TIDMCLI
RNS Number : 9662O
CLS Holdings PLC
13 August 2014
CLS HOLDINGS PLC
("CLS", THE "COMPANY" OR THE "GROUP")
ANNOUNCES ITS HALF YEAR FINANCIAL REPORT
FOR THE SIX MONTHS TO 30 JUNE 2014
CLS is a property investment company with a diverse portfolio of
GBP1,169 million modern, well-let properties in the UK, France,
Germany and Sweden.
FINANCIAL HIGHLIGHTS
-- EPRA net assets per share up 11.3% to 1,412.0 pence (31 December 2013: 1,268.4 pence)
-- EPRA earnings per share up 13.0% to 37.3 pence (2013: 33.0 pence)
-- Net assets up 10.4% to GBP531.1 million (31 December 2013: GBP480.9 million)
-- Earnings per share up 169.1% to 141.8 pence (2013: 52.7 pence)
-- Profit after tax up 173.1% to GBP62.0 million (2013: GBP22.7 million)
-- Portfolio valued at GBP1,168.8 million (31 December 2013:
GBP1,132.9 million), up 4.0% in local currencies in the six
months
-- High interest cover of 3.6 times (2013: 3.8 times)
-- Low weighted average cost of debt of 3.73% (31 December 2013:
3.64%) - one of the lowest in the property sector
-- Net cash inflow from operating activities up 16.0% to GBP17.4
million (2013: GBP15.0 million)
-- GBP153.7 million of liquid resources, and GBP84.9 million of undrawn facilities
-- Distributions to shareholders up 5.0% like-for-like to GBP5.5
million by way of tender offer buy-back: 1 in 119 at 1,500.0 pence,
equivalent to 12.6 pence per share
OPERATIONAL HIGHLIGHTS
-- Sold Cambridge House, Hammersmith for GBP29.5 million, 32% above its 2013 external valuation
-- Lowest ever vacancy rate of 3.5% (31 December 2013: 4.4%),
well under half the benchmark average of 9.7% for our type of
portfolio
-- EPRA net initial yield of 6.8%, over 300 basis points above cost of debt, one of the highest differentials in the listed property sector
-- London rental values up 8.7% in six months, Rest of UK up
1.7% and Germany up 1.3%; Sweden down 0.6% and France down 1.4%
-- High quality rental income, with 50.4% derived from
governments and 23.4% from major corporations, and with 61.1%
subject to indexation
-- Spring Mews, SE11:
o Nominations Agreement signed with University of Roehampton to
let 210 student rooms for 10 years
o 90% of student accommodation let for 2014/15 academic year
o Intercontinental Hotels Group due to open their Staybridge
suite hotel in Q4 2014
o Completion due Q3 2014
-- Clifford's Inn, 138 Fetter Lane, EC4
o Rental growth of over 10%
o Completion due October 2014
-- Vauxhall Square, SW8
o Conditional agreement signed for a long lease to a student
housing operator to build and manage adjacent 359 student room
building
o Likely start on site 2015
Sten Mortstedt, Executive Chairman of CLS, commented:
"The six months to June have proved to be very successful,
generating strong earnings, a record low vacancy rate, continued
progress in our developments, and solid rental growth driven by our
acquisitions of last year, especially the Neo portfolio.
"I am pleased to welcome Fredrik Widlund from GE Capital as our
new Chief Executive Officer, and look forward to his joining on 3
November.
"The outlook for the Group remains attractive as our high level
of occupancy and continued low cost of debt underpin our ability to
generate cash. With strong operations, a solid balance sheet and a
high level of liquid resources, we remain in a good position to
benefit from the opportunities and challenges which lay 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
and Acting Chief Executive Officer
John Whiteley, Chief Financial
Officer
Kinmont Limited +44 (0)20 7087 9100
Jonathan Gray
Smithfield Consultants Limited +44 (0)20 7360 4900
Alex Simmons
Liberum Capital Limited +44 (0)20 3100 2222
Tom Fyson
Charles Stanley Securities +44 (0)20 7149 6000
Mark Taylor
Hugh Rich
CLS will be presenting to analysts at 8.30am on Wednesday, 13
August 2014, at Smithfield Consultants, 10 Aldersgate Street,
London, EC1A 4HJ.
Conference call dial in numbers as follows:
Conference call access numbers:
Participant telephone number: +44(0)20 3427 1918 (UK Toll)
Confirmation code: 7606323
Participants will have to quote the above code when dialing into
the conference line.
CHAIRMAN'S STATEMENT
The first half of 2014 demonstrated the benefits of the
geographical diversity of the Group.
OVERVIEW
The first half of 2014 proved to be a successful period,
generating strong earnings, a record low average vacancy rate and
continued progress in our developments. Furthermore the benefits of
the Neo portfolio, acquired last year, became evident, generating
solid growth in net rental income.
The period also demonstrated the benefits of the geographical
diversity of the Group: whilst the French economy remains strained,
the London non-prime market has been buoyant for both investors and
occupiers, and the markets in the rest of UK and Germany have been
very active. The Group achieved some notable progress during the
period, including the vacancy rate falling to 3.5%, the disposal of
Cambridge House at 32% above its year end valuation, the
conditional disposal of a peripheral element of Vauxhall Square,
and the imminent completion of the developments at Spring Mews and
Clifford's Inn. This, together with strong operational earnings and
the rise in London property values, has led to EPRA net asset value
growing by 11.3% to 1,412.0 pence per share (31 December 2013:
1,268.4 pence).
The core fundamentals of the Group's business strategy remain
sound. The investment property portfolio contains a diverse base of
473 occupiers across four markets generating rental income well in
excess of the Group's cost of debt. Approximately 50% of rents are
paid by governments and 24% by major corporations, and 61% of rents
are subject to indexation. The balance sheet is strong with
significant levels of cash and liquid resources and the Groups'
funding is achieved from a diversified base of 23 banks, together
with other capital market funding sources.
RESULTS AND FINANCING
Profit before tax for the six months to 30 June 2014 was GBP72.6
million (2013: GBP27.9 million), significantly higher than last
year, primarily through the valuation uplift of the London
portfolio, and generated earnings per share of 141.8 pence (2013:
52.7 pence). EPRA earnings per share, which exclude the effect of
revaluations, were 37.3 pence (2013: 33.0 pence), an uplift of
13.0% which reflected the impact of the earnings-enhancing
acquisitions of last year.
Shareholders' funds rose by 10.4% to GBP531.1 million, net of
distributions to shareholders of GBP10.0 million.
Interest cover remained a very healthy 3.6 times (2013: 3.8
times) and the weighted average cost of debt at 3.73% (31 December
2013: 3.64%) remained one of the lowest in the real estate sector
of the London Stock Exchange. We continue to believe that interest
rates will remain at historically low levels in the foreseeable
future, and in our hedging strategy we favour the use of interest
rate caps rather than swaps. At 30 June 2014, net debt as a
proportion of gross assets (less liquid resources) was 46.9%.
The availability of debt has improved with more lenders in the
markets and better terms being offered, which has benefited the
values for higher yielding property.
Net debt reduced to GBP577.9 million (31 December 2013: GBP601.1
million) reflecting the cash generated by our operations and the
disposal proceeds of Cambridge House. Our liquid resources,
consisting of cash and corporate bonds, remained at a very healthy
level of GBP153.7 million, demonstrating the strength of the
balance sheet and our capacity to invest in the future. The
corporate bond portfolio, in which we invest as a cash management
tool, generated a total return of GBP7.4 million in the six months,
corresponding to a 10.5% return on the invested capital.
PROPERTY PORTFOLIO
The value of the investment property portfolio grew to GBP1.2
billion in the six months, principally through GBP27.8 million of
capital expenditure on our development portfolio and an 8.4%
revaluation uplift in London of GBP44.0 million. The market for
acquisitions in London has become significantly more competitive
since the turn of the year, but we see good investment
opportunities in Germany, where financing is more prevalent and
attractive.
Net rental income in the period grew by 16.6% to GBP40.8 million
(2013: GBP35.0 million), reflecting the high level of investment we
undertook in the second half of 2013 when we acquired the Neo
portfolio for GBP123.7 million, generating a net initial yield of
12.23%. We have executed some management initiatives in this
portfolio and are exploring a number of others.
In local currencies, the investment property portfolio's
underlying value rose by 4.0% in the six months. Net of an adverse
foreign exchange variance from sterling's relative strength against
the euro (3.8%) and Swedish krona (7.3%), the underlying portfolio
rose by 2.1%. The London portfolio grew by 8.4%; while developments
added 6.3% after capital expenditure, the remaining properties
increased in value by 9.1%. The rest of the UK, consisting of most
of the Neo assets, rose by 0.8% in value. The French portfolio saw
a large improvement in the vacancy rate, reducing to 7.1% from
10.6% at the end of last year. This was, however, not enough to
fully compensate for falling rents in the letting market, and the
portfolio's value declined by 1.0% in local currency. The German
portfolio increased in value by 1.4% in local currency, and its
vacancy rate is now only 1.5%. The Swedish portfolio remained
broadly unchanged, rising 0.2% in local currency. Overall, the
vacancy rate at 30 June 2014 was 3.5% (31 December 2013: 4.4%), a
record
low for the Group.
In April, we took advantage of the strong investment demand for
offices in London, and disposed of Cambridge House, Hammersmith.
The property was only 50% occupied when sold for GBP29.5 million,
reflecting an initial yield of 2.34%, and an uplift on the 31
December 2013 valuation of 32%.
Across the portfolio, the average rent is now GBP161 per sqm
which is a very competitive price level in the key European cities
in which we operate. The low level of new office construction is
expected to produce growth of office rents in suburban London areas
over the next few years, further to that already seen this
year.
At Clifford's Inn, Fetter Lane, EC4 we have resisted pre-letting
enquiries for the 3,423 sqm office space on which construction is
due to be completed later this year, as the likely rental to be
achieved has risen by over 10%. Good progress has been made at
Spring Mews, Vauxhall, SE11 where the student and hotel development
scheme is due to reach completion this quarter.
We have entered into a Nominations Agreement with a university
for 210 of the 378 student rooms, and the rest are letting well for
the 2014/15 academic year. In addition, we are readying the 93
bedroom suite hotel to open under Intercontinental Hotels Group's
Staybridge brand, to be run by Cycas Hospitality.
At Vauxhall Square, SW8, in January we signed an agreement with
a specialist student operator to build and manage the 359 room
student building which, on discharging the conditionality attached
to the agreement, is expected to be the first phase of the scheme,
with a start in 2015. We are also in discussions with hotel
operators for the two hotels in the scheme.
PROPERTY VALUATIONS
The last three UK properties sold by the Group generated total
proceeds of GBP56.4 million, which exceeded the most recent
external valuations by more than 40%. This, and our own internal
valuations, lead me to continue to believe that there is potential
upside in the values of our UK portfolio.
DISTRIBUTIONS
In May, the Group made a distribution to shareholders of GBP10.0
million using our traditional tender offer buy-back process. We
propose to distribute a further GBP5.5 million by similar means in
September, offering 1 in 119 shares to be tendered at 1,500 pence
per share, on which a circular will be sent to shareholders in the
next few days. If approved, these two shareholder distributions
will correspond to an implied dividend yield of 2.65%, based on the
average market capitalisation during the first half of 2014.
BOARD CHANGES
Since 1 January, Tom Thomson, Brigith Terry and Claes-Johan
Geijer retired as non-executive directors, and were replaced by
Lennart Sten and Elizabeth Edwards. During the period, CEO Richard
Tice also left the board. Fredrik Widlund has been appointed Chief
Executive Officer and is due to join the Group on 3 November
2014.
OUTLOOK
The strong development in the London economy and real estate
market now seems to be feeding into other parts of the UK. This may
prove challenging for the Bank of England, as any consequent rise
in the base rate risks derailing the economic recovery. Meanwhile
within the Eurozone, the promising signs in the German economy are
in stark contrast to the weak development in France and some other
parts of the Eurozone. It may take some time before a solid
economic recovery is seen across Europe, which may cause interest
rates to remain low for the foreseeable future.
The outlook for the Group remains attractive as our high level
of occupancy and continued low cost of debt underpin our ability to
generate cash. With strong operations, a solid balance sheet and a
high level of liquid resources, we remain in a good position to
benefit from the opportunities and challenges which lay ahead.
Sten Mortstedt
Executive Chairman
13 August 2014
BUSINESS REVIEW
INVESTMENT PROPERTY
London (47% of the Group's property activities)
The clear signs of economic recovery in the UK in 2013 have
continued in the first half of this year, with London as the main
driver. GDP growth for London in 2014 is forecast to be 3.4%, and
the demand for investment in its commercial real estate market,
particularly from overseas investors, has begun to permeate the
wider markets within the M25.
In the two years to 31 December 2013, the Group took advantage
of buying opportunities in this region, investing GBP40.9 million
at an average net initial yield of 9.9%. A significant increase in
competition for offices in suburban London, coupled with more
readily available bank finance, has since reduced yields by some
200 basis points. Whilst we continued actively to compete in these
markets in the six months to 30 June 2014, making bids of GBP90
million in aggregate, being one-third of the investments we
actively considered, no further acquisitions were made.
We have, however, taken the opportunity to dispose selectively
of certain types of property. Following the sale in December of
Ingram House, John Adam Street, WC2 for GBP13.2 million at a
capital value before refurbishment costs of over GBP10,000 per sqm,
in April we sold Cambridge House, Hammersmith, W6 for GBP29.5
million at a net initial yield of 2.34%, which, considered a
development site, reflected the 50% vacancy.
In addition to a more competitive investment market, the first
half of the year was noticeable for the increase in occupational
demand and, in the absence of significant new construction, the
positive impact this had on rental levels. On average, new lettings
were achieved at 7.0% above ervs of 31 December 2013, with notable
successes at CI Tower, New Malden, Great West House, Brentford, and
Quayside Lodge, SW6. In the six months to 30 June 2014, ervs across
the London portfolio rose by 8.7%, and the portfolio moved from
being GBP0.4 million net over-rented to being reversionary to the
tune of GBP1.9 million. The vacancy rate in London rose in the six
months to 4.0% (31 December 2013: 3.0%) due to 1,100 sqm of space
being taken back for refurbishment at CI Tower, and an expiry of
480 sqm at Hygeia Building, Harrow at the end of June. Occupational
demand within the London investment portfolio has been strong, with
2,704 sqm of space having been let or renewed in the six months at
the higher rents, and 4,265 sqm made vacant.
The London portfolio demonstrated valuation uplifts across the
board, rising by 8.4% in the first half of the year: the investment
portfolio rose by 9.1%, whilst the three development sites added a
further 6.3% onto the aggregate of their opening valuations and
development costs in the period.
Good progress has been made on the three developments in Central
London. At Spring Mews, Vauxhall, SE11, Shepherd Construction is on
target to complete in the autumn the mixed-use scheme of 378
student beds and a 93 bedroom suite hotel.
We have entered into a Nominations Agreement to let 210 student
rooms to the University of Roehampton for 10 years, and our
specialist agent, Fresh Student Living, has directly let most of
the remaining student rooms, such that 90% have been let for the
2014/15 academic year. For the hotel, towards the end of last year
a franchise agreement was signed with Intercontinental Hotels Group
for a Staybridge branded suite hotel, to be run by specialist
franchise operator Cycas Hospitality. The estimated rental value
per annum of the whole development when complete and running is
over GBP5.5 million per annum.
At Clifford's Inn, Fetter Lane, EC4, Vinci Construction is due
to complete the comprehensive refurbishment in October, to create
3,423 sqm of offices and eight residential apartments. Interest in
a single occupancy of the entire offices remains strong; not having
committed to a pre-letting has allowed the Group to take advantage
of the increase of over 10% in rents at the building in the past
six months.
The Vauxhall Nine Elms area continues to strengthen: in addition
to the ongoing construction of the new US and Dutch embassies, and
the demolition by Chinese developer, Dalian Wanda Group, of Market
Towers to make way for Vauxhall's first five-star hotel, the second
phase of the Battersea Power Station's residential scheme was
successfully brought to the market, and planning permission was
granted to Christies to replace its warehouse with 510 residential
units on a 2.7 acre site. At our Vauxhall Square site, in January
we conditionally entered into a long lease with a specialist
student housing developer/operator to build and manage the 359 bed
student building adjacent to the main Vauxhall Square site. We are
working on discharging the conditionality such that construction of
the first phase of the scheme can begin in 2015, without the
deployment of any Group cash. Interest from international hoteliers
for both of our hotels, which will be of at least a 4-star quality,
continues to be received and reviewed.
At 405 Kennington Road, SE11, which was acquired in 2013, a
planning application is in preparation to change the external
elevations prior to conversion to residential use. This is one of a
number of London office properties which have residential potential
as a viable alternative use and we fully support the government's
measures to ease the conversion of offices to residential, which
can both enhance asset values and satisfy the need for new
homes.
Rest of UK (8% of the Group's property activities)
Following the acquisition in September last year of the Neo
portfolio, we now report separately on the progress of the 32
properties which are outside London.
The UK economic recovery driven by London has begun to reach
other areas around the UK, and the UK's growth in GDP is forecast
to be 3.2% in 2014.
The portfolio is 99% let to 14 government departments. We have
already renewed two leases, and there are several asset management
opportunities within this portfolio which we look forward to
reporting on when completed.
In acquiring the Neo portfolio, we took a portfolio view on the
likelihood of occupiers leaving on breaks or lease expiries. There
is a concentration of these in March 2018 and the external valuers
are required by their professional rules to assume that each event
affects the value as if it will be exercised. This was a
significant feature in restricting the growth in the value of the
Rest of UK portfolio over the six months to 30 June 2014 to 0.8%;
ervs rose by 1.7%.
France (19% of the Group's property activities)
The French economy stagnated in the first quarter of 2014 and
the expected growth of only 0.7% in the full year is unlikely to
change the historically high rate of unemployment of 10.1%.
Against this background, letting activity in the Paris region in
the first half of 2014 has been 24% higher than last year's low
level, and the investment market recorded aggregate transactions in
Q2 2014 of double the same quarter last year.
We indicated six months ago that CLS's vacancy level in France
at 31 December 2013 was likely to have peaked, and following
strenuous efforts by the French team in the six months to 30 June
2014 it has fallen significantly to 7.1% (31 December 2013: 10.6%).
During the period occupiers vacated or leases expired on 6,970 sqm,
but we let or renewed 9,978 sqm, including 5,657 sqm of expiries,
and 1,634 sqm at Inside, Rueil-Malmaison, which was refurbished
towards the end of 2013 following a significant expiry. This is
currently an occupier's market and rents achieved in the French
portfolio in the first six months of the year have been 1.3% below
December 2013's ervs.
The value of our French investment portfolio fell marginally by
1.0% in local currency since the beginning of the year, reflecting
a fall in ervs of 1.4%. Three properties fell in aggregate by
EUR2.7 million: two present medium-term redevelopment
opportunities, and at the third the occupier has indicated its
intention to leave at the end of 2015. The value of the other 23
properties in the French portfolio, which benefited from increased
occupancy but falling rents, was broadly unchanged.
Germany (18% of the Group's property activities)
Economic indicators provide a mixed picture for the German
economy, albeit one more robust than much of the rest of the
Eurozone, with the latest Bundesbank forecasts for GDP growth of
1.9% but inflation of only 1.1% in 2014. Employment levels show a
positive trend, with an historically high 42.1 million people in
work and unemployment at 5.1%. The German business confidence
index, Ifo, whilst significantly higher than a year ago, has begun
to decline since May.
Vacancies in the German markets have fallen since mid-2010 and,
with a lack of good new properties, rents are rising. The take-up
of office space in the main German markets in the six months to 30
June 2014 was the same as the corresponding period last year at
around 1.2 million sqm, and the national vacancy rate was 7.3%.
The vacancy rate in our German portfolio, which was 7.4% 18
months ago, has fallen to an all-time low of 1.5% (31 December
2013: 3.5%), with strong occupational demand being captured in
significant lettings at Bismarckallee, Freiburg, Maximilian Forum,
Munich, and 2,121 sqm at Bismarckstrasse, Berlin. In the six months
to 30 June 2014, 3,480 sqm of space was let or renewed and only 385
sqm made vacant.
There were EUR16.9 billion of commercial investment transactions
in Germany in the first half of 2014, 34% higher than the
comparable period last year, and, including a relatively large
number of portfolio deals, the second highest half year result
since 2007. Following our EUR13.1 million acquisition in the heart
of Freiburg a year ago, we expect to make further acquisitions in
Germany before the end of the year. The availability of bank debt
in Germany continues to be the most prevalent, and the terms the
most advantageous, of our operating regions.
The value of the German portfolio increased by EUR3.6 million or
1.4% in local currency, but this was net of a fall of EUR3.5
million at Feldkirchen, near Munich, where the single occupier had
indicated its intention to vacate at the end of its lease in
December 2016. The remaining 16 properties in the German portfolio
increased in value by EUR7.1 million or 3.0% in local currency,
whilst ervs grew by 1.3%.
Sweden (8% of the Group's property activities)
The Swedish economy is forecast to grow by 2.5% in 2014 and 3.1%
in 2015, driven by the international outlook and domestic
consumption, but CPI inflation is forecast to be 0.0% in 2014.
In the six months to 30 June 2014, we acquired from a distressed
seller for GBP2.0 million a piece of land with planning permission
adjacent to retail park in Hyllinge, near Malmo. The aggregate
values of this acquisition, and the existing larger asset at
Vänerparken, rose marginally in the period by 0.2% in local
currency.
Catena AB, the Stockholm-listed real estate company in which the
Group owns a 13.5% shareholding, has continued to move forward the
planning process on its scheme for 800 apartments and 73,000 sqm of
offices at Haga Norra, Stockholm, and since 2013 now owns a
substantial logistics property portfolio across southern Sweden.
The market value of the Group's stake at 30 June was GBP31.0
million.
Cood Investments AB, the residential-focused property company in
which the Group owns 44.2%, is on track with its busy summer season
of bookings. In addition the operational improvement process is
ongoing to ensure it has a more efficient seasonal cost base. The
book value of the holding at 30 June 2014 was GBP2.5 million and we
remain confident in its future prospects.
RESULTS FOR THE PERIOD
Headlines
Profit after tax of GBP62.0 million (2013: GBP22.7 million)
generated basic earnings per share of 141.8 pence (2013: 52.7
pence), and EPRA earnings per share of 37.3 pence (2013: 33.0
pence). Gross property assets at 30 June 2014 rose to GBP1,168.8
million (31 December 2013: GBP1,132.9 million), net assets per
share increased by 12.1% to 1,226.9 pence (31 December 2013:
1,094.1 pence) and EPRA net assets per share by 11.3% to 1,412.0
pence (31 December 2013: 1,268.4 pence).
Statement of Comprehensive Income
We continue to increase the level of cash from operations
generated annually by the Group. Rental income for the six months
to 30 June 2014 of GBP42.1 million (2013: GBP35.9 million) was
higher than last year by a net GBP6.2 million, driven by the Neo
portfolio (GBP7.6 million) and other acquisitions (GBP1.7 million)
more than compensating for the negative effect of disposals (GBP0.8
million), the strength of sterling (GBP0.9 million), a one-off
surrender premium received in 2013 (GBP1.1 million) and other
leasing activity.
The increase in net rental income to GBP40.8 million (2013:
GBP35.0 million) drove an increase in Group revenue less costs to
GBP32.8 million (2013: GBP27.5 million).
Operating profit of GBP84.1 million (2013: GBP33.0 million) was
significantly ahead of that of last year due largely to non-cash
items. Investment property values rose in the six months by 4.0% in
local currencies or GBP45.2 million (2013: fall of GBP3.5 million),
and the disposal of Cambridge House for GBP29.5 million realised a
profit of GBP6.8 million.
Interest income of GBP3.9 million (2013: GBP5.5 million) was
lower than last year due to the lower average value of corporate
bonds held by the Group. Interest expense of GBP14.3 million (2013:
GBP12.7 million) was GBP1.6 million higher than in 2013, reflecting
the cost of the borrowings taken out to finance the acquisitions in
2013. The Board continues to favour floating rate debt, hedged by
interest rate caps, and with inter-bank lending rates unmoved
across Europe, our weighted cost of debt remained low at 3.73% (31
December 2013: 3.64%).
EPRA Net Assets Per Share
EPRA net assets per share rose from 1,268.4 pence to 1,412.0
pence in the six months to 30 June 2014, an increase of 143.6 pence
per share, or 11.3%. The majority of this increase came from the
property portfolio's revaluation, which added 104.4 pence per share
and other profits after tax contributed 51.2 pence per share, but
these were offset by foreign exchange losses of 20.2 pence per
share reflecting the strength of sterling.
Cash Flow, Net Debt and Gearing
The Group's ability to generate cash was enhanced by the
acquisitions in 2013, with net cash flow from operating activities
rising to GBP17.4 million (2013: GBP15.0 million), GBP10.0 million
of which was distributed to shareholders, and interest of GBP4.4
million was received from investments. Net proceeds of GBP29.3
million from the sale of Cambridge House were spent on the
development programme, and GBP53.6 million of bank loans were
repaid through amortisation or the repayment of short-term
facilities. A net GBP13.8 million was invested in corporate bonds
and in total cash and cash equivalents were reduced to GBP69.4
million at 30 June 2014, whilst undrawn facilities rose to GBP84.9
million (31 December 2013: GBP42.8 million).
In the six months to 30 June 2014, gross borrowings fell by
GBP68.7 million to GBP731.6 million (31 December 2013: GBP800.3
million), through loan repayments and foreign exchange movements.
The Group's weighted average property loan to value was 54.0%
(2013: 56.3%) and balance sheet loan to value was 50.3% (2013:
52.8%).
Share Capital
In May, 665,966 shares were cancelled under the tender offer
buy-back at 1,495 pence per share, and at 30 June 2014, there were
43,287,824 shares in issue, and 2,903,103 Treasury Shares held by
the Company.
SUSTAINABILITY
We have continued to make progress on sustainability. At Falcon
House, Hounslow TW3, which we bought in 2011, we have refurbished
the reception, ground and first floors of some 800 sqm in aggregate
to SKA Gold standard, and over the summer we will fit a chiller and
install the portfolio's third array of photovoltaic cells to
provide clean, renewable energy to tenants.
In the twelve months to April 2014, the total floor space of
managed UK buildings increased by 14.5% but consumption of gas and
electricity increased by only 3.8% and 1.8%, respectively,
resulting in a fall in CO2 emissions per square metre of 11.3%.
In Sweden, electricity consumption in 2013 fell by 9%, and waste
generation by 38%, and in France electricity consumption was down
by 11%.
In the first half of the year we increased our voluntary
reporting on sustainability by taking part in the Carbon Disclosure
Project sustainability reporting scheme for the first time, as well
as the Global Real Estate Sustainability Benchmark scheme for the
fourth time.
PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause the
results for the year to differ materially from expected or
historical results. The Directors do not consider that the
principal risks and uncertainties have changed since the
publication of the annual report for the year ended 31 December
2013. A detailed explanation of the risks summarised below can be
found on pages 30 and 31 of the 2013 Annual Report, which is
available at www.clsholdings.com:
-- Underperformance of investment portfolio due to:
- Cyclical downturn in property market
- Inappropriate buy/sell/hold decisions
- Changes in supply of space and/or occupier demand
- Poor asset management
-- Corporate bond investments:
- Underperformance of portfolio
- Insolvency of bond issuer
-- Failure to secure planning permission
-- Contractor solvency and availability
-- Downturn in investment or occupational markets
-- Increasing building regulation and obsolescence
-- Climate change
-- Increasing energy costs and regulation
-- Unavailability of financing at acceptable prices
-- Adverse interest rate movements
-- Breach of borrowing covenants
-- Foreign currency exposure
-- Financial counterparty credit risk
-- Increases in tax rates or changes to the basis of taxation
-- Break-up of the euro
-- Economic downturn
-- Inadequate working capital to remain a going concern for the next 12 months
GOING CONCERN
As stated in note 2 to the Condensed Group Financial Statements,
the Directors are satisfied that the Group has sufficient resources
to continue in operation for the foreseeable future, being a period
of not less than 12 months from the date of the approval of this
Half-Yearly Financial Report. Accordingly, they continue to adopt
the going concern basis in preparing the Condensed Group Financial
Statements.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
(b) the Chairman's Statement and Business Review include a fair
review of the information required by DTR 4.2.7R (indication of
important events during the first six months and description of
principal risks and uncertainties for the remaining six months of
the year); and
(c) the Chairman's Statement and Business Review include a fair
review of the information required by DTR 4.2.8R (disclosure of
related party transactions and changes therein).
On behalf of the Board
Sten Mortstedt Henry Klotz
Executive Chairman Executive Vice Chairman
13 August 2014
INDEPENDENT REVIEW REPORT TO CLS HOLDINGS PLC
We have been engaged by the Company to review the condensed set
of financial statements in the Half-Yearly Financial Report for the
six months ended 30 June 2014 which comprises the Condensed Group
Statement of Comprehensive Income, the Condensed Group Balance
Sheet, the Condensed Group Statement of Changes in Equity, the
Condensed Group Statement of Cash Flows and related notes 1 to 15.
We have read the other information contained in the Half-Yearly
Financial Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The Half-Yearly Financial Report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the Half-Yearly Financial Report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this Half-Yearly Financial Report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Half-Yearly
Financial Report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the Half-Yearly Financial Report for the six months ended 30
June 2014 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
13 August 2014
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2014
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
------------------------------------------------------------ ------ ------------- ------------- -------------
Continuing operations
Group revenue 49.8 43.3 91.2
------------------------------------------------------------ ------ ------------- ------------- -------------
Net rental income 3 40.8 35.0 73.1
Administration expenses (6.2) (5.7) (12.4)
Other expenses (1.8) (1.8) (3.5)
------------------------------------------------------------ ------ ------------- ------------- -------------
Group revenue less costs 32.8 27.5 57.2
Profit on sale of investment property 7.0 - 4.5
Profit on sale of joint venture - 1.8 1.8
Net (loss)/gain on sale of corporate bonds and
other financial investments (0.9) 7.2 14.1
Net movements on revaluation of investment properties 45.2 (3.5) (0.2)
Fair value gain on reclassification of an associate
as an investment - - 14.9
------------------------------------------------------------ ------ ------------- ------------- -------------
Operating profit 84.1 33.0 92.3
Finance income 4 4.6 6.2 7.6
Finance costs 5 (14.7) (10.2) (23.7)
Share of loss of associates after tax (1.4) (1.1) (4.8)
------------------------------------------------------------ ------ ------------- ------------- -------------
Profit before tax 72.6 27.9 71.4
Taxation 6 (10.6) (5.2) (8.2)
------------------------------------------------------------ ------ ------------- ------------- -------------
Profit for the period 62.0 22.7 63.2
------------------------------------------------------------ ------ ------------- ------------- -------------
Other comprehensive income
Items that will not be reclassified to profit or
loss
Foreign exchange differences (6.1) 8.5 3.4
------------------------------------------------------------ ------ ------------- ------------- -------------
Items that may be reclassified to profit or loss
Fair value gains/(losses) on corporate bonds and
other financial investments 4.6 (0.1) (1.4)
Fair value losses/(gains) taken to net (loss)/gain
on sale of corporate bonds and other financial
investments 0.1 (4.6) (11.2)
Deferred tax on net fair value gains on corporate
bonds and other financial investments 6 (0.8) 1.5 3.1
Revaluation of owner-occupied property 0.4 (0.1) -
------------------------------------------------------------ ------ ------------- ------------- -------------
Total items that may be reclassified to profit
or loss 4.3 (3.3) (9.5)
------------------------------------------------------------ ------ ------------- ------------- -------------
Total comprehensive income for the period 60.2 27.9 57.1
------------------------------------------------------------ ------ ------------- ------------- -------------
Earnings per share from continuing operations attributable
to the owners of the Company during the period
(expressed in pence per share)
Basic 7 141.8p 52.7 146.9
Diluted 7 141.8p 52.6 146.7
------------------------------------------------------------ ------ ------------- ------------- -------------
CONDENSED GROUP BALANCE SHEET
at 30 June 2014
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
------------------------------------- ------ ------------- ------------- ------------
Non-current assets
Investment properties 9 1,168.8 1,001.8 1,132.9
Property, plant and equipment 3.4 2.7 2.8
Goodwill 1.1 1.1 1.1
Investments in associates 10 6.5 33.5 9.1
Other financial investments 11 120.1 92.3 104.3
Derivative financial instruments 0.1 0.5 0.4
Deferred tax 6 5.0 6.6 6.4
------------------------------------- ------ ------------- ------------- ------------
1,305.0 1,138.5 1,257.0
------------------------------------- ------ ------------- ------------- ------------
Current assets
Trade and other receivables 10.9 13.2 12.7
Derivative financial instruments 0.6 - 0.3
Cash and cash equivalents 69.4 69.7 129.8
------------------------------------- ------ ------------- ------------- ------------
80.9 82.9 142.8
------------------------------------- ------ ------------- ------------- ------------
Total assets 1,385.9 1,221.4 1,399.8
------------------------------------- ------ ------------- ------------- ------------
Current liabilities
Trade and other payables (37.1) (35.1) (40.3)
Current tax 6 (6.6) (5.1) (3.5)
Borrowings 12 (98.9) (99.9) (77.5)
Derivative financial instruments - (0.2) -
------------------------------------- ------ ------------- ------------- ------------
(142.6) (140.3) (121.3)
Non-current liabilities
Deferred tax 6 (78.5) (78.9) (74.4)
Borrowings 12 (628.2) (557.3) (717.3)
Derivative financial instruments (5.5) (7.1) (5.9)
------------------------------------- ------ ------------- ------------- ------------
(712.2) (643.3) (797.6)
------------------------------------- ------ ------------- ------------- ------------
Total liabilities (854.8) (783.6) (918.9)
------------------------------------- ------ ------------- ------------- ------------
Net assets 531.1 437.8 480.9
------------------------------------- ------ ------------- ------------- ------------
Equity
Share capital 13 11.5 11.8 11.7
Share premium 82.9 71.5 82.9
Other reserves 94.4 107.2 96.0
Retained earnings 342.3 247.3 290.3
------------------------------------- ------ ------------- ------------- ------------
Total equity 531.1 437.8 480.9
------------------------------------- ------ ------------- ------------- ------------
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2014
Share Share Other Retained
capital premium reserves earnings Total
Unaudited GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- --------- --------- ---------- ---------- -------
Arising in the six months ended 30 June
2014:
Total comprehensive income for the period - - (1.8) 62.0 60.2
Purchase of own shares (0.2) - 0.2 (10.0) (10.0)
---------------------------------------------- --------- --------- ---------- ---------- -------
Total changes arising in the period (0.2) - (1.6) 52.0 50.2
At 1 January 2014 11.7 82.9 96.0 290.3 480.9
---------------------------------------------- --------- --------- ---------- ---------- -------
At 30 June 2014 11.5 82.9 94.4 342.3 531.1
---------------------------------------------- --------- --------- ---------- ---------- -------
Share Share Other Retained
capital premium reserves earnings Total
Unaudited GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- --------- --------- ---------- ---------- ------
Arising in the six months ended 30 June
2013:
Total comprehensive income for the period - - 5.2 22.7 27.9
Purchase of own shares (0.2) - 0.2 (8.6) (8.6)
Exercise of share options - - - 1.4 1.4
---------------------------------------------- --------- --------- ---------- ---------- ------
Total changes arising in the period (0.2) - 5.4 15.5 20.7
At 1 January 2013 12.0 71.5 101.8 231.8 417.1
---------------------------------------------- --------- --------- ---------- ---------- ------
At 30 June 2013 11.8 71.5 107.2 247.3 437.8
---------------------------------------------- --------- --------- ---------- ---------- ------
Share Share Other Retained
capital premium reserves earnings Total
Audited GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- --------- --------- ---------- ---------- -------
Arising in the year ended 31 December
2013:
Total comprehensive income for the year - - (6.1) 63.2 57.1
Issue of share capital - 11.4 - 8.0 19.4
Expenses thereof - - - (0.4) (0.4)
Exercise of share options - - - 1.4 1.4
Purchase of own shares (0.3) - 0.3 (13.6) (13.6)
Expenses thereof - - - (0.1) (0.1)
-------------------------------------------- --------- --------- ---------- ---------- -------
Total changes arising in 2013 (0.3) 11.4 (5.8) 58.5 63.8
At 1 January 2013 12.0 71.5 101.8 231.8 417.1
-------------------------------------------- --------- --------- ---------- ---------- -------
At 31 December 2013 11.7 82.9 96.0 290.3 480.9
-------------------------------------------- --------- --------- ---------- ---------- -------
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the six months ended 30 June 2014
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
--------------------------------------------------------- ------ ------------- ------------- -------------
Cash flows from operating activities
Cash generated from operations 14 30.4 26.2 63.4
Interest paid (12.7) (9.1) (22.2)
Income tax paid (0.3) (2.1) (5.4)
--------------------------------------------------------- ------ ------------- ------------- -------------
Net cash inflow from operating activities 17.4 15.0 35.8
--------------------------------------------------------- ------ ------------- ------------- -------------
Cash flows from investing activities
Purchase of investment property (0.6) (35.4) (165.3)
Capital expenditure on investment property (30.5) (12.1) (34.3)
Proceeds from sale of investment property 29.3 - 13.2
Proceeds from sale of joint venture - 2.6 4.4
Interest received 4.4 8.3 11.2
Purchase of corporate bonds (58.3) (39.9) (110.6)
Proceeds from sale of corporate bonds 44.5 83.0 172.9
Purchase of equity investments (2.6) (2.8) (3.3)
Dividends received from equity investments 0.7 0.3 0.4
Proceeds from sale of equity investments 0.4 1.7 3.1
Purchase of interests in associate undertakings - (0.3) (0.3)
Loans (made to)/repaid from associate undertakings (1.1) 2.3 (1.2)
Distributions received from associate undertakings 0.8 0.3 0.3
Income from/(costs of) foreign currency transactions 0.8 (0.4) (1.7)
Costs of corporate disposals - - (0.3)
Purchases of property, plant and equipment (0.3) - (0.3)
--------------------------------------------------------- ------ ------------- ------------- -------------
Net cash (outflow)/inflow from investing activities (12.5) 7.6 (111.8)
--------------------------------------------------------- ------ ------------- ------------- -------------
Cash flows from financing activities
Proceeds from issue of shares - 1.4 20.4
Purchase of own shares (10.0) (8.6) (13.7)
New loans - 20.8 207.4
Issue costs of new loans - (0.2) (1.9)
Repayment of loans (53.6) (65.7) (103.4)
Purchase or cancellation of derivative financial
instruments - (0.3) (0.3)
--------------------------------------------------------- ------ ------------- ------------- -------------
Net cash (outflow)/inflow from financing activities (63.6) (52.6) 108.5
--------------------------------------------------------- ------ ------------- ------------- -------------
Cash flow element of net (decrease)/increase in
cash and cash equivalents (58.7) (30.0) 32.5
Foreign exchange (loss)/gain (1.7) 2.1 (0.3)
--------------------------------------------------------- ------ ------------- ------------- -------------
Net (decrease)/increase in cash and cash equivalents (60.4) (27.9) 32.2
Cash and cash equivalents at the beginning of the
period 129.8 97.6 97.6
--------------------------------------------------------- ------ ------------- ------------- -------------
Cash and cash equivalents at the end of the period 69.4 69.7 129.8
--------------------------------------------------------- ------ ------------- ------------- -------------
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS
30 June 2014
1 BASIS OF PREPARATION
The financial information contained in this Half-Yearly
Financial Report does not constitute statutory accounts as defined
in section 434 of the Companies Act 2006. The results for the year
ended 31 December 2013 are an abridged version of the full accounts
for that year, which received an unqualified report from the
auditor, did not contain a statement under section 498(2) or (3) of
the Companies Act 2006 or include a reference to any matter to
which the auditor drew attention by way of emphasis without
qualifying the auditor's report, and have been filed with the
Registrar of Companies. The annual financial statements of CLS
Holdings plc are prepared in accordance with IFRSs as adopted by
the European Union. The condensed set of financial statements
included in this Half-Yearly Financial Report has been prepared in
accordance with IAS 34 Interim Financial Reporting, as adopted by
the European Union. The same accounting policies, presentation and
methods of computation are followed in the condensed set of
financial statements as applied in the latest audited annual
financial statements.
2 GOING CONCERN
The Directors regularly stress-test the business model to ensure
that the Group has adequate working capital. They have reviewed the
current and projected financial position of the Group as discussed
in the Business Review, taking into account the repayment profile
of the Group's loan portfolio, and making reasonable assumptions
about future trading performance. The Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and, therefore,
they continue to adopt the going concern basis in preparing the
Half-Yearly Financial Report.
3 SEGMENT INFORMATION
The Group has two operating divisions - Investment Property and
Other Investments. Other Investments comprise corporate bonds,
shares in Catena AB, Bulgarian Land Development Plc and Cood
Investments AB, and other small corporate investments. The Group
manages the Investment Property division on a geographical basis
due to its size and geographical diversity. Consequently, the
Group's principal operating segments are:
Investment Property London
- Rest of United
Kingdom
France
Germany
Sweden
Other Investments
There are no transactions between the operating segments.
In order to reflect the significant number of UK properties
outside London acquired in late 2013, and the way in which they are
now managed, the United Kingdom segment has been sub-divided
between London and Rest of UK for the first time, and the
comparative results have been restated accordingly.
The Group's results for the six months ended 30 June 2014 by
operating segment were as follows:
Investment Property
--------------------------------------- ------------------------------------------------
London Rest of UK France Germany Sweden Other Investments Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ------- ----------- ------- -------- ------- ------------------ -------
Rental income 15.5 6.6 9.0 7.8 3.2 - 42.1
Other property-related income 0.6 - 0.1 0.1 - - 0.8
Service charge income 2.8 - 2.7 1.3 0.1 - 6.9
Service charges and similar expenses (3.5) - (3.0) (1.7) (0.8) - (9.0)
--------------------------------------- ------- ----------- ------- -------- ------- ------------------ -------
Net rental income 15.4 6.6 8.8 7.5 2.5 - 40.8
Administration expenses (1.3) (0.1) (0.7) (0.6) (0.2) (0.2) (3.1)
Other expenses (0.7) (0.2) (0.5) (0.4) - - (1.8)
--------------------------------------- ------- ----------- ------- -------- ------- ------------------ -------
Group revenue less costs 13.4 6.3 7.6 6.5 2.3 (0.2) 35.9
Profit on sale of investment
properties 6.8 - 0.2 - - - 7.0
Net loss on sale of corporate bonds
and other financial investments - - - - - (0.9) (0.9)
Net movements on revaluation of
investment properties 43.9 0.7 (2.6) 3.0 0.2 - 45.2
--------------------------------------- ------- ----------- ------- -------- ------- ------------------ -------
Segment operating profit/(loss) 64.1 7.0 5.2 9.5 2.5 (1.1) 87.2
Finance income - - - - - 4.6 4.6
Finance costs (5.2) (1.7) (1.6) (1.3) (0.5) (4.4) (14.7)
Share of loss of associates after tax - - - - - (1.4) (1.4)
--------------------------------------- ------- ----------- ------- -------- ------- ------------------ -------
Segment profit/(loss) before tax 58.9 5.3 3.6 8.2 2.0 (2.3) 75.7
--------------------------------------- ------- ----------- ------- -------- ------- ------------------
Central administration expenses (3.1)
--------------------------------------- ------- ----------- ------- -------- ------- ------------------ -------
Profit before tax 72.6
--------------------------------------- ------- ----------- ------- -------- ------- ------------------ -------
The Group's results for the six months ended 30 June 2013 by
operating segment were as follows:
Investment Property
--------------------------------- ---------------------------------------------
Rest of Other
London UK France Germany Sweden Investments Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------- -------- ------- -------- ------- ------------- -------
Rental income 15.2 - 10.0 7.3 3.4 - 35.9
Other property-related income 0.3 - 0.3 0.1 - - 0.7
Service charge income 2.3 - 3.1 1.1 0.2 - 6.7
Service charges and similar
expenses (2.9) - (3.1) (1.5) (0.8) - (8.3)
--------------------------------- ------- -------- ------- -------- ------- ------------- -------
Net rental income 14.9 - 10.3 7.0 2.8 - 35.0
Administration expenses (1.2) - (0.7) (0.6) (0.2) (0.3) (3.0)
Other expenses (0.7) - (0.3) (0.7) (0.1) - (1.8)
--------------------------------- ------- -------- ------- -------- ------- ------------- -------
Group revenue less costs 13.0 - 9.3 5.7 2.5 (0.3) 30.2
Profit on sale of joint venture 1.8 - - - - - 1.8
Net gain on sale of corporate
bonds and other investments - - - - - 7.2 7.2
Net movements on revaluation
of investment properties 0.6 - (4.1) 0.7 (0.7) - (3.5)
Segment operating profit 15.4 - 5.2 6.4 1.8 6.9 35.7
Finance income - - - - - 6.2 6.2
Finance costs (4.1) - (1.6) (1.5) (0.4) (2.6) (10.2)
Share of loss of associates
after tax - - - - - (1.1) (1.1)
--------------------------------- ------- -------- ------- -------- ------- ------------- -------
Segment profit before tax 11.3 - 3.6 4.9 1.4 9.4 30.6
--------------------------------- ------- -------- ------- -------- ------- -------------
Central administration expenses (2.7)
--------------------------------- ------- -------- ------- -------- ------- ------------- -------
Profit before tax 27.9
--------------------------------- ------- -------- ------- -------- ------- ------------- -------
The Group's results for the year ended 31 December 2013 were as
follows:
Investment Property
------------------------------------- ---------------------------------------------
Rest of
London UK France Germany Sweden Other Investments Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- ------- -------- ------- -------- ------- ------------------ -------
Rental income 30.8 3.9 19.2 15.5 6.6 - 76.0
Other property-related income 0.7 - 0.4 0.1 - - 1.2
Service charge income 5.1 - 5.4 3.1 0.4 - 14.0
Service charges and similar
expenses (6.5) (0.1) (5.7) (3.4) (2.4) - (18.1)
------------------------------------- ------- -------- ------- -------- ------- ------------------ -------
Net rental income 30.1 3.8 19.3 15.3 4.6 - 73.1
Administration expenses (3.0) - (1.4) (1.3) (0.6) (0.5) (6.8)
Other expenses (1.5) (0.1) (0.6) (1.1) (0.2) - (3.5)
------------------------------------- ------- -------- ------- -------- ------- ------------------ -------
Group revenue less costs 25.6 3.7 17.3 12.9 3.8 (0.5) 62.8
Profit on sale of investment
property 4.5 - - - - - 4.5
Profit on sale of joint venture 1.8 - - - - - 1.8
Net gain on sale of corporate
bonds and other financial
instruments - - - - - 14.1 14.1
Net movements on revaluation
of investment properties 15.3 (4.3) (9.2) (0.6) (1.4) - (0.2)
Fair value gain on reclassification
of an associate as an investment - - - - - 14.9 14.9
Segment operating profit/(loss) 47.2 (0.6) 8.1 12.3 2.4 28.5 97.9
Finance income - - - - - 7.6 7.6
Finance costs (9.1) (0.5) (3.2) (2.9) (0.8) (7.2) (23.7)
Share of loss of associates
after tax - - - - - (4.8) (4.8)
------------------------------------- ------- -------- ------- -------- ------- ------------------ -------
Segment profit/(loss) before
tax 38.1 (1.1) 4.9 9.4 1.6 24.1 77.0
------------------------------------- ------- -------- ------- -------- ------- ------------------
Central administration expenses (5.6)
------------------------------------- ------- -------- ------- -------- ------- ------------------ -------
Profit before tax 71.4
------------------------------------- ------- -------- ------- -------- ------- ------------------ -------
Segment assets and liabilities
Assets Liabilities
-------------------------------- --------------------------------
30 June 30 June 31 December 30 June 30 June 31 December
2014 2013 2013 2014 2013 2013
GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- -------- ------------ -------- -------- ------------
Investment
Property
London 578.3 493.6 542.2 345.7 366.4 374.9
Rest of UK 99.5 - 98.7 81.4 - 82.2
France 235.6 258.5 245.1 196.0 215.1 206.2
Germany 214.9 232.0 220.3 140.1 158.4 147.7
Sweden 63.4 65.6 67.5 42.7 40.5 44.5
Other investments 194.2 171.7 226.0 48.9 3.2 63.4
------------------- -------- -------- ------------ -------- -------- ------------
1,385.9 1,221.4 1,399.8 854.8 783.6 918.9
------------------- -------- -------- ------------ -------- -------- ------------
Segment capital expenditure
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
--------------------- ----------- ----------- -------------
Investment Property
London 29.1 33.2 78.9
Rest of UK - - 101.5
France 1.3 1.4 4.7
Germany 0.5 12.7 13.2
Sweden 3.1 0.6 2.1
--------------------- ----------- ----------- -------------
34.0 47.9 200.4
--------------------- ----------- ----------- -------------
4 FINANCE INCOME
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
---------------------------- ----------- ----------- -------------
Interest income 3.9 5.5 7.2
Other finance income 0.7 0.3 0.4
Foreign exchange variances - 0.4 -
---------------------------- ----------- ----------- -------------
4.6 6.2 7.6
---------------------------- ----------- ----------- -------------
5 FINANCE COSTS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
--------------------------------------------------------------- ----------- ----------- -------------
Interest expense
Bank loans 7.0 7.1 13.9
Debenture loan 1.6 1.6 3.3
Zero-coupon note 0.7 0.7 1.4
Secured notes 1.7 - 0.3
Unsecured bonds 2.4 2.5 5.1
Amortisation of loan issue costs 0.9 0.8 2.1
--------------------------------------------------------------- ----------- ----------- -------------
Total interest costs 14.3 12.7 26.1
Less interest capitalised on development projects (1.3) (0.3) (0.9)
--------------------------------------------------------------- ----------- ----------- -------------
13.0 12.4 25.2
Movement in fair value of derivative financial instruments
Interest rate swaps: transactions not qualifying as hedges (0.3) (2.2) (3.4)
Interest rate caps: transactions not qualifying as hedges 0.3 - 0.1
Foreign exchange variances 1.7 - 1.8
--------------------------------------------------------------- ----------- ----------- -------------
14.7 10.2 23.7
--------------------------------------------------------------- ----------- ----------- -------------
6 TAXATION
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
-------------- ----------- ----------- -------------
Current tax 3.5 3.5 5.3
Deferred tax 7.1 1.7 2.9
-------------- ----------- ----------- -------------
10.6 5.2 8.2
-------------- ----------- ----------- -------------
The balance sheet movement in current and deferred tax since the
last reported balance sheet is as follows:
Deferred Deferred
Current tax tax tax Total Net
Liability Asset Liability Liability
GBPm GBPm GBPm GBPm
----------------------------------------- ------------ --------- ----------- -----------
At 1 January 2014 (3.5) 6.4 (74.4) (71.5)
Charged in arriving at profit after tax (3.5) (1.2) (5.9) (10.6)
Charged to other comprehensive income - (0.1) (0.7) (0.8)
Net tax paid 0.3 - - 0.3
Foreign exchange variances 0.1 (0.1) 2.5 2.5
----------------------------------------- ------------ --------- ----------- -----------
At 30 June 2014 (6.6) 5.0 (78.5) (80.1)
----------------------------------------- ------------ --------- ----------- -----------
7 EARNINGS PER SHARE
Management has chosen to disclose the European Public Real
Estate Association (EPRA) measure of earnings per share, which has
been provided to give relevant information to investors on the
long-term performance of the Group's underlying business. The EPRA
measure excludes items which are non-recurring in nature such as
profits (net of related tax) on sale of investment properties and
of other non-current investments, and items which have no impact to
earnings over their life, such as the change in fair value of
derivative financial instruments and the net movement on
revaluation of investment properties, and the related deferred
taxation on these items.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Earnings GBPm GBPm GBPm
---------------------------------------------------------------- ----------- ----------- -------------
Profit for the period 62.0 22.7 63.2
Profit on sale of investment property (7.0) - (4.5)
Profit on sale of joint venture - (1.8) (1.8)
Net loss/(gain) on sale of corporate bonds and other financial
investments 0.9 (7.2) (14.1)
Net movements on investment properties (45.2) 3.5 0.2
Fair value gain on reclassification of an associate as
an investment - - (14.9)
Impairment of carrying value of associate - - 4.0
Change in fair value of derivative financial instruments - (2.2) (3.3)
Deferred tax relating to the above adjustments 5.6 (0.1) (0.3)
Adjustments in respect of associates - (0.7) -
---------------------------------------------------------------- ----------- ----------- -------------
EPRA earnings 16.3 14.2 28.5
---------------------------------------------------------------- ----------- ----------- -------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Weighted average number of ordinary 2014 2013 2013
shares in circulation Number Number Number
------------------------------------- ----------- ----------- -------------
Weighted average number of ordinary
shares in circulation 43,733,028 43,058,195 43,026,586
Dilutive share options(1) - 98,031 59,992
------------------------------------- ----------- ----------- -------------
Diluted weighted average number
of ordinary shares 43,733,028 43,156,226 43,086,578
------------------------------------- ----------- ----------- -------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Earnings per Share Pence Pence Pence
-------------------- ----------- ----------- -------------
Basic 141.8 52.7 146.9
Diluted 141.8 52.6 146.7
EPRA 37.3 33.0 66.2
-------------------- ----------- ----------- -------------
1. 300,000 share options were granted on 11 March 2010 at an
exercise price of 470 pence, and exercised on 17 May 2013.
8 NET ASSETS PER SHARE
Management has chosen to disclose the two European Public Real
Estate Association (EPRA) measures of net assets per share: EPRA
net assets per share; and EPRA triple net assets per share. The
EPRA net assets per share measure highlights the fair value of
equity on a long-term basis, and so excludes items which have no
impact on the Group in the long term, such as fair value movements
of derivative financial instruments and deferred tax on the fair
value of investment properties. The EPRA triple net assets per
share measure discloses net assets per share on a true fair value
basis: all balance sheet items are included at their fair value in
arriving at this measure, including deferred tax, fixed rate loan
liabilities and any other balance sheet items not reported at fair
value.
30 June 30 June 31 December
2014 2013 2013
Net Assets GBPm GBPm GBPm
----------------------------------------------------------- -------- -------- ------------
Basic net assets 531.1 437.8 480.9
Adjustment to increase fixed rate debt to fair value, net
of tax (22.2) (19.7) (21.1)
Goodwill as a result of deferred tax (1.1) (1.1) (1.1)
----------------------------------------------------------- -------- -------- ------------
EPRA triple net assets 507.8 417.0 458.7
Deferred tax on property and other non-current assets 76.4 75.9 72.5
Fair value of derivative financial instruments 4.8 6.8 5.2
Adjustment to decrease fixed rate debt to book value, net
of tax 22.2 19.7 21.1
Adjustments in respect of associates - 3.4 -
----------------------------------------------------------- -------- -------- ------------
EPRA net assets 611.2 522.8 557.5
----------------------------------------------------------- -------- -------- ------------
30 June 30 June 31 December
2014 2013 2013
Number of ordinary shares in circulation Number Number Number
------------------------------------------ ----------- ----------- ------------
Number of ordinary shares in circulation 43,287,824 42,722,083 43,953,790
------------------------------------------ ----------- ----------- ------------
30 June 30 June 31 December
2014 2013 2013
Net Assets per Share Pence Pence Pence
---------------------- -------- -------- ------------
Basic 1,226.9 1,024.8 1,094.1
EPRA 1,412.0 1,223.7 1,268.4
EPRA triple net 1,173.1 976.0 1,043.6
---------------------- -------- -------- ------------
9 INVESTMENT PROPERTIES
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
------------ -------- -------- ------------
London 570.3 468.6 519.9
Rest of UK 98.7 - 97.9
France 230.8 249.7 240.6
Germany 209.9 221.4 214.4
Sweden 59.1 62.1 60.1
------------ -------- -------- ------------
1,168.8 1,001.8 1,132.9
------------ -------- -------- ------------
The movement in investment properties since the last reported
balance sheet was as follows:
London Rest of UK France Germany Sweden Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------- ----------- ------- -------- ------- --------
At 1 January 2014 519.9 97.9 240.6 214.4 60.1 1,132.9
Acquisitions - - - - 2.0 2.0
Capital expenditure 28.8 - 1.3 0.5 1.1 31.7
Disposals (22.4) - - - - (22.4)
Net movements on revaluation
of investment properties 43.9 0.8 (2.5) 2.9 0.1 45.2
Rent-free period debtor
adjustments 0.1 - 0.1 (0.1) - 0.1
Exchange rate variances - - (8.7) (7.8) (4.2) (20.7)
------------------------------ ------- ----------- ------- -------- ------- --------
At 30 June 2014 570.3 98.7 230.8 209.9 59.1 1,168.8
------------------------------ ------- ----------- ------- -------- ------- --------
The investment properties were revalued at 30 June 2014 to their
fair value. Valuations were based on current prices in an active
market for all properties. The property valuations were carried out
by external, professionally qualified valuers as follows:
London: Lambert Smith Hampton, Savills or Knight Frank
Rest of UK: Savills or Lambert Smith Hampton
France: Jones Lang LaSalle
Germany: Colliers International
Sweden: CB Richard Ellis
Investment properties include leasehold properties with a
carrying value of GBP56.6 million (30 June 2013: GBP19.4 million;
31 December 2013: GBP57.4 million).
Where the Group leases out its investment property under
operating leases the duration is typically three years or more. No
contingent rents have been recognised in the current or comparative
years.
Substantially all investment properties are secured against
debt.
10 INVESTMENTS IN ASSOCIATES
Bulgarian
Land Development
Plc Other associates Total
At 30 June 2014 GBPm GBPm GBPm
----------------------------------------- ------------------ ----------------- -------
Interest held in ordinary share capital 48.3% various
Revenues - 2.5 2.5
----------------------------------------- ------------------ ----------------- -------
Share loss of associates after tax (0.2) (1.2) (1.4)
----------------------------------------- ------------------ ----------------- -------
Assets 6.6 17.0 23.6
Liabilities (0.4) (10.5) (10.9)
----------------------------------------- ------------------ ----------------- -------
Net assets 6.2 6.5 12.7
Goodwill - 1.4 1.4
Impairment (3.9) (3.7) (7.6)
----------------------------------------- ------------------ ----------------- -------
Investments in associates 2.3 4.2 6.5
----------------------------------------- ------------------ ----------------- -------
Bulgarian
Land Development
Catena AB Plc Other associates Total
At 30 June 2013 GBPm GBPm GBPm GBPm
-------------------------------------------- ---------- ------------------ ----------------- -------
Interest held in ordinary share capital 29.9% 48.3% various
Revenues 0.4 0.1 1.8 2.3
-------------------------------------------- ---------- ------------------ ----------------- -------
Share of profit/(loss) of associates after
tax 0.9 (0.2) (1.8) (1.1)
-------------------------------------------- ---------- ------------------ ----------------- -------
Assets 27.9 8.6 20.0 56.5
Liabilities (13.2) (0.6) (17.3) (31.1)
-------------------------------------------- ---------- ------------------ ----------------- -------
Net assets 14.7 8.0 2.7 25.4
Goodwill 5.4 - 2.7 8.1
-------------------------------------------- ---------- ------------------ ----------------- -------
Investments in associates 20.1 8.0 5.4 33.5
-------------------------------------------- ---------- ------------------ ----------------- -------
Bulgarian
Land Development
Catena AB Plc Other associates Total
At 31 December 2013 GBPm GBPm GBPm GBPm
-------------------------------------------- ---------- ------------------ ----------------- ------
Interest held in ordinary share capital 13.8% 48.3% various
Revenues 0.6 0.2 6.4 7.2
-------------------------------------------- ---------- ------------------ ----------------- ------
Share of profit/(loss) of associates after
tax, before impairment 1.0 (0.6) (1.2) (0.8)
Impairment - (4.0) - (4.0)
-------------------------------------------- ---------- ------------------ ----------------- ------
Share of profit/(loss) of associates after
tax 1.0 (4.6) (1.2) (4.8)
-------------------------------------------- ---------- ------------------ ----------------- ------
Assets - 7.8 17.6 25.4
Liabilities - (0.4) (9.4) (9.8)
-------------------------------------------- ---------- ------------------ ----------------- ------
Net assets - 7.4 8.2 15.6
Goodwill - - 1.5 1.5
Impairment - (4.0) (4.0) (8.0)
-------------------------------------------- ---------- ------------------ ----------------- ------
Investments in associates - 3.4 5.7 9.1
-------------------------------------------- ---------- ------------------ ----------------- ------
On 30 September 2013, Catena AB issued new shares in payment for
an acquisition, reducing the Group's interest in Catena from 29.9%
to 13.8%. Consequently, the investment in Catena was reclassified
as an available-for-sale financial investment and held at fair
value by reference to Catena's share price.
The movement in associates since the last reported balance sheet
is as follows:
Net assets Goodwill Impairment Total
GBPm GBPm GBPm GBPm
--------------------------------------- ----------- --------- ----------- ------
At 1 January 2014 15.6 1.5 (8.0) 9.1
Share of loss of associates after tax (1.4) - - (1.4)
Dividends received (0.8) - - (0.8)
Exchange rate differences (0.7) (0.1) 0.4 (0.4)
--------------------------------------- ----------- --------- ----------- ------
At 30 June 2014 12.7 1.4 (7.6) 6.5
--------------------------------------- ----------- --------- ----------- ------
11 OTHER FINANCIAL INVESTMENTS
Destination 30 June 30 June 31 December
of 2014 2013 2013
Investment type Investment GBPm GBPm GBPm
------------------------ ----------------------- ------------- -------- -------- ------------
Available-for-sale
financial investments
carried at fair Listed corporate
value bonds UK 30.2 50.4 28.4
Eurozone 9.5 13.5 10.8
Other 44.6 25.0 30.2
-------- -------- ------------
84.3 88.9 69.4
Listed equity
securities UK 0.2 0.2 0.2
Sweden 32.7 2.8 34.1
Other - - 0.3
Unlisted investments Sweden 2.9 0.3 0.3
Government securities UK - 0.1 -
------------------------ ----------------------- ------------- -------- -------- ------------
120.1 92.3 104.3
-------------------------------------------------------------- -------- -------- ------------
The movement of other investments since the last reported
balance sheet, based on the methods used to measure their fair
value, is given below:
Level 3
Level 1 Level 2 Other
Quoted Observable Valuation
Market price Market data methods* Total
GBPm GBPm GBPm GBPm
-------------------------------------------------- -------------- ------------- ----------- -------
At 1 January 2014 34.6 69.4 0.3 104.3
Additions - 58.3 2.6 60.9
Disposals (0.5) (45.2) (0.1) (45.8)
Fair value movements recognised in reserves
on available-for-sale assets 1.1 3.5 - 4.6
Fair value movements recognised in profit before
tax on available-for-sale assets 0.1 (0.1) 0.1 0.1
Exchange rate variations (2.4) (1.6) - (4.0)
-------------------------------------------------- -------------- ------------- ----------- -------
At 30 June 2014 32.9 84.3 2.9 120.1
-------------------------------------------------- -------------- ------------- ----------- -------
* Unlisted equity shares valued using multiples from comparable
listed organisations.
The net (loss)/gain on sale of corporate bonds and other
investments for the six months ended 30 June 2014 included a
valuation impairment of GBPnil (30 June 2013: GBP0.3 million; 31
December 2013: GBP0.3 million).
Corporate Bond Portfolio
At 30 June 2014
Travel
and Food
Sector Banking Insurance Tourism Producers Other Total
--------- ----------------- --------------- --------- ----------- ------------------ ---------
Value GBP36.6m GBP5.3m GBP10.7m GBP4.9m GBP26.8m GBP84.3m
Running
yield 10.5% 6.7% 6.8% 9.0% 7.4% 7.5%
--------- ----------------- --------------- --------- ----------- ------------------ ---------
British
Issuers Societe Generale Brit Insurance Airways Boparan Vedanta Resources
Bank of Ireland Phoenix Life Stena Findus Telecom Italia
Deutsche
Bank SAS Arcelor Mittal
Commerzbank TUI Corral Finans
Credit Agricole Manutencoop
Rothschild Century Link
SNS Bank Stora Enso
Unicredit Enel
Barclays Dell
Investec
Lloyds
RBS
--------- ----------------- --------------- --------- ----------- ------------------ ---------
12 BORROWINGS
Maturity profile
Bank Debenture Zero coupon Unsecured Secured
loans loans note bonds notes Total
At 30 June 2014 GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Within one year or on
demand 94.8 1.6 - - 4.2 100.6
More than one but not
more than two years 221.5 1.7 - 26.2 4.2 253.6
More than two but not
more than five years 171.8 6.4 - - 12.5 190.7
More than five years 30.5 20.0 14.2 65.0 57.0 186.7
-------------------------------- ------- ---------- ------------ ---------- -------- -------
518.6 29.7 14.2 91.2 77.9 731.6
Unamortised issue costs (2.5) - - (1.1) (0.9) (4.5)
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Borrowings 516.1 29.7 14.2 90.1 77.0 727.1
Less amount due for settlement
within 12 months (93.7) (1.6) - 0.4 (4.0) (98.9)
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Amount due for settlement
after 12 months 422.4 28.1 14.2 90.5 73.0 628.2
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Bank Debenture Zero coupon Unsecured Secured
loans loans note bonds notes Total
At 30 June 2013 GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Within one year or on
demand 99.9 1.4 - - - 101.3
More than one but not
more than two years 39.9 1.6 - - - 41.5
More than two but not
more than five years 340.0 5.8 - 29.4 - 375.2
More than five years 43.8 22.4 12.8 65.0 - 144.0
-------------------------------- ------- ---------- ------------ ---------- -------- -------
523.6 31.2 12.8 94.4 - 662.0
Unamortised issue costs (3.5) - - (1.3) - (4.8)
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Borrowings 520.1 31.2 12.8 93.1 - 657.2
Less amount due for settlement
within 12 months (98.8) (1.4) - 0.3 - (99.9)
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Amount due for settlement
after 12 months 421.3 29.8 12.8 93.4 - 557.3
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Bank Debenture Zero coupon Unsecured Secured
loans loans note bonds notes Total
At 31 December 2013 GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Within one year or on
demand 73.7 1.5 - - 4.2 79.4
More than one but not
more than two years 155.4 1.7 - - 4.2 161.3
More than two but not
more than five years 321.3 6.1 - 28.2 12.5 368.1
More than five years 32.8 21.2 13.4 65.0 59.1 191.5
-------------------------------- ------- ---------- ------------ ---------- -------- -------
583.2 30.5 13.4 93.2 80.0 800.3
Unamortised issue costs (3.1) - - (1.5) (0.9) (5.5)
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Borrowings 580.1 30.5 13.4 91.7 79.1 794.8
Less amount due for settlement
within 12 months (72.6) (1.5) - 0.6 (4.0) (77.5)
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Amount due for settlement
after 12 months 507.5 29.0 13.4 92.3 75.1 717.3
-------------------------------- ------- ---------- ------------ ---------- -------- -------
Currency profile
Floating
Fixed rate rate
financial financial
liabilities liabilities Total
At 30 June 2014 GBPm GBPm GBPm
----------------- ------------- ------------- ------
Sterling 202.7 180.2 382.9
Euro 26.6 244.4 271.0
Swedish krona - 73.2 73.2
----------------- ------------- ------------- ------
229.3 497.8 727.1
----------------- ------------- ------------- ------
Floating
Fixed rate rate
financial financial
liabilities liabilities Total
At 30 June 2013 GBPm GBPm GBPm
----------------- ------------- ------------- ------
Sterling 121.8 173.8 295.6
Euro 47.2 254.7 301.9
Swedish krona - 59.7 59.7
----------------- ------------- ------------- ------
169.0 488.2 657.2
----------------- ------------- ------------- ------
Floating
Fixed rate rate
financial financial
liabilities liabilities Total
At 31 December 2013 GBPm GBPm GBPm
--------------------- ------------- ------------- ------
Sterling 200.6 213.9 414.5
Euro 28.1 260.3 288.4
Swedish krona - 81.1 81.1
Other - 10.8 10.8
--------------------- ------------- ------------- ------
228.7 566.1 794.8
--------------------- ------------- ------------- ------
Fair values
Carrying amounts Fair values
------------------------ -------------------------------- --------------------------------
30 June 30 June 31 December 30 June 30 June 31 December
2014 2013 2013 2014 2013 2013
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ -------- -------- ------------ -------- -------- ------------
Current borrowings 98.9 99.9 77.5 98.9 100.0 77.5
Non-current borrowings 628.2 557.3 717.3 655.9 582.9 743.7
------------------------ -------- -------- ------------ -------- -------- ------------
727.1 657.2 794.8 754.8 682.9 821.2
------------------------ -------- -------- ------------ -------- -------- ------------
The fair value of borrowings represents the amount at which a
financial instrument could be exchanged in an arm's length
transaction between informed and willing parties, discounted at the
prevailing market rate, and excludes accrued interest.
13 SHARE CAPITAL
Number
--------------------- ------------------------------------------
Ordinary
shares Total
Ordinary in Treasury ordinary
shares in Treasury Total ordinary circulation shares shares
circulation shares shares GBPm GBPm GBPm
--------------------- ------------- ---------- --------------- ------------- --------- ----------
At 1 January
2014 43,953,790 2,903,103 46,856,893 11.0 0.7 11.7
Cancelled following
tender offer(1) (665,966) - (665,966) (0.2) - (0.2)
--------------------- ------------- ---------- --------------- ------------- --------- ----------
At 30 June 2014 43,287,824 2,903,103 46,190,927 10.8 0.7 11.5
--------------------- ------------- ---------- --------------- ------------- --------- ----------
Number
--------------------- --------------------------------------
Ordinary
shares Total
Ordinary Total in Treasury ordinary
shares in Treasury ordinary circulation shares shares
circulation shares shares GBPm GBPm GBPm
--------------------- ------------- ---------- ----------- ------------- --------- ----------
At 1 January
2013 43,305,876 4,803,103 48,108,979 10.8 1.2 12.0
Cancelled following
tender offer(2) (883,793) - (883,793) (0.2) - (0.2)
Exercise of
share options 300,000 (300,000) - 0.1 (0.1) -
--------------------- ------------- ---------- ----------- ------------- --------- ----------
At 30 June 2013 42,722,083 4,503,103 47,225,186 10.7 1.1 11.8
--------------------- ------------- ---------- ----------- ------------- --------- ----------
Number
--------------------- -----------------------------------------
Ordinary
shares Total
Ordinary Total in Treasury ordinary
shares in Treasury ordinary circulation shares shares
circulation shares shares GBPm GBPm GBPm
--------------------- ------------- ------------ ------------ ------------- --------- ----------
At 1 January
2013 43,305,876 4,803,103 48,108,979 10.8 1.2 12.0
Cancelled following
tender offer(2
& 3) (1,252,086) - (1,252,086) (0.3) - (0.3)
Exercise of
share options 300,000 (300,000) - 0.1 (0.1) -
Ordinary shares
issued from
treasury shares 1,600,000 (1,600,000) - 0.4 (0.4) -
--------------------- ------------- ------------ ------------ ------------- --------- ----------
At 31 December
2013 43,953,790 2,903,103 46,856,893 11.0 0.7 11.7
--------------------- ------------- ------------ ------------ ------------- --------- ----------
1. A tender offer by way of a Circular dated 14 March 2014 for
the purchase of 1 in 66 shares at 1,495 pence per share was
completed in April 2014. It returned GBP10.0 million to
shareholders, equivalent to 22.65 pence per share.
2. A tender offer by way of a Circular dated 15 March 2013 for
the purchase of 1 in 49 shares at 970 pence per share was completed
in April 2013. It returned GBP8.6 million to shareholders,
equivalent to 19.80 pence per share.
3. A tender offer by way of a Circular dated 23 August 2013 for
the purchase of 1 in 116 shares at 1,360 pence per share was
completed in September 2013. It returned GBP5.0 million to
shareholders, equivalent to 11.72 pence per share.
14 CASH GENERATED FROM OPERATIONS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
------------------------------------------------------------------- ----------- ----------- -------------
Operating profit 84.1 33.0 92.3
Adjustments for:
Net movements on revaluation of investment properties (45.2) 3.5 0.2
Depreciation and amortisation 0.1 - 0.3
Profit on sale of investment property (7.0) - (4.5)
Profit on sale of joint venture - (1.8) (1.8)
Net loss/(gain) on sale of corporate bonds and other financial
investments 0.9 (7.2) (14.1)
Fair value gain on reclassification of an associate as
an investment - - (14.9)
Non-cash rental income (0.1) (0.1) (0.5)
Changes in working capital:
Decrease/(increase) in debtors 0.6 (1.1) 1.2
(Decrease)/increase in creditors (3.0) (0.1) 5.2
------------------------------------------------------------------- ----------- ----------- -------------
Cash generated from operations 30.4 26.2 63.4
------------------------------------------------------------------- ----------- ----------- -------------
15 RELATED PARTY TRANSACTIONS
There have been no material changes in the related party
transactions described in the last annual report, other than those
disclosed elsewhere in this condensed set of financial
statements.
GLOSSARY OF TERMS
ADJUSTED NET ASSETS OR ADJUSTED SHAREHOLDERS' FUNDS
Net assets excluding the fair value of financial derivatives,
deferred tax on revaluations and goodwill arising as a result of
deferred tax
ADJUSTED NET GEARING
Net debt expressed as a percentage of adjusted net assets
ADJUSTED SOLIDITY
Adjusted net assets expressed as a percentage of adjusted total
assets
ADJUSTED TOTAL ASSETS
Total assets excluding deferred tax assets
ADMINISTRATION COST RATIO
Recurring administration expenses of the Investment Property
operating segment expressed as a percentage of net rental
income
BALANCE SHEET LOAN TO VALUE
Net debt expressed as a percentage of total assets less cash and
short-term deposits
CONTRACTED RENT
Annual contracted rental income after any rent-free periods have
expired
CORE PROFIT
Profit before tax and before net movements on revaluation of
investment properties, profit on sale of investment properties,
subsidiaries and corporate bonds, impairment of intangible assets
and goodwill, non-recurring costs, change in fair value of
derivatives and foreign exchange variances
DILUTED EARNINGS PER SHARE
Profit after tax divided by the diluted weighted average number
of ordinary shares
DILUTED NET ASSETS
Equity shareholders' funds increased by the potential proceeds
from issuing those shares issuable under employee share schemes
DILUTED NET ASSETS PER SHARE OR DILUTED NET ASSET VALUE
Diluted net assets divided by the diluted number of ordinary
shares
DILUTED NUMBER OF ORDINARY SHARES
Number of ordinary shares in circulation at the balance sheet
date adjusted to include the effect of potential dilutive shares
issuable under employee share schemes
DILUTED WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
Weighted average number of ordinary shares in issue during the
period adjusted to include the effect of potential weighted average
dilutive shares issuable under employee share schemes
EARNINGS PER SHARE
Profit after tax divided by the weighted average number of
ordinary shares in issue in the period
EPRA
European Public Real Estate Association
EPRA EARNINGS PER SHARE
Profit after tax, but excluding net gains or losses from fair
value adjustments on investment properties, profits or losses on
disposal of investment properties and other non-current investment
interests, impairment of goodwill and intangible assets, movements
in fair value of derivative financial instruments and their related
current and deferred tax
EPRA NET ASSETS
Diluted net assets excluding the mark-to-market on effective
cash flow hedges and related debt adjustments, deferred tax on
revaluations and goodwill arising as a result of deferred tax
EPRA NET ASSETS PER SHARE
EPRA net assets divided by the diluted number of ordinary
shares
EPRA NET INITIAL YIELD
Annual passing rent less net service charge costs on investment
properties expressed as a percentage of the investment property
valuation after adding purchasers' costs
EPRA TOPPED UP NET INITIAL YIELD
Annual net rents on investment properties expressed as a
percentage of the investment property valuation after adding
purchasers' costs
EPRA TRIPLE NET ASSETS
EPRA net assets adjusted to reflect the fair value of debt and
derivatives and to include the fair value of deferred tax on
property revaluations
EPRA TRIPLE NET ASSETS PER SHARE
EPRA triple net assets divided by the diluted number of ordinary
shares
ERV (ESTIMATED RENTAL VALUE)
The market rental value of lettable space as estimated by the
Group's valuers
INTEREST COVER
The aggregate of group revenue less costs divided by the
aggregate of interest expense and amortisation of loan issue costs,
less interest income
LIQUID RESOURCES
Cash and short-term deposits and listed corporate bonds
NET ASSETS PER SHARE OR NET ASSET VALUE (NAV)
Equity shareholders' funds divided by the number of ordinary
shares in circulation at the balance sheet date
NET DEBT
Total borrowings less liquid resources
NET GEARING
Net debt expressed as a percentage of net assets
NET INITIAL YIELD
Annual net rents on investment properties expressed as a
percentage of the investment property valuation
NET RENT
Contracted rent less net service charge costs
OCCUPANCY RATE
Contracted rent expressed as a percentage of the aggregate of
contracted rent and the ERV of vacant space
OVER-RENTED
The amount by which ERV falls short of the passing rent
PASSING RENT
Contracted rent before any rent-free periods have expired
PROPERTY LOAN TO VALUE
Property borrowings expressed as a percentage of the market
value of the property portfolio
RENT ROLL
Contracted rent
REVERSIONARY
The amount by which the ERV exceeds the passing rent
SOLIDITY
Equity shareholders' funds expressed as a percentage of total
assets
TOTAL SHAREHOLDER RETURN
For a given number of shares, the aggregate of the proceeds from
tender offer buy-backs and change in the market value of the shares
during the year adjusted for cancellations occasioned by such
buy-backs, as a percentage of the market value of the shares at the
beginning of the year
TRUE EQUIVALENT YIELD
The capitalisation rate applied to future cash flows to
calculate the gross property value, as determined by the Group's
external valuers
DIRECTORS, OFFICERS AND ADVISERS
Directors
Sten Mortstedt (Executive Chairman)
Henry Klotz (Executive Vice Chairman and Acting Chief Executive
Officer)
John Whiteley (Chief Financial Officer)
Malcolm Cooper * (Non-Executive Director)
++
Joseph Crawley (Non-Executive Director)
Elizabeth Edwards (Non-Executive Director)
Christopher Jarvis (Non-Executive Director)
++
Thomas Lundqvist (Non-Executive Director)
Jennica Mortstedt (Non-Executive Director)
Lennart Sten (Non-Executive Director)
* Senior Independent Director
member of Remuneration Committee
++ member of Audit Committee
Company Secretary
David Fuller BA, FCIS
Registered Office
86 Bondway
London
SW8 1SF
Registered Number
2714781
Registrars and Transfer Office
Computershare Investor Services Plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
Shareholder Helpline: 0870 889 3286
CLS Holdings plc online:
www.clsholdings.com
email:
enquiries@clsholdings.com
Clearing Bank
Royal Bank of Scotland Plc
24 Grosvenor Place
London
SW1X 7HP
Financial Advisers
Kinmont Limited
5 Clifford Street
London
W1S 2LJ
Stockbrokers
Liberum Capital
Ropemaker Place, Level 12
25 Ropemaker Street
London
EC2Y 9LY
Charles Stanley Securities
131 Finsbury Pavement
London
EC2A INT
Registered Auditor
Deloitte LLP
Chartered Accountants
2 New Street Square
London
EC4A 3BZ
Financial and Corporate Public Relations
Smithfield Consultants Limited
10 Aldersgate Street
London
EC1A 4HJ
www.clsholdings.com
CLS Holdings plc
86 Bondway
London
SW8 1SF
Tel: +44 (0)20 7582 7766
Fax: +44 (0)20 7828 0960
email: enquiries@clsholdings.com
This information is provided by RNS
The company news service from the London Stock Exchange
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