Embargoed: 0700hrs 23 September 2005
CLS Holdings plc ("CLS", the "Company", or the "Group")
Interim Report 2005
For the six month period ended 30 June 2005
Introduction
The business has continued to generate profitable growth showing a healthy
increase in the value of its property assets in each of its markets comprising
the UK, Sweden and Continental Europe.
This is the first time that the results of CLS have been reported under
International Financial Reporting Standards ("IFRS"). Although this has
resulted in a change in the presentation of the Group's results, its underlying
strategy, direction and resultant cash flows remain unchanged.
The primary focus of our attention and resources is on the efficient management
of and investment in property assets in order to enhance value.
We continue to believe that the primary indicator of our performance is net
asset value per share as adjusted to exclude the provision for deferred
taxation. We consider it very unlikely that the maximum deferred tax liability
that we are obliged to report under IFRS will ever crystallise as the provision
takes no account of the way in which the Group would intend to sell its
properties and does not allow for the deduction of indexation relief which is
available on the disposal of UK properties.
FINANCIAL HIGHLIGHTS
Adjusted NAV per share* of 551.2 pence, up 5.7 per cent (Statutory NAV per
share of 403.8 pence, up 4.9 per cent) - adverse foreign exchange translation
impact on adjusted NAV per share was 22.0 pence.
Profit before tax (including property valuation uplift) �38.8 million, up 110.9
per cent.
Intended distribution for the interim period to 30 June 2005 of �7.0 million by
way of tender offer buy-back on the basis of 1 for 60 at 510 pence per share,
representing a distribution of 8.5 pence per share, an increase of 13.3 per
cent.
Property portfolio (including share of JVs) valued at �1.05 billion, up 2.6 per
cent.
Net rental income �34.0 million, up 5.6 per cent.
Annualised added value to shareholders 16.0 per cent, up 7.2 per cent, based on
increase in adjusted NAV per share and distributions in the year (15.8 per cent
added value based on statutory NAV up 7.2 per cent).
Cash �54.2 million, down 5.6 per cent on year end position.
Key statistics and other financial information
Income Statement
30 June 30 June
2005 2004
Adjusted earnings per share* ** 8.2p 9.7p Down
15.5%
Earnings per share 33.8p 15.7p Up
115.3%
Net rental income �34.0m �32.2m Up 5.6%
Operating profit (excluding fair value gains on �26.1m �24.6m Up 6.1%
investment property)
Fair value gains on investment property �31.5m �10.4m Up
202.9%
Net interest payable �18.6m �16.6m Up
12.0%
Underlying profit before tax (excluding fair value �7.3m �8.0m Down
gains on investment property) 8.8%
Profit before taxation �38.8m �18.4m Up
110.9%
Profit for the period �28.2m �13.7m Up
105.8%
Balance Sheet
30 June 31 December
2005 2004
Adjusted NAV per share* 551.2p 521.3p Up 5.7%
Statutory NAV per share 403.8p 385.1p Up 4.9%
Distribution per share from tender offer 8.5p 7.5p Up
buy-backs 13.3%
Property portfolio �1,048.9m �1,022.5m Up 2.6%
Net asset value �330.4m �323.0m Up
2.3%
Cash �54.2m �57.4m Down
5.6%
Adjusted gearing* 134.4% 134.1% Up 0.3%
Statutory gearing 183.5% 181.5% Up 2.0%
Adjusted solidity* 39.2% 39.0% Up 0.2%
Statutory solidity (net assets as a ratio of 28.3% 28.4% Down
gross assets) 0.1%
Shares in issue (000's) - excluding treasury 81,822 83,853 Down
shares 2.4%
IAS 32 fair value on fixed loans adjustment 33.1p 27.8p Up
after tax 19.1%
* IAS12 requires that a deferred tax provision be made in respect of the
potential gain that would arise if properties were to be sold at valuation and
for the potential clawback of UK capital allowances to the extent that these
amounts are not covered by available tax losses. The calculation of this
deferred tax liability has been carried out on the basis that the revaluation
gains on the properties will be realised through receipt of net rents for the
properties owned. As such the amount provided represents the maximum potential
tax liability. Your Board considers it unlikely that this theoretical liability
will ever crystallise because it takes no account of the way in which the Group
would realise these gains. In particular as further explained in the note on
page 8 the deferred tax provision takes no account of the way in which
properties are expected to be sold, of the indexation allowance available when
calculating a taxable capital gain in the UK or of elections available to
ensure that deductions claimed previously for capital allowances are not
reversed. The Board has complied with pronouncements from the APB and the UK
Listing Authority in showing NAV and Earnings per share including the IAS 12
provision with equal prominence as the adjusted figures. The effect of IAS 12
has been excluded from those statistics that are indicated by an asterisk.
At 30 June 2005 the IAS 12 deferred tax charge included in the income statement
was �10.2 million and the cumulative reduction to net assets was �120.6 million
(31 December 2004: charge to tax of �16.0 million and �114.1 million
respectively). The accounting policies of the Group are as set out in the
Group's IFRS Transition Report for the year ended 31 December 2004 with the
exception of the application of IAS32 and IAS39.
** In line with UK property industry practice adjusted earnings per share does
not include gains on revaluations and deferred taxation.
BUSINESS HIGHLIGHTS
Six months to 30 June 2005
Successful completion of our major refurbishment of Fr�saren 12 at Solna and
the occupation by ICA Maxi supermarket in May 2005 and ICA headquarter offices
in August 2005, in all 24,000 sq.m (259,400 sq.ft).
An additional property, Yrket 3, bought at Solna Business Park, Stockholm for �
5.3 million (SEK 70.0 million) giving a return on equity of 18.4 per cent after
financing.
Office property purchased at 23 rue Raspail, Ivry-sur-Seine, Paris for �8.1
million (Euro11.6 million) giving a return on equity of 40.7 per cent.
Planning permission granted for an extensive �11.5 million refurbishment at
Great West House, Brentford.
Further letting success in the UK, at Solna in Sweden and in France.
Chairman's Statement
The Group has again produced a solid performance with adjusted NAV per share of
551.2 pence, up 29.9 pence since 31 December 2004 (Statutory NAV per share
403.8 pence, up 18.7 pence per share). The net assets include the effect of
notional adverse foreign exchange translation losses of 22.0 pence per share
arising on the consolidation of the equity in our Swedish and Continental
European operations based in local currency.
The property portfolio has shown a further increase in value in each of our
three main markets amounting to �31.5 million in the six months to 30 June
2005.
For the first time this year, under IFRS, the gain in property valuation has
been included within Profit before tax which has amounted to �38.8 million,
showing an increase over the corresponding period last year of 110.9 per cent,
mainly due to the increase in fair value of properties.
In order to better understand the underlying elements of the Group's
performance the movement in its net assets are set out in the table below:
OPENING ASSETS �m
Net assets at 31 December 2004 (UK GAAP) 426.4
Additional IFRS deferred tax provision (107.4)
Other IFRS adjustments 4.0
________
Net assets as restated for IFRS at 31 December 2004 323.0
Adjustment for IAS 39 - fair value financial instruments 8.1
________
Net assets as restated for IFRS at 1 January 2005 331.1
PROFIT
Property trading profit before tax 8.2
Fair value gains on investment properties 31.5
Losses in respect of cable companies (2.4)
Gain on sale of equity investment 1.5
________
Profit before tax 38.8
Current tax (0.5)
Deferred tax (10.2)
_______
Profit after tax 28.1
OTHER EQUITY MOVEMENTS
Tender offer buy-back and market purchases and share issues (10.0)
Foreign exchange translation deficit (12.2)
Fair value adjustment in respect of non-property assets (6.6)
_______
CLOSING ASSETS 30 JUNE 2005 330.4
_______
The annualised return on market capitalisation of the Company (�348.4 million
at 31 December 2004) was 14.9 per cent (30 June 2004: 13.9 per cent) based on
the aggregation of the May 2005 distribution to shareholders, retained profits
less adverse foreign exchange translation movements.
Our shares are currently trading at a discount to adjusted NAV per share of
14.9 per cent, based on a share price of 469 pence.
In November we intend to make a further distribution to shareholders of �7.0
million under a proposed tender offer buy-back equivalent in cash terms to an
interim net dividend of 8.5 pence per share, an increase of 13.3 per cent over
the previous interim distribution.
There has been growth in value across the portfolio in the UK, Sweden and
Continental Europe, the total value of which is �1.05 billion including our
interests in joint ventures at London Bridge Tower and New London Bridge House.
ICA, Scandinavia's largest food retailer, has now taken occupation of both the
supermarket and head office at Solna Business Park near Stockholm, covering a
total area of 23,800 sq.m (256,183 sq.ft). This project was successfully
completed to budget and to the very tight programme demanded by our tenant.
In Paris we have purchased a further property at Ivry-sur-Seine, Paris at a
cost of �8.1 million on an initial yield of 8.7 per cent.
IBM vacated the 6,000 sq.m property Le 41, Courbevoie, Paris causing vacant
space in France to rise an additional 4.2 per cent from 5.9 per cent by area at
31 December 2004. However, we pro-actively manage the portfolio and have
contained the overall vacancy rate to 9.8 per cent.
We continue to believe that there is potential growth in a number of holdings
managed by the investment division. The cable companies showed a loss of �2.4
million including an impairment provision of �1.8 million. During the period we
sold our holding in Sit-up TV yielding a profit on that investment of �1.6
million and net assets have been enhanced by �6.9 million due to the fact that
in accordance with IFRS we now carry our equity investments at fair value
rather than at the lower of cost and net realisable value.
Financial
Core property profit of �39.6 million (June 2004: �20.1 million - restated for
IFRS) is set out below:
30 June 2005 Restated 30 June
2004
�m �m
Underlying profit before taxation 7.3 8.0
Fair value gains on investment properties 31.5 10.4
_________ _________
Profit before taxation 38.8 18.4
Add back:
Consolidated cable company losses 2.4 2.5
Less:
Lease surrenders and variations (0.1) -
Sale of investment property - (0.5)
Net gains and write downs on equity (1.5) (0.3)
investments
_________ _________
Core property profit 39.6 20.1
========= =========
A summary of the results of the Group, analysed by location and main business
activity is as set out below:
June UK Sweden Continental Equity Restated
2005 Europe** investments June
2004
�m �m �m �m �m �m
Net rental income 34.0 16.2 8.0 9.8 - 32.2
Other income 4.1 0.5 0.3 0.3 3.0 1.1
_______ ______ ______ ______ ______ ______
Net rental and other 38.1 16.7 8.3 10.1 3.0 33.3
income
Fair value gains on 31.5 12.0 10.8 8.7 - 10.4
investment property
(Loss)/gain from sale - (0.1) - 0.1 - 0.5
of investment
properties
Operating expenses (12.0) (4.3) (1.9) (1.4) (4.4) (9.2)
_______ ______ ______ ______ ______ ______
Operating profit/ 57.6 24.3 17.2 17.5 (1.4) 35.0
(loss)
Share of associates' (0.3) - - - (0.3) -
losses
Net interest payable (18.5) (9.5) (5.6)+ (2.7) (0.7) (16.6)
and related charges
_______ ______ ______ ______ ______ ______
Profit/(loss) on 38.8 14.8 11.6 14.8 (2.4) 18.4
ordinary activities
before tax
Taxation-current (0.5) - - (0.5) - (0.2)
Taxation-deferred (10.2) (2.2) (3.5) (4.5) - (5.1)
Minority interest 0.1 - - - 0.1 0.6
_______ ______ ______ ______ ______ ______
Retained profit/ 28.2 12.6 8.1 9.8 (2.3) 13.7
(loss)
________ _______ _______ _______ ________ ________
+ Of the net interest payable of �5.6 million, �0.5 million relates to space
undergoing refurbishment at Solna
** Includes the results of France, Luxembourg and Germany
Balance sheet
Total UK Sweden Continental Equity
Europe invest.
June 2005 �m % �m % �m % �m % �m %
Investment 1,048.9 100 496.1 47.3 284.2 27.1 268.6 25.6 - -
properties
Loans (654.6) 100 (325.1) 49.6 (159.6) 24.4 (167.5) 25.6 (2.4) 0.4
Equity in 394.3 100 171.0 43.4 124.6 31.6 101.1 25.6 (2.4) (0.6)
property
assets
Other 56.6 100 23.9 42.2 (11.6) (20.5) 17.4 30.8 26.9 47.5
Net 450.9 100 194.9 43.2 113.0 25.1 118.5 26.3 24.5 5.4
adjusted
equity
====== === ====== ==== ====== ====== ======= ==== ====== =====
=== == ==
=
Equity in 37.6% 34.5% 43.8% 37.6%
Property
as a
percentage
of
Investment
Share Capital
No of shares No of shares
Million Million
2005 2004
(six months) (full year)
Opening shares for NAV purposes 83.9 87.6
Tender offer buy-back (2.1) (4.1)
Share option exercised - 0.4
_________ ________
Closing shares for NAV purposes 81.8 83.9
Shares held in Treasury by the Company 3.7 1.6
_________ ________
Closing shares 85.5 85.5
========= ========
Options to purchase 555,000 shares were held by staff and management at 30 June
2005
Net rental income of �34.0 million increased by �1.8 million compared to the
six months ended 30 June 2004. This reflected an uplift of �0.9 million in the
UK and �0.9 million in France following acquisitions during 2004 and continued
letting success reducing vacant space.
Other income as set out in the summary table above, comprises net income from
non-property activities and other income.
Net income from non-property activities
Gross profit from our two cable company investments amounted to �1.5 million,
an increase of �1.3 million on the same period last year. The figures for the
previous period included a write off of �1.1 million principally relating to
disconnections.
Other income
Other income of �2.6 million (30 June 2004: �0.9 million) included �1.6 million
profit on the sale of Sit-up TV, an investment within our equity investment
portfolio; �0.6 million in respect of dilapidations receipts; �0.2 million
revenue from Solna Sports Park which was sold to an external operator in May
and sundry other income of �0.2 million.
Operating expenses as set out in the summary table above, comprises
administrative expenditure and net property expenses.
Administrative expenditure
Administrative expenditure of �10.2 million (30 June 2004: �7.3 million)
included costs relating to our two cable company investments totalling �4.0
million (30 June 2004: �2.7 million) of which an impairment provision in
respect of WightCable North Limited amounted to �1.8 million. In addition, we
have expensed professional fees of �1.1 million that were incurred in respect
of our development properties.
Excluding the above mentioned items, underlying administrative expenditure did
not increase compared to the six months to 30 June 2004.
Net property expenses
Net property expenses amounted to �1.8 million in the six months (30 June 2004:
�1.9 million). The main elements of expenditure were operating costs of �0.4
million in respect of Solna Sports Park, depreciation of equipment of �0.2
million, void space costs of �0.3 million, marketing, letting and related legal
fees of �0.3 million and bad debts of �0.2 million.
Gains from sale of investment property
A small net profit of �35,000 (30 June 2004: �0.5 million gain) was made on the
sale of three minor French properties for a total consideration of �3.1 million
(Euro4.7 million)
Financial income and costs
Interest income of �0.5 million (30 June 2004: �0.9 million) was adversely
affected by foreign exchange movements of �0.3 million.
Interest payable of �19.0 million (30 June 2004: �17.5 million) comprised bank
interest of �17.9 million, net loss on fair value of interest rate caps of �0.5
million and depreciation of loan arrangement fees of �0.6 million. The Group's
policy is to expense all interest payable and financial costs to the income
statement, including interest incurred in the funding of refurbishment and
development projects. During the period interest was expensed in respect of
our Solna refurbishment of �0.6 million and Great West House, currently
undergoing a major refurbishment, of �0.2 million.
At the period end, gross floating rate loans totalled �264.4 million, 40.4 per
cent of the total loan book. All floating rate debt was hedged by interest
rate caps at an average cap rate of 5.2 per cent for Sterling, 5.0 per cent for
Swedish Kronor and 4.8 per cent for Euro (excluding bank margin). The average
cost of borrowing, inclusive of the cost of fixed rate borrowings, interest
rate caps and amortisation of arrangement fees, was 6.9 per cent on the UK
debt, 4.6 per cent for Sweden and 4.0 per cent for Continental Europe.
Adjusted gearing has increased by 0.3 per cent to 134.4 per cent incorporating
the effect of the re-financings raising an additional �60.3 million across all
three key markets. Interest cover (excluding fair value gains on investment
properties) decreased to 1.41 times at 30 June 2005 from 1.49 times at 30 June
2004.
Taxation
The Group's current taxation charge continues to benefit from the utilisation
of losses and from significant capital allowances and amortisation deductions.
There is a significant increase in the deferred tax provision being charged in
the income statement following the adoption of IAS12 as explained in the IFRS
transition report issued on 15 September 2005. This deferred tax charge
reflects the potential tax on the revaluation gain on the properties for the
period to June 2005 and the additional capital allowances claimed in that
period.
The method of calculation for deferred tax under IAS12 has resulted in a
provision being made for the maximum potential tax liability based on the
difference between the carrying value of each property and its tax base without
taking into account any factors which would mitigate that tax liability. In
practice the Group would not suffer this liability even if all its properties
were to be sold, as it structures its property disposals to reduce tax
liabilities on the gains.
For overseas properties, we plan to make corporate disposals, as opposed to
property disposals, which would result in smaller tax liabilities than those
calculated under IAS12. In the UK the actual gain which would be realised on
property disposals would be reduced by indexation allowance. At 30 June 2005
this allowance would reduce the potential taxable gains if UK properties were
to be sold, by �136.3 million and the deferred tax provision in the balance
sheet, by �40.9 million.
Furthermore, on a disposal, the Group intends to make the election available to
ensure that there is no claw back of capital allowances previously claimed in
respect of UK properties. At 30 June 2005 the potential claw back of allowances
in respect of plant and machinery in the Group's UK properties amounts to �52.9
million. If this amount had been excluded from the provision, the overall
deferred tax provision would be further reduced by �15.9 million.
Buy-backs and dividends
A tender offer buy-back was taken up in full in May of this year in lieu of a
final dividend for 2004. With the current share price remaining at a discount
to net asset value, we are proposing an interim distribution of �7.0 million by
way of a further tender offer buy-back of shares on the basis of 510 pence per
share for 1 in 60 shares held. This will enhance net asset value per share and
is equivalent in cash terms to an interim net dividend of 8.5 pence per share
(30 June 2004: 7.5 pence per share), an increase of 13.3 per cent.
At 31 December 2004 there were 85,497,177 ordinary shares in issue, of which
1,644,176 were held as Treasury shares. The number of shares at that date,
used as a base for the purpose of calculating NAV or Earnings per share and
participating in the subsequent tender offer buy-backs, was 83,853,001 as
Treasury shares are excluded from such calculations.
Since the year end, the Company has completed the 2004 year end tender offer
buy-back of 2,045,926 shares (a distribution of �9.9 million) and re-purchased
34,000 shares in the market (at a cost of �0.1 million). All of the shares thus
acquired were transferred to Treasury.
After the issue of 30,000 shares relating to the exercise of share options and
18,521 allotted from Treasury in payment of a debt, the number of shares in
issue at 30 June 2005 (excluding 3,705,581 shares held as Treasury shares) was
81,821,596.
Total shares in issue at 30 June 2005, including Treasury shares, were
85,527,177.
If the current tender offer proposal to buy back 1,363,693 shares is accepted,
ordinary shares in issue for the purposes of NAV and Earnings per share will
have been reduced by a further 1.7 per cent to 80,457,903 shares, an overall
reduction in the six months of 3,395,098 shares equivalent to 4.1 per cent of
opening shares.
Investment Property
The value of our portfolio is now �1,048.9 million and has increased by a net �
26.4 million (2.6 per cent) since 31 December 2004. This movement included
notional foreign exchange translation movements, which had the effect of
reducing Swedish and Continental European property values by �43.1 million.
Acquisitions of new properties totalled �13.2 million, refurbishment
expenditure amounted to �26.5 million, principally at Solna, Stockholm and a
revaluation surplus of �31.5 million was recorded at 30 June 2005. Disposals of
�2.9 million were made during the period, offset by an equivalent amount of
capitalised rent-free periods transferred from current assets.
The revaluation surplus comprises:
�m
UK 12.0
Sweden 10.8
Continental Europe 8.7
______
31.5
______
Cash
Cash at bank amounted to �54.2 million compared with �57.4 million at 31
December 2004.
Debt Structure
Net debt amounted to �600.4 million compared to �580.6 million as at 31
December 2004. The increase of �19.8 million reflects new property purchases
of �13.7 million and refurbishment expenditure of �27.4 million. New loan
finance raised in the six months, net of repayments, amounted to �42.1 million.
The interest-bearing debt of the Group at 30 June 2005 was �654.6 million (31
December 2004: �637.9 million). The increase includes re-financing parts of
the portfolios in each main market, which raised an additional �60.3 million of
which �27.7 million was raised on the UK portfolio, �24.3 million (SEK325
million) in Sweden and �9.1 million (Euro13.6 million) in France. The funds raised
included �9.9 million relating to the purchase of new buildings, of which �6.3
million related to French purchases and �3.6 million to a further property
purchase at Solna.
The strengthening of Sterling against the Swedish Kronor and the Euro decreased
the sterling equivalent of foreign currency loans on translation by �26.3
million. These loans finance properties located in Sweden and Continental
Europe.
The fair value of the Group's fixed rate debt was in excess of book value by an
amount of �38.7 million (31 December 2004: �33.3 million) reflecting decreased
long-term interest rates at 30 June 2005. If we were to hold loans at fair
value, the notional after tax adjustment to NAV, at a corporation tax rate of
30 per cent (31 December 2004: 30 per cent) would be �27.1 million or 33.1
pence per share (31 December 2004: �23.3 million or 27.8 pence per share).
Gearing adjusted for IAS 12 deferred tax, at 30 June 2005 was 134.4 per cent
(31 December 2004: 134.1 per cent), statutory gearing was 183.5 per cent (31
December 2004: 181.5 per cent).
Non interest-bearing debt at 30 June 2005, represented by short-term creditors,
amounted to �41.2 million (31 December 2004: �45.0 million).
Effect of foreign exchange translation on overseas net assets
An adverse foreign exchange movement on translation of adjusted net assets in
Sweden and Continental Europe of �18.0 million (22.0 pence per share) was
included within the Group net assets at 30 June 2005. The adverse translation
movement on overseas fixed assets was �43.1 million, offset by an exchange
translation gain mainly on bank borrowings, of �26.3 million.
Statutory net assets include an offsetting exchange gain relating to the
conversion of deferred tax provisions computed in local currency for overseas
operations. This had the effect of reducing the above adjusted translation
movement of �18.0 million to �12.2 million.
Property
The valuation of the Group's portfolio at 30 June 2005, undertaken by Allsop &
Co. in respect of the UK and Swedish properties and by DTZ Debenham Tie Leung
in respect of the French properties, amounted to �1,048.9 million (31 December
2004 : �1,022.5 million).
The portfolio comprises 112 properties of which 45 are located in the UK, 23 in
Sweden, 42 in France, 1 in Germany and 1 in Luxembourg, with a total lettable
area of 609,328 sq.m (6,558,980 sq. ft.).
UK
The UK portfolio, including joint ventures, has increased in value by 3.5 per
cent from �479.4 million to �496.1 million since December.
Office yields have shown further compression and we are beginning to realise
the benefits of recent refurbishments carried out at a number of our properties
including Westminster Tower, SE1 and Quayside, Fulham SW6.
There has been much activity within the Spring Gardens Estate during the first
half of the year. In April, we started construction of an 'infill' office block
between Units 3 and 4, which upon completion at the end of 2005 will provide
further office accommodation of approximately 855 sq.m (9,203 sq.ft) for our
Government tenant. The deal for this letting was signed last year and at
completion our tenant will be granted a new 20 year lease at �32.00 per sq.ft.
On 21 June 2005 planning consent was granted for another infill block between
Units 5 and 6. This will provide 1,000 sq.m (10,600 sq.ft) of office
accommodation. Our tenant has an option to call for this infill to be built and
on completion the building would be let at a rent of �32.00 per sq.ft as part
of the new 20 year lease granted in respect of the adjoining properties.
One final infill block is capable of being built between Units 1 and 2. This
would provide a further 1,558 sq.m (16,770 sq.ft) of net office space. On 9th
August 2005 planning consent was granted for this final infill although as yet
terms have not been agreed for its construction.
The overcladding and refurbishment of Great West House on the Great West Road,
Brentford started in March and is progressing well. Completion remains on
schedule for the first quarter of 2006. Approximately 5,070 sq.m (54,500 sq.ft)
is currently vacant, representing in the order of 44 per cent of our vacant
stock in the UK portfolio. There are signs of tenant demand improving in West
London and we are gearing up for a proactive marketing campaign in advance of
completion during the first quarter of 2006.
The UK vacancy rate, excluding joint ventures, which are fully let, has
increased marginally from 7.2 per cent to 7.5 per cent since December. This is
largely accounted for by the 998 sq.m (15,000 sq.ft) of offices that became
vacant at Chancel House, Neasden. We have refurbished the offices vacated on
the 5th floor, and carried out other improvement works to the property
including replacement air conditioning, lifts and a new reception.
The refurbishment of the reception and common areas at Quayside, Fulham, SW6
has also been completed and is having a positive impact on the marketing of the
remaining vacant offices.
The five apartments on the top two floors of Ingram House, John Adam Street,
WC2 have been completed, as has the refurbishment of the offices over the lower
three floors. The office space, comprising 365 sq.m (3,929 sq.ft) was let prior
to completion to Spayne Lindsay and Co. and the Internet Advertising Bureau at
an office rent of �323 per sq.m (�30 per sq.ft), whilst three out of the five
apartments have been let.
Other important lettings during the first half include the letting of 35 Albert
Embankment, SE1 to Lovatt Developments Ltd (331 sq.m, 3,563 sq.ft), the letting
of the 9th floor at Westminster Tower, SE1 to Westminster Live Ltd (290 sq.m,
3,124 sq.ft) and the letting at CI Tower, New Malden to the Metropolitan Police
Authority (116 sq.m, 1,249 sq.ft).
Our marketing of the office element of The Shard at London Bridge continues
following the pre-letting of the hotel to Shangri-La at the start of the year.
The outlook for the second half is positive. With a strengthening occupational
market we look forward to reaping the benefits of the improvements carried out
at Chancel House, Quayside and Westminster Tower. Finding new investment
product that offers value for money is increasingly challenging but we continue
to pursue a number of opportunistic and site specific acquisitions.
Sweden
The Swedish investment market has continued to attract international and local
investment and that, together with a fall in short-term Swedish interest rates
has contributed to a compression of yields over the last twelve months.
The general letting market has stabilized and vacant space is now reducing,
particularly in the Greater Stockholm area.
Solna
Since the beginning of the year we have signed new leases over 9,380 sq.m
(100,968 sq.ft) of previously vacant space at Solna Business Park.
In Fr�saren 11 Alcatel, the French telecom company, has moved into 1,324 sq.m
(14,252 sq.ft).
The refurbishment of Fr�saren 12 was completed on schedule enabling ICA to
successfully open their supermarket on 25 May and move into its new head
office premises on 15 August as planned. Another new tenant, SYSteam, will
occupy a further 1,785 sq.m (19,214 sq.ft) with effect from 1 April 2006.
At Smeden 1, a ten year lease has been signed with Nautilus, one of the
biggest gym operators in Sweden. Our Business Centre has re-opened in newly
refurbished space of 1,806 sq.m (19,440 sq.ft) and Ginos Coffee House and
restaurant opened for business within its 146 sq.m (1,572 sq.ft) premises in
June.
In April 2005 we purchased an additional building at Solna Business Park, known
as Yrket 3, for a total price of SEK 70 million (�5.3 million) including
costs. The property comprises a lettable area of 6,273 sq.m (67,524 sq.ft) and
generates rent of SEK 5.0 million (�0.4 million), 85 per cent of which is
secure until 2009. The return on equity after financing is 18.4 per cent and
the purchase allows us to improve access to our existing buildings,
particularly those used for retail purposes. The property also has significant
development potential in its own right.
Solna Business Park has now become a landmark within Greater Stockholm and is
fast developing a reputation as one of the capital's best developments of its
type.
L�vg�rdet has continued to be fully let and has performed well and in
accordance with our projections.
V�nerparken provides key facilities and services to its local community
including hospital services and sports and leisure facilities as well as
offices and a university, which has extended its lease to mid 2008. The
development is currently 96 per cent let.
Continental Europe
Overall, the French letting market remains quiet reflecting the economy as a
whole. Take-up of new lettings in France in general was slightly down on the
same period for the previous year.
Vacant space in the portfolio has increased to 14,157 sq.m (152,389 sq.ft) or
9.3 per cent by area (December 2004: 5.9 per cent). The principal reason for
this was the vacation of the 6,026 sq.m (64,865 sq.ft) property, Le 41, in
Paris-La D�fense by IBM, who had previously fully occupied the building. This
currently accounts for 42.6 per cent of vacant space in the French portfolio.
The property has undergone a minor refurbishment and is being actively marketed
for letting.
New space was let amounting to 6,376 sq.m (68,633 sq.ft), within a variety of
properties during the six months to 30 June 2005. As a consequence, with the
exception of the above mentioned Le 41, vacant space within the rest of the
portfolio reduced slightly from 5.9 per cent to 5.6 per cent by area.
Furthermore, the negotiation in 1/15 Belin in Rueil of a new 6/9 year lease
covering a net 9,468 sq.m (101,915 sq.ft) with BNP Paribas Insurance, completed
in July, contemporaneously with the surrender of a lease by a previous tenant.
This will result in an increase in revenue effective from January 2006 and in
addition we will have secured a further long-term lease to a prime tenant.
In September 2005 we have signed two major lettings, one of 1,193 sq.m in Sigma
to Database Factory, thereafter it only remains 579 sq.m (8.8 per cent.) vacant
in the building, and one of 1,064 sq.m in the Paul Doumer property to Veritas,
the property is thereafter fully let.
Revenue has been enhanced by rent indexation uplifts during the first half of
the year of 5.5 per cent generating additional annual income of �0.8 million (Euro
1.1 million).
In March 2005 one 5,547 sq.m (59,709 sq.ft) property, Rue Raspail
,Ivry-sur-Seine, Paris, was purchased at a cost of �8.1 million (Euro11.6
million) at an initial yield 8.7 per cent. and generates a return on equity of
40.7 per cent.
Three small properties with an area of 2,134 sq.m (22,971 sq.ft) were sold in
the period generating a profit of �35,000.
Two properties underwent significant renovation programs: Le Clemenceau in
Courbevoie (Entry hall, new lifts) and Marcel Pourtout, in Rueil (Entry hall,
surroundings and partial fa�ade modification).
We have recently contracted to purchase a 1,595 sq.m office property in Hamburg
which is let to a sole tenant on a 15 year lease at a purchase price of �2.3
million (Euro3.4 million) at a yield of 6.9 per cent.
Rent, book value and yields are analysed by location as set out below:
Total Net Book Yield on Yield when
Rent Rent Value net rent fully let
�000 % �000 % �000 % % %
UK
London City 212 0.3% 212 0.3% 2,850 0.2% 7.4%
Fringes
London Mid 6,980 9.3% 6,980 10.2% 106,350 10.1% 6.6%
town
London West 4,045 5.4% 4,045 5.9% 67,730 6.5% 6.0%
End
London West 5,052 6.7% 4,649 6.8% 70,856 6.7% 6.6%
London South 12,357 16.4% 12,342 18.1% 184,608 17.6% 6.7%
Bank
London South 1,367 1.8% 1,227 1.8% 19,500 1.9% 6.3%
West
London North 3,063 4.1% 2,414 3.5% 42,500 4.1% 5.7%
West
Outside 245 0.3% 245 0.4% 1,825 0.2% 13.4%
London
Total UK 33,321 44.3% 32,114 47.0% 496,219 47.1% 6.5% 6.7%*
Sweden
Sweden 5,700 7.6% 2,457 3.6% 38,886 3.7% 6.3%
Gothenburg
Sweden 11,752 15.6% 9,749 14.3% 200,581 19.1% 4.9%
Stockholm
Sweden 4,318 5.7% 3,701 5.4% 44,684 4.3% 8.3%
Vanersborg
Total Sweden 21,770 28.9% 15,907 23.3% 284,151 27.1% 5.6% 6.4%**
Continental
Europe
France Paris 15,547 20.6% 15,547 22.9% 217,450 20.7% 7.1%
France Lyon 2,692 3.6% 2,692 3.9% 30,275 2.9% 8.9%
France Lille 565 0.8% 565 0.8% 6,289 0.6% 9.0%
France 409 0.5% 409 0.6% 4,137 0.4% 9.9%
Antibes
Total France 19,213 25.5% 19,213 28.2% 258,151 24.6% 7.4% 8.4%
Luxembourg 785 1.0% 785 1.2% 8,688 0.8% 9.0%
Total 785 1.0% 785 1.2% 8,688 0.8% 9.0% 9.0%
Luxembourg
Germany 223 0.3% 206 0.3% 1,738 0.2% 11.9%
Total Germany 223 0.3% 206 0.3% 1,738 0.2% 11.9% 11.9%
Total 20,221 26.8% 20,204 29.7% 268,577 25.6% 7.5% 8.4%
Continental
Europe
Group Total 75,312 100.0% 68,225 100.0% 1,048,947 100.0% 6.5% 7.0%
Conversion rates: SEK/GBP 14.144 Euro/GBP 1.496
* Yields based on receivable rent and potential rents have been calculated on
the assumption that book values at 30 June 2005 will increase by anticipated
refurbishment expenditure of approximately �13.7 million in respect of projects
in the UK.
** Yields based on receivable rent and potential rents have been calculated on
the assumption that book values will increase by anticipated refurbishment
expenditure of approximately �15.3 million in respect of projects in Solna,
Stockholm, Sweden.
Rent analysed by length of lease and location is set out below:
Contracted Contracted Unlet Space under Total Total
aggregate but not space refurbishment
rental income at or with
producing ERV planning
consent
Sq.m Sq.ft �000 �000 �000 �000 �000 %
UK > 10 61,505 662,061 12,510 294 12,804 36.5%
years
UK 5-10 43,429 467,484 10,477 10,477 29.9%
years
UK < 5 45,786 492,855 9,994 46 10,040 28.6%
years
Development 1,177 12,670 15 15 0.0%
Stock
Vacant 11,269 121,306 1,736 1,736 4.9%
Total UK 163,166 1,756,376 32,981 340 1,751 - 35,072 100.0%
Sweden > 10 40,966 440,969 4,563 4,563 17.7%
years
Sweden 5-10 43,462 467,836 3,413 3,413 13.3%
years
Sweden < 5 174,345 1,876,695 13,794 13,794 53.6%
years
Refurbished 25,358 272,960 3,106* 3,106 12.1%
Space
Vacant 10,193 109,720 859 859 3.3%
Total 294,324 3,168,180 21,770 - 859 3,106 25,735 100.0%
Sweden
France 5-10 60,724 653,649 8,660 8,660 40.0%
years
France < 5 70,164 755,264 10,553 10,553 48.8%
years
Vacant 14,157 152,390 2,424 2,424 11.2%
Total 145,045 1,561,303 19,213 - 2,424 - 21,637 100.0%
France
Luxembourg 3,698 39,806 785 785 100.0%
< 5 years
Total 3,698 39,806 785 - - - 785 100.0%
Luxembourg
Germany < 5 3,095 33,315 223 223 100.0%
years
Total 3,095 33,315 223 - - - 223 100.0%
Germany
Summary
Group > 10 102,471 1,103,030 17,073 294 17,367 20.8%
years
Group 5-10 147,615 1,588,969 22,550 22,550 27.0%
years
Group < 5 297,088 3,197,935 35,349 46 35,395 42.4%
years
Refurbished 25,358 272,960 3,106 3,106 3.7%
space
Development 1,177 12,670 15 15 0.0%
Stock
Vacant 35,619 383,416 5,019 5,019 6.0%
Group Total 609,328 6,558,980 74,972 340 5,034 3,106 83,452 100.0%
*Of the rental due on refurbished space in Sweden, �0.3 million relates to
Fr�saren 11, Solna (2,523 sq.m) which requires further capital expenditure of �
1.9 million.
Equity investments
At 30 June 2005, equity investments held amounted to �19.1 million (December
2004: �22.7 million) excluding the Group's cable assets and holdings in
associates. The majority by value of these equity investments are listed
investments, which are carried at fair market value, and represent
approximately 1.6 per cent of the gross assets of the Group.
The carrying value of our portfolio of listed investments was �16.4 million at
30 June 2005, which includes an unrealised gain of �6.9 million.
We believe that our unlisted investments have potential for growth in value in
due course and we continue to be closely involved in monitoring their progress
and add commercial support where appropriate.
The investment division has been further formalised through the establishment
of CLS Capital Partners Ltd as a holding company for all CLS' venture capital
investments. We have recruited a Board for CLS Capital Partners, the membership
of which includes a number of non-executive directors who have either held
senior positions in venture capital organisations or at Board level within
successful blue chip companies.
Conclusion
The property portfolio has continued to perform well and we continue to search
for attractive property investments that meet our strict investment criteria,
within the UK, Sweden and Continental Europe. Our focus remains on our
overriding objective to optimise shareholder returns.
Finally, I am pleased to announce a restructuring of the senior management team
in line with our overall planning for succession within the Group. Per Sjoberg
will succeed Tom Thomson as Chief Executive Officer with effect from 1 January
2006. Per graduated from Stockholm University with a Bachelor degree in
Business Administration. He is also an engineer and has experience of a number
of large development projects globally. Before joining CLS Per worked as an
independent consultant, and set up his own consultancy company in 1996. He has
been responsible for property development activities at the Group since 1
November 2001 and was appointed to the main board as Group Development Director
on 6 February 2004. I would like to welcome Per to his new role and wish him
every success.
Tom Thomson has been associated with CLS for more than twenty years and has
been Chief Executive Officer since October 2001. He will retain his main Board
position and will become non-executive Vice Chairman. I give him my heart-felt
thanks for the very significant contribution he has made to the success of the
Group over the years and I very much look forward to continue to work with him
in his new role for the foreseeable future.
S. A. Mortstedt
Executive Chairman
23 September 2005
Unaudited Consolidated Income Statement
For the six months ended 30 June 2005
30 June 30 June 31 Dec
2005 2004 2004
Re-stated Re-stated
�000 �000 �000
Revenue 45,231 42,355 86,913
====== ====== ======
Rental and similar income 38,386 36,172 74,489
Service charge and similar income 4,066 3,462 6,900
Service charge expense and similar charges (8,438) (7,475) (13,772)
_______ _______ _______
Net rental income 34,014 32,159 67,617
Turnover from non-property activities 2,779 2,721 5,524
Cost of sales of non-property activities (1,275) (2,536) (4,076)
_______ _______ _______
Net income non-property activities 1,504 185 1,448
Other operating gains 2,626 945 2,651
Administrative expenses (10,224) (7,277) (15,003)
Net property expenses (1,800) (1,891) (3,902)
_______ _______ _______
Operating profit before net gains on investment 26,120 24,121 52,811
properties
Net gain from fair value adjustment on 31,545 10,389 36,988
investment property
Profit from sale of investment property 35 539 464
_______ _______ _______
Operating profit 57,700 35,049 90,263
Finance income 453 897 1,801
Finance expense (19,038) (17,462) (36,050)
Share of loss of associates (277) (40) (201)
_______ _______ _______
Profit before income tax 38,838 18,444 55,813
Taxation - current (497) (252) (596)
Taxation - deferred (10,188) (5,125) (16,042)
_______ _______ _______
(10,685) (5,377) (16,638)
______ ______ ______
Profit for the period 28,153 13,067 39,175
Attributable to: ====== ====== ======
Equity holders of the Company 28,224 13,680 40,253
Equity minority interest (71) (613) (1,078)
_______ _______ _______
28,153 13,067 39,175
======= ======= =======
Basic Earnings per Share 33.8p 15.7p 46.7p
======= ======= =======
Diluted Earnings per Share 33.6p 15.5p 46.5p
======= ======= =======
Unaudited Consolidated Balance Sheet
At 30 June 2005
30 June 30 June 31 Dec
2005 2004 2004
Re-stated Re-stated
�000 �000 �000
ASSETS
Non-current assets
Investment property 1,048,948 918,671 1,022,539
Property, plant and equipment 10,337 7,235 10,710
Intangible assets 2,823 198 2,944
Investment in associates 3,618 3,731 3,010
Available-for-sale investments 19,129 171 171
Derivative financial instruments 1,003 - -
Deferred income tax assets 16,298 13,684 13,813
Trade and other receivables 433 3,455 3,163
_________ _________ __________
1,102,589 947,145 1,056,350
Current assets
Trade and other receivables 9,145 15,682 11,261
Investments - 8,036 10,492
Cash and cash equivalents 54,244 61,896 57,371
_________ _________ __________
63,389 85,614 79,124
Total assets 1,165,978 1,032,759 1,135,474
LIABILITES
Non-current liabilities
Trade and other payables 1,151 4,187 1,279
Deferred income tax liabilities 136,848 109,066 127,951
Borrowings, including finance leases 626,387 555,008 620,508
Provisions for other liabilities and charges - - 301
_________ _________ _________
764,386 668,261 750,039
Current liabilities
Trade and other payables 39,789 35,100 44,128
Current income tax liabilities 1,330 1,149 902
Borrowings, including finance leases 28,363 33,620 17,447
Derivative financial instruments 1,675 - -
_________ _________ _________
71,157 69,869 62,477
Total liabilities 835,543 738,130 812,516
_________ _________ _________
NET ASSETS 330,435 294,629 322,958
========= ========= =========
EQUITY
Capital and reserves attributable to the
Company's equity holders
Share capital 21,382 21,365 21,374
Other reserves 115,668 113,394 122,070
Retained earnings 194,120 161,383 181,492
_________ _________ __________
331,170 296,142 324,936
Equity minority interests (735) (1,513) (1,978)
_________ _________ __________
TOTAL EQUITY 330,435 294,629 322,958
========= ========= ==========
Unaudited Consolidated Statement of Changes in Equity
Attributable to equity holders Minority Total
of interest
the Company
Share Other Retained
capital reserves earnings
Balance at 1 January 2004 21,911 120,610 157,034 (900) 298,655
as restated under IFRS
_________ _________ _________ __________ _________
Arising in the period:-
Currency translation - (8,159) - - (8,159)
differences on foreign
currency net investments
Expenses of share issue/ - - (67) - (67)
purchase of own shares
Purchase of own shares - - (9,264) - (9,264)
Issue of shares 63 329 - - 392
Cancellation of shares (609) 609 - - -
__________ _________ _________ __________ _________
Net gains / (losses) (546) (7,221) (9,331) - (17,098)
recognised directly in
equity
Employee share option - 5 - - 5
scheme
Profits/(loss) for the - - 13,680 (613) 13,067
period
__________ __________ _________ __________ _________
Total (decrease) /increase (546) (7,216) 4,349 (613) (4,026)
in equity for the period
__________ __________ _________ __________ _________
At 30 June 2004 as 21,365 113,394 161,383 (1,513) 294,629
restated under IFRS
__________ __________ _________ __________ _________
Arising in the period:-
Currency translation - 8,644 (1) - 8,643
differences on foreign
currency net investments
Expenses of share issue / - - (51) - (51)
purchase of own shares
Purchase of own shares - - (6,412) - (6,412)
Issue of shares 9 27 - - 36
__________ __________ _________ __________ _________
Net gains/ (losses) 9 8,671 (6,464) - 2,216
recognised directly in
equity
Employee share option - 5 - - 5
scheme
Profit for the period - - 26,573 (465) 26,108
__________ _________ _________ __________ _________
Total increase / 9 8,676 20,109 (465) 28,329
(decrease) in equity for
the period
__________ _________ _________ __________ _________
At 31 December 2004 as 21,374 122,070 181,492 (1,978) 322,958
restated under IFRS
__________ _________ _________ __________ _________
Adoption of IAS 32 and IAS - 12,270 (4,148) - 8,122
39
__________ _________ _________ __________ _________
At 1 January 2005 21,374 134,340 177,344 (1,978) 331,080
Arising in the period:-
Fair value gains /
(losses)
-available for sale - (5,069) - - (5,069)
-cash flow hedges - (1,523) - - (1,523)
Currency translation - (12,219) - - (12,219)
differences on foreign
currency net investments
Expenses of share issue / - - (69) - (69)
purchase of own shares
Purchase of own shares - - (10,066) - (10,066)
Issue of shares 8 136 - - 144
__________ _________ _________ __________ _________
Net gains / (losses) 8 (18,675) (10,135) - (28,802)
recognised directly in
equity
Employee share option - 3 - - 3
scheme
Reduction in minority - - (1,314) 1,314 -
interest
Profit for the period - - 28,225 (71) 28,154
__________ _________ _________ __________ _________
Total increase / 8 (18,672) 16,776 1,243 (645)
(decrease) in equity for
the period
__________ _________ _________ __________ _________
At 30 June 2005 21,382 115,668 194,120 (735) 330,435
========== ========= ========= ========= ========
Unaudited Consolidated Cash Flow Statement
For the six months ended 30 June 2005
30 June 2005 30 June 2004 31 Dec 2004
Re-stated Re-stated
�000 �000 �000
Cash flows from operating activities
Cash generated from operations 22,440 22,585 52,257
Interest paid (17,756) (16,719) (33,326)
Income tax paid (228) (238) (539)
____________ ____________ ____________
Net cash inflow from operating 4,456 5,628 18,392
activities
____________ ____________ ____________
Cash flows from investing activities
Purchase of investment property (13,154) (16,067) (38,249)
Capital expenditure on investment (27,387) (6,818) (31,177)
property
Proceeds from sale of investment 2,973 1,202 8,486
property
Purchase of property, plant and (474) (352) (1,545)
equipment (PPE)
Proceeds from sale of PPE - - 2,029
Purchase of available-for-sale financial (2,181) (4,073) (6,529)
assets
Purchase of interests in associates (277) (546) (1,486)
Interest received 783 794 1,715
____________ ____________ ____________
Net cash outflow from investing (39,717) (25,860) (66,756)
activities
____________ ____________ ____________
Cash flows from financing activities
Issue of shares 143 392 428
Purchase of own shares (10,136) (9,331) (15,795)
New loans 61,121 45,003 112,938
Issue costs of new loans (796) (936) (2,018)
Interest rate caps purchased (6) (1,063) (1,234)
Repayment of loans (18,192) (9,168) (45,814)
____________ ____________ ____________
Net cash inflow from financing 32,134 24,897 48,505
activities
____________ ____________ ____________
Net (decrease) / increase in cash and (3,127) 4,665 141
cash equivalents
Cash and cash equivalents at beginning 57,371 57,231 57,230
of period
____________ ____________ ____________
Cash and cash equivalents at end of 54,244 61,896 57,371
period
=========== =========== ============
Independent Review report to CLS Holdings plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2005 which comprises consolidated interim balance
sheet as at 30 June 2005 and the related consolidated interim statements of
income, cash flows and statement of changes in equity for the six months then
ended and related notes. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority.
As disclosed in note 2, the next annual financial statements of the group will
be prepared in accordance with accounting standards adopted for use in the
European Union. This interim report has been prepared in accordance with the
basis set out in note 3.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. As explained in note 2, there is,
however, a possibility that the directors may determine that some changes are
necessary when preparing the full annual financial statements for the first
time in accordance with accounting standards adopted for use in the European
Union. The IFRS standards and IFRIC interpretations that will be applicable and
adopted for use in the European Union at 31 December 2005 are not known with
certainty at the time of preparing this interim financial information.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the disclosed accounting
policies have been applied. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit and therefore provides a lower level
of assurance. Accordingly we do not express an audit opinion on the financial
information. This report, including the conclusion, has been prepared for and
only for the company for the purpose of the Listing Rules of the Financial
Services Authority and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2005.
PricewaterhouseCoopers LLP
Chartered Accountants
London
23 September 2005
Notes to the interim financial report
1. General information
CLS Holdings plc ('the Company') and its subsidiaries (together 'CLS Holdings'
or the 'Group') are an investment property group which is principally involved
in the investment, development and management of commercial properties. The
Group's principal operations are carried out in the United Kingdom, Sweden and
Continental Europe.
The Company is registered in the UK, registration number 2714781, of registered
address: One Citadel Place, Tinworth Street, London SE11 5EF.
The Company has its primary listing on the London Stock Exchange.
The Interim Report is unaudited and does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. The statutory accounts for
2004, which were prepared under UK Generally Accepted Accounting Principles
('UK GAAP'), a copy of the statutory accounts for that year has been filed with
the Registrar of Companies. The Auditors' opinion on those accounts was
unqualified and did not contain a statement made under section 237 of the
Companies Act 1985.
The interim financial information was approved by a duly appointed and
authorised committee of the board of directors on 22 September 2005. It has
been reviewed by the auditors as set out in their report on page 20.
The income statement and balance sheet have been prepared, in accordance with
applicable International Accounting Standards ('IAS') and International
Financial Reporting Standards ('IFRS') issued by the International Accounting
Standards Board ('IASB') and on the basis that all such standards will be
endorsed by the European Union ('EU'). These standards are collectively
referred to as 'IFRS'.
The maintenance and integrity of the CLS Holdings plc web site is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information may differ from legislation in other jurisdictions.
2. Transition to IFRS
To date, CLS Holdings has prepared its financial statements under UK GAAP.
Under European legislation, all companies listed in the EU are required to
prepare consolidated financial statements under IFRS for financial periods
beginning on or after 1 January 2005. As a result the Group will be required to
prepare its consolidated financial statements in accordance with IFRS as
adopted by the EU. The Group's first IFRS financial statements will be for the
year ended 31 December 2005.
This report is prepared in accordance with the transitional provisions set out
in IFRS 1 - 'First-time Adoption of IFRS'. The Group has applied IFRS 1 to
provide a starting point for reporting under IFRS. The date of transition to
IFRS is 1 January 2004, as determined in accordance with IFRS 1. All
comparative information in these financial statements has been restated to
reflect the Group's adoption of IFRS.
In accordance with the transitional provisions set out in IFRS 1, and other
relevant standards, the Group has applied IFRS expected to be in force as at 31
December 2005 in its financial reporting with effect from 1 January 2004 (date
of transition to IFRS), however the Group has made use of the exemption
available under IFRS 1 to only apply IAS 32 and IAS 39 from 1 January 2005.
The reconciliations of equity at 1 January 2004 (date of transition to IFRS)
and at 31 December 2004 (date of last UK GAAP financial statements) and the
reconciliation of profit for 2004, as required by IFRS 1, including the
significant accounting policies and selected notes to 31 December 2004, have
been published* in the 'IFRS Transition Report 31 December 2004'.
Reconciliations of equity and profit for the periods ended 30 June 2004 and 31
December 2004, and a reconciliation of equity at 1 January 2005 (the date of
transition for IAS 32 and IAS 39) have been presented in section 4 below.
This Interim Report has been prepared in accordance with those IFRS standards
and International Financial Reporting Interpretations Committee ('IFRIC')
interpretations issued and effective or issued and early adopted as at the time
of preparing this report. The IFRS standards and IFRIC interpretations that
will be applicable at 31 December 2005, including those that will be applicable
on an optional basis, are not known with certainty at the time of preparing
this report, as further standards and interpretations may be issued that could
be applicable for financial years beginning on or after 1 January 2005 or that
are applicable to later accounting periods but with the option for companies to
adopt for earlier periods.
The Group's first annual financial statements prepared under IFRS may,
therefore, be prepared in accordance with different accounting policies to
those used in the preparation of the financial information in this document. In
addition, IFRS is currently being applied in the EU and other countries for the
first time and contains many new and revised standards. Therefore practice on
which to draw in applying the standards may develop. At this preliminary stage,
before the Group's first annual financial statements prepared under IFRS are
completed, it should be noted that the financial information in this document
could be subject to change.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise judgement in the process of applying the Group's accounting policies.
Although these estimates are based on management's best knowledge of the
amount, events or actions, actual results ultimately may differ from those
estimates.
* The 'IFRS Transition Report 31 December 2004' was released to the Stock
Exchange and published on the Company's website, www.clsholdings.com, on 15
September 2005.
3. Accounting policies
The interim financial report has been prepared in accordance with the Group's
IFRS accounting policies. These are the first IFRS financial statements of the
company, details of the impact of transition to IFRS are set out in the
following sections, and in the 'IFRS Transition Report 31 December 2004' which
has been published*.
Changes in accounting policies
The same accounting policies and methods of computation are followed in the
interim financial report as were followed in the 'IFRS Transition Report 31
December 2004' which has been published*.
For the recognition and measurement of financial instruments, the Group applied
the exemption in IFRS 1 - 'First Time Adoption of International Financial
Reporting Standards' to adopt IAS 32 - 'Financial Instruments: Disclosure and
Presentation' and IAS 39 - 'Financial Instruments: Recognition and Measurement'
from 1 January 2005 and comparative information presented does not need to
comply with these standards in the first year on transition.
The principal changes with the adoption of IAS 32 and IAS 39 from 1 January
2005 are:
Hedge accounting
Hedging instruments such as interest rate swaps and forward foreign exchange
contracts have been included in the balance sheet at fair value. Movements in
fair value of these hedging instruments are recognised in the income statement
or in equity, as appropriate. To the extent that such instruments are
ineffective hedges, they are included in the balance sheet at fair value with
changes in fair value being recognised in the income statement. These
instruments are classified in the balance sheet as 'Derivative financial
instruments' under either assets or liabilities, as appropriate.
Investments
Investments are carried at fair value on the balance sheet, with changes in the
fair value being recognised either in the income statement or in equity and
recycled through the income statement when the investments are realised, as
appropriate. Under UK GAAP these investments were carried at the lower of cost
and market value. Under IFRS, these investments will be classified as
'Available-for-sale investments' in the balance sheet.
Other financial instruments
Movements in the fair value of those derivative financial instruments which are
not accounted for as hedging instruments are recognised in the income statement
and not by way of a note, as is the case under UK GAAP. These instruments are
classified in the balance sheet as 'Derivative financial instruments' under
either assets or liabilities, as appropriate.
Borrowings
The version of IAS 39 adopted by the EU prohibits the option to carry
borrowings at their fair values, and consequently the Group continue to include
borrowings in the balance sheet at amortised cost. The fair value of borrowings
will be disclosed under IAS 32, as is the case under UK GAAP.
A reconciliation of the transition to IAS 32 and IAS 39 at 1 January 2005 can
be found in section 4.5 below.
The revised accounting policies for derivative financial instruments and other
investments are set out in the 'IFRS Transition Report 31 December 2004' which
has been published*.
* The 'IFRS Transition Report 31 December 2004' was released to the Stock
Exchange and published on the Company's website, www.clsholdings.com, on 15
September 2005.
4. Reconciliations between IFRS and UK GAAP
4.1 Reconciliation of consolidated IFRS balance sheet at 30 June 2004
(all amounts in GBP thousands unless otherwise stated)
Previ- Share Opera-
ously Based Busi- ting Foreign Invest- Inter- Impair- Invest- Total Re-
repor- pay- ness Income Leases lease exchange ments ests ment ment adjust- stated
ted ments combin- taxes incen- in in of pro- ments under
under ations tives asso- joint assets perty IFRS
ciates ven-
tures
UK
GAAP* IFRS IFRS IAS IAS SIC IAS IAS IAS IAS IAS
2 3 12 17 15 21 28 31 36 40
ASSETS
Non- current
assets
Invest-
882,390 - - - 146 - - - 36,135 - - 36,281 918,671
ment property
Property, plant
5,063 - - - - - - - 2,172 - - 2,172 7,235
and equipment
Intangible - - - - - - - - 198 - - 198 198
assets
Invest- ments
3,731 - - - - - - (71) - 71 - - 3,731
in asso- ciates
Invest- ments
8,554 - - - - - - - (8,554) - - (8,554) -
in joint ventures
Investments 171 - - - - - - - - - - - 171
Deferred income
- - - 13,684 - - - - - - - 13,684 13,684
tax assets
Trade and other
3,379 - - - - - - - 76 - - 76 3,455
receiv- ables
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
903,288 - - 13,684 146 - - (71) 30,027 71 - 43,857 947,145
Current assets
Trade and other 15,049
- - - - 179 - - 454 - - 633 15,682
receiv- ables
Investments 8,036 - - - - - - - - - - - 8,036
Cash and cash
60,189 - - - - - - - 1,707 - - 1,707 61,896
equiv- alents
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
83,274 - - - - 179 - - 2,161 - - 2,340 85,614
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Total 986,562 - - 13,684 146 179 - (71) 32,188 71 - 46,1971,032,759
assets
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
LIABILITIES
Non- current
liabilities
Trade and other
4,187 - - - - - - - - - - - 4,187
payables
Deferred income
6,231 - - 102,835 - - - - - - - 102,835 109,066
tax liabilities
Borrowings, including
finance 526,612 - -
- 146 - - - 28,250 - - 28,396 555,008
leases
Provisions for other
liabilities - - -
- - - - - - - - - -
and charges
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
537,030 - - 102,835 146 - - - 28,250 - - 131,231 668,261
Current liabilities
Trade
and other 33,017 - -
- - - - - 2,083 - - 2,083 35,100
payables
Current income
1,149 - - - - - - - - - - - 1,149
tax liabilities
Borrowings, including
finance 32,970 - -
- - - - - 650 - - 650 33,620
leases
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
67,136 - - - - - - - 2,733 - - 2,733 69,869
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Total 604,166 - - 102,835 146 - - - 30,983 - - 133,964 738,130
liabilities
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Net 382,396 - - (89,151) - 179 - (71) 1,205 71 - (87,767) 294,629
assets
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
EQUITY
Capital and reserves
attributable
to the
company's
equity
holders
Share 21,365 - - - - - - - - - - - 21,365
capital
Other 332,281 10 - 3,082 - - 3,814 - - - (225,793) (218,887) 113,394
reserves
Retained 30,263 (10) - (92,233) - 179 (3,814) (71) 1,205 71 225,793 131,120 161,383
earnings
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
383,909 - - (89,151) - 179 - (71) 1,205 71 - (87,767) 296,142
Minority (1,513) - - - - - - - - - - - (1,513)
interest
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Total 382,396 - - (89,151) - 179 - (71) 1,205 71 - (87,767) 294,629
equity
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Notes - a b c d e f g h i j refer to
section 4.7
* Reformatted to reflect IFRS reporting requirements
4.2 Reconciliation of consolidated IFRS income statement for year ended 30 June
2004
(all amounts in GBP thousands unless otherwise stated)
Previ- Share Opera-
ously Based Busi- ting Foreign Invest- Inter- Impair- Invest- Total Re-
repor- pay- ness Income Leases lease exchange ments ests ment ment adjust- stated
ted ments combin- taxes incen- in in of pro- ments under
under ations tives asso- joint assets perty IFRS
ciates ven-
tures
UK
GAAP* IFRS IFRS IAS IAS SIC IAS IAS IAS IAS IAS
2 3 12 17 15 21 28 31 36 40
Rental
and similar 34,818 - - - - 44 - - 1,310 - - 1,354 36,172
income
Service
charge and 3,264 - - - - - - - 198 - - 198 3,462
similar
income
Service
charge
expense (7,234) - - - - - - - (241) - - (241) (7,475)
and similar
charges
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Net 30,848 - - - - 44 - - 1,267 - - 1,311 32,159
rental
income
Turnover
from non- 2,721 - - - - - - - - - - - 2,721
property
activities
Cost of
sales (2,536) - - - - - - - - - - - (2,536)
of non-
property
activities
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Net
income 185 - - - - - - - - - - - 185
non-
property
activities
Other
operating 945 - - - - - - - - - - - 945
gains /
(losses)
- net
Adminis-
trative (7,185) (5) - - - - - - (87) - - (92) (7,277)
expenses
Net
property (1,896) - - - 5 - - - - - - 5 (1,891)
expenses
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Operating
profit
before
net gain on 22,897 (5) - - 5 44 - - 1,180 - - 1,224 24,121
investment
properties
Net gain
from
fair value - - - - - - - - - - 10,389 10,389 10,389
adjustment
on invest-
ment
property
Profit on
sale 539 - - - - - - - - - - - 539
of invest-
ment
property
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ _____ _____
Operating 23,436 (5) - - 5 44 - - 1,180 - 10,389 11,613 35,049
profit
Interest
receivable
and
similar
income:
Finance 897 - - - - - - - - - - - 897
income
Interest
payable
and similar
charges:
Finance (17,457) - - - (5) - - - - - - (5) (17,462)
Expense
Share of
(loss) (40) - - - - - - 71 - (71) - - (40)
/profit of
associates
Share of
(loss) 1,180 - - - - - - - (1,180) - - (1,180) -
/ profit
of JVs
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Profit
before 8,016 (5) - - - 44 - 71 - (71) 10,389 10,428 18,444
income
tax
Taxation - (252) - - - - - - - - - - - (252)
current
Taxation - (551) - - (4,574) - - - - - - - (4,574) (5,125)
deferred
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Profit for 7,213 (5) - (4,574) - 44 - 71 - (71) 10,389 5,854 13,067
the period
_____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ _____ ____
Attributable
to:
Equity
holders 7,826 (5) - (4,574) - 44 - 71 - (71) 10,389 5,854 13,680
of the
parent
Minority (613) - - - - - - - - - - - (613)
interest
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
7,213 (5) - (4,574) - 44 - 71 - (71) 10,389 5,854 13,067
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Notes -
refer a. b. c. d. e. f. g. h. i. j.
to section
4.7
* Reformatted to reflect IFRS reporting requirements
4.3 Reconciliation of consolidated IFRS balance sheet at 31 December 2004
(all amounts in GBP thousands unless otherwise stated)
Previ- Share Opera-
ously Based Busi- ting Foreign Invest- Inter- Impair- Invest- Total Re-
repor- pay- ness Income Leases lease exchange ments ests ment ment adjust-stated
ted ments combin- taxes incen- in in joint of pro- ments under
under ations tives asso- ven- assets perty IFRS
ciates tures
UK
GAAP* IFRS IFRS IAS IAS SIC IAS IAS IAS IAS IAS
2 3 12 17 15 21 28 31 36 40
ASSETS
Non- current
assets
Invest-
ment 981,560 - - - 146 - - - 40,833 - - 40,9791,022,539
proper- ties
Property, plant and
5,040 - - - - - - - 5,670 - - 5,67010,710
equipment
Intangible - - 2,509 - - - - - 435 - - 2,944 2,944
assets
Investments in
3,010 - - - - - - (143) - 143 - - 3,010
associates
Investments in joint
13,848 - - - - - - - (13,848) - - (13,848) -
ventures
Investments 171 - - - - - - - - - - - 171
Deferred income tax
- - - 13,813 - - - - - - - 13,81313,813
assets
Trade and other
3,096 - - - - - - - 67 - - 67 3,163
receiv- ables
__ __ __ __ __ __ __ __ __ __ __ __ __
1,006,725 - 2,509 13,813 146 - - (143) 33,157 143 - 49,6251,056,350
Current assets
Trade
and other 10,480 - -
- - 223 - - 558 - - 78111,261
receiv- ables
Investments 10,492 - - - - - - - - - - -10,492
Cash and cash
56,680 - - - - - - - 691 - - 69157,371
equivalents
__ __ __ __ __ __ __ __ __ __ __ __
77,652 - - - - 223 - - 1,249 - - 1,47279,124
__ __ __ __ __ __ __ __ __ __ __ __ __
Total 1,084,377 - 2,509 13,813 146 223 - (143) 34,406 143 - 51,0971,135,474
assets
__ __ __ __ __ __ __ __ __ __ __ __
LIABILITIES
Non- current
liabilities
Trade
and other 1,279 - -
- - - - - - - - 1,279
payables
Deferred
income tax 6,777 - - 121,174 - - - - - - 121,174127,951
liabilities
Borrowings, including
finance 592,439 - -
- 146 - - - 27,923 - 28,069620,508
leases
Provisions for other
liabilities 301 - -
- - - - - - - - 301
and charges
__ __ __ __ __ __ __ __ __ __ __ __ __
600,796 - - 121,174 146 - - - 27,923 - - 149,243750,039
Current liabilities
Trade and other
39,472 - - - - - - - 4,656 - - 4,65644,128
payables
Current income tax
902 - - - - - - - - - - - 902
liabilities
Borrowings, including
finance 16,825 - -
- - - - - 622 - - 62217,447
leases
__ __ __ __ __ __ __ __ __ __ __ __
57,199 - - - - - - - 5,278 - - 5,27862,477
__ __ __ __ __ __ __ __ __ __ __ __ __
Total 657,995 - - 121,174 146 - - - 33,201 - - 154,52 812,516
liabilities
__ __ __ __ __ __ __ __ __ __ __ __ __
Net 426,382 - 2,509 (107,361) - 223 - (143) 1,205 143 - (103,424)322,958
assets
__ __ __ __ __ __ __ __ __ __ __ __ __
EQUITY
Capital and reserves
attributable
to the
company's
equity
holders
Share 21,374 - - - - - - - - - - -21,374
capital
Other 374,592 15 97 (951) - - 13,096 - - - (264,779) (252,522)122,070
reserves
Retained 32,394 (15) 2,412 (106,410) - 223 (13,096) (143) 1,205 143 264,779 149,098 181,492
earnings
__ __ __ __ __ __ __ __ __ __ __ __
428,360 - 2,509 (107,361) - 223 - (143) 1,205 143 - (103,424) 324,936
Minority (1,978) - - - - - - - - - - - (1,978)
interest
__ __ __ __ __ __ __ __ __ __ __ __ __
Total 426,382 - 2,509 (107,361) - 223 - (143) 1,205 143 - (103,424) 322,958
equity
__ __ __ __ __ __ __ __ __ __ __ __ __
Notes - refer
a. b. c. d. e. f. g. h. i. j. to section
4.7
* Reformatted to reflect IFRS reporting requirements
4.4 Reconciliation of consolidated IFRS income statement for year ended 31
December 2004
(all amounts in GBP thousands unless otherwise stated)
Previ- Share Opera-
ously Based Busi- ting Foreign Invest- Inter- Impair- Invest- Total Re-
reported pay- ness Income Leases lease exchange ments ests ment ment adjust- stated
under ments combin- taxes incen- in in of pro- ments under
ations tives asso- joint assets perty IFRS
ciates ven-
tures
UK
GAAP* IFRS IFRS IAS IAS SIC IAS IAS IAS IAS IAS
2 3 12 17 15 21 28 31 36 40
Rental
and 71,787 - - - - 83 - - 2,619 - - 2,702 74,489
similar
income
Service
charge 6,401 - - - - - - - 499 - - 499 6,900
and similar
income
Service
charge
expense (13,293) - - - - - - - (479) - - (479) (13,772)
and
similar
charges
__ __ __ __ __ __ __ __ __ __ __ __ __
Net 64,895 - - - - 83 - - 2,639 - - 2,722 67,617
rental
income
Turnover
from 5,524 - - - - - - - - - - - 5,524
non-
property
activities
Cost of
sales
of non- (4,076) - - - - - - - - - - - (4,076)
property
activities
__ __ __ __ __ __ __ __ __ __ __ __ __
Net
income 1,448 - - - - - - - - - - - 1,448
non-
property
activities
Other
operating 2,651 - - - - - - - - - - - 2,651
gains/
(losses)
- net
Adminis-
trative (14,845) (10) - - - - - - (148) - - (158) (15,003)
expenses
Net
property (3,911) - - - 9 - - - - - - 9 (3,902)
expenses
__ __ __ __ __ __ __ __ __ __ __ __ __
Operating
profit
before net
gain on 50,238 (10) - - 9 83 - - 2,491 - - 2,573 52,811
investment
properties
Net gain
from
fair value
adjustment - - (1,394) - - 5 - - - - 38,377 36,988 36,988
on
investment
property
Profit on
sale of
investment 464 - - - - - - - - - - - 464
properties
__ __ __ __ __ __ __ __ __ __ __ __ __
Operating 50,702 (10) (1,394) - 9 88 - - 2,491 - 38,377 39,561 90,263
profit
Finance 1,801 - - - - - - - - - - - 1,801
income
Finance (36,041) - - - (9) - - - - - - (9) (36,050)
expense
Share of
(loss)/
profit (201) - - - - - - 143 - (143) - - (201)
of
associates
Share of
(loss)/ 2,491 - - - - - - - (2,491) - - (2,491) -
profit
of JVs
__ __ __ __ __ __ __ __ __ __ __ __ __
Profit
before 18,752 (10) (1,394) - - 88 - 143 - (143) 38,377 37,061 55,813
income
tax
Taxation (596) - - - - - - - - - - - (596)
- current
Taxation (1,097) - 3,806 (18,751) - - - - - - - (14,945) (16,042)
- deferred
__ __ __ __ __ __ __ __ __ __ __ __ __
Profit for 17,059 (10) 2,412 (18,751) - 88 - 143 - (143) 38,377 22,116 39,175
year
__ __ __ __ __ __ __ __ __ __ __ __ __
Attributable
to:
Equity
holders 18,137 (10) 2,412 (18,751) - 88 - 143 - (143) 38,377 22,116 40,253
of the
parent
Minority (1,078) - - - - - - - - - - - (1,078)
nterest
__ __ __ __ __ __ __ __ __ __ __ __ __
17,059 (10) 2,412 (18,751) - 88 - 143 - (143) 38,377 22,116 39,175
__ __ __ __ __ __ __ __ __ __ __ __ __
Notes -
refer a. b. c. d. e. f. g. h. i. j.
to section
4.7
* Reformatted to reflect IFRS reporting requirements
4.5 Reconciliation of consolidated IFRS balance sheet at 1 January 2005
(all amounts in GBP thousands unless otherwise stated)
IFRS (excl Financial Income Total IFRS (incl
IAS 32 and Instruments taxes Adjustments IAS 32 and
IAS 39) IAS 39)
IAS 39 IAS 12
ASSETS
Non-current assets
Investment property 1,022,539 - - - 1,022,539
Property, plant and 10,710 - - - 10,710
equipment
Intangible assets 2,944 - - - 2,944
Investments in 3,010 - - - 3,010
associates
Available -for -sale - 22,671 - 22,671 22,671
investments
Investments 171 (171) - (171) -
Derivative financial - 1,315 - 1,315 1,315
instruments
Deferred income tax 13,813 - 1,016 1,016 14,829
assets
Trade and other 3,163 (1,968) - (1,968) 1,195
receivables
___ ___ ___ ___ ___
1,056,350 21,847 1,016 22,863 1,079,213
Current assets
Trade and other 11,261 (599) - (599) 10,662
receivables
Investments 10,492 (10,492) - (10,492) -
Cash and cash 57,371 - - - 57,371
equivalents
____ ____ ____ ____ ____
79,124 (11,091) - (11,091) 68,033
____ ____ ____ ____ ____
Total assets 1,135,474 10,756 1,016 11,772 1,147,246
____ ____ ____ ____ ____
LIABILITIES
Non-current liabilities
Trade and other payables 1,279 - - - 1,279
Deferred income tax 127,951 - 2,888 2,888 130,839
liabilities
Borrowings, including 620,508 - - - 620,508
finance leases
Derivative financial - 1,063 - 1,063 1,063
instruments
Provisions for other 301 (301) - (301) -
liabilities and charges
____ ____ ____ ____ ____
750,039 762 2,888 3,650 753,689
Current liabilities
Trade and other payables 44,128 - - - 44,128
Current income tax 902 - - - 902
liabilities
Borrowings, including 17,447 - - - 17,447
finance leases
____ ____ ____ ____ ____
62,477 - - - 62,477
____ ____ ____ ____ ____
Total liabilities 812,516 762 2,888 3,650 816,166
____ ____ ____ ____ ____
Net assets 322,958 9,994 (1,872) 8,122 331,080
____ ____ ____ ____ ____
EQUITY
Capital and reserves
attributable to the
company's equity holders
Share capital 21,374 - - - 21,374
Other reserves 122,070 12,270 - 12,270 134,340
Retained earnings 181,492 (2,276) (1,872) (4,148) 177,344
____ ____ ____ ____ ____
324,936 9,994 (1,872) 8,122 333,058
Minority interest (1,978) - - - (1,978)
____ ____ ____ ____ ____
Total equity 322,958 9,994 (1,872) 8,122 331,080
____ ____ ____ ____ ____
Notes - refer to section k. c.
4.7
Notes to the interim financial report (continued)
4.6 Notes to the consolidated IFRS cash flow statement for year ended 31
December 2004
The transition to IFRS will not affect the cash flows of the business. The
presentation of the cash flow statement for the Group does not differ
significantly from that under UK GAAP, except for the inclusion of short term
deposits within the definition of cash and cash equivalents. Previously these
were shown separately from cash as liquid resources.
From 1 January 2005, due to the classification of investments as
'available-for-sale' financial assets, the movement in investments will now be
shown in the cash flow statement under cash flows from investing activities
rather than in cash generated from operations.
There are no other material differences between the cash flow statement
presented under IFRS and the cash flow statement presented under UK GAAP.
Notes to IFRS reconciliations
IFRS 2 - Share-based payments
Share option plans are fair valued at the date of grant and costs taken to the
income statement over the vesting period. IFRS 1 transitional exemption
applied. A corresponding release from equity means that there is no effect on
the balance sheet or NAV.
IFRS 3 - Business combinations
In the light of IFRS 3, a portfolio acquired during 2004 has been reclassified
as a business combination rather than as a purchase of assets.
IAS 12 - Income taxes
Provision is now made for the deferred tax liability associated with the
revaluation of investment properties, this was not required under UK GAAP.
IAS 17 - Leases
Investment property head leases are capitalised and shown as a corresponding
lease liability.
SIC 15 - Operating lease incentives
Lease incentives are now amortised over the period of the lease, rather than to
the first rent review.
IAS 21 - The effects of changes in foreign exchange rates
Under UK GAAP revaluation movements on overseas assets were booked at the
closing rate and retranslated at each reporting period. Since the revaluation
movements are now posted to the income statement, they are translated at the
average rate. On transition to IFRS, all previous exchange gains held within
the revaluation reserve have been transferred back to the cumulative
translation reserve.
IAS 28 - Investments in associates
Cessation of goodwill amortisation. Negative goodwill eliminated.
IAS 31 - Interests in joint ventures
Proportional consolidation for all joint ventures. The net investment line is
now eliminated and joint ventures are shown gross on a line-by-line basis.
Cessation of goodwill amortisation. Negative goodwill eliminated.
IAS 36 - Impairment of assets
Certain assets are reviewed for impairment. An impairment loss is recognised
for the amount by which the assets' carrying amount exceeds its recoverable
amount.
IAS 40 - Investment property
Investment property revaluations and tax thereon taken through the income
statement.
IAS 32 and IAS 39 - Financial instruments
Financial assets and liabilities such as interest rate swaps, caps, floors and
forward foreign exchange contracts have been included in the balance sheet at
fair value. Investments are carried at fair value on the balance sheet.
CLS Holdings plc
Directors, Officers and Advisers
Directors
Sten Mortstedt (Executive Chairman)
Thomas Thomson BA (Chief Executive and Vice Chairman )
Dan B�verstam (Chief Financial Officer)
Steven Board FCCA (Chief Operating Officer )
Per Sj�berg (Group Development Director)
James Dean FRICS * D (Non-executive Director)
Keith Harris PhD * D �(Non-executive Director)
Thomas Lundqvist D (Non-executive Director)
Bengt Mortstedt Juris Cand (Non-Executive Director)
* = member of Remuneration Committee
D= member of Audit Committee
�= senior independent director
Company Secretary
Steven Board FCCA
Registered Office
One Citadel Place
Tinworth Street
London SE11 5EF
Registered Number
2714781
Registered Auditors
PricewaterhouseCoopers LLP
Chartered Accountants
1 Embankment Place
London WC2N 6RH
Registrars and Transfer Office
Computershare Services Plc
P O Box 435
Owen House
8 Bankhead Crossway North
Edinburgh EH11 4BR
Clearing Bank
Royal Bank of Scotland Plc
24 Grosvenor Place
London SW1X 7HP
Financial Advisers
Williams de Bro� Plc
6 Broadgate
London EC2M 2RP
Joint Stockbrokers
Williams de Bro� Plc
6 Broadgate
London EC2M 2RP
KBC Peel Hunt
11 Old Broad Street
London EC2N 1PH
CLS Holdings plc on line:
www.clsholdings.com
e-mail:
enquiries@clsholdings.com
END
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