Half Yearly Report

RNS Number : 3012R

CLS Holdings PLC

19 August 2010

 



19 August 2010

CLS HOLDINGS PLC

("CLS", THE "COMPANY" OR THE "GROUP")

ANNOUNCES ITS HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS TO 30 JUNE 2010

A solid set of results demonstrating the success of CLS's secondary portfolio and active property, financing and cash management

CLS is a property investment company with a diverse portfolio of £792 million modern, well-let properties in the UK, France, Germany and Sweden.  CLS's properties have been selected for their potential to generate high returns on capital investment through active asset management.

FINANCIAL HIGHLIGHTS

á     Profit before tax up 113% to £28.1 million (2009: £13.2 million)

á     Profit after tax up 137% to £24.7 million (2009: £10.4 million)

á     Gain on sale of corporate bonds £10.6 million

á     Earnings per share up 142% to 51.8 pence (2009: 21.4 pence)

á     Adjusted earnings per share up 246% to 39.4 pence

á     Underlying valuations up 0.8% overall in local currencies

á     Portfolio value £792.3 million (31 December 2009: £813.0 million)

á     Adjusted gearing down to 135.2% (31 December 2009: 141.7%)

á     Proposed tender offer buy-back of 1 in 74 shares at 625 pence, equivalent to 8.45 pence per share

OPERATIONAL HIGHLIGHTS

á     A robust start to the year in challenging economic conditions

á     Continued strong performance on lettings with average vacancy of 5%

á     Weighted average cost of debt 4%, one of the lowest in the sector

á     Net initial yield of 7.4%, 340 basis points above cost of debt

á     Re-entered the UK property market with the acquisition of Apex Tower for £20m in July

á     Further progress made on redevelopment options

Sten Mortstedt, Executive Chairman of CLS, commented:

"The Group has had an encouraging first half of 2010, which demonstrates the quality of our assets, the strength of our balance sheet and the benefits of diversification into liquid corporate bonds generating a much higher return than bank deposits.

"Our results have been achieved against a backdrop of tough economic and political conditions. The period has seen a sovereign debt crisis, concern over the stability of the Eurozone, further bank stress testing, a coalition government in the UK, and anxiety over the durability of the economic recovery.

"The fundamentals of our business remain sound, we are heartened by the signs of new tenant demand, we have a solid, diversified portfolio, and we have substantial cash available for new investment. There are opportunities and challenges ahead and we are well prepared to meet them both."

Copies of the half-yearly report are available for download from our website at www.clsholdings.com.  Hard copies can be requested via the website or by contacting the company (email: [e-mail] or phone [phone]).

Enquiries:

CLS Holdings plc                                                020 7582 7766

Sten Mortstedt, Executive Chairman

Henry Klotz, Chief Executive Officer

Richard Tice, Deputy Chief Executive Officer

Smithfield                                                            020 7360 4900

Alex Simmons

Brewin Dolphin Limited

Mark Brady                                                            0845 213 4729

Miriam Greenwood

Liberum Capital Limited                                    020 3100 2222

Chris Bowman

Tom Fyson

Kinmont                                                               020 7087 9100

Jonathan Gray

www.clsholdings.com

CLS HOLDINGS PLC - HALF-YEARLY FINANCIAL REPORT 2010

FINANCIAL HIGHLIGHTS

>       Profit before tax: up 113% to £28.1 million (2009: £13.2 million)

>       Profit after tax: up 137% to £24.7 million (2009: £10.4 million)

>       Core profit: up 48% to £19.8 million (2009: £13.4 million)

>       £10.6 million gain realised on sale of corporate bonds

>       Adjusted earnings per share: up 246% to 39.4 pence (2009: 11.4 pence)

>       Adjusted net assets per share: 768.4 pence (31 December 2009: 767.5 pence)

>       Proposed tender offer buy-back: 1 in 74 shares at 625 pence, equivalent to 8.45 pence per share, and increasing pro forma adjusted net assets per share to 770.3 pence

>       Portfolio value: £792.3 million - underlying valuation movement up 0.8% overall in local currencies Ð up 0.5% in UK, 2.1% in France and 0.2% in Germany, down 1.1% in Sweden

>       Recurring interest cover: increased to 3.2 times (2009: 2.4 times)

>       Weighted average cost of debt: 4.0% (31 December 2009: 4.0%) - one of the lowest in the property sector

>       £20.45 million acquisition of Apex Tower in New Malden exchanged in July

OTHER KEY DATA

>       Net assets per share: up to 655.3 pence (31 December 2009: 643.3 pence)

>       Earnings per share: up 142% to 51.8 pence (2009: 21.4 pence)

>       Liquid corporate bond portfolio: £58.7 million

>       Cash resources: £64.0 million

>       Property loan to value ratio: down to 65.0% (31 December 2009: 66.9%)

>       Adjusted gearing: 135.2% (31 December 2009: 141.7%)

>       Solidity: 31.3% (31 December 2009: 30.2%)

>       Adjusted solidity: 37.2% (31 December 2009: 36.4%)

>       Portfolio valuation: down 3.2%, comprising an underlying gain of 0.8% and a fall of 4.0% from foreign exchange movements

>       Weakness of euro and Swedish krona: reduced adjusted net assets per share by 35.0 pence

>       Movement in fair value of interest rate swaps: reduced adjusted net assets per share by 14.4 pence

A glossary of terms is set out below

CHAIRMAN'S STATEMENT

OVERVIEW

The Group has had an encouraging first half to 2010, which demonstrates the quality of our assets, the strength of our balance sheet and the benefits of diversification into liquid corporate bonds generating a much higher return than bank deposits.

Our results have been achieved against a backdrop of tough economic and political conditions. The period has seen a sovereign debt crisis, concern over the stability of the Eurozone, further bank stress testing, a coalition government in the UK, and anxiety over the durability of the economic recovery.

Since the beginning of the year, property investment markets, particularly in the UK, have displayed more rational characteristics than in late 2009. The number of buyers has reduced and banks are showing clear preference only to lend to strong companies like CLS.

PORTFOLIO

In local currency the investment property portfolio gained 0.8% in value, or £6.3 million, on a like-for-like basis in the six months: the UK portfolio rose by 0.5%, France by 2.1% and Germany by 0.2%, and Sweden fell by 1.1%. The weakness of the euro against sterling meant gross property assets at 30 June 2010 fell to £792.3 million (31 December 2009: £813.0 million), or 3.2% on a like-for-like basis. The net initial yield of 7.4% compares to our weighted average cost of debt of 4.0%, a differential of some 340 basis points, which is one of the highest in the property sector.

The letting markets in which we operate remain challenging and it is testament to our team that the void rate across the Group of 5.0% at 30 June was well below the average in our chosen sectors. There have been signs in the last two months of tenant demand improving across our markets and, with leases signed or agreed since 1 July, the vacancy rate has dropped back to 4.4%.

We concentrate on the well-proven virtues of active asset management and cash flow focus, so our weighted average lease length remains at 8.4 years, or 7.3 years if calculated to the first break, and 42.3% of the Group's rent roll is with Government tenants.

RESULTS

Profit after tax was £24.7 million (2009: £10.4 million), which included a gain of £10.6 million on the disposal of corporate bonds. This generated basic earnings per share of 51.8 pence (2009: 21.4 pence). After excluding the effect of deferred tax and the movement on the revaluation of investment properties, adjusted earnings per share were 39.4 pence (2009: 11.4 pence).

Adjusted net assets per share at 30 June 2010 were 768.4 pence (31 December 2009: 767.5 pence) a marginal rise, dampened by 35.0 pence per share through the euro and krona having weakened against sterling in the six months, and by 14.4 pence per share through the movement in the fair value of derivative financial instruments.

Net debt as a proportion of gross assets (less cash) was 53.1% (2009: 54.7%) and the Group's property loan to value was 65.0% (2009: 66.9%). Our liquid resources are healthy, with over £120 million of cash and corporate bonds at our disposal, so the balance sheet is robust. We continue to enjoy strong banking relationships with 19 lenders, and our financing is secure and effective; at 30 June our weighted average unexpired loan term was 6.1 years.

DISTRIBUTIONS

Following the exceptional £48.0 million returned to shareholders in January 2009, in April 2010 we restored our distribution policy and returned £6.0 million to shareholders through our traditional route of a tender offer buy-back. We intend to distribute a further £4.0 million in September through a tender offer buy-back of 1 in 74 shares at 625 pence per share. A circular giving notice of a general meeting to consider this will be issued to shareholders today.

APPOINTMENTS TO THE BOARD

On 11 May Richard Tice and Jennica Mortstedt joined the Board as Deputy Chief Executive and Non-Executive Director, respectively, and Bengt Mortstedt retired as a Non-Executive Director. I would like to reiterate my thanks to my brother, Bengt, for his many years of service and wise counsel to the Group.

EVENTS AFTER THE BALANCE SHEET DATE

Earlier this month we took advantage of the current market opportunities when we exchanged contracts on the acquisition of Apex Tower in New Malden for £20.45 million, representing a net initial yield of 8.66% from a ten year lease to a FTSE 100 tenant. We anticipate that this will produce a return on capital employed of over 16% per annum. We are seeing further interesting potential acquisitions at attractive prices both in London and in Paris, which we will look to exploit over the coming months.

CONCLUSION

The fundamentals of our business remain sound: our portfolio yields 340 basis points over our weighted average cost of debt; more than 40% of our rent roll is let to Government tenants; we believe in strong, in-house active management of the portfolio; our void rate of 4.4% is low; we are heartened by the signs of new tenant demand; we have a solid, diversified portfolio; and we have substantial cash and liquid resources available for new investment. There are opportunities and challenges ahead and we are well prepared to meet them both.

Sten Mortstedt

Executive Chairman

19 August 2010

BUSINESS REVIEW

INVESTMENT PROPERTY

UNITED KINGDOM  At 30 June 2010, the UK accounted for 44.2% of the investment portfolio at a value of £350.3 million, 0.5% higher than six months earlier on a like-for-like basis. The UK portfolio has a strong tenant profile, with over 50% by rental value let to government tenants, and longevity of income, with a weighted average lease term of over 10 years.

In the first half of 2010, the UK property investment market continued its tentative improvement which began in 2009. As prime yields continued to fall the gap between these and the yields of secondary assets widened. We believe that there are now selective opportunities for CLS. The rush to buy commercial property by institutional investors in late 2009 has subsided, leaving a more sensible and settled market closer reflecting its fundamentals. Overseas investors, though active, mainly target prime trophy assets outside our core markets.

In April we acquired 100 Vauxhall Walk, SE11, for £1.8 million, thereby completing the site assembly for our intended development of Spring Gardens III, adjacent to our highly successful 19,387 sq m Spring Gardens development.

A number of leases across the 117,300 sq m UK portfolio expired in the period. Whilst some have been restructured at current rental levels, we have taken advantage of others, in particular at Westminster Tower, SE1, to refurbish and improve tenant and common areas. Consequently, the UK void rate by rent increased from 4.5% to 5.4% in the six months. The vacancies at Westminster Tower, together with three further floors we plan to take back from tenants before the end of the year, provide the opportunity for a significant refurbishment to be undertaken later this year.

FRANCE Valued at £211.3 million, or 26.7% of the Group's total, the French portfolio rose by 2.1% on a like-for-like basis in local currency, but fell by 5.7% in sterling. The rise reflected positive market sentiment towards good quality, multi-let properties with strong cash flows.

The French investment market continued to exhibit a greater demand for good quality office investments than supply, which continued to produce downward pressure on yields. Following our £29.2 million acquisition of 7 rue Eugene et Armand Peugeot in Rueil-Malmaison at the end of December, we have remained selectively active in the Paris property market and expect to complete the acquisition of a further property before the end of the year.

The Paris occupancy market in the six months has shown greater signs of demand than in 2009 and, with a relatively restricted supply, the market vacancy rate in Paris has dropped to 5.3%, and across France to 6.8%.

Of the Group's 85,800 sq m portfolio, 5,940 sq m was subject to lease extensions. Expiries on 1,819 sq m exceeded new lettings on 1,650 sq m and, consequently, the void rate by rent increased from 4.2% to 4.7%, well below the national average.

GERMANY The German portfolio, 22.7% of the Group, was valued at £179.7 million at 30 June 2010, a rise of 0.2% in local currency on a like-for-like basis, but a fall of 7.7% in sterling after exchange rate movements.

In the first half of 2010 the German economy grew by 2.4%, whilst the commercial investment property market was characterised by larger portfolio transactions when compared to twelve months earlier. The occupational market showed marginal signs of improvement, but demand remained below the ten year average. Nevertheless, we have noticed a definitive improvement in enquiries and demand in the last two months.

Of the 140,000 sq m in our German portfolio, 2,164 sq m were vacated in the half year to 30 June, but lettings were achieved on 2,379 sq m, a notable accomplishment in a difficult market, and consequently, the void rate remained largely unchanged at 5.9% by rental value; the national average vacancy rate in Germany is some 10%.

SWEDEN We treat our Swedish portfolio of adjacent buildings in Vanersborg, near Gothenburg, collectively as one asset of 45,500 sq m called Vanerparken. At 30 June 2010 it was valued at £51.0 million, a fall of 1.1% on a like-for-like basis in local currency, and of 1.7% after a small foreign exchange impact. It represented 6.4% of our total portfolio.

97% of our Swedish rental income is from governmental tenants, subject to annual indexation. The weighted average lease term is 6.5 years, and voids are 1.9% by rental income.

The Swedish investment market in the first half of 2010 was SEK 43.3 billion, 200% higher than the equivalent period last year, and we remained vigilant for well-priced investment opportunities, but have continued to see better value elsewhere in Europe.

OTHER INVESTMENTS

We continue to hold, and closely monitor the performance of, corporate bonds issued by well-known, large companies. In February, we disposed of around half of the £70.0 million of bonds held at the beginning of the period, realising a gain of £10.6 million on historical cost. £31.2 million of these proceeds were subsequently and gradually reinvested and at 30 June the portfolio comprised 29 bonds valued at £58.7 million. Overall, the portfolio fell in value during the period by £2.2 million, of which £1.3 million was due to adverse foreign exchange movements. Interest of £2.5 million generated from corporate bonds in the six months represented an annualised return on cost of 8.95%. Since 1 July 2010, we have invested a further £3.9 million, and the portfolio has risen by £7.2 million to £65.9 million.

Catena AB is a property investment company listed in Stockholm in which the Group owns a 29.99% stake. In the six months to June, Catena enjoyed a strong half year, contributing £5.2 million (2009: £0.9 million) to our profit before tax.

Throughout the six months to 30 June 2010, the Group owned a 47.7% interest in Bulgarian Land Development Plc, which was valued at £11.8 million at 30 June 2010. In July shareholders in BLD voted to delist the company from the AIM market to save running costs, and, working closely with the other two major shareholders, our aim is to maximise the value of our investment in BLD over the short to medium term.

Wyatt Media Group AB, the third largest on-line media house in Scandinavia, continues to perform well, exceeding budget in the period with a pre-tax profit of £0.3 million.

RESULTS FOR THE PERIOD

HEADLINES Profit after tax of £24.7 million (2009: £10.4 million) generated basic earnings per share of 51.8 pence (2009: 21.4 pence). After excluding the effect of deferred tax and the movement on the revaluation of investment properties, adjusted earnings per share were 39.4 pence (2009: 11.4 pence). Gross property assets at 30 June 2010 fell to £792.3 million (31 December 2009: £813.0 million) after an adverse exchange rate movement of £32.7 million. Net assets per share were 655.3 pence (31 December 2009: 643.3 pence) and adjusted net assets per share, which exclude deferred tax, were broadly unchanged at 768.4 pence (31 December 2009: 767.5 pence).

Approximately 40% of the Group's business is conducted in the reporting currency of sterling, and 8% in Swedish kronor, the exchange rate for which remained largely unchanged against sterling. However, half of the Group's business is conducted in euros, the rate of which weakened by 7.7% against sterling between 31 December 2009 and 30 June 2010, adversely impacting adjusted net assets per share by around 4.4%, or 35 pence per share.

STATEMENT OF COMPREHENSIVE INCOME Rental income of £30.7 million was £1.7 million higher than the corresponding period in 2009 due largely to the acquisition of 7 rue Eugne et Armand Peugeot in Rueil-Malmaison in December (£1.1 million) and new rental income from recent developments at Bochum and Landshut in Germany (£1.0 million).

The 0.8% uplift in local currency of the investment property portfolio generated a gain of £6.3 million (2009: £5.2 million), and the sale of corporate bonds in February realised an historical cost gain of £10.6 million on bonds which had cost £30.8 million, and had been held on average for less than nine months.

At 30 June 2010 the weighted average cost of debt was 4.0%, one of the lowest in the listed property sector. Net finance costs of £17.6 million (2009: £14.5 million) included bank interest payable of £9.0 million, £1.1 million below the comparable figure last year.

Our 29.9% interest in Catena AB generated £5.2 million (2009: £0.9 million) of profits, and our share of profits of associates in aggregate was £4.6 million (2009: £0.4 million).

ADJUSTED NET ASSETS PER SHARE   Although adjusted net assets per share at 30 June 2010 remained virtually unchanged from six months earlier at 768.4 pence (2009: 767.5 pence), this masked a number of compensating elements. Profit after tax, but before the effect of valuations and foreign exchange, added 38.4 pence per share. The property revaluation added 13.3 pence per share, but adjusted net assets per share were reduced by 14.4 pence on the revaluation of financial derivatives, by 3.6 pence on the revaluation of corporate bonds and other investments, and by 35.0 pence per share by the relative weakness of the euro and krona to sterling. The tender offer buy-back and the issue of treasury shares at market value added 2.2 pence per share.

During the period, 300,000 share options were granted, although they had no dilutive effect on adjusted net assets per share at 30 June 2010.

CASH FLOW, NET DEBT AND GEARING Net cash flow from operating activities of £14.3 million was £7.9 million higher than the corresponding period in 2009 due primarily to higher rental income and lower interest costs. Of the £41.4 million of proceeds from the disposal of corporate bonds, £31.2 million was reinvested, and capital expenditure of £6.5 million was incurred. New bank loans of £30.1 million were taken out and £47.0 million repaid. £6.0 million was returned to shareholders through the tender offer buy-back in April, and overall cash balances fell marginally, by £6.3 million to £64.0 million.

At 30 June 2010, gross debt was £554.6 million (31 December 2009: £592.8 million) and net debt £490.6 million (2009: £522.5 million). The Group's property loan to value was 65.0% (2009: 66.9%), balance sheet gearing was down to 158.5% (2009: 169.1%) and adjusted gearing, excluding deferred tax, was 135.2% (2009: 141.7%).

At 30 June 2010, current liabilities exceeded current assets by £67.4 million. Within current borrowings was a loan of £7.7 million which was refinanced in July and a loan of £42.9 million due to expire in October, the refinancing of which was well advanced. Further, in addition to cash and cash equivalents of £64.0 million, at 30 June the Group had liquid corporate bonds of £58.7 million. None of the Group's borrowing covenants was in breach at 30 June 2010; potential breaches could be rectified on the part-repayment of £1.6 million of principal.

SHARE CAPITAL  In March, 207,000 Treasury Shares were issued at market value, and in April 1,004,817 shares were cancelled under the tender offer buy-back at 525 pence per share. At 30 June 2010, there were 47,226,439 shares in issue, and 4,793,000 Treasury Shares held by the Company. If taken up in full, the effect of the proposed tender offer buy-back in September would be to reduce the number of shares in issue to 46,588,244.

PRINCIPAL RISKS AND UNCERTAINTIES

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance and could cause the results to differ materially from expected or historical results. The management and mitigation of these risks are the responsibility of the Board.

Risk	Mitigation
Property investment risks Underperformance of investment portfolio impacting on financial performance due to: -    Cyclical downturn in property market -    Inappropriate buy/sell/hold decisions	Senior management has detailed knowledge of core markets and experience gained through many market cycles. This experience is supplemented by external advisors and financial models used in capital allocation decision-making.
-    Changes in supply of space and/or tenant      demand affecting rents and vacancies	The Group's property portfolio is diversified across four countries. The weighted-average unexpired lease term is 8.4 years and the Group's largest tenant concentration is with the Government sector (42.3 per cent).
-    Poor asset management	Property teams proactively manage tenants to ensure changing needs are met, and review the current status of all properties weekly. Written reports are submitted bi-weekly to senior management on, inter alia, vacancies, lease expiry profiles and progress on rent reviews.
Other investment risks Underperformance of corporate bond portfolio	In assessing potential investments, the Group Treasury department undertakes research on the bond and its issuer, seeks third-party advice, and receives legal advice on the terms of the bond, where appropriate. The Treasury department receives updates on bond price movements and third party market analysis on a daily basis and reports on corporate bonds to the Board on a bi-weekly basis.
Funding risks Unavailability of financing at acceptable prices	The Group has a dedicated Treasury department and relationships are maintained with approximately 20 banks, thus reducing credit and liquidity risk. The exposure on re-financing debt is mitigated by the lack of concentration in maturities.
Adverse interest rate movements	The Group's exposure to changes in prevailing market rates is largely hedged on existing debt through interest rate swaps and caps, or by borrowing at fixed rates.
Breach of borrowing covenants	Financial covenants are closely monitored by the Group Treasury department and regularly reported to the Board.
Foreign currency exposure	Property investments are bank financed in matching currency. The difference between the value of the property and the amount of the financing is generally unhedged and monitored on an ongoing basis.
Taxation risks The risk that there will be increases in tax rates or changes to the basis of taxation	The Group monitors legislative proposals and consults external advisors to understand and mitigate the effects of any such change.
Going concern The risk that given the economic uncertainties the Group will not have adequate working capital to remain a going concern for the next 12 months	See note 2 to the financial statements.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a)     the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b)     the Chairman's Statement and Business Review include 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 year); and

(c)     the Chairman's Statement and Business Review include 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

Sten Mortstedt                                                      Henry Klotz

Executive Chairman                                                Chief Executive Officer

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME

for the 6 months ended 30 June 2010

	Notes	Six months ended 30 June 2010 £m (unaudited)	Six months ended 30 June 2009 £m (unaudited)	Year ended 31 December  2009 £m (audited)
Continuing operations
Group revenue	3	38.4	36.1	76.3
Costs	3	(14.2)	(13.2)	(30.3)
		24.2	22.9	46.0
Net movements on       revaluation of      investment properties	8	6.3	5.2	(6.7)
Profit on sale of      investment properties		-	-	0.3
Gain/(loss) on sale of       corporate bonds		10.6	(0.8)	1.9
Operating profit		41.1	27.3	41.5
Net finance costs	4	(17.6)	(14.5)	(25.5)
Share of profit of      associates after tax	9	4.6	0.4	2.5
Profit before tax		28.1	13.2	18.5
Taxation	5	(3.4)	(2.8)	(1.1)
Profit for the period		24.7	10.4	17.4
Other comprehensive income
Foreign exchange      differences		(10.0)	(16.3)	(9.5)
Fair value (losses)/gains      on corporate      bonds and other       investments		(1.7)	6.0	12.5
Deferred tax thereon		0.7	-	(3.2)
Fair value (gains)/losses       taken to the      income statement on       disposal of      corporate bonds		(9.5)	-	1.0
Deferred tax thereon		2.6	-	-
Share of other      comprehensive      (loss)/income of       associates	9	(1.3)	(1.0)	0.4
Total comprehensive income/(loss) for the period		5.5	(0.9)	18.6
Profit/(loss) attributable to:
Owners of the Company		24.7	10.4	17.5
Non-controlling interests		-	-	(0.1)
Profit for the period		24.7	10.4	17.4
Total comprehensive income/(loss) attributable to:
Owners of the Company		5.5	(0.9)	18.7
Non-controlling interests		-	-	(0.1)
Total comprehensive income/(loss) for the period		5.5	(0.9)	18.6
Earnings per share from continuing operations attributable to the owners of the Company during the period (expressed in pence per share)
Basic	6	51.8	21.4	36.4
Diluted	6	51.8	21.4	36.4

CONDENSED GROUP BALANCE SHEET

at 30 June 2010

	Notes	30 June 2010 £m (unaudited)	30 June 2009 £m (unaudited)	31 December 2009 £m  (audited)
Non-current assets
Investment properties	8	792.3	767.1	813.0
Property, plant and      equipment		2.6	2.5	2.5
Intangible assets		1.1	1.1	1.1
Investments in      associates	9	42.4	36.0	40.9
Other investments	10	62.6	34.6	73.9
Derivative financial       instruments		0.1	0.1	0.1
Deferred tax	5	13.1	14.4	12.7
		914.2	855.8	944.2
Current assets
Trade and other      receivables		9.5	11.7	10.4
Cash and cash       equivalents		64.0	105.2	70.3
		73.5	116.9	80.7
Total assets		987.7	972.7	1,024.9
Non-current liabilities
Deferred tax	5	(66.5)	(70.1)	(72.3)
Derivative financial      instruments		(22.4)	-	-
Borrowings	11	(448.4)	(489.7)	(479.3)
		(537.3)	(559.8)	(551.6)
Current liabilities
Trade and other      payables		(29.3)	(27.5)	(30.1)
Current tax	5	(5.1)	(6.2)	(5.0)
Derivative financial       instruments		(0.3)	(17.1)	(15.7)
Borrowings	11	(106.2)	(72.4)	(113.5)
		(140.9)	(123.2)	(164.3)
Total liabilities		(678.2)	(683.0)	(715.9)
Net assets		309.5	289.7	309.0
EQUITY
Capital and reserves attributable to owners of the Company
Share capital	12	13.0	13.3	13.3
Share premium		71.5	70.5	70.5
Other reserves		86.1	92.5	105.0
Retained earnings		140.2	114.6	121.5
		310.8	290.9	310.3
Non-controlling interests		(1.3)	(1.2)	(1.3)
Total equity		309.5	289.7	309.0

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY

for the 6 months ended 30 June 2010

Unaudited	Attributable to the owners of the Company					Non- controlling interest £m		Total £m
	Share capital  £m	Share premium £m	Other reserves £m	Retained earnings £m	Total £m
At 1 January 2010	13.3	70.5	105.0	121.5	310.3	(1.3)		309.0
Arising in the six months ended 30 June 2010:
Total    comprehensive    income for the     period	-	-	(19.2)	24.7	5.5	-	5.5
Issue of treasury     shares	-	1.0	-	-	1.0	-	1.0
Purchase of own    shares	(0.3)	-	0.3	(6.0)	(6.0)	-	(6.0)
Total changes arising in the period	(0.3)	1.0	(18.9)	18.7	0.5	-	0.5
At 30 June 2010	13.0	71.5	86.1	140.2	310.8	(1.3)	309.5

Unaudited	Attributable to the owners of the Company					Non- controlling interest £m	Total £m
	Share capital  £m	Share premium £m	Other reserves £m	Retained earnings £m	Total £m
At 1 January 2009	16.7	70.5	100.4	152.2	339.8	(1.2)	338.6
Arising in the six months ended 30 June 2009:
Total     comprehensive    income for the     period	-	-	(11.3)	10.4	(0.9)	-	(0.9)
Purchase of     own shares	(3.4)	-	3.4	(48.0)	(48.0)	-	(48.0)
Total changes arising in the period	(3.4)	-	(7.9)	(37.6)	(48.9)	-	(48.9)
At 30 June 2009	13.3	70.5	92.5	114.6	290.9	(1.2)	289.7

Audited	Attributable to the owners of the Company					Non- controlling interest £m	Total £m
	Share capital  £m	Share premium £m	Other reserves £m	Retained earnings £m	Total £m
At 1 January 2009	16.7	70.5	100.4	152.2	339.8	(1.2)	338.6
Arising in the year ended 31 December 2009:
Total    comprehensive    income for the     year	-	-	1.2	17.5	18.7	(0.1)	18.6
Purchase of own    shares	(3.4)	-	3.4	(48.0)	(48.0)	-	(48.0)
Expenses     thereof	-	-	-	(0.2)	(0.2)	-	(0.2)
Total changes arising in the year	(3.4)	-	4.6	(30.7)	(29.5)	(0.1)	(29.6)
At 31 December 2009	13.3	70.5	105.0	121.5	310.3	(1.3)	309.0

CONDENSED GROUP STATEMENT OF CASH FLOWS

for the 6 months ended 30 June 2010

	Notes	Six months ended 30 June 2010 £m  (unaudited)	Six months ended 30 June 2009 £m  (unaudited)	Year ended 31 December  2009 £m (audited)
Cash flows from operating activities
Cash generated from      operations	13	25.5	21.0	45.7
Interest received		2.3	3.0	4.8
Interest paid		(11.3)	(15.7)	(30.1)
Income tax paid		(2.2)	(1.9)	(3.0)
Net cash inflow from operating activities		14.3	6.4	17.4
Cash flows from investing activities
Purchase of      investment property		(1.8)	-	(29.2)
Capital expenditure on      investment      property		(4.7)	(15.3)	(22.8)
Proceeds from sale of       investment      property		-	-	2.2
Purchase of corporate       bonds		(31.2)	(20.2)	(70.8)
Proceeds from sale of       corporate      bonds		41.4	3.3	24.9
Purchase of equity       investments		(1.0)	-	-
Proceeds from sale of       equity      investments		0.1	-	0.7
Purchase of interests       in associate		(0.3)	(1.2)	(1.8)
Dividend received        from associate      undertaking		1.8	1.5	1.5
Proceeds/(costs) on       foreign currency      transactions		0.2	(1.6)	(4.2)
Amounts expended in      relation to      corporate disposals in       prior periods		-	(0.4)	(1.0)
Purchases of property,       plant and      equipment		(0.1)	-	(0.1)
Net cash inflow/(outflow) from investing activities		4.4	(33.9)	(100.6)
Cash flows from financing activities
Purchase of own      shares		(6.0)	(48.0)	(48.2)
New share issues		1.0	-	-
New loans		30.1	14.0	69.7
Issue costs of new       loans		Ð	(0.1)	(0.3)
Purchase of financial       instruments		(0.1)	-	(0.1)
Repayment of loans		(47.0)	(17.4)	(57.4)
Net cash outflow from financing activities		(22.0)	(51.5)	(36.3)
Cash flow element of net decrease in cash and cash equivalents		(3.3)	(79.0)	(119.5)
Foreign exchange loss		(3.0)	(11.1)	(5.5)
Net decrease in cash and cash equivalents		(6.3)	(90.1)	(125.0)
Cash and cash equivalents at the beginning of the period		70.3	195.3	195.3
Cash and cash equivalents at the end of the period		64.0	105.2	70.3

NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS

30 June 2010

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 for the year ended 31 December 2009 are an abridged version of the full accounts for that year, which received an unqualified report from the auditors, 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 auditors drew attention by way of emphasis without qualifying their report, and have been filed with the Registrar of Companies. The annual financial statements of CLS Holdings plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this Half-Yearly Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union. 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.

The following standards and interpretations have been issued since the last annual report, none of which has a material impact on either the result or financial position of the Group:

-     Amendments to IFRS 2 - Group Cash-Settled Share-Based Payment Transactions; effective for accounting periods starting on or after 1 January 2010

-     IFRS 3 (revised) and IAS 27 (revised) - Business Combinations and Consolidated and Separate Financial Statements; effective for accounting periods starting on or after 1 July 2009

The adoption of these standards has no significant impact on these financial statements.

2     GOING CONCERN

The Directors regularly stress-test the business model to ensure that the Group has adequate working capital. They have reviewed the current and projected financial position of the Group as discussed in the Business Review, taking into account the repayment profile of the Group's loan portfolio, and making reasonable assumptions about future trading performance. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, therefore, they continue to adopt the going concern basis in preparing the Half-Yearly Financial Report.

3     SEGMENT INFORMATION

The Group has two operating divisions - Investment Property and Other Investments. Other Investments comprise corporate bonds, shares in Catena AB, Bulgarian Land Development Plc and Wyatt Media Group AB, and other small corporate investments. The Group manages the Investment Property division on a geographical basis due to its size and geographical diversity. Consequently, the Group's principal operating segments are:

Investment Property -    United Kingdom

                                       France

                                       Germany

                                       Sweden

Other Investments

There are no transactions between the operating segments.

The Group's results for the six months ended 30 June 2010 by operating segment were as follows:

	Investment property
	United Kingdom £m	France £m	Germany £m	Sweden £m	Other Investments £m	Total £m
Rental income	12.0	8.9	7.2	2.6	-	30.7
Service charge income	1.8	1.9	1.4	0.1	-	5.2
Other property-related income	0.1	-	-	-	-	0.1
Income from non-property activities	-	-	-	-	2.4	2.4
Group revenue	13.9	10.8	8.6	2.7	2.4	38.4
Service charges and similar expenses	(2.9)	(2.0)	(1.4)	(0.7)	-	(7.0)
Administration expenses	(1.5)	(0.6)	(0.5)	(0.2)	(2.0)	(4.8)
Other expenses	-	(0.2)	(0.6)	-	-	(0.8)
Costs	(4.4)	(2.8)	(2.5)	(0.9)	(2.0)	(12.6)
Group revenue less costs	9.5	8.0	6.1	1.8	0.4	25.8
Net movements on revaluation of investment properties	1.7	4.7	0.5	(0.6)	-	6.3
Gain on sale of corporate bonds	-	-	-	-	10.6	10.6
Segment operating profit	11.2	12.7	6.6	1.2	11.0	42.7
Net finance costs	(12.2)	(1.6)	(4.2)	(0.1)	0.5	(17.6)
Share of profit of associates after tax	-	-	-	-	4.6	4.6
Segment (loss)/profit before tax	(1.0)	11.1	2.4	1.1	16.1	29.7
Taxation	2.0	(3.8)	0.5	(0.1)	(2.0)	(3.4)
Segment profit after tax	1.0	7.3	2.9	1.0	14.1	26.3
Central administration costs						(1.6)
Profit for the period						24.7

On the adoption of IFRS 8 - Operating Statements in 2009, certain items in the segment analysis for June 2009 have been reclassified. Previously other investments were shown within their respective geographical segment and central administration costs were included within the UK segment and the deferred tax charge was not allocated by segment. In the six months ended 30 June 2009, results from associates (profit of £0.4 million) were shown within the Sweden segment and are now shown within the Other Investments segment. Available-for-sale investments of £34.6 million were shown in the assets of the UK segment and investments in associates of £36.0 million were shown in the Sweden segment; both are now shown within the Other Investments segment.

The Group's results for the six months ended 30 June 2009 by operating segment, restated as explained above, were as follows:

	Investment property
	United Kingdom £m	France £m	Germany £m	Sweden £m	Other Investments £m	Total £m
Rental income	12.3	7.8	6.5	2.4	-	29.0
Service charge income	1.4	1.6	1.2	0.1	-	4.3
Other property-related income	0.1	0.2	0.2	0.1	-	0.6
Income from non-property activities	-	-	-	-	2.2	2.2
Group revenue	13.8	9.6	7.9	2.6	2.2	36.1
Service charges and similar expenses	(2.1)	(1.8)	(1.1)	(0.5)	-	(5.5)
Administration expenses	(0.9)	(0.7)	(0.5)	(0.2)	(2.4)	(4.7)
Other expenses	(0.7)	(0.3)	(0.8)	(0.1)	-	(1.9)
Costs	(3.7)	(2.8)	(2.4)	(0.8)	(2.4)	(12.1)
Group revenue less costs	10.1	6.8	5.5	1.8	(0.2)	24.0
Net movements on revaluation of investment properties	20.9	(7.5)	(6.6)	(1.6)	-	5.2
Loss on sale of corporate bonds	-	-	-	-	(0.8)	(0.8)
Segment operating profit/(loss)	31.0	(0.7)	(1.1)	0.2	(1.0)	28.4
Net finance costs	(0.4)	(2.2)	(3.8)	(0.3)	(7.8)	(14.5)
Share of profit of associates after tax	-	-	-	-	0.4	0.4
Segment profit/(loss) before tax	30.6	(2.9)	(4.9)	(0.1)	(8.4)	14.3
Taxation	(3.8)	(0.7)	0.2	1.5	-	(2.8)
Segment profit/(loss) after tax	26.8	(3.6)	(4.7)	1.4	(8.4)	11.5
Central administration costs						(1.1)
Profit for the period						10.4

The Group's results for the year ended 31 December 2009 were as follows:

	Investment property
	United Kingdom £m	France £m	Germany £m	Sweden £m	Other Investments £m	Total £m
Rental income	25.0	15.9	14.8	4.9	-	60.6
Service charge income	4.7	4.2	1.7	0.3	-	10.9
Other property-related income	0.4	0.3	0.3	-	-	1.0
Income from non-property activities	-	-	-	-	3.8	3.8
Group revenue	30.1	20.4	16.8	5.2	3.8	76.3
Service charges and similar expenses	(6.3)	(4.5)	(2.8)	(1.2)	-	(14.8)
Administration expenses	(2.6)	(1.5)	(1.1)	(0.5)	(3.7)	(9.4)
Other expenses	(1.0)	(0.7)	(1.2)	(0.2)	(0.2)	(3.3)
Costs	(9.9)	(6.7)	(5.1)	(1.9)	(3.9)	(27.5)
Group revenue less costs	20.2	13.7	11.7	3.3	(0.1)	48.8
Net movements on revaluation of investment properties	24.1	(15.9)	(13.5)	(1.4)	-	(6.7)
Profit on sale of investment properties	0.3	-	-	-	-	0.3
Gain on sale of corporate bonds	-	-	-	-	1.9	1.9
Segment operating profit/(loss)	44.6	(2.2)	(1.8)	1.9	1.8	44.3
Net finance costs	(6.1)	(7.0)	(7.4)	(1.6)	(3.4)	(25.5)
Share of profit of associates after tax	-	-	-	-	2.5	2.5
Segment profit/(loss) before tax	38.5	(9.2)	(9.2)	0.3	0.9	21.3
Taxation	(4.0)	1.6	0.2	0.6	0.5	(1.1)
Segment profit/(loss) after tax	34.5	(7.6)	(9.0)	0.9	1.4	20.2
Central administration costs						(2.8)
Profit for the year						17.4

Segment assets and liabilities

	Assets			Liabilities
	30 June 2010 £m	30 June 2009 £m	31 December 2009 £m	30 June 2010 £m	30 June 2009 £m	31 December  2009 £m
Investment Property
United Kingdom	369.2	370.8	370.2	286.9	288.4	282.0
France	223.5	212.7	246.1	171.3	165.6	187.6
Germany	187.7	193.4	200.0	148.5	149.9	158.8
Sweden	56.3	51.7	58.6	28.0	47.7	30.7
Other investments	151.0	144.1	150.0	43.5	31.4	56.8
	987.7	972.7	1,024.9	678.2	683.0	715.9

Segment capital expenditure

	Capital expenditure
	Six months ended 30 June 2010 £m	Six months ended 30 June 2009 £m	Year ended 31 December  2009 £m
Investment Property
United Kingdom	1.8	0.9	1.3
France	1.3	1.3	31.4
Germany	2.2	11.9	17.8
Sweden	0.5	1.1	2.2
	5.8	15.2	52.7

4     NET FINANCE COSTS

	Six months ended 30 June 2010 £m	Six months ended 30 June 2009 £m	Year ended 31 December 2009 £m
Interest expense
Bank loans	9.0	10.1	22.7
Debenture loans	2.3	2.3	4.7
Other interest	0.1	0.1	0.3
Amortisation of issue costs of loans	0.4	0.4	0.8
Foreign exchange variances	1.8	10.0	9.7
Movement in fair value of derivative financial instruments
Interest rate swaps: transactions not qualifying      as hedges	6.7	(5.8)	(6.7)
Interest rate caps, collars and floors: transactions      not qualifying as hedges	0.1	0.4	0.4
Interest income	(2.8)	(3.0)	(6.4)
	17.6	14.5	25.5

5     TAXATION

	Six months ended 30 June 2010 £m	Six months  ended 30 June 2009 £m	Year ended 31 December  2009 £m
Current tax	3.0	2.5	2.1
Deferred tax	0.4	0.3	(1.0)
	3.4	2.8	1.1

The Balance Sheet movement in current and deferred tax since the last reported balance sheet is as follows;

	Current tax Liability	Deferred tax Asset	Deferred tax Liability	Total Net Liability
At 1 January 2010	(5.0)	12.7	(72.3)	(64.6)
Recognised directly in arriving at profit after tax	(3.0)	-	(0.4)	(3.4)
Recognised directly in equity	-	0.5	2.8	3.3
Net tax paid	2.2	-	-	2.2
Other movements	0.6	-	-	0.6
Foreign exchange movements	0.1	(0.1)	3.4	3.4
At 30 June 2010	(5.1)	13.1	(66.5)	(58.5)

6     EARNINGS PER SHARE

Management has chosen to disclose adjusted earnings per share from continuing operations in order to provide an indication of the Group's underlying business performance. Adjusted earnings per share exclude the effect of revaluations of investment properties and deferred tax. Management has also chosen to disclose the European Public Real Estate Association (EPRA) measure of earnings per share. This has been provided to give relevant information to investors on the long-term performance of the Group's underlying business. The EPRA measure excludes items which are non-recurring in nature such as profits, net of related tax, on sale of investment property, other non-current investments and items that have no impact to earnings over their life such as the change in fair value of derivative financial instruments and net movement on revaluation of investment properties, and the related deferred taxation on these items.

Earnings	Six months ended 30 June 2010 £m	Six months ended 30 June 2009 £m	Year ended 31 December 2009 £m
Profit for the period attributable to the owners of the Company	24.7	10.4	17.5
Revaluation (gains)/losses on investment properties	(6.3)	(5.2)	6.7
Total deferred tax charge/(credit)	0.4	0.3	(1.0)
Adjusted Earnings	18.8	5.5	23.2
Profit on sale of investment properties	-	-	(0.3)
Change in fair value of derivative financial instruments	6.8	(5.4)	(6.3)
(Gain)/loss on other investments	(10.6)	0.8	(1.9)
Deferred tax relating items other than revaluation gains/(losses) and changes in fair value of derivative financial instruments	(1.8)	4.1	1.6
EPRA Earnings	13.2	5.0	16.3

Weighted average number of ordinary shares	Six months ended 30 June 2010 Number	Six months ended 30 June 2009 Number	Year ended 31 December 2009 Number
Weighted average number of ordinary shares	47,719,329	48,481,630	48,249,810
Dilutive share options1	8,678	-	-
Diluted weighted average number of ordinary shares	47,728,007	48,481,630	48,249,810

Earnings per Share	Six months ended 30 June 2010 Pence	Six months ended 30 June 2009 Pence	Year ended 31 December 2009 Pence
Basic	51.8	21.4	36.4
Diluted	51.8	21.4	36.4
Adjusted	39.4	11.4	48.2
EPRA	27.7	10.3	33.8

1.  300,000 share options were granted on 11 March 2010 at an exercise price of 470 pence.

7     NET ASSETS PER SHARE

Management has chosen to disclose adjusted net assets per share, after the exclusion of deferred tax, in order to provide an indication of the Group's underlying balance sheet strength which is a key metric in the property sector. Management has also chosen to disclose the two European Public Real Estate Association (EPRA) measures of net assets per share, EPRA net assets per share and EPRA triple net assets per share. The objective of the EPRA net assets per share measure is to highlight the fair value of equity on a long-term basis. Items which have no impact on the Group in the long term, such as fair value movements of derivative financial instruments and movements on fair value of investment properties and associated deferred tax, are excluded. The objective of EPRA triple net assets per share is to disclose a net assets per share measure on a true fair value basis. Accordingly all balance sheet items are included at their fair value in arriving at this measure including deferred tax, fixed rate loan liabilities and any other balance sheet items not reported at fair value.

Net Assets	30 June 2010  £m	30 June 2009 £m	31 December 2009 £m
Basic and Diluted Net Assets	309.5	289.7	309.0
Deferred tax	53.4	55.7	59.6
Adjusted Net Assets	362.9	345.4	368.6

Net Assets	30 June 2010  £m	30 June 2009 £m	31 December 2009 £m
Basic and Diluted Net Assets	309.5	289.7	309.0
Adjustment to increase fixed rate debt to fair value	(26.8)	(29.8)	(24.1)
EPRA Triple Net Assets	282.7	259.9	284.9
Deferred tax on property and other non-current investments	58.8	65.1	66.8
Fair value of derivative financial instruments	22.6	17.0	15.6
Adjustment to reduce fixed rate debt to book value	26.8	29.8	24.1
EPRA Net Assets	390.9	371.8	391.4

	30 June 2010 Number	30 June 2009 Number	31 December 2009 Number
Number of ordinary shares in circulation	47,226,439	48,024,256	48,024,256

Net Assets Per Share	30 June  2010  Pence	30 June 2009 Pence	31 December 2009 Pence
Basic and Diluted	655.3	603.2	643.3
Adjusted	768.4	719.2	767.5
EPRA	827.7	774.2	815.0
EPRA Triple Net	598.6	541.2	593.2

8     INVESTMENT PROPERTIES

	30 June 2010 £m	30 June 2009 £m	31 December  2009 £m
United Kingdom	350.3	344.7	346.8
France	211.3	193.0	222.8
Germany	179.7	184.1	192.1
Sweden	51.0	45.3	51.3
	792.3	767.1	813.0

The movement in investment properties since the last reported balance sheet is as follows:

	United Kingdom £m	France £m	Germany £m	Sweden £m	Total £m
At 1 January 2010	346.8	222.8	192.1	51.3	813.0
Acquisitions	1.8	-	-	-	1.8
Capital expenditure	-	1.3	2.2	0.5	4.0
Net movements on revaluation of investment properties	1.7	4.7	0.5	(0.6)	6.3
Rent-free period debtor adjustments	-	-	(0.2)	0.1	(0.1)
Exchange rate variances	-	(17.5)	(14.9)	(0.3)	(32.7)
At 30 June 2010	350.3	211.3	179.7	51.0	792.3

The investment properties were revalued at 30 June 2010 to their fair value. Valuations were based on current prices in an active market for all properties. The property valuations were carried out by external, professionally qualified valuers as follows:

UK : Lambert Smith Hampton

France 2009 : DTZ Debenham Tie Leung; France 2010 : DTZ Debenham Tie Leung or Jones Lang LaSalle

Germany 2009 : DTZ Debenham Tie Leung; Germany 2010 : DTZ Debenham Tie Leung or Colliers International

Sweden : CB Richard Ellis

Investment properties include leasehold properties with a carrying value of £18.4 million (June 2009: £18.2 million; December 2009: £18.1 million).

Where the Group leases out its investment property under operating leases the duration is typically 3 years or more. No contingent rents have been recognised in the current or comparative years. Substantially all investment properties are secured against debt. The Directors are satisfied that the external valuations supplied are appropriate to adopt without adjustment.

9     INVESTMENTS IN ASSOCIATES

	30 June 2010 £m	30 June 2009 £m	31 December 2009 £m
Catena AB
Interest in ordinary share capital: 29.9% (30 June 2009: 29.1%; 31 December 2009: 29.8%)
Share of assets	59.3	55.6	66.4
Share of liabilities	(33.6)	(37.5)	(43.8)
Goodwill	4.8	4.3	4.8
	30.5	22.4	27.4
Bulgarian Land Development Plc
Interest in ordinary share capital: 47.7%
Share of assets	25.4	24.9	27.4
Share of liabilities	(13.6)	(11.3)	(13.9)
	11.8	13.6	13.5
Flavour of the Month AB
Interest in ordinary share capital: 40.0%
Share of assets	0.1	-	-
Share of liabilities	-	-	-
	0.1	-	-
Carrying value of investments in associates	42.4	36.0	40.9

The movement in associates since the last reported balance sheet is as follows:

	Net assets £m	Goodwill £m	Total £m
At 1 January 2010	36.1	4.8	40.9
Additions	0.2	0.1	0.3
Share of profit of associates after tax	4.6	-	4.6
Dividends received	(1.8)	-	(1.8)
Share of other comprehensive loss of associates	(1.3)	-	(1.3)
Exchange rate differences	(0.2)	(0.1)	(0.3)
At 30 June 2010	37.6	4.8	42.4

10   OTHER INVESTMENTS

	Investment type	Destination of Investment	30 June 2010 £m	30 June 2009 £m	31 December 2009 £m
Available-for-sale financial investments carried at fair value	Listed corporate bonds	UK	30.1	3.7	17.1
		Eurozone	16.9	21.7	40.0
		Other	11.7	5.6	12.9
	Listed equity securities	UK	0.6	0.5	0.6
		Sweden	2.5	2.3	2.5
		Other	0.1	0.1	0.1
	Unlisted investments	Sweden	0.6	0.5	0.6
	Government securities	UK	0.1	0.2	0.1
			62.6	34.6	73.9

The movement of other investments since the last reported balance sheet is analysed below:

	Corporate Bonds £m	Other Investments £m	Total £m
At 1 January 2010	70.0	3.9	73.9
Additions	31.2	1.0	32.2
Disposals	(30.8)	(0.1)	(30.9)
Fair value movements recognised in reserves	(0.9)	(0.8)	(1.7)
Fair value movements recognised in profit before tax	(9.5)	-	(9.5)
Exchange rate differences	(1.3)	(0.1)	(1.4)
At 30 June 2010	58.7	3.9	62.6

11   BORROWINGS

Maturity profile

At 30 June 2010	Bank loans £m	Debenture  loans £m	Zero Coupon Note £m	Other  loans £m	Total £m
Within one year or on demand	102.9	1.0	-	2.3	106.2
More than one but not more than two years	38.8	1.1	-	-	39.9
More than two but not more than five years	203.9	4.2	-	-	208.1
More than five years	162.9	28.2	9.3	-	200.4
	508.5	34.5	9.3	2.3	554.6

At 30 June 2009	Bank loans £m	Debenture loans £m	Zero Coupon  Note £m	Other loans £m	Total £m
Within one year or on demand	71.4	1.0	-	-	72.4
More than one but not more than two years	63.8	1.0	-	2.3	67.1
More than two but not more than five years	211.9	3.8	-	-	215.7
More than five years	168.9	29.7	8.3	-	206.9
	516.0	35.5	8.3	2.3	562.1

At 31 December 2009	Bank loans £m	Debenture loans £m	Zero Coupon  Note £m	Other loans £m	Total £m
Within one year or on demand	112.5	1.0	-	-	113.5
More than one but not more than two years	26.7	1.1	-	2.3	30.1
More than two but not more than five years	199.7	4.0	-	-	203.7
More than five years	207.7	29.0	8.8	-	245.5
	546.6	35.1	8.8	2.3	592.8

Arrangement fees of £2.4 million (June 2009: £2.9 million; December 2009: £2.9 million) have been offset in arriving at the balances in the above tables.

Included in the above tables are non-property related loans of £39.9 million (June 2009: £17.6 million; December 2009: £48.5 million).

Analysis

At 30 June 2010	Fixed rate financial liabilities £m	Floating rate financial liabilities £m	Total £m
Sterling	153.4	111.1	264.5
Euro	114.5	150.7	265.2
Swedish kronor	-	24.3	24.3
Other	-	0.6	0.6
	267.9	286.7	554.6

At 30 June 2009	Fixed rate financial liabilities £m	Floating rate financial liabilities £m	Total £m
Sterling	183.5	80.5	264.0
Euro	95.2	160.9	256.1
Swedish kronor	17.3	24.7	42.0
	296.0	266.1	562.1

At 31 December 2009	Fixed rate financial liabilities £m	Floating rate financial liabilities £m	Total £m
Sterling	154.2	115.4	269.6
Euro	123.8	165.1	288.9
Swedish kronor	-	34.3	34.3
	278.0	314.8	592.8

Fair values

	Carrying amounts			Fair values
	June 2010 £m	June 2009 £m	December 2009 £m	June 2010 £m	June 2009 £m	December 2009 £m
Current borrowings	106.2	72.4	113.5	106.2	72.4	113.5
Non-current borrowings	448.4	489.7	479.3	475.2	519.5	503.4
	554.6	562.1	592.8	581.4	591.9	616.9

The fair value of non-current 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.

The fair value of current borrowings approximates to the carrying value because of their short maturity.

12   SHARE CAPITAL

	Number of Ordinary shares in circulation	Number of Treasury shares in circulation	Total number of shares	Ordinary shares in circulation £m	Treasury shares £m	Total  ordinary shares £m
At 1 January 2010	48,024,256	5,000,000	53,024,256	12.0	1.3	13.3
Ordinary shares issued from Treasury shares	207,000	(207,000)	-	0.1	(0.1)	-
Cancelled following tender offer1	(1,004,817)	-	(1,004,817)	(0.3)	-	(0.3)
At 30 June 2010	47,226,439	4,793,000	52,019,439	11.8	1.2	13.0

	Number of Ordinary  shares in  circulation	Number of Treasury shares in circulation	Total number of shares	Ordinary shares in circulation £m	Treasury shares £m	Total  ordinary shares £m
At 1 January 2009	61,745,471	5,000,000	66,745,471	15.4	1.3	16.7
Cancelled following tender offer2	(13,721,215)	-	(13,721,215)	(3.4)	-	(3.4)
At 30 June 2009	48,024,256	5,000,000	53,024,256	12.0	1.3	13.3

	Number of Ordinary  shares in  circulation	Number of Treasury shares in circulation	Total number of shares	Ordinary shares in circulation £m	Treasury shares £m	Total  ordinary shares £m
At 1 January 2009	61,745,471	5,000,000	66,745,471	15.4	1.3	16.7
Cancelled following tender offer2	(13,721,215)	-	(13,721,215)	(3.4)	-	(3.4)
At 31 December 2009	48,024,256	5,000,000	53,024,256	12.0	1.3	13.3

1.    A tender offer by way of a Circular dated 23 March 2010 for the purchase of 1 in 48 shares at 600 pence per share was completed in April 2010, returning £6.0 million to shareholders.

2.    A tender offer by way of a Circular dated 1 December 2008 for the purchase of 2 in 9 shares at 350 pence per share was completed in January 2009, returning £48.0 million to shareholders.

13   CASH GENERATED FROM OPERATIONS

	Six months ended 30 June 2010 £m	Six months ended 30 June 2009 £m	Year ended 31 December  2009 £m
Operating profit from continuing operations	41.1	27.3	41.5
Adjustments for:
Net movements on revaluation of investment      properties	(6.3)	(5.2)	6.7
Depreciation	0.1	0.3	0.5
Profit on sale of investment properties	-	-	(0.3)
(Gain)/loss on other investments	(10.6)	0.8	(2.1)
Changes in working capital:
Decrease/(increase) in debtors	1.5	(0.6)	(0.7)
(Decrease)/increase in creditors	(0.3)	(1.6)	0.1
Cash generated from operations	25.5	21.0	45.7

INDEPENDENT REVIEW REPORT TO CLS HOLDINGS PLC

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 2010 which comprises 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 related notes 1 to 13. 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.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

DIRECTORS' RESPONSIBILITIES

The Half-Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

OUR RESPONSIBILITY

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half-Yearly Financial Report based on our review.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, 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 Ireland) 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.

CONCLUSION

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 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditors

London, United Kingdom

19 August 2010

GLOSSARY OF TERMS

ADJUSTED EARNINGS PER SHARE

Profit after tax, but excluding deferred tax and net gains or losses from fair value adjustments on investment properties, divided by the diluted weighted average number of ordinary shares

ADJUSTED NET ASSETS OR ADJUSTED SHAREHOLDERS' FUNDS

Net assets excluding deferred tax assets and deferred tax liabilities

ADJUSTED NET ASSETS PER SHARE OR ADJUSTED NET ASSET VALUE

Adjusted net assets divided by the diluted number of ordinary shares

ADJUSTED NET GEARING

Net debt expressed as a percentage of adjusted net assets

ADJUSTED SOLIDITY

Adjusted net assets expressed as a percentage of adjusted total assets

ADJUSTED TOTAL ASSETS

Total assets excluding deferred tax assets

CONTRACTED RENT

Annual contracted rental income

CORE PROFIT

Profit before tax and before net movements on revaluation of investment properties, profit on sale of investment properties, subsidiaries and corporate bonds, impairment of intangible assets and goodwill, non-recurring costs and foreign exchange variances

DILUTED ADJUSTED NET ASSETS

Diluted net assets excluding deferred tax assets and deferred tax liabilities

DILUTED EARNINGS PER SHARE

Profit after tax divided by the diluted weighted average number of ordinary shares

DILUTED NET ASSETS

Equity shareholders' funds increased by the potential proceeds from issuing those shares issuable under employee share schemes

DILUTED NET ASSETS PER SHARE OR DILUTED NET ASSET VALUE

Diluted net assets divided by the diluted number of ordinary shares

DILUTED NUMBER OF ORDINARY SHARES

Number of ordinary shares in circulation at the balance sheet date adjusted to include the effect of potential dilutive shares issuable under employee share schemes

DILUTED WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES

Weighted average number of ordinary shares in issue during the period adjusted to include the effect of potential weighted average dilutive shares issuable under employee share schemes

EARNINGS PER SHARE

Profit after tax divided by the weighted average number of ordinary shares in issue in the period

EPRA

European Public Real Estate Association

EPRA EARNINGS PER SHARE

Profit after tax, but excluding net gains or losses from fair value adjustments on investment properties, profits or losses on disposal of investment properties and other non-current investment interests, impairment of goodwill and intangible assets, movements in fair value of derivative financial instruments and their related current and deferred taxation

EPRA NET ASSETS

Diluted net assets excluding the mark-to-market on effective cash flow hedges and related debt adjustments and deferred taxation on revaluations

EPRA NET ASSETS PER SHARE

EPRA net assets divided by the diluted number of ordinary shares

EPRA TRIPLE NET ASSETS

EPRA net assets adjusted to reflect the fair value of debt and derivatives and to include the fair value of deferred taxation on property revaluations.

EPRA TRIPLE NET ASSETS PER SHARE

EPRA triple net assets divided by the diluted number of ordinary shares

ESTIMATED RENTAL VALUE (ERV)

The market rental value of lettable space as estimated by the Group's valuers

NET ASSETS PER SHARE OR NET ASSET VALUE (NAV)

Equity shareholders' funds divided by the number of ordinary shares in circulation at the balance sheet date

NET DEBT

Total borrowings less cash and short-term deposits

NET GEARING

Net debt expressed as a percentage of net assets

NET INITIAL YIELD

Annual net rents on investment properties expressed as a percentage of the investment property valuation

NET RENT

Contracted 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 passing rent and the ERV of vacant space

PASSING RENT

Contracted rent after any rent-free periods have expired

PROPERTY LOAN TO VALUE

Property borrowings expressed as a percentage of the market value of the property portfolio

RECURRING INTEREST COVER

The aggregate of group revenue less costs plus share of results of associates, divided by the aggregate of interest expense and amortisation of issue costs of debt, less interest income

RENT ROLL

Contracted rent

RETURN ON SHAREHOLDERS' EQUITY

The movement in the adjusted net assets in the period plus distributions as a percentage of the adjusted net assets at the beginning of the period

SOLIDITY

Equity shareholders' funds expressed as a percentage of total assets

TOTAL SHAREHOLDER RETURN

For a given number of shares, the aggregate of the proceeds from tender offer buy-backs and change in the market value of the shares during the year adjusted for cancellations occasioned by such buy-backs, as a percentage of the market value of the shares at the beginning of the year

DIRECTORS, OFFICERS AND ADVISERS

Directors

Sten Mortstedt (Executive Chairman)

Henry Klotz (Chief Executive Officer)

Richard Tice (Deputy Chief Executive Officer)

John Whiteley (Chief Financial Officer)

Thomas Lundqvist *  † (Non-Executive Vice Chairman)

Malcolm Cooper †  ‡ (Non-Executive Director)

Joseph Crawley * (Non-Executive Director)

Christopher Jarvis †  (Non-Executive Director)

Jennica Mortstedt (Non-Executive Director)

Thomas Thomson (Non-Executive Director)

* member of Remuneration Committee

† member of Audit Committee

‡ senior independent Director

Company Secretary

David Fuller BA, FCIS

Registered Office

86 Bondway

London

SW8 1SF

Registered Number

2714781

Registrars and Transfer Office

Computershare Investor Services Plc

PO Box 82

The Pavilions

Bridgwater Road

Bristol

BS99 7NH

Shareholder Helpline: 0870 889 3286

CLS Holdings plc on line:

www.clsholdings.com

email:

[e-mail]

Clearing Bank

Royal Bank of Scotland Plc

24 Grosvenor Place

London

SW1X 7HP

Financial Advisers

Kinmont Limited

5 Clifford Street

London

W1S 2LJ

Joint Stockbrokers

Brewin Dolphin Limited

12 Smithfield Street

London

EC1A 9BD

Liberum Capital Limited

Ropemaker Place, Level 12

25 Ropemaker Street

London

EC2Y 9LY

Registered Auditors

Deloitte LLP

Chartered Accountants

London

Financial and Corporate Public Relations

Smithfield Consultants Limited

10 Aldersgate Street

London

EC1A 4HJ

 

END

 

 

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