TIDMCLI
RNS Number : 7155I
CLS Holdings PLC
09 August 2023
PRESS RELEASE
Release date: 9 August 2023
Embargoed until: 07:00
CLS HOLDINGS PLC
("CLS", the "Company" or the "Group")
ANNOUNCES ITS HALF-YEARLY FINANCIAL REPORT
FOR THE 6 MONTHS TO 30 JUNE 2023
Net rental income growth, good financing progress and
significant further rental upside potential
CLS is a leading FTSE250 office space specialist and a
supportive, progressive and sustainably focused commercial
landlord, with a c.GBP2.2 billion portfolio in the UK, Germany and
France, offering geographical diversification with local presence
and knowledge. For the half year ended 30 June 2023, the Group has
delivered the following results:
30 June 31 December Change (%)
2023 2022
------------------------------------ -------- ------------ -----------
EPRA Net Tangible Assets ("NTA")
per share (pence)(1) 291.6 329.6 (11.5)
Statutory NAV per share (pence)(1) 271.5 307.3 (11.7)
Contracted rents (GBP'million) 108.7 110.2 (1.5)
------------------------------------ -------- ------------ -----------
30 June 30 June 2022(2) Change (%)
2023
------------------------------------------ -------- ---------------- -----------
Net rental income 55.6 52.8 5.3
(Loss)/profit before tax (GBP'million) (106.4) 21.3 Nm(3)
EPRA Earnings per share ("EPS")
(pence)(1) 5.2 5.8 (10.3)
Statutory EPS from continuing operations
(pence)(1) (26.2) 4.4 Nm (3)
Dividend per share (pence) 2.60 2.60 -
------------------------------------------ -------- ---------------- -----------
(1) A reconciliation of statutory to alternative performance
measures is set out in Note 5 to the condensed Group financial
statements
(2) Restated for reclassification of student to investment
property (see account note 3 for detail)
(3) Nm = Not meaningful
Fredrik Widlund, Chief Executive Officer of CLS, commented:
"CLS has continued to perform well and deliver on its business
plan despite macro-economic conditions remaining challenging. We
have completed twelve out of thirteen of our planned 2023
refinancings already as well as two of our three major projects to
improve the quality of our buildings, which has contributed to our
ongoing relative valuation outperformance compared to the office
market.
"CLS remains focussed on executing operational and portfolio
improvements, and our geographic diversity and high-quality
properties continue to provide resilience and performance. Recent
lettings are encouraging and demonstrate our ability to capture
opportunities for our properties when they arise."
FINANCIAL HIGHLIGHTS
-- Portfolio valuation down 5.5% in local currencies, ahead of
the office market reflecting the quality of our portfolio and
indexed-linked leases. Yield expansion offset ERV increases and
resulted in valuation decreases of 8.5% in the UK, 3.3% in Germany
and 1.9% in France in local currencies
-- EPRA NTA down 11.5% primarily as a result of property
valuation declines and foreign exchange losses from strengthening
sterling
-- Loss before tax GBP106.4 million ( 30 June 2022: GBP21.3
million profit) principally due to valuation declines on investment
properties of GBP132.9 million (30 June 2022: GBP5.1 million
decline)
-- EPRA EPS down 10.3% to 5.2 pence per share with higher net
rental income more than offset by higher financing costs and
foreign exchange losses . Statutory EPS was a loss of 26.2 pence
per share due to valuation declines across all regions
-- Interim dividend maintained at 2.60 pence per share (30 June
2022: 2.60 pence per share) to be paid on 3 October 2023
-- Total accounting return per share of -9.9% (30 June 2022: 2.2%)
OPERATIONAL HIGHLIGHTS
-- Net rental income increased by 5.3% to GBP55.6 million (30
June 2022: GBP52.8 million) as a result of higher income from our
2022 German acquisitions, indexation and stronger performance of
our hotel and student operations
-- Completed the disposal of two smaller properties in the UK
and Sweden, and unconditionally exchanged on the sale of
Westminster Tower, Albert Embankment. In aggregate, the three
properties had a net initial yield of 2.4% and sold for a total of
GBP49.0 million, 7.5% above 31 December 2022 book value
-- In addition, offers accepted or terms agreed for a further 6 sales for GBP39.1 million
-- Completed 69 lease events (30 June 2022: 60) securing GBP7.8
million (30 June 2022: GBP4.4 million) of annual rent at 10.0%
above ERV with like-for-like contracted rent increasing by 1.5%.
This included securing one of CLS' largest ever leases, for 30
years, over 17,400 sqm in Essen
-- Vacancy rate increased to 9.2% (31 December 2022: 7.4%).
Underlying vacancy was flat at 7.4% and the increase was due to
completion of developments currently being marketed to prospective
tenants
-- Rent collection remained at the same, consistently high
levels with 99% of first half rent collected and 97% of third
quarter contracted rent due collected to date
FINANCING
-- Weig hted average cost of debt at 30 June 2023 up 63 basis
points to 3.32% (31 December 2022: 2.69%) resulting from the impact
of central bank interest rate increases
-- Loan-to-value at 45.1% (31 December 2022: 42.2%) reflecting
valuation declines in the period. Gross debt of GBP1,089.4 million
(31 December 2022: GBP1,105.9 million) with cash of GBP92.5 million
(31 December 2022: GBP113.9 million) and GBP50 million (31 December
2022: GBP50 million) of undrawn facilities
-- In the first half of 2023 refinanced or extended GBP299.1
million of debt at 5.21% for 2.9 years. In July completed another
refinancing for GBP20.8 million. Discussions starting for the one
last remaining GBP24.7 million refinancing due in December 2023
-- The loan portfolio as at 30 June 2023 had 75% at fixed rates
and 4% subject to interest rate caps (31 December 2022: 72% at
fixed rates and 4% subject to interest rate caps) with the increase
due to GBP25.7m of loans at floating rate having been repaid and
replaced with fixed rate loans
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
-- In delivering our 2030 Net Zero Carbon Pathway, a further
GBP6.1 million is expected to be invested in 2023. So far this
year, completed 34 projects with another 84 projects due to finish
before year end, which will save over 1,200 tonnes CO2e per annum
and puts us on track to achieve our targets
-- CLS' solar electricity generation at 30 June 2023 has
increased 48% year on year and a further 90 kWp of UK installations
will be completing this year
-- CLS now a Living Wage Foundation Accredited Employer in the UK
Interim Dividend Timetable
The Board has declared an interim dividend of 2.60 pence per
ordinary share with the following timetable:
Announcement Date 9 August 2023
Ex-Dividend Date 7 September
2023
---------------
Record Date 8 September
2023
---------------
Payment Date 3 October 2023
---------------
-ends-
Results presentation
A presentation for analysts and investors will be held in-person
at Liberum Capital, by webcast and by conference call on Wednesday
9 August 2023 at 8:30am followed by Q&A. Questions can be
submitted either online via the webcast or to the operator on the
conference call.
-- Liberum Capital: Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY
-- Webcast: The live webcast will be available here:
https://secure.emincote.com/client/cls/cls00 7
-- Conference call: In order to dial in to the presentation via
phone, please register at the following link and you will be
provided with dial-in details and a unique access code:
https://secure.emincote.com/client/cls/cls007/vip_connect
For further information, please contact:
CLS Holdings plc
(LEI: 213800A357TKB2TD9U78)
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 +44 7970 174353
Hastings Tarrant +44 7813 407665
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.
Chief Executive's statement
Net rental income growth, good financing progress and
significant further rental upside potential
OVERVIEW
CLS has continued to perform well and deliver on its business
plan despite economic conditions remaining challenging. Our
investment in the portfolio to improve its quality together with
the majority of our leases being index-linked has led to growth in
rental income and valuations which are better compared to the
overall office market. We have delivered all of our planned
refinancings for the year to date and have one GBP24.7 million
refinancing remaining in 2023. Our focus going forward is on
executing a selected number of disposals to reduce LTV and reducing
vacancy to capture the significant upside in the portfolio,
particularly from newly refurbished buildings.
We secured 375,873 sq. ft (34,919 sqm) of lettings and renewals
but vacancy increased to 9.2% (31 December 2022: 7.4%) essentially
as two of our three major projects were completed in the period and
are being actively marketed to prospective tenants. We invested
GBP31.6 million of capital expenditure to improve the quality of
our space but expect this amount to fall significantly from the
second half of 2023 to more normal historical levels.
Over the six months, EPRA NTA decreased by 11.5% to 291.6p per
share (31 December 2022: 329.6p) mainly from a reduction in
property valuations and negative foreign exchange movements due to
sterling strengthening. Total accounting return per share for the
six months was -9.9% (30 June 2022: 2.2%).
We sold two smaller properties in the UK and Sweden and
exchanged on the sale of Westminster Tower, Albert Embankment in
the first half. The total consideration for the three properties is
GBP49.0 million, 7.5% above 2022 book value. We are targeting
further selected disposals in the second half to reduce gearing and
to continue to invest in the portfolio's quality.
RESULTS AND FINANCING
The loss after tax for the six months to 30 June 2023 was
GBP104.1 million (30 June 2022: GBP18.3 million profit), equivalent
to a loss per share of 26.2p (30 June 2022: 4.4p profit). The
decrease was as a result of: higher revaluation losses of GBP132.9
million (30 June 2022: GBP5.1 million); and higher net finance
expense of GBP16.2 million (30 June 2022: GBP12.0 million), partly
offset by higher net rental income of GBP55.6 million (30 June
2022: GBP52.8 million); reduced expenses, other and tax of GBP13.3
million debit (30 June 2022: GBP13.9 million debit); and a profit
on disposal of GBP2.7 million (30 June 2022: GBP0.2 million loss).
EPRA earnings per share were 5.2p (30 June 2022: 5.8p), 10.3% down
on last year.
Shareholders' funds decreased in the six months by 11.6% to
GBP1,078.7 million reflecting property valuation declines and the
strengthening of sterling.
Our balance sheet liquidity remains strong with GBP92.5 million
of cash and GBP50 million of undrawn facilities, and our loan book
remains substantially at fixed rates with 79% fixed/capped (31
December 2022: 76%). Our weighted average cost of debt increased to
3.32% (31 December 2022 2.69%) principally as a result of an
increase in the UK base rate impacting UK floating rate debt and
refinancings completed during the year at a higher all-in cost.
Only one loan for GBP24.7 million remains to be refinanced in 2023.
Net debt excluding leasehold liabilities was essentially flat at
GBP996.9 million (31 December 2022: GBP992.0 million) and
loan-to-value rose to 45.1% (31 December 2022: 42.2%) reflecting
valuation declines. Interest cover remained high at 2.4 times (30
June 2022: 3.1 times) demonstrating the Group's operating strength
and ongoing ability to generate cash.
PROPERTY PORTFOLIO
At 30 June 2023, the value of the property portfolio, including
properties held for sale, was GBP2,210.5 million, GBP142.3 million
lower than six months earlier. This decrease was as a result of:
net valuation decreases of GBP131.5 million; foreign exchange
losses of GBP37.1 million; and disposals of GBP5.4 million partly
offset by investment in the portfolio through capital expenditure
of GBP32.0 million.
As a result of market conditions remining challenging, we did
not pursue any acquisitions and do not expect to for at least the
rest of 2023. To date, we have sold two smaller properties in the
UK and Sweden and unconditionally exchanged on the sale of
Westminster Tower, Albert Embankment. In aggregate, the three
properties had a net initial yield of 2.4% and sold for a total of
GBP49.0 million, 7.5% above 2022 book value.
We announced that we would be a net seller in 2023 and, in the
second half of 2023, we will target further selected disposals of
properties that do not fit our long-term return criteria. We will
use the disposal proceeds to reduce the Group's loan to value and
continue investing to improve the quality of the portfolio.
In the six months to June, the like-for-like valuation of the
property portfolio (which excludes acquisitions and disposals), as
well as the overall portfolio valuation, fell by 5.5% in local
currency. There were like-for-like valuation decreases of 8.5% in
the UK, 3.3% in Germany and 1.9% in France. In Sterling, the
valuation decrease was 7.1% incorporating the strengthening of
Sterling in the period. At 30 June 2023, the EPRA 'topped up' net
initial yield of the portfolio was 4.9% (31 December 2022: 4.7%),
158 basis points above the Group's average cost of debt,
demonstrating the Group's continuing ability to generate cash.
The EPRA vacancy rate as at 30 June 2022 was 9.2% (31 December
2022: 7.4%) with the increase as a result of the completion of our
developments of The Coade at Vauxhall Walk in London and Park
Avenue in Lyon. These properties offer over 100,000 sq. ft of
top-quality offices with excellent amenities and sustainability
credentials. Underlying vacancy was flat at 7.4%.
DIVIDS
In October 2023, the Group will pay an interim dividend for the
current financial year of 2.60 pence per share, which is at the
same level as the 2022 interim dividend, and in line with the
revised dividend policy announced in May 2022 of 1.20x to 1.60x
EPRA earnings dividend cover. The PID part of the dividend is 1.70
pence per share.
ENVIRONMENT, SOCIAL AND GOVERNANCE
We have built upon the good progress made in 2022 across many
ESG objectives by continuing to invest in our assets and work
towards the targets in our Sustainability Strategy and Net Zero
Carbon Pathway.
So far in 2023, we have been continuing with the implementation
of technical and cost-effective Net Zero Carbon projects across all
regions. This year, 34 carbon reduction projects are complete with
a further 84 projects due to be completed by the end of 2023. These
projects save an estimated 1,200 tonnes CO2e per annum, keeping us
on track to achieve our 2030 targets. The projects include LED
lighting upgrades, façade replacement as part of the renovation at
Park Avenue, smart water metering (including leak detection) across
our German portfolio, and a high-efficiency heating and air
conditioning system using ground water at Front de Parc in
Lyon.
We continually align implementation of opportunities with our
lease and refurbishment plans, and thus refine the optimal time to
deliver projects over the coming years. This ensures we maintain a
comprehensive picture of the costs and compliance risks which are
incorporated into the long-term asset management strategies for
each property. The full programme includes meeting regulatory
requirements such as future higher minimum EPC standards in the UK
and the 2030 Décret Tertiaire energy efficiency targets in
France.
As part of being a responsible company and long-term investor,
we have continued to support local and industry related charities,
with our core focus being to support the issues of homelessness,
food poverty, youth skills and environmental sustainability.
Finally, as pressures continue on the lowest paid from the
increased cost of living, CLS has signed up to be an accredited
Living Wage Employer certified by the Living Wage Foundation. This
covers both UK employees and regular contractors, and fulfils a key
Sustainability Strategy commitment ahead of time.
OUTLOOK
As expected, the economic backdrop for the property market has
been challenging and we expect it to remain so until interest rates
have definitively peaked. There are tentative signs that the labour
market is becoming less tight which is encouraging more employers
to demand employees back in the office more often particularly as
reports, such as "The working-from-home illusion fades" from the
Economist in June 2023, demonstrate that productivity is enhanced
in the office.
To encourage workers back to the office and in response to
market trends, CLS is continuing to invest in its portfolio to
provide high quality and affordable offices that are sustainable
with good amenities and well-being facilities whilst providing
flexible and digitally connected space. This, together with the
majority of our leases being index-linked, is contributing to
rental growth in excess of ERV growth. We also continue to see
record results from our hotel through higher daily rates and our
student accommodation is 100% booked for the 2023/2024 academic
year at higher rates.
The diversification benefits of the portfolio have again been
demonstrated with Germany and France balancing the weaker UK
market. Whilst markets remain challenging, we are prioritising
maintaining a strong balance sheet and will continue to be a net
seller of selected assets at appropriate prices. Our long-term
approach and active asset management should keep the Group in good
stead, and we have significant opportunities to increase rental
income through reducing vacancy, to more than compensate for higher
interest costs, over the next couple of years.
Our investor proposition
Strong and consistent long-term shareholder returns
Set out below are the key tenets of our investment proposition.
A fuller description can be found on pages 10 and 11 of CLS' 2022
Annual Report and Accounts:
Clear strategy Active management
---------------------------------------------- ----------------------------------------------
* Diversified approach * Experienced in-house capabilities
* The best offices in our locations * Secure rents and high occupancy
* Selected development schemes * Interest rate management
Leading track record Focus on sustainability
----------------------------------------------------- ------------------------------------------
* Disciplined approach to investment * Responsible profit
* Cash-backed progressive dividend * Strong ESG performance
* Financing headroom * Climate risk mitigation
----------------------------------------------------- ------------------------------------------
DIVID POLICY
The Company expects to generate sufficient cash flow to be able
to meet the growth requirements of the business, maintain an
appropriate level of debt and provide cash returns to shareholders
via a dividend.
As announced in May 2022, we updated our dividend policy
following the conversion of our UK operations to a REIT. The
company will maintain a progressive dividend policy, with a
dividend cover of 1.2 to 1.6 times EPRA earnings (previously 1.5 to
2.0 times). Approximately one-third of the annual dividend is paid
as an interim in September or October, with the balance paid as a
final dividend in April.
ANALYST COVERAGE
We are covered by four brokers which publish regular analyst
research: Liberum Capital; Panmure Gordon; Berenberg and Peel Hunt.
Contact details can be found on our website
www.clsholdings.com.
2023 INVESTOR ENGAGEMENT
Events which have taken place Events which are due to take
place
------------------------------- ----------------------------------
March 2023 August 2023
Annual Results presentation Half-Year Results presentation
Annual Results investor calls
and meetings August/September 2023
Half-Year Results investor calls
April 2023 and meetings
Annual General Meeting
November 2023
Trading Update
------------------------------- ----------------------------------
Business review
United Kingdom
UK inflation and interest rate increases impacting overall
market sentiment
30 June 2023 31 December 2022
------------------------------------------ ------------- -----------------
Value of properties GBP1,000.9m GBP1,070.6m
------------------------------------------ ------------- -----------------
Percentage of Group's property interests 46% 46%
------------------------------------------ ------------- -----------------
Number of properties 38 39
------------------------------------------ ------------- -----------------
Number of tenants 211 204
------------------------------------------ ------------- -----------------
EPRA vacancy rate 12.5% 10.0%
------------------------------------------ ------------- -----------------
Lettable space 1.8m sq. ft 1.8m sq. ft
------------------------------------------ ------------- -----------------
Government and large companies 71% 78%
------------------------------------------ ------------- -----------------
Weighted average lease length to end 3.4 years 3.7 years
------------------------------------------ ------------- -----------------
Leases subject to indexation 33% 33%
------------------------------------------ ------------- -----------------
The value of the UK portfolio decreased by GBP69.7 million as a
result of: capex of GBP25.9 million, offset by one disposal for
GBP1.8 million; and valuation decreases of GBP93.8 million or 8.5%.
The valuation decrease was fairly consistent across our London,
South-East and government-let properties due to outward yield
shifts resulting from rising interest rates and ongoing
inflationary pressure. Hotel and student properties fared better
reflecting the strength of these sectors.
The construction of "The Coade", our 28,400 sq. ft (2,638 sqm)
new office development at Vauxhall Walk, London, was completed in
April and is expected to achieve EPC A and a BREEAM rating of
Excellent. In addition, "The Artesian", our development at 9
Prescot Street, London, is due to complete in Q4 2023 and will
offer 92,500 sq. ft (8,594 sqm) of modern and attractive space
including a café/reception, ample bike storage, showers and a large
roof terrace. In both cases, we are seeing occupier demand for
these locations improve with a number of viewings taking place.
In terms of disposals, we have continued to execute our strategy
of disposing of assets which are either small lot sizes or have
greater value for alternative use. More specifically, we completed
the sale of St Cloud Gate in Maidenhead which is a 9,700 sq. ft
(901 sqm) office building close to the town centre. The property
has the benefit of a planning permission for a 40,000 sq. ft (3,716
sqm) Grade A office building which was granted prior to the
sale.
We have unconditionally exchanged on the sale of Westminster
Tower, a prominent office building of 48,500 sq. ft (4,505 sqm)
which is located on the banks of the River Thames and overlooks the
Houses of Parliament. The building benefits from implemented
planning permission for conversion to residential apartments and
the sale is due to complete in Q4 2023. Overall, these two
transactions have a combined price of GBP42.8 million.
Vacancy increased in the period from 10.0% to 12.5% largely due
to completed developments and refurbishments in particular The
Coade. Since 1 January 2023, we let or renewed leases on 246,742
sq. ft (22,923 sqm) and lost 271,276 sq. ft (25,202 sqm) from
expiries or new vacancies. 32 lease extensions and new leases were
signed adding GBP2.9 million of rent at an average of 4.7% above 31
December 2022 ERV. The most significant transactions were a 5-year
lease extension with Allocate Software at Thameslink House,
Richmond for 14,221 sq. ft (1,321 sqm) and a 3-year lease extension
with Select Contracts Limited to 2032 for 19,714 sq. ft (1,831 sqm)
at Pacific House, Reading. Furthermore, we negotiated the surrender
of the head lease of one of our largest assets, New Printing House
Square, London from the Secretary of State. It is fully let to a
variety of sub-tenants and the surrender resulted in increasing the
rent receivable from the building by c.GBP1.2m pa whilst giving us
full control of the asset. Excluding this surrender, like-for-like
ERVs were up 0.8% for our UK portfolio.
The consensus forecast published by the Bank of England in June
2023 is that GDP will grow by 0.3% in 2023 and 0.6% in 2024.
Unemployment rose again in June 2023 to 4.0% and the estimated
employment rate was 76% which has been attributed to an increase in
part-time employees.
In terms of the UK property market, commercial investment
volumes were c.GBP14.6 billion in the first half of 2023 compared
with GBP35.6 billion in the same period in 2022. In the South-East,
the occupational take up was 493,577 sq. ft, 34% below the 10-year
quarterly average. Vacancy in London is now 9.2% and in the
South-East 10.9%.
Germany
Investment market slow but lettings holding up well to
Government and Mittelstand
30 June 2023 31 December 2022
-------------------------------- ------------- -----------------
Value of properties GBP936.0m GBP996.1m
-------------------------------- ------------- -----------------
Percentage of Group's property
interests 42% 42%
-------------------------------- ------------- -----------------
Number of properties 33 33
-------------------------------- ------------- -----------------
Number of tenants 358 372
-------------------------------- ------------- -----------------
EPRA vacancy rate 6.2% 6.1%
-------------------------------- ------------- -----------------
Lettable space 3.7m sq. ft 3.9m sq. ft
-------------------------------- ------------- -----------------
Government and large companies 55% 56%
-------------------------------- ------------- -----------------
Weighted average lease length 5.1 years 5.2 years
to end
-------------------------------- ------------- -----------------
Leases subject to indexation 65% 65%
-------------------------------- ------------- -----------------
The value of the German portfolio decreased by GBP60.1 million
as a result of: capex of GBP4.8 million, offset by a disposal of
GBP3.6 million; foreign exchange loss of GBP28.8 million; and a
valuation decrease of GBP32.5 million or 3.3% in local currency.
The portfolio valuation loss was as a result of yield
expansion.
In terms of disposals we sold a land holding outside Helsingborg
in Sweden for GBP6.2 million. The property was included within our
German portfolio and it was sold with planning permission for
logistics.
During the period bbw Academy ended their lease at
Bismarkstrasse, Berlin after 17 years in occupation. We have
commenced a substantial renovation plan to the façade, common areas
and vacated floors to make the building best in class. The property
will be rebranded as "Loop Berlin" which on completion will present
excellent opportunities to capture substantially higher rents.
During the six months to 30 June 2023, we continued to invest
across the portfolio improving the quality of our assets and
enhancing their sustainability credentials.
Vacancy was relatively flat at 6.2% compared with 6.1% at 31
December 2022 due to expired leases moving to development stock.
Since 1 January 2023, 70,562 sq. ft (6,555 sqm) was let or renewed
but 162,137 sq. ft (15,063 sqm) of space expired or was vacated. 22
lease extensions and new leases were signed adding GBP3.7 million
of rent at an average of 17.8% above 31 December 2022 ERV. The most
significant transaction was a new 30-year letting for 187,292 sq.
ft (17,400 sqm) to The City of Essen at The Brix, Kruppstrasse in
Essen. A substantial development programme will commence on
expiration of the existing tenant's lease in July 2024. The plan to
spend up to EUR20 million over a three year period will include a
host of energy efficiency, sustainability, and wellbeing
initiatives, providing The City of Essen with high quality and
flexible workspace, in compliance with the EU taxonomy. Across the
portfolio, like-for-like ERVs were up 1.1%. On a proforma basis,
the inclusion of the Essen deal would increase proforma WAULT by
1.6 years to 6.7 years and add GBP0.9 million to contracted
rent.
The German economy is projected to stagnate in 2023 and grow by
1.0% in 2024. High inflation is reducing real incomes and savings,
dampening private consumption. Although energy prices have dropped
from last summer's heights, inflation is again increasing with
regards to food and services industries prices. Unemployment
remained at 5.5% but is expected to rise slightly by the end of
2023.
The commercial property market stabilised somewhat in the second
quarter, but activity remained low. For the first half of 2023,
investment volume totalled c.EUR9.9 billion, substantially lower
than the same period in 2022 when c.EUR27.8 billion was
invested.
In the letting market, large companies are reluctant to take
space due to the uncertain economic environment and the
space-saving potential associated with hybrid working tends to be
greater the larger the office. In contrast, lettings to Government
and Mittelstand companies are holding up well and here we saw
increased activity in the period. Take-up in the first half of 2023
was at around 1.1 million sqm, around 30% lower than the same
period in 2022. The average vacancy rate in the top seven cities
increased to 5.3% from 4.8%.
France
Letting market resilient for small to medium sized
floorplates
30 June 2023 31 December 2022
--------------------------------- ------------- -----------------
Value of properties GBP273.6m GBP286.1m
--------------------------------- ------------- -----------------
Percentage of Group's property
interests 12% 12%
--------------------------------- ------------- -----------------
Number of properties 17 17
--------------------------------- ------------- -----------------
Number of tenants 149 147
--------------------------------- ------------- -----------------
EPRA vacancy rate 6.8% 2.6%
--------------------------------- ------------- -----------------
Lettable space 0.8m sq. ft 0.8m sq. ft
--------------------------------- ------------- -----------------
Government and major corporates 54% 56%
--------------------------------- ------------- -----------------
Weighted average lease length 5.0 years 4.9 years
to end
--------------------------------- ------------- -----------------
Leases subject to indexation 100% 100%
--------------------------------- ------------- -----------------
The value of the French portfolio decreased by GBP12.5 million
as a result of: capex of GBP1.3 million, offset by a foreign
exchange loss of GBP8.3 million and a valuation decrease of GBP5.5
million or 1.9% in local currency which was largely driven by yield
expansion.
During the first half of the year, we continued our programme of
refurbishing several of our French properties. The most significant
was the completion of our EUR11.2 million refurbishment at Park
Avenue in Lyon. This included replacement of the existing façade
and creation of new common terraces through the extension of
existing landings. The sustainability credentials of the building
have been enhanced through the installation of new windows,
electric shades and a green roof. During the works, the tenants
were relocated to temporary office space but resumed occupation in
March 2023. Two new leases have been signed to date and there is a
good level of interest in the remaining newly refurbished space
with several viewings taking place.
Vacancy increased from 2.6% to 6.8% which was due to the
completion of the Park Avenue refurbishment works. During the
period, 58,569 sq. ft (5,441 sqm) was let or renewed but 68,299 sq.
ft (6,345 sqm) of space expired or was vacated. Since 1 January
2023, 15 lease extensions and new leases were signed adding GBP1.2
million of rent at an average of 1.6% above 31 December 2022 ERV.
The most significant transactions were a lease extension at Inside
in Paris for 10,280 sq. ft (955 sqm) with Transdev on a 3/6/9 year
lease and another extension with Citadines at Jean Jaurès, Paris
for 8,837sq. ft (821 sqm) on a 6/9 year lease. Across the
portfolio, like-for-like ERVs were up 1.1%. The French portfolio
benefitted from a larger proportion of small to medium sized
floorplates which have done well compared to larger ones.
The French economy is expected to see a slowdown in 2023 with
limited growth of 0.7% followed by a slight uptick in 2024 to 1.0%.
The unemployment rate is forecast to increase to 7.1% at the end of
2023 and will continue its upward trend in 2024 before stabilising
in 2025. Nevertheless, hiring intentions remain high and the
employment market could even set a new record.
Following the sharp decline in investment activity at the end of
2022 and in Q1 2023, the investment volume in commercial real
rstate in France over the first half of 2023 reached c.EUR6.1
billion, compared with c.EUR11.2 billion for the same period in
2022. The sharp drop in the number of transactions illustrates the
general slowdown in activity.
Foreign investors have been scarcer since the beginning of 2023,
representing only 30% of the amounts invested, mainly concentrated
in the Greater Paris Region. In the Greater Paris Region, the
investment volume in commercial real estate over first half 2023
reached c.EUR4.2 billion, down by 44% compared with the first half
of 2022.
In the letting market, over first half 2023, office take-up in
the Greater Paris Region reached 816,200 sqm, this is down by 22%
compared to the first half of 2022. Office immediate supply on June
30 2023 in the Greater Paris Region is estimated at 4.5 million
sqm, up by 10% year on year with the vacancy rate reaching 8% at 30
June 2023.
Key data
Rental Data
Rental Net Rental Lettable Contracted ERV Contracted EPRA Vacancy
Income Income Space Rent at at 30 Rent Subject rate at
for the for the (sqm) 30 June June to Indexation 30 June
Period Period 2023 (GBPm) 2023 (GBPm) 2023
(GBPm) (GBPm) (GBPm)
--------- ----------- --------- ------------- -------- --------------- -------------
UK 22.7 22.3 168,174 49.3 58.0 16.3 12.5%
----------------- --------- ----------- --------- ------------- -------- --------------- -------------
Germany 21.7 20.9 347,311 45.2 48.8 29.4 6.2%
----------------- --------- ----------- --------- ------------- -------- --------------- -------------
France 6.6 6.7 73,763 14.2 15.9 14.2 6.8%
----------------- --------- ----------- --------- ------------- -------- --------------- -------------
Total Portfolio 51.0 49.9 589,248 108.7 122.7 59.9 9.2%
----------------- --------- ----------- --------- ------------- -------- --------------- -------------
Valuation Data
H1 Valuation
Movement
----------- ------------------------- ---------- ----------- ----------- ------------- ------------
EPRA
Market EPRA Topped-up
Value Foreign Net Net
of Underlying Exchange Initial Initial Over-rented Equivalent
Property (GBPm) (GBPm) Yield Yield Reversion Yield
(GBPm)
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
UK 866.5 (104.0) - 5.3% 5.6% 8.2% 5.2% 6.1%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
Germany 934.3 (32.4) (28.6) 3.8% 4.4% 8.9% 7.5% 5.0%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
France 271.9 (5.5) (8.3) 4.4% 4.8% 8.9% 4.2% 5.4%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
Total
Portfolio 2,072.7 (141.9) (36.9) 4.5% 4.9% 8.6% 6.1% 5.6%
----------- ----------- ------------ ----------- ---------- ----------- ----------- ------------- ------------
Lease Data
Average Lease Contracted Rent of Lease ERV of Lease
Length Expiring In: Expiring In:
-------------------- ---------------------------------------- -----------------------------------------
To Break To Years After Years After
(Years) Expiry Year Year 3 - 5 Years Year Year 3 - 5 Years
(Years) 1 2 5 (GBPm) (GBPm) 1 2 5 (GBPm) (GBPm)
(GBPm) (GBPm) (GBPm) (GBPm)
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
UK 2.6 3.4 5.7 12.6 21.9 9.1 5.5 15.4 21.0 8.8
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
Germany 5.0 5.1 10.0 5.3 15.5 14.4 10.7 5.4 16.0 13.6
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
France 2.2 5.0 1.7 0.5 3.3 8.7 1.6 0.4 3.2 9.5
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
Total
Portfolio 3.6 4.3 17.4 18.4 40.7 32.2 17.8 21.2 40.2 31.9
----------- --------- --------- -------- -------- --------- --------- -------- --------- --------- ---------
Note: The above tables comprise data for our offices in
investment property and properties held for sale. They exclude
owner-occupied, student accommodation and hotel.
Tenant Industries by Contracted Property use
Rent by rent
Government 21.3% Offices 88.6%
------ ------
Commercial and Professional Student 5.2%
Services 13.0% ------
------ Hotel 3.9%
Information Technology 11.9% ------
------ Food/Retail 2.3%
Consumer Discretionary 10.3% ------
------
Communication Services 8.4%
------
Health Care 6.7%
------
Industrials 6.3%
------
Financials 6.3%
------
Other 6.1%
------
Real Estate 5.4%
------
Consumer staples 4.3%
------
Financial review
RESULTS FOR THE PERIOD
HEADLINES
The loss after tax of GBP104.1 million (30 June 2022: GBP18.3
million profit) generated basic loss per share of 26.2 pence (30
June 2022: 4.4 pence profit). EPRA earnings per share, which
exclude valuation losses, were 5.2 pence (30 June 2022: 5.8 pence),
which were down 10.3% year on year. This was due to: higher net
rental income more than offset by higher finance expenses from
higher interest rates on our floating rate debt and recently
refinanced loans. The higher net rental income was also reduced by
tax in Germany and France and the higher UK tax rate on UK non-REIT
income. Gross property assets at 30 June 2023, including those in
property, plant and equipment and those held for sale, decreased to
GBP2,210.5 million (31 December 2022: GBP2,352.8 million) as a
result of: a revaluation decrease of GBP131.5 million; foreign
exchange reductions of GBP37.0 million; and disposals of GBP5.5
million, partly offset by capital expenditure of GBP31.7 million.
Net assets per share fell by 11.7% to 271.5 pence (31 December
2022: 307.3 pence) and EPRA NTA per share by 11.5% to 291.6 pence
(31 December 2022: 329.6 pence). Total accounting return per share
including dividends paid in the period was -9.9% (30 June 2022:
2.2%).
CLS uses a number of Alternative Performance Measures ('APMs')
alongside statutory figures. We believe that these assist in
providing stakeholders with additional useful information on the
underlying trends, performance and position of the Group. Note 5 to
these condensed set of Financial Statements gives a full
description and reconciliation of our APMs, and sets out the full
suite of EPRA measures.
STATEMENT OF COMPREHENSIVE INCOME
Net rental income for the six months to 30 June 2023 of GBP55.6
million (30 June 2022: GBP52.8 million) was higher than last year
by 5.3% as a result of higher rental income from index-linked
leases and acquisitions more than offsetting disposals and lease
surrenders as well as higher income from our hotel and student
operations and higher dilapidations income. Rent collection
remained at the same, consistently high levels with 99% of first
half rent collected and 97% of third quarter contracted rent due
collected to date.
Operating loss of GBP90.5 million (30 June 2022: GBP28.2 million
profit) was due primarily to the 5.5% revaluation decline in local
currency equivalent to a loss of GBP132.9 million (30 June 2022:
GBP5.1 million loss) which was only partially offset by higher
operating profit before revaluation and disposals of GBP39.7
million (30 June 2022: GBP36.8 million) and profit on disposal of
GBP2.7 million (30 June 2022: GBP0.2 million loss).
Net interest expense of GBP15.5 million (30 June 2022: GBP6.7
million), which was up GBP8.8 million, is comprised of three
elements. Finance costs of GBP17.2 million (30 June 2022: GBP12.6
million) were up year on year as a result of higher interest rates
on CLS' floating rate debt and recent refinancings. Finance income
was higher with both interest income at GBP1.0 million (30 June
2022: GBP0.6 million) and the movement in the fair value of
derivatives of GBP0.7 million (30 June 2022: GBP5.3 million)
benefitting from the increase in interest rates.
The tax credit of GBP2.3 million (30 June 2022: tax charge
GBP3.0 million) represented an effective rate of 2.2% (30 June
2022: 14.7%). The overall tax credit is primarily attributable to
the release of deferred tax liabilities in France and Germany
resulting from the reduction in property values.
EPRA NET TANGIBLE ASSETS PER SHARE
EPRA NTA per share fell from 329.6p to 291.6p in the six months
to 30 June 2023, a decrease of 38.0p per share or 11.5%. On a per
share basis, the decrease comprised the decrease in property values
of 33.4p, foreign exchange losses of 5.0p and the final 2022
dividend of 5.35p, partly offset by EPRA earnings of 5.2p and other
positive movements of 0.6p.
CASH FLOW, NET DEBT AND FINANCING
In the six months to 30 June 2023, gross borrowings decreased by
GBP16.5 million to GBP1,089.4 million (31 December 2022: GBP1,105.9
million), principally due to a stronger pound decreasing the value
of debt denominated in Euros.
As at 30 June 2023, the Group had cash of GBP92.5 million (31
December 2022: GBP113.9 million) and GBP50.0 million (31 December
2022: GBP50.0 million) of undrawn facilities. The cash balance
decreased by GBP21.4 million from 31 December 2022 given net
investment in our portfolio. During the period, we invested GBP30.9
million of capital expenditure in our properties partially offset
by net receipts from disposals of GBP9.7 million. Net proceeds from
new financing were GBP83.4 million and GBP83.5 million of loans
were repaid. Net cash flow from operating activities was GBP23.5
million (30 June 2022: GBP19.3 million) which was used to pay the
2022 final dividend of GBP20.5 million (net of withholding tax
which was paid in July).
Net debt excluding leasehold liabilities at the half-year was
GBP996.9 million and the Group's loan-to-value was 45.1% (31
December 2022: 42.2%). The weighted average cost of debt increased
to 3.32% (31 December 2022: 2.69%) principally as a result of an
increase in the UK base rate impacting UK floating rate debt and
refinancing completed during the year at a higher all-in cost .
Weighted average debt maturity was 3.8 years (31 December 2022: 3.8
years).
The proportions of fixed, capped and unhedged debt were 75%, 4%
and 21% (31 December 2022: 72%, 4%, 24%) respectively. The
proportion of fixed rate debt has increased in the first half of
the year due to GBP25.7m of loans at floating rate having been
repaid and replaced with fixed rate loans. The 4% of total debt
subject to interest rate caps are all for French and German loans
which are at a range of 0.5% to 1.5%, being on average 1.99% below
the average 3 month EURIBOR of 3.19%.
CLS has 44 different loans secured by individual, or small
portfolios of, properties. The loans vary in terms of the number of
covenants with the three main covenants being ratios relating to
loan to value, interest cover and debt service cover. However, some
loans only have one or two of these covenants, some have other
covenants and some have none. The loans also vary in terms of the
level of these covenants and the headroom to these covenants.
On average across the 44 loans, CLS has between 16% and 33%
headroom for these three main covenants. In the event of an actual
or forecast covenant breach, all of the loans have equity cure
mechanisms to repair the breach which allow CLS to either repay
part of the loan or deposit cash for the period the loan is in
breach, after which the cash can be released.
Overall, since the start of the year, CLS has successfully
refinanced loans due in 2023 but also in 2024. Of the total loans
of GBP162.0 million due in 2023, only one loan remains to be
refinanced in December for GBP24.7 million.
The loan balance due in 2024, excluding amortisation, was
GBP342.2 million at the start of 2023. Of that balance, GBP178.2
million of loans have been extended. We are confident that the
remaining balance of GBP183.7 million, after amortisation, which
now includes GBP19.7 million for Westminster Tower which was
extended prior to the sale, will be refinanced well ahead of their
maturity dates. The balance of GBP183.7 million is well-diversified
being split across 10 loans with 2 loans for GBP84.7 million in the
UK, 4 loans for GBP66.8 million in Germany and 4 loans for GBP32.2
million in France. The average loan to value across the 10 loans is
only 46% financed by 7 different banks.
Finally, we are advanced for a new GBP30 million Revolving
Credit Facility to replace the existing RCF which expires on 20
September 2023.
PRINCIPAL RISKS AND UNCERTAINTIES
A detailed explanation of the principal risks and uncertainties
affecting the Group, and the steps it takes to mitigate these
risks, can be found on pages 96 to 103 of the annual report and
financial statements for the year ended 31 December 2022, which is
available at www.clsholdings.com/investors.
The Group's principal risks and uncertainties are grouped into
six categories: property; sustainability; business interruption;
financing; political and economic; and people. These risks and
uncertainties are expected to remain relevant for the remaining six
months of the financial year, and these are discussed further
below.
The Board has reviewed the risk status of each of the six risk
categories, particularly with regard to the ongoing economic and
geopolitical risks including high inflation and correspondingly
higher interest rates as well as Russia's continued invasion of
Ukraine. The overall risk landscape remains heightened; however, we
do not believe that there has been sufficient change to alter any
of the risk ratings. Both property and financing risks remain as
high risks and we continue to monitor the risks, focused around
vacancy, disposals and loan to value, and refinancings, and
mitigations vigilantly.
Work continues on implementing software to document, and help
test, risks and internal controls with further progress expected by
the end of the year. In the second half of the year, end to end
"walkthrough" tests of a number of processes and the associated
controls will be performed.
Principal Status Change since Commentary
risk at year year end
end
Property High No change Investor sentiment around the property industry
remains depressed given value reductions
and lower market activity. In addition, with
hybrid working becoming accepted, there remain
concerns about the future level of demand
for offices. However, there is increasing
evidence that tenants are seeking out, and
paying more for, higher quality offices.
CLS is responding by investing in its properties
to provide the best offices in our locations
and staying close to our tenants.
-------- ------------ ---------------------------------------------------
Sustainability Medium No change A key part of CLS' DNA is to provide sustainable
buildings, which also accords with changing
office trends and regulatory demands. We
are committed to, and are on track to, deliver
our 2030 Net Zero Carbon Pathway, which is
a key part of our Sustainability (and wider
ESG) Strategy.
-------- ------------ ---------------------------------------------------
Business Low No change We continue to invest in our IT and other
interruption equipment to give our employees the tools
to perform their roles effectively. Ongoing
penetration testing and other work has resulted
in continued Cyber Essential Plus standard
certification.
-------- ------------ ---------------------------------------------------
Financing High No change Whilst inflation appears to have peaked and
interest rates are peaking, financing risk
remains high. This is reflected in higher
interest costs, albeit with few increases
in bank margins, and some lowering of loan
to value ratios. Through ongoing selected
disposals CLS is seeking to reduce Group
LTV. In addition to de-gearing, CLS continues
to maintain banking relationships, monitor
covenants and engage early with upcoming
refinancings. CLS has significant protection
with c. 80% of debt fixed and good covenant
headroom.
-------- ------------ ---------------------------------------------------
Political High No change The risk remains high given concerns over
and economic economic growth and continued geopolitical
uncertainty not least from Russia's invasion
of Ukraine. The most immediate impact on
CLS has been from higher interest rates and
some exposure to higher construction costs
but these have been mitigated through CLS'
high levels of inflation-indexed rent and
higher replacement values for existing buildings.
-------- ------------ ---------------------------------------------------
People Medium No change CLS' staff turnover remains elevated given
the tight labour market. Through ongoing
training, CSR activities, and social and
culture events activities, we continue to
respond to staff needs. A new staff survey
later in the year will give further feedback
and areas upon which to focus.
-------- ------------ ---------------------------------------------------
GOING CONCERN
The Directors' assessment of going concern uses the same
methodology as for the preparation and validation of the year end
going concern (and viability) statement(s) (see pages 104 and 105
of the 2022 Annual Report and Accounts). This assessment uses
forecasts that have been adjusted for the impacts of the current
economic, property and financing markets. A more detailed
description of the approach is set out in note 2 to these condensed
Group financial statements.
The Group is reliant in the Base case and Severe but plausible
case upon its ability to both refinance the debt maturing and to
complete a number of investment property disposals in the going
concern period in more challenging market conditions.
Whilst the Directors remain confident that a combination of
sufficient refinancings and property disposals will be achieved,
the timing and value of both the planned refinancing of facilities
falling due within the going concern review period, and planned
property disposals, is outside of management's control and
consequently a material uncertainty exists that may cast
significant doubt on the Group's ability to continue as a going
concern.
Notwithstanding this material uncertainty on the going concern
assumption, given our track-record and reputation, and the progress
made since 31 December 2022 in terms of refinancing, the Directors
are confident that the debt falling due for repayment in the going
concern period will be refinanced or settled in line with their
plans for the reasons set out above, rather than requiring
repayment on maturity, or will be extinguished as part of property
disposals in the period. Therefore, the Directors continue to adopt
the going concern basis in preparing these Group financial
statements.
The financial statements do not contain the adjustments that
would result if the Group were unable to continue as a going
concern.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) the condensed set of financial statements, which has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
contained in UK adopted financial standards, gives a true and fair
view of the assets, liabilities, financial position and profit of
the Group, as required by DTR 4.2.4R;
b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the financial year);
and
c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
On behalf of the Board
Fredrik Widlund Andrew Kirkman
Chief Executive Officer Chief Financial Officer
8 August 2023
INDEPENT REVIEW REPORT TO CLS HOLDINGS plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises Condensed Group
income statement, the Condensed Group statement of comprehensive
income, the Condensed Group balance sheet, the Condensed Group
statement of changes in equity, the Condensed Group statement of
cash flows and the related notes to the financial statement 1 to
19. We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Material uncertainty related to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, we draw attention to Note 2 -
Going Concern in the condensed set of financial statements, which
indicates that the going concern assumption is dependent upon the
timing and value of both the refinancing of the debt maturing and
investment property disposals during the going concern period to 30
September 2024. The Group acknowledges that these refinancings and
disposals are dependent on circumstances outside their control. As
stated in note 2, these events or conditions, along with the other
matters as set forth in note 2, indicate that a material
uncertainty exists that may cast significant doubt on the Group's
ability to continue as a going concern.
Our conclusion is not modified in respect of this matter.
The responsibilities of the directors with respect to going
concern are described in the relevant section of this report.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern (including the material uncertainty set out in Note 2) and
using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including the Material uncertainty related to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
8 August 2023
Financial statements
Condensed Group income statement
for the six months ended 30 June 2023
Six months ended Restated Year ended
Six months ended
30-Jun-23 30-Jun-22 31-Dec-22
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Revenue 4 72.3 68.3 139.7
Costs 4 (16.7) (15.5) (31.9)
Net rental income 55.6 52.8 107.8
Administration expenses (8.8) (8.4) (15.7)
Other expenses (7.1) (7.6) (16.2)
Operating profit before revaluation and disposals 39.7 36.8 75.9
Net revaluation movement on investment property 10 (132.9) (5.1) (136.5)
Net revaluation movement on equity investments - (3.3) (3.8)
Profit/(loss) on sale of investment property 2.7 (0.2) 0.5
Operating profit (90.5) 28.2 (63.9)
Finance income 6 1.7 5.9 10.1
Finance costs 7 (17.2) (12.6) (26.8)
Foreign exchange loss (0.4) (0.2) (0.3)
Impairment of goodwill - - (1.1)
(Loss)/profit before tax (106.4) 21.3 (82.0)
Taxation 8 2.3 (3.0) 0.1
---------------------------------------------------- ---- ----------------- ------------------ -----------
(Loss)/profit for the period (104.1) 18.3 (81.9)
---------------------------------------------------- ---- ----------------- ------------------ -----------
Attributable to:
Owners of the Company (104.1) 18.3 (81.9)
---------------------------------------------------- ---- ----------------- ------------------ -----------
p
Basic and diluted earnings per share 15 (26.2)p 4.4p (20.2)p
---------------------------------------------------- ---- ----------------- ------------------ -----------
Condensed Group statement of comprehensive income for the six
months ended 30 June 2023
Six months ended Restated Year ended
30 June 2023 Six months ended 31 December 2022
GBPm 30 June 2022 GBPm
(unaudited) GBPm (audited)
Note (unaudited)
-------------------------------------------------------- ---- ---------------- ----------------- -----------------
(Loss)/profit for the period (104.1) 18.3 (81.9)
-------------------------------------------------------- ---- ---------------- ----------------- -----------------
Other comprehensive income
Items that may be reclassified to profit or loss
Revaluation of property, plant and equipment 11 (0.1) 1.3 1.9
Foreign exchange differences (16.8) 13.6 28.5
Deferred tax on fair value movements - (0.2) (0.4)
Total items that may be reclassified to profit or
loss (16.9) 14.7 30.0
-------------------------------------------------------- ---- ---------------- ----------------- -----------------
Total other comprehensive (expense)/income (16.9) 14.7 30.0
-------------------------------------------------------- ---- ---------------- ----------------- -----------------
Total comprehensive (expense)/income for the period (121.0) 33.0 (51.9)
-------------------------------------------------------- ---- ---------------- ----------------- -----------------
Attributable to:
Owners of the Company (121.0) 33.0 (51.9)
-------------------------------------------------------- ---- ---------------- ----------------- -----------------
Condensed Group balance sheet at 30 June 2023
Restated
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
----------------------------------- ----- ------------- ------------ -------------
Non-current assets
Investment properties 10 1,992.7 2,299.1 2,295.0
Property, plant and equipment 11 39.6 42.4 39.6
Goodwill and intangible assets 3.0 3.5 2.8
Equity investments 2.5 3.3 2.7
Deferred tax 3.1 2.6 2.8
Derivative financial instruments 7.2 5.1 8.5
2,048.1 2,356.0 2,351.4
----------------------------------- ----- ------------- ------------ -------------
Current assets
Trade and other receivables 14.2 30.9 15.8
Derivative financial instruments 1.9 - -
Cash and cash equivalents 17 92.5 110.4 113.9
----------------------------------- ----- ------------- ------------ -------------
108.6 141.3 129.7
----------------------------------- ----- ------------- ------------ -------------
Assets held for sale 12 180.6 59.5 20.3
Total assets 2,337.3 2,556.8 2,501.4
----------------------------------- ----- ------------- ------------ -------------
Current liabilities
Trade and other payables (63.0) (52.9) (58.6)
Current tax (0.2) (0.6) (2.0)
Borrowings 13 (224.5) (184.6) (173.4)
Derivative financial instruments - (0.2) -
----------------------------------- ----- ------------- ------------ -------------
(287.7) (238.3) (234.0)
----------------------------------- ----- ------------- ------------ -------------
Non-current liabilities
Deferred tax (102.6) (114.5) (110.5)
Borrowings 13 (864.9) (858.6) (932.5)
Leasehold liabilities (3.4) (3.5) (3.6)
(970.9) (976.6) (1,046.6)
----------------------------------- ----- ------------- ------------ -------------
Total liabilities (1,258.6) (1,214.9) (1,280.6)
----------------------------------- ----- ------------- ------------ -------------
Net assets 1,078.7 1,341.9 1,220.8
----------------------------------- ----- ------------- ------------ -------------
Equity
Share capital 14 11.0 11.0 11.0
Share premium 83.1 83.1 83.1
Other reserves 98.7 99.9 115.4
Retained earnings 885.9 1,147.9 1,011.3
----------------------------------- ----- ------------- ------------ -------------
Total equity 1,078.7 1,341.9 1,220.8
----------------------------------- ----- ------------- ------------ -------------
Condensed Group statement of changes in equity for the six
months ended 30 June 2023
Share Share Other Retained
capital premium reserves earnings Total
Unaudited GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- ------------ ------------- --------- -------
At 1 January 2023 11.0 83.1 115.4 1,011.3 1,220.8
----------------------------------------- -------- ------------ ------------- --------- -------
Arising in the six months ended
30 June 2023:
Total comprehensive income for
the period - - (16.9) (104.1) (121.0)
Share-based payments - - 0.2 - 0.2
Dividends to shareholders - - - (21.3) (21.3)
Total changes arising in the period - - (16.7) (125.4) (142.1)
----------------------------------------- -------- ------------ ------------- --------- -------
At 30 June 2023 11.0 83.1 98.7 885.9 1,078.7
----------------------------------------- -------- ------------ ------------- --------- -------
Restated Restated
Share Share Other Retained
capital premium reserves earnings Total
Unaudited GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- ------------ ------------- --------- -------
At 1 January 2022 11.0 83.1 88.7 1,147.9 1,330.7
----------------------------------------- -------- ------------ ------------- --------- -------
Arising in the six months ended
30 June 2022:
Total comprehensive income for the
period (restated) - - 14.7 18.3 33.0
Share-based payments - - - - -
Transfer of fair value of property
(restated) - - (3.5) 3.5 -
Dividends to shareholders - - - (21.8) (21.8)
-----------------------------------------
Total changes arising in the period - - 11.2 - 11.2
----------------------------------------- -------- ------------ ------------- --------- -------
At 30 June 2022 11.0 83.1 99.9 1,147.9 1,341.9
----------------------------------------- -------- ------------ ------------- --------- -------
Share Share Other Retained
capital premium reserves earnings Total
Audited GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- ------------ ------------- --------- -------
At 1 January 2022 11.0 83.1 88.7 1,147.9 1,330.7
----------------------------------------- -------- ------------ ------------- --------- -------
Arising in the year ended 31 December
2022:
Total comprehensive income/(expense)
for the year - - 30.0 (81.9) (51.9)
Share-based payments - - 0.2 - 0.2
Transfer of fair value of property - - (3.5) 3.5 -
Dividends to shareholders - - - (32.4) (32.4)
Purchase of own shares - - - (25.8) (25.8)
----------------------------------------- -------- ------------ ------------- --------- -------
Total changes arising in 2022 - - 26.7 (136.6) (109.9)
----------------------------------------- -------- ------------ ------------- --------- -------
At 31 December 2022 11.0 83.1 115.4 1,011.3 1,220.8
----------------------------------------- -------- ------------ ------------- --------- -------
Condensed Group statement of cash flows for the six months ended
30 June 2023
Restated
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
------------------------------------------------------------------- ------------- ------------ --------------
Notes
Cash flows from operating activities
Cash generated from
operations 16 40.6 31.0 70.5
Interest received 1.0 0.6 1.3
Interest paid (15.4) (11.3) (24.2)
Income tax paid on operating activities (2.7) (1.0) (4.6)
------------------------------------------------------------------- ------------- ------------ --------------
Net cash inflow from operating activities 23.5 19.3 43.0
------------------------------------------------------------------- ------------- ------------ --------------
Cash flows from investing activities
Purchase of investment properties - (32.1) (83.4)
Capital expenditure on investment properties (30.9) (25.9) (57.2)
Proceeds from sale of investment properties 9.7 9.8 56.2
Income tax paid on sale of properties (1.8) (3.8) (3.2)
Purchases of property, plant and equipment (0.7) (0.1) (0.4)
Purchase of intangibles (0.1) (0.4) (0.8)
Repayment of vendor loan - - 7.7
Cost on foreign currency transactions - - (0.2)
Net cash outflow from investing activities (23.8) (52.5) (81.3)
------------------------------------------------------------------- ------------- ------------ --------------
Cash flows from financing activities
Dividends paid (20.5) (21.8) (32.4)
Purchase of own shares - - (25.8)
New loans 83.9 14.7 144.1
Issue costs of new loans (0.5) (0.2) (1.1)
Repayment of loans (83.5) (16.1) (99.4)
------------------------------------------------------------------- ------------- ------------ --------------
Net cash (outflow)/inflow from financing
activities (20.6) (23.4) (14.6)
------------------------------------------------------------------- ------------- ------------ --------------
Cash flow element of net decrease in cash
and cash equivalents (20.9) (56.6) (52.9)
Foreign exchange loss (0.5) (0.4) (0.6)
------------------------------------------------------------------- ------------- ------------ --------------
Net decrease in cash and cash equivalents (21.4) (57.0) (53.5)
Cash and cash equivalents at the beginning
of the period 113.9 167.4 167.4
------------------------------------------------------------------- ------------- ------------ --------------
Cash and cash equivalents at the end of
the period 92.5 110.4 113.9
------------------------------------------------------------------- ------------- ------------ --------------
Notes to the condensed Group financial statements 30 June
2023
1 BASIS OF PREPARATION
The financial information contained in this half-yearly
financial report does not constitute statutory accounts as defined
in section 434 of the Companies Act 2006. The results disclosed for
the year ended 31 December 2022 are an abridged version of the full
accounts for that year, which received an unqualified report from
the Auditor, did not contain a statement under section 498(2) or
(3) of the Companies Act 2006 or include a reference to any matter
to which the Auditor drew attention by way of emphasis without
qualifying the Auditor's report, and have been filed with the
Registrar of Companies. The annual financial statements of CLS
Holdings plc are prepared in accordance with United Kingdom adopted
International Accounting Standards (IASs) and International
Financial Reporting Standards (IFRSs). The condensed financial
statements included in this half-yearly financial report have been
prepared in accordance with IAS 34 Interim Financial Reporting, as
adopted by the United Kingdom.
The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the latest audited annual financial
statements. A number of new standards and amendments to IFRSs have
become effective for the financial year beginning on 1 January
2023. These new standards and amendments are listed below:
-- Insurance Contracts - Amended IFRS 17
-- Definition of Accounting Estimates - Amendments to IAS 8
-- Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
The adoption of these new standards and amendments to IFRSs did
not materially impact the condensed Group financial statements for
the six months ended 30 June 2023 and are not expected to
materially impact the full year financial statements for the 12
months ended 31 December 2023.
2 GOING CONCERN - BASIS OF PREPARATION
Background
CLS' strategy and business model include regular secured loan
refinancings, and capital deployment and recycling through
acquisitions, capital expenditure and disposals. Over the last
thirty years, the Group has successfully navigated several periods
of economic uncertainty, including the recent economic stress
resulting from the Covid-19 pandemic, Russia's invasion of Ukraine
and the cost-of-living crisis. The Group continues to have high
rent collection and low bad debts, and has a long-term track record
in financing and refinancing debt including GBP229.9 million
completed in 2022 and a further GBP299.1 million during the six
month period to 30 June 2023.
Going concern period and basis
The Group's going concern assessment covers the period to 30
September 2024 ("the going concern period"). The period chosen
takes into consideration the maturity date of loans totalling
GBP226.3 million that expire by September 2024. The going concern
assessment uses the forecast cash flows approved by the Board at
its May 2023 meeting as the Base case, updated for the actual
results achieved for 2023 half year. The assessment also considers
a Severe but plausible case.
Forecast cash flows - Base case
The forecast cash flows prepared for the Base case take account
of the Group's principal risks and uncertainties, and reflect the
current greater uncertainty related to the more challenging
economic backdrop. The forecast cash flows have been updated using
assumptions regarding forecast forward interest curves, inflation
and foreign exchange, updated for a worsening of these assumptions
in 2023 and 2024. The Base case includes the impact of revenue
growth, principally from contractual increases in rent, and
increasing cost levels in line with forecast inflation.
The Base case is focussed on the cash and working capital
position of the Group throughout the going concern period. In this
regard, the Base case assumes continued access to lending
facilities in the UK, Germany and France, and specifically that
debt facilities of GBP226.3 million with 9 lenders expiring within
the going concern period will be refinanced as expected (GBP96.1
million) or will be repaid (GBP130.2 million, of which GBP116.4
million is linked to forecast property disposals, with the balance
being planned repayments). The Directors recognise that these
events and conditions are outside their control; however, they
remain confident that refinancings or extensions of these loans
will be executed within the required timeframe, having taken into
account:
-- existing banking relationships and ongoing discussions with
existing and new lenders in relation to these refinancings with the
Group having ongoing relationships with over 24 banks;
-- CLS' track record of prior refinancings, particularly in the
18 months to 30 June 2023 when GBP529.0 million was successfully
refinanced or extended as planned, both in terms of timing and
commercial terms; and
-- recent refinancings subsequent to the period end that have
been executed, credit approved by lenders, or where the terms have
been agreed.
The Group also has a number of mitigating actions at its
disposal, as set out below.
The Base case also includes property disposals in the going
concern period in line with the Group's business model and the
forecast cash flows approved by the Board in May 2023. The
Directors acknowledge that property disposals are not within their
control both in terms of timing and value; however, the Directors
are confident these transactions will be completed within the going
concern period, based on their history of achieving disposals and
the status of ongoing disposal processes (offers accepted or terms
agreed for 6 properties for GBP39.1 million). The value of the
properties available for disposal is significantly in excess of the
value of the debt maturing during the going concern period.
The Group's financing arrangements, which utilise non-recourse
property loans, contain Loan to Value ('LTV'), Interest Cover Ratio
('ICR') and Debt Service Coverage Ratio ('DSCR') covenants. In the
Base case, limited cure payments have been forecast such that the
Group's expects to maintain its compliance with the covenant
requirements.
The near-term impacts of climate change risks within the going
concern period have been considered in all scenarios modelled and
are expected to be immaterial.
Forecast cash flows - Severe but plausible case
A Severe but plausible case has been assessed which has been
produced by flexing key assumptions further including: lower rents;
increased service charges; higher property and administration
expenses; falling property values; and higher interest rates. The
flexed assumptions are more severe than CLS experienced during the
2007-2009 global financial crisis and other downturns such as that
experienced in 2020-2022 during the Covid-19 pandemic. A key
assumption in this scenario is a reduction in property values of
10% until September 2024, impacting forecast refinancings, sales
and cash cures. This is in addition to the property value reduction
of 10.5% experienced over the 12 months to 30 June 2023.
Assumptions around refinancing and investment property disposals
remain the same as in the base case; however, the reduction in
property values of 10% results in additional cure payments of
GBP5.2 million being necessary for the Group to remain in
compliance with its covenant requirements.
Due to the severity of the assumptions used in this scenario,
which is severe but plausible and therefore not remote, the
liquidity of the Group is exhausted before putting in place
controllable mitigating actions as set out below.
Mitigating actions
In the Severe but plausible case, CLS would need to take further
mitigating actions including depositing additional cash to equity
cure certain loans as required under the agreements of GBP15.1
million, scaling back uncommitted capital expenditure (without
impacting revenue streams over the going concern period) and
deferring in full the dividend related to the Property Income
Distribution required under the UK REIT rules as well as drawing
upon its existing GBP50 million of currently unutilised facilities
of which GBP30 million is committed until 20 September 2023 and
GBP20 million is an overdraft available subject to certain criteria
being met and until further notice. Discussions for a new secured
GBP30 million revolving credit facility are advanced. As with the
Base case, it is assumed that loan facilities are refinanced as
they become due. If needed, further disposals could be considered
as there are no sale restrictions on CLS' GBP2.2 billion of
properties, albeit the timing and the amount of these potential
disposals are not in the Group's control.
Material uncertainty related to going concern
As described above, the Group is reliant in the Base case and
Severe but plausible case upon its ability to both refinance the
debt maturing and to complete a number of investment property
disposals in the going concern period in more challenging market
conditions.
Whilst the Directors remain confident that a combination of
sufficient refinancings and property disposals will be achieved,
the timing and value of both the planned refinancing of facilities
falling due within the going concern review period, and planned
property disposals, is outside of management's control and
consequently a material uncertainty exists that may cast
significant doubt on the Group's ability to continue as a going
concern.
Notwithstanding this material uncertainty on the going concern
assumption, given our track-record and reputation, and the progress
made since 31 December 2022 in terms of refinancing, the Directors
are confident that the debt falling due for repayment in the going
concern period will be refinanced or settled in line with their
plans for the reasons set out above, rather than requiring
repayment on maturity, or will be extinguished as part of property
disposals in the period. Therefore, the Directors continue to adopt
the going concern basis in preparing these Group financial
statements.
The financial statements do not contain the adjustments that
would result if the Group were unable to continue as a going
concern.
3 RESTATEMENT OF PRIOR PERIOD
The restatement of the prior period noted below does not change
profit, earnings per share or the net assets of the Group
materially; they are presentational restatements that reclassify
amounts to alternative financial statement lines.
GBP95.0 million reclassification from property plant and
equipment to investment property
The student accommodation at Spring Mews was held as investment
property until 31 December 2020 when it was reclassified to
property, plant and equipment. The accounting judgement made at
that time was reconsidered and it was determined that it was more
appropriate and market sector comparable to classify the student
accommodation as an investment property and so it has been
reclassified back to investment property. There is a GBP1.0 million
increase to profit before tax and a corresponding decrease in other
comprehensive income as a result of the revaluation movement being
recognised in the income statement for investment property. The
impact on basic and diluted earning per share is an increase of
0.2p. These impacts are not material.
4 SEGMENT INFORMATION
The Group has two operating divisions - investment properties
and other investments. Other investments comprise the hotel at
Spring Mews and other small corporate investments. The Group
manages the investment properties division on a geographical basis
due to its size and geographical diversity. Consequently, the
Group's principal operating segments are:
Investment properties: United Kingdom
Germany France
Other investments
The Group's results for the six months ended 30 June 2023 by
operating segment were as follows:
Investment properties
----------------------------- ---------------------------
United Other Central
Kingdom Germany France investments administration Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---------- ------- ------ ------------ --------------- -------
Rental income 22.7 21.7 6.6 - - 51.0
Other property-related
income 4.2 0.3 0.5 2.4 - 7.4
Service charge income 6.0 5.5 2.4 - - 13.9
----------------------------- ---------- ------- ------ ------------ --------------- -------
Revenue 32.9 27.5 9.5 2.4 - 72.3
Service charges and
similar expenses (7.3) (6.6) (2.8) - - (16.7)
----------------------------- ---------- ------- ------ ------------ --------------- -------
Net rental income 25.6 20.9 6.7 2.4 - 55.6
Administration expenses (3.8) (1.6) (0.7) (0.1) (2.6) (8.8)
Other expenses (3.6) (2.1) (0.3) (1.1) - (7.1)
----------------------------- ---------- ------- ------ ------------ --------------- -------
Revenue less costs 18.2 17.2 5.7 1.2 (2.6) 39.7
Net movements on
revaluation of investment
property (93.1) (34.4) (5.4) - - (132.9)
Movement on revaluation - - - - - -
of equity investments
Profit on sale of
investment property 0.1 2.6(1) - - - 2.7
Operating profit/(loss) (74.8) (14.6) 0.3 1.2 (2.6) (90.5)
Finance income 0.6 0.1 0.1 - 0.9 1.7
Finance costs (10.0) (5.3) (1.8) - (0.1) (17.2)
Foreign exchange
loss - - - - (0.4) (0.4)
Loss before tax (84.2) (19.8) (1.4) 1.2 (2.2) (106.4)
----------------------------- ---------- ------- ------ ------------ --------------- -------
1 This is the land disposal in Sweden
4 SEGMENT INFORMATION (continued)
The Group's results for the six months ended 30 June 2022 by
operating segment were as follows:
Investment properties
United Kingdom Germany France Other Central Total
GBPm GBPm GBPm investments administration GBPm
GBPm GBPm
------------------------------------------ ---------------- ------- ------- ------------ --------------- -------
Rental income 25.1 17.3 6.4 - - 48.8
Other property-related income 4.0 - 0.1 2.1 - 6.2
Service charge income 5.7 5.1 2.5 - - 13.3
------------------------------------------ ---------------- ------- ------- ------------ --------------- -------
Revenue 34.8 22.4 9.0 2.1 - 68.3
Service charges and similar expenses (6.8) (6.0) (2.7) - - (15.5)
------------------------------------------ ---------------- ------- ------- ------------ --------------- -------
Net rental income 28.0 16.4 6.3 2.1 - 52.8
Administration expenses (3.6) (1.4) (0.8) - (2.6) (8.4)
Other expenses (3.7) (2.1) (0.3) (1.5) - (7.6)
------------------------------------------ ---------------- ------- ------- ------------ --------------- -------
Revenue less costs 20.7 12.9 5.2 0.6 (2.6) 36.8
Net movements on revaluation of
investment property 4.6 (3.6) (6.1) - - (5.1)
Net movements on revaluation of equity
investments - - - (3.3) - (3.3)
Loss on sale of investment property (0.2) - - - - (0.2)
Operating profit/(loss) 25.1 9.3 (0.9) (2.7) (2.6) 28.2
Finance income 3.4 0.7 0.7 1.1 - 5.9
Finance costs (7.9) (2.8) (1.3) (0.6) - (12.6)
Foreign exchange loss - - - - (0.2) (0.2)
Share of associates after tax - - - - - -
------------------------------------------ ---------------- ------- ------- ------------ --------------- -------
Profit/(loss) before tax 20.6 7.2 (1.5) (2.2) (2.8) 21.3
------------------------------------------ ---------------- ------- ------- ------------ --------------- -------
4 SEGMENT INFORMATION (continued)
The Group's results for the year ended 31 December 2022 were as
follows:
Investment properties
United Other Central
Kingdom Germany France investments administration Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ------- ------ ------------ --------------- -------
Rental income 48.5 38.0 12.9 - - 99.4
Other property-related
income 8.2 0.2 - 4.9 - 13.3
Service charge income 11.2 11.3 4.5 - - 27.0
------------------------------- ------------ ------- ------ ------------ --------------- -------
Revenue 67.9 49.5 17.4 4.9 - 139.7
Service charges and similar
expenses (13.1) (14.1) (4.7) - - (31.9)
Net rental income 54.8 35.4 12.7 4.9 - 107.8
Administration expenses (6.4) (2.8) (1.4) (0.2) (4.9) (15.7)
Other expenses (8.1) (4.2) (0.7) (3.2) - (16.2)
------------------------------- ------------ ------- ------ ------------ --------------- -------
Revenue less costs 40.3 28.4 10.6 1.5 (4.9) 75.9
Net movements on revaluation
of investment properties (79.6) (41.5) (15.4) - - (136.5)
Net revaluation movements
on equity investments - - - (3.8) - (3.8)
(Loss)/profit on sale
of investment property (0.3) - 0.8 - - 0.5
------------------------------- ------------ ------- ------ ------------ --------------- -------
Operating profit/(loss) (39.6) (13.1) (4.0) (2.3) (4.9) (63.9)
Finance income 5.3 1.4 1.4 2.0 - 10.1
Finance costs (16.4) (6.8) (2.4) (0.8) (0.4) (26.8)
Foreign exchange loss - - - - (0.3) (0.3)
Impairment of goodwill - (0.3) (0.8) - - (1.1)
------------------------------- ------------ ------- ------ ------------ --------------- -------
Loss before tax (50.7) (18.8) (5.8) (1.1) (5.6) (82.0)
------------------------------- ------------ ------- ------ ------------ --------------- -------
SEGMENT ASSETS AND LIABILITIES
Assets Liabilities Capital expenditure
----------------- ------------------------- ------------------------- ------------------------
30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec
2023 2022 2022 2023 2022 2022 2023 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Investment property
segment
United Kingdom 1009.5 1,073.8 1,083.6 556.5 539.1 551.7 25.5 14.1 36.6
Germany 968.3 962.8 1,011.6 529.3 487.6 536.4 4.8 3.6 9.8
France 280.7 296.8 294.3 167.4 182.2 185.7 1.3 6.8 11.7
Other investments
segment
78.8 223.4 111.9 5.4 6.0 6.8 0.7 - 0.4
----------------- ------- ------- ------- ------- ------- ------- ------- ------- ------
2,337.3 2,556.8 2,501.4 1,258.6 1,214.9 1,280.6 32.3 24.5 58.5
----------------- ------- ------- ------- ------- ------- ------- ------- ------- ------
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs')
Alternative performance measures ('APMs') should be considered
in addition to, and are not intended to be a substitute for, or
superior to, IFRS measurements. An APM is a financial measure of
historical or future financial performance, position or cash flows
of the Group which is not a measure defined or specified in
IFRS.
Introduction
The Group has applied the October 2015 European Securities and
Markets Authority ('ESMA') guidelines on APMs and the October 2021
Financial Reporting Council ('FRC') thematic review of APMs in
these results, whilst noting the International Organization of
Securities Commissions (IOSCO) 2016 guidance and ESMA's December
2019 report on the use of APMs.
Overview of our use of APMs
The Directors believe that APMs assist in providing additional
useful information on the underlying trends, performance and
position of the Group. APMs assist our stakeholder users of the
accounts, particularly equity and debt investors, through the
comparability of information. APMs are used by the Directors and
management, both internally and externally, for performance
analysis, strategic planning, reporting and incentive-setting
purposes.
APMs are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, including peers in the real
estate industry. There are two sets of APMs which we utilise, and
which are reconciled where possible to statutory measures on the
following pages.
1. EPRA APMs
CLS monitors the Group's financial performance using APMs which
are European Public Real Estate Association ('EPRA') measures as
these are a set of standard disclosures for the property industry
and thus aid comparability for our stakeholder users.
The latest edition of the EPRA guidelines was issued in February
2022 and contains three net asset measures which are defined in the
glossary:
-- EPRA net tangible assets (NTA);
-- EPRA net realisable value (NRV); and
-- EPRA net development value (NDV).
CLS considers EPRA NTA to be the most relevant of these new
measures as we believe that this will continue to reflect the
long-term nature of our property investments most accurately.
However, all three balance sheet measures along with EPRA Earnings
have been disclosed.
Whilst CLS primarily uses the measures referred to above, we
have also disclosed other EPRA metrics being:
-- EPRA net initial yield;
-- EPRA 'topped-up' net initial yield;
-- EPRA vacancy;
-- EPRA capital expenditure;
-- EPRA cost ratio; and
-- EPRA LTV
2. Other APMs
CLS uses a number of other APMs, many of which are commonly used
by industry peers:
-- Total accounting return;
-- Net borrowings and gearing;
-- Loan-to-value;
-- Administration cost ratio;
-- Dividend cover; and
-- Interest cover.
Changes to APMs
There have been no changes to the Group's APMs in the year. The
APMs utilised by the business are defined, calculated and used on a
consistent basis.
Set out below is a reconciliation of the APMs used in these
results to the statutory measures.
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
1) EPRA APMs
Number of shares for use in EPRA calculations:
31 December
30 June 2023 30 June 2022 2022
Number Number Number
------------------------------------- -------------- -------------- -------------
Weighted average number of ordinary
shares in circulation 397,249,424 407,395,760 404,410,051
------------------------------------- -------------- -------------- -------------
Number of ordinary shares in
circulation 397,410,268 407,395,760 397,210,866
------------------------------------- -------------- -------------- -------------
i) EPRA Earnings
Restated
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
GBPm GBPm GBPm
------------------------------------------- --------------- --------------- --------------
(Loss)/profit for the period (104.1) 18.3 (81.9)
Net movement on revaluation of investment
property 132.9 5.1 136.5
Deferred taxation on revaluations (4.7) 1.9 (4.8)
Net movement on revaluation of equity
investment - 3.3 3.8
(Profit)/loss from sale of investment
property (2.7) 0.2 (0.5)
Current tax on disposals - - 1.6
Movement in fair value of derivative
financial instruments (0.7) (5.3) (8.8)
Impairment of goodwill - - 1.1
EPRA earnings 20.7 23.5 47.0
------------------------------------------- --------------- --------------- --------------
Basic and diluted earnings per share
from continuing operations (26.2)p 4.4p (20.2)p
------------------------------------------- --------------- --------------- --------------
EPRA earnings per share 5.2p 5.8p 11.6p
------------------------------------------- --------------- --------------- --------------
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
ii) Net asset value measures
30 June 2023 IFRS EPRA EPRA EPRA
NAV NTA NRV NDV
GBPm GBPm GBPm GBPm
-------------------------------------- ------- ------- ------- ---------
Net assets 1,078.7 1,078.7 1,078.7 1,078.7
Goodwill as a result of deferred - - - -
tax on acquisitions
Other intangibles - (3.0) - -
Fair value of fixed interest debt - - - 89.1
- tax thereon - - - (5.6)
Deferred tax on revaluation surplus - 100.3 100.3 -
Adjustment for short-term disposals - (8.3) - -
Fair value of financial instruments - (9.1) (9.1) -
Purchasers' costs(1) - - 145.7 -
-------------------------------------- ------- ------- ------- ---------
1,078.7 1,158.6 1,315.6 1,162.2
-------------------------------------- ------- ------- ------- ---------
Per share 271.5p 291.6p 331.0p 292.4p
-------------------------------------- ------- ------- ------- ---------
(1) Purchasers costs have been calculated using the regional
market rates
30 June 2022 Restated(1)
IFRS EPRA EPRA EPRA
NAV NTA NRV NDV
GBPm GBPm GBPm GBPm
-------------------------------------- ------- ------- ------- -----------
Net assets 1,341.9 1,341.9 1,341.9 1,341.9
Goodwill as a result of deferred
tax on acquisitions - (1.1) (1.1) (1.1)
Other intangibles - (2.4) - -
Fair value of fixed interest
debt(1) - - - 53.0
- tax thereon(1) - - - (3.6)
Deferred tax on revaluation surplus - 112.5 112.5 -
Adjustment for short-term disposals - (8.2) - -
Fair value of financial instruments - (4.9) (4.9) -
Purchasers' costs - - 153.3 -
-------------------------------------- ------- ------- ------- -----------
1,341.9 1,437.8 1,601.7 1,390.2
-------------------------------------- ------- ------- ------- -----------
Per share 329.2p 352.8p 393.0p 341.2p
-------------------------------------- ------- ------- ------- -----------
(1) Restated to be consistent with the 31 December 2022
disclosure which included all fair value movements and not just the
downside movement.
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
31 December 2022 IFRS EPRA EPRA EPRA
NAV NTA NRV NDV
GBPm GBPm GBPm GBPm
-------------------------------------- ------- ------- ------- -------
Net assets 1,220.8 1,220.8 1,220.8 1,220.8
Goodwill as a result of deferred - - - -
tax on acquisitions
Other intangibles - (2.8) -
Fair value of fixed interest
debt - - - 87.2
- tax thereon - - - (6.4)
Deferred tax on revaluation surplus - 108.6 108.6 -
Adjustment for short-term disposals - (8.6) - -
Fair value of financial instruments - (8.5) (8.5) -
Purchasers' costs - - 149.3 -
-------------------------------------- ------- ------- ------- -------
1,220.8 1,309.5 1,470.2 1,301.6
-------------------------------------- ------- ------- ------- -------
Per share 307.3p 329.6p 370.1p 327.7p
-------------------------------------- ------- ------- ------- -------
iii) Yield
EPRA Net Initial Yield ('NIY')
EPRA NIY is calculated as the annualised rental income based on
the cash rents passing at the balance sheet date less
non-recoverable property operating expenses, divided by the gross
market value of the property (excluding those that are under
development, held as PPE or occupied by CLS).
Six months ended 30
June 2023
-------------------------------------------------- ------------------------------
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
-------- -------- -------- -------
Rent passing 46.6 40.1 13.2 99.9
Adjusted for development stock - - - -
Forecast non-recoverable service charge (1.7) (1.9) (0.4) (4.0)
------------------------------------------ -------- -------- -------- -------
Annualised net rents (A) 44.9 38.2 12.8 95.9
------------------------------------------ -------- -------- -------- -------
Property portfolio 866.5 934.4 271.8 2,072.7
Adjusted for development stock (75.8) (4.8) - (80.6)
Purchasers' costs 53.8 63.2 18.5 135.5
------------------------------------------ -------- -------- -------- -------
Property portfolio valuation including
purchasers' costs (B) 844.5 992.8 290.3 2,127.6
------------------------------------------ -------- -------- -------- -------
EPRA NIY (A/B) 5.3% 3.8% 4.4% 4.5%
------------------------------------------ -------- -------- -------- -------
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
Six months ended 30 June
2022
-------- ----------------------------
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
-------- ---------- -------- ------
Rent passing 49.6 38.1 12.3 100.0
Adjusted for development stock (2.6) (0.5) - (3.1)
Forecast non-recoverable service charge (1.6) (1.3) (0.5) (3.4)
----------------------------------------------------- -------- ------------ ------ -------
Annualised net rents (A) 45.4 36.3 11.8 93.5
----------------------------------------------------- -------- ------------ ------ -------
Property portfolio 1,043.0 933.4 287.9 2,264.3
Adjusted for development stock (115.4) (46.6) - (162.0)
Purchasers' costs 63.1 60.3 19.6 143.0
----------------------------------------------------- -------- ------------ ------ -------
Property portfolio valuation including purchasers'
costs (B) 990.7 947.1 307.5 2,245.3
----------------------------------------------------- -------- ------------ ------ -------
EPRA NIY (A/B) 4.6% 3.8% 3.8% 4.2%
----------------------------------------------------- -------- ------------ ------ -------
Year ended 31 December
2022
-------- -----------------------------
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
-------------------------------------------------------------- ------------ ------ ---------
Rent passing 46.0 42.6 12.8 101.4
Adjusted for development stock (0.9) - - (0.9)
Forecast non-recoverable service charge (1.5) (2.1) (0.3) (3.9)
----------------------------------------------------- ------------- ------- ------ ---------
Annualised net rents (A) 43.6 40.5 12.5 96.6
----------------------------------------------------- ------------- ------- ------ ---------
Property portfolio 946.8 990.1 284.2 2,221.1
Adjusted for development stock (118.7) (4.9) - (123.6)
Purchasers' costs 56.3 67.0 19.3 142.6
----------------------------------------------------- -------------
Property portfolio valuation including purchasers'
costs (B) 884.4 1,052.2 303.5 2,240.1
EPRA NIY (A/B) 4.9% 3.9% 4.1% 4.3%
----------------------------------------------------- ------------- ------- ------ ---------
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
EPRA 'topped-up' NIY
EPRA 'topped-up' NIY is calculated by making an adjustment to
EPRA NIY in respect of the expiration of rent-free periods (or
other unexpired lease incentives such as discounted rent periods
and stepped rents).
Six months ended 30
June 2023
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Contracted rent 49.3 45.2 14.2 108.7
Adjusted for development stock - - - -
Forecast non-recoverable service charge (1.7) (1.9) (0.4) (4.0)
'Topped-up' annualised net rents (A) 47.6 43.3 13.8 104.7
Property portfolio 866.5 934.4 271.8 2,072.7
Adjusted for development stock (75.8) (4.8) - (80.6)
Purchasers' costs 53.8 63.2 18.5 135.5
Property portfolio valuation including
purchasers' costs (B) 844.5 992.8 290.3 2,127.6
EPRA 'topped-up' NIY (A/B) 5.6% 4.4% 4.8% 4.9%
Six months ended 30 June
2022
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Contracted rent 51.9 42.0 14.0 107.9
Adjusted for development stock (2.6) (0.6) - (3.2)
Forecast non-recoverable service charge (1.6) (1.3) (0.5) (3.4)
'Topped-up' annualised net rents (A) 47.7 40.1 13.5 101.3
Property portfolio 1,043.0 933.4 287.9 2,264.3
Adjusted for development stock (115.4) (46.6) - (162.0)
Purchasers' costs 63.1 60.3 19.6 143.0
Property portfolio valuation including
purchasers' costs (B) 990.7 947.1 307.5 2,245.3
EPRA 'topped-up' NIY (A/B) 4.8% 4.2% 4.4% 4.5%
Year ended 31 December
2022
------------------------------
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Contracted rent 48.1 47.4 14.7 110.2
Adjusted for development stock (0.9) - - (0.9)
Forecast non-recoverable service charge (1.5) (2.1) (0.3) (3.9)
'Topped-up' annualised net rents (A) 45.7 45.3 14.4 105.4
Property portfolio 946.8 990.1 284.2 2,221.1
Adjusted for development stock (118.7) (4.9) - (123.6)
Purchasers' costs 56.3 67.0 19.3 142.6
Property portfolio valuation including
purchasers' costs (B) 884.4 1,052.2 303.5 2,240.1
EPRA 'topped-up' NIY (A/B) 5.2% 4.3% 4.8% 4.7%
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
iv) EPRA vacancy
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2023 2022 2022
GBPm GBPm GBPm
ERV of vacant space (A) 11.3 8.2 9.0
ERV of let space 111.4 110.6 112.4
ERV of lettable space (B) 122.7 118.8 121.4
EPRA vacancy rate (A/B) 9.2% 6.9% 7.4%
v) EPRA capital expenditure
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Acquisitions - 22.5 83.4
Amounts spent on the completed investment
property portfolio
Creation of incremental space 1.9 5.9 12.7
Creation of no incremental space 29.7 18.6 45.5
EPRA capital expenditure 31.6 47.0 141.6
Conversion from accrual to cash basis (0.8) 11.0 (1.0)
EPRA capital expenditure on a cash basis 30.8 58.0 140.6
vi) EPRA cost ratio
Restated
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2023 2022 2022
GBPm GBPm GBPm
Administration expenses - recurring 8.8 8.4 15.7
Other expenses (restated) 7.1 7.6 16.2
Less: investment segment and student
operating costs (2.3) (2.5) (5.7)
13.6 13.5 26.2
Net service charge costs 2.8 2.2 4.9
Service charge costs recovered through
rents but not separately invoiced (0.1) (0.2) (0.3)
Dilapidations receipts (1.1) (0.6) (1.2)
EPRA costs (including direct vacancy
costs) (A) 15.2 14.9 29.6
Direct vacancy costs (2.7) (2.0) (4.0)
EPRA costs (excluding direct vacancy
costs) (B) 12.5 12.9 25.6
Gross rental income 51.0 48.8 99.4
Service charge components of rental
income (0.1) (0.2) (0.3)
Adjusted gross rental income (C) 50.9 48.6 99.1
EPRA cost ratio (including direct
vacancy costs) (A/C) 29.9% 30.7% 29.9%
EPRA cost ratio (excluding direct
vacancy costs) (B/C) 24.6% 26.5% 25.8%
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
vii) EPRA LTV
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2023 2022 2022
GBPm GBPm GBPm
Borrowings from financial institutions 1,089.4 998.8 1,105.9
Bank loans (secured notes) - 44.4 -
Foreign currency derivatives - - -
Net payables 48.9 22.6 44.8
Cash and cash equivalents (92.5) (110.4) (113.9)
Net debt (A) 1,045.8 955.4 1,036.8
Properties held as property, plant
and equipment 37.2 40.4 37.5
Investment properties 1,992.7 2,299.1 2,295.0
Properties and land held for sale 180.6 60.2* 20.3
Financial assets - equity investments 2.5 3.3 2.7
Total property value (B) 2,213.0 2,403.0 2,355.5
EPRA LTV (A/B) 47.3% 39.8% 44.0%
* This figure differs from assets held for sale on the balance
sheet due to GBP0.7m of associated liabilities
2. Other APMs
i) Total accounting return per share
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
p p p
EPRA closing net tangible assets 291.6 352.8 329.6
Add back: prior year final dividend
paid 5.4 5.4 5.4
Add back: interim dividend paid - - 2.6
Less: EPRA opening net tangible
assets (A) (329.6) (350.5) (350.5)
Return before dividends (B) (32.6) 7.7 (12.9)
Total accounting return (B/A) (9.9%) 2.2% (3.7%)
ii) Net borrowings and gearing
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
Notes GBPm GBPm GBPm
Borrowings short-term 13 224.5 184.6 173.4
Borrowings long-term 13 864.9 858.6 932.5
Add back: unamortised issue costs 13 4.9 5.3 5.3
Gross debt 13 1,094.3 1,048.5 1,111.2
Cash (92.5) (110.4) (113.9)
Net borrowings (A) 1,001.8 938.1 997.3
Net assets (B) 1,078.7 1,341.9 1,220.8
Net gearing (A/B) 92.9% 69.9% 81.7%
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
iii) Balance sheet loan-to-value
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
Notes GBPm GBPm GBPm
Borrowings short-term 13 224.5 184.6 173.4
Borrowings long-term 13 864.9 858.6 932.5
Less: cash (92.5) (110.4) (113.9)
Net debt (A) 996.9 932.8 992.0
1,992.71,99 2,295.0
Investment properties 9 1,992.7 2,299.1 2,295.0
Properties in PPE 9 37.2 40.4 37.5
Properties and land held for sale 9 180.6 60.2* 20.3
Total property portfolio (B) 2,210.5 2,399.7 2,352.8
Loan-to-value (A/B) 45.1% 38.9% 42.2%
* Sum total differs from assets held for sale on the balance
sheet due to GBP0.7m of associated liabilities
iv) Dividend cover Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
Notes GBPm GBPm GBPm
Interim dividend * 10.3 10.6 10.6
Final dividend - - 21.3
Total dividend (A) 10.3 10.6 31.9
EPRA earnings (B) 20.7 23.5 47.0
Dividend cover (B/A) 2.00 2.22 1.47
* The 30 June 2023 amount represents the proposed interim 2023 dividend
v) Interest cover Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
Notes GBPm GBPm GBPm
Net rental income 4 55.6 52.8 107.8
Administration expenses 4 (8.8) (8.4) (15.7)
Other expenses 4 (7.1) (7.6) (16.2)
Revenue less costs (A) 4 39.7 36.8 75.9
Finance income (excluding dividends and
derivatives) 6 1.0 0.6 1.3
Finance costs (excluding derivatives) 7 (17.2) (12.6) (26.8)
Net interest (B) (16.2) (12.0) (25.5)
Interest cover (A/B) 2.45 3.07 2.98
5 ALTERNATIVE PERFORMANCE MEASURES ('APMs') (continued)
vi) CLS administration cost ratio
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
GBPm GBPm GBPm
Administration expenses 8.8 8.4 15.7
Less: Other investment segment (0.1) - (0.2)
Underlying administration expenses
(A) 8.7 8.4 15.5
Net rental income (B) 55.6 52.8 107.8
Administration cost ratio (A/B) 15.6% 15.9% 14.4%
6 FINANCE INCOME
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
GBPm GBPm GBPm
Interest income
Financial instruments carried at
amortised cost 1.0 0.6 1.3
Movement in fair value of derivative
financial instruments 0.7 5.3 8.8
1.7 5.9 10.1
7 FINANCE COSTS
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
GBPm GBPm GBPm
Interest expense
Secured bank loans 16.3 10.9 23.3
Secured notes - 0.8 1.7
Amortisation of loan issue costs 0.9 0.9 1.8
17.2 12.6 26.8
8 TAXATION
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
GBPm GBPm GBPm
Deferred tax
Origination and reversal of temporary differences (5.0) 1.8 (5.4)
(5.0) 1.8 (5.4)
Current tax 2.7 1.2 5.3
Tax (credit)/charge (2.3) 3.0 (0.1)
8 TAXATION continued
Tax for the six months ended 30 June 2023 has been recorded at
an effective rate of 2.2% (six months ended 30 June 2022: 14.7%;
year ended 31 December 2022: 18.5%), representing the best estimate
of the average annual effective tax rate expected for the full year
adjusted for the tax effect of one-off items, applied to the
pre-tax income of the six month period. The effective tax rate for
the period of 2.2.% is lower than the weighted average tax rate of
21.8%. This is primarily due to the revaluation loss arising from
the UK property rental business which is exempt from UK Corporation
Tax under the REIT regime.
The total tax credit for the period of GBP2.3 million is lower
than the GBP3.0 million tax charge for the six months ended 30 June
2022 primarily due to the release of deferred tax liabilities in
Germany and France. The total tax credit for the period of GBP2.3
million is higher than the GBP0.1 million credit recognised for the
year ended 31 December 2022 as a result of a decrease in the
current tax charge related to France.
9 PROPERTY PORTFOLIO
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Investment property 915.4 814.9 262.4 1,992.7
Property held as property, plant and equipment 33.7 1.7 1.8 37.2
Properties held for sale 51.8 119.4 9.4 180.6
Property portfolio at 30 June 2023 1,000.9 936.0 273.6 2,210.5
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Investment property 1,105.1 926.5 267.5 2,299.1
Property held as property, plant and equipment 33.1 5.4 1.9 40.4
Properties held for sale* 32.9 6.9 20.0 59.8
0.0
Land held for sale* - - 0.4 0.4
Property portfolio at 30 June 2022 1,171.1 938.8 289.8 2,399.7
*Sum total differs from assets held for sale on the balance
sheet due to GBP0.7m of associated liabilities
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
Investment property 1,030.0 990.5 274.5 2,295.0
Property held as property, plant and equipment 33.6 2.0 1.9 37.5
Properties held for sale 7.0 3.6 9.7 20.3
Property portfolio at 31 December 2022 1,070.6 996.1 286.1 2,352.8
The property portfolio which comprises investment properties
detailed in note 10, properties held for sale detailed in note 12,
and the hotel detailed in note 11 was revalued at 30 June 2023 to
its fair value. Valuations were based on current prices in an
active market for all properties. The property valuations were
carried out by external independent valuers as follows:
30 June 2023 30 June 2022 31 December 2022
Investment Other Property Investment Other Property Investment Other Property
property property portfolio property property portfolio property property portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cushman and
Wakefield 915.4 85.5 1,000.9 1,105.1 66.0 1,171.1 1,030.0 40.6 1,070.6
Jones Lang LaSalle 1,077.3 132.3 1,209.6 1,194.0 31.0 1,225.0 1,265.0 13.6 1,278.6
L
Fällström
AB - - - - 3.6 3.6 - 3.6 3.6
1,992.7 217.8 2,210.5 2,299.1 100.6 2,399.7 2,295.0 57.8 2,352.8
The total fees, including the fees for this assignment, earned
by each of the valuers from the Group is less than 5% of their
total revenues in each jurisdiction. See note 10 for details on
valuation technique and fair value measurement.
10 INVESTMENT PROPERTIES
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2023 1,030.0 990.5 274.5 2,295.0
Capital expenditure 25.5 4.8 1.3 31.6
Disposals (1.8) - - (1.8)
Net revaluation movement (93.0) (34.4) (5.5) (132.9)
Lease incentives (0.5) 2.0 - 1.5
Exchange rate variances - (28.6) (7.9) (36.5)
Transfer to properties held for sale (44.8) (119.4) - (164.2)
At 30 June 2023 915.4 814.9 262.4 1,992.7
Restated*
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2022 (restated*) 1,090.5 883.0 273.6 2,247.1
Acquisitions - 22.5 - 22.5
Capital expenditure 14.1 3.6 6.8 24.5
Net revaluation movement (restated*) 4.7 (3.6) (7.1) (6.0)
Lease incentives 0.7 6.3 - 7.0
Exchange rate variances - 21.6 6.5 28.1
Transfer to properties held for sale (4.9) (6.9) (12.3) (24.1)
At 30 June 2022 (restated*) 1,105.1 926.5 267.5 2,299.1
* See note 3 for detail
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2022 (restated) 1,090.5 883.0 273.6 2,247.1
Acquisitions - 83.4 - 83.4
Capital expenditure 36.6 9.9 11.7 58.2
Disposals (11.5) - - (11.5)
Net revaluation movement (79.5) (41.6) (15.4) (136.5)
Lease incentives 0.9 6.9 - 7.8
Exchange rate variances - 48.9 14.3 63.2
Transfer to plant, property and equipment - - - -
Transfer to properties held for sale (7.0) - (9.7) (16.7)
At 31 December 2022 1,030.0 990.5 274.5 2,295.0
Investment properties include leasehold properties with a
carrying value of GBP72.6 million (30 June 2022: GBP49.8 million;
31 December 2022: GBP77.7 million).
Interest capitalised within capital expenditure in the period
amounted to GBP0.6 million (30 June 2022: GBPnil; 31 December 2022
GBP0.5 million)
Valuation process
The Group's property portfolio was valued by external valuers on
the basis of fair value using information provided to them by the
Group such as current rents, terms and conditions of lease
agreements, service charges and capital expenditure. This
information is derived from the Group's property management systems
and is subject to the Group's overall control environment. The
valuation reports are based on assumptions and valuation models
used by the external valuers. The assumptions are typically market
related, such as yields and discount rates, and are based on
professional judgement and market evidence of transactions for
similar properties on arm's length terms. The valuations are
prepared in accordance with RICS standards.
10 INVESTMENT PROPERTIES continued
Each Country Head, who report to the Chief Executive Officer,
verifies all major inputs to the external valuation reports,
assesses the individual property valuation changes from the prior
year valuation report and holds discussions with the external
valuers. When the process is complete, the valuation report is
recommended to the Audit Committee and the Board, which considers
it as part of its overall responsibilities.
Valuation techniques
The fair value of the property portfolio (excluding ongoing
developments, see below) has been determined using the following
approaches in accordance with International Valuation
Standards:
United Kingdom: an income capitalisation approach whereby
contracted and market rental values are capitalised with a market
capitalisation rate
Germany: a 10 year discounted cash flow model with an assumed exit thereafter
France: both the market capitalisation approach and a 10 year
discounted cash flow approach
The resulting valuations are cross-checked against the
equivalent yields and the fair market values per square foot
derived from comparable recent market transactions on arm's length
terms. Other factors taken into account in the valuations include
the tenure of the property, tenancy details, and ground and
structural conditions.
Ongoing developments are valued under the 'residual method' of
valuation, which is the same method as the income capitalisation
approach to valuation described above, with a deduction for all
costs necessary to complete the development, including a notional
finance cost, together with a further allowance for remaining risk.
As the development approaches completion, the valuer may consider
the income capitalisation approach to be more appropriate.
All valuations have considered the environmental, social and
governance credentials of the properties and the potential cost of
improving them to local regulatory standards along with the broader
potential impact of climate change.
These techniques are consistent with the principles in IFRS 13
Fair Value Measurement and use significant unobservable inputs such
that the fair value measurement of each property within the
portfolio has been classified as Level 3 in the fair value
hierarchy.
There were no transfers between any of the Levels in the fair
value hierarchy during either 2023 or 2022. The Group determines
whether transfers have occurred between levels in the fair value
hierarchy by re-assessing categorisation at the end of each
reporting period.
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to a loss of GBP132.9 million (30 June 2022:
GBP6.0 million; 31 December 2022: GBP136.5 million) and are
presented in the income statement in the line item 'Net movements
on revaluation of investment properties'.
All gains and losses recorded in profit or loss in 2023 and 2022
for recurring fair value measurements categorised within Level 3 of
the fair value hierarchy are attributable to changes in unrealised
gains or losses relating to investment property held at 30 June
2023 and 30 June 2022, respectively.
10 INVESTMENT PROPERTIES continued
Quantitative information about fair value measurement using
unobservable inputs (Level 3)
ERV
Average GBP per sq ft Range GBP per sq ft
30-Jun-23 30-Jun-22 31-Dec-22 30-Jun-23 30-Jun-22 31-Dec-22
UK 35.62 36.83 34.01 10.00 - 55.85 10.00 - 63.22 10.00 - 58.09
Germany 14.07 13.56 14.10 9.84 - 24.53 9.08 - 24.62 10.14 - 25.27
France 21.19 20.78 21.69 12.87 - 40.20 12.05 - 39.60 13.26 - 41.38
Equivalent yield
Average % Range %
30-Jun-23 30-Jun-22 31-Dec-22 30-Jun-23 30-Jun-22 31-Dec-22
UK 6.09 5.31 5.61 2.93 - 9.27 2.75 - 9.09 2.94 - 9.61
Germany 5.01 4.40 4.75 4.00 - 6.00 3.00 - 5.40 3.30 - 5.90
France 5.41 5.03 5.13 4.30 - 6.90 3.90 - 6.50 4.05 - 6.75
Sensitivity of measurement to variations in the significant
unobservable inputs
All other factors remaining constant, an increase in ERV would
increase valuations, whilst an increase in the equivalent yield
would result in a fall in value, and vice versa. There are
inter-relationships between these inputs as they are partially
determined by market conditions. An increase in the reversionary
yield may accompany an increase in ERV and would mitigate its
impact on the fair value measurement.
A decrease in the equivalent yield by 25 basis points would
result in an increase in the fair value of the Group's investment
property by GBP93.5 million (30 June 2022: GBP137.0 million; 31
December 2022: GBP138.5 million) whilst a 25 basis point increase
would reduce the fair value by GBP98.9 million (30 June 2022:
GBP116.5 million; 31 December 2022: GBP107.0 million). A decrease
in the ERV by 5% would result in a decrease in the fair value of
the Group's investment property by GBP87.9 million (30 June 2022:
GBP86.4 million; 31 December 2022: GBP86.8 million) whilst an
increase in the ERV by 5% would result in an increase in the fair
value of the Group's investment property by GBP72.6 million (30
June 2022: GBP95.5 million; 31 December 2022: GBP106.5
million).
Where the Group leases out its investment property under
operating leases the duration is typically three years or more. No
contingent rents have been recognised in the current or prior
year.
Although not a key valuation assumption, in the absence of a
financial instruments note and disclosure on foreign exchange risk,
the table below shows how the investment property values would be
impacted by a 5% movement in the sterling/euro exchange rate at 30
June 2023.
GBPm
5% increase in value of sterling
against the euro (51.3)
5% fall in value of sterling against
the euro 56.7
Sustainability, climate change, Net Zero Carbon Pathway and EPC
compliance
The Group published its sustainability strategy including a
pathway to Net Zero Carbon ("NZC") in August 2021 and has set 2030
as its date to achieve this (see pages 58 to 61 of the 2022 Annual
Report). During 2021 the Group employed technical experts to carry
out individual property energy audits to identify energy and carbon
saving opportunities. A total of 76 properties were visited from
January to April 2021 across the UK, France and Germany, with new
developments, properties under refurbishment and properties
earmarked for sale all excluded from the programme. The investment
needed to deliver the audit findings amounts to an estimated GBP65
million over 9 years for all properties. We have integrated these
energy audits into each Asset Management Plan to enable strategic
decisions about the refurbishment, sale or full redevelopment of
assets to be made. The UK portfolio is already compliant with the
2023 Minimum Energy Efficiency Standard (MEES) requirements and the
2030 target of EPC B is factored in to the NZC Pathway model (see
page 58 of the 2022 Annual Report for more detail).
11 PROPERTY, PLANT AND EQUIPMENT
Restated*
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Hotel 27.1 25.8 26.7
Land and buildings - 3.6 -
Owner-occupied property 10.1 11.0 10.8
Fixtures and fittings 2.4 2.0 2.1
Total 39.6 42.4 39.6
* See note 3 for detail
Fixtures
Owner-occupied and
Hotel property fittings Total
GBPm GBPm GBPm GBPm
At 1 January 2023 26.7 10.8 3.5 41.0
Additions 0.4 - 0.3 0.7
Disposals - - - -
Reclassification (0.2) - 0.2 -
Revaluation 0.2 (0.4) - (0.2)
Exchange rate variances - (0.3) - (0.3)
At 30 June 2023 27.1 10.1 4.0 41.2
Comprising:
At cost - - 4.0 4.0
At valuation 27.1 10.1 - 37.2
27.1 10.1 4.0 41.2
Accumulated depreciation
and impairment
At 1 January 2023 - - (1.4) (1.4)
Disposals - - - -
Depreciation charge (0.1) - (0.2) (0.3)
Revaluation 0.1 - - 0.1
At 30 June 2023 - - (1.6) (1.6)
Net book value
At 30 June 2023 27.1 10.1 2.4 39.6
At 31 December 2022 26.7 10.8 2.1 39.6
Valuation techniques
The fair value of the hotel has been determined using the
following approach in accordance with International Valuation
Standards:
Hotel: a 10 year discounted cash flow model with an assumed exit
thereafter. The projected net operating profit in the 11(th) year
is capitalised at a market yield before being brought back to
present day values.
This technique is consistent with the principles in IFRS 13 Fair
Value Measurement and uses significant unobservable inputs such
that the fair value measurement of the hotel within the portfolio
has been classified as Level 3 in the fair value hierarchy.
The revaluation deficit for the property, plant and equipment of
GBP0.1 million (30 June 2022: surplus GBP1.3 million 31 December
2022: surplus GBP1.9 million) was included within the revaluation
reserve via other comprehensive income.
12 ASSETS HELD FOR SALE
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2023 7.0 3.6 9.7 20.3
Disposals - (3.6)(1) - (3.6)
Exchange rate variances - - (0.3) (0.3)
Transfer from investment property 44.8 119.4 - 164.2
At 30 June 2023 51.8 119.4 9.4 180.6
(1 This is the disposal of our land holding in Sweden)
The balance above comprises 7 properties (31 Dec 2022: 3
properties; 30 June 2022: 7 properties). The facts and
circumstances of the disposals or expected disposals are
commercially sensitive and therefore are not disclosed here however
further detail may be obtained from the earlier part of this
report. Management expect that properties transferred to held for
sale during the year will be disposed of within 12 months, usually
via an open market process.
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2022 37.3 - 6.9 44.2
Disposals (10.1) - - (10.1)
Net revaluation movement - - 0.9 0.9
Exchange rate variances - - 0.3 0.3
Transfer from investment property 5.0 6.9 12.3 24.2
At 30 June 2022 32.2 6.9 20.4 59.5
United Kingdom Germany France Total
GBPm GBPm GBPm GBPm
At 1 January 2022 37.3 - 6.9 44.2
Disposals (37.3) - (6.9) (44.2)
Transfer from investment property 7.0 - 9.7 16.7
Transfer from property, plant and equipment - 3.6(1) - 3.6
At 31 December 2022 7.0 3.6(1) 9.7 20.3
(1 Land holding in Sweden)
13 BORROWINGS
MATURITY PROFILE
Bank Secured
loans notes Total
At 30 June 2023 GBPm GBPm GBPm
Maturing in:
Within one year or on demand 225.9 - 225.9
One to two years 176.8 - 176.8
Two to five years 424.3 - 424.3
More than five years 267.3 - 267.3
1,094.3 - 1,094.3
Unamortised issue costs (4.9) - (4.9)
Borrowings 1,089.4 - 1,089.4
Due within one year (224.5) - (224.5)
Due after one year 864.9 - 864.9
At the year ended 31 December 2022, GBP175.1 million of
borrowings were due for repayment within one year and GBP350.1m was
due within one to two years including unamortised issue costs (see
2022 Annual Report and Accounts, note 21). During the six-month
period, CLS has refinanced GBP299.1million (of which GBP83.9m was
classified as new loans).
MATURITY PROFILE
Bank Secured
loans notes Total
At 30 June 2022 GBPm GBPm GBPm
Maturing in:
Within one year or on demand 141.7 44.4 186.1
One to two years 319.3 - 319.3
Two to five years 229.4 - 229.4
More than five years 313.7 - 313.7
1,004.1 44.4 1,048.5
Unamortised issue costs (5.3) - (5.3)
Borrowings 998.8 44.4 1,043.2
Due within one year (140.2) (44.4) (184.6)
Due after one year 858.6 - 858.6
Bank Secured
loans notes Total
At 31 December 2022 GBPm GBPm GBPm
Maturing in:
Within one year or on demand 175.1 - 175.1
One to two years 350.1 - 350.1
Two to five years 314.4 - 314.4
More than five years 271.6 - 271.6
1,111.2 - 1,111.2
Unamortised issue costs (5.3) - (5.3)
Borrowings 1,105.9 - 1,105.9
Due within one year (173.4) - (173.4)
Due after one year 932.5 - 932.5
13 BORROWINGS continued
FAIR VALUES
Carrying amounts Fair values
30 June 30 June 31 December 30 June 30 June 31 December
2023 2022 2022 2023 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm
Current borrowings 224.5 184.6 173.4 224.5 184.4 173.4
Non-current borrowings 864.9 858.6 932.5 777.3 805.8 845.3
1,089.4 1,043.2 1,105.9 1,001.8 990.2 1,018.7
The fair value of borrowings represents the amount at which a
financial instrument could be exchanged in an arm's length
transaction between informed and willing parties, discounted at the
prevailing market rate, and excludes accrued interest.
14 SHARE CAPITAL
Ordinary
shares Ordinary Total
in Treasury Total ordinary shares Treasury ordinary
circulation shares shares in circulation shares shares
Number Number Number GBPm GBPm GBPm
At 1 January 2022
and 30 June 2022 407,395,760 31,382,020 438,777,780 10.2 0.8 11.0
Purchase of own shares
(market purchase) (10,184,894) 10,184,894 - (0.3) 0.3 -
At 31 December 2022 397,210,866 41,566,914 438,777,780 9.9 1.1 11.0
Issue of shares from
treasury 199,402 (199,402) - - - -
At 30 June 2023 397,410,268 41,367,512 438,777,780 9.9 1.1 11.0
15 EARNINGS PER SHARE
The calculation of earnings per ordinary share is based on
earnings after tax and the weighted average number of ordinary
shares in issue during the year.
30 June 2023 31 December 2022
Number 30 June 2022 Number Number
Weighted average number of ordinary shares in circulation 397,249,424 407,395,760 404,410,051
Number of ordinary shares in circulation 397,410,268 407,395,760 397,210,866
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The diluted earnings per share
does not assume conversion of potential ordinary shares that would
have an antidilutive effect on earnings per share.
The Group has three types of dilutive potential ordinary shares,
being: unvested shares granted under the Long Term Incentive Plan
for executive directors and senior management; unvested shares
granted under the Element B plan for executive directors and senior
management; and unvested shares granted under the Special Share
Award plan to key management. The issue of all these unvested
shares is contingent upon satisfying specified conditions in
addition to the passage of time.
Employee share plan 30 June 2023 30 June 31 December
Number 2022 2022
Number Number
Element B / Special Award 932,847 520,901 520,901
LTIP 2,963,569 1,674,113 1,674,113
Total potential dilutive shares 3,896,416 2,195,014 2,195,014
16 CASH GENERATED FROM OPERATIONS
Restated
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Operating (loss)/profit (90.5) 28.2 (63.9)
Adjustments for:
Net movements on revaluation of investment
properties (restated) 132.9 5.1 136.5
Net movements on revaluation of equity investments - 3.3 3.8
Depreciation and amortisation (restated) 0.3 0.3 0.6
Non-cash rental income (lease incentives) (1.5) (7.0) (0.5)
Share-based payments 0.2 (0.6) (7.8)
(Profit)/loss on sale of investment properties (2.7) 0.2 0.2
Changes in working capital:
Decrease in receivables 1.5 4.6 2.3
Increase/(decrease) in payables 0.4 (3.1) (0.7)
Cash generated from operations 40.6 31.0 70.5
17 CASH AND CASH EQUIVALENTS
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
GBPm GBPm GBPm
Cash at bank and cash in hand 92.5 110.4 113.9
At 30 June 2023, cash at bank and in hand included GBP30.0
million (31 Dec 2022: GBP15.8 million; 30 June 2022: GBP13.4
million) which was restricted by a third-party charge. GBP19.9
million of the restricted cash is deposited with banks in respect
of borrowings (31 Dec 2022: GBP5.3 million; 30 June 2022: GBP3.0
million), GBP9.9 million is tenant deposits (31 Dec 2022: GBP10.3
million; 30 June 2022: GBP10.2 million) and GBP0.2 million (31 Dec
2022: GBP0.2 million; 30 June 2022: GBP0.2m) is from a recently
terminated contract for the provision of property management
services to a related party.
18 RELATED PARTY TRANSACTIONS
There have been no material changes in the related party
transactions described in the last annual report, other than those
disclosed elsewhere in this condensed set of financial
statements.
19 POST BALANCE SHEET EVENTS
Since 30 June 2023 we have repaid a loan in Germany of GBP13.4
million and refinanced a loan in Germany of GBP20.8 million of
borrowings.
GLOSSARY
Administration cost ratio
Recurring administration expenses of the investment property
operating segment expressed as a percentage of net rental
income.
Balance sheet loan-to-value
Net debt expressed as a percentage of property assets.
Building Research Establishment Environmental
Assessment Method (BREEAM) An environmental impact assessment
method for non-domestic buildings. Their standards cover new
construction, In-Use as well as refurbishment and fit-out. BREEAM
In-Use enables property investors, owners, managers and occupiers
to determine and drive sustainable improvements in the operational
performance of their buildings. It provides sustainability
benchmarking and assurance for all building types and assesses
performance in a number of areas; management, health &
wellbeing, energy, transport, water, resources, resilience, land
use & ecology, and pollution. Performance is measured across a
series of ratings; Good, Very Good, Excellent and Outstanding.
Carbon emissions Scopes 1, 2 and 3
Scope 1 - direct emissions;
Scope 2 - indirect emissions; and
Scope 3 - other indirect emissions.
CDP
CDP, formerly known as the Carbon Disclosure Project, assesses
the ESG performance of all major companies worldwide and aids
comparability between organisations to allow the investor community
to assess the carbon and climate change risk of each company.
Contracted rent
Annual contracted rental income after any rent-free periods have
expired.
Earnings per share
Profit for the year attributable to the owners of the Company
divided by the weighted average number of ordinary shares in issue
in the period.
Energy Performance Certificate (EPC)
An EPC is an asset rating detailing how energy efficient a
building is, rated by carbon dioxide emission on a scale of A-G,
where an A rating is the most energy efficient. They are legally
required for any building that is to be put on the market for sale
or rent.
European Public Real Estate Association (EPRA)
A not-for-profit association with a membership of Europe's
leading property companies, investors and consultants which strives
to establish best practices in accounting, reporting and corporate
governance and to provide high-quality information to investors.
EPRA's Best Practices Recommendations includes guidelines for the
calculation of the following performance measures which the Group
has adopted.
EPRA capital expenditure
Investment property acquisitions and expenditure split between
amounts used for the creation of additional lettable area
('incremental lettable space') and enhancing existing space ('no
incremental space') both on an accrual and cash basis.
EPRA cost ratio
Administrative & operating costs (including & excluding
costs of direct vacancy) divided by gross rental income. A measure
to enable meaningful measurement of the changes in a company's
operating costs.
EPRA earnings per share (EPS)
Earnings from operational activities. A measure of a company's
underlying operating results and an indication of the extent to
which current dividend payments are supported by earnings.
EPRA net reinstatement value (NRV)
NAV adjusted to reflect the value required to rebuild the entity
and assuming that entities never sell assets. Assets and
liabilities, such as fair value movements on financial derivatives
are not expected to crystallise in normal circumstances and
deferred taxes on property valuation surpluses are excluded.
EPRA net tangible assets (NTA)
Assumes that entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax.
EPRA net disposal value (NDV)
Represent the shareholders' value under a disposal scenario,
where deferred tax, financial instruments and certain other
adjustments are calculated to the full extent of their liability,
net of any resulting tax.
EPRA net initial yield (NIY)
Annualised rental income based on the cash rents passing at the
balance sheet date, less non-recoverable property operating
expenses, divided by the market value of the EPRA property
portfolio, increased by estimated purchasers' costs.
EPRA LTV
The aim of EPRA LTV is to assess the gearing of the shareholder
equity within a real estate company by adjusting IFRS reporting.
The main overarching concepts are: any capital which is not equity
is considered as debt irrespective of its IFRS classification; it
is calculated on proportional consolidation; and assets are
included at fair value and net debt at nominal value.
EPRA 'topped up' net initial yield
This measure incorporates an adjustment to the EPRA NIY in
respect of the expiration of rent-free periods (or other unexpired
lease incentives such as discounted rent periods and stepped
rents).
EPRA vacancy rate
Estimated rental value (ERV) of immediately available space
divided by the ERV of the lettable portfolio. Estimated rental
value (ERV) The market rental value of lettable space as estimated
by the Group's valuers.
GRESB
GRESB assesses and benchmarks the environmental, social and
governance (ESG) performance of real assets, providing standardised
and validated data to the capital markets.
Interest cover
The aggregate of group revenue less costs, divided by the
aggregate of interest expense and amortisation of loan issue costs,
less interest income.
Key performance indicators (KPIs)
Activities and behaviours, aligned to both business objectives
and individual goals, against which the performance of the Group is
annually assessed. Performance measured against them is referenced
in the annual report.
Liquid resources
Cash and short-term deposits.
Net assets per share or net asset value (NAV)
Equity attributable to the owners of the Company divided by the
diluted number of ordinary shares.
Net debt
Total borrowings less liquid resources.
Net gearing
Net debt expressed as a percentage of net assets attributable to
the owners of the Company.
Net initial yield
Net rent on investment properties and properties held for sale
expressed as a percentage of the valuation of those properties.
Net rent
Passing rent less net service charge costs.
Occupancy rate
Contracted rent expressed as a percentage of the aggregate of
contracted rent and the ERV of vacant space.
Over-rented
The amount by which ERV falls short of the aggregate of
contracted rent.
Passing rent
Contracted rent before any rent-free periods have expired.
Passive infrared sensor (PIR)
A PIR sensor will turn the lights on automatically when someone
walks into a room or space and off when it becomes empty resulting
in significant energy savings.
Property loan-to-value
Property borrowings expressed as a percentage of the market
value of the property portfolio.
Real Estate Investment Trust (REIT)
A Real Estate Investment Trust (REIT) is a vehicle that allows
an investor to obtain broadly similar returns from their
investment, as they would have, had they invested directly in
property. In the UK a REIT is exempt from UK tax on the income and
gains of its property rental business. A REIT in the UK is required
to invest mainly in property (75% of total Group's assets and
profits must be in the tax exempt business) and to pay out 90% of
the profits from its property rental business as measured for tax
purposes as dividends to shareholders (property income
distributions). In the hands of the shareholder, property income
distributions (PID) are taxable as profits of a UK property rental
business. The PID is received net of withholding tax, unless it is
to a recipient entitled to gross payment.
Rent reviews
Rent reviews take place at intervals agreed in the lease
(typically every five years) and their purpose is usually to adjust
the rent to the current market level at the review date. For
upwards only rent reviews, the rent will either remain at the same
level or increase (if market rents are higher) at the review
date.
Rent roll
Contracted rent.
Return on equity
The aggregate of the change in equity attributable to the owners
of the Company plus the amounts paid to the shareholders as
dividends and the purchase of shares in the market, divided by the
opening equity attributable to the owners of the Company.
Reversion
The amount by which ERV exceeds contracted rent.
Streamlined energy and carbon reporting (SECR)
The SECR regulations were introduced in April 2019 and require
companies incorporated in the UK to undertake enhanced disclosures
of their energy and carbon emissions in their financial
reporting.
SKA rating
SKA rating is an environmental assessment method, benchmark and
standard for non-domestic fit-outs, led and owned by RICS.
Performance is measured across the ratings; Bronze, Silver and
Gold.
The Task Force on Climate-related Financial Disclosures
(TCFD)
Set up by the Financial Stability Board (FSB) in response to the
G20 Finance Ministers and Central Bank Governors request for
greater levels of decision-useful, climate-related information; the
TCFD was asked to develop climate-related disclosures that could
promote more informed investment, credit (or lending), and
insurance underwriting decisions. In turn, this would enable
stakeholders to understand better the concentrations of
carbon-related assets in the financial sector and the financial
system's exposures to climate-related risks.
Total Accounting Return - basic
The change in IFRS net assets before the payment of
dividends.
Total Accounting Return
The change in EPRA NTA before the payment of dividends.
Total Shareholder Return (TSR)
The growth in capital from purchasing a share, assuming that
dividends are reinvested every time they are received.
True equivalent yield
The capitalisation rate applied to future cash flows to
calculate the gross property value, as determined by the Group's
external valuers.
UN Sustainable Development Goals (SDGs)
The 2030 Agenda for Sustainable Development, adopted by all
United Nations Member States in 2015, provides a shared blueprint
for peace and prosperity for people and the planet, now and into
the future. At its heart are the 17 Sustainable Development Goals
(SDGs), which are an urgent call for action by all countries -
developed and developing - in a global partnership. They recognize
that ending poverty and other deprivations must go hand-in-hand
with strategies that improve health and education, reduce
inequality, and spur economic growth - all while tackling climate
change and working to preserve our oceans and forests.
Variable refrigerant flow (VRF)
The modular design of VRF results in energy savings by giving
occupants the choice to air condition or heat only the zones in
use.
, 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 or visit 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.
END
IR NKFBDKBKBFFK
(END) Dow Jones Newswires
August 09, 2023 02:00 ET (06:00 GMT)
Cls (LSE:CLI)
Historical Stock Chart
Von Apr 2024 bis Mai 2024
Cls (LSE:CLI)
Historical Stock Chart
Von Mai 2023 bis Mai 2024