TIDMCLI
RNS Number : 4782V
CLS Holdings PLC
10 August 2022
PRESS RELEASE
The announcement contains inside information for the purposes of
UK MAR.
Release date: 10 August 2022
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 2022
Sound portfolio, index-linking and majority fixed debt provide
protection against economic headwinds
CLS is a leading FTSE250 office space specialist and a
supportive, progressive and sustainably focused commercial
landlord, with a c.GBP2.4 billion portfolio in the UK, Germany and
France, offering geographical diversification with local presence
and knowledge. For the half year ended 30 June 2022, the Group has
delivered the following results:
30 June 31 December Change (%)
2022 2021
------------------------------------ -------- ------------ -----------
EPRA Net Tangible Assets ("NTA")
per share (pence)(1) 352.8 350.5 0.7
Statutory NAV per share (pence)(1) 329.2 326.6 0.8
Contracted rents (GBP'million) 107.9 107.6 0.3
------------------------------------ -------- ------------ -----------
30 June 2022 30 June 2021 Change (%)
--------------------------------- ------------- ------------- -----------
Profit before tax (GBP'million) 20.3 24.7 (17.8)
EPRA Earnings per share ("EPS")
(pence)(1) 5.8 5.4 7.4
Statutory EPS from continuing
operations (pence)(1) 4.2 2.2 90.1
Dividend per share (pence) 2.60 2.35 10.6
--------------------------------- ------------- ------------- -----------
(1) A reconciliation of statutory to alternative performance
measures is set out in Note 4 to the condensed Group financial
statements
Fredrik Widlund, Chief Executive Officer of CLS, commented:
"CLS delivered a robust set of results in the first half of
2022, with EPRA NTA growing by 0.7%, EPRA EPS up 7.4% and the
interim dividend up 10.6%. We remain focused on actively managing
our portfolio to drive long-term value and continue to invest where
we see opportunities.
"We are well placed to navigate the challenging economic and
trading conditions with our high-quality portfolio, a significant
portion of index-linked leases and strong balance sheet.
"We continue to believe the share price discount is unjustified
and today are announcing an initial GBP25.5 million tender offer
share buyback to address the issue. If the share price discount
persists, we will consider further buybacks in tandem with
disposals demonstrating the Board's commitment to delivering
shareholder value whilst maintaining the Group's gearing at
appropriate levels."
FINANCIAL HIGHLIGHTS
-- EPRA NTA up 0.7% primarily as a result of foreign exchange
gains from weakening sterling with the portfolio valuation slightly
up in local currency before lease incentives
-- Portfolio valuation up 0.1% in local currency with increases
in the UK of 0.5% and Germany of 0.3%, partly offset by declines in
France of 2.1%
-- Profit before tax down 17.8% to GBP20.3 million ( 30 June
2021: GBP24.7 million) from lower fair value movements on
investment properties due to lease incentives (GBP3.1 million) and
a one-off profit on disposal of equity investments in 2021 (GBP1.4
million)
-- EPRA EPS up 7.4% to 5.8 pence per share from lower foreign
exchange losses , lower tax following REIT conversion, and higher
income from our hotel and student operations, partly offset by
higher expenses as 2021 included the release of pandemic bad debt
provisions. Statutory EPS up 90.1% due to lower UK tax charges
after the conversion to a UK REIT
-- Interim dividend up 10.6% to 2.60 pence per share (30 June
2021: 2.35 pence per share) to be paid on 3 October 2022. Increased
dividend reflects the adoption of our updated dividend policy
announced in May
-- Total accounting return of 2.2% (30 June 2021: (0.8%))
OPERATIONAL HIGHLIGHTS
-- Net rental income increased by 0.9% to GBP52.8 million (30
June 2021: GBP52.3 million) as a result of higher income from our
hotel and student operations and higher dilapidations income
-- Acquired two properties for GBP76.9 million, which completed
in April and July respectively. These properties were bought for
their asset management opportunities at a combined net initial
yield of 5.1% and a reversionary yield of 5.6%
-- Completed the disposal of two smaller properties for GBP10.1
million, one of which had exchanged in 2021, at book value. Post
period end, completed on a further three disposals for GBP39.8
million at an average 3.7% above book value
-- Completed 60 lease events (30 June 2021: 53) securing GBP4.4
million (30 June 2021: GBP5.2 million) of annual rent at 4.5% above
ERV with like-for-like contracted rent increasing by 0.4%
-- Vacancy rate increased to 6.9% (31 December 2021: 5.8%; 31
March 2022: 7.2%). Most of this increase was due to lease expiries
and completion of developments currently being marketed to
prospective tenants
-- Rent collection remained at the same, consistently high
levels with 99% of first half rent collected and 98% of third
quarter contracted rent due collected to date
FINANCING
-- Weig hted average cost of debt at 30 June 2022 up 4 basis
points to 2.26% (31 December 2021: 2.22%) due to increases in SONIA
on UK floating rate debt
-- Loan-to-value at 38.9% (31 December 2021: 37.1%) reflecting
net investments in the period. Gross debt of GBP1,043.2 million (31
December 2021: GBP1,031.6 million) with cash of GBP110.4 million
(31 December 2021: GBP167.4 million) and GBP50 million (31 December
2021: GBP50 million) of undrawn facilities
-- In the first half of 2022, financed or refinanced GBP92.3
million of debt at 1.81% for 1.9 years. Discussions well advanced
for the remaining GBP93.6 million refinancings, excluding
amortisation, due in 2022
-- The loan portfolio as at 30 June 2022 had 80% at fixed rates
(31 December 2021: 85%) with the reduction as a result of
short-term floating rate extensions in advance of longer-term loans
once the letting of the buildings has been improved or to give
flexibility for potential sales
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
-- Progress continues with implementing our ambitious but
achievable long-term sustainability targets including our 2030 Net
Zero Carbon Pathway. We have completed 35 carbon reduction projects
with another 76 projects in progress totalling GBP11 million
estimated spend by the end of 2022 which will save an estimated
1,300 tonnes CO2e per annum and puts us on track to achieve our
targets
-- A 23% net increase in CLS' solar electricity generation and a
further 347kWp increase in capacity in progress from the
installation of new solar arrays in the UK. We are also installing
more electric vehicle charging points in the UK and Germany
-- Taking action on social challenges including supporting
refugees from the Ukraine war, donating to local food banks
tackling the cost-of-living crisis for the poorest and volunteering
to support local community projects
Tender Offer Share Buyback and Interim Dividend Timetable
Further to this announcement, in which the Board announced a
GBP25.5 million tender offer share buyback and declared an interim
dividend of 2.60 pence per ordinary share, the expected key
timetable dates are as follows:
Tender Offer Dividend Timetable
Announcement Date for the Tender 10 August 2022 10 August 2022
Offer and Dividend
------------------ -------------------
Posting of Tender Offer Circular 15 August 2022
/ Tender Offer opens
------------------ -------------------
Ex-Dividend Date 8 September 2022
------------------ -------------------
Record Date for the Tender Offer 9 September 2022 9 September 2022
and Dividend
------------------ -------------------
General Meeting / Tender Offer Closes 9 September 2022
------------------ -------------------
Outcome of Tender Offer announced 12 September 2022
by
------------------ -------------------
Cheques despatched / CREST accounts By 16 September
credited 2022
------------------ -------------------
Dividend Payment Date 3 October 2022
------------------ -------------------
-ends-
Results presentation
A presentation for analysts and investors will be held in-person
at Liberum Capital, by webcast and by conference call on Wednesday
10 August 2022 at 8:30am followed by Q&A. Questions can be
submitted either online via the webcast or to the operator on the
conference call.
-- Liberum Capital: Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY
-- Webcast: The live webcast will be available here:
https://secure.emincote.com/client/cls/cls005
-- 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/cls005/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
Berenberg
Matthew Armitt
Richard Bootle
+44 (0)20 3207 7800
Edelman Smithfield (Financial PR)
Alex Simmons +44 7970 174353
Hastings Tarrant +44 7813 407665
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
Sound portfolio, index-linking and majority fixed debt provide
protection against economic headwinds
OVERVIEW
CLS delivered a robust set of results in the first half with
increases in net assets, profits and dividends. Our focus remains
on our diverse and strong set of tenants with continued high rent
collection and excellent results from our one hotel and student
operation. CLS remains well-placed with significant financial
strength despite the slowdown in market activity that we have seen
since the end of the first quarter.
We secured 331,668 sq. ft (30,813 sqm) of lettings and renewals
but vacancy increased to 6.9% (31 December 2021: 5.8%) due to lease
expiries and completion of refurbishments, which are currently
being marketed to prospective tenants. We invested GBP24.5 million
of capital expenditure in an increased number of refurbishments and
a limited amount of developments so as to improve the quality of
our space to meet market needs.
Over the six months, EPRA NTA increased by 0.7% to 352.8p per
share (31 December 2021: 350.5p) mainly as a result of positive
foreign exchange movements due to sterling weakening and a slight
overall uptick in property valuations before lease incentives.
Total accounting return for the six months was 2.2% (30 June 2021:
(0.8%)).
Given market uncertainty, we have chosen to reduce our
acquisition activity with just two acquisitions made in Germany for
GBP76.9 million. The properties, which exchanged in the first
quarter, completed in April and July. Each had a Net Initial Yield
("NIY") of 5.1% but both have good asset management opportunities
and a combined reversionary yield of 5.6%. Two disposals were
completed in the first half for GBP10.1 million at book value with
a NIY of 6.0%. Since the half-year, three further disposals have
completed for GBP39.8 million at an average of 3.7% above 31
December 2021 book values with a NIY of 4.9%. We are targeting
further disposals in the second half, focussing on smaller
properties with less growth potential, to release funds to invest
in the portfolio whilst maintaining gearing at appropriate
levels.
We announced in May an intention to initiate a tender buyback if
the share price discount to book value remained at unjustified
levels. Consequently, today we have announced a GBP25.5 million
tender buyback for 1 in every 40 ordinary shares at GBP2.50 per
share. The tender offer document containing further details will be
sent out shortly. If the share price discount persists, we will
consider further buybacks in tandem with disposals so as to
maintain gearing at appropriate levels.
RESULTS AND FINANCING
Profit after tax for the six months to 30 June 2022 was GBP17.3
million (30 June 2021: GBP8.8 million), equivalent to earnings per
share of 4.2p (30 June 2021: 2.2p). The increase was as a result
of: higher net rental income of GBP52.8 million (30 June 2021:
GBP52.3 million); smaller FX losses of GBP0.2 million (30 June
2021: GBP1.9 million loss); lower current tax charge of GBP1.2
million (30 June 2021: GBP4.5 million) and lower deferred tax
charge of GBP1.8 million (30 June 2021: GBP11.4 million) following
the conversion of CLS' UK operations to a REIT. EPRA earnings per
share were 5.8p (30 June 2021: 5.4p), 7.4% up on last year.
Shareholders' funds increased in the six months by 0.8% to
GBP1,341.3 million reflecting the weakening of sterling partly
offset by the payment of the final dividend in April.
Our balance sheet liquidity remains strong with GBP110.4 million
of cash and GBP50 million of undrawn facilities. Whilst our loan
book remains substantially at fixed rates with 80% secured (31
December 2021: 85%), our weighted average cost of debt increased
marginally to 2.26% (31 December 2021 2.22%) reflecting the
increase in the UK bank base rate impacting UK floating rate debt.
All of the remaining 2022 refinancings of GBP93.6 million are well
advanced. Net debt excluding leasehold liabilities rose to GBP932.8
million (31 December 2021: GBP864.2 million) and loan-to-value rose
to 38.9% (31 December 2021: 37.1%) reflecting net investment in the
period. Interest cover remained high at 3.1 times (30 June 2021:
3.2 times) demonstrating the Group's ongoing ability to generate
cash.
PROPERTY PORTFOLIO
At 30 June 2022, the value of the property portfolio, including
properties held for sale, was GBP2,399.7 million, GBP68.4 million
higher than six months earlier. This increase was as a result of:
investments in the portfolio through capital expenditure of GBP24.5
million and acquisitions of GBP22.5 million (including costs); net
valuation increases of GBP3.4 million; and foreign exchange gains
of GBP28.3 million, offset by depreciation of GBP0.2 million and
disposals of GBP10.1 million.
Given market conditions, we took a cautious approach to
acquisitions with just two purchases both of which exchanged in the
first quarter of the year. Kanzlerstrasse, Dusseldorf completed at
the end of April 2022 for GBP20.9 million and had a WAULT of c.8
years, an initial yield of 5.1% and a reversionary yield of 5.7%.
The Yellow, Dortmund completed at the start of July 2022 for
GBP56.0 million and had a WAULT of 5.2 years, an initial yield of
5.1% and a reversionary yield of 5.6%. We are already actively
asset managing the properties to secure market rents and lease the
small amount of vacant space.
As in prior years, selective disposal activity targeting smaller
properties with higher alternative use values and/or less growth
potential continued. Two properties in Bromley and Wallington in
the UK, which had exchanged before the start of the year, completed
for a total of GBP10.1 million in the first quarter of 2022. Since
the half-year we have sold two properties in Staines and Brentford
in the UK and one property in Lille for a total of GBP39.8 million
on average 3.7% ahead of book value.
In the second half of 2022, we do not expect to make any further
acquisitions and will continue to explore selected disposals. The
intention is to use the disposal proceeds to: reduce CLS' loan-to
value ratio and potentially fund a further tender buyback; focus
the portfolio on better growth prospects; and continue to invest to
improve the quality of the existing portfolio.
In the six months to June, the like-for-like valuation of the
property portfolio (which excludes acquisitions), as well as the
overall portfolio valuation, rose by 0.1% in local currency. There
were like-for-like valuation increases of 0.5% in the UK and 0.3%
in Germany with France down by 2.1%. In Sterling, the valuation
increase was 1.3% with increases in all countries. At 30 June 2022,
the EPRA 'topped up' net initial yield of the portfolio was 4.5%
(31 December 2021: 4.6%), some 225 basis points above the Group's
cost of debt, underpinning the Group's continuing ability to
generate cash.
The EPRA vacancy rate as at 30 June 2022 was 6.9% (31 December
2021: 5.8%) with the increase as a result of two factors. Firstly,
lettings started the year strongly but slowed following the Russian
invasion of Ukraine as tenants became more hesitant. Secondly, as a
result of our investment in the portfolio, a number of
refurbishments were completed towards the end of the period, many
of which have yet to be let.
DIVIDS
In October, the Group will pay an interim dividend for 2022 of
2.60 pence per share, an increase of 10.6% compared to the 2021
interim dividend, and in line with the revised dividend policy
announced in May 2022 of 1.20x to 1.60x EPRA earnings dividend
cover.
TER OFFER
On 11 May 2022 we announced a proposed tender offer of our
Ordinary Shares subject to the completion of a number of property
sales and the unjustified share price discount to NTA
persisting.
During the first six months of the current financial year, the
Group completed two property disposals, realising an aggregate of
GBP10.1 million at prices that were in line with their valuations
as at 31 December 2021. Furthermore, on 3 August 2022, CLS
announced that it had completed on the sale of two UK properties,
Great West House, Brentford and 62 London Road, Staines and one
French property, 96 Rue Nationale, Lille for a total of GBP39.8
million. The three properties sold for an average of 3.7% above the
31 December 2021 valuations.
The share price of an Ordinary Share in the Company has
continued to trade at a significant discount to the NTA value of an
Ordinary Share in the Company (30 June 2022: 352.8 pence). The
Board believes the share price discount to its NTA is unjustified
and it is in the best interests of all Shareholders to implement
the Tender Offer to reduce this discount.
In light of the persisting share price discount to NTA and the
completion of a number of property sales, we are announcing here
that the Company is making a tender offer to return up to
approximately GBP25.5 million or 10,184,894 Ordinary Shares
(representing 2.5% of the Company's current issued ordinary share
capital excluding treasury shares), through the purchase of 1 in
every 40 Ordinary Shares, at 250 pence per Ordinary Share.
The Board has determined that a Tender Offer should be made at
an appropriate premium to the price per Ordinary Share and that
this would be the most suitable way of returning capital to
Shareholders in a quick and efficient manner, taking account of the
relative costs, complexity and timeframes of the possible methods,
as well as the equality of treatment of Shareholders.
The size of the Tender Offer has been determined to be
appropriate to ensure that the Group's loan-to-value ratio remains
within an acceptable level, being below 40% and with cash and
liquid resources and available facilities being over GBP100
million, providing the Group with the flexibility to focus its
portfolio on attractive growth prospects and continue to invest to
improve the quality of its existing portfolio.
A document setting out the full details of the Tender Offer will
be sent to Shareholders shortly.
ENVIRONMENT, SOCIAL AND GOVERNANCE
The focus of this year is continuing the implementation of
initiatives and projects in support of the targets announced in our
Sustainability Strategy and Net Zero Carbon Pathway last year and
improving our ability to report on key sustainability data
including those related to material risks identified in relation to
TCFD.
Our biggest sustainability achievement so far in 2022 has been
implementing technical and cost-effective Net Zero Carbon projects
across all regions. Since commencing on our Net Zero Carbon
Pathway, 35 carbon reduction projects are complete with another 76
projects in progress for 2022. These projects represent an
investment of around GBP11 million across the portfolio saving an
estimated 214 Tonnes CO2e per annum, putting us on track to achieve
our 2030 targets. This has included projects such as LED lighting
upgrades at Columbia, BMS upgrades at Priory Place, smart meter
installation at Kings Court and new, high-efficiency heating and
air conditioning system at Rossstrasse.
We improved our data collection and management to ensure we
possess an accurate and comprehensive record of our carbon
footprint. We currently estimate a further GBP53 million will be
required up to 2030 to deliver the remainder of the full programme,
although this does not currently include the full impact of current
high inflation. We have aligned implementation of opportunities
with our lease and refurbishment plans and are continuing to refine
the optimal time to deliver each project over the coming years.
Within this expenditure for our Net Zero Carbon model, we
include meeting 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, with our core focus being to support the issues of
homelessness, food poverty, youth unemployment and environmental
sustainability. Examples include supporting refugees from the
Ukraine war, donating to local food banks tackling the
cost-of-living crisis for the poorest and volunteering by employees
to support local community assets such as parks, community farms
and bee-keeping projects. The social value we produce as a business
beyond shareholder value is measured using our social value
framework
OUTLOOK
The economic, geopolitical and market situation and outlook have
deteriorated markedly since the end of the first quarter with the
impact of the Russian invasion of Ukraine contributing to existing
inflationary and supply chain pressures. CLS though retains
significant protection through its well-placed portfolio with over
half of its leases being index-linked and the majority of its
financing at fixed rates.
Our focus remains on minimising vacancy in our existing
portfolio with the potential to capture significant uplifts from
the portfolio's net reversion and the increased rents that will be
commanded from our higher quality refurbished space with great
tenant amenities and facilities. Furthermore, our hotel enjoyed its
best ever month in June and our student accommodation is 98% booked
for the 2022/2023 academic year.
Today we have announced a tender share buyback to drive
shareholder value. If the share price remains at an unjustified
level compared to book value, we will consider further buybacks
alongside being a net disposer of property so as to maintain the
Group's gearing at appropriate levels.
We believe that our strategy and business model remain
well-placed for the long-term success of the Company with
significant benefits from our focus on, and the diversity benefits
of exposure to, the three largest economies in Europe. Our
portfolio has significant opportunities to grow rental income over
the next couple of years.
Our investor proposition
Strong and consistent long-term shareholder returns
Set out below are the key tenets of our investment proposition,
which remain unchanged from previous years. A full description can
be found on pages 16 and 17 of CLS' 2021 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.
As announced in May 2022, we updated our dividend policy
following the conversion of our UK operations to a REIT. The
company will maintain a progressive dividend policy, with a
dividend cover of 1.2 to 1.6 times EPRA earnings (previously 1.5 to
2.0 times). Approximately one-third of the annual dividend is paid
as an interim in September or October, 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; Berenberg and Peel Hunt.
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 2022 August 2022
Annual Results presentation Half-Year Results presentation
Annual Results investor calls
and meetings August/September 2022
Half-Year Results investor calls
April 2022 and meetings
Annual General Meeting
November 2022
Trading Update
------------------------------- ----------------------------------
Business review
United Kingdom
UK inflation and cost of living impacting overall market
sentiment
30 June 2022 31 December 2021
--------------------------------- ------------- -----------------
Value of properties GBP1,171.1m GBP1,160.9m
--------------------------------- ------------- -----------------
Percentage of Group's property
interests 49% 50%
--------------------------------- ------------- -----------------
Number of properties 42 44
--------------------------------- ------------- -----------------
Number of tenants 219 227
--------------------------------- ------------- -----------------
EPRA vacancy rate 7.6% 5.4%
--------------------------------- ------------- -----------------
Lettable space 1.9m sq. ft 2.0m sq. ft
--------------------------------- ------------- -----------------
Government and major corporates 67.4% 64.6%
--------------------------------- ------------- -----------------
Weighted average lease 4.0 years 4.3 years
length to end
--------------------------------- ------------- -----------------
The value of the UK portfolio increased by GBP10.2 million as a
result of: capex of GBP14.1 million, partly offset by two disposals
for GBP10.1 million and depreciation of GBP0.2 million; and
valuation increases of GBP6.3 million or 0.5%. The valuation
increase mainly related to government occupied assets, particularly
those subject to indexation.
Construction of "The Coade", our 28,500 sq. ft (2,647 sqm) new
office development at Vauxhall Walk, London, is progressing well
and we recently celebrated the topping out of the 10-storey
building. Construction is expected to complete by Q1 2023 and we
are targeting a 20% profit on cost, and EPC A and BREEAM Excellent
ratings. "The Artesian", our development at 9 Prescot Street,
London, has ramped up following the expiration of leases of
remaining tenants in April 2022 which gave us vacant possession.
The 94,000 sq. ft (8,733 sqm) development, incorporates many tenant
amenities including a café/reception, ample bike storage, showers
and a large roof terrace, is expected to complete in Q2 2023.
Other ongoing, significant refurbishments to create attractive
and contemporary office space with plenty of amenities are at Apex
Tower and CI Tower in New Malden, Columbia and Reflex in Bracknell,
and Kings Court in Leatherhead. All of these schemes include a
number of smaller flexible suites in line with current market
trends.
Our programme of disposing of assets with small lot sizes has
continued with two disposals, one of which exchanged in 2021,
completing during the period. These disposals at Kings House,
Bromley and Crosspoint House, Wallington completed at book value of
GBP10.1 million and were both for residential conversions. After
the period, in July and August respectively, we completed the sales
of 62 London Road, Staines and Great West House, Brentford for a
combined GBP32.4 million equating to a 1.6% profit on sale compared
with the 2021 year-end valuation.
Vacancy increased in the period from 5.4% to 7.6% largely due to
completing refurbishments that are yet to be occupied. In addition,
since 1 January 2022, we let or renewed leases on 69,459 sq. ft
(6,453 sqm) and lost 139,693 sq. ft (12,978 sqm) from expiries or
new vacancies. 33 lease extensions and new leases were signed
adding GBP2.2 million of rent at an average of 2.1% above 31
December 2021 ERV. The most significant transactions were a new
10-year lease with ATS Euromaster at Aqueous II, Birmingham for
13,114 sq. ft (1,218 sqm) and a 10-year lease extension with
Consilient Health for 3,887 sq. ft (361 sqm) at Thameslink House,
Richmond. Furthermore, we successfully negotiated the removal of
break clauses for leases with the Secretary of State for: Unicorn
House, Bromley; Armstrong Road, Acton; and 62 London Road, Staines,
which secured a total rent of GBP2.7 million p.a. for an additional
5 years past the previous break date of April 2023.
The UK economy grew marginally in the first six months of the
year with the construction and services sector performing strongly
and offsetting falls in the retail sector which are likely to have
been caused by the increased cost of living. Overall, the OECD
predicts that the UK economy will grow by 3.6% in 2022. Inflation
in the year to June 2022 was 9.4% due to the continuing rise in
energy and labour costs. Unemployment is now 3.8% and for the first
time in the UK there are more job vacancies than unemployed people,
although it remains an issue that over 20% of adults are deemed to
be economically inactive and not counted within the unemployment
figures.
In terms of the UK property market, commercial investment
volumes for H1 2022 were c.GBP25 billion which is ahead of 2021 for
the same period of c.GBP23 billion. In the South-East there was a
significant uplift in activity in Q2 with a total of GBP1.2 billion
of transactions completed which was 21% up on Q2 2021. In the
occupational market, take-up in Q2 in Central London was 20% up on
the 10-year average and vacancy now stands at 8.1% for London.
Germany
Energy and interest rate nervousness has slowed investments but
lettings are holding up
30 June 2022 31 December 2021
--------------------------------- ------------- -----------------
Value of properties GBP938.8m GBP888.0m
--------------------------------- ------------- -----------------
Percentage of Group's property
interests 39% 38%
--------------------------------- ------------- -----------------
Number of properties 32 31
--------------------------------- ------------- -----------------
Number of tenants 377 367
--------------------------------- ------------- -----------------
EPRA vacancy rate 7.5% 7.4%
--------------------------------- ------------- -----------------
Lettable space 3.6m sq. ft 3.5m sq. ft
--------------------------------- ------------- -----------------
Government and major corporates 39.2% 40.5%
--------------------------------- ------------- -----------------
Weighted average lease 4.8 years 5.0 years
length to end
--------------------------------- ------------- -----------------
The value of the German portfolio increased by GBP50.8 million
as a result of: one acquisition for GBP22.5 million (including
costs); capex of GBP3.6 million; foreign exchange increase of
GBP21.6 million; and a valuation gain of GBP3.1 million or 0.3% in
local currency. The portfolio valuation increased as a result of
positive letting activity and achieving planning consent on a
rooftop extension.
In the first half of the year, we exchanged and completed on the
acquisition of Kanzlerstrasse 8 in Dusseldorf and exchanged on The
Yellow in Dortmund which completed in July. The purchase price of
these acquisitions was GBP76.9 million. These properties each had a
net initial yield of 5.1%, a combined reversionary yield of 5.6%
and the WAULT of each property is in excess of 5 years. They
present good asset management opportunities through capturing
under-renting and letting of vacancy which is c.10% by ERV.
Vacancy increased slightly from 7.4% to 7.5% as lettings fell
slightly behind expiries as prospective occupiers have been
tentative to commit to long-term leases in the current environment
of economic uncertainty. Since 1 January 2022, 218,674 sq. ft
(20,316 sqm) was let or renewed but 242,960 sq. ft (22,572 sqm) of
space expired or was vacated. 16 lease extensions and new leases
were signed adding GBP1.6 million of rent at an average of 12.1%
above 31 December 2021 ERV. The most significant transaction was a
new 10-year letting for 62,458 sq. ft (5,803 sqm) to Toptica at
Gräfelfing in Munich. The letting pipeline is looking promising
particularly at Flexion, Berlin where we are in advanced
negotiations for most of the vacant area in this building.
Refurbishments continue across our portfolio to improve the
quality of our assets focusing on meeting tenants' needs and
improving the sustainability credentials of our properties.
Planning has been granted for a rooftop extension at Adlershofer
Tor, Berlin which will increase the lettable area of the building
by approximately 46,285 sq. ft (4,300 sqm).
The German economy slowed down in H1 2022 with GDP growth
forecast for 2022 now at 2.5%. Inflation rose further in Q2 to 7.6%
in June and is expected to stay at 6% during 2022, whilst on the
positive side, unemployment decreased further to 5.1%.
Nearly all industries are suffering from supply chain problems
and prices continue to increase to such an extent that developers
are postponing or cancelling projects which have become
unprofitable. German industry is also heavily dependent on gas
which is putting further pressure on companies with talks of
potential gas shortages and emergency plans later in the year.
The investment market showed a record result in Q1 2022 with
c.GBP21 billion (EUR24 billion) of deals, significantly exceeding
the same period in 2021, while the second quarter saw a significant
drop with only c.GBP3.5 billion (EUR4 billion) transacted as
investors took a step back and paused given the developing
political and economic backdrop.
On the letting side, the office leasing markets were little
affected by the changed macroeconomic environment in the first half
of 2022. In the year to date, a total of more than 1.8m sqm of
office space has been taken-up. This represents an increase of 55%
compared to the first half of 2021, with just over 1 million sqm in
the months of April to June alone. Many companies started to
implement their new working strategies in the first half of the
year, which often resulted in new leases, or, in some cases,
owner-occupier starts. As employees are returning to their offices
there is also a noticeable increase in the willingness of companies
to invest in the quality, equipment and location of their office
space. The overall vacancy rate in the top seven cities remained at
4.5%.
France
Ongoing capital expenditure to maintain quality of portfolio
30 June 2022 31 December 2021
--------------------------------- ------------- -----------------
Value of properties GBP289.8m GBP282.4m
--------------------------------- ------------- -----------------
Percentage of Group's property
interests 12% 12%
--------------------------------- ------------- -----------------
Number of properties 18 18
--------------------------------- ------------- -----------------
Number of tenants 153 158
--------------------------------- ------------- -----------------
EPRA vacancy rate 2.3% 3.0%
--------------------------------- ------------- -----------------
Lettable space 0.8m sq. ft 0.8m sq. ft
--------------------------------- ------------- -----------------
Government and major corporates 47.4% 46.4%
--------------------------------- ------------- -----------------
Weighted average lease length 4.9 years 5.0 years
to end
--------------------------------- ------------- -----------------
The value of the French portfolio increased by GBP7.4 million as
a result of: capex of GBP6.8 million; and a foreign exchange
valuation uplift of GBP6.7 million, offset by a valuation loss of
GBP6.1 million or 2.1% in local currency due to softer leasing
deals to maintain higher occupancy.
In the absence of identifying acquisition opportunities that
meet our investment criteria in the first half of the year, we
invested substantially in our existing portfolio. Of particular
note, works are ongoing on the significant redevelopment of our
Park Avenue property in Lyon. The project to refurbish the common
areas, replace the façade and create new common terraces through
extension of existing landings is progressing well. Installation of
new windows, electric shades and a green roof is also designed to
improve the sustainability credentials of the building increasing
its DPE rating from G to B. The GBP9.2 million (EUR10.7 million)
renovation is expected to be delivered on time, ready for
occupation in Q1 2023. Across the rest of portfolio, additional
works are taking place to upgrade facilities and amenities, and we
expect similar levels of capital expenditure over the second half
of the year.
Continuing with our strategy of disposing of properties which
have little asset management potential to drive growth, we
exchanged on Rue Nationale in Lille for GBP7.4 million (EUR8.8
million). The disposal completed in July at a 14.4% profit compared
to the 2021 year-end valuation.
During the period, 43,525 sq. ft (4,044 sqm) was let or renewed
but 54,420 sq. ft (5,056 sqm) of space expired or was vacated. Some
of the recently vacated space is currently being refurbished and so
the vacancy rate fell to 2.3% by the end of June (31 December 2021:
3.0%). Our French portfolio maintained its low vacancy rates
through a series of renewals and letting recently refurbished space
to new tenants. 11 lease extensions and new leases were signed
adding GBP0.6 million of rent at an average of 3.9% below 31
December 2021 ERV. The most significant transactions during the
period were: a lease renewal at D'Aubigny for 12,695 sq. ft (1,179
sqm) with Icon plc via a 4/7/10 year lease and a lease extension
with Bewink at Mission Marchand for 4,774 sq. ft (444 sqm).
The French economy was relatively flat in the first six months
of 2022 although exports increased 1.2% and imports 0.5%, making
the net trade surplus slightly positive. Like other countries GDP
expectations have fallen, with French GDP growth for 2022 now
forecast to be 2.3% (compared with 6.8% in 2021) according to the
latest Banque de France estimate and headline inflation is expected
to reach 5.1% in 2022. Inflation in France, although historically
high, is lower compared to other major European economies, as it is
dampened by state subsidies and price caps on essential goods like
energy and fuel.
In France, the investment volume in commercial real estate for
H1 2022 reached c.GBP9.5 billion (EUR11 billion), up by over 40%
compared to the same period in 2021 and a strong bounce back
especially in the second quarter. The majority of investors are
French but we have seen increased interest from international
investors for the larger cities.
At 30 June 2022, immediate supply in Greater Paris represented 4
million sqm, corresponding to an unchanged vacancy rate of 7.3%.
The number of transactions recorded represents a slight increase
(+3%) compared to the levels normally seen. The marked recovery
seen in the small space segmented at the beginning of the year
continued with take-up reaching 389,000 sqm over the first half of
2022. This is 11% higher than the long-term average. Oversupplied
markets were once again la Défense (12.2%) and the Western Crescent
(13.4%) while in the City of Paris the vacancy rate was below 4% in
almost all the districts. This is also similar to the vacancy rate
in Lyon, which has continued to perform strongly.
Key data
Rental Data
Rental Net Rental Lettable Contracted ERV Contracted EPRA Vacancy
Income Income Space Rent at at 30 Rent Subject rate at
for the for the (sqm) 30 June June to Indexation 30 June
Period Period 2022 (GBPm) 2022 (GBPm) 2022
(GBPm) (GBPm) (GBPm)
--------- ----------- --------- ------------- -------- --------------- -------------
UK 25.1 24.9 180,390 51.9 57.7 15.7 7.6%
----------------- --------- ----------- --------- ------------- -------- --------------- -------------
Germany 17.3 16.4 338,234 42.0 46.4 27.4 7.5%
----------------- --------- ----------- --------- ------------- -------- --------------- -------------
France 6.4 6.3 71,689 14.0 14.7 14.0 2.3%
----------------- --------- ----------- --------- ------------- -------- --------------- -------------
Total Portfolio 48.8 47.6 590,313 107.9 118.8 57.1 6.9%
----------------- --------- ----------- --------- ------------- -------- --------------- -------------
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 1,043.0 4.5 - 4.6% 4.8% 6.4% 3.7% 5.4%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
Germany 933.4 2.7 21.6 3.8% 4.2% 10.4% 8.2% 4.4%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
France 287.9 (6.1) 6.7 3.8% 4.4% 6.6% 3.9% 5.0%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
Total
Portfolio 2,264.3 1.1 28.3 4.2% 4.5% 8.0% 5.5% 4.9%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
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 3.2 4.0 3.8 5.6 28.9 13.6 4.0 5.5 30.0 13.7
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
Germany 4.7 4.8 8.9 6.7 14.6 11.8 10.2 6.8 14.5 11.5
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
France 2.5 4.9 1.6 1.5 3.1 7.8 1.5 1.4 3.1 8.4
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
Total
Portfolio 3.7 4.4 14.3 13.8 46.6 33.2 15.7 13.7 47.6 33.6
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
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
Rent by rent
Government 25.7% Offices 88.6%
------ ------
Commercial and Professional Student 5.3%
Services 12.2% ------
------ Hotel 3.9%
Information Technology 11.3% ------
------ Food/Retail 2.2%
Consumer Discretionary 10.4% ------
------
Communication Services 7.6%
------
Industrials 7.0%
------
Real Estate 5.9%
------
Health Care 5.8%
------
Other 5.1%
------
Financials 4.8%
------
Consumer staples 4.2%
------
Financial review
RESULTS FOR THE PERIOD
HEADLINES
Profit after tax of GBP17.3 million (30 June 2021: GBP8.8
million) generated basic earnings per share of 4.2 pence (30 June
2021: 2.2 pence) and EPRA earnings per share of 5.8 pence (30 June
2021: 5.4 pence), which was up 7.4% year on year resulting from
lower foreign exchange losses, lower tax following REIT conversion,
and higher income from our hotel and student operations, partly
offset by higher expenses from a more normal level of bad debt
charges due to a one off release of bad debt provisions in H1 2021.
Gross property assets at 30 June 2022, including those in property,
plant and equipment and those held for sale, increased to
GBP2,399.7 million (31 December 2021: GBP2,331.3 million) through:
net additions and capex of GBP47.0 million; foreign exchange
increases of GBP28.3 million; and a revaluation increase of GBP3.4
million, partly offset by depreciation of GBP0.2 million and
disposals of GBP10.1 million. Net assets per share rose by 0.8% to
329.2 pence (31 December 2021: 326.6 pence) and EPRA NTA per share
by 0.7% to 352.8 pence (31 December 2021: 350.5 pence). Total
accounting return including dividends paid in the period was 2.2%
(30 June 2021: (0.8)%).
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 2022 of GBP52.8
million (30 June 2021: GBP52.3 million) was higher than last year
by 0.9% as a result of higher income from our hotel and student
operations and higher dilapidations income. Rent collection
remained at the same, consistently high levels with 99% of first
half rent collected and 98% of third quarter contracted rent due
collected to date.
Operating profit of GBP27.2 million (30 June 2021: GBP34.9
million) was down GBP7.7 million year on year mostly due to three
factors: firstly a slight increase in expenses due to a one off
release of bad debt provisions in H1 2021 not repeating and higher
staff costs partly offset by higher net rental income (GBP0.9
million); secondly, a slightly higher valuation increase offset by
higher lease incentives (GBP3.2 million); and finally, a reduction
in the value of our legacy equity holdings (GBP3.4 million). Lease
incentives are higher almost entirely as we have signed a large
number of new leases in Germany for which we do not spend capex in
advance of a letting but instead capex spend is de-risked by being
tied to the lease.
Net interest expense of GBP6.7 million (30 June 2021: GBP9.7
million), which was down GBP3.0 million, is comprised of three
elements. Net finance costs of GBP12.6 million (30 June 2021:
GBP12.6 million) were unchanged year on year with CLS' lower cost
of debt offsetting slightly higher debt amounts. Finance income was
higher with both interest income at GBP0.6 million (30 June 2021:
GBP0.3 million) and the movement in the fair value of derivatives
of GBP5.3 million (30 June 2021: GBP2.6 million) higher as a result
of the increase in UK base rates.
The tax charge of GBP3.0 million (30 June 2021: GBP15.9 million)
represented an effective rate of 14.7% (30 June 2021: 64.4%). The
comparable amounts and rates are impacted by two things: 1) the
conversion of CLS' UK operations to a REIT at the start of 2022
which saved tax of over GBP1.0 million in the first half of 2022;
and 2) the enactment in 2021 of an increase in UK corporation tax
from 19% to 25% from 2023 onwards which increased deferred tax by
GBP10.2 million in the first half of 2021.
EPRA NET TANGIBLE ASSETS PER SHARE
EPRA NTA per share rose from 350.5p to 352.8p in the six months
to 30 June 2022, an increase of 2.3p per share or 0.7%. On a per
share basis, the increase comprised EPRA earnings of 5.8p less the
final dividend of 5.35p together with foreign exchange gains of
4.0p and the increase in property values of 0.8p less lease
incentives of 1.7p and other negative movements of 1.2p.
DIVID POST UK REIT CONVERSION
Following conversion to a UK REIT, the dividend will comprise
two parts: 1) A Property Income Distribution ("PID") from the UK
operations which fall under the REIT regime with the 2022 interim
PID being 1.20 pence per share; and 2) A dividend from the
remaining business with the 2022 interim being 1.40 pence per
share. It is expected that, as the UK business represents c.50% of
CLS' operations and 90% needs to be paid out as a PID, the split
between PID and remaining dividend will be approximately 45:55.
CASH FLOW, NET DEBT AND FINANCING
As at 30 June 2022, the Group had cash of GBP110.4 million (31
December 2021: GBP167.4 million) and GBP50.0 million (31 December
2021: GBP50.0 million) of undrawn facilities. The cash balance
decreased by GBP57.0 million from 31 December 2021 given net
investment in our portfolio. During the period, GBP32.1 million was
paid for property acquisitions (including costs and a deposit) and
we invested GBP25.9 million of capital expenditure in our
properties partially offset by net receipts from disposals of
GBP6.0 million. Net proceeds from new financing were GBP14.5
million and GBP16.1 million of loans were repaid. Net cash flow
from operating activities was GBP19.3 million (30 June 2021:
GBP21.9 million) which was used to pay the 2021 final dividend of
GBP21.8 million.
In the six months to 30 June 2022, borrowings rose by GBP11.6
million to GBP1,043.2 million (31 December 2021: GBP1,031.6
million), principally due to a weaker pound increasing the value of
debt denominated in Euros.
Net debt excluding leasehold liabilities at the half-year was
GBP932.8 million and the Group's loan-to-value was 38.9% (31
December 2021: 37.1%). The weighted average cost of debt increased
to 2.26% (31 December 2021: 2.22%) principally as a result of an
increase in the UK base rate impacting UK floating rate debt .
Despite bank rates increasing, there are still opportunities to
offset these increases on the overall weighted average cost of debt
in 2022 somewhat through the portfolio refinancing highlighted
below and the expiry of some historical swaps. Weighted average
debt maturity was 4.0 years (31 December 2021: 4.4 years).
The proportion of fixed debt to floating rate debt was 80%:20%
(31 December 2021: 85%:15%). The proportion of floating rate debt
has increased in the first half year following the expiry of four
fixed rate loans, all in Germany, with an aggregate amount of
GBP57.1 million, which have been extended on a short-term basis at
floating rates. Three of these loans, amounting to GBP29.6 million,
have been extended for 12 months with the aim to refinance at more
favourable terms once the letting situations of the buildings have
improved and one loan at GBP27.6 million has been extended for 24
months as the property is planned for sale. For the latter, a
floating rate loan provides greater repayment timing flexibility
due to no breakage costs should a sale progress sooner.
A quarter of the 20% floating rate debt, or c.5% of total debt,
has interest rate caps in place. These caps, all for French and
German loans, are at a range of 0.5% to 1.5%, being on average
0.84% above 3 month EURIBOR of 0.30%.
CLS has 48 different loans 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 30% and 44%
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 is in advanced discussions with lenders to refinance various
loans due to mature within the next 12 months. With regard to 2022
and some 2023 refinancings, we have agreed terms to refinance a
portfolio of six UK based assets for a new loan amount of circa
GBP60 million, bank credit approval is in progress and the loan is
expected to be drawn in Q4 2022. We have also had initial terms
proposed and agreed in principle for three new loans to refinance
three German assets for an aggregate amount of circa GBP71.4
million (EUR83 million), all of which are expected to complete in
Q3 2022. Lastly, terms are being sought and lenders have been
approached for a further two loans to refinance two French assets
for an amount in the region of between GBP19-22 million (EUR22-25
million), with some initial terms received. Completion of the
French loans is expected in early Q4 2022.
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 42 to 52 of the annual report and
financial statements for the year ended 31 December 2021, 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 economic and
geopolitical risks resulting from both Russia's invasion of Ukraine
and Covid-19. As a consequence, we have highlighted that the risk
for financing is increasing but that the risk for business
interruption is reducing. Nevertheless, the overall risk landscape
remains heightened and we continue to be vigilant. Of particular
note is Germany's dependence on Russian gas and the potential
impact on European GDP, and thus property demand, of reduced gas
supply.
Work continues on implementing software to document, and help
test, risks and internal controls with further progress expected by
the end of the year. In the second half of the year, further
external reviews and facilitated sessions are planned to help with
assurance over these areas.
Principal risk Status at year end Change since year end Commentary
Property High No change Whilst hybrid working now seems to be
established as the current pattern, property
risk remains
heightened given greater economic uncertainty
and slower market activity. The risk of
reductions
in property values in the second half of 2022
(and the resultant impact on covenant headroom)
has increased. In response, CLS is staying
close to its tenants ensuring that it provides
modern, flexible, quality and affordable
offices with good amenities to meet occupier
needs.
------------------- ---------------------- ------------------------------------------------
Sustainability Medium No change Providing sustainable buildings remains a key
priority for CLS both to meet regulatory
demands
but moreover to meet tenant and societal needs.
CLS is committed to delivering its enhanced
Sustainability Strategy including its 2030 Net
Zero Carbon Pathway which can be found on the
Group's website.
------------------- ---------------------- ------------------------------------------------
Business interruption Medium Reducing Our IT infrastructure has stood up well to the
demands of the last few years, including recent
testing of back-up fail-over systems. The risk
is therefore reducing albeit we continue to
maintain vigilance, particularly against cyber
threats.
------------------- ---------------------- ------------------------------------------------
Financing Medium Increasing As interest rates in most countries are
increasing, often quite sharply, financing risk
is
also increasing. As yet, there have been few
increases in bank margins and limited lowering
of loan to value ratios. As part of our
potential mitigations, CLS is maintaining
relationships,
monitoring covenants and engaging early with
upcoming refinancings. CLS has significant
protection
with 80% of debt fixed and substantial covenant
headroom.
------------------- ---------------------- ------------------------------------------------
Political and economic High No change The risk remains high given Russia's invasion
of Ukraine and economic concerns over, and
responses
to, higher levels of inflation and slowing GDP.
CLS has limited supply chain exposure but
changes in construction prices will impact
refurbishments costs. However, higher
construction
costs also support the values of existing
buildings through higher replacement costs.
------------------- ---------------------- ------------------------------------------------
People Medium No change Like many companies, we are still experiencing
a higher level of staff turnover. We continue
to respond by listening to our staff and acting
on suggestions as well as holding events to
reinforce our culture. Our first in-person
staff conference since the pandemic later this
year is particularly welcomed.
------------------- ---------------------- ------------------------------------------------
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 53 of the 2021 Annual Report and
Accounts). This assessment uses forecasts that have been adjusted
for the impacts of Covid-19 and current economic forecasts. 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
10 August 2022
INDEPENT REVIEW REPORT TO CLS HOLDINGS plc
Conclusion
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 2022 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 the related notes to the financial statement 1 to
16. 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.
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 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. A review of
interim financial information consists of making enquiries,
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.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of 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.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
09 August 2022
Financial statements
Condensed Group income statement for the six months ended 30
June 2022
Six months ended Six months ended Year ended
30-Jun-22 30-Jun-21 31-Dec-21
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
------------------------------ -------------------------------------------------------------- ----------------------------------------------------------
Notes Total(1) Recurring items Non-recurring items Total Recurring items Non-recurring Total
items
---------------- ------ ------------------------------ ------------------ -------------------- -------------------- ------------------ ------------------ ------------------
Revenue 3 68.3 67.7 - 67.7 139.8 - 139.8
Cost of sales 3 (15.5) (15.4) - (15.4) (31.8) - (31.8)
Net rental
income 52.8 52.3 - 52.3 108.0 - 108.0
Administration
expenses (8.4) (7.6) (1.2) (8.8) (15.0) (1.2) (16.2)
Other expenses (7.7) (5.9) - (5.9) (14.4) - (14.4)
Revenue less
costs 36.7 38.8 (1.2) 37.6 78.6 (1.2) 77.4
Net
revaluation
movements on
investment
property (6.0) (2.8) - (2.8) 28.5 - 28.5
Net
revaluation
movements on
equity
investments (3.3) 0.1 - 0.1 1.0 - 1.0
Loss on sale
of investment
property (0.2) - - - (0.1) - (0.1)
Operating
profit 27.2 36.1 (1.2) 34.9 108.0 (1.2) 106.8
Finance
income 5 5.9 2.9 - 2.9 5.9 - 5.9
Finance costs 6 (12.6) (12.6) - (12.6) (25.4) - (25.4)
Foreign
exchange loss (0.2) (1.9) - (1.9) (2.3) - (2.3)
Share of
profit of
associate
after tax - - 1.4 1.4 5.1 1.4 6.5
Profit before
tax 20.3 24.5 0.2 24.7 91.3 0.2 91.5
Taxation 7 (3.0) (15.9) - (15.9) (14.0) 42.0 28.0
---------------- ------ ------------------------------ ------------------ -------------------- -------------------- ------------------ ------------------ ------------------
Profit for the
period 17.3 8.6 0.2 8.8 77.3 42.2 119.5
---------------- ------ ------------------------------ ------------------ -------------------- -------------------- ------------------ ------------------ ------------------
Attributable
to:
Owners of the
Company 17.3 8.8 119.5
---------------- ------ ------------------------------ ------------------ -------------------- -------------------- ------------------ ------------------ ------------------
Basic and
diluted
earnings per
share 4 4.2p 2.2p 29.3p
---------------- ------ ------------------------------ ------------------ -------------------- -------------------- ------------------ ------------------ ------------------
(1) There are no non-recurring items in 2022, all amounts are
recurring.
Condensed Group statement of comprehensive income for the six
months ended 30 June 2022
Six months Six months Year ended
ended ended30 June 31 December
30 June 2022 2021 2021
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
--------------------------------------------- ------------- ------------- ------------
Profit for the period 17.3 8.8 119.5
--------------------------------------------- ------------- ------------- ------------
Other comprehensive income
Items that will not be reclassified
to profit or loss
Foreign exchange differences 13.6 (21.5) (32.8)
--------------------------------------------- ------------- ------------- ------------
Items that may be reclassified to
profit or loss
Revaluation of property, plant and
equipment 2.3 1.3 5.5
Deferred tax on fair value movements (0.2) (3.2) (1.0)
Total items that may be reclassified
to profit or loss 2.1 (1.9) 4.5
--------------------------------------------- ------------- ------------- ------------
Total other comprehensive income/(expense) 15.7 (23.4) (28.3)
--------------------------------------------- ------------- ------------- ------------
Total comprehensive income/(expense)
for the period 33.0 (14.6) 91.2
--------------------------------------------- ------------- ------------- ------------
Attributable to:
Owners of the Company 33.0 (14.6) 91.2
--------------------------------------------- ------------- ------------- ------------
Condensed Group balance sheet at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
----------------------------------- ----- ------------ ------------ -----------
Non-current assets
Investment properties 9 2,204.1 2,141.5 2,153.0
Property, plant and equipment 10 137.4 131.2 135.4
Goodwill and intangible assets 3.5 2.5 3.1
Investments 3.3 0.9 6.6
Deferred tax 2.6 11.6 2.6
Derivative financial instruments 5.1 - 0.4
Other receivables - 7.9 7.7
----------------------------------- ----- ------------ ------------ -----------
2,356.0 2,295.6 2,308.8
----------------------------------- ----- ------------ ------------ -----------
Current assets
Trade and other receivables 30.9 11.3 18.1
Properties held for sale 59.5 46.9 44.2
Cash and cash equivalents 110.4 168.7 167.4
----------------------------------- ----- ------------ ------------ -----------
200.8 226.9 229.7
----------------------------------- ----- ------------ ------------ -----------
Total assets 2,556.8 2,522.5 2,538.5
----------------------------------- ----- ------------ ------------ -----------
Current liabilities
Trade and other payables (52.9) (59.2) (57.6)
Current tax (0.6) - (4.5)
Borrowings 12 (184.6) (147.4) (169.1)
Derivative financial instruments (0.2) - (0.7)
----------------------------------- ----- ------------ ------------ -----------
(238.3) (206.6) (231.9)
----------------------------------- ----- ------------ ------------ -----------
Non-current liabilities
Deferred tax (114.5) (173.4) (109.9)
Borrowings 12 (858.6) (903.4) (862.5)
Leasehold liabilities (3.5) (1.5) (3.4)
Derivative financial instruments - (3.0) (0.1)
----------------------------------- ----- ------------ ------------ -----------
(976.6) (1,081.3) (975.9)
----------------------------------- ----- ------------ ------------ -----------
Total liabilities (1,214.9) (1,287.9) (1,207.8)
----------------------------------- ----- ------------ ------------ -----------
Net assets 1,341.9 1,234.6 1,330.7
----------------------------------- ----- ------------ ------------ -----------
Equity
Share capital 13 11.0 11.0 11.0
Share premium 83.1 83.1 83.1
Other reserves 104.4 93.7 88.7
Retained earnings 1,143.4 1,046.8 1,147.9
----------------------------------- ----- ------------ ------------ -----------
Total equity 1,341.9 1,234.6 1,330.7
----------------------------------- ----- ------------ ------------ -----------
Condensed Group statement of changes in equity for the six
months ended 30 June 2022
Share Share Other Retained
capital premium reserves earnings Total
Unaudited GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- ------------ ------------- --------- -------
At 1 January 2022 11.0 83.1 88.7 1,147.9 1,330.7
----------------------------------------- -------- ------------ ------------- --------- -------
Arising in the six months ended
30 June 2022:
Total comprehensive income for
the period - - 15.7 17.3 33.0
Share-based payments - - - - -
Dividends to shareholders - - - (21.8) (21.8)
Total changes arising in the period - - 15.7 (4.5) 11.2
----------------------------------------- -------- ------------ ------------- --------- -------
At 30 June 2022 11.0 83.1 104.4 1,143.4 1,341.9
----------------------------------------- -------- ------------ ------------- --------- -------
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 payments - - (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
Audited GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- ------------ ------------- --------- -------
At 1 January 2021 11.0 83.1 117.3 1,059.2 1,270.6
----------------------------------------- -------- ------------ ------------- --------- -------
Arising in the year ended 31 December
2021:
Total comprehensive (expense)/income
for the year - - (28.3) 119.5 91.2
Share-based payments - - (0.3) - (0.3)
Dividends to shareholders - - - (30.8) (30.8)
----------------------------------------- -------- ------------ ------------- --------- -------
Total changes arising in 2021 - - (28.6) 88.7 60.1
----------------------------------------- -------- ------------ ------------- --------- -------
At 31 December 2021 11.0 83.1 88.7 1,147.9 1,330.7
----------------------------------------- -------- ------------ ------------- --------- -------
Condensed Group statement of cash flows for the six months ended
30 June 2022
Six months
ended Year ended
30 June Six months 31 December
2022 ended 2021
GBPm 30 June 2021 GBPm
Notes (unaudited) GBPm (unaudited) (audited)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash flows from operating
activities
Cash generated from
operations 14 31.0 38.6 73.1
Interest received 0.6 0.3 0.5
Interest paid (11.3) (12.3) (24.3)
Income tax paid on operating activities (1.0) (4.7) (5.1)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Net cash inflow from operating activities 19.3 21.9 44.2
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash flows from investing activities
Purchase of investment properties (32.1) (163.9) (164.6)
Capital expenditure on investment properties (25.9) (19.5) (35.8)
Proceeds from sale of investment properties 9.8 19.1 37.0
Income tax paid on sale of properties (3.8) (1.4) (1.3)
Purchases of property, plant and equipment (0.1) (0.2) (0.6)
Distributions received from associate and
investment undertakings - - 0.2
Proceeds from sale of associate - 0.6 0.5
Purchase of intangibles (0.4) (0.3) (0.9)
Net cash outflow from investing activities (52.5) (165.6) (165.5)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash flows from financing activities
Dividends paid (21.8) (21.2) (30.8)
New loans 14.7 144.6 196.7
Issue costs of new loans (0.2) (1.1) (1.4)
Repayment of loans (16.1) (44.7) (107.2)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Net cash (outflow)/inflow from financing
activities (23.4) 77.6 57.3
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash flow element of net decrease in cash
and cash equivalents (56.6) (66.1) (64.0)
Foreign exchange loss (0.4) (0.9) (4.3)
--------------------------------------------------------------------- ------------ ------------------ ---------------
Net decrease in cash and cash equivalents (57.0) (67.0) (68.3)
Cash and cash equivalents at the beginning
of the period 167.4 235.7 235.7
--------------------------------------------------------------------- ------------ ------------------ ---------------
Cash and cash equivalents at the end of
the period 110.4 168.7 167.4
--------------------------------------------------------------------- ------------ ------------------ ---------------
Notes to the condensed Group financial statements 30 June
2022
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 2021 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 United Kingdom adopted
International Accounting Standards (IASs) and International
Financial Reporting Standards (IFRSs). 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
2022. These new standards and amendments are listed below:
-- Reference to the Conceptual Framework - Amendments to IFRS 3
-- Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16
-- Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37
-- AIP IFRS 1 First-time Adoption of International Financial
Reporting Standards - Subsidiary as a first-time adopter
-- AIP IFRS 9 Financial Instruments - Fees in the '10 per cent'
test for derecognition of financial liabilities
-- AIP IAS 41 Agriculture - Taxation in fair value measurements
The adoption of these new standards and amendments to IFRSs did
not materially impact the condensed Group financial statements for
the six months ended 30 June 2022 and are not expected to
materially impact the full year financial statements for the 12
months ended 31 December 2022.
2 GOING CONCERN
The most significant events of recent years, being Covid-19 and
the Russian invasion of Ukraine, and the associated responses, are
continuing to have a profound impact on the global economy. The
actual and forecast impacts on commodity prices and supply chains,
and thereby inflation and interest rates, have been considered and
are being monitored as well as the far greater levels of
uncertainty. CLS continues to weather these impacts well with high
rent collection, low bad debts and an ongoing ability to meet its
financing and refinancing needs.
The Board reviews the going concern assessments every six months
alongside the approval of the financial statements. For the
half-year assessment, a new forecast was reviewed and approved by
the Board at its August 2022 meeting. The going concern assessment
has been prepared considering a going concern period to 31 August
2023 and applies the same methodology that was used for the 2021
year-end going concern assessment.
The latest forecast reflects current negative expectations
arising as a result of Covid-19 and the Russian invasion of Ukraine
with the impacts largely restricted to slower reductions in vacancy
and no general valuation increases. However, global political and
economic events are giving rise to greater uncertainty.
The Board has prepared a base case which reflects this greater
uncertainty through using current economic forecasts such as
forward interest rate curves, inflation, yields and foreign
exchange rates. The base case is focused on the cash, liquid
resources and working capital position of the Group, including
forecast covenant compliance. It also assumes that debt facilities
of GBP193.3 million expiring within the going concern period will
be repaid (GBP30.6 million) or refinanced (GBP162.7 million) as
expected, taking into account:
-- existing banking relationships;
-- the recent financing of the Yellow acquisition for GBP35.2 million;
-- refinancings from 30 June 2022 until 31 August 2023 of
GBP162.7 million of which terms have been agreed for GBP81.4
million; and
-- ongoing discussions with lenders.
The base case is then flexed to produce two downside scenarios,
being mid and severe cases. The mid and severe cases incorporate
the key potential property risks 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 mid case assumes a 5% reduction in rental income and a 10%
reduction in property values. The severe case is based off the
negative market and economic impacts experienced during the
2007-2009 global financial crisis (for example property values are
assumed to fall by 30%), and assumes the GBP193.3 million of debt
maturing in the going concern period will be either repaid (GBP30.6
million) or refinanced (GBP162.7 million). The Board considers that
this scenario reflects a robust stress test scenario. It is highly
unlikely all the changes modelled would occur at the same time, and
to this extent, during the going concern period as, for example,
the assumptions have been applied equally to all regions and thus
there is no benefit given for CLS' geographic and tenant diversity
benefits.
The modelling has focused also on potential covenant breaches.
On average across its 48 loans, CLS has between 30% and 44%
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 severe case there
is sufficient available cash to resolve any covenant breaches
resulting from the severe assumptions modelled in this case. This
is through the use of mitigations within Management's control, such
as: reduced capital expenditure and dividends which could be either
reduced or cancelled. Under the severe stress test scenario, which
we consider to be a remote likelihood, these mitigations also
include property disposals which would be made at lower values. The
Group also has GBP50 million of undrawn facilities of which GBP30
million is committed until 30 June 2023 and GBP20 million is
available until further notice from one of our clearing banks;
however, these facilities have not been utilised as a mitigation in
either downside scenario as they provide an additional working
capital buffer.
In both downside scenarios, a minimum cash balance of GBP100
million has been maintained after mitigations with no use of the
current GBP50 million of undrawn facilities. In the severe case,
this is after GBP30.6 million of debt repayments and GBP162.7
million of debt refinancings and GBP10 million asset sales, which
represents less than 1% of the property portfolio, at the assumed
lower valuations. If the GBP50 million undrawn facility were
utilised, no additional sales would be needed in the severe case.
Whilst Management's downside scenarios envisage mitigations, the
Group's going concern position is only reliant upon such
mitigations in the severe case. The downside assumptions within the
severe case are considered to be remote, based on:
-- the magnitude of the downside assumptions applied, in the
context of the historic and forecast performance of the Group;
-- the current economic environment;
-- the recent portfolio valuations; and
-- the forecast market expectations.
Similarly, Management are confident that the debt falling due
for repayment in the going concern period will be refinanced or
settled in line with their plans for the reasons set out above
rather than requiring repayment on maturity.
As a result, the Directors can confirm that they have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due, with no
material uncertainties that would cast significant doubt on the
ability of the Group to continue as a going concern for the period
to 31 August 2023. The Directors continue to adopt the going
concern basis in preparing these condensed Group financial
statements.
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 2022. 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 2022 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 25.1 17.3 6.4 - - 48.8
Other property-related
income 0.9 - 0.1 5.2 - 6.2
Service charge income 5.7 5.1 2.5 - - 13.3
----------------------------- ---------- ------- ------ ------------ --------------- ------
Revenue 31.7 22.4 9.0 5.2 - 68.3
Service charges and
similar expenses (6.8) (6.0) (2.7) - - (15.5)
----------------------------- ---------- ------- ------ ------------ --------------- ------
Net rental income 24.9 16.4 6.3 5.2 - 52.8
Administration expenses (3.6) (1.4) (0.8) - (2.6) (8.4)
Other expenses (2.8) (2.1) (0.3) (2.5) - (7.7)
----------------------------- ---------- ------- ------ ------------ --------------- ------
Revenue less costs 18.5 12.9 5.2 2.7 (2.6) 36.7
Net movements on
revaluation of investment
property 3.7 (3.6) (6.1) - - (6.0)
Movement on revaluation
of equity investments - - - (3.3) - (3.3)
Loss on sale of investment
property (0.2) - - - - (0.2)
Operating profit/(loss) 22.0 9.3 (0.9) (0.6) (2.6) 27.2
Finance income 3.4 0.7 0.7 1.1 - 5.9
Finance costs (7.9) (2.8) (1.3) (0.6) - (12.6)
Foreign exchange
loss - - - - (0.2) (0.2)
Share of associates - - -
after tax - - -
----------------------------- ---------- ------- ------ ------------ --------------- ------
Profit/(loss) before
tax 17.5 7.2 (1.5) (0.1) (2.8) 20.3
----------------------------- ---------- ------- ------ ------------ --------------- ------
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 Kingdom Germany France Other Central Non recurring Total
GBPm GBPm GBPm investments administration items 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 (3.2) (1.3) (1.0) - (2.1) (1.2) (8.8)
Other expenses (2.1) (1.4) (0.3) (2.1) - - (5.9)
--------------------------- ---------------- ------- ------- ------------ --------------- ------------- -------
Revenue less costs 21.1 13.5 6.0 0.3 (2.1) (1.2) 37.6
Net movements on
revaluation of investment
property (7.5) 5.4 (0.7) - - - (2.8)
Net movements on
revaluation of equity
investments - - - 0.1 - - 0.1
Loss on sale of investment
property (0.1) 0.1 - - - - -
Operating profit/(loss) 13.5 19.0 5.3 0.4 (2.1) (1.2) 34.9
Finance income 1.9 0.1 - 0.9 - - 2.9
Finance costs (7.9) (2.5) (1.3) (0.7) (0.2) - (12.6)
Foreign exchange loss - - - (1.9) - - (1.9)
Share of associates after
tax - - - - - 1.4 1.4
--------------------------- ---------------- ------- ------- ------------ --------------- ------------- -------
(Loss)/profit before tax 7.5 16.6 4.0 0.1 (2.9) 0.2 24.7
--------------------------- ---------------- ------- ------- ------------ --------------- ------------- -------
3 SEGMENT INFORMATION (continued)
The Group's results for the year ended 31 December 2021 were as
follows:
Investment properties
United Other Central Non recurring
Kingdom Germany France investments administration items Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------------ ------- ------ ------------ --------------- ------------- ------
Rental income 53.3 33.8 14.1 - - - 101.2
Other property-related
income 1.9 0.3 0.5 6.8 - - 9.5
Service charge income 12.3 11.2 5.6 - - - 29.1
Revenue 67.5 45.3 20.2 6.8 - - 139.8
Service charges and
similar expenses (13.8) (12.0) (6.0) - - - (31.8)
------------------------------ ------------ ------- ------ ------------ --------------- ------------- ------
Net rental income 53.7 33.3 14.2 6.8 - - 108.0
Administration expenses (6.9) (2.9) (1.7) 0.2 (3.7) (1.2) (16.2)
Other expenses (5.9) (3.3) (1.1) (4.6) 0.5 - (14.4)
------------------------------ ------------ ------- ------ ------------ --------------- ------------- ------
Revenue less costs 40.9 27.1 11.4 2.4 (3.2) (1.2) 77.4
Net movements on revaluation
of investment property 3.7 24.2 0.6 - - - 28.5
Net revaluation movements
on equity investments - - - 1.0 - - 1.0
(Loss)/profit on sale
of investment property 0.7 (1.1) 0.3 - - - (0.1)
Operating profit/(loss) 45.3 50.2 12.3 3.4 (3.2) (1.2) 106.8
-
Finance income 3.8 0.2 (2.7) 1.9 - - 5.9
Finance costs (15.7) (5.4) (2.7) (1.3) (0.3) - (25.4)
Foreign exchange loss - - - (2.3) - - (2.3)
Share of profit of
associate after tax - - - 5.1 - 1.4 6.5
------------------------------ ------------ ------- ------ ------------ --------------- ------------- ------
(Loss)/profit before
tax 33.4 45.0 9.6 6.8 (3.5) 0.2 91.5
------------------------------ ------------ ------- ------ ------------ --------------- ------------- ------
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
2022 2021 2021 2022 2021 2021 2022 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ------- ----------- ------- ------- ----------- ------- ------- -----------
Investment
property
United Kingdom 1,073.8 1,054.5 1,065.6 539.7 629.3 555.0 14.1 11.8 20.6
Germany 962.8 893.4 900.2 487.6 451.9 462.4 3.6 4.1 9.4
France 296.8 300.5 293.8 182.2 195.0 183.8 6.8 3.0 6.0
Other
investments 223.4 274.1 278.9 6.0 16.3 6.6 - - 0.5
----------------- ------- ------- ----------- ------- ------- ----------- ------- ------- -----------
2,556.8 2,522.5 2,538.5 1,215.5 1,292.5 1,207.8 24.5 18.9 36.5
----------------- ------- ------- ----------- ------- ------- ----------- ------- ------- -----------
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 October 2021
Financial Reporting Council ('FRC') thematic review of APMs in
these results, whilst noting the International Organization of
Securities Commissions (IOSCO) 2016 guidance and 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.
The latest edition of the EPRA guidelines were issued in March
2022 and contain three net asset 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 three balance sheet measures along with EPRA Earnings
have been disclosed.
Whilst CLS primarily uses the measures referred to above, we
have also disclosed other EPRA metrics being:
-- 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
There have been no changes to the Group's APMs in the year. The
APMs utilised by the business are 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.
4 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
1) EPRA APMs
Number of shares for use in EPRA calculations:
31 December
30 June 2022 30 June 2021 2021
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 2022 30 June 2021 2021
GBPm GBPm GBPm
--------------------------------------------- --------------- --------------- --------------
Profit for the period 17.3 8.8 119.5
Non-recurring items after tax - (0.4) 1.5
--------------------------------------------- --------------- --------------- --------------
Profit for the period before non-recurring
items 17.3 8.4 121.0
Net movement on revaluation of investment
property 6.0 2.8 (28.5)
Net movement on revaluation of equity
investment 3.3 (0.1) (1.0)
Loss from sale of investment property 0.2 - 0.1
Current tax on disposals - 1.0 3.2
Movement in fair value of derivative
financial instruments (5.3) (2.6) (5.2)
Deferred taxation 1.9 12.4 (38.6)
Uplift in value of associates - - (5.1)
--------------------------------------------- --------------- --------------- --------------
EPRA earnings 23.4 21.9 45.9
--------------------------------------------- --------------- --------------- --------------
Basic and diluted earnings per share
from continuing operations 4.2p 2.2p 29.3p
--------------------------------------------- --------------- --------------- --------------
EPRA earnings per share 5.8p 5.4p 11.3p
--------------------------------------------- --------------- --------------- --------------
4 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
ii) Net asset value measures
30 June 2022 IFRS EPRA EPRA EPRA
NAV NTA NRV NDV
GBPm GBPm GBPm GBPm
------------------------------ ------- ------- ------- ---------
Net assets 1,341.3 1,341.3 1,341.3 1,341.3
Goodwill as a result
of deferred tax on
acquisitions - (1.1) (1.1) (1.1)
Other intangibles - (2.4) - -
Fair value of fixed
interest debt(1) - - - (0.1)
- tax thereon - - - -
Deferred tax on revaluation
surplus - 112.5 112.5 -
Adjustment for short-term - (8.2) - -
disposals
Fair value of financial
instruments - (4.9) (4.9) -
Purchasers' costs(2) - - 153.3 -
------------------------------ ------- ------- ------- ---------
1,341.3 1,437.2 1,601.1 1,340.1
------------------------------ ------- ------- ------- ---------
Per share 329.2p 352.8p 393.0p 328.9p
------------------------------ ------- ------- ------- ---------
(1) Note that only downside fair value differences have been
recognised. At 30 June 2022 the majority of our fixed rate debt has
a positive fair value difference of GBP53.1m.
(2) Purchasers costs have been calculated using the regional
market rates
30 June 2021 IFRS EPRA EPRA EPRA
NAV NTA NRV NDV
GBPm GBPm GBPm GBPm
------------------------------ ------- ------- ------- -------
Net assets 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)
Other intangibles - (1.4) - -
Fair value of fixed
interest debt - - - (8.6)
- tax thereon - - - 1.6
Deferred tax on revaluation
surplus - 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 -
Purchasers' costs - - 148.4 -
------------------------------ ------- ------- ------- -------
1,234.6 1,373.6 1,531.6 1,226.5
------------------------------ ------- ------- ------- -------
Per share 303.0p 337.2p 375.9p 301.1p
------------------------------ ------- ------- ------- -------
4 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
31 December 2021 IFRS EPRA EPRA EPRA
NAV NTA NRV NDV
GBPm GBPm GBPm GBPm
------------------------------ ------- ------- ------- -------
Net assets 1,330.7 1,330.7 1,330.7 1,330.7
Goodwill as a result
of deferred tax on
acquisitions - (1.1) (1.1) (1.1)
Other intangibles - (2.0) - -
Fair value of fixed
interest debt - - - (4.2)
- tax thereon - - - 0.8
Deferred tax on revaluation
surplus - 108.1 108.1 -
Capital allowances - (0.3) (0.3) -
Adjustment for short-term
disposals - (7.8) - -
Fair value of financial
instruments - 0.4 0.4 -
Purchasers' costs - - 149.3 -
------------------------------ ------- ------- ------- -------
1,330.7 1,428.0 1,587.1 1,326.2
------------------------------ ------- ------- ------- -------
Per share 326.6p 350.5p 389.6p 325.5p
------------------------------ ------- ------- ------- -------
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 2022
------------------------------------------ ------------------------------------
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
-------- ------- ------ -------
Rent passing 49.6 38.1 12.3 100.0
Adjusted for development stock (2.6) (0.5) - (3.1)
Forecast non-recoverable service charge (1.6) (1.3) (0.5) (3.4)
------------------------------------------ -------- ------- ------ -------
Annualised net rents (A) 45.4 36.3 11.8 93.5
------------------------------------------ -------- ------- ------ -------
Property portfolio 1,043.0 933.4 287.9 2,264.3
Adjusted for development stock (115.4) (46.6) - (162.0)
Purchasers' costs 63.1 60.3 19.6 143.0
------------------------------------------ -------- ------- ------ -------
Property portfolio valuation including
purchasers' costs (B) 990.7 947.1 307.5 2,245.3
------------------------------------------ -------- ------- ------ -------
EPRA NIY (A/B) 4.6% 3.8% 3.8% 4.2%
------------------------------------------ -------- ------- ------ -------
4 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
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%
-------------- ------- ------ -------
Year ended 31 December 2021
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
-------------- ------- ------ -------
Rent passing 52.8 34.9 11.7 99.4
-------------- ------- ------ -------
Adjusted for development stock (2.6) (0.5) -- (3.1)
-------------- ------- ------ -------
Forecast non-recoverable service charge (2.0) (0.6) (0.3) (2.9)
-------------- ------- ------ -------
Annualised net rents (A) 48.2 33.8 11.4 93.4
-------------- ------- ------ -------
Property portfolio 1,034.5 883.0 280.1 2,197.6
-------------- ------- ------ -------
Adjusted for development stock (103.7) (46.2) -- (149.9)
-------------- ------- ------ -------
Purchasers' costs 63.3 56.9 19.0 139.2
-------------- ------- ------ -------
Property portfolio valuation including purchasers' costs (B) 994.1 893.7 299.1 2,186.9
-------------- ------- ------ -------
EPRA NIY (A/B) 4.8% 3.8% 3.8% 4.3%
-------------- ------- ------ -------
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 2022
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Contracted rent 51.9 42.0 14.0 107.9
Adjusted for development stock (2.6) (0.6) - (3.2)
Forecast non-recoverable service charge (1.6) (1.3) (0.5) (3.4)
'Topped-up' annualised net rents (A) 47.7 40.1 13.5 101.3
Property portfolio 1,043.0 933.4 287.9 2,264.3
Adjusted for development stock (115.4) (46.6) - (162.0)
Purchasers' costs 63.1 60.3 19.6 143.0
Property portfolio valuation including purchasers' costs (B) 990.7 947.1 307.5 2,245.3
EPRA 'topped-up' NIY (A/B) 4.8% 4.2% 4.4% 4.5%
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%
Year ended 31 December
2021
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Contracted rent 55.0 38.8 13.8 107.6
Adjusted for development stock (2.6) (0.6) - (3.2)
Forecast non-recoverable service charge (2.0) (0.6) (0.3) (2.9)
'Topped-up' annualised net rents (A) 50.4 37.6 13.5 101.5
Property portfolio 1,034.5 883.0 280.1 2,197.6
Adjusted for development stock (103.7) (46.2) - (149.9)
Purchasers' costs 63.3 56.9 19.0 139.2
Property portfolio valuation including
purchasers' costs (B) 994.1 893.7 299.1 2,186.9
EPRA 'topped-up' NIY (A/B) 5.1% 4.2% 4.5% 4.6%
4 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
iv) EPRA vacancy
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2022 2021 2021
GBPm GBPm GBPm
ERV of vacant space (A) 8.2 9.5 7.0
ERV of let space 110.6 114.2 113.0
ERV of lettable space (B) 118.8 123.7 120.0
EPRA vacancy rate (A/B) 6.9% 7.7% 5.8%
v) EPRA capital expenditure
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Acquisitions 22.5 177.2 179.5
Amounts spent on the completed investment
property portfolio
Creation of incremental space 5.9 1.7 8.6
Creation of no incremental space 18.6 17.2 27.4
EPRA capital expenditure 47.0 196.1 215.5
Conversion from accrual to cash basis 11.0 (12.7) (15.1)
EPRA capital expenditure on a cash basis 58.0 183.4 200.4
vi) EPRA cost ratio
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2022 2021 2021
GBPm GBPm GBPm
Administration expenses - recurring 8.4 7.6 15.0
Other expenses 7.7 5.9 14.4
Less: investment segment (2.5) (2.0) (4.4)
13.6 11.5 25.0
Net service charge costs 2.2 1.2 2.7
Service charge costs recovered through
rents but not separately invoiced (0.2) (0.2) (0.3)
Dilapidations receipts (0.6) (0.4) (1.2)
EPRA costs (including direct vacancy
costs) (A) 15.0 12.1 26.2
Direct vacancy costs (2.0) (2.2) (3.4)
EPRA costs (excluding direct vacancy
costs) (B) 13.0 9.9 22.8
Gross rental income 48.8 50.6 101.2
Service charge components of rental
income (0.2) (0.3) (0.3)
Adjusted gross rental income (C) 48.6 50.3 100.9
EPRA cost ratio (including direct
vacancy costs) (A/C) 30.9% 24.1% 26.0%
EPRA cost ratio (excluding direct
vacancy costs) (B/C) 26.7% 19.7% 22.6%
4 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
2. Other APMs
i) Total accounting return
Six months Six months Year ended
ended ended 31
30 June 30 June December
2022 2021 2021
GBPm GBPm GBPm
EPRA closing net tangible assets 1,437.2 1,373.6 1,428.0
Add back: prior year final dividend
paid 21.8 21.2 21.2
Add back: interim dividend paid - - 9.6
Less: EPRA opening net tangible
assets (A) (1,428.0) (1,406.4) (1,406.4)
Return before dividends (B) 31.0 (11.6) 52.4
Total accounting return (B/A) 2.2% (0.8)% 3.7%
ii) Net borrowings and gearing
Six months Six months Year ended
ended ended 31
30 June 30 June December
2022 2021 2021
Notes GBPm GBPm GBPm
Borrowings short-term 12 184.6 147.4 169.1
Borrowings long-term 12 858.6 903.4 862.5
Add back: unamortised issue costs 12 5.3 6.4 5.9
Gross debt 12 1,048.5 1,057.2 1,037.5
Cash (110.4) (168.7) (167.4)
Net borrowings (A) 938.1 888.5 870.1
Net assets (B) 1,341.3 1,234.6 1,330.7
Net gearing (A/B) 69.9% 72.0% 65.4%
4 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
iii) Loan-to-value
Six months Six months Year ended
ended ended 31
30 June 30 June December
2022 2021 2021
Notes GBPm GBPm GBPm
Borrowings short-term 12 184.6 147.4 169.1
Borrowings long-term 12 858.6 903.4 862.5
Less: cash (110.4) (168.7) (167.4)
Net debt (A) 932.8 882.1 864.2
Investment properties 8 2,204.1 2,141.5 2,153.0
Properties in PPE 8 135.4 129.2 133.3
Properties and land held for sale 8 60.2 46.9 45.0
Total property portfolio (B) 2,399.7 2,317.6 2,331.3
Loan-to-value (A/B) 38.9% 38.1% 37.1%
iv) Dividend cover Six months Six months Year ended
ended ended 31
30 June 30 June December
2022 2021 2021
Notes GBPm GBPm GBPm
Interim dividend * 10.6 9.6 9.6
Final dividend - - 21.8
Total dividend (A) 10.6 9.6 31.4
EPRA earnings (B) 23.4 21.9 45.9
Dividend cover (B/A) 2.21 2.28 1.46
* The 30 June 2022 amount represents the proposed interim 2022 dividend
v) Interest cover Six months Six months Year ended
ended ended 31
30 June 30 June December
2022 2021 2021
Notes GBPm GBPm GBPm
Net rental income 3 52.8 52.3 108.0
Administration expenses 3 (8.4) (7.6) (15.0)
Other expenses 3 (7.7) (5.9) (14.4)
Revenue less costs (A) 3 36.7 38.8 78.6
Finance income (excluding dividends and
derivatives) 5 0.6 0.3 0.5
Finance costs (excluding derivatives) 6 (12.6) (12.6) (25.4)
Net interest (B) (12.0) (12.3) (24.9)
Interest cover (A/B) 3.06 3.15 3.16
5 FINANCE INCOME
Six months Six months Year ended
ended ended 31
30 June 30 June December
2022 2021 2021
GBPm GBPm GBPm
Interest income
Financial instruments carried at
amortised cost 0.6 0.3 0.5
Movement in fair value of derivative
financial instruments 5.3 2.6 5.2
Other finance income - - 0.2
5.9 2.9 5.9
6 FINANCE COSTS
Six months Six months Year ended
ended ended 31
30 June 30 June December
2022 2021 2021
GBPm GBPm GBPm
Interest expense
Secured bank loans 10.9 10.5 21.4
Secured notes 0.8 1.1 2.1
Amortisation of loan issue costs 0.9 1.0 1.9
Total interest expense 12.6 12.6 25.4
12.6 12.6 25.4
7 TAXATION
Six months Six months Year ended
ended ended 31
30 June 30 June December
2022 2021 2021
GBPm GBPm GBPm
Deferred tax
Underlying 1.8 1.2 3.0
Non-recurring deferred tax liability release
due to REIT conversion - - (43.7)
Non-recurring deferred tax asset release
due to REIT conversion - - 1.9
Due to increase in UK corporation tax rate - 10.2 -
1.8 11.4 (38.8)
Current tax 1.2 4.5 10.8
3.0 15.9 (28.0)
Tax for the six months ended 30 June 2022 has been charged at an
effective rate of 14.7 % (six months ended 30 June 2021: 64.4%;
year ended 31 December 2021: 30.6%), 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 14.7% is lower than the weighted average tax rate of
18.9%. This is primarily due to the fact that group elected into
the UK REIT regime from 1 January 2022 and as such the profits
arising from the UK property rental business are now exempt from UK
Corporation Tax.
The total tax charge for the period of GBP3.0m is lower than the
GBP15.9m for the six months ended 30 June 2021 primarily due to the
GBP10.2m deferred tax charge recognised at 30 June 2021 resulting
from the substantial enactment of the increase in the UK
Corporation Tax rate from 19% to 25%, effective 1 April 2023. The
total tax charge for the period of GBP3.0m is higher than the
GBP(28.0)m credit recognised at 31 December 2021 due for the most
part to the 31 December 2021 release of deferred tax of GBP41.8m on
entry into the UK REIT regime
8 PROPERTY PORTFOLIO
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Investment property 1,010.1 926.5 267.5 2,204.1
Property held as property, plant and equipment 128.1 5.4 1.9 135.4
Properties held for sale* 32.9 6.9 20.0 59.8
0.0
Land held for sale* - - 0.4 0.4
Property portfolio at 30 June 2022 1,171.1 938.8 289.8 2,399.7
*Sum total differs from assets held for sale on the balance
sheet due to GBP0.7m of associated liabilities
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Investment property 989.1 871.1 281.3 2,141.5
Property held as property, plant and equipment 123.1 4.2 1.9 129.2
Properties held for sale 30.9 4.9 11.1 46.9
Land held for sale - - - -
Property portfolio at 30 June 2021 1,143.1 880.2 294.3 2,317.6
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Investment property 996.4 883.0 273.6 2,153.0
Property held as property, plant and equipment 126.4 5.0 1.9 133.3
Properties held for sale* 38.1 - 6.5 44.6
Land held for sale* - - 0.4 0.4
Property portfolio at 31 December 2021 1,160.9 888.0 282.4 2,331.3
*Sum total differs from assets held for sale on the balance
sheet due to GBP0.8m of liabilities associated with a corporate
sale
The property portfolio which comprises investment properties
detailed in note 9, properties held for sale detailed in note 11,
and the student accommodation, hotel and landholding detailed in
note 10 was revalued at 30 June 2022 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:
30 June 2022 30 June 2021 31 December 2021
Investment Other Property Investment Other Property Investment Other Property
property property portfolio property property portfolio property property portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cushman and
Wakefield 1,010.1 161.0 1,171.1 1,270.3 167.0 1,437.3 1,270.0 173.3 1,443.3
Jones Lang LaSalle 1,194.0 31.0 1,225.0 871.2 6.1 877.3 883.0 1.8 884.8
L
Fällström
AB - 3.6 3.6 - 3.0 3.0 - 3.2 3.2
2,204.1 195.6 2,399.7 2,141.5 176.1 2,317.6 2,153.0 178.3 2,331.3
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 TECHNIQUE AND FAIR VALUE MEASUREMENT
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 2022 or 2021.
SUSTAINABILITY AND CLIMATE CHANGE
The Group published its new sustainability strategy including a
pathway to net zero carbon in August 2021 and has set 2030 as its
date to achieve this (see pages 58 to 61 of the 2021 Annual
Report). Last year the Group employed technical experts to carry
out individual property energy audits to identify energy and carbon
saving opportunities. A total of 76 properties were visited from
January to April 2021 across the UK, France and Germany, with new
developments, properties under refurbishment and properties
earmarked for sale all excluded from the programme. The investment
needed to deliver the audit findings amounts to an initial
estimated GBP58 million over 9 years. We have integrated these
energy audits into each Asset Management Plan to enable strategic
decisions about the refurbishment, sale or full redevelopment of
assets to be made.
9 INVESTMENT PROPERTIES
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2022 996.4 883.0 273.6 2,153.0
Acquisitions - 22.5 - 22.5
Capital expenditure 14.1 3.6 6.8 24.5
Net revaluation movement 3.8 (3.6) (7.1) (6.9)
Lease incentives 0.7 6.3 - 7.0
Exchange rate variances - 21.6 6.5 28.1
Transfer to properties held for sale (4.9) (6.9) (12.3) (24.1)
At 30 June 2022 1010.1 926.5 267.5 2,204.1
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2021 997.9 733.2 301.7 2,032.8
Acquisitions 17.9 159.3 - 177.2
Capital expenditure 11.8 4.1 3.0 18.9
Net revaluation movement (7.5) 6.4 (0.7) (1.8)
Lease incentives (0.1) 0.5 0.4 0.8
Exchange rate variances - (32.4) (12.5) (44.9)
Transfer to properties held for sale (30.9) - (10.6) (41.5)
At 30 June 2021 989.1 871.1 281.3 2,141.5
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2021 997.9 733.2 301.7 2,032.8
Acquisitions 17.9 161.6 - 179.5
Capital expenditure 20.6 9.4 6.0 36.0
Disposals (5.0) - (10.7) (15.7)
Net revaluation movement 3.7 24.2 0.6 28.5
Lease incentives (0.6) 3.0 0.3 2.7
Exchange rate variances - (48.0) (17.9) (65.8)
Transfer to plant, property and equipment - (0.4) - (0.4)
Transfer to properties held for sale (38.1) (6.5) (44.6)
At 31 December 2021 996.4 883.0 273.6 2,153.0
Investment properties include leasehold properties with a
carrying value of GBP49.8 million (30 June 2021: GBP50.0 million;
31 December 2021: GBP48.6 million).
Substantially all investment properties (and the hotel and
student accommodation detailed in note 10 are provided as security
against debt.
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 GBP6.0 million (30 June 2021: GBP2.8
million loss; 31 December 2021: GBP28.5 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 GBP2.3 million (30 June 2021:
GBP1.3 million; 31 December 2021: GBP5.5 million) was included
within the revaluation reserve.
Where the Group leases out its investment property under
operating leases the duration is typically three years or more.
Quantitative information about fair value measurement using
unobservable inputs (Level 3)
ERV Equivalent yield
Average GBP per sq ft Range GBP per sq ft Average % Range %
30-Jun-22 30-Jun-21 30-Jun-22 30-Jun-21 30-Jun-22 30-Jun-21 30-Jun-22 30-Jun-21
UK 36.83 36.91 10.00 - 63.22 10.00 - 66.19 5.43 5.51 2.75 - 9.09 2.54 - 10.30
Germany 13.56 13.21 9.08 - 24.62 8.88 - 24.05 4.40 4.39 3.00 - 5.40 3.00 - 5.40
France 20.78 19.49 12.05 - 39.60 11.96 - 37.36 5.03 5.04 3.90 - 6.50 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 GBP137.0 million (31 December 2021: GBP126.3 million)
whilst a 25 basis point increase would reduce the fair value by
GBP116.5 million (31 December 2021: GBP125.4 million). A decrease
in the ERV by 5% would result in a decrease in the fair value of
the Group's investment property by GBP86.4 million (31 December
2021: GBP88.8 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 GBP95.5 million (31 December 2021: GBP74.7
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 2022.
GBPm
5% increase in value of sterling
against the euro (56.9)
5% fall in value of sterling against
the euro 62.8
10 PROPERTY, PLANT AND EQUIPMENT
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Student accommodation 95.0 92.0 94.1
Hotel 25.8 23.8 25.0
Land and buildings 3.6 3.0 3.2
Owner-occupied property 11.0 10.4 11.0
Fixtures and fittings 2.0 2.0 2.1
Total 137.4 131.2 135.4
Fixtures
Land and Owner-occupied and
Student accommodation Hotel buildings property fittings Total
GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2022 94.1 25.0 3.2 11.0 3.2 136.5
Additions - - - - 0.1 0.1
Disposals - - - - (0.1) (0.1)
Revaluation(1) 0.9 0.8 0.4 - - 2.1
At 30 June 2022 95.0 25.8 3.6 11.0 3.2 138.6
Comprising:
At cost - - - - 3.2 3.2
At valuation 95.0 25.8 3.6 11.0 - 135.4
95.0 25.8 3.6 11.0 3.2 138.6
Accumulated depreciation
and impairment
At 1 January 2022 - - - - (1.1) (1.1)
Disposals - - - - 0.1 0.1
Depreciation charge (0.1) (0.1) - - (0.2) (0.4)
Revaluation(1) 0.1 0.1 - - - 0.2
At 30 June 2022 - - - - (1.2) (1.2)
Net book value
At 30 June 2022 95.0 25.8 3.6 11.0 2.0 137.4
At 31 December 2021 94.1 25.0 3.2 11.0 2.1 135.4
(1) See note 8 and 9 for disclosure around fair value including
technique and sensitivity
11 PROPERTIES AND LAND HELD FOR SALE
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2022 38.1 - 6.9 45.0
Disposals (10.1) - - (10.1)
Net revaluation movement - - 0.9 0.9
Exchange rate variances - - 0.3 0.3
Transfer from investment property 4.9 6.9 12.3 24.1
At 30 June 2022(1) 32.9 6.9 20.4 60.2
1 The total differs from the assets held for sale on the Group
balance sheet due to GBP0.7m of liabilities associated with a
corporate sale
11 PROPERTIES AND LAND HELD FOR SALE (continued)
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2021 5.9 10.2 5.8 21.9
Disposals (5.9) (4.1) (5.1) (15.1)
Net revaluation movement - (1.0) - (1.0)
Exchange rate variances - (0.2) (0.2) (0.4)
Transfer from investment property 30.9 - 10.6 41.5
At 30 June 2021 30.9 4.9 11.1 46.9
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2021 5.9 10.2 5.8 21.9
Disposals (5.9) (10.2) (5.3) (21.4)
Net revaluation movement - - (0.1) (0.1)
Exchange rate variances - - - -
Transfer from investment property 38.1 - 6.5 44.6
At 31 December 2021(1) 38.1 - 6.9 45.0
1 The total differs from the assets held for sale on the Group
balance sheet due to GBP0.8m of liabilities associated with a
corporate sale
12 BORROWINGS
MATURITY PROFILE
Bank Secured
loans notes Total
At 30 June 2022 GBPm GBPm GBPm
Maturing in:
Within one year or on demand 141.7 44.4 186.1
One to two years 319.3 - 319.3
Two to five years 229.4 - 229.4
More than five years 313.7 - 313.7
1,004.1 44.4 1,048.5
Unamortised issue costs (5.3) - (5.3)
Borrowings 998.8 44.4 1,043.2
Due within one year (140.2) (44.4) (184.6)
Due after one year 858.6 - 858.6
At 30 June 2021
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
12 BORROWINGS (continued)
At 31 December 2021
Maturing in:
Within one year or on demand 124.3 46.5 170.8
One to two years 111.3 - 111.3
Two to five years 432.7 - 432.7
More than five years 322.7 - 322.7
991.0 46.5 1,037.5
Unamortised issue costs (5.8) (0.1) (5.9)
Borrowings 985.2 46.4 1,031.6
Due within one year (122.7) (46.4) (169.1)
Due after one year 862.5 - 862.5
FAIR VALUES
Carrying amounts Fair values
30 June 30 June 31 December 30 June 30 June 31 December
2022 2021 2021 2022 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm
Current borrowings 184.6 147.4 169.1 184.4 148.1 169.1
Non-current borrowings 858.6 903.4 862.5 805.8 911.3 866.7
1,043.2 1,053.8 1,031.6 990.2 1,062.4 1,035.8
The fair value of borrowings represents the amount at which a
financial instrument could be exchanged in an arm's length
transaction between informed and willing parties, discounted at the
prevailing market rate, and excludes accrued interest.
13 SHARE CAPITAL
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 2022
and 30 June 2022 407,395,760 31,382,020 438,777,780 10.2 0.8 11.0
14 CASH GENERATED FROM OPERATIONS
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2022 2021 2021
GBPm GBPm GBPm
Operating profit 27.2 38.9 106.8
Adjustments for:
Net movements on revaluation of investment
properties 6.0 2.8 (28.5)
Net movements on revaluation of equity
investments 3.3 (0.1) (1.0)
Depreciation and amortisation 0.4 0.4 1.1
Non-cash rental income (lease incentives) (7.0) (0.8) (2.7)
Share-based payments (0.6) (0.2) (0.3)
Loss on sale of investment properties 0.2 - 0.1
Changes in working capital:
Decrease/(increase) in receivables 4.6 5.0 (3.7)
(Decrease)/increase in payables (3.1) (3.4) 1.3
Cash generated from operations 31.0 38.6 73.1
15 RELATED PARTY TRANSACTIONS
There have been no material changes in the related party
transactions described in the last annual report, other than those
disclosed elsewhere in this condensed set of financial
statements.
16 POST BALANCE SHEET EVENTS
The Group completed the acquisition of The Yellow property in
Dortmund (7 July) for a price of GBP56.0 million with secured debt
of GBP35.2 million.
The Group completed on the sale of two UK properties, 62 London
Road, Staines (18 July) and Great West House, Brentford (2 August)
and one French property, 96 Rue Nationale, Lille (21 July) for a
total of GBP39.8 million. At the balance sheet date these were all
classified as assets held for sale on the balance sheet.
On the date these accounts were released the Group announced a
GBP25.5 million tender buyback for 1 in every 40 ordinary shares at
GBP2.50 per share.
There were no other material events after 30 June 2022 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.
Balance sheet loan-to-value
Net debt expressed as a percentage of property assets.
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.
Contracted rent
Annual contracted rental income after any rent-free periods have
expired.
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 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.
Liquid resources
Cash and short-term deposits and listed corporate bonds.
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.
Property loan-to-value
Property borrowings expressed as a percentage of the market
value of the property portfolio.
Real Estate Investment Trust (REIT)
A Real Estate Investment Trust (REIT) is a vehicle that allows
an investor to obtain broadly similar returns from their
investment, as they would have, had they invested directly in
property. In the UK a REIT is exempt from UK tax on the income and
gains of its property rental business. A REIT in the UK is required
to invest mainly in property and to pay out 90% of the profits from
its property rental business as measured for tax purposes as
dividends to shareholders (property income distributions). In the
hands of the shareholder, property income distributions (PID) are
taxable as profits of a UK property rental business. The PID is
received net of withholding tax, unless it is to a recipient
entitled to gross payment
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.
Streamlined energy and carbon reporting (SECR)
The SECR regulations were introduced in April 2019 and require
companies incorporated in the UK to undertake enhanced disclosures
of their energy and carbon emissions in their financial
reporting.
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.
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 - basic
The change in IFRS net assets before the payment of
dividends.
Total accounting return
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.
UN Sustainable Development Goals (SDGs)
The 2030 Agenda for Sustainable Development, adopted by all
United Nations Member States in 2015, provides a shared blueprint
for peace and prosperity for people and the planet, now and into
the future. At its heart are the 17 Sustainable Development Goals
(SDGs), which are an urgent call for action by all countries -
developed and developing - in a global partnership. They
recognise that ending poverty and other deprivations must go
hand-in-hand
with strategies that improve health and education, reduce
inequality, and spur economic growth - all while tackling climate
change and
working to preserve our oceans and forests.
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 SSUESUEESEIA
(END) Dow Jones Newswires
August 10, 2022 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
