Half Yearly Report

Hansteen Holdings PLC

("Hansteen" or the "Group" or the "Company")

HALF YEAR RESULTS

Hansteen Holdings PLC (LSE: HSTN), the investor in continental European and UK property, announces its half year results for the six months ended 30 June 2012.

Financial Highlights

Operational Highlights

James Hambro, Chairman, commented: "In the continuing difficult economic environment across Europe, Hansteen's results for the first six months of 2012 were good. Profit and dividends have both increased despite adverse currency movement and, on a like-for-like basis, occupancy, values and rent have all improved.

"Industrial properties are simple, flexible and economical; characteristics which guarantee that, as long as there is economic activity, there will be a need for this type of property. Our portfolio is substantial, diverse, both geographically and occupationally, affordable for tenants and profitable. We now have management teams in each core region which are clearly focussed on extracting value from the properties they manage.

"We have further cash resources and are seeing increasing opportunities in all of our core markets. Identifying and acquiring the truly outstanding opportunities is a difficult and frustrating task; however, we have recently concluded purchases on excellent terms and have a pipeline of further such opportunities, some of which are likely to be converted over the next 6 months."

A presentation for analysts and investors will be held at 9.30 am today (Wednesday, 29 August) at the offices of Tavistock Communications, 131 Finsbury Pavement, London EC2A 1NT. If you would like to attend or dial-in to the conference please contact Amy Walker ([email protected]) on 020 7920 3150 for details.

For more information:

CHAIRMAN'S INTERIM STATEMENT

In the continuing difficult economic environment across Europe, Hansteen's results for the first six months of 2012 were good. Profit and dividends have both increased despite a 5.5% adverse currency movement compared to the previous half-year and, on a like-for-like basis, occupancy, values and rent have all improved.

In June, the Group completed a €26 million purchase in Germany with an initial yield of 13.8%. In the first half of this year, including HPUT, 14 sales were concluded with an average yield of 4% and a profit, above the December 2011's valuation, of £1.4 million.

The Hansteen strategy of buying high yielding industrial properties at less than replacement cost with opportunities to add value and managing them intensively via locally based management teams for income and value growth is an approach which is well suited to current times.

Results

Normalised Income Profit (which excludes profit from sales of properties, valuation movements and exceptional items) increased by 21% to £14.7 million (H1 2011: £12.1 million). This growth results in part from the positive performance of the Spencer Portfolio which was purchased in December 2011. Both revenue and overheads increased substantially reflecting expansion of the Group, in particular the Spencer acquisition and the Group's investment in the local management network throughout our core regions.

Normalised Total Profit for the half year was £17.1 million representing 2.7p per share including an insurance receipt of £1.1 million (H1 2011: £18.0 million representing 3.5p per share, which included an insurance receipt of £5.3 million).

Under IFRS, Hansteen showed a £23.7 million pre-tax profit for the period (H1 2011: £16.8 million).

Diluted EPRA earnings per share was 2.4p of which 0.2p related to an insurance receipt (H1 2011: 2.9p of which 1.0p related to an insurance receipt).

The reconciliation of normalised profits and normalised earnings per share to the IFRS figures is set out in notes 10 and 11 to this statement.

The post tax profit in the period of £20.3 million was principally offset by dividends paid of £15.3 million and adverse currency movements of £9.4 million resulting in a reduction of £4.2 million in net assets overall. The Group's diluted EPRA net asset value (NAV) was 81p per share (31 December 2011: 82p). The earnings performance was despite an adverse currency movement of 5.5% compared to the previous half year and the NAV was also impacted by an adverse currency movement of 3.4% since 31 December 2011.

Dividend

The Board has increased the interim dividend to be paid on 22 November 2012 by 13% to 1.8p per share (November 2011: 1.6p per share) reflecting the growing Normalised Income Profit of the business and the further potential for earnings growth resulting from the Group's financial strength and vacant property. The associated record date is 26 October 2012 and the ex-dividend date is 24 October 2012.

Property Portfolio

At 30 June 2012, Hansteen's total portfolio, both owned and under management (including the properties owned by the HPUT) comprised 2.5 million sq m with 20% vacant, a rent roll of £79.7 million per annum and a value of £947.5 million. The yield on the portfolio is 8.4%, generated from 280 estates with 2,600 tenants in five different countries. Hansteen's average all-in cost of debt at the half year was 3.3%.

On a like-for-like basis, allowing for acquisitions, sales and currency movement, the asset management performance of the portfolio has been positive.

Overall net occupancy (calculated by taking the vacancies at the start of the period plus purchased vacancy during the period and comparing it with vacancies at the end of the period) has increased marginally by 1,124 sq m.

The occupational markets in our three core geographic regions reflected the same themes reported over the last eighteen months.

Demand in Germany has continued to be strong. Vacancy grew from 12.88% at the year end to 13.82% at the half year. However, during the second half of 2011 Hansteen concluded a number of large short-term lettings in Germany which were expected to, and did, become vacant in the first six months of this year therefore the underlying letting achievement is not reflected in our statistics. A more representative statistic in the Board's view would be to compare that 13.82% with the 20% vacancy at the beginning of 2011.

In the Benelux, the most challenging of our markets, where net occupancy fell by 29,000 sq m or 6% of the region, there does not appear to be any material pick up in demand yet in sight.

In the UK, the net occupancy growth equating to 7% of the total portfolio was very pleasing but probably reflected asset management achievement more than strength in the market which remains fairly flat.

Like-for-like rental improvement for the Group, including HPUT, was £0.5 million per annum. The passing rent at 31 December 2011 was £79.3 million per annum, the net effect of acquisition and sales was £1.8 million per annum, the loss due to exchange rate movements was £1.9 million per annum and the closing rent was £79.7 million per annum, a net like-for-like improvement of 0.6%.

A high level of activity has been maintained as Hansteen completed 325 new leases and lease renewals in the first six months securing £9.6 million per annum of rental income, an average of £30,000 per letting.

The like-for-like movement in the portfolio value has been an increase of £7.6 million, or 0.8% of the portfolio, in addition to the profit from sales of £1.4 million. Property valuations increased in both Europe and the UK.

Set out below is a schedule of property reflecting our core operating areas:

* Figures include 100% of HPUT's portfolio. Hansteen has an investment of 33% in HPUT.

In July, Hansteen notarised the acquisition of Zeppelin Park, a 160 hectare industrial park located in western Berlin, for €11.3 million. Financial completion is expected no more than eight weeks following notarisation. The park contains 40,134 sq m of logistics and light industrial space in 19 buildings let to 26 tenants, with a current vacancy of approximately 17%. The passing rent is €1.7 million per annum and the target rent when fully occupied will be in the order of €2 million per annum. Around €3 million of capital expenditure cost is expected to be required to achieve the target rent.

Financing and Hedging

Finance

At 30 June 2012, net debt was £300 million (31 December 2012: £307 million); net debt to property value was 38.4% (31 December 2011: 38.7%) and net debt to shareholders equity was 59% (31 December 2011: 60%). Bank borrowings of £439.1 million compared to £467.0 million at 31 December 2011.

In February 2012, the bank loan from FGH Bank, used to finance the Group's properties in the Netherlands, was extended. In exchange for a reduction in the facility from €109.1 million to €94.0 million, the loan term, which was due to expire in June 2013, was extended for four years until April 2017. The current all-in-cost of the loan is 3.7% compared to 4.32% before the re-financing as, although the margin increased, the underlying fixed rate was moved to market level.

The Group has interest rate swaps of £259.0 million in place at an average rate of 2.125% and £84.6 million is capped at an average rate of 4.912%, giving an overall average all-in-cost of debt of 3.3% at 30 June 2012.

The maturity of the Group's facilities is such that only £7.5 million of the existing £439.1 million bank loans fall due for repayment before June 2014 and all of the loans continue to have significant headroom on their loan to value and interest cover covenants.

The Board continues to investigate alternative sources of potential debt finance as protection against the possibility that bank debt will become increasingly difficult to secure.

Currency

As at 30 June 2012 the Group's net assets were £505 million, of which £260 million or 51% were located in the UK and denominated in £ sterling. The balance of £245 million (€303 million) or 49% were located in the northern European countries of Germany, the Benelux and France. Given that our investments are predominantly in the stronger European economies, the Board believes that this provides some protection against the potential impact of a break-up (partial or otherwise) of the Euro-zone.

The Board continues to review its currency hedging policy, particularly in the light of the uncertainty concerning the Euro. The current policy can be summarised as:

With the above policy in mind the following actions were implemented.

Outlook

One of the features of the current property downturn has been the polarisation between the pricing of, and the market for prime property compared to secondary property. This has been exacerbated by investor caution and the lack of bank debt available for secondary property. Whilst it is understandable that in times of great uncertainty investors may favour apparent safety over current returns, the Board of Hansteen believes that money can be made, or lost, from all types of property. The key is price, financing structure and management approach. In particular, Hansteen believes that when purchased carefully, financed prudently and managed in a vigorous and hands-on fashion, a large and diverse industrial portfolio can combine secure high current returns with a resilient and growing income.

Industrial properties are simple, flexible and economical; characteristics which guarantee that, as long as there is economic activity, there will be a need for this type of property. The Group's portfolio is substantial, diverse, both geographically and occupationally, affordable for tenants and profitable. The Group now has management teams in each core region which are clearly focussed on extracting value from the properties they manage. The greater part of the input both in terms of the investment and effort required to put those teams in place has now been completed.

In this environment successful investment is a painstaking task and, as a result, the Group is acquiring properties at a slower pace than envisaged when the new capital was raised in April 2011. It is a testament to the business that notwithstanding the new shares issued in 2011 and the amount of capital still to be invested, the earnings per share dilution is minimal.

The Group has further cash resources and is seeing increasing opportunities in all of its core markets. Identifying and acquiring the truly outstanding opportunities is a difficult and frustrating task; however, both prospective purchases identified in the May IMS have been purchased on excellent terms and there is a pipeline of further such opportunities, some of which are likely to be converted over the next 6 months.

James Hambro

Chairman

28 August 2012

Responsibility statement

We confirm to the best of our knowledge:

On behalf of the Board

28 August 2012

The Interim Report and condensed set of financial statements will be posted to shareholders and will be available from the Company's RegisteredOffice at 6th Floor, Clarendon House, 12 Clifford Street, London W1S 2LL.

Consolidated income statement

for the six months ended 30 June 2012

Consolidated statement of comprehensive income

for the six months ended 30 June 2012

Consolidated balance sheet

as at 30 June 2012

Consolidated statement of changes in equity

for the six months ended 30 June 2012

Consolidated cash flow statement

for the six months ended 30 June 2012

Notes to the condensed set of financial statements for the six months ended 30 June 2012

1. General information

Hansteen Holdings PLC is a company which is incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 6th Floor, Clarendon House, 12 Clifford Street, London, W1S 2LL.

The Group's principal activities are those of a property group investing mainly in industrial properties in Continental Europe and the United Kingdom.

The financial information contained in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the year ended 31 December 2011 was derived from the statutory accounts for the year ended 31 December 2011, a copy of which has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis of matter and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2. Basis of preparation

The annual financial statements of Hansteen Holdings 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, presentation 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 interim report was approved by the Board on 28 August 2012.

The principal exchange rates used to translate foreign currency denominated amounts are:

Balance sheet: £1 = €1.2361 (31 December 2011: £1 = €1.195)

Income statement: £1 = €1.2159 (30 June 2011: £1 = €1.152)

3. Principal risks and uncertainties

Risk management is an important part of the Group's system of internal controls. Senior management staff and the Board regularly consider the significant risks, which it believes are facing the Group, identify appropriate controls and if necessary instigate action to improve those controls. There will always be some risk when undertaking property investments but the control process is aimed at mitigating and minimising these risks where possible. The key risks identified by the Board, the steps taken to mitigate them and additional commentary is as follows:

4. Going concern

The Group's principal risks and uncertainties are detailed above. The Directors believe that the Group is well placed to manage its business risks successfully despite the potential impact of the current uncertain economic outlook on the Group's operating cash flows and the possibility of tenancy failures and increased vacancies. After consideration of the Group's forecast cash flows and covenant compliance, including evaluation of the impact of potential reductions in property valuations, rental income and increases in interest rates, the Directors have a reasonable expectation that the Group will continue to have adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing these condensed financial statements.

Information on the Group's performance and its risk management is included in the Chairman's Interim Statement, including sections on the finance, hedging and outlook of the Group. The Group's debt maturity profile and principal covenants are disclosed in note 13 to these condensed financial statements.

5. Related party transactions

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed. There have been no other material transactions with related parties in the first six months of 2012 and there have been no material changes in the related party transactions described in the Annual Report and Accounts for the year ended 31 December 2011.

6. Operating segments

The following is an analysis of the Group's revenue and results by reportable segment:

Administrative expenses and net finance costs are managed as central costs and are not allocated to segments.

The following is an analysis of the Group's assets by reportable segment:

Investment properties includes those classified as held for sale on the balance sheet.

7. Other operating income

Other operating income of £1.1 million (2011: £5.3 million) comprises an insurance receipt relating to an investment property damaged by fire in a previous period.

8. Tax on profit on ordinary activities

9. Dividends

As a REIT, the Company is required to pay Property Income Distributions ('PIDs') equal to at least 90% of the Group's exempted net income after deduction of withholding tax at the basic rate (currently 20%). None of the cash dividend paid in the period ended 30 June 2012 is attributable to PIDs (2011: 1.24p).

10. Normalised Income Profit and Normalised Total Profit

Normalised Income Profit and Normalised Total Profit are adjusted measures intended to show the underlying earnings of the Group before fair value movements and other non-recurring or otherwise non-cash one-off items. A reconciliation of the Normalised Income Profit and Normalised Total Profit reconciled to profit before tax prepared in accordance with IFRS is set out below.

11. Earnings per share and net asset value per share

The European Public Real Estate Association ('EPRA') has issued recommended bases for the calculation of certain per share information. Diluted EPRA EPS and Diluted EPRA NAV are included in the following tables.

12. Investment property

13. Borrowings

On 25 May 2008, Hansteen Netherlands and Hansteen Ormix BV entered into a five year €109.1 million bank loan facility with an expiry date of June 2013. In February 2012, the facility was modified and reduced to €94 million and the expiry date extended to April 2017.

Security for secured borrowings at 30 June 2012 is provided by charges on property with an aggregate carrying value of £705 million (31 December 2011: £718 million).

14. Share capital

The share capital comprises one class of ordinary shares carrying no right to fixed income. There are no restrictions on the size of a shareholding or the transfer of shares, except for UK REIT restrictions.

15. Notes to the cash flow statement

16. Events after the balance sheet date

There are no post balance sheet events.

INDEPENDENT REVIEW REPORT TO HANSTEEN HOLDINGS 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 30 June 2012 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 16. 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 it 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 2, 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 30 June 2012 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 Auditor

Reading, UK

28 August 2012