Source - RNS
RNS Number : 6186M
Lok'nStore Group PLC
17 October 2016
 



 

 

LOK'NSTORE GROUP PLC

("Lok'nStore" or "the Group")

 

Preliminary results

for the year ended 31 July 2016

 

Lok'nStore Group Plc, a leading company in the UK self-storage market announces results for the year ended 31 July 2016.

 

Highlights of Lok'nStore Group plc results 2016

 

"Impressive performance from landmark stores - with more to come"

 

Robust growth in asset value and record financial results ahead of expectations

·      Adjusted Net Asset Value1 per share up 27.6% to £3.86  (2015: £3.02)

·      Group Revenue £16.06 million up 4.1 % (2015: £15.42 million) - like for like (LFL) 2  up 7.6%

·      Group Adjusted EBITDA3 £6.30million up 10.8% (2015: £5.68 million) - LFL  up 14.0%

 

Strong cash flow supports 12.5% dividend increase - progressive dividend policy

·      Annual dividend 9 pence per share up 12.5% (2015: 8 pence per share)

·      Cash available for Distribution (CAD) 4 18.1 pence per share up 17.7% (2015:15.4 pence)

 

Strong balance sheet, efficient use of capital, low debt

·      Net debt down to £23.5 million (2015: £25.3 million)

·      Loan to value ratio down to 20.8%5 (2015: 25.8%)

 

Self-storage business performing strongly

·      Self-storage revenue £13.44 million up 1.2% (2015: £13.28 million) - LFL up 5.1%

·      Adjusted Store EBITDA £7.49 6 million up 4.2 % (2015: £7.19 million) - LFL up 6.6%

·      Unit Pricing up 2.2 %  LFL

·      Unit occupancy up 2.0% LFL

 

Document storage profit more than doubles

·      Revenue £2.17 million up 11.1% (2015: £1.96 million)

·      Adjusted EBITDA £0.59million up 125% (2015: £0.26 million)

 

Growth from new stores and more new stores to come

·      3 Stores opened in Chichester, Bristol and Southampton

·      4 Sites acquired in Wellingborough, Gillingham, Hemel Hempstead and Broadstairs

·      New sites will add 14% to trading space

 

 

For all of the definitions of the terms used in the highlights above refer to the notes section below

 

Commenting on the Group's results, Andrew Jacobs CEO of Lok'nStore Group said, 

 

"2016 was an exciting year for Lok'nStore executing on all of our objectives across our strategy. Our adjusted net asset value per share has increased by 28% this year as a result of strong trading in existing stores, in combination with new store openings and the market's increasing appetite for well-located landmark self-storage centres.

"Our new store development programme continues to change the balance of our store portfolio with new and purpose built stores accounting for around 63% of the portfolio. During the year we opened three new stores which are all trading well and acquired sites for four further new landmark stores which will increase space a further 14%.

"Lok'nStore's low level of debt, our new banking facility on significantly improved terms and the strong growth of the business means that this rapid development programme can be financed from cash flow and existing bank facilities, while increasing the dividend by 12.5%."

 

 

 

Press Enquiries

 

Andrew Jacobs, CEO

 

 

 

Lok'nStore Group plc

 

 

 

Tel: 01252 521010

Ray Davies, CFO

Lok'nStore Group plc


Billy Clegg / Tom Huddart

 

Camarco

 

Tel: 0203 757 4980

Julian Blunt/ Giles Rolls

Corporate Finance

Alice Lane, Corporate Broking

 

finnCap Ltd

 

Tel: 020 7220 0500

 

 

 

 



 

Notes - What we mean when we say … (and why we use these key performance indicators (KPIs))

 

 

1.     NAV - Net Asset Value per share - Adjusted net asset value per share is the net assets adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the year-end.  The shares held in the Group's employee benefits trust and treasury shares are excluded from the number of shares.

 

2.     LFL- Like for like - This measure is used to give transparency on improvements in the operating business unrelated to the opening of new stores or closure of old stores therefore giving visibility of the true trading picture. On 30 September 2015, Lok'nStore sold its store in Swindon on a sale and manage-back basis. Like-for-like (LFL) growth figures for the period strip out the effect of this sale and the opening of the new Bristol store during the period.

 

3.     Group EBITDA - Earnings before interest, tax, depreciation and amortisiation - The measure is designed to give clarity on the operating cash flow of the business stripping away non-cash charges, finance charges and tax. Adjusted EBITDA is defined as EBITDA before losses or profits on disposal, share-based payments, acquisition costs, and exceptional items.

 

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 tax.  This measure is designed to give clarity to the capacity of the business to generate net operating cash that can be used to pay dividends to shareholders.

 

5.     LTV - Loan to value ratio - measures the debt of the business expressed as a percentage of total property assets giving a perspective on the gearing of the business. The calculation is based on net debt of £23.5 million (2015: £25.3 million) as a percentage of the total properties independently valued by JLL and including development land assets totalling £113.2 million (2015: £97.8 million) as set out in the Business and Financial Review section of the Strategic Report.

 

6.     Store adjusted EBITDA is Adjusted EBITDA (see 3 above) before the deduction of central and head office costs.

 

7.     Exceptional items - arose during the year from a further £2 million received from the disposal of the old Reading store site and £0.12 million of costs relating to the disposal of the old Swindon site(s).

 

8.     Gearing - refers to the level of a company's debt related to its equity capital, usually expressed in percentage form. It is a measure of a company's financial leverage and shows the extent to which its operations are funded by lenders versus shareholders. Gearing can be measured by a number of ratios and we use the debt-to-equity ratio in this document.

 

9.     Capex - capital expenditure 

 

 

 



 

Chairman's Review

 

Strong growth and robust capital structure

 

Lok'nStore Group has had an exciting year successfully implementing all of our strategy objectives. Revenue, profits and particularly asset values have moved ahead rapidly.  A substantial increase in the proportion of our store space which is new or purpose built will add further momentum to the growth of sales and profits with plenty of new capacity contributing to growth over the coming years.

 

The growth of sales, profit and asset values combined with innovative asset management has combined to achieve a reduction in the loan-to-value (LTV) ratio from 25.8% to 20.8%.  While we invested £7 million in stores this year this was more than covered by £8.5 million (gross) of capital receipts. 

 

To reflect this healthy performance we are proposing to increase the annual dividend pay-out by 12.5%. Cash available for distribution (CAD) per share which guides the dividend pay-out has moved ahead 17.7% to 18.1 pence per share.

 

Adjusted Net Asset Value (NAV) per share has also moved ahead sharply as our new valuers Jones Lang LaSalle (JLL) have reflected the strength of market demand for prime self-storage assets in their valuations, in addition to the uplift achieved from our new store openings and improved trading at existing stores. The year-end property valuation valued our trading stores at £112.7 million. With other land and property assets this equates to a total value of land and properties held of £116.2 million (2015: £97.8 million), an 18.8% increase in value.

 

Trading positive

 

Group revenue for the year was £16.06 million, up 4.1% year on year (2015: £15.42 million). Like for Like Revenue stripping out the effect of the sale of the Swindon operations and the opening of the new Bristol store was up 7.6%.

This strong revenue growth led to a 10.8% increase in Group Adjusted EBITDA profit.  Tight control over operating costs which are broadly unchanged has also contributed in pushing the Group's margins and profits to record levels.

 

New £40 million Banking Facility reflects financial strength of business

 

In January 2016 the Group agreed a new banking facility with Royal Bank of Scotland plc on significantly improved terms.  The new £40 million five year revolving credit facility replaced the existing facility which was due to expire in October 2016, and will provide funding for site acquisitions and working capital. The interest margin, non-utilisation fee and arrangement fee have all been significantly reduced leading to a large saving over the life of the facility.

 

Appointment of New Director demonstrates operational focus

 

The Group is pleased to announce the appointment of Neil Newman as an Executive Director.  Neil (39) brings significant managerial and operational experience to the Board having worked in the business since 2006.  He is currently Group Sales Director and retains this title on the Board.  Neil's contribution to Lok'nStore over the recent years has been significant and we look forward to his continuing contribution to our future growth at Board level.

 

Dividend

 

It is intended that the Company's future dividend payments will reflect the growth in the underlying cash generated by the business as reflected in the cash available for distribution (CAD) which is up 17.7% in the period.  The interim dividend will represent approximately one-third of the total for the year and final dividend two-thirds.

 

This year we are recommending a full year dividend of 9 pence per share. This is up 12.5% from 8 pence for the full year last year. The Group will therefore pay a final dividend of 6.33 pence per share on 21 December 2016 following the payment of an interim dividend of 2.67 pence per share in June 2016.

 

Performance and Outlook

 

The table below sets our achievements for the last year against our objectives:

 

 

Objective


 

Achievements in Financial Year 2016

 

1.     Continue to increase EBITDA per share over the coming years                

-      

Like for like (LFL) Group Adjusted EBITDA up 14% in 2016 and adjusted EBITDA per share 24.2 pence up 8%                           

2.     Fill existing stores and improve pricing                   

-      

LFL Self-storage occupancy up 2% and LFL self-storage pricing up 2.2% in 2016.

 

3.     Develop new stores on a self-funded basis

-      

During the year we generated a further £2 million from the disposal of the old Reading store site taking the total proceeds from the sale to well in excess of the cost of the new Reading store. We received £3.5 million for the sale and manage back of the Swindon store and we sold surplus land in Portsmouth for £3 million producing a total of £8.5 million - more than covering the £7 million spent on new store development in the year.

               

4.     Acquire new sites

-      

During the financial year to July 2016 we opened new stores in Bristol, Southampton and Chichester and acquired sites in Wellingborough, Gillingham, Hemel Hempstead and Broadstairs.

 

5.     Increase the number of stores we manage for third parties 

-      

In 2016 we sold our Swindon store on a sale-and-manage back contract, we opened a new managed store in Chichester and we signed contracts to manage further stores to be built in Hemel Hempstead and Broadstairs which will take total managed stores to 8.

               

6.     Grow our document storage business

-      

In the financial year 2016 the turnover of our document storage business grew 11.1% with number of boxes up 8.7% and number of tapes stored up 13.4%. Adjusted EBITDA profit was up by 97%. 

 

 

Following this year of solid successes we have created a strong platform for significant further growth for Lok'nStore.

 

Our main objective is to steadily increase the cash available for distribution (CAD) enabling a predictable growth of the dividend from a strong asset base and conservatively geared balance sheet.

 

In order to achieve this our focus will be on four key areas:

   

1.     Fill stores and improve pricing to continue increasing cash flow from the existing stores

2.     Acquire more sites to build new landmark stores

3.     Increase the number of stores we manage for third parties     

4.     Grow our document storage business

 

Finally, I should like to thank all of our employees for the contribution they have made to the Group's success. Lok'nStore is a robust business with a record of consistent profit growth and cash generation. With our experienced and dedicated staff we have built a firm base for the coming years and we are looking to the future with confidence.

 

 

 

 

Simon G Thomas

Chairman

14 October 2016

 



 

The Strategic Report

 

The Strategic Report covers the following areas of Lok'nStore's business:-

 

Ø Strategy

Ø The UK Self-Storage Market

Ø Lok'nStore's Business Model

Ø Operating and Marketing Review

Ø Property Review

Ø Financial Review

Ø Principal Risks and Uncertainties in operating our Business

 

 

Strategy

 

Lok'nStore Group Plc is one of the leading companies in the fast growing UK self-storage market. We opened our first self-storage centre in 1995 and have grown consistently over the last 20 years, currently operating 26 self-storage centres and two serviced document stores in Southern England. 

 

We have been listed on the AlM Market since June 2000 and the board accounts for 35% of the Total Voting Rights (TVR) in the ordinary shares of the Company.

 

We offer self-storage and serviced document storage from our own stores, and management services to third party self-storage owners. Self-storage is available to both household and business customers at our highly branded Lok'nStore centres. Each centre is prominently located mainly in the affluent South-East of England in large towns and cities.

 

We develop and operate self-storage centres in prominent locations broadly in South-East England. Our eye-catching buildings with their distinctive orange livery create highly visible landmarks which continue to be a big contributor of new business for Lok'nStore.

 

Demand for self-storage by both business and domestic customers is driven by a combination of specific need based on changing circumstances but also linked to local economic activity and prevailing consumer and business confidence.

 

People and business are more space constrained in the relatively expensive areas of the South East.  Barriers to entry in terms of competition for suitable sites and the difficulties in securing appropriate planning consents are also correspondingly higher.

 

Lok'nStore aims to build more landmark self-storage centres primarily across South-East England, to steadily increase the cash available for distribution (CAD) enabling a predictable growth of the dividend from a strong asset base and conservatively geared balance sheet. We believe there is the opportunity for significant further growth.

 

The UK self-storage market

 

There remains significant opportunity in the UK self-storage market where there are an estimated 882 self-storage facilities providing approximately 37.6 million square feet of storage space.  With a population estimated at 64 million people in the UK this equates to only 0.6 square feet per person, compared to 7.7 square feet per person in the USA (Self-Storage Association 2016 UK Annual Survey).

 

The sector remains in good health. The Cushman & Wakefield 2016 Report for the Self-Storage Association says, "The industry enjoyed a year of healthy growth in 2015 adding around 1.9 million sq. ft. of space on top of putting on around 1.3 million sq. ft. of space in 2014....". The Report estimates that…." total annual turnover for the UK self-storage industry in 2014 was around £440 million (2014: 402 million) from approximately 490 different operators."  When compared to Europe the UK has around 46% of the total space in Europe.

 

As awareness of self-storage continues to grow, more businesses and individuals will use self-storage in a market that is supply constrained.

 

 

 

 

 

 

 

 

 

 

 

Lok'nStore's Business Model

 

 

Attractive market dynamics

Ø UK self-storage penetration remains relatively low

Ø Limited new supply coming onto the market - Lok'nStore is bucking the trend with significant new store development

Ø Resilient through economic downturns

Ø Sector is growing

 

Our competitive strengths

Ø Recognised brand

Ø Prominent new stores on main roads

Ø Strong internet marketing delivering

Ø Excellent customer service

Ø Stores concentrated in the affluent South East England

Ø Strong balance sheet

Ø Experienced board with clear strategic direction

Ø Robust business model

 

Stable and rising income streams and low credit risk

Ø Over 9,200 customers

Ø Mix of business and domestic customers

Ø Low bad debt expense 

Ø Strong credit risk model 

 

Strong growth opportunities

 

Ø Demand increasing

Ø Under supplied market

 

Translation of the business model into high quality earnings

Ø The self-storage business is strongly cash generative on established stores

Ø Low technology & product obsolescence

Ø Lok'nStore has a track record of strong and growing cash generation driving a progressive dividend policy

 

Our over-riding objective

 

Ø To steadily increase the cash available for distribution (CAD) enabling a predictable growth of the dividend from a strong asset base and conservatively geared balance sheet. We believe there is the opportunity for significant further growth.

 

 

 

 



 

Strategic Report (continued) 

Operating and Marketing Review

 

Self-storage business performing strongly

 

·      Self-storage revenue £13.44 million up 1.2% (2015: £13.28 million) - LFL up 5.1%

·      Adjusted Store EBITDA £7.49  million up 4.2 % (2015: £7.19 million) - LFL up 6.6%

·      Management fees from Managed Stores up 150.1% at £439,254 (2015: £175,630) 

 

With costs firmly under control revenue growth translates into healthy profit growth. We again managed to increase the overall adjusted EBITDA margin across all stores by 1.6 percentage points from 53.7% to 55.3%. The adjusted Store EBITDA margins of the freehold stores were 64.6% (2015: 63.4%) and the leasehold stores 41.7% (2015: 40.7%).

 

Total adjusted store EBITDA in the self-storage business, a key performance indicator of profitability and cash flow of the business, increased 4.2% to £7.49 million (2015: £7.19 million). Like for like growth in store EBITDA was 6.6%.

 

At the end of July 2016, 34% of Lok'nStore's self-storage revenue was from business customers (2015: 33.5%) and 66% was from household customers, (2015: 66.5%). By number of customers 18.5% of our customers were business customers (2015: 18.9%) and 81.5% household customers (2015: 81.1%).

 

 

 







When fully developed

Portfolio Analysis and  Performance Breakdown

Number of stores

% of Valuation

% of Adjusted Store EBITDA

Adjusted Store EBITDA margin (%)

% lettable space

Lok owned

Number of stores

Total % lettable space

 

As at 31 July 2016

 

 





 

 


Freehold and long leasehold

12

85.0

69.5

60.7

62.6

14

54.2

Operating Leaseholds 1

8

14.7

30.5

41.7

37.4

8

26.3

Pipeline (Freehold)

2

0.3

-

-

-

-

-

Managed Stores (trading)    

6

-

-

-

-

8

19.5

Managed Stores  (under development)

2

-

-

-

-

-

-

Total

30

100

100

55.3

100

30

100

 

1            The average unexpired term of the Group's operating leaseholds is approximately 11 years and 8 months as at 31 July 2016

(12 years and 8 months: 31 July 2015).

 

Ancillary Sales

Ancillary sales which consist of boxes and packaging materials, insurance and other sales increased 5.3 % over the year accounting for 11.2 % of self-storage revenues (2015: 10.8%). 

 

We continue to promote our insurance to new customers with the result that 91% (2015: 92%) of our new customers purchased our insurance over the year and this has resulted in an increase in the percentage of our customers who are insured through Lok'nStore to 80% (2015: 78%).

 

Document storage profit more than doubles

 

·      Revenue £2.17 million up 11.1% (2015: £1.96 million)

·      Adjusted EBITDA £0.59 million up 124.3% (2015: £0.26 million)

·      Year-end boxes stored up 8.7% 

·      Year-end tapes stored up 13.4% 

 

Revenue and adjusted EBITDA have increased in our document storage business as operating metrics improve in response to the Company's more customer facing marketing stance. This approach has resulted in excellent customer feedback and puts us in a good position to win new business, with boxes stored increasing 8.7% and tapes stored up 13.4%. 

 

 

 

 

 

 

 

 

Strategic Report (continued) 

Operating and Marketing Review

 

Last year we consolidated our serviced document warehouse capacity, closing one of the three storage sites. This year we have undertaken a further fit-out of new warehouse racking in our site in Olney and we now have the capacity to significantly increase the number of boxes stored within our existing premises. As part of this strategy, additions of £0.34 million were made in the current year to fixtures, fittings and equipment (2015: £0.46 million).

 

Managed Store Service

Over recent years we have been developing our management services to third party storage owners. In the year we sold one store to a third party owner on a sale-and-manage back basis, we opened a new managed store and we acquired two new sites for management contract clients taking our total managed stores to eight.

 

For managed stores we receive a standard monthly fee, a performance fee based on certain objectives and a fee on successful exit. In some cases we charge acquisition, planning and branding fees. This allows us to earn revenue from our expertise and knowledge of the self-storage industry without having to commit our capital, to amortise various fixed central  costs over a wider operating base, and to drive more visits to our website moving it up the rankings and benefitting all the stores we both own and manage.

 

In 2016 we earned £439,254 (2015: £175,630) from our managed stores in management fees, a substantial contribution to our profit.

 

Security

The safety and security of our customers and their goods remains our highest priority. We invest in CCTV, intruder and fire alarm systems and the remote monitoring of our stores out of hours. Importantly all of our stores are manned during opening hours.

 

Marketing

During the year our marketing efforts have been focused on the internet and the presentation of our buildings to attract passing traffic.  Total enquiries were up  6.6% across all stores. 

 

Visibility of our stores remains very important to our marketing efforts. With their prominent positions, distinctive design and bright orange elevations, our stores raise the profile of the Lok'nStore brand. We continue to invest in new signage and lighting at our existing stores as well as creating striking designs for our new landmark stores to promote and enhance their visual prominence.

 

The internet continues to be the main media channel for our advertising. Our website at www.loknstore.co.uk is one of the most established self-storage websites in the UK.  The website was significantly upgraded during the year to further improve customer experience across desktop, tablet and smartphone devices.  This is a very dynamic area and we are committed to its continued development.  We believe the internet provides a strong competitive advantage for the major operators such as Lok'nStore with large marketing budgets compared with those of the smaller self-storage operators.

 

Property Review

 

Growth from new stores and more new stores to come

 

·      New Bristol, Southampton and Chichester stores opened - early trading strong

·      4 new sites acquired adding 14% more space

·      New and purpose built stores lettable space 63.5% of portfolio

·      Continually reviewing new store opportunities

 

Strong cash flows and solid asset base create opportunities

Lok'nStore's strong operating cash flow, solid asset base, and tactical approach to its store property portfolio provide the Group with opportunities to improve the terms of its property usage in all stages of the economic cycle. Our focus on the trading business gives us many opportunities and our property decisions are always driven by the requirements of the trading business. Lok'nStore has 26 freehold, leasehold and managed stores trading. Of these, 20 stores are owned with 12 freehold or long leasehold, 8 leasehold and 6 further sites operate under management contracts.

 

Acquisition of two landmark sites for new stores

Located in Wellingborough and Gillingham, the two sites are in prominent retail locations with large catchment areas and little established competition.  The total capital investment of approximately £10 million will be financed from cash flow and the new banking facility signed in January 2016.  The stores are scheduled to be open at the end of 2017.  When developed these stores will add around 110,000 sq. ft. to the trading portfolio increasing the company's capacity of owned stores by 10%.  They will take the proportion of Lok'nStore's space which is new or purpose built to 63.5%.

 

 

 

 

 

 

Strategic Report (continued) 

Property Review

 

 

Two new stores to be developed under management contracts

Two new management contracts were signed in July 2016 to develop and operate two new stores.  The new sites are in prominent retail locations in Hemel Hempstead and Broadstairs.  Opening for both stores is scheduled for 2017.  When developed, these Managed Stores will add around 70,000 sq. ft. to the trading portfolio.

 

Efficient use of capital

 

·      Additional £2 million received for sale of old Reading store

·      £3 million received for sale of Portsmouth development land

·      Sale and manage-back of Swindon store for £3.5 million

·      Total disposal proceeds of £8.5 million (gross)

 

These capital receipts, combined with the managed store model enable Lok'nStore to continue to rapidly grow the operating footprint of the business while firmly capping borrowing and leverage.

 

Store portfolio

These projects are part of our strategy of actively managing our store operating portfolio to ensure we are maximising both trading potential and asset value. This includes strengthening our distinctive brand, increasing the size and number of our stores and replacing stores or sites where it will increase shareholder value. We prefer to own freeholds if possible, and where opportunities arise we will seek to acquire the freehold of our leasehold stores. However we are happy to take leases on appropriate terms and benefit from the advantages of a lower entry cost, with further options to create value later in the site's development. Our most important consideration is always the trading potential of the store rather than the property tenure.

 

With Wellingborough, Gillingham, Hemel Hempstead and Broadstairs set to open in 2017 this will increase the number of stores we operate to 30 and will capitalise on our efficient operating systems and growing internet marketing presence.

 

At the year end the average length of the 7 leases which were valued at July 2015 decreased by 12 months to 11 years and 8 months (2015: 12 years and 8 months).  7 out of 8 of our leasehold stores are inside the Landlord and Tenant Act providing us with a strong security of tenure. The leaseholds produced 30.5% of the total store EBITDA in the year (2015: 32.1%).

 

Store property assets and Net Asset Value

 

·      Total assets now circa £134 million (2015: £111 million)

·      Adjusted net asset value of £3.86 per share up 27.6% on last year

 

 

Lok'nStore's freehold and operating leasehold stores have been independently valued by Jones Lang LaSalle (JLL) (2015 : Cushman & Wakefield) at £112.7 million (NBV £ 46.9 million) as at 31 July 2016 (2015: £88.9 million: NBV £28.1 million). The change in property valuation is referred to further in the Financial Review section of the Strategic Report and is detailed in note 10b of the notes to the financial statements. 

 

Adding our stores under development at cost and land and buildings held at Director valuation, our total property valuation is £116.2 million (2015: £97.8 million). This translates into an adjusted net asset value of £3.86 per share up 27.6% on last year (2015: £3.02 per share).

 

The increase in the property values of properties which were also valued last year was 19.2%



 

Strategic Report (continued) 

Financial Review 

 

Record financial results on all measures

 

·      Group Revenue £16.06 million up 4.1 % (2015: £15.42 million) - like for like (LFL) up 7.6%

·      Group Adjusted EBITDA  £6.30million up 10.8% (2015: £5.68 million) - LFL  up 14.0%

·      Operating profit (pre-exceptional items7) £4.41 million up 14.1% (2015: £3.86 million) LFL 18.3%

·      Operating profit £6.23 million up 70.3% (2015: £3.66 million)

·      Profit after taxation £4.28 million up 117% (2015 : £1.97 million)

 

Trading

Total revenue for the year grew 4.1% to £16.1 million (2015: £15.42 million). Group operating profit for the year is up 70% to £6.23 million (2015: £3.66 million). 

 

Taxation

The Group will pay tax on its earnings at an effective tax rate of 20% and has made a tax provision of £0.6 million. (2015: £0.54 million)

 

Earnings per share

Basic earnings per share (EPS) were 16.60 pence (2015: 7.84 pence per share). Diluted EPS were 16.24 pence (2015: 7.64 pence per share). If 2016 figures are adjusted to eliminate the 2016 property sale gain of £1.94 million, the 2016 EPS is adjusted to 9.08 pence per share and the 2016 diluted EPS to 8.88 pence per share.

 

Treasury shares

The Group did not purchase any Treasury shares during the year. We are proposing to renew our ongoing authority to buy back shares at this year's AGM to ensure the Group continues to have flexibility to make further purchases should it be considered to be in the best interests of shareholders to do so.

 

Operating costs

Through disciplined management we have again reduced property costs and contained overall cost growth to less than 0.1% despite staff costs increasing by 1.1% through a combination of strong sales bonuses and additional national insurance costs arising on the exercise of employee share options. Group operating costs amounted to £9.4 million for the year, a 0.1% increase from last year (2015: £9.4 million). Overall operating costs as a percentage of revenue have decreased and represent 58.9% as a cost ratio. (2015: 61.2%).

 

Group

Increase/

(Decrease) in costs %


2016

£'000


2015

£'000

Property costs

(4.6)


3,913


4,101

Staff costs

1.0


4,232


4,188

Overheads

7.6


1,128


1,049

Distribution costs

(10.4)


170


190

Total

0.1%


9,443


9,437

 

Strong balance sheet, efficient use of capital, low debt

 

·      New £40 million Bank facility on lower interest margin

·      Net debt down to £23.5 million (2015: £25.3 million)

·      Loan to value ratio (LTV)  down to 20.8% (2015: 25.8%) 

·      Gearing down

 

New £40 million Bank facility on improved terms

 

Following the agreement of new facilities with Royal Bank of Scotland on improved terms the new £40 million five year revolving credit facility replaced the existing facility which was due to expire in October 2016, and will provide funding for site acquisitions as well as working capital for the development of the business over the medium term. 

 

Under this new five year facility the Group is not obliged to make any repayments prior to its expiration in January 2021 and further provides during the term of the facility for the possibility of an optional extension of the five year term by a maximum of a further two years. The facility also provides for the possibility of an additional accordion of up to £10 million which if taken up during the term of the facility will increase facilities available to £50 million.

 

 

 

 

 

 

 

 

Strategic Report (continued) 

Financial Review 

 

The following interest rates applied during the financial year:

 


Up to 14 January 2016

From 15 January 2016


Lloyds Bank plc

Royal Bank of Scotland plc (RBS)

Interest margin

2.35%-2.65%

1.40%-1.65%

Non-utilisation charge

0.94%.

0.56%.

 

At current levels of borrowing this translates into a 0.95% points saving on outstanding borrowings and 0.38% saving on the unborrowed balance of the facility. At current borrowing levels this would equate to a £316,249 saving on an anualised basis.

 

Management of interest rate risk

Lok'nStore has £28.8 million of debt currently drawn against its £40 million revolving credit facility. £20 million is at a fixed interest rate with £10 million fixed rate swap at a fixed 1 month sterling LIBOR rate of 1.2% and £10 million swap at a fixed 1 month sterling LIBOR rate of 1.15%. With 1 month LIBOR around 0.5% for the year, this leaves a balance of £8.8 million floating at a current all-in rate of around 2.56% and results in an overall weighted average rate over the financial year of 2.88.%. The £20 million fixed rate swap is an interest rate hedge and its fair value on a mark-to-market basis fluctuates. Its current fair value of £0.037 million is currently stated as a current liability (2015: non-current liability: £0.12 million). Both swaps run up to 20 October 2016 whereupon they lapse and the Groups all-in floating rate will drop to (currently) 1.67%.

 

Cash flow and financing

At 31 July 2016 the Group had cash balances of £5.3 million (2015: £2.4 million). Cash inflow from operating activities before investing and financing activities was £3.8 million (2015: £6.0 million). As well as using cash generated from operations to fund some capital expenditure, the Group has a five year revolving credit facility. This provides sufficient liquidity for the Group's current needs.  Undrawn committed facilities at the year-end amounted to £11.2 million (2015: £12.3 million).

 

Gearing 

There was £28.8 million of gross borrowings (2015: £27.7 million) representing gearing of 32.9 % (2015: 47.7%) on net debt of £23.5 million (2015: £25.3 million).  If leaseholds, which are stated at depreciated historic cost in the statement of financial position, are stated at their Jones Lang LaSalle (JLL) valuation, gearing drops to 27.6% (2015: 39.2%). If the deferred tax liability carried at year- end of £15.4 million is excluded gearing drops further to 23.4% (2015: 33.0%).

 

Strong cash flow supports 12.5% dividend increase

·      Annual dividend 9 pence per share up 12.5% (2015: 8 pence per share)

·      Cash available for Distribution (CAD) from operations £4.71 million up 20.8% (2015: £4.98 million)

·      Cash available for Distribution (CAD) of 18.1 pence per share up 17.7% (2015: 15.4 pence per share)

 

Cash available for Distribution (CAD) 

Cash available for Distribution (CAD) provides a clear picture of ongoing cash flow available for dividends. To illustrate this fully the table below shows the calculation of CAD.

 

Analysis of Cash Available for Distribution (CAD)



CAD



Year ended 31 July 2016

Year ended 31 July 2015

 

Group Adjusted EBITDA


6,295

5,682

Less: Net finance costs (per Income Statement)


(735)

(1,003)

Capitalised maintenance expenses


(110)

(113)

New Works Team


(134)

(133)

Current tax


(606)

(535)

Total deductions


(1,585)

(1,784)

Cash Available for Distribution


4,710

3,898

 

 

 




Increase over last year


20.8%








Number

Adjusted shares in issue


26,019,241

25,356,688

CAD per share (annualised)


18.1p

15.4p

Increase in CAD per share


17.7%


 

 

Strategic Report (continued) 

Financial Review 

 

Capital expenditure and capital commitments

 

The Group has grown through a combination of new site acquisition, existing store improvements and relocations, and has concentrated on extracting value from its existing assets and developing through collaborative projects and management contracts.

 

Capital expenditure during the year totalled £6.99 million (2015: £3.58 million).  This capital expenditure was more than fund by the capital receipts of £8.5 million.

 

The Group has capital expenditure contracted but not provided for in the financial statements of £1.10 million (2015: £3.03 million) .  The Company was also committed to complete on its new Wellingborough site following completion of all relevant planning matters.

 

Statement of Financial Position

 

Net assets at the year-end were £71.5 million (2015: £53.0 million). Freehold and long leasehold properties independently valued at 31 July 2016 were £96.1 million (2015: £74.1 million). Refer to the table of property values below.

 

Market Valuation of Freehold and Operating Leasehold Land and Buildings

 

It is the Group's policy to commission an independent external valuation of its properties at each year-end.  In previous years this work had been undertaken by Cushman & Wakefield (C&W). This year the Group selected Jones Lang LaSalle Limited (JLL) to undertake this work due to their greater exposure to the transactions undertaken in the market.

 

Our eleven freehold properties and one long leasehold are held in the statement of financial position at fair value and have been valued by JLL. Refer to note 10b) - property, plant and equipment and also to the accounting policies for details of the fair value of trading properties.

 

The valuations of the leasehold stores held as 'operating leases' are not taken onto the statement of financial position. However seven of these have also been valued and these valuations have been used to calculate the adjusted net asset value position of the Group. The value of our operating leases in the valuation totals £16.6 million (2015: £14.8 million) and we have reported by way of a note the underlying value of these leasehold stores in our revaluations and adjusted our Net Asset Value (NAV) calculation accordingly to include their value. This ensures comparable NAV calculations.

 

A deferred tax liability arises on the revaluation of the properties and on the rolled-over gain arising from the disposal of some trading stores. It is not envisaged that any tax will become payable in the foreseeable future on these disposals due to the availability of rollover relief.  The proceeds from the sale of the Reading store sold with the benefit of its permission for residential development have been reinvested into new store development.  It is not the intention of the Directors to make any other significant disposals of operational stores, although individual disposals may be considered where it is clear that added value can be created by recycling the capital into other opportunities.

 

The Board will continue to commission independent valuations on its trading stores annually to coincide with its year-end reporting.

 

Analysis of Total Property Value


No of stores/sites

31 July 2016 Valuation

£

No of stores/sites

31 July 2015 Valuation

£

Freehold & Long Leasehold valued by JLL (2015 C&W) 1

12

96,125,000

12

74,110,000

Short Leasehold valued by JLL (2015 C&W) 2

7

16,575,000

7

14,760,000

Freehold land and buildings at Director valuation 3

1

3,000,000


-

Subtotal

20

115,700,000

19

88,870,000

Sites in development at cost

2

457,826

4

8,887,858

Total

22

116,157,826

23

97,757,858

 

1   Includes related fixtures and fittings (refer note 10b)

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 11 years and 8 months at the date of the 2016 valuation (2015 valuation: 12 years and 8 months).  One leasehold store is not valued by JLL due to the relatively short unexpired period of its lease.

3   For more details (refer note 10b - Directors valuation)

 

Total freeholds account for 85.7% of property values (2015:84.9%).

 

 



 

Strategic Report (continued) 

Financial Review 

 

 

Adjusted Net Asset Value per Share            

·      Adjusted Net Asset Value per share  up 27.6% to £3.86  (2015: £3.02)

 

Adjusted net assets per share is the net assets of the Group business adjusted for the valuation of leasehold stores and deferred tax divided by the number of shares at the year-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 July 2016 the adjusted net asset value per share (before deferred tax) increased an impressive 27.6% to £3.86 from £3.02 last year.  This substantial increase is a result of higher property values as our new valuers recognised the strength of our landmark stores, cash generated from operations and additional sale proceeds from the disposal of our Reading site, offset in part by an increase in the shares in issue due to the exercise of share options by management and staff during the year.

 

 

 

Analysis of net asset value (NAV)

31 July

2016

£'000

31 July

2015

£'000

 

Net assets

Adjustment to include operating/short leasehold stores at valuation

Add: JLL leasehold valuation (2015: C & W)

Deduct: leasehold properties and their fixtures and fittings at NBV

 

71,475

 

16,575

(3,065)

 

52,969

 

14,760

(3,339)


84,985

64,390

 

Deferred tax arising on revaluation of leasehold properties1

 

(2,432)

 

 

(2,284)

 

 

Adjusted net assets

 

82,553

 

62,106

 

Shares in issue

 

Number

 

Number

Opening shares in issue

Shares issued for the exercise of options

28,447

662

27,809
638

Closing shares in issue

Shares held in treasury

Shares held in EBT

29,109

(2,467)

(623)

28,447

(2,467)

(623)

 

Closing shares for NAV purposes

 

26,019

 

25,357

 

Adjusted net asset value per share after deferred tax provision

 

£3.17

 

£2.45




Adjusted net asset value per share before deferred tax provision



 

Adjusted net assets

 

82,553

 

62,106

Deferred tax liabilities and assets recognised by the Group

15,361

12,252

 

Deferred tax arising on revaluation of leasehold properties1                                                           

 

2,432

 

2,284

 

Adjusted net assets before deferred tax

 

100,346

 

76,642

 

Closing shares for NAV purposes

 

26,019

 

25,357

 

Adjusted net asset value per share before deferred tax provision

 

£3.86

 

£3.02

 

 

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.

 

 

Summary

 

Lok'nStore is a robust business with low debt and gearing which generates a rapidly growing cash flow from its substantial asset base. The UK self-storage market is still immature and presents an excellent opportunity for further growth of the business.

 

 



 

Strategic Report (continued) 

Principal Risks and Uncertainties in operating our Business

 

Finance

Lok'nStore finances its current needs through a combination of strong operational cash flows and debt.

 

Cash deposits are placed with Royal Bank of Scotland plc on a no-notice treasury deposit account which tracks base rate and yields a rate equivalent to RBS bank base rate on all deposited balances.  The Group's cash position is reviewed daily and cash is transferred daily between these accounts and the Group's operational current accounts as required.

 

The main risks arising from the Group's financial instruments are interest rate risk and liquidity risk. The policies for managing these risks are regularly reviewed and agreed by the Board. Full details are set out in the Financial Review.  Further information on our treasury arrangements is set out in note 16.

 

The financial risk management objectives and policies of the Group, along with details of exposure to liquidity and cash flow risk are set out below and in note 16 (Financial Instruments) to the financial statements.

 

Risk Management

Risk management has been a fundamental part of the development of Lok'nStore. We maintain a risk register which identifies and categorises our risks and provides an assessment of risk based on a combination of 'likelihood' and 'consequences and impact' on the business. This is reviewed regularly by management and the Board and underpins our structured approach to identifying, assessing and controlling risks that emerge during the course of operating the business. Its purpose is to support better decision-making through understanding the risks inherent in both the day-to-day operations and the strategic direction of the Group and their likely impact. This is a continuing and evolving process as we review and monitor the underlying risk elements relevant to the business.

 

Market Risk

Self-storage is a developing market with further opportunities for significant growth. Awareness of self-storage and how it can be used by customers is well understood in the United States, but historically has been relatively low throughout the UK. Survey and anecdotal evidence suggest this awareness is now rising in the UK. The rate of growth in branded self-storage operations in good trading locations continues to be limited by the challenge of acquiring sites at appropriate prices and obtaining planning permission.

 

Lok'nStore invests in prime locations where its criteria for site selection are met and which will enable it to develop high quality stores which are prominent with high visibility and strong branding. We believe this will place us in a strong trading position and may discourage competitors from entering that local market. However it is possible that Lok'nStore may be unable to execute this strategy which will inhibit its growth. Further it is possible that an increasing number of competitors in the industry may negatively impact Lok'nStore's existing operations.

 

We have a large customer base spread across the stores including those customers who have used Lok'nStore regularly over the years. Many of these periodically return as their circumstances and their storage needs change. Across all of the stores we operate self-storage customers are a broad mix of both domestic and business. 

 

Property Risk

The acquisition of new sites for development into self-storage centres is a key strategic objective of the business. We will continue to face significant competition for site locations from other uses such as hotels, car showrooms and offices as well as from the other self-storage operators.

 

The process of gaining planning permissions remains challenging. Lok'nStore may take on the risk of obtaining planning permission when acquiring sites in the face of competitive bids. In these cases we are obliged to undertake the planning, environmental and other property due diligence under tight timescales which creates greater risk in the process.

 

Nevertheless Lok'nStore's management has gained significant experience in operating in this property environment, acquiring sites on main roads in prominent locations and obtaining appropriate planning permissions.

 

We manage the construction of our properties carefully. The building of each store is handled through a design and build contract with established contractors. We employ an external team of professionals to monitor the progress of each development. The fitting of mezzanine floors and steel units is generally managed in-house using an established external professional team of sub-contractors who understand Lok'nStore's particular specifications.

 

Credit Risk

Lok'nStore's self-storage credit model is strong with customers paying four weekly in advance in addition to an initial four weeks rental deposit. We retain a legal lien over customers' goods which can be sold to cover their unpaid bills.  Credit control remains tight with only £33,210 (2015: £38,891) of bad debts recognised during the year representing around 0.21% of Group revenue (2015: 0.25%). There was £8,116 of additional costs associated with recovery (2015: £8,714). Given the tight credit conditions in the wider economy our own credit control indicators are resilient, showing no appreciable signs of weakening during the year.

 

 

 

 

Strategic Report (continued) 

Principal Risks and Uncertainties in operating our Business

 

 

Tax Risk

We regularly monitor proposed and actual changes in legislation in the tax regime affecting principally corporation tax, capital gains tax, VAT and Stamp Duty Land Tax (SDLT). We work with our professional advisors and through trade bodies to understand and mitigate or benefit from their effects.

 

Corporate Social Responsibility and Employee Risk

The Corporate Social Responsibility and Employee Risk within the business are discussed within the Corporate Responsibility Report.

 

Reputational Risk

Lok'nStore's business reputation is very important to the Group. Our management and staff work hard to protect and develop it. We always try to communicate clearly with our customers, suppliers, local authorities and communities, employees and shareholders and to listen and take account of their views. The Lok'nStore Group websites (www.loknstore.co.uk  www.loknstore.com and www.saracendatastore.co.uk) are important avenues of communication and a source of information for employees, customers and investors. Employee communication is augmented by quarterly staff newsletters.

                                                                                                 

Approved by the Board of Directors and authorised for issue on 14 October 2016 and signed on its behalf by:

 

                                     

 

 

 

Andrew Jacobs                                                  Ray Davies

Chief Executive Officer                                       Finance Director

 



 

Consolidated Statement of Comprehensive Income

For the year ended 31 July 2016

 


Notes

2016

£'000

2015

£'000

Revenue

 

1a

16,056

15,424





Total property, staff, distribution and general costs

2a

(9,761)

(9,742)

 

Adjusted EBITDA1


6,295

5,682

 

Amortisation of intangible assets


(165)

 (165)

Depreciation and loss on sale


 (1,537)

 (1,440)

Equity settled share based payments


(182)

 (211)

Irrecoverable property costs


-

 (209)

Property disposal costs

2c

(123)

-

Net settlement proceeds

2c

1,940

-



(67)

(2,025)





Operating profit1


6,228

          3,657





Finance income

3

313

141

Finance cost

4

(1,048)

(1,144)





Profit before taxation

5

5,493

2,654

Income tax expense

7

(1,211)

(686)





Profit for the year              


4,282

1,968





Profit attributable to:




Owners of the parent

22

4,282

1,968





Other Comprehensive Income




Items that will not be reclassified to profit and loss




Increase in property valuation


17,651

8,009

Deferred tax relating to change in property valuation


(2,387)

(1,578)



15,264

6,431

Items that may be subsequently reclassified to profit and loss




Increase / (decrease) in fair value of cash flow hedges


83

(170)

Deferred tax relating to cash flow hedges


(21)

38



62

(132)

Other comprehensive income


15,326

6,299

Total comprehensive income for the year


19,608

8,267

Attributable to owners of the parent


19,608

8,267





Earnings per share




Basic

9

16.60p

7.84p

Diluted

9

16.24p

7.64p

 

1  Adjusted EBITDA and operating profit are defined in the accounting policies section of the notes to the financial statements.

 



 

Consolidated Statement of Changes in Equity

For the year ended 31 July 2016 

 


Share

capital

£'000

Share

premium

£'000

Other

reserves

£'000

Revaluation

reserve

£'000

Retained

earnings

£'000

Total

equity

£'000








1 August 2014

279

1,801

8,595

26,478

8,057

45,210

 

Profit for the year

-

-

-

-

1,968

1,968

Other comprehensive income:







Increase in property valuation net of deferred tax

-

-

-

6,431

-

6,431

Increase in fair value of cash flow hedges net of deferred tax

-

-

(132)

-

-

(132)

Total comprehensive income for the year

-

-

(132)

6,431

1,968

8,267

 

Transactions with owners:







Dividend paid

-

-

-

-

(1,847)

(1,847)

Share based payments

-

-

211

-

-

211

Transfers in relation to share based payments

-

-

(298)

-

298

-

Deferred tax credit relating to share options

-

-

309

-

-

309

Exercise of share options

6

813

-

-

-

819

Total transactions with owners

6

813

222

-

(1,549)

(508)

 

Transfer realised gain on asset disposal

-

-

-

(421)

421

-

Transfer additional dep'n on revaluation net of deferred tax

-

-

-

(249)

249

-

 

31 July 2015

285

2,614

8,685

32,239

9,146

52,969

 

Profit for the year

-

-

-

-

4,282

4,282

Other comprehensive income:







Increase in property valuation net of deferred tax

-

-

-

15,264

-

15,264

Decrease in fair value of cash flow hedges net of deferred tax

-

-

62

-

-

62

Total comprehensive income for the year

-

-

62

15,264

4,282

19,608

 

Transactions with owners:







Dividend paid

-

-

-

-

(2,147)

(2,147)

Share based payments

-

-

182

-

-

182

Transfers in relation to share based payments

-

-

(401)

-

401

-

Deferred tax credit relating to share options

-

-

(96)

-

-

(96)

Exercise of share options

6

953

-

-

-

959

Total transactions with owners

6

953

(315)

-

(1,746)

(1,102)

 

Transfer realised gains on asset disposal

-

-

-

(1,639)

1,639

-

Transfer additional dep'n on revaluation net of deferred tax

-

-

-

(262)

262

-

 

31 July 2016

291

3,567

8,432

45,602

13,583

71,475



Company Statement of Changes in Equity

For the year ended 31 July 2016

                                                 

 

 


Share

capital

£'000

Share

premium

£'000

Retained

reserves (deficit)

£'000

Other

reserves

£'000

Total

£'000







31 July 2014

279

1,801

(167)

2,267

4,180

Loss for the year

-

-

(139)

-

(139)

Equity settled share based payments

-

-

-

211

211

Transfer in relation to share based payments

-

-

298

(298)

 

-

Exercise of share options

6

813

-

-

819

31 July 2015

285

2,614

(8)

2,180

5,071

 

Loss for the year

-

-

(276)

-

(276)

Equity settled share based payments

-

-

-

182

182

Transfer in relation to share based payments

-

-

401

(401)

 

-

Exercise of share options

6

953

-

-

959

31 July 2016

291

3,567

117

1,961

5,936

 

 



 

 

Consolidated Statements of Financial Position

31 July 2016                                                                                 Company Registration No. 04007169

                                                                                                                                                    


Notes

Group

2016

£'000

Group

2015

£'000

Company

2016

£'000

Company

2015

£'000

Assets






Non-current assets






Intangible assets

10a

3,593

3,758

-

-

Property, plant and equipment

10b

104,363

87,802

-

-

Investments

11

-

-

2,288

2,106

Development loan capital

12

3,159

2,779

Amounts due from subsidiary undertakings

26

-

-

3,648

2,965



111,115

94,339

5,936

5,071

Current assets






Inventories

13

165

141

-

-

Trade and other receivables

14

4,952

2,479

-

-

Cash and cash equivalents

16

5,335

2,435

 

Total current assets


 

10,452

5,055

-

-

Total assets


121,567

99,394

5,936

5,071







Liabilities






Current liabilities






Trade and other payables

15

(5,794)

(5,971)

-

-

Current tax liabilities


(173)

(535)

-

-

Derivative financial instruments

17b

(37)

-

-

-









(6,004)

(6,506)

-

-

Non-current liabilities






Borrowings

17a

(28,727)

(27,548)

-

-

Derivative financial instruments

17b

-

(119)

-

-

Deferred tax

18

(15,361)

(12,252)

-

-



(44,088)

(39,919)

-

-







Total liabilities


(50,092)

(46,425)

-

-

Net assets


71,475

52,969

5,936

5,071

 

 

 

Equity attributable to owners of the parent






Called up share capital

19

291

285

291

285

Share premium


3,567

2,614

3,567

2,614

Other reserves

21a

8,432

8,685

1,961

2,180

Retained earnings / (deficit)

22

13,583

9,146

117

(8)

Revaluation reserve


45,602

32,239

 

Total equity attributable to owners of the parent


 

71,475

 

52,969

5,936

5,071

                                                                                                                                                                                                      

Approved by the Board of Directors and authorised for issue on 14 October 2016 and signed on its behalf by:

                                               

 

                                                               

Andrew Jacobs                                                  Ray Davies

Chief Executive Officer                                       Finance Director



Consolidated Statement of Cash Flows

For the year ended 31 July 2016

 


Notes

2016

£'000

2015

£'000

Operating activities




Cash generated from operations

24a

3,774

5,984

Income tax paid


(961)

(338)

Net cash generated from operations


2,813

5,646

 

Investing activities




Development loan capital


(380)

(2,650)

Purchase of property, plant and equipment


(6,988)

(3,583)

Proceeds from disposal of property, plant and equipment


8,399

2,901

Interest received


14

12

Net cash generated from investing activities


1,045

(3,320)

 

Financing activities

Proceeds from new borrowings

Repayment of borrowings


 

28,816

(27,701)

 

 

 

-

-

Finance costs paid


(885)

(1,041)

Equity dividends paid


(2,147)

(1,847)

Proceeds from issue of ordinary shares (net)


959

819

Net cash used in financing activities


 (958)

 (2,069)





Net increase in cash and cash equivalents in the year


2,900

257

Cash and cash equivalents at beginning of the year


 

2,435

 

2,178

Cash and cash equivalents at end of the year


 

5,335

 

2,435

 

No statement of cash flows is presented for the Company as it had no cash flows in either year.

 

 



Accounting Policies

 

General Information

Lok'nStore Group plc is an AIM listed company incorporated and domiciled in England and Wales. The address of the registered office is One London Wall, London EC2Y 5AB, UK.

 

The preliminary financial information does not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 but is derived from statutory accounts for the years ended 31 July 2016 and 31 July 2015, both of which are audited. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 31 July 2016. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRSs.

 

The statutory accounts for the year ended 31 July 2016 will be delivered to the Registrar of Companies following the Company's Annual General Meeting and can be obtained from the investor section of the Company's website at http://www.loknstore.co.uk. Statutory accounts for the year ended 31 July 2015 have been filed with the Registrar of Companies. The auditor's report for the year ended 31 July 2016 was unqualified, did not include a reference to any matter to which the auditor drew attention by way of emphasis without qualifying their report and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

 

Basis of accounting

The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) Interpretations as adopted by the European Union and comply with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretation Committee relevant to its operations and effective for accounting periods beginning on or after 1 August 2015.

 

The financial statements have been prepared on the historic cost basis except that certain trading properties and derivative financial instruments are stated at fair value.

 

Adoption of new and revised standards

The following relevant new standards, interpretations and amendments have been adopted in the year but have no significant impact.

 

IFRS 10: Consolidated Financial Statements

IFRS 11: Joint Arrangements

IFRS 12: Disclosure of Interest in Other Entities

Amendment to IAS 19: Employee Benefits

Amendment to IAS 27: Separate Financial Statements

Amendment to IAS 28: Investments in Associates and Joint Ventures

Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities

Amendment to IAS 36: Impairment of Assets

Amendment to IAS 39: Financial Instruments: Recognition and Measurement

 

Standards in issue but not yet effective

At the date of approval of these financial statements, the following principal standards and interpretations which were in issue but not yet effective:

 

 

Standards, interpretations and amendments

Not Yet Endorsed

 

Effective date: Periods commencing on or after

IFRS 9

Financial Instruments

1 Jan 2018

IFRS

10 and

IAS 28

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

 

1 Jan 2016

 

IFRS11

Accounting for Acquisitions of Interests in Joint Operations

 

1 Jan 2016

IFRS15

Revenue from Contracts with Customers

 

1 Jan 2018

IAS 16 and IAS 38

Clarification of Acceptable Methods of Depreciation and Amortisation

 

1 Jan 2016

IAS 27

Equity Method in Separate Financial Statements

 

1 Jan 2016

IAS 1

Disclosure Initiative

1 Jan 2016

IFRS 16

Leases

1 Jan 2019

 

 

Subject to the adoption in due course of IFRS 16, The directors do not anticipate that the adoption of these Standards will have a significant impact on the financial statements of the Group. With regard to IFRS 16, the Directors are currently assessing the impact on the financial statements.

 

There were no other Standards or Interpretations, which were in issue but not yet effective at the date of authorisation of these financial statements, that the Directors anticipate will have a material impact on the financial statements of the Group.

 

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 July each year. Control is achieved where the Company has power over the investee, exposure or rights to variable returns from the investee and the ability to use its power to vary those returns.

 

Intra-group transactions, balances, and unrealised gains and losses on transactions between Group companies are eliminated on consolidation, except to the extent that intra-group losses indicate an impairment.

 

Going concern

The Directors can report that, based on the Group's budgets and financial projections, they have satisfied themselves that the business is a going concern. The Board has a reasonable expectation that the Company and the Group have adequate resources and facilities to continue in operational existence for the foreseeable future based on Group cash balances and cash equivalents of £5.3 million (2015: £2.4 million), undrawn committed bank facilities at 31 July 2016 of £11.2 million (2015: £12.3 million), and cash generated from operations in the year to 31 July 2016 of £3.8 million (2015: £6.0 million).

 

Following the agreement of new facilities with Royal Bank of Scotland on improved terms, the Group now operates a five year £40 million revolving credit facility with RBS plc.  The facility has been in place since 15 January 2016 and runs until 14 January 2021. The Group is fully compliant with all bank covenants and undertakings and is not obliged to make any repayments prior to expiration. The financial statements are therefore prepared on a going concern basis.

 

Critical accounting estimates and judgements

The preparation of consolidated financial statements under EU-IFRS requires management to make estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual outcomes may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

a) Estimate of fair value of trading properties

The Group values its self storage stores using a discounted cash flow methodology which is based on current and projected net operating income. Principal assumptions underlying management's estimation of the fair value are those relating to stabilised occupancy levels; expected future growth in storage rents and operating costs, maintenance requirements, capitalisation rates and discount rates. A more detailed explanation of the background and methodology adopted in the valuation of the Group's trading properties is set out in note 10b. The carrying value of land and buildings held at valuation at the reporting date was £81 million (2015: £61.0 million) as shown in the table in note 10b.

 

b) Assets in the course of construction and land held for pipeline store development ('Development property assets')

The Group's development property assets are held in the statement of financial position at historic cost and are not valued externally. In acquiring sites for redevelopment into self-storage facilities, the Group estimates and makes judgements on the potential net lettable storage space that it can achieve in its planning negotiations, together with the time it will take to achieve maturity occupancy level. In addition, assumptions are made on the storage rent that can be achieved at the store by comparison with other stores within the portfolio and within the local area. These judgements, taken together with estimates of operating costs and the projected construction cost, allow the Group to calculate the potential net operating income at maturity, projected returns on capital invested and hence to support the purchase price of the site at acquisition. Following the acquisition, regular reviews are carried out taking into account the status of the planning negotiations, and revised construction costs or capacity of the new facility, for example, to make an assessment of the recoverable amount of the development property. The Group reviews all development property assets for impairment at each reporting date in the light of the results of these reviews.  Once a store is opened, it is valued as a trading store.

 

The carrying value of development property assets at the reporting date was £0.5 million (2015: £8.9 million).  Please see note 10b for more details.

 

c) Estimate of fair value of intangible assets acquired in business combination

The relative size of the Group's intangible assets, excluding goodwill, makes the judgements surrounding the estimated useful lives important to the Group's financial position and performance. At 31 July 2016 intangible assets, excluding goodwill, amounted to £2.48 million (2015: £2.65 million). The valuation method used and key assumptions are described in note 10a.

 

The useful life used to amortise intangible assets relates to the expected future performance of the assets acquired and management's judgement of the period over which economic benefit will be derived from the asset.  The estimated useful life of customer relationships principally reflects management's view of the average economic life of the customer base and is assessed by reference to customer churn rates. Typically, the customer base for a serviced archive business is relatively inert. Corporate customers do not tend to switch service providers and indeed they incur box withdrawal charges should they do so. An increase in churn rates may lead to a reduction in the estimated useful life and an increase in the amortisation charge.

 

 



 

Notes to the Financial Statements

For the year ended 31 July 2016

 

1a           Revenue

Analysis of the Group's revenue is shown below:

 


2016

2015

Stores trading

£'000

£'000

 

Self-storage revenue

11,931

11,851

Other storage related revenue

1,510

1,434

Ancillary store rental revenue

3

7

Management fees

439

176

Sub-total

13,883

13,468

Document storage revenue

2,173

1,956

Total revenue per statement of comprehensive income

16,056

15,424

                                                                                                                                                                                                        

1b    Segmental information

 

IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board to allocate resources to the segments and to assess their performance. All of the Group's activities occur in the United Kingdom.

 

Financial information is reported to the Board with revenue and profit analysed between self-storage activity and serviced document storage activity.

 

Segment revenue comprises of sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the Board represents the profit earned by each segment before acquisition costs and other non-recurring set-up costs, finance income, finance costs and tax.  For the purposes of assessing segment performance and for determining the allocation of resources between segments, the Board uses a measure of adjusted EBITDA (as defined in the accounting policies) and reviews the non-current assets attributable to each segment as well as the financial resources available. All assets are allocated to reportable segments.  Assets that are used jointly by segments are allocated to the individual segments on a basis of revenues earned.  All liabilities are allocated to individual segments other than borrowings and tax. Information is reported to the Board of Directors on a product basis as management believe that the activity of self-storage and the activity of serviced document storage expose the Group to differing levels of risk and rewards due to the length, nature, seasonality and  customer base  of their respective operating cycles.

 

The segment information for the year ended 31 July 2016 is as follows:

 

               

 

 

Self-storage

  

2016

£'000

Serviced archive &

  records management

2016

£'000

Total

2016

£'000

Revenue from external customers

13,883

2,173

16,056





Adjusted EBITDA

5,708

587

6,295

Management charges

72

 

(72)

-

 

Segment Adjusted EBITDA

5,780

515

6,295

Depreciation

Amortisation of intangible assets

(1,436)

-

(101)

(165)

(1,537)

(165)

Equity settled share based payments

(182)

-

(182)

Net settlement proceeds - Reading site

1,940

-

1,940

Disposal costs - Swindon store(s)

(123)

-

(123)

Segment profit

5,979

249

6,228

 

Central costs not allocated to segments:




Finance income



313

Finance costs



(1,048)

Profit before taxation



5,493

Income tax expense



(1,211)

Consolidated profit for the financial year


       

4,282

 

 

 

The segment information for the year ended 31 July 2015 is as follows:

               

 

 

Self-storage

  

2015

£'000

Serviced archive &

  records management

2015

£'000

Total

2015

£'000

Revenue from external customers

13,468

1,956

15,424





Adjusted EBITDA

5,420

262

5,682

Management charges

25

 

(25)

-

 

Segment Adjusted EBITDA

5,445

237

5,682

Depreciation

Amortisation of intangible assets

(1,340)

-

(100)

(165)

(1,440)

(165)

Equity settled share based payments

(211)

-

(211)

Irrecoverable property costs

(209)

-

(209)

Segment profit/(loss)

3,685

(28)

3,657

 

Central costs not allocated to segments:




Finance income



141

Finance costs



(1,144)

Profit before taxation



2,654

Income tax expense



(686)

Consolidated profit for the financial year


      

1,968

 

 

Corporate transactions and the treasury function are managed centrally and therefore are not allocated to segments. Sales between segments are carried out at arm's length. The serviced archive segment with over 430 customers has a greater customer concentration with its ten largest corporate customers accounting for 34.6% (2015: 34.6%) of revenue, its top 50 customers accounting for 61.7% (2015: 63.3%) and its top 100 customers accounting for 77.0 % (2015: 79.9%) of revenue. The self-storage segment with over 9,200 customers has no individual self-storage customer accounting for more than 1% of total revenue and no group of entities under common control (e.g. Government) accounts for more than 10% of total revenues.

 

 

 

Self-storage

2016

£'000

Serviced archive &

records management

2016

£'000

Total

2016

£'000





Segment assets

114,334

6,314

120,648





Segment liabilities

(19,807)

(601)

(20,408)

Borrowings



(28,727)

Derivative financial instruments not allocated to segments



(37)

Total liabilities



(49,172)

Capital expenditure  (note 10b).

6,629

359

6,988

 

 


Self-storage

2015

£'000

Serviced archive &

records management

2015

£'000

Total

2015

£'000





Segment assets

93,296

6,098

99,394





Segment liabilities

(18,222)

(536)

(18,758)

Borrowings



(27,548)

Derivative financial instruments not allocated to segments



(119)

Total liabilities



(46,425)

Capital expenditure (note 10b).

3,126

457

3,583

 

 

The amounts presented to the Board with respect to total assets and total liabilities are measured in a manner consistent with the financial statements and are allocated based on the operations of the segment. Borrowings are managed centrally on a Group basis and are therefore not allocated to segments.

 

 

 

 

2a           Property, staff, distribution and general costs




2016

£'000

2015

£'000

Property and premises costs

3,913

4,010

Staff costs

4,232

4,188

General overheads

1,128

1,049

Distribution costs

170

190

Retail products cost of sales  (see note 2b)

318

305


9,761

9,742

 

 

2b           Cost of sales of retail products

Cost of sales represents the direct costs associated with the sale of retail products (boxes, packaging etc.), and the ancillary sales of insurance cover for customer goods, all of which fall within the Group's ordinary activities.

 


2016

£'000

2015

£'000

Retail

118

130

Insurance

51

33

Other

2

2


171

165

Serviced archive consumables and direct costs

147

140


318

305

 

 

2c           Other Income and costs

 


2016

£'000

2015

£'000

Property disposal costs1

123

-

Net settlement proceeds2

(1,940)

-

Irrecoverable property costs3

-

209


(1,817)

209

 

1 Property disposal costs relate to the sale and manage back of the Swindon store.

2 Net settlement proceeds relate to an additional £2 million received for sale of old Reading store net of costs.

3 Irrecoverable property costs relate to site demolition costs not recoverable from the prospective purchaser of the Portsmouth North site.

 

 

3              Finance income                                                                                                 


2016

£'000

2015         

£'000         

Bank interest

14

12        

 

Other interest

299

129        

 


313

         141

 

Interest receivable arises on cash and cash equivalents (see note 16) and on development loan capital deployed.

 

 

4              Finance costs


2016

£'000

2015

£'000

 

Bank interest

 

797

 

925

Non-utilisation fees and amortisation of bank loan arrangement fees

251

219


1,048

1,144

 

 

 

 

 

5              Profit before taxation                                                                                       


2016

£'000

2015

£'000

 

Profit before taxation is stated after charging:



Depreciation and amounts written off property, plant and equipment:

 



Owned assets

1,535

1,440

Amortisation of intangible assets

165

165

Operating lease rentals - land and buildings

1,529

1,562




 

 

Amounts payable to RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP) and their associates for audit and non-audit services:        

 

Audit services



- UK statutory audit of the Company and consolidated accounts

48

45

Other services



-the auditing of accounts of associates of the Company pursuant to legislation

14

14

Other services supplied pursuant to such legislation



- interim review

7

7

Tax services



- compliance services

26

26

- advisory services

2

13


97

105

 

Comprising:



Audit services

62

59

Non-audit services

35

46


97

105

 

 

6              Employees          

                                               


2016

No.

2015

No.

The average monthly number of persons (including Directors) employed by the Group during the year was:



Store management

121

113

Administration

29

30


150

143

                                                                                                                                                                                                        

                                                                                                                                                                                                      


2016

£'000

2015

£'000

Costs for the above persons:



Wages and salaries

3,425

3,451

Social security costs

532

443

Pension costs

92

87


4,049

3,981

Share based remuneration (options)

182

211


4,231

4,192

 

Share based remuneration is separately disclosed in the statement of comprehensive income. Wages and salaries of £133,669 (2015: £132,543) have been capitalised as additions to property, plant and equipment as they are directly attributable to the acquisition of these assets. All other employee costs are included in staff costs in the statement of comprehensive income.

 

In relation to pension contributions, there was £11,705 (2015: £9,260) outstanding at the year-end.

 

 

 

 

 

 

 

Directors' remuneration

 

2016

Emoluments

£

Bonuses

£

Benefits

£

 

Sub total

£

Gains on

share options

£

Total

£

Executive:







A Jacobs

208,080

24,000

3,460

235,540

408,600

644,140

SG Thomas

52,020

-

3,315

55,335

132,146

187,481

RA Davies

116,750

12,000

3,492

132,242

409,245

541,487

CM Jacobs

N Newman *

59,021

42,556

14,000

21,154

2,711

1,299

75,732

65,009

43,601

-

119,333

65,009

Non-Executive:







RJ Holmes

20,808

-

-

20,808

-

20,808

ETD Luker

26,010

-

-

26,010

-

26,010

CP Peal

20,808

-

-

20,808

22,900

43,708


546,053

71,154

14,277

631,484

1,016,492

1,647,976

*Appointed 26 November 2015

 






 

2015

Emoluments

£

Bonuses

£

Benefits

£

 

Sub total

£

Gains on

share options

£

Total

£

Executive:







A Jacobs

204,000

38,000

4,055

246,055

156,399

402,454

SG Thomas

51,000

9,500

3,724

64,224

50,399

115,199

RA Davies

110,000

15,500

3,063

128,563

55,437

184,000

CM Jacobs

57,834

6,500

3,177

67,511

152,865

220,376

Non-Executive:







RJ Holmes

20,033

-

-

20,033

-

20,033

ETD Luker

25,500

-

-

25,500

-

25,500

CP Peal

20,400

-

-

20,400

-

20,400


488,767

69,500

14,019

572,286

415,676

987,962

                                                                                                                 

Pension contributions of £30,775 (2015: £30,475) were paid by the Group on behalf of R A Davies and are not included in the Directors' emoluments table above. The highest paid Director did not accrue any pension rights during the year. The benefits in kind all relate to medical insurance premiums paid on behalf of the Directors. The number of Directors to whom retirement benefits are accruing under money purchase pension schemes in respect of qualifying service is one (2015: one).

 

7              Taxation


2016

£'000

2015

£'000

Current tax:



UK corporation tax at 20% (2015: 20.7%)

606

535

 

Deferred tax:



Origination and reversal of temporary differences

976

100

Adjustments in respect of prior periods

75

51

Impact of change in tax rate on closing balance

(446)

-

Total deferred tax

605

151

Income tax expense for the year

1,211

686

 

The charge for the year can be reconciled to the profit for the year as follows:


2016

£'000

2015

£'000

 

Profit before tax

5,493

2,654

 

Tax on ordinary activities at the effective standard rate of corporation tax in the UK of 20% (2015: 20.7%)

 

 

1,099

 

 

549

Expenses not deductible for tax purposes

3

2

Depreciation of non-qualifying assets

85

85

Share based payment charges in excess of corresponding tax deduction

36

-

Impact of change in tax rate on closing deferred tax balance

(69)

-

Adjustments in respect of prior periods - deferred tax

Other

75

4

51

(1)

Share option scheme

(22) 

-

Income tax expense for the year

1,211

686

Effective tax rate

22 %

26%

 

The UK's main rate of corporation tax and the applicable rate for this period is 20.0%. In addition to the amount charged to profit or loss for the year, deferred tax relating to the revaluation of the Group's properties of £2,387,114 (2015: £1,577,896) and the movement in the fair value of cash flow hedges of (£20,834) (2015: (£37,549)) has been recognised as a debit/credit directly in other comprehensive income (see note 18 on deferred tax).

 

8              Dividends


2016

£'000

2015

£'000

Amounts recognised as distributions to equity holders in the year:






Final dividend for the year ended 31 July 2014 (5.0 pence per share)

-

1,258

Interim dividend for the six months to 31 January 2015 (2.33 pence per share)

-

589

Final dividend for the year ended 31 July 2015 (5.67 pence per share)

Interim dividend for the six months to 31 January 2016 (2.67 pence per share)

1,456

691

-

-


2,147

1,847

 

In respect of the current year the Directors propose that a final dividend of 6.33 pence per share will be paid to the shareholders. The total estimated dividend to be paid is £1,689,379 based on the number of shares in issue at 3 October 2016 as adjusted for shares held in the Employee Benefits Trust and for shares held on treasury. This is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The ex-dividend date will be 17 November 2016; the record date 18 November 2016; with an intended payment date of 19 December 2016.

 

9              Earnings per share

 

The calculations of earnings per share are based on the following profits and numbers of shares.


2016

£'000

2015

 £'000

Profit for the financial year attributable to owners of the parent

4,282

1,968





2016

No. of shares

2015

No. of shares

Weighted average number of shares



For basic earnings per share

25,791,821

25,102,032

Dilutive effect of share options1

577,822

654,598

For diluted earnings per share

26,369,643

25,756,630

1 Further options that could potentially dilute EPS in the future are excluded from the above because they are not dilutive in the period presented. Full details of share options are included in notes 20 to 23

 

623,212 (2015: 623,212) shares held in the Employee Benefit Trust and 2,466,869 (2015: 2,466,869) Treasury shares are excluded from the above (see note 26).

                                                                                                                                                                                                         


2016

2015

Earnings per share



Basic

16.60p

7.84p

Diluted

16.24p

7.64p

 

10a    Intangible assets                                                                                                                                                                    

Group

 

 

Goodwill

£'000

Contractual

customer

relationships

£'000

Total

£'000

Cost at 1 August 2014

1,110

3,309

4,419

Amortisation at 1 August 2014

-

(496)

(496)

Amortisation charge

-

(165)

(165)

Amortisation at 31 July 2015

-

(661)

(661)

Net book value at 31 July 2015

1,110

2,648

3,758

Cost at 1 August 2015

1,110

3,309

4,419

Amortisation at 1 August 2015

-

(661)

(661)

Amortisation charge

-

(165)

(165)

Amortisation at 31 July 2016

-

(826)

(826)

 

Net book value at 31 July 2016

 

1,110

 

2,483

 

3,593

                                                                                                                                                    

All goodwill and customer relationships are allocated to the serviced document storage cash-generating unit (CGU) identified as a separate business segment. 

 

The remaining amortisation period of the contractual customer relationships at 31 July 2016 is 14 years and 11 months (2015: 15 years 11 months).

 

The values for impairment purposes are based on past and current experience of trading, estimated future cash flows and external information where relevant and derived from the following key assumptions:

·      a discount rate of 11%

·      estimated useful lives of customer relationships (20 years)

·      short term sustainable growth rates of 5% (next 5 years)

·      thereafter long term sustainable growth rates of 2.0%

·      sensitivity: the Group has conducted a sensitivity analysis on the impairment test of each CGU's carrying value.  A cut in projected sales growth by around 7% would result in the carrying value of goodwill being reduced to its recoverable amount.

 

10b         Property, plant and equipment 

Group

Development

property assets

at cost

£'000

Land and

buildings

at valuation

£'000

Long leasehold land and 

buildings

at valuation

£'000

Short leasehold

improvements

at cost

£'000

Fixtures,

fittings and

equipment

at cost

£'000

Motor

vehicles

at cost

£'000

Total

£'000









Cost or valuation








1 August 2014

13,013

51,412

5,121

2,560

18,242

32

90,380

Additions

1,504

525

-

3

1,551

-

3,583

Disposals

-

-

-

-

(289)

(2)

(291)

Reclassification

(4,025)

2,958

-

-

1,067

-

-

Revaluations

-

6,140

1,304

-

-

-

7,444

31 July 2015

10,492

61,035

6,425

2,563

20,571

30

 101,116









Depreciation








1 August 2014

1,604

 -

 -

1,599

9,478

19

12,700

Depreciation

-

572

23

91

751

3

1,440

Disposals

-

-

-

-

(230)

(1)

(231)

Revaluations

-

(572)

 (23)

-

-

-

(595)

31 July 2015

1,604

-

-

1,690

9,999

 21

13,314

 

Net book value at 31 July 2015

8,888

61,035

6,425

873

10,572

9

87,802









Cost or valuation








1 August 2015

10,492

61,035

6,425

2,563

20,571

30

 101,116

Additions

3,281

152

1

-

3,554

-

6,988

Disposals

(4,604)

(3,228)

-

-

(701)

(13)

(8,546)

Reclassification

(8,711)

9,377

-

-

(666)

-

-

Revaluations

-

13,617

2,837

-

-

-

16,454

31 July 2016

458

80,953

9,263

2,563

22,758

17

 116,012









Depreciation








1 August 2015

1,604

-

-

1,690

9,999

 21

13,314

Depreciation

-

606

100

91

736

2

1,535

Disposals

(1,604)

-

-

-

(389)

(11)

(2,004)

Reclassification

-

490

-

-

(490)

-

-

Revaluations

-

(1,096)

 (100)

-

-

-

(1,196)

31 July 2016

-

-

-

1,781

9,856

 12

11,649

 

Net book value at 31 July 2016

458

80,953

9,263

782

12,902

5

104,363

 

If all property, plant and equipment were stated at historic cost the carrying value would be £49.5 million (2015: £47.5 million).

 

Capital expenditure during the year related to the ongoing building at Bristol and Southampton, the expansion of capacity at our Swindon East Store and also limited expenditures at our other existing stores. Further expenditure on racking at the Saracen Olney store also increased capacity in our serviced document storage business.

 

In August 2015, the Group received an additional £2 million (gross) from the purchaser of the original Reading store site in return for relinquishing of all remaining rights to receive further payments in connection with the sale of the property. This sum is in addition to the £2.9 million received from the purchaser on 31 October 2014, taking the total consideration to £4.9m. 

 

Property, plant and equipment (non-current assets) with a carrying value of £104.4 million (2014: £87.8 million) are pledged as security for bank loans.

 

Market Valuation of Freehold and Operating Leasehold Land and Buildings

 

On 31 July 2016, a professional valuation was prepared by Jones Lang LaSalle Limited (JLL) (2015: Cushman & Wakefield) in respect of eleven freehold, one long leasehold and seven operating leasehold properties. The valuation was prepared in accordance with the RICS Valuation - Professional Standards, published by The Royal Institution of Chartered Surveyors ("the Red Book") and the valuation methodology is explained in more detail below.  The valuations were prepared on the basis of Fair Value as a fully equipped operational entity having regard to trading potential. The valuation was provided for accounts purposes and as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure requirements of the Red Book JLL have confirmed that:

 

·      This is the first year that JLL has been appointed to value the properties

·      The valuers who prepared the valuation have the necessary skills and experience having been significantly involved in the sector

·      JLL do not provide other significant professional or agency services to the Company

·      In relation to the preceding financial year of JLL the proportion of the total fees payable by the Company to the total fee income of the firm is less than 5%

 

The valuation report indicates a total valuation for all properties valued of £112.7 million (2015: £88.9 million) of which £96.1 million (2015: £74.1 million) relates to freehold and long leasehold properties, and £16.6 million (2015: £14.8 million) relates to properties held under operating leases.

 

Freehold and long leasehold land and buildings are carried at valuation in the statement of financial position. Short leasehold improvements at properties held under operating leases are carried at cost rather than valuation in accordance with IFRS.

 

For the trading properties the valuation methodology explained in more detail below is based on fair value as fully equipped operational entities, having regard to trading potential. Of the £96.1 million valuation of the freehold and long leasehold properties £9.0 million (2015: £6.7 million) relates to the net book value of fixtures, fittings and equipment, and the remaining £87.1 million (2015: £ 67.4 million) relates to freehold and long leasehold properties.

 

The 2016 valuation includes and reflects movements in value which have resulted from the operational performance of the stores and movements in the investment environment.

 

Valuation Methodology

 

Jones Lang LaSalle Limited (JLL) have adopted the profits method of valuation, and cross checked with the direct comparison method based on recent transactions in the sector, which is the main method of pricing adopted by purchasers of self storage properties. 

 

JLL have valued the assets on an individual basis and have disregarded any portfolio effect.

 

The profits method of valuation considers the cash flow generated by the trading potential of the self storage facility.  Due to the specialised design and use of the buildings, the value is typically based on their ability to generate a net income from operating as self storage facilities. 

 

JLL have constructed a discounted cash flow model.  This sets out their explicit assumptions on the underlying cash flow that they believe could be generated by a Reasonably Efficient Operator at each of the properties, both at the valuation date and in the near future as the properties increase their occupancy and rents charged to customers.  Judgements are made as to the trading potential and likely long term sustainable occupancy. 

 

Stable occupancy depends upon the nature of demand, size of property and nearby competition, and allows for a reasonable vacancy rate to enable the operator to sell units to new customers. In the valuation the assumed stabilised occupancy level for the 19 trading stores (both freeholds and leaseholds) averages 81% (2015: 68.4%).

 

Expenditure is deducted (such as business rates, staff costs, repair and maintenance, utilities, marketing and bad debts) as well as an operator's charge which takes account of central costs. JLL also make an allowance for long term capex requirements where applicable.

 

·     The cash flow for freeholds runs for an explicit period of 10 years, after which it is capitalised at an all risks yield which reflects the implicit future growth of the business, or a hypothetical sale.

·     The cash flow for leaseholds continue for the unexpired term of the lease.

·     The discount rate applied has had regard to recent transactions, weighted average costs of capital and target return in other asset types with adjustments made to reflect differences in the risk and liquidity profile.

·     The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 11.32% (2015: 11.25%).  The yield arising from the first year of the projected cash flow is 7.43% (2015: 7.76%), rising to 10.86% in year five

·     JLL have assumed purchasers costs of 6.8%

·     The average stabilised occupancy is 80.1%

·     The average exit yield assumed  is 7.9%

The comparison method considers recent transactions where self storage properties have sold, and then adjusts them based on a multiple of current earnings, and a capital value per square foot.  They are adjusted to reflect differences in location, physical characteristics, local supply and demand, tenure and trading levels.

 

For leaseholds the same methodology has been used as for freehold property, except that no sale of the assets in the 10th year is assumed, but the discounted cash flow is extended to the expiry of the lease. The average unexpired term of the Group's operating leaseholds is approximately 11 years and 8 months as at 31 July 2016 (12 years and 8 months: 31 July 2015). Valuations for stores held under operating leases are not reflected in the statement of financial position and the assets in relation to these stores are carried at cost less accumulated depreciation.

 

In 2011, one of the Group store's leases was renegotiated and includes a ten year option to renew the leases from March 2026 to March 2036.  The option to extend is only operable in the event that all four of the leases applicable to this store are extended and this option is personal to Lok'nStore or another "major self-storage operator", to be approved by the landlord (approval not to be unreasonably withheld).  The JLL valuation on this store is based on this Special Assumption that the option to extend the lease for 10 years is exercised. This is consistent with the approach taken in previous years.

 

The fair value hierarchy within which the Fair Value measurements are categorised is level 3, in accordance with IFRS 13 fair value measurements.

 

Directors' valuation of land and property

 

The Old Southampton Store: Following the development and opening of the new Southampton store with the corresponding transfer of all customers from the old Southampton store, the vacant building will be redeveloped for alternative use. Accordingly the Directors have placed their valuation on the site at the year-end at £2.5 million.

 

The New Southampton Store: Following the development and opening of the new Southampton store there remains surplus land to the rear of the building which may be ultimately utilised for an expansion of the store or could be sold or used for alternative use. The Directors have considered the advice given and recommendations of value obtained by local agents and in weighing this with their own view are satisfied to place a value at year-end on this land of £0.5 million.

 

The total value of land and property carried at Director Valuation at 31 July 2016 is £3 million (2015: nil).

 

11                    Investments

 

Company Investments in subsidiary undertakings

£'000

31 July 2013

1,776

Capital contributions arising from share-based payments

119

31 July 2014

1,895

Capital contributions arising from share-based payments

211

31 July 2015

2,106

Capital contributions arising from share-based payments

182

31 July 2016

2,288

 

 

 

 

 

The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in England and Wales: 


% of shares and voting rights held


Class of shareholding 

Directly

Indirectly

Nature of entity

Lok'nStore Limited *

Ordinary

100

-

Self-storage

Lok'nStore Trustee Limited1 *

 

Ordinary

-

100

Trustee

Southern Engineering and Machinery Company Limited1 *

 

Ordinary

-

100

Land

Semco Machine Tools Limited2 *

 

Ordinary

-

100

Dormant

Semco Engineering Limited2 *

Ordinary

-

100

Dormant

Saracen Datastore Limited1

Ordinary

-

 100

 Serviced Document
Storage

1  These companies are subsidiaries of Lok'nStore Limited.

2 These companies are subsidiaries of Southern Engineering and Machinery Company Limited and did not trade during the year.

* These companies have taken the exemption from audit under Section 479A of the Companies Act 2006

 

The fair value of these investments has not been disclosed because it cannot be measured reliably as there is no active market for these equity instruments. The Company currently has no plans to dispose of these investments.

 

12           Development capital

 

In May 2015 Lok'nStore opened a new managed store in Aldershot, Hampshire. The store is managed for third party investors under the Lok'nStore brand.  Lok'nStore has managed the building and subsequent operation of the store. Lok'nStore generates a 10% annual return on £2.5 million of the total development capital committed to the project, and a management fee for the construction, operation and branding of the store.  The capital provided is fully secured by a first fixed charge on the property.

 


Group

2016

£'000

Group

2015

£'000

Development capital

3,159

2,779

 

Contingent Asset

When the Aldershot Store is sold by its owners the Group is entitled to receive a capital fee,of 5% of the proceeds of sale (less reasonable selling costs).  Due to the uncertainty of the property market, the timing of the ultimate sale, where the general property cycle might be at that time, and the immateriality of the sum, the directors believe that it would not be appropriate to recognise this as an asset at this time. There is a backstop date of 2022 at which time a realisation (or a payment based on an independent valuation) must be made to Lok'nStore and as this date gets nearer, the directors will give due consideration as to when the value of the property can be reliably measured, at which point it will be appropriate to recognise the asset in the financial statements. 

 

13           Inventories


Group

2016

£'000

Group

2015

£'000

Consumables and goods for resale

165

141

 

The amount of inventories recognised in cost of sales as an expense during the year was £156,121 (2015: £184,716).

 

14           Trade and other receivables

                                                                                                                                                    


Group

2016

£'000

Group

2015

£'000

Trade receivables

2,027

1,302

Other receivables

1,910

640

Prepayments and accrued income

1,015

537


4,952

2,479

                                               

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

 

Trade receivables

In respect of its self-storage business the Group does not typically offer credit terms to its customers and hence the Group is not exposed to significant credit risk. All customers are required to pay in advance of the storage period. Late charges are applied to a customer's account if they are more than 10 days overdue in their payment. The Group provides for receivables based upon sales levels and estimated recoverability. There is a right of lien over the customers' goods, so if they have not paid within a certain time frame, the Company has the right to sell the items they store to cover the debt owed by the customer. Trade receivables that are overdue are provided for based on estimated irrecoverable amounts, determined by reference to past default experience.           

 

For individual self-storage customers the Group does not perform credit checks. However this is mitigated by the fact that all customers are required to pay in advance, and also to pay a deposit of four weeks' storage income. Before accepting a new business customer who wishes to use a number of the Group's stores, the Group uses an external credit rating to assess the potential customer's credit quality and defines credit limits by customer. There are no customers who represent more than 5% of the total balance of trade receivables.

 

In respect of its document storage business, customers are invoiced typically monthly in advance for the storage of their boxes, tapes and files. The provision of additional services, such as document boxes or tape collection and retrieval from archive, typically are invoiced monthly in arrears. The serviced archive segment with over 360 customers has a greater customer concentration - refer note 1(b) segmental analysis.

 

Included in the Group's trade receivables balance are receivables with a carrying amount of £269,153 (2015: £202,546) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group holds a right of lien over its self-storage customers' goods if these debts are not paid. The average age of these receivables is 40 days past due (2015: 39 days past due).

 

Other receivables

The Group has provided bridging finance on normal commercial terms (interest at 4.5% p.a.) to Chichester Storage Limited (CSL) to facilitate the development of the site (including obtaining the requisite planning approvals).  As the store approaches breakeven and all conditions precedent have been met the CSL has facilities agreed whereupon it will refinance the bridging loan.  The amounts included in other receivables above includes £1.025 million (2015: £Nil) in respect of the Chichester loan.

 

Ageing of past due but not impaired receivables


Group

2016

£'000

Group

2015

£'000

0-30 days

147

119

30-60 days

72

43

60+ days

50

41

Total

269

203

 

Movement in the allowance for bad debts




Group

Group


2016

2015


£'000

£'000

Balance at the beginning of the year

174

163

Impairment losses recognised

34

39

Amounts written off as uncollectible

(22)

(28)

Balance at the end of the year

186

174

 

The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further provision required.

 

Ageing of impaired trade receivables

 

Group

2016

£'000

Group

2015

£'000

0-30 days

-

-

30-60 days

-

-

60+ days

186

174

Total

186

174

 

15           Trade and other payables


Group

2016

£'000

Group

2015

£'000

Trade payables

887

1,901

Taxation and social security costs

1,369

464

Other payables

1,197

1,173

Accruals and deferred income

2,341

2,433


5,794

5,971

 

The Directors consider that the carrying amount of trade and other payables and accruals and deferred income approximates fair value.

 

16           Financial instruments

 

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debts, which include the borrowings disclosed in note 17a, cash and cash equivalents and equity attributable to the owners of the parent, comprising issued capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity.  The Group's banking facilities require that management give regular consideration to interest rate hedging strategy. The Group has complied with this during the year.

 

The Group's Board reviews the capital structure on an on-going basis. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital. The Group seeks to have a conservative gearing ratio (the proportion of net debt to equity). The Board considers at each review the appropriateness of the current ratio in light of the above. The Board is currently satisfied with the Group's gearing ratio.

 

The gearing ratio at the year-end is as follows:

 

Capital Management

Group

2016

£'000

Group

2015

£'000

Gross borrowings

(28,816)

Cash and cash equivalents

5,335

2,435

Net debt

(23,481)

(25,266)

Total equity

71,475

52,968

Net debt to equity ratio

32.8 %

47.7%

 

The decrease in the Group's gearing ratio arises principally through the combined effect of an increase in the value of its properties and the cash generated from operations.

 

Exposure to credit and interest rate risk arises in the normal course of the Group's business.

 

A Derivative financial instruments and hedge accounting

The Group's activities expose it primarily to the financial risks of interest rates.  The Group currently has two interest rate swaps with Lloyds Bank plc which run until 20 October 2016. These have been maintained and are reported fully in the Financial Review and in note 17(b).

 

B Debt management

Debt is defined as non-current and current borrowings, as detailed in note 17a. Equity includes all capital and reserves of the Group. The Group is not subject to externally imposed capital requirements.

 

The Group borrows through a senior five year term revolving credit facility, arranged during the year with Royal Bank of Scotland plc secured on its store portfolio and other Group assets, excluding intangibles, with a net book value of £118.0 million (2015: £95.6 million). Borrowings are arranged to ensure the Group fulfils its strategy of growth and development of its stores and to maintain short-term liquidity. As at the reporting date the Group has a committed revolving credit facility of £40 million (2015: £40 million). This facility expires on 15 January 2021. Undrawn committed facilities at the year-end amounted to £11.2 million (2015: £12.3 million).

 

C Interest rate risk management

The Group's policy on interest rate management is agreed at Board level and is reviewed on an on-going basis. All borrowings are denominated in Sterling and are detailed in note 17a. The Group has a number of revolving loans within its overall revolving credit facility and as such is exposed to interest rate risks at the time of renewal arising from any upward movement in the LIBOR rate.  The Group continues its two cash flow hedging interest rate swap arrangements in order to reduce the risk of such upward movements in LIBOR rate. These instruments and the movement in their fair values are detailed in note 17b.

 

Following the agreement of new facilities with Royal Bank of Scotland on improved terms the following interest rates applied during the financial year:

 

a)    Up to 14 January 2016: London Inter-Bank Offer Rate (LIBOR) plus 2.35%-2.65% Lloyds Bank plc margin based on a loan to value covenant test for the revolving advances amounting to £28.5 million (2015: £27.7 million).

b)    Up to 14 January 2016: 40% of the applicable margin for non-utilisation (i.e. that part of the facility which remains undrawn from time to time). For this period the prevailing non-utilisation charge is calculated at a rate of 0.94%.

c)     From 15 January 2016: London Inter-Bank Offer Rate (LIBOR) plus 1.40%-1.65% Lloyds Bank plc margin based on a loan to value covenant test for the revolving advances amounting to £28.5 million (2015: £27.7 million).

d)    From 15 January 2016: 40% of the applicable margin for non-utilisation (i.e. that part of the facility which remains undrawn from time to time). For this period the prevailing non-utilisation charge is calculated at a rate of 0.56%.

e)    Rates prevailing on the Group's Interest rate swaps. See note 17b.

 

Cash balances held in current accounts attract no interest but surplus cash is transferred daily to a treasury deposit account which earns interest at the prevailing money market rates1. All amounts are denominated in Sterling. The balances at 31 July 2016 are as follows:

                                                                                                                                                                                                      


Group

2016

£'000

Group

2015

£'000

 

Variable rate treasury deposits1

 

4,915

 

1,744

SIP trustee  deposits

34

46

Cash in operating current accounts

339

602

Other cash and cash equivalents

47

43

Total cash and cash equivalents

5,335

2,435

 

1   Money market rates for the Group's variable rate treasury deposit track Royal Bank of Scotland plc base rate.  The rate attributable to the variable rate deposits at 31 July 2016 was 0.5%.

 

The Group reviews the current and forecast projections of cash flow, borrowing and interest cover as part of its monthly management accounts review. In addition, an analysis of the impact of significant transactions is carried out regularly, as well as a sensitivity analysis of the impact of movements in interest rates on gearing and interest cover.

 

D Interest rate sensitivity analysis

In managing interest rate risk the Group aims to reduce the impact of short-term fluctuations on the Group's earnings, without jeopardising its flexibility. Over the longer term, permanent changes in interest rates may have an impact on consolidated earnings.

 

At 31 July 2016, it is estimated that an increase of one percentage point in interest rates would have reduced the Group's annual profit before tax by £88,156 (2015: £77,005) and conversely a decrease of one percentage point in interest rates would have increased the Group's annual profit before tax by £88,156 (2015: £77,005). There would have been no effect on amounts recognised directly in other comprehensive income. The sensitivity has been calculated by increasing by 1% the average variable interest rate of 2.56% applying to the variable rate borrowings of £8.8 million in the year (2015: £7.7 million / 2.84%).

 

E Cash management and liquidity

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note B above is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.

 

Short-term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources, giving due consideration to risk.

 

F Foreign currency management

The Group operates solely in the United Kingdom and as such all of the Group's financial assets and liabilities are denominated in Sterling and there is no exposure to exchange risk.

 

G Credit risk

The credit risk management policies of the Group with respect to trade receivables are discussed in note 14.

The credit risk on liquid funds is limited because the counterparty is a bank with high credit ratings assigned by international credit-rating agencies, in line with the Group's policy which is to borrow from major institutional banks when arranging finance.

 

The Group's maximum exposure to credit risk at 31 July 2016 was £3.70 million (2015: £1.47 million) on receivables and £5.33 million (2015: £2.44 million) on cash and cash equivalents. Additionally, the Group has provided development loan capital in respect of the Aldershot store development, a managed contract. The current balance outstanding at 31 July 2016 was £3.16 million. (2015: £2.78 million). These amounts are secured by way of a fixed priority first charge and a debenture over all of the Aldershot assets.

 

H Maturity analysis of financial liabilities

The undiscounted contractual cash flow maturities are as follows:

 

2016 - Group


Trade

and other

payables

£'000

Borrowings

£'000

Interest on

borrowings

£'000

From two to five years

-

28,816

1,814

From one to two years

-

-

738

Due after more than one year

-

28,816

2,552

Due within one year

2,359

-

831

Total contractual undiscounted cash flows

2,359

28,816

3,383

 

2015 - Group


Trade

and other

payables

£'000

Borrowings

£'000

Interest on

borrowings

£'000

From two to five years

-

-

-

From one to two years

-

27,701

205

Due after more than one year

-

27,701

205

Due within one year

3,392

-

925

Total contractual undiscounted cash flows

3,392

27,701

1,130

 

 

I Fair values of financial instruments                                                                                                          


2016

£'000

2015

£'000

Categories of financial assets and financial liabilities



Financial assets



Trade and other receivables

3,700

1,468

Cash and cash equivalents

5,335

2,435

Development loan capital

3,159

2,779

Financial liabilities



Trade and other payables

(2,359)

(3,392)

Bank loans

 (28,728)

(27,548)

 

The fair values of the Group's cash and short-term deposits and those of other financial assets equate to their carrying amounts. The Group's receivables and cash and cash equivalents are all classified as loans and receivables and carried at amortised cost. The amounts are presented net of provisions for doubtful receivables and allowances for impairment are made where appropriate. Trade and other payables and bank borrowings are all classified as financial liabilities measured at amortised cost.

 

J Company's financial instruments

The Company's financial assets are amounts owed by subsidiary undertakings amounting to £3.8 million (2015: £3.0 million) which are classified as loans and receivables, and the investment in its subsidiary undertaking of £0.2 million (excluding capital contributions). These amounts are denominated in Sterling, are non-interest bearing, are unsecured and fall due for repayment within one year. No amounts are past due or impaired. The Company has no financial liabilities.

 

17a         Borrowings


Group

2016

£'000

Group

2015

£'000

 

Non-current



 

Bank loans repayable in more than two years



 

 but not more than five years



 

Gross

28,816

27,701

Deferred financing costs

(89)

(153)

Net bank borrowings

28,727

27,548

Non-current borrowings

28,727

27,548

 

On 15 January 2016, the Group agreed a new banking facility on improved terms with Royal Bank of Scotland Bank plc (RBS). The new £40 million five year revolving credit facility replaced the existing facility which was due to expire in October 2016, and will provide funding for site acquisitions as well as working capital for the development of the business over the medium term. 

Under this new five year facility the Group is not obliged to make any repayments prior to its expiration in January 2021 and further provides during the term of the facility for the possibility of an optional extension of the five year term by a maximum of a further two years. The facility also provides for the possibility of an additional accordion of up to £10 million which if taken up during the term of the facility will increase facilities available to £50 million.

 

The Group currently has £28.8 million drawn against its existing £40 million facility. The margin on the new facility is at the London Inter-Bank Offer Rate (LIBOR) plus 1.40%-1.65% margin based on a loan to value covenant test (1.40% at Lok'nStore's current LTV level). This is a marked improvement on the previous 2.35%-2.65% margin and the Group will therefore benefit from a lower average cost of debt and thus improved cash flow.  Loan to value covenants are in line with the previous facility. 

 

The £40 million revolving credit facility with RBS is secured by legal charges and debentures over the freehold and leasehold properties and other tangible assets of the business with a net book value of £118.0 million (2015: £95.6) million together with cross-company guarantees from Group companies.

 

 

 

 

17b         Derivative financial instruments

 

The Group continues to operate two separate £10 million interest rate swaps as a cash flow hedge with Lloyds Bank plc, both effective from 31 May 2012, the first at a fixed 1 month sterling LIBOR rate of 1.2% and the second at a fixed one-month sterling LIBOR rate of 1.15%. Both swaps run up to 20 October 2016 whereupon they lapse. The balance of the drawn facility of £8.8 million (2015: £7.7 million) remains at a floating rate.

 


Currency

Principal

£

Maturity

date

Fair value    2016

£'000

Fair value

2015

       £'000

3032816LS Interest rate swap

GBP

10,000,000

20/10/2016

(19)

(63)

3047549LS Interest rate swap

GBP

10,000,000

20/10/2016

(18)

(56)

 



20,000,000


(37)

(119)

 

The movement in fair value of the interest rate swaps of £82,675 (2015: £169,925) has been recognised in other comprehensive income in the year.

 

 

18           Deferred tax

                                                                                                                                                                                                        

Deferred tax liability

Group

2016

£'000

Group

2015

£'000

 

Liability at start of year

 

12,252

 

10,870

Credited  to income for the year

605

151

Tax credited directly to other comprehensive income

2,408

1,540

Debit / (credit) to share based payment reserve

96

(309)

Liability at end of year

15,361

12,252

 

 

The following are the major deferred tax liabilities and assets recognised by the Group and the movements during the year:

 


Accelerated

Capital

Allowances

£'000

Intangible

assets

£'000

Other

temporary

differences

£'000

Revaluation of

properties

£'000

Rolled

over gain

on disposal

£'000

 

 

Share

options

£'000

Total

£'000

At 31 August 2014

1,441

563

29

7,008

1,829

-

10,870

Charge/ (credit) to income for the year

267

(33)

(1)

-

(42)

 

(42)

151

(Credit) / charge to other comprehensive income

 

-

 

-

 

(38)

 

1,578

 

-

 

-

1,540

Credit to share based payment reserve






(309)

(309)

At 31 July 2015

1,708

530

(8)

8,586

1,787

(351)

12,252

Charge/ (credit) to income for the year

147

(83)

11

-

524

 

6

605

Charge to other comprehensive income

 

-

 

-

 

21

 

2,375

 

12

 

-

2,408

Charge to share based payment reserve

-

-

-

-

-

96

96

At 31 July 2016

1,855

447

24

10,961

2,323

(249)

15,361

 

 

 

 

19           Share capital

                                                                                                                                                                                                      



2016

2015

Authorised:


£'000

£'000

35,000,000 ordinary shares of 1 pence each (2015: 35,000,000)


350

350





Allotted, issued and fully paid ordinary shares


£

£

Balance 1 August


285

279

Options exercised 662,573  shares (2015: 637,641 shares)


6

6

Balance 31 July


291

285



 

Called up,

 

Called up,



allotted and

allotted and



fully paid

fully paid



Number

Number

Number of shares at 31 July


29,109,322

28,466,749

 

The Company has one class of ordinary shares which carry no right to fixed income.

 

 

20           Equity settled share-based payment plans

The Group operates two equity-settled share-based payment plans, an approved and an unapproved share option scheme, the rules of which are similar in all material respects. The Enterprise Management Initiative Scheme (EMI) is closed to new grants of options as the Company no longer meets the HMRC small company criteria. 

 

The Company has the following share options:

 

2016


As At




As at

Summary


31 July 2015



Lapsed/

31 July 2016



No of options

Granted

Exercised

surrendered

No of options

Unapproved Share Options


1,722,361

59,858

(643,894)

(43,841)

1,094,482

Approved CSOP Share Options


172,462

23,137

(18,679)

(10,909)

170,763

Total


1,894,823

82,995

(662,573)

(54,750)

1,260,459

 

 

 

 

2015


As At




As at

Summary


31 July 2014



Lapsed/

31 July 2015



No of options

Granted

Exercised

surrendered

No of options

Enterprise Management Initiative Scheme


41,414

-

(41,414)

-

-

Unapproved Share Options


2,276,111

5,182

(535,321)

(23,611)

1,722,361

Approved CSOP Share Options


246,286

13,471

(60,906)

(26,389)

172,462

Total


2,563,811

18,653

(637,641)

(50,000)

1,894,823

 

 

 

 

 

 

 

 

 

The following table shows options held by Directors under all schemes. 


Total

 at 31 July 2015

Options granted

Options

exercised

 

  Unapproved Scheme

Approved

 CSOP share options

Total

 at 31 July 2016

2016







Executive Directors







A Jacobs - Unapproved

380,000

26,087

(200,000)

206,087

-

206,087

SG Thomas - Unapproved

170,000

5,217

(100,000)

75,217

-

75,217

RA Davies - Unapproved

531,977

-

(250,000)

281,977

-

281,977

RA Davies - CSOP

14,493

-

-

-

14,493

14,493

RA Davies total

546,470

-

(250,000)

281,977

14,493

296,470

CM Jacobs - Unapproved

145,668

3,329

(25,000)

123,997

-

123,997

CM Jacobs - CSOP

20,577

3,594

(5,245)

-

18,926

18,926

CM Jacobs total

166,245

6,923

(30,245)

123,997

18,926

142,923

Neil Newman - Unapproved

180,714

17,028

(10,000)

187,742


187,742

Neil Newman - CSOP

19,939

1,434

(5,178)


16,195

16,195

N Newman total

200,653

18,462

(15,178)

187,742

16,195

203,937

Non-Executive Directors







ETD Luker - Unapproved

15,000

-

-

15,000

-

15,000

C P Peal - Unapproved

10,000

-

(10,000)

-

-

-

Non-Executive total

25,000

-

(10,000)

15,000

-

15,000

All Directors total

1,488,368

56,689

(605,423)

890,020

49,614

939,634

 

The grant of options to Executive Directors and senior management is recommended by the Remuneration Committee on the basis of their contribution to the Group's success. The options vest after two and a half or three years.

 

The exercise price of the options is equal to the closing mid-market price of the shares on the trading day previous to the date of the grant. Exercise of an option is subject to continued employment. The life of each option granted is six and a half to seven years. There are no cash settlement alternatives. The expected volatility is based on a historical review of share price movements over a period of time, prior to the date of grant, commensurate with the expected term of each award. The expected term is assumed to be six years which is part way between vesting (two and a half to three years after grant) and lapse (10 years after grant). The risk free rate of return is the UK gilt rate at date of grant commensurate with the expected term (i.e. six years).

 

The total charge for the year relating to employer share-based payment schemes was £182,124 (2015: £210,558), all of which relates to equity-settled share-based payment transactions.

 

21a         Other reserves


 

Cash flow


 

 

 

Capital

Share-based



hedge

Merger

Other

redemption

payment



reserve

reserve

reserve

reserve

reserve

Total

Group

£'000

£'000

£'000

£'000

£'000

£'000

1 August 2014

33

6,295

1,294

34

939

8,595

Share based remuneration (options)

-

-

-

211

211

IFRS 2 - transfer to retained earnings

-

-

-

(298)

(298)

Cash flow hedge reserve net of tax

-

-

-

-

(132)

Tax credit relating to share options

-

-

-

-

309

309

31 July 2015

(99)

6,295

1,294

34

1,161

8,685

Share based remuneration (options)

-

-

-

182

182

IFRS 2 - transfer to retained earnings

-

-

-

(401)

(401)

Cash flow hedge reserve net of tax

62

-

-

-

-

62

Tax charge relating to share options

-

-

-

-

(96)

(96)

31 July 2016

(37)

6,295

1,294

34

846

8,432

 

The merger reserve represents the excess of the nominal value of the shares issued by Lok'nStore Group plc over the nominal value of the share capital and share premium of Lok'nStore Limited as at 31 July 2001 The other distributable reserve and the capital redemption reserve arose in the year ended 31 July 2004 from the purchase of the Company's own shares and a cancellation of share premium.

 

Share based payment reserve

Under IFRS2 there is the option to make transfers from the share based payment reserve to retained earnings in respect of accumulated share option charges where the options have either been exercised or have lapsed post-vesting. The total amounts calculated and accordingly transferred to retained earnings amounted to £400,957 (2015: £298,268).

 

21b         Other reserves


 

Other

 

Share-based



reserve

payment




reserve

Total

Company

£'000

£'000

£'000

1 August 2014

1,114

1,153

2,267

Share based remuneration (options)

-

211

211

IFRS 2 - transfer to retained earnings

-

(298)

(298)

31 July 2015

1,114

1,066

2,180

Share based remuneration (options)

-

182

182

IFRS 2 - transfer to retained earnings

-

(401)

(401)

31 July 2016

1,114

847

1,961

 

22           Retained earnings




 

Retained earnings


 

Retained




before deduction

Own shares

earnings




of own shares

(note 23)

Total

Group



£'000

£'000

£'000

1 August 2014



12,298

(4,241)

8,057

Profit attributable to owners of

Parent for the financial year



 

1,968

 

-

 

1,968

Transfer from revaluation reserve

(Additional depreciation on revaluation)



249

-

249

Transfer from share based payment  reserve (Note 21a)



298

-

298

Transfer realised gain on asset disposal



421

-

421

Dividend paid



(1,847)

-

(1,847)

31 July 2015



13,387

(4,241)

9,146

Profit attributable to owners of

Parent for the financial year



 

4,282

 

-

 

4,282

Transfer from revaluation reserve

(Additional depreciation on revaluation)



262

-

262

Transfer from share based payment  reserve (Note 21a)



401

-

401

Transfer realised gain on asset disposal



1,639

-

1,639

Dividend paid



(2,147)

-

(2,147)

31 July 2016



17,824

(4,241)

13,583

 

The transfer from revaluation reserve represents the additional depreciation charged on revalued assets net of deferred tax.

 

The Own Shares Reserve represents the cost of shares in Lok'nStore Group plc purchased in the market and held in the Employee Benefit Trust to satisfy awards made under the Group's share incentive plan and shares purchased separately by Lok'nStore Limited for Treasury Account. These treasury shares have not been cancelled and were purchased at an average price considerably lower than the Group's adjusted net asset value. These shares may in due course be released back into the market to assist liquidity of the Company's stock and to provide availability of a reasonable line of stock to satisfy investor demand as and when required.

 

The Company has taken advantage of the exemption available under the Companies Act 2006 not to present the Company income statement of Lok'nStore Group plc. The Company loss for the year was £276,288 (2015: £139,354).

 

23           Own shares


EBT

EBT

Treasury

Treasury

Own shares


shares

shares

shares

shares

total


Number

£

Number

£

£

31 July 2015 and 31 July 2016

623,212

499,910

2,466,869

3,741,036

4,240,946

 

Lok'nStore Limited holds a total of 2,466,869 of Lok'nStore Group plc ordinary shares of 1p each for treasury with an aggregate nominal value of £24,669 purchased for an aggregate cost of £3,741,036 at an average price of £1.503 per share. These shares represent 8.5% (2015: 8.7%) of the Parent Company's called-up share capital. The maximum number of shares held by Lok'nStore Limited in the year was 2,466,869. No shares were disposed of or cancelled in the year.

 

The Group operates an Employee Benefit Trust (EBT) under a settlement dated 8 July 1999 between Lok'nStore Limited and Lok'nStore Trustee Limited, constituting an employees' share scheme.

 

Funds are placed in the trust by way of deduction from employees' salaries on a monthly basis as they so instruct for purchase of shares in the Company. Shares are allocated to employees at the prevailing market price when the salary deductions are made.

 

As at 31 July 2016, the Trust held 623,212 (2015: 623,212) ordinary shares of 1 pence each with a market value of £2,025,439 (2015: £1,791,735). No shares were transferred out of the scheme during the year (2015: nil).

 

No dividends were waived during the year. No options have been granted under the EBT.

 

24           Cash flows

(a) Reconciliation of profit before tax to cash generated from operations





2016

2015





£'000

£'000

 

Profit before tax




 

5,493

 

2,654

Depreciation




1,535

1,440

Amortisation of intangible assets




165

165

Equity settled share based payments




182

211

Net settlement proceeds - Reading site




(1,940)

-

Disposal costs- Swindon stores




123

-

Interest receivable




(313)

(141)

Interest payable




1,048

1,144

Increase in inventories




(24)

(10)

(Increase) / decrease in receivables




(2,471)

423

(Decrease) / increase in payables




(24)

98

Cash generated from operations




3,774

5,984

 

(b) Reconciliation of net cash flow to movement in net debt

Net debt is defined as non-current and current borrowings, as detailed in note 17a less cash and cash equivalents.

 





2016

2015





£'000

£'000

 

Increase in cash in the year




 

2,900

 

257

Change in net debt resulting from cash flows




(1,115)

 

-

Movement in net debt in year




1,785

257

Net debt brought forward




(25,266)

(25,523)

Net debt carried forward




(23,481)

(25,266)

 

25           Commitments under operating leases

 

At 31 July 2016 the total future minimum lease payments as a lessee under non-cancellable operating leases were as follows:                                                                         






Group

Group






2016

2015






£'000

£'000

 

Land and buildings







Amounts due:







 Within one year





1,535

1,546

 

Between two and five years





 

5,847

 

5,725

 After five years





7,468

8,054






14,850

15,325

 

Operating lease payments represent rentals payable by the Group for certain of its properties.  Typically leases are negotiated for a term of 20 years and rentals are fixed for an average of five years.

 

26           Related party transactions

 

The following balances existed between the Company and its subsidiaries at 31 July:








2016

2015








£'000

£'000

Net amount due from Lok'nStore Limited




3,648

2,965










The amount due from Lok'nStore Limited is interest free. The balance is repayable on demand, however the Company has no present intention to demand repayment within one year and so the amount has been presented as a non-current asset as at 31 July 2016.

 

The Company provides share options for the employees of Lok'nStore Limited. The capital contributions arising from these share-based payments are separately disclosed under investments in note 11.

 

The aggregate remuneration of the Directors, who are the key management personnel of the Group, is set out below.  Further information on the remuneration of individual Directors is found in note 6.

                                                                                                                                                    








2016

2015








£'000

£'000

Short term employee benefits





1,648

988

Post-employment benefits





31

30

Share-based payments







182

211

Total







1,861

1,229

 

The Group uses Trucost plc, an environmental research company, to provide information and undertake performance assessment of the environmental effect of its business activities. Trucost plc is a company in which Andrew Jacobs and Simon Thomas have a beneficial interest. The total fees payable to Trucost plc in respect of its environmental assessment and reporting for the year was £6,000 (2015: £6,000). The balance outstanding to Trucost plc at year-end was £nil (2015: £nil).

 

27a         Capital commitments and guarantees

The Group has capital expenditure contracted but not provided for in the financial statements of £1.10 million (2015: £3.03 million) relating to building contract retentions outstanding on the completed Bristol, Southampton and Reading stores and also the strip out works at the old Southampton store .  The Company was also committed to complete on its new Wellingborough site following completion of all relevant planning matters.

 

27b         Bank borrowings

The Company has guaranteed the bank borrowings of Lok'nStore Limited, a subsidiary company. As at the year-end, that company had gross bank borrowings of £28.8 million (2015: £27.7 million).

 

28           Events after the reporting date

 

a)      Legal completion of the purchase of the Wellingborough site 

On 14 September 2016 following completion of all relevant planning matters the Group completed its purchase of the Wellingborough site.

 

b)      Planning permission obtained and subsequent completion of the Gillingham site

(i)      On 16 September 2016 planning permission was granted for the demolition of existing commercial buildings on the site the and construction of a self-storage unit with associated vehicular access, parking and landscaping works.

(ii)     On 14 October 2016 following completion of all relevant planning matters the Group completed its purchase of the Gillingham site.

 

Our Stores

 

Head office

Lok'nStore plc

112 Hawley Lane

Farnborough

Hampshire GU14 8JE

Tel   01252 521010

 

www.loknstore.co.uk

www.loknstore.com              

 

Central Enquiries

0800 587 3322

[email protected]             

www.loknstore.co.uk            

 

Basingstoke, Hampshire

Crockford Lane

Chineham

Basingstoke

Hampshire RG24 8NA

Tel           01256 474700

Fax          01256 477377

[email protected] 

 

Bristol, Gloucestershire

Longwell Green Trade Park

Aldermoor Way

Bristol

BS30 7ET

Tel 0117 967 7055

[email protected]

 

Crayford, Kent

Block B

Optima Park

Thames Road

Crayford

Kent DA1 4QX

Tel           01322 525292

Fax          01322 521333

[email protected]     

 

Eastbourne, East Sussex

Unit 4, Hawthorn Road

Eastbourne

East Sussex BN23 6QA

Tel           01323 749222

Fax          01323 648555

[email protected] 

 

Fareham, Hampshire

26 + 27 Standard Way

Fareham Industrial Park

Fareham

Hampshire PO16 8XJ

Tel           01329 283300

Fax          01329 284400

[email protected]      

               

 

Farnborough, Hampshire

112 Hawley Lane

Farnborough

Hampshire GU14 8JE

Tel           01252 511112

Fax          01252 744475

[email protected]               

 

Harlow, Essex

Unit 1 Dukes Park

Edinburgh Way

Harlow

Essex CM20 2GF

Tel           01279 454238

Fax          01279 443750

[email protected]        

 

Horsham, West Sussex

Blatchford Road

Redkiln Estate

Horsham

West Sussex RH13 5QR

Tel           01403 272001

Fax          01403 274001

[email protected]     

 

Luton, Bedfordshire

27 Brunswick Street

Luton

Bedfordshire LU2 0HG

Tel           01582 721177

Fax          01582 721188

[email protected]           

 

Maidenhead, Berkshire

Stafferton Way

Maidenhead

Berkshire

SL6 1AY

Tel           01628 878870

Fax          01628 620136

[email protected]

 

Milton Keynes, Buckinghamshire

Etheridge Avenue

Brinklow

Milton Keynes

Buckinghamshire MK10 0BB

Tel           01908 281900

Fax          01908 281700

[email protected]              

 

Northampton Central

16 Quorn Way

Grafton Street Industrial Estate

Northampton NN1 2PN

Tel           01604 629928

Fax          01604 627531

[email protected]    

 

Northampton Riverside

Units 1-4

Carousel Way

Northampton

Northamptonshire NN3 9HG

Tel           01604 785522

Fax          01604 785511

[email protected]               

 

Poole, Dorset

50 Willis Way

Fleetsbridge

Poole

Dorset BH15 3SY

Tel           01202 666160

Fax          01202 666806

[email protected]          

 

 

Portsmouth, Hampshire

Rudmore Square

Portsmouth PO2 8RT

Tel           02392 876783

Fax          02392 821941

[email protected] 

 

Reading, Berkshire

251 A33 Relief Road

Reading

RG2 0RR

 

[email protected]       

 

Southampton, Hampshire

Third Avenue

Southampton

Hampshire SO15 0JX

Tel           02380 783388

Fax          02380 783383

[email protected]              

 

Staines, Middlesex

The Causeway

Staines

Middlesex TW18 3AY

Tel           01784 464611

Fax          01784 464608

[email protected]       

 

Sunbury on Thames, Middlesex

Unit C, The Sunbury Centre

Hanworth Road

Sunbury

Middlesex TW16 5DA

Tel           01932 761100

Fax          01932 781188

[email protected]      

 

 

Tonbridge, Kent

Unit 6 Deacon Trading Estate

Vale Road

Tonbridge

Kent TN9 1SW

Tel           01732 771007

Fax          01732 773350

[email protected]    

 

Development locations (Owned Stores) 

 

Wellingborough, Northamptonshire

19/21 Whitworth Way

Wellingborough NN8 2EF

 

Gillingham, Kent

Courtney Road

Gillingham

Kent ME8 0RT

 

 

Managed stores

 

Aldershot, Hampshire

251, Ash Road

Aldershot

GU12 4DD

Tel  0845 4856415

[email protected]    

 

 

Ashford, Kent  

Wotton Road

Ashford

Kent TN23 6LL

Tel   01233 645500

Fax 01233 646000

[email protected]

 

Chichester, West Sussex

17, Terminus Road,

Chichester,

PO19 8TX

Tel 01243 771840

[email protected]

 

Crawley, West Sussex

Sussex Manor Business Park

Gatwick Road

Crawley

RH10 9NH

Tel  01293 738530

[email protected]      

 

Swindon Kembrey Park, Wiltshire

Kembrey Street

Elgin Industrial Estate

Swindon

Wiltshire SN2 8UY

Tel   01793 421234

Fax  01793 422888

[email protected]              

 

Woking

Marlborough Road

Woking

GU21 5JG

Tel   01483 378323

Fax  01483 722444

[email protected]

 

Under Development (Managed Stores)

 

Hemel Hempstead

Broadstairs

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR ZZLFFQBFEFBK

Related Charts

Lok'n Store Group (LOK)

-8.00p (-1.95%)
delayed 18:15PM