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Stock Code: LOK
www.loknstore.com
Lok’nStore Group Plc
Annual Report and Accounts
for the year ended 31 July 2016
24921.04 – 26 October 2016 3:23 PM – proof 6
Welcome to
Lok’nStore Group Plc
We are a leading company in the fast growing UK self-storage market.
We opened our first self-storage centre in February 1995 and
have grown consistently over the last 20 years, currently operating
26 self-storage centres and two serviced document stores in
Southern England.
Strengths of our Business:
■ Strong and increasing asset base
■ The self-storage business is highly cash generative with high profit margins
on established stores and all customers paying on a rolling 28 day basis
■ Lok’nStore has a track record of strong and growing cash generation driving
a progressive dividend policy
■ New store openings
■ Significant growth in third party management services
■ The property requirements of self-storage coupled with challenging local
planning regimes create significant barriers to entry, especially in Southern
England where Lok’nStore operates
■ Experienced Board and Executive management team with clear strategic
direction and proven business model
Read more about our Strategy on page 8
and our Business Model on page 10
“Impressive performance
from landmark stores – with
more to come.”
24921.04 – 26 October 2016 3:23 PM – proof 6
Contents
OVERVIEW
3 Highlights
4 Chairman’s Review
6 Group at a Glance
THE STRATEGIC REPORT
8 Strategy
10 Business Model
12 Operating and Marketing Review
16 Property Review
17 Financial Review
21 Principal Risks and Uncertainties
in operating our Business
GOVERNANCE REPORT
22 Board of Directors and
Advisers
24 Directors’ Report
26 Corporate Social Responsibility
Report
27 Environmental Performance
32 Corporate Governance
34 Directors’ Responsibilities in
the Preparation of Financial
Statements
35 Independent Auditor’s Report
to the Members of Lok’nStore
Group Plc
FINANCIAL REPORT
36 Consolidated Statement of
Comprehensive Income
37 Consolidated Statement of
Changes in Equity
38 Company Statement of
Changes in Equity
39 Statements of Financial
Position
40 Consolidated Statement of
Cash Flows
41 Accounting Policies
48 Notes to the Financial
Statements
72 Glossary
74 Our Stores
www.loknstore.com
Stock Code: LOK
1
24921.04 – 26 October 2016 3:23 PM – proof 6
HeadingOVERVIEW
Revenue
Group Adjusted EBITDA
Adjusted Net Asset Value per share
£16.06m
£6.30m
£3.86
20.8%
18.1p
Cash available for Distribution (CAD) per share
Loan to Value Ratio
2
Lok’nStore Group Plc
Annual Report and Accounts for the year ended 31 July 2016
24921.04 – 26 October 2016 3:23 PM – proof 6
2016 Highlights
Robust growth in asset value and record financial results
ahead of expectations
■ Adjusted Net Asset Value1 per share up 27.6% to £3.86 (2015: £3.02)
■ Group Revenue £16.06 million up 4.1% (2015: £15.42 million) – like for like (LFL)2 up 7.6%
■ Group Adjusted EBITDA3 £6.30 million up 10.8% (2015: £5.68 million) – LFL up 14.0%
Strong cash flow supports 12.5% dividend increase
– progressive dividend policy
■ Annual dividend 9 pence per share up 12.5% (2015: 8 pence per share)
■ Cash available for Distribution (CAD)4 18.1 pence per share up 17.7% (2015:15.4 pence)
Strong balance sheet, efficient use of capital, low debt
■ Net debt down to £23.5 million (2015: £25.3 million)
■ Loan to value ratio down to 20.8%5 (2015: 25.8%)
Self-storage business performing strongly
■ Self-storage revenue £13.44 million up 1.2% (2015: £13.28 million) – LFL up 5.1%
■ Adjusted Store EBITDA £7.49 million up 4.2% (2015: £7.19 million) – LFL up 6.6%
■ Unit Pricing up 2.2% LFL
■ Unit occupancy up 2.0% LFL
Document storage profit more than doubles
■ Revenue £2.17 million up 11.1% (2015: £1.96 million)
■ Adjusted EBITDA £0.59 million up 125% (2015: £0.26 million)
Growth from new stores and more new stores to come
■ 3 Stores opened in Chichester, Bristol and Southampton
■ 4 Sites acquired in Wellingborough, Gillingham, Hemel Hempstead and Broadstairs
■ New sites will add 14% to trading space
For an explanation of what we mean when we use a term above and
why we use these key performance indicators please see page 73
24921.04 – 26 October 2016 3:23 PM – proof 6
3
www.loknstore.com Stock Code: LOKOVERVIEW Chairman’s Review
“Our main objective is to
steadily increase the cash
available for distribution
enabling a predictable growth
of the dividend from a strong
asset base and conservatively
geared balance sheet.”
valuation valued our trading stores at £112.7
million. With other land and property assets
this equates to a total value of land and
properties held of £116.2 million (2015:
£97.8 million), an 18.8% increase in value.
Trading positive
Group revenue for the year was £16.06
million, up 4.1% year on year (2015: £15.42
million). Like for Like Revenue stripping
out the effect of the sale of the Swindon
operations and the opening of the new
Bristol store was up 7.6%. This strong
revenue growth led to a 10.8% increase in
Group Adjusted EBITDA profit. Tight control
over operating costs which are broadly
unchanged has also contributed in pushing
the Group’s margins and profits to record
levels.
New £40 million Banking Facility
reflects financial strength of
business
In January 2016 the Group agreed a new
banking facility with Royal Bank of Scotland
plc on significantly improved terms. The
new £40 million five year revolving credit
facility replaced the existing facility which
was due to expire in October 2016, and
will provide funding for site acquisitions and
working capital. The interest margin, non-
utilisation fee and arrangement fee have all
been significantly reduced leading to a large
saving over the life of the facility.
Appointment of New Director
demonstrates operational focus
The Group is pleased to announce the
appointment of Neil Newman as an
Executive Director. Neil (39) brings significant
managerial and operational experience to
the Board having worked in the business
since 2006. He is currently Group Sales
Director and retains this title on the Board.
Neil’s contribution to Lok’nStore over the
recent years has been significant and we
look forward to his continuing contribution
to our future growth at Board level.
Dividend
It is intended that the Company’s future
dividend payments will reflect the growth
in the underlying cash generated by the
business as reflected in the cash available
for distribution (CAD) which is up 17.7%
in the period. The interim dividend will
represent approximately one-third of the
total for the year and final dividend two-
thirds.
This year we are recommending a full year
dividend of 9 pence per share. This is up
12.5% from 8 pence for the full year last
year. The Group will therefore pay a final
dividend of 6.33 pence per share on
21 December 2016 following the payment of
an interim dividend of 2.67 pence per share
in June 2016.
24921.04 – 26 October 2016 3:23 PM – proof 6
Strong growth and robust
capital structure
Lok’nStore Group has had an exciting year
successfully implementing all of our strategy
objectives. Revenue, profits and particularly
asset values have moved ahead rapidly. A
substantial increase in the proportion of our
store space which is new or purpose built
will add further momentum to the growth of
sales and profits with plenty of new capacity
contributing to growth over the coming
years.
The growth of sales, profit and asset
values combined with innovative asset
management has combined to achieve a
reduction in the loan-to-value (LTV) ratio
from 25.8% to 20.8%. While we invested
£7 million in stores this year this was more
than covered by £8.5 million (gross) of
capital receipts.
To reflect this healthy performance we are
proposing to increase the annual dividend
pay-out by 12.5%. Cash available for
distribution (CAD) per share which guides
the dividend pay-out has moved ahead
17.7% to 18.1 pence per share.
Adjusted Net Asset Value (NAV) per share
has also moved ahead sharply as our new
valuers Jones Lang LaSalle (JLL) have
reflected the strength of market demand for
prime self-storage assets in their valuations,
in addition to the uplift achieved from our
new store openings and improved trading
at existing stores. The year-end property
4
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Performance
The table below sets our achievements for the last year against our strategy objectives:
Objective
Achievements in Financial Year 2016
Continue to increase EBITDA per share
over the coming years
Fill existing stores and improve
pricing
Develop new stores on a self-funded
basis
Acquire new sites
Increase the number of stores we
manage for third parties
Grow our document storage business
✓
✓
✓
✓
✓
✓
Like for like (LFL) Group Adjusted EBITDA up 14% in 2016 and
adjusted EBITDA per share 24.2 pence up 8%
LFL Self-storage occupancy up 2% and LFL self-storage pricing up
2.2% in 2016.
During the year we generated a further £2 million from the disposal
of the old Reading store site taking the total proceeds from the sale
to well in excess of the cost of the new Reading store. We received
£3.5 million for the sale and manage back of the Swindon store and
we sold surplus land in Portsmouth for £3 million producing a total of
£8.5 million – more than covering the £7 million spent on new store
development in the year.
During the financial year to July 2016 we opened new stores in Bristol,
Southampton and Chichester and acquired sites in Wellingborough,
Gillingham, Hemel Hempstead and Broadstairs.
In 2016 we sold our Swindon store on a sale-and-manage back
contract, we opened a new managed store in Chichester and we
signed contracts to manage further stores to be built in Hemel
Hempstead and Broadstairs which will take total managed stores to 8.
In the financial year 2016 the turnover of our document storage
business grew 11.1% with number of boxes up 8.7% and number of
tapes stored up 13.4%. Adjusted EBITDA profit was up by 97%.
Outlook
Following this year of solid successes we
have created a strong platform for significant
further growth for Lok’nStore.
Our main objective is to steadily increase the
cash available for distribution (CAD) enabling
a predictable growth of the dividend from
a strong asset base and conservatively
geared balance sheet.
In order to achieve this our focus will be on
four key areas:
■ Fill stores and improve pricing to
continue increasing cash flow from the
existing stores
■ Acquire more sites to build new
landmark stores
■ Increase the number of stores we
manage for third parties
■ Grow our document storage business
Finally, I should like to thank all of our
employees for the contribution they
have made to the Group’s success.
Lok’nStore is a robust business with a
record of consistent profit growth and cash
generation. With our experienced and
dedicated staff we have built a firm base for
the coming years and we are looking to the
future with confidence.
Simon G Thomas
Chairman
14 October 2016
24921.04 – 26 October 2016 3:23 PM – proof 6
5
www.loknstore.com Stock Code: LOKOVERVIEW
Group at a Glance
Opening
programme of
four new stores –
available space will
increase by 14%
Landmark stores
increase to 63%
of portfolio
6
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Lok’nStore’s Locations
1 Aldershot
2 Ashford
3 Basingstoke
4 Bristol
5 Chichester
6 Crawley
7 Crayford
8 Eastbourne
9 Fareham
10 Farnborough
11 Harlow
12 Horsham
13 Luton
14 Maidenhead
15 Milton Keynes
16 Northampton Central
17 Northampton Riverside
18 Poole
19 Portsmouth
20 Reading
21 Southampton
22 Staines
23 Sunbury
24 Swindon
25 Tonbridge
26 Woking
27 Olney
28 Leatherhead
New Stores
(Under development)
29 Wellingborough
30 Hemel Hempstead
31 Gillingham
32 Broadstairs
Read more about our Strategy
and Marketplace on page 08
24921.04 – 26 October 2016 3:23 PM – proof 6
7
1023781911112131415161729303132189202124272223252628465www.loknstore.com Stock Code: LOKOVERVIEW The Strategic Report
“Lok’nStore’s eye-catching
buildings with their distinctive
orange livery create highly
visible landmarks.”
Strategy
Lok’nStore Group Plc is one of the leading
companies in the fast growing UK self-
storage market. We opened our first
self-storage centre in 1995 and have grown
consistently over the last 20 years, currently
operating 26 self-storage centres and two
serviced document stores in Southern
England.
We have been listed on the AlM Market
since June 2000 and the Board accounts
for 35% of the Total Voting Rights (TVR) in
the ordinary shares of the Company.
We offer self-storage and serviced
document storage from our own stores,
and management services to third party
self-storage owners. Self-storage is available
to both household and business customers
at our highly branded Lok’nStore centres.
Each centre is prominently located mainly in
the affluent South-East of England in large
towns and cities.
We develop and operate self-storage
centres in prominent locations broadly in
South-East England. Our eye-catching
buildings with their distinctive orange livery
create highly visible landmarks which
continue to be a big contributor of new
business for Lok’nStore.
Demand for self-storage by both business
and domestic customers is driven by a
combination of specific need based on
changing circumstances but also linked
to local economic activity and prevailing
consumer and business confidence.
People and business are more space
constrained in the relatively expensive areas
of the South East. Barriers to entry in terms
of competition for suitable sites and the
difficulties in securing appropriate planning
consents are also correspondingly higher.
Lok’nStore aims to build more landmark
self-storage centres primarily across South-
East England, to steadily increase the cash
available for distribution (CAD) enabling a
predictable growth of the dividend from a
strong asset base and conservatively geared
balance sheet. We believe there is the
opportunity for significant further growth.
The UK self-storage market
There remains significant opportunity in
the UK self-storage market where there
are an estimated 882 self-storage facilities
providing approximately 37.6 million square
feet of storage space. With a population
estimated at 64 million people in the UK this
equates to only 0.6 square feet per person,
compared to 7.7 square feet per person in
the USA (Self-Storage Association 2016 UK
Annual Survey).
The sector remains in good health. The
Cushman & Wakefield 2016 Report for the
Self-Storage Association says, “The industry
enjoyed a year of healthy growth in 2015
adding around 1.9 million sq. ft. of space
on top of putting on around 1.3 million
sq. ft. of space in 2014....”. The Report
estimates that “….total annual turnover for
the UK self-storage industry in 2015 was
around £440 million (2014: 402 million) from
approximately 490 different operators.”
When compared to Europe the UK has
around 46% of the total space in Europe.
As awareness of self-storage continues to
grow, more businesses and individuals will
use self-storage in a market that is supply
constrained.
Steady growth
of profit (EBITDA)
The Strategic Report covers the
following areas of Lok’nStore’s
business:
■ Strategy
■ The UK Self-Storage Market
■ Lok’nStore’s Business Model
■ Operating and Marketing Review
■ Property Review
■ Financial Review
■ Principal Risks and Uncertainties in
operating our Business
8
Lok’nStore Group Plc
Annual Report and Accounts for the year ended 31 July 2016
24921.04 – 26 October 2016 3:23 PM – proof 5
2016201520142013201220112010£6.30m£4.62m£5.68m£4.13m£3.28m£3.97m£2.93m Full Year Dividend 9 pence per share
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24921.04 – 26 October 2016 3:23 PM – proof 5
9
www.loknstore.com Stock Code: LOK
Business Model
1
Attractive
Market
Dynamics
2
Our
competitive
strengths
3
Stable and rising
income streams
and low credit risk
4
Strong
growth
opportunities
5
Translation of the
business model into
high quality earnings
6
Our
over-riding
objective
10
■ UK self-storage penetration remains relatively low
■ Limited new supply coming onto the market - Lok’nStore is bucking the trend with
significant new store development
■ Resilient through economic downturns
■ Sector is growing
■ Recognised brand
■ Prominent new stores on main roads
■ Strong internet marketing
■ Excellent customer service
■ Stores concentrated in the affluent South East England
■ Strong balance sheet
■ Experienced board with clear strategic direction
■ Robust business model
■ Over 9,200 customers
■ Mix of business and domestic customers
■ Low bad debt expense
■ Strong credit risk model
■ Demand increasing
■ Under supplied market
■ The self-storage business is strongly cash generative on established stores
■ Low technology & product obsolescence
■ Lok’nStore has a track record of strong and growing cash generation
■ A progressive dividend policy
■ To steadily increase the cash available for distribution (CAD) enabling a predictable growth
of the dividend from a strong asset base and conservatively geared balance sheet. We
believe there is the opportunity for significant further growth.
24921.04 – 26 October 2016 3:23 PM – proof 5
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 “Lok’nStore has a record of
consistent profit growth
and cash generation and
has built a firm base for the
coming years.”
Simon G. Thomas
CHAIRMAN
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www.loknstore.com
Stock Code: LOK
11
24921.04 – 26 October 2016 3:23 PM – proof 5
Heading
Operating and Marketing Review
“With costs firmly under control
revenue growth translates into
buoyant profit growth.”
Self-storage business
performing strongly
■ Self-storage revenue £13.44 million up
1.2% (2015: £13.28 million) – LFL up
5.1%
■ Adjusted Store EBITDA £7.49 million
up 4.2% (2015: £7.19 million) – LFL up
6.6%
■ Management fees from Managed
Stores up 150.1% at £439,254 (2015:
£175,630)
With costs firmly under control revenue
growth translates into healthy profit growth.
We again managed to increase the overall
adjusted EBITDA margin across all stores
by 1.6 percentage points from 53.7% to
55.3%. The adjusted Store EBITDA margins
of the freehold stores were 64.6% (2015:
63.4%) and the leasehold stores 41.7%
(2015: 40.7%).
Total adjusted store EBITDA in the self-
storage business, a key performance
indicator of profitability and cash flow of the
business, increased 4.2% to £7.49 million
(2015: £7.19 million). Like for like growth in
store EBITDA was 6.6%.
At the end of July 2016, 34% of
Lok’nStore’s self-storage revenue was from
business customers (2015: 33.5%) and
66% was from household customers, (2015:
66.5%). By number of customers 18.5% of
our customers were business customers
(2015: 18.9%) and 81.5% household
customers (2015: 81.1%).
12
24921.04 – 26 October 2016 3:23 PM – proof 5
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 PORTFOLIO ANALYSIS
AND PERFORMANCE
BREAKDOWN
AS AT 31 JULY 2016
FREEHOLD AND LONG
LEASEHOLD
OPERATING LEASEHOLDS1
PIPELINE (FREEHOLD)
MANAGED STORES
(TRADING)
MANAGED STORES
(UNDER DEVELOPMENT)
Number
of stores
% of
valuation
% of
adjusted
store
EBITDA
Adjusted
store
EBITDA
margin
(%)
% lettable
space
Lok
owned
When fully developed
Number
of stores
Total%
lettable
space
12
85.0
69.5
60.7
62.6
14
54.2
8
2
6
2
14.7
30.5
41.7
37.4
0.3
–
–
–
–
–
–
–
–
–
–
–
8
–
8
–
26.3
–
19.5
–
TOTAL
30
100
100
55.3
100
30
100
1 The average unexpired term of the Group’s operating leaseholds is approximately 11 years and 8 months as at 31 July 2016
(12 years and 8 months: 31 July 2015).
Ancillary Sales
Ancillary sales which consist of boxes
and packaging materials, insurance and
other sales increased 5.3% over the year
accounting for 11.2% of self-storage
revenues (2015: 10.8%).
We continue to promote our insurance
to new customers with the result that
91% (2015: 92%) of our new customers
purchased our insurance over the year
and this has resulted in an increase in the
percentage of our customers who are
insured through Lok’nStore to 80%
(2015: 78%).
Document storage profit more
than doubles
■ Revenue £2.17 million up 11.1%
(2015: £1.96 million)
■ Adjusted EBITDA £0.59 million up
124.3% (2015: £0.26 million)
■ Year-end boxes stored up 8.7%
■ Year-end tapes stored up 13.4%
Revenue and adjusted EBITDA have
increased in our document storage business
as operating metrics improve in response
to the Company’s more customer facing
marketing stance. This approach has
resulted in excellent customer feedback
and puts us in a good position to win new
business, with boxes stored increasing 8.7%
and tapes stored up 13.4%.
Last year we consolidated our serviced
document warehouse capacity, closing
one of the three storage sites. This year we
have undertaken a further fit-out of new
warehouse racking in our site in Olney and
we now have the capacity to significantly
increase the number of boxes stored
within our existing premises. As part of this
strategy, additions of £0.34 million were
made in the current year to fixtures, fittings
and equipment (2015: £0.46 million).
24921.04 – 26 October 2016 3:23 PM – proof 5
13
www.loknstore.com Stock Code: LOKSTRATEGIC REPORT Operating and Marketing Review
continued
Managed Store Service
Over recent years we have been developing
our management services to third party
storage owners. In the year we sold one
store to a third party owner on a sale-and-
manage back basis, we opened a new
managed store and we acquired two new
sites for management contract clients taking
our total managed stores to eight.
For managed stores we receive a standard
monthly fee, a performance fee based on
certain objectives and a fee on successful
exit. In some cases we charge acquisition,
planning and branding fees. This allows
us to earn revenue from our expertise and
knowledge of the self-storage industry
without having to commit our capital, to
amortise various fixed central costs over
a wider operating base, and to drive more
visits to our website moving it up the
rankings and benefitting all the stores we
both own and manage.
In 2016 we earned £439,254 (2015:
£175,630) from our managed stores in
management fees, a substantial contribution
to our profit.
Security
The safety and security of our customers
and their goods remains our highest priority.
We invest in CCTV, intruder and fire alarm
systems and the remote monitoring of our
stores out of hours. Importantly all of our
stores are manned during opening hours.
14
Lok’nStore Group Plc
Annual Report and Accounts for the year ended 31 July 2016
24921.04 – 26 October 2016 3:23 PM – proof 5
Marketing
During the year our marketing efforts have
been focused on the internet and the
presentation of our buildings to attract
passing traffic. Total enquiries were up
6.6% across all stores.
Visibility of our stores remains very
important to our marketing efforts. With their
prominent positions, distinctive design and
bright orange elevations, our stores raise the
profile of the Lok’nStore brand. We continue
to invest in new signage and lighting at
our existing stores as well as creating
striking designs for our new landmark
stores to promote and enhance their visual
prominence.
The internet continues to be the main media
channel for our advertising. Our website
at www.loknstore.co.uk is one of the most
established self-storage websites in the
UK. The website was significantly upgraded
during the year to further improve customer
experience across desktop, tablet and
smartphone devices. This is a very dynamic
area and we are committed to its continued
development. We believe the internet
provides a strong competitive advantage
for Lok’nStore and the major operators with
bigger marketing budgets compared to
those of the smaller self-storage operators.
24921.04 – 26 October 2016 3:23 PM – proof 5
15
www.loknstore.com Stock Code: LOKSTRATEGIC REPORT Property Review
Growth from new stores and more
new stores to come
■ New Bristol, Southampton and
Chichester stores opened – early trading
strong
■ 4 new sites acquired adding 14% more
space
■ New and purpose built stores lettable
space 63.5% of portfolio
Two new stores to be developed
under management contracts
Two new management contracts were
signed in July 2016 to develop and
operate two new stores. The new sites
are in prominent retail locations in Hemel
Hempstead and Broadstairs. Opening for
both stores is scheduled for 2017. When
developed, these Managed Stores will add
around 70,000 sq. ft. to the trading portfolio.
■ Continually reviewing new store
opportunities
Strong cash flows and solid asset
base create opportunities
Lok’nStore’s strong operating cash flow,
solid asset base, and tactical approach to
its store property portfolio provide the Group
with opportunities to improve the terms
of its property usage in all stages of the
economic cycle. Our focus on the trading
business gives us many opportunities and
our property decisions are always driven by
the requirements of the trading business.
Lok’nStore has 26 freehold, leasehold
and managed stores trading. Of these, 20
stores are owned with 12 freehold or long
leasehold, 8 leasehold and 6 further sites
operated under management contracts.
Acquisition of two landmark sites for
new stores
Located in Wellingborough and Gillingham,
the two sites are in prominent retail locations
with large catchment areas and little
established competition. The total capital
investment of approximately £10 million will
be financed from cash flow and the new
banking facility signed in January 2016. The
stores are scheduled to be open at the end
of 2017. When developed these stores will
add around 110,000 sq. ft. to the trading
portfolio increasing the company’s capacity
of owned stores by 10%. They will take the
proportion of Lok’nStore’s space which is
new or purpose built to 63.5%.
Efficient use of capital
■ Additional £2 million received for sale of
old Reading store
■ £3 million received for sale of Portsmouth
development land
■ Sale and manage-back of Swindon store
for £3.5 million
■ Total disposal proceeds of £8.5 million
(gross)
These capital receipts, combined with the
managed store model enable Lok’nStore
to continue to rapidly grow the operating
footprint of the business while firmly capping
borrowing and leverage.
Store portfolio
These projects are part of our strategy
of actively managing our store operating
portfolio to ensure we are maximising
both trading potential and asset value.
This includes strengthening our distinctive
brand, increasing the size and number of
our stores and replacing stores or sites
where it will increase shareholder value.
We prefer to own freeholds if possible, and
where opportunities arise we will seek to
acquire the freehold of our leasehold stores.
However we are happy to take leases on
appropriate terms and benefit from the
advantages of a lower entry cost, with
further options to create value later in the
site’s development. Our most important
consideration is always the trading potential
of the store rather than the property tenure.
With Wellingborough, Gillingham, Hemel
Hempstead and Broadstairs set to open
in 2017 this will increase the number of
stores we operate and will capitalise on our
efficient operating systems and growing
internet marketing presence.
At the year end the average length of the
7 leases which were valued at July 2015
decreased by 12 months to 11 years and
8 months (2015: 12 years and 8 months).
7 out of 8 of our leasehold stores are inside
the Landlord and Tenant Act providing
us with a strong security of tenure. The
leaseholds produced 30.5% of the total
store EBITDA in the year (2015: 32.1%).
Store property assets and
Net Asset Value
■ Total assets now circa £134 million
(2015: £111 million)
■ Adjusted net asset value of £3.86 per
share up 27.6% on last year
Lok’nStore’s freehold and operating
leasehold stores have been independently
valued by Jones Lang LaSalle (JLL) (2015
: Cushman & Wakefield) at £112.7 million
(NBV £ 46.9 million) as at 31 July 2016
(2015: £88.9 million: NBV £28.1 million). The
change in property valuation is referred to
further in the Financial Review section of the
Strategic Report and is detailed in note 10b
of the notes to the financial statements.
Adding our stores under development at
cost, land and buildings held at Director’s
valuation, our total property valuation is
£116.2 million (2015: £97.8 million). This
translates into an adjusted net asset value
of £3.86 per share up 27.6% on last year
(2015: £3.02 per share).
The increase in the property values of
properties which were also valued last year
was 19.2%
16
24921.04 – 26 October 2016 3:23 PM – proof 5
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Financial Review
Record financial results on all measures
■ Group Revenue £16.06 million up 4.1%
(2015: £15.42 million) - like for like (LFL) up 7.6%
■ Group Adjusted EBITDA £6.30 million up 10.8%
(2015: £5.68 million) - LFL up 14.0%
Strong balance sheet, efficient use of capital,
low debt
■ New £40 million Bank facility on lower interest margin
■ Net debt down to £23.5 million (2015: £25.3 million)
■ Loan to value ratio (LTV) down to 20.8% (2015: 25.8%)
■ Operating profit (pre-exceptional items7) £4.41 million up 14.1%
(2015: £3.86 million) LFL 18.3%
■ Gearing down
■ Operating profit £6.23 million up 70.3% (2015: £3.66 million)
■ Profit after taxation £4.28 million up 117% (2015 : £1.97 million)
Trading
Total revenue for the year grew 4.1% to £16.1 million (2015: £15.42
million). Group operating profit for the year is up 70% to £6.23
million (2015: £3.66 million).
Taxation
The Group will pay tax on its earnings at an effective tax rate of 20%
and has made a tax provision of £0.6 million. (2015: £0.54 million).
Earnings per share
Basic earnings per share (EPS) were 16.60 pence (2015: 7.84
pence per share). Diluted EPS were 16.24 pence (2015: 7.64
pence per share). If 2016 figures are adjusted to eliminate the 2016
property sale gain of £1.94 million, the 2016 EPS is adjusted to 9.08
pence per share and the 2016 diluted EPS to 8.88 pence per share.
Treasury shares
The Group did not purchase any Treasury shares during the year.
We are proposing to renew our ongoing authority to buy back
shares at this year’s AGM to ensure the Group continues to have
flexibility to make further purchases should it be considered to be in
the best interests of shareholders to do so.
Operating costs
Through disciplined management we have again reduced property
costs and contained overall cost growth to less than 0.1% despite
staff costs increasing by 1.1% through a combination of strong
sales bonuses and additional national insurance costs arising on
the exercise of employee share options. Group operating costs
amounted to £9.4 million for the year, a 0.1% increase from last
year (2015: £9.4 million). Overall operating costs as a percentage
of revenue have decreased and represent 58.9% as a cost ratio.
(2015: 61.2%).
Group
Property costs
Staff costs
Overheads
Distribution costs
Total
Increase/(Decrease)
in costs
%
(4.6)
1.0
7.6
(10.4)
0.1%
2016
£’000
3,913
4,232
1,128
170
9,443
2015
£’000
4,101
4,188
1,049
190
9,437
New £40 million Bank facility on improved terms
Following the agreement of new facilities with Royal Bank of
Scotland on improved terms the new £40 million five year revolving
credit facility replaced the existing facility which was due to expire
in October 2016, and will provide funding for site acquisitions as
well as working capital for the development of the business over the
medium term.
Under this new five year facility the Group is not obliged to make
any repayments prior to its expiration in January 2021 and
further provides during the term of the facility for the possibility
of an optional extension of the five year term by a maximum of a
further two years. The facility also provides for the possibility of an
additional accordion of up to £10 million which if taken up during the
term of the facility will increase facilities available to £50 million.
The following interest rates applied during the financial year:
Up to
14 January
2016
From
15 January
2016
Lloyds Bank plc
2.35%–2.65%
0.94%
Royal Bank of
Scotland plc (RBS)
1.40%–1.65%
0.56%
Interest margin
Non-utilisation charge
At current levels of borrowing this translates into a 0.95% points
saving on outstanding borrowings and 0.38% saving on the
unborrowed balance of the facility. At current borrowing levels this
would equate to a £316,249 saving on an annualised basis.
Management of interest rate risk
Lok’nStore has £28.8 million of debt currently drawn against its £40
million revolving credit facility. £20 million is at a fixed interest rate
with £10 million fixed rate swap at a fixed 1 month sterling LIBOR
rate of 1.2% and £10 million swap at a fixed 1 month sterling LIBOR
rate of 1.15%. With 1 month LIBOR around 0.5% for the year, this
leaves a balance of £8.8 million floating at a current all-in rate of
around 2.56% and results in an overall weighted average rate over
the financial year of 2.88.%. The £20 million fixed rate swap is an
interest rate hedge and its fair value on a mark-to-market basis
fluctuates. Its current fair value of £0.037 million is currently stated
as a current liability (2015: non-current liability: £0.12 million). Both
swaps run up to 20 October 2016 whereupon they lapse and the
Groups all-in floating rate will drop to (currently) 1.67%.
24921.04 – 26 October 2016 3:23 PM – proof 5
17
www.loknstore.com Stock Code: LOKSTRATEGIC REPORT Financial Review
continued
Cash flow and financing
At 31 July 2016 the Group had cash balances of £5.3 million (2015:
£2.4 million). Cash inflow from operating activities before investing
and financing activities was £ 3.8 million (2015: £6.0 million). As
well as using cash generated from operations to fund some capital
expenditure, the Group has a five year revolving credit facility. This
provides sufficient liquidity for the Group’s current needs. Undrawn
committed facilities at the year-end amounted to £11.2 million
(2015: £12.3 million).
Strong cash flow supports 12.5% dividend
increase
■ Annual dividend 9 pence per share up 12.5% (2015: 8 pence per
share)
■ Cash available for Distribution (CAD) from operations £4.71
million up 20.8% (2015: £4.98 million)
■ Cash available for Distribution (CAD) of 18.1 pence per share up
17.7% (2015: 15.4 pence per share)
Gearing
There was £28.8 million of gross borrowings (2015: £27.7 million)
representing gearing of 32.9% (2015: 47.7%) on net debt of £23.5
million (2015: £25.3 million). If leaseholds, which are stated at
depreciated historic cost in the statement of financial position, are
stated at their Jones Lang LaSalle (JLL) valuation, gearing drops
to.27.6% (2015: 39.2%). If the deferred tax liability carried at year-
end of £15.4 million is excluded gearing drops further to 23.4%
(2015: 33.0%).
Analysis of Cash Available for Distribution (CAD)
Group Adjusted EBITDA
Less: Net finance costs (per Income Statement)
Capitalised maintenance expenses
New Works Team
Current tax
Total deductions
Cash Available for Distribution
Increase over last year
Adjusted shares in issue
CAD per share (annualised)
Increase in CAD per share
Cash available for Distribution (CAD)
Cash available for Distribution (CAD) provides a clear picture of
ongoing cash flow available for dividends. To illustrate this fully the
table below shows the calculation of CAD.
Year ended
31 July
2016
Year ended
31 July
2015
6,295
(735)
(110)
(134)
(606)
(1,585)
4,710
20.8%
5,682
(1,003)
(113)
(133)
(535)
(1,784)
3,898
Number
Number
26,019,241
18.1p
17.7%
25,356,688
15.4p
Capital expenditure and capital commitments
The Group has grown through a combination of new site acquisition, existing store improvements and relocations, and has concentrated on
extracting value from its existing assets and developing through collaborative projects and management contracts. Capital expenditure during
the year totalled £6.99 million (2015: £3.58 million). This capital expenditure was more than funded by the capital receipts of £8.5 million.
The Group has capital expenditure contracted but not provided for in the financial statements of £1.10 million (2015: £3.03 million). The
Company was also committed to complete on its new Wellingborough site following completion of all relevant planning matters.
18
24921.04 – 26 October 2016 3:23 PM – proof 5
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Statement of Financial Position
Net assets at the year-end were £71.5 million (2015: £53.0 million).
Freehold and long leasehold properties independently valued at
31 July 2016 were £96.1 million (2015: £74.1 million). Please refer
to the table of property values below.
Market Valuation of Freehold and Operating
Leasehold Land and Buildings
It is the Group’s policy to commission an independent external
valuation of its properties at each year-end. In previous years
this work had been undertaken by Cushman & Wakefield (C&W).
This year the Group selected Jones Lang LaSalle Limited (JLL)
to undertake this work due to their greater exposure to the
transactions undertaken in the market.
Our eleven freehold properties and one long leasehold are held in
the statement of financial position at fair value and have been valued
by JLL. Refer to note 10b) – property, plant and equipment and
also to the accounting policies for details of the fair value of trading
properties.
The valuations of the leasehold stores held as ‘operating leases’ are
not taken onto the statement of financial position. However seven
of these have also been valued and these valuations have been
Analysis of Total Property Value
Freehold & Long Leasehold valued by JLL (2015 C&W) 1
Short Leasehold valued by JLL (2015 C&W) 2
Freehold land and buildings at Director valuation 3
Subtotal
Sites in development at cost
Total4
1 Includes related fixtures and fittings (refer note 10b).
used to calculate the adjusted net asset value position of the Group.
The value of our operating leases in the valuation totals £16.6
million (2015: £14.8 million) and we have reported by way of a note
the underlying value of these leasehold stores in our revaluations
and adjusted our Net Asset Value (NAV) calculation accordingly to
include their value. This ensures comparable NAV calculations.
A deferred tax liability arises on the revaluation of the properties and
on the rolled-over gain arising from the disposal of some trading
stores. It is not envisaged that any tax will become payable in the
foreseeable future on these disposals due to the availability of
rollover relief. The proceeds from the sale of the Reading store sold
with the benefit of its permission for residential development have
been reinvested into new store development. It is not the intention of
the Directors to make any other significant disposals of operational
stores, although individual disposals may be considered where it is
clear that added value can be created by recycling the capital into
other opportunities.
The Board will continue to commission independent valuations on
its trading stores annually to coincide with its year-end reporting.
No of stores/
sites
12
7
1
20
2
22
31 July 2016
Valuation
£
96,125,000
16,575,000
3,000,000
115,700,000
457,826
116,157,826
No of stores/
sites
12
7
19
3
22
31 July 2015
Valuation
£
74,110,000
14,760,000
–
88,870,000
8,887,858
97,757,858
2 The seven leaseholds valued by JLL are all within the terms of the Landlord and Tenant Act (1954) giving a degree of security of tenure. The average length
of the leases on the leasehold stores valued was 11 years and 8 months at the date of the 2016 valuation (2015 valuation: 12 years and 8 months).
One leasehold store is not valued by JLL due to the relatively short unexpired period of its lease.
3 For more details (refer note 10b - Directors’ valuation)
4 Total freeholds account for 85.7% of property values (2015: 84.9%).
24921.04 – 26 October 2016 3:23 PM – proof 5
19
www.loknstore.com Stock Code: LOKSTRATEGIC REPORT Financial Review
continued
Adjusted Net Asset Value per Share
Adjusted Net Asset Value per share up 27.6% to £3.86 (2015: £3.02)
Adjusted net assets per share is the net assets of the Group business adjusted for the valuation of leasehold stores and deferred tax 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.
At July 2016 the adjusted net asset value per share (before deferred tax) increased an impressive 27.6% to £3.86 from £3.02 last year. This
substantial increase is a result of higher property values as our new valuers recognised the strength of our landmark stores, cash generated
from operations and additional sale proceeds from the disposal of our Reading site, offset in part by an increase in the shares in issue due to
the exercise of share options by management and staff during the year
Analysis of net asset value (NAV)
Net assets
Adjustment to include operating/short leasehold stores at valuation
Add: JLL leasehold valuation (2015: C & W)
Deduct: leasehold properties and their fixtures and fittings at NBV
Deferred tax arising on revaluation of leasehold properties1
Adjusted net assets
Shares in issue
Opening shares in issue
Shares issued for the exercise of options
Closing shares in issue
Shares held in treasury
Shares held in EBT
Closing shares for NAV purposes
Adjusted net asset value per share after deferred tax provision
Adjusted net asset value per share before deferred tax provision
Adjusted net assets
Deferred tax liabilities and assets recognised by the Group
Deferred tax arising on revaluation of leasehold properties1
Adjusted net assets before deferred tax
Closing shares for NAV purposes
Adjusted net asset value per share before deferred tax provision
31 July
2016
£’000
71,475
16,575
(3,065)
84,985
(2,432)
82,553
Number
28,447
662
29,109
(2,467)
(623)
26,019
£3.17
82,553
15,361
2,432
100,346
26,019
£3.86
31 July
2015
£’000
52,969
14,760
(3,339)
64,390
(2,284)
62,106
Number
27,809
638
28,447
(2,467)
(623)
25,357
£2.45
62,106
12,252
2,284
76,642
25,357
£3.02
1 A deferred tax adjustment in respect of the uplift in the value of the leasehold properties has been included. Although this is a memorandum adjustment as
leasehold properties are included in the Group’s financial statements at cost and not at valuation, this deferred tax adjustment is included in the adjusted net
asset value calculation in order to maintain a consistency of tax treatment between freehold and leasehold properties.
Summary
Lok’nStore is a robust business with low debt and gearing which generates a rapidly growing cash flow from its substantial asset base. The
UK self-storage market is still immature and presents an excellent opportunity for further growth of the business.
20
24921.04 – 26 October 2016 3:23 PM – proof 5
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Principal Risks and Uncertainties
in operating our Business
Lok’nStore invests in prime locations where
its criteria for site selection are met and
which will enable it to develop high quality
stores which are prominent with high
visibility and strong branding. We believe this
will place us in a strong trading position and
may discourage competitors from entering
that local market. However it is possible that
Lok’nStore may be unable to execute this
strategy which will inhibit its growth. Further
it is possible that an increasing number of
competitors in the industry may negatively
impact Lok’nStore’s existing operations.
We have a large customer base spread
across the stores including those customers
who have used Lok’nStore regularly over the
years. Many of these periodically return as
their circumstances and their storage needs
change. Across all of the stores we operate
self-storage customers are a broad mix of
both domestic and business.
Property Risk
The acquisition of new sites for development
into self-storage centres is a key strategic
objective of the business. We will continue
to face significant competition for site
locations from other uses such as hotels,
car showrooms and offices as well as from
the other self-storage operators.
The process of gaining planning permissions
remains challenging. Lok’nStore may
take on the risk of obtaining planning
permission when acquiring sites in the
face of competitive bids. In these cases
we are obliged to undertake the planning,
environmental and other property due
diligence under tight timescales which
creates greater risk in the process.
Nevertheless Lok’nStore’s management has
gained significant experience in operating
in this property environment, acquiring sites
on main roads in prominent locations and
obtaining appropriate planning permissions.
We manage the construction of our
properties carefully. The building of each
store is handled through a design and build
contract with established contractors. We
employ an external team of professionals to
monitor the progress of each development.
The fitting of mezzanine floors and steel
units is generally managed in-house
using an established external professional
team of sub-contractors who understand
Lok’nStore’s particular specifications.
Finance
Lok’nStore finances its current needs
through a combination of strong operational
cash flows and debt.
Cash deposits are placed with Royal Bank
of Scotland plc on a no-notice treasury
deposit account which tracks base rate and
yields a rate equivalent to RBS bank base
rate on all deposited balances. The Group’s
cash position is reviewed daily and cash is
transferred daily between these accounts
and the Group’s operational current
accounts as required.
The main risks arising from the Group’s
financial instruments are interest rate risk
and liquidity risk. The policies for managing
these risks are regularly reviewed and
agreed by the Board. Full details are set out
in the Financial Review. Further information
on our treasury arrangements is set out in
note 16.
The financial risk management objectives
and policies of the Group, along with details
of exposure to liquidity and cash flow risk
are set out below and in note 16 (Financial
Instruments) to the financial statements.
Risk Management
Risk management has been a fundamental
part of the development of Lok’nStore.
We maintain a risk register which identifies
and categorises our risks and provides an
assessment of risk based on a combination
of ‘likelihood’ and ‘consequences and
impact’ on the business. This is reviewed
regularly by management and the Board
and underpins our structured approach
to identifying, assessing and controlling
risks that emerge during the course of
operating the business. Its purpose is to
support better decision-making through
understanding the risks inherent in both the
day-to-day operations and the strategic
direction of the Group and their likely
impact. This is a continuing and evolving
process as we review and monitor the
underlying risk elements relevant to the
business.
Market Risk
Self-storage is a developing market with
further opportunities for significant growth.
Awareness of self-storage and how it can
be used by customers is well understood
in the United States, but historically has
been relatively low throughout the UK.
Survey and anecdotal evidence suggest this
awareness is now rising in the UK. The rate
of growth in branded self-storage operations
in good trading locations continues to be
limited by the challenge of acquiring sites at
appropriate prices and obtaining planning
permission.
Credit Risk
Lok’nStore’s self-storage credit model is
strong with customers paying four weekly
in advance in addition to an initial four
weeks rental deposit. We retain a legal lien
over customers’ goods which can be sold
to cover their unpaid bills. Credit control
remains tight with only £33,210 (2015:
£38,891) of bad debts recognised during
the year representing around 0.21% of
Group revenue (2015: 0.25%). There was
£8,116 of additional costs associated with
recovery (2015: £8,714). Given the tight
credit conditions in the wider economy our
own credit control indicators are resilient,
showing no appreciable signs of weakening
during the year.
Tax Risk
We regularly monitor proposed and actual
changes in legislation in the tax regime
affecting principally corporation tax, capital
gains tax, VAT and Stamp Duty Land Tax
(SDLT). We work with our professional
advisors and through trade bodies to
understand and mitigate or benefit from their
effects.
Corporate Social Responsibility
and Employee Risk
The Corporate Social Responsibility
and Employee Risk within the business
are discussed within the Corporate
Responsibility Report.
Reputational Risk
Lok’nStore’s business reputation is very
important to the Group. Our management
and staff work hard to protect and develop
it. We always try to communicate clearly
with our customers, suppliers, local
authorities and communities, employees
and shareholders and to listen and take
account of their views. The Lok’nStore
Group websites (www.loknstore.co.uk www.
loknstore.com and www.saracendatastore.
co.uk) are important avenues of
communication and a source of information
for employees, customers and investors.
Employee communication is augmented by
quarterly staff newsletters.
Approved by the Board of Directors and
authorised for issue on 14 October 2016
and signed on its behalf by:
Andrew Jacobs
Chief Executive Officer
Ray Davies
Finance Director
21
24921.04 – 26 October 2016 3:23 PM – proof 5
www.loknstore.com Stock Code: LOKSTRATEGIC REPORT
Board of Directors
and Advisers
Executive Directors
Simon Thomas
Chairman
Andrew Jacobs
Chief Executive Officer
Ray Davies
Finance Director
Simon has been a Director of Lok’nStore
since 1997 after a successful career
in the publishing and finance sectors.
He co-founded the emerging markets
investment trust business at LCF Edmond
de Rothschild. He has also worked at Swiss
Bank Corporation, Nomura International and
Reed International.
Simon is responsible for the composition
and performance of the Board.
Andrew established Lok’nStore in February
1995 after eight years’ experience at
Nomura International in London. He has
an MPhil in Economics from Cambridge
University and a BSc in Economics from the
London School of Economics.
Andrew is responsible for strategy,
corporate finance and property.
Ray is a chartered accountant. He joined
Lok’nStore in 2004 after a number of senior
finance positions in the construction, and
health and fitness sectors. In 1992, he was
appointed Group Finance Director and
Company Secretary of Dragons Health
Clubs plc during a period of rapid and
sustained growth. Following its acquisition
by Crown Sports plc in 2000, he was
appointed Finance Director of Crown Sports
Clubs Division and Company Secretary of
Crown Sports plc, a company listed on the
London Stock Exchange.
Ray is responsible for finance, administration
and risk management.
Colin Jacobs
Director
Neil Newman
Director
Colin has been a director since founding in
1995.
Colin is responsible for identifying and
negotiating new sites for Lok’nStore, and for
business development.
Neil joined the Lok’nStore group in October
2006 rising to the position of Group Sales
Director in September 2014 and as an
Executive Director of the Group since
November 2015. Prior to joining Lok’nStore,
Neil gained a wealth of experience in the
retail sector including positions at Wickes
and Woolworths plc.
Neil takes responsibility for sales, marketing
and our people in Lok’nStore and Saracen.
22
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Non-Executive Directors
Edward Luker
Senior Non-Executive Director
Richard Holmes
Non-Executive Director
Charles Peal
Non-Executive Director
Joined Lok’nStore in 2007. Edward is
a well-known figure in the UK property
industry, having worked for CB Richard Ellis
for 33 years, where he has been a Director
and Partner for 20 years. In 1997/8 Edward
was Chairman of the Investment Property
Forum, the industry body, and has acted
for a number of pensions in the creation
of property investment funds. Edward is a
Fellow of the Royal Institute of Chartered
Surveyors and is currently Consultant
and Chairman of the Investment Advisory
Committee of CBRE Real Estate Finance
Limited.
Joined Lok’nStore in 2000. Richard is
currently Group Marketing Director of
Specsavers. Previously, Richard held a
number of senior positions within the
Boots organisation, including Director of
Offer Development at Boots e-commerce
business, Marketing Director of Boots
the Chemist and Director of Health &
Beauty. Richard was also Head of Strategy
Development for Unilever’s worldwide dental
business and holds an MSc in Economics
from Warwick University and a BSc in
Economics from the London School of
Economics.
Joined Lok’nStore in 2007. Charles started
his career in 1977 at 3i Group, the leading
UK quoted Venture Capital Company.
He was the Chief Executive of Legal and
General Ventures from 1988 to 2000 and
was a Director of various quoted private
equity investment trusts and management
buyouts. He is currently a Director of
Warnborough Asset Management, an
independent fund management business
and Chairman of BLME Sharia’a Umbrella
Fund SICAV-SIF.
Charles chairs the Audit Committee.
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
Edward sits on the Audit Committee and
chairs the Remuneration Committee.
Richard sits on the Remuneration
Committee.
Directors and Advisers
Directors
SG Thomas Chairman
A Jacobs
RA Davies
CM Jacobs Director
N Newman Director
ETD Luker Senior Non-Executive Director
RJ Holmes Non-Executive Director
Non-Executive Director
CP Peal
Auditor
RSM UK AUDIT LLP
(formerly Baker Tilly UK Audit LLP)
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
Chief Executive Officer
Finance Director
Secretary and Registered Office
Secretarial Solutions Limited
c/o Maclay Murray Spens LLP
One London Wall
London EC2Y 5AB
Nominated Adviser and Broker
finnCap Ltd
60 New Broad Street
London EC2M 1JJ
Solicitors
Maclay Murray Spens LLP
One London Wall
London EC2Y 5AB
Goodman Derrick LLP
10 St Bride Street
London EC4A 4AD
Glovers LLP
6 York Street
London W1U 6QD
Registrars
Capita Registrars
Capita Group plc
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Bankers
Royal Bank of Scotland
Abbey Gardens
4 Abbey Street
Reading
RG1 3BA
24921.04 – 26 October 2016 3:23 PM – proof 6
23
www.loknstore.com Stock Code: LOK
Directors’ Report
The Directors submit their report and the audited financial statements of the Company and of the
Group for the year ended 31 July 2016.
Principal Activity
The principal activity of the Group during the year was that of providing self-storage and managed storage services.
Review of the Business and Future Developments
A detailed account of the Group’s progress during the year and its future prospects are set out in the Chairman’s Review, and the Strategic
Report.
The key performance indicators are set out in the Highlights on page 3 and discussed in more detail in the Financial Review and the
Performance of our Stores sections of the Strategic Report.
Going Concern
A review of the Group’s business activities, together with the matters likely to influence its future development, performance and its position
in the wider market are set out in the Strategic Report. The financial position of the Group, its cash flows and borrowing facilities are shown
in the Statement of Financial Position, Cash Flow Statement and corresponding notes and policies contained within the financial statements.
Further information concerning the Group’s objectives, policies, its financial risk management objectives as well as details of financial
instruments and credit and liquidity risk are also found in the Strategic Report and in the notes to the financial statements.
The Directors can report that, based on the Group’s budgets and financial projections, they have satisfied themselves that the business
is a going concern. The Board has a reasonable expectation that the Company and the Group have adequate resources and facilities to
continue in operational existence for the foreseeable future based on Group cash balances of £5.3 million, (2015: £2.4 million) undrawn
committed facilities at 31 July 2016 of £11.2 million (2015: £12.3 million) and cash generated from operations in the year to 31 July 2016 of
£3.8 million (2015: £6.1 million). Following the agreement of new facilities with Royal Bank of Scotland on improved terms, the Group now
operates a five year £40 million revolving credit facility with RBS plc. The facility has been in place since 15 January 2016 and runs until 14
January 2021. The Group is fully compliant with all bank covenants and undertakings and is not obliged to make any repayments prior to
expiration. The financial statements are therefore prepared on a going concern basis.
Dividend
In respect of the current year, the Directors propose that a final dividend of 6.33 pence per share (2015: 5.67 pence) will be paid on 19
December 2016 to shareholders on the register on 18 November 2016. The total estimated dividend to be paid is £1,689,379 based on the
number of shares in issue on 3 October 2016 as adjusted for shares held in the Employee Benefits Trust and for shares held on treasury.
This dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial
statements.
Events after the Reporting Date
Reportable events after the reporting date are set out in Note 31 in the financial statements.
Directors
The following Directors held office during the year and subsequently:
SG Thomas
A Jacobs
RA Davies
CM Jacobs
ETD Luker
RJ Holmes
CP Peal
N Newman (from 26 November 2015)
Details of the interests of the Directors in the shares of the Company are set out below and details of their remuneration are disclosed in note
6 of the financial statements.
Biographical details of the Directors are set out on page 22.
Reappointment of Directors
In accordance with the Company’s Articles of Association, Ray Davies and Charles Peal retire by rotation and each being eligible offer
themselves for re-election at the next Annual General Meeting (AGM). Richard Holmes and Edward Luker who have over 12 years and
9 years tenure respectively as non-executives are required under the Companies Act 2006 to offer themselves for re-election at every AGM
and accordingly offer themselves for re-election at the next AGM. Neil Newman a board appointee during the year, offers himself for election
at the next AGM.
24
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Directors’ and Officers’ Liability Insurance
The Company has liability insurance covering the Directors and Officers of the Company and its subsidiaries.
Substantial Shareholdings
The Directors have been notified or are aware that the following are interested in 3% or more of the issued Ordinary Share capital of the
Company as at 3 October 2016:
Andrew Jacobs
Miton Capital Partners
Simon Thomas
Cavendish Asset Management
Slater Investments
Charles Peal
Current
rank
% at
3 October
2016
1
2
3
4
5
6
19.51
12.92
6.74
6.48
4.60
3.24
Number
of shares
5,206,600
3,447,476
1,800,000
1,729,700
1,228,750
865,000
1 Represents total shares in issue (excluding treasury shares) at 3 October 2016.
Total shares
in issue
(excluding
treasury
shares)
Total shares
in issue
(excluding
treasury
shares)
% at
5 October
2015
20.32
11.79
7.66
7.02
4.89
3.31
Number
of shares
5,305,200
3,077,476
2,000,000
1,831,700
1,275,501
865,000
26,688,4531
26,102,803
Market Valuation of Freehold Land and Buildings
The changes in property, plant and equipment during the year and details of property valuations at 31 July 2016 are shown in note 10b to
the Financial Statements. Further commentary on the property portfolio is contained in the Property Review and in the Financial Review.
Share Buy-back Authority
Authority will be sought at the Company’s AGM on 24 November 2016 from shareholders to approve a share buyback authority. The buy-
back authority will only be exercised in circumstances where the Directors regard such purchases to be in the best interests of shareholders
as a whole.
Statement of Disclosure of Information to the Auditor
The Directors who were in office at the date of approval of these financial statements have confirmed that, as far as they are aware, there
is no relevant audit information of which the auditor is unaware. Each of the Directors has confirmed that they have taken all the steps that
they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been
communicated to the auditor.
Annual General Meeting
The Company’s Annual General Meeting will be held on 24 November 2016 at 5.30pm at the offices of Goodman Derrick LLP 10, St Bride
Street London EC4A 4AD.
Auditor
A resolution to reappoint RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP) as auditor will be put to the members at the Annual General
Meeting.
A formal notice together with explanatory circular and Form of Proxy will be sent to shareholders.
On behalf of the Board.
Ray Davies
Director
14 October 2016
24921.04 – 26 October 2016 3:23 PM – proof 6
25
www.loknstore.com Stock Code: LOKGOVERNANCE REPORT Corporate Social
Responsibility Report
Corporate and Social
Responsibilities
Lok’nStore conducts its business in a
manner that reflects honesty, integrity
and ethical conduct. Our Corporate
Social Responsibility Report sets out
our environmental policy and how we
manage our impact on the environment,
our policies and principles in relation to our
responsibilities to stakeholders including
suppliers, customers and employees.
We believe that the long-term success of
our business is best served by respecting
the interests of all our stakeholders.
Management of social, environmental and
ethical issues is of high importance to
Lok’nStore. These issues are dealt with
on a day-to-day basis by the Group’s
managers with principal accountability lying
with the Board of Directors. We look for
opportunities to address our responsibility
to the environment, and we pay close
attention to our energy use, carbon dioxide
emissions, water use and waste production.
A full assessment is set out below in our
Environmental Policy.
Customers
We believe in clarity and transparency.
Brochures and literature are written in
plain English, explaining clearly our terms
of business without hiding anything in the
‘small print’. We are open and honest
about our products and services and do
not employ pressure selling techniques
or attempt to take advantage of any
vulnerable groups. If we make a mistake
we acknowledge it, deal with the problem
quickly, and learn from our error. We listen
to our customers as we know that they
can help us improve our service to them. In
return a substantial amount of our business
comes from previous customers, existing
customers taking more space and customer
referrals.
Suppliers
We are committed to conducting our
business with suppliers in a fair and honest
manner, with openness and integrity,
operating in accordance with the terms
and conditions agreed upon. We expect
our suppliers to operate to these same
principles.
Employees
At 31 July 2016 we had 153 employees
(2015:145).
We treat our employees with dignity and
respect and are committed to providing
a positive attitude in the business and an
enjoyable working environment. We have
a professional open culture where staff
can exchange ideas and offer suggestions
for work and business improvement.
This encourages our staff to build on
their skills, through appropriate training
and regular performance review. Regular
training courses at our Farnborough
Head Office support these objectives. We
have a large conference room which can
accommodate all our training requirements
for the foreseeable future. This reduces
outgoings and increases and improves
contact between Head Office and the stores
by bringing staff into Head Office for their
training. This in turn contributes to attracting
and retaining the right people which is key
to the success of Lok’nStore.
The Lok’nStore Academy
This will be the second year of our running
the Lok’nStore Academy which has been
received very positively by our people
throughout the Group. The Academy
brings some great strategic and operational
benefits, including:-
■ Aligning all of our training and
development under one “branded “
project
■ To build teams for the future through
internal succession planning
■ Enhancing the internal and external
perception of the business as a great
place to work, giving our people a sense
of belonging and achievement through
our training and development
During the year 6 employees successfully
completed National, Vocational
Qualifications under the sponsorship of the
academy. The Academy has had a good
impact on the sales skills of our customer
facing teams, with specific increase seen
in the conversion of new enquiries from our
website as a direct result of the academy
workshops. We also successfully promoted
3 internal candidates to Centre Managers
following the completion of our management
development training.
The Academy encompasses all “in house”
training, quality audits (such as our monthly
mystery shop programme and standards
audits) and performance reviews.
Share Ownership Plans
All employees are eligible to participate
in our share ownership plans. Lok’nStore
operates a Share Incentive Plan with 124
members (2015: 117), a total of 81% of
employees participating in the Scheme
(2015: 81%). This high level of participation
is testament to the loyalty and commitment
of our staff. Our personnel 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 and efforts over the year.
Policy on Payment of Suppliers
The Group does not follow any formal code
or standard on payment practice. The
Company’s policy, which is also applied
by the Group, is to ensure that, in the
absence of dispute, all suppliers are dealt
with in accordance with standard payment
practice, whereby all outstanding trade
accounts are settled within the terms agreed
with the supplier at the time of the supply or
otherwise 30 days from invoice date. At the
year-end the credit taken from suppliers by
the Group was 50 days (2015: 56 days).
Health and Safety
The Board recognises the prime importance
of maintaining high standards of Health &
Safety and healthy working conditions for
staff, customers, visitors, contractors and
other people who may be affected by our
business activities.
Lok’nStore has a Property Risk Committee
which meets every other month and
considers issues relevant to Health and
Safety and other risk issues within the
Group under the overall supervision of Ray
Davies, Finance Director, who carries Board
responsibility for risk management.
The Health and Safety policy is reviewed by
the Committee on an annual basis. It is also
amended to include changes to Health and
Safety Law as they occur. The Health and
Safety policy clearly sets out the duties and
responsibilities of the Chief Executive Officer,
Managers and all staff within the Group.
Employee Benefit Trust
The Employee Benefit Trust owns 623,212
shares (2015: 623,212), the costs of
which are shown as a deduction from
shareholders’ funds. Full details are provided
in note 26 - Own Shares.
26
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Environmental Performance
Our Environmental Policy is to effectively manage our waste, control
our polluting emissions and to encourage our suppliers to minimise
their impact on the environment. Trucost, the environmental
reporting company has reviewed Lok’nStore Group plc’s reporting
of environmental matters in its Annual Report for the year ended 31
July 2016.
Figure 1 shows the level of total GHG emissions each year since the
start of reporting. The figures include direct emissions from vehicles
and gas boilers and indirect emissions from electricity. Since 2015
Lok’nStore has stopped hiring vans to customers, and hence the
emissions, previously accounted for as indirect emissions, are now
zero.
The Group’s environmental report is fully in accordance with
Government Guidelines, Environmental Key Performance Indicators:
Reporting Guidelines for UK Business (2006).
Environmental Management and Performance
Lok’nStore Group has been measuring its environmental impacts
for the last eleven years (since FY 2005). Monitoring focuses on
environmental key performance indicators (eKPIs): greenhouse gas
emissions (GHG), water use and waste.
Highlights year ending 31 July 2016
■ In 2016 total GHG emissions have been reduced by 10%, with
288 tonnes (319 tonnes in 2015). Over the eleven-year period,
GHG emissions have reduced by 76%, from 1,189 tonnes in
2005. When normalized to turnover, there has been an 11%
reduction this year, from 21 tCO2e/£m to 18 tCO2e/£m.
Figure 1: Direct and Indirect GHG emissions
s
e
n
n
o
t
e
2
O
C
1,600
1,400
1,200
1,000
800
600
400
200
0
180
160
140
120
100
80
60
40
20
0
r
e
v
o
n
r
u
T
m
r
e
p
e
2
O
C
t
■ Following the effective elimination of indirect emissions from
2005
2006
2007 2008 2009 2010 2011
2012
2013
2014 2015 2016
electricity at its Lok’nStore facilities by the purchase of 100%
renewable sourced electricity, the Group’s direct emissions,
which result from natural gas and vehicle fuel consumption, now
account for 85% of overall GHG emissions. As direct gas and
fuel use is now the largest source of GHG emissions, Lok’nStore
has concentrated on reducing this impact by 5% (normalised to
turnover) to 246 tonnes (2015, 255 tonnes).
■ Electricity generation from PV installations rose by 23% to 149
MWh (2015, 122 MWh). The electricity generation in 2016 is
equivalent to 62 tonnes CO2e when supplied from the national
grid. Lok’nStore has opened a new facility in Bristol, which has
contributed an additional 18 MWh.
■ Total waste sent to landfill reduced for the 11th successive
year to 164 tonnes (2015, 168 tonnes), a 3% reduction on a
normalised basis.
■ Water consumption has been reduced by 72% since 2005.
Overall GHG emissions
The total GHG emissions (direct and indirect) have decreased
by 10%, falling from 319 tCO2e to 288 tCO2e. Since the start of
reporting in 2005, when emissions were 1,189 tonnes in the year,
the current level represents a 76% reduction. When normalized
based on turnover, the decrease in emissions from 2005 is 88%.
Absolute GHG emissions
GHG Emissions Intensity, CO2e tonnes per million Turnover
In previous years, indirect GHG emissions from electricity
consumption have been proportionally higher than direct emissions.
However, due to using 100% renewable energy at its Lok’nStore
facilities for the fourth consecutive year, direct GHG emissions
from 2013 onwards are proportionally higher than indirect GHG
emissions. Lok’nStore will continue identifying opportunities to
reduce its GHG emissions with a particular focus on natural gas
consumption and fuel use.
Indirect GHG Emissions (electricity)
For the eighth year running all of Lok’nStore Ltd.’s electricity was
supplied by Green Energy plc. It has been confirmed by Green
Energy that 100% of the electricity supplied to Lok’nStore Ltd has
been from renewable sources. Since 2013 reporting, an emission
factor of zero is applied to Lok’nStore’s electricity consumption
to account for its usage of renewables. This change effectively
eliminates Lok’nStore Ltd.’s indirect emissions from electricity
consumption, which now only reflect Saracen’s electricity usage.
Absolute indirect GHG emissions from electricity consumption
decreased from 64 tCO2e to 42 tCO2e. The decrease is due
to Saracen using renewable energy (10% of its total energy
consumption) for the first time this year. When normalised to
turnover, the intensity is 3 tCO2e per £m turnover, which is a 35%
decrease from the previous year.
www.loknstore.com
Stock Code: LOK
27
24921.04 – 26 October 2016 3:23 PM – proof 6
GOVERNANCE REPORT
Environmental Performance
Figure 2 shows absolute and normalised GHG emissions from
electricity consumption over the last eleven years.
Figure 2: GHG emissions from electricity consumption
s
e
n
n
o
t
e
2
O
C
1,200
1,000
800
600
400
200
0
2005
2006
2007 2008 2009 2010 2011
2012
2013
2014 2015 2016
140
120
100
80
60
40
20
0
r
e
v
o
n
r
u
T
m
r
e
p
e
2
O
C
t
Poole, Maidenhead and Reading were operating for the full financial
year and generated 131 MWh of electricity (2015, 122 MWh). Of this
86% was used on site providing 26% of the stores’ annual electricity
needs, with a balance of 17 MWh exported back to the grid.
Technical issues reduced the output from the Maidenhead store
for a part of the reporting period. The system generated 38 MWh
of electricity (2015, 50MWh) which still provided 29% of the store’s
annual electricity requirement.
The solar arrays in Bristol were added later in the year. The facility
has generated 18 MWh electricity. Of the total installed capacity
at Bristol, 11 MWh was used at its own facility and 7 MWh was
exported to the grid. With the solar panel arrays installed at Poole,
Maidenhead, Reading and Bristol, Lok’nStore was able to increase
electricity generation by 23% compared to 2015. This year a larger
proportion of the electricity generated has been used on site.
84% of the total electricity produced is now used by Lok’nStore’s
facilities. Lok’nStore also exported 24 MWh to the national grid in
2016, which is a decrease of 7% when compared to last year (2015,
26 MWh).
Absolute GHG emissions
GHG Emissions Intensity, CO2e tonnes per million Turnover
Table 1: Lok’nStore’s photovoltaic installations –
electricity generation
Electricity generation
Where appropriate Lok’nStore equips new stores with solar panel
arrays. In 2014, Lok’nStore installed a 50kWp array at Maidenhead
in addition to the installation at Poole. In 2015 Lok’nStore added
PV installations at their new Reading facility and then later that year,
at their facility in Bristol. Lok’nStore will continue and expand its
electricity generation from solar power and has also installed PV
arrays at the new building completed for the Southampton centre,
which will start being operational in the next financial year.
2015
2016 % change
Generation (MWh) – Poole
Generation (MWh) –
Maidenhead
Generation (MWh) – Reading
Generation (MWh) – Bristol
Total generation, MWh
tCO2e of generated electricity
at national standard mix
50
50
21
122
56
46
38
47
18
149
62
-8%
-25%
125%
23%
9%
Figure 3 and table 1 below show the overall electricity generation
from the PV systems, the consumption of this electricity at each site
and the electricity exported to the national grid.
Table 2: Lok’nStore’s photovoltaic installations –
electricity exported
Figure 3: Electricity usage on site and exported from PV
systems
Generation (MWh) – Poole
Generation (MWh) –
Maidenhead
Generation (MWh) – Reading
Generation (MWh) – Bristol
Total exported, MWh
tCO2e of exported electricity at
national standard mix
2015
7
18
0.2
-
26
12
2016 % change
6
7
4
7
24
12
-21%
-60%
2011%
-7%
-7%
The total generation of 149 MWh would represent 62 tCO2e (2015,
56 tCO2e), if drawn from the national grid. Although Lok’nStore
generated 23% more electricity from its photovoltaic installations,
there was a 7% decrease in the amount of electricity exported,
which is a change in direction of its previous trend of increasing
annual export.
4.27
43.00
5.83
40.2
7.20
30.80
6.66
11.49
Lok’nStore
Poole
Lok’nStore
Maidenhead
Lok’nStore
Reading
Lok’nStore
Bristol
Total electricity used on site (MWh)
Total electricity exported (MWh)
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
h
W
M
%
28
Lok’nStore Group Plc
Annual Report and Accounts for the year ended 31 July 2016
24921.04 – 26 October 2016 3:23 PM – proof 6
Direct GHG emissions
In 2011, Lok’nStore acquired the Saracen records management
business which includes a document delivery and collection service.
This has led to a 16% increase in the GHG emissions in comparison
to the baseline year 2005. The Group has introduced a new van fleet
fitted with Euro V compliant diesel engines which greatly improve
fuel efficiency. In 2015, the company discontinued its services to
hire vans to customers, reducing the absolute GHG emission to 212
tCO2e (2015, 221 tCO2e) Overall, vehicle fuel GHG emissions were
reduced by 5% on a normalised basis to 14 tCO2e/£m.
Emissions from gas boilers have changed marginally with 33 tCO2e
in 2016 compared to 34 tCO2e in the previous year. Direct GHG
emissions intensity from natural gas usage has remained constant at
2 tCO2e per £m turnover. The natural gas consumption includes the
gas consumed by office tenants. Lok’nStore is currently exploring
options to improve the tenants’ consumption and to monitor their
consumption separately.
Overall, the Group’s direct carbon footprint has decreased from 255
to 246 CO2e tonnes. Normalised to turnover, direct GHG emissions
decreased from 17 to 16 CO2e tonnes per £m, which is a 5%
reduction.
Figure 4 shows absolute and normalised GHG emissions from
natural gas consumption and vehicle fuel consumption over the last
ten years.
Figure 4: GHG emissions from natural gas and vehicles
s
e
n
n
o
t
e
2
O
C
350
300
250
200
150
100
50
0
30
25
20
15
10
5
0
r
e
v
o
n
r
u
T
m
r
e
p
e
2
O
C
t
2005
2006
2007 2008 2009 2010 2011
2012
2013
2014 2015 2016
Absolute GHG emissions
GHG Emissions Intensity, CO2e tonnes per million Turnover
Waste generation and recycling
In line with the Group’s waste management strategy, we continue
to monitor waste generation and recycling levels. For the eleventh
successive year Lok’nStore reduced the quantity of waste
produced. Waste sent to landfill fell to 164 tonnes in 2016, from
168 tonnes in the previous year, a 3% reduction when normalised
to turnover. Total waste recycled has fallen from 240 tonnes to 218
tonnes this year, representing a 9% decrease in absolute quantity.
However, this can be attributed to the reduction of total waste
by 7% when normalised to turnover. We also monitor hazardous
(sanitary) waste, but the amount is negligible.
www.loknstore.com
Stock Code: LOK
Figure 5 shows absolute and normalised landfill waste produced
over the last ten years.
Figure 5: Landfill waste
s
e
n
n
o
t
e
2
O
C
1,000
800
600
400
200
0
120
100
80
60
40
20
0
r
e
v
o
n
r
u
T
m
r
e
p
e
2
O
C
t
2005
2006
2007 2008 2009 2010 2011
2012
2013
2014 2015 2016
Absolute GHG emissions
GHG Emissions Intensity, CO2e tonnes per million Turnover
Since the acquisition of Saracen, the Group also monitors its
contracted waste produced (i.e. consumer waste sent to Saracen
for disposal). In 2016, Saracen recycled 268 tonnes of shredded
paper on behalf of its customers, compared to 344 tonnes in 2015.
It also disposed of media and exhibition items and PC equipment,
which is nearly three times as much as in 2015 (0.61 tonne).
Water consumption
The water consumption intensity reduced by 72% from 662 m3/£m
in 2005 to 185 m3/£m in 2016. This KPI is an extremely sensitive
and useful indicator of any anomalous use or leakage. This year’s
water consumption intensity of 185 m3/£m represents a 2% rise
compared to 2015. The 2016 absolute consumption of 2,885 m3 of
water (2015, 2,780 m3) represents a 4% increase.
Figure 6 shows absolute and normalised water use over the last ten
years.
Figure 6: Water use
r
e
t
e
m
c
b
u
c
i
6,000
4,500
3,000
1,500
0
2005
2006
2007 2008 2009 2010 2011
2012
2013
2014 2015 2016
Absolute water use
Water Intensity, cubic meter per million Turnover
r
e
v
o
n
r
u
T
m
r
e
p
e
2
O
C
t
700
600
500
400
300
200
100
0
29
24921.04 – 26 October 2016 3:23 PM – proof 3
Quantity
GOVERNANCE REPORT
Environmental Performance
Direct Impacts (Operational)
Greenhouse
Gases
Definition
Gas
Emissions from utility boilers
Vehicle
Fuel
Diesel and petrol used
in company vans and by
employees on company
business.
Total
Greenhouse
Gases
Includes Carbon Dioxide
(CO2), Methane (CH4) and
Nitrous Oxide (N2O)
Data Source and
Calculation Methods
Yearly consumption in kWh
collected from fuel bills,
converted according to
Defra Guidelines
Fuel invoices, recorded
mileage or satellite tracking
converted according to
Defra Guidelines.
Calculated according to
Defra Guidelines
Greenhouse
Gases
Landfill
Definition
General office waste, which
includes a mixture of paper,
card, wood, plastics and
metals.
Recycled
General office waste
recycled, primarily
cardboard, and fluorescent
lights.
Data Source and
Calculation Methods
Volume of waste generated
per annum, calculated by
recording the number of bins
& skips removed, converted
to tonnes according to Defra
Guidelines.
Volume of waste recycled
per annum, calculated by
recording the number of
bins & skips removed for
recycling, converted to
tonnes according to Defra
Guidelines.
Absolute Tonnes
CO2e
Normalised*
Tonnes CO2e Per £m
Turnover
2016
2015
2016
2015
% change in
normalised
quantity
33
34
3
2
4%
212
221
14
14
-5%
246
255
16
17
-5%
Quantity
Absolute Tonnes
Normalised*
Tonnes Per £m
Turnover
2016
2015
2016
2015
% change in
normalised
quantity
164
168
11
11
-3%
218
240
14
16
-10%
30
Lok’nStore Group Plc
Annual Report and Accounts for the year ended 31 July 2016
24921.04 – 26 October 2016 3:23 PM – proof 6
Indirect Impacts (Supply Chain)
Quantity
Absolute Tonnes
CO2e
Normalised*
Tonnes CO2e Per £m
Turnover
Greenhouse
Gases
Definition
Data Source and
Calculation Methods
2016
2015
2016
2015
% change in
normalised
quantity
Energy
Use
Directly purchased
electricity, which generates
Greenhouse Gases including
CO2 emissions
Yearly consumption of
directly purchased electricity
in kWh collected, converted
according to Defra
Guidelines
42
64
3
4
35%
Quantity
Absolute m3
Normalised*
m3 Per £m Turnover
2016
2015
2016
2015
% change in
normalised
quantity
2,885
2,708
185
180
-2%
Quantity
Absolute Tonnes
CO2e
Normalised*
Tonnes CO2e Per £m
Turnover
2016
2015
2016
2015
% change in
normalised
quantity
–
–
–
–
–
Water
Definition
Supplied
water
Consumption of piped
water. No water directly
abstracted
by the Group.
Data Source and
Calculation Methods
Yearly consumption of
purchased water
Indirect Impacts – Downstream
Greenhouse
Gases
Definition
Vehicle
Fuel
Petrol and diesel used by
customers in van hire fleet.
Data Source and
Calculation Methods
Recorded mileage,
converted according to
Defra Guidelines.
Figures are rounded up
* Normalised based on annual turnover for the respective years.
www.loknstore.com
Stock Code: LOK
31
24921.04 – 26 October 2016 3:23 PM – proof 6
GOVERNANCE REPORT
Corporate Governance
Introduction
The UK Corporate Governance Code
is intended to promote the principles of
openness, integrity and accountability.
The Group and Board fully support these
principles. In view of the size and nature of
the Group, the Directors have taken into
consideration the recommendations of the
Guidance for Smaller Quoted Companies
produced by the Quoted Companies
Alliance and applied the principles that they
consider relevant to the Group.
Narrative Statement
Directors
There is a Board of Directors, which is set
up to control the Group and consists of
five Executive and three Non-Executive
Directors. Richard Holmes who by virtue of
over twelve years tenure as a non-executive
is not considered to be independent.
Edward Luker and Charles Peal are by
virtue of a tenure now exceeding 9 years
also not considered to be independent.
SG Thomas is Chairman of the Board
and the Board has a formal schedule of
matters reserved for its consideration and
decision. This schedule includes approval of
financial strategy, major investments, review
of performance, monitoring risk, ensuring
adequate capital resources are available and
reporting to shareholders. The Chairman
is not independent as he is a substantial
shareholder of the Company and was
formerly the Chief Executive.
The full Board meets at least every three
months to discuss a range of significant
matters including strategic decisions, major
acquisitions and Group performance. A
procedure to enable Directors to take
independent professional advice if required
has been agreed by the Board and formally
confirmed by all Directors.
Each Board meeting receives the latest
financial information available which consists
of detailed management accounts with the
relevant comparisons to budget. A current
trading appraisal is given by the Executive
Directors.
Each member of the Board is subject to
the re-election provisions of the Articles
of Association, which require them to
offer themselves for re-election at least
once every three years. In the event of a
proposal to appoint a new Director, this
is discussed at a full Board meeting with
each member being given the opportunity
to meet the individual concerned prior to
any formal decision being taken. Richard
Holmes, Edward Luker and Charles Peal
who all have over nine years’ tenure as
non-executives are now required under the
Companies Act 2006 to offer themselves for
re-election at every Annual General Meeting
and accordingly offer themselves for election
at the next AGM.
Directors’ Remuneration
The Remuneration Committee consists of
Edward Luker (Chairman of the Committee)
and Richard Holmes. The Committee
meets and considers, within existing
terms of reference, the remuneration
policy and makes recommendations to
the Board for each Executive Director. The
Committee’s remuneration policy aims
to design a package that will align the
interests of Executive Directors and those
of shareholders. The Executive Directors’
remuneration consists of a package of
basic salary, bonuses and share options,
which are linked to corporate achievements
and these levels are determined by the
Remuneration Committee. The details of
each Director’s remuneration are set out in
note 6 in the financial statements.
The Committee meets once a year and
considers proposals from the Chairman and
Chief Executive Officer.
Shareholders’ Relations
The Directors meet and discuss the
performance of the Group with shareholders
during the year. Queries raised by a
shareholder, either verbally or in writing,
are promptly answered by whoever is best
placed on the Board to do so. At the AGM
the Board give a presentation of events
and progress during the year and Directors
are individually introduced to shareholders
at the Meeting. Attendee shareholders are
encouraged to mix and engage with the
Directors after the formal business of the
AGM has concluded.
Accountability and Audit
The Board believes that the Annual Report
and Accounts play an important part
in presenting all shareholders with an
assessment of the Group’s position and
prospects. The Chairman’s Review contains
a detailed consideration of the Group’s
position and prospects.
Internal Control
The Board is responsible for ensuring
that the Group has in place a system of
internal control. In this context, internal
control is defined as those policies and
processes established to ensure that
business objectives are achieved cost
effectively, assets and shareholder value
are safeguarded, and laws, regulations
and policies are complied with. Controls
can provide reasonable but not absolute
assurance that risks are identified and
adequately managed to achieve business
objectives and to minimise material errors,
losses and fraud or breaches of laws and
regulations.
The Group operates a strict system
of internal financial control, which is
designed to ensure that the possibility of
misstatement or loss is kept to a minimum.
There is a comprehensive system in place
for financial reporting and the Board receives
a number of reports to enable it to carry out
these functions in the most efficient manner.
These procedures include the preparation
of management accounts, forecast variance
analysis and other ad hoc reports. There are
clearly defined authority limits throughout
the Group.
The Group continues to develop the
internal audit function utilising operational
management to make unannounced store
visits as part of a process supported
by audit control checklists and other
procedures. This undertaking has
contributed to sales by promoting efficient
store management, but also addresses risk
and credit control, cash and store banking,
and space and customer management. The
internal audit checks are designed to ensure
any fraud or mismanagement is quickly
identified.
32
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 The Board supports the highest standards
in corporate governance, appropriate to
its size, and continues to consider the UK
Corporate Governance Code as well as
the Group’s procedures to maintain proper
control and accountability. In common
with many small companies, a nomination
committee has not been established and
appointments to the Board are decided on
by the Board as a whole.
On behalf of the Board.
Simon G Thomas
Chairman
14 October 2016
The Group has a whistle blowing procedure
within its staff handbook, which is issued to
all staff. All employees may raise concerns
about malpractice or improper or potentially
illegal behaviour in confidence without
concern of victimisation or disciplinary
action.
Audit Committee
The Company has an established Audit
Committee, to whom the external auditor,
RSM UK Audit LLP, reports. The Committee
consists of Charles Peal (Chairman of
the Committee) and Edward Luker. It is
responsible for the relationship with the
Group’s external auditor and the review of
the Group’s financial reporting and internal
controls.
The Committee meets prior to the
announcement of annual results to consider
the Auditors’ Findings Report and consider
any corresponding recommendations, and
would convene at other times should it be
necessary.
The Audit Committee also undertakes
a formal assessment of the auditor’s
independence each year, which includes:
■ a review of non-audit services provided
to the Group and related fees;
■ discussion with the auditor of a written
report detailing all relationships with
the Company and any other parties
that could affect independence or the
perception of independence;
■ a review of the auditor’s own procedures
for ensuring the independence of the
audit firm and partners and staff involved
in the audit, including the regular rotation
of the audit partner every five years; and
■ obtaining written confirmation from
the auditor that, in their professional
judgement, they are independent.
An analysis of the fees payable to the
external audit firm in respect of both audit
and non-audit services during the year is set
out in note 5 to the financial statements.
The Committee is satisfied that the external
auditor remains independent in the
discharge of their audit responsibilities.
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
www.loknstore.com
Stock Code: LOK
33
24921.04 – 26 October 2016 3:23 PM – proof 6
Directors’ Responsibilities in the
Preparation of Financial Statements
The Directors are responsible for preparing the Strategic Report and Directors’ Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare Group and Company Financial Statements for each financial year. The Directors are required
by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union (“EU”) and have elected under company law to prepare the Company financial
statements in accordance with IFRS as adopted by the EU.
The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and the
Company and the financial performance of the Group. The Companies Act 2006 provides in relation to such financial statements
that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair
presentation.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.
In preparing the Group and Company financial statements the directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with IFRSs adopted by the EU; and
d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable
them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of
the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information on the Lok’nStore Group plc
websites.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
34
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Independent Auditor’s Report to the
Members of Lok’nStore Group plc
We have audited the group and parent company financial statements (“the financial statements”) on pages 36 to 71. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As more fully explained in the Directors’ Responsibilities Statement on page 34, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at http://www.frc.org.
uk/auditscopeukprivate
Opinion on financial statements
In our opinion:
■ the financial statements give a true and fair view of the state of the group’s and the parent’s affairs as at 31 July 2016 and of the group’s
profit for the year then ended;
■ the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
■ the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as
applied in accordance with the Companies Act 2006; and
■ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
■ adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
■ the parent company financial statements are not in agreement with the accounting records and returns; or
■ certain disclosures of directors’ remuneration specified by law are not made; or
■ we have not received all the information and explanations we require for our audit.
David Clark (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, (formerly Baker Tilly UK Audit LLP) Statutory Auditor
Chartered Accountants
25 Farringdon Street
EC4A 4AB
14 October 2016
24921.04 – 26 October 2016 3:23 PM – proof 6
35
www.loknstore.com Stock Code: LOKGOVERNANCE REPORT Consolidated Statement of
Comprehensive Income
For the year ended 31 July 2016
Revenue
Total property, staff, distribution and general costs
Adjusted EBITDA1
Amortisation of intangible assets
Depreciation and loss on sale
Equity settled share based payments
Irrecoverable property costs
Property disposal costs
Net settlement proceeds
Operating profit1
Finance income
Finance cost
Profit before taxation
Income tax expense
Profit for the year
Profit attributable to:
Owners of the parent
Other Comprehensive Income
Items that will not be reclassified to profit and loss
Increase in property valuation
Deferred tax relating to change in property valuation
Items that may be subsequently reclassified to profit and loss
Increase/(decrease) in fair value of cash flow hedges
Deferred tax relating to cash flow hedges
Other comprehensive income
Total comprehensive income for the year
Attributable to owners of the parent
Earnings per share
Basic
Diluted
Notes
1a
2a
2c
2c
3
4
5
7
2016
£’000
16,056
(9,761)
6,295
(165)
(1,537)
(182)
–
(123)
1,940
(67)
6,228
313
(1,048)
5,493
(1,211)
4,282
2015
£’000
15,424
(9,742)
5,682
(165)
(1,440)
(211)
(209)
–
–
(2,025)
3,657
141
(1,144)
2,654
(686)
1,968
25
4,282
1,968
17,651
(2,387)
15,264
83
(21)
62
15,326
19,608
19,608
16.60p
16.24p
8,009
(1,578)
6,431
(170)
38
(132)
6,299
8,267
8,267
7.84p
7.64p
9
9
1 Adjusted EBITDA and Operating profit are defined in the accounting policies section of the notes to the financial statements.
36
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Consolidated Statement of
Changes in Equity
For the year ended 31 July 2016
1 August 2014
Profit for the year
Other comprehensive income:
Increase in property valuation net of
deferred tax
Increase in fair value of cash flow hedges
net of deferred tax
Total comprehensive income for the year
Transactions with owners:
Dividend paid
Share based payments
Transfers in relation to share based
payments
Deferred tax credit relating to share
options
Exercise of share options
Total transactions with owners
Transfer realised gain on asset disposal
Transfer additional dep’n on revaluation
net of deferred tax
31 July 2015
Profit for the year
Other comprehensive income:
Increase in property valuation net of
deferred tax
Decrease in fair value of cash flow
hedges net of deferred tax
Total comprehensive income for the year
Transactions with owners:
Dividend paid
Share based payments
Transfers in relation to share based
payments
Deferred tax credit relating to share
options
Exercise of share options
Total transactions with owners
Transfer realised gains on asset disposal
Transfer additional dep’n on revaluation
net of deferred tax
31 July 2016
Share
capital
£’000
279
–
Share
premium
£’000
1,801
–
Other
reserves
£’000
8,595
–
Revaluation
reserve
£’000
26,478
–
Retained
earnings
£’000
8,057
1,968
Total
equity
£’000
45,210
1,968
–
–
–
–
–
–
–
6
6
–
–
285
–
–
–
–
–
–
–
–
6
6
–
–
291
–
–
–
–
–
–
–
813
813
–
–
2,614
–
–
–
–
–
–
–
–
953
953
–
–
3,567
–
(132)
(132)
–
211
(298)
309
–
222
–
–
8,685
–
–
62
62
–
182
(401)
(96)
–
(315)
–
–
8,432
6,431
–
6,431
–
–
–
–
–
–
(421)
(249)
32,239
–
15,264
–
15,264
–
–
–
–
–
–
(1,639)
(262)
45,602
–
6,431
–
1,968
(1,847)
–
298
–
–
(1,549)
421
249
9,146
4,282
(132)
8,267
(1,847)
211
–
309
819
(508)
–
–
52,969
4,282
–
15,264
–
4,282
(2,147)
–
401
–
–
(1,746)
1,639
262
13,583
62
19,608
(2,147)
182
–
(96)
959
(1,102)
–
–
71,475
37
24921.04 – 26 October 2016 3:23 PM – proof 6
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Company Statement of
Changes in Equity
For the year ended 31 July 2016
31 July 2014
Loss for the year
Equity settled share based payments
Transfer in relation to share based payments
Exercise of share options
31 July 2015
Loss for the year
Equity settled share based payments
Transfer in relation to share based payments
Exercise of share options
31 July 2016
Share
capital
£’000
Share
premium
£’000
Retained
deficit
£’000
Other
reserves
£’000
279
–
–
–
6
285
–
–
–
6
291
1,801
–
–
–
813
2,614
–
–
–
953
3,567
(167)
(139)
–
298
–
(8)
(276)
–
401
–
117
2,267
–
211
(298)
–
2,180
–
182
(401)
–
1,961
Total
£’000
4,180
(139)
211
–
819
5,071
(276)
182
–
959
5,936
38
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Statements of
Financial Position
31 July 2016
Company Registration No. 04007169
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Development loan capital
Amounts due from subsidiary undertakings
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Derivative financial instruments
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax
Total liabilities
Net assets
Equity attributable to owners of the parent
Called up share capital
Share premium
Other reserves
Retained earnings/(deficit)
Revaluation reserve
Total equity attributable to owners of the parent
Notes
Group
2016
£’000
Group
2015
£’000
Company
2016
£’000
Company
2015
£’000
10a
10b
11
12
29
13
14
16
15
17b
17a
17b
18
19
24a
25
3,593
104,363
–
3,159
–
111,115
165
4,952
5,335
10,452
121,567
(5,794)
(173)
(37)
(6,004)
(28,727)
–
(15,361)
(44,088)
(50,092)
71,475
291
3,567
8,432
13,583
45,602
71,475
3,758
87,802
–
2,779
–
94,339
141
2,479
2,435
5,055
99,394
(5,971)
(535)
–
(6,506)
(27,548)
(119)
(12,252)
(39,919)
(46,425)
52,969
285
2,614
8,685
9,146
32,239
52,969
–
–
2,288
–
3,648
5,936
–
–
–
–
5,936
–
–
–
–
–
–
–
–
–
5,936
291
3,567
1,961
117
–
5,936
Approved by the Board of Directors and authorised for issue on 14 October 2016 and signed on its behalf by:
Andrew Jacobs
Chief Executive Officer
Ray Davies
Finance Director
24921.04 – 26 October 2016 3:23 PM – proof 6
–
–
2,106
–
2,965
5,071
–
–
–
–
5,071
–
–
–
–
–
–
–
–
–
5,071
285
2,614
2,180
(8)
–
5,071
39
www.loknstore.com Stock Code: LOKFINANCIAL REPORT
Consolidated Statement of
Cash Flows
For the year ended 31 July 2016
Operating activities
Cash generated from operations
Income tax paid
Net cash generated from operations
Investing activities
Development loan capital
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Interest received
Net cash generated from investing activities
Financing activities
Proceeds from new borrowings
Repayment of borrowings
Finance costs paid
Equity dividends paid
Proceeds from issue of ordinary shares (net)
Net cash used in financing activities
Net increase in cash and cash equivalents in the year
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
No statement of cash flows is presented for the Company as it had no cash flows in either year.
Notes
27a
2016
£’000
3,774
(961)
2,813
(380)
(6,988)
8,399
14
1,045
28,816
(27,701)
(885)
(2,147)
959
(958)
2,900
2,435
5,335
2015
£’000
5,984
(338)
5,646
(2,650)
(3,583)
2,901
12
(3,320)
–
–
(1,041)
(1,847)
819
(2,069)
257
2,178
2,435
40
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Accounting Policies
General Information
Lok’nStore Group plc is an AIM listed company incorporated and domiciled in England and Wales. The address of the registered office is
One London Wall, London EC2Y 5AB, UK. Copies of this Annual Report and Accounts 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.
Basis of accounting
The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International
Financial Reporting Interpretations Committee (IFRIC) Interpretations as adopted by the European Union and comply with those parts of
the Companies Act 2006 that are applicable to companies reporting under IFRS. The Group has applied all accounting standards and
interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretation Committee
relevant to its operations and effective for accounting periods beginning on or after 1 August 2015.
The financial statements have been prepared on the historic cost basis except that certain trading properties and derivative financial
instruments are stated at fair value.
Adoption of new and revised standards
The following relevant new standards, interpretations and amendments have been adopted in the year but have no significant impact.
IFRS 10: Consolidated Financial Statements
IFRS 11: Joint Arrangements
IFRS 12: Disclosure of Interest in Other Entities
Amendment to IAS 19: Employee Benefits
Amendment to IAS 27: Separate Financial Statements
Amendment to IAS 28: Investments in Associates and Joint Ventures
Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities
Amendment to IAS 36: Impairment of Assets
Amendment to IAS 39: Financial Instruments: Recognition and Measurement
Standards in issue but not yet effective
At the date of approval of these financial statements, the following principal standards and interpretations which were in issue but not yet
effective:
Standards, interpretations and amendments
Not Yet Endorsed
Effective date: Periods
commencing on or after
IFRS 9
IFRS 10 and IAS 28
IFRS11
IFRS15
IAS 16 and IAS 38
IAS 27
IAS 1
IFRS 16
Financial Instruments
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Accounting for Acquisitions of Interests in Joint Operations
Revenue from Contracts with Customers
Clarification of Acceptable Methods of Depreciation and Amortisation
Equity Method in Separate Financial Statements
Disclosure Initiative
Leases
1 Jan 2018
1 Jan 2016
1 Jan 2016
1 Jan 2018
1 Jan 2016
1 Jan 2016
1 Jan 2016
1 Jan 2019
Subject to the adoption in due course of IFRS 16, the directors do not anticipate that the adoption of these Standards will have a significant
impact on the financial statements of the Group. With regard to IFRS 16, the Directors are currently assessing the impact on the financial
statements.
There were no other Standards or Interpretations, which were in issue but not yet effective at the date of authorisation of these financial
statements, that the Directors anticipate will have a material impact on the financial statements of the Group.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 31 July each year. Control is achieved where the Company has power over the investee, exposure or rights to
variable returns from the investee and the ability to use its power to vary those returns.
Intra-group transactions, balances, and unrealised gains and losses on transactions between Group companies are eliminated on
consolidation, except to the extent that intra-group losses indicate an impairment.
24921.04 – 26 October 2016 3:23 PM – proof 6
41
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Accounting Policies
Goodwill
Goodwill arising on consolidation represents the excess of the consideration transferred, the amount of any non-controlling interest and the
fair value of any previous interest in the acquired entity over the fair value of the identifiable assets and liabilities of a subsidiary at the date of
acquisition. Goodwill is recognised as a non-current asset.
Any deficiency of the consideration transferred, the amount of any non-controlling interest and the fair value of any previous interest in the
acquired entity below the fair value of identifiable assets and liabilities of a subsidiary (i.e. discount on acquisition) is recognised directly in
profit or loss.
Goodwill is 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, known as cash generating units, and goodwill is allocated to these units. If the recoverable
amount of the cash generating unit is less than the 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 in relation to goodwill are recognised immediately in profit or loss and are not reversed in subsequent
periods.
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 discounted 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.
When determining whether goodwill is impaired the carrying value of the cash generating unit is adjusted to include the goodwill attributable
to the non-controlling interest when the non-controlling interest has been measured as a proportionate share of the net identifiable assets of
the subsidiary.
Going concern
The Directors can report that, based on the Group’s budgets and financial projections, they have satisfied themselves that the business
is a going concern. The Board has a reasonable expectation that the Company and the Group have adequate resources and facilities to
continue in operational existence for the foreseeable future based on Group cash balances and cash equivalents of £5.3 million (2015: £2.4
million), undrawn committed bank facilities at 31 July 2016 of £11.2 million (2015: £12.3 million), and cash generated from operations in the
year to 31 July 2016 of £3.8 million (2015: £6.0 million).
Following the agreement of new facilities with Royal Bank of Scotland on improved terms, the Group now operates a five year £40 million
revolving credit facility with RBS plc. The facility has been in place since 15 January 2016 and runs until 14 January 2021. The Group is fully
compliant with all bank covenants and undertakings and is not obliged to make any repayments prior to expiration. The financial statements
are therefore prepared on a going concern basis.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for goods and services provided in the ordinary course of the
Group’s activities, net of discount, VAT and after eliminating sales within the Group.
The Group recognises revenue when the amount of the revenue can be reliably measured and when goods are sold and title has passed.
Revenue from services provided is recognised evenly over the period in which the services are provided.
a) Self-storage revenue
Self-storage services are provided on a time basis. The price at which customers store their goods is dependent on size of unit and store
location. Customers are invoiced on a four-weekly cycle in advance and revenue is recognised based on time stored to date within the
cycle. When customers vacate they are rebated the unexpired portion of their four weekly advance payment (subject to a seven day notice
requirement).
b) Retail sales
The Group operates a packaging shop within each of its storage centres for selling storage related goods such as boxes, tape and bubble-
wrap. Sales include sales to the public at large as well as self-storage customers. Sales of goods are recognised at point of sale when the
product is sold to a customer.
c) Insurance
Customers may choose to insure their goods in storage. The weekly rate of insurance charged to customers is calculated based on the tariff
per week for each £1,000 worth of goods stored by the customer. This charge is retained by Lok’nStore and covers the cost of the block
policy and other costs. Customers are invoiced on a four-weekly basis for the insurance cover they use and revenue is recognised based on
time stored to date within the cycle.
42
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 d) Management fee income
Management fees earned for managing stores not owned by the Group are recognised over the period for which the services are provided.
e) Serviced archive and records management
Customers are invoiced typically monthly in advance for the archive storage of their boxes, tapes and files and revenue is recognised based
on time stored to date within the monthly cycle. In respect of the provision of additional services, such as document box or tape collection
and retrieval from archive, customers are invoiced typically monthly in arrears and revenue is recognised in line with the provision of these
services.
Segmental information
In accordance with the requirements of IFRS8 Operating Segments, the Group has reviewed its identifiable business segments and the
information used and provided internally to the Board, which is considered to be the Chief Operating Decision Maker, in order to make
decisions about resource allocation and performance management. Financial information is reported to the Board with revenue and profit
analysed between self-storage activity and serviced archive and records management activity. All activities arise in the United Kingdom.
Adjusted EBITDA
Earnings before interest, tax, depreciation and amortisation (EBITDA), is defined as profits from operations before all depreciation and
amortisation charges, share-based payments and other non-recurring costs, finance income, finance costs and taxation.
Store adjusted EBITDA
Store adjusted EBITDA is defined as adjusted EBITDA (see above) but before central and head office costs.
Operating profit
Operating profit is defined as profit after all costs except finance income, finance costs and taxation.
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 statement of
comprehensive income 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
reporting date.
Deferred tax is the tax expected to be payable or recoverable in the future arising 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 can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting 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 reporting date.
Tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to other comprehensive income, in
which case the tax is also recognised directly in other comprehensive income.
Retirement benefits
The amount charged to profit or loss in respect of pension costs is the contributions payable to 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
statement of financial position. There are no defined benefits schemes.
Equity share-based payments
The cost of providing share-based payments to employees is charged to profit or loss over the vesting period of the related share options.
The cost is based on the fair value of the options determined using the Black-Scholes 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.
24921.04 – 26 October 2016 3:23 PM – proof 6
43
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Accounting Policies
Property lease premiums
Costs relating to the acquisition of long leases are classified as a non-current asset in the statement of financial position. Costs may include
lease premiums paid on entering such a lease and other related costs. Following the opening of a store during the year amounts held under
lease premiums are transferred to property plant and equipment.
Property, plant and equipment
Freehold properties and long leasehold properties (classified as finance leases) are measured at fair value which represents the Group’s
assessment of the highest and best use of the asset. A comprehensive external valuation is performed at each reporting date. Once a
store is opened lease premiums are transferred to property, plant and equipment and carried at their transferred cost less any accumulated
depreciation.
Short leasehold improvements, fixtures, fittings and equipment, and motor vehicles are carried at cost less accumulated depreciation.
Assets in the course of construction and land held for development of new stores (‘development property assets’) are carried at cost, less
any recognised impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.
Depreciation is provided on all property, plant and equipment other than freehold land and development property assets at rates calculated
to write each asset down to its estimated residual value evenly over its expected useful life as follows:
Freehold property
Long leasehold property and lease premium
Short leasehold improvements
Fixtures, fittings and equipment
Computer equipment
Motor vehicles
over 50 years straight line
over unexpired lease period or renewal term
over unexpired lease period or renewal term
5% to 15% reducing balance
over two years straight line
25% reducing balance
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.
The additional depreciation arising from the revaluation of freehold and long leasehold properties is separately presented on the face of the
statement of comprehensive income and transferred from the revaluation reserve to retained earnings each year.
Intangible assets (other than goodwill)
Customer relationships acquired in a business combination are measured initially at fair value and are subsequently amortised on a straight-
line basis over their estimated useful lives (20 years).
Impairment of property, plant and equipment and intangible assets (other than goodwill)
At each reporting date the Group reviews the carrying amounts of its property, plant and equipment and 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 profit or loss. Where an
impairment loss is subsequently reversed, 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 profit or loss.
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 profit or loss in proportion to the remaining balance outstanding.
All other leases are ‘operating leases’ and the annual rentals are charged to profit or loss on a straight-line basis over the lease term.
Payments made on entering into or acquiring a leasehold that is accounted for as an operating lease are amortised over the lease term once
the property is brought into use.
44
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Investments
Shares in subsidiary undertakings are considered long-term investments and are classified as non-current assets in the Parent Company’s
statement of financial position. 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. Cost is determined on a first in, first out basis. 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 assets and financial liabilities are recognised when the Group becomes a party to the contractual provision of the instrument.
Bank borrowings and finance costs
Interest-bearing bank loans are recorded at the proceeds received net of direct issue costs. Issue costs are amortised against the carrying
value amount of the loan over the period of the loan with the cost recognised in profit and loss as part of finance costs.
Borrowing costs are recognised in profit or loss in the year in which they are incurred, unless the costs are incurred as part of the
development of a qualifying asset, when they will be capitalised. A qualifying asset is an asset that necessarily takes a substantial period
of time to get ready for its intended use. Commencement of capitalisation is the date when the Group incurs expenditure for the qualifying
asset, incurs borrowing costs and undertakes activities that are necessary to prepare the assets for their intended use. In the case of
suspension of activities during extended periods, the Group suspends capitalisation. The Group ceases capitalisation of borrowing costs
when substantially all of the activities necessary to prepare the asset for use are complete.
All of the Group’s current qualifying assets predate the date of adoption and accordingly, under the transitional adoption arrangements, no
borrowing costs have been capitalised in the current year or in prior years.
Derivative financial instruments and hedge accounting
The Group’s activities expose it to interest rate risk. The Group uses interest rate swap contracts to hedge these exposures. The Group
does not use derivative financial instruments for speculative or for any other purposes.
The use of financial derivatives is governed by the Group’s policies as approved by the board of directors. The Group documents its risk
management objectives and strategy for undertaking hedging transactions within the Group’s Risk Register. The Group also documents
its assessment both at hedge inception and on an on-going basis to assess whether the derivatives that are used are effective in offsetting
changes in fair value or cash flows of the hedged items.
Derivative financial instruments are measured at fair value and the fair values of the hedged derivative instruments are disclosed in note
17b. Movements on the hedging reserve in other comprehensive income are shown in note 24a. The full fair value of a hedging derivative
is classified as a non-current asset or liability when the remaining hedged item has more than 12 months to run, and as a current asset or
liability when the remaining maturity of the hedged item is less than 12 months.
Instruments quoted in an active market are measured at their current bid price. For instruments that are not quoted in an active market,
the fair value is estimated using a valuation technique. Techniques that are used by the Group include comparisons to recent market
transactions or reference to other instruments which are substantially the same, discounted cash flow analysis and option pricing models.
Inputs to such techniques rely on market inputs where such information is readily available. Where such information is not available entity-
specific inputs are used.
Cash flow hedges
Hedges of exposures to variable cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable
forecast transaction that could affect profit or loss are accounted for as cash flow hedges when the hedging criteria has been achieved. The
Group designates certain derivative instruments as hedges of the variable rate borrowings. The effective portion of changes in the fair value
is recognised in other comprehensive income whilst the gain or loss on the ineffective portion is recognised immediately in profit or loss.
Amounts accumulated in other comprehensive income are recycled to profit or loss in the periods when the hedged item affects profit or
loss. However when a forecast transaction that is hedged results in the recognition of a non-financial asset, the gains and losses previously
deferred into other comprehensive income are transferred from other comprehensive income and included in the initial measurement of the
cost of the asset.
24921.04 – 26 October 2016 3:23 PM – proof 6
45
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Accounting Policies
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are
classified as loans and receivables. Loans and receivables are initially recognised at fair value less transaction costs and subsequently
measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Liabilities and equity
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.
Trade payables are initially recognised at fair value and are subsequently stated at amortised cost using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents comprises cash and short-term deposits and other short term highly liquid investments that are readily
convertible to a known amount of cash. The carrying amounts of these assets approximate to their fair value and the risk of changes in value
is not significant.
Impairment of financial assets
Financial assets are assessed for indications of impairment at each reporting date. Financial assets are impaired where there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash
flows from the asset have been reduced.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade
receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered
uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
Net debt
Net debt comprises the borrowings of the Group less cash and liquid resources.
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.
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.
Own shares
The cost of own shares held by the employee benefit trust (‘ESOP shares’) and treasury shares is shown as a deduction from retained
earnings. Earnings per share are calculated on the net shares in issue.
Critical accounting estimates and judgements
The preparation of consolidated financial statements under EU-IFRS requires management to make estimates and assumptions that may
affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual outcomes may
differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are discussed below.
46
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 a) Estimate of fair value of trading properties
The Group values its self storage stores using a discounted cash flow methodology which is based on current and projected net operating
income. Principal assumptions underlying management’s estimation of the fair value are those relating to stabilised occupancy levels;
expected future growth in storage rents and operating costs, maintenance requirements, capitalisation rates and discount rates. A more
detailed explanation of the background and methodology adopted in the valuation of the Group’s trading properties is set out in note 10b.
The carrying value of land and buildings held at valuation at the reporting date was £81 million (2015: £61.0 million) as shown in the table in
note 10b.
b) Assets in the course of construction and land held for pipeline store development (‘Development property assets’)
The Group’s development property assets are held in the statement of financial position at historic cost and are not valued externally. In
acquiring sites for redevelopment into self-storage facilities, the Group estimates and makes judgements on the potential net lettable storage
space that it can achieve in its planning negotiations, together with the time it will take to achieve maturity occupancy level. In addition,
assumptions are made on the storage rent that can be achieved at the store by comparison with other stores within the portfolio and within
the local area. These judgements, taken together with estimates of operating costs and the projected construction cost, allow the Group to
calculate the potential net operating income at maturity, projected returns on capital invested and hence to support the purchase price of
the site at acquisition. Following the acquisition, regular reviews are carried out taking into account the status of the planning negotiations,
and revised construction costs or capacity of the new facility, for example, to make an assessment of the recoverable amount of the
development property. The Group reviews all development property assets for impairment at each reporting date in the light of the results of
these reviews. Once a store is opened, it is valued as a trading store.
The carrying value of development property assets at the reporting date was £0.5 million (2015: £8.9 million). Please see note 10b for more
details.
c) Estimate of fair value of intangible assets acquired in business combination
The relative size of the Group’s intangible assets, excluding goodwill, makes the judgements surrounding the estimated useful lives important
to the Group’s financial position and performance. At 31 July 2016 intangible assets, excluding goodwill, amounted to £2.48 million (2015:
£2.65 million). The valuation method used and key assumptions are described in note 10a.
The useful life used to amortise intangible assets relates to the expected future performance of the assets acquired and management’s
judgement of the period over which economic benefit will be derived from the asset. The estimated useful life of customer relationships
principally reflects management’s view of the average economic life of the customer base and is assessed by reference to customer churn
rates. Typically, the customer base for a serviced archive business is relatively inert. Corporate customers do not tend to switch service
providers and indeed they incur box withdrawal charges should they do so. An increase in churn rates may lead to a reduction in the
estimated useful life and an increase in the amortisation charge.
24921.04 – 26 October 2016 3:23 PM – proof 6
47
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
1a Revenue
Analysis of the Group’s revenue is shown below:
Stores trading
Self-storage revenue
Other storage related revenue
Ancillary store rental revenue
Management fees
Sub-total
Document storage revenue
Total revenue per statement of comprehensive income
2016
£’000
11,931
1,510
3
439
13,883
2,173
16,056
2015
£’000
11,851
1,434
7
176
13,468
1,956
15,424
1b Segmental information
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group
that are regularly reviewed by the Board to allocate resources to the segments and to assess their performance. All of the Group’s activities
occur in the United Kingdom.
Financial information is reported to the Board with revenue and profit analysed between self-storage activity and serviced document storage
activity.
Segment revenue comprises of sales to external customers and excludes gains arising on the disposal of assets and finance income.
Segment profit reported to the Board represents the profit earned by each segment before acquisition costs and other non-recurring set-up
costs, finance income, finance costs and tax. For the purposes of assessing segment performance and for determining the allocation of
resources between segments, the Board uses a measure of adjusted EBITDA (as defined in the accounting policies) and reviews the non-
current assets attributable to each segment as well as the financial resources available. All assets are allocated to reportable segments.
Assets that are used jointly by segments are allocated to the individual segments on a basis of revenues earned. All liabilities are allocated
to individual segments other than borrowings and tax. Information is reported to the Board of Directors on a product basis as management
believe that the activity of self-storage and the activity of serviced document storage expose the Group to differing levels of risk and rewards
due to the length, nature, seasonality and customer base of their respective operating cycles.
The segment information for the year ended 31 July 2016 is as follows:
2016
Revenue from external customers
Adjusted EBITDA
Management charges
Segment Adjusted EBITDA
Depreciation
Amortisation of intangible assets
Equity settled share based payments
Net settlement proceeds – Reading site
Disposal costs – Swindon store(s)
Segment profit
Central costs not allocated to segments:
Finance income
Finance costs
Profit before taxation
Income tax expense
Consolidated profit for the financial year
48
Serviced
archive &
records
management
2016
£’000
Self-storage
2016
£’000
13,883
5,708
72
5,780
(1,436)
–
(182)
1,940
(123)
5,979
2,173
587
(72)
515
(101)
(165)
–
–
–
249
Total
2016
£’000
16,056
6,295
–
6,295
(1,537)
(165)
(182)
1,940
(123)
6,228
313
(1,048)
5,493
(1,211)
4,282
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016
1b Segmental information continued
The segment information for the year ended 31 July 2015 is as follows:
2015
Revenue from external customers
Adjusted EBITDA
Management charges
Segment Adjusted EBITDA
Depreciation
Amortisation of intangible assets
Equity settled share based payments
Irrecoverable property costs
Segment profit/(loss)
Central costs not allocated to segments:
Finance income
Finance costs
Profit before taxation
Income tax expense
Consolidated profit for the financial year
Serviced
archive &
records
management
2015
£’000
1,956
262
(25)
237
(100)
(165)
–
–
(28)
Self-storage
2015
£’000
13,468
5,420
25
5,445
(1,340)
–
(211)
(209)
3,685
Total
2015
£’000
15,424
5,682
–
5,682
(1,440)
(165)
(211)
(209)
3,657
141
(1,144)
2,654
(686)
1,968
Corporate transactions and the treasury function are managed centrally and therefore are not allocated to segments. Sales between
segments are carried out at arm’s length. The serviced archive segment with over 430 customers has a greater customer concentration
with its ten largest corporate customers accounting for 34.6% (2015: 34.6%) of revenue, its top 50 customers accounting for 61.7% (2015:
63.3%) and its top 100 customers accounting for 77.0% (2015: 79.9%) of revenue. The self-storage segment with over 9,200 customers
has no individual self-storage customer accounting for more than 1% of total revenue and no group of entities under common control (e.g.
Government) accounts for more than 10% of total revenues.
2016
Segment assets
Segment liabilities
Borrowings
Derivative financial instruments not allocated to segments
Total liabilities
Capital expenditure (note 10b)
Serviced
archive &
records
management
2016
£’000
6,314
(601)
Self-storage
2016
£’000
115,253
(20,727)
6,629
359
Total
2016
£’000
121,567
(21,328)
(28,727)
(37)
(50,092)
6,988
24921.04 – 26 October 2016 3:23 PM – proof 6
49
www.loknstore.com Stock Code: LOKFINANCIAL REPORT
Notes to the Financial Statements
For the year ended 31 July 2016
1b Segmental information continued
2015
Segment assets
Segment liabilities
Borrowings
Derivative financial instruments not allocated to segments
Total liabilities
Capital expenditure (note 10b)
Serviced
archive &
records
management
2015
£’000
6,098
(536)
Self-storage
2015
£’000
93,296
(18,222)
3,126
457
Total
2015
£’000
99,394
(18,758)
(27,548)
(119)
(46,425)
3,583
The amounts presented to the Board with respect to total assets and total liabilities are measured in a manner consistent with the financial
statements and are allocated based on the operations of the segment. Borrowings are managed centrally on a Group basis and are
therefore not allocated to segments.
2a Property, staff, distribution and general costs
2015
£’000
4,010
4,188
1,049
190
305
9,742
2015
£’000
130
33
2
165
140
305
2015
£’000
–
–
209
209
Property and premises costs
Staff costs
General overheads
Distribution costs
Retail products cost of sales (see note 2b)
2016
£’000
3,913
4,232
1,128
170
318
9,761
2b Cost of sales of retail products
Cost of sales represents the direct costs associated with the sale of retail products (boxes, packaging etc.), and the ancillary sales of
insurance cover for customer goods, all of which fall within the Group’s ordinary activities.
2016
£’000
118
51
2
171
147
318
2016
£’000
123
(1,940)
–
(1,817)
Retail
Insurance
Other
Serviced archive consumables and direct costs
2c Other Income and costs
Property disposal costs1
Net settlement proceeds2
Irrecoverable property costs3
1 Property disposal costs relate to the sale and manage back of the Swindon store.
2 Net settlement proceeds relate to an additional £2 million received for sale of old Reading store net of costs.
3
Irrecoverable property costs relate to site demolition costs not recoverable from the purchaser of the Portsmouth North site.
50
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 3 Finance income
Bank interest
Other interest
Interest receivable arises on cash and cash equivalents (see note 16) and on development loan capital deployed.
4 Finance costs
Bank interest
Non-utilisation fees and amortisation of bank loan arrangement fees
5 Profit before taxation
Profit before taxation is stated after charging:
Depreciation and amounts written off property, plant and equipment:
Owned assets
Amortisation of intangible assets
Operating lease rentals – land and buildings
2016
£’000
14
299
313
2016
£’000
797
251
1,048
2016
£’000
1,535
165
1,529
Amounts payable to RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP) and their associates for audit and non-audit services:
Audit services
– UK statutory audit of the Company and consolidated accounts
Other services
– the auditing of accounts of associates of the Company pursuant to legislation
Other services supplied pursuant to such legislation
– interim review
Tax services
– compliance services
– advisory services
Comprising:
Audit services
Non-audit services:
6 Employees
The average monthly number of persons (including Directors) employed by the Group during the year was:
Store management
Administration
48
14
7
26
2
97
62
35
97
2016
No.
121
29
150
2015
£’000
12
129
141
2015
£’000
925
219
1,144
2015
£’000
1,440
165
1,562
45
14
7
26
13
105
59
46
105
2015
No.
113
30
143
51
24921.04 – 26 October 2016 3:23 PM – proof 6
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
6 Employees continued
Costs for the above persons:
Wages and salaries
Social security costs
Pension costs
Share based remuneration (options)
2016
£’000
3,425
532
92
4,049
182
4,231
2015
£’000
3,451
443
87
3,981
211
4,192
Share based remuneration is separately disclosed in the statement of comprehensive income. Wages and salaries of £133,669 (2015:
£132,543) have been capitalised as additions to property, plant and equipment as they are directly attributable to the acquisition of these
assets. All other employee costs are included in staff costs in the statement of comprehensive income.
In relation to pension contributions, there was £11,705 (2015: £9,260) outstanding at the year-end.
Directors’ remuneration
2016
Executive:
A Jacobs
SG Thomas
RA Davies
CM Jacobs
N Newman*
Non-Executive:
RJ Holmes
ETD Luker
CP Peal
* Appointed 29 November 2015
2015
Executive:
A Jacobs
SG Thomas
RA Davies
CM Jacobs
Non-Executive:
RJ Holmes
ETD Luker
CP Peal
Emoluments
£
Bonuses
£
Benefits
£
Sub total
£
Gains on
share options
£
208,080
52,020
116,750
59,021
42,556
20,808
26,010
20,808
546,053
24,000
–
12,000
14,000
21,154
–
–
–
71,154
3,460
3,315
3,492
2,711
1,299
–
–
–
14,277
235,540
55,335
132,242
75,732
65,009
20,808
26,010
20,808
631,484
Emoluments
£
Bonuses
£
Benefits
£
Sub total
£
204,000
51,000
110,000
57,834
20,033
25,500
20,400
488,767
38,000
9,500
15,500
6,500
–
–
–
69,500
4,055
3,724
3,063
3,177
–
–
–
14,019
246,055
64,224
128,563
67,511
20,033
25,500
20,400
572,286
408,600
132,146
409,245
43,601
–
–
–
22,900
1,016,492
Gains on
share options
£
156,399
50,399
55,437
152,865
–
–
–
415,676
Total
£
644,140
187,481
541,487
119,333
65,009
20,808
26,010
43,708
1,647,976
Total
£
402,454
115,199
184,000
220,376
20,033
25,500
20,400
987,962
Pension contributions of £30,775 (2015: £30,475) were paid by the Group on behalf of R A Davies and are not included in the Directors’
emoluments table above. The highest paid Director did not accrue any pension rights during the year. The benefits in kind all relate to
medical insurance premiums paid on behalf of the Directors.
The number of Directors to whom retirement benefits are accruing under money purchase pension schemes in respect of qualifying service
is one (2015: one).
52
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016
7 Taxation
Current tax:
UK corporation tax at 20% (2015: 20.7%)
Deferred tax:
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Impact of change in tax rate on closing balance
Total deferred tax
Income tax expense for the year
The charge for the year can be reconciled to the profit for the year as follows:
Profit before tax
Tax on ordinary activities at the effective standard rate of corporation tax in the UK of 20% (2015: 20.7%)
Expenses not deductible for tax purposes
Depreciation of non-qualifying assets
Share based payment charges in excess of corresponding tax deduction
Impact of change in tax rate on closing deferred tax balance
Adjustments in respect of prior periods – deferred tax
Other
Share option scheme
Income tax expense for the year
Effective tax rate
The UK’s main rate of corporation tax and the applicable rate for this period is 20.0%.
2016
£’000
606
976
75
(446)
605
1,211
2016
£’000
5,493
1,099
3
85
36
(69)
75
4
(22)
1,211
22%
2015
£’000
535
100
51
–
151
686
2015
£’000
2,654
549
2
85
–
–
51
(1)
–
686
26%
In addition to the amount charged to profit or loss for the year, deferred tax relating to the revaluation of the Group’s properties of
£2,387,114 (2015: £1,577,896) and the movement in the fair value of cash flow hedges of (£20,834) (2015: (£37,549) has been recognised
as a debit/credit directly in other comprehensive income (see note 18 on deferred tax).
8 Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2014 (5.0 pence per share)
Interim dividend for the six months to 31 January 2015 (2.33 pence per share)
Final dividend for the year ended 31 July 2015 (5.67 pence per share)
Interim dividend for the six months to 31 January 2016 (2.67 pence per share)
2016
£’000
–
–
1,456
691
2,147
2015
£’000
1,258
589
–
–
1,847
In respect of the current year the Directors propose that a final dividend of 6.33 pence per share will be paid to the shareholders. The total
estimated dividend to be paid is £1,689,379 based on the number of shares in issue at 3 October 2016 as adjusted for shares held in the
Employee Benefits Trust and for shares held on treasury. This is subject to approval by shareholders at the Annual General Meeting and has
not been included as a liability in these financial statements. The ex-dividend date will be 17 November 2016; the record date
18 November 2016; with an intended payment date of 19 December 2016.
24921.04 – 26 October 2016 3:23 PM – proof 6
53
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
9 Earnings per share
The calculations of earnings per share are based on the following profits and numbers of shares.
Profit for the financial year attributable to owners of the parent
Weighted average number of shares
For basic earnings per share
Dilutive effect of share options1
For diluted earnings per share
2016
£’000
4,282
2015
£’000
1,968
2016
No. of shares
2015
No. of shares
25,791,821
577,822
26,369,643
25,102,032
654,598
25,756,630
1 Further options that could potentially dilute EPS in the future are excluded from the above because they are not dilutive in the period presented. Full details of
share options are included in notes 20 to 23.
623,212 (2015: 623,212) shares held in the Employee Benefit Trust and 2,466,869 (2015: 2,466,869) Treasury shares are excluded from the
above (see note 26).
Earnings per share
Basic
Diluted
10a Intangible assets
Group
Cost at 1 August 2014
Amortisation at 1 August 2014
Amortisation charge
Amortisation at 31 July 2015
Net book value at 31 July 2015
Cost at 1 August 2015
Amortisation at 1 August 2015
Amortisation charge
Amortisation at 31 July 2016
Net book value at 31 July 2016
2016
£’000
16.60p
16.24p
Contractual
customer
relationships
£’000
Goodwill
£’000
1,110
–
–
–
1,110
1,110
–
–
–
1,110
3,309
(496)
(165)
(661)
2,648
3,309
(661)
(165)
(826)
2,483
2015
£’000
7.84p
7.64p
Total
£’000
4,419
(496)
(165)
(661)
3,758
4,419
(661)
(165)
(826)
3,593
All goodwill and customer relationships are allocated to the serviced document storage cash-generating unit (CGU) identified as a separate
business segment.
The remaining amortisation period of the contractual customer relationships at 31 July 2016 is 14 years and 11 months (2015: 15 years 11
months).
The values for impairment purposes are based on past and current experience of trading, estimated future cash flows and external
information where relevant and derived from the following key assumptions:
■ a discount rate of 11%
■ estimated useful lives of customer relationships (20 years)
■ short term sustainable growth rates of 5% (next 5 years)
■ thereafter long term sustainable growth rates of 2.0%
■ sensitivity: the Group has conducted a sensitivity analysis on the impairment test of each CGU’s carrying value. A cut in projected sales
growth by around 7% would result in the carrying value of goodwill being reduced to its recoverable amount.
54
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 10b Property, plant and equipment
Development
property
assets at cost
£’000
Land and
buildings at
valuation
£’000
Long leasehold
land and
buildings at
valuation
£’000
Short
leasehold
improvements
at cost
£’000
Fixtures,
fittings
and
equipment
at cost
£’000
Motor
vehicles
at cost
£’000
13,013
1,504
–
(4,025)
–
10,492
1,604
–
–
–
1,604
51,412
525
–
2,958
6,140
61,035
–
572
–
(572)
–
5,121
–
–
–
1,304
6,425
–
23
–
(23)
–
2,560
3
–
–
–
2,563
1,599
91
–
–
1,690
18,242
1,551
(289)
1,067
–
20,571
9,478
751
(230)
–
9,999
8,888
61,035
6,425
873
10,572
10,492
3,281
(4,604)
(8,711)
–
458
1,604
–
(1,604)
–
–
–
61,035
152
(3,228)
9,377
13,617
80,953
–
606
–
490
(1,096)
–
6,425
1
–
–
2,837
9,263
–
100
–
–
(100)
–
2,563
–
–
–
–
2,563
1,690
91
–
–
–
1,781
20,571
3,554
(701)
(666)
–
22,758
9,999
736
(389)
(490)
–
9,856
32
–
(2)
–
–
30
19
3
(1)
–
21
9
30
–
(13)
–
–
17
21
2
(11)
–
–
12
Total
£’000
90,380
3,583
(291)
–
7,444
101,116
12,700
1,440
(231)
(595)
13,314
87,802
101,116
6,988
(8,546)
–
16,454
116,012
13,314
1,535
(2,004)
–
(1,196)
11,649
458
80,953
9,263
782
12,902
5
104,363
Group
Cost or valuation
1 August 2014
Additions
Disposals
Reclassification
Revaluations
31 July 2015
Depreciation
1 August 2014
Depreciation
Disposals
Revaluations
31 July 2015
Net book value at
31 July 2015
Cost or valuation
1 August 2015
Additions
Disposals
Reclassification
Revaluations
31 July 2016
Depreciation
1 August 2015
Depreciation
Disposals
Reclassification
Revaluations
31 July 2016
Net book value at
31 July 2016
If all property, plant and equipment were stated at historic cost the carrying value would be £49.5 million (2015: £47.5 million).
Capital expenditure during the year related to the ongoing building at Bristol and Southampton, the expansion of capacity at our Swindon
East Store and also limited expenditures at our other existing stores. Further expenditure on racking at the Saracen Olney store also
increased capacity in our serviced document storage business.
In August 2015, the Group received an additional £2 million (gross) from the purchaser of the original Reading store site in return for
relinquishing of all remaining rights to receive further payments in connection with the sale of the property. This sum is in addition to the £2.9
million received from the purchaser on 31 October 2014, taking the total consideration to £4.9m.
Property, plant and equipment (non-current assets) with a carrying value of £104.4 million (2014: £87.8 million) are pledged as security for
bank loans.
24921.04 – 26 October 2016 3:23 PM – proof 6
55
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
10b Property, plant and equipment continued
Market Valuation of Freehold and Operating Leasehold Land and Buildings
On 31 July 2016, a professional valuation was prepared by Jones Lang LaSalle Limited (JLL) (2015: Cushman & Wakefield) in respect
of eleven freehold, one long leasehold and seven operating leasehold properties. The valuation was prepared in accordance with the
RICS Valuation - Professional Standards, published by The Royal Institution of Chartered Surveyors (“the Red Book”) and the valuation
methodology is explained in more detail below. The valuations were prepared on the basis of Fair Value as a fully equipped operational entity
having regard to trading potential. The valuation was provided for accounts purposes and as such, is a Regulated Purpose Valuation as
defined in the Red Book. In compliance with the disclosure requirements of the Red Book JLL have confirmed that:
■ This is the first year that JLL has been appointed to value the properties
■ The valuers who prepared the valuation have the necessary skills and experience having been significantly involved in the sector
■ JLL do not provide other significant professional or agency services to the Company
■ In relation to the preceding financial year of JLL the proportion of the total fees payable by the Company to the total fee income of the
firm is less than 5%
The valuation report indicates a total valuation for all properties valued of £112.7 million (2015: £88.9 million) of which £96.1 million (2015:
£74.1 million) relates to freehold and long leasehold properties, and £16.6 million (2015: £14.8 million) relates to properties held under
operating leases.
Freehold and long leasehold land and buildings are carried at valuation in the statement of financial position. Short leasehold improvements
at properties held under operating leases are carried at cost rather than valuation in accordance with IFRS.
For the trading properties the valuation methodology explained in more detail below is based on fair value as fully equipped operational
entities, having regard to trading potential. Of the £96.1 million valuation of the freehold and long leasehold properties £9.0 million (2015:
£6.7 million) relates to the net book value of fixtures, fittings and equipment, and the remaining £87.1 million (2015: £67.4 million) relates to
freehold and long leasehold properties.
The 2016 valuation includes and reflects movements in value which have resulted from the operational performance of the stores and
movements in the investment environment.
Valuation Methodology
Jones Lang LaSalle Limited (JLL) have adopted the profits method of valuation, and cross checked with the direct comparison method
based on recent transactions in the sector, which is the main method of pricing adopted by purchasers of self storage properties.
JLL have valued the assets on an individual basis and have disregarded any portfolio effect.
The profits method of valuation considers the cash flow generated by the trading potential of the self storage facility. Due to the specialised
design and use of the buildings, the value is typically based on their ability to generate a net income from operating as self storage facilities.
JLL have constructed a discounted cash flow model. This sets out their explicit assumptions on the underlying cash flow that they believe
could be generated by a Reasonably Efficient Operator at each of the properties, both at the valuation date and in the near future as the
properties increase their occupancy and rents charged to customers. Judgements are made as to the trading potential and likely long term
sustainable occupancy.
Stable occupancy depends upon the nature of demand, size of property and nearby competition, and allows for a reasonable vacancy rate
to enable the operator to sell units to new customers. In the valuation the assumed stabilised occupancy level for the 19 trading stores (both
freeholds and leaseholds) averages 81% (2015: 68.4%).
Expenditure is deducted (such as business rates, staff costs, repair and maintenance, utilities, marketing and bad debts) as well as an
operator’s charge which takes account of central costs. JLL also make an allowance for long term capex requirements where applicable.
■ The cash flow for freeholds runs for an explicit period of 10 years, after which it is capitalised at an all risks yield which reflects the implicit
future growth of the business, or a hypothetical sale.
■ The cash flow for leaseholds continue for the unexpired term of the lease.
■ The discount rate applied has had regard to recent transactions, weighted average costs of capital and target return in other asset types
with adjustments made to reflect differences in the risk and liquidity profile.
56
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 10b Property, plant and equipment continued
■ The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 11.32% (2015: 11.25%). The yield arising
from the first year of the projected cash flow is 7.43% (2015: 7.76%), rising to 10.86% in year five
■ JLL have assumed purchasers costs of 6.8%
■ The average stabilised occupancy is 80.1%
■ The average exit yield assumed is 7.9%
The comparison method considers recent transactions where self storage properties have sold, and then adjusts them based on a multiple of
current earnings, and a capital value per square foot. They are adjusted to reflect differences in location, physical characteristics, local supply
and demand, tenure and trading levels.
For leaseholds the same methodology has been used as for freehold property, except that no sale of the assets in the 10th year is assumed,
but the discounted cash flow is extended to the expiry of the lease. The average unexpired term of the Group’s operating leaseholds is
approximately 11 years and 8 months as at 31 July 2016 (12 years and 8 months: 31 July 2015). Valuations for stores held under operating
leases are not reflected in the statement of financial position and the assets in relation to these stores are carried at cost less accumulated
depreciation.
In 2011, one of the Group store’s leases was renegotiated and includes a ten year option to renew the leases from March 2026 to March 2036.
The option to extend is only operable in the event that all four of the leases applicable to this store are extended and this option is personal
to Lok’nStore or another “major self-storage operator”, to be approved by the landlord (approval not to be unreasonably withheld). The JLL
valuation on this store is based on this Special Assumption that the option to extend the lease for 10 years is exercised. This is consistent with
the approach taken in previous years.
The fair value hierarchy within which the Fair Value measurements are categorised is level 3, in accordance with IFRS 13 fair value
measurements.
Directors’ valuation of land and property
The Old Southampton Store: Following the development and opening of the new Southampton store with the corresponding transfer of
all customers from the old Southampton store, the vacant building will be redeveloped for alternative use. Accordingly the Directors have
placed their valuation on the site at the year-end at £2.5 million.
The New Southampton Store: Following the development and opening of the new Southampton store there remains surplus land to the
rear of the building which may be ultimately utilised for an expansion of the store or could be sold or used for alternative use. The Directors
have considered the advice given and recommendations of value obtained by local agents and in weighing this with their own view are
satisfied to place a value at year-end on this land of £0.5 million.
The total value of land and property carried at Director Valuation at 31 July 2016 is £3 million (2015: nil).
11 Investments
Company Investments in subsidiary undertakings
31 July 2013
Capital contributions arising from share-based payments
31 July 2014
Capital contributions arising from share-based payments
31 July 2015
Capital contributions arising from share-based payments
31 July 2016
24921.04 – 26 October 2016 3:23 PM – proof 6
£’000
1,776
119
1,895
211
2,106
182
2,288
57
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
11 Investments continued
The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in England and Wales:
Lok’nStore Limited*
Lok’nStore Trustee Limited1*
Southern Engineering and Machinery Company Limited1*
Semco Machine Tools Limited2*
Semco Engineering Limited2*
Saracen Datastore Limited1
Class of
shareholding
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
% of shares and voting rights held
Directly
Indirectly
100
–
–
–
–
–
–
100
100
100
100
100
Nature
of entity
Self–storage
Trustee
Land
Dormant
Dormant
Serviced
Document
Storage
1 These companies are subsidiaries of Lok’nStore Limited.
2 These companies are subsidiaries of Southern Engineering and Machinery Company Limited and did not trade during the year.
* These companies have taken the exemption from audit under Section 479A of the Companies Act 2006
The fair value of these investments has not been disclosed because it cannot be measured reliably as there is no active market for these
equity instruments. The Company currently has no plans to dispose of these investments.
12 Development capital
In May 2015 Lok’nStore opened a new managed store in Aldershot, Hampshire. The store is managed for third party investors under the
Lok’nStore brand. Lok’nStore has managed the building and subsequent operation of the store. Lok’nStore generates a 10% annual
return on £2.5 million of the total development capital committed to the project, and a management fee for the construction, operation and
branding of the store. The capital provided is fully secured by a first fixed charge on the property.
Development capital
Group
2016
£’000
3,159
Group
2015
£’000
2,779
Contingent Asset
When the Aldershot Store is sold by its owners the Group is entitled to receive a capital fee of 5% of the proceeds of sale (less reasonable
selling costs).
Due to the uncertainty of the property market, the timing of the ultimate sale, where the general property cycle might be at that time, and the
immateriality of the sum, the Directors believe that it would not be appropriate to recognise this as an asset at this time. There is a backstop
date of 2022 at which time a realisation (or a payment based on an independent valuation) must be made to Lok’nStore and as this date
gets nearer, the Directors will give due consideration as to when the value of the property can be reliably measured, at which point it will be
appropriate to recognise the asset in the financial statements.
13 Inventories
Consumables and goods for resale
Group
2016
£’000
165
Group
2015
£’000
141
The amount of inventories recognised in cost of sales as an expense during the year was £156,121 (2015: £184,716).
58
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 14 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Group
2016
£’000
2,027
1,910
1,015
4,952
Group
2015
£’000
1,302
640
537
2,479
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Trade receivables
In respect of its self-storage business the Group does not typically offer credit terms to its customers and hence the Group is not exposed
to significant credit risk. All customers are required to pay in advance of the storage period. Late charges are applied to a customer’s
account if they are more than 10 days overdue in their payment. The Group provides for receivables based upon sales levels and estimated
recoverability. There is a right of lien over the customers’ goods, so if they have not paid within a certain time frame, the Company has the
right to sell the items they store to cover the debt owed by the customer. Trade receivables that are overdue are provided for based on
estimated irrecoverable amounts, determined by reference to past default experience.
For individual self-storage customers the Group does not perform credit checks. However this is mitigated by the fact that all customers
are required to pay in advance, and also to pay a deposit of four weeks’ storage income. Before accepting a new business customer who
wishes to use a number of the Group’s stores, the Group uses an external credit rating to assess the potential customer’s credit quality and
defines credit limits by customer. There are no customers who represent more than 5% of the total balance of trade receivables.
In respect of its document storage business, customers are invoiced typically monthly in advance for the storage of their boxes, tapes
and files. The provision of additional services, such as document boxes or tape collection and retrieval from archive, typically are invoiced
monthly in arrears. The serviced archive segment with over 400 customers has a greater customer concentration – refer note 1(b) segmental
analysis.
Included in the Group’s trade receivables balance are receivables with a carrying amount of £269,153 (2015: £202,546) which are past due
at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are
still considered recoverable. The Group holds a right of lien over its self-storage customers’ goods if these debts are not paid. The average
age of these receivables is 40 days past due (2015: 39 days past due).
Other receivables
The Group has provided bridging finance on normal commercial terms (interest at 4.5% p.a.) to Chichester Storage Limited (CSL) to facilitate
the development of the site (including obtaining the requisite planning approvals). As the store approaches breakeven and all conditions
precedent have been met the CSL has facilities agreed whereupon it will refinance the bridging loan. The amounts included in other
receivables above includes £1.025 million (2015: £Nil) in respect of the Chichester loan.
Ageing of past due but not impaired receivables
0–30 days
30–60 days
60+ days
Total
Movement in the allowance for bad debts
Balance at the beginning of the year
Impairment losses recognised
Amounts written off as uncollectible
Balance at the end of the year
24921.04 – 26 October 2016 3:23 PM – proof 6
Group
2016
£’000
147
72
50
269
Group
2016
£’000
174
34
(22)
186
Group
2015
£’000
119
43
41
203
Group
2015
£’000
163
39
(28)
174
59
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
14 Trade and other receivables continued
The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is
no further provision required.
Ageing of impaired trade receivables
0–30 days
30–60 days
60+ days
Total
15 Trade and other payables
Trade payables
Taxation and social security costs
Other payables
Accruals and deferred income
Group
2016
£’000
–
–
186
186
Group
2016
£’000
887
1,369
1,197
2,341
5,794
Group
2015
£’000
–
–
174
174
Group
2015
£’000
1,901
464
1,173
2,433
5,971
The Directors consider that the carrying amount of trade and other payables and accruals and deferred income approximates fair value.
16 Financial instruments
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return
to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debts, which include
the borrowings disclosed in note 17a, cash and cash equivalents and equity attributable to the owners of the parent, comprising issued
capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity. The Group’s banking facilities
require that management give regular consideration to interest rate hedging strategy. The Group has complied with this during the year.
The Group’s Board reviews the capital structure on an on-going basis. As part of this review, the Board considers the cost of capital and the
risks associated with each class of capital. The Group seeks to have a conservative gearing ratio (the proportion of net debt to equity). The
Board considers at each review the appropriateness of the current ratio in light of the above. The Board is currently satisfied with the Group’s
gearing ratio.
The gearing ratio at the year-end is as follows:
Capital Management
Gross borrowings
Cash and cash equivalents
Net debt
Total equity
Net debt to equity ratio
Group
2016
£’000
(28,816)
5,335
(23,481)
71,475
32.8%
Group
2015
£’000
(27,701)
2,435
(25,266)
52,968
47.7%
The decrease in the Group’s gearing ratio arises principally through the combined effect of an increase in the value of its properties and the
cash generated from operations.
Exposure to credit and interest rate risk arises in the normal course of the Group’s business.
A Derivative financial instruments and hedge accounting
The Group’s activities expose it primarily to the financial risks of interest rates. The Group currently has two interest rate swaps with Lloyds
Bank plc which run until 20 October 2016. These have been maintained and are reported fully in the Financial Review and in note 17(b).
60
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 16 Financial instruments continued
B Debt management
Debt is defined as non-current and current borrowings, as detailed in note 17a. Equity includes all capital and reserves of the Group. The
Group is not subject to externally imposed capital requirements.
The Group borrows through a senior five year term revolving credit facility, arranged during the year with Royal Bank of Scotland plc secured
on its store portfolio and other Group assets, excluding intangibles, with a net book value of £118.0 million (2015: £95.6 million). Borrowings
are arranged to ensure the Group fulfils its strategy of growth and development of its stores and to maintain short-term liquidity. As at the
reporting date the Group has a committed revolving credit facility of £40 million (2015: £40 million). This facility expires on 15 January 2021.
Undrawn committed facilities at the year-end amounted to £11.2 million (2015: £12.3 million).
C Interest rate risk management
The Group’s policy on interest rate management is agreed at Board level and is reviewed on an on-going basis. All borrowings are
denominated in Sterling and are detailed in note 17a. The Group has a number of revolving loans within its overall revolving credit facility and
as such is exposed to interest rate risks at the time of renewal arising from any upward movement in the LIBOR rate. The Group continues
its two cash flow hedging interest rate swap arrangements in order to reduce the risk of such upward movements in LIBOR rate. These
instruments and the movement in their fair values are detailed in note 17b.
Following the agreement of new facilities with Royal Bank of Scotland on improved terms the following interest rates applied during the
financial year:
d. Up to 14 January 2016: London Inter-Bank Offer Rate (LIBOR) plus 2.35%–2.65% Lloyds Bank plc margin based on a loan to value
covenant test for the revolving advances amounting to £28.5 million (2015: £27.7 million).
e. Up to 14 January 2016: 40% of the applicable margin for non-utilisation (i.e. that part of the facility which remains undrawn from time to
time). For this period the prevailing non-utilisation charge is calculated at a rate of 0.94%.
f. From 15 January 2016: London Inter-Bank Offer Rate (LIBOR) plus 1.40%–1.65% Lloyds Bank plc margin based on a loan to value
covenant test for the revolving advances amounting to £28.5 million (2015: £27.7 million).
g. From 15 January 2016: 40% of the applicable margin for non-utilisation (i.e. that part of the facility which remains undrawn from time to
time). For this period the prevailing non-utilisation charge is calculated at a rate of 0.56%.
h. Rates prevailing on the Group’s Interest rate swaps. See note 17b.
Cash balances held in current accounts attract no interest but surplus cash is transferred daily to a treasury deposit account which earns
interest at the prevailing money market rates1. All amounts are denominated in Sterling. The balances at 31 July 2016 are as follows:
Variable rate treasury deposits1
SIP trustee deposits
Cash in operating current accounts
Other cash and cash equivalents
Total cash and cash equivalents
Group
2016
£’000
4,915
34
339
47
5,335
Group
2015
£’000
1,744
46
602
43
2,435
1 Money market rates for the Group’s variable rate treasury deposit track Royal Bank of Scotland plc base rate. The rate attributable to the variable rate deposits
at 31 July 2016 was 0.5%.
The Group reviews the current and forecast projections of cash flow, borrowing and interest cover as part of its monthly management
accounts review. In addition, an analysis of the impact of significant transactions is carried out regularly, as well as a sensitivity analysis of the
impact of movements in interest rates on gearing and interest cover.
24921.04 – 26 October 2016 3:23 PM – proof 6
61
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
16 Financial instruments continued
D Interest rate sensitivity analysis
In managing interest rate risk the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings, without jeopardising
its flexibility. Over the longer term, permanent changes in interest rates may have an impact on consolidated earnings.
At 31 July 2016, it is estimated that an increase of one percentage point in interest rates would have reduced the Group’s annual profit
before tax by £88,156 (2015: £77,005) and conversely a decrease of one percentage point in interest rates would have increased the
Group’s annual profit before tax by £88,156 (2015: £77,005). There would have been no effect on amounts recognised directly in other
comprehensive income. The sensitivity has been calculated by increasing by 1% the average variable interest rate of 2.56% applying to the
variable rate borrowings of £8.8 million in the year (2015: £7.7 million/2.84%).
E Cash management and liquidity
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk
management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note B above is a
description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.
Short-term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources, giving due
consideration to risk.
F Foreign currency management
The Group operates solely in the United Kingdom and as such all of the Group’s financial assets and liabilities are denominated in Sterling
and there is no exposure to exchange risk.
G Credit risk
The credit risk management policies of the Group with respect to trade receivables are discussed in note 14.
The credit risk on liquid funds is limited because the counterparty is a bank with high credit ratings assigned by international credit-rating
agencies, in line with the Group’s policy which is to borrow from major institutional banks when arranging finance.
The Group’s maximum exposure to credit risk at 31 July 2016 was £3.70 million (2015: £1.47 million) on receivables and £5.33 million
(2015: £2.44 million) on cash and cash equivalents. Additionally, the Group has provided development loan capital in respect of the
Aldershot store development, a managed contract. The current balance outstanding at 31 July 2016 was £3.16 million. (2015: £2.78
million). These amounts are secured by way of a fixed priority first charge and a debenture over all of the Aldershot assets.
H Maturity analysis of financial liabilities
The undiscounted contractual cash flow maturities are as follows:
2016 – Group
From two to five years
From one to two years
Due after more than one year
Due within one year
Total contractual undiscounted cash flows
2015 – Group
From two to five years
From one to two years
Due after more than one year
Due within one year
Total contractual undiscounted cash flows
62
Trade and
other payables
£’000
Borrowings
£’000
Interest on
borrowings
£’000
–
–
–
2,359
2,359
28,816
–
28,816
–
28,816
1,814
738
2,552
831
3,383
Trade and
other payables
£’000
Borrowings
£’000
Interest on
borrowings
£’000
–
–
–
3,392
3,392
–
27,701
27,701
–
27,701
–
205
205
925
1,130
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 16 Financial instruments continued
I Fair values of financial instruments
Categories of financial assets and financial liabilities
Financial assets
Trade and other receivables
Cash and cash equivalents
Development loan capital
Financial liabilities
Trade and other payables
Bank loans
2016
£’000
3,700
5,335
3,159
2015
£’000
1,468
2,435
2,779
(2,359)
(28,728)
(3,392)
(27,548)
The fair values of the Group’s cash and short-term deposits and those of other financial assets equate to their carrying amounts. The
Group’s receivables and cash and cash equivalents are all classified as loans and receivables and carried at amortised cost. The amounts
are presented net of provisions for doubtful receivables and allowances for impairment are made where appropriate. Trade and other
payables and bank borrowings are all classified as financial liabilities measured at amortised cost.
J Company’s financial instruments
The Company’s financial assets are amounts owed by subsidiary undertakings amounting to £3.8 million (2015: £3.0 million) which are
classified as loans and receivables, and the investment in its subsidiary undertaking of £0.2 million (excluding capital contributions). These
amounts are denominated in Sterling, are non-interest bearing, are unsecured and fall due for repayment within one year. No amounts are
past due or impaired. The Company has no financial liabilities.
17a Borrowings
Non-current
Bank loans repayable in more than two years but not more than five years
Gross
Deferred financing costs
Net bank borrowings
Non-current borrowings
Group
2016
£’000
28,816
(89)
28,727
28,727
Group
2015
£’000
27,701
(153)
27,548
27,548
On 15 January 2016, the Group agreed a new banking facility on improved terms with Royal Bank of Scotland Bank plc (RBS). The new £40
million five year revolving credit facility replaced the existing facility which was due to expire in October 2016, and will provide funding for site
acquisitions as well as working capital for the development of the business over the medium term.
Under this new five year facility the Group is not obliged to make any repayments prior to its expiration in January 2021 and further provides
during the term of the facility for the possibility of an optional extension of the five year term by a maximum of a further two years. The facility
also provides for the possibility of an additional accordion of up to £10 million which if taken up during the term of the facility will increase
facilities available to £50 million.
The Group currently has £28.8 million drawn against its existing £40 million facility. The margin on the new facility is at the London Inter-Bank
Offer Rate (LIBOR) plus 1.40%–1.65% margin based on a loan to value covenant test (1.40% at Lok’nStore’s current LTV level). This is a
marked improvement on the previous 2.35%–2.65% margin and the Group will therefore benefit from a lower average cost of debt and thus
improved cash flow. Loan to value covenants are in line with the previous facility.
The £40 million revolving credit facility with RBS is secured by legal charges and debentures over the freehold and leasehold properties and
other tangible assets of the business with a net book value of £118.0 million (2015: £95.6 million) together with cross-company guarantees
from Group companies.
24921.04 – 26 October 2016 3:23 PM – proof 6
63
www.loknstore.com Stock Code: LOKFINANCIAL REPORT
Notes to the Financial Statements
For the year ended 31 July 2016
17b Derivative financial instruments
The Group continues to operate two separate £10 million interest rate swaps as a cash flow hedge with Lloyds Bank plc, both effective from
31 May 2012, the first at a fixed 1 month sterling LIBOR rate of 1.2% and the second at a fixed one-month sterling LIBOR rate of 1.15%.
Both swaps run up to 20 October 2016 whereupon they lapse. The balance of the drawn facility of £8.8 million (2015: £7.7 million) remains
at a floating rate.
3032816LS Interest rate swap
3047549LS Interest rate swap
Currency
GBP
GBP
Principal
£
10,000,000
10,000,000
20,000,000
Maturity
date
20/10/2016
20/10/2016
Fair value
2016
£’000
(19)
(18)
(37)
Fair value
2015
£’000
(63)
(56)
(119)
The movement in fair value of the interest rate swaps of £82,675 (2015: £169,925) has been recognised in other comprehensive income in
the year.
18 Deferred tax
Deferred tax liability
Liability at start of year
Credited to income for the year
Tax credited directly to other comprehensive income
Debit/(credit) to share based payment reserve
Liability at end of year
Group
2016
£’000
12,252
605
2,408
96
15,361
The following are the major deferred tax liabilities and assets recognised by the Group and the movements during the year:
Accelerated
Capital
Allowances
£’000
Intangible
assets
£’000
Other
temporary
differences
£’000
Revaluation of
properties
£’000
Rolled
over gain
on disposal
£’000
At 31 August 2014
Charge/(credit) to income for the year
(Credit)/charge to other comprehensive
income
Credit to share based payment reserve
At 31 July 2015
Charge/(credit) to income for the year
Charge to other comprehensive income
Charge to share based payment reserve
At 31 July 2016
1,441
267
–
1,708
147
–
–
1,855
563
(33)
–
530
(83)
–
–
447
29
(1)
(38)
(8)
11
21
–
24
7,008
–
1,578
8,586
–
2,375
–
10,961
1,829
(42)
–
1,787
524
12
–
2,323
Share
options
£’000
–
(42)
–
(309)
(351)
6
–
96
(249)
Group
2015
£’000
10,870
151
1,540
(309)
12,252
Total
£’000
10,870
151
1,540
(309)
12,252
605
2,408
96
15,361
64
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 19 Share capital
Authorised:
35,000,000 ordinary shares of 1 pence each (2015: 35,000,000)
Allotted, issued and fully paid ordinary shares
Balance 1 August
Options exercised 662,573 shares (2015: 637,641 shares)
Balance 31 July
Number of shares at 31 July
2016
£’000
350
£’000
285
6
291
2015
£’000
350
£’000
279
6
285
Called up,
allotted and
fully paid
Number
Called up,
allotted and
fully paid
Number
29,109,322
28,466,749
The Company has one class of ordinary shares which carry no right to fixed income.
20 Equity settled share-based payment plans
The Group operates two equity-settled share-based payment plans, an approved and an unapproved share option scheme, the rules of
which are similar in all material respects. The Enterprise Management Initiative Scheme (EMI) is closed to new grants of options as the
Company no longer meets the HMRC small company criteria.
The Company has the following share options:
2016 Summary
Unapproved Share Options
Approved CSOP Share Options
Total
2015 Summary
Enterprise Management Initiative Scheme
Unapproved Share Options
Approved CSOP Share Options
Total
As at
31 July 2015
No of options
1,722,361
172,462
1,894,823
As at
31 July 2014
No of options
41,414
2,276,111
246,286
2,563,811
Granted
Exercised
Lapsed/
surrendered
As at
31 July 2016
No of options
59,858
23,137
82,995
Granted
–
5,182
13,471
18,653
(643,894)
(18,679)
(662,573)
(43,841)
(10,909)
(54,750)
1,094,482
170,763
1,260,459
Exercised
(41,414)
(535,321)
(60,906)
(637,641)
Lapsed/
surrendered
–
(23,611)
(26,389)
(50,000)
As at
31 July 2015
No of options
–
1,722,361
172,462
1,894,823
24921.04 – 26 October 2016 3:23 PM – proof 6
65
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
20 Equity settled share-based payment plans continued
The following table shows options held by Directors under all schemes.
2016
Executive Directors
A Jacobs – Unapproved
SG Thomas – Unapproved
RA Davies – Unapproved
RA Davies – CSOP
RA Davies total
CM Jacobs – Unapproved
CM Jacobs – CSOP
CM Jacobs total
Neil Newman – Unapproved
Neil Newman – CSOP
N Newman total
Non-Executive Directors
ETD Luker – Unapproved
C P Peal – Unapproved
Non-Executive total
All Directors total
Total
at 31 July
2015
380,000
170,000
531,977
14,493
546,470
145,668
20,577
166,245
180,714
19,939
200,653
15,000
10,000
25,000
1,488,368
Options
granted
Options
exercised
Unapproved
Scheme
26,087
5,217
–
–
–
3,329
3,594
6,923
17,028
1,434
18,462
–
–
–
56,689
(200,000)
(100,000)
(250,000)
–
(250,000)
(25,000)
(5,245)
(30,245)
(10,000)
(5,178)
(15,178)
–
(10,000)
(10,000)
(605,423)
206,087
75,217
281,977
–
281,977
123,997
–
123,997
187,742
187,742
15,000
–
15,000
890,020
Approve
CSOP
share
otions
–
–
–
14,493
14,493
–
18,926
18,926
16,195
16,195
–
–
–
49,614
Total
at 31 July
2016
206,087
75,217
281,977
14,493
296,470
123,997
18,926
142,923
187,742
16,195
203,937
15,000
–
15,000
939,634
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 two and a half or 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.
Exercise of an option is subject to continued employment. The life of each option granted is six and a half to 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
(two and a half to three 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 year relating to employer share-based payment schemes was £182,124 (2015: £210,558), all of which relates to
equity-settled share-based payment transactions.
21 Enterprise Management Initiative Scheme
The Company operated a share option scheme under the Enterprise Management Initiative (EMI), the vesting conditions of which have
been met.
The Group has for some years no longer met the EMI Scheme qualifying criteria. Accordingly, there were no options issued under this
scheme during the year, and no options remained at the year end. The scheme is now closed.
66
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 22 Unapproved Share Options
The Company issues unapproved share options, the vesting conditions of which have been met.
Movements in the year are shown below:
Outstanding at 1 August
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 31 July
Exercisable at 31 July
Weighted
average
exercise
price
2016
pence
148.65
305.50
166.51
143.98
159.85
134.60
Options
2015
number
2,276,111
5,182
(23,611)
(535,321)
1,722,361
1,152,443
Weighted
average
exercise
price
2015
price
144.68
287.50
207.00
129.21
148.65
139.49
Options
2016
number
1,722,361
59,858
(43,841)
(643,894)
1,094,482
798,957
The options outstanding at 31 July 2016 had a weighted average remaining contractual life of 5.4 years (2015: 5.3 years). The exercise
prices for shares exercisable at 31 July 2016 ranged from 56.5 pence per share to 269.5 pence per share. .
The following sets out the movements in the year in respect of unapproved share options held by the Directors of the Company.
As at
31 July
2015
380,000
170,000
531,977
180,714
145,668
15,000
10,000
1,433,359
A Jacobs
S Thomas
R Davies
N Newman
C Jacobs
ETD Luker
C Peal
Total
Granted
26,087
5,217
–
17,028
3,329
–
–
51,661
Exercised
/lapsed
(200,000)
(100,000)
(250,000)
(10,000)
(25,000)
–
(10,000)
(595,000)
As at
31 July
2016
Exercise
price
(pence)
206,087 1.085 – 2.855
75,217 1.360 – 2.855
281,977 0.565 – 2.135
187,742 1.070 – 3.250
123,997 1.070 – 3.250
0.565
–
15,000
–
890,020
Date from
which
exercisable
Expiry
date
31/7/15 – 6/8/18
31/7/16 – 6/8/18
31/7/10 – 31/7/17
31/7/10 – 31/7/19
24/4/10 – 31/7/19
31/7/12
–
31/7/22 – 6/8/25
31/1/24 – 6/8/25
31/7/17 – 31/7/24
31/7/17 – 31/7/26
24/4/17 – 31/7/26
31/7/19
–
23 CSOP Approved Share Options
On 2 June 2010 the Group adopted a Company Share Option Plan (CSOP). The CSOP achieved HMRC approval on 28 June 2010. There
are no performance conditions attached to share options issued under CSOP.
Movements in the year are shown below:
Outstanding at 1 August
Granted during the year
Forfeited/surrendered during the year
Exercised during the year
Outstanding at 31 July
Exercisable at 31 July
Weighted
average
exercise
price
2016
pence
178.82
325.00
207.00
98.75
206.05
116.49
Options
2016
number
172,462
23,137
(10,909)
(18,679)
166,011
43,890
Options
2015
number
246,286
13,471
(26,389)
(60,906)
172,462
44,727
Weighted
average
exercise
price
2015
pence
144.48
287.50
113.68
101.47
178.82
97.35
The options outstanding at 31 July 2016 had a weighted average remaining contractual life of 7.8 years (2015: 7.1 years). The exercise
prices for shares exercisable at 31 July 2016 ranged from 85.0 pence per share to 136.0 pence per share.
24921.04 – 26 October 2016 3:23 PM – proof 6
67
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Notes to the Financial Statements
For the year ended 31 July 2016
23 CSOP Approved Share Options continued
The inputs into the Black-Scholes model used to value the options granted during the year are as follows:
Date of grant
31 July 2016
Expected life
(years)
Share price at
date of grant
(pence)
Exercise price
(pence)
6.5
325.0
325.0
Expected
volatility
(%)
25.0
Expected
dividend yield
(%)
Risk free
interest rate
(%)
2.57
0.36
Fair value
charge
per award
(pence)
54.67
The following CSOP approved share options have been granted to Directors of the Company.
R Davies
C Jacobs
N Newman
As at
31 July
2015
14,493
20,577
19,939
55,009
Granted
–
3,594
1,434
5,028
Exercised/
lapsed
–
(5,245)
(5,178)
(10,423)
As at
31 July
2016
Exercise price
(pence)
Date from which
exercisable
Expiry
date
2.070
14,493
18,926 0.850 – 3.250
16,195 1.070 – 3.250
49,614
31/7/17
31/7/14 – 31/7/19
31/7/14 – 31/7/19
31/7/24
31/7/20 – 31/7/26
31/7/21 – 31/7/26
24a Other reserves
Group
1 August 2014
Share based remuneration (options)
IFRS 2 — transfer to retained earnings
Cash flow hedge reserve net of tax
Tax credit relating to share options
31 July 2015
Share based remuneration (options)
IFRS 2 — transfer to retained earnings
Cash flow hedge reserve net of tax
Tax charge relating to share options
31 July 2016
Cash flow
hedge
reserve
£’000
33
–
–
(132)
–
(99)
–
–
62
–
(37)
Merger
reserve
£’000
6,295
–
–
–
–
6,295
–
–
–
–
6,295
Other
reserve
£’000
1,294
–
–
–
–
1,294
–
–
–
–
1,294
Capital
redemption
reserve
£’000
Share-based
payment
reserve
£’000
34
–
–
–
–
34
–
–
–
–
34
939
211
(298)
–
309
1,161
182
(401)
–
(96)
846
Total
£’000
8,595
211
(298)
(132)
309
8,685
182
(401)
62
(96)
8,432
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.
The other distributable reserve and the capital redemption reserve arose in the year ended 31 July 2004 from the purchase of the
Company’s own shares and a cancellation of share premium.
Share based payment reserve
Under IFRS2 there is the option to make transfers from the share based payment reserve to retained earnings in respect of accumulated
share option charges where the options have either been exercised or have lapsed post-vesting. The total amounts calculated and
accordingly transferred to retained earnings amounted to £400,957 (2015: £298,268).
24b Other reserves
Company
1 August 2014
Share based remuneration (options)
IFRS 2 — transfer to retained earnings
31 July 2015
Share based remuneration (options)
IFRS 2 — transfer to retained earnings
31 July 2016
68
Other
reserve
£’000
1,114
–
–
1,114
–
–
1,114
Share-based
payment
reserve
£’000
1,153
211
(298)
1,066
182
(401)
847
Total
£’000
2,267
211
(298)
2,180
182
(401)
1,961
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 25 Retained earnings
Group
1 August 2014
Profit attributable to owners of Parent for the financial year
Transfer from revaluation reserve
(Additional depreciation on revaluation)
Transfer from share based payment reserve (Note 24a)
Transfer realised gain on asset disposal
Dividend paid
31 July 2015
Profit attributable to owners of Parent for the financial year
Transfer from revaluation reserve
(Additional depreciation on revaluation)
Transfer from share based payment reserve (Note 24a)
Transfer realised gain on asset disposal
Dividend paid
31 July 2016
Retained
earnings
before
deduction of
own shares
£’000
Own shares
(note 26)
£’000
12,298
1,968
249
298
421
(1,847)
13,387
4,282
262
401
1,639
(2,147)
17,824
(4,241)
–
–
–
–
–
(4,241)
–
–
–
–
–
(4,241)
Retained
earnings
Total
£’000
8,057
1,968
249
298
421
(1,847)
9,146
4,282
262
401
1,639
(2,147)
13,583
The transfer from revaluation reserve represents the additional depreciation charged on revalued assets net of deferred tax.
The Own Shares Reserve represents the cost of shares in Lok’nStore Group plc purchased in the market and held in the Employee Benefit
Trust to satisfy awards made under the Group’s share incentive plan and shares purchased separately by Lok’nStore Limited for Treasury
Account. These treasury shares have not been cancelled and were purchased at an average price considerably lower than the Group’s
adjusted net asset value. These shares may in due course be released back into the market to assist liquidity of the Company’s stock and to
provide availability of a reasonable line of stock to satisfy investor demand as and when required.
The Company has taken advantage of the exemption available under the Companies Act 2006 not to present the Company income
statement of Lok’nStore Group plc. The Company loss for the year was £276,288 (2015: £139,354).
26 Own shares
31 July 2015 and 31 July 2016
ESOP
shares
Number
623,212
ESOP
shares
£
Treasury
shares
Number
Treasury
shares
£
Own shares
total
£
499,910
2,466,869
3,741,036
4,240,946
Lok’nStore Limited holds a total of 2,466,869 of Lok’nStore Group plc ordinary shares of 1p each for treasury with an aggregate nominal
value of £24,669 purchased for an aggregate cost of £3,741,036 at an average price of £1.503 per share. These shares represent 8.5%
(2015: 8.7%) of the Parent Company’s called-up share capital. The maximum number of shares held by Lok’nStore Limited in the year was
2,466,869. No shares were disposed of or cancelled in the year.
The Group operates an Employee Benefit Trust (EBT) under a settlement dated 8 July 1999 between Lok’nStore Limited and Lok’nStore
Trustee Limited, constituting an employees’ share scheme.
Funds are placed in the trust by way of deduction from employees’ salaries on a monthly basis as they so instruct for purchase of shares in
the Company. Shares are allocated to employees at the prevailing market price when the salary deductions are made.
As at 31 July 2016, the Trust held 623,212 (2015: 623,212) ordinary shares of 1 pence each with a market value of £2,025,439 (2015:
£1,791,735). No shares were transferred out of the scheme during the year (2015: nil).
No dividends were waived during the year. No options have been granted under the EBT.
24921.04 – 26 October 2016 3:23 PM – proof 6
69
www.loknstore.com Stock Code: LOKFINANCIAL REPORT
Notes to the Financial Statements
For the year ended 31 July 2016
27 Cash flows
(a) Reconciliation of profit before tax to cash generated from operations
Profit before tax
Depreciation
Amortisation of intangible assets
Equity settled share based payments
Net settlement proceeds — Reading site
Disposal costs — Swindon stores
Interest receivable
Interest payable
Increase in inventories
(Increase)/decrease in receivables
(Decrease)/increase/in payables
Cash generated from operations
2016
£’000
5,493
1,535
165
182
(1,940)
123
(313)
1,048
(24)
(2,471)
(24)
3,774
(b) Reconciliation of net cash flow to movement in net debt
Net debt is defined as non-current and current borrowings, as detailed in note 17a less cash and cash equivalents.
Increase in cash in the year
Change in net debt resulting from cash flows
Movement in net debt in year
Net debt brought forward
Net debt carried forward
2016
£’000
2,900
(1,115)
1,785
(25,266)
(23,481)
28 Commitments under operating leases
At 31 July 2016 the total future minimum lease payments as a lessee under non-cancellable operating leases were as follows:
Land and buildings
Amounts due:
Within one year
Between two and five years
After five years
Group
2016
£’000
1,535
5,847
7,468
14,850
2015
£’000
2,654
1,440
165
211
–
–
(141)
1,144
(10)
423
98
5,984
2015
£’000
257
–
(257)
(25,523)
(25,266)
Group
2015
£’000
1,546
5,725
8,054
15,325
Operating lease payments represent rentals payable by the Group for certain of its properties. Typically leases are negotiated for a term of 20
years and rentals are fixed for an average of five years.
70
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 29 Related party transactions
The following balances existed between the Company and its subsidiaries at 31 July:
Net amount due from Lok’nStore Limited
2016
£’000
3,648
2015
£’000
2,965
The amount due from Lok’nStore Limited is interest free. The balance is repayable on demand, however the Company has no present
intention to demand repayment within one year and so the amount has been presented as a non-current asset as at 31 July 2016.
The Company provides share options for the employees of Lok’nStore Limited. The capital contributions arising from these share-based
payments are separately disclosed under investments in note 11.
The aggregate remuneration of the Directors, who are the key management personnel of the Group, is set out below. Further information on
the remuneration of individual Directors is found in note 6.
Short term employee benefits
Post-employment benefits
Share-based payments
Total
2016
£’000
1,648
31
182
1,861
2015
£’000
988
30
211
1,229
The Group uses Trucost plc, an environmental research company, to provide information and undertake performance assessment of the
environmental effect of its business activities. Trucost plc is a company in which Andrew Jacobs and Simon Thomas have a beneficial
interest. The total fees payable to Trucost plc in respect of its environmental assessment and reporting for the year was £6,000 (2015:
£6,000). The balance outstanding to Trucost plc at year-end was £nil (2015: £nil).
30a Capital commitments and guarantees
The Group has capital expenditure contracted but not provided for in the financial statements of £1.10 million (2015: £3.03 million) relating
to building contract retentions outstanding on the completed Bristol, Southampton and Reading stores and also the strip out works at the
old Southampton store. The Company was also committed to complete on its new Wellingborough site following completion of all relevant
planning matters.
30b Bank borrowings
The Company has guaranteed the bank borrowings of Lok’nStore Limited, a subsidiary company. As at the year-end, that company had
gross bank borrowings of £28.8 million (2015: £27.7 million).
31 Events after the reporting date
a) Legal completion of the purchase of the Wellingborough site
On 14 September 2016 following completion of all relevant planning matters the Group completed its purchase of the Wellingborough site.
b) Planning permission obtained and subsequent completion of the Gillingham site
(i) On 16 September 2016 planning permission was granted for the demolition of existing commercial buildings on the site the and
construction of a self-storage unit with associated vehicular access, parking and landscaping works.
(ii) On 14 October 2016 following completion of all relevant planning matters the Group completed its purchase of the Gillingham site.
24921.04 – 26 October 2016 3:23 PM – proof 6
71
www.loknstore.com Stock Code: LOKFINANCIAL REPORT Glossary
Abbreviation
Adjusted EBITDA
Earnings before all depreciation and amortisation charges, losses or profits on disposal, share-based payments,
acquisition costs, and non-recurring professional costs, finance income, finance costs and taxation
AGM
APD
Bps
C&W
CAC
CAD
Capex
CGU
C2O e
CSOP
EBT
EMI
ESOP
EU
GHG
HMRC
IAS
IFRIC
IFRS
JLL
LIBOR
LFL
LTV
MWh
NAV
NBV
Annual General Meeting
Auditing Practices
Basis Points
Cushman & Wakefield
Contributory asset charges
Cash available for Distribution
Capital Expenditure
Cash generating units
Carbon Dioxide Emissions
Company Share Option Plan
Employee Benefit Trust
Enterprise Management Incentive Scheme
Employee Share Option Plan
European Union
Greenhouse gas
Her Majesty’s Revenue & Customs
International Accounting Standard
International Financial Reporting Interpretations Committee
International Financial Reporting Standards
Jones Lang LaSalle
London Interbank Offered Rate
Like for like
Loan to Value Ratio
Megawatt Hour
Net Asset Value
Net book value
Operating Profit
Earnings before interest and tax (EBIT)
PV
RICS
sq. ft.
Photovoltaic
Royal Institution of Chartered Surveyors
Square Feet
Store adjusted EBITDA
Adjusted EBITDA (see above) but before central and head
VAT
Value Added Tax
72
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Notes – What we mean when we say… (and why
we use these key performance indicators (KPIs))
KPI
1. NAV
2. LFL
Description
Net Asset Value per share – Adjusted net asset value per share is the net assets adjusted for the
valuation of leasehold stores and deferred tax divided by the number of shares at the year-end. The
shares held in the Group’s employee benefits trust and treasury shares are excluded from the number
of shares.
Like for like – This measure is used to give transparency on improvements in the operating business
unrelated to the opening of new stores or closure of old stores therefore giving visibility of the true
trading picture. On 30 September 2015, Lok’nStore sold its store in Swindon on a sale and manage-
back basis. Like-for-like (LFL) growth figures for the period strip out the effect of this sale and the
opening of the new Bristol store during the period.
3. GROUP EBITDA
Earnings before interest, tax, depreciation and amortisiation – The measure is designed to give
clarity on the operating cash flow of the business stripping away non-cash charges, finance charges
and tax. Adjusted EBITDA is defined as EBITDA before losses or profits on disposal, share-based
payments, acquisition costs, and exceptional items.
4. CAD
5. LTV
Cash available for Distribution – is calculated as Adjusted EBITDA minus total net finance cost,
less capitalised maintenance expenses, New Works Team costs and current tax. This measure is
designed to give clarity to the capacity of the business to generate net operating cash that can be
used to pay dividends to shareholders.
Loan to value ratio – measures the debt of the business expressed as a percentage of total property
assets giving a perspective on the gearing of the business. The calculation is based on net debt of
£23.5 million (2015: £25.3 million) as a percentage of the total properties independently valued by JLL
and including development land assets totalling £113.2 million (2015: £97.8 million) as set out in the
Business and Financial Review section of the Strategic Report.
6. STORE ADJUSTED EBITDA
Is Adjusted EBITDA (see 3 above) before the deduction of central and head office costs.
7. EXCEPTIONAL ITEMS
Arose during the year from a further £2 million received from the disposal of the old Reading store site
and £0.12 million of costs relating to the disposal of the old Swindon site(s).
8. GEARING
Refers to the level of a company’s debt related to its equity capital, usually expressed in percentage
form. It is a measure of a company’s financial leverage and shows the extent to which its operations
are funded by lenders versus shareholders. Gearing can be measured by a number of ratios and we
use the debt-to-equity ratio in this document.
9. CAPEX
Capital expenditure
24921.04 – 26 October 2016 3:23 PM – proof 6
73
www.loknstore.com Stock Code: LOKFINANCIAL REPORT
Our Stores
Head office
Lok’nStore plc
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel
www.loknstore.co.uk
www.loknstore.com
01252 521010
Central Enquiries
0800 587 3322
info@loknstore.co.uk
www.loknstore.co.uk
Basingstoke, Hampshire
Crockford Lane
Chineham
Basingstoke
Hampshire RG24 8NA
Tel
Fax
basingstoke@loknstore.co.uk
01256 474700
01256 477377
Bristol, Gloucestershire
Longwell Green Trade Park
Aldermoor Way
Bristol
BS30 7ET
Tel
bristol@loknstore.co.uk
0117 967 7055
Crayford, Kent
Block B
Optima Park
Thames Road
Crayford
Kent DA1 4QX
01322 525292
Tel
Fax
01322 521333
crayford@loknstore.co.uk
Eastbourne, East Sussex
Unit 4, Hawthorn Road
Eastbourne
East Sussex BN23 6QA
Tel
Fax
eastbourne@loknstore.co.uk
01323 749222
01323 648555
Fareham, Hampshire
26 + 27 Standard Way
Fareham Industrial Park
Fareham
Hampshire PO16 8XJ
01329 283300
Tel
Fax
01329 284400
fareham@loknstore.co.uk
74
Farnborough, Hampshire
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel
Fax
farnborough@loknstore.co.uk
01252 511112
01252 744475
Harlow, Essex
Unit 1 Dukes Park
Edinburgh Way
Harlow
Essex CM20 2GF
01279 454238
Tel
Fax
01279 443750
harlow@loknstore.co.uk
Horsham, West Sussex
Blatchford Road
Redkiln Estate
Horsham
West Sussex RH13 5QR
01403 272001
Tel
Fax
01403 274001
horsham@loknstore.co.uk
Luton, Bedfordshire
27 Brunswick Street
Luton
Bedfordshire LU2 0HG
Tel
Fax
luton@loknstore.co.uk
01582 721177
01582 721188
Maidenhead, Berkshire
Stafferton Way
Maidenhead
Berkshire
SL6 1AY
Tel
Fax
maidenhead@loknstore.co.uk
01628 878870
01628 620136
Milton Keynes, Buckinghamshire
Etheridge Avenue
Brinklow
Milton Keynes
Buckinghamshire MK10 0BB
Tel
Fax
miltonkeynes@loknstore.co.uk
01908 281900
01908 281700
Northampton Central
16 Quorn Way
Grafton Street Industrial Estate
Northampton NN1 2PN
Tel
Fax
nncentral@loknstore.co.uk
01604 629928
01604 627531
Northampton Riverside
Units 1–4
Carousel Way
Northampton
Northamptonshire NN3 9HG
Tel
Fax
northampton@loknstore.co.uk
01604 785522
01604 785511
Poole, Dorset
50 Willis Way
Fleetsbridge
Poole
Dorset BH15 3SY
Tel
Fax
poole@loknstore.co.uk
01202 666160
01202 666806
Portsmouth, Hampshire
Rudmore Square
Portsmouth PO2 8RT
Tel
Fax
portsmouth@loknstore.co.uk
02392 876783
02392 821941
Reading, Berkshire
251 A33 Relief Road
Reading
RG2 0RR
0118 958 8999
Tel
Fax
0118 958 7500
reading@loknstore.co.uk
Southampton, Hampshire
Third Avenue
Southampton
Hampshire SO15 0JX
Tel
Fax
southampton@loknstore.co.uk
02380 783388
02380 783383
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 Chichester, West Sussex
17, Terminus Road,
Chichester,
PO19 8TX
Tel
chichester@loknstore.co.uk
01243 771840
Crawley, West Sussex
Sussex Manor Business Park
Gatwick Road
Crawley
RH10 9NH
Tel
01293 738530
crawley@loknstore.co.uk
Swindon Kembrey Park, Wiltshire
Kembrey Street
Elgin Industrial Estate
Swindon
Wiltshire SN2 8UY
Tel
Fax
swindoneast@loknstore.co.uk
01793 421234
01793 422888
Woking
Marlborough Road
Woking
GU21 5JG
01483 378323
Tel
Fax
01483 722444
woking@loknstore.co.uk
Under Development
(Managed Stores)
Hemel Hempstead
Broadstairs
Staines, Middlesex
The Causeway
Staines
Middlesex TW18 3AY
01784 464611
Tel
Fax
01784 464608
staines@loknstore.co.uk
Sunbury on Thames, Middlesex
Unit C, The Sunbury Centre
Hanworth Road
Sunbury
Middlesex TW16 5DA
01932 761100
Tel
Fax
01932 781188
sunbury@loknstore.co.uk
Tonbridge, Kent
Unit 6 Deacon Trading Estate
Vale Road
Tonbridge
Kent TN9 1SW
Tel
Fax
tonbridge@loknstore.co.uk
01732 771007
01732 773350
Development locations
(Owned Stores)
Wellingborough, Northamptonshire
19/21 Whitworth Way
Wellingborough NN8 2EF
Gillingham, Kent
Courteney Road
Gillingham
Kent ME8 0RT
Managed stores
Aldershot, Hampshire
251, Ash Road
Aldershot
GU12 4DD
Tel
aldershot@loknstore.co.uk
0845 4856415
Ashford, Kent
Wotton Road
Ashford
Kent TN23 6LL
01233 645500
Tel
Fax
01233 646000
ashford@loknstore.co.uk
24921.04 – 26 October 2016 3:23 PM – proof 6
75
www.loknstore.com Stock Code: LOKFINANCIAL REPORT 76
24921.04 – 26 October 2016 3:23 PM – proof 6
Lok’nStore Group Plc Annual Report and Accounts for the year ended 31 July 2016 24921.04 – 26 October 2016 3:23 PM – proof 6
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Head Office
Lok’nStore PLC
112 Hawley Lane
Farnborough
Hampshire GU14 8JE
Tel 01252 521010
www.loknstore.co.uk
www.loknstore.com
24921.04 – 26 October 2016 3:23 PM – proof 6