Interim Results
Lok'n Store Group PLC
12 April 2005
12 April 2005: for immediate release
LOK'NSTORE GROUP PLC
('Lok'nStore' or 'the Group')
Interim Results
for the six months to 31 January 2005
Lok'nStore Group Plc, one of the leading companies in the fast-growing
self-storage market, which operates 19 stores in the South East, announces
interim results for the six months ended 31 January 2005.
Highlights
• Turnover increased by 24% to £3.89 million (£3.14m: six months to 31.1.04)
• Operating profit £320,261 (Loss -£131,827 *: six months to 31.01.04)
• Profit before tax of £75,903 (Loss - £169,237 *: six months to 31.01.04)
• Store EBITDA of £1.233 million (six months to 31.01.04: £0.734 million)
• Customers up 21.2% to 5,790 from 4,776 in January 2004
• Properties valued at £33.6 million (NBV £18.4 m)
• Further significant uplift in value expected from potential Kingston
residential development.
• Planning permission for high-density residential scheme at Kingston site
granted. Permission is for 124 flats, and a new GP surgery of
approximately 7,000 square feet.
* After 31/01/2004 exceptional items - £127,407
Andrew Jacobs, Chief Executive, commented:
'Lok'nStore's market position, leading brand and the increasing strength of our
balance sheet demonstrates that we are well positioned to take advantage of this
under-developed market. Trading is good and we continue to see attractive
opportunities to grow the number of stores. The increased valuation of our
properties provides financial flexibility for us. The Board is confident in its
ability to continue to deliver growth in shareholder value.'
12 April 2005
Lok'nStore Group plc
Andrew Jacobs, Chief Executive Today: 020 7831 3113
Ray Davies, Finance Director Thereafter: 020 8247 1861
Financial Dynamics Tel: 020 7831 3113
Billy Clegg
Jonathan Brill
CHAIRMAN'S STATEMENT
Overview
I am pleased to report another period of progress for the Group.
During the period our revenue grew and the business moved into profit as we
continued to fill our centres. The operation is showing encouraging growth of
EBITDA with stores producing over £1.23 million in the period. The increased
property valuations discussed below emphasise the Group's financial strength and
provides flexibility for future growth.
The Board remains committed to finding high quality self-storage sites whilst
examining profitable opportunities to enhance the value of the existing stores.
We continue to believe that the South and South East of England presents the
greatest opportunity for the Group, and our site acquisition strategy remains
driven by rate of return, site location and visibility. Our tactical as well as
strategic approach to acquisition continues to offer opportunities.
Our priorities remain:
• improving the operating performance of existing stores
• maximising the potential value of existing stores
• increasing the number of stores
• optimising the group's capital structure
Turnover Growth
Turnover for the six months to 31 January 2005 increased by 24% to £3.89 million
(£3.14 million). Trading is following its usual seasonal pattern with annualised
revenues rising to £8.1 million at 31 March 2005.
The Group achieved an operating profit of £320,261, after taking account of the
development and launch of our new Tonbridge store, which incurred a loss of
£124,296 in the five months since opening. This compares with an operating loss
for the Group of £131,827 for the corresponding 2004 period.
The Group made pre-tax profit for the period of £75,903 compared with a loss of
£169,237 for the corresponding period in 2004. Basic earnings per share was
0.31p per share (2004: loss of 0.59p per share).
Store earnings before interest, tax, depreciation and amortisation (EBITDA) were
£1.233 million for the period (six months to 31.01.2004: £0.734 million).
Packing materials, insurance and other sales broadly kept pace with storage
income at 7.5% of turnover, an increase of 15.8% over the period.
At the period end, the number of customers had risen to 5,790 from 4,776 in
January 2004, an increase of 21.2% over the year. The business handled 3,593 '
move-ins' during the period compared to 3,386 in the corresponding period in
2004. The total area let increased by 21.6% to 489,123 sq. ft (31.01.2004:
402,346 sq. ft).
Financial strength and balance sheet efficiency
Strong cash flows continue to demonstrate the cash generative nature of the
underlying business. Cash inflow from operating activities before interest and
capital expenditure was just under £0.87million for the period, compared to
£0.18 million for the corresponding 2004 period. Capital expenditure totalled
£0.8 million. At 31 January 2005, the Group had cash balances of £0.55 million
(31 July 2004: £0.65 million) and £7.65 million of borrowings representing
gearing of 66% on net debt of £7.1 million (31 July 2004: 66%). Gearing is 28%
when calculated using current market values of properties. (See below).
On 31 January 2005, professional valuations were prepared by external valuers,
Cushman & Wakefield Healey & Baker, in respect of all trading freehold and
leasehold properties as operational self-storage businesses. Since the freehold
site at Farnborough was only acquired on 30 July 2004, it has not been revalued.
This Report was prepared on the basis of Market Value/Existing Use Value, having
regarded its trading potential as appropriate, in accordance with RICS Appraisal
and Valuation Standards but on the special assumption that any potential for
residential development was excluded. (See note 2 in the notes to the accounts
for a more detailed description of valuation methodology).
The Report indicates a total for properties valued of £31.84 million. Including
Farnborough, (NBV £1.76 million), this gives a total value of properties held of
£33.6 million. (NBV £18.4 million). These valuations do not account for any
further uplift in values, arising from the planning permission achieved for
housing at the Kingston site, nor any successful outcome of the planning
application for housing at the Reading site. While the Company does not envisage
routinely revaluing its properties it will do so when appropriate.
This increase in property valuations provides the Group with increased financial
flexibility and strength enhancing our ability to borrow. It makes the value
created more transparent and gives the Group the potential to release more value
to shareholders,whilst continuing to grow..
Planning permission granted
We are pleased to report that planning permission has been granted for
high-density residential development at the site of the Company's current
Kingston operation. The permission is for two 6-8 storey buildings containing 78
private flats, 16 key worker (shared equity) and 30 social units (43 one
bedroom, 75 two bedroom and 6 three bedroom), and a new GP surgery of
approximately 7,000 square feet. The planning permission is subject to the
signing of the Section 106 Agreement.
The Kingston site was purchased in 1996 for £905,000. It has been operational as
one of the Companies self-storage facilities for 8 years. The book value of this
site is currently £1.2 million. The Kingston site was valued by Cushman
Wakefield Healey and Baker as an operational self storage site at £2.75m
The Board is progressing discussions to maximise the proceeds and profit from
this redevelopment.
Outlook
Lok'nStore's market position, leading brand and the increasing strength of our
balance sheet demonstrates that we are well positioned to take advantage of this
under-developed market. Trading is good and we continue to see attractive
opportunities to grow the number of stores. The increased valuation of our
freehold and leasehold sites provides financial flexibility for us. The Board is
confident in its ability to continue to deliver growth in shareholder value.
Simon Thomas
Chairman
11 April 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 January 2005
Notes Unaudited Unaudited Audited
Six months Six months Year
31 January 31 January 31 July
2005 2004 2004
£ £ £
TURNOVER
Continuing operations 3,885,117 3,135,997 6,611,911
Operating expenses (3,564,856) (3,140,418) (6,490,237)
Exceptional items - (127,406) (127,407)
-------------- -------------- --------------
OPERATING PROFIT/(LOSS) 320,261 (131,827) (5,733)
Loss on disposal fixed assets - - (870)
Interest receivable 13,562 36,950
Interest payable (244,358) (50,972) (199,451)
-------------- -------------- --------------
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE TAXATION 75,903 (169,237) (169,104)
Taxation 3 - - -
-------------- -------------- --------------
PROFIT/ (LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION 75,903 (169,237) (169,104)
============== ============== ==============
EARNINGS PER SHARE
Basic 5 0.31 p (0.59) p (0.64) p
Fully diluted 5 0.28 p (0.59) p (0.64) p
============== ============== ==============
There are no other recognised gains or losses.
CONSOLIDATED BALANCE SHEET
31 January 2005
Unaudited Unaudited Audited
31 January 31 January 31 July
2005 2004 2004
£ £ £
FIXED ASSETS
Intangible assets 371,196 395,450 383,323
Tangible assets 18,611,312 13,684,285 18,162,957
-------------- -------------- --------------
18,982,508 14,079,735 18,546,280
-------------- -------------- --------------
CURRENT ASSETS
Stock 87,443 89,604 103,880
Debtors 1,296,618 1,203,851 1,948,711
Cash at bank and in hand 550,545 642,693 654,361
-------------- -------------- --------------
1,934,606 1,936,148 2,706,952
CREDITORS: Amounts falling due within
one year (2,601,913) (1,966,778) (3,094,644)
-------------- -------------- --------------
NET CURRENT (LIABILITIES)/ASSETS (667,307) (30,630) (387,692)
-------------- -------------- --------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 18,315,201 14,049,105 18,158,588
CREDITORS: Amounts falling due after
more than one year (7,650,000) - (7,600,000)
-------------- -------------- --------------
10,665,201 14,049,105 10,558,588
============== ============== ==============
CAPITAL AND RESERVES
Called up share capital 250,711 284,687 250,481
Share premium 4 51,976 21,496 21,496
Capital redemption reserve 4 34,205 - 34,205
Merger reserve 6,295,295 6,295,295 6,295,295
Other distributable reserve 4 5,903,002 9,907,951 5,903,002
Profit and loss account (1,360,402) (1,436,438) (1,436,305)
ESOP shares (509,586) (1,023,886) (509,586)
-------------- -------------- --------------
SHAREHOLDERS' FUNDS 10,665,201 14,049,105 10,558,588
============== ============== ==============
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 January 2005
Notes Unaudited Unaudited Audited
Six months Six months Year
31 January 31 January 31 July
2005 2004 2004
£ £ £
Cash flow from operating activities 6a 870,510 178,432 934,854
Returns on investments and servicing of (251,115) (37,410) (122,163)
finance
Taxation - - -
Capital expenditure and financial investment (804,751) (614,827) (5,429,344)
-------------- -------------- --------------
CASH OUTFLOW BEFORE FINANCING (185,356) (473,806) (4,616,653)
Financing 81,540 14,690 4,169,204
-------------- -------------- --------------
(DECREASE) IN CASH IN THE PERIOD (103,816) (459,116) (447,449)
============== ============== ==============
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
31 January 31 January 31 July
2005 2004 2004
£ £ £
Decrease in cash in the period (103,816) (459,116) (447,449)
Change in net funds/(debt) resulting from
cash flows (49,851) 2,310 (7,597,153)
-------------- -------------- --------------
MOVEMENT IN NET FUNDS IN PERIOD (153,667) (456,806) (8,044,602)
NET FUNDS BROUGHT FORWARD (6,945,788) 1,098,814 1,098,814
-------------- -------------- --------------
NET FUNDS CARRIED FORWARD 6b (7,099,455) 642,008 6,945,788
============== ============== ==============
NOTES TO THE INTERIM RESULTS
1. BASIS OF PREPARATION
The interim results have been prepared on the basis of the accounting policies
as set out in the statutory financial statements for the year ended 31 July
2004. The interim results, which were approved by the Directors on 11 April
2005, are unaudited but have been reviewed in accordance with Auditing Practices
Board bulletin 'Review of Interim Financial Information' by the auditors. The
interim results do not constitute statutory financial statements within the
meaning of section 240 of the Companies Act 1985.
Comparative figures for the year ended 31 July 2004 are an abridged version of
the Group's full accounts, which carry an unqualified audit report and have been
delivered to the Registrar of Companies.
2. MARKET VALUATION OF FREEHOLD LAND AND BUILDINGS
On 31 January 2005, professional valuations were prepared by external valuers,
Cushman & Wakefield Healey & Baker, in respect of all trading freehold land
leasehold properties as operational self-storage businesses. The freehold site
at Farnborough, acquired on 30 July 2004 was not valued on this occasion. This
Report was prepared on the basis of Market Value/Existing Use Value, having
regarded its trading potential as appropriate, in accordance with RICS Appraisal
and Valuation Standards but on the special assumption that any potential for
residential development was excluded. (See note 2 in the notes to the accounts
for a more detailed description of valuation methodology).
The Report indicates a total for properties valued of £31.84 million. Including
Farnborough, (NBV £1.76 million), this gives a total value of properties held of
£33.6 million. (NBV £18.4 million). These valuations do not account for any
further uplift in values, which would result from the planning permission
achieved for housing at the Kingston site, nor any successful outcome of the
planning application for housing at the Reading site. While the Company does not
envisage routinely revaluing its properties it will do so when appropriate.
Valuation Methodology
Background
The USA has over 40,000 self-storage centres trading in a highly fragmented
market with the largest 5 operators accounting for less than 16% of market share
based on net rentable square footage. The vast majority of centres are owned and
managed singly or in small portfolios. These properties have a well established
track record of being traded and are therefore considered as liquid property
assets.
Many valuations of this asset class are undertaken by appraisers in the USA and
the accepted valuation approach is to value the properties having regard to
trading potential. This approach is recognised in the RICS Appraisal &
Valuation Standards published by The Royal Institution of Chartered Surveyors
and is adopted for other categories of property that are normally bought and
sold on the basis of their trading potential. Examples include hotels, bars,
restaurants, marinas and petrol stations.
In the UK the scope for active trading of these property assets is likely to be
less, in a smaller market. However there is now some evidence that there will be
liquidity as the market continues to develop.
Cushman & Wakefield Healey & Baker ('C&W/H&B') believe that the valuation
methodology adopted in the USA is the most appropriate for the UK market.
Methodology
C&W/H&B have adopted different methodologies for the valuation of the leasehold
and freehold assets as follows:
Freehold
The valuation is a discounted cash flow of the net operating income projected
over a ten-year period and notional sale of the asset at the end of the tenth
year.
Assumptions
A. Net operating income is based on actual revenue received less actual
operating costs together with a central administration charge representing 7% of
the estimated annual revenue. The initial net operating income is calculated by
estimating the net operating income in the first twelve months following the
valuation date.
B. The net operating income in future years is calculated assuming
straight-line absorption from day 1 actual occupancy to an estimated stabilised/
mature occupancy level. In the valuation the assumed stabilised occupancy level
for the eighteen stores (both freehold and leaseholds) averages 78%. The
projected revenues and costs have been adjusted for estimated cost inflation and
revenue growth.
C. Capitalisation rates of existing and future net cashflow have been
estimated by reference to underlying yields for industrial and retail warehouse
property, bank base rates, ten-year money rates and inflation. On average, for
all eighteen stores, the yield (net of purchaser's costs) arising from the first
year of the projected cashflow is 6%. This rises to 12.86% based on the
projected cashflow for the first full cashflow year following estimated
stabilisation in respect of each property.
D. The notional sale of the freeholds at the end of the tenth year has been
calculated at an average weighted exit yield of 9.66%.
E. The future net cashflow projections (including revenue growth and cost
inflation) have been discounted at a rate that reflects the risk associated with
each asset. The weighted average annual discount rate adopted (for both
freeholds and leaseholds) is 12.5%.
F. On all assets, purchaser's costs of 5.75% have been assumed initially
and sale and purchaser's costs totalling 7.75% are assumed on the notional sales
in the tenth year in relation to the freehold stores.
Leasehold
The same methodology has been deployed as for freeholds, 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 (unweighted) of the
Group's leaseholds is approximately 11 years and 1 month.
3. TAXATION
There is no charge to corporation tax for the Group due to the availability of
brought forward trading losses. No value is ascribed to the Group's tax losses,
as their recovery in the foreseeable future is considered to be uncertain.
4. SHARE CAPITAL
Unaudited Unaudited Audited
31 Jan 2005 31 Jan 2004 31 Jul 2004
£ £ £
Authorised: 350,000 350,000 350,000
35,000,000 ordinary shares of 1p
each (2004: 35,000,000)
250,711 284,687 250,481
Allotted, issued and fully paid:
25,071,144 ordinary shares of 1p
each (2004: 25,048,144)
Authority to make market purchases of its shares
Following approval by shareholders of a special resolution at the AGM on 16
December 2004, the company has authority to make market purchases of up to
5,845,299 shares. The authority expires on 15 December 2005, but is expected to
be renewed at the next annual general meeting.
Exercise of Share Options
On 25 January 2005, Colin Jacobs, a director of the Company, exercised an option
to acquire 23,000 Ordinary Shares at 37 pence per share pursuant to an
unapproved option arrangement dated 20 June 2000. In addition, Colin Jacobs sold
on 25 January 2005, 20,496 Ordinary Shares in the Company at 150 pence per
share. The share sale was affected through the company and as at 31 January
2005, the company owes Mr Jacobs £11,683 in respect of the proceeds of sale. No
interest is payable on the sum. Following these transactions, Colin Jacobs total
beneficial holding (including family interests) in the Company increased from
12,496 to 15,000 Ordinary Shares.
5. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on the profit for the
period of £75,903 (year to 31 July 2004 - loss of £169,104, period to 31 January
2004 - loss of £169,237) and on the weighted average number of shares in issue
during the period of 24,421,519 shares (31 July 2004- 26,300,997 shares; 31
January 2004 - 28,468,693).
Fully diluted earnings per share includes shares held under the directors'
option scheme and is based on a profit for the period of £75,903 (period to 31
July 2004 - loss of £169,104, period to 31 January 2004 - loss of £169,237) and
on a weighted average number of shares during the period of 26,900,125 shares
(31 July 2004 - 27,436,581 shares; 31 January 2004 - 30,346,523 shares).
6. CASH FLOWS Unaudited Unaudited Audited
31 January 31 January 31 July
2005 2004 2004
£ £ £
(a) Reconciliation of operating profit to net
cash flow from operating activities
Operating profit/(loss) 320,261 (131,827) (5,733)
Depreciation 356,397 329,179 664,153
Amortisation 12,126 12,127 24,255
Decrease/(Increase) in stocks 16,437 12,179 (2,097)
Decrease/(Increase) in debtors 657,781 323,929 (420,932)
(Decrease)/Increase in creditors (492,492) (367,155) 675,208
-------------- -------------- --------------
Net cash flow from operating activities 870,510 178,432 934,854
============== ============== ==============
At
31 July Other non- At
2004 Cash flow cash changes 31 Jan 2005
£ £ £ £
(b) Analysis of net
funds/(debt)
Cash at bank and in hand 654,361 (103,816) - 550,545
Debt due within one year - - - -
Debt due after one year (7,600,000) (50,000) - (7,650,000)
Finance leases (149) 149 - -
-------------- -------------- -------------- --------------
TOTAL (6,945,788) (153,667) - (7,099,45)
-------------- -------------- ------------- --------------
INDEPENDENT REVIEW REPORT TO LOK'N STORE GROUP PLC
Introduction
We have been instructed by the company to review the financial information set
out on pages 4 to 11 and we have read the other information in the interim
statement and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of their interim statement and for no other purpose. We
do not, therefore, in producing this report, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
Directors' responsibilities
The interim statement, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Interim Statement in accordance with the
Alternative Investment Market Rules which require that the accounting policies
and presentation applied to the interim figures must be consistent with those
that will be adopted in the company's annual accounts.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board as if that Bulletin applied. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit opinion
on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 January 2005.
BAKER TILLY
Chartered Accountants
2 Bloomsbury Street
London WC1B 3ST
11 April 2005
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