REG - Lok'nStore Group - Interim Results
RNS Number : 6771LLok'nStore Group PLC23 April 2018LOK'NSTORE GROUP PLC
("Lok'nStore" or "the Group")
Lok'nStore Group Plc, the fast growing self-storage company announces interim results for the six months to 31 January 2018
"Strong cash flows and balance sheet fund growth strategy and pipeline of new landmark stores"
Highlights:
Strong trading and cash flow
· Revenue £8.82 million up 5.7% (31.1.2017: £8.34 million) LFL1 up 8.3%
· Group operating costs down by 1.4% at £4.80 million (31.1.2017: £4.87 million)
· Group Adjusted EBITDA2 £3.85 million up 16.3% (31.1.2017: £3.31 million)
· Adjusted pre-tax profit £2.55 million up 21.3% (31.1.2017: £2.10 million)
Cash flow growth supports 11.0% dividend increase - progressive dividend policy
· Cash available for Distribution (CAD) 3 £2.96 million up 13.0% (31.1.2017: £2.62 million)
· Cash available for Distribution (CAD) per share (annualised) 20.5 pence (31.1.2017: 18.6 pence) up 10.2%
· Interim dividend 3.33 pence per share up 11.0% (31.1.2017: 3 pence per share)
Significant growth in asset value
· Adjusted Net Asset Value (NAV) per share4 up 7.9% to £4.18 (31.1.2017: £3.87)
· Total assets5 up to £154.5 million up 8.4% (31.1.2017: £142.6 million)
Strong balance sheet, efficient use of capital, low debt
· Net debt £23.45 million (31.1.2017: £16.67 million)
· Loan to value6 ratio 16.8% (31.1.2017: 14.4%)
· Average cost of debt 1.72% (31.1.2017: 1.69%)
· Post period-end: Bank facility increased by £10 million to £50 million
Consistent performance of the self-storage business
· Core self-storage revenue £7.32 million up 4.5% (31.1.2017: £7.0 million) LFL up 7.6%
· Adjusted Store EBITDA7 £4.29 million up 11.6% (31.1.2017: £3.85 million) LFL up 14.4%
· Store EBITDA margin increased to 58.6% from 54.5%
· Occupied units pricing up 0.4% LFL
· Unit Occupancy up 6.0% LFL
Healthy pipeline of new landmark stores8
· 2 new stores opened in this period in Gillingham and Hemel Hempstead
· 2 new sites acquired in this period in Bedford and Bournemouth
· Current pipeline of 7 contracted stores adds 26% of extra trading space to the overall portfolio, 22% to our owned portfolio and 41% to the managed portfolio
· 4 pipeline sites are currently with lawyers
· Following successful completion of the pipeline, we will have 11 stores under management contracts
Confident outlook
· Positive momentum carried into second half
· The Group continues to grow strongly
Commenting on the Group's results, Andrew Jacobs CEO of Lok'nStore Group said,
"With strong trading and reduced costs Lok'nStore's profits and margins continue to grow rapidly. We are using our robust balance sheet to invest in the future growth of the business building more new landmark stores in a structurally under-supplied market. We have opened 2 new stores in the period and added 2 more to our pipeline with four more sites currently with lawyers.
"Our objective is to open more landmark stores while remaining conservatively geared delivering sustainable growth and consistently increasing dividends."
Enquiries:
Lok'nStore:
Andrew Jacobs, CEO
Ray Davies, Finance Director
01252 521 010
finnCap Ltd
Julian Blunt / Giles Rolls, Corporate Finance
Alice Lane, Corporate Broking
020 7220 0500
Camarco
Billy Clegg / Tom Huddart
0203 757 4980
Notes - What we mean when we say … (and why we use these key performance indicators (KPIs))
1. LFL- Like for like - This measure is used to give transparency on performance in the operating business unrelated to the opening of new stores or closure of old stores therefore giving visibility of the true trading picture. During December 2016 and January 2017 Lok'nStore closed its store in Staines. Our new store in Gillingham opened in December 2017. Like-for-like (LFL) growth figures for the period strip out these 2 effects.
2. Group Adjusted EBITDA - Earnings before interest, tax, depreciation and amortisation - The measure is designed to give clarity on the operating cash flow of the business stripping away non-cash charges, finance charges and tax. Adjusted EBITDA is defined as earnings before all depreciation and amortisation charges, losses or profits on disposal, share-based payments, acquisition costs, exceptional costs finance income, finance costs and taxation.
3. CAD - Cash available for Distribution - is calculated as Adjusted EBITDA minus total net finance cost, less capitalised maintenance expenses, New Works Team costs and current taxation. This measure is designed to give clarity to the capacity of the business to generate net operating cash that can be used to pay dividends to shareholders on a continuing basis.
4. NAV - Adjusted Net Asset Value per share - Adjusted net asset value per share is the net assets of the business 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 any treasury shares are excluded from the number of shares.
5. Total assets - Total assets of £154.5 million is calculated by adding the independent valuation of the leasehold properties (£16.7 million) less their corresponding net book value (NBV) of £2.8 million to the total assets as shown in the balance sheet of £140.6 million.
6. LTV - Loan to value ratio - measures the debt of the business expressed as a percentage of total property assets giving a perspective on the gearing of the business. The calculation is based on net debt of £23.5 million (31.1.2017: £16.7 million) as a percentage of the total properties independently valued by JLL and including development land assets totalling £139.7 million (31.1.2017: £118.5 million) as set out in the Business and Financial Review.
7. Store adjusted EBITDA is Adjusted EBITDA (see 3 above) before the deduction of central and head office costs.
8. Pipeline sites - 11 sites including 7 sites which have been contracted and 4 sites which are currently progressing to contract with lawyers.
Glossary
Abbreviation
Adjusted EBITDA Earnings before all depreciation and amortisation charges, losses or profits on disposal, share basedpayments, acquisition costs, and non-recurring professional costs, finance income, finance costs and taxation
CAD Cash available for Distribution
Capex Capital Expenditure
CSOP Company Share Option Plan
EBT Employee Benefit Trust
EMI Enterprise Management Incentive Scheme
ESOP Employee Share Option Plan
EU European Union
HMRC Her Majesty's Revenue & Customs
IAS International Accounting Standard
IFRIC International Financial Reporting Interpretations Committee
IFRS International Financial Reporting Standard
JLL Jones Lang LaSalle
LIBOR London Interbank Offered Rate
LFL Like for like
LTV Loan to Value Ratio
NAV Net Asset Value
NBV Net book value
Operating Profit Earnings before interest and tax (EBIT)
RICS Royal Institution of Chartered Surveyors
Sq. ft. Square Feet
Store adjusted
EBITDA Adjusted EBITDA (see above) but before central and head office costs
VAT Value Added Tax
Chairman's Statement
Healthy growth, increased dividend and active store opening programme
Lok'nStore continues to grow rapidly as evidenced by these strong results and the increased dividend. This growth will continue. We have the people and the balance sheet strength to buy and build many more landmark stores.
New sites can be difficult to find. The understandable desire to preserve 'greenfield' spaces and the restrictive planning laws that this necessitates leads to high land prices. This is why the UK self-storage market remains structurally undersupplied. However improvements in our store acquisition, design and development processes have resulted in the biggest pipeline of new landmark stores in the company's history.
These smart, modern buildings, which already make up over two-thirds of the space Lok'nStore owns, so the Board looks forward to further expansion with confidence.
Positive trading
For the half year period to January 2018 trading has been good with revenue, profits and assets all increasing.
An increase in Group revenue of 5.7% to £8.82 million (31.1.2017: £8.34 million) resulted mainly from occupancy growth with prices holding steady. Stripping out the effect of the Staines closure and the early trading from our new store in Gillingham, like for like Group revenue increased by 8.3%.
Progressive Dividend
Dividend payments will reflect the growth in the underlying cash generated by the business as reflected in the cash available for distribution (CAD) which is up 13% period to period.
At this interim stage we will pay one third of the previous year's total annual dividend which equates to 3.33 pence per share, up 11.0% on the 3.00 pence per share interim dividend last year. The increase in the interim dividend follows a consistent pattern of dividend growth reflecting the sustained growth of the Group. The interim dividend will be paid on 15 June 2018 to shareholders on the register on 4 May 2018. The ex-dividend date will be 3 May 2018. The final deadline for Dividend Reinvestment Election is 21 May 2018. The final dividend will be declared when the Group's full year results are announced.
Balance Sheet and financial platform strengthened to support a rapid store development programme
Lok'nStore has worked to increase the value of its assets and this is reflected in our higher NAV and low LTV metrics. Our bank facilities run until 2023 and were increased post balance sheet by £10 million to £50 million with no change to underlying covenants. We continue to benefit from low interest costs. This is all reported in more detail in the remainder of the Statement.
The growth of sales, profit and asset values combined with innovative asset management allows us to report a loan-to-value (LTV) ratio of only 16.8% (31.1.2017: 14.4%) and net debt of £23.5 million (31.1.2017: £16.7 million) while we invested £10.9 million in store development in this period.
The Group continues to source high quality sites. Our rapid store development programme has led to an increase in new and purpose built space to 64% of our owned portfolio. Trading at our new landmark stores has been excellent. This underpins our confidence that our strong pipeline of seven more landmark stores will add further momentum to sales and earnings growth. They will add 26% more trading space to our portfolio.
Reduced Operating Costs
We have a strong record of reducing our group operating costs each year however we cautioned at our 2017 year end results that although we maintain a disciplined approach to costs, continuing to reduce them is increasingly challenging while delivering both strong revenue growth and an acceleration of our store opening programme. Nevertheless in this period we have reduced Group operating costs which are down 1.4% and we provide a breakdown in the Business Review. Any future cost increases will be driven by the increase in number of stores, chiefly showing in local business rates, staffing and advertising. However we are not seeing significant cost pressures outside of these areas.
Group margins will increase by building more landmark freehold stores and increasing the number of managed stores we operate from a broadly unchanged central cost platform. Group Adjusted EBITDA margins in the period were 43.7% up from 39.7% in the corresponding period last year.
Lok'nStore increases its existing £40 million Banking Facility to £50 million (Post Balance sheet)
In February 2018, after the period-end the Group increased its bank facility by £10 million to £50 million. The increased facility will provide funding for landmark site acquisitions and working capital to support the Group's ambitious growth plans.
The facility was originally agreed with The Royal Bank of Scotland plc in January 2016 and the term extended in January 2017. This larger facility runs until January 2023. The interest rate is set at the London Inter-Bank Offer Rate (LIBOR) plus a 1.40%-1.65% margin based on a loan to value covenant test (currently the margin is 1.40%). Bank covenants and margin are unaffected by this increase in facility.
The cost of our debt on £28.8 million drawn (gross) averaged 1.72% in the period.
Positive Outlook for Growth
Lok'nStore is a dynamic business designed to deliver significant future growth with an established record of consistent profit and cash generation. It is particularly pleasing to note that the momentum reported earlier in the year has translated into a strong start to the second half.
Our main objective is to steadily increase the cash available for distribution (CAD) per share enabling a predictable growth of the dividend from a strong asset base with conservative levels of debt.
In order to achieve this our focus will be on three key areas:
1. Fill stores and improve pricing to increase cash flow from the existing stores
2. Acquire sites to build more landmark stores
3. Increase the number of stores we manage for third parties
Our current pipeline of 11 new stores will contribute to the achievement of these objectives.
Finally, I should like to thank all of our employees for the huge contribution they have made to the Group's success. Managing growth is a key challenge to organisations. It is a challenge which our staff are meeting with expertise, dedication and enthusiasm.
Simon G Thomas
Chairman
20 April 2018
Business and Financial Review
The Performance of our Stores - Self-storage business steady
· Self-storage revenue £7.32 million up 3.8% (31.1.2017: £7.00 million) LFL up 6.9%
· Adjusted Store EBITDA £4.29 million up 11.6% (31.1.2017: £3.85 million) LFL up 14.4%
· Unit occupancy increased 6.0% year on year on a like for like basis to 66% of current lettable area (CLA)
· Occupied units pricing up 0.4% LFL
With operating costs firmly under control during the period (down 1.4%) steady revenue growth has translated into healthy profit growth. Total adjusted store EBITDA in the self-storage business, a key performance indicator of profitability and cash flow of the business, increased 11.6% to £4.29 million (31.01.2017: £3.85 million). Like for like growth in store EBITDA was 14.4%.
The overall adjusted EBITDA margin across all stores was up at 58.6% (31.1.2017: 54.5%) with the adjusted Store EBITDA margins of the freehold stores at 66.9% (31.1.2017: 62.9%) and the leasehold stores at 44.1% (31.1.2017: 41.3%).
Over the course of the year unit occupancy rose by a healthy 6.0% LFL and unit pricing growth was up 0.4 % LFL.
As you can see from the table below as the business develops the balance of the stores continues to shift towards landmark freehold stores and managed stores which have a higher than average store EBITDA margin (66.9% and 100% respectively versus 58.6% across all stores). The impact of this is to continue to increase the average store EBITDA margin of the Group overall, and this effect is accentuated by operating more stores from a relatively fixed central cost base. In this context the new stores in the pipeline will over time make a larger than average contribution to Group profits as they become established trading units.
At the end of January 2018, 34.8% of Lok'nStore's self-storage revenue was from business customers (31.1.2017: 34.5%) with the remainder from household customers. By number of customers 18.8% of our customers were business customers (31.1.2017: 19.7%).
When Fully Developed
Portfolio Analysis and Performance Breakdown
Number of stores
% of Property
Valuation
% of Adjusted Store EBITDA
Adjusted Store
EBITDA Margin (%)
% lettable space
Lok Owned
Number of stores
Total % lettable space
As at 31 January 2018
Freehold and long leasehold stores
13
87.7
72.7
66.9
65.8
17
54.3
Operating Leaseholds stores
7
12.3
27.3
44.1
34.2
7
21.2
Managed Stores
8
100
11
24.5
Total stores trading
28
35
Pipeline stores
Owned
4
Managed
3
Total Self Storage
35
100
100
58.6
100
35
100
Document Storage
2
-
-
-
-
2
-
Total freeholds and long leasehold stores account for 88% of total property values.
Ancillary Sales
Ancillary sales consisting of boxes and packaging materials, insurance and other sales increased 1.1% over the year accounting for 10.8% of self-storage revenues (31.1.2017: 11.1%). We continue to promote customer goods insurance to new customers with the result that 91% (31.1.2017: 90%) of our new customers purchased the product over the period. This has resulted in nearly 80% of our customers being insured through Lok'nStore.
Saracen - Document storage business
· Revenue £1.18 million up 2.6% (31.01.2017: £1.15 million)
· Adjusted EBITDA £0.36 million up 43.6% (31.01.2017: £0.25 million)
In Saracen we have further reduced cost by vacating surplus property and this has helped to increase Adjusted EBITDA significantly up 43.4% from a steady increase in turnover compared to the corresponding period last year. This is part of a continuing strategy within the document storage business of optimising the utilisation of trading space which has now been consolidated into two trading units.
Our Stores
Lok'nStore has 28 freehold, leasehold and managed stores trading. Of these, 20 stores are owned with 13 freehold or long leasehold, 7 leasehold and 8 further sites operate under management contracts.
The average unexpired term of the Group's operating leaseholds is approximately 10 years and 2 months as at 31 January 2018 (11 years and 2 months: 31 January 2017). All of our current leasehold stores are inside the Landlord and Tenant Act providing us with a strong security of tenure.
Growth from new stores and more new landmark stores to come
Lok'nStore's strong operating cash flow, solid asset base, and tactical approach to its store property portfolio provide the Group with opportunities to improve the terms of its property usage in all stages of the economic cycle. Our focus on the trading business gives us many opportunities and our property decisions are always driven by the requirements of the trading business.
· Early trading at Gillingham has been excellent
· New and purpose built stores lettable space 64% of portfolio
· 4 further new store opportunities identified and are progressing with lawyers
· Current pipeline of 7 contracted stores adds 26% of extra trading space to the overall portfolio, 22% to our owned portfolio and 41% to the managed portfolio
Development of four new landmark stores
Wellingborough, Bedford, Bournemouth, and Leicester.
Wellingborough
The Wellingborough site is in a prominent retail location with large catchment areas and little established competition. The total capital investment of approximately £5 million has been financed from cash flow and our bank facility. After the period-end we completed the development and the store opened on 23 March 2018.
Purchase of the Bedford site
On 1 December 2017 contracts were completed on the purchase of a site in Bedford which will be developed as a purpose built landmark store. The site is in a prominent location to the South-East of Bedford town centre, adjacent to a modern retail park and a large food retailer on a very busy arterial road. Net capital expenditure of £6 million will be funded from cash flow and existing banking facilities. Subject to the completion of all planning matters the store is scheduled to open in 2019 and deliver around 55,000 sq. ft. of trading space.
Acquisition of a freehold site for a new landmark store in Bournemouth, Dorset
The 3-acre site is in a highly prominent location on Castle Lane, adjacent to a major food retailer and Bournemouth Hospital. Building work will follow completion of all relevant planning matters, and the circa £8 million of net capital expenditure will be funded from cash flow and existing banking facilities. Opening is scheduled for 2019. When developed, this store will add around 80,000 sq. ft. of trading space.
Post Balance Sheet: Acquisition of a freehold site for a new landmark store in Leicester (subject to planning)
The 1 acre site is in a highly prominent location opposite a major food retailer in the heart of Leicester's busy retail district. The total investment of circa £8.5 million will be funded from cash flow and existing banking facilities. When developed this store will add around 60,000 sq. ft. of trading space.
More Managed Stores
Over recent years we have been developing our management services to third party storage owners. We have eleven stores under management with eight of these open and trading and three in Exeter, Ipswich and Dover under development and scheduled to open in 2018/19.
In the case of managed stores Lok'nStore receives a standard monthly fee, a performance fee based on certain objectives and a fee on successful exit. In some cases we charge acquisition, planning and branding fees. This allows us to earn revenue from our expertise and knowledge of the self-storage industry without having to commit our capital, to amortise various fixed central costs over a wider operating base, and to drive more visits to our website moving it up the rankings and benefitting all the stores we both own and manage.
In this period we earned £0.31 million (31.1.2017: £0.18 million) in management fees. We expect this to increase steadily over the coming years.
Management fees
Six months ended
31 January 2018
Unaudited
Six months ended
31 January 2017
Unaudited
£
£
Total management fees
311,524
180,881
Three stores currently being developed under management contracts
ü Exeter - scheduled to open next financial year
ü Ipswich - scheduled to open next financial year
ü Dover - scheduled to open next financial year
Summary - Stores Property review
The most recent site acquisition in Leicester increases our pipeline of new landmark stores which are legally secured, to seven. All are in prominent locations with large catchment areas and little established competition and demonstrate the Company's ability to source high quality sites adding to future sales and earnings growth. These eye-catching buildings, with their distinctive orange Lok'nStore branded livery and prominent signage, create highly visible landmarks, which continue to be a big contributor of new customers. We are in the final stages of construction at Wellingborough and the early stages of construction at both Dover and Exeter. Bedford, Ipswich, Bournemouth and Leicester are all in the design and planning stage. All of these new stores will be open by the end of 2019. This will increase the number of stores we operate to 35 and will capitalise on our efficient operating systems and growing internet marketing presence.
Flexible approach to site acquisition
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. Our most important consideration is always the trading potential of the store rather than the type of property tenure.
Store property assets and Net Asset Value
· Total assets now £154.5 million up 8.4% (31.1.2017: £142.6 million)
· Adjusted net asset value of £4.18 per share up 7.9% on last year
Financial results
· Group Revenue £8.82 million up 5.7% (31.1.2017: £8.34 million) LFL up 8.3%
· Group Adjusted EBITDA £3.85 million up 16.3% (31.1.2017: £3.31 million)
· Average cost of debt currently 1.72% (31.1.2017: 1.69%)
· LTV still only 16.8% (31.1.2017: 14.4%)
· Cash available for Distribution (CAD) £2.96 million up 13.0% (31.1.2017: £2.62 million)
· Interim dividend up 11% to 3.33 pence per share (31.1.2017: 3.00 pence per share)
· Cash balances £5.4 million (31.1.2017: £12.1 million)
· Investment in new stores £10.9 million (31.1.2017: £2.8 million)
Lok'nStore is a robust business which generates an increasing cash flow from its strong asset base. With a low LTV of 16.8% and low interest margins of 1.4% on its extended banking facility the business has a firm base for growth. The value of the Group's property assets underpins a flexible business model with stable and rising cash flows and low credit risk.
Management of interest rate risk
With £28.8 million of gross debt currently drawn against the £50 million bank facility the Group is not committed to enter into hedging instruments going forwards but rather to keep such matters under review.
It is not the intention of the Group to enter into an interest rate hedging arrangement at this time given our low level of debt, low loan to value ratio and high interest cover.
Taxation
The Group has made a current tax provision against earnings in this period of £0.49 million (31.1.2017: £0.42 million) based on a corporation tax rate of 20%. The deferred tax provision which is calculated at forward corporation tax rates of 17% and is substantially a tax provision against the potential crystallisation (sales) of revalued properties and past 'rolled over' gains amounts to £16.63 million. (31.1.2017: £14.45 million) (See Note 16).
Earnings per share
Basic earnings per share were 6.70 pence (31.1.2017: 6.91 pence per share) and diluted earnings per share were 6.58 pence (31.1.2017: 6.74 pence per share) showing small declines due to the increased number of shares in issue.
Reduced Operating costs
Group operating costs amounted to £4.80 million for the period, a 1.4% decrease year on year (31.1.2017: £4.87 million).
We have a strong record of reducing our group operating costs each year however we cautioned at our 2017 year end results that although we maintain a disciplined approach to costs continuing to reduce them is increasingly challenging while delivering both strong revenue growth and an acceleration of our store opening programme.
For this period we have contained overall costs which are down 1.4% and we provide a breakdown below. Future cost increases are driven by the expansion of the business in the areas of rates, staffing and advertising (higher internet marketing costs). Overall the cost increases are mainly driven by the expansion of the business and we are seeing little other cost pressures.
Property costs which mainly constitute rent and rates have risen in recent years as we felt the effects of higher rates bills as we opened our new landmark stores particularly at Southampton and Bristol. However we have in this period been able to secure rate reductions for past periods on these sites and this has contributed to the reduction in property costs. Rents have remained broadly static but overall are lower in this period as the closure of Staines has eliminated rent costs (31.01.2017: £62,447) and utility costs are lower as a result of a renegotiation of our energy tariffs.
Group
Increase (decrease)
in costs %
Six months
ended 31 Jan
2018
£'000
Six months
ended 31 Jan
2017
£'000
Year
ended 31 July
2017
£'000
Property costs
(5.4%)
1,974
2,087
4,179
Staff costs
1.8%
2,194
2,156
4,389
Overheads
1.8%
552
542
1,098
Distribution costs
(2.4%)
81
83
171
Total
(1.4%)
4,801
4,868
9,837
Cash flow and financing
At 31 January 2018 the Group had cash balances of £5.4 million (31.1.2017: £12.1 million). Cash inflow from operating activities before investing and financing activities was £3.76 million (31.1.2017: £2.90 million). As well as using cash generated from operations to fund some capital expenditure, the Group has a five year revolving credit facility which runs until January 2023. This provides sufficient liquidity for the Group's current needs. Undrawn committed facilities at the period-end amounted to £11.2 million (31.1.2017: £11.2 million). See also Note 22 (i) (Events after the Reporting Date).
Gearing
At 31 January 2018 the Group had £28.8 million of gross borrowings (31.1.2017: £28.8 million) representing gearing of 26.1% (31.1.2017: 20.7%) on net debt of £23.5 million (31.1.2017: £16.7 million). After adjusting for the uplift in value of short leaseholds which are stated at depreciated historic cost in the statement of financial position, gearing is 22.6% (31.1.2017: 17.7%). After adjusting for the deferred tax liability carried at period end of £16.6 million gearing drops to 19.5% (31.1.2017: 15.3%).
Cash available for Distribution (CAD) up 13%
Cash available for Distribution (CAD) provides a clear picture of ongoing cash flow available for dividends. The CAD was up 13% in the period although at a per share level this was partially offset by the increase in the number of shares outstanding resulting from the sale of the Treasury shares. Cash available for Distribution (CAD) per share (Annualised) was up 10.2% to 20.5 pence (31.1.2017:18.6 pence).
To illustrate this fully the table below shows the calculation of CAD.
Analysis of Cash Available for Distribution (CAD)
Six months ended 31 January 2018
£'000
Six months ended 31 January 2017
£'000
Year ended 31 July 2017
£'000
Group Adjusted EBITDA
3,852
3,313
6,493
Less: Net finance costs (per Income Statement)
(296)
(151)
(297)
Capitalised maintenance expenses
(45)
(55)
(90)
New Works Team
(69)
(66)
(138)
Current tax
(485)
(424)
(792)
Total deductions
(895)
(696)
(1,317)
Cash Available for Distribution
2,957
2,617
5,176
Increase over last period
13.0%
Number Number
Number
Number of shares in issue (excluding treasury and EBT shares)
28,806,711
28,084,149
28,679,711
CAD per share (annualised)
20.5p
18.6p
18.0p
Capital expenditure and capital commitments
The Group has grown through a combination of building new stores, existing store improvements and relocations. We have concentrated on extracting value from existing assets and developing through collaborative projects and management contracts. As we accelerate the store development programme capital expenditure during the period increased to £10.9 million (31.1.2017: £2.8 million). This was primarily the construction and fitting out work at our development sites in Gillingham and Wellingborough as well as the acquisition of the Bedford, Bournemouth and Leicester sites.
Market Valuation of Freehold and Operating Leasehold Land and Buildings
On 31 July 2017 professional valuations were prepared by Jones Lang LaSalle (JLL) for eleven freeholds, one long leasehold and seven operating leasehold properties. This valuation has been adopted for the 31 January 2018 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 some properties. It is not envisaged that any tax will become payable in the foreseeable future on these disposals due to the availability of rollover relief.
It is not the intention of the Directors to make any other significant disposals of trading stores, although individual disposals may be considered where it is clear that value can be added by recycling the capital into other opportunities.
The Board will continue to commission independent valuations on its trading stores annually to coincide with its year-end reporting.
The valuations of our freehold property assets are included in the Statement of Financial Position at their fair value, 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 £16.7 million (31.1.2017: £16.6 million). Instead we have reported by way of a note the underlying value of these leasehold stores in future revaluations and adjusted our Net Asset Value (NAV) calculation accordingly to include their value. This ensures comparable NAV calculations.
Analysis of Total Property Value
No of stores/sites
31 Jan 2018 Valuation
£'000
No of stores/sites
31 Jan 2017
Valuation
£'000
No of stores/sites
31 July 2017 Valuation
£'000
Freehold and long leasehold valued by JLL 1
12
102,900
12
96,125
12
102,900
Leasehold valued by JLL 2
7
16,725
7
16,575
7
16,725
Freehold land and buildings at Director valuation
1
4,148
1
3,000
1
4,195
Subtotal
20
123,773
20
115,700
20
123,820
Sites in development at cost
5
15,880
2
2,792
2
5,124
Total
25
139,653
22
118,492
22
128,945
1 Includes related fixtures and fittings (refer note 9)
2 The seven leaseholds valued by JLL are all within the terms of the Landlord and Tenant Act (1954) giving a degree of security of tenure. The average length of the leases on the leasehold stores valued was 10 years and 8 months at the date of the 2017 valuation (2016 valuation: 11 years and 8 months).
Total freeholds account for 88.0% of property values (31.1.2017: 86.0%).
Adjusted Net Asset Value per Share
Adjusted net assets per share is the net assets of the Group adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the period-end. The shares currently held in the Group's employee benefits trust (own shares held) and in treasury are excluded from the number of shares.
At January 2018 the adjusted net asset value per share increased to £4.18 from £3.87 year on year, up 7.9%. This is a result of cash generated from operations offset in part by an increase in the shares in issue due to the sale of treasury shares and the exercise of share options during the period.
Analysis of net asset value (NAV)
31 Jan
2018
£'000
Unaudited
31 Jan
2017
£'000
Unaudited
31 July
2017
£'000
Audited
Net assets
Adjustment to include operating/short leasehold stores at valuation
Add: JLL leasehold valuation
Deduct: leasehold properties and their fixtures and fittings at NBV
89,775
16,725
(2,777)
80,733
16,575
(3,006)
89,119
16,725
(2,878)
103,723
94,302
102,966
Deferred tax arising on revaluation of leasehold properties1
(2,371)
(2,307)
(2,354)
Adjusted net assets
101,350
91,995
100,612
Shares in issue
Number
'000
Number
'000
Number
'000
Opening shares in issue
Shares issued for the exercise of options
29,303
127
29,109
90
29,109
194
Closing shares in issue
Shares held in treasury
Shares held in EBT
29,430
-
(623)
29,199
(492)
(623)
29,303
-
(623)
Closing shares for NAV purposes
28,807
28,084
28,680
Adjusted net asset value per share after deferred tax provision
£3.52
£3.28
£3.51
Adjusted net asset value per share before deferred tax provision
Adjusted net assets
101,350
91,995
100,612
Deferred tax liabilities and assets recognised by the Group
16,633
14,446
16,363
Deferred tax arising on revaluation of leasehold properties1
2,371
2,307
2,354
Adjusted net assets before deferred tax
120,354
108,748
119,329
Closing shares for NAV purposes
28,807
28,084
28,680
Adjusted net asset value per share before deferred tax provision
£4.18
£3.87
£4.16
1 A deferred tax adjustment in respect of the uplift in the value of the leasehold properties has been included. Although this is a memorandum adjustment as leasehold properties are included in the Group's financial statements at cost and not at valuation, this deferred tax adjustment is included in the adjusted net asset value calculation in order to maintain a consistency of tax treatment between freehold and leasehold properties.
Corporate and Social Responsibilities
Lok'nStore conducts its business in a manner that reflects honesty, integrity and ethical conduct. We believe that the long-term success of the business is best served by respecting the interests of all our stakeholders. Management of social, environmental and ethical issues is of high importance to Lok'nStore. These issues are dealt with on a day-to-day basis by the Group's managers with principal accountability lying with the Board of Directors. We look for opportunities to address our responsibility to the environment, and we pay close attention to our energy use, carbon dioxide emissions, water use and waste production. At each year-end Lok'nStore commissions a full assessment of the Group's environmental impact.
Customers
We believe in clarity and transparency towards our customers. Brochures and literature are written in plain English, explaining clearly our terms of business without hiding anything. We are open and honest about our products and services and do not employ pressure selling techniques or attempt to take advantage of any vulnerable groups. If we make a mistake we acknowledge it, deal with the problem quickly, and learn from our error. We listen to our customers as we know that they can help us improve our service to them.
Andrew Jacobs Ray Davies
Chief Executive Officer Finance Director
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2018
Notes
Six months
ended
31 January 2018
Unaudited
£'000
Six months
ended
31 January 2017
Unaudited
£'000
Year ended
31 July 2017
Audited
£'000
Revenue
1
8,819
8,343
16,654
Total property, staff, distribution and general costs
2a
(4,967)
(5,030)
(10,161)
Adjusted EBITDA1
3,852
3,313
6,493
Amortisation of intangible assets
(83)
(83)
(165)
Depreciation
(962)
(897)
(1,856)
Equity settled share based payments
18
(17)
(48)
(97)
(1,062)
(1,028)
(2,118)
Store relocation costs
-
(21)
(29)
Property disposal costs
-
(14)
(15)
Director retirement costs
-
-
(69)
(1,062)
(1,063)
(2,231)
Operating profit
2,790
2,250
4,262
Finance income
3
71
174
309
Finance cost
4
(314)
(325)
(606)
Profit before taxation
5
2,547
2,099
3,965
Income tax expense
6
(621)
(229)
(904)
Profit for the period
1,926
1,870
3,061
Profit attributable to:
Owners of the parent
19
1,926
1,870
3,061
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Increase in property valuation
629
391
7,772
Deferred tax relating to change in property valuation
(119)
499
(932)
510
890
6,840
Items that may be subsequently reclassified to profit and loss
Increase in fair value of cash flow hedges
-
37
37
Other comprehensive income
510
927
6,877
Total comprehensive income for the period
2,436
2,797
9,938
Attributable to:
Owners of the parent
2,436
2,797
9,938
Earnings per share attributable to owners of the Parent
Basic
8
6.70p
6.91p
11.02p
Diluted
8
6.58p
6.74p
10.64p
1 Adjusted EBITDA is defined in the accounting policies section of the notes to the interim report.
Consolidated Statement of Changes in Equity
Attributable to owners of the Parent
Share
capital
£'000
Share
premium
£'000
Other
reserves
£'000
Revaluation
reserve
£'000
Retained
earnings
£'000
Total
equity
£'000
1 August 2016 - Audited
291
3,567
8,432
45,602
13,583
71,475
Profit for the period
-
-
-
-
1,870
1,870
Other comprehensive income:
Increase in property valuation net of deferred tax
-
-
-
890
-
890
Decrease in fair value of cash flow hedges net of deferred tax
-
-
37
-
-
37
Total comprehensive income for the year
-
-
37
890
1,870
2,797
Transactions with Owners
Dividend paid
-
-
-
-
(1,778)
(1,778)
Share based payments
-
-
48
-
-
48
Transfers in relation to share based payments
-
-
(66)
-
66
-
Deferred tax credit relating to share options
-
-
221
-
-
221
Sale of shares from treasury (net of costs)
-
4,704
-
-
3,117
7,821
Exercise of share options
1
148
-
-
-
149
Total transactions with owners
1
4,852
203
-
1,405
6,461
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(115)
115
-
31 January 2017 - Unaudited
292
8,419
8,672
46,377
16,973
80,733
Profit for the period
-
-
-
-
1,191
1,191
Other comprehensive income:
Increase in property valuation net of deferred tax
-
-
-
5,950
-
5,950
Total comprehensive income for the year
-
-
-
5,950
1,191
7,141
Transactions with Owners
Dividend paid
-
-
-
-
(859)
(859)
Share based payments
-
-
49
-
-
49
Transfers in relation to share based payments
-
-
(73)
-
73
-
Deferred tax credit relating to share options
-
-
(179)
-
-
(179)
Sale of shares from treasury (net of costs)
-
1,446
-
-
624
2,070
Exercise of share options
1
163
-
-
-
164
Total transactions with owners
2
1,609
(203)
-
(162)
1,245
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(162)
162
-
31 July 2017 - Audited
293
10,028
8,469
52,165
18,164
89,119
Profit for the period
-
-
-
-
1,926
1,926
Other comprehensive income:
Increase in property valuation net of deferred tax
-
-
-
510
-
510
Total comprehensive income for the year
-
-
-
510
1,926
2,436
Transactions with Owners
Dividend paid
-
-
-
-
(2,016)
(2,016)
Share based payments
-
-
17
-
-
17
Transfers in relation to share based payments
-
-
(80)
-
80
-
Deferred tax credit relating to share options
-
-
(16)
-
-
(16)
Exercise of share options
1
234
-
-
-
235
Total transactions with owners
1
234
(79)
-
(1,936)
(1,780)
Transfer additional dep'n on revaluation net of deferred tax
-
-
-
(148)
148
-
31 January 2018 - Unaudited
294
10,262
8,390
52,527
18,302
89,775
Consolidated Statement of Financial Position
31 January 2018
Notes
31 January
2018
Unaudited
£'000
31 January
2017
Unaudited
£'000
31 July
2017
Audited
£'000
Assets
Non-current assets
Intangible assets
3,343
3,509
3,428
Property, plant and equipment
9
127,447
106,628
116,901
Development loan capital
10
-
3,319
3,463
130,790
113,456
123,792
Current assets
Inventories
11
236
168
203
Trade and other receivables
12
4,192
3,271
4,266
Cash and cash equivalents
5,359
12,140
11,386
Total current assets
9,787
15,579
15,855
Total assets
140,577
129,035
139,647
Liabilities
Current liabilities
Trade and other payables
13
(4,912)
(4,522)
(5,032)
Taxation
(573)
(597)
(463)
(5,485)
(5,119)
(5,495)
Non-current liabilities
Borrowings
15a
(28,684)
(28,737)
(28,670)
Deferred tax
16
(16,633)
(14,446)
(16,363)
(45,317)
(43,183)
(45,033)
Total liabilities
(50,802)
(48,302)
(50,528)
Net assets
89,775
80,733
89,119
Equity
Equity attributable to owners of the parent
Called up share capital
17
294
292
293
Share premium
10,262
8,419
10,028
Other reserves
18
8,390
8,672
8,469
Retained earnings
19
18,302
16,973
18,164
Revaluation reserve
52,527
46,377
52,165
Total equity
89,775
80,733
89,119
Approved by the Board of Directors and authorised for issue on 20 April 2018 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 2018
Notes
Six months ended
31 January
2018
Unaudited
£'000
Six months
ended
31 January
2017
Unaudited
£'000
Year
ended
31 July
2017
Audited
£'000
Operating activities
Cash generated from operations
21a
3,756
2,897
5,523
Income tax paid
(375)
-
(502)
Net cash from operating activities
3,381
2,897
5,021
Investing activities
Development loan capital repaid /(invested)
3,463
(160)
(304)
Purchase of property, plant and equipment
9
(10,879)
(2,770)
(6,628)
Interest received
68
18
25
Net cash used in investing activities
(7,348)
(2,912)
(6,907)
Financing activities
Loans repaid from projects under management contracts
-
944
944
Finance costs paid
(280)
(315)
(574)
Equity dividends paid
(2,016)
(1,778)
(2,637)
Proceeds from issuance of ordinary shares (net)
236
148
313
Proceeds from sale of treasury shares (net)
-
7,821
9,891
Net cash (used in) / from financing activities
(2,060)
6,820
7,937
Net (decrease) / increase in cash and cash equivalents in the period
(6,027)
6,805
6,051
Cash and cash equivalents at beginning of the period
11,386
5,335
5,335
Cash and cash equivalents at end of the period
5,359
12,140
11,386
Accounting Policies
General Information
Lok'nStore Group plc is an AIM listed company incorporated and domiciled in England and Wales. The address of the registered office is One Fleet Place, London EC4M 7WS, UK. Copies of this 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 2018 have been prepared on the basis of the accounting policies expected to be used in the 2018 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 20 April 2018, are unaudited. The interim results do not constitute statutory financial statements within the meaning of section 434A of the Companies Act 2006.
Comparative figures for the year ended 31 July 2017 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 £5.4 million (31.01.2017: £12.1 million), undrawn committed bank facilities at 31 January 2018 of £11.2 million (31.01.2017: £11.2 million), and cash generated from operations in the period to 31 January 2018 of £3.76 million (31.01.2017: £2.90 million). The Group operates a £40 million five year revolving credit facility with Royal Bank of Scotland plc which provides funding for site acquisitions and working capital and which was increased to £50 million after the period end in February 2018. The Group is fully compliant with all bank covenants and undertakings and is not obliged to make any repayments prior to expiration. The Group had reported in its July year-end financial statements that it had agreed a two year extension on its existing banking facility with Royal Bank of Scotland plc and the facility which was due to expire in January 2021, will now run until January 2023. The financial statements are therefore prepared on a going concern basis.
Adjusted EBITDA
Adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA) is defined as profits from operations before all depreciation and amortisation charges, share-based payments and other non-recurring costs, finance income, finance costs and taxation.
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 2018
1 Revenue
Analysis of the Group's revenue is shown below:
Six months
ended
31 January
2018
Unaudited
Six months
ended
31 January
2017
Unaudited
Year
ended
31 July
2017
Audited
Stores trading
£'000
£'000
£'000
Self-storage revenue
6,532
6,225
12,343
Other storage related revenue
787
778
1,550
Ancillary store rental revenue
-
-
14
Sub-total - Self-storage revenue - owned stores
7,319
7,003
13,907
Management fees - managed stores
312
181
420
Sub-total
7,631
7,184
14,327
Stores under development
Non-storage income
7
8
-
Sub-total
7,638
7,192
14,327
Serviced archive and records management revenue
1,181
1,151
2,327
Total revenue per statement of comprehensive income
8,819
8,343
16,654
The segment information for the period ended 31 January 2018 and 2017 is as follows:
2017/2018 - Unaudited
Self-storage
six months ended
31 January
2018
£'000
Serviced archive
and records management
six months ended
31 January
2018
£'000
Total
six months ended
31 January 2018
£'000
Self-storage
six months ended
31 January
2017
£'000
Serviced archive
and records management
six months ended
31 January
2017
£'000
Total
six months ended
31 January 2017
£'000
Revenue from external customers
7,638
1,181
8,819
7,192
1,151
8,343
Segment adjusted EBITDA
3,495
357
3,852
3,064
249
3,313
Depreciation
Amortisation of intangible assets
(912)
-
(50)
(83)
(962)
(83)
(848)
-
(49)
(83)
(897)
(83)
Equity settled share based payments
(17)
-
(17)
(48)
-
(48)
Store relocation costs
-
-
-
(21)
-
(21)
Costs of disposal
-
-
-
(14)
-
(14)
Segment profit
2,566
224
2,790
2,133
117
2,250
Central costs not allocated to segments:
Finance income
71
174
Finance costs
(314)
(325)
Profit before taxation
2,547
2,099
Income tax expense
(621)
(229)
Consolidated profit for the financial period
1,926
1,870
2017 - Audited
Self-storage
year
ended
31 July
2017
£'000
Serviced archive & records management
year
ended
31 July
2017
£'000
Total
year
ended
31 July
2017
£'000
Revenue from external customers
14,327
2,327
16,654
Segment adjusted EBITDA
Management charges
5,933
25
560
(25)
6,493
-
Segment adjusted EBITDA
5,958
535
6,493
Depreciation
(1,760)
(96)
(1,856)
Amortisation of intangible assets
-
(165)
(165)
Equity settled share based payments
(97)
-
(97)
Store relocation costs
(29)
-
(29)
Property disposal costs
-
(15)
(15)
Director retirement costs
(69)
-
(69)
Segment profit
4,003
259
4,262
Central costs not allocated to segments:
Finance income
309
Finance costs
(606)
Profit before taxation
3,965
Income tax expense
(904)
Consolidated profit for the financial year
3,061
2018
Unaudited
Self-storage
31 January
2018
£'000
Serviced archive & records management
31 January 2018
£'000
Total
31 January
2018
£'000
Self-storage
31 January
2017
£'000
Serviced archive & records management
31 January 2017
£'000
Total
31 January
2017
£'000
Segment assets
134,660
5,917
140,577
122,935
6,100
129,035
Segment liabilities
(21,512)
(606)
(22,118)
(19,067)
(498)
(19,565)
Borrowings
(28,684)
(28,737)
Total liabilities
(50,802)
(48,302)
Capital expenditure
10,863
16
10,879
2,768
2
2,770
2017
Audited
Self-storage
31 July
2017
£'000
Serviced archive & records management
31 July 2017
£'000
Total
31 July
2017
£'000
Segment assets
133,457
6,190
139,647
Segment liabilities
(21,189)
(669)
(21,858)
Borrowings
(28,670)
Total liabilities
(50,528)
Capital expenditure
6,459
169
6,628
2a Property, staff, distribution, general costs and retail cost of sales
Six months ended
31 January
2018
Unaudited
£'000
Six months
ended
31 January
2017
Unaudited
£'000
Year
ended
31 July
2017
Audited
£'000
Property and premises costs
1,974
2,087
4,179
Staff costs
2,194
2,156
4,389
General overheads
552
542
1,098
Distribution costs
81
83
171
Subtotal - operating costs
4,801
4,868
9,837
Retail products cost of sales
166
162
324
4,967
5,030
10,161
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
2018
Unaudited
£'000
Six months
ended
31 January
2017
Unaudited
£'000
Year
ended
31 July
2017
Audited
£'000
Retail
56
67
128
Insurance
20
20
37
Other
5
2
2
81
89
167
Serviced archive consumables and direct costs
85
73
157
166
162
324
2c Other Income and costs
Six months ended
31 January
2018
Unaudited
£'000
Six months
ended
31 January
2017
Unaudited
£'000
Year
ended
31 July
2017
Audited
£'000
Property disposal costs
-
14
15
Director retirement costs
-
-
69
Store relocation costs
-
21
29
-
35
113
3 Finance income
Six months ended
31 January
2018
Unaudited
£'000
Six months ended
31 January
2017
Unaudited
£'000
Year ended
31 July
2017
Audited
£'000
Bank interest
5
18
25
Other interest
66
156
284
71
174
309
4 Finance costs
Six months ended
31 January
2018
Unaudited
£'000
Six months ended 31 January
2017
Unaudited
£'000
Year ended
31 July
2017
Audited
£'000
Bank interest
269
283
520
Non-utilisation fees and amortisation of bank loan arrangement fees
45
42
86
314
325
606
Most interest payable arises on bank loans classified as financial liabilities measured at amortised cost.
5 Profit before taxation
Six months ended
31 January
2018
Unaudited
£'000
Six months
ended 31 January
2017
Unaudited
£'000
Year ended
31 July
2017
Audited
£ '000
Profit before taxation is stated after charging:
Depreciation of plant, property and equipment
- owned assets
962
897
1,856
Amortisation of intangible assets
Operating lease rentals - land and buildings
83
719
83
764
165
1,488
6 Taxation
Six months ended 31 January
2018
Unaudited
£'000
Six months
ended 31 January
2017
Unaudited
£'000
Year
ended 31 July
2017
Audited
£'000
Current tax:
UK corporation tax
486
424
792
Deferred tax:
Origination and reversal of temporary differences
135
71
204
Adjustments in respect of prior periods
-
-
173
Impact of change in tax rate on closing balance
-
(266)
(265)
Total deferred tax charge
135
(195)
112
Income tax expense for the period/year
621
229
904
The charge for the period can be reconciled to the profit for the period as follows:
Six months ended 31 January
2018
Unaudited
£'000
Six months
ended 31 January
2017
Unaudited
£'000
Year
ended 31 July
2017
Audited
£'000
Profit before tax
2,547
2,099
3,695
Tax on ordinary activities at the standard effective rate of corporation tax in the UK of 20% (31.1.2017: 20.0%)
509
420
793
Expenses not deductible for tax purposes
2
2
2
Depreciation of non-qualifying assets
144
50
104
Share based payment charges in excess of corresponding tax deduction
3
10
19
Adjustments in respect of prior periods - deferred tax
-
-
173
Impact of change in tax rate on closing DT balance
-
(266)
(265)
Share option scheme
-
12
5
Other timing differences
(37)
-
71
Income tax expense for the period/year
621
229
904
Effective tax rate
24.4%
10.9%
23%
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 £118,872 (31.1.2017: £498,983) has been recognised directly in other comprehensive income (see note 16 on deferred tax).
7 Dividends
Six months ended 31 January 2018
Unaudited
£'000
Six months ended 31 January 2017
Unaudited
£'000
Year ended 31 July
2017
Audited
£'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2016 (6.33 pence per share)
-
1,778
1,778
Interim dividend for the six months to 31 January 2017 (3 pence per share)
-
-
859
Final dividend for the year ended 31 July 2017 (7 pence per share)
2,016
-
-
2,016
1,778
2,637
In respect of the current period the Directors propose that an interim dividend of 3.33 pence per share will be paid to the shareholders. The total estimated dividend to be paid is £983,956 based on the number of shares currently in issue as adjusted for shares held in the Employee Benefits Trust. This interim dividend is an on-account payment of a final annual dividend and is ultimately subject to approval by shareholders at the 2018 Annual General Meeting and has not been included as a liability in these financial statements. The ex-dividend date will be 3 May 2018; the record date 4 May 2018; with an intended payment date of 15 June 2018. The final deadline for Dividend Reinvestment Election is 21 May 2018.
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
2018
Unaudited
£'000
Six months
ended
31 January
2017
Unaudited
£'000
Year
ended
31 July
2017
Audited
£'000
Profit for the financial period
1,926
1,870
3,061
No. of shares
No. of shares
No. of shares
Weighted average number of shares
For basic earnings per share
28,746,236
27,071,818
27,780,676
Dilutive effect of share options
526,509
651,347
999,657
For diluted earnings per share
29,272,745
27,723,165
28,780,333
623,212 shares (31.01.2017: 623,212) are held in the Employee Benefit Trust and nil (31.01.2017: 491,869) shares are held in Treasury. Both are excluded from the above calculation.
Six months
ended
31 January
2018
Unaudited
Six months
ended
31 January
2017
Unaudited
Year
ended
31 July
2017
Audited
Earnings per share
Basic
6.70p
6.91p
11.02p
Diluted
6.58p
6.74p
10.64p
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 2016 - Audited
458
80,953
9,263
782
12,902
5
104,363
Net book value at 31 January 2017 - Unaudited
2,792
80,865
9,314
769
12,884
4
106,628
Net book value at 31 July 2017 - Audited
5,124
87,548
10,293
719
13,213
4
116,901
Cost or valuation
1 August 2017
5,124
87,548
10,293
2,599
23,984
17
129,565
Additions
10,756
105
-
18
-
-
10,879
Revaluations
-
145
49
-
-
-
194
31 January 2018 Unaudited
15,880
87,798
10,342
2,617
23,984
17
140,638
Depreciation
1 August 2017
-
-
-
1,880
10,771
13
12,664
Depreciation
-
372
63
49
478
-
962
Revaluations
(372)
(63)
-
-
-
(435)
31 January 2018 Unaudited
-
-
-
1,929
11,249
13
13,191
Net book value at 31 January 2018 - Unaudited
15,880
87,798
10,342
688
12,735
4
127,447
Capital expenditure during the period totalled £10.9 million (31.1.2017: £2.8 million). This was primarily the purchase and subsequent construction works at our development sites in Gillingham and Wellingborough as well as completing fitting-out works at our Bristol store.
Property, plant and equipment (non-current assets) with a carrying value of £127.4 million (31.1.2017: £106.6 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 2017 by JLL, the freehold and leasehold properties have not been externally valued at 31 January 2018, although in accordance with the Group's established policy it is the intention to do so at the next year end at 31 July 2018.
Although the Board did not commission an external valuation at this interim period-end it is mindful of the need to accord with the measurement principles of International Financial Reporting Standards as adopted by the European Union. Accordingly after consulting with our external valuers, whilst there has been continued market activity in the self storage sector since July 2017, the Directors considered that there had not been such a material movement in market yields that warranted a modification to the position as at 31 January 2018 in respect of our properties externally valued at 31 July 2017. 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 2018 year-end.
10 Development loan capital
In May 2015 Lok'nStore opened a new store in Aldershot, Hampshire on behalf of outside investors, to which it provided development loan capital. The store is managed under the Lok'nStore brand. The Group has managed the building and subsequent operation of the store and has generated a return on £2.5 million of the total development capital committed to the project, as well as management fees for the construction, operation and branding of the store. On 31 October 2017 the entire development loan was repaid to Lok'nStore together with all accrued interest. Lok'nStore continues to manage the operation of the store.
31 January
2018
Unaudited
£'000
31 January
2017
Unaudited
£'000
31 July
2017
Audited
£'000
Development loan capital
-
3,319
3,463
11 Inventories
31 January
2018
Unaudited
£'000
31 January
2017
Unaudited
£'000
31 July
2017
Audited
£'000
Consumables and goods for resale
236
168
203
The amount of inventories recognised as an expense during the period was £77,039 (31.1.2017: £81,005).
12 Trade and other receivables
31 January
2018
Unaudited
£'000
31 January
2017
Unaudited
£'000
31 July
2017
Audited
£'000
Trade receivables
2,098
1,414
1,693
Other receivables
1,473
857
1,822
Prepayments and accrued income
621
1,000
751
4,192
3,271
4,266
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
2018
Unaudited
£'000
31 January
2017
Unaudited
£'000
31 July
2017
Audited
£'000
Trade payables
960
593
818
Taxation and social security costs
496
666
288
Other payables
1,221
1,156
1,692
Accruals and deferred income
2,235
2,107
2,234
4,912
4,522
5,032
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:
31 January
2018
Unaudited
£'000
31 January
2017
Unaudited
£'000
31 July
2017
Audited
£'000
Gross debt
(28,816)
(28,816)
(28,816)
Cash and cash equivalents
5,359
12,140
11,386
Net debt
(23,457)
(16,676)
(17,430)
Total equity
89,775
80,733
89,119
Net debt to equity ratio
26.1%
20.7%
19.6%
15a Borrowings
31 January
2018 Unaudited
£'000
31 January
2017 Unaudited
£'000
31 July
2017
Audited
£'000
Non-current
Bank loans repayable in more than two years
but not more than five years
Gross
28,816
28,816
28,816
Deferred financing costs
(132)
(79)
(146)
Net bank borrowings
28,684
28,737
28,670
The £40 million five year revolving credit facility which was executed in January 2016 with Royal Bank of Scotland plc. included a two year extension option which means it will now run until January 2023.
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 1.7% in the last five months.
The revolving credit facility 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 £127.4 million together with cross-company guarantees from Group companies. The Group is not obliged to make any repayments prior to expiration.
(Post Balance Sheet) In February 2018, after the period-end, the Group executed its £10 million accordion increasing its existing £40 million Banking Facility to £50 million. The increased facility will provide funding for site acquisitions and working capital to support the Group's ambitious growth plans for more landmark site acquisitions and working capital.
16 Deferred tax
Deferred tax liability
31 January 2018
Unaudited
£'000
31 January 2017
Unaudited
£'000
31 July 2017
Audited
£'000
Liability at start of period/year
16,363
15,361
15,361
Charge to income for the period/year
135
(195)
112
Tax charged directly to other comprehensive income
119
(499)
932
Credit to share based payment reserve
16
(221)
(42)
Liability at end of period/year
16,633
14,446
16,363
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 31 July 2016 - Audited
1,855
-
447
24
10,961
2,323
(249)
15,361
Charge/ (credit) to income for the period
(34)
-
(39)
(8)
-
(141)
27
(195)
Charge to other comprehensive income
-
-
-
-
(511)
12
-
(499)
Charge to share based payment reserve
-
-
-
-
-
-
(221)
(221)
At 31 January 2017 - Unaudited
1,821
-
408
16
10,450
2,194
(443)
14,446
Charge/ (credit) to income for the period
375
-
(14)
1
-
(48)
(7)
307
Charge to other comprehensive income
-
-
-
-
1,431
-
-
1,431
Charge to share based payment reserve
-
-
-
-
-
-
179
179
At 31 July 2017 - Audited
2,196
-
394
17
11,881
2,146
(271)
16,363
Charge/ (credit) to income for the period
161
-
(14)
-
-
(12)
-
135
Charge to other comprehensive income
-
-
-
-
107
12
-
119
Charge to share based payment reserve
-
-
-
-
-
-
16
16
At 31 January 2018 - Unaudited
2,357
-
380
17
11,988
2,146
(255)
16,633
17 Share capital
31 January 2018
Unaudited
£'000
31 January 2017
Unaudited
£'000
31 July 2017
Audited
£'000
Authorised: 35,000,000 ordinary shares of 1 pence each
350
350
350
Called up,
Called up,
Called up,
allotted and
allotted and
allotted and
fully paid
fully paid
fully paid
Number
Number
Number
Number of shares at start of period/year
29,302,923
29,109,322
29,109,322
Options exercised during period/year
127,000
89,908
193,601
Balance at end of period/year
29,429,923
29,199,230
29,302,923
Allotted, issued and fully paid ordinary shares
£
£
£
Balance at start of period/year
293,029
291,093
291,093
Options exercised during period/year
1,270
899
1,936
Balance at end of period/year
294,299
291,992
293,029
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 2016 - Audited
(37)
6,295
1,294
34
846
8,432
Equity share based payments
-
-
-
-
48
48
Transfer to retained earnings in relation to share based payments
-
-
-
-
(66)
(66)
Cash flow hedge reserve net of tax
37
-
-
-
-
37
Tax credit relating to share options
-
-
-
-
221
221
31 January 2017 - Unaudited
-
6,295
1,294
34
1,049
8,672
Equity share based payments
-
-
-
-
49
49
Transfer to retained earnings in relation to share based payments
-
-
-
-
(73)
(73)
Tax credit relating to share options
(179)
(179)
31 July 2017 - Audited
-
6,295
1,294
34
846
8,469
Equity share based payments
-
-
-
-
17
17
Transfer to retained earnings in relation to share based payments
-
-
-
-
(80)
(80)
Tax credit relating to share options
-
-
-
-
(16)
(16)
31 January 2018 - Unaudited
-
6,295
1,294
34
767
8,390
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 £79,666 (31.1.2017: £65,570).
19 Retained earnings
Retained earnings before
Retained
deduction of
Own shares
earnings
own shares
(note 20)
Total
Group
£'000
£'000
£'000
1 August 2016 - Audited
17,824
(4,241)
13,583
Profit for the financial period
1,870
-
1,870
Transfer from revaluation reserve
115
-
115
Transfer from share based payment reserve (Note 18)
66
-
66
Dividend paid
(1,778)
-
(1,778)
Sale of treasury shares
-
3,117
3,117
31 January 2017 - Unaudited
18,097
(1,124)
16,973
Profit for the financial period
1,191
-
1,191
Transfer from revaluation reserve
162
-
162
Transfer from share based payment reserve (Note 18)
73
-
73
Sale of treasury shares
-
624
624
Dividend paid
(859)
-
(859)
Transfer realised gain on asset disposal
-
-
-
31 July 2017 - Audited
18,664
(500)
18,164
Profit for the financial period
1,926
-
1,926
Transfer from revaluation reserve
148
-
148
Transfer from share based payment reserve (Note 18)
80
-
80
Dividend paid
(2,016)
-
(2,016)
31 January 2018 - Unaudited
18,802
(500)
18,302
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.
20 Own shares
ESOP
ESOP
Treasury
Treasury
Own shares
shares
shares
shares
shares
total
Number
£
Number
£
£
1 August 2016- Audited
623,212
499,910
2,466,869
3,741,036
4,240,946
31 January 2017 - Unaudited
623,212
499,910
491,869
624,247
1,124,157
31 July 2017- Audited
623,212
499,910
-
-
499,910
31 January 2018 - Unaudited
623,212
499,910
-
-
499,910
Following the disposal on 26 April 2017 in the previous period of the remaining shares held in Treasury, and with no purchases made during the current period, Lok'nStore Limited no longer holds any shares in Treasury at the period-end (31.1.2017: 491,869).
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 2018, the Trust held 623,212 (31.01.2017: 623,212) ordinary shares of 1 pence each with a market value of £2,461,687 (31.01.2017: £2,835,615). No shares were transferred out of the scheme during the period (2017: nil).. 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
2018
Unaudited
£'000
Six months
ended
31 January
2017
Unaudited
£'000
Year
ended
31 July
2017
Audited
£'000
Profit before tax
2,547
2,099
3,965
Depreciation
962
897
1,856
Amortisation of intangible assets
83
83
165
Equity settled share based payments
17
48
97
Store relocation costs and site disposal costs
-
35
44
Interest receivable
(71)
(174)
(309)
Interest payable
314
325
606
(Increase) in inventories
(33)
(3)
(38)
Decrease/(increase) in receivables
74
736
(284)
(Decrease) in payables
(137)
(1,149)
(648)
Cash generated from operations
3,756
2,897
5,523
(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
2018
Unaudited
£'000
Six months
ended
31 January
2017
Unaudited
£'000
Year
ended
31 July
2017
Audited
£'000
(Decrease) / Increase in cash in the period/year
(6,027)
6,805
6,051
Change in net debt resulting from cash flows
-
-
-
Movement in net debt in period
(6,027)
6,805
6,051
Net debt brought forward
(17,430)
(23,481)
(23,481)
Net debt carried forward
(23,457)
(16,676)
(17,430)
22 Events after the Reporting Date
i) Lok'nStore increases its existing £40 million Banking Facility to £50 million
In February 2018, after the period-end the Group executed its £10 million accordion. The increased facility will provide funding for site acquisitions and working capital to support the Group's ambitious growth plans for more landmark site acquisitions and working capital.
ii) Wellingborough Store
The store opened on 23 March 2018.
iii) Gloucester
On 2 March 2018 the Gloucester site was secured as a Managed Store.
iv) Leicester
Acquisition on 14 February 2018 of a freehold site for a new landmark store (subject to planning).
The 1 acre site is in a highly prominent location opposite a major food retailer in the heart of Leicester's busy retail district. The total investment of circa £8.5 million will be funded from cash flow and existing banking facilities. When developed, this store will add around 60,000 sq. ft. of trading space.
v) Fareham Store (Leasehold)
On 22 February 2018, the Group completed the Deed of Variation, Reversionary Lease and Rent Review Memorandum extending the lease term by ten years to 2036.
Our Stores/Sites
Head office
Lok'nStore plc
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel 01252 521010
www.loknstore.co.uk
Owned Trading Stores
Basingstoke, Hampshire
Crockford Lane
Chineham
Basingstoke
Hampshire RG24 8NA
Tel 01256 474700
Horsham, West Sussex
Blatchford Road
Redkiln Estate
Horsham
West Sussex RH13 5QR
Tel 01403 272001
Poole, Dorset
50 Willis Way
Fleetsbridge
Poole
Dorset BH15 3SY
Tel 01202 666160
Bristol, Gloucestershire
Longwell Green Trade Park
Aldermoor Way
Bristol
BS30 7ET
Tel 0117 967 7055
Crayford, Kent
Block B
Optima Park
Thames Road
Crayford
Kent DA1 4QX
Tel 01322 525292
Luton, Bedfordshire
27 Brunswick Street
Luton
Bedfordshire LU2 0HG
Tel 01582 721177
Portsmouth, Hampshire
Rudmore Square
Portsmouth PO2 8RT
Tel 02392 876783
Gillingham, Kent
Courtney Road
Gillingham
Kent ME8 0RT
Tel 01634 366044
gillingham@loknstore.co.uk
Eastbourne, East Sussex
Unit 4, Hawthorn Road
Eastbourne
East Sussex BN23 6QA
Tel 01323 749222
Maidenhead, Berkshire
Stafferton Way
Maidenhead
Berkshire
SL6 1AY
Tel 01628 878870
Reading, Berkshire
251 A33 Relief Road
Reading
RG2 0RR
Tel 01189 588999
Tonbridge, Kent
Unit 6 Deacon Trading Estate
Vale Road
Tonbridge
Kent TN9 1SW
Tel 01732 771007
Fareham, Hampshire
26 + 27 Standard Way
Fareham Industrial Park
Fareham
Hampshire PO16 8XJ
Tel 01329 283300
Milton Keynes, Buckinghamshire
Etheridge Avenue
Brinklow
Milton Keynes
Buckinghamshire MK10 0BB
Tel 01908 281900
Southampton, Hampshire
Manor House Avenue
Millbrook
Southampton
Hampshire SO15 0LF
Tel 02380 783388
Harlow, Essex
Edinburgh Way
Temple Fields
Harlow
Essex CM20 2GF
Tel 01279 882366
Farnborough, Hampshire
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel 01252 511112
Northampton Central
16 Quorn Way
Grafton Street Industrial Estate
Northampton NN1 2PN
Tel 01604 629928
Northampton Riverside
Units 1-4
Carousel Way
Northampton
Northamptonshire NN3 9HG
Tel 01604 785522
Sunbury, Middlesex
Unit C
The Sunbury Centre
Hanworth Road
Sunbury on Thames
Middlesex TW16 5DA
Southampton, Hampshire
Third Avenue
Southampton
Hampshire SO15 0JX
Tel 02380 783388
ParknCruise
Manor House Avenue
Millbrook, Southampton Hampshire SO15 0LF
Tel 02380 789966
Development locations - LNS Owned Stores
Wellingborough,
19/21 Whitworth Way
Wellingborough NN8 2EF
Bedford
69 Cardington Road, Bedford.
NK42 0BQ
Bournemouth
Land at Wessex Field, Deansleigh Road, Bournemouth BH7 7DU
Leicester
Part of land forming part of Freemens Common Road, Leicester LE2 7SL
Managed stores - Trading
Aldershot, Hampshire
251, Ash Road
Aldershot
GU12 4DD
Tel 0845 4856415
Chichester, West Sussex
17, Terminus Road
Chichester
West Sussex
PO19 8TX
Woking
Marlborough Road
Woking
GU21 5JG
Tel 01483 378323
Broadstairs
Unit 2, Pyramid Business Park, Poorhole Lane,
Broadstairs,
Kent CT10 2PT
Ashford, Kent
Wotton Road
Ashford
Kent TN23 6LL
Tel 01233 645500
Fax 01233 646000
Crawley, West Sussex
Sussex Manor Business Park
Gatwick Road
Crawley
RH10 9NH
Tel 01293 738530
Swindon Kembrey Park
Kembrey Street
Elgin Industrial Estate
Swindon
Wiltshire SN2 8UY
Tel 01793 421234
Hemel Hempstead
Fortius Point,
47, Maylands Avenue, Hemel Hempstead,
Hertfordshire HP2 7DE
Managed stores - Under Development
Dover, Kent
Honeywood Parkway, Whitfield,
Dover, CT16 3FJ
Exeter
Land on the West Side of Matford Park Road, Marsh Barton, Exeter
Devon
Ipswich,
Part of Site 7,
Futura Park, Ipswich
IP3 9QH
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR FKKDQQBKDOQB
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AnnouncementREG - Barclays PLC Lok'nStore Group - Form 8.3 - Lok’n Store Group plc
AnnouncementREG - Goldman Sachs (EPT) Lok'nStore Group - Form 8.5 (EPT/RI) - LOK 'N STORE
AnnouncementREG - Peel Hunt LLP Lok'nStore Group - Form 8.5 (EPT/RI) - Lok'nStore Group PLC
AnnouncementREG - JPMorgan Sec.Plc Lok'nStore Group - Form 8.5 (EPT/RI)-Lok’n Store Group plc
Announcement