Cls hy results_2014

Interim Results 2014

1

CLS Holdings plc

Annual Report &

Accounts 2013

CLS Holdings plcAnnual Report & Accounts

CLS Holdings plc

86 BondwayLondonSW8 1SF

Tel: +44 (0)20 7582 7766Fax: +44 (0)20 7828 0960email: [email protected]

www.clsholdings.com Taking advantageof Opportunities

Contents

Overview

Financials

Portfolio

Our Markets

Summary

2

Henry Klotz Executive Vice Chairman

John Whiteley Chief Financial Officer

Simon Wigzell Head of Group Property

CLS Holdings plc

Annual Report &

Accounts 2013


CLS Holdings plc




London 47%

Rest of UK 8%

France 19%

Germany 18%

Direct 5%

Indirect 3%

Property investments by value

Sweden

About CLS

•  Specialist in high-yielding offices and opportunistically adding value

•  Cash generative: high yield (6.8%) vs low cost of debt (3.73%)

•  Rental income £84.0m Property portfolio £1.2bn

•  Management strong alignment of interest via shares

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30 June 2014

Achievements in H1 2014 Benefiting from geographical diversity

•  Healthy growth in NAV

–  Strong growth in London valuations

–  Enhanced cash generation as impact of 2013 acquisitions comes through

•  Good progress on developments at Spring Mews, Clifford’s Inn and Vauxhall Square

•  Record low vacancy rate of 3.5% (Dec 2013: 4.4%) driven by significant lettings in France and Germany

•  Disposal of Cambridge House, W6 for £29.5m at 32% above Dec 2013 valuation

•  Low cost of debt maintained

4

Contents

Overview

Financials

Portfolio

Our Markets

Summary

5

CLS Holdings plc

Annual Report &

Accounts 2013


CLS Holdings plc




Financial Highlights In Good Health

•  EPRA NAV up 11.3% to 1,412.0p (Dec 2013: 1,268.4p)

•  Profit after tax up 173.1% to £62.0m (2013: £22.7m)

•  EPRA EPS up 13.0% to 37.3p (2013: 33.0p)

•  Interest cover 3.6x (2013: 3.8x)

•  Low cost of debt 3.73% (Dec 2013: 3.64%)

•  Half year distributions up 5.0% like-for-like; proposed £5.5m buy-back at 1 in 119 at 1,500p

6

1,268.4

1,412.0

51.2

104.4 11.9

-3.7

-20.2

1,200

1,240

1,280

1,320

1,360

1,400

1,440

1,480

1 Jan 2014 Underlying profit

Revaluation of properties

Other revaluations

Tender buy backs

FX 30 Jun 2014

Strong NAV Growth Movement in EPRA NAV

Pence

7

1 Jan 2014

Underlying Profit

Revaluation of Properties

Other Revaluations

Tender Buy Back

FX 30 Jun 2014

Strong Income Generation Profit after Tax

14.2

-3.5

1.8 7.2

3.0

22.7 16.3

39.6

7.0

-0.9

-

62.0

-20

0

20

40

60

80

2013 2014

For the six months to 30 June (£m)

8

EPRA Profit after Tax + Property

revaluation + Gain on disposals + Gain / (loss) on

sale of bonds + Other = Profit after Tax

69.4 84.3

129.8

21.8

-10.0

29.3

-31.1

-53.6 -1.9

69.4

0

50

100

150

200

250

300

At 1 Jan 2014 From operations

Tender buy-back

Sale of properties

Capital expenditure

Net loan repayments

Other At 30 Jun 2014

Very High Liquidity Movement in Liquid Resources

£m

9

Cash Corporate Bonds

153.7

199.2

Debt Profile As at 30 June 2014

0

50

100

150

200

250

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Amortisation Bullet Repayments

£m

10

2015: 4 loans 2016: 2 loans account for £105m

•  Swedish bond •  Loan on a building let until 2026

Diverse Financing Strategy to lower risk

•  Spread risk

–  23 banks (71%)

–  1 secured note (11%)

–  1 debenture (6%)

–  2 unsecured bonds (12%)

–  Ring-fencing model

•  76% fixed or hedged

•  67% floating rate

•  Weighted avg. cost of debt 3.73% (Dec 2013: 3.64%)

•  Balance sheet LTV 50.3% (Dec 2013: 52.8%)

Hedging of Finance

11

Hedged

Floating

33% Fixed

43% Capped

24% Unhedged

Contents

Overview

Financials

Portfolio

Our Markets

Summary

12

CLS Holdings plc

Annual Report &

Accounts 2013


CLS Holdings plc




Govt. 51%

Major corporates 23%

Other 26%

Occupiers by sector

Property Portfolio Overview

•  Diversified investment portfolio, primarily in major European cities:

– 473 customers in 109 properties

– 539,000 sqm1

– £84.0m contracted rental income

– £161 per sqm average rent

•  61% of rents indexed

•  Secure income: 74% from governments & major corporates

•  WAULT 6.7 years (5.7 years to first break)

•  Core activity is cash generating investments (>85% of portfolio)

13 1. Excludes 24,200 sqm of developments

0.0

5.0

10.0

15.0

20.0

25.0

1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year Later

Rent expiring Current ERV of rent expiring

Portfolio Performance

•  New lettings in London achieved at 7% above Dec 2013 ERVs •  ERV movements in H1 2014:

•  London rents moved from £0.4m net over-rented to £1.9m net reversionary •  Portfolio broadly rack-rented

Rented in line with market rates (£m pa)1

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- London - Rest of UK - Germany

+8.7% +1.7% +1.3%

- Sweden - France

-0.6% -1.4%

1. Current ERVs assume no rental growth

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014

CLS Portfolio Vacancy Rate European Avg

Actively Managed Portfolio In-House Property Management

•  +100 asset management transactions in 6 months •  12,000 sqm expired; 17,140 sqm let/relet/regeared •  Lowest ever vacancy rate of 3.5% (Dec 2013: 4.4%) •  Vacancy rate consistently below comparable European average

Maintaining Low Vacancy Rate

European Average: RREEF Real Estate & BNP Paribas 15

Investment Property Portfolio

At 30 June 2014

Contracted rent

£m Valuation

£m

Revaluation in local

currency

EPRA Net Initial

Yield1 %

Vacancy by rent

% WAULT (Years)

Contracted rent

£ psm

Capital Value1 £ psm

London 31.0 570.3 ñ 8.4% 5.6 4.0 7.9 218 3,327

Rest of UK 13.3 98.7 ñ 0.8% 12.7 1.0 7.1 140 1,006

France 17.5 230.8 ò 1.0% 6.6 7.1 4.6 194 2,407

Germany 16.0 209.9 ñ 1.4% 6.7 1.5 8.0 107 1,378

Sweden 6.2 59.1 ñ 0.2% 8.7 0.6 2.9 139 1,303

Total portfolio 84.0 1,168.8 ñ 4.0% 6.8 3.5 6.7 161 2,022

16 1  Excludes development sites: Spring Mews and Clifford’s Inn

Total uplift £45.3m, of which £44.0m was in London

Movement in Rental Income 6 months to 30 June

35.9

35.9

45.2 44.6 44.1 43.0

42.1

42.1

9.3 0.2

-0.8 -0.5 -1.1 -0.9

20

25

30

35

40

45

50

Rental Income 2013

Acquisitions Indexation Disposals Lettings & Expiries

Surrender Premium

FX Rental Income 2014

£m

17

Movement in Investment Properties

1,132.9

1,168.8

2.0

28.8 2.9

45.3

-22.4

-20.7

1,100

1,120

1,140

1,160

1,180

1,200

1,220 Portfolio Value £m

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1 Jan 2014

Additions Development Refurbish Valuation Uplift

Disposals FX 30 Jun 2014 Capex

Adding Value Sustainability

London & Rest of UK

•  800 sqm refurbishment at Falcon House achieved SKA Gold sustainability standard

•  11.3% reduction in CO2 emissions per sqm in 12 months to April 2014

•  Ground source energy system completed at Spring Mews

•  Completed third photovoltaic array

Sweden

•  9% reduction in electricity consumption

•  38% reduction in waste generation

France

•  11% reduction in electricity consumption

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Adding Value: Vauxhall Regeneration Intense Activity

US Embassy

TfL Station upgrade

Vauxhall Square

Spring Mews

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Dutch Embassy

Possible Chinese Embassy

Wanda 5 star hotel & residential

Berkeley Group 2 schemes

St Modwen

Barratt / Sainsbury BT

Vauxhall Cross

Christies Conditional long lease

Bondway Store

Adding Value: Vauxhall Square, SW8 Overview

Full consent in place for 143,000 sqm mixed-use scheme

•  520 apartments

–  410 private in two 50-storey towers

–  110 affordable homes

•  22,732 sqm offices

•  3,119 sqm of retail

•  3,777 sqm multi-screen cinema

•  278 bedroom hotel

•  123 bedroom suite hotel

•  359 student bedrooms

•  Development cost c.£500m

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Adding Value: Vauxhall Square, SW8 Good Progress

Achievements since 1 Jan 2014 •  Conditional exchange with student

operator to build and manage -  Good progress on meeting

conditions -  Ground investigation works

under way -  Application to increase consent

by 95 student bedrooms -  Attractive terms, no Group cash

involved -  On site 2015

•  Revised application in preparation to upgrade to four-star hotel

•  Section 106 variation agreed improving phasing flexibility

22

Adding Value: Spring Mews, SE11 Close to Completion

Gross internal area 20,800 sqm

•  378 student rooms

–  90% of rooms pre-let for 2014/15

–  Including 210 rooms pre-let to Roehampton University on 10 year deal

–  Opens September 2014

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•  93 bedroom long-stay hotel

–  Intercontinental Hotels Group Staybridge brand

–  Opens Q4 2014

•  1,000 sqm offices

Adding Value: Spring Mews, SE11 Close to Completion

Phase One

- Development cost c.£55m ex. land

- Estimated rental value £5.5m

- Estimated capital value >£80m

- Funding to be sought H1 2015

24

Further Opportunities

-  Planning consented for additional 22 student suites

-  Additional floors subject to planning

Adding Value: Clifford’s Inn, EC4 Close to Completion

3,423 sqm office refurbishment and 8 residential apartments •  Construction to complete Q4 2014 •  £10.1m refurbishment cost •  Estimated income £1.6m pa •  Rental values +10%

since beginning of year •  Estimated capital value >£26m

25

Adding Value More to come in next 12 months

•  Annualised rental stream

–  Spring Mews >£5.5m

–  Clifford’s Inn >£1.6m

•  Valuation uplift on developments to be realised in 2014/2015

–  Spring Mews & Clifford’s Inn

•  Profit on disposal

–  Vauxhall Square student building 20151

1. Subject to discharging conditionality 26

Contents

Overview

Financials

Portfolio

Our Markets

Summary

27

CLS Holdings plc

Annual Report &

Accounts 2013


CLS Holdings plc




5.0

6.0

7.0

8.0

9.0

10.0

Q2 2004 Q2 2006 Q2 2008 Q2 2010 Q2 2012 Q2 2014

London Momentum continues

Occupational market •  Office vacancy at 6.4% around M25 - lowest in last 10 years

•  Driven by: –  Obsolete buildings –  Lack of development stock –  Residential conversions reducing office stock

•  Leading to rental growth Investment market •  Investor demand continuing to outweigh supply •  Investment yields in suburbs have hardened by over 150 bps in last six months

M25 Office Vacancy Rates (%)1

1. Source: Knight Frank

28

Continental Europe Selective Investment Opportunities

Germany – Mixed economic picture •  Forecast for 2014: GPD growth 1.9%; inflation 1.1% •  Historically high employment levels; unemployment only 5.1% •  Vacancy levels have fallen since mid-2010 and rents rising modestly •  Most advantageous availability of bank debt

France - Stagnant economy •  Forecast GDP growth 0.7% for 2014 •  Unemployment at 10.1%; unlikely to fall •  Letting activity in Paris 24% higher than 2013 •  Investment market transactions in Paris Q2 2014 double that of Q2 2013

Sweden - Stable •  Forecast GDP growth 2.5% for 2014

•  0.0% 2014 inflation forecast

•  Yield compression in Stockholm secondary market driven by investment demand

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Contents

Overview

Financials

Portfolio

Our Markets

Summary

30

CLS Holdings plc

Annual Report &

Accounts 2013


CLS Holdings plc




Summary Strong Performance

•  Driven by London portfolio

•  Cash generation increased by >20%

•  Active in-house management delivering lowest ever vacancy rate

•  Developments adding significant value

•  Retaining high levels of liquidity for future opportunities

31

Appendices

32

www.clsholdings.com CLS Holdings plc 86 Bondway Tel: +44 (0) 20 7582 7766 London Fax: +44 (0) 20 7820 7728 SW8 1SF Email: [email protected]

CLS Holdings plc

Annual Report &

Accounts 2013


CLS Holdings plc




Corporate Bond Portfolio At 30 June 2014

Banking Insurance Travel and

Tourism Food

Producers Other Total

Value £36.6m £5.3m £10.7m £4.9m £26.8m £84.3m

Running yield 10.5% 6.7% 6.8% 9.0% 7.4% 7.5%

Issuers Societe Generale

Bank of Ireland

Deutsche Bank

Commerzbank

Credit Agricole

Rothschild

SNS Bank

Unicredit

Barclays

Investec

Lloyds

RBS

Brit Insurance

Phoenix Life

British Airways

Stena

SAS

TUI

Boparan

Findus

Vedanta Resources

Telecom Italia

Arcelor Mittal

Corral Finans

Manutencoop

Century Link

Stora Enso

Enel

Dell

33

London and the South East

•  33 properties •  148,000 sqm

34

Rest of UK


35

•  26 properties •  17 in Paris •  96,000 sqm

France

36

LUXEMBOURG

PARIS

LILLE

LYON

ANTIBES

Germany


37

SÜDERHASTEDT

HAMBURG

BERLIN

BOCHUM

DÜSSELDORF

LANDSHUT

MUNICH FREIBURG

Sweden

1 property •  45,000 sqm office park

1 associate •  Cood Investments

1 investment •  Catena AB

–  150,000 sqm mixed-use development in Stockholm

–  SEK 4.4 bn logistics portfolio

38

VÄNERPARKEN

GOTHENBURG

STOCKHOLM

Vauxhall & Nine Elms Central London’s largest regeneration

39

Vauxhall Square

Spring Mews

Conditional long lease

EPRA Profit After Tax

£m 2014 2013 Difference Rental income 42.1 35.9 6.2

Other income 0.8 0.7 0.1

Net service charges (2.1) (1.6) (0.5)

Net rental income 40.8 35.0 5.8

Expenses (8.0) (7.5) (0.5)

Operating profit 32.8 27.5 5.3

Finance income 4.6 5.8 (1.2)

Finance costs (13.0) (12.4) (0.6)

FX (1.7) 0.4 (2.1)

Share of associates (1.4) (1.8) 0.4

21.3 19.5 1.8

Tax (5.0) (5.3) 0.3

EPRA Profit after Tax 16.3 14.2 2.1 40

Investor Relations

Cls hy results_2014