015: 10.7%). We continue to promote our insurance to new customers with the result that 91% (31.1.2015: 93%) of our new customers purchased our insurance over the year. This has resulted in 78% percent of our customers being insured by Lok'nStore.
Saracen - Document storage business
Volume metrics in our documents storage business have continued to grow with period-end boxes stored up 11% year on year and period-end tapes stored up 12.5% year on year.Revenue and adjusted EBITDA have increased rapidly as the operating metrics improve in response to the Company's more customer-facing marketing stance. This approach has resulted in excellent customer feedback and puts us in a good position to win new business. Revenue and profit are now starting to follow these volume metrics upwards with EBITDA profits up 134% over the same period last year.
Having previously consolidated our serviced document warehouse capacity, closing one of the three storage sites we embarked last year on further fit-out of new warehouse racking in our site in Olney and we now have the capacity to significantly increase the number of boxes stored within our existing premises. As part of this strategy, and in response to further box growth we commissioned a further and final fitting out of the Olney warehouse. Additions of 0.14 million were made in the current period to fixtures, fittings and equipment.
6 months ended 31 January 2016
6 months ended 31 January 2015
Document Storage
'000
Growth
%
Document Storage
'000
Document storage - Revenue
1,058
14.7
923
Document storage - Adjusted EBITDA
252
133.3
108
Stores Property review
Lok'nStore's strong operating cash flow, solid asset base, and tactical approach to its store property portfolio provide the Group with opportunities to improve the terms of its property usage in all stages of the economic cycle. Our focus on the trading business gives us many opportunities and our property decisions are always driven by the requirements of the trading business. Lok'nStore has 27 sites,of these, 21 sites are owned with 13 freehold or long leasehold, 8 leasehold and 6 further sites which operate under management contracts. 26 sites are trading stores. Lok'nStore is attracting a steady stream of investment partners to help drive the growth of the operating business. At the period-end the average length of the 7 leases which were valued at July 2015 decreased by 12 months to 12 years and 2 months (31.1.2015: 13 years and 2 months). 7 out of 8 of our leasehold stores are inside the Landlord and Tenant Act providing us with a strong security of tenure.
Bristol
In January 2014 Lok'nStore acquired a site in Longwell Green, Bristol. The site of approximately 0.9 acres is in a busy retail park with planning permission to build a 50,000 sq. feet self-storage centre in Lok'nStore's modern and distinctive design. Development is currently well advanced. The total cost of the store when built and fitted-out, will be around 4.3 million and will add to Lok'nStore's high-quality portfolio of freehold, purpose built self-storage centres in prominent trading locations when it opens in May 2016.
Additional 2 million received for sale of Reading site
The Group has received an additional 2 million from the purchaser of the original Reading store site. This sum is in addition to the 2.9 million received from the purchaser on 31 October 2014, taking the total consideration to 4.9m. These additional proceeds will be re-invested into the Group's opening programme of highly visible purpose-built new stores.
Sale and manage-back of Swindon store
On 30 September 2015 the Group completed the sale and manage-back of its Swindon East store for 3.5 million in cash to an investment fund. Historically, the Group has operated two stores in Swindon, one leasehold and one freehold. Following the completion of 0.5m of capital expenditure to increase capacity at its freehold store, the two stores were consolidated into one. The aggregate Net Book Value (NBV) was 1.4 million at the date of sale.
The Group will continue to manage the store as a branded Lok'nStore operation on behalf of the investor, and will receive management and performance fees. The proceeds of this transaction will be re-invested into projects such as the new stores currently under construction.
Portsmouth North
On 24 November 2014 the Company announced thesale of the Company's undeveloped site at Portsmouth North Harbour for 3 million subject to planning. The planning application filed and validated on 28 July 2015 was granted inJanuary 2016. The sale will now complete subject to completion of the S106 and the expiration of the judicial review period.
Management contracts
Aldershot
In May 2015 Lok'nStore opened a new managed store in Aldershot, Hampshire. The store is in a prominent location on the main Aldershot roundabout above the A331, is visually striking and benefits from significant levels of passing traffic.
The store is managed for outside investors under the Lok'nStore brand. Lok'nStore has managed the building and subsequent operation of the store and generates a return on 2.5 million of the total development loan capital it has committed to the project, and also receives management fees for the operation and branding of the store. This project is consistent with Lok'nStore's strategy of expanding the operating footprint of the business while maintaining its strong balance sheet. The store has traded well and in January 2016 a further phase of units was commissioned.
Chichester
Lok'nStore has also completed the development and fit-out on behalf of external investors of a new storage facility in Chichester, West Sussex which opened in January 2016. Lok'nStore manages the operation and branding of the store under a Management Services Agreement.
Store portfolio
We continue our strategy of actively managing our store operating portfolio to ensure we are maximising both trading potential and asset value. This includes strengthening our distinctive brand, increasing the size and number of our stores and replacing stores or sites where it will increase shareholder value. We prefer to own freeholds if possible, and where opportunities arise we will seek to acquire the freehold of our leasehold stores. However we are happy to take leases on appropriate terms and benefit from the advantages of a lower entry cost, with further options to create value later in the site's development. Our most important consideration is always the trading potential of the store rather than the type of property tenure and we will capitalise on our efficient operating systems and growing internet marketing presence to attract investment partners where appropriate and create innovative ownership structures to drive the growth of the operating business.
Financial
Lok'nStore is a robust business which generates an increasing cash flow from its strong asset base. With a low LTV of 26.2% and low interest margins of 1.4% on its new banking facility the business has a firm base for growth. The value of the Group's property assets underpin a flexible business model with stable and rising cash flows, low credit risk and tightly controlled operating costs.
New 40 million Banking Facility
The new 40 million five year revolving credit facility replaces the existing facility which was due to expire in October 2016,and will provide funding for site acquisitions as well as working capital for the development of the business over the medium term.
Under this new five year facility, the Group is not obliged to make any repayments prior to its expiration in 2021 and further provides during the term of the facility for the possibility of an optional extension of the five year term by a maximum of a further two years. The facility also provides for the possibility of an additional accordion of up to 10 million which if taken up will increase facilities available to 50 million. Loan to value covenants are in line with the previous facility.
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). This is a marked improvement on the existing 2.35%-2.65% margin and the Group will therefore benefit from a lower average cost of debt and improved cash flow.
Management of interest rate risk
Of the 28.8 million of gross debt currently drawn against the 40 million revolving credit facility. 20 million is at a fixed interest rate with 10 million fixed rate swap at a fixed 1 month sterling LIBOR rate of 1.2% and 10 million swap at a fixed 1 month sterling LIBOR rate of 1.15%. With 1 month LIBOR around 0.5%, this leaves a balance of 8.8 million floating at a current all-in rate of around 2.8% and results in an overall weighted average rate of 3.25%. The 20 million fixed rate is treated as an effective cash flow hedge and its fair value on a mark-to-market basis has fluctuated historically. Under the new facility arrangements the Group is not committed to enter into hedging instruments going forwards but rather to keep such matters under periodic review.
The current fair value of the swaps is a liability of 0.1 million and is currently stated as (31.1.2015: asset of 0.2 million). (See Note 15b).
Taxation
The Group has made a tax provision against earnings in this period of 0.82 million. The reduction in forward corporation tax rates to 18% has resulted in a net reduction in the deferred tax provision carried against revalued properties of 0.73 million. (see Note 16).
Earnings per share
Basic earnings per share were 11.53pence (31.1.2015: 4.39 pence per share) and diluted earnings per share were 11.26 pence (31.1.2015: 4.29 pence per share).
Operating costs
Costs have been reduced in the period and store EBITDA margins have been increased by 1.9 percentage points to 56.5% (31.1.2015: 54.6%). The cost ratio reduced to 56.6%1 (31.1.2015: 59.7%)
Group operating costs amounted to 4.52 million for the period, a 0.6% decrease year on year (31.1.2015: 4.55 million). Overall operating costs as a percentage of revenue have decreased and represent 56.6% as a cost ratio. (31.1.2015: 59.7%). This disciplined approach to costs ensures that as much as possible of the revenue growth achieved contributes to increasing our profits. Historically we have a strong record of reducing our group operating costs each year. Although this is increasingly challenging while delivering strong growth, we have again in this period contained property costs with underlying property costs down 3.6%. Overhead costs have also been reduced. Staff costs increased by 3.4% through a combination of higher sales bonuses driven by strong sales growth and additional national insurance costs arising on the exercise of employee share options. Progress continues on reducing Saracen's operating costs with a 0.1% decrease year on year while at the same time achieving nearly 15% revenue growth.
Group
Increase/
(Decrease) in costs %
Six months
ended 31 Jan
2016
'000
Six months
ended 31 Jan
2015
'000
Year
ended 31 July
2015
'000
Property costs
(3.6)
1,889
1,960
4,010
Staff costs
3.4
2,074
2,005
4,188
Overheads
(1.9)
481
491
1,049
Distribution costs
(18.4)
78
95
190
Total
(0.6)
4,522
4,551
9,437
Cash flow
At 31 January 2016 the Group had cash balances of 3.0million (31.1.2015: 3.4 million). Cash inflow from operating activities before investing and financing activities was 3.8 million (31.1.2015: 1.4 million). The Group also received 3.5 million on the sale and manage-back of its Swindon East store and an additional 2 million from the purchaser of the original Reading store site. As well as using cash generated from operations to fund some capital expenditure, the Group has a new five year revolving credit facility. This provides sufficient liquidity for the Group's current needs. Undrawn committed facilities at the period-end amounted to 11.2 million (31.1.2015: 12.3 million).
Gearing
At 31 January 2016 the Group had 28.8 million of gross borrowings (31.1.2015: 27.7 million) representing gearing of 45.7% (31.1.2015: 53.2%) on net debt of 25.8 million (31.1.2015: 24.3 million). After adjusting for the uplift in value of leaseholds which are stated at depreciated historic cost in the statement of financial position, gearing is 38.5% (31.1.2015: 42.8%). After adjusting for the deferred tax liability carried at period end of 11.6million gearing drops to 32.5% (31.1.2015: 35.8%).
Funds from Operations (FFO)
By excluding 0.22 million (31.1.2015: 0.16 million) of the interest costs of carrying the development sites from the total net interest charge of 0.41 million (31.1.2015: 0.55 million) the interest on the operating portfolio is 0.2 million for the period (31.1.2015: 0.39 million). Funds from operations (FFO) represented by EBITDA minus interest on the operating portfolio is therefore 3.1 million up 22.7% (31.1.2015: 2.52 million) equating to 24 pence per share annualised, up 19.3% on last year (31.1.2015: 20.1 pence per share annualised).
Analysis of Funds from Operations (FFO)
Six months
ended 31 Jan 2016
'000
Six months
ended 31 Jan 2015
'000
Year
ended 31 July 2015
'000
Group EBITDA
3,297
2,916
5,682
Finance Costs
414
549
1,003
Interest costs relating to holding development assets
(216)
(158)
(297)
Net finance cost based on operations
198
391
706
Funds from Operations
3,099
2,525
4,976
Increase in Funds from Operations
22.7%
Adjusted shares in issue
No.
25,873,996
No.
25,162,113
No.
25,356,668
FFO per share (annualised)
24.0 pence
20.1 pence
19.6 pence
Increase in FFO per share
19.3%
Capital expenditure and capital commitments
The Group has grown through a combination of site acquisition, existing store improvements and relocations. It has concentrated on extracting value from its existing assets and developing through collaborative projects and management contracts. Capital expenditure during the period totalled 4.6million (31.1.2015: 1.9 million). This was primarily the construction and fitting out works at our development sites in Southampton and Bristol as well as completing works at our Reading store and expanding capacity at our Luton store. The Group also invested 0.14 million in additional racking in our document storage warehouse to increase box capacity.
The Company has no further capital commitments beyond final amounts due on its Reading store, the outstanding build and fitting out commitments at its Bristol and Southampton stores which are currently under development and a further phase of document storage racking.
Market Valuation of Freehold and Operating Leasehold Land and Buildings
On 31 July 2015 professional valuations were prepared by Cushman and Wakefield (C&W) in respect of eleven freeholds one long leasehold and seven operating leasehold properties. This valuation, after adjusting for the sale and manage-back of the Swindon store, has been adopted for the 31 January 2016 period-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.
A deferred tax liability arises on the revaluation of the properties and on the rolled-over gain arising from the disposal of the Kingston and Woking sites in 2007. It is not envisaged that any tax will become payable in the foreseeable future on these disposals due to the availability of rollover relief. The existing Reading store was sold with the benefit of its permission for residential development and the proceeds have been reinvested in our new store pipeline. It is not the intention of the Directors to make any other significant disposals of trading stores, although individual disposals may be considered where it is clear that added value can be created 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, but under applicable accounting standards, no value is included in respect of our leasehold stores to the extent that they are classified as operating leases. The value of our operating leases in the valuation totals 14.8 million (31.1.2015: 14.6 million). Instead we have reported by way of a note the underlying value of these leasehold stores in future revaluations and adjusted our Net Asset Value (NAV) calculation accordingly to include their value. This will ensure comparable NAV calculations.
Analysis of Total Property Value
No of stores/sites
31 Jan 2016 Valuation
'000
No of stores/sites
31 Jan 2015
Valuation
'000
No of stores/sites
31 July 2015 Valuation
'000
Freehold and long leasehold valued by C & W
112
70,610
12
65,910
12
74,110
Leasehold valued by C & W
7
14,760
7
14,570
71
14,760
Subtotal
18
85,370
19
80,480
19
88,870
Sites in development at cost
3
13,150
3
7,874
3
8,888
Total
21
98,520
22
88,354
22
97,758
1 Two leasehold stores were not valued as their remaining unexpired terms were insufficient to yield a value under the Cushman & Wakefield valuation methodology.
2 The Swindon Store was sold under a sale and manage-back arrangement.
Adjusted Net Asset Value per Share
Adjusted net assets per share is the net assets of the Group business adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the 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 January 2016 the adjusted net asset value per share increased to 3.07 from 2.69 year on year, up 14.1%. This increase is a result of higher property values, cash generated from operations, offset in part by an increase in the shares in issue due to the exercise of share options during the period and an increased dividend pay-out.
Adjusted Net Asset Value per Share(NAV)
31 Jan
2016
'000
31 Jan
2015
'000
31 July
2015
'000
Net assets
Adjustment to include leasehold stores at valuation
Add: C & W leasehold valuation 1
Deduct: leasehold properties and their fixtures and fittings at NBV
56,409
14,760
(3,296)
45,711
14,570
(3,445)
52,969
14,760
(3,339)
67,873
56,836
64,390
Deferred tax arising on revaluation of leasehold properties 2
(2,063)
(2,225)
(2,284)
Adjusted net assets
65,810
54,611
62,106
Shares in issue
Number
Number
'000s
Number
'000s
Opening shares
Shares issued for the exercise of options
28,447
517
27,809
443
27,809
638
Closing shares in issue
Shares held in treasury
Shares held in EBT
28,964
(2,467)
(623)
28,252
(2,467)
(623)
28,447
(2,467)
(623)
Closing shares for NAV purposes
25,874
25,162
25,357
Adjusted net asset value per share after deferred tax provision
2.54
2.17
2.45
Adjusted net asset value per share before deferred tax provision
3.07
2.69
3.02
1 The seven leaseholds valued by Cushman & Wakefield are all within the terms of the Landlord and Tenant Act (1954) giving a degree of security of tenure. The average length of the leases on the leasehold stores valued was 12 years and 8 months at the date of the 2015 valuation (2015 valuation: 13 years and 8 months).
2 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.
Andrew Jacobs Ray Davies
Chief Executive Officer Finance Director
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2016
Notes
Six months
ended
31 January 2016
Unaudited
'000
Six months
ended
31 January 2015
Unaudited
'000
Year ended
31 July 2015
Audited
'000
Revenue
1a
7,986
7,629
15,424
Total property, staff, distribution and general costs
2a
(4,689)
(4,713)
(9,742)
Adjusted EBITDA1
3,297
2,916
5,682
Amortisation of intangible assets
(84)
(83)
(165)
Depreciation
(735)
(689)
(1,440)
Equity settled share based payments
18
(93)
(112)
(211)
(912)
(884)
(1,816)
Irrecoverable property costs
-
-
(209)
Net settlement proceeds
2c
1,940
-
-
Costs of disposal - Swindon store(s)
(122)
-
-
906
(884)
(2,025)
Operating profit
4,203
2,032
3,657
Finance income
3
150
26
141
Finance cost
4
(564)
(575)
(1,144)
Profit before taxation
5
3,789
1,483
2,654
Income tax expense
6
(817)
(387)
(686)
Profit for the period
2,972
1,096
1,968
Profit attributable to:
Owners of the parent
20
2,972
1,096
1,968
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Increase/(decrease) in property valuation
379
(128)
8,009
Deferred tax relating to change in property valuation
734
26
(1,578)
1,102
(102)
6,431
Items that may be subsequently reclassified to profit and loss
Increase/(decrease) in fair value of cash flow hedges
21
137
(170)
Deferred tax relating to cash flow hedges
(10)
(28)
38
11
109
(132)
Other comprehensive income
1,113
7
6,299
Total comprehensive income for the period
4,085
1,103
8,267
Attributable to:
Owners of the parent
4,085
1,103
8,267
Earnings per share
Basic
8
11.53p
4.39p
7.84p
Diluted
8
11.26p
4.29p
7.64p
1 Adjusted EBITDA and operating profit are defined in the accounting policies section of the notes to the interim report.
Consolidated Statement of Changes in Equity
Share
capital
'000
Share
premium
'000
Other
reserves
'000
Revaluation
reserve
'000
Retained
earnings
'000
Attributable
to owners of
the parent
'000
Non
controlling
interest
'000
Total
equity
'000
1 August 2014
279
1,801
8,595
26,478
8,057
45,210
-
45,210
Profit for the period
-
-
-
-
1,096
1,096
-
1,096
Other comprehensive income:
Decrease in property valuation net of deferred tax
-
-
-
(102)
-
(102)
-
(102)
Decrease in fair value of cash flow hedges net of deferred tax
-
-
109
-
-
109
-
109
Total comprehensive income
-
-
109
(102)
1,096
1,103
-
1,103
Transactions with owners:
Dividend paid
-
-
(1,258)
-
-
(1,258)
-
(1,258)
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(107)
107
-
-
-
IFRS2 transfer share options to which the equity relates have either been exercised or lapsed
-
-
(211)
-
211
-
-
-
Equity share based payments
-
-
112
-
-
112
-
112
Exercise of share options
4
540
-
-
-
544
-
544
31 January 2015 - Unaudited
283
2,341
7,347
26,269
9,471
45,711
-
45,711
Profit for the period
-
-
-
-
872
872
-
872
Other comprehensive income:
Increase in asset valuation net of deferred tax
-
-
-
6,533
-
6,533
-
6,533
Decrease in fair value of cash flow hedges net of deferred tax
-
-
(241)
-
-
(241)
-
(241)
Total comprehensive income
-
-
(241)
6,533
872
7,164
-
7,164
Transactions with owners:
Dividend paid
-
-
1,258
-
(1,847)
(1,847)
-
(589)
IFRS2 transfer share options to which the equity relates have either been exercised or lapsed
-
-
(87)
-
87
-
-
Equity share based payments
-
-
99
-
-
99
-
99
Deferred tax credit relating to share options
-
-
309
-
-
309
309
Exercise of share options
2
273
-
-
-
275
-
275
Total transactions with owners
Transfer realised gain on asset disposal
-
-
-
(421)
421
-
-
-
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(142)
142
-
-
-
31 July 2015 - Audited
285
2,614
8,685
32,239
9,146
52,969
-
52,969
Profit for the period
-
-
-
-
2,972
2,972
-
2,972
Other comprehensive income:
Increase in property valuation net of deferred tax
-
-
-
1,102
-
1,102
-
1,102
Decrease in fair value of cash flow hedges net of deferred tax
-
-
11
-
-
11
-
11
Total comprehensive income
-
-
11
1,102
2,972
4,085
-
4,085
Transactions with owners:
Dividend paid
-
-
-
-
(1,456)
(1,456)
-
(1,456)
IFRS2 transfer share options to which the equity relates have either been exercised or lapsed
-
-
(303)
-
303
-
-
-
Equity share based payments
-
-
93
-
-
93
-
93
Deferred tax credit relating to share options
-
-
(6)
-
-
(6)
(6)
Exercise of share options
5
719
-
-
-
724
-
724
Total transactions with owners
Transfer realised gain on asset disposal
-
-
-
(1,668)
1,668
-
-
-
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(128)
128
-
-
-
31 January 2016 - Unaudited
290
3,333
8,480
31,545
12,761
56,409
-
56,409
Consolidated Statement of Financial Position
31 January 2016
Notes
31 January
2016
Unaudited
'000
31 January
2015
Unaudited
'000
31 July
2015
Audited
'000
Assets
Non-current assets
Intangible assets
3,674
3,840
3,758
Property, plant and equipment
9
88,494
78,721
87,802
Development loan capital
10
2,905
-
2,779
Derivative financial instruments
15b
-
188
-
95,073
82,749
94,339
Current assets
Inventories
11
139
127
141
Trade and other receivables
12
3,677
3,408
2,479
Cash and cash equivalents
3,010
3,397
2,435
Total current assets
6,826
6,932
5,055
Total assets
101,899
89,681
99,394
Liabilities
Current liabilities
Trade and other payables
13
(4,839)
(4,883)
(5,971)
Taxation
(294)
(624)
(535)
Derivative financial instruments
15b
(99)
-
-
(5,232)
(5,507)
(6,506)
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax
15a
15b
16
(28,624)
-
(11,634)
(27,497)
-
(10,966)
(27,548)
(119)
(12,252)
(40,258)
(38,463)
(39,919)
Total liabilities
(45,490)
(43,970)
(46,425)
Net assets
56,409
45,711
52,969
Equity
Equity attributable to owners of the parent
Called up share capital
17
290
282
285
Share premium
3,333
2,342
2,614
Other reserves
18
8,480
7,347
8,685
Retained earnings
19
12,761
9,471
9,146
Revaluation reserve
31 ,545
26,269
32,239
Total equity
56,409
45,711
52,969
Approved by the Board of Directors and authorised for issue on 22 April 2016 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 2016
Notes
Six months ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Operating activities
Cash generated from operations
21a
1,826
1,388
5,984
Income tax paid
(961)
-
(338)
Net cash from operating activities
865
1,388
5,646
Investing activities
Development loan capital
(126)
-
(2,650)
Purchase of property, plant and equipment
9
(4,589)
(1,865)
(3,583)
Net proceeds from disposal of property, plant and equipment
5,398
2,907
2,901
Interest received
135
26
12
Net cash from/(used in) investing activities
818
(1,068)
(3,320)
Financing activities
Repayment of borrowings
(27,701)
-
-
Proceeds from new borrowings
28,816
-
-
Loans granted to projects under management contracts
(978)
-
-
Finance costs paid
(513)
(524)
(1,041)
Equity dividends paid
(1,456)
(1,258)
(1,847)
Proceeds from issuance of ordinary shares (net)
724
545
819
Net cash used in financing activities
(1,108)
(1,237)
(2,069)
Net increase in cash and cash equivalents in the period
575
1,219
257
Cash and cash equivalents at beginning of the period
2,435
2,178
2,178
Cash and cash equivalents at end of the period
3,010
3,397
2,435
Accounting Policies
General Information
Lok'nStore Group plc is an AIM listed company incorporated and domiciled in England and Wales. The address of the registered office is One London Wall, London EC2Y 5AB, UK. 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 2016 have been prepared on the basis of the accounting policies expected to be used in the 2016 Lok'nStore Group Plc Annual Report and Accounts and in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union ('EU') ('IFRS').
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 22 April 2016, are unaudited. The interim results do not constitute statutory financial statements within the meaning of section 435 of the Companies Act 2006.
Comparative figures for the year ended 31 July 2015 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.
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 3.0 million (31.01.2015: 3.4 million), undrawn committed bank facilities at 31January 2016 of 11.4 million (31.01.2015: 12.3 million), and cash generated from operations in the period to 31 January 2016 of 3.8 million (31.01.2015: 1.4 million). The Group operates a new banking facility on improved terms with Royal Bank of Scotland plc. The new 40 million five year revolving credit facility has replaced the existing facility which was due to expire in October 2016, and will provide funding for site acquisitions and working capital. The Group is fully compliant with all bank covenants and undertakings and is not obliged to make any repayments prior to expiration. The financial statements are therefore prepared on a going concern basis.
Adjusted EBITDA
Earnings before interest, tax, depreciation and amortisation (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.
Store adjusted EBITDA
Store adjusted EBITDA is defined as adjusted EBITDA (see above) but before central and head office costs.
Notes to the Financial Statements
For the six months ended 31 January 2016
1 Revenue
Analysis of the Group's revenue is shown below:
Six months
ended
31 January
2016
Unaudited
Six months
ended
31 January
2015
Unaudited
Year
ended
31 July
2015
Audited
Stores trading
'000
'000
'000
Self-storage revenue
6,004
5,921
11,851
Other storage related revenue
738
713
1,434
Ancillary store rental revenue
4
4
4
Management fees
190
68
176
Sub-total
6,936
6,706
13,465
Stores under development
Non-storage income
(8)
-
3
Sub-total
6,928
6,706
13,468
Serviced archive and records management revenue
1,058
923
1,956
Total revenue per statement of comprehensive income
7,986
7,629
15,424
The segment information for the period ended 31 January 2016 is as follows:
2015/2016 - Unaudited
Self-storage
six months ended
31 January
2016
'000
Serviced archive
and records management
six months ended
31 January
2016
'000
Total
six months ended
31 January 2016
'000
Self-storage
six months ended
31 January
2015
'000
Serviced archive
and records management
six months ended
31 January
2015
'000
Total
six months ended
31 January 2015
'000
Revenue from external customers
6,928
1,058
7,986
6,706
923
7,629
Segment adjusted EBITDA
3,045
252
3,297
2,808
108
2,916
Depreciation
Amortisation of intangible assets
(685)
-
(50)
(84)
(735)
(84)
(633)
-
(48)
(83)
(689)
(83)
Equity settled share based payments
(93)
-
(93)
(112)
-
(112)
Net settlement proceeds - Reading site
1,940
-
1,940
Costs of disposal - Swindon Store
(122)
-
(122)
Segment profit/(loss)
4,085
118
4,203
2,063
(31)
2,032
Central costs not allocated to segments:
Finance income
150
26
Finance costs
(564)
(575)
Profit before taxation
3,789
1,483
Income tax expense
(841)
(387)
Consolidated profit for the financial period
2,948
1,096
2014/2015 - Audited
Self-storage
year
ended
31 July
2015
'000
Serviced archive & records management
year
ended
31 July
2015
'000
Total
year
ended
31 July
2015
'000
Revenue from external customers
13,468
1,956
15,424
Segment adjusted EBITDA
Management charges
5,420
25
262
(25)
5,682
-
Depreciation
Amortisation of intangible assets
(1,340)
-
(100)
(165)
(1,440)
(165)
Equity settled share based payments
(211)
-
(211)
Irrecoverable property costs
(209)
-
(209)
Segment profit/(loss)
3,685
(28)
3,657
Central costs not allocated to segments:
Finance income
141
Finance costs
(1,141)
Profit before taxation
2,654
Income tax expense
(686)
Consolidated profit for the financial year
1,968
2016
Unaudited
Self-storage
31 January
2016
'000
Serviced archive & records management
31 January 2016
'000
Total
31 January
2016
'000
Self-storage
31 January
2015
'000
Serviced archive & records management
31 January 2015
'000
Total
31 January
2015
'000
Segment assets
95,913
5,986
101,899
83,806
5,875
89,681
Segment liabilities
(17,246)
(445)
(17,691)
(15,975)
(498)
(16,473)
Borrowings
(28,624)
(27,497)
Total liabilities
(46,315)
(43,970)
Capital expenditure
4,449
140
4,589
1,423
442
1,865
1 Capital expenditure includes fixed asset additions (note 9).
2015
Audited
Self-storage
31 July
2015
'000
Serviced archive & records management
31 July 2015
'000
Total
31 July
2015
'000
Segment assets
93,296
6,098
99,394
Segment liabilities
(18,341)
(536)
(18,877)
Borrowings
(27,548)
Total liabilities
(46,425)
Capital expenditure
3,126
457
3,583
2a Property, staff, distribution and general costs
Six months ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Property and premises costs
1,889
1,960
4,010
Staff costs
2,074
2,005
4,188
General overheads
481
491
1,049
Distribution costs
78
95
190
Retail products cost of sales
167
162
305
4,689
4,713
9,742
2b 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
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Retail
55
69
130
Insurance
33
17
33
Van hire
1
-
2
Other
1
1
-
90
87
165
Serviced archive consumables and direct costs
77
75
140
167
162
305
2c Other Income
Six months ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Net settlement proceeds
1,940
-
-
The Group has received an additional 2 million from the purchaser of the original Reading store site in return for the relinquishment of all remaining rights over the site. This sum is in addition to the 2.9 million received from the purchaser on 31 October 2014, taking the total consideration to 4.9m.
3 Finance income
Six months
ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Bank interest
150
26
141
4 Finance costs
Six months ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Bank interest
456
465
925
Non-utilisation fees and amortisation of bank loan arrangement fees
108
110
219
Hire purchase and other interest
-
-
1
564
575
1,144
Most interest payable arises on bank loans classified as financial liabilities measured at amortised cost.
5 Profit before taxation
Six months ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Profit before taxation is stated after charging:
Depreciation and amounts written off property, plant and equipment:
- owned assets
Amortisation of intangible assets
Operating lease rentals - land and buildings
735
84
762
681
83
773
1,440
165
1,562
6 Taxation
Six months ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Current tax:
UK corporation tax
728
293
535
Deferred tax:
Origination and reversal of temporary differences
468
94
100
Adjustments in respect of prior periods
(379)
-
51
Total deferred tax charge
89
94
151
Income tax expense for the period/year
817
387
686
The charge for the period can be reconciled to the profit for the period as follows:
Six months ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Profit before tax
3,789
1,483
2,654
Tax on ordinary activities at the standard effective rate of corporation tax in the UK of 20% (31.1.2015: 20.67%)
758
306
549
Expenses not deductible for tax purposes
1
4
2
Depreciation of non-qualifying assets
38
58
85
Share based payment charges in excess of corresponding tax deduction
19
23
-
Adjustments in respect of prior periods - deferred tax
-
-
51
Adjustments in respect of prior periods - corporation tax
3
-
-
Impact of change in tax rate on closing DT balance
(379)
-
-
Impact of change in tax rate on timing differences
-
(4)
-
Share option scheme
(12)
-
-
Deferred tax on rolled over gain
388
-
-
Other timing differences
1
-
(1)
Income tax expense for the period/year
817
387
686
Effective tax rate
22.2%
26%
26%
The UK's main rate of corporation tax reduced to 20% from 1 April 2015. The effective rate for this period is 22.2%. (31.01.2015: 26%).
In addition to the amount charged to profit or loss for the period, deferred tax relating to the revaluation of the Group's properties of 75,900 (31.1.2015: 25,612) and the fair value of cash flow hedges of 11,616 (31.1.2014: 28,320) has been recognised directly in other comprehensive income (see note 16 on deferred tax).
7 Dividends
Six months ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2014 (5.00 pence per share)
-
1,258
1,258
Interim dividend for the six months to 31 January 2015 (2.33 pence per share)
-
-
589
Final dividend for the year ended 31 July 2015 (5.67 pence per share)
1,456
-
-
1,456
1,258
1,847
In respect of the current period the Directors propose that an interim dividend of 2.67 pence per share will be paid to the shareholders. The total estimated dividend to be paid is 691,236 based on the number of shares currently in issue as adjusted for shares held in the Employee Benefits Trust and for shares held on treasury. This interim dividend is an on-account payment of a final annual dividend and is ultimately subject to approval by shareholders at the 2016 Annual General Meeting and has not been included as a liability in these financial statements. The ex-dividend date will be 5 May 2016; the record date 6 May 2016; with an intended payment date of 10 June 2016.
8 Earnings per share
The calculations of earnings per share are based on the following profits and numbers of shares.
Six months
ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Profit for the financial period
2,972
1,096
1,968
No. of shares
No. of shares
No. of shares
Weighted average number of shares
For basic earnings per share
25,775,767
24,950,434
25,102,032
Dilutive effect of share options
626,082
614,261
654,598
For diluted earnings per share
26,401,849
25,564,695
24,981,571
623,212 (31.01.2015: 623,212) shares are held in the Employee Benefit Trust and 2,466,869 (31.01.2015:2,466,869) shares are held in Treasury. Both are excluded from the above calculation.
Six months
ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
Year
ended
31 July
2015
Audited
Earnings per share
Basic
11.53p
4.39p
7.84p
Diluted
11.26p
4.29p
7.64p
9 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 2014 Audited
11,409
51,412
5,121
961
8,764
12
77,679
Net book value at 31 Jan 2015 Audited
7,874
54,265
5,029
918
10,624
11
78,721
Net book value at 31 July 2015 Audited
8,888
61,035
6,425
873
10,572
19
87,802
Cost or valuation
1 August 2015
10,492
61,035
6,425
2,563
20,571
30
101,116
Additions
2,831
134
1
-
1,623
-
4,589
Disposals
-
(3,228)
-
-
(701)
-
(3,929)
Reclassification
1,431
-
-
-
(1,431)
-
-
Revaluations
-
(6)
52
-
-
-
46
31 January 2016 - Unaudited
14,754
57,935
6,478
2,563
20,062
30
101,822
Depreciation
1 August 2015
1,604
-
-
1,690
9,999
21
13,314
Depreciation
-
295
37
46
356
1
735
Disposals
-
-
-
-
(389)
-
(389)
Revaluations
(295)
(37)
-
-
-
(332)
31 January 2016 - Unaudited
1,604
-
-
1,736
9,966
22
13,328
Net book value at January 2016 Unaudited
13,150
57,935
6,478
827
10,096
8
88,494
If all property, plant and equipment were stated at historic cost the carrying value would be 50.0 million (31.01.2015: 46.4 million).
Capital expenditure during the period totalled 4.6million (31.1.2015: 1.9 million). This was primarily the construction and fitting out works at our developments sites in Southampton and Bristol as well as completing works at our Reading Store and expanding capacity at our Luton store. The Group also invested a further 0.14 million in additional racking at the Saracen Olney warehouse to increase box capacity.
Property, plant and equipment (non-current assets) with a carrying value of 88.5 million (31.1.2015: 78.7 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 2015 by Cushman and Wakefield (C&W), the freehold and leasehold properties have not been externally valued at 31 January 2016, although in accordance with the Group's established policy it is the intention to do so at the next year end at 31 July 2016.
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, the Directors considered that although there was evidence of a more buoyant real estate market, there had not been such a material movement in market yields that warranted a modification to the position as at 31 January 2016 in respect of our properties externally valued at 31 July 2015. 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 2016 year-end.
10 Development loan capital
In May 2015 Lok'nStore opened a new store in Aldershot, Hampshire to which it provided development loan capital. The store is managed for outside investors under the Lok'nStore brand. Lok'nStore has managed the building and subsequent operation of the store and will generate a return on 2.5 million of the total development capital committed to the project, and a management fee for the construction, operation and branding of the store.
31 January
2016
Unaudited
'000
31 January
2015
Unaudited
'000
31 July
2015
Audited
'000
Development loan capital
2,905
-
2,779
11 Inventories
31 January
2016
Unaudited
'000
31 January
2015
Unaudited
'000
31 July
2015
Audited
'000
Consumables and goods for resale
139
127
141
The amount of inventories recognised as an expense during the period was 74,320 (31.1.2015: 98,634).
12 Trade and other receivables
31 January
2016
Unaudited
'000
31 January
2015
Unaudited '000
31 July
2015
Audited '000
Trade receivables
1,344
1,183
1,302
Other receivables
1,511
1.596
640
Prepayments and accrued income
822
629
537
3,677
3,408
2,479
The Directors consider that the carrying amount of trade and other receivables and accrued income approximates their fair value.
13 Trade and other payables
31 January
2016
Unaudited
'000
31 January
2015
Unaudited '000
31 July
2015
Audited '000
Trade payables
864
952
1,901
Taxation and social security costs
884
598
464
Other payables
1,095
1,112
1,173
Accruals and deferred income
1,996
2,221
2,433
4,839
4,883
5,971
The Directors consider that the carrying amount of trade and other payables and accruals approximates fair value.
14 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:
Capital Management
31 January
2016
Unaudited '000
31 January
2015 Unaudited '000
31 July
2015
Audited '000
Gross debt
(28,816)
(27,701)
(27,701)
Cash and cash equivalents
3,010
3,397
2,435
Net debt
(25,806)
(24,304)
(25,266)
Total equity
56,409
45,711
52,968
Net debt to equity ratio
45.7%
53.2%
47.7%
15a Borrowings
31 January
2016 Unaudited
'000
31 January
2015 Unaudited
'000
31 July
2015
Audited '000
Non-current
Bank loans repayable in more than two years
but not more than five years
Gross
28,816
27,701
27,701
Deferred financing costs
(192)
(204)
(153)
Net bank borrowings
28,624
27,497
27,548
In January 2016, the Group announced the agreement of a new banking facility on improved terms with Royal Bank of Scotland plc. The new 40 million five year revolving credit facility will replace the existing facility which was due to expire in October 2016, and will provide funding for site acquisitions and working capital. The 40 million revolving credit facility with Royal Bank of Scotland plc is secured by legal charges and debentures over the freehold and leasehold properties and other assets of the business with a net book value of 98.7 million together with cross-company guarantees from Group companies. The revolving credit facility is for a five-year term and expires on 14 January 2021. The Group is not obliged to make any repayments prior to expiration. The loans bear interest at the London Inter-Bank Offer Rate (LIBOR) plus 1.40%-1.45% Royal Bank of Scotland plc margin based on a loan to value covenant test while the interest cover and loan to value covenants are broadly in line with the previous facility.
15b Derivative financial instruments
Of the 28.8 million of gross debt currently drawn against the revolving credit facility, 20 million is at a fixed interest rate with 10 million fixed rate swap at a fixed 1 month sterling LIBOR rate of 1.2% and 10 million swap at a fixed 1 month sterling LIBOR rate of 1.15%. With 1 month LIBOR around 0.5%, this leaves a balance of 8.8 million floating at a current all-in rate of around 2.8% and results in an overall weighted average rate of 3.25%. The 20 million fixed rate is treated as an effective cash flow hedge and its fair value on a mark-to-market basis has fluctuated historically. Under the new facility arrangements the Group is not committed to enter into hedging instruments going forwards but rather to keep such matters under periodic review. Due to the relatively short unexpired term of the existing 20m of swaps these will continue to be held by Lloyds Bank plc on a modest 'cash cover' basis until their expiration in October 2016.
Fair Value
Currency
Principal
Maturity date
31 Jan
2016 Unaudited
'000
31 Jan
2015 Unaudited
'000
31 July
2015 Audited '000
3032816LS Interest rate swap
GBP
10,000,000
20/10/2016
(51)
98
(63)
3047549LS Interest rate swap
GBP
10,000,000
20/10/2016
(48)
90
(56)
20,000,000
(99)
188
(119)
The movement in fair value of the interest rate swaps of 20,529 (31.1.2015: 137,033) has been recognised in other comprehensive income in the period.
16 Deferred tax
Deferred tax liability
31 January 2016
Unaudited
'000
31 January 2015
Unaudited
'000
31 July 2015
Audited
'000
Liability at start of period/year
12,252
10,870
10,870
Charge to income for the period/year
89
94
151
Tax charged directly to other comprehensive income
(707)
2
1,540
Credit to share based payment reserve
-
-
(309)
Liability at end of period/year
11,634
10,966
12,252
The following are the major deferred tax liabilities and assets recognised by the Group and the movements during the year:
Accelerated
Capital
Allowances
'000
Tax
losses
'000
Intangible
assets
'000
Other
temporary
differences
'000
Revaluation of
properties
'000
Rolled
over gain
on disposal
'000
Share
Options
'000
Total
'000
At 1 August 2014
1,441
-
563
29
7,008
1,829
-
10,870
Charge/ (credit) to income for the period
111
-
(17)
-
-
-
-
94
Charge to other comprehensive income
-
-
-
28
(26)
-
-
2
At 31 January 2015 Unaudited
1,552
-
546
57
6,982
1,829
-
10,966
Charge/ (credit) to income for the period
156
-
(16)
1
-
(42)
(42)
57
Charge to other comprehensive income
-
-
-
(66)
1,604
-
-
1,538
Credit to share based payment reserve
-
-
-
-
-
-
(309)
(309)
At 31 July 2015 Audited
1,708
-
530
(8)
8,586
1,787
(351)
12,252
Charge/ (credit) to income for the period
(62)
-
(68)
34
-
162
23
89
Charge to other comprehensive income
-
-
-
10
(734)
11
6
(707)
At 31 January 2016 Unaudited
1,646
-
462
36
7,852
1,960
(322)
11,634
A deferred tax asset of 321,313 arises in respect of the share options in existence at 31 January 2016. No deferred tax asset arises in relation to the remainder of the share options as at 31 January 2016 as the share price at the period-end is below the exercise price of the options.
17 Share capital
31 January 2016
Unaudited
'000
31 January 2015
Unaudited
'000
31 July 2015
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
28,446,749
27,809,108
27,809,108
Options exercised during period/year
517,328
443,086
637,641
Balance at end of period/year
28,964,077
28,252,194
28,446,749
Allotted, issued and fully paid ordinary shares
'000
'000
'000
Balance at start of period/year
284,467
278,091
278,091
Options exercised during period/year
5,175
4,430
6,376
Balance at end of period/year
289,640
282,521
284,467
The Company has one class of ordinary shares which carry no right to fixed income.
18 Other reserves
Cash flow
Other
Capital
Share-based
hedge
Merger
reserve
redemption
payment
reserve
reserve
reserve
reserve
Total
Group
'000
'000
'000
'000
'000
'000
1 August 2014 - Audited
33
6,295
1,294
34
939
8,595
Equity share based payments
-
-
-
-
112
112
Transfer to retained earnings
-
-
-
-
(211)
(211)
Cash flow hedge reserve net of tax
109
-
-
-
-
109
Dividend paid
-
-
(1,258)
-
-
(1,258)
31 January 2015 - Unaudited
142
6,295
36
34
840
7,347
Equity share based payments
-
-
-
-
99
99
Transfer to retained earnings in relation to share based payments
-
-
-
-
(87)
(87)
Cash flow hedge reserve net of tax
(241)
-
-
-
-
(241)
Dividend paid
-
-
1,258
-
-
1,258
Tax credit relating to share options
-
-
-
-
309
309
31 July 2015 - Audited
(99)
6,295
1,294
34
1,161
8,685
Equity share based payments
-
-
-
-
93
93
Transfer to retained earnings in relation to share based payments
-
-
-
-
(303)
(303)
Cash flow hedge reserve net of tax
11
-
-
-
-
11
Tax credit relating to share options
(6)
(6)
31 January 2016 - Unaudited
(88)
6,295
1,294
34
945
8,480
The merger reserve represents the excess of the nominal value of the shares issued by Lok'nStore Group plc over the nominal value of the share capital and share premium of Lok'nStore Limited as at 31 July 2001. The other distributable reserve and the capital redemption reserve arose in the year ended 31 July 2004 from the purchase of the Company's own shares and a cancellation of share premium.
Share based payment reserve
Under IFRS2 there is the option to make transfers from the share based payment reserve to retained earnings in respect of accumulated share option charges where the options have either been exercised or have lapsed post-vesting. The total amounts calculated and accordingly transferred to retained earnings in the period amounted to 302,804. (31.1.2015: 210,749)
19 Retained earnings
Retained earnings before
Retained
deduction of
Own shares
earnings
own shares
(note 21)
Total
Group
'000
'000
'000
1 August 2014 - Audited
12,298
(4,241)
8,057
Profit for the financial period
1,096
-
1,096
Transfer from non-controlling interest
107
-
107
Transfer from revaluation reserve
211
-
211
31 January 2015 - Unaudited
13,712
(4,241)
9,471
Profit for the financial period
872
-
872
Transfer from revaluation reserve (additional depreciation on revaluation)
142
-
142
Transfer from share based payment reserve (Note 19)
87
-
87
Dividend paid
(1,847)
-
(1,847)
Transfer realised gain on asset disposal
421
-
421
31 July 2015 - Audited
13,387
(4,241)
9,146
Profit for the financial period
2,972
-
2,972
Transfer from revaluation reserve
128
-
128
Transfer from share based payment reserve (Note 19)
303
-
303
Dividend paid
(1,456)
-
(1,456)
Transfer realised gain on asset disposal
1,668
-
1,668
31 January 2016 - Unaudited
17,002
(4,241)
12,761
The transfer from revaluation reserve represents the additional depreciation charged on revalued assets net of deferred tax.
The Own Shares Reserve represents the cost of shares in Lok'nStore Group plc purchased in the market and held in the Employee Benefit Trust to satisfy awards made under the Group's share incentive plan and shares purchased separately by Lok'nStore Limited for Treasury Account. These treasury shares have not been cancelled and were purchased at an average price considerably lower than the Group's adjusted net asset value. These shares may in due course be released back into the market to assist liquidity of the Company's stock and to provide availability of a reasonable line of stock to satisfy investor demand as and when required.
20 Own shares
ESOP
ESOP
Treasury
Treasury
Own shares
shares
shares
shares
shares
total
Number
Number
1 August 2014 - Audited
623,212
499,910
2,466,869
3,741,036
4,240,946
31 January 2015 - Unaudited
623,212
499,910
2,466,869
3,741,036
4,240,946
31 July 2015 - Audited
623,212
499,910
2,466,869
3,741,036
4,240,946
31 January 2016 - Unaudited
623,212
499,910
2,466,869
3,741,036
4,240,946
Lok'nStore Limited holds a total of 2,466,869 of Lok'nStore Group plc ordinary shares of 1p each for treasury with an aggregate nominal value of 24,669 purchased for an aggregate cost of 3,741,036 at an average price of 1.503 per share. These shares represent 8.52% of the Parent Company's called-up share capital. The maximum number of shares held by Lok'nStore Limited in the period was 2,466,869. No shares were disposed of or cancelled in the year.
The Group operates an Employee Benefit Trust (EBT) under a settlement dated 8 July 1999 between Lok'nStore Limited and Lok'nStore Trustee Limited, constituting an employees' share scheme. Funds are placed in the trust by way of deduction from employees' salaries on a monthly basis as they so instruct for purchase of shares in the Company. Shares are allocated to employees at the prevailing market price when the salary deductions are made. As at 31 January 2016, the Trust held 623,212 (31.01.2015: 623,212) ordinary shares of 1 pence each with a market value of 2,003,627 (31.01.2015: 1,486,361). No shares were transferred out of the scheme during the period (2015: nil).
No dividends were waived during the year. No options have been granted under the EBT.
21 Cash flows
(a) Reconciliation of profit before tax to cash generated from operations
Six months
ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Profit before tax
1,849
1,483
2,654
Depreciation
735
681
1,440
Amortisation of intangible assets
83
83
165
Equity settled share based payments
93
112
211
Interest receivable
(150)
(26)
(141)
Interest payable
564
575
1,144
Decrease/ (increase) in inventories
2
3
(10)
(Increase)/ decrease in receivables
(221)
(507)
423
(Decrease) / increase in payables
(1,129)
(1,024)
98
Cash generated from operations
1,826
1,388
5,984
(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 15a less cash and cash equivalents.
Six months
ended
31 January
2016
Unaudited
'000
Six months
ended
31 January
2015
Unaudited
'000
Year
ended
31 July
2015
Audited
'000
Increase in cash in the period/year
575
1,219
257
Change in net debt resulting from cash flows
(1,115)
-
-
Movement in net debt in period
(540)
1,219
257
Net debt brought forward
(25,266)
(25,523)
(25,523)
Net debt carried forward
(25,806)
(24,304)
(25,266)
22 Events after the reporting date
There were no reportable events after the reporting date.
23 Capital commitments and guarantees
The Group has capital expenditure contracted but not provided for in the financial statements of 2.2 million (31.01.2015: 1.6 million). The Company has no further capital commitments beyond final amounts due on its Reading store, the outstanding build and fit-out commitments at its Bristol and Southampton stores which are currently under development, and a further phase of racking fit-out at its Saracen Olney Warehouse.
Our Stores
Head office
Lok'nStore plc
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel 01252 521010
www.loknstore.co.uk
Central Enquiries
0800 587 3322
Basingstoke, Hampshire
Crockford Lane
Chineham
Basingstoke
Hampshire RG24 8NA
Tel 01256 474700
Fax 01256 477377
Crayford, Kent
Block B
Optima Park
Thames Road
Crayford
Kent DA1 4QX
Tel 01322 525292
Fax 01322 521333
Eastbourne, East Sussex
Unit 4, Hawthorn Road
Eastbourne
East Sussex BN23 6QA
Tel 01323 749222
Fax 01323 648555
Fareham, Hampshire
26 + 27 Standard Way
Fareham Industrial Park
Fareham
Hampshire PO16 8XJ
Tel 01329 283300
Fax 01329 284400
Farnborough, Hampshire
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel 01252 511112
Fax 01252 744475
Harlow, Essex
Unit 1 Dukes Park
Edinburgh Way
Harlow
Essex CM20 2GF
Tel 01279 454238
Fax 01279 443750
Horsham, West Sussex
Blatchford Road
Redkiln Estate
Horsham
West Sussex RH13 5QR
Tel 01403 272001
Fax 01403 274001
Luton, Bedfordshire
27 Brunswick Street
Luton
Bedfordshire LU2 0HG
Tel 01582 721177
Fax 01582 721188
Maidenhead, Berkshire
Stafferton Way
Maidenhead
Berkshire
SL6 1AY
Tel 01628 878870
Fax 01628 620136
Milton Keynes, Buckinghamshire
Etheridge Avenue
Brinklow
Milton Keynes
Buckinghamshire MK10 0BB
Tel 01908 281900
Fax 01908 281700
Northampton Central
16 Quorn Way
Grafton Street Industrial Estate
Northampton NN1 2PN
Tel 01604 629928
Fax 01604 627531
Northampton Riverside
Units 1-4
Carousel Way
Northampton
Northamptonshire NN3 9HG
Tel 01604 785522
Fax 01604 785511
Poole, Dorset
50 Willis Way
Fleetsbridge
Poole
Dorset BH15 3SY
Tel 01202 666160
Fax 01202 666806
Portsmouth, Hampshire
Rudmore Square
Portsmouth PO2 8RT
Tel 02392 876783
Fax 02392 821941
Reading, Berkshire
251 A33 Relief Road
Reading
RG2 0RR
Tel 0118 9588999
Fax 0118 9587500
Southampton, Hampshire
Manor House Avenue
Millbrook
Southampton
Hampshire SO15 0LF
Tel 02380 783388
Fax 02380 783383
Staines, Middlesex
The Causeway
Staines
Middlesex TW18 3AY
Tel 01784 464611
Fax 01784 464608
Sunbury on Thames, Middlesex
Unit C, The Sunbury Centre
Hanworth Road
Sunbury
Middlesex TW16 5DA
Tel 01932 761100
Fax 01932 781188
Tonbridge, Kent
Unit 6 Deacon Trading Estate
Vale Road
Tonbridge
Kent TN9 1SW
Tel 01732 771007
Fax 01732 773350
Development locations
Southampton, Hampshire
Third Avenue
Millbrook
Southampton
SO15 0JX
North Harbour, Port Solent, Hampshire
Southampton Road
Portsmouth
PO6 4RH
Bristol
Gallagher Trade Park
Longwell Green
Bristol
BS30
Managed stores
Aldershot, Hampshire
251, Ash Road
Aldershot
GU12 4DD
Tel 0845 4856415
Ashford, Kent
Wotton Road
Ashford
Kent TN23 6LL
Tel 01233 645500
Fax 01233 646000
Chichester, West Sussex
(Opened January 2016)
17, Terminus Road
Chichester
West Sussex
PO19 8TX
Tel 01243 771840
Fax 01243 775313
Crawley, West Sussex
Sussex Manor Business Park
Gatwick Road
Crawley
RH10 9NH
Tel 01293 738530
Swindon Kembrey Park, Wiltshire
Kembrey Street
Elgin Industrial Estate
Swindon
Wiltshire SN2 8UY
Tel 01793 421234
Fax 01793 422888
Woking
Marlborough Road
Woking
GU21 5JG
Tel 01483 378323
Fax 01483 722444
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Recent news on Lok'n Store
See all newsREG - Lok'nStore Group - Holding(s) in Company
AnnouncementREG - GWM Asset Management Lok'nStore Group - Form 8.3 - Lok'n Store Group plc
AnnouncementREG - Barclays PLC Lok'nStore Group - Form 8.3 - LOK'NSTORE GROUP PLC
AnnouncementREG-Samson Rock Capital LLP: Form 8.3 - Lok'n Store Group Plc
AnnouncementREG - City Asset Mngt PLC Lok'nStore Group - City Asset Mngt PLC- Form 8.3-Lok'NStore Group PLC
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