Lok N Store Regulatory News (LOK)

31 Oct 2005 07:00

Lok'n Store Group PLC31 October 2005 31st October 2005 LOK'nSTORE GROUP PLC ("Lok'nStore" or "the Company") Preliminary Results for the year ended 31 July 2005 Lok'nStore Group plc, one of the leading players in the fast growingself-storage market, announces Preliminary Results for the year ended 31 July2005. Financial Highlights • Turnover £7.77 million - up 17.6%• EBITDA £1.36 million - up 68%• Operating cash flow £1.98 million - up 112%• Storage centres EBITDA £2.48 million - up 41%• Operating Profit £607,000 up from an operating loss• New £20 million banking facility• Properties valued at £33.6 million at 31.01.05 (NBV £18.4 million) Operational Highlights • Increased occupancy by 83,417 sq ft. - up 17.7%• Number of customers 6,715 up 20.6%• Good sales growth in established and new storage centres• Opened Tonbridge centre• Building Farnborough centre• Acquired Crayford centre• Increased capacity to 920,000 sq ft.• Planning permission achieved for high density residential at Kingston site• 11 Freeholds:10 Leaseholds Andrew Jacobs, Chief Executive Officer commented: "Lok'nStore has again made excellent progress. "Operating performance has continued to improve, we have enhanced the value ofour existing centres and we have acquired new sites. Our new £20 million bankfacility combined with the increased value of our properties provide the Companywith financial firepower and flexibility. "The acquisition and build-out of sites in Farnborough and in Crayford, and thecontinued investment in our existing centres, reflect our positive view of themarket, and we are looking forward to opening these two highly visible newcentres around the turn of the year. "The UK self-storage market continues to offer an unrivalled combination ofpredictable profits and potential for growth. Lok'nStore's proven ability toexpand steadily within this market gives us confidence in the future performanceof the Company. "Lok'nStore's market position, leading brand, and active management team areproducing robust and growing cashflows and improving asset values. This willcontinue to deliver substantial growth in shareholder value." Press Enquiries: Andrew Jacobs, CEO, Lok'nStore Tel: 020 8547 2288Ray Davies, Finance Director, Lok'nStore Tel: 020 8547 2288Jonathon Brill/ Billy Clegg Financial Dynamic Tel: 020 7831 3113 CHAIRMAN'S STATEMENT OVERVIEW I am pleased to report that Lok'nStore has again made good progress against itsstated objectives. The operating performance of our existing centres hascontinued to improve. We have increased the value of our existing centres andwe have acquired new sites. During the year we have revalued all of ourproperties and signed a new £20 million bank facility. Lok'nStore's focus on growth has again underpinned satisfactory results.Enquiries, turnover, profits and operating cash in flows have all increased. The acquisition and build-out of sites in Farnborough and in Crayford, and thecontinued investment in our existing centres, reflect our positive view of themarket. We are looking forward to opening these two highly visible new centresaround the turn of the year. We believe that the UK self-storage market offers great potential forLok'nStore. SALES AND EARNINGS GROWTH Turnover for the year was £7.77 million (2004: £6.61 million), an increase of17.6%, with annualised revenues now reaching £8.48 million demonstrating thecontinued growth of the business. The Group made an operating profit for theyear of £606,961 compared with a loss of £5,733 in 2004. The Group made apre-tax profit for the year of £114,325 compared with a loss of £169,104 in2004. Demonstrating the growing cash-flow of the operating business, EBITDA from thestorage centres was £2.48 million and cash flow from operating activities grewfrom £0.93 million to £1.98 million. At 31 July 2005, the number of customers had risen to 6,715 from 5,566 at 31July 2004, an increase of 20.6% over the year. Our established centres have continued to grow alongside the more rapid salesincreases at our newest centres. Centres trading for more than 250 weeks grew(snapshot) revenue by 9.7 %, centres with 100 to 250 weeks' trading grew 22.2%,while newer centres trading for less than 100 weeks grew at 113%. Lok'nStore's 11 most established centres (over 250 weeks old) made EBITDAmargins of 48%, demonstrating the strong underlying profitability of thebusiness. DIVIDEND The directors do not recommend the payment of a dividend, however the Board willkeep this matter under periodic review. NEW CENTRES During the year we opened a new centre in Tonbridge, obtained planningpermission and started construction on our new centre in Farnborough, andacquired a new centre in Crayford. They are all located in attractive marketswith high visibility and provide 167,000 net sq. ft. This will take the totalnumber of our centres to 21 with 920,000 sq. ft. of net storage space when fullycompleted. Following the exercise of an option to purchase the freehold of our Poolecentre, we have now fitted out a further 12,000 net sq. ft. providing the centrewith total capacity of 64,000 sq. ft. Our objective continues to be to increase our number of centres within thecurrent geographical coverage of South-East England. PROPERTY ASSETS Our trading freehold and leasehold centres were valued at 31 January 2005.This report valued our trading properties at £31.84 million. Including theFarnborough site, the total valuation is £33.6 million compared to a net bookvalue of £18.4 million. These valuations do not include any uplift foralternative use with planning permission obtained at Kingston, nor do theyinclude the value of the Crayford site, other investment in established centressince January 2005, or the build-out costs at Farnborough. During the year we were pleased to obtain planning permission for a high-densityresidential development at our existing Kingston site. The permission is for 124flats and a new 7,000 square feet GP's surgery. This potentially creates muchgreater value than can be obtained as a self-storage site. The management aremaking progress towards realising this value. NEW BANK FACILITY Lok'nStore Group plc has agreed a new £20 million revolving credit facility at areduced interest margin. The new facility replaces the previous £10 millionfacility and provides sufficient additional liquidity for the Group's immediateexpansion plans. Interest payable on the loan is on improved terms, payingbetween 1.25% and 1.35% over LIBOR. The facility is secured on the existing self-storage portfolio, excluding theKingston and Reading properties. Following the signing of this new facility, themanagement is confident that the Group has full flexibility to maximise thevalue of any potential exit or realisation of these two redevelopmentopportunities and that the Group is in a position to continue to grow itsself-storage business. SELF-STORAGE IN THE UK The UK self-storage market continues to grow rapidly and offers a greatopportunity, particularly to the major operators with specialist skills. The more mature US market, grew from 2.9 sq. ft. per member of the population in1994 to 5 sq. ft. in 2004. Despite this increase in capacity, the average weeklyprice for a 100 sq ft. unit has increased by 45% between 2000 and 2004*. (*Source: Pramerica Real Estate Investors) The population density of the US isonly 32 per square kilometre against 246 in the UK. This creates far morepressure to use property resources efficiently in the UK, which is a driver ofdemand for self-storage. Lok'nStore is now one of only two quoted storage operators in the UK, rankedfourth in size in the UK and sixth in Europe. LOK'NSTORE PEOPLE Andrew Jacobs, as Chief Executive Officer, is supported by an experiencedexecutive team. Our storage centre personnel are committed and motivated andhelp maintain the levels of friendly service that Lok'nStore gives itscustomers, which, we believe, is exemplary. I would therefore like to thank all of the people who work both in our headoffice and in our centres for their commitment to our business and for theirhard work. Their continued efforts will provide us with the necessary platformfor our ongoing success. OUTLOOK The self-storage market continues to offer an unrivalled combination ofpredictable profits and potential for growth. Lok'nStore's proven ability toexpand steadily within this market gives us confidence in the future performanceof the Group. Growing turnover from existing centres and growth in the number ofcentres are combining to produce attractive growth and profits. Our priorities are to further improve the operating performance of existingcentres; to enhance the value of existing centres; to grow the number ofcentres; and to optimise the Group's capital structure. I believe that Lok'nStore's market position, leading brand, and activemanagement team will continue to deliver substantial growth in shareholdervalue. Simon ThomasChairman OPERATING REVIEW SALES PERFORMANCE We have continued to raise operational standards and to focus centre personnelon taking responsibility for increasing turnover. This work has continued toimprove the consistency of performance across the centres. Our central salesteam are now running more frequent and improved sales training courses. Inaddition, we regularly review the bonus scheme to link performance and rewardmore directly to turnover growth and consistently high quality customer service.As a result our conversion ratio of enquiries into customers remains very high. During the year we increased occupied space by 83,417 sq. ft. (17.7%), withtotal occupied space at 31 July 2005 of 555,445 sq. ft. (2004: 472,028 sq ft).We have included a table summarising the trading performance of all our centresover the year, analysed between centres open less than 100 weeks, between 100and 250 weeks, and more than 250 weeks at the end of the period. Both first generation, converted buildings and modern, well-located centrescontinue to show good growth. The lower cost base associated with the olderconverted buildings ensures that they generate returns equal to the more highlyspecified, but higher cost base new centres. Also, encouragingly, revenueoccupancy of these 11 older centres (over 250 weeks) increased 9.7% on the year.We believe there is room for further increases with new space still to be fittedout in some of these centres in addition to improving income from existingspace. Lok'nStore's established centres (over 250 weeks old) achieved EBITDA margins of48%. During the year we opened our new Tonbridge centre, bringing the number ofcentres trading to 19. Total capacity is currently 792,000 sq. ft. With the newcentres at Crayford and Farnborough coming on stream in Winter 2005/06 thenumber of centres trading will be 21 and will increase total capacity to 920,000sq. ft. 14 of the centres are now trading profitably at the pre-tax level (2004: 12) and17 have positive operating cash flow (2004: 14). Packing materials, insurance and other sales increased 11% over the yearaccounting for 7.7% of turnover. MARKETING The Company spent approximately 6.4% of turnover on advertising and marketing(including postage, printing and stationery) (2004: 7.7%). Our marketing costsshould remain at these levels over the coming years. Marketing resources andefforts have been upgraded, and this contributed to Lok'nStore achieving anotherexcellent increase in occupancy over the year of 83,417 sq. ft, up 17.7% on theprevious year, whilst reducing pro-rata costs. We are still reviewing new and better opportunities in the media and throughlocal marketing efforts and each of these shows progress. New centres willbenefit from the marketing and promotion effort already applied to our existingcentres. Work on centre visibility is also improving response to our marketing. Our newFarnborough centre with its prominent design and position adjacent to the M3motorway will help to raise the profile of thewhole Lok'nStore brand. We areconspicuous in our directory advertising, which is targeted in all of the areasin which our stores operate, and produces a significant proportion of ourenquiries. We apply coordinated sales and marketing messages and our storage centrepersonnel are as involved as our head office, which ensures our expenditureremains effective. SYSTEMS During the year we have increased the penetration of direct debit facilities,which reduces the administrative burden and use of paper and postage at thecentres, as well as being a positive service to our customers and reducing thetime committed to credit management. The current focuses are on greater systems centralisation, greater auditcapability and a continued focus on efficient and timely data. The new centre audit system has been effective in terms of improved security,credit control and centre presentation. SECURITY ISSUES The safety and security of our customers and centres remains a high priority.With today's heightened terrorist concerns this is of particular importance. Wealready invest in CCTV systems, intruder and fire alarm systems and the remotemonitoring of our centres out of hours and we have rigorous security proceduresin relation to customers. Furthermore, we are currently reviewing our security resources and we areupgrading our security in line with up-to-date equipment, for example, colourCCTV monitors of greater capability and detail. The importance of security and the need for vigilance is communicated to allpersonnel and reinforced through our various training procedures. OUR PEOPLE At 31 July 2005, we had 94 employees. Attracting, retaining and encouraging the right people is key to the success ofLok'nStore. We are committed to providing a positive attitude in the businessand an enjoyable working environment. Lok'nStore encourages all personnel tobuild their skills through appropriate training and regular performancemonitoring. Regular training courses support these objectives. All employees are eligible to participate in share ownership plans after 3months of employment and 38% of our employees have EBT shares or options. 45% ofthe personnel are members of the contributory pension scheme. I would like to thank all of our people for their contribution to a successfulyear. The continuing progress of the Group is being achieved as a result oftheir efforts and hard work. PROPERTY AND CONSTRUCTION The total portfolio of centres and sites is now 21, of which 11 are heldfreehold. We prefer to acquire freeholds if possible, and where opportunitiesarise we will seek to acquire the freehold of our leasehold centres. Indeed, weachieved the early exercise of our option to purchase the freehold interest inour Poole centre during the year, and this also allowed an expansion of thespace available by12,000 sq. ft. to a total of 64,000 sq. ft. However, our overriding objective is to increase the number of storage centreswe operate and we are comfortable to take leases on appropriate terms. Our new Farnborough Centre is a freehold and will be our first purpose-builtcentre. It will open in January 2006. Our new freehold centre in Crayford iscurrently being fitted out and is expected to open in December 2005. Thesecentres are located within our existing geographical coverage and will bemanaged by our existing sales team. The Company continues to focus on the efficiency of our fitting out programme inorder to bring forward the revenue stream and maximise our rate of return. Weoptimise the available space in new centres by fitting mezzanine floors andstorage units as customer demand dictates. This allows revenue to be generatedby utilising open storage space, and thereby keeping tighter control on capitalexpenditure until it is required. Over the year under review we fitted out afurther 67,000 sq. ft. of self-storage units. Subject to market conditions, it is our current aim to acquire between 2 and 4centres per annum. Our current average centre size is around 40,000 net sq. ft.and this may increase for new centres up to 60,000 net sq. ft. The exact timingof centre openings will largely depend on market availability, and we willretain our disciplined and flexible approach to site acquisition. CENTRE ANALYSIS MATURITY ANALYSIS Jul-05Weeks Old over 250 100 to 250 under 100 To be opened Total in 2005/06 Sales (£'000) 4,813 2,398 437 7,648 Stores EBITDA (£'000) 2,307 349 -179 2,477 EBITDA MARGIN (%) 47.9 14.6 -41.0 32.4 Maximum Net Area 423 289 80 128 920('000 sq ft) Freehold 7 2 0 2 11 Leasehold 4 4 2 0 10 Total Centres 11 6 2 2 21 CUSTOMER ANALYSIS At the end of July 42.6% of our turnover was from business customers (28.6% bynumber) and 57.4% was from household customers (71.4% by number). Andrew JacobsChief Executive Officer FINANCIAL REVIEW TRADING During the financial year Lok'nStore has shown 17.6% growth in turnover to £7.77million (2004: £6.61m). The continuing growth during the year and since theyear-end is shown by the increase in annualised turnover to £8.48 million. Demonstrating the cash generative nature of the business, EBITDA was up 68% to£1.36 million (2004: £0.81 million before exceptional items). Operating profitincreased to £606,961 (2004: Loss: £5,733). There were no exceptional costs this year (2004; £127,407). Credit control remains tight with £36,000 of bad debts written off during theyear representing less than 0.5% of turnover. The net interest charge increased from £162,501 to £492,636. This increase is aconsequence of the Group utilising its bank facilities to acquire the freeholdsites at Farnborough and Crayford, the continuing fit-out programme at ourexisting stores, and the full year effect of the share buy back implemented inMarch 2004. Year-end borrowings of £8.15 million together with outstandingexpenditure on the Farnborough and Crayford build-outs mean that the interestcharge will rise significantly next year on a full-year charge. The Group made a profit on ordinary activities before tax of £114,325 (2004:£169,104 Loss) No charge to corporation tax arises as a result of the Group's tax loss in theyear. Tax losses available to carry forward for offset against future profitsamount to some £3 million. In addition the business had capital losses availableto carry forward of £362,636. Basic earnings per share was 0.47 pence per share (2004: loss of 0.16 pence pershare before exceptional items: loss of 0.64 pence per share after exceptionalitems). BORROWINGS AND CASH FLOW Cash flows from the Group remain encouraging, with increasing cash flows asturnover increases continuing to demonstrate the cash generative nature of thebusiness. The Group had cash balances at the year-end of £0.42 million (2004:£0.65 million). Cash Inflow from operating activities before interest and capital expenditurewas £1.98 million, compared to £0.93 million for 2004. Capital expendituretotalling some £2.6 million reflects the Group's commitment to growing itsbusiness through a combination of site acquisition and related works (£1.1million) and investing in our existing stores (£1.5million). At 31 July 2005,the Group had £8.15 million of borrowings representing gearing on a NBV basis of72% on net debt of £7.73 million. Gearing, when adjusted on the basis of theGroup's revalued stores, drops to 22%. BUYBACK AUTHORITY At the Company's AGM on 16 December 2004, shareholders gave approval to replacethe existing share buy-back authority. This authority will be sought annuallyat the Company's annual general meeting each year. The authority is restrictedto a maximum of 5,845,299 Ordinary Shares, which is equivalent to 23.3% of theCompany's issued share capital and is equal to the number of shares availablefor purchase under the previous authority. The buy-back authority will only beexercised in circumstances where the Directors regard such purchases to be inthe best interests of Shareholders as a whole and is subject to the waiver ofRule 9 by the Panel of Takeovers and Mergers being approved by the Shareholders. The total number of shares in issue is 25,071,144 Ordinary Shares. BALANCE SHEET Net assets at the year-end increased to £10.7 million (2004: £10.6 million). The Employee Benefit Trust owns 627,500 (2004: 627,500) shares, the costs ofwhich are shown as a deduction from shareholders' funds in accordance withUrgent Issues Task Force Abstract 38. On 31 January 2005, professional valuations were prepared by external valuers,Cushman & Wakefield Healey & Baker, ('CWHB') in respect of all trading freeholdand leasehold properties as operational self-storage businesses. The freeholdland at Farnborough, acquired on 30 July 2004, was not valued on this occasion,as building works had not commenced. This Report was prepared on the basis of Market Value/Existing Use Value, havingregard to its trading potential as appropriate, in accordance with RICSAppraisal and Valuation Standards, but on the special assumption that anypotential for residential development was excluded. (See note 11 in the notes tothe accounts for a more detailed description of valuation methodology). The Report indicates a total for properties valued of £31.84 million. IncludingFarnborough, (NBV £1.76 million), this gives a total value of properties held of£33.6 million (NBV £18.4 million). These valuations have not been included inthe Balance Sheet. These valuations do not account for any further uplift invalues, which would result from the planning permission achieved for residentialat the Kingston site, nor any successful outcome of the planning application forresidential at the Reading site. These valuations also do not account for anyfurther uplift arising from the acquisition of the Crayford site or furtherinvestment in existing centres since January 2005 and in particular the furtherbuild-out works to the Farnborough centre, which is under development. While theCompany does not envisage routinely revaluing its properties it will do so whenappropriate. PROPERTY ASSETS £ million Valuation NBV Properties valued 31.01.2005 by 'CWHB' 31.84 16.69Farnborough - at cost 1.76 1.76 Total £33.6 £18.45 Uplift 31 Jan 05 31 Jan 04 % £m £m Valuation (8 freehold Centres) 13.6 22.84 20.10 Over the years Lok'nStore has acquired the freehold interest in previouslyleased centres at Horsham, Reading and Poole. This tactical approach combinesthe early cash flow advantages of leasehold centres with the long-term incomesecurity and investment potential of freeholds. 8 of our 10 leaseholds arewithin the terms of the 1954 landlord and tenant act giving a degree of securityof tenure. The average length of the leases was 11.1 years at the date of the2005 Valuation. (Source: 'CWHB') FINANCING & LIQUIDITY The Company has signed a new £20 million revolving credit facility at a reducedinterest margin for the Group. The new facility replaces the previous £10million facility and provides sufficient additional liquidity for the Group'simmediate expansion plans. Interest payable on the loan is on improved terms,paying between 1.25% and 1.35% over LIBOR. Non-utilisation charges have alsobeen reduced to 0.25% on the value of the undrawn facility. Undrawn committedfacilities at the year-end amounted to £11,850,000. The facility is secured on the existing self-storage portfolio, excluding theKingston and Reading properties. This ensures that the Group has fullflexibility to maximise the value of any potential exit or realisation of thesetwo redevelopment opportunities, as well as using the proceeds in the bestinterests of Shareholders. The £20 million revolving credit facility agreed with The Royal Bank of ScotlandPlc is a five-year committed facility and during the year the Company compliedwith all corresponding debt covenants. TREASURY All cash deposits are placed with Royal Bank of Scotland Plc on treasury depositutilising either one-day or two-day money funds. The Group's cash position isreviewed daily and cash is transferred daily between these accounts and thecompany's operational current accounts as required. During the year the companyobtained improved terms on its treasury deposit rates. Ray DaviesFinance Director CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 31 July 2005 Notes 2005 2004 £ £ TURNOVER 7,774,541 6,611,911Operating expenses (7,167,580) (6,617,644)OPERATING PROFIT/(LOSS) 606,961 (5,733)Loss on disposal of fixed assets - (870)Interest receivable 35,898 36,950PROFIT ON ORDINARY ACTIVITIES 642,859 30,347 BEFORE INTEREST PAYABLEInterest payable (528,534) (199,451)PROFIT / (LOSS) ON ORDINARY 114,325 (169,104)ACTIVITIES BEFORE TAXATION Taxation 3 - - PROFIT /(LOSS) FOR THE YEAR 8 114,325 (169,104)EARNINGS PER SHARE Basic 4 0.47p (0.64p)Diluted 4 0.44p (0.64p) BALANCE SHEETS - 31 July 2005 Group Group Company Company Notes 2005 2004 2005 2004 £ £ £ £FIXED ASSETS Intangible assets 5 359,068 383,323 - -Tangible assets 20,032,760 18,162,957 - -Investments 6 - - 214,563 214,563 20,391,828 18,546,280 214,563 214,563 CURRENT ASSETS Stocks 88,648 103,880 - -Debtors 1,684,793 1,948,711 6,025,331 5,994,621Cash at bank and in hand 424,738 654,361 - - 2,198,179 2,706,952 6,025,331 5,994,621CREDITORS: Amounts falling (3,736,384) (3,094,644) - -due within one yearNET CURRENT (1,538,205) (387,692) 6,025,331 5,994,621(LIABILITIES)/ASSETSTOTAL ASSETS LESS 18,853,623 18,158,588 6,239,894 6,209,184 CURRENT LIABILITIESCREDITORS: Amounts falling (8,150,000) (7,600,000) - -due after more than one year 10,703,623 10,558,588 6,239,894 6,209,184CAPITAL AND RESERVES Called up share capital 7 250,711 250,481 250,711 250,481Share premium account 8 51,976 21,496 51,976 21,496Capital redemption reserve 8 34,205 34,205 34,205 34,205Merger reserve 8 6,295,295 6,295,295 - -Other distributable reserve 8 5,903,002 5,903,002 5,903,002 5,903,002Profit and loss account 8 (1,321,980) (1,436,305) - - ESOP shares 9 (509,586) (509,586) - -SHAREHOLDERS' FUNDS 10,703,623 10,558,588 6,239,894 6,209,184 CONSOLIDATED CASH FLOW STATEMENT31 July 2005 Notes 2005 2004 £ £ Cash flow from operating activities 10a 1,983,832 934,854Returns on investments and servicing of finance 10b (500,901) (122,163)Taxation - -Capital expenditure and financial investment 10b (2,293,945) (5,429,344)CASH OUTFLOW BEFORE FINANCING (811,014) (4,616,653)Financing 10b 581,392 4,169,204DECREASE IN CASH IN THE PERIOD (229,622) (447,449) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) Notes 2005 2004 £ £ Decrease in cash in the period (229,622) (447,449)Cash inflow from increase in debt and lease financing (549,852) (7,597,153)MOVEMENT IN NET (DEBT)/FUNDS IN PERIOD (779,474) (8,044,602)NET (DEBT) / FUNDS AT 1 AUGUST (6,945,788) 1,098,814NET DEBT AT 31 JULY 10c (7,725,262) (6,945,788) NOTES TO THE FINANCIAL STATEMENTS 1 ACCOUNTING POLICIES The above results for the year ended 31 July 2005 are an abridged version of theCompany's statutory financial statements. The profit and loss account andbalance sheet do not constitute statutory financial statements within themeaning of Section 240 of the Companies Act 1985. These accounts have beenprepared on the basis of the same accounting policies as set out in thestatutory accounts for the year ended 31 July 2004. 2 EXCEPTIONAL ITEMS 2005 2004 £ £Termination payments - 20,246Professional fees re bid approach - 38,600Director's compensation for loss of office - 68,561 - 127,407 3 TAXATION There is no Corporation Tax or deferred tax charge due to the availability ofaccumulated losses. The tax assessed is lower than the standard rate of corporation tax in the UK(30%). The differences are explained below: 2005 2004 £ £Profit / (Loss) on ordinary activities before tax 114,325 (169,104)Profit / (Loss) on ordinary activities multiplied by the standard 34,298 (50,731)rate of corporation tax in the UK of 30% (2004 - 30%)Expenses not deductible for tax purposes 15,295 7,492Capital allowances for period in excess of depreciation (82,429) (52,506)Accounting loss on disposal of capital assets - -Tax losses not utilised 60,552 95,745General provision (203) -Deduction for employee share options (23,277) -Depreciation on revenue items (4,236 -Current tax charge for the period - - The Group has revenue tax losses of approximately £3 million available to carryforward against future taxable profits of the same trade. No value is ascribedto these losses, due to the uncertainty as to the utilisation of the losses inthe foreseeable future. Future tax charges may be affected by the degree to which deferred tax assetsare subject to recognition in the future. It is not the intention of the directors to dispose of any of the properties asoperational self-storage centres in the foreseeable future. If, however, theproperties were sold at their market values as operational self-storage centresas disclosed in note 11, an estimate of the tax payable on the gain arisingwould be approximately £3m. This tax payable figure does not take into accountany claims to rollover relief that the company might make. At present, it isnot envisaged that any tax will become payable in the foreseeable future. 4 EARNINGS PER ORDINARY SHARE The calculations of earnings per share are based on the following profits andnumbers of shares. 2005 2004 £ £Profit / (Loss) for the financial year before exceptional 114,325 (41,697)itemsProfit / (Loss) for the financial year 114,325 (169,104) 2005 2004 No. of shares No. of sharesWeighted average number of shares or basic earnings 24,432,491 26,300,997per shareExercise of share options 1,414,688 1,135,584For diluted earnings per share 25,847,179 27,436,581 5 INTANGIBLE FIXED ASSETS Purchased Goodwill TotalGROUP £ Cost 1 August 2004 485,093Additions - 31 July 2005 485,093Amortisation 101,7701 August 2004Charged in year 24,255 31 July 2005 126,025Net book value 31 July 2005 359,06831 July 2004 383,323 6 INVESTMENTS COMPANY Shares in subsidiary undertakings £ Cost: At 1 August 2004 and 31 July 2005Lok'nStore Limited 214,563 The Company holds more than 20% of the share capital of the following companies,all of which are incorporated in England and Wales: Subsidiary undertakings Class of % of shares held shareholding Directly Indirectly Nature of business Lok'nStore Limited Ordinary 100 - Self-storageLok'nStore Trustee Limited Ordinary - 100 Trustee Company 7 SHARE CAPITAL 2005 2004 £ £Authorised: 35,000,000 ordinary shares of 1p each (2004: 35,000,000) 350,000 350,000 Allotted, issued and fully paid ordinary shares: Number of shares £ At 31 July 2004 25,048,144 250,481Options exercised 23,000 230 At 31 July 2005 25,071,144 250,711 During the year, options were exercised on 23,000 ordinary shares at 37 pence per share and that number of shares were issued for a consideration of £8,510. At the Company's AGM on 16 December 2004, shareholders gave approval to replace the existing share buy-back authority and this authority will be subsequently renewed annually at the Company's annual general meeting each year thereafter. The authority is restricted to a maximum of 5,845,299 Ordinary Shares, which is equivalent to 23.3% of the Company's issued share capital and is equal to the number of shares available for purchase under the previous authority. The buy-back authority will only be exercised in circumstances where the Directors regard such purchases to be in the best interests of Shareholders as a whole and is subject to the waiver of Rule 9 by the Panel of Takeovers and Mergers being approved by the Shareholders. 8 RESERVES Other Capital Share Merger Distributable Redemption Profit and premium reserve reservee reserve loss account Total £ £ £ £ £ £ 1 August 2004 21,496 6,295,295 5,903,002 34,205 (1,436,305) 10,817,693Exercise of Share Options 30,480 - - - - 30,480Profit for the year - - - 114,325 114,325 31 July 2005 51,976 6,295,295 5,903,002 34,205 (1,321,980) 10,962,498 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. 9 ESOP SHARES Group Group Group Group 2005 2004 2005 2004 Number Number £ £1 August 2004 627,500 1,127,500 509,586 1,023,886Purchased in the year - - - -Sold in the year - (500,000) - (514,300)31 July 2005 627,500 627,500 509,586 509,586 The ESOP shares are held by the employee benefit trust. The disposals in 2004arose from the Group's buyback of shares. 10 CASH FLOWS A 2005 2004 £ £Reconciliation of operating profit to net cash inflow fromoperating activitiesOperating profit / (loss) 606,961 (5,733)Depreciation 728,522 664,153Amortisation 24,255 24,255Decrease / (increase) in stocks 15,232 (2,097)Decrease / (increase) in debtors 263,089 (420,932)Increase in creditors 345,773 675,208 Net cash flow from operating activities 1,983,832 934,854 2005 2004 B £ £Analysis of cash flows for headings netted in thecash flowReturns on investments and servicing offinanceInterest received 35,898 36,950Interest paid (536,757) (158,319)Interest element of finance lease rental payments (42) (794)Net cash outflow for returns on (500,901) (122,163)nvestments and servicing of finance Capital expenditure and financial investment Purchase of tangible fixed assets (2,293,945) (5,429,644)Proceeds from sale of tangible fixed assets - 300 Net cash outflow for capital expenditure (2,293,945) (5,429,344)and financial investmentFinancing Bank loans 550,000 7,600,000Capital element of finance lease rental payments (148) (2,847)Exercise of share options 31,540 17,000Purchase of own shares (incl. costs) - (3,444,949) Net cash inflow from financing 581,392 4,169,204 C Analysis of net debt At Other non At 31 July 2004 Cash flow cash changes 31 July 2005 £ £ £ £Cash at bank and in hand 654,360 (229,622) - 424,738Debt due after 1 year (7,600,000) (550,000) - (8,150,000)Finance leases (148) 148 - -Total (6,945,788) (779,474) - (7,725,262) This information is provided by RNS The company news service from the London Stock Exchange