Preliminary Results

Lok'n Store Group PLC
30 October 2006

30th October 2006

                              Lok'nStore Group Plc



             Preliminary results for the year ended 31st July 2006



Lok'nStore Group plc, one of the leading players in the fast growing
self-storage market, announces Preliminary Results for the year ended 31 July
2006.



Financial Highlights

  • Turnover £8.95 million - up 15.1% (2005: £7.77 million)
  • Company EBITDA £1.75 million - up 29% (2005: £1.36 million)
  • Storage centres EBITDA £3.1 m - up 24% (2005: £2.5 million)
  • Operating Profit £851k - up 40.3% (2005 £607k)
  • EBITDA margin on established stores (>250 weeks): 40%



Property Highlights

  • Property valuation £66.6 m
  • Net Asset Value (NAV) £2.13 per share (based on 31.07.2006 valuations)
  • Built and opened first purpose built store in Farnborough
  • Total portfolio capacity 920,000 sq ft
  • Planning permission granted for the new Reading store on adjacent land



Operational Highlights

  • Good sales growth at established and new storage centres
  • Opened Farnborough and Crayford centres on time and on budget
  • 104,818 sq ft of self-storage units fitted - an increase of 20% in fitted
    space
  • 19 out of 21 stores now operating at EBITDA positive levels
  • Prices for self-storage up 4% year on year





Andrew Jacobs, Chief Executive Officer commented:



'Lok'nStore has made excellent progress during the year and we are encouraged by
the early success of the Farnborough store as a model for rolling out future
stores. The new centre with its prominent design, distinctive orange elevations
and position adjacent to the M3 motorway will help to raise the profile of the
whole Lok'nStore brand.



'Our property portfolio has been independently valued at £66.6 million which
translates into net asset value per share of 213 pence. This reflects the
improved operational efficiency of the business, the immediate increase of the
value of the new stores opened during the year, and the full market value of the
Kingston and Reading properties.



'The UK self-storage market continues to offer an excellent combination of
predictable profits and potential for growth.  It continues to grow rapidly and
offers a great opportunity, particularly to the major operators with specialist
skills. Lok'nStore has a proven ability to increase revenue from our existing
centres and open new centres, which combine to produce attractive growth and
profits.  There are opportunities to open new stores, and to improve margins
further by enlarging their average size and increasing prices. We believe that
there is an opportunity to further increase the value of the business by
accelerating our growth rate.



'Lok'nStore's market position, leading brand and increasing balance sheet
strength means we are well positioned to take advantage of this under-developed
market and I am confident that our management team will continue to deliver
substantial growth in shareholder value.'





Press Enquiries:
Andrew Jacobs, CEO                  Lok'nStore                 Tel: [phone]
Ray Davies, Finance Director        Lok'nStore
Jonathon Brill/ Billy Clegg         Financial Dynamics        Tel: [phone]






CHAIRMAN'S STATEMENT



OVERVIEW



I am pleased to report that Lok'nStore continues to make good progress and I am
delighted at the successful opening of our new flagship store and head office in
Farnborough.  The operating performance of our existing centres has continued to
improve, we have increased the value of our existing centres and we have
successfully launched new sites acquired last year.  At our year end we have
revalued all of our properties. These valuations have not been included in the
balance sheet.



Lok'nStore's focus on growth again has underpinned satisfactory results.
Turnover, profits and operating cash flows have all increased. We continue to
invest in our existing centres, as well as opening new centres, reflecting our
positive view of the market.



We believe that the UK self-storage market offers great potential for
Lok'nStore.



SALES AND EARNINGS GROWTH



Total turnover for the year was £8.95 million (2005: £7.77 million), an increase
of 15.1%, with annualised revenues now reaching £10.36 million (2005: £8.48
million) demonstrating the continued growth of the business during the year.
The Group made an operating profit for the year of £851,351 up 40.3% compared
with £606,961 in 2005. The Group made a pre-tax profit for the year of £124,301
compared with £114,325 in 2005.



The cash-flow of the operating business has continued to grow with earnings
before interest, tax, depreciation and amortisation (EBITDA) from the storage
centres at £3.08 million, and cash flow from operating activities amounting to
£1.6 million.



At 31 July 2006, the number of customers/contracts had risen to 7,570 up from
6,715 at 31 July 2005, an increase of 12.7% over the year.



Our established centres have continued to grow alongside the more rapid sales
increases at our newest centres. On a like for like basis, our 15 Centres
trading for more than 250 weeks grew revenue by 9.2%, our 4 centres with 100 to
250 weeks' trading grew revenue by 42.3%. Our 2 new centres at Farnborough and
Crayford had been trading for around six months at the year end and have started
encouragingly.



Lok'nStore's 11 most established centres (those stores over 250 weeks old in the
last financial year) made EBITDA margins of 49% this year compared to 48% last
year, demonstrating improvement in the underlying margin on a like for like
basis.  At 31 July 2006, Lok'nStore had 15 established stores (over 250 weeks
old) with the addition of 4 stores, all leasehold, joining this category during
the year.  These made an aggregate EBITDA margin of 39.8%. Again, we have seen
margin improvement when compared to 37.7% last year for the same 15 stores,
showing the strong underlying and increasing profitability of the business.



Overall EBITDA margins on the aggregate of all stores improved from 32.4% to
34.6%



DIVIDEND



The directors do not recommend the payment of a dividend; however the Board will
keep this matter under periodic review.



NEW CENTRES



During the year we built and opened our new centre in Farnborough, and opened a
new centre in Crayford.  They are both located in attractive markets with high
visibility.  We now have 21 stores open with capacity of 920,000 sq. ft. of
storage space when fully fitted.



These two new stores, which provide 128,000 sq ft of space, are larger than
Lok'nStore's average size of 43,800 ft per store, and add 16% to total space.
Combined with the fact that they are both freeholds and prominent, high
specification buildings this adds significantly to the potential margins they
are capable of achieving. This in turn positively impacts on the potential
margins of the Group overall.



The successful development and opening of the Farnborough centre, which is the
first purpose built for Lok'nStore, represents an evolution of the business
model, creating value through larger new-build centres.  It is the first centre
where Lok'nStore has managed the entire process of buying the land, gaining
planning permission, building, and fitting the store. With its prominent design
and position adjacent to the M3 motorway it has raised the profile of the whole
Lok'nStore brand.



I would like to take this opportunity to thank the Lok'nStore team for its
prompt construction and successful opening.



Our objective is to increase the number of Lok'nStore centres and we have
further sites in the pipeline which we expect to sign during the coming
financial year. We continuously review opportunities to buy, to build, and to
lease new stores and are encouraged by the early success of the Farnborough
store as a model for rolling out future stores.  We believe that there is an
opportunity to further increase the value of the business by accelerating our
growth rate.



PROPERTY ASSETS



Lok'nStore's property holdings have been valued at 31 July 2006.  This report
valued our properties at £66.6 million (Jan 2005: £31.8 million) compared to a
net book value of £25.2 million.  (2005: NBV £16.7 million). This valuation
includes the new Farnborough and Crayford stores, in addition to the Kingston
and Reading properties at full market value. This valuation translates into a
net asset value of 213 pence per share. The value of trading properties which
were previously valued in January 2005 showed an uplift of 33.42% from that
date, of which 13.25% is capital growth (yield contraction) and 20.17%
operational performance.



During the year we were pleased to conclude the planning permission formalities
in respect of high-density residential development at our existing Kingston site
with the formal execution of the S.106 Agreement.



SELF-STORAGE IN THE UK AND US



The UK self-storage market continues to grow rapidly and offers a great
opportunity, particularly to the major operators with specialist skills.



The more mature US market, grew from 2.9 sq. ft. per member of the population in
1994 to 5.54 sq. ft. in 2006. The population density of the US is only 32 per
square kilometre against 246 in the UK. This creates far more pressure to use
property resources efficiently in the UK, which is a driver of demand for
self-storage.



Lok'nStore is one of two quoted storage operators in the UK, ranked fourth in
size in the UK and sixth in Europe.



LOK'NSTORE PEOPLE



Andrew Jacobs, Chief Executive Officer, is supported by an experienced executive
team now all based at our corporate head office in Farnborough. Our storage
centre personnel are committed and motivated and help maintain the exemplary
levels of friendly service that Lok'nStore provides to its customers.



I would like to thank all of the people who work at our head office and in our
centres for their commitment to our business and for their hard work. Their
continued effort will enable us to further increase the value of the business.



OUTLOOK



The UK self-storage market continues to offer an excellent combination of
predictable profits and potential for growth.  It continues to grow rapidly and
offers a great opportunity, particularly to the major operators with specialist
skills. Lok'nStore has a proven ability to increase revenue from our existing
centres and open new centres, which combine to produce attractive growth and
profits.  There are opportunities to open new stores, and to improve margins
further by enlarging their average size and increasing prices. We believe that
there is an opportunity to further increase the value of the business by
accelerating our growth rate.



Lok'nStore's market position, leading brand and increasing balance sheet
strength means we are well positioned to take advantage of this under-developed
market and I am confident that our management team will continue to deliver
substantial growth in shareholder value.'





Simon Thomas
Chairman
27th October 2006






OPERATING REVIEW



SALES AND PRICING



During the year under review we have continued to raise operational standards at
LoknStore, and to focus store personnel on taking responsibility for increasing
turnover. This work has continued to improve the consistency of performance
across the centres. Our central sales team are now running more frequent and
improved sales training courses using facilities in our new flagship store in
Farnborough. In addition, we regularly review the bonus scheme to link
performance and reward more directly to turnover growth and consistently high
quality customer service.



During the year we increased occupied space by 50,301 sq. ft. (9.1%), with total
occupied space at 31 July 2006 of 605,746 sq ft. (31 July 2005 of 555,445 sq
ft). We have included a table summarising the trading performance of all our
centres over the year, analysed between centres open less than 100 weeks,
between 100 and 250 weeks, and more than 250 weeks at the end of the period.



Encouragingly, revenue from the 15 most established centres (over 250 weeks)
increased 9.2% on the previous year. We believe there is room for further
increases in these older stores with new space still to be fitted out in
addition to improving income from existing space.



Lok'nStore is now taking a more active approach to yield management with average
prices for self-storage units increasing 4% over the year. This compares
favourably with the last several years where prices have only risen 0.5-1 % per
annum. We have introduced a yield management system underlying our confidence
that we will be able to increase prices by more than inflation for several
years. Our average price for self-storage was £16.40 at 31st July 2006 which
compares favourably with the average of £18.29 for the industry across the
south-east. (Source: Self-Storage Association survey 2006). We believe that
there is room to continue to increase prices while retaining our price
competitive position in the market.



Lok'nStore's established centres (over 250 weeks old) achieved EBITDA margins of
40%.



14 of the centres are trading profitably at the pre-tax level (2005: 14) and 19
have positive operating cash flow (2005: 17).



Packing materials, insurance and other sales increased 18.6% over the year
accounting for 7.9% of turnover (2005: 7.7%).



MARKETING



The Company spent approximately 6.5% of turnover on advertising and marketing
(including postage, printing and stationery) (2005: 6.4%).   Our marketing costs
should remain at these levels over the coming years.   Marketing resources and
efforts have been upgraded, and this contributed to Lok'nStore achieving another
increase in occupancy over the year of 50,301 sq. ft, up 9.1% on the previous
year, and increases in self storage pricing by 4%.



We continually review new and better opportunities in the media and through
local marketing efforts and each of these shows progress. New centres benefit
from the marketing and promotion effort already applied to our existing centres.



Work on the visibility of our storage centres is also improving response to our
marketing.  Our new Farnborough centre with its prominent design, distinctive
orange elevations and position adjacent to the M3 motorway will help to raise
the profile of the whole Lok'nStore brand.  We are prominent in our directory
advertising, which also produces a significant proportion of our enquiries.



We apply coordinated sales and marketing messages. Our storage centre personnel
are closely involved and work with our head office, to ensure our expenditure
remains effective.



SYSTEMS - CENTRALISED SPACE MANAGER



During the year we have centralised our store management computer system which
is already yielding marketing and other management information benefits. We
remain committed to continuing systems centralisation, greater audit capability
and a continued focus on efficient and timely data. During the year we have
increased the penetration of direct debit facilities which reduces
administrative effort and saves on stationery and postage costs at the centres.
As well as being a positive service to our customers it also reduces the time
committed to credit management. The 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. We
already invest in CCTV systems, intruder and fire alarm systems and the remote
monitoring of our centres out of hours and we have rigorous security procedures
in relation to customers.



Furthermore, we continually review our security resources and are upgrading our
security in line with up-to-date equipment, for example, colour CCTV monitors of
greater capability and detail and improved lighting.



The importance of security and the need for vigilance is communicated to all
personnel and reinforced through our various training procedures.



OUR PEOPLE



At 31 July 2006, we had 104 employees (2005: 94).



Attracting, retaining and encouraging the right people is key to the success of
Lok'nStore. We are committed to providing a positive attitude in the business
and an enjoyable working environment.  In January 2006, we moved the Lok'nStore
head office from our Kingston centre to a new purpose built accommodation in our
Farnborough centre. This has improved coordination and communication within the
Company, and particularly amongst our property and other functional management
previously dispersed around our different offices.  All head office staff now
operate from Farnborough.



Lok'nStore encourages all personnel to build their skills through appropriate
training and regular performance monitoring. Regular weekly training courses at
Farnborough support these objectives. We have incorporated a new conference room
into our head office, which can accommodate all our training requirements for
the foreseeable future. We have reduced outgoings, increased the regularity of
training and improved contact between head office and the stores by bringing
staff into head office for regular training.



All employees are eligible to participate in share ownership plans after 3
months of employment .34% of our employees have EBT shares or options. 36% of
the personnel are members of the contributory pension scheme.



I would like to thank all of our people for their contribution to a successful
year. The continuing progress of the Group is being achieved as a result of
their efforts and hard work.



PROPERTY AND CONSTRUCTION



During the year we built and opened our new freehold centres in Farnborough, and
Crayford totalling 128,000 square feet.  Farnborough is the first store we have
had purpose built for Lok'nStore and we are delighted with the result. Both
these stores are located in attractive markets with high visibility.



We now have 21 stores open with capacity of 920,000 sq. ft. of storage space
when fully fitted. 11 stores are held freehold and 10 leasehold.  We prefer to
acquire freeholds if possible, and where opportunities arise we will seek to
acquire the freehold of our leasehold centres.  However, our overiding objective
is to increase the number of storage centres we operate and we are comfortable
to take leases on appropriate terms.



Lok'nStore continues to focus on the efficiency of our fitting out programme in
order to bring forward the revenue stream and maximise our rate of return. We
optimise the available space in new centres by fitting mezzanine floors and
storage units as customer demand dictates. This allows revenue to be generated
by opening storage space, and keeping tight control on capital expenditure by
fitting out when it is required. Over the year under review we fitted out a
further 104,818 sq. ft. of self-storage units, a 20% increase in fitted space.



Subject to market conditions, it is our current aim to acquire between 2 and 4
centres per annum. Our current average centre size is 43,800 sq. ft. and this
may increase for new centres up to 60,000 sq. ft. or more. The exact timing of
centre openings will largely depend on market availability, and we will retain
our disciplined and flexible approach to site acquisition.



Centre Analysis


Maturity Analysis                          Jul-06

Weeks Old                   over 250     100 to 250     under 100       Total

Sales (£'000)                 7,243        1,443           202          8,888

Stores EBITDA (£'000)         2,885         269            -78          3,076

EBITDA MARGIN (%)             39.8          18.7          -38.7         34.6
Maximum Net Area               630          162            128           920
('000 sq ft)

Freehold                        7            2              2            11

Leasehold                       8            2              0            10

Total Centres                  15            4              2            21



Customer Analysis



At the end of July 39.6% of our turnover was from business customers (25.2% by
number) and 60.4% was from household customers (74.8% by number).





Andrew Jacobs
Chief Executive Officer
27th October 2006






FINANCIAL REVIEW



TRADING



Total turnover for the year was £8.95 million (2005: £7.77 million), an increase
of 15.1%, with annualised revenues now reaching £10.36 million. (2005: £8.48
million) Excluding the rental income foregone by expanding the Poole Store self
storage turnover grew by 16.4%.



Group EBITDA was up 29% to £1.75 million (2005: £1.36 million). Operating profit
increased 40.3% to £851,351 (2005: £606,961). There were no exceptional costs.



Lok'nStore's business model is a robust one with security deposits taken from
customers when they first store with us.  Customers also pay four weekly in
advance. Credit control therefore remains tight with only £44,000 of bad debts
written off during the year representing less than 0.5% of turnover.



The net interest charge increased from £492,636 to £727,050. This is a
consequence of the Group utilising its bank facilities to acquire the freehold
sites at Farnborough and Crayford, and the continuing fit-out programme at our
existing stores. Year-end borrowings were £14.12 million.



The Group made a profit on ordinary activities before tax of £124,301 (2005:
£114,325).



The current year tax charge of £100,483 relates to a movement in deferred tax
arising on capital allowances in excess of depreciation. No actual cash
liability to corporation tax arises during the year as a result of the Group's
tax loss in the year. Tax losses available to carry forward for offset against
future profits amount to some £3.4 million. In addition the business had capital
losses available to carry forward of £362,636.



Basic earnings per share was 0.10 pence per share (2005: 0.47 pence per share).



BORROWINGS AND CASH FLOW



Cash flows from the Group remain encouraging, with increasing cash flows as
turnover increases continuing to demonstrate the cash generative nature of the
business. The Group had cash balances at the year-end of £0.92 million (2005:
£0.42 million).



Cash inflow from operating activities before interest and capital expenditure
was £1.6 million. Capital expenditure totalling some £6.3 million reflects the
Group's commitment to growing the business through a combination of site
acquisition and related works (£5.2 million) and investing in our existing
stores (£1.1 million). At 31 July 2006, the Group had £14.12 million of
borrowings representing gearing on a NBV basis of 123% on net debt of £13.2
million. Gearing, when adjusted, on the basis of the Group's revalued stores,
drops to 25%.



BUYBACK AUTHORITY



At the Company's AGM on 1 December 2005, shareholders gave approval to replace
the existing share buy-back authority.  This authority will be sought annually
at the Company's annual general meeting each year. 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.

The total number of shares in issue is 25,091,144 Ordinary Shares.


BALANCE SHEET



Net assets at the year-end increased to £10.74 million (2005: £10.7 million).
This does not reflect the significant uplift in valuation as a result of the
property valuation of £66.6 million which increases net assets to £52.1 million.
This valuation translates into a net asset value per share of £2.13 as reported
below.



The Employee Benefit Trust owns 627,500 (2005: 627,500) shares, the costs of
which are shown as a deduction from shareholders' funds in accordance with
Urgent Issues Task Force Abstract 38.



Market valuation of freehold and leasehold land and buildings



On 31 July 2006, professional valuations were prepared by external valuers,
Cushman & Wakefield (C&W), in respect of 11 freehold and 6 leasehold properties.
The valuation was prepared in accordance with RICS Appraisal and Valuation
Standards, The valuation has been provided for accounts purposes and as such, is
a Regulated Purpose Valuation as defined in the Red Book, The external valuation
methodology provides for a Purchaser acquiring a centre incurring purchase costs
of 5.75% initially and sale plus purchaser's costs totalling 7.75% are assumed
on the notional sales in the tenth year in relation to the freehold stores. In
practice we believe that it is unlikely that Lok'nStore stores would be acquired
other than in a corporate structure (See note 5 in the notes to the accounts for
a more detailed description of the valuation methodology).



The valuation report indicates a total for properties valued of £66.6 million
(NBV £25.2 million). (January 2005 : £31.8 million : NBV £16.7 million). These
valuations have not been included in the Balance Sheet.   The 2006 valuation
includes the new stores Farnborough and Crayford and reflects the uplift in
value which has resulted from the grant of planning permission and the execution
of the S.106 Agreement at the Kingston site. In relation to the existing store
at Reading, there is potential for redevelopment for residential use.
Accordingly the site has been valued as an operating self storage site but with
an additional uplift to reflect residential development potential, but
recognising that this has yet to be obtained.   The valuations also do not
account for any further investment in existing centres since July 2006. While
the Company does not envisage routinely revaluing its properties it will
continue to do so when appropriate.


PROPERTY ASSETS                               31.07.2006                        31.01.2005
                                               £ million                        £ million
                                      Valuation          NBV           Valuation            NBV
Properties valued by 'C&W'              66.6            25.2              31.8             16.7
Farnborough at cost                       -               -               1.8               1.8
                                        66.6            25.2              33.6             18.5



Over the years Lok'nStore has acquired the freehold interest in previously
leased centres at Horsham, Reading and Poole. This tactical approach combines
the early cash flow advantages of leasehold centres with the long-term income
security and investment potential of freeholds. 8 of our 10 leaseholds are
within the terms of the Landlord and Tenant Act (1954) giving a degree of
security of tenure. The average length of the leases on the stores valued was
11.2 years at the date of the 2006 Valuation. (Source: 'C &W') (2005 valuation:
11.1 years).

NET ASSET VALUE PER SHARE


                                                                                                      2006

Analysis of net asset value                                                                              £

Net assets per balance sheet                                                                    10,742,441
Add : revalued property assets                                                                  66,590,000
Deduct : tangible fixed assets at net book value (NBV)                                        (25,240,096)
Revalued net assets                                                                             52,092,345

Shares in Issue                                                                                     Number

Opening shares                                                                                  25,071,144
Shares issued for the exercise of options                                                           20,000
Closing shares in issue                                                                         25,091,144
Shares held in EBT                                                                               (627,500)
Closing shares for NAV purposes                                                                 24,463,644


Basic net asset value per share                                                                  213 pence



Net assets per share are shareholders' funds divided by the number of shares at
the year end. The shares currently held in the Group's employee benefits trust
(own shares held) are excluded from both net assets and the number of shares.



FINANCING & LIQUIDITY



The Company has a £20 million revolving five-year committed credit facility with
Royal Bank of Scotland Plc and provides sufficient additional liquidity for the
Group's immediate expansion 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 the undrawn facility. Undrawn committed facilities at the year-end
amounted to £5.88 million.


The facility is secured on the existing property portfolio, excluding the
Kingston and Reading properties.  This ensures that the group has the full
flexibility to maximise the value of any potential exit or realisation of these
two redevelopment opportunities.



During the year the Company complied with all corresponding debt covenants.



TREASURY



All cash deposits are placed with Royal Bank of Scotland Plc on treasury deposit
utilising either one-day or two-day money funds. The Group's cash position is
reviewed daily and cash is transferred daily between these accounts and the
company's operational current accounts as required. During the year the company
obtained improved terms on its treasury deposit rates.





Ray Davies
Finance Director
27th October 2006








CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 July 2006


                                                  Notes          2006              2005

                                                                    £                 £

TURNOVER                                                    8,946,083         7,774,541
Operating expenses                                        (8,094,732)       (7,167,580)
OPERATING PROFIT                                              851,351           606,961
Interest receivable                                            36,936            35,898
PROFIT ON ORDINARY ACTIVITIES BEFORE                          888,287           642,859
INTEREST PAYABLE
Interest payable                                            (763,986)         (528,534)
PROFIT ON ORDINARY ACTIVITIES BEFORE                          124,301           114,325
TAXATION
Taxation                                              2     (100,483)                 -
PROFIT FOR THE YEAR                                   8        23,818           114,325
EARNINGS PER SHARE
Basic                                                 3         0.10p             0.47p
Diluted                                               3         0.09p             0.44p



The operating profit for the year arises from the Group's continuing operations.



No separate statement of Total Recognised Gains and Losses has been presented as
all such gains and losses have been dealt with in the Profit and Loss account.








BALANCE SHEET as at 31 July 2006


                                                            Group         Group      Company    Company
                                             Notes           2006          2005         2006       2005
                                                                £             £            £          £

FIXED ASSETS                                              334,813       359,068            -          -

Intangible assets                                4
Tangible assets                                  5     25,430,037    20,032,760            -          -
Investments                                      6              -             -      214,563    214,563
                                                       25,764,850    20,391,828      214,563    214,563
CURRENT ASSETS                                             77,668        88,648            -          -

Stocks
Debtors                                                 2,022,769     1,684,793    6,040,331  6,025,331
Cash at bank and in hand                                  921,928       424,738            -          -
                                                        3,022,365     2,198,179    6,040,331  6,025,331
CREDITORS: Amounts falling due within                 (3,877,489)   (3,736,384)            -          -
one year

NET CURRENT (LIABILITIES)/ASSETS                        (855,124)   (1,538,205)    6,040,331  6,025,331
TOTAL ASSETS LESS CURRENT LIABILITIES                  24,909,726    18,853,623    6,254,894  6,239,894
CREDITORS: Amounts falling due after                 (14,066,802)   (8,150,000)            -          -
more than one year
PROVISION FOR LIABILITIES                               (100,483)             -            -          -
AND CHARGES
NET ASSETS                                             10,742,441    10,703,623    6,254,894  6,239,894
CAPITAL AND RESERVES                                      250,911       250,711      250,911    250,711

Called up share capital                          7
Share premium account                            8         66,776        51,976       66,776     51,976
Capital redemption reserve                       8         34,205        34,205       34,205     34,205
Merger reserve                                   8      6,295,295     6,295,295            -          -
Other distributable reserve                      8      5,903,002     5,903,002    5,903,002  5,903,002
Profit and loss account                          8    (1,298,162)   (1,321,980)            -          -
ESOP shares                                      9      (509,586)     (509,586)            -          -
SHAREHOLDERS' FUNDS                                    10,742,441    10,703,623    6,254,894  6,239,894



Approved by the Board of Directors and authorised for issue on 27th October 2006
and signed on its behalf by:



A Jacobs
Chief Executive


R Davies
Finance Director








CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 July 2006


                                                              Notes             2006             2005
                                                                                   £                £

Cash flow from operating activities                             10a        1,603,118        1,983,832
Returns on investments and servicing of finance                 10b        (771,211)        (500,901)
Taxation                                                                    (50,500)                -
Capital expenditure and financial investment                    10b      (6,273,461)      (2,293,945)
CASH OUTFLOW BEFORE FINANCING                                            (5,492,054)        (811,014)
Financing                                                       10b        5,989,244          581,392
INCREASE/(DECREASE)  IN CASH IN THE PERIOD                                   497,190        (229,622)







RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT


                                                              Notes             2006             2005
                                                                                   £                £

Increase/(decrease) in cash in the period                                    497,190        (229,622)
Cash inflow from increase in debt and lease financing                    (5,974,244)        (549,852)
MOVEMENT IN NET DEBT IN PERIOD                                           (5,477,054)        (779,474)
NET DEBT AT 1 AUGUST                                                     (7,725,262)      (6,945,788)
NET DEBT AT 31 JULY                                             10c     (13,202,316)      (7,725,262)







NOTES TO THE FINANCIAL STATEMENTS





1. ACCOUNTING POLICIES



The above results for the year ended 31 July 2006 are an abridged version of the
Company's statutory financial statements. The profit and loss account and
balance sheet do not constitute statutory financial statements within the
meaning of Section 240 of the Companies Act 1985. These accounts have been
prepared on the basis of the same accounting policies as set out in the
statutory accounts for the year ended 31 July 2005.





2.             TAXATION


                                                                                2006            2005
                                                                                   £               £

Current tax charge for the year (see below)                                        -               -

Deferred tax
Origination and reversal of timing differences                             (100,483)               -
Total deferred tax charge for the year                                     (100,483)               -
Tax on profit on ordinary activities                                       (100,483)               -



The tax assessed is lower than the standard rate of corporation tax in the UK
(30%).   A reconciliation of the factors affecting the tax charge for the year
is shown below:


                                                                                2006            2005
                                                                                   £               £

Profit on ordinary activities before tax                                     124,301         114,325
Profit on ordinary activities multiplied by the standard rate of              37,290          34,298
corporation tax in the UK of 30% (2005 - 30%)
Expenses not deductible for tax purposes                                      19,534          15,295
Capital allowances for period in excess of depreciation                    (159,558)        (82,429)
Tax losses not utilised                                                      123,173          60,552
General provision                                                              (101)           (203)
Deduction for employee share options                                        (15,000)        (23,277)
Depreciation on revenue items capitalised                                    (5,338)         (4,236)
Current tax charge for the year                                                    -               -



The Group has revenue tax losses of approximately £3.4 million available to
carry forward against future taxable profits of the same trade. The current year
tax charge relates to a movement in deferred tax arising on accelerated capital
allowances in excess of depreciation after taking account of all revenue tax
losses.



Future tax charges may be affected by the degree to which deferred tax assets
are subject to recognition in the future.



It is not the intention of the directors to dispose of any of the properties as
operational self-storage centres in the foreseeable future. If, however, the
properties were sold at their market values as operational self-storage centres
or in the case of the Kingston and Reading sites with their residential
development value as disclosed in note 5, an estimate of the tax payable on the
gain  arising would be approximately £10.6 million.  This tax payable figure
does not take into account any claims to rollover relief that the company might
make.  At present, it is not envisaged that any tax will become payable in the
foreseeable future.





3.             EARNINGS PER ORDINARY SHARE



The calculations of earnings per share are based on the following profits and
numbers of shares.


                                                                                2006             2005
                                                                                   £                £

Profit for the financial year                                                124,301          114,325


                                                                                2006             2005
                                                                       No. of shares    No. of shares
Weighted average number of shares                                         24,453,288       24,432,491
For basic earnings per share
Dilutive effect of share options                                           1,526,446        1,414,688
For diluted earnings per share                                            25,979,734       25,847,179





4.             INTANGIBLE FIXED ASSETS
                                                                                          Purchased
GROUP                                                                                      Goodwill
                                                                                                  £

Cost  1 August 2005 and  31 July 2006                                                       485,093
31 July 2006
Amortisation  1 August 2005                                                                 126,025
Charged in year                                                                              24,255
31 July 2006                                                                                150,280
Net book value  31 July 2006                                                                334,813
Net book value  31 July 2005                                                                359,068





5.             TANGIBLE FIXED ASSETS

GROUP                           Freehold                     Furniture,         Motor
                              properties  Short leasehold      fixtures      vehicles         Total
                                             improvements    & fittings             
                                       £                £             £             £             £
Cost                          14,453,112        1,497,642     7,456,771        69,049    23,476,574
1 August 2005
Additions                      4,074,589           97,935     2,101,005             -     6,273,529
Disposals                              -                -             -       (8,643)       (8,643)
31 July 2006                  18,527,701        1,595,577     9,557,776        60,406    29,741,460
Depreciation                     427,482          502,463     2,472,585        41,284     3,443,814
1 August 2005
Charged in year                  112,596          130,592       626,033         5,982       875,203
Disposals                              -                -             -       (7,594)       (7,594)
31 July 2006                     540,078          633,055     3,098,618        39,672     4,311,423
Net book value                17,987,623          962,522     6,459,158        20,734    25,430,037
31 July 2006
Net book value                14,025,630          995,179     4,984,186        27,765    20,032,760
31 July 2005



The additions to freehold properties include the acquisition and development of
the freehold sites in Hawley Lane, Farnborough and at Optima Business Park,
Crayford totalling £3.8 million. The additions to fixtures & fittings includes
fit-outs at Tonbridge, Poole, Sunbury, Luton, Eastbourne and Milton Keynes
stores.



Market valuation of freehold and leasehold land and buildings



On 31 July 2006, a professional valuation was prepared by external valuers,
Cushman & Wakefield (C&W), in respect of 12 freehold and 6 leasehold properties.
The valuation was prepared in accordance with RICS Appraisal and Valuation
Standards, 5th Edition, published by The Royal Institution of Chartered
Surveyors ('the Red Book').  The valuations were prepared on the basis of Market
Value for the two non trading properties and, for the 16 trading properties,
Market Value as a fully equipped operational entity, having regard to trading
potential.  The valuation has been provided for accounts purposes and as such,
is a Regulated Purpose Valuation as defined in the Red Book. In compliance with
the disclosure requirements of the Red Book, C&W have confirmed that:



•  The members of the RICS who have been the signatories to the valuation
   provided to the Company for the same purposes as this valuation have done so
   since January 2004.

•  C&W have prepared two previous valuations for the same purpose as this
   valuation on behalf of the Company.

•  C&W do not provide other significant professional or agency services
   to the Company

•  In relation to the preceding financial year of C&W, the proportion of
   the total fees payable by the Company to the total fee income of the firm is
   less than 5%.



The valuation report indicates a total for all properties valued of £66.6
million (NBV £25.2 million). (January 2005 : £31.8 million : NBV £16.7 million).
These valuations have not been included in the Balance Sheet.



The 2006 valuation includes the new stores Farnborough and Crayford and reflects
the uplift in value which has resulted from the grant of planning permission and
the execution of the S.106 Agreement at the Kingston site. In relation to the
existing store at Reading, there is potential for redevelopment for residential
use. Accordingly the site has been valued as an operating self storage facility
but with an additional uplift to reflect residential development potential but
recognising that this has yet to be obtained.  The valuations also do not
account for any further investment in existing centres since July 2006. While
the Company does not envisage routinely revaluing its properties it will
continue to do so when appropriate.



Valuation Methodology



Background



The USA has over 40,000 self-storage centres trading in a highly fragmented
market with the largest 5 operators accounting for less than 20% of market share
based on net rentable square footage. The vast majority of centres are owned and
managed singly or in small portfolios. These properties have a well established
track record of being traded and are therefore considered as liquid property
assets.



Many valuations of this asset class are undertaken by appraisers in the USA and
the accepted valuation approach is to value the properties on the basis of
Market Value as fully equipped operational entities, having regard to trading
potential.  This approach is recognised in the Red Book and is adopted for other
categories of property that are normally bought and sold on the basis of their
trading potential.  Examples include hotels, licensed properties, marinas and
petrol stations.



The UK self storage sector differs from the USA in that the five larger groups
control over 50% of the market by net rentable storage space.  The scope for
active trading of these property assets is therefore likely to be less, however
there is now some evidence that there will be increasing liquidity with recent
sales of independently owned product in larger conurbations.



In addition the acquisition of Shurgard Storage Centres, Inc. by Public Storage,
Inc. was announced in March this year including a portfolio of over 140 trading
storage facilities in Europe, with 18 in the UK.



C&W believe that the valuation methodology adopted in the USA is the most
appropriate for the UK market.



Methodology



C&W have adopted different approaches for the valuation of the leasehold and
freehold assets as follows:



Freehold



The valuation is based on a discounted cash flow of the net operating income
projected over a ten-year period and a notional sale of the asset at the end of
the tenth year.



Assumptions



A.  Net operating income is based on projected revenue received
less projected operating costs together with a central administration charge
representing 6% of the estimated annual revenue. The initial net operating
income is calculated by estimating the net operating income in the first twelve
months following the valuation date.



B.  The net operating income in future years is calculated
assuming straight-line absorption from day 1 actual occupancy to an estimated
stabilised/mature occupancy level. In the valuation the assumed stabilised
occupancy level for the sixteen stores (both freehold and leaseholds) averages
78.28% (2005:78.20%). The projected revenues and costs have been adjusted for
estimated cost inflation and revenue growth.



C.  The capitalisation rates applied to existing and future net
cash flow have been estimated by reference to underlying yields for industrial
and retail warehouse property, bank base rates, ten-year money rates, inflation
and the available evidence of transactions in the sector. On average, for all
sixteen stores, the yield (net of purchaser's costs) arising from the first year
of the projected cash flow is 6.05% (2005 6.00%).  This rises to 10.54% (2005:
12.86%) based on the projected cash flow for the first year following estimated
stabilisation in respect of each property.



D.  The future net cash flow projections (including revenue
growth and cost inflation) have been discounted at a rate that reflects the risk
associated with each asset. The weighted average annual discount rate adopted
(for both freeholds and leaseholds) is 11.31% (2005: 12.50%).



E.  Purchaser's costs of 5.75% have been assumed initially and
sale plus purchaser's costs totalling 7.75% are assumed on the notional sales in
the tenth year in relation to the freehold stores.



Leaseholds  The same methodology has been used as for freeholds, except that no
sale of the assets in the 10th year are assumed, but the discounted cash flow is
extended to the expiry of the lease. The average unexpired term of the Group's
leaseholds is approximately 11 years and 2 month as at 31 July 06 (11 years and
1 month as at January 2005).





6.         INVESTMENTS
COMPANY                                                              Shares in subsidiary undertakings

                                                                                                     £

Cost: At 1 August 2005 and 31 July 2006 Lok'nStore Limited                                     214,563



The Company holds more than 20% of the share capital of the following companies,
all of which are incorporated in England and Wales:


Subsidiary undertakings                      Class of     % of shares held
                                         shareholding  Directly Indirectly        Nature of business

Lok'nStore Limited                           Ordinary         100        -              Self-storage
Lok'nStore Trustee Limited                   Ordinary           -      100           Trustee Company
                                                                                           (dormant)





7.        SHARE CAPITAL
                                                                                2006             2005
                                                                                   £                £
Authorised:                                                                  350,000          350,000
35,000,000 ordinary shares of 1p each (2005: 35,000,000)


Allotted, issued and fully paid ordinary shares:                    Number of shares                £
At 1 August 2005                                                          25,071,144          250,711
Options exercised                                                             20,000              200
                                                                          25,091,144          250,911

At 31 July 2006


During the year, options were exercised on 20,000 ordinary shares at 38 pence 
per share and that number of shares were issued for a consideration of £7,600.


At the Company's AGM on 1 December 2005, 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    Profit and        Total
                               Share       Merger   Distributable    Redemption  loss account      
                             premium      reserve         reserve       reserve                                         
                                   £             £              £             £             £            £
                                                

1 August 2005                 51,976    6,295,295       5,903,002        34,205   (1,321,980)   10,962,498
Exercise of share options     14,800            -               -             -             -       14,800
Profit  for the year               -            -               -             -       23,818,       23,818
31 July 2006                  66,776    6,295,295       5,903,002        34,205   (1,298,162)   11,001,116



The merger reserve represents the excess of the nominal value of the shares
issued by Lok'nStore Group Plc over the nominal value of the share capital and
share premium of Lok'nStore Limited as at 31 July 2001.





9.             ESOP SHARES
                                         Group 2006       Group 2005       Group 2006       Group 2005
                                             Number           Number                £                £
                                                                                    

1 August 2005 & 31 July 2006                627,500          627,500          509,586          509,586



The ESOP shares are held by the employee benefit trust.





10.          CASH FLOWS
                                                                                2006             2005
                                                                                   £                £
a              Reconciliation of operating profit to net cash
inflow from operating activities
Operating profit                                                             851,351          606,961
Depreciation                                                                 875,203          728,522
Amortisation                                                                  24,255           24,255
Loss on sale of fixed assets                                                     980                -
Decrease in stocks                                                            10,980           15,232
(Increase)/decrease in debtors                                             (330,187)          263,089
Increase in creditors                                                        170,536          345,773

Net cash flow from operating activities                                    1,603,118        1,983,832



b              Analysis of cash flows for headings netted in the                2006             2005
cash flow
                                                                                   £                £

Returns on investments and servicing of finance
Interest received                                                             36,936           35,898
Interest paid                                                              (808,147)        (536,757)
Interest element of finance lease rental payments                                  -             (42)
Net cash outflow for returns on investments and servicing of               (771,211)        (500,901)
finance

Capital expenditure and financial investment                             (6,273,529)      (2,293,945)

Purchase of tangible fixed assets
Proceeds from sale of tangible fixed assets                                       68                -
Net cash outflow for capital expenditure and financial investment        (6,273,461)      (2,293,945)
Financing                                                                  5,974,244          550,000

Bank loans
Capital element of finance lease rental payments                                   -            (148)
Exercise of share options                                                     15,000           31,540
Net cash inflow from financing                                             5,989,244          581,392


c              Analysis of net debt             At                         Other non               At
                                      31 July 2005        Cash flow     cash changes     31 July 2006
                                                 £                £                £                £

Cash at bank and in hand                   424,738          497,190                -          921,928
Debt due after 1 year                  (8,150,000)      (5,974,244)                -     (14,124,244)
Total                                  (7,725,262)      (5,477,054)                      (13,202,316)

11.  EVENTS AFTER THE BALANCE SHEET DATE

On 25th September 2006, Lok'nStore Limited exchanged contracts on the purchase
of a freehold site in Portsmouth with a contractual completion date set for 27th
November 2006.  The purchase price is £2,025,000 and the property will be
refurbished and fitted out for a further cost of approximately £2 million. The
refurbished store will open in 2007.

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