Final Results

Lok'n Store Group PLC 26 September 2003 LOK'nSTORE GROUP PLC ('Lok'nStore' or 'the Company') Preliminary Results for the year ended 31 July 2003 Lok'nStore Group Plc, one of the leading players in the fast-growing self-storage market, announces preliminary results for the year ended 31 July 2003. Highlights • Turnover for the year up by 12% to £5.6m (2002: £5.0m) • Operating profit* up £74,000 to £77,000 (2002: £3,000) • Profit before tax* up £434,000 to £35,000 (2002: loss of £399,000) • New sites acquired in Luton (opened 2002) and in Eastbourne (opening in October 2003) • Gradual increase in new site opportunities within our proven investment criteria • Strong financial structure, with no borrowings at the year end • Number of stores currently 18 * Pre-exceptional items Andrew Jacobs, Chairman of Lok'nStore, commented, 'This is a solid set of results in what has been a challenging trading period. Our competitive position remains strong in the self storage market and there is evidence of a gradual increase in new site opportunities which meet our strict investment criteria. The market remains attractive and the Directors remain optimistic that the Company will deliver continued growth.' 26 September 2003 Press enquiries: Andrew Jacobs, Chairman Lok'nStore Group plc Tel: 020 8547 2288 Simon Thomas, Chief Executive Lok'nStore Group plc Chris Stevens, Finance Director Lok'nStore Group plc Justine Warren College Hill Tel: 020 7457 2020 Crawford Burden College Hill CHAIRMAN & CHIEF EXECUTIVE'S STATEMENT OVERVIEW Lok'nStore is a strong company with a sound trading and investment strategy in an attractive market. Turnover for the year moved up 12% to £5.6m (2002: £5.0m) and operating profit, before exceptional items, was £77,000 (2002: £3,000). Lok'nStore's financial structure is strong, with no borrowings at the year end. We have acquired new sites in Luton (opened 2002) and in Eastbourne which will open in October 2003. Also we are seeing a gradual increase in new site opportunities, which fit our proven investment criteria. SALES Sales growth has been in line with expectations and operating profit (pre-exceptionals) has been maintained. Sales of insurance and storage accessories have grown by 49.4% compared to 2002. In addition, we aim to accelerate new site opportunities over the next few years. The Company is also capable of a fast turnaround of new sites following purchase. For example, the turnaround time at Luton was only two months to opening. Our competitive position remains strong in the self storage market. SHARE BUY-BACK AND CAPITAL REDUCTION At the Company's EGM on 5 September 2003, shareholders gave approval for a buy-back of shares, the cancellation of the share premium account and transfer to distributable reserves. High Court approval for cancellation of the share premium account was received on 24 September 2003. The purpose of this exercise is to optimise Lok'nStore's financial structure. We expect to launch the formal tender price shortly. We plan to ask shareholders to vote in favour of an ongoing authority to buy back shares at the AGM on 27 November 2003. DIVIDEND As in prior years, the Directors do not recommend the payment of a dividend. OUR PEOPLE The Directors would like to take this opportunity to thank the staff of Lok'nStore for their efforts and commitment during the last year. Their efforts are key to our future success. In June of this year we parted company with our Managing Director, Steven Hourston, who left the Group to pursue other interests. Andrew Jacobs has assumed the responsibilities of this role and there are no plans currently to replace this position. The Board would like to thank Steven for his contribution to the business over the last two years. There is a positive and progressive programme of improvements in management, systems and information and these are already showing benefits to sales. OUTLOOK Our annualised sales are currently running at £6.4m. Our new Eastbourne centre (40,650 ft of net lettable space) opens in October 2003. We continue to see improvements in sales at our existing centres and aim to accelerate new site acquisitions in the year ahead. We are also making further improvements in the new site appraisal model. We will continue to explore the opportunities presented by the uplift in the value of our freehold properties. This enhances the Company's ability to borrow as and when debt is required and gives the opportunity to release value to shareholders. Andrew Jacobs, Chairman Simon Thomas, Chief Executive 26 September 2003 OPERATING REVIEW THE MARKET The self storage market remains attractive and we believe it continues to be significantly under-supplied. As a leading company in this growing market, Lok'nStore enjoys economies of scale in funding, property acquisition and operations. OUR SPACE Lok'nStore fits out new centres progressively as customers move in, so that investment costs are in line with sales growth enhancing profitability. As a result of this and other efficiencies, Lok'nStore enjoys a low cost base per lettable sq ft of space. We had 17 centres at the end of the reported year and with the addition of Eastbourne we will have 18 in the first quarter of 2003/04. We have freehold properties in Ashford (Kent), Basingstoke, Horsham, Kingston-upon-Thames, Luton, Reading, Southampton and Woking. We have leasehold properties in Eastbourne, Fareham, Milton Keynes, Northampton, Poole, Portsmouth, Staines, Sunbury-on-Thames, and two stores in Swindon. We have a total space of 775,000 sq ft, including fitted space of 472,000 sq ft. Our total space further divides beyond fitted units and open/covered space with car parks, offices and vehicle and container storage all of which maximise revenue from unfitted space at any stage of the fit out process of the centre. Sales of insurance and packaging are now 9.7% of letting revenues, making an important contribution to operating profits. OUR CUSTOMERS Our split of customers is between household (49%) and business (51%). Our business customers range from small local traders to charities, government departments and agencies and large private, international and FTSE 100 companies. MANAGEMENT & SYSTEMS Steven Hourston, who was appointed as Managing Director in April 2001, resigned from the Company in June 2003. Executive members of the Board have re-assigned all responsibilities and do not currently plan to re-fill the MD position. In recognition of a slower rate of growth in sales last year, the Company has now reorganised responsibilities and the management focus is on growth. Along with these changes, improvements in management and sales systems are now flowing throughout the Company, with an emphasis on efficiency and on timely data. We remain optimistic for the future. SOCIAL & EMPLOYMENT We have 83 employees, with 65 in storage centre management and 18 in central services. 35% of all employees are shareholders through our employee benefit trust, which has personal tax advantages and a bonus share allocation scheme. We support and encourage education; 4 employees are currently studying for their NVQ's with a further 14 employees having completed their studies. ENVIRONMENTAL We have implemented an environmental performance framework, called the Trucost Environmental System, providing a quantitative measure of our overall environmental performance and impact, including that of our supply chain. We have a preliminary assessment of our performance that identifies greenhouse gas emissions (e.g. CO2) as being the main environmental impact. We have implemented an environmental policy to help us to carefully manage our waste, to control polluting emissions and to encourage our suppliers to undertake similar assessments. We have switched four centres to Green Energy plc, a provider of renewable energy. In 2003/04 we plan to continue to gather data in more detail and devise strategies to minimise our environmental impact where possible. FINANCE REVIEW RESULTS Lok'nStore has shown 12% growth in turnover to £5.6m (2002: £5m). The continuing growth in the business is demonstrated by the increase in annualised turnover to £6.4m. Demonstrating the cash generative nature of the business, EBITDA before exceptional items was up 42% to £0.72m (2002: £0.51m). Operating profit before exceptional items increased to £77,190 (2002: £2,899). The exceptional costs during the year totalled £0.47m: • Of these costs, the bulk relates to the disposal of the excess space at Swindon West. Following the acquisition of Swindon Self Storage Ltd during year ended 31 July 2000, which consisted of a single site on the west side of Swindon, the Company was able to take on a new site in a more prominent location at the front of the Swindon West plot. Lok'nStore sold the surplus space in the form of the original freehold, generating cash of £1.1million and an exceptional loss of £0.4million. • The remaining £64,248 relates to the compensation for loss of office of Steven Hourston, who resigned as the Company's Managing Director on 6 June 2003. The net interest charge reduced to £39,309 from £401,772. This large reduction in interest payment is a consequence of the funds raised through the placing and open offer in July 2002, giving the Company the ability to pay down debt. Profit before tax and exceptional items increased to a profit of £34,704 from a loss of £398,873, with the majority of the improvement relating to the reduced interest charge. No charge to corporation tax arises as the company incurred a taxable loss in the year. Tax losses available to carry forward for offset against future profits amount to some £2.3m. Earnings per share before exceptional items improved from a loss of 1.81p per share to a profit of 0.12p per share. On a fully diluted basis this equates to 0.11p per share. CASH FLOW The Company was cash positive at the year end with a net cash balance of £1.1m (2002: £3m). Cash flows from the Company still remain encouraging, continuing to demonstrate the cash generative nature of the business. The Company generated £1.1m from the disposal of the freehold site at Swindon and invested £2.3m in both the acquisition of the freehold site at Luton and further phased fit out at a number of centres across the Company. Lok'nStore continues to operate a ' just-in-time' approach to capital expenditure and this is reflected in the fact that capital expenditure increased by 15%, similar to the rise in sales over the period. BALANCE SHEET Net assets at the year end totalled £15.2m (2002: £15.7m). Included in Investments is £1m of Lok'nStore shares held by the Lok'nStore Employee Benefit Trust. In April 2003 the Employee Benefit Trust invested £0.85m in the acquisition of 1m shares. This investment was made in order to cover any requirements under the employee share save scheme and to honour the potential exercise of share options. FINANCING The current level of cash held reflects an inefficient company balance sheet structure in the present environment. Accordingly, the share buyback proposal, recently approved by shareholders, gives the Company the ability to switch an element of the Company's finances from equity to debt and so gear up the balance sheet. The Company signed a new £10m revolving credit facility in September 2002, which was completely un-drawn at the year end. TREASURY MANAGEMENT Following the signing of the new bank facility, the Company paid down all the remaining debt that existed at year ended 31 July 2002. All cash deposits are placed with 'AA' or 'AAA' credit rated institutions in accordance with the Board's approval. LIQUIDITY RISK The £10m revolving credit facility agreed with The Royal Bank of Scotland plc is a three year committed facility and during the year the Company complied with all debt covenants. CONSOLIDATED PROFIT & LOSS ACCOUNT for the year ended 31 July 2003 Notes 2003 2003 2003 2002 £ £ £ £ Before Exceptional Total Exceptional Items Items (Note 2) Turnover 5,612,978 - 5,612,978 5,000,488 Operating expenses (5,535,788) (64,287) (5,600,075) (4,997,589) Operating profit 77,190 (64,287) 12,903 2,899 Loss on disposal of fixed (3,177) (400,901) (404,078) - assets Interest receivable 61,748 - 61,748 53,958 Profit/(Loss) on ordinary 135,761 (465,188) (329,427) 56,857 activities before interest Interest payable (101,057) - (101,057) (455,730) Profit/(Loss) on ordinary 34,704 (465,188) (430,484) (398,873) activities before taxation Taxation 3 - - - - Profit/(Loss) for the 34,704 (465,188) (430,484) (398,873) year Earnings per share Basic 4 0.12p (1.51)p (1.81)p Diluted 4 0.11p (1.51)p (1.81)p The operating profit for the year arises from the group's continuing operations. No separate statement of Total Recognised Gains and Losses has been presented as all such gains and losses have been dealt with in the profit and loss account. GROUP BALANCE SHEET As at 31 July 2003 Notes 2003 2002 £ £ Fixed Assets Intangible assets 5 407,578 431,832 Tangible assets 13,398,636 13,129,442 Investments 6 1,023,886 172,917 14,830,100 13,734,191 Current Assets Stocks 101,783 62,967 Debtors 1,527,779 1,256,102 Cash in bank and in hand 1,101,809 10,127,340 2,731,371 11,446,409 Creditors: Amounts falling due within one year (2,336,243) (2,395,389) Net current assets 395,128 9,051,020 Total assets less current liabilities 15,225,228 22,785,211 Creditors: Amounts falling due after more than one year - (7,133,995) 15,225,228 15,651,216 Capital and reserves Called up share capital 7 284,687 284,687 Share Premium 8 9,912,447 9,907,951 Merger reserve 8 6,295,295 6,295,295 Profit and loss account 8 (1,267,201) (836,717) Shareholders' funds 15,225,228 15,651,216 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 July 2003 Notes 2003 2002 £ £ Cash flow from operating activities 9 292,975 806,994 Returns on investments and servicing of finance 9 (39,309) (401,772) Taxation - - Capital expenditure and financial investment 9 (2,139,262) (2,951,402) Cash outflow before financing (1,885,596) (2,546,180) Financing 9 (7,139,935) 11,678,381 (Decrease)/Increase in cash in the period (9,025,531) 9,132,201 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) 2003 2002 £ £ (Decrease)/Increase in cash in the period (9,025,531) 9,132,201 Change in net debt resulting from cash flows 7,144,431 (1,700,518) MOVEMENT IN NET FUNDS IN PERIOD (1,881,100) 7,431,683 NET FUNDS/(DEBT) BROUGHT FORWARD 2,979,914 (4,451,769) NET FUNDS AT 31 JULY 9c 1,098,814 2,979,914 NOTES 1. ACCOUNTING POLICIES The above results for the year ended 31 July 2003 are an abridged version of the Company's statutory financial statements. The profit and loss account and balance sheet do not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. These accounts have been prepared on the basis of the same accounting policies as set out in the statutory accounts for the year ended 31 July 2002. 2. EXCEPTIONAL ITEMS 2003 2002 £ £ Compensation for loss of office 64,287 - Loss on disposal of Swindon freehold 400,901 - 465,188 - 3. TAXATION There is no charge to corporation tax as the group incurred a tax loss in the year. The Company has tax losses of approximately £2.3 million available to carry forward against future taxable profits of the same trade. No value is ascribed to these losses, due to the uncertainty as to the utilisation of the losses in the foreseeable future. 4. EARNINGS PER ORDINARY SHARE The calculations of earnings per share are based on the following profits and numbers of shares. Basic & Diluted Basic & Diluted 2003 2002 £ £ Profit/(Loss) for the financial year before 34,704 (398,373) exceptional items Loss for the financial year (430,484) (398,373) 2003 2002 No. of shares No. of shares Weighted average number of shares For basic earnings per share 28,468,693 22,081,169 Exercise of share options 1,784,467 1,353,125 For diluted earnings per share 30,253,160 23,434,294 The exercise of share options would give rise to a reduction in the loss per share. This is not considered to be dilutive. 5. INTANGIBLE FIXED ASSETS - PURCHASED GOODWILL £ Group Cost 1 August 2002 and 31 July 2003 485,093 Amortisation At 1 August 2002 53,261 Charged in the year 24,254 31 July 2003 77,515 Net book value 31 July 2003 407,578 31 July 2002 431,832 6. INVESTMENTS Own shares £ Group Cost At 1 August 2002 172,917 Additions 850,969 As at 31 July 2003 1,023,886 This represents the shares owned by Lok'nStore Employee Benefit Trust as part of the group's employees share scheme and share option schemes. The market value of the shares as at 31 July 2003 was £755,425. In view of the current share price and the ongoing share buyback programme, the directors do not believe that there has been a permanent diminution in value of the investments. 7. SHARE CAPITAL 2003 2002 £ £ Group and Company Authorised: 35,000,000 (2002: 35,000,000) Ordinary Shares of 1p each 350,000 350,000 Allotted, issued and fully paid: 28,468,693 (2002: 28,468,693) Ordinary shares of 1p each 284,687 284,687 8. RESERVES Share Premium Merger reserve Profit and loss Total account £ £ £ £ 1 August 2002 9,907,951 6,295,295 (836,717) 5,857,451 Exercise of Share Options 4,496 - - 4,496 Loss for the year - - (430,484) (430,484) 9,912,447 6,295,295 (1,267,201) 14,940,541 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. 9. CASH FLOWS 2003 2002 £ £ a Reconciliation of operating profit to net cash inflow from operating activities Operating profit 12,903 2,899 Depreciation 621,835 481,598 Amortisation 24,254 24,255 Profit on disposal of fixed assets - (115) Increase in stocks (38,816) (21,719) Increase in debtors (271,677) (252,633) (Decrease)/Increase in creditors (48,710) 572,709 Exceptional Item (6,814) - Net cash inflow from operating activities 292,975 806,994 b Analysis of cash flows for headings netted in the cash flow Returns on investments and servicing of finance Interest received 61,748 53,958 Interest paid (97,654) (446,451) Interest element of finance lease rental payments (3,403) (9,279) Net cash outflow for returns on investment and servicing of finance (39,309) (401,772) Capital expenditure and financial investment Purchase of tangible fixed assets (2,324,045) (2,953,677) Proceeds from sale of tangible fixed assets 1,035,752 2,275 Purchase of fixed asset investments (850,969) - Net cash outflow for capital expenditure and financial investment (2,139,262) (2,951,402) 9. CASH FLOWS (CONT) 2003 2002 £ £ Financing Bank loans (7,130,998) 1,717,336 Capital element of finance lease rental payments (13,433) (17,030) Exercise of share options 4,496 - New share issue (net of issue costs) - 9,978,075 Net cash inflow/(outflow) from financing (7,139,935) 11,678,381 c Analysis of net debt Other non At 31 July 2002 Cash flow cash changes At 31 July 2003 £ £ £ £ Cash at bank and in hand 10,127,340 (9,025,531) - 1,101,809 Debt due within 1 year - - - - Debt due after 1 year (7,130,998) 7,130,998 - - Finance leases (16,428) 13,433 - (2,995) Total 2,979,914 (1,881,100) - 1,098,814 This information is provided by RNS The company news service from the London Stock Exchange

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