Preliminary Results

RNS Number : 6226Z

Safestore Holdings plc

18 January 2011

FOR IMMEDIATE RELEASE

18 January 2011

Safestore Holdings plc
("Safestore" or "the Company")

Safestore Holdings plc is the largest self storage company in the UK and Paris.

Preliminary results announcement for the year ended 31 October 2010

'Strong performance across the Group'

Financial Highlights:

· Revenue up 5.7% to £89.2 million (2009: £84.4 million)

· Underlying EBITDA¹ up 6.1% to £49.2 million (2009: £46.3 million)

· Profit before Tax of £29.2 million (2009: Loss before tax of £9.4 million)

· EPRA Adjusted Earnings per share² ("EPS") up 8.9% to 8.19 pence (2009: 7.52 pence per share)

· Basic EPS² of 14.05 pence (2009: a loss per share of 0.14 pence)

· As at 31 October 2010, Safestore's property portfolio was valued at £687.2 million, up 6.1% since October 2009

· Final dividend increased by 8.3% to 3.25 pence (2009: 3.00 pence)

· New and increased bank facilities to August 2013

Operational Highlights:

· Strong performance across the Group

· Average rental rate at record levels at £25.55 per square foot ("sq ft")

· Closing occupancy at record level of 2.94 million sq ft, up 168,000 sq ft, an increase of 195% over the growth delivered in FY2009

· Ancillary sales up 6.1% to £12.2 million

· Higher levels of enquiries and new lets from both business and domestic customers

¹ EBITDA before exceptional items, contingent rent, gain/(loss) on investment properties and fair value movement of derivatives (underlying EBITDA)

² See note 7

Steve Williams, Safestore's Chief Executive, commented:

"2010 has been a year of considerable progress across all areas of the business against a background of a 'flat' economy and a stagnant housing market. This achievement is a testament to the strength and depth of the management team aligned to the flexible business model, our geographic spread and market leading position.

Our investment in marketing and enquiry generation will continue and we will look to further focus on the brand awareness of Safestore specifically, and self storage generally, where the level of awareness remains relatively low in what is still an immature market sector with excellent growth potential.

Maintaining the balance of occupancy, rate, and ancillary growth will remain a core part of our strategy and the Group should see the benefits of our operational gearing.

Since the year end, we have continued to see good levels of enquiries and new lets. Reservations for future new lets also remain at high levels. Vacate activity has increased which is expected given the time of year and strong trading in previous periods.

We believe that the self storage market will continue to grow as awareness increases and furthermore we are confident that Safestore as market leader can take a bigger share of the overall market through our operational expertise, national coverage and scale and is ideally placed to exploit any potential opportunities."

For further information, please contact:

Safestore Holdings plc	Tel: 020 7796 4133 on Tuesday 18 January 2011 and thereafter on 020 8732 1500
Steve Williams, Chief Executive
Richard Hodsden, Chief Financial Officer

Hudson Sandler	Tel: 020 7796 4133
Nick Lyon / Wendy Baker

A presentation for analysts will be held at 9.30am today at Hudson Sandler, 29 Cloth Fair, London EC1A 7NN.

For dial-in details of the presentation please contact Anna Domin at adomin@hudsonsandler.com or telephone on 020 7796 4133.

Notes to Editors

·	Safestore is the UK's largest self storage group with 118 stores including 96 wholly owned stores and 12 stores under management throughout the UK and 22 stores in Paris.
·	The Company provides storage facilities to over 41,000 domestic and business customers.
·	Safestore (excluding Space Maker stores under management) has a maximum lettable area ("MLA") for self storage of 5.2 million sq ft (including 10 expansion pipeline stores) of which 2.94 million sq ft was occupied as at 31 October 2010.
·	As the UK's only national self storage provider, Safestore is uniquely positioned to meet the needs of companies requiring a national service.
·	A strong balance sheet and operational cash flow along with increased bank facilities allows Safestore to invest in continual improvements in the operational performance of its stores, in new store development and acquisitions where appropriate.
·	Safestore employs around 500 people.

www.safestore.com

Certain statements in this announcement are forward looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement. Information in this announcement relating to the price at which investments have been bought or sold in the past or the yield on investments cannot be relied upon as a guide to future performance. Except as required by law, the Company is under no obligation to update or keep current the forward-looking statements contained in this announcement or to correct any inaccuracies which may become apparent in such forward-looking statements.

Chairman's statement

As Chairman of Safestore Holdings plc, the market leader and largest self storage retailer in the UK and Paris, I am pleased to announce a record set of results in terms of revenue and EBITDA for the year ended 31 October 2010 building on the momentum delivered in prior years.

We have continued to grow the business in spite of a flat macro-economy and housing market and have seen high levels of new lets resulting in strong occupancy growth and a robust rental rate. We have opened three new stores in excellent locations and closed one old store in the year. We now trade from 118 facilities firmly consolidating Safestore's position as the market leader in both the UK and central Paris.

We have confidence in the resilience of our business model and the strength and depth of our management team which has continued to deliver strong trading and cash flows in what is still a developing market in the UK and Europe.

Financial results

Turnover for the year of £89.2 million was 5.7% higher than last year (FY2009: £84.4 million) and Profit before tax was £29.2 million (FY2009: Loss before tax £9.4 million).

The key drivers for revenue growth continue to be movements in the self storage rate per square foot ("sq ft"), occupancy and ancillary revenues:

· Closing occupancy increased by 168,000 sq ft or 6.1% to 2.94 million sq ft (FY2009: 2.77 million sq ft).

· The average self storage rental rate per sq ft in the UK and France were up 3.3% and 1.9% respectively this year over last on a constant currency basis. The impact of foreign exchange movements has reduced the increase to 1.2% at group level at £25.55 per sq ft (FY2009: £25.24).

· Ancillary revenues were up 6.1% to £12.2 million (FY2009: £11.5 million).

· Underlying EBITDA^* increased by 6.1% to £49.2 million (FY2009: £46.3 million).

· Underlying EBITDA margins have increased to 55.1% (FY2009: 54.9%).

· EPRA Adjusted Earnings Per Share increased by 8.9% to 8.19 pence (FY2009: 7.52 pence).

* Underlying EBITDA is Earnings Before Interest, Taxation, Depreciation and Amortisation (before exceptional items, change in fair value of derivatives, contingent rent and movement on investment properties)

Property Valuation

As at 31 October 2010, the total value of the Group's investment property portfolio was £687.2 million, up £39.4 million from £647.8 million at 31 October 2009 and up £31.8 million from the half year valuation of £655.4 million at 30 April 2010. All areas of the business have contributed to the valuation uplift seen during the year. New stores opened in the second half of the financial year account for £12.8 million of the uplift with the balance being delivered from the UK and Parisian existing portfolios on a like for like basis. More details are provided in the Financial Review.

Dividend

The Board are pleased to recommend a final dividend of 3.25 pence per share bringing the total dividend to 4.95 pence per share for the year. This total dividend represents an increase of 6.5% versus FY2009. We consider that it represents the appropriate balance between shareholder return and the requirement of capital to fund new store organic growth and it further demonstrates the Board's confidence in the prospects of the Group.

People

The Board recognises the significant role our people play in the success of the business and we remain committed to the training and development of our staff as we strongly believe that it is our strength in this area that sets Safestore apart from its competition. I would like to take this opportunity to thank all my colleagues throughout the business for their hard work and dedication this year.

Following Steve Williams' desire to retire from the Board, I am pleased to announce his successor, Peter Gowers whose most recent role was Chief Executive, Asia Pacific, InterContinental Hotels Group PLC. Steve Williams will leave the Group on 30 April 2011 after handing over to Peter who will join Safestore on 1 February 2011 and become Chief Executive on 1 March 2011.

The entire Board and I are extremely grateful to Steve for his enormous contribution to the success of the Group and for his outstanding leadership of Safestore since his appointment as Chief Executive in January 2002.

Steve led the successful flotation in 2007 and today, we have a high quality self storage business throughout the UK and Paris. He has provided a solid platform for the Group's continued success and we appreciate his intention to remain in the business until 30 April to ensure a smooth handover.

Outlook

The strong performance of Safestore in the year reflects the operational experience of the executive team and its understanding of the self storage market. The continued resilience of the Group's performance and business model is underpinned by our diverse cross-section of customers, both domestic and business, and the geographies in which we operate.

Since the year end, we have continued to see good levels of enquiries and new lets. Vacate activity has increased which is expected given the time of year and strong trading in previous periods. Traditionally the first quarter of the financial year is the quietest trading period for the self storage sector and whilst we have seen the usual fall in occupancy in the quarter this is in line with historical trading and better than might have been expected given the high level of new lets in previous periods. The self storage rental rate per sq ft has remained strong and continued to increase during the first quarter.

We will continue to manage the business with a clear but flexible strategy thus enabling us to respond in line with any recovery in the wider market. New store openings remain on schedule and we continue to invest and acquire new stores in first class locations. These new stores will provide further growth drivers for the Group as they mature over time. Maintaining the balance of occupancy, rate and ancillary growth will continue to be a core part of our strategy and the Group should see the benefits of our operational gearing.

We believe that the self-storage market will continue to grow as awareness increases and furthermore we are also confident that we can deliver a bigger share of the overall market through our operational expertise, national coverage and scale.

The Board believes that Safestore, with its strong cash flow characteristics and flexible business model, operating expertise and market leading position, is ideally placed to exploit potential opportunities within the market.

R S Grainger
Chairman

Chief Executive's review

Introduction

I am pleased to report a strong performance and another successful year of progress for the Group. Safestore, which is an operationally led business with a significant property asset base, has delivered strong occupancy growth and improved rental rates along with increased ancillary sales resulting in high quality cash flow and record earnings. At the year-end closing occupancy was at a record level of 2.94 million sq ft with the average self storage rental rate also at its highest ever level of £25.55 per sq ft. The occupancy growth performance during the year is due to record levels of enquiries and new lets from both domestic and business customers.

During the year we completely revamped and re-launched our website and have seen enquiries via the internet increase substantially accounting for around 60% of all enquiries. We have also increased the number of strategic partnerships we have with other companies that further helped drive enquiries and offer additional benefits to our customers. Our National Accounts and Call Centre resources have also been increased and we have again seen the results of this in the record level of new lets.

The self storage rental rate which is at its highest ever level is due to a combination of factors including increased sales of smaller but higher yielding units alongside moderate rental rate increases and a lower level of competitor activity. I am particularly pleased that all of our geographies, London, the rest of the UK and Paris, have all contributed to the performance.

Operating Review

This strong set of results has been achieved despite a relatively flat period for the wider economy. The results reflect the operational expertise of the management team of Safestore and the competitive advantage of stores throughout the UK which enables us to offer a national account network to a large number of business customers as well as strategic alliances with a number of business partners including Tesco which have undoubtedly helped drive occupancy.

We have been especially pleased to see high levels of enquiries and new lets through the year which has resulted in a much improved occupancy performance and has built on the previous year's good occupancy growth along with increases in self storage rental rates and ancillary sales. The improvements in all the key metrics have been achieved across all the UK regions as well as Paris.

Maintaining the balance of occupancy, rate and ancillary revenue growth will continue to be core to everything we do.

The diversity by both customer type and geography remain key parts of our strategy. There has been no material change in the customer mix during the year.

We have seen an increase in enquiries and space let to both domestic and business customers. In particular, domestic customers' enquiries have been exceptionally high due, in large part, to our strategic partnerships, as well as a continuing shift in trends for house movers who cannot or will not move house but want an additional space at home to use self storage as the solution. We have also seen an increased number of customers who are now willing to move but sell before they buy. This is creating a natural break in the house moving process with a requirement for a storage solution during the interim period between selling and buying.

In addition, high levels of enquiries continue from event driven customers such as those getting married, divorced, travelling, renovating, moving abroad or inheriting possessions. There are also those that rent an extra room in self storage in order to release space for the longer term, for an addition to the family, desire to create an office space or free up a room to let.

As noted above we have strategic alliances with a number of partners, including the likes of Wickes, O₂, DHL, Countrywide estate agents, Europcar and Tesco. These partnerships have driven enquiries and new lets through a combination of special offers and added value services. Moreover, the halo effect of the alliance with our strategic partners as well as the direct website links all help to reinforce the No.1 status Safestore has in the customers' mind.

Over the last 12 months we have further enhanced our National Accounts offering for business customers. We now provide a user friendly multi site solution across the UK which meets their needs with a simple pricing and billing structure. In addition, the National Accounts team has increased from one to three people with the possibility of adding additional manpower as demand grows. We are continuing to innovate in our offering to non-national account customers and we see business customers as a core part of our business as they tend, on average, to take larger square footage and stay longer.

Occupancy

At 31 October 2010 occupied space was 2,941,000 sq ft, up 6.1% from 2,773,000 sq ft at 31 October 2009. The 168,000 sq ft growth in FY2010 represents a 195% increase over the 57,000 sq ft growth delivered in FY2009.

We have seen very high levels of enquiries and new lets throughout the year from both domestic and business customers resulting in record levels of occupancy. During the year we had a moderately good first quarter and a very strong second and third quarter. Whilst the last quarter of the financial year saw an increase in vacates which is a natural result of the high levels of new lets earlier in the year, as well as students who took storage in the third quarter vacating on their return to education.

The level of reservations has remained at consistently high levels throughout the year and is a good indicator of future business.

The length of stay has not significantly changed in the last 12 months with the average length of stay in the UK increasing to 92 weeks (FY2009: 91 weeks). The average length of stay in France has fallen marginally to 111 weeks from 113 weeks although this is linked to the closure of our oldest store in Paris and its replacement with a new and better specified property.

Self Storage Rate per sq ft

The Group continued its trend of improving rental rates per sq ft with the average rate for the year at a record high of £25.55. The rental rate in the UK was 3.3% ahead of last year whilst France delivered an increase of 1.9% on a constant currency basis. The rate for the fourth quarter FY2010 was £25.94 and has continued to improve since the year end. As always, Safestore aims to offer excellent value for money to our customers through a combination of our service led ethos supported by competitive pricing. We continue to innovate in the area of customer service and believe this philosophy, along with the micro management of the business have allowed Safestore to deliver continued self storage rate per sq ft growth. As noted above, the rental rate improvement has in part been delivered by the average room size let being lower during the year which yields a higher rate per sq ft and our proactive management of unit mix and configuration has ensured we have taken full advantage of this trend. In addition, we achieved moderate rental increases and saw a lower level of competitor activity. We anticipate seeing this trend continuing with further rental rate growth during 2011.

We view the rental rate performance as a key indicator for the business and a major component in delivering earnings growth and leveraging the operational gearing element of the business.

Ancillary revenues

Ancillary sales, which primarily consist of insurance and merchandise sales, increased by 6.1% to £12.2 million (FY2009: £11.5 million). The increase in ancillary sales is particularly pleasing and reflects the results of our improved insurance offering for our storage customers, our improved displays and increased range of eco friendly packaging materials. We continue to innovate in improving our offering to customers with a wider range of products in more spacious surroundings. We anticipate our ancillary sales will continue to increase as a percentage of self storage revenue.

Retail store portfolio

Safestore has retained its Number 1 position in the UK and Paris in terms of number of stores. At the year end the Group had 118 stores trading of which 96 (including two business centres) were in the UK and 22 in Paris.

The geographical breakdown includes 42 stores inside the M25, 54 in the rest of the UK and 22 in Paris. We believe we have a good balance between the more mature stores which provide high quality cash flows with earnings similar to annuities and stores with the potential to deliver real growth upside.

We continue to closely control our capital expenditure and adjust it according to the prevailing economic climate. Over the last year we have continued to invest in the existing store portfolio adding new storage space and further improving security, layout and ambience of the existing stores as we see this to be crucial to the business in the medium term.

Estate and asset management

We actively manage the portfolio with a view to enhancing value through more intense use of the property and also look to create value through capital investment and identifying development potential. The property portfolio and assets are managed in-house supported by external property expertise when required. We continue to review opportunities to buy the freehold of leasehold stores or to extend leases where appropriate and prudent. During the year we have bought the freehold interest of our store in Gentilly, Paris.

This year we completed a major refurbishment of our store at Enfield North and in doing so have completed the final phase of the conversion of this former industrial premises to a state of the art self storage facility with new reception, loading bay, redesigned parking arrangements and a full new fit out internally. We expect trade at this store to grow accordingly. We have also completed the sale of the business centre at Digbeth, Birmingham which we did not consider to be core to our self storage business.

During the year we opened three new stores at Barking and Crystal Palace in London and Ney in Paris. All of these stores were opened in the second half of the year. Both of the newly opened UK properties are state of the art purpose-built facilities with the store in Paris being a high specification conversion and is a significant improvement on the store it replaced. The new stores have made a promising start and are trading ahead of expectations. Both the UK stores are long leasehold (more than 90 years) whilst the store in Paris is leasehold (9 years with the option to extend).

At the year-end we had a pipeline of ten stores. Two of these stores, Bolton and Southend which are relocations of existing first generation stores to purpose-built new facilities, opened in November 2010. We also opened Trappes, a purpose built store in the Paris region during December 2010. Of the remaining seven pipeline sites, six are in the UK and one in Paris. Five are freehold and two are long leasehold (more than 90 years) and three already have planning permission. We are contracted, subject to planning, on the other four sites. Four of these seven pipeline stores will be in new trading territory and three of the sites, all in the UK, will be replacement of existing stores in prime trading markets. Six of the stores will be new, purpose-built facilities with one high quality conversion. These expansion stores, including the stores at Bolton, Southend and Trappes opened at the beginning of the new financial year, will deliver approximately 0.4 million sq ft of additional net lettable space, representing nearly 8% of the overall portfolio of approximately 5.2 million sq ft when fully fitted out and are expected to deliver good return on capital going forward. Since the year end we have acquired a further store in Paris.

We aim to maintain our market leadership by a measured approach to organic growth with an opening programme of new stores with strong projected returns in priority locations or relocations of existing stores in important existing markets. Our aim is to acquire and open around five new stores annually, both UK and Paris combined, over the next three years. However, the pipeline can be tailored to the Group's performance and the wider macro economic climate. We continue to place the highest importance on striking the right balance between growing the business, achieving high returns and prudently managing our capital expenditure. This is underpinned by our policy of remaining flexible in terms of size of store and tenure; which we believe gives us competitive advantage. While organic new store openings remain our priority, the Group will continue to consider and review any acquisition opportunities as they arise provided they meet our strategic objectives and represent the appropriate return on investment.

Tenure

Safestore operates a mix of freehold and leasehold stores. The Group's approach provides the twin advantages of Safestore being able to extend its offering in areas where freeholds are not available while providing flexibility in terms of competing for new sites. As an operational cash flow business the model works equally well for both freehold and leasehold tenure although at a corporate level we seek to maintain an approximate two third freehold to one third leasehold balance in the UK.

Existing Portfolio	UK	% of Portfolio	France	% of Portfolio	Total	% of Portfolio
Freehold/Long Leasehold	61	64%	9	41%	70	59%
Short Leasehold	35*	36%	13**	59%	48	41%
Total	96		22		118

* Short leaseholds in the UK are stores with leases of 25 years or less. The average remaining tenure is 12.6 years and we have three leases due for renewal in the next five years, two of which are targeted for relocation.

**French short leaseholds typically 9 years but akin to freeholds because of security of tenure.

Geographic spread

Our strategy of having a national footprint with stores across the UK and in all major cities has again been justified with occupancy and rental rate growth being achieved in all our trading regions. This strategy not only gives competitive advantage, particularly in relation to National Accounts and strategic alliances, but also gives the business an enhanced growth platform as well as excellent defensive qualities, given that the Group's exposure to any one specific market is limited, particularly during an economic downturn. This strategy is further strengthened with our strong presence in central Paris which continues to perform well. The recent store openings have further improved the quality of the store portfolio both in terms of geographical spread and the balance between new, established and mature stores. Our aim is to continue to build and consolidate our position in the UK with both additional new sites and relocations.

Our Parisian business, Une Pièce en Plus ("UPP"), which now trades from 22^# stores (including one opened since the year end) in the Paris region, the second most developed self storage market in Europe after London, has again delivered strong growth during the year. The strategy is similar to that of the UK in that we look to cluster our stores. Our intention is to continue to build our position in central Paris wherever possible and to actively pursue expanding in the Paris regions. This should have the benefit of consolidating our position in central Paris whilst allowing significant opportunity to expand within the wider Paris region.

^#On 30 December 2010 there was a fire at our La Défense store which was also our Paris head office. There were no injuries and the Group is fully insured both for customer property and for loss of trade and business whilst the store is inoperable. A full disaster and recovery plan was immediately implemented and has proved fully effective, as a result there has been no disruption to the running of the business and the store will be rebuilt or replaced as soon as practicable.

Property - net asset value

At 31 October 2010 Cushman & Wakefield LLP ("C&W") valued the portfolio at £687.2 million, a year on year increase of £39.4 million (+6.1%) and £31.8 million (+4.8%) up from the half year valuation at 30 April 2010.

The properties are valued on the basis of market value as fully equipped operational entities having regard to trading potential. The valuation is carried out on a discounted cash flow basis. Freeholds, long leaseholds and the French commercial leasehold stores are assessed on the basis of 10 years' trading and then disposal, the disposal price based on projected net operating income at Year 10 capitalised at the projected exit yield. Short leasehold stores in the UK and France are valued on the basis of the value of the net operating income for the remaining life of the lease.

Yield changes in the wider property market are reflected in the valuation with freehold exit yields improving from 8.14% to 7.87% (27 bps) over the year. The majority of this improvement applied to H1 with only a minor 3 bps improvement applying to H2 FY2010.

A more detailed analysis of the valuation movements is provided in the Financial Review section of this Report.

Maximum lettable area ("MLA") and occupancy

As at 31 October 2010	Group	UK	France
	Sq Ft	Sq Ft	Sq Ft
MLA*	5.00 million	4.12 million	0.88 million
Occupied	2.94 million	2.27 million	0.67 million
Occupancy %	58.8%	55.1%	76.1%

*For valuation purposes MLA includes offices.

Currently 58.8% of the Group's maximum lettable area is occupied compared to 53.4% at the end of FY2009. The occupancy for the mature stores has increased to 67% from 64%.

This is not directly comparable as we have completed a review of the MLA in the UK, identifying areas where space allocated to self storage (either existing or not yet built out) is expected to be surplus in the medium term. As a result we have removed a net 176,000 sq ft of MLA from the UK portfolio spread over 15 stores. Given that the majority of this space was not being valued by the valuer we have only seen a relatively small drop in valuation by circa £1.9m in relation to these stores. We have identified alternative use of this space in a number of locations and will be focusing on increasing revenues for the unutilised space in the medium term.

Whilst the MLA review accounts for part of the percentage increase in the occupied space we have also seen strong growth during the year which demonstrates the significant opportunity to increase occupancy within the existing estate, only requiring minimal further investment.

Retail and operational focus

We continue to strive to find ways of improving the customer experience. In each of the years sampled, overall satisfaction levels increased with over 90% of our customers either satisfied or very satisfied with the service they received. (Source: ESA customer satisfaction survey August 2010)

Our ambition to provide the very highest levels of customer service is combined with a detailed store by store approach to make sure that pricing and deals are set to maximise revenue opportunities. We believe that this approach has been at the heart of improvements not just in customer service but in occupancy growth and rate increases in the year.

Our operations team in the UK, which consists of eight regional managers, has been strengthened with the appointment in the year of a national Operations Director with a wealth of retail and sales experience. Our operations team in France has two regional managers who report to the Sales and Operations Director. The operational teams in both the UK and France are backed up by a team of auditors whose function is to ensure that the stores are compliant in all aspects of operational and health and safety procedures.

The average number of stores per regional manager affords them the opportunity to really understand each local market and the time to coach and develop their people. In this they are supported by dedicated trainers and a comprehensive and effective central training programme.

The year saw a significant increase in the volume of business generated by our National Accounts function which increased occupied space by over 50% during the period. We are uniquely positioned to take advantage of this growing part of the market given our national store distribution.

Our call centre has also seen much higher levels of activity as we have continued to extend its role in dealing directly with new customer enquiries. The performance of the call centre has exceeded expectations and we anticipate increasing the resource in this area during the next 12 months.

During FY2011 we will be continuing to grow occupancy, rate and ancillary revenues through the consistent delivery of the brand proposition; excellent value for money backed up by our lowest price guarantee and highly trained expert staff.

We announced in May 2010 that we were awarded a six year management contract for the 12 store Space Maker self storage business. We are pleased to report that we have seen pleasing improvement in storage and ancillary revenues during the period.

Marketing

Marketing and advertising is the key source of enquiry generation in the business.

Our routes to market have changed fundamentally in recent years and the importance of the Web has increased exponentially. This year we have completely redesigned and re-launched our website which has improved visibility, usability and information for site visitors and substantially increased the number of unique hits and enquiries. Behind the scenes there continues to be a daily, detailed focus on maximising search engine rankings, both organic and sponsored, in every location we operate.

We believe that Web prominence gives us a powerful source of competitive advantage as well as providing a stream of new customers into the business. It is also a critical role in communicating the brand proposition. We see ensuring that online strategies are adequately funded and well resourced as central to the ongoing growth and development of the company.

FY2010 also saw the continued strengthening of our strategic partnerships with Tesco, eBay, Europcar, Wickes, and DHL and new partnerships agreed with Countywide and O_2.

These relationships not only generate enquiries and provide benefits to our customers but also reinforce our position as market leader by association.

In-store the operations teams' responsibilities include making sure that the right marketing messages are communicated clearly and effectively.

FY2011 will continue to see Safestore invest heavily in this area and increase our marketing team as well as increasing our marketing expenditure. We will see the continued evolution of our online presence together with the ongoing development of other brand building and enquiry generating activities.

In addition, we will continue to build our knowledge of our customers and marketplace via research and data analysis.

Real Estate Investment Trusts ("REITs")

We continue to examine the possibility of converting our business into a REIT, but as we have previously highlighted, we currently benefit from carried forward tax losses, and, whilst we can utilise the tax losses and claim capital allowances with the business still growing and expanding there is no immediate benefit from conversion at this time. We will continue to monitor and review the position.

Systems

Robust IT systems and associated procedures are identified as key tools for operational success.

Our developments this year have been focused on supporting our key strategic aims. These are adding value to the customer journey, business efficiency, the creative development and use of our systems, business continuity and information security.

Improvements to our business continuity platform has resulted in a tested offsite system which can be brought online within 30 minutes with no loss in data should we suffer a catastrophic failure in our main office at Borehamwood. Similarly, our French business is also adequately protected.

We continue to improve the smooth transfer of data between our systems on the web, in head office and store. Examples include the transfer of Web enquiries directly into our core trading system in a secure yet easy to use manner.

New tools for analysing our store performance have resulted in much greater granularity of reporting and a deeper insight into our business.

We will continue to adopt new technology where this adds value to the business and supports our strategic focus.

Our people

We aim to be "the employer of choice" and recognise that our continued success is dependent on our highly motivated and well trained employees across the group who all aim to be the best in class in everything they do.

There is strong alignment between the Group vision, goals and values and our employees. Our HR policies aim to ensure we raise the performance of the business by developing staff to their full potential.

The Group is delighted to announce that during the year Safestore was the recipient of a Ruban d'Honneur for the category of "Employer of the Year" awarded by the European Business Awards. Receiving the award is a testament to the commitment of our staff and the determination and passion which drives our business.

We also continue to be recognised as an 'Investor in People' employer.

After nine years with Safestore, I am retiring from the business on 30 April 2011.

I am very proud of what we have achieved at Safestore and during my time as Chief Executive the business has grown from 24 stores to 118 stores across the UK and Paris.

The achievements that have been made would not have been possible without the unstinting support and commitment of all my colleagues both in the UK and France. I would like to thank them all and wish them well for the future.

Going forward

The year ended 31 October 2010 has been a year of considerable progress in many areas of the business against a background of a 'flat' economy and a stagnant housing market. This achievement is a testament to the strength and depth of the management team aligned to the flexible business model, our geographic spread and market leading position. We continued to focus on marketing and search engine optimisation with the re-launch of the website during the year as well as further growing National Accounts and strategic alliances which, with the support of the store teams and expanded call centre, have played a significant role in the growth of enquiries and new lets during the year. We will continue to build on these growth platforms during 2011.

The continued resilience of the Group's performance and business model is underpinned by our diverse cross section of customers, both domestic and business, and the geographies in which we operate. We will continue to refine and improve our offering across all customer segments and look to further increase our market share. Our investment in marketing and enquiry generation will continue and we will look to further focus on the brand awareness of Safestore specifically, and self storage generally, where the level of awareness remains relatively low in what is still an immature market sector with excellent growth potential.

We will continue to manage the business with a clear but flexible strategy with the ability to respond in line with any recovery in the wider market. New store openings remain on schedule and we continue to invest and acquire new stores in first class locations. These new stores will provide further growth drivers for the Group as they mature over time. Maintaining the balance of occupancy, rate and ancillary growth will remain a core part of our strategy and the Group should see the benefits of our operational gearing.

Since the year end, we have continued to see good levels of enquiries and new lets. Reservations for future new lets also remains at high levels. Vacate activity has increased which is expected given the time of year and strong trading in previous periods. Traditionally the first quarter of the financial year is the quietest trading period for the self storage sector and whilst we have seen the usual fall in occupancy in the quarter, this is in line with historical trading and better than might have been expected given the high level of new lets in 2010. The self storage rental rate per sq ft has remained strong and continued to increase during the first quarter with the trend of customers taking smaller but higher yielding units per sq ft.

As noted above we believe that the self-storage market will continue to grow as awareness increases and furthermore we are confident that Safestore as market leader can take a bigger share of the overall market through our operational expertise, national coverage and scale and is ideally placed to exploit any potential opportunities.

S W Williams
Chief Executive Officer

Financial Review

International Financial Reporting Standards ("IFRS")

This report is prepared in accordance with IFRS and details the key performance measures during the year.

Results of operations

The table below sets out the Group's results of operations for the year ended 31 October 2010 and the year ended 31 October 2009, as well as the year on year change.

	Year ended 31 October
	2010	2009
	£'000	£'000	% Change
Revenue	89,214	84,433	+5.7%
Cost of sales	(28,951)	(26,606)
Gross profit	60,263	57,827	+4.2%
Administrative expenses	(11,819)	(10,608)
Operating profit before gain/(loss) on investment properties	48,444	47,219	+2.6%
Gain/(loss) on investment properties	18,472	(41,610)
Operating profit	66,916	5,609	+1,093.0%
Net finance costs	(37,695)	(15,027)
Profit/(loss) before income tax	29,221	(9,418)	N/A
Income tax (expense)/credit	(2,881)	9,153
Profit/(loss) for the year	26,340	(265)	N/A

Revenue

Revenue for the Group is primarily derived from the rental of self storage space, the sale of ancillary products such as insurance and merchandise, such as packing and storage products, in both the UK and France.

The table below sets out the Group's revenues by geographic segment for FY2010 and FY2009.

	Year ended 31 October
	2010 £'000	% of Total	2009 £'000	% of Total	% Change
United Kingdom	67,116	75.2%	63,017	74.6%	+6.5%
France	22,098	24.8%	21,416	25.4%	+3.2%
Total revenue	89,214	100.0%	84,433	100.0%	+5.7%

The Group's revenue increased by £4.8 million (an increase of 5.7%) from £84.4 million in FY2009 to £89.2 million in FY2010. As covered in the Chief Executive's Report, the key drivers for revenue growth have been the increase in occupancy (168,000 sq ft year on year), the growth in average rate per sq ft (+1.2% year on year) and ancillary revenues (+6.1% year on year). It should be noted that we have experienced adverse currency effects during the year with an average rate of €1.16:£1 for FY2010 against an average rate of €1.13:£1 for FY2009.

Cost of sales

Cost of sales principally consists of staff salaries, business rates, utilities, insurance and repairs and renewals. The Group's cost of sales increased by £2.3 million or 8.8% from £26.6 million in FY2009 to £28.9 million in FY2010. The main reasons for the increase in the year are additional costs relating to the new stores opened in the year, the full year impact of stores opened in the second half of last year and general inflationary pressure.

Administrative expenses

Administrative expenses consist principally of directors' salaries, head office salaries, professional fees, public company costs, marketing and advertising expenses and depreciation. The Group's administrative expenses were beneficially affected by exceptional items in the prior year but not this year. Administrative expenses increased by £1.2 million or 11.4% from £10.6 million in FY2009 to £11.8 million in FY2010. The increase is principally attributable to the impact of the insurance receipt and the gain on the sale of non-current assets which benefitted the income statement last year but have no equivalent in FY2010. Adjusting for the exceptional items, contingent rent, (losses)/gains on the sale of non-current fixed assets and the change in fair value of derivatives, results in underlying administrative expenses of £11.3 million, 3.4% lower than last year (FY2009: £11.7 million).

EBITDA before exceptional items, change in fair value of derivatives and loss on investment properties

Underlying EBITDA is calculated as follows for FY2010 and FY2009:

		Financial Year
		2010 £'000	2009 £'000
Operating profit		66,916	5,609
Adjusted for
	(Profit)/loss on investment properties	(18,472)	41,610
	Depreciation	168	168
	Contingent rent	747	594
	Change in fair value of derivatives	(461)	395
	Loss/(gain) on sale of non-current assets	280	(292)
	Exceptional insurance receipt	-	(1,754)
	Underlying EBITDA	49,178	46,330

The Group's Underlying EBITDA increased by £2.9 million or 6.1% from £46.3 million in FY2009 to £49.2 million in FY2010. This increase principally reflects the increase in revenues discussed above partly offset by the higher cost base in FY2010.

Exceptional items

The operating exceptional item in the current year relates to the disposal of a non-core property in the UK and the disposal due to relocation of a property in France . The exceptional items in the prior year relate to an insurance receipt in respect of a fire at one of the UPP stores which occurred in 1999 prior to our ownership of the asset and the gain on the sale of a development property in France.

Gain/(loss) on investment properties

The gain/(loss) on investment properties consists of the fair value revaluation gains and losses with respect to the investment properties under IAS40 and finance lease depreciation for the interests in leaseholds. The Group's gain on investment properties was £18.5 million in FY2010 comprising a gain of £24.1 million for revaluations and finance lease depreciation of £5.6 million, compared to a loss of £41.6 million in FY2009 comprising a loss of £36.3 million for revaluations and £5.3 million for finance lease depreciation. The movement reflects the combination of yield movements within the valuations together with the impact of changes in the cash flow metrics of each store. The key variables in the valuations are rate per sq ft, stabilised occupancy, number of months to reach stabilised occupancy and the yields applied. The valuation of investment properties is covered in more detail in the property section below.

Operating profit

Operating profit increased by £61.3 million or 1,093% to £66.9 million for FY2010 from £5.6 million in FY2009. This movement predominantly reflects the £60.1 million swing in the investment properties from a loss of £41.6 million last year to a gain of £18.5 million this year. Over and above that the £2.8 million increase in the Underlying EBITDA generated from the trading movements throughout the year is partly offset by the non-recurrence of the £1.8 million credit received last year.

Net finance costs

Net finance costs consist of interest receivable from bank deposits as well as interest payable and interest on obligations under finance leases as summarised in the table below.

	Financial Year
	2010	2009
	£'000	£'000
Bank interest receivable	290	344
Bank and other interest payable	(17,922)	(15,664)
Net bank interest	(17,632)	(15,320)
Exceptional recycled foreign exchange translation gain	431	6,607
Exceptional recycling of cash flow hedge reserve	(8,749)	-
Fair value movement of derivatives	(4,829)	-
Exceptional finance expense	(2,004)	-
Interest on obligations under finance leases	(4,912)	(6,314)
Net finance costs	(37,695)	(15,027)

In March 2010, the Group entered into a new increased bank facilities agreement of £350 million and €40 million to replace its existing facilities of £302 million for the UK and €60 million for France which were due to expire in July 2011. The bank syndicate comprises seven members. A principal repayment of £5.0 million is due in March 2012 with six monthly repayments thereafter of £7.5 million.

The Group restructured existing hedge agreements and entered into new agreements to August 2013 swapping LIBOR on £222 million at an effective rate of 2.578% and EURIBOR on €24 million at an effective rate of 1.67%. The hedge agreements provide cover for 75% of the drawn debt leaving a 25% floating element.

The bank interest receivable reflects the lower interest environment prevailing throughout FY2010.

Bank and other interest payable has increased by 14.4% to £17.9 million in FY2010 from £15.7 million in FY2009 although this is after capitalising interest of £0.4 million (FY2009: £0.7 million). The new bank facility agreement had an interest margin of 300 basis points for the initial six months from March 2010 before reverting to an interest margin ratcheted between 200 basis points and 300 basis points based on quarterly interest cover. Also, the amortisation of debt issuance costs increased from £1.5 million in FY2009 to £2.1 million in FY2010 primarily driven by the costs associated with the new debt facility.

The exceptional recycling of foreign exchange gains within finance income arose in respect of recycled foreign currency translation gains from the translation reserve which are now realised.

Due to the bank re-financing, cumulative brought forward interest swap movements of £8.7 million have been recycled from reserves and included as a charge in the income statement. The Group have decided to cease hedge accounting for all financial derivative instruments and hence valuation movements will be included in the income statement as a result of the restructuring of existing interest swap agreements and the inception of new swap agreements. The income statement for the period includes a charge of £4.8 million in respect of the fair value movement of derivatives subsequent to the refinancing.

Exceptional finance expenses relate to unamortised debt issuance costs (non-cash) of £2.0 million that were written off in respect of the previous bank facilities. During the period, the Company paid £8.2 million of debt issuance costs in respect of the new facility and paid £8.7 million for restructuring existing interest rate swaps and entering into new financial derivative instruments.

Interest on finance leases has decreased by 22.2% to £4.9 million (FY2009: £6.3 million) and reflects part of the rental payable (the balance being charged through the investment gain/(loss) line in the income statement and contingent rent).

Gearing

Net borrowings (excluding finance leases) at 31 October 2010 stood at £294.0 million up from £272.0 million at 31 October 2009. During the year net assets increased by £21.6 million or 8.7% to £270.2 million at 31 October 2010 from £248.6 million at 31 October 2009. The net impact is that the gearing level was 108.8% at 31 October 2010 compared to 109.4% at 31 October 2009.

Dividend

Given the strong cash flow characteristics of the business model, our robust funding and future commitments, the Board is pleased to recommend a final dividend of 3.25 pence per share bringing the total dividend to 4.95 pence per share for the year. We consider the level of dividend recommended represents the right balance between dividend growth and new store organic growth and it further demonstrates the Board's confidence in the prospects of the Group.

Subject to approval at the Annual General Meeting, the final dividend will be paid on 08 April 2011 to shareholders on the register on 11 March 2011.

Income tax

Income tax for FY2010 was an expense of £2.9 million against a credit of £9.2 million for FY2009. Actual tax paid in each period was insignificant due to the availability of carried forward tax losses and capital allowances in both the United Kingdom and France. Further details are given in note 5. The income tax expense for FY10 includes an exceptional credit of £3.5 million relating to the re-measurement of deferred tax due to changes in UK corporation tax rates. The income tax credit for FY2009 includes an exceptional tax credit of £5.5 million arising on the recognition of tax losses in France at 31 October 2009 based on an improved outlook on projected utilisation together with a further tax credit arising in respect of the net reduction in the market value of investment properties at 31 October 2009.

Profit for the year ("Earnings")

Earnings increased by £26.6 million for FY2010 to a profit of £26.3 million from a loss of £0.3 million for FY2009.

EPRA adjusted earnings, which is the earnings figure above with gain/loss on investment properties, exceptional items, the recycling of foreign exchange gains and the tax thereon added back increased by £1.2 million or 8.9% to £15.3 million for FY2010 from £14.1 million for FY2009. Further details of this are given in note 7.

Property valuation

C&W has again valued the Group's property portfolio. As at 31 October 2010, the total value of the Group's portfolio (including £1.0 million of owner occupied properties) was £687.2 million.

This represents an increase of £39.4 million (6.1%) over the £647.8 million valuation as at 31 October 2009. Of this overall increase in value, £12.8 million derives from the addition of three new stores in the year with the balance of £26.6 million being delivered by the existing store portfolio.

There are several factors influencing the year on year valuation movement of the existing store portfolio and, as such, we should consider the UK and France separately:

· Taking the UK first, the existing store valuation shows an £8.7 million valuation increase compared to October 2009. We estimate that capital movements account for around £6.3 million of this increase with operational/cash flow movements accounting for the remaining £2.4 million.

· An exchange loss of around £3.8 million is directly attributable to foreign exchange movements translating the UPP valuations at the respective year ends.

· The French existing store valuation shows a same currency, year on year increase of €25.1 million, or £21.8 million. This increase in value includes £3.7 million (€4.3 million) generated from buying in the freehold interest of one of our existing leasehold stores. The freehold interest was acquired for £2.6 million (€3.0 million). We estimate that capital movements account for around £13.1 million of this increase with operational/cash flow movements accounting for the remaining £5.0 million.

· The valuation at 31 October 2010 is £31.8 million up on 30 April 2010. New stores have delivered around £12.8 million of additional value in the second half of the year with the like for like portfolio therefore delivering a valuation increase of around £19.0 million. The existing UK store portfolio has delivered an increase of £2.0 million in the second half of the year which is enhanced by a £17.0 million gain in France. There has been very little exchange impact in the second half of the financial year.

The Group freehold exit yield for the valuation at 31 October 2010 was 7.87% reflecting a 27 bps inward movement from 8.14% at 31 October 2009. The weighted average annual discount rate for the whole portfolio has followed a similar trend to exit yield.

At the year-end, the Group's property portfolio consisted of 118 trading stores. The freehold/long leasehold stores were valued at £541.4 million and the short leasehold properties, including the French commercial leases, were valued at £145.8 million. Freehold/long leasehold stores which make up 59% of the stores by number account for 79% of the valuation. The remaining 21% measured by value is attributable to the short leasehold portfolio.

Additionally, the Group's pipeline of expansion stores is valued at £18.4 million as investment properties under construction.

The net impact of the valuation is for adjusted EPRA NAV per share to increase to 212.6 pence per share (31 October 2009: 201.8 pence per share).

In their report to us our valuer has drawn attention to valuation uncertainty resulting from exceptional volatility in the financial markets and a lack of transactions in the property investment market. Please see note 8 for further details.

Cash flows

The following table summarises the Group's cash flow activity during the FY2010 and FY2009 in accordance with IFRS:

	Financial Year
	2010 £'000	2009 £'000
Net cash inflow from operating activities	27,761	24,997
Net cash outflow from investing activities	(22,981)	(13,685)
Net cash (outflow)/inflow from financing activities	(15,354)	3,421
Net (decrease)/increase in cash and cash equivalents	(10,574)	14,733

Net cash inflow from operational activities

There are two main factors influencing the £2.8 million increase in cash from operating activities in FY2010 compared to FY2009.

· Cash generated from operations has increased by £0.9m being the increased EBITDA generated by the business which has been partially offset by the negative working capital movement.

· The net interest paid has decreased by £1.9 million in the year due primarily to changes in the payment profile resulting from the refinancing.

Net cash outflow from investing activities

Cash outflow from investing activities has increased by £9.3 million to £23.0 million for FY2010 from £13.7 million for FY2009. Whilst there are several contributing factors affecting this movement it is mainly due to the increase in expenditure on investment and development assets and the net proceeds from the disposal of a development property. Expenditure on investment and development properties in FY2010 was £23.3 million, an increase of £7.1 million from £16.2 million in FY2009. This reflects an increase on last year but is still significantly below historic levels of expenditure as we continue to control the discretionary expenditure. In addition, we disposed of one non-core site in France in FY2009 which realised net proceeds of £1.2 million compared to £0.6 million net proceeds in FY2010 from a similar non-core disposal in the UK.

Net cash outflow from financing activities

The cash flows from financing activities decreased by £18.8 million in FY2010 to an outflow of £15.4 million from an inflow of £3.4 million in FY2009. This has several key factors which are set out on the face of the cash flow statement but mainly reflects the costs associated with the refinancing and realignment of the hedging arrangements concluded in H1 FY 2010.

Future liquidity and capital resources

The Group anticipates funding any future small to medium acquisitions or new store developments from available cash and borrowings. Borrowings under the existing bank facilities are subject to certain financial covenants and the Group is comfortably in compliance with its covenants at 31 October 2010, and based on forecast projections, for a period in excess of 12 months thereafter. The debt facilities do not mature until August 2013.

Annual General Meeting

The meeting will be held on 23 March 2011 at the Group's registered office, Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT.

Richard Hodsden

Chief Financial Officer

Consolidated income statement for the year ended 31 October 2010

		Group
	Notes	2010 £'000	2009 £'000
Revenue	2	89,214	84,433
Cost of sales		(28,951)	(26,606)
Gross profit		60,263	57,827
Administrative expenses		(11,819)	(10,608)
EBITDA before exceptional items, change in fair value of derivatives, (gain)/loss on investment properties, depreciation and contingent rent		49,178	46,330
Exceptional items	4	(280)	2,046
Change in fair value of derivatives		461	(395)
Depreciation and contingent rent		(915)	(762)
Operating profit before gain/(loss) on investment properties		48,444	47,219
Gain/(loss) on investment properties	8	18,472	(41,610)
Operating profit	2	66,916	5,609
Finance income before exceptional item		290	344
Recycling of foreign exchange gains		431	6,607
Total finance income	3	721	6,951
Finance expense before exceptional items and change in fair value of derivatives		(22,834)	(21,978)
Recycling of cash flow hedge - exceptional item		(8,749)	-
Exceptional finance expenses		(2,004)	-
Change in fair value of derivatives		(4,829)	-
Total finance expense	3	(38,416)	(21,978)
Profit/(loss) before income tax		29,221	(9,418)
Income tax (expense)/credit*	5	(2,881)	9,153
Profit/(loss) for the year		26,340	(265)
Earnings/(loss) per share for profit/(loss) attributable to the equity holders
- basic (pence) - diluted (pence)	7 7	14.05 13.81	(0.14) (0.14)

The financial results for both years relate to continuing activities.

*includes an exceptional credit of £3,478,000 (2009: £5,524,000) (see note 5)

Consolidated statement of comprehensive income for the year ended 31 October 2010

		Group
	Notes	2010	2009
		£'000	£'000
Profit/(loss) for the year		26,340	(265)
Other comprehensive income:
Cash flow hedges		1,172	(6,110)
Currency translation differences		(2,767)	12,128
Recycled cumulative exchange gain		(431)	(6,607)
Recycled cumulative cash flow hedges		8,749	-
Tax (charge)/ credit in respect of items taken directly to equity		(2,846)	1,727
Total other comprehensive income, net of tax		3,877	1,138
Total comprehensive income for the year		30,217	873

Consolidated balance sheet as at 31 October 2010

		Group
	Notes	2010 £'000	2009 £'000
Assets
Non-current assets
Investment properties	8	686,178	646,778
Interests in leasehold properties	8	69,130	71,954
Investment properties under construction	8	18,360	12,641
Property, plant & equipment		1,794	1,739
Deferred income tax assets		8,498	11,449
Derivative financial instruments	11	227	-
		784,187	744,561
Current assets
Inventories		253	228
Trade and other receivables		16,244	13,739
Derivative financial instruments	11	72	-
Cash and cash equivalents	14	15,481	26,352
		32,050	40,319
Total assets		816,237	784,880
Current liabilities
Financial liabilities
- Bank borrowings	10	-	(2,485)
- Derivative financial instruments	11	(3,332)	(13,578)
Trade and other payables		(35,817)	(31,106)
Obligations under finance leases	12	(10,005)	(10,301)
		(49,154)	(57,470)
Non-current liabilities
Financial liabilities
-Bank borrowings	10	(309,511)	(295,900)
-Derivative financial instruments	11	(4,956)	-
Trade and other payables		(745)	(896)
Deferred income tax liabilities		(122,557)	(120,257)
Obligations under finance leases	12	(59,125)	(61,653)
Provisions		-	(109)
		(496,894)	(478,815)
Total liabilities		(546,048)	(536,285)
Net assets		270,189	248,595
Equity
Ordinary shares		1,881	1,881
Share premium		28,349	28,349
Other reserves		10,715	6,785
Retained earnings		229,244	211,580
Total equity		270,189	248,595

Consolidated statement of changes in shareholders' equity for the year ended 31 October 2010

Group	Share	Share	Translation	Hedge	Retained
	capital	premium	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 November 2008	1,881	28,349	8,392	(2,745)	219,949	255,826
Comprehensive income
Loss for the year	-	-	-	-	(265)	(265)
Other comprehensive income
Exchange differences on translation of foreign operations	-	-	12,128	-	-	12,128
Recycling of balances in the translation reserve to finance income in the income statement (note 3)	-	-	(6,607)	-	-	(6,607)
Cash flow hedge	-	-	-	(4,383)	-	(4,383)
Total other comprehensive income	-	-	5,521	(4,383)	(265)	1,138
Total comprehensive income	-	-	5,521	(4,383)	(265)	873
Transactions with owners
Dividends (note 6)	-	-	-	-	(8,717)	(8,717)
Employee share options	-	-	-	-	613	613
Transactions with owners	-	-	-	-	(8,104)	(8,104)
Balance at 1 November 2009	1,881	28,349	13,913	(7,128)	211,580	248,595
Comprehensive income
Profit for the year	-	-	-	-	26,340	26,340
Other comprehensive income
Exchange differences on translation of foreign operations	-	-	(2,767)	-	-	(2,767)
Recycling of balances in the translation reserve to finance income in the income statement (note 3)	-	-	(431)	-	-	(431)
Change in value of interest rate swaps	-	-	-	1,172	-	1,172
Recycling of balances in hedge reserve to finance expenses in the income statement	-	-	-	8,749	-	8,749
Tax relating to hedge reserve recycled to income statement	-	-	-	(2,793)	(53)	(2,846)
Total other comprehensive income	-	-	(3,198)	7,128	(53)	3,877
Total comprehensive income	-	-	(3,198)	7,128	26,287	30,217
Transactions with owners
Dividends (note 6)	-	-	-	-	(8,812)	(8,812)
Employee share options	-	-	-	-	189	189
Transactions with owners	-	-	-	-	(8,623)	(8,623)
Balance at 31 October 2010	1,881	28,349	10,715	-	229,244	270,189

Consolidated cash flow statement for the year ended 31 October 2010

			Group
	Notes	2010	2009
		£'000	£'000
Cash flows from operating activities
Cash generated from operations	13	46,205	45,348
Interest paid		(18,564)	(21,206)
Interest received		139	913
Tax paid		(19)	(58)
Net cash inflow from operating activities		27,761	24,997
Cash flows from investing activities
Expenditure on investment properties and development properties		(23,313)	(16,219)
Net proceeds from disposal of development properties		559	1,188
Purchase of property, plant and equipment		(227)	(215)
Sale of available for sale financial assets		-	1,561
Net cash outflow from investing activities		(22,981)	(13,685)
Cash flows from financing activities
Equity dividends paid	6	(8,812)	(8,717)
Net proceeds from issue of new borrowings		326,026	25,464
Debt issue costs		(8,161)	-
Financial instruments		(8,746)	-
Finance lease principal payments		(5,635)	(5,326)
Repayment of borrowings		(310,026)	(8,000)
Net cash (outflow)/inflow from financing activities		(15,354)	3,421
Net (decrease)/increase in cash and cash equivalents		(10,574)	14,733
Exchange(losses)/ gains on cash and cash equivalents		(297)	476
Cash and cash equivalents at 1 November		26,352	11,143
Cash and cash equivalents at 31 October	14	15,481	26,352

Notes to the financial information for the year ended 31 October 2010

1 Basis of preparation

The preliminary results for the year ended 31 October 2010, which are an abridged statement of the full Annual Report, have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group has adopted the following new and amended International Financial Reporting Standards as of 1 November 2009:

i) IFRS8 'Operational Segments'

For more information see note 2

ii) IAS 1 'Amendment-Presentation of Financial Statements'

This revised standard requires that the Group statement of changes in equity is now presented as a primary statement. The standard also prohibits the presentation of items of income and expense within this statement and requires such 'non-owner changes in equity' to be presented separately from owner changes in equity. Accordingly the standard requires that all 'non-owner changes in equity' are shown in a performance statement and, as permitted by the standard, the Group has elected to comply with this requirement by presenting an income statement and a statement of comprehensive income.

iii) IAS 40 'Amendment- Investment Property'

Previously, development properties were accounted for under IAS 16, but are now accounted for under IAS 40. The Group's date of adoption was 1 November 2009. The impact of the adoption of IAS 40 (revised) was the reclassification of property under construction into investment property under construction (previously held within development property). In accordance with the requirements of IAS 40 the prior year comparatives have been represented as investment property under construction but have not been restated to reflect this change in accounting policy. In the past, where the Group had assets in the course of construction, these had been held at cost, and an assessment made of the anticipated surplus to be achieved on the opening and leasing of a Safestore self storage facility. If this supported the existing book cost, taking account of projected costs to complete, no provision was made against the cost. The external valuation takes a different approach, and in effect is assuming a sale to a third party of an asset in the course of construction, assuming contingencies on construction costs, assessment of alternative use where planning risk remains and a level of developer's profit. The impact of this change on basic and diluted EPS for the year ended 31 October 2010 is 0.38 pence per share and 0.37 pence per share.

The preliminary results have been prepared on a going concern basis. The Directors of Safestore are confident that, on the basis of current financial projections and facilities available and after considering sensitivities, the Group has sufficient resources for its operational needs and to enable the Group to remain in compliance with the financial covenants in its bank facilities for at least the next 12 months.

The preliminary results do not constitute the statutory accounts of the Group within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 October 2009 have been filed with the Registrar of Companies. The auditors have reported on those accounts and on the statutory accounts for the year ended 31 October 2010, which will be filed with the Registrar of Companies following the Annual General Meeting. Both the audit reports were unqualified and did not contain any statement under section 498 of the Companies Act 2006.

2 Segmental analysis

The segmental information presented has been prepared in accordance with the requirements of IFRS8. The Group's revenue, profit/(loss) before income tax and net assets are attributable to one activity; the provision of self storage accommodation and related services. Segmental information is presented in respect of the Group's geographical segment. This is based on the Group's management and internal reporting structure.

Safestore is organised and managed in two operating segments, based on geographical areas, supported by its central Group functions:

· United Kingdom

· France

The chief operating decision-maker, being the executive directors, identified in accordance with the requirements of IFRS8, assess the performance of the operating segments on the basis of adjusted EBITDA.

As the above two operating segments comprise of 100% of the Group's results and net assets and are both individually greater than 10%, there is no additional segment to be disclosed as the "All other segments" category required under IFRS8.

The operating profits, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items principally comprise interest bearing loans and deferred taxation.

	UK	France	Central	Group
Year ended 31 October 2010	£'000	£'000	£'000	£'000
Continuing operations
Revenue	67,116	22,098	-	89,214
EBITDA before exceptional items, change in fair values of derivatives, gain/(loss) on investment properties, depreciation and contingent rent	35,344	13,834	-	49,178
Exceptional items	(45)	(235)	-	(280)
Contingent rent & depreciation	(588)	(327)	-	(915)
Change in fair value of derivative	-	-	461	461
Operating profit before gain on investment properties	34,711	13,272	461	48,444
Gain on investment properties	2,151	16,321	-	18,472
Operating profit	36,862	29,593	461	66,916
Finance expense	-	-	(38,416)	(38,416)
Finance income	-	-	721	721
Profit/(loss) before tax	36,862	29,593	(37,234)	29,221
Income tax expense	-	-	(2,881)	(2,881)
(Profit)/loss for the year	36,862	29,593	(40,115)	26,340
Segment assets
Fixed assets	608,563	166,899	-	775,462
Inventories	153	100	-	253
Current & non-current assets	11,245	4,999	-	16,244
Unallocated assets
- tax asset	-	-	8,498	8,498
- derivative financial instruments	-	-	299	299
- cash and cash equivalents	-	-	15,481	15,481
Total assets	619,961	171,998	24,278	816,237
Segment liabilities
Current & non-current liabilities	(80,674)	(25,018)	-	(105,692)
Unallocated liabilities:
- group borrowings	-	-	(309,511)	(309,511)
- derivative financial instruments	-	-	(8,288)	(8,288)
- tax liabilities	-	-	(122,557)	(122,557)
Total liabilities	(80,674)	(25,018)	(440,356)	(546,048)
Net assets	539,287	146,980	(416,078)	270,189

	UK	France	Central	Group
Year ended 31 October 2009	£'000	£'000	£'000	£'000
Continuing operations
Revenue	63,017	21,416	-	84,433
EBITDA before exceptional items, change in fair values of derivatives,(loss)/gain on investment properties, depreciation and contingent rent	32,770	13,560	-	46,330
Exceptional items	-	2,046	-	2,046
Contingent rent & depreciation	(444)	(318)	-	(762)
Change in fair value of derivative	-	-	(395)	(395)
Operating profit/(loss) before (loss)/gain on investment properties	32,326	15,288	(395)	47,219
(Loss)/gain on investment properties	(47,520)	5,910	-	(41,610)
Operating (loss)/profit	(15,194)	21,198	(395)	5,609
Finance expense	-	-	(21,978)	(21,978)
Finance income	-	-	344	344
Recycling of foreign exchange gains	-	-	6,607	6,607
(Loss)/profit before tax	(15,194)	21,198	(15,422)	(9,418)
Income tax credit	-	-	9,153	9,153
(Loss)/profit for the year	(15,194)	21,198	(6,269)	(265)
Segment assets
Fixed assets	613,379	119,733	-	733,112
Inventories	140	88	-	228
Current & non-current assets	8,568	5,171	-	13,739
Unallocated assets
- tax asset	-	-	11,449	11,449
- derivative financial instruments	-	-	-	-
- cash & cash equivalents	-	-	26,352	26,352
Total assets	622,087	124,992	37,801	784,880
Segment liabilities
Current & non-current liabilities	(80,623)	(23,333)	-	(103,956)
Unallocated liabilities:
- group borrowings	-	-	(298,385)	(298,385)
- provisions	-	-	(109)	(109)
- derivative financial instruments	-	-	(13,578)	(13,578)
- tax liabilities	-	-	(120,257)	(120,257)
Total liabilities	(80,623)	(23,333)	(432,329)	(536,285)
Net assets	541,464	101,659	(394,528)	248,595

Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties. There is no material impact from inter-segment transactions on the Group's results.

The entity is domiciled in the UK. The result of its revenue from external customers in the UK is £67,116, 000 (2009: £63,017,000), and the total revenue from external customers in other countries is £22,098,000 (2009: £21,416,000). All revenues are generated from the entities provision of self storage.

3 Finance income and costs

	2010		2009
	£'000		£'000
Finance costs:
Interest payable on bank loans and overdraft		(16,227)	(14,896)
Amortisation of debt issue costs on bank loan (note 10)		(2,093)	(1,468)
Interest payable on other loans		-	(17)
Interest on obligations under finance leases		(4,912)	(6,314)
Capitalised interest		398	717
Recycle of cash flow hedge reserve		(8,749)	-
Fair value movement of derivatives		(4,829)	-
Exceptional finance expense		(2,004)	-
Total finance cost		(38,416)	(21,978)
Finance income:
Interest receivable from bank deposits		290	344
Exceptional recycling of foreign currency translation gains from the translation reserve		431	6,607
Net finance costs		(37,695)	(15,027)

Interest has been capitalised at an average rate of 3.5% (2009: 3.5%) for the year.

The recycling of the cash flow hedge reserve of £8.7 million represents the transfer of cumulative movements on cash flow hedges that were previously charged directly to reserves. The exceptional finance expense of £2.0 million (2009: £nil) shown above represents the debt issue costs relating to the previous banking facility written off in the year.

The exceptional item of £0.4 million (£6.6 million) within finance income arises in respect of recycled foreign currency translation gains from the translation reserve which are now realised.

Included within interest payable of £16.2m is £4.7m of interest relating to derivative financial instruments that are economically hedging the Group's borrowings. The total change in fair value of these derivatives for the year is £9.5m.

4 Exceptional items

The operating exceptional item in the year of £280,000 relates to the loss on the sale of investment properties. The exceptional items in the year ended 31 October 2009 comprised £1,754,000 income arising from the commutation of an insurance policy related to the 2005 Access France acquisition and a gain of £292,000 on the sale of a development property in France.

5 Income tax (expense)/credit

Analysis of tax expense/(credit) in the year

	2010	2009
	£'000	£'000
Current tax:
UK Corporation tax charge	(17)	(15)
Deferred tax
- Current year, including exceptional credit of £3,478,000 (2009: £5,524,000)	(4,155)	11,050
-Adjustment in respect of prior year	1,291	(1,882)
Tax (expense)/credit	(2,881)	9,153

Reconciliation of income tax (expense)/credit

The tax on the Group's profit/(loss) before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits/(losses) of the consolidated entities as follows:

	2010	2009
	£'000	£'000
Profit/(loss) before tax	29,221	(9,418)
Tax calculated at domestic tax rates applicable in the UK: 28% (2009: 28%)	8,182	(2,637)
Effect of:
Income and expenses not taxable or deductable	(1,174)	(1,767)
Indexation on property revaluation	(770)	(280)
Utilisation of French tax losses not previously recognised	-	(1,703)
Recognition of French tax losses previously unprovided	-	(5,524)
Difference from overseas tax rates	1,412	876
Adjustments in respect of prior years	(1,291)	1,882
Remeasurement of deferred tax from change in UK rate	(3,478)	-
Tax expense/(credit)	2,881	(9,153)

The exceptional tax credit in 2010 of £3,478,000 arises as a result of the impact on deferred tax of the UK tax rate change from 28% to 27%. The exceptional credit in 2009 of £5,524,000 arises on the recognition of previously unprovided French tax losses of €18.5m.

Further reductions in the main corporation tax rate from 27% to 24% have been announced but not yet enacted. In addition, the rates of capital allowances on assets in the main and special pools are expected to fall from 20% to 18% and from 10% to 8% respectively from 1 April 2012. The Directors are in the process of evaluating the impact these changes will have on future tax charges.

6 Dividends per share

The dividend paid in 2010 was £8,812,000 (4.70p per share) (2009: £8,717,000 (4.65p per share)). A dividend in respect of the year ended 31 October 2010 of 3.25p (2009: 3.0p) per share, amounting to a final dividend of £6,092,000 (2009: £5,624,000), is to be proposed at the Annual General Meeting on 23 March 2011. The ex-dividend date will be 9 March 2011 and the record date 11 March 2011 with an intended payment date of 8 April 2011. The final dividend has not been included as a liability at 31 October 2010.

7 Earnings/(loss) per share

Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares held as treasury shares. Diluted earnings per share is calculated by adjusting the weighted average numbers of ordinary shares to assume conversion of all dilutive potential shares. The Company has one category of dilutive potential ordinary shares; share options. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market price of the Company's shares) based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

	Year ended			Year ended
	31 October 2010			31 October 2009
	Earnings	Shares	Pence	Earnings	Shares	Pence
	£m	million	per share	£m	million	per share
Basic	26.34	187.50	14.05	(0.26)	187.48	(0.14)
Dilutive securities		3.28			1.76
Diluted	26.34	190.78	13.81	(0.26)	189.24	(0.14)

As the Basic EPS in the prior year was a loss per share, the above adjustments would not be dilutive.

Adjusted earnings per share

Adjusted earnings per share represents profit after tax adjusted for the gain/(loss) on investment properties, exceptional items, change in fair value of derivatives and the associated tax thereon. The directors consider that these alternative measures provide useful information on the performance of the Group.

	Year ended			Year ended
	31 October 2010			31 October 2009
	Earnings	Shares	Pence	Earnings	Shares	Pence
	£m	million	per share	£m	million	per share
Basic	26.34	187.50	14.05	(0.26)	187.48	(0.14)
Adjustments:
(Gain)/loss on investment properties	(18.47)	-	(9.85)	41.61	-	22.19
Exceptional operating items	0.28	-	0.15	(2.05)	-	(1.10)
Exceptional recycling of foreign exchange gains	(0.43)	-	(0.23)	(6.61)	-	(3.52)
Exceptional recycling of cash flow hedge reserve to the income statement	8.75	-	4.67	-	-	-
Exceptional finance costs	2.00	-	1.07	-	-	-
Change in fair value of derivatives	4.37	-	2.33	-	-	-
Tax on adjustments	(0.11)	-	(0.06)	(9.30)	-	(4.95)
Exceptional tax credit	(3.48)	-	(1.86)	(5.52)	-	(2.95)
Adjusted	19.25	187.50	10.27	17.87	187.48	9.53

Gain/(loss) on investment properties includes depreciation on leasehold properties of £5.6 million (2009: £5.3 million) and the related tax thereon of £1.7 million (2009: £1.5 million). As an industry standard measure, EPRA earnings are presented. EPRA earnings, of £15.3 million (2009: £14.1 million) and EPRA earnings per share of 8.19 pence (2009: 7.52 pence) are calculated after further adjusting for these items.

8 Investment properties, investment properties under construction and interests in leasehold properties

	Investment property £'000	Interests in leasehold properties £'000	Investment property under construction £'000	Total investment properties £'000
As at 1 November 2009	646,778	71,954	12,641	731,373
Additions	8,668	9,433	16,948	35,049
Reclassifications	10,480	(3,492)	(10,480)	(3,492)
Revaluations	24,816	-	(709)	24,107
Depreciation	-	(5,635)	-	(5,635)
Disposals	(795)	(2,700)	(40)	(3,535)
Exchange movements	(3,769)	(430)	-	(4,199)
As at 31 October 2010	686,178	69,130	18,360	773,668

Development property held at 1 November 2009 was reclassified to investment property under construction.

The interest in leasehold properties as 1 November 2009 has been adjusted by £2.9 million to reflect the present value of minimum lease payments of contractual rents. A corresponding reduction has been recorded in the finance lease obligations with no impact on net assets. The remaining £0.6 million of the reclassification relates to the acquisition of the freehold of a leasehold property.

	Investment property £'000	Interests in leasehold properties £'000	Investment properties under construction £'000	Total investment properties £'000
As at 1 November 2008	637,656	75,218	31,483	744,357
Additions	2,873	371	11,274	14,518
Reclassifications	29,404	-	(29,404)	-
Revaluations	(36,284)	-	-	(36,284)
Depreciation	-	(5,326)	-	(5,326)
Disposals	-	-	(1,273)	(1,273)
Exchange movements	13,129	1,691	561	15,381
As at 31 October 2009	646,778	71,954	12,641	731,373

Gains/(losses) on investment properties comprise:

	2010 £'000	2009 £'000
Revaluations	24,107	(36,284)
Depreciation	(5,635)	(5,326)
	18,472	(41,610)

			Revaluation
	Deemed		on deemed
	cost	Valuation	cost
	£'000	£'000	£'000
Freehold stores
As at 1 November 2009	292,769	499,447	206,678
Movement in year	4,265	41,734	37,469
As at 31 October 2010	297,034	541,181	244,147
Leasehold stores
As at 1 November 2009	72,125	147,331	75,206
Movement in year	635	(2,334)	(2,969)
As at 31 October 2010	72,760	144,997	72,237
All stores
As at 1 November 2009	364,894	646,778	281,884
Movement in year	4,900	39,400	34,500
As at 31 October 2010	369,794	686,178	316,384

The valuation of £686.2 million excluded £1 million in respect of owner occupied property. Rental income earned from Investment properties for the years ended 31 October 2010 and 31 October 2009 were £76.72m and £73.0m respectively.

The freehold and leasehold investment properties have been valued as at 31 October 2010 by external values, Cushman & Wakefield LLP ("C&W"). The valuation has been carried out in accordance with the RICS Valuation Standards published by The Royal Institution of Chartered Surveyors ("the Red Book"). The valuation of each of the investment properties has been prepared on the basis of 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 valuations provided to the Group for the same purposes as this valuation have been so since October 2006.

· C&W do not provide other significant professional or agency services to the Group.

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

· C&W have continuously been carrying out bi-annual valuations for accounts purposes on behalf of the Group since October 2006.

Market uncertainty

C&W's valuation report comments on valuation uncertainty resulting from the recent global banking crisis coupled with the economic downturn, which have caused a low number of transactions in the market for self storage property. C&W note that, although there were a number of self storage transactions in 2007, the only two significant transactions since 2007 are the sale of a 51% share in Shurguard Europe, which was announced in January 2008 and completed in March 2008 and the sale of the former Keepsafe portfolio by Macquarie to Alligator Self Storage, which was completed in January 2010. C&W state that there is therefore greater uncertainty attached to their opinion of value than would be anticipated during more active market conditions.

Valuation method and assumptions

The valuation of the operational self storage facilities has been prepared having regard to trading potential. Cash flow projections have been prepared for all of the properties reflecting estimated absorption, revenue growth and expense inflation. A discounted cash flow method of valuation based on these cash flow projections has been used to arrive at market value for these properties.

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

Freehold (UK and France)

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

Leasehold (UK)

The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the discounted cash flow is extended to the expiry of the lease.

Leasehold (France)

In relation to the French commercial leases, C&W have valued the cash flow projections in perpetuity due to the security of tenure arrangements in that market and the potential compensation arrangements in the event of the landlord wishing to take possession. The valuation treatment is therefore the same as for the freehold properties. The capitalisation rates on these stores reflect the risk of the landlord terminating the lease arrangements.

Investment properties under construction (UK and France)

C&W have valued the stores in development adopting the same methodology as set out above but on the basis of the Cashflow projection expected for the store at opening and allowing for the outstanding costs to take each store from its current state to completion and full fit out. C&W have allowed for carry costs and construction contingency, as appropriate.

Prudent lotting

C&W have assessed the value of each property individually. However, with regard to recently opened stores with negative or low short term cash flow, C&W have prepared their valuation on the assumption that were these properties to be brought to the market then they would be lotted or grouped for sale with other more mature assets of a similar type owned by the Group in such a manner as would most likely be adopted in the case of an actual sale of the interests valued. This lotting assumption has been made in order to alleviate the issue of low or negative short term cash flow. C&W have not assumed that the entire portfolio of properties owned by the Group would be sold as a single lot and the value for the whole portfolio in the context of a sale as a single lot may differ significantly from the aggregate of the individual values for each property in the portfolio, reflecting prudent lotting as described above.

9 Adjusted net assets per share

	2010 £'000	2009 £'000
Analysis of net asset value: Basic and diluted net asset value Adjustments: Deferred tax on revaluation	270,189 122,557	248,595 119,070
Adjusted net asset value	392,746	367,665
Basic net assets per share (pence) Diluted net assets per share (pence) Adjusted net assets per share (pence)	144.1 141.6 209.5	132.6 131.3 196.1
	Number	Number
Shares in issue	187,495,348	187,495,348

Basic net assets per share are shareholders' funds divided by the number of shares at the year end. Diluted net assets per share are shareholders' funds divided by the number of shares at the year end, adjusted for dilutive share options. Adjusted net assets per share excludes deferred tax on the revaluation uplift on freehold and leasehold properties. The EPRA net asset value, which further excludes fair value adjustments for debt and related derivatives net of tax, was £398.6 million (2009: £378.4 million) giving EPRA net assets per share of 212.6 pence (2009: 201.8 pence). The directors consider that these alternative measures provide useful information on the performance of the Group.

10 Financial liabilities - bank borrowings

Current	2010 £'000	2009 £'000
Bank loans and overdrafts due within one year or on demand: Secured - bank loan	-	4,000
Debt issue costs	-	(1,515)
	-	2,485

	2010	2009
Non-current	£'000	£'000
Bank loans:
Secured	316,071	296,874
Debt issue costs	(6,560)	(974)
	309,511	295,900

In March 2010, the Group renegotiated its existing bank loan facilities. The total available amount under the new facility was £41million higher than under the old facilities. The current drawn down amounts are now repayable £5 million in March 2012, £7.5 million in September 2012, £7.5 million in March 2013 and £289.5 million in August 2013.

The loan has a floating rate of interest, with £350 million of the facility being denominated in Sterling and £35 million being denominated in Euros. The loan is carried at amortised cost. The renegotiation did not have any impact on the Group's exposure to foreign exchange and interest rate risk. (2009: £274m of the Group's borrowings were denominated in Sterling and £26.9m were denominated in Euros).

Finance costs of £8,168,000 (2009: £2,489,000) have been capitalised against bank loans and other borrowings and are being amortised over the life of the banking and loan facilities during the year.

The bank loans and overdrafts are secured by a fixed charge over the Group's investment property portfolio. Following the bank re-financing in March 2010, as part of the interest rate management strategy, the Group entered into several interest rate swap contracts , details of which are shown in note 11`.

The maturity profile of the carrying amount of the Group's non-current liabilities at 31 October 2010 and 31 October 2009 was as follows:

	Less than	One to two	Two to five	More than
	one year	years	years	five years
	£'000	£'000	£'000	£'000
2010
Borrowings	-	12,500	303,571	-
Derivative financial instruments	3,332	93	4,863	-
Contractual interest payments and finance lease charges	10,005	9,321	20,151	29,653
Trade & other payables	35,817	745	-	-
	49,154	22,659	328,585	29,653
2009
Borrowings	4,000	296,874	-	-
Derivative financial instruments	13,578	-	-
Contractual interest payments and finance lease charges	10,301	9,338	20,046	32,269
Trade & other payables	31,106	896	-	-
	58,985	307,108	20,046	32,269

Bank loans are stated before unamortised issue costs of £6,560,000 (2009: £2,489,000). Bank loans are repayable as follows:

		Group
	2010	2009
	£'000	£'000
In one year or less	-	4,000
Between one and two years	12,500	296,874
Between two and five years	303,571	-
Bank loans	316,071	300,874
Unamortised issue costs due within one year	-	(1,515)
Unamortised issue costs due after one year	(6,560)	(974)
	309,511	298,385

The effective interest rates at the balance sheet date were as follows:

2010

2009

Bank loans

Quarterly LIBOR plus 2.5%/quarterly EURIBOR plus 2.5%

Monthly LIBOR plus 0.90% / monthly EURIBOR plus 1.75%

Borrowing facilities

The Group has the following undrawn committed borrowing facilities available at 31 October in respect of which all conditions precedent had been met at that date:

	Floating rate
	2010	2009
	£'000	£'000
Expiring beyond 1 year	68,690	46,875

11 Financial instruments

Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the Financial Review .

	2010 Liability £'000	2009 Liability £'000
Interest rate swaps	8,061	13,189
Interest rate caps	-	-
Foreign exchange contracts	(72)	389

In accordance with IAS39 'Financial Instruments: recognition and measurement', the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet certain requirements set out in the standard. No adjustments have been identified following this review. All of these derivatives are level 2 fair value hierarchy.

Interest rate swap

The notional principal amount of the outstanding interest rate swap contracts at 31 October 2010 was £212,438,000 and €24,000,000 (2009: £170,250,000 and €24,000,000). At 31 October 2010 the fixed interest rates were Sterling at 2.8646% and Euro at 1.67% (2009: Sterling at 5.21525% and Euro at 2.25%) and floating rates are at quarterly LIBOR and quarterly EURIBOR. The LIBOR swaps expire in June 2011 and the EURIBOR swaps expire in August 2013.

The notional principal amount of the outstanding forward start interest rate swap contracts at 31 October 2010 was £233,100,000. These swap contracts commence in June 2011 and the fixed interest rates were 2.3246% and floating rates are at quarterly LIBOR. The swaps expire in August 2013.

Foreign exchange swap

At 31 October 2010, the Group had foreign currency swap contracts outstanding for a notional principal amount of €4,500,000 every six months commencing 1 November 2010 followed by an increased notional amount of €5,500,000 every six months commencing 1 November 2011. The Group will receive the sterling equivalent of €4,500,000 at an exchange rate of 1.1452 Euros to the pound and €5,500,000 at an exchange rate of 1.1550 Euros to the pound and pay the sterling equivalent of the average monthly spot rates for the six months. The swap contracts expire in October 2012.

Interest cap

At 31 October 2010, the Group had interest rate cap contracts outstanding for a notional principal amount of £67,300,000 commencing 3 June 2011. The Group will recover the excess in the event that three month LIBOR exceeds 420 basis points. The option contracts expire on 31 August 2013.

Fair values of non-derivative financial assets and financial liabilities

Where market values are not available, fair values of financial assets and financial liabilities have been calculated by discounting expected future cash flows at prevailing interest rates and by applying year end exchange rates. The fair values of bank loans and finance leases are calculated as:

2010
Book value

£'000

2010
Fair value

£'000

2009
Book value

£'000

2009

Fair value

£'000

Bank loans

Finance lease obligations

309,511

69,130

344,221

107,920

298,385

71,954

308.809

105,600

The fair values of other financial assets and liabilities equal their book values.

Financial instruments by category

	Loans and receivables	Assets at fair value through profit and loss	Total
Group
	£'000	£'000	£'000
Assets as per balance sheet
Trade receivables and other receivables excluding prepayments	9,490	-	9,490
Derivative financial instruments	-	299	299
Cash and cash equivalents	15,481	-	15,481
As at 31 October 2010	24,971	299	25,270

	Liabilities at fair value through profit and loss	Other financial liabilities at amortised cost	Total
Group
	£'000	£'000	£'000
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities)	-	309,511	309,511
Finance lease liabilities	-	69,130	69,130
Derivative financial instruments	8,288	-	8,288
Trade payable and other payables	-	36,582	36,582
As at 31 October 2010	8,288	415,223	423,511

	Loans and	Derivatives
Group	receivables	used for hedging	Total
	£'000	£'000	£'000
Assets as per balance sheet
Trade receivables and other receivables excluding prepayments	7,980	-	7,980
Cash and cash equivalents	26,352	-	26,352
As at 31 October 2009	34,332	-	34,332

	Derivatives	Other financial
	used for	liabilities at
Group	hedging	amortised cost	Total
	£'000	£'000	£'000
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities)	-	298,385	298,385
Finance lease liabilities	-	71,954	71,954
Derivative financial instruments	13,578	-	13,578
Trade payable and other payables	-	32,002	32,002
As at 31 October 2009	13,578	402,341	415,919

12 Obligations under finance leases

	Minimum 2010 £'000	lease payments 2009 £'000	Present value of minimum lease payments 2010 2009 £'000 £'000
Within one year	10,488	10,890	10,005	10,301
Within two to five years	38,219	36,856	29,472	29,384
Greater than five years	59,213	66,057	29,653	32,269
	107,920	113,803	69,130	71,954
Less: future finance charges on finance leases	(38,790)	(41,849)	-	-
Present value of finance lease obligations	69,130	71,954	69,130	71,954

2010
£'000

2009
£'000

Current

Non-current

10,005

59,125

10,301

61,653

69,130

71,954

13 Cash flow from operating activities

Reconciliation of operating profit to net cash inflow from operating activities:

	2010	2009
Cash generated from continuing operations	£'000	£'000
Profit/(loss) before income tax	29,221	(9,418)
(Gain)/loss on investment properties	(18,472)	41,610
Depreciation	168	168
Change in fair value of derivatives	(461)	395
Gain/(loss) on non-current assets	280	(292)
Finance income	(721)	(6,951)
Finance expense	38,416	21,978
Employee share options	189	613
Changes in working capital:
(Decrease)/increase in inventories	(28)	30
Increase in trade and other receivables	(2,886)	(1,527)
Increase/(decrease) in trade and other payables	608	(1,258)
Decrease in provisions	(109)	-
Cash generated from continuing operations	46,205	45,348

14 Analysis of movement in net debt

	2009 £'000	Cash flows £'000	Non cash movements £'000	2010 £'000
Cash in hand	26,352	(10,574)	(297)	15,481
	26,352	(10,574)	(297)	15,481
Debt due within 1 year	(2,485)	4,000	(1,515)	-
Debt due after 1 year	(295,900)	(11,839)	(1,772)	(309,511)
Total net debt excluding finance leases	(272,033)	(18,413)	(3,584)	(294,030)
Finance leases due within 1 year	(10,301)	5,635	(5,339)	(10,005)
Finance leases due after 1 year	(61,653)	-	2,528	(59,125)
Total finance leases	(71,954)	5,635	(2,811)	(69,130)
Total net debt	(343,987)	(12,778)	(6,395)	(363,160)

Non-cash movements relate to reclassification of non-current debt to current debt, amortisation of debt issue costs, foreign exchange movements, new finance leases and unwinding of discount.

15 Capital commitments

The Group had £12.3m capital commitments as at 31 October 2010 (2009: £4.0m).

16 Events after the reporting period

On 30 December 2010 there was a fire at the La Défense store in Paris.

The French head office was also based at this store which trades under the name 'Une Pièce en Plus'. The building, all fixtures and fittings, and customer property stored within the building were fully insured and the Group is also insured for loss of trade and business interruption whilst the store is inoperable. The store contributes less than 1% of revenue and will therefore have no material impact on the business or its performance. It is currently not known how the fire started. Our disaster recovery plan was implemented and so there will be no disruption to the running of the rest of the business in France and the store will be rebuilt and reopened as soon as practicably possible.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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