REG - Lok'nStore Group - Interim Results
25/04/2022 07:01
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RNS Number : 1171J Lok'nStore Group PLC 25 April 2022
LOK'NSTORE GROUP PLC
("Lok'nStore" or "the Group")
Lok'nStore Group Plc, the AIM listed self-storage Company announces interim
results for the six months to 31 January 2022
v Strong growth in occupied space and achieved rate per square foot
v Significant increase in net asset value
v Increased dividend
v Pipeline driving future growth
Highlights:
Strong trading
· Group revenue £13.38 million up 31.1% (31.1.2021: £10.21
million)
· Group adjusted EBITDA(1) £8.12 million up 46.5% (31.1.2021:
£5.5 million)
· Achieved rate per sq. ft. of occupied space up 18.5% vs last year
· Unit occupied space up 6.0% yoy with £24.22 per sq.ft achieved
(31.1.2021 £20.44)
Cash flow growth drives interim dividend increase
· Cash available for Distribution (CAD)(3) £5.58 million up 59.6%
(31.1.2021: £3.49 million)
· Cash available for Distribution per share (annualised) 38.00
pence up 57.2% (31.1.2021: 24.17 pence)
· Interim dividend 5.0 pence per share up 15.5% (31.1.2021: 4.33
pence per share) - Eleventh consecutive year of increase
Significant increase in net asset value
· Adjusted Net Asset Value (NAV) per share up 48.4% to £8.43
(31.1.2021: £5.68)
and up 15.3% from 31 July 2021 (£7.31)
Disciplined use of capital leads to strong balance sheet and low net debt
· Sale and manage back of four stores at a 22.8% premium to 31 July
2021 valuations. (£37.2 million) - proceeds will be re-cycled into new,
faster growing Landmark stores
· £44.4 million cash at period-end (31.7.2021: £11.3 million)
· Net debt (excluding lease liabilities) £22.4 million (31.7.2021:
£42.6 million)
· Loan to value ratio(6) 8.3% (31.7.2021: 20.4%)
Embedded future growth from dynamic pipeline(8 )of new landmark stores( )
· New stores currently on site will add 16.8% of new trading space
by July 2023
· Fully funded secured store pipeline(9) total of 12 sites will add
35.5% of new space over the coming years
Positive Outlook for Growth
· Trading remains buoyant with pricing up 1.5% and like for like
occupied space up 0.9% in the two months since the 31 January 2022 period-end
· Seeing many more exciting new store opportunities
Commenting on the Group's results, Andrew Jacobs Executive Chairman of
Lok'nStore Group said,
"Trading in the six months to 31 January 2022 has been excellent. Revenue is
up 31.1% against last year. Our achieved rate per occupied square foot is up
18.5% yoy with unit occupied space up 6.0% driving strong growth of revenue
and profits. The interim dividend is 5 pence up 15.5%. Demand for UK
Self-Storage assets remains strong and this, combined with strong trading has
driven our Net Asset Value per share forward by 48.4% over the last twelve
months.
"Our new Warrington Store opened in January, our new store in Wolverhampton
opened in March and Stevenage opens in the final week of April. We are on site
at three further stores all of which will open within the next 15 months. At
31 January 2022, our current fully funded secured pipeline of twelve new
stores increases lettable owned space by 35.5%. We are seeing many more
exciting new store opportunities.
"Continuing this exciting period of growth, our objective is to build more
Landmark stores in an under-supplied market, remaining conservatively geared
delivering sustainable growth and consistently increasing dividends.
The Board is confident the Group will continue to thrive under its highly
experienced management team and we look to the future with confidence. "
Enquiries:
Lok'nStore 01252 521 010
Andrew Jacobs, Executive Chairman
Ray Davies, Finance Director
020 7220 0500
finnCap Ltd
Julian Blunt/Seamus Fricker, Corporate Finance
Alice Lane, Corporate Broking
020 7418 8900
Peel Hunt LLP
Capel Irwin/Carl Gough/Henry Nicholls
Camarco 020 3757 4991
Billy Clegg/Tom Huddart/Emily Shea-Simonds
Key Performance Indicators (KPIs))
What we mean when we say… (and why we use these Key Performance Indicators)
1. Group Adjusted EBITDA - Earnings before interest, tax, depreciation
and amortisation - This measure strips away non-cash charges, finance charges
and tax. Adjusted EBITDA is defined as EBITDA before losses or profits on
disposal, share-based payments, acquisition costs, exceptional items, finance
income, finance costs and taxation.
2. Other income and expenditure items - refers to one-off items of a
non-operational nature which arose during the year, often relating to asset
disposals, and are unlikely to be recurring. (Refer Note 3(c) of the Interim
Financial Statements).
3. CAD - Cash Available for Distribution - is calculated as Adjusted
EBITDA less total net finance cost, less capitalised maintenance expenses, New
Works Team costs and current tax. This measure is designed to give clarity
to the capacity of the business to generate ongoing net operating cash that
can be used to pay dividends to shareholders or pay down debt. The calculation
of the Cash available for Distribution is set out in the Business and
Financial Review.
4. Adjusted Total Group Assets - The value of adjusted total assets of
£332.3 million (31.01.2021: £235.9 million) (31.07.2021: £294.8 million) is
calculated by adding the independent valuation of the leasehold properties of
£23.1 million (31.01.2021: £16.7 million) (31.07.2021: £22.1 million) less
their corresponding net book value (NBV) £7.3 million (31.01.2021: £3.5
million) (31.07.2021: £7.6 million) to the total assets in the Statement of
Financial Position of £316.5 million (31.01.2021: £222.7 million)
(31.07.2021: £280.3 million). This provides clarity on the significant value
of the leasehold stores as trading businesses which under accounting rules on
leases are only presented based on cost rather than valuation within the
Statement of Financial Position.
5. NAV - Net Asset Value per share - Adjusted net asset value per
share is the net assets adjusted for the valuation of leasehold stores
(properties held under leases) and deferred tax divided by the number of
shares at the period-end. The shares held in the Group's Employee Benefits
Trust and treasury shares are excluded from the number of shares. The
calculation of the Net Asset Value per share is set out in the Business and
Financial Review.
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 (excluding IFRS
16 lease liabilities) of £22.4 million as set out in note 15 (31.01.2021:
£42.6 million) (31.07.2021: £56.3 million) as a percentage of the total
properties independently valued by JLL and including development land assets
all totalling £269.3 million (31.01.2021: £209.2 million) (31.07.2021:
£268.6 million) as set out in the Business and Financial Review in the
Analysis of Total Property Value table.
7. Average Cost of Debt
The average cost of debt is calculated by taking the total interest paid on
the Group's Revolving Credit Facility in the monthly/weekly charging periods
throughout the period and taking an average based on the whole financial
period. Apart from the Group's Revolving Credit Facility the Group has no
other debt. The average cost of debt in the period was 1.55% (31.1.2021:
1.55%). Average cost of debt on active loans not yet 'rolled over' is 1.72%
(31.7.2021: 1.55%).
8. Pipeline Sites - means sites for new stores that we have either
exchanged contracts on or have agreed heads of terms and are progressing with
our lawyers towards completion. We now have 15 pipeline sites of which 12 are
contracted and 3 are currently with lawyers. We currently have 23 owned stores
with an additional 15 managed stores trading. When these 15 sites are fully
developed, we will have a total of 53 stores.
9. Secured Pipeline Sites - means the 12 sites for new stores on which
we have exchanged legal contracts. Of these ten stores are Lok'nStore Owned
Stores and two will be Managed Stores.
10. Adjusted Store EBITDA is Group Adjusted EBITDA (see 1 above) before the
deduction of central and head office costs. Unlike Group Adjusted EBITDA
this measure excludes the impact of IFRS16 and includes leasing charges as
normal operating costs of each store. The measure is designed to give
clarity on the recurring operating cash flow of the business and provides
important information on the underlying performance of the trading stores and
shows the cash generating core of the business. Use of this metric enables us
to provide additional information on store EBITDA contributions (after leasing
costs) and the margins analysed between freehold and leasehold stores and
according to the age of the stores. This analysis is set out in a table in the
Business and Financial Review.
11. Gearing - refers to the level of a company's debt relative to its
equity (http://www.investopedia.com/terms/e/equity.asp) capital, usually
expressed in percentage form. It is a measure of a company's financial
leverage (http://www.investopedia.com/terms/l/leverage.asp) and shows the
extent to which its operations are funded by lenders
(http://www.investopedia.com/terms/l/lender.asp) versus shareholders. Gearing
can be measured by a number of ratios and we use the debt-to-equity ratio in
this document. The calculation of the gearing percentage, also referred to as
the net debt to equity ratio is set out in Note 15 of the Interim Financial
Statements.
12. Group Adjusted EBITDAR - EBITDAR is Earnings before interest, tax,
depreciation amortisation and rent. The measure is designed to give clarity on
the effect of the rent payable by leasehold stores and how its elimination
enables an analytical comparison between freehold stores operating performance
(which do not pay rent) and leasehold stores operating performance. This
analysis is set out in a table in the Business and Financial Review on page.
13. Cost Ratio - calculates the ratio of the total operating costs of the
business as set out in the Business and Financial Review, expressed as a
percentage of total group revenue (note 2), giving a perspective on the cost
efficiency of the business when compared to the cost ratio of the previous
year.
14. LFL- Like for Like - This measure is used to give transparency on
improvements in the operating business unrelated to the opening of new stores
or closure of old stores therefore giving visibility of the true trading
picture. The like for like key performance measure is only used where its use
is particularly relevant to illustrate a performance metric not otherwise
apparent.
Chairman's Statement
I am delighted to report these results to you.
The first half-year results can be summarised as:-
· Strong growth of occupied space and pricing
· Excellent operating performance resulting in rapid revenue and
profit growth
· Sale and manage back of 4 stores at a 22.8% premium to July 2021
valuations
· Significant increase in Net Asset Value per share of 48.4% over
12 months
· 15.5% increase in interim dividend
· Fully funded new secured store pipeline(9) will increase total
trading space by 35.5% to 2.61 million sq. ft.
These results testify to Lok'nStore delivering on our commitment to
sustainable growth. Continued investor interest in the self-storage sector
demonstrated by market transactions underpins the value of our assets and our
strategy to open more Landmark stores.
The detail behind these results is discussed further in our Business and
Financial Review.
Sale and Manage-Back of four freehold stores
On 31 January 2022, the Group completed the Sale and Manage-Back of four
freehold stores for a total gross consideration of £39.0 million representing
a 22.8% uplift on the independent external valuation of the stores at 31 July
2021.
This transaction is immediately accretive to Group net asset value,
demonstrating the increasing demand for good quality UK self-storage assets
with mature cash flows and has provided net sales proceeds of c.£37.2 million
for reinvestment into new, faster growing Landmark stores. Further detail is
set out in the Business and Financial Review.
Significant Increase in Net Asset Value per share
Although the Board do not usually commission an external valuation at the
interim period-end it is mindful of the need to accord with the measurement
principles of International Financial Reporting Standards in determining the
fair value of its trading assets. Accordingly, after consulting with our
external valuers JLL, the Directors considered that the self-storage
transactional market has shown very good levels of liquidity and continued
investor interest with strong capital flows coming into the market. This is
resulting in very strong demand for self-storage assets with corresponding
yield compression. Usually, the market has historically moved forward in a
predictable fashion however the Directors considered that there had been such
a material movement in market yields that an external reconsideration of the
position as at 31 January 2022 was appropriate in respect of our properties
externally valued at 31 July 2021. Accordingly, the Directors instructed Jones
Lang LaSalle (JLL) to undertake a valuation of the trading stores.
It remains the Group's established policy to undertake a comprehensive
external valuation at each year-end and will do so at the next year end at 31
July 2022.
In this period, we saw a like for like uplift of £25.98 million in our
freehold and leasehold trading stores, a 12.8% increase. The like for like
comparison excludes the four sale and manage back stores and the maiden
valuation on our new store in Warrington.
Most of this uplift, £23.28 million, comes from improvements in both the
Discount Rate and Exit Yield applied to the valuations. On a same store
basis on our owned freehold trading stores, we have seen exit yields compress
on average from 6.15% at 31 July 2021 to 5.54% at 31 January 2022. Average
Discount rates are now 7.25% compared to an average of 8.18% at 31 July
2021. These improving metrics reflect the increasing investor appetite in
the UK Self Storage Market and its robust nature throughout the economic cycle
and exogenous shocks.
The continued improving valuation of our trading assets combined with the
recent Sale and Manage-Back transaction resulted in a significant uplift in
Net Asset Value per share of 48.8% to £8.45 compared to 12 months ago.
Adjusted Total Group Assets(4) moved upwards sharply in the six-month period
to £332.3 million up 12.7% on 31 July 2021 (£294.8 million).
The Exit Yield and Discount Rates applied in the valuations are validated by
transactional evidence and give us confidence that there may be more exit
yield compression to come as investors chase scarce assets. We are well
positioned to benefit from future changes with our high-quality portfolio of
stores, and Landmark store development pipeline.
Increased Dividend
The Board's dividend policy balances its disciplined approach to capital
allocation alongside the requirement to invest in the landmark store opening
programme, with the cash-generative qualities of the business. Its dividend
policy will therefore reflect the strong long-term underlying cash flow growth
of the business.
At this interim stage we will pay one third of the previous year's total
annual dividend which equates to 5 pence per share, up 15.5% on the 4.33 pence
per share interim dividend last year. The increase in the interim dividend
follows a consistent pattern reflecting the continued growth of the Group. The
interim dividend will be paid on 10 June 2022 to shareholders on the register
on 6 May 2022. The ex-dividend date will be 5 May 2022. The final deadline
for Dividend Reinvestment Election by investors is 20 May 2022. The final
dividend will be declared when the Group's full year results are announced in
late October 2022.
Investment in our stores
In the period we invested £7.1 million (31.1.21: £9.8 million) in sites and
store development. Today we are onsite at three stores, with a further store
due to commence shortly, which will accelerate capital expenditure over the
coming twelve months.
Following the receipt of £37.2 million from the Sale and Manage-Back
transaction above we are able to report a period end loan-to-value (LTV) ratio
(net of cash) of only 8.3% (31.1.2021: 20.4%) (31.7.2021: 21.0%) and net debt
of £22.4 million (31.1.2021: £42.6 million) (31.7.2021: £56.3 million).
Managed Stores
Our strategy includes growing the number of stores we manage for third party
owners. This enables the Group to earn revenue without having to commit
capital, to amortise fixed central costs over a wider operating base and drive
further traffic to our website which benefits our entire operation.
We generated managed store income of £0.67 million, with recurring fees up
35.3% from the previous period. Second half income will be stronger
benefitting from additional fees from performance, store opening and planning
success fees.
Lok'nStore manages 15 trading stores for third-party owners as Managed Stores.
These off-balance sheet Managed Store assets under Lok'nStore management are
now approaching a valuation of £150 million. Our current pipeline includes
an additional three managed stores which will take the total number of managed
stores to 18.
Our People
We always rely on our amazing people to deliver these impressive results, and
this has been especially the case during the pandemic when I am proud to say
that they went the 'extra mile' every day to provide essential services such
as storing medical equipment and PPE.
We will continue to invest in training to develop and deepen the skills of our
team members. We have reviewed our pay levels to ensure that all of our
employees are paid fairly and we continue to promote equity ownership to our
colleagues via our Share Investment Plan and the granting of options.
Robust Capital Structure, Liquidity and Cash Flow
At 31 January 2022, the Group had cash balances of £44.4 million (31.7.2021:
£9.1million) and a £100 million five-year revolving credit facility which
runs until April 2026. This provides sufficient liquidity for the Group's
current needs. Undrawn committed facilities at the period-end amounted to
£33.2 million. The Group is not obliged to make any repayments prior to the
facility's expiration in April 2026.
Cash inflow from operating activities before investing and financing
activities was £7.45 million in the period to 31 January up 9.9%on the same
period last year (31.1.2021: £6.78 million).
Debt and Bank Covenants
The average cost of bank debt on drawn facilities for the period was 1.55%.
All of the Group's total drawn bank debt of £66.8 million is unhedged,
which means we have benefited from the low bank lending rates. The Board keeps
the decision on interest rate hedging under regular review and despite the
recent increase in bank rates does not currently see entering into a hedged
instrument as compelling.
Pro forma interest cover based on the most recent quarterly covenant test is
in excess of 11 times. The banking covenants are set at 2.5 times. At the
period end our loan-to-value ratio (LTV) based on net bank debt was 8.3%
versus a bank covenant limit of 60% providing a strong platform for us to
develop our pipeline and open new stores.
Both the Loan to Value and Senior Interest covenants continue to be tested
excluding the effects of IFRS 16.
For this purpose, debt / LTV will continue to exclude Right of Use Assets and
corresponding lease liabilities accounted for under IFRS 16. Property lease
costs (rents) will continue to be a deduction in the calculation of EBITDA, in
accordance with the accounting principles in force prior to 1 January 2019,
when testing the Senior Interest covenant.
Our Objectives
Our strategic and operational objectives remain to:
· Steadily increase cash available for distribution (CAD) per share
enabling a predictable growth of the dividend from a strong asset base with
conservative levels of debt
· Fill existing stores and improve achieved rate per sq.ft
· Develop our secured pipeline into trading stores
· Acquire more sites to build new landmark stores
· Increase the number of stores we manage for third parties
Positive Outlook for Growth over short, medium and long term
Our first half results are excellent with all metrics sharply higher, and
trading since the period end has remained strong. The excellent occupancy
gains give us significant embedded pricing and margin opportunities over the
second half and beyond. Our new secured store pipeline will add 35.5% more
trading space over coming years.
We have a unique and exciting growth opportunity ahead of us. With
Lok'nStore's resilient business model and flexible and conservative debt
structure the Board is confident the Group will continue to thrive under its
proven and highly experienced management team and staff. We look to the future
with confidence.
Andrew Jacobs
Executive Chairman
22 April 2022
Business and Financial Review
Lok'nStore Group has had another excellent period successfully delivering
against all of our strategic objectives with revenue, profits and asset values
all moving sharply ahead. In coming years our pipeline of new stores will
substantially increase the proportion of our store space which is new or
purpose-built and will add further momentum to the growth of sales and
profits.
The Performance of our Stores
Group revenue for the six-month period was £13.38 million, up 31.1% year on
year (31.1.2021: £10.21 million) driven by occupancy increases and improved
pricing across our stores. This revenue growth led to a 46.5% increase in
Group Adjusted EBITDA.
· Self-storage revenue £12.69 million up 34.0% (31.1.2021: £9.47
million)
· Adjusted Store EBITDA £8.1 million up 47.8% (31.1.2021: £5.5
million)
· Unit occupied space increased 6.0% year on year
· Price per sq. ft of occupied space increased 18.5%
· Store EBITDA Margins increased from 58.5% to 63.6%
· Cost ratio(13) reduced further to 38.7% (31.1.2021: 44.8%)
(31.7.2021: 44.9%)
With operating costs firmly under control, revenue growth translates into
healthy profit growth. Total adjusted store EBITDA in the self-storage
business, a key performance indicator of profitability and cash flow of the
business, increased 47.8% to £8.1 million (31.01.2021: £5.5 million).
Over the course of the year unit occupied space rose by 6.0%. Continued
strong demand and higher than previous occupancy levels have allowed us to
move pricing forward 18.5% compared to twelve months ago.
The overall adjusted EBITDA margin across all stores increased to 63.6% from
58.5%. Adjusted Store EBITDA margins of the freehold stores increased to
67.8% (31.1.2021: 64.4%) and the leasehold stores increased to 53.1%
(31.1.2021: 44.6%).
As the business develops the balance of the stores continues to shift towards
landmark freehold stores and managed stores which have a higher-than-average
adjusted store EBITDA margin at 67.8% and 100.0% respectively versus 63.6%
across all stores. The impact of this will be to continue to increase the
average store EBITDA margin of the Group overall, and this effect is
accentuated by operating more stores from a relatively fixed central cost
base. In this context the new stores in the pipeline will make a larger than
average contribution to Group profits as they become established trading
units.
In the table below we show how the performance of the stores varies between
freehold and leasehold stores. Currently 41.3% of Lok'nStore owned trading
space is freehold, 21.2% is leasehold and 37.5% is in Managed Stores.
Leaseholds trade on lower margins due to the rent payable, but nevertheless
the 53.1% margin achieved is substantial, and leads to a higher return on
capital than the freehold stores which require much larger capital expenditure
to buy the land and buildings. The freehold stores produce 74.1% (31.1.2021:
77.4%) of the Adjusted store EBITDA and account for 91.5% (31.1.2021: 90.5%)
of valuations (including secured pipeline stores).
This mix of tenures with their different risk and return characteristics
provides flexibility in the balance sheet and opportunities to create value
throughout the property cycle.
Portfolio Analysis and Performance Breakdown
When Fully Developed
Portfolio Analysis and Performance Breakdown Number of stores % of Property % of Adjusted Store EBITDA Adjusted Store % lettable space Number of stores Total % lettable space
Valuation EBITDA Margin (%)
As at 31 January 2022
Freehold Stores 14 79.7 74.1 67.8 41.3 23 51.0
Leasehold Stores 9 8.6 25.9 53.1 21.2 10 17.8
Managed Stores 15 100.0 37.5 17 31.2
Total stores trading 38 50
Pipeline Stores (secured)*
Owned 10 11.7
Managed 2
Total secured Pipeline Stores 12
Total Stores 50 100 100 63.6 100 50 100
*Applies to the 12 contracted stores only.
In the Operating Performance table below, we show how the performance breaks
down across the stores, based on the age of store. Older stores have had more
time to fill-up and produce higher EBITDA returns.
Operating Performance at a glance (Lok'nStore freehold and leasehold stores
only)
Weeks Old Secured Under 100 100 to 250 over 250 Total
Pipeline
Six months ended 31 January 2022
Sales £000 449 1,396 10,844 12,689
Stores Adjusted EBITDA £'000 (24) 1,013 7,076 8,065
Adjusted EBITDA Margin (%) (5.3%) 72.5% 65.2% 63.6%
Stores Adjusted EBITDAR £'000 (22) 1,013 7,977 8,968
Adjusted EBITDAR Margin (%) (5.0%) 72.5% 73.6% 70.7%
As at 31 January 2022 (sq. ft.)
Maximum Net Area 594 209 156 838 1,797
Freehold / Long leasehold ('000 sq. ft.) 594 209 156 403 1362
Short Leasehold (sq. ft.) - - - 435 435
Number of Stores
Freehold / Long Leasehold 12 3 3 12 30
Short Leasehold - - - 9 9
Total Stores 12 3 3 21 39
Marketing
New customers are typically drawn to Lok'nStore by three key drivers:
· Our distinctive landmark stores
· Google and other search engines
· Existing or previous customers and customer referrals
Store visibility remains pivotal to our marketing efforts. With their
prominent positions, distinctive design and bright orange elevations our
stores raise the profile of the Lok'nStore brand and help to generate a
substantial proportion of our business. Our new landmark stores are located
in highly prominent locations, and we continually invest in new signage and
lighting at our existing stores as well as creating striking designs for our
new landmark stores, to promote and enhance their visual prominence and engage
the local community.
The internet continues to be the main media channel for our advertising. Our
website at www.loknstore.co.uk (http://www.loknstore.co.uk) is one of the most
established self-storage websites in the UK. The website delivers a high
level of customer experience across desktop and mobile devices. Any new
development of the website begins with a mobile first focus. 57% of visits
to the website in the year were from a mobile device, consistent with last
year. This is a very dynamic area, and we are committed to its continued
development. We believe the internet provides a strong competitive advantage
for the major operators such as Lok'nStore with relatively large marketing
budgets.
Sale and Manage-Back of four of our freehold stores
On 31 January 2022, the Group executed the Sale and Manage-Back of four of its
freehold stores for a total gross consideration of £39.0 million realising a
significant premium of 22.8% to the stores valuation at 31 July 2021. The
purchaser is an existing institutional managed-store client wholly independent
of Lok'nStore and its directors.
Lok'nStore will continue to manage the stores located in Basingstoke, Cardiff,
Horsham and Portsmouth, as branded Lok'nStore operations maintaining the
operational footprint of the business. Lok'nStore will receive management and
performance fees for managing them on behalf of their new owner.
The total consideration of £39 million receivable is subject to a £1.8
million downward adjustment in respect of certain committed works to be
completed by Lok'nStore at two of the sites. The net proceeds of the sale will
be recycled into new, fast growing landmark stores.
In the year to 31 July 2021 the four stores generated revenue of £2.54
million and contributed £1.54 million to Group EBITDA. In the first year
following the sale, the Group expects to receive incremental management fees
of c.£0.2 million in respect of the manage-back arrangement which will flow
directly to Group EBITDA. The historic cost of the four stores was £13.75
million and their stated fair value as at 31 July 2021 was £31.75 million.
This transaction does not impact the Group's ability to grow its annual
dividend in line with market expectations and which is well covered by
projected CAD profit levels of the business going forward.
Ancillary Sales
Ancillary sales consisting of boxes, packaging materials, insurance and other
sales increased to £1.33 million an increase of 20.1% year on year
(31.01.2021: £1.1 million) accounting for 10.5% of self-storage revenues.
Store properties and Net Asset Value
· Adjusted Total Assets £332.3 million up 40.9% (31.1.2021:
£235.9 million)
· Adjusted Net Asset Value (NAV) per share(5) January to January up
48.4% to £8.43 (31.1.2021: £5.68)
· Adjusted Net Asset Value (NAV) per share(5) up 15.3% from 31 July
2021 (£7.31)
· Investment in new stores £7.1 million (31.1.2021: £9.6
million)
At the period-end Lok'nStore had 38 stores trading. Of these, 23 stores are
owned with 14 freeholds, nine leasehold and 15 further sites operate under
management contracts.
The average unexpired term of the Group's operating leaseholds is
approximately 11 years as at 31 January 2022. All of our leasehold stores
are inside the Landlord and Tenant Act providing us with a strong degree of
security of tenure.
Market Valuation of Freehold and Leasehold Land and Buildings
Although the Board do not usually commission an external valuation at the
interim period-end it is mindful of the need to accord with the measurement
principles of International Financial Reporting Standards. Accordingly, after
consulting with our external valuers JLL, the Directors considered that the
self-storage transactional market has shown strong levels of liquidity and
continued investor interest with strong capital flows coming into the market.
This is resulting in very strong demand for self-storage assets with
corresponding yield compression. The Directors considered that there had
been such a material movement in market yields that an independent
reconsideration of the position as at 31 January 2022 was appropriate in
respect of our properties externally valued at 31 July 2021. Accordingly, the
Directors instructed JLL to undertake a valuation of the trading store
properties.
Our freehold stores have been independently valued by Jones Lang LaSalle (JLL)
at £214.6 million (Net Book Value (NBV) £68.1million) at 31 January 2022 (31
July 2021: £212.8 million: NBV 70.9 million).
Accordingly, Adjusted Total Group Assets(4) have moved upwards sharply in the
six-month period to £332.3 million up 12.7% on 31 July 2021 (£294.8
million). A significant contributor to this increase was the uplift from the
external valuation as at 31 January 2022 combined with the trading strength of
our business, as well as our investment in new stores.
In this six-month period, we saw a like for like uplift of £25.98 million in
our freehold and leasehold trading stores, a 12.8% increase. The like for
like comparison excludes the Sale and Manage-Back stores and the maiden
valuation on our new store in Warrington.
£23.28 million of this valuation uplift comes from improvements in both the
Discount Rate and Exit Yield applied to the valuations. On a same store
basis on our owned freehold trading stores, we have seen exit yields compress
on average from 6.15% at 31 July 2021 to 5.54% at 31 January 2022. Average
Discount rates are now 7.25% compared to an average of 8.18% at 31 July
2021. These improving metrics reflect the increasing investor appetite in
the UK Self Storage Market.
The remaining £2.7 million of valuation uplift comes from the impact of
improved cash flows of the same store portfolio that were valued last year.
At the full year-end in July 2021, we saw significant improvements in the cash
flow assumptions applied by JLL and these have been improved further in this
valuation demonstrating the impact operating performance has on asset values
and why one of our key objectives remains to fill existing stores and continue
improving pricing.
The Exit Yield and Discount Rates applied are validated by transactional
evidence and give us confidence that there may be more exit yield compression
to come as investors chase scarce assets. We are well positioned to benefit
from future changes with our high-quality portfolio of stores. It remains the
Group's established policy to undertake a comprehensive external valuation at
each year-end and we will do so at the next year end at 31 July 2022.
Valuations
It is not the intention of the Directors to make any further 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 valuations of our freehold property assets are included in the Statement
of Financial Position at their fair value. The value of our leasehold stores
in the valuation totals £23.1 million (31.1.2021: £16.7 million) but they
are held at cost in the Statement of Financial Position.
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.
We have reported by way of a note the underlying value of these leasehold
stores in revaluations and adjusted our Net Asset Value (NAV) calculation
accordingly to include their value. This ensures comparable NAV calculations.
An analysis of the valuations achieved is set out in the table below.
Analysis of Total Property Value No of stores 31 Jan 2022 Valuation No of stores 31 Jan 2021 Valuation No of stores 31 July 2021 Valuation
/sites £'000 /sites £'000 /sites £'000
Freeholds(3) valued by JLL (1) 14 214,600 15 151,675 17 212,800
Leaseholds valued by JLL (2) 9 23,075 9 20,705 9 22,100
Subtotal 23 237,675 24 172,425 26 234,900
Sites in development at cost (3) 12 31,643 10 26,787 12 33,675
Subtotal 35 269,318 34 199,212 38 268,575
Freehold store at Director valuation (4) - - 1 10,000 - -
Subtotal (5) 35 269,318 35 209,212 38 268,575
Freehold land & Buildings at Director valuation 1 1,500 - - 1 1,500
Total 36 270,818 35 209,212 39 270,075
(1) Includes related fixtures and fittings (refer note 10)
(2 )The nine 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 7 months at the date of the 2022 valuation.
(3) Includes £296,466 of capitalised interest during the period.
(31/01/21: £190,655) (31/07/21: £380,193).
(4) Leicester store opened during the previous period and valued at a
Directors' valuation of £10.0 million and was subsequently valued by JLL at
31 July 2021 and 31 January 2022.
(5) Loan to value calculation based on these property values.
Total freehold properties account for 91.5% of all property values (31.1.2021:
90.1%).
Store and Portfolio Strategy
Our strategy is to continue to increase the number of stores we operate
without over stretching our balance sheet. The core focus of this strategy is
the acquisition of highly prominent freehold locations in busy towns and
cities in England where we will build well-branded landmark stores.
Lok'nStore's rising 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.
Flexible Approach to Site Acquisition
All of the projects noted below are part of our strategy of actively managing
our 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 are focussed on allocating capital in the most
efficient manner to achieve our objectives for our shareholders.
We prefer to own freeholds if possible, and where opportunities arise, we will
seek to acquire the freehold of our leasehold stores. However, we are happy to
take leases on appropriate terms and benefit from the advantages of a lower
entry cost, with further options to create value later in the store's life
cycle.
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.
· Total secured pipeline of 12 stores adds 35.5% of extra trading
space to the overall portfolio, 49.2% to our owned portfolio and 12.7% to the
managed portfolio.
· A further 3 new store opportunities have been identified and are
progressing with lawyers.
Analysis of Stores No of Pipeline Pipeline Pipeline
Stores Stores
As at 31 Jan 2022 Stores/Sites Trading Trading Total Secured With lawyers
Lok'nStore Managed
Freeholds 14 14
Leaseholds 9 9
Pipeline (Freehold) 11 11 9 2
Pipeline (Leasehold) 1 1 1
Managed Stores (Trading) 15 15
Managed Stores (Pipeline) 3 3 2 1
Total No. 53 23 15 15 12 3
MLA sq. ft. 2,756,203 1,203,745 722,700 829,758 684,758 145,000
Pipeline of New Stores
Against this background of ever improving operating performance, we have
invested £7.1 million (31.1.2021: £9.8 million) in new store development
this period and we have a new store pipeline of 12 secured stores which will
take the total to 50 stores. These will all be purpose-built landmark stores
in highly prominent locations and will add substantially to the Group's
capacity for revenue, profit and asset growth.
All of the 12 stores in our Secured Pipeline(9) are in prominent locations
with large catchment areas and little established competition and demonstrate
the Group's ability to source high-quality sites adding to future sales and
earnings growth. These eye-catching buildings, with their distinctive orange
Lok'nStore branded livery and prominent signage, create highly visible
landmarks, which continue to be a big source of new customers.
We believe that the UK self-storage market is still in its infancy with low
penetration and increased consumer awareness leading to faster fill up rates.
Summary of our contracted pipeline at 31 January 2022:
On-site at On-site at Total
Store Size Status 31 Jan 2022 30 April 2022 30 April 2022
sq. ft Size sq. ft Size sq. ft Size sq. ft
(Additional) (Additional)
Stevenage 56,813 On site - Will open April 2022 56,813 56,813
Wolverhampton 52,100 Opened March 2022 52,100 52,100
Bedford 56,445 On site - Opening early 2023 56,445 56,445
Staines 56,200 On site - Opening Summer 2023 56,200 56,200
Basildon 56,200 On site - Opening Summer 2023 56,200 56,200
Bournemouth 75,100 Planning consent granted
Peterborough 45,900 Planning consent granted - On site end April 45,900 45,900
Cheshunt 60,300 Planning consent granted
Kettering 40,000 Planning application submitted
Chester 45,700 Planning process under review
Altrincham 60,000 Planning application submitted
Barking 80,000 Design
Total - 12 stores 684,758 221,558 102,100 323,658
Total Onsite 323,658
Sq. ft. Trading (including Managed Stores) at 31 January 2022 1,926,445
Trading + On site 2,250,103
% increase from on site sq.ft 16.80%
Store opening programme by year
Financial Year Store Opening Pipeline Lok'nStore Capital Expenditure Remaining % growth lettable area Owned portfolio % cumulative growth lettable area % growth lettable area % cumulative growth lettable area
(secured) Owned portfolio Total portfolio Total portfolio
FY2022 3 new stores £2.9 million 4.7% 4.7% 5.7% 5.7%
FY2023 4 new stores £22.3 million 17.9% 22.6% 11.1% 16.8%
FY2024 5 new stores £20.0 million 26.6% 49.2% 18.7% 35.5%
12 new stores £45.2 million 49.2% 35.5%
Managed Stores
· Approaching £150 million of Managed Store assets under
management for third party Owners
· 35.3% increase in recurring management fees earned
Lok'nStore manages an increasing number of stores for third-party owners.
Under this model Lok'nStore can provide a turnkey package for investors
wishing to own trading self-storage assets. The investor supplies the capital
for the project which Lok'nStore manages. Lok'nStore will buy, build and
operate the stores under the Lok'nStore brand and within our current
management structure.
As recently demonstrated, we also consider selling established stores on sale
and manage-back contracts in order to recycle the capital into the development
of new landmark stores. We can then manage the balance sheet as part of our
successful growth strategy and disciplined capital allocation. Indeed, some of
our stores have been freehold, leasehold and managed stores during their
operating life cycle!
Our most important consideration is always the trading potential of the store
rather than the property tenure and sale and manage-backs have the additional
advantages:-
i) The critical mass of store numbers benefits the business
(e.g. through Google search and sharing of other marketing costs)
ii) It spreads the central management costs
iii) Through the performance fees we benefit from the capital
upside without committing capital
During the period the Group continued its development of the Wolverhampton
store which opened post period-end on 25 March 2022. Chester and Kettering are
in the planning stage.
For managed stores Lok'nStore receives a standard monthly management fee, a
performance fee based on certain objectives and fees on a successful exit. We
also charge acquisition, planning and branding fees. This allows Lok'nStore to
earn revenue from our expertise and knowledge of the self-storage industry
without committing our capital. We can amortise various fixed central costs
over a wider operating base and drive more visits to our website moving it up
the internet search rankings and benefitting all of the stores we both own and
manage.
This strategy improves the risk adjusted return of the business by increasing
the operating footprint, revenues and profits without committing capital.
There is a strong correlation between the total management fee income and the
number of stores under management.
We generated managed store income of £674,545 in this period, compared to
£737,946 for the same period last year. Recurring management fees
generated £588,014 an increase of 35.3% over the same period last year
(31.1.2021: £434,619). Non-recurring fees were lower in the first half at
£86,531 (31.01.2021: £303,327).
We expect this to continue increasing steadily over the coming years as more
managed stores are opened. Second half income will be stronger and will
include additional fees from store openings and non-recurring fees will
benefit from additional supplementary fees (Initial branding fees etc).
Managed store income is generated from our existing platform and central
management, resulting in an effective margin from this activity of 100%.
Percentage Increase/ Group Group Group
Management fees (decrease) Period ended Period ended Year ended
31 January 2022 31 January 2021 31 July 2021
% £ £ £
Recurring fees
Base management fees 294,012 257,072 515,940
Administration and compliance fees 35,000 31,000 59,500
Enhanced Management fees 259,002 146,547 307,184
Recurring fees - Sub-total 35.3% 588,014 434,619 882,624
Non-recurring fees
Construction & Advisory fees 12,500 - 12,500
Supplementary fees 50,000 303,327 303,327
Increase in estimated fees receivable 24,031 - 147,813
Non-recurring fees 86,531 303,327 463,640
Total management fees (8.7%) 674,545 737,946 1,346,264
Financial results
· Group Revenue £13.38 million up 31.1% (31.1.2021: £10.21
million)
· Group Adjusted EBITDA(1) £8.12 million up 46.5% (31.1.2021:
£5.5 million)
· Profit before tax £11.33** million up 287% (31.1.2021: £2.93
million)
· Loan to Value (net of cash) 8.3% (31.1.2021: 20.4%) (31.7.2021:
21.0%)
· Cash available for Distribution (CAD)(3) £5.58 million up 59.6%
(31.1.2021: £3.49 million)
· Cash available for Distribution (CAD) per share (Annualised)
38.00 pence up 57.2% (31.1.2021: 24.17 pence)
· Interim dividend up 15.5% to 5 pence per share (31.1.2021: 4.33
pence per share)
· Cash balance £44.4 million (31.1.2021: £11.3 million)
(31.7.2021: £9.1 million)
· £25 million accordion executed - increases bank facility to
£100 million
· Bank facility extended by one year to April 2026
** A significant part of this increase in profit before tax is due to the
profit of £6.1 million arising on the sale of four trading stores, which is
"non-recurring" and separately disclosed in the Income Statement below
"adjusted EBITDA".
On 20 October 2021, the Group executed the accordion arrangement embedded
within the Revolving Credit Facility which increases the facilities available
to the Group from £75 million to £100 million. In addition, the Group has
also agreed a one-year extension on its existing joint banking facility. The
facility is a joint agreement with ABN AMRO N V and NatWest Bank plc
participating equally and is closely aligned to the terms of the Group's
previous facility. ABN AMRO N V replaced Lloyds Bank plc in June 2021 as one
of the Group's strategic banking partners.
The facility, which was due to expire in April 2025, will now run until April
2026 providing funding for more landmark site acquisitions. The two
principal bank covenants (LTV and Senior Interest) and margin are unaffected
by the execution of the accordion and this extension of term.
Amendments to the Facility Agreement dealing with the transition from LIBOR to
SONIA (Sterling Over Night Indexed Average) have also been made, fulfilling
the UK regulator's requirements ahead of LIBOR's phasing out after 31 December
2021.
Lok'nStore is a robust business which generates an increasing cash flow from
its strong asset base with a low LTV net of cash of 8.33% and a low average
cost of debt of 1.55%. The value of the Group's assets underpins a
flexible business model with stable and rising cash flows and low credit risk
giving the business a firm base for growth.
Management of interest rate risk
· Average cost of debt 1.55% (31.1.2021: 1.55%) (31.7.2021: 1.54%)
· Average cost of debt (active revolving loans) 1.72% (31.7.2021:
1.55%)
With £66.8 million of gross debt currently drawn against the £100 million
bank facility the Group is not committed to enter into hedging instruments but
continues to keep the matter under review. It is not the intention of the
Group to enter into an interest rate hedging arrangement at this time given
our low level of net debt, low loan to value ratio and high interest cover and
the Group has continued to benefit from low lending rates.
Operating Costs
· Cost ratio(13) reduced further to 38.7% (31.1.2021: 44.8%)
(31.7.2021: 44.9%)
We have a strong record of disciplined control of our group operating costs
with like for like costs increasing by 5.9% (Refer same store analysis of
Group operating costs in the table below).
In the period Group operating costs were up 13.2% year on year as we opened
new landmark stores. We provide a breakdown below. Overall, the cost ratio
continues to decrease as we grow revenue and bear down on costs.
Future cost increases are likely to be driven by the expansion of the business
in the areas of rates, staffing and marketing. Overall cost increases are
mainly driven by the expansion of the business, and we are seeing some other
cost pressures through energy and some wage costs.
Property costs increased by 16.1%. These costs mainly constitute rent and
rates and have risen in recent years as we felt the effects of rent reviews
and higher rates bills and as we opened our new Landmark stores which are
generally larger.
Staff costs increased by 11.1% as we staffed the new stores and paid
performance bonuses to all our store colleagues resulting from the excellent
revenue growth. We also incurred additional national insurance costs arising
on these performance bonuses and the exercise of employee share options.
Group Operations Increase (decrease) Six months Six months Year
in costs % ended 31 Jan ended 31 Jan ended 31 July
2022 2021 2021
£'000 £'000 £'000
Property costs 16.1% 2,681 2,309 4,783
Adjustment for property lease rentals 17.4% (903) (769) (1,559)
Restated property and premises costs 15.5% 1,778 1,540 3,224
Staff costs 11.1% 2,694 2,424 5,269
Overheads 15.6% 703 608 1,341
Total 13.2% 5,175 4,572 9,834
On a same store basis, excluding the financial effects of the Chichester,
Salford and Warrington stores, the table below shows the overall Group cost
increased by 5.9%
Group Operations Increase (decrease) Six months Six months Year
Same Store analysis in costs % ended 31 Jan ended 31 Jan ended 31 July
2022 2021 2021
£'000 £'000 £'000
Property costs 8.1% 2,497 2,309 4,517
Adjustment for property lease rentals 17.1% (901) (769) (1,558)
Restated property and premises costs 3.6% 1,596 1,540 2,959
Staff costs 6.5% 2,581 2,424 5,178
Overheads 9.4% 665 608 1,306
Total 5.9% 4,842 4,572 9,443
Cash flow and financing
At 31 January 2022 the Group had cash balances of £44.4 million (31.1.2021:
£11.3 million) (31.7.2021: £9.1 million). Cash inflow from operating
activities before investing and financing activities was £7.45 million
(31.1.2021: £6.8 million).
As well as using cash generated from operations to fund some capital
expenditure, the Group has a £100 million five-year revolving credit facility
which runs until April 2026. This provides sufficient liquidity for the
Group's current needs. Undrawn committed facilities at the period-end
amounted to £33.2 million (31.1.2021: £21.1 million) (31.7.2021: £9.6
million). Cash plus undrawn committed facilities amounts to £77.6 million
leaving the business with plenty of headroom to keep acquiring and building
new landmark stores.
Increasing Cash Flow Supports 15.5% Increase in Interim Dividend
· Interim dividend 5.0 pence per share up 15.5% (2021: 4.33 pence
per share)
· CAD up 59.6% in the period compared to the corresponding period
last year.
· Cash available for Distribution (CAD) per share (annualised) was
up 57.2% to 38.00 pence (31.1.2021: 24.17 pence).
To illustrate this fully the table below shows the calculation of CAD.
Analysis of Cash Available for Distribution (CAD)
Period ended Period ended Year ended
31 January 2022 31 January 2021 31 July 2021
£'000 £'000 £'000
Group Adjusted EBITDA 8,116 5,540 11,890
(Per Statement of Comprehensive Income)
Adjustment for property lease rentals (903) (769) (1,559)
Net finance costs paid(1) (600) (484) (969)
Capitalised maintenance expenses (60) (169) (193)
New Works Team (73) (42) (129)
Current tax (note 7) (903) (583) (798)
Total deductions (2,539) (2,047) (3,648)
Cash Available for Distribution 5,577 3,493 8,242
Increase in CAD over last year 59.6% 19.7% 32.5%
Number Number Number
Closing shares in issue (less shares held in EBT and treasury)
29,354,843 28,903,100 29,063,575
CAD per share (annualised) 38.00p 24.17p 28.36p
Increase in CAD per share over last year 57.2% 20.0% 33.3%
Taxation
The Group has made a current tax provision against earnings in this period of
£1.05 million (31.1.2021: £0.58 million) based on a corporation tax rate of
19% (31.1.2021: 19%). The deferred tax provision which is calculated at
forward corporation tax rates of 25% is substantially a tax provision against
the potential crystallisation (sales) of revalued properties and past 'rolled
over' gains and amounts to £54.2 million (31.1.2021: £27.0 million)
(31.7.2021: £46.8 million).
The external revaluation of the trading stores and the rolled over gains made
on the sale and manage-back of the four stores during the period have both
contributed to the uplift in the total deferred tax provision at the
period-end (See Note 17).
Earnings per share
Basic earnings per share were 30.16 pence (31.1.2021: 7.89 pence per share)
and diluted earnings per share were 29.64 pence (31.1.2021: 7.76 pence per
share).
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Total profit for the financial year attributable to owners of the parent 8,832 2,286 3,283
No. of shares
Weighted average number of shares No. of shares No. of shares
For basic earnings per share 29,277,827 28,965,774 29,035,104
Dilutive effect of share options 520,839 505,832 527,846
For diluted earnings per share 29,798,666 29,471,606 29,562,950
623,212 shares (31.01.2021: 623,212) are held in the Employee Benefit Trust,
and these are excluded from the above calculation.
Earnings per share attributable to owners of the Parent Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
Earnings per share - Basic
Basic earnings per share 30.16p 7.89p 11.33p
Earnings per share - Diluted
Total diluted earnings per share 29.64p 7.76p 11.10p
The significant increase in earnings per share in the period is due in
substantial part to the profits generated by the sale and manage-back of the
four stores during the period. (Refer Statement of Comprehensive Income)
Gearing(11 ()excluding IFRS16 lease liabilities)
At 31 January 2022 the Group had £66.8 million of gross bank borrowings
(31.1.2021: £53.9 million) (31.7.2021: £65.4 million) representing gearing
of 12.6% (31.1.2021: 34.9%) (31.7.2021: 37.2%) on net debt of £22.4 million
(31.1.2021: £42.6 million) (31.7.2021: £56.3 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 11.6%
(31.1.2021: 24.2%) (31.7.2021: 33.8%). After adjusting for the deferred tax
liability carried at period end of £54.2 million gearing drops to 9.0%
(31.1.2021: 27.0%) (31.7.2021: 26.4%).
Gearing(11 ()including IFRS16 lease liabilities)
At 31 January 2022 the Group had £66.8 million of gross bank borrowings
(31.1.2021: £53.9 million) (31.7.2021: £65.4 million) and £12.45 million of
lease liabilities (31.1.2021: £11.8 million) (31.7.2021: £11.2 million)
representing gearing of 19.7% (31.1.2021: 44.6%) (31.7.2021: 44.6%) on net
debt of £34.9 million (31.1.2021: £54.5 million) (31.7.2021: £67.5
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 18.1% (31.1.2021: 41.8%) (31.7.2021: 40.7%). After
adjusting for the deferred tax liability carried at period end of £54.2
million gearing drops to 14.1% (31.1.2021: 34.6%) (31.7.2021: 31.7%).
Capital expenditure
The Group has an active new store development programme. The Group has grown
through a combination of building new stores, existing store improvements and
relocations. We have concentrated on extracting value from existing assets and
developing through collaborative projects and management contracts.
Capital expenditure during the period totalled £7.1 million. This was
primarily the purchase of the Peterborough site, together with ongoing
construction and fit out works at our sites in Stevenage, final costs on
Warrington prior to opening, as well as planning and pre-development works at
our Bedford, Bournemouth, Peterborough, Altrincham, Barking and Cheshunt
sites.
Adjusted Net Asset Value per Share
Adjusted net assets per share are the net assets of the Group adjusted for the
valuation of leasehold stores and deferred tax divided by the number of shares
at the period-end. The shares currently held in the Group's employee benefits
trust (own shares held) and in treasury are excluded from the number of
shares.
At 31 January 2022 the adjusted net asset value per share increased to £8.43
from £5.68 year on year, up 48.4% and increased by 15.3% since 31 July
2021. This increase is a result of cash generated from operations, the sale
and manage-back of the four stores at a premium, a revaluation of the stores
by JLL, all offset in part by dividend payments and an increase in the shares
in issue due to the exercise of share options during the year.
31 Jan 31 Jan 31 July
2022 2021 2021
Analysis of net asset value (NAV) £'000 £'000 £'000
Unaudited Unaudited Audited
Net assets 177,362 123,432 151,259
Adjustment to include operating/short leasehold stores at valuation
Add: JLL leasehold valuation 23,075 16,725 22,100
Deduct: leasehold properties and their fixtures and fittings at NBV (7,313) (3,571) (7,630)
193,124 136,586 165,729
Deferred tax arising on revaluation of leasehold properties(1) (3,941) (2,500) (3,618)
Adjusted net assets 189,183 134,086 162,111
Number Number Number
Shares in issue '000 '000 '000
Opening shares in issue 29,687 29,633 29,633
Shares issued for the exercise of options 291 20 54
Closing shares in issue 29,978 29,653 29,687
Shares held in EBT (623) (623) (623)
Shares held in treasury - (127) -
Closing shares for NAV purposes 29,355 28,903 29,064
Adjusted net asset value per share after deferred tax provision £6.45 £4.64 £5.58
Adjusted net asset value per share before deferred tax provision
Adjusted net assets (see above) 189,183 134,086 162,111
Deferred tax liabilities and assets recognised by the Group 54,174 27,479 46,760
Deferred tax arising on revaluation of leasehold 3,941 2,500 3,618
properties(1 )
Adjusted net assets before deferred tax 247,298 164,065 212,489
Closing shares for NAV purposes 29,355 28,903 29,064
Adjusted net asset value per share before deferred tax provision £8.43 £5.68 £7.31
(1) A deferred tax adjustment in respect of the uplift in the value of the
leasehold properties has been included. Although this is a memorandum
adjustment as leasehold properties are included in the Group's financial
statements at cost and not at valuation, this deferred tax adjustment is
included in the adjusted net asset value calculation in order to maintain a
consistency of tax treatment between freehold and leasehold properties.
Corporate and Social Responsibilities
Lok'nStore conducts its business in a manner that reflects honesty, integrity,
and ethical conduct. We believe that the long-term success of the business is
best served by respecting the interests of all our stakeholders. Management of
social, environmental, and ethical issues is of high importance to Lok'nStore.
These issues are dealt with on a day-to-day basis by the Group's managers with
principal accountability lying with the Board of Directors.
We look for opportunities to address our responsibility to the environment,
and we pay close attention to our energy use, carbon dioxide emissions, water
use and waste production. At each year-end Lok'nStore commissions a full
assessment of the Group's environmental impact.
Customers
We believe in clarity and transparency towards our customers. Brochures and
literature are written in plain English, explaining clearly our terms of
business without hiding anything. We are open and honest about our products
and services and do not employ pressure selling techniques or attempt to take
advantage of any vulnerable groups. If we make a mistake, we acknowledge it,
deal with the problem quickly, and learn from our error. We listen to our
customers as we know that they can help us improve our service to them.
Neil Newman Ray Davies
Group Managing Director Group Finance Director
Principal Risks and Uncertainties:
Principal Risks and Uncertainties in Operating our Business
Risk management has been a fundamental part of the successful development of
Lok'nStore. The process is designed to improve the probability of achieving
our strategic objectives, keeping our employees safe, protecting the interests
of our shareholders and key stakeholders, and enhancing the quality of our
decision-making through understanding the risks inherent in both the
day-to-day operations and the strategic direction of the Group as well as
their likely impact.
Management of our risks helps us protect our reputation which is very
important to the ability of the Group to attract customers, particularly with
the growth of social media. We always try to communicate clearly with our
customers, suppliers, local authorities and communities, employees, and
shareholders, and to listen and take account of their views. We operate strict
Health and Safety policies and procedures.
Our Risk Management Governance
The Board has overall responsibility for the management of the Group's risks.
As the Group's strategic direction is reviewed and agreed the Board identifies
the associated risks and works to reduce or mitigate them using an established
risk management framework in conjunction with the executive management team.
This is a continuing and evolving process as we review and monitor the
underlying risk elements relevant to the business.
Risk Management Framework
The risk register covers all areas of the business including property,
finance, employees, insurance, customers, strategy, governance, and disaster
recovery. The risks are categorised by risk area and numerically rated based
on a combination of 'likelihood' and 'consequences and impact' on the
business. The combination of these two becomes the 'risk factor' and any
factor with a rating over 15 is reported to the Board.
Risk Management Team
Ray Davies, Finance Director, is the Board member responsible for ensuring
that the risk management and related control systems are effective, and that
the communication channels between the Board and the Executive Management team
are open and working correctly. The Executive Management Team is responsible
for the day-to-day management of the risk factors. Responsibility for
identifying, managing, and controlling the risk is assigned to an individual
as shown on the risk register depending on the business area. Reporting
against the risks forms part of the monthly executive management meeting and
the risk factor may be amended if applicable. There are also sub-committees
for particular risk areas which meet regularly. The Risk Management and
Reporting Structure is shown below.
Our Risk Management and Reporting Structure
The Board
Reviews Risk Register in full twice a year
Considers specific risk areas as raised by the Executive Board Committee
Executive Board Committee
Reviews risks at monthly executive management meetings and if material
requests for the Board to consider risk at next scheduled Board Meeting (or
earlier if necessary)
Capex Committee Property Risk Committee
Meets Monthly Meets Periodically
Manages proposed capital expenditure, actual spend, rolling capex requirements Considers:
Risks associated with properties including Health and Safety
and environmental impact.
Principal Risks
The principal risks our business faces, and our key mitigations are outlined
in the table below.
Risk Description Key mitigation
Interest Rate and Liquidity Risk The main risks arising from the Group's financial instruments are interest §Regular review by the Board (full details are set out in the Financial
rate risk, and the likely effects of interest rate rises, and liquidity risk Review).
(for details please see note 16).
§Debt and interest are low relative to assets and earnings.
§Could reduce debt, if required, by executing 'Sale and Manage-Back'
arrangements on mature stores.
Tax Risk Changes to tax legislation may impact the level of corporation tax, capital §Regular monitoring of changes in legislation.
gains tax, VAT and stamp duty land tax which would in turn affect the profits
of the Company. §Use of appointed professional advisers and trade bodies.
Property Valuation Risk The external independent valuations of the stores are sensitive to both §Regular monitoring of any changes in market conditions and transactions
operational trading performance of the stores and also wider market occurring within our marketplace.
conditions. It follows that a reduction in operational performance or a
deterioration of market conditions could have a material adverse impact on the §Use of independent professional valuers' expert in the self-storage sector.
Net Asset Value (NAV) of the Group.
§Past experience from the financial crisis of 2008 shows the sector has been
resilient to a market downturn.
§Store properties are all UK based and predominantly located in the affluent
South of England and therefore not exposed to overseas/international/currency
risks etc.
§Operational management teams with the skills, experience and motivation to
continue to drive operational performance.
Environmental Risk Flooding. §Flood risk due diligence undertaken on all prospective site acquisitions.
§Flood protection measures in place at all stores.
§Group has been measuring environmental impact since 2005 and is committed to
manage waste effectively and control polluting emissions.
Increased requirement to reduce waste and greenhouse gas emissions and reduce
environmental impact on the environment §All new construction has solar power on the roofs of its buildings.
Property Acquisition Acquiring new sites is a key strategic objective of the business but we face §We hold weekly property meetings to manage the search process and property
significant competition from other uses such as hotels, car showrooms and purchases.
offices as well as from other self-storage operators.
§Use of property acquisition consultants.
§Regular communication with agents.
§Attendance at industry relevant property events.
Planning Permission The process of gaining planning permissions remains challenging. §Where we can we acquire sites subject to planning.
§We work with an established external planning consultant.
§Our property team has over 20 years' experience.
Construction Poor construction may affect the value of the property and/ or the efficient §We use a design and build contract with a variety of established
operation of the centre. contractors.
§We use external project managers.
§All projects are overseen by our property team which has over 20 years'
experience.
Maintenance/Damage Damage to properties through poor maintenance or flood or fire could render a §Regular site checks by team members.
centre inoperable.
§Rolling maintenance plan for all stores.
§Comprehensive disaster recovery plan.
§Appropriate insurance cover.
Increased Competition An increasing number of competitors in the industry may negatively impact §Established criteria for site selection including:
Lok'nStore's existing operations (e.g. pricing / available sites).
o Prominent locations
o High visibility
o Distinctive designs and bright orange elevations and signage to attract
customers.
§Continued investment in the Group's website and internet marketing.
§Ensure high levels of customer service through training and monitoring.
Employee Retention Loss of employees may affect our ability to operate our stores and provide the §Aim to offer a good work/life balance and career development.
high levels of customer service expected.
§Regular reviews of remuneration levels against market.
§Achievable bonus systems.
§Generous Employee Share Schemes.
§High-quality training via Lok'nStore Academy.
§Intranet for improved communications.
§Established Employee rewards programme.
IT System Breach A breach of our IT systems might adversely affect the operations of the §Regularly reviewed IT security systems.
business and our reputation.
§Well communicated policies and procedures for handling and managing a
systems breach.
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2022
Notes Six months Year ended
Six months ended 31 July 2021
ended 31 January 2021 Audited
31 January 2022 Unaudited £'000
Unaudited £'000
£'000
Revenue 2 21,892
13,384 10,211
Total property, staff, distribution and general costs 3a (10,001)
(5,268) (4,671)
11,891
Adjusted EBITDA(1) 8,116 5,540
6
Depreciation (2,232) (1,900) (4,149)
Equity settled share-based payments (101) (67) (118)
(2,333) (1,967) (4,267)
Profit on sale of trading stores 3(c) 6,089 - -
Loss on sale of trading stores 3(c) - (135) (160)
3,756 (2,102) (4,427)
Operating profit 7,464
11,872 3,438
Finance income 4 - - 1
Finance cost 5 (539) (510) (1,017)
Profit before taxation 11,333 2,928 6,448
Income tax expense 7 (2,501) (642) (3,165)
Profit for the period 8,832 2,286 3,283
Profit attributable to:
Owners of the parent 20 8,832 2,286 3,283
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Increase in property valuation 25,590 3,596 47,718
Deferred tax relating to change in property valuation
(5,816) (683) (18,224)
Other comprehensive income 19,774 2,913 29,494
Total comprehensive income for the period 28,606 5,199 32,777
Attributable to owners of the parent 28,606 5,199 32,777
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2022
Earnings per share attributable to owners of the Parent Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Notes Unaudited Unaudited Audited
Earnings per share
Basic
30.16p 7.89p
Total basic earnings per share 9 11.33p
Earnings per share
Diluted
Total diluted earnings per share 9 29.64p 7.76p 11.10p
Consolidated Statement of Changes in Equity
For the six months ended 31 January 2022
Attributable to owners of the Parent
Share Share Other Revaluation Retained Total
capital premium reserves reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000
1 August 2020 - Audited 297 10,560 8,455 75,975 26,095 121,382
Profit for the period - - - - 2,286 2,286
Other comprehensive income
Increase in property valuation net of deferred tax - - - 2,913 - 2,913
Total comprehensive income for the year - - - 2,913 2,286 5,199
Transactions with Owners
Dividend paid - - - - (2,612) (2,612)
Share based payments - - 67 - - 67
Deferred tax credit relating to share options - - 24 - - 24
Purchase of shares for treasury - - - - (693) (693)
Exercise of share options - 65 - - - 65
Total transactions with owners - 65 91 - (3,305) (3,149)
Transfer additional dep'n on revaluation net of deferred tax - - -
(189) 189 -
31 January 2021 - Unaudited 297 10,625 8,546 78,699 25,265 123,432
997 997
Profit for the period (restated) - - - -
Other comprehensive income
Increase in property valuation net of deferred tax - - - 26,581 - 26,581
Total comprehensive income for the year - - - 26,581 997 27,578
Transactions with Owners
Dividend paid - - - - (1,253) (1,253)
Share based payments - - 51 - - 51
Transfers in relation to share based payments - - (26) - 26 -
Deferred tax credit relating to share options - - 567 - - 567
Sale of shares from treasury - - - - 693 693
Exercise of share options 1 190 - - - 191
Reserve transfer on disposal of assets - - - (165) 165 -
Transfer additional dep'n on revaluation net of deferred tax - -
- - (379) 379 -
Total transactions with owners 1 190 592 (544) 10 249
31 July 2021 - Audited 298 10,815 9,138 104,736 26,272 151,259
Profit for the period - - - - 8,832 8,832
Other comprehensive income
Increase in property valuation net of deferred tax - - - 19,774 - 19,774
Total comprehensive income for the year - - - 19,774 8,832 28,606
Transactions with Owners
Dividend paid - - - - (3,132) (3,132)
Share based payments - - 101 - - 101
Transfers in relation to share based payments - - (166) - 166 -
Exercise of share options 3 526 - - - 529
Reserve transfer on disposal of assets - - - (20,258) 20,258 -
Transfer additional dep'n on revaluation net of deferred tax -
- - (234) 234 -
Total transactions with owners 3 526 (65) (20,492) 17,526 (2,502)
31 January 2022 - Unaudited 301 11,341 9,073 104,018 52,630 177,363
Consolidated Statement of Financial Position
31 January
2022
Notes
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 10 255,097 196,107 255,652
Financial assets - 361 -
Right of use assets 11 11,809 11,137 10,503
266,906 207,605 266,155
Current assets
Inventories 12 252 335 290
Trade and other receivables 13 4,481 3,514 4,273
Cash and cash equivalents 44,363 11,297 9,105
Financial assets 533 - 509
Total current assets 49,629 15,146 14,177
Total assets 316,535 222,751 280,332
Liabilities
Current liabilities
14
Trade and other payables (5,450) (6,034) (5,841)
Lease liabilities 16b (1,272) (1,335) (1,258)
Taxation (1,019) (583) (365)
(7,741) (7,952) (7,464)
Non-current liabilities
Borrowings 16a (66,079) (53,398) (64,941)
Lease liabilities 16b (11,179) (10,490) (9,908)
Deferred tax 17 (54,174) (27,479) (46,760)
(131,432) (91,367) (121,609)
(99,319)
Total liabilities (139,173) (129,073)
Net assets 177,362 123,432 151,259
Equity
Equity attributable to owners of the parent
Called up share capital 18 300 297 298
Share premium 11,341 10,625 10,815
Other reserves 19 9,073 8,546 9,138
Retained earnings 20 52,630 25,265 26,272
Revaluation reserve 104,018 78,699 104,736
Total equity 177,362 123,432 151,259
Approved by the Board of Directors and authorised for issue on 22 April 2022
and signed on its behalf by:
Andrew
Jacobs
Ray Davies
Executive Chairman
Finance Director
Consolidated Statement of Cash Flows
For the six months ended 31 January 2022
Notes Six months ended Six months Year
31 January ended ended
2022 31 January 31 July
Unaudited 2021 2021
£'000 Unaudited Audited
£'000 £'000
Operating activities
Cash generated from operations 22a 7,445 6,777 12,187
Income tax paid (250) (225) (800)
11,387
Net cash from operating activities 7,195 6,552
Investing activities
Proceeds of sale & manage-back stores 37,922 - -
Proceeds of sale of development land (net of disposal costs) - 1,509 1,509
Proceeds of sale of land at Southampton (net of disposal costs) 1,676
- 1,676
Purchase of property, plant and equipment 10 (6,793) (9,627) (26,474)
Interest received - - 1
Net cash generated by / used in investing activities 31,129 (6,442) (23,288)
Financing activities
Proceeds of bank borrowings utilised for store development 1,198 2,614 14,077
Proceeds of bank borrowings utilised for payment of accordion fees 188 - -
Finance costs paid (946) (484) (969)
Lease liabilities paid (903) (769) (1,559)
Equity dividends paid (3,132) (2,612) (3,865)
Purchase of shares for treasury - (693) (693)
Equity shares sold from treasury (net of costs) - - 846
Proceeds from issuance of ordinary shares (net) 529 65 103
Net cash (used in) / from financing activities (3,066) (1,879) 7,940
(3,961)
Net increase / (decrease) in cash and cash equivalents in the period
35,258 (1,769)
Cash and cash equivalents at beginning of the period
9,105 13,066 13,066
Cash and cash equivalents at end of the period 44,363 11,297 9,105
Accounting Policies
General information
Lok'nStore Group plc is an AIM listed company incorporated and domiciled in
England and Wales. As required, further information is available in the
investor section of the Company's website at http://www.loknstore.co.uk.The
address of the registered office is One Fleet Place, London, EC4M 7WS, UK.
Copies of this Interim Report and Accounts may be obtained from the Company's
head office at 112 Hawley Lane, Farnborough, Hants, GU14 8JE or from the
investor section of the Company's website at http://www.loknstore.co.uk
(http://www.loknstore.co.uk) .
Basis of preparation
The interim results for the six months ended 31 January 2022 have been
prepared on the basis of the accounting policies expected to be used in the
2022 Lok'nStore Group Plc Annual Report and Accounts and in accordance with
the recognition and measurement principles of UK adopted International
Accounting Standards in conformity with the requirements of the Companies Act
2006.
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 and will
also be applied to the next annual audited financial statements.
The interim results, which were approved by the Directors on 22 April 2022,
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 2021 have been extracted from
the statutory accounts for the Group for that period, which carried an
unqualified audit report, did not include a reference to any matters to which
the auditor drew attention by way of emphasis of matter, did not contain a
statement under section 498(2) or (3) of the Companies Act 2006 and have been
delivered to the Registrar of Companies.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (and its subsidiaries).
Control is achieved where the Company has power over the investee, exposure or
rights to variable returns from the investee and the ability to use its power
to vary those returns. Intra-group transactions, balances, and unrealised
gains and losses on transactions between Group companies are eliminated on
consolidation, except to the extent that intra-group losses indicate an
impairment.
Going concern
The Directors can report that, based on the Group's budgets and financial
projections, they have satisfied themselves that the business is a going
concern. The Board has a reasonable expectation that the Company and the Group
have adequate resources and facilities to continue in operational existence
for the foreseeable future based on Group cash balances and cash equivalents
of £44.4 million (31.07.2021: £11.3 million), undrawn committed bank
facilities at 31 January 2022 of £33.2 million (31.07.2021: £9.6 million),
and cash generated from operations in the period of £7.4 million (31.01.2021:
£6.8 million) (31.07.2021: £12.2 million).
In October 2021, the Group executed the accordion arrangement embedded within
the Revolving Credit Facility which increases the facilities available to the
Group to £100 million.
In addition, the Group has agreed a one-year extension on its existing joint
banking facility with National Westminster Bank/ Royal Bank of Scotland plc
and ABN AMRO Bank NV. The facility, which was due to expire in April 2025,
will now run until April 2026 providing funding for more landmark site
acquisitions to support the Group's ambitious growth plans.
The Group is fully compliant with all bank covenants and undertakings and is
not obliged to make any repayments prior to expiration. The robust capital
structure, cash flow and financing and the performance of the business are
reported in the Chairman's Statement and in the Business and Financial review.
The interim financial statements are therefore prepared on a going concern
basis.
Revenue recognition
The Group recognises revenue when the amount of the revenue can be reliably
measured and when goods are sold and title has passed. Revenue from services
provided is recognised evenly over the period in which the services are
provided.
a) Self-storage revenue
Self-storage services are provided on a time basis. The price at which
customers store their goods is dependent on size of unit and store location.
Customers are invoiced on a four-weekly cycle in advance and revenue is
recognised based on time stored to date within the cycle. When customers
vacate, they are rebated the unexpired portion of their four weekly advance
payment (subject to a seven-day notice requirement). Revenue is recognised
evenly over the period of self-storage.
b) Retail sales
The Group operates a packaging shop within each of its storage centres for
selling storage-related goods such as boxes, tape and bubble-wrap. Sales
include sales to the public at large as well as self-storage customers. Sales
of goods are recognised at point of sale when the product is sold to a
customer.
c) Insurance
Customers may choose to insure their goods in storage. The weekly rate of
insurance charged to customers is calculated based on the tariff per week for
each £1,000 worth of goods stored by the customer. This charge is retained by
Lok'nStore and covers the cost of the block policy and other costs.
Customers are invoiced on a four-weekly basis for the insurance cover they
use, and revenue is recognised based on time stored to date within the cycle.
The Group provides insurance to customers through a block policy purchased
from its insurer. Block policyholders supply VAT exempt insurance transactions
as principals rather than insurance-related services as intermediaries and
accordingly insurance income received from the customer is recognised as
revenue rather than offset against the costs of the block policy. The key
characteristics of a block policy are that:
· There is a contract between the block policyholder and the insurer which
allows the block policyholder to effect insurance cover subject to certain
conditions.
· The Group acting in our own name as the block policyholder procures
insurance cover for third parties from the insurer.
· There is a contractual relationship between the block policyholder and
third parties under which the insurance is procured.
· The block policyholder stands in place of the insurer in effecting the
supply of insurance to the third parties.
· The Group is not exposed to any insured losses arising from its insurance
activity.
d) Management fee income
Management fees earned for managing stores not owned by the Group are
recognised over the period for which the services are provided. Fees are
invoiced monthly based on a percentage of revenue performance. Additional
performance fees may be earned if an individual managed stores' EBITDA
performance exceeds agreed thresholds. Periodic fees may also be earned for
additional specific services provided and are invoiced when that service has
been completed. Revenue is recognised for each performance condition once the
condition has been met.
Critical Accounting Estimates a) and b) and Judgements c) and d)
The preparation of financial statements under IFRS requires management to make
estimates and assumptions that may affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expenses. Actual outcomes may differ from these estimates and assumptions. The
estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
a) Estimate of fair value of trading properties
The Group commissions an external valuation of its self-storage stores. This
valuation uses a discounted cash flow methodology which is based on current
and projected net operating income. Principal assumptions underlying
management's estimation of the fair value are those relating to stabilised
occupancy levels expected future growth in storage fees and operating costs,
maintenance requirements, capitalisation rates and Discount Rates.
A more detailed explanation of the background and methodology adopted in the
valuation of the Group's trading properties is set out in note 10. The
carrying value of land and buildings held at valuation at the reporting date
was £201.3 million (31.07.2021: £199.6 million) as shown in the table in
note 10.
b) Assets in the course of construction and land held for store development
('Development property assets')
The Group's development property assets are held in the statement of financial
position at historic cost and are not valued externally. In acquiring sites
for redevelopment into self-storage facilities, the Group estimates and makes
judgements on the potential lettable storage space that it can achieve in its
planning negotiations, together with the time it will take to achieve
maturity. In addition, assumptions are made on the storage fees that can be
achieved at the store by comparison with other stores within the portfolio and
within the local area. These judgements, taken together with estimates of
operating costs and the projected construction cost, allow the Group to
calculate the potential net operating income at maturity, projected returns on
capital invested and hence to support the purchase price of the site at
acquisition.
Following the acquisition, regular reviews are carried out taking into account
the status of the planning negotiations, and revised construction costs or
capacity of the new facility, for example, to make an assessment of the
recoverable amount of the development property. The Group reviews all
development property assets for impairment at each reporting date in the light
of the results of these reviews. Once a store is opened it is valued as a
trading store.
The carrying value of development property assets at the reporting date was
£31.6 million (31.07.2021: £33.7 million). See note 10 for more details.
c) Classification of self-storage facilities as owner-occupied properties
rather than investment properties
The Directors consider that Lok'nStore Group plc is the Parent Company of a
"Trading business" and is not wholly or mainly engaged in making investments.
The holding of land is not a core activity.
The Group is an integrated storage solutions business offering a range of
services to its customers. We provide services to our customers under
contracts for the provision of storage services which do not give them any
property or tenancy rights and a large number of the stores we operate are
from properties where we do not own the land or the buildings. The assets we
do own are valued on the basis of the trading cash flows that the operating
businesses generate.
The Group continues to develop Its managed stores' business where it uses its
operational and logistic expertise to provide a full range of services to
customers in stores we manage for third-party owners. In recent years the
Group has developed many new managed stores all of which are owned by
third-party investors and managed by Lok'nStore.
Previously owned sites at Woking, Ashford, Swindon and Crayford, have been the
subject of sale and manage-back transactions by which Lok'nStore has retained
the management of the business when a third-party owner acquired the business,
land and buildings. In this period the Group executed on the sale and
Manage-back of four trading stores, again retaining the management of the
stores as Lok'nStore branded stores. All of this trading activity as well as
the self-storage income earned from our leasehold stores' activity demonstrate
that the holding of land is not a core activity because the trading operation
is not dependent on the ownership of land.
Furthermore, the Group has always and continues to comply with all of the
usual accounting and tax protocols consistent with a trading business. As at
the period-end, Lok'nStore operates 23 owned stores mainly in southern
England, although in recent years we have expanded our historically southern
England focused geographic footprint into the South-West (Exeter), Wales
(Cardiff) and the North West (Salford, Warrington and Altrincham). Of the 23
stores, Lok'nStore owns the freehold interest in 14 stores, 9 of the stores
are held under commercial leases. There are a further 15 managed stores
operating under management contracts for third-party owners making a total of
38 stores trading under the Lok'nStore brand.
One of the features of Lok'nStore's strategy is to increase the number of
stores we manage for third parties selling our expertise in storage solutions
management, operating systems and marketing, through management fees rather
than retaining a proprietary interest in land and buildings.
The classification of self-storage facilities as owner-occupied properties
rather than investment properties has resulted in the recognition of fair
value gains in the period of £19.8 million (net deferred of tax) (31.07.2021:
£29.5 million) (31.1.2021: £2.9 million) in Other Comprehensive Income
rather than in the profit or loss.
d) Application of IFRS 16
The Group uses judgement to assess whether the interest rate implicit in the
lease is readily determinable. When the interest rate implicit in the
lease is not readily determinable, the Group estimates the incremental
borrowing rate based on its external borrowings secured against a similar
asset, adjusted for the term of the lease.
Notes to the Financial Statements
For the six months ended 31 January 2022
1 The Group's property leases
The Group accounts for the value of its property leases on the balance sheet
by the recognition of a Right of Use Asset (the right to use the leased item)
and a corresponding financial liability to pay rentals due under the property
lease term. This treatment relates to the Groups property leases. The Group
has no leases on any other types of assets.
In this period we show a Right of Use Assets (ROU) of £11.8 million at 31
January 2022 (refer Note 11) and total lease liabilities of £12.45 million
(refer Note 16b), with depreciation charges of £0.74 million (refer Note 6)
and interest charges of £0.14 million (refer Note 5).
The Group has applied a single discount rate equivalent to its effective cost
of debt. For more detailed information on the Group's Commitments under
property leases refer to note 23 (Commitments under property leases).
2 Revenue
Analysis of the Group's revenue from continuing operations is shown below:
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
Stores trading £'000 £'000 £'000
Self-storage revenue 11,362 8,361 18,165
Insurance revenue 1,201 966 2,079
Retail sales 126 139 285
Sub-total - self-storage revenue - owned stores 12,689 9,466 20,529
Management fees - managed stores 674 738 1,346
Sub-total 13,363 10,204 21,875
Non-storage income 20 7 17
Total revenue per statement of comprehensive income 13,383 10,211 21,892
3a Property, staff, distribution, general costs Six months ended Six months Year
and
31 January ended ended
retail cost of sales
2022 31 January 31 July
Unaudited 2021 2021
£'000 Unaudited Audited
£'000 £'000
Property and premises costs 2,680 2,309 4,783
Property lease rental payments (903) (769) (1,559)
Net property and premises costs 1,777 1,540 3,224
Staff costs 2,695 2,424 5,269
General overheads 703 608 1,341
Sub total - operating costs 5,175 4,572 9,834
Retail products cost of sales 93 99 167
Total property, staff, distribution, general costs and retail cost of sales 5,268 4,671 10,001
3b Cost of sales of retail products
Cost of sales represents the direct costs associated with the sale of retail
products such as boxes and packaging and the ancillary sales of insurance
cover for customer goods, all of which fall within the Group's ordinary
activities.
Six months ended Six months Year
31 January ended ended
2022 31 January 31 July
Unaudited 2021 2021
£'000 Unaudited Audited
£'000 £'000
Retail 57 56 125
Insurance 12 14 14
Other 24 29 28
Total cost of sales of retail products 93 99 167
3c Other Income and costs
Six months ended Six months Year
31 January ended ended
2022 31 January 31 July
Unaudited 2021 2021
£'000 Unaudited Audited
£'000 £'000
Profit on sale of land at Wolverhampton (1) - 265 (265)
Loss on sale of land at Southampton (2) - (400) (425)
Realised gain on sale and manage-back of 4 stores(3) 6,089
6,089 (135) 160
2021:
1 Profit on sale of land at Wolverhampton: During the period development land
with the benefit of planning permission was sold on a sale and manage-back.
2022:
2 In December 2020, we completed the sale of our vacant property in
Southampton, Hampshire for £1.6 million (net of disposal costs) (Net Book
Value c. £2 million).
( )
3 Sale and manage-back of four freehold stores (Basingstoke, Cardiff, Horsham
and Portsmouth) for a total gross consideration of £39.0 million resulting in
a realised gain of £6.1 million.
4 Finance
income
Six months ended Six months ended Year ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank interest - - 1
Total finance income - - 1
5 Finance costs
Six months ended Six months ended 31 January Year ended
31 January 2021 31 July
2022 Unaudited 2021
Unaudited £'000 Audited
£'000 £'000
Bank interest 235 228 469
Non-utilisation fees 68 64 120
Amortisation of bank loan arrangement fees 98 79 158
Interest on lease liabilities 138 139 270
Total finance cost 539 510 1,017
Most interest payable arises on bank loans classified as financial
liabilities measured at amortised cost.
6 Profit before
taxation
Six months ended Six months Year ended
31 January ended 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £ '000
Profit before taxation is stated after charging:
Depreciation of plant, property and equipment - owned assets 1,176 1,040 2,178
Depreciation based on revalued assets 311 233 710
Sub-total (Note 10) 1,487 1,273 2,888
Depreciation of right of use assets (Note 11) 744 627 1,261
2,231 1,900 4,149
7 Taxation
Six months ended 31 January Six months Year
2022 ended 31 January ended 31 July
Unaudited 2021 2021
£'000 Unaudited Audited
£'000 £'000
Current tax:
UK corporation tax 903 583 798
Deferred tax:
Origination and reversal of temporary differences 1,598 59 260
Adjustments in respect of prior periods - - 2,107
Total deferred tax charge 1,598 59 2,367
Income tax expense for the period/year 2,501 642 3,165
The charge for the period can be reconciled to the profit for the period as
follows:
Six months ended 31 January Six months Year
2022 ended 31 January ended 31 July
Unaudited 2021 2021
£'000 Unaudited Audited
£'000 £'000
2,928 6,448
Profit before tax 11,333
Tax on ordinary activities at the standard effective rate of corporation tax 556 1,225
in the UK of 19%
2,153
Depreciation of non-qualifying assets 62 74 263
Share based payment charges in excess of corresponding tax deduction (21) 12 (20)
Impact of change in tax rate on timing differences - - 2,107
Adjustments in respect of prior periods - corporation tax - - (375)
Realised gain on sale and manage-back assets subject to 'roll-over relief' (1,157) -
-
Rolled over gain on sale and manage back stores 1,522 - -
Other (58) - (35)
Income tax expense for the period/year 2,501 642 3,165
Effective tax rate 22.1% 21.9% 49%
8 Dividends
Six months ended 31 January 2022 Six months ended 31 January 2021
Unaudited Unaudited Year ended 31 July
£'000 £'000 2021
Audited
£'000
Amounts recognised as distributions to equity holders in the year:
Final dividend - year ended 31 July 2020 (9.00 pence per share) - 2,612 2,612
Interim dividend - six months to 31 July 2021 (4.33 pence per share) - - 1,253
Final dividend - year ended 31 July 2021 (10.67 pence per share)
3,132 - -
3,132 2,612 3,865
In respect of the current period the Directors propose that an interim
dividend of 5.00 pence per share will be paid to the shareholders. The total
estimated dividend to be paid is £1.5 million based on the number of shares
currently in issue as adjusted for shares held in the Employee Benefits Trust.
This interim dividend is an on-account payment of a final annual dividend and
is ultimately subject to approval by shareholders at the 2022 Annual General
Meeting and has not been included as a liability in these financial
statements. The ex-dividend date will be 5 May 2022; the record date 6 May
2022 with an intended payment date of 10 June 2022. The final deadline for
Dividend Reinvestment Election is 20 May 2022.
9 Earnings per share
The calculations of earnings per share are based on the following profits and
numbers of shares.
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Total profit for the financial year attributable to owners of the parent 8,832 2,286
3,283
No. of shares No. of shares No. of shares
Weighted average number of shares
For basic earnings per share 29,277,827 28,965,774 29,035,104
Dilutive effect of share options 520,839 505,832 527,846
For diluted earnings per share 29,798,266 29,471,606 29,562,950
623,212 shares (31.01.2021: 623,212) are held in the Employee Benefit Trust,
and these are excluded from the above calculation.
Earnings per share attributable to owners of the Parent Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
Earnings per share - Basic
Basic earnings per share 30.16p 7.89p 11.33p
Earnings per share - Diluted
Total diluted earnings per share 29.64p 7.76p 11.10p
10 Property, plant and equipment
Group Development Land and Short leasehold Fixtures, Motor Total
property assets buildings improvements fittings and vehicles £'000
at cost at valuation at cost equipment at cost
£'000 £ '000 £'000 at cost £'000
£'000
Cost or valuation
1 August 2020 29,885 141,366 3,997 26,943 10 202,201
Additions 5,534 92 3,312 879 - 9,817
Transfers (7,389) 5,893 - 1,496 - -
Disposals (1,243) (1,497) - (1,301) - (4,041)
Revaluations - 2,991 - - - 2,991
31 January 2021 Unaudited 26,787 148,845 7,309 28,017 10 210,968
Depreciation
1 August 2020 - - 2,269 12,664 10 14,943
Depreciation - 605 96 572 - 1,273
Disposals - - - (750) - (750)
Revaluations - (605) - - - (605)
31 January 2021 Unaudited - - 2,365 12,486 10 14,861
Net book value at 31 January 2021 - Unaudited
26,787 148,845 4,944 15,532 - 196,107
Cost or valuation
1 February 2021 26,787 148,845 7,309 28,017 10 210,968
Additions 16,154 233 248 402 - 17,037
Transfers (9,265) 7,264 - 2,001 -
Revaluations - 43,275 - - - 43,275
31 July 2021 - Audited 33,676 199,617 7,557 30,420 10 271,280
Depreciation
1 February 2021 - - 2,365 12,486 10 14,861
Depreciation - 847 144 623 - 1,614
Revaluations - (847) - - - (847)
31 July 2021 - Audited - - 2,509 13,109 10 15,628
Net book value at 31 July 2021 - Audited 33,676 199,617 5,048 17,311 - 255,652
Cost or valuation
1 August 2021 33,676 199,617 7,557 30,420 10 271,280
Additions 5,993 649 24 424 - 7,090
Transfers (8,026) 6,212 - 1,814 - -
Disposals - (9,843) - (1,649) - (11,492)
Revaluations - 4,618 - - - 4,618
31 January 2022 Unaudited 31,643 201,253 7,581 31,009 10 271,496
Depreciation
1 August 2021 - - 2,509 13,109 10 15,628
Depreciation - 716 149 622 - 1,487
Revaluations - (716) - - - (716)
31 January 2022 Unaudited - - 2,658 13,731 10 16,399
Net book value at 31 January 2022 - Unaudited
31,643 201,253 4,923 17,278 - 255,097
The Group has an active store development programme and in accordance with IAS
23 has material qualifying assets that take a substantial period of time to
develop from acquisition to store opening. Accordingly borrowing costs of
£296,466 (six months ended 31.1.2021: £190,655: year ended 31.07.2021
£380,193) have been capitalised in the current period that are directly
attributable to the acquisition, construction and fit-out of these qualifying
store assets. £296,466 of the total amount is carried in development property
assets.
Capital expenditure during the period totalled £7.1 million. This was
primarily the purchase of the Peterborough site, together with ongoing
planning, construction and fit out works at other sites. Disposals during the
period relate to the sale and manage-back of four stores.
Property, plant and equipment (non-current assets) with a carrying value of
£255.1 million (31.1.2021: £196.1 million) are pledged as security for bank
loans (see note 15a).
Market Valuation of Freehold and Operating Leasehold Land and Buildings
Although the Board do not usually commission an external valuation at the
interim period-end it is mindful of the need to accord with the measurement
principles of International Financial Reporting Standards. Accordingly, after
consulting with our external valuers JLL, the Directors considered that the
self-storage transactional market has shown very good levels of liquidity and
continued investor interest with strong capital flows coming into the market.
This is resulting in very strong demand for self-storage assets with
corresponding yield compression. The Directors considered that there had
been such a material movement in market yields that an independent
reconsideration of the position as at 31 January 2022 was appropriate in
respect of our properties externally valued at 31 July 2021. Accordingly, the
Directors instructed JLL to undertake a valuation of the Group's trading
stores.
It remains the Group's established policy to undertake a comprehensive
external valuation at each year-end and we will do so at the next year-end at
31 July 2022.
On 31 January 2022 an independent professional valuation was prepared by Jones
Lang LaSalle Limited (JLL) in respect of 14 freehold and 9 leasehold stores
operated by Lok'nStore. The valuation was prepared in accordance with the RICS
Valuation - Global Standards 2020 - UK national supplement, published by The
Royal Institution of Chartered Surveyors (the RICS Red Book) and the valuation
methodology is explained in more detail below. The valuations were prepared
on the basis of Fair Value as a fully equipped operational entity having
regard to trading potential. The valuation was provided for accounts purposes
and as such, is a Regulated Purpose Valuation as defined in the Red Book. In
compliance with the disclosure requirements of the RICS Red Book JLL have
confirmed that:
· This is the seventh year that JLL has been appointed to value the
properties.
· The valuers who prepared the valuation have the necessary skills
and experience having been significantly involved in the sector.
· JLL do not provide other significant professional or agency
services to the Company.
· In relation to the preceding financial year of JLL the proportion
of the total fees payable by the Company to the total fee income of the firm
is less than 5% and is minimal.
The valuation report indicates a total valuation for all properties valued of
£237.7 million (31 July 2021: £234.9 million) of which £214.6 million (31
July 2021: £212.8 million) relates to freehold properties, and £23.1 million
(31 July 2021: £22.1 million) relates to properties held under leases.
Freehold land and buildings are carried at valuation in the statement of
financial position. Short leasehold improvements at properties held under
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 £214.6 million (31 July 2021: £212.8
million) valuation of the freehold properties £14.9 million (31 July 2021:
£14.7 million) relates to the net book value of fixtures, fittings and
equipment, and the remaining £199.7 million (2020: £198.1 million) relates
to freehold properties.
The 2022 valuation includes and reflects movements in value which have
resulted from the operational performance of the stores and market movements
in the investment environment.
Valuation Methodology
Jones Lang LaSalle Limited (JLL) have adopted the profits method of valuation
and cross-checked with the direct comparison method based on recent
transactions in the sector, which is the main method of pricing adopted by
purchasers of self-storage properties.
JLL have valued the assets on an individual basis and have disregarded any
portfolio effect.
The profits method of valuation considers the cash flow generated by the
trading potential of the self-storage facility. Due to the specialised
design and use of the buildings, the value is typically based on their ability
to generate a net income from operating as self-storage facilities.
JLL have constructed a discounted cash flow model. This sets out their
explicit assumptions on the underlying cash flow that they believe could be
generated by a Reasonably Efficient Operator at each of the properties, both
at the valuation date and in the near future as the properties increase their
occupancy and rates charged to customers. Judgements are made as to the
trading potential and likely long-term sustainable occupancy.
Stable occupancy depends upon the nature of demand, size of property and
nearby competition, and allows for a reasonable vacancy rate to enable the
operator to contract units to new customers. In the valuation the assumed
stabilised occupancy level for the 23 trading stores (both freeholds and
leaseholds) averages 88.59% (31 July 2021: 88.5%).
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 assumptions used by
JLL include:-
· The cash flow for freeholds runs for an explicit period of ten years,
after which it is capitalised at an all risks yield which reflects the
implicit future growth of the business, or a hypothetical sale.
· The cash flow for leaseholds continues for the unexpired term of the
lease.
· The Discount Rate applied has had regard to recent transactions,
weighted average costs of capital and target return in other asset types with
adjustments made to reflect differences in the risk and liquidity profile.
· The weighted average annual Discount Rate adopted (for both freeholds
and leaseholds) is 8.33% (31 July 2021: 9.24%).
· The Discount Rates used in the freehold valuation ranges from 6.5% to
8.75% (31 July 2021: 7.75% to 9.5%).
· The yield arising from the first year of the projected cash flow is
5.51% (31 July 2021: 6.49%), rising to 7.09% (31 July 2021: 7.61%) in year
five.
· JLL have assumed purchasers' costs of 6.8% (31 July 2021: 6.8%).
· The average assumed stabilised occupancy is 88.59% (31 July 2021:
88.85%).
· The average Exit Yield assumed is 6.29% (31 July 2021: 6.73%).
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.
The Group has reported that the Lok'nStore trading stores have performed very
well in terms of increasing occupancy over the course of the year which has
driven higher the stabilised occupancy assumed by JLL.
For leaseholds the same methodology has been used as for freehold property,
except that no sale of the assets in the tenth year is assumed, but the
discounted cash flow is extended to the expiry of the lease. The average
unexpired term of the Group's property leaseholds is approximately 10 years
and 7 months as at 31 January 2022 (11 years and 1 month: 31 July 2021).
Valuations for stores held under 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 ten years is exercised. This is consistent with the approach taken in
previous years.
Directors' valuation of land and property
Land & Buildings at the rear of the new Salford trading store.
Following the opening of the Salford store there is a remainder of land and
building at the rear of the new store which is suitable for rent on commercial
terms to third party users. Based on negotiated rents with third parties the
Directors have placed a Directors' Valuation of £1.5 million on this land and
building.
The total value of land and property carried at Director Valuation at 31
January 2022 is £1.5 million (31.01.21: £Nil).
11 Right of Use assets (ROU)
Group Group Group
Group property leases 31 January 31 January 31 July
2022 2021 2021 £'000
£'000 £'000
Right of Use Asset (ROU) - opening balance 10,503 11,764 11,764
Additions - lease extensions 2,050 - -
Depreciation of Right of Use Asset (ROU) (744) (627) (1,261)
Right of Use Asset (ROU) - closing balance 11,809 11,137 10,503
The Right of use Asset (ROU) relates to the Group's property leases. The Group
has no leases on any other types of assets. The right-of-use asset is
depreciated on a weighted depreciation charge based on the individual lease
term of the separate property leases.
12 Inventories
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Consumables and goods for resale 252 335 290
The amount of inventories recognised as an expense during the period was
£56,183 (31.1.2021: £55,820).
13 Trade and other receivables
31 January
2022 31 January 31 July
Unaudited 2021 2021
£'000 Unaudited £'000 Audited £'000
Trade receivables 1,353 993 1,451
Other receivables 2,537 1,665 881
Taxation - - 1,497
Prepayments and accrued income 591 856 444
4,481 3,514 4,273
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 ten 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 Group has the right to sell the items they
store to cover the debt owed by the customer. Trade receivables that are
overdue are provided for based on estimated irrecoverable amounts, determined
by reference to expected credit losses.
For individual self-storage customers, the Group does not perform credit
checks. However, this is mitigated by the fact that all customers are required
to pay in advance. 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.
There has not been a significant change in credit quality in the Group's trade
receivables and the amounts are still considered recoverable. The Group holds
a right of lien over its self-storage customers' goods if these debts are not
paid.
14 Trade and other payables
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited £'000 Audited £'000
£'000
Trade payables 1,141 1,083 1,385
Taxation and social security costs 552 1,379 370
Other payables 584 751 690
Accruals and deferred income 3,173 2,821 3,397
5,450 6,034 5,842
The Directors consider that the carrying amount of trade and other payables
and accruals approximates fair value.
15 Capital management and gearing
The Group manages its capital to ensure that entities in the Group will be
able to continue as going concerns while maximising the return to stakeholders
through the optimisation of the debt and equity balance. The capital structure
of the Group consists of debt, which include the borrowings disclosed in note
16a, 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 requirement during the
year.
The gearing ratio at the period-end is as follows:
Gearing - Bank Borrowings 31 January 31 January 31 July
2022 2021 2021
Unaudited £'000 Unaudited £'000 Audited £'000
Gross debt (66,785) (53,935) (65,399)
Cash and cash equivalents 44,363 11,297 9,105
Net debt (22,422) (42,638) (56,294)
Total equity - balance sheet 177,362 123,432 151,259
Net debt to equity ratio 12.6% 34.5% 37.2%
Total Gearing - Bank Borrowings and lease liabilities 31 January 31 January 31 July
2022 2021 2021
Unaudited £'000 Unaudited £'000 Audited £'000
Gross debt - bank borrowings (66,785) (53,935) (65,399)
Gross debt - lease liabilities (12,451) (11,825) (11,166)
Cash and cash equivalents 44,363 11,297 9,105
Net debt (34,873) (54,463) (67,460)
Total equity - balance sheet 177,362 123,432 151,259
Net debt to equity ratio 19.7% 44.1% 44.6%
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 rates(1). All amounts are denominated in Sterling. The
balances at 31 January 2022 are as follows:
31 January 31 January 31 July
2022 2021 2021
Unaudited £'000 Unaudited £'000 Audited £'000
9,812
Variable rate treasury deposits(1) 4,815 7,604
SIP trustee deposits 63 63 63
Cash in operating current accounts 39,223 1,413 1,430
Other cash and cash equivalents 262 9 8
Total cash and cash equivalents 44,363 11,297 9,105
(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 January 2022 was 0.01%.
16a) Borrowings
· £25 million accordion executed and increases bank facility from
£75 million to £100 million
· Bank facility extended by one year to April 2026
· Migration from LIBOR to an alternative risk-free reference rate
(SONIA)
Bank borrowings 31 January 31 January 31 July
2022 Unaudited 2021 Unaudited 2021
£'000 £'000 Audited £'000
Non-current
Bank loans repayable in more than two years
but not more than five years
Gross 66,785 53,935 65,399
Deferred financing costs (706) (537) (458)
Net bank borrowings 66,079 53,398 64,941
Non-current borrowings 66,079 53,398 64,941
On 20 October 2021, the Group executed the accordion arrangement embedded
within the Revolving Credit Facility which increases the facilities available
to the Group from £75 million to £100 million.
In addition, the Group has also agreed a one-year extension on its existing
joint banking facility with National Westminster Bank/ Royal Bank of Scotland
plc and ABN AMRO Bank N V. The facility, which was due to expire in April
2025, will now run until April 2026 providing funding for more landmark site
acquisitions.
The two principal bank covenants (LTV and Senior interest) and margin are
unaffected by the execution of the accordion and this extension of term.
Margin and pricing are also unaffected.
Amendments to the Facility Agreement dealing with the transition from LIBOR to
SONIA (Sterling Over Night Indexed Average) have also been made, the
fulfilling UK regulator's requirements ahead of LIBOR's phasing out after 31
December 2021.
The Group currently has £66.8 million drawn against its facility which is
secured with RBS and ABN AMRO jointly by legal charges and debentures over the
freehold and leasehold properties and other tangible assets of the business
with a net book value of £255.8 million (31.1.2021: £196.1 million) together
with cross-company guarantees from Group companies.
The interest rate is set under the new Sterling Overnight Index Average
(SONIA) arrangements replacing the London Inter-Bank Offer Rate (LIBOR). The
all-in debt cost on £66.8 million drawn averaged 1.55% (31.7.2021: 1.55%) in
the period with the costs of debt rising to 1.72% on active revolving loans.
The Group is not obliged to make any repayments prior to the facility's
expiration in April 2026.
16b) Lease liabilities
Lease liabilities attributable to Right of Use assets 31 January 31 January 31 July
2022 Unaudited £'000 2021 Unaudited £'000 2021
Audited
£'000
Current lease liabilities
Amounts due within one year 1,272 1,335 1,298
Non-current lease liabilities
Amounts due in one to two years 1,044 1,202 1,085
Amounts due in three to five years 2,827 2,726 2,585
Amounts due in more than five years 7,308 6,562 6,238
Non-current lease liabilities 11,179 10,490 9,908
Total lease liabilities 12,451 11,825 11,166
Lease liabilities attributable to Right of Use assets 31 January 31 January 31 July
2022 Unaudited £'000 2021 Unaudited 2021
£'000 Audited £'000
Balance B/Fwd 11,166 12,455 12,455
Increase in lease liabilities - lease extensions 2,050 - -
Lease repayments (903) (769) (1,559)
Lease interest (non-cash) 138 139 270
Total lease liabilities 12,451 11,825 11,166
17 Deferred
tax
Deferred tax liability 31 January 2022 31 January 2021 31 July
Unaudited Unaudited 2021
£'000 £'000 Audited
£'000
Liability at start of period/year 46,760 26,760 26,760
Charge to income for the period/year
1,598 59 2,367
Tax charged / credited directly to other comprehensive income 5,816 683 18,224
Credit to share based payment reserve - (23) (591)
Liability at end of period/year 54,174 27,479 46,760
18 Share
capital
31 January 2022 31 January 2021 31 July
Unaudited Unaudited 2021
£'000 £'000 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 29,686,787 29,633,290 29,633,290
Options exercised during period/year 291,268 19,877 53,497
Balance at end of period/year 29,978,055 29,653,167 29,686,787
Allotted, issued and fully paid ordinary shares £ £ £
Balance at start of period/year 296,868 296,333 296,333
Options exercised during period/year 2,913 199 53
Balance at end of period/year 299,781 296,532 296,868
The Company has one class of ordinary shares which carry no right to fixed
income
19 Other reserves
Other Capital Share-based
Merger reserve redemption payment
reserve reserve reserve Total
Group £'000 £'000 £'000 £'000 £'000
1 August 2020 - Audited 6,295 1,294 34 832 8,455
Equity share based payments - - - 67 67
Transfer to retained earnings in relation to share based payments - - - - -
Tax credit relating to share options - - - 24 24
31 January 2021 - Unaudited 6,295 1,294 34 923 8,546
Equity share based payments - - - 51 51
Transfer to retained earnings in relation to share based payments
- - - (26) (26)
Tax credit relating to share options - - - 567 567
31 July 2021 - Audited 6,295 1,294 34 1,515 9,138
Equity share based payments - - - 101 101
Tax (debit) / credit relating to share options - - - (166) (166)
31 January 2022 - Unaudited 6,295 1,294 34 1,450 9,073
Merger reserve
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.
Other reserves
The other distributable reserve and the capital redemption reserve arose in
the year ended 31 July 2004 from the purchase of the Company's own shares and
a cancellation of share premium.
Share based payment reserve
Under IFRS 2 there is the option to make transfers from the share-based
payment reserve to retained earnings in respect of accumulated share option
charges where the options have either been exercised or have lapsed
post-vesting.
20 Retained earnings Retained earnings before
Retained
deduction of Own shares earnings
own shares (Note 21) Total
Group £'000 £'000 £'000
1 August 2020 - Audited 26,595 (500) 26,095
Profit for the financial period- restated 2,286 - 2,286
Transfer from revaluation reserve 189 - 189
Purchase of shares for treasury (693) - (693)
Dividend paid (2,612) - (2,612)
31 January 2021 - Unaudited 25,765 (500) 25,265
1 February 2021 - Unaudited
Profit for the financial period 997 - 997
Transfer from revaluation reserve- additional depreciation on revaluation 379 - 379
Transfer from share-based payment reserve (Note 19) 26 - 26
Sale of shares for treasury 693 - 693
Reserve transfer on disposal of assets 165 - 165
Dividend paid (1,253) - (1,253)
31 July 2021 - Audited 26,772 (500) 26,272
1 August 2021 - Audited
Profit for the financial period 8,832 - 8,832
Transfer from revaluation reserve - additional depreciation on revaluation 234 -
234
Transfer share-based payment reserve 166 - 166
Reserve transfer from disposal of assets 20,258 - 20,258
Dividend paid (3,132) - (3,132)
31 January 2022 - Unaudited 53,130 (500) 52,630
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.
The reserve transfer on disposal of assets arises from the disposal of the
four sale and manage-back stores and represents a transfer from revaluation
reserve (an unrealised gain) to retained earnings (a realised gain).
21 Own shares
EBT EBT Treasury Treasury Own shares
shares shares shares shares total
Number £ Number £ £
1 August 2020 - Audited 623,212 499,910 - - 499,910
31 January 2021 - Unaudited 623,212 499,910 - - 499,910
31 July 2021 - Unaudited 623,212 499,910 - 499,910
Purchase of shares for treasury - - 126,855 693,250 693,250
31 January 2021 - Unaudited 623,212 499,910 126,855 693,250 499,910
Sale of treasury shares -18 May 2021 - - (126,855) (693,250) (693,250)
31 July 2021 - Audited 623,212 499,910 - - 499,910
31 January 2022 - Unaudited 623,212 499,910 - - 499,910
The Group operates an Employee Benefit Trust (EBT) under a settlement dated 8
July 1999 between Lok'nStore Limited and Lok'nStore Trustee Limited,
constituting an employees' share scheme. Funds are placed in the trust by way
of deduction from employees' salaries on a monthly basis as they so instruct
for purchase of shares in the Company. Shares are allocated to employees at
the prevailing market price when the salary deductions are made.
As at 31 January 2022, the Trust held 623,212 (31.01.2021: 623,212) ordinary
shares of 1 pence each with a market value of £6,232,120 (31.01.2021:
£4,269,002). No shares were transferred out of the scheme during the period
(2021: Nil). No options have been granted under the EBT.
22 Cash flows
(a) Reconciliation of profit before tax to cash generated from operations
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Group profit before tax 11,333 2,928 6,448
Depreciation 2,231 1,900 4,149
Equity settled share-based payments 101 67 118
Loss on disposal of land - 135 160
Profit on Sale and Manage-Backs (6,089) - -
Interest receivable - - (1)
Interest payable - bank borrowings 401 371 747
Interest payable - lease liabilities 138 139 270
Increase in financial asset (24) - (148)
Decrease / (increase) in inventories 38 (65) (20)
(Increase) / decrease in receivables (208) 114 (645)
Increase / (decrease) in payables (476) 1,188 1,109
Cash generated from operations 7,445 6,777 12,187
(b) Reconciliation of net cash flow to movement in net debt
Net debt is defined as non-current and current borrowings, as detailed in note
16 less cash and cash equivalents.
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Increase / (decrease) in cash in the period/year 35,258 (1,769) (3,961)
Change in net debt resulting from cash flows (1,386) (2,614) (14,077)
Movement in net debt in period 33,872 (4,383) (18,038)
Net debt brought forward (56,294) (38,255) (38,256)
Net debt carried forward (22,422) (42,638) (56,294)
23 Commitments under property leases
At 31 January 2022 the total future minimum lease payments as a lessee under
non-cancellable property leases were as follows:
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Land and buildings
Amounts due:
Within one year 1,843 1,605 1,612
Between two and five years
5,352 4,836 4,583
After five years 6,091 7,292 6,863
13,286 13,733 13,058
Property lease payments represent rentals payable by the Group for certain of
its properties. Typically, leases are negotiated for a term of 20 years and
rentals are fixed for an average of five years.
24 Related party events
The aggregate remuneration of the Directors, and the other key management
personnel of the Group, is set out below.
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Short-term employee benefits - Directors 669 457 1,112
Short-term employee benefits - Other key management 165 203 525
Post-employment benefits - Directors 9 8 10
Post-employment benefits - Other key management 4 14 18
Share-based payments 101 67 118
Total 948 749 1,783
The Group recognises a number of management personnel that are important to
retain within the business in order for it to achieve its strategic plan.
Accordingly, these are recognised as key personnel and are participants in the
Long-Term Performance Plan. They are included in the table above.
25 Events after the Reporting Date
(i) On 25 March 2022, the Wolverhampton store opened.
(ii) On 23(rd) March 2022 we executed an option to extend the
lease of our location at Etheridge Avenue, Milton Keynes. The lease has been
extended to December 2035 with a tenant break option in 2030. The new lease
contains rent reviews at five-year intervals.
Glossary
Abbreviation
APM Alternative
performance measures
Adjusted EBITDA Earnings before all depreciation and
amortisation charges, losses or profits on disposal, share-based payments,
acquisition costs, and non-recurring professional costs, finance income,
finance costs and taxation
Adjusted Store EBITDA Adjusted EBITDA (see above) but before central and head
office costs
AGM Annual General
Meeting
Bps Basis Points
CAC Contributory asset
charges
CAD Cash available for
Distribution
Capex Capital Expenditure
CGU Cash generating
units
CO2 e Carbon Dioxide
Equivalents
CSOP Company Share Option
Plan
EBT Employee Benefit
Trust
(eKPIs) Environmental key
performance indicators
EMI Enterprise
Management Incentive Scheme
ESOP Employee Share Option
Plan
EU European
Union
GHG Greenhouse gas
HMRC Her Majesty's Revenue
& Customs
IAS International
Accounting Standard
IFRIC International
Financial Reporting Interpretations Committee
IFRS International
Financial Reporting Standards
ISA International
Standards on Auditing
JLL Jones Lang
LaSalle
LIBOR London Interbank Offered Rate
LFL Like for like
LTV Loan to Value
Ratio
MWh Megawatt Hour
NAV Net Asset Value
NBV Net Book Value
Operating Profit Earnings before interest and tax (EBIT)
PPP Partnership
Performance Plan
PV Photovoltaic
QCA Quoted Companies
Alliance
RICS Royal Institution
of Chartered Surveyors
SIP Share
Incentive Plan
SME Small and medium
sized enterprises
Sq.ft. Square Feet
tCO2e Tonnes of carbon
dioxide equivalent
TVR Total voting
rights
VAT Value Added Tax
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. END FR UUSNRUSUSUARRecent news on Lok'n Store
See all newsREG - 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
AnnouncementREG - City Asset Mngt PLC Lok'nStore Group - Form 8.3 - Lok'nStore Group plc
Announcement