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Annual Results 2011 1 Contents Overview Financials Portfolio Markets Summary Richard Tice John Whiteley Chief Executive Officer Chief Financial Officer 2 About CLS Property investments by value Top TSR


  1. Annual Results 2011 1

  2. Contents • Overview • Financials • Portfolio • Markets • Summary Richard Tice John Whiteley Chief Executive Officer Chief Financial Officer 2

  3. About CLS Property investments by value • Top TSR performance 31 December 2011 since 2008 in UK listed France property sector and third in 27% 2011 Germany 22% • Long-term benefits of diversified property portfolio – 4 markets • Specialist in Direct high-yielding offices 6% Sweden Catena London • Emphasis on high initial yield 2% 43% vs low cost of debt 3

  4. Overview Year of achievement at operating level: • Lowest vacancy rate for over ten years • Higher rental on like-for-like basis • Lower debt cost • Additional sources of finance • Progressing development value Financial year of two halves: • Strong first half • Second half affected by Eurozone crisis 4

  5. Contents • Overview • Financials • Portfolio • Markets • Summary 5

  6. Financial Highlights Strengths Impacted by Eurozone issues • Underlying earnings up 53% • Weakness of euro – to 64.9p (2010: 42.5p) • Fall in corporate bond values • Increase in property portfolio • Fall in long-term interest rates – Up 2.1% in local currency • Low cost of debt – Increase in derivative liabilities – 4.1% (2010: 4.3%) – Early closure of long-term swap • Highest TSR 2008 to 2011 – 64.9% = 13.3% p.a. compound – 2011: 11.1% • Increased distribution – Proposed £7.9m – Thus 10.1% uplift in year to £12.3m 6

  7. Strong Underlying Earnings Profit after Tax £m 70 2010 2011 60.1 60 50 38.8 40 30.1 29.7 30 20.1 18.0 20 13.0 9.6 10 0 -3.1 -10 -20 -18.5 -30 EPRA earnings Property valuation FV movement on Other Profit after tax surplus derivatives 7

  8. A Year of Two Halves Movement in EPRA NAV Pence 1120 3.7 9.1 42.8 1080 -27.4 1047.7 4.8 13.9 30.7 1040 -39.3 4.9 40.5 1000 983.1 -53.5 952.9 960 920 880 840 800 At 1 Core Share Uplift of FX FV bonds At 30 Core Share Uplift of FX FV bonds Close out At 31 Dec Jan operations buy-backs property June 2011 operations buy-backs property swap 2011 2011 8

  9. Improved Liquidity Movement in Liquid Resources £m 250 Bonds Cash 39.2 200 25.1 -20.4 19.9 140.4 150 -11.8 -24.2 1.8 126.4 -15.6 55.3 48.3 100 50 85.1 78.1 0 At 1 January Catena From Tender buy- Net new Capital Close out of Other Bond At 31 2011 dividend operations backs loans expenditure swap revaluation December 2011 9

  10. Extending Sources of Finance Movement in Gross Debt £m 680 5.0 660 30.4 640 625.1 -19.1 29.5 620 -13.0 592.3 600 580 560 540 At 1 January 2011 Swedish bond French portfolio New bank loans Amortisation FX At 31 December issue refinancing 2011 10

  11. Moving Forward with Debt Profile At 31 December 2011 £m 160 Amortisation Bullet Repayments 140 120 100 80 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 11

  12. Moving Forward with Debt Profile Pro forma after approved refinancing £m 160 Amortisation Bullet Repayments 140 120 100 80 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 12

  13. Diverse, low cost debt Financing Debt Hedging • Strategy – Ring-fenced Fixed rate – 64 loans loans Floating – 20 banks and rate - Fixed unhedged 1 capital markets bond £83.7m through swaps £157.4m £50.0m • Property loan to value 62.5% (2010: 63.5%) • Weighted average cost of debt reduced to 4.1% £334.0m (2010: 4.3%) • 75% fixed or hedged Floating rate - capped 13

  14. Certainty and Flexibility at a Cost Movement in Net Derivative Liabilities At 31 £m At 1 January Fair value Derivatives December 2011 movements bought Other Close out swap 2011 0 -5 24.2 -7.3 -10 -15 -15.7 -20 -25 1.0 -30 1.7 -35 -18.5 -40 14

  15. Total Shareholder Return TSR of listed property companies 2008 - 2011 80% 60% 40% 20% 0% CLS -20% -40% -60% -80% -100% 15 Source: Bloomberg, CLS

  16. Contents • Overview • Financials • Portfolio • Markets • Summary 16

  17. Property Portfolio Overview • Diversified portfolio: – 400 tenants, 76 properties – 413,700 sq m • Stable income platform: – 40% from governments – 29% from major corporations – WAULT 7.7 years • 65% of rents indexed • Strong asset management: – Void by rent 3.9% 17

  18. Property Portfolio Schedule Contracted Net Initial Vacancy Rent Yield By rent Valuation Uplift in local At 31 December 2011 £m £m currency % % London 27.5 398.0  2.7% � 6.6 4.0 France 18.7 248.3  1.9% 7.5 2.7 Germany 13.9 197.1  1.0% 7.0 6.0 Sweden 6.2 58.7  1.5% 7.1 1.8 Total portfolio 66.3 902.1  2.1% 7.0 3.9 18

  19. Rental Indexation Annual Impact (£000s) Current Index Rate 1.0% 2.0% 3.0% 4.0% 5.0% Current 5.0% London 41 82 123 164 205 205 5.0% France 166 332 497 663 829 829 2.1% Germany 80 228 324 425 473 228 2.3% Sweden 33 66 99 132 155 66 Total portfolio 320 708 1,043 1,384 1,662 1,328 Relevant Indexes: London (RPIX & RPI), France (Insee Construction), Germany (Consumer Price Index), Sweden (Consumer Price Index) 19

  20. Movement in Investment Properties £m 950 3.2 2.8 940 10.9 930 924.9 26.0 920 910 902.1 15.0 900 -39.7 890 5.0 2.0 876.9 880 870 860 20

  21. Rack Rented into the Medium Term Portfolio Rent Expiries £m 45 Rent expiring ERV of rent expiring 40 35 30 25 20 15 10 5 0 2012 2013 2014 2015 2016 Later 21

  22. Property Portfolio Acquisitions in year Falcon House and Quest House, Hounslow, London • £5.5m on 10.1% initial yield • Cap Value £1,172 per sq m • Subsequent letting, yield >12% • 4,693 sq m 22

  23. Well Positioned for Growth Developments London - Planning Applications Submitted • Spring Mews, Vauxhall (1-2 years) - 20,800 sq m mixed use, student / hotel • Vauxhall Square (3-6 years) – 154,000 sq m mixed use Germany - on site • Munich pre-let to Dr Hönle AG 1,642 sq m – Completed February 2012 • Landshut pre-let to EON 5,400 sq m – Complete Summer 2012 Sweden, via Catena associate • Mixed-use in Stockholm: 950 apartments & 50,000 sq m commercial (2-4 years) • Planning expected H1 2012 23

  24. Well Positioned for Growth Regeneration plan for Vauxhall Houses of Parliament Spring Mews US Embassy Vauxhall Square 24

  25. Other Investments Cash management via corporate bonds • 39 bonds valued at £85.1 million • ROCE since late 2008: 32.8% (9.1% compound p.a.) • Running yield 10.2% • Eurozone worries reduced values by £15.6m in year • Value recovered £8.2m first two months 2012 Other associates • Bulgarian Land Development (48.3% stake) – £8.7m share of book value; cash neutral • Nyheter24 – Sale of Wyatt; 20% stake in merged group and £0.5m convertible bond 25

  26. Contents • Overview • Financials • Portfolio • Markets • Summary 26

  27. Market Overview Future Direction in our Markets • Positive arbitrage growing between high net yields and low interest rates • New lenders emerging as traditional debt sources recede; margins up • Real financing advantage for listed over private propcos • Genuine tenant demand continues • Exposure to stronger markets in Europe 27

  28. Market Overview London 5yr Interest Rate Swaps Inner South Eastern Offices Central London Offices 15% 12% 9% 6% 3% Source: Savills 0% Dec 87 Dec 90 Dec 93 Dec 96 Dec 99 Dec 02 Dec 05 Dec 08 Dec 11 • Development completions in central London lowest since the early 1990s; almost no new offices under way outside CBD • London attracting global investment capital • Banks continue to push consensual sales and receiverships • Actively targeting new opportunities 28

  29. Continental Europe FRANCE • Some anxiety in investment market - over € 6 billion of loans to refinance in 2012-2013 • Greater Paris lettings +14% in 2011, second hand rents +3%, new supply minimal • Lyon vacancy below 5%, dearth of new supply, ERVs moving back up GERMANY • I nvestment volumes +23% in 2011, similar € 20-25bn expected 2012 • Some keen sellers funded by overseas banks • Lettings at 13% above 10 year average as economy expands • Munich and Berlin are strongest markets SWEDEN • GDP growth 4% in 2011, but slowing fast • 6% vacancy in Stockholm CBD; 11.5% in Greater Stockholm, much being older stock • Projected new supply half 10 year average • Population migration into Stockholm; limited residential supply bodes well for Catena Source: DTZ 29

  30. Contents • Overview • Financials • Portfolio • Markets • Summary 30

  31. Summary • Strong TSR performance • Year of achievement at operating level • Financially a year of two halves • Retain high levels of liquidity • New sources of finance • Development opportunities progressing 31

  32. Appendices www.clsholdings.com CLS Holdings plc 86 Bondway Tel: +44 (0) 20 7582 7766 32 London Fax: +44 (0) 20 7820 7728 SW8 1SF Email: enquiries@clsholdings.com

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