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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lok'n Store Group Plc | LSE:LOK | London | Ordinary Share | GB0007276115 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,105.00 | 1,100.00 | 1,110.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Business Services, Nec | 28.96M | 4.69M | 0.1420 | 78.17 | 366.83M |
From May 2019 to May 2024
TIDMLOK
RNS Number : 3035X
Lok'nStore Group PLC
29 April 2019
LOK'NSTORE GROUP PLC
("Lok'nStore" or "the Group")
Lok'nStore Group Plc, the fast growing AIM listed self-storage company announces interim results for the six months to 31 January 2019
"Growing cash flows and recycling of capital deliver increased dividends and an exciting pipeline of new landmark stores"
Highlights:
Strong trading
-- Group Revenue (continued operations(1) ) GBP8.51 million up 11.5% (31.1.2018: GBP7.64 million)
-- Group Adjusted EBITDA(3) GBP3.80 million up 8.6% (31.1.2018: GBP3.49 million) -- Net profit GBP2.08 million up 22.7% (31.1.2018: GBP1.70 million)
Cash flow growth supports 10.2% interim dividend increase
-- Cash available for Distribution (CAD) (4) GBP2.78 million up 4.5% (31.1.2018: GBP2.67 million)
-- Interim dividend 3.67 pence per share up 10.2% (31.1.2018: 3.33 pence per share)
Steady increase in asset value,
-- Adjusted Net Asset Value (NAV) per share(5) up 16.1% to GBP4.85 (31.1.2018: GBP4.18) -- Total assets(6) GBP188.1 million up 21.7% (31.1.2018: GBP154.5 million)
Secure balance sheet, capital recycling
-- Net debt GBP31.19 million (31.1.2018: GBP23.45 million) (31.7.2018: GBP32.3 million) -- Loan to value(7) ratio 17.9% (31.1.2018: 16.8%) (31.7.2018: 19.7%) -- Average cost of debt 2.13% (31.1.2018: 1.72%) (31.7.2018: 1.85%) -- Capital expenditure GBP8.8 million (31.1.2018: GBP10.9 million) (31.7.2018: GBP21.7 million) -- Disposal of document storage business for GBP7.6 million cash -- Post period-end: -- Sale and manage back of Crayford site for GBP7.52 million cash resulting in:
-- Net debt reducing further to GBP23.66 million (31.1.2018: GBP23.45 million) (31.7.2018: GBP32.3 million)
-- Loan to value(6) ratio down to 14.2% (31.1.2018: 16.8%) (31.7.2018: 19.7%) -- Bank facility increased by GBP25 million to GBP75 million with accordion to GBP100 million
Consistent performance of self-storage business - both occupancy and pricing up
-- Adjusted Store EBITDA(8) GBP4.66 million up 8.6% (31.1.2018: GBP4.29 million) -- Unit Occupancy up 8.0% -- Occupied units pricing up 1.4%
Healthy pipeline of new landmark stores(8)
-- New stores opened in Dover, Cardiff (post period-end), Exeter (post period-end) -- Acquisition of an existing trading store in Hedge End, Southampton -- 2 new sites acquired in Stevenage and Wolverhampton
-- Current Pipeline(10) of 8 contracted stores will add 27% of extra trading space to the overall portfolio, 32% to our owned portfolio and 10% to the managed portfolio
-- 2 more sites are progressing with lawyers
Commenting on the Group's results, Andrew Jacobs CEO of Lok'nStore Group said,
"Lok'nStore's trading is strong and our outlook remains confident. With low gearing helped by capital recycling, we will continue to build more landmark stores in a structurally under-supplied market. In the first half of this year we opened a new store, acquired an existing operation and added two more sites to our pipeline. We have opened two more sites since the period-end and two more sites are currently with lawyers.
"Our objective is to open more landmark stores while remaining conservatively geared delivering sustainable growth and consistently increasing dividends."
Enquiries:
Lok'nStore: Andrew Jacobs, CEO Ray Davies, Finance Director 01252 521 010 finnCap Ltd Julian Blunt / Giles Rolls, Corporate Finance Alice Lane, ECM 020 7220 0500 Camarco Billy Clegg / Tom Huddart 0203 757 4980
Notes - What we mean when we say ... (and why we use these key performance indicators (KPIs))
1. Discontinued Operation - The Saracen business was sold on 31 January 2019 and its disposal constitutes a discontinued operation. Separate reporting of discontinued operations is important in providing users of financial statements with the information necessary to determine the effects of a disposal transaction on the ongoing operations of our business. Discontinued operations are shown separately on the Statement of Comprehensive Income as a profit on disposal (after tax) which combines Saracen's operating profit with the profit arising on its disposal. The profit on discontinued operations is then aggregated with profit on continuing operations in determining the Group's total net profit.
2. LFL- Like for like - This measures performance of the operating business ignoring the opening of new stores or closure of old stores therefore giving visibility of the true trading picture. Like-for-like (LFL) figures for the period strip out these effects in respect of the recently opened stores in Gillingham, Wellingborough and Hedge End.
3. Adjusted Group EBITDA - Earnings before interest, tax, depreciation and amortisation -the operating cash flow of the business before non-cash charges, finance charges and tax. Adjusted EBITDA is defined as earnings before all depreciation and amortisation charges, losses or profits on disposal, share-based payments, acquisition costs, exceptional costs finance income, finance costs and taxation.
4. CAD - Cash available for Distribution - is calculated as Adjusted EBITDA minus total net finance cost, less capitalised maintenance expenses, New Works Team costs and current taxation. This is the Board's preferred measure to show the capacity of the business to generate net operating cash that can be used to pay dividends to shareholders on a continuing basis or to reduce debt.
5. NAV - Adjusted Net Asset Value per share - Adjusted net asset value per share is the net assets of the business adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the year-end. The shares held in the Group's employee benefits trust and any treasury shares are excluded from the number of shares.
6. Total assets - Total assets of GBP188.1 million is calculated by adding the independent valuation of the leasehold properties (GBP18.2 million) less their corresponding net book value (NBV) of GBP3.8 million to the total assets as shown in the balance sheet of GBP173.7 million.
7. LTV - Loan to value ratio - measures the debt of the business expressed as a percentage of total property assets giving a perspective on the gearing of the business. The calculation is based on net debt of GBP31.2 million (31.1.2018: GBP23.5 million) as a percentage of the total properties independently valued by JLL and including development land assets totalling GBP174.3 million (31.1.2018: GBP139.7 million) as set out in the Business and Financial Review.
8. Adjusted Store EBITDA is Adjusted EBITDA (see 3 above) before the deduction of central and head office costs.
9. Pipeline sites - represents 10 sites which have been contracted and are not yet trading as at the 31 January 2019 period-end and includes the Cardiff and Exeter sites which opened post period-end.
10. Current Pipeline sites - represents 8 sites which have been contracted and are not yet trading as at 26 April 2019 the date of the approval of these financial statements.
Chairman's Statement
Healthy growth, increased dividend and recycling capital into landmark store opening programme
I am pleased to present to shareholders another strong set of results. Lok'nStore continues its healthy growth with new landmark store openings, new sites added to our development pipeline and substantial recycling of capital.
Positive trading
For the half year period to January 2019 trading has been good with revenue, profits, pricing and occupancy all increasing.
An increase in Group revenue (continuing operations) of 11.5% to GBP8.51 million (31.1.2018: GBP7.64 million) resulted mainly from occupancy growth of 8% with prices up 1.4%. Our ninth managed store opened in Dover in the period. Trading has started well and fees from the management and performance of this store will follow the development fees already received. Shortly after the period end we opened a freehold store in Cardiff where trading has also started well. Both stores fit our landmark store profile being in prominent locations with our eye-catching bright orange Lok'nStore livery.
We also acquired a trading, single store self-storage operation in Hedge End, Southampton for a total investment of GBP1.4m including an allowance for refurbishment and rebranding costs. We expect future revenues and profit at this store to benefit from the store's rebranding and implementation of our management processes once complete.
Progressive Dividend
Lok'nStore's dividend payments to shareholders will reflect the growth in the underlying cash generated by the operating business as reflected in the cash available for distribution (CAD) which is up 4.5% period to period.
At interim stage we will pay one third of the previous year's total annual dividend which equates to 3.67 pence per share, up 10.2% on the 3.33 pence per share interim dividend last year. The increase in the interim dividend follows a consistent pattern of dividend growth reflecting the sustained growth of the Group. The interim dividend will be paid on 14 June 2019 to shareholders on the register on 10 May 2019. The ex-dividend date will be 9 May 2019. The final deadline for Dividend Reinvestment Election by investors is 24 May 2019. The final dividend will be declared when the Group's full year results are announced in October 2019.
Capital recycling
The strategic disposal of our document storage business generated GBP7.64 million in cash (gross) while the sale and manage back of our Crayford store, completed after the period close, generated a further GBP7.52 million in cash. These proceeds will now be reinvested back into new faster growth landmark stores.
While we invested GBP8.8 million in store development in this period, as a result of this recycling of capital we are able to report a post period end loan-to-value (LTV) ratio of only 14.2% (31.1.2018: 16.8%) and net debt of only GBP23.66 million (31.1.2018: GBP23.5 million).
The Group continues to source high quality sites for new landmark stores. Our rapid store development programme has led to an increase in new and purpose built space to 62% of our owned portfolio and will rise to 69% following development of our Current Pipeline(10) . Trading at our new stores has been excellent and this underpins our confidence that our strong pipeline of nine more landmark stores will add further momentum to sales and earnings growth. They will add 35% more trading space to our portfolio.
Lok'nStore increases its existing GBP50 million Banking Facility to GBP75 million (Post Balance sheet event)
In April 2019, after the period-end the Group increased its bank facility by GBP25 million to GBP75 million, with a further GBP25 million accordion option taking the facility to GBP100 million. The increased facility will provide funding for new landmark site acquisitions and working capital to support the Group's ambitious growth plans.
The facility is a combined agreement with Lloyds Bank and The Royal Bank of Scotland plc and runs until 2024 with an option for a further two one year extensions and is closely aligned to the terms of the Group's previous facility. The interest rate is set at the London Inter-Bank Offer Rate (LIBOR) plus a 1.50%-1.75% margin based on a loan to value covenant test.
The cost of our debt on GBP42.4 million drawn (gross) averaged 2.13% in the period.
Operating Costs
As stated in last year's interim statement, costs associated with the development of new stores will increase the overall operating costs of the business. On a like for like basis excluding the new stores in the period costs increased by only 2.7% and this is explained more fully in the Business Review. We are not seeing significant cost pressures outside of pro rata increases from new store openings and we will remain disciplined in our approach to cost control.
Positive Outlook for Growth
Lok'nStore is a dynamic business designed to deliver significant growth with an established record of consistent profit and cash generation. Our main objective is to steadily increase the cash available for distribution (CAD) per share enabling a predictable growth of the dividend from a strong asset base with conservative levels of debt.
In order to achieve this our focus will be on three key areas:
1. Fill stores and improve pricing to increase cash flow from the existing stores 2. Acquire sites to build more new landmark stores 3. Increase the number of stores we manage for third parties
Our Current Pipeline of 8 new stores will contribute to the achievement of these objectives.
Finally, I should like to thank all of our employees for the huge contribution they have made to the Group's success. Managing growth is a key challenge to organisations and our team are meeting the challenge with expertise, dedication and enthusiasm.
Simon G Thomas
Chairman
26 April 2019
Business and Financial Review
The Performance of our Stores - Self-storage business growing
-- Self-storage revenue GBP8.08 million up 10.4% (31.1.2018: GBP7. 33 million) LFL up 4.7% -- Adjusted Store EBITDA GBP4.66 million up 8.6% (31.1.2018: GBP4.29 million) LFL up 3.8 % -- Unit occupancy increased 8% year on year LFL up 2.4% -- Occupied units pricing up 1.4% LFL 1.3%
With operating costs under control, steady 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 8.6% to GBP4.66 million (31.01.2018: GBP4.29 million). Over the course of the year unit occupancy rose by a healthy 8% (2.4% LFL) and unit pricing was up 1.4% (LFL 1.3%). The overall adjusted EBITDA margin across all stores was 58.1% rising to 58.8% on a like for like basis (31.1.2018: 58.6%).
The table below shows that as the business develops the balance of the stores continues to shift towards landmark freehold stores and managed stores which have a higher than average store EBITDA margin (64.3% and 100% respectively versus 57.7% 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.
As we build out the Current Pipeline we will be operating from 58.8% freehold space, leasehold space will decline to 20.2% of space and managed stores will increase to 21% of total space operated.
At the end of January 2019, 33.8% of Lok'nStore's self-storage revenue was from business customers (31.1.2018: 34.8%) with the remainder from household customers. By number of customers 18.5% of our customers were business customers (31.1.2018: 18.8%).
Portfolio Analysis and Performance Breakdown
Hot Features
Premium
When Fully Developed
Portfolio Analysis Number % of Property % of Adjusted Adjusted % lettable Number Total
and Performance of stores Valuation Store EBITDA Store space of stores % lettable
Breakdown EBITDA Lok Owned space
Margin
(%)
----------- -------------- -------------- --------- ----------- ----------- ------------
As at 31 January
2019
----------- -------------- -------------- --------- ----------- ----------- ------------
Freehold and long
leasehold stores 14 88.7 75.7 64.3 64.8 22 58.8
----------- -------------- -------------- --------- ----------- ----------- ------------
Operating Leaseholds
stores 8 11.3 24.3 43.6 35.2 8 20.2
----------- -------------- -------------- --------- ----------- ----------- ------------
Managed Stores 9 100 11 21.0
----------- -------------- -------------- --------- ----------- ----------- ------------
Total stores trading 31 41
----------- -------------- -------------- --------- ----------- ----------- ------------
Pipeline stores
----------- -------------- -------------- --------- ----------- ----------- ------------
Owned 8
----------- -------------- -------------- --------- ----------- ----------- ------------
Managed 2
----------- -------------- -------------- --------- ----------- ----------- ------------
Total Self Storage 41 100 100 57.7 100 41 100
---------------------- ----------- -------------- -------------- --------- ----------- ----------- ------------
Ancillary Sales
Ancillary sales consisting of boxes and packaging materials, insurance and other sales increased to GBP883,241 an increase of 12.3% year on year (31.01.18: GBP786,737) accounting for 11.0% of self-storage revenues.
Saracen - Document storage business sold at period end
-- Saracen sold for GBP7.64 million cash
On 31 January 2019, our document storage business, Saracen was sold for GBP7.64 million in cash. Saracen made a good profit every year of Lok'nStore's ownership and contributed GBP1.12 million to the Group's revenue and GBP0.25 million to its EBITDA in the six months to 31 January 2019.
For accounting purposes the disposal of the Saracen business constitutes a discontinued operation. Separate reporting of discontinued operations is important in providing users of financial statements with the information necessary to determine the effects of a disposal transaction on the ongoing operations of our business. Accordingly Saracen's operating numbers and cash flow are excluded from the headline figures. Discontinued operations are shown separately as a single line on the Statement of Comprehensive Income as a profit on disposal (after tax) which combines Saracen's operating profit with the profit arising on its disposal. The profit on discontinued operations is then aggregated with profit on continuing operations in determining the Group's total net profit.
In the short term, the disposal proceeds will be used to reduce overall Group borrowing and will improve all key banking ratios. In the medium term the disposal proceeds will be used to fund the ongoing investment into our highly accretive development pipeline of new self-storage centres, fulfilling the Company's objective of growing asset value by recycling capital from lower growth assets into high growth landmark stores.
Store properties and Net Asset Value
-- Total assets GBP188.1 million up 21.7% (31.1.2018: GBP154.5 million) -- Adjusted net asset value GBP4.85 per share up 16.1% (31.1.2018: GBP4.18) -- Investment in new stores GBP8.8 million (31.1.2018: GBP10.9 million)
Lok'nStore has 31 freehold, leasehold and managed stores trading. Of these, 22 stores are owned with 14 freehold or long leasehold, 8 leasehold and 9 further sites operate under management contracts. Post period-end The Exeter and Cardiff stores increased this to 33 stores currently trading.
The average unexpired term of the Group's operating leaseholds is approximately 10 years and 7 months as at 31 January 2019 (10 years and 2 months: 31 January 2018). All of our leasehold stores are inside the Landlord and Tenant Act providing us with a strong degree of security of tenure.
Growth from new stores and more new landmark stores to come
Lok'nStore's strong operating cash flow, solid asset base, and tactical approach to its store property portfolio provide the Group with opportunities to improve the terms of its property usage in all stages of the economic cycle. Our focus on the trading business gives us many opportunities and our property decisions are always driven by the requirements of the trading business.
-- Early trading at recently opened stores has been excellent -- 2 further new store opportunities identified and are progressing with lawyers
-- Current Pipeline of 8 contracted stores adds 27% of extra trading space to the overall portfolio, 32% to our owned portfolio and 10% to the managed portfolio
Development of new stores
Bedford
The planning process for a 55,000 sq. ft. purpose built store is progressing. The site is in a prominent location next to a retail park on the south east side of Bedford.
Bournemouth
An 80,000 sq. ft. purpose built store has been designed for this site in Castle Lane. The site is in a highly prominent location adjacent to a major food retailer and Bournemouth Hospital. We aim to open what will be our largest store yet in the summer of 2020.
Cheshunt
In Cheshunt, Hertfordshire, the Company acquired a 2.2-acre development site in a prominent location facing the busy A10 and in the vicinity of a major retail park. A 60,000 sq. ft. landmark store is currently being designed.
Ipswich
Our 40,000 sq. ft. landmark store in Ipswich is located on Futura Park a relatively new but established retail destination to the South East of Ipswich town centre. The store sits between a supermarket and car dealership. The internal fit out is currently underway and the store will open summer 2019.
Leicester
On 17 August 2018, planning permission for a 60,000 sq. ft. store was granted. The Store is in a highly prominent location opposite a major food retailer in the heart of Leicester's busy retail district. The frame has been built and the store will open towards the end of 2019.
Gloucester
On 5 September 2018, planning permission was granted for a 40,000 sq. ft. store and contractors begin on site next month. The store will be a Lok'nStore branded store and Lok'nStore will receive management and performance fees for managing the store on behalf of its new owners.
Stevenage
On Friday 21 December 2018 we exchanged contracts on the site in Gunnels Wood Road in Stevenage, Kent. The site is in a prominent location in an established commercial and retail area. The 60,000 sq. ft. store is currently being designed.
Wolverhampton
Designs for a 40,000 sq. ft. store are currently underway for a store in Wolverhampton. The site is opposite a busy retail park on the North East of Wolverhampton.
Acquisition of The Box Room (Self Storage) Ltd (Hedge End Store)
The Box Room was acquired for GBP1.17 million. It operates from a leasehold unit in the thriving commercial area of Hedge End, Hampshire. The acquisition secures a profitable business with further opportunities to increase sales. The rebranding project will be complete summer 2019. The new 15 year lease is inside the Landlord & Tenant Act 1954 and has been secured on attractive terms with 12 months' rent free.
Sale of land at rear of Southampton store
Following the development and opening of the new Southampton store there remained land to the rear of the building. On 25 October 2018, this land was sold for GBP0.8 million. The Directors had placed a value in the financial statements to 31 July 2018 on this land of GBP0.5 million.
Post Balance Sheet events:
Cardiff store Opened
The new store in Cardiff opened in February 2019 and is trading well. The store is 45,000 sq. ft. and located in a busy retail area to the South East of the City
Exeter store Opened
The new Managed store in Exeter opened on 13 April 2019 shortly before the date of this Statement.
Maidenhead - Acquisition of Freehold interest:
On 29 March 2019, we acquired the freehold interest in our existing long leasehold from the Royal Borough of Windsor and Maidenhead to secure the freehold position of the store.
Sale and Manage back of Crayford store
On 28 February 2019, we announced the sale and manage back of our Crayford store for GBP7.52 million in cash.
The store has been sold on a sale and manage back basis as part of the Company's strategic objective to recycle capital from older, lower growth assets to new, high growth landmark stores. Lok'nStore will continue to manage the store maintaining the operational footprint of the business, and will receive management and performance fees. The sale price represents the independent external valuation of the store and also the store's net book value (fair value) as at July 31 2018 so there will be no impact on net asset value.
More Managed Stores
Over recent years we have been developing our management services to third party self-storage owners. We have twelve stores under management contracts with nine of these open and trading and those in Exeter, and Gloucester under development. Post period end our existing Crayford store was sold on a sale and manage back contract and so became a managed store taking total managed stores to 12.
Rather than receiving the operating income of the managed stores, Lok'nStore receives a standard monthly management fee, a performance fee based on certain objectives and fees on any successful exits. 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 rankings and benefitting all 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.
In this period we earned GBP0.39 million (31.1.2018: GBP0.31 million) in management fees. We expect this to continue increasing steadily over the coming years as more managed stores are opened.
Management fees Six months ended Six months ended
31 January 2019 31 January 2018
Unaudited Unaudited
GBP GBP
------------------ ----------------- -----------------
Total management
fees 386,884 311,524
------------------ ----------------- -----------------
Two stores being developed under management contracts
-- Exeter - opened April 2019 -- Gloucester - scheduled to open Spring 2020
Summary - Flexible approach to site acquisition
We continue our strategy of actively managing our portfolio as demonstrated by the disposal of Saracen, the sale and manage back of the Crayford store and the disposal of land at our Southampton store, to ensure we are maximising both trading potential and asset value. This includes strengthening our distinctive brand, increasing the size and number of our stores and replacing stores or sites where it will increase shareholder value. We prefer to own freeholds if possible, and where opportunities arise we will seek to acquire the freehold of our leasehold stores. However we are happy to take leases on appropriate terms and benefit from the advantages of a lower entry cost, with further options to create value later. Our most important consideration is always the trading potential of the store rather than the type of property tenure.
We have 8 new stores in our secured Current Pipeline(10) . All are in prominent locations with large catchment areas and little established competition and demonstrate the Company's ability to source high quality sites adding to future sales and earnings growth. These eye-catching buildings, with their distinctive orange Lok'nStore branded livery and prominent signage, create highly visible landmarks, which continue to be a big source of new customers.
Financial results
-- Group Revenue (continued operations) GBP8.51million up 11.5% (31.1.2018: GBP7.64 million) LFL up 4.9%
-- Group Adjusted EBITDA(2) GBP3.80 million up 8.6% (31.1.2018: GBP3.49 million)
-- Loan to value still only 17.9% (31.1.2018: 16.8%) (Post sale and manage back of Crayford 14.2%)
-- Cash available for Distribution (CAD)(3) GBP2.78 million up 4.5% (31.1.2018: GBP2.67 million)
-- Interim dividend up 10.2% to 3.67 pence per share (31.1.2018: 3.33 pence per share) -- Cash balances GBP11.2 million (31.1.2018: GBP5.4 million) (31.7.2018: GBP5.0 million)
Post Balance Sheet event: New GBP75 million Banking Facility
In April 2019 the Group agreed a new joint banking facility with Lloyds Bank and Royal Bank of Scotland plc. The new GBP75 million five year revolving credit facility replaces the existing GBP50 facility and will provide funding for site acquisitions and their development to support the Group's growth plans. The facility also provides for a GBP25 million accordion uplift to GBP100 million and runs to 2024 with an extension option for a further two one year extensions.
The facility is closely aligned to the terms of the Group's previous facility. The interest rate is set at the London Inter-Bank Offer Rate (LIBOR) plus a 1.50%-1.75% margin based on a loan to value covenant test.
Lok'nStore is a robust business which generates an increasing cash flow from its strong asset base with a low LTV of 17.9% and a low average cost of debt of 2.13%. With its new banking facility the business has a firm base for growth. The value of the Group's property assets underpins a flexible business model with stable and rising cash flows and low credit risk.
Management of interest rate risk
-- Average cost of debt currently 2.13% (31.1.2018: 1.72%) (31.7.2018: 1.85%)
With GBP42.4 million of gross debt currently drawn against the GBP50 million bank facility the Group is not committed to enter into hedging instruments but will 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.
Taxation
The Group has made a current tax provision against earnings in this period of GBP0.47 million (31.1.2018: GBP0.49 million) based on a corporation tax rate of 19% (31.1.2018: 20%). The deferred tax provision which is calculated at forward corporation tax rates of 17% and is substantially a tax provision against the potential crystallisation (sales) of revalued properties and past 'rolled over' gains amounts to GBP20.05 million. (31.1.2018: GBP16.63 million) (See Note 16).
Earnings per share
Basic earnings per share were 14.72 pence (31.1.2018: 6.70 pence per share) and diluted earnings per share were 14.40 pence (31.1.2018: 6.58 pence per share).
On a normalised basis stripping out the contribution from the Saracen business and the corresponding profit on disposal Basic earnings per share for the continuing operations were 7.21 pence (31.1.2018: 5.90 pence per share) and diluted earnings per share were 7.05 pence (31.1.2018: 5.80 pence per share).
Six months Six months Year ended
ended ended 31 July
31 January 2019 31 January 2018
Unaudited 2018 Audited
Unaudited
-------------------------------------------------- ------------- ----------------
Basic
Continuing operations 7.21p 5.90p 11.48p
Discontinued operations 7.51p 0.80p 1.57p
----------------------------------- ------------- ------------- ----------------
Total basic earnings per share 14.72p 6.70p 13.05p
----------------------------------- ------------- ------------- ----------------
Diluted
Continuing operations 7.05p 5.80p 11.28p
Discontinued operations 7.35p 0.78p 1.55p
----------------------------------- ------------- ------------- ----------------
Total diluted earnings per share 14.40p 6.58p 12.83p
----------------------------------- ------------- ------------- ----------------
Costs - Continuing Operations
Group operating costs amounted to GBP4.62 million for the period (31.1.2018: GBP4.06 million).
We have a strong record of reducing our group operating costs each year however we cautioned at our 2018 year end results that although we maintain a disciplined approach to costs we will not be able to continue to reduce them while also delivering an acceleration of our store opening programme. In the period operating costs were up 13.8% year on year as we opened the new stores. On a like for like basis stripping out the costs of new stores, Group operating costs amounted to GBP4.17 million for the period, a 2.7% increase year on year (31.1.2018: GBP4.06 million) and we provide a breakdown below.
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 little other cost pressures.
Property costs which mainly constitute rent and rates have risen in recent years as we felt the effects of higher rates bills and as we opened our new landmark stores. Rents have remained broadly static.
Staff costs increased by 12.5% (6.0% LFL) as we staffed the new stores and paid performance bonuses to all our store staff. We also incurred additional national insurance costs arising on these performance bonuses and the exercise of employee share options.
The principal increase in overhead costs have been driven by a higher level of legal and professional costs due to work on rent reviews, corporate tax and compliance work and costs arising on aborted store acquisitions.
Group-Continuing Operations Increase Six months Six months Year
(decrease) ended 31 ended 31 ended 31
in costs Jan Jan July
% 2019 2018 2018
GBP'000 GBP'000 GBP'000
----------------------------- ------------ ----------- ----------- ----------
Property costs 11.0% 1,971 1,777 3,647
Staff costs 12.5% 2,027 1,802 3,832
Overheads 29.3% 625 484 1,079
Total 13.8% 4,623 4,063 8,558
----------------------------- ------------ ----------- ----------- ----------
Group-Continuing Operations Increase Six months Six months Year
Like for Like (decrease) ended 31 ended 31 ended 31
in costs Jan Jan July
% 2019 2018 2018
GBP'000 GBP'000 GBP'000
----------------------------- ------------ ----------- ----------- ----------
Property costs 5.7% 1,677 1,777 3,647
Staff costs 6.0% 1,908 1,802 3,832
Overheads 21.7% 588 484 1,079
Total 2.7% 4,173 4,063 8,558
----------------------------- ------------ ----------- ----------- ----------
Cash flow and financing
At 31 January 2019 the Group had cash balances of GBP11.2 million (31.1.2018: GBP5.4 million) (31.7.2018: GBP5.0 million). Cash inflow from operating activities before investing and financing activities was GBP5.33 million (31.1.2018: GBP3.76 million). As well as using cash generated from operations to fund some capital expenditure, the Group has a five year revolving credit facility which runs until January 2023. This provides sufficient liquidity for the Group's current needs. Undrawn committed facilities at the period-end amounted to GBP7.6 million (31.1.2018: GBP11.2 million). See the commentary in the Business Review and also Note 22 (i) (Events after the Reporting Date) which references the Group's new GBP75 million revolving credit facility.
Gearing
At 31 January 2019 the Group had GBP42.4 million of gross borrowings (31.1.2018: GBP28.8 million) representing gearing of 29.5% (31.1.2018: 26.1%) on net debt of GBP31.2 million (31.1.2018: GBP23.5 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 25.9% (31.1.2018: 22.6%). After adjusting for the deferred tax liability carried at period end of GBP20.0 million gearing drops to 22.2% (31.1.2018: 19.5%).
Cash available for Distribution (CAD) up 4.5% from Continuing Operations
Cash available for Distribution (CAD) provides a clear picture of ongoing cash flow available for dividends or debt repayment. The CAD was up 4.5% in the period. Cash available for Distribution (CAD) per share (annualised) was up 4.0% to 19.2 pence (31.1.2018: 18.5 pence).
To illustrate this fully the table below shows the calculation of CAD.
Analysis of Cash Available for Distribution
(CAD)
Based on Continued Operations
Period ended Period ended Year ended
31 January 31 January 31 July 2018
2019 2018 GBP'000
GBP'000 GBP'000
------------- ---------------
Group Adjusted EBITDA
(per Statement of Comprehensive
Income) 3,795 3,494 6,633
Less: Net finance costs(1) (439) (296) (537)
Capitalised maintenance expenses (55) (45) (80)
New Works Team (47) (69) (149)
Current tax (note 7) (470) (418) (837)
------------- --------------- --------------
Total deductions (1,011) (828) (1,603)
------------- --------------- --------------
Cash Available for Distribution 2,784 2,666 5,030
------------- --------------- --------------
Increase in CAD over last year 4.5%
Number Number Number
Closing shares in issue (less shares
held in EBT) 28,927,707 28,806,711 28,875,403
CAD per share (annualised) 19.2p 18.5p 17.4p
-------------------------------------- ------------- --------------- --------------
Capital expenditure and capital commitments
The Group has grown through a combination of building new stores, existing store improvements and relocations. We have concentrated on extracting value from existing assets and developing through collaborative projects and management contracts.
Capital expenditure during the period was GBP8.8 million (31.1.2018: GBP10.9 million). This was primarily the purchase of the Leicester and Wolverhampton sites, and exchange of contracts on our Stevenage site, together with construction and fit out works at our sites in Cardiff and Ipswich as well as planning and pre-development works at our Bedford, Bournemouth, and Cheshunt sites.
During the period land at the rear of our Southampton store valued at GBP500,000 was sold for GBP800,000.These proceeds will be recycled into the store development programme. There are GBP4.4 million of capital commitments on contracted works on stores currently under development.
Market Valuation of Freehold and Operating Leasehold Land and Buildings
On 31 July 2018 professional valuations were prepared by Jones Lang LaSalle (JLL) for eleven freeholds, one long leasehold and seven operating leasehold properties. This valuation has been adopted for the 31 January 2019 period-end after adjusting for additions and disposals since the 31 July 2018 year-end. The valuation was prepared in accordance with the RICS Valuation - Professional Standards, published by The Royal Institute of Chartered Surveyors (the "Red Book"). The valuation has been provided for accounts purposes and, as such, is a Regulated Purpose Valuation as defined in the Red Book. Although the Board did not commission an external valuation at this interim period-end it is mindful of the need to accord with the measurement principles of International Financial Reporting Standards as adopted by the European Union. Accordingly after consulting with our external valuers, whilst there has been continued market activity in the self storage sector since July 2018, the Directors considered that there had not been such a material movement in market yields that warranted a modification to the position as at 31 January 2019 in respect of our properties externally valued at 31 July 2018. The Directors therefore consider that it is appropriate to maintain the portfolio's external valuation without modification pending a comprehensive external valuation at our 31 July 2019 year-end.
A deferred tax liability arises on the revaluation of the properties and on the rolled-over gain arising from the disposal of some properties. It is not envisaged that any tax will become payable in the foreseeable future on these disposals due to the availability of rollover relief.
It is not the intention of the Directors to make any other significant disposals of trading stores, although individual disposals may be considered where it is clear that value can be added by recycling the capital into other opportunities.
The Board will continue to commission independent valuations on its trading stores annually to coincide with its year-end reporting.
The valuations of our freehold property assets are included in the Statement of Financial Position at their fair value, but under applicable accounting standards no value is included in respect of our leasehold stores to the extent that they are classified as operating leases. The value of our operating leases in the valuation totals GBP18.2 million (31.1.2018: GBP16.7 million). Instead we have reported by way of a note the underlying value of these leasehold stores in future revaluations and adjusted our Net Asset Value (NAV) calculation accordingly to include their value. This ensures comparable NAV calculations.
Analysis of Total Property Value
31 Jan 31 Jan 2018 31 July
No of 2019 Valuation No of Valuation No of 2018 Valuation
stores/sites GBP'000 stores/sites GBP'000 stores/sites GBP'000
-------------- ---------------- -------------- ------------ -------------- ----------------
Freehold and long
leasehold(3)
valued
by JLL (1) 14 128,000 12 102,900 14 128,000
Leasehold valued by
JLL (2) 7 18,200 7 16,725 7 18,200
Freehold land and
buildings at
Director
valuation 1 3,051 1 4,148 1 3,603
Leasehold land
and
buildings at
Director
valuation 1 1,236 - - - -
-------------------- -------------- ---------------- -------------- ------------ -------------- ----------------
Subtotal 23 150,487 20 123,773 22 149,803
Sites in
development
at cost 9 23,830 5 15,880 7 16,568
-------------- ---------------- -------------- ------------ -------------- ----------------
Total 32 174,317 25 139,653 29 166,371
-------------- ---------------- -------------- ------------ -------------- ----------------
(1) Includes related fixtures and fittings (refer note 9)
(2) The seven leaseholds valued by JLL are all within the terms of the Landlord and Tenant Act (1954) giving a degree of security of tenure. The average length of the leases on the leasehold stores valued was 9 years and 8 months at the date of the 2018 valuation (2017 valuation: 10 years and 8 months).
(3) The freehold interest in the long leasehold was acquired post period-end on 29 March 2019.
Total freeholds and long leasehold account for 88.9% of property values (31.1.2018: 88.1%).
Adjusted Net Asset Value per Share
Adjusted net assets per share is the net assets of the Group adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the period-end. The shares currently held in the Group's employee benefits trust (own shares held) and in treasury are excluded from the number of shares.
At January 2019 the adjusted net asset value per share increased to GBP4.85 from GBP4.18 year on year, up 16.1%. This is a result of cash generated from operations offset in part by an increase in the shares in issue due to the exercise of share options during the period. The sales of the Saracen serviced document business also contributed to the uplift.
31 Jan 31 Jan 31 July
2019 2018 2018
Analysis of net asset value (NAV) GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
--------------------------------------------------- ----------- ----------- ----------
Net assets 105,905 89,775 103,251
Adjustment to include operating/short leasehold
stores at valuation
Add: JLL leasehold valuation 18,200 16,725 18,200
Deduct: leasehold properties and their
fixtures and fittings at NBV (3,813) (2,777) (2,691)
--------------------------------------------------- ----------- ----------- ----------
120,292 103,723 118,760
--------------------------------------------------- ----------- ----------- ----------
Deferred tax arising on revaluation of
leasehold properties(1) (2,446) (2,371) (2,636)
--------------------------------------------------- ----------- ----------- ----------
Adjusted net assets 117,846 101,350 116,124
--------------------------------------------------- ----------- ----------- ----------
Number Number Number
Shares in issue '000 '000 '000
--------------------------------------------------- ----------- ----------- ----------
Opening shares in issue 29,499 29,303 29,303
Shares issued for the exercise of options 52 127 196
--------------------------------------------------- ----------- ----------- ----------
Closing shares in issue 29,551 29,430 29,499
Shares held in EBT (623) (623) (623)
--------------------------------------------------- ----------- ----------- ----------
Closing shares for NAV purposes 28,928 28,807 28,876
--------------------------------------------------- ----------- ----------- ----------
Adjusted net asset value per share after GBP4.07 GBP3.52 GBP4.02
deferred tax provision
--------------------------------------------------- ----------- ----------- ----------
Adjusted net asset value per share before
deferred tax provision
Adjusted net assets 117,846 101,350 116,124
Deferred tax liabilities and assets recognised by the Group 20,046 16,633 19,735 Deferred tax arising on revaluation of leasehold properties(1) 2,446 2,371 2,636 --------------------------------------------------- ----------- ----------- ---------- Adjusted net assets before deferred tax 140,338 120,354 138,495 --------------------------------------------------- ----------- ----------- ---------- Closing shares for NAV purposes 28,928 28,807 28,876 --------------------------------------------------- ----------- ----------- ---------- Adjusted net asset value per share before GBP4.85 GBP4.18 GBP4.80 deferred tax provision --------------------------------------------------- ----------- ----------- ----------
(1) A deferred tax adjustment in respect of the uplift in the value of the leasehold properties has been included. Although this is a memorandum adjustment as leasehold properties are included in the Group's financial statements at cost and not at valuation, this deferred tax adjustment is included in the adjusted net asset value calculation in order to maintain a consistency of tax treatment between freehold and leasehold properties.
Corporate and Social Responsibilities
Lok'nStore conducts its business in a manner that reflects honesty, integrity and ethical conduct. We believe that the long-term success of the business is best served by respecting the interests of all our stakeholders. Management of social, environmental and ethical issues is of high importance to Lok'nStore. These issues are dealt with on a day-to-day basis by the Group's managers with principal accountability lying with the Board of Directors. We look for opportunities to address our responsibility to the environment, and we pay close attention to our energy use, carbon dioxide emissions, water use and waste production. At each year-end Lok'nStore commissions a full assessment of the Group's environmental impact.
Customers
We believe in clarity and transparency towards our customers. Brochures and literature are written in plain English, explaining clearly our terms of business without hiding anything. We are open and honest about our products and services and do not employ pressure selling techniques or attempt to take advantage of any vulnerable groups. If we make a mistake we acknowledge it, deal with the problem quickly, and learn from our error. We listen to our customers as we know that they can help us improve our service to them.
Andrew Jacobs Ray Davies Chief Executive Officer Finance Director
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2019
Notes Six months Six months Year ended
ended ended 31 July
31 January 31 January 2018
2019 2018 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
Revenue 1 8,512 7,638 15,372
Total
property,
staff,
distribution
and general
costs 2a (4,717) (4,144) (8,739)
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
Adjusted
EBITDA(1) 3,795 3,494 6,633
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
Amortisation
of intangible
assets (83) (83) (165)
Depreciation (1,069) (912) (1,880)
Equity settled
share based
payments (11) (17) (33)
Carried
Interest -
fees
receivable - - 361
Receivables
from warranty
claims - - 230
Profit on sale
of land at
store 2c 296 - -
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
(867) (1,012) (1,487)
Operating 5,146
profit 2,928 2,482
Finance income 3 10 71 80
Finance cost 4 (253) (314) (463)
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
Profit before
taxation 2,685 2,239 4,763
Income tax
expense 6 (602) (542) (1,459)
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
Profit for the
period from
continuing
operations 2,083 1,697 3,304
Profit for the
period from
discontinued
operations 11 2,169 229 453
Profit for the
period 4,252 1,926 3,757
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
Profit
attributable
to:
Owners of the
parent 20 4,252 1,926 3,757
Other
Comprehensive
Income
Items that
will not be
reclassified
to profit and
loss
Increase in
property
valuation 655 629 15,723
Deferred tax
relating to
change
in property
valuation (122) (119) (2,698)
Items that may
be
subsequently
reclassified
to profit and
loss 533 510 13,025
Other
comprehensive
income 633 510 13,025
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
Total
comprehensive
income for
the period 4,785 2,436 16,782
--------------- ------ ------------------------- ------------------------- ----------------------------------------------
Attributable to:
Owners of the parent 4,785 2,436 16,782
------------------------ -------- -------- ---------
Earnings per share attributable
to owners of the Parent
Basic 8
Continuing operations 7.21p 5.90p 11.48p
Discontinued operations 7.51p 0.80p 1.57p
---------------------------------- ------------- ------------- -----------------
Total basic earnings per share 14.72p 6.70p 13.05p
---------------------------------- ------------- ------------- -----------------
Diluted 8
Continuing operations 7.05p 5.80p 11.28p
Discontinued operations 7.35p 0.78p 1.55p
---------------------------------- ------------- ------------- -----------------
Total diluted earnings per share 14.40p 6.58p 12.83p
---------------------------------- ------------- ------------- -----------------
(1) Adjusted EBITDA is defined in the accounting policies section of the notes to the interim report.
Consolidated Statement of Changes in Equity
Attributable to owners of the Parent
Share Share Other Revaluation Retained Total
capital premium reserves reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
1 August 2017 - Audited 293 10,028 8,469 52,165 18,164 89,119
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Profit for the period - - - - 1,926 1,926
Other comprehensive income:
Increase in property valuation
net of deferred tax - - - 510 - 510
Decrease in fair value of
cash flow hedges net of deferred
tax - - - - - -
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Total comprehensive income
for the year - - - 510 1,926 2,436
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Transactions with Owners
Dividend paid - - - - (2,016) (2,016)
Share based payments - - 17 - - 17
Transfers in relation to share
based payments - - (80) - 80 -
Deferred tax credit relating
to share options - - (16) - - (16)
Sale of shares from treasury
(net of costs) - - - - - -
Exercise of share options 1 234 - - - 235
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Total transactions with owners 1 234 (79) - (1,936) (1,780)
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Transfer additional dep'n
on revaluation net of deferred
tax - - - (148) 148 -
31 January 2018 - Unaudited 294 10,262 8,390 52,527 18,302 89,775
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Profit for the period - - - - 1,831 1,831
Other comprehensive income:
Increase in property valuation
net of deferred tax - - - 12,515 - 12,515
Total comprehensive income
for the year - - - 12,515 1,831 14,346
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Transactions with Owners
Dividend paid - - - - (961) (961)
Share based payments - - 16 - - 16
Transfers in relation to share
based payments - - (29) - 29 -
Deferred tax credit relating
to share options - - (14) - - (14)
Sale of shares from treasury
(net of costs) - - - - - -
Exercise of share options 1 88 - - - 89
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Total transactions with owners 1 88 (27) - (932) (870)
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Transfer additional dep'n
on revaluation net of deferred
tax - - - (143) 143 -
31 July 2018 - Audited 295 10,350 8,363 64,899 19,344 103,251
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Profit for the period - - - - 4,252 4,252
Other comprehensive income:
Increase in property valuation
net of deferred tax - - - 533 - 533
Total comprehensive income
for the year - - - 533 4,252 4,785
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Transactions with Owners
Dividend paid - - - - (2,217) (2,217)
Share based payments - - 11 - - 11
Transfers in relation to share
based payments - - (27) - 27 -
Deferred tax credit relating
to share options - - (15) - - (15)
Asset disposal - - - (500) 500 -
Exercise of share options 1 89 - - - 90
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Total transactions with owners 1 89 (31) (500) (1,690) (2,131)
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Transfer additional dep'n
on revaluation net of deferred
tax - - - (151) 151 -
31 January 2019 - Unaudited 296 10,439 8,332 64,781 22,057 105,905
----------------------------------- --------- --------- ---------- ------------ -------------- ----------
Consolidated Statement of Financial Position
31 January 2019
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
------------------------------- ------ ----------------- ------------------- ---------------
Assets
Non-current assets
Intangible assets - 3,343 3,263
Property, plant and equipment 9 158,774 127,447 152,580
Development loan capital - - 3,463
Financial assets 361 - 361
159,135 130,790 156,204
------------------------------- ------ ----------------- ------------------- ---------------
Current assets
Inventories 12 275 236 257
Trade and other receivables 13 3,074 4,192 4,476
Cash and cash equivalents 11,236 5,359 4,990
------------------------------- ------ ----------------- ------------------- ---------------
Total current assets 14,585 9,787 9,723
------------------------------- ------ ----------------- ------------------- ---------------
Total assets 173,720 140,577 165,927
------------------------------- ------ ----------------- ------------------- ---------------
Liabilities
Current liabilities
Trade and other payables 14 (5,066) (4,912) (5,159)
Taxation (503) (573) (612)
(5,569) (5,485) (5,771)
------------------------------- ------ ----------------- ------------------- ---------------
Non-current liabilities
Borrowings 16 (42,200) (28,684) (37,170)
Deferred tax 17 (20,046) (16,633) (19,735)
------------------------------- ------ ----------------- ------------------- ---------------
(62,246) (45,317) (56,905)
------------------------------- ------ ----------------- ------------------- --------------- Total liabilities (67,815) (50,802) (62,676) ------------------------------- ------ ----------------- ------------------- --------------- Net assets 105,905 89,775 103,251 ------------------------------- ------ ----------------- ------------------- --------------- Equity Equity attributable to owners of the parent Called up share capital 18 296 294 295 Share premium 10,439 10,262 10,350 Other reserves 19 8,332 8,390 8,363 Retained earnings 20 22,057 18,302 19,344 Revaluation reserve 64,781 52,527 64,899 ------------------------------- --- -------- ------- -------- Total equity 105,905 89,775 103,251 ------------------------------- --- -------- ------- --------
Approved by the Board of Directors and authorised for issue on 26 April 2019 and signed on its behalf by:
Andrew Jacobs Ray Davies Chief Executive Officer Finance Director
Consolidated Statement of Cash Flows
For the six months ended 31 January 2019
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
------------------------------------------ ------ ------------ ------------ -----------
Operating activities
Cash generated from operations 22a 5,232 3,756 6,982
Income tax paid (450) (375) (775)
Net cash from operating activities 4,782 3,381 6,207
Investing activities
Proceeds from disposal of discontinued 6,866 - -
operation
(net of disposal costs and cash
included in sale)
Proceeds of sale of land (net of 796 - -
disposal costs)
Development loan capital repaid
/(invested) - 3,463 3,463
Purchase of property, plant and
equipment 9 (7,526) (10,879) (21,935)
Acquisition of subsidiary (net of
cash) 10 (1,136) - -
Proceeds from warranty claims - - 342
Interest received 10 68 80
------------------------------------------ ------ ------------ ------------ -----------
Net cash used in investing activities (990) (7,348) (18,050)
------------------------------------------ ------ ------------ ------------ -----------
Financing activities
Proceeds from new bank borrowings 5,030 - 8,519
Finance costs paid (449) (280) (419)
Equity dividends paid (2,217) (2,016) (2,977)
Proceeds from issuance of ordinary
shares (net) 90 236 324
Net cash from / (used in) financing
activities 2,454 (2,060) 5,447
Net increase / (decrease) in cash
and cash equivalents in the period 6,246 (6,027) (6,396)
Cash and cash equivalents at beginning
of the period 4,990 11,386 11,386
------------------------------------------ ------ ------------ ------------ -----------
Cash and cash equivalents at end
of the period 11,236 5,359 4,990
------------------------------------------ ------ ------------ ------------ -----------
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.
Basis of preparation
The interim results for the six months ended 31 January 2019 have been prepared on the basis of the accounting policies expected to be used in the 2019 Lok'nStore Group Plc Annual Report and Accounts and in accordance with the recognition and measurement principles of International Financial Reporting Standards ('IFRS') and the International Financial Reporting Interpretations Committee ('IFRIC') as adopted by the European Union ('EU')
The 2019 Lok'nStore Group Plc Annual Report and Accounts will cover the implementation of IFRS 9 and IFRS 15 that were not applicable at the 31 July 2018 year-end but will be applicable for the year-ended 31 July 2019.
Although not relevant for the year under review (or the next) when applied IFRS 16 will represent a significant change to the way that the Group will prepare its financial statements. The effective date of adoption is for accounting periods commencing after 1 January 2019 and will therefore apply to Lok'nStore's financial statements for the year ended 31 July 2020.
Nevertheless the 2019 financial statements will provide a sufficient overview of the effects of IFRS 16 on the profit and loss, balance sheet, financial performance and cash flows of the Group as a significant lessee in respect of our leased stores. IFRS 16 will primarily affect the accounting by lessees and will result in the recognition of almost all leases on the balance sheet. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for virtually all lease contracts.
The same accounting policies, presentation and methods of computation are followed in these interim condensed set of financial statements as have been applied in the Group's latest annual audited financial statements.
The interim results, which were approved by the Directors on 26 April 2019, 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 2018 have been extracted from the statutory accounts for the Group for that period, which carried an unqualified audit report, did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter, did not contain a statement under section 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.
Going concern
The Directors can report that, based on the Group's budgets and financial projections, they have satisfied themselves that the business is a going concern. The Board has a reasonable expectation that the Company and the Group have adequate resources and facilities to continue in operational existence for the foreseeable future based on Group cash balances and cash equivalents of GBP11.2 million (31.07.2018: GBP5.0 million), undrawn committed bank facilities at 31 January 2019 of GBP7.6 million (31.01.2018: GBP11.2 million), and cash generated from operations in the period to 31 January 2019 of GBP5.33 million (31.01.2018: GBP3.76 million) (31.07.2018: GBP6.98 million). The Group now operates a GBP75 million five year revolving credit facility with Royal Bank of Scotland plc and Lloyds Bank plc which provides funding for site acquisitions and working capital. The Group is fully compliant with all bank covenants and undertakings and is not obliged to make any repayments prior to expiration. The facility expires in April 2024. The financial statements are therefore prepared on a going concern basis.
Adjusted EBITDA
Adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA) is defined as profits from operations before all depreciation and amortisation charges, share-based payments and other non-recurring costs, finance income, finance costs and taxation.
Store adjusted EBITDA
Store adjusted EBITDA is defined as adjusted EBITDA (see above) but before central and head office costs.
Discontinued operations
The results of discontinued operations are presented in a single line in the Consolidated Statement of Comprehensive Income and the comparative information has been re-stated accordingly.
Notes to the Financial Statements
For the six months ended 31 January 2019
1 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
2019 2018 2018
Unaudited Unaudited Audited
Stores trading GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ------------ ----------
Self-storage revenue 7,144 6,484 13,094
Other storage related revenue 883 787 1,585
Ancillary store rental revenue - - 159
Sub-total - self-storage revenue
- owned stores 8,027 7,271 14,838
Management fees - managed stores 386 312 534
---------------------------------- ------------ ------------ ----------
Sub-total 8,413 7,583 15,372
Stores under development
Non-storage income 99 55 -
---------------------------------- ------------ ------------ ----------
Total revenue per statement of
comprehensive income 8,512 7,638 15,372
---------------------------------- ------------ ------------ ----------
The Group's serviced archive and record management segment was sold in the period and is presented as a discontinued operation (see note 11). Following the disposal, the Group has one operating segment, being self-storage in the UK.
2a Property, staff, distribution, general costs and retail cost of sales
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------- ---------------------- ------------- ---------
Property and premises costs 1,971 1,777 3,647
Staff costs 2,027 1,802 3,832
General overheads 625 484 1,079
Sub total - operating costs 4,623 4,063 8,558
------------------------------- ---------------------- ------------- ---------
Retail products cost of sales 94 81 181
------------------------------- ---------------------- ------------- ---------
4,717 4,144 8,739
------------------------------- ---------------------- ------------- ---------
2b Cost of sales of retail products
Cost of sales represents the direct costs associated with the sale of retail products such as boxes and packaging and, the ancillary sales of insurance cover for customer goods, all of which fall within the Group's ordinary activities.
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------- ------------ ------------ ---------
Retail 62 56 116
Insurance 15 20 45
Other 17 5 20
----------- ------------ ------------ ---------
94 81 181
----------- ------------ ------------ ---------
2c Other Income and costs
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ ---------
Carried interest - fees receivable - - (361)
Receipts from warranty claims - - (230)
Property on sale of land at store (296) - -
(296) - (591)
------------------------------------ ------------ ------------ ---------
3 Finance income
Six months Six months
ended ended Year ended
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------- ------------ ------------ -----------
Bank interest 7 5 7
Other interest 3 66 73
---------------- ------------ ------------ -----------
10 71 80
---------------- ------------ ------------ -----------
4 Finance costs
Six months Six months
ended ended 31 Year ended
31 January January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ----------- -----------
Bank interest 206 269 342
Non-utilisation fees and amortisation
of bank loan arrangement fees 47 45 116
Other interest - - 5
253 314 463
--------------------------------------- ------------ ----------- -----------
Most interest payable arises on bank loans classified as financial liabilities measured at amortised cost.
5 Profit before taxation
Six months
ended Six months Year ended
31 January ended 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP '000
----------------------------------------------- ------------ -------------------------- -----------
Profit before taxation is stated
after charging:
Depreciation of plant, property
and equipment
- owned assets 1,069 962 1,980
Amortisation of intangible assets 83 83 165
Operating lease rentals - land
and buildings 646 719 1,436
----------------------------------------------- ------------ -------------------------- -----------
6 Taxation
Six months ended Six months Year
31 January ended 31 January ended 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Current tax:
UK corporation tax 470 418 837
---------------------------------------- ----------------- ------------------ ---------------
Deferred tax:
Origination and reversal of temporary
differences 132 124 292
Adjustments in respect of prior
periods - - 330
Total deferred tax charge 132 124 622
---------------------------------------- ----------------- ------------------ ---------------
Income tax expense for the period/year 602 542 1,459
---------------------------------------- ----------------- ------------------ ---------------
The charge for the period can be reconciled to the profit for the period as follows:
Year
Six months ended Six months ended 31
31 January ended 31 January July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit before tax 2,685 2,239 4,763
Tax on ordinary activities at
the standard effective rate of
corporation tax in the UK of 19%
(31.1.2018: 20.0%) 454 448 884
Expenses not deductible for tax - 2 -
purposes
Depreciation of non-qualifying
assets 195 142 314
Share based payment charges in
excess of corresponding tax deduction 2 3 6
Adjustments in respect of prior
periods - deferred tax - - 330
Impact of change in tax rate on (28) -
timing differences -
Impact of group relief - (18) -
Other timing differences 22 (35) (45)
---------------------------------------- ----------------- ------------------ -----------------------
Small companies Relief (43) - (30)
---------------------------------------- ----------------- ------------------ -----------------------
Income tax expense for the period/year 602 542 1,459
---------------------------------------- ----------------- ------------------ -----------------------
Effective tax rate 22.5% 24.2% 30.7%
---------------------------------------- ----------------- ------------------ -----------------------
In addition to the amount charged to profit or loss for the period, deferred tax relating to the revaluation of the Group's properties of GBP122,876 (31.1.2018: GBP118,872) has been recognised directly in other comprehensive income (see note 16 on deferred tax).
7 Dividends
Six months Six months
ended ended 31 Year ended
31 January January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------ ----------- -------------
Amounts recognised as distributions to equity
holders in the year:
----------------------------------------------- ------------ ----------- -------------
Final dividend for the year ended 31 July
2017 (7.00 pence per share) - 2,016 2,016
Interim dividend for the six months to 31
January 2018 (3.33 pence per share) - - 961
Final dividend for the year ended 31 July 2,217 - -
2018 (7.67 pence per share)
2,217 2,016 2,977
----------------------------------------------- ------------ ----------- -------------
In respect of the current period the Directors propose that an interim dividend of 3.67 pence per share will be paid to the shareholders. The total estimated dividend to be paid is GBP1.085 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 2019 Annual General Meeting and has not been included as a liability in these financial statements. The ex-dividend date will be 9 May 2019; the record date 10 May 2019; with an intended payment date of 14 June 2019. The final deadline for Dividend Reinvestment Election is 24 May 2019.
8 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
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------- ---------------- ---------------- -----------
Profit for the financial period 4,252 1,926 3,757
----------------------------------- ---------------- ---------------- -----------
No. of
No. of shares No. of shares shares
----------------------------------- ---------------- ---------------- -----------
Weighted average number of shares
For basic earnings per share 28,894,795 28,746,236 28,792,029
Dilutive effect of share options 621,082 526,509 490,064
----------------------------------- ---------------- ---------------- -----------
For diluted earnings per share 29,515,877 29,272,745 29,282,093
----------------------------------- ---------------- ---------------- -----------
623,212 shares (31.01.2018: 623,212) are held in the Employee Benefit Trust and are excluded from the above calculation.
Earnings per share attributable Six months Six months Year
to owners of the Parent ended ended ended
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
---------------------------------- -------------------------------------- ------------ ---------
Earnings per share
Basic
Continuing operations 7.21p 5.90p 11.48p
Discontinued operations 7.51p 0.80p 1.57p
---------------------------------- -------------------------------------- ------------ ---------
Total basic earnings per share 14.72p 6.70p 13.05p
---------------------------------- -------------------------------------- ------------ ---------
Earnings per share
Diluted
Continuing operations 7.05p 5.80p 11.28p
Discontinued operations 7.35p 0.78p 1.55p
---------------------------------- -------------------------------------- ------------ ---------
Total diluted earnings per share 14.40p 6.58p 12.83p
---------------------------------- -------------------------------------- ------------ ---------
9 Property, plant and equipment
Fixtures,
Development Land and Long leasehold Short fittings
property buildings land and leasehold and Motor
assets at buildings improvements equipment vehicles
at cost valuation at valuation at cost at cost at cost Total
Group GBP'000 GBP '000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------ ------------ --------------- ------------- ------------- ------------- ----------
Net book
value
at 31 July
2017
- Audited 5,124 87,548 10,293 2,599 23,984 17 129,565
-------------- ------------ ------------ --------------- ------------- ------------- ------------- ----------
Net book
value
at 31
January 2018
- Unaudited 15,880 87,798 10,342 688 12,735 4 127,447
-------------- ------------ ------------ --------------- ------------- ------------- ------------- ----------
Net book
value
at 31 July
2018
- Audited 16,570 108,486 11,438 669 15,414 3 152,580
-------------- ------------ ------------ --------------- ------------- ------------- ------------- ---------- Cost or valuation 1 August 2018 16,570 108,486 11,438 2,648 27,186 17 166,345 Additions 7,254 148 3 - 101 20 7,526 Additions - Acquisition of subsidiary - - - 1,238 - - 1,238 Disposals - (500) - - - - (500) Disposals - discontinued operations - - - (84) (2,696) (7) (2,787) Transfers 6 (6) - - - - - Revaluations - 134 34 - - - 168 -------------- ------------ ------------ --------------- ------------- ------------- ------------- ---------- 31 January 2019 Unaudited 23,830 108,262 11,475 3,802 24,591 30 171,990 -------------- ------------ ------------ --------------- ------------- ------------- ------------- ---------- Depreciation 1 August 2018 - - - 1,979 11,772 14 13,765 Depreciation - 425 63 60 519 2 1,069 Disposals - discontinued operations - - - (56) (1,067) (7) (1,130) Revaluations - (425) (63) - - - (488) -------------- ------------ ------------ --------------- ------------- ------------- ------------- ---------- 31 January 2019 Unaudited - - - 1,983 11,224 9 13,216 -------------- ------------ ------------ --------------- ------------- ------------- ------------- ---------- Net book value at 31 January 2019 - Unaudited 23,830 108,262 11,475 1,819 13,367 21 158,774 -------------- ------------ ------------ --------------- ------------- ------------- ------------- ----------
Capital expenditure during the period totalled GBP8.8 million (31.1.2018: GBP10.9 million). This was primarily the purchase of the Leicester and Wolverhampton sites, and exchange of contracts on our Stevenage site, the acquisition of the property plant and equipment of the Box Room (self storage) Limited (Refer Note 10 below), together with construction and fit out works at our sites in Cardiff and Ipswich as well as planning and pre-development works at our Bedford, Bournemouth, and Cheshunt sites. During the period land at the rear of our Southampton store with a fair value of GBP500,000 was sold for GBP800,000.
Property, plant and equipment (non-current assets) with a carrying value of GBP158.8 million (31.1.2018: GBP127.4 million) are pledged as security for bank loans (see note 15a).
Market Valuation of Freehold and Operating Leasehold Land and Buildings
Following the comprehensive external valuation at 31 July 2018 by JLL, the freehold and leasehold properties have not been externally valued at 31 January 2019, although in accordance with the Group's established policy it is the intention to do so at the next year end at 31 July 2019.
Although the Board did not commission an external valuation at this interim period-end it is mindful of the need to accord with the measurement principles of International Financial Reporting Standards as adopted by the European Union. Accordingly after consulting with our external valuers, whilst there has been continued market activity in the self storage sector since July 2018, the Directors considered that there had not been such a material movement in market yields that warranted a modification to the position as at 31 January 2019 in respect of our properties externally valued at 31 July 2018. The Directors therefore consider that it is appropriate to maintain the portfolio's external valuation without modification pending a comprehensive external valuation at our 31 July 2019 year-end.
10 Acquisition of Hedge End
On 30 November 2018, Lok'nStore purchased the entire share capital of The Box Room (Self Storage) Limited for a consideration of GBP1.17 million in cash, comprising an existing single store operation of 42,000 sq. ft.in Hedge End, Southampton.
Net assets acquired
Provisional
Fair Value 30 November
Book Value Adjustments 2018
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 88 1,150 1,238
Trade and other receivables 35 - 35
Prepayments and other debtors 27 - 27
Cash and cash equivalents 34 - 34
Total assets 184 1,150 1,334
Liabilities
Trade and other payables (62) - (62)
Accruals (6) - (6)
Current tax liabilities (13) - (13)
Deferred tax liabilities (24) - (24)
Finance leases (59) - (59)
Total liabilities (164) - (164)
Fair value of identifiable assets and liabilities
20 1,150 1,170
Non-controlling interest - - -
Goodwill - - -
Total consideration 20 1,150 1,170
The store operation will be rebranded and refurbished. Further disclosures around acquisition costs, post-acquisition profit and revenue contribution will be made at the financial year-end following this work.
11 Disposal of Saracen Datastore Limited
On 31(st) January 2019 Lok'nStore disposed of its document storage business Saracen Datastore Limited ("Saracen") for GBP7.64 million in cash against its Net Book Value as at 31 July 2018 of GBP5.4 million.
Key amounts relating to the discontinued operation are as follows;
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Revenue 1,156 1,181 2,382
Expenses (902) (824) (1,720)
----------------------------------------- ----------- ----------- -----------
EBITDA 254 357 662
Depreciation (48) (50) (100)
Finance income /costs 3 - -
----------------------------------------- ----------- ----------- -----------
Profit before tax 209 307 562
----------------------------------------- ----------- ----------- ----------- Tax (27) (78) (109) Profit after tax 182 229 453 ----------------------------------------- ----------- ----------- ----------- Profit on disposal of subsidiary 1,987 - - Tax on disposal profit - - - ----------------------------------------- ----------- ----------- ----------- After tax disposal profit 1,987 - - ----------------------------------------- ----------- ----------- ----------- Total profit on discontinued operations 2,169 229 453 ----------------------------------------- ----------- ----------- -----------
Before disposal, Saracen contributed GBP1.12 million to the Group's revenue and GBP0.25 million to its EBITDA in the period to 31 January 2019. (31.01.18 GBP1.18 million and GBP0.35 million respectively).
The carrying value of Saracen Datastore's assets and liabilities that were sold on 31(st) January 2019 was as follows:
Assets
Non-current assets GBP'000
Intangible assets 3,178
Property, plant and equipment 1,657
4,835
Current assets
Inventories 5
Receivables 722
Cash 508
----------------------------------------------- --------
1,235
----------------------------------------------- --------
Total assets 6,070
-----------------------------------------------
Current Liabilities (604)
Non-current Liabilities (79)
----------------------------------------------- --------
Total liabilities (683)
Net assets disposed of 5,387
Cash proceeds (net of fees/costs of disposal) 7,374
----------------------------------------------- --------
Profit on disposal 1,987
----------------------------------------------- --------
The profit on disposal is included in profit on discontinued operations in the consolidated statement of comprehensive income.
The Group believes that Substantial Shareholder Relief would be available on the gain made on the disposal of the shares. Proceeds from disposal of discontinued operation (net of disposal costs and cash included in sale) is presented as an investing activity in the consolidated statement of cash flow.
12 Inventories
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- ---------
Consumables and goods for resale 275 236 257
---------------------------------- ----------- ----------- ---------
The amount of inventories recognised as an expense during the period was GBP62,045 (31.1.2018: GBP77,039).
13 Trade and other receivables
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ------------- ----------
Trade receivables 1,664 2,098 1,969
Other receivables 599 1,473 1,927
Prepayments and accrued income 811 621 580
3,074 4,192 4,476
-------------------------------- ----------- ------------- ----------
The Directors consider that the carrying amount of trade and other receivables and accrued income approximates their fair value. The credit model of the business ensures that credit loss (bad debts) is very low and therefore the impact of these on trade and other receivables is minimal.
14 Trade and other payables
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------ ----------- ----------- ---------
Trade payables 1,519 960 1,102
Taxation and social security costs 259 496 313
Other payables 1,278 1,221 1,340
Accruals and deferred income 2,010 2,235 2,404
------------------------------------ ----------- ----------- ---------
5,066 4,912 5,159
------------------------------------ ----------- ----------- ---------
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 gearing ratio at the period-end is as follows:
31 January 31 January 31 July
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------- ----------- ----------- ---------
Gross debt (42,424) (28,816) (37,335)
Cash and cash equivalents 11,236 5,359 4,990
--------------------------- ----------- ----------- ---------
Net debt (31,188) (23,457) (32,345)
Total equity 105,905 89,775 103,251
Net debt to equity ratio 29.5% 26.1% 31.3%
--------------------------- ----------- ----------- ---------
16 Borrowings
31 January 31 January 31 July
2019 Unaudited 2018 Unaudited 2018
GBP'000 GBP'000 Audited
GBP'000
--------------------------------------- ---------------- ---------------- ---------
Non-current
Bank loans repayable in more than two
years
but not more than five years
Gross 42,424 28,816 37,335
Deferred financing costs (224) (132) (165)
--------------------------------------- ---------------- ---------------- ---------
Net bank borrowings 42,200 28,684 37,710
--------------------------------------- ---------------- ---------------- ---------
The GBP50 million five year revolving credit facility runs until January 2023.
The GBP50 million five year revolving credit facility set the interest rate margin at the London Inter-Bank Offer Rate (LIBOR) plus 1.40%-1.65% based on a loan to value covenant test. The all in debt cost on GBP42.24 million drawn averaged 2.13% in the period.
The revolving credit facility is secured by legal charges and debentures over the freehold and leasehold properties and other assets of the business with a net book value of GBP158.8 million together with cross-company guarantees from Group companies. The Group is not obliged to make any repayments prior to expiration.
(Post Balance Sheet) In April 2019, the Group agreed a new joint banking facility with Lloyds Bank and Royal Bank of Scotland plc. The new GBP75 million five year revolving credit facility replaces the existing GBP50 million facility and will provide funding for site acquisitions and working capital. The facility provides an accordion GBP25 million which can take the facility to GBP100 million and runs to 2024 with an option of two one year extensions.
The facility is closely aligned to the terms of the Group's previous facility. The interest rate is set at the London Inter-Bank Offer Rate (LIBOR) plus a 1.50%-1.75% margin based on a loan to value covenant test.
17 Deferred tax
31 January 31 January 31 July 2018
2019 2018 Audited
Unaudited Unaudited GBP'000
Deferred tax liability GBP'000 GBP'000
-------------------------------------- --------------------------------- ----------- -------------
Liability at start of period/year 19,735 16,363 16,363
Charge to income for the period/year
-continued operations 132 124 622
Charge to income for the period/year
- discontinued operations 18 11 22
Tax charged directly to other
comprehensive income 122 119 2,698
Acquisition of subsidiary 24 - -
Credit to share based payment
reserve 15 16 30
Liability at end of period/year 20,046 16,633 19,735
-------------------------------------- --------------------------------- ----------- -------------
18 Share capital
31 January 31 January 2018 31 July 2018
2019 Unaudited Audited
Unaudited GBP'000 GBP'000
GBP'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 29,498,615 29,302,923 29,302,923
-------------------------------------- ------------- ---------------- -------------
Options exercised during period/year 52,304 127,000 195,692
-------------------------------------- ------------- ---------------- -------------
Balance at end of period/year 29,550,919 29,429,923 29,498,615
-------------------------------------- ------------- ---------------- -------------
Allotted, issued and fully paid GBP GBP GBP
ordinary shares
-------------------------------------- ------------- ---------------- -------------
Balance at start of period/year 294,986 293,029 293,029
Options exercised during period/year 543 1,270 1,957
-------------------------------------- ------------- ---------------- -------------
Balance at end of period/year 295,509 294,299 294,986
-------------------------------------- ------------- ---------------- -------------
The Company has one class of ordinary shares which carry no right to fixed income.
19 Other reserves
Share-based
Other Capital
Merger reserve redemption payment
reserve reserve reserve Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- ----------- ------------ --------
1 August 2017 - Audited 6,295 1,294 34 846 8,469
------------------------------- -------- -------- ----------- ------------ --------
Equity share based payments - - - 17 17
Transfer to retained
earnings in relation
to share based payments - - - (80) (80)
Cash flow hedge reserve
net of tax - - - - 37
Tax credit relating to
share options - - - (16) (16)
------------------------------- -------- -------- ----------- ------------ --------
31 January 2018 - Unaudited 6,295 1,294 34 767 8,390
------------------------------- -------- -------- ----------- ------------ --------
Equity share based payments - - - 16 16
Transfer to retained
earnings in relation
to share based payments - - - (29) (29)
Tax credit relating to
share options (14) (14)
------------------------------- -------- -------- ----------- ------------ --------
31 July 2018 - Audited 6,295 1,294 34 740 8,363
------------------------------- -------- -------- ----------- ------------ --------
Equity share based payments - - - 11 11
Transfer to retained
earnings in relation
to share based payments - - - (27) (27)
Tax credit relating to
share options - - - (15) (15)
------------------------------- -------- -------- ----------- ------------ --------
31 January 2019 - Unaudited 6,295 1,294 34 709 8,332
------------------------------- -------- -------- ----------- ------------ --------
The merger reserve represents the excess of the nominal value of the shares issued by Lok'nStore Group plc over the nominal value of the share capital and share premium of Lok'nStore Limited as at 31 July 2001. The other distributable reserve and the capital redemption reserve arose in the year ended 31 July 2004 from the purchase of the Company's own shares and a cancellation of share premium.
Share based payment reserve
Under IFRS2 there is the option to make transfers from the share based payment reserve to retained earnings in respect of accumulated share option charges where the options have either been exercised or have lapsed post-vesting. The total amounts calculated and accordingly transferred to retained earnings in the period amounted to GBP27,140 (31.1.2017: GBP79,666).
20 Retained earnings Retained
earnings Retained
before
deduction Own shares earnings
of
own shares (note 20) Total
Group GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- -----------
1 August 2017 - Audited 18,664 (500) 18,164
------------------------------------- ----------- ----------- -----------
Profit for the financial period 1,926 - 1,926
Transfer from revaluation reserve 148 - 148
Transfer from share based payment
reserve (Note 19) 80 - 80
Dividend paid (2,016) - (2,016)
31 January 2018 - Unaudited 18,802 (500) 18,302
------------------------------------- ----------- ----------- -----------
Profit for the financial period 1,831 - 1,831
Transfer from revaluation reserve 143 - 143
Transfer from share based payment
reserve (Note 19) 29 - 29
Dividend paid (961) - (961)
31 July 2018 - Audited 19,844 (500) 19,344
------------------------------------- ----------- ----------- -----------
Profit for the financial period 4,252 - 4,252
Transfer from revaluation reserve 151 - 151
Transfer from share based payment
reserve (Note 19) 27 - 27
Asset disposal 500 - 500
Dividend paid (2,217) - (2,217)
31 January 2019 - Unaudited 22,557 (500) 22,057
------------------------------------- ----------- ----------- -----------
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.
21 Own shares
ESOP ESOP Treasury Treasury Own shares
shares shares shares shares total
Number GBP Number GBP GBP
------------------- -------- -------- ---------- ---------- -----------
1 August
2017- Audited 623,212 499,910 2,466,869 3,741,036 4,240,946
31 January
2018 - Unaudited 623,212 499,910 - - 499,910
31 July 2018-
Audited 623,212 499,910 - - 499,910
------------------- -------- -------- ---------- ---------- -----------
31 January
2019 - 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 2019, the Trust held 623,212 (31.01.2018: 623,212) ordinary shares of 1 pence each with a market value of GBP2,508,428 (31.01.2018: GBP2,461,687). No shares were transferred out of the scheme during the period (2018: 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
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------ --------------------------- ------------ ---------
Profit before tax - continuing
operations 2,685 2,239 4,763
Profit before tax - discontinued
operations 209 307 562
Depreciation 1,117 962 1,980
Amortisation of intangible
assets 83 83 165
Equity settled share based
payments 11 17 33
Profit on sale of land at store (296) - -
Warranty claims - - (230)
Carried interest - fees receivable - - (361)
Interest receivable (10) (71) (80)
Interest payable 250 314 463
(Increase) in inventories (18) (33) (54)
Decrease/(increase) in receivables 1,402 74 (571)
(Decrease) / increase in payables (201) (136) 312
-------------------------------------- --------------------------- ------------ ---------
Cash generated from operations 5,232 3,756 6,982
-------------------------------------- --------------------------- ------------ ---------
(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
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Increase / (decrease) in cash
in the period/year 6,246 (6,027) (6,396)
Change in net debt resulting
from cash flows (5,089) - (8,519)
----------------------------------- ------------ ------------ ----------
Movement in net debt in period 1,157 (6,027) (14,915)
Net debt brought forward (32,345) (17,430) (17,430)
----------------------------------- ------------ ------------ ----------
Net debt carried forward (31,188) (23,457) (32,345)
----------------------------------- ------------ ------------ ----------
23 Events after the Reporting Date
i) New joint GBP75 million banking facility with Lloyds Bank and Royal Bank of Scotland plc
In April 2019, the Group agreed a new joint banking facility with Lloyds Bank and Royal Bank of Scotland plc. The new GBP75 million five year revolving credit facility replaces the existing GBP50 million facility and will provide funding for site acquisitions and working capital. The facility provides an accordion GBP25 million which can take the facility to GBP100 million and runs to 2024 with an option of two one year extensions.
ii) Portfolio Management:
As part of the continued strategy to focus on our core business and growth plans and to reallocate capital from lower growth assets into high growth landmark stores the Company executed the following;
a) Sale and manage-back - Crayford store:
On 28th February 2019, the Crayford site was sold to an investment fund for GBP7.52 million in cash. Lok'nStore will continue to manage the store maintaining the operational footprint of the business and will receive management and performance fees.
b) Maidenhead - Acquisition of Freehold interest:
On 29 March 2019, we acquired the freehold interest in our existing long leasehold from the Royal Borough of Windsor and Maidenhead - to secure the freehold position of the store.
c) Gloucester - Grant of Planning permission:
Following the grant of planning permission on 28th February 2018 development is now underway at the new Gloucester store. Lok'nStore will receive management and performance fees for managing the store on behalf of its owners.
d) ParknCruise - Cruise parking operations at the old Southampton site ceased in March 2019 allowing our management team to focus solely on self storage development. The site is being marketed to maximise the value.
iii) Store openings:
a) Cardiff: The new store in Cardiff opened in February 2019 and trading has started well.
b) Exeter: The new Managed store in Exeter opened on 13 April 2019.
Glossary
Abbreviation
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
CAD Cash available for Distribution Capex Capital Expenditure CSOP Company Share Option Plan EBT Employee Benefit Trust EMI Enterprise Management Incentive Scheme ESOP Employee Share Option Plan EU European Union HMRC Her Majesty's Revenue & Customs IAS International Accounting Standard IFRIC International Financial Reporting Interpretations Committee IFRS International Financial Reporting Standard JLL Jones Lang LaSalle LIBOR London Interbank Offered Rate LFL Like for like LTV Loan to Value Ratio NAV Net Asset Value NBV Net book value Operating Profit Earnings before interest and tax (EBIT) RICS Royal Institution of Chartered Surveyors Sq. ft. Square Feet
Store adjusted
EBITDA Adjusted EBITDA (see above) but before central and head office costs VAT Value Added Tax
Our Stores
Head Office - Central Enquiries Lok'nStore plc 0800 587 3322 112 Hawley Lane info@loknstore.co.uk Farnborough www.loknstore.co.uk Hampshire GU14 8JE Tel 01252 521010 www.loknstore.co.uk www.loknstore.com
Owned Trading Stores
Basingstoke, Hampshire Bristol, Gloucestershire Cardiff, Wales Eastbourne, East
Crockford Lane Longwell Green 234, Penarth Road Sussex
Chineham Trade Park Cardiff Unit 4, Hawthorn
Basingstoke Aldermoor Way Wales Road
Hampshire Bristol CF11 8LR Eastbourne
RG24 8NA Gloucestershire Tel 0292 022 1901 East Sussex
Tel 01256 474700 BS30 7ET cardiff@loknstore.co.uk BN23 6QA
basingstoke@loknstore.co.uk Tel 0117 967 7055 Tel 01323 749222
Bristol@loknstore.co.uk eastbourne@loknstore.co.uk
Fareham, Hampshire Farnborough, Hampshire Gillingham, Kent Harlow, Essex
26 + 27 Standard 112 Hawley Lane Courtney Road Edinburgh Way
Way Farnborough Gillingham Temple Fields
Fareham Industrial Hampshire Kent Harlow
Park GU14 8JE ME8 0RT Essex
Fareham Tel 01252 511112 Tel 01634 366044 CM20 2GF
Hampshire farnborough@loknstore.co.uk gillingham@loknstore.co.uk Tel 01279 882366
PO16 8XJ harlow@loknstore.co.uk
Tel 01329 283300
fareham@loknstore.co.uk
---------------------------- ---------------------------- ----------------------------
Hedge End, Southampton Horsham, West Sussex Luton, Bedfordshire Maidenhead, Berkshire
Units 2 & 3 Blatchford Road 27 Brunswick Street Stafferton Way
Waterloo Industrial Redkiln Estate Luton Maidenhead
Estate Flanders Horsham Bedfordshire Berkshire
Rd West Sussex LU2 0HG SL6 1AY
Hedge End RH13 5QR Tel 01582 721177 Tel 01628 878870
Southampton Tel 01403 272001 luton@loknstore.co.uk maidenhead@loknstore.co.uk
SO30 2QT horsham@loknstore.co.uk
Tel 01489 787005
HedgeEnd@loknstore.co.uk
---------------------------- ---------------------------- ----------------------------
Milton Keynes, Northampton Central Northampton Riverside Poole, Dorset
Buckinghamshire 16 Quorn Way Units 1-4, Carousel 50 Willis Way
Etheridge Avenue Grafton Street Way Fleetsbridge
Brinklow Industrial Estate Northampton Poole
Milton Keynes Northampton Northamptonshire Dorset
Buckinghamshire Northamptonshire NN3 9HG BH15 3SY
MK10 0BB NN1 2PN Tel 01604 785522 Tel 01202 666160
Tel 01908 281900 Tel 01604 629928 northampton@loknstore.co.uk poole@loknstore.co.uk
miltonkeynes@loknstore.co.u nncentral@loknstore.co.uk
k
---------------------------- ---------------------------- ----------------------------
Portsmouth, Hampshire Reading, Berkshire Southampton, Hampshire Sunbury, Middlesex
Rudmore Square 251 A33 Relief Third Avenue Unit C, The Sunbury
Portsmouth Road Southampton Centre
Hampshire Reading Hampshire Hanworth Road
PO2 8RT Berkshire SO15 0JX Sunbury on Thames
Tel 02392 876783 RG2 0RR Tel 02380 783388 Middlesex
portsmouth@loknstore.co.uk Tel 01189 588999 southampton@loknstore.co.uk TW16 5DA
reading@loknstore.co.uk Tel 01932 761100
sunbury@loknstore.co.uk
---------------------------- ---------------------------- ----------------------------
Tonbridge, Kent Wellingborough,
Unit 6 Deacon Northamptonshire
Trading Estate 19/21 Whitworth
Vale Road Way
Tonbridge Wellingborough
Kent Northamptonshire
TN9 1SW NN8 2EF
Tel 01732 771007 Tel 01634 366044
tonbridge@loknstore.co.uk gillingham@loknstore.co.uk
---------------------------- ---------------------------- ----------------------------
Development locations - LNS Owned Stores
Bedford Bournemouth, Dorset Cheshunt, Hertfordshire Leicester
69 Cardington Land at Wessex Land lying on Part of land forming
Road Field the South Side part of Freemens
Bedford Deansleigh Road of Halfhide Lane Common Road Leicester
NK42 0BQ Bournemouth Turnford LE2 7SL
Dorset Hertfordshire
BH7 7DU
Stevenage, Hertfordshire Wolverhampton, Ipswich
Part of Land at Staffordshire Part of Site 7
Plot 2000 Land at Pantheon Futura Park
Stevenage Business Park Wednesfield Ipswich
Park Gunnels Wood Way IP3 9QH
Road Wolverhampton
Stevenage Staffordshire
Hertfordshire WV11 3DR
SG1 2BL
-------------------- ------------------------ -----------------------
Managed stores - Trading
Aldershot, Hampshire Ashford, Kent Broadstairs, Kent Chichester, West
251, Ash Road Wotton Road Unit 2, Pyramid Sussex
Aldershot Ashford Business Park, 17, Terminus Road
Hampshire Kent Poorhole Lane, Chichester
GU12 4DD TN23 6LL Broadstairs, West Sussex
Tel 0845 4856415 Tel 01233 645500 Kent PO19 8TX
aldershot@loknstore.co.uk ashford@loknstore.co.uk CT10 2PT Tel 01243 771840
Tel 01843 863253 chichester@loknstore.co.uk
broadstairs@loknstore.co.uk
Crawley, West Crayford, Kent Dover, Kent Hemel Hempstead,
Sussex Block B Honeywood Parkway Hertfordshire
Sussex Manor Business Optima Park Whitfield Fortius Point,
Park Thames Road Dover 47, Maylands Avenue
Gatwick Road Crayford CT16 3FJ Hemel Hempstead
Crawley Kent Tel 01304 827353 Hertfordshire
West Sussex DA1 4QX dover@loknstore.co.uk HP2 7DE
RH10 9NH Tel 01322 525292 Tel 01442 240768
Tel 01293 738530 crayford@loknstore.co.uk hemelhempstead@loknstore.co
crawley@loknstore.co.uk .uk
-------------------------- ----------------------------- ----------------------------
Swindon, Wiltshire Woking, Surrey
Kembrey Street Marlborough Road
Elgin Industrial Woking
Estate Surrey
Swindon GU21 5JG
Wiltshire Tel 01483 378323
SN2 8UY woking@loknstore.co.uk
Tel 01793 421234
swindoneast@loknstore.co.uk
-------------------------- ----------------------------- ----------------------------
Managed stores - Under Development
Exeter Gloucester 1 Matford Park Land at Triangle Road Park Exeter Metz Way Devon Gloucester EX2 8ED GL4
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END
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April 29, 2019 02:00 ET (06:00 GMT)
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