Lok'nStore : Interim Results 2023 LOK’NSTORE GROUP PLC

LOK'NSTORE GROUP PLC ("Lok'nStore" or "the Group")

Lok'nStore Group Plc, the AIM quoted self-storage Company announces interim results for the six months to 31 January 2023

Highlights:

Reminder - We sold four stores on 31 January 2022 adding circa £37 million to cash, reinforcing our strong financial footing. Our Same Store analysis strips out the effect of this and of new stores opened

• Excellent growth of same store revenue
• 15% increase in interim dividend
• New store opening schedule driving future growth
• Strong balance sheet with low net debt and LTV
• Growth strategy flexible and adaptive

Strong revenue growth

Same Store

• Same Store Group Revenue £13.22 million up 11.2 % (31.1.2022: £11.89 million)
• Same Store Group Adjusted EBITDA1 £7.79 million up 8.9% (31.1.2022: £7.16 million)
• Same Store Group Operating Profit before non-underlying2 items £5.33 million up 7.6% (31.1.2022: £4.95 million)
  Headline
• Group Revenue £13.58 million up 1.5% (31.1.2022: £13.38 million)
• Group Adjusted EBITDA1 £7.93 million down 2.3% (31.1.2022: £8.12 million)
• Group Operating Profit before non-underlying2 items £5.24 million down 9.3% (31.1.2022: £5.78 million)

Driven by solid operating metrics

• Move-insup 13.5% on corresponding period last year
• Same-Storeoccupied space up 2.6%
• Achieved rate on occupied space up 9.2% to £26.45 per sq. ft (31.1.2022: £24.22 per sq. ft)

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• Managed store revenue £0.82 million up 21.8% (31.1.2022: £0.67 million)
• Trading momentum continues post year end with same-store revenue up 11.4% for February and March 2023 compared to the same period last year

Management of Costs

• External cost increases experienced in period, specifically in energy, local rates, and interest
• EBITDA margins remain robust at 60.3% despite these cost increases

Cash flow (CAD) supports interim dividend increase

• Cash available for Distribution 17.70 pence per share down 6.8% (31.1.2022: 19.00 pence)
• Interim dividend 5.75 pence per share up 15% (31.1.2022: 5.0 pence per share) - Twelfth consecutive year of interim dividend increase

Operational resilience reflected in net asset value

• Adjusted Net Asset Value (NAV) per share up 8.6% year on year to £9.15 (31.1.2022: £8.43) and down 5.9% from 31 July 2022 (£9.72)
• Four new owned stores on site accretive to NAV when they open

Sale of four stores last year leads to strong balance sheet and low net debt

• £40.3 million cash at period-end (31.7.2022: £44.4 million)
• Net debt (excluding lease liabilities and deferred financing costs) £26.5 million (31.7.2022: £20.3 million)
• Loan to value ratio6 8.9% (31.7.2022: 6.6%)
• £18.2 million capex required to complete store development on site covered by cash
• Bank facility runs until April 2026

New Landmark stores will deliver further growth

• Bedford store opened February 2023 - very early trading has been excellent
• Peterborough store opening in 2nd half
• A further three store openings in FY24

Commenting on the Group's results, Andrew Jacobs, Chair of Lok'nStore Group said,

"Lok'nStore is reporting excellent results with same-store sales rising 11.2%, operating margins remaining resilient at 60.3% and same-store EBITDA growth of 8.9%. This is against the background of a more challenging business environment with increased costs of energy, local rates and interest.

"After the sale-and-manage back of 4 stores on 31 January 2022 for £37.9 million we are focused on same store growth. This transaction puts the Company in a strong financial position with only 8.9% net loan to value ratio. We are committed to continuing our disciplined approach to capital allocation.

"We have updated the valuation of our assets resulting in net asset value per share of £9.15, down 5.9% since July 2022 and 8.6% up from January 2022. This valuation reflects increased interest rates and our buoyant sales and robust margins.

"We will open 5 new Landmark stores in the coming year. These will all be accretive to asset value, revenue and profits as they fill up. Trading since the period end has remained solid. Our flexible and adaptive business model gives us confidence about the future, and we are increasing the interim dividend by 15% to 5.75 pence per share, the twelfth consecutive increase of the interim dividend."

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Key Performance Indicators (KPIs))

What we mean when we say… (and why we use these Key Performance Indicators)

In addition to IFRS accounting performance measures we use some Alternative Performance Measures (APMs) to help us explain how the underlying business is performing.

Here we identify those measures and explain what we mean when we use them and, importantly, why we use them: -

1. Group Adjusted Earnings before interest, tax, depreciation and amortisation - Adjusted EBITDA is defined as EBITDA before losses or profits on disposal, share-based payments, acquisition costs, non-underlying items and which demonstrates the cash generative qualities of the business.
2. Non-underlyingitems - Refers to one-off items of a non-operational nature which arose during the year, and which may relate to asset disposals, abortive site acquisition costs, or other costs and which are likely to be infrequent events. (Refer to note 4 of the Financial Statements).
3. Cash Available for Distribution (CAD) - Is calculated as Adjusted EBITDA less total net finance cost, less capitalised maintenance expenses, New Works Team costs and current tax. This measures the capacity of the business to pay dividends or pay down debt. The Cash Available for Distribution per share is CAD divided by the number of shares in issue less shares held in the Employee Benefit Trust (EBT). The calculation of the CAD and the CAD per share is set out in the Business and Financial Review.
4. Adjusted Total Group Assets - The value of adjusted total assets of £353.0 million (31.01.2022: £332.3 million) (31.07.2022: £370.9 million) is calculated by adding the independent valuation of the leasehold properties of £22.9 million (31.01.2022: £23.1 million) (31.07.2022: £24.2 million) less their corresponding net book value (NBV) £7.0 million (31.01.2022: £7.3 million) (31.07.2022: £7.2 million) to the total assets in the Statement of Financial Position of £337.1 million (31.01.2022: £316.5 million) (31.07.2022: £353.9 million). This provides clarity on the significant value of the leasehold stores as trading businesses which are only presented at their book values within the Statement of Financial Position.
5. Adjusted Net Asset Value per share (NAV per share) - Adjusted Net Asset Value per share is the net assets adjusted for the valuation of leasehold stores (properties held under leases) and deferred tax divided by the number of shares at the period-end. The shares held in the Group's Employee Benefits Trust are excluded from the number of shares. The calculation of the Net Asset Value per share is set out in the Business and Financial Review.
6. Loan to Value Ratio (LTV) - measures the debt of the business expressed as a percentage of total property assets giving a perspective on the gearing of the business. The LTV calculation of 8.9% is based on (excluding IFRS 16 lease liabilities) of £26.5 million as set out in note 24b (31.01.2022: £22.4 million) (31.07.2022: £20.3 million) as a percentage of the total properties independently valued by JLL, and at 31 January 2023 at Directors' Valuation and including development land assets all totalling £297.5 million (31.01.2022: £269.3 million) (31.07.2022: £308.2 million) as set out in the Business and Financial Review in the Analysis of Total Property Value table.
7. Average Cost of Debt - The average cost of debt is calculated by taking the total interest paid on the Group's Revolving Credit Facility in the monthly/weekly charging periods throughout the period and taking an average based on the whole financial period. Apart from the Group's Revolving Credit Facility the Group has no other debt. The average cost of debt in the period was 4.13% (31.7.2022: 1.71%).
   Average cost of debt on active loans not yet 'rolled over' is 4.96% (31.7.2022: 2.71%).
8. 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 16 pipeline sites of which 11 are contracted and 5 are currently with lawyers. We currently have 24 owned stores trading with an additional 16 managed stores trading. When these 16 sites are fully developed, we will have a total of 56 stores. (Refer to table of Analysis of Stores in the Business and Financial Review).
9. Secured Pipeline Sites - means the 11 sites for new stores on which we have exchanged legal contracts. Of these 10 stores are Lok'nStore Owned Stores and 1 will be a Managed Store.

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1. Adjusted Store EBITDA - is Group Adjusted EBITDA (see 1 above) before the deduction of central and head office costs. Unlike Group Adjusted EBITDA this measure excludes the impact of IFRS16 and includes leasing charges as normal operating costs of each store. The measure is designed to give clarity on the recurring operating cash flow of the business and provides important information on 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 (after leasing costs) 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 Business and Financial Review.
2. Gearing - refers to the level of a company's debt relative 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 16 of the Interim Financial Statements.
3. 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 Business and Financial Review on page.
4. Cost Ratio - calculates the ratio of the total operating costs of the business as set out in the Business and Financial Review, expressed as a percentage of total Group Revenue (note 1), giving a perspective on the cost efficiency of the business when compared to the cost ratio of the previous year. Cost pressures around energy particularly has increased the Cost Ratio to 40.7% (31.1.2022: 38.7%)
5. Same Store Analysis - This measure is used to give transparency on improvements in the operating business in the period unrelated to the opening of new stores, closure of old stores, and more particularly in this financial period, the sale and manage-back of four stores which were sold on 31 January 2022, and reporting on stores that were open and trading at both financial period ends 31 January 2022 and 31 January 2023. This also eliminates two new stores from the 31 January 2023 calculation. The Same Store key performance measure helps to illustrate the performance of the underlying business.

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