CLS HOLDINGS PLC HALF YEAR RESULTS 2017/media/Files/C/CLS-Holdings/...CLS HOLDINGS PLC HALF YEAR...

CLS HOLDINGS PLC HALF YEAR RESULTS 2017

CONTENTS

2

OVERVIEW Fredrik Widlund Chief Executive

FINANCIALS John Whiteley Chief Financial Officer

PROPERTY Simon Wigzell Head of Group Property

MARKETS & SUMMARY

Fredrik Widlund Chief Executive


OVERVIEW Delivering significant outperformance

CREATING VALUE

EPRA NAV up 9.3% to 268.5p Earnings £100.0m (2016: £29.7m) Valuation up 4.7% to £1.57bn Dividend up 6.6% to 2.05p

Increased diversification in multi-let, higher yielding offices in Europe’s three largest economies

REFOCUSING THE PORTFOLIO

Strong period with £210m of acquisitions and £179m of sales, driving yield and cash flow

RECYCLING OF CAPITAL

3


CREATING VALUE Period of outstanding growth

126.8

177.4

208.3

245.6 268.5

-

50.0

100.0

150.0

200.0

250.0

300.0

2013 2014 2015 2016 2017 H1

0

20

40

60

80

100

2016 H1 2017 H1

Core earnings Revaluation uplift

Profit on sales

pence

EPRA NAV+9.3% since Dec 2016

Total Earnings +237%

4

£29.7m

£100.0m

1. EPRA EPS and other items

1

£29.1m

£44.9m


Increasing Multi-Let Occupancy Total number of tenants up 33% Average income per tenant down p.a. 16%

REFOCUSING THE PORTFOLIO Increased German weighting and multi-let occupancy

Movement in the Portfolio By value

5

1. Including Zublin Portfolio and Gotic Haus acquisitions

No of tenants Income per tenant

30 June 2017 Pro forma

530

706 £172,800

£145,800

31 Dec 2016 30 June 2017 Pro forma

UK France Germany

£1.57bn

23%

16%

61%

£1.57bn

24%

18%

58%

£1.73bn

31%

16%

53%

1

1


89.0 91.2 91.6

102.9

75.0

100.0

2015 2016 2017 H1 Pro Forma

RECYCLING OF CAPITAL Increasing rent roll

0.0

50.0

100.0

150.0

200.0

2014 2015 2016 Pro Forma

Acquisitions Sales

£389m of Acquisitions / Sales 12% increase in Contracted Rent

6

Pro Forma1 £m NIY (%)

Acquisitions 210 6.6 Sales 179 2.1 £m

Rent £m pa


CONTENTS

7




MARKETS & SUMMARY



50

150

250

2013 2014 2015 2016 2017 H1

EPRA NAV

FINANCIALS Strong progress

8 CLS HOLDINGS PLC HALF YEAR RESULTS 2017

p

EPRA NAV é Up 9.3% to 268.5p (31 Dec 2016: 245.6p)

EPRA EPS ê Down to 5.3p (31 Dec 2016: 8.1p)

Profit on disposals £41.7m

Portfolio Value é Up 3.4% in local currencies

Weighted Av. Cost of Debt

Up 3bps at 2.94% (31 Dec 2016: 2.91%)

Strong interest cover é 3.7x (30 June 2016: 3.6x)

Dividend é Up 6.6% to 2.05p 0.0

5.0

10.0

15.0

2013 2014 2015 2016 2017 H1

Distributions £m

H2

H1

H2

H1

H2

H1

H2

H1 H1

2.50%

3.00%

3.50%

2015 2016 2017 H1 Pro Forma

Cost of Debt %


+9.3%

245.6

268.5

-4.0

5.3

7.1

11.7 0.8 2.0

235

245

255

265

275

At 1 Jan 2017 Dividend EPRA EPS Profit on disposals

FV movement in properties

Other FX At 30 June 2017

MOVEMENT IN EPRA NAV Growth driven by EPRA earnings, profit on disposals and revaluations

9

Pence


-2.3

0.2

-0.7

0.2

-0.3

0.1

0.0

2.0

4.0

6.0

8.0

2016 H1 FX Net rental income

Expenses Net finance costs

Tax Minority interest

2017 H1

MOVEMENT IN EPRA EPS Solid performance

Pence

10

149, 97, 13

248,161,40

183,1,64

181,211,36

11,79,134

8.1

5.3


+10%

1,536.6 1,499.6

38.1

31.6 34.4

-136.8

46.6 13.6

48.2 19.3

165.0

1,250

1,350

1,450

1,550

1,650

1,750

1,850

1 Jan 2017 Disposals Additions Capex Valuation Uplift

FX 30 June 2017 Completions in H2

Pro Forma

MOVEMENT IN PROPERTY PORTFOLIO Refocusing the portfolio

£m

11

1,574.7 1,565.6

Held for sale

PPE

Investment Properties 1,730.6


DEBT POSITION Well financed

0

40

80

120

160

2017 2018 2019 2020 2021 2022 2023 2024 2025

Debt Maturity At 30 June 2017

12

149, 97, 13

248,161,40

183,1,64

181,211,36

11,79,134

Expiries Amortisation

£m

70% 5%

25%

Debt Structure At 30 June 2017

Fixed Capped Unhedged

Low cost of debt é Up to 2.94% (31 Dec 2016: 2.91%) Pro forma 2.79%

Strong Interest cover é

Up to 3.7x (30 June 2016: 3.6x) Pro forma 3.9x

Net debt to property assets

34.6% (31 Dec 2016: 43.7%) Pro forma 40.7%

Property LTV ê Down to 48.8% (31 Dec 2016: 49.8%) Pro forma 50.2%

Avg maturity of fixed debt 4.6 years

CONTENTS

13




MARKETS & SUMMARY



STRONG TENANT PROPOSITION

Index linked rents of total portfolio

48%

Secure Income of £91.6m Affordable Rents

£17.07 psf Total Portfolio avg. contracted rent

£21.53

£18.31

£10.94

14

35% Government

Major Corporates 21%

530 tenants

116 properties


0.0

4.0

8.0

2014 2015 2016 2017 H1

To first break To end of lease

H1 2016 H2 2016 H1 2017

ACTIVE MANAGEMENT Strong period of activity

Maintaining value from in-house asset management Number of property transactions in line with long run average of +160 transactions

£6.77m leasing deals

86transactions

15

Portfolio WAULT 5.7 years Years

Germany 18%

UK 68%

France 14%


SALES AND ACQUISITIONS1 Investing in our core markets 2017

£179m of sales at 2.1% NIY releasing £151m of net equity

£210m of acquisitions at 6.6% NIY with 10% vacancy

16

Zublin Portfolio Acquisition, Germany June 2017 •  12 properties, £134m •  NIY 6.3% •  Almost 1m sq ft •  157 tenants •  89% occupancy rate •  WAULT 3.3 years •  £8.9m rent p.a.



+4.8%

Strong valuations in France and Germany drove total portfolio valuation +3.4%1

A WELL POSITIONED PORTFOLIO Good rental growth and letting opportunities

0.0

5.0

2013 2014 2015 2016 2017 HY

Vacancy rate maintained below Group KPI Total portfolio 4.6%

17

UK +£21.3m +2.5%

France +£12.3m +4.8%1

Germany +£15.5m +4.4%1

1. Before FX


INVESTING IN OUR PORTFOLIO Building outperformance for the future

Rolling refurbishment programme Munich, Germany; New Malden; Bromley; Birmingham

Good progress on developments Spring Mews Phase 2, London; Ateliers Victoires, Paris

Longer term Working up planning applications at Quayside, London and St Cloud Gate, Maidenhead

18

CONTENTS

19




MARKETS & SUMMARY



MARKET UPDATE Investment strategy responding to market conditions

Focus on existing portfolio Greater political clarity and optimism; improving economy; tenant demand strong in the right locations; relatively low property yields

Actively looking to invest in major cities Politically stable; positive economic story; tenant demand strong; limited new office supply; competitive market place; increasing international presence

Opportunistic approach in good locations Brexit uncertainty; weakening economic forecast; strong international capital inflows; London tenant demand softening

20


Portfolio Total contracted rent

£1.57bn £91.6m

£1.73bn £102.9m

30 June 2017 Pro Forma1

Properties Tenants

116 530

129 706

Gearing Liquid resources

34.6% £238.0m

40.7% £178.0m

Well-positioned to create value and secure future opportunities in our markets

CLS GROUP GOING FORWARD

21


APPENDICES

22


PROPERTY PORTFOLIO1

At 30 June 2017

Market Value2

£m Valuation3

%

EPRA Net Initial

Yield4 %

Vacancy By Rent

% WAULT (years)

ERV of Contracted

Rent £m

Contracted Rent

£m

Contracted Rent

£/sq ft (£/sqm)

UK 911.8 é 2.5% 5.4% 3.4% 5.8 56.4 54.1 21.53 (232)

Germany 378.4 é 4.4% 5.3% 8.0% 5.6 22.6 21.9 10.94 (118)

France 275.4 é 4.8% 5.1% 3.6% 5.6 15.3 15.6 18.31 (197)

Total portfolio 1,565.6 é 3.4% 5.4% 4.6% 5.7 94.3 91.6 17.07 (184)

23

1 Data relates to investment properties unless otherwise stated 2 Includes hotel 3 In local currency 4 Excludes developments

149, 97, 13

248,161,40

183,1,64

181,211,36

11,79,134

CLS HOLDINGS PLC HALF YEAR RESULTS 2017 24

LONG-TERM VALUE-ADD OPPORTUNITIES

Property Country Existing Size (sq m)

Potential Time Frame Opportunity

St Cloud Gate, Maidenhead UK 941 2018 - 2020 Office redevelopment. Planning submission end 2017/early 2018

Ty Cambria, Cardiff UK 3,135 2019 - 2020 Mixed-use development. Planning submission early 2018.

Quayside, London SW6 UK 3,064 2020 - 2022 Residential development site. PDR application submitted. Full application to be submitted Q3 2017

Westminster Tower, London SW1 UK 4,457 2020 - 2022 Planning permission for residential / office development granted.

Le Quatuor, Paris France 2,459 2020 - 2022 Office development with land assembly

Atholl House, Aberdeen UK 5,058 2021 - 2023 Mixed-use development

Bismarckallee, Freiburg Germany 7,471 2021 - 2023 Major office refurb /redevelopment

Schanzenstrasse, Dusseldorf Germany 3,095 2024 - 2025 Residential development

New Printing House, London WC1 UK 26,295 2025 - 2027 Major office refurb / development

Spring Gardens, London SE11 UK 19,964 2026 - 2028 Mixed-use development

Malakoff, Paris France 10,778 2028 - 2030 Mixed-use development

Unicorn House, Bromley UK 5,456 2028 - 2030 Major office refurb / development

Armstrong Road, Acton UK 4,039 2028 - 2030 Residential development

St Cross House, Southampton UK 3,993 2028 - 2030 Mixed-use development


UK

§  71 properties §  £911.8m §  2,774,094 sq ft / 257,722 sqm §  199 tenants §  £54.1m contracted rent §  3.4% vacancy

25


GERMANY

30 June 2017 §  21 properties §  £378.4m §  2,181,834 sq ft / 202,699 sqm §  170 tenants §  £21.9m contracted rent §  8.0% vacancy

Pro forma1

§  34 properties §  £543.4m §  3,381,167 sq ft / 314,121 sqm §  346 tenants §  £33.3m contracted rent §  8.5% vacancy

26



§  24 properties §  £275.4m §  893,619 sq ft / 83,020 sqm §  161 tenants §  £15.6m contracted rent §  3.6% vacancy

FRANCE

27


LEASE PROFILE

28

0.0

5.0

10.0

UK Germany France Total

To first break To end of lease

0

10

20

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Later

Mill

ions

Rent expiring ERV of rent expiring

Average Unexpired Lease Term

Effect of Rent Expiries

£m

Years


65.1 66.0

99.0

172.0

20.8

-16.3

168.9

-55.8 -13.5

-42.9

12.7

0.0

100.0

200.0

300.0

400.0

At 1 Jan 2017 From operations

Dividends Sale of properties

Property acquisitions

Capital expenditure

Net drawdown of loans

Other At 30 June 2017

MOVEMENT IN LIQUID RESOURCES

£m

29

Cash

Corporate Bonds

238.0

164.1


Banks & Financials Insurance

Travel & Tourism

Telecoms & IT

Energy & Resources Other Total

Value £23.4m £1.9m £11.1m £11.9m £13.6m £4.1m £66.0m

Running Yield 7.0% 6.0% 7.2% 7.1% 9.4% 6.6% 7.5%

Issuers Standard Chartered Societe Generale

Deutsche Bank

Credit Agricole

Allied Irish

Santander

Unicredit

Barclays

Investec

Lloyds

HSBC

RBS

Brit Insurance

Phoenix Life

British Airways

Air France

Stena

Hertz

SAS

Western Digital

Telecom Italia

Centurylink

Millicom

Seagate

Dell

Freeport-McMoRan

Arcelor Mittal

Transocean

Seadrill

Enel

Stora Enso

L Brands

CORPORATE BOND PORTFOLIO At 30 June 2017

30

Total portfolio return 2017 H1: 6.6 % in local currencies Benchmark return 2017 H1: 3.0 % iShares Euro HY Corporate Bond ETF

4.4 % iShares iBoxx USD HY Corporate Bond ETF Reason for outperformance: Overweight allocation in contingent convertible bonds and financial services exposure Diversification: 32 bonds issued by large-cap companies

Average Duration: 12.6 years


SUSTAINABILITY AT CLS 30 June 2017

CO2 Reduced by 9% (Target reduction 5%)

Solar PV 3% of group electricity from 7 systems

Water usage Reduced by 4.5% (Target reduction 5%)

Recycling 53% (Target 70%)

2018 EPC Regulation UK Portfolio 100% compliant

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