REG - CLS Holdings PLC - Q3 Trading Update

CLS HoldingsAnnouncement

16/11/2022 07:00

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RNS Number : 5249G  CLS Holdings PLC  16 November 2022

 

PRESS RELEASE

 

Release date:                16 November 2022

Embargoed until:           07:00

 

 

CLS Holdings plc ("CLS", the "Company" or the "Group")

Trading Update for the period 1 July 2022 to 16 November 2022

 

 

Fredrik Widlund, Chief Executive of CLS, commented:

 

"CLS remains on course with its plans for the year with earnings tracking
in-line with market expectations 1  (#_ftn1) . Our office upgrade strategy
remains a priority and we are seeing the benefits in good letting activity
with leases signed above ERV and previous passing rent. We have substantially
completed our 2022 financing activity, are making good progress with
refinancing our loans due to mature in 2023 and have around £150 million of
cash and undrawn facilities.

 

"With our strong balance sheet, a high-quality portfolio, a majority of
index-linked leases and our active in-house asset management, we believe we
are well positioned to weather the current challenging economic conditions."

 

A summary of our key operational and financial metrics is set out below:

 

Vacancy, lettings and occupancy (as at 30 September 2022)

Since 30 June 2022, we completed the refurbishment of 405 Kennington Road,
London with an ERV of £0.7 million, representing 0.6% of the Group's ERV at
30 June 2022. This new scheme is being marketed to prospective tenants and we
are encouraged by the interest we are seeing. As a result, UK vacancy has
increased whilst France maintained its very low level of vacancy. In Germany,
vacancy reduced slightly as we are successfully progressing our letting
strategy.

 

·      EPRA vacancy rates (Based on 30 June 2022 ERVs):

 Group:    7.4%   (30 June 2022: 6.9%)
 UK:       8.9%   (30 June 2022: 7.6%)
 Germany:  7.3%   (30 June 2022: 7.5%)
 France:   2.4%   (30 June 2022: 2.3%)

 

Between 1 July 2022 and 30 September 2022, 24 deals were signed securing £1.5
million of annual rent at 5.9% above ERV. The most significant of these was a
lease extension with Rockwell Automation at Connect in Dusseldorf securing
€0.4m of rent at 11.1% above ERV.

 

Renewals for the period 1 July 2022 to 30 September 2022 were 12.4% ahead of
previously contracted rent (3.8% ahead of previously contracted rent 1 January
2022 to 30 September 2022).  Index-linked lease increases during the period 1
July 2022 to 30 September 2022 were 6.7% in Germany (6.4% 1 January 2022 to 30
September 2022), 2.5% in France (2.6% 1 January 2022 to 30 September 2022) and
11.8% at Spring Gardens in the UK (10.5% 1 January 2022 to 30 September 2022).

 

As announced on 8 November 2022, we have recently signed three leases in
Germany at "Flexion", Kaiser-Augusta-Allee, Berlin and Office Connect, Cologne
for 3,566sqm (38,384 sq. ft) with combined rent of €1 million, 4.9% above
ERV.

 

Very high occupancy levels continue in our Student and Hotel accommodation in
Vauxhall with the student accommodation fully let for the new academic year
and hotel occupancy at 90% for the third quarter.

 

Liquid resources and financing

The Group's balance sheet remains well-capitalised and robust, providing
significant flexibility. As at 30 September 2022, our average cost of debt was
2.4% with cash of over £96 million and a further £50 million in undrawn
facilities. We have substantially completed transactions for all debt expiring
in 2022 and are making good progress with refinancing debt due to mature in
2023.

 

Since 1 July 2022, in Germany we have financed or refinanced three loans for
an aggregated loan amount of £62.7 million at a weighted average all-in cost
of 3.01% and a weighted maturity of 5.7 years. In October 2022, in the UK we
signed a new loan agreement to combine a loan portfolio of £44.4m (for 6
properties and expiring in December 2022) into an existing floating loan
portfolio expiring in 2024, releasing a net amount of £15 million after fees.

 

We are also well advanced in progressing the two loans for c.£40 million
expiring before April 2023 (out of c.£75 million expiring in H1 2023) to
release a further c.£20 million of cash. Both are due to complete in the
early part of next year.

 

Rent collections

The Group's rental income in the UK and France is due on a quarterly basis
with the current Q4 payment due between 25 September 2022 and 1 October 2022.
In Germany, rents are due monthly and the current payment was due on 6 October
2022.

 

By close on 15 November 2022, we had received 97% of Q4 contractual rents due
(2021: 95%) and for the first three quarters of 2022, we have now received 98%
of contractual rents due (2021: 98%).

 

Disposals and Acquisition

In the period, we completed the sales of: 62 London Road, Staines; Great West
House, Brentford; Sentinel House, Coulsdon; and Rue Nationale, Lille for a
combined £45.7 million equating to a 3.2% profit on sale compared with the
2021 year-end valuation.

 

In the period, we completed the acquisition of The Yellow, Dortmund at the
start of July 2022 for £56.0 million which had a WAULT of 5.2 years, an
initial yield of 5.1% and a reversionary yield of 5.6%.

 

Tender buyback

Our share buyback tender offer on 16 September 2022 was fully subscribed.  A
total of 10,184,894 Ordinary Shares (1 in 40) were purchased for 250 pence per
Ordinary Share, all of which were transferred to Treasury.

 

Developments and refurbishments

The development of the "Coade", Vauxhall is progressing well, with the
topping-out of the structure completed in June; this 10-storey EPC A, BREEAM
Excellent rated office building is on track to complete in Q1 2023.
Similarly, our major refurbishment of "Artesian", 9 Prescot Street, London is
on track to complete in Q2 2023 with the marketing campaign launched earlier
this month.

In France, our major refurbishment at Park Avenue is entering the final
stages. Existing tenants are expected to move back in Q1 2023, having been
temporarily relocated during the project. Existing and future tenants will
benefit from the improved sustainability credentials of the building and the
renovation of common areas including the creation of additional terraces.

 

Sustainability

We completed the installation of a solar PV array at Thameslink House,
Richmond in October. The panels are estimated to generate over 81,000 kWh of
renewable energy per annum, saving 19 tonnes of CO2 emissions per year. We
expect to have completed over 100 carbon saving projects by the end of 2022,
which will save an estimated 1,300 tonnes of CO2 emissions per annum.

 

Our sustainability progress was recognised with an increase to a Silver award
in the EPRA Sustainability Best Practices Recommendations, up from Bronze in
2021. We have maintained our GRESB score of 85 out of 100 (2021: 85 out of
100) and, as a result, were awarded 4 green stars (2021: 4 green stars).

 

Governance

The Board confirms that Chris Jarvis will retire from the Board at the
conclusion of the 2023 Annual General Meeting. Chris has served on the Board
for nearly 14 years and we thank him for his invaluable contribution during
his tenure.

 

 

-ends-

 

 

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

 

Liberum Capital Limited

Richard Crawley

Jamie Richards

+44 (0)20 3100 2222

 

Panmure Gordon

Hugh Rich

+44 (0)20 7886 2733

 

Berenberg

Matthew Armitt

Richard Bootle

+44 (0)20 3207 7800

 

Edelman Smithfield (Financial PR)

Alex Simmons

Hastings Tarrant

+44 (0)20 3047 2546

 

Forward-looking statements

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

 1  (#_ftnref1) As published on 9 November 2022, the Company compiled
consensus expectation for full year 2022 EPRA Earnings Per Share is 11.5p.

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