Trading Update

RNS Number : 1296R

CLS Holdings PLC

03 November 2021

 

  PRESS RELEASE

Release date:  3 November 2021

Embargoed until:  07:00

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

Trading Update for the period 1 July 2021 to 2 November 2021

Fredrik Widlund, Chief Executive of CLS, commented:

"We are pleased to present this trading update ahead of today's Capital Markets Day, which is being held at our London office, and at some of our exciting developments and redevelopments in London. The day gives CLS the opportunity to showcase our asset management capabilities and the quality of our properties, highlighting the potential upside for value creation within our portfolio.

"Operationally, we are seeing improving market conditions and activity levels in all our geographies, albeit at different speeds, with Germany bouncing back strongly, France performing well and an encouraging recovery in the UK. We are confident that our ongoing asset management activity will lead to a reduction in vacancy by the year-end."

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

Q4 2021 rent collections

The Group's rental income in the UK and France is due on a quarterly basis with the current payment due between 25 September 2021 and 1 October 2021. In Germany, rents are due monthly and the current payment was due on 5 October 2021.

By close on 2 November 2021, we had received 97% of contractual rents due (2020: 95%).

Update on first three quarters 2021 rent collections

For the first three quarters of 2021, we have now received 99% of contractual rents due (2020: 98%).

Vacancy, lettings and occupancy (as at 30 September 2021)

Group, UK and France vacancies are largely unchanged since 30 June 2021. Vacancy in Germany has increased, primarily due to the expected expiry of leases at Parsevallstrasse and Hansaalle in Dusseldorf. As a result of current lease negotiations, we are expecting a reduction in German and Group vacancy by year-end.

· EPRA vacancy rates (Based on June 2021 ERVs):

Group:	7.8%  (30 June 2021: 7.7%)
UK:	7.0%  (30 June 2021: 7.3%)
Germany:	10.2% (30 June 2021: 9.3%)
France:	4.1%  (30 June 2021: 4.0%)

Since 1 July 2021, there have been 26 deals securing £2.9 million of annual rent at 10% above ERV. This includes the previously announced leases with the City of Hamburg and FUTRUE GmbH for 68,975 sq. ft (6,408 sqm). Excluding the City of Hamburg letting, the remaining 25 deals were 4% above ERV.

Occupancy in our Student and Hotel accommodation in Vauxhall has returned to near pre-pandemic levels at 91% and 93% respectively, both of which are above the levels expected at the time of our half-year results.

Disposals

We have unconditionally exchanged contracts to sell La Madeline in Lille for £8.2 million and our share of Leclerc in Paris for £2.8 million. The properties were sold at 5.2% above the 30 June 2021 valuation and completion is expected before the end of the year.

Developments and refurbishments

Permitted development rights ("PDR") for residential conversions were granted at Crosspoint House in Wallington and Kings House in Bromley, Greater London. Both properties have been earmarked for sale in the near future to capture this increased optionality value.

At 92-98 Vauxhall Walk a contract was signed in August with Galliford Try for the construction of a 10-storey office building. The piling has been completed and the super structure will commence in the coming months. The estimated rental value on completion in 2023 is expected to increase 10-fold to £1.5 million compared to the previous buildings on the site.

In the period, the Board has approved the refurbishment of three additional floors at Prescot Street in the City of London such that the scope of the project now extends to the entire building. On completion of the project in 2023, the refurbished building is expected to achieve an estimated rental value of £4.9 million and an EPC rating improvement to A from D.

In the period, we also completed on the refurbishment of 45 London Road, Reigate, with the building achieving SKA Gold and an EPC rating improvement to B from D together with an e stimated rental value of £0.6 million.

Sustainability

We have been awarded 4 green stars (2020: 3 green stars) based on our GRESB score of 85 out of 100 (2020: 72 out of 100). This is a significant improvement which has been driven by improved disclosure, independent verifications and on-going investments in the portfolio. Furthermore, we achieved EPRA Sustainability Best Practices Recommendations ("BPR") Bronze for the first time. We were also awarded EPRA BPR Gold for our 2020 Annual Report up from Bronze in 2019.

Liquid resources and financing

The Group's balance sheet remains well-capitalised and robust, providing significant flexibility. As at 30 September 2021 our average cost of debt was 2.21% with cash of over £155 million and a further £50 million in undrawn facilities.

In September, we completed the re-financing of Max Forum, Munich with a new 7-year loan for €28.5 million at 1.10%. We are in advanced negotiations for the remaining €24 million to be re-financed in 2021.

UK Real Estate Investment Trust ("REIT") conversion

We are making good progress with our evaluation of converting the Group's UK operations to a REIT to ensure that it benefits shareholders and that we would satisfy all the necessary criteria. A further update will be given before year-end.

Organisation

Due to the growth of the portfolio and the continued strategic focus on Germany, CLS Germany opened an office in Dusseldorf in September to support our tenants and partners in the region.

Capital Markets Event 2021

CLS will be hosting a Capital Markets presentation at its London office today, focusing on the embedded value within its existing portfolio and future opportunities from refurbishment and developments.

No new material disclosures will be made during the event.

The presentation will be available via the following link: https://www.clsholdings.com/investors/financial-reports-and-presentations/2021

-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]

Elm Square Advisers Limited

Jonathan Gray

[phone]

Smithfield Consultants (Financial PR)
Alex Simmons

Rob Yates

[phone]

Forward-looking statements

This announcement 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 should not be relied upon as an indicator of future performance or construed as a profit forecast.

 

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