Interim Results

Lok'n Store Group PLC 24 April 2006 24 April 2006 LOK'NSTORE GROUP PLC ('Lok'nStore' or 'the Group') Interim Results for the six months to 31 January 2006 Lok'nStore Group Plc, one of the leading companies in the fast-growing self-storage market, which operates 21 freehold and leasehold storage centres in the South East, announces interim results for the six months ended 31 January 2006. Highlights • Turnover increased by 10.2% to £4.28 million (£3.89m: six months to 31.1.05) • Store EBITDA up 23% to £1.517 million (six months to 31.01.05: £1.233 million) • Group EBITDA up 32% to £906,759 (six months to 31.01.05: £688,784) • Operating profit up 59% to £510,975 (operating profit £320,261: six months to 31.01.05) • Profit before tax of £153,524 up 102% (Profit £75,903: six months to 31.01.05) • Successfully opened two new large freehold stores in Farnborough & Crayford adding 127,000 sq ft or 16% to capacity • The new store in Farnborough is Lok'nStore's first purpose-built site Andrew Jacobs, Chief Executive, commented: 'Lok'nStore's market position, leading brand and increasing balance sheet strength leaves us well positioned to take advantage of this under-developed market. There are attractive opportunities to grow the number of stores, and to improve margins by enlarging their average size. We are pleased with current trading, and encouraged by the early progress in our newly opened Farnborough and Crayford stores, which create a model for the future. We therefore believe that there is an opportunity to further increase the value of the business by accelerating the development of new stores.' For further information, please contact: Lok'nStore Group plc Andrew Jacobs, Chief Executive Today: 020 7831 3113 Ray Davies, Finance Director Thereafter: 01252 521010 Financial Dynamics Billy Clegg Tel: 020 7831 3113 Jonathan Brill CHAIRMAN'S STATEMENT Overview I am pleased to report another period of steady progress for the Group. In December we opened our new freehold store in Crayford (south-east London), and at the end of January we opened our new freehold store next to the M3 at Farnborough (Hampshire). We have also moved all of our head office staff to new offices based at the Farnborough store. During the period under review turnover growth resulted in geared profit growth at all levels as we continued to fill our existing centres. The operation is showing encouraging growth of earnings before interest, tax, depreciation and amortisation (EBITDA) with the stores producing over £1.5 million in the period. The Board remains committed to finding high quality self-storage sites such as the new stores at Farnborough and Crayford, whilst examining profitable opportunities to enhance the value of the existing stores. In this regard we continue to make good progress at our Kingston, Reading and Poole sites. We continue to believe that the South East of England presents the greatest opportunity for the Group, and our site acquisition strategy remains driven by profitability, site location and visibility. We are encouraged by the early success of the Farnborough store as a model for rolling out future stores. We therefore believe that there is an opportunity to further increase the value of the business by accelerating our growth rate. Our priorities remain: • improving the operating performance of existing stores • maximising the potential value of existing stores • increasing the number of stores • optimising the group's capital structure Improving the operating performance of existing stores Turnover Growth Turnover for the six months to 31 January 2006 increased by 10.2% to £4.28 million with stores in all age brackets contributing to this growth (£3.89 million: six months to 31.01.2005). Excluding the rental income foregone by expanding the Poole store turnover grew by 12.4%. Trading is following its usual pattern with a strong spring pick-up. Annualised revenues have risen to £9.25 million at time of writing. We are encouraged by the trading environment since the period end, as well as the early results from the new Farnborough and Crayford stores. The Group achieved an operating profit of £510,975 up 59.5%, after taking account of the development and launch of our new Farnborough & Crayford stores. This compares with an operating profit for the Group of £320,261 for the corresponding 2005 period. The Group made a pre-tax profit for the period of £153,524 up 102% from the £75,903 profit for the corresponding period in 2005. Basic earnings per share was 0.63p per share (2005: 0.31p per share). Demonstrating the continued growth of cash generation, store EBITDA was up 23% to £1.517 million for the period (six months to 31.01.2005: £1.233 million). Packing materials, insurance and other sales broadly kept pace with storage income at 7.4% of turnover, an increase of 11.3% over the period. At the period end, the number of customers had risen to 6,703 from 5,790 in January 2005, an increase of 15.8% over the year. The business handled 3,669 ' move-ins' during the period compared to 3,593 in the corresponding period in 2005. The total area let increased by 6.7% to 521,739 sq. ft (31.01.2005: 489,123 sq. ft). The amount of fitted space occupied increased by 12.6% to 445,228 (31.01.2005: 395,477 sq. ft). Maximising the potential value of existing stores We now have 21 stores trading. 11 of these are freehold accounting for 56.5% of total space, and 10 are leasehold. We have previously reported receiving planning permission for a high density residential development at our Kingston site. This was subject to the signing of the Section 106 Agreement with the local authority which stipulates the developers financial and other obligations to the local authority. I am delighted to report that this agreement has now been signed. This enhances the Group's ability to realise the extra value embedded in this site. In Reading we have now received a planning permission for a new store on our land immediately across the road from our existing Store. This will enable us, in due course, to develop a prominent new self-storage centre providing approximately 55,000 sq ft of storage space on the site, an increase of around 14,000 sq ft over the existing site. In September we opened the additional 12,000 sq. ft of space which became available when we acquired the freehold of our Poole Centre. This took the size of our Poole store to approximately 64,000 sq ft of storage space, and this extra space continues to fill up. We continue to explore options such as these to create extra value at both our freehold and leasehold operations. Increasing the number of stores During the period we opened new centres in Crayford in December 2005, and in Farnborough at the end of January 2006. They are both located in attractive markets with high visibility and provide 127,000 sq. ft of storage space. This takes the total number of our centres to 21 comprising 11 freehold stores and 10 leasehold stores with a total of 920,000 sq. ft. of space. It is important to recognise that these two new stores are larger than Lok'nStore's average size of around 42,000 ft per store, and add 16% to total space, which combined with the fact that they are both freeholds and prominent, high specification buildings adds significantly to the potential margins they are capable of achieving. This in turn positively impacts on the potential margins of the Group overall. The successful development and opening of the Farnborough centre which is the first purpose built centre for Loknstore represents an evolution of the business model creating value through larger new build centres. It is the first centre where Lokn'Store has managed the process of buying the land, gaining planning permission, building, fitting and operating the store. With its prominent design and position adjacent to the M3 motorway it will help to raise the profile of the whole Lok'nStore brand. I would like to take this opportunity to thank all those members of the Lok'nStore team for its prompt construction and opening. Our objective is to increase the number of Lok'nStore centres within the current geographical coverage of South-East England. We are continuously reviewing opportunities to buy, to build, and to lease new stores. Farnborough and Crayford provide the business with a model which can be replicated in rolling out future stores. We believe that there is an opportunity to further increase the value of the business by accelerating our growth rate. Optimising the group's capital structure Financial strength and balance sheet efficiency Capital expenditure during the period totalled £4.8 million of which £4.2 million is accounted for by Farnborough and Crayford, and this is reflected in the increase in tangible assets from £18,611,312 to £24,405,504. At 31 January 2006, the Group had cash balances of £0.63 million (31 January 2005: £0.55 million) and £13.28 million of borrowings representing gearing of 116% on net debt of £12.6m million (31 July 2005: 66%). Gearing is 49% when calculated taking account of the uplift in market values of properties arising from the January 2005 independently verified valuations. New Head office In January 2006, we moved the Lokn'Store head office from our Kingston centre to a new purpose built office in our Farnborough store. This has improved coordination and communication within the Company, and particularly amongst our property and other functional management previously dispersed around our various different offices. All head office staff now operate from Farnborough. We have also incorporated a new conference room which can accommodate all our training requirements for the foreseeable future. We have reduced outgoings, increased the regularity of training and improved contact between head office and the stores by bringing staff to head office for regular training. Our people At 31 January 2006, we had 98 employees and I would like to thank them all for their contribution during the period. Outlook Lok'nStore's market position, leading brand and increasing balance sheet strength leaves us well positioned to take advantage of this under-developed market. There are attractive opportunities to grow the number of stores, and to improve margins by enlarging their average size. We are pleased with current trading, and encouraged by the early progress in our newly opened Farnborough and Crayford stores, which create a model for the future. We therefore believe that there is an opportunity to further increase the value of the business by accelerating the development of new stores. Simon Thomas Chairman 24 April 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six months ended 31 January 2006 Notes Unaudited Audited Six months Six months Year 31 January 31 January 31 July 2006 2005 2005 £ £ £ TURNOVER Continuing operations 4,281,574 3,885,117 7,774,541 Operating expenses (3,770,599) (3,564,856) (7,167,580) OPERATING PROFIT 510,975 320,261 606,961 Loss on disposal of fixed assets (980) - - Interest receivable 14,859 - 35,898 Interest payable (371,330) (244,358) (528,534) PROFIT ON ORDINARY CTIVITIES BEFORE TAXATION 153,524 75,903 114,325 Taxation 3 - - - PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 153,524 75,903 114,325 EARNINGS PER SHARE Basic 5 0.63 p 0.31 p 0.47 p Fully diluted 5 0.59 p 0.28 p 0.44 p There are no other recognised gains or losses. CONSOLIDATED BALANCE SHEET 31 January 2005 Notes Unaudited Audited 31 January 31 January 31 July 2006 2005 2005 £ £ £ FIXED ASSETS Intangible assets 346,941 371,196 359,068 Tangible assets 24,405,504 18,611,312 20,032,760 24,752,445 18,982,508 20,391,828 CURRENT ASSETS Stock 102,221 87,443 88,648 Debtors 1,535,076 1,296,618 1,684,793 Cash at bank and in hand 631,004 550,545 424,738 2,268,301 1,934,606 2,198,179 CREDITORS: Amounts falling due within one year (2,876,955) (2,601,913) (3,736,384) NET CURRENT LIABILITIES (608,654) (667,307) (1,538,205) TOTAL ASSETS LESS CURRENT LIABILITIES 24,143,791 18,315,201 18,853,623 CREDITORS: Amounts falling due after more than one year (13,279,244) (7,650,000) (8,150,000) 10,864,547 10,665,201 10,703,623 CAPITAL AND RESERVES Called up share capital 4 250,711 250,711 250,711 Share premium 59,376 51,976 51,976 Capital redemption reserve 34,205 34,205 34,205 Merger reserve 6,295,295 6,295,295 6,295,295 Other distributable reserve 5,903,002 5,903,002 5,903,002 Profit and loss account (1,168,456) (1,360,402) (1,321,980) ESOP shares (509,586) (509,586) (509,586) SHAREHOLDERS' FUNDS 10,864,547 10,665,201 10,703,623 CONSOLIDATED CASH FLOW STATEMENT For the six months ended 31 January 2005 Notes Unaudited Audited Six months Six months Year 31 January 31 January 31 July 2006 2005 2005 £ £ £ Cash flow from operating activities (6a) 118,270 870,510 1,983,832 Returns on investments and servicing of finance (290,284) (251,115) (500,901) Taxation - - - Capital expenditure and financial investment (4,758,364) (804,751) (2,293,945) CASH OUTFLOW BEFORE FINANCING (4,930,378) (185,356) (811,014) Financing 5,136,644 81,540 581,392 INCREASE / (DECREASE) IN CASH IN THE PERIOD 206,266 (103,816) (229,622) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) Notes 31 January 31 January 31 July 2006 2005 2005 £ £ £ Increase / (Decrease) in cash in the period 206,266 (103,816) (229,622) Change in net debt resulting from cash flows (5,129,244) (49,851) (549,852) MOVEMENT IN NET DEBT IN PERIOD (4,922,978) (153,667) (779,474) NET DEBT BROUGHT FORWARD (7,725,262) (6,945,788) (6,945,788) NET DEBT CARRIED FORWARD 6b (12,648,240) (7,099,455) (7,725,262) NOTES TO THE INTERIM RESULTS 1. BASIS OF PREPARATION The interim results have been prepared on the basis of the accounting policies as set out in the statutory financial statements for the year ended 31 July 2005. This is the same basis as will be applied at the year-end. The interim results, which were approved by the Directors on 21 April 2006, are unaudited but have been reviewed in accordance with Auditing Practices Board bulletin ' Review of Interim Financial Information' by the auditors. The interim results do not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. Comparative figures for the year ended 31 July 2005 are an abridged version of the Group's full accounts, which carry an unqualified audit report, do not contain a statement under section 237(2) or (3) of the companies act and have been delivered to the Registrar of Companies. 2. MARKET VALUATION OF FREEHOLD LAND AND BUILDINGS On 31 January 2005, professional valuations were prepared by external valuers, Cushman & Wakefield Healey & Baker, in respect of all trading freehold land leasehold properties as operational self-storage businesses. The freehold site at Farnborough, acquired on 30 July 2004 was not valued on this occasion. This Report was prepared on the basis of Market Value/Existing Use Value, having regarded its trading potential as appropriate, in accordance with RICS Appraisal and Valuation Standards but on the special assumption that any potential for residential development was excluded. The Report indicates a total for properties valued of £31.84 million. Including Farnborough, (NBV £1.76 million as at 31.01.05), this gives a total value of properties held of £33.6 million as at 31.01.05. (NBV £18.4 million as at 31.01.05). These valuations do not account for any further uplift in values, which would result from the planning permission achieved for housing at the Kingston site, any successful outcome of the planning application for housing at the Reading site, or any capital expenditure since 31.01.05. While the Company does not envisage routinely revaluing its properties it will do so when appropriate. 3. TAXATION There is no charge to corporation tax for the Group due to the availability of brought forward trading losses. No value is ascribed to the Group's tax losses, as their recovery in the foreseeable future is considered to be uncertain. 4. SHARE CAPITAL Unaudited Unaudited Audited 31 Jan 2006 31 Jan 2005 31 Jul 2005 £ £ £ Authorised: 35,000,000 ordinary shares of 350,000 350,000 350,000 1p each Allotted, issued and fully paid: 25,071,144 ordinary shares of 1p each 250,711 250,711 250,711 Authority to make market purchases of its shares Following approval by shareholders of a special resolution at the AGM on 1 December 2005, the company has authority to make market purchases of up to 5,845,299 shares. The authority expires at the conclusion of the next AGM, but is expected to be renewed at the next annual general meeting. 5. EARNINGS PER ORDINARY SHARE The calculation of earnings per ordinary share is based on the profit for the period of £153,524 (year to 31 July 2005 - profit of £114,325, period to 31 January 2005 - profit of £75,903) and on the weighted average number of shares in issue during the period of 24,443,644 shares (31 July 2005 - 24,432,491 shares; 31 January 2005 - 24,421,519). Fully diluted earnings per share includes shares held under the directors' option scheme and is based on a profit for the period of £153,524 (period to 31 July 2005 - profit of £114,325, period to 31 January 2005 - profit of £75,903) and on a weighted average number of shares during the period of 25,915,309 shares (31 July 2005 - 25,847,179 shares; 31 January 2005 - 26,900,125 shares). 6. CASH FLOWS Unaudited Audited 31 January 31 January 31 July 2006 2005 2005 £ £ £ (a) Reconciliation of operating profit to net cash flow from operating activities Operating profit 510,975 320,261 606,961 Depreciation 384,638 356,397 728,522 Amortisation 12,127 12,126 24,255 (Increase) / Decrease in stocks (13,573) 16,437 15,232 Decrease/(Increase) in debtors 149,717 657,781 263,089 (Decrease)/Increase in creditors (925,614) (492,492) 345,773 Net cash flow from operating activities 118,270 870,510 1,983,832 At Other non- At 31 July 2005 Cash flow cash changes 31 Jan 2006 £ £ £ £ (b) Analysis of net funds/ (debt) Cash at bank and in hand 424,738 206,266 - 631,004 Debt due after one year (8,150,000) (5,129,244) - (13,279,244) Finance leases - - - - TOTAL (7,725,262) (4,922,978) - (12,648,240) INDEPENDENT REVIEW REPORT TO LOK'N STORE GROUP PLC Introduction We have been instructed by the company to review the financial information set out on pages 6 to 11 and we have read the other information in the interim statement and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of their interim statement and for no other purpose. We do not, therefore, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Directors' responsibilities The interim statement, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Interim Statement in accordance with the Alternative Investment Market Rules which require that the accounting policies and presentation applied to the interim figures must be consistent with those that will be adopted in the company's annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board as if that Bulletin applied. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 January 2006. BAKER TILLY Chartered Accountants 2 Bloomsbury Street London WC1B 3ST 24 April 2006 This information is provided by RNS The company news service from the London Stock Exchange

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