Lok’nStore Group plc
Annual Report
and Accounts
for the year ended 31 July 2019
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 24 years. We currently operate 34 self-storage centres
mainly in Southern England. We have been listed on AIM
since June 2000.
Financial Statements
56 Consolidated Statement of Comprehensive Income
57 Consolidated Statement of Changes in Equity
58 Company Statement of Changes in Equity
Consolidated and Company Statements
59
of Financial Position
60 Consolidated Statement of Cash Flows
61 Accounting Policies
70 Notes to the Financial Statements
98 Glossary
99 Our Stores
Overview
2 Chairman’s Statement
4 Group at a Glance
Strategic Report
The UK Self-Storage Market
8
10 Our Business Model
12 Our Strategy
13 Chief Executive Officer’s Review
17 Key Performance Indicators
19 Property Review
22 Financial Review
30 Principal Risks and Uncertainties
33 Corporate Sustainability Report
Governance
38 Board of Directors and Advisers
40 Corporate Governance
46 Directors’ Report
48 Remuneration Report
50 Statement of Directors’ Responsibilities
51
Independent Auditor’s Report to the
Members of Lok’nStore Group plc
Lok’nStore Group plc Annual Report and Accounts 2019
To find out more visit:
www.loknstore.com/investors
Highlights
Impressive growth and expanding
new store opening programme.
GROUP REVENUE1
£16.95m
£15.37m
up 10.3%
GROUP ADJUSTED
EBITDA2
up 11.5%
18
19
£7.39m
£6.63m
18
19
ADJUSTED TOTAL
ASSETS5
up 11.2%
ADJUSTED NET ASSET
VALUE6 PER SHARE
up 11.1%
OPERATING PROFIT3
£5.06m
£4.55m
up 11.1%
18
19
ANNUAL DIVIDEND
PER SHARE
up 9.1%
£201.7m
£181.4m
18
19
£5.33
£4.80
18
19
12.0p
11.0p
18
19
STRONG BALANCE SHEET, CONSERVATIVE DEBT
• Net debt down 9.3% to £29.3 million
EFFICIENT CAPITAL ALLOCATION
• Disposal of document storage business for
(2018: £32.3 million)
£7.63 million cash
• Loan to value ratio7 down to 16.1% (2018: 19.7%)
• Increased bank facility from £50 million to
£75 million with an accordion to £100 million
• Sale and manage back of Crayford store at
valuation for £7.42 million net cash
“ Lok’nStore Group has had an excellent year successfully implementing our
strategic objectives. We have created a strong platform for an exciting period of
growth for Lok’nStore with revenue, profits and asset values all moving strongly
ahead. Our adjusted net asset value per share has increased by a substantial
11.1% to £5.33 this year and we are raising the annual dividend by 9.1% to 12
pence per share. We have achieved a notable acceleration in our new store
pipeline to 14 sites which will significantly increase operating space over the
coming years.”
“ With a strong balance sheet and low gearing helped by capital recycling, we will
continue to build more landmark stores in an under-supplied market. This will add
considerable momentum to sales and earnings growth and positions the Group
well for the future.”
Andrew Jacobs, CEO
Find out more about our Key
Performance Indicators on page 17
01
Strategic ReportOverviewGovernanceFinancial Statements
Chairman’s Statement
“ We are fulfilling our commitment to a period
of sustainable growth based on the strong
platform we have built.”
Simon G. Thomas
Chairman
This is an exciting set of results with
Lok’nStore continuing to deliver
on our commitment to rapid and
sustainable growth.
Crayford store generated a further
£7.42 million in cash. These proceeds
will now be reinvested back into new
faster growth landmark stores.
During the year we opened four
new landmark stores which are all
trading well and have contributed to
both the growth in turnover and the
significant rise (11.1%) in our Adjusted
Net Asset Value per share to £5.33
(2018: £4.80). Our new store pipeline
has increased to 14 sites.
While we invested over £14 million
in store development in this financial
year, as a result of this recycling of
capital we are able to report a year-
end loan-to-value (LTV) ratio down
to 16.1% (2018: 19.7%) and net
debt down to £29.3 million (2018:
£32.3 million).
The detail behind these results
is discussed further in our Chief
Executive Officer’s review and the
Financial Review on pages 13 and
22 respectively. The performance
of Lok’nStore this year can be
summarised under three headings:
• Strong operating performance
resulting in double digit turnover
and Group Adjusted EBITDA
growth
• Growing asset value driven by
existing store performance and
growth in new stores
• More new stores in the pipeline
The continued investor interest in this
sector together with the transactions
of self-storage centres gives the
Board confidence in the increased
value of our assets.
Capital Recycling
The disposal of our document
storage business generated
£7.64 million in cash (gross) while
the sale and manage back of our
The Group continues to source
high quality sites for new landmark
stores. Our rapid store development
programme has led to an increase in
new and purpose built space to 62%
of our owned portfolio. This will rise
to 69% following development of our
current pipeline.
Managed Stores
Our growth strategy includes
increasing the number of stores we
manage for third party owners. This
enables the Company to earn revenue
without having to commit our capital,
to amortise fixed central costs over a
wider operating base and drive further
traffic to our website which benefits
our entire operation. We generated
managed store income of £816,676
this year, up 53% from the previous
year. Managed store income is
generated from our existing platform
and central management, resulting
in an effective margin from this
activity of 100%. Our current pipeline
includes an additional two managed
stores which will take the total
number of managed stores to 13.
Committed People
We rely on the dedication of our
people to deliver these impressive
results and will continue to invest in
training to develop and deepen their
skills. This year we have provided
over 4,000 hours of training via
our Academy and you can read
more about this in our Corporate
Sustainability Report. We have
reviewed our pay levels to ensure
that all of our employees are paid
fairly and we continue to promote
equity ownership to our colleagues
via our Share Investment Plan and
the granting of options.
We do this because it makes
business sense, directly contributing
to our strategic and operational
objectives which are to:
• Steadily increase cash available
for distribution (CAD) per share
enabling a predictable growth
of the dividend from a strong
asset base with conservative
levels of debt
• Fill existing stores and improve
pricing
• Acquire more sites to build new
landmark stores
•
Increase the number of stores
we manage for third parties
I would like to thank all of our
employees for the enormous
contribution they have made to
our Group’s continuing success.
02
Lok’nStore Group plc Annual Report and Accounts 2019 1995
LOK’N STORE
FOUNDED
£10m
EQUITY RAISED
IN 2001
#4
SELF STORAGE
OPERATOR IN THE UK
Board Governance
In March 2018 the London Stock
Exchange published AIM Notice 50
requiring companies to comply with
a recognised Corporate Governance
Code. Your Board has decided
to apply the Quoted Companies
Alliance’s (QCA) Corporate
Governance Code which takes
a proportionate principle based
approach to the application and
reporting of good governance. We
believe this code is appropriate to
the size and nature of the Company.
Please refer to the Corporate
Governance section of this report
and our website for more information.
The composition of the Board is also
my responsibility and I believe the
current composition of your Board
continues to be in the best interest
of Shareholders as a whole.
Progressive Dividend Policy
For the eighth consecutive year and
in line with our stated aim to provide
a predictable dividend growth, we
are proposing to increase the annual
dividend pay-out by one penny.
The Group will therefore pay a final
dividend of 8.33 pence per share on
10 January 2020 following the interim
dividend payment of 3.67 pence per
share in June 2019 making a total
annual dividend of 12 pence
per share, up 9.1% from 11 pence
last year.
I hope you enjoy reading this
year’s report and that you will feel
as confident and optimistic as I
do about the future of Lok’nStore
Group plc.
Simon G. Thomas
Chairman
1 November 2019
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4
NEW LANDMARK
STORES
1
ACQUIRED STORE
216,000
ADDITIONAL SQ. FT.
OF LETTABLE SPACE
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Group at a Glance
Lok’nStore Group plc is one of the leading companies
in the fast growing UK self-storage market.
HOUSEHOLD STORAGE
BUSINESS STORAGE
• Storage rooms
• Vehicle storage
• Pallet storage
• Self-storage archiving
• Student packages
• Flexible space
• Forces & services
• Commercial vehicle
packages
storage
We opened our first self-storage centre in 1995
and have grown consistently over the last 24
years, currently with 34 self-storage centres
trading mainly in Southern England.
We have been listed on the AlM Market since
June 2000 and the Board accounts for 28.52%
of the Total Voting Rights (TVR) in the ordinary
shares of the Company (2018: 29.3%).
We offer self-storage from our own stores,
and management services to third party
storage owners. Self-storage and other storage
services are available to both household and
business customers at our highly branded
Lok’nStore centres.
REVENUE BY
CUSTOMER TYPE
NUMBER OF TRADING
STORES BY TYPE
NUMBER OF PIPELINE
STORES BY TYPE
33.3%
Business customers
66.7%
Household
customers
23
Owned stores
11
Managed stores
9
Owned stores
5
Managed stores
OUR LANDMARK STORES
We develop and operate self-storage centres
predominantly in prominent locations in Southern
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.
We opened or acquired five new stores in this
financial year: Cardiff, Dover, Exeter, Ipswich and
Hedge End.
04
PAGE
7
IPSWICH
Lok’nStore Group plc Annual Report and Accounts 2019 34
STORAGE CENTRES
11,800+
CUSTOMERS
161
EMPLOYEES
OUR LOCATIONS
New Stores
Cardiff
Dover
Exeter
Ipswich
Hedge End
Pipeline Stores
Bedford
Bournemouth
Cheshunt
Gloucester
Leicester
Stevenage
Warrington
Wolverhampton
Stores
Aldershot
Ashford
Basingstoke
Bristol
Broadstairs
Chichester
Crawley
Crayford
Eastbourne
Farnborough
Fareham
Gillingham
Harlow
Hemel Hempstead
Horsham
Luton
Maidenhead
Milton Keynes
Northampton Central
Northampton Riverside
Poole
Portsmouth
Reading
Southampton
Sunbury
Swindon
Tonbridge
Wellingborough
Woking
To find out more about
our store locations visit:
www.loknstore.com
PAGE
37
PAGE
55
EXETER
DOVER
05
Strategic ReportOverviewGovernanceFinancial Statements 06
Lok’nStore Group plc Annual Report and Accounts 201908 The UK Self-Storage Market10 Our Business Model12 Our StrategyStrategic Report IPSWICH
Lok’nStore Ipswich opened in July 2019 and early trading
has been encouraging.
This stunning landmark store is located on Futura Park, a new
but established retail destination to the south-east of Ipswich
town centre. The store sits between premium brands such as
John Lewis, Waitrose and Audi, reflecting the premium service
that our store team provides to its customers.
The market-leading, modern store is the only purpose-built
storage facility serving the 135,000 people of Ipswich and
becomes the first Lok’nStore location open in Suffolk.
40,690
SQUARE FEET OF MAXIMUM
LETTABLE AREA
OPEN
NOW
07
Strategic ReportOverviewGovernanceFinancial Statements13 Chief Executive Officer’s Review 17 Key Performance Indicators19 Property Review22 Financial Review30 Principal Risks and Uncertainties33 Corporate Sustainability Report The UK Self-Storage Market
The UK self-storage market at a glance
The Self-Storage Association UK Annual Industry Survey 2019 reports that the
UK Self Storage industry is made up of 1,582 sites offering 45.6 million square
feet of space. There was a 3.9% increase in space used by customers in 2018.
SQUARE FEET
OF SELF STORAGE PER
HEAD OF POPULATION
9.4
1.8
0.7
UK
AUSTRALIA
USA
£720m
ANNUAL
TURNOVER OF UK
SELF STORAGE
INDUSTRY
28,800
SQ. FT. AVERAGE
STORE SIZE
1.3m
SQ FT OF
ADDITIONAL
SPACE USED BY
CUSTOMERS IN 2018
3.9%
RISE IN OCCUPANCY
ACROSS THE
INDUSTRY IN 2018
48%
ONLY
OF PEOPLE HAVE A
REASONABLE OR
GOOD AWARENESS
OF SELF STORAGE
08
Lok’nStore Group plc Annual Report and Accounts 2019 Lok’nStore’s Opportunity
in the Market
The Self-Storage Association UK
(SSA UK) Annual Industry Survey
2019 notes that public awareness
of and demand for self-storage is
increasing. We know that on average
customers chose a store within five
miles of their home or business. With
a pipeline of eight secured stores
and a further six stores progressing
through the acquisitions process,
Lok’nStore is well placed to attract
these customers and add further
momentum to the growth of our
sales and profits.
Combining the Group’s competitive
strengths (recognised brand,
excellent customer service, rigorous
cost control) and the attractive
market dynamics of the storage
sector (growing sector, under supply,
resilience during economic downturn)
with our strong balance sheet and
flexible operating and ownership
model (see our portfolio strategy on
page 12), we believe Lok’nStore can
take advantage of the opportunities
presented and continue its growth
without significantly increasing risk.
Market Overview
As reported in the Self-Storage
Association UK (SSA UK) Annual
Industry Survey 2019 the UK self-
storage market continues to grow
but remains under-developed relative
to Australia and the USA. In the
UK there are an estimated 1,582
self-storage facilities providing 45.6
million square feet of storage space.
With a population of 65.2 million
people in the UK this equates to
only 0.68 square feet per person
compared to 9.4 square feet per
person in the USA and 1.8 square
feet in Australia. The UK has 46%
of all European self-storage space.
Drivers of Demand
for Self-storage
Demand for self-storage by both
business and household customers
is driven by a specific need based
on changing circumstances as well
as economic activity and business
confidence.
For household customers their need
is often linked to a life event where
they will need space temporarily, for
example to support a house sale, but
increasingly householders are using
storage on a semi-permanent basis
to free up space at home or store
belongings they don’t have room for.
The structure of the UK industry
is changing. When the industry
first emerged companies were
predominately single owner sites
often located in industrial areas
but larger operators (defined as
operators managing ten or more
sites), such as Lok’nStore, have
recently been developing purpose
built stores in retail facing locations
offering customers a higher standard
of product and service.
Business customers use self-
storage for a variety of purposes
including storage of goods, excess
or seasonal stock, document
archiving or storage of equipment
and tools. Businesses tend to store
for longer than household customers
and take larger units, although they
also take advantage of self-storage
for temporary periods to support
seasonal sales or office moves
or refurbishments.
The main barriers to entry to the
market remain the difficulty in finding
and securing suitable sites as well
as gaining the appropriate planning
consents. As a result, according to
the SSA UK, larger operators now
own or manage around 30% of
facilities which translates to 40% of
market share in terms of revenue and
space. Currently Lok’nStore is the
fourth largest operator in the UK.
09
Strategic ReportOverviewGovernanceFinancial Statements Our Business Model
Our overriding 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.
WHAT WE DO
• Buy (or lease) prominent sites
• Build (or refurbish) landmark, highly
visible orange storage centres
• Offer clean, dry, secure storage to
business and household customers
34
UK STORES CURRENTLY
TRADING
HOW WE CREATE VALUE
• Take a flexible approach to
site selection
•
Increase our asset base
• Careful cost control
• Managed pricing strategy
• Earn fees from managing stores on
behalf of others
• Carefully balanced use of leverage
£17 million
REVENUE
10
Lok’nStore Group plc Annual Report and Accounts 2019 SHARING VALUE WITH OUR STAKEHOLDERS
SHAREHOLDERS
CUSTOMERS
OUR PEOPLE
• High quality earnings
• Easy to locate stores
• Growing NAV
• Progressive dividend policy
• Friendly and high level
customer service
• Wide range of storage
solutions
• Transparent and
open contracts
12p
ANNUAL DIVIDEND
PER SHARE
5 STAR
CUSTOMER REVIEWS
ON TRUSTPILOT
• Development opportunities
through the Lok’nStore
Academy
• Uncapped bonus scheme
for all
• Share ownership plans
• Strong health and safety
approach
£440,000
PAID OUT IN
STORE BONUSES
TO STORE TEAMS
(2018: £400,000)
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Strategic ReportOverviewGovernanceFinancial Statements
Our Strategy
OUR OBJECTIVES
ACHIEVEMENTS IN 2019
STRATEGY IN ACTION
STEADILY INCREASE
CASH AVAILABLE FOR
DISTRIBUTION (CAD)
PER SHARE
Cash Available for Distribution
(CAD) per share up 8.8% to
18.95 pence (2018:17.42 pence).
9.1%
increase in annual
dividend to 12 pence
per share
FILL EXISTING STORES
AND IMPROVE PRICING
We developed the customer
journey giving customers the
ability to find and respond to
previous quotes with one click.
We focussed on developing
our teams’ sales and customer
service through the Lok’nStore
Academy. These actions
resulted in conversion of new
enquiries improving by 1% over
the year.
6.0%
Self-storage unit
occupancy up
0.6%
Self-storage
pricing up
ACQUIRE MORE
SITES TO BUILD NEW
LANDMARK STORES
Cardiff, Dover, Exeter and
Ipswich stores opened in the
year – all in prominent locations.
Eight stores in planning or
development.
INCREASE THE NUMBER
OF STORES WE MANAGE
FOR THIRD PARTIES
Dover and Exeter managed
stores opened during the year.
We are developing a managed
store in Gloucester and have
three managed store sites
with lawyers.
3
new sites acquired
in Stevenage,
Wolverhampton
and Warrington
5
managed stores
in pipeline
12
Lok’nStore Group plc Annual Report and Accounts 2019 Chief Executive Officer’s Review
“ Store visibility remains pivotal to our
marketing efforts. Our new landmark stores
are located in highly prominent locations and
we continually invest in new signage and
lighting at our existing stores.”
Andrew Jacobs
Chief Executive Officer
Lok’nStore Group has had an excellent
year successfully implementing
all of our strategic objectives.
Revenue, profits and asset values
have all moved ahead steadily. Our
rapidly expanding pipeline of new
stores will substantially increase the
proportion of our store space which
is new or purpose-built and will add
further momentum to the growth of
sales and profits with plenty of new
capacity contributing to growth over
the coming years.
Total Adjusted Store EBITDA in self-
storage, a key performance indicator
of profitability and cash flow of the
business, increased 6.7% to £8.99
million (2018: £8.42 million). On a like
for like basis13, the overall Adjusted
EBITDA margin across all stores was
over one percentage point higher
at 58.0% (2018: 56.9%) with the
Adjusted Store EBITDA margins of
the freehold stores at 65.4% (2018:
64.1%) and the leasehold stores at
43.1% (2018: 44.1%).
Robust Trading
Group revenue (Continuing
Operations) for the year was £16.95
million, up 10.3% year on year (2018:
£15.37 million) driven by occupancy
increases in both old and new stores.
This revenue growth led to an 11.5%
increase in Group Adjusted EBITDA.
• Self-storage revenue £16.0 million
up 9.0% (2018: £14.68 million)
• Adjusted Store EBITDA
£8.99 million up 6.7%
(2018: £8.42 million)
• Unit occupancy up 6.0%
• Unit pricing up 0.6%
Over the course of the year unit
occupancy rose by a healthy 6.0%
and unit pricing edged ahead by
0.6%. Out of 34 stores open 18 were
trading at above 70% occupancy.
At the end of July 2019 33.3% of
Lok’nStore’s self-storage revenue
was from business customers
(2018: 33.9%) and 66.7% was from
household customers, (2018: 66.1%).
By number of customers 17.7% of our
customers were business customers
(2018: 17.8%) and 82.3% household
customers (2018: 82.2%).
By the year-end we had 11 managed
stores following the opening of the
two new managed stores in Dover
and Exeter, and the sale of our
existing store in Crayford on a
sale and manage back.
The average unexpired term of the
Group’s operating leaseholds is
approximately 11 years and 0 months
as at 31 July 2019 (11 years and 1
month: 31 July 2018). The leaseholds
produced 24.8% of the total Adjusted
Store EBITDA in the year (2018: 27.6%).
In the table on page 14 we show
how the performance of the stores
varies between freehold and
leasehold stores. Currently 46.9%
of Lok’nStore owned trading space
is freehold, 24.6% is leasehold and
28.5% managed stores. Inevitably
the leaseholds trade on lower
margins due to the rent payable,
but nevertheless the 43.1% margins
achieved is substantial, and leads to
a higher return on capital than the
freehold stores which require much
larger capital expenditure to buy
the land and buildings. The freehold
stores produce 75.2% of the Adjusted
Store EBITDA and account for 89.7%
of valuations (including secured
pipeline stores).
When the secured pipeline is
fully developed the freeholds will
account for 53.6% of trading space,
leaseholds will be 19.3% and
managed stores 27.1%. This mix
of tenures with their different risk
and return characteristics provides
strength in the balance sheet
and opportunities to create value
throughout the cycle, and is always
driven solely by consideration of the
operating business.
13
Strategic ReportOverviewGovernanceFinancial Statements Chief Executive Officer’s Review
continued
Portfolio Analysis and Performance Breakdown
As at 31 July 2019
Freehold
Operating Leaseholds
Managed Stores
Total Stores Trading
Pipeline Stores
Owned
Managed Stores
Total Stores
Number
of Stores
% of
Valuation
% of
Adjusted
Store
EBITDA
Adjusted
Store
EBITDA
Margin (%)
When Fully Developed
% Lettable
Space
Number
of Stores
Total %
Lettable
Space
15
8
11
34
8*
6
2
42
79.5
10.3
–
–
10.2
–
100
75.2
24.8
–
–
–
–
61.8
43.1
100
–
–
–
46.9
24.6
28.5
–
–
–
100
55.8
100
21
8
13
42
–
–
42
53.6
19.3
27.1
–
–
–
100
*
Applies to the 8 contracted stores only.
In the table below we show how the performance breaks down between the age brackets of the stores. Clearly older
stores have had more time to fill up and produced 66.5% EBITDAR profit (earnings before interest, tax, depreciation,
amortisation and rent) margins. Over time as new stores and pipeline sites go through their life cycle they will
progress towards similar margins as the fully established stores and add substantially to revenues and profits.
Operating Performance at a Glance (Lok’nStore owned stores only)
Weeks Old
Year Ended 31 July 2019
Sales £’000
Stores Adjusted EBITDA £'000
EBITDA Margin (%)
Stores Adjusted EBITDAR £'000
EBITDAR Margin (%)
As at 31 July 2019 (‘000 sq. ft.)
Maximum Net Area
Freehold (‘000 sq. ft.)
Short Leasehold ('000 sq. ft.)
Number Stores
Freehold
Short Leasehold
Total Stores
Contracted
Pipeline Under 100
100 to 250
Over 250
Total
972
304
722
452
31.3%
62.6%
308
452
14,415
8,230
57.1%
9,581
31.7%
62.6%
66.5%
355
355
–
6
–
6
193
193
–
4
–
4
49
49
–
1
–
1
945
537
408
10
8
18
16,109
8,986
55.8%
10,341
64.2%
1,542
1,134
408
21
8
29
Table covers Lok’nStore owned stores only.
In respect of the Farnborough Store (over 250 weeks) the total store revenue includes a £100,000 contribution
receivable from Group Head Office.
14
Lok’nStore Group plc Annual Report and Accounts 2019
9.0%
6.0%
6.7%
INCREASE IN
STORAGE REVENUE
INCREASE IN
UNIT OCCUPANCY
INCREASE IN ADJUSTED
STORE EBITDA
Ancillary Sales
Ancillary sales which consist of boxes
and packaging materials, insurance
and other sales increased 11.0%
(2018: 4.0%) over the year accounting
for 11.1% of self-storage revenues
(2018: 11.0%).
which combines Saracen’s operating
profit up to the date of disposal with
the profit arising on its disposal. The
profit on discontinued operations
is then aggregated with profit on
continuing operations in determining
the Group’s total net profit.
Document Storage
Business Sold
• Document storage business
sold for £7.63 million cash
On 31 January 2019, our serviced
document storage business, Saracen
was sold for £7.64 million in cash.
Saracen made a good profit every
year under Lok’nStore’s ownership
and contributed £1.12 million to the
Group’s revenue and £0.25 million
to its EBITDA in the six months to
31 January 2019.
For accounting purposes the
disposal of the Saracen business
constitutes a discontinued operation.
Separate reporting of discontinued
operations is important in providing
users of financial statements with the
information necessary to determine
the effects of a disposal transaction
on the ongoing operations of our
business. Accordingly the unit’s
operating numbers and cash flow are
excluded from the headline figures.
Discontinued operations are shown
separately as a single line on the
Statement of Comprehensive Income
as a profit on disposal (after tax)
In the short term the disposal
proceeds will be used to reduce
overall Group borrowing and will
improve all key banking ratios.
In the medium term the disposal
proceeds will be used to fund the
ongoing investment into our highly
accretive development pipeline of
new self-storage centres, fulfilling
the Company’s objective of growing
asset value by recycling capital from
lower growth assets into high growth
landmark stores.
Marketing
Store visibility remains pivotal to our
marketing efforts. Our new landmark
stores are located in highly prominent
locations and we continually invest
in new signage and lighting at our
existing stores.
During the year our marketing
efforts have continued to focus on
the presentation of our buildings to
attract passing traffic and internet
marketing. With their prominent
positions, distinctive design and
bright orange elevations, our stores
raise the profile of the Lok’nStore
brand and generate a substantial
proportion of our business. 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, and
engage the local community.
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 delivers a high level
of 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 the major
operators such as Lok’nStore with
relatively large marketing budgets.
Pipeline of New Stores
Against this background of ever
improving operating performance
we have invested £14.0 million in
new store development this year and
we have now seen a rapid increase
in our new store pipeline to eight
secured stores by the reporting
date, which will take the total to 42
stores. These will all be purpose built
landmark stores in highly prominent
locations and will add substantially
to the Group’s capacity for revenue,
profit and asset growth. We have six
further store acquisitions progressing
through the legal process.
15
Strategic ReportOverviewGovernanceFinancial Statements Chief Executive Officer’s Review
continued
The graph below shows the speed of fill-up of our stores broken down into their age groups. You can see that over
time the stores have filled up faster with the most recently opened stores (on the left of the graph) filling fastest of all.
We believe that this shows that the UK self-storage market is still in its infancy with low penetration and increased
consumer awareness leading to faster fill. It also shows the strength of Lok’nStore’s newly developed landmark
store model.
Store Revenue Growth after Opening
2013–2019
l
e
u
n
e
v
e
R
y
k
e
e
W
e
g
a
r
e
v
A
2005–2012
1995–2004
Time Open
Managed Stores
Lok’nStore manages an increasing number of stores for third party owners. Under this model Lok’nStore can provide
a turnkey package for investors wishing to own trading self-storage assets. The investor supplies all the capital for
the project which Lok’nStore manages. Lok’nStore will buy, build and operate the stores under the Lok’nStore brand
and within our current management structure.
All of the operating expenses of the store are paid for by the third party out of the store revenue with Lok’nStore
receiving various fees and performance bonuses. Lok’nStore has no costs directly associated with this function and
no equity capital at risk. Therefore this activity generates a positive return at minimal risk increasing the overall risk
adjusted return of the Group as a whole.
Notable in this year’s accounts is the increase in management fees to £816,676 for this year, up 52.7% on last year. As
the number of managed stores increases rapidly over the coming years the revenue from them will rise commensurately.
Future
Lok’nStore Group has had an excellent year successfully implementing our strategic objectives. We have created
a strong platform for an exciting period of growth for Lok’nStore with revenue, profits and asset values all moving
ahead at double digit growth rates.
Against this background of a strong performance from our existing stores, we have also achieved a notable increase
in our pipeline to 14 new stores. This will add considerable momentum to sales and earnings growth.
Lok’nStore’s strong operating performance and robust balance sheet underpin our strategy of new landmark store
openings, positioning the Group well for future growth.
Andrew Jacobs
Chief Executive Officer
1 November 2019
16
Lok’nStore Group plc Annual Report and Accounts 2019
Key Performance Indicators
What we mean when we say … (and why we
use these Key Performance Indicators (KPIs))
In addition to IFRS accounting performance measures we use some Alternative Performance
Measures (APMs) to help us understand how the underlying business is performing. The following
table identifies those measures and explains what we mean when we use them and importantly
why we use them and what they tell you about our business and performance.
1.
2.
3.
4.
Continuing Operations – The Group’s document
storage business was sold on 31 January 2019 and its
disposal constitutes a discontinued operation. Separate
reporting of discontinued operations is important
in providing users of financial statements with the
information necessary to determine the effects of a
disposal on the ongoing continuing operations of our
business. To ensure a clear separation of the financial
performance of Continuing Operations, Discontinued
Operations are shown separately on the Statement of
Comprehensive Income as a profit on disposal (after tax)
which combines operating profit with the profit arising
on its disposal. The profit on discontinued operations is
then aggregated with profit on continuing operations in
determining the Group’s total net profit.
Group Adjusted EBITDA – Earnings Before
Interest, Tax, Depreciation and Amortisation –
The measure is designed to give clarity on the recurring
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, exceptional
items, finance income, finance costs and taxation.
Exceptional Items – refers to one-off items of a
non-operational nature which arose during the year,
often relating to asset disposals, and are unlikely to be
recurring. (Refer to Note 2(c) of the Financial Statements).
CAD – Cash Available for Distribution – is calculated
as Adjusted EBITDA less 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
ongoing net operating cash that can be used to pay
dividends to Shareholders or pay down debt. The
calculation of the Cash Available for Distribution is set
out in the Financial Review on page 24.
5.
6.
7.
8.
Adjusted Total Assets – The value of adjusted
total assets of £201.7 million (2018: £181.4 million)
is calculated by adding the independent valuation
of the leasehold properties of £18.7 million (2018:
£18.2 million) less their corresponding net book
value (NBV) £4.0 million (2018: £2.7 million) to the
total assets in the Statement of Financial Position of
£187.0 million (2018: £165.9 million). This provides clarity
on the significant value of the leasehold stores as trading
businesses which under accounting rules on operating
leases are only presented at their book values within the
Statement of Financial Position.
NAV – Net Asset Value per Share – Adjusted net
asset value per share is the net assets adjusted for the
valuation of leasehold stores (properties held under
operating leases) 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. The calculation of
the Net Asset Value per share is set out in the Financial
Review on page 26.
LTV – 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
£29.3 million as set out in Note 28(b) (2018: £32.3 million)
as a percentage of the total properties independently
valued by JLL and including development land assets
totalling £181.2 million (2018: £162.8 million) as set out
in the Business and Financial Review on page 26.
Pipeline Sites – means sites for new stores that we
have either exchanged contracts on or have agreed
heads of terms and are progressing with our lawyers
towards completion. We now have 14 pipeline sites
of which eight are contracted and six are currently
with lawyers.
17
Strategic ReportOverviewGovernanceFinancial Statements Key Performance Indicators
continued
Cost Ratio – calculates the ratio of the total operating
costs of the business as set out on page 22 of the
Financial Review, expressed as a percentage of total
Group revenue (Note 1(a)), giving a perspective on the
cost efficiency of the business when compared to the
cost ratio of the previous year.
LFL– 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. The like for like key performance measure is only
used where its use is particularly relevant to illustrate a
performance metric not otherwise apparent.
See also the Glossary on page 98.
Adjusted Store EBITDA is Group Adjusted EBITDA
(see 2 overleaf) before the deduction of central and
head office costs. This important information provides
an insight into the underlying performance of the
trading stores and shows the cash generating core of
the business. Use of this metric enables us to provide
additional information on store EBITDA contributions
and the margins analysed between freehold and
leasehold stores and according to the age of the stores.
This analysis is set out in a table in the Chief Executive
Officer’s Review on page 14.
12.
13.
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. The calculation
of the gearing percentage, also referred to as the
net debt to equity ratio is set out in Note 17 of the
Financial Statements.
Group Adjusted EBITDAR – EBITDAR is Earnings
before interest, tax, depreciation amortisation and rent.
The measure is designed to give clarity on the effect
of the rent payable by leasehold stores and how its
elimination enables an analytical comparison between
freehold stores operating performance (which do not
pay rent) and leasehold stores operating performance.
This analysis is set out in a table in the Chief Executive
Officer’s Review on page 14.
9.
10.
11.
18
Lok’nStore Group plc Annual Report and Accounts 2019 Property Review
Store and Portfolio Strategy
Our experience in operating our stores in the UK
self-storage industry is that each operating store is a
profitable store in its own right. Therefore our strategy is
to continue to increase the number of stores we operate
without stretching our balance sheet. The core focus
of this strategy is the acquisition of highly prominent
freehold locations in busy towns and cities in England
where we will build well branded landmark stores.
Flexible Approach to Site Acquisition
All of the projects noted below are part of our strategy
of actively managing our operating portfolio to ensure
we are maximising both trading potential and 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 store’s development. We also
consider selling established stores on sale and manage
back contracts in order to recycle the capital and protect
the balance sheet. Indeed some of our stores have been
freehold, leasehold and managed stores during their
operating life cycle! Our most important consideration is
always the trading potential of the store rather than the
property tenure.
The table below illustrates the rapid growth of store
numbers and the changing tenure mix over time.
Noteworthy is the growth of managed stores over
recent years.
Lok’nStore now operates 34 stores of which it owns 23.
Of the 23 stores Lok’nStore owns 15 are freehold and
8 stores are held under commercial leases with all of
our leasehold stores inside the Landlord and Tenant Act
providing us with a strong security of tenure. The average
unexpired term of the Group’s operating leaseholds is
approximately 11 years and 0 months as at 31 July 2019.
A further eight stores are under development of which
six will be owned freehold by Lok’nStore. There are six
further sites with lawyers.
Lok’n Store Number of Stores Trading Since Inception
(with pipeline of secured stores and stores with lawyers)
s
e
r
o
t
s
f
o
r
e
b
m
u
N
50
40
30
20
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Pipeline
Managed
Leasehold
Freehold
19
Strategic ReportOverviewGovernanceFinancial Statements
Property Review continued
Growth from New Stores and
More New Stores to Come
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 tenure is always driven
by the requirements of the trading business.
Bedford
The planning process for a 55,000 sq. ft. purpose built
store is progressing. The site is in a prominent location
next to a retail park on the south east side of Bedford.
Bournemouth
An 80,000 sq. ft. purpose built store has been
designed for this site in Castle Lane. The site is in
a highly prominent location adjacent to a major food
retailer and Bournemouth Hospital.
Cheshunt
In Cheshunt, Hertfordshire, the Company acquired a
2.2-acre development site in a prominent location facing
the busy A10 and in the vicinity of a major retail park. A
60,000 sq. ft. landmark store is currently being designed.
Leicester
The frame of this 60,000sq ft. landmark store has been
built and the store will open in 2020. The store is in a
highly prominent location opposite a major food retailer
in the heart of Leicester’s busy retail district.
Gloucester
Construction of this 40,000sq ft landmark store is well
underway. The store will be a Lok’nStore branded
store and Lok’nStore will receive management and
performance fees for managing the store on behalf
of its new owners. It will open early in 2020.
Stevenage
On Friday 21 December 2018 contracts were
exchanged on a site in Stevenage, Hertfordshire.
The site is in a prominent location in an established
commercial and retail area. The 60,000 sq. ft. store
is currently being designed.
Wolverhampton
Designs for a 50,000 sq. ft. store are currently underway
for a store in Wolverhampton. The site is opposite a busy
retail park on the North East of Wolverhampton.
Warrington
On Friday 21 June 2019 contracts were exchanged on a
site in Warrington, Cheshire. The site is in an exceptional
location in the heart of Warrington, directly opposite
Tesco and the Warrington rugby league stadium.
The planning process for a striking 60,000 square
foot landmark store is underway.
New Stores Opened During the Year
Cardiff
The new store in Cardiff opened in February 2019.
The store is 45,000 sq. ft. and located in a busy retail
area to the South East of the City.
Exeter
The new Managed store in Exeter opened on 13 April 2019.
Acquisition of The Box Room in Hedge End,
Southampton
The Box Room was acquired for £1.13 million. It operates
from a leasehold unit in the thriving commercial area
of Hedge End, Hampshire. The acquisition secures a
profitable business with further opportunities to increase
sales. The rebranding project is complete. The new 15
year lease is inside the Landlord & Tenant Act 1954 and
has been secured on attractive terms with 12 months’
initial rent free period.
Ipswich
Our 40,000 sq. ft. landmark store in Ipswich is located
on Futura Park a relatively new but established retail
destination to the South East of Ipswich town centre.
The store sits between a supermarket and car
dealership. Works were completed and the store
opened for trading on 31 July 2019.
Portfolio Enhancements
Sale and Manage Back of Crayford store
On 28 February 2019, we announced the sale and
manage back of our Crayford store at its JLL valuation
of £7.52 million (£7.42 million net cash).
The store has been sold on a sale and manage back
basis as part of the Company’s strategic objective to
recycle capital from older, lower growth assets to new,
high growth landmark stores. Lok’nStore will continue to
manage the store maintaining the operational footprint
of the business, and will receive management and
performance fees. Because the sale price represents the
JLL independent external valuation of the store and also
the store’s net book value (fair value) as at 31 July 2018
so there will be no impact on net asset value.
20
Lok’nStore Group plc Annual Report and Accounts 2019 5
8
27%
NEW STORES
TRADING
LANDMARK STORES
SECURED
INCREASE IN
TRADING SPACE
Sale of Land at Rear of Southampton Store
Following the development and opening of the new
Southampton store there remained land to the rear of the
building no longer required for further store expansion.
This land was sold for £0.8 million in October 2018. The
Directors had placed a value in the financial statements
to 31 July 2018 on this land of £0.5 million.
Maidenhead – Acquisition of Freehold interest
On 29 March 2019, we acquired the freehold interest in
our existing long leasehold from the Royal Borough of
Windsor and Maidenhead.
More Pipeline Sites with Lawyers
Currently we have six more pipeline sites with lawyers.
More Managed Stores
One of the features of Lok’nStore’s strategy is developing
our management services to third party self-storage
owners. Our existing Crayford store was sold on a sale
and manage back contract and so became a managed
store making 12 stores under management contracts
with 11 of these open and trading and Gloucester
under development.
Rather than receiving the operating income of the
managed stores, Lok’nStore receives a standard
monthly management fee, a performance fee based
on certain objectives and fees on any successful exits.
We also charge acquisition, planning and branding
fees. This allows Lok’nStore to earn revenue from our
expertise and knowledge of the self-storage industry
without committing our capital by selling our expertise
in storage solutions management, operating systems
and marketing, leveraging our brand and skill rather
than retaining a proprietary interest in the land. We
can amortise various fixed central costs over a wider
operating base and drive more visits to our website
moving it up the rankings and benefiting all the stores
we both own and manage.
This strategy improves the risk adjusted return of the
business by increasing the operating footprint, revenues
and profits without committing capital.
From a very low base Lok’nStore has grown this
managed store revenue to around £0.82 million currently
(up 52.7%) but with the pipeline of secured sites and
further additional sites anticipated for the foreseeable
future we expect this revenue stream to continue to
grow strongly.
Management Fees
Base management fees
Administration and
compliance fees
Enhanced Management
fees
Construction &
Advisory fees
Supplementary fees
Total management fees
Group
Year Ended
31 July 2019
£
Group
Year Ended
31 July 2018
£
352,814
40,500
283,524
30,500
168,362
66,864
55,000
–
200,000
816,676
154,000
534,888
When this contracted development pipeline of eight
sites has been completed Lok’nStore will operate
from 42 stores including 13 managed stores. In addition
six further new store opportunities are progressing
with lawyers.
The eight secured pipeline sites represent a combination
of six owned and two managed stores. These will add
455,000 sq. ft. of new capacity adding 45.6% to freehold
trading space and 21.1% to the managed store portfolio
delivering a 27.4% increase in overall trading space.
Growing Store Property Assets
and Net Asset Value
• Adjusted Total Assets £201.7 million5 up 11.2% on last
year (2018: £181.4 million)
• Adjusted Net Asset Value of £5.33 per share up 11.1%
on last year (2018: £4.80 per share)
Lok’nStore has a strong and growing asset base. Our
freehold and operating leasehold stores have been
independently valued by Jones Lang LaSalle (JLL) at
£162.7 million (Net Book Value (NBV) £57.9 million) as at
31 July 2019 (2018: £146.2 million: NBV £55.4 million).
The change in property valuation is referred to further
in the Financial Review section of the Strategic Report
and is detailed in Note 10(b) of the Notes to the Financial
Statements.
Adding our stores under development at cost and land
and buildings held at Director valuation, our total property
valuation is £183.7 million (2018: £166.4 million).
The increase in the property values of properties which
were also valued last year was 9.1% (2018: 6.33%).
21
Strategic ReportOverviewGovernanceFinancial Statements Financial Review
£16.95m
GROUP REVENUE
(CONTINUING OPERATIONS)
UP 10.3%
“ The sale of our document storage business and
the sale and manage back of our Crayford store
demonstrates an efficient capital allocation as
we reinvest these proceeds into fast growing
landmark stores.”
Ray Davies
Finance Director
Record Financial Results on All Measures
• Group Revenue £16.95 million up 10.3%
(2018: £15.37 million)
• Group Adjusted EBITDA £7.39 million up 11.5%
(2018: £6.63 million)
• Operating profit (before exceptional items3)
£5.06 million up 11.1% (2018: £4.55 million)
The Group has again delivered strong financial results.
Earnings per Share
The calculations of earnings per share are based on the
following profits and numbers of shares.
Earnings per share
Basic
Continuing Operations
Discontinued Operations
Total basic earnings per share
Diluted
Continuing Operations
Discontinued Operations
Total diluted earnings per share
Group
2019
Pence
Group
2018
Pence
11.69
7.55
19.24
11.50
7.42
18.92
11.48
1.57
13.05
11.28
1.55
12.83
Earnings per share
Profit for the financial year –
Continuing Operations
Profit for the financial year –
Discontinued Operations
Total profit for the financial year
attributable to owners of the
parent
Group
2019
£’000
3,380
Group
2018
£’000
3,304
2,182
453
5,562
3,757
2019
No. of
Shares
2018
No. of
Shares
Weighted average number
of shares
For basic earnings per share
28,921,229
28,792,029
Dilutive effect of share options1
481,848
490,064
For diluted earnings per share
29,403,077
29,282,093
623,212 (2018: 623,212) shares are held in the Employee
Benefit Trust (see Note 27).
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 21 to 24.
Purchase of Treasury Shares
The Group did not buy or sell 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 purchases
should it be considered to be in the best interests of
Shareholders to do so.
Operating Costs
• Cost ratio12 reduced to 56% (2018: 57%)
We have a strong record of reducing our Group operating
costs each year. We noted in our 2017 year end results
that although we maintain a disciplined approach to
costs, they will likely rise in line with new stores opened.
Group operating costs from continuing operations
amounted to £9.4 million for the period, a 9.6% increase
year on year (2018: £8.6 million) which derived from higher
aggregate costs as we opened new landmark stores. We
are also spending more on internet marketing which is
generating an ever increasing proportion of our customer
enquiries. Nevertheless our tight discipline on costs has
enabled us to reduce our cost ratio from 57% to 56%.
22
Lok’nStore Group plc Annual Report and Accounts 2019 £7.39m
GROUP ADJUSTED
EBITDA UP 11.5%
£5.06m
OPERATING PROFIT (BEFORE
EXCEPTIONAL ITEMS3) UP 11.1%
In respect of property costs which mainly constitute
rent and rates, because we had previously negotiated
rate reductions on some of the newer stores, rates on
a same store basis have remained broadly static. On a
same store basis rents were also static. Utility costs were
higher as a result of a general market trend of increasing
energy tariffs.
Staff costs increased by 7.3% as we staffed the new
stores and paid performance bonuses to all our store
colleagues for strong sales growth. We also incurred
additional national insurance costs arising on the exercise
of employee share options.
The principal increase in overhead costs has been driven
by a higher level of legal and professional costs due
to work on rent reviews, business rate reductions and
abortive costs arising on prospective store acquisitions
that did not proceed.
Overall future cost increases will be driven by the
expansion of the business and we are seeing little other
cost pressures.
Increase in £50 million Banking
Facility to £75 million
In April 2019, the Group increased its bank facility by
£25 million to £75 million, with a further £25 million
accordion option taking the facility to £100 million. The
increased facility will provide funding for new landmark
site acquisitions and working capital to support the
Group’s ambitious growth plans.
The facility is a combined agreement with Lloyds Bank
and The Royal Bank of Scotland plc and runs until 2024
with an option for a further two one year extensions and
is closely aligned to the terms of the Group’s previous
facility. The interest rate is set at the London Inter-Bank
Offer Rate (LIBOR) plus a 1.50%–1.75% margin based
on a loan to value covenant test.
The cost of our debt on £43.0 million drawn (gross)
averaged 2.11% in the period.
The Group is not obliged to make any repayments
prior to the facilities expiration in April 2024 and there
are no additional bank covenants attaching to this new
increased facility.
Group
Property costs
Staff costs
Overheads
Total
Increase/
(Decrease)
in Costs %
10.3
7.3
15.3
9.6%
2019
£’000
4,022
4,111
1,244
9,377
2018
£’000
3,647
3,832
1,079
8,558
Lok’nStore is a robust business which generates an
increasing cash flow from its strong asset base with
a low LTV of 16.1% and a low average cost of debt of
2.11%. With its new banking facility the business has a
firm base for growth. The value of the Group’s property
assets underpins a flexible business model with stable
and rising cash flows and low credit risk.
Management of Interest Rate Risk
Under the current bank facility the Group is not
committed to enter into hedging instruments but rather to
keep such matters under review. Given our relatively low
level of indebtedness, low Loan to Value ratio and high
interest cover, combined with the wider uncertainties
within the economy, it is not the intention of the Group
to enter into an interest rate hedging arrangement at this
time although the Board continues to keep this under
regular review.
Strong Balance Sheet, Efficient Use
of Capital, Conservative Level of Debt
•
Increase in £50 million bank facility to £75 million
on similar terms with accordion up to £100 million
• £15.1 million invested in new store pipeline
(2018: £21.7 million)
• Net debt down 9.3% to £29.3 million
(2018: £32.3 million)
• Loan to Value Ratio (LTV) down to 16.1% (2018:
19.7%)
• Cost of debt averaged 2.11% in the year on
£43.0 million drawn (2018: 1.85%)
Lok’nStore is a robust business with an excellent credit
model, low debt and gearing and which is strongly cash
generative from an increasing asset base. Its increased
bank facilities at low rates of interest position the
business well for the new store development programme.
23
Strategic ReportOverviewGovernanceFinancial Statements Financial Review continued
Cash Flow and Financing
At 31 July 2019 the Group had cash balances of £13.6
million (2018: £5.0 million). Cash inflow from operating
activities before tax and investing and financing activities
was £8.1 million (2018: £7.0 million). As well as using
cash generated from operations to fund some capital
expenditure, the Group has a revolving credit facility
which runs to 2024. This provides sufficient liquidity
for the Group’s current needs. Undrawn committed
facilities at the year-end amounted to £32.0 million (2018:
£12.7 million), excluding a further undrawn £25 million
accordion facility.
Gearing
At year end there was £43.0 million of gross borrowings
(2018: £37.3 million) representing gearing of 25.0% (2018:
31.3%) on net debt of £29.3 million (2018: £32.3 million) –
refer to Note 17. The leaseholds are stated at depreciated
historic cost in the statement of financial position. If these
leaseholds are adjusted for the uplift in value to their
Jones Lang LaSalle (JLL) valuation, gearing drops to
22.2% (2018: 27.2%). If the deferred tax liability carried at
year-end of 22.4 million (2018: £19.7 million) is excluded
gearing drops further to 19.0% (2018: 23.4%).
Strong Cash Flow Supports 9.1%
Dividend Increase
• Annual dividend 12 pence per share up 9.1% (2018:
11 pence per share)
• Cash Available for Distribution (CAD) from Continuing
Operations £5.49 million up 9.2% (2018: £5.03 million)
• Cash Available for Distribution (CAD) of 18.95 pence
per share (2018: 17.42 pence per share)
• 8.8% Increase in CAD per share over last year
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.
Analysis of Cash Available for Distribution (CAD)
Group Adjusted EBITDA (per Statement of Comprehensive Income)
Less: Net finance costs1
Capitalised maintenance expenses
New Works Team
Current tax (Note 7)
Total deductions
Cash Available for Distribution
Increase in CAD over last year
Closing shares in issue (less shares held in EBT)
CAD per share
Increase in CAD per share over last year
Year Ended
31 July 2019
£’000
Year Ended
31 July 2018
£’000
7,393
6,633
(903)
(99)
(90)
(811)
(1,903)
5,490
9.2%
(537)
(80)
(149)
(837)
(1,603)
5,030
Number
Number
28,960,574
28,875,403
18.95p
8.8%
17.42p
1
Net finance costs represent finance costs paid per the cash flow statement of £0.94 million less bank interest received to give the true cash flow effect
(excluding the one-off payment of the arrangement fee on the new bank facility).
Total CAD has increased by 9.2% as a result of higher EBITDA profit and despite a higher net finance charge.
24
Lok’nStore Group plc Annual Report and Accounts 2019 Capital Expenditure and
Capital Commitments
The Group has grown through a combination of new
site acquisition, existing store improvements and the
purchase of the Box Room in Hedge End, Southampton.
Capital expenditure during the year totalled £14.0 million
(2018: £21.94 million) plus £1.13 million in cash for the
purchase of the Box Room.
This was primarily the purchase of our Leicester and
Wolverhampton sites and exchanged contracts on our
Stevenage site and completion of construction works at
our development sites in Gillingham and Wellingborough,
ongoing construction works at our Leicester store and
completing works at our Cardiff and Ipswich stores which
are now open and trading. Costs relating to the planning
and pre-development works on our Bournemouth,
Bedford, and Cheshunt sites also featured. The freehold
of our existing Maidenhead store, previously held on a
long lease, was also acquired.
The Group has an active store development programme
and in accordance with IAS 23 has material qualifying
assets that take a substantial period of time to develop
from acquisition to ultimate opening. Accordingly
borrowing costs of £430,321 (2018: £197,209) have been
capitalised in the current year that are directly attributable
to the acquisition, construction and fit-out of these
qualifying store assets. £332,326 of the total amount is
carried in development property assets and £97,994 is
carried in land and buildings following the opening of the
Gillingham and Wellingborough stores.
The Group has capital expenditure contracted but not
provided for in the financial statements of £5.56 million
(2018: £3.4 million).
Statement of Financial Position
Net assets at the year-end were £117.2 million up
13.5 % (2018: £103.3 million). Freehold properties were
independently valued at 31 July 2019 at £144.0 million
up 12.5% (2018: £128.0 million). Refer to the table of
property values below.
Taxation
The Group will pay tax on its earnings and has made a
current tax provision of £0.81 million (2018: £0.84 million),
an effective tax rate of 19% (2018: 20%). The deferred
tax provision is calculated at forward corporation tax
rates of 17% and is substantially a tax provision against
the potential crystallisation (sales) of revalued properties
and past ‘rolled over’ gains and amounts to £22.4 million
(2018: £19.7 million) – see Note 19.
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 financial
year-end.
Our 15 freehold properties are held in the statement of
financial position at fair value and have been valued by
JLL. Refer to Note 10(b) – 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 these have also been valued and
these valuations have been used to calculate the
adjusted net asset value position of the Group. The value
of our operating leases in the valuation totals £18.73
million (2018: £18.20 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. It is
not the intention of the Directors to make any 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
store opportunities.
The Board will continue to commission independent
valuations on its trading stores annually to coincide with
its year-end reporting.
25
Strategic ReportOverviewGovernanceFinancial Statements Financial Review continued
Analysis of Total Property Value
Freehold stores valued by JLL1
Short leasehold stores valued by JLL2
Freehold land and buildings at Director valuation3
Subtotal
Sites in development at cost4
Total
No of
Stores/Sites
15
8
1
24
6
30
31 July 2019
Valuation
£
144,000,000
18,725,000
2,509,070
165,234,407
18,441,750
183,675,820
No of
Stores/Sites
14
7
1
22
7
29
31 July 2018
Valuation
£
128,000,000
18,200,000
3,603,013
149,803,013
16,568,961
166,371,974
1
2
Includes related fixtures and fittings (refer to Note 10(b).
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 0 months at the date of the 2019 valuation (2018 valuation: 11 years and 1 month).
3 For more details refer to Note 10(b) – Directors valuation.
4
Includes £332,326 of capitalised interest during the year.
Total freeholds account for 89.8% of property valuations (2018: 89.1%).
Significant Increase in Adjusted Net Asset Value per Share
• Adjusted Net Asset Value per share up 11.1% to £5.33 (2018: £4.80)
Adjusted Net Assets per Share are the net assets of the Group 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 (zero) are excluded from the number of shares.
At July 2019 the adjusted net asset value per share (before deferred tax) increased 11.1% to £5.33 from £4.80 last
year. This increase is a result of higher property values on our existing stores as well as the maiden valuations on
our new stores in Cardiff, Ipswich and Hedge End as the strength of our landmark stores is recognised, combined
with cash generated from operations, offset in part by an increase in the shares in issue due to the exercise of share
options during the year.
Analysis of net asset value (NAV) £’000
Net assets
Adjustment to include operating/short leasehold stores at valuation
Add: JLL operating leasehold valuation
Deduct: leasehold properties and their fixtures and fittings at NBV
Deferred tax arising on revaluation of leasehold properties1
Adjusted net assets
Group
31 July 2019
£’000
Group
31 July 2018
£’000
117,158
103,251
18,725
(3,905)
131,978
(2,519)
129,459
18,200
(2,691)
118,760
(2,636)
116,124
26
Lok’nStore Group plc Annual Report and Accounts 2019 Shares in issue
Opening shares in issue
Shares issued for the exercise of options
Closing shares in issue
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
Number
(‘000s)
29,499
85
29,584
(623)
28,961
£4.47
Number
(‘000s)
29,303
196
29,499
(623)
28,876
£4.02
Group
31 July 2019
£’000
Group
31 July 2018
£’000
129,459
22,385
2,519
154,363
28,961
£5.33
116,124
19,735
2,636
138,495
28,876
£4.80
1
A deferred tax adjustment in respect of the uplift in the value of the leasehold properties has been included, calculated by applying a tax rate of 17%
(2018: 17%). 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
The business operates within the UK self-storage sector which is still relatively immature. With a low loan to value
and flexible bank facilities through to 2024 this market presents an excellent opportunity for further growth of the
business. Recently opened landmark stores and our strong pipeline of more landmark stores demonstrate the
Group’s ability to use those strengths to exploit the opportunities available.
27
Strategic ReportOverviewGovernanceFinancial Statements Financial Review continued
IFRS Update
IFRS 16 Leases
Although not relevant for the year under review, when
applied IFRS 16 will represent a significant change to the
way that the Group will prepare its financial statements.
The effective date of adoption is for accounting periods
commencing after 1 January 2019 and the standard will
therefore apply to Lok’nStore’s financial statements for
the year ended 31 July 2020.
Nevertheless it is important to give the users of our
financial statements sufficient overview of the effects of
IFRS 16 on the profit and loss, balance sheet, financial
performance and cash flows of the Group as a significant
lessee in respect of our leased stores.
IFRS 16 will primarily affect the accounting by lessees
and will result in the recognition of almost all leases on
the balance sheet. The standard removes the current
distinction between operating and financing leases and
requires recognition of an asset (the right to use the
leased item) and a financial liability to pay rentals for
virtually all lease contracts.
The Statement of Financial Position: The Group’s
operating leases on its leased stores will be recognised
as a ‘right of use asset’ and as a corresponding liability at
the year–end. Each lease payment is allocated between
the liability and finance cost. The finance costs are
charged to profit and loss over the lease period so as
to produce a constant periodic rate of interest on the
remaining liability for the period. The right-of-use asset
is depreciated on a weighted depreciation charge based
on the individual lease term of the separate operating
leases. Assets and liabilities arising from a lease will
initially be measured on a present value basis which
will include the fixed rental payments less any lease
incentives receivable. If the interest rate implicit in the
lease cannot be readily determined the lease payments
will be discounted by the Group’s incremental borrowing
rate (cost of debt) to obtain an asset of similar value over
a similar term with similar security. Right of use assets will
be measured at cost comprising the initial measurement
of the lease liability plus any initial direct costs (if any).
The Group’s current operating lease commitments are
reported in Note 29.
The Statement of Profit or Loss: This will also be affected
because the total expense is typically higher in the earlier
years of a lease and lower in later years. Additionally
the rent operating expense currently reported in these
financial statements at £1.36 million (2018: £1.19 million)
will be replaced with interest and depreciation as a
consequence of the ‘capitalisation effect’ of the leases,
so the Group’s key metric of Adjusted EBITDA will
increase significantly by the removal of the rent expense
from the operating profit and loss. Other performance
measures including Operating Profit will also increase
although reported interest and depreciation will be higher.
The Consolidated Statement of Cash Flows: While overall
underlying cash flow is unaffected by the changes the
presentation within the Consolidated Statement of Cash
Flows will change. Reported operating cash flows will be
higher as cash payments for the principal portion of the
lease liability are classified within financing activities.
The effect on financial ratios such as gearing or leverage
will be to cause them to rise as the lease liability now
forms part of net debt.
To give a broad overview of the numerical effect on
adoption next year of IFRS 16 as it would apply to the
current year and comparative numbers we have:
Group
31 July 2019
£’000
Group
31 July 2018
£’000
1,356
1,191
Rents payable under operating
leases (Refer to Note 5)
The Present Value of all future operating lease payments
is then calculated using 2.22% which is the effective
cost of debt as the discount rate. This calculates an
opening Right of Use Asset (ROU) as at 1 August 2017 of
£14.83 million. This is also the opening value of the lease
liability following the capitalisation of the leases.
28
Lok’nStore Group plc Annual Report and Accounts 2019 After the application of a weighted depreciation charge based on the individual lease term of the separate operating
leases and the imputation of an interest charge at 2.22% as part of the amortisation of the lease liability the relevant
extracts from the financial statements are as follows:
Statement of Financial Position (extract)
Right of Use Asset (ROU)
Equity – accumulated effect of restatement
Lease Liability
Amounts due within one year
Amounts due in one to two years
Amounts due in three to five years
Amounts due in more than five years
Group
31 July 2019
£’000
Group
31 July 2019
£’000
Group
31 July 2018
£’000
Group
31 July 2018
£’000
IFRS 16
12,396
535
12,931
1,230
1,257
3,225
7,219
12,931
IAS 17
–
–
–
–
–
–
–
–
IFRS 16
13,617
359
13,976
1,045
1,230
3,583
8,118
13,976
IAS 17
–
–
–
–
–
–
–
–
Group
31 July 2019
£’000
Group
31 July 2019
£’000
Group
31 July 2018
£’000
Group
31 July 2018
£’000
Statement of Comprehensive Income (extract)
IFRS 16
IAS 17
IFRS 16
IAS 17
Operating lease expense
Depreciation of Right of Use Asset (ROU)
Interest charged on lease liability
Impact on Comprehensive Income
(1,356)
1,221
311
(176)
–
–
–
–
(1,191)
1,221
329
(359)
–
–
–
–
Statement of Comprehensive Income (extract)
Increase in EBITDA
Increase / (decrease) in operating profit
Decrease in PBT
Group
31 July 2019
£’000
Group
31 July 2018
£’000
IFRS 16
1,356
135
(176)
IFRS 16
1,191
(30)
(359)
The application of IFRS 16 relates to the Groups property leases. The Group has no leases on any other types of assets.
The Group will apply a single discount rate equivalent to its effective cost of debt.
For more detailed information on the Groups Commitments under operating leases refer to Note 29 (Commitments
under operating leases).
29
Strategic ReportOverviewGovernanceFinancial Statements Principal Risks and Uncertainties
Risk Management Team
Ray Davies, Group Finance Director,
is the Board member responsible for
ensuring that the risk management
and related control systems are
effective and that the communication
channels between the Board and
the Executive Management team
are open and working correctly.
The Executive Management Team
is responsible for the day to day
management of the risk factors.
Responsibility for identifying,
managing and controlling the risk is
assigned to an individual as shown
on the risk register depending
on the business area. Reporting
against the risks forms part of the
monthly Executive Management
Meeting and the risk factor may be
amended if applicable. There are
also sub-committees for particular
risk areas which meet regularly. The
Risk Management and Reporting
Structure is shown below.
Principal Risks and
Uncertainties in Operating
our Business
Risk management has been a
fundamental part of the successful
development of Lok’nStore. The
process is designed to improve the
probability of achieving our strategic
objectives, keeping our employees
safe, protecting the interests of our
Shareholders and key stakeholders,
and enhancing the quality of
our decision-making through
understanding the risks inherent in
both the day-to-day operations and
the strategic direction of the Group
as well as their likely impact.
Management of our risks helps us
protect our reputation which is very
important to the ability of the Group
to attract customers, particularly with
the growth of social media. 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. We operate
strict Health and Safety policies and
procedures and more information on
these can be found on page 34.
Our Risk Management
Governance
The Board has overall responsibility
for the management of the Group’s
risks. As the Group’s strategic
direction is reviewed and agreed the
Board identifies the associated risks
and works to reduce or mitigate them
using an established risk management
framework in conjunction with the
Executive management team. This is
a continuing and evolving process as
we review and monitor the underlying
risk elements relevant to the business.
Risk Management
Framework
The risk register covers all areas of the
business including property, finance,
employees, insurance, customers,
strategy, governance and disaster
recovery. The risks are categorised
by risk area and rated based on
a combination of ‘likelihood’ and
‘consequences and impact’ on the
business. The combination of these
two becomes the ‘risk factor’ and
any factor with a rating over 15 is
reported to the Board.
Our Risk Management and Reporting Structure
THE BOARD
Reviews Risk Register in full twice a year
Considers specific risk areas as raised
by the Executive Board
EXECUTIVE BOARD COMMITTEE
Reviews risks at monthly Executive management meetings and if material requests for
the Board to consider risk at next scheduled Board Meeting (or earlier if necessary)
CAPEX COMMITTEE
PROPERTY RISK COMMITTEE
Meets Monthly
Meets Quarterly
Manages proposed capital expenditure,
actual spend, rolling capex requirements
Considers: Risks associated with properties
including Health & Safety
Environmental Impact
30
Lok’nStore Group plc Annual Report and Accounts 2019 Principal Risks
The principal risks our business faces and our key mitigations are outlined in the table below.
Risk
Description
Key Mitigation
Interest Rate
and Liquidity
Risk
The main risks arising from the Group’s
financial instruments are interest rate risk
and liquidity risk (for details please see
Note 17 on page 84).
Tax Risk
Changes to tax legislation may impact
the level of corporation tax, capital
gains tax, VAT and stamp duty land tax
which would in turn affect the profits of
the Company.
• Regular review by the Board (full details are set out in the
Financial Review, page 22).
• Debt and interest are low relative to assets and earnings.
• Could reduce debt, if required, by executing ‘Sale and
Manage-Back’ arrangements on mature stores.
• Regular monitoring of changes in legislation.
• Use of appointed professional advisers and trade bodies.
Property
Valuation Risk
The external independent valuations of
the stores is sensitive to both operational
trading performance of the stores
and also wider market conditions. It
follows that a reduction in operational
performance or a deterioration of market
conditions could have a material adverse
impact on the Net Asset Value (NAV) of
the Group.
• Regular monitoring of any changes in market conditions and
transactions occurring within our marketplace.
• Use of independent professional valuers expert in the self-
storage sector.
• Past experience from the financial crisis of 2008 shows the
sector has been resilient to a market downturn.
• Store properties are all UK based and predominately located
in the affluent South of England and therefore not exposed to
overseas/international/currency risks etc.
• Strong operational management teams with the
skills, experience and motivation to continue to drive
operational performance.
Property
Acquisition
Acquiring new sites is a key strategic
objective of the business but we face
significant competition from other uses
such as hotels, car showrooms and
offices as well as from other self-storage
operators.
• We hold weekly property meetings to manage the search
process and property purchases.
• Use of property acquisition consultants.
• Regular communication with agents.
• Attendance at industry relevant property events.
Planning
Permission
The process of gaining planning
permissions remains challenging.
• Where we can we acquire sites subject to planning.
• We work with an established external planning consultant.
• Our property team has over 20 years’ experience.
Construction
Poor construction may affect the value
of the property and/or the efficient
operation of the centre.
• We use a design and build contract with a variety of
established contractors.
• We use external project managers.
• All projects are overseen by our property team which has
over 20 years’ experience.
31
Strategic ReportOverviewGovernanceFinancial Statements Principal Risks and Uncertainties
continued
Principal Risks continued
Risk
Description
Key Mitigation
Maintenance/
Damage
Damage to properties through poor
maintenance or flood or fire could
render a centre inoperable.
• Regular site checks by team members.
• Rolling maintenance plan for all stores.
• Comprehensive disaster recovery plan.
• Appropriate insurance cover.
Increased
Competition
An increasing number of competitors
in the industry may negatively impact
Lok’nStore’s existing operations.
(e.g. pricing/available sites).
Employee
Retention
Loss of employees may affect our
ability to operate our stores and
provide the high levels of customer
service expected.
• Established criteria for site selection including:
– Prominent locations
– High visibility
– Distinctive designs and bright orange elevations and strong
signage to attract customers
• Continued investment in internet marketing.
• Ensure high levels of customer service through training
and monitoring.
• Aim to offer a good work/life balance and career
development.
• Regular reviews of remuneration levels against market.
• Achievable bonus systems.
• Generous Employee Share Schemes.
• High quality training via Lok’nStore Academy (for further
information see page 33).
• New Intranet for improved communications.
• Established Employee rewards program.
IT System
Breach
A breach of our IT systems might
adversely affect the operations of the
business and our reputation.
• Strong and regularly reviewed IT security systems.
• Well communicated policies and procedures for handling
and managing a systems breach.
32
Lok’nStore Group plc Annual Report and Accounts 2019 Corporate Sustainability Report
4005 hours
OF ACADEMY TRAINING
Corporate and Social Responsibilities
Lok’nStore conducts its business in a manner that
reflects honesty, integrity and ethical conduct.
Our Corporate Sustainability Report sets out our
environmental policy and how we manage our impact
on the environment and 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 of 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.
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 40 days (2018: 40 days).
Employees
At 31 July 2019 we had 161 employees (2018: 187 including
33 in the now discontinued document storage business).
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 all colleagues
can exchange ideas and offer suggestions for work
and business improvement. This encourages our team
members to build on their skills, through appropriate
training and regular performance review. Regular training
courses at our Head Office support these objectives
and we talk below about the contribution Lok’nStore
Academy makes to this (see the case study on the work
of the Academy).
LOK’NSTORE ACADEMY
The Lok’nStore Academy continues to bring strategic and operational
benefits to the business, aligning our training under one branded
project, improving the sales skills of and providing personal development
opportunities to our team members. During the year the Academy offered
training courses on 14 different subjects resulting in 4005 hours of
interactive classroom based training to our team members – the equivalent
of over 28 hours per person. We are delighted to report that 14 team
members completed National Vocational Qualifications (NVQs) and NCFE
Qualifications during the financial year. The total number of NVQs attained
has increased to 28 since the Academy opened.
Development of our teams through the Academy supports our strategic
aim to fill future Centre Manager roles internally. Over 55% of our current
Centre Managers are internal appointments and we expect to improve this
percentage as the business grows, giving us committed and talented team
members at the customer facing heart of our business. The Academy
encompasses all in house training and quality audits such as our monthly
mystery shop programme and standards audits and performance reviews.
33
Strategic ReportOverviewGovernanceFinancial Statements Corporate Sustainability Report
continued
100%
OF EMPLOYEES RECEIVE
PERFORMANCE RELATED
BONUSES
Employees continued
Remuneration of all Group colleagues is reviewed
annually to ensure all of our employees are paid fairly
and to ensure we can attract and retain the correct
talent to support our rapid growth.
Our Company Intranet provides a central point of
knowledge for all employees across the organisation.
The system is regularly updated with news, events and
files making it a first point of reference for company
communication and documents.
Share Ownership Plans
We are proud to have share ownership plans in which
all employees are eligible to participate. 75% of our
employees are members of our Share Incentive Plan
(SIP), a tax efficient equity scheme. This high level of
participation is testament to the loyalty and commitment
of our team members.
Our personnel are committed and motivated and help
maintain the exemplary levels of friendly service that
Lok’nStore provides to its customers. The Board would
like to thank all colleagues for their commitment to our
business and for their hard work and efforts over the year.
Employee Benefit Trust
The Employee Benefit Trust owns 623,212 shares
(2018: 623,212), the costs of which are shown as a
deduction from Shareholders’ funds. Full details are
provided in Note 27 – Own Shares.
Health and Safety
The Board recognises the prime importance of
maintaining high standards of Health & Safety and
healthy working conditions for our teams, 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 colleagues within the Group.
ENVIRONMENTAL CASE STUDY:
As a socially responsible company Lok’nStore is
committed to reducing the impact our operations
have on the environment. To ensure this commitment
is fulfilled for this year and in the future we are proud
to confirm that electricity for the entire Lok’nStore
Group now comes from 100% renewable energy.
Our electricity supplier obtains its energy either
from renewable generators or from combined heat
and power sources. The Group stipulates that all
energy supplied must be from renewable generation.
We believe that a large part of being a socially
responsible company is ensuring our suppliers share
our commitment to our green policies.
We continue to install photovoltaic (PV) solar panels
on the roofs of our new buildings and are proud that
we have managed to increase electricity generated
by 53% whilst exporting clean green energy to the
national grid.
Further information on our environmental management
and performance can be found on page 35.
Environmental Performance
Lok’nStore remains committed to reducing waste and
ensuring commitment to its green policies. We have been
actively monitoring and measuring our environmental
impacts since 2005. By monitoring environmental key
performance indicators (eKPIs) including greenhouse gas
emissions (GHG), water use and waste, and reviewing
them against our stated Environmental Policy, we
continue to achieve our stated aims; to manage waste
effectively, control polluting emissions and to encourage
suppliers to minimise their impact on the environment.
The UK government requires all quoted companies to
report on their GHG emissions as part of their Annual
Director’s Report under the Companies Act 2006
(Strategic Report and Director’s Report) Regulations
2013. As in previous years, Lok’nStore engaged Trucost
to review its reporting of environmental impacts for the
financial year ending 31 July 2019. A summary of their
findings is included overleaf.
More detail can be found on our website:
www.loknstore.com
34
Lok’nStore Group plc Annual Report and Accounts 2019 75%
75%
OF EMPLOYEES ARE
MEMBERS OF SHARE
INCENTIVE PLAN
OF EMPLOYEES ARE
MEMBERS OF THE
PENSION FUND
100%
OF ELECTRICITY FROM
RENEWABLE SOURCES
Environmental Management and Performance
Highlights for the year ending 31 July 2019
Impact
Result Comment
Operational GHG
Emissions
(scope 1 & 2) ✓ In the year 2018–19 operational GHG emissions intensity has decreased by 19%. This
demonstrates our ongoing commitment to decreasing GHG emissions, which have reduced
by 66% since 2009.
Direct Operational
GHG Emissions
(scope 1)
Indirect Operational
GHG Emissions
(scope 2)
✓
✓
This year we are pleased to have achieved a decrease in direct GHG emissions despite
an increased number of stores trading and geographical spread. Vehicle fuel usage has
decreased and efforts continue to be made to reduce the use of heating from gas sources
wherever possible.
We continue to emit no indirect operational GHG emissions due to all of our electricity
coming from renewable feed stocks and onsite photovoltaic electricity generation. Where
possible PV solar panels will be installed on new stores to increase electricity generated by
our operations.
Renewable Energy
Generation ✓ This year has seen a 53% increase in energy generated at our sites, with two additional
facilities generating renewable energy.
Water Consumption
Waste Generation
✗
✗
Water usage has increased in the year 2018–19 as the total number of trading sites increased.
Since 2005, both absolute water consumption and water use intensity have decreased by
23% and 66% respectively, with ongoing efforts to reduce this further.
In the year 2018–19 total waste generation increased as the total number of trading sites
increased. However cardboard recycling waste increased by 6% and incinerated waste was
considered to be at insignificant levels. Since 2009 absolute waste to landfill has decreased
by 65%.
Waste Recycling ✓ The volume of recycled waste remained constant this year. We continue to promote recycling
in our stores and offices to both our colleagues and our customers.
The Company’s environmental reporting is consistent with ‘Environmental Key Performance Indicators: Reporting Guidelines for
UK Business 2006’
Lok’nStore’s GHG reporting for 2018–19 aligns with government guidelines
Trucost found that Lok’nStore assessed and disclosed all material environmental impacts – GHG emissions, water consumption
and waste generation for its own facilities
Operational GHG emissions decreased by 14%. Since 2009, GHG emissions have decreased by 66% and when normalised by
annual revenue have decreased by 81%
GHG emissions from the consumption of purchased electricity remains at zero due to the Group’s use of electricity derived
from renewable sources
The Board is committed to considering the impact our operations have on the environment and minimising them
wherever possible. We will continue to monitor and report our environmental impacts in line with government guidelines.
The Strategic Report as set out in pages 8 to 35 was approved by the Board of Directors and authorised for
issue on 1 November 2019 and signed on its behalf by
Andrew Jacobs
Chief Executive Officer
Ray Davies
Finance Director
35
Strategic ReportOverviewGovernanceFinancial Statements
36
Lok’nStore Group plc Annual Report and Accounts 201938 Board of Directors and Advisers 40 Corporate GovernanceGovernance O
v
e
r
v
e
w
i
G
o
v
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n
a
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F
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EXETER
The landmark Exeter store sits prominently on the
economically vibrant Marsh Barton retail district to the
south-east of the city centre.
With over 40% of new customers first becoming aware of
Lok’nStore through our distinctive buildings, our striking designs
are developed to maximise customer awareness.
51,000
SQUARE FEET OF
MAXIMUM LETTABLE AREA
The Lok’nStore management team identified and acquired the
land, developing this store for a managed store client. Boasting
51,000 square feet of storage space once fully developed, Exeter
is the eleventh store opened under a management contract.
OPEN
NOW
S
t
a
t
e
m
e
n
t
s
37
Strategic ReportOverviewGovernanceFinancial Statements46 Directors’ Report48 Remuneration Report50 Statement of Directors’ Responsibilities51 Independent Auditor’s Report to the Members of Lok’nStore Group plc
Board of Directors and Advisers
EXECUTIVE DIRECTORS
Andrew Jacobs (60)
Chief Executive Officer
Ray Davies (62)
Finance Director
Neil Newman-Shepherd (42)
Sales Director
Experience
Andrew established
Lok’nStore 25 years ago
after eight years working in
the Japanese equity market.
Andrew is responsible for
strategy, corporate finance
and property. He has an
MPhil in Economics from
Cambridge University and a
BSc in Economics from LSE.
Experience
Ray is a Fellow of the Institute
of Chartered Accountants
and the Institute of Chartered
Secretaries & Administrators.
Prior to joining Lok’nStore
in 2004, Ray held several
senior finance positions
in listed companies in the
construction, health and
fitness sectors.
Experience
Neil joined the Lok’nStore
Group in October 2006
becoming Sales Director
in November 2015. Prior
to joining Lok’nStore, Neil
gained retail experience at
Wickes and Woolworths plc.
Neil is responsible for sales,
marketing and people.
Key Areas of Expertise
Strategy, corporate finance,
economics and property.
Key Areas of Expertise
Finance and accounting,
corporate reporting, risk
management, legal, tax
and compliance.
Key Areas of Expertise
Sales, Marketing and Human
Resource Management.
DIRECTORS AND ADVISERS
Directors
The Board of Directors is supported by an Assistant Company Secretary who assists the Chairman with the setting
of meeting agendas and provides the information to the Board members prior to the meetings. A procedure to
enable Directors to take independent professional advice if required has been agreed by the Board and formally
confirmed by all Directors.
S.G. Thomas
Non-Executive Chairman
A. Jacobs
R.A. Davies
Chief Executive Officer
Finance Director
N. Newman-Shepherd Director
E.T.D. Luker
R.J. Holmes
C.P. Peal
Senior Non-Executive Director
Non-Executive Director
Non-Executive Director
38
Lok’nStore Group plc Annual Report and Accounts 2019
The Board has over 100 years
of self-storage experience.
Audit Committee
Remuneration Committee
Find out more about the Company’s
committees on pages 44 and 45
NON-EXECUTIVE DIRECTORS
Simon Thomas (59)
Non-Executive Chairman
Experience
Simon joined Lok’nStore in
1997 following successful
careers in the publishing and
finance sectors. He worked
at Reed International,
Swiss Bank Corporation,
Nomura International and
co-founded the emerging
markets investment
trust business at LCF
Edmond de Rothschild.
Simon is responsible
for the composition and
performance of the Board.
Edward Luker (70)
Senior Non-Executive
Director
Experience
Edward is a Fellow of
the Royal Institution of
Chartered Surveyors.
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. Edward joined
Lok’nStore in 2007.
Key Areas of Expertise
Corporate Finance.
Key Areas of Expertise
Commercial Property.
Charles Peal (64)
Non-Executive Director
Richard Holmes (59)
Non-Executive Director
Experience
Charles joined Lok’nStore
in 2007. Charles started his
career in 1977 at 3i Group,
the leading UK quoted
Venture Capital Company.
He was Chief Executive of
Legal and General Ventures
from 1988 to 2000 and has
served on several Boards
since then.
Experience
Richard joined Lok’nStore
in 2000 having held senior
marketing and commercial
roles in Unilever, Boots
(as Marketing Director and
Commercial Director) and
latterly Specsavers (as
Group Marketing Director).
Key Areas of Expertise
Capital Markets and Fund
Management.
Key Areas of Expertise
Marketing including digital
marketing, and customer
experience.
In addition the Board is advised by:
Secretary and Registered Office: Dentons Secretaries Limited, One Fleet Place, London, EC4M 7WS
Nominated Adviser and Broker: finnCap Limited, 60 New Broad Street, London, EC2M 1JJ
Auditor: RSM UK Audit LLP, 25 Farringdon Street, London, EC4A 4AB
Registrars: Link Asset Services (Formerly Capita Registrars), Link Group, 6th Floor, 65 Gresham Street,
London, EC2V 7NQ
Solicitors: Dentons UKMEA LLP (formerly Maclay Murray Spens LLP), One Fleet Place, London, EC4M 7WS
Solicitors: Goodman Derrick LLP, 10 St Bride Street, London, EC4A 4AD
Solicitors: Glovers LLP, 6 York Street, London, W1U 6QD
To find out more visit:
www.loknstore.com/
investors/the-board
39
Strategic ReportOverviewGovernanceFinancial Statements
Corporate Governance
The Board of Lok’nStore Group plc has always sought to operate the highest
level of governance standards appropriate to the size and nature of the
Company. Although the Company had not previously been obliged to comply
with a recognised code, its annual reporting has previously detailed how the
Company has followed the UK Corporate Governance Code and where it has
departed from the code explained why.
Corporate Governance Statement
In March 2018, the London Stock Exchange published
AIM Notice 50 which requires AIM companies to state
which of the recognised corporate governance codes
the Board of Directors has decided to apply, how the
Company complies with that code and where it departs
from the code an explanation of the reasons for doing so.
Having reviewed the two recognised codes, the Board
decided to apply the Quoted Companies Alliance’s
Corporate Governance Code (‘QCA Code’).
As Chairman it is my responsibility to ensure the
Company complies with the QCA Code and where the
Company deviates to explain why the Directors believe
this to be in the best interests of the Company. In this
section, we hope to demonstrate our Company’s good
corporate governance structure and where our practices
differ from the expectations set by the QCA Code, why
they do so. You can find more information including
our reporting directly referenced to the 10 principles
of the QCA Code on the corporate governance page
in the investor section on our website. These are also
summarised below and referenced to the relevant
content within the Annual Report.
QCA Code Principle
Reporting Location
Compliant
With Code
1 Establish a strategy and business
model which promote long-term
value for Shareholders
Our Business Model is set out on page 10 and our strategic
objectives and achievements in the year are set out on page 12.
2 Seek to understand and meet
Shareholder needs and expectations
Under Shareholder Relations on page 44 we discuss how we seek
to understand and meet shareholder needs and expectations.
Andrew Jacobs, CEO, is responsible for Shareholder liaison.
3 Take into account wider stakeholder
and social responsibilities and their
implications for long-term success
How we work with and take into account wider stakeholder
interests is detailed in our Corporate Sustainability Report on
pages 33 to 35.
4 Embed effective risk management,
considering both opportunities and
threats, throughout the organisation
Our approach to risk management is detailed on page 30 and our
principal risks are outlined on page 31.
5 Maintain the Board as a well-functioning,
balanced team led by the Chair
The Board structure is reported on pages 38 to 45. Our committees
are detailed in this section of the Annual Report but can also be
found on our website: https://www.loknstore.co.uk/investors/
6 Ensure that between them the Directors
have the necessary up-to-date
experience, skills and capabilities
Our Directors’ biographies can be found on pages 38 and 39 and
further information on the balance of skills and capabilities within
our Board can be found in the commentary on Board Evaluation on
page 43.
7 Evaluate Board performance based
on clear and relevant objectives,
seeking continuous improvement
We set out this year’s information in the Corporate Governance
section on page 43.
✓
✓
✓
✓
✓
✓
✓
40
Lok’nStore Group plc Annual Report and Accounts 2019 QCA Code Principle
Reporting Location
8 Promote a corporate culture that is
based on ethical values and behaviours
Please see our Corporate Sustainability Report on pages
33 to 35.
9 Maintain governance structures and
processes that are fit for purpose
and support good decision-making
by the Board
10 Communicate how the Company
is governed and is performing by
maintaining a dialogue with Shareholders
and other relevant stakeholders
Our Governance Structure
THE BOARD
Please see the Corporate Governance section from page 40.
Please see the Corporate Governance section, specifically
page 44.
Results of voting at our AGMs can be found on the announcements
page of our website: https://www.loknstore.co.uk/investors/
announcements/
Compliant
With Code
✓
✓
✓
Remuneration Committee
Meets Once a Year
Audit Committee
Meets Twice a Year
Chaired by Edward Luker
Chaired by Charles Peal
See page 45 for more information
See page 45 for more information
EXECUTIVE BOARD COMMITTEE
Meets Monthly
Considers:
Strategy, Management accounts, Store operations,
Customer Issues & Human Resources
Capex Committee
Property Committee
Meets Monthly
Meets Weekly
Considers:
Proposed capital
expenditure, actual
spend against budgets
Considers:
Sites under
development,
new acquisitions
Property Risk
Committee
Meets Quarterly
Considers:
Risks associated with
properties including
HS&E
OPERATIONAL MANAGEMENT
Day to Day Business Delivery
Internal Control
The Board is responsible for ensuring that the Group has
established and operates 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. The Group has a whistle-blowing
procedure within its employee handbook, which is issued
to all colleagues. All employees may raise concerns
about malpractice or improper or potentially illegal
behaviour in confidence without concern of victimisation
or disciplinary action.
41
Strategic ReportOverviewGovernanceFinancial Statements Corporate Governance
continued
The Board
Three Executive Directors and Four Non-Executive Directors
Meets:
Considers:
Receives:
Five times a year with
teleconferences when
required
• Financial strategy
• Company performance
• Major investments
• Capital resources
• Risk Management
• Reporting to Shareholders
• Detailed management accounts
against budgets
• A current trading appraisal
• Minutes of all subcommittees
• The Risk Register
• The Conflicts Register
The Directors
The Board consists of three Executive Directors and four Non-Executive Directors. The expertise of the Directors
covers Company Law, Corporate Finance, Economics, Finance and Accounting, Corporate Reporting, Risk
Management. Tax and Compliance, Marketing, Operations, Property Law and Strategy.
Activities
The Non-Executive Directors provide considerable support to the Chief Executive Officer and while much of this
is via informal meetings, telephone calls and email correspondence, the Non-Executive Directors also lend their
expertise and experience to other members of the management team.
Conflicts of Interest
The Directors have a responsibility to act in the best interests of the Group and its Shareholders and in keeping with
this responsibility it is imperative that Directors are aware of and properly manage potential conflicts of interest.
The table below shows the Directorships that the Group Directors hold in other companies both inside and outside
the Group:
Andrew Jacobs
Andrew Jacobs (UK) Limited
Lok’nStore Limited*
The Box Room (Self Storage) Limited*
Ray Davies
Ash Road SS Limited
Chichester Storage Limited
Davies Elise Consulting Limited
Lok’nStore Limited*
Lok’nStore Trustee Limited*
ParknCruise Limited*
Semco Engineering Limited*
Semco Machine Tools Limited*
Southern Engineering and Machinery Co. Limited*
The Box Room (Self Storage) Limited*
*
Lok’nStore Group Companies.
** Guernsey registered company.
Neil Newman-Shepherd
Lok’nStore Limited*
Simon Thomas
Lok’nStore Limited*
Simon Thomas (UK) Limited
Edward Luker
Edward Luker Consulting Limited
St George’s School Ascot Trust Limited
Richard Holmes
Lok’nStore Limited*
Lok’nStore Trustee Limited*
First Contact Healthcare**
Conflicts of interest arise where an individual’s personal interests or those interests related to legitimate outside roles
may conflict with the interests of the Group. This could, for example, inhibit open discussions or lead to a perception
that the individual is acting outside of the Group’s interests.
42
Lok’nStore Group plc Annual Report and Accounts 2019 It is recognised that conflicts of interest will inevitably
occur from time to time and that Directors legitimately
undertake roles outside of the Group. The Board
therefore believes it is important to be transparent
in terms of such interests and to ensure they are
properly recorded and, where necessary, Directors
will withdraw from decision-making if there is a
danger of perceived conflict.
A register of interests is maintained by the Assistant
Company Secretary and is circulated to the Directors in
advance of each Board meeting. Conflicts of interest are
considered and authorised by the Board as they arise.
We report in Note 30 related party transactions.
Additionally, within Note 30, in the interests of
transparency we include items which, while not strictly
falling within the definition of a related party transaction,
are still considered matters of interest.
Board Evaluation and Composition
Board Attendance
Total Number of
Board
Audit
Committee
Remuneration
Committee
Annual General
Meeting % Attendance
Meetings in 2018/2019
5 (3 Telecon)
Executive Directors
Andrew Jacobs
Ray Davies
Neil Newman-Shepherd
Non-Executive Directors
Simon Thomas
Edward Luker
Charles Peal
Richard Holmes
5 (3)
5 (3)
5 (3)
5 (3)
5 (3)
4 (3)
5 (3)
1
n/a
n/a
n/a
n/a
1
1
n/a
2
n/a
n/a
n/a
n/a
2
n/a
1
1
1
1
1
1
1
1
1
100%
100%
100%
100%
100%
90%
91%
The 2018 QCA Code expects companies to, ‘evaluate
Board performance based on clear and relevant
objectives, seeking continuous improvement.’ Our
Executive Directors are evaluated on a quarterly basis
via the Company’s senior management review system in
which objectives are set and performance against these
objectives is subsequently measured. Remuneration
is linked to these objectives and may include relevant
performance targets such as number of new properties
acquired or turnover growth. Our Non-Executives were
evaluated informally within this year’s review of our Board
composition and we report on this below.
Therefore as part of our review of the Board composition
this year we looked at the ability of our Non-Executive
Directors to be objective, the experience each of our
Non-Executive Directors brings to the business and the
contribution they have made in the year. We established
that the broad range of skills, expertise and attitude
amongst the Executive and Non-Executive Directors
includes all the matters that the Company deals with –
strategy, property, finance, human resources, marketing,
and organisation. Further the long experience of Board
Members continues to be considered an asset and all
express challenges freely and robustly.
We have previously reported (against The UK Corporate
Governance Code’s requirement that a smaller company
should have at least two Non-Executive Directors that
are deemed independent) that all of our Non-Executive
Directors have served for longer than nine years and
were therefore no longer deemed independent. Our new
code, the Quoted Companies Alliance Code, takes a
more pragmatic approach stating that, ‘length of tenure
does not automatically affect independence’ and that
the Board should, ‘make a decision regarding such
Director’s independence.’
We also met with potential Non-Executive Directors to
explore what expertise they might bring to the Board
and discussed the balance between new experiences
and increasing costs. After careful consideration we
concluded that the current composition of the Board
remains in the best interest of Shareholders and the
Company as a whole.
Non-Executive Directors who have served over nine
years must offer themselves for re-election at every
Annual General Meeting and accordingly Simon Thomas,
Edward Luker, Charles Peal and Richard Holmes offer
themselves for re-election at every AGM.
43
Strategic ReportOverviewGovernanceFinancial Statements Corporate Governance
continued
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.
Performance related bonuses are calculated in
accordance with strict and measurable performance
criteria. There are no specific performance conditions
relating to the historic grant of share options beyond the
share price performance. The Remuneration Committee
has introduced appropriate performance criteria to apply
for the grant of future share options as part of long term
performance awards in order to meet the objectives
of the business and accord with accepted corporate
governance. 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.
Shareholder Relations
We aim to provide balanced, clear and transparent
communications which allow our Shareholders to
understand our performance, strategy and prospects.
Further aiding transparency is the fact that the Group has
a straight forward capital structure; one class of shares
and one bank facility.
The Directors also meet and discuss the performance of
the Group with Shareholders throughout the year with
specific schedules to visit institutional investors, analysts
and the media being held after the announcement of
the half year and full year results. At the AGM the Board
give a presentation of events and progress during the
year. Attendee Shareholders are encouraged to mix and
engage with the Directors after the formal business of the
AGM has concluded.
Regular Regulatory News Service announcements
(RNS) are made via the London Stock Exchange
throughout the year keeping all Shareholders informed
about acquisitions, trading conditions, Director dealings
etc. Queries raised by a Shareholder, either verbally or
in writing, are promptly answered by whoever is best
placed on the Board to do so.
44
Accounting Dates and
Reporting Calendar 2019
January
February
March
April
May
June
July
August
September
October
November
December
H1 Period- End
Pre-close Trading Statement (H1)
Interim Results announced
Financial Year-End
Pre-close Trading Statement
Preliminary Statement
AGM
Accountability and Audit
The Board believes that the audited Annual Report
and Accounts play an important part in presenting all
Shareholders with an assessment of the Group’s position
and prospects. The Strategic Review contains a detailed
consideration of the Group’s position and prospects.
Board Committees
The following section introduces the Group’s
committees, members and the terms of reference.
Nomination Committee
A Nomination Committee would oversee the appointment
of a new Director. Due to the relatively small size of the
Company, the Board do not believe that a Nomination
Committee is necessary. 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.
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.
Lok’nStore Group plc Annual Report and Accounts 2019 Remuneration Committee
The Remuneration Committee consists of Edward Luker
(Chairman of the Committee) and Richard Holmes. The
Committee meets once a year and considers, within
existing terms of reference, the remuneration policy
and makes recommendations to the Board for each
Executive Director. Further the Committee considers
proposals from the Chief Executive Officer on the
remuneration of the operational management team
especially in relation to bonus share option awards
under the long term performance related pay schemes.
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 long term performance related pay
including 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 the Remuneration Report
on page 48 and more details are given in Note 6 in the
financial statements.
Audit Committee
The Company has an 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. Charles Peal is the
Committee’s Nominated Financial Expert (for details
of Charles’ experience please see his biography on
page 39).
The Committee 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
the Group’s financial results to consider the Auditors’
Findings Report and consider any corresponding
recommendations. It also convenes to discuss and
review the findings of the external JLL Valuation Report
prior to the Groups year-end results. The Committee
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 team members 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.
The Board will continue to review the Company’s
corporate governance and annual reporting against
the QCA Code and to implement appropriate systems
in order to support the Directors in executing their
responsibilities to all of the Company’s Stakeholders.
On behalf of the Board.
Simon G Thomas
Chairman
1 November 2019
45
Strategic ReportOverviewGovernanceFinancial Statements
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 2019.
Principal Activity
The principal activity of the Group during the year was
that of providing self-storage and related 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 on page 2 and the Strategic Report
on pages 8 to 35.
The key performance indicators are set out in the
Highlights on page 1 and discussed in more detail in the
Financial Review on page 22 and the Chief Executive’s
Review on page 13. Commentary on financial risk
managements is included on page 30 and disclosures
on financial instruments are provided in Note 17.
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. See Note 17.
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
£13.7 million, (2018: £5.0 million) undrawn committed
facilities at 31 July 2019 of £32.0 million (2018: £12.7
million) and cash generated from operations £8.1 million
(2018: £7.0 million).
In April 2019, the Group increased its bank facility by
£25 million to £75 million, with a further £25 million
accordion option taking the facility to £100 million. The
increased facility will provide funding for new landmark
site acquisitions and working capital to support the
Group’s ambitious growth plans.
The facility is a combined agreement with Lloyds Bank
and The Royal Bank of Scotland plc and runs until 2024
with an option for a further two one year extensions and
is closely aligned to the terms of the Group’s previous
facility. The interest rate is set at the London Inter-Bank
Offer Rate (LIBOR) plus a 1.50%–1.75% margin based on
a loan to value covenant test.
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 8.33 pence per share (2018:
7.67 pence) will be paid on 10 January 2020 to
Shareholders on the register on 29 November 2019. The
corresponding ex-dividend date is 28 November 2019.
The total estimated dividend to be paid is £2.4 million
based on the number of shares in issue on 17 October
2019 as adjusted for shares held in the Employee
Benefits Trust. 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
N Newman-Shepherd
ETD Luker
RJ Holmes
CP Peal
Details of the interests of the Directors in the shares
of the Company are set out on page 49 and details
of their remuneration are disclosed in Note 6 of the
financial statements.
Biographical details of the Directors are set out on
page 38 and 39.
Reappointment of Directors
Richard Holmes, Edward Luker and Charles Peal who
have over 15, 12 and 12 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. Simon Thomas by virtue of his accumulated
tenure both as an Executive and a Non-Executive Director
also offers himself for re-election at the next AGM.
46
Lok’nStore Group plc Annual Report and Accounts 2019
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 17 October 2019:
Current
Rank
% at
17 Oct
2019
Number of
Shares
Total
Shares
in Issue
% at
17 Oct
2018
Number of
Shares
Total
Shares
in Issue
1
2
3
4
5
6
7
8
17.59
5,204,600
8.28
2,449,455
5.54
1,640,000
5.17
1,530,000
4.66
1,379,608
3.64
3.37
3.25
1,077,115
996,650
960,480
17.64
5,204,600
8.50
2,509,455
5.56
1,640,000
6.03
1,780,000
–
–
5.07
1,496,500
4.15
1,225,250
3.60
1,061,001
29,586,555
29,505,9191
Andrew Jacobs
Miton Asset Management
Canaccord Genuity Wealth
Management
Simon Thomas
BlackRock
Cavendish Asset Management
Downing
Hargreaves Lansdown
1 Represents total shares in issue.
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 2019 are
shown in Note 10(b) to the Financial Statements. Further commentary on the property portfolio is contained in the
Property Review on page 19 and in the Financial Review on page 22.
Share Buy-back Authority
Authority will be sought at the Company’s AGM on 12 December 2019 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 12 December 2019 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 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
1 November 2019
47
Strategic ReportOverviewGovernanceFinancial Statements Remuneration Report
Although the Group is not required to set out a formal Remuneration Report we set out below the key
components of the Directors’ remuneration in accordance with AIM Rule 19.
Base Salary: Provides competitive fixed remuneration
to retain key employees and reflect their experience and
expertise in the context of the role and set by reference
to the market.
Annual and Monthly Bonuses: Aligns reward to
key Group strategic objectives and drives short-term
performance.
Long Term Incentive Plan: Following strict
performance criteria aligns Executive Director interests
with those of Shareholders and rewards achievement
of the long term plan. (See below and Note 23(b) of the
financial statements).
All Employee Scheme: The Group operates an HMRC
approved Share Incentive Plan (SIP). This encourages
share ownership by all employees and allows them to
Directors’ Remuneration
share in the long term success of the Group. R Davies
and N Newman, Executive Directors, also participate in
this scheme.
Other Benefits: The benefits reported in the table below
all relate to medical insurance premiums paid on behalf
of the Directors. An additional benefit is Death in Service
Insurance typically at four times base salary (subject to a
cap of £0.5 million).
Service Contracts: Executive Directors’ service
contracts operate on a rolling basis without a specific
end-date providing for one year’s notice on the part of
the Company and six months’ notice on the part of the
employee. Non-Executives do not have service contracts
with the Company but rather their appointments are
governed by letters of appointment.
2019
Executive:
A Jacobs
RA Davies
N Newman-Shepherd
Non-Executive:
SG Thomas
RJ Holmes
ETD Luker
CP Peal
2018
Executive:
A Jacobs
RA Davies
N Newman-Shepherd
Non-Executive:
SG Thomas
RJ Holmes
ETD Luker
CP Peal
Emoluments
Bonuses
Pension
Benefits
Sub total
Gains on
Share Options
£
£
220,816
160,968
78,931
30,900
22,297
27,873
22,297
38,250
22,641
64,034
–
–
–
–
£
–
4,829
2,631
–
–
–
–
£
£
5,435
4,612
2,364
4,804
–
–
–
264,501
193,050
147,960
35,704
22,297
27,873
22,297
£
–
–
–
40,580
–
–
–
Total
£
264,501
193,050
147,960
76,284
22,297
27,873
22,297
564,082
124,925
7,460
17,215
713,682
40,580
754,262
Emoluments
Bonuses
Pension
Benefits
Sub total
Gains on
Share Options
£
£
216,487
131,280
75,172
30,000
21,648
27,061
21,648
26,000
19,222
42,477
–
–
–
–
£
–
31,190
2,255
–
–
–
–
£
£
4,272
4,090
1,933
4,009
–
–
–
246,759
185,782
121,837
34,009
21,648
27,061
21,648
£
–
20,415
71,317
–
–
52,275
–
Total
£
246,759
206,197
193,154
34,009
21,648
79,336
21,648
523,296
87,699
33,445
14,304
658,744
144,007
802,751
Details of the Directors remuneration are shown above. Key management personnel are defined as the Directors of
the Group and the additional participants in the Long Term Partnership Performance Plan (LTPPP).
48
Lok’nStore Group plc Annual Report and Accounts 2019 The following table shows a summary of the options held by Directors under all schemes. Refer to Notes 21 to 24
for details.
2019
Executive Directors
A Jacobs – Unapproved
A Jacobs – LTPPP
A Jacobs total
RA Davies – Unapproved
RA Davies – CSOP
RA Davies – LTPPP
RA Davies total
N Newman-Shepherd – Unapproved
N Newman-Shepherd – CSOP
N Newman-Shepherd – LTPPP
N Newman-Shepherd total
Non-Executive Directors
SG Thomas – Unapproved
All Directors total
Total at
31 July
2018
Options
Granted
Options
Exercised/
Lapsed
Unapproved
Scheme
Approved
CSOP
Share
Options
Total at
31 July
2019
206,087
–
206,087
246,977
7,742
–
254,719
172,421
10,661
–
183,082
–
80,000
80,000
–
–
80,000
80,000
–
–
120,000
120,000
–
–
–
–
–
–
–
–
–
–
–
206,087
80,000
286,087
246,977
–
80,000
326,977
172,421
–
–
–
–
7,742
–
7,742
–
–
10,661
120,000
292,421
–
10,661
206,087
80,000
286,087
246,977
7,742
80,000
334,719
172,421
10,661
120,000
303,082
25,217
–
669,105
280,000
(20,000)
(20,000)
5,217
910,702
–
5,217
18,403
929,105
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.
Unapproved Share Options – Long Term Partnership Performance Plan (LTPPP)
On 2 July 2018 the Group adopted the Company Long Term Partnership Performance Plan (LTPPP). The Plan
is a discretionary benefit offered by the Company for the benefit of selected key employees including Executive
Directors. Its main purpose is to increase the interest of the employees in the Groups long term business goals and
performance through share ownership. It contains specific performance criteria. Further details are set out in Note
23(b) of the financial statements.
On behalf of the Board and signed on its behalf by:
Andrew Jacobs
Chief Executive Officer
Ray Davies
Finance Director
49
Strategic ReportOverviewGovernanceFinancial Statements
Statement of Directors’
Responsibilities
The Directors are responsible for preparing the Strategic Report and
Directors’ Report and the financial statements in accordance with applicable
law and regulations.
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.
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.
b.
c.
d.
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that
are reasonable and prudent;
state whether they have been prepared in
accordance with IFRSs adopted by the EU; and
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.
50
Lok’nStore Group plc Annual Report and Accounts 2019 Independent Auditor’s Report
to the Members of Lok’nStore Group plc
Opinion
We have audited the financial statements of
Lok’nStore Group plc (the ‘parent company’) and its
subsidiaries (the ‘Group’) for the year ended 31 July
2019 which comprises the Consolidated Statement of
Comprehensive income, the Consolidated and Company
Statements of Change in Equity, the Consolidated
and Company Statements of Financial Position, the
Consolidated Statement of Cash Flows and Notes to the
Financial Statements, including a summary of significant
Accounting Policies. 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.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of
the state of the Group’s and of the parent company’s
affairs as at 31 July 2019 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 company 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
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report.
We are independent of the Group and the parent
company in accordance with the ethical requirements
that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as
applied to SME listed entities and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a
basis for our opinion.
Conclusions Relating to Going Concern
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the Directors’ use of the going concern basis
of accounting in the preparation of the financial
statements is not appropriate; or
the Directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the Group’s or the
parent company’s ability to continue to adopt the
going concern basis of accounting for a period of
at least 12 months from the date when the financial
statements are authorised for issue.
Key Audit Matters
Key audit matters are those matters that, in our
professional judgment, were of most significance in
our audit of the Group and parent company financial
statements of the current period and include the most
significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including
those which had the greatest effect on the overall audit
strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. These
matters were addressed in the context of our audit
of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
Group Key Audit Matters
Property Valuation
Risk
Fair values are calculated using actual and forecast
inputs such as: occupancy, capitalisation rates,
maximum lettable area, operating expenses and net
rent per square foot by property as at 31 July 2019.
In addition, the external valuer applies professional
judgement concerning market conditions and factors
impacting individual properties.
We consider property valuation to be a significant and
key risk of material misstatement as the valuation process
is subjective and inherently judgemental in nature.
Refer to Note 10(b) to the financial statements for the
disclosures relating to the property valuations.
51
Strategic ReportOverviewGovernanceFinancial Statements Independent Auditor’s Report
continued
to the Members of Lok’nStore Group plc
Approach
Our approach to auditing the valuations involved
the following:
• We tested the integrity of the information provided
to the external valuer by management by agreeing
key inputs such as actual occupancy and profitability
to underlying records and source evidence;
• We evaluated the competence, capabilities and
objectivity of the external valuation expert;
• We assessed the scope of the work which the
external valuer was requested to perform by
management and the valuation methodology
applied, determining whether changes to the
method were appropriate;
• We discussed the valuations with the external
valuer and challenged them on the key assumptions
applied and focussed on properties we identified as
having significant or unusual valuation movements
(compared to underlying performance or previous
periods);
• We benchmarked the resulting valuations and valuation
inputs to comparable businesses in the sector;
• We challenged management to justify the
assumptions used in the model (particularly in
respect of trading forecasts and comparison of those
forecasts to actual results); and
• We considered the key assumptions relating to the
rollover relief and to the calculations of deferred tax
arising on the property valuations.
Company Key Audit Matters
There were no key audit matters relating to the
parent company.
Our Application of Materiality
When establishing our overall audit strategy, we set
certain thresholds which help us to determine the
nature, timing and extent of our audit procedures. When
evaluating whether the effects of misstatements, both
individually and on the financial statements as a whole,
could reasonably influence the economic decisions of the
users we take into account the qualitative nature and the
size of the misstatements. During planning materiality for
the Group financial statements as a whole was calculated
at £462,000, which was not significantly changed
during the course of our audit. Materiality for the parent
company financial statements as a whole was calculated
as £230,000, which was not significantly changed
during the course of our audit. We agreed with the Audit
Committee that we would report to them all unadjusted
differences in excess of £23,100 as well as differences
below those thresholds that, in our view, warranted
reporting on qualitative grounds.
An Overview of the Scope of our Audit
Our audit was scoped by obtaining an understanding
of the Group and its control environment, including
Group-wide controls, and assessing the risks of material
misstatement. The scope of our audit covered 100% of
both consolidated profit before tax and consolidated net
assets. Subsidiaries that were subject to audit exemption
were audited to a materiality of £460,000 as part of the
audit of the consolidated financial statements.
Other Information
The Directors are responsible for the other information.
The other information comprises the information included
in the Annual Report, other than the financial statements
and our Auditor’s report thereon. Our opinion on the
financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we
are required to determine whether there is a material
misstatement in the financial statements or a material
misstatement of the other information. If, based on the
work we have performed, we conclude that there is a
material misstatement of this other information, we are
required to report that fact. We have nothing to report in
this regard.
Opinions on Other Matters Prescribed
by the Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
•
•
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; and
the Strategic Report and the Directors’ Report
have been prepared in accordance with applicable
legal requirements.
52
Lok’nStore Group plc Annual Report and Accounts 2019 Matters on Which we are
Required to Report by Exception
In the light of the knowledge and understanding of the
Group and the parent company and its environment
obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or the
Directors’ Report.
We have nothing to report in respect of the following
matters in relation to which 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.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities
statement (set out on page 50), the Directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view,
and for such internal control as the Directors determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors
are responsible for assessing the Group’s and the
parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate
the Group or the parent company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s Responsibilities for the
Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an Auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in
the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
Auditor’s report.
Use of our Report
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.
Graham Ricketts
(Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP,
Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
1 November 2019
53
Strategic ReportOverviewGovernanceFinancial Statements
54
Lok’nStore Group plc Annual Report and Accounts 201956 Consolidated Statement of Comprehensive Income57 Consolidated Statement of Changes in EquityFinancial Statements DOVER
Lok’nStore Dover opened in December 2018 and trading
has been excellent.
This prominent store has 36,000 square feet of storage space
over four floors. The experienced Lok’nStore management team
located and acquired a 0.75-acre site, going on to develop the
store for an existing managed store client.
The impressive glass frontage sits proudly on a main arterial
road in the Whitfield retail area to the North of the town, adjacent
to Lidl, B&Q and Dover Council’s new flagship leisure centre.
36,000
SQUARE FEET OF
MAXIMUM LETTABLE AREA
OPEN
NOW
55
Strategic ReportOverviewGovernanceFinancial Statements58 Company Statement of Changes in Equity59 Consolidated and Company Statements of Financial Position60 Consolidated Statement of Cash Flows61 Accounting Policies70 Notes to the Financial Statements 98 Glossary99 Our Stores Consolidated Statement of Comprehensive Income
For the year ended 31 July 2019
Revenue
Total property, staff, distribution and general costs
Adjusted EBITDA1
Amortisation of intangible assets
Depreciation
Equity settled share based payments
Carried interest – fees receivable
Receivables from warranty claims
Profit on sale of land at store
Costs of sale & manage–back of Crayford store
Deferred financing on bank loan written off
Operating profit1
Finance income
Finance cost
Profit before taxation
Income tax expense
Profit for the year from Continuing Operations
Profit for the year from Discontinued Operations
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
Other comprehensive income
Total comprehensive income for the year
Attributable to owners of the parent
Earnings per share attributable to owners of the parent
Basic
Continuing Operations
Discontinued Operations
Total basic earnings per share
Diluted
Continuing Operations
Discontinued Operations
Total diluted earnings per share
Notes
1(a)
2(a)
10(a)
10(b)
21
2(c)
2(c)
2(c)
2(c)
2(c)
3
4
5
7
12
9
9
Group
Year Ended
31 July 2019
£’000
Group
Year Ended
31 July 2018
£’000
16,950
(9,557)
7,393
(83)
(2,207)
(46)
(2,336)
–
–
295
(54)
(133)
108
(2,228)
5,165
31
(605)
4,591
(1,211)
3,380
2,182
5,562
15,372
(8,739)
6,633
(165)
(1,880)
(33)
(2,078)
361
230
–
–
–
591
(1,487)
5,146
80
(463)
4,763
(1,459)
3,304
453
3,757
5,562
3,757
13,765
(2,327)
11,438
17,000
17,000
11.69p
7.55p
19.23p
11.50p
7.42p
18.92p
15,723
(2,698)
13,025
16,782
16,782
11.48p
1.57p
13.05p
11.28p
1.55p
12.83p
1 Adjusted EBITDA and operating profit are defined in the Accounting Policies section of the Notes to the Financial Statements.
56
Lok’nStore Group plc Annual Report and Accounts 2019 Consolidated Statement of Changes in Equity
For the year ended 31 July 2019
31 July 2017
Profit for the year
Other comprehensive income:
Increase in property valuation 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 relating to share options
Exercise of share options
Total transactions with owners
Transfer additional depreciation on
revaluation net of deferred tax
31 July 2018
Profit for the year
Other comprehensive income:
Increase in property valuation 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 relating to share options
Exercise of share options
Total transactions with owners
Reserve transfer on disposal of assets
Transfer additional depreciation on
revaluation net of deferred tax
Attributable to Owners of the Parent
Share
Capital
£’000
Share
Premium
£’000
Other
Reserves
£’000
Revaluation
Reserve
£’000
Retained
Earnings
£’000
293
10,028
8,469
52,165
18,164
Total
Equity
£’000
89,119
–
–
–
–
–
–
–
2
2
–
–
–
–
–
–
–
–
322
322
–
–
–
–
–
33
(109)
(30)
–
(106)
–
–
3,757
3,757
13,025
13,025
–
3,757
13,025
16,782
–
–
–
–
–
–
(2,977)
(2,977)
–
109
–
–
33
–
(30)
324
(2,868)
(2,650)
(291)
291
–
295
10,350
8,363
64,899
19,344
103,251
–
–
–
–
–
–
–
1
1
–
–
–
–
–
–
–
–
–
140
140
–
–
–
–
–
–
46
(51)
(1)
–
(6)
–
–
–
5,562
5,562
11,438
11,438
–
5,562
11,438
17,000
–
–
–
–
–
–
(3,279)
(3,279)
–
51
–
–
46
–
(1)
141
(3,228)
(3,093)
(4,927)
(304)
4,927
304
–
–
31 July 2019
296
10,490
8,357
71,106
26,909
117,158
57
Strategic ReportOverviewGovernanceFinancial Statements Total
£’000
15,406
3,572
33
–
324
(2,977)
1,919
–
33
(109)
–
–
1,843
16,358
–
46
(51)
–
–
3,774
46
–
141
(3,279)
1,838
17,040
Company Statement of Changes in Equity
For the year ended 31 July 2019
Share Capital
£’000
Share Premium
£’000
Retained
Earnings
£’000
Other Reserves
£’000
31 July 2017
293
10,028
Profit for the year
Share based payments
Transfer in relation to
share based payments
Exercise of share options
Dividends paid
31 July 2018
Profit for the year
Equity settled share
based payments
Transfer in relation to
share based payments
Exercise of share options
Dividends paid
31 July 2019
–
–
–
2
–
–
–
–
322
–
295
10,350
–
–
–
1
–
–
–
–
140
–
296
10,490
3,166
3,572
–
109
–
(2,977)
3,870
3,774
–
51
–
(3,279)
4,416
58
Lok’nStore Group plc Annual Report and Accounts 2019 Consolidated and Company Statements of Financial Position
31 July 2019
Company Registration No. 04007169
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Financial assets
Director review
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Borrowings
Deferred tax
Total liabilities
Net assets
Equity attributable to owners
of the parent
Called up share capital
Share premium
Other reserves
Retained earnings
Revaluation reserve
Total equity attributable to
owners of the parent
Notes
10(a)
10(b)
13
2(c)1
14
15
17
16
18
19
20
25(a)
26
Group
2019
£’000
Group
2018
£’000
Company
2019
£’000
Company
2018
£’000
–
168,938
–
361
3,263
152,580
–
361
169,299
156,204
298
3,707
13,662
17,667
186,966
(4,753)
(339)
(5,092)
(42,331)
(22,385)
(64,716)
(69,808)
117,158
296
10,490
8,357
26,909
71,106
257
4,476
4,990
9,723
165,927
(5,159)
(612)
(5,771)
(37,170)
(19,735)
(56,905)
(62,676)
103,251
295
10,350
8,363
19,344
64,899
–
–
2,464
–
2,464
–
14,576
–
14,576
17,040
–
–
–
–
–
–
–
–
–
2,418
–
2,418
–
13,940
–
13,940
16,358
–
–
–
–
–
–
–
17,040
16,358
296
10,490
1,838
4,416
–
295
10,350
1,843
3,870
–
117,158
103,251
17,040
16,358
As permitted by section 408 Companies Act 2006, the parent company’s Statement of Comprehensive Income
has not been included in these financial statements. The profit and comprehensive income for the year ended
31 July 2019 was £3.8 million (2018: £3.6 million).
Approved by the Board of Directors and authorised for issue on 1 November 2019 and signed on its behalf by:
Andrew Jacobs
Chief Executive Officer
Ray Davies
Finance Director
59
Strategic ReportOverviewGovernanceFinancial Statements
Consolidated Statement of Cash Flows
For the year ended 31 July 2019
Notes
28(a)
Operating activities
Cash generated from operations
Income tax paid
Net cash generated from operations
Investing activities
Proceeds of disposal of discontinued operation –
net of disposal costs and cash included in sale
Proceeds of sale of land (net of disposal costs)
Proceeds of sale of store
Acquisition of subsidiary (net of cash acquired)
Development loan capital repaid / invested
Purchase of property, plant and equipment
Proceeds from warranty claims
Interest received
Net cash outflow from investing activities
Financing activities
Proceeds from drawdown of new bank facility
Repayment of bank borrowings on retiring bank facility
Proceeds of bank borrowings utilised for store development
Finance costs paid on bank refinancing
Finance costs paid
Equity dividends paid
Proceeds from issue of ordinary shares (net)
Net cash inflow from financing activities
Net increase / (decrease) 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.
Group
2019
£’000
8,067
(955)
7,112
6,849
796
7,418
(1,069)
–
(14,029)
–
31
(4)
42,971
(42,395)
5,653
(593)
(934)
(3,279)
141
1,564
8,672
4,990
13,662
Group
2018
£’000
6,982
(775)
6,207
–
–
–
–
3,463
(21,935)
342
80
(18,050)
–
–
8,519
–
(419)
(2,977)
324
5,447
(6,396)
11,386
4,990
60
Lok’nStore Group plc Annual Report and Accounts 2019 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 Fleet Place, London, EC4M 7WS, 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. The principal activities of the Group and the nature
of its operations are described in the Strategic Report.
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 2018.
The financial statements have been prepared on the historic cost basis except that certain trading properties and
non-current financial assets are stated at fair value.
Standards Adopted in the Year
IFRS 9 (Financial instruments), IFRS 15 (Revenue from contracts with customers) and IFRS 2 (Amendments,
classification and measurement of share based payment transactions) were all adopted in the year.
Adoption of IFRS 9 covers the classification, measurement and derecognition of financial assets and liabilities. There
has been no impact on the Group’s accounting for financial liabilities although the standard has increased the level
of reporting in Note 17 (Financial instruments) particularly around a more detailed explanation of credit risks to the
business and a reiteration of the robust credit model that underpins the business.
IFRS 15 has its own section below but in summary the Group has concluded revenue recognition will be unchanged
under IFRS 15 although there is additional reporting of separate revenue streams in Note 1 which are aligned with the
Group’s accounting policies on revenue recognition.
There has been no material impact from the amendments to IFRS 2.
Standards in Issue but not yet Effective
At the date of approval of these financial statements, the following principal standards and interpretations were in
issue but not yet effective:
Standards, Interpretations and Amendments
Endorsed
IFRS 16
Leases
Standards, Interpretations and Amendments
Not Yet Endorsed
IFRIC 23
Uncertainty over income tax treatments
Effective Date:
Periods Commencing on or After
1 Jan 2019
Effective Date:
Periods Commencing on or After
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, although
the Group will not be adopting the Standard until its year ended 31 July 2020 the Directors consider that this will
have a significant impact on the financial statements of the Group at that time and have provided an initial overview
of the impact on the 2020 financial statements with supporting calculations and which is set out on page 28.
There were no other Standards or Interpretations issued 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.
61
Strategic ReportOverviewGovernanceFinancial Statements Accounting Policies continued
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (and 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.
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 or CGU for which the estimate of
future cash flows have not been adjusted.
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 £13.7 million (2018: £5.0 million), undrawn committed bank
facilities at 31 July 2019 of £32.0 million (2018: £12.7 million), and cash generated from operations in the year ended
31 July 2019 of £8.1 million (2018: £7.0 million).
In April 2019, the Group increased its bank facility by £25 million to £75 million, with a further £25 million accordion
option taking the facility to £100 million. The increased facility will provide funding for new landmark site acquisitions
and working capital to support the Group’s ambitious growth plans.
The facility is a combined agreement with Lloyds Bank and The Royal Bank of Scotland plc and runs until April 2024
with an option for a further two one year extensions and is closely aligned to the terms of the Group’s previous facility.
The interest rate is set at the London Inter-Bank Offer Rate (LIBOR) plus a 1.50%–1.75% margin based on a loan to
value covenant test.
IFRS 15 – Revenue Recognition
IFRS 15 replaces IAS 18 and is the applicable standard that sets the rules for the recognition of revenue. The
standard is effective for financial years commencing on or after 1 January 2018 and therefore applies for the first time
for the current financial year 31 July 2019. The standard is based on the principle that revenue is recognised when
control of a good or service transfers to a customer.
The Group’s assessment is that IFRS 15 applies to all its streams of revenue. There has not been a material change
in the amounts and timing of revenue recognised following the adoption of the standard. Each customer agreement
is terminable on seven days’ notice by the customer at any time or in specific circumstances by the Group and
each agreement has a discrete performance obligation with revenue recognition from the commencement of the
agreement and therefore the Group has concluded revenue recognition will be unchanged under IFRS 15.
62
Lok’nStore Group plc Annual Report and Accounts 2019 Accordingly, 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). Revenue is recognised evenly over the
period of self-storage.
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.
The Group provides insurance to customers through a block policy purchased from its insurer. Block policyholders
supply VAT exempt insurance transactions as principals rather than insurance related services as intermediaries and
accordingly insurance income received from the customer is recognised as revenue rather than offset against the
costs of the block policy.
The key characteristics of a block policy are that:
• There is a contract between the block policyholder and the insurer which allows the block policyholder to effect
insurance cover subject to certain conditions
• The Group acting in our own name as the block policyholder procures insurance cover for third parties from
the insurer
• There is a contractual relationship between the block policyholder and third parties under which the insurance
is procured
• The block policyholder stands in place of the insurer in effecting the supply of insurance to the third parties
The Group is not exposed to any insured losses arising from its insurance activity.
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. Fees are invoiced monthly based on revenue performance. Additional performance fees may
be earned if an individual Managed Store EBITDA performance exceeds agreed thresholds. Periodic fees may also
be earned for additional specific services provided and are invoiced when that service has been completed. Revenue
is recognised for each performance condition once the condition has been met.
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 IFRS 8 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.
63
Strategic ReportOverviewGovernanceFinancial Statements Accounting Policies continued
Adjusted EBITDA
Earnings before interest, tax, depreciation and amortisation (EBITDA), is defined as defined as EBITDA before losses
or profits on disposal, share-based payments, acquisition costs, and exceptional items, finance income, finance
costs and taxation.
Adjusted Store EBITDA
Adjusted Store 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.
Discontinued Operations
The Group’s document storage business was sold on 31 January 2019 and its disposal constitutes a discontinued
operation. Separate reporting of discontinued operations is important in providing users of financial statements
with the information necessary to determine the effects of a disposal on the ongoing continuing operations of
our business. To ensure a clear separation of the financial performance of Continuing Operations, Discontinued
Operations are shown separately on the Statement of Comprehensive Income as a profit on disposal (after tax)
which combines operating profit with the profit arising on its disposal. The profit on discontinued operations is then
aggregated with profit on continuing operations in determining the Group’s total net profit.
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 which may 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 is
provided in full on the differences between the revalued amount of trading property assets carried in the Statement
of Financial Positon and their corresponding tax bases. 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 at grant date using the Black-
Scholes pricing model, which is appropriate given the vesting and other conditions attaching to the options. The
charge is adjusted to reflect expected and actual levels of vesting.
64
Lok’nStore Group plc Annual Report and Accounts 2019 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. Gains or losses arising from the
changes in fair value of the trading properties are included in the Consolidated Statement of Changes in Equity
for the period in which they arise. A comprehensive external valuation is performed annually 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. Expenditure related to the improvement of the buildings is capitalised and depreciated
over the remaining period of the lease term.
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
over 50 years straight line
Long leasehold property and lease premium
over unexpired lease period or renewal term
Short leasehold improvements
Fixtures, fittings and equipment
Computer equipment
Motor vehicles
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 of £302,605
(2018: £363,963) is included within total depreciation 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.
65
Strategic ReportOverviewGovernanceFinancial Statements
Accounting Policies continued
Leased Assets and Obligations
Annual rentals under ‘operating leases’ 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. Whenever land and buildings are acquired by the Group
they will not be acquired under finance leases but rather through a combination of operational cash generated by the
Group business supported by bank debt drawn from its revolving credit facility.
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
IFRS 9 covers the classification, measurement and derecognition of financial assets and liabilities. It also introduces a
new impairment model for financial assets and new rules for hedge accounting. The standard is effective for financial
years commencing on or after 1 January 2018 and therefore applies for the first time for the current financial year
ended 31 July 2019.
There has been no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designed at fair value through the income statement and the Group does
not have any such liabilities.
The impairment model under IFRS 9 requires the recognition of impairment provisions based on expected credit
losses rather than only incurred credit losses as is the situation under IAS 39. The significant financial assets held by
the Group that will be affected by the impairment losses recognised under IFRS 9 are trade receivables.
Trade receivables as indicated in Note 15 are £1.01 million. As described in Note 15 the Group’s exposure to credit
risk is low and the Group’s credit model robust. The Directors have assessed the impact of impairment losses
recognised for trade receivables under IFRS 9 at 31 July 2019 based on actual losses experienced over the past five
years and concluded that the impact and volatility on impairment losses recognised under IFRS 9 to be immaterial.
The Company hold intercompany loan and receivables balances with the subsidiaries of the Group as disclosed in
Note 15. The Directors do not estimate there to be a material impact on the Company only Financial Statements from
the recognition of impairment provisions for the loans and receivables under IFRS 9 adoption.
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.
66
Lok’nStore Group plc Annual Report and Accounts 2019 The Group has an active store development programme and in accordance with IAS 23 has material qualifying
assets that take a substantial period of time to develop from acquisition to ultimate store opening. Accordingly
borrowing costs have been capitalised in the current year that are directly attributable to the acquisition, construction
and fit-out of these qualifying store assets. The Group funds these developments from a general bank revolving
credit facility and the capitalisation rate applied is the average cost of these funds. When an individual store
development is complete and the store has opened, capitalisation of attributable borrowing costs ceases. In the
current year £430,321 interest was capitalised in respect of nine qualifying development assets.
Derivative Financial Instruments and Hedge Accounting
The Group’s activities expose it to interest rate risk. The Group has used 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.
There were no financial derivatives held by the Group at 31 July 2018 or 31 July 2019.
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. The Group currently has no
hedging instruments although hedging policy is kept under regular review.
Loans, and Other Receivables
Trade receivables are initially measured at their transaction price. Group and other receivables are initially measured
at fair value plus transaction costs. Receivables are held to collect the contractual cash flows which are solely
payments of principal and interest. Therefore, these receivables are subsequently measured at amortised cost using
the effective interest rate method.
Trade Receivables
For trade receivables, expected credit losses are measured by applying an expected loss rate to the gross carrying
amount. The expected loss rate comprises the risk of a default occurring and the expected cash flows on default
based on the aging of the receivable. The risk of a default occurring always takes into consideration all possible
default events over the expected life of those receivables (the lifetime expected credit losses).
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 and other payables are initially recognised at fair value and are subsequently stated at amortised
cost using the effective interest rate method.
67
Strategic ReportOverviewGovernanceFinancial Statements Accounting Policies continued
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.
Financial Assets
Trade, Group and other debtors which are receivable within one year and which do not constitute a financing
transaction are initially measured at the transaction price and subsequently measured at amortised cost being the
transaction price less any amounts settled and any impairment losses. Where the Group is entitled to receive cash
under a management services agreement at a future specified date this is recorded as a financial asset at the current
fair value of the cash ultimately receivable. Where this amount is receivable in more than one year hence the financial
asset is presented as a non-current asset.
Impairment of Financial Assets
Financial assets are assessed for indications of impairment at each reporting date. An impairment loss is recognised
for the expected credit losses on financial assets when there is an increased probability that the counterparty will
be unable to settle an instrument’s contractual cash flows on the contractual due dates, a reduction in the amounts
expected to be recovered, or both. The probability of default and expected amounts recoverable are assessed using
reasonable and supportable past and forward-looking information that is available without undue cost or effort. The
expected credit loss is a probability-weighted amount determined from a range of outcomes and takes into account
the time value of money.
Net Debt
Net debt comprises the borrowings of the Group less cash and cash equivalents.
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 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.
a) Estimate of Fair Value of Trading Properties
The Group commissions an external valuation of its self-storage stores. This valuation uses 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 10(b). The carrying value of land and buildings held at valuation at the reporting date was
£133.5 million (2018: £108.5 million) as shown in the table in Note 10(b).
68
Lok’nStore Group plc Annual Report and Accounts 2019 b) Assets in the Course of Construction and Land Held for 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 fees 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 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 £18.4 million (2018: £16.6 million).
Please see Note 10(b) for more details.
c) Classification of Self-storage Facilities as Owner Occupied Properties Rather than Investment Properties
The Directors consider that Lok’nStore Group plc is the parent company of a ‘Trading business’ and is not wholly or
mainly engaged in making investments. The holding of land is not a core activity.
The Group is an integrated storage solutions business offering a range of services to its customers. We provide
services to our customers under contracts for the provision of storage services which do not give them any property
or tenancy rights and a large number of the stores we operate are from properties where we do not own the land
or the buildings. The assets we do own are valued on the basis of the trading cash flows that the operating
businesses generate.
The Group continues to develop its managed stores business where it uses its operational and logistic expertise
to provide a full range of services to customers in stores we manage for third party owners. In recent years the
Group has developed many new managed stores all of which are owned by third-party investors and managed
by Lok’nStore.
Previously owned sites at Woking, Ashford and Swindon have been the subject of sale and manage-back
transactions by which Lok’nStore has retained the management of the business when a third party owner acquired
the business, land and buildings. During this financial year we completed a sale and manage-back of our Crayford
store. All of this trading activity as well as the self-storage income earned from our leasehold stores activity
demonstrate that the holding of land is not a core activity because the trading operation is not dependent on the
ownership of land. See the chart on page 19 for the changing ownership structure of the stores.
Furthermore the Group has always and continues to comply with all of the usual accounting and tax protocols
consistent with a trading business. Lok’nStore operates 34 stores mainly in Southern England. Of the 34 stores,
Lok’nStore owns the freehold interest in 15 stores, eight of the stores are held under commercial leases, with the
remaining 11 managed stores operating under management contracts for third party owners. One of the features
of Lok’nStore’s strategy is to increase the number of stores we manage for third parties selling our expertise in
storage solutions management, operating systems and marketing, through management fees rather than retaining
a proprietary interest in land and buildings.
The classification of self-storage facilities as owner occupied properties rather than investment properties has
resulted in the recognition of fair value gains in 2019 (net deferred of tax) of £11.4 million (2018: £13.0 million) in
Other Comprehensive Income rather than the Income Statement.
69
Strategic ReportOverviewGovernanceFinancial Statements Notes to the Financial Statements
For the year ended 31 July 2019
1(a) Revenue
Analysis of the Group’s revenue is shown below:
Stores Trading
Self-storage revenue
Insurance revenue
Retail sales
Total self-storage revenue – owned stores
Ancillary store revenue
Management fees – managed stores
Sub-total
Non-storage income
Total revenue per statement of comprehensive income
Group
2019
£’000
14,235
1,533
241
16,009
44
817
16,870
80
16,950
Group
2018
£’000
13,081
1,368
230
14,679
140
534
15,353
19
15,372
The Group’s serviced archive and record management segment was sold in the period and is presented as a
Discontinued Operation (see Note 12). Following the disposal, the Group has one operating segment, being self-
storage in the UK.
2(a) Property, Staff, Distribution and General Costs
Property and premises costs
Staff costs
General overheads
Sub-total operating costs
Retail products cost of sales (see Note 2(b))
Group
2019
£’000
4,022
4,111
1,224
9,357
180
9,537
Group
2018
£’000
3,647
3,832
1,079
8,558
181
8,739
2(b) 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.
Group
2019
£’000
121
26
33
180
Group
2018
£’000
116
45
20
181
Retail
Insurance
Other
70
Lok’nStore Group plc Annual Report and Accounts 2019
2(c) Other Income and Costs
Profit on sale of land at store 1
Costs of sale & manage-back Crayford store 2
Deferred financing on bank loan written off 3
Carried interest – fees receivable 4
Receipts from warranty claims 5
Group
2019
£’000
(295)
54
133
–
–
(108)
Group
2018
£’000
–
–
–
(361)
(230)
(591)
2019:
1
Profit on sale of land at store: During the year land at the rear of our Southampton store with a fair value of £500,000 was sold for £800,000. There was
£4,043 of associated costs of sale.
2
3
Costs of sale & manage-back Crayford store: On 28 February 2019 the Crayford store was sold at its fair value to an investment fund for £7.52 million in
cash. Lok’nStore will continue to manage the store maintaining the operational footprint of the business and will receive management and performance
fees. Legal and professional costs associated with this transaction amounted to £54,483.
Deferred financing on bank loan written off. In April 2019, the Group executed a new bank facility increasing facilities available by £25 million to £75
million, with a further £25 million accordion option taking the facility to £100 million. The deferred element of the original financing costs of £133,307
was accordingly written off.
2018:
4
Carried interest fees receivable:
Upon the sale of one of the ‘Managed stores’ Lok’nStore will be entitled to receive a fee of 5% of the proceeds of the sale (less reasonable selling
costs). Due to the uncertainty of the property market and the timing of the ultimate sale the Directors have in previous years believed that it would
not yet be appropriate to recognise this as an asset, on the basis that it could not be reliably measured. However 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. Accordingly, the Directors have given due
consideration as to the current fair value of the Carried interest – fee receivable and have recognised £361,460 as a non-current financial asset in the
financial statements. No change was made to the assessment of fair value in 2019.
5
Receipts from warranty claims relates to receipts due and payable under a mediated settlement agreement.
3 Finance Income
Bank interest
Other interest
Interest receivable arises on cash and cash equivalents (see Note 17).
4 Finance Costs
Bank interest
Non-utilisation fees and amortisation of bank loan arrangement fees
Other interest
Group
2019
£’000
24
7
31
Group
2019
£’000
452
153
–
605
Group
2018
£’000
7
73
80
Group
2018
£’000
342
116
5
463
71
Strategic ReportOverviewGovernanceFinancial Statements
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
Amounts payable to RSM 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 subsidiaries of the Company pursuant to legislation
Other services supplied pursuant to such legislation
– interim review
– other services
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
Costs for the above persons:
Wages and salaries
Social security costs
Pension costs
Share based remuneration (options)
72
Group
2019
£’000
2,207
83
1,356
66
–
12
3
23
31
135
66
69
135
Group
2018
£’000
1,880
165
1,191
52
15
11
7
29
10
124
67
57
124
Group
2019
No.
Group
2018
No.
132
24
156
120
24
144
Group
2019
£’000
Group
2018
£’000
3,446
424
85
3,955
46
4,001
3,170
395
100
3,665
33
3,698
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 Share based remuneration is separately disclosed in the Statement of Comprehensive Income. Wages and salaries
of £90,436 (2018: £149,492) 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 £13,217 (2018: £13,894) outstanding at the year-end.
There were no employees employed by Lok’nStore Group plc in the year (2018: nil).
Directors’ Remuneration
Directors’
Remuneration
2019
Executive:
A Jacobs
RA Davies
N Newman-Shepherd
Non-Executive:
SG Thomas
RJ Holmes
ETD Luker
CP Peal
Directors’
Remuneration
2018
Executive:
A Jacobs
RA Davies
N Newman-Shepherd
Non-Executive:
SG Thomas
RJ Holmes
ETD Luker
CP Peal
Emoluments
Bonuses
£
£
Benefits
£
220,816
160,968
78,931
30,900
22,297
27,873
22,297
38,250
22,641
64,034
–
–
–
–
5,435
4,612
2,364
4,804
–
–
–
Sub Total
Pension
£
264,501
188,221
145,329
35,704
22,297
27,873
22,297
£
–
4,829
2,631
–
–
–
–
Gains on
Share
Options
£
–
–
–
40,580
–
–
–
Total
£
264,501
193,050
147,960
76,284
22,297
27,873
22,297
564,082
124,925
17,215
706,222
7,460
40,580
754,262
Emoluments
Bonuses
£
£
Benefits
£
216,487
131,280
75,172
30,000
21,648
27,061
21,648
26,000
19,222
42,477
–
–
–
–
4,272
4,090
1,933
4,009
–
–
–
Sub Total
Pension
£
246,759
154,592
119,582
34,009
21,648
27,061
21,648
£
–
31,190
2,255
–
–
–
–
Gains on
Share
Options
£
–
20,415
71,317
–
–
52,275
–
Total
£
246,759
206,197
193,154
34,009
21,648
79,336
21,648
523,296
87,699
14,304
625,299
33,445
144,007
802,751
Details of the Directors remuneration is shown above. Key management personnel are defined as the Directors of the
Group and the additional participants in the Long Term Partnership Performance Plan (LTPPP).
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 two (2017: two).
73
Strategic ReportOverviewGovernanceFinancial Statements 7 Taxation
Current tax:
UK corporation tax
Deferred tax:
Origination and reversal of temporary differences
Adjustments in respect of prior periods
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 19% (2018: 19%)
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 timing differences
Adjustments in respect of prior periods – deferred tax
Other
Small companies relief
Income tax expense for the year
Effective tax rate
Group
2019
£’000
Group
2018
£’000
811
400
–
400
1,211
2019
£’000
4,591
880
18
355
2
(17)
–
(27)
–
1,211
26 %
837
292
330
622
1,459
2018
£’000
4,763
884
–
314
6
–
330
(45)
(30)
1,459
30%
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 £2.3 million (2018: £2.7 million) has been recognised as a debit/credit directly in other comprehensive
income (see Note 19 on deferred tax).
8 Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2017 (7.00 pence per share)
Interim dividend for the six months to 31 January 2018 (3.33 pence per share)
Final dividend for the year ended 31 July 2018 (7.67 pence per share)
Interim dividend for the six months to 31 January 2019 (3.67 pence per share)
2019
£’000
–
–
2,217
1,062
3,279
2018
£’000
2,016
961
–
–
2,977
In respect of the current year the Directors propose that a final dividend of 8.33 pence per share will be paid to
the Shareholders. The total estimated dividend to be paid is £2.4 million based on the number of shares in issue
at 17 October 2019 as adjusted for shares held in the Employee Benefits Trust. 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 28 November 2019; the record date 29 December 2019; with an intended payment
date of 10 January 2020. The final deadline for Dividend Reinvestment Election (DRIP) is 13 December 2019.
74
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 9 Earnings per Phare
The calculations of earnings per share are based on the following profits and numbers of shares.
Profit for the financial year attributable to Continuing Operations
Profit for the financial year attributable to Discontinued Operations
Total 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 options 1
For diluted earnings per share
Group
2019
£’000
3,380
2,182
5,562
Group
2018
£’000
3,304
453
3,757
2019
No. of Shares
2018
No. of Shares
28,921,229
28,792,029
481,848
490,064
29,403,077
29,282,093
623,212 (2018: 623,212) shares are held in the Employee Benefit Trust (see Note 27).
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 21 to 24.
Earnings per share
Basic
Continuing Operations
Discontinued Operations
Total basic earnings per share
Diluted
Continuing Operations
Discontinued Operations
Total diluted earnings per share
Group
2019
11.69p
7.55p
19.24p
11.50p
7.42p
18.92p
Group
2018
11.48p
1.57p
13.05p
11.28p
1.55p
12.83p
75
Strategic ReportOverviewGovernanceFinancial Statements 10(a) Intangible Assets
Group
Cost at 1 August 2017
Amortisation at 1 August 2017
Amortisation charge
Amortisation at 31 July 2018
Net book value at 31 July 2018
Cost at 1 August 2018
Amortisation at 1 August 2018
Amortisation charge
Disposal
Net book value at 31 July 2019
Goodwill
£’000
1,110
–
–
–
1,110
1,110
–
–
(1,110)
–
Contractual
Customer
Relationships
£’000
3,309
(991)
(165)
(1,156)
2,153
3,309
(1,156)
(83)
(2,070)
–
Total
£’000
4,419
(991)
(165)
(1,156)
3,263
4,419
(1,156)
(83)
(3,180)
–
All goodwill and customer relationships were allocated to the serviced document storage cash-generating unit (CGU)
identified as a separate business segment.
On 31 January 2019 Lok’nStore disposed of its serviced document storage business Saracen Datastore Limited
(Saracen) for £7.64 million in cash against its Net Book Value as at 31 July 2018 of £5.4 million and which included
the value of the intangible assets. The recoverable amount exceeds the carrying amount of the CGU.
76
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 10(b) 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
Total
£’000
10,293
2,599
49
–
–
23,984
3,190
12
–
17
129,565
–
–
–
21,935
–
14,845
Group
Cost or valuation
1 August 2017
Additions
Reclassification
Revaluations
31 July 2018
Depreciation
1 August 2017
Depreciation
Revaluations
31 July 2018
Net book value
at 31 July 2018
Cost or valuation
1 August 2018
Additions
Additions – Acquisition
of subsidiary
Reclassification
Transfers
Disposals
Disposals –
Discontinued
Operations
Revaluations
31 July 2019
Depreciation
1 August 2018
Depreciation
Disposals
Disposals –
Discontinued
Operations
Revaluations
31 July 2019
Net book value
at 31 July 2019
5,124
18,513
(7,067)
–
16,570
87,548
183
7,055
13,700
108,486
–
–
–
–
–
753
(753)
–
–
–
1,145
11,438
–
126
(126)
–
16,570
108,486
11,438
108,486
2,804
–
11,438
1,493
–
17,116
(12,931)
16,570
6,667
–
(4,185)
6
(616)
–
–
18,442
–
–
–
–
–
–
(6)
(8,058)
–
13,189
133,531
–
1,004
(428)
–
(576)
–
18,442
133,531
–
–
–
–
–
–
–
–
–
–
–
–
2,648
27,186
17
166,345
1,880
99
–
1,979
669
2,648
162
1,242
–
–
–
(84)
–
3,968
1,979
156
–
(57)
–
2,078
1,890
10,771
1,001
–
11,772
15,414
27,186
2,744
–
–
–
(1,109)
(2,267)
–
26,554
11,772
1,091
(726)
(640)
–
11,497
15,057
13
1
–
14
3
17
20
–
–
–
–
(7)
–
30
12,664
1,980
(879)
13,765
152,580
166,345
13,890
1,242
–
–
(9,783)
(2,358)
13,189
182,525
14
13,765
5
–
(7)
–
12
18
2,256
(1,154)
(704)
(576)
13,587
168,938
77
Strategic ReportOverviewGovernanceFinancial Statements
10(b) Property, Plant and Equipment continued
The Group has an active store development programme and in accordance with IAS 23 has material qualifying
assets that take a substantial period of time to develop from acquisition to ultimate store opening. Accordingly
borrowing costs of £430,321 (2018: £197,209) have been capitalised in the current year that are directly attributable
to the acquisition, construction and fit-out of these qualifying store assets. £332,326 of the total amount is carried
in development property assets and £97,994 is carried in land and buildings following the opening of the Gillingham
and Wellingborough stores.
If all property, plant and equipment were stated at historic cost the carrying value would be £81.7 million
(2018: £74.1 million).
Capital expenditure during the year totalled £14.0 million (2018: £21.9 million). This was primarily the purchase of
our Leicester and Wolverhampton sites, exchanged contracts on our Stevenage site, completion of construction
works at our stores in Gillingham and Wellingborough, ongoing construction works at our Leicester store and
completing works at our Cardiff and Ipswich stores which are now open and trading. Costs relating to the planning
and pre-development works on our Bournemouth, Bedford, and Cheshunt sites also featured. The freehold of our
existing Maidenhead store, previously held on a long lease, was also acquired for £1.4 million.
In addition the Group the acquired The Box Room (Self Storage) Limited a trading store located in Hedge End,
Southampton.
During the year land at the rear of our Southampton store with a fair value of £500,000 was sold for £800,000.
On 28 February 2019 the Crayford store was sold to an investment fund for £7.42 million in cash. Lok’nStore will
continue to manage the store maintaining the operational footprint of the business and will receive management
and performance fees.
Property, plant and equipment (non-current assets) with a carrying value of £169.0 million (2018: £152.6 million) are
pledged as security for bank loans.
Market Valuation of Freehold and Operating Leasehold Land and Buildings
On 31 July 2019 a professional valuation was prepared by Jones Lang LaSalle Limited (JLL) in respect of 15 freehold,
and eight operating leasehold properties. The valuation was prepared in accordance with the RICS Valuation –
Global Standards 2017, published by The Royal Institution of Chartered Surveyors (the RICS 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 RICS Red Book JLL have confirmed that:
• This is the third 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; and
•
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% and is minimal.
The valuation report indicates a total valuation for all properties valued of £162.7 million (2018: £146.2 million) of
which £144.0 million (2018: £128.0 million) relates to freehold properties, and £18.7 million (2018: £18.2 million) relates
to properties held under operating leases.
Freehold 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 £144.0 million valuation of the freehold and
long leasehold properties £13.0 million (2018: £11.7 million) relates to the net book value of fixtures, fittings and
equipment, and the remaining £131.0 million (2018: £116.3 million) relates to freehold and long leasehold properties.
The 2019 valuation includes and reflects movements in value which have resulted from the operational performance
of the stores and movements in the investment environment.
78
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 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 rates 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 23 trading stores (both freeholds and leaseholds) averages 84.3% (2018: 84.1%).
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 continues 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.
• The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 10.09% (2018:
10.58%). The yield arising from the first year of the projected cash flow is 5.99% (2018: 6.35%), rising to 8.74%
(2018: 9.39%) in year five.
• JLL have assumed purchasers costs of 6.8% (2018: 6.8%).
• The average stabilised occupancy is 84.3% (2018: 84.1%).
• The average exit yield assumed is 7.22% (2018: 7.42%).
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.
JLL reported that the Lok’nStore portfolio has generally performed very well in terms of increasing occupancy over
the course of the year which has driven the assumed stabilised occupancy higher.
For leaseholds the same methodology has been used as for freehold property, except that no sale of the assets in the
tenth 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 0 months as at 31 July 2019 (11 years and 1 month:
31 July 2018). 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.
79
Strategic ReportOverviewGovernanceFinancial Statements 10(b) Property, Plant and Equipment continued
Directors’ Valuation of Land and Property
The old Southampton store: Following the opening of the new Southampton store with the corresponding transfer
of all customers from the old Southampton store, the vacant building was redeveloped for cruise parking. Market
evidence suggested that there was a potential market in Southampton for car parking for cruise liner passengers
and that this property with its proximity to the Southampton port was appropriate to this use and could potentially
deliver more Shareholder value than merely a sale of the building. The building was converted to this use costing
£1.195 million (£1.103 million net of depreciation) and started trading as ‘Park’nCruise’ in May 2017. Trading however
was slower than expected and would take much longer to build. In 2019 the Board concluded that management
time and capital could be more effectively deployed within the self-storage business and the operation was closed.
Accordingly the Directors placed their valuation on the current developed site at £2.5 million which is their best
estimate of the potential realisable value of the site.
The new Southampton store: Following the development and opening of the new Southampton store there
remained land to the rear of the building which was held pending a subsequent expansion of the store. During the
year the Group sold this land with a fair value of £500,000 for £800,000.
The total value of land and property carried at Director Valuation at 31 July 2019 is £2.51 million (2018: £3.60 million).
11 Acquisition of Hedge End
On 30 November 2018 Lok’nStore purchased the entire share capital of The Box Room (Self Storage) Limited
comprising an existing single store operation of 42,000 sq. ft. in Hedge End Southampton for a consideration of
£1.13 million in cash. The Group considers this to be a good leasehold operation in a known market place which
will benefit from Lok’nStore’s operating systems and digital platform.
Hedge End Net assets acquired
Assets
Property, plant and equipment
Trade and other receivables
Prepayments and other debtors
Cash and cash equivalents
Total assets
Liabilities
Trade and other payables
Accruals
Current tax liabilities
Deferred tax liabilities *
Finance leases
Total liabilities
Fair value of identifiable assets and liabilities
Non-controlling interest
Goodwill
Total consideration
Book Value
£’000
Provisional Fair
Value Adjustments
£’000
30 November 2018
£’000
372
33
10
4
419
(47)
(6)
(53)
(24)
(29)
(159)
260
–
–
260
870
–
–
–
870
–
–
–
–
–
–
870
–
–
870
1,242
33
10
4
1,289
(47)
(6)
(53)
(24)
(29)
(159)
1,130
–
–
1,130
*
Deferred tax potentially arising on the fair value adjustment on acquisition is not considered material in the context of the Group’s current deferred tax
provision of £22.4 million and is ignored.
The store has been rebranded and refurbished and we expect returns to rise as this takes effect. Staff costs are
expected to reduce to come in line with other Lok’nStore stores raising the margins towards the Group’s average.
80
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 12 Disposal of Saracen Datastore Limited
On 31 January 2019 Lok’nStore disposed of its serviced document storage business Saracen Datastore Limited
(Saracen) for £7.64 million in cash against its Net Book Value as at 31 July 2018 of £5.4 million.
In the short term the disposal proceeds will be used to reduce overall Group borrowing and will improve all key
banking ratios. In the medium term the disposal proceeds will be used to fund the ongoing investment into our highly
accretive development pipeline of new self-storage centres, fulfilling the Company’s objective of growing asset value
by recycling capital from lower growth assets into high growth landmark stores.
The fees and costs of sale associated with the disposal amounted to £294,866. The proceeds of disposal net of
disposal costs is treated as a receipt in Investing Activities in the Consolidated Cash Flow Statement and contributed
£6.85 million to the increase in cash and cash equivalents during the year.
Key amounts relating to the discontinued operation are as follows:
Revenue
Expenses
EBITDA
Depreciation
Finance income/costs
Profit before tax
Tax
Profit after tax
Profit on disposal of subsidiary
Tax on disposal profit
After tax disposal profit
Total profit on Discontinued Operations
31 July 2019
£’000
1,156
(902)
254
(48)
3
209
8
217
1,965
–
1,965
2,182
31 July 2018
£’000
2,382
(1,720)
662
(100)
–
562
(109)
453
–
–
–
453
Before disposal, Saracen contributed £1.16 million to the Group’s revenue and £0.25 million to its EBITDA in the
period up to its disposal on 31 January 2019. The carrying value of Saracen Datastore’s assets and liabilities that
were sold on 31 January 2019 was as follows:
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Inventories
Receivables
Cash
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets disposed of
Cash proceeds (net of fees/costs of disposal)
Profit on disposal
£’000
3,180
1,654
4,834
5
722
508
1,235
6,069
(603)
(79)
(682)
5,387
7,352
1,965
The profit on disposal is included in profit on Discontinued Operations in the Consolidated Statement of
Comprehensive Income.
The Group believes that Substantial Shareholder Relief would be available on the gain made on the disposal of the
shares. Proceeds from disposal of Discontinued Operations (net of disposal costs and cash included in sale) is
presented as an Investing Activity in the Consolidated Statement of Cash Flows.
81
Strategic ReportOverviewGovernanceFinancial Statements 13 Investments
Company Investments in subsidiary undertakings
31 July 2017
Capital contributions arising from share-based payments
31 July 2018
Capital contributions arising from share-based payments
31 July 2019
£’000
2,385
33
2,418
46
2,464
The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in
England and Wales:
% of Shares and Voting Rights Held
Lok’nStore Limited*#
Lok’nStore Trustee Limited1*†
Class of
Shareholding
Ordinary
Ordinary
Southern Engineering and Machinery Company Limited1*#
Ordinary
Semco Machine Tools Limited2*#
Semco Engineering Limited2*#
Saracen Datastore Limited1#@
ParknCruise Limited1†
The Box Room (Self Storage) Limited1†
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Directly
Indirectly Nature of Entity
100
–
–
–
–
–
–
–
–
100
100
100
100
100
100
100
Self-storage
Trustee
Self-storage
Dormant
Dormant
Serviced Document
Storage
Dormant
Self-storage
1
2
*
†
#
These companies are subsidiaries of Lok’nStore Limited.
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 address of these companies is 112, Hawley Lane, Farnborough, Hants. GU14 8JE.
The address of these companies is 1, Fleet Place London EC4M 7WS.
@ The serviced document storage business was sold during the year.
14 Inventories
Consumables and goods for resale
Group
2019
£’000
298
Group
2018
£’000
257
The amount of inventories recognised in cost of sales as an expense during the year was £120,954 (2018: £160,177).
(See Note 2(b)).
15 Trade and Other Receivables
Trade receivables
Other receivables
Prepayments and accrued income
Group
2019
£’000
1,055
2,270
382
3,707
Group
2018
£’000
1,969
1,927
580
4,476
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
82
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 The following balances existed between the Company and its subsidiaries at 31 July:
Net amount due from Lok’nStore Limited
Company
2019
£’000
14,576
Company
2018
£’000
13,940
The amount due from Lok’nStore Limited is interest free. The balance is repayable on demand.
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 expected credit losses.
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.
Included in the Group’s trade receivables balance are receivables with a carrying amount of £55,049 (2018: £57,006)
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 51 days past due
(2018: 51 days past due).
Ageing of Past Due but not Impaired Receivables
0–30 days
30–60 days
60+ days
Total
Movement in the Allowance for Credit Losses
Balance at the beginning of the year
Impairment losses recognised
Amounts written off as uncollectible
Balance at the end of the year
Group
2019
£’000
14
4
37
55
Group
2019
£’000
165
39
(13)
191
Group
2018
£’000
15
4
38
57
Group
2018
£’000
161
40
(36)
165
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.
83
Strategic ReportOverviewGovernanceFinancial Statements 15 Trade and Other Receivables continued
Ageing of impaired trade receivables
0–30 days
30–60 days
60+ days
Total
16 Trade and Other Payables
Trade payables
Taxation and social security costs
Other payables
Accruals and deferred income
Group
2019
£’000
–
–
191
191
Group
2019
£’000
640
388
1,115
2,610
4,753
Group
2018
£’000
–
–
165
165
Group
2018
£’000
1,102
313
1,340
2,404
5,159
The Directors consider that the carrying amount of trade and other payables approximates fair value.
17 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 18, 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 relatively conservative
gearing ratio (the proportion of net debt to equity) balancing the overall level with the opportunities for the growth of
the business. 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:
Gross borrowings
Cash and cash equivalents
Net debt
Total equity
Net debt to equity ratio
Group
2019
£’000
(42,972)
13,662
(29,310)
117,158
25.1%
Group
2018
£’000
(37,335)
4,990
(32,345)
103,251
31.3 %
The decrease in the Group’s gearing ratio arises principally through the combined effect of an increase in the value of
its trading properties, and the cash generated from operations during the year and the sale of the Group’s document
storage business. These effects on gearing were offset by the purchase of our Leicester and Wolverhampton and
Stevenage sites and completion of construction works at our development sites in Gillingham and Wellingborough,
ongoing construction works at our Leicester store and completing works at our Cardiff and Ipswich stores which are
now open and trading. Costs relating to the planning and pre-development works on our Bournemouth, Bedford,
and Cheshunt sites also featured. The freehold of our existing Maidenhead store, previously held on a long lease,
was also acquired for £1.5 million.
Exposure to credit and interest rate risk arises in the normal course of the Group’s business.
84
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 A Derivative Financial Instruments and Hedge Accounting
The Group’s activities expose it primarily to the financial risks of interest rates. The Group previously has hedged
through the deployment of interest rate swaps although the Group had no such instruments in place at 31 July 2018
or 31 July 2019. The Board continues to keep its hedging policy under periodic review.
B Debt Management
Debt is defined as non-current and current borrowings, as detailed in Note 18. Equity includes all capital and
reserves of the Group. The Group is not subject to externally imposed capital requirements.
The Group borrows through a joint revolving credit facility with Royal Bank of Scotland plc and Lloyds Banking Group
secured on its store portfolio and other Group assets, excluding intangibles, with a net book value of £187.0 million
(2018: £162.6 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 £75 million (2018: £50 million). This facility provides an accordion £25 million which can take the facility to
£100 million and runs to 2024 with an option of two one year extensions. Undrawn committed facilities at the year-
end amounted to £32.0 million (2018: £12.7 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 18. 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.
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 2019 are as follows:
Variable rate treasury deposits 1
SIP trustee deposits
Cash in operating current accounts
Other cash and cash equivalents
Total cash and cash equivalents
Group
2019
£’000
12,232
63
1,357
10
13,662
Group
2018
£’000
4,337
40
582
31
4,990
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 2019 was 0.1%. (2018: 0.1%).
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.
D Interest Rate Sensitivity Analysis
Over the longer term, significant changes in interest rates may have an impact on consolidated earnings.
At 31 July 2019, it is estimated that an increase of one percentage point in interest rates would have reduced the
Group’s annual profit before tax by £429,717 (2018: £373,345) and conversely a decrease of one percentage point
in interest rates would have increased the Group’s annual profit before tax by £429,717 (2018: £373,345). 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 2.11% applying to the variable rate borrowings of
£43.0 million in the year (2018: £37.3 million / 1.85%).
85
Strategic ReportOverviewGovernanceFinancial Statements 17 Financial Instruments continued
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 overleaf 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 15. There
has not been a significant change in credit quality. The Group has a robust credit model with customers paying
four weekly in advance for their storage. The Group has no significant concentration of credit risk, with exposure
spread across over 11,800 customers and with no individual self-storage customer accounting for more than 1%
of total revenue and no Group entities under common control (e.g. Government) accounting for more than 10% of
total revenues. The Group holds a right of lien over its self-storage customers’ goods if customer debts are not paid
although this is used relatively infrequently within the context of overall customer numbers and only ever as a final
stage in the debt recovery process.
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 2019 was £3.38 million (2018: £3.06 million) on receivables
and £13.67 million (2018: £4.99 million) on cash and cash equivalents.
H Maturity Analysis of Financial Liabilities
The undiscounted contractual cash flow maturities are as follows:
2019 – Group
Over five years
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
2018 – Group
Over five years
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
86
Trade and
Other Payables
£’000
–
–
–
–
2,199
2,199
Trade and
Other Payables
£’000
–
–
–
–
2,728
2,728
Borrowings
Interest on
Borrowings
£’000
–
42,972
–
42,972
–
42,972
£’000
–
2,474
906
3,380
906
4,286
Borrowings
Interest on
Borrowings
£’000
–
37,335
–
37,335
–
37,335
£’000
–
1,307
532
1,839
532
2,371
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 I Fair Values of Financial Instruments
Categories of financial assets and financial liabilities
Financial assets – loans and receivables at amortised cost
Trade and other receivables1
Cash and cash equivalents
Financial liabilities – other financial liabilities at amortised cost
Trade and other payables
Bank loans
Group
2019
£’000
3,992
13,662
(2,199)
(42,331)
Group
2018
£’000
4,616
4,990
(2,728)
(37,170)
1
Includes £361,460 relating to fees receivable in 2022 from the Aldershot managed store currently classified as a non-current asset (measured at fair value).
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 £14.6 million (2018:
£13.9 million) which are classified as loans and receivables, and the investment in its subsidiary undertaking
of £2.46 million (2018: £2.42 million). 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.
18 Borrowings
Non-current
Bank loans repayable in more than five years (Gross)
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
2019
£’000
–
42,972
(641)
42,331
42,331
Group
2018
£’000
–
37,335
(165)
37,170
37,170
In April 2019, the Group agreed a new joint banking facility with Lloyds Bank and Royal Bank of Scotland plc. The
new £75 million five year revolving credit facility replaces the existing £50 million facility and will provide funding for
site acquisitions and working capital. The facility provides an accordion £25 million which can take the facility to
£100 million and runs to April 2024 with an option of two one year extensions.
The facility is closely aligned to the terms of the Group’s previous facility. The interest rate is set at the London
Inter-Bank Offer Rate (LIBOR) plus a 1.50%–1.75% margin based on a loan to value covenant test. The Group is
not obliged to make any repayments prior to its expiration in January 2023.
The Group currently has £43.0 million drawn against its existing £75 million revolving credit facility which is secured
with RBS and Lloyds jointly by legal charges and debentures over the freehold and leasehold properties and other
tangible assets of the business with a net book value of £152.6 million (2018: £152.6 million) together with cross-
company guarantees from Group companies.
87
Strategic ReportOverviewGovernanceFinancial Statements 19 Deferred Tax
Deferred tax liability
Liability at start of year
Charge to income for the year – Continued Operations
Charge to income for the year – Discontinued Operations
Total charge to income for the year – Discontinued Operations
Tax charged directly to other comprehensive income
Tax credited – disposal of subsidiary
Initial recognition on acquisition of subsidiary
Credit to share based payment reserve
Liability at end of year
Group
2019
£’000
19,735
400
32
432
2,327
(134)
24
1
Group
2018
£’000
16,363
622
22
644
2,698
–
–
30
22,385
19,735
The following are the major deferred tax liabilities and assets recognised by the Group and the movements during
the year:
At 1 August 2017
Charge/(credit) to income for the year
Charge to other comprehensive income
Charge to share based payment reserve
At 31 July 2018
Charge/(credit) to income for the year
Charge to other comprehensive income
Reclassification following store disposal
Charge to share based payment reserve
Accelerated
Capital
Allowances
£’000
2,196
683
–
–
2,879
336
–
–
–
Other
Temporary
Differences
£’000
Revaluation
of
Properties
£’000
Rolled
Over gain
on
Disposal
£’000
Share
Options
£’000
Total
£’000
411
(28)
–
–
383
(14)
–
–
–
11,881
2,146
(271)
16,363
–
2,687
–
(11)
11
–
–
–
30
644
2,698
30
14,568
2,146
(241)
19,735
–
2,327
(558)
–
–
–
558
–
–
–
–
1
322
2,327
–
1
At 31 July 2019
3,215
369
16,337
2,704
(240)
22,385
20 Share Capital
Authorised:
35,000,000 ordinary shares of 1 pence each (2018: 35,000,000)
Allotted, issued and fully paid ordinary shares
Balance at start of year
Options exercised during the year 85,171 (2018: 195,692)
Balance at end of year
Number of shares at start of the year
Options exercised during the year
Number of shares at end of the year
2019
£’000
350
£’000
295
1
296
2018|
£’000
350
£’000
293
2
295
Called up, Allotted
and Fully Paid
Number
Called up, Allotted
and Fully Paid
Number
29,498,615
85,171
29,583,786
29,302,923
195,692
29,498,615
The Company has one class of ordinary shares which carry no right to fixed income.
88
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 21 Equity Settled Share-based Payment Plans
The Group operates three equity-settled share-based payment plans; one approved and two unapproved share
option schemes.
The Company has the following share options:
2019 Summary
Unapproved Share Options (refer to Note 23(a))
Unapproved Share Options (LTPPP Scheme) –
refer to Note 23(b))
Approved CSOP Share Options (refer to Note 24)
Total
2018 Summary
As at
31 July 2018
No. of
Options
817,551
140,000
92,199
1,049,750
As at
31 July 2017
No. of
Options
Granted
Exercised
Surrendered
Lapsed/
As at
31 July 2019
No. of
Options
3,300
400,000
15,673
418,973
(70,000)
–
(9,952)
(79,952)
–
–
750,851
540,000
(2,981)
(2,981)
94,939
1,385,790
Granted
Exercised
Surrendered
Lapsed/
–
140,000
–
–
As at
31 July 2018
No. of
Options
817,551
140,000
Unapproved Share Options (refer to Note 23(a))
964,108
4,343
(145,095)
(5,805)
Unapproved Share Options (LTPPP Scheme) –
refer to Note 23(b)
Approved CSOP Share Options (refer to Note 24)
Total
135,378
1,099,486
21,493
165,836
(55,814)
(200,909)
(8,858)
(14,663)
92,199
1,049,750
The following table shows options held by Directors under all schemes.
Total at
31 July 2018
Options
Granted
Options
Exercised/
Lapsed
Unapproved
Scheme
Approved
CSOP Share
Options
Total at
31 July 2019
2019
Executive Directors
A Jacobs – Unapproved
A Jacobs – LTPPP
A Jacobs – total
RA Davies – Unapproved
RA Davies – CSOP
RA Davies – LTPPP
RA Davies total
N Newman-Shepherd – Unapproved
N Newman-Shepherd – CSOP
N Newman-Shepherd – LTPPP
N Newman-Shepherd total
Non-Executive Directors
SG Thomas – Unapproved
All Directors total
206,087
–
206,087
246,977
7,742
–
254,719
172,421
10,661
–
183,082
–
80,000
80,000
–
–
80,000
80,000
–
–
120,000
120,000
–
–
–
–
–
–
–
–
–
–
–
206,087
80,000
286,087
246,977
–
80,000
326,977
172,421
–
–
–
–
7,742
–
7,742
–
–
10,661
120,000
292,421
–
10,661
–
18,403
206,087
80,000
286,087
246,977
7,742
80,000
334,719
172,421
10,661
120,000
303,082
5,217
929,105
25,217
–
669,105
280,000
(20,000)
(20,000)
5,217
910,702
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, three or
five years, subject to the performance criteria attached to the options.
Under the CSOP Approved Share Option scheme (Note 24) and the Unapproved Share Options scheme (Note 23(a)),
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 or in the case of unapproved options
at the discretion of the Board. The life of each option granted is six and a half to seven years. There are no cash
settlement alternatives.
89
Strategic ReportOverviewGovernanceFinancial Statements
21 Equity Settled Share-based Payment Plans continued
The rules governing the LTPPP scheme are disclosed in Note 23(b).
Under the CSOP Approved Share Option scheme (Note 24) and the Unapproved Share Options scheme (Note 23(a)),
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 and
a half 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
and a half years).
Under the Long Term Partnership Performance Plan (Note 23(b)), 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 12.4 years, which is halfway between vesting and lapse.
The vesting date is based upon the assumption that the CAD and/or NAV targets are met at the same time as the
share price target is met, and the lapse date is the fifteenth anniversary of the grant. The risk free rate of return is the
UK gilt rate at date of grant commensurate with the expected term (i.e. 12.4 years).
The total charge for the year relating to employer share-based payment schemes was £46,221 (2018: £33,339), all of
which relates to equity-settled share-based payment transactions.
22 Enterprise Management Initiative Scheme
The Company operated a share option scheme under the Enterprise Management Initiative (EMI).
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.
23(a) 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
2019
Pence
174.59
527.00
–
146.46
178.76
164.43
Options
2019
Number
817,551
3,300
–
(70,000)
750,851
704,982
Weighted
Average
Exercise Price
2018
pence
167.57
402.50
387.50
126.23
174.59
150.79
Options
2018
Number
964,108
4,343
(5,805)
(145,095)
817,551
718,453
The options outstanding at 31 July 2019 had a weighted average remaining contractual life of 6.6 years (2018: 6.6
years). The exercise prices for shares exercisable at 31 July 2019 ranged from 56.50 pence per share to 3.25 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
2018 Granted
Exercised/
Lapsed
As at
31 July
2019
Exercise Price
Pence
Date from Which
Exercisable
Expiry Date
A Jacobs
SG Thomas
RA Davies
206,087
25,217
246,977
N Newman-Shepherd
172,421
Total
650,702
–
–
–
–
–
–
206,087
1.085 – 2.855
31/7/15 – 6/8/18
31/7/22 – 6/8/25
(20,000)
5,217
2.070 – 2.855
31/7/17 – 6/8/18
31/1/24 – 6/8/25
–
–
246,977
172,421
0.850 – 2.135
31/7/10 – 31/7/17
31/7/17 – 31/7/27
1.070 – 3.875
31/7/11 – 31/7/20
31/7/18 – 31/7/27
(20,000)
630,702
90
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 23(b) Unapproved Share Options – Long Term Partnership Performance Plan (LTPPP)
On 2 July 2018 the Group adopted the Company Long Term Partnership Performance Plan (LTPPP).
The Plan is a discretionary benefit offered by the Company for the benefit of selected key employees. Its main
purpose is to increase the interest of the employees in the Group’s long term business goals and performance
through share ownership.
Shares purchased or received under the Plan, any cash received under the Plan and any gains obtained under the
Plan are not part of salary for any purpose except to any extent required by statute. The Remuneration Committee of
the Board of the Company shall have the right to decide, in its sole discretion, whether or not awards will be granted
and to which employees those awards will be granted.
A summary of the structure and rules of the Plan are set out below:
Structure
• Options are granted on Lok’nStore Group plc shares.
• The exercise price is at £6 is well above the current price to allow the issuance of more options increasing
member returns if ambitious targets are hit.
• Options are to be issued to participants in five annual tranches from July 2018 to July 2022.
• Participants will have 10 years to exercise from vesting dates.
• Performance criteria are geared to achievement of ambitious long term plan.
• Performance targets of share price, NAV and CAD thresholds for each award. NAV and CAD thresholds to be
determined each year by the Remuneration Committee.
• Alternative exercise methods can be considered by the Group:
– Participants may exercise and hold – paying tax arising;
– Participants may exercise and sell – paying tax arising;
– Group delivers net profit to participants in cash or shares.
Main Rules and Conditions
• Conditional on participants remaining in employment with the Group.
• Replaces LTPRP for participating members.
• Existing cash bonus schemes remain in place.
• All options vest if there is a change of control.
•
Includes Good / Bad Leaver clauses.
• The Scheme is entirely at the discretion of the Remuneration Committee who act on behalf of the Board.
Movements in the year are shown below:
Outstanding at 1 August 2018
Granted during the year
Outstanding at 31 July 2019
Exercisable at 31 July 2019
Options
Number
140,000
400,000
540,000
–
Weighted Average
Exercise Price
Pence
600.00
600.00
600.00
–
91
Strategic ReportOverviewGovernanceFinancial Statements 23(b) Unapproved Share Options – Long Term Partnership Performance Plan (LTPPP) continued
The following unapproved share options have been granted to Directors of the Company during the year.
As at
As at
Exercise
Price
A Jacobs
A Jacobs
A Jacobs – Total
RA Davies
RA Davies
RA Davies – Total
N Newman-Shepherd
N Newman-Shepherd
N Newman-Shepherd –
Total
Total
31 July 2018
Granted
31 July 2019
–
–
–
–
–
–
–
–
–
–
40,000
40,000
80,000
40,000
40,000
80,000
60,000
60,000
40,000
40,000
80,000
40,000
40,000
80,000
60,000
60,000
120,000
120,000
280,000
280,000
Pence
600.00
600.00
600.00
600.00
600.00
600.00
Date from
Which
Exercisable
Expiry Date
31/07/2023
31/07/2033
31/07/2024
31/07/2034
31/07/2023
31/07/2033
31/07/2024
31/07/2034
31/07/2023
31/07/2033
31/07/2024
31/07/2034
24 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 2019
Pence
311.59
527.00
402.50
269.79
261.68
241.78
Options 2018
Number
135,378
21,493
(8,858)
(55,814)
92,199
39,537
Weighted
Average
Exercise
Price 2018
Pence
250.22
402.50
338.65
193.46
311.59
222.27
Options 2019
Number
92,199
15,673
(2,981)
(9,952)
94,939
42,204
The options outstanding at 31 July 2019 had a weighted average remaining contractual life of 10.5 years (2018: 9.9
years). The exercise prices for shares exercisable at 31 July 2019 ranged from 107.0 pence per share to 325.0 pence
per share.
The inputs into the Black-Scholes model used to value the options granted during the year are as follows:
Expected
Life
Years
6.50
Share Price
at Date of
Grant
Pence
402.50
Exercise
Price
Pence
402.50
Expected
Volatility
Expected
Dividend
Yield %
Risk Free
Interest Rate
%
Fair Value
Charge per
Award
Pence
24.59
2.57
1.15
72.0
Date of grant
31 July 2018
92
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 The following CSOP approved share options have been granted to Directors of the Company.
As at 31
July 2018 Granted
Exercised/
Lapsed
As at 31
July 2019
Exercise Price
Pence
Date from
Which
Exercisable
Expiry Date
RA Davies
7,742
N Newman-Shepherd
10,661
18,403
–
–
–
–
–
–
7,742
3.875
31/7/20
31/7/27
10,661
1.070 – 3.875 31/7/14 – 31/7/20 31/7/21 –31/7/27
18,403
25(a) Other Reserves
Group
1 August 2018
Share based remuneration (options)
IFRS 2 – transfer (to)/from retained earnings
Tax charge relating to share options
Merger
Reserve
£’000
Other
Reserve
£’000
6,295
1,294
–
–
–
–
–
–
31 July 2018
6,295
1,294
Share based remuneration (options)
IFRS 2 – transfer (to)/from retained earnings
Tax charge relating to share options
–
–
–
–
–
–
31 July 2019
6,295
1,294
Capital
Redemption
Reserve
£’000
Share-based
Payment
Reserve
£’000
34
–
–
–
34
–
–
–
34
740
33
(109)
(30)
740
46
(51)
(1)
734
Total
£’000
8,363
33
(109)
(30)
8,363
46
(51)
(1)
8,357
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 IFRS 2 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 £51,295
(2018: £109,218).
25(b) Other Reserves
Company
1 August 2017
Share based remuneration (options)
IFRS 2 – transfer to retained earnings
31 July 2018
Share based remuneration (options)
IFRS 2 – transfer to/from retained earnings
31 July 2019
Other Reserve
£’000
1,114
–
–
1,114
–
–
1,114
Share-based
payment Reserve
£’000
805
33
(109)
729
46
(51)
724
Total
£’000
1,919
33
(109)
1,843
46
(51)
1,838
93
Strategic ReportOverviewGovernanceFinancial Statements 26(a) Retained Earnings
Group
1 August 2017
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 25(a))
Dividend paid
31 July 2018
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 25(a))
Dividend paid
Asset disposals
31 July 2019
Retained
Earnings Before
Deduction of
Own Shares
£’000
18,664
3,757
291
109
(2,977)
19,844
5,562
304
51
(3,279)
4,927
27,409
Own Shares
(Note 27)
£’000
(500)
–
–
–
–
(500)
–
–
–
–
–
(500)
Retained
Earnings
Total
£’000
18,164
3,757
291
109
(2,977)
19,344
5,562
304
51
(3,279)
4,927
26,909
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.
26(b) Retained Earnings
1 August 2017
Profit attributable to owners of Company for the financial year
Transfer from share based payment reserve (Note 25(a))
Disposal of treasury shares – restated
Dividend paid
31 July 2018
Profit attributable to owners of Company for the financial year
Transfer from share based payment reserve (Note 25(a))
Dividend paid
31 July 2019
Retained
Earnings Before
Deduction of
Own Shares
£’000
3,166
3,572
109
(2,977)
3,870
3,774
51
(3,279)
4,416
Own Shares
(Note 27)
£’000
–
–
–
–
–
–
–
–
–
Retained
Earnings
Total
£’000
3,166
3,572
109
(2,977)
3,870
3,774
51
(3,279)
4,416
94
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 27 Own Shares
31 July 2018 and 31 July 2019
623,212
499,910
–
EBT
Shares
Number
EBT
Shares
£
Treasury
Shares
Number
Treasury
Shares
Own Shares
Total
£
–
£
499,910
Employee Benefit Trust (EBT): 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 2019, the Trust held 623,212 (2018: 623,212) ordinary shares of 1 pence each with a market value of
£3,284,327 (2018: £2,508,428). No shares were transferred out of the scheme during the year (2018: nil).
No options have been granted under the EBT. The EBT waived its dividends in full. No other dividends were waived
during the year.
28 Cash Flows
(a) Reconciliation of Profit Before Tax to Cash Generated from Operations
Profit before tax – Continuing Operations
Profit before tax – Discontinued Operations
Total profit before tax
Depreciation
Amortisation of intangible assets
Equity settled share based payments
Warranty claims
Carried interest – fees receivable
Profit on sale of land at store
Profit on disposal of Saracen business
Costs of sale & manage-back Crayford store
Deferred financing on bank loan written off
Finance income
Finance cost
Increase in inventories
Decrease / (Increase) in receivables
(Decrease) / Increase in payables
Cash generated from operations
Group
2019
£’000
4,590
2,175
6,765
2,256
83
46
–
–
(295)
(1,965)
54
133
(31)
605
(41)
768
(311)
Group
2018
£’000
4,763
562
5,325
1,980
165
33
(230)
(361)
–
–
–
–
(80)
463
(54)
(571)
312
8,067
6,982
95
Strategic ReportOverviewGovernanceFinancial Statements 28 Cash Flows continued
(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 18 less cash and cash equivalents.
Increase / (decrease) 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
Group
2019
£’000
9,181
(6,146)
3,035
(32,345)
(29,310)
Group
2018
£’000
(6,396)
(8,519)
(14,915)
(17,430)
(32,345)
29 Commitments Under Operating Leases
At 31 July 2019 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
2019
£’000
Group
2018
£’000
1,517
5,358
8,165
15,040
1,467
5,868
7,036
14,371
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.
30 Related Party Transactions
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, and the other 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 – Directors
Short term employee benefits – Other key management
Post-employment benefits – Directors
Post-employment benefits – Other key management
Share-based payments
Total
Group
2019
£’000
Group
2018
£’000
892
311
7
7
46
802
358
33
6
33
1,263
1,232
As part of a review of its management personnel the Group recognised a number of management personnel that
it felt were important to retain within the business in order for it to achieve its strategic plan. Accordingly these were
recognised as key personnel and are participants in the new Long Term Performance Plan (see Note 23(b)). They are
included in the table above. For consistency the 2018 figures include their comparative figures.
96
Notes to the Financial Statements continuedFor the year ended 31 July 2019Lok’nStore Group plc Annual Report and Accounts 2019 Group Director shareholdings – Dividends Received
In respect of the total dividends paid during the year of £3,279,691, the Group Directors received the amounts set
out in the table below:
Director’s Dividend Income
Executive:
A Jacobs
RA Davies
N Newman-Shepherd
Non-Executive:
SG Thomas
RJ Holmes
ETD Luker
CP Peal
Final 2018
7.67 Pence
per Share
£
Interim 2019
3.67 Pence
per Share
£
Holding
No.
Total 2019
Total 2018
£
£
5,204,600
399,193
191,009
590,202
536,144
64,037
14,312
4,827
1,098
1,530,000
136,526
273,674
28,800
539,653
20,991
2,209
39,109
2,339
472
56,151
10,044
1,057
19,805
7,166
1,570
6,389
538
192,677
184,740
31,035
3,266
58,914
28,188
1,421
52,897
7,655,076
603,953
280,877
884,830
810,317
Although the Director holdings in Managed Stores falls outside of the definition of related party transactions they are
disclosed here for transparency and are set out in the table below:
Director
Andrew Jacobs
Charles Peal
Simon Thomas
Total shareholding
Issued Share Capital
% of Issued Share Capital
Chichester
Broadstairs
Exeter
No. of Shares
No. of Shares
No. of Shares
36,800
38,160
–
–
36,800
189,341
19.4%
–
–
38,160
240,000
500,000
160,000
900,000
189,690
3,970,000
20.1%
22.7%
31 Capital Commitments and Guarantees
The Group has capital expenditure contracted but not provided for in the financial statements of £5.56 million
(2018: £3.38 million) relating to commitments to complete the purchase of two sites in Warrington and Stevenage
respectively and on which contracts have been exchanged, building contracts on its Leicester development site as
well as building retentions outstanding on the completed Gillingham, Wellingborough and Ipswich stores.
32 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 £43.0 million (2018: £37.3 million).
33 Events After the Reporting Date
On 18 October 2019, the Group completed the purchase of the Stevenage site.
97
Strategic ReportOverviewGovernanceFinancial Statements
Glossary
Abbreviation
APM
Alternative performance measures
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
Adjusted Store
EBITDA
Adjusted EBITDA (see above) but before central and head office costs
AGM
APD
Bps
CAC
CAD
Capex
CGU
CO2 e
CSOP
EBT
(eKPIs)
EMI
ESOP
EU
GHG
HMRC
IAS
IFRIC
IFRS
ISA
JLL
LIBOR
LFL
LTPPP
LTV
MWh
NAV
NBV
Annual General Meeting
Auditing Practices
Basis Points
Contributory asset charges
Cash available for Distribution
Capital Expenditure
Cash generating units
Carbon Dioxide Equivalents
Company Share Option Plan
Employee Benefit Trust
Environmental key performance indicators
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
International Standards on Auditing
Jones Lang LaSalle
London Interbank Offered Rate
Like for like
Long Term Partnership Performance Plan
Loan to Value Ratio
Megawatt Hour
Net Asset Value
Net Book Value
Operating Profit
Earnings before interest and tax (EBIT)
Photovoltaic
Quoted Companies Alliance
Royal Institution of Chartered Surveyors
Share Incentive Plan
Small and medium sized enterprises
Square Feet
Tonnes of carbon dioxide equivalent
Total voting rights
Value Added Tax
PV
QCA
RICS
SIP
SME
Sq. ft.
tCO2e
TVR
VAT
98
Lok’nStore Group plc Annual Report and Accounts 2019 Our Stores
Head Office
Lok’nStore plc
112 Hawley Lane
Farnborough
Hampshire
GU14 8JE
Tel 01252 521010
www.loknstore.co.uk
www.loknstore.com
Central Enquiries
0800 587 3322
info@loknstore.co.uk
www.loknstore.co.uk
Owned Stores – Trading
Basingstoke, Hampshire
Crockford Lane
Chineham
Basingstoke
Hampshire
RG24 8NA
Tel 01256 474700
basingstoke@loknstore.co.uk
Bristol, Gloucestershire
Longwell Green Trade Park
Aldermoor Way
Bristol
Gloucestershire
BS30 7ET
Tel 0117 967 7055
bristol@loknstore.co.uk
Cardiff, Wales
234 Penarth Road
Cardiff
Wales
CF11 8LR
Tel 0292 0221901
cardiff@loknstore.co.uk
Eastbourne, East Sussex
Unit 4 Hawthorn Road
Eastbourne
East Sussex
BN23 6QA
Tel 01323 749222
eastbourne@loknstore.co.uk
Fareham, Hampshire
26 + 27 Standard Way
Fareham Industrial Park
Fareham
Hampshire
PO16 8XJ
Tel 01329 283300
fareham@loknstore.co.uk
Farnborough, Hampshire
112 Hawley Lane
Farnborough
Hampshire
GU14 8JE
Tel 01252 511112
farnborough@loknstore.co.uk
Gillingham, Kent
Courtney Road
Gillingham
Kent
ME8 0RT
Tel 01634 366044
gillingham@loknstore.co.uk
Harlow, Essex
Edinburgh Way
Temple Fields
Harlow
Essex
CM20 2GF
Tel 01279 882366
harlow@loknstore.co.uk
Hedge End, Southampton
Units 2 & 3
Waterloo Industrial Estate
Flanders Road
Hedge End
Southampton
SO30 2QT
Tel 01489 787005
hedgeend@loknstore.co.uk
Horsham, West Sussex
Blatchford Road
Redkiln Estate
Horsham
West Sussex
RH13 5QR
Tel 01403 272001
horsham@loknstore.co.uk
Ipswich, Suffolk
Crane Boulevard
Ipswich
Suffolk
IP3 9SQ
Tel 01473 794940
ipswich@loknstore.co.uk
Luton, Bedfordshire
27 Brunswick Street
Luton
Bedfordshire
LU2 0HG
Tel 01582 721177
luton@loknstore.co.uk
Maidenhead, Berkshire
Stafferton Way
Maidenhead
Berkshire
SL6 1AY
Tel 01628 878870
maidenhead@loknstore.co.uk
Milton Keynes, Buckinghamshire
Etheridge Avenue
Brinklow
Milton Keynes
Buckinghamshire
MK10 0BB
Tel 01908 281900
miltonkeynes@loknstore.co.uk
Northampton Central,
Northamptonshire
16 Quorn Way
Grafton Street Industrial Estate
Northampton
Northamptonshire
NN1 2PN
Tel 01604 629928
nncentral@loknstore.co.uk
Northampton Riverside,
Northamptonshire
Units 1–4, Carousel Way
Northampton
Northamptonshire
NN3 9HG
Tel 01604 785522
northampton@loknstore.co.uk
99
Strategic ReportOverviewGovernanceFinancial Statements Our Stores continued
Poole, Dorset
50 Willis Way
Fleetsbridge
Poole
Dorset
BH15 3SY
Wellingborough,
Northamptonshire
19/21 Whitworth Way
Wellingborough
Northamptonshire
NN8 2EF
Tel 01202 666160
poole@loknstore.co.uk
Tel 01634 366044
wellingborough@loknstore.co.uk
Portsmouth, Hampshire
Rudmore Square
Portsmouth
Hampshire
PO2 8RT
Tel 02392 876783
portsmouth@loknstore.co.uk
Reading, Berkshire
251 A33 Relief Road
Reading
Berkshire
RG2 0RR
Tel 01189 588999
reading@loknstore.co.uk
Southampton, Hampshire
Third Avenue
Southampton
Hampshire
SO15 0JX
Tel 02380 783388
southampton@loknstore.co.uk
Sunbury, Middlesex
Unit C, The Sunbury Centre
Hanworth Road
Sunbury on Thames
Middlesex
TW16 5DA
Tel 01932 761100
sunbury@loknstore.co.uk
Tonbridge, Kent
Unit 6 Deacon Trading Estate
Vale Road
Tonbridge
Kent
TN9 1SW
Tel 01732 771007
tonbridge@loknstore.co.uk
Owned Stores –
Development Locations
Bedford, Bedfordshire
69 Cardington Road
Bedford
Bedfordshire
NK42 0BQ
Bournemouth, Dorset
Land at Wessex Field
Deansleigh Road
Bournemouth
Dorset
BH7 7DU
Cheshunt, Hertfordshire
Land lying on the South Side
of Halfhide Lane
Turnford
Hertfordshire
Leicester, Leicestershire
Part of land forming part of
Freemens Common Road
Leicester
Leicestershire
LE2 7SL
Stevenage, Hertfordshire
Part of Land at Plot 2000
Stevenage Business Park
Gunnels Wood Road
Stevenage
Hertfordshire
SG1 2BL
Wolverhampton, Staffordshire
Land at Pantheon Park
Wednesfield Way
Wolverhampton
Staffordshire
WV11 3DR
Managed Stores – Trading
Aldershot, Hampshire
251 Ash Road
Aldershot
Hampshire
GU12 4DD
Tel 0845 4856415
aldershot@loknstore.co.uk
Ashford, Kent
Wotton Road
Ashford
Kent
TN23 6LL
Tel 01233 645500
ashford@loknstore.co.uk
Broadstairs, Kent
Unit 2 Pyramid Business Park,
Poorhole Lane,
Broadstairs,
Kent
CT10 2PT
Tel 01843 863253
broadstairs@loknstore.co.uk
Chichester, West Sussex
17 Terminus Road
Chichester
West Sussex
PO19 8TX
Tel 01243 771840
chichester@loknstore.co.uk
Crawley, West Sussex
Sussex Manor Business Park
Gatwick Road
Crawley
West Sussex
RH10 9NH
Tel 01293 738530
crawley@loknstore.co.uk
Crayford, Kent
Block B
Optima Park
Crayford
Kent
DA1 4QX
Tel 01322 525292
crayford@loknstore.co.uk
100
Lok’nStore Group plc Annual Report and Accounts 2019 Managed Stores –
Under Development
Gloucester, Gloucestershire
Land at Triangle Park
Metz Way
Gloucester
Gloucestershire
GL4
Warrington, Cheshire
Land at Winwick Road
Warrington
Cheshire
WA2 7PF
Dover, Kent
Honeywood Parkway
Whitfield
Dover
CT16 3FJ
Tel 01304 827353
dover@loknstore.co.uk
Exeter, Devon
1 Matford Park Road
Exeter
Devon
EX2 8ED
Tel 01392 823989
exeter@loknstore.co.uk
Hemel Hempstead, Hertfordshire
47 Maylands Avenue
Hemel Hempstead
Hertfordshire
HP2 7DE
Tel 01442 240768
hemelhempstead@loknstore.co.uk
Swindon, Wiltshire
Kembrey Street
Elgin Industrial Estate
Swindon
Wiltshire
SN2 8UY
Tel 01793 421234
swindoneast@loknstore.co.uk
Woking, Surrey
Marlborough Road
Woking
Surrey
GU21 5JG
Tel 01483 378323
woking@loknstore.co.uk
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101
Head Office
Lok’nStore Group plc
112 Hawley Lane
Farnborough
Hampshire
GU14 8JE
T. 01252 521010
www.loknstore.co.uk
www.loknstore.com