Contents. of Opportunities. Overview. Financials. Portfolio. Looking forwards. Summary. John Whiteley. Henry Klotz. Simon Wigzell

Transcription

1 Annual Results

2 Contents Overview Financials Portfolio Looking forwards Summary Henry Klotz Executive Vice Chairman John Whiteley Chief Financial Officer Taking advantage of Opportunities Simon Wigzell Head of Group Property 2

3 About CLS Top TSR performance since 2008 in UK listed property sector: 324.3% (27.2% pa compound) Specialist in high-yielding offices and opportunistically adding value Cash generative: high yield (7.0%) vs low cost of debt (3.64%) Rental income 85.6m Property portfolio 1.1bn Management strong alignment of interest via shares UK 53% Property investments by value 31 December 2013 France 21% Germany 18% Direct 5% Indirect 3% Sweden 3

4 Achievements in 2013 A Good Time to be Buying Property Healthy growth in NAV Acquisitions: 165.3m of acquisitions at a yield of 11.6% Disposals: 26.9m 1, at a yield of 3.3% Good progress on developments at Vauxhall Square, Spring Mews and Clifford s Inn Including conditional exchange with student operator at Vauxhall Square Low cost of debt maintained 1.6m shares issued at 0.5% discount to prevailing share price Delivered Total Shareholder Return of 80.3% % value 4

5 Contents Overview Financials Portfolio Looking forwards Summary Taking advantage of Opportunities 5

6 Financial Highlights In Good Health EPRA NAV up 9.9% to 1,268.4p (2012: 1,154.4p) Profit after tax up 35.3% to 63.2m (2012: 46.7m) Interest cover 3.2x (2012: 3.5x) Low cost of debt 3.64% (2012: 3.67%) Issue of innovative institutional secured notes TSR 80.3% in 2013; 324.3% in 6 years Full year distributions up 13.5% like-for-like Proposed 10.0m buy-back at 1 in 66 at 1,495p 6

7 Strong NAV Growth Movement in EPRA NAV 1,320 1,280 1,240 Pence , ,200 1,160 1, ,120 1,080 1,040 1,000 1 Jan 1 Jan 2013 Underlying 2013 profit Reclassify Catena Bond / equity sales FX Revaluation Property of revaluation properties before costs Write Purchase off of purchase costs costs BLD impairment 31 Dec

8 Strong Income Generation Profit after Tax 80 m EPRA Profit after tax Property revaluation Gain on disposals Gain / (loss) on sale of bonds Reclassify Catena Other Profit after tax 1. Includes unfavourable 2.4m movement in FX 8

9 Very High Liquidity Movement in Liquid Resources 400 m Cash Corporate Bonds At 1 Jan 2013 From operations Tender buyback Net new loans Property acquisitions Share issues Sale of properties Capital expenditure Other Bond revaluation At 31 Dec

10 Cash Management via Corporate Bonds Portfolio sold in August to finance acquisition of Neo portfolio Reinvested into 21 bonds from 21 issuers valued at 69.4 million ROCE since late 2008: 88.8% Return in 2013: 10.8% Running yield 7.8% Income 5.4m pa 10

11 Debt Profile As at 31 December m Amortisation Bullet Repayments : 4 loans 2016: 2 loans account for 105m Swedish bond Loan on a building let until

12 Diverse Financing Strategy to lower risk Spread risk 22 banks (73%) Hedging of Finance 2 unsecured bonds (12%) 1 secured note (10%) 1 debenture (5%) Ring fencing model 29% Fixed 41% Capped 30% 70% fixed or hedged 71% floating rate Weighted avg. cost of debt 3.64% (2012: 3.67%) Balance sheet LTV 52.8% (2012: 52.5%) Hedged Floating 12

13 Contents Overview Financials Portfolio Looking forwards Summary Taking advantage of Opportunities 13

14 Property Portfolio Overview Diversified investment portfolio, primarily in major European cities: Occupiers by sector 469 customers in 109 properties (2012: 71) 544,000 sqm 1 (2012: 424,000 sqm) Cost-effective rents 60% of rents indexed Other 28% Govt. 50% Secure income: 72% from governments & major corporates WAULT 7.0 years (5.8 years to first break) Cash generating investments = Core activity Developments <10% portfolio value Major corporates 22% 1. Excludes developments 14

15 Actively Managed Portfolio In-house property management +150 asset management transactions in the year Successful integration of 129,150 sqm acquisitions Low vacancy rate of 4.4% vs European office average of over 9.7% (2) Rented in line with market rates with growth potential, especially in UK Rented in line with market rates (1) ( m pa) Rent expiring Current ERV of rent expiring Later Source: 1. CLS Holdings plc 2. JLL 15

16 Property Acquisitions 2013 Good Time to be Buying 165m invested in 42 properties Highly cash generative blended NIY 11.6%; 4.0% avg cost of debt Low average rent: 148 psm Low average capital value: 1,277 psm Looking for more purchases No of Properties Area (sqm) Rent ( m) Rent ( psm) Price ( m inc costs) N.I.Y. (%) Capital Value ( psm) WAULT to expiry (years) WAULT to break (years) Neo , , London 7 15, , UK , , Germany 1 7, , Total , ,

17 Neo Portfolio Receivership sale of 34 properties across the UK Purchase price including costs: million NIY: 12.23% Rent: 15.1 million, 66% index-linked 99% Government occupied 14 Government departments in occupation Asset management opportunities encouraging Scotland Aberdeen (x2), Dundee (x2), Edinburgh, Paisley Yorkshire & North East Billingham, Redcar, Bradford (x2), Rotherham Midlands 5-6 years 6% 3-4 years 13% Expiry Profile As at end Dec 2013 North Wales & North West Manchester (x2), Birkenhead, Chester, St Helens, St Asaph (Clwyd) South Wales & South West Cardiff (x2), Plymouth, Bridgewater, Chippenham, Swansea, Birmingham, Norwich, Peterborough, Bedford, Northampton, Wolverhampton South East Acton, Basildon, Bromley, Hayes, Southampton 0-2 years 13% >6 years 68% Financed December 2013: % 9 years (partially amortising) 17

18 Investment Property Portfolio At 31 December 2013 Contracted Rent m Valuation m Revaluation in local currency 2 EPRA Net Initial Yield % Vacancy by rent % WAULT (Years) Rent psm Capital Value 1 psm London ñ 3.1% ,119 Neo ò 3.2% ,124 Total UK ñ 1.9% ,266 France ò 3.6% ,495 Germany ò 0.2% ,408 Sweden ò 2.3% ,325 Total portfolio ,132.9 ñ 0.1% ,988 1 Excludes development sites: Spring Mews and Clifford s Inn 2 7.9m purchase costs written off for 2013 purchases, average 5% 18

19 Movement in Rental Income 90 m Rental Income 2012 Acquisitions Disposals Indexation Lettings & Expiries FX Rental Income 2013 Contracted Rent Dec

20 Movement in Investment Properties 1,150 Portfolio Value m , , ,050 1, Jan 2013 Additions Development Refurbish Disposals Revaluation FX 31 Dec

21 Vauxhall & Nine Elms Central London s largest regeneration Spring Mews Vauxhall Square 21

22 Vauxhall Regeneration Intense Activity US Embassy Wanda 5 star hotel & residential Berkeley Group 2 schemes Dutch Embassy Spring Mews Possible Chinese Embassy TfL Station upgrade Barratt / Sainsbury St Modwen BT Vauxhall Square 22

23 Adding Value Vauxhall Square, SW8 - First deal agreed Gross internal area 143,000 sqm Section 106 signed, full consent in place 520 apartments 410 private in 2 x 50 storey towers, 110 affordable homes 22,732 sqm offices; 3,119 sqm of retail; 3,777 sqm multi-screen cinema 278 bedroom hotel, 123 bedroom suite hotel Four-star hoteliers short-listed 359 student bedrooms Exchanged (conditional) with student operator to build and manage Attractive terms, no Group cash involved; commence 2015 Development cost c. 500m 23

24 Adding Value Spring Mews, SE11 - On site Gross internal area 20,800 sqm 378 student rooms; 22 later phase Heads of Terms agreed with university: 210 rooms, 10 year deal 93 bedroom suite hotel IHG management deal signed, Staybridge brand 245 sqm retail space; 1,000 sqm offices Started on site Q Completion late 2014 Development cost c. 55m ex. land Estimated rental value 5.5m 24

25 Adding Value Clifford s Inn, Fetter Lane, EC4 On site 3,423 sqm office refurbishment and 8 residential apartments Construction to complete Q m refurbishment cost, income 1.4m pa Heads of Terms agreed for single pre-let 100% offices Catena, Stockholm 150,000 sqm Haga Norra site: 800 apartments 73,000 sqm commercial Exploring phasing and funding options CLS stake 13.8%, valued at 32.6m CGI of Clifford s Inn 25

26 Sustainability London Helped reduce customers gas costs by 87,000 1,300 sqm refurbishment at Falcon House with the aim of achieving a SKA Gold sustainability standard Reduced gas usage within the UK managed portfolio by 33% and carbon dioxide emissions by a further 290 tonnes Ground source energy system under construction at Spring Mews Sweden Reduction of 65% energy cost and 80% emissions from ground source system at Vänerparken Falcon House: SKA sustainable fit-out France Reduced energy withdrawn from district heating and cooling schemes by 23% Reduced energy usage from fuels by 17% 26

27 Contents Overview Financials Portfolio Looking forwards Summary Taking advantage of Opportunities 27

28 UK Economic data improving Investors returning to non-prime markets, prices responding More capital and debt investing in property Genuine occupier demand increasing Across the board reduction in lettable available space 28

29 UK Gathering momentum M25 Office Take Up Pre-let & New Second-Hand Forecast 10 Year Avg F UK momentum powered by London Clear rental growth emerging in suburbs Office vacancy at 6.9% around M25 - lowest for 10 years 2 Foreign capital prevalent safe haven status increasing Vauxhall Nine Elms regeneration zone successes continue New rules enhance residential conversion potential 1. Source: Knight Frank 2. Source: Knight Frank, Q

30 Continental Europe Wide variations Germany Employment at all time high, almost 42 million; economy feels better than the data Investment volumes up 21% y-on-y; Q4 highest since end 2007 Vacancy levels at 10 year low of 8% 1 German IFO Index highest for 2 years at (Dec 2013) Most advantageous availability of bank debt France Pressure for further reform to generate growth GDP growth negligible for foreseeable future Unemployment at 10.8%; gap with Germany increasingly unsustainable Greater Paris: letting and investment volumes down 25% and 9% y-on-y Sweden GDP growth steady at 1.5% in 2013, 2.4% forecast consensus for Central bank rate cut to 0.75%; inflation low at 0.1% 3 Exports held back by low growth in Eurozone 4% vacancy in Stockholm CBD; rents stable 2 Source: DTZ, CLS, 1. Savills, 2. Swedish Statistic Central Office / CLS, 3. Riksbank 30

31 Contents Overview Financials Portfolio Looking forwards Summary Taking advantage of Opportunities 31

32 Conclusion Continuing Momentum A year of substantial progress Further TSR performance Strong management team delivering for shareholders Performing on developments, adding value Confidently investing into recovering markets Retaining high levels of liquidity for future opportunities 32

33 Appendices CLS Holdings plc 86 Bondway Tel: +44 (0) London Fax: +44 (0) SW8 1SF

34 Corporate Bond Portfolio At 31 December 2013 Banking Insurance Travel and Tourism Food Producers Other Total Value 27.0m 4.6m 10.2m 7.7m 19.9m 69.4m Running yield 8.0% 7.2% 5.9% 8.8% 8.3% 7.8% Issuers RBS Brit TUI Findus Dell Lloyds Phoenix Life SAS Boparan Enel Investec British Airways Stora Enso SNS Bank* Bombardier Rothschild Manutencoop Commerzbank Corral Finans Societe Generale Telecom Italia * Less than 0.1m market value 34

35 UK Aberdeen 65 properties 250,000 sqm Paisley Dundee Edinburgh M1 A1(M) Billingham Redcar Bradford St Helens Manchester Birkenhead Salford Quays Rotherham St Asaph Chester M4 M40 Staines M3 Hayes Brentford Hounslow Chertsey LONDON AND THE SOUTH EAST Sunbury-on-Thames Harrow NW10 W3 W6 W10 WC1 SE1 SE11 SW8 SW6 New Malden EC4 Wallington Coulsdon Bromley M2 Wolverhampton Peterborough Norwich M25 Birmingham Northampton Bedford Ipswich Swansea Cardiff Chippenham London Basildon Bridgwater Southampton Plymouth 35

36 France 26 properties 17 in Paris 96,400 sqm LILLE PARIS LUXEMBOURG LYON ANTIBES 36

37 Germany SÜDERHASTEDT 17 properties 152,300 sqm HAMBURG BERLIN BOCHUM DÜSSELDORF LANDSHUT FREIBURG MUNICH 37

38 Sweden 1 property 45,400 sqm office park 1 associate Cood Investments 1 investment Catena AB 150,000 sqm mixed-use development in Stockholm SEK 3.85 bn logistics portfolio VÄNERPARKEN GOTHENBURG STOCKHOLM 38

39 EPRA Profit After Tax m Difference Rental income Other income Net service charges (4.1) (4.0) (0.1) Net rental income Expenses (15.9) (13.4) (2.5) Operating profit Finance income (2.4) Finance costs (25.2) (24.1) (1.1) FX (1.8) 0.6 (2.4) Share of associates (0.8) 0.2 (1.0) Tax (8.5) (7.4) (1.1) EPRA Profit after Tax (0.3) 39

40 Total Shareholder Return TSR of listed property companies % CLS -100 Source: Bloomberg London-listed property investment and development companies with a market cap of over 50m, 6 Year TSR to 31 Dec