REG - CLS Holdings PLC - Annual Financial Report
01/04/2025 07:15
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RNS Number : 0265D CLS Holdings PLC 01 April 2025
THIS ANNOUNCEMENT RELATES TO THE DISCLOSURE OF INFORMATION THAT QUALIFIED OR
MAY HAVE QUALIFIED AS INSIDE INFORMATION WITHIN THE MEANING OF ARTICLE 7(1) OF
THE MARKET ABUSE REGULATION (EU) 596/2014
CLS HOLDINGS PLC
("CLS", the "Company" or the "Group")
ANNOUNCES ITS ANNUAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Delivering on our strategic priorities
CLS' vision is to be a leading pan-European office and commercial property
specialist and a supportive, progressive and sustainably focused property
investment company. We aim to deliver long-term value through the active
management of high-yielding properties.
For the year ended 31 December 2024, the Group has delivered the following
results:
31 December Change
2024 2023
EPRA Net Tangible Assets ("NTA") Per Share (pence) ¹ 215.0 253.0 (15.0)%
Statutory NAV per share (pence)¹ 197.3 233.8 (15.6)%
Contracted rents (£'million) 108.9 112.6 (3.3)%
Loss before tax (£'million) (97.4) (263.4) 63.0%
EPRA Earnings Per Share ("EPS") (pence) ¹ 9.2 10.3 (10.7)%
Statutory EPS from continuing operations (pence) ¹ (23.6) (62.9) 62.5%
Dividend per share (pence) 5.28 7.95 (33.6)%
(1)A reconciliation of statutory to alternative performance measures is set
out in Note 5 to the financial statements
Fredrik Widlund, Chief Executive Officer of CLS, commented:
"In 2024, CLS made significant progress in executing our strategic objectives,
despite a demanding economic backdrop. Our strong leasing performance
highlights the quality and resilience of our portfolio, while completed
property sales and refinancing efforts have strengthened our balance sheet and
positioned the business for future growth.
"Looking ahead, we believe the commercial property market is at or near the
bottom of the current cycle across the UK, Germany, and France. Over the past
year, the real estate sector has entered a period of cautious optimism, with
signs of gradual recovery and stabilising investment activity. While economic
uncertainties remain, improving market fundamentals, such as strong leasing
take-up, a limited pipeline of new office supply, and moderating interest
rates, are creating new opportunities. With a 30-year track record of
successfully navigating market cycles, CLS is well-placed to capitalise on
this improving landscape.
"By resetting our dividend and increasing our asset disposal programme, we
will unlock funds to invest in capturing the upside potential embedded in our
portfolio in the years ahead, while maintaining or reducing our LTV."
OPERATIONAL HIGHLIGHTS
· Net rental income increased by 3.8% to £117.3 million on a
like-for-like and constant currency basis (0.9% to £114.0 million (2023:
£113.0 million) on a statutory basis) as a result of: new leases and
renewals, other income including the buyer's forfeited deposit on the failed
sale of Westminster Tower, increased student and hotel revenue and indexation
(54.4% of contracted rent is index-linked)
· Strong leasing performance securing contracted annual rent of
£16.6 million (2023: £15.5 million) with 112 new lettings and renewals in
2024 (2023: 130). The leases were 6.8% above 31 December 2023 estimated rental
values
· Underlying vacancy decreased by 0.4% to 10.6% but overall vacancy
increased to 12.7% (2023: 11.0%), due to the completion of developments in the
year, adding c.14,200 sqm (153,000 sq. ft) of high-quality and refurbished
space to our portfolio
· Rent collection has continued to be strong with 99% collected
(2023: 99%) and 99% of Q1 2025 contracted rent due collected to date
· High occupancy levels continue in our Student and Hotel assets in
Vauxhall, with the student accommodation fully let for the current academic
year and the hotel achieving record revenue
· Completed the disposal of five properties for a total of £66.1
million, which was in line with presale valuations
· In 2025, we exchanged on the disposal of the student accommodation
asset at Spring Mews, for £101.1 million, in-line with book value. CLS has
also agreed the disposal of one property in Germany and one property in the UK
for a combined £24.2 million, in-line with the latest valuation. All three
sales are targeted to complete in the first half of 2025
· CLS intends to complete the remaining £78.6 million of its £270
million targeted sales program this year. In due course, CLS is also
considering additional sales of up to £130 million to help fund the pipeline
of refurbishment and redevelopment opportunities in the portfolio whilst
maintaining or reducing LTV
FINANCIAL HIGHLIGHTS
· Portfolio valuation down 5.8% in local currency (UK -8.3%, Germany
-3.5% and France -5.1%), with estimated rental value decline of -0.8% (1.8%
growth excluding New Printing House Square which was impacted by a change in
valuation assumption) as well as equivalent yield expansion of 24 basis points
on a like-for-like basis. The pace of these valuation declines reduced in
2024, and in the second half of the year valuations were flat in Germany and
France with a small decrease in the UK
· EPRA NTA per share down 15.0% primarily as a result of property
valuation falls. Total accounting return for the year of -11.9% (2023: -20.8%)
· EPRA EPS down 10.7% to 9.2 pence per share due to higher financing
costs and non-recoverable costs related to vacancy
· Loss before tax of £97.4 million (2023: £263.4 million loss) from
net valuation declines on investment properties of £127.7 million (2023:
£302.7 million loss). Statutory EPS was a loss of 23.6p
· A proposed final dividend of 2.68 pence per share, so as to retain
cash to invest in the significant opportunities within our portfolio,
resulting in a full-year dividend of 5.28 pence per share (2023: 7.95 pence
per share). Dividend cover of 1.73 times, in line with the Group's revised
dividend policy of the dividend being covered 1.50 to 3.00 times by EPRA
earnings
FINANCING HIGHLIGHTS
· Balance sheet remains resilient with total liquidity of £120.5
million comprising cash and cash equivalents of £60.5 million, two undrawn
revolving credit facilities totalling £50 million and a £10 million
overdraft facility
· Balance sheet loan-to-value at 50.7% (2023: 48.5%) reflecting
valuation declines with net debt down by over £60 million to £938.7 million
(2023: £1,000.0 million). Weighted average debt maturity of 3.2 years (2023:
3.5 years) with 80% at fixed rates and 4% subject to interest rate caps (2023:
76% fixed and 4% caps)
· Weighted average cost of debt at 31 December 2024 up 16 basis
points to 3.77% (2023: 3.61%) resulting from higher interest rates on
completed refinancings and new debt, less a decrease in the reference rates on
floating rate loans and repayments of higher-cost loans
· Refinanced or extended nine loans totalling £154.5 million in 2024
at an average of 5.13%, including £137.7 million fixed at 4.99%
· Significant progress made with the refinancing activity for 2025
such that of the £373.7 million expiring in 2025 (including £9.6 million of
amortisation), progress has been made with £342.1 million: £42.1 million has
been refinanced; £85.8 million that will be refinanced or repaid alongside
the completion of the Spring Mews Student sale and £189.1 million has been
credit approved or is well progressed
ENVIRONMENTAL, SOCIAL AND Governance
· Our sustainability progress was again recognised by maintaining our
Gold award in the EPRA Sustainability Best Practices Recommendations as well
as maintaining our GRESB award of 4 green stars
· Progress continues with implementing our ambitious, but achievable,
long-term sustainability targets including our 2030 Net Zero Carbon Pathway.
We achieved landlord energy savings of 4.9% for the year on a like-for-like
basis and maintained over 99% Group purchased electricity being carbon-free
· In 2024, we spent a further £0.8 million towards our estimated
total programme cost of £65 million such that we have now invested over £17
million since launching our Net Zero Carbon Pathway
· Over 50% of our UK properties are now rated A or B, and we are
fully compliant with 2024 minimum EPC regulations in the UK
Dividend Timetable
The Board has recommended a final dividend of 2.68 pence per ordinary share
with the following dividend timetable:
Announcement date 1 April 2025
Ex-Dividend date 10 April 2025
Record date 11 April 2025
Payment date 23 May 2025
- ends -
Results presentation
A presentation for analysts and investors will be held in-person at Panmure
Liberum, by webcast on Tuesday 1 April 2025 at 8:30am followed by Q&A.
Questions can be submitted online via the webcast.
· Panmure Liberum: Ropemaker Place, 25 Ropemaker Street, London EC2Y
9LY
· Webcast: The live webcast will be available to access here:
https://sparklive.lseg.com/CLSHoldings/events/5ba5e123-5ed2-42e9-8521-06b1e2f0cb75/cls-holdings-plc-full-year-results-2024
(https://sparklive.lseg.com/CLSHoldings/events/5ba5e123-5ed2-42e9-8521-06b1e2f0cb75/cls-holdings-plc-full-year-results-2024)
For further information, please contact:
CLS Holdings plc
(LEI: 213800A357TKB2TD9U78)
www.clsholdings.com (http://www.clsholdings.com/)
Fredrik Widlund, Chief Executive Officer
Andrew Kirkman, Chief Financial Officer
+44 (0)20 7582 7766
Panmure Liberum
Jamie Richards
David Watkins
+44 (0)20 3100 2000
Berenberg
Carl Gough
Harry Nicholas
+44 (0)20 3207 7800
Edelman Smithfield (Financial PR)
Alex Simmons +44 7970 174 353
Hastings Tarrant +44 7813 407 665
cls@edelmansmithfield.com (mailto:cls@edelmansmithfield.com)
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.
Chairman's review
"2024 was another demanding year for CLS but, with interest rates reducing and
valuations bottoming, we believe that 2025 will see CLS return to growth.
Regardless, we remain focused on operational delivery to reduce vacancy and
increase net asset value by continuing to provide high‑quality office space
for our customers."
Dear Shareholder,
After two years, market fundamentals are again moving in CLS' favour with
reducing interest rates and employers increasingly promoting greater office
time to improve their operations. Operationally, CLS continues to stay close
to our occupiers and respond to their quality requirements. Our delivery of
the best offices in our locations has been particularly demonstrated in 2024
through some notable lettings in Germany and the UK, and we continue to see
strong demand for well-located and efficient properties from government and
mid-sized companies that value high quality and cost-effective offices.
Performance and our property portfolio
CLS again delivered resilient performance with valuations now bottoming. Good
underlying rental growth was achieved through the signing of new leases,
increased other income, record student and hotel results, and indexation,
although this was offset by increased interest expense from higher rates
leading to overall lower earnings.
Our property portfolio fell by 10.3% to £1.85 billion (2023: £2.06 billion)
with the portfolio now split 44% in the UK, 44% in Germany and 12% in France.
The movement in the property portfolio was a result of £116.0 million from a
net valuation decrease of 5.8% in local currencies, £50.5 million from the
strengthening of Sterling by 4.8%, and £67.1 million of disposals partly
offset by £21.1 million of capital expenditure.
The property valuation decreases resulted in EPRA NTA per share declining by
15.0% to 215.0 pence per share (2023: 253.0 pence per share) and the Total
Accounting Return, including the dividends paid in the year, was -11.9% (2023:
-20.8%).
Strategic outlook
Throughout several property cycles, CLS has pursued a long-term, successful
strategy focused on high-quality, well-located offices in Europe's three
largest economies. The Board has considered various possible funding options
and strategies and has concluded that its existing financing methods and
strategy remain appropriate. In the near term, the Board intends to expand its
disposal programme, recycling the net cash proceeds from asset sales into
continuing to develop and refurbish its existing properties and further
reducing leverage across the Group. With the market bottoming, we are finding
increasing opportunities within our portfolio, to reduce vacancy and increase
value by investment.
In order to fund this investment, but also to ensure our leverage is within
our target range of 35% to 45% LTV, we will continue to sell those properties,
at appropriate values, for which we see less growth potential and/or we have
completed the business plan. This investment will support our vision of being
a sustainably focused property investment company. A large part of which will
be achieved through executing our 2030 Net Zero Carbon Pathway and meeting our
other Sustainability Strategy targets although, with the ever-changing
sustainability landscape and being half way to 2030, we will also initiate a
review of the strategy, pathway and key targets.
Dividends
As highlighted throughout this report, there are significant opportunities
within the portfolio to grow net asset value, which is in-line with CLS'
strategy as a total return share focused on growth and income. Consequently,
we are reducing the dividend by 50% to retain funds to capture these
opportunities and we are revising the dividend policy such that the dividend
is covered 1.5x to 3.0x by EPRA earnings (previously 1.2x to 1.6x).
Our staff and our culture
In 2024, CLS celebrated 30 years on the London Stock Exchange. During these
three decades, the Company has enjoyed great success but also weathered
several downturns, particularly over the last four years with Covid-19
followed by a challenging economy. Although this period has been demanding
for CLS, our team has performed very well throughout helped by, but also
reinforcing, CLS' positive culture and, on behalf of the Board, I again extend
our thanks for all their efforts.
CLS cannot control economic market fluctuations but we can, and will, continue
to drive operational improvements to ensure that CLS takes advantage of
opportunities to deliver for shareholders.
Lennart Sten
Non-Executive Chairman
31 March 2025
Chief Executive's review
"Our strong leasing performance and stable rent collection highlight the
quality and resilience of our portfolio, while targeted disposals and
refinancing efforts have strengthened our balance sheet. We successfully
completed property sales and loan refinancings, reducing debt and positioning
the business for future growth."
Creating life stories
2024 was a significant year for CLS in terms of economic and market activity.
For the first time in two years, the central banks in England and Europe cut
interest rates. We did not expect, and have yet to see, a sudden turn-around
in property investment activity but there are certainly green shoots emerging.
Moreover, and more importantly, we have seen property valuations start to
bottom. For while UK property valuations initially fell more quickly than in
Germany and France, our properties in all three markets have seen valuation
falls of more than 20% since 2022. However, in the second half of 2024 the
values of our properties in Germany and France were flat and the reduction in
UK property values also lessened, particularly when property specific factors
are excluded.
2024 also witnessed a further acceleration in the return to the office, and
whilst working patterns continue to evolve, we have seen employees now
returning to offices in force and employers increasingly mandating greater
office attendance. As we have consistently said, we do not expect a complete
return to pre-pandemic working with hybrid patterns here to stay. However,
with occupiers mandating more three, four or five office days, this bodes well
for future office letting demand.
2024 was also a significant year for CLS as we celebrated 30 years as a
publicly listed company on the London Stock Exchange. To reflect this
milestone, we updated our website and links to our digital marketing to
showcase the quality of our properties and that we are "Creating Life
Stories" for our occupiers. As an illustration of how the Company is Creating
Life Stories, in 2024 we signed the highest value of letting contracts in
recent times, either with new or existing long‑term customers.
Delivering on our strategy
As a long-term business, CLS has benefited from, and weathered, many property
cycles and we recognise that it is important for CLS to ensure that its
strategy and business model remains resilient. In these more demanding
conditions, our focus has been on delivering our strategic priorities and
making operational improvements. Our priorities have been, and continue to be,
the letting of recent refurbishments and executing our refinancing and sales
programme.
In 2024, we made good progress in all these areas and have made more advances
in 2025.
Underlying vacancy, excluding completed refurbishments and disposals, dropped
in 2024 from 11.0% to 10.6% with particularly strong letting activity in the
UK and Germany. We have strong relationships with occupiers and expect further
progress in 2025 as we are seeing continued interest from government
departments and mid-sized companies, sectors that fit well with CLS' portfolio
of well-located and efficient office properties.
We sold £66.1 million of properties in-line with book values out of our
targeted £270 million sale programme. Progress was slower than hoped due to a
sluggish investment market and because we remained disciplined on sales
prices. Significant further progress has been made at the start of 2025 as we
have exchanged on Spring Mews Student, for £101.1 million, again in-line with
book value. We have also agreed the disposal of one property in Germany and
one property in the UK for a combined £24.2 million, in-line with the latest
valuation. These disposals are due to be completed in the first half of the
year. Over the rest of the year, CLS intends to complete the remaining c.£70
million of its targeted sales programme. In due course, CLS may also consider
additional sales of assets to help fund the pipeline of refurbishment and
redevelopment opportunities in the portfolio.
Finally, we completed all of the refinancing of debt maturing in 2024.
Furthermore, we have made good progress on £342.1 million of the £373.7
million debt which matures in 2025. As evidence of this, we have refinanced
£42.1 million and £85.8 million will be refinanced or repaid alongside the
completion of the Spring Mews Student sale.
Asset and property management
The significant capital expenditure investment that CLS made in 2022 and 2023
to increase the quality of its portfolio started to pay off in 2024. CLS
enjoyed the best leasing performance in the UK and Germany since 2015. In
total, CLS secured contracted annual rent of £16.6 million which was 7% more
than in 2023 (2023: £15.5 million) as we signed bigger leases across the 112
new lettings and renewals (2023: 130). The leases were 6.8% above 31 December
2023 ERVs.
While underlying vacancy dropped in 2024, total EPRA vacancy increased to
12.7% (31 December 2023: 11.0%) as more high-quality refurbishments were
completed in 2024 in the UK and France, which are now available for
occupation.
The combination of the strong letting performance and the completion of
refurbishments, resulted in the vacancy position again being mixed across the
Group. In the UK, vacancy increased from 15.8% at the end of 2023 to 18.5% at
the end of 2024 from the completion of the remaining floors at Artesian,
Prescot Street in London. Although the vacancy in the UK did reduce from 19.6%
in the first half mainly due to the letting of one floor at Artesian to
Médecins Sans Frontières for over 12,000 sq. ft (1,100 sqm). In Germany, a
strong letting performance offset expiries and vacancy dropped from 6.8% in
2023 to 6.7% at the end of 2024. In France, vacancy increased from 5.6% at
the end of 2023 to 8.3% at the end of 2024 from refurbishments completed in
Lyon. We expect vacancy in Lyon to reduce in 2025 given tight planning
restrictions, market vacancy of 7% and good demand for the smaller units
CLS offers.
2025 has started positively with the 7-month extension of the lease with the
National Crime Agency at Spring Gardens, which fits well with our
redevelopment timeline as commented on below. We have larger lease expiries in
2025 at New Printing House Square in London, where all leases were due to
expire in June 2025, although we expect to renew over half of the existing
leases and have positive discussions for further space. We also have one
larger lease expiry at Inside in Paris for which we expect the occupier to
vacate or downsize.
Overall, our properties are multi-let with over 700 tenants, of which 25.5%
are government agencies, 40.3% are large corporations and 18.3% are
medium-sized companies. Reflecting the strength of our tenant base, CLS' rent
collection has remained consistently in excess of 99% for at least the last
five years.
In 2024, the value of the portfolio was down by 5.8% in local currencies with
the UK down 8.3%, Germany down 3.5% and France down 5.1%.
During the year some properties increased in value with the rate of valuation
reduction down significantly in the second half, with the value of the
properties in Germany and France essentially flat. In the UK, the shortening
lease at Spring Gardens, one of the largest assets in the Group, leased by the
National Crime Agency, contributed to roughly half of the UK reduction as the
site is valued as an office investment with a shortening lease and not yet as
a development site. The ERV of the Group declined 0.8% but excluding the ERV
decline at New Printing House Square for which the major refurbishment (and
thus ERV increase) was delayed, then Group ERV was up 1.8% with increases in
all three countries. However, this ERV increase was not sufficient to offset
the 12-basis point increase in equivalent yields to 5.93% (2023: 5.81%), or a
24 basis point increase on a like‑for‑like basis.
"Looking ahead, we believe the commercial property market is at or near the
bottom of the current cycle across the UK, Germany, and France. Over the past
year, the real estate sector has entered a period of cautious optimism, with
signs of gradual recovery and stabilising investment activity."
Financial results
In 2024, CLS' focus remained on delivery of its strategic objectives as the
economic backdrop continued to be demanding. Property valuations were down,
but outperformed relative to the market and started to bottom in the second
half of the year, and whilst net rental income grew by 3.8%, on a
like-for-like and constant currency basis, finance costs rose more rapidly
such that EPRA earnings were lower.
EPRA earnings per share fell 10.7% from 10.3 pence in 2023 to 9.2 pence
in 2024 (IFRS loss per share 2024: (23.6) pence, 2023: (62.9) pence) as
increased rental income from new leases and renewals, other income including
the forfeited Westminster Tower deposit and another record year for our
student and hotel operations less lease expiries was more than offset by
increased finance costs that increased from 3.61% to 3.77% due to higher rates
on refinanced debt. The operating loss for the year was £52.5 million (2023:
£223.4 million loss).
EPRA NTA decreased by 15.0% (2023: 23.2% decrease) to 215.0 pence per share
(IFRS net assets 2024: £784.2 million, 2023: £929.2 million), reflecting
revaluation reductions of 5.8% in local currency, foreign exchange losses of
£25.8 million from the 4.8% strengthening of Sterling against the Euro (2023:
£26.3 million loss) and dividend payments, which was partly offset by EPRA
earnings.
At the year-end, we had cash and cash equivalents of £60.5 million (2023:
£70.6 million), which was lower than in 2023 due to the repayment of debt and
continued investment in the portfolio, as well as £50.0 million of committed
credit facilities (2023: £50.0 million) and a £10 million overdraft facility
(2023: £nil) and have significantly progressed the 2025 refinancings that are
going to become due.
Sustainability
This year we maintained progress on our Net Zero Carbon Pathway, with
year-on-year reductions of 4.9% in landlord energy consumption and 6.9% in
Scope 1 and 2 greenhouse gas emissions, on a like-for-like basis.
Additionally, our focus was to ensure the complex task of replacing the
remaining gas heating systems with electric heat pumps was derisked and
aligned with our leasing and refurbishment plans over coming years. We
completed the majority of this feasibility work, which has adjusted our
forward works programme resulting in a planned reduction in projects
implemented this year to 27 and a reduced capital investment of £0.8 million.
Alongside maintaining compliance for key energy and sustainability regulations
in all countries, CLS continues to report under many different sustainability
frameworks that go beyond compliance. We maintained our 4 star rating in
GRESB, as well as our EPRA SBPR Gold award for reporting and improved our
BREEAM In-Use ratings at 8 buildings.
Finally, as part of being a responsible company and long-term investor, we
have continued to support local and industry-related charities, with our core
focus being to support the issues of youth homelessness and youth skills.
2025 and beyond
Our long-term strategy remains unchanged, and our focus remains on operational
delivery and securing capital for investment. Operationally the highest
priority for 2025 is to reduce vacancy.
Included again is our rent progression waterfall chart which has been updated
to show the changes and progress made in the year. In summary, it shows the
more than 20% rental upside that exists within the portfolio, with a large
proportion of it able to be captured quickly. We are confident that vacancy
will reduce in 2025 given that two-thirds of our vacancy is EPC A or B
(or equivalent), with almost all the remainder being EPC C. Securing these
rental increases is critical to drive rental growth in excess of higher
financing costs and thus achieve higher profits.
What has been increasingly evident in the last year is that a greater number
of value-creating opportunities to invest and grow the business have emerged
within the portfolio.
These opportunities include: The Brix in Essen and The Yellow in Dortmund,
both related to the new long-term government leases recently signed; Debussy
in Paris, a conversion of an existing office building into serviced
apartments; and a comprehensive upgrade of Bismarckstrasse in Berlin that will
drive significantly higher rents. Each of these projects have the potential to
deliver an estimated profit on cost between 15-25% in the near term.
In the UK, we are also progressing our plans for both Citadel Place (currently
known as Spring Gardens), to secure planning for a residential development of
500 new homes, as well as several UK office properties that are suitable for
residential conversion.
In terms of capital and the balance sheet, the focus is on executing upcoming
refinancings and reducing LTV through selective disposals to give the
firepower to execute these opportunities. For CLS to remain successful we need
to invest in these opportunities, at what appears to be a particularly
favourable point in the cycle, to meet customer needs and deliver asset value
growth.
By delivering on the opportunities within our existing property portfolio,
together with more favourable monetary policies and an improving
macro-economic environment, CLS is well placed to deliver long-term value for
shareholders.
Fredrik Widlund
Chief Executive Officer
31 March 2025
CFO review
Summary
Given valuation declines, EPRA net tangible assets ('NTA') per share fell by
15.0% to 215.0 pence (2023: 253.0 pence) and basic net assets per share by
15.6% to 197.3 pence (2023: 233.8 pence). EPRA earnings per share were 9.2
pence (2023: 10.3 pence) whilst the loss after tax of £93.6 million (2023:
£249.8 million loss) generated basic earnings per share of -23.6 pence (2023:
negative 62.9 pence). EPRA EPS covered the full year dividend of 5.28 pence
per share 1.73 times.
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 5 and our Supplementary disclosures give a full
description and reconciliation of our APMs.
Income statement
Net rental income in 2024 of £114.0 million, was up 0.9% from 2023 (£113.0
million). On a like-for-like and constant currency basis, net rental income
was up 3.8% to £117.3 million. The increase arose from four areas: new leases
and renewals of £5.7 million; other income of £3.8 million including the
forfeited deposit less costs of £2.9 million on the buyer's failed
completion of the Westminster Tower sale; another record year for our student
and hotel operations up £1.2 million; and rental indexation increases of
£0.9 million. This increase was offset by lease expiries and movement of
properties to development stock which reduced rental income by £4.8 million
and £2.5 million respectively. Overlaying the impact of lost rental income
from property disposals of £1.7 million and the impact of foreign exchange
from Sterling strengthening in 2024 of £1.6 million resulted in reported net
rental income of £114.0 million.
CLS' tenant relationships remain strong and the quality and diversity of our
tenant base has continued to be reflected in our rent collection, and, as in
previous years, we collected over 99% of rent. Rent collection for the first
quarter of 2025 is 99% as is customary at this point in time.
Overall administration and property expenses increased by £2.0 million to
£35.8 million (2023: £33.8 million). Administration costs were lower by
£0.5 million compared with 2023 due to tight control over personnel costs.
Property expenses were £2.5 million higher as a result of one-off savings in
2023 such as recovery of long outstanding bad debt, increased costs associated
with higher vacancy and the variable costs from hotel and student operations
were higher as a result of higher occupancy. The proportion of index-linked
rent was 54.4% (2023: 55.2%) of the total contracted rent of the portfolio.
This high level of indexation continues to be a benefit in a time of higher
inflation and interest rates.
Due to lower personnel costs, CLS' administration cost ratio decreased to
15.4% (2023: 16.0%) whereas our EPRA cost ratio increased to 25.4% (2023:
25.1%) as a result of higher property expenses.
Given market weakness from higher interest rates and economic uncertainty, the
valuation of CLS' properties fell, although the reduction was lower than wider
market movements and reduced significantly in the second half as values began
to bottom. The reduction in the value of investment properties, excluding
lease incentive movements, was £127.7 million (2023: £302.7 million fall)
with falls in the UK of 8.3%, Germany 3.5% and France 5.1% in local
currencies.
Five properties were sold in 2024 for an aggregate consideration of £66.1
million. This consideration was in-line with the pre-sale book values but,
after costs, resulted in a loss on sale of investment properties before tax of
£2.3 million (2023: £1.4 million profit). Since the year-end, we have
exchanged on or agreed the sale of three properties for £125.3 million,
in-line with book value, which are due to complete in the first half of 2025.
Operating loss for the year was £52.5 million (2023: loss £223.4 million).
Finance income of £1.4 million (2023: £1.6 million) reduced given lower cash
deposit balances and lower interest rates on cash deposits. Derivative
financial instruments fell in value by £3.4 million (2023: £4.2 million
reduction) as they are now close to maturity. Finance costs, excluding the
movement on derivative financial instruments, increased to £42.3 million
(2023: £37.1 million) as a result of higher interest costs on floating rate,
and recently refinanced, loans given wider market interest rate increases
particularly since these loans were last financed.
Approximately 54% of the Group's sales are conducted in the reporting currency
of Sterling and 46% in Euros. The year-end Sterling rate against the Euro
strengthened by 4.8% and the average Sterling rate strengthened by 2.7%, both
more than in 2023, resulting in a higher level of foreign exchange losses of
£0.6 million in the income statement compared to last year (2023: £0.3
million).
Exchange rates to the £ EUR
At 31 December 2022 1.1295
2023 average rate 1.1500
At 31 December 2023 1.1535
2024 average rate 1.1814
At 31 December 2024 1.2085
The effective tax rate of 3.9% (2023: 5.2%) was below the weighted average
rate of the countries in which we operate principally as a result of the
conversion of CLS' UK operations to a REIT at the start of 2022 and the
consequent lower UK effective tax rate.
Overall, EPRA earnings were lower than last year at £36.4 million (2023:
£40.9 million) and generated EPRA earnings per share of 9.2 pence (2023: 10.3
pence). The decrease of 1.1 pence in EPRA EPS was primarily due to: the
increase in finance expenses of 1.3 pence; and a decrease in rental income and
net service charge of 0.7 pence, which were only partly offset by: increases
in other income of 0.7 pence which mostly consisted of the Westminster Tower
deposit; and a net increase of 0.2 pence from the increase in Other of 0.4
pence due to lower tax, less higher property (0.1 pence) and hotel and student
operating costs (0.1 pence).
EPRA net tangible assets and gearing
At 31 December 2024, EPRA net tangible assets per share were 215.0 pence
(2023: 253.0 pence), a fall of 15.0%, or 38.0 pence per share. The main
reasons for the decrease were: property valuation decreases of 5.8% in local
currency or 31.8 pence per share; dividends of 7.95 pence per share paid in
the year; foreign exchange declines on our European business of 6.5 pence per
share; and other movements of 0.9 pence per share, partly offset by EPRA
earnings per share of 9.2 pence per share.
Balance sheet loan-to-value (net debt to property assets) at 31 December 2024
increased to 50.7% (2023: 48.5%) which was as a result of property valuation
reductions as net debt fell by over £60 million. The value of properties not
secured against debt decreased to £41.3 million (2023: £74.1 million). In
2025, CLS is intending to remain a net disposer of property to reduce LTV
below 45% in the short-term and 40% in the medium-term.
Cash flow and net debt
As at 31 December 2024, the Group's cash and cash equivalents balance was
£60.5 million (2023: £70.6 million). Net cash flow from operating
activities, after payment of £41.7 million for financing costs and tax,
generated £29.5 million, a decrease of £16.4 million from 2023 reflecting
higher debt and tenant fit-out costs. Dividends of £31.6 million were paid.
Capital expenditure of £22.5 million was funded by proceeds after tax from
property disposals of £63.8 million. In addition, there was a net repayment
of loans of £47.7 million and foreign exchange reductions and other of £1.6
million. The net result of property and financing transactions, being the
investment of £10.1 million in the business to reduce net debt and grow net
tangible assets.
Gross debt decreased by £71.4 million to £999.2 million (2023: £1,070.6
million) due to: the net repayment of loans of £47.7 million; and the
decrease of £25.3 million due to the strengthening of Sterling against the
Euro, less the amortisation of loan issue costs of £1.5 million. In the year,
£74.4 million (£73.4 million net of capitalised fees) of new or replacement
loans were taken out, loans of £102.4 million were repaid and £18.7 million
of contractual periodic or partial repayments were made. Year-end net debt
fell to £938.7 million (2023: £1,000.0 million). At the year-end, CLS'
additional facilities remained unchanged comprising two undrawn revolving
credit facilities totalling £50.0 million, both of which are committed, and a
£10 million overdraft.
Secured rent above ERV for new leases
+6.8%
The weighted average cost of debt at 31 December 2024 was 3.77%, 16 basis
points ('bps') higher than 12 months earlier but 4 bps lower than at the
half-year. The full-year movement was as a result of: new higher cost debt
drawn for completed refinancings and new debt (28 bps increase); and the
strengthening of Sterling against the Euro (1 bps increase), less a decrease
in the reference rates on floating rate loans (8 bps decrease); and
repayments of higher cost loans (5 bps decrease). In 2024, interest cover at
1.9 times (2023: 2.2 times) gave comfortable covenant headroom although it has
limited relevance as there are no Group interest cover or LTV covenants.
"We have made significant headway with the refinancing activity for 2025 such
that of the £373.7 million expiring in 2025, progress has been made with
£342.1 million of debt."
Financing strategy and covenants
In 2024, we refinanced the remaining expiring loans for 2024 which had not
already been refinanced in 2023. We have made significant headway with the
refinancing activity for 2025 such that of the £373.7 million of debt
(including £9.6 million of amortisation) across 11 loan facilities expiring
in 2025 (£377.7 million at the start of 2024), progress has been made with
£342.1 million. This progress comprises the following: £42.1 million has
been refinanced; £85.8 million will be refinanced or repaid alongside the
completion of the Spring Mews Student sale; and £189.1 million has been
credit approved or we have received heads of terms. The remaining £47.1
million of debt maturing in 2025 comprises four loans, one in Germany for
£12.7 million and three in France for £34.4 million. We have made good
progress with £25.1 million of this amount and expect to refinance these two
loans in the second quarter of 2025. The remaining two loans for £22.0
million do not mature until the fourth quarter of 2025.
The Group's strategic financing priorities remain to keep the cost of debt low
whilst: keeping an appropriate LTV; maintaining a high proportion of fixed
debt; increasing the amount of green loans; and seeking to match the Group's
weighted average debt maturity against the Group's WAULT. At a tactical
level, the priorities for this year are to complete the remaining
refinancings for 2025 and progress refinancings due in 2026, albeit there is a
much lower amount maturing in 2026 than 2025. We are also investigating
financing properties in the UK using Euro-denominated loans given the
significant swap rate differential between Sterling- and Euro-denominated
loans and CLS' existing unhedged Euro exposure on the equity invested in our
properties in Germany and France.
As noted, CLS' objective remains to keep a high proportion of fixed rate debt.
However, in 2024 just as in 2022 and 2023 more floating rate loans and
extensions than usual were executed given that: some properties are to be sold
and thus CLS wants to avoid break costs; the letting profile for some
properties needs to be improved in advance of securing a longer-term fixed
rate loan; and a belief that lower rates could be secured in the future once
the floating rate loan expired. As a good example, CLS secured short-term
intra-year extensions for three loans for £39.9 million. Two of these loans
were subsequently financed for five years and one was repaid after the
property was sold.
In 2024, the Group refinanced, financed or extended, by more than one year, 9
loans to a value of £154.5 million for a weighted average duration of 3.7
years and at a weighted average all-in rate of 5.13%. Of these £137.7 million
were fixed at a weighted average all-in rate of 4.99%. Consequently, at 31
December 2024, 79.7% of the Group's borrowings were at fixed rates or subject
to interest rate swaps, 3.8% were subject to caps which had been hit and 16.6%
of loans were unhedged. The fixed rate debt had a weighted average maturity
of 3.4 years and the floating rate 2.3 years. The overall weighted average
unexpired term of the Group's debt was 3.2 years (2023: 3.5 years).
Rent collection
99%
The Group's financial derivatives, predominantly interest rate swaps, are
marked to market at each balance sheet date. At 31 December 2024 they
represented a net asset of £1.4 million (2023: £4.3 million asset), with the
asset declining in value as the swaps reach maturity.
At 31 December 2024, the Group had 44 loans (33 through SPVs, eight portfolios
and three facilities) from 25 different lenders. The loans vary in terms of
the number of covenants with the three main financial 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 44 loans, CLS has between 14% and 32% 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, substitute property or
deposit cash, for the period the loan is in breach after which the cash can be
released.
Distributions to shareholders and Total Accounting Return
The final dividend for 2023 of 5.35 pence per share (£21.3 million) was paid
in May 2024 and in October 2024, CLS paid an interim dividend for 2024 of
2.60 pence per share (£10.3 million).
Given the significant opportunities within the portfolio to grow net asset
value and thus the desire to retain funds to capture these opportunities, we
are reducing the proposed final dividend for 2024 by 50% to 2.68 pence per
share equating to £10.7 million (2023: 5.35 pence per share equating to
£21.3 million). This would result in a full year distribution of 5.28 pence
per share (£21.0 million), covered 1.73 times by EPRA earnings per share. The
revised dividend policy going forward is for the dividend to be covered 1.5
to 3.0 times by EPRA earnings. This investment focus and dividend policy
is consistent with CLS' strategy as a total return share concentrated on
growth and income. The Total Accounting Return, being the reduction in EPRA
NTA plus the dividends paid in the year, was -11.9% (2023: -20.8%).
As a result of the conversion of our UK operations to a REIT in 2022,
shareholders receive dividends comprising two elements. The dividends comprise
a Property Income Distribution ('PID') from the UK REIT operations and a
second element from CLS' remaining operations. For the 2024 interim dividend
of 2.60 pence per share, the PID was 1.75 pence per share and for the proposed
final dividend of 2.68 pence per share, the PID will be 1.50 pence per share
giving a full year dividend of 5.28 pence per share of which 3.25 pence per
share is the PID. The split between the PID and the dividend from our
remaining operations is likely to fluctuate over time and will depend on the
level of capital allowances and inter-company interest, amongst other things.
Andrew Kirkman
Chief Financial Officer
31 March 2025
United Kingdom
Value of property portfolio
£807.0m
Number of tenants
210
Government and large companies
75.2%
Percentage of Group's property interests
44%
EPRA vacancy rate
18.5%
Years weighted average lease length to end
3.5
Number of properties
34
Lettable space (sq. ft)
1.8m
Leases subject to indexation
34.7%
Market overview
The UK economy experienced a mixed year with stronger GDP growth in the first
half of 2024 offset by stagnation in the second half, leading to overall GDP
growth of 0.8%. Business uncertainty grew following tax increases announced in
the Autumn budget, but inflation fell to 2.5% in 2024 from over 7% in 2023.
The commercial property investment market achieved a volume of c.£43 billion,
up 21% compared to 2023, with the strongest improvement in the fourth quarter
of 2024. Leasing take-up in London for the year was just below the 10-year
average at c.11 million sq. ft and in line with the previous year. The wider
South East/M25 office market was up close to 5% with c.3.6 million sq. ft of
take-up.
Year-end vacancy in London was up marginally to 9.2% from 9.1% at the end of
2023 while the South East/M25 market was up to 12.3% from 11.8% in 2023.
Portfolio movement and valuation summary
In 2024, the value of the UK portfolio decreased by £112.9 million as a
result of a revaluation decline of £73.3 million or 8.3%, and disposals of
£49.0 million, partly offset by capital expenditure of £9.4 million. The
8.3% valuation decline was a result of equivalent yields expanding by 41 basis
points on a like-for-like basis and increased vacancy from refurbishments
completed in the year, and ERVs decreasing by 2.4% on a like-for-like basis.
The decline in like-for-like ERVs is due to a change in valuation assumption
for New Printing House Square, following our decision to delay redevelopment
to the end of the decade. Excluding this results in like-for-like ERV growth
of 3.0% for the portfolio.
CLS' valuation decline was in line with the UK office market. However,
excluding the valuation of Spring Gardens, which was significantly impacted by
the shortening office lease and the development potential not considered, CLS'
valuation decline was better than the market at 5.1% for the other 33
properties.
Asset management
Underlying vacancy, excluding completed refurbishments and disposals, fell
from 15.8% to 15.0% as a result of improved leasing activity during the year
across both new lettings and renewals.
The EPRA vacancy rate increased to 18.5% as of 31 December 2024 (2023: 15.8%)
due to the completion of the refurbishment of the remaining three floors at
Artesian at the start of 2024.
In 2024, we let or renewed leases for 205,503 sq. ft and lost 226,145 sq. ft
of space from expiries, showing minimal movement in underlying vacancy. Newly
refurbished space of 65,232 sq. ft became lettable during 2024, mainly
at Artesian, The Portland Building and Kings Court, increasing our vacancy
rate. Excluding rent reviews, 55 lease extensions and new leases secured
£7.6 million of rent at an average of 3.0% above 31 December 2023 ERVs.
The most significant new leasing transaction in 2024 was the letting of
the 5th floor (12,052 sq. ft) at Artesian to Médecins Sans Frontières
(UK). In terms of existing tenants, we completed a new lease with Signature
Litigation for a total of 29,816 sq. ft of office space over four floors at
138 Fetter Lane in central London.
Once again, our student and hotel operations achieved a record breaking year.
The student accommodation is fully let for the 2024/25 academic year, with
sales for 2025/26 in line with expectations. The hotel occupancy averaged 93%
for 2024 (2023: 87%) and average daily room rates also grew by 2% which led
to a further increase in profitability.
Developments and refurbishments
Total capital expenditure in 2024 was £9.4 million, which was reduced from
the £37.7 million spent in 2023 due to the completion of major projects at
The Coade and Artesian. In-line with current market trends the focus in 2024
was to undertake a select number of CAT A plus refurbishments to capitalise on
tenant demand for high quality fitted spaces.
At Spring Gardens, let to the National Crime Agency, we plan to submit a
planning application in Q2 this year for Citadel Place, a major residential
scheme. We have also agreed, subject to contract, to extend the leases with
the National Crime Agency to September 2026, aligning with our proposed
development programme.
Disposals
During 2024 we continued with our strategy of disposing of some of our smaller
assets and assets which have a higher value for an alternative use.
We completed the sale of Aqueous II which is a 35,922 sq. ft office building
in Birmingham and the sale of Cassini Court and Pascal Place which are two
buildings totalling 26,739 sq. ft located in Leatherhead.
As for buildings with higher value alternative uses, following the failure of
the original buyer to complete the sale of Westminster Tower by the
prescribed date in Q4 2023, the sale contract was rescinded and the deposit
retained. The building was subsequently sold to an alternative buyer in June
2024 at the same price of £40.8 million.
Overall, these sales realised a total of £48.9m which were in line with
book value.
Outlook
The consensus forecast for the UK economy indicates a rebound, with GDP growth
projected at 1.1% for 2025.
Whilst uncertainty persists regarding the trajectory of UK interest rates,
the outlook for UK real estate investment has become more positive compared
to twelve months ago, with increasingly larger transactions in the office
sector.
With a concentrated development pipeline and limited speculative activity,
best-in-class office space remains highly sought after, as supply is not
currently keeping pace with lease events. Office-first work policies are
gaining momentum among businesses of all sizes, leading to companies upgrading
their corporate accommodations. Our flexible and customer-centric approach
will enable us to capitalise on this positive structural shift.
Germany
Value of property portfolio
£815.7m
Number of tenants
360
Government and large companies
56.1%
Percentage of Group's property interests
44%
EPRA vacancy rate
6.7%
Years weighted average lease length to end
5.6
Number of properties
31
Lettable space (sq. ft)
3.6m
Leases subject to indexation
62.3%
Market review
The German economy had a challenging year due to lower business confidence and
political uncertainty, and GDP contracted by 0.2% as global demand for
industrial goods weakened. The annual inflation rate fell to 2.5% from 6.1%
in 2023.
The commercial property investment market achieved a volume of c.€25
billion, up 10% compared to 2023. Investment markets are likely to have
bottomed out and should benefit from improved investor sentiment due to
attractive yields compared to long-term swap rates. Leasing take-up in the
larger cities in Germany was still below the 10-year average but at c.2.7
million sqm take-up, showed a small increase to the previous year.
Year-end vacancy for the seven largest cities increased to 6.8% from 5.7% at
the end of 2023 with significant differences between Cologne and Hamburg at
4.3% and 5.3% respectively to over 10% in Dusseldorf.
Portfolio movement and valuation summary
In 2024, the value of the German portfolio decreased by £69.8 million
as a result of a revaluation decline of £30.3 million or 3.5% in local
currency, a foreign exchange decrease of £39.4 million, disposals of £8.3
million, and depreciation of £0.1 million partly offset by capital
expenditure of £8.3 million. The 3.5% valuation decline resulted from
equivalent yields expanding by 12 basis points on a like-for-like basis with
some offset from ERVs increasing by 0.9% on a like-for-like basis, the
majority of leases being indexed and improvement in vacancy.
According to the Association of German Pfandbrief Banks, office property
values in Germany fell by 5.6% in 2024 which compares to the fall in CLS'
property values of 3.5%. This outperformance of CLS' German properties was a
result of valuation uplifts for those properties where we have secured
long-term leases with public bodies or institutions.
Asset management
Underlying vacancy, excluding completed refurbishments and disposals, fell
from 6.8% to 6.0% as a result of improved leasing activity with several
government and mid-sized companies secured during the year.
The EPRA vacancy rate decreased to 6.7% as of 31 December 2024 (2023: 6.8%) as
a result of strong leasing activity during the year across new leases and
renewals, offset by the expected departure of some large tenants.
In 2024, we let or renewed leases for 50,551 sqm and lost 41,669 sqm of space
from expiries. Excluding those arising from contractual indexation uplifts, 36
lease extensions and new leases secured £7.1 million of rent at an average of
12.2% above ERV. The rent secured surpassed 2023 levels by nearly 40%. Leases
subject to indexation increased by an average of 3.7%.
The largest transaction in 2024 was a 20-year lease signed with the City of
Dortmund for 9,634 sqm at The Yellow in Dortmund. The property, acquired by
CLS in 2021, is now fully let with a WAULT of nine years.
Developments and refurbishments
Several ongoing development projects within our German portfolio will
significantly grow ERVs and are already driving valuation uplifts.
Works associated with our 30-year lease with the City of Essen at The Brix are
progressing well and construction has been under way since the summer of 2024.
The first stage handover is scheduled for April with the second stage later in
2025.
Smaller refurbishments also continued with £8.3 million spent across our
portfolio, enhancing sustainability credentials and meeting the demands
of the occupier market. For example, at Hansaallee, Düsseldorf, we
refurbished the entrance area to include a new co-working space for tenants
and their clients.
We are also commencing work at The Yellow in Dortmund as part of the new
20-year lease with the City of Dortmund, to tailor the space to their needs.
In 2025, we will also be starting works at Gotic Haus, Dortmund, following the
departure of the main tenant. The building will be divided into similarly
sized rental units so it can be gradually let and fully configured to meet
occupiers' needs, including private entrances.
Disposals
In 2024, we disposed of Hansastrasse, Dortmund, a 3,986 sqm office building,
for £7.7 million, which was c.3% discount to book value.
Outlook
The consensus forecast for the German economy indicates a gradual but muted
recovery, with GDP growth projected at 0.3% for the year. The recent result of
the federal election is expected to shift Germany's economic policy towards a
more growth-oriented path, likely resulting in an increase in office take-up
and stronger confidence in Germany as an investment location.
The gap between well-connected, sustainable, quality assets and
non-energy-efficient older assets in out-of-town business park locations will
continue to widen. The latter are at risk of obsolescence thereby reducing
supply in the longer term, which will support CLS' portfolio. With continued
strong demand from government and medium-sized businesses, we expect our
lettings pace to continue and vacancy to reduce in 2025.
France
Value of property portfolio
£227.5m
Number of tenants
149
Government and large companies
62.7%
Percentage of Group's property interests
12%
EPRA vacancy rate
8.3%
Years weighted average lease length to end
5.7
Number of properties
16
Lettable space (sq. ft)
0.8m
Leases subject to indexation
100%
Market review
The French economy experienced a comparably strong year with GDP growth of
1.1% despite a precarious political situation following the snap election in
June 2024. The annual inflation rate fell to 2.3% from 5.7% in 2023.
The commercial property investment market achieved a volume of c.€12.5
billion, up 2% compared to the previous year, also with the strongest
performance in the fourth quarter of 2024. Leasing take-up in Paris for the
year was 1.75 million sqm, 11% below 2023 and close to 20% below the 10-year
average. Take-up in Lyon reached 249,000 sqm, which was stable to last year.
Year-end vacancy in Paris increased to 10.2% from 8.5% at the end of 2023
while the Lyon market was up to 7.0% from 4.9% in 2023.
Portfolio movement and valuation summary
In 2024, the value of the French portfolio decreased by £30.0 million as a
result of a revaluation decline of £12.5 million or 5.1% in local currency, a
foreign exchange decrease of £11.1 million, and disposals of £9.8 million,
partly offset by capital expenditure of £3.4 million. The 5.1% valuation
decline was a result of equivalent yields expanding by 16 basis points on a
like-for-like basis and increased vacancy, with some offset from ERVs
increasing by 0.6% on a like-for-like basis and all leases being indexed.
According to market data, office property values in France fell by 3.3% in
2024 which compares to the fall in CLS' property values of 5.1%. This was
driven by higher yield shifts in the Western Crescent of Paris, where the
majority of our Paris properties are located, compared with Paris CBD.
Asset management
Underlying vacancy, excluding completed refurbishments and disposals,
increased from 5.6% to 7.1% primarily as a result of lease expiries at Front
de Parc in Lyon.
The EPRA vacancy rate increased to 8.3% as of 31 December 2024 (2023: 5.6%)
resulting from a marked difference in vacancy in our portfolio with 3.8% in
Paris but 16.3% in Lyon, which we are confident of reducing given the tighter
market conditions in the city.
In 2024, we let or renewed leases for 8,229 sqm and lost 7,545 sqm of space
due to expiries, however, 2,525 sqm of refurbished space came back into the
portfolio, mainly at Park Avenue in Lyon. Excluding contractual indexation
uplifts, 21 lease extensions and new leases secured £1.9 million in rent,
averaging 3.9% above ERV. Leases subject to indexation increased by an average
of 5.2% in 2024.
The most significant transaction in Paris was with the software company Pixid
at Cap G, a modern building located east of La Défense. The lease for 1,022
sqm, which was signed at 9% above ERV, means that Cap G is now fully let. In
Lyon, the largest transaction was a nine-year lease renewal for 1,274 sqm with
a consultancy, Wavestone, at Park Avenue. The newly refurbished building now
boasts an energy-efficient façade, with panoramic views over Parc de la Tête
d'Or, and has received increased levels of interest from occupiers in the
second half of 2024. Post year-end we also completed a further lease for the
5th floor at Park Avenue.
Developments and refurbishments
Following the successful completion of works at Park Avenue last year, we
continued to invest in our properties throughout 2024. This includes the
4,198 sqm office building Debussy in Paris, which is set to be converted into
57 serviced apartments. These apartments are pre-let to Edgar Suites, a
leading national operator, under a 12-year agreement. Nexity will manage the
conversion through a fixed-price redevelopment contract, valued at c.€12
million, with completion targeted for the beginning of 2027.
We have also embarked on a significant project at Petits Hôtels, a 2,079 sqm
office in central Paris. We commenced a €1.7 million, 8-month transformation
to create contemporary workspaces, with a strong focus on sustainability to
meet France's Décret Tertiaire standards. As a result, we secured a pre-let
for the entire renovated building B with the new rent c.70% higher than the
previous rate. The project is scheduled for completion in Spring 2025.
Disposals
In May 2024, we completed the disposal of Quatuor, located in the Montrouge
area in Paris. The 2,500 sqm office building was originally acquired for
€4.6 million in 2002 and is located in front of the future Grand Paris metro
station. The City of Montrouge purchased the property for €11.3 million,
which was in line with the latest valuation.
Outlook
France currently faces political uncertainty due to the lack of a clear
parliamentary majority and the consensus forecast for the French economy
indicates a reduction in GDP growth to 0.7% for 2025.
In 2025, the French real estate market is expected to maintain similar
investment volume levels to 2024, although this remains highly correlated to
the trajectory of interest rate reductions. The supply and demand balance
remains challenging in parts of Paris, while the CBD faces constraints with
low vacancies. Lyon is expected to lease well due to restrictive policies for
new developments that support existing office properties.
Valuation data(1) Market value of property £m Valuation movement in the year EPRA net initial yield EPRA 'topped-up' net initial yield Reversion Over- Equivalent yield
rented
Underlying £m Foreign exchange £m
United Kingdom 668.4 (82.0) - 6.1% 6.6% 4.1% 8.7% 7.4%
Germany 814.1 (30.3) (39.3) 4.5% 4.9% 4.6% 9.9% 5.2%
France 225.9 (12.5) (11.0) 5.2% 5.6% 3.6% 5.0% 6.1%
Total office portfolio 1,708.4 (124.8) (50.3) 5.2% 5.6% 4.2% 8.7% 6.2%
Lease data(1) Average lease length Contracted rent of leases expiring in: ERV of leases expiring in:
To break years To expiry years Year 1 Year 2 3 to 5 years £m After 5 years £m Year 1 Year 2 3 to 5 years £m After 5 years £m
£m
£m
£m
£m
United Kingdom 2.6 3.5 11.1 15.1 13.7 10.2 10.9 13.3 13.4 10.2
Germany 5.6 5.6 7.1 3.8 16.6 17.4 8.6 3.7 15.3 14.9
France 2.7 5.7 0.7 0.5 4.0 8.7 0.6 0.4 3.9 8.7
Total office portfolio 3.9 4.7 18.9 19.4 34.3 36.3 20.1 17.4 32.6 33.8
Rental data(1) Rental income for the year Net rental income for the year Lettable space Contracted rent at year-end ERV of lettable space at year-end Contracted rent subject to indexation EPRA vacancy rate at year-end
£m
£m
sqm
£m
£m
%
United Kingdom 47.1 50.1 169,338 50.1 58.6 34.7 18.5%
Germany 40.3 38.0 331,770 44.9 45.5 62.3 6.7%
France 12.8 12.4 71,812 13.9 14.9 100.0 8.3%
Total office portfolio 100.2 100.5 572,920 108.9 119.0 54.4 12.7%
1 The above tables comprise data for our offices in investment
properties and held for sale (see note 12 and 14). They exclude
owner‑occupied space, student accommodation and hotel.
Strategy and business model and KPIs
Realising value and reinvesting for the future
We acquire the right properties
At CLS, we invest in commercial real estate across the UK, Germany, and
France, with the majority of our properties being offices situated in key
European cities, carefully chosen in central or urban locations, close to
excellent transport networks. Most of our properties are multi-let to a wide
variety of occupiers, giving us the opportunity to add value whilst spreading
our risk.
KPIs/OPIs
· TSR - Relative
· Total Accounting Return
Link to principal risks
· Property risk
· Sustainability risk
We secure the right finance
Most of our properties are held in their own legal entity and are financed
with bank loans borrowed on an asset specific, ring-fenced basis to the rest
of the Group. We also have some portfolio loans. We have the flexibility to
borrow at fixed or floating rates of interest and, by borrowing against each
asset, we are able to use a level of gearing suitable to the specific
property.
KPIs/OPIs
· Cost of debt
· EPRA earnings per share
Link to principal risks
· Financing risk
· Property risk
We deliver value through active management and cost control
The key to active management is to perform it in-house. By using our own
employees, we harness greater motivation, response times and attention to
detail than if tasks were to be outsourced. By performing in-house, not only
do we have a hands-on relationship with our occupiers, but we are able to
control costs.
KPIs/OPIs
· Vacancy rate
· Administration cost ratios
Link to principal risks
· Sustainability risk
· Business interruption risk
We continually assess whether to hold or sell properties
Our active management approach is applied at a portfolio level, continually
assessing whether properties meet return criteria and/or we can continue to
add value. Each property in our portfolio has its own asset management plan,
which we flex depending upon our occupiers' requirements and leasing activity.
KPIs/OPIs
· TSR - Relative
· Total Accounting Return
Link to principal risks
· Property risk
· Financing Risk
We reward shareholders, customers and employees
We pay dividends to our shareholders, with the balance reinvested in the
business. Our occupiers are our customers. We pride ourselves in how we build
relationships and align our strategic vision to their own business ambitions.
We reward employees for their work and their loyalty, through salaries and
bonus schemes which reflect the success of the business.
KPIs/OPIs
· Dividend cover
· Staff turnover
Link to principal risks
· People risk
· Business interruption risk
Total Accounting Return (%)
Why this is important to CLS
This KPI measures the change in EPRA NTA per share of the Company before the
payment of dividends and so represents the value added to the Company in the
year.
Our target
Our target Total Accounting Return is over 8%.
Progress
In 2024 the Total Accounting Return was -11.9%.
Net initial yield vs cost of debt (%)
Why this is important to CLS
This KPI compares the return from our properties with reference to the cost of
debt financing them.
Our target
We seek to maintain a cost of debt at least 200 bps below the Group's net
initial yield.
Progress
At 31 December 2024 the cost of debt of 3.77% was 187 bps below the net
initial yield of 5.64%.
EPRA vacancy rate (%)
Why this is important to CLS
This KPI measures the potential rental income of unlet space and, therefore,
the cash flow which the Company would seek to capture.
Our target
We target a vacancy rate of between 3% and 5%; if the rate exceeds 5%, other
than through recent acquisitions or refurbishments, we may be setting our
rental aspirations too high in the current market; if it is below 3% we may be
letting space too cheaply.
Progress
At 31 December 2024 the EPRA vacancy rate was 12.7%
EPRA earnings per share (p)
Why this is important to CLS
This KPI gives relevant information to investors on the income generation of
the Group's underlying property investment business and an indication of the
extent to which current dividend payments are supported by earnings.
Our target
We will seek to grow the earnings of the business alongside net asset value.
Progress
EPRA earnings per share for 2024 were 9.2 pence.
Total Shareholder Return - relative (%)
Why this is important to CLS
This KPI measures the change in the wealth of a CLS shareholder over the year,
against the change in the wealth of the shareholders of a peer group of
20 companies in the FTSE 350.
Our target
Our target Total Shareholder Return (relative) is between the median and upper
quartile.
Progress
CLS ranked 15th within its peer group of 20 companies.
GRESB (ESG) score/100
Why this is important to CLS
This KPI is our main sustainability indicator which is an industry standard
measure which helps gauge the sustainability credentials of our portfolio.
Our target
We aim to maintain or exceed our previous year's GRESB Score.
Progress
In 2024 CLS increased its GRESB score by 1 point to 85.
Our investment case
A clear strategy
Key investment tenets
Diversified approach
This approach is across countries (we invest in major cities in Europe's
three largest economies), customers (over 700 customers spread across most
sectors), and financing (loans with 25 different lenders).
Focus on multi-let offices
Long-term investment in high yielding, multi-let offices in London and the
South East of the UK, and the larger cities in Germany and France.
Selected development schemes
Opportunities arise in the portfolio to carry out development projects to
capture rental and capital growth; the amount of development is kept below 10%
of the portfolio value at any one time. Opportunities to secure alternative
uses are pursued usually until planning permission is secured and then the
property is sold to a developer.
Active management
Key investment tenets
Experienced in-house capabilities
In-house asset, property and facilities management teams result in better cost
control, closer asset knowledge and synergies across the property portfolio.
Secure rents and high occupancy
Targeted occupancy levels above 95% with affordable rents and flexible lease
terms to meet customer demand and so create opportunities to capture above
market rental growth. On average over 125 lettings executed each year over the
past six years.
Interest rate management
Financing facilities, which are arranged in-house, seek to balance
flexibility, diversity and maturity of funding whilst ensuring a low cost of
debt which is targeted to be at least 200 basis points below the Group's net
initial yield.
Strong 30 year track record
Key investment tenets
Disciplined approach to investment
Acquisitions are assessed against strict return and strategic fit criteria but
are pursued on an opportunistic and property by property basis with no set
capital allocation across countries. Low yielding assets with limited
potential are sold. Our TSR has outperformed the FTSE 350 Index over a 30 year
period.
Cash-backed progressive dividend
CLS is a total return business using cash flow generated to pay a progressive
dividend and also to reinvest in the business to generate further net asset
growth. We aim to grow the dividend in line with the growth of the business,
targeting the dividend to be covered 1.5 to 3.0 times by EPRA earnings.
Financing headroom
Our aim is to keep at least £100 million of cash and cash equivalents and
undrawn facilities. This approach gives the ability to move quickly to
complete acquisition opportunities as well as the flexibility to secure the
optimal financing solution.
A focus on sustainability
Key investment tenets
Responsible profit
Across our business model, in everything we do, we seek to generate
responsible profit through employing sustainable long-term decisions with the
environment in mind.
Strong ESG performance
We believe in full transparency and therefore continually measure our progress
against global ESG benchmark schemes in our industry, such as GRESB. This also
allows us to monitor our progress and gives our stakeholders confidence in our
delivery against commitments.
Climate risk mitigation
Our in-house sustainability programme is focused on mitigating our impact on
environmental climate risks and energy security whilst maximising the benefits
we deliver to the communities in which we are involved.
Strategy in action
Maximising value, reinvesting for growth
We acquire the right properties
Strategy
We invest in high-yielding properties, predominantly offices, with a focus on
cash returns. We diversify market risk by investing in geographical areas with
differing characteristics and also seek to diversify the tenant base.
Strategy implementation
We target modern, high quality properties with good asset management
opportunities in larger cities in the UK, Germany and France. In addition to
geographic diversity, we have a wide variety of tenants in many different
sectors and we invest in Sterling and Euros.
Our performance in 2024
· Since mid-2022 whilst property values have been falling, CLS has not made
any acquisitions. Instead, our focus has been on reducing LTV through
disposals
· We did, and do, continue to invest in our portfolio to improve its
quality and meet tenant needs. This has allowed us to attract tenants at
higher rents and reduce vacancy
· In 2024, we spent £21.1 million of capital expenditure which included
£7.1 million on our most significant repositionings at Artesian, The Brix,
Bismarckstrasse and the advancement of planning permission for Citadel Place
Priorities for 2025
· Our focus will be on the many opportunities within the portfolio
to upgrade or reposition existing properties to capture higher rents and
values. We will reduce our LTV to within our target range of 35% to 45% before
considering acquisitions
· We will continue to improve the quality of our property portfolio
including sustainability enhancements as per our Net Zero Carbon Pathway.
Capital expenditure is expected to be higher in 2025, utilising around £30
million of internal funding
Case study
Latest acquisition to be 100% full
The Yellow, Dortmund, Germany
In July 2022, CLS completed our latest acquisition which was The Yellow, a
23,982 sqm (258,140 sq. ft) office in the CBD of Dortmund for €66.25 million
with significant repositioning opportunities and 12% vacancy.
In December 2024, we announced a 20-year lease with the City of Dortmund for
9,634 sqm (103,700 sq. ft). Occupancy is scheduled in two phases, with space
handed over in Summer 2025 and early 2026.
The lease will increase the Weighted Unexpired Average Lease Term (WAULT) from
2.5 years to 9 years and the property will become fully let.
By filling existing and upcoming vacancy, total rental income will increase
from €3.9 million to €4.8 million in 2026 as well as driving an increase
in valuation.
"This significant lease agreement with the City of Dortmund reflects our
commitment to providing high-quality, sustainable office space, especially to
government tenants."
We secure the right finance
Strategy
Whilst CLS has several financing strategic objectives, the key ones are to:
target a low cost of debt whilst maintaining an appropriate LTV; maintain a
high proportion of fixed rate debt; utilise diversified sources of finance to
reduce risk; and maintain a high level of liquid resources.
Strategy implementation
To meet CLS' strategic objectives, we: aim to keep cost of debt at least 200
basis points below net initial yield albeit this depends on market conditions;
execute fixed rate debt loans or use interest rate caps and hedges; have
strong relationships with over 25 lending institutions which each have less
than 20% of our total loan exposure; own properties in special purpose
vehicles financed individually or in small portfolios by ring-fenced debt in
the currency used to purchase the asset; and keep at least £100 million in
cash and cash equivalents and undrawn facilities. As noted in the Going
concern assessment on page 63, CLS' business model relies upon the refinancing
of loans annually, as well as disposals, for which we have a successful track
record.
Our performance in 2024
Financed, refinanced or extended by more than one year, nine loans to a value
of £154.5 million.
These loans were at a weighted average duration of 3.7 years and at a weighted
all‑in rate of 5.13%.
These loans encompassed all of the financings expiring in 2024 and one
new loan.
Priorities for 2025
We have made significant headway with the refinancing activity for 2025 such
that of the £373.7 million of debt (including £9.6 million of amortisation)
across 11 loan facilities expiring in 2025 (£377.7 million at the start of
2024), progress has been made with £342.1 million. This progress comprises
the following: £42.1 million has been refinanced; £85.8 million will be
refinanced or repaid alongside the completion of the Spring Mews Student sale;
and £189.1 million has been credit approved or we have received heads of
terms. The remaining £47.1 million of debt maturing in 2025 comprises four
loans, one in Germany for £12.7 million and three in France for £34.4
million. We have made good progress with £25.1 million of this amount and
expect to refinance these two loans in the second quarter of 2025. The
remaining two loans for £22.0 million do not mature until the fourth quarter
of 2025.
Four capex facilities for significant property refurbishments or
repositionings for a total of c.£40 million to be completed.
Case study
Successful linked refinancings
FleXion and Gotic Haus, Germany
The two German properties, FleXion and Gotic Haus had loans with Berlin Hyp
expiring in 2024, being 30 March 2024 and 31 October 2024 respectively, for a
total of €38.37 million.
The loan for FleXion had been agreed when the property had vacancy of 72% but
on the basis of a business plan to reduce this. The loan was initially
extended until the end of September 2024, by when the vacancy had reduced to
23%, so both loans could be considered together.
The largest tenant at Gotic Haus vacated the property in July 2024 resulting
in vacant space of c.70% in the building. The same financing strategy for
Gotic Haus, alongside executing its business plan to reduce vacancy, was
agreed with the bank as had been executed for FleXion.
Ultimately, both loans were refinanced on a cross secured basis for a period
of 5 years at the same amount of €38.37 million and at a blended rate of
4.81%.
"2024 was another busy and successful year in terms of financing activity.
2025 is expected to be no different and we have already made great progress
with the refinancing of loans expiring this year as well as new capex
facilities."
We deliver value through active management and cost control
Strategy
Our overall objective is to maintain a high occupancy for our properties
alongside a diversified customer base which is underpinned by a strong core
income stream. In conjunction with driving letting performance, we maintain
strict cost control.
Strategy implementation
In order to deliver on high occupancy and cost control, we use in-house staff
wherever appropriate. Consequently, we use in-house local asset and property
managers who maintain close links with occupiers to understand their needs.
Our focus is on the quality of service and accommodation for our customers.
On the cost side, we perform as many back-office functions as possible
in-house and monitor our performance against our peer group.
Our performance in 2024
· Completed 112 lease events securing £16.6 million of annual rent at 6.8%
above ERV with like-for-like contracted rent increasing by 3.7%
· Underlying vacancy was down at 10.6% but the overall vacancy rate
increased to 12.7%. The increase was due to completion of redevelopments
currently being marketed to prospective tenants
· The bad debt provision remained low at £1.7 million and rent collection
remained at the same, consistently high level of 99%
Priorities for 2025
· Our priorities remain unchanged from last year with the focus on
increasing letting activity, particularly in the UK
· Reduce vacancy levels below 11.0% and over time bring down to our
historic target level of 5.0%
· Maintain rent collection levels and actively manage bad debts as well
as continue cost control measures
Case study
Pre-let proves value of refurbishment
Petits Hôtels, Paris, France
Petits Hôtels is a 2,079 sqm (22,378 sq. ft) office in central Paris. In
February 2024, following lease expiry, the smaller of the two buildings at
465 sqm (5,005 sq. ft) became vacant.
After securing planning permission, CLS embarked on a €1.7 million 8-month
transformation of this 4-floor courtyard building. Whilst retaining the
exterior of a typical Parisian building, the interior is being completely
redesigned to provide contemporary workspaces suited to the current occupiers'
needs.
The project has a strong sustainability focus to meet energy efficiency
objectives under France's Décret Tertiaire by installing exterior insulation
and the latest HVAC and BMS system, amongst other things. The project
is scheduled to complete in spring 2025.
In December 2024, CLS secured a pre-let for the whole of the renovated
building to a travel company under a 4/6/9-year lease starting in April 2025.
The new rent is 56% above the previous rent and the uplift in the value of
the property is estimated at €2.5 million. The whole office is now fully
let.
"This complete refurbishment has resulted in CLS offering premium office
spaces whilst retaining the character of a very sought-after Parisian
building. This sustainably-focused upgrade has attracted a great occupier and
delivered long-term value for Petits Hôtels."
We continually assess whether to hold or sell properties
Strategy
Our focus is to hold those properties with the potential to add value through
active asset management. We dispose of those properties; which are too small
or too low yielding; for which the risk/reward balance is unfavourable; or
for which the acquisition business plan has been executed and there is
limited active asset management potential.
Strategy implementation
We have an asset management plan for every property which we flex to capture
rental and capital growth via leasing and refurbishment activity. We will also
assess whether greater value can be captured through a change of use. If a
decision to dispose of a property is made, we will seek to optimise the timing
of sales depending on market conditions, the characteristics of the property
and the overall portfolio composition.
Our performance in 2024
· Disposed of five properties across all of our geographies for £66.1
million, in-line with the pre-sale valuations
· After the original buyer failed to complete, the sale of Westminster
Tower was completed in September 2024 at the same consideration of £40.8
million, its book value. We recognised £2.9 million, net of costs,
in respect of the retained deposit as the original buyer failed to complete
Priorities for 2025
· Since the start of 2025, we have exchanged on or agreed the sale
of three properties in the UK and Germany for £125.3 million, in-line with
book values, to reduce LTV. These sales leave £78.6 million of disposals left
to be executed in 2025 of the originally targeted 2024 disposal amount of
c.£270 million
· In addition, we are exploring the disposal of a further c.£130 million
to reduce LTV to be comfortably within our targeted range of 35% to 45% and
help fund opportunities within our property portfolio
Case study
Successful sale of CLS' Student Accommodation
Spring Mews Student, Vauxhall, UK
In 2014, CLS constructed its student accommodation as part of the mixed-use
Spring Mews development, comprising student, hotel and offices. Since the
early years, it has always been fully occupied (apart from the Covid pandemic)
and in 2024, following a minor upgrade, it achieved record results with
little further upside potential remaining.
The decision to sell the property was taken in the first half of 2024 and
marketing commenced shortly thereafter. Unfortunately, enactment of the
Building Safety Act, with regulations relating to residential buildings over
18 metres, added complexity to the sale and delayed the process.
In March 2025, the sale of Spring Mews Student was unconditionally exchanged
with Rosethorn and Barings for £101.1 million, in-line with the 2024 year-end
valuation and 8.1% ahead of the 2023 year-end valuation.
The sale will complete in May 2025 when the remaining 90% consideration will
be paid. At the same time, CLS will restructure the financing associated with
Spring Mews student such that other properties will be substituted into the
Aviva portfolio financing so as to retain the 2.54% debt and repay more
expensive debt.
"CLS has achieved excellent financial returns from the development and
ownership of Spring Mews Student. The sale allows this value to be realised
and reinvested into other portfolio opportunities."
Risk management
Our Risk Management Structure
Risk management is a critical component of the operation of our business,
allowing us to take advantage of opportunities whilst ensuring that we do not
expose the business to excessive risk, thereby generating shareholder value
over the long term in a sustainable and compliant manner.
3rd Line of Defence
The Board
· Sets our overarching risk appetite and ensures that we manage risks
appropriately across the Group within a robust internal control framework.
The Board delegates oversight of risk management activities to the
Audit Committee.
· Annual assessment of principal and emerging risks.
The Audit Committee
· Key oversight function for risk management, internal controls and
viability.
· Receives updates on risks and the control environment including the
results of any internal control review procedures and other assessments
undertaken in the period at each Audit Committee meeting.
· Reports to the Board on the effectiveness of the external auditors, risk
management and internal controls.
2nd Line of Defence
Management Committees
· Several management committees have the responsibility for overseeing and
mitigating risks associated with safety, sustainability, treasury and energy
procurement amongst other things.
· Responsible for the day-to-day operational oversight of risk management.
· Major business-wide decisions such as property acquisitions, disposals,
significant strategy changes and the wider changing geopolitical landscape are
discussed. These decisions are assessed with reference to risk appetite.
The Senior Leadership Team
· Comprised of the CEO, the CFO, the COO and senior members of the property
operations, finance and human resources teams.
· Reviews and monitors the Group's principal and emerging risks taking into
account the appetite for, and impact of, risk in all areas of the business.
These are presented to the Audit Committee every six months for further
discussion.
Risk and Assurance Manager
· Responsible for the management of the Group's risk and internal control
system, CoreStream. Conducts regular testing and monitoring of material
controls.
· Responsible for following up and tracking any process or control
improvements.
· The Group has policies set by the Board that govern key risks across the
business. These are regularly reviewed to ensure they are up to date and
comply with laws and regulations.
1st Line of Defence
Business units
· Risk management embedded in day-to-day operations including identifying,
evaluating and reviewing within these units.
· Executes strategic actions in compliance with the Group's objectives and
policies.
What we did in 2024
· Established an initial list of material controls. This included
performing testing cycles over a number of these controls.
· Targeted capital expenditure to ensure properties remain appealing to
tenants in terms of their amenities and sustainability credentials to mitigate
identified property and sustainability risks.
· Retained our Cyber Essentials Plus ranking.
· Achieved milestone targets on the Net Zero Carbon Pathway.
· Addressed 2023 internal control recommendations as outlined by our
external auditor.
· Engaged external consultants who performed an in-depth analysis of our
buildings' climate related resilience.
· Competency checks were undertaken for the consultants and contractors we
engage and regular safety tours of our assets were undertaken by the property
management team.
· Successful sales of targeted properties in our portfolio to align with
our principal strategies to put the Group in a strong position going forward.
· Effectively managed our financing strategies to ensure sustainable growth
and financial stability, positioning us for continued success in the future.
Our priorities for 2025
· Continue to deliver on our roadmap of readiness activities for the UK
Government's proposed corporate reforms. This includes:
- agreeing upon a target level of confidence required for each
material control;
- agreeing the cadence for monitoring material controls, including what is
presented to the Board. Developing an internal control testing framework and
approach to testing our material controls;
- agreeing the Board's appetite for disclosing any material control's
ineffectiveness and actions required to address weaknesses;
- preparing a draft of the material controls declaration including any
ineffectiveness explanations; and
- assigning ownership and oversight for each material control.
· Finance remaining 2025 maturing debt and advance refinancings of
2026 loans.
· Ensure Cyber Essentials Plus ranking retained.
· Enhance our crisis response capabilities to reflect the dynamic nature of
the global risk landscape.
· Digitally enable employees and tenants, and continue to build digital
literacy, awareness and capability.
· Minimise financial risk in relation to securing future gas and
electricity supply for the portfolio through adherence to risk limits with
guidance from our external energy procurement partners.
· Closely monitor and support the business through risks arising from the
changing geopolitical environment.
Management of risk throughout the Group
1. Identification
We proactively identify potential risks across all processes and the wider
environment that could impact our organisation.
2. Prioritisation
We evaluate and rank risks based on their potential impact and likelihood of
occurrence. Using risk matrices and scoring systems, we focus our resources on
the most critical risks. This prioritisation process allows us to address the
most significant threats first, ensuring that our risk management efforts are
both effective and efficient.
3. Controls and responses
We develop and implement strategies to mitigate or manage risks. We design
controls to prevent or reduce the impact of risks and plan responses for when
risks materialise. Our controls include preventive, detective, and corrective
measures.
4. Governance and reporting
We have established a robust governance framework to oversee our risk
management. Roles and responsibilities are clearly defined, and policies and
procedures are set to ensure accountability. Regular reporting to senior
management and the Board keeps them informed of the risk landscape and the
effectiveness of our risk management activities, ensuring transparency
and oversight.
5. Monitoring
Continuous monitoring is a key part of our risk management process. We track
identified risks, assess the performance of controls, and detect new risks.
Regular reviews and updates to our risk management plan help us adapt to
changes in the internal and external environment, ensuring that our risk
management practices remain effective and relevant.
6. Audit and assurance
We conduct independent reviews and audits to provide assurance that our risk
management process is functioning as intended. Reviews both internally and by
our external auditors help evaluate the effectiveness of our controls and
compliance with policies. These assurance activities help us identify gaps and
areas for improvement, ensuring that we maintain a robust risk management
framework.
Based on the size of its balance sheet and market capitalisation, CLS is a
large business, but it is relatively small based on the number of people
working directly in the business. The small number of employees and our
internal control structures allow the Group to safeguard its assets, prevent
and detect material fraud and errors and ensure accuracy and completeness of
the accounting records used to produce reliable financial information, while
still allowing the flexibility to take advantage of opportunities to further
the business strategies of the Group.
Our Assessment and Appetite for Risk
Risk assessment
As part of annual business planning, the Board undertakes an assessment of
the risks that could threaten the Group's strategic objectives, future
performance, solvency or liquidity. Risks are reviewed in detail with their
respective owners, typically a member of the Senior Leadership Team or key
business leader.
We use a risk scoring matrix to consider the likelihood and impact of each
risk at regular points throughout the year. We evaluate risks on an inherent
(before mitigating actions) and residual (after mitigating actions and
controls) basis. To do so, we identify principal risks (current risks with
relatively high impact and certainty) and emerging risks (risks where the
extent and implications are not yet fully understood).
The chart above illustrates the relative positioning of the potential impact
and likelihood of the principal risks on the Group's strategic objectives,
financial position or reputation after mitigation. Internal or external
forces, or a combination of both, will continue to have the potential to alter
this positioning and therefore these risks are closely monitored on a
continual basis.
Throughout the year, the Board monitored the changing economic and market
situation and considered its effect on the business, as it will continue to do
so going forward. The impact of the macro-economic factors is discussed in the
CEO review and the individual country property reviews.
Our principal risks are set out on the following pages. In evaluating these
risks, any potential impact as a result of market uncertainties has been
considered.
Risk appetite
The Board reviews our risk appetite at least annually. The risk appetite of
the Group is assessed with reference to changes both that have occurred, or
trends that are beginning to emerge in the external environment, and changes
in the principal risks and their mitigation. These will guide the actions we
take in executing our strategy. Whilst our appetite for risk will vary over
time, in general we maintain a balanced approach to risk. The Group uses five
risk categories to allocate its risk appetite:
Very low: Avoid risk and uncertainty
Low: Keep risk as low as reasonably practical with very limited, if any,
reward
Medium: Consider options and accept a mix of low and medium risk options with
moderate rewards
High: Accept a mix of medium and high-risk options with better rewards
Very high: Choose high risk options with potential for high returns
On reviewing our risk appetite, the Board recognised that there are factors
outside of the Group's control, for example the market that influences their
appetite in any one year.
Risk appetite vs risk assessment
The Board's risk appetite in relation to the Group's principal
risk assessment is broadly aligned. As shown in the table
there is divergence of risk appetite and risk status in relation to the
financing and people risks. The Board accepts that there are factors in
relation to these risks that are outside the Group's control and are likely to
change over time. Mitigating actions have been put in place to ensure
financing risk is adequately managed and monitored to reduce the potential
impact on the Group. We expect the people risk appetite and assessment to
align in the medium term. The Board recognises that not all risks can be fully
mitigated and that they need to be balanced alongside commercial, and
political and economic, considerations.
Property Sustainability Business Financing Political & People
Interruption
Economic
Risk assessment High Med Low High Med Low
Risk appetite High Med Low Med Med Med
Our principal risks
Our principal risks and risk assessments are discussed over the following
pages along with: any change in their risk profile since the last year end;
the current direction of travel; and our risk mitigation actions and plans.
Whilst we do not consider that there has been any material change to the
nature of the Group's principal risks over the last 12 months, several risks
remain elevated as a result of the challenging external environment and
significant ongoing uncertainty.
The following pages are only focused on our principal risks being those that
have the greatest impact on our strategy and/or business model. In addition,
there are many lower level operational and financial risks which are managed
on a day-to-day basis through the effective operation of a comprehensive
system of internal controls.
Principal risk Risk description Mitigation
1. Property 2024
· Maintained strong relationships with our occupiers, agents and direct
Market fundamentals and/or internal behaviours lead to adverse changes to investors active in the market and actively monitored trends in our sectors
Strategy: We acquire the right properties capital values of the property portfolio or ability to sustain and improve
income generation from these assets. · Asset management committees meet once a month to discuss each property
KPIs: TSR(R), TAR, EPS
Key risks
· Cyclical downturn in the property market which may be indicated by an · Continued investment of £21.1 million in our properties with
Risk assessment: High increase in yields refurbishments taking place in over 30 properties to meet tenant demands
Change in risk profile in the year: No change · Changes in supply of space and/or demand (vacancy rate) · Rigorous and established governance approval processes for capital and
leasing decisions
Direction of travel: Decreasing · Poor property/facilities management
· Engagement with tenants to understand their needs and space requirements
· Inadequate due diligence and/or poor commercial assessment of
acquisitions · Targeted capital expenditure with a focus on sustainability
· Failure of tenants · Disposal of 5 properties with low yield, limited asset management
potential or risk/reward ratio unfavourably balanced
· Insufficient health and safety risk protection
· Continued monitoring of covenant strength and health of tenants
· Building obsolescence
· High quality provision of property and facilities management services
with our in-house team
· Health and Safety Committee met 3 times to closely monitor activity and
regulation, reporting to every Board meeting
2025
· Continue with our current controls and mitigating actions
2. Sustainability 2024
· Implemented new sustainability data platform
As a result of a failure to plan properly for, and act upon, the potential
Strategy: We acquire the right properties, we deliver value through active environmental and social impact of our activities, changing societal · Continued monitoring and oversight by the Sustainability Committee over
management and cost control attitudes, and/or a breach of any legislation, this could lead to damage to key ongoing projects
our reputation and customer relationships, loss of income and/or property
KPIs: TSR(R), TAR, VR value, and erosion of shareholder confidence in the Group. · Implementation of our climate resilience plan
Key risks
Risk assessment: Medium Transition risks: · Detailed Sustainability risk registers maintained, reviewed and updated
These include regulatory changes, economic shifts, obsolescence, and the
Change in risk profile in the year: No change changing availability and price of resources. · Continued implementation and active monitoring of NZC Pathway projects
Physical risks:
Direction of travel: No change
These are climate-related events that affect our supply chain as well as the · Completion of planned energy efficiency projects including all scheduled
buildings' physical form and operation; they include extreme weather events, PV installations
pollution and changing weather patterns.
· Continued EPC upgrade programme
· Recertification of relevant properties in the UK and France to BREEAM
In-Use V6
· Independent assurance on EPRA sBPR KPI data
· Renewal of Sustainable refurbishment and fit-out guide
· Maintained living wage accreditation
2025
· Ongoing rollout of biodiversity net gain plan
· Initiate a review of the NZC Pathway including the strategy and key
targets
· Continue with our current controls and mitigating actions
3. Business 2024
interruption
· Maintained a Centre of Internet Security 'A' rating
Data loss; or disruption to corporate or building management systems; or
catastrophic external attack; or disaster; may limit the ability of the · Maintained Cyber Essentials Plus certification
Strategy: We continually assess whether to hold or sell properties business to operate resulting in negative reputational, financial and
regulatory implications for long-term shareholder value. · Conducted penetration testing on the Group's properties (e.g. simulate
KPIs: TSR(R), TAR
Key risks cyber-attacks on building management systems)
· Cyber threat
Risk assessment: Low
· Continued implementation of shared property and finance system across the
· Large scale terrorist attack Group
Change in risk profile in the year: No change
· Environmental disaster, power shortage or pandemic · Continued use of external partners for specialist cyber security
Direction of travel: No change activities and independent reviews
· Transitioned to continuous and automated patching across all managed
systems
· New Email Gateway implemented
· Identity management protection implemented
· Continued to test and train employees on cyber security
2025
· Complete implementation of shared property and finance system across the
Group
· Start to drive greater cost and reporting efficiencies across the Group
from using a common platform
· Reassess business continuity and disaster recovery plans
· Continue with our current controls and mitigating actions
4. Financing The risk of not being able to source funding in cost-effective forms will negatively impact the ability of the Group to meet its business plans or satisfy its financial obligations. 2024
Key risks
· Financed, refinanced or extended 9 loans to a value of £154.5 million
· Inability to refinance debt at maturity due to lack of funding sources,
Strategy: We secure the right finance market liquidity, etc. · Weekly treasury meetings took place with the CEO and CFO including
discussion of financing, rolling 12-month cash flow forecasts, FX requirements
KPIs: Cost of debt, EPS · Unavailability of financing at acceptable debt terms and hedging, amongst other items
Risk assessment: High · Risk of rising interest rates on floating rate debt · Weekly cash flow forecasts prepared and distributed to Senior Leadership
Team
Change in risk profile in the year: Increasing · Risk of breach of loan covenants
· 79.7% of the Group's borrowings are fixed rate plus a further 3.8% of
Direction of travel: No change · Foreign currency risk interest rate caps
· Financial counterparty risk · Regularly monitored loan covenants
· Risk of not having sufficient liquid resources to meet payment · CLS borrows in local markets and in local currencies via individual SPVs
obligations when they fall due to provide a 'natural' hedge
· In 2024, the financing markets remained open and supportive for CLS but · All loans have equity cure mechanisms to repair breaches
with greater amounts of loans maturing in 2025 the risk has increased.
Notwithstanding this, CLS has made significant progress with 2025 debt · Maintained a wide number of banking relationship with 25 lenders across
maturities the Group to diversify funding sources
· Maintained low weighted average cost of debt (3.77%)
· Maintained average debt maturity of 3.2 years
· Significant headroom across three main loan covenants of between 14% and
32%
2025
· Continue with our current controls and mitigating actions
5. Political & Significant events or changes in the Global and/or European political and/or economic landscape may increase the reluctance of investors and customers to make timely decisions and thereby impact the ability of the Group to plan and deliver its strategic priorities in accordance with its core business model. 2024
economic Key risks
· Monitored events and trends closely, making business responses if needed
· Ongoing transition of the UK from the EU
· Maintained membership of key industry bodies for example the British
Strategy: We deliver value through active management and cost control · Global geopolitical and trade environments Property Federation, British Council of Offices and Better Buildings
Partnership
KPIs: EPS · Potential impact of US tariffs on inflation and interest rates
· Monitored tenants for sanction issues
Risk assessment: Medium
2025
· Continue with our current controls and mitigating actions
Change in risk profile in the year: No change
Direction of travel: No change
6. People The failure to attract, develop and retain the right people with the required 2024
skills, and in an environment where employees can thrive, will inhibit the
· Bi-annual townhall meetings held by Senior Independent Board member to
ability of the Group to deliver its business plans in order to create listen to employee concerns and suggestions and discuss with the Board
Strategy: We reward shareholders, customers and employees long-term sustainable value.
Key risks · Employee compensation packages reviewed at least annually to ensure they
KPIs: TSR(R), TAR
· Failure to recruit senior management and key executives with the right remain competitive
skills
Risk assessment: Low
· Implementation of a calendar of wellbeing, social and diversity, equity,
· Excessive staff turnover levels and inclusion activities
Change in risk profile in the year: No change
· Lack of succession planning and development opportunities · Implementation of feedback from Staff Engagement and Enablement Survey
Direction of travel: No change
2025
· Poor employee engagement levels
· Continue with our current controls and mitigating actions
Emerging risks
We define emerging risks to be those that may either materialise or impact
over a longer timeframe. They may be a new risk, a changing risk or a
combination of risks for which the broad impacts, likelihoods and costs are
not yet well understood, and which could have a material effect on CLS'
business strategy.
Emerging risks may also be superseded by other risks or cease to be relevant
as the internal and external environment in which we operate evolves. The
Senior Leadership Team, which has representatives from each area of the
business, is tasked with identifying emerging risks for the business and
discussing what impact these risks may have on the business and what steps we
should be taking to mitigate these risks. The Board reviews these assessments
on an annual basis.
Emerging risk Potential impact Mitigation Short Medium Long
<2yrs 2-5yrs >5yrs
Adoption of technology Failure to embrace technology could result in the Group falling behind its We thoroughly examine emerging technologies to ensure that we extract the X X X
competitors in efficiency, thereby risking a loss of competitive edge. As utmost value from any new system or service we opt to incorporate into our
buildings evolve to incorporate smart features, tenants may prefer such comprehensive digital and technological framework.
technologically advanced spaces over those lacking similar amenities.
Neglecting occupant preferences for technology could diminish the
attractiveness of the Group's office properties, potentially leading to
vacancies and a decline in rental revenue.
Artificial The automation of certain tasks through AI may lead to job displacement for Active monitoring of the changing landscape through attendance at AI industry X X X
intelligence those whose roles are automated but it will also create jobs. This could have talks and regular discussion/awareness at the executive committee level.
implications on our current tenant base which may impact office space
requirements.
Regulation/ Increased capital cost of maintaining our property portfolio. Continued ongoing assessment of all properties against emerging regulatory X X X
changes and benchmarking of fit-out and refurbishment projects against
compliance Increased administration costs to ensure resources sufficient to deliver third‑party schemes.
corporate compliance.
Increasing energy and construction costs Increased cost of operating properties will reduce attractiveness of tenancies Ongoing consideration of, and investment in, energy efficient plant and X X X
to existing and potential customers. building-mounted renewable energy systems.
Increased costs of refurbishments and developments leading to reduced Continued monitoring of materials, investment in key skills for staff and
investment returns. viability assessments of buildings.
Changes in office occupation trends Changes in societal attitudes to agile and flexible working practices may In-house asset management model provides the means for the property team to: X X X
reduce demand for space compared to historical trends. proactively manage customers; and gain real-time insight and transparency on
changes in needs and trends allowing us to adapt our properties to meet
these.
Climate change, natural resources and biodiversity risks Increased risk of weather-related damage to property portfolio and Our sustainability strategy continues to evolve and has been developed in X X
reputational impact of not evolving sustainability goals in line with global alignment with Global Real Estate Sustainability Benchmarks (GRESB),
benchmarks and/or public expectations. consideration of the UN Sustainable Development Goals (SDGs) and climate risk
modelling.
Inability to obtain sufficient carbon credits at suitable price to offset
residual carbon emissions in order to achieve net zero carbon. We are investigating various solutions to achieve sufficient offsets by 2030.
Going concern statement
Background
CLS' strategy and business model include regular secured loan refinancings,
and capital deployment and recycling through acquisitions, capital expenditure
and disposals. Over the last thirty years, the Group has successfully
navigated several periods of economic uncertainty, including the recent
economic stress resulting from the Covid-19 pandemic, Russia's invasion of
Ukraine and the cost-of-living crisis.
The Group continues to have very high rent collection and low bad debts, and
has a long-term track record in financing and refinancing debt including
£154.5 million completed in 2024, £42.1 million already completed in 2025
and a further £174.1 million has been well advanced subsequent to year-end,
whereby term sheets have been obtained, we have reached a first stage credit
review or short term extensions between 3 to 12 months have been agreed in
anticipation of the planned refinancings of these facilities.
The Directors note that the Group financial statements for the year ended 31
December 2023 contained disclosure of a Material Uncertainty related to going
concern due to the timing and amounts of the planned refinancing of debt and
disposals of property being outside of Management's control. In this context
the Directors set out their considerations and conclusions in respect of going
concern for these financial statements below.
Going concern period and basis
The Group's going concern assessment covers the period to 31 July 2026 ('the
going concern period'). The period chosen takes into consideration the
maturity date of loans totalling £426.0 million that expire by July 2026. The
going concern assessment uses the forecast approved by the Board at its
November 2024 meeting as the Base case. The assessment also considers a Severe
but plausible case. The Directors have considered the period between the date
of Board approval and the date of signing the accounts. Based on a review of
events since Board approval in November 2024, the Directors conclude that
there have been no significant changes since the forecast was approved.
Forecast cash flows - Base case
The forecast cash flows prepared for the Base case take account of the Group's
principal risks and uncertainties, and reflect the challenging economic
backdrop. The forecast cash flows have been updated using assumptions
regarding forecast forward interest curves, inflation and foreign exchange,
and includes revenue growth, principally from contractual increases in rent,
and increasing cost levels in line with forecast inflation.
The Base case is focused on the cash and working capital position of the Group
throughout the going concern period. In this regard, the Base case assumes
continued access to lending facilities in the UK, Germany and France, and
specifically that debt facilities of £426.0 million with 11 lenders expiring
within the going concern period will be refinanced as expected (£303.0
million) or will be repaid (£123.0 million), some of which are linked to
forecast property disposals. The Board acknowledges that these refinancings
are not fully within its control; however, they remain confident that
refinancings or extensions of these loans will be executed within the required
timeframe, having taken into account:
· existing banking relationships and ongoing discussions with the lenders
in relation to these refinancings;
· CLS' track record of prior refinancings, particularly in the 12 months to
31 December 2024 when £154.5 million was successfully refinanced or extended;
and
· recent refinancings subsequent to 31 December 2024 that have completed,
reached an initial credit committee review stage by lenders, or where term
sheets have been obtained, totalling £216.2 million (£66.2 million of which
short term extensions between 3 to 12 months have been agreed in anticipation
of the planned refinancings of these facilities) of the £303.0 million noted
above.
The Base case includes property disposals in the going concern period in line
with the Group's business model and the forecast cash flows approved by the
Board in November 2024. The Board acknowledges that property disposals are not
fully within its control; however, they are confident these transactions will
be completed within the going concern period, based on their history of
achieving disposals (with disposals of £66.1 million achieved in the 12
months to 31 December 2024) and the progress made with the disposal of Spring
Mews Student which has been unconditionally exchanged. The value of the
properties available for disposal is significantly in excess of the value of
the debt maturing during the going concern period.
The Group's financing arrangements, which utilise ring-fenced property loans,
contain Loan-to-Value ('LTV'), Interest Cover Ratio ('ICR') and Debt Service
Coverage Ratio ('DSCR') covenants. In the Base case, minimal cure payments
have been forecast given that the Group expects to maintain its compliance
with the covenant requirements.
The near-term impacts of climate change risks within the going concern period
are expected to be immaterial following an assessment of potential significant
inflation resulting from climate change, in the context of increased property
and administrative costs, as part of the reverse stress testing performed by
CLS. Furthermore, the forecast cash flows prepared for the Base case include
all necessary capital expenditure to meet the minimum energy efficiency
standards required in the countries where CLS operates.
Forecast cash flows - Severe but plausible case
A Severe but plausible case has been assessed which has been produced by
flexing key assumptions further including: lower rents, increased service
charges, higher property and administration expenses, falling property values,
higher interest rates and reduced achievements of refinancings and disposals.
These flexed assumptions are more severe than CLS experienced during the
2007-2009 global financial crisis and other downturns such as that experienced
in 2020-2022 during the Covid-19 pandemic. A key assumption in this scenario
is a further reduction to the Base case in property values of 10% until July
2026, impacting forecast refinancings, sales and cash cures. This is in
addition to the reduction experienced of 12.5% in 2023 and cumulative c.24%
decline from 30 June 2022 to 31 December 2024.
Assumptions around refinancing and investment property disposals are adjusted
to incorporate the higher interest rates and lower property values noted
above. A reduction in property values of 10% results in additional cure
payments of £11.8 million being necessary for the Group to remain in
compliance with its covenant requirements.
Due to the severity of the assumptions used in this scenario, which is severe
but plausible and therefore not remote, the liquidity of the Group is
exhausted even after putting in place controllable mitigating actions as set
out below.
Mitigating actions
In the Severe but plausible case, CLS is assumed to take mitigating actions in
terms of depositing cash to equity cure some loans, scaling back uncommitted
capital expenditure (without impacting revenue streams over the going concern
period) and reducing the dividend to the Property Income Distribution required
under the UK REIT rules as well as drawing the currently available £42.9
million of its existing £60.0 million revolving credit and overdraft
facilities. If needed, further disposals could be considered as there are no
sale restrictions on CLS' £1.9 billion of properties, albeit the timing and
the amount of these potential disposals are not in the Group's control.
Additionally, the Directors note that the loans that require refinancing in
the going concern period are all through ring-fenced SPV borrower structures.
Accordingly, in extremis, the lender could enforce their security on an
individual property with no claim on the rest of the Group's assets apart from
certain limited guarantees and limited recourse security granted by the
Company and certain Group companies.
Material Uncertainty related to going concern
As described above, the Group is reliant in the Base case and Severe but
plausible case upon its ability to both refinance the debt maturing and to
complete a number of investment property disposals in the going concern period
in challenging market conditions.
Whilst the Directors remain confident that a combination of sufficient
refinancings and property disposals will be achieved, the timing and value of
both the planned refinancing of facilities falling due within the going
concern review period, and planned property disposals, is outside of
Management's control and consequently a material uncertainty exists that may
cast significant doubt on the Group's ability to continue as a going concern.
Notwithstanding this material uncertainty on the going concern assumption,
given our track-record and reputation, the Directors 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, or will be extinguished as part of property
disposals in the period. In extremis, the loans requiring refinancing are all
through ring-fenced SPV borrower structures, save for certain limited
guarantees and limited recourse security granted by the Company and certain
other Group companies. Therefore, the Directors continue to adopt the going
concern basis in preparing these Group financial statements.
The financial statements do not contain the adjustments that would result if
the Group and Company were unable to continue as a going concern.
Viability statement
The Group's viability assessment follows a similar methodology to the going
concern assessment in terms of analysing the Base case financial forecasts and
a Severe but plausible case but makes the assessment of the viability of the
Company to continue in operation and meet its liabilities as they fall due
over a considerably longer period.
The viability assessment covers the period to 31 December 2028 ('the viability
period'), a period chosen as it is coincident with the period of the forecasts
approved by the Board at its November 2024 Board meeting. These forecasts
comprise the Base case but they have been updated for the actual results for
2024 and any changed assumptions. The period of 4 years was also chosen as
this is similar to the Group's WAULT and weighted average debt maturity, and
so aligns with the period over which the Group has good visibility.
In performing this assessment, the Board notes that the financial information
for the year ended 31 December 2024 contained disclosure of a Material
Uncertainty related to going concern because the timing and amounts of the
planned refinancing of debt and disposals of property at the time were outside
of Management's control. In this context the Directors set out their
considerations and conclusions in respect of their Viability statement for
these financial statements below.
Viability assessment
As with the Going concern assessment, the financial forecast prepared for the
Base case takes account of the Group's principal risks and uncertainties, and
reflects the current challenging economic backdrop. The forecast uses forward
interest rate curves, inflation and foreign exchange.
The Base case is focused on the cash, liquid resources and working capital
position of the Group including forecast covenant compliance. The forecast
also assumes continued access to lending facilities but given the longer time
period than the going concern period the amounts requiring to be refinanced
are consequentially greater. Within the viability period, it is assumed debt
facilities of £703.1 million expiring will be refinanced (£557.4 million)
as expected or repaid (£145.8 million), which is linked to forecast property
sales) taking into account:
· existing banking relationships;
· CLS' track record of prior refinancings, particularly in 12 months to 31
December 2024 when £154.5 million was successfully refinanced or extended;
· refinancings subsequent to year-end that have completed, or where terms
have been agreed, or where negotiations are very advanced totalling £216.2
million (£66.2 million of which short term extensions between 3 to 12 months
have been agreed in anticipation of the planned refinancing of these
facilities) of the £703.1 million expiring before 31 December 2028; and
· other ongoing discussions with lenders.
A Severe but plausible case was also produced by flexing key assumptions
including: lower rents, increased service charges, higher property and
administration expenses, falling property values, higher interest rates and
reduced achievements of refinancings and disposals. These flexed assumptions
are derived by considering the negative market and economic impacts
experienced during the 2007-2009 global financial crisis and other downturns
such as that experienced in 2020-2022 during the Covid-19 pandemic. A key
assumption in this scenario is a further reduction in property values of 10%
until 31 December 2026 which is in addition to the fall in value already
experienced in 2022, 2023 and 2024 but no subsequent bounce back in valuation
has been assumed.
Assumptions around refinancing and property disposals are adjusted to only
include those agreed or considered significantly advanced by management. In
addition, a reduction in property values of 10% results in additional cure
payments of £11.8 million being necessary for the Group to remain in
compliance with its covenant requirements.
The impacts of climate change risks within the viability period have been
considered in the Severe but plausible case and are expected to be immaterial.
Due to the severity of the assumptions used in this scenario, which is Severe
but plausible and therefore not remote, the liquidity of the Group is
exhausted even after putting in place controllable mitigating actions as set
out below.
In the Severe but plausible case, CLS would need to take mitigating actions in
terms of depositing cash to equity cure some loans as envisaged under the
facilities, scaling back uncommitted capital expenditure and reducing the
dividend to the Property Income Distribution required under the UK REIT rules
as well as drawing the currently available £42.9 million of its existing
£60.0 million revolving credit and overdraft facilities, of which £30
million is committed until October 2026 with the option to extend a further
two years and £20 million is committed until November 2025 with an option to
extend a further year.
Additionally, the Board note that the properties that require refinancing in
the going concern period are all through ring-fenced SPV borrower structures.
Accordingly, in extremis, the lender could enforce their security on an
individual property with no claim on the rest of the Group's assets apart from
certain limited guarantees and limited recourse security granted by the
Company and certain other Group companies.
Material uncertainty
The Directors highlighted in their going concern assessment that whilst they
remain confident in the future prospects for the Group and its ability to
continue as a going concern, the Group is reliant upon its ability to both
refinance the debt maturing and to complete a number of property disposals in
the going concern period in challenging market conditions. The same material
uncertainty may also cast significant doubt over the future viability of the
Group.
Directors' responsibility statement
Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors are required to prepare the Group
financial statements in accordance with the Companies Act 2006 and United
Kingdom adopted International Accounting Standards and International Financial
Reporting Standards (IFRSs) and have elected to prepare the Parent Company
financial statements in accordance with FRS101 of United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law). Under company law the Directors must not approve the accounts
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and of the profit or loss of the Group for that period.
In preparing the Parent Company financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard
1 requires that Directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity's
financial position and financial performance; and
· make an assessment of the Group's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
· the strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
· the annual report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
This statement of responsibilities was approved by the Board on 31 March 2025.
Approved and authorised on behalf of the Board
David Fuller BA FCG
Company Secretary
31 March 2025
Group income statement
for the year ended 31 December 2024
Notes 2024 2023
£m £m
Revenue 4 151.9 148.7
Service charges and similar expenses 4 (37.9) (35.7)
Net rental income 4 114.0 113.0
Administration expenses (17.7) (18.2)
Other property expenses (18.1) (15.6)
Operating profit before revaluation and disposals 78.2 79.2
Net revaluation movements on investment property 12/14 (127.7) (302.7)
Net revaluation movements on equity investments (0.6) (1.3)
(Loss)/profit on sale of investment property (2.3) 1.4
Loss on sale of other equity investments (0.1) -
Operating loss (52.5) (223.4)
Finance income 8 1.4 1.6
Finance costs 9 (45.7) (41.3)
Foreign exchange loss (0.6) (0.3)
Loss before tax (97.4) (263.4)
Taxation 10 3.8 13.6
Loss for the year attributable to equity shareholders (93.6) (249.8)
Basic and diluted earnings per share 5/24 (23.6)p (62.9)p
The notes are an integral part of these Group financial statements.
Group statement of comprehensive income
for the year ended 31 December 2024
Notes 2024 2023
£m
£m
Loss for the year (93.6) (249.8)
Other comprehensive income:
Items that may be reclassified to profit or loss
Revaluation of property, plant and equipment 26 1.3 2.2
Foreign exchange differences 26 (21.6) (12.3)
Deferred tax on revaluation of property, plant and equipment 18 (0.1) (0.6)
Total items that may be reclassified to profit or loss (20.4) (10.7)
Total other comprehensive expense (20.4) (10.7)
Total comprehensive expense for the year attributable to equity shareholders (114.0) (260.5)
The notes are an integral part of these Group financial statements.
Group balance sheet
at 31 December 2024
Notes 2024 2023
£m
£m
Non-current assets
Investment properties 12 1,676.5 1,850.5
Property, plant and equipment 13 42.5 41.8
Intangible assets 2.7 2.9
Equity investments 0.6 1.4
Derivative financial instruments 20 0.7 3.6
1,723.0 1,900.2
Current assets
Trade and other receivables 15 14.2 16.7
Derivative financial instruments 20 1.1 0.7
Cash and cash equivalents 16 60.5 70.6
75.8 88.0
Assets held for sale 14 133.0 172.7
Total assets 1,931.8 2,160.9
Current liabilities
Trade and other payables 17 (65.7) (68.6)
Current tax (0.9) (0.3)
Borrowings 19 (372.4) (193.9)
(439.0) (262.8)
Non-current liabilities
Deferred tax 18 (78.1) (88.7)
Borrowings 19 (626.8) (876.7)
Leasehold liabilities (3.3) (3.5)
Derivative financial instruments 20 (0.4) -
(708.6) (968.9)
Total liabilities (1,147.6) (1,231.7)
Net assets 784.2 929.2
Equity
Share capital 23 11.0 11.0
Share premium 83.1 83.1
Other reserves 26 86.9 106.7
Retained earnings 603.2 728.4
Total equity 784.2 929.2
The financial statements of CLS Holdings plc (registered number: 02714781)
were approved by the Board of Directors and authorised for issue on 31 March
2025 and were signed on its behalf by:
Mr F Widlund Mr A
Kirkman
Chief Executive Officer Chief Financial
Officer
The notes are an integral part of these Group financial statements.
Group statement of changes in equity
for the year ended 31 December 2024
Share Share Other Retained Total equity
capital
premium
reserves
earnings
£m
£m
£m
£m
£m
Note 23 Note 26
Arising in 2024:
Total comprehensive expense for the year - - (20.4) (93.6) (114.0)
Share-based payments - - 0.6 - 0.6
Dividends to shareholders - - - (31.6) (31.6)
Total changes arising in 2024 - - (19.8) (125.2) (145.0)
At 1 January 2024 11.0 83.1 106.7 728.4 929.2
At 31 December 2024 11.0 83.1 86.9 603.2 784.2
Share Share Other Retained Total equity
capital
premium
reserves
earnings
£m
£m
£m
£m
£m
Note 23 Note 26
Arising in 2023:
Total comprehensive expense for the year - - (10.7) (249.8) (260.5)
Share-based payments - - 0.5 - 0.5
Dividends to shareholders - - - (31.6) (31.6)
Transfer of fair value on property, plant and equipment - - 1.5 (1.5) -
Total changes arising in 2023 - - (8.7) (282.9) (291.6)
At 1 January 2023 11.0 83.1 115.4 1,011.3 1,220.8
At 31 December 2023 11.0 83.1 106.7 728.4 929.2
The notes are an integral part of these Group financial statements.
Group statement of cash flows
for the year ended 31 December 2024
Notes 2024 2023
£m £m
Cash flows from operating activities
Cash generated from operations 27 71.2 83.2
Interest received 1.4 1.6
Interest paid (40.6) (35.1)
Income tax paid on operating activities (2.5) (3.8)
Net cash inflow from operating activities 29.5 45.9
Cash flows from investing activities
Capital expenditure on investment properties (22.3) (46.4)
Proceeds from sale of properties 63.8 17.0
Income tax paid on sale of properties - (1.8)
Purchases of property, plant and equipment (0.2) (0.8)
Purchase of intangibles (0.2) (0.3)
Net cash inflow/(outflow) from investing activities 41.1 (32.3)
Cash flows from financing activities
Dividends paid 25 (31.6) (31.6)
Cash received on settlement of derivative financial instrument 0.7 -
Purchase of derivative financial instrument (1.2) -
Proceeds from borrowings(1) 8.8 72.5
Transaction costs related to borrowings (1.0) (1.1)
Repayment of borrowings(1) (55.5) (96.0)
Net cash outflow from financing activities (79.8) (56.2)
Cash flow element of net decrease in cash and cash equivalents (9.2) (42.6)
Foreign exchange loss (0.9) (0.7)
Net decrease in cash and cash equivalents (10.1) (43.3)
Cash and cash equivalents at the beginning of the year 70.6 113.9
Cash and cash equivalents at the end of the year 16 60.5 70.6
1 Proceeds from borrowings and repayment of borrowings for the year
ended 31 December 2023 have been restated. Details of these restatements are
included at note 27.
The notes are an integral part of these Group financial statements.
Notes to the Group financial statements
for the year ended 31 December 2024
1. General information
CLS Holdings plc (the 'Company' or 'Ultimate Parent') and its subsidiaries
(together 'CLS Holdings' or the 'Group') is an investment property group which
is principally involved in the investment, management and development of
commercial properties. The Group's principal operations are carried out in
the United Kingdom, Germany and France.
The Company is an incorporated public limited company and is registered and
incorporated in the United Kingdom. Its registration number is 02714781, with
its registered address at 16 Tinworth Street, London SE11 5AL. The Company is
listed on the London Stock Exchange and domiciled in the United Kingdom.
2. Annual financial report
This financial information has been prepared in accordance with the Companies
Act 2006 and United Kingdom adopted International Accounting Standards and
International Financial Reporting Standards (IFRSs). The Company prepares its
Parent Company financial statements in accordance with FRS 101.
The financial information set out in this announcement is unaudited and does
not constitute the Group's financial statements for the year ended 31 December
2024 or 31 December 2023 as defined by Section 434 of the Companies Act 2006.
Statutory accounts for 2023 have been delivered to the Registrar of Companies
and those for 2024 will be delivered following the Company's Annual General
Meeting.
The Group's full financial statements for the year ended 31 December 2024 were
approved by the Board of Directors and reported on by the auditors, BDO LLP,
on 31 March 2025. The independent auditor's report is unqualified, does not
contain statements under section 498 (2) or (3) of the Companies Act 2006,
however does include reference to a material uncertainty related to going
concern.
The 2023 accounts were audited Ernst & Young LLP and their report was
unqualified, did not contain any statement under Section 498 (2) or (3) of the
Companies Act 2006, however did include reference to a material uncertainty
related to going concern.
The financial statements have been prepared on the historical cost basis,
except for the revaluation properties and financial instruments that are
measured at fair values at the end of each reporting period, as explained in
the accounting policies. The consolidated financial statements, including the
results and financial position, are presented in pounds sterling, which is the
functional and presentational currency of CLS Holdings plc. The amounts
presented in the financial statements are rounded to the nearest £0.1
million.
The annual financial report (produced in accordance with the Disclosure and
Transparency Rules) can be found on the Company's website www.clsholdings.com.
The 2024 Annual Report and Accounts is expected to be posted to shareholders
on 14 April 2025 and will also be available on the Company's website.
3. Going concern
Background
CLS' strategy and business model include regular secured loan refinancings,
and capital deployment and recycling through acquisitions, capital expenditure
and disposals. Over the last thirty years, the Group has successfully
navigated several periods of economic uncertainty, including the recent
economic stress resulting from the Covid-19 pandemic, Russia's invasion of
Ukraine and the cost-of-living crisis.
The Group continues to have very high rent collection and low bad debts, and
has a long-term track record in financing and refinancing debt including
£154.5 million completed in 2024, £42.1 million already completed in 2025
and a further £174.1 million has been well advanced subsequent to year-end,
whereby term sheets have been obtained, we have reached a first stage credit
review or short term extensions between 3 to 12 months have been agreed in
anticipation of the planned refinancing of these facilities.
The Directors note that the Group financial statements for the year ended 31
December 2023 contained disclosure of a Material Uncertainty related to going
concern due to the timing and amounts of the planned refinancing of debt and
disposals of property being outside of Management's control. In this context
the Directors set out their considerations and conclusions in respect of going
concern for these financial statements below.
Going concern period and basis
The Group's going concern assessment covers the period to 31 July 2026 ('the
going concern period'). The period chosen takes into consideration the
maturity date of loans totalling £426.0 million that expire by July 2026. The
going concern assessment uses the forecast approved by the Board at its
November 2024 meeting as the Base case. The assessment also considers a Severe
but plausible case. The Directors have considered the period between the date
of Board approval and the date of signing the accounts. Based on a review of
events since Board approval in November 2024, the Directors conclude that
there have been no significant changes since the forecast was approved.
Forecast cash flows - Base case
The forecast cash flows prepared for the Base case take account of the Group's
principal risks and uncertainties, and reflect the challenging economic
backdrop. The forecast cash flows have been updated using assumptions
regarding forecast forward interest curves, inflation and foreign exchange,
and includes revenue growth, principally from contractual increases in rent,
and increasing cost levels in line with forecast inflation.
The Base case is focused on the cash and working capital position of the Group
throughout the going concern period. In this regard, the Base case assumes
continued access to lending facilities in the UK, Germany and France, and
specifically that debt facilities of £426.0 million with 11 lenders expiring
within the going concern period will be refinanced as expected (£303.0
million) or will be repaid (£123.0 million), some of which are linked to
forecast property disposals. The Board acknowledges that these refinancings
are not fully within its control; however, they remain confident that
refinancings or extensions of these loans will be executed within the required
timeframe, having taken into account:
· existing banking relationships and ongoing discussions with the lenders
in relation to these refinancings;
· CLS' track record of prior refinancings, particularly in the 12 months to
31 December 2024 when £154.5 million was successfully refinanced or extended;
and
· recent refinancings subsequent to 31 December 2024 that have completed,
reached an initial credit committee review stage by lenders, or where term
sheets have been obtained, totalling £216.2 million (£66.2 million of which
short term extensions between 3 to 12 months have been agreed in anticipation
of the planned refinancing of these facilities) of the £303.0 million noted
above.
The Base case includes property disposals in the going concern period in line
with the Group's business model and the forecast cash flows approved by the
Board in November 2024. The Board acknowledges that property disposals are not
fully within its control; however, they are confident these transactions will
be completed within the going concern period, based on their history of
achieving disposals (with disposals of £66.1 million achieved in the 12
months to 31 December 2024) and the progress made with the disposal of Spring
Mews Student which has been unconditionally exchanged. The value of the
properties available for disposal is significantly in excess of the value of
the debt maturing during the going concern period.
The Group's financing arrangements, which utilise ring-fenced property loans,
contain Loan-to-Value ('LTV'), Interest Cover Ratio ('ICR') and Debt Service
Coverage Ratio ('DSCR') covenants. In the Base case, minimal cure payments
have been forecast given that the Group expects to maintain its compliance
with the covenant requirements.
The near-term impacts of climate change risks within the going concern period
are expected to be immaterial following an assessment of potential significant
inflation resulting from climate change, in the context of increased property
and administrative costs, as part of the reverse stress testing performed by
CLS. Furthermore, the forecast cash flows prepared for the Base case include
all necessary capital expenditure to meet the minimum energy efficiency
standards required in the countries where CLS operates.
Forecast cash flows - Severe but plausible case
A Severe but plausible case has been assessed which has been produced by
flexing key assumptions further including: lower rents, increased service
charges, higher property and administration expenses, falling property values,
higher interest rates and reduced achievements of refinancings and disposals.
These flexed assumptions are more severe than CLS experienced during the
2007-2009 global financial crisis and other downturns such as that experienced
in 2020-2022 during the Covid-19 pandemic. A key assumption in this scenario
is a further reduction to the Base case in property values of 10% until July
2026, impacting forecast refinancings, sales and cash cures. This is in
addition to the reduction experienced of 12.5% in 2023 and cumulative c.24%
decline from 30 June 2022 to 31 December 2024.
Assumptions around refinancing and investment property disposals are adjusted
to incorporate the higher interest rates and lower property values noted
above. A reduction in property values of 10% results in additional cure
payments of £11.8 million being necessary for the Group to remain in
compliance with its covenant requirements.
Due to the severity of the assumptions used in this scenario, which is Severe
but plausible and therefore not remote, the liquidity of the Group is
exhausted even after putting in place controllable mitigating actions as set
out below.
Mitigating actions
In the Severe but plausible case, CLS is assumed to take mitigating actions in
terms of depositing cash to equity cure some loans, scaling back uncommitted
capital expenditure (without impacting revenue streams over the going concern
period) and reducing the dividend to the Property Income Distribution required
under the UK REIT rules as well as drawing the currently available £42.9
million of its existing £60.0 million revolving credit and overdraft
facilities. If needed, further disposals could be considered as there are no
sale restrictions on CLS' £1.9 billion of properties, albeit the timing and
the amount of these potential disposals are not in the Group's control.
Additionally, the Directors note that the loans that require refinancing in
the going concern period are all through ring-fenced SPV borrower structures.
Accordingly, in extremis, the lender could enforce their security on an
individual property with no claim on the rest of the Group's assets apart from
certain limited guarantees and limited recourse security granted by the
Company and certain Group companies.
Material Uncertainty related to going concern
As described above, the Group is reliant in the Base case and Severe but
plausible case upon its ability to both refinance the debt maturing and to
complete a number of investment property disposals in the going concern period
in challenging market conditions.
Whilst the Directors remain confident that a combination of sufficient
refinancings and property disposals will be achieved, the timing and value of
both the planned refinancing of facilities falling due within the going
concern review period, and planned property disposals, is outside of
Management's control and consequently a material uncertainty exists that may
cast significant doubt on the Group's ability to continue as a going concern.
Notwithstanding this material uncertainty on the going concern assumption,
given our track-record and reputation, the Directors 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, or will be extinguished as part of property
disposals in the period. In extremis, the loans requiring refinancing are all
through ring-fenced SPV borrower structures, save for certain limited
guarantees and limited recourse security granted by the Company and certain
other Group companies. Therefore, the Directors continue to adopt the going
concern basis in preparing these Group financial statements.
The financial statements do not contain the adjustments that would result if
the Group and Company were unable to continue as a going concern.
4. Segment information
Each property represents an operating segment which the Group aggregates into
two reporting segments with similar characteristics - investment properties
and other investments. Other investments comprise the hotel at Spring Mews and
other small corporate investments. Central administration relates to the
operating costs of the Group's headquarters and are not allocated to any
reporting segment. The Group manages the investment properties division on a
geographical basis due to its size and geographical diversity. Consequently,
the Group's principal reporting segments are:
Investment properties: United Kingdom
Germany
France
Other investments
2024
Year ended 31 December 2024 Investment properties Other Central administration Total
£m
investments £m
£m
United Germany France
£m
£m
Kingdom
£m
Rental income 47.1 40.3 12.8 - - 100.2
Other property-related income(1) 13.2 0.3 0.3 6.0 0.1 19.9
Service charge income 15.8 11.0 5.0 - - 31.8
Revenue 76.1 51.6 18.1 6.0 0.1 151.9
Service charges and similar expenses (18.6) (13.6) (5.7) - - (37.9)
Net rental income 57.5 38.0 12.4 6.0 0.1 114.0
Administration expenses (7.4) (3.2) (1.4) (0.1) (5.6) (17.7)
Other property expenses (9.7) (4.1) (0.8) (3.5) - (18.1)
Revenue less costs 40.4 30.7 10.2 2.4 (5.5) 78.2
Net revaluation movements on investment property (73.7) (41.5) (12.5) - - (127.7)
Net revaluation movements on equity investments - - - (0.6) - (0.6)
(Loss)/profit on sale of investment property (1.6) (0.8) - - 0.1 (2.3)
Loss on sale of other equity investments - - - (0.1) - (0.1)
Segment operating (loss)/profit (34.9) (11.6) (2.3) 1.7 (5.4) (52.5)
Finance income 1.0 - - 0.4 - 1.4
Finance costs (26.9) (14.2) (4.3) - (0.3) (45.7)
Foreign exchange loss - - - (0.6) - (0.6)
Segment (loss)/profit before tax (60.8) (25.8) (6.6) 1.5 (5.7) (97.4)
1 Other property-related income includes an amount of £2.9 million in
the United Kingdom segment which is the forfeited deposit, net of costs, from
the original purchaser upon their failure to complete on the sale of
Westminster Tower.
2023
Year ended 31 December 2023 Investment properties Other Central administration Total
£m
investments £m
£m
United Germany France
£m
£m
Kingdom
£m
Rental income 46.4 43.2 13.2 - - 102.8
Other property-related income 8.9 0.6 0.9 5.5 - 15.9
Service charge income 13.4 11.7 4.9 - - 30.0
Revenue 68.7 55.5 19.0 5.5 - 148.7
Service charges and similar expenses (16.3) (14.0) (5.4) - - (35.7)
Net rental income 52.4 41.5 13.6 5.5 - 113.0
Administration expenses (7.5) (3.2) (1.3) (0.1) (6.1) (18.2)
Other property expenses (8.6) (4.2) (0.4) (2.4) - (15.6)
Revenue less costs 36.3 34.1 11.9 3.0 (6.1) 79.2
Net revaluation movements on investment property (186.6) (90.6) (25.5) - - (302.7)
Net revaluation movements on equity investments - - - (1.3) - (1.3)
Profit/(loss) on sale of investment property 0.4 (1.6) (0.1) 2.7 - 1.4
Segment operating (loss)/profit (149.9) (58.1) (13.7) 4.4 (6.1) (223.4)
Finance income 0.1 - - 1.5 - 1.6
Finance costs (25.2) (11.9) (4.0) - (0.2) (41.3)
Foreign exchange gain/(loss) - - 0.1 (0.4) - (0.3)
Segment (loss)/profit before tax (175.0) (70.0) (17.6) 5.5 (6.3) (263.4)
Other segment information
Assets Liabilities Capital expenditure
2024 2023 2024 2023 2024 2023
£m
£m
£m
£m
£m
£m
Investment properties
United Kingdom 825.1 930.0 510.5 548.2 9.4 37.2
Germany 828.8 908.1 477.4 510.8 8.3 9.3
France 233.2 265.0 158.4 164.3 3.4 3.1
Other investments 44.7 57.8 1.3 8.4 - 0.8
1,931.8 2,160.9 1,147.6 1,231.7 21.1 50.4
5. Alternative Performance Measures
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 across the European
real estate sector. 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 (European Public Real Estate Association
('EPRA') APMs and similar CLS APMs) which are reconciled where possible to
statutory measures on the following pages.
CLS monitors the Group's financial performance using APMs which are EPRA
measures as these are a set of standard disclosures for the property industry
and thus aid comparability for our stakeholder users. CLS considers the two
measures below to be the most relevant as we believe that these will continue
to reflect the long-term nature of our property investments most accurately:
· EPRA earnings; and
· EPRA net tangible asset value ('NTA').
The Group adopted the EPRA Best Practice Recommendations ('BPRs') September
2024 in the current reporting period. This has not had a material impact on
the Group's reported EPRA earnings and there has been no change to the Group's
APMs in the year with the same APMs utilised by the business being defined,
calculated and used on a consistent basis. All other EPRA measures are shown
within the supplementary unaudited disclosures to the financial statements.
1. EPRA APMs
For use in earnings per share calculations 2024 2023
Number
Number
Weighted average number of ordinary shares in circulation 397,410,268 397,330,507
Diluted number of ordinary shares 402,916,907 400,942,040
For use in net asset per share calculations
Number of ordinary shares in circulation at 31 December 397,410,268 397,410,268
i) Earnings - EPRA earnings
Notes 2024 2023
£m £m
Loss for the year (93.6) (249.8)
Net revaluation movement on investment property 12/14 127.7 302.7
Deferred tax on revaluations (6.6) (16.3)
Net revaluation movement on equity investments 0.6 1.3
Loss/(profit) on sale of investment property 2.3 (1.4)
Current tax thereon 2.1 -
Movement in fair value of derivative financial instruments 9 3.4 4.2
Loss from sale of equity investments 0.1 -
Amortisation of intangible assets 0.4 0.2
EPRA earnings 36.4 40.9
Basic and diluted loss per share (23.6)p (62.9)p
EPRA earnings per share 9.2p 10.3p
ii) Net asset value measures
2024 2023
2024 IFRS EPRA EPRA EPRA IFRS EPRA EPRA EPRA
NAV NTA NRV NDV NAV NTA NRV NDV
£m
£m
£m
£m
£m £m £m £m
IFRS Net assets 784.2 784.2 784.2 784.2 929.2 929.2 929.2 929.2
Other intangibles - (2.7) - - - (2.9) - -
Fair value of fixed interest debt - - - 50.4 - - - 56.7
Tax thereon - - - (1.7) - - - (3.3)
Deferred tax on revaluation surplus - 79.8 79.8 - - 90.0 90.0 -
Adjustment for short-term disposals - (5.5) - - - (6.6) - -
Fair value of financial instruments - (1.4) (1.4) - - (4.3) (4.3) -
Purchasers' costs(1) - - 132.6 - - - 147.7 -
784.2 854.4 995.2 832.9 929.2 1,005.4 1,162.6 982.6
Per share 197.3p 215.0p 250.4p 209.6p 233.8p 253.0p 292.5p 247.2p
1 EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers'
costs. Purchasers' costs are added back when calculating EPRA NRV.
6. Loss for the year
Loss for the year has been arrived at after charging:
Notes 2024 2023
£m £m
Auditor's remuneration: Fees payable to the Company's Auditor for:
Audit of the Parent Company and Group accounts 0.7 0.5
Audit of the Company's subsidiaries pursuant to legislation 0.1 0.2
Audit overrun fee for prior year(1) 0.2 -
Depreciation of property, plant and equipment 13 0.6 0.6
Amortisation of intangible assets 0.4 0.2
Employee benefits expense 7 11.6 12.1
Foreign exchange loss 0.6 0.3
Provision against trade and other receivables 15 0.1 -
1 The fee was paid to the previous auditor for overruns relating to the
2023 audit.
Other services provided to the Group by the Company's Auditor consisted of the
2024 interim review of £nil (2023: £76k for the previous auditor) and the
provision of access to a technical financial reporting database of £nil
(2023: £1k for the previous auditor).
7. Employee benefits expense
2024 2023
£m
£m
Wages and salaries 7.4 7.6
Social security costs 1.4 1.4
Pension costs - defined contribution plans 0.4 0.3
Performance incentive plan 0.8 1.2
Other employee-related expenses 1.6 1.6
11.6 12.1
The Directors are considered to be the only key management of the Group.
Information on Directors' emoluments, share options and interests in the
Company's shares is given in the Remuneration Committee Report.
The monthly average number of employees of the Group in continuing operations,
including Executive Directors, was as follows:
2024 2023
Property Number Hotel Total Property Number Hotel Total
Number
Number
Number
Number
Male 53 11 64 50 11 61
Female 49 10 59 48 9 57
102 21 123 98 20 118
8. Finance income
2024 2023
£m
£m
Interest income
Financial instruments carried at amortised cost 1.4 1.6
1.4 1.6
9. Finance costs
2024 2023
£m
£m
Interest expense
Secured bank loans 40.6 35.5
Amortisation of loan issue costs 1.7 1.6
Total interest costs 42.3 37.1
Movement in fair value of derivative financial instruments 3.4 4.2
Total finance costs 45.7 41.3
10. Taxation
2024 2023
£m
£m
Corporation tax
Current year charge 3.0 5.6
Adjustments in respect of prior years 0.1 (1.9)
3.1 3.7
Deferred tax (see note 18)
Origination and reversal of temporary differences (6.9) (17.3)
(6.9) (17.3)
Tax credit for the year (3.8) (13.6)
A deferred tax charge of £0.1 million (2023: £0.6 million) was recognised
directly in equity (note 18). The (credit)/charge for the year differs from
the theoretical amount which would arise using the weighted average tax rate
applicable to profits of Group companies as follows:
2024 2023
£m
£m
Loss before tax (97.4) (263.4)
Expected tax credit at applicable tax rate (21.2) (56.3)
Expenses not deductible for tax purposes 0.3 0.3
Non-deductible loss from REIT 13.4 42.9
Deferred tax on losses not recognised 3.8 3.7
Adjustments in respect of prior years 0.2 (3.8)
Other (0.3) (0.4)
Tax credit for the year (3.8) (13.6)
The weighted average applicable tax rate of 21.8% (2023: 21.4%) was derived by
applying to their relevant profits and losses the rates in the jurisdictions
in which the Group operated. The standard UK rate of corporation tax applied
to profits is 25.0% (2023: 23.5%).
11. Property portfolio
Notes United Kingdom Germany France Total
£m
£m
£m
£m
Investment property 12 657.0 793.6 225.9 1,676.5
Property held as property, plant and equipment 13 37.5 1.6 1.6 40.7
Properties held for sale 14 112.5 20.5 - 133.0
Property portfolio at 31 December 2024 807.0 815.7 227.5 1,850.2
Notes United Kingdom Germany France Total
£m
£m
£m
£m
Investment property 12 836.3 768.2 246.0 1,850.5
Property held as property, plant and equipment 13 36.3 1.7 1.7 39.7
Properties held for sale 14 47.3 115.6 9.8 172.7
Property portfolio at 31 December 2023 919.9 885.5 257.5 2,062.9
12. Investment property
United Kingdom Germany France Total
£m
£m
£m
investment
properties
£m
At 1 January 2024 836.3 768.2 246.0 1,850.5
Acquisitions - - - -
Capital expenditure 9.4 8.3 3.4 21.1
Disposals (8.2) - - (8.2)
Net revaluation movement (73.7) (41.5) (12.5) (127.7)
Lease incentive adjustments(1) (0.8) 11.2 - 10.4
Exchange rate variances - (36.8) (11.0) (47.8)
Reclassification to property, plant and equipment - (0.1) - (0.1)
Transfer (to)/from properties held for sale (106.0) 84.3 - (21.7)
At 31 December 2024 657.0 793.6 225.9 1,676.5
United Kingdom Germany France Total
£m
£m
£m
investment
properties
£m
At 1 January 2023 1,030.0 990.5 274.5 2,295.0
Acquisitions - - - -
Capital expenditure 37.2 9.3 3.1 49.6
Disposals (3.7) (6.6) - (10.3)
Net revaluation movement (186.1) (90.6) (25.5) (302.2)
Lease incentive adjustments (0.3) 1.6 (0.2) 1.1
Exchange rate variances - (20.3) (5.7) (26.0)
Transfer to properties held for sale (40.8) (115.7) (0.2) (156.7)
At 31 December 2023 836.3 768.2 246.0 1,850.5
1 Increase in the lease incentive adjustments in Germany primarily
relates to the tenant incentive works conducted at the Brix, Essen in advance
of a 30 year lease with the City of Essen.
Investment properties included leasehold properties with a carrying amount of
£62.4 million (2023: £65.1 million).
Interest capitalised within capital expenditure in the year amounted to £nil
(2023: £1.0 million).
The property portfolio, which comprises investment properties, properties held
for sale (note 14), and hotel and other, detailed in note 13, was revalued
at 31 December 2024 to its fair value. Valuations were based on current
prices in an active market for all properties. The property valuations were
carried out by independent external valuers as follows:
Investment property Other property Property portfolio Investment property Other property Property portfolio
2024 2024 2024 2023 2023 2023
£m
£m
£m
£m
£m £m
Cushman and Wakefield 657.0 150.0 807.0 836.3 83.6 919.9
Jones Lang LaSalle 1,019.5 23.7 1,043.2 1,014.2 128.8 1,143.0
1,676.5 173.7 1,850.2 1,850.5 212.4 2,062.9
The total fees, including the fees for this assignment, earned by each of the
valuers from the Group is less than 5% of their total revenues in each
jurisdiction.
Valuation process
The Group's property portfolio was valued by independent 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 Valuation -
Global standards.
Each Country Head, who reports to the Chief Executive Officer, verifies all
major inputs to the external valuation reports, assesses the individual
property valuation changes from the prior year valuation report and holds
discussions with the external valuers. When the process is complete, the
valuation report is recommended to the Audit Committee and the Board, which
considers it as part of its overall responsibilities.
Valuation techniques
The fair value of the property portfolio (excluding ongoing developments, see
below) has been determined using the following approaches, which are
consistent with valuation methodologies in their respective countries, and are
in accordance with RICS Valuation - Global Standards:
United Kingdom an income capitalisation approach whereby contracted and market rental values
are capitalised with a market capitalisation rate
Germany a 10 year discounted cash flow model with an assumed exit thereafter
France both the market capitalisation approach and a 10 year discounted cash flow
approach
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 method as the income capitalisation approach to 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.
All valuations have considered the environmental, social and governance
credentials of the properties and the potential cost of improving them to
local regulatory standards along with the broader potential impact of climate
change.
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 2024 or 2023. The Group determines whether transfers have
occurred between levels in the fair value hierarchy by reassessing
categorisation at the end of each reporting period.
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 £127.7 million (2023: a loss of £302.7 million) and are presented
in the income statement in the line item 'Net revaluation movements on
investment property'. The revaluation gain for the property, plant and
equipment of £1.3 million (2023: gain of £2.2 million) was included within
the revaluation reserve via other comprehensive income.
All gains and losses recorded in profit or loss in 2024 and 2023 or recurring
fair value measurements categorised within Level 3 of the fair value hierarchy
are attributable to changes in unrealised gains or losses relating to
investment property held at 31 December 2024 and 31 December 2023,
respectively.
Quantitative information about investment property fair value measurement using unobservable inputs (Level 3)
ERV Equivalent yield
Average Range Average Ra
ng
e
2024 2023 2024 2023 2024 2023 2024 2023
£ per sq. ft £ per sq. ft £ per sq. ft £ per sq. ft % % % %
UK 38.08 34.76 10.00-56.41 10.00-56.05 7.39 6.08 6.21-10.03 2.98-13.23
Germany 13.41 14.40 9.19-27.59 9.93-29.70 5.23 5.24 4.30-6.40 4.40-6.20
France 21.42 21.96 12.40-45.25 12.99-43.53 6.13 6.00 4.82-7.50 4.79-7.40
Sensitivity of measurement to variations in the significant unobservable inputs
All other factors remaining constant, an increase in estimated rental value
'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 £79.3
million (2023: £84.8 million) whilst a 25 basis point increase would reduce
the fair value by £79.2 million (2023: £85.4 million). A decrease in the ERV
by 5% would result in a decrease in the fair value of the Group's investment
property by £70.7 million (2023: £79.0 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 £64.4 million (2023: £70.7
million).
Where the Group leases out its investment property under operating leases the
duration is typically three years or more. No material variable contingent
rents have been recognised in the current or prior year.
13. Property, plant and equipment
Hotel Owner- occupied property Fixtures Total
£m
£m
and fittings
£m
£m
Cost or valuation
At 1 January 2023 26.7 10.8 3.5 41.0
Additions 0.5 - 0.3 0.8
Reclassification (to)/from fixtures and fittings (0.2) - 0.2 -
Revaluation 3.2 (1.2) - 2.0
Exchange rate variances - (0.1) (0.1) (0.2)
At 31 December 2023 30.2 9.5 3.9 43.6
Additions - - 0.2 0.2
Disposals - - (0.1) (0.1)
Reclassification from investment properties - 0.1 - 0.1
Revaluation 1.2 (0.1) - 1.1
Exchange rate variances - (0.2) - (0.2)
At 31 December 2024 31.4 9.3 4.0 44.7
Comprising:
At cost - - 4.0 4.0
At valuation 31.4 9.3 - 40.7
31.4 9.3 4.0 44.7
Accumulated depreciation and impairment
At 1 January 2023 - - (1.4) (1.4)
Depreciation charge (0.1) (0.1) (0.4) (0.6)
Revaluation 0.1 0.1 - 0.2
At 31 December 2023 - - (1.8) (1.8)
Depreciation charge (0.1) (0.1) (0.4) (0.6)
Revaluation 0.1 0.1 - 0.2
At 31 December 2024 - - (2.2) (2.2)
Net book value
At 31 December 2024(1) 31.4 9.3 1.8 42.5
At 31 December 2023 30.2 9.5 2.1 41.8
1 If the assets were held at cost, the carrying amount at 31 December
2024 would be £20.2 million for Hotel and £6.8 million for Owner-occupied
property.
Valuation techniques
The fair value of the hotel and owner-occupied property has been determined
using the following approach in accordance with International Valuation
Standards:
Hotel a 10 year discounted cash flow model with an assumed exit thereafter. The
projected EBITDA in the 11th year is capitalised at a market yield before
being brought back to present day values
Owner-occupied an income capitalisation approach whereby contracted and market rental values
property are capitalised with a market capitalisation rate
This technique is consistent with the principles in IFRS 13 Fair Value
Measurement and uses significant unobservable inputs such that the fair value
measurement of the hotel within the portfolio has been classified as Level 3
in the fair value hierarchy.
Sensitivity of measurement to variations in the significant unobservable inputs
All other factors remaining constant, an increase in EBITDA would increase the
valuation, whilst an increase in exit capitalised yield would result in a
fall in value, and vice versa. A decrease in the exit capitalisation yield by
100 basis points would result in an increase in the fair value of the hotel
by £5.5 million, whilst a 100 basis point increase would reduce the fair
value by £4.1 million. A decrease in EBITDA by 5% would result in a decrease
in the fair value of the hotel by £1.6 million whilst an increase in the
EBITDA by 5% would result in an increase in the fair value of the hotel by
£1.6 million.
14. Assets held for sale
2024 2023
UK Germany France Total UK Germany France Total
£m
£m
£m
£m
£m
£m
£m
£m
At 1 January 47.3 115.6 9.8 172.7 7.0 3.6 9.7 20.3
Disposals (40.8) (8.3) (9.8) (58.9) - (3.6) - (3.6)
Transfer from/(to) investment property 106.0 (84.3) - 21.7 40.8 115.6 0.3 156.7
Revaluation - - - - (0.5) - - (0.5)
Exchange rate variances - (2.5) - (2.5) - - (0.2) (0.2)
At 31 December 112.5 20.5 - 133.0 47.3 115.6 9.8 172.7
The balance above comprises 4 properties (2023: 6 properties) that at the
year-end were being marketed for sale and are expected to be disposed of
within 12 months via an open market process. The properties are situated in
the UK and Germany. The Directors expect that the sale proceeds achieved to be
similar to their carrying amounts.
Three properties classified as held for sale at 31 December 2023 were
transferred back into investment property during the period. Despite the
Directors determining these properties met the threshold of held for sale as
at 31 December 2023, a suitable purchaser was not identified for these
properties and they are no longer classified as held for sale, as they were
not being actively marketed at 31 December 2024. As held for sale properties
are held at fair value, the change in classification has no material impact on
the financial statements.
15. Trade and other receivables
2024 2023
£m
£m
Current
Trade receivables 4.2 8.8
Other receivables 5.3 4.4
Prepayments 2.7 1.4
Accrued income 2.0 2.1
14.2 16.7
Trade receivables are shown after deducting a provision of £1.7 million
(2023: £1.9 million) which is calculated as an expected credit loss. The
movements in this provision were as follows:
2024 2023
£m
£m
At 1 January 1.9 2.8
Debt write-offs (0.3) (0.9)
Charge to the income statement 0.1 -
At 31 December 1.7 1.9
The Group uses a provision matrix to calculate the expected credit loss for
trade receivables. The provision rates are based on the Group's historical
observed aging of debt and the probability of default. At every reporting
date, the provision rates are updated to incorporate the previous 12 months'
data and forward-looking information such as actual and potential impacts of
political and economic uncertainty, if applicable. In addition, on a
tenant-by-tenant basis, the Group takes into account any recent payment
behaviours and future expectations of likely default events. Specific
provisions are made in excess of the expected credit loss where information is
available to suggest a higher provision is required, for example individual
customer credit ratings, actual or expected insolvency filings or company
voluntary arrangements, likely deferrals of payments due, agreed rent
concessions and market expectations and trends in the wider macro-economic
environment in which our customers operate. An additional review of tenant
debtors was undertaken to assess recoverability in light of the political and
economic uncertainty.
The Directors consider that the carrying amount of trade and other receivables
is approximate to their fair value. There is no concentration of credit risk
with respect to trade receivables as the Group has a large number of customers
who are paying their rent in advance. Further details about the Group's
credit risk management practices are disclosed in note 21.
16. Cash and cash equivalents
2024 2023
£m
£m
Cash at bank 60.5 70.6
At 31 December 2024, cash at bank included £41.4 million (2023: £26.1
million) which was restricted by a third-party charge. £10.1 million of the
restricted cash related to tenant deposits (2023: £10.7 million).
17. Trade and other payables
2024 2023
£m
£m
Current
Trade payables 5.2 4.1
Social security and other taxes 1.7 2.2
Tenant deposits 10.1 10.7
Other payables 4.6 5.7
Deferred income 14.5 20.5
Accruals 29.6 25.4
65.7 68.6
18. Deferred tax
Liabilities Assets Total deferred
tax
£m
UK capital Fair value Other Total UK capital Losses Other Total
allowances
adjustments to properties
£m
£m
allowances
£m
£m
£m
£m £m £m
At 1 January 2023 0.3 108.6 1.6 110.5 - (2.6) (0.2) (2.8) 107.7
Charged/(credited)
to income statement 0.4 (17.0) (0.1) (16.7) - (0.7) 0.1 (0.6) (17.3)
to OCI(1) - 0.6 - 0.6 - - - - 0.6
Exchange rate variances - (2.3) - (2.3) - - - - (2.3)
At 31 December 2023 0.7 89.9 1.5 92.1 - (3.3) (0.1) (3.4) 88.7
Charged/(credited)
to income statement 0.2 (7.6) (0.2) (7.6) - 1.0 (0.3) 0.7 (6.9)
to OCI(1) - 0.1 - 0.1 - - - - 0.1
Exchange rate variances - (3.8) - (3.8) - - - - (3.8)
At 31 December 2024 0.9 78.6 1.3 80.8 - (2.3) (0.4) (2.7) 78.1
1 Other Comprehensive Income.
Deferred tax has been calculated based on local rates applicable under local
legislation substantively enacted at the balance sheet date.
Deferred tax assets are recognised in respect of tax losses carried forward to
the extent that the realisation of the related tax benefit through future
taxable profits is probable. At 31 December 2024 the Group offset tax losses
valued at the applicable local tax rate of £13.3 million (2023: £12.8
million) against the deferred tax liability arising on the fair value
adjustments to properties. At 31 December 2024 the Group did not recognise
deferred tax assets of £13.6 million (2023: £13.2 million) in respect of
losses amounting to £78.8 million (2023: £76.1 million) which may be carried
forward and utilised against future taxable income or gains. There is no
expiry period for the carried forward tax losses.
19. Borrowings
At 31 December 2024 At 31 December 2023
Current Non-current Total borrowings £m Current Non- Total borrowings £m
£m
£m
current
£m
£m
Secured bank loans 372.4 626.8 999.2 193.9 876.7 1,070.6
Issue costs of £4.3 million (2023: £5.0 million) have been offset in
arriving at the balances in the above tables.
Secured bank loans
Interest on bank loans is charged at fixed rates ranging between 0.8% and 5.6%
including margin (2023: 0.8% and 5.1%) and at floating rates of typically
SONIA or EURIBOR plus a margin. Floating rate margins range between 1.1% and
2.8% (2023: 1.1% and 2.8%). The bank loans are secured by legal charges over
£1,808.9 million (2023: £1,988.8 million) of the Group's properties, and in
most cases a floating charge over the remainder of the assets held in the
company which owns the property. In addition, the share capital of some
of the subsidiaries within the Group has been charged.
Secured green loans
The Group's debt portfolio includes two sustainability linked loans:
· £149.5 million maturing between 2030 and 2032
· £58.5 million maturing in 2033
These loans have a basis point margin incentive for meeting annual
sustainability targets which align with our Net Zero Carbon Pathway for the
properties which are securing them. The targets have been independently
verified to be aligned with the Loan Market Association (LMA)
Sustainability-Linked loan principles. The targets set for any given year are
based on actual ESG
data/milestones achieved in the prior year. Each of the 2024 targets (tested
on 31 December 2023 actual results) have been met resulting in lower interest
rates being applied to these loans. The reduction in interest rate margin is
not considered to be a substantial modification of the loan terms.
Capitalised interest
Interest capitalised within investment property capital expenditure during the
year was £nil (2023: £1.0 million).
The Group has complied with all externally imposed capital requirements to
which it was subject.
The maturity profile of the carrying amount of the Group's borrowings was as
follows:
At 31 December 2024 Secured
bank loans
£m
Maturing in: 373.7
Within one year or on demand
One to two years 98.9
Two to five years 326.8
More than five years 204.1
1,003.5
Unamortised issue costs (4.3)
Borrowings 999.2
Due within one year (372.4)
Due after one year 626.8
At the year ended 31 December 2023, £195.4 million of borrowings were due for
repayment within one year and £327.0 million was due within one to two years
excluding unamortised issue costs. During 2024, CLS refinanced £154.5 million
of which £74.4 million was classified as new loans.
At 31 December 2023 Secured
bank loans
£m
Maturing in: 195.4
Within one year or on demand
One to two years 327.0
Two to five years 331.0
More than five years 222.2
1,075.6
Unamortised issue costs (5.0)
Borrowings 1,070.6
Due within one year (193.9)
Due after one year 876.7
The carrying amounts of the Group's borrowings are denominated in the
following currencies:
At 31 December 2024 At 31 December 2023
Sterling Euro Total Sterling Euro Total
£m
£m
£m
£m
£m
£m
Fixed rate financial liabilities 236.1 439.6 675.7 238.9 462.4 701.3
Floating rate financial liabilities - swaps 107.7 16.1 123.8 115.3 - 115.3
Total fixed rate 343.8 455.7 799.5 354.2 462.4 816.6
Floating rate financial liabilities - capped - 37.8 37.8 - 40.6 40.6
Floating rate financial liabilities 131.1 35.1 166.2 159.9 58.5 218.4
Total floating rate 131.1 72.9 204.0 159.9 99.1 259.0
474.9 528.6 1,003.5 514.1 561.5 1,075.6
Unamortised issue costs (2.4) (1.9) (4.3) (3.3) (1.7) (5.0)
Borrowings 472.5 526.7 999.2 510.8 559.8 1,070.6
Of the Group's total borrowings, 80% (2023: 76%) are considered fixed rate
borrowings.
At 31 December 2024, the Group had interest rate swap agreements in place with
an aggregate notional amount of £123.8 million (2023: £115.3 million)
whereby the Group pays an average fixed rate of interest of 2.72% and receives
interest at a daily variable rate. The swap is being used to hedge the
exposure to changes in the variable rate of Sterling and Euro denominated
loans.
The interest rate risk profile of the Group's borrowings was as follows:
At 31 December 2024 Weighted average interest rate(1) Weighted average life
Sterling Euro Total Sterling Euro Total
%
%
%
Years
Years
Years
Fixed rate financial liabilities 2.7 3.0 2.9 6.4 2.5 3.8
Floating rate financial liabilities - swaps 5.4 4.9 5.3 0.5 4.5 1.1
3.5 3.1 3.3 4.5 2.5 3.4
Floating rate financial liabilities - capped - 2.6 2.6 - 2.8 2.8
Floating rate financial liabilities 7.1 4.4 6.5 0.9 7.1 2.2
7.1 3.4 5.8 0.9 4.9 2.3
Gross borrowings 4.5 3.1 3.8 3.5 2.9 3.2
At 31 December 2023 Weighted average interest rate(1) Weighted average life
Sterling Euro Total Sterling Euro Total
%
%
%
Years
Years
Years
Fixed rate financial liabilities 2.7 2.5 2.5 7.4 2.8 4.4
Floating rate financial liabilities - swaps 4.7 - 4.7 - - 1.0
3.3 2.5 2.8 5.3 2.8 3.9
Floating rate financial liabilities - capped - 2.6 2.6 - 3.8 3.8
Floating rate financial liabilities 7.1 5.2 6.6 1.6 2.9 1.9
7.1 4.2 6.0 1.6 3.3 2.2
Gross borrowings 4.5 2.8 3.6 4.1 2.9 3.5
1 The weighted average interest rates are based on the nominal value of
the debt facilities.
The carrying amounts and fair values of the Group's borrowings are as follows:
Carrying amounts Fair values
2024 2023 2024 2023
£m
£m
£m
£m
Current borrowings 372.4 193.9 372.4 193.9
Non-current borrowings 626.8 876.7 629.8 820.0
999.2 1,070.6 1,002.2 1,013.9
The valuation methods used to measure the fair values of the Group's fixed
rate borrowings were derived from inputs which were either observable as
prices or derived from prices taken from Bloomberg (Level 2).
The Group had the following undrawn committed facilities available at 31
December:
2024 2023
£m
£m
Floating rate:
- expiring within one year 20.0 -
- expiring after one year(1) 30.0 50.0
50.0 50.0
1 This facility is secured by selected UK properties.
In addition to the above committed facilities, at 31 December 2024, the Group
has £10.0 million of uncommitted facilities available (2023: £nil).
Contractual undiscounted cash outflows
The tables below show the contractual undiscounted cash outflows arising from
the Group's gross debt.
At 31 December 2024 Less than 1 to 2 2 to 3 3 to 4 4 to 5 Over Total
1 year
years
years
years
years
5 years
£m
£m
£m
£m
£m
£m £m
Secured bank loans 373.7 98.9 125.8 115.6 85.4 204.1 1,003.5
Interest payments on borrowings(1) 36.0 17.7 14.8 11.1 8.2 13.8 101.6
Effect of interest rate swaps (1.3) 0.1 0.1 0.1 - - (1.0)
Effect of interest rate caps (0.4) (0.2) (0.1) - - - (0.7)
Gross loan commitments 408.0 116.5 140.6 126.8 93.6 217.9 1,103.4
At 31 December 2023 Less than 1 to 2 2 to 3 3 to 4 4 to 5 Over Total
1 year
years
years
years
years
5 years
£m
£m
£m
£m
£m
£m £m
Secured bank loans 195.3 327.0 75.5 135.7 119.8 222.2 1,075.5
Interest payments on borrowings(1) 39.4 32.8 14.9 12.3 8.2 17.6 125.2
Effect of interest rate swaps (2.8) (0.6) - - - - (3.4)
Effect of interest rate caps (0.8) (0.4) (0.3) (0.1) - - (1.6)
Gross loan commitments 231.1 358.8 90.1 147.9 128.0 239.8 1,195.8
1 Interest payments on borrowings are calculated without taking into
account future events. Floating rate interest is estimated using a future
interest rate curve as at 31 December.
20. Derivative financial instruments
2024 2024 2023 2023
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
Non-current:
Interest rate caps and swaps 0.7 (0.4) 3.6 -
Current:
Interest rate caps and swaps 1.1 - 0.7 -
1.8 (0.4) 4.3 -
The valuation methods used to measure the fair value of all derivative
financial instruments were derived from inputs which were either observable as
prices or derived from prices (Level 2).
There were no derivative financial instruments accounted for as hedging
instruments.
Interest rate caps
The aggregate notional principal of interest rate caps at 31 December 2024 was
£37.8 million (2023: £40.8 million). The average period to maturity
of these interest rate caps was 1.7 years (2023: 2.7 years).
Interest rate swaps
The aggregate notional principal of interest rate swap contracts at 31
December 2024 was £123.8 million (2023: £115.3 million). The average period
to maturity of these interest rate swaps was 2.5 years (2023: 0.9 years).
Forward foreign exchange contracts
The Group uses forward foreign exchange contracts from time to time to add
certainty to, and to minimise the impact of foreign exchange movements on,
committed cash flows. At 31 December 2024, the Group had no outstanding
foreign exchange contracts (2023: none).
Derivative financial instruments cash flows
The following table provides an analysis of the anticipated contractual cash
flows for the derivative financial instruments using undiscounted cash flows.
These amounts represent the gross cash flows of the derivative financial
instruments and are settled as either a net payment or receipt.
2024 2024 2023 2023
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
Maturing in:
Less than 1 year 1.8 - 3.8 -
1 to 2 years 0.2 (0.1) 1.0 -
2 to 3 years 0.1 (0.1) 0.3 -
3 to 4 years - (0.1) 0.1 -
4 to 5 years - (0.1) - -
Over 5 years - - - -
2.1 (0.4) 5.2 -
21. Financial instruments
Categories of financial instruments
Financial assets of the Group comprise: interest rate caps; foreign currency
forward contracts; financial assets at fair value through other comprehensive
income or fair value through profit and loss; trade and other receivables; and
cash and cash equivalents.
Financial liabilities of the Group comprise: interest rate swaps; forward
foreign currency contracts; bank loans; secured notes; and trade and other
payables.
The fair values of financial assets and liabilities are determined as follows:
(a) Interest rate swaps and caps are measured at the present value of future
cash flows based on applicable yield curves derived from quoted interest
rates;
(b) Foreign currency options and forward contracts are measured using quoted
forward exchange rates discounted to their present value based on applicable
yield curves derived from quoted interest rates;
(c) The fair values of non-derivative financial assets and liabilities with
standard terms and conditions and traded on active liquid markets are
determined with reference to quoted market prices. Financial assets in this
category include financial assets at fair value through other comprehensive
income or fair value through profit and loss such as equity investments;
(d) In more illiquid conditions, non-derivative financial assets are valued
using multiple quotes obtained from market makers and from pricing
specialists. Where the spread of prices is tightly clustered the consensus
price is deemed to be fair value. Where prices become more dispersed or there
is a lack of available quoted data, further procedures are undertaken such
as evidence from the last non-forced trade; and
(e) The fair values of other non-derivative financial assets and financial
liabilities are determined in accordance with generally accepted pricing
models based on discounted cash flow analysis, using prices from observable
current market transactions and dealer quotes for similar instruments.
Except for fixed rate loans, the carrying amounts of financial assets and
liabilities recorded at amortised cost approximate to their fair value.
Capital risk management
The Group manages its capital to ensure that entities within the Group will be
able to continue as going concerns while maximising the return to stakeholders
through the optimisation of debt and equity balances. The capital structure of
the Group consists of debt, cash and cash equivalents and equity attributable
to the owners of the parent, comprising issued capital, reserves and retained
earnings. Management perform 'stress tests' of the Group's business model to
ensure that the Group's objectives can be met and these objectives were met
during 2024 and 2023.
The Directors review the capital structure on a quarterly basis to ensure that
key strategic goals are being achieved. As part of this review they consider
the cost of capital and the risks associated with each class of capital.
The gearing ratio at the year-end was as follows:
Notes 2024 2023
£m
£m
Debt 19 1,003.5 1,075.6
Liquid resources 16 (60.5) (70.6)
Net debt (A) 943.0 1,005.0
Equity (B) 784.2 929.2
Net debt to equity ratio (A/B) 120.2% 108.2%
Debt is defined as long-term and short-term borrowings before unamortised
issue costs as detailed in note 19. Liquid resources are cash and short-term
deposits. Equity includes all capital and reserves of the Group attributable
to the owners of the Company.
Externally imposed capital requirement
The Group was subject to externally imposed capital requirements to the extent
that debt covenants may require Group companies to maintain ratios such as
debt to equity (or similar) below certain levels.
Risk management objectives
The Group's activities expose it to a variety of financial risks, which can be
grouped as:
· market risk;
· credit risk; and
· liquidity risk.
The Group's overall risk management approach seeks to minimise potential
adverse effects on the Group's financial performance whilst maintaining
flexibility.
Risk management is carried out by the Group's treasury department in close
co-operation with the Group's operating units and with guidance from the Board
of Directors. The Board regularly assesses and reviews the financial risks and
exposures of the Group.
(a) Market risk
The Group's activities expose it primarily to the financial risks of changes
in interest rates and foreign currency exchange rates, and to a lesser extent
other price risk such as inflation. The Group enters into a variety of
derivative financial instruments to manage its exposure to interest rate and
foreign currency risk and also uses natural hedging strategies such as
matching the duration, interest payments and currency of assets and
liabilities. There has been no change to the Group's exposure to market risks
or the manner in which these risks are managed and measured.
(I) Interest rate risk
The Group's most significant interest rate risk arises from its long-term
variable rate borrowings. Interest rate risk is regularly monitored by the
treasury department and by the Board on both a country and a Group basis. The
Board's policy is to mitigate variable interest rate exposure whilst
maintaining the flexibility to borrow at the best rates and with consideration
to potential penalties on termination of fixed rate loans. To manage its
exposure the Group uses interest rate swaps, interest rate caps and natural
hedging from cash held on deposit.
In assessing risk, a range of scenarios is taken into consideration such as
refinancing, renewal of existing positions, and alternative financing and
hedging. Under these scenarios, the Group calculates the impact on the income
statement for a defined movement in the underlying interest rate. The impact
of a reasonably likely movement in interest rates, based on historic trends,
is set out below:
Scenario 2024 2023
Income statement & equity
Income statement & equity
£m
£m
Cash +50 basis points 0.3 0.4
Variable borrowings (including swaps and caps) +50 basis points (1.8) (2.6)
Cash -50 basis points (0.3) (0.4)
Variable borrowings (including swaps and caps) -50 basis points 1.0 1.3
An increase or decrease of 100 basis points on the cash balance would result
in a gain/(loss) of £0.6 million/(£0.6 million) from cash and cash
equivalents. An increase of 100 basis points on variable borrowings would
result in a loss of £1.3 million and a decrease of 100 basis points on
variable borrowings would result in a gain of £2.0 million.
(II) Foreign exchange risk
The Group does not have any regular transactional foreign exchange exposure.
However, it has operations in Europe which transact business denominated in
Euros and, to a minimal extent, in Swedish krona. Consequently, there is
currency exposure caused by translating into Sterling the local trading
performance and net assets for each financial period and balance sheet,
respectively.
The policy of the Group is to match the currency of investments with the
related borrowing, which reduces foreign exchange risk on property
investments. A portion of the remaining operations, equating to the net assets
of the foreign property operations, is not hedged except in exceptional
circumstances. Where foreign exchange risk arises from future commercial
transactions, the Group will hedge the future committed commercial
transaction using foreign exchange swaps or forward foreign exchange
contracts.
The Group's principal currency exposure is in respect of the Euro. If the
value of Sterling were to increase or decrease in strength, the Group's net
assets and profit for the year would be affected. The impact of a reasonably
likely movement in exchange rates is set out below:
Scenario 2024 2024 2023 2023
Net
Profit
Net
Profit
assets
before tax
assets
before tax
£m
£m
£m
£m
1% increase in value of Sterling against the Euro (3.9) 0.2 (5.1) 0.9
1% fall in value of Sterling against the Euro 4.0 (0.2) 5.2 (0.9)
A 10% increase in the value of the Sterling against the Euro would result in a
decrease in net assets of £36.1 million and reduction of profit before tax of
£1.7 million. A 10% decrease in the value of the Sterling against the Euro
would result in an increase in net assets of £44.2 million and an increase of
profit before tax of £2.1 million. The sensitivity disclosed related to the
foreign operations, as the sensitivity related to financial instruments is not
considered significant.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. Credit risk
arises from the ability of customers to meet outstanding receivables and
future lease commitments, and from financial institutions with which the Group
places cash and cash equivalents, and enters into derivative financial
instruments. The maximum exposure to credit risk is partly represented by the
carrying amounts of the financial assets which are carried in the balance
sheet, including derivatives with positive fair values.
For credit exposure other than to occupiers, the Directors believe that
counterparty risk is minimised to the fullest extent possible as the Group
has policies which limit the amount of credit exposure to any individual
financial institution.
The Group has policies in place to ensure that rental contracts are made with
customers with an appropriate credit history. Credit risk to customers is
assessed by a process of internal and external credit review, and is reduced
by obtaining bank guarantees from the customer or its parent, and cash rental
deposits. At 31 December 2024, the Group held £10.1 million in rent deposits
(2023: £10.7 million) against £4.2 million of trade receivables (2023: £8.8
million). The overall credit risk in relation to customers is monitored on an
ongoing basis. Moreover, a significant proportion of the Group portfolio is
let to Government occupiers which can be considered financially secure.
Credit risk also arises from cash and cash equivalents and deposits with banks
and financial institutions. For banks and financial institutions, only
independently rated parties with a minimum rating of investment grade are
accepted.
At 31 December 2024 the Group held £1.8 million (2023: £4.3 million) of
financial assets at fair value through profit and loss. Management considers
the credit risk associated with individual transactions and monitors the risk
on a continuing basis. Information is gathered from external credit rating
agencies and other market sources to allow management to react to any
perceived change in the underlying credit risk of the instruments in which the
Group invests. This allows the Group to minimise its credit exposure to such
items and at the same time to maximise returns for shareholders.
(c) Liquidity risk
Liquidity risk management requires maintaining sufficient cash, other liquid
assets and the availability of funding to meet short, medium and long-term
requirements. The Group maintains adequate levels of liquid assets to fund
operations and to allow the Group to react quickly to potential risks and
opportunities. Management monitors rolling forecasts of the Group's liquidity
on the basis of expected cash flows so that future requirements can be
managed effectively.
The majority of the Group's debt is arranged on an asset-specific, ring-fenced
basis (mortgage type loans in SPVs), which is designed to ensure that the
Group's exposure in relation to each loan is restricted to the assets of the
relevant SPV borrower(s) and its/their subsidiaries with such assets being a
property or number of properties in a portfolio, save for certain limited
guarantees and limited recourse security granted by the Company and certain
other Group companies. This allows the Group a higher degree of flexibility
in dealing with potential covenant defaults than if the debt was arranged
under a Group-wide borrowing facility. Portfolio loans secured by multiple
properties are also used when circumstances require it or to obtain better
terms.
Banking covenants vary according to each loan agreement, but typically include
loan-to-value and income related covenants. In addition, the Group has two
'green' loans, each of which have a 10-basis point incentive for achieving
certain sustainability targets. The Group targets a loan-to-value in the range
of 35% to 45%. Balance sheet loan-to-value at 31 December 2024 was 50.7%
(2023: 48.5%).
Loan covenant compliance is closely monitored by the treasury department.
Potential covenant breaches can ordinarily be avoided by placing additional
security or a cash deposit with the lender, or by partial repayment to cure an
event of default.
The Group's loan facilities and other borrowings are spread across a range of
25 banks and financial institutions so as to minimise any potential
concentration of risk.
22. Financial assets and liabilities
Fair value through profit and loss Amortised Total
£m
cost
£m carrying
value
£m
Financial assets:
Cash and cash equivalents - 60.5 60.5
Derivative financial assets 1.8 - 1.8
Other assets - current(1) - 11.5 11.5
1.8 72.0 73.8
Financial liabilities:
Secured bank loans - (999.2) (999.2)
Derivative financial liabilities (0.4) - (0.4)
Other liabilities - current(2) - (49.5) (49.5)
(0.4) (1,048.7) (1,049.1)
At 31 December 2024 1.4 (976.7) (975.3)
Fair value through profit and loss Amortised Total
£m
cost
£m carrying
value
£m
Financial assets:
Cash and cash equivalents - 70.6 70.6
Derivative financial assets 4.3 - 4.3
Other assets - current(1) - 15.3 15.3
4.3 85.9 90.2
Financial liabilities:
Secured bank loans - (1,070.6) (1,070.6)
Other liabilities - current(2) - (45.9) (45.9)
- (1,116.5) (1,116.5)
At 31 December 2023 4.3 (1,030.6) (1,026.3)
1 Other assets included all amounts shown as trade and other receivables
in note 15 except prepayments of £2.7 million (2023: £1.4 million). All
current amounts are non-interest bearing and receivable within one year.
2 Other liabilities included all amounts shown as trade and other
payables in note 17 except deferred income and sales and social security taxes
of £16.2 million (2023: £22.7 million). All amounts are non-interest bearing
and are due within one year.
Reconciliation of net financial assets and liabilities to borrowings and derivative financial instruments
2024 2023
£m £m
Net financial assets and liabilities: 975.3 1,026.3
Other assets - current 11.5 15.3
Other liabilities - current (49.5) (45.9)
Cash and cash equivalents 60.5 70.6
Borrowings and derivative financial instruments 997.8 1,066.3
23. Share capital
Number of shares authorised, issued and fully paid Ordinary shares in circulation Treasury shares Total
£m
£m
ordinary shares
£m
Ordinary Treasury Total
shares in circulation
shares
ordinary
shares
At 1 January 2024 and 31 December 2024 397,410,268 41,367,512 438,777,780 9.9 1.1 11.0
Number of shares authorised, issued and fully paid Ordinary shares in circulation Treasury shares Total
£m
£m
ordinary shares
£m
Ordinary Treasury Total
shares in circulation
shares
ordinary
shares
At 1 January 2023 397,210,866 41,566,914 438,777,780 9.9 1.1 11.0
Issue of shares 199,402 (199,402) - - - -
At 31 December 2023 397,410,268 41,367,512 438,777,780 9.9 1.1 11.0
The Board is authorised, by shareholder resolution, to allot shares or grant
such subscription rights (as are contemplated by sections 551(1) (a) and (b)
respectively of the Companies Act 2006) up to a maximum aggregate nominal
value of £3,311,752 representing one-third of the issued share capital of the
Company excluding treasury shares.
24. Earnings per share
The calculation of earnings per ordinary share is based on earnings after tax
and the weighted average number of ordinary shares in issue during the year.
2024 2023
Number
Number
Weighted average number of ordinary shares in circulation 397,410,268 397,330,507
Number of ordinary shares in circulation at the year-end 397,410,268 397,410,268
For diluted earnings per share, the weighted average number of ordinary shares
in issues is adjusted to assume conversion of all dilutive potential ordinary
shares. The diluted earnings per share does not assume conversion of potential
ordinary shares that would have an antidilutive effect on earnings per share.
The diluted loss per share for the period to 31 December 2024 was restricted
to a loss of 23.6 pence per share, as the loss per share cannot be reduced by
dilution in accordance with IAS 33 Earnings Per Share.
The Group has three types of dilutive potential ordinary shares, being:
unvested shares granted under the Long Term Incentive Plan for executive
directors and senior management; unvested shares granted under the Element B
plan for executive directors and senior management; and unvested shares
granted under the Special Share Award plan to key management. The issue of all
these unvested shares is contingent upon satisfying specified conditions such
as length of service and company performance.
Employee share plan 2024 2023
Number
Number
Element B/Special Award 694,695 820,246
LTIP 4,811,944 2,880,054
Total potential dilutive shares 5,506,639 3,700,300
25. Dividend
Payment Dividend 2024 2023
£m
£m
date per share
p
Current year
2024 final dividend(1) 23 May 2025 2.68 - -
2024 interim dividend 2 October 2024 2.60 10.3 -
Distribution of current year profit 5.28 10.3 -
Prior year
2023 final dividend 2 May 2024 5.35 21.3 -
2023 interim dividend 3 October 2023 2.60 - 10.3
Distribution of prior year profit 7.95 21.3 10.3
2022 final dividend 2 May 2023 5.35 - 21.3
Dividends as reported in the Group statement of changes in equity 31.6 31.6
1 Subject to shareholder approval at the AGM on 16 May 2025. Total cost
of proposed dividend is £10.7 million. The proposed dividend is not
recognised as a liability at the balance sheet date.
26. Other reserves
Notes Capital redemption reserve Cumulative translation reserve Fair value reserve Share-based payment reserve Other Total
£m
£m
£m
£m
reserves
£m
£m
At 1 January 2024 22.7 47.4 6.1 2.4 28.1 106.7
Exchange rate variances - (21.6) - - - (21.6)
Property, plant and equipment:
- net fair value gains in the year 13 - - 1.3 - - 1.3
- deferred tax thereon 18 - - (0.1) - - (0.1)
Share-based payments - - - 0.6 - 0.6
At 31 December 2024 22.7 25.8 7.3 3.0 28.1 86.9
Notes Capital redemption reserve Cumulative translation reserve Fair value reserve Share-based payment reserve Other Total
£m
£m
£m
£m
reserves
£m
£m
At 1 January 2023 22.7 59.7 3.0 1.9 28.1 115.4
Exchange rate variances - (12.3) - - - (12.3)
Property, plant and equipment:
- net fair value gains in the year 13 - - 2.2 - - 2.2
- deferred tax thereon 18 - - (0.6) - - (0.6)
- reserve transfer on disposal of PPE - - 1.5 - - 1.5
Share-based payments - - - 0.5 - 0.5
At 31 December 2023 22.7 47.4 6.1 2.4 28.1 106.7
The capital redemption reserve comprises of the nominal value of the Company's
own shares acquired as a result of share buyback programmes.
The cumulative translation reserve comprises the aggregate effect of
translating net assets of overseas subsidiaries into Sterling since
acquisition.
The fair value reserve comprises the aggregate movement in the value of
financial assets classified as fair value through comprehensive income,
owner-occupied property and hotel since acquisition, net of deferred tax.
The amount classified as other reserves was created prior to listing in 1994
on a Group reconstruction and is considered to be non‑distributable.
Share options exercised have been settled using the treasury shares of the
Group. The reduction in the treasury share equity component is equal to the
cost incurred to acquire the shares, on a weighted average basis. Any excess
of the cash received from employees over the reduction in treasury shares is
recorded in share premium. In 2024, there were no treasury shares transferred
to the EBT (2023: 199,402) to satisfy future awards under employee share
plans. At 31 December 2024, the Group held 41,367,512 ordinary shares (2023:
41,367,512) with a nominal value of £1.1 million (2023: £1.1 million) in
treasury. The Company's voting rights and dividends in respect of the treasury
shares, including those own shares which the EBT holds, continue to be waived.
27. Notes to the cash flow
Cash generated from operations 2024 2023
£m
£m
Operating loss (52.5) (223.4)
Adjustments for:
Net movements on revaluation of investment properties 127.7 302.7
Net movements on revaluation of equity investments 0.6 1.3
Depreciation and amortisation 1.0 0.8
Loss/(profit) on sale of investment property 2.3 (1.4)
Lease incentive debtor adjustments (10.4) (1.1)
Share-based payments 0.6 0.5
Loss on sale of other equity investments 0.1 -
Changes in working capital:
Decrease/(increase) in receivables 2.5 (0.9)
(Decrease)/increase in payables (0.7) 4.7
Cash generated from operations 71.2 83.2
Non-cash movements
2024
Changes in liabilities arising from financing activities Notes 1 January 2024 Financing cash flows Amortisation of borrowing issue costs Fair value adjustments Foreign exchange 31 December 2024
£m
£m
£m
£m
£m
£m
Borrowings 19 1,070.6 (47.7) 1.7 - (25.4) 999.2
Derivative financial instruments 20 (4.3) (0.5) - 3.4 - (1.4)
Lease liabilities 3.5 - - - (0.2) 3.3
1,069.8 (48.2) 1.7 3.4 (25.6) 1,001.1
Non-cash movements
2023
Changes in liabilities arising from financing activities Notes 1 January 2023 Financing cash flows Amortisation of borrowing issue costs Fair value adjustments Foreign exchange 31 December 2023
£m
£m
£m
£m £m £m
Borrowings 19 1,105.9 (24.6) 1.6 - (12.3) 1,070.6
Derivative financial instruments 20 (8.5) - - 4.2 - (4.3)
Lease liabilities 3.6 - - - (0.1) 3.5
1,101.0 (24.6) 1.6 4.2 (12.4) 1,069.8
Prior period restatement
Proceeds from borrowings and repayment of borrowings for the year ended 31
December 2023 have been restated on the Group statement of cash flows to
exclude any loans that were refinanced with the same lender where cash did not
transfer between the Group and the lender upon refinancing. As a result, in
the prior year proceeds from borrowings decreases from £129.1 million to
£72.5 million and repayment of borrowings decreases from £152.6 million to
£96.0 million.
28. Contingencies
In 2021 and 2023, CLS Holdings plc dissolved 2 subsidiaries (the 'Companies').
Before the Companies were dissolved, capital reductions and distributions of
the net assets of the subsidiaries, primarily represented by intercompany
receivables of £0.8 million, to the Parent should have been executed.
However, they were not. As a consequence of this, as a matter of Law,
on dissolution of these Companies the technical titles to the intercompany
receivables were transferred from the Group to the Crown. The Directors have
taken legal advice and started the process to restore these Companies.
Thereafter, the Directors can execute the capital reductions and make
appropriate distributions to the Parent of these Companies assets. Also, based
on that legal advice, the Directors consider that it is improbable that the
Crown will pursue the CLS Group for these assets of the Companies prior to the
process of the restoration of the Companies being completed and the technical
title to the receivables being returned to the Group. Therefore, the Directors
consider that it is not probable that an outflow of cash or other economic
resources of £0.8 million from the Group will occur, and therefore no
provision is recognised at year-end, but has been disclosed as a contingent
liability. Subsequent to 31 December 2024, notice was received that the
Companies had been successfully restored, reducing the contingent liability to
£nil at the date of this report.
29. Commitments
At the balance sheet date the Group had contracted with customers under
non-cancellable operating leases for the following minimum lease payments:
Operating lease commitments - where the Group is lessor 2024 2023
£m
£m
Within one year 94.2 100.9
Between one and two years 71.3 84.0
Between two and three years 59.4 61.0
Between three and four years 47.6 48.6
Between four and five years 37.3 36.7
More than five years 158.8 153.2
468.6 484.4
Operating leases where the Group is the lessor are typically negotiated on a
customer-by-customer basis and include break clauses and indexation
provisions.
Other commitments
At 31 December 2024 the Group had contracted capital expenditure of £10.3
million (2023: £6.9 million). At the balance sheet date, the Group had not
exchanged contracts to acquire any investment properties (2023: £nil). There
were no authorised financial commitments which were yet to be contracted with
third parties (2023: £nil).
30. Post-balance sheet events
On 26 March 2025, the Group unconditionally exchanged on the disposal of
Spring Mews Student for £101.1 million. Completion is scheduled for May 2025.
Supplementary disclosures (unaudited)
Unaudited unless otherwise stated
Alternative Performance Measures
CLS uses all the EPRA metrics but we have also disclosed the measures that CLS
used to prefer for certain of these categories. The notes below highlight
where the measures that we monitor differ and our previous rationale for using
them.
The measures we disclose are:
· EPRA net initial yield;
· EPRA 'topped-up' net initial yield;
· EPRA vacancy;
· EPRA capital expenditure;
· EPRA cost ratio;
· EPRA LTV; and
· EPRA like-for-like gross rental income growth.
Other APMs
CLS uses a number of other APMs, many of which are commonly used by industry
peers:
· Total Accounting Return;
· Net debt and gearing;
· Balance sheet loan-to-value;
· Administration cost ratio;
· Dividend cover; and
· Interest cover.
1. EPRA APMs
i) 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, student accommodation, held as PPE or occupied by
CLS).
2024 2023
United Kingdom Germany France Total United Kingdom Germany France Total
£m
£m
£m
£m
£m £m £m £m
Rent passing 46.6 41.6 12.9 101.1 45.5 46.4 13.2 105.1
Adjusted for properties in development (0.1) - (0.3) (0.4) - - - -
Forecast non-recoverable service charge (3.9) (2.5) (0.5) (6.9) (3.7) (2.0) (0.5) (6.2)
Annualised net rents (A) 42.6 39.1 12.1 93.8 41.8 44.4 12.7 98.9
Property portfolio(1) 668.4 814.1 225.9 1,708.4 745.4 883.8 246.0 1,875.2
Adjusted for properties in development (11.4) (2.0) (8.3) (21.7) (15.7) (2.9) - (18.5)
Purchasers' costs at 6.8% 44.7 55.2 14.8 114.7 49.6 59.9 16.7 126.2
Property portfolio valuation including purchasers' costs (B) 701.7 867.3 232.4 1,801.4 779.3 940.8 262.7 1,982.9
EPRA NIY (A/B) 6.1% 4.5% 5.2% 5.2% 5.4% 4.7% 4.8% 5.0%
1 The above table comprise data of the investment properties and
properties held for sale. They exclude owner-occupied, student accommodation
and hotel.
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 step rents).
2024 2023
United Kingdom Germany France Total United Kingdom Germany France Total
£m
£m
£m
£m
£m £m £m £m
Contracted rent 50.1 44.9 13.9 108.9 50.9 47.5 14.2 112.6
Adjusted for properties in development (0.1) - (0.3) (0.4) - - - -
Forecast non-recoverable service charge (3.9) (2.5) (0.5) (6.9) (3.7) (2.0) (0.5) (6.2)
'Topped-up' annualised net rents (A) 46.1 42.4 13.1 101.6 47.2 45.5 13.7 106.4
Property portfolio(1) 668.4 814.1 225.9 1,708.4 745.4 883.8 246.0 1,875.2
Adjusted for properties in development (11.4) (2.0) (8.3) (21.7) (15.7) (2.8) - (18.5)
Purchasers' costs (6.8%) 44.7 55.2 14.8 114.7 49.6 59.9 16.7 126.2
Property portfolio valuation including purchasers' costs (B) 701.7 867.3 232.4 1,801.4 779.3 940.9 262.7 1,982.9
EPRA 'topped-up' NIY (A/B) 6.6% 4.9% 5.6% 5.6% 6.1% 4.8% 5.2% 5.4%
1 The above table comprise data of the investment properties and
properties held for sale. They exclude owner-occupied, student accommodation
and hotel.
ii) Vacancy
The EPRA vacancy rate calculates vacancy as a proportion of the ERV of the
total portfolio.
EPRA vacancy
2024 2023
£m £m
ERV of vacant space (A) 15.1 13.9
ERV of let space 103.9 112.4
ERV of total portfolio (B) 119.0 126.3
EPRA vacancy rate (A/B) 12.7% 11.0%
iii) Capital expenditure
EPRA capital expenditure
This measure shows the total amounts spent on the Group's investment
properties on an accrual and cash basis with a split between expenditure used
for the creation of incremental space and enhancing space ('no incremental
space'). The sum of these expenditures is included in Capital expenditure in
Note 12 of the Notes to the Group financial statements. The Group is not party
to any joint venture arrangements, therefore this measure is not disclosed.
Notes 2024 2023
£m £m
Acquisitions 12 - -
Amounts spent on the completed investment property portfolio 12
Creation of incremental space - 2.1
Creation of no incremental space 21.1 47.5
EPRA capital expenditure 21.1 49.6
Conversion from accrual to cash basis 1.2 (3.2)
EPRA capital expenditure on a cash basis CF(1) 22.3 46.4
1 Group statement of cash flows.
iv) Cost ratios
EPRA cost ratio
The Group has a policy of capitalising certain staff costs directly
attributable to the management of the development of investment properties.
Notes 2024 2023
£m £m
Administration expenses 17.7 18.2
Other property expenses 4 18.1 15.6
Less: Other investments segment and student accommodation operating costs (6.8) (5.2)
29.0 28.6
Net service charge costs 4 6.1 5.7
Service charge costs recovered through rents but not separately invoiced (0.3) (0.1)
Dilapidations receipts (1.2) (2.3)
EPRA costs (including direct vacancy costs) (A) 33.6 31.9
Direct vacancy costs (8.2) (6.1)
EPRA costs (excluding direct vacancy costs) (B) 25.4 25.8
Gross rental income 4 100.2 102.8
Service charge components of gross rental income (0.3) (0.1)
EPRA gross rental income (C) 99.9 102.7
EPRA cost ratio (including direct vacancy costs) (A/C) 33.6% 31.1%
EPRA cost ratio (excluding direct vacancy costs) (B/C) 25.4% 25.1%
v) EPRA LTV
Notes 2024 2023
£m £m
Borrowings from financial institutions 19 999.2 1,070.6
Net payables 52.4 52.2
Cash and cash equivalents 16 (60.5) (70.6)
Net debt (A) 991.1 1,052.2
Properties held as property, plant and equipment 13 40.7 39.7
Investment properties 12 1,676.5 1,850.5
Properties held for sale 14 133.0 172.7
Financial assets - equity investments 0.6 1.4
Total property value (B) 1,850.8 2,064.3
EPRA LTV (A/B) 53.5% 51.0%
vi) EPRA like-for-like gross rental income growth
This measure shows the growth in gross rental income on properties owned
throughout the current and previous year. This growth rate excludes properties
held for development, acquired or disposed in either year.
Notes 2024 2023
% %
Increase in gross rental income (%) 1.2 3.5
2024 2023
£m £m
Increase in gross rental income (£m) 1.1 3.4
2. Other APMs
i) Total Accounting Return per share
Notes 2024 2023
pence pence
EPRA NTA at 31 December 5 215.0 253.0
Distribution - prior year final(1) 25 5.4 5.4
Distribution - current year interim 25 2.6 2.6
Less: EPRA NTA at 1 January (A) 5 (253.0) (329.6)
Return before dividends (B) (30.0) (68.6)
Total Accounting Return (NTA) (B/A) (11.9)% (20.8)%
1 The 2023 and 2022 final dividend was 5.35 pence but has been rounded
to 5.4 pence for the purpose of this note.
ii) Net debt and gearing
Notes 2024 2023
£m £m
Borrowings short-term 19 372.4 193.9
Borrowings long-term 19 626.8 876.7
Add back: unamortised issue costs 19 4.3 5.0
Gross debt 19 1,003.5 1,075.6
Cash 16 (60.5) (70.6)
Net debt (A) 943.0 1,005.0
Net assets (B) 784.2 929.2
Net gearing (A/B) 120.2% 108.2%
iii) Balance sheet loan-to-value
Notes 2024 2023
£m £m
Borrowings short-term 19 372.4 193.9
Borrowings long-term 19 626.8 876.7
Less: cash 16 (60.5) (70.6)
Net debt (A) 938.7 1,000.0
Investment properties 12 1,676.5 1,850.5
Properties in plant, property and equipment 13 40.7 39.7
Properties and land held for sale 14 133.0 172.7
Total property portfolio (B) 1,850.2 2,062.9
Balance sheet loan-to-value (A/B) 50.7% 48.5%
iv) CLS administration cost ratio
CLS' administration cost ratio represents the cost of running the property
portfolio relative to its net income. CLS uses this measure to monitor the
efficiency of the business as it focuses on the administrative cost of active
asset management across three countries.
Notes 2024 2023
£m £m
Administration expenses 17.7 18.2
Less: Other investment segment 4 (0.1) (0.1)
Underlying administration expenses (A) 17.6 18.1
Net rental income (B) 4 114.0 113.0
Administration cost ratio (A/B) 15.4% 16.0%
v) Dividend cover
Notes 2024 2023
£m £m
Interim dividend 25 10.3 10.3
Final dividend 25 10.7 21.3
Total dividend (A) 21.0 31.6
EPRA earnings (B) 5 36.4 40.9
Dividend cover (B/A) 1.73 1.30
vi) Interest cover
Notes 2024 2023
£m £m
Net rental income 4 114.0 113.0
Administration expenses 4 (17.7) (18.2)
Other property expenses 4 (18.1) (15.6)
Group revenue less costs (A) 78.2 79.2
Finance income (excluding derivatives and dividend income) 8 1.4 1.6
Finance costs (excluding derivatives) 9 (42.3) (37.1)
Net interest (B) (40.9) (35.5)
Interest cover (-A/B) 1.91 2.23
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