Interim Results
CLS Holdings PLC
11 September 2003
Embargoed 0700hrs 11 September 2003
CLS Holdings plc
('CLS', the 'Company', or the 'Group')
Interim Report 2003
For the six month period ended 30 June 2003
Financial Highlights
• Adjusted NAV per share* of 435.1 pence, up 6.5 per cent since 31
December 2002 (Statutory NAV per share of 422.5 pence, up 7.0 per cent since
31 December 2002).
• Profit before tax £7.7 million (£8.2 million for the period to 30 June
2002).
• Intended distribution at 30 June 2003 of £5.8 million by way of tender
offer buy-back on the basis of 1 for 46 at 300 pence per share.
• Portfolio valued at £884.0 million up 4.1 per cent since 31 December
2002.
• Net rental income (including associate and JV) £31.6 million (£30.4
million for the period to 30 June 2002).
• Cash at 30 June 2003 of £62.1 million (31 December 2002: £65.7
million).
For further information please contact:
Sten Mortstedt, Executive Chairman
Tom Thomson, Vice chairman and Acting Chief Executive
CLS Holdings plc
020 7582 7766
Adam Reynolds / Ben Simons
Hansard Communications
020 7245 1100 / 0771 309 0135
Key Statistics
30 June 2003 30 June 2002
------------------ ------------- ------------- -------- ------ -----
Adjusted NAV per share* 435.1 p 394.7 p Up 10.2 %
Statutory NAV per share 422.5 p 381.7 p Up 10.7 %
Adjusted earnings per 8.7 p 7.2 p Up 20.8 %
share*
Earnings per share 7.4 p 6.1 p Up 21.3 %
Shares in issue (000's) 89,592 96,808 Down 7.5 %
Proposed distribution per 6.5 p 5.6 p Up 16.1 %
share
(from tender offer
buy-backs)
Other Financial Information 31 December
----------------------------- 30 June 2003 30 June 2002 2002
---------- ------------ --------- ------ -------------
Property portfolio £ 884.0 m £ 830.6 m up 6.4 % £ 848.9 m
Net asset value £ 378.5 m £ 369.6 m up 2.4 % £ 371.7 m
Cash £ 62.1 m £ 39.7 m up 56.4 % £ 65.7 m
Net rental income (including £ 31.6 m £ 30.4 m up 3.9 % £ 60.3 m
associate and JV)
Operating profit (including £ 21.8 m £ 22.1 m down 1.4 % £ 46.1 m
associate and JV)
Net interest payable £ 14.8 m £ 13.9 m up 6.5 % £ 28.9 m
Core profit before tax (see £ 10.5 m £ 9.5 m up 10.5 % £ 20.9 m
page 2)
Profit before taxation £ 7.7 m £ 8.2 m down 6.1 % £ 17.1 m
Retained profit £ 6.8 m £ 6.0 m up 13.3 % £ 15.3 m
Adjusted gearing* 125.4 % 117.5 % up 7.9 % 119.6 %
Gearing 129.1 % 121.5 % up 7.6 % 123.8 %
Solidity (net assets as a 38.8 % 41.1 % down 2.3 % 39.6 %
ratio of gross assets)
FRS13 fair value adjustment (27.3) p (15.5) p up 76.1 % (23.6) p
after tax
* The Group has adopted the requirements of FRS19, that requires a tax provision
to be made in respect of capital allowances to the extent that they are not
covered by available tax losses brought forward. In practice we consider it
unlikely that the benefit of these capital allowances will not continue to be
available whether or not the properties are sold in the future. The Board has
complied with recent pronouncements from the APB, ASB and Listing Authority in
showing NAV and Earnings per share including the FRS19 provision with equal
prominence as adjusted figures. The effect of FRS 19 has been excluded from
those statistics that are indicated by an asterisk , a reconciliation of which
is on page 14. At 30 June 2003 the FRS 19 deferred tax charge included in the
profit and loss account was £1.3 million and the cumulative reduction to net
assets was £11.2 million (31 December 2002 : £1.5 million and £13.0 million
respectively). The remaining accounting policies are as set out in the Group's
Annual Report and Accounts 31 December 2002.
Chairman's Statement
I am delighted to report once again record adjusted NAV per share of 435.1
pence, up 6.5 per cent since 31 December 2002 (Statutory NAV per share 422.5
pence, up 7.0 per cent).
The underlying business has continued its robust performance, with core property
profit before taxation of £10.5 million, showing strong growth despite trading
in a current environment of slow economic activity.
The Group has acquired two new properties in Vauxhall Cross, London at a total
cost of £4.1 million, and sold its freehold building at 142-170 Vauxhall Street,
London for £2.3 million, producing a profit of £0.7 million over the year end
valuation.
Other sales include six out of the eighteen newly refurbished apartments at
Coventry House, London for a total consideration of £1.8 million.
Since 30 June, we have fixed the interest on part of our variable rate loan
portfolio and prolonged other fixed interest loans about to mature. The amount
of the loans affected was £129.8 million with interest on them fixed at an
average rate of 3.87 per cent. This exercise was carried out just prior to the
rise in long term interest rates and as a result, approximately half of the
Group's net loans will pay interest at a fixed rate.
Financial
Core property profit of £10.5 million has increased by £1.0 million (10.5 per
cent) over the six months ended 30 June 2002 reflecting increased income streams
in the Swedish and French operations.
The calculation of core property profit is set out below:
30 June 2003 30 June 2002
Restated
£m £m
------------------------------------ -------- ---------
Profit before taxation 7.7 8.2
Less:
Lease surrenders and variations (0.3) (0.4)
Back-dated rent settlement at New - (1.2)
Printing House Square
Sale of investment property (0.7) -
Consolidated cable company losses 2.4 -
Losses and write-downs on equity
investment
1.4 2.9
------------------------------------ -------- ---------
Core property profit 10.5 9.5
==================================== ======== =========
The results of the Group analysed by location and main business activity are as
set out below:
June 2003 UK(*) Sweden June 2002
Equity investments
France
£m £m £m £m £m £m
--------------------------- ------ ------- ------ ------- -------- -------
Net rental income 31.6 15.9 7.0 8.7 - 30.4
Less JV income (0.5) (0.5) - - - (0.5)
Other income 1.9 0.6 0.2 - 1.1 0.5
--------------------------- ------ ------- ------ ------- -------- -------
Net rental and property
related income
(excluding JV) 33.0 16.0 7.2 8.7 1.1 30.4
Operating expenses (10.3) (3.9) (1.7) (0.9) (3.8) (5.8)
Losses and write-downs on (1.2) - - - (1.2) (2.9)
equity investments
JV & Associate operating 0.3 0.5 - - (0.2) 0.4
profit
--------------------------- ------ ------- ------ ------- -------- -------
Operating profit 21.8 12.6 5.5 7.8 (4.1) 22.1
Gains from sale of 0.7 0.7 - - - -
investment properties
Net interest payable and (14.8) (7.6) (4.8)+ (2.2) (0.2) (13.9)
related charges ------ ------- ------ ------- -------- -------
Profit on ordinary 7.7 5.7 0.7 5.6 (4.3) 8.2
activities before tax ====== ======= ====== ======= ======== =======
(*)Results relating to Germany were immaterial in the context of the overall
results of the Group and have therefore been included within the UK segment for
all analyses.
+ Of the net interest payable of £4.8 million, £0.5 million relates to space
undergoing refurbishment at Solna
Balance sheet
Total Balance
Sheet
UK (**) Sweden France
------------- ------ ------ ------ --- ----- ------ ----- ------- ------
June 2003 £m % £m % £m % £m %
------------- ------ ------ ------ --- ----- ------ ----- ------- ------
Investment 884.0 100 427.5 48.4 230.3 26.0 226.2 25.6
Properties
Loans (550.9) 100 (280.1) 50.8 (133.1) 24.2 (137.7) 25.0
------------- ------ ------ ------ --- ----- ------ ----- ------- ------
Equity in 333.1 100 147.4 44.2 97.2 29.2 88.5 26.6
Property
Assets
Other 45.4 100 22.5 49.5 8.2 18.1 14.7 32.4
------------- ------ ------ ------ --- ----- ------ ----- ------- ------
Net Equity 378.5 100 169.9 44.9 105.4 27.8 103.2 27.3
============= ====== ====== ====== === ===== ====== ===== ======= ======
Equity in
Property as a
Percentage of
Investment 37.7% 34.5% 42.2% 39.1%
(**) results relating to Germany were immaterial in the context of the overall
results of the Group and have therefore been included within the UK segment for
all analyses.
-------------------------- ---------------- -------------
Share capital No of shares No of shares
Million Million
2003 2002
(six months) (full year)
-------------------------- ---------------- -------------
Opening shares 94.1 99.3
Tender offer buy back (3.4) (4.6)
Buybacks in the market for cancellation (1.5) (0.6)
Share options exercised 0.4 -
========================== ================ =============
Closing shares 89.6 94.1
========================== ================ =============
Options to purchase 849,000 shares were held by staff and management at 30 June
2003.
Net rental income
Net rental income of £31.6 million is inclusive of the Group's share of joint
venture turnover and has increased by £1.2 million over the six months ended 30
June 2002.
The results for the period to 30 June 2002 reflected the settlement of a rent
review at New Printing House Square of £1.2 million (including backdated rent to
1 July 2000). The like for like increase is £2.4 million higher (7.9 per cent)
and includes £1.1 million of rent from 10 properties in France acquired at the
end of June 2002, and organic growth in Sweden and France.
Net rental income is shown net of service charges of £3.4 million (30 June 2002:
£2.8 million).
Other income
Other income of £1.9 million (30 June 2002: £0.5 million) includes £0.3 million
profit on lease surrenders at Great West House and gross profit for WightCable
and OMNE Communications of £1.1 million derived from turnover of £1.9 million.
These companies were not subsidiaries at 30 June 2002.
Administrative expenditure
Administrative expenditure of £7.9 million (30 June 2002: £3.9 million) includes
overheads relating to OMNE Communications of £2.3 million, and WightCable
overheads of £1.2 million. Excluding the results of these two companies,
comparative expenditure to 2002 has increased by £0.5 million which is mainly
due to the timing of expenditure falling within the first half, particularly in
respect of professional fees.
Net property expenses
Net property expenses of £2.5 million (30 June 2002: £2.0 million) includes
amortisation costs of £0.4 million of the residue of the short lease to NIG at
Elan House (now fully written off) and marketing expenditure of £0.4 million.
Repair and maintenance costs of £0.5 million relate to refurbishment of
properties in Vanerparken and Paris.
Financial income and costs
Interest income at £1.5 million included favourable foreign exchange movements
of £0.5 million, mainly relating to foreign currency cash balances.
Interest payable of £16.2 million comprises bank interest of £15.2 million, net
interest rate cap depreciation of £0.5 million and depreciation of bank loan
issue costs of £0.5 million. The Group's policy is to expense all interest
payable and financial costs to the profit and loss account, including interest
incurred in the funding of refurbishment and development projects which amounted
to £0.5 million for the six months to 30 June 2003.
At the period end floating rate loans totalled £357.8 million. All floating rate
debt was hedged by interest rate caps at an average cap rate of 6.35 per cent
for Sterling, 6.07 per cent for Swedish Kronor and 6.09 per cent for Euro
(excluding bank margin). Three month LIBOR sterling rate fell from 4.1 per cent
at 30 June 2002 to 3.6 per cent at 30 June 2003. The average cost of borrowing
for the UK portion of our debt was 6.5 per cent, inclusive of the cost of fixed
rate borrowings, interest rate caps and amortisation of arrangement fees, and
4.8 per cent for the international portion. Gearing has increased to 129.1 per
cent reflecting the re-financing at Solna Business Park at the period end, and
interest cover has decreased to 1.52 times from 1.59 times at 30 June 2002.
Taxation
Within the total charge of £1.6 million there is a provision under FRS 19, for
deferred taxation in respect of accelerated capital allowances, amounting to
£1.3 million.
Buy-backs and dividends
In lieu of a final dividend for 2002 there was a tender offer buy-back taken up
in full in April of this year. With the current share price remaining at a
considerable discount to net asset value, we are proposing an interim
distribution of £5.8 million by way of a further tender offer buy-back of shares
on the basis of 300 pence per share for 1 in 46 shares held. This will enhance
net asset value per share and is equivalent in cash terms to an interim net
dividend of 6.5 pence per share (30 June 2002: 5.6 pence per share), an increase
of 16.0 per cent.
At 31 December 2002 there were 94,129,431 ordinary shares in issue. Since that
date the Company has completed the 2002 year end tender offer buy back of
3,435,835 shares (£8.3 million) and bought back a further 1,487,884 shares in
the market (£3.0 million), involving a total cash expenditure of £11.3 million.
This left the number of shares in issue at 30 June 2003 at 89,591,712 after
taking into account the exercise of 386,000 management options during the
period.
Tangible Assets
Tangible assets of £893.6 million have increased by £41.2 million (4.8 per cent)
since 31 December 2002. The increase included new building purchases amounting
to £4.1 million, refurbishment expenditure of £6.9 million, principally at
Solna, Stockholm and a revaluation surplus of £0.4 million arising at 30 June on
the existing portfolio. The revaluation surplus comprises :
£m
UK revaluation increase 1.4
Sweden revaluation decrease (3.1)
France revaluation increase 2.1
-----
£m
0.4
In addition, foreign exchange gains on the translation of Swedish and French
assets has enhanced the value by £27.4 million.
We have also purchased a majority stake in a new telecommunications subsidiary
in the period, the fair value of whose network assets amounted to £4.5 million.
Cash
Cash at bank amounted to £62.1 million compared to £65.7 million at 31 December
2002.
Debt Structure
The net interest bearing debt of the Group at 30 June 2003 was £488.8 million
(31 December 2002: £460.5 million). The increase includes a further draw-down of
financing at Solna Business Park of SEK 232.0 million (£17.3 million),
reflecting the increase in value of the properties. The strengthening of the
Swedish Kronor and the Euro against Sterling increased the sterling equivalent
of foreign currency loans by £16.1 million. These loans finance properties in
Sweden and France.
The fair value of the Group's fixed rate debt was in excess of book value by an
amount of £35.0 million (31 December 2002: £31.7 million) reflecting lower
long-term interest rates at 30 June 2003. The notional after tax adjustment to
NAV, at a corporation tax rate of 30 per cent (31 December 2002: 30 per cent),
if we were to hold loans at fair value was £24.5 million or 27.3 pence per share
(31 December 2002: £22.2 million or 23.6 pence per share).
Gearing adjusted for FRS 19 deferred tax, at 30 June 2003 was 125.4 per cent (31
December 2002: 119.6 per cent), statutory gearing 129.1 per cent (31 December
2002 : 123.8 per cent).
Since 30 June, CLS has fixed the interest of part of its previously floating
loans and prolonged the interest rate fixing period for some of its fixed loans
with short fixed term remaining. The major changes in respect of the loan
portfolio are set out below:
UK
Fixing of £45.0 million from 10 October 2003 until 10 January 2008 at an average
rate of 4.15% (excluding margin).
Sweden
Prolonged fixing of SEK100.0 million from 20 July 2004 to 20 July 2008 at an
average rate of 4.71% (excluding margin).
France
Fixing of €91.8 million of loans at an average rate of 3.57% (excluding margin)
for five years.
Effect of foreign exchange translation on overseas net assets
An exchange gain on translation of net assets in Sweden and France of £10.7
million (12.2 pence per share) was included within the Group net assets at 30
June 2003. The gain on overseas fixed assets was £27.4 million, offset by an
exchange translation loss mainly on bank borrowings, of £16.5 million.
Property
The valuation of the Group's portfolio at 30 June 2003, undertaken by Allsop &
Co. in respect of the UK and Swedish properties and by DTZ Debenham Tie Leung in
respect of the French properties, amounted to £884.0 million, an increase of
£35.1million (inclusive of foreign exchange gains of £27.4 million) since the
year end.
The portfolio comprises 111 properties of which 47 are located in the UK, 23 in
Sweden and 41 in France with a total lettable area of 571,558 sq.m (6,152,377
sq. ft.).
UK
The UK property portfolio has seen values improving for the properties with long
leases let to strong covenants, principally Spring Gardens Business Park,
Vauxhall SE11 and New Printing House Square, Gray's Inn Road WC1; and in respect
of those properties such as Brent House and Drury Lane where we have achieved
significant new lettings during the period. These increases have more than
offset reductions elsewhere in the portfolio in particular where we have vacant
space and limited occupier demand.
We have agreed the rent review with Cap Gemini at Hoskyns House, 95-97
Wandsworth Road, SW8. The new rent is £1,736,000 per annum which will be payable
from March 2004 until their lease expiry in March 2009. This represents an
increase of £219,500 per annum.
We have acquired the freehold interests of three adjoining properties at 80-84
Bondway, 86 Bondway and 18-20 Miles Street, Vauxhall SW8 for £4.1 million. These
buildings complete a site assembly at Hoskyns House which we anticipate will
release additional development value when the leases expire in 2009. In the
meantime, these three additional buildings totalling 30,100 sq ft, currently
produce an income of £212,250 p.a, rising to around £365,000 p.a. upon the
letting of the vacant space.
At Great West House and Computer House on the Great West Road, Brentford we have
completed a series of lettings to Alliance Cornhill Insurance, Cara Information
Technology and Steria Ltd totalling just over 48,000 sq ft. The majority of the
leases expire in Sep 2013 and generate a total rent of approximately £687,000
per annum.
Brent House, High Road, Wembley is now fully let following the letting of the
remaining 18,650 sq ft to Capita Group who has taken a lease expiring in April
2011 at an annual rent of £212,119 per annum.
The vacancy rate in respect of the portfolio has increased from 7.3 per cent at
the year end to 8.6 per cent at 30 June 2003. Our principal vacancies are at 1
Leicester Square, WC1, Vista Office Centre, Salisbury Road, Hounslow and Great
West House, Great West Road, Brentford. We are encouraged by the level of
interest being shown by prospective tenants in 1 Leicester Square and have
active marketing initiatives in place for Great West House and Vista.
Sweden
At Solna Business Park, completion of the fit-out for Coop (14,350 sq.m /
154,462 sq.ft) is on time for occupation of the premises in January 2004.
Various further lettings and prolongation of existing tenancies have been
completed during the period. An hotel and a conference centre will open in early
2004. In addition, a business centre using the same concept as we have
successfully developed in the UK will open in January 2004.
France
Despite a falling letting market we have been active and successful in letting
space in the period. New leases and prolongation of existing leases totalling
8,102 sq. m have produced a rental income of €1,626,992 (£1.1 million) with an
average 10 per cent rent increase.
Rent indexation has increased rents by €393,000 (£274,000) at the end of June
compared with 31 December 2002.
We have been actively pursuing various new investments, but are finding it
harder to source well-let office buildings generating a satisfactory return on
capital.
Rent, book value and yields are analysed by location as set out below:
-------- ------ ------ ------ ------ ------ ------ ------
Total Net Book Yield Yield
Rent rent Value on net when
rent fully let
in '000 £ % in '000 £ % in '000 £ % % %
-------- ------ ------ ------ ------ ------ ------ ------
London City 280 0.4% 280 0.4% 2,385 0.3% 11.7%
Fringes
London Mid 6,640 9.2% 6,640 10.2% 100,700 11.4% 6.6%
Town
London West 3,193 4.4% 3,173 4.9% 64,385 7.3% 4.9%
End
London 5,243 7.3% 4,835 7.5% 56,125 6.3% 8.6%
West
London South 8,966 12.5% 8,855 13.7% 127,264 14.4% 7.0%
Bank
London South 2,175 3.0% 1,792 2.8% 23,425 2.7% 7.7%
West
London North 5,547 7.7% 5,229 8.1% 48,475 5.5% 10.8%
West
Outside 350 0.5% 350 0.5% 2,590 0.3% 13.5%
London -------- ------ ------ ------ ------ ------ ------ ------
Total 32,394 45.0% 31,154 48.1% 425,349 48.1% 7.3% 8.1%(***)
UK
Germany 226 0.3% 204 0.3% 2,088 0.2% 9.8%
-------- ------ ------ ------ ------ ------ ------ ------
Total 226 0.3% 204 0.3% 2,088 0.2% 9.8% 9.8%
Germany
Sweden 6,313 8.8% 3,241 5.0% 40,880 4.6% 7.9%
Gothenburg
Sweden 11,152 15.5% 9,024 13.9% 140,960 15.9% 6.4%
Stockholm
Sweden 4,546 6.3% 3,799 5.9% 48,450 5.5% 7.8%
Vanersborg -------- ------ ------ ------ ------ ------ ------ ------
Total 22,011 30.6% 16,064 24.8% 230,290 26.1% 7.0% 7.1%++
Sweden
France 13,901 19.3% 13,901 21.5% 186,583 21.1% 7.5%
Paris
France 2,649 3.7% 2,649 4.1% 30,104 3.4% 8.8%
Lyon
France 504 0.7% 504 0.8% 5,658 0.6% 8.9%
Lille
France 323 0.4% 323 0.5% 3,883 0.4% 8.3%
Antibes -------- ------ ------ ------ ------ ------ ------ ------
Total 17,377 24.1% 17,377 26.8% 226,228 25.6% 7.7% 8.3%
France
-------- ------ ------ ------ ------ ------ ------ ------
Group 72,008 100.0% 64,799 100.0% 883,955 100.0% 7.3% 7.8%
Total
======== ====== ====== ====== ====== ====== ====== ======
-------- ------ ------ ------ ------ ------ ------ ------
Conversion rates : SEK/GBP 13.2094 Euro/GBP 1.437
(***) Yields based on receivable rent and potential rents have been calculated
on the assumption that book values at 30 June 2003 will increase by anticipated
refurbishment expenditure of approximately £1.6 million in respect of projects
in the UK.
(++)Yields based on receivable rent and potential rents have been calculated on
the assumption that year-end book values will increase by anticipated
refurbishment expenditure of approximately £24.8 million in respect of projects
in Solna, Stockholm, Sweden.
Rent analysed by length of lease and location is set out below:
-------- ------- --------- -------- ------ --------- -------
Space under
Portfolio Contracted Contracted Unlet Refurbishment Total
analysed Aggregate but not Space or with
by lease Rental income at ERV planning
term producing consent
Sq. m Sq.ft £000 £000 £000 £000 £000
-------- ------- --------- -------- ------ --------- -------
UK< 5 yrs 31,377 337,720 7,246 7,246
UK 5-10 45,510 489,898 10,700 204 10,904
yrs
UK>10 yrs 67,401 725,526 14,150 94 14,244
Vacant 13,558 145,928 3,095 3,095
-------- ------- --------- -------- ------ --------- -------
Total 157,846 1,699,072 32,096 298 3,095 - 35,489
UK
Germany < 5 3,095 33,315 226 226
yrs -------- ------- --------- -------- ------ --------- -------
Total 3,095 33,315 226 - - - 226
Germany
Sweden< 5 180,561 1,943,606 12,925 148 13,073
yrs
Sweden 28,517 306,965 2,598 191 2,789
5-10yrs
Sweden > 51,090 549,946 4,188 1,960 6,148
10yrs
Refurbished 4,296 46,243 1,070* 1,070
space
Vacant 19,945 214,693 1,224 1,224
-------- ------- --------- -------- ------ --------- -------
Total 284,409 3,061,453 19,711 2,299 1,224 1,070 24,304
Sweden
France < 5 71,513 769,785 10,356 10,356
yrs
France 5-10 46,946 505,339 7,021 7,021
yrs
Vacant 7,749 83,412 1,333 1,333
-------- ------- --------- -------- ------ --------- -------
Total 126,208 1,358,536 17,377 - 1,333 - 18,710
France
-------- ------- --------- -------- ------ --------- -------
Group 571,558 6,152,376 69,410 2,597 5,652 1,070 78,729
Total
======== ======= ========= ======== ====== ========= =======
-------- ------- --------- -------- ------ --------- -------
* Of the rental due on refurbished space in Sweden, £1.1 million relates to
FrTM?saren 11, Solna (4,296 sq m) requiring further capital expenditure of £10.8
million.
Equity investments
Equity investments form just 0.5 per cent of the Group's gross assets. A number
of investments are now progressing toward successful maturity and it is our
intention to seek an exit from these in due course.
At the end of January we purchased 75.5 per cent of a Scottish telecoms
operator, OMNE Communications that had capital assets of £50 million and an
established customer base. The cash outlay amounted to £4.1 million of which
£3.1 million is represented by a secured loan. It is our intention to maximise
its potential in the short to medium term. The revenue projections on which we
based our purchase have not been achieved to date and therefore it is likely we
will need to inject limited further funds in order to secure the results we
require. We were however, conservative in assessing the potential ancillary
benefits attaching to the assets which may be of greater value to us than first
expected.
Conclusion
The strong growth in our balance sheet and core profits for the six months are
the continuing result of our strategy to actively manage the business in a risk
averse manner concentrating on our core markets of the UK, Sweden and France.
The aggregate annual contracted rent roll of the Group has grown from £70.8
million in December 2002 to £72.0 million with a further £6.7 million projected
to be received as vacant space is let and the refurbishment at Solna is
completed.
Although the letting market throughout Europe continues to be relatively weak we
are well placed for continued organic growth. With 36 per cent of our contracted
rent roll let to the UK, Swedish and French government, the majority on leases
in excess of ten years, and a further 32 per cent let to large companies and
major partnerships, our ongoing rental income is well secured
We believe that the overall business is in a strong position and able to
generate growth in profits while continuing to benefit from relatively low
charges to taxation.
S. A. Mortstedt
Executive Chairman
11 September 2003
CLS Holdings plc
Consolidated Profit and Loss
Account
6 months to 6 months to 12 months to
30 June 2003 30 June 2002 31 December
2002
£ 000 £ 000 £ 000
(un-audited) (un-audited)
Net rental income (continuing
operations, including joint
ventures) 31,627 30,360 60,328
Less: Joint venture (continuing (453) (454) (907)
operations) ---------- ---------- -----------
Group net rental income 31,174 29,906 59,421
Other income 1,935 546 1,289
---------- ---------- -----------
33,109 30,452 60,710
---------- ---------- -----------
Administrative expenses (7,881) (3,857) (8,342)
Net property expenses (2,467) (1,982) (3,998)
---------- ---------- -----------
(10,348) (5,839) (12,340)
Other operating losses (1,246) (2,932) (3,054)
---------- ---------- -----------
Group operating profit 21,515 21,681 45,316
---------- ---------- -----------
Continuing 23,242 21,681 45,316
Acquisitions (1,727) - -
---------- ---------- -----------
Share of joint venture's 414 436 883
operating profit (continuing)
Share of associates'operating (154) - (93)
losses (continuing operations) ---------- ---------- -----------
Operating profit including joint 21,775 22,117 46,106
ventures and associates
Gains/(losses) from sale of 688 - (153)
investment property ---------- ---------- -----------
Profit on ordinary activities 22,463 22,117 45,953
before interest
Interest receivable and similar 1,472 1,042 1,915
income: Group
Joint venture 3 8 1
Interest payable and similar (15,799) (14,493) (29,925)
charges: Group
Joint venture (432) (432) (860)
Associate - - (17)
---------- ---------- -----------
Profit on ordinary activities 7,707 8,242 17,067
before taxation
Tax on profit on ordinary
activities:
Group - current (347) (1,188) (648)
- deferred (1,250) (1,081) (1,497)
Joint venture - current (10) - -
---------- ---------- -----------
Profit on ordinary activities 6,100 5,973 14,922
after taxation
Equity minority interests 724 - 388
---------- ---------- -----------
Retained profit for the period 6,824 5,973 15,310
========== ========== ===========
Adjusted basic earnings per 8.7 p 7.2 p 17.2 p
share
FRS 19 adjustment per share (1.3)p (1.1)p (1.5)p
---------- ---------- -----------
Basic earnings per share 7.4p 6.1p 15.7p
==========
Adjusted diluted earnings per 8.6p 7.2p 17.0 p
share
FRS 19 adjustment per share (1.4)p (1.1)p (1.5)p
---------- ---------- -----------
Diluted earnings per share 7.2p 6.1p 15.5p
========== ========== ===========
Ordinary shares in issue '000 '000 '000
Cumulative total 89,592 96,808 94,129
Weighted average number during 92,461 98,710 97,428
the period ========== ========== ===========
CLS Holdings plc
Consolidated Balance Sheet
30 June 2003 30 June 2002 31 December 2002
£ 000 £ 000 £ 000
(un-audited) (un-audited)
Fixed assets
Tangible assets 893,556 833,582 852,354
Investments:
Interest in joint venture:
Share of gross assets 17,306 15,701 17,024
Share of gross liabilities (14,257) (13,147) (14,257)
---------- --------- -----------
3,049 2,554 2,767
Interest in associates 3,355 - 1,730
Other investments 730 809 301
--------- --------- -----------
900,690 836,945 857,152
Current assets
---------- --------- -----------
Debtors - amounts falling due 4,032 5,694 4,354
after more than one year
Debtors - amounts falling due 5,490 11,398 9,156
within one year
Investments 2,918 6,059 4,580
Cash at bank and in hand 62,083 39,738 65,650
---------- --------- -----------
74,523 62,889 83,740
Creditors: amounts falling due (70,029) (59,996) (48,182)
within one year ---------- --------- -----------
Net current assets 4,494 2,893 35,558
---------- --------- -----------
Total assets less current 905,184 839,838 892,710
liabilities
Creditors: amounts falling due
after more than one year (515,407) (457,699) (507,735)
Provisions for liabilities and (11,229) (12,563) (13,255)
charges ---------- --------- -----------
Net Assets 378,548 369,576 371,720
========== ========= ===========
Capital and Reserves
---------- --------- -----------
Called up share capital 22,398 24,202 23,532
Share premium account 68,928 68,506 68,551
Revaluation reserve 227,606 218,637 218,837
Capital redemption reserve 11,206 9,295 9,975
Other reserves 24,978 23,115 22,637
Profit and loss account 23,769 25,712 28,468
---------- --------- -----------
Total equity shareholders' 378,885 369,467 372,000
funds
Equity minority interests (337) 109 (280)
========== ========= ===========
Capital employed 378,548 369,576 371,720
========== ========= ===========
CLS Holdings plc
Statement of Total Recognised
Gains and Losses
30 June 2003 30 June 2002 31 December
2002
£ 000 £ 000 £ 000
(un-audited) (un-audited)
Profit for the period/year 6,824 5,973 15,310
========== ========== ============
Unrealised surplus on revaluation 399 8,341 7,530
of properties
Share of joint venture unrealised
surplus
on revaluation of properties - 333 333
Release of revaluation deficit on - - 443
property disposal ---------- ---------- ------------
Currency translation differences
on foreign
currency net investments 10,713 11,400 11,489
---------- ---------- ------------
Other recognised gains relating to 11,112 20,074 19,795
the period/year ========== ========== ============
Total recognised gains and losses
relating to the period/year 17,936 26,047 35,105
========== ========== ============
CLS Holdings plc
Consolidated Cash Flow Statement
30 June 30 June 2002 31 Dec
2003 2002
£ 000 £ 000 £ 000
(un-audited) (un-audited)
Net cash inflow from operating 26,685 21,913 52,143
activities --------- -------- --------
Returns on investments and servicing
of finance
Interest received 909 884 1,541
Interest paid (13,979) (13,013) (26,598)
Issue costs on new bank loans (773) (1,411) (2,196)
Interest rate caps purchased (149) (448) (1,062)
--------
Net cash outflow from returns on
investments and servicing of
finance (13,992) (13,988) (28,315)
Taxation (1,169) (141) (223)
Capital expenditure and financial
investment
Purchase and enhancement of (11,834) (71,725) (90,270)
properties
Sale of investment properties 4,010 - 1,802
Purchase of other fixed assets (2,213) (166) (945)
Purchase of own shares (11,286) (7,426) (14,007)
--------- -------- --------
Net cash outflow for capital (21,323) (79,317) (103,420)
expenditure and financial
investment
Acquisitions and disposals
Purchase of subsidiary (2,243) (91) (92)
undertakings
Cash acquired on purchase of 572 228 228
subsidiary undertakings
Investment in associate/joint (333) - (461)
venture --------- -------- --------
Net cash outflow before use of (11,803) (71,396) (80,140)
liquid resources and financing
Management of liquid resources
Cash released from/(placed on) short 3,864 (7,790) (8,364)
term deposits
Financing
Issue of ordinary share capital 474 35 90
New loans 20,766 59,985 113,935
Repayment of loans (13,304) (4,322) (24,231)
--------- -------- --------
Net cash inflow from financing 7,936 55,698 89,794
--------- -------- --------
(Decrease)/increase in cash (3) (23,488) 1,290
========= ======== ========
Basis of preparation and accounting policies
The information contained in this interim statement does not constitute accounts
as defined by section 240 of the Companies Act 1985. The un-audited results for
the half-year to 30 June 2003 have been prepared in accordance with UK generally
accepted accounting principles. The accounting policies applied are those set
out in the Group's 2002 Annual Report and Accounts The information relating to
the year ended 31 December 2002 is an extract from the latest published
accounts, which have been delivered to the Registrar of Companies. The audit
report on the published accounts was unqualified and did not contain a statement
under section 237 (2) or section 237 (3) Companies Act 1985.
Reconciliation of Statutory to disclosed Adjusted statistics
Statutory figure Deferred tax adjustment
Adjusted figure
Net Assets £378.5 m £11.2 m £389.7 m
NAV per 422.5 p 12.6 p 435.1 p
share
Earnings per 7.4 p 1.3 p 8.7 p
share
Diluted 7.2 p 1.4 p 8.6 p
earnings per
share
Gearing 129.1 % 3.7 % 125.4 %
Independent Review report to CLS Holdings plc
Introduction
We have been instructed by the company to review the financial information which
comprises the profit and loss account, balance sheet, cash flow statement and
the statement of total recognised gains and losses. We have read the other
information contained in the interim report for any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
, and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit opinion
on the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of the Listing Rules of the Financial Services Authority
and for no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
London
11 September 2003
CLS Holdings plc
Directors, Officers and Advisors
Directors
Sten Mortstedt (Executive Chairman)
Thomas Thomson BA (Vice Chairman and Acting Chief Executive)
Dan Baverstam (Chief Financial Officer)
Anna Seeley BSc MRICS (Group Property Director)
Steven Board FCCA (Chief Operating Officer )
Bengt Mortstedt Juris Cand (Non-Executive Director)
Keith Harris PhD (Non-executive Director)
Thomas Lundqvist (Non-executive Director)
James Dean FRICS (Non-executive Director)
Company Secretary
Steven Board FCCA (Chief Operating Officer)
Registered Office
One Citadel Place
Tinworth Street
London SE11 5EF
Registered Number
2714781
Registered Auditors
PricewaterhouseCoopers LLP
Chartered Accountants
1 Embankment Place
London WC2N 6NN
Registrars and Transfer Office
Computershare Services plc
P O Box 435
Owen House
8 Bankhead Crossway North
Edinburgh EH11 4BR
Clearing Bank
Royal Bank of Scotland plc
24 Grosvenor Place
London SW1X 7HP
Financial Advisors
HSBC Bank plc
8 Canada Square
London E14 5HQ
Joint Stockbrokers
HSBC Bank plc
8 Canada Square
London E14 5HQ
KBC Peel Hunt
11 Old Broad Street
London EC2N 1PH
CLS Holdings plc on line:
www.clsholdings.com
e-mail:
enquiries@clsholdings.com
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