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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cls Holdings Plc | LSE:CLI | London | Ordinary Share | GB00BF044593 | ORD 2.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.40 | -0.48% | 82.40 | 82.30 | 83.00 | 82.40 | 81.20 | 81.50 | 30,467 | 09:57:43 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Agents & Mgrs | 113M | -249.8M | -0.6286 | -1.31 | 327.47M |
TIDMCLI
RNS Number : 9452I
CLS Holdings PLC
14 August 2019
PRESS RELEASE
Release date: 14 August 2019 Embargoed until: 07:00
CLS HOLDINGS PLC
("CLS", the "Company" or the "Group")
ANNOUNCES ITS HALF-YEARLY FINANCIAL REPORT
FOR THE 6 MONTHS TO 30 JUNE 2019
Further growth through disciplined capital utilisation
CLS is a FTSE 250 property investment company with a GBP2.1 billion portfolio in the UK, Germany and France offering geographical diversification with local presence and knowledge. For the half year ended 30 June 2019, the Group has delivered the following results:
Hot Features
Premium
30 June 31 December Change
2019 2018 (%)
-------------------------------- -------- ------------ -------
EPRA Net Asset Value ("NAV")
per share (pence) 325.3 309.8 5.0
Basic NAV per share (pence) 287.8 275.5 4.5
Contracted rents (GBP'million) 116.2 109.6 6.0
-------------------------------- -------- ------------ -------
30 June 2019 30 June 2018(1) Change
(%)
-------------------------------------- ------------- ---------------- -------
Profit before tax (GBP'million) 84.6 66.0 28.2
EPRA Earnings per share ("EPS")
(pence) 6.0 6.3 (4.8)
Basic EPS from continuing operations
(pence) 16.8 15.0 12.0
Dividend per share (pence) 2.35 2.20 6.8
-------------------------------------- ------------- ---------------- -------
Notes: (1) Restated to exclude discontinued operations of First Camp
FINANCIAL HIGHLIGHTS
-- EPRA NAV up 5.0% primarily through portfolio valuation gains of GBP36.9 million (30 June 2018: GBP31.2 million) and the increase in the value of our shareholding in Catena of GBP21.0 million after foreign exchange variations (30 June 2018: GBP2.9 million)
-- Profit before tax up 28.2% due to portfolio valuation gains, the increase in the value of Catena and increased rental income from acquisitions, new lettings and indexation
-- Basic EPS up 12.0% from the above valuation increases and operational performance increases while EPRA EPS was down 4.8% as profitability increases from net rental income were offset by lower interest income from our reduced corporate bond portfolio and higher tax costs
-- Interim dividend up 6.8% to 2.35 pence per share (30 June 2018: 2.20 pence per share) to be paid on 27 September 2019
OPERATIONAL HIGHLIGHTS
Investment Property Portfolio:
-- Net rental income increased by 5.9% to GBP53.8 million (30 June 2018: GBP50.8 million) -- Portfolio valuation uplift of 1.9% (1.9% in local currency) driven by Germany and France
-- Acquired six properties for GBP111.7 million in the UK, Germany and France (5.6% Net Initial Yield) with an Estimated Rental Yield of 5.7%
-- Disposed of two properties in Germany and the UK for GBP4.3 million. The previously announced disposal of our 58% stake in First Camp for GBP28.7 million completed on 7(th) March
-- Completed 78 lease events securing GBP6.9 million of annual rent at 4.3% above 31 December 2018 Estimated Rental Value
-- Vacancy rate increased slightly to 4.2% (31 December 2018: 3.8%)
-- Since period end exchanged on one acquisition in Germany for GBP27.3 million (5.1% Net Initial Yield) with an Estimated Rental Yield of 6.0% and agreed five disposals in Germany, France and the UK for GBP110.8 million (3.7% Net Initial Yield)
Financing:
-- Weighted average cost of debt at 30 June 2019 of 2.49% (31 December 2018: 2.43%) -- Financed or refinanced GBP188.9 million of debt including GBP74.4 million fixed at 2.66% -- The loan portfolio as at 30 June 2019 had 76% at fixed rates (31 December 2018: 79%) -- Balance sheet Loan to Value at 39.3% (31 December 2018: 36.7%)
Governance:
-- Lennart Sten to become independent Non-Executive Chairman -- Appointment of Denise Jagger as independent Non-Executive Director
Henry Klotz, Executive Chairman of CLS, commented:
"In the first six months of 2019, CLS delivered further growth through the disciplined use of our capital. We have continued to refine our portfolio by making acquisitions at attractive yields and the disposal of properties which no longer meet our return targets including First Camp in Sweden.
"These are my last results as Chairman of CLS. It has been an honour to have worked for, and led, CLS through a sustained period of growth. It is also pleasing to leave the company in such a strong position both financially and operationally.
"With a proven strategy of owning and managing high-yielding office properties across our three core markets, and our progressive dividend policy, I am confident we will continue to deliver value for our shareholders. I wish all of my colleagues and our shareholders every success in the future."
Interim Dividend Timetable
Further to this announcement, in which the Board recommended an interim dividend of 2.35 pence per ordinary share, the Company confirmed its dividend timetable as follows:
Announcement 14 August 2019
date
Ex-Dividend date 22 August 2019
---------------
Record date 23 August 2019
---------------
Payment date 27 September
2019
---------------
-ends-
CLS will be presenting to analysts at 9.00am on Wednesday, 14 August 2019, at Liberum Capital, Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY
Participant
1. In the 10 minutes prior to call start time, call the appropriate Participant Dial-In Number listed in the Conference Dial-In Number section below.
2. Provide the Operator with the Conference ID Number.
Conference ID 3083829
United Kingdom 08445 718892 Standard International Dial-In +44 20 7192 8000 United States, New York +1 631 510 7495
For further information, please contact:
CLS Holdings plc
(LEI: 213800A357TKB2TD9U78)
www.clsholdings.com
Fredrik Widlund, Chief Executive Officer
Andrew Kirkman, Chief Financial Officer
+44 (0)20 7582 7766
Liberum Capital Limited
Richard Crawley
Jamie Richards
+44 (0)20 3100 2222
Whitman Howard
Hugh Rich
+44 (0)20 7659 1261
Elm Square Advisers Limited
Jonathan Gray
+44 (0)20 7823 3695
Smithfield Consultants (Financial PR)
Alex Simmons
Rob Yates
+44 (0)20 3047 2546
Forward-looking statements
This document may contain certain 'forward-looking statements'. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from those expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of CLS speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Except as required by its legal or statutory obligations, the Company does not undertake to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Information contained in this document relating to the Company or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.
Chairman's statement
Well positioned for the future
We have continued our strategy to refocus our portfolio with the objective to increase income, earnings and dividends for the long term.
OVERVIEW
The benefits of being a pan-European business operating in the UK, Germany and France, three of Europe's largest economies, are again evident in our results for the first six months of 2019. The Group produced solid underlying earnings and valuation gains leading to a growth in NAV. We continued to refocus our portfolio, with selective, strategic acquisitions at attractive yields and have exchanged contracts on the disposal of assets with low yields and limited upside for CLS.
Over the six months, EPRA NAV increased by 5.0% to 325.3p per share (31 December 2018: 309.8p) mainly through EPRA earnings and revaluation uplifts. We delivered 245,105 sqft (22,771sqm) of lettings, GBP117.1 million of acquisitions, GBP4.3 million of disposals and the financing or refinancing of GBP188.9 million of bank loans. Total accounting return for the six months was 6.5% (2018: 4.5%).
Our business strategy is to invest in well-located office properties. The investment property portfolio has over 700 occupiers across three markets generating rental income well in excess of the Group's cost of debt. Approximately 26.9% of rents are paid by governments and 25.4% by major corporations with 47.8% of rents subject to indexation. In the UK, 40.5% of the rent roll is derived from central government departments. The balance sheet is strong, with significant levels of cash and liquid resources, and the Group is funded by 28 lenders across Europe.
RESULTS AND FINANCING
Profit after tax from continuing operations for the six months to 30 June 2019 was GBP68.5 million (2018: GBP61.4 million), corresponding to earnings per share of 16.8p (2018: 15.0p). Earnings included a revaluation uplift of the property portfolio of GBP36.9million (2018: GBP31.2 million). EPRA earnings per share was 6.0p (2018: 6.3p), 4.8% down on last year.
Shareholders' funds rose in the six months by 4.4% to GBP1,172.3 million, net of dividends of GBP19.1 million paid to shareholders in April.
Interest cover remained high at 3.6 times (2018: 3.8 times), reflecting the Group's ability to generate cash. We financed or refinanced GBP188.9 million of loans and our weighted average cost of debt rose slightly to 2.49% (31 December 2018: 2.43%), reflecting a larger proportion of financing in the UK. Net debt rose to GBP857.7 million (31 December 2018: GBP742.0 million), reflecting net acquisitions in the period. Our liquid resources, comprising GBP141.4 million of cash and corporate bonds, demonstrate the strength of the balance sheet and our capacity to invest in the future. At 30 June 2019, net debt (after liquid resources) as a proportion of property assets was 39.3% (31 December 2018: 36.7%).
PROPERTY PORTFOLIO
At 30 June 2019, the value of the property portfolio, including properties held for sale, was GBP2,080.4 million, GBP157.1million higher than six months earlier, driven by net additions and capital expenditure of GBP123.2 million and the valuation uplift of GBP39.7 million (including rent-free debtor) less a small foreign exchange movement.
We have continued our strategy to refocus our portfolio with the objective to increase income, earnings and dividends for the long term. In the UK we acquired four assets: 9 Prescot Street, E1 for GBP53.9 million; The Portland Building and Gresham House, adjacent properties in the centre of Crawley, for an aggregate of GBP16.5 million; and 92/98 Vauxhall Walk, SE11 for GBP2.5 million, adjacent to our existing Spring Mews asset which now enables further development.
In Germany, we bought Puro in the Munich suburb of Ismaning for GBP28.6 million and in France, we purchased Les Reflets in Lille for GBP10.2 million. In addition, since the half year we have exchanged contracts on the acquisition of Connect, an office in Cologne for GBP27.3 million, which is due to complete shortly.
In June, we exchanged contracts to sell Ateliers Victoires, our recently-completed and fully let development in central Paris for GBP37.6 million at a net initial yield of 3.0%. In Germany, we completed on the sale of Witten for GBP3.5 million in March and in July we exchanged contracts on the sale of East Gate in Munich, for GBP40.6 million at a net initial yield of 4.3% and Schanzenstrasse 76 in Düsseldorf for GBP10.7 million at a net initial yield of 3.3%. In the UK we sold a small property in Plymouth for GBP0.8 million, and in July we exchanged contracts for the sale of a property in Hayes for GBP2.9 million and Quayside Lodge in Fulham for GBP19.0 million.
All properties were sold at or above their 31 December 2018 valuations and the exchanged sales, which are due to complete in the second half of the year, were classified in the balance sheet at 30 June 2019 as held for sale and were valued at their disposal values.
In the six months to June, the value of the property portfolio rose by 1.9%, principally driven by Germany. At 30 June 2019, the net initial yield of the portfolio was 5.0% (31 December 2018: 5.1%), some 251 basis points above the Group's cost of debt, underpinning the Group's ability to generate cash.
Overall, the vacancy rate at 30 June 2019 was 4.2%, marginally up on six months earlier (31 December 2018: 3.8%), but comfortably below our target of 5.0%.
DIVIDS
In April the Group paid a final dividend for 2018 of 4.70 pence per share and, in September, will pay an interim dividend for 2019 of 2.35 pence per share, an increase over 2018 of 6.8%.
BOARD OF DIRECTORS
As previously announced, John Whiteley, Chief Financial Officer, retired from the Board on 30 June and was replaced by Andrew Kirkman on 1 July, and I warmly welcome Andrew to the Board.
I am also pleased to welcome Denise Jagger as a new independent Non-Executive Director. Her breadth of experience across a number of sectors, including real estate, means that she will strengthen the knowledge base and add significant value to the Board. As previously announced, I have decided to retire from CLS and Lennart Sten, who has been an independent Non-Executive Director for just over five years, will become independent Non-Executive Chairman from tomorrow, 15 August 2019.
OUTLOOK
We continue to seek well-located properties with good asset management opportunities, particularly in Germany and the South East of the UK, where we believe the better opportunities lie. This reinvestment of funds into properties yielding well in excess of our cost of debt will enhance earnings and the prospects for dividend growth, and it supports the Group's ability to generate cash.
The performance of the UK market has proven resilient while facing uncertainties as businesses take a "wait and see" approach to the impact of Brexit and we continue to keep a close eye on any market changes. Increased trade tensions remain a threat to global growth but the German and French property markets benefit from strong domestic demand and a limited supply of new offices.
With our professional organisation in all our markets, strong balance sheet, significant level of cash and liquid resources, focus on cash flow, long term asset management and ambitious investment strategy, I am very confident we are well positioned for the future.
I have had the pleasure to be part of the Group's Senior Management team for a large part of my career and it has been a fantastic journey with many great memories. The Group is in good shape and I am confident that the Board, led by Lennart Sten, will continue to take it to the next level.
I wish all my colleagues well for the future and I would like to sincerely thank you for the period I have had the honour to serve as your Executive Chairman.
Henry Klotz
Executive Chairman
14 August 2019
Business review
United Kingdom
Repositioning for long-term income growth
Value of properties
GBP1,058.6m
Lettable space
2.8m sq ft
Number of tenants
231
Percentage of Group's property interests
51%
Vacancy rate
4.1%
Government and major corporates
65.0%
The value of the UK portfolio decreased by GBP3.5 million or 0.3% with ERV growth of 1.1% and a yield softening of 13 basis points. This is a blend of the different characteristics between London and the Rest of UK.
In our London portfolio, values rose by GBP1.8 million or 0.2% driven by ERV growth of 1.2% which compensated for a softening in yields by 3 basis points. In the Rest of the UK portfolio, values fell by GBP5.3 million or 6.5%. This movement was driven by a shortening of the lease terms for many of our regional
assets and softening in yields. Excluding the impact of rent free burn-offs for Cardiff and Bradford yields softened by 64 basis points as the market for non-prime regional locations weakened.
In the period, we successfully acquired four assets with attractive asset management opportunities. We bought 9 Prescot Street, E1, 96,948 sqft (9,007 sqm), for GBP53.9 million excluding costs, with a net initial yield of 4.5% and the potential to raise the yield above 7.0% through active asset management. We also completed two adjacent acquisitions in Crawley for an aggregate of GBP16.5 million excluding costs; The Portland Building comprises 41,690 sqft (3,873 sqm) of offices, with 18% vacancy and a net initial yield of 6.0%, which is expected to rise to 7.5% when fully let. Gresham House is entirely let to the UK Government with a net initial yield of 6.7%.
Earlier in the year, we sold a small property in Plymouth for GBP0.8 million and, since the start of July, we have exchanged on the disposal of two properties. Quayside Lodge in Fulham was a four-storey office building on which we had gained planning consent for a residential development and which was sold for GBP19.0 million. The Grange in Hayes was a small property which was sold for GBP2.9 million. Finally, we have acquired 92/98 Vauxhall Walk for GBP2.5 million, which completes the jigsaw for an office development adjacent to our Spring Mews mixed-use scheme in Vauxhall.
In the first half of 2019, 56,930 sqft (5,289 sqm) of space expired and 74,690 sqft (6,939 sqm) was let. The vacancy rate rose marginally in the first six months to 4.1% based on rental values (31 December 2018: 4.0%). On average, new lettings and rent reviews (excluding indexation uplifts) were achieved at 5.0% above 31 December 2018 ERVs. Occupational demand within the London investment portfolio has remained encouraging overall.
Germany
Actively looking to invest in larger cities
Value of properties
GBP689.9m
Lettable space
3.3m sqft
Number of tenants
314
Percentage of Group's property interests
33%
Vacancy rate
4.7%
Government and major corporates
27.6%
The value of the German portfolio increased by GBP27.9 million or 4.5% in local currency. Excluding two assets held for sale that have exchanged, East Gate (Munich) and Schanzenstrasse (Dusseldorf), the portfolio increased by 3.2%. The 4.5% increase was driven by ERV growth of 4.3% and a 21 basis point hardening of yields in the first six months.
We continue to see good value in selective opportunities in Germany. In May, we acquired Puro, a 140,717 sqft (13,073 sqm) multi-let office building in Munich for GBP28.6 million excluding costs with a net initial yield of 5.3% and with an Estimated Rental Value (ERV) of 6.4%. Since the start of July, we have exchanged contracts to purchase Connect a 140,491 sqft (13,052 sqm) office building in Cologne for GBP27.3 million excluding costs with a net initial yield of 5.1% and with an ERV of 6.1%.
We have also made disposals of properties with limited further asset management opportunities and completed the sale of Witten for GBP3.5 million. We have also exchanged contracts on two disposals since the start of July, the 90% occupied East Gate in Feldkirchen near Munich for GBP40.5 million, which was empty and valued at GBP14.9 million in 2015 when the previous tenant vacated; and Schanzenstrasse 76 in Düsseldorf for GBP10.7 million.
Whilst 120,405 sqft (11,186 sqm) was renewed or let at an average of 5.3% above 31 December 2018 ERVs, 139,014 sqft (12,915 sqm) of space expired or vacated and vacancy therefore rose to 4.7% by the end of June (31 December 2018: 4.2%). We expect this to improve again given the positive fundamentals in the German letting market. For while the German economy is slowing down, with the large export sector affected by trade disputes and lower global demand, the low vacancy and limited supply of new offices in the larger cities is driving demand and rental growth.
France
Delivering value from existing assets
Value of properties
GBP331.9m
Lettable space
0.9m sqft
Number of tenants
166
Percentage of Group's property interests
16%
Vacancy rate
3.1%
Government and major corporates
59.0%
The value of the French portfolio increased by GBP13.7 million or 4.5% in local currency. Excluding the uplift in the value of the development at Ateliers Victoires, the portfolio increased by 2.7%. The 4.5% increase was primarily driven by a 37 basis point yield improvement, with strong performance from the Lyon properties, compared to December 2018 values and by ERV growth of 0.2% in the first six months.
The Paris and Lyon investment markets continued to offer few opportunities for value-add investments. In March, we acquired Les Reflets in the South of Lille for GBP10.2 million excluding costs. This 44,756 sqft (4,157 sqm) multi-let office building had a 6.6% net initial yield and complements our two other properties in Lille. In June, we exchanged contracts on the sale of Ateliers Victoires in Paris for GBP37.6 million. This recently completed development, which was fully pre-let, was sold at a net initial yield of 3.0%.
There were fewer lettings in France in the first six months than expiries, and they were achieved at an
average of 0.6% below 31 December 2018 ERVs, reflecting our strategy to prioritise occupancy.
As 56,263 sqft (5,227 sqm) of space expired or vacated and 50,009 sqft (4,646 sqm) was renewed or let, the vacancy rose to 3.1% by the end of June (31 December 2018: 2.3%).
The French economic indicators have gradually been improving with positive unemployment and consumer confidence indicators. The occupational market in Paris is impacted by low levels of new office supply and we expect a fairly stable environment with our focus being on maximising value from existing assets.
Our investor proposition
Cash and capital returns
A pan-European strategy
PAN-EUROPEAN FOCUSED
We are a pan-European property company which offers geographical diversity. We have a history of delivering strong financial and operational results, and a well-regarded strategy that continues to deliver sustainable returns to shareholders.
DIVID POLICY
The Company expects to generate sufficient cash flow to be able to meet the growth requirements of the business, maintain an appropriate level of debt and provide cash returns to shareholders via a dividend.
It is our policy to pay a progressive dividend fully covered by EPRA earnings. Approximately one-third of the annual dividend is paid as an interim in September, with the balance paid as a final dividend in April.
ANALYST COVERAGE
We are covered by four brokers which publish regular analyst research: Liberum Capital, Whitman Howard, Peel Hunt and Berenberg. Contact details can be found on our website www.clsholdings.com.
2019 INVESTOR ENGAGEMENT
March 2019
Annual Results presentation;
Annual Results roadshows (London and Edinburgh)
April 2019
Annual General Meeting;
Capital Markets Day (Hamburg)
August 2019
Half-Year Results presentation
August/September 2019
Half-Year Results roadshows (London and Edinburgh)
November 2019
CLS Trading Update
Financial review
RESULTS FOR THE PERIOD
RESTATEMENT OF COMPARATIVES
On 7 March 2019, we disposed of the Group's 58.02% interest in First Camp Sverige Holding AB. The results of First Camp have been disclosed as a discontinued operation and accordingly relevant comparatives have been restated.
HEADLINES
Profit after tax from continuing operations and attributable to the owners of the Company of GBP68.5 million (2018: GBP61.4 million) generated basic earnings per share of 16.8 pence (2018: 15.0 pence) and EPRA earnings per share of 6.0 pence (2018: 6.3 pence), which was down 4.8% as profitability increases from net rental income were more than offset by lower interest income from our reduced corporate bond portfolio and higher tax costs. Gross property assets at 30 June 2019, including those in property, plant and equipment and those held for sale, increased to GBP2,080.4 million (31 December 2018: GBP1,923.3 million) through net acquisitions and revaluation uplifts. Net assets per share rose by 4.5% to 287.8 pence (31 December 2018: 275.5 pence) and EPRA net assets per share by 5.0% to 325.3 pence (31 December 2018: 309.8 pence).
STATEMENT OF COMPREHENSIVE INCOME
Rental income for the six months to 30 June 2019 of GBP52.5 million (2018: GBP49.9 million) was higher than last year by a net GBP2.6 million, or 5.2%, in part because acquisitions, which added GBP1.6 million, far exceeded disposals, which reduced rent by only GBP0.8 million.
Operating profit of GBP97.8 million (2018: GBP76.8 million) included a net uplift on the revaluation of investment properties of GBP36.9 million (2018: GBP31.2 million), a net GBP0.3 million loss (2018: GBP1.7 million profit) on sale of properties from selling costs and an uplift in the value of our shareholding in Catena of GBP23.6 million (2018: GBP6.6 million).
The fall in interest income to GBP3.3 million (2018: GBP4.7 million) reflected a lower average balance of corporate bond investments than in 2018. Finance costs of GBP16.5 million (2018: GBP15.5 million) contained GBP3.4 million (2018: GBP4.4 million) of negative foreign exchange variances from translating monetary assets into sterling at the balance sheet date.
The tax charge of GBP16.1 million (2018: GBP4.6 million), which represented an effective rate of 19.0% (2018: 7.1%) was distorted in 2018 by a fall in the rate of tax in France which had been applied to the deferred tax on the cumulative revaluation surplus of the French portfolio. Without this, the estimated weighted average tax rate of the Group in 2018 would have been 19.1%.
EPRA NET ASSETS PER SHARE
EPRA net assets per share rose from 309.8p to 325.3p in the six months to 30 June 2019, an increase of 15.5p per share or 5.0%. On a per share basis, the increase comprised EPRA earnings of 6.0p, from which a dividend of 4.7p was paid, a property revaluation uplift of 9.1p and an increase of 5.1p (net of foreign exchange) from our shareholding in Catena with other items netting each other out.
CASH FLOW, NET DEBT AND GEARING
Net cash flow from operating activities was GBP21.4 million (2018: GBP21.2 million). During the period, GBP123.6 million was paid for property acquisitions and capital expenditure. Net proceeds from new financing was GBP135.7 million and GBP12.9 million of loans were repaid.
In the period, GBP19.1 million was distributed to shareholders, being the final 2018 dividend.
In the six months to 30 June 2019, borrowings rose by GBP122.4 million to GBP959.3 million (31 December 2018: GBP836.9 million), principally through the funding of new acquisitions, and the Group's balance sheet loan to value at 30 June 2019 was 39.3% (31 December 2018: 36.7%).
The cost of debt fell in each of our three countries but our weighted average cost of debt increased to 2.49% (31 December 2018: 2.43%) as our proportion of debt in the UK increased.
OTHER INVESTMENTS
Strategically, we maintain liquid resources of over GBP100 million, and as part of our cash management strategy we invest part of the cash with banks and part in corporate bonds. The corporate bond portfolio was valued at GBP33.8 million at the end of June (31 December 2018: GBP30.3 million) and produced a return on investment of 11.6% in the period, outperforming the relevant benchmark indices.
The Group owns a 10.6% shareholding in Catena AB, a Stockholm-listed logistics real estate company. In the six months to 30 June 2019, we received from Catena a dividend of GBP1.9 million and its share price rose by 32.4%, increasing the market value of the Group's stake to GBP98.5 million (31 December 2018: GBP77.5 million).
SUSTAINABILITY
We are pleased to report a reduction of over 3.5% in CO2 emissions across the managed like-for-like assets in the first half of 2019. This goes towards CLS's long-term target to reduce CO2 emissions by 25% before the end of 2025. We have also exceeded the recycling target of 70% across all managed UK assets and are consistently achieving above 75%.
In the second half of the year there will be more electric car charging points and solar photovoltaic installations across key assets in conjunction with our ongoing energy efficiency programme.
In March, we launched our improved Sustainability strategy which enhances the original approach and aligns with the Global Real Estate Sustainability Benchmark (GRESB) and the UN Sustainable Development Goals (SDGs). By 2020 this will also align with the Task Force on Climate-related Financial Disclosures (TCFD). If you want to find out more, please see our 2018 Sustainability report.
PRINCIPAL RISKS AND UNCERTAINTIES
A detailed explanation of the principal risks and uncertainties affecting the Group, and the steps it takes to mitigate these risks, can be found on pages 18 and 19 of the Annual Report and Financial Statements for the year ended 31 December 2018, which is available at www.clsholdings.com/investors.
The Group's principal risks and uncertainties are grouped into six categories: property investment; sustainability; funding; political and economic; people; and catastrophic event. These risks and uncertainties are expected to remain relevant for the remaining six months of the financial year.
As negotiations continue for the United Kingdom's withdrawal from the European Union, the Board expects that the Group will continue to operate in an uncertain economic and political climate in the short to medium term. Whilst the Group is not immune to that uncertainty, it is mitigated by operating in the three largest and most stable economies in Europe, and by having a diverse range of high-quality tenants.
GOING CONCERN
As stated in note 2 to the condensed group financial statements, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this Half-Yearly Financial Report. Accordingly, they continue to adopt the going concern basis in preparing the condensed group financial statements.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements, which has been prepared in accordance with IAS 34 'Interim Financial Reporting', gives a true and fair view of the assets, liabilities, financial position and profit of the Group, as required by DTR 4.2.4R;
(b) the 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
Henry Klotz
Executive Chairman
14 August 2019
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 2019 which comprises the condensed Group income statement, the condensed Group statement of comprehensive income, the condensed Group balance sheet, the condensed Group statement of changes in equity, the condensed Group statement of cash flows and related notes 1 to 16. 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 Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it 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 Conduct 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 Financial Reporting Council 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 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 2019 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 Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
14 August 2019
Financial Statements
Condensed group income statement
for the six months ended 30 June 2019
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
---------------------------------------- ------ ------------- -------------- --------------
Continuing operations
Group revenue 67.6 63.3 133.0
---------------------------------------- ------ ------------- -------------- --------------
Net rental income 3 53.8 50.8 107.3
Administration expenses (9.9) (8.5) (17.8)
Other expenses (6.3) (6.0) (13.2)
---------------------------------------- ------ ------------- -------------- --------------
Group revenue less costs 37.6 36.3 76.3
Net movements on revaluation of
investment properties 9 36.9 31.2 62.8
(Loss)/Profit on sale of properties (0.3) 1.7 2.3
Net movements on revaluation of
equity investments 23.6 6.6 22.2
Gain on sale of other financial
instruments, net of impairments - 1.0 1.7
---------------------------------------- ------ ------------- -------------- --------------
Operating profit 97.8 76.8 165.3
Finance income 4 3.3 4.7 6.1
Finance costs 5 (16.5) (15.5) (26.5)
---------------------------------------- ------ ------------- -------------- --------------
Profit before tax 84.6 66.0 144.9
Taxation 6 (16.1) (4.6) (12.1)
---------------------------------------- ------ ------------- -------------- --------------
Profit for the period from continuing
operations 68.5 61.4 132.8
Discontinued operations
Loss for the period from discontinued
operations 14 (1.8) (1.1) (14.9)
---------------------------------------- ------ ------------- -------------- --------------
Profit for the period 66.7 60.3 117.9
---------------------------------------- ------ ------------- -------------- --------------
Attributable to:
Owners of the Company 67.5 60.8 124.3
Non-controlling interests (0.8) (0.5) (6.4)
---------------------------------------- ------ ------------- -------------- --------------
66.7 60.3 117.9
---------------------------------------- ------ ------------- -------------- --------------
Earnings per share (expressed in
pence per share)
Basic and diluted earnings per
share from continuing operations 16.8 15.0 32.6
Basic and diluted (loss) per share
from discontinued operations (0.2) (0.1) (2.1)
---------------------------------------- ------ ------------- -------------- --------------
Basic and diluted earnings per
share 16.6 14.9 30.5
---------------------------------------- ------ ------------- -------------- --------------
June 2018 has been restated to separate the individual line items of discontinued operations from those of continuing operations.
Condensed group statement of comprehensive income
for the six months ended 30 June 2019
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm (audited)
(unaudited) (unaudited)
------------------------------------------------ ------------- -------------- -------------
Profit for the period 66.7 60.3 117.9
------------------------------------------------ ------------- -------------- -------------
Other comprehensive income
Items that will not be reclassified
to profit or loss
Foreign exchange differences (0.7) (3.9) 3.6
------------------------------------------------ ------------- -------------- -------------
Items that may be reclassified to profit
or loss
Fair value gains/(losses) on corporate
bonds and other financial investments 3.4 (4.9) (7.4)
Fair value gains taken to gain on sale
of other financial investments, net
of impairments - (1.0) (0.4)
Revaluation of property, plant and equipment 0.2 (0.9) (0.4)
Deferred tax on net fair value (gains)/losses (0.7) 0.2 0.6
Discontinued operations (0.9) (0.2) 1.5
------------------------------------------------ ------------- -------------- -------------
Total items that may be reclassified
to profit or loss 2.0 (6.8) (6.1)
------------------------------------------------ ------------- -------------- -------------
Total comprehensive income for the period 68.0 49.6 115.4
------------------------------------------------ ------------- -------------- -------------
Attributable to:
Owners of the Company 68.8 50.7 121.4
Non-controlling interests (0.8) (1.1) (6.0)
------------------------------------------------ ------------- -------------- -------------
68.0 49.6 115.4
------------------------------------------------ ------------- -------------- -------------
June 2018 has been restated to separate items that are attributable to discontinued operations.
Condensed group balance sheet
at 30 June 2019
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
---------------------------------------- ------ ------------- ------------- ------------
Non-current assets
Investment properties 9 1,904.3 1,832.0 1,888.1
Property, plant and equipment 10 44.3 33.4 33.7
Goodwill and intangibles 1.4 1.4 1.4
Other financial investments 11 132.3 105.5 107.8
Deferred tax 4.8 3.3 3.5
---------------------------------------- ------ ------------- ------------- ------------
2,087.1 1,975.6 2,034.5
---------------------------------------- ------ ------------- ------------- ------------
Current assets
Trade and other receivables 18.9 12.0 12.3
Properties held for sale 135.1 22.3 4.3
Cash and cash equivalents 107.6 136.6 100.3
Assets of discontinued operations - 69.1 56.1
---------------------------------------- ------ ------------- ------------- ------------
261.6 240.0 173.0
---------------------------------------- ------ ------------- ------------- ------------
Total assets 2,348.7 2,215.6 2,207.5
---------------------------------------- ------ ------------- ------------- ------------
Current liabilities
Trade and other payables (53.2) (48.0) (51.9)
Current tax (5.1) (5.6) (7.0)
Borrowings 12 (61.5) (121.7) (66.3)
Derivative financial instruments (0.4) (2.6) (0.5)
Liabilities of discontinued operations - (46.2) (44.3)
---------------------------------------- ------ ------------- ------------- ------------
(120.2) (224.1) (170.0)
---------------------------------------- ------ ------------- ------------- ------------
Non-current liabilities
Deferred tax (152.6) (135.1) (139.3)
Borrowings 12 (897.8) (785.2) (770.6)
Derivative financial instruments (5.8) (5.4) (4.6)
---------------------------------------- ------ ------------- ------------- ------------
(1,056.2) (925.7) (914.5)
---------------------------------------- ------ ------------- ------------- ------------
Total liabilities (1,176.4) (1,149.8) (1,084.5)
---------------------------------------- ------ ------------- ------------- ------------
Net assets 1,172.3 1,065.8 1,123.0
---------------------------------------- ------ ------------- ------------- ------------
Equity
Share capital 13 11.0 11.0 11.0
Share premium 83.1 83.1 83.1
Other reserves 124.7 115.4 123.0
Retained earnings 953.5 850.6 905.1
---------------------------------------- ------ ------------- ------------- ------------
Equity attributable to owners
of the Company 1,172.3 1,060.1 1,122.2
Non-controlling interests - 5.7 0.8
---------------------------------------- ------ ------------- ------------- ------------
Total equity 1,172.3 1,065.8 1,123.0
---------------------------------------- ------ ------------- ------------- ------------
June 2018 has been restated to separate the assets and liabilities of discontinued operations from those of continuing operations.
Condensed group statement of changes in equity
for the six months ended 30 June 2019
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interest equity
Unaudited GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- --------- ---------- ---------- --------- ---------------- ---------
At 1 January 2019 11.0 83.1 123.0 905.1 1,122.2 0.8 1,123.0
---------------------------- --------- --------- ---------- ---------- --------- ---------------- ---------
Arising in the six
months ended 30 June
2019:
Total comprehensive
income
for the period - - 1.3 67.5 68.8 (0.8) 68.0
Employee Performance
Incentive Plan charge - - 0.4 - 0.4 - 0.4
Dividends to shareholders - - - (19.1) (19.1) - (19.1)
---------------------------- --------- --------- ---------- ---------- --------- ---------------- ---------
Total changes arising
in the period - - 1.7 48.4 50.1 (0.8) 49.3
---------------------------- --------- --------- ---------- ---------- --------- ---------------- ---------
At 30 June 2019 11.0 83.1 124.7 953.5 1,172.3 - 1,172.3
---------------------------- --------- --------- ---------- ---------- --------- ---------------- ---------
Non-
Share Share Other Retained controlling Total
capital premium reserves earnings Total interest equity
Unaudited GBPm GBPm GBPm GBPm GBPm GBPm GBPm ---------------------------- --------- --------- ---------- ---------- -------- ------------- -------- At 1 January 2018 11.0 83.1 143.0 789.4 1,026.5 6.8 1,033.3 ---------------------------- --------- --------- ---------- ---------- -------- ------------- -------- Arising in the six months ended 30 June 2018: Total comprehensive income for the period - - (10.1) 60.8 50.7 (1.1) 49.6 Employee Performance Incentive Plan charge - - 0.4 - 0.4 - 0.4 Reclassify fair value movements on equity investments(1) - - (17.9) 17.9 - - - Dividends to shareholders - - - (17.5) (17.5) - (17.5) ---------------------------- --------- --------- ---------- ---------- -------- ------------- -------- Total changes arising in the period - - (27.6) 61.2 33.6 (1.1) 32.5 ---------------------------- --------- --------- ---------- ---------- -------- ------------- -------- At 30 June 2018 11.0 83.1 115.4 850.6 1,060.1 5.7 1,065.8 ---------------------------- --------- --------- ---------- ---------- -------- ------------- --------
Condensed group statement of changes in equity (continued)
Non-
Share Share Other Retained controlling Total
capital premium reserves earnings Total interest equity
Audited GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- --------- ---------- ---------- -------- ------------- --------
At 1 January 2018 11.0 83.1 143.0 789.4 1,026.5 6.8 1,033.3
---------------------------- --------- --------- ---------- ---------- -------- ------------- --------
Arising in the year
ended 31 December
2018:
Total comprehensive
income
for the year - - (2.9) 124.3 121.4 (6.0) 115.4
Employee Performance
Incentive Plan charge - - 0.8 - 0.8 - 0.8
Reclassify fair value
movements
on equity investments(1) - - (17.9) 17.9 - - -
Dividends to shareholders - - - (26.5) (26.5) - (26.5)
---------------------------- --------- --------- ---------- ---------- -------- ------------- --------
Total changes arising
in 2018 - - (20.0) 115.7 95.7 (6.0) 89.7
---------------------------- --------- --------- ---------- ---------- -------- ------------- --------
At 31 December 2018 11.0 83.1 123.0 905.1 1,122.2 0.8 1,123.0
---------------------------- --------- --------- ---------- ---------- -------- ------------- --------
1 As a result of adopting IFRS 9 for the first time in the year ended 31 December 2018, previously recognised fair value movements were transferred from other reserves to retained earnings.
Condensed group statement of cash flows
for the six months ended 30 June 2019
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
---------------------------------------------- ------ ------------- ------------- -------------
Cash flows from operating activities
Cash generated from operations 15 35.1 34.8 72.9
Interest received 1.4 1.9 4.4
Interest paid (10.4) (11.8) (24.2)
Income tax paid (4.7) (3.7) (5.1)
---------------------------------------------- ------ ------------- ------------- -------------
Net cash inflow from operating
activities 21.4 21.2 48.0
---------------------------------------------- ------ ------------- ------------- -------------
Cash flows from investing activities
Purchase of investment properties (116.9) (71.1) (70.9)
Capital expenditure on investment
properties (6.7) (5.8) (15.8)
Proceeds from sale of properties 4.0 26.2 48.8
Income tax paid on sale of properties (1.8) (5.9) (7.9)
Purchases of property, plant
and equipment (1.0) (1.5) (2.0)
Purchase of corporate bonds - (37.3) (39.7)
Proceeds from sale of corporate
bonds - 51.5 68.7
Proceeds from sale of equity
investments 4.6 - 1.0
Dividends received from equity
investments 1.9 1.7 1.7
Purchase of intangibles - (0.1) (0.1)
Net cash flow from discontinued
operations - (0.4) 1.0
Proceeds from/(costs of) foreign
currency transactions (1.0) 2.1 (0.9)
---------------------------------------------- ------ ------------- ------------- -------------
Net cash (outflow) from investing
activities (116.9) (40.6) (16.1)
---------------------------------------------- ------ ------------- ------------- -------------
Cash flows from financing activities
Dividends paid (19.1) (17.5) (26.5)
New loans 137.0 108.5 137.7
Issue costs of new loans (1.4) (1.5) (1.8)
Repayment of loans (12.9) (73.5) (181.7)
---------------------------------------------- ------ ------------- ------------- -------------
Net cash inflow/(outflow) from
financing activities 103.6 16.0 (72.3)
---------------------------------------------- ------ ------------- ------------- -------------
Cash flow element of net increase/(decrease)
in cash and cash equivalents 8.1 (3.4) (40.4)
Foreign exchange (losses)/gains (0.8) (0.5) 0.2
---------------------------------------------- ------ ------------- ------------- -------------
Net increase/(decrease) in cash
and cash equivalents 7.3 (3.9) (40.2)
Cash and cash equivalents at
the beginning of the period 100.3 140.5 140.5
---------------------------------------------- ------ ------------- ------------- -------------
Cash and cash equivalents at
the end of the period 107.6 136.6 100.3
---------------------------------------------- ------ ------------- ------------- -------------
Notes to the condensed group financial statements
30 June 2019
1 BASIS OF PREPARATION
The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The results disclosed for the year ended 31 December 2018 are an abridged version of the full accounts for that year, which received an unqualified report from the Auditor, did not contain a statement under section 498(2) or (3) of the Companies Act 2006 or include a reference to any matter to which the Auditor drew attention by way of emphasis without qualifying the Auditor's report, and have been filed with the Registrar of Companies. The annual financial statements of CLS Holdings plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed financial statements included in this half-yearly financial report have been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the 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. A number of new standards and amendments to IFRSs have become effective for the financial year beginning on 1 January 2019. These new standards and amendments are listed below:
- IFRS 16 Leases - Amendments to IFRS 9 - Prepayment Features with Negative Compensation - Amendments to IAS 28 - Long term Interests in Associates and Joint Ventures - Amendments to IAS 19 - Plan Amendment, Curtailment or Settlement - IFRIC 23 Uncertainty over Income Tax Treatments
The adoption of these new standards and amendments to IFRSs did not materially impact the condensed set of financial statements for the six months ended 30 June 2019.
2 GOING CONCERN
The Directors regularly stress-test the business model by flexing assumptions to ensure that the Group has adequate working capital. They have reviewed the current and projected financial position of the Group, taking into account the repayment profile of the Group's loan portfolio, and making reasonable assumptions about future trading performance. In particular, the Directors are confident that loans expiring within the next 12 months will be repaid or refinanced, and, therefore, they 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 the hotel at Spring Mews, corporate bonds, shares in Catena 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
Germany
France
Other Investments
3 SEGMENT INFORMATION (continued)
The Group's results for the six months ended 30 June 2019 by operating segment were as follows:
Investment Property
--------------------------------------
United Other Central
Kingdom Germany France Investments Administration Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------------------- ----------------- -------- ------------- ----------------- ---------
Rental income 28.3 15.9 8.3 - - 52.5
Other
property-related
income 0.6 - 0.1 2.2 - 2.9
Service charge
income 4.2 4.9 3.1 - - 12.2
------------------- ------------------- ----------------- -------- ------------- ----------------- ---------
Revenue 33.1 20.8 11.5 2.2 - 67.6
Service charges
and similar
expenses (5.3) (5.5) (3.0) - - (13.8)
------------------- ------------------- ----------------- -------- ------------- ----------------- ---------
Net rental income 27.8 15.3 8.5 2.2 - 53.8
Administration
expenses (3.8) (1.2) (0.9) (0.3) (3.7) (9.9)
Other expenses (3.0) (1.6) (0.4) (1.3) - (6.3)
------------------- ------------------- ----------------- -------- ------------- ----------------- ---------
Group revenue
less costs 21.0 12.5 7.2 0.6 (3.7) 37.6
Net movements
on revaluation
of investment
properties (3.5) 27.2 13.2 - - 36.9
Gain on
revaluation
of equity
investments - - - 23.6 - 23.6
Loss on sale of
investment
property - (0.3) - - - (0.3)
------------------- ------------------- ----------------- -------- ------------- ----------------- ---------
Segment operating
profit/(loss) 17.5 39.4 20.4 24.2 (3.7) 97.8
Finance income - - - 3.3 - 3.3
Finance costs (8.6) (2.5) (1.4) (3.7) (0.3) (16.5)
------------------- ------------------- ----------------- -------- ------------- ----------------- ---------
Segment
profit/(loss)
before tax 8.9 36.9 19.0 23.8 (4.0) 84.6
------------------- ------------------- ----------------- -------- ------------- ----------------- ---------
3 SEGMENT INFORMATION (continued)
The Group's results for the six months ended 30 June 2018 by operating segment were as follows:
Investment Property
----------------------
United Other Central
Kingdom Germany France Investments Administration Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- --------- ------- ------------- ---------------- -------
Rental income 26.9 15.5 7.5 - - 49.9
Other property-related
income 0.6 - 0.1 2.1 - 2.8
Service charge
income 3.3 4.5 2.8 - - 10.6
------------------------- ----------- --------- ------- ------------- ---------------- -------
Revenue 30.8 20.0 10.4 2.1 - 63.3
Service charges
and similar expenses (4.8) (4.8) (2.9) - - (12.5)
------------------------- ----------- --------- ------- ------------- ---------------- -------
Net rental income 26.0 15.2 7.5 2.1 - 50.8
Administration
expenses (3.0) (1.3) (1.1) (0.2) (2.9) (8.5)
Other expenses (2.7) (1.5) (0.4) (1.4) - (6.0)
------------------------- ----------- --------- ------- ------------- ---------------- -------
Group revenue less
costs 20.3 12.4 6.0 0.5 (2.9) 36.3
Net movements on
revaluation of
investment properties 0.9 24.0 6.3 - - 31.2
Profit on sale
of investment property 1.5 0.1 - 0.1 - 1.7
Net movement on
revaluation of
equity investments - - - 6.6 - 6.6
Gain on sale of
corporate bonds - - - 1.0 - 1.0
------------------------- ----------- --------- ------- ------------- ---------------- -------
Segment operating
profit/(loss) 22.7 36.5 12.3 8.2 (2.9) 76.8
Finance income - - - 4.7 - 4.7
Finance costs (5.5) (2.4) (1.2) (4.3) (2.1) (15.5)
------------------------- ----------- --------- ------- ------------- ---------------- -------
Segment profit/(loss)
before tax 17.2 34.1 11.1 8.6 (5.0) 66.0
------------------------- ----------- --------- ------- ------------- ---------------- -------
3 SEGMENT INFORMATION (continued)
The Group's results for the year ended 31 December 2018 were as follows:
Investment Property
----------------------
United Other Central
Kingdom Germany France Investments Administration Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----------- --------- -------- ------------- ---------------- ---------
Rental income 56.7 31.1 15.2 - - 103.0
Other property-related
income 2.0 0.1 0.4 4.4 - 6.9
Service charge income 8.2 9.5 5.4 - - 23.1
---------------------------- ----------- --------- -------- ------------- ---------------- ---------
Revenue 66.9 40.7 21.0 4.4 - 133.0
Service charges and
similar expenses (10.3) (9.9) (5.5) - - (25.7) ---------------------------- ----------- --------- -------- ------------- ---------------- --------- Net rental income 56.6 30.8 15.5 4.4 - 107.3 Administration expenses (6.7) (3.0) (1.9) (0.6) (5.6) (17.8) Other expenses (5.7) (3.5) (1.0) (3.0) - (13.2) ---------------------------- ----------- --------- -------- ------------- ---------------- --------- Group revenue less costs 44.2 24.3 12.6 0.8 (5.6) 76.3 Net movements on revaluation of investment properties 4.0 48.0 10.8 - - 62.8 Gain on revaluation of equity investments - - - 22.2 - 22.2 Profit on sale of investment property 1.9 0.3 0.1 - - 2.3 Gain on sale of corporate bonds - - - 1.7 - 1.7 ---------------------------- ----------- --------- -------- ------------- ---------------- --------- Segment operating profit/(loss) 50.1 72.6 23.5 24.7 (5.6) 165.3 Finance income - - - 6.1 - 6.1 Finance costs (18.3) (4.9) (2.7) (0.6) - (26.5) ---------------------------- ----------- --------- -------- ------------- ---------------- --------- Segment Profit/(loss) before tax 31.8 67.7 20.8 30.2 (5.6) 144.9 ---------------------------- ----------- --------- -------- ------------- ---------------- ---------
SEGMENT ASSETS AND LIABILITIES
Assets Liabilities
-------------------------------- --------------------------------
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- -------- -------- ------------ -------- -------- ------------
Investment Property
United Kingdom 1,052.3 980.6 981.0 568.4 529.5 463.5
Germany 723.3 607.9 643.4 365.6 340.8 347.5
France 336.8 322.5 315.9 227.5 219.0 218.4
Other Investments 236.3 235.5 211.1 14.9 14.4 10.9
--------------------- -------- -------- ------------ -------- -------- ------------
2,348.7 2,146.5 2,151.4 1,176.4 1,103.7 1,040.3
--------------------- -------- -------- ------------ -------- -------- ------------
3 SEGMENT INFORMATION (continued)
SEGMENT CAPITAL EXPITURE
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
--------------------- ----------- ----------- -------------
Investment Property
United Kingdom 80.2 74.5 82.0
Germany 32.5 0.6 2.3
France 10.5 3.8 5.7
Other investments - 2.0 -
--------------------- ----------- ----------- -------------
123.2 80.9 90.0
--------------------- ----------- ----------- -------------
4 FINANCE INCOME
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
---------------------- ----------- ----------- -------------
Interest income 1.4 3.0 4.4
Other finance income 1.9 1.7 1.7
---------------------- ----------- ----------- -------------
3.3 4.7 6.1
---------------------- ----------- ----------- -------------
5 FINANCE COSTS
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------------------------------------------ ----------- ----------- -------------
Interest expense
Bank loans 9.7 8.7 17.9
Secured notes 1.2 1.3 2.6
Unsecured bonds - 1.8 2.0
Amortisation of loan issue costs 1.0 0.8 2.0
------------------------------------------ ----------- ----------- -------------
Total interest costs 11.9 12.6 24.5
Less interest capitalised on development - - -
projects
------------------------------------------ ----------- ----------- -------------
11.9 12.6 24.5
------------------------------------------ ----------- ----------- -------------
Loss on early redemption of debt - - 3.7
Foreign exchange variances 3.4 4.4 0.6
------------------------------------------ ----------- ----------- -------------
Movement in fair value of derivative
financial instruments
Interest rate swaps: transactions
not qualifying as hedges 1.2 (1.5) (2.3)
------------------------------------------ ----------- ----------- -------------
16.5 15.5 26.5
------------------------------------------ ----------- ----------- -------------
6 TAXATION
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
-------------- ----------- ----------- -------------
Current tax 4.6 3.7 8.5
Deferred tax 11.5 0.9 3.6
-------------- ----------- ----------- -------------
16.1 4.6 12.1
-------------- ----------- ----------- -------------
Tax for the six months ended 30 June 2019 has been charged at an effective rate of 19.0% (six months ended 30 June 2018: 7.1%; year ended 31 December 2018: 8.4%), representing the best estimate of the average annual effective tax rate expected for the full year adjusted for the tax effect of one-off items, applied to the pre-tax income of the six month period. The effective tax rate for the period of 19.0% is lower than the weighted average tax rate of 21.1%
7 EARNINGS PER SHARE
Management has chosen to disclose the European Public Real Estate Association (EPRA) measure of earnings per share, which 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 properties and of other non-current investments, and items which have no impact to earnings over their life, such as the change in fair value of derivative financial instruments, the net movement on revaluation of equity investments net of foreign exchange, and the net movement on revaluation of investment properties, and the related deferred taxation on these items.
Earnings Six months Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm
-------------------------------------------- ----------- ----------- -------------
Profit for the period 67.5 60.8 124.3
Net movements on revaluation of investment
properties (36.9) (31.2) (62.8)
Loss on early redemption of debt,
net of tax - - 3.0
Loss/(profit) on sale of properties,
net of tax 0.3 (1.7) 0.1
Gain on sale of corporate bonds, net
of tax - (0.8) (1.3)
Loss from discontinued operations 1.0 0.6 8.5
Movements on revaluation of equity
investments, net of foreign exchange (21.0) (2.8) (21.6)
Change in fair value of derivative
financial instruments 2.1 (0.3) (0.3)
Deferred tax relating to the above
adjustments 11.5 0.9 3.6
-------------------------------------------- ----------- ----------- -------------
EPRA earnings 24.5 25.5 53.5
-------------------------------------------- ----------- ----------- -------------
Six months Six months
ended ended Year ended
30 June 30 June 31 December
Weighted average number of ordinary 2019 2018 2018
shares in circulation Number Number Number
------------------------------------- ------------ ------------ -------------
Weighted average number of ordinary
shares in circulation 407,395,760 407,395,760 407,395,760
------------------------------------- ------------ ------------ -------------
7 EARNINGS PER SHARE (continued)
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
Earnings per share Pence Pence Pence
-------------------- ----------- ----------- -------------
Basic and diluted 16.6 14.9 30.5
EPRA 6.0 6.3 13.1
-------------------- ----------- ----------- -------------
8 NET ASSETS PER SHARE
Management has 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 EPRA net assets per share measure highlights the fair value of equity on a long-term basis, and so excludes items which have no impact on the Group in the long term, such as fair value movements of derivative financial instruments and deferred tax on the fair value of investment properties. The EPRA triple net assets per share measure discloses net assets per share on a true fair value basis: 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.
30 June 30 June 31 December
2019 2018 2018
Net assets GBPm GBPm GBPm
----------------------------------------- --------- -------- ------------
Basic net assets attributable to owners
of the Company 1,172.3 1,060.1 1,122.2
Adjustment to increase fixed rate debt
to fair value, net of tax (10.8) (6.2) (5.3)
Goodwill as a result of deferred tax (1.1) (1.1) (1.1)
----------------------------------------- --------- -------- ------------
EPRA triple net assets 1,160.4 1,052.8 1,115.8
Deferred tax on property and other
non-current assets, net of minority
interests 147.8 132.0 135.8
Fair value of derivative financial
instruments 6.2 8.0 5.1
Adjustment to decrease fixed rate debt
to book value, net of tax 10.8 6.2 5.3
----------------------------------------- --------- -------- ------------
EPRA net assets 1,325.2 1,199.0 1,262.0
----------------------------------------- --------- -------- ------------
30 June 30 June 31 December
Number of ordinary shares in 2019 2018 2018
circulation Number Number Number
------------------------------ ------------ ------------ ------------
Number of ordinary shares in
circulation 407,395,760 407,395,760 407,395,760
------------------------------ ------------ ------------ ------------
30 June 30 June 31 December
2019 2018 2018
Net assets per share Pence Pence Pence
---------------------- -------- -------- ------------
Basic 287.8 260.2 275.5
EPRA 325.3 294.3 309.8
EPRA triple net 284.8 258.4 273.9
---------------------- -------- -------- ------------
9 INVESTMENT PROPERTIES
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
---------------- -------- -------- ------------
United Kingdom 995.4 944.2 954.1
Germany 617.2 591.3 625.9
France 291.7 296.5 308.1
---------------- -------- -------- ------------
1,904.3 1,832.0 1,888.1
---------------- -------- -------- ------------
The movement in investment properties since the last reported balance sheet was as follows:
United Germany France Total
Kingdom GBPm GBPm GBPm
GBPm
------------------------------------- --------- -------- ------- --------
At 1 January 2019 954.1 625.9 308.1 1,888.1
Acquisitions 77.2 29.7 10.1 117.0
Capital expenditure 3.0 2.7 0.4 6.1
Reclassification to owner-occupied
property (7.3) (1.0) (1.8) (10.1)
Net movements on revaluation of
investment properties (3.5) 27.2 13.2 36.9
Rent-free period debtor adjustments 0.3 1.8 0.7 2.8
Exchange rate variances - (0.8) (0.6) (1.4)
Transfer to held for sale (28.4) (68.3) (38.4) (135.1)
------------------------------------- --------- -------- ------- --------
At 30 June 2019 995.4 617.2 291.7 1,904.3
------------------------------------- --------- -------- ------- --------
The investment properties (and the hotel and landholding detailed in note 10) were revalued at 30 June 2019 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, Cushman & Wakefield.
Investment properties include leasehold properties with a carrying value of GBP74.6 million (30 June 2018: GBP74.1 million; 31 December 2018: GBP73.3 million). Property occupied by the Group during the period was reclassified from investment properties to property, plant and equipment.
Where the Group leases out its investment property under operating leases the duration is typically three years or more. No contingent rents have been recognised in the current or comparative years.
Substantially all investment properties (and the hotel detailed in note 10) are provided as security against debt.
Property valuations are complex and require a degree of judgement and are based on data which is not publicly available. Consistent with EPRA guidance, we have classified the valuations of our property portfolio as level 3 as defined by IFRS 13. Inputs into the valuations include equivalent yields and rental income and are described as 'unobservable' as per IFRS 13. These inputs are analysed by segment in the portfolio statistics on page 3 of the Half Yearly Financial Report 2019. All other factors remaining constant, an increase in rental income would increase valuations, whilst an increase in equivalent nominal yield would result in a fall in value and vice versa.
10 PROPERTY, PLANT AND EQUIPMENT
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------------------------- -------- -------- ------------
Hotel 27.5 27.1 27.4
Land and buildings 3.4 2.6 3.5
Owner-occupied property 10.1 - -
Fixtures and fittings 3.3 3.7 2.8
------------------------- -------- -------- ------------
Total 44.3 33.4 33.7
------------------------- -------- -------- ------------
The movement in property, plant and equipment since the last reported balance sheet was as follows:
Land and Owner-occupied Fixtures
Hotel buildings property and fittings Total
GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------ ----------- --------------- -------------- -------
At 1 January 2019 28.2 3.5 - 5.7 37.4
Additions 0.1 - - 0.9 1.0
Exchange rate variances - (0.1) - - (0.1)
Disposals - - - - -
Reclassification from investment
property - - 10.1 - 10.1
Revaluation 0.2 - - - 0.2
---------------------------------- ------ ----------- --------------- -------------- -------
At 30 June 2019 28.5 3.4 10.1 6.6 48.6
---------------------------------- ------ ----------- --------------- -------------- -------
Comprising:
At cost - - - 6.6 6.6
At valuation 30 June 2019 28.5 3.4 10.1 - 42.0
---------------------------------- ------ ----------- --------------- -------------- -------
28.5 3.4 10.1 6.6 48.6
---------------------------------- ------ ----------- --------------- -------------- -------
Accumulated depreciation
and impairment
At 1 January 2019 (0.8) - - (2.9) (3.7)
Disposals - - - - -
Depreciation charge (0.2) - - (0.4) (0.6)
---------------------------------- ------ ----------- --------------- -------------- -------
At 30 June 2019 (1.0) - - (3.3) (4.3)
---------------------------------- ------ ----------- --------------- -------------- -------
Net book value
At 30 June 2019 27.5 3.4 10.1 3.3 44.3
---------------------------------- ------ ----------- --------------- -------------- -------
At 31 December 2018 27.4 3.5 - 2.8 33.7
---------------------------------- ------ ----------- --------------- -------------- -------
11 OTHER FINANCIAL INSTRUMENTS
30 June 30 June 31 December
Investment Destination 2019 2018 2018
type of Investment GBPm GBPm GBPm
----------------------- ---------------------- ---------------- -------- -------- ------------
Carried at fair
value through other Listed corporate
comprehensive income bonds UK 7.6 9.1 7.1
Eurozone - 1.8 -
Other 26.2 35.6 23.2
-------- -------- ------------
33.8 46.5 30.3
Carried at fair
value through profit Listed equity
and loss securities Sweden 98.5 58.8 77.5
Unlisted investments Sweden - 0.2 -
----------------------- ---------------------- ---------------- -------- -------- ------------
132.3 105.5 107.8
--------------------------------------------------------------- -------- -------- ------------
The movement of other financial investments since the last reported balance sheet, based on the methods used to measure their fair value, is given below:
Level
1 Level Level
Quoted 2 Observable 3 Other
market market valuation
price data methods* Total
GBPm GBPm GBPm GBPm
--------------------------------- -------- -------------- ----------- -------
At 1 January 2019 77.5 30.3 - 107.8
Fair value movements recognised
in
other comprehensive income - 3.4 - 3.4
Fair value movements recognised
in profit before tax 23.6 - - 23.6
Exchange rate variations (2.6) 0.1 - (2.5)
--------------------------------- -------- -------------- ----------- -------
At 30 June 2019 98.5 33.8 - 132.3
--------------------------------- -------- -------------- ----------- -------
* Unlisted equity shares have been valued using multiples from comparable listed organisations.
CORPORATE BOND PORTFOLIO
At 30 June 2019
Sector Banking Insurance Travel Telecoms Energy Other Total
and Tourism and IT and Resources
--------- ----------- --------------- ------------- ------------- --------------- ------------- ------
Value 12.7 2.5 3.8 8.8 1.6 4.4 33.8
Running
yield 7.4% 6.5% 6.5% 6.8% 9.1% 4.0% 6.7%
--------- ----------- --------------- ------------- ------------- --------------- ------------- ------
Issuers Standard Brit Insurance Stena Telecom Transocean Stora Enso
Chartered PGH Capital Hertz Italia Yum! Brands
Societe CenturyLink Liberty
Generale Seagate Interactive
Credit Xerox
Agricole Dell
Unicredit
Barclays
Lloyds
HSBC
RBS
--------- ----------- --------------- ------------- ------------- --------------- ------------- ------
12 BORROWINGS
MATURITY PROFILE
Bank Unsecured Secured
loans bonds notes Total
At 30 June 2019 GBPm GBPm GBPm GBPm
--------------------------------- ------- ---------- -------- -------
Within one year or on demand 59.2 - 4.2 63.4
More than one but not more than
two years 227.8 - 4.2 232.0
More than two but not more than
five years 479.5 - 48.6 528.1
More than five years 141.6 - - 141.6
--------------------------------- ------- ---------- -------- -------
908.1 - 57.0 965.1
Unamortised issue costs (5.5) - (0.3) (5.8)
--------------------------------- ------- ---------- -------- -------
Borrowings 902.6 - 56.7 959.3
Less amount due for settlement
within 12 months (57.4) - (4.1) (61.5)
--------------------------------- ------- ---------- -------- -------
Amount due for settlement after
12 months 845.2 - 52.6 897.8
--------------------------------- ------- ---------- -------- -------
Bank Unsecured Secured
loans bonds notes Total
At 30 June 2018 GBPm GBPm GBPm GBPm
--------------------------------- ------- ---------- -------- --------
Within one year or on demand 54.4 65.0 4.2 123.6
More than one but not more than
two years 56.4 - 4.2 60.6
More than two but not more than
five years 526.0 - 52.8 578.8
More than five years 150.4 - - 150.4
--------------------------------- ------- ---------- -------- --------
787.2 65.0 61.2 913.4
Unamortised issue costs (5.8) (0.2) (0.5) (6.5)
--------------------------------- ------- ---------- -------- --------
Borrowings 781.4 64.8 60.7 906.9
Less amount due for settlement
within 12 months (52.8) (64.8) (4.1) (121.7)
--------------------------------- ------- ---------- -------- --------
Amount due for settlement after
12 months 728.6 - 56.6 785.2
--------------------------------- ------- ---------- -------- --------
Bank Unsecured Secured
loans bonds notes Total
At 31 December 2018 GBPm GBPm GBPm GBPm
--------------------------------- ------- ---------- -------- -------
Within one year or on demand 64.0 - 4.2 68.2
More than one but not more than
two years 132.1 - 4.2 136.3
More than two but not more than
five years 443.0 - 50.7 493.7
More than five years 144.1 - - 144.1
--------------------------------- ------- ---------- -------- -------
783.2 - 59.1 842.3
Unamortised issue costs (5.0) - (0.4) (5.4)
--------------------------------- ------- ---------- -------- -------
Borrowings 778.2 - 58.7 836.9
Less amount due for settlement
within 12 months (62.2) - (4.1) (66.3)
--------------------------------- ------- ---------- -------- -------
Amount due for settlement after
12 months 716.0 - 54.6 770.6
--------------------------------- ------- ---------- -------- -------
12 BORROWINGS (continued)
FAIR VALUES
Carrying amounts Fair values
-------------------------------- --------------------------------
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ -------- -------- ------------ -------- -------- ------------
Current borrowings 61.5 121.7 66.3 61.5 121.7 66.3
Non-current borrowings 897.8 785.2 770.6 911.0 792.7 777.0
------------------------ -------- -------- ------------ -------- -------- ------------
959.3 906.9 836.9 972.5 914.4 843.3
------------------------ -------- -------- ------------ -------- -------- ------------
The fair value of borrowings represents the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties, discounted at the prevailing market rate, and excludes accrued interest.
13 SHARE CAPITAL
Number
------------------------------------------
Ordinary Total
Ordinary Total shares Treasury ordinary
shares Treasury ordinary in circulation shares shares
in circulation shares shares GBPm GBPm GBPm
-------------- ---------------- ----------- ----------- ---------------- --------- ---------
At 1 January
2019 and 30
June 2019 407,395,760 31,382,020 438,777,780 10.2 0.8 11.0
-------------- ---------------- ----------- ----------- ---------------- --------- ---------
14 DISCONTINUED OPERATIONS
On 12 November 2018, the Board resolved to dispose of First Camp Sverige Holdings AB and on 19 January 2019 contracts were exchanged. The disposal completed on 7 March 2019 and finalisation of the consideration to be received remains subject to the completion accounts process which is ongoing. The Group has recognised its share of the operating result of the First Camp sub-group for the period 1 January to the date of completion.
The results of the discontinued operations, which have been included in the Group income statement, were as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------------------------------------- ----------- ----------- -------------
Revenue 0.6 4.2 15.8
Expenses (2.4) (5.3) (12.7)
------------------------------------- ----------- ----------- -------------
(Loss)/profit before tax (1.8) (1.1) 3.1
Loss recognised on measurement to
fair value less costs to sell - - (17.9)
Attributable tax expense - - (0.1)
------------------------------------- ----------- ----------- -------------
(Loss) from discontinued operations (1.8) (1.1) (14.9)
Attributable to:
Owners of the Company (1.0) (0.6) (8.5)
Non-controlling interests (0.8) (0.5) (6.4)
------------------------------------- ----------- ----------- -------------
(1.8) (1.1) (14.9)
------------------------------------- ----------- ----------- -------------
15 CASH GENERATED FROM OPERATIONS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------- ----------- ----------- -------------
Operating profit 97.8 76.8 165.3
Adjustments for:
Net movements on revaluation of investment
properties (36.9) (31.2) (62.8)
Net movements on revaluation of equity
investments (23.6) (6.6) (22.2)
Depreciation and amortisation 0.6 0.4 1.0
Non-cash rental income (2.8) (2.1) (5.0)
Share-based payment expense 0.4 0.4 0.8
Loss/(profit) on sale of investment
properties 0.3 (1.7) (2.3)
(Gain)/loss on sale of other financial
instruments, net of impairments - (1.0) (1.7)
Changes in working capital:
Decrease/(increase) in receivables 0.1 1.0 (2.6)
(Decrease)/increase in payables (0.8) (1.2) 2.4
--------------------------------------------- ----------- ----------- -------------
Cash generated from operations 35.1 34.8 72.9
--------------------------------------------- ----------- ----------- -------------
16 RELATED PARTY TRANSACTIONS
There have been no material changes in the related party transactions described in the last Annual Report, other than those disclosed elsewhere in this condensed set of financial statements.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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