CLS Holdings plc Half-Yearly Financial Report 2011
CORPORATE OVERVIEW Shareholders’ funds of £396 million > EPRA net assets of £481 million > £925 million of office properties across London, France, Germany and Sweden > Top 3 property company total shareholder return performance in the last 10 years > Strong alignment of interest with shareholders: management owns 54% > Over £225 million of cash and liquid resources available for new investment > Cautiously entrepreneurial approach to future opportunities > 1 Cap Gemini, London SW8 1 2 3 2 Westminster Tower, London SE1 3 Maximilian Forum, Munich
Business Review CLS Holdings plc Accounts Half-Yearly Financial Report 2011 INVESTORS IN EUROPEAN COMMERCIAL PROPERTY CLS is a property investment company which has been listed on the > London Stock Exchange since 1994 We own and manage a diverse portfolio of £0.9 billion of modern, > well-let office properties in London, France, Germany and Sweden Our properties have been selected for their potential to add value > and to generate high returns on capital investment CONTENTS Business Review > 2 How We Operate 3 Financial Highlights 4 Chairman’s Statement 6 Business Review > 10 Responsibility Statement Accounts 11 Independent Review Report to CLS Holdings plc 12 Condensed Group Statement of Comprehensive Income 13 Condensed Group Balance Sheet 14 Condensed Group Statement of Changes in Equity 15 Condensed Group Statement of Cash Flows 16 Notes to the Condensed Group Financial Statements 32 Glossary of Terms 33 Directors, Officers and Advisers 1
HOW WE OPERATE Our goal is to create long-term shareholder value by: Purchasing modern, high quality, well-let properties in good locations > in selected European cities Working closely with our tenants to provide high quality accommodation > at competitive rates Minimising vacant space within the portfolio > Using in-house teams to manage, refurbish or redevelop properties > Creating value through new developments > Responding quickly to changes in macro-economic conditions > Actively managing an appropriate level of liquid resources > Maintaining strong links with a wide variety of banks and other sources > of finance 1 Westminster Tower, London SE1 2 Gräfelfing, Munich 1 2 3 3 Malakoff, Paris 2
Business Review CLS Holdings plc Accounts Half-Yearly Financial Report 2011 FINANCIAL HIGHLIGHTS Profit before tax: up 32% to £37.1 million (2010: £28.1 million) > Profit after tax: up 36% to £33.6 million (2010: £24.7 million) > Earnings per share: up 35% to 69.9 pence (2010: 51.8 pence) > Net assets: up 11% in the last six months to £396.3 million (31 December 2010: £357.2 million) and up 28% in the last 12 > months (30 June 2010: £309.5 million) Net assets per share: up 13% to 869.1 pence (31 December 2010: 766.7 pence) > EPRA earnings per share: up 103% to 37.4 pence (2010: 18.4 pence) > EPRA net assets per share: up 10% to 1,047.7 pence (31 December 2010: 952.9 pence) > Proposed distribution: up 10% to £4.4 million (2010: £4.0 million) by way of tender offer buy-back: 1 in 72 at 700 pence, > equivalent to 9.7 pence per share Excess of net initial yield over cost of debt: remains high at 260 bps (31 December 2010: 290 bps) > Recurring interest cover: up to 3.4 times (2010: 3.2 times) > Increase in liquid resources of £100 million to £228.8 million (31 December 2010: £126.4 million) > Other key data Portfolio value £924.8 million: up 4.6% like-for-like in six months; 1.6% in local currencies > Proportion of government tenants: 40.5% (31 December 2010: 40.8%) > Void rate: down to 4.2% (31 December 2010: 4.3%) > > Catena 29.9% shareholding premium of market value over book value: £24.8 million; equates to 54 pence of unrecorded net assets per share at 30 June 2011 Rental income subject to indexation: 67% (31 December 2010: 66%) > Weighted average cost of debt: remains low at 4.5% (31 December 2010: 4.3%) > Loan to value ratio 64.5% (31 December 2010: 63.5%) > Adjusted gearing 119% (31 December 2010: 122%) > Adjusted solidity 39.8% (31 December 2010: 41.7%) > 3
CHAIRMAN’S STATEMENT There are significant added value opportunities, the vacancy rate is low and the Group is well financed. OVERVIEW EPRA net assets per share at 30 June 2011 were 1,047.7 pence (31 December 2010: 952.9 pence), an increase of 10% The Group has had an active and positive first half of 2011. since the year end, and shareholders’ funds increased by 11% The results benefit from our diversity across four European to £396.3 million (31 December 2010: £357.2 million), and by property markets, three currencies, and a broad and growing 28% in twelve months (30 June 2010: £309.5 million). range of funding structures and lending sources. The Group's net debt as a proportion of gross assets (less This time last year I wrote about the first half of 2010 being cash) was down to 51.8% (31 December 2010: 52.5%). The subject to sovereign debt crises, concern over the stability of overall property loan to value was 64.5% (31 December 2010: the Eurozone, further bank stress testing, and anxiety over the 63.5%) and the average cost of debt 4.5%. We enjoy good durability of the economic recovery. Today, with concerns banking relationships with our 20 lenders and have a arising over Italy and Spain and challenges in the United weighted average unexpired loan term of 4.6 years across States, the macro economic and political picture appears to all our debt. have deteriorated. It is within this context that I am delighted to report that the Group has been able to make real progress In addition to these results we have successfully increased, with both our property assets and our financing diversified and strengthened our financing arrangements. arrangements. In May, we raised the first CLS corporate bond, for SEK 300 million in Sweden. This five year, unsecured bond, now listed The Group’s core proposition remains solid: well-managed, on the NASDAQ OMX in Stockholm, attracts a rate of 375 basis high-yielding property which is soundly financed to generate points above Stibor. Secondly, in late June we signed new a substantial surplus over a low cost of debt, backed by a financing arrangements for € 128.6 million on the majority of strong corporate balance sheet. our French portfolio, through separate facilities with Saar LB ( € 100.6 million) and Société Générale ( € 28.0 million). Thirdly, RESULTS AND FINANCING we entered into a SEK 300 million revolving credit facility with Danske Bank for working capital purposes. These Profit before tax for the six months to 30 June 2011 was 32% achievements are particularly encouraging in a financing higher than last year at £37.1 million (2010: £28.1 million), and market which remains difficult for most property companies. profit after tax was 36% up at £33.6 million (2010: £24.7 million), It is a positive sign of how lenders view our strengths and generating earnings per share of 69.9 pence (2010: 51.8 pence), track record. an increase of 35%. EPRA earnings per share were 103% higher at 37.4 pence (2010: 18.4 pence). In the six months to 30 June 2011, largely through these financings, the Group’s liquid resources, consisting of cash and corporate bonds, rose by over £100 million to £228.8 million, which increased the strength of the balance sheet and the available firepower for new investments. 4
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