REG - CLS Holdings PLC - Trading Update 12 November 2024

CLS HoldingsAnnouncement

13/11/2024 07:00

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RNS Number : 9726L  CLS Holdings PLC  13 November 2024

 

 
PRESS RELEASE

 

Release date:                13 November 2024

Embargoed until:           07:00

 

 

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

Trading Update for the period 1 July 2024 to 12 November 2024

 

 

Fredrik Widlund, Chief Executive of CLS, commented:

 

"We continue to deliver on our strategic goals to increase lettings, reduce
leverage through targeted disposals, and execute our financing strategy. Over
the nine months to September, we secured 81 deals, generating over £10
million in annual rent at 5.5% above ERV.

 

"The letting trend remains positive although we are experiencing longer
decision timelines due to macro and political factors slowing progress.
However, with two-thirds of our vacant spaces EPC-rated A or B, we believe we
are well placed for the period ahead."

 

"Our disposal program is progressing well, with a preferred bidder selected
for the Spring Mews student property and completion expected in December.
Additionally, we have agreed further small UK disposals and have initiated
sale processes for two properties in Germany.

 

"Our refinancing activity for 2024 is nearly finished, with one smaller loan
outstanding due to complete in December. Looking ahead, we are focused on 2025
refinancings and anticipate further progress by year-end. Debt costs have
already decreased slightly as of September and we expect further reductions as
sales proceeds are used to pay down more expensive loans."

 

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

 

Vacancy, lettings and occupancy (as at 30 September 2024)

In the first three quarters of 2024, CLS' transaction levels have remained
healthy with letting activity in-line with 2023, offsetting expiries.  Rental
growth is evident in our markets for the right quality offices and floor plate
sizes.

 

Between 1 July and 30 September 2024, we signed 23 leasing deals securing
£3.7 million of annual rent, over 50% higher than the same period last year,
at 4.8% above ERV. The most significant transactions were the first letting at
Artesian, Prescot Street, London where we agreed a 10-year lease for one of
the six floors with Médecins Sans Frontières for over 12,000 sq. ft (1,100
sqm) and in Germany where we signed a 10-year lease renewal for over 96,000
sq. ft (8,900 sqm) with HPH Institute at Fangdieckstrasse in Hamburg.

 

Between 1 January 2024 and 30 September 2024, we signed 81 deals securing
£10.1 million of annual rent at 5.5% above ERV (1 January 2023 to 30
September 2023: 93 deals securing £10.2 million of annual rent at 9.1% above
ERV). The 2023 deals included a significant €3.0 million p.a. 30-year lease
signed with the City of Essen. Excluding this deal, 2024 lettings are 31%
ahead of 2023.

 

Index-linked lease increases for the 9-months to 30 September 2024 were 3.9%
in Germany, 5.0% in France and 2.6% at Spring Gardens in the UK. The renewals
for the 9-months to 30 September 2024 were 1.4% behind previously contracted
rent.

 

High occupancy levels continue in our Student and Hotel accommodation in
Vauxhall, with the student accommodation fully let for the current academic
year and the hotel achieving record revenues.

 

From 30 June to 30 September 2024, our underlying vacancy, excluding completed
refurbishments and disposals, fell to 10.5% from 10.8%.  However, total
vacancy increased slightly to 13.3% (30 June 2024: 13.2%) as more high-quality
refurbishments were completed and letting activity was slower than forecast.
Two-thirds of our vacancy is EPC A or B (or equivalent), with almost all the
remainder being EPC C, and we therefore expect vacancy to fall as we progress
further lettings in the short- to medium-term.

 

·      EPRA vacancy rates (Based on 30 June 2024 ERVs):

 Group:    13.3% (30 June 2024: 13.2%)
 UK:       19.0% (30 June 2024: 19.6%)
 Germany:    7.3% (30 June 2024:   7.2%)
 France:     9.1% (30 June 2024:   7.1%)

 

Disposals

The sale of Spring Mews student continues to advance with a preferred bidder
chosen and completion is targeted for December.

 

In addition, we have agreed further small UK disposals totaling £16.6 million
for this year.  We have also started the sale process for two German
properties with a combined book value of £50.5 million.

 

As at 30 September, LTV had fallen marginally to 49.6%.  If all these
disposals complete then pro-forma LTV at 30 September 2024, assuming no other
changes, would fall to 44.6%.

 

Liquid resources, financing and rent collection

The Group's balance sheet remains resilient with cash of over £62 million as
at 30 September 2024 and £50 million of committed undrawn Revolving Credit
Facilities ('RCFs') as well as a £10 million overdraft.

 

All 2024 refinancing activity has been completed but for one remaining loan of
less than £10.0 million due in December 2024 which is currently well advanced
and will complete by year-end.

 

As at 30 June 2024, we had 12 loans totaling £372 million which were due to
expire in 2025. We have provisionally agreed deals for £161 million of these
loans through a combination of early refinancings and loan
restructurings/repayments connected with ongoing sales. Completion of these
deals would leave £211 million across nine loans remaining to be refinanced
in 2025 with the vast majority by value due in the final quarter of the year.
These provisionally agreed deals could all complete by the end of 2024 and
would further reduce our cost of debt.

 

As at 30 September 2024, our average cost of debt had fallen slightly to 3.75%
as a result of refinancings and floating rate reductions and 84% of total debt
was fixed or subject to interest rate caps.

 

By close on 12 November 2024, we had received 96% of Q4 contractual rents due
(2023: 96%) and for the first three quarters of 2024, we have now received 99%
of contractual rents due (2023: 99%).

Refurbishments and developments

In the period, we started the refurbishment of The Brix in Essen and advanced
the pre-conditions before starting work at Bismarckstrasse and Debussy.
Further meetings were held with Lambeth Council and the GLA to optimise and
advance the expected Spring 2025 planning application for Citadel Place, with
positive progress made regarding massing, heights and building uses.

 

Sustainability

We are on track with our energy and carbon saving target as part of our Net
Zero Carbon Pathway. We expect to have reduced our energy use and scope 1
& 2 GHG emissions by more than 3% (like-for like) by the end of 2024. With
the completion of our UK rollout of electric vehicle charging and solar PV,
there has been a reduced amount of net zero carbon projects delivered this
year. However, there has also been considerable detailed planning and progress
on projects to remove fossil fuels from the remaining buildings in our
portfolio in coming years.

 

Our sustainability progress was again recognised with EPRA Sustainability Best
Practices Recommendations Gold this year. We have also maintained our GRESB
award of 4 green stars.

 

Governance

As part of the Nomination Committee's annual review of Board composition and
succession planning, it has been agreed that Elizabeth Edwards will step down
from the Board at the end of next year. In addition, Eva Lindqvist has been
appointed to the Nomination Committee with immediate effect and will become
the Senior Independent Director when Elizabeth steps down. During 2025, it has
been agreed to appoint two further independent non-executive directors who
will strengthen the skills and experience of the Board.

 

-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

 

Panmure Liberum

Jamie Richards

David Watkins

+44 (0)20 3100 2000

 

Berenberg

Matthew Armitt

Richard Bootle

+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.

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