CLS Holdings Regulatory News (CLI)

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.

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

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.