TIDMCLI
RNS Number : 2229I
CLS Holdings PLC
11 August 2021
PRESS RELEASE
Release date: 11 August 2021
Embargoed until: 07:00
CLS HOLDINGS PLC
("CLS", the "Company" or the "Group")
ANNOUNCES ITS HALF-YEARLY FINANCIAL REPORT
FOR THE 6 MONTHS TO 30 JUNE 2021
Well placed to grow through delivering operational
improvements
CLS is a leading FTSE 250 office space specialist and a
supportive, progressive and sustainably focused commercial
landlord, with a GBP2.3 billion portfolio in the UK, Germany and
France, offering geographical diversification with local presence
and knowledge. For the half year ended 30 June 2021, the Group has
delivered the following results:
30 June 31 December Change (%)
2021 2020
------------------------------------ -------- ------------ -----------
EPRA NTA per share (pence)(1) 337.2 345.2 (2.3)
EPRA NAV per share (pence)(1) 343.4 350.1 (1.9)
Statutory NAV per share (pence)(1) 303.0 311.9 (2.9)
Contracted rents (GBP'million) 109.9 107.9 1.9
------------------------------------ -------- ------------ -----------
30 June 2021 30 June 2020 Change (%)
--------------------------------- ------------- ------------- -----------
Profit before tax (GBP'million) 24.7 31.5 (21.6)
EPRA Earnings per share ('EPS')
(pence)(1) 5.4 7.0 (22.9)
Statutory EPS from continuing
operations (pence)(1) 2.2 5.3 (58.5)
Dividend per share (pence) 2.35 2.35 -
--------------------------------- ------------- ------------- -----------
(1) A reconciliation of statutory to alternative performance
measures is set out in Note 4 to the financial statements
Fredrik Widlund, Chief Executive Officer of CLS, commented:
"Over the course of 2019 and 2020, we undertook a significant
reshaping of the portfolio, disposing of non-core assets while
making acquisitions in strategic growth markets, particularly
Germany, with the opportunity for active asset management. Equally
significant, today we announce our new sustainability strategy
which includes an ambitious set of long-term targets, including
becoming net zero carbon by 2030. This fully costed plan is a
critical aspect of how we will deliver space which meets our
tenants' requirements including the increasing emphasis placed on
environmental sustainability.
"Our first half 2021 performance has naturally been shaped by
the pandemic with higher vacancy and stable property valuations.
This was compounded by a strengthening of sterling which has
resulted in lower NTA and earnings. We are hopeful we will see some
improvements in the second half of the year as people continue to
return to the office and our recent increased level of enquiries
translates into letting deals. Our focus remains on delivering our
value enhancement opportunities to ensure continued growth over the
long-term."
FINANCIAL HIGHLIGHTS
-- EPRA NTA down 2.3% and EPRA NAV down 1.9% primarily as a
result of foreign exchange reductions from strengthening sterling
with the portfolio valuation flat in local currency
-- Like-for-like portfolio valuation up 0.2% in local currency
with an increase in Germany of 1.5%, offset by declines in France
of 0.1% and the UK of 0.5%
-- Profit before tax down 21.6% to GBP24.7 million (30 June
2020: GBP31.5 million) from investment property valuation decline
of GBP2.8 million (30 June 2020: GBP2.7 million uplift) and FX
reductions of GBP1.9 million (30 June 2020: GBP3.1 million gain)
partly offset by cost savings
-- EPRA EPS down 22.9% from foreign exchange reductions, lower
income from our hotel and student operations and lower
dilapidations income. Statutory EPS down 58.5% due to increased
deferred tax liabilities following the enactment of the change in
future UK corporation tax rate from 19% to 25%
-- Interim dividend maintained at 2.35 pence per share (30 June
2020: 2.35 pence per share) to be paid on 24 September 2021.
-- Total accounting return of (0.8)% (30 June 2020: 4.6%)
OPERATIONAL HIGHLIGHTS
-- Rent collection remained high with 99% of first half rent
collected and 97% of third quarter contracted rent due collected to
date. Continued high rent collection has led to a slight reduction
in bad debt provisions
-- Net rental income decreased by 7.4% to GBP52.3 million (30
June 2020: GBP56.5 million) as a result of foreign exchange
reductions, lower income from our hotel and student operations and
lower dilapidations income
-- Acquired six properties for GBP164.8 million, three of which
had exchanged in 2020. The five properties in Germany and one in
the UK were bought for their asset management opportunities at a
combined net initial yield of 3.9% and a reversionary yield of
6.1%
-- Completed the disposal of four properties for GBP15.5
million, two of which had exchanged in 2020. Exchanged on a further
two disposals for GBP10.9 million which have both completed
following the period end
-- Completed 53 lease events (30 June 2020: 52) securing GBP5.2
million (30 June 2020: GBP7.8 million) of annual rent. Excluding
the Veolia lease in France, the lettings were at 1.2% above 31
December 2020 Estimated Rental Value
-- Vacancy rate increased to 7.7% (31 December 2020: 5.1%). Most
of this increase was due to the vacancy acquired with the recent
German acquisitions with some increase from expiries running ahead
of lettings
FINANCING
-- Weig hted average cost of debt at 30 June 2021 down six basis
points to 2.22% (31 December 2020: 2.28%)
-- Loan-to-value at 38.1% (31 December 2020: 33.7%) reflecting
net acquisitions in the period. Gross debt of GBP1,058.7 million
(31 December 2020: GBP977.0 million) with cash of GBP168.7 million
(31 December 2020: GBP235.7 million) and GBP50.0 million (31
December 2020: GBP50.0 million) of undrawn facilities
-- Second long-term, 'green' loan secured for GBP61.7 million
with Scottish Widows at 2.65% fixed interest rate for 12 years -
c.20% of CLS' loan portfolio is now 'green'. Weighted average debt
maturity of 4.6 years (31 December 2020: 4.6 years)
-- In the first half of 2021, financing of c.GBP145 million at
1.76% for 6.9 years secured across five German SPV loans and one UK
portfolio loan. Discussions advanced for the remaining GBP52.4
million financing due in 2021
-- The loan portfolio as at 30 June 2021 had 86% at fixed rates (31 December 2020: 84%)
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
-- Today published a new sustainability strategy and calibrated
a set of ambitious but achievable long-term targets following asset
level reviews. These carbon reduction targets, which include our
Net Zero Carbon Pathway and CLS' commitment to become Net Zero
Carbon by 2030, have been verified by the Science Based Targets
Initiative
-- Increased CLS' solar electricity generation capacity by 48%
through the installation of a new UK solar array. Completed
asset-level climate change risk assessments for all our French
assets with the UK and Germany to be completed shortly. On course
to achieve margin reduction targets for Aviva and Scottish Widows'
loans
-- Worked in partnership with the Social Value Portal to
calibrate a Social Value Framework that CLS will adopt to start
measuring the social value we produce as a business beyond
shareholder value
Interim Dividend Timetable
Further to this announcement, in which the Board declared an
interim dividend of 2.35 pence per ordinary share, the Company
confirmed its dividend timetable as follows:
Announcement 11 August 2021
date
Ex-Dividend date 19 August 2021
---------------
Record date 20 August 2021
---------------
Payment date 24 September
2021
---------------
-ends-
Results presentation
A presentation for analysts and investors will be held by
webcast and conference call on Wednesday 11 August 2021 at 9.00am
followed by Q&A. Questions can be submitted either online via
the webcast or to the operator on the conference call.
Webcast: The live webcast will be available here:
https://secure.emincote.com/client/cls/cls003
Conference call: In order to dial in to the presentation via
phone, please register at the following link and you will be
provided with dial-in details and a unique access code:
https://secure.emincote.com/client/cls/cls003/vip_connect
For further information, please contact:
CLS Holdings plc
(LEI: 213800A357TKB2TD9U78)
www.clsholdings.com
Fredrik Widlund, Chief Executive Officer
Andrew Kirkman, Chief Financial Officer
+44 (0)20 7582 7766
Liberum Capital Limited
Richard Crawley
Jamie Richards
+44 (0)20 3100 2222
Panmure Gordon
Hugh Rich
+44 (0)20 7886 2733
Elm Square Advisers Limited
Jonathan Gray
+44 (0)20 7823 3695
Smithfield Consultants (Financial PR)
Alex Simmons
Rob Yates
+44 (0)20 3047 2546
Forward-looking statements
This document may contain certain 'forward-looking statements'.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Actual outcomes and results may differ materially from those
expressed or implied by such forward-looking statements. Any
forward-looking statements made by or on behalf of CLS speak only
as of the date they are made and no representation or warranty is
given in relation to them, including as to their completeness or
accuracy or the basis on which they were prepared. Except as
required by its legal or statutory obligations, the Company does
not undertake to update forward-looking statements to reflect any
changes in its expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is
based. Information contained in this document relating to the
Company or its share price, or the yield on its shares, should not
be relied upon as an indicator of future performance.
Chief Executive's statement
Well placed to grow through delivering operational
improvements
OVERVIEW
CLS continues to perform well in a market that remains
challenging due to the ongoing impacts of Covid-19. Investment, and
especially letting, markets have yet to return to pre-pandemic
levels although we are seeing increasing levels of activity. Our
focus on our tenants remains absolute and that investment in
relationships is reaping rewards.
As with 2020, rent collection remained high with 99% of first
half rent and 97% of third quarter contracted rent due collected as
of the date of this report. Of the 785 tenants across our three
countries, approximately 23.7% of rents are paid by governments and
26.5% by major corporations with 50.2% of rents subject to
indexation. The benefits of a diverse tenant base with strong
credit ratings and a limited exposure to those sectors that have
been most affected by the pandemic is reflected in the strong rent
collection performance.
Over the six months, EPRA NTA decreased by 2.3% to 337.2p per
share (31 December 2020: 345.2p) mainly as a result of foreign
exchange movements due to sterling strengthening whilst property
valuations were flat with continued growth in Germany offset by
weakness in the UK. Total accounting return for the six months was
(0.8)% (2020: 4.6%).
The first few months were busy with six acquisitions completed
for GBP164.8 million before costs and four small disposals for
GBP15.5 million. We delivered 347,355 sq. ft (32,270 sqm) of
lettings and renewals and the financing of c.GBP145 million of bank
loans. This activity together with a greater focus on operational
activity leaves CLS well-placed.
Our portfolio also remains well-placed in terms of: great
locations; the potential to capture the reversionary up-lifts from
vacancy, under renting and selected refurbishment and development;
and the ability to provide tenants with modern, flexible,
high-quality space. Come the autumn as workers return, the
attractions of the office will again be proved.
RESULTS AND FINANCING
Profit after tax for the six months to 30 June 2021 was GBP8.8
million (2020: GBP21.6 million), equivalent to earnings per share
of 2.2p (2020: 5.3p). The reduction was as a result of a property
valuation decline of GBP2.8 million (30 June 2020: GBP2.7 million
uplift), FX reductions of GBP1.9 million (30 June 2020: GBP3.1
million gain) and increased deferred tax of GBP10.2 million from
the enactment of the 2023 UK corporation tax rise from 19% to 25%
partly offset by cost savings. EPRA earnings per share were 5.4p
(2020: 7.0p), 22.9% down on last year.
Shareholders' funds fell in the six months by 2.8% to GBP1,234.6
million reflecting the strengthening of sterling and the payment of
the final dividend in April.
Our balance sheet liquidity remains strong with GBP168.7 million
(31 December 2020: GBP235.7 million) of cash and GBP50.0 million
(31 December 2020: GBP50.0 million) of undrawn facilities. We were
pleased to execute our second 'green' loan with Scottish Widows
with the remaining financing activity for 2021 well advanced. Our
weighted average cost of debt fell to 2.22% (31 December 2020
2.28%) reflecting the increased proportion of lower cost
Euro-dominated debt. Net debt excluding leasehold liabilities rose
to GBP882.1 million (31 December 2020: GBP735.0 million) and
loan-to-value rose to 38.1% (31 December 2020: 33.7%) reflecting
net acquisitions in the period. Interest cover remained high at 3.2
times (30 June 2020: 3.5 times) demonstrating the Group's ongoing
ability to generate cash.
PROPERTY PORTFOLIO
At 30 June 2021, the value of the property portfolio, including
those within property, plant and equipment and properties held for
sale, was GBP2,317.6 million, GBP134.6 million higher than six
months earlier, driven by acquisitions of GBP177.2 million
including costs and capital expenditure of GBP18.9 million offset
by foreign exchange reductions of GBP45.6 million, disposals of
GBP15.1 million and a small revaluation loss of GBP0.8 million.
As previously highlighted, it was a busy start to the year in
terms of acquisition activity, and the associated financing, with
the completion of the six acquisitions, five in Germany and one in
the UK, which had exchanged at the turn of the year, for c.GBP165
million. The acquisitions were bought for their asset management
opportunities at a net initial yield of 3.9% and a reversionary
yield of 6.1%. We are already starting to execute new lettings to
capture this reversionary potential through rent increases and
vacancy reduction.
Selective disposal activity is also taking place targeting
smaller properties with higher alternative use values and/or less
growth potential. Four properties, two in the UK, one in Germany
and one in France, were sold for GBP 15.5 million, two of which had
exchanged in 2020. In the first half we also exchanged on a further
two disposals for GBP10.9 million (one in Hounslow, UK and one in
Wiesbaden, Germany) which completed following the period end. In
total, the six properties were sold for a net initial yield of
4.4%.
In the second-half, we expect to continue with selective
disposals of smaller properties to drive higher growth from the
portfolio. All of this transactional activity is part of a
repositioning of the portfolio to allow us to deliver value through
active asset management.
In the six months to June, the like-for-like valuation of the
property portfolio, which excludes acquisitions, rose by 0.2% in
local currency with a continued strong performance in Germany up
1.5% offsetting a decline in the UK of 0.5% and a virtually flat
performance in France at (0.1)%. Including acquisition costs, the
portfolio valuation was flat. At 30 June 2021, the net initial
yield of the portfolio was 4.3% (31 December 2020: 4.6%), 206 basis
points above the Group's cost of debt, underpinning the Group's
ability to generate cash.
The EPRA vacancy rate as at 30 June 2021 was 7.7% (31 December
2020: 5.1%) primarily driven by the vacancy acquired with the
German acquisitions and, to a lesser extent, by lease expiries
being ahead of lettings as pandemic restrictions limited tenant
viewing opportunities. We expect letting activity to pick up in the
second-half, particularly in Germany, as we are seeing increased
tenant enquiries following the lifting of lockdown.
DIVIDS
In September, the Group will pay an interim dividend for 2021 of
2.35 pence per share, which is at the same level as the 2020
interim dividend.
ENVIRONMENT, SOCIAL AND GOVERNANCE
With the importance of sustainability reporting growing and the
introduction of TCFD this year, we have decided to replace our
annual sustainability report with an enhanced sustainability
section within our annual company report and accounts starting with
the 2021 report. Today we are publishing our new sustainability
strategy and Net Zero Carbon Pathway, which outlines our plan for
CLS to navigate a decade that will be defined by the impacts of
climate change.
Our biggest sustainability achievement so far in 2021 has been
the completion of our Net Zero Carbon Pathway, for which we took an
evidence-based approach through undertaking a program of
asset-level energy audits to obtain the technical and cost data for
each property to achieve energy and carbon savings. We also
employed a specialist consultant to compile our Scope 3 emissions
baseline to ensure we had a full picture of the carbon footprint of
our business. Our technical assessments have provided us with an
estimated total capital expenditure spend of up to GBP58 million
until 2030 to deliver the full programme. We are currently in the
process of refining our model to scrutinise the technical and
commercial feasibility of each opportunity, and determine the
optimal time to deliver each project over the coming years. This
will confirm the year-on-year capital expenditure investment and
estimated carbon performance split between the amounts which will
be recoverable through service charges, which are part of our
normal annual capital expenditure programmes of c.GBP20 million and
which amounts are additional.
Incorporated within our Net Zero Carbon model are the regulatory
criteria relating to energy efficiency and/or carbon reductions for
office properties as relevant to the UK, France and Germany by
2030. These include the new EPC-B requirements in the UK, the
Decret Tertiaire energy efficiency targets in France, and the new
energy efficiency targets and carbon costs recently announced in
Germany. By incorporating these details into our model we now have
a comprehensive picture of the costs and compliance risks for each
property that we will incorporate into the long-term asset
management strategies for each property.
As part of being a responsible corporate citizen and long-term
investor, we have continued to support local and industry related
charities during this crisis, with our core focus being to support
the issues of homelessness, food poverty, and youth unemployment.
In March, a CLS team participated in the SleepOut for LandAid event
to raise money for, and awareness of, youth homelessness. In
addition, we have supported local food banks in Vauxhall and
Hamburg, and sponsored the Levallois Young Readers prize in Paris
for the third consecutive year.
OUTLOOK
The benefits of being active in the three largest economies in
Europe, our focused strategy and business model, and our long-term
commitment to driving shareholder value continue to be
demonstrated. With the easing of the majority of lockdown measures
in our three country markets, we expect activity to see a
pronounced pick-up in the rest of the year. Our balance sheet
remains resilient which supports our transactional activity. These
transactions will remain opportunistic with some selective
disposals likely in the second-half.
Whilst we expect the return to offices will support increased
activity, we also recognise that the market has become more
discerning in terms of the space that is sought after. CLS is
continuing to focus on its tenants by providing modern, quality
space with great amenities and facilities and, as announced today,
sustainability improvements continue to be made. We also recognise
that space and leases need to remain flexible all while providing
well-located buildings at affordable rents.
The second half of the year will see a greater emphasis on
driving operational improvements through reduced vacancy in our
portfolio and increased occupancy at our Spring Mews student and
hotel operations. In addition, the delivery of major refurbishments
and progress on our developments provides the opportunity to
capture additional ERV of GBP11.5 million in the portfolio over the
next two years. In the first half, we made some cost
rationalisations to improve the efficiency of the business and also
made a number of well deserved, internal promotions thereby
allowing us to strengthen our senior leadership team further. We
will be holding a Capital Markets Day in November at which these
leaders, among others, will be presenting to our investors and
analysts. We are looking forward to improved operating performance
in the second half of the year and going into 2022.
Our investor proposition
Strong and consistent long-term shareholder returns
Set out below are the key tenets of our investment proposition.
A full description can be found on pages 10 and 11 of CLS' 2020
Annual Report and Accounts:
Clear strategy Active management
-------------------------------------------- ----------------------------------------------
* Diversified approach * Experienced in-house capabilities
* Sole focus on non-prime offices * Secure rents and high occupancy
* Selected development schemes * Interest rate management
Leading track record Focus on sustainability
----------------------------------------------------- ------------------------------------------
* Disciplined approach to investment * Responsible profit
* Cash-backed progressive dividend * Strong ESG performance
* Financing headroom * Climate risk mitigation
----------------------------------------------------- ------------------------------------------
DIVID POLICY
The Company expects to generate sufficient cash flow to be able
to meet the growth requirements of the business, maintain an
appropriate level of debt and provide cash returns to shareholders
via a dividend.
It is our policy to pay a progressive dividend, fully covered by
EPRA earnings. Approximately one-third of the annual dividend is
paid as an interim in September, with the balance paid as a final
dividend in April.
ANALYST COVERAGE
We are covered by four brokers which publish regular analyst
research: Liberum Capital; Panmure Gordon; Peel Hunt; and
Berenberg. Contact details can be found on our website
www.clsholdings.com.
2021 INVESTOR ENGAGEMENT
Events which have taken place Events which are due to take
place
------------------------------- ------------------------------------
March 2021 August 2021
Annual Results presentation Half-Year Results presentation
Annual Results investor calls August/September 2021
April 2021 Half-Year Results investor calls
Trading update November 2021
Annual General Meeting Trading Update and Capital Markets
Day in London
------------------------------- ------------------------------------
Business review
United Kingdom
Confidence and deal activity returning as vaccine roll-out
progresses
30 June 2021 31 December 2020
--------------------------------- ------------- -----------------
Value of properties GBP1,143.1m GBP1,125.7m
--------------------------------- ------------- -----------------
Percentage of Group's property
interests 49% 52%
--------------------------------- ------------- -----------------
Number of properties 45 47
--------------------------------- ------------- -----------------
Number of tenants 243 256
--------------------------------- ------------- -----------------
EPRA vacancy rate 7.3% 5.9%
--------------------------------- ------------- -----------------
Lettable space 2.1m sq. ft 2.2m sq. ft
--------------------------------- ------------- -----------------
Government and major corporates 63.1% 62.8%
--------------------------------- ------------- -----------------
Weighted average lease 4.6 years 4.7 years
length to end
--------------------------------- ------------- -----------------
The value of the UK portfolio increased by GBP17.4 million as a
result of: net additions of GBP23.8 million (one acquisition for
GBP17.9 million including costs and capital expenditure of GBP11.8
million partly offset by two disposals for GBP5.9 million) and a
valuation loss of GBP6.4 million or 0.6% in local currency. The
like-for-like valuation decrease, which excludes the acquisition
costs, was 0.5%. The valuation decline was as a result of increased
vacancy more than offsetting a marginal increase in ERVs and a
slight decline in net initial yields.
The acquisition of Radius House, Watford, which had exchanged in
December 2020, completed in January 2021 for GBP17.9 million. The
building is fully let to four tenants with a WAULT of 8.1 years and
a net initial yield of 5.6%. Half of the rent is contracted to a UK
Government department until 2030 without break, offering secure
long-term income.
In July, construction started on the 28,500 sq. ft new office
development at Vauxhall Walk. The 10-storey building, which is
targeting a minimum 20% profit on cost, is forecast to complete in
the first quarter of 2023. At St. Cloud Gate, Maidenhead, final
detailed designs are being worked up alongside gauging occupier
interest. We are also in the midst of a major refurbishment at 9
Prescot Street, Aldgate with clear out completing before commencing
the construction and fit-out works for the BREEAM Excellent space
we will be creating here. In addition, refurbishments are ongoing
to create attractive, contemporary and flexible office space at
Apex Tower, Hygeia and Reigate (which completed in July). Where
flexible space is additive to our existing offerings, we are
rolling out further Base Office floors on a selective basis.
Two disposals, which had exchanged in 2020, completed in the
period for GBP5.9 million. The disposals at Atholl House in
Aberdeen and Quest House in Hounslow were at book value. In the
second half of the year we expect further disposals of properties
which have limited growth potential for CLS as they are small
and/or have more valuable alternative uses. In July, we completed
the sale of Falcon House, Hounslow for GBP6.1 million being a 22%
profit on sale compared to the 2020 year-end valuation.
Vacancy increased within the period from 5.9% to 7.3% largely as
a result of weak letting conditions at the start of the year which
gradually improved throughout the period. As a result, 165,784 sq.
ft (15,402 sqm) of expired or vacated space was ahead of 62,521 sq.
ft (5,808 sqm) of space which was let or renewed at values ahead of
year-end ERVs. The most significant transactions were a new 10-year
lease with RSM Management at Priory Place, Chelmsford for 5,637 sq.
ft (524 sqm) and a 10-year lease extension for 5,693 sq. ft (529
sqm) renewal at Hygeia, Harrow with Coyle Personnel.
The UK economy experienced an unprecedented drop in GDP in 2020
of c.9%. However, the success of the furlough scheme, which limited
unemployment, and the vaccine roll-out means that GDP growth is
forecast at 7% in 2021 with the economy to return to its
pre-pandemic size in early 2022.
In 2021, the UK property market started the year sluggishly but
activity started to increase with the gradual easing of lockdown
and increased vaccinations. While the commercial investment market
at GBP23 billion was up 15% year on year and the South-East market
volume at GBP1.5 billion was up on the 5 and 10-year averages, both
were distorted by some exceptionally large transactions, without
which volumes were more in-line with recent levels of activity.
Volumes though are forecast to increase in the second half. The
letting market was more subdued and whilst Greater London and the
South East office letting volume of c.1.8 million sq. ft in H1 2021
was up 67% year on year, this was still down on the 10-year
average.
Germany
Markets supported by favourable supply and demand dynamics
30 June 2021 31 December 2020
--------------------------------- ------------- -----------------
Value of properties GBP880.2m GBP747.7m
--------------------------------- ------------- -----------------
Percentage of Group's property
interests 38% 34%
--------------------------------- ------------- -----------------
Number of properties 33 29
--------------------------------- ------------- -----------------
Number of tenants 369 311
--------------------------------- ------------- -----------------
EPRA vacancy rate 9.3% 3.6%
--------------------------------- ------------- -----------------
Lettable space 3.6m sq. ft 3.0m sq. ft
--------------------------------- ------------- -----------------
Government and major corporates 33.4% 32.4%
--------------------------------- ------------- -----------------
Weighted average lease 4.9 years 5.2 years
length to end
--------------------------------- ------------- -----------------
The value of the German portfolio increased by GBP132.5 million
as a result of: net additions of GBP159.3 million (five
acquisitions for GBP159.3 million (including costs) and capital
expenditure of GBP4.1 million partly offset by one disposal for
GBP4.1 million); foreign exchange valuation decline of GBP32.7
million; and a valuation gain of GBP5.9 million or 0.7% in local
currency. The like-for-like valuation increase was 1.5%, which
excludes the acquisition costs but also the valuation uplifts on
these acquisitions which increased by 2.8% since purchase. The
portfolio valuation increased as a result of a slight decrease in
net initial yields with ERVs flat.
The first half was a particularly busy period for acquisitions
with the completion of five purchases in Berlin, Hamburg,
Dusseldorf and Essen for GBP159.3 million (two of which for GBP70.2
million had exchanged in December last year). The net initial yield
was 3.8% with a reversionary yield of 5.9%. This considerable
upside is as a result of acquiring vacancy in three of the
buildings as well under renting which CLS intends to capture
through our active asset management model.
We are progressing our development at Vor dem Lauch, Stuttgart
(now renamed Lichthof Stuttgart) by seeking a substantial pre-let
and negotiating a construction contract conditional on the
pre-let.
While expanding the portfolio through acquisitions, on a
selective basis we are also selling smaller properties. In the
first half, we sold Frohbosestrasse in Hamburg for GBP4.1 million.
The sale of Kreuzberger Ring in Wiesbaden exchanged in the first
half and completed in July for GBP4.8 million. Combined, the sales
were at a 4.1% net initial yield.
Vacancy increased significantly within the period from 4.0% to
9.3% largely as a result of acquired vacancy which added 4.0% on a
pro forma basis at the point of acquisition but as a result of
letting activity since purchase, this fell to 3.8%. In addition in
the period, 220,953 sq. ft (20,527 sqm) of space expired or was
vacated and 189,585 sq. ft (17,613 sqm) was let or renewed at
values slightly ahead of year-end ERVs. The most significant
transactions were a new seven-year letting for 12,766 sq. ft (1,186
sqm) to Landersverband at Connect, Cologne and a three-year lease
extension to 2028 for 36,447 sq. ft (3,386 sqm) with Naturstrom at
Parsevalstrasse, Dusseldorf. The letting pipeline is looking
promising with advanced discussions taking place for around half of
the vacancy.
Most of the pandemic restrictions have been lifted since the end
of June and Germany has made accelerating progress on the
vaccination campaign with over half of the adult population now
having received two jabs. The IFO-business climate is showing
greater confidence with German industry now back to pre-Covid
levels, and services and retail are picking up as well. GDP growth
of c.3.5% is expected for 2021 and unemployment has started to
decrease and is expected to drop further in the second half.
Investment transactions in commercial properties in the
first-half totalled EUR22 billion, close to the levels seen in
record years and showing increased momentum. However, there was
considerable variability between the cities in the second quarter
with volumes down 46% in Hamburg but up 97% in Munich. Overall,
2021 investment volumes are expected to be above the 10-year
average at c.EUR55 billion.
In the first half of 2021 take-up of office space in the top
seven cities was 1.2 million sqm, which was marginally up on last
year but below the 10-year average. Larger lettings are still
scarce and hesitation remains amongst the larger corporations hence
the vacancy rate has increased to 4.2% from 3.8% at the end of
2020. Again, there is a mixed picture across the major cities with
considerable variability in activity which is also reflected in
vacancy rates which are above 7% in Frankfurt and 6% in Dusseldorf
but at or below 4% in the other five major cities. Take-up is
likely to revive with forecasters estimating a busy second half of
the year.
France
Engaged in selective capital expenditure works to upgrade our
existing portfolio
30 June 2021 31 December 2020
--------------------------------- ------------- -----------------
Value of properties GBP294.3m GBP309.6m
--------------------------------- ------------- -----------------
Percentage of Group's property
interests 13% 14%
--------------------------------- ------------- -----------------
Number of properties 20 21
--------------------------------- ------------- -----------------
Number of tenants 173 176
--------------------------------- ------------- -----------------
EPRA vacancy rate 4.0% 5.1%
--------------------------------- ------------- -----------------
Lettable space 0.8m sq. ft 0.9m sq. ft
--------------------------------- ------------- -----------------
Government and major corporates 46.4% 45.1%
--------------------------------- ------------- -----------------
Weighted average lease length 5.0 years 4.9 years
to end
--------------------------------- ------------- -----------------
The value of the French portfolio decreased by GBP15.3 million
as a result of: net reductions of GBP2.1 million (one disposal for
GBP5.1 million offset by capital expenditure of GBP3.0 million);
foreign exchange valuation decline of GBP12.9 million; and a
valuation loss of GBP0.3 million or 0.1% in local currency.
Overall, there was little valuation movement for the French
portfolio with a reduction in ERVs mostly offset by a slight
decline in net initial yield.
There were few attractive acquisition opportunities in the first
half and consequently we continued to focus on our ambitious
redevelopments and important refurbishments as highlighted in our
reporting last year. The most significant capital expenditure in
the first half was at Park Avenue, Lyon, where a renovation of
internal accommodation areas followed by the refurbishment of the
façade and common areas is taking place over this year and the
next. Across the portfolio, additional works are taking place to
upgrade facilities and amenities, and we expect similar or greater
levels of capital expenditure in the second half.
Continuing with our strategy of disposing of properties which
are too small to have a meaningful impact and/or have little asset
management potential to drive growth, we sold Gennevilliers in
Paris for GBP6.0 million, of which GBP5.5 million was received in
June and GBP0.5 million to be received in the second half of the
year. The disposal represented a profit on sale of GBP0.3 million
or 6.3% increase compared to the 2020 year-end valuation. We expect
further limited disposals in the second half.
Letting activity picked up in the first half from previously
subdued levels and while 80,718 sq. ft (7,499 sqm) of space expired
or was vacated, 95,250 sq. ft (8,849 sqm) was let or renewed. As a
consequence, the vacancy rate fell to 4.0% by the end of June (31
December 2020: 5.1%). The most significant transaction was a lease
renewal at Inside, Paris to Veolia for at least 4.5 years. Veolia
has taken additional space under the renewal and now occupies over
half of the property, which has resulted in the building being
fully let. Excluding this deal, lettings were in line with year-end
ERVs. A major new 3/6/9-year letting of 6,988 sq. ft (649 sqm) was
also made to Apside-Advance, at Sigma in Paris.
In May, most pandemic restrictions were released with around
half of the adult population now fully vaccinated. Since the end of
the lockdown, the economy has been recovering quite strongly
especially in the industrial sector. GDP growth for 2021 has
consequently been revised upwards and should be in the region of
5.8% in 2021 although unemployment is expected to peak this year
before falling next.
The performance of the property market is varying across France
with regions such as Lyon and central Paris performing more
strongly whereas the Parisian suburbs are weaker particularly the
Western Crescent with significant vacancy. Small to medium size
companies are more active but government institutions seem to be
waiting for the outcome of elections next year.
In the first half of 2021, letting activity in the Greater Paris
region reached 0.8 million sqm which was up by 14% year on year but
down on its long-term average. Commercial real estate investment
volumes in France reached EUR8 billion which was a decline of 11%
compared to 2020. Most forecasters consider that the second half of
2021 should be active both in terms of letting and investment.
Key data
Rental Data
Rental Net Rental Lettable Contracted ERV at Contracted EPRA Vacancy
Income Income Space Rent At 30 June Rent Subject rate at
for the for the (sqm) 30 June 2021 to Indexation 30 June
Period Period 2021 (GBPm) (GBPm) (GBPm) 2021
(GBPm) (GBPm)
--------- ----------- --------- ------------- --------- --------------- -------------
UK 26.8 28.8 196,765 55.8 62.3 14.2 7.3%
----------------- --------- ----------- --------- ------------- --------- --------------- -------------
Germany 16.4 16.2 336,298 39.7 46.2 26.6 9.3%
----------------- --------- ----------- --------- ------------- --------- --------------- -------------
France 7.4 7.3 78,632 14.4 15.2 14.4 4.0%
----------------- --------- ----------- --------- ------------- --------- --------------- -------------
Total Portfolio 50.6 52.3 611,695 109.9 123.7 55.2 7.7%
----------------- --------- ----------- --------- ------------- --------- --------------- -------------
Valuation Data
H1 Valuation Movement
----------- ------------------------- ---------- ----------- ----------- ------------- ------------
EPRA
Market EPRA Topped-up
Value Foreign Net Net
of Underlying Exchange Initial Initial Over-rented Equivalent
Property (GBPm) (GBPm) Yield Yield Reversion Yield
(GBPm)
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
UK 1,020.0 (7.6) - 4.7% 5.0% 6.6% 3.2% 5.7%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
Germany 876.0 5.9 (32.5) 3.9% 4.2% 11.7% 6.1% 4.4%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
France 292.4 (0.3) (12.8) 3.8% 4.5% 5.7% 4.4% 5.1%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
Total
Portfolio 2,188.4 (2.0) (45.3) 4.3% 4.6% 9.0% 4.4% 5.1%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
Lease Data
Average Lease Contracted Rent of Lease ERV of Lease
Length Expiring In: Expiring In:
-------------------- ---------------------------------------- -----------------------------------------
To Break To Years After Years After
(Years) Expiry Year Year 3 - 5 Years Year Year 3 - 5 Years
(Years) 1 2 5 (GBPm) (GBPm) 1 2 5 (GBPm) (GBPm)
(GBPm) (GBPm) (GBPm) (GBPm)
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
UK 3.4 4.6 3.8 5.1 32.4 14.5 4.0 5.3 33.8 14.6
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
Germany 4.7 4.9 8.3 4.8 14.1 12.5 8.4 6.0 14.5 13.0
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
France 2.6 5.0 0.5 1.7 4.9 7.3 0.6 1.6 5.1 7.3
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
Total
Portfolio 3.8 4.7 12.6 11.6 51.4 34.3 13.0 12.9 53.4 34.9
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
Note: The above tables comprise data for investment property and
properties held for sale. They exclude owner-occupied, student
accommodation, hotel; and land.
Tenant Industries by Contracted Property use by
Rent rent
Government 23.7% Offices 93.0%
------ ------
Commercial and Professional Student 3.0%
Services 12.2% ------
------ Hotel 2.0%
Information Technology 11.3% ------
------ Food Retail 2.0%
Consumer Discretionary 10.0% ------
------
Industrials 8.9%
------
Communication Services 8.5%
------
Other 8.2%
------
Health Care 6.1%
------
Real Estate 6.1%
------
Financials 5.0%
------
Financial review
RESULTS FOR THE PERIOD
HEADLINES
Profit after tax of GBP8.8 million (2020: GBP21.6 million)
generated statutory earnings per share of 2.2 pence (2020: 5.3
pence) and EPRA earnings per share of 5.4 pence (2020: 7.0 pence),
which was down 22.9% year on year resulting from foreign exchange
reductions and lower net rental income partly offset by lower
administration and other expenses. Gross property assets at 30 June
2021, including those in property, plant and equipment and those
held for sale, increased to GBP2,317.6 million (31 December 2020:
GBP2,183.0 million) through net additions and capital expenditure
of GBP181.0 million reduced by foreign exchange reductions of
GBP45.6 million and a small revaluation decline of GBP0.8 million.
Net assets per share fell by 2.9% to 303.0 pence (31 December 2020:
311.9 pence) and EPRA NTA per share by 2.3% to 337.2 pence (31
December 2020: 345.2 pence). Total accounting return including
dividends paid in the period was (0.8)% (30 June 2020: 4.6%).
CLS uses a number of Alternative Performance Measures ('APMs')
alongside statutory figures. We believe that these assist in
providing stakeholders with additional useful information on the
underlying trends, performance and position of the Group. Note 4 to
these condensed set of Financial Statements gives a full
description and reconciliation of our APMs, and sets out the full
suite of EPRA measures.
STATEMENT OF COMPREHENSIVE INCOME
Net rental income for the six months to 30 June 2021 of GBP52.3
million (2020: GBP56.5 million) was lower than last year by a net
GBP4.2 million, or 7.4%, as a result of lower hotel and student
revenue due to Covid-19 and lower dilapidations income. The table
below sets out our rent collection across our countries and the
Group in the first half and the third quarter of 2021 as at the
date of this report:
Business segment First half 2021 Third quarter 2021
Headline Adjusted Headline
---------------- ---------- ---------
UK 98% 96% 93%
---------------- ---------- ---------
Germany 99% 99% 99%
---------------- ---------- ---------
France 98% 99% 95%
---------------- ---------- ---------
Group 99% 97% 94%
---------------- ---------- ---------
Note: Adjusted Q3 2021 rent includes agreed quarterly to monthly
changes which have been agreed for c.7% of our tenant base
Operating profit of GBP36.3 million (2020: GBP41.9 million) was
down year on year due to the shortfall in net rental income
described above and the revaluation losses on investment properties
of GBP2.8 million (2020: Gain GBP2.7 million) offset by reductions
in administration and other expenses which was down to GBP13.5
million (2020: GBP17.1 million). Part of this expense reduction was
from the release of a proportion of the bad debt provision as a
result of continuing high rent collection.
The increase in net interest expense to GBP11.6 million (2020:
GBP10.4 million) contained GBP1.9 million of negative foreign
exchange variances (2020: GBP3.1 million positive) from translating
monetary assets into sterling at the balance sheet date offsetting
the positive movement on financial instruments of GBP2.6 million
(2020: GBP2.3 million negative).
The tax charge of GBP15.9 million (2020: GBP9.9 million), which
represented an effective rate of 79.1% (2020: 31.3%) was distorted
in 2021 by the enactment of an increase in UK corporation tax from
19% to 25% from 2023 onwards which increased deferred tax by
GBP10.2 million. Without this, the estimated effective tax rate of
the Group in 2021 would have been 28.4%.
EPRA NET TANGIBLE ASSETS PER SHARE
EPRA NTA per share fell from 345.2p to 337.2p in the six months
to 30 June 2021, a decrease of 8.0p per share or 2.3% (EPRA NAV
fell by 1.9%). On a per share basis, the decrease comprised EPRA
earnings of 5.4p from which a dividend of 5.2p was paid together
with foreign exchange reductions of 6.4p, the reduction in property
values of 0.4p and other net negative movements of 1.4p.
CASH FLOW, NET DEBT AND FINANCING
As at 30 June 2021, the Group had cash of GBP168.7 million (31
December 2020: GBP235.7 million) and GBP50.0 million (31 December
2020: GBP50.0 million) of undrawn facilities. The cash balance
decreased by GBP67.0 million from 31 December 2020 given net
investment in our portfolio. During the period, GBP163.9 million
was paid for property acquisitions (including costs) and we
invested GBP19.7 million of capital expenditure in our properties
offset by net receipts from disposals of GBP17.7 million. Net
proceeds from new financing were GBP143.5 million and GBP44.7
million of loans were repaid. Net cash flow from operating
activities was GBP21.9 million (2020: GBP21.6 million) which was
used to pay the 2020 final dividend of GBP21.2 million.
In the six months to 30 June 2021, borrowings rose by GBP80.1
million to GBP1,050.8 million (31 December 2020: GBP970.7 million),
principally due to net loans drawn for new acquisitions. The most
notable financing in the first half was CLS' second long-term,
'green' loan secured for GBP61.7 million with Scottish Widows at
2.65% fixed interest rate for 12 years including a 10 basis point
sustainability margin incentive. As a result, approximately 20% of
CLS' loan portfolio is now 'green' and we are on target to achieve
the first-year margin reduction targets under the Aviva and
Scottish Widows' loans.
Net debt excluding leasehold liabilities at the half-year was
GBP882.1 million and the Group's loan-to-value was 38.1% (31
December 2020: 33.7%). The weighted average cost of debt decreased
to 2.22% (31 December 2020: 2.28%) as a result of the greater
proportion of lo wer cost Euro denominated loans. Weighted average
debt maturity was 4.6 years (31 December 2020: 4.6 years) and the
proportion of fixed debt to floating rate debt was 86%:14% (31
December 2020: 84%:16%).
CLS has 48 different loans either secured by individual, or
portfolios of, properties. The loans vary in terms of the number of
covenants with the three main covenants being ratios relating to
loan-to-value, interest cover and debt service cover. However, some
loans only have one or two of these covenants, some have other
covenants and some have none. The loans also vary in terms of the
level of these covenants and the headroom to these covenants.
On average across the 48 loans, CLS has between 27% and 49%
headroom for these three main covenants. In the event of an actual
or forecast covenant breach, all of the loans have equity cure
mechanisms to repair the breach which allow CLS to either repay
part of the loan or deposit cash for the period the loan is in
breach, after which the cash can be released.
CLS has started to engage with its finance providers regarding
the transition away from LIBOR by the end of 2021. At this stage we
do not expect any issues or overall change in pricing.
PRINCIPAL RISKS AND UNCERTAINTIES
A detailed explanation of the principal risks and uncertainties
affecting the Group, and the steps it takes to mitigate these
risks, can be found on pages 54 to 62 of the annual report and
financial statements for the year
ended 31 December 2020, which is available at www.clsholdings.com/investors.
The Group's principal risks and uncertainties are grouped into
six categories: property; sustainability; business interruption;
financing; political and economic; and people. These risks and
uncertainties are expected to remain relevant for the remaining six
months of the financial year, and these are discussed further
below.
The Board has reviewed the risk status of each of the six risk
categories, particularly with regard to the ongoing direct and
indirect effects of Covid-19. Particularly noteworthy is the
progress being made with the vaccination programmes in each of our
operating countries which, taken together with a general easing of
lockdown restrictions, is resulting in a pick-up in economic
activity. However, we believe that it is still too early to be
sufficiently clear as to some of the long-term impacts as well as
ongoing concerns regarding Covid-19 variants and consequently we
have left the status of our six risks as unchanged from those at
the 2020 year end.
It is hoped that the risk level for some of the risk categories
will be reduced by the year end. However, as noted below, the focus
on some of the risks (especially property and sustainability)
remains heightened and thus increased mitigating actions are being
taken. The status of all risks will be reassessed at the 2021 year
end when further clarity is expected.
Principal Status Change since Commentary
risk at year year end
end
Property High No change Whilst the hybrid occupation market
is now accepted, it is as yet not fully
clear what this means in practice. To
ensure that we can meet changing needs,
CLS continues its focus on tenants by
providing modern, flexible, quality
and affordable space with good amenities.
---------- ------------- -----------------------------------------------
Sustainability Medium No change There is continuing increased global
focus in this area. CLS remains committed
to improving the sustainability of our
properties and has today published its
enhanced Sustainability Strategy including
its Net Zero Carbon Pathway which can
be found on the Group's website.
---------- ------------- -----------------------------------------------
Business Medium No change Our robust IT infrastructure meant that
interruption we responded well to the changes necessitated
by Covid-19, especially home working.
Overall these changes resulted in little
impact to the Group's productivity and
performance.
---------- ------------- -----------------------------------------------
Financing Medium No change In our markets, the appetite and support
of lenders remains good but continues
to depend on the quality of the property,
letting history and covenant strength.
Maintaining our strong lending relationships
across multiple, diversified finance
providers remains a key strength of
the Group particularly if markets are
more volatile.
---------- ------------- -----------------------------------------------
Political High No change Strong levels of government spending
and economic and monetary measures from central banks
together with the roll-out of vaccines
have helped mitigate some of the impact
of Covid-19, leading to improved GDP
forecasts for 2021 and 2022. However,
Covid-19 variants still pose a threat
and the level of future fiscal corrective
measures needed to return to a post
pandemic "normal" is unclear.
---------- ------------- -----------------------------------------------
People Medium No change There has been little change in our
people risk. The positive results from
our 2020 employee survey (discussed
in the 2020 annual report) have been
discussed with staff and the recommendations
have been progressed in conjunction
with our Workforce Advisory Panel.
---------- ------------- -----------------------------------------------
GOING CONCERN
The Directors' assessment of going concern uses the same
methodology as for the preparation and validation of the year end
viability statement (see page 63 of the annual report and financial
statements for the year ended 31 December 2020). This assessment
uses forecasts that have been adjusted for the impacts of Covid-19.
A more detailed description of the approach is set out in note 2 to
these condensed Group financial statements.
The Directors consider that in their assessment there are no
material uncertainties that would cast significant doubt on the
ability of the Group to continue as a going concern and therefore
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for at least 12 months from
the date of this interim 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, which has been
prepared in accordance with IAS 34 'Interim Financial Reporting',
gives a true and fair view of the assets, liabilities, financial
position and profit of the Group, as required by DTR 4.2.4R;
b) the interim management report includes 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 financial year);
and
c) the interim management report includes 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
Fredrik Widlund Andrew Kirkman
Chief Executive Officer Chief Financial Officer
11 August 2021
INDEPENT 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 2021 which comprises the condensed Group
income statement, 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.
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 Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
International Financial Reporting Standards. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34, "Interim Financial
Reporting".
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 Financial Reporting Council 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 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 2021 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
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 Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
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.
Deloitte LLP
Statutory Auditor
London, United Kingdom
11 August, 2021
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
------------------------------------------------ ----- --------------- --------------- ------------
Revenue 3 67.7 71.1 139.4
------------------------------------------------ ----- --------------- --------------- ------------
Net rental income 3 52.3 56.5 109.8
Administration expenses (8.8) (9.9) (18.5)
------------------------------------------------ ----- --------------- --------------- ------------
Recurring (7.6) (9.9) (18.5)
Non-recurring 5 (1.2) - -
------------------------------------------------ ----- --------------- --------------- ------------
Other expenses (5.9) (7.2) (15.1)
------------------------------------------------ ----- --------------- --------------- ------------
Revenue less costs 37.6 39.4 76.2
Net movements on revaluation of investment
property 9 (2.8) 2.7 31.5
Movement on revaluation of equity investment 0.1 - -
(Loss)/profit on sale of investment
property - (0.2) 11.6
Profit on sale of associate - non-recurring 5 1.4 - -
Operating profit 36.3 41.9 119.3
Finance income 6 2.9 3.8 3.2
Finance costs 7 (14.5) (14.2) (26.0)
------------------------------------------------ ----- --------------- --------------- ------------
Profit before tax 24.7 31.5 96.5
------------------------------------------------ ----- --------------- --------------- ------------
Recurring 24.5 31.5 96.5
Non-recurring 5 0.2 - -
------------------------------------------------ ----- --------------- --------------- ------------
Taxation 8 (15.9) (9.9) (19.1)
------------------------------------------------ ----- --------------- --------------- ------------
Profit for the period 8.8 21.6 77.4
------------------------------------------------ ----- --------------- --------------- ------------
Attributable to:
Owners of the Company 8.8 21.6 77.4
------------------------------------------------ ----- --------------- --------------- ------------
Basic and diluted earnings per share 4 2.2p 5.3p 19.0p
------------------------------------------------ ----- --------------- --------------- ------------
Condensed Group statement of comprehensive income for the six
months ended 30 June 2021
Six months Year ended
ended Six months 31 December
30 June 2021 ended 2020
GBPm 30 June 2020 GBPm
(unaudited) GBPm (unaudited) (audited)
---------------------------------------------- ------------------- ------------------- ---------------
Profit for the period 8.8 21.6 77.4
---------------------------------------------- ------------------- ------------------- ---------------
Other comprehensive income
Items that will not be reclassified
to profit or loss
Foreign exchange differences (21.5) 30.3 24.2
---------------------------------------------- ------------------- ------------------- ---------------
Items that may be reclassified to profit
or loss
Revaluation of property, plant and
equipment 1.3 (4.9) (3.6)
Deferred tax on fair value movements (3.2) 0.7 0.5
Total items that may be reclassified
to profit or loss (1.9) (4.2) (3.1)
---------------------------------------------- ------------------- ------------------- ---------------
Total other comprehensive (expense)/income (23.4) 26.1 21.1
---------------------------------------------- ------------------- ------------------- ---------------
Total comprehensive (expense)/income
for the period (14.6) 47.7 98.5
---------------------------------------------- ------------------- ------------------- ---------------
Attributable to:
Owners of the Company (14.6) 47.7 98.5
---------------------------------------------- ------------------- ------------------- ---------------
Condensed Group balance sheet at 30 June 2021
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
----------------------------------- ----- ------------ ------------ -----------
Non-current assets
Investment properties 9 2,141.5 2,053.9 2,032.8
Property, plant and equipment 10 131.2 38.4 130.5
Goodwill and intangible assets 2.5 1.7 2.2
Investments 0.9 - -
Deferred tax 11.6 7.3 7.7
Other receivables 7.9 - 8.2
----------------------------------- ----- ------------ ------------ -----------
2,295.6 2,101.3 2,181.4
----------------------------------- ----- ------------ ------------ -----------
Current assets
Trade and other receivables 11.3 20.3 22.0
Properties held for sale 46.9 39.9 21.9
Cash and cash equivalents 168.7 195.4 235.7
----------------------------------- ----- ------------ ------------ -----------
226.9 255.6 279.6
----------------------------------- ----- ------------ ------------ -----------
Total assets 2,522.5 2,356.9 2,461.0
----------------------------------- ----- ------------ ------------ -----------
Current liabilities
Trade and other payables (59.2) (51.9) (54.3)
Current tax - 0.7 (0.3)
Borrowings 11 (147.4) (128.0) (103.6)
----------------------------------- ----- ------------ ------------ -----------
(206.6) (179.2) (158.2)
----------------------------------- ----- ------------ ------------ -----------
Non-current liabilities
Deferred tax (173.4) (156.1) (159.5)
Borrowings 11 (903.4) (785.9) (867.1)
Leasehold liabilities 11 (1.5) - -
Derivative financial instruments 11 (3.0) (6.4) (5.6)
----------------------------------- ----- ------------ ------------ -----------
(1,081.3) (948.4) (1,032.2)
----------------------------------- ----- ------------ ------------ -----------
Total liabilities (1,287.9) (1,127.6) (1,190.4)
----------------------------------- ----- ------------ ------------ -----------
Net assets 1,234.6 1,229.3 1,270.6
----------------------------------- ----- ------------ ------------ -----------
Equity
Share capital 12 11.0 11.0 11.0
Share premium 83.1 83.1 83.1
Other reserves 93.7 122.3 117.3
Retained earnings 1,046.8 1,012.9 1,059.2
----------------------------------- ----- ------------ ------------ -----------
Total equity 1,234.6 1,229.3 1,270.6
----------------------------------- ----- ------------ ------------ -----------
Condensed Group statement of changes in equity for the six
months ended 30 June 2021
Share Share Other Retained
capital premium reserves earnings Total
Unaudited GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- -------------- ---------------- --------- -------
At 1 January 2021 11.0 83.1 117.3 1,059.2 1,270.6
Arising in the six months ended
30 June 2021:
Total comprehensive (expense)/income
for the period - - (23.4) 8.8 (14.6)
Share-based payment credit - - (0.2) - (0.2)
Dividends to shareholders - - - (21.2) (21.2)
Total changes arising in the
period - - (23.6) (12.4) (36.0)
----------------------------------------- -------- -------------- ---------------- --------- -------
At 30 June 2021 11.0 83.1 93.7 1,046.8 1,234.6
----------------------------------------- -------- -------------- ---------------- --------- -------
Share Share Other Retained
capital premium reserves earnings Total
Unaudited GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- -------------- ---------------- --------- -------
At 1 January 2020 11.0 83.1 96.4 1,011.9 1,202.4
----------------------------------------- -------- -------------- ---------------- --------- -------
Arising in the six months ended
30 June 2020:
Total comprehensive income for
the period - - 26.1 21.6 47.7
Share-based payment credit - - (0.2) - (0.2)
Dividends to shareholders - - - (20.6) (20.6)
----------------------------------------- -------- -------------- ---------------- --------- -------
Total changes arising in the
period - - 25.9 1.0 26.9
----------------------------------------- -------- -------------- ---------------- --------- -------
At 30 June 2020 11.0 83.1 122.3 1,012.9 1,229.3
----------------------------------------- -------- -------------- ---------------- --------- -------
Share Share Other Retained
capital premium reserves earnings Total
Audited GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- -------------- ---------------- --------- -------
At 1 January 2020 11.0 83.1 96.4 1,011.9 1,202.4
----------------------------------------- -------- -------------- ---------------- --------- -------
Arising in the year ended 31
December 2020:
Total comprehensive income for
the year - - 21.1 77.4 98.5
Share-based payment credit - - (0.2) - (0.2)
Dividends to shareholders - - - (30.1) (30.1)
----------------------------------------- -------- -------------- ---------------- --------- -------
Total changes arising in 2020 - - 20.9 47.3 68.2
----------------------------------------- -------- -------------- ---------------- --------- -------
At 31 December 2020 11.0 83.1 117.3 1,059.2 1,270.6
----------------------------------------- -------- -------------- ---------------- --------- -------
Condensed Group statement of cash flows for the six months ended
30 June 2021
Six months
ended Year ended
30 June Six months 31 December
2021 ended 2020
GBPm 30 June 2020 GBPm
Notes (unaudited) GBPm (unaudited) (audited)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash flows from operating
activities
Cash generated from
operations 13 38.6 39.0 76.9
Interest received 0.3 0.6 1.0
Interest paid (12.3) (11.0) (22.1)
Income tax paid on operating activities (4.7) (7.0) (11.5)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Net cash inflow from operating activities 21.9 21.6 44.3
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash flows from investing activities
Purchase of investment properties (163.9) (49.1) (124.6)
Capital expenditure on investment properties (19.5) (9.5) (18.9)
Proceeds from sale of properties 19.1 10.1 62.2
Income tax paid on sale of properties (1.4) (9.0) (9.0)
Purchases of property, plant and equipment (0.2) (0.1) (0.3)
Distributions received from associate and
investment undertakings - 0.1 0.1
Proceeds from sale of associate 0.6 - -
Net cash flow from sale of subsidiaries - - (1.4)
Purchase of intangibles (0.3) (0.3) (0.8)
Net cash flow on foreign currency transactions - 0.3 0.3
--------------------------------------------------------------------- ------------ ------------------ ---------------
Net cash outflow from investing activities (165.6) (57.5) (92.4)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash flows from financing activities
Dividends paid (21.2) (20.6) (30.1)
New loans 144.6 11.1 182.5
Issue costs of new loans (1.1) - (2.5)
Repayment of loans (44.7) (21.9) (128.3)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Net cash inflow/(outflow) from financing
activities 77.6 (31.4) 21.6
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash flow element of net decrease in cash
and cash equivalents (66.1) (67.3) (26.5)
Foreign exchange (loss)/gain (0.9) 3.3 2.8
--------------------------------------------------------------------- ------------ ------------------ ---------------
Net decrease in cash and cash equivalents (67.0) (64.0) (23.7)
Cash and cash equivalents at the beginning
of the period 235.7 259.4 259.4
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash and cash equivalents at the end of
the period 168.7 195.4 235.7
--------------------------------------------------------------------- ------------ ------------------ ---------------
Notes to the condensed Group financial statements 30 June
2021
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 disclosed for
the year ended 31 December 2020 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 financial statements included in
this half-yearly financial report have been prepared in accordance
with IAS 34 Interim Financial Reporting, as adopted by the United
Kingdom.
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. A number of new standards and amendments to IFRSs have
become effective for the financial year beginning on 1 January
2021. These new standards and amendments are listed below:
- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
- Covid-19-Related Rent Concessions - Amendment to IFRS 16
The adoption of these new standards and amendments to IFRSs did
not materially impact the condensed set of financial statements for
the six months ended 30 June 2021.
Transition from LIBOR to SONIA
The London Interbank Offered Rate (LIBOR) is a measure of the
average rate at which banks are willing to borrow wholesale
unsecured funds. It is administered by ICE Benchmark Administration
and is calculated based on submissions from selected panel banks.
It is published in five currencies and a range of tenors and
underpins financial contracts including derivatives, bonds and
loans. As a result of past market manipulation, LIBOR is being
abolished from the end of 2021 and will be replaced by SONIA
(Sterling Overnight Indexed Average).
SONIA has been administered and published by the Bank of England
since April 2018. It is robust and sustainable given the volume of
transactions underpinning it and does not include a term bank
credit risk component so is a better measure of the general level
of interest rates than LIBOR. SONIA can be compounded to be used in
term contracts and the compounded rates tend to be relatively
predictable. Referencing alternatives such as SONIA is the most
effective way of avoiding risks related to LIBOR
discontinuation.
Discussions in relation to the transition from LIBOR to SONIA
have been taking place since the beginning of the year with our
relationship banks and are ongoing. We do not expect any financial
impact on our results as a result of the transition.
2 GOING CONCERN
Covid-19, and the associated responses, are having a profound
impact on the global economy and it is currently the single biggest
negative influence on the Group leading to both current and
forecast impacts as well as far greater levels of uncertainty. CLS
is weathering these impacts well with high rent collection, low bad
debts and a continuing ability to meet its financing and
refinancing needs.
The Board reviews a going concern assessment every six-months
alongside the approval of the financial statements. For the
half-year assessment, a new 4-year forecast was reviewed and
approved by the Board at its August 2021 meeting. The forecast and
the going concern assessment apply the same methodology that was
used for the 2020 year-end viability statement.
The latest forecast reflects current negative expectations
arising as a result of Covid-19, in terms of some lower property
valuations, reduced rent and increased bad debts whilst also
incorporating mitigating cash preservation measures in terms of
cost savings, and reduced and delayed capital expenditure and
acquisitions.
This forecast is used as the base case for our going concern and
viability assessment which has focused on the cash, liquid
resources and working capital position of the Group. The Directors
are confident that loans expiring within at least the next 12
months will be refinanced as expected given existing banking
relationships and ongoing discussions.
Two downside scenarios, being mid and severe cases, have also
been prepared. The key potential property risks have been
incorporated in the modelling by assuming: lower rents; increased
service charges and property expenses; falling property values; and
reduced loan to value covenants on refinancing reflecting expected
greater risk aversion by banks. More general economic factors such
as higher interest and tax rates, and foreign exchange changes
through a strengthened sterling have also been assumed.
The downside scenarios modelled are based off the negative
market and economic impacts experienced during the 2007-2009 global
financial crisis with the mid case being somewhat less extreme and
the severe case being somewhat more extreme (for example property
falls of 35% over four years and 40% over two years respectively).
It is worth noting that these scenarios are potentially overly
harsh as: it is unlikely all the changes would occur at the same
time; the assumptions have been applied equally to all regions and
thus there is no benefit given for the geographic and tenant
diversity benefits of the Group; and the base case already reflects
current expectations of the impact of Covid-19.
The modelling has focused on the cash position of the Group and
potential covenant breaches. On average across its 48 loans, CLS
has between 27% and 49% headroom for the three main covenant ratios
of loan to value, interest cover and debt service cover. In
addition, our loan agreements have equity cure mechanisms and in
the downside scenarios it is assumed that sufficient, available
cash is used to avoid covenant breaches. It has also been assumed
that acquisitions, capital expenditure and dividends are either
reduced or cancelled. Finally, property sales at the reduced
modelled values are assumed.
In the downside scenarios, a minimum cash balance of GBP100
million has been maintained and no use has been made of the current
GBP50 million of undrawn facilities. In the severe case, only 15%
of the property portfolio, at the assumed lower valuations, would
need to be sold to maintain this GBP100 million cash buffer. In a
downside scenario, the GBP50 million of facilities could be
withdrawn but if they were not withdrawn and were used, less than
1% of properties would need to be sold.
The longer term operational and financial implications of
Covid-19 are hard to forecast accurately. However, based on flexing
the key financial assumptions impacting core drivers of CLS' cash
flows, it appears that the potential negative outcomes can be
mitigated without risking the going concern and longer-term
viability of the Group.
Taking the foregoing into account, the Directors consider that
in their assessment there are no material uncertainties that would
cast significant doubt on the ability of the Group to continue as a
going concern and therefore have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for at least 12 months from the date of this interim report and
therefore, the Directors continue to adopt the going concern basis
in preparing these accounts.
3 SEGMENT INFORMATION
The Group has two operating divisions - investment properties
and other investments. Other investments comprise the hotel, the
student accommodation and other small corporate investments for the
six months ended 30 June 2021. The Group manages the investment
properties division on a geographical basis due to its size and
geographical diversity. Consequently, the Group's principal
operating segments are:
Investment properties: United Kingdom
Germany France
Other investments
3 SEGMENT INFORMATION (continued)
The Group's results for the six months ended 30 June 2021 by
operating segment were as follows:
Investment properties
------------------------------- ---------------------------
United Other Central
Kingdom Germany France investments administration Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- ------- ------ ------------ --------------- ------
Rental income 26.8 16.4 7.4 - - 50.6
Other property-related
income 0.4 - 0.1 2.4 - 2.9
Service charge income 5.7 5.5 3.0 - - 14.2
------------------------------- ---------- ------- ------ ------------ --------------- ------
Revenue 32.9 21.9 10.5 2.4 - 67.7
Service charges and
similar expenses (6.5) (5.7) (3.2) - - (15.4)
------------------------------- ---------- ------- ------ ------------ --------------- ------
Net rental income 26.4 16.2 7.3 2.4 - 52.3
Administration expenses (3.8) (1.3) (1.0) - (2.7) (8.8)
------------------------------- ---------- ------- ------ ------------ --------------- ------
Recurring (3.3) (1.3) (1.0) - (2.0) (7.6)
Non-recurring (0.5) - - - (0.7) (1.2)
------------------------------- ---------- ------- ------ ------------ --------------- ------
Other expenses (2.1) (1.4) (0.3) (2.1) - (5.9)
------------------------------- ---------- ------- ------ ------------ --------------- ------
Revenue less costs 20.5 13.5 6.0 0.3 (2.7) 37.6
Net movements on revaluation
of investment property (7.5) 5.4 (0.7) - - (2.8)
Movement on revaluation
of equity investment - - - 0.1 - 0.1
(Loss)/profit on sale
of investment property (0.1) 0.1 - - - -
Profit of sale of
associate - non-recurring - - - 1.4 - 1.4
------------------------------- ---------- ------- ------ ------------ --------------- ------
Operating profit/(loss) 12.9 19.0 5.3 1.8 (2.7) 36.3
------------------------------- ---------- ------- ------ ------------ --------------- ------
Recurring 13.4 19.0 5.3 0.4 (2.0) 36.1
Non-recurring (0.5) - - 1.4 (0.7) 0.2
------------------------------- ---------- ------- ------ ------------ --------------- ------
Finance income 1.9 0.1 - 0.9 - 2.9
Finance costs (7.9) (2.5) (1.3) (2.6) (0.2) (14.5)
------------------------------- ---------- ------- ------ ------------ --------------- ------
Profit/(loss) before
tax 6.9 16.6 4.0 0.1 (2.9) 24.7
------------------------------- ---------- ------- ------ ------------ --------------- ------
3 SEGMENT INFORMATION (continued)
The Group's results for the six months ended 30 June 2020 by
operating segment were as follows:
Investment properties
United Germany France Other Central Total
Kingdom GBPm GBPm investments administration GBPm
GBPm GBPm GBPm
---------------------------- ---------- ------- ------- ------------ --------------- -------
Rental income 29.4 16.4 7.6 - - 53.4
Other property-related
income 3.2 - 0.1 1.0 - 4.3
Service charge income 5.5 5.0 2.9 - - 13.4
---------------------------- ---------- ------- ------- ------------ --------------- -------
Revenue 38.1 21.4 10.6 1.0 - 71.1
Service charges and
similar expenses (6.3) (5.4) (2.9) - - (14.6)
---------------------------- ---------- ------- ------- ------------ --------------- -------
Net rental income 31.8 16.0 7.7 1.0 - 56.5
Administration expenses (3.8) (1.3) (0.9) (0.2) (3.7) (9.9)
Other expenses (3.8) (1.1) (0.6) (1.0) (0.7) (7.2)
---------------------------- ---------- ------- ------- ------------ --------------- -------
Revenue less costs 24.2 13.6 6.2 (0.2) (4.4) 39.4
Net movements on
revaluation of investment
property (18.0) 19.5 1.2 - - 2.7
Loss on sale of investment
property (0.2) - - - - (0.2)
---------------------------- ---------- ------- ------- ------------ --------------- -------
Operating profit/(loss) 6.0 33.1 7.4 (0.2) (4.4) 41.9
Finance income - - - 3.8 - 3.8
Finance costs (10.0) (2.5) (1.3) (0.2) (0.2) (14.2)
---------------------------- ---------- ------- ------- ------------ --------------- -------
(Loss)/profit before
tax (4.0) 30.6 6.1 3.4 (4.6) 31.5
---------------------------- ---------- ------- ------- ------------ --------------- -------
3 SEGMENT INFORMATION (continued)
The Group's results for the year ended 31 December 2020 were as
follows:
Investment properties
United Other Central
Kingdom Germany France investments administration Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------------ ------- ------ ------------ --------------- ------
Rental income 58.2 33.3 15.0 - - 106.5
Other property-related
income 3.8 - 0.2 1.9 - 5.9
Service charge income 11.2 10.3 5.5 - - 27.0
Revenue 73.2 43.6 20.7 1.9 - 139.4
Service charges and
similar expenses (12.8) (10.9) (5.9) - - (29.6)
------------------------------ ------------ ------- ------ ------------ --------------- ------
Net rental income 60.4 32.7 14.8 1.9 - 109.8
Administration expenses (7.5) (2.9) (1.8) (0.2) (6.1) (18.5)
Other expenses (8.9) (2.8) (1.4) (2.0) - (15.1)
------------------------------ ------------ ------- ------ ------------ --------------- ------
Revenue less costs 44.0 27.0 11.6 (0.3) (6.1) 76.2
Net movements on revaluation
of investment property (29.1) 60.1 0.5 - - 31.5
(Loss)/profit on sale
of investment property (0.1) 11.7 - - - 11.6
Operating profit/(loss) 14.8 98.8 12.1 (0.3) (6.1) 119.3
Finance income - - - 3.2 - 3.2
Finance costs (17.3) (5.1) (2.7) (0.9) - (26.0)
------------------------------ ------------ ------- ------ ------------ --------------- ------
(Loss)/profit before
tax (2.5) 93.7 9.4 2.0 (6.1) 96.5
------------------------------ ------------ ------- ------ ------------ --------------- ------
SEGMENT ASSETS AND LIABILITIES
Assets Liabilities Capital expenditure
----------------- ----------------------------- ----------------------------- -----------------------------
30 June 30 June 31 December 30 June 30 June 31 December 30 June 30 June 31 December
2021 2020 2020 2021 2020 2020 2021 2020 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ------- ----------- ------- ------- ----------- ------- ------- -----------
Investment
property
United Kingdom 1,054.5 1,068.5 1,044.8 629.3 522.3 605.2 11.8 3.8 7.3
Germany 893.4 761.2 767.2 451.9 393.4 373.3 4.1 3.9 6.3
France 300.5 314.1 314.9 195.0 206.6 207.2 3.0 1.7 4.2
Other
investments 274.1 213.1 334.1 16.3 5.3 4.7 - - 0.1
----------------- ------- ------- ----------- ------- ------- ----------- ------- ------- -----------
2,522.5 2,356.9 2,461.0 1,292.5 1,127.6 1,190.4 18.9 9.4 17.9
----------------- ------- ------- ----------- ------- ------- ----------- ------- ------- -----------
4 ALTERNATIVE PERFORMANCE MEASURES ('APMs')
Alternative performance measures ('APMs') should be considered
in addition to, and are not intended to be a substitute for, or
superior to, IFRS measurements.
Introduction
The Group has applied the October 2015 European Securities and
Markets Authority ('ESMA') guidelines on APMs and the November 2017
Financial Reporting Council ('FRC') corporate thematic review of
APMs in these results, whilst noting ESMA's December 2019 report on
the use of APMs. An APM is a financial measure of historical or
future financial performance, position or cash flows of the Group
which is not a measure defined or specified in IFRS.
Overview of our use of APMs
The Directors believe that APMs assist in providing additional
useful information on the underlying trends, performance and
position of the Group. APMs assist our stakeholder users of the
accounts, particularly equity and debt investors, through the
comparability of information. APMs are used by the Directors and
management, both internally and externally, for performance
analysis, strategic planning, reporting and incentive-setting
purposes. APMs are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including peers in
the real estate industry. There are two sets of APMs which we
utilise, and which are reconciled where possible to statutory
measures on the following pages.
1. EPRA APMs
CLS monitors the Group's financial performance using APMs which
are European Public Real Estate Association ('EPRA') measures as
these are a set of standard disclosures for the property industry
and thus aid comparability for our stakeholder users. Prior to last
year end, the two key APMs for CLS, which were in accordance with
the November 2016 EPRA guidelines, were:
-- EPRA earnings, which gives relevant information to investors
on the long-term performance of the Group's underlying property
investment business and an indication of the extent to which
current dividend payments are supported by earnings; and
-- EPRA net asset value (NAV), which excludes certain items not
expected to crystallise in a long-term investment property business
model, such as CLS'.
The latest edition of the EPRA guidelines were issued in October
2019 and replaced EPRA NAV and EPRA NNNAV with three other balance
sheet reporting measures, which are defined in the glossary:
-- EPRA net tangible assets (NTA);
-- EPRA net realisable value (NRV); and
-- EPRA net development value (NDV).
CLS considers EPRA NTA to be the most relevant of these new
measures as we believe that this will continue to reflect the
long-term nature of our property investments most accurately.
However, all the new measures have been disclosed along with the
previous measures for comparative purposes. EPRA Earnings remains
the same.
Whilst CLS primarily uses the measures referred to above, we
have also disclosed all other EPRA metrics as well as disclosing
the measures that CLS used to prefer for certain of these
categories.
-- EPRA net initial yield;
-- EPRA 'topped-up' net initial yield;
-- EPRA vacancy;
-- EPRA capital expenditure; and
-- EPRA cost ratio.
2. Other APMs
CLS uses a number of other APMs, many of which are commonly used
by industry peers:
-- Total accounting return;
-- Net borrowings and gearing;
-- Loan-to-value;
-- Dividend cover; and
-- Interest cover.
Changes to APMs
Except for the removal of the CLS specific performance measures
mentioned above, there have been no changes to the Group's APMs in
the period with the same APMs utilised by the business being
defined, calculated and used on a consistent basis.
Set out below is a reconciliation of the APMs used in these
results to the statutory measures.
1) EPRA APMs
Number of shares for use in EPRA calculations:
31 December
30 June 2021 30 June 2020 2020
Number Number Number
------------------------------------------ -------------- -------------- -------------
Weighted average number of ordinary
shares in circulation 407,395,760 407,395,760 407,395,760
------------------------------------------ -------------- -------------- -------------
Number of ordinary shares in circulation 407,395,760 407,395,760 407,395,760
------------------------------------------ -------------- -------------- -------------
i) EPRA Earnings
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
GBPm GBPm GBPm
---------------------------------------------- --------------- --------------- --------------
Profit for the period 8.8 21.6 77.4
Non-recurring items after tax 5 (0.4) - -
------------------------------------------ --------------- --------------- --------------
Profit for the period before non-recurring
items 8.4 21.6 77.4
Net movement on revaluation of investment
property 2.8 (2.7) (31.5)
Movement on revaluation of equity
investment (0.1) - -
Loss/(profit) from sale of investment
property - 0.2 (11.6)
Current tax on disposals 1.0 0.2 2.7
Movement in fair value of derivative
financial instruments (2.6) 2.3 1.6
Deferred taxation 12.4 6.8 10.9
---------------------------------------------- --------------- --------------- --------------
EPRA earnings 21.9 28.4 49.5
---------------------------------------------- --------------- --------------- --------------
Basic and diluted earnings per share
from continuing operations 2.2p 5.3p 19.0p
---------------------------------------------- --------------- --------------- --------------
EPRA earnings per share 5.4p 7.0p 12.2p
---------------------------------------------- --------------- --------------- --------------
ii) Net asset value measures
30 June 2021 IFRS EPRA EPRA EPRA EPRA EPRA
NAV NNNAV NAV NTA NRV NDV
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------- ------- ------- ------- ------- ---------
Net assets 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6
Goodwill as a result
of deferred tax on
acquisitions - (1.1) (1.1) (1.1) (1.1) (1.1)
Other intangibles - - - (1.4) - -
Fair value of fixed
interest debt - (8.6) - - - (8.6)
- tax thereon - 1.6 - - - 1.6
Deferred tax on revaluation
surplus - - 162.3 162.3 162.3 -
Capital allowances - - - (15.6) (15.6) -
Adjustment for short-term
disposals - - - (8.2) - -
Fair value of financial
instruments - - 3.0 3.0 3.0 -
Purchasers' costs - - - - 148.4 -
------------------------------ ------- ------- ------- ------- ------- ---------
1,234.6 1,226.5 1,398.8 1,373.6 1,531.6 1,226.5
------------------------------ ------- ------- ------- ------- ------- ---------
Per share 303.0p 301.1p 343.4p 337.2p 375.9p 301.1p
------------------------------ ------- ------- ------- ------- ------- ---------
30 June 2020
------------------------------ ------- ------- ------- ------- ------- -------
Net assets 1,229.3 1,229.3 1,229.3 1,229.3 1,229.3 1,229.3
Goodwill as a result
of deferred tax on
acquisitions - (1.1) (1.1) (1.1) (1.1) (1.1)
Other intangibles - - - (0.6) - -
Fair value of fixed
interest debt - (12.6) - - - (12.6)
- tax thereon - 2.4 - - - 2.4
Deferred tax on revaluation
surplus - - 148.8 148.8 148.8 -
Capital allowances - - - (11.5) (11.5) -
Adjustment for short-term
disposals - - - (0.8) - -
Fair value of financial
instruments - - 6.4 6.4 6.4 -
Purchasers' costs - - - - 137.3 -
------------------------------ ------- ------- ------- ------- ------- -------
1,229.3 1,218.0 1,383.4 1,370.5 1,509.2 1,218.0
------------------------------ ------- ------- ------- ------- ------- -------
Per share 301.7p 299.0p 339.6p 336.4p 370.5p 299.0p
------------------------------ ------- ------- ------- ------- ------- -------
31 December 2020
------------------------------ ------- ------- ------- ------- ------- -------
Net assets 1,270.6 1,270.6 1,270.6 1,270.6 1,270.6 1,270.6
Goodwill as a result
of deferred tax on
acquisitions - (1.1) (1.1) (1.1) (1.1) (1.1)
Other intangibles - - - (1.1) - -
Fair value of fixed
interest debt - (13.2) - - - (13.2)
- tax thereon - 2.5 - - - 2.5
Deferred tax on revaluation
surplus - - 151.3 151.3 151.3 -
Capital allowances - - - (12.0) (12.0) -
Adjustment for short-term
disposals - - - (6.9) - -
Fair value of financial
instruments - - 5.6 5.6 5.6 -
Purchasers' costs - - - - 140.9 -
------------------------------ ------- ------- ------- ------- ------- -------
1,270.6 1,258.8 1,426.4 1,406.4 1,555.3 1,258.8
------------------------------ ------- ------- ------- ------- ------- -------
Per share 311.9p 309.0p 350.1p 345.2p 381.8p 309.0p
------------------------------ ------- ------- ------- ------- ------- -------
iii) Yield
EPRA Net Initial Yield ('NIY')
EPRA NIY is calculated as the annualised rental income based on
the cash rents passing at the balance sheet date less
non-recoverable property operating expenses, divided by the gross
market value of the property (excluding those that are under
development, held as PPE or occupied by CLS).
Six months ended 30 June
2021
------------------------------------------ -------- ------------------------------
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
------------------------------------------ -------- ---------- ------- ---------
Rent passing 52.4 37.6 12.4 102.4
Adjusted for development stock (1.1) - - (1.1)
Forecast non-recoverable service charge (2.5) (1.1) (0.5) (4.1)
------------------------------------------ -------- ---------- ------- ---------
Annualised net rents (A) 48.8 36.5 11.9 97.2
------------------------------------------ -------- ---------- ------- ---------
Property portfolio 1,020.0 876.0 292.4 2,188.4
Adjusted for development stock (50.3) (7.0) - (57.3)
Purchasers' costs 65.9 59.1 19.9 144.9
------------------------------------------ -------- ---------- ------- ---------
Property portfolio valuation including
purchasers' costs (B) 1,035.6 928.1 312.3 2,276.0
------------------------------------------
EPRA NIY (A/B) 4.7% 3.9% 3.8% 4.3%
Six months ended 30 June
2020
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Rent passing 55.8 34.1 14.9 104.8
Adjusted for development stock (1.3) - - (1.3)
Forecast non-recoverable service charge (2.5) (1.0) (0.1) (3.6)
Annualised net rents (A) 52.0 33.1 14.8 99.9
-----
Property portfolio 1,036.7 751.3 305.8 2,093.8
Adjusted for development stock (45.3) (28.5) - (73.8)
Purchasers' costs 67.3 49.2 20.8 137.3
Property portfolio valuation including purchasers'
costs (B) 1,058.7 772.0 326.6 2,157.3
EPRA NIY (A/B) 4.9% 4.3% 4.5% 4.6%
Year ended 31 December
2020
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Rent passing 54.4 33.2 13.7 101.3
Adjusted for development stock (1.1) - - (1.1)
Forecast non-recoverable service charge (2.5) (0.8) (0.5) (3.8)
Annualised net rents (A) 50.8 32.4 13.2 96.4
----- -------------
Property portfolio 1,003.8 743.3 307.6 2,054.7
Adjusted for development stock (49.5) (7.5) - (57.0)
Purchasers' costs 64.6 50.0 20.9 135.5
Property portfolio valuation including purchasers'
costs (B) 1,018.9 785.8 328.5 2,133.2
EPRA NIY (A/B) 5.0% 4.1% 4.0% 4.5%
EPRA 'topped-up' NIY
EPRA 'topped-up' NIY is calculated by making an adjustment to
EPRA NIY in respect of the expiration of rent-free periods (or
other unexpired lease incentives such as discounted rent periods
and stepped rents).
Six months ended 30 June
2021
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Contracted rent 55.8 39.7 14.4 109.9
Adjusted for development stock (1.1) - - (1.1)
Forecast non-recoverable service charge (2.5) (1.1) (0.5) (4.1)
-------- ----------
'Topped-up' annualised net rents (A) 52.2 38.6 13.9 104.7
-------- ----------
Property portfolio 1,020.0 876.0 292.4 2,188.4
Adjusted for development stock (50.3) (7.0) - (57.3)
Purchasers' costs 65.9 59.1 19.9 144.9
-------- ----------
Property portfolio valuation including
purchasers' costs (B) 1,035.6 928.1 312.3 2,276.0
EPRA 'topped-up' NIY (A/B) 5.0% 4.2% 4.5% 4.6%
Six months ended 30 June
2020
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Contracted rent 59.6 37.4 16.5 113.5
Adjusted for development stock (1.5) - - (1.5)
Forecast non-recoverable service charge (2.5) (1.0) (0.1) (3.6)
'Topped-up' annualised net rents (A) 55.6 36.4 16.4 108.4
Property portfolio 1,036.7 751.3 305.8 2,093.8
Adjusted for development stock (45.3) (28.5) - (73.8)
Purchasers' costs 67.3 49.2 20.8 137.3
Property portfolio valuation including
purchasers' costs (B) 1,058.7 772.0 326.6 2,157.3
EPRA 'topped-up' NIY (A/B) 5.3% 4.7% 5.0% 5.0%
Year ended 31 December
2020
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Contracted rent 57.2 34.7 16.0 107.9
Adjusted for development stock (1.2) - - (1.2)
Forecast non-recoverable service charge (2.5) (0.8) (0.5) (3.8)
'Topped-up' annualised net rents (A) 53.5 33.9 15.5 102.9
Property portfolio 1,003.8 743.3 307.6 2,054.7
Adjusted for development stock (49.5) (7.5) - (57.0)
Purchasers' costs 64.6 50.0 20.9 135.5
Property portfolio valuation including
purchasers' costs (B) 1,018.9 785.8 328.5 2,133.2
EPRA 'topped-up' NIY (A/B) 5.2% 4.3% 4.7% 4.8%
iv) EPRA vacancy
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2021 2020 2020
GBPm GBPm GBPm
ERV of vacant space (A) 9.5 6.2 6.1
ERV of let space 114.2 119.9 113.9
ERV of lettable space (B) 123.7 126.1 120.0
EPRA vacancy rate (A/B) 7.7% 4.9% 5.1%
v) EPRA capital expenditure
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2021 2020 2020
GBPm GBPm GBPm
Acquisitions 177.2 51.6 119.1
Amounts spent on the completed investment
property portfolio
Creation of incremental space 1.7 0.8 1.9
Creation of no incremental space 17.2 8.5 15.9
EPRA capital expenditure 196.1 60.9 136.9
Conversion from accrual to cash basis (12.7) (2.3) 6.6
EPRA capital expenditure on a cash
basis 183.4 58.6 143.5
vi) EPRA cost ratio
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2021 2020 2020
GBPm GBPm GBPm
Administration expenses - recurring 7.6 9.9 18.5
Other expenses 5.9 7.2 15.1
Less: investment segment (2.0) (1.2) (2.2)
11.5 15.9 31.4
Net service charge costs 1.2 1.2 2.6
Service charge costs recovered through
rents but not separately invoiced (0.2) (0.2) (0.3)
Dilapidations receipts (0.4) (2.2) (2.6)
EPRA costs (including direct vacancy
costs) (A) 12.1 14.7 31.1
Direct vacancy costs (2.2) (1.2) (2.9)
EPRA costs (excluding direct vacancy
costs) (B) 9.9 13.5 28.2
Gross rental income 50.6 53.4 106.5
Service charge components of rental
income (0.3) (0.3) (0.3)
Adjusted gross rental income (C) 50.3 53.1 106.2
EPRA cost ratio (including direct vacancy
costs) (A/C) 24.1% 27.7% 29.3%
EPRA cost ratio (excluding direct vacancy
costs) (B/C) 19.7% 25.4% 26.6%
2. Other APMs
i) Total accounting return
Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
GBPm GBPm GBPm
EPRA closing net tangible assets 1,373.6 1,370.5 1,406.4
Add back: prior year final dividend
paid 21.2 20.6 20.5
Add back: interim dividend paid - - 9.6
Less: EPRA opening net tangible
assets (A) (1,406.4) (1,329.3) (1,329.3)
Return before dividends (B) (11.6) 61.8 107.2
Total accounting return (B/A) (0.8)% 4.6% 8.1%
ii) Net borrowings and gearing
Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
Notes GBPm GBPm GBPm
Borrowings short-term 11 147.4 128.0 103.6
Borrowings long-term 11 903.4 785.9 867.1
Add back: unamortised issue costs 11 6.4 4.8 6.3
Leasehold liabilities 11 1.5 - -
Gross debt 11 1,058.7 918.7 977.0
Leasehold liabilities (1.5) - -
Cash (168.7) (195.4) (235.7)
Net borrowings 888.5 723.3 741.3
Net assets 1,234.6 1,229.3 1,270.6
Net gearing 72.0% 58.8% 58.3%
iii) Loan-to-value
Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
Notes GBPm GBPm GBPm
Borrowings short-term 11 147.4 128.0 103.6
Borrowings long-term 11 903.4 785.9 867.1
Leasehold liabilities 11 1.5 - -
Less: cash (168.7) (195.4) (235.7)
Net debt 883.6 718.5 735.0
Leasehold liabilities (1.5) - -
Net debt excluding leasehold liabilities
(A) 882.1 718.5 735.0
Investment properties 2,141.5 2,053.9 2,032.8
Properties in PPE 129.2 36.2 128.3
Held for sale 46.9 39.9 21.9
Total property portfolio (B) 2,317.6 2,130.0 2,183.0
Loan-to-value (A/B) 38.1% 33.7% 33.7%
iv) Dividend cover Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
Notes GBPm GBPm GBPm
Interim dividend * 9.6 9.6 9.6
Final dividend - - 21.2
Total dividend (A) 9.6 9.6 30.8
EPRA earnings (B) 21.9 28.4 49.5
Dividend cover (B/A) 2.28 2.96 1.61
*Proposed interim 2021 dividend
v) Interest cover Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
Notes GBPm GBPm GBPm
Net rental income 3 52.3 56.5 109.8
Administration expenses 3 (7.6) (9.9) (18.5)
Other expenses 3 (5.9) (7.2) (15.1)
Revenue less costs (A) 3 38.8 39.4 76.2
Finance income (excluding dividend
income) 6 0.3 0.6 1.0
Finance costs (excluding derivatives) 7 (12.6) (11.9) (24.4)
Net interest (B) (12.3) (11.3) (23.4)
Interest cover (A/B) 3.15 3.49 3.26
5 NON-RECURRING ITEMS
Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
GBPm GBPm GBPm
Profit on sale of associate 1.4 - -
Restructuring costs (1.2) - -
0.2 - -
6 FINANCE INCOME
Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
GBPm GBPm GBPm
Interest income
Financial instruments carried at
amortised cost 0.3 0.6 1.0
Foreign exchange gain - 3.1 2.1
Movement in fair value of derivative
financial instruments 2.6 - -
Other finance income - 0.1 0.1
2.9 3.8 3.2
7 FINANCE COSTS
Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
GBPm GBPm GBPm
Interest expense
Secured bank loans 10.5 9.9 20.0
Secured notes 1.1 1.1 2.3
Amortisation of loan issue costs 1.0 0.9 2.1
Total interest costs 12.6 11.9 24.4
Foreign exchange loss 1.9 - -
Movement in fair value of derivative
financial instruments - 2.3 1.6
14.5 14.2 26.0
8 TAXATION
Six months Six months Year ended
ended ended 31
30 June 30 June December
2021 2020 2020
GBPm GBPm GBPm
Deferred tax
Underlying 1.2 6.6 10.7
Due to increase in UK corporation
tax rate 10.2 - -
11.4 6.6 10.7
Current tax 4.5 3.3 8.4
15.9 9.9 19.1
Tax for the six months ended 30 June 2021 has been charged at an
effective rate of 79.1 % (six months ended 30 June 2020: 31.3%;
year ended 31 December 2020: 16.9%), representing the best estimate
of the average annual effective tax rate expected for the full year
adjusted for the tax effect of one-off items, applied to the
pre-tax income of the six month period. The effective tax rate for
the period of 79.1% is higher than the weighted average tax rate of
19.0%. This is predominantly due to a deferred tax charge resulting
from the substantive enactment of the future increase in the UK
corporation tax rate from 19% to 25% in the period.
9 PROPERTY PORTFOLIO
Property Assets
United Total investment held in held for Total property
Kingdom Germany France properties PPE (1) sale portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2021 997.9 733.2 301.7 2,032.8 128.3 21.9 2,183.0
Acquisitions 17.9 159.3 - 177.2 - - 177.2
Capital expenditure 11.8 4.1 3.0 18.9 - - 18.9
Disposals - - - - - (15.1) (15.1)
Net revaluation
movement (7.5) 6.4 (0.7) (1.8) 1.3 (1.0) (1.5)
Lease incentive
debtor adjustments (0.1) 0.5 0.4 0.8 - - 0.8
Depreciation - - - - (0.1) - (0.1)
Exchange rate
variances - (32.4) (12.5) (44.9) (0.3) (0.4) (45.6)
Transfer to held
for sale (30.9) - (10.6) (41.5) - 41.5 -
At 30 June 2021 989.1 871.1 281.3 2,141.5 129.2 46.9 2,317.6
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Investment property 989.1 871.1 281.3 2,141.5
Property held in PPE(1) 123.1 4.2 1.9 129.2
Held for sale 30.9 4.9 11.1 46.9
At 30 June 2021 1,143.1 880.2 294.3 2,317.6
At 30 June 2020 1,067.7 754.6 307.7 2,130.0
At 31 December 2020 1,125.7 747.7 309.6 2,183.0
(1) PPE: Property, plant and equipment (see note 10)
Investment properties include leasehold properties with a
carrying value of GBP50.0 million (30 June 2020: GBP31.5 million;
31 December 2020: GBP32.8 million).
The property portfolio which comprises investment properties,
properties held for sale, and the student accommodation, hotel and
landholding detailed in note 10 was revalued at 30 June 2021 to its
fair value. Valuations were based on current prices in an active
market for all properties. The property valuations were carried out
by external independent valuers as follows:
31
30 June 30 June December
2021 2020 2020
GBPm GBPm GBPm
Cushman and Wakefield 1,437.3 1,375.4 1,435.3
Jones Lang LaSalle 877.3 752.4 744.6
L Fällström AB 3.0 2.2 3.1
2,317.6 2,130.0 2,183.0
Valuation process
The Group's property portfolio was valued by external valuers on
the basis of fair value using information provided to them by the
Group such as current rents, terms and conditions of lease
agreements, service charges and capital expenditure. This
information is derived from the Group's property management systems
and is subject to the Group's overall control environment. The
valuation reports are based on assumptions and valuation models
used by the external valuers. The assumptions are typically market
related, such as yields and discount rates, and are based on
professional judgement and market evidence of transactions for
similar properties on arm's length terms. The valuations are
prepared in accordance with RICS standards.
Each region's Head of Property verifies all major inputs to the
external valuation reports, assesses the individual property
valuation changes from the prior year valuation report and holds
discussions with the external valuers. When the process is
complete, the valuation report is recommended to the Audit
Committee and the Board, which considers it as part of its overall
responsibilities.
Valuation techniques
The fair value of the property portfolio has been determined
using an income capitalisation approach (excluding ongoing
developments), whereby contracted and market rental values are
capitalised with a market capitalisation rate. The resulting
valuations are cross-checked against the equivalent yields and the
fair market values per square foot derived from comparable recent
market transactions on arm's length terms. Other factors taken into
account in the valuations include the tenure of the property,
tenancy details and ground and structural conditions.
Ongoing developments are valued under the 'residual method' of
valuation, which is the same of the method of valuation described
above, with a deduction for all costs necessary to complete the
development, including a notional finance cost, together with a
further allowance for remaining risk. As the development approaches
completion, the valuer may consider the income capitalisation
approach to be more appropriate.
These techniques are consistent with the principles in IFRS 13
Fair Value Measurement and use significant unobservable inputs such
that the fair value measurement of each property within the
portfolio has been classified as Level 3 in the fair value
hierarchy.
There were no transfers between any of the Levels in the fair
value hierarchy during either 2021 or 2020.
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to a loss of GBP2.8 million (30 June 2020: GBP2.7
million gain; 31 December 2020: GBP31.5 million gain) and are
presented in the income statement in the line item 'Net movements
on revaluation of investment property'. The revaluation surplus for
the property, plant and equipment of GBP1.3 million (30 June 2020:
GBP4.9 million deficit; 31 December 2020: GBP3.6 million deficit)
was included within the revaluation reserve.
Quantitative information about fair value measurement using
unobservable inputs (Level 3)
ERV Equivalent yield
Average Range per sq ft Average Range %
%
GBP per sq Min Max Min Max
ft
UK 36.16 10.00 66.18 5.69 2.36 8.75
Germany 13.45 9.05 24.05 4.43 3.00 5.50
France 19.39 11.17 36.50 5.13 4.38 6.00
Sensitivity of measurement to variations in the significant
unobservable inputs
All other factors remaining constant, an increase in ERV would
increase valuations, whilst an increase in the equivalent yield
would result in a fall in value, and vice versa. There are
inter-relationships between these inputs as they are partially
determined by market conditions. An increase in the reversionary
yield may accompany an increase in ERV and would mitigate its
impact on the fair value measurement.
A decrease in the equivalent yield by 25 basis points would
result in an increase in the fair value of the Group's investment
property by GBP119.3 million (31 December 2020: GBP115.2 million)
whilst a 25 basis point increase would reduce the fair value by
GBP119.8 million (31 December 2020: GBP103.7 million). A decrease
in the ERV by 5% would result in a decrease in the fair value of
the Group's investment property by GBP76.3 million (31 December
2020: GBP75.8 million) whilst an increase in the ERV by 5% would
result in an increase in the fair value of the Group's investment
property by GBP79.1 million (31 December 2020: GBP75.6
million).
Although not a key valuation assumption, in the absence of a
financial instruments note and disclosure on foreign exchange risk,
the table below shows how the investment property values would be
impacted by a 5% movement in the sterling/euro exchange rate at 30
June 2021.
GBPm
5% increase in value of sterling
against the euro (54.9)
5% fall in value of sterling against
the euro 60.6
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 (and the hotel and
student accommodation detailed in note 10 are provided as security
against debt.
10 PROPERTY, PLANT AND EQUIPMENT
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
Student accommodation 92.0 - 90.8
Hotel 23.8 23.6 23.8
Land and buildings 3.0 2.2 3.1
Owner-occupied property 10.4 10.4 10.6
Fixtures and fittings 2.0 2.2 2.2
Total 131.2 38.4 130.5
Fixtures
Land and Owner-occupied and
Student accommodation Hotel buildings property fittings Total
GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2021 90.8 25.0 3.1 10.6 6.3 135.8
Reclassification - (1.2) - - - (1.2)
Additions - - - - 0.2 0.2
Disposals - - - - (3.4) (3.4)
Exchange rate variances - - (0.1) (0.2) - (0.3)
Revaluation 1.2 - - - - 1.2
At 30 June 2021 92.0 23.8 3.0 10.4 3.1 132.3
Comprising:
At cost - - - - 3.1 3.1
At valuation 92.0 23.8 3.0 10.4 - 129.2
92.0 23.8 3.0 10.4 3.1 132.3
Accumulated depreciation
and impairment
At 1 January 2021 - (1.2) - - (4.1) (5.3)
Reclassification - 1.2 - - - 1.2
Disposals - - - - 3.3 3.3
Depreciation charge (0.1) - - - (0.3) (0.4)
Revaluation 0.1 - - - - 0.1
At 30 June 2021 - - - - (1.1) (1.1)
Net book value
At 30 June 2021 92.0 23.8 3.0 10.4 2.0 131.2
At 31 December 2020 90.8 23.8 3.1 10.6 2.2 130.5
11 BORROWINGS MATURITY PROFILE
Bank Secured
loans notes Total
At 30 June 2021 GBPm GBPm GBPm
Maturing in:
Within one year or on demand 144.9 4.2 149.1
One to two years 85.4 44.4 129.8
Two to five years 472.8 - 472.8
More than five years 305.5 - 305.5
1,008.6 48.6 1,057.2
Unamortised issue costs (6.3) (0.1) (6.4)
Borrowings 1,002.3 48.5 1,050.8
Due within one year (143.3) (4.1) (147.4)
Due after one year 859.0 44.4 903.4
At 30 June 2020
Maturing in:
Within one year or on demand 125.4 4.2 129.6
One to two years 170.5 4.2 174.7
Two to five years 481.7 44.4 526.1
More than five years 88.3 - 88.3
865.9 52.8 918.7
Unamortised issue costs (4.6) (0.2) (4.8)
Borrowings 861.3 52.6 913.9
Due within one year (123.9) (4.1) (128.0)
Due after one year 737.4 48.5 785.9
At 31 December 2020
Maturing in:
Within one year or on demand 101.2 4.2 105.4
One to two years 116.1 46.5 162.6
Two to five years 432.0 - 432.0
More than five years 277.0 - 277.0
926.3 50.7 977.0
Unamortised issue costs (6.1) (0.2) (6.3)
Borrowings 920.2 50.5 970.7
Due within one year (99.5) (4.1) (103.6)
Due after one year 820.7 46.4 867.1
FAIR VALUES
Carrying amounts Fair values
30 June 30 June 31 December 30 June 30 June 31 December
2021 2020 2020 2021 2020 2020
GBPm GBPm GBPm GBPm GBPm GBPm
Current borrowings 147.4 128.0 103.6 148.1 128.0 103.6
Non-current borrowings 903.4 785.9 867.1 911.3 798.5 880.3
Derivative financial
instruments 3.0 6.4 5.6 3.0 6.4 5.6
1,053.8 920.3 976.3 1,062.4 932.9 989.5
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.
Reconciliation to net debt
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
Borrowings and derivative financial
instruments 1,053.8 920.3 976.3
Adjustments for:
Leasehold liabilities 1.5 - -
Derivative financial instruments (3.0) (6.4) (5.6)
Cash and cash equivalents (168.7) (195.4) (235.7)
Net debt 883.6 718.5 735.0
12 SHARE CAPITAL
Ordinary
shares Total Ordinary Total
in Treasury ordinary shares Treasury ordinary
circulation shares shares in circulation shares shares
Number Number Number GBPm GBPm GBPm
At 1 January 2021
and 30 June 2021 407,395,760 31,382,020 438,777,780 10.2 0.8 11.0
13 CASH GENERATED FROM OPERATIONS
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2021 2020 2020
GBPm GBPm GBPm
Operating profit 36.3 41.9 119.3
Adjustments for:
Net movements on revaluation of investment
properties 2.8 (2.7) (31.5)
Net movements on revaluation of equity
investments (0.1) - -
Depreciation and amortisation 0.4 0.3 0.7
Non-cash rental income (0.8) (0.3) (1.9)
Share-based payments (0.2) (0.2) (0.2)
(Profit)/loss on sale of investment
properties - 0.2 (11.6)
Profit on sale of associate (1.4) - -
Changes in working capital:
Decrease/(increase) in receivables 5.0 1.7 (0.8)
(Decrease)/increase in payables (3.4) (1.9) 2.9
Cash generated from operations 38.6 39.0 76.9
14 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.
15 POST BALANCE SHEET EVENTS
Since the period end, we have completed the sale of two
properties for a total of GBP10.9 million before costs. Both these
properties were presented within assets held for sale at the
balance sheet date.
There were no other material events after 30 June 2021 which
have a bearing on the understanding of the financial statements and
require disclosure.
Glossary of terms
Administration cost ratio
Recurring administration expenses of the investment property
operating segment expressed as a percentage of net rental
income.
Building Research Establishment Environmental Assessment Method
(BREEAM)
An environmental impact assessment method for non-domestic
buildings. Their standards cover new construction, In-Use as well
as refurbishment and fit-out. BREEAM In-Use enables property
investors, owners, managers and occupiers to determine and drive
sustainable improvements in the operational performance of their
buildings. It provides sustainability benchmarking and assurance
for all building types and assesses performance in a number of
areas; management, health & wellbeing, energy, transport,
water, resources, resilience, land use & ecology and pollution.
Performance is measured across a series of ratings; Good, Very
Good, Excellent and Outstanding.
Carbon emissions Scopes 1, 2 and 3
Scope 1 - direct emissions;
Scope 2 - indirect emissions; and
Scope 3 - other indirect emissions.
CDP
CDP, formerly known as the Carbon Disclosure Project, assesses
the ESG performance of all major companies worldwide and aids
comparability between organisations to allow the investor community
to assess the carbon and climate change risk of each company.
CLS vacancy rate
The ERV of vacant lettable space, divided by the aggregate of
the contracted rent of let space and the ERV of vacant lettable
space.
Contracted rent
Annual contracted rental income after any rent-free periods have
expired.
Diluted earnings per share
Profit for the year attributable to the owners of the Company
divided by the diluted weighted average 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 for the year attributable to the owners of the Company
divided by the weighted average number of ordinary shares in issue
in the period.
Energy Performance Certificate (EPC)
An EPC is an asset rating detailing how energy efficient a
building is, rated by carbon dioxide emission on a scale of A-G,
where an A rating is the most energy efficient. They are legally
required for any building that is to be put on the market for sale
or rent.
European Public Real Estate Association (EPRA)
A not-for-profit association with a membership of Europe's
leading property companies, investors and consultants which strives
to establish best practices in accounting, reporting and corporate
governance and to provide high-quality information to investors.
EPRA's Best Practices Recommendations includes guidelines for the
calculation of the following performance measures which the Group
has adopted.
EPRA capital expenditure
Investment property acquisitions and expenditure split between
amounts used for the creation of additional lettable area
('incremental lettable space') and enhancing existing space ('no
incremental space') both on an accrual and cash basis.
EPRA cost ratio
Administrative & operating costs (including & excluding
costs of direct vacancy) divided by gross rental income. A measure
to enable meaningful measurement of the changes in a company's
operating costs.
EPRA earnings per share (EPS)
Earnings from operational activities. A measure of a company's
underlying operating results and an indication of the extent to
which current dividend payments are supported by earnings.
EPRA net asset value (NAV)
NAV adjusted to include trading properties and other investment
interests at fair value and to exclude certain items not expected
to crystallise in a long-term investment property business
model.
EPRA triple net asset value (NNNAV)
EPRA NAV adjusted to include the fair values of (i) financial
instruments, (ii) debt and (iii) deferred taxes on revaluations,
where applicable.
EPRA net reinstatement value (NRV)
NAV adjusted to reflect the value required to rebuild the entity
and assuming that entities never sell assets. Assets and
liabilities, such as fair value movements on financial derivatives
are not expected to crystallise in normal circumstances and
deferred taxes on property valuation surpluses are excluded.
EPRA net tangible assets (NTA)
Assumes that entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax.
EPRA net disposal value (NDV)
Represents the shareholders' value under a disposal scenario,
where deferred tax, financial instruments and certain other
adjustments are calculated to the full extent of their liability,
net of any resulting tax.
EPRA net initial yield (NIY)
Annualised rental income based on the cash rents passing at the
balance sheet date, less non-recoverable property operating
expenses, divided by the market value of the EPRA property
portfolio, increased by estimated purchasers' costs.
EPRA 'topped up' net initial yield
This measure incorporates an adjustment to the EPRA NIY in
respect of the expiration of rent free periods (or other unexpired
lease incentives such as discounted rent periods and stepped
rents).
EPRA vacancy rate
Estimated rental value (ERV) of immediately available space
divided by the ERV of the EPRA portfolio.
Estimated rental value (ERV)
The market rental value of lettable space as estimated by the
Group's valuers. GRESB GRESB assesses and benchmarks the
environmental, social and governance (ESG) performance of real
assets, providing standardised and validated data to the capital
markets.
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.
Key performance indicators (KPIs)
Activities and behaviours, aligned to both business objectives
and individual goals, against which the performance of the Group is
annually assessed. Performance measured against them is referenced
in the annual report.
LIBOR
The London Interbank Offered Rate (LIBOR) is a measure of the
average rate at which banks are willing to borrow wholesale
unsecured funds. It is calculated based on submissions from
selected panel banks, published in five currencies and a range of
tenors and underpins financial contracts including derivatives,
bonds and loans.
Liquid resources
Cash and short-term deposits and listed corporate bonds.
Loan-to-value
Net debt (excluding leasehold liabilities) expressed as a
percentage of the market value of the property portfolio.
Net assets per share or net asset value (NAV)
Equity attributable to the owners of the Company divided by the
diluted number of ordinary shares.
Net debt
Total borrowings less liquid resources.
Net gearing
Net debt expressed as a percentage of net assets attributable to
the owners of the Company.
Net initial yield
Net rent on investment properties and properties held for sale
expressed as a percentage of the valuation of those properties.
Net rent
Passing 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 aggregate of
contracted rent.
Passing rent
Contracted rent before any rent-free periods have expired.
Passive infrared sensor (PIR)
A PIR sensor will turn the lights on automatically when someone
walks into a room or space and off when it becomes empty resulting
in significant energy savings.
Rent reviews
Rent reviews take place at intervals agreed in the lease
(typically every five years) and their purpose is usually to adjust
the rent to the current market level at the review date. For
upwards only rent reviews, the rent will either remain at the same
level or increase (if market rents are higher) at the review
date.
Rent roll
Contracted rent.
Return on equity
The aggregate of the change in equity attributable to the owners
of the Company plus the amounts paid to the shareholders as
dividends and the purchase of shares in the market, divided by the
opening equity attributable to the owners of the Company.
Reversion
The amount by which ERV exceeds contracted rent.
SKA rating
SKA rating is an environmental assessment method, benchmark and
standard for non-domestic fit-outs, led and owned by RICS.
Performance is measured across the ratings; Bronze, Silver and
Gold.
SONIA
SONIA (Sterling Overnight Indexed Average) has been administered
and published by the Bank of England since April 2018 and is the
replacement for LIBOR.
Task Force on Climate-related Financial Disclosures (TCFD)
The Financial Stability Board established the TCFD to develop
recommendations for more effective climate-related disclosures that
could promote more informed investment, credit, and insurance
underwriting decisions and, in turn, enable stakeholders to
understand better the concentrations of carbon-related assets in
the financial sector and the financial system's exposures to
climate-related risks.
Total accounting return - NAV
The change in EPRA NAV before the payment of dividends.
Total accounting return - NTA
The change in EPRA NTA before the payment of dividends.
Total shareholder return (TSR)
The growth in capital from purchasing a share, assuming that
dividends are reinvested every time they are received.
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.
Variable refrigerant flow (VRF)
The modular design of VRF results in energy savings by giving
occupants the choice to air condition or heat only the zones in
use.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR DKKBPFBKDCFD
(END) Dow Jones Newswires
August 11, 2021 02:00 ET (06:00 GMT)
Cls (LSE:CLI)
Historical Stock Chart
From May 2024 to Jun 2024
Cls (LSE:CLI)
Historical Stock Chart
From Jun 2023 to Jun 2024
