REG - CLS Holdings PLC - Q3 Trading Update

CLS HoldingsAnnouncement

15/11/2023 07:00

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RNS Number : 4524T  CLS Holdings PLC  15 November 2023

 

 
PRESS RELEASE

 

Release date:                15 November 2023

Embargoed until:           07:00

 

 

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

Trading Update for the period 1 July 2023 to 14 November 2023

 

 

Fredrik Widlund, Chief Executive of CLS, commented:

 

"Our business is trading well, and we are making good progress on our
strategic priorities. Leasing activity has increased substantially, with 93
deals securing £10.2 million of annual rent at 9.1% above ERV signed in the 9
months to 30 September. The Group is also benefiting from its high proportion
of index-linked leases and a strong performance in our student and hotel
operations. Underlying vacancy is stable. Consequently, the Board remains
confident that the Group will meet its earnings expectations for the full
year.

 

"Our 2023 refinancing activity is substantially complete and we have made
further progress with refinancing our loans maturing in 2024. The Group has
over £120 million of cash and undrawn facilities.

 

"We are seeing an improving lettings market and some early signs that the
economic headwinds impacting the office sector are moderating. CLS is well
positioned to continue to execute its operational and asset management
initiatives and deliver long term shareholder value."

 

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

 

Vacancy, lettings and occupancy (as at 30 September 2023)

CLS' deal activity in the first three quarters of 2023 is tracking
significantly higher compared with last year and we expect this to continue
throughout Q4 2023 with the UK performing particularly strongly since the
summer. Rental growth is evident in all our markets for the right quality
offices and floor plate sizes.

 

Between 1 July and 30 September 2023, we signed 24 leasing deals securing
£2.4 million of annual rent, over 50% higher than the same period last year,
at 6.2% above ERV. The most significant transactions were a 10-year lease with
Hays Recruitment at Apex Tower and a lease extension with the Borough of
Hammersmith and Fulham at the Clockwork Building, both in the UK.

 

Between 1 January 2023 and 30 September 2023, we have now signed 93 deals
securing £10.2 million of annual rent, over 70% higher than the same period
last year, at 9.1% above ERV. The most significant transaction was at
Kruppstrasse (The Brix), in Essen where we secured a 30-year lease with the
City of Essen for €3.0 million annually.

 

The renewals for the 9-months to 30 September 2023 were 2.3% ahead of
previously contracted rent. Index-linked lease increases for the 9-months to
30 September 2023 were 7.0% in Germany, 5.1% in France and 11.4% at Spring
Gardens in the UK. Since 30 September 2023, we have also secured a 10-year
lease renewal with Honda at Reflex, Bracknell for £1.1 million of annual
rent, which is above the previously contracted rent per sq. ft.

 

The high occupancy levels continue in our Student and Hotel accommodation in
Vauxhall with the student accommodation fully let for the current academic
year and the hotel achieving record revenues.

 

Our underlying vacancy from 30 June to 30 September 2023 was stable but total
vacancy increased slightly driven mainly by the completion of refurbishments
now available to let following our extensive capex programme in 2023 to ensure
the portfolio meets tenants' requirements and sustainability measures.

 * EPRA vacancy rates (Based on 30 June 2023 ERVs):

 Group:      9.9% (30 June 2023:   9.2%)
 UK:       13.2% (30 June 2023: 12.5%)
 Germany:    6.8% (30 June 2023:   6.2%)
 France:     7.4% (30 June 2023:   6.8%)

 

Disposals

The sale of Westminster Tower exchanged in the first half of 2023 and we
expect it to complete for £40.8 million, 1.2% ahead of valuation, to Third.i
on 30 November 2023.

 

In addition, we have agreed heads of terms for the sale of a further four
properties for £51.2 million, on average 13.1% below half-year valuation. We
expect at least three of these to exchange before year-end.

 

If all these five disposals complete, then pro-forma LTV at 30 June 2023,
assuming no other changes, would have fallen from 45.1% to 43.0%.

 

Liquid resources, financing and rent collection

The Group's balance sheet remains resilient and well positioned to meet any
economic headwinds with cash of over £72 million as at 30 September 2023 and
£50 million of committed undrawn Revolving Credit Facilities ('RCFs'). In
October and November, we replaced existing, shorter term facilities with a
£30 million 3+1+1 year RCF and a £20 million 2+1 year RCF respectively.

 

All 2023 refinancing activity has been completed but for one remaining loan of
£24.8 million due in December 2023 which is currently well advanced with
terms agreed. This will complete by year end.

 

As at 30 June 2023, we had 10 loans totaling £183.7 million at a 46% property
LTV which were due to expire in 2024.  We have agreed extensions for two
loans until 2025 and one loan is for Westminster Tower, for which the sale is
due to complete shortly.  As a consequence, we have £93.6 million across
seven loans at a 42% property LTV which require refinancing in 2024 and we are
already well advanced with those loans which are due to expire before June
2024.

 

As at 30 September 2023, our average cost of debt was 3.50% and 80% of total
debt was fixed or subject to interest rate caps.

 

By close on 14 November 2023, we had received 96% of Q4 contractual rents due
(2022: 97%) and for the first three quarters of 2023, we have now received 99%
of contractual rents due (2022: 98%).

 

Developments and refurbishments

We are nearing the end of our programme of significant refurbishments to
improve the quality of our properties to attract tenants and drive rental
income. We expect capital expenditure to drop from c.£50 million in 2023 to
around £30 million in 2024.

 

The lettings of the refurbishment of Park Avenue in Lyon and the development
of The Coade in Vauxhall, which were completed earlier in the year, are
progressing well. At Park Avenue, 7 out of 10 floors are let with 1 floor
completed in the period and with terms out for a further 1 floor and at The
Coade we now have one tenant in occupation and terms out for lettings on two
further floors.

 

"Artesian", 9 Prescot Street, London, our 98,000 sq. ft fully refurbished and
electrified art deco building in Aldgate, was successfully launched on 1
November 2023 with over 130 agents in attendance. Viewings and enquiries have
increased since the launch.

 

Sustainability

In line with our Net Zero Carbon Pathway, we expect to have completed more
than 100 carbon saving projects by the end of 2023 which will save over an
estimated 1,000 tonnes of CO2 emissions per annum making our properties fit
for a net zero future. This includes installing a further 90 kWp of solar PV
panels. Our electric vehicle charging network is now up and running in the UK
with 53 charging points across many of our UK properties to help tenants with
electric vehicle fleet transition.

 

Our sustainability progress was recognised with EPRA Sustainability Best
Practices Recommendations Gold in 2023, up from Silver in 2022. We have also
maintained our GRESB award of 4 green stars.

 

 

-ends-

 

 

For further information, please contact:

 

CLS Holdings plc

(LEI: 213800A357TKB2TD9U78)

www.clsholdings.com (http://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

 

Panmure Gordon

Hugh Rich

+44 (0)20 7886 2733

 

Berenberg

Matthew Armitt

Richard Bootle

+44 (0)20 3207 7800

 

Edelman Smithfield (Financial PR)

Alex Simmons

Hastings Tarrant

+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.

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