Half Yearly Report

5 July 2011

ST. MODWEN PROPERTIES PLC

("St. Modwen" or the "Company")

Half Year Results for the six months to 31 May 2011

STRONG FIRST HALF PERFORMANCE DRIVEN BY ACTIVE MANAGEMENT INITIATIVES

HIGHLIGHTS

St. Modwen Properties plc (LSE: SMP), the UK's leading regeneration specialist, announces half year results for the six months to 31 May 2011.

Financial Highlights:

·; 40% increase in profit before tax to £37.4 million (H1 2010: £26.7 million).

·; 6% increase in NAV per share in first six months to 226p (Nov 2010: 213p).

·; Property valuations increased by £25 million, of which 96% or £24 million were achieved through active management. This represents an increase of 59% over the £15.1 million of valuation gains achieved in H1 2010.

·; 11% increase in development profits to £11.2 million (H1 2010: £10.1 million).

·; 2% increase in net rental income to £17.8 million (H1 2010: £17.4 million).

·; 10% increase in interim dividend to 1.1p per share.

Operational Highlights:

·; Contracts signed following the period end to develop a 135,000 sq ft office and production facility for Siemens in Lincoln. Further to the commercial developments already signed in the first half of the year this points to an increasingly secure development programme for 2011/2012.

·; Positive outlook for residential land with strong progress on the Persimmon joint venture, with construction at Wolverhampton now underway and detailed planning secured at Glan Llyn and Sunderland. Four further developments with Persimmon are expected to commence on site in the next 12 months.

·; Significant planning permissions secured at Longbridge, Birmingham; RAF Uxbridge and RAF Mill Hill; and in South Wales at Coed Darcy and for Swansea University's second campus.

·; Active portfolio management successfully generating value in flat market conditions.

·; Vacancy levels maintained at 12%.

Bill Oliver, chief executive of St. Modwen, commented:

"We have achieved very strong results for the first half of the year in markets that continue to present challenges. Even in this market, our skilled regional teams have been able to drive income and valuation gains through active management and progressing sites through the planning process in London and across the UK. We are also seeing an increase in demand for developable residential land and we continue to progress our residential development programme both in-house and through joint ventures.

"Our long term focus, track record of delivery, strong asset management skills and ability to secure new projects, either on our own behalf or in joint venture, give us continued confidence in both the results for the current financial year and our future growth."

Enquiries:

A presentation for analysts and investors will be held at 9.30am today at the offices of Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB. If you would like to attend, please contact Will Henderson at Financial Dynamics ([email protected], 020 7831 3113).

HALF YEAR REVIEW

This strong set of half year results is a clear demonstration of St. Modwen's ability to outperform the market through the application of its asset management skills as well as its ability to create value from its 5,700 acre landbank and pipeline of long term development projects. This is evidenced by a 40% increase in profit before tax to £37.4 million (H1 2010: £26.7 million), a 6% increase in NAV per share in the first half of the year to 226p (Nov 2010: 213p) and an 11% increase in property profits to £11.2 million (H1 2010: £10.1 million).

We are particularly pleased that 96%, or £24 million, of the £25 million increase in property valuations is attributable to our own active management approach, notably through improving the planning position of our residential assets. We have also managed to increase net rental income to £17.8 million.

This performance has given the Board the confidence to increase the Company's interim dividend by 10% to 1.1p per share which will be paid on 5 September 2011 to shareholders on the register at 12 August 2011.

The Company's focus and expertise is on undertaking long term and often complex regeneration projects. This has also stood us in good stead as the size and scale of the projects within our development pipeline allow us the flexibility to adjust our construction programmes in response to evolving demand or market conditions. This means we can focus on those opportunities which will generate the greatest value for the business and our shareholders at any one time.

Over the last two years, we have focussed heavily on site preparation, remediation and securing planning permissions, putting us in the highly competitive position of being able to offer 'ready to develop' sites to potential occupiers or investors. Increasingly, we are now turning our attention to growing our development pipeline. This will be achieved both by bringing forward new developments from our existing landbank and through the acquisition of new opportunities.

In addition to the major schemes under construction at the start of 2011, which included Bournville College at Longbridge, Etrop Court in Wythenshawe and The Hive in Widnes, we have now secured a significant number of projects which will underpin our 2011/2012 development programme.

In market terms, we are witnessing an increase in demand for residential land although the recovery in the industrial and regional office markets continues to be slow. However, there is activity at the top end of the secondary retail marketplace, particularly in foodstore development. Overall, there are deals to be done and good progress can be made, but hard work is required and the process is generally slower than in more normal times.

PORTFOLIO

Our £1.066 billion portfolio is made up of the following categories of assets; Residential and Commercial Land, which account for 36% and 13% of the portfolio respectively, and Income Producing properties which make up the remaining 51%. Of this UK-wide portfolio, a third is located in London and the South East.

RESIDENTIAL - Outperforming expectations

Our ability to outperform expectations and extract maximum value from our residential landbank can be attributed directly to the following principal activities:

1) The development and subsequent sale of 'oven ready', predominantly brownfield, sites with viable planning permissions already in place.

2) Maximising value through joint venture agreements.

3) In-house development under our housebuilding brand, St. Modwen Homes.

While a full residential recovery is still not yet underway outside London, a combination of the following market trends means we are experiencing increasing demand for our land:

1) Long-term supply constraints and demand fundamentals.

2) The depletion of the major housebuilders' landbanks and the scarcity of suitable land to replace it.

3) Housebuilders increasing production from the low current levels of housing starts.

Until we see a full recovery underway, we are unlikely to accelerate our land disposal programme. However, we continue to crystallise value through obtaining planning permission for our landholdings, while ensuring we are well placed to sell into the market as it recovers.

Residential Land Development

Throughout the first half of this year, we experienced an increasing number of enquiries from housebuilders looking to replenish their diminished landbanks. In addition to the joint venture transactions outlined below, we have completed the sale of 32 acres of land for £42 million, all transactions being at or above book value.

The Company has continued to generate valuation gains by progressing its landbank through the planning process in the first half of the financial year. Highlights have included:

·; Securing outline planning consent at Long Marston near Stratford-upon-Avon for the development of up to 500 homes.

·; Resolving Compulsory Purchase Order issues at Coed Darcy, South Wales, confirming an increased outline consent for the development of up to 4,000 homes.

Joint Ventures

Our two major residential-led joint ventures are VSM Estates (St. Modwen / VINCI PLC) for Project MoDEL and our joint venture with Persimmon, both of which have made excellent progress in the period.

Project MoDEL - we have now secured planning consent for all six sites originally contained within the portfolio, thereby completing a major milestone within this five year partnership with the Ministry of Defence. In the period, we have secured outline residential consent at the former RAF Uxbridge and RAF Mill Hill sites for 1,373 and 1,100 homes, respectively.

Persimmon - We have now secured detailed planning consent for three of the initial seven sites within the agreement:

·; Goodyear, Wolverhampton - 314 units (on site).

·; Former Glassworks site, Sunderland - 212 units (on site H2 2011).

·; Glan Llyn, South Wales - 307 units (on site H2 2011).

Three more planning applications, totalling over 800 units, are expected to be submitted before the end of the financial year, putting us well on track to securing consent across the seven sites identified for the joint venture within the next 12 months.

St. Modwen Homes

St. Modwen Homes, whilst still in its infancy, is gaining momentum and helping us unlock value from some of our other consented sites in areas where we have identified a demand and are able to match it with supply.

Our target, over the next three years, is to increase production to 250 homes per annum. Currently, construction works have commenced on 115 homes at Lickey Road, Longbridge, and 100 homes at Locking Parklands, Weston-super-Mare. Both schemes are being delivered by St. Modwen Homes in partnership with the Homes and Communities Agency (HCA) and the houses on both sites are expected to be released for sale to the market in late summer 2011.

COMMERCIAL DEVELOPMENT - Increasingly secure development pipeline for 2011/12

Our development pipeline continues to grow, facilitated by our landbank of ready to develop sites, our local expertise and network of contacts and our flexible and immediately available financing structure. While the market is not yet ready for speculative development, this allows us to react swiftly to occupier demand for pre-lets and pre-sales.

Our nationwide network of regional teams continues to secure deals which allow us to convert our planning consents into deliverable development opportunities. Our good levels of activity, against a backdrop of a very quiet wider marketplace, mean that we continue to be able to secure excellent terms for our construction contracts.

Highlights:

·; Agreed a pre-letting with Siemens PLC for a new 135,000 sq ft facility at Teal Park, Lincoln, on a 12 year lease, at an initial rent of £1.2 million per annum.

·; At Elephant and Castle, London, we are now working with Southwark Council to progress the comprehensive regeneration of the iconic shopping centre.

·; Secured planning for the development of the £70 million new Longbridge Town Centre and an 85,000 sq ft foodstore, pre-sold to Sainsbury's, which will anchor the scheme.

·; Agreements signed for an 85,000 sq ft foodstore, pre-sold to Tesco, at Hednesford, Staffordshire.

·; We have commenced construction of a 25,000 sq ft casino, pre-sold to Grosvenor Casinos, in Birchley, West Midlands; 27,000 sq ft of office facilities, pre-let to Viridor, in Taunton and a Travelodge hotel at Edmonton.

·; Our existing projects continue to proceed well. Major projects at Bournville College, Longbridge; Etrop Court in Wythenshawe, Manchester; and Venture Fields in Widnes are all expected to complete on time and on budget during the current financial year.

·; Outline planning permission obtained for the £200 million first phase of Swansea University's second campus on a former BP site.

INCOME PRODUCING - continues to provide strong financial backbone

The strength of our income producing portfolio is defined by its regional spread and a well diversified tenant base, which spans the entire market spectrum and means we are not over-exposed to a single major tenant, scheme or sector.

Our tenant base is robust and spread across the regions and the income we receive continues to provide a strong financial backbone to the business.

Our regional teams continue to manage intensively our income producing properties which are subject to marked regional variations, maintaining rental and occupancy levels across the portfolio. Our success in active asset management is evident in the valuations achieved against a weak regional backdrop, with our secondary retail assets performing particularly well.

Our annualised rent roll now stands at £46 million, which has been helped by £3.9 million of new lettings and lease renewals in the period. Void levels have remained steady at 12% since our full year results, but show a notable decrease from the 15% reported in May 2010.

Highlights:

·; Acquisition of The Market Precinct, Farnworth, Bolton, for £4 million. The site, acquired at a double digit initial yield, comprises 21 units and is let to a range of national and local retailers. 

·; Over 145 new lettings and lease renewals secured in the period.

·; Agreed to lease a 312,000 sq ft refurbished industrial unit at Long Marston in Warwickshire to Jet Logistics, for £755,000 per annum.

·; Parkside Industrial Estate, Doncaster, acquired in 2009 with only 40,000 sq ft occupied and now fully let at 240,000 sq ft, producing a total rent of £0.4 million per annum.

FINANCE

Financial Performance

We have delivered a strong set of results for the first half of the year, with profit before tax up 40% to £37.4 million (H1 2010: £26.7 million). Our income is driven by improving rental income, a growing and consistent stream of development profits and valuation uplift secured almost entirely as a result of our active management approach. Our outgoings remain under control with overheads steady and interest reduced as we restructure our hedging to reduce the cost of finance.

Looking forward, we can see predictable and consistent income streams and controllable costs. Our rental income and recurring other income substantially covers our overheads and interest and we retain capacity in the business for an increased future development workload.

Movements in the forward yield curves have resulted in a small credit in mark-to-market of derivatives. This is offset by an increase in estimated tax as we use up available tax losses brought forward. The overall 11% increase in profit after tax and 9% increase in earnings per share compared to the same period last year is a pleasing result.

As a consequence, net asset value per share has risen by 6% over the last six months to 226p (Nov 2010: 213p). Net asset value is calculated by dividing shareholders' equity funds by the number of shares in issue. There is no difference between the basic and diluted number of shares in issue. On an EPRA basis, adjusted net asset value per share was 238p, an increase of 4% since November 2010 (229p).

Funding

As we indicated previously, our growing activity levels have resulted in an increase in net debt to £342 million (Nov 2010: £315 million) but gearing remains steady at 74% (Nov 2010: 72%). Our bilateral facilities are proving an advantage in this market place, enabling us to move swiftly to secure development opportunities.

We retain substantial headroom in our banking facilities, with committed facilities of £524 million against our net debt of £342 million. With our facilities having an average maturity of 3.3 years, we are in a good position and we have already made good progress in our discussions to renew both corporate and joint venture facilities falling due in the second half of 2012.

Our defined benefit pension scheme, previously closed to new entrants and to future accrual, remains fully funded on an IAS 19 basis. The triennial valuation date is 31 March 2011. We are well underway with discussions to finalise the valuation and do not anticipate any significant changes to valuations or contribution levels in the future.

Business Risks and Uncertainties

The status of these remains as outlined in the annual report.

OUTLOOK

While the market has been tough and uncertainty remains, we believe that our strong, regionally based asset management skills, large and diverse landbank and ability to maximise development value, puts us in a strong position for future growth.

On the back of a very strong first half, we will continue to identify and build a steady supply of future development opportunities, while developing and enhancing our current portfolio. Our long term focus, track record of delivery, strong asset management skills and ability to secure new projects, either on our own or in joint venture, give us continued confidence in both the results for the current financial year and our future growth.

Bill Oliver Michael Dunn

Chief Executive Group Finance Director

5 July 2011

GROUP INCOME STATEMENT

FOR THE PERIOD TO 31ST MAY 2011

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD TO 31ST MAY 2011

GROUP BALANCE SHEET

AS AT 31ST MAY 2011

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD TO 31ST MAY 2011

GROUP CASH FLOW STATEMENT

FOR THE PERIOD TO 31ST MAY 2011

Notes to the condensed Financial Statements

1. Accounting policies

The annual financial statements of St. Modwen PLC are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.

The same accounting policies and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. The following standards have been adopted in the period but have no impact on the Group's condensed financial statements:

- IAS 32 (amended) Classification of Rights Issues

- IFRS 1 (amended)/IAS 27 (amended) Limited Exemption from Comparative IFRS7 disclosures

- IFRS 1 (amended) Additional Exemptions for First-time Adoptors

- IFRS 2 (amended) Group Cash-settled Share-based payment transactions

- IFRIC 9 (amended)/IAS 39 Embedded Derivatives

- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

Based on a review of the Group's future cash flow forecasts and valuation projections, which they believe are based on realistic assumptions, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they adopt the going concern basis in preparing the condensed financial statements.

2. Revenue and gross profit

The Group operates exclusively in the UK and all of its revenues derive from its portfolio of properties which the Group manages as one business. Therefore, the condensed financial statements represent the results and financial position of the Group's sole business segment.

3. Joint venture and associates

4. Net finance cost

5. Earnings per share

Shares held by the Employee Benefit Trust are excluded from the above calculation.

The Group's share options are accounted for as cash-settled share-based payments. In calculating diluted earnings per share, earnings have been adjusted for changes which would have resulted from share options being classified as equity-settled. Where applicable, the number of shares included in the calculation has been adjusted accordingly.

6. Other information

 (i) Investment properties were valued at 31st May 2011 by Jones Lang LaSalle LLP, Chartered Surveyors and (prior to the merger of the two firms) by King Sturge LLP, Chartered Surveyors at 31st May 2010 and 30th November 2010. All valuations were in accordance with the Appraisal and Valuation method of the Royal Institution of Chartered Surveyors, on the basis of market value. Jones Lang LaSalle LLP are professionally qualified independent external valuers and have recent experience in the relevant location and category of the properties being valued.

 (ii) The information for the year ended 30th November 2010 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 (iii) The effective tax rate used for the period is a charge of 20.3%. The tax charge booked in the period is disproportionately low as a result of certain revaluations not giving rise to a deferred tax charge. For the full year tax is expected to remain below the standard rate of tax.

 (iv) The proposed dividend of 1.1p (six months to 31st May 2010: 1.0p) per ordinary share was approved by the Board on 4th July 2011 and will amount to £2.2m (six months to 31st May 2010: £2.0m).

 (v) Principal risks and uncertainties are discussed in the Outlook section of the half-year review. All results are derived from continuing activities, which the directors do not consider to be seasonal.

 (vi) There has been no material change to transactions with related parties since the year end.

7. Non-statutory information

(i) Trading profit

The non-statutory measure of trading profit, which includes the Group's share of joint ventures and associates, is discussed in the half year review and has been calculated as set out below:

(1) Stated before the deduction of net realisable value provisions of: Group £2.6m (Period to 31st May 2010: £4.8m, Year ended 30th November 2010: £6.1m) ; Joint venture and associates £nil (Period to 31st May 2010: £nil, Year ended 30th November 2010: £0.3m).

(2) Stated before mark-to-market of derivatives and other non-cash items of: Group £2.4m (Period to 31st May 2010: £2.1m, Year ended 30th November 2010: £4.0m) ; Joint venture and associates £nil (Period to 31st May 2010: £0.3m, Year ended 30th November 2010: £0.8m).

(3) Stated before mark-to-market of derivatives and other non-cash items of: Group £3.9m (Period to 31st May 2010: £1.1m, Year ended 30th November 2010: £2.6m) ; Joint venture and associates £0.9m (Period to 31st May 2010: £nil, Year ended 30th November 2010: £nil).

(ii) Property valuations

Property valuations, including the Group's share of joint ventures and associates, have been calculated as set out below:

The split of property valuation gains between asset management and market movements is based on an analysis of total property valuation movements provided by our external valuers: Jones Lang LaSalle LLP, Chartered Surveyors for the period ended 31st May 2011; and (prior to the merger of the two firms) by King Sturge LLP, Chartered Surveyors for the periods ended 31st May 2010 and 30th November 2010.

 7. Non-statutory information (continued)

(iii) Property portfolio

The property portfolio, including the Group's share of joint ventures and associates, is derived from the balance sheet as detailed below:

(1) Represents deductions for pre-sold properties under construction, principally RAF Northolt as part of the Project MoDEL arrangements between VSM Estates Limited and the Ministry of Defence.

The Group's property portfolio, including share of joint ventures and associates can be split by category as detailed below:

(iv) Movement in net debt

Movement in net debt as discussed in the half-year review is calculated as set out below:

7. Non-statutory information (continued)

(v) Trading cash flow

Trading cash flows are derived from the Group cash flow statement as set out below:

(vi) Net assets per share

Net assets per share are calculated as set out below:

DIRECTORS' RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events for the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board

Bill Oliver Michael Dunn

Chief Executive Group Finance Director

4 July 2011

INDEPENDENT REVIEW REPORT TO ST MODWEN PROPERTIES PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31st May 2011 which comprises the Group income statement, the Group statement of comprehensive income, the Group balance sheet, the Group statement of changes in equity, the Group cash flow statement and related notes 1 to 7. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31st May 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditors

Birmingham, United Kingdom

4 July 2011