LOK'NSTORE GROUP PLC
(“Lok’nStore” or “the Group”)
for the six months to 31 January 2007
Lok’nStore Group Plc, a leading company in the fast-growing self-storage market with over 1 million sq. ft of lettable space, announces record interim results for the six months ended 31 January 2007.
· Turnover up 23.8% to £5.30 million (£4.28 million: six months to 31.1.06)
· Store EBITDA up 43.7% to £2.18 million (£1.52 million: six months to 31.01.06)
· Store EBITDA margin up to 41.3% from 35.6% (six months to 31.01.06)
· Group EBITDA * up 73.8% to £1.44 million (£0.83 million: six months to 31.01.06)
· Operating profit * up 108.5% to £899,357 (£431,367: six months to 31.01.06)
· Profit before tax * up 504% to £447,061 (Profit £73,916: six months to 31.01.06)
· New banking facility of £40 million
· Commencement of dividend at full year
* including a profit and loss charge for the application of FRS 20 ( share-based payments)
Andrew Jacobs, Chief Executive, commented:
“These record results show that Lok’nStore is taking full advantage of this exciting market. We are particularly encouraged by the progress of our new units at Farnborough and Crayford which have created a compelling model for future growth, and since the period end we have broken through the 1 million square feet mark with the acquisition of the new Harlow store.
We are investing in new larger purpose built stores and enlarging the average size of our existing units to improve margins. To underline our confidence in the business the Board expects to pay a maiden dividend in respect of the full year.”
I am delighted to report on this record first half for the Group, during which turnover, cash flow and profits all increased significantly.
A 23.8% increase in turnover resulted in geared profit growth at all levels. Our key performance measure for each store is earnings before interest, tax, depreciation and amortisation (Store EBITDA) which rose by 43.7%. This resulted in a five-fold increase in Group profit before tax.
We are encouraged by the operating success at our new stores in Farnborough and Crayford and we plan to accelerate our growth rate of larger new build stores. To help fund growth a new £40 million bank facility has been put in place which will provide all the external funding currently required. This facility replaces the previous £20 million facility. Interest payable on the loan is on similar terms as previously at between 1.25% and 1.35% over LIBOR.
Your Board is committed to finding high quality self-storage sites similar to the new stores at Farnborough and Crayford, while at the same time enhancing the value of the existing portfolio. In regard to the latter we announced after the period end the sale of our Kingston store for £10 million in cash, a price at the upper end of our expectations. This price is significantly in excess of what could be achieved for self-storage use and the proceeds will be reinvested in a number of new stores.
The sale of the Kingston store is in line with our core strategy of actively managing our existing portfolio in order to maximise the growth of asset values for our shareholders. This includes increasing the size of our stores, and where possible buying in the freeholds of our leasehold stores and occasionally selling stores if appropriate. This is in addition to our continuing efforts to drive storage revenues up by strengthening our branding, filling space and increasing our pricing.
Our priorities continue to be:
improving the operating performance of existing stores
maximising the value of existing stores
increasing the number of stores
IMPROVING THE OPERATING PERFORMACE OF EXISTING STORES
Turnover for the six months to 31 January 2007 increased by 23.8% to £5.3 million with stores in all age brackets contributing to this growth (£4.28 million: six months to 31.01.2006). Stores over 250 weeks grew by 13% demonstrating continued robust performance from the established portfolio. The recent efforts to strengthen the brand are bearing fruit and this will continue with projects such as the development at our Fareham store in the current period.
The Group achieved an operating profit of £899,357 up 108.5% compared to £431,367 for the corresponding 2006 period.
Average prices for self-storage increased to £16.70 at January 31 2007 from £16.40 per sq ft in July 2006.
The Group made a pre-tax profit for the period of £447,061 up 504% from the £73,916 profit for the corresponding period in 2006. Basic earnings per share was 1.92p per share (0.30p per share: six months to 31.01.2006).
The cash flow of the operating business has continued to grow. Store EBITDA was up 43.7% to £2.181 million for the period (£1.517 million: six months to 31.01.2006), with overall store margins expanding from 35.6% to 41.3%.
Packing materials, insurance and other sales kept pace with the increase in storage income at 7.8% of turnover, (7.4%: 31.01.2006) an increase of 32.8% over the corresponding 2006 period.
The total area let increased by 15.9% to 604,712 sq. ft (521,739 sq. ft: 31.01.2006) and the amount of fitted space occupied increased by 18.4% to 527,504 (445,228 sq. ft: 31.01.2006).
MAXIMISING THE VALUE OF EXISTING STORES
During the period we commenced two exciting projects to increase the value of existing stores.
A new lease has been signed at the Company’s Fareham store which will double the size of the store to around 60,000 sq ft. The store fronts the busy M27 motorway, and will carry the distinctive orange livery and neon lighting which is proving an effective generator of business at our other stores. The expansion of the store adds significantly to the potential profit margins as no further operating costs are required.
During the period the Company also purchased a new freehold site for the existing store in Portsmouth which currently occupies a leasehold premises. This new freehold increases the space available to the Portsmouth business to 64,000 sq ft, an increase of 63%. It is adjacent to the busy M275 motorway access to Portsmouth city centre and will also carry Lok’nStore’s strengthened branding.
We continue to explore options such as these to create extra value at both our freehold and leasehold operations.
Following the Company’s comprehensive external valuation at 31 July 2006, the freehold and leasehold properties have not been revalued during this six month period. The Board has determined in the future to value all properties annually.
INCREASING THE NUMBER OF STORES
We have 21 stores of which 11 are freehold accounting for 60% of total space, and 10 are leasehold.
After the period end we announced the acquisition of a new 69,000 sq ft store in Harlow. This store will be purpose built with opening targeted for spring 2008, and is prominently located opposite a busy retail park. This takes Lok’nStore through the 1 million square feet mark which is a notable milestone in the development of the Company.
Our objective is to increase the number of Lok’nStore centres within the current geographical coverage of South-East England and we are continuously reviewing opportunities to buy, to build, and to lease new stores. We have recently appointed Rapleys, the roadside specialist surveyors to assist the property acquisition team.
FINANCIAL STRENGTH AND BALANCE SHEET EFFICIENCY
Capital expenditure during the period totalled £3.6 million, of which £2.2 million is accounted for by the acquisition of the new Portsmouth site and this is reflected in the increase in tangible assets from £24,405,504 to £28,501,660.
At 31 January 2007, the Group had cash balances of £1.35 million (31 January 2006: £0.63 million) and £16.7 million of borrowings representing gearing of 128% on net debt of £15.4m million (31 July 2006: 122%). Gearing is 29% when calculated taking account of the uplift in market values of properties arising from the July 2006 valuations. Following the sale of the Kingston store after the period end gearing reduces to 10% on a revalued basis.
The Board expects to pay a maiden dividend at the full year reflecting its view of the continuing progress and development of the business.
NON EXECUTIVE DIRECTORS
I am delighted to announce that Edward Luker and Charles Peal have joined the Board as Non- Executive Directors.
Edward Luker (57) is a well known figure in the UK property industry, having worked for CB Richard Ellis for 33 years, where Edward has been a Director and Partner for 20 years. In 1997-8 Edward was Chairman of the Investment Property Forum, the industry body, and has acted for a number of pension funds in the creation of property investment funds. Edward is a Fellow of the Royal Institute of Chartered Surveyors and is currently the discretionary portfolio manager of one of the UK's largest public sector pension funds investing in property.
Charles Peal (52) started his career in 1977 at 3i Group, the leading UK quoted venture capital company. He was the Chief Executive of Legal and General Ventures from 1988 to 2000 and was a director of various quoted private equity investment trusts and management buyouts. He is currently a director of Warnborough Asset Management, an independent fund management business, and other private equity investments.
Edward and Charles bring a raft of valuable experience in property and finance to our Board. With Lok'nStore's strong operational model this will be a powerful combination. Edward's depth of property experience and contacts will greatly contribute to our site acquisition programme and portfolio management. Charles' financial skills will complement this, and further help us to get full value from Lok'nStore's proven ability to grow assets and cash-flow.
At 31 January 2007, we had 107 employees and I would like to thank them all for their contribution during the period.
These results show Lok’nStore is taking full advantage of the exciting UK self-storage market. We are encouraged by the progress of our new units at Farnborough and Crayford which has created a compelling model for future growth, and since the period end we have broken through the 1 million square feet mark with the acquisition of the new Harlow store.
The doubling in size of the Fareham store and the move of the Portsmouth store to a new freehold location demonstrate that plenty of extra value can be created from the established portfolio, beyond the geared effect of the turnover growth on profitability.
We are investing in new stores and enlarging the average size of our existing units to improve margins. To underline our confidence in the business the Board expects to pay a maiden dividend in respect of the full year