Q3 Trading Update

RNS Number : 5249G

CLS Holdings PLC

16 November 2022

 

PRESS RELEASE

Release date:  16 November 2022

Embargoed until:  07:00

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

Trading Update for the period 1 July 2022 to 16 November 2022

Fredrik Widlund, Chief Executive of CLS, commented:

"CLS remains on course with its plans for the year with earnings tracking in-line with market expectations[1]. Our office upgrade strategy remains a priority and we are seeing the benefits in good letting activity with leases signed above ERV and previous passing rent. We have substantially completed our 2022 financing activity, are making good progress with refinancing our loans due to mature in 2023 and have around £150 million of cash and undrawn facilities.

"With our strong balance sheet, a high-quality portfolio, a majority of index-linked leases and our active in-house asset management, we believe we are well positioned to weather the current challenging economic conditions."

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

Vacancy, lettings and occupancy (as at 30 September 2022)

Since 30 June 2022, we completed the refurbishment of 405 Kennington Road, London with an ERV of £0.7 million, representing 0.6% of the Group's ERV at 30 June 2022. This new scheme is being marketed to prospective tenants and we are encouraged by the interest we are seeing. As a result, UK vacancy has increased whilst France maintained its very low level of vacancy. In Germany, vacancy reduced slightly as we are successfully progressing our letting strategy.

· EPRA vacancy rates (Based on 30 June 2022 ERVs):

Group:	7.4%  (30 June 2022: 6.9%)
UK:	8.9%  (30 June 2022: 7.6%)
Germany:	7.3%  (30 June 2022: 7.5%)
France:	2.4%  (30 June 2022: 2.3%)

Between 1 July 2022 and 30 September 2022, 24 deals were signed securing £1.5 million of annual rent at 5.9% above ERV. The most significant of these was a lease extension with Rockwell Automation at Connect in Dusseldorf securing €0.4m of rent at 11.1% above ERV.

Renewals for the period 1 July 2022 to 30 September 2022 were 12.4% ahead of previously contracted rent (3.8% ahead of previously contracted rent 1 January 2022 to 30 September 2022).  Index-linked lease increases during the period 1 July 2022 to 30 September 2022 were 6.7% in Germany (6.4% 1 January 2022 to 30 September 2022), 2.5% in France (2.6% 1 January 2022 to 30 September 2022) and 11.8% at Spring Gardens in the UK (10.5% 1 January 2022 to 30 September 2022).

As announced on 8 November 2022, we have recently signed three leases in Germany at "Flexion", Kaiser-Augusta-Allee, Berlin and Office Connect, Cologne for 3,566sqm (38,384 sq. ft) with combined rent of €1 million, 4.9% above ERV.

Very high occupancy levels continue in our Student and Hotel accommodation in Vauxhall with the student accommodation fully let for the new academic year and hotel occupancy at 90% for the third quarter.

Liquid resources and financing

The Group's balance sheet remains well-capitalised and robust, providing significant flexibility. As at 30 September 2022, our average cost of debt was 2.4% with cash of over £96 million and a further £50 million in undrawn facilities. We have substantially completed transactions for all debt expiring in 2022 and are making good progress with refinancing debt due to mature in 2023.

Since 1 July 2022, in Germany we have financed or refinanced three loans for an aggregated loan amount of £62.7 million at a weighted average all-in cost of 3.01% and a weighted maturity of 5.7 years. In October 2022, in the UK we signed a new loan agreement to combine a loan portfolio of £44.4m (for 6 properties and expiring in December 2022) into an existing floating loan portfolio expiring in 2024, releasing a net amount of £15 million after fees.

We are also well advanced in progressing the two loans for c.£40 million expiring before April 2023 (out of c.£75 million expiring in H1 2023) to release a further c.£20 million of cash. Both are due to complete in the early part of next year.

Rent collections

The Group's rental income in the UK and France is due on a quarterly basis with the current Q4 payment due between 25 September 2022 and 1 October 2022. In Germany, rents are due monthly and the current payment was due on 6 October 2022.

By close on 15 November 2022, we had received 97% of Q4 contractual rents due (2021: 95%) and f or the first three quarters of 2022, we have now received 98% of contractual rents due (2021: 98%).

Disposals and Acquisition

In the period, we completed the sales of: 62 London Road, Staines; Great West House, Brentford; Sentinel House, Coulsdon; and Rue Nationale, Lille for a combined £45.7 million equating to a 3.2% profit on sale compared with the 2021 year-end valuation.

In the period, we completed the acquisition of The Yellow, Dortmund at the start of July 2022 for £56.0 million which had a WAULT of 5.2 years, an initial yield of 5.1% and a reversionary yield of 5.6%.  

Tender buyback

Our share buyback tender offer on 16 September 2022 was fully subscribed.  A total of 10,184,894 Ordinary Shares (1 in 40) were purchased for 250 pence per Ordinary Share, all of which were transferred to Treasury. 

Developments and refurbishments

The development of the "Coade", Vauxhall is progressing well, with the topping-out of the structure completed in June; this 10-storey EPC A, BREEAM Excellent rated office building is on track to complete in Q1 2023.  Similarly, our major refurbishment of "Artesian", 9 Prescot Street, London is on track to complete in Q2 2023 with the marketing campaign launched earlier this month.

In France, our major refurbishment at Park Avenue is entering the final stages. Existing tenants are expected to move back in Q1 2023, having been temporarily relocated during the project. Existing and future tenants will benefit from the improved sustainability credentials of the building and the renovation of common areas including the creation of additional terraces.

Sustainability

We completed the installation of a solar PV array at Thameslink House, Richmond in October. The panels are estimated to generate over 81,000 kWh of renewable energy per annum, saving 19 tonnes of CO2 emissions per year. We expect to have completed over 100 carbon saving projects by the end of 2022, which will save an estimated 1,300 tonnes of CO2 emissions per annum.

Our sustainability progress was recognised with an increase to a Silver award in the EPRA Sustainability Best Practices Recommendations, up from Bronze in 2021. We have maintained our GRESB score of 85 out of 100 (2021: 85 out of 100) and, as a result, were awarded 4 green stars (2021: 4 green stars).

Governance

The Board confirms that Chris Jarvis will retire from the Board at the conclusion of the 2023 Annual General Meeting. Chris has served on the Board for nearly 14 years and we thank him for his invaluable contribution during his tenure.

-ends-

For further information, please contact:

CLS Holdings plc

(LEI: 213800A357TKB2TD9U78)

www.clsholdings.com

Fredrik Widlund, Chief Executive Officer

Andrew Kirkman, Chief Financial Officer

[phone]

Liberum Capital Limited

Richard Crawley

Jamie Richards

[phone]

Panmure Gordon

Hugh Rich

[phone]

Berenberg

Matthew Armitt

Richard Bootle

[phone]

Edelman Smithfield (Financial PR)

Alex Simmons 

Hastings Tarrant

[phone]

Forward-looking statements

This document may contain certain 'forward-looking statements'. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from those expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of CLS speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Except as required by its legal or statutory obligations, the Company does not undertake to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Information contained in this document relating to the Company or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.

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[1] As published on 9 November 2022, the Company compiled consensus expectation for full year 2022 EPRA Earnings Per Share is 11.5p.

 

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