Active Portfolio Management/media/Files/C/CLS-Holdings/docume… · Active Portfolio Management. Contents CLS Holdings plc Full Year Results 2019 Overview Fredrik Widlund CEO02 Simon

CLS Holdings plcFull Year Results 2019

Active Portfolio

Management

CLS Holdings plc Full Year Results 2019

Contents

OverviewFredrik

Widlund

CEO

02

Simon

Wigzell

Head of

Group

Property

15

Andrew

Kirkman

CFO

07

Fredrik

Widlund

CEO

22

Property

Financials Markets & Summary

Appendices

25


OverviewFredrik Widlund CEO

02


Overview

Active portfolio management

▪ EPRA NAV up 6.3% to 329.2 pence per share

(31 Dec 2018: 309.8p)

▪ Valuations up 3.0% in local currency driven by

Germany increasing 8.4%

▪ Refocusing with sales of Catena, First Camp,

and Regional UK properties

▪ £257.2m of acquisitions and £187.2m of

property disposals

▪ Vacancy stable at 4.0% (31 Dec 2018: 3.8%)

▪ Net rental income increased by 3.1% to

£110.6m (31 Dec 2018: £107.3m)

▪ Profit before tax was up 9.7% to £159.0m (31

Dec 2018: £144.9m). EPRA EPS down 8.4% to

12.0p (31 Dec 2018: 13.1p)

▪ Total accounting return of 8.6% (2018: 10.8%)

▪ Proposed dividend of 7.4p per share, up 7.2%

Up 3.0% in local currency

£2.0bn(31 Dec 2018: £1.9bn)

Up 6.3%

329.2p(31 Dec 2018: 309.8p)

53%

14%

33%

Total Portfolio

EPRA NAV (p)

208.3245.6

285.6309.8

329.2

2015 2016 2017 20192018

/ UK (£1,059.8m)

/ Germany (£667.0m)

/ France (£285.3m)

03


Overview

Valuations up 3%

in local currencyUK

▪ Total valuation down -0.3% driven

by acquisition costs (like-for-like valuations +0.3%)

▪ Rental growth with ERVs up 1.3%

▪ Yields down by 22 bps to 5.4% NIY due to portfolio

mix after disposals

Germany

▪ Valuation uplift of 8.4% in local currency

▪ Strong rental growth with ERVs up 5.1%

▪ Yields down by 41 bps to 5.0% NIY

France

▪ Valuation uplift of 3.8% in local currency

▪ Rental growth with ERVs up 2.5%

▪ Yields down by 4 bps to 5.2% NIY

Valuation movement in local currency

UK Germany France Total

Valuation Uplift1 -0.3% 8.4% 3.8% 3.0%

ERV Movement2 1.3% 5.1% 2.5% 2.6%

Net Initial Yield (NIY)3 5.4% 5.0% 5.2% 5.2%

NIY Movement -22 bps -41bps -4bps -25bps

1 In local currency

2 Like-for-like

3 EPRA Topped Up NIY

9.3%

1.6%4.7%

0.5%-0.3%

8.2%

3.8%

6.6%

9.3% 8.4%

3.3%

4.8%

8.2%

3.8%3.8%

2015 2016 2017 2018 2019

/ UK / Germany / France

04


Overview

Significant year of activity

Key

Acquisitions

Sales

19

* Completed Q1 2020

UK

▪ Foliot House, Plymouth

▪ Quayside, Fulham

▪ Grange, Hayes

▪ 19 Regional UK Portfolio*

▪ Heather Court, Sidcup*

Germany

▪ Markstrasse, Witten

▪ East Gate, Munich

▪ Schanzenstrasse,

Dusseldorf

France

▪ Ateliers Victoires, Paris

▪ Foch, Paris*

28 Properties, £187.2m, NIY 5.4%

(3.6% NIY excluding UK Regional Sale)

UK

▪ Portland Building, Crawley

▪ Gresham House, Crawley

▪ Prescot Street, Aldgate

▪ Vauxhall Walk, Vauxhall

▪ Pacific House, Reading

▪ Lloyds Avenue, Aldgate

▪ Clockwork, Hammersmith

▪ College Road, Harrow*

▪ Kingston Road, Staines*

Germany

▪ Puro, Munich

▪ Office Connect, Cologne

France

▪ Les Reflets, Lille

▪ Park Avenue, Lyon

13 Acquisitions, £257.2m, NIY 5.8%

39

* Two UK regional assets, Sidcup and

Foch completed Q1 2020

Acquisitions

Disposals

05


▪ Our vision: To be a leading office space specialist

and a supportive, progressive and sustainably

focused commercial landlord

▪ Imbedding sustainability in all that we do

▪ Employee led vision and values project to enhance

stakeholder engagement and collaboration

▪ Corporate objectives around carbon and energy

reduction, renewable energy and waste

management

▪ Established a workforce advisory panel looking at

improving workplace policies, practices and

wellbeing

▪ New independent non-executive chairman

▪ Two new independent non-

executive directors chairing audit and

remuneration committees

Tenant Surveys

713(31 Dec 2018: 441)

GRESB ESG

70(31 Dec 2018: 63)

CSR Events

43Investing in our local communities

and employees

Environmental, Social and Governance

Progress in 2019

06

49%51%

Gender Diversity

/ Male/ Female


FinancialsAndrew Kirkman CFO

07


Finance

Strong performance alongside portfolio refocusing

EPRA EPS (Pence)

Down 8.4%8.5

12.3 12.6 13.112.0

2015 2016 2017 20192018

Cost of Debt

2.42%(31 Dec 2018: 2.43%)

-1bp

EPRA NAV

329.2p(31 Dec 2018: 309.8p)

+6.3%

EPRA EPS

12.0p(31 Dec 2018: 13.1p)

-8.4%

Total Accounting Return

8.6%(31 Dec 2018: 10.8%)

-220 basis points

Interest Cover

3.4x(31 Dec 2018: 3.8x)

-0.4x

Total Proposed Dividend

7.4p(31 Dec 2018: 6.9p)

+7.2%

Cost of Debt (%)

Record low 3.40

2.912.51 2.43 2.42

2015 2016 2017 20192018

Distributions (£m)

Up 7.2%

5.7 7.2 8.4 9.0 9.6

13.4

16.317.5

19.120.6

2015 2016 2017 20192018

08


Movement in ERPA NAV

Growth through valuations and earnings

Movement In EPRA NAV (pence per share)

309.8

329.2

(7.1)

12.0

14.1

8.8

(0.7)

(7.7)

At 31 December 2018 Dividends EPRA earnings Propertyvaluation

Catena Bonds/Discontinued/Other FX At 31 December 20191

1 After fx

09


Movement in ERPA Earnings per Share

Impact of foreign exchange and lower finance income

Movement In EPRA Earnings (pence per share)

13.1

12.0p

(0.6)

(0.3)

0.3

(1.3)

0.8

At 31 December 2018 Netrental income

Expenses Finance income Tax/Finance expense FX At 31 December 2019

12.0

10


Movement in liquid resources

Healthy liquid resources

100.3

(25.5)

(253.9)

75.3

165.0

34.5

30.3

31 December 2018 Fromoperations

Interest/Tax/Other Dividends Sale ofproperties

Net drawdown ofloans

Propertyacquisitions &

capex

Sale of bonds Catena sale 31 December 2019

79.3

113.1 259.4

(28.7)

259.4

208.1

77.5

/ Cash / Bonds / Catena

Movement in liquid resources (£’m)

11


Finance

Active debt management

Financed or refinanced £292.4m debt at 2.65%

▪ £238.2m in GBP at 2.97% and £54.1m in EUR at

1.25%; weighted average maturity of 5.2 years

▪ £82.7m for new acquisitions and £177.9m fixed

at 2.50%

Mitigated key Spring Gardens refinancing risk

▪ 2021 maturity refinanced early, extended to 2024

▪ Debt cost reduced from 3.49% to 2.92% fixed

Continue to fix at low interest rates

▪ Fixed debt (77%): 3.6 years at 2.32%

▪ Floating debt (23%): 3.0 years at 2.73%

Progress made with 2020 objectives

▪ Advancing with £134.0m to be refinanced in

2020

▪ Exploring wider UK financing strategy options

50

100

150

200

250

300

2020 2021 2022 2023 2024 2025 2026

UK Germany France Total

Gross debt (£m) 447.0 312.6 137.6 897.2

Number of loans 15 18 16 49

Net Gearing* 18.6% 45.2% 46.7% 31.4%

Cost of debt 3.38% 1.39% 1.60% 2.42%

Years to maturity 3.1 3.5 3.6 3.5

Loan Maturity (£’m) / GBP / EUR

* UK gearing shown after cash of £246.9m

12


Finance

Low cost and diversified debt

Interest Cover

3.4x3.2

3.4

3.9 3.8

3.4

2015 2016 2017 20192018Balance Sheet LTV

31.4%(31 Dec 2018: 36.7%)

Number of lenders

27(31 Dec 2018: 26)

Cost of Debt

2.42%(31 Dec 2018: 2.43%)

Interest Cover

3.4x(31 Dec 2018: 3.8x)

Unencumbered Assets

£143.6m(31 Dec 2018: £283.6m)

77%

1%

22%

/ Fixed rate

/ Floating rate (capped)

/ Floating rate (unhedged)

Debt Profile

31 December 2019

13


Movement in property portfolio

Net acquisitions and valuations drive increase

Movement In property portfolio1 (£’m)

31 December 2018 Disposals Acquisitions Capex Valuation uplift FX 31 December 2019

60.82

(58.4)

16.6232.9

2,012.1

1,923.3

(163.1)

1,923.3

2,012.1

1 Comprises investment property, PPE and properties held for sale2 Includes rent free debtor of £3.7m

14


PropertySimon Wigzell Head of Group Property

15


Property

A diversified tenant base

Average rents (per sq ft)Contracted rent (£109.3m)

23%

25%

52%

Government

As at 31 December 2019

1. National Crime Agency (UK)

2. Secretary of State (UK)

3. University of Roehampton (UK)

4. City of Bochum (Germany)

5. BAE Systems (UK)

6. Barts Health NHS Trust (UK)

7. Hammersmith & Fulham Council (UK)

8. General Mills (UK)

9. Bosch (Germany)

10. Materna (Germany)

11. Colt (France)

12. Honda (UK)

13. Kaufland (Germany)

14. Dr Hönle (Germany)

15. Volksbank (Germany)

779Tenants

/ Office (89%)

/ Student (5%)

/ Hotel (4%)

/ Food Retail (2%)

Property use by rent

31 December 2019Top 15 Tenants (32% of contracted rent)

97Properties

Major corporations

Other

14.96

15.96 16.19

17.00

17.97

2015 2016 2017 2018 2019

16


Property

Securing income

Vacancy

4.0%4.2%

2.3%

3.8%4.1%

4.3%

3.1%

4.0%

UK Germany France Group

158 deals secured £14.7m of annual rent

3.3% above ERV(2018: 176 deals, secured £16.2m of annual rent, 2.2% above ERV)

Deals Done

109.3

120.1

(4.5)

4.6

10.7

ContractedRent

Vacancy OverRented

Reversionary ERV

Estimated Rental Value (“ERV”)

(£’m)

WAULT

4.75(31 Dec 2018: 5.26)

Like-for-Like ERV

2.6%(31 Dec 2018: 1.2%)

/ 2018 / 2019

Vacancy

4.0%(31 Dec 2018: 3.8%)

Lease Extensions

57%New Leases

43%

17


Sustainability

Leaner, greener portfolio

UK Portfolio EPC Ratings

Renewable Electricity Purchased

94%(31 Dec 2018: 96%)

Renewable & Low Carbon Generation

(kWh)

718,000 (31 Dec 2018: 546,000 kWh)

UK Recycling

73%(31 Dec 2018: 71%)

Like-for-like Carbon

Reduction in 2019

214(tC02e)

Year-on-year Carbon Reduction (tC02e)

409

1,124

1,569

2,999 3,213

2015 2016 2017 20192018

Water Intensity (m3/m2/year)

0.354(31 Dec 2018: 0.371)

Solar PV Capacity (kWp)

349(31 Dec 2018: 327)

18

0%

0%

42%

29%

25%

4%

F

E

D

C

B

A


Capital expenditure programme

Investing in more sustainable workspaces

Mittler Pfad 2-4, Stuttgart

▪ Investing £2m

▪ 19,000 sq. ft of redundant storage

converted to offices

▪ Modern lobbies with digital

information displays

▪ Refurbishment of the façade

including a modern lighting system

▪ Creation of modern outside

communal area and landscaping

▪ New branding and signage

Apex Tower, New Malden

▪ Investing £10m

▪ New enlarged reception with 'drop

in' work zone

▪ Office floor

▪ Meeting rooms and communal

kitchen floor

▪ Showers and changing facilities

▪ EV car charging points

▪ EPC improvement D to B

Base Offices, Brentford

▪ Investing £1m

▪ Rebranding as Offices

▪ 5 Suites available on flexible terms

▪ Plug & Play - Furnished and

prewired with fibre

▪ Shared meeting rooms and kitchen

▪ Biophilic design to improve working

environment

▪ Bracknell and New Malden to

follow

19


Capital expenditure programme

Investing in more sustainable workspaces

Park Avenue, Lyon

▪ Investing £5m capex 2020-2022

▪ Thermally efficient façade will

enhance energy performance and

re-position the building to capture

higher rents

▪ Refurbishing 42,000 sq. ft of office

space

▪ Introducing roof terraces and new

landscaping to promote wellbeing

▪ EV charging, showers, lockers and

bike storage

9 Prescot Street, London

▪ Investing £20m capex 2021-2022

▪ Thermally improve facade, efficient

plant, PVs and target EPC

improvement from D to B rating

▪ Refurbish 4 floors capturing higher

ERV

▪ Enlarged roof terrace, cycle,

shower and locker facilities

▪ Co work hub initiative

▪ Re-branding

Technisches Rathaus, Bochum

▪ Investing £5m 2020-2021

▪ Awaiting planning approval spring

2020

▪ 20,000 sq. ft roof top extension

▪ Open plan pilot project

▪ Lease extension 2039 to 2049

▪ Light weight Cross Laminated

Timber frame under consideration

▪ Naturally ventilated & PVs on roof

20


Medium-term office Developments

Creating destinations with amenities and services

▪ Awaiting planning permission for

29,000 sq. ft office development

▪ New scheme ERV £1.4m per annum

(existing £130k per annum)

▪ Indicative build cost £12m

▪ Café, roof terraces, showers

▪ Target EPC A & BREEAM Excellent

▪ Incubator floor for local businesses

▪ PVs, Electrification and EV charging

▪ Potential delivery 2022

▪ Planning application progressing for

reduced height providing 43,000 sq. ft

▪ Potential ERV £1.7m per annum

(existing ERV £130k per annum)


▪ Café, roof terraces, showers, lockers

and co work zone

▪ Target EPC A & BREEAM Excellent



▪ Awaiting planning permission for

141,000 sq. ft office development

▪ New scheme ERV £2.5m per annum

(existing £1m per annum)


▪ Café, roof terraces, showers, lockers

and co work zone


▪ Target Gold DGNB


Vauxhall Walk, SE11 London St Cloud Gate, MaidenheadVor Dem Lauch 14, Stuttgart

21


Markets & SummaryFredrik Widlund CEO

22


Markets

Opportunities in all countries

United Kingdom

▪ UK macro indicators relatively strong,

Brexit negotiations remain a risk

▪ Market sentiment and

occupier interest improving

▪ Portfolio now well positioned in the

Greater London area to benefit from

any uptick in the economy

▪ Rental growth in London, ERVs up

1.3% in 2019, vacancy trending down

▪ Domestic political situation stabilised

with more acquisition opportunities

available

France

▪ Economy resilient with improving

domestic demand; protests and

strike action remain a risk to growth

▪ Strong investment markets in larger

cities, transaction volumes

increasing

▪ Signs that falling vacancy in CBD is

starting to cascade to non-prime

▪ Rental growth in Paris and Lyon,

ERVs up 2.5% in 2019

▪ Maximising value from existing

properties and selective acquisitions

Germany

▪ Economy slowing but well

diversified with low unemployment

▪ Fundamentals for property

investments remains favourable

▪ Attractive net yields over cost of

debt; +350 bps on average

▪ Strong rental growth, ERVs up

5.1% in 2019, low office vacancies

in all major cities

▪ We continue to see value in non-

prime offices with vacancy and/or

repositioning opportunities

23


Summary

Active and consistent delivery

▪ EPRA NAV up 6.3% to 329.2 pence per share,

consistently growing

▪ Refocusing completed with sales of Catena and

Regional UK properties

▪ Active year with £257.2m of acquisitions and

£187.2m of disposals

▪ Healthy net initial yield vs. cost of debt

▪ Total accounting return of 8.6% and proposed

dividend of 7.4p per share, up 7.2%

▪ Robust ESG framework and actions

▪ Well positioned, resilient and focussed portfolio

in London and the South East and in major

cities in Germany and France

Excess Net Initial Yield over Cost of Debt

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Liquid Resources (£’m)

/ Net Initial Yield / Cost of Debt

24

100.3

259.430.3

77.5

31 Dec 2018 31 Dec 2019

208.1

/ Cash

/ Bonds

/ Catena

259.4


Appendices25


Appendices

Overview

▪ CLS Holdings plc is a FTSE 250 property

investment company which has been listed on

the London Stock Exchange since 1994

▪ We specialise in owning and managing office

buildings, with a range of lease lengths, in order

to achieve stable cash flows

▪ We operate in London and the South East of

the UK, and in the larger cities in Germany and

France

▪ We aim to hold, refurbish and develop our

property investments to obtain long-term asset

growth

▪ We have established offices in London,

Hamburg and Paris

Up 3.0% in local currency

£2.0bn(31 Dec 2018: £1.9bn)

53%

14%

33%

Total Portfolio

/ UK (£1,059.8m)

/ Germany (667.0m)

/France (£285.3m)

Top 10 Shareholders

As at 31 December 2019

Mortstedt Family & Charity Trust 51.4%

Fidelity Worldwide Investments 9.9%

Bengt Mortstedt 6.4%

Invesco 4.9%

Bank of Montreal 4.7%

Schroders 2.5%

AXA 1.6%

Janus Henderson 1.4%

Blackrock 1.0%

JP Morgan Chase 0.9%

26


Appendices

Consistent & Strong Returns

Distributions (£m)

Total Shareholder Return Portfolio Value (£bn)

EPRA NAV (pence)

/ CLS / FTSE 350 / FTSE RE SS

0.9 0.9 0.91.1

1.31.5

1.6

1.81.9 2.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

95.3 98.3 115.4 126.8

177.4 208.3

245.6

285.6 309.8

329.2

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

11.2 12.3 13.2 15.0 15.9

19.1

23.5 25.9

28.1 30.2

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

27


Appendices

Who we are and what we believe in

Our Values

▪ Our tenants, our focus

▪ Agility unlocks opportunity

▪ Openness creates

closeness

▪ Collaboration gets the job

done

Our Purpose

▪ Our purpose is to transform

office properties into

sustainable, modern

spaces that help

businesses to grow

Our Vision

▪ To be a leading office space

specialist and a supportive,

progressive and sustainably

focused commercial

landlord

28


Appendices

United Kingdom

Lettable Space

2.2m sq ftValue of Properties

£1,059.8m

Vacancy

4.1%

Percentage of Group’s Property Interest

53%

Contracted Rent

£59.2m

Government and Major Corporations

57%

UK Properties

London 33

South East 8

Birmingham 1

Aberdeen 1

Salford Quays 1

Norwich 1

45*

* Norwich, Sidcup and Salford Quays sold Q1 2020

Number of Tenants

253Number of Properties

45

29


Appendices

Germany

German Properties

Hamburg 10

Munich 7

Stuttgart 3

Berlin 2

Dusseldorf 2

Dortmund 2

Cologne 1

Freiburg 1

Wiesbaden 1

Bochum 1

30Lettable Space


£667.0m

Vacancy

4.3%


33%

Contracted Rent

£34.2m


31%

Number of Tenants


30

30


Appendices

France

French Properties

Paris 14

Lyon 5

Lille 3

22*

* Foch (Paris) sold Q1 2020

Lettable Space


£285.3m

Vacancy

3.1%


14%

Contracted Rent

£15.8m


55%

Number of Tenants


22

31


Appendices

Group Statistics

1. Valuations performed by Cushman and Wakefield

2. Excludes developments; calculations based on passing rents

3. Excludes developments; calculations based on contracted rents

At 31 December

2019

Valuation1

(£m)

Valuation in

local currency

(%)

EPRA NIY2

(%)

EPRA

topped-up

NIY3

(%)

Vacancy by

rent

(%)

Weighted

average

unexpired

lease term

(years)

ERV of

lettable

Space

(£m)

Contracted

rent

(£m)

Contracted

rent

(£/sq ft)

UK 1,059.8 -0.3% 5.12% 5.35% 4.1% 4.8 64.8 59.3 28.48

Germany 667.0 + 8.4% 4.78% 5.00% 4.3% 4.6 38.7 34.2 11.02

France 285.3 + 3.8% 4.66% 5.21% 3.1% 5.0 16.6 15.8 17.68

Total portfolio 2,012.1 + 3.0% 4.93% 5.21% 4.0% 4.8 120.1 109.3 17.97

32


This document may contain certain ‘forward-looking statements’. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from those expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of CLS speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Except as required by its legal or statutory obligations, the Company does not undertake to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Information contained in this document relating to the Company or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.

All numbers provided are as at 31 December 2019 unless otherwise stated.

Disclaimer

Documents

Active Portfolio Management/media/Files/C/CLS-Holdings/docume… · Active Portfolio Management. Contents CLS Holdings plc Full Year Results 2019 Overview Fredrik Widlund CEO02 Simon