Lok'nStore : Interim Results to January 2022

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

Lok'nStore Group Plc, the AIM listed self-storage Company announces interim results for the six months to 31 January 2022

• ❖ Strong growth in occupied space and achieved rate per square foot

• ❖ Significant increase in net asset value

• ❖ Increased dividend

• ❖ Pipeline driving future growth

Highlights:

Strong trading

• • Group revenue £13.38 million up 31.1% (31.1.2021: £10.21 million)

• • Group adjusted EBITDA1 £8.12 million up 46.5% (31.1.2021: £5.5 million)

• • Achieved rate per sq. ft. of occupied space up 18.5% vs last year

• • Unit occupied space up 6.0% yoy with £24.22 per sq.ft achieved (31.1.2021 £20.44)

Cash flow growth drives interim dividend increase

• • Cash available for Distribution (CAD)3 £5.58 million up 59.6% (31.1.2021: £3.49 million)

• • Cash available for Distribution per share (annualised) 38.00 pence up 57.2% (31.1.2021: 24.17 pence)

• • Interim dividend 5.0 pence per share up 15.5% (31.1.2021: 4.33 pence per share) - Eleventh consecutive year of increase

Significant increase in net asset value

• • Adjusted Net Asset Value (NAV) per share up 48.4% to £8.43 (31.1.2021: £5.68) and up 15.3% from 31 July 2021 (£7.31)

Disciplined use of capital leads to strong balance sheet and low net debt

• • Sale and manage back of four stores at a 22.8% premium to 31 July 2021 valuations. (£37.2 million) - proceeds will be re-cycled into new, faster growing Landmark stores

• • £44.4 million cash at period-end (31.7.2021: £11.3 million)

• • Net debt (excluding lease liabilities) £22.4 million (31.7.2021: £42.6 million)

• • Loan to value ratio6 8.3% (31.7.2021: 20.4%)

Embedded future growth from dynamic pipeline8 of new landmark stores

• • New stores currently on site will add 16.8% of new trading space by July 2023

• • Fully funded secured store pipeline9 total of 12 sites will add 35.5% of new space over the coming years

Positive Outlook for Growth

• • Trading remains buoyant with pricing up 1.5% and like for like occupied space up 0.9% in the two months since the 31 January 2022 period-end

• • Seeing many more exciting new store opportunities

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

"Trading in the six months to 31 January 2022 has been excellent. Revenue is up 31.1% against last year. Our achieved rate per occupied square foot is up 18.5% yoy with unit occupied space up 6.0% driving strong growth of revenue and profits. The interim dividend is 5 pence up 15.5%. Demand for UK Self-Storage assets remains strong and this, combined with strong trading has driven our Net Asset Value per share forward by 48.4% over the last twelve months.

"Our new Warrington Store opened in January, our new store in Wolverhampton opened in March and Stevenage opens in the final week of April. We are on site at three further stores all of which will open within the next 15 months. At 31 January 2022, our current fully funded secured pipeline of twelve new stores increases lettable owned space by 35.5%. We are seeing many more exciting new store opportunities.

"Continuing this exciting period of growth, our objective is to build more Landmark stores in an under-supplied market, remaining conservatively geared delivering sustainable growth and consistently increasing dividends.

The Board is confident the Group will continue to thrive under its highly experienced management team and we look to the future with confidence. "

Enquiries:

Lok'nStore

01252 521 010

Andrew Jacobs, Executive Chairman Ray Davies, Finance Director

020 7220 0500

finnCap Ltd

Julian Blunt/Seamus Fricker, Corporate Finance Alice Lane, Corporate Broking 020 7418 8900

Peel Hunt LLP

Capel Irwin/Carl Gough/Henry Nicholls

Camarco

020 3757 4991

Billy Clegg/Tom Huddart/Emily Shea-Simonds

Key Performance Indicators (KPIs))

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

• 1. Group Adjusted EBITDA - Earnings before interest, tax, depreciation and amortisation - This measure strips 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.

• 2. Other income and expenditure 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 Note 3(c) of the Interim Financial Statements).

• 3. 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 Business and Financial Review.

• 4. Adjusted Total Group Assets - The value of adjusted total assets of £332.3 million (31.01.2021: £235.9 million) (31.07.2021: £294.8 million) is calculated by adding the independent valuation of the leasehold properties of £23.1 million (31.01.2021: £16.7 million) (31.07.2021: £22.1 million) less their corresponding net book value (NBV) £7.3 million (31.01.2021: £3.5 million) (31.07.2021: £7.6 million) to the total assets in the Statement of Financial Position of £316.5 million (31.01.2021: £222.7 million) (31.07.2021: £280.3 million). This provides clarity on the significant value of the leasehold stores as trading businesses which under accounting rules on leases are only presented based on cost rather than valuation within the Statement of Financial Position.

• 5. 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 leases) and deferred tax divided by the number of shares at the period-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 Business and Financial Review.

• 6. 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 (excluding IFRS 16 lease liabilities) of £22.4 million as set out in note 15 (31.01.2021: £42.6 million) (31.07.2021: £56.3 million) as a percentage of the total properties independently valued by JLL and including development land assets all totalling £269.3 million (31.01.2021: £209.2 million) (31.07.2021: £268.6 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 1.55% (31.1.2021: 1.55%). Average cost of debt on active loans not yet 'rolled over' is 1.72% (31.7.2021: 1.55%).

• 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 15 pipeline sites of which 12 are contracted and 3 are currently with lawyers. We currently have 23 owned stores with an additional 15 managed stores trading. When these 15 sites are fully developed, we will have a total of 53 stores.

• 9. Secured Pipeline Sites - means the 12 sites for new stores on which we have exchanged legal contracts. Of these ten stores are Lok'nStore Owned Stores and two will be Managed Stores.

• 10. 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.

• 11. Gearing - refers to the level of a company's debt relative to itsequitycapital, usually expressed in percentage form. It is a measure of a company's financialleverageand shows the extent to which its operations are funded bylendersversus 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 15 of the Interim Financial Statements.

• 12. 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.

• 13. 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 2), giving a perspective on the cost efficiency of the business when compared to the cost ratio of the previous year.

• 14. 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.

Chairman's Statement

I am delighted to report these results to you.

The first half-year results can be summarised as:-

• • Strong growth of occupied space and pricing

• • Excellent operating performance resulting in rapid revenue and profit growth

• • Sale and manage back of 4 stores at a 22.8% premium to July 2021 valuations

• • Significant increase in Net Asset Value per share of 48.4% over 12 months

• • 15.5% increase in interim dividend

• • Fully funded new secured store pipeline9 will increase total trading space by 35.5% to 2.61 million sq. ft.

These results testify to Lok'nStore delivering on our commitment to sustainable growth. Continued investor interest in the self-storage sector demonstrated by market transactions underpins the value of our assets and our strategy to open more Landmark stores.

The detail behind these results is discussed further in our Business and Financial Review.

Sale and Manage-Back of four freehold stores

On 31 January 2022, the Group completed the Sale and Manage-Back of four freehold stores for a total gross consideration of £39.0 million representing a 22.8% uplift on the independent external valuation of the stores at 31 July 2021.

This transaction is immediately accretive to Group net asset value, demonstrating the increasing demand for good quality UK self-storage assets with mature cash flows and has provided net sales proceeds of c.£37.2 million for reinvestment into new, faster growing Landmark stores. Further detail is set out in the Business and Financial Review.

Significant Increase in Net Asset Value per share

Although the Board do not usually commission an external valuation at the interim period-end it is mindful of the need to accord with the measurement principles of International Financial Reporting Standards in determining the fair value of its trading assets. Accordingly, after consulting with our external valuers JLL, the Directors considered that the self-storage transactional market has shown very good levels of liquidity and continued investor interest with strong capital flows coming into the market. This is resulting in very strong demand for self-storage assets with corresponding yield compression. Usually, the market has historically moved forward in a predictable fashion however the Directors considered that there had been such a material movement in market yields that an external reconsideration of the position as at 31 January 2022 was appropriate in respect of our properties externally valued at 31 July 2021. Accordingly, the Directors instructed Jones Lang LaSalle (JLL) to undertake a valuation of the trading stores.

It remains the Group's established policy to undertake a comprehensive external valuation at each year-end and will do so at the next year end at 31 July 2022.

In this period, we saw a like for like uplift of £25.98 million in our freehold and leasehold trading stores, a 12.8% increase. The like for like comparison excludes the four sale and manage back stores and the maiden valuation on our new store in Warrington.

Most of this uplift, £23.28 million, comes from improvements in both the Discount Rate and Exit Yield applied to the valuations. On a same store basis on our owned freehold trading stores, we have seen exit yields compress on average from 6.15% at 31 July 2021 to 5.54% at 31 January 2022. Average Discount rates are now 7.25% compared to an average of 8.18% at 31 July 2021. These improving metrics reflect the increasing investor appetite in the UK Self Storage Market and its robust nature throughout the economic cycle and exogenous shocks.

The continued improving valuation of our trading assets combined with the recent Sale and Manage-Back transaction resulted in a significant uplift in Net Asset Value per share of 48.8% to £8.45 compared to 12 months ago. Adjusted Total Group Assets4 moved upwards sharply in the six-month period to £332.3 million up 12.7% on 31 July 2021 (£294.8 million).

The Exit Yield and Discount Rates applied in the valuations are validated by transactional evidence and give us confidence that there may be more exit yield compression to come as investors chase scarce assets. We are well positioned to benefit from future changes with our high-quality portfolio of stores, and Landmark store development pipeline.

This is an excerpt of the original content. To continue reading it, access the original document here.