CLS Holdings plc /media/Files/C/CLS-Holdings/... CLS Holdings plc | Interim Report and Accounts 2018

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  • CLS Holdings plc Half-Yearly Financial Report 2018

    Actively adding value…

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    Actively adding value… We own and actively manage properties in well‑connected locations that satisfy the needs of our customers. Our knowledge of the UK, German and French property markets informs our proactive investment strategy. By understanding customer’s needs and market dynamics, we actively add value for our occupiers and shareholders.

    Contents Business review 1 Highlights 2 Our business at a glance 4 Chairman’s statement 6 Country business reviews 9 Other investments 10 Financial review 11 Responsibility statement

    Financial statements 12 Independent review report 13 Condensed group income statement 14 Condensed group statement

    of comprehensive income 15 Condensed group balance sheet 16 Condensed group statement

    of changes in equity 17 Condensed group statement

    of cash flows 18 Notes to the condensed group

    financial statements

    Additional information 30 Glossary of terms 32 Directors, officers and advisers

    Reflex, Bracknell

    Front cover image: Roßstraße, Dortmund

    Jean Jaurès, Levallois, Paris

    Statutory and alternative performance measures Throughout this report we use a range of financial and non-financial measures to assess our performance in accordance with European Public Real Estate Association (EPRA) measures. EPRA is a recognised body in the property industry which is involved in the formulation of accounting metrics and sustainability reporting, which give the European listed real estate sector greater transparency and consistency. These standards also provide visibility and comparability to industry stakeholders in addition to being appreciated by the investment community. Management uses these measures to monitor the Group’s financial performance alongside International Financial Reporting Standards (IFRS) measures because they help illustrate the underlying financial performance and position of the Group. We have defined and explained each of these EPRA measures in the glossary of terms on pages 30 and 31. The EPRA measurements should be considered in addition to measures of financial performance, financial position or cash flows reported in accordance with IFRS.

  • 1

    B usiness review

    | Financial statem ents | A

    dditional inform ation

    CLS H

    oldings plc | Interim R

    eport and A ccounts 2018

    Business review

    Financial highlights

    Other highlights

    EPRA NAV +3.0%

    294.7p (31 December 2017: 286.0p)

    EPRA earnings per share +15.1%

    6.1p (2017: 5.3p)

    Interim dividend +7.3%

    2.20p per share (2017: 2.05p per share)

    Total accounting return

    4.5% (2017: 11.0%)

    Interest cover

    3.5 times (2017: 3.7 times)

    Profit before tax

    £64.9m (2017: £119.4m)

    Property portfolio valuation1

    £1.89bn (31 December 2017: £1.80bn)

    Acquisitions in six months

    £69.3m (2 properties)

    Basic NAV +3.3%

    260.2p (31 December 2017: 252.0p)

    Basic earnings per share -39.2%

    14.9p (2017: 24.5p)

    Property valuation uplift1

    +1.6% (2017: +4.7%)

    Total property return

    4.9% (2017: 6.5%)

    Average cost of debt2

    2.42% (31 December 2017: 2.51%)

    Balance sheet loan-to-value

    38.4% (31 December 2017: 36.9%)

    Occupancy rate

    94.3% (31 December 2017: 94.2%)

    Disposal proceeds in six months

    £26.2m (5 properties)

    1 Comprises investment property, properties held for sale, hotel and landholding

    2 At 31 July 2018 following redemption of retail bond

    Highlights Solid, stable and diversified portfolio

  • Business review CL

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    Contracted rent by sector

    Government – 27.6% Business services – 20.9% Manufacturing – 11.4% IT – 5.9% Student – 4.7% Finance – 4.7% Retail – 4.7% Other – 20.1%

    Property value by geography1

    UK – 52.5% Germany – 31.6% France – 15.9%

    We are a FTSE 250 property investment company with a £1.9 billion portfolio in the UK, Germany and France, offering geographical diversification with local presence and knowledge.

    Our business at a glance Solid, stable and diversified portfolio

    £106.1m £1,885.2m

    – Our core business is owning and managing high-yielding offices in good, non-prime locations close to major transport links.

    – We are an active manager, repositioning properties through lease restructuring, refurbishments and developments, and working closely with our customers.

    – We look to achieve long-term capital appreciation with a strong emphasis on cash generation and an opportunistic approach to acquisition, development and disposal.

    – We finance our activities through diverse and flexible structures, multiple sources of finance and active cash management.

    1 Comprises investment property, properties held for sale, hotel and landholding

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    B usiness review

    | Financial statem ents | A

    dditional inform ation

    CLS H

    oldings plc | Interim R

    eport and A ccounts 2018

    Contracted rent

    £106.1m No. of tenants

    711 No. of properties

    126 Total floor space

    6.9m sq ft

    United Kingdom

    £990.3m Germany

    £596.0m France

    £298.9m

    Property portfolio by value The map shows the value of the property portfolio which comprises investment property, properties held for sale, hotel and landholding.

    Portfolio statistics ERV of

    contracted rent (£m)

    Contracted rent (£m)

    Valuation (£m)

    6 month revaluation

    in local currency

    (%)

    EPRA NIY1

    (%)

    EPRA topped-up

    NIY2

    (%)

    Vacancy by rent

    (%)

    Weighted average

    unexpired lease term

    (years)

    Contracted rent per let sq ft

    (£)

    United Kingdom 59.9 56.4 962.8 +0.1% 5.4% 5.5% 5.4% 5.5 22.72

    Germany 35.0 34.1 592.5 +4.6% 5.1% 5.3% 7.1% 4.7 11.14

    France 15.6 15.6 299.0 +2.1% 5.1% 5.3% 3.4% 5.4 18.25

    Total Portfolio 110.5 106.1 1,854.3 +1.7% 5.3% 5.4% 5.7% 5.2 16.59

    Note: The above table comprises data of the investment properties and properties held for sale; they exclude the hotel, landholding and First Camp land and buildings

    1 Excludes developments; calculation based on passing rents 2 Excludes developments; calculation based on contracted rents

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    Chairman’s statement Continuing to refocus the business

    “ The strength of the results underlines the benefits of geographical diversification”

    Henry Klotz, Executive Chairman

    Overview With 32% of our property assets in Germany and 16% in France, the Group continues to be one of the few real estate companies listed in London with a significant exposure to these countries, two of Europe’s largest economies, and the strength of the results for the first six months of 2018 underlines the benefits of this geographical diversification. In the first half of 2018 the Group produced solid underlying earnings and valuation gains across all of our regions, leading to a growth in NAV. We continued to refocus our portfolio, with selective, strategic acquisitions at attractive yields and the disposal of assets with limited upside. We further reduced our average cost of debt with the early redemption of a retail bond. Together these initiatives will translate into higher future core income and solid earnings growth.

    Over the six months, EPRA NAV increased by 3.0% to 294.7 pence per share (31 December 2017: 286.0 pence) mainly through EPRA earnings and revaluation uplifts. We delivered 168,664 sq ft (15,669 sqm) of lettings, £69.3 million of acquisitions, £26.2 million of disposals, and the financing or refinancing of £111.6 million of bank loans. Total property return for the six months was 4.9% (2017: 6.5%), and total accounting return was 4.5% (2017: 11.0%).

    Our business strategy is to invest in well-located office properties. The investment property portfolio is well-diversified with over 700 occupiers across three markets generating rental income well in excess of the Group’s cost of debt. Approximately 28% of rents are paid by governments and 28% by major corporations, and 39% of rents are subject to indexation. In the UK, 42% of the rent roll is derived from central government departments. The balance sheet is strong, with significant levels of cash and liquid resources, and the Group is funded by 25 lenders across Europe.

    Results and Financing Profit after tax for the six months to 30 June 2018 was £60.8 million (2017: £100.0 million), corresponding to earnings per share of 14.9 pence (2017: 24.5 pence), including a revaluation uplift of the property portfolio of £31.2 million (2017: £48.7 million) and profits on disposals. Exclu