Final Results

Lok'n Store Group PLC 03 November 2004 3 November 2004 LOK'nSTORE GROUP PLC ('Lok'nStore' or 'the Company') Preliminary Results for the year ended 31 July 2004 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 2004. Highlights • Turnover for the year up by 17.8% to £6.6m (2003: £5.6m) • Operating profit* up to £121,674 (2003: £77,190) • The 8 established '250 week' stores now generating EBITDA margins of 48.2% • Customers up 27.5% to 5,566 from 4,365 in July 2003 • Store occupancy up by 26%, a record 96,909 sq ft • Three new sites acquired or opened in year in Eastbourne, Tonbridge and Farnborough • 19 stores trading with 1 in development with a total store capacity up to 840,000 sq ft • Increased financial flexibility and strength through significant increase in freehold valuations • Increased capital expenditure totalling £5.4m reflects commitment to growth through site acquisition (£4.3m) and investing in existing stores (£1.1m) *Pre-exceptional items Andrew Jacobs, Chief Executive Officer commented: 'The Self Storage market continues to offer an unrivalled combination of predictable profits and potential for growth. Lok'nStore has delivered accelerated sales growth over the past year. Lok'nStore's market position, leading brand, and growing cash flow make us confident of delivering substantial growth in shareholder value.' Press Enquiries: Andrew Jacobs, CEO Lok'nStore Tel: 020 8547 2288 Ray Davies, Finance Director Lok'nStore Jonathon Brill/ Billy Clegg Financial Dynamics Tel: 020 7831 3113 Preliminary Results for the year ended 31 July 2004 CHAIRMAN'S STATEMENT OVERVIEW The Group has experienced accelerating sales growth over the past year. We are particularly pleased to report that stores opened earlier in the Group's development have contributed to this growth in combination with rapid sales increases at more recently opened stores. As we said in our last annual statement 'the management focus is on growth' and this strategy has underpinned the highly satisfactory outcome that has been achieved. The recent acquisition of sites at Tonbridge and Farnborough, and the opening of the Eastbourne store in October 2003, reflect our buoyant view of the market. We remain committed to finding new high quality self-storage sites while increasing occupancy at, and enhancing the value of, existing stores. We continue to believe that the South-East of England represents the greatest potential for the Group's expansion, and our acquisition strategy remains driven by prospective rates of return, site location and visibility. GROWTH IN TURNOVER AND CUSTOMERS Turnover for the year was £6.61 million (2003: £5.61 million), an increase of 17.8%. Annualised revenues are currently £7.7 million (2003: £6.4 million), up 20.3% compared to the previous year. The Group made an operating profit before exceptionals for the year of £121,674 compared with a profit of £77,190 in 2003. The Group made a small pre-tax and exceptionals loss for the year of £41,697 compared with a profit of £34,704 in 2003. Basic earnings per share before exceptionals was a loss of 0.16p per share (2003: profit of 0.13p per share). Packing materials, insurance and other sales kept pace with storage income at 8.2% of turnover, an increase of 20.4% over the year. At the year end the number of customers had risen to 5,566 from 4,365 in July 2003, an increase of 27.5% over the year. The business handled 7,435 'move-ins' during the year compared to 5,127 in 2003. DIVIDEND As in previous years, the Directors do not recommend the payment of a dividend. NEW STORES As we said in our last annual statement we are aiming 'to accelerate new site acquisitions in the year ahead'. I am delighted to report that during the year we acquired or opened an additional 3 sites at Eastbourne, Tonbridge and Farnborough which are located within our existing geographical coverage. They are all located in attractive markets with little local competition, and will be managed by our existing sales team. This will take the total number of our stores to 20. We also acquired the effective freehold of our Poole store, which would otherwise have been due for lease renewal next year. This provides the store with a further 13,567 sq. feet to expand into, as well as securing the valuable income stream, and protecting against future rent reviews. When fully developed, the Tonbridge and Farnborough stores will provide an additional 90,000 sq ft of net storage capacity, taking the total for the 20 stores to 840,000 sq ft. 10 of our 20 Centres are owned freehold by the Group with the remainder as leasehold. POSITIVE TRADING During the year we increased occupancy by a record 96,909 sq. ft, with total occupancy at 31 July 2004 of 472,028 sq ft. We have included a table below summarising the trading performance of all our stores over the year, analysed between stores open less than 100 weeks, between 100 and 250 weeks, and more than 250 weeks at the beginning of the period. Trading Summary EBITDA 100 to < 100 July-04 > 250 weeks old 250 weeks old weeks old Stores Sub Sub Sub Total Total Total £'000 £'000 £'000 Sales 3,105 3,159 270 EBITDA 1,491 536 -271 EBITDA % 48% 17% -100% Maximum Lettable Area '000 sq ft 305 365 80 The 8 stores open for more than 250 weeks made trading profits before central and head office overheads, interest, tax, depreciation and amortisation ('EBITDA') of £1.5million in the year on turnover of £3.1 million, a margin of 48%. Also, encouragingly, revenue occupancy of these 8 stores increased 17.5% year on year, and there is still room to further increase this in the coming year. FINANCIAL STRENGTH AND BALANCE SHEET EFFICIENCY On 31 January 2004, professional valuations were prepared by external valuers, Cushman & Wakefield Healey & Baker, in respect of all freehold land and properties held by the Group as operational self-storage businesses. This Report was prepared on the basis of Market Value/Existing Use Value, as appropriate, in accordance with RICS Appraisal and Valuation Standards but on the special assumption that any potential for residential development was ignored. The Report indicated a total value of £20.1 million. This is £10.2 million in excess of the net book value of freehold property and land as disclosed in the Group's interim financial statements as at 31 January 2004. This increase in freehold valuations provides the Group with increased financial flexibility and financial strength going forward enhancing the Group's ability to borrow, as and when debt is required and, making the value created within our operations more transparent to shareholders, potentially giving the Group the opportunity to release more value to shareholders. These valuations do not account for any further uplift in values, which would result from the successful outcome of the proposed planning applications for high density housing schemes at the Kingston and Reading sites. Since this valuation we have also purchased the effective freehold at Poole and the new site at Farnborough for a total of £4.4million. With the planning applications at Kingston and Reading moving forward we will assess the Group's attitude to reinvesting the potential proceeds from these sales versus returning cash to shareholders as the outcome becomes clearer. MORE STORES Our objective continues to be increasing our number of stores within our current geographical coverage of South-East England. As evidenced by our recent acquisitions and openings we believe the current market for new sites is becoming less competitive, while the excess of untapped demand for self-storage provides plenty of room for growth for many years. When fully completed, our current portfolio of 20 stores and sites will provide around 840,000 sq. ft of net storage space. Subject to market conditions, it is our current aim to acquire between 2 and 4 stores per annum. Our current store size is typically around 40,000 lettable sq ft per store and this may increase for new stores up to 60,000 lettable sq ft, which would result in additional capacity of 80,000 to 240,000 sq ft per annum. However the exact timing of store openings will largely depend on market availability, and we will retain our disciplined approach to site acquisition. THE SELF-STORAGE MARKET IN THE UK The self-storage market continues to grow rapidly with both first generation converted buildings and modern, well located, prominent stores all continuing to show good growth. The lower cost base associated with the older converted buildings ensures that they generate returns equal to the more highly specified, but higher cost base new stores. Lok'nStore's four stores in the oldest buildings with the lowest specification, grew revenue occupancy by 19.8% over the financial year. This compares with a company average for the year of 18.8% Those oldest four stores generated a combined EBITDA margin of 52%. During the year Safestore and Mentmore, 2 of the 4 UK listed self-storage operators were bought by Bridgepoint, a private equity house who recognised the quality of the cash flow which self-storage produces. Lok'nStore is now one of only two quoted storage operators, ranked 4th in size in the UK (and sixth in Europe). LOK'NSTORE PEOPLE Following the departure of Steven Hourston in June 2003, Andrew Jacobs stepped in to undertake the day-to-day management of the business. Andrew founded the business in 1995 and after conducting a strategic review in early 2003 Andrew has taken detailed control of the business, consenting to take up the role of Chief Executive Officer from August 2004. Andrew's concentration on the sales and marketing functions has resulted in a 15% increase in enquiries per Centre, and conversion increasing by seven percentage points. During the year we were very pleased to welcome Ray Davies, who replaced Chris Stevens the departing Finance Director. We thank Chris for his work over the two years he was with the Group. Ray, a chartered accountant, has held a number of senior finance positions in the construction and health & fitness sectors and brings with him a wealth of experience of both Aim and fully listed companies which will benefit both the Board and the Group. He has a solid track record in the finance and strategic arenas and will be an asset to the business. We also welcomed Robert Jackson as non-executive director. Robert's experience of finance and accounting, both inside and outside the City, and his extensive network of contacts are already proving invaluable. The overall cost and staff numbers of head office have been trimmed and these resources redirected towards sales and marketing functions. This emphasis will be maintained. I would like to thank all of the people who work both in our head office and in our stores for their commitment to our business and for their hard work over the year. Their continued efforts will provide us with the necessary platform for our success. I am pleased to say that 36 of them (40%) are either Employee Benefit Trust ('EBT') share or option holders, which ensures staff and shareholders are working towards the same objectives. OUTLOOK: COMBINATION OF PREDICTABLE PROFITS AND POTENTIAL FOR GROWTH The self-storage market continues to offer an unrivalled combination of predictable profits and potential for growth. Lok'nStore's proven ability to expand steadily within this market gives us confidence in the future performance of the Group with growing turnover from existing stores and growth in number of stores combining to produce attractive growth and profits. Our priorities continue to be: - further improve the operating performance of existing stores - enhance the value of existing stores - grow the number of stores - optimise the Group's capital structure Lok'nStore's market position, leading brand, and growing cash flow make us confident of delivering substantial growth in shareholder value. Simon G Thomas Chairman 2 November 2004 OPERATING REVIEW SALES PERFORMANCE In the last 12 months we have raised operational standards and increasingly focused store staff on taking responsibility for increasing turnover. This work has improved the consistency of performance across the stores. Our central sales team has been augmented and its role redefined. In particular the team has run more and better sales training courses. In addition, we have revised the bonus scheme to link performance and reward more directly to turnover growth and consistently high quality customer service. As a result our conversion ratio of enquiries into customers increased by 7%. During the year we successfully opened our new Eastbourne store, and then Tonbridge after the year-end in August, bringing the number of stores now trading to 19. Total capacity is currently 790,000 sq. ft. 12 of the stores are now trading profitably at the pre-tax level and 14 have positive operating cash flow. I am pleased to report that even our older stores (over 250 weeks) increased revenue occupancy by 17.5% over the year, and there is still room to further increase this in the coming year. The maturity profile across the stores open at the end of the year is set out in the Trading Summary. The new store at Farnborough will increase total capacity to 840,000 sq. ft. SECURITY ISSUES The safety and security of our customers and stores is our first priority. With today's heightened terrorist concerns this is of particular importance .To achieve this we invest in CCTV systems, intruder and fire alarm systems and the remote monitoring of our stores out of hours. We have rigorous security procedures in relation to customers. We have reviewed recent advice from the Metropolitan Police (circulated by the Self Storage Association to members) and have adapted our procedures where necessary to comply with their recommendations. Furthermore, we continue to review our operational procedures in terms of security and for example, our reception areas are monitored by cameras. The importance of security and the need for vigilance is communicated to all staff and reinforced through training. A new store audit system was also implemented which has already proved its effectiveness in terms of improved security, credit control and store presentation. PROPERTY AND CONSTRUCTION The total portfolio of stores and sites is now 20, of which 10 are held freehold. We are primarily focused on acquiring freeholds and where opportunities arise, we will seek to acquire the freehold of our leasehold stores. Indeed we have acquired the effective freehold of our Poole store during the year. However our overriding objective is to increase the number of stores we operate and are prepared to take leases where necessary. Over the years Lok'nStore has acquired the freehold interest in previously leased stores at Horsham, Reading and Poole. This tactical approach, combines the early cash flow advantages of leasehold stores with the long-term income security and investment potential of freeholds. Our new Farnborough Store is a freehold and will be purpose built. It is expected to open in Autumn 2005. The Company continues to focus on the efficiency of our fitting out programme in order to bring forward the revenue stream and maximise the rate of return. We optimise the available space in new stores by fitting mezzanine floors and storage units as demand dictates, allowing revenue to be generated by renting open storage space, and thereby keeping tight control on capital expenditure until it is required. COMPETITIVE LOW COST BASE These and other measures keep Lok'nStore's cost base competitively low at around £8.22 per square foot for space available at year-end. Whether or not the self-storage market becomes price competitive this low cost base will be a continuing advantage. This can be reduced further by spreading marketing and head office costs across more stores as the Group continues to expand. MARKETING During the year the Company spent approximately 5.4% of turnover on advertising and marketing. (2003: 5.4%). We anticipate our marketing costs remaining at these levels over the next year. All the marketing materials were reviewed and these initiatives contributed to Lok'nStore achieving a record increase in occupancy over the year of approximately 96,909 sq. ft. Enquiries per store per week increased 15% over the previous 5-year average. We have significantly improved the efficiency of our marketing data and reporting, which allows an increasingly focused approach. Our database has now been centralised which will enable our marketing efforts to be even more accurately targeted in the coming year. New stores will benefit from the marketing and promotion effort already applied to our existing stores. Our new Farnborough store with its prominent site will raise the profile of the whole Lok'nStore brand, as well as becoming the focus for marketing our 5 stores along the M3 corridor (Sunbury, Woking, Farnborough, Basingstoke, and Southampton). SYSTEMS In last year's report we discussed our intention to focus our systems on ' efficiency and timely data'. This has resulted in a concentration of management reporting into one comprehensive monthly and one weekly report. The result has been a significant reduction in time spent compiling, printing and posting at the stores, together with a reduction of paper consumed. The reports contain more relevant and timely data which has facilitated an increasingly focused approach to our sales and marketing. During the year we have introduced direct debit facilities, which will also reduce the administrative burden and use of paper at the stores. Of course this also is a positive service to our customers and reduces the time committed to credit management. Direct Debits are growing rapidly as a percentage of payment methods and will contribute to capping our already low bad debt write-off level of less than 1/4% of total turnover. In consultation with Trading Standards, the Self Storage Association and our own Counsel we have introduced a new customer occupancy licence, which by clarifying the rights and obligations of Lok'nstore and its customers enhances our ability to enforce our lien, which is likely to further improve our credit control systems. PEOPLE At 31 July we had 92 employees. Attracting and retaining the right people is critical to the success of Lok'nStore. We are committed to providing a positive attitude in the business and an enjoyable working environment. Lok'nStore encourages all staff to build their skills through appropriate training and regular performance monitoring. We now run regular training courses to support these objectives. The development of the Central Sales Team and the Central Support Team provide a progressive career path for all staff. All employees are eligible to participate in share ownership plans after 3 months of employment and 40% of our employees have EBT shares or options. 28 of the staff are members of the contributory pension scheme I would like to thank all of our staff for their contribution to a successful year. The continuing progress of the Group is being achieved as a result of their efforts and hard work. Andrew Jacobs Chief Executive Officer FINANCIAL REVIEW TRADING During the financial year Lok'nStore has shown 17.8% growth in turnover to £6.6m (2003: £5.6m). The continuing growth during the year and since the year-end is demonstrated by the increase in annualised turnover to £7.7m. Demonstrating the cash generative nature of the business, EBITDA before exceptional items was up 15.2% to £0.83 million (2003: £0.72 million). Operating profit before exceptional items increased to £121,674 (2003: £77,190). The exceptional costs during the year totalled £127,407: • Of these costs, just under a half relates to termination payments made to senior managers, and all associated fees, as well as costs incurred relating to a bid approach; • The remaining £68,561 relates to the compensation for loss of office of Christopher Stevens, who resigned as the Company's Finance Director on 25 September 2003. The net interest charge increased from £39,309 to £162,501. This increase is a consequence of the Group utilising its bank facilities to acquire the head lease at Poole and the sites at Tonbridge and Farnborough, and to fund the buy back of shares. Year-end borrowings of £7.6 million mean that the interest charge will rise significantly next year on a full-year charge. The Group made a small loss of £41,697 before tax and exceptional items (2003: £34,704 Profit) No charge to corporation tax arises a result of the Group's loss in the year. Tax losses available to carry forward for offset against future profits amount to some £2.7 million. In addition the business had capital losses available to carry forward of £362,636. Earnings per share before exceptional items showed a loss of 0.16p per share. BORROWINGS AND CASH FLOW The Group was cash positive at the year-end with net cash balances of £0.65 million (2002: £1.1 million). Cash flows from the Group remain encouraging, with increasing cash flows as turnover increases continuing to demonstrate the cash generative nature of the business. Cash Inflow from operating activities before interest and capital expenditure was just under £1 million, compared to £0.3 million for 2003. Increased capital expenditure totalling some £5.4 million reflects the Group's commitment to growing its business through a combination of site acquisition (£4.3 million) and investing in our existing stores (£1.1 million). At 31 July 2004, the Group had £7.6 million of borrowings representing gearing of 66% on net debt of £6.95 million. SHARE-BUYBACK Following approval by shareholders of a special resolution at the AGM on 27 November 2003, the Company has an ongoing general authority to make market purchases of up to 9,265,848 of its ordinary shares (less any shares purchased pursuant to a tender offer). This authority expires eighteen months after the date on which the resolution was passed unless renewed, varied or revoked by the Company in General Meeting. On 23 March 2004, the Company purchased 3,420,549 of its Ordinary Shares of 1p for cancellation at a price of 112p per Ordinary Share leaving ongoing authority to make market purchases of up to 5,845,299 of its Ordinary Shares (subject to any Ordinary Shares purchased pursuant to a tender offer). Of the shares cancelled, 500,000 were owned by the employee benefit trust. After the cancellation, the total number of shares in issue reduced to 25,048,144 Ordinary Shares. The Group will continue to use the remainder of this authority as appropriate in the best interests of shareholders. BALANCE SHEET Net assets at the year-end decreased to £10.6 million (2003: £14.2 million) reflecting the effect of the share buyback. The employee benefit trust owns 627,500 (2003: 1,127,500) shares, the costs of which are shown as a deduction from shareholders' funds in accordance with Urgent Issues Task Force Abstract 38. FINANCING The Company signed a new £10 million revolving credit facility in March 2004, which gives the Company the ability to make further purchase of its own shares as and if appropriate. TREASURY MANAGEMENT All cash deposits are placed with Royal Bank of Scotland Plc on treasury deposit utilising either one-day or two-day money funds. The Group's cash position is reviewed daily and cash is transferred daily between these accounts and the company's operational current accounts as required. LIQUIDITY The £10 million 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 corresponding debt covenants. Ray Davies Finance Director CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 July 2004 Notes 2004 2004 2004 2003 £ £ £ £ Before Exceptional Total Restated Exceptional Items Items Note 2 TURNOVER 6,611,911 - 6,611,911 5,612,978 Operating expenses (6,490,237) (127,407) (6,617,644) (5,600,075) OPERATING 121,674 (127,407) (5,733) 12,903 PROFIT/(LOSS) Loss on disposal of fixed assets (870) - (870) (404,078) Interest receivable 36,950 - 36,950 61,748 PROFIT / (LOSS) ON ORDINARY ACTIVITIES BEFORE INTEREST PAYABLE 157,754 (127,407) 30,347 (329,427) Interest payable (199,451) - (199,451) (101,057) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (41,697) (127,407) (169,104) (430,484) Taxation 3 - - - - LOSS FOR THE YEAR (41,697) (127,407) (169,104) (430,484) EARNINGS PER SHARE (0.16p) (0.64p) (1.57p) Basic 4 Diluted 4 (0.16p) (0.64p) (1.57p) 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. BALANCE SHEETS 31 July 2004 Group Group Company Company Notes 2004 2003 2004 2003 £ £ £ £ FIXED ASSETS Intangible assets 5 383,323 407,578 - - Tangible assets 18,162,957 13,398,636 - - Investments 6 - - 214,563 214,563 18,546,280 13,806,214 214,563 214,563 CURRENT ASSETS Stocks 103,880 101,783 - - Debtors 1,948,711 1,527,779 5,994,621 9,982,571 Cash at bank and in hand 654,361 1,101,809 - - 2,706,952 2,731,371 5,994,621 9,982,571 CREDITORS: Amounts falling due within one year (3,094,644) (2,336,243) - - NET CURRENT (LIABILITIES)/ASSETS (387,692) 395,128 5,994,621 9,982,571 TOTAL ASSETS LESS CURRENT LIABILITIES 18,158,588 14,201,342 6,209,184 10,197,134 CREDITORS: Amounts falling due after more than one year 7,600,000 - - - 10,558,588 14,201,342 6,209,184 10,197,134 CAPITAL AND RESERVES Called up share capital 7 250,481 284,687 250,481 284,687 Share premium account 8 21,496 9,912,447 21,496 9,912,447 Capital redemption reserve 8 34,205 - 34,205 - Merger reserve 8 6,295,295 6,295,295 - - Other distributable reserve 8 5,903,002 - 5,903,002 - Profit and loss account 8 (1,436,305) (1,267,201) - - ESOP shares 9 (509,586) 1,023,886) - - SHAREHOLDERS' FUNDS 10,558,588 14,201,342 6,209,184 10,197,134 Approved by the Board of Directors on 2 November 2004 and signed on its behalf by A Jacobs Chief Executive R Davies Director CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 July 2004 Notes 2004 2003 £ £ Cash flow from operating activities 10a 934,854 292,975 Returns on investments and servicing of finance 10b (122,163) (39,309) Taxation - - Capital expenditure and financial investment 10b (5,429,344) (1,288,293) CASH OUTFLOW BEFORE FINANCING (4,616,653) (1,034,627) Financing 10b 4,169,204 (7,990,904) DECREASE IN CASH IN THE PERIOD (447,449) (9,025,531) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) 2004 2003 Notes £ £ Decrease in cash in the period (447,449) (9,025,531) Change in net debt resulting from cash flows (7,597,153) (7,144,431) MOVEMENT IN NET (DEBT)/FUNDS IN PERIOD (8,044,602) (1,881,100) NET FUNDS AT 1 AUGUST 1,098,814 2,979,914 NET (DEBT)/FUNDS AT 31 JULY 10c (6,945,788) 1,098,814 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2004 1 ACCOUNTING POLICIES The above results for the year ended 31 July 2004 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 2003. 2 EXCEPTIONAL ITEMS 2004 2003 £ £ Termination payments 20,246 - Professional fees re bid approach 38,600 - Director's compensation for loss of office 68,561 64,287 Loss on disposal of Swindon freehold - 400,901 127,407 465,188 Exceptional costs of £127,407 arose from termination payments to the former finance director and senior managers, and all associated fees, as well as professional fees relating to the approach to the Group. 3 TAXATION There is no Corporation Tax or deferred tax charge due to the availability of accumulated losses. The tax assessed is lower than the standard rate of corporation tax in the UK (30%). The differences are explained below: 2004 2003 £ £ Loss on ordinary activities before tax (169,104) (430,484) Loss on ordinary activities multiplied by the standard rate of (50,731) (129,145) corporation tax in the UK of 30% (2002 - 30%) Expenses not deductible for tax purposes 7,492 18,084 Capital allowances for period in excess of depreciation (52,506) (96,540) Accounting loss on disposal of capital assets - 121,223 Losses carried forward 95,745 86,378 Current tax charge for the period - - The Group has revenue tax losses of approximately £2.7 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. Future tax charges may be affected by the degree to which deferred tax assets are subject to recognition in the future. 4 EARNINGS PER ORDINARY SHARE The calculations of earnings per share are based on the following profits and numbers of shares. 2004 2003 £ £ Loss for the financial year before exceptional items (41,697) 34,704 Loss for the financial year (169,104) (430,484) 2004 2003 No. of shares No. of shares Weighted average number of shares 26,300,997 27,341,193 For basic earnings per share Exercise of share options 1,135,584 1,169,855 For diluted earnings per share 27,436,581 28,511,048 The exercise of share options would give rise to a reduction in the losses per share. This is not considered to be dilutive. 5 INTANGIBLE FIXED ASSETS GROUP Purchased Goodwill Total £ Cost 1 August 2003 485,093 Additions - 31 July 2004 485,093 Amortisation 1 August 2003 77,515 Charged in year 24,255 31 July 2004 101,770 Net book value 31 July 2004 383,323 31 July 2003 407,578 6 INVESTMENTS COMPANY Shares in subsidiary undertakings £ Cost At 1 August 2003 and 31 July 2004 Lok'nStore Limited 214,563 The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in England and Wales: Subsidiary undertakings Class of % of shares held shareholding Directly Indirectly Nature of business Lok'nStore Limited Ordinary 100 - Self-storage Lok'nStore Trustee Limited Ordinary - 100 Trustee Company 7 SHARE CAPITAL 2004 2003 £ £ Authorised: 35,000,000 ordinary shares of 1p each (2002: 35,000,000) 350,000 350,000 Allotted, issued and fully paid: 25,048,144 ordinary shares of 1p each (2003: 28,468,693) 250,481 284,687 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 its corresponding conversion into a distributable reserve. On 23 March 2004,the Group purchased 3,420,549 of its Ordinary Shares of 1p for cancellation at a price of 112p per Ordinary Share leaving ongoing authority to make market purchases of up to 5,845,299 of its Ordinary Shares. The authority expires on 26 May 2005, this being 18 months after the annual general meeting at which the authority to purchase the shares was granted. 8 RESERVES Profit and Total Other Capital loss £ Share Merger Distributable Redemption account premium reserve reserve reserve £ £ £ £ £ 1 August 2003 9,912,447 6,295,295 - - (1,267,201) 14,940,541 Cancellation of share premium (9,907,951) - 9,907,951 - - - Purchase of own shares - - (4,004,949) 34,205 - (3,970,744) Exercise of Share Options 17,000 - - - - 17,000 Loss for the - - - - (169,104) (169,104) year 31 July 2003 21,496 6,295,295 5,903,002 34,205 (1,436,305) 10,817,693 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 ESOP SHARES Group Group Group Group 2004 2003 2004 2003 Number Number £ £ 1 August 2003 1,127,500 127,500 1,023,886 172,917 Purchased in the - 1,000,000 - 850,967 year Sold in the year (500,000) - (514,300) - 31 July 2004 627,500 1,127,500 509,586 1,023,886 The ESOP shares are held by the employee benefit trust. The disposals in the year arose from the Group's buyback of shares. 10 CASH FLOWS 2004 2003 £ £ a Reconciliation of operating profit to net cash inflow from operating activities Operating (loss) / profit (5,733) 12,903 Depreciation 664,153 621,835 Amortisation 24,255 24,254 Increase in stocks (2,097) (38,816) Increase in debtors (420,932) (271,677) Increase / (decrease) in creditors 675,208 (48,710) Exceptional Item - (6,814) Net cash flow from operating activities 934,854 292,975 b Analysis of cash flows for headings netted in the cash flow 2004 2003 £ £ Returns on investments and servicing of finance Interest received 36,950 61,748 Interest paid (158,319) (97,654) Interest element of finance lease rental payments (794) (3,403) Net cash outflow for returns on investments and (122,163) (39,309) servicing of finance Capital expenditure and financial investment (5,429,644) (2,324,045) Purchase of tangible fixed assets Proceeds from sale of tangible fixed assets 300 1,035,752 Net cash outflow for capital expenditure and (5,429,344) (1,288,293) financial investment Financing 7,600,000 (7,130,998) Bank loans Capital element of finance lease rental payments (2,847) (13,433) Exercise of share options 17,000 4,496 Purchase of ESOP shares - (850,967) Purchase of own shares (incl. costs) (3,444,949) - Net cash inflow / (OUTFLOW) from financing 4,169,204 (7,990,704) c Analysis of net debt At Other non At 31 July 2003 Cash flow Cash 31 July 2004 £ £ changes £ £ Cash at bank and in hand 1,101,809 (447,448) - 654,361 Debt due after 1 year - (7,600,000) - (7,600,000) Finance leases 2,995) 2,847 - (148) Total 1,098,814 (8,044,602) - (6,945,788) This information is provided by RNS The company news service from the London Stock Exchange

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