Lok N Store Regulatory News (LOK)

28 Apr 2008 07:00

Lok'n Store Group PLC28 April 2008 28 April 2007 LOK'NSTORE GROUP PLC ("Lok'nStore" or "the Group") Interim Results for the six months to 31 January 2008 Lok'nStore Group Plc, a leading company in the fast-growing UK self-storagemarket announces interim results for the six months ended 31 January 2008. Theseare the first interim results presented under International Financial ReportingStandards (IFRS') and the first after the successful sale of the Kingston andWoking Stores at the end of the last financial year. Where reference is madebelow to 'like for like' comparisons this excludes the Kingston & Woking storesfrom the 2007 figures for comparative purposes. Financial Highlights 1. • Turnover £5.52 million - (£5.30 million: six months to 31.1.07) up 13% on a like for like basis 2. • Group EBITDA £1.42 million - (£1.44 million: six months to 31.01.07) up 18.2 % on a like for like basis 3. • Operating profit £748,647 - (£769,549: six months to 31.01.07) up 35.5% on a like for like basis 4. • Adjusted NAV * £2.70 unchanged over period ** (31 July 2007: £2.70, 31 January 2007: £2.02) 5. • First interim dividend proposed - 0.33 pence per share Operational Highlights 6. • Store EBITDA £2.34 million (£2.18 million: six months to 31.01.07) up 20.3% on a like for like basis 7. • Store EBITDA margin increased to 42.6% (six months to 31.01.07: 41.3%, and like for like 39.6%) 8. • Unit prices achieved for self-storage up 6.3 % year-on-year Property Highlights 9. • Total estate 1.22 million sq ft. - up 17.7% over the six month period - 64% freehold/long leasehold 10. • Three new sites acquired 11. - North Harbour, Portsmouth 12. - Maidenhead, Berks 13. - Northampton 14. • High density residential planning permission achieved on Reading site 15. Main changes as a result of IFRS • Freehold property values have been recognised in the balance sheet at their full valuation levels increasing assets by £42.8 million to £86 million (historic cost £43.3million) • Comparative figures have been similarly restated. • A deferred tax provision of £14.7 million is shown which results from this revaluation surplus. 16. 17. * refer to page 5 for detailed calculation **January 2008 valuation is a Directors valuation based on 31 July 2007 external valuations) Andrew Jacobs, Chief Executive, commented "Lok'nStore has made good progress, both in the operating business and towardsour strategic objectives. Store EBITDA was up 20.3% on a like for like basis,and we acquired a record 3 new sites in the six month period. Lok'nStore has ahigh quality portfolio of self-storage assets. The resilient business model isunderpinned by a solid and growing asset base and we will continue to take fulladvantage of the opportunities within this exciting growth market." For further information: Lok'nStore Group plcAndrew Jacobs, Chief Executive Today: 020 7831 3113Ray Davies, Finance Director Thereafter: 01252 521010 Financial Dynamics Tel: 020 7831 3113Billy CleggJonathan Brill Chairman's Statement Overview I am delighted to report on another successful period for the Group, duringwhich we strengthened the operating performance of the business and acquired arecord 3 new sites. Lok'nStore has not experienced the turbulence seen in much of the property andfinancial markets throughout this reporting period. The business model remains arobust one with good operating margins, strong cash flow, and relatively lowgearing backed by substantial property assets. Current trading continues to beresilient reflecting the strong fundamentals and defensive qualities of theself-storage business model. Reassuringly we have not seen any increase in lateletters, bad debts or lien sales over the period. We are delighted to have obtained the planning permission for our valuableReading site which enables the execution of our strategy at Reading. This interim report is prepared under IFRS and includes the Group's IFRSaccounting policies together with further details on key performance measures inthe notes to the accounts. Sales and Earnings Growth Total turnover for the period was £5.52 million (£5.30 million: six months to31.1.07) a like for like * (Refer footnote below) increase of 13%' The Groupmade an operating profit for the period of £748,647 compared with £769,549 forthe corresponding 2007 period, a like for like increase of 35.5%. The Group madea pre-tax profit for the period of £216,020 (£317,253: six months to 31.1.07). The cash flow of the operating business has continued to grow with storeearnings before interest, tax, depreciation and amortisation (Store EBITDA) up7.3 % at £2.34 million (£2.18 million: six months to 31.01.07). This is a keyperformance indicator reflecting the effects of both the efficient operationalmanagement and the increasingly established nature of the existing portfolio. Ona like for like basis Store EBITDA increased by 20.3%. Performance of Stores January 2008Store analysis Over 100 to Under PipelineWeeks old 250 250 100 TotalSix months ended 31 January 2008Sales (£'000) 4,327 1,167 - - 5,494*Stores EBITDA (£'000) 1,834 506 - - 2,340EBITDA margin (%) 42.4 45.3 - - 42.6As at 31 January 2008Maximum Net Area ('000 sq ft) 765 209 0 248 1,222Freehold 8 2 0 3 13Leasehold 7 2 0 1 10Total stores 15* 4 0 4 23 * In respect of the Farnborough store (100 to 250 weeks) total storerevenue includes a contribution receivable from Group Head Office in respect ofthe space and facilities the store provides for the Head Office function. Thisincome to the Store and the corresponding charge to Head Office are netted downin the Group turnover figures. Footnote: Disposal of Kingston and Woking stores in last financial year At the end of the last financial year we sold our stores in Kingston and Woking.These two stores were mature cash producing stores with substantial turnoversbut with little scope for further growth or expansion. The sale proceeds ofaround £12.5 million are being invested in our new store pipeline and these newand typically larger stores will increase the profitability of the Group whenthey start trading in future years. Accordingly, in this narrative we have shown the comparative figures alsoexcluding Kingston and Woking from the previous period in order to showshareholders the growth of the underlying operating performance of the remainingassets over the period. Where a reference is made to 'like for like' comparisonsin this document this excludes the Kingston & Woking stores from the 2007figures for comparative purposes. You will see that we have, at a headlinelevel, largely or wholly replaced the turnover and profit foregone from thesedisposals over this period, a performance with which we are delighted. We wereable to relocate many of the vacating Kingston customers to our Sunbury store Sales and Earnings Growth (Cont) Our established stores have continued to grow alongside the more rapid salesincreases at our newer stores. On a like-for-like basis, our 15 stores tradingfor more than 250 weeks grew revenue by 7.4%. We believe there is room forfurther increases in these older stores with new space still to be fitted out inaddition to improving income from existing space. Our developing stores (ones with 100 to 250 weeks' trading) grew revenue by39.1% and we are delighted both by the continued growth of the more establishedstores as well by the success of the developing stores. With over a quarter of amillion sq ft now in the pipeline we look forward to substantial future growth. Overall EBITDA margins across all stores improved from 41.3% to 42.6% as theportfolio became more established. Like for like EBITDA margins for 6 monthsended 31 January 2007 were actually 39.6% and so the improvement in theunderlying margin of the business is more marked. Lok'nStore is taking an active approach to yield management with average pricesachieved for self-storage units increasing 6.3% year-on-year, comfortablybeating our target of 4% that we achieved last year. Average prices for allrented space increased 6.7% over the year reflecting both the increase inself-storage prices as well as the conversion from lower value uses intoself-storage space. The success of our yield management system underlies ourconfidence that we will be able to increase prices by more than inflation overthe medium term. Lok'nStore's average price for self-storage of £17.75 per sq ft per annum at 31January 2008 compared with the average of £20.63 for the UK industry (source:Self-Storage Association Survey 2007). We believe that there is room to continueto increase our prices while retaining our strong pricing position in themarket. Packing materials, insurance and other sales increased 4.6% over theyear on a like for like basis accounting for 7.4% of turnover (31.01.2007:7.8%). During the period we opened 46,000 sq ft of new space at the existingNorthampton and Fareham stores. We have successfully moved our PortsmouthCentral store into an extremely prominent purpose-built location. The new storeis 74% larger than the old and is already trading cash-generatively. Like for like 6 Months Ended Increase/ 6 Months Ended 6 Months Ended Headline Increase/ 31 January 2007 (decrease) 31 January 2008 31 January 2007 (decrease) Excl Kingston & Jan 08 vs Actual Headline Jan 08 vs Jan 07 Woking Jan 07 £ £ % £ %Turnover 5,523,329 5,298,485 4.2 4,888,629 13.0Store EBITDA 2,340,279 2,180,568 7.3 1,946,165 20.3EBITDA 1,421,592 1,437,570 (1.1) 1,203,168 18.2Operating profit 748,648 769,549 (2.7) 552,585 35.5(Loss)/profit before 216,021 317,253 100,289tax Growing Property Assets and Net Asset Value Following the Company's comprehensive external valuation at 31 July 2007, thefreehold and leasehold properties have not been externally valued during thisinterim six month period. Despite the turbulence in the overall property market demand for self-storageassets in the UK remains buoyant with the industry being seen as resilient to aneconomic downturn. Importantly, Shurgard who are the largest self-storagecompany in Europe with around 180 stores have recently announced a placing of51% of the company's shares with a US pension fund. This was achieved at a price"consistent" with the price of the IPO that was abandoned last spring due tomarket conditions. Having consulted with valuers, and based on market evidence both at theindividual property level and at the corporate level, the Directors considerthat the market for self storage assets has remained resilient to the downturnin property values generally. The Board consider that at present there is nomaterial difference in the value of our self-storage portfolio compared to thelast external valuation. The Board will continue to commission independent valuations on its tradingstores annually to coincide with its year-end reporting. Lok'nStore's freehold and operating leasehold properties were independentlyvalued by Cushman & Wakefield ('C&W') at £75.7 million as of 31 July 2007 (July2006: £66.6 million) compared to a net book value of £27.9 million (2006: NBV£25.2 million). As at 31 January 2008, following the grant of planningpermission at Reading, £525,000 was added to the value of the 2007 C&Wvaluation. Adding our stores under development at cost, our total propertyvaluation of £90.4 million (NBV £43.2 million) translates into a net assetvalue, of 270 pence per share, (31.07.2007: 270 pence). (31.01.2007: 202 pence).This translates into a net asset value of 213 pence per share after making fullprovision for deferred tax arising on the revaluations. (31.07.2007: 213 pence).(31.01.2007: 157 pence). The deferred tax liability arises on the revaluation of the properties and onthe rolled over gain arising from the disposal of the Kingston and Woking sites.In due course the site of the existing Reading store is likely to be sold withthe benefit of its permission for residential development and the proceeds willbe reinvested in our new store pipeline. It is not the intention of thedirectors to make any other significant disposals of operational self-storagecentres in the foreseeable future. At present, it is not envisaged that any taxwill become payable in the foreseeable future due to the trading losses broughtforward and the availability of rollover relief. Our operating leases remain as operating leases under IFRS (Refer section belowon the full effect of International Financial Reporting Standards ('IFRS')). Both historically and currently we have valued our freehold and our leaseholdproperty assets. We have reported this as information but have not previouslyincluded their values into the balance sheet although we base our Net AssetValue calculation ('NAV') upon it. Under IFRS, the valuation of our freeholdproperty assets, are now formally included in the Balance Sheet at their fairvalue, but the IFRS rules do not permit the inclusion of any valuation inrespect of our leasehold properties to the extent that they are classified asoperating leases. The value of our operating leases in the valuation totals£9.44 million. Instead, we have reported by way of a note the underlying valueof these leaseholds in future revaluations and adjusted our Net Asset Value ('NAV') calculation accordingly to include their value. This will ensurecomparable NAV calculations. Analysis of total property value 31 January 2008 31 January 2007 31 July 2007 Valuation Valuation Valuation £ £ £Stores valued by 'C&W, - Freehold * 66,800,000 60,550,000* 66,275,000Stores valued by 'C&W' - Leasehold * 9,440,000 6,040,000* 9,440,000Sub total 76,240,000 66,590,000 75,715,000Stores in development at cost 14,140,987 2,477,431 4,609,013Total 90,380,987 69,067,431 80,324,013 * Directors' valuation at 31 January 2008 and 31 January 2007 Adjusted Net Asset Value Per Share (adjusted NAV) 31 January 2008 31 January 2007 31 July 2007 £m £m £mAnalysis of net asset value (NAV)Total non-current assets 86,334,730 67,539,744 76,064,162Adjustment to include leasehold stores at valuationAdd: C&W leasehold valuation 9,440,000 6,040,000 9,440,000Deduct: leasehold properties and their fixtures & fittings at NBV (4,651,569) (4,171,354) (4,806,254) 91,123,161 69,408,390 80,697,908 Add: current assets 6,905,149 3,205,845 11,188428Less: current liabilities (3,373,106) (3,274,557) (6,000,253)Less: non-current liabilities (excluding deferred tax provision) (24,294,378) (16,724,392) (15,492,606) Adjusted net assets before deferred tax provision 70,360,826 52,615,286 70,393,477Deferred tax on revaluation surpluses (14,729,164) (11,614,619) (14,851,644) Adjusted net assets 55,631,662 41,000,667 55,541,833 Shares in issue Number Number NumberOpening shares 26,731,365 25,091,144 25,091,144 Shares issued for the exercise of options 27,500 1,626,600 1,640,221 Closing shares in issue 26,758,865 26,717,744 26,731,365Shares held in treasury (52,000) - -Shares held in EBT (627,500) (627,500) (627,500) Closing shares for NAV purposes 26,079,365 26,090,244 26,103,865 Adjusted net asset value per share after deferred tax provision 213 pence 157 pence 213 penceAdjusted net asset value per share before deferred tax provision 270 pence 202 pence 270 pence Net assets per share are net assets adjusted for the valuation of the freeholdand operating leasehold stores divided by the number of shares at the year-end.The shares currently held in the Group's employee benefits trust (own sharesheld) and in treasury are excluded from the number of shares. Planning Permission Granted at Reading I am delighted to report that on 8 January 2008, Lok'nStore obtained planningpermission for high-density residential development on the freehold site of itsexisting Reading store. The local planning committee originally rejected theapplication but the appeal has now been upheld and permission has been granted.The permission for 112 flats on the 0.66 hectare site has resulted in a furtheruplift in value. This has been reflected in the valuations above. The Company already has planning permission for a new larger 53,500 sq ft storeon its site opposite the existing store an increase in space of 29%. Theprominence and modern look of the new store with its distinctive orange liverywill position Lok'nStore in a highly visible and easily accessible locationadjacent to the A33 at the gateway to Reading. The existing self-storagebusiness will be moved into the new store once it is complete. In due course the site of the existing store site is likely to be sold with thebenefit of its permission for residential development and the proceeds will bereinvested in our new store pipeline. The two properties in Reading were held ata cost of £2.2 million. This project is part of our core strategy of continuallyreviewing and actively managing our operating portfolio, to ensure we aremaximising its value. This includes strengthening our distinctive brand,increasing the size of our stores and moving or selling stores or sites when itwill increase shareholder value. New Stores In October 2007, Lok'nStore purchased a freehold site in North Harbour,Portsmouth. The freehold site extends to almost two acres and will be used tobuild a new self-storage centre of around 60,000 sq ft. The store will front theA27 to the north of Portsmouth, is opposite a busy retail area and is prominentto the M27. Total net investment in the store is likely to be around £6 million. Additionally, we have acquired a new long leasehold site of 1.6 acres inMaidenhead, which may ultimately provide up to 83,000 square feet ofself-storage space when completed subject to planning permission. It isprominently located opposite a busy retail park. Total investment in the storewill be up to £7 million with opening scheduled for summer 2009. The lease termruns until April 2076. We have also acquired a 20 year leasehold site in Northampton which isprominently located close to the city centre, and will provide up to 36,000square feet of self-storage space. The existing building will be fitted andbranded on a short time scale and will open during summer 2008. Total investmentwill be around £900,000. These acquisitions will take the Company's total number of stores to 23. Adevelopment pipeline of 264,000 sq ft takes total space to over 1.22 millionsquare feet of which 64% is held freehold/long leasehold. I am pleased toreport that of these 23 stores 8 will be purpose built with a further 3 occupiedas brand new buildings showing the continuous upgrading of Lok'nStore's estate. We will open our new purpose-built store in Harlow in summer 2008 which provides69,000 square feet. Since the period end we have completed the move from our old leased PortsmouthCentral store to a new purpose built freehold store located immediately adjacentto the motorway spur into the middle of Portsmouth city. I am glad to note thatwe successfully moved 96% of the customers to the new store which is thereforetrading cash-generatively immediately. In this period we have recognised anexceptional cost of £29,945 relating to this move and the full cost of the movewill be taken to the Income Statement at the year end. Subject to market conditions, it is our current aim to acquire between two andfour stores per annum. A part of our strategy is to increase store size andnumber in order to increase profit margins. Our current average store size isnow around 53,000 sq ft up from just over 50,000 sq ft at 31 January 2007. Theexact timing of store openings will largely depend on market availability ofsites, and we will retain our disciplined but flexible approach to siteacquisition. We view the current slowing of the property investment market as apotential opportunity to increase the rate of growth of new stores. Financing and Treasury The operating cash outflow in the cash flow statement was distorted by £1.7million of VAT provided in creditors at 31 July 2007 arising on the disposal ofthe Kingston store. This was paid during the period. The Group is cash generative as demonstrated by its EBITDA earnings. The Groupalso draws from its five year revolving credit facility with Royal Bank ofScotland Plc to finance new site acquisitions, construction and store fit outs.This provides sufficient additional liquidity for the Group's immediateexpansion plans. Interest payable on the loan is on terms, paying between 1.25%and 1.35% over LIBOR. Non-utilisation charges are 0.25% on the value of theundrawn facility. Undrawn committed facilities at the period-end amounted to£20.31 million net of funds held on treasury deposit. The facility is secured onthe existing property portfolio. Turbulence in the capital and debt markets caused LIBOR rates to fluctuatematerially with some sharp upward spikes. This resulted in the businessincurring higher interest charges on the revolving loans rolled over during theperiod. Towards the end of the period LIBOR rates had settled to a level whichdelivered an 'all in rate' to the Group at 31 January 2007 of 6.82% against a 'all-in' high of 7.9 % and an 'all-in' average since July 2007 of 7.38 %. During the period the Group complied with all debt covenants. Capital expenditure during the period totalled £11.26 million, which includesthe acquisition of the freehold site at North Harbour, Portsmouth and theacquisition at Maidenhead. Ongoing store construction at Portsmouth Central (£1million) and Harlow (£1.36 million) added £2.36 million. The additions tofixtures and fittings of £1.57 million include fit-outs at the PortsmouthCentral, Northampton, and Fareham stores. This is reflected in the increase inproperty, plant and equipment to £86 million (£43.25 million NBV). (31.01.2007:£67.2 million: NBV £28.5 million). In December 2007, the Group received £4.14million representing the balance due, plus accrued interest, following the saleof the Kingston store in June 2007 for £10 million. At 31 January 2008, the Group had cash balances of £4.78 million (31 January2007: £1.35 million) and £24.5 million of borrowings representing gearing of86.4% on net debt of £19.69 million (31 July 2007: 128%). Gearing is 39.3% whencalculated taking account of the combined effect of the uplift in market valuesof properties arising from the July 2007 valuations together with investment innew properties since that date (31.01.2007:39.4%).After adjusting for the upliftin value of Leaseholds which are stated at NBV in the balance sheet, gearing is36.1%. (31.01.2007:37.6%). Dividend In respect of the current year, the directors propose that an interim dividendof 0.33 pence per share will be paid to the shareholders on 10 June 2008 toshareholders on the register on 9 May 2008. The total estimated dividend to bepaid is £86,110 based on the number of shares currently in issue as adjusted fornet shares held in the Employee Benefit Trust (ESOP) and held on treasury. International Financial Reporting Standards ('IFRS'). The first full financial statements that the Group will report under IFRS willbe for the year ended 31 July 2008. Therefore Lok'nStore Group Plc has adoptedIFRS with effect from 1 August 2007. Consequently this interim report isprepared under IFRS and includes the Group's IFRS accounting policies togetherwith further details on key performance measures in the notes to the accounts. As IFRS comparative figures must be prepared for the year ended 31 July 2007,the date of transition to IFRS was 1 August 2006. Our interim results for theperiod to 31 January 2008 are presented under IFRS and include reconciliationsand explanations of differences between IFRS and UK GAAP in respect of keyreported numbers. This move to IFRS has not changed the underlying performanceand cash flow of the business but has a significant impact on the way in whichthe results are presented. The main changes for Lok'nStore are explained in Note 16 together with apresentation of the reconciliations and explanations of the main adjustmentsbetween previously reported interim and full year UK GAAP figures and restatedfigures under IFRS. Reconciliations of equity at 31 July 2007 and profit forthe year ended 31 July 2007 reported under UK GAAP and IFRS are also shown. Briefly the two main changes are the inclusion of freehold property at currentvalues on the balance sheet, and the inclusion in the accounts of a deferred taxcharge relating to these property value increases and disposals. The effect ofthese movements is shown in a newly presented "Consolidated Statement of Changesin Equity Statement". The profit on disposal of the Kingston and Woking storesshown in the year-end financial statements under UK GAAAP has been restated byreference to their values under IFRS. People At 31 January 2008, we had 108 employees. They are committed and motivated andhelp maintain the exemplary levels of friendly service that Lok'nStore providesto its customers. I would like to thank all of our staff for their commitment toour business and for their hard work. Outlook Lok'nStore has not experienced the turbulence seen in much of the property andfinancial markets throughout this reporting period. The business model remains arobust one with good operating margins, strong cash flow, and relatively lowgearing backed by substantial property assets. Current trading continues to beresilient reflecting the strong fundamentals and defensive qualities of theself-storage business model. Reassuringly we have not seen any increase in lateletters, bad debts or lien sales over the period. With unit prices achieved upby 6.3% year to year and enquiries picking up noticeably in recent weeksLok'nStore's well trained staff and loyal customers are creating a stableplatform for the remainder of the year. The three sites acquired so far this financial year add around 179,000 sq. feetto our development pipeline demonstrating our commitment to the continued growthof the business. With over a quarter of a million sq ft now in the pipeline welook forward to substantial future growth. Having obtained the planningpermissions for our valuable Reading sites we are looking forward to buildingand opening this exciting new store in due course. Our new Harlow and Northampton Central stores opening this summer and we lookforward to the rest of the year with enthusiasm. Simon ThomasChairman 25 April 2008 Consolidated Income Statement For the six months ended 31 January 2008 Notes Six Months Six Months Year Ended 31 Jan 2008 31 Jan 2007 31 July 2007 Unaudited Unaudited Unaudited Revenue - Continuing Operations 3 5,523,329 5,298,485 10,665,532Cost of sales (162,770) (169,597) (328,216) Gross profit 5,360,559 5,128,888 10,337,316 Administrative expenses (3,782,104) (3,557,475) (7,433,920)Share based payments (156,863) (133,843) (275,572)EBITDA 1,421,592 1,437,570 2,627,824 Depreciation based on historic cost (555,812) (526,086) (1,057,228)Additional depreciation based on revalued assets (117,133) (129,808) (235,307)Impairment of goodwill - (12,127) (24,254) (672,945) (668,021) (1,316,789)Operating profit 748,647 769,549 1,311,035 Costs of relocation of Portsmouth store (29,945) - -Profit on sale of properties - - 605,263 (29,945) - 605,263 Profit before interest 718,702 769,549 1,916,298 Interest receivable 230,813 29,976 147,461Interest payable (733,495) (482,272) (1,113,201) Profit on ordinary activities before taxation 216,020 317,253 950,558Taxation 4 32,797 75,855 (55,243) Profit on ordinary activities attributable to equity shareholders 248,817 393,108 895,315 Earnings per share 6Basic 0.95p 1.6p 3.5pFully diluted 0.93p 1.5p 3.4p Consolidated Statement of changes in Equity For the six months ended 31 January 2008 Share Share Other ESOP Treasury Revaluation Retained Capital Premium Reserves Shares Surplus Earnings Total £ £ £ £ £ £ £ £ (See note 13)1 August 2006 (Unaudited) 250,911 66,776 12,444,403 (509,586) - 39,482,295 (1,446,493) 50,288,306Deferred tax taken to equity on restatement under IFRS - - - - - (11,844,688) - (11,844,688)1 August 2006 (Unaudited) 250,911 66,776 12,444,403 (509,586) - 27,637,607 (1,446,493) 38,443,618Increase/(decrease) in assetvaluation - - - - - (637,092) - (637,092)Deferred tax recognised in equity 191,128 191,128Income and expense recognised directly in equity - - - - - (445,964) - (445,964)Profit for the period - - - - - - 393,108 393,108Transfer - - - - - (90,866) 90,866 -Total recognised income and expense - - - - - (536,830) 483,974 (52,856)Share based remuneration (options) - - 133,843 - - - - 133,843Exercise of share options 16,266 591,148 - - - - - 607,4141 February 2007 (Unaudited) 267,177 657,924 12,578,246 (509,586) - 27,100,777 (962,519) 39,132,019Effect of change in tax rate - - - - - 579,513 - 579,513Increase/(decrease) in asset valuation - - - - - 14,228,117 - 14,228,117Deferred tax recognised in equity - - - - - (3,685,442) - (3,685,442)Income and expense recognised directly in equity - - - - - 11,122,188 - 11,122,188Profit for the period - - - - - - 502,207 502,207Transfer - - - - - (7,116,264) 7,116,264 -Total recognised income and expense - - - - - 4,005,924 7,618,471 11,624,395Share based remuneration (options) - - 141,729 - - - - 141,729Exercise of share options 137 9,807 - - - - - 9,9441 August 2007 (Unaudited) 267,314 667,731 12,719,975 (509,586) - 31,106,701 6,655,952 50,908,087Increase/(decrease) in assetvaluation - - - - - (320,297) - (320,297)Deferred tax recognised in equity - - - - - 89,683 - 89,683Income and expense recognised directly in equity - - - - - (230,614) - (230,614) Profit for the period - - - - - - 248,817 248,817 - -Transfer - - - - - (84,321) 84,321 -Total recognised income and expense - - - - - (314,935) 333,138 18,203Share based remuneration (options) - - 156,863 - - - - 156,863Exercise of share options 275 30,313 - - - - - 30,588Purchase of shares for Treasury - - - - (95,728) - - (95,728)Dividend Paid (net) - - - - - - (174,782) (174,782)31 January 2008 (Unaudited) 267,589 698,044 12,876,838 (509,586) (95,728) 30,791,766 6,814,308 50,843,231 Consolidated Balance Sheet 31 January 2008 Unaudited Unaudited Unaudited 31 January 31 January 31 July 2008 2007 2007 £ £ £ Notes as restatedNon-current assets Goodwill 310,559 322,686 310,559Property, plant and equipment,fixtures and fittings 7 86,024,171 67,217,058 75,753,603 86,334,730 67,539,744 76,064,162Current assetsInventories 79,797 78,776 74,544Trade and other receivables 8 2,045,745 1,773,785 5,924,750Cash and cash equivalents 4,779,607 1,353,284 5,189,134 6,905,149 3,205,845 11,188,428 Total assets 93,239,879 70,745,589 87,252,590 Current liabilitiesTrade and other payables 9 (3,308,024) (3,228,402) (5,935,171)Provisions (65,082) (46,157) (65,082) (3,373,106) (3,274,559) (6,000,253) Non-current liabilitiesBank borrowings 10 (24,294,378) (16,724,392) (15,492,606)Deferred tax 11 (14,729,164) (11,614,619) (14,851,644) (39,023,542) (28,339,011) (30,344,250) Total liabilities (42,396,648) (31,613,570) (36,344,503) Net assets 50,843,231 39,132,019 50,908,087 EquityCalled up share capital 5 267,589 267,177 267,314Share premium 698,044 657,924 667,731Other reserves 13 12,876,838 12,578,246 12,719,975Retained earnings 6,814,308 (962,519) 6,655,952Treasury shares 15a (95,728) - -ESOP shares (509,586) (509,586) (509,586)Revaluation surplus 30,791,766 27,100,777 31,106,701Total equity attributable 50,843,231 39,132,019 50,908,087to equity holders of the parent Consolidated Cash Flow Statement For the six months ended 31 January 2008 Notes Unaudited Unaudited Unaudited Six months 31 Six months 31 Year 31 January January 2007 July 2007 2008 £ £ £Net cash from operating activities 14a (1,215,959) 1,151,015 5,001,126Investing activities Purchase of non-current assets (11,263,810) (3,597,709) (10,262,286)Sale of non-current assets 4,000,000 - 8,324,768Interest received 230,813 29,976 147,461Net cash used in Investing activities (7,032,997) (3,567,733) (1,790,057)Financing activitiesIssue of new ordinary shares(Share options) 30,588 607,414 617,357Increase in borrowings - bank loans 8,801,772 2,650,250 1,425,804Interest paid (722,421) (409,590) (987,024)Purchase of shares for treasury (95,728) - -Equity dividends paid (174,782) - -Net cash from financing activities 7,839,429 2,848,074 1,056,137Net (decrease)/increase in cash and (409,527) 431,356 4,267,206cash equivalents in the periodCash and cash equivalents at 5,189,134 921,928 921,928beginning of the periodCash and cash equivalents at 4,779,607 1,353,284 5,189,134end of the period Reconciliation of Net Cash Flow to Movement in Net Debt Notes Unaudited Unaudited Unaudited 31 January 31 January 31 July 2008 2007 2007 £ £ £(Decrease)/Increase in cash in the period (409,527) 431,356 4,267,206Change in net debt resulting from cash flows (8,819,282) (2,650,250) (1,525,954)Movement in net debt in period (9,228,809) (2,218,894) 2,741,252Net debt brought forward (10,461,064) (13,202,316) (13,202,316)Net debt carried forward 15b (19,689,873) (15,421,210) (10,461,064) Notes to the Interim Results 1 General information Lok'nStore plc is a company incorporated in the United Kingdom under theCompanies Act 1985. The address of the registered office is 1 London Wall,London EC2Y 5AB, UK. Copies of this Interim Statement may be obtained from theCompany's head office at 112, Hawley lane, Farnborough, Hants. GU14 8JE or theinvestor section of the Company's website at http://www.loknstore.co.uk 2 Basis of preparation The interim results for the half year ended 31 January 2008 have been preparedon the basis of the accounting policies expected to be used in the 2008Lok'nStore Group Plc Annual Report and Accounts and in accordance with therecognition and measurement principles of International Financial ReportingStandards ("IFRS") as endorsed by the European Union ('EU'). The disclosuresrequired by the IFRS 1 concerning the transition from UK GAAP to IFRS are givenin Note 15 which includes an analysis of how the balance sheet, incomestatements and cash flow statements prepared under UK GAAP have changed underIFRS. The interim results, which were approved by the Directors on 25 April2008 are unaudited but have been reviewed by the auditors in accordance withInternational Standard on Review Engagements (UK and Ireland) 2410 "Review ofthe Interim Financial Information performed by the independent Auditor of theEntity" issued by the Auditing Practices Board for use in the United Kingdom.The interim results do not constitute statutory financial statements within themeaning of section 240 of the Companies Act 1985. Comparative figures for the year ended 31 July 2007 have been extracted from thestatutory accounts for the Group for that period, amended to conform to the IFRSaccounting policies expected to be used in the 2008 Lok'nStore Group Plc AnnualReport and Accounts. Statutory accounts for the year ended 31 July 2007 wereprepared under UK GAAP carried an unqualified audit report, did not contain astatement under section 237(2) or (3) of the Companies Act and have beendelivered to the Registrar of Companies. Accounting policies Based upon the adoption of IFRS the directors have made assumptions about theaccounting policies expected to be applied, which are set out below but may besubject to some change and or to additional interpretation from the adopted IFRSthat will be effective when the first annual financial statements of the Groupfor the year ended 31 July 2008 will be prepared. Accordingly the accountingpolicies will only be finally determined at that time Basis of Consolidation The interim consolidated financial statements incorporate those of Lok'nStoreGroup plc and all of its subsidiary undertakings for the period. Subsidiariesacquired during the period are consolidated from the date that control passesand will continue to be consolidated until the date that such control ceases.All intra-group transactions, balances, income and expenses are eliminated onconsolidation. The acquisition of subsidiaries is accounted for using the purchase method. Thecost of the acquisition is measured at the aggregate of the fair values, at thedate of exchange, of assets given, liabilities incurred or assumed, and equityinstruments issued by the Group in exchange for control of the acquiree's , plusany costs directly attributable to the business combination. The acquiree'sidentifiable assets and liabilities are recognised at their fair values at theacquisition date. Goodwill arising on acquisition is recognised as an asset and initially measuredat cost, being the excess of the cost of the business combination over theGroup's interest in the net fair value of the identifiable assets, liabilitiesand contingent liabilities recognised. Property, Plant and Equipment Depreciation is provided on all property, plant and equipment other thanfreehold land at rates calculated to write each asset down to its estimatedresidual value evenly over its expected useful life as follows:- Freehold buildings over 50 year's straight lineLeasehold improvements over unexpired lease period or renewal termFixtures fittings and equipment 10% to 15% reducing balanceComputer equipment over two year's straight lineMotor vehicles 25% reducing balance Freehold trading stores are held in the balance sheet at fair value. Followingthe Company's comprehensive external valuation at 31 July 2007 the freehold andleasehold properties have not been externally valued during this six monthperiod, although it is the intention to do so at the next year-end at 31 July2008. Accordingly, at 31 January 2008 and 31 January 2007, the assets are statedat Directors' valuation. Leasehold stores remain as operating leases under IFRS. Leasehold improvementstogether with all of their related fit-out costs are carried at cost lessaccumulated depreciation in the Balance Sheet. The value of stores held undershort operating leases in the July 2007 valuation was £9.44 million. Assets in the course of construction are carried at cost, less any recognisedimpairment loss. Depreciation of these assets commences when the assets areready for their intended use. The assets' residual values, useful lives and methods of depreciation arereviewed and adjusted if appropriate on an annual basis. An item of property,plant and equipment is derecognised upon disposal or when no future economicbenefits are expected from its use or disposal. Purchased Goodwill Goodwill represents the excess of the purchase cost over the Group's interest inthe fair value of the identifiable assets and liabilities acquired. Goodwill isrecognised as an asset and reviewed for impairment at least annually. For the purposes of impairment testing, assets are grouped at the lowest levelsfor which there are separately identifiable cash flows, know as cash generatingunits, and goodwill is allocated to these units. If the recoverable amount ofthe cash generating unit is less than carrying amount of the unit, theimpairment loss is allocated first to reduce the carrying amount of any goodwillallocated to the unit and then to the other assets of the unit pro-rata on thebasis of the carrying amount of each asset in the unit. Impairment losses arerecognised immediately in the income statement and are not reversed in thesubsequent period. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discount totheir present value using a pre-tax discount rate that reflects current marketassessment of the time value of money and the risks specific to the asset forwhich the estimate of future cash flows have not been adjusted. Impairment of Property, Plant and Equipment At each balance sheet date, the Group reviews the carrying amounts of itsproperty, plant and equipment and finite life intangible assets to determinewhether there is any indication that those assets have suffered an impairmentloss. If any such indication exists, the recoverable amount of the asset isestimated in order to determine the extent, if any, of the impairment loss.Where it is not possible to estimate the recoverable amount of an individualasset, the Group estimates the recoverable amount of the cash-generating unit towhich the asset belongs. If the recoverable amount of an asset orcash-generating unit is estimated to be less than its carrying amount, thecarrying amount of the asset or cash-generating unit is reduced to itsrecoverable amount. An impairment loss is recognised immediately in the incomestatement. Where an impairment loss subsequently reverses, the carrying amountof the assets or cash-generating unit is increased to the revised estimate ofits recoverable amount, not to exceed the carrying amount that would have beendetermined had no impairment loss been recognised for the asset orcash-generating unit in prior years. A reversal of an impairment loss isrecognised immediately in the income statement. Leased Assets and Obligations Where assets are financed by leasing agreements that give rights approximatingto ownership ('finance leases'), the assets are treated as if they had beenpurchased outright. The amount capitalised is the present value of the minimumlease payments payable during the lease term. The corresponding leasingcommitments are shown as obligations to the lessor. Lease payments are treatedas consisting of capital and interest elements, and the interest is charged tothe profit and loss account in proportion to the remaining balance outstanding. All other leases are 'operating leases' and the annual rentals are charged tothe profit and loss account on a straight-line basis over the lease term. Investments Shares in subsidiary undertakings are considered long-term investments and areclassified as non-current assets. All investments are stated at cost. Provisionis made for any impairment in the value of non-current asset investments. Inventories Inventories are stated at the lower of cost and net realisable value. Netrealisable value is based upon estimated selling prices less any costs ofdisposal. Provision is made for obsolete and slow moving items. Financial Instruments Financial instruments are recognised on the Group's balance sheet when the Groupbecomes a party to the contractual provision of the instrument. Trade Receivables Trade receivables do not carry interest, are initially recognised at fair valueand are subsequently stated at amortised cost using the effective interest ratemethod, as reduced by appropriate allowances for estimated irrecoverableamounts. Estimated irrecoverable amounts are based on the ageing of thereceivable balances and historical experience. Individual trade receivables arewritten off when management deems them not to be collectible. Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand and call deposits, and othershort term highly liquid investments that are readily convertible to a knownamount of cash and are subject to an insignificant risk of changes in value. Trade Payables Trade payables are initially recognised at fair value and are subsequentlystated at amortised cost using the effective interest rate method. Financial Liabilities and Equity Instruments Financial liabilities and equity instruments issued by the Group are classifiedaccording to the substance of the contractual arrangements entered into. Anequity instrument is any contract that evidences a residual interest in theassets of the Group after deducting all of its liabilities and includes noobligation to deliver cash or other financial assets. Equity instrumentsissued by the Group are recorded at the proceeds received, net of direct issuecosts. Interest bearing loans and overdrafts are initially measured at fairvalue net of direct transaction costs and are subsequently measured at amortisedcost, using the effective interest rate method. Any difference between theproceeds net of transaction costs and the settlement or redemption of borrowingsis recognised over the term of the borrowing. Provisions Provisions are recognised when the Group has a present obligation as a result ofa past event which it is probable will result in an outflow of economic benefitsthat can be reliably estimated. Taxation Income tax expense represents the sum of the current tax payable and deferredtax. Current tax payable or recoverable is based on taxable profit for the year.Taxable profit differs from profit as reported in the income statement becausesome items of income or expense are taxable or deductible in different years ormay not be taxable or deductible. The Group's liability for current tax iscalculated using tax rates and laws that have been enacted or substantivelyenacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable in the futurearsing from the temporary differences between the carrying amounts of assets andliabilities in the financial statements and the corresponding tax bases used inthe computation of taxable profit. It is accounted for using the balance sheetliability method. Deferred tax liabilities are generally recognised for alltaxable temporary differences and deferred tax assets are recognised to theextent that it is probable that taxable profits will be available against whichdeductible temporary differences are utilised. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset realised, based on tax ratesthat have been enacted or substantively enacted by the balance sheet. Tax is charged or credited to the income statement, except when it relates toitems charged or credited directly to equity, in which case the tax is alsorecognised directly in equity. Retirement Benefits The amount charged to the income statement in respect of pension costs is thecontributions payable to the money purchase schemes in the year. Differencesbetween contributions payable in the year and contributions actually paid areshown as either accruals or prepayments in the balance sheet. Revenue Recognition Revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for goods and services provided inthe normal course of business, net of discount, VAT and other sales relatedtaxes. Sales of goods are recognised when goods are delivered and title has passed. Revenue from services provided is recognised on a time basis. EBITDA Earnings before Interest, tax, depreciation and amortisation ('EBITDA'), isdefined as profits from operations and after share based payments but beforecosts, as separately and specifically disclosed in the income statement, and alldepreciation charges, finance costs and taxation. Operating Profit Operating profit is defined as profits from operations and after share basedpayments but before costs, as separately and specifically disclosed in theincome statement, finance costs and taxation. Share-based payments The cost of providing share-based payments to employees is charged to the incomestatement over the vesting period of the related share options. The cost isbased on the fair value of the options determined using the Monte Carlo pricingmodel, which is appropriate given the vesting and other conditions attaching tothe options. The value of the charge may be adjusted to reflect expected andactual levels of vesting. Advantage has been taken of the exemption available in IFRS2 - Share-basedpayments to exclude share options granted before 7 November 2002. Employee Benefit Trust The Group operates an employment benefit trust and has de facto control of theshares held by the trust and bears their benefits and risks. The Group recordscertain assets and liabilities of the trust as its own. Finance costs andadministrative expenses are charged as they accrue. ESOP Shares The cost of own shares held by the employee benefit trust ('ESOP shares') isshown as a deduction from shareholders' funds. Earnings per share are calculatedon the net shares in issue. 3 Revenue and segmental information Revenue represents amounts derived from the provision of self-storageaccommodation and related services to customers outside the Group which fallwithin the Group's ordinary activities after deduction of trade discounts andvalue added tax. The Group's net assets, revenue and profit before tax areattributable to one principal activity, the provision of self-storageaccommodation and related services. These all arise in the United Kingdom. Six months ended Six months ended Year ended 31 January 2008 31January 2007 31 July 2007 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000Stores tradingSelf storage income 5,038,843 4,857,011 9,775,849Other storage related income 402,317 420,115 828,123Ancillary store rental income 21,359 21,359 42,718Management fees 11,113 - 3,403Sub-Total 5,473,632 5,298,485 10,650,093Stores under developmentNon-storage income 49,697 - 15,439 Total revenue 5,523,329 5,298,485 10,665,532 4 Taxation Unaudited Unaudited Unaudited six months six months Year 31 Jan 31 Jan 31 July 2008 2007 2007 £ £ £Current tax charge for the period - - -Deferred tax (credit)/charge for the period (32,797) (75,855) 55,243Total tax (credit)/charge for the period (32,797) (75,855) 55,243 No current tax charge arises due to the availability of excess tax lossesbrought forward. No deferred tax asset is recognised in relation to these excesslosses, due to the uncertainty as to the utilisation of the losses in theforeseeable future. Future tax charges may be affected by the degree to which deferred tax assetsare recognised in the future. 5 Share capital Unaudited Unaudited Unaudited six months six months Year 31 Jan 31 Jan 31 July 2008 2007 2007 £ £ £Authorised: 350,000 350,000 350,000 35,000,000 ordinary shares of 1p eachAllotted, issued and fully paid: 267,589 267,177 267,314 26,758,865 ordinary shares of 1p each Following approval by shareholders of a special resolution at the AGM on 7December 2007, the Company has authority to make market purchases of up to5,845,299 shares. The authority expires at the conclusion of the next AGM, butis expected to be renewed at the next AGM. 6 Earnings per ordinary share The calculation of earnings per ordinary share is based on the following profitand on the following weighted average number of shares in issue. Unaudited Unaudited Unaudited six months six months Year 31 Jan 31 Jan 31 July 2008 2007 2007 £ £ £Profit for the financial period 248,817 393,108 895,315 No of shares No of shares No of sharesWeighted average number of sharesFor basic earnings per share 26,113,131 25,250,423 25,670,204Dilutive effect of share options 676,338 1,733,817 673,980 26,789,469 26,984,240 26,344,183Earnings/ (loss) per share Basic 0.95p 1.6p 3.5pDiluted 0.93p 1.5p 3.4p Freehold and long Short Leasehold Fixtures, fittings Motor Total leasehold Property improvements and equipment Vehicles7 Property, plant andequipment £ £ £ £ GroupCost or valuation1 August 2006 18,527,700 1,595,576 9,557,776 60,406 29,741,458Revaluation at 38,942,217 - - - 38,942,217transition1 August 2006 b/fwd 57,469,917 1,595,576 9,557,776 60,406 68,683,675 Additions 2,415,736 139,433 1,042,543 - 3,597,712Revaluations (840,288) - - (840,288)31 January 2007 c/fwd 59,045,365 1,735,009 10,600,319 60,406 71,441,098 Depreciation1 August 2006 b/fwd 540,078 633,054 3,098,619 39,672 4,311,422Revaluation at (540,078) - - - (540,078)transition1 August 2006 b/fwd - 633,054 3,098,619 39,672 3,771,344Depreciation 203,196 71,215 379,022 2,461 655,894Revaluations (203,196) - - - (203,196)31 January 2007 c/fwd - 704,269 3,477,641 42,133 4,224,042 Net book value at 59,045,365 1,030,740 7,122,677 18,273 67,217,05831 January 2007 Net book value at 57,469,919 962.521 6,459,157 20,734 64,912,3311 August 2006 Cost or valuation1 February 2007 b/fwd 59,045,365 1,735,009 10,600,318, 60,406 71,441,098Additions 5,447,074 168,305 1,020,197 29,000 6,664,576Disposals (11,586,241) - (370,580) - (11,956,821)Revaluations 14,061,228 - - - 14,061,22831 July 2007 c/fwd 66,967,426 1,903,314 11,249,935 89,406 80,210,081 Depreciation1 February 2007 b/fwd - 704,269 3,477,641 42,133 4,224,042Depreciation 178,075 64,739 391,659 2,168 636,641Disposals (11,187) - (226,130) - (237,317)Revaluations (166,889) - - - (166,889)31 July 2007 c/fwd - 769,008 3,643,170 44,301 4,456,478 Net book value at 66,967,426 1,134,306 7,606,766 45,105 75,753,60331 July 2007Cost or valuation1 August 2007 b/fwd 66,967,426 1,903,314 11,249,935 89,406 80,210,081Additions 9,504,513 174,904 1,573,044 11,349 11,263,810Transfers - - - - -Revaluations (505,393) - - - (505,393)31 January 2008 C/fwd 75,966,546 2,078,218 12,822,979 100,755 90,968,499 Depreciation1 August 2007 b/fwd - 769,008 3,643,170 44,301 4,456,479Depreciation 185,096 77,842 405,877 4,130 672,945Transfers - - - - -Revaluations (185,096) - (185,096)31 January 2008 c/fwd - 846,850 4,049,047 48,431 4,944,328 Net book value at 31 75,966,546 1,231,368 8,773,933 52,324 86,024,171January 2008 The additions to freehold properties include the acquisition of the freeholdsite at North Harbour, Portsmouth totalling £4.45 million and the acquisition atMaidenhead totalling £2.51 million. The addition to fixtures and fittings of£1.57 million includes fit-outs at the Portsmouth Central, Northampton, andFareham stores. Market valuation of freehold and leasehold land and buildings Following the Company's comprehensive external valuation at 31 July 2007 whichindicated a total for properties valued of £75.7 million (NBV £27.9 million, thefreehold and leasehold properties have not been externally valued during thissix month period, although it is the intention to do so at the next year-end at31 July 2008. Accordingly, at 31 January 2008, the assets are stated atDirectors' valuation. As at 31 January 2008, following the grant of planningpermission at Reading, £525,000 was added to the value of the 2007 C&Wvaluation. The Directors consider, based on market evidence and opinionavailable that the market for self storage assets has remained resilient to thedownturn in property values generally and increasing yields seen in the widerproperty market and they consider that their should be no material difference atthis time compared to the last external valuation. That said, at this time it isunclear to the future direction of market values. 8 Trade and other receivables Unaudited Unaudited Unaudited six months six months Year 31 Jan 31 Jan 31 July 2008 2007 2007 £ £ £Due within one year:Trade receivables 802,469 802,077 768,833Other receivables 554,710 308,145 4,084,169Prepayments and accrued income 688,566 663,563 1,071,748 2,045,745 1,773,785 5,924,750 9 Trade and other payables Unaudited Unaudited Unaudited 31 Jan 31 Jan 31 July 2008 2007 2007 £ £ £Trade payables 413,450 582,664 1,142,276Taxation and social security costs 105,950 101,066 1,807,742Other payables 1,006,758 959,166 1,001,710Accruals and deferred income 1,781,866 1,585,506 1,983,443 3,308,024 3,228,402 5,935,171 10 Bank loans Unaudited Unaudited Unaudited 31 Jan 31 Jan 31 July 2008 2007 2007 £ £ £Bank loans repayable in more than2 years but not more than 5 years Gross 24,434,459 16,774,494 15,650,198Deferred financing costs (140,081) (50,102) (157,592)Bank loans repayable in more than 24,294,378 16,724,392 15,492,6062 years but not more than 5 years 11 Deferred tax 31 January 2008 31 January 2007 31 July 2007 £ £ £Provision at start of period 14,851,644 11,881,601 11,881,601Effect of reduction in tax rate - - (579,514)(Credit)/charge to income in the period (32,797) (75,855) 55,243Charge/ (credit) to equity in period (89,683) (191,127) 3,494,314Provision at end of period 14,729,164 11,614,619 14,851,644 The deferred tax liability arises on the revaluation of the properties and onthe rolled over gain arising from the disposal of the Kingston and Woking sites.In due course the site of the existing Reading store is likely to be sold withthe benefit of its permission for residential development and the proceeds willbe reinvested in our new store pipeline. It is not the intention of thedirectors to make any other significant disposals of operational self-storagecentres in the foreseeable future. At present, it is not envisaged that any taxwill become payable in the foreseeable future due to the trading losses broughtforward and the availability of rollover relief. 12 Share-based payment plans The Group operates an Enterprise Management Initiative ('EMI') approved and anunapproved share option scheme, the rules of which are similar in all materialrespects. The grant of options to executive directors and senior management isrecommended by the Remuneration Committee on the basis of their contribution tothe Group's success. The options vest after three years. The exercise price of the options is equal to the closing mid-market price ofthe shares on the trading day previous to the date of the grant. The exercise ofoptions awarded has been subject to the meeting of performance criteria gearedprimarily to sales growth with the key non-market performance condition beingthe achievement of £10 million annual turnover. Exercise of an option is subjectto continued employment. The life of each option granted is seven years. Thereare no cash settlement alternatives. The expected volatility is based on a historical review of share price movementsover a period of time, prior to the date of grant, commensurate with theexpected term of each award. The expected term is assumed to be six years whichis part way between vesting (3 years after grant) and lapse (10 years aftergrant). The risk free rate of return is the UK gilt rate at date of grantcommensurate with the expected term (i.e. six years). The total charge for the period relating to employer share-based payment schemeswas £156,863. (31.01.2007: £133,843), all of which relates to equity-settledshare-based payment transactions. 13 Other reserves Merger Other Capital Share-based Unaudited Reserve Distributable Redemption Payment £ Reserve Reserve Reserve Total £ £ £ £ 1 August 2006 6,295,295 5,903,002 34,205 211,901 12,444,403Share based remuneration(options) 133,843 133,84331 January 2007 6,295,295 5,903,002 34,205 345,744 12,578,246Share based remuneration(options) 141,729 141,7291 August 2007 6,295,295 5,903,002 34,205 487,473 12,719,975Share based remuneration(options) 156,863 156,86331 January 2008 6,295,295 5,903,002 34,205 644,336 12,876,838 The merger reserve represents the excess of the nominal value of the sharesissued by Lok'nStore Group Plc over the nominal value of the share capital andshare premium of Lok'nStore Limited as at 31 July 2001. 14 Cash flows Unaudited Unaudited Unaudited Six months Six months Year 31 January 31 January 31 July 2008 2007 2007 £ £ £(a) Reconciliation of net cash flows fromoperating activitiesProfit before interest 718,702 769,549 1,916,298Depreciation 672,945 655,894 1,292,535Profit on disposal of fixed assets - - (605,264)Impairment of goodwill - 12,127 24,254Share-based employee remuneration 156,863 133,843 275,572Operating cash flows before movementsin 1,548,510 1,571,413 2,903,395working capital(Increase)/decrease in inventories (5,253) (1,108) 3,124Decrease/ (increase) in trade and other (120,995) 256,325 98,018receivables(Decrease)/increase in payables (2,638,221) (675,615) 1,996,589Net cash flow from operating activities (1,215,959) 1,151,015 5,001,126 At 31 July Other non-cash At 31 JanuaryUnaudited 2007 Cash flow Changes 2008 £ £ £ £(b) Analysis of net debt Cash at bank and in hand 5,189,134 (409,527) - 4,779,607Debt due after one year (15,650,198) (8,819,282) - (24,469,480)Total (10,461,064) (9,228,809) - (19,689,873) 15 Post balance sheet events a) Purchase of treasury Shares During the period the Company purchased 52,000 of its own ordinary shares of 1peach for treasury. After the period end and in the period up to 21 February2008, the Company purchased in several tranches, a further 290,000 shares fortreasury. In total, 342,000 shares were acquired for treasury at an averageprice of £1.86. 16 Explanation of the transition to IFRS The first full annual consolidated financial statements that the Group willreport under IFRS will be for the year ended 31 July 2008. Our interim resultsfor the period to 31 January 2008 are presented under IFRS and includereconciliations and explanations of differences between IFRS and UK GAAP inrespect of key reported numbers. As IFRS comparative figures must be prepared for the year ended 31 July 2007,the date of transition to IFRS was 1 August 2006. Reconciliations of equity at31 July 2007 and profit for the year ended 31 July 2007 reported under GAAP andIFRS are shown below. This move to IFRS has not changed the underlyingperformance and cash flow of the business but has significantly impacted on theway in which the results are presented. The main changes for Lok'nStore are as follows: 18. • Our freehold trading stores are now held in the balance sheetat fair value, having previously been held at Historic Cost less accumulateddepreciation. 19. • The goodwill in our balance sheet is no longer subject to anamortisation charge for each period, but instead is been subject to an annualimpairment review. No adjustment has been made to the carrying value ofgoodwill in previous periods as the amortisation charge under UK GAAP was notmaterially different from the impairment charge determined from our impairmentreview. 20. • There are three main areas of deferred tax we have identified that are impacted by our adoption of IFRS: 1) Deferred Tax on Rolled Over Gains Lok'nStore has realised significant gains on the disposal of the Kingston andWoking stores and the proceeds are and will continue to be reinvested in newoperating properties. As such rollover relief will be claimed in respect of theentire gain. The tax liability deferred as a result of this is approximately£2.75 million at 28%. Under UK GAAP this need only be disclosed by way of a notein the accounts. However, under IFRS this balance is provided for as a deferredtax liability. 2) Deferred Tax on Revaluation Gains Under IFRS a deferred tax liability is recognised on the difference between costand the revalued amount of our freehold properties at 28% using current rates. 3) Deferred Tax on Share-based Payments Under UK GAAP deferred tax is recognised on share based payment charges to theextent that they give rise to a timing difference. Under IFRS, the potential taxrelief should be calculated by reference to the share price at the balance sheetdate, and then spread over the vesting period. Also under IFRS deferred taxshould be recognised on all share based payments whereas under UK GAAP deferredtax on options issued prior to November 2002 or which vested prior toapplication of the standard is not recognised. This has not however resulted inan adjustment as the resulting deferred tax asset has not been recognised, asexplained in note 7. This interim report is therefore prepared under IFRS and includes the Group'sIFRS accounting policies together with further details on key performancemeasures in the notes to the accounts. 16a Reconciliation of Equity Previously Reported Under UK GAAP To Equity UnderIFRS 31 January 2007 31 July 2007 1 August 2006 (Unaudited) (Unaudited) (Unaudited) £'000s £'000s £'000s Equity shareholders' funds under UK GAAP 12,031,242 22,551,039 10,806,011 Measurement and recognition IFRS adjustmentsRevaluation of trading properties 38,715,398 43,208,692 39,482,295Goodwill amortisation - - -Deferred tax (11,614,619) (14,851,644) (11,844,688) NET IFRS adjustments 27,100,779 28,357,048 27,637,607 Equity shareholders' funds under IFRS 39,132,021 50,908,087 38,443,618 16b Reconciliation of Profit Previously Reported Under UK GAAP to Profit UnderIFRS 31 January 2007 31 July 2007 (Unaudited) (Unaudited) £'000s £'000s Profit for the period under UK GAAP 483,974 10,852,098 Measurement and recognition IFRS adjustmentsShare options - -Goodwill amortisation / impairment - -Deferred tax credit / (charge) 38,942 (92,156)Reduction to profit on disposal of freehold properties - (9,629,320)carried at valuationAdditional depreciation arising on revaluation of Freehold (129,808) (235,307)properties Net IFRS adjustments (90,866) (9,956,783) Profit for the period under IFRS 393,108 895,315 Reconciliations To explain the impact of the transition, unaudited reconciliations have beenincluded that show the changes made to the balance sheets and income statementspreviously reported under UK GAAP. The consolidated cash flow statements are not affected by the transition from UKGAAP to IFRS other than presentational and formatting differences. Reconciliation of the UK GAAP consolidated balance sheet to the IFRSconsolidated balance sheet: 1 August 2006 Notes As at As at 1 August 2006 Measurement 1 August. 2006 UK GAAP Presentation & recognition IFRS Audited Differences Differences Unaudited £'000 £'000 £'000 £'000 Non-current assetsGoodwill & intangible assets 334,813 - 334,813Property, plant & equipment 25,430,037 - 39,482,295 64,912,332Trade & other receivables - - -Deferred taxation assets - - - - 25,764,850 - 39,482,295 65,247,145 Current assetsInventories 77,668 - - 77,668Trade & other receivables 2,002,769 - - 2,002,769Cash & cash equivalents 921,928 - - 921,928 3,022,365 - - 3,022,365 Total assets 28,787,215 - 68,269,510 Current LiabilitiesTrade & other payables (3,877,489) 55,305 - (3,822,184)Provisions - (55,305) - (55,305)Bank overdrafts & loans - - - (3,877,489) - - (3,877,489) Net current liabilities (855,124) - - (855,124) Non-current liabilitiesBank loans (14,066,802) - - (14,066,802)Deferred taxation liabilities (36,913) - (11,844,688) (11,881,601) (14,103,715) - (11,844,688) (25,948,403) Total liabilities (17,981,204) - (11,844,688) (29,825,892) Net assets 10,806,011 - 27,637,607 38,443,618 EquityShare capital 250,911 - - 250,911Share premium account 66,776 - - 66,776Other reserves 12,444,403 - - 12,444,403ESOP shares (509,586) - - (509,586)Retained earnings (1,446,493) - - (1,446,493)Revaluation surplus - - 27,637,607 27,637,607Total equity 10,806,011 - 27,637,607 38,443,618 Reconciliation of the UK GAAP consolidated balance sheet to the IFRS cons Consolidated balance sheet: 1 February 2007 As at As at 1 February 2007 Measurement 1 February 2007 UK GAAP Presentation & recognition IFRS Audited Differences Differences Unaudited £'000 £'000 £'000 £'000 Non-current assetsGoodwill & intangible assets 322,686 - 322,686Property, plant & equipment 28,501,660 - 38,715,398 67,217,058Trade & other receivables - - - -Deferred taxation assets - - - - 28,824,346 - 38,715,398 67,539,744 Current assetsInventories 78,776 - - 78,776Trade & other receivables 1,773,785 - - 1,773,785Cash & cash equivalents 1,353,284 - - 1,353,284 3,205,845 - - 3,205,845 Total assets 32,030,191 - 38,715,398 70,745,589 Current LiabilitiesTrade & other payables (3,274,557) 46,157 (3,228,402)Provisions - (46,157) - (46,157Bank overdrafts & loans - - - - (3,274,557) - - (3,274,577) Net current liabilities (68,712) - - (68,712) Non-current liabilitiesBank loans (16,724,392) - - (16,724,392)Deferred taxation liabilities - - (11,614,619) (11,614,619) (16,724,392) - - (28,339,011)) Total liabilities (19,998,949) - (11,614,619) (31,613,570) Net assets 12,031,242 - 27,100,777 39,132,019 EquityShare capital 267,177 - - 267,177Share premium account 657,924 - - 657,924Other reserves 12,578,246 - - 12,578,246ESOP shares (509,586) - - (509,586)Retained earnings (962,519) - - (962,519)Revaluation surplus - - 27,100,777 27,100,777 Total equity 12,031,242 - 27,100,777 39,132,019 Reconciliation of the UK GAAP consolidated income statement to the IFRSconsolidated income statement: Six months ended 31 January 2007 Notes Six months Six months Ended Ended 31 January 2007 Measurement 31 January 2007 UK GAAP & recognition IFRS Unaudited Differences Unaudited £'000 £'000 £'000 Revenue from continuing operations 5,298,485 - 5,298,485 Cost of sales (169,597) - (169,597) Gross profit 5,128,888 - 5,128,888 Administrative expenses (4,095,688) - (4,095,688)Share based payments (133,843) - (133,843)Additional depreciation based on - (129,808) (129,808) Revalued assets Operating profit 899,357 (129,808) 769,549 Exceptional costs - - -Investment revenuesFinance costs (452,296) - (452,296) Profit before taxation 447,061 (129,808) 317,253 Taxation 36,913 38,942 75,855 Profit for the period 483,974 (90,866) 393,108 Earnings per share (total and fromcontinuing operations) Basic 1.92p 1.56p Diluted 1.79p 1.46p Reconciliation of the UK GAAP consolidated balance sheet to the IFRSconsolidated balance sheet: 1 August 2007 As at As at 1 August 2007 Measurement 1 August 2007 UK GAAP Presentation & recognition IFRS Audited Differences Differences Unaudited £'000 £'000 £'000 £'000Non-current assetsGoodwill & intangible assets 310,559 - - 310,559Property, plant & equipment 32,544,911 - 43,208,692 75,753,603Trade & other receivables - - - -Deferred taxation assets - - - - 32,855,470 - 43,208,692 76,064,162 Current assetsInventories 74,544 - - 74,544Trade & other receivables 5,924,750 - - 5,924,750Cash & cash equivalents 5,189,134 - - 5,189,134 11,188,428 - - 11,188,428 Total assets 44,043,898 - 43,208,692 87,252,590 Current LiabilitiesTrade & other payables (6,000,253) 65,082 - (5,935,171)Provisions - (65,082) - (65,082)Bank overdrafts & loans - - - - (6,000,253) - - (6,000,253) Net current assets 5,188,175 - - 5,188,175 Non-current liabilitiesBank loans (15,492,606) - - (15,492,606)Deferred taxation liabilities - - (14,851,644) (14,851,644) (15,492,606) - (14,851,644) (30,344,250) Total liabilities (21,492,859) - (14,851,644) (36,344,503) Net assets 22,551,039 - 28,357,048 50,908,087 EquityShare capital 267,314 - - 267,314Share premium account 667,731 - - 667,731Other reserves 12,719,975 - - 12,719,975ESOP shares (509,586) - - (509,586)Retained earnings 9,405,605 - (2,749,653) 6,655,952Revaluation Surplus - - 31,106,701 31,106,701 Total equity 22,551,039 - 28,357,048 50,908,087 Reconciliation of the UK GAAP consolidated income statement to the IFRSconsolidated income statement: Year ended 31 July 2007 Year Year Ended Ended 31 July 2007 Measurement 31 July 2007 UK GAAP & recognition IFRS Unaudited Differences Unaudited £'000 £'000 £'000 Revenue from continuing operations 10,665,532 - 10,665,532 Cost of sales (328,216) - (328,216) Gross profit 10,337,316 - 10,337,316 Administrative expenses (8,515,402) - (8,515,402)Share based payments (275,572) - (275,572)Additional depreciation based on - (235,307) (235,307)Revalued assets Operating profit 1,546,342 (235,307) 1,311,035 Exceptional (costs) / gains 10,234,583, (9,629,320) 605,263Investment revenuesFinance costs (965,740) - (965,740) Profit before taxation 10,815,185 (9,864,627) 950,558 Taxation 36,913 (92,156) (55,243) Profit for the period 10,852,098 (9,956,783) 895,315 Earnings per share (total and fromcontinuing operations) Basic 43.3p 3.49pDiluted 42.2p 3.40p Independent Review Report to Lok'nStore Group Plc Introduction We have been engaged by the Company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 31January 2008 which comprises the consolidated income statement, the consolidatedbalance sheet, the consolidated statement of changes in equity, the consolidatedcash flow statement, and related notes 1 to 16. We have read the otherinformation contained in the half-yearly financial report and considered whetherit contains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements. This report, including the conclusion, has been prepared for and only for theCompany for the purpose of meeting the requirements of the AIM Rules forCompanies and for no other purpose. We do not, therefore, in producing thisreport, accept or assume responsibility for any other purpose or to any otherperson to whom this report is shown or into whose hands it may come save whereexpressly agreed by our prior consent in writing. Directors' Responsibilities The half-yearly financial report, is the responsibility of, and has beenapproved by the directors. The directors are responsible for preparing andpresenting the half-yearly financial report in accordance with the AIM Rules forCompanies. As disclosed in note 2, the annual financial statements of the Group areprepared in accordance with International Financial Reporting Standards andInternational Financial Reporting Interpretations Committee ("IFRIC")pronouncements as adopted by the European Union. The condensed set of financialstatements included in this half-yearly financial report has been prepared inaccordance with the measurement and recognition criteria of InternationalFinancial Reporting Standards and International Financial ReportingInterpretations Committee ("IFRIC") pronouncements, as adopted by the EuropeanUnion. Our Responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 31 January 2008 is not prepared, in all materialrespects, in accordance with the measurement and recognition criteria ofInternational Financial Reporting Standards and International FinancialReporting Interpretations Committee ("IFRIC") pronouncements as adopted by theEuropean Union, and the AIM Rules for Companies. BAKER TILLY UK AUDIT LLPRegistered AuditorChartered Accountants2 Bloomsbury StreetLondon WC1B 3ST 25 April 2008 This information is provided by RNS The company news service from the London Stock Exchange