REG - CLS Holdings PLC - Trading Update 24 February 2025

CLS HoldingsAnnouncement

24/02/2025 07:00

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250224:nRSX0877Ya&default-theme=true

RNS Number : 0877Y  CLS Holdings PLC  24 February 2025

 

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

Trading Update for the financial year ended 31 December 2024

 

 

Fredrik Widlund, Chief Executive of CLS, commented:

"In 2024, CLS made meaningful progress with its strategic goals of letting recent refurbishments and executing its refinancing and sales programme. With good progress on the redevelopment opportunities in the portfolio, property values bottoming in the second half of 2024, and positive leasing activity since the start of the year, we are confident of delivering improved shareholder value over the near term."

 

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

2024 Financial performance and valuation

We expect CLS' 2024 EPRA earnings and Net Tangible Assets ("NTA") to be in
line with market expectations 1  (#_ftn1)  when we publish our 2024 full year
accounts at the end of March 2025.

 

Full-year property valuations, as set out in the table below, were down by
5.8% in local currency. Including the strengthening of Sterling in the year,
valuations were down by 8.3%. Valuations across all our markets appear to be
bottoming out with Germany and France flat in the second half of 2024,
reflecting greater rental indexation and interest rate reductions supporting
valuation yields. In the UK, the shortening lease to the National Crime Agency
at Spring Gardens, one of the largest assets in the Group, contributed to half
of the UK reduction as the site is valued as an office investment and not yet
as a development site.

 

 Movements in local currency  H1 2024 (01-01 to 30-06)  H2 2024 (01-07 to 31-12)  Full-year 2024

 UK                           (4.4)%                    (4.1)%                    (8.3)%

 Germany                      (3.6)%                    0.0%                      (3.5)%

 France                       (5.0)%                    (0.1)%                    (5.1)%

 Total                        (4.1)%                    (1.8)%                    (5.8)%

 

Vacancy, lettings and occupancy

For the full year 2024, CLS transaction levels have shown strong momentum with
letting activity above 2023 levels and continued healthy rental growth. We
signed 112 leasing deals (2023:130) securing annual rent of £16.6 million
(2023: £15.5 million) at 6.8% (2023: 6.9%) above December 2023 estimated
rental values.

 

The most significant transactions in 2024 were in Germany and the UK and
included new lettings at The Yellow in Dortmund for a 20-year lease with the
City of Dortmund for over 103,000 sq. ft (9,600 sqm) and the first letting at
Artesian, Prescot Street, London where we completed a 10-year lease for one of
the six floors with Médecins Sans Frontières for over 12,000 sq. ft (1,100
sqm).  We also secured major renewals at Fangdieckstrasse in Hamburg where we
signed a 10-year lease renewal for over 96,000 sq. ft (8,900 sqm) with HPH
Institute and at Fetter Lane, London where we signed a 10-year lease renewal
with Signature Litigation for over 29,800 sq. ft (2,770 sqm) with both leases
being for the entire buildings.

 

Index-linked lease increases for the year were 3.7% in Germany, 5.2% in France
and 2.6% at Spring Gardens in the UK. The lease renewals for 2024 were 0.1%
ahead of 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.

 

Underlying vacancy, excluding completed refurbishments and disposals,
continued to fall in the second half of 2024 to 10.6% as at 31 December 2024,
down from 10.8% in June 2024 and 11.0% at the end of 2023. We expect to make
further letting progress in the first half of 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 properties.

 

Total 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.

 

EPRA vacancy rates as at 31 December 2024:

 Group:    12.7% (31 December 2023: 11.0%)
 UK:       18.5% (31 December 2023: 15.8%)
 Germany:    6.7% (31 December 2023:   6.8%)
 France:     8.3% (31 December 2023:   5.6%)

 

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.

 

Disposals

In 2024, CLS disposed of five properties for £66.1 million, collectively in
line with book value as part of its targeted £270 million disposal programme.

 

The sale of our student accommodation asset at Spring Mews continues to
advance with the preferred bidder, and the transaction has now entered its
final stage. We are targeting an unconditional exchange in early March and the
agreed price is in excess of £100 million which is in-line with the latest
valuation.

 

CLS has also agreed the disposal of two smaller UK properties and one in
Germany for a combined £29.2 million, in-line with the latest valuation.
 All three sales are targeted to complete in the first half of 2025 and CLS
intends to complete the remaining c.£70 million of its £270 million targeted
sales programme this year. In due course, CLS may also consider additional
sales of assets with limited potential upside to help fund the pipeline of
refurbishment and redevelopment opportunities in the portfolio whilst
maintaining or reducing LTV.

 

As at 31 December, LTV had risen slightly since September 2024 to 50.7% given
the valuation declines in the second half of 2024.

Liquid resources, financing and rent collection

As at 31 December, the Group had cash of over £60 million and £50 million of
committed undrawn Revolving Credit Facilities ('RCFs') as well as a £10
million overdraft facility.

 

All 2024 financing activity was executed successfully with nine loans totaling
£154.5 million being refinanced, financed or extended for more than one year
at an average rate of 5.13%, including £137.7 million fixed at 4.05%.

 

We are advanced with the refinancing activity for 2025 such that of the
£377.7 million expiring during the year, progress has been made with £327.2
million. £208.1 million has been, or is going, through credit approval and a
further £119.1 million is subject to advanced discussions. We would expect to
announce further progress with our full-year results and are confident that
these loans will be refinanced before they become due.

 

As at 31 December 2024, CLS' average cost of debt was 3.77%, 4 basis points
lower than at 30 June 2024 but, as expected, 16 basis points higher than 31
December 2023 given higher rates on refinanced loans.  83% of total debt was
fixed or subject to interest rate caps.

 

As at 23 February 2025, we had received 99% of 2024 contractual rents due
(2023: 99%).

Refurbishments and developments

The refurbishment of The Brix in Essen is progressing well and the project is
on track for the first stage handover to the City of Essen in April with the
second stage later in 2025. The refurbishment at The Yellow, Dortmund,
connected to the new lease with the City of Dortmund, is about to commence.

 

At Debussy, Paris, planning permission has now been granted for the conversion
to serviced apartments and the construction pre-planning, undertaken with our
partners, is progressing at pace for a mid-year 2025 start.  Planning
permission for a comprehensive upgrade of Bismarckstrasse in Berlin has also
been granted.

 

Good progress is also being made with the development at Citadel Place, London
(currently known as Spring Gardens), with the second public consultation
scheduled for 19 March 2025. We are working closely with Lambeth Council and
the GLA to progress the scheme with a target date for planning submission in
Q2 2025.

Sustainability

We remain on track with our energy and carbon saving targets as part of our
2030 Net Zero Carbon ("NZC") Pathway.In 2024, as part of tracking the NZC
Pathway, we reduced our energy use and scope 1 & 2 GHG emissions by more
than our target of 3% (like-for like). Our planning continues to remove fossil
fuels from the remaining buildings in our portfolio in the coming years, with
five electrification projects currently scheduled in Germany and the UK for
2025.

 

Governance

Bengt Mortstedt (age 76) has decided to retire from the Board with effect from
28 February 2025 to spend more time with his family and on his own hotel
business in the Caribbean. We are deeply grateful to Bengt for his
contribution to the company over the last 30 years as one of the founding
directors of CLS. As previously announced, we are seeking to recruit two
independent non-executive directors and this process is now well advanced.

 

 

-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

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.

 1  (#_ftnref1) As published on 21 February 2025, the Company-compiled
consensus expectation for full year 2024 EPRA Earnings Per Share and NTA were
9.2p and 216.5p respectively.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTFZGZZVMNGKZM