Interim Results
Lok'n Store Group PLC
24 April 2006
24 April 2006
LOK'NSTORE GROUP PLC
('Lok'nStore' or 'the Group')
Interim Results
for the six months to 31 January 2006
Lok'nStore Group Plc, one of the leading companies in the fast-growing
self-storage market, which operates 21 freehold and leasehold storage centres in
the South East, announces interim results for the six months ended 31 January
2006.
Highlights
• Turnover increased by 10.2% to £4.28 million (£3.89m: six months to 31.1.05)
• Store EBITDA up 23% to £1.517 million (six months to 31.01.05: £1.233 million)
• Group EBITDA up 32% to £906,759 (six months to 31.01.05: £688,784)
• Operating profit up 59% to £510,975 (operating profit £320,261: six months to
31.01.05)
• Profit before tax of £153,524 up 102% (Profit £75,903: six months to 31.01.05)
• Successfully opened two new large freehold stores in Farnborough & Crayford
adding 127,000 sq ft or 16% to capacity
• The new store in Farnborough is Lok'nStore's first purpose-built site
Andrew Jacobs, Chief Executive, commented:
'Lok'nStore's market position, leading brand and increasing balance sheet
strength leaves us well positioned to take advantage of this under-developed
market. There are attractive opportunities to grow the number of stores, and to
improve margins by enlarging their average size. We are pleased with current
trading, and encouraged by the early progress in our newly opened Farnborough
and Crayford stores, which create a model for the future. We therefore believe
that there is an opportunity to further increase the value of the business by
accelerating the development of new stores.'
For further information, please contact:
Lok'nStore Group plc
Andrew Jacobs, Chief Executive Today: 020 7831 3113
Ray Davies, Finance Director Thereafter: 01252 521010
Financial Dynamics
Billy Clegg Tel: 020 7831 3113
Jonathan Brill
CHAIRMAN'S STATEMENT
Overview
I am pleased to report another period of steady progress for the Group.
In December we opened our new freehold store in Crayford (south-east London),
and at the end of January we opened our new freehold store next to the M3 at
Farnborough (Hampshire). We have also moved all of our head office staff to new
offices based at the Farnborough store.
During the period under review turnover growth resulted in geared profit growth
at all levels as we continued to fill our existing centres. The operation is
showing encouraging growth of earnings before interest, tax, depreciation and
amortisation (EBITDA) with the stores producing over £1.5 million in the period.
The Board remains committed to finding high quality self-storage sites such as
the new stores at Farnborough and Crayford, whilst examining profitable
opportunities to enhance the value of the existing stores. In this regard we
continue to make good progress at our Kingston, Reading and Poole sites.
We continue to believe that the South East of England presents the greatest
opportunity for the Group, and our site acquisition strategy remains driven by
profitability, site location and visibility. We are encouraged by the early
success of the Farnborough store as a model for rolling out future stores. We
therefore believe that there is an opportunity to further increase the value of
the business by accelerating our growth rate.
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
Improving the operating performance of existing stores
Turnover Growth
Turnover for the six months to 31 January 2006 increased by 10.2% to £4.28
million with stores in all age brackets contributing to this growth (£3.89
million: six months to 31.01.2005). Excluding the rental income foregone by
expanding the Poole store turnover grew by 12.4%. Trading is following its usual
pattern with a strong spring pick-up. Annualised revenues have risen to £9.25
million at time of writing. We are encouraged by the trading environment since
the period end, as well as the early results from the new Farnborough and
Crayford stores.
The Group achieved an operating profit of £510,975 up 59.5%, after taking
account of the development and launch of our new Farnborough & Crayford stores.
This compares with an operating profit for the Group of £320,261 for the
corresponding 2005 period.
The Group made a pre-tax profit for the period of £153,524 up 102% from the
£75,903 profit for the corresponding period in 2005. Basic earnings per share
was 0.63p per share (2005: 0.31p per share).
Demonstrating the continued growth of cash generation, store EBITDA was up 23%
to £1.517 million for the period (six months to 31.01.2005: £1.233 million).
Packing materials, insurance and other sales broadly kept pace with storage
income at 7.4% of turnover, an increase of 11.3% over the period.
At the period end, the number of customers had risen to 6,703 from 5,790 in
January 2005, an increase of 15.8% over the year. The business handled 3,669 '
move-ins' during the period compared to 3,593 in the corresponding period in
2005. The total area let increased by 6.7% to 521,739 sq. ft (31.01.2005:
489,123 sq. ft). The amount of fitted space occupied increased by 12.6% to
445,228 (31.01.2005: 395,477 sq. ft).
Maximising the potential value of existing stores
We now have 21 stores trading. 11 of these are freehold accounting for 56.5% of
total space, and 10 are leasehold.
We have previously reported receiving planning permission for a high density
residential development at our Kingston site. This was subject to the signing of
the Section 106 Agreement with the local authority which stipulates the
developers financial and other obligations to the local authority. I am
delighted to report that this agreement has now been signed. This enhances the
Group's ability to realise the extra value embedded in this site.
In Reading we have now received a planning permission for a new store on our
land immediately across the road from our existing Store. This will enable us,
in due course, to develop a prominent new self-storage centre providing
approximately 55,000 sq ft of storage space on the site, an increase of around
14,000 sq ft over the existing site.
In September we opened the additional 12,000 sq. ft of space which became
available when we acquired the freehold of our Poole Centre. This took the size
of our Poole store to approximately 64,000 sq ft of storage space, and this
extra space continues to fill up.
We continue to explore options such as these to create extra value at both our
freehold and leasehold operations.
Increasing the number of stores
During the period we opened new centres in Crayford in December 2005, and in
Farnborough at the end of January 2006. They are both located in attractive
markets with high visibility and provide 127,000 sq. ft of storage space. This
takes the total number of our centres to 21 comprising 11 freehold stores and
10 leasehold stores with a total of 920,000 sq. ft. of space.
It is important to recognise that these two new stores are larger than
Lok'nStore's average size of around 42,000 ft per store, and add 16% to total
space, which combined with the fact that they are both freeholds and prominent,
high specification buildings adds significantly to the potential margins they
are capable of achieving. This in turn positively impacts on the potential
margins of the Group overall.
The successful development and opening of the Farnborough centre which is the
first purpose built centre for Loknstore represents an evolution of the business
model creating value through larger new build centres. It is the first centre
where Lokn'Store has managed the process of buying the land, gaining planning
permission, building, fitting and operating the store. With its prominent design
and position adjacent to the M3 motorway it will help to raise the profile of
the whole Lok'nStore brand. I would like to take this opportunity to thank all
those members of the Lok'nStore team for its prompt construction and opening.
Our objective is to increase the number of Lok'nStore centres within the current
geographical coverage of South-East England. We are continuously reviewing
opportunities to buy, to build, and to lease new stores. Farnborough and
Crayford provide the business with a model which can be replicated in rolling
out future stores. We believe that there is an opportunity to further increase
the value of the business by accelerating our growth rate.
Optimising the group's capital structure
Financial strength and balance sheet efficiency
Capital expenditure during the period totalled £4.8 million of which £4.2
million is accounted for by Farnborough and Crayford, and this is reflected in
the increase in tangible assets from £18,611,312 to £24,405,504. At 31 January
2006, the Group had cash balances of £0.63 million (31 January 2005: £0.55
million) and £13.28 million of borrowings representing gearing of 116% on net
debt of £12.6m million (31 July 2005: 66%). Gearing is 49% when calculated
taking account of the uplift in market values of properties arising from the
January 2005 independently verified valuations.
New Head office
In January 2006, we moved the Lokn'Store head office from our Kingston centre to
a new purpose built office in our Farnborough store. This has improved
coordination and communication within the Company, and particularly amongst our
property and other functional management previously dispersed around our various
different offices. All head office staff now operate from Farnborough.
We have also incorporated a new conference room which can accommodate all our
training requirements for the foreseeable future. We have reduced outgoings,
increased the regularity of training and improved contact between head office
and the stores by bringing staff to head office for regular training.
Our people
At 31 January 2006, we had 98 employees and I would like to thank them all for
their contribution during the period.
Outlook
Lok'nStore's market position, leading brand and increasing balance sheet
strength leaves us well positioned to take advantage of this under-developed
market. There are attractive opportunities to grow the number of stores, and to
improve margins by enlarging their average size. We are pleased with current
trading, and encouraged by the early progress in our newly opened Farnborough
and Crayford stores, which create a model for the future. We therefore believe
that there is an opportunity to further increase the value of the business by
accelerating the development of new stores.
Simon Thomas
Chairman
24 April 2006
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 January 2006
Notes Unaudited Audited
Six months Six months Year
31 January 31 January 31 July
2006 2005 2005
£ £ £
TURNOVER
Continuing operations 4,281,574 3,885,117 7,774,541
Operating expenses (3,770,599) (3,564,856) (7,167,580)
OPERATING PROFIT 510,975 320,261 606,961
Loss on disposal of fixed assets (980) - -
Interest receivable 14,859 - 35,898
Interest payable (371,330) (244,358) (528,534)
PROFIT ON ORDINARY
CTIVITIES BEFORE TAXATION 153,524 75,903 114,325
Taxation 3 - - -
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 153,524 75,903 114,325
EARNINGS PER SHARE
Basic 5 0.63 p 0.31 p 0.47 p
Fully diluted 5 0.59 p 0.28 p 0.44 p
There are no other recognised gains or losses.
CONSOLIDATED BALANCE SHEET
31 January 2005
Notes Unaudited Audited
31 January 31 January 31 July
2006 2005 2005
£ £ £
FIXED ASSETS
Intangible assets 346,941 371,196 359,068
Tangible assets 24,405,504 18,611,312 20,032,760
24,752,445 18,982,508 20,391,828
CURRENT ASSETS
Stock 102,221 87,443 88,648
Debtors 1,535,076 1,296,618 1,684,793
Cash at bank and in hand 631,004 550,545 424,738
2,268,301 1,934,606 2,198,179
CREDITORS: Amounts falling due
within one year (2,876,955) (2,601,913) (3,736,384)
NET CURRENT LIABILITIES (608,654) (667,307) (1,538,205)
TOTAL ASSETS LESS CURRENT LIABILITIES 24,143,791 18,315,201 18,853,623
CREDITORS: Amounts falling due after
more than one year (13,279,244) (7,650,000) (8,150,000)
10,864,547 10,665,201 10,703,623
CAPITAL AND RESERVES
Called up share capital 4 250,711 250,711 250,711
Share premium 59,376 51,976 51,976
Capital redemption reserve 34,205 34,205 34,205
Merger reserve 6,295,295 6,295,295 6,295,295
Other distributable reserve 5,903,002 5,903,002 5,903,002
Profit and loss account (1,168,456) (1,360,402) (1,321,980)
ESOP shares (509,586) (509,586) (509,586)
SHAREHOLDERS' FUNDS 10,864,547 10,665,201 10,703,623
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 January 2005
Notes Unaudited Audited
Six months Six months Year
31 January 31 January 31 July
2006 2005 2005
£ £ £
Cash flow from operating activities (6a) 118,270 870,510 1,983,832
Returns on investments and servicing
of finance (290,284) (251,115) (500,901)
Taxation - - -
Capital expenditure and financial
investment (4,758,364) (804,751) (2,293,945)
CASH OUTFLOW BEFORE
FINANCING (4,930,378) (185,356) (811,014)
Financing 5,136,644 81,540 581,392
INCREASE / (DECREASE) IN CASH
IN THE PERIOD 206,266 (103,816) (229,622)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
Notes 31 January 31 January 31 July
2006 2005 2005
£ £ £
Increase / (Decrease) in cash in the
period 206,266 (103,816) (229,622)
Change in net debt resulting from cash
flows (5,129,244) (49,851) (549,852)
MOVEMENT IN NET DEBT IN PERIOD (4,922,978) (153,667) (779,474)
NET DEBT BROUGHT FORWARD (7,725,262) (6,945,788) (6,945,788)
NET DEBT CARRIED FORWARD 6b (12,648,240) (7,099,455) (7,725,262)
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
2005. This is the same basis as will be applied at the year-end. The interim
results, which were approved by the Directors on 21 April 2006, 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 2005 are an abridged version of
the Group's full accounts, which carry an unqualified audit report, do not
contain a statement under section 237(2) or (3) of the companies act 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.
The Report indicates a total for properties valued of £31.84 million. Including
Farnborough, (NBV £1.76 million as at 31.01.05), this gives a total value of
properties held of £33.6 million as at 31.01.05. (NBV £18.4 million as at
31.01.05). 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, any successful outcome of the planning application for housing at
the Reading site, or any capital expenditure since 31.01.05. While the Company
does not envisage routinely revaluing its properties it will do so when
appropriate.
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 2006 31 Jan 2005 31 Jul 2005
£ £ £
Authorised:
35,000,000 ordinary shares of 350,000 350,000 350,000
1p each
Allotted, issued and fully paid:
25,071,144 ordinary shares of
1p each 250,711 250,711 250,711
Authority to make market purchases of its shares
Following approval by shareholders of a special resolution at the AGM on 1
December 2005, the company has authority to make market purchases of up to
5,845,299 shares. The authority expires at the conclusion of the next AGM, but
is expected to be renewed at the next annual general meeting.
5. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on the profit for the
period of £153,524 (year to 31 July 2005 - profit of £114,325, period to 31
January 2005 - profit of £75,903) and on the weighted average number of shares
in issue during the period of 24,443,644 shares (31 July 2005 - 24,432,491
shares; 31 January 2005 - 24,421,519).
Fully diluted earnings per share includes shares held under the directors'
option scheme and is based on a profit for the period of £153,524 (period to 31
July 2005 - profit of £114,325, period to 31 January 2005 - profit of £75,903)
and on a weighted average number of shares during the period of 25,915,309
shares (31 July 2005 - 25,847,179 shares; 31 January 2005 - 26,900,125 shares).
6. CASH FLOWS
Unaudited Audited
31 January 31 January 31 July
2006 2005 2005
£ £ £
(a) Reconciliation of operating profit to net
cash flow from operating activities
Operating profit 510,975 320,261 606,961
Depreciation 384,638 356,397 728,522
Amortisation 12,127 12,126 24,255
(Increase) / Decrease in stocks (13,573) 16,437 15,232
Decrease/(Increase) in debtors 149,717 657,781 263,089
(Decrease)/Increase in creditors (925,614) (492,492) 345,773
Net cash flow from operating activities 118,270 870,510 1,983,832
At Other non- At
31 July 2005 Cash flow cash changes 31 Jan 2006
£ £ £ £
(b) Analysis of net funds/
(debt)
Cash at bank and in
hand 424,738 206,266 - 631,004
Debt due after one
year (8,150,000) (5,129,244) - (13,279,244)
Finance leases - - - -
TOTAL (7,725,262) (4,922,978) - (12,648,240)
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 6 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 2006.
BAKER TILLY
Chartered Accountants
2 Bloomsbury Street
London WC1B 3ST
24 April 2006
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