O Twelve Estates Limited : - Half Yearly Report

I am pleased to present the Group's results for the six months ended 30 September 2011.

At 30 September 2011, the Group's investment property portfolio was valued by CB Richard Ellis ("CBRE") at £158.2 million (31 March 2011: £158.5 million), an increase of 0.3% on a like-for-like basis, although after taking into account capital expenditure during the period the value remained static. The rental value of the portfolio increased by 0.2% in the six months ended 30 September 2011, matching the Investment Property Databank ("IPD") All Property Monthly Index over the same period.

During the period there was a partial disposal of two units at Larkfield Mill in Aylesford for a total consideration of £725,000.

During the period, the Group accepted a lease surrender from the tenant of Western Avenue, Thurrock. The tenant, then the Group's largest with an annual rental of £800,000, had been in serious financial difficulty and it was felt that the best course of action would be to accept a surrender of its lease, subject to payment by the tenant of £262,500, rather than pursue a claim after an insolvency event.

Results

The Group reported a net loss for the six months ended 30 September 2011 of £3.7 million (30 September 2010: loss of £5.9 million, 31 March 2011: loss of £8.6 million), representing a loss per Ordinary Share of 0.78p (30 September 2010: loss of 4.78p, 31 March 2011: loss of 4.64p). A significant contributor to the loss was the adverse movement in the mark to market of interest rate swaps of £3.4 million.

Financing

On 9 May 2011, the Group announced that the fixed rate hedging arrangement on £26 million of loan principal had been broken and reset to variable rates at a one-off cost of £3 million.

The loss of the tenant at Western Avenue had a negative impact on the interest cover ratio ("ICR"). However, this was offset by the reduction in interest cost following the hedging break and the thirteen new leases which were contracted in the period, accounting for 45,000 sq ft of space and £0.7 million of rental income after rent free periods.

Following the above, the interest cover ratio ("ICR") under the loan facility improved from 117% as at 25 April 2011 to 135% as at 25 October 2011 against a current default level of 105%. The loan to value ratio ("LTV") at 30 September 2011 remained unchanged from 31 March 2011 at 71% which is satisfactorily below the default level of 85%.

The loan principal outstanding at 30 September 2011 was £124.8 million, with £12.8 million of the Group's cash balances being held on blocked deposits over which the lenders have security. In October 2011, £5.9 million of cash held on blocked deposit was applied in partial repayment of the loan principal. As LTV under the loan facility is calculated after deducting the blocked deposits, this had no effect on LTV, but will have a small positive effect on ICR. At 30 September 2011, cash balances freely available to the Group amounted to £4.9 million.

Dividend

The Board does not recommend the payment of an interim dividend (31 March 2011: nil).

Future Prospects

The Board believes that the resolution passed at the Annual General Meeting to extend the Group's Target Area is a positive step, which will enable the Group to take advantage of projects and acquisitions outside the original Target Area that it believes will add shareholder value. However, in the present unfavourable economic and financial climate, the Directors do not expect the Group's lenders to approve new acquisitions or projects other than those which would directly benefit existing assets. For the foreseeable future it must, therefore, be assumed that the greater part of any realisation proceeds will not be reinvested and will be applied in paying down the loan facility.