Lok N Store Regulatory News (LOK)

12 Apr 2005 07:00

Lok'n Store Group PLC12 April 2005 12 April 2005: for immediate release LOK'NSTORE GROUP PLC ("Lok'nStore" or "the Group") Interim Results for the six months to 31 January 2005 Lok'nStore Group Plc, one of the leading companies in the fast-growingself-storage market, which operates 19 stores in the South East, announcesinterim results for the six months ended 31 January 2005. Highlights • Turnover increased by 24% to £3.89 million (£3.14m: six months to 31.1.04) • Operating profit £320,261 (Loss -£131,827 *: six months to 31.01.04) • Profit before tax of £75,903 (Loss - £169,237 *: six months to 31.01.04) • Store EBITDA of £1.233 million (six months to 31.01.04: £0.734 million) • Customers up 21.2% to 5,790 from 4,776 in January 2004 • Properties valued at £33.6 million (NBV £18.4 m) • Further significant uplift in value expected from potential Kingston residential development. • Planning permission for high-density residential scheme at Kingston site granted. Permission is for 124 flats, and a new GP surgery of approximately 7,000 square feet. * After 31/01/2004 exceptional items - £127,407 Andrew Jacobs, Chief Executive, commented: "Lok'nStore's market position, leading brand and the increasing strength of ourbalance sheet demonstrates that we are well positioned to take advantage of thisunder-developed market. Trading is good and we continue to see attractiveopportunities to grow the number of stores. The increased valuation of ourproperties provides financial flexibility for us. The Board is confident in itsability to continue to deliver growth in shareholder value." 12 April 2005 Lok'nStore Group plcAndrew Jacobs, Chief Executive Today: 020 7831 3113Ray Davies, Finance Director Thereafter: 020 8247 1861 Financial Dynamics Tel: 020 7831 3113Billy CleggJonathan Brill CHAIRMAN'S STATEMENT Overview I am pleased to report another period of progress for the Group. During the period our revenue grew and the business moved into profit as wecontinued to fill our centres. The operation is showing encouraging growth ofEBITDA with stores producing over £1.23 million in the period. The increasedproperty valuations discussed below emphasise the Group's financial strength andprovides flexibility for future growth. The Board remains committed to finding high quality self-storage sites whilstexamining profitable opportunities to enhance the value of the existing stores. We continue to believe that the South and South East of England presents thegreatest opportunity for the Group, and our site acquisition strategy remainsdriven by rate of return, site location and visibility. Our tactical as well asstrategic approach to acquisition continues to offer opportunities. Our priorities remain: • improving the operating performance of existing stores • maximising the potential value of existing stores • increasing the number of stores • optimising the group's capital structure Turnover Growth Turnover for the six months to 31 January 2005 increased by 24% to £3.89 million(£3.14 million). Trading is following its usual seasonal pattern with annualisedrevenues rising to £8.1 million at 31 March 2005. The Group achieved an operating profit of £320,261, after taking account of thedevelopment and launch of our new Tonbridge store, which incurred a loss of£124,296 in the five months since opening. This compares with an operating lossfor the Group of £131,827 for the corresponding 2004 period. The Group made pre-tax profit for the period of £75,903 compared with a loss of£169,237 for the corresponding period in 2004. Basic earnings per share was0.31p per share (2004: loss of 0.59p per share). Store earnings before interest, tax, depreciation and amortisation (EBITDA) were£1.233 million for the period (six months to 31.01.2004: £0.734 million). Packing materials, insurance and other sales broadly kept pace with storageincome at 7.5% of turnover, an increase of 15.8% over the period. At the period end, the number of customers had risen to 5,790 from 4,776 inJanuary 2004, an increase of 21.2% over the year. The business handled 3,593 'move-ins' during the period compared to 3,386 in the corresponding period in2004. The total area let increased by 21.6% to 489,123 sq. ft (31.01.2004:402,346 sq. ft). Financial strength and balance sheet efficiency Strong cash flows continue to demonstrate the cash generative nature of theunderlying business. Cash inflow from operating activities before interest andcapital expenditure was just under £0.87million for the period, compared to£0.18 million for the corresponding 2004 period. Capital expenditure totalled£0.8 million. At 31 January 2005, the Group had cash balances of £0.55 million(31 July 2004: £0.65 million) and £7.65 million of borrowings representinggearing of 66% on net debt of £7.1 million (31 July 2004: 66%). Gearing is 28%when calculated using current market values of properties. (See below). On 31 January 2005, professional valuations were prepared by external valuers,Cushman & Wakefield Healey & Baker, in respect of all trading freehold andleasehold properties as operational self-storage businesses. Since the freeholdsite at Farnborough was only acquired on 30 July 2004, it has not been revalued.This Report was prepared on the basis of Market Value/Existing Use Value, 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. (See note 2 in the notes to the accountsfor a more detailed description of valuation methodology). The Report indicates a total for properties valued of £31.84 million. IncludingFarnborough, (NBV £1.76 million), this gives a total value of properties held of£33.6 million. (NBV £18.4 million). These valuations do not account for anyfurther uplift in values, arising from the planning permission achieved forhousing at the Kingston site, nor any successful outcome of the planningapplication for housing at the Reading site. While the Company does not envisageroutinely revaluing its properties it will do so when appropriate. This increase in property valuations provides the Group with increased financialflexibility and strength enhancing our ability to borrow. It makes the valuecreated more transparent and gives the Group the potential to release more valueto shareholders,whilst continuing to grow.. Planning permission granted We are pleased to report that planning permission has been granted forhigh-density residential development at the site of the Company's currentKingston operation. The permission is for two 6-8 storey buildings containing 78private flats, 16 key worker (shared equity) and 30 social units (43 onebedroom, 75 two bedroom and 6 three bedroom), and a new GP surgery ofapproximately 7,000 square feet. The planning permission is subject to thesigning of the Section 106 Agreement. The Kingston site was purchased in 1996 for £905,000. It has been operational asone of the Companies self-storage facilities for 8 years. The book value of thissite is currently £1.2 million. The Kingston site was valued by CushmanWakefield Healey and Baker as an operational self storage site at £2.75m The Board is progressing discussions to maximise the proceeds and profit from this redevelopment. Outlook Lok'nStore's market position, leading brand and the increasing strength of ourbalance sheet demonstrates that we are well positioned to take advantage of thisunder-developed market. Trading is good and we continue to see attractiveopportunities to grow the number of stores. The increased valuation of ourfreehold and leasehold sites provides financial flexibility for us. The Board isconfident in its ability to continue to deliver growth in shareholder value. Simon Thomas Chairman 11 April 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the six months ended 31 January 2005 Notes Unaudited Unaudited Audited Six months Six months Year 31 January 31 January 31 July 2005 2004 2004 £ £ £ TURNOVERContinuing operations 3,885,117 3,135,997 6,611,911 Operating expenses (3,564,856) (3,140,418) (6,490,237)Exceptional items - (127,406) (127,407) -------------- -------------- -------------- OPERATING PROFIT/(LOSS) 320,261 (131,827) (5,733) Loss on disposal fixed assets - - (870)Interest receivable 13,562 36,950Interest payable (244,358) (50,972) (199,451) -------------- -------------- --------------PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 75,903 (169,237) (169,104) Taxation 3 - - - -------------- -------------- --------------PROFIT/ (LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION 75,903 (169,237) (169,104) ============== ============== ============== EARNINGS PER SHARE Basic 5 0.31 p (0.59) p (0.64) pFully diluted 5 0.28 p (0.59) p (0.64) p ============== ============== ============== There are no other recognised gains or losses. CONSOLIDATED BALANCE SHEET31 January 2005 Unaudited Unaudited Audited 31 January 31 January 31 July 2005 2004 2004 £ £ £FIXED ASSETSIntangible assets 371,196 395,450 383,323Tangible assets 18,611,312 13,684,285 18,162,957 -------------- -------------- -------------- 18,982,508 14,079,735 18,546,280 -------------- -------------- -------------- CURRENT ASSETSStock 87,443 89,604 103,880Debtors 1,296,618 1,203,851 1,948,711Cash at bank and in hand 550,545 642,693 654,361 -------------- -------------- -------------- 1,934,606 1,936,148 2,706,952CREDITORS: Amounts falling due withinone year (2,601,913) (1,966,778) (3,094,644) -------------- -------------- --------------NET CURRENT (LIABILITIES)/ASSETS (667,307) (30,630) (387,692) -------------- -------------- -------------- TOTAL ASSETS LESS CURRENTLIABILITIES 18,315,201 14,049,105 18,158,588 CREDITORS: Amounts falling due aftermore than one year (7,650,000) - (7,600,000) -------------- -------------- -------------- 10,665,201 14,049,105 10,558,588 ============== ============== ============== CAPITAL AND RESERVESCalled up share capital 250,711 284,687 250,481Share premium 4 51,976 21,496 21,496Capital redemption reserve 4 34,205 - 34,205Merger reserve 6,295,295 6,295,295 6,295,295Other distributable reserve 4 5,903,002 9,907,951 5,903,002Profit and loss account (1,360,402) (1,436,438) (1,436,305)ESOP shares (509,586) (1,023,886) (509,586) -------------- -------------- --------------SHAREHOLDERS' FUNDS 10,665,201 14,049,105 10,558,588 ============== ============== ============== CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 31 January 2005 Notes Unaudited Unaudited Audited Six months Six months Year 31 January 31 January 31 July 2005 2004 2004 £ £ £ Cash flow from operating activities 6a 870,510 178,432 934,854 Returns on investments and servicing of (251,115) (37,410) (122,163)finance Taxation - - - Capital expenditure and financial investment (804,751) (614,827) (5,429,344) -------------- -------------- --------------CASH OUTFLOW BEFORE FINANCING (185,356) (473,806) (4,616,653) Financing 81,540 14,690 4,169,204 -------------- -------------- -------------- (DECREASE) IN CASH IN THE PERIOD (103,816) (459,116) (447,449) ============== ============== ============== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) 31 January 31 January 31 July 2005 2004 2004 £ £ £ Decrease in cash in the period (103,816) (459,116) (447,449) Change in net funds/(debt) resulting fromcash flows (49,851) 2,310 (7,597,153) -------------- -------------- --------------MOVEMENT IN NET FUNDS IN PERIOD (153,667) (456,806) (8,044,602) NET FUNDS BROUGHT FORWARD (6,945,788) 1,098,814 1,098,814 -------------- -------------- --------------NET FUNDS CARRIED FORWARD 6b (7,099,455) 642,008 6,945,788 ============== ============== ============== NOTES TO THE INTERIM RESULTS 1. BASIS OF PREPARATION The interim results have been prepared on the basis of the accounting policiesas set out in the statutory financial statements for the year ended 31 July2004. The interim results, which were approved by the Directors on 11 April2005, are unaudited but have been reviewed in accordance with Auditing PracticesBoard bulletin "Review of Interim Financial Information" by the auditors. Theinterim results do not constitute statutory financial statements within themeaning of section 240 of the Companies Act 1985. Comparative figures for the year ended 31 July 2004 are an abridged version ofthe Group's full accounts, which carry an unqualified audit report and have beendelivered 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. (See note 2 in the notes to the accountsfor a more detailed description of valuation methodology). The Report indicates a total for properties valued of £31.84 million. IncludingFarnborough, (NBV £1.76 million), this gives a total value of properties held of£33.6 million. (NBV £18.4 million). These valuations do not account for anyfurther uplift in values, which would result from the planning permissionachieved for housing at the Kingston site, nor any successful outcome of theplanning application for housing at the Reading site. While the Company does notenvisage routinely revaluing its properties it will do so when appropriate. Valuation MethodologyBackground The USA has over 40,000 self-storage centres trading in a highly fragmentedmarket with the largest 5 operators accounting for less than 16% of market sharebased on net rentable square footage. The vast majority of centres are owned andmanaged singly or in small portfolios. These properties have a well establishedtrack record of being traded and are therefore considered as liquid propertyassets. Many valuations of this asset class are undertaken by appraisers in the USA andthe accepted valuation approach is to value the properties having regard totrading potential. This approach is recognised in the RICS Appraisal &Valuation Standards published by The Royal Institution of Chartered Surveyorsand is adopted for other categories of property that are normally bought andsold on the basis of their trading potential. Examples include hotels, bars,restaurants, marinas and petrol stations. In the UK the scope for active trading of these property assets is likely to beless, in a smaller market. However there is now some evidence that there will beliquidity as the market continues to develop. Cushman & Wakefield Healey & Baker ("C&W/H&B") believe that the valuationmethodology adopted in the USA is the most appropriate for the UK market. Methodology C&W/H&B have adopted different methodologies for the valuation of the leaseholdand freehold assets as follows: Freehold The valuation is a discounted cash flow of the net operating income projectedover a ten-year period and notional sale of the asset at the end of the tenthyear. Assumptions A. Net operating income is based on actual revenue received less actualoperating costs together with a central administration charge representing 7% ofthe estimated annual revenue. The initial net operating income is calculated byestimating the net operating income in the first twelve months following thevaluation date. B. The net operating income in future years is calculated assumingstraight-line absorption from day 1 actual occupancy to an estimated stabilised/mature occupancy level. In the valuation the assumed stabilised occupancy levelfor the eighteen stores (both freehold and leaseholds) averages 78%. Theprojected revenues and costs have been adjusted for estimated cost inflation andrevenue growth. C. Capitalisation rates of existing and future net cashflow have beenestimated by reference to underlying yields for industrial and retail warehouseproperty, bank base rates, ten-year money rates and inflation. On average, forall eighteen stores, the yield (net of purchaser's costs) arising from the firstyear of the projected cashflow is 6%. This rises to 12.86% based on theprojected cashflow for the first full cashflow year following estimatedstabilisation in respect of each property. D. The notional sale of the freeholds at the end of the tenth year has beencalculated at an average weighted exit yield of 9.66%. E. The future net cashflow projections (including revenue growth and costinflation) have been discounted at a rate that reflects the risk associated witheach asset. The weighted average annual discount rate adopted (for bothfreeholds and leaseholds) is 12.5%. F. On all assets, purchaser's costs of 5.75% have been assumed initiallyand sale and purchaser's costs totalling 7.75% are assumed on the notional salesin the tenth year in relation to the freehold stores. Leasehold The same methodology has been deployed as for freeholds, except that no sale ofthe assets in the tenth year is assumed but the discounted cash flow is extendedto the expiry of the lease .The average unexpired term (unweighted) of theGroup's leaseholds is approximately 11 years and 1 month. 3. TAXATION There is no charge to corporation tax for the Group due to the availability 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 2005 31 Jan 2004 31 Jul 2004 £ £ £Authorised: 350,000 350,000 350,00035,000,000 ordinary shares of 1peach (2004: 35,000,000) 250,711 284,687 250,481 Allotted, issued and fully paid:25,071,144 ordinary shares of 1peach (2004: 25,048,144) Authority to make market purchases of its shares Following approval by shareholders of a special resolution at the AGM on 16December 2004, the company has authority to make market purchases of up to5,845,299 shares. The authority expires on 15 December 2005, but is expected tobe renewed at the next annual general meeting. Exercise of Share Options On 25 January 2005, Colin Jacobs, a director of the Company, exercised an optionto acquire 23,000 Ordinary Shares at 37 pence per share pursuant to anunapproved option arrangement dated 20 June 2000. In addition, Colin Jacobs soldon 25 January 2005, 20,496 Ordinary Shares in the Company at 150 pence pershare. The share sale was affected through the company and as at 31 January2005, the company owes Mr Jacobs £11,683 in respect of the proceeds of sale. Nointerest is payable on the sum. Following these transactions, Colin Jacobs totalbeneficial holding (including family interests) in the Company increased from12,496 to 15,000 Ordinary Shares. 5. EARNINGS PER ORDINARY SHARE The calculation of earnings per ordinary share is based on the profit for theperiod of £75,903 (year to 31 July 2004 - loss of £169,104, period to 31 January2004 - loss of £169,237) and on the weighted average number of shares in issueduring the period of 24,421,519 shares (31 July 2004- 26,300,997 shares; 31January 2004 - 28,468,693). Fully diluted earnings per share includes shares held under the directors'option scheme and is based on a profit for the period of £75,903 (period to 31July 2004 - loss of £169,104, period to 31 January 2004 - loss of £169,237) andon a weighted average number of shares during the period of 26,900,125 shares(31 July 2004 - 27,436,581 shares; 31 January 2004 - 30,346,523 shares). 6. CASH FLOWS Unaudited Unaudited Audited 31 January 31 January 31 July 2005 2004 2004 £ £ £ (a) Reconciliation of operating profit to net cash flow from operating activities Operating profit/(loss) 320,261 (131,827) (5,733) Depreciation 356,397 329,179 664,153 Amortisation 12,126 12,127 24,255 Decrease/(Increase) in stocks 16,437 12,179 (2,097) Decrease/(Increase) in debtors 657,781 323,929 (420,932) (Decrease)/Increase in creditors (492,492) (367,155) 675,208 -------------- -------------- -------------- Net cash flow from operating activities 870,510 178,432 934,854 ============== ============== ============== At 31 July Other non- At 2004 Cash flow cash changes 31 Jan 2005 £ £ £ £ (b) Analysis of net funds/(debt) Cash at bank and in hand 654,361 (103,816) - 550,545 Debt due within one year - - - - Debt due after one year (7,600,000) (50,000) - (7,650,000) Finance leases (149) 149 - - -------------- -------------- -------------- -------------- TOTAL (6,945,788) (153,667) - (7,099,45) -------------- -------------- ------------- -------------- INDEPENDENT REVIEW REPORT TO LOK'N STORE GROUP PLC Introduction We have been instructed by the company to review the financial information setout on pages 4 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 2005. BAKER TILLYChartered Accountants2 Bloomsbury StreetLondon WC1B 3ST 11 April 2005 This information is provided by RNS The company news service from the London Stock Exchange