Interim Results

For immediate release 17 June 2013

LXB Retail Properties Plc

INTERIM RESULTS FOR THE PERIOD ENDED 31 MARCH 2013

LXB Retail Properties Plc, a Jersey resident closed-ended real estate investment company focused on edge of town and out of town retail assets, today announces interim results for the period ended 31 March 2013.

Highlights

31 March 30 September

2013 2012

·; Cash deposits and liquid investments: £38.7m £70.1m

·; NAV per share: 115.77p 110.74p

·; EPRA* NAV per share: 117.16p 111.98p

·; Earnings per share: 4.31p 3.71p

·; October 2012: obtained planning permission for 494,000 sq ft of mixed-use retail and leisure at Rushden Lakes (the decision is currently under review by the Secretary of State)

·; January 2013: obtained planning permission at Greenwich for a Sainsbury's and M&S led scheme with a combined total area of 236,000 sq ft

·; January 2013: secured development finance facilities for foodstores at Gloucester and Sheppey

·; January 2013: entered into a pre-let agreement with Asda for a 78,000 sq ft foodstore in Truro

·; January 2013: exchanged contracts to sell 2 foodstores for a total consideration of £46m

·; March 2013: undertook a share buy-back programme returning £25m of surplus funds to Shareholders

Post period end:

·; May 2013: completed sale of the foodstore in Sheppey

·; June 2013: announced a number of transactions involving investment properties at Greenwich:

¨ Conditional sale of the Sainsbury's/M&S site

¨ Unconditional sale of Stone Lake Retail Park

¨ Conditional sale of the Wickes unit at Brocklebank Road

¨ Grant of an option for the remainder of the Brocklebank Road site

* excluding fair values of financial instruments and deferred tax.

For further information please contact:

LXB Adviser LLP Tel: 020 7432 7900

Tim Walton, CEO

Brendan O'Grady, FD

Buchanan Tel: 020 7466 5000

Charles Ryland / Sophie McNulty

Forward looking statements

This document includes forward looking statements which are subject to risks and uncertainties. You are cautioned that forward looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if assumptions underlying any of these statements prove incorrect, the actual results of operations and financial condition of the Group may materially differ from those made in, or suggested by, forward looking statements. Other than in accordance with its legal or regulatory obligations, the Company undertakes no obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward looking statements to reflect events that occur or circumstances that arise after the date of this document.

Chairman's statement

Dear Shareholder

I am pleased to present the Group's results for the six months ended 31 March 2013.

There has been significant activity and progress in the period since the last reporting date, with EPRA NAV per share up 4.63% to 117.16p at the balance sheet date. That progress is evident in today's announcement of the substantial transactions involving our Greenwich investments, of which more later.

The backdrop to the Group's business remains challenging as retailers continue to cope with sluggish consumer demand whilst looking to adjust their formats to multi-channel. We remain confident however, that they will continue to pay for the best space that satisfies their evolving needs and that we are developing space that fits their requirements.

In addition, the planning system remains slow and costly and as a consequence, the pipeline of new developments in the market generally is very limited. The Group is one of the few building retail formats demanded by occupiers at an affordable cost. This is increasingly being recognised by the investment market which wants to acquire up to date product of which there is limited availability as is evidenced by the Greenwich announcement.

Following today's Greenwich announcement (and assuming satisfaction of the planning and letting conditions thereon) and the previously reported sales of the foodstores at Sheppey and Gloucester, the Group now has an interest in five core retail investment schemes at Banbury, Biggleswade, Rushden, Stafford and Sutton. We anticipate being able to recognise almost all of the value on these investments by September 2014. Our investments at Ayr and Truro are longer term projects involving mixed-use and residential components as well as pre-lets to Sainsbury's and Asda respectively, for full size foodstores. They continue to move forward and we expect to submit revised planning applications for both shortly.

In spite of a difficult environment the period has been one of exceptional activity for the Group and significant progress towards the ultimate goal of assembling a portfolio of prime retail investments. Although two of our schemes, Rushden and Banbury, are delayed due to circumstances outside the Board's control, we expect these to be resolved this year. Where planning consents have been achieved we are progressing rapidly with lettings and construction work.

The Board's acceptance of a number of offers for the Greenwich investments at prices which it considers represent good value to Shareholders will create significant amounts of surplus cash over the coming months. Should all of the conditions be satisfied, these will crystallise a total surplus of £41m with a return on cost of 26.5% and permit a return of capital of up to £103m over the coming 18 months. This is in addition to the £25m returned by purchasing shares for cancellation in March 2013. (In February 2013, Shareholders voted to allow the Board the authority to purchase up to 14.99% of the issued share capital representing 38.09m shares and to date, 21.05m shares have been purchased at an average price of 118.4p.) Mindful of our duty to Shareholders as a whole, we will continue to consult as to the appropriate amount and form of further returns of capital.

My last report talked about the wider opportunities we see in large mixed-use masterplan sites and in residential. Shareholders have already given the Group authority to invest up to £30m in non-retail property. We continue to build on existing relationships to explore and evaluate such opportunities and have had a very positive response from landowners and the planning community, particularly in relation to the Living Villages concept. I look forward to reporting on those plans as the year progresses and opportunities are secured. However, the assembly of the retail portfolio has been, and remains the absolute prime focus of the Board and Investment Manager to deliver Shareholder returns in the short to medium term and we remain on track to deliver the value from this portfolio prior to the continuation vote in late 2014.

Phil Wrigley

Chairman

17 June 2013

Report of the Investment Manager, LXB Adviser LLP

LXB Adviser LLP advises LXB Retail Properties Plc ("LXB" or "the Group") and is pleased to report on the Group's Interim Report for the six months ended 31 March 2013.

Investment portfolio

Planning consents

Since the last reporting date the Group has received planning permission (subject to signing S.106 agreements) for an enhanced scheme at Stafford Riverside and at Sheppey for additional retail space on Phase 2 (an equivalent amount of industrial consent was conceded). New planning consents (including resolutions to grant planning) achieved since the Group's IPO in October 2009 (excluding properties sold at the balance sheet date) are as follows:

* Subject to judicial review challenge

New planning consents subject to review by the Secretary of State:

In addition, the Group has applications pending or intends to apply for planning consents on its remaining sites and to add to existing consented space due to tenant demand. The following table shows the additional applications that are envisaged:

* Application will also include a neighbourhood centre, 750 dwellings and offices.

** Application will also include a 120 bed hotel and 174 flats.

*** Application will also include a district centre and 1,225 dwellings.

Agreements for lease

The Group has also made good progress on signing pre-lets to tenants. Many of the Group's developments include mezzanine space and, although this space is included in the planning consent, it is (for retail space) generally not rentalised; therefore any reference made to pre-let space in the table below is to rentalised space only. Agreements for lease signed (by sq ft) up to the date of this report (excluding properties sold at the balance sheet date):

The agreements for lease signed correspond to total rental income of £15.95m per annum.

We anticipate further lettings in the near future and are currently in solicitors' hands to let a further 90,000 sq ft of ground floor space plus associated mezzanines.

Property details

The Group's most significant investments are discussed in greater detail below.

Ayr foodstore

The current resolution to grant planning permission is subject to signing a S.75 agreement and is for a small convenience foodstore and associated retail. It is anticipated that a new planning application will be submitted this summer. This application will be for a larger foodstore which is pre-let to Sainsbury's, a neighbourhood centre, residential and offices.

Banbury Gateway

The local authority received a judicial review challenge in March 2013 which may delay a start on site. The Group has strong advice from a QC that the judicial review will be unsuccessful in overturning the planning permission. A judge has now granted an order for a hearing to be held in the first week of November 2013.

With pre-lets to M&S and Next already in place, another 7,000 sq ft in solicitors' hands and 10,000 sq ft of space close to being agreed the scheme will soon be over 50% pre-let. Discussions are being held with other retailers with suitable covenants, so that the process to secure vacant possession of the Prodrive site can be initiated as soon as the legal challenge is resolved.

Biggleswade

Since 30 September 2012, further pre-lets have been concluded with Next and Matalan to take 20,000 sq ft on 2 floors and 40,000 sq ft on 2 floors respectively. These commitments, along with the existing M&S pre-let, mean that 35% of the new ground floor space is now pre-let, alongside the existing 43,000 sq ft Homebase. Negotiations with both existing and new tenants continue with interest from a number of High Street names.

The Group expects to receive planning permission in June 2013 reflecting the layouts agreed with retailers and good progress is being made on securing vacant possession on the existing Biggleswade Retail Park with the assistance of the Council. A S.278 agreement relating to the upgrade of London Road which provides access to the scheme is currently in solicitors' hands.

At Plot C, two commercial properties have been acquired for redevelopment. It is hoped that this site will ultimately be a relocation site for some of the retailers on the existing Biggleswade Retail Park. A planning application was submitted in June 2013 for 30,000 sq ft of non-food retail space with a decision expected before the end of this year.

Gloucester

The Morrisons foodstore is due for practical completion in July 2013 at which point the sale will also complete. On the remaining plots, enabling works have commenced and tenant interest is strong with a pre-let to Costa Coffee in solicitors' hands and advanced negotiations being held with a well known commercial motor vehicle dealership to take a vehicle showroom and workshop.

Greenwich

At Brocklebank, progress has been made on lettings and site assembly. A pre-let to a major retailer is in solicitors' hands with exchange expected in the next couple of months and interest has been received from a host of other retailers.

Planning permission was received for the Sainsbury's/M&S development in January 2013 and the S.106 agreement has now been signed. Construction is due to commence in September 2013.

Separate offers have been accepted by the Board in connection with the Sainsbury's/M&S development, Stone Lake Retail Park, the Wickes unit at Brocklebank Road, and the remainder of the Group's investment at Brocklebank Road. Furthermore, the Group has agreed commercial terms in connection with an offer to acquire its interest in the existing Sainsbury's, conditional on the buyer achieving a satisfactory planning consent and both parties' solicitors are instructed.

As set out more fully in today's Greenwich announcement, apart from Stone Lake Retail Park, the sales are conditional; however if and when completed they will crystallise almost £41m of value uplift of which £19.1m has been recognised in the Group's NAV to date. We anticipate that the majority of the remainder will be recognised in the NAV by 31 March 2014. The cash released on these sales, having repaid the loans secured on Stone Lake Retail Park and the Wickes unit, amounts to £103m over the coming 18 months.

Rushden

In December 2012, the Secretary of State decided to call in the Rushden Lakes scheme for a planning enquiry and a hearing is to be held in June 2013 with a decision expected before Christmas.

There is good demand from retailers for space at this location and numerous expressions of interest have been received. Converting this interest into lettings is dependent on a successful planning decision.

The Group remains confident of the merits of its case and wishes to place on record its thanks for the astonishing level of public support that has been received.

Sheppey

A revised planning application for Phase 2 to increase the non-food space from 40,000 sq ft to 68,376 sq ft was granted in May 2013. The retail space replaces a similar amount of industrial space that was granted in the first planning application.

A pre-let to take 22,000 sq ft on a 15 year lease is in solicitors' hands with exchange expected in the next few weeks. Discussions continue with other operators and interest has been received from a number of other national retailers.

The development and the subsequent sale of Phase 1, the foodstore and KFC unit, both completed in May 2013.

Stafford

The Riverside site is assembled and a revised planning permission for an improved scheme was unanimously approved by the local authority planning committee in May 2013, subject to ratification. Discussions concerning the building contract are well advanced. Negotiations to raise bank finance for the development are in progress although these are inevitably dependent on securing pre-lets. Currently, the site is 36% pre-let by rental income with three further pre-lets in solicitors' hands and negotiations continuing with a number of occupiers.

At Kingsmead, the site assembly has now been secured with the acquisition of the final parcel of land for £1.8m (including costs) in March 2013. Building works will commence once the multi-storey car-park is delivered at Riverside. With the agreement for lease to Morrisons the scheme is already 85% pre-let. Advanced discussions are in progress with potential occupiers for the balance of the space.

Sutton

The planning application for the scheme is anticipated to be submitted in June 2013 and a decision is expected in November 2013. Terms are agreed with all of the landowners including the owners of the gas holder sites (Southern Gas Networks and National Grid). In respect of Southern Gas Networks, this site will be acquired following decommissioning of the gas holders which itself will be triggered on the receipt of a satisfactory planning consent. The letting of the hotel is in solicitors' hands.

Truro

At Willow Green an outline planning application is due to be submitted imminently, on a joint basis with the adjoining developer, Walker Developments, for a substantial mixed-use development including 1,225 houses, a 78,000 sq ft foodstore, pre-let to Asda, a district centre and leisure facilities.

The site forms part of Cornwall Council's Strategic Housing Area as set out in the Truro and Threemilestone Development Brief, which also recommends a district centre being located here. The two adjoining development sites have both received resolutions to grant planning permission subject to signing S.106 agreements in recent months. It is anticipated that the LXB application will be determined later this year.

Revaluation surplus

As described in note 7 to the Interim Report the investment properties held by the Group at 31 March 2013 were valued by external property valuers, Jones Lang LaSalle Limited. In their opinion the open market value of these investment properties at that date was £242.54m, resulting in a revaluation surplus for the six months to 31 March 2013 of £10.33m. 

Hedge accounting

In October 2011 the Group entered into a £100m interest rate swap facility in anticipation of hedging needs for future borrowings. Hedge accounting was adopted for this instrument which meant that where the derivative was matched by expected borrowings, any movement in the fair value of the instrument was not recognised in the Income Statement. It is now apparent that the Group's borrowings profile will be different to that previously projected. The Directors have therefore decided to revoke hedge accounting in respect of this hedging relationship. This has resulted in a one off non cash debit to the Income Statement of £2.65m which is included within finance costs. It should be stressed however, that this is merely an accounting presentation issue; it has no impact on NAV.

Cash position and future expenditure

During the six months to 31 March 2013, £21.5m of cash has been deployed in the purchase of and capital expenditure on investment properties. 

At the balance sheet date the Group had £38.7m of cash and other liquid resources and this is substantially all allocated to existing projects or pipeline opportunities.

The Group maintains regular dialogue with a range of banks and is in the process of negotiating development funding for the Stafford Riverside and Kingsmead developments. The Group is confident that it will be able to secure the further development and investment financing required to supplement the cash on hand and facilitate delivery of the portfolio. 

Tim Walton

On behalf of LXB Adviser LLP

17 June 2013

Group income statement

for the period ended 31 March 2013

All amounts relate to continuing activities.

Group statement of comprehensive income

for the period ended 31 March 2013

Group statement of changes in equity

for the period ended 31 March 2013

Group balance sheet

at 31 March 2013

Group cash flow statement

for the period ended 31 March 2013

Notes to the interim report

1. General information about the Group

LXB Retail Properties Plc was listed on the AIM and CISX markets on 23 October 2009. It is a closed-ended real estate investment company that was incorporated in Jersey on 27 August 2009.

This Interim Report includes the results and net assets of the Company and its subsidiaries, together referred to as the Group, on a consolidated basis.

Further general information about the Company and the Group can be found on its website:

www.lxbretailproperties.com.

2. Basis of preparation

The financial information contained in this report has been prepared in accordance with IAS 34, "Interim Financial Reporting", as adopted by the European Union and on a going concern basis.

The condensed set of financial statements for the half year are unaudited and do not constitute statutory accounts for the purposes of the Companies (Jersey) Law 1991. They should be read in conjunction with the Group's statutory financial statements for the year ended 30 September 2012, which were prepared under International Financial Reporting Standards adopted for use in the European Union and upon which an unqualified auditors' report was given.

The accounting policies adopted in this report are consistent with those applied in the Group's Annual Report and financial statements for the year ended 30 September 2012 (the 2012 Annual Report) and are expected to be consistently applied in the year ending 30 September 2013. The 2012 Annual Report is available from the "Investor relations" page of the Company's website, www.lxbretailproperties.com, or by writing to the Company Secretary at Ogier Fund Administration (Jersey) Limited, Ogier House, The Esplanade, St Helier, Jersey, JE4 9WG.

The Group's financial performance is not subject to material seasonal fluctuations.

3. Segmental information

During the current period and prior periods, the Group operated in and was managed as one business segment, being property investment, with all investment properties located in the United Kingdom.

4. Finance income and costs

The average interest rate incurred by the Group on its bank borrowings for the period ended 31 March 2013, including the effects of hedging instruments and the lender's margin but excluding amortisation of capitalised finance costs was 3.4% (31 March 2012: 3.8%, 30 September 2012: 3.8%).

Further information about the derivative financial instruments, including details of their valuation at each balance sheet date is included in note 13.

5. Taxation

The tax assessed for the period varies from the standard rate of income tax in the UK of 20%. The differences are explained below:

The Group has revenue related losses of £1,406,952 (31 March 2012: £902,830; 30 September 2012: £1,113,425) available to carry forward to utilise against applicable future revenue profits, for which no deferred tax asset is currently recognised.

Tax status of the Company and its subsidiaries

All group undertakings are either tax resident in Jersey or are tax transparent entities owned by Jersey resident entities. Jersey has a corporate tax rate of zero, so the Company and its subsidiaries have no liability to taxation on their income or gains in Jersey. The Company is not subject to UK Corporation tax on any dividend or interest income it receives.

The Group's investment properties are located in the United Kingdom and therefore the net rental income earned less deductible items is subject to UK income tax, currently at a rate applicable to the relevant group undertakings of 20%.

6. Earnings per share

Earnings per share is calculated on a weighted average of 251,461,951 ordinary shares (31 March 2012: 254,099,895 ordinary shares; 30 September 2012: 254,099,895 ordinary shares) in issue for the period and is based on earnings attributable to shareholders for the period of £10,843,284 (31 March 2012: earnings of £8,603,524; 30 September 2012: earnings of £9,424,960).

There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or potentially dilutive equity arrangements.

The European Public Real Estate Association ("EPRA") issues guidelines aimed at providing a measure of earnings per share designed to present underlying earnings from core operating activities only. The adjusted EPRA earnings per share figure is calculated as follows:

7. Investment properties

A reconciliation of the carrying values of the investment properties to their market values is provided below:

At 31 March 2013, the Group's investment properties were valued by Jones Lang LaSalle Limited, Chartered Surveyors, on a fixed fee basis, in their capacity as external valuers. The total external valuation of these properties at 31 March 2013 is £242,540,000 (31 March 2012: £222,400,000; 30 September 2012: £245,225,000). The external valuers' valuation was undertaken in accordance with the Royal Institution of Chartered Surveyors' Valuation Standards Eighth Edition on the basis of market value. Market value represents the estimated amount for which a property would be expected to exchange at the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Costs to complete of £nil (31 March 2012: £1,071,000; 30 September 2012: £nil) have been offset against the external valuation.

The historic cost of the Group's investment properties as at 31 March 2013 was £209,930,084 (31 March 2012: £191,273,152; 30 September 2012: £213,465,846).

8. Business and other receivables

Property sales receivables comprises amounts receivable in respect of investment property sales that have unconditionally exchanged prior to 31 March 2013.

£1,601,658 (31 March 2012: £750,403; 30 September 2012: £1,559,048) of rents recognised in advance and lease incentives were due to be released to the income statement in more than one year.

All other amounts above are either receivable within one year or will be released to the income statement within one year except for £2,678,000 (31 March 2012: £nil; 30 September 2012: £2,313,000) which has been advanced to the provider of the Group's £100m swap facility (see note 13) as collateral due to the current fair value deficit position of the swap at the balance sheet date.

No business receivables were overdue or impaired at the end of any of the above periods.

9. Cash and cash equivalents and current asset investments

All of the Group's current asset investments (which comprised Money Market Fund investments and a portfolio of UK Government Gilts) were disposed of during the period.

The Money Market Fund investment was an investment in a liquidity fund with instant access and was therefore disclosed in the balance sheet as a current asset investment. The value of the Money Market Fund investment at 31 March 2012 was £19,242,564 and at 30 September 2012 was £19,311,419.

The UK Government Gilts had maturity dates of less than one year from origination and were therefore disclosed in the balance sheet as current asset investments. The value of the portfolio at 31 March 2012 was £39,636,719 and at 30 September 2012 was £15,623,370.

Included within the Group's cash and cash equivalents balance as at 31 March 2013 is £3,817,502 (31 March 2012: £3,033,942; 30 September 2012: £990,865) in bank accounts held as security by the providers of the Group's secured bank debt and hedging facilities.

10. Business and other payables

Accruals and other amounts payable includes £4,323,170 (31 March 2012: £9,357,998; 30 September 2012: £10,434,256) of committed costs included as additions to the Group's investment properties either in the current period or in a prior period.

All of the above amounts are due within one year and none incur interest.

11. Borrowings: amounts repayable within one year

On 15 January 2013 and 30 January 2013 two group entities entered into agreements with the Royal Bank of Scotland Plc for short term development finance facilities. The loans shown above (net of unamortised loan issue costs) were drawn during the period in several tranches. The amounts are secured against certain properties which are held within ring-fenced sub-groups beyond which the loans are non-recourse. The secured properties have been sold pending practical completion of the construction works. The loans (and accrued interest payable) are due for repayment no later than October 2013, subject to covenant compliance.

At 31 March 2013, the amounts undrawn under the above facilities was £15,364,920.

There have been no defaults or other breaches of financial covenants under the terms of the loan agreement during the current period, or in the period since the balance sheet date.

There was no difference between the book value and the fair value of the borrowings disclosed above.

12. Borrowings: amounts repayable in more than one year

On 11 February 2011 a group entity entered into an agreement with Deutsche Hypothekenbank (Actien-Gesellschaft) for a five year debt facility. A loan amounting to £25,950,000 was drawn on 17 February 2011, secured against certain investment properties held within a ring-fenced sub-group beyond which the loan is non-recourse. The loan to value financial covenant is 70%. At 31 March 2013 the secured properties have been externally valued at £49,050,000 (31 March 2012: £54,200,000; 30 September 2012: £53,700,000). The loan is due for repayment on 30 April 2016 with only interest payable, subject to covenant compliance, until the repayment date.

There have been no defaults or other breaches of financial covenants under the terms of the loan agreement during the current or prior periods, or in the period since the balance sheet date.

The Group has no undrawn, committed long-term borrowing facilities at 31 March 2013 (31 March 2012: £nil; 30 September 2012: £nil).

There was no difference between the book value and the fair value of the borrowings disclosed above.

13. Derivative financial liabilities

The Group enters into hedging arrangements to provide protection against interest rate fluctuations in respect of its bank borrowings.

In the prior year, the Group entered into an interest rate swap facility with the Royal Bank of Scotland Plc, effective, 25 March 2013, in anticipation of hedging needs for future investments. The fair value of this instrument at each balance sheet date is set out below: