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A diversified approach

CLS Holdings plc

Half Year Results 2019

Disclaimer

This document may contain certain ‘forward-looking statements’. By their nature, forward-looking statements involverisk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differmaterially from those expressed or implied by such forward-looking statements. Any forward-looking statementsmade by or on behalf of CLS speak only as of the date they are made and no representation or warranty is given inrelation to them, including as to their completeness or accuracy or the basis on which they were prepared. Except asrequired by its legal or statutory obligations, the Company does not undertake to update forward-looking statementsto reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances onwhich any such statement is based. Information contained in this document relating to the Company or its shareprice, or the yield on its shares, should not be relied upon as an indicator of future performance.

All numbers provided are as at 30 June 2019 unless otherwise stated.

CLS Holdings plc Half Year Results 2019

Contents

Overview

01

Property13

05 20Appendices

23

Fredrik Widlund – CEO

Andrew Kirkman – CFO

Simon Wigzell – Head of Group Property

Financials Markets and Summary

CLS Holdings plc Half Year Results 2019

OverviewFredrik Widlund – CEO

CLS Holdings plc Half Year Results 2019 | 01

Actively creating valueOverview

● Net rental income increased by 5.9% to £53.8m(30 June 2018: £50.8m)

● Vacancy stable at 4.2% (31 Dec 2018: 3.8%) below our target of 5%

● Valuations up 1.9% (£36.9m) led by Germany;total portfolio value of £2.1bn

● Catena valuation up 32% resulting in a gain of £23.6m (30 June 2018: £6.6m)

● Completed or exchanged on £139.0m of acquisitions and £115.1m of disposals

● EPRA NAV up 5.0% to 325.3 pence per share (31 Dec 2018: 309.8p)

● EPRA EPS down 4.8% to 6.0p (30 June 2018: 6.3p1)

● Interim dividend of 2.35p per share up 6.8% (30 June 2018: 2.20p)

● New independent Chairman and non-executive director

CLS Holdings plc Half Year Results 2019 | 021 Restated to exclude discontinued operations

PROPERTY VALUE BY GEOGRAPHY

UK (£1,058.6m) 51%

Germany (£689.9m) 33%

France (£331.9m) 16%

£2.1bn

208.3

245.6

285.6 309.8

325.3

2015 2016 2017 2018 H1 2019

EPRA NAV (pence)

325.3pUp 5.0%

Portfolio growth

UK

● Total valuation down 0.3%, London up, Regions down

● Rental growth with ERV up 1.1%, London 1.2%

● Yields softening by 13 bps to 5.4% NIY

Germany

● Valuation uplift of 4.5% in local currency

● Strong rental growth with ERVs up 4.3%

● Yield hardening by 21 bps to 4.9% NIY

France

● Valuation uplift of 4.5% in local currency

● Rents roughly flat with ERVs up 0.2%

● Yields hardening by 37 bps to 4.3% NIY

Group valuations up 1.9%

VALUATION UPLIFT

£36.9mDriven by Germany


2016 2017 2018 H1 2019

H2

H1

£67.9m

£96.8m

£38.6m £36.9m

UK Germany France Total

Valuation Uplift1 -0.3% 4.5% 4.5% 1.9%

ERV Movement2 1.1% 4.3% 0.2% 2.0%

Net Initial Yield (NIY) 5.4% 4.9% 4.3% 5.0%

NIY Movement 13 bps -21bps -37bps -7bps

1 In local currency2 Like-for-like


Acquisitions and sales

Active recycling of capital

Acquisitions £139.0m (H1 £111.7m)

Sales £115.1m (H1 £4.3m)

Volume (£’m)

Witten

Plymouth

Aldgate

Paris

7 assets acquired with a NIY of 5.5%• Les Reflets, Lille• Portland Building, Crawley• Gresham House, Crawley• Prescot Street, Aldgate• Puro, Munich• Vauxhall Walk, Vauxhall• Office Connect, Cologne (Post H1)

Crawley

Lille

Munich

Cologne

Dusseldorf

-

50.0

100.0

150.0

200.0

250.0

2015 2016 2017 2018 H12019

July '19

AcquisitionsSales

7 assets sold with a NIY of 3.8%• Marktstrasse, Witten• Foliot House, Plymouth• Ateliers Victoires, Paris (Post H1)• East Gate, Munich (Post H1)• Schanzenstrasse, Dusseldorf (Post H1)• Quayside, Fulham (Post H1)• Grange, Hays (Post H1)

Key

Acquisitions

Sales

Vauxhall

HaysFulham


FinancialsAndrew Kirkman – CFO

EPRA NAV per share

325.3pUp 5.0%

(31 Dec 2018: 309.8p)

EPRA EPS

6.0pDown 4.8%

(2018: 6.3p1)

Total accounting return

6.5%Up 200 bps

(2018: 4.5%)

Weighted average cost of debt

2.49%Up 6 bps

(31 Dec 2018: 2.43%)

Strong interest cover

3.6xDown 0.2x(2018: 3.8)

Interim dividend

2.35pUp 6.8%

(H1 2018: 2.20p)

Further good progressFinancial highlights


3.40

2.91 2.51 2.43 2.49

2015 2016 2017 2018 H1 2019

COST OF DEBT (%)

Kept low

Up 6.8%

5.7 7.2 8.4 9.0 9.6

13.416.3

17.519.1

2015 2016 2017 2018 H1 2019

25.923.5

19.1

28.1DISTRIBUTIONS (£m)

208.3 245.6

285.6 309.8 325.3

2015 2016 2017 2018 H1 2019

EPRA NAV per share (pence)

Up 5.0%

1 Restated to exclude discontinued operations

309.8

325.3

(4.7)

6.0

9.1

5.1 0.2

(0.2)

At 31 December 2018 Dividends EPRA earnings Property valuation Catena Bonds/Discontinued/Other FX At 30 June 2019

Growth driven by fair value uplifts and earningsMovement in EPRA NAV


+5.0%

MOVEMENT IN EPRA NAV (pence per share)

1

1 After FX

Stable earnings impacted by lower interest incomeMovement in EPRA EPS


MOVEMENT IN EPRA EPS

6.31

6.0

(0.4)

(0.4)

(0.2)

0.7

At 30 June 2018 Netrental income

Expenses Finance income Tax/Other At 30 June 2019

1 Restated to exclude discontinued operations

Increase from acquisitions and fair value upliftsMovement in property portfolio


31 December2018

Disposals Acquisitions Capex Valuation uplift FX 30 June 2019

39.72

(1.5)6.1117.1

2,080.4

1,923.3

(4.3)

MOVEMENT IN PROPERTY PORTFOLIO1 (£m)

1 Comprises investment property, PPE and properties held for sale2 Includes rent free debtor of £2.8m

Utilising capital to reinvest in the businessMovement in liquid resources


MOVEMENT IN LIQUID RESOURCES (£m)

100.3

(19.2)

35.1

2.2

107.6

30.333.8

31 December 2018 Fromoperations

Dividends Sale ofproperties

Net drawdown ofloans

Propertyacquisitions & capex

Interest/Tax/Other 30 June 2019

122.8

(124.6) (5.5)

141.4

■ Cash ■ Corporate Bonds

130.6

Actively managing our debt

● H1 2019 financing summary

Financed or refinanced £188.9m at c.2.80%

➢ new debt £137.1m, refinancing £51.8m

➢ weighted average duration 5.1 years

➢ £74.4m fixed at 2.66%

● H1 2019 financing of new acquisitions

1 in France and 1 in Germany £25.7m (LTV 67.8%)

➢ at all-in fixed rate of 1.53% for 7 years

2 in UK which were added to existing debt portfolio

➢ new tranche added for £46.4m (LTV 60%)

➢ maturity extended from 2021 to 2024

● Continue to fix at attractively low rates

Fixed debt (76%): 3.5 years at 2.44%

Floating debt (24%): 3.2 years at 2.66%


Debt transactions

DEBT MATURITY (£m)

UK Germany France Total

Gross debt (£m) 485.3 319.1 154.9 959.3

Number of loans 18 18 17 53

Gearing 35.6% 41.9% 45.7% 39.3%

Cost of debt 3.48% 1.42% 1.61% 2.49%

Years to maturity 3.0 3.5 3.9 3.4

50

100

150

200

250

2019 2020 2021 2022 2023 2024 2025 2026

GBP EUR

DEBT PROFILE

Weighted average cost of debt

2.49% (31 Dec 2018: 2.43%)

Interest cover

3.6x (2018: 3.8x)

Fixed rate debt

76% (31 Dec 2018: 79%)

Balance sheet LTV

39.3% (31 Dec 2018: 36.7%)

Unencumbered properties

£154m (31 Dec 2018: £284m)

Low cost, diversified debtDebt position


3.23.4

3.9 3.83.6

2015 2016 2017 2018 H1 2019

INTEREST COVER (TIMES)

3.6x

DEBT PROFILE30 June 2019

Fixed rate (76%)

Floating rate (capped) (3%)

Floating rate (unhedged)(21%)


PropertySimon Wigzell – Head of Group Property


Asset management

TOP 15 TENANTS (35% of contracted rent)

As at 30 June 2019

CONTRACTED RENT (£116.2m)

Resilient and diversified tenant base

Government (27% by rent)

Major corporates (25%)

Other (48%)

125Properties

1. First Secretary of State (UK)2. National Crime Agency (UK)3. Roehampton University (UK)4. City of Bochum (Germany)5. BAE Systems (UK)6. General Mills (UK)7. Kaufland (Germany)8. Bosch (Germany)9. Honda Motors (UK)10. EPOKA (France)

11. COLT (France)12. Materna (Germany)13. Dr Honle (Germany)14. Telefonica (Germany)15. Volksbank (Germany)

711Tenants

£23.42

£11.52

£19.43

UK Germany France

AVERAGE RENTS (per sq ft)

PROPERTY USE BY REVENUE

Office (90%)

Student (4%)

Hotel (4%)

Food retail (2%)

Leasing deals

78 deals, secured £6.9m of annual rent, 4.3% above December ERVs(2018: 85 deals, secured £7.1m of annual rent)

53% lease extensions(30 June 2018: 59%)

41% new leases (30 June 2018: 31%)

6% rent reviews(30 June 2018: 10%)

WAULT

4.9 years(31 Dec 2018: 5.3 years)

Securing income whilst adding valueActive management


LEASING DEALS

UK (£3.1m)

Germany (£3.0m)

France (£0.8m)

£6.9mAnnual rent

4.0%4.2%

2.3%

3.8%4.1%

4.7%

3.1%

4.2%

UK Germany France Group

2018

H1 2019

VACANCY RATE

Actively adding value

Adlershofer Tor, Berlin

● Regear of lease to large food retailer Kaufland for a further 12 years to 2035

● Kaufland to refurbish and extend then hand back extended space to landlord

● Refurbishment of common space whilst fully let

● Future plans to add additional office floor space

Facade upgrades, France

● Facade and lobby upgrades D’Aubigny and Park Avenue (Lyon), La Madeleine (Lille)

● Compete with new stock

● Increase ERVs

● Improve energy efficiency


Capital expenditure programme

Apex Tower, New Malden

● Currently let to a single tenant BAE

● Regeared with main tenant to remain in half the space for a further 10 years

● Capex program initiated across building prior to tenant handing back space

● Co-working and wellbeing initiatives planned

Creating value through selective developmentCase study: Ateliers Victoires


Ateliers Victoires, Paris

● Valued at £9.9m Dec 2015

● Redevelopment of 21,500 sq ft completed Q3 2018; capex £9.8m

● Fully let to a single tenant on a long lease during Q4 2018

● Sale completed mid-July 2019 for £37.6m

PRE DEVELOPMENT

COMPLETED DEVELOPMENT

Maximising value from the existing portfolio

Vauxhall Walk, SE11 London

● Existing building 4,465 sq ft and ERV of £130k pa

● Potential 29,000 sq ft office and ERV £1.4m pa

● Planning application submitted August 2019

● Potential delivery 2021

St Cloud Gate, Maidenhead

● Existing building 10,124 sq ft and ERV of £250k pa

● Potential 78,000 sq ft office and ERV £3.2m pa

● Planning application submitted June 2019



Medium-term office developments

Vor dem Lauch 14, Stuttgart

● Existing building 93,500 sq ft and ERV of €1.1m pa

● Potential 140,000 sq ft office and ERV €2.85m pa

● Planning application submission Q3 2019


Sustainability – enhancing our strategyA responsible approach


EXTERNALLY AWARDED

INTERNALLY ACHIEVED

Planet

Mitigate impact of business activities on environment

Property

Improve quality and efficiency of our buildings

People

Engage with CLS stakeholders to raise awareness of sustainability

commitments, objectives and performance

Profit

Focus on initiatives that help protect against or manage financial risks and

maximise profitable opportunities

Awarded a BREEAM Excellent certificate on Tinworth St development

96%

of the energy purchased is from renewable resourced contracts.

154 tonnes CO2 saved

YTD 3.4% reduction on carbon emission performance on our managed assets

34 tonnes C02 mitigated

Generated 150,000 kWh of on-site renewable energy YTD.

SUSTAINABILITY CHARTER


Markets & SummaryFredrik Widlund – CEO

Country snapshots

United Kingdom● Brexit remains a risk, uncertainty

driving “wait and see” approach

● Sales volumes down in the first six months, agents reporting falls of 35-40% compared to 2018

● Leading macro indicators remain relatively strong with inflation and unemployment rates at record low

● Slower take-up from new tenants but existing occupiers not exercising breaks

● Long-term positive on London and the South East due to strong fundamentals

Germany● Economy slowing down and export

sector negatively affected by trade disputes and lower global demand

● Sales volumes down 10-15% in the first six months, likely driven by product shortage

● Unemployment at record low and service and consumer sector holding-up well

● Low vacancy and limited supply driving office rental growth

● We continue to see good value in non-prime offices in major cities

Markets

France● Economic indicators gradually

improving, positive unemployment and consumer confidence

● Reform agenda, process of deregulation and tax cuts have slowed, but remain ongoing

● Sales volumes relatively flat and continued strong investment markets in Paris and Lyon

● Paris impacted by low levels of new office supply

● Seeing few value-add opportunities, maximising value from existing assets


Active portfolio management

● Strong results delivered from executing sound strategy

- Benefiting from geographical, portfolio, tenant and financing diversification

- Continuing to capture rental growth

● Ongoing refocusing through active capital recycling

- Opportunities for further value-add acquisitions

- Crystalising value through disposals

- Selective development of existing portfolio

● Strong balance sheet leaves us well positioned to continue to deliver long-term shareholder value


Summary and outlook

OFFICE CONNECT (COLOGNE)

EXCESS NET INITIAL YIELD OVER COST OF DEBT

0%

2%

4%

6%

8%

2010 2011 2012 2013 2014 2015 2016 2017 2018 H12019

Net initial yield Weighted average cost of debt


Appendices

OverviewAbout us

● CLS Holdings plc is a FTSE 250 property investment company which has been listed on the London Stock Exchange since 1994

● At 30 June 2019 the Company had shareholders’ funds of £1.2bn, and a property portfolio in the UK, Germany and France valued at £2.1bn

● We specialise in owning and managing office buildings, with a range of lease lengths, in order to achieve stable cash flows

● We operate in London and the South East of the UK, and in the larger cities in Germany and France

● We aim to hold, refurbish and develop our property investments to obtain long-term asset growth

● We have established offices in London, Hamburg and Paris

TOP 10 SHAREHOLDERS

Mortstedt Family & Charity Trust 51.4%Fidelity Worldwide Investments 9.6%Bengt Mortstedt 6.5%Bank of Montreal 5.5%Invesco 5.1%Schroders 2.4%AXA 1.7%Janus Henderson 1.3%JP Morgan Chase 1.0%NW Brown Group 0.9%


PROPERTY VALUE BY GEOGRAPHY

UK (£1,058.6m) 51%

Germany (£689.9m) 33%

France (£331.9m) 16%

£2.1bn

Consistent & Strong ReturnsAbout us

4.3

6.5 6.5 6.6 7.7

8.5

12.3 12.6 13.1

6.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 H12019

EPRA EPS (pence)

95 98 115 127

177 208

246 286

310 325

2010 2011 2012 2013 2014 2015 2016 2017 2018 H12019

EPRA NAV (pence)

11.2 12.3 13.2 15.0 15.9

19.1

23.5 25.9

28.1

9.6

2010 2011 2012 2013 2014 2015 2016 2017 2018 H12019

DISTRIBUTIONS (£m)

TOTAL SHAREHOLDER RETURN

0.88 0.90 0.931.13

1.311.46

1.57

1.801.92

2.08

2010 2011 2012 2013 2014 2015 2016 2017 2018 H12019

PORTFOLIO VALUE (£bn)


0

100

200

300

400

500

600

700

800

900

1,000

Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19

FTSE Real Estate Super Sector FTSE 350 CLS

16%

CAGR

Create value, reinvest for the futureStrategy

We acquire the right properties…

…we secure the right finance…

…we deliver value through active

management and cost control

We reward shareholders, customers and

employees

● Distribute half of our EPRA earnings and reinvest remaining

● Our tenants are our customers, we understand their needs

● Reward employees for their work and loyalty

● Invest in offices in UK, Germany and France

● Non-prime, good transport links, larger European cities

● Multi-let to spread risk

● Bank loans to mainly SPVs, non-recourse

● Primarily fixed rate

● Up to 7 year terms from broad range of lenders

● In-house asset and property management

● Invest to improve our assets

● Effective cost control and high occupancy


United Kingdom

VALUE OF INVESTMENTPROPERTIES

£1,058.6mLETTABLE SPACE

2.8m sq ftPERCENTAGE OF GROUP’S

PROPERTY INTERESTS

51%VACANCY RATE

4.1%GOVERNMENT AND

MAJOR CORPORATES

65.0%


Business Review

Germany


£689.9mLETTABLE SPACE


PROPERTY INTERESTS

33%VACANCY RATE

4.7%GOVERNMENT AND

MAJOR CORPORATES

27.6%


Business Review

France


£331.9mLETTABLE SPACE


PROPERTY INTERESTS

16%VACANCY RATE

3.1%GOVERNMENT AND

MAJOR CORPORATES

59.0%


Business Review

Portfolio statistics

Group statistics

At 30 June 2019Valuation3

(£m)

Valuation in local currency

(%)EPRA NIY1

(%)

EPRA topped-up

NIY2

(%)

Vacancy by rent(%)

Weighted average

unexpired lease term

(years)

ERV of contracted

rent(£m)

Contracted rent(£m)

Contracted rent

(£/sq ft)

UK 1,058.6 -0.3% 5.4% 5.6% 4.1% 5.0 67.8 61.8 23.42

Germany 689.9 + 4.5% 4.9% 5.1% 4.7% 4.6 41.8 36.6 11.52

France 331.9 + 4.5% 4.3% 5.1% 3.1% 5.3 17.8 17.8 19.43

Total portfolio 2,080.4 + 1.9% 5.0% 5.3% 4.2% 4.9 127.4 116.2 17.26

1. Excludes developments; calculations based on passing rents2. Excludes developments; calculations based on contracted rents3. Valuations performed by Cushman & Wakefield



Portfolio statistics

3.94.5

2.8

3.9

5.04.6

5.34.9

UK Germany France TotalTo first break To end of lease

0.00

10.00

20.00

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Later

Mil

lio

ns

Rent expiring ERV of rent expiring

AVERAGE UNEXPIRED LEASE TERM

EFFECT OF RENT EXPIRIES (£m)

Group statistics

RENTS BY SECTOR

Government (26.9%)

Business Services (20.8%)

Manufacturing (11.1%)

IT (6.0%)

Student lets (4.5%)

Finance (4.9%)

Retail (3.5%)

Other (22.3%)

Holdings at 30 June 2019

Banking Insurance Travel & tourism

Telecoms & IT

Energy & resources

Other Total

Value £12.7m £2.5m £3.8m £8.8m £1.6m £4.4m £33.8m

Running yield

7.4% 6.5% 6.5% 6.8% 9.1% 4.0% 6.7%

Issuers RBS

HSBC

Lloyds

Barclays

Unicredit

Crédit Agricole

Société Generale

Standard Chartered

PGH Capital

Brit Insurance

Hertz

Stena

Dell

Seagate

Centurylink

Telecom Italia

Xerox

Transocean Yum Brands

Stora Enso

Liberty Interactive


Corporate bond portfolio

Total portfolio return 15.7%

Benchmark return iShares Euro High Yield index 7.1%

iShares iBoxxUSD High Yield Corporate Bond ETF 10.4%

Reason for performance

Declining market interest rates, corporate earnings growth and supportive market sentiment supported bond prices while a decline in Sterling added a positive currency effect.

Diversification 21 bond issues in large-cap companies

Average duration 11 years

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