Annual Results 2013 1 Contents Overview Financials Portfolio - - PowerPoint PPT Presentation

Annual Results

2013

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Contents

Overview Financials Portfolio Looking forwards Summary

2

Henry Klotz

Executive Vice Chairman

John Whiteley

Chief Financial Officer

Simon Wigzell

Head of Group Property

UK 53% France 21% Germany 18% Direct 5% Indirect 3%

Property investments by value

Sweden

About CLS

• Top TSR performance since 2008

in UK listed property sector: 324.3% (27.2% pa compound)

• Specialist in high-yielding offices and
• pportunistically adding value
• Cash generative: high yield (7.0%)

vs low cost of debt (3.64%)

• Rental income £85.6m

Property portfolio £1.1bn

• Management strong alignment of

interest via shares

3

31 December 2013

Achievements in 2013

A Good Time to be Buying Property

• Healthy growth in NAV
• Acquisitions: £165.3m of acquisitions at a yield of 11.6%
• Disposals: £26.9m1, at a yield of 3.3%
• Good progress on developments at Vauxhall Square, Spring Mews and Clifford’s Inn

– Including conditional exchange with student operator at Vauxhall Square

• Low cost of debt maintained
• 1.6m shares issued at 0.5% discount to prevailing share price
• Delivered Total Shareholder Return of 80.3%

4

• 1. 100% value

Contents

Overview Financials Portfolio Looking forwards Summary

5

Financial Highlights

In Good Health

• EPRA NAV up 9.9% to 1,268.4p (2012: 1,154.4p)
• Profit after tax up 35.3% to £63.2m (2012: £46.7m)
• Interest cover 3.2x (2012: 3.5x)
• Low cost of debt 3.64% (2012: 3.67%)
• Issue of innovative institutional secured notes
• TSR 80.3% in 2013; 324.3% in 6 years
• Full year distributions up 13.5% like-for-like

Proposed £10.0m buy-back at 1 in 66 at 1,495p

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1,154.4 1,268.4 80.2 26.3 6.6 10.5 17.3

• 17.8
• 9.1

1,000 1,040 1,080 1,120 1,160 1,200 1,240 1,280 1,320 1 Jan 2013 Underlying profit Reclassify Catena Bond / equity sales FX Revaluation

• f properties

Write off of purchase costs BLD impairment 31 Dec 2013

Strong NAV Growth

Movement in EPRA NAV

Pence

7

1 Jan 2013 Underlying profit Reclassify Catena Bond / equity sales FX Property revaluation before costs Purchase costs BLD impairment 31 Dec 2013

Strong Income Generation

Profit after Tax

28.8 16.2

• 0.4
• 2.1

46.7 28.51

• 0.2

6.3 14.1 14.9

• 0.4

63.2

• 20

20 40 60 80 2012 2013

£m

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EPRA Profit after tax Property revaluation Gain on disposals Gain / (loss)

• n sale of

bonds Reclassify Catena Other Profit after tax

• 1. Includes unfavourable £2.4m movement in FX

127.3 224.9 258.2 258.2 195.0 195.0 215.4 198.4 195.2 195.2 69.4 97.6 47.0

• 13.7

102.1

• 165.3

20.4 17.6

• 34.6
• 3.2

4.0 129.8 50 100 150 200 250 300 350 400

At 1 Jan 2013 From

• perations

Tender buy- back Net new loans Property acquisitions Share issues Sale of properties Capital expenditure Other Bond revaluation At 31 Dec 2013

Very High Liquidity

Movement in Liquid Resources

£m

9

Cash Corporate Bonds 199.2 224.9

Cash Management via Corporate Bonds

• Portfolio sold in August to finance acquisition of Neo portfolio
• Reinvested into 21 bonds from 21 issuers valued at £69.4 million
• ROCE since late 2008: 88.8%
• Return in 2013: 10.8%
• Running yield 7.8%
• Income £5.4m pa

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Debt Profile

As at 31 December 2013

50 100 150 200 250

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Amortisation Bullet Repayments £m

11

2015: 4 loans 2016: 2 loans account for £105m

• Swedish bond
• Loan on a building let until 2026

Diverse Financing

Strategy to lower risk

• Spread risk

– 22 banks (73%) – 2 unsecured bonds (12%) – 1 secured note (10%) – 1 debenture (5%) – Ring fencing model

• 70% fixed or hedged
• 71% floating rate
• Weighted avg. cost of debt 3.64%

(2012: 3.67%)

• Balance sheet LTV 52.8% (2012: 52.5%)

Hedging of Finance

12

Hedged Floating

29%

Fixed

41%

Capped

30%

Contents

Overview Financials Portfolio Looking forwards Summary

13

Govt. 50% Major corporates 22% Other 28%

Occupiers by sector

Property Portfolio

Overview

• Diversified investment portfolio, primarily in

major European cities: – 469 customers in 109 properties (2012: 71) – 544,000 sqm1 (2012: 424,000 sqm) – Cost-effective rents

• 60% of rents indexed
• Secure income: 72% from governments

& major corporates

• WAULT 7.0 years

(5.8 years to first break)

• Cash generating investments = Core activity

Developments <10% portfolio value

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• 1. Excludes developments

0.0 5.0 10.0 15.0 20.0 25.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Later Rent expiring Current ERV of rent expiring

Actively Managed Portfolio

• In-house property management

– +150 asset management transactions in the year – Successful integration of 129,150 sqm acquisitions

• Low vacancy rate of 4.4% vs European office average of over 9.7%

(2)

• Rented in line with market rates with growth potential, especially in UK

Rented in line with market rates(1) (£m pa)

Source: 1. CLS Holdings plc 2. JLL 15

Property Acquisitions 2013

Good Time to be Buying

16 No of Properties Area (sqm) Rent (£m) Rent (£psm) Price (£m inc costs) N.I.Y. (%) Capital Value (£psm) WAULT to expiry (years) WAULT to break (years)

Neo 34 106,762 15.1 141.9 123.7 12.2 1,161 7.2 4.8 London 7 15,251 3.0 188.7 29.5 9.9 1,907 6.2 4.2 UK 41 122,013 18.1 147.7 153.2 11.8 1,254 7.0 4.7 Germany 1 7,135 1.0 148.1 12.1 8.9 1,668 1.8 1.8 Total 42 129,148 19.1 147.8 165.3 11.6 1,277 6.8 4.6

• £165m invested in 42 properties
• Highly cash generative – blended NIY 11.6%; 4.0% avg cost of debt
• Low average rent: £148 psm
• Low average capital value: £1,277 psm
• Looking for more purchases

South Wales & South West Cardiff (x2), Plymouth, Bridgewater, Chippenham, Swansea, North Wales & North West Manchester (x2), Birkenhead, Chester, St Helens, St Asaph (Clwyd) South East Acton, Basildon, Bromley, Hayes, Southampton Scotland Aberdeen (x2), Dundee (x2), Edinburgh, Paisley Yorkshire & North East Billingham, Redcar, Bradford (x2), Rotherham Midlands Birmingham, Norwich, Peterborough, Bedford, Northampton, Wolverhampton

0-2 years 13% 3-4 years 13% 5-6 years 6% >6 years 68%

Neo Portfolio

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• Receivership sale of 34 properties across the UK
• Purchase price including costs: £123.7 million
• NIY: 12.23%
• Rent: £15.1 million, 66% index-linked
• 99% Government occupied
• 14 Government departments in occupation
• Asset management opportunities encouraging

Expiry Profile

As at end Dec 2013

Financed December 2013:

• £80 million @ 4.17%
• 9 years (partially amortising)

Investment Property Portfolio

At 31 December 2013 Contracted Rent £m Valuation £m Revaluation in local currency2 EPRA Net Initial Yield % Vacancy by rent % WAULT (Years) Rent £ psm Capital Value1 £ psm

London 29.9 497.9 ñ ñ 3.1% 5.8 3.2 8.0 216 3,119 Neo 15.2 119.9 ò 3.2% 11.9 0.9 7.9 146 1,124 Total UK 45.1 617.8 ñ ñ 1.9% 7.1 2.4 8.0 186 2,266 France 18.0 240.6 ò 3.6% 6.6 10.6 4.8 206 2,495 Germany 16.2 214.4 ò 0.2% 6.9 3.5 8.3 110 1,408 Sweden 6.3 60.1 ò 2.3% 8.4 1.7 3.4 144 1,325 Total portfolio 85.6 1,132.9 ñ ñ 0.1% 7.0 4.4 7.0 165 1,988

18 1 Excludes development sites: Spring Mews and Clifford’s Inn 2 £7.9m purchase costs written off for 2013 purchases, average 5%

Movement in Rental Income

66.1 76.0 85.6 7.5

• 0.1

1.2

• 0.6

1.9 60 65 70 75 80 85 90 Rental Income 2012 Acquisitions Disposals Indexation Lettings & Expiries FX Rental Income 2013 Contracted Rent Dec 2013

£m

19

Movement in Investment Properties

934.5 1,132.9 165.3 24.4 10.4

• 11.3

0.3 9.3 900 950 1,000 1,050 1,100 1,150

Portfolio Value £m

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1 Jan 2013 Additions Development Refurbish Disposals Revaluation FX 31 Dec 2013

Vauxhall & Nine Elms

Central London’s largest regeneration

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Vauxhall Square Spring Mews

Vauxhall Regeneration

Intense Activity

US Embassy TfL Station upgrade Vauxhall Square Spring Mews

22

Dutch Embassy Possible Chinese Embassy Wanda 5 star hotel & residential Berkeley Group 2 schemes St Modwen Barratt / Sainsbury BT

Adding Value

Vauxhall Square, SW8 - First deal agreed

Gross internal area 143,000 sqm

• Section 106 signed, full consent in place
• 520 apartments – 410 private in 2 x 50

storey towers, 110 affordable homes

• 22,732 sqm offices; 3,119 sqm of retail;

3,777 sqm multi-screen cinema

• 278 bedroom hotel, 123 bedroom suite hotel

– Four-star hoteliers short-listed

• 359 student bedrooms

– Exchanged (conditional) with student

• perator to build and manage

– Attractive terms, no Group cash involved; commence 2015

• Development cost c.£500m

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Adding Value

Spring Mews, SE11 - On site

Gross internal area 20,800 sqm

• 378 student rooms; 22 later phase

– Heads of Terms agreed with university: 210 rooms, 10 year deal

• 93 bedroom suite hotel

– IHG management deal signed, Staybridge brand

• 245 sqm retail space; 1,000 sqm offices
• Started on site Q4 2012
• Completion late 2014
• Development cost c.£55m ex. land
• Estimated rental value £5.5m

24

Adding Value

Clifford’s Inn, Fetter Lane, EC4 – On site

• 3,423 sqm office refurbishment and

8 residential apartments

• Construction to complete Q3 2014
• £10.1m refurbishment cost, income £1.4m pa
• Heads of Terms agreed for single pre-let 100% offices

Catena, Stockholm

• 150,000 sqm Haga Norra site:

– 800 apartments – 73,000 sqm commercial – Exploring phasing and funding options

• CLS stake 13.8%, valued at £32.6m

CGI of Clifford’s Inn

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Sustainability

London

• Helped reduce customers’ gas costs by

£87,000

• 1,300 sqm refurbishment at Falcon House

with the aim of achieving a SKA Gold sustainability standard

• Reduced gas usage within the UK

managed portfolio by 33% and carbon dioxide emissions by a further 290 tonnes

• Ground source energy system under

construction at Spring Mews Sweden

• Reduction of 65% energy cost and 80%

emissions from ground source system at Vänerparken

26

Falcon House: SKA sustainable fit-out

France

• Reduced energy withdrawn from district

heating and cooling schemes by 23%

• Reduced energy usage from fuels

by 17%

Contents

Overview Financials Portfolio Looking forwards Summary

27

UK

• Economic data improving
• Investors returning to non-prime

markets, prices responding

• More capital and debt investing

in property

• Genuine occupier demand increasing
• Across the board reduction

in lettable available space

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2 4 6 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F Pre-let & New Second-Hand Forecast

UK

Gathering momentum

• UK momentum powered by London
• Clear rental growth emerging in suburbs
• Office vacancy at 6.9% around M25 - lowest for 10 years2
• Foreign capital prevalent – safe haven status increasing
• Vauxhall Nine Elms regeneration zone – successes continue
• New rules enhance residential conversion potential

M25 Office Take Up1

• 1. Source: Knight Frank 2. Source: Knight Frank, Q4 2013

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10 Year Avg

Continental Europe

Wide variations

Germany

• Employment at all time high, almost 42 million; economy feels better than the data
• Investment volumes up 21% y-on-y; Q4 highest since end 2007
• Vacancy levels at 10 year low of 8%1
• German IFO Index highest for 2 years at 109.5 (Dec 2013)
• Most advantageous availability of bank debt

France

• Pressure for further reform to generate growth
• GDP growth negligible for foreseeable future
• Unemployment at 10.8%; gap with Germany increasingly unsustainable
• Greater Paris: letting and investment volumes down 25% and 9% y-on-y

Sweden

• GDP growth steady at 1.5% in 2013, 2.4% forecast consensus for 20142
• Central bank rate cut to 0.75%; inflation low at 0.1%3
• Exports held back by low growth in Eurozone
• 4% vacancy in Stockholm CBD; rents stable2

30 Source: DTZ, CLS, 1. Savills, 2. Swedish Statistic Central Office / CLS, 3. Riksbank

Contents

Overview Financials Portfolio Looking forwards Summary

31

Conclusion

Continuing Momentum

• A year of substantial progress
• Further TSR performance
• Strong management team

delivering for shareholders

• Performing on developments,

adding value

• Confidently investing into

recovering markets

• Retaining high levels of liquidity

for future opportunities

32

Appendices

33

www.clsholdings.com

CLS Holdings plc

86 Bondway Tel: +44 (0) 20 7582 7766 London Fax: +44 (0) 20 7820 7728 SW8 1SF Email: enquiries@clsholdings.com

Corporate Bond Portfolio

At 31 December 2013

Banking Insurance Travel and Tourism Food Producers Other Total Value £27.0m £4.6m £10.2m £7.7m £19.9m £69.4m Running yield 8.0% 7.2% 5.9% 8.8% 8.3% 7.8%

Issuers RBS Lloyds Investec SNS Bank* Rothschild Commerzbank Societe Generale Brit Phoenix Life TUI SAS British Airways Findus Boparan Dell Enel Stora Enso Bombardier Manutencoop Corral Finans Telecom Italia 34 * Less than £0.1m market value

Plymouth Northampton Bedford Birmingham Wolverhampton Chester Edinburgh Billingham Redcar Bradford Rotherham Paisley Dundee Aberdeen Swansea Birkenhead St Asaph Cardiff Peterborough Norwich Bridgwater Southampton Chippenham Basildon Ipswich Manchester St Helens Salford Quays London Bromley Brentford Chertsey Coulsdon Hounslow New Malden Wallington Sunbury-on-Thames SW6 Harrow W10 NW10 W3 W6 Staines Hayes WC1 EC4 SE1 SE11 SW8

A1(M) M1 M4 M3 M40 M2 M25

LONDON AND THE SOUTH EAST

UK

• 65 properties
• 250,000 sqm

35

• 26 properties
• 17 in Paris
• 96,400 sqm

France

36

LUXEMBOURG

PARIS LILLE LYON ANTIBES

Germany

• 17 properties
• 152,300 sqm

37

SÜDERHASTEDT HAMBURG BERLIN BOCHUM DÜSSELDORF LANDSHUT MUNICH FREIBURG

Sweden

1 property

• 45,400 sqm office park

1 associate

• Cood Investments

1 investment

• Catena AB

– 150,000 sqm mixed-use development in Stockholm – SEK 3.85 bn logistics portfolio

38

VÄNERPARKEN GOTHENBURG STOCKHOLM

EPRA Profit After Tax

£m 2013 2012 Difference Rental income 76.0 66.1 9.9 Other income 1.2 0.8 0.4 Net service charges (4.1) (4.0) (0.1) Net rental income 73.1 62.9 10.2 Expenses (15.9) (13.4) (2.5) Operating profit 57.2 49.5 7.7 Finance income 7.6 10.0 (2.4) Finance costs (25.2) (24.1) (1.1) FX (1.8) 0.6 (2.4) Share of associates (0.8) 0.2 (1.0) 37.0 36.2 0.8 Tax (8.5) (7.4) (1.1) EPRA Profit after Tax 28.5 28.8 (0.3)

39

• 100
• 50

50 100 150 200 250 300 350

Total Shareholder Return

TSR of listed property companies 2008 – 2013

40 Source: Bloomberg London-listed property investment and development companies with a market cap of over £50m, 6 Year TSR to 31 Dec 2013

CLS %