TIDMLOK
RNS Number : 5535E
Lok'nStore Group PLC
31 October 2022
LOK'NSTORE GROUP PLC
(" Lok'nStore " or "the Group ")
Preliminary Results for the year ended 31 July 2021
Lok'nStore, the fast-growing AIM listed self-storage company, is
pleased to announce its Preliminary Results for the year ended 31
July 2022.
Highlights
v Record revenue and profits
v Significant increase in net asset value per share
v 15% in crease in dividend
v Dynamic new store opening schedule driving future growth
v Low debt and LTV
Strong revenue and profit growth
ü Group Revenue GBP26.9 million up 22.9% (2021: GBP21.9
million)
ü Group Adjusted EBITDA(1) GBP16.4 million up 37.5% (2021:
GBP11.9 million)
ü Operating Profit before non-underlying items GBP11.4 million
up 49.8% (2021: GBP7.6 million)
ü Operating Profit after non-underlying items GBP17.2 million up
130.0% (2021: GBP7.5 million)
Driven by solid operating metrics
ü Achieved rate on occupied space up 13 % to GBP 25.6 per sq. ft
(2021: GBP22.7 per sq. ft)
ü Managed store revenue GBP2.8 million up 107%
ü Cost Ratio(13) reduced to 38.5% (2021: 44.9%)
Cash flow growth drives eleventh consecutive year of dividend
increase
ü Cash Available for Distribution (CAD) (3) per share up 36.6%
to 38.7 pence (2021: 28.4 pence)
ü Annual dividend increased by 2.25 pence to 17.25 pence per
share up 15% (2021: 15 pence per share) - covered 2.24 times by
CAD
Significant increase in net asset value
ü Adjusted Net Asset Value(5) per share up 33% to GBP9.72 per
share (2021: GBP7.31 per share)
Disciplined use of capital leads to strong balance sheet and low
debt
ü Sale and manage back of four stores at a 22.8% premium to 31
July 2021 valuations delivering GBP37.9 million of net sale
proceeds in cash
ü GBP46.5 million cash at year-end (2021: GBP9.1 million)
ü Net debt (excluding lease liabilities and deferred finance
costs) reduced to GBP20.3 million (2021: GBP56.3 million)
ü Loan to value ratio(6) down to 6.6% (2021: 21.0%)
ü GBP25 million accordion executed - increases bank facility to
GBP100 million
ü Bank facility extended by one year to April 2026
Dynamic pipeline (8) of new Landmark stores will deliver further
growth
ü 4 new stores currently on site will add over 218,000 sq. ft of
new trading space
ü Secured store pipeline(9) total of 10 sites will add 44.1% to
owned new space over the coming years
Well positioned for the future
ü New store openings and rate increases will lead to further
revenue and profit growth
ü Trading momentum continues post year end with same-store
revenue up 13.6% for August and September 2022 compared to the same
period last year.
ü Strategy unchanged - increase revenue from existing stores and
open more new Landmark stores
ü Flexibility to respond to market circumstances
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, Executive
Chairman of Lok'nStore Group said,
"Lok'nStore's business has moved ahead significantly with
revenue up 22.9% and EBITDA up 37.5% on last year . Demand for UK
self-storage assets remains strong, and this has driven our Net
Asset Value per share up by 33% to GBP9.72. Trading since the
year-end has been good .
"We are on site at four new Landmark stores which will open
within the next 12 months and can be completed using cash on hand.
At 31 July 2022, our secured pipeline of ten new sites increases
owned space by 44.1%. This pipeline of new stores will add further
momentum to sales and earnings growth. We have reduced our net debt
to GBP20.3 million and our business model enables us to build out
the pipeline as market circumstances dictate.
"We aim to build more Landmark stores in the under-supplied UK
market. We are growing the business from a strong financial
platform that gives us great flexibility to respond to market
circumstances. We have multiple levers to allocate our capital in
ways which are most accretive to our shareholders through the
economic cycle, and we are confident that we will continue to
increase net assets, cash flows and dividends."
Enquiries:
Lok'nStore:
Andrew Jacobs, Executive Chairman
Ray Davies, Finance Director 01252 521 010
finnCap Ltd
Julian Blunt / Seamus Fricker, Corporate
Finance
Alice Lane, ECM 020 7220 0500
Peel Hunt
Carl Gough, Capel Irwin, Henry Nicholls 020 7418 8900
Camarco
Billy Clegg / Tom Huddart 0203 757 4980
Notes - What we mean when we say ... (and why we use these key
performance indicators (KPIs))
In addition to IFRS accounting performance measures we use some
Alternative Performance Measures (APMs) to help us explain how the
underlying business is performing.
Here we identify those measures and explain what we mean when we
use them and, importantly, why we use them: -
1. Group Adjusted Earnings before interest, tax, depreciation
and amortisation Adjusted EBITDA is defined as EBITDA before losses
or profits on disposal, share-based payments, acquisition costs,
non-underlying items and which demonstrates the cash generative
qualities of the business.
2. Non-underlying items Refers to one-off items of a
non-operational nature which arose during the year, and which may
relate to asset disposals, abortive site acquisition costs, or
other costs and which are likely to be infrequent events. (Refer to
note 4 of the Financial Statements).
3. Cash Available for Distribution (CAD) Is calculated as
Adjusted EBITDA less total net finance cost, less capitalised
maintenance expenses, New Works Team costs and current tax. This
measures the capacity of the business to pay dividends or pay down
debt. The Cash Available for Distribution per share is CAD divided
by the number of shares in issue less shares held in the Employee
Benefit Trust (EBT). The calculation of the CAD and the CAD per
share is set out in the Financial Review.
4. Adjusted Total Group Assets - The value of adjusted total
assets of GBP370.9 million (2021: GBP294.8 million) is calculated
by adding the independent valuation of the leasehold properties of
GBP24.2 million (2021: GBP22.1 million) less their corresponding
net book value (NBV) GBP7.2 million (2021: GBP7.6 million) to the
total assets in the Statement of Financial Position of GBP353.9
million (2021: GBP280.3 million). This provides clarity on the
significant value of the leasehold stores as trading businesses
which, under the Group's accounting policy on leases, are only
presented at their book values within the Statement of Financial
Position.
5. Adjusted Net Asset Value per share (NAV per share) - Adjusted
Net Asset Value per share is the net assets adjusted for the
valuation of leasehold stores (properties held under leases) and
deferred tax divided by the number of shares at the year-end. The
shares held in the Group's employee benefits trust and treasury
shares are excluded from the number of shares. The calculation of
the Net Asset Value per share is set out in the Financial
Review.
6. Loan to Value ratio (LTV) Measures the net debt of the
business expressed as a percentage of total property assets giving
a perspective on the gearing of the business. The calculation is
based on net debt (excluding deferred finance costs) of GBP20.3
million expressed as a percentage of the total properties
independently valued by JLL of GBP279.0 million (2021: GBP234.9
million) and development land assets of GBP29.2 million (2021:
GBP33.7 million) totalling GBP308.2 million (2021: GBP268.6
million) as set out in the Financial Review in the Analysis of
Total Property Value table.
7. Average Cost of Debt - The average cost of debt is calculated
by taking the total interest paid on the Group's Revolving Credit
Facility in the quarterly/weekly charging periods throughout the
year and taking an average based on the whole financial year. Apart
from the Group's Revolving Credit Facility the Group has no other
bank debt. The average cost of debt 1.71% ( 2021: 1.54%).
8. Pipeline Sites - Sites for new stores that either we have
exchanged contracts on or have agreed heads of terms and are
progressing with our lawyers towards completion. We have 14
pipeline sites of which ten are contracted and four are progressing
with lawyers. We currently have 24 owned stores trading with an
additional 16 managed stores trading. When these 14 sites are fully
developed, we will have a total of 54 stores.
9. Secured Pipeline Sites The ten sites for new stores on which
we have exchanged legal contracts. Of these nine stores are
Lok'nStore owned Stores and one will be a managed store. When these
ten sites are fully developed, we will have a total of 50
stores.
10. Adjusted Store EBITDA is Group Adjusted EBITDA (see 1 over)
before the deduction of central and head office costs. Unlike Group
Adjusted EBITDA this measure excludes the impact of IFRS 16 and
includes leasing charges as normal operating costs of each store.
The measure is designed to give clarity on the recurring operating
cash flow of the business and provides important information on the
underlying performance of the trading stores and shows the
cash-generating core of the business. Use of this metric enables us
to provide additional information on store EBITDA contributions
(after leasing costs) and the margins analysed between freehold and
leasehold stores and according to the age of the stores. This
analysis is set out in a table in the Financial Review.
11. Gearing refers to the level of debt compared to 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. The calculation of the gearing percentage,
also referred to as the net debt to equity ratio is set out in note
17 of the Financial Statements.
12. Group Adjusted EBITDAR is Group Adjusted EBITDA before the
deduction of rent. The measure is designed to give clarity on the
effect of the rent payable by leasehold stores and how its
elimination enables a comparison between the operating performance
of freehold stores (which do not pay rent) and leasehold stores
which pay rent. This analysis is set out in a table in the
Financial Review.
13. Cost Ratio calculates the ratio of the total operating costs
of the business as set out in the Financial Review, expressed as a
percentage of total Group revenue (note 1), giving a perspective on
the cost efficiency of the business when compared to the cost ratio
of the previous year. The Cost Ratio has been reduced further to
38.5% (2021: 44.9 %)
14. Same Store Analysis - This measure is used to give
transparency on improvements in the operating business in the year
unrelated to the opening of new stores, closure of old stores, and
more particularly in this financial year, the sale and manage-back
of previously owned stores (Basingstoke, Cardiff, Horsham and
Portsmouth stores) commenting on stores that were open and trading
at both financial year ends 31 July 2021 and 31 July 2022. The same
store key performance measure helps to illustrate the performance
of the underlying business.
See also the glossary
Chairman's Statement
I am delighted to be reporting another year of great results for
Lok'nStore, delivering a strong operating and financial
performance. We have seen significant growth in revenue, profits,
and asset values, enabling the Group to increase the dividend.
These excellent results can be summarised as:
-- 22.9% increase in Group Revenue
-- 37.5% growth in Group Adjusted EBITDA
-- Sale and manage back of four stores at a 22.8% premium to July 2021 valuations
-- Low debt and LTV
-- 33% increase in Adjusted Net Asset Value per share
-- Dynamic new store opening schedule
-- Increase of 15% in annual dividend
-- Operational GHG emissions down 92.5% since 2005
These results demonstrate Lok'nStore's delivery of our
commitment to deliver sustainable growth through all stages of the
economic cycle. Continued investor interest in the UK self-storage
sector demonstrated by market transactions underpins the increased
value of our assets and our strategy to open more Landmark
stores.
The detail behind these results is discussed further in our
Financial Review.
Significant Increase in Net Asset Value
Adjusted Total Group Assets(4) have moved upwards sharply in the
year by 27.3% to GBP 375.2 million mainly due to the trading
strength of our business, as well as investor interest in
self-storage assets and our investment in new stores.
Our trading assets are independently valued by Jones Lang La
Salle (JLL) on 31 July each year and this year produced a total
valuation of GBP279.0 million (2021: GBP234.9 million), an uplift
in the value of our freehold and leasehold trading stores of
GBP44.1 million. GBP30 million of this uplift comes from the maiden
valuations of our new stores in Warrington and Stevenage.
The Same Store uplift in the value of our freehold and leasehold
trading stores (adjusting for the disposal of the four trading
stores and the new stores in Warrington and Stevenage) is GBP45.9
million.
GBP 15.5 million of the same store uplift comes from the impact
of improved cash flows of the same store portfolio that was valued
last year. This demonstrates the impact operating performance has
on asset values and why one of our key objectives remains to fill
existing stores and continue improving pricing.
The balance of the same-store uplift of GBP 30.4 million comes
from improvements in the Discount Rate and Exit Yield applied to
the valuations. On our owned freehold trading stores we have seen
exit yields improving on average by 68 basis points, with discount
rates improving by 116 basis points. This demonstrates that the UK
Self-Storage Market is attracting significant interest from
institutional investors.
The Exit Yield and Discount Rates applied in the valuations are
validated by transactional evidence. We are well positioned to
benefit from future changes with our high-quality portfolio of
stores, and Landmark store development pipeline. As we enter a new
interest rate cycle, rising yields and discount rates may reduce
the value of the stores, but we expect any reductions will soon be
offset by new store openings and the continued revenue growth of
the business.
More details on the valuation of our trading stores can be found
in the Property Review and in note 12(a) of the financial
statements.
Further Dividend Growth
The Directors are proposing a final dividend of 12.25 pence per
share (2021: 10.67 pence) following the interim dividend payment of
5.0 pence per share in June 2022, bringing the total distribution
for the year to 17.25 pence per share, an increase of 2.25 pence
per share up 15% (2021: 15 pence per share) and our eleventh year
of increase in a row.
As announced last year, the Board has reviewed the Company's
dividend policy in the context of its disciplined approach to
capital allocation. Considering the cash-generative qualities of
the business and noting the requirement to invest in the Landmark
store opening programme, Lok'nStore will pursue a progressive
dividend policy which reflects the strong long-term underlying cash
flow growth of the business.
Subject to approval at the Company's AGM on 8 December 2022 the
final dividend will be paid on 6 January 2023 to shareholders on
the register on 25 November 2022. The ex-dividend date will be 24
November 2022. The final deadline for Dividend Reinvestment
Election by investors is 9 December 2022.
Sale and Manage-Back of four stores
On 31 January 2022, the Group completed the Sale and Manage-Back
of four stores for a total gross consideration of GBP39.0 million
representing a 22.8% uplift on the independent external valuation
of the stores at 31 July 2021.
Sale and manage-back of stores, when appropriate, demonstrate
how the Group can manage its cash generation and control its debt.
At the same time, we can increase the quality of our portfolio by
investing in new more environmentally efficient Landmark
stores.
This transaction was immediately accretive to Group net asset
value and has provided net sales proceeds of c.GBP37.9 million for
reinvestment into new, faster growing Landmark stores. Further
detail is set out in the Financial Review.
Due to the sale of four trading stores half-way through the
financial year and the opening of two new stores it has been
necessary this year to provide some 'Same Store Analysis'. This
quantifies the improvement in the core business in the year
unrelated to the opening of new stores, and more particularly in
this financial year, the sale and manage-back of previously owned
stores. The same store analysis is set out in the Managing
Director's Report.
Investment in new Stores
This year we invested GBP12.2 million in new store
development.
Following the receipt of GBP37.9 million from the Sale and
Manage-Back transaction reported above we can report a year-end LTV
ratio (net of cash) of only 6.6% (2021: 21.0%) and a very low level
of net debt of only GBP20.3 million, down from GBP56.3 million in
the previous year (Refer to note 29b).
During the year we opened two new owned stores in Warrington and
Stevenage. Early trading in these two stores has been excellent.
Trading at our new stores continues to exceed expectations and this
underpins our confidence that our pipeline will add further to
sales and earnings growth. The Group continues to find high-quality
sites for new Landmark stores. The current secured pipeline adds
44.1% more trading space to our total owned portfolio.
We are on site at four Stores, in Basildon, Bedford, Staines and
Peterborough which will all open in 2023. This will mean increased
capital expenditure in the coming twelve months. We are also due to
go on site shortly at Kettering on behalf of a third-party Managed
Store client.
Capital Expenditure
It is generally our intention to commence the construction and
fit out of all our pipeline stores as soon as all planning and
enabling works have been completed. Self-storage benefits from the
short lead time between breaking ground and store opening of only
around twelve months. We have only committed future capital
expenditure at the four stores where we are on site all of which
will be open and producing cash within the next 18 months. We have
a high degree of flexibility regarding start dates for further
building at other sites. We can therefore adapt our development
programme quickly to react to changing economic circumstances.
We are seeing material cost inflation in building costs which we
continue to monitor closely, particularly for future buildouts as
the four developments currently on site are on fixed cost
contracts. Because our own pricing achieved increased at 13% over
the past year, we are not seeing input costs increase at such a
level that would impact the viability of the projects we have
currently under review.
We report more generally on operating/trading costs in the
Financial Review.
Planning permissions
The planning process remains challenging. The system is complex,
successful outcomes can take considerable time to achieve, and the
process consumes a significant amount of management time. Despite
its challenges, during the year we secured planning consents on the
Kettering and Peterborough sites.
Managed Stores
Our strategy to grow the number of stores we manage for third
party owners, enables the Group to earn revenue without having to
commit capital, to amortise fixed central costs over a wider
operating base and drive further traffic to our website which
benefits our entire operation.
We had a particularly good year with managed stores generating
managed store income of GBP 2.79 million, up 107 % from the
previous year (2021: GBP 1.35 million). In the management fees
table in the Managing Director's Review, we separate recurring
management fees from non-recurring fees. Recuring management fees
increased by 49% in the year with non-recurring fees (planning,
store opening and supplementary fees) increasing by a spectacular
217%.
Lok'nStore manages 16 trading stores for third-party owners with
a property value approaching GBP150 million. Our current pipeline
includes an additional managed store which will take the total
number of managed stores to 17.
Our People
We always rely on our amazing people to deliver these impressive
results. I am delighted to say that all of our colleagues continue
to benefit from the success of the business with significant
bonuses paid to all staff members.
We will continue to invest in training to develop and deepen the
skills of our team members and create internal succession as the
business continues to expand. To support our colleagues with the
rising cost of living we brought forward annual pay reviews of our
store teams and ensured all colleagues in the business received an
annual salary review. We continue to keep salary levels under
review to ensure that all of our employees are paid fairly, and we
continue to promote equity ownership to our colleagues via our
Share Investment Plan and the granting of options.
Board changes
At the Company Annual General Meeting in December 2021, Edward
Luker retired from the board. I would like to personally thank
Edward for his support, wisdom and challenge over many years.
Jeff Woyda joined the board as a Non-Executive Director in
September 2021 and has now replaced Edward Luker as Senior
Non-Executive Director. Jeff also now chairs the Remuneration
Committee and is a member of the Audit Committee.
Liquidity and Cash Flow
At 31 July 2022, the Group had cash balances of GBP46.5 million,
a significant increase on last year's GBP9.1 million following the
sale-and-manage-back of four stores and strong operating cash
generation. The Group has a GBP100 million five-year revolving
credit facility which together with cash provides all the financing
needs for the current secured pipeline. Following the execution of
a one-year extension the facility now runs until April 2026. The
Group is not obliged to make any repayments on its loan facility
prior to its expiration in April 2026.
Cash inflow from operating activities before investing and
financing activities was GBP18.6 million in the year to 31 July
2022 up 52.4% (2021: GBP12.2 million).
Debt and Bank Covenants
The average cost of bank debt on drawn facilities for the year
was 1.71% (2021: 1.54%). All of the Group's total drawn bank debt
of GBP66.8 million (2021: GBP65.4 million) is unhedged. At the date
of this Report the Group's current cost of debt is running at 3.72%
as rates have moved higher since the year-end.
At the year-end interest cover was ten times tested on a
12-month rolling basis, against a covenant of 2.5 times. At the
year-end our loan-to-value ratio based on net bank debt was 6.6%
versus a bank covenant of 60% providing a large cushion of comfort.
Both the LTV and Interest covenants exclude the gearing effects of
IFRS 16 as agreed with our banks.
Environmental, Social and Governance
We are working hard to create an environmentally sustainable
business for all our customers, our colleagues, local communities
and the wider environment. Lok'nStore have been reporting on ESG
factors since 2005 and was the first listed UK self-storage company
to do so. Since then, we have been continually active and our
operational GHG emissions are 96.5% lower than if we had taken no
action since 2005.
In recent years, the Lok'nStore Environmental committee,
consisting of colleagues in various roles across the business and
including three Board members have been focused on practical
improvements we can make to our environmental footprint.
Details of our environmental performance along with our
commitments and targets can be found in our ESG report.
Our business model provides strength and adapts quickly in an
uncertain world
Looking forward during this period of economic and market
uncertainty, it is worth emphasising Lok'nStore's robust business
model.
We operate with a high EBITDA margin, sheltering the business
from cost increases. Debt and leverage are low, and we have
considerable cash on hand. Importantly the Company can pause
capital expenditure quickly if market conditions dictate and the
ongoing business requires little maintenance capital expenditure.
At the year-end, we are onsite at four stores where the capex
required to complete these projects is GBP 22.3 million, compared
to the GBP 46.5 million of cash on hand.
The Company has 17,000 customers who come from a diverse social
and economic background and whose reasons for storing are widely
diverse. Customers pay on a rolling four weekly up front basis. As
a result, bad debt continues to be low at 0.21% of revenue. Each
customer is relatively small with no self-storage customer
accounting for more than 0.3% of revenue. Additionally, the UK
self-storage market remains under-supplied, and demand remains
strong.
We are experiencing some cost increases in the short term, but
these are largely or wholly balanced by our ability to increase our
own achieved rate. We have also taken steps to mitigate the energy
cost increases, for instance we now use 88% of the electricity
generated in stores that have PV installed.
Our Objectives
Our objectives remain to:
-- Steadily increase cash available for distribution (CAD) per
share enabling a predictable growth of the dividend
-- Fill existing stores and improve achieved rates
-- Develop our secured pipeline of sites into new Landmark stores
-- Acquire more sites and build more new Landmark stores
-- Increase the number of stores we manage for third parties
Outlook
This year's results are excellent with all metrics sharply
higher, and trading since the period end is good. The continued
strong demand and high occupancy levels across our stores give us
pricing opportunities in the coming year.
Lok'nStore continues to experience strong year to year revenue
growth on a same store basis and this will be enhanced by the three
stores opened this year and the opening of four new stores opening
over the coming year. Our new secured store pipeline of new stores
will add 44.1% more owned trading space over coming years. Over the
medium to long term these factors will continue to increase
revenue, profits and asset value substantially. This strength
enables Lok'nStore to confidently look through the current external
market turbulence.
We have an exciting period of growth ahead. With Lok'nStore's
resilient and flexible business model enabling the business to
manage its conservative debt structure the Board is confident the
Group will continue to thrive .
Andrew Jacobs
Executive Chairman
28 October 2022
The UK Self-Storage Market
The UK Self-Storage Market at a Glance
The Self-Storage Association UK Annual Industry Survey 2022
reports that the UK self-storage industry is made up of 2050 sites
offering 52 million sq. ft. of space.
Market Overview
As reported in the Self-Storage Association UK (SSA UK) Annual
Industry Survey 2022 the UK self-storage market continues to grow
but remains under-developed relative to Australia and the US. In
the UK there are an estimated 1,429 self-storage facilities plus an
additional 621 containerised sites, providing a total of 52 million
sq. ft. of storage space. With a population of 68 million people in
the UK this equates to only 0.76 sq. ft. per person. Occupancy
rates across the UK industry at 31 December 2021 of built space was
83.3%. This has increased from 76.2% at the start of the
pandemic.
The structure of the UK industry is changing. When the industry
first emerged companies were predominately single owner sites often
located in industrial areas, but larger operators (defined as
operators managing ten or more sites), such as Lok'nStore, have
recently been developing purpose-built stores in retail-facing
locations offering customers a higher standard of product and
service.
The main barriers to entry to the market remain the difficulty
in finding and securing suitable sites as well as gaining the
appropriate planning consents. As a result, larger operators now
own or manage around a third of all facilities which translates to
45% of market share in terms of revenue and space. Currently
Lok'nStore is the fifth largest operator in the UK by number of
stores.
Drivers of Demand for Self-Storage
Demand for self-storage by both household and business customers
is driven by a specific need based on changing circumstances as
well as economic activity and business confidence.
For household customers their need is often linked to a life
event where they will need space temporarily, for example, to turn
a box room into a home office, but increasingly householders are
using storage on a semi-permanent basis to free up space at home or
store belongings they don't have room for.
Business customers use self-storage for a variety of purposes
including storage of goods, excess or seasonal stock, document
archiving or storage of equipment and tools. Businesses tend to
store for longer than household customers and take larger units,
although they also take advantage of self-storage for temporary
periods to support seasonal sales or office moves or
refurbishments.
During the pandemic many of our customers were providing
critical services distributing medical and other essential
supplies. We include the NHS, GP surgeries, care and home support
services and government departments amongst our customers.
Lok'nStore's Opportunity in the Market
The SSA UK Annual Industry Survey 2022 notes that public
awareness of and demand for self-storage is increasing. We know
that on average customers chose a store within five miles of their
home or business. With a secured pipeline of ten stores, a further
four stores at lawyers and a continuing programme of evaluating
further site opportunities, Lok'nStore is well placed to attract
new customers and add further momentum to the growth of our sales
and profits.
Combining the Group's competitive strengths (recognised brand,
excellent customer service, rigorous cost control) and the
attractive market dynamics of the storage sector (growing sector,
under supply, resilience during economic downturn) with our strong
balance sheet and flexible operating and ownership model (see our
portfolio strategy), we believe Lok'nStore can take advantage of
the opportunities presented and continue its growth without
significantly increasing risk.
Our Business Model:
Our overriding objective is to increase the Cash Available for
Distribution (CAD) enabling a predictable growth of the dividend
from a rising asset base while maintaining a conservatively geared
balance sheet.
What we do How we create value Sharing value with our stakeholders
Shareholders
* Buy or lease prominent sites * Take a strategic and tactical approach to site * High-quality earnings
selection
* Build highly visible orange Landmark storage centres * Growing NAV per share
* Increase our asset base
* Offer clean, dry, secure storage to business and * Progressive dividend policy
household customers * Careful cost control
* Offer managed storage services to third-party owners * Drive store EBITDA growth through a closely managed Customers
occupancy and pricing strategy * Easy to locate stores
* Earn fees from managing stores on behalf of others * Friendly and high-quality customer service
* Carefully balanced use of leverage * Wide range of storage solutions
* Transparent and open contracts
Our people
* Personal development through the Lok'nStore Academy
* Regular opportunities for career progression through
our expanding store portfolio
* Uncapped bonus scheme
* Share ownership plans
* Regular gifts and rewards for all colleagues
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40 UK Stores currently GBP26.9 million Group * Rated excellent on Google with an average score of
trading revenue 4.7 out of 5 from over 3,500 reviews
(Including 16 Managed (2021: GBP21.9 million)
Stores)
* GBP0.73 million paid out in bonuses to store teams
(2021: GBP1.0 million)
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Our strategy:
Our objectives Achievements in 2022 Strategy in action
Steadily increase CAD per share up 36.7 Annual dividend 17.25 pence
cash available for % to 38.7 pence (2021: per share up 15% (2021: 15 pence
distribution (CAD) 28.4 pence) per share)
per share
---------------------------- --------------------------------------------------------
Fill existing stores We continued to improve
and improve pricing our online visibility * 16 freehold stores over 80% occupied at year end
through evolution of
our search engine strategy
We focused on developing
our teams' sales and * Self-storage pricing up 13%
customer service through
the Lok'nStore Academy
--
---------------------------- --------------------------------------------------------
Acquire more sites 3 landmark stores opened
to build new Landmark during the year. * We acquired one new site in this financial year:
stores Bolton
10 stores secured in
planning or development.
* Four sites currently at lawyers
Planning permissions
achieved at Peterborough
and Kettering.
Increase the number 1 managed store in development
of stores we manage and 1 opened during * Recurring managed store fees up 107%
for third parties the year.
* Kettering Site acquired by third party investor
------------------------------- ------------------------------------------------------------
Managing Director's Review:
Lok'nStore Group has had another successful year delivering
against all of our strategic objectives. Once again revenue,
profits and asset values have all moved sharply ahead. In coming
years our pipeline of new stores will substantially increase the
proportion of our store space which is new or purpose-built and
will add further momentum to the growth of sales and profits.
Trading
Group revenue for the year was GBP26.9 million, up 22.9% year on
year (2021: GBP21.9 million) driven by occupancy increases and
improved pricing across our stores. This revenue growth led to a
37.5% increase in Group Adjusted EBITDA.
ü Total self-storage revenue GBP24.1 million up 17.3%
ü Adjusted Store EBITDA GBP14.9 million up 23.7%
ü Unit pricing up 13.0%
ü Managed store revenue GBP2.8 million up 107%.
ü Recurring management revenue GBP1.31 million up 49%.
ü GBP12.2 million invested in our portfolio of stores this
year
Total Adjusted Store EBITDA, a key performance indicator of
profitability and cash flow of the business, increased 23.7% to
GBP14.88 million (2021: GBP12.03 million). The overall Adjusted
EBITDA margin across all stores was higher again at 61.6% (2021:
58.3%) with the Adjusted Store EBITDA margins of the freehold
stores at 65.5% (2021: 63.1%) and the leasehold stores at 53.3%
(2021: 46.5%).
As the business develops the balance of the stores continues to
shift towards Landmark freehold stores and managed stores which
have a higher-than-average Adjusted Store EBITDA margin at 65.5%
and 100% respectively versus 61.6% across all stores. The impact of
this will be to continue to increase the average Adjusted Store
EBITDA margin of the Group overall, and this effect is accentuated
by operating more stores from a relatively fixed central cost base.
In this context the new stores in the pipeline will make a larger
than average contribution to Group profits and asset values as they
become established trading units.
In the tables below, we show how the performance of the stores
varies between freehold and leasehold stores. Currently 43.3% of
Lok'nStore branded trading space is owned freehold, 20.5% is
leasehold and 36.2% is managed stores.
The freehold stores produce 71.8% (2021: 76.9%) of the Adjusted
Store EBITDA and account for 91.4% (2021: 91.8%) of valuations
(including secured pipeline stores). Leaseholds trade on lower
margins due to the rent payable, but nevertheless the 53.3% margin
achieved is substantial, and leads to a higher return on capital
than the freehold stores which require much larger capital
expenditure to buy the land and buildings.
This mix of tenures with their different risk and return
characteristics provides flexibility in the balance sheet and
opportunities to create value throughout the property and economic
cycle.
Performance - Same Store Analysis(14)
Headline Store Performance Same Store Performance 31 July 2022
31 July 2022
FYE 31 July 2022 GBP '000 Percentage GBP '000 Percentage
Increase Increase
% %
Group revenue 26,902 22.9 25,299 30.7
---------- ----------- ---------- -----------
Self-storage revenue 24,076 17.3 22,473 24.9
---------- ----------- ---------- -----------
Store Adjusted EBITDA 14,884 23.7 14,137 34.8
---------- ----------- ---------- -----------
Group EBITDA 16,349 37.5 14,390 39.1
---------- ----------- ---------- -----------
Operating profit (before non-underlying) 11,421 49.8 10,889 71.7
---------- ----------- ---------- -----------
Operating profit (after non-underlying) 17,160 130.0 16,628 168.9
---------- ----------- ---------- -----------
Operating costs 10,365 5.4 9,522 7.5
---------- ----------- ---------- -----------
Profit before tax 15,874 146.2 15,343 197.0
---------- ----------- ---------- -----------
Store EBITDA Margins 61.6% 62.9%
---------- ----------- ---------- -----------
Portfolio Analysis and Performance Breakdown
As at 31 July 2022 When fully
Developed
Portfolio Analysis Number % of Valuation % of Adjusted % lettable Number Total
and Performance of Adjusted Store EBITDA space of Stores % lettable
Breakdown stores Store margin space
EBITDA (%)
-------- --------------- ---------- -------------- ----------- ------------
Freehold 15 80.4 71.8 65.5 43.3 23 51.8
-------- --------------- ---------- -------------- ----------- ------------
Leaseholds 9 8.6 28.2 53.3 20.5 10 15.4
-------- --------------- ---------- -------------- ----------- ----------- ------------
Managed Stores 16 - - 100.0 36.2 17 32.8
-------- --------------- ---------- -------------- ----------- ----------- ------------
Total Stores Trading 40 - - - - 50 -
-------- --------------- ---------- -------------- ----------- ----------- ------------
Pipeline Stores
*
-------- --------------- ---------- -------------- ----------- ----------- ------------
Owned - Freehold 8 11.0 - - - - -
-------- --------------- ---------- -------------- ----------- ----------- ------------
Owned - Leasehold 1 -
-------- --------------- ---------- -------------- ----------- ----------- ------------
Managed Stores 1 - - - - - -
-------- --------------- ---------- -------------- ----------- ----------- ------------
Total Stores 50 100 100 61.6 100 50 100
-------- --------------- ---------- -------------- ----------- ----------- ------------
*Applies to the ten contracted stores only
In the table below we show how the performance breaks down
across the stores based on age . Clearly older stores have had more
time to fill up and produced 72.8% EBITDAR margins. Over time as
new stores and pipeline sites go through their life cycle they will
progress towards similar margins , adding substantially to revenues
and profits.
Operating Performance by age of store (Lok'nStore owned stores
only)
Weeks Old Pipeline Under 100 to over 250 Total
100 250
Year Ended 31 July 2022
---------- -------- ------- --------- ----------
Sales GBP000 481 3,734 19,961 24,176(1)
---------- -------- ------- --------- ----------
Stores Adjusted EBITDA
GBP'000 (400) 2,504 12,780 14,884
---------- -------- ------- --------- ----------
EBITDA Margin (%) (83.2%) 67.1% 64.0% 61.6%
---------- -------- ------- --------- ----------
Store Adjusted EBITDAR
GBP'000 (395) 2,504 14,523 16,632
---------- -------- ------- --------- ----------
EBITDAR Margin (%) (82.2%) 67.1% 72.8% 68.8%
---------- -------- ------- --------- ----------
As at 31 July 2022 ('000
sq. ft.)
---------- -------- ------- --------- ----------
Maximum Net Area 561 169 285 1,018 2,033
---------- -------- ------- --------- ----------
Freehold / Long Leasehold
('000 sq. ft.) 511 169 285 583 1,548
---------- -------- ------- --------- ----------
Short Leasehold ('000
sq. ft.) 50 - - 435 485
---------- -------- ------- --------- ----------
Number of Stores
---------- -------- ------- --------- ----------
Freehold 8 3 5 11 27
---------- -------- ------- --------- ----------
Short Leasehold 1 - - 9 10
---------- -------- ------- --------- ----------
Total Stores 9 3 5 20 37(2)
---------- -------- ------- --------- ----------
(1) In respect of the Farnborough Store (over 250 weeks) the
total store revenue includes a GBP100,000 contribution receivable
from Group Head Office.
(2) The 37 stores include performance of the four sale and
manage-back stores up to 31 January 2022 prior to their disposal.
At the year-end the total number of owned stores was 33.
Marketing
New customers are typically drawn to Lok'nStore by three key
drivers:
-- Our distinctive Landmark stores
-- Google and other search engines
-- Existing or previous customers and customer referrals
Store visibility remains pivotal to our marketing efforts. With
their prominent positions, distinctive design, and bright orange
elevations our stores raise the profile of the Lok'nStore brand and
help to generate a substantial proportion of our business. Our
Landmark stores are in highly prominent locations, and we
continually invest in new signage and lighting at our existing
stores as well as creating striking designs for our new Landmark
stores, to promote and enhance their visual prominence and engage
the local community.
The internet continues to be the main media channel for our
advertising. Our website at www.loknstore.co.uk is one of the most
established self-storage websites in the UK. The website delivers a
high level of customer experience across desktop and mobile
devices. Any new development of the website begins with a mobile
first focus. 60% of visits to the website in the year were from a
mobile device, consistent with last year. This is a very dynamic
area, and we are committed to its continued development. We believe
the internet provides a strong competitive advantage for the major
operators such as Lok'nStore with relatively large marketing
budgets.
Pipeline of New Stores
Against this background of ever improving operating performance,
we have invested GBP12.2 million (2021: GBP26.9 million) in new
store development this year and we have a new store pipeline of ten
secured stores by the reporting date, which will take the total to
50 stores. These will all be purpose-built Landmark stores in
highly prominent locations and will add substantially to the
Group's capacity for revenue, profit and asset growth.
We believe that the UK self-storage market is still in its
infancy with low penetration and increased consumer awareness
leading to faster fill up rates.
Sale and Manage-Back of four of our freehold stores
On 31 January 2022, the Group executed the Sale and Manage-Back
of four of its freehold stores for a total gross consideration of
GBP39.0 million realising a significant premium of 22.8% to the
stores valuation at 31 July 2021. The purchaser was an existing
institutional managed-store client wholly independent of Lok'nStore
and its Directors.
Lok'nStore continue to manage the stores located in Basingstoke,
Cardiff, Horsham, and Portsmouth, as branded Lok'nStore operations
maintaining the operational footprint of the business. Lok'nStore
will receive management and performance fees for managing them on
behalf of their new owner. The total consideration of GBP39 million
receivable was subject to a GBP1.8 million downward adjustment in
respect of certain committed works to be completed by Lok'nStore at
two of the sites. The net proceeds of the sale will be recycled
into new, fast-growing Landmark stores.
In the year to 31 July 2021, the four stores generated revenue
of GBP2.54 million and contributed GBP1.54 million to Group EBITDA.
In the six months to 31 January 2022, the four stores generated
revenue of GBP1.50 million and contributed GBP0.97 million to Group
EBITDA. In the six months post the sale in January 2022, the Group
has received management fees of GBP0.151 million in respect of the
manage-back arrangement which flow directly to Group EBITDA. The
historic cost of the four stores was GBP13.75 million and their
stated fair value at 31 July 2021 was GBP31.75 million.
This transaction does not impact the Group's ability to grow its
annual dividend in line with market expectations and which is well
covered by projected CAD profit levels of the business going
forward.
Managed stores revenue increasing
Total managed store revenue in the year was up by 107% to
GBP2.79 million.
Recurring management fees were up by 49% to GBP1.31 million as
we increased the number of stores under management, including
opening the new Landmark store in Wolverhampton in March 2022 as
well as the four stores transacted to a managed store client in
January 2022. At the year-end we had 16 Managed Stores operating
with the Kettering store due to go on site in the coming
months.
Income from non-recurring fees was up dramatically in the year
to GBP1.47 million. Although these fees are irregular in nature,
this demonstrates the contractually embedded value in the managed
stores income stream. Non-recurring fees come from various sources
such as including planning success fees, construction and advisory
fees and fees crystallised when an asset transaction occurs.
Percentage Group
Management fees Increase Year ended Group
31 July Year ended
2022 31 July 2021
% GBP GBP
------------------------------- ----------- ------------ --------------
Recurring fees
Base management fees 722,084 515,940
Administration and compliance
fees 86,916 59,500
Management performance
fees 504,379 307,184
------------------------------- ----------- ------------ --------------
Recurring fees - Sub-total 49% 1,313,379 882,624
------------------------------- ----------- ------------ --------------
Construction & Advisory
fees 12,500 12,500
Supplementary fees 1,459,177 451,140
Non-recurring fees -sub
total 217% 1,471,677 463,640
------------------------------- ----------- ------------ --------------
Total management fees 107% 2,785,056 1,346,264
------------------------------- ----------- ------------ --------------
The graph below shows how our historical management fees have
grown and indicates a strong correlation between the total
management fee income and the number of stores under
management.
Future
Lok'nStore has had an excellent year , with all our trading and
financial metrics moving ahead briskly, demonstrating the strength
of the self-storage business model throughout the economic cycle .
Trading has remained good since the year-end.
We are currently experiencing some cost pressure, but the
business is sheltered from this effect by high EBITDA margins and
our ability to raise rates charged.
Against the background of a strong performance from our existing
stores, we have a secured pipeline of ten new stores plus a further
four at lawyers all of which will add considerable momentum to
sales and earnings growth in the future. Our flexible model allows
us to develop these new stores when market circumstances
dictate.
Neil Newman-Shepherd
Managing Director
28 October 2022
Property review
40 stores now 10 new Landmark stores New stores will add 29.6% to
trading secured total trading space
Store and Portfolio Strategy
Our strategy is to continue to increase the number of stores we
operate without stretching our balance sheet. The core focus of
this strategy is the acquisition of highly prominent freehold
locations in busy towns and cities in England where we will build
well-branded Landmark stores.
Lok'nStore's rising operating cash flow, solid asset base, and
tactical approach to its store property portfolio provide the Group
with opportunities to improve the terms of its property usage in
all stages of the economic cycle. Our focus on the trading business
gives us many opportunities and our property decisions are always
driven by the requirements of the trading business.
Flexible Approach to Site Acquisition
All the projects noted below are part of our strategy of
actively managing our operating portfolio to ensure we are
maximising both trading potential and value. This includes
strengthening our distinctive brand, increasing the size and number
of our stores, and replacing stores or sites where it will increase
shareholder value. We are focused on allocating capital in the most
efficient manner to achieve our objectives.
We prefer to own freeholds if possible, and where opportunities
arise, we will seek to acquire the freehold of our leasehold
stores. However, we are happy to take leases on appropriate terms
and benefit from the advantages of a lower entry cost, with further
options to create value later in the store's life cycle.
Sale and Manage-Back of Stores
We also consider selling established stores on sale and
manage-back contracts in order to recycle the capital into the
development of new Landmark stores and manage the balance sheet as
part of our successful growth strategy and disciplined capital
allocation. Indeed, some of our stores have been freehold,
leasehold, and managed stores during their operating life
cycle.
In the period we successfully completed on the sale and manage
back of four older stores which raised net proceeds of GBP37.9
million to be recycled into new Landmark stores.
Our most important consideration is always the trading potential
of the store rather than the property tenure and sale and
manage-backs have the additional advantages: -
i) The critical mass of store numbers benefits the business
(e.g. through Google search and sharing of other marketing
costs)
ii) It spreads the central management costs
iii) Through the performance and exit fees we are exposed to the
trading and capital upside without committing capital
The table below illustrates the rapid growth of store numbers
and the changing tenure mix over time including the growth of
managed stores over recent years.
At 31 July 2022, Lok'nStore operated 24 of its own stores. Of
these Lok ' nStore owns 15 freehold and nine leasehold stores. All
nine leasehold stores are all inside the Landlord and Tenant Act
providing us with security of tenure. The average unexpired term of
the Group's leaseholds is 10 years and one month as at 31 July
2022. We operate 16 further stores under management contracts.
The lease on the Sunbury store expired on the 30/07/2022. We are
in dialogue with the landlord regarding a new lease on the existing
site or in a new site. In the meantime, we continue to trade from
the current store which benefits from being inside the Landlord and
Tenant Act.
Our Exciting Landmark Store Pipeline
-- We have ten stores in our current Secured Pipeline of which
eight are freehold, one is leasehold and one managed
-- We are on site at four stores that will open during 2023 with
a fifth site due to commence shortly
-- Four new store opportunities are progressing with lawyers
-- Current Pipeline of ten contracted stores adds 29.6% of extra
trading space to the overall portfolio, 44.1% to our owned
portfolio and 5.9% to the managed portfolio
All ten stores in our Secured Pipeline (9) are in prominent
locations with large catchment areas and little established
competition and demonstrate the Group's ability to source
high-quality sites adding to future sales and earnings growth.
These eye-catching buildings, with their distinctive orange
Lok'nStore branded livery and prominent signage, create highly
visible landmarks, which continue to be a big source of new
customers.
Summary of our current pipeline at 31 July 2022:
Total On site On site On site
Store Size Status at at after
sq. ft 31 July 31 October 31 October
2022 2022 2022
sq. ft sq. ft sq. ft
(Additional) (Additional)
On site -
Bedford 55,978 opening early 2023 55,978
-------- --------------------- --------- -------------- --------------
On site - opening
Peterborough 45,900 spring 2023 45,900
-------- --------------------- --------- -------------- --------------
On site -
Staines 66,500 opening summer 2023 66,500
-------- --------------------- --------- -------------- --------------
On site -
Basildon 49,700 opening summer 2023 49,700
-------- --------------------- --------- -------------- --------------
On site autumn 2022
- opening autumn
Kettering 45,900 2023 45,900
-------- --------------------- --------- -------------- --------------
Planning consent
Bournemouth 75,100 granted 75,100
-------- --------------------- --------- -------------- --------------
Planning consent
Cheshunt 60,300 granted 60,300
-------- --------------------- --------- -------------- --------------
Planning application
Altrincham 63,900 submitted 63,900
-------- --------------------- --------- -------------- --------------
Barking 84,200 Design 84,200
-------- --------------------- --------- -------------- --------------
Bolton 59,100 Design 59,100
-------- --------------------- --------- -------------- --------------
Total 10
stores 606,578 218,078 45,900 342,600
-------- --------------------- --------- -------------- --------------
Total On site at 31 July 2022 218,078
----------------
Sq. ft. Trading (including Managed Stores) at 31 July
2022 2,046,673
----------------
Trading + On site at 31 July 2022 2,264,751
----------------
% Increase from on-site sq. ft 10.60%
----------------
Total secured pipeline 606,578
----------------
Sq. ft. Trading (including Managed Stores) at 31 July
2022 2,046,673
----------------
Trading + secured pipeline at 31 July 2022 2,653,251
----------------
% Increase from secured pipeline sq. ft 29.64%
----------------
During the year we opened three new stores in Warrington,
Stevenage, and Wolverhampton. Early trading in all new stores has
been very encouraging. We acquired one new site during the year and
have a further four sites progressing with lawyers.
Store opening programme by year
% Cumulative
Store Lok'nStore % Growth % Cumulative % Growth growth
Opening Capital Expenditure lettable growth lettable lettable lettable
Financial Pipeline Remaining area Owned area Owned area total area Total
Year (secured) (million) Portfolio portfolio portfolio portfolio
2023 4 GBP28.0 17.1% 17.1% 10.7% 10.7%
----------- --------------------- ------------ ----------------- ------------ -------------
2024 3 GBP18.1 10.7% 27.8% 8.8% 19.5%
----------- --------------------- ------------ ----------------- ------------ -------------
2025 3 GBP26.0 16.3% 44.1% 10.1% 29.6%
----------- --------------------- ------------ ----------------- ------------ -------------
10 GBP72.1 44.1% 29.6%
----------- --------------------- ------------ ----------------- ------------ -------------
Portfolio breakdown
When the contracted development pipeline of ten sites has been
completed Lok'nStore will operate from 50 stores including 17
managed stores. In addition, four further new store opportunities
are progressing with lawyers. The secured pipeline sites represent
a combination of nine owned and one managed store. These will add
606,578 sq. ft. of new capacity adding 44.1% to freehold and
leasehold owned trading space and 5.9% to the managed store
portfolio delivering a 29.6% increase in overall trading space.
Portfolio Breakdown
As at 31 July
2022 No of Trading Trading Pipeline Secured With
Stores/Sites Lok'nStore Managed Lawyers
------------- ----------- -------- --------- -------- --------
Freehold & Long
Leasehold 15 15
Leaseholds 9 9
Pipeline (Freehold) 12 12 8 4
Pipeline (Leasehold) 1 1 1
Managed Stores
(Trading) 16 16
Managed Stores
(Pipeline) 1 1 1
----------------------
Total 54 24 16 14 10 4
---------------------- ------------- ----------- -------- --------- --------
MLA sq. ft. 2,888,251 1,271,873 774,800 841,578 606,578 235,000
---------------------- ------------- ----------- -------- --------- -------- --------
Managed Stores
-- Circa GBP150 million of Store assets under management
-- 49% increase in recurring management fees earned
Lok'nStore manages an increasing number of stores for
third-party owners. Under this model Lok'nStore can provide a
turnkey package for investors wishing to own trading self-storage
assets. The investor supplies the capital for the project which
Lok'nStore manages. Lok'nStore will buy, build and operate the
stores under the Lok'nStore brand and within our current management
structure.
During the period the Group opened the Wolverhampton Managed
Store on 25 March 2022. The new Kettering store will be on site
autumn 2022 and open in 2023.
For managed stores Lok'nStore receives a standard monthly
management fee, a performance fee based on certain return hurdles
and fees on a successful exit. We also charge acquisition, planning
and branding fees. This allows Lok'nStore to earn revenue from our
expertise and knowledge of the self-storage industry without
committing our capital. We can amortise various fixed central costs
over a wider operating base and drive more visits to our website,
moving it up the internet search rankings and benefitting all the
stores we both own and manage.
This strategy improves the risk adjusted return of the business
by increasing the operating footprint, revenues and profits without
committing capital. There is a strong correlation between the total
management fee income and the number of stores under
management.
We now manage approaching GBP150 million of assets under this
structure on which we generated managed store income of
GBP2,785,056 this year, up 107% (2021: GBP1,346,264) from the
previous year. We expect this to continue increasing steadily over
the coming years as more managed stores are opened. Second half
income was stronger and includes additional fees from store
openings and non-recurring fees contributed to benefit additional
supplementary fees (Initial branding fees etc). Managed store
income is generated from our existing platform and central
management, resulting in an effective margin from this activity of
100%.
Growing Store Property Assets and Net Asset Value
ü Adjusted Total Assets GBP370.9 million(4) up 25.8% on last
year (2021: GBP294.8 million)
ü Adjusted Net Asset Value of GBP9.72 pence per share up 33% on
last year (2021: GBP7.31 per share)
ü Value of operating stores GBP279.0 million up 18.8% on last
year (2021: GBP234.9 million)
ü Total property assets GBP309.7 million up 14.7% on last year
(2021: GBP270.1 million)
Our freehold and leasehold stores have been independently valued
by Jones Lang LaSalle (JLL) at GBP279.0 million as at 31 July 2022
(2021: GBP234.9 million).
Adding our stores under development at cost, and land and
buildings held at director valuation, our total property valuation
is up 14.7% to GBP309.7 million (2021: GBP270.1 million). The
increase in the values of properties which were also valued by JLL
last year was 22.6% (2021: 22.8%).
The significant change in property valuation is referred to
further in the Financial Review section of the Strategic Report and
is detailed in note 12(a) of the notes to the financial statements.
The principal drivers for this increase are: -
-- The trading stores have continued to trade at high occupancy.
The stabilised occupancy assumed by JLL is materially unchanged at
88.23% (2021: 88.85%)
-- Discount Rates and Exit Yields applied by JLL have also compressed this year
-- Transactional activity in the UK and across Europe remains strong
-- There is an increasing amount of capital looking to access
the self-storage market, with a real step change in the interest in
the sector, with major private equity and institutions either
having entered the market, (Schroders, Legal and General and the
Carlyle Group) or are looking to enter the market. More recently,
Angelo Gordon, GIC and Heitman have committed significant capital
to the sector, with other institutions looking to enter the market
either through direct acquisition or by funding new store
developments.
JLL reported in their 2022 Valuation report...."Self-storage is
widely viewed as an inflation hedge. The sector has proved itself
as a resilient asset class that generally performs well during
economic stress events as was seen during the Global Financial
Crisis and the COVID-19 pandemic" .
Post year-end we have seen considerable market turbulence which
may have an effect on the future valuations of our stores but which
may be offset to some degree by improvements in trading and trading
outlook. In note 11 we set out the likely effects of a 50 bps and a
100 bps increase / decrease in Discount Rate and Exit Yield.
Financial Review:
Group Revenue Group Adjusted EBITDA Operating profit GBP17.2
GBP26.9 million up 22.9% GBP16.4 million up million
37.5% up 130%
"Disciplined capital allocation and investment into fast-growing
Landmark assets"
Ray Davies
Finance Director
The Group has reported record revenue and profits with all KPi
metrics up on the previous year.
Financial results
ü Group Revenue GBP26.9 million up 22.9% (2021: GBP21.9
million)
ü Group Adjusted EBITDA(1) GBP16.4 million up 37.5% (2021:
GBP11.9 million)
ü Profit before Tax GBP15.9** million up 146.3% (2021: GBP6.5
million)
ü Operating Profit GBP17.2 million up 130.0% (2021: GBP7.5
million)
ü Cash available for Distribution (CAD) per share up 36.6% to
38.7 pence (2021: 28.4 pence)
ü Final dividend up 14.8% to 12.25 pence per share (2021: 10.67
pence per share)
ü Cash balance GBP46.5 million (2021: GBP9.1 million)
ü Bank facility extended by one year to April 2026
** A significant part of this increase in profit before tax is
due to the profit of GBP5.94 million arising on the sale of four
trading stores, which is "non-recurring" and separately disclosed
in the Income Statement below "adjusted EBITDA" and in note 4 to
the financial statements (non-underlying costs). Operating profit
is therefore increased by this amount.
On 20 October 2021, the Group executed the accordion arrangement
embedded within the Revolving Credit Facility which increases the
loan facilities available to the Group from GBP75 million to GBP100
million. In addition, the Group has also agreed a one-year
extension on its existing joint banking facility. The facility is a
joint agreement with ABN AMRO NV and NatWest Bank plc participating
equally and is closely aligned to the terms of the Group's previous
facility. ABN AMRO NV replaced Lloyds Bank plc in June 2021 as one
of the Group's banking partners.
The facility, which was due to expire in April 2025, will now
run until April 2026 providing funding for more Landmark site
acquisitions. The two principal bank covenants (LTV and Senior
Interest) and margin are unaffected by the execution of the
accordion and this extension of term.
Amendments to the Facility Agreement dealing with the transition
from LIBOR to SONIA (Sterling Over Night Indexed Average) have also
been made, fulfilling the UK regulator's requirements ahead of
LIBOR's phasing out after 31 December 2021.
Management of Interest Rate Risk
Lok'nStore generates an increasing cash flow from its strong
asset base with a low LTV net of cash of 6.6% and a low average
cost of debt of 1.71%. The value of the Group's assets underpins a
resilient business model with stable and rising cash flows and low
credit risk giving the business a firm base to fund future
growth.
Interest expense and bank borrowings
-- Average cost of debt 1.71% (2021: 1.54%)
-- Average cost of debt (on active revolving loans at 31 July 2022) 2.71% ( 2021: 1.55%)
With GBP66.8 million of gross debt currently drawn against the
GBP 100 million bank facility the Group is not committed to enter
into interest rate hedged instruments but continues to keep the
matter under review. It is not the current intention of the Group
to do so at this time given our low level of net debt, low loan to
value ratio and high interest cover. During the year the Group has
continued to benefit from relatively low lending rates although it
is recognised that interest rates are now rising.
The gross bank interest expense (before capitalisation of
interest costs, non-utilisation fees and loan amortisation fees)
for the year was GBP1.30 million (2021: GBP0.85 million), due to
higher average debt and higher average costs of borrowing. These
average costs of borrowing have continued to rise after the
year-end and the Group's current cost of debt is running at
3.72%.
The Group continues to monitor closely the effects of rising
interest rates on its senior interest covenant, which is tested on
a 12-month rolling basis, and the Group's flexible business model
will enable it to take appropriate steps to mitigate its effects
should it be required.
Capitalised interest in the year on our store development
programme was GBP589,983 (2021: GBP380,193). Total finance costs in
the Statement of Comprehensive income increased to GBP1.33 million
(2021: GBP1.02 million).
Lok'nStore will continue to report on the Cash available for
Distribution (CAD) which aims to look through the statutory
accounts and give a clear picture of the ongoing ability of the
Company to generate cash flow from the operating business that can
be used to pay dividends, make investments in new stores, or pay
down debt. CAD was up 38.1% for the year.
As agreed with the banks, both the Loan to Value and Senior
Interest covenants set out in our bank facility continue to be
tested excluding the effects of IFRS 16. For covenant calculation
purposes, debt / LTV will continue to exclude right of use assets
and the corresponding lease liabilities created by IFRS 16. When
testing the Senior Interest Covenant, property lease costs will
continue to be a deduction in the calculation of EBITDA, in
accordance with the accounting principles in force prior to 1
January 2019.
Earnings Per Share
The calculations of earnings per share are based on the
following profits and numbers of shares.
Group Group
Year ended Year ended
31 July 31 July
2022 2021
GBP'000 GBP'000
-------------------------------------------------- --------------- ---------------
Total profit for the financial year attributable
to owners of the parent 12,077 3,283
-------------------------------------------------- --------------- ---------------
2022 2021
No. of Shares No. of shares
-------------------------------------------------- --------------- ---------------
Weighted average number of shares
For basic earnings per share 29,287,451 29,035,104
Dilutive effect of share options(1) 549,321 527,846
-------------------------------------------------- --------------- ---------------
For diluted earnings per share 29,836,772 29,562,950
-------------------------------------------------- --------------- ---------------
(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 21 to 25 .
Group Group
2022 2021
Earnings per share pence pence
Basic
Total basic earnings per share 41.24p 11.33p
---------------------------------- --------- ---------
Diluted
Total diluted earnings per share 40.48p 11.10p
---------------------------------- --------- ---------
Basic earnings per share were 41.24 pence ( 2021: 11.33 pence
per share) and diluted earnings per share were 40.48 pence (2021:
11.10 pence per share).
Operating Costs
Cost Ratio
ü Group operating costs amounted to GBP10.4 million for the year
(2021: GBP9.8 million) up by 5.4%
ü Cost ratio(13) reduced further to 38.5% (2021: 44.9%)
We have a strong record of disciplined control of our Group
operating costs with same store costs increasing by 7.5% (Refer to
same store analysis of Group operating costs in the table
below).
In the year Group operating costs at a headline level were up
5.4% year on year as we opened new Landmark stores in Warrington
and Stevenage. We provide a breakdown below. Overall, the cost
ratio continues to decrease as we grow revenue and continue to bear
down on costs.
Future cost increases are likely to be driven by the expansion
of the business in the areas of rates, staffing and marketing.
Historically, overall cost increases have been mainly driven by the
expansion of the business, however we are now seeing some other
cost pressures through energy (significant) and some wage costs
(moderate), and the insurance market has hardened considerably as
it re-rates its risk/premium positions in the light of store fires
in the wider self-storage sector.
Property costs increased by 10.9%. These costs mainly constitute
rates, light and heat and property maintenance and have risen in
recent years as we felt the effects of higher rates and energy
bills and as we opened our new Landmark stores which are generally
larger and therefore incur higher rates bills.
Staff costs increased by 1.9% as we staffed the new stores which
was offset by lower performance bonuses to our store
colleagues.
The 7.3% increase in overhead costs is principally due to a
stepped increase in audit fees as the audit profession adjusts its
fee rates in response to higher regulatory costs. Legal and
professional costs related to work on rent reviews, corporate tax,
increased valuation costs for additional work commissioned by the
Group for valuation work completed by JLL, and general compliance
work also increased. Peel Hunt were appointed joint broker during
the year adding to the overall brokerage costs.
Bank charges which now contain a full year amortisation charge
(non-cash) in respect of bank fees charged for the GBP25 million
accordion and the one-year RCF extension also increased.
Amortisation charges for 2022 were GBP215,845 (2021: GBP158,216).
Other administrative costs (computer support, telephones, PPS and
marketing etc) show no material cost pressures.
Group Operations Increase Year ended Year ended
in costs 31 July 31 July
% 2022 2021
GBP'000 GBP'000
------------------------------- ---------- ----------- -----------
Property costs 10.9 5,304 4,783
Adjustment for property lease
rentals 12.0 (1,746) (1,559)
------------------------------- ---------- ----------- -----------
Property and premises costs 10.4 3,558 3,224
Staff costs 1.9 5,369 5,269
Overheads 7.3 1,438 1,341
Total 5.4 10,365 9,834
------------------------------- ---------- ----------- -----------
On a same store basis, excluding the financial effects of the
four trading stores sold and the new stores opened in Warrington
and Stevenage, the table below shows the overall Group cost
increased by 7.5%.
Group Operations Increase Year ended Year ended
Same Store analysis (decrease) 31 July 31 July
in costs 2022 2021
% GBP'000 GBP'000
---------------------- ------------ ----------- -----------
Property costs 11.6 3,135 2,808
Staff costs 4.3 5,062 4,853
Overheads 10.8 1,325 1,195
Total 7.5 9,522 8,856
---------------------- ------------ ----------- -----------
Cash Flow and Financing
At 31 July 2022, the Group had cash balances of GBP46.5 million
( 2021: GBP9.1 million) the large increase from the previous year
was due to the successful sale-and-manage-back of four stores
during the year for net cash proceeds of GBP37.9 million.
Cash inflow from operating activities before investing and
financing activities was GBP18.57 million in the year to 31 July
2022 up 52.4% (2021: GBP12.19 million).
Increasing Cash Flow Supports 15% Annual Dividend Increase
ü Annual dividend 17.25 pence per share up 15% (2021: 15 pence
per share)
ü Cash Available for Distribution (CAD) of 38.7 pence per share
(2021: 28.4 pence per share)
ü Cash Available for Distribution (CAD) up 38.2%
CAD provides a clear picture of ongoing cash flow available for
dividends, new store development or debt repayment.
Analysis of Cash Available for Distribution Group Group
(CAD) Year ended Year ended
31 July 31 July 2021
2022 GBP'000
GBP'000
----------------
Group Adjusted EBITDA
(Per Statement of Comprehensive Income) 16,349 11,890
Property lease rents (1,746) (1,559)
Net finance costs paid (excluding re-financing
costs) (1,395) (969)
Capitalised maintenance expenses (120) (193)
New Works Team (125) (129)
Current tax (note 9) (1,572) (798)
---------------- ----------------
(4,958) (3,648)
---------------- ----------------
Cash Available for Distribution 11,391 8,242
---------------- ----------------
Increase in CAD over last year GBP 3,149 2,069
Increase in CAD over last year % 38.2% 33.5%
Number Number
Closing shares in issue (less shares
held in EBT) 29,380,333 29,063,575
CAD per share 38.7p 28.4p
Increase in CAD per share over last year 36.7% 33.3%
Analysis of the underlying business after adjustment for
non-underlying items
During the year the Group has benefited from a higher than usual
level of non-recurring management fees of GBP1.47 million and
exceptional gains principally resulting from the sale of the four
sale and manage-back stores totalling GBP5.74 million. In the table
below we separate these non-underlying items and non-recurring
management fee income to show the performance of the underlying
business.
2022 2022 2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
Underlying Non-underlying Total Underlying Non-underlying Total
business items and business items and
non-recurring non-recurring
management management
fee income fee income
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
Revenue 25,430 1,472(1) 26,902 21,428 464(1) 21,892
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
Total property,
staff, distribution,
and general costs (10,553) - (10,553) (10,001) - (10,001)
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
Adjusted EBITDA(1) 14,877 1,472 16,349 11,427 464 11,891
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
Depreciation (4,727) - (4,727) (4,149) - (4,149)
Equity-settled
share-based payments (201) - (201) (118) - (118)
Non-underlying
items - 5,739(2) 5,739 - (160)(2) (160)
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
(4,928) 5,739 811 (4,267) (160) (4,427)
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
Operating profit 9,949 7,211 17,160 7,160 304 7,464
Finance income 42 - 42 1 - 1
Finance cost (1,328) - (1,328) (1,017) - (1,017)
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
Profit before
taxation 8,663 7,211 15,874 6,144 304 6,448
----------------------- ------------ --------------- ----------- ----------- --------------- -----------
(1) Represents non-recurring management fees
(2) Refer note 4 of the notes to the financial statements for
the analysis of non-underlying items
Analysis of Cash Available for Distribution 2022 2021
(CAD) GBP'000 GBP'000
(after after adjustment for non-underlying
items
---------------- ----------------
Cash Available for Distribution 11,391 8,242
Adjustment for non-recurring management fees (1,472) (464)
---------------- ----------------
Cash Available for Distribution on the underlying
business 9,919 7,778
Increase in CAD over last year GBP 2,141
Increase in CAD over last year % 27.5%
Number Number
Closing shares in issue (less shares held in
EBT) 29,380,333 29,063,575
CAD per share 33.8p 26.8p
Increase in CAD per share over last year 26.1%
Taxation
The Group has made a current tax provision against earnings in
this period of GBP 1.7 million (2021: GBP0.8 million) based on a
corporation tax rate of 19% (2021: 19%). The deferred tax provision
which is calculated at forward corporation tax rates of 25% is
substantially a tax provision against the potential crystallisation
(sales) of revalued properties and past 'rolled over' gains and
amounts to GBP63.2 million ( 2021: GBP46.8 million).
The external revaluation of the trading stores and the rolled
over gains made on the sale and manage-back of the four stores
during the period have both contributed to the uplift in the total
deferred tax provision at the year-end (See note 20).
Gearing (11) (excluding IFRS16 lease liabilities)
At 31 July 2022 the Group had GBP66.8 million of gross bank
borrowings ( 2021: GBP65.4 million) representing gearing of 9.9%
(2021: 37.2%) on net debt of GBP20.3 million (2021: GBP56.3
million). After adjusting for the uplift in value of short
leaseholds which are stated at depreciated historic cost in the
statement of financial position at GBP7.2 million (2021: GBP7.6
million), gearing is 9.1% (2021: 33.8%). After adjusting for the
deferred tax liability carried at year-end of GBP54.2 million
gearing drops to 7.1% (2021: 26.4%).
Gearing(11) (including IFRS16 lease liabilities)
At 31 July 2022 the Group had GBP66.8 million of gross bank
borrowings ( 2021: GBP65.4 million) and GBP10.9 million of lease
liabilities (2021: GBP11.2 million) representing gearing of 15.2%
(2021: 44.6%) on net debt of GBP35.5 million (2021: GBP67.5
million). After adjusting for the uplift in value of short
leaseholds which are stated at depreciated historic cost in the
statement of financial position at GBP7.2 million (2021: GBP7.6
million), gearing is 17.0% (2021: 40.7%). After adjusting for the
deferred tax liability carried at year-end of GBP63.2 million
gearing drops to 12.6% (2021: 31.7%).
Capital expenditure
The Group has an active new store development programme. The
Group has grown through a combination of building new stores,
existing store improvements and relocations. We have concentrated
on extracting value from existing assets and developing through
collaborative projects and management contracts.
Capital expenditure during the period totalled GBP12.2 million.
This was primarily the purchase of the Peterborough site, together
with ongoing construction and fit out works at our sites in
Stevenage, final costs on Warrington prior to opening, as well as
planning and pre-development works at our Bedford, Bournemouth,
Peterborough, Altrincham, Barking and Cheshunt sites.
The Group has capital expenditure contracted but not provided
for in the financial statements of GBP11.21 million (2021: GBP6.16
million). We carefully evaluate the ongoing economic and trading
position before making any further capital commitments and can
reduce capex quickly if the market deteriorates.
Strong Balance Sheet, Efficient Use of Capital, Low Debt
ü Revolving Credit Facility (RCF) increased to GBP100
million
ü GBP12.2 million invested in new store pipeline (2021: GBP26.9
million)
ü Net debt (excluding leases) GBP20.3 million (2021: GBP56.3
million)
ü Loan to Value Ratio (LTV) net of cash 6.6% (2021: 21.0%)
ü Cost of debt averaged 1.71% in the year (2021: 1.54%) on GBP
66.8 million debt (2021: GBP65.4 million)
Lok'nStore has a good credit model, with low debt and gearing
and which is strongly cash generative from an increasing asset
base. Increased bank facilities, on competitive margins, and
extended to April 2026, positions the business well for the
future.
Statement of Financial Position
Group net assets at the year-end were GBP205.3 million, up 35.7%
(2021: GBP151.3 million). Freehold properties were independently
valued at 31 July 2022 at GBP254.8 million up 19.7% (2021: GBP212.8
million). Please refer to the table of property values below.
The Parent Company's net assets have increased because of the
GBP6.0 million dividend paid up from Lok'nStore Limited, the
principal operating business of the Group.
Market Valuation of Freehold and Leasehold Land and
Buildings
It is the Group's policy to commission an independent external
valuation of its properties at each financial year-end.
Our freehold stores have been independently valued by Jones Lang
LaSalle (JLL) at GBP254.8 million (2021: GBP212.8 million).
Accordingly, Adjusted Total Group Assets(4) have moved upwards
sharply in the year to GBP370.9 million up 25.8% on 31 July (2021:
GBP294.8 million). A significant contributor to this increase was
the uplift from the external valuation at 31 July 2022 combined
with the trading strength of our business, as well as our
investment in new stores.
In this twelve-month period, we saw a same-store uplift in
valuations of GBP43.7 million in our freehold and leasehold trading
stores, a 24.1% increase. The like for like comparison excludes the
Sale and Manage-Back of four stores located in Basingstoke,
Cardiff, Horsham and Portsmouth, and the maiden valuations on our
new stores in Warrington and Stevenage.
GBP30.4 million of this valuation uplift comes from improvements
in both the Discount Rate and Exit Yield applied to the valuations.
On our owned freehold trading stores, we have seen exit yields
compress on average from 6.15% at 31 July 2021 to 5.47% at 31 July
2022, with Average Discount rates at 7.02% compared to an average
of 8.18% at 31 July 2021. These improving metrics reflect the
increasing investor demand for UK Self Storage assets.
The remaining GBP15.5 million of valuation uplift comes from the
impact of improved cash flows of the same store portfolio that were
valued last year. At the full year-end in July 2021, we saw
significant improvements in the cash flow assumptions applied by
JLL and these have been improved further in this 2022 valuation
demonstrating the impact operating performance has on asset values
and why one of our key objectives remains to fill existing stores
and continue improving pricing. We are well positioned to benefit
from future changes with our high-quality portfolio of stores. The
Exit Yield and Discount Rates applied are validated by
transactional evidence.
It remains the Group's established policy to undertake a
comprehensive external valuation at each year-end and we will do so
at the next year end at 31 July 2023.
Valuations
It is not the intention of the Directors to make any further
significant disposals of trading stores, although individual
disposals may be considered where value can more easily be added by
recycling the capital into new stores.
The valuations of our freehold property assets are included in
the Statement of Financial Position at their fair value. The value
of our leasehold stores in the valuation totals GBP24.3 million
(2021: GBP22.1 million) but they are held at cost less accumulated
depreciation in the Statement of Financial Position.
A deferred tax liability arises on the revaluation of the
properties and on the rolled-over gain arising from the disposal of
some properties. It is not envisaged that any tax will become
payable in the foreseeable future on these disposals due to the
availability of rollover relief.
We have reported by way of a note, the underlying value of these
leasehold stores in revaluations and adjusted our Net Asset Value
(NAV) calculation accordingly to include their value. This ensures
comparable NAV calculations . An analysis of the valuations
achieved is set out in the table below.
Analysis of Total Property Value No of 31 July No of 31 July
stores 2022 Valuation stores 2021 Valuation
/sites GBP'000 /sites GBP'000
-------- ---------------- -------- ----------------
Freeholds (1) valued by JLL (2) 15 254,775 17 212,800
Leaseholds valued by JLL (3) 9 24,250 9 22,100
Subtotal 24 279,025 26 234,900
Sites in development at cost (1) 9 29,215 12 33,675
-------- ---------------- -------- ----------------
Subtotal (4) 33 308,240 38 268,575
Freehold land & Buildings at Director
valuation 1 1,500 1 1,500
Total 34 309,740 39 270,075
-------- ---------------- -------- ----------------
(1) Includes GBP440,522 of capitalised interest during the year
(2021: GBP314,891).
(2) Includes related fixtures and fittings (refer note 12).
(3) The nine leaseholds valued by JLL are all within the terms
of the Landlord and Tenant Act (1954) giving a degree of security
of tenure. The average length of the leases on the leasehold stores
valued was ten years and one month at the date of the 2022
valuation.
(4) Loan to value calculation based on these property values.
Total freehold properties account for 92.2% of all property
values (2021: 91.8%).
Increase in Adjusted Net Asset Value per Share
ü Adjusted Net Asset Value per share up 33% to GBP9.72 (2021:
GBP7.31)
Adjusted Net Assets per Share are the net assets of the Group
adjusted for the valuation of leasehold stores and deferred tax
divided by the number of shares at the year-end. The shares
currently held in the Group's employee benefits trust (own shares
held) and in treasury (zero) are excluded from the number of
shares.
At July 2022, the Adjusted Net Asset Value per share (before
deferred tax) increased 33% to GBP9.72 from GBP7.31 last year. This
increase is a result of higher property values on our existing
stores as the strength of our Landmark stores is recognised,
combined with cash generated from operations less dividend
payments, offset in part by an increase in the shares in issue due
to the exercise of a small number of share options during the
year.
31 July 31 July
2022 2021
Analysis of net asset value (NAV) GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Net assets
Adjustment to include operating/short leasehold
stores at valuation 205,346 151,259
---------------------------------------------------- ---------- ----------
Add: JLL leasehold valuation 24,250 22,100
---------------------------------------------------- ---------- ----------
Deduct: leasehold properties and their fixtures
and fittings at NBV (7,224) (7,630)
---------------------------------------------------- ---------- ----------
222,372 165,729
---------------------------------------------------- ---------- ----------
Deferred tax arising on revaluation of leasehold
properties(1) (4,256) (3,618)
---------------------------------------------------- ---------- ----------
Adjusted net assets 218,116 162,111
---------------------------------------------------- ---------- ----------
Number Number
Shares in issue '000 '000
---------------------------------------------------- ---------- ----------
Opening shares in issue 29,687 29,633
---------------------------------------------------- ---------- ----------
Shares issued for the exercise of options 317 54
---------------------------------------------------- ---------- ----------
Closing shares in issue 30,004 29,687
---------------------------------------------------- ---------- ----------
Shares held in EBT (623) (623)
---------------------------------------------------- ---------- ----------
Closing shares for NAV purposes 29,381 29,064
---------------------------------------------------- ---------- ----------
Adjusted net asset value per share after deferred GBP7.42 GBP5.58
tax provision
---------------------------------------------------- ---------- ----------
Adjusted net asset value per share before
deferred tax provision
Adjusted net assets (see above) 218,116 162,111
Deferred tax liabilities and assets recognised
by the Group 63,214 46,760
Deferred tax arising on revaluation of leasehold
properties(1) 4,256 3,618
---------------------------------------------------- ---------- ----------
Adjusted net assets before deferred tax 285,586 212,489
---------------------------------------------------- ---------- ----------
Closing shares for NAV purposes 29,381 29,064
---------------------------------------------------- ---------- ----------
Adjusted net asset value per share before deferred
tax provision GBP9.72 GBP7.31
---------------------------------------------------- ---------- ----------
(1) A deferred tax adjustment in respect of the uplift in the
value of the leasehold properties has been included, calculated by
applying the substantively enacted corporation tax rate of 25%
(2021: 25%). 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.
Post Balance Sheet:
Acquisition of a development site in Milton Keynes
On 4(th) October 2022, we exchanged contracts on a freehold
development opportunity in Watling Street, Milton Keynes subject to
planning. This highly visible roadside location in the north west
of the city complements our existing leasehold store, 7 miles to
the south east. Once developed the store will add c. 60,000 sq. ft.
of lettable area.
Summary
Lok'nStore Group operates within the UK self-storage industry
which is still an immature sector with strong growth prospects.
With a low loan to value ratio and plenty of headroom on our bank
facilities this market presents an excellent opportunity for
further growth of Lok'nStore's business. Recently opened Landmark
stores and our ambitious new store pipeline demonstrate the Group's
ability to use those strengths to exploit the opportunities
available throughout the economic cycle.
Ray Davies
Finance Director
Principal Risks and Uncertainties:
Principal Risks and Uncertainties in Operating our Business
Risk management has been a fundamental part of the successful
development of Lok'nStore. The process is designed to improve the
probability of achieving our strategic objectives, keeping our
employees safe, protecting the interests of our shareholders and
key stakeholders, and enhancing the quality of our decision-making
through understanding the risks inherent in both the day-to-day
operations and the strategic direction of the Group as well as
their likely impact.
Management of our risks helps us protect our reputation, which
is very important to the ability of the Group to attract customers,
particularly with the growth of social media. We always try to
communicate clearly with our customers, suppliers, local
authorities, communities, employees, and shareholders, and to
listen and take account of their views. We operate strict Health
and Safety policies and procedures.
Our Risk Management Governance
The Board has overall responsibility for the management of the
Group's risks. As the Group's strategic direction is reviewed and
agreed the Board identifies the associated risks and works to
reduce or mitigate them using an established risk management
framework in conjunction with the executive management team. This
is a continuing and evolving process as we review and monitor the
underlying risk elements relevant to the business.
Risk Management Framework
The risk register covers all areas of the business including
property, finance, employees, insurance, customers, strategy,
governance, and disaster recovery. The risks are categorised by
risk area and numerically rated based on a combination of
'likelihood' and 'consequences and impact' on the business. The
combination of these two becomes the 'risk factor' and any factor
with a rating over 15 is reported to the Board.
Risk Management Team
Ray Davies, Finance Director, is the Board member responsible
for ensuring that the risk management and related control systems
are effective, and that the communication channels between the
Board and the Executive Management team are open and working
correctly. The Executive Management Team is responsible for the
day-to-day management of the risk factors. Responsibility for
identifying, managing, and controlling the risk is assigned to an
individual as shown on the risk register depending on the business
area. Reporting against the risks forms part of the monthly
executive management meeting and the risk factor may be amended if
applicable. There are also sub-committees for particular risk areas
which meet regularly. The Risk Management and Reporting Structure
is shown below.
Our Risk Management and Reporting Structure
The Board
Reviews Risk Register in full twice a year
Considers specific risk areas as raised by the Executive Board
Executive Board Committee
Reviews risks at monthly executive management meetings and if material,
requests the Board consider risk at next scheduled Board Meeting (or
earlier if necessary)
Capex Committee Property Risk Committee
--------------------------------------------
Meets Monthly Meets Periodically
Manages proposed capital expenditure, Considers:
actual spend, rolling capex Risks associated with properties including
requirements Health and Safety
Environmental Impact
--------------------------------------------
Principal Risks
The principal risks our business faces, and our key mitigations
are outlined in the table below.
Risk Description Key Mitigation
Interest The main risks arising
Rate and from the Group's financial * Regular review by the Board (full details are set out
Liquidity instruments are interest in the Financial Review.
Risk rate risk and liquidity
risk (for details please
see note 17).
* Debt and interest are low relative to assets and
earnings. With interest rates rising, this risk per
se is increasing, however the Executive and the Board
monitor this position carefully through the Group's
detailed operating reports produced on a weekly basis
and detailed financial and accounting reports
produced on a monthly basis.
* Could reduce debt, if required, by executing 'Sale
and Manage-Back' arrangements on mature stores or
slow the rate of site development.
------------------------------ -----------------------------------------------------------------
Tax Risk Changes to tax legislation
may impact the level * Regular monitoring of changes in legislation.
of corporation tax, capital
gains tax, VAT and stamp
duty land tax which would
in turn affect the profits * Use of appointed professional advisers and trade
of the Group. bodies.
------------------------------ -----------------------------------------------------------------
Treasury The Group may face increased
Risk costs from adverse interest * On 20 October 2021, the Group executed the accordion
rate movements. The Bank arrangement embedded within the Revolving Credit
of England has raised Facility which increases the facilities available to
base rates six times the Group from GBP75 million to GBP100 million. In
since February 2022 and addition, the Group has also agreed a one-year
is currently 2.25% up extension on its existing joint banking facility.
from 0.1% in March 2020.
* The facility, which was due to expire in April 2025,
will now run until April 2026 providing funding for
more Landmark site acquisitions. The two principal
bank covenants (LTV and Senior Interest) and margin
are unaffected by the execution of the accordion and
this extension of term.
* Lok'nStore is a robust business which generates an
increasing cash flow from its strong asset base with
a low LTV net of cash of 6.6% (2021: 21.0%) and a low
average cost of debt of 1.71%. The value of the
Group's assets underpins a flexible business model
with stable and rising cash flows and low credit risk
giving the business a firm base for growth.
* Average cost of debt 1.71% (2021: 1.54%)
* Average cost of debt (active revolving loans) 2.71% (
2021: 1.55%)
* With GBP66.8 million of gross debt currently drawn
against the GBP 100 million bank facility the Group
is not committed to enter into hedging instruments
but continues to keep the matter under review.
* It is not the intention of the Group to enter into an
interest rate hedging arrangement at this time given
our low level of net debt, low loan to value ratio
and high interest cover and the Group has continued
to benefit from relatively low lending rates although
recognising that these rates are now rising, and the
group is regularly monitoring this risk.
* The Group monitors compliance with its bank covenants
closely and during the year it complied with all of
its bank covenants.
------------------------------ -----------------------------------------------------------------
Property The external independent
Valuation valuations of the stores * Regular monitoring of any changes in market
Risk are sensitive to both conditions and transactions occurring within our
operational trading marketplace.
performance
of the stores and also
wider market conditions.
It follows that a reduction * Use of independent professional valuers who are
in operational performance experts in the self-storage sector. There is regular
or a deterioration of contact with the current valuer JLL and discussions
market conditions could around market values and transactions within the
have a material adverse sector, including post year-end.
impact on the Net Asset
Value (NAV) of the Group.
* Previous experience of downturns, such as the Dotcom
and global financial crises, has demonstrated that
Self Storage has considerable resilience.
* Stores are predominantly Landmark stores in prime
locations and are all UK based and predominantly
located in the affluent South of England. The Group
is therefore not exposed to overseas/international/
currency risks etc.
* Operational management teams with the skills,
experience, and motivation to continue to drive
operational performance.
------------------------------ -----------------------------------------------------------------
Environmental Flooding.
Risk * Flood risk due diligence undertaken on all
prospective site acquisitions.
Increased requirement
to reduce waste and
greenhouse
gas emissions and reduce * Flood protection measures in place at all stores.
environmental impact
on the environment.
* Group has been measuring environmental impact since
2005 and is committed to manage waste effectively and
control polluting emissions.
* All new construction has solar power on the roofs of
its buildings.
------------------------------ -----------------------------------------------------------------
Property Acquiring new sites is
Acquisition a key strategic objective * We hold weekly property meetings to manage the search
of the business but we process and property purchases.
face significant competition
from other uses such
as hotels, car showrooms
and offices as well as * Use of property acquisition consultants.
from other self-storage
operators.
* Regular communication with agents.
* Attendance at industry relevant property events.
------------------------------ -----------------------------------------------------------------
Planning The process of gaining
Permission planning permissions * Where we can we acquire sites subject to planning.
remains challenging.
Planning approval is
increasingly dependent
on Social or Environmental * We work with an established external planning
enhanced features such consultant.
as BREEAM standards,
as well as local planners
demands for green spaces,
cycle, and footpaths * Our property team has over 20 years' experience in
etc, all adding cost obtaining planning consents for our stores.
and complexity to a planning
project.
------------------------------ -----------------------------------------------------------------
Construction Poor construction may
affect the value of the * We use a design and build contract with a variety of
property and/or the efficient established contractors.
operation of the store.
Rising costs of developing
a store may mean site
opportunities which do * We use external project managers.
not meet management's
return on investment
criteria may not be taken
up. * All projects are overseen by our property team which
has over 20 years' experience.
* Construction projects are subject to a tender process
* Rising costs are factored into our financial
modelling to ensure the required returns are
achievable.
------------------------------ -----------------------------------------------------------------
Maintenance/Damage Damage to properties
through poor maintenance * Regular site checks by team members.
or flood or fire could
render a store inoperable.
* Rolling maintenance plan for all stores.
* Comprehensive disaster recovery plan.
* Appropriate insurance cover.
------------------------------ -----------------------------------------------------------------
Increased An increasing number
Competition of competitors in the * Established criteria for site selection including:
industry may negatively
impact Lok'nStore's existing
operations (e.g. o Prominent locations
pricing/available o High visibility
sites). o Distinctive designs and bright orange
elevations and signage to attract customers.
* Continued investment in the Group's website and
internet marketing.
* Ensure high levels of customer service through
training and monitoring.
------------------------------ -----------------------------------------------------------------
Employee Loss of employees may
Retention affect our ability to * Aim to offer a good work/life balance and career
operate our stores and development.
provide the high levels
of customer service expected.
* Regular reviews of remuneration levels against
market.
* Achievable bonus systems.
* Generous Employee Share Schemes.
* High-quality training within the Lok'nStore Academy.
* Intranet for improved communications.
* Established Employee rewards programme.
------------------------------ -----------------------------------------------------------------
Cyber A breach of our IT systems
security might adversely affect * Regularly reviewed IT security systems.
and IT the operations and income
System of the business resulting
Breach in potential fines, customer
compensation and causing * Well communicated policies and procedures for
reputational damage to handling and managing a systems breach.
the Group.
------------------------------ -----------------------------------------------------------------
Future A spread of the virus
Pandemic and social protection * The Group has a well-defined policy and response
Risk measures which may be developed and executed throughout the recent Covid-19
introduced by Government pandemic.
may adversely affect
the operations and financial
performance of the business
and adversely impact * Our Covid-19 Group Safe Response has been documented
on the health of staff. in detail in the Managing Director's Review in the
2021 Annual Report and is not repeated here .
------------------------------ -----------------------------------------------------------------
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2022
Notes Group Group
Year ended Year ended
31 July 31 July 2021
2022 GBP'000
GBP'000
--------------------------------------------- ------ ------------ --------------
Revenue 1 26,902 21,892
Total property, staff, distribution,
and general costs 2 (10,553) (10,001)
--------------------------------------------- ------ ------------ --------------
Adjusted EBITDA(1) 16,349 11,891
--------------------------------------------- ------ ------------ --------------
Depreciation 7 (4,727) (4,149)
Equity-settled share-based payments (201) (118)
Non-underlying items 4 5,739 (160)
--------------------------------------------- ------ ------------ --------------
811 (4,427)
Operating profit 17,160 7,464
Finance income 5 42 1
Finance cost 6 (1,328) (1,017)
--------------------------------------------- ------ ------------ --------------
Profit before taxation 15,874 6,448
Income tax expense 9 (3,796) (3,165)
--------------------------------------------- ------ ------------ --------------
Profit for the year attributable to
Owners of the Parent 27a 12,078 3,283
Other comprehensive income
Items that will not be reclassified
to profit and loss
Fair value movement in property valuation 12 60,171 47,718
Deferred tax relating to change in property
valuation 20 (14,284) (18,224)
--------------
Other comprehensive income 45,887 29,494
Total comprehensive income for the
year attributable to Owners of the Parent 57,965 32,777
--------------------------------------------- ------ ------------ --------------
Group Group
Year ended Year ended
31 July 31 July 2021
Earnings per share attributable to 2022 GBP'000
owners of the Parent GBP'000
------------------------------------ --- ------------ --------------
Basic 11
Total basic earnings per share 41.24p 11.33p
------------------------------------ --- ------------ --------------
Diluted 11
Total diluted earnings per share 40.48p 11.10p
------------------------------------ --- ------------ --------------
(1) Adjusted EBITDA is defined in the accounting policies
section of the notes to this Report.
Consolidated Statement of Changes in Equity
For the year ended 31 July 2022
Attributable to owners of the Parent
Share Share Other Revaluation Retained Total
Capital Premium Reserves Reserve Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
31 July 2020 297 10,560 8,455 75,975 26,095 121,382
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Profit for the year - - - - 3,283 3,283
Other comprehensive income:
Increase in property valuation
net of deferred tax - - - 29,494 - 29,494
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Total comprehensive income
for the year - - - 29,494 3,283 32,777
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Transactions with owners:
Dividend paid - - - - (3,865) (3,865)
Share-based payments - - 118 - - 118
Transfers in relation
to share-based payments - - (26) - 26 -
Deferred tax relating
to share options - - 591 - - 591
Exercise of share options 1 255 - - - 256
Reserve transfer on disposal
of assets - - - (165) 165 -
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Transfer additional depreciation
on revaluation net of
deferred tax - - - (568) 568 -
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Total transactions with
owners 1 255 683 (733) (3,106) (2,900)
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
31 July 2021 298 10,815 9,138 104,736 26,272 151,259
--------- --------- ---------- ------------
Profit for the year - - - - 12,078 12,078
Other comprehensive income:
Increase in property valuation
net of deferred tax - - - 45,887 - 45,887
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Total comprehensive income
for the year - - - 45,887 12,078 57,965
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Transactions with owners:
Dividend paid - - - - (4,601) (4,601)
Share-based payments - - 201 - - 201
Transfers in relation
to share-based payments - - (180) - 180 -
Deferred tax relating
to share options - - (57) - - (57)
Exercise of share options 3 576 - - - 579
Reserve transfer on disposal
of assets - - - (20,258) 20,258 -
Transfer additional depreciation
on revaluation net of
deferred tax - - - (821) 821 -
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Total transactions with
owners 3 576 (36) (21,079) 16,658 (3,878)
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
31 July 2022 301 11,391 9,102 129,544 55,008 205,346
---------------------------------- --------- --------- ---------- ------------ ---------- ----------
Company Statement of Changes in Equity
For the year ended 31 July 2022
Share Share Retained Other Total
Capital Premium Earnings Reserves Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- ---------- ---------- ---------
31 July 2020 297 10,560 15,650 1,912 28,419
---------------------------- --------- --------- ---------- ---------- ---------
Profit and total
comprehensive income
for the year - - 4,793 - 4,793
Transactions with
owners:
Equity settled share-based
payments - - - 118 118
Transfer in relation
to share- based payments - - 26 (26) -
Exercise of share
options 1 255 - 256
Dividends paid - - (3,865) - (3,865)
---------------------------- --------- --------- ---------- ---------- ---------
Total transactions
with owners 1 255 (3,839) 92 (3,491)
---------------------------- --------- --------- ---------- ---------- ---------
31 July 2021 298 10,815 16,604 2,004 29,721
---------------------------- --------- --------- ---------- ---------- ---------
Profit and total
comprehensive income
for the year - - 5,756 - 5,756
Transactions with
owners:
Equity settled share-based
payments - - - 201 201
Transfer in relation
to share-based payments - - 180 (180) -
Exercise of share
options 3 576 - 579
Dividends paid - - (4,601) - (4,601)
---------------------------- --------- --------- ---------- ---------- ---------
Total transactions
with owners 3 576 (4,421) 21 (3,821)
---------------------------- --------- --------- ---------- ---------- ---------
31 July 2022 301 11,391 17,939 2,025 31,656
---------------------------- --------- --------- ---------- ---------- ---------
Consolidated and Company Statements of Financial Position
31 July 2022 Company Registration No. 04007169
Group Group Company Company
31 July 31 July 31 July 31 July
2022 2021 2022 2021
Notes GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------ ------------ ---------- --------- ----------
Assets
Non-current assets
Property, plant, and
equipment 12a 292,848 255,652 - -
Investments 13 - - 2,871 2,670
Right of use assets 12b 10,424 10,503 - -
----------------------------- ------ ------------ ---------- --------- ----------
303,272 266,155 2,871 2,670
----------------------------- ------ ------------ ---------- --------- ----------
Current assets
Inventories 14 143 290 - -
Trade and other receivables 15 3,988 4,273 28,785 27,051
Cash and cash equivalents 17c 46,465 9,105 - -
Financial assets - 509 - -
----------------------------- ------ ------------ ---------- --------- ----------
Total current assets 50,596 14,177 28,785 27,051
----------------------------- ------ ------------ ---------- --------- ----------
Total assets 353,868 280,332 31,656 29,721
----------------------------- ------ ------------ ---------- --------- ----------
Liabilities
Current liabilities
Trade and other payables 16 (7,229) (5,841) - -
Lease liabilities 19 (1,612) (1,258) - -
Taxation (989) (365) - -
(9,830) (7,464) - -
----------------------------- ------ ------------ ---------- --------- ----------
Non-current liabilities
Borrowings 18 (66,196) (64,941) - -
Lease liabilities 19 (9,282) (9,908) - -
Deferred tax 20 (63,214) (46,760) - -
----------------------------- ------ ------------ ---------- --------- ----------
(138,692) (121,609) - -
----------------------------- ------ ------------ ---------- --------- ----------
Total liabilities (148,522) (129,073) - -
----------------------------- ------ ------------ ---------- --------- ----------
Net assets 205,346 151,259 31,656 29,721
----------------------------- ------ ------------ ---------- --------- ----------
Equity
Equity attributable
to owners of the Parent
Called up share capital 21 301 298 301 298
Share premium 11,391 10,815 11,391 10,815
Other reserves 23a 9,102 9,138 2,025 2,004
Retained earnings 24 55,008 26,272 17,939 16,604
Revaluation reserve 129,544 104,736 - -
----------------------------- ------ ------------ ---------- --------- ----------
Total equity 205,346 151,259 31,656 29,721
----------------------------- ------ ------------ ---------- --------- ----------
As permitted by section 408 Companies Act 2006, the Parent
Company's statement of comprehensive income has not been included
in these financial statements. The profit and comprehensive income
for the year ended 31 July 2022 was GBP5.8 million (2021: GBP4.8
million).
Consolidated Statement of Cash Flows
For the year ended 31 July 2022
Group Group
Year ended Year ended
31 July 31 July
2022 2021
Notes GBP'000 GBP'000
------------------------------------------------- ------ ------------ ------------------
Operating activities
Cash generated from operations 26a 18,569 12,187
Income tax paid (1,060) (800)
------------------
Net cash inflow from operating activities 17,509 11,387
Investing activities
Proceeds of sale & manage-back stores 37,922 -
Proceeds of sale of land (net of disposal
costs) - Wolverhampton - 1,509
Proceeds of sale of land (net of disposal
costs) - Southampton - 1,676
Purchase of property, plant, and equipment 12a (11,961) (26,474)
Interest received 13 1
------------------------------------------------- ------ ------------ ------------------
Net cash generated by / (used in) in
investing activities 25,974 (23,288)
------------------------------------------------- ------ ------------ ------------------
Financing activities
Proceeds of bank borrowings utilised for
store development and bank refinancing 1,386 14,077
Finance costs paid including bank refinancing (1,741) (969)
Lease liabilities paid (1,746) (1,559)
Equity shares purchased for treasury (net
of costs) - (693)
Equity shares sold from treasury (net
of costs) - 846
Equity dividends paid (4,601) (3,865)
Proceeds from issuance of Ordinary Shares
(net) 579 103
Net cash (used in) / generated from financing
activities (6,123) 7,940
Net increase / (decrease) in cash and
cash equivalents in the year 37,360 (3,961)
Cash and cash equivalents at beginning
of the year 9,105 13,066
------------------------------------------------- ------ ------------ ------------------
Cash and cash equivalents at end of the
year 46,465 9,105
------------------------------------------------- ------ ------------ ------------------
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 Fleet Place, London, EC4M 7WS, UK. Copies of this
Annual Report and Accounts may be obtained from the Company's head
office at 112 Hawley Lane, Farnborough, Hants, GU14 8JE or the
investor section of the Company's website at
http://www.loknstore.co.uk . The principal activities of the Group
and the nature of its operations are described in the Strategic
Report.
Basis of Accounting
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 2022 and 31 July 2021, both of which are
audited. The report of the auditor on the statutory financial
statements for the year ended 31 July 2021 was (i) unqualified;
(ii) did not include references to any matters to which the auditor
drew attention by way of emphasis without qualifying their report;
and (iii) did not contain statements under S 498(2) or (3) of the
Companies Act 2006. The statutory financial statements for the year
ended 31 July 2022 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
The Preliminary Announcement is prepared on the same basis as
set out in the statutory accounts for the year ended 31 July 2022.
While the financial information included in this Preliminary
Announcement has been prepared in accordance with the recognition
and measurement criteria of UK-adopted International Financial
Reporting Standards (IFRS), this announcement does not in itself
contain sufficient information to comply with IFRSs.
The financial statements for the year ended 31 July 2021 were
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies act 2006. The
financial statements for the year ended 31 July 2022 have been
prepared in accordance with UK-adopted International Accounting
Standards (IFRS) as adopted by the UK Endorsement Board. This
change in the basis of preparation is required by UK company Law
for the purpose of financial reporting as a result of the UK's exit
from the European Union on 31 January 2020. This change does not
constitute a change in accounting policy, rather a change in
framework which is required to group the use of IFRS into company
law. There is no impact on the recognition, measurement or
disclosure between the two frameworks in the year reported.
The Group has applied all accounting standards and
interpretations issued by the International Accounting Standards
Board and International Financial Reporting Interpretation
Committee applicable to companies reporting under UK adopted IFRS
relevant to its operations and effective for accounting periods
beginning on or after 1 August 2021. There was no material impact
on the adoption of these.
The statutory accounts for the year ended 31 July 2022 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting and will be available from the investor
section of the Company's website at http://www.loknstore.co.uk
.
The financial statements have been prepared on the historic cost
basis except that certain trading properties and non-current
financial assets are stated at fair value.
Standards, Amendments, Improvements & Interpretations
applicable (1)
At the date of authorisation of these financial statements the
following standards, which have not been applied in these financial
statements, were in issue but not yet effective.
Effective Date - P/c
on or after
Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9 (issued on 25 June 2020) 1 January 2021
Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021 (issued 1 April 2021
on 31 March 2021)
(1) The above standards have been endorsed by both the EU and
the UK. EU-IFRS at 31 December 2020 were adopted for use within the
UK (from 1 January 2021) by Regulation 4 of Statutory Instrument
2019/685.
Endorsed Standards, Amendments, Improvements &
Interpretations available for early adoption in the UK
Effective Date - P/c Endorsed in the UK? Endorsed in the EU?
on or after
Amendments to IFRS 3 Business Combinations; IAS 16 1 January 2022 Y Y
Property, Plant and Equipment; IAS 37 Provisions,
Contingent Liabilities and Contingent Assets; and
Annual Improvements 2018-2020 (All issued
14 May 2020)
IFRS 17 Insurance Contracts (issued on 18 May 1 January 2023 Y Y
2017); including Amendments to IFRS 17 (issued
on 25 June 2020)
Amendments to IFRS 17 Insurance contracts: Initial 1 January 2023 Y N
Application of IFRS 17 and IFRS 9 - Comparative Not endorsed
Information (issued on 9 December 2021)
Amendments to IAS 8 Accounting policies, Changes 1 January 2023 N Y
in Accounting Estimates and Errors: Definition Not endorsed
of Accounting Estimates (issued on 12 February
2021)
Amendments to IAS 1 Presentation of Financial 1 January 2023 N Y
Statements and IFRS Practice Statement 2: Not endorsed
Disclosure
of Accounting policies (issued on 12 February
2021)
The Directors do not anticipate that the adoption of these
revised standards, amendments and interpretations will have a
significant impact on the figures included in the financial
statements in the period of initial application.
Basis of Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(and 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, which include a recognition of the
inflationary effect on rising costs, on the Group, they have
satisfied themselves that the business is a going concern. The
impact of rising costs and increasing bank interest rates and the
measures the Directors have taken to mitigate its effects are set
out in the Managing Director's Review.
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 GBP 46.5 million (2021:
GBP9.1 million), undrawn committed bank facilities at 31 July 2022,
based on the Group's facility of GBP100 million, of GBP 33.2
million (2021: GBP9.6 million - based on GBP75 million facility),
and cash generated from operations in the year ended 31 July 2022
of GBP 18.6 million (2021: GBP12.2 million).
In October 2021, the Group executed the accordion arrangement
embedded within the Revolving Credit Facility which increases the
facilities available to the Group to GBP100 million. In addition,
the Group has also agreed a one-year extension on its existing
joint banking facility with National Westminster Bank/Royal Bank of
Scotland plc and ABN AMRO Bank N.V. The facility, which was due to
expire in April 2025, will now run until April 2026 providing
funding for more Landmark site acquisitions to support the Group's
ambitious growth plans .
With interest rates rising, interest risk per se is increasing,
however the Executive and the Board monitor this position carefully
through the Group's detailed operating reports produced on a weekly
basis and detailed financial and accounting reports produced on a
monthly basis. The Group's bank covenant compliance is reviewed as
part of this process. The Bank's senior interest covenant is tested
quarterly on a 12-month rolling basis.
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.
Revenue Recognition
The Group recognises revenue when the amount of the revenue can
be reliably measured and when goods are sold, and title has passed.
Revenue from services provided is recognised evenly over the period
in which the services are provided.
a) Self-storage revenue
Self-storage revenue is recognised over the period for which the
space is occupied by the customer on a time apportionment basis.
The price at which customers store their goods is dependent on size
of unit and store location. Customers are invoiced on a four-weekly
cycle in advance and revenue is recognised based on time stored to
date within the cycle. When customers vacate, they are rebated the
unexpired portion of their four weekly advance payment (subject to
a seven-day notice requirement). Revenue is recognised evenly over
the period of self-storage.
b) Retail sales
The Group operates a packaging shop within each of its storage
centres for selling storage-related goods such as boxes, tape and
bubble-wrap. Sales include sales to the public at large as well as
self-storage customers. Sales of goods are recognised at point of
sale when the product is sold to a customer.
c) Insurance
Customers may choose to insure their goods in storage. The
weekly rate of insurance charged to customers is calculated based
on the tariff per week for each GBP1,000 worth of goods stored by
the customer. This charge is retained by Lok'nStore and covers the
cost of the block policy and other costs. Customers are invoiced on
a four-weekly basis for the insurance cover they use, and revenue
is recognised based on time stored to date within the cycle.
The Group provides insurance to customers through a block policy
purchased from its insurer. Block policyholders supply VAT exempt
insurance transactions as principals rather than insurance-related
services as intermediaries and accordingly insurance income
received from the customer is recognised as revenue rather than
offset against the costs of the block policy. The key
characteristics of a block policy are that:
-- There is a contract between the block policyholder and the
insurer which allows the block policyholder to effect insurance
cover subject to certain conditions.
-- The Group acting in our own name as the block policyholder
procures insurance cover for third parties from the insurer.
-- There is a contractual relationship between the block
policyholder and third parties under which the insurance is
procured.
-- The block policyholder stands in place of the insurer in
effecting the supply of insurance to the third parties.
-- The Group is not exposed to any insured losses arising from
its insurance activity and therefore insurance risk.
d) Management fee income
Management fees earned for managing stores not owned by the
Group are recognised over the period for which the services are
provided. Fees are invoiced monthly based on revenue performance.
Additional performance fees may be earned if an individual Managed
Store's EBITDA performance exceeds agreed thresholds. Periodic fees
may also be earned for additional specific services provided and
are invoiced when that service has been completed. Revenue is
recognised for each performance condition once the condition has
been met.
Critical Accounting Estimates a) and b) and Judgements c) and
d)
The preparation of financial statements under IFRS requires
management to make estimates and assumptions that may affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expenses. Actual outcomes may
differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
a) Estimate of fair value of trading properties
The Group commissions an external valuation of its self-storage
stores. This valuation uses a discounted cash flow methodology
which is based on current and projected net operating income.
Principal assumptions underlying management's estimation of the
fair value are those relating to stabilised occupancy levels
expected future growth in storage fees and operating costs,
maintenance requirements, capitalisation rates and Discount
Rates.
A more detailed explanation of the background and methodology
adopted in the valuation of the Group's trading properties is set
out in note 12(a) together with estimation sensitivities
undertaken. The carrying value of land and buildings held at
valuation at the reporting date was GBP 239.8 million (2021: GBP
199.6 million) as shown in the table in note 12(a).
b) Assets in the course of construction and land held for store
development ('Development property assets')
The Group's development property assets are held in the
statement of financial position at historic cost and are not valued
externally. In acquiring sites for redevelopment into self-storage
facilities, the Group estimates and makes judgements on the
potential lettable storage space that it can achieve in its
planning negotiations, together with the time it will take to
achieve maturity. In addition, assumptions are made on the storage
fees that can be achieved at the store by comparison with other
stores within the portfolio and within the local area. These
judgements, taken together with estimates of operating costs and
the projected construction cost, allow the Group to calculate the
potential net operating income at maturity, projected returns on
capital invested and therefore justify the proposed 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 GBP 29.2 million (2021: GBP33.7 million). Please
see note 12(a) for more details.
c) Classification of self-storage facilities as owner-occupied
properties rather than investment properties
The Directors consider that Lok'nStore Group plc is the Parent
Company of a 'Trading business' and is not wholly or mainly engaged
in making investments.
The Group is an integrated storage solutions business offering a
range of services to its customers. We provide services to our
customers under contracts for the provision of storage services
which do not give them any property or tenancy rights and a large
number of the stores we operate are from properties where we do not
own the land or the buildings. The assets we do own are valued on
the basis of the trading cash flows that the operating businesses
generate.
The Group continues to develop its managed stores' business
where it uses its operational and logistic expertise to provide a
full range of services to customers in stores we manage for
third-party owners. In recent years the Group has developed many
new managed stores all of which are owned by third-party investors
and managed by Lok'nStore.
Previously owned sites at Woking, Ashford, Swindon, and
Crayford, have been the subject of sale and manage-back
transactions by which Lok'nStore has retained the management of the
business when a third-party owner acquired the business, land and
buildings. In this year another four trading stores were the
subject of sale and manage-back transactions by which Lok'nStore
has retained the management of the business.
All of this trading activity, including active management and
marketing activity, as well as the self-storage income earned from
our leasehold stores' activity, demonstrate that the holding of
land is not a core activity because the trading operation is not
dependent on the ownership of land. See the chart in the Property
Review for the changing ownership structure of the stores.
The Group has always and continues to comply with all of the
usual accounting and tax protocols consistent with a trading
business. As at the year-end, Lok'nStore operates 24 owned stores
mainly in southern England, although in recent years we have
expanded our historically southern England focused geographic
footprint into the Southwest (Exeter), Wales (Cardiff) and the
Northwest (Salford, Warrington, and Altrincham). Of the 24 stores,
Lok'nStore owns the freehold interest in 15 stores, nine of the
stores are held under commercial leases. There are a further 16
managed stores operating under management contracts for third-party
owners making a total of 40 stores trading under the Lok'nStore
brand.
One of the features of Lok'nStore's strategy is to increase the
number of stores we manage for third parties selling our expertise
in storage solutions management, operating systems and marketing,
through management fees rather than retaining a proprietary
interest in land and buildings.
The classification of self-storage facilities as owner-occupied
properties rather than investment properties has resulted in the
recognition of fair value gains in 2022 (net deferred of tax) of
GBP 45.9 million (2021: GBP29.5 million) in Other Comprehensive
Income rather than the Income Statement.
d) Application of IFRS 16
The Group uses judgement to assess whether the interest rate
implicit in the lease is readily determinable. When the interest
rate implicit in the lease is not readily determinable, the Group
estimates the incremental borrowing rate based on its external
borrowings secured against a similar asset, adjusted for the term
of the lease.
Notes to the Financial Statements
For the year ended 31 July 2022
1 Revenue
Analysis of the Group's revenue is shown below:
Group Group
Stores trading 2022 2021
GBP'000 GBP'000
Self-storage revenue 21,585 18,165
Insurance revenue 2,239 2,079
Retail sales (packing materials etc) 252 285
Total self-storage revenue - owned stores 24,076 20,529
Management fees - managed stores 2,785 1,346
---------------------------------------------- --------- ---------
Sub-total 26,861 21,875
Non-storage income 41 17
---------------------------------------------- --------- ---------
Total revenue per statement of comprehensive
income 26,902 21,892
---------------------------------------------- --------- ---------
The Group has one operating segment, being self-storage in the
UK.
2 Property, Staff and General Costs Group Group
2022 2021
GBP'000 GBP'000
----------------------------------------- --------- ----------------------------------
Property and premises costs 5,304 4,783
Property rentals (1,746) (1,559)
----------------------------------------- --------- ----------------------------------
Net property and premises costs 3,558 3,224
Staff costs 5,369 5,269
General overheads 1,438 1,341
----------------------------------------- --------- ----------------------------------
Sub-total operating costs 10,365 9,834
Retail products cost of sales (see note
3) 188 167
----------------------------------------- --------- ----------------------------------
10,553 10,001
----------------------------------------- --------- ----------------------------------
3 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.
Group Group
2022 2021
GBP'000 GBP'000
----------- --------- ---------
Retail 113 125
Insurance 23 14
Other 52 28
----------- --------- ---------
188 167
----------- --------- ---------
4 Non-underlying items Group Group
2022 2021
GBP'000 GBP'000
------------------------------------------------ -------------------- ---------
Profit on sale of trading stores (1) 5,936 -
Liquidated damages received on development 175 -
(2)
Abortive site costs (3) (372) -
Profit on sale of land at Wolverhampton
(4) - 265
Loss on sale of vacant property at Southampton
(5) - (425)
5,739 (160)
------------------------------------------------ -------------------- ---------
(2022)
(1) Profit arising on the sale and manage-back of four trading
stores located at Basingstoke, Cardiff, Horsham, and
Portsmouth.
(2) Liquidated damages received on the late delivery of a new
store development which has subsequently opened.
(3) The Group's active search for suitable development sites for
new Landmark stores has resulted in some abortive costs - mainly
around planning and associated professional costs.
(2021)
(4) Profit on sale of land at Wolverhampton: During the period
development land with the benefit of planning permission was sold
on a sale and manage-back basis.
(5) In December 2020, we completed the sale of our vacant
property in Southampton, Hampshire for GBP1.6 million (net of
disposal costs) (Net Book Value c. GBP2 million) eliminating over
GBP150,000 p.a. of residual costs .
5 Finance Income
Group Group
2022 2021
GBP'000 GBP'000
--------------- --------- ---------
Bank interest 42 1
--------------- --------- ---------
Interest receivable arises on cash and cash equivalents (see
note 17).
6 Finance Costs
Group Group
2022 2021
GBP'000 GBP'000
------------------------------- --------- ---------
Bank interest 707 469
Non-utilisation fees 166 120
Bank loan arrangement fees 216 158
Interest on lease liabilities 239 270
1,328 1,017
------------------------------- --------- ---------
7 Profit before Taxation
Group Group
Profit before taxation is stated after 2022 2021
charging: GBP'000 GBP'000
------------------------------------------------ --------- ---------
Depreciation and amounts written off property,
plant and equipment:
Depreciation based on historic cost 2,316 2,178
Depreciation based on revalued assets 1,094 710
------------------------------------------------ --------- ---------
Depreciation of property, plant and equipment
(note 12a) 3,410 2,888
Depreciation of right of use assets 1,314 1,261
Loss on disposal of fixed assets 3 -
------------------------------------------------ --------- ---------
4,727 4,149
------------------------------------------------ --------- ---------
Amounts payable to RSM UK Audit LLP and their associates for
audit and non-audit services:
Group Group
2022 2021
GBP'000 GBP'000
--------- ---------
Audit services
- UK statutory audit of the Company and
consolidated accounts 125 80
Other services
- interim agreed upon procedures 9 9
134 89
----------------------------------------- ---- ---
Comprising:
Audit services 125 80
Non-audit services 9 9
134 89
----------------------------------------- ---- ---
8 Employees
Group Group
2022 2021
No. No.
-------------------------------------------------- ------ ------
The average monthly number of persons (including
Directors) employed by the Group during
the year was:
Store management 151 145
Administration 27 26
-------------------------------------------------- ------ ------
178 171
-------------------------------------------------- ------ ------
Group Group
2022 2021
Costs for the above persons: GBP'000 GBP'000
------------------------------------ --------- ---------
Wages and salaries 4,174 4,369
Social security costs 819 555
Pension costs 135 130
------------------------------------ --------- ---------
5,128 5,054
Share-based remuneration (options) 201 118
------------------------------------ --------- ---------
5,329 5,172
------------------------------------ --------- ---------
Share-based remuneration is separately disclosed in the
statement of comprehensive income. Wages and salaries of GBP
154,920 (2021: GBP107,304) 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 GBP 32,807
(2021: GBP14,292) outstanding at the year-end. There were no
employees employed by Lok'nStore Group plc in the year other than
the Directors (2021: nil).
Gains
on
Directors' Sub Share
Remuneration Emoluments Bonuses Benefits Total Pension Options Total
2022 GBP GBP GBP GBP GBP GBP GBP
Executive:
A Jacobs 223,842 146,500 7,387 377,729 - 1,360,277 1,738,006
RA Davies 174,087 49,287 5,587 228,961 6,963 456,995 692,919
N Newman-Shepherd 97,521 100,523 2,793 200,837 3,901 11,058 215,796
Non-Executive:
J Woyda 27,364 - - 27,364 - - 27,364
SG Thomas 23,881 - 5,570 29,451 - - 29,451
RJ Holmes 23,881 - - 23,881 - - 23,881
ETD Luker 9,950 - - 9,950 - - 9,950
CP Peal 23,881 - - 23,881 - - 23,881
604,407 296,310 21,337 922,054 10,864 1,828,330 2,761,248
------------------- ----------- -------- --------- -------- -------- ---------- -------------
Gains
on
Directors' Sub Share
Remuneration Emoluments Bonuses Benefits Total Pension Options Total
2021 GBP GBP GBP GBP GBP GBP GBP
Executive:
A Jacobs 215,233 132,500 6,568 354,301 - - 354,301
RA Davies 165,797 45,946 5,434 217,177 6,631 - 223,808
N Newman-Shepherd 91,210 179,545 2,571 273,326 3,648 - 276,974
Non-Executive:
SG Thomas 22,743 - 5,087 27,830 - 14,436 42,266
RJ Holmes 22,743 - - 22,743 - - 22,743
ETD Luker 28,430 - - 28,430 - - 28,430
CP Peal 22,743 - - 22,743 - - 22,743
J Woyda 20,848 - - 20,848 - - 20,848
589,747 357,991 19,660 967,398 10,279 14,436 992,113
------------------- ----------- -------- --------- -------- -------- ---------- ---------
Details of the Directors' remuneration are shown 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 two
(2021: two).
9 Taxation
Group Group
2022 2021
GBP'000 GBP'000
Current tax:
UK corporation tax - current year 1,572 798
--------------------------------------------------- --------- ---------
UK corporation tax - adjustment in respect of 111 -
prior period
--------------------------------------------------- --------- ---------
Total UK corporation tax 1,683 798
--------------------------------------------------- --------- ---------
Deferred tax:
Origination and reversal of temporary differences 2,113 260
Impact of change of rate on closing balance - 2,107
Total deferred tax 2,113 2,367
--------------------------------------------------- --------- ---------
Total Income tax expense for the year 3,796 3,165
--------------------------------------------------- --------- ---------
The charge for the year can be reconciled to the profit for the
year as follows:
2022 2021
GBP'000 GBP'000
Profit before tax 15,874 6,448
Tax on ordinary activities at the effective standard
rate of corporation tax in the UK of 19% (2021:
19%) 3,016 1,225
Depreciation of non-qualifying assets 377 263
Share-based payment charges in excess of corresponding
tax deduction (337) (20)
Impact of change in tax rate on closing deferred
tax balances - 2,107
Adjustments in respect of prior periods - corporation
tax 111 (375)
Tax effect of rolled over gains on sale of property 432 -
Other 197 (35)
Income tax expense for the year 3,796 3,165
-------------------------------------------------------- --------- ---------
Effective tax rate 24% 49%
-------------------------------------------------------- --------- ---------
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 GBP14.3 million (2021: GBP18.2 million) has been
recognised as a debit/credit directly in other comprehensive income
(see note 20 on deferred tax).
The current rates of corporation tax are calculated at a rate of
19%. The deferred tax balances are measured at the substantively
enacted rates of corporation tax being 19% until 31 March 2023 and
a rate of 25% thereafter.
10 Dividends
Amounts recognised as distributions to equity 2022 2021
holders in the year: GBP'000 GBP'000
Final dividend for the year ended 31 July 2021 3,132 -
(10.67 pence per share)
Interim dividend for the year to 31 July 2022 1,469 -
(5.00 pence per share)
Final dividend for the year ended 31 July 2020
(9.00 pence per share) - 2,612
Interim dividend for the year to 31 July 2021
(4.33 pence per share) - 1,253
4,601 3,865
------------------------------------------------- --------- ---------
In respect of the current year the Directors paid an interim
dividend of 5.00 pence per share to shareholders on 10 June 2022.
The Directors propose that a final dividend of 12.25 pence per
share will be paid to the shareholders. The total estimated final
dividend to be paid is approximately GBP 3.6 million based on the
number of shares in issue at 14 October 2022 as adjusted for shares
held in the Employee Benefits Trust.
This is subject to approval by shareholders at the Annual
General Meeting on 8 December 2022 and has not been included as a
liability in these financial statements. The ex-dividend date will
be 24 November 2022; the record date 25 November 2022; with an
intended payment date of 6 January 2023. The final deadline for
Dividend Reinvestment Election (DRIP) is 9 December 2022.
11 Earnings per Share
The calculations of earnings per share are based on the
following profits and numbers of shares.
Group Group
2022 2021
GBP'000 GBP'000
-------------------------------------------------- --------------- ---------------
Total profit for the financial year attributable
to owners of the parent 12,078 3,283
-------------------------------------------------- --------------- ---------------
2022 2021
No. of shares No. of shares
-------------------------------------------------- --------------- ---------------
Weighted average number of shares
For basic earnings per share 29,287,451 29,035,104
Dilutive effect of share options(1) 549,321 527,846
-------------------------------------------------- --------------- ---------------
For diluted earnings per share 29,836,772 29,562,950
-------------------------------------------------- --------------- ---------------
(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 22 to 25 .
Group Group
2022 2021
Earnings per share pence pence
Basic
Total basic earnings per share 41.24p 11.33p
---------------------------------- --------- ---------
Diluted
Total diluted earnings per share 40.48p 11.10p
---------------------------------- --------- ---------
12a) Property, Plant and Equipment
Fixtures,
Development Fittings
Property Land and Short Leasehold and Motor
Assets Buildings Improvements Equipment Vehicles
at Cost at Valuation at Cost at Cost at Cost Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
Cost or valuation
1 August 2020 29,885 141,366 3,997 26,943 10 202,201
Additions 21,688 325 3,560 1,281 - 26,854
Transfers (16,654) 13,157 - 3,497 - -
Disposals (1,243) (1,497) - (1,301) - (4,041)
Revaluations - 46,266 - - - 46,266
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
31 July 2021 33,676 199,617 7,557 30,420 10 271,280
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
Depreciation
1 August 2020 - - 2,269 12,664 10 14,943
Depreciation - 1,453 240 1,195 - 2,888
Disposals - - - (750) - (750)
Revaluations - (1,453) - - - (1,453)
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
31 July 2021 - - 2,509 13,109 10 15,628
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
Net book value
at 31 July 2021 33,676 199,617 5,048 17,311 - 255,652
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
Cost or valuation
1 August 2021 33,676 199,617 7,557 30,420 10 271,280
Additions 10,611 756 158 663 - 12,188*
Transfers (15,072) 11,234 - 3,838 - -
Disposals - (30,101) - (3,615) - (33,716)
Revaluations - 58,299 - - - 58,299
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
31 July 2022 29,215 239,805 7,715 31,306 10 308,051
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
Depreciation
1 August 2021 - - 2,509 13,109 10 15,628
Depreciation - 1,872 296 1,242 - 3,410
Disposals - - - (1,963) - (1,963)
Revaluations - (1,872) - - - (1,872)
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
31 July 2022 - - 2,805 12,388 10 15,203
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
Net book value
at 31 July 2022 29,215 239,805 4,910 18,918 - 292,848
------------------- ------------ -------------- ---------------- ----------- ---------- ----------
* in cluding capitalised interest costs of GBP589,843 (2021:
GBP380,193).
The Group has an active store development programme and in
accordance with IAS 23 (Borrowing costs) has material assets that
take a substantial period of time to develop from acquisition to
ultimate store opening. Accordingly borrowing costs of GBP 589,843
(2021: GBP380,193) have been capitalised that are directly
attributable to the acquisition, construction and fit-out of these
qualifying store assets. GBP149,321 of this amount relates to
development stores which opened during the year leaving a balance
of GBP440,522 carried in development property assets. If all
property, plant and equipment were stated at historic cost the
carrying value would be GBP111.4 million (2021: GBP113.0
million).
Capital expenditure during the year totalled GBP 12.2 million (
2021 : GBP26.9 million). This was primarily the purchase of the
Peterborough site, together with ongoing planning, construction and
fit out works at other sites, principally at our Warrington and
Stevenage stores and the completion of construction works at our
Leicester and Salford stores. Disposals during the period relate to
the sale and manage-back of four trading stores. Costs relating to
the planning and pre-development works on our Bournemouth,
Cheshunt, Peterborough and Staines sites also featured.
Property, plant and equipment (non-current assets) with a
carrying value of GBP 292.8 million (2021: GBP 255.7 million) are
pledged as security for bank loans.
Independent External Market Valuation of Freehold and Leasehold
Land and Buildings
Fair Value Measurement
The fair value hierarchy within which the fair value
measurements are categorised is level 3, in accordance with IFRS 13
(Fair value measurement).
On 31 July 2022, an independent professional valuation was
prepared by Jones Lang LaSalle Limited (JLL) in respect of 15
freehold, and nine leasehold stores operated by Lok'nStore. The
valuation was prepared in accordance with the RICS Valuation -
Global Standards 2021 - UK national supplement, published by The
Royal Institution of Chartered Surveyors (the RICS Red Book) and
the valuation methodology is explained in more detail below. The
valuations were prepared on the basis of Fair Value as a fully
equipped operational entity having regard to trading potential. The
valuation was provided for accounts purposes and as such, is a
Regulated Purpose Valuation as defined in the Red Book. In
compliance with the disclosure requirements of the RICS Red Book
JLL have confirmed that:
-- This is the seventh year that JLL has been appointed to value the properties.
-- The valuers who prepared the valuation have the necessary
skills and experience having been significantly involved in the
sector.
-- JLL do not provide other significant professional or agency services to the Company.
-- In relation to the preceding financial year of JLL the
proportion of the total fees payable by the Company to the total
fee income of the firm is less than 5% and is minimal.
The valuation report indicates a total valuation for all
properties valued of GBP 279.0 million (2021: GBP 234.9 million) of
which GBP 254.8 million (2021: GBP 212.8 million) relates to
freehold properties, and GBP 24.2 million (2021: GBP 22.1 million)
relates to properties held under leases.
Freehold land and buildings are carried at valuation in the
statement of financial position. Short leasehold improvements at
properties held under leases are carried at cost rather than
valuation in accordance with IFRS.
For the trading properties the valuation methodology explained
in more detail below is based on fair value as fully equipped
operational entities, having regard to trading potential. Of the
GBP 254.8 million (2021: GBP212.8 million) valuation of the
freehold properties GBP 16.6 million (2021: GBP 14.7 million)
relates to the net book value of fixtures, fittings and equipment,
and the remaining GBP 238.2 million (2021: GBP 198.1 million)
relates to freehold properties.
The 2022 valuation includes and reflects movements in value
which have resulted from the operational performance of the stores
and market movements in the investment environment.
Valuation Methodology
Jones Lang LaSalle Limited (JLL) have adopted the profits method
of valuation and cross-checked with the direct comparison method
based on recent transactions in the sector, which is the main
method of pricing adopted by purchasers of self-storage properties.
The carrying value of freehold land and buildings of GBP239.8
million also includes GBP1.5 million of assets held at directors'
valuation (see below).
JLL have valued the assets on an individual basis and have
disregarded any portfolio effect.
The profits method of valuation considers the cash flow
generated by the trading potential of the self-storage facility.
Due to the specialised design and use of the buildings, the value
is typically based on their ability to generate a net income from
operating as self-storage facilities.
JLL have constructed a discounted cash flow model. This sets out
their explicit assumptions on the underlying cash flow that they
believe could be generated by a Reasonably Efficient Operator at
each of the properties, both at the valuation date and in the near
future as the properties increase their occupancy and rates charged
to customers. Judgements are made as to the trading potential and
likely long-term sustainable occupancy.
Stable occupancy depends upon the nature of demand, size of
property and nearby competition, and allows for a reasonable
vacancy rate to enable the operator to contract units to new
customers. In the valuation the assumed stabilised occupancy level
for the 24 trading stores (both freeholds and leaseholds) averages
88.23 % (2021: 88.5%).
Expenditure is deducted (such as business rates, staff costs,
repair and maintenance, utilities, marketing and bad debts) as well
as an operator's charge which takes account of central costs. JLL
also make an allowance for long- term capex requirements where
applicable. The assumptions used by JLL include: -
-- The cash flow for freeholds runs for an explicit period of
ten years, after which it is capitalised at an all risks yield
which reflects the implicit future growth of the business, or a
hypothetical sale.
-- The cash flow for leaseholds continues for the unexpired term of the lease.
-- The Discount Rate applied has had regard to recent
transactions, weighted average costs of capital and target return
in other asset types with adjustments made to reflect differences
in the risk and liquidity profile.
-- The weighted average annual Discount Rate adopted (for both
freeholds and leaseholds) is 7.21% (2021: 9.24%).
-- The Discount Rates used in the freehold valuation ranges from
6.50% to 8.75% (2021: 7.5% to 9.25%).
-- The yield arising from the first year of the projected cash
flow is 5.30% (2021: 6.49%), rising to 6.79% (2021: 7.61%) in year
five.
-- JLL have assumed purchasers' costs of 6.80% (2021: 6.80%).
-- The average assumed stabilised occupancy is 88.23% (2021: 88.85%).
-- The average Exit Yield assumed is 6.16% (2021: 6.73 %).
The comparison method considers recent transactions where
self-storage properties have sold, and then adjusts them based on a
multiple of current earnings, and a capital value per square foot.
They are adjusted to reflect differences in location, physical
characteristics, local supply and demand, tenure and trading
levels.
The Group has reported that the Lok'nStore trading stores have
performed very well in terms of increasing pricing while
maintaining occupancy over the course of the year.
For leaseholds, the same methodology has been used as for
freehold property, except that no sale of the assets in the tenth
year is assumed, but the discounted cash flow is extended to the
expiry of the lease. The average unexpired term of the Group's
operating leaseholds is approximately ten years and one month as at
31 July 2022 (11 years and one month: 31 July 2021). Valuations for
stores held under leases are not reflected in the statement of
financial position and the assets in relation to these stores are
carried at cost less accumulated depreciation.
In 2011, one of the Group store's leases was renegotiated and
includes a ten-year option to renew the leases from March 2026 to
March 2036. The option to extend is only operable in the event that
all four of the leases applicable to this store are extended and
this option is personal to Lok'nStore or another "major
self-storage operator", to be approved by the landlord (approval
not to be unreasonably withheld). The JLL valuation on this store
is based on this Special Assumption that the option to extend the
lease for ten years is exercised. This is consistent with the
approach taken in previous years.
Self-storage valuations are complex and involve a degree of
judgement. As a guide and assuming all other factors or constant,
improvements in a store's EBITDA would lead to an increase in that
store's valuation. Conversely, an increase in Exit Yield and
Discount Rate would result in a lower valuation and vice-versa.
The effect of a change in more than one input would magnify the
impact on the valuation. Inputs moving in opposite directions, such
as price and occupancy improving but capitalisation rates
increasing could result in no net impact on valuations.
As an example of the sensitivity of capitalisation rates;
-- A 50bpts decrease in the Exit Yields and Discount Rate would
result in a GBP27.75 million increase in this year's valuation.
-- A 100bpts decrease in the Exit Yields and Discount Rate would
result in a GBP62.0 million increase in this year's valuation.
-- A 50bpts increase in the Exit Yield and Discount Rate would
result in a GBP23.1 million decrease in this year's valuation.
-- A 100bpts increase in the Exit Yield and Discount Rate would
result in a GBP42.5 million decrease in this year's valuation.
It is the Company's policy to conduct independent valuations of
all trading assets at the end of each financial year. At the
interim half year stage, the directors will consult with JLL to
consider whether there has been any material change in market
conditions. If there has been then the Directors will instruct an
Independent Valuation at this point.
Directors' valuation of land and property
Land & Buildings at the rear of the new Salford trading
store
Following the opening of the new Salford store in 2021, there is
available land and building at the rear of the new store which is
suitable for rent on commercial terms to third party users. Based
on negotiated rents with tenants, the Directors continue to place a
Directors' Valuation of GBP1.5 million (2021: GBP1.5 million) on
this land and building.
The total value of land and property carried at Directors'
Valuation at 31 July 2022 is GBP 1.5 million (2021: GBP1.5
million).
12b) Right of use assets (ROU)
The Group accounts for the value of its property leases on the
balance sheet by the recognition of a right of use asset (the right
to use the leased item) and a corresponding financial liability to
pay rentals due over the property lease term. This treatment
relates to the Group's property leases. The Group has no leases on
any other types of assets.
The Group recognises right of use assets (ROU) of GBP10.4
million at 31 July 2022 (2021: GBP10.5 million) and total lease
liabilities of GBP10.9 million, (2021: GBP11.17 million) with
depreciation charges of GBP1.31 million (2021: GBP1.26 million) and
lease interest charges of GBP0.2 million (2021: GBP0.3
million).
Detailed analysis is provided in the tables below: -
Group Group
31 July 2022 31 July 2021
GBP'000 GBP'000
--------------------------------------------- -------------- --------------
Total annual rents payable under property
leases 1,746 1,559
--------------------------------------------- -------------- --------------
Group Group
31 July 2022 31 July 2021
GBP'000 GBP'000
Right of use asset (ROU) 10,424 10,503
Current Lease Liability
Amounts due within one year 1,612 1,258
Non-current Lease Liability
Amounts due in one to two years 1,174 1,085
Amounts due in three to five years 2,774 2,585
Amounts due in more than five years 5,334 6,238
------------------------------------- -------------- --------------
Non-current Lease Liability 9,282 9,908
------------------------------------- -------------- --------------
Total lease liability 10,894 11,166
------------------------------------- -------------- --------------
Group Group
31 July 2022 31 July 2021
GBP'000 GBP'000
Property rentals 1,746 1,559
Depreciation of right of use asset (ROU) (1,314) (1,261)
Interest charged on lease liability (239) (270)
Impact on Comprehensive Income 193 28
------------------------------------------ -------------- --------------
The Group has no leases on any other types of assets. The
Present Value of all future operating lease payments is calculated
using 2.2% (2021: 2.2%) as an incremental borrowing rate as the
single Discount Rate. The right of use assets are depreciated based
on the individual lease term of the separate leases.
13 Investments
Company investments in subsidiary undertakings GBP'000
--------------------------------------------------------- --------
31 July 2020 2,552
Capital contributions arising from share-based payments 118
--------------------------------------------------------- --------
31 July 2021 2,670
--------------------------------------------------------- --------
Capital contributions arising from share-based payments 201
--------------------------------------------------------- --------
31 July 2022 2,871
--------------------------------------------------------- --------
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
Company Name Company Class of Directly Indirectly Nature of
Registration Shareholding Entity
No.
Lok'nStore Limited *
# 02902717 Ordinary 100 - Self-storage
Lok'nStore Trustee
Limited
Yen 03788705 Ordinary - 100 Trustee
Southern Engineering
and Machinery Company
Ltd Yen (*) # 00381670 Ordinary - 100 Self-storage
Semco Machine Tools
Limited != # 01025573 Ordinary - 100 Dormant
Semco Engineering
Limited
!= # 01164294 Ordinary - 100 Dormant
ParknCruise Limited
Yen 10329934 Ordinary - 100 Dormant
The Box Room
(Self-storage)
Limited Yen (*) 06840417 Ordinary - 100 Self-storage
Yen These companies are subsidiaries of Lok'nStore Limited.
!= 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 address of these companies is 112, Hawley Lane, Farnborough,
Hants. GU14 8JE.
# The address of these companies is 1, Fleet Place, London. EC4M
7WS.
14 Inventories
Group Group
2022 2021
GBP'000 GBP'000
---------------------------------- --------- ---------
Consumables and goods for resale 143 290
---------------------------------- --------- ---------
The amount of inventories recognised in Group cost of sales as
an expense during the year was GBP112,887 (2021: GBP124,656) (See
note 3). The Company had no inventory in either year.
15 Trade and Other Receivables
Group Group
2022 2021
GBP'000 GBP'000
-------------------------------- --------- ---------
Trade receivables 1,198 1,451
Other receivables 2,318 881
Taxation - 1,497
Prepayments and accrued income 472 444
3,988 4,273
-------------------------------- --------- ---------
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
Other receivables include monies receivable from the managed
stores for services provided by the Group. The 2021 taxation debtor
of GBP1.497 million was a VAT repayment owed to the Group by HMRC
which was received post year-end.
The following balances existed between the Company and its
subsidiaries at 31 July:
Company Company
2022 2021
GBP'000 GBP'000
-------------------------------- -------------- --------------
Net amount due from Lok'nStore
Limited 28,785 27,051
----------------------------------- -------------- --------------
The amount due from Lok'nStore Limited is interest free. The
balance is repayable on demand.
Trade receivables
In respect of its self-storage business the Group does not
typically offer credit terms to its customers and hence the Group
is not exposed to significant credit risk. All customers are
required to pay in advance of the storage period. Late charges are
applied to a customer's account if they are more than ten days
overdue in their payment. The Group provides for receivables based
upon sales levels and estimated recoverability. There is a right of
lien over the customers' goods, so if they have not paid within a
certain time frame the Group has the right to sell the items they
store to cover the debt owed by the customer. Trade receivables
that are overdue are provided for based on estimated irrecoverable
amounts, determined by reference to expected credit losses.
For individual self-storage customers, the Group does not
perform credit checks. However, this is mitigated by the fact that
all customers are required to pay in advance. Before accepting a
new business customer who wishes to use a number of the Group's
stores, the Group uses an external credit rating to assess the
potential customer's credit quality and defines credit limits by
customer. There are no customers who represent more than 5% of the
total balance of trade receivables.
Included in the Group's trade receivables balance are
receivables with a carrying amount of GBP100,214 (2021: GBP89,329)
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
53 days past due (2021: 55 days past due). The Group does not
expect credit losses on intra-group balances.
Ageing of past due but not impaired receivables
Group Group
2022 2021
GBP'000 GBP'000
----------------------------------------------- --------- ---------
0-30 days 22 14
30-60 days 8 4
60+ days 70 71
----------------------------------------------- --------- ---------
Total 100 89
----------------------------------------------- --------- ---------
Movement in the allowance for credit losses
2022 2021
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Balance at the beginning of the year 147 189
Impairment losses recognised 30 22
Amounts written off as uncollectible (77) (64)
----------------------------------------------- --------- ---------
Balance at the end of the year 100 147
----------------------------------------------- --------- ---------
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 Group
2022 2021
GBP'000 GBP'000
-------------------------------------- --------- ---------
0-30 days - -
30-60 days - -
60+ days 100 147
-------------------------------------- --------- ---------
Total 100 147
-------------------------------------- --------- ---------
16 Trade and Other Payables
Group Group
2022 2021
GBP'000 GBP'000
------------------------------------ --------- ---------
Trade payables 1,849 1,385
Taxation and social security costs 1,014 370
Other payables 588 690
Accruals and deferred income 3,778 3,397
------------------------------------ --------- ---------
7,229 5,842
------------------------------------ --------- ---------
The Directors consider that the carrying amount of trade and
other payables approximates fair value. The Company had no trade
and other payables in either year.
17 Financial Instruments
Capital management and gearing
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 debt, which
include the borrowings disclosed in note 18, 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 with hedging forming a Board
agenda item for discussion at each Board meeting.
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 relatively conservative gearing ratio
(the proportion of net debt to equity) balancing the overall level
with the opportunities for the growth of the business. 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:
Gearing - Bank borrowings Group Group
2022 2021
GBP'000 GBP'000
Gross debt - bank borrowings * (66,785) (65,399)
Cash and cash equivalents 46,465 9,105
-------------------------------- --------- ---------
Net debt (20,320) (56,294)
---------
Total equity - balance sheet 205,346 151,259
---------
Net debt to equity ratio 9.9% 37.2%
-------------------------------- --------- ---------
Total Gearing - Bank borrowings Group Group
and lease liabilities 2022 2021
GBP'000 GBP'000
--------------------------------- --------- ---------
Gross debt - bank borrowings * (66,785) (65,399)
Gross debt - lease liabilities (10,894) (11,166)
Cash and cash equivalents 46,465 9,105
--------------------------------- --------- ---------
Net debt (31,214) (67,460)
---------
Total equity - balance sheet 205,346 151,259
---------
Net debt to equity ratio 15.2% 44.6%
--------------------------------- --------- ---------
* Gross debt is the total amount of bank debt drawn before any
amortisation of bank arrangement fees.
The movement of the Group's gearing ratio arises principally
through the combined effect of an increase in the value of its
trading properties, and the cash generated from operations , offset
primarily by drawdown of debt to fund the acquisition of the
development site in Peterborough. The Group's gearing ratio was
also enhanced by the profitable disposals during the year relating
to the sale and manage-back of four trading stores.
The Group's operating cash was also applied to ongoing planning,
construction and fit out works at other sites, principally at our
Warrington and Stevenage stores and the completion of construction
works at our Leicester and Salford stores. Costs relating to the
planning and pre-development works on our Bournemouth, Cheshunt,
Peterborough and Staines sites also featured.
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 previously has hedged through
the deployment of interest rate swaps although the Group had no
such instruments in place at 31 July 2021 or 31 July 2022. The
Board continues to keep its hedging policy under periodic
review.
B Debt management
Debt is defined as non-current and current borrowings, as
detailed in note 18. Equity includes all capital and reserves of
the Group. The Group is not subject to externally imposed capital
requirements.
The Group borrows through a joint revolving credit facility with
Royal Bank of Scotland/NatWest Bank plc and ABN AMRO Bank secured
on its store portfolio and other Group assets, excluding
intangibles, with a net book value of GBP 292.8 million (2021:
GBP255.7 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 GBP 100 million (2021: GBP75 million)
providing undrawn committed facilities at 31 July 2022 of GBP33.2
million. This facility runs to April 2026, and details are provided
in note 18 (Borrowings).
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 17. 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 SONIA rate. With
the rising level of interest rates, the Board monitors closely its
effect on the business and has levers in place to mitigate the
effects.
Cash balances held in current accounts attract no interest, but
surplus cash is transferred daily to a treasury deposit account
which earns interest at the prevailing money market rates. All
amounts are denominated in Sterling. The balances at 31 July 2022
are as follows:
Group Group
2022 2021
GBP'000 GBP'000
--------------------------------------- --------- ---------
Variable rate treasury deposits (#) 45,371 7,604
SIP trustee deposits 63 63
Cash in operating current accounts 1,031 1,430
Other cash and cash equivalents - 8
--------------------------------------- --------- ---------
Total cash and cash equivalents 46,465 9,105
--------------------------------------- --------- ---------
# On 7 July 2022, the Group placed GBP15.0 million on Treasury
Deposit Reserve on a 3-month fixed rate at 1.36% which ended on 7
October 2022. On its maturity date this amount was rolled over into
a 4-month fixed rate on Treasury Deposit Reserve at 2%.
Also, on 7 July 2022, the Group placed GBP15.0 million on
Treasury Deposit Reserve on a 4-month fixed rate at 1.55% which
ends on 7 November 2022.
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
Over the longer term, significant changes in interest rates may
have an impact on consolidated earnings.
At 31 July 2022, it is estimated that an increase of one
percentage point in interest rates would have reduced the Group's
annual profit before tax by GBP 667,846 (2021: GBP653,989) and
conversely a decrease of one percentage point in interest rates
would have increased the Group's annual profit before tax by GBP
667,846 (2021: GBP653,989). 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 1.71% and applying to the variable rate
borrowings of GBP68.8 million in the year (2021: GBP65.4
million/1.54%).
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 [15]. There has not
been a significant change in credit quality.
The Group has a strong credit model with customers paying
four-weekly in advance for their storage. The Group has no
significant concentration of credit risk, with exposure spread
across 17,000 customers (2021: 16,000) and with no individual
self-storage customer accounting for more than 1 % of total revenue
and no entities under common control (e.g., Government) accounting
for more than 5 % of total revenues.
The Group holds a right of lien over its self-storage customers'
goods if customer debts are not paid although this is used
relatively infrequently within the context of overall customer
numbers and only ever as a final stage in the debt recovery
process.
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 2022 was
GBP 2.26 million (2021: GBP1.48 million) on receivables and GBP
46.5 million (2021: GBP9.1 million) on cash and cash
equivalents.
H Maturity analysis of financial liabilities
The undiscounted contractual cash flow maturities are as
follows:
2022 - Group Trade Interest
and Other on
Payables Borrowings Borrowings
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- ------------
Over five years - - -
From two to five years - 66,785 3,131
From one to two years - - 1,809
------------------------------------- ----------- ----------- ------------
Due after more than one year - 66,785 4,940
Due within one year 4,207 - 1,809
------------------------------------- ----------- ----------- ------------
Total contractual undiscounted cash
flows 4,207 66,785 6,749
------------------------------------- ----------- ----------- ------------
2021 - Group Trade Interest
and Other on
Payables Borrowings Borrowings
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- ------------
Over five years - - -
From two to five years - 65,399 2,248
From one to two years - - 1,010
------------------------------------- ----------- ----------- ------------
Due after more than one year - 65,399 3,258
Due within one year 2,856 - 1,010
------------------------------------- ----------- ----------- ------------
Total contractual undiscounted cash
flows 2,856 65,399 4,268
------------------------------------- ----------- ----------- ------------
Lease liabilities are separately disclosed in note 19.
I Fair values of financial instruments
Group Group
2022 2021
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Categories of financial assets and financial
liabilities
Financial assets measured at amortised cost
Trade and other receivables (1) 3,516 2,824
Cash and cash equivalents 46,465 9,105
Financial liabilities measured at amortised
cost
Trade and other payables (4,207) (2,856)
Lease liabilities (10,894) (11,166)
Bank loans (66,196) (64,941)
---------------------------------------------- --------- ---------
1 Includes GBP1.0 million (gross) relating to fees receivable
from the Aldershot managed Store classified in Other Debtors, plus
Trade Receivables of GBP1.2 million plus Other Receivables of
GBP1.3 million
The fair values of the Group's cash and short-term deposits and
those of other financial assets equate to their carrying amounts.
The amounts are presented net of provisions for doubtful
receivables and allowances for impairment are made where
appropriate.
J Company's financial instruments
The Company's financial assets are amounts owed by subsidiary
undertakings amounting to GBP28.8 million (2021: GBP27.1 million)
which are classified as loans and receivables, and the investment
in its subsidiary undertaking of GBP2.87 million (2021: GBP2.67
million). These amounts are denominated in Sterling. The Company
has no financial liabilities.
18 Borrowings
Group Group
2022 2021 GBP'000
Bank borrowings GBP'000
--------------------------------------------- --------- --------------
Non-current
Bank loans repayable in more than two years
but not more than five years
Gross 66,785 65,399
Deferred financing costs (589) (458)
--------------------------------------------- --------- --------------
Net bank borrowings 66,196 64,941
--------------------------------------------- --------- --------------
Non-current borrowings 66,196 64,941
--------------------------------------------- --------- --------------
-- GBP25 million accordion executed and increases bank facility
from GBP75 million to GBP100 million
-- Bank facility extended by one year to April 2026
-- Migration from LIBOR to an alternative risk-free reference rate (SONIA)
On 20 October 2021, the Group executed the accordion arrangement
embedded within the Revolving Credit Facility which increases the
facilities available to the Group from GBP75 million to GBP100
million.
In addition, the Group has also agreed a one-year extension on
its existing joint banking facility with National Westminster
Bank/Royal Bank of Scotland plc and ABN AMRO Bank N.V. The
facility, which was due to expire in April 2025, will now run until
April 2026 providing funding for more Landmark site
acquisitions.
The two principal bank covenants (LTV and Senior interest) and
margin are unaffected by the execution of the accordion and this
extension of term. Margin/pricing is also unaffected.
Amendments to the Facility Agreement dealing with the transition
from LIBOR to SONIA (Sterling Over Night Indexed Average) have also
been made, fulfilling UK regulators' requirements ahead of LIBOR's
phasing out after 31 December 2021.
The Group currently has GBP66.8 million drawn against its
facility, which is secured with National Westminster Bank/ RBS and
ABN AMRO jointly by legal charges and debentures over the freehold
and leasehold properties and other tangible assets of the business
with a net book value of GBP292.8 million (2021: GBP255.7 million)
together with cross-company guarantees from Group companies.
With current facility utilisation at GBP66.8 million and
combined with cash balances of GBP46.5 million the GBP100 million
facility provides around GBP79.7 million of available cash
headroom.
19 Lease Liabilities
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the leases. Where this
cannot be readily determined the Present Value of all future
operating lease payments is calculated using 2.2% (2021: 2.2%) as
an incremental borrowing rate as the Discount Rate.
After the application of a weighted depreciation charge based on
the individual lease term of the separate leases and the imputation
of an interest charge at 2.2% (2021: 2.2%) as part of the
amortisation of the lease liability the total lease liabilities are
shown below.
Lease liabilities attributable to right of Group
use assets 2022 Group
GBP'000 2021 GBP'000
Current lease liabilities
Amounts due within one year 1,612 1,258
Non-current lease liabilities
Amounts due in one to two years 1,174 1,085
Amounts due in three to five years 2,774 2,585
Amounts due in more than five years 5,334 6,238
-------------------------------------------- --------- --------------
Non-current lease liabilities 9,282 9,908
-------------------------------------------- --------- --------------
Total lease liabilities 10,894 11,166
-------------------------------------------- --------- --------------
Lease liabilities attributable to right of Group Group
use assets 2022 2021
GBP'000 GBP'000
--------- ---------
Balance brought forward 11,166 12,455
Increase in property rentals 1,235 -
Lease repayments (1,746) (1,559)
Lease interest (non-cash) 239 270
Total lease liabilities 10,894 11,166
-------------------------------------------- --------- ---------
The portfolio of property leases all have similar
characteristics. Subject to periodic future rent reviews, typically
every five years, there are no variable lease payments. The Group
has no leases on any other types of assets.
The total future commitments due under non-cancellable leases is
set out in note 30 (Commitments under Property Leases).
20 Deferred Tax
Group Group
2022 2021
Deferred tax liability GBP'000 GBP'000
-------------------------------------------------- --------- ---------
Liability at start of year 46,760 26,760
Total charge to income for the year 2,113 2,367
-------------------------------------------------- --------- ---------
48,873 29,127
Tax charged directly to other comprehensive
income 14,284 18,224
Charge / (credit) to share-based payment reserve 57 (591)
Liability at end of year 63,214 46,760
-------------------------------------------------- --------- ---------
The following are the major deferred tax liabilities and assets
recognised by the Group and the movements during the year:
Accelerated Other Rolled
Capital Temporary Revaluation of over Gain Share
Allowances Differences Properties on Disposal Options Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ------------- --------------- ------------- ---------- ---------
At 31 July 2020 3,649 479 19,939 2,956 (263) 26,760
---------------------------------- ------------ ------------- --------------- ------------- ---------- ---------
Charge to income for the year 1,479 130 - 758 - 2,367
---------------------------------- ------------ ------------- --------------- ------------- ---------- ---------
Charge to other comprehensive
income - - 18,224 - - 18,224
---------------------------------- ------------ ------------- --------------- ------------- ---------- ---------
Credit to share-based payment
reserve - - - - (591) (591)
---------------------------------- ------------ ------------- --------------- ------------- ---------- ---------
At 31 July 2021 5,128 609 38,163 3,714 (854) 46,760
---------------------------------- ------------ ------------- --------------- ------------- ---------- ---------
Charge to income for the year 591 - - 1,522 - 2,113
Charge to other comprehensive
income - - 9,978 4,306 - 14,284
Credit to share-based payment
reserve - - - - 57 57
---------------------------------- ------------ ------------- --------------- ------------- ---------- ---------
At 31 July 2022 5,719 609 48,141 9,542 (797) 63,214
---------------------------------- ------------ ------------- --------------- ------------- ---------- ---------
The increase in the deferred tax liability arises substantially
from a combination of an increase in the valuation of the Group's
stores and a provision for the gain arising on the sale of the four
sale and manage-back stores which will in due course be subject to
a roll-over relief claim.
The deferred tax provision is substantially a tax provision
against the potential crystallisation (sales) of revalued
properties and past 'rolled over' gains and amounts to GBP63.2
million (2021: GBP46.8 million), the crystallisation of which is
within the Board's control.
21 Share Capital
2022 2021
Authorised: GBP'000 GBP'000
------------------------------------------------- ------------- -------------
35,000,000 ordinary shares of 1 pence each
(2021: 35,000,000) 350 350
------------------------------------------------- ------------- -------------
Allotted, issued and fully paid ordinary shares GBP'000 GBP'000
------------------------------------------------- ------------- -------------
Balance at start of year 298 297
Options exercised during the year 3 1
------------------------------------------------- ------------- -------------
Balance at end of year 301 298
------------------------------------------------- ------------- -------------
Called up, Called up,
Allotted Allotted
and and
Fully Paid Fully Paid
Number Number
------------------------------------------------- ------------- -------------
Number of shares at start of the year 29,686,787 29,633,290
Options exercised during the year 316,758 53,497
------------------------------------------------- ------------- -------------
Number of shares at end of the year 30,003,545 29,686,787
------------------------------------------------- ------------- -------------
The Company has one class of Ordinary Shares which carry no
right to fixed income.
22 Equity-Settled Share-Based Payment Plans
The Group operates three equity-settled share-based payment
plans: one approved and two unapproved share option schemes.
The Company has granted the following share options:
2022 As at As at
Summary 31 July 2021 31 July
Lapsed/ 2022
No. of Options Granted Exercised Surrendered No. of
Options
Unapproved Share Options
(refer note 24(a)) 683,950 1,163 (280,323) - 404,790
Unapproved Share Options
(PPP Scheme) - refer
note 24(b)) 990,000 277,658 - - 1,267,658
Approved CSOP Share
Options (refer note
25) 86,476 12,542 (36,435) - 62,583
Total 1,760,426 291,363 (316,758) - 1,735,031
2021 As at As at
Summary 31 July 2020 31 July
Lapsed/ 2021
No. of Options Granted Exercised Surrendered No of Options
Unapproved Share Options
(refer note 24(a)) 715,104 8,608 (39,762) - 683,950
Unapproved Share Options
(PPP Scheme) - refer
note 24(b)) 830,000 280,000 - (120,000) 990,000
Approved CSOP Share
Options (refer note
25) 97,935 2,276 (13,735) - 86,476
Total 1,643,039 290,884 (53,497) (120,000) 1,760,426
The following table shows options held by Directors under all
schemes.
Approved
Total CSOP Total
at 31 Options Options Unapproved Share at 31
July 2021 Granted Exercised Scheme Options July 2022
2022
Executive Directors
A Jacobs - Unapproved 206,087 - (206,087)- - - -
A Jacobs - PPP 160,000 40,000 - 200,000 - 200,000
A Jacobs - total 366,087 40,000 (206,087) 200,000 - 200,000
RA Davies - Unapproved 246,977 - (65,000) 181,977 - 181,977
RA Davies - CSOP 7,742 (7,742) - 2,941 2,941
RA Davies - PPP 160,000 38,236 - 198,236 - 198,236
RA Davies total 414,719 38,236 (72,742) 380,213 2,941 383,154
N Newman-Shepherd
- Unapproved 135,599 - - 135,599 - 135,599
N Newman-Shepherd
- CSOP 8,618 (1,400) 7,218 964 8,182
N Newman-Shepherd
- PPP 240,000 59,422 - 299,422 - 299,422
N Newman-Shepherd
total 384,217 59,422 (1,400) 442,239 964 443,203
All Directors total 1,165,023 137,658 (280,229) 1,022,452 3,905 1,026,357
---------- -----------
Approved
Total CSOP Total
at 31 Options Options Unapproved Share at 31
July 2020 Granted Exercised Scheme Options July 2021
2021
Executive Directors
A Jacobs - Unapproved 206,087 - - 206,087 - 206,087
A Jacobs - PPP 80,000 40,000 - 120,000 - 120,000
A Jacobs - total 286,087 40,000 - 326,087 - 326,087
RA Davies - Unapproved 246,977 - - 246,977 - 246,977
RA Davies - CSOP 7,742 - - - 7,742 7,742
RA Davies - PPP 80,000 40,000 - 120,000 - 120,000
RA Davies total 334,719 40,000 - 366,977 7,742 374,719
N Newman-Shepherd -
Unapproved 172,421 - (36,822) 135,599 - 135,599
N Newman-Shepherd -
CSOP 10,661 - (2,043) - 8,618 8,618
N Newman-Shepherd -
PPP 120,000 60,000 - 180,000 - 180,000
N Newman-Shepherd total 303,082 60,000 (38,865) 315,599 8,618 324,217
Non-Executive Directors
SG Thomas - Unapproved 5,217 - - 5,217 - 5,217
All Directors total 929,105 140,000 (38,865) 1,013,880 16,360 1,030,240
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, three or five years, subject to the
performance criteria attached to the options.
Under the CSOP Approved Share Option scheme (note 25) and the
Unapproved Share Options scheme (note 24(a)), 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 or in the case of
unapproved options at the discretion of the Board. The life of each
option granted is six and a half to seven years. There are no cash
settlement alternatives.
The rules governing the PPP scheme are disclosed in note
24b.
Under the CSOP Approved Share Option scheme (note 25) and the
Unapproved Share Options scheme (note 24a), 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
and a half years which is part way between vesting (two and a half
to three years after grant) and lapse (ten 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 and a half
years).
Under the Partnership Performance Plan (note 24(b)), 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. For options
granted on 31 July 2022, the expected term is assumed to be 10.34
years (2021: 11.76 years), which is halfway between vesting and
lapse. The vesting date is based upon the assumption that the CAD
and/or NAV targets are met at the same time as the share price
target is met, and the lapse date is the fifteenth anniversary of
the grant. The risk-free rate of return is the UK gilt rate at date
of grant commensurate with the expected term (i.e.10.34 years).
The total charge for the year relating to employer share-based
payment schemes was GBP201,385 (2021: GBP117,586), all of which
relates to equity-settled share-based payment transactions.
23(a) Other Reserves
Capital Share-based
Merger Other Redemption Payment
Reserve Reserve Reserve Reserve Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
31 July 2020 6,295 1,294 34 832 8,455
Share-based remuneration
(options) - - - 118 118
IFRS 2 - transfer retained
earnings - - - (26) (26)
Tax charge relating to
share options - - - 591 591
31 July 2021 6,295 1,294 34 1,515 9,138
Share-based remuneration
(options) - - - 201 201
IFRS 2 - transfer retained
earnings - - - (180) (180)
Tax charge relating to
share options - - - (57) (57)
31 July 2022 6,295 1,294 34 1,479 9,102
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. The
revaluation reserve is a non-cash non-distributable reserve that
reflects the uplift between market (fair) value of the Group's
store assets and their historic book value.
Share-based payment reserve
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 GBP180,391 (2021: GBP26,419).
23(b) Other Reserves
Other Share-based
Reserve Payment
Reserve Total
Company GBP'000 GBP'000 GBP'000
31 July 2020 1,114 798 1,912
Share-based remuneration (options) - 118 118
IFRS 2 - transfer to/from retained
earnings - (26) (26)
31 July 2021 1,114 890 2,004
Share-based remuneration (options) - 201 201
IFRS 2 - transfer to/from retained
earnings - (180) (180)
31 July 2022 1,114 912 2,026
24(a) Retained Earnings
Retained
Earnings
before Deduction Retained
Own Shares Earnings
of Own Shares (note 25) Total
Group GBP'000 GBP'000 GBP'000
31 July 2020 26,595 (500) 26,095
Profit attributable to owners
of
Parent for the financial year 3,283 - 3,283
Transfer from revaluation reserve
Additional depreciation on revaluation 568 - 568
Transfer from share-based payment
reserve (note 23a) 26 - 26
Reserve transfer on disposal
of assets 165 - 165
Dividend paid (3,865) - (3,865)
31 July 2021 26,772 (500) 26,272
Profit attributable to owners
of
Parent for the financial year 12,078 - 12,078
Transfer from revaluation reserve
Additional depreciation on revaluation 821 - 821
Transfer from share-based payment
reserve (note 23a) 180 - 180
Reserve transfer on disposal
of assets 20,258 - 20,258
Dividend paid (4,601) - (4,601)
31 July 2022 55,508 (500) 55,008
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.
24(b) Retained Earnings
Retained
Earnings Retained
before Deduction Earnings
Own Shares
of Own Shares (note 25) Total
Company GBP'000 GBP'000 GBP'000
31 July 2020 15,650 - 15,650
Profit attributable to owners
of
Company for the financial year 4,793 - 4,793
Transfer from share-based payment
reserve (note 23b) 26 - 26
Dividend paid (3,865) - (3,865)
31 July 2021 16,604 - 16,604
Profit attributable to owners
of
Company for the financial year 5,756 - 5,756
Transfer from share-based payment
reserve (note 23b) 180 - 180
Dividend paid (4,601) - (4,601)
31 July 2022 17,939 - 17,939
25 Own Shares
EBT EBT Treasury Treasury Own Shares
Shares Shares Shares Shares total
Number GBP Number GBP GBP
31 July 2021 and 31
July 2022 623,212 499,910 - - 499,910
The Group operates an Employee Benefit Trust (EBT) under a
settlement dated 8 July 1999 between Lok'nStore Limited and
Lok'nStore Trustee Limited, constituting an employees' share
scheme.
Funds are placed in the Trust by way of deduction from
employees' salaries on a monthly basis as they so instruct for
purchase of shares in the Company. Shares are allocated to
employees at the prevailing market price when the salary deductions
are made.
As at 31 July 2022, the Trust held 623,212 (2021: 623,212)
Ordinary Shares of 1 pence each with a market value of GBP6,356,762
(2021: GBP4,580,608). No shares were transferred out of the scheme
during the year (2021: nil).
No options have been granted under the EBT. The EBT waived its
dividends in full. No other dividends were waived during the
year.
26 Cash flows
(a) Reconciliation of profit before tax to cash generated from
operations
Year Year
ended ended
31 July 31 July
2022 2021
GBP'000 GBP'000
Profit before tax 15,874 6,448
Depreciation and loss on disposal 4,727 4,149
Equity-settled share-based
payments 201 118
Non-underlying items (note
4) (5,739) 160
Interest receivable (42) (1)
Interest payable - bank borrowings 1,089 747
Interest payable - lease liabilities 239 270
Decrease / (increase) in financial
asset 509 (148)
Decrease / (increase) in inventories 148 (20)
Decrease (increase) in receivables 285 (645)
Increase / (decrease) in payables 1,278 1,109
Cash generated from operations 18,569 12,187
(b) Reconciliation of net cash flow to movement in net bank
debt
Net bank debt is defined as non-current and current borrowings,
as detailed in note 18, less cash and cash equivalents.
Group Group
2022 2021
GBP'000 GBP'000
--------
Increase / (decrease) in cash
in the year 37,360 (3,961)
Change in net debt resulting
from cash flows (1,386) (14,077)
Movement in net debt in year 35,974 (18,038)
Net bank debt brought forward (56,294) (38,256)
Net bank debt carried forward (20,320) (56,294)
27 Commitments Under Property Leases
At 31 July 2022 the total future minimum lease payments as a
lessee under non-cancellable leases were as follows:
Group Group
2022 2021
Land and Buildings GBP'000 GBP'000
-------- --------
Amounts due:
Within one year 1,727 1,612
Between two and five years 4,737 4,583
After five years 6,273 6,863
-------- --------
12,737 13,058
--------
Property lease payments represent rentals payable by the Group
for certain of its properties. Typically, leases are negotiated for
a term of 20 years and rentals are fixed for an average of five
years.
The Group's property leases on its leased stores are recognised
as a right of use asset and as a corresponding liability at the
year-end.
28 Related Party Transactions
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 13.
The aggregate remuneration of the Directors, and the other key
management personnel of the Group, is set out below. Further
information on the remuneration of individual Directors is found in
note 8.
Group Group
2022 2021
GBP'000 GBP'000
Short-term employee benefits - Directors 922 968
Short-term employee benefits - Other key
management 373 469
Post-employment benefits - Directors 11 10
Post-employment benefits - Other key management 8 18
Share-based payments 201 118
Social security costs -Directors 370 120
Social security costs -Other key
management 49 56
Total 1,934 1,759
The Group recognises a number of management personnel that are
important to retain within the business in order for it to achieve
its strategic plan. Accordingly, these are recognised as key
personnel and are participants in the Long-Term Performance Plan.
They are included in the table above.
Group Director shareholdings - dividends received
In respect of the total dividends paid during the year of GBP4.6
million (2021: GBP3.87 million), the Group Directors received the
amounts set out in the table below: -
Director's Dividend Holding Final 2021 Interim Total 2022 Total 2021
Income 2022
10.67 pence 5.0 pence
per Share per
Share
Executive: No. GBP GBP GBP GBP
A Jacobs * 5,513,950 588,338 275,698 864,036 658,776
R Davies 73,832 7,878 3,692 11,570 8,400
N Newman-Shepherd 30,739 3,280 1,537 4,817 4,098
Non-Executive:
SG Thomas * 1,691,190 180,450 84,560 265,010 203,733
RJ Holmes 289,606 30,901 14,480 45,381 41,004
CP Peal 600,629 64,087 30,031 94,118 84,797
J Woyda 2,419 258 121 379 105
8,202,365 875,192 410,119 1,285,311 1,005,579
* Andrew Jacobs and Simon Thomas dividend income above includes
their respective holdings in their individual pension funds.
Managed Stores - Group Director shareholdings
The relationship between Lok'nStore Group plc and the Managed
Stores which it manages have been reported in detail in last year's
financial statements and is not repeated here.
Although the Director holdings in Managed Stores falls outside
of the definition of related party transactions they are disclosed
here, as in previous years, for transparency and are set out in the
table below: -
Director Wolverhampton Broadstairs Exeter
No. of Shares No. of Shares No. of Shares
Andrew Jacobs 36,800 38,160 240,000
Charles Peal - - 500,000
Simon Thomas - - 160,000
Total shareholding 36,800 38,160 900,000
Issued Share Capital 189,341 189,690 3,970,000
% of Issued Share
Capital 19.4% 20.1% 22.7%
-- These shareholdings relate to three Managed Stores, each in
separate corporate vehicles, which have very specific EIS tax
advantages. The Directors' respective shareholdings in these
companies have remained unchanged since their initial
investment.
-- The Lok'nStore Directors have no other shareholdings in any other Managed Stores.
-- Changes in UK Tax legislation mean that these EIS tax
advantages no longer exist, and these reliefs are no longer
available for Managed Store opportunities that may be undertaken in
the future.
-- Under UK Takeover Panel protocols in relation to the Rule 9
Waiver agreed each year with Lok'nStore Group plc, necessary to
preserve the Group's share buyback authority, Andrew Jacobs cannot,
by agreement with the Panel, purchase any more Lok'nStore shares.
As such the three EIS investment vehicles represented an
opportunity for Mr Jacobs to hold additional self-storage assets in
tax efficient vehicles.
-- Lok'nStore Group operate 16 Managed Stores, currently
trading, and have a further one secured Managed Stores in the
pipeline making a total of 17 Managed Stores. The Managed Store
strategy is a well-developed one which enables the Group to
increase the operational footprint of Lok'nStore branded stores
without the balance sheet risk of ownership.
-- At 31 July 2022, Lok'nStore has a total of 50 stores ( 40
currently trading and a pipeline of ten secured stores).
-- The terms of the Management Services Agreements executed
between Lok'nStore and with Wolverhampton, Broadstairs and Exeter
were executed at arm's length on normal commercial terms with
independent Director(s) who were not directors of Lok'nStore and
therefore unconnected. The commercial terms are all similar to, and
consistent with, those agreed with other third-party Managed Store
owners.
-- The Board of Lok'nStore Group plc have governance protocols
in place to ensure that there are no conflicts of interest between
the Group and the shareholders of the Wolverhampton, Broadstairs
and Exeter stores. Specifically, Mr Jacobs could not hold a
disproportionate holding in the EIS Managed Stores not commensurate
with his shareholding in Lok'nStore Group plc.
29 Capital Commitments
The Group has capital expenditure contracted but not provided
for in the financial statements of GBP11.21 million (2021: GBP 6.16
million) relating to commitments to complete the ongoing
construction of our sites in Bedford and Peterborough and final
contract commitments on our completed sites at Warrington and
Stevenage. We are also committed on the Staines Store project in
respect of the land and main build contract and the Basildon Store
in respect of the lease commitment which commences when practical
completion of the building is delivered to us at the end of March
2023.
30 Guarantees
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 GBP66.8 million (2021: GBP 65.4
million).
31 Events after the Reporting Date
Acquisition of a development site in Milton Keynes
On 4 October 2022, we exchanged contracts, subject to planning,
on a freehold development opportunity in Watling Street, Milton
Keynes. This new highly visible roadside location in the north west
of the city complements our existing leasehold store, seven miles
to the south east. Once developed the store will add circa 60,000
sq. ft. of lettable area.
Glossary
Abbreviation
APM Alternative performance measure
Adjusted EBITDA Earnings before all depreciation and amortisation charges,
losses or profits on disposal, share-based payments,
acquisition costs, non-underlying items and non-recurring
professional costs, finance income, finance costs and
taxation
Adjusted Store Adjusted EBITDA (see above) but before central and
EBITDA head office costs
AGM Annual General Meeting
Bps Basis Points
CAD Cash available for Distribution
Capex Capital Expenditure
CGU Cash-generating units
CO2 e Carbon Dioxide Equivalents
CSOP Company Share Option Plan
DRIP Dividend Reinvestment Plan
EBT Employee Benefit Trust
EIS Enterprise Investment Scheme
(eKPIs) Environmental key performance indicators
EMI Enterprise Management Incentive Scheme
ESOP Employee Share Option Plan
EU European Union
GHG Greenhouse gas
HMRC His Majesty's Revenue and Customs
IAS International Accounting Standard
IFRIC International Financial Reporting Interpretations Committee
IFRS International Financial Reporting Standards
ISA International Standards on Auditing
JLL Jones Lang LaSalle
KPI Key Performance Indicator
LFL Like for like
LTPPP Long Term Partnership Performance Plan
LTV Loan to Value Ratio
MWh Megawatt Hour
NAV Net Asset Value
NBV Net Book Value
Operating Profit Earnings before interest and tax (EBIT)
PPP Partnership Performance Plan
PV Photovoltaic
QCA Quoted Companies Alliance
RICS Royal Institution of Chartered Surveyors
RNS Regulatory News Service
ROU Right of Use Asset
SIP Share Incentive Plan
SME Small and medium sized enterprises
SONIA Sterling Overnight Index Average
Sq. ft. Square feet
tCO2e Tonnes of carbon dioxide equivalent
TVR Total voting rights
VAT Value Added Tax
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END
FR BUBDGCSDDGDI
(END) Dow Jones Newswires
October 31, 2022 03:00 ET (07:00 GMT)
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