REG - Lok'nStore Group - Preliminary results for the year ended 31 July 16 <Origin Href="QuoteRef">LOK.L</Origin> - Part 3
17/10/2016 07:07
- Part 3: For the preceding part double click ID:nRSQ6186Mb
identified as a separate business segment.
The remaining amortisation period of the contractual customer relationships at 31 July 2016 is 14 years and 11 months
(2015: 15 years 11 months).
The values for impairment purposes are based on past and current experience of trading, estimated future cash flows and
external information where relevant and derived from the following key assumptions:
· a discount rate of 11%
· estimated useful lives of customer relationships (20 years)
· short term sustainable growth rates of 5% (next 5 years)
· thereafter long term sustainable growth rates of 2.0%
· sensitivity: the Group has conducted a sensitivity analysis on the impairment test of each CGU's carrying value. A
cut in projected sales growth by around 7% would result in the carrying value of goodwill being reduced to its recoverable
amount.
10b Property, plant and equipment
Group Developmentproperty assetsat cost£'000 Land and buildings at valuation£'000 Long leasehold land and buildings at valuation£'000 Short leasehold improvementsat cost£'000 Fixtures, fittings and equipmentat cost£'000 Motorvehiclesat cost £'000 Total£'000
Cost or valuation
1 August 2014 13,013 51,412 5,121 2,560 18,242 32 90,380
Additions 1,504 525 - 3 1,551 - 3,583
Disposals - - - - (289) (2) (291)
Reclassification (4,025) 2,958 - - 1,067 - -
Revaluations - 6,140 1,304 - - - 7,444
31 July 2015 10,492 61,035 6,425 2,563 20,571 30 101,116
Depreciation
1 August 2014 1,604 - - 1,599 9,478 19 12,700
Depreciation - 572 23 91 751 3 1,440
Disposals - - - - (230) (1) (231)
Revaluations - (572) (23) - - - (595)
31 July 2015 1,604 - - 1,690 9,999 21 13,314
Net book value at 31 July 2015 8,888 61,035 6,425 873 10,572 9 87,802
Cost or valuation
1 August 2015 10,492 61,035 6,425 2,563 20,571 30 101,116
Additions 3,281 152 1 - 3,554 - 6,988
Disposals (4,604) (3,228) - - (701) (13) (8,546)
Reclassification (8,711) 9,377 - - (666) - -
Revaluations - 13,617 2,837 - - - 16,454
31 July 2016 458 80,953 9,263 2,563 22,758 17 116,012
Depreciation
1 August 2015 1,604 - - 1,690 9,999 21 13,314
Depreciation - 606 100 91 736 2 1,535
Disposals (1,604) - - - (389) (11) (2,004)
Reclassification - 490 - - (490) - -
Revaluations - (1,096) (100) - - - (1,196)
31 July 2016 - - - 1,781 9,856 12 11,649
Net book value at 31 July 2016 458 80,953 9,263 782 12,902 5 104,363
If all property, plant and equipment were stated at historic cost the carrying value would be £49.5 million (2015: £47.5
million).
Capital expenditure during the year related to the ongoing building at Bristol and Southampton, the expansion of capacity
at our Swindon East Store and also limited expenditures at our other existing stores. Further expenditure on racking at the
Saracen Olney store also increased capacity in our serviced document storage business.
In August 2015, the Group received an additional £2 million (gross) from the purchaser of the original Reading store site
in return for relinquishing of all remaining rights to receive further payments in connection with the sale of the
property. 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.
Property, plant and equipment (non-current assets) with a carrying value of £104.4 million (2014: £87.8 million) are
pledged as security for bank loans.
Market Valuation of Freehold and Operating Leasehold Land and Buildings
On 31 July 2016, a professional valuation was prepared by Jones Lang LaSalle Limited (JLL) (2015: Cushman & Wakefield) in
respect of eleven freehold, one long leasehold and seven operating leasehold properties. The valuation was prepared in
accordance with the RICS Valuation - Professional Standards, published by The Royal Institution of Chartered Surveyors
("the Red Book") and the valuation methodology is explained in more detail below. The valuations were prepared on the
basis of Fair Value as a fully equipped operational entity having regard to trading potential. The valuation was provided
for accounts purposes and as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the
disclosure requirements of the Red Book JLL have confirmed that:
· This is the first year that JLL has been appointed to value the properties
· The valuers who prepared the valuation have the necessary skills and experience having been significantly involved
in the sector
· JLL do not provide other significant professional or agency services to the Company
· In relation to the preceding financial year of JLL the proportion of the total fees payable by the Company to the
total fee income of the firm is less than 5%
The valuation report indicates a total valuation for all properties valued of £112.7 million (2015: £88.9 million) of which
£96.1 million (2015: £74.1 million) relates to freehold and long leasehold properties, and £16.6 million (2015: £14.8
million) relates to properties held under operating leases.
Freehold and long leasehold land and buildings are carried at valuation in the statement of financial position. Short
leasehold improvements at properties held under operating leases are carried at cost rather than valuation in accordance
with IFRS.
For the trading properties the valuation methodology explained in more detail below is based on fair value as fully
equipped operational entities, having regard to trading potential. Of the £96.1 million valuation of the freehold and long
leasehold properties £9.0 million (2015: £6.7 million) relates to the net book value of fixtures, fittings and equipment,
and the remaining £87.1 million (2015: £ 67.4 million) relates to freehold and long leasehold properties.
The 2016 valuation includes and reflects movements in value which have resulted from the operational performance of the
stores and movements in the investment environment.
Valuation Methodology
Jones Lang LaSalle Limited (JLL) have adopted the profits method of valuation, and cross checked with the direct comparison
method based on recent transactions in the sector, which is the main method of pricing adopted by purchasers of self
storage properties.
JLL have valued the assets on an individual basis and have disregarded any portfolio effect.
The profits method of valuation considers the cash flow generated by the trading potential of the self storage facility.
Due to the specialised design and use of the buildings, the value is typically based on their ability to generate a net
income from operating as self storage facilities.
JLL have constructed a discounted cash flow model. This sets out their explicit assumptions on the underlying cash flow
that they believe could be generated by a Reasonably Efficient Operator at each of the properties, both at the valuation
date and in the near future as the properties increase their occupancy and rents charged to customers. Judgements are made
as to the trading potential and likely long term sustainable occupancy.
Stable occupancy depends upon the nature of demand, size of property and nearby competition, and allows for a reasonable
vacancy rate to enable the operator to sell units to new customers. In the valuation the assumed stabilised occupancy level
for the 19 trading stores (both freeholds and leaseholds) averages 81% (2015: 68.4%).
Expenditure is deducted (such as business rates, staff costs, repair and maintenance, utilities, marketing and bad debts)
as well as an operator's charge which takes account of central costs. JLL also make an allowance for long term capex
requirements where applicable.
· The cash flow for freeholds runs for an explicit period of 10 years, after which it is capitalised at an all risks
yield which reflects the implicit future growth of the business, or a hypothetical sale.
· The cash flow for leaseholds continue for the unexpired term of the lease.
· The discount rate applied has had regard to recent transactions, weighted average costs of capital and target return
in other asset types with adjustments made to reflect differences in the risk and liquidity profile.
· The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 11.32% (2015: 11.25%). The
yield arising from the first year of the projected cash flow is 7.43% (2015: 7.76%), rising to 10.86% in year five
· JLL have assumed purchasers costs of 6.8%
· The average stabilised occupancy is 80.1%
· The average exit yield assumed is 7.9%
The comparison method considers recent transactions where self storage properties have sold, and then adjusts them based on
a multiple of current earnings, and a capital value per square foot. They are adjusted to reflect differences in location,
physical characteristics, local supply and demand, tenure and trading levels.
For leaseholds the same methodology has been used as for freehold property, except that no sale of the assets in the 10th
year is assumed, but the discounted cash flow is extended to the expiry of the lease. The average unexpired term of the
Group's operating leaseholds is approximately 11 years and 8 months as at 31 July 2016 (12 years and 8 months: 31 July
2015). Valuations for stores held under operating leases are not reflected in the statement of financial position and the
assets in relation to these stores are carried at cost less accumulated depreciation.
In 2011, one of the Group store's leases was renegotiated and includes a ten year option to renew the leases from March
2026 to March 2036. The option to extend is only operable in the event that all four of the leases applicable to this
store are extended and this option is personal to Lok'nStore or another "major self-storage operator", to be approved by
the landlord (approval not to be unreasonably withheld). The JLL valuation on this store is based on this Special
Assumption that the option to extend the lease for 10 years is exercised. This is consistent with the approach taken in
previous years.
The fair value hierarchy within which the Fair Value measurements are categorised is level 3, in accordance with IFRS 13
fair value measurements.
Directors' valuation of land and property
The Old Southampton Store: Following the development and opening of the new Southampton store with the corresponding
transfer of all customers from the old Southampton store, the vacant building will be redeveloped for alternative use.
Accordingly the Directors have placed their valuation on the site at the year-end at £2.5 million.
The New Southampton Store: Following the development and opening of the new Southampton store there remains surplus land to
the rear of the building which may be ultimately utilised for an expansion of the store or could be sold or used for
alternative use. The Directors have considered the advice given and recommendations of value obtained by local agents and
in weighing this with their own view are satisfied to place a value at year-end on this land of £0.5 million.
The total value of land and property carried at Director Valuation at 31 July 2016 is £3 million (2015: nil).
11 Investments
Company Investments in subsidiary undertakings £'000
31 July 2013 1,776
Capital contributions arising from share-based payments 119
31 July 2014 1,895
Capital contributions arising from share-based payments 211
31 July 2015 2,106
Capital contributions arising from share-based payments 182
31 July 2016 2,288
The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in England
and Wales:
% of shares and voting rights held
Class of shareholding Directly Indirectly Nature of entity
Lok'nStore Limited * Ordinary 100 - Self-storage
Lok'nStore Trustee Limited1 * Ordinary - 100 Trustee
Southern Engineering and Machinery Company Limited1 * Ordinary - 100 Land
Semco Machine Tools Limited2 * Ordinary - 100 Dormant
Semco Engineering Limited2 * Ordinary - 100 Dormant
Saracen Datastore Limited1 Ordinary - 100 Serviced Document
Storage
1 These companies are subsidiaries of Lok'nStore Limited.
2 These companies are subsidiaries of Southern Engineering and Machinery Company Limited and did not trade during the
year.
* These companies have taken the exemption from audit under Section 479A of the Companies Act 2006
The fair value of these investments has not been disclosed because it cannot be measured reliably as there is no active
market for these equity instruments. The Company currently has no plans to dispose of these investments.
12 Development capital
In May 2015 Lok'nStore opened a new managed store in Aldershot, Hampshire. The store is managed for third party investors
under the Lok'nStore brand. Lok'nStore has managed the building and subsequent operation of the store. Lok'nStore
generates a 10% annual return on £2.5 million of the total development capital committed to the project, and a management
fee for the construction, operation and branding of the store. The capital provided is fully secured by a first fixed
charge on the property.
Group2016£'000 Group2015£'000
Development capital 3,159 2,779
Contingent Asset
When the Aldershot Store is sold by its owners the Group is entitled to receive a capital fee,of 5% of the proceeds of sale
(less reasonable selling costs). Due to the uncertainty of the property market, the timing of the ultimate sale, where the
general property cycle might be at that time, and the immateriality of the sum, the directors believe that it would not be
appropriate to recognise this as an asset at this time. There is a backstop date of 2022 at which time a realisation (or a
payment based on an independent valuation) must be made to Lok'nStore and as this date gets nearer, the directors will give
due consideration as to when the value of the property can be reliably measured, at which point it will be appropriate to
recognise the asset in the financial statements.
13 Inventories
Group2016£'000 Group2015£'000
Consumables and goods for resale 165 141
The amount of inventories recognised in cost of sales as an expense during the year was £156,121 (2015: £184,716).
14 Trade and other receivables
Group2016£'000 Group2015£'000
Trade receivables 2,027 1,302
Other receivables 1,910 640
Prepayments and accrued income 1,015 537
4,952 2,479
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Trade receivables
In respect of its self-storage business the Group does not typically offer credit terms to its customers and hence the
Group is not exposed to significant credit risk. All customers are required to pay in advance of the storage period. Late
charges are applied to a customer's account if they are more than 10 days overdue in their payment. The Group provides for
receivables based upon sales levels and estimated recoverability. There is a right of lien over the customers' goods, so if
they have not paid within a certain time frame, the Company has the right to sell the items they store to cover the debt
owed by the customer. Trade receivables that are overdue are provided for based on estimated irrecoverable amounts,
determined by reference to past default experience.
For individual self-storage customers the Group does not perform credit checks. However this is mitigated by the fact that
all customers are required to pay in advance, and also to pay a deposit of four weeks' storage income. Before accepting a
new business customer who wishes to use a number of the Group's stores, the Group uses an external credit rating to assess
the potential customer's credit quality and defines credit limits by customer. There are no customers who represent more
than 5% of the total balance of trade receivables.
In respect of its document storage business, customers are invoiced typically monthly in advance for the storage of their
boxes, tapes and files. The provision of additional services, such as document boxes or tape collection and retrieval from
archive, typically are invoiced monthly in arrears. The serviced archive segment with over 360 customers has a greater
customer concentration - refer note 1(b) segmental analysis.
Included in the Group's trade receivables balance are receivables with a carrying amount of £269,153 (2015: £202,546) which
are past due at the reporting date for which the Group has not provided as there has not been a significant change in
credit quality and the amounts are still considered recoverable. The Group holds a right of lien over its self-storage
customers' goods if these debts are not paid. The average age of these receivables is 40 days past due (2015: 39 days past
due).
Other receivables
The Group has provided bridging finance on normal commercial terms (interest at 4.5% p.a.) to Chichester Storage Limited
(CSL) to facilitate the development of the site (including obtaining the requisite planning approvals). As the store
approaches breakeven and all conditions precedent have been met the CSL has facilities agreed whereupon it will refinance
the bridging loan. The amounts included in other receivables above includes £1.025 million (2015: £Nil) in respect of the
Chichester loan.
Ageing of past due but not impaired receivables
Group2016£'000 Group2015£'000
0-30 days 147 119
30-60 days 72 43
60+ days 50 41
Total 269 203
Movement in the allowance for bad debts
Group Group
2016 2015
£'000 £'000
Balance at the beginning of the year 174 163
Impairment losses recognised 34 39
Amounts written off as uncollectible (22) (28)
Balance at the end of the year 186 174
The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors
believe that there is no further provision required.
Ageing of impaired trade receivables Group2016 £'000 Group2015£'000
0-30 days - -
30-60 days - -
60+ days 186 174
Total 186 174
15 Trade and other payables
Group2016£'000 Group2015£'000
Trade payables 887 1,901
Taxation and social security costs 1,369 464
Other payables 1,197 1,173
Accruals and deferred income 2,341 2,433
5,794 5,971
The Directors consider that the carrying amount of trade and other payables and accruals and deferred income approximates
fair value.
16 Financial instruments
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the
Group consists of debts, which include the borrowings disclosed in note 17a, cash and cash equivalents and equity
attributable to the owners of the parent, comprising issued capital, reserves and retained earnings as disclosed in the
Consolidated Statement of Changes in Equity. The Group's banking facilities require that management give regular
consideration to interest rate hedging strategy. The Group has complied with this during the year.
The Group's Board reviews the capital structure on an on-going basis. As part of this review, the Board considers the cost
of capital and the risks associated with each class of capital. The Group seeks to have a conservative gearing ratio (the
proportion of net debt to equity). The Board considers at each review the appropriateness of the current ratio in light of
the above. The Board is currently satisfied with the Group's gearing ratio.
The gearing ratio at the year-end is as follows:
Capital Management Group2016£'000 Group2015£'000
Gross borrowings (28,816) (27,701)
Cash and cash equivalents 5,335 2,435
Net debt (23,481) (25,266)
Total equity 71,475 52,968
Net debt to equity ratio 32.8 % 47.7%
The decrease in the Group's gearing ratio arises principally through the combined effect of an increase in the value of its
properties and the cash generated from operations.
Exposure to credit and interest rate risk arises in the normal course of the Group's business.
A Derivative financial instruments and hedge accounting
The Group's activities expose it primarily to the financial risks of interest rates. The Group currently has two interest
rate swaps with Lloyds Bank plc which run until 20 October 2016. These have been maintained and are reported fully in the
Financial Review and in note 17(b).
BDebt management
Debt is defined as non-current and current borrowings, as detailed in note 17a. Equity includes all capital and reserves of
the Group. The Group is not subject to externally imposed capital requirements.
The Group borrows through a senior five year term revolving credit facility, arranged during the year with Royal Bank of
Scotland plc secured on its store portfolio and other Group assets, excluding intangibles, with a net book value of £118.0
million (2015: £95.6 million). Borrowings are arranged to ensure the Group fulfils its strategy of growth and development
of its stores and to maintain short-term liquidity. As at the reporting date the Group has a committed revolving credit
facility of £40 million (2015: £40 million). This facility expires on 15 January 2021. Undrawn committed facilities at the
year-end amounted to £11.2 million (2015: £12.3 million).
C Interest rate risk management
The Group's policy on interest rate management is agreed at Board level and is reviewed on an on-going basis. All
borrowings are denominated in Sterling and are detailed in note 17a. The Group has a number of revolving loans within its
overall revolving credit facility and as such is exposed to interest rate risks at the time of renewal arising from any
upward movement in the LIBOR rate. The Group continues its two cash flow hedging interest rate swap arrangements in order
to reduce the risk of such upward movements in LIBOR rate. These instruments and the movement in their fair values are
detailed in note 17b.
Following the agreement of new facilities with Royal Bank of Scotland on improved terms the following interest rates
applied during the financial year:
a) Up to 14 January 2016: London Inter-Bank Offer Rate (LIBOR) plus 2.35%-2.65% Lloyds Bank plc margin based on a loan
to value covenant test for the revolving advances amounting to £28.5 million (2015: £27.7 million).
b) Up to 14 January 2016: 40% of the applicable margin for non-utilisation (i.e. that part of the facility which remains
undrawn from time to time). For this period the prevailing non-utilisation charge is calculated at a rate of 0.94%.
c) From 15 January 2016: London Inter-Bank Offer Rate (LIBOR) plus 1.40%-1.65% Lloyds Bank plc margin based on a loan
to value covenant test for the revolving advances amounting to £28.5 million (2015: £27.7 million).
d) From 15 January 2016: 40% of the applicable margin for non-utilisation (i.e. that part of the facility which remains
undrawn from time to time). For this period the prevailing non-utilisation charge is calculated at a rate of 0.56%.
e) Rates prevailing on the Group's Interest rate swaps. See note 17b.
Cash balances held in current accounts attract no interest but surplus cash is transferred daily to a treasury deposit
account which earns interest at the prevailing money market rates1. All amounts are denominated in Sterling. The balances
at 31 July 2016 are as follows:
Group2016£'000 Group2015£'000
Variable rate treasury deposits1 4,915 1,744
SIP trustee deposits 34 46
Cash in operating current accounts 339 602
Other cash and cash equivalents 47 43
Total cash and cash equivalents 5,335 2,435
1 Money market rates for the Group's variable rate treasury deposit track Royal Bank of Scotland plc base rate. The rate
attributable to the variable rate deposits at 31 July 2016 was 0.5%.
The Group reviews the current and forecast projections of cash flow, borrowing and interest cover as part of its monthly
management accounts review. In addition, an analysis of the impact of significant transactions is carried out regularly, as
well as a sensitivity analysis of the impact of movements in interest rates on gearing and interest cover.
D Interest rate sensitivity analysis
In managing interest rate risk the Group aims to reduce the impact of short-term fluctuations on the Group's earnings,
without jeopardising its flexibility. Over the longer term, permanent changes in interest rates may have an impact on
consolidated earnings.
At 31 July 2016, it is estimated that an increase of one percentage point in interest rates would have reduced the Group's
annual profit before tax by £88,156 (2015: £77,005) and conversely a decrease of one percentage point in interest rates
would have increased the Group's annual profit before tax by £88,156 (2015: £77,005). There would have been no effect on
amounts recognised directly in other comprehensive income. The sensitivity has been calculated by increasing by 1% the
average variable interest rate of 2.56% applying to the variable rate borrowings of £8.8 million in the year (2015: £7.7
million / 2.84%).
E Cash management and liquidity
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. Included in note B above is a description of additional undrawn facilities that the Group
has at its disposal to further reduce liquidity risk.
Short-term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources,
giving due consideration to risk.
F Foreign currency management
The Group operates solely in the United Kingdom and as such all of the Group's financial assets and liabilities are
denominated in Sterling and there is no exposure to exchange risk.
G Credit risk
The credit risk management policies of the Group with respect to trade receivables are discussed in note 14.
The credit risk on liquid funds is limited because the counterparty is a bank with high credit ratings assigned by
international credit-rating agencies, in line with the Group's policy which is to borrow from major institutional banks
when arranging finance.
The Group's maximum exposure to credit risk at 31 July 2016 was £3.70 million (2015: £1.47 million) on receivables and
£5.33 million (2015: £2.44 million) on cash and cash equivalents. Additionally, the Group has provided development loan
capital in respect of the Aldershot store development, a managed contract. The current balance outstanding at 31 July 2016
was £3.16 million. (2015: £2.78 million). These amounts are secured by way of a fixed priority first charge and a debenture
over all of the Aldershot assets.
H Maturity analysis of financial liabilities
The undiscounted contractual cash flow maturities are as follows:
2016 - Group
Tradeand otherpayables£'000 Borrowings£'000 Interest onborrowings£'000
From two to five years - 28,816 1,814
From one to two years - - 738
Due after more than one year - 28,816 2,552
Due within one year 2,359 - 831
Total contractual undiscounted cash flows 2,359 28,816 3,383
2015 - Group
Tradeand otherpayables£'000 Borrowings£'000 Interest onborrowings£'000
From two to five years - - -
From one to two years - 27,701 205
Due after more than one year - 27,701 205
Due within one year 3,392 - 925
Total contractual undiscounted cash flows 3,392 27,701 1,130
I Fair values of financial instruments
2016£'000 2015£'000
Categories of financial assets and financial liabilities
Financial assets
Trade and other receivables 3,700 1,468
Cash and cash equivalents 5,335 2,435
Development loan capital 3,159 2,779
Financial liabilities
Trade and other payables (2,359) (3,392)
Bank loans (28,728) (27,548)
The fair values of the Group's cash and short-term deposits and those of other financial assets equate to their carrying
amounts. The Group's receivables and cash and cash equivalents are all classified as loans and receivables and carried at
amortised cost. The amounts are presented net of provisions for doubtful receivables and allowances for impairment are made
where appropriate. Trade and other payables and bank borrowings are all classified as financial liabilities measured at
amortised cost.
J Company's financial instruments
The Company's financial assets are amounts owed by subsidiary undertakings amounting to £3.8 million (2015: £3.0 million)
which are classified as loans and receivables, and the investment in its subsidiary undertaking of £0.2 million (excluding
capital contributions). These amounts are denominated in Sterling, are non-interest bearing, are unsecured and fall due for
repayment within one year. No amounts are past due or impaired. The Company has no financial liabilities.
17a Borrowings
Group2016£'000 Group2015£'000
Non-current
Bank loans repayable in more than two years
but not more than five years
Gross 28,816 27,701
Deferred financing costs (89) (153)
Net bank borrowings 28,727 27,548
Non-current borrowings 28,727 27,548
On 15 January 2016, the Group agreed a new banking facility on improved terms with Royal Bank of Scotland Bank plc (RBS).
The new £40 million five year revolving credit facility replaced 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 January 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 during the term of the facility will increase facilities available to £50 million.
The Group currently has £28.8 million drawn against its existing £40 million facility. The margin on the new facility is at
the London Inter-Bank Offer Rate (LIBOR) plus 1.40%-1.65% margin based on a loan to value covenant test (1.40% at
Lok'nStore's current LTV level). This is a marked improvement on the previous 2.35%-2.65% margin and the Group will
therefore benefit from a lower average cost of debt and thus improved cash flow. Loan to value covenants are in line with
the previous facility.
The £40 million revolving credit facility with RBS is secured by legal charges and debentures over the freehold and
leasehold properties and other tangible assets of the business with a net book value of £118.0 million (2015: £95.6)
million together with cross-company guarantees from Group companies.
17b Derivative financial instruments
The Group continues to operate two separate £10 million interest rate swaps as a cash flow hedge with Lloyds Bank plc, both
effective from 31 May 2012, the first at a fixed 1 month sterling LIBOR rate of 1.2% and the second at a fixed one-month
sterling LIBOR rate of 1.15%. Both swaps run up to 20 October 2016 whereupon they lapse. The balance of the drawn facility
of £8.8 million (2015: £7.7 million) remains at a floating rate.
Currency Principal£ Maturity date Fair value 2016 £'000 Fair value 2015 £'000
3032816LS Interest rate swap GBP 10,000,000 20/10/2016 (19) (63)
3047549LS Interest rate swap GBP 10,000,000 20/10/2016 (18) (56)
20,000,000 (37) (119)
The movement in fair value of the interest rate swaps of £82,675 (2015: £169,925) has been recognised in other
comprehensive income in the year.
18 Deferred tax
Deferred tax liability Group2016£'000 Group2015£'000
Liability at start of year 12,252 10,870
Credited to income for the year 605 151
Tax credited directly to other comprehensive income 2,408 1,540
Debit / (credit) to share based payment reserve 96 (309)
Liability at end of year 15,361 12,252
The following are the major deferred tax liabilities and assets recognised by the Group and the movements during the year:
AcceleratedCapitalAllowances£'000 Intangibleassets£'000 Othertemporarydifferences£'000 Revaluation ofproperties£'000 Rolledover gainon disposal£'000 Shareoptions£'000 Total£'000
At 31 August 2014 1,441 563 29 7,008 1,829 - 10,870
Charge/ (credit) to income for the year 267 (33) (1) - (42) (42) 151
(Credit) / charge to other comprehensive income - - (38) 1,578 - - 1,540
Credit to share based payment reserve (309) (309)
At 31 July 2015 1,708 530 (8) 8,586 1,787 (351) 12,252
Charge/ (credit) to income for the year 147 (83) 11 - 524 6 605
Charge to other comprehensive income - - 21 2,375 12 - 2,408
Charge to share based payment reserve - - - - - 96 96
At 31 July 2016 1,855 447 24 10,961 2,323 (249) 15,361
19 Share capital
2016 2015
Authorised: £'000 £'000
35,000,000 ordinary shares of 1 pence each (2015: 35,000,000) 350 350
Allotted, issued and fully paid ordinary shares £ £
Balance 1 August 285 279
Options exercised 662,573 shares (2015: 637,641 shares) 6 6
Balance 31 July 291 285
Called up, Called up,
allotted and allotted and
fully paid fully paid
Number Number
Number of shares at 31 July 29,109,322 28,466,749
The Company has one class of ordinary shares which carry no right to fixed income.
20 Equity settled share-based payment plans
The Group operates two equity-settled share-based payment plans, an approved and an unapproved share option scheme, the
rules of which are similar in all material respects. The Enterprise Management Initiative Scheme (EMI) is closed to new
grants of options as the Company no longer meets the HMRC small company criteria.
The Company has the following share options:
2016 As At As at
Summary 31 July 2015 Lapsed/ 31 July 2016
No of options Granted Exercised surrendered No of options
Unapproved Share Options 1,722,361 59,858 (643,894) (43,841) 1,094,482
Approved CSOP Share Options 172,462 23,137 (18,679) (10,909) 170,763
Total 1,894,823 82,995 (662,573) (54,750) 1,260,459
2015 As At As at
Summary 31 July 2014 Lapsed/ 31 July 2015
No of options Granted Exercised surrendered No of options
Enterprise Management Initiative Scheme 41,414 - (41,414) - -
Unapproved Share Options 2,276,111 5,182 (535,321) (23,611) 1,722,361
Approved CSOP Share Options 246,286 13,471 (60,906) (26,389) 172,462
Total 2,563,811 18,653 (637,641) (50,000) 1,894,823
The following table shows options held by Directors under all schemes.
Total at 31 July 2015 Options granted Options exercised Unapproved Scheme Approved CSOP share options Total at 31 July 2016
2016
Executive Directors
A Jacobs - Unapproved 380,000 26,087 (200,000) 206,087 - 206,087
SG Thomas - Unapproved 170,000 5,217 (100,000) 75,217 - 75,217
RA Davies - Unapproved 531,977 - (250,000) 281,977 - 281,977
RA Davies - CSOP 14,493 - - - 14,493 14,493
RA Davies total 546,470 - (250,000) 281,977 14,493 296,470
CM Jacobs - Unapproved 145,668 3,329 (25,000) 123,997 - 123,997
CM Jacobs - CSOP 20,577 3,594 (5,245) - 18,926 18,926
CM Jacobs total 166,245 6,923 (30,245) 123,997 18,926 142,923
Neil Newman - Unapproved 180,714 17,028 (10,000) 187,742 187,742
Neil Newman - CSOP 19,939 1,434 (5,178) 16,195 16,195
N Newman total 200,653 18,462 (15,178) 187,742 16,195 203,937
Non-Executive Directors
ETD Luker - Unapproved 15,000 - - 15,000 - 15,000
C P Peal - Unapproved 10,000 - (10,000) - - -
Non-Executive total 25,000 - (10,000) 15,000 - 15,000
All Directors total 1,488,368 56,689 (605,423) 890,020 49,614 939,634
The grant of options to Executive Directors and senior management is recommended by the Remuneration Committee on the basis
of their contribution to the Group's success. The options vest after two and a half or three years.
The exercise price of the options is equal to the closing mid-market price of the shares on the trading day previous to the
date of the grant. Exercise of an option is subject to continued employment. The life of each option granted is six and a
half to seven years. There are no cash settlement alternatives. The expected volatility is based on a historical review of
share price movements over a period of time, prior to the date of grant, commensurate with the expected term of each award.
The expected term is assumed to be six years which is part way between vesting (two and a half to three years after grant)
and lapse (10 years after grant). The risk free rate of return is the UK gilt rate at date of grant commensurate with the
expected term (i.e. six years).
The total charge for the year relating to employer share-based payment schemes was £182,124 (2015: £210,558), all of which
relates to equity-settled share-based payment transactions.
21a Other reserves
Cash flow Capital Share-based
hedge Merger Other redemption payment
reserve reserve reserve reserve reserve Total
Group £'000 £'000 £'000 £'000 £'000 £'000
1 August 2014 33 6,295 1,294 34 939 8,595
Share based remuneration (options) - - - - 211 211
IFRS 2 - transfer to retained earnings - - - - (298) (298)
Cash flow hedge reserve net of tax (132) - - - - (132)
Tax credit relating to share options - - - - 309 309
31 July 2015 (99) 6,295 1,294 34 1,161 8,685
Share based remuneration (options) - - - - 182 182
IFRS 2 - transfer to retained earnings - - - - (401) (401)
Cash flow hedge reserve net of tax 62 - - - - 62
Tax charge relating to share options - - - - (96) (96)
31 July 2016 (37) 6,295 1,294 34 846 8,432
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 amounted to £400,957 (2015: £298,268).
21b Other reserves
Other Share-based
reserve payment
reserve Total
Company £'000 £'000 £'000
1 August 2014 1,114 1,153 2,267
Share based remuneration (options) - 211 211
IFRS 2 - transfer to retained earnings - (298) (298)
31 July 2015 1,114 1,066 2,180
Share based remuneration (options) - 182 182
IFRS 2 - transfer to retained earnings - (401) (401)
31 July 2016 1,114 847 1,961
22 Retained earnings
Retained earnings Retained
before deduction Own shares earnings
- More to follow, for following part double click ID:nRSQ6186MdRecent news on Lok'n Store
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