Interim Results
Lok'n Store Group PLC
28 April 2008
28 April 2007
LOK'NSTORE GROUP PLC
('Lok'nStore' or 'the Group')
Interim Results
for the six months to 31 January 2008
Lok'nStore Group Plc, a leading company in the fast-growing UK self-storage
market announces interim results for the six months ended 31 January 2008. These
are the first interim results presented under International Financial Reporting
Standards (IFRS') and the first after the successful sale of the Kingston and
Woking Stores at the end of the last financial year. Where reference is made
below to 'like for like' comparisons this excludes the Kingston & Woking stores
from the 2007 figures for comparative purposes.
Financial Highlights
1. • Turnover £5.52 million - (£5.30 million: six months to
31.1.07) up 13% on a like for like basis
2. • Group EBITDA £1.42 million - (£1.44 million: six months to
31.01.07) up 18.2 % on a like for like basis
3. • Operating profit £748,647 - (£769,549: six months to
31.01.07) up 35.5% on a like for like basis
4. • Adjusted NAV * £2.70 unchanged over period ** (31 July 2007:
£2.70, 31 January 2007: £2.02)
5. • First interim dividend proposed - 0.33 pence per share
Operational Highlights
6. • Store EBITDA £2.34 million (£2.18 million: six months to
31.01.07) up 20.3% on a like for like basis
7. • Store EBITDA margin increased to 42.6% (six months to
31.01.07: 41.3%, and like for like 39.6%)
8. • Unit prices achieved for self-storage up 6.3 % year-on-year
Property Highlights
9. • Total estate 1.22 million sq ft. - up 17.7% over the six
month period - 64% freehold/long leasehold
10. • Three new sites acquired
11. - North Harbour, Portsmouth
12. - Maidenhead, Berks
13. - Northampton
14. • High density residential planning permission achieved on
Reading site
15.
Main changes as a result of IFRS
• Freehold property values have been recognised in the balance sheet at
their full valuation levels increasing assets by £42.8 million to
£86 million (historic cost £43.3million)
• Comparative figures have been similarly restated.
• A deferred tax provision of £14.7 million is shown which results from
this revaluation surplus.
16.
17. * refer to page 5 for detailed calculation
**January 2008 valuation is a Directors valuation based on 31 July 2007
external valuations)
Andrew Jacobs, Chief Executive, commented
'Lok'nStore has made good progress, both in the operating business and towards
our strategic objectives. Store EBITDA was up 20.3% on a like for like basis,
and we acquired a record 3 new sites in the six month period. Lok'nStore has a
high quality portfolio of self-storage assets. The resilient business model is
underpinned by a solid and growing asset base and we will continue to take full
advantage of the opportunities within this exciting growth market.'
For further information:
Lok'nStore Group plc
Andrew Jacobs, Chief Executive Today: 020 7831 3113
Ray Davies, Finance Director Thereafter: 01252 521010
Financial Dynamics Tel: 020 7831 3113
Billy Clegg
Jonathan Brill
Chairman's Statement
Overview
I am delighted to report on another successful period for the Group, during
which we strengthened the operating performance of the business and acquired a
record 3 new sites.
Lok'nStore has not experienced the turbulence seen in much of the property and
financial markets throughout this reporting period. The business model remains a
robust one with good operating margins, strong cash flow, and relatively low
gearing backed by substantial property assets. Current trading continues to be
resilient reflecting the strong fundamentals and defensive qualities of the
self-storage business model. Reassuringly we have not seen any increase in late
letters, bad debts or lien sales over the period.
We are delighted to have obtained the planning permission for our valuable
Reading site which enables the execution of our strategy at Reading.
This interim report is prepared under IFRS and includes the Group's IFRS
accounting policies together with further details on key performance measures in
the notes to the accounts.
Sales and Earnings Growth
Total turnover for the period was £5.52 million (£5.30 million: six months to
31.1.07) a like for like * (Refer footnote below) increase of 13%' The Group
made an operating profit for the period of £748,647 compared with £769,549 for
the corresponding 2007 period, a like for like increase of 35.5%. The Group made
a pre-tax profit for the period of £216,020 (£317,253: six months to 31.1.07).
The cash flow of the operating business has continued to grow with store
earnings before interest, tax, depreciation and amortisation (Store EBITDA) up
7.3 % at £2.34 million (£2.18 million: six months to 31.01.07). This is a key
performance indicator reflecting the effects of both the efficient operational
management and the increasingly established nature of the existing portfolio. On
a like for like basis Store EBITDA increased by 20.3%.
Performance of Stores
January 2008
Store analysis Over 100 to Under Pipeline
Weeks old 250 250 100 Total
Six months ended 31 January 2008
Sales (£'000) 4,327 1,167 - - 5,494*
Stores EBITDA (£'000) 1,834 506 - - 2,340
EBITDA margin (%) 42.4 45.3 - - 42.6
As at 31 January 2008
Maximum Net Area ('000 sq ft) 765 209 0 248 1,222
Freehold 8 2 0 3 13
Leasehold 7 2 0 1 10
Total stores 15* 4 0 4 23
* In respect of the Farnborough store (100 to 250 weeks) total store
revenue includes a contribution receivable from Group Head Office in respect of
the space and facilities the store provides for the Head Office function. This
income to the Store and the corresponding charge to Head Office are netted down
in the Group turnover figures.
Footnote:
Disposal of Kingston and Woking stores in last financial year
At the end of the last financial year we sold our stores in Kingston and Woking.
These two stores were mature cash producing stores with substantial turnovers
but with little scope for further growth or expansion. The sale proceeds of
around £12.5 million are being invested in our new store pipeline and these new
and typically larger stores will increase the profitability of the Group when
they start trading in future years.
Accordingly, in this narrative we have shown the comparative figures also
excluding Kingston and Woking from the previous period in order to show
shareholders the growth of the underlying operating performance of the remaining
assets over the period. Where a reference is made to 'like for like' comparisons
in this document this excludes the Kingston & Woking stores from the 2007
figures for comparative purposes. You will see that we have, at a headline
level, largely or wholly replaced the turnover and profit foregone from these
disposals over this period, a performance with which we are delighted. We were
able to relocate many of the vacating Kingston customers to our Sunbury store
Sales and Earnings Growth (Cont)
Our established stores have continued to grow alongside the more rapid sales
increases at our newer stores. On a like-for-like basis, our 15 stores trading
for more than 250 weeks grew revenue by 7.4%. We believe there is room for
further increases in these older stores with new space still to be fitted out in
addition to improving income from existing space.
Our developing stores (ones with 100 to 250 weeks' trading) grew revenue by
39.1% and we are delighted both by the continued growth of the more established
stores as well by the success of the developing stores. With over a quarter of a
million sq ft now in the pipeline we look forward to substantial future growth.
Overall EBITDA margins across all stores improved from 41.3% to 42.6% as the
portfolio became more established. Like for like EBITDA margins for 6 months
ended 31 January 2007 were actually 39.6% and so the improvement in the
underlying margin of the business is more marked.
Lok'nStore is taking an active approach to yield management with average prices
achieved for self-storage units increasing 6.3% year-on-year, comfortably
beating our target of 4% that we achieved last year. Average prices for all
rented space increased 6.7% over the year reflecting both the increase in
self-storage prices as well as the conversion from lower value uses into
self-storage space. The success of our yield management system underlies our
confidence that we will be able to increase prices by more than inflation over
the medium term.
Lok'nStore's average price for self-storage of £17.75 per sq ft per annum at 31
January 2008 compared with the average of £20.63 for the UK industry (source:
Self-Storage Association Survey 2007). We believe that there is room to continue
to increase our prices while retaining our strong pricing position in the
market. Packing materials, insurance and other sales increased 4.6% over the
year on a like for like basis accounting for 7.4% of turnover (31.01.2007:
7.8%).
During the period we opened 46,000 sq ft of new space at the existing
Northampton and Fareham stores. We have successfully moved our Portsmouth
Central store into an extremely prominent purpose-built location. The new store
is 74% larger than the old and is already trading cash-generatively.
Like for like
6 Months Ended Increase/
6 Months Ended 6 Months Ended Headline Increase/ 31 January 2007 (decrease)
31 January 2008 31 January 2007 (decrease) Excl Kingston & Jan 08 vs
Actual Headline Jan 08 vs Jan 07 Woking Jan 07
£ £ % £ %
Turnover 5,523,329 5,298,485 4.2 4,888,629 13.0
Store EBITDA 2,340,279 2,180,568 7.3 1,946,165 20.3
EBITDA 1,421,592 1,437,570 (1.1) 1,203,168 18.2
Operating profit 748,648 769,549 (2.7) 552,585 35.5
(Loss)/profit before 216,021 317,253 100,289
tax
Growing Property Assets and Net Asset Value
Following the Company's comprehensive external valuation at 31 July 2007, the
freehold and leasehold properties have not been externally valued during this
interim six month period.
Despite the turbulence in the overall property market demand for self-storage
assets in the UK remains buoyant with the industry being seen as resilient to an
economic downturn. Importantly, Shurgard who are the largest self-storage
company in Europe with around 180 stores have recently announced a placing of
51% of the company's shares with a US pension fund. This was achieved at a price
'consistent' with the price of the IPO that was abandoned last spring due to
market conditions.
Having consulted with valuers, and based on market evidence both at the
individual property level and at the corporate level, the Directors consider
that the market for self storage assets has remained resilient to the downturn
in property values generally. The Board consider that at present there is no
material difference in the value of our self-storage portfolio compared to the
last external valuation.
The Board will continue to commission independent valuations on its trading
stores annually to coincide with its year-end reporting.
Lok'nStore's freehold and operating leasehold properties were independently
valued by Cushman & Wakefield ('C&W') at £75.7 million as of 31 July 2007 (July
2006: £66.6 million) compared to a net book value of £27.9 million (2006: NBV
£25.2 million). As at 31 January 2008, following the grant of planning
permission at Reading, £525,000 was added to the value of the 2007 C&W
valuation. Adding our stores under development at cost, our total property
valuation of £90.4 million (NBV £43.2 million) translates into a net asset
value, of 270 pence per share, (31.07.2007: 270 pence). (31.01.2007: 202 pence).
This translates into a net asset value of 213 pence per share after making full
provision for deferred tax arising on the revaluations. (31.07.2007: 213 pence).
(31.01.2007: 157 pence).
The deferred tax liability arises on the revaluation of the properties and on
the rolled over gain arising from the disposal of the Kingston and Woking sites.
In due course the site of the existing Reading store is likely to be sold with
the benefit of its permission for residential development and the proceeds will
be reinvested in our new store pipeline. It is not the intention of the
directors to make any other significant disposals of operational self-storage
centres in the foreseeable future. At present, it is not envisaged that any tax
will become payable in the foreseeable future due to the trading losses brought
forward and the availability of rollover relief.
Our operating leases remain as operating leases under IFRS (Refer section below
on the full effect of International Financial Reporting Standards ('IFRS')).
Both historically and currently we have valued our freehold and our leasehold
property assets. We have reported this as information but have not previously
included their values into the balance sheet although we base our Net Asset
Value calculation ('NAV') upon it. Under IFRS, the valuation of our freehold
property assets, are now formally included in the Balance Sheet at their fair
value, but the IFRS rules do not permit the inclusion of any valuation in
respect of our leasehold properties to the extent that they are classified as
operating leases. The value of our operating leases in the valuation totals
£9.44 million. Instead, we have reported by way of a note the underlying value
of these leaseholds in future revaluations and adjusted our Net Asset Value ('
NAV') calculation accordingly to include their value. This will ensure
comparable NAV calculations.
Analysis of total property value 31 January 2008 31 January 2007 31 July 2007
Valuation Valuation Valuation
£ £ £
Stores valued by 'C&W, - Freehold * 66,800,000 60,550,000* 66,275,000
Stores valued by 'C&W' - Leasehold * 9,440,000 6,040,000* 9,440,000
Sub total 76,240,000 66,590,000 75,715,000
Stores in development at cost 14,140,987 2,477,431 4,609,013
Total 90,380,987 69,067,431 80,324,013
* Directors' valuation at 31 January 2008 and 31 January 2007
Adjusted Net Asset Value Per Share (adjusted NAV) 31 January 2008 31 January 2007 31 July 2007
£m £m £m
Analysis of net asset value (NAV)
Total non-current assets 86,334,730 67,539,744 76,064,162
Adjustment to include leasehold stores at valuation
Add: C&W leasehold valuation 9,440,000 6,040,000 9,440,000
Deduct: leasehold properties and their fixtures & fittings at NBV (4,651,569) (4,171,354) (4,806,254)
91,123,161 69,408,390 80,697,908
Add: current assets 6,905,149 3,205,845 11,188428
Less: current liabilities (3,373,106) (3,274,557) (6,000,253)
Less: non-current liabilities (excluding deferred tax provision) (24,294,378) (16,724,392) (15,492,606)
Adjusted net assets before deferred tax provision 70,360,826 52,615,286 70,393,477
Deferred tax on revaluation surpluses (14,729,164) (11,614,619) (14,851,644)
Adjusted net assets 55,631,662 41,000,667 55,541,833
Shares in issue Number Number Number
Opening shares 26,731,365 25,091,144 25,091,144
Shares issued for the exercise of options 27,500 1,626,600 1,640,221
Closing shares in issue 26,758,865 26,717,744 26,731,365
Shares held in treasury (52,000) - -
Shares held in EBT (627,500) (627,500) (627,500)
Closing shares for NAV purposes 26,079,365 26,090,244 26,103,865
Adjusted net asset value per share after deferred tax provision 213 pence 157 pence 213 pence
Adjusted net asset value per share before deferred tax provision 270 pence 202 pence 270 pence
Net assets per share are net assets adjusted for the valuation of the freehold
and operating leasehold stores divided by the number of shares at the year-end.
The shares currently held in the Group's employee benefits trust (own shares
held) and in treasury are excluded from the number of shares.
Planning Permission Granted at Reading
I am delighted to report that on 8 January 2008, Lok'nStore obtained planning
permission for high-density residential development on the freehold site of its
existing Reading store. The local planning committee originally rejected the
application but the appeal has now been upheld and permission has been granted.
The permission for 112 flats on the 0.66 hectare site has resulted in a further
uplift in value. This has been reflected in the valuations above.
The Company already has planning permission for a new larger 53,500 sq ft store
on its site opposite the existing store an increase in space of 29%. The
prominence and modern look of the new store with its distinctive orange livery
will position Lok'nStore in a highly visible and easily accessible location
adjacent to the A33 at the gateway to Reading. The existing self-storage
business will be moved into the new store once it is complete.
In due course the site of the existing store site is likely to be sold with the
benefit of its permission for residential development and the proceeds will be
reinvested in our new store pipeline. The two properties in Reading were held at
a cost of £2.2 million. This project is part of our core strategy of continually
reviewing and actively managing our operating portfolio, to ensure we are
maximising its value. This includes strengthening our distinctive brand,
increasing the size of our stores and moving or selling stores or sites when it
will increase shareholder value.
New Stores
In October 2007, Lok'nStore purchased a freehold site in North Harbour,
Portsmouth. The freehold site extends to almost two acres and will be used to
build a new self-storage centre of around 60,000 sq ft. The store will front the
A27 to the north of Portsmouth, is opposite a busy retail area and is prominent
to the M27. Total net investment in the store is likely to be around £6 million.
Additionally, we have acquired a new long leasehold site of 1.6 acres in
Maidenhead, which may ultimately provide up to 83,000 square feet of
self-storage space when completed subject to planning permission. It is
prominently located opposite a busy retail park. Total investment in the store
will be up to £7 million with opening scheduled for summer 2009. The lease term
runs until April 2076.
We have also acquired a 20 year leasehold site in Northampton which is
prominently located close to the city centre, and will provide up to 36,000
square feet of self-storage space. The existing building will be fitted and
branded on a short time scale and will open during summer 2008. Total investment
will be around £900,000.
These acquisitions will take the Company's total number of stores to 23. A
development pipeline of 264,000 sq ft takes total space to over 1.22 million
square feet of which 64% is held freehold/long leasehold. I am pleased to
report that of these 23 stores 8 will be purpose built with a further 3 occupied
as brand new buildings showing the continuous upgrading of Lok'nStore's estate.
We will open our new purpose-built store in Harlow in summer 2008 which provides
69,000 square feet.
Since the period end we have completed the move from our old leased Portsmouth
Central store to a new purpose built freehold store located immediately adjacent
to the motorway spur into the middle of Portsmouth city. I am glad to note that
we successfully moved 96% of the customers to the new store which is therefore
trading cash-generatively immediately. In this period we have recognised an
exceptional cost of £29,945 relating to this move and the full cost of the move
will be taken to the Income Statement at the year end.
Subject to market conditions, it is our current aim to acquire between two and
four stores per annum. A part of our strategy is to increase store size and
number in order to increase profit margins. Our current average store size is
now around 53,000 sq ft up from just over 50,000 sq ft at 31 January 2007. The
exact timing of store openings will largely depend on market availability of
sites, and we will retain our disciplined but flexible approach to site
acquisition. We view the current slowing of the property investment market as a
potential opportunity to increase the rate of growth of new stores.
Financing and Treasury
The operating cash outflow in the cash flow statement was distorted by £1.7
million of VAT provided in creditors at 31 July 2007 arising on the disposal of
the Kingston store. This was paid during the period.
The Group is cash generative as demonstrated by its EBITDA earnings. The Group
also draws from its five year revolving credit facility with Royal Bank of
Scotland Plc to finance new site acquisitions, construction and store fit outs.
This provides sufficient additional liquidity for the Group's immediate
expansion plans. Interest payable on the loan is on terms, paying between 1.25%
and 1.35% over LIBOR. Non-utilisation charges are 0.25% on the value of the
undrawn facility. Undrawn committed facilities at the period-end amounted to
£20.31 million net of funds held on treasury deposit. The facility is secured on
the existing property portfolio.
Turbulence in the capital and debt markets caused LIBOR rates to fluctuate
materially with some sharp upward spikes. This resulted in the business
incurring higher interest charges on the revolving loans rolled over during the
period. Towards the end of the period LIBOR rates had settled to a level which
delivered an 'all in rate' to the Group at 31 January 2007 of 6.82% against a '
all-in' high of 7.9 % and an 'all-in' average since July 2007 of 7.38 %.
During the period the Group complied with all debt covenants.
Capital expenditure during the period totalled £11.26 million, which includes
the acquisition of the freehold site at North Harbour, Portsmouth and the
acquisition at Maidenhead. Ongoing store construction at Portsmouth Central (£1
million) and Harlow (£1.36 million) added £2.36 million. The additions to
fixtures and fittings of £1.57 million include fit-outs at the Portsmouth
Central, Northampton, and Fareham stores. This is reflected in the increase in
property, plant and equipment to £86 million (£43.25 million NBV). (31.01.2007:
£67.2 million: NBV £28.5 million). In December 2007, the Group received £4.14
million representing the balance due, plus accrued interest, following the sale
of the Kingston store in June 2007 for £10 million.
At 31 January 2008, the Group had cash balances of £4.78 million (31 January
2007: £1.35 million) and £24.5 million of borrowings representing gearing of
86.4% on net debt of £19.69 million (31 July 2007: 128%). Gearing is 39.3% when
calculated taking account of the combined effect of the uplift in market values
of properties arising from the July 2007 valuations together with investment in
new properties since that date (31.01.2007:39.4%).After adjusting for the uplift
in value of Leaseholds which are stated at NBV in the balance sheet, gearing is
36.1%. (31.01.2007:37.6%).
Dividend
In respect of the current year, the directors propose that an interim dividend
of 0.33 pence per share will be paid to the shareholders on 10 June 2008 to
shareholders on the register on 9 May 2008. The total estimated dividend to be
paid is £86,110 based on the number of shares currently in issue as adjusted for
net shares held in the Employee Benefit Trust (ESOP) and held on treasury.
International Financial Reporting Standards ('IFRS').
The first full financial statements that the Group will report under IFRS will
be for the year ended 31 July 2008. Therefore Lok'nStore Group Plc has adopted
IFRS with effect from 1 August 2007. Consequently this interim report is
prepared under IFRS and includes the Group's IFRS accounting policies together
with further details on key performance measures in the notes to the accounts.
As IFRS comparative figures must be prepared for the year ended 31 July 2007,
the date of transition to IFRS was 1 August 2006. Our interim results for the
period to 31 January 2008 are presented under IFRS and include reconciliations
and explanations of differences between IFRS and UK GAAP in respect of key
reported numbers. This move to IFRS has not changed the underlying performance
and cash flow of the business but has a significant impact on the way in which
the results are presented.
The main changes for Lok'nStore are explained in Note 16 together with a
presentation of the reconciliations and explanations of the main adjustments
between previously reported interim and full year UK GAAP figures and restated
figures under IFRS. Reconciliations of equity at 31 July 2007 and profit for
the year ended 31 July 2007 reported under UK GAAP and IFRS are also shown.
Briefly the two main changes are the inclusion of freehold property at current
values on the balance sheet, and the inclusion in the accounts of a deferred tax
charge relating to these property value increases and disposals. The effect of
these movements is shown in a newly presented 'Consolidated Statement of Changes
in Equity Statement'. The profit on disposal of the Kingston and Woking stores
shown in the year-end financial statements under UK GAAAP has been restated by
reference to their values under IFRS.
People
At 31 January 2008, we had 108 employees. They are committed and motivated and
help maintain the exemplary levels of friendly service that Lok'nStore provides
to its customers. I would like to thank all of our staff for their commitment to
our business and for their hard work.
Outlook
Lok'nStore has not experienced the turbulence seen in much of the property and
financial markets throughout this reporting period. The business model remains a
robust one with good operating margins, strong cash flow, and relatively low
gearing backed by substantial property assets. Current trading continues to be
resilient reflecting the strong fundamentals and defensive qualities of the
self-storage business model. Reassuringly we have not seen any increase in late
letters, bad debts or lien sales over the period. With unit prices achieved up
by 6.3% year to year and enquiries picking up noticeably in recent weeks
Lok'nStore's well trained staff and loyal customers are creating a stable
platform for the remainder of the year.
The three sites acquired so far this financial year add around 179,000 sq. feet
to our development pipeline demonstrating our commitment to the continued growth
of the business. With over a quarter of a million sq ft now in the pipeline we
look forward to substantial future growth. Having obtained the planning
permissions for our valuable Reading sites we are looking forward to building
and opening this exciting new store in due course.
Our new Harlow and Northampton Central stores opening this summer and we look
forward to the rest of the year with enthusiasm.
Simon Thomas
Chairman
25 April 2008
Consolidated Income Statement
For the six months ended 31 January 2008
Notes Six Months Six Months Year Ended
31 Jan 2008 31 Jan 2007 31 July 2007
Unaudited Unaudited Unaudited
Revenue - Continuing Operations 3 5,523,329 5,298,485 10,665,532
Cost of sales (162,770) (169,597) (328,216)
Gross profit 5,360,559 5,128,888 10,337,316
Administrative expenses (3,782,104) (3,557,475) (7,433,920)
Share based payments (156,863) (133,843) (275,572)
EBITDA 1,421,592 1,437,570 2,627,824
Depreciation based on historic cost (555,812) (526,086) (1,057,228)
Additional depreciation based on revalued assets (117,133) (129,808) (235,307)
Impairment of goodwill - (12,127) (24,254)
(672,945) (668,021) (1,316,789)
Operating profit 748,647 769,549 1,311,035
Costs of relocation of Portsmouth store (29,945) - -
Profit on sale of properties - - 605,263
(29,945) - 605,263
Profit before interest 718,702 769,549 1,916,298
Interest receivable 230,813 29,976 147,461
Interest payable (733,495) (482,272) (1,113,201)
Profit on ordinary activities before taxation 216,020 317,253 950,558
Taxation 4 32,797 75,855 (55,243)
Profit on ordinary activities
attributable to equity shareholders 248,817 393,108 895,315
Earnings per share 6
Basic 0.95p 1.6p 3.5p
Fully diluted 0.93p 1.5p 3.4p
Consolidated Statement of changes in Equity
For the six months ended 31 January 2008
Share Share Other ESOP Treasury Revaluation Retained
Capital Premium Reserves Shares Surplus Earnings Total
£ £ £ £ £ £ £ £
(See note
13)
1 August 2006
(Unaudited) 250,911 66,776 12,444,403 (509,586) - 39,482,295 (1,446,493) 50,288,306
Deferred tax taken to equity on
restatement under IFRS - - - - - (11,844,688) - (11,844,688)
1 August 2006
(Unaudited) 250,911 66,776 12,444,403 (509,586) - 27,637,607 (1,446,493) 38,443,618
Increase/(decrease) in asset
valuation - - - - - (637,092) - (637,092)
Deferred tax recognised in equity 191,128 191,128
Income and expense recognised
directly in equity - - - - - (445,964) - (445,964)
Profit for the period - - - - - - 393,108 393,108
Transfer - - - - - (90,866) 90,866 -
Total recognised income and expense - - - - - (536,830) 483,974 (52,856)
Share based remuneration (options) - - 133,843 - - - - 133,843
Exercise of share options 16,266 591,148 - - - - - 607,414
1 February 2007
(Unaudited) 267,177 657,924 12,578,246 (509,586) - 27,100,777 (962,519) 39,132,019
Effect of change in tax rate - - - - - 579,513 - 579,513
Increase/(decrease) in asset
valuation - - - - - 14,228,117 - 14,228,117
Deferred tax recognised in equity - - - - - (3,685,442) - (3,685,442)
Income and expense recognised
directly in equity - - - - - 11,122,188 - 11,122,188
Profit for the period - - - - - - 502,207 502,207
Transfer - - - - - (7,116,264) 7,116,264 -
Total recognised income and expense - - - - - 4,005,924 7,618,471 11,624,395
Share based remuneration (options) - - 141,729 - - - - 141,729
Exercise of share options 137 9,807 - - - - - 9,944
1 August 2007
(Unaudited) 267,314 667,731 12,719,975 (509,586) - 31,106,701 6,655,952 50,908,087
Increase/(decrease) in asset
valuation - - - - - (320,297) - (320,297)
Deferred tax recognised in equity - - - - - 89,683 - 89,683
Income and expense recognised
directly in equity - - - - - (230,614) - (230,614)
Profit for the period - - - - - - 248,817 248,817
- -
Transfer - - - - - (84,321) 84,321 -
Total recognised income and expense - - - - - (314,935) 333,138 18,203
Share based remuneration (options) - - 156,863 - - - - 156,863
Exercise of share options 275 30,313 - - - - - 30,588
Purchase of shares for Treasury - - - - (95,728) - - (95,728)
Dividend Paid (net) - - - - - - (174,782) (174,782)
31 January 2008
(Unaudited) 267,589 698,044 12,876,838 (509,586) (95,728) 30,791,766 6,814,308 50,843,231
Consolidated Balance Sheet
31 January 2008
Unaudited Unaudited Unaudited
31 January 31 January 31 July
2008 2007 2007
£ £ £
Notes as restated
Non-current assets
Goodwill 310,559 322,686 310,559
Property, plant and equipment,
fixtures and fittings 7 86,024,171 67,217,058 75,753,603
86,334,730 67,539,744 76,064,162
Current assets
Inventories 79,797 78,776 74,544
Trade and other receivables 8 2,045,745 1,773,785 5,924,750
Cash and cash equivalents 4,779,607 1,353,284 5,189,134
6,905,149 3,205,845 11,188,428
Total assets 93,239,879 70,745,589 87,252,590
Current liabilities
Trade and other payables 9 (3,308,024) (3,228,402) (5,935,171)
Provisions (65,082) (46,157) (65,082)
(3,373,106) (3,274,559) (6,000,253)
Non-current liabilities
Bank borrowings 10 (24,294,378) (16,724,392) (15,492,606)
Deferred tax 11 (14,729,164) (11,614,619) (14,851,644)
(39,023,542) (28,339,011) (30,344,250)
Total liabilities (42,396,648) (31,613,570) (36,344,503)
Net assets 50,843,231 39,132,019 50,908,087
Equity
Called up share capital 5 267,589 267,177 267,314
Share premium 698,044 657,924 667,731
Other reserves 13 12,876,838 12,578,246 12,719,975
Retained earnings 6,814,308 (962,519) 6,655,952
Treasury shares 15a (95,728) - -
ESOP shares (509,586) (509,586) (509,586)
Revaluation surplus 30,791,766 27,100,777 31,106,701
Total equity attributable 50,843,231 39,132,019 50,908,087
to equity holders of the parent
Consolidated Cash Flow Statement
For the six months ended 31 January 2008
Notes Unaudited Unaudited Unaudited
Six months 31 Six months 31 Year 31
January January 2007 July 2007
2008 £ £
£
Net cash from operating activities 14a (1,215,959) 1,151,015 5,001,126
Investing activities
Purchase of non-current assets (11,263,810) (3,597,709) (10,262,286)
Sale of non-current assets 4,000,000 - 8,324,768
Interest received 230,813 29,976 147,461
Net cash used in Investing activities (7,032,997) (3,567,733) (1,790,057)
Financing activities
Issue of new ordinary shares
(Share options) 30,588 607,414 617,357
Increase in borrowings - bank loans 8,801,772 2,650,250 1,425,804
Interest paid (722,421) (409,590) (987,024)
Purchase of shares for treasury (95,728) - -
Equity dividends paid (174,782) - -
Net cash from financing activities 7,839,429 2,848,074 1,056,137
Net (decrease)/increase in cash and (409,527) 431,356 4,267,206
cash equivalents in the period
Cash and cash equivalents at 5,189,134 921,928 921,928
beginning of the period
Cash and cash equivalents at 4,779,607 1,353,284 5,189,134
end of the period
Reconciliation of Net Cash Flow to Movement in Net Debt
Notes Unaudited Unaudited Unaudited
31 January 31 January 31 July
2008 2007 2007
£ £ £
(Decrease)/Increase in cash in the period (409,527) 431,356 4,267,206
Change in net debt resulting from cash flows (8,819,282) (2,650,250) (1,525,954)
Movement in net debt in period (9,228,809) (2,218,894) 2,741,252
Net debt brought forward (10,461,064) (13,202,316) (13,202,316)
Net debt carried forward 15b (19,689,873) (15,421,210) (10,461,064)
Notes to the Interim Results
1 General information
Lok'nStore plc is a company incorporated in the United Kingdom under the
Companies Act 1985. The address of the registered office is 1 London Wall,
London EC2Y 5AB, UK. Copies of this Interim Statement 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
2 Basis of preparation
The interim results for the half year ended 31 January 2008 have been prepared
on the basis of the accounting policies expected to be used in the 2008
Lok'nStore Group Plc Annual Report and Accounts and in accordance with the
recognition and measurement principles of International Financial Reporting
Standards ('IFRS') as endorsed by the European Union ('EU'). The disclosures
required by the IFRS 1 concerning the transition from UK GAAP to IFRS are given
in Note 15 which includes an analysis of how the balance sheet, income
statements and cash flow statements prepared under UK GAAP have changed under
IFRS. The interim results, which were approved by the Directors on 25 April
2008 are unaudited but have been reviewed by the auditors in accordance with
International Standard on Review Engagements (UK and Ireland) 2410 'Review of
the Interim Financial Information performed by the independent Auditor of the
Entity' issued by the Auditing Practices Board for use in the United Kingdom.
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 2007 have been extracted from the
statutory accounts for the Group for that period, amended to conform to the IFRS
accounting policies expected to be used in the 2008 Lok'nStore Group Plc Annual
Report and Accounts. Statutory accounts for the year ended 31 July 2007 were
prepared under UK GAAP carried an unqualified audit report, did not contain a
statement under section 237(2) or (3) of the Companies Act and have been
delivered to the Registrar of Companies.
Accounting policies
Based upon the adoption of IFRS the directors have made assumptions about the
accounting policies expected to be applied, which are set out below but may be
subject to some change and or to additional interpretation from the adopted IFRS
that will be effective when the first annual financial statements of the Group
for the year ended 31 July 2008 will be prepared. Accordingly the accounting
policies will only be finally determined at that time
Basis of Consolidation
The interim consolidated financial statements incorporate those of Lok'nStore
Group plc and all of its subsidiary undertakings for the period. Subsidiaries
acquired during the period are consolidated from the date that control passes
and will continue to be consolidated until the date that such control ceases.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree's , plus
any costs directly attributable to the business combination. The acquiree's
identifiable assets and liabilities are recognised at their fair values at the
acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured
at cost, being the excess of the cost of the business combination over the
Group's interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities recognised.
Property, Plant and Equipment
Depreciation is provided on all property, plant and equipment other than
freehold land at rates calculated to write each asset down to its estimated
residual value evenly over its expected useful life as follows:-
Freehold buildings over 50 year's straight line
Leasehold improvements over unexpired lease period or renewal term
Fixtures fittings and equipment 10% to 15% reducing balance
Computer equipment over two year's straight line
Motor vehicles 25% reducing balance
Freehold trading stores are held in the balance sheet at fair value. Following
the Company's comprehensive external valuation at 31 July 2007 the freehold and
leasehold properties have not been externally valued during this six month
period, although it is the intention to do so at the next year-end at 31 July
2008. Accordingly, at 31 January 2008 and 31 January 2007, the assets are stated
at Directors' valuation.
Leasehold stores remain as operating leases under IFRS. Leasehold improvements
together with all of their related fit-out costs are carried at cost less
accumulated depreciation in the Balance Sheet. The value of stores held under
short operating leases in the July 2007 valuation was £9.44 million.
Assets in the course of construction are carried at cost, less any recognised
impairment loss. Depreciation of these assets commences when the assets are
ready for their intended use.
The assets' residual values, useful lives and methods of depreciation are
reviewed and adjusted if appropriate on an annual basis. An item of property,
plant and equipment is derecognised upon disposal or when no future economic
benefits are expected from its use or disposal.
Purchased Goodwill
Goodwill represents the excess of the purchase cost over the Group's interest in
the fair value of the identifiable assets and liabilities acquired. Goodwill is
recognised as an asset and reviewed for impairment at least annually.
For the purposes of impairment testing, assets are grouped at the lowest levels
for which there are separately identifiable cash flows, know as cash generating
units, and goodwill is allocated to these units. If the recoverable amount of
the cash generating unit is less than carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the
basis of the carrying amount of each asset in the unit. Impairment losses are
recognised immediately in the income statement and are not reversed in the
subsequent period.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discount to
their present value using a pre-tax discount rate that reflects current market
assessment of the time value of money and the risks specific to the asset for
which the estimate of future cash flows have not been adjusted.
Impairment of Property, Plant and Equipment
At each balance sheet date, the Group reviews the carrying amounts of its
property, plant and equipment and finite life intangible assets to determine
whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent, if any, of the impairment loss.
Where it is not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the cash-generating unit to
which the asset belongs. If the recoverable amount of an asset or
cash-generating unit is estimated to be less than its carrying amount, the
carrying amount of the asset or cash-generating unit is reduced to its
recoverable amount. An impairment loss is recognised immediately in the income
statement. Where an impairment loss subsequently reverses, the carrying amount
of the assets or cash-generating unit is increased to the revised estimate of
its recoverable amount, not to exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset or
cash-generating unit in prior years. A reversal of an impairment loss is
recognised immediately in the income statement.
Leased Assets and Obligations
Where assets are financed by leasing agreements that give rights approximating
to ownership ('finance leases'), the assets are treated as if they had been
purchased outright. The amount capitalised is the present value of the minimum
lease payments payable during the lease term. The corresponding leasing
commitments are shown as obligations to the lessor. Lease payments are treated
as consisting of capital and interest elements, and the interest is charged to
the profit and loss account in proportion to the remaining balance outstanding.
All other leases are 'operating leases' and the annual rentals are charged to
the profit and loss account on a straight-line basis over the lease term.
Investments
Shares in subsidiary undertakings are considered long-term investments and are
classified as non-current assets. All investments are stated at cost. Provision
is made for any impairment in the value of non-current asset investments.
Inventories
Inventories are stated at the lower of cost and net realisable value. Net
realisable value is based upon estimated selling prices less any costs of
disposal. Provision is made for obsolete and slow moving items.
Financial Instruments
Financial instruments are recognised on the Group's balance sheet when the Group
becomes a party to the contractual provision of the instrument.
Trade Receivables
Trade receivables do not carry interest, are initially recognised at fair value
and are subsequently stated at amortised cost using the effective interest rate
method, as reduced by appropriate allowances for estimated irrecoverable
amounts. Estimated irrecoverable amounts are based on the ageing of the
receivable balances and historical experience. Individual trade receivables are
written off when management deems them not to be collectible.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other
short term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Trade Payables
Trade payables are initially recognised at fair value and are subsequently
stated at amortised cost using the effective interest rate method.
Financial Liabilities and Equity Instruments
Financial liabilities and equity instruments issued by the Group are classified
according to the substance of the contractual arrangements entered into. An
equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities and includes no
obligation to deliver cash or other financial assets. Equity instruments
issued by the Group are recorded at the proceeds received, net of direct issue
costs. Interest bearing loans and overdrafts are initially measured at fair
value net of direct transaction costs and are subsequently measured at amortised
cost, using the effective interest rate method. Any difference between the
proceeds net of transaction costs and the settlement or redemption of borrowings
is recognised over the term of the borrowing.
Provisions
Provisions are recognised when the Group has a present obligation as a result of
a past event which it is probable will result in an outflow of economic benefits
that can be reliably estimated.
Taxation
Income tax expense represents the sum of the current tax payable and deferred
tax.
Current tax payable or recoverable is based on taxable profit for the year.
Taxable profit differs from profit as reported in the income statement because
some items of income or expense are taxable or deductible in different years or
may not be taxable or deductible. The Group's liability for current tax is
calculated using tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable in the future
arsing from the temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in
the computation of taxable profit. It is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which
deductible temporary differences are utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised, based on tax rates
that have been enacted or substantively enacted by the balance sheet.
Tax is charged or credited to the income statement, except when it relates to
items charged or credited directly to equity, in which case the tax is also
recognised directly in equity.
Retirement Benefits
The amount charged to the income statement in respect of pension costs is the
contributions payable to the money purchase schemes in the year. Differences
between contributions payable in the year and contributions actually paid are
shown as either accruals or prepayments in the balance sheet.
Revenue Recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discount, VAT and other sales related
taxes.
Sales of goods are recognised when goods are delivered and title has passed.
Revenue from services provided is recognised on a time basis.
EBITDA
Earnings before Interest, tax, depreciation and amortisation ('EBITDA'), is
defined as profits from operations and after share based payments but before
costs, as separately and specifically disclosed in the income statement, and all
depreciation charges, finance costs and taxation.
Operating Profit
Operating profit is defined as profits from operations and after share based
payments but before costs, as separately and specifically disclosed in the
income statement, finance costs and taxation.
Share-based payments
The cost of providing share-based payments to employees is charged to the income
statement over the vesting period of the related share options. The cost is
based on the fair value of the options determined using the Monte Carlo pricing
model, which is appropriate given the vesting and other conditions attaching to
the options. The value of the charge may be adjusted to reflect expected and
actual levels of vesting.
Advantage has been taken of the exemption available in IFRS2 - Share-based
payments to exclude share options granted before 7 November 2002.
Employee Benefit Trust
The Group operates an employment benefit trust and has de facto control of the
shares held by the trust and bears their benefits and risks. The Group records
certain assets and liabilities of the trust as its own. Finance costs and
administrative expenses are charged as they accrue.
ESOP Shares
The cost of own shares held by the employee benefit trust ('ESOP shares') is
shown as a deduction from shareholders' funds. Earnings per share are calculated
on the net shares in issue.
3 Revenue and segmental information
Revenue represents amounts derived from the provision of self-storage
accommodation and related services to customers outside the Group which fall
within the Group's ordinary activities after deduction of trade discounts and
value added tax. The Group's net assets, revenue and profit before tax are
attributable to one principal activity, the provision of self-storage
accommodation and related services. These all arise in the United Kingdom.
Six months ended Six months ended Year ended
31 January 2008 31January 2007 31 July 2007
(unaudited) (unaudited) (unaudited)
£'000 £'000 £'000
Stores trading
Self storage income 5,038,843 4,857,011 9,775,849
Other storage related income 402,317 420,115 828,123
Ancillary store rental income 21,359 21,359 42,718
Management fees 11,113 - 3,403
Sub-Total 5,473,632 5,298,485 10,650,093
Stores under development
Non-storage income 49,697 - 15,439
Total revenue 5,523,329 5,298,485 10,665,532
4 Taxation
Unaudited Unaudited Unaudited
six months six months Year
31 Jan 31 Jan 31 July
2008 2007 2007
£ £ £
Current tax charge for the period - - -
Deferred tax (credit)/charge for the period (32,797) (75,855) 55,243
Total tax (credit)/charge for the period (32,797) (75,855) 55,243
No current tax charge arises due to the availability of excess tax losses
brought forward. No deferred tax asset is recognised in relation to these excess
losses, due to the uncertainty as to the utilisation of the losses in the
foreseeable future.
Future tax charges may be affected by the degree to which deferred tax assets
are recognised in the future.
5 Share capital
Unaudited Unaudited Unaudited
six months six months Year
31 Jan 31 Jan 31 July
2008 2007 2007
£ £ £
Authorised: 350,000 350,000 350,000
35,000,000 ordinary shares of 1p each
Allotted, issued and fully paid: 267,589 267,177 267,314
26,758,865 ordinary shares of 1p each
Following approval by shareholders of a special resolution at the AGM on 7
December 2007, 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 AGM.
6 Earnings per ordinary share
The calculation of earnings per ordinary share is based on the following profit
and on the following weighted average number of shares in issue.
Unaudited Unaudited Unaudited
six months six months Year
31 Jan 31 Jan 31 July
2008 2007 2007
£ £ £
Profit for the financial period 248,817 393,108 895,315
No of shares No of shares No of shares
Weighted average number of shares
For basic earnings per share 26,113,131 25,250,423 25,670,204
Dilutive effect of share options 676,338 1,733,817 673,980
26,789,469 26,984,240 26,344,183
Earnings/ (loss) per share
Basic 0.95p 1.6p 3.5p
Diluted 0.93p 1.5p 3.4p
Freehold and long Short Leasehold Fixtures, fittings Motor Total
leasehold Property improvements and equipment Vehicles
7 Property, plant and
equipment £ £ £ £
Group
Cost or valuation
1 August 2006 18,527,700 1,595,576 9,557,776 60,406 29,741,458
Revaluation at 38,942,217 - - - 38,942,217
transition
1 August 2006 b/fwd 57,469,917 1,595,576 9,557,776 60,406 68,683,675
Additions 2,415,736 139,433 1,042,543 - 3,597,712
Revaluations (840,288) - - (840,288)
31 January 2007 c/fwd 59,045,365 1,735,009 10,600,319 60,406 71,441,098
Depreciation
1 August 2006 b/fwd 540,078 633,054 3,098,619 39,672 4,311,422
Revaluation at (540,078) - - - (540,078)
transition
1 August 2006 b/fwd - 633,054 3,098,619 39,672 3,771,344
Depreciation 203,196 71,215 379,022 2,461 655,894
Revaluations (203,196) - - - (203,196)
31 January 2007 c/fwd - 704,269 3,477,641 42,133 4,224,042
Net book value at 59,045,365 1,030,740 7,122,677 18,273 67,217,058
31 January 2007
Net book value at 57,469,919 962.521 6,459,157 20,734 64,912,331
1 August 2006
Cost or valuation
1 February 2007 b/fwd 59,045,365 1,735,009 10,600,318, 60,406 71,441,098
Additions 5,447,074 168,305 1,020,197 29,000 6,664,576
Disposals (11,586,241) - (370,580) - (11,956,821)
Revaluations 14,061,228 - - - 14,061,228
31 July 2007 c/fwd 66,967,426 1,903,314 11,249,935 89,406 80,210,081
Depreciation
1 February 2007 b/fwd - 704,269 3,477,641 42,133 4,224,042
Depreciation 178,075 64,739 391,659 2,168 636,641
Disposals (11,187) - (226,130) - (237,317)
Revaluations (166,889) - - - (166,889)
31 July 2007 c/fwd - 769,008 3,643,170 44,301 4,456,478
Net book value at 66,967,426 1,134,306 7,606,766 45,105 75,753,603
31 July 2007
Cost or valuation
1 August 2007 b/fwd 66,967,426 1,903,314 11,249,935 89,406 80,210,081
Additions 9,504,513 174,904 1,573,044 11,349 11,263,810
Transfers - - - - -
Revaluations (505,393) - - - (505,393)
31 January 2008 C/fwd 75,966,546 2,078,218 12,822,979 100,755 90,968,499
Depreciation
1 August 2007 b/fwd - 769,008 3,643,170 44,301 4,456,479
Depreciation 185,096 77,842 405,877 4,130 672,945
Transfers - - - - -
Revaluations (185,096) - (185,096)
31 January 2008 c/fwd - 846,850 4,049,047 48,431 4,944,328
Net book value at 31 75,966,546 1,231,368 8,773,933 52,324 86,024,171
January 2008
The additions to freehold properties include the acquisition of the freehold
site at North Harbour, Portsmouth totalling £4.45 million and the acquisition at
Maidenhead totalling £2.51 million. The addition to fixtures and fittings of
£1.57 million includes fit-outs at the Portsmouth Central, Northampton, and
Fareham stores.
Market valuation of freehold and leasehold land and buildings
Following the Company's comprehensive external valuation at 31 July 2007 which
indicated a total for properties valued of £75.7 million (NBV £27.9 million, the
freehold and leasehold properties have not been externally valued during this
six month period, although it is the intention to do so at the next year-end at
31 July 2008. Accordingly, at 31 January 2008, the assets are stated at
Directors' valuation. As at 31 January 2008, following the grant of planning
permission at Reading, £525,000 was added to the value of the 2007 C&W
valuation. The Directors consider, based on market evidence and opinion
available that the market for self storage assets has remained resilient to the
downturn in property values generally and increasing yields seen in the wider
property market and they consider that their should be no material difference at
this time compared to the last external valuation. That said, at this time it is
unclear to the future direction of market values.
8 Trade and other receivables
Unaudited Unaudited Unaudited
six months six months Year
31 Jan 31 Jan 31 July
2008 2007 2007
£ £ £
Due within one year:
Trade receivables 802,469 802,077 768,833
Other receivables 554,710 308,145 4,084,169
Prepayments and accrued income 688,566 663,563 1,071,748
2,045,745 1,773,785 5,924,750
9 Trade and other payables
Unaudited Unaudited Unaudited
31 Jan 31 Jan 31 July
2008 2007 2007
£ £ £
Trade payables 413,450 582,664 1,142,276
Taxation and social security costs 105,950 101,066 1,807,742
Other payables 1,006,758 959,166 1,001,710
Accruals and deferred income 1,781,866 1,585,506 1,983,443
3,308,024 3,228,402 5,935,171
10 Bank loans
Unaudited Unaudited Unaudited
31 Jan 31 Jan 31 July
2008 2007 2007
£ £ £
Bank loans repayable in more than
2 years but not more than 5 years
Gross 24,434,459 16,774,494 15,650,198
Deferred financing costs (140,081) (50,102) (157,592)
Bank loans repayable in more than 24,294,378 16,724,392 15,492,606
2 years but not more than 5 years
11 Deferred tax
31 January 2008 31 January 2007 31 July 2007
£ £ £
Provision at start of period 14,851,644 11,881,601 11,881,601
Effect of reduction in tax rate - - (579,514)
(Credit)/charge to income in the period (32,797) (75,855) 55,243
Charge/ (credit) to equity in period (89,683) (191,127) 3,494,314
Provision at end of period 14,729,164 11,614,619 14,851,644
The deferred tax liability arises on the revaluation of the properties and on
the rolled over gain arising from the disposal of the Kingston and Woking sites.
In due course the site of the existing Reading store is likely to be sold with
the benefit of its permission for residential development and the proceeds will
be reinvested in our new store pipeline. It is not the intention of the
directors to make any other significant disposals of operational self-storage
centres in the foreseeable future. At present, it is not envisaged that any tax
will become payable in the foreseeable future due to the trading losses brought
forward and the availability of rollover relief.
12 Share-based payment plans
The Group operates an Enterprise Management Initiative ('EMI') approved and an
unapproved share option scheme, the rules of which are similar in all material
respects. 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 three years.
The exercise price of the options is equal to the closing mid-market price of
the shares on the trading day previous to the date of the grant. The exercise of
options awarded has been subject to the meeting of performance criteria geared
primarily to sales growth with the key non-market performance condition being
the achievement of £10 million annual turnover. Exercise of an option is subject
to continued employment. The life of each option granted is seven years. There
are no cash settlement alternatives.
The expected volatility is based on a historical review of share price movements
over a period of time, prior to the date of grant, commensurate with the
expected term of each award. The expected term is assumed to be six years which
is part way between vesting (3 years after grant) and lapse (10 years after
grant). The risk free rate of return is the UK gilt rate at date of grant
commensurate with the expected term (i.e. six years).
The total charge for the period relating to employer share-based payment schemes
was £156,863. (31.01.2007: £133,843), all of which relates to equity-settled
share-based payment transactions.
13 Other reserves
Merger Other Capital Share-based Unaudited
Reserve Distributable Redemption Payment
£ Reserve Reserve Reserve Total
£ £ £ £
1 August 2006 6,295,295 5,903,002 34,205 211,901 12,444,403
Share based remuneration
(options)
133,843 133,843
31 January 2007 6,295,295 5,903,002 34,205 345,744 12,578,246
Share based remuneration
(options)
141,729 141,729
1 August 2007 6,295,295 5,903,002 34,205 487,473 12,719,975
Share based remuneration
(options)
156,863 156,863
31 January 2008 6,295,295 5,903,002 34,205 644,336 12,876,838
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.
14 Cash flows
Unaudited Unaudited Unaudited
Six months Six months Year
31 January 31 January 31 July
2008 2007 2007
£ £ £
(a) Reconciliation of net cash flows from
operating activities
Profit before interest 718,702 769,549 1,916,298
Depreciation 672,945 655,894 1,292,535
Profit on disposal of fixed assets - - (605,264)
Impairment of goodwill - 12,127 24,254
Share-based employee remuneration 156,863 133,843 275,572
Operating cash flows before movementsin 1,548,510 1,571,413 2,903,395
working capital
(Increase)/decrease in inventories (5,253) (1,108) 3,124
Decrease/ (increase) in trade and other (120,995) 256,325 98,018
receivables
(Decrease)/increase in payables (2,638,221) (675,615) 1,996,589
Net cash flow from operating activities (1,215,959) 1,151,015 5,001,126
At 31 July Other non-cash At 31 January
Unaudited 2007 Cash flow Changes 2008
£ £ £ £
(b) Analysis of net debt
Cash at bank and in hand 5,189,134 (409,527) - 4,779,607
Debt due after one year (15,650,198) (8,819,282) - (24,469,480)
Total (10,461,064) (9,228,809) - (19,689,873)
15 Post balance sheet events
a) Purchase of treasury Shares
During the period the Company purchased 52,000 of its own ordinary shares of 1p
each for treasury. After the period end and in the period up to 21 February
2008, the Company purchased in several tranches, a further 290,000 shares for
treasury. In total, 342,000 shares were acquired for treasury at an average
price of £1.86.
16 Explanation of the transition to IFRS
The first full annual consolidated financial statements that the Group will
report under IFRS will be for the year ended 31 July 2008. Our interim results
for the period to 31 January 2008 are presented under IFRS and include
reconciliations and explanations of differences between IFRS and UK GAAP in
respect of key reported numbers.
As IFRS comparative figures must be prepared for the year ended 31 July 2007,
the date of transition to IFRS was 1 August 2006. Reconciliations of equity at
31 July 2007 and profit for the year ended 31 July 2007 reported under GAAP and
IFRS are shown below. This move to IFRS has not changed the underlying
performance and cash flow of the business but has significantly impacted on the
way in which the results are presented.
The main changes for Lok'nStore are as follows:
18. • Our freehold trading stores are now held in the balance sheet
at fair value, having previously been held at Historic Cost less accumulated
depreciation.
19. • The goodwill in our balance sheet is no longer subject to an
amortisation charge for each period, but instead is been subject to an annual
impairment review. No adjustment has been made to the carrying value of
goodwill in previous periods as the amortisation charge under UK GAAP was not
materially different from the impairment charge determined from our impairment
review.
20. • There are three main areas of deferred tax we have
identified that are impacted by our adoption of IFRS:
1) Deferred Tax on Rolled Over Gains
Lok'nStore has realised significant gains on the disposal of the Kingston and
Woking stores and the proceeds are and will continue to be reinvested in new
operating properties. As such rollover relief will be claimed in respect of the
entire gain. The tax liability deferred as a result of this is approximately
£2.75 million at 28%. Under UK GAAP this need only be disclosed by way of a note
in the accounts. However, under IFRS this balance is provided for as a deferred
tax liability.
2) Deferred Tax on Revaluation Gains
Under IFRS a deferred tax liability is recognised on the difference between cost
and the revalued amount of our freehold properties at 28% using current rates.
3) Deferred Tax on Share-based Payments
Under UK GAAP deferred tax is recognised on share based payment charges to the
extent that they give rise to a timing difference. Under IFRS, the potential tax
relief should be calculated by reference to the share price at the balance sheet
date, and then spread over the vesting period. Also under IFRS deferred tax
should be recognised on all share based payments whereas under UK GAAP deferred
tax on options issued prior to November 2002 or which vested prior to
application of the standard is not recognised. This has not however resulted in
an adjustment as the resulting deferred tax asset has not been recognised, as
explained in note 7.
This interim report is therefore prepared under IFRS and includes the Group's
IFRS accounting policies together with further details on key performance
measures in the notes to the accounts.
16a Reconciliation of Equity Previously Reported Under UK GAAP To Equity Under
IFRS
31 January 2007 31 July 2007 1 August 2006
(Unaudited) (Unaudited) (Unaudited)
£'000s £'000s £'000s
Equity shareholders' funds under UK GAAP 12,031,242 22,551,039 10,806,011
Measurement and recognition IFRS adjustments
Revaluation of trading properties 38,715,398 43,208,692 39,482,295
Goodwill amortisation - - -
Deferred tax (11,614,619) (14,851,644) (11,844,688)
NET IFRS adjustments 27,100,779 28,357,048 27,637,607
Equity shareholders' funds under IFRS 39,132,021 50,908,087 38,443,618
16b Reconciliation of Profit Previously Reported Under UK GAAP to Profit Under
IFRS
31 January 2007 31 July 2007
(Unaudited) (Unaudited)
£'000s £'000s
Profit for the period under UK GAAP 483,974 10,852,098
Measurement and recognition IFRS adjustments
Share options - -
Goodwill amortisation / impairment - -
Deferred tax credit / (charge) 38,942 (92,156)
Reduction to profit on disposal of freehold properties - (9,629,320)
carried at valuation
Additional depreciation arising on revaluation of Freehold (129,808) (235,307)
properties
Net IFRS adjustments (90,866) (9,956,783)
Profit for the period under IFRS 393,108 895,315
Reconciliations
To explain the impact of the transition, unaudited reconciliations have been
included that show the changes made to the balance sheets and income statements
previously reported under UK GAAP.
The consolidated cash flow statements are not affected by the transition from UK
GAAP to IFRS other than presentational and formatting differences.
Reconciliation of the UK GAAP consolidated balance sheet to the IFRS
consolidated balance sheet:
1 August 2006
Notes As at As at
1 August 2006 Measurement 1 August. 2006
UK GAAP Presentation & recognition IFRS
Audited Differences Differences Unaudited
£'000 £'000 £'000 £'000
Non-current assets
Goodwill & intangible assets 334,813 - 334,813
Property, plant & equipment 25,430,037 - 39,482,295 64,912,332
Trade & other receivables - - -
Deferred taxation assets - - - -
25,764,850 - 39,482,295 65,247,145
Current assets
Inventories 77,668 - - 77,668
Trade & other receivables 2,002,769 - - 2,002,769
Cash & cash equivalents 921,928 - - 921,928
3,022,365 - - 3,022,365
Total assets 28,787,215 - 68,269,510
Current Liabilities
Trade & other payables (3,877,489) 55,305 - (3,822,184)
Provisions - (55,305) - (55,305)
Bank overdrafts & loans - - -
(3,877,489) - - (3,877,489)
Net current liabilities (855,124) - - (855,124)
Non-current liabilities
Bank loans (14,066,802) - - (14,066,802)
Deferred taxation liabilities (36,913) - (11,844,688) (11,881,601)
(14,103,715) - (11,844,688) (25,948,403)
Total liabilities (17,981,204) - (11,844,688) (29,825,892)
Net assets 10,806,011 - 27,637,607 38,443,618
Equity
Share capital 250,911 - - 250,911
Share premium account 66,776 - - 66,776
Other reserves 12,444,403 - - 12,444,403
ESOP shares (509,586) - - (509,586)
Retained earnings (1,446,493) - - (1,446,493)
Revaluation surplus - - 27,637,607 27,637,607
Total equity 10,806,011 - 27,637,607 38,443,618
Reconciliation of the UK GAAP consolidated balance sheet to the IFRS cons
Consolidated balance sheet:
1 February 2007
As at As at
1 February 2007 Measurement 1 February 2007
UK GAAP Presentation & recognition IFRS
Audited Differences Differences Unaudited
£'000 £'000 £'000 £'000
Non-current assets
Goodwill & intangible assets 322,686 - 322,686
Property, plant & equipment 28,501,660 - 38,715,398 67,217,058
Trade & other receivables - - - -
Deferred taxation assets - - - -
28,824,346 - 38,715,398 67,539,744
Current assets
Inventories 78,776 - - 78,776
Trade & other receivables 1,773,785 - - 1,773,785
Cash & cash equivalents 1,353,284 - - 1,353,284
3,205,845 - - 3,205,845
Total assets 32,030,191 - 38,715,398 70,745,589
Current Liabilities
Trade & other payables (3,274,557) 46,157 (3,228,402)
Provisions - (46,157) - (46,157
Bank overdrafts & loans - - - -
(3,274,557) - - (3,274,577)
Net current liabilities (68,712) - - (68,712)
Non-current liabilities
Bank loans (16,724,392) - - (16,724,392)
Deferred taxation liabilities - - (11,614,619) (11,614,619)
(16,724,392) - - (28,339,011))
Total liabilities (19,998,949) - (11,614,619) (31,613,570)
Net assets 12,031,242 - 27,100,777 39,132,019
Equity
Share capital 267,177 - - 267,177
Share premium account 657,924 - - 657,924
Other reserves 12,578,246 - - 12,578,246
ESOP shares (509,586) - - (509,586)
Retained earnings (962,519) - - (962,519)
Revaluation surplus - - 27,100,777 27,100,777
Total equity 12,031,242 - 27,100,777 39,132,019
Reconciliation of the UK GAAP consolidated income statement to the IFRS
consolidated income statement:
Six months ended 31 January 2007
Notes Six months Six months
Ended Ended
31 January 2007 Measurement 31 January 2007
UK GAAP & recognition IFRS
Unaudited Differences Unaudited
£'000 £'000 £'000
Revenue from continuing operations 5,298,485 - 5,298,485
Cost of sales (169,597) - (169,597)
Gross profit 5,128,888 - 5,128,888
Administrative expenses (4,095,688) - (4,095,688)
Share based payments (133,843) - (133,843)
Additional depreciation based on - (129,808) (129,808)
Revalued assets
Operating profit 899,357 (129,808) 769,549
Exceptional costs - - -
Investment revenues
Finance costs (452,296) - (452,296)
Profit before taxation 447,061 (129,808) 317,253
Taxation 36,913 38,942 75,855
Profit for the period 483,974 (90,866) 393,108
Earnings per share (total and from
continuing operations)
Basic 1.92p 1.56p
Diluted 1.79p 1.46p
Reconciliation of the UK GAAP consolidated balance sheet to the IFRS
consolidated balance sheet:
1 August 2007
As at As at
1 August 2007 Measurement 1 August 2007
UK GAAP Presentation & recognition IFRS
Audited Differences Differences Unaudited
£'000 £'000 £'000 £'000
Non-current assets
Goodwill & intangible assets 310,559 - - 310,559
Property, plant & equipment 32,544,911 - 43,208,692 75,753,603
Trade & other receivables - - - -
Deferred taxation assets - - - -
32,855,470 - 43,208,692 76,064,162
Current assets
Inventories 74,544 - - 74,544
Trade & other receivables 5,924,750 - - 5,924,750
Cash & cash equivalents 5,189,134 - - 5,189,134
11,188,428 - - 11,188,428
Total assets 44,043,898 - 43,208,692 87,252,590
Current Liabilities
Trade & other payables (6,000,253) 65,082 - (5,935,171)
Provisions - (65,082) - (65,082)
Bank overdrafts & loans - - - -
(6,000,253) - - (6,000,253)
Net current assets 5,188,175 - - 5,188,175
Non-current liabilities
Bank loans (15,492,606) - - (15,492,606)
Deferred taxation liabilities - - (14,851,644) (14,851,644)
(15,492,606) - (14,851,644) (30,344,250)
Total liabilities (21,492,859) - (14,851,644) (36,344,503)
Net assets 22,551,039 - 28,357,048 50,908,087
Equity
Share capital 267,314 - - 267,314
Share premium account 667,731 - - 667,731
Other reserves 12,719,975 - - 12,719,975
ESOP shares (509,586) - - (509,586)
Retained earnings 9,405,605 - (2,749,653) 6,655,952
Revaluation Surplus - - 31,106,701 31,106,701
Total equity 22,551,039 - 28,357,048 50,908,087
Reconciliation of the UK GAAP consolidated income statement to the IFRS
consolidated income statement:
Year ended 31 July 2007
Year Year
Ended Ended
31 July 2007 Measurement 31 July 2007
UK GAAP & recognition IFRS
Unaudited Differences Unaudited
£'000 £'000 £'000
Revenue from continuing operations 10,665,532 - 10,665,532
Cost of sales (328,216) - (328,216)
Gross profit 10,337,316 - 10,337,316
Administrative expenses (8,515,402) - (8,515,402)
Share based payments (275,572) - (275,572)
Additional depreciation based on - (235,307) (235,307)
Revalued assets
Operating profit 1,546,342 (235,307) 1,311,035
Exceptional (costs) / gains 10,234,583, (9,629,320) 605,263
Investment revenues
Finance costs (965,740) - (965,740)
Profit before taxation 10,815,185 (9,864,627) 950,558
Taxation 36,913 (92,156) (55,243)
Profit for the period 10,852,098 (9,956,783) 895,315
Earnings per share (total and from
continuing operations)
Basic 43.3p 3.49p
Diluted 42.2p 3.40p
Independent Review Report to Lok'nStore Group Plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
January 2008 which comprises the consolidated income statement, the consolidated
balance sheet, the consolidated statement of changes in equity, the consolidated
cash flow statement, and related notes 1 to 16. We have read the other
information contained in the half-yearly financial report and considered whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report, including the conclusion, has been prepared for and only for the
Company for the purpose of meeting the requirements of the AIM Rules for
Companies 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 half-yearly financial report, is the responsibility of, and has been
approved by the directors. The directors are responsible for preparing and
presenting the half-yearly financial report in accordance with the AIM Rules for
Companies.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards and
International Financial Reporting Interpretations Committee ('IFRIC')
pronouncements as adopted by the European Union. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with the measurement and recognition criteria of International
Financial Reporting Standards and International Financial Reporting
Interpretations Committee ('IFRIC') pronouncements, as adopted by the European
Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 January 2008 is not prepared, in all material
respects, in accordance with the measurement and recognition criteria of
International Financial Reporting Standards and International Financial
Reporting Interpretations Committee ('IFRIC') pronouncements as adopted by the
European Union, and the AIM Rules for Companies.
BAKER TILLY UK AUDIT LLP
Registered Auditor
Chartered Accountants
2 Bloomsbury Street
London WC1B 3ST
25 April 2008
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