Final Results
Lok'n Store Group PLC
26 September 2003
LOK'nSTORE GROUP PLC
('Lok'nStore' or 'the Company')
Preliminary Results for the year ended 31 July 2003
Lok'nStore Group Plc, one of the leading players in the fast-growing
self-storage market, announces preliminary results for the year ended 31 July
2003.
Highlights
• Turnover for the year up by 12% to £5.6m (2002: £5.0m)
• Operating profit* up £74,000 to £77,000 (2002: £3,000)
• Profit before tax* up £434,000 to £35,000 (2002: loss of £399,000)
• New sites acquired in Luton (opened 2002) and in Eastbourne (opening in
October 2003)
• Gradual increase in new site opportunities within our proven investment
criteria
• Strong financial structure, with no borrowings at the year end
• Number of stores currently 18
* Pre-exceptional items
Andrew Jacobs, Chairman of Lok'nStore, commented,
'This is a solid set of results in what has been a challenging trading period.
Our competitive position remains strong in the self storage market and there is
evidence of a gradual increase in new site opportunities which meet our strict
investment criteria. The market remains attractive and the Directors remain
optimistic that the Company will deliver continued growth.'
26 September 2003
Press enquiries:
Andrew Jacobs, Chairman Lok'nStore Group plc Tel: 020 8547 2288
Simon Thomas, Chief Executive Lok'nStore Group plc
Chris Stevens, Finance Director Lok'nStore Group plc
Justine Warren College Hill Tel: 020 7457 2020
Crawford Burden College Hill
CHAIRMAN & CHIEF EXECUTIVE'S STATEMENT
OVERVIEW
Lok'nStore is a strong company with a sound trading and investment strategy in
an attractive market. Turnover for the year moved up 12% to £5.6m (2002: £5.0m)
and operating profit, before exceptional items, was £77,000 (2002: £3,000).
Lok'nStore's financial structure is strong, with no borrowings at the year end.
We have acquired new sites in Luton (opened 2002) and in Eastbourne which will
open in October 2003. Also we are seeing a gradual increase in new site
opportunities, which fit our proven investment criteria.
SALES
Sales growth has been in line with expectations and operating profit
(pre-exceptionals) has been maintained. Sales of insurance and storage
accessories have grown by 49.4% compared to 2002.
In addition, we aim to accelerate new site opportunities over the next few
years. The Company is also capable of a fast turnaround of new sites following
purchase. For example, the turnaround time at Luton was only two months to
opening.
Our competitive position remains strong in the self storage market.
SHARE BUY-BACK AND CAPITAL REDUCTION
At the Company's EGM on 5 September 2003, shareholders gave approval for a
buy-back of shares, the cancellation of the share premium account and transfer
to distributable reserves. High Court approval for cancellation of the share
premium account was received on 24 September 2003. The purpose of this exercise
is to optimise Lok'nStore's financial structure.
We expect to launch the formal tender price shortly. We plan to ask
shareholders to vote in favour of an ongoing authority to buy back shares at the
AGM on 27 November 2003.
DIVIDEND
As in prior years, the Directors do not recommend the payment of a dividend.
OUR PEOPLE
The Directors would like to take this opportunity to thank the staff of
Lok'nStore for their efforts and commitment during the last year. Their efforts
are key to our future success.
In June of this year we parted company with our Managing Director, Steven
Hourston, who left the Group to pursue other interests. Andrew Jacobs has
assumed the responsibilities of this role and there are no plans currently to
replace this position.
The Board would like to thank Steven for his contribution to the business over
the last two years.
There is a positive and progressive programme of improvements in management,
systems and information and these are already showing benefits to sales.
OUTLOOK
Our annualised sales are currently running at £6.4m. Our new Eastbourne centre
(40,650 ft of net lettable space) opens in October 2003. We continue to see
improvements in sales at our existing centres and aim to accelerate new site
acquisitions in the year ahead. We are also making further improvements in the
new site appraisal model.
We will continue to explore the opportunities presented by the uplift in the
value of our freehold properties. This enhances the Company's ability to borrow
as and when debt is required and gives the opportunity to release value to
shareholders.
Andrew Jacobs, Chairman
Simon Thomas, Chief Executive
26 September 2003
OPERATING REVIEW
THE MARKET
The self storage market remains attractive and we believe it continues to be
significantly under-supplied. As a leading company in this growing market,
Lok'nStore enjoys economies of scale in funding, property acquisition and
operations.
OUR SPACE
Lok'nStore fits out new centres progressively as customers move in, so that
investment costs are in line with sales growth enhancing profitability. As a
result of this and other efficiencies, Lok'nStore enjoys a low cost base per
lettable sq ft of space.
We had 17 centres at the end of the reported year and with the addition of
Eastbourne we will have 18 in the first quarter of 2003/04.
We have freehold properties in Ashford (Kent), Basingstoke, Horsham,
Kingston-upon-Thames, Luton, Reading, Southampton and Woking. We have leasehold
properties in Eastbourne, Fareham, Milton Keynes, Northampton, Poole,
Portsmouth, Staines, Sunbury-on-Thames, and two stores in Swindon.
We have a total space of 775,000 sq ft, including fitted space of 472,000 sq ft.
Our total space further divides beyond fitted units and open/covered space
with car parks, offices and vehicle and container storage all of which maximise
revenue from unfitted space at any stage of the fit out process of the centre.
Sales of insurance and packaging are now 9.7% of letting revenues, making an
important contribution to operating profits.
OUR CUSTOMERS
Our split of customers is between household (49%) and business (51%).
Our business customers range from small local traders to charities, government
departments and agencies and large private, international and FTSE 100
companies.
MANAGEMENT & SYSTEMS
Steven Hourston, who was appointed as Managing Director in April 2001, resigned
from the Company in June 2003. Executive members of the Board have re-assigned
all responsibilities and do not currently plan to re-fill the MD position. In
recognition of a slower rate of growth in sales last year, the Company has now
reorganised responsibilities and the management focus is on growth. Along with
these changes, improvements in management and sales systems are now flowing
throughout the Company, with an emphasis on efficiency and on timely data. We
remain optimistic for the future.
SOCIAL & EMPLOYMENT
We have 83 employees, with 65 in storage centre management and 18 in central
services. 35% of all employees are shareholders through our employee benefit
trust, which has personal tax advantages and a bonus share allocation scheme.
We support and encourage education; 4 employees are currently studying for their
NVQ's with a further 14 employees having completed their studies.
ENVIRONMENTAL
We have implemented an environmental performance framework, called the Trucost
Environmental System, providing a quantitative measure of our overall
environmental performance and impact, including that of our supply chain. We
have a preliminary assessment of our performance that identifies greenhouse gas
emissions (e.g. CO2) as being the main environmental impact.
We have implemented an environmental policy to help us to carefully manage our
waste, to control polluting emissions and to encourage our suppliers to
undertake similar assessments. We have switched four centres to Green Energy
plc, a provider of renewable energy. In 2003/04 we plan to continue to gather
data in more detail and devise strategies to minimise our environmental impact
where possible.
FINANCE REVIEW
RESULTS
Lok'nStore has shown 12% growth in turnover to £5.6m (2002: £5m). The continuing
growth in the business is demonstrated by the increase in annualised turnover to
£6.4m.
Demonstrating the cash generative nature of the business, EBITDA before
exceptional items was up 42% to £0.72m (2002: £0.51m). Operating profit before
exceptional items increased to £77,190 (2002: £2,899).
The exceptional costs during the year totalled £0.47m:
• Of these costs, the bulk relates to the disposal of the excess space at
Swindon West. Following the acquisition of Swindon Self Storage Ltd during
year ended 31 July 2000, which consisted of a single site on the west side
of Swindon, the Company was able to take on a new site in a more prominent
location at the front of the Swindon West plot. Lok'nStore sold the surplus
space in the form of the original freehold, generating cash of £1.1million
and an exceptional loss of £0.4million.
• The remaining £64,248 relates to the compensation for loss of office of
Steven Hourston, who resigned as the Company's Managing Director on 6 June
2003.
The net interest charge reduced to £39,309 from £401,772. This large reduction
in interest payment is a consequence of the funds raised through the placing and
open offer in July 2002, giving the Company the ability to pay down debt.
Profit before tax and exceptional items increased to a profit of £34,704 from a
loss of £398,873, with the majority of the improvement relating to the reduced
interest charge.
No charge to corporation tax arises as the company incurred a taxable loss in
the year. Tax losses available to carry forward for offset against future
profits amount to some £2.3m.
Earnings per share before exceptional items improved from a loss of 1.81p per
share to a profit of 0.12p per share. On a fully diluted basis this equates to
0.11p per share.
CASH FLOW
The Company was cash positive at the year end with a net cash balance of £1.1m
(2002: £3m). Cash flows from the Company still remain encouraging, continuing
to demonstrate the cash generative nature of the business. The Company generated
£1.1m from the disposal of the freehold site at Swindon and invested £2.3m in
both the acquisition of the freehold site at Luton and further phased fit out at
a number of centres across the Company. Lok'nStore continues to operate a '
just-in-time' approach to capital expenditure and this is reflected in the fact
that capital expenditure increased by 15%, similar to the rise in sales over the
period.
BALANCE SHEET
Net assets at the year end totalled £15.2m (2002: £15.7m).
Included in Investments is £1m of Lok'nStore shares held by the Lok'nStore
Employee Benefit Trust. In April 2003 the Employee Benefit Trust invested
£0.85m in the acquisition of 1m shares. This investment was made in order to
cover any requirements under the employee share save scheme and to honour the
potential exercise of share options.
FINANCING
The current level of cash held reflects an inefficient company balance sheet
structure in the present environment. Accordingly, the share buyback proposal,
recently approved by shareholders, gives the Company the ability to switch an
element of the Company's finances from equity to debt and so gear up the balance
sheet.
The Company signed a new £10m revolving credit facility in September 2002, which
was completely un-drawn at the year end.
TREASURY MANAGEMENT
Following the signing of the new bank facility, the Company paid down all the
remaining debt that existed at year ended 31 July 2002. All cash deposits are
placed with 'AA' or 'AAA' credit rated institutions in accordance with the
Board's approval.
LIQUIDITY RISK
The £10m revolving credit facility agreed with The Royal Bank of Scotland plc is
a three year committed facility and during the year the Company complied with
all debt covenants.
CONSOLIDATED PROFIT & LOSS ACCOUNT
for the year ended 31 July 2003
Notes 2003 2003 2003 2002
£ £ £ £
Before Exceptional Total
Exceptional Items Items
(Note 2)
Turnover 5,612,978 - 5,612,978 5,000,488
Operating expenses (5,535,788) (64,287) (5,600,075) (4,997,589)
Operating profit 77,190 (64,287) 12,903 2,899
Loss on disposal of fixed (3,177) (400,901) (404,078) -
assets
Interest receivable 61,748 - 61,748 53,958
Profit/(Loss) on ordinary 135,761 (465,188) (329,427) 56,857
activities before
interest
Interest payable (101,057) - (101,057) (455,730)
Profit/(Loss) on ordinary 34,704 (465,188) (430,484) (398,873)
activities before
taxation
Taxation 3 - - - -
Profit/(Loss) for the 34,704 (465,188) (430,484) (398,873)
year
Earnings per share
Basic 4 0.12p (1.51)p (1.81)p
Diluted 4 0.11p (1.51)p (1.81)p
The operating profit for the year arises from the group's continuing operations.
No separate statement of Total Recognised Gains and Losses has been presented as
all such gains and losses have been dealt with in the profit and loss account.
GROUP BALANCE SHEET
As at 31 July 2003
Notes 2003 2002
£ £
Fixed Assets
Intangible assets 5 407,578 431,832
Tangible assets 13,398,636 13,129,442
Investments 6 1,023,886 172,917
14,830,100 13,734,191
Current Assets
Stocks 101,783 62,967
Debtors 1,527,779 1,256,102
Cash in bank and in hand 1,101,809 10,127,340
2,731,371 11,446,409
Creditors:
Amounts falling due within one year (2,336,243) (2,395,389)
Net current assets 395,128 9,051,020
Total assets less current liabilities 15,225,228 22,785,211
Creditors:
Amounts falling due after more than one year - (7,133,995)
15,225,228 15,651,216
Capital and reserves
Called up share capital 7 284,687 284,687
Share Premium 8 9,912,447 9,907,951
Merger reserve 8 6,295,295 6,295,295
Profit and loss account 8 (1,267,201) (836,717)
Shareholders' funds 15,225,228 15,651,216
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 July 2003
Notes 2003 2002
£ £
Cash flow from operating activities 9 292,975 806,994
Returns on investments and servicing of finance
9 (39,309) (401,772)
Taxation - -
Capital expenditure and financial investment 9 (2,139,262) (2,951,402)
Cash outflow before financing (1,885,596) (2,546,180)
Financing 9 (7,139,935) 11,678,381
(Decrease)/Increase in cash in the period (9,025,531) 9,132,201
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
2003 2002
£ £
(Decrease)/Increase in cash in the period (9,025,531) 9,132,201
Change in net debt resulting from cash flows 7,144,431 (1,700,518)
MOVEMENT IN NET FUNDS IN PERIOD (1,881,100) 7,431,683
NET FUNDS/(DEBT) BROUGHT FORWARD 2,979,914 (4,451,769)
NET FUNDS AT 31 JULY 9c 1,098,814 2,979,914
NOTES
1. ACCOUNTING POLICIES
The above results for the year ended 31 July 2003 are an abridged version
of the Company's statutory financial statements. The profit and loss
account and balance sheet do not constitute statutory financial statements
within the meaning of section 240 of the Companies Act 1985. These accounts
have been prepared on the basis of the same accounting policies as set out
in the statutory accounts for the year ended 31 July 2002.
2. EXCEPTIONAL ITEMS
2003 2002
£ £
Compensation for loss of office 64,287 -
Loss on disposal of Swindon freehold 400,901 -
465,188 -
3. TAXATION
There is no charge to corporation tax as the group incurred a tax loss in
the year. The Company has tax losses of approximately £2.3 million
available to carry forward against future taxable profits of the same
trade. No value is ascribed to these losses, due to the uncertainty as to
the utilisation of the losses in the foreseeable future.
4. EARNINGS PER ORDINARY SHARE
The calculations of earnings per share are based on the following profits
and numbers of shares.
Basic & Diluted Basic & Diluted
2003 2002
£ £
Profit/(Loss) for the financial year before 34,704 (398,373)
exceptional items
Loss for the financial year (430,484) (398,373)
2003 2002
No. of shares No. of shares
Weighted average number of shares
For basic earnings per share 28,468,693 22,081,169
Exercise of share options 1,784,467 1,353,125
For diluted earnings per share 30,253,160 23,434,294
The exercise of share options would give rise to a reduction in the loss per
share. This is not considered to be dilutive.
5. INTANGIBLE FIXED ASSETS - PURCHASED GOODWILL
£
Group
Cost
1 August 2002 and 31 July 2003 485,093
Amortisation
At 1 August 2002 53,261
Charged in the year 24,254
31 July 2003 77,515
Net book value
31 July 2003 407,578
31 July 2002 431,832
6. INVESTMENTS
Own shares
£
Group
Cost
At 1 August 2002 172,917
Additions 850,969
As at 31 July 2003 1,023,886
This represents the shares owned by Lok'nStore Employee Benefit Trust as
part of the group's employees share scheme and share option schemes. The
market value of the shares as at 31 July 2003 was £755,425.
In view of the current share price and the ongoing share buyback programme,
the directors do not believe that there has been a permanent diminution in
value of the investments.
7. SHARE CAPITAL
2003 2002
£ £
Group and Company
Authorised:
35,000,000 (2002: 35,000,000) Ordinary Shares of 1p each 350,000 350,000
Allotted, issued and fully paid:
28,468,693 (2002: 28,468,693) Ordinary shares of 1p each 284,687 284,687
8. RESERVES
Share Premium Merger reserve Profit and loss Total
account
£ £ £ £
1 August 2002 9,907,951 6,295,295 (836,717) 5,857,451
Exercise of Share Options 4,496 - - 4,496
Loss for the year - - (430,484) (430,484)
9,912,447 6,295,295 (1,267,201) 14,940,541
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.
9. CASH FLOWS
2003 2002
£ £
a Reconciliation of operating profit to net cash inflow
from operating activities
Operating profit 12,903 2,899
Depreciation 621,835 481,598
Amortisation 24,254 24,255
Profit on disposal of fixed assets - (115)
Increase in stocks (38,816) (21,719)
Increase in debtors (271,677) (252,633)
(Decrease)/Increase in creditors (48,710) 572,709
Exceptional Item (6,814) -
Net cash inflow from operating activities 292,975 806,994
b Analysis of cash flows for headings netted in the cash flow
Returns on investments and servicing of finance
Interest received 61,748 53,958
Interest paid (97,654) (446,451)
Interest element of finance lease rental payments (3,403) (9,279)
Net cash outflow for returns on investment and servicing of
finance (39,309) (401,772)
Capital expenditure and financial investment
Purchase of tangible fixed assets (2,324,045) (2,953,677)
Proceeds from sale of tangible fixed assets 1,035,752 2,275
Purchase of fixed asset investments (850,969) -
Net cash outflow for capital expenditure and financial
investment (2,139,262) (2,951,402)
9. CASH FLOWS (CONT)
2003 2002
£ £
Financing
Bank loans (7,130,998) 1,717,336
Capital element of finance lease rental payments (13,433) (17,030)
Exercise of share options 4,496 -
New share issue (net of issue costs) - 9,978,075
Net cash inflow/(outflow) from financing (7,139,935) 11,678,381
c Analysis of net debt
Other non
At 31 July 2002 Cash flow cash changes At 31 July 2003
£ £ £ £
Cash at bank and in hand 10,127,340 (9,025,531) - 1,101,809
Debt due within 1 year - - - -
Debt due after 1 year (7,130,998) 7,130,998 - -
Finance leases (16,428) 13,433 - (2,995)
Total 2,979,914 (1,881,100) - 1,098,814
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