Lok N Store Regulatory News (LOK)

24 Apr 2006 07:01

Lok'n Store Group PLC24 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-growingself-storage market, which operates 21 freehold and leasehold storage centres inthe South East, announces interim results for the six months ended 31 January2006. 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 sheetstrength leaves us well positioned to take advantage of this under-developedmarket. There are attractive opportunities to grow the number of stores, and toimprove margins by enlarging their average size. We are pleased with currenttrading, and encouraged by the early progress in our newly opened Farnboroughand Crayford stores, which create a model for the future. We therefore believethat there is an opportunity to further increase the value of the business byaccelerating the development of new stores." For further information, please contact: Lok'nStore Group plcAndrew Jacobs, Chief Executive Today: 020 7831 3113Ray Davies, Finance Director Thereafter: 01252 521010 Financial DynamicsBilly Clegg Tel: 020 7831 3113Jonathan 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 atFarnborough (Hampshire). We have also moved all of our head office staff to newoffices based at the Farnborough store. During the period under review turnover growth resulted in geared profit growthat all levels as we continued to fill our existing centres. The operation isshowing encouraging growth of earnings before interest, tax, depreciation andamortisation (EBITDA) with the stores producing over £1.5 million in the period. The Board remains committed to finding high quality self-storage sites such asthe new stores at Farnborough and Crayford, whilst examining profitableopportunities to enhance the value of the existing stores. In this regard wecontinue to make good progress at our Kingston, Reading and Poole sites. We continue to believe that the South East of England presents the greatestopportunity for the Group, and our site acquisition strategy remains driven byprofitability, site location and visibility. We are encouraged by the earlysuccess of the Farnborough store as a model for rolling out future stores. Wetherefore believe that there is an opportunity to further increase the value ofthe 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 £4.28million with stores in all age brackets contributing to this growth (£3.89million: six months to 31.01.2005). Excluding the rental income foregone byexpanding the Poole store turnover grew by 12.4%. Trading is following its usualpattern with a strong spring pick-up. Annualised revenues have risen to £9.25million at time of writing. We are encouraged by the trading environment sincethe period end, as well as the early results from the new Farnborough andCrayford stores. The Group achieved an operating profit of £510,975 up 59.5%, after takingaccount of the development and launch of our new Farnborough & Crayford stores.This compares with an operating profit for the Group of £320,261 for thecorresponding 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 sharewas 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 storageincome 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 inJanuary 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 in2005. 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% to445,228 (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% oftotal space, and 10 are leasehold. We have previously reported receiving planning permission for a high densityresidential development at our Kingston site. This was subject to the signing ofthe Section 106 Agreement with the local authority which stipulates thedevelopers financial and other obligations to the local authority. I amdelighted to report that this agreement has now been signed. This enhances theGroup'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 ourland immediately across the road from our existing Store. This will enable us,in due course, to develop a prominent new self-storage centre providingapproximately 55,000 sq ft of storage space on the site, an increase of around14,000 sq ft over the existing site. In September we opened the additional 12,000 sq. ft of space which becameavailable when we acquired the freehold of our Poole Centre. This took the sizeof our Poole store to approximately 64,000 sq ft of storage space, and thisextra space continues to fill up. We continue to explore options such as these to create extra value at both ourfreehold and leasehold operations. Increasing the number of stores During the period we opened new centres in Crayford in December 2005, and inFarnborough at the end of January 2006. They are both located in attractivemarkets with high visibility and provide 127,000 sq. ft of storage space. Thistakes the total number of our centres to 21 comprising 11 freehold stores and10 leasehold stores with a total of 920,000 sq. ft. of space. It is important to recognise that these two new stores are larger thanLok'nStore's average size of around 42,000 ft per store, and add 16% to totalspace, which combined with the fact that they are both freeholds and prominent,high specification buildings adds significantly to the potential margins theyare capable of achieving. This in turn positively impacts on the potentialmargins of the Group overall. The successful development and opening of the Farnborough centre which is thefirst purpose built centre for Loknstore represents an evolution of the businessmodel creating value through larger new build centres. It is the first centrewhere Lokn'Store has managed the process of buying the land, gaining planningpermission, building, fitting and operating the store. With its prominent designand position adjacent to the M3 motorway it will help to raise the profile ofthe whole Lok'nStore brand. I would like to take this opportunity to thank allthose 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 currentgeographical coverage of South-East England. We are continuously reviewingopportunities to buy, to build, and to lease new stores. Farnborough andCrayford provide the business with a model which can be replicated in rollingout future stores. We believe that there is an opportunity to further increasethe 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 £4.2million is accounted for by Farnborough and Crayford, and this is reflected inthe increase in tangible assets from £18,611,312 to £24,405,504. At 31 January2006, the Group had cash balances of £0.63 million (31 January 2005: £0.55million) and £13.28 million of borrowings representing gearing of 116% on netdebt of £12.6m million (31 July 2005: 66%). Gearing is 49% when calculatedtaking account of the uplift in market values of properties arising from theJanuary 2005 independently verified valuations. New Head office In January 2006, we moved the Lokn'Store head office from our Kingston centre toa new purpose built office in our Farnborough store. This has improvedcoordination and communication within the Company, and particularly amongst ourproperty and other functional management previously dispersed around our variousdifferent offices. All head office staff now operate from Farnborough. We have also incorporated a new conference room which can accommodate all ourtraining requirements for the foreseeable future. We have reduced outgoings,increased the regularity of training and improved contact between head officeand 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 fortheir contribution during the period. Outlook Lok'nStore's market position, leading brand and increasing balance sheetstrength leaves us well positioned to take advantage of this under-developedmarket. There are attractive opportunities to grow the number of stores, and toimprove margins by enlarging their average size. We are pleased with currenttrading, and encouraged by the early progress in our newly opened Farnboroughand Crayford stores, which create a model for the future. We therefore believethat there is an opportunity to further increase the value of the business byaccelerating the development of new stores. Simon ThomasChairman 24 April 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the six months ended 31 January 2006 Notes Unaudited Audited Six months Six months Year 31 January 31 January 31 July 2006 2005 2005 £ £ £ TURNOVERContinuing 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 - 35,898Interest payable (371,330) (244,358) (528,534) PROFIT ON ORDINARYCTIVITIES BEFORE TAXATION 153,524 75,903 114,325 Taxation 3 - - - PROFIT ON ORDINARYACTIVITIES AFTER TAXATION 153,524 75,903 114,325 EARNINGS PER SHARE Basic 5 0.63 p 0.31 p 0.47 pFully diluted 5 0.59 p 0.28 p 0.44 p There are no other recognised gains or losses. CONSOLIDATED BALANCE SHEET31 January 2005 Notes Unaudited Audited 31 January 31 January 31 July 2006 2005 2005 £ £ £FIXED ASSETSIntangible assets 346,941 371,196 359,068Tangible assets 24,405,504 18,611,312 20,032,760 24,752,445 18,982,508 20,391,828 CURRENT ASSETSStock 102,221 87,443 88,648Debtors 1,535,076 1,296,618 1,684,793Cash at bank and in hand 631,004 550,545 424,738 2,268,301 1,934,606 2,198,179CREDITORS: Amounts falling duewithin 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 aftermore than one year (13,279,244) (7,650,000) (8,150,000) 10,864,547 10,665,201 10,703,623 CAPITAL AND RESERVESCalled up share capital 4 250,711 250,711 250,711Share premium 59,376 51,976 51,976Capital redemption reserve 34,205 34,205 34,205Merger reserve 6,295,295 6,295,295 6,295,295Other distributable reserve 5,903,002 5,903,002 5,903,002Profit 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 STATEMENTFor 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 servicingof finance (290,284) (251,115) (500,901) Taxation - - - Capital expenditure and financialinvestment (4,758,364) (804,751) (2,293,945) CASH OUTFLOW BEFOREFINANCING (4,930,378) (185,356) (811,014) Financing 5,136,644 81,540 581,392 INCREASE / (DECREASE) IN CASHIN 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 theperiod 206,266 (103,816) (229,622) Change in net debt resulting from cashflows (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 policiesas set out in the statutory financial statements for the year ended 31 July2005. This is the same basis as will be applied at the year-end. The interimresults, which were approved by the Directors on 21 April 2006, are unauditedbut have been reviewed in accordance with Auditing Practices Board bulletin "Review of Interim Financial Information" by the auditors. The interim results donot constitute statutory financial statements within the meaning of section 240of the Companies Act 1985. Comparative figures for the year ended 31 July 2005 are an abridged version ofthe Group's full accounts, which carry an unqualified audit report, do notcontain a statement under section 237(2) or (3) of the companies act and havebeen 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 landleasehold properties as operational self-storage businesses. The freehold siteat Farnborough, acquired on 30 July 2004 was not valued on this occasion. ThisReport was prepared on the basis of Market Value/Existing Use Value, havingregarded its trading potential as appropriate, in accordance with RICS Appraisaland Valuation Standards but on the special assumption that any potential forresidential development was excluded. The Report indicates a total for properties valued of £31.84 million. IncludingFarnborough, (NBV £1.76 million as at 31.01.05), this gives a total value ofproperties held of £33.6 million as at 31.01.05. (NBV £18.4 million as at31.01.05). These valuations do not account for any further uplift in values,which would result from the planning permission achieved for housing at theKingston site, any successful outcome of the planning application for housing atthe Reading site, or any capital expenditure since 31.01.05. While the Companydoes not envisage routinely revaluing its properties it will do so whenappropriate. 3. TAXATION There is no charge to corporation tax for the Group due to the availability ofbrought 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 350,000 350,000 350,0001p each Allotted, issued and fully paid:25,071,144 ordinary shares of1p 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 1December 2005, the company has authority to make market purchases of up to5,845,299 shares. The authority expires at the conclusion of the next AGM, butis 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 theperiod of £153,524 (year to 31 July 2005 - profit of £114,325, period to 31January 2005 - profit of £75,903) and on the weighted average number of sharesin issue during the period of 24,443,644 shares (31 July 2005 - 24,432,491shares; 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 31July 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 25,915,309shares (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 setout on pages 6 to 11 and we have read the other information in the interimstatement and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for thecompany for the purpose of their interim statement and for no other purpose. Wedo not, therefore, in producing this report, accept or assume responsibility forany other purpose or to any other person to whom this report is shown or intowhose hands it may come save where expressly agreed by our prior consent inwriting. Directors' responsibilities The interim statement, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the Interim Statement in accordance with theAlternative Investment Market Rules which require that the accounting policiesand presentation applied to the interim figures must be consistent with thosethat will be adopted in the company's annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board as if that Bulletin applied. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an audit opinionon the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 January 2006. BAKER TILLYChartered Accountants2 Bloomsbury StreetLondon WC1B 3ST 24 April 2006 This information is provided by RNS The company news service from the London Stock Exchange