TIDMCLI
RNS Number : 5166D
CLS Holdings PLC
17 May 2012
Release date: 17 May 2012
Embargoed until: 07:00
CLS Holdings plc
("CLS", the "Company" or the "Group")
Interim Management Statement for the period 1 January 2012 to 16
May 2012
The Company announces its Interim Management Statement for the
period 1 January 2012 to 16 May 2012.
HIGHLIGHTS
-- Planning consent successfully gained at Spring Mews, Vauxhall
for 20,763 sq m mixed-use development
-- Refinancing of GBP117 million of debt signed, being 86% of loans expiring in 2012
-- Weighted average cost of debt down to 3.8% (31 December 2011: 4.1%)
-- Planning application for 154,000 sq m mixed-use scheme at
Vauxhall Square, London progressing
-- One pre-let development completed in Germany and a second on
schedule for completion in the summer
-- Occupational demand resilient; vacancy level remains low at 3.9%
-- New leases, lease renewals and extensions completed on 13,621 sq m
-- Over GBP130 million of liquid resources available for investment
OVERVIEW - Since 1 January, the Group's core operations have
continued to deliver: occupational markets have proven resilient;
and progress has been made on development opportunities. The
Group's vacancy rate has remained low at 3.9% (31 December 2011:
3.9%) and we continue to be cautiously encouraged by a steady level
of demand and new enquiries from occupiers in most of the areas in
which we operate. 65% of the Group's rental income is subject to
indexation, and 40% is derived from government occupiers. Planning
permission has been gained on the Group's proposed 20,763 sq m
Spring Mews development in Vauxhall, London; proposals for our
second Vauxhall development, Vauxhall Square, are progressing with
the local council. In addition, in Germany a 1,642 sq m pre-let
development extension completed on time and on budget in February,
and a 5,400 sq m pre-let development is due to do the same in the
summer.
Since 1 January, net assets per share have been adversely
affected by the euro falling by around 3% against sterling, but
positively affected by the market value of our corporate bond
investments rising by 7.5% like-for-like.
LONDON - Whilst the prime investment market benefits from
London's "safe haven" status, banks' caution over new lending in
the non-prime markets has led to many proposed investment
transactions, including some on which we have been under-bidders,
being delayed or abandoned. Coupled with a reluctance from the
banks to put too many financially distressed properties on the
market too quickly, this bears out our expectation that the window
for new acquisition opportunities will remain open for some
considerable time.
We have continued to be successful in letting our properties,
and our London vacancy rate has fallen to 3.7% (31 December 2011:
4.0%). New lettings have been achieved on 1,921 sq m, including 574
sq m of vacant space inherited in the acquisition of Falcon House,
Hounslow in September last year. Lease renewals and extensions
totalled 4,452 sq m, including 3,414 sq m in Great West House,
Brentford, while tenants vacated from 1,535 sq m.
On 15 May, Spring Mews, a mixed-use, student accommodation-led
development in Vauxhall gained planning consent for 399 student
rooms and amenity space, a 120 bed hotel, a new community centre
and cafe, ancillary office and retail space and a pedestrian mews;
the Group is in active discussions with potential operators and we
expect to start on site later this year.
A detailed planning submission for a major new mixed-use
development, Vauxhall Square, was made in December. This 154,000 sq
m scheme will be progressed with the Council throughout the rest of
the year, and vacant possession of the site can be gained from the
end of 2014.
FRANCE - The run up to the presidential election has led to a
traditional pause in activity in investment markets and it remains
to be seen how the new president is received by the domestic
business community, who form the clear majority of property
investors. Bank debt, however, continues to be more prevalent than
in London and there are very few signs of distress amongst property
owners.
Since 1 January 2012, the letting markets in Paris and Lyon have
slowed noticeably; leases totalling 4,179 sq m expired or were
taken back, and 3,289 sq m let or renewed. As a result the vacancy
rate rose from its all-time low of 2.7% at 31 December 2011 to
3.7%.
GERMANY - Whilst there has been a decline in investment
transaction volumes of some 15% in the first quarter, there have
been significant positive net inflows into German open-ended funds
in the same period. This infers that private investors are
increasingly enthusiastic about the sector and the income
opportunities that it provides. Commentators have suggested this
has marked a positive turning point for an important part of the
domestic investment market. Although take up was 15% lower overall
in the first quarter than in that of the previous year, vacancy
levels continue to fall as a whole.
We are on site for the construction of a 5,400 sq m development
of a fourth building pre-let to E.ON in Landshut, near Munich on a
17 year lease. Upon completion of the building in summer 2012, this
will result in an additional rent receivable of EUR659,000.
Construction was completed on time and on budget in February on the
1,642 sq m extension at Grafelfing, Munich, pre-let to Dr. Holne
AG.
Leases totalling 2,405 sq m expired, but others on 3,959 sq m
were signed and, consequently, by 30 April 2012 the vacancy rate
had fallen to 5.4% (31 December 2011: 6.0%).
SWEDEN - Positive progress has continued to be made on the
150,000 sq m mixed-use development proposals for the remaining
property owned by our 29.9% associate, Catena. Catena's share price
of SEK 57 at 16 May means the current market value of our interest
exceeds book value by GBP4.0 million, which would add 9 pence per
share to CLS's net asset value.
The void rate at Vanerparken, the Group's only directly held
property in Sweden, remained unchanged from 31 December 2011 at
1.8%.
FINANCE - Core profit has continued to be resilient, with stable
net rental income, high debt collection rates, tightly controlled
costs, and an even lower cost of debt of 3.8% (31 December 2011:
4.1%).
At 30 April 2012, the Group had cash, liquid resources and
undrawn facilities of over GBP130 million in aggregate. Since 1
January, GBP117.6 million of loans have been renewed or refinanced:
at Spring Gardens, Vauxhall we replaced an expiring loan from
Eurohypo with a GBP78.5 million, four year club facility with
Deutsche Postbank and RBS; at CI Tower, New Malden we replaced an
expiring loan from KBC with a five year, GBP9.1 million facility
with another of our existing lenders; and we renewed GBP30 million
of overdraft facilities. At 16 May 2012 the Group had 64 loans from
20 lenders, and an unsecured corporate bond; none of the loan
covenants was in breach and none of the debt was securitised.
After a period of relative stability in Q1, the financial
markets in Europe have again become more volatile. The euro, in
which half of our business is conducted, has fallen in value by
around 3% against our reporting currency of sterling.
The corporate bond portfolio is generating an attractive running
yield of 9.4%, and we continue to monitor actively the underlying
strength and performance of all the issuers. There are currently 35
different bonds in the portfolio, giving broad diversification.
Since 1 January 2012, the bond portfolio has risen in value by some
7.5% like-for-like and the total return for the bond investments
has been 11.0%.
All of the shares available under the tender offer were
cancelled by the Company on 27 April, resulting in a distribution
of GBP7.9 million to shareholders.
Executive Chairman of CLS, Sten Mortstedt, commented:
"The operating performance of our core property activities
remains robust, with the vacancy rate well below that of directly
comparable investors in our markets, the cost of debt at an
all-time low, and much of our portfolio benefiting from rental
indexation.
"Gaining planning consent at Spring Mews is an important
achievement for our plans in Vauxhall, an area of London which we
expect will see significant regeneration and growth in the next few
years.
"I am delighted that we continue to enjoy strong relationships
with our banks. Our balance sheet remains strong, and our liquid
resources are at high levels.
"I remain confident that we are well placed to meet the
challenges ahead."
-ends-
For further information, please contact:
CLS Holdings plc +44 (0)20 7582 7766
www.clsholdings.com
Sten Mortstedt, Executive Chairman
Henry Klotz, Executive Vice Chairman
Richard Tice, Chief Executive Officer
Kinmont Limited +44 (0)20 7087 9100
Jonathan Gray
Smithfield Consultants (Financial PR) +44 (0)20 7903 0669
Alex Simmons
This information is provided by RNS
The company news service from the London Stock Exchange
END
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