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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.70 | 1.90% | 91.40 | 91.30 | 92.00 | 93.30 | 87.00 | 87.00 | 488,706 | 16:29:50 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Agents & Mgrs | 148.7M | -249.8M | -0.6286 | -1.45 | 363.23M |
From May 2019 to May 2024
TIDMCLI
RNS Number : 8116X
CLS Holdings PLC
15 August 2018
CLS Holdings plc
("CLS", the "Company" or the "Group")
announces its Half-Yearly Financial Report
for the 6 months to 30 June 2018
Delivering robust and disciplined growth
CLS is a FTSE 250 property investment company with a GBP1.9bn portfolio in the UK, Germany and France offering geographical diversification with local presence and knowledge.
FINANCIAL HIGHLIGHTS
-- EPRA net asset value: up 3.0% to 294.7 pence (31 December 2017: 286.0 pence) -- Basic net asset value: up 3.3% to 260.2 pence (31 December 2017: 252.0 pence) -- EPRA earnings per share up 15.1% to 6.1 pence (30 June 2017: 5.3 pence)
-- Basic earnings per share of 14.9 pence (30 June 2017: 24.5 pence including Vauxhall Square sale)
-- Profit before tax down to GBP64.9 million (30 June 2017: GBP119.4m including Vauxhall Square sale)
-- Contracted rents rose by 2.2% to GBP106.1 million (31 December 2017: GBP103.8 million)
-- Interim dividend of 2.20 pence per share to be paid on 28 September 2018, an uplift of 7.3% (30 June 2017: 2.05 pence per share)
OPERATIONAL HIGHLIGHTS
Investment Property Portfolio:
-- Net rental income increased by 8.7% to GBP55.0 million (30 June 2017: GBP50.6 million) -- Valuation gains across all regions up 1.6% (1.7% in local currency) -- Proceeds of GBP26.2 million on disposal of 4 properties in the UK and 1 in Germany
-- Acquired properties for GBP69.3 million in the UK and France with an average net initial yield of 5.8%
-- Completed 85 lease events securing rental income of GBP7.1 million -- Vacancy rate reduced to 5.7% (31 December 2017: 5.8%)
Financing:
-- Further reduced the weighted average cost of debt at 31 July 2018 to 2.42% with the early redemption of a retail bond (31 December 2017: 2.51%)
-- Financed or refinanced GBP111.6 million of debt including GBP91.6m fixed at 2.20% -- The loan portfolio as at 31 July 2018 had 79% at fixed rates (31 December 2017: 74%)
Henry Klotz, Executive Chairman of CLS, commented:
"The first six months of 2018 has seen CLS deliver a strong set of results underpinned by robust and disciplined growth. We have delivered on our strategy of refocusing our portfolio with acquisitions at attractive yields and the disposal of properties which no longer meet our return targets.
The strength of our results for the first six months of 2018 underlines the benefits of our geographical diversification across Europe's three largest economies: the UK, Germany and France. Over the period, the Group has produced underlying earnings and valuation gains across all regions in which we operate, which has resulted in solid growth in NAV.
We have locally established management teams and are well positioned to enhance and grow our business. With our 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."
Interim Dividend Timetable
Hot Features
Premium
Announcement 15 August
date 2018
------------- -------------
Ex-Dividend 23 August
date 2018
------------- -------------
Record date 24 August
2018
------------- -------------
Payment date 28 September
2018
------------- -------------
-ends-
CLS will be presenting to analysts at 9.00am on Wednesday, 15 August 2018, at Liberum Capital, Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY
Conference call dial in numbers as follows:
Participant telephone number +44 (0)330 336 9127 Confirmation code 7669957
Please dial in at least 5 minutes prior to the start of the meeting and quote the above confirmation code when prompted.
For further information, please contact:
CLS Holdings plc
(LEI: 213800A357TKB2TD9U78)
www.clsholdings.com
Fredrik Widlund, Chief Executive Officer
John Whiteley, 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
+44 (0)20 3047 2476
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
Continuing to refocus the business
Overview
With 32% of our property assets in Germany and 16% in France, the Group continues to be one of the few real estate companies listed in London with a significant exposure to these countries, two of Europe's largest economies, and the strength of the results for the first six months of 2018 underlines the benefits of this geographical diversification. In the first half of 2018 the Group produced solid underlying earnings and valuation gains across all of our regions, leading to a growth in NAV. We continued to refocus our portfolio, with selective, strategic acquisitions at attractive yields and the disposal of assets with limited upside. We further reduced our average cost of debt with the early redemption of a retail bond. Together these initiatives will translate into higher future core income and solid earnings growth.
Over the six months, EPRA NAV increased by 3.0% to 294.7 pence per share (31 December 2017: 286.0 pence) mainly through EPRA earnings and revaluation uplifts. We delivered 168,664 sq ft (15,669 sqm) of lettings, GBP69.3 million of acquisitions, GBP26.2 million of disposals, and the financing or refinancing of GBP111.6 million of bank loans. Total Property Return for the six months was 4.9% (2017: 6.5%), and total accounting return was 4.5% (2017: 11.0%).
Our business strategy is to invest in well-located office properties. The investment property portfolio is well-diversified with over 700 occupiers across three markets generating rental income well in excess of the Group's cost of debt. Approximately 28% of rents are paid by governments and 28% by major corporations, and 39% of rents are subject to indexation. In the UK, 42% 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 25 lenders across Europe.
Results and Financing
Profit after tax for the six months to 30 June 2018 was GBP60.8 million (2017: GBP100.0 million), corresponding to earnings per share of 14.9 pence (2017: 24.5 pence), including a revaluation uplift of the property portfolio
of GBP31.2 million (2017: GBP48.7 million) and profits on disposals. Excluding these, EPRA earnings per share were 6.1 pence (2017: 5.3 pence), 15.1% ahead of last year.
Shareholders' funds rose in the six months by 3.3% to GBP1,060.1 million, net of dividends of GBP17.5 million paid to shareholders in April.
Interest cover remained high at 3.5 times (2017: 3.7 times), reflecting the Group's ability to generate cash. We financed 8 loans with a total principal amount of GBP111.6 million. On 31 July we redeemed our GBP65 million 5.5% unsecured retail bond, reducing our weighted average cost of debt to 2.42% (31 December 2017: 2.51%), the lowest yet recorded by the Group. At 30 June 2018, net debt (after liquid resources) as a proportion of property assets was 38.4% (31 December 2017: 36.9%).
Net debt rose to GBP765.1 million (31 December 2017: GBP706.2 million), reflecting net acquisitions in the period. Our liquid resources, comprising GBP183.5 million of cash and corporate bonds, demonstrate the strength of the balance sheet and our capacity to invest in the future.
Property Portfolio
By 30 June 2018, the value of the property portfolio of GBP1,885.2 million was GBP82.3 million higher than six months earlier. This was driven by net additions and capital expenditure of GBP53.2 million and the valuation uplift of GBP32.5 million, less a small foreign exchange movement.
We have continued our strategy to refocus our portfolio with the objective to increase income and earnings.
We were close to acquiring a pan-German portfolio of five assets with a value of around GBP80 million but were unwilling to compromise on the rigour of our due diligence. In the UK we acquired two assets: in March we completed the acquisition of Harman House, Uxbridge for GBP51.3 million, and in April we bought 401 King Street, Hammersmith for GBP16.1 million.
Since the start of the year we have sold, or exchanged contracts to sell, eight peripheral assets, five in the six months to 30 June 2018 for GBP26.2 million and three on which we have subsequently exchanged contracts or completed for GBP20.6 million.
The changing nature of office occupation and the need for employers to offer attractive and flexible work space is accelerating and we have incorporated a more contemporary and co-working design in our recent refurbishments. This has been well received by our customers.
In the six months to June, the value of the investment property portfolio rose by 1.6% in sterling and by 1.7% in local currencies, principally driven by Germany. At 30 June 2018, the net initial yield of the portfolio was 5.25% (31 December 2017: 5.21%), almost 300 bps above the Group's cost of debt, underpinning the Group's ability to generate cash.
Overall, the vacancy rate at 30 June 2018 was 5.7%, marginally down on six months earlier (31 December 2017: 5.8%), with the rate in France falling to 3.5% (31 December 2017: 4.4%) and the rest of the portfolio unchanged despite significant volumes of transactions.
Both of our developments, Spring Mews Phase 2, Vauxhall and Ateliers Victoires, Paris, will reach practical completion in the third quarter.
Dividends
In April the Group paid a final dividend for 2017 of 4.30 pence per share and, in September, will pay an interim for 2018 of 2.20 pence per share, an increase over 2017 of 7.3%.
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 is likely to be somewhat subdued in the period leading up to at least Spring 2019 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.
We have local, well-established management teams and a strong balance sheet and, therefore, we are well positioned to enhance and grow our business by investing in the right properties and markets. With a strategy of geographical diversification in the UK, Germany and France, I am confident we will continue to deliver value for our shareholders.
Henry Klotz
Executive Chairman
15 August 2018
Business review
United Kingdom
Repositioning for long-term income growth
The valuation of the UK portfolio rose by 0.1%, which is a blend of the effect of the very different characteristics of our portfolios in London and the rest of the UK. In London, values rose by 0.5% when the effect of developments and acquisitions is excluded, which was a reflection of a marginal increase in like-for-like contracted rent; yields rose a little as rent frees expired. In the rest of the UK, the effect of the 14 lease agreements with the Secretary of State which took effect on 1 April was the main driver in the reduction of like-for-like contracted rent, but was compensated by a hardening of yields, and the overall net effect on valuation was a fall of 2.2% at 30 June 2018. Overall in the UK, like-for-like contracted rent fell by 0.2%, whilst the weighted average UK yields were broadly unchanged.
We have been successful in acquiring two investments in London with strong potential. In March, we bought Harman House, a 129,000 sq ft office building adjacent to Uxbridge underground station, for GBP51.3 million, representing a net initial yield of 6.9%, and with a potential to raise to 7.1% as we capture market rents
at rent review. 401 King Street, Hammersmith was acquired in April for GBP16.1 million including costs. This 24,566 sq ft office is expected to generate 5.9% when all leases revert to market rents, and significantly more after a refurbishment planned for the third floor.
We have continued to reposition the portfolio, selling assets which were either low yielding with limited potential, or provided an unfavourable balance of risks to rewards, or were too small to have a meaningful impact on the Group. Four UK properties were sold in the six months to 30 June 2018, in Peterborough, St Asaph, Datchet and Birmingham, generating proceeds of GBP20.1 million, and since 1 July we have exchanged contracts to sell a further two, in Chertsey and Notting Hill, for GBP18.2 million.
The first half of 2018 was a busy period of asset management in which 62,129 sq ft (5,772 sqm) of space expired in the UK and 59,234 sq ft (5,503 sqm) was let, and the vacancy rate in the UK remained unchanged in the six months at 5.3%, based on rental values. On average, new lettings and rent reviews (excluding indexation uplifts) were achieved at 6.3% above ervs of 31 December 2017. Occupational demand within the London investment portfolio has remained encouraging overall, albeit there are localised examples of space not being taken up as quickly as a year ago.
Phase 2 of Spring Mews, SE11, an GBP8.6 million, 7-storey development of 9,181 sq ft (853 sqm) of offices plus student accommodation will reach practical completion in August, ready for the new student year.
Germany
Actively looking to invest in major cities
The value of the German portfolio increased by GBP25.9 million or 4.6% in local currency, driven by a 1.5% increase in like-for-like contracted rent, and a 9 basis point hardening of yields, whilst ervs on a like-for-like basis rose by 1.3% in the six months.
We continue to see good value in selective opportunities in Germany, but the competition in the investment market continues to strengthen, and despite coming close on a couple of potential acquisitions we did not buy any new investments in the first half of the year. In March, we sold a mixed industrial/office asset at Merkurring, near Hamburg, for GBP6.1 million on which the risk/reward was unfavourably balanced.
There were more lettings in Germany in the six months than expiries, and they were achieved at an average of 8.3% above ervs of 31 December 2017. Whilst 81,235 sq ft (7,547 sqm) of space expired or vacated, 88,904 sq ft (8,259 sqm) renewed or was let. Had the fully let property at Merkurring not been sold, the vacancy rate in Germany would, therefore, have fallen to 7.0%, but lower vacancies in a smaller portfolio meant that it remained unchanged at 7.1%.
France
Delivering value from existing assets
The value of the French portfolio increased by GBP6.2 million or 2.1% in local currency. Excluding the uplift in the value of the development at Ateliers Victoires, the portfolio rose by 1.0%, primarily from an increase in like-for-like contracted rent of 1.5% as vacancies fell, whilst yields rose on the expiry on rent-free periods.
To consolidate our part ownership in Park Avenue in Lyon, we bought a further floor in the building for GBP1.1 million. This 7,244 sq ft (673 sqm) was unoccupied (we then let it) and 7,180 sq ft (667 sqm) of space expired in the six months to June. In total, 20,527 sq ft (1,907 sqm) was leased in the period, at an average of 3.8% above December 2017 ervs, and the vacancy rate consequently fell to 3.5% (31 December 2017: 4.4%).
In July we unconditionally exchanged contracts on the sale of a small property, 18 Rue Stephenson in Paris, for GBP2.5 million.
The development of Ateliers Victoires, our 21,500 sq ft (2,000 sqm) prime office scheme in central Paris close to the Louvre, will reach practical completion in August and terms have been agreed on a pre-letting of the entire building on a 7/9 year lease to a business services company.
Other investments
Generating returns from liquid resources
Other investments
The Group owns a 10.6% shareholding in Catena AB, a Stockholm-listed logistics real estate company. In the six months to 30 June 2018, we received from Catena a dividend of GBP1.6 million, and its share price rose by 12.4%, increasing the market value of the Group's stake to GBP58.8 million (31 December 2017: GBP55.9 million). In July the share price rose by a further 7.7%.
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 GBP46.5 million at the end of June (31 December 2017: GBP65.5 million) and produced a negative return on investment of -1.2% in the six months to June, in line with the relevant benchmark indices.
Financial review
Results for the period
Headlines
Profit after tax attributable to the owners of the Company of GBP60.8 million (2017: GBP100.0 million) generated basic earnings per share of 14.9 pence (2017: 24.5 pence), and EPRA earnings per share of 6.1 pence (2017: 5.3 pence). Gross property assets at 30 June 2018 including those in property, plant and equipment and those held for sale, increased to GBP1,885.2 million (31 December 2017: GBP1,803.4 million) through net acquisitions and revaluation uplifts, net assets per share rose by 3.3% to 260.2 pence (31 December 2017: 252.0 pence) and EPRA net assets per share by 3.0% to 294.7 pence (31 December 2017: 286.0 pence). Total accounting return was 4.5% (2017: 11.0%).
Statement of Comprehensive Income
Rental income for the six months to 30 June 2018 of GBP49.9 million (2017: GBP45.3 million) was higher than last year by a net GBP4.6 million, or 10.2%, mainly because acquisitions, which added GBP6.8 million, far exceeded disposals, which lost only GBP2.7 million.
Operating profit of GBP76.3 million (2017: GBP125.7 million) included a net uplift on the revaluation of investment properties of GBP31.2 million (2017: GBP48.7 million), and a net GBP1.7 million (2017: GBP41.7 million) profit on sale of properties - last year included a large gain on the disposal of Vauxhall Square.
The fall in interest income to GBP4.6 million (2017: GBP5.6 million) reflected a lower average balance of corporate bond investments than in 2017. Finance costs of GBP16.0 million (2017: GBP11.2 million) contained GBP4.4 million of negative foreign exchange variances from translating monetary assets into sterling at the balance sheet date (2017: positive GBP0.2 million).
The tax charge of GBP4.6 million (2017: 20.4 million), which represents an effective rate of 7.1% (2017: 17.1%) is distorted by a fall in the rate of tax in France which has 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 for the period would have been 19.1%.
EPRA Net Assets Per Share
EPRA net assets per share rose from 286.0 pence to 294.7 pence in the six months to 30 June 2018, an increase of 8.7 pence per share, or 3.0%. The increase comprised 6.1 pence of EPRA earnings, from which a dividend of 4.3 pence was paid, a revaluation uplift of 7.4 pence, and a fall of 0.5 pence from other items.
Cash Flow, Net Debt and Gearing
Net cash flow from operating activities was GBP16.8 million (2017: GBP20.8 million). GBP33.5 million was raised from new loans, net of repayments, net proceeds from the sale of corporate bonds generated GBP14.2 million, and GBP26.2 million was received from property disposals. GBP76.9 million was spent on acquisitions and capital expenditure, GBP17.5 million was distributed to shareholders, and at 30 June 2018 the cash balance was less than GBP5 million different from its position six months earlier.
In the six months to 30 June 2018, gross borrowings rose by GBP33.2 million to GBP942.1 million (31 December 2017: GBP908.9 million), principally through financing the acquisition of Harman House. In total, GBP111.6 million of new debt was taken out at an average rate of interest of 2.08% and for an average of 5.9 years, and the Group's balance sheet loan to value at 30 June 2018 was 38.4% (31 December 2017: 36.9%). Interest cover for the six months to 30 June 2018 was 3.5 times (2017: 3.7 times).
On 31 July 2018, we redeemed 17 months early our GBP65.0 million 5.5% unsecured bonds due 2019 for GBP68.4 million plus accrued interest. This had been the most expensive debt left in the Group, and its redemption reduced the weighted average cost of debt from 2.65%, at the end of June 2018, to 2.42%, the lowest in the Group's history.
Debt profile at 31 July 2018
UK France Germany Total
------------------- ------ ------- -------- ------
Gross debt (GBPm) 386.4 308.9 153.9 849.2
------------------- ------ ------- -------- ------
Number of loans 18 18 16 52
------------------- ------ ------- -------- ------
Gearing 29.3% 49.6% 49.0% 38.6%
------------------- ------ ------- -------- ------
Cost of debt 3.55% 1.43% 1.59% 2.42%
------------------- ------ ------- -------- ------
Sustainability
We are pleased to report a reduction of over 20% in CO2 emissions across our managed like-for-like assets in the first half of 2018. 6% of the reduction was through energy efficiency initiatives, on-site renewable installations and refurbishment projects delivering sustainable solutions. The rest of the fall was attributable to the decarbonisation of the UK grid where two thirds of our energy is consumed. Our water usage has fallen by 8%, and we have exceeded our target of 70% recycling across all our UK assets, with a ban on any waste going to landfill.
In the second half the year we shall be installing electric charging points at key assets and introducing smart energy reporting which will enable us to engage with our customers to help them identify savings in their own businesses.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause the results for the year to differ materially from expected or historical results. The Directors considered that the principal risks and uncertainties which affected the Group at the time of the publication of the annual report for the year ended 31 December 2017 were those set out below. A detailed explanation of these risks and uncertainties can be found on pages 20 and 21 of the 2017 Annual Report, which is available at www.clsholdings.com:
-- Underperformance of property investment portfolio due to:
- Cyclical downturn in property market
- Changes in supply of space and/or occupier demand
- Poor asset management
-- Underperformance of corporate bond portfolio -- Increasing building regulation and obsolescence -- Increasing energy costs and regulation -- Unavailability of financing at acceptable prices -- Adverse interest rate movements -- Breach of borrowing covenants -- Foreign currency exposure -- Financial counterparty credit risk -- Impact of UK exit from the EU -- Failure to recruit suitable staff to accommodate investment expansion -- Failure to recruit, develop and retain staff and key executives with the right skills -- Large scale terrorist or cyber attack, environmental disaster or power shortage
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
15 August 2018
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 2018 which comprise 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 15. 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 2018 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
15 August 2018
Financial statements
Condensed group income statement
for the six months ended 30 June 2018
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
------------------------------------ ------ ------------- ------------- -------------
Continuing operations
Group revenue 67.5 60.1 133.4
------------------------------------ ------ ------------- ------------- -------------
Net rental income 3 55.0 50.6 113.1
Administration expenses (11.2) (10.3) (21.6)
Other expenses (8.0) (8.1) (15.9)
------------------------------------ ------ ------------- ------------- -------------
Group revenue less costs 35.8 32.2 75.6
Net movements on revaluation
of investment properties 9 31.2 48.7 94.2
Profit on sale of properties 1.7 41.7 43.7
Net movements on revaluation
of equity investments 6.6 - -
Gain on sale of corporate
bonds and other financial
instruments 1.0 3.1 2.5
------------------------------------ ------ ------------- ------------- -------------
Operating profit 76.3 125.7 216.0
Finance income 4 4.6 5.6 10.1
Finance costs 5 (16.0) (11.2) (34.0)
Share of loss of associates
after tax - (0.7) (0.7)
------------------------------------ ------ ------------- ------------- -------------
Profit before tax 64.9 119.4 191.4
Taxation 6 (4.6) (20.4) (33.5)
------------------------------------ ------ ------------- ------------- -------------
Profit for the period 60.3 99.0 157.9
------------------------------------ ------ ------------- ------------- -------------
Attributable to:
Owners of the Company 60.8 100.0 157.7
Non-controlling interests (0.5) (1.0) 0.2
------------------------------------ ------ ------------- ------------- -------------
60.3 99.0 157.9
------------------------------------ ------ ------------- ------------- -------------
Earnings per share from continuing
operations (expressed in
pence per share)
Basic and diluted 7 14.9 24.5 38.7
------------------------------------ ------ ------------- ------------- -------------
Condensed group statement of comprehensive income
for the six months ended 30 June 2018
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
-------------------------------------------------- ------------- ------------- ------------
Profit for the period 60.3 99.0 157.9
-------------------------------------------------- ------------- ------------- ------------
Other comprehensive income
Items that will not be reclassified
to profit or loss
Foreign exchange differences (3.9) 6.7 7.7
-------------------------------------------------- ------------- ------------- ------------
Items that may be reclassified to
profit or loss
Fair value (losses)/gains on corporate
bonds and other financial investments (4.9) 5.4 13.9
Fair value gains taken to gain on
sale of corporate bonds and other
financial investments, net of impairments (1.0) (2.0) (0.9)
Revaluation of property, plant and
equipment (1.0) (0.8) (1.5)
Fair value gains taken to profit
on sale of properties - (3.9) (3.9)
Deferred tax on net fair value (gains)/losses 0.1 - 1.9
-------------------------------------------------- ------------- ------------- ------------
Total items that may be reclassified
to profit or loss (6.8) (1.3) 9.5
-------------------------------------------------- ------------- ------------- ------------
Total comprehensive income for the
period 49.6 104.4 175.1
-------------------------------------------------- ------------- ------------- ------------
Attributable to:
Owners of the Company 50.7 105.2 174.4
Non-controlling interests (1.1) (0.8) 0.7
-------------------------------------------------- ------------- ------------- ------------
49.6 104.4 175.1
-------------------------------------------------- ------------- ------------- ------------
Condensed group balance sheet
at 30 June 2018
30 30 31
June June December
2018 2017 2017
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
------------------------------------- ------ ------------- ------------- ----------
Non-current assets
Investment properties 9 1,832.0 1,499.6 1,753.4
Property, plant and equipment 10 100.0 103.8 102.8
Goodwill and intangibles 1.4 1.2 1.3
Other financial investments 11 105.7 115.6 121.8
Derivative financial instruments - - 0.1
Deferred tax 3.3 3.2 3.3
------------------------------------- ------ ------------- ------------- ----------
2,042.4 1,723.4 1,982.7
------------------------------------- ------ ------------- ------------- ----------
Current assets
Trade and other receivables 13.9 65.9 9.5
Properties held for sale 22.3 34.4 17.9
Derivative financial instruments - - 0.6
Cash and cash equivalents 137.0 172.0 146.7
------------------------------------- ------ ------------- ------------- ----------
173.2 272.3 174.7
------------------------------------- ------ ------------- ------------- ----------
Total assets 2,215.6 1,995.7 2,157.4
------------------------------------- ------ ------------- ------------- ----------
Current liabilities
Trade and other payables (56.1) (51.8) (58.9)
Current tax (5.6) (19.2) (11.5)
Borrowings 12 (132.2) (122.6) (107.1)
Derivative financial instruments (2.6) (0.1) -
------------------------------------- ------ ------------- ------------- ----------
(196.5) (193.7) (177.5)
------------------------------------- ------ ------------- ------------- ----------
Non-current liabilities
Deferred tax (138.0) (126.8) (137.9)
Borrowings 12 (809.9) (696.5) (801.8)
Derivative financial instruments (5.4) (8.1) (6.9)
------------------------------------- ------ ------------- ------------- ----------
(953.3) (831.4) (946.6)
------------------------------------- ------ ------------- ------------- ----------
Total liabilities (1,149.8) (1,025.1) (1,124.1)
------------------------------------- ------ ------------- ------------- ----------
Net assets 1,065.8 970.6 1,033.3
------------------------------------- ------ ------------- ------------- ----------
Equity
Share capital 13 11.0 11.0 11.0
Share premium 83.1 83.1 83.1
Other reserves 115.4 131.1 143.0
Retained earnings 850.6 740.1 789.4
------------------------------------- ------ ------------- ------------- ----------
Equity attributable to owners
of the Company 1,060.1 965.3 1,026.5
Non-controlling interests 5.7 5.3 6.8
------------------------------------- ------ ------------- ------------- ----------
Total equity 1,065.8 970.6 1,033.3
------------------------------------- ------ ------------- ------------- ----------
Condensed group statement of changes in equity
for the six months ended 30 June 2018
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 investments1 - - (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
------------------------------ --------- --------- ---------- ---------- -------- ------------ --------
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 2017 11.0 83.1 125.9 656.4 876.4 6.1 882.5
------------------------------ --------- --------- ---------- ---------- ------- ------------- --------
Arising in the
six months ended
30 June 2017:
Total comprehensive
income for the
period - - 5.2 100.0 105.2 (0.8) 104.4
Dividends to shareholders - - - (16.3) (16.3) - (16.3)
------------------------------ --------- --------- ---------- ---------- ------- ------------- --------
Total changes arising
in the period - - 5.2 83.7 88.9 (0.8) 88.1
------------------------------ --------- --------- ---------- ---------- ------- ------------- --------
At 30 June 2017 11.0 83.1 131.1 740.1 965.3 5.3 970.6
------------------------------ --------- --------- ---------- ---------- ------- ------------- --------
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 2017 11.0 83.1 125.9 656.4 876.4 6.1 882.5
------------------------------ --------- --------- ---------- ---------- -------- ------------- --------
Arising in the
year ended 31 December
2017:
Total comprehensive
income for the
year - - 16.7 157.7 174.4 0.7 175.1
Employee Performance
Incentive Plan
charge - - 0.4 - 0.4 - 0.4
Dividends to shareholders - - - (24.7) (24.7) - (24.7)
------------------------------ --------- --------- ---------- ---------- -------- ------------- --------
Total changes arising
in 2017 - - 17.1 133.0 150.1 0.7 150.8
------------------------------ --------- --------- ---------- ---------- -------- ------------- --------
At 31 December
2017 11.0 83.1 143.0 789.4 1,026.5 6.8 1,033.3
------------------------------ --------- --------- ---------- ---------- -------- ------------- --------
1 As a result of adopting IFRS 9 for the first time, previously recognised fair value movements have been transferred from other reserves to retained earnings in line with the disclosure made at the year end
Condensed group statement of cash flows
for the six months ended 30 June 2018
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
---------------------------------------------- ------ ------------- ------------- -------------
Cash flows from operating activities
Cash generated from operations 14 36.8 37.4 75.9
Interest received 1.9 4.6 8.8
Interest paid (12.3) (13.7) (25.4)
Income tax paid (9.6) (7.5) (16.1)
---------------------------------------------- ------ ------------- ------------- -------------
Net cash inflow from operating
activities 16.8 20.8 43.2
---------------------------------------------- ------ ------------- ------------- -------------
Cash flows from investing activities
Purchase of investment properties (71.1) (55.8) (230.8)
Capital expenditure on investment
properties (5.8) (13.5) (24.2)
Proceeds from sale of investment
properties 26.2 168.9 241.9
Purchases of property, plant
and equipment (3.6) (2.4) (3.3)
Proceeds from sale of property,
plant and equipment - 5.7 -
Purchase of corporate bonds (37.3) (6.7) (11.9)
Proceeds from sale of corporate
bonds 51.5 6.9 12.0
Proceeds from sale of equity
investments - 5.4 5.6
Dividends received from equity
investments 1.6 1.3 1.4
Purchase of intangibles (0.1) - -
Proceeds from/(costs of) foreign
currency transactions 2.1 1.0 (3.8)
---------------------------------------------- ------ ------------- ------------- -------------
Net cash inflow/(outflow) from
investing activities (36.5) 110.8 (13.1)
---------------------------------------------- ------ ------------- ------------- -------------
Cash flows from financing activities
Dividends paid (17.5) (16.3) (24.7)
New loans 108.5 50.7 211.6
Issue costs of new loans (1.5) (0.4) (2.5)
Repayment of loans (73.5) (93.2) (176.9)
---------------------------------------------- ------ ------------- ------------- -------------
Net cash (outflow) from financing
activities 16.0 (59.2) 7.5
---------------------------------------------- ------ ------------- ------------- -------------
Cash flow element of net (decrease)/increase
in cash and cash equivalents (3.7) 72.4 37.6
Foreign exchange (losses)/gains (0.5) 0.6 4.6
---------------------------------------------- ------ ------------- ------------- -------------
Net (decrease)/increase in
cash and cash equivalents (4.2) 73.0 42.2
Cash and cash equivalents at
the beginning of the period 141.2 99.0 99.0
---------------------------------------------- ------ ------------- ------------- -------------
Cash and cash equivalents at
the end of the period 137.0 172.0 141.2
---------------------------------------------- ------ ------------- ------------- -------------
1 At 31 December 2017, the Group held, on behalf of a third party, cash of GBP5.5 million which was paid to the third party in January 2018. As the Group held no beneficial interest in this cash at the year end it has been excluded from the group statement of cash flows.
Notes to the condensed group financial statements
30 June 2018
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 2017 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, apart from a number of new standards and amendments to IFRSs which became effective for the financial year beginning on 1 January 2018. These new standards and amendments are listed below:
-- IFRS 2 (amendments), Classification and measurement of share-based payment transactions
-- IFRS 9 Financial Instruments
-- IFRS 15 Revenue from Contracts with Customers
-- IAS 40 (amendments) Transfers of Investment Property
-- IFRIC 22 Foreign Currency Transactions and advance consideration
For the reasons set out on pages 94 and 95 of the latest audited annual financial statements, 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 2018 except for a reclassification arising as a result of IFRS 9.
Listed equity securities (see note 11) are treated as available for sale assets and held at market value on the balance sheet. Under IAS 39, movements in fair value were recognised directly in equity through other comprehensive income. On derecognition or impairment of these assets, any gains previously recognised in equity were recycled to the income statement. Under IFRS 9, this accounting treatment has changed, and fair value movements are now recognised directly in the income statement. On transition to IFRS 9 this resulted in a material reclassification of the available for sale reserve to retained earnings. The amount reclassified on transition was GBP17.9 million.
2 Going concern
The directors regularly stress-test the business model to ensure that the Group has adequate working capital. They have reviewed the current and projected financial position of the Group, 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 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 Spring Mews hotel, corporate bonds, shares in Catena AB and First Camp Sverige Holding 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
Sweden
Other Investments
All transactions between the operating segments have been eliminated on consolidation.
The Group's results for the six months ended 30 June 2018 by operating segment were as follows:
Investment Property
-------------------------------------
Central
United Other Head Total
Kingdom Germany France Sweden investments Office Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- -------- ------- ------- ------------ -------- -------
Rental income 26.9 15.5 7.5 - - - 49.9
Other property-related
income 0.6 - 0.1 - 6.3 - 7.0
Service charge
income 3.3 4.5 2.8 - - - 10.6
------------------------ --------- -------- ------- ------- ------------ -------- -------
Revenue 30.8 20.0 10.4 - 6.3 - 67.5
Service charges
and similar
expenses (4.8) (4.8) (2.9) - - - (12.5)
------------------------ --------- -------- ------- ------- ------------ -------- -------
Net rental
income 26.0 15.2 7.5 - 6.3 - 55.0
Administration
expenses (3.0) (1.3) (1.1) - (2.9) (2.9) (11.2)
Other expenses (2.7) (1.5) (0.4) - (3.4) - (8.0)
------------------------ --------- -------- ------- ------- ------------ -------- -------
Group revenue
less costs 20.3 12.4 6.0 - - (2.9) 35.8
Net movements
on revaluation
of investment
properties 0.9 24.0 6.3 - - - 31.2
Profit on
sale of properties 1.5 0.1 - - 0.1 - 1.7
Net movements
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 - 7.7 (2.9) 76.3
Finance income - - - - 4.6 - 4.6
Finance costs (5.5) (2.4) (1.2) - (4.9) (2.0) (16.0)
Share of loss
of associates - - - - - - -
------------------------ --------- -------- ------- ------- ------------ -------- -------
Profit before
tax 17.2 34.1 11.1 - 7.4 (4.9) 64.9
------------------------ --------- -------- ------- ------- ------------ -------- -------
The Group's results for the six months ended 30 June 2017 by operating segment were as follows:
Investment Property
Central
United Other Head Total
Kingdom Germany France Sweden investments Office Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- -------- ------- ------- ------------- -------- -------
Rental income 27.2 10.4 7.7 - - - 45.3
Other property-related
income 0.9 0.4 0.3 - 5.7 - 7.3
Service charge
income 2.4 2.4 2.7 - - - 7.5
------------------------ --------- -------- ------- ------- ------------- -------- -------
Revenue 30.5 13.2 10.7 - 5.7 - 60.1
Service charges
and similar
expenses (4.2) (2.5) (2.8) - - - (9.5)
------------------------ --------- -------- ------- ------- ------------- -------- -------
Net rental
income 26.3 10.7 7.9 - 5.7 - 50.6
Administration
expenses (2.6) (0.7) (0.9) (0.1) (3.1) (2.9) (10.3)
Other expenses (2.9) (1.1) (0.5) - (3.6) - (8.1)
------------------------ --------- -------- ------- ------- ------------- -------- -------
Group revenue
less costs 20.8 8.9 6.5 (0.1) (1.0) (2.9) 32.2
Net movements
on revaluation
of investment
properties 20.8 16.1 11.8 - - - 48.7
Profit on
sale of properties 41.7 - - - - - 41.7
Gain on sale
of corporate
bonds - - - - 3.1 - 3.1
------------------------ --------- -------- ------- ------- ------------- -------- -------
Segment operating
profit/(loss) 83.3 25.0 18.3 (0.1) 2.1 (2.9) 125.7
Finance income 0.1 - - 1.3 4.2 - 5.6
Finance costs (6.7) (1.5) (1.0) - (0.6) (1.4) (11.2)
Share of loss
of associates - - - - (0.7) - (0.7)
------------------------ --------- -------- ------- ------- ------------- -------- -------
Profit before
tax 76.7 23.5 17.3 1.2 5.0 (4.3) 119.4
------------------------ --------- -------- ------- ------- ------------- -------- -------
The Group's results for the year ended 31 December 2017 were as follows:
Investment Property
-------------------------------------
Central
United Other Head Total
Kingdom Germany France Sweden investments Office Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- -------- ------- ------- ------------- -------- -------
Rental income 54.1 24.4 15.2 - - - 93.7
Other property-related
income 2.8 0.6 0.5 - 17.5 - 21.4
Service charge
income 7.2 5.9 5.2 - - - 18.3
------------------------ --------- -------- ------- ------- ------------- -------- -------
Revenue 64.1 30.9 20.9 - 17.5 - 133.4
Service charges
and similar
expenses (9.1) (5.9) (5.3) - - - (20.3)
------------------------ --------- -------- ------- ------- ------------- -------- -------
Net rental
income 55.0 25.0 15.6 - 17.5 - 113.1
Administration
expenses (6.0) (1.8) (1.7) - (7.4) (4.7) (21.6)
Other expenses (6.2) (2.5) (0.7) - (6.5) - (15.9)
------------------------ --------- -------- ------- ------- ------------- -------- -------
Group revenue
less costs 42.8 20.7 13.2 - 3.6 (4.7) 75.6
Net movements
on revaluation
of investment
properties 39.9 34.2 20.1 - - - 94.2
Profit/(loss)
on sale of
properties 43.7 (0.1) 0.1 - - - 43.7
Gain on sale
of corporate
bonds - - - - 4.5 - 4.5
Permanent
impairment
of value of
corporate
bond - - - - (2.0) - (2.0)
------------------------ --------- -------- ------- ------- ------------- -------- -------
Segment operating
profit/(loss) 126.4 54.8 33.4 - 6.1 (4.7) 216.0
Finance income - - - 2.2 7.9 - 10.1
Finance costs (23.6) (2.9) (2.3) - (1.9) (3.3) (34.0)
Share of loss
of associates
after tax - - - - (0.7) - (0.7)
------------------------ --------- -------- ------- ------- ------------- -------- -------
Profit before
tax 102.8 51.9 31.1 2.2 11.4 (8.0) 191.4
------------------------ --------- -------- ------- ------- ------------- -------- -------
Segment assets and liabilities
Assets Liabilities
------------------------------- -------------------------------
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- -------- -------- ----------- -------- -------- -----------
Investment Property
United Kingdom 980.6 902.5 925.4 529.5 553.0 510.3
Germany 607.9 397.7 584.8 340.8 220.0 346.3
France 322.5 281.8 296.1 219.0 186.5 201.9
Sweden - 48.6 10.6 - 3.6 8.1
Other investments 304.6 365.1 340.5 60.5 62.0 57.5
--------------------- -------- -------- ----------- -------- -------- -----------
2,215.6 1,995.7 2,157.4 1,149.8 1,025.1 1,124.1
--------------------- -------- -------- ----------- -------- -------- -----------
Segment capital expenditure
Six Six Year
months months ended
ended ended 31 December
30 June 30 June 2017
2018 2017 GBPm
GBPm GBPm
--------------------- --------- --------- ------------
Investment Property
United Kingdom 74.5 41.8 66.2
Germany 0.6 15.2 190.1
France 3.8 3.6 6.0
Other investments 2.0 1.8 -
------------------------ --------- --------- ------------
80.9 62.4 262.3
--------------------- --------- --------- ------------
4 Finance income
Six Six Year
months months ended
ended ended 31 December
30 June 30 June 2017
2018 2017 GBPm
GBPm GBPm
---------------------- --------- --------- ------------
Interest income 3.0 4.1 6.9
Other finance income 1.6 1.3 1.4
Foreign exchange
variances - 0.2 1.8
------------------------- --------- --------- ------------
4.6 5.6 10.1
---------------------- --------- --------- ------------
5 Finance costs
Six Six Year
months months ended
ended ended 31 December
30 June 30 June 2017
2018 2017 GBPm
GBPm GBPm
------------------------------------------ --------- --------- ------------
Interest expense
Bank loans 9.2 8.1 17.3
Debenture loan - 1.3 2.4
Secured notes 1.3 1.4 2.8
Unsecured bonds 1.8 1.8 3.6
Amortisation of loan issue costs 0.8 0.8 1.6
------------------------------------------ --------- --------- ------------
Total interest costs 13.1 13.4 27.7
Less interest capitalised on development
projects - (0.5) (0.5)
------------------------------------------ --------- --------- ------------
13.1 12.9 27.2
Loss on early redemption of debt - - 9.7
Foreign exchange variances 4.4 - -
------------------------------------------ --------- --------- ------------
Movement in fair value of derivative
financial instruments
Interest rate swaps: transactions
not qualifying as hedges (1.5) (1.7) (2.9)
------------------------------------------ --------- --------- ------------
16.0 11.2 34.0
------------------------------------------ --------- --------- ------------
6 Taxation
Six Six Year
months months ended
ended ended 31 December
30 June 30 June 2017
2018 2017 GBPm
GBPm GBPm
-------------- --------- --------- ------------
Current tax 3.7 16.7 17.7
Deferred tax 0.9 3.7 15.8
----------------- --------- --------- ------------
4.6 20.4 33.5
-------------- --------- --------- ------------
Tax for the six month period has been charged at 7.1% (six months ended 30 June 2017: 17.1%; year ended 31 December 2017: 20.7%), 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 7.1% is lower than the Weighted Average Tax Rate of 19.1%. This is predominantly a result of a deferred tax credit arising from a future decrease in the French Corporate Income Tax rate from 28% to 25% by 2022.
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.
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Earnings GBPm GBPm GBPm
--------------------------------------- --------- --------- ------------
Profit for the period 60.8 100.0 157.7
Net movements on revaluation of
investment properties (31.2) (48.7) (94.2)
Loss on early redemption of debt,
net of tax - - 7.9
Profit on sale of properties, net
of tax (1.7) (29.1) (30.8)
Gain on sale of corporate bonds,
net of tax (0.8) (3.1) (3.6)
Permanent impairment of value of
corporate bond, net of tax - - 1.6
Movements on revaluation of equity
investments, net of foreign exchange (2.8) - -
Change in fair value of derivative
financial instruments (0.3) (2.1) (2.9)
Impairment of carrying value of
associates - 0.7 0.7
Deferred tax relating to the above
adjustments 0.9 3.7 15.8
--------------------------------------- --------- --------- ------------
EPRA earnings 24.9 21.4 52.2
--------------------------------------- --------- --------- ------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Weighted average number of ordinary 2018 2017 2017
shares in circulation Number Number Number
------------------------------------- ------------ ------------ ------------
Weighted average number of ordinary
shares in circulation 407,395,760 407,395,760 407,395,760
------------------------------------- ------------ ------------ ------------
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Earnings per share Pence Pence Pence
-------------------- --------- --------- ------------
Basic and diluted 14.9 24.5 38.7
EPRA 6.1 5.3 12.8
-------------------- --------- --------- ------------
* On 8 May 2017, the Company subdivided each of its ordinary shares of 25 pence into ten new ordinary shares of 2.5 pence each. In accordance with IAS 33 Earnings per Share, the weighted average number of ordinary shares in circulation and earnings per share have been restated as if the subdivision were effective from 1 January 2017.
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
2018 2017 2017
Net Assets GBPm GBPm GBPm
-------------------------------------- -------- -------- -----------
Basic net assets attributable to
owners of the Company 1,060.1 965.3 1,026.5
Adjustment to increase fixed rate
debt to fair value, net of tax (6.2) (16.6) (5.9)
Goodwill as a result of deferred
tax (1.1) (1.1) (1.1)
-------------------------------------- -------- -------- -----------
EPRA triple net assets 1,052.8 947.6 1,019.5
Deferred tax on property and other
non-current assets, net of minority
interests 133.5 121.6 133.4
Fair value of derivative financial
instruments 8.0 8.2 6.2
Adjustment to decrease fixed rate
debt to book value, net of tax 6.2 16.6 5.9
-------------------------------------- -------- -------- -----------
EPRA net assets 1,200.5 1,094.0 1,165.0
-------------------------------------- -------- -------- -----------
30 June 30 June 31 December
Number of ordinary shares in 2018 2017 2017
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
2018 2017 2017
Net Assets per Share Pence Pence Pence
---------------------- -------- -------- -----------
Basic 260.2 236.9 252.0
EPRA 294.7 268.5 286.0
EPRA triple net 258.4 232.6 250.2
---------------------- -------- -------- -----------
9 Investment properties
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
---------------- -------- -------- -----------
United Kingdom 944.2 850.7 895.0
Germany 591.3 373.5 568.4
France 296.5 275.4 290.0
---------------- -------- -------- -----------
1,832.0 1,499.6 1,753.4
---------------- -------- -------- -----------
The movement in investment properties since the last reported balance sheet was as follows:
United
Kingdom Germany France Total
GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- ------- -------
At 1 January 2018 895.0 568.4 290.0 1,753.4
Acquisitions 67.4 - 1.9 69.3
Capital expenditure 5.8 0.3 1.9 8.0
Disposals (9.9) - - (9.9)
Net movements on revaluation
of investment properties 0.9 24.0 6.3 31.2
Rent-free period debtor adjustments 0.3 1.9 (0.1) 2.1
Exchange rate variances - (2.1) (1.0) (3.1)
Transfer to held for sale (15.3) (1.2) (2.5) (19.0)
------------------------------------- -------- -------- ------- -------
At 30 June 2018 944.2 591.3 296.5 1,832.0
------------------------------------- -------- -------- ------- -------
The investment properties (and the hotel and landholding detailed in note 10) were revalued at 30 June 2018 to their fair value. Valuations were based on current prices in an active market for all properties. The property valuations were carried out by external, professionally qualified valuers as follows:
United Kingdom: Cushman and Wakefield
Germany: Cushman and Wakefield
France: Jones Lang LaSalle
Sweden: L Fällström AB
Investment properties include leasehold properties with a carrying value of GBP74.1 million (30 June 2017: GBP37.9 million; 31 December 2017: GBP73.1 million).
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 2018. 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
2018 2017 2017
GBPm GBPm GBPm
----------------------- -------- -------- -----------
Hotel 27.1 27.0 27.0
Land and buildings 69.2 74.4 73.2
Fixtures and fittings 3.7 2.4 2.6
----------------------- -------- -------- -----------
Total 100.0 103.8 102.8
----------------------- -------- -------- -----------
The movement in property, plant and equipment since the last reported balance sheet was as follows:
Land Fixtures
and and
Hotel buildings fittings Total
GBPm GBPm GBPm GBPm
------------------------------ ------ ----------- --------- ------
At 1 January 2018 27.6 74.3 5.8 107.7
Additions 0.1 2.1 1.4 3.6
Exchange rate variances - (4.8) - (4.8)
Disposals - - (0.9) (0.9)
Revaluation 0.1 (1.1) - (1.0)
------------------------------ ------ ----------- --------- ------
At 30 June 2018 27.8 70.5 6.3 104.6
------------------------------ ------ ----------- --------- ------
Comprising:
At cost - - 6.3 6.3
At valuation 30 June 2018 27.8 70.5 - 98.3
------------------------------ ------ ----------- --------- ------
27.8 70.5 6.3 104.6
------------------------------ ------ ----------- --------- ------
Accumulated depreciation and
impairment
At 1 January 2018 (0.6) (1.1) (3.2) (4.9)
Disposals - - 0.9 0.9
Depreciation charge (0.1) (0.2) (0.3) (0.6)
------------------------------ ------ ----------- --------- ------
At 30 June 2018 (0.7) (1.3) (2.6) (4.6)
------------------------------ ------ ----------- --------- ------
Net book value
At 30 June 2018 27.1 69.2 3.7 100.0
------------------------------ ------ ----------- --------- ------
At 31 December 2017 27.0 73.2 2.6 102.8
------------------------------ ------ ----------- --------- ------
11 Other financial investments
30 June 30 June 31 December
Investment Destination 2018 2017 2017
type of Investment GBPm GBPm GBPm
------------------------ ---------------------- --------------- -------- -------- -----------
Available-for-sale
financial investments
carried at fair Listed corporate
value bonds UK 9.1 11.1 11.5
Eurozone 1.8 8.4 6.3
Other 35.6 46.5 47.7
-------- -------- -----------
46.5 66.0 65.5
Listed equity
securities Sweden 58.8 49.1 55.9
Unlisted investments Sweden 0.4 0.5 0.4
---------------------- ---------------------------------------- -------- -------- -----------
105.7 115.6 121.8
--------------------------------------------------------------- -------- -------- -----------
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 Level
1 Level 3
Quoted 2 Observable Other
market market valuation
price data methods* Total
GBPm GBPm GBPm GBPm
--------------------------------------------- -------- -------------- ---------- -------
At 1 January 2018 55.9 65.5 0.4 121.8
Additions - 37.3 - 37.3
Disposals - (50.5) - (50.5)
Fair value movements recognised
in reserves on available-for-sale
assets - (4.9) - (4.9)
Fair value movements recognised
in profit before tax on available-for-sale
assets 6.6 (0.9) - 5.7
Exchange rate variations (3.7) - - (3.7)
--------------------------------------------- -------- -------------- ---------- -------
At 30 June 2018 58.8 46.5 0.4 105.7
--------------------------------------------- -------- -------------- ---------- -------
* Unlisted equity shares have been valued using multiples from comparable listed organisations.
Corporate Bond Portfolio
At 30 June 2018
Sector Banking Insurance Travel Telecoms Energy Other Total
and and IT and
Tourism Resources
--------- ----------- --------------- -------- ------------- ----------------- ------------ --------
Value GBP14.9m GBP1.8m GBP7.3m GBP10.2m GBP5.0m GBP7.3m GBP46.5m
Running
yield 7.6% 6.1% 7.4% 7.3% 7.7% 3.1% 6.8%
--------- ----------- --------------- -------- ------------- ----------------- ------------ --------
Issuers Standard Brit Insurance British Telecom Freeport-McMoRan Qurate
Chartered PGH Capital Airways Italia Transocean Retail
Societe Stena CenturyLink Enel Yum! Brands
Generale Hertz Seagate Stora Enso
Deutsche SAS Xerox L Brands
Bank Dell
Credit
Agricole
Unicredit
Barclays
Lloyds
HSBC
RBS
--------- ----------- --------------- -------- ------------- ----------------- ------------ --------
12 Borrowings
Maturity profile
Bank Debenture Unsecured Secured
loans loans bonds notes Total
At 30 June 2018 GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- --------- -------- --------
Within one year or on
demand 64.9 - 65.0 4.2 134.1
More than one but not
more than two years 58.4 - - 4.2 62.6
More than two but not
more than five years 544.1 - - 52.8 596.9
More than five years 155.0 - - - 155.0
-------------------------------- ------- ---------- --------- -------- --------
822.4 - 65.0 61.2 948.6
Unamortised issue costs (5.8) - (0.2) (0.5) (6.5)
-------------------------------- ------- ---------- --------- -------- --------
Borrowings 816.6 64.8 60.7 942.1
Less amount due for settlement
within 12 months (63.3) - (64.8) (4.1) (132.2)
-------------------------------- ------- ---------- --------- -------- --------
Amount due for settlement
after 12 months 753.3 - - 56.6 809.9
-------------------------------- ------- ---------- --------- -------- --------
Bank Debenture Unsecured Secured
loans loans bonds notes Total
At 30 June 2017 GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- ---------- --------- -------- --------
Within one year or on
demand 117.6 2.1 - 4.2 123.9
More than one but not
more than two years 44.7 2.4 - 4.2 51.3
More than two but not
more than five years 424.9 8.9 65.0 12.5 511.3
More than five years 81.2 11.1 - 44.4 136.7
-------------------------------- -------- ---------- --------- -------- --------
668.4 24.5 65.0 65.3 823.2
Unamortised issue costs (3.2) - (0.3) (0.6) (4.1)
-------------------------------- -------- ---------- --------- -------- --------
Borrowings 665.2 24.5 64.7 64.7 819.1
Less amount due for settlement
within 12 months (116.5) (2.1) 0.1 (4.1) (122.6)
-------------------------------- -------- ---------- --------- -------- --------
Amount due for settlement
after 12 months 548.7 22.4 64.8 60.6 696.5
-------------------------------- -------- ---------- --------- -------- --------
Bank Debenture Unsecured Secured
loans loans bonds notes Total
At 31 December 2017 GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- ---------- --------- -------- --------
Within one year or on
demand 104.5 - - 4.2 108.7
More than one but not
more than two years 55.7 - 65.0 4.2 124.9
More than two but not
more than five years 501.4 - - 54.9 556.3
More than five years 124.4 - - - 124.4
-------------------------------- -------- ---------- --------- -------- --------
786.0 - 65.0 63.3 914.3
Unamortised issue costs (4.9) - - (0.5) (5.4)
-------------------------------- -------- ---------- --------- -------- --------
Borrowings 781.1 - 65.0 62.8 908.9
Less amount due for settlement
within 12 months (103.0) - - (4.1) (107.1)
-------------------------------- -------- ---------- --------- -------- --------
Amount due for settlement
after 12 months 678.1 - 65.0 58.7 801.8
-------------------------------- -------- ---------- --------- -------- --------
Fair values
Carrying amounts Fair values
------------------------------- -------------------------------
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ -------- -------- ----------- -------- -------- -----------
Current borrowings 132.2 122.6 107.1 132.2 122.6 107.1
Non-current borrowings 809.9 696.5 801.8 817.5 716.7 809.0
------------------------ -------- -------- ----------- -------- -------- -----------
942.1 819.1 908.9 949.7 839.3 916.1
------------------------ -------- -------- ----------- -------- -------- -----------
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 in Treasury ordinary
shares in Treasury ordinary circulation shares shares
circulation shares shares GBPm GBPm GBPm
------------------- ------------- ----------- ----------- ------------- --------- ---------
At 1 January 2018
and 30 June 2018 407,395,760 31,382,020 438,777,780 10.2 0.8 11.0
------------------- ------------- ----------- ----------- ------------- --------- ---------
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
2017 40,739,576 3,138,202 43,877,778 10.2 0.8 11.0
Share subdivision1 366,656,184 28,243,818 394,900,002 - - -
-------------------- ---------------- ----------- ----------- ---------------- --------- ---------
At 30 June
2017 407,395,760 31,382,020 438,777,780 10.2 0.8 11.0
-------------------- ---------------- ----------- ----------- ---------------- --------- ---------
1 On 8 May 2017, the Company subdivided each of its existing ordinary shares of 25 pence each into ten new ordinary shares of 2.5 pence each.
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
2017 40,739,576 3,138,202 43,877,778 10.2 0.8 11.0
Share subdivision1 366,656,184 28,243,818 394,900,002 - - -
-------------------- ---------------- ----------- ----------- ---------------- --------- ---------
At 31 December
2017 407,395,760 31,382,020 438,777,780 10.2 0.8 11.0
-------------------- ---------------- ----------- ----------- ---------------- --------- ---------
1 On 8 May 2017, the Company subdivided each of its existing ordinary shares of 25 pence each into ten new ordinary shares of 2.5 pence each.
14 Cash generated from operations
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
-------------------------------------------- --------- --------- ------------
Operating profit 76.3 125.7 216.0
Adjustments for:
Net movements on revaluation of
investment properties (31.2) (48.7) (94.2)
Net movements on revaluation of
equity investments (6.6) - -
Depreciation and amortisation 0.6 0.5 1.1
Non-cash rental income (2.1) (0.4) (3.5)
Share-based payment expense 0.4 - 0.4
Profit on sale of investment properties (1.7) (41.7) (43.7)
(Gain)/loss on sale of other financial
instruments, net of impairments (1.0) (3.1) (2.5)
Changes in working capital:
(Increase)/decrease in receivables (0.1) 2.3 2.6
Increase/(decrease) in payables 2.2 2.8 (0.3)
-------------------------------------------- --------- --------- ------------
Cash generated from operations 36.8 37.4 75.9
-------------------------------------------- --------- --------- ------------
15 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
IR FKQDKOBKDOFD
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