Annual Results 2013

1

ContentsOverview

Financials

Portfolio

Looking forwards

Summary

2

Henry KlotzExecutive Vice Chairman

John WhiteleyChief Financial Officer

Simon WigzellHead of Group Property

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

3

31 December 2013

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: £26.9m1, 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%

41. 100% value

ContentsOverview

Financials

Portfolio

Looking forwards

Summary

5

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

Strong NAV Growth Movement in EPRA NAV

Pence

7

1 Jan 2013

Underlying profit

Reclassify Catena

Bond / equity sales

FX Property revaluation

before costs

Purchase costs

BLD impairment

31 Dec 2013

Strong Income Generation Profit after Tax

£m

8

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

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

Debt Profile As at 31 December 2013

£m

11

2015: 4 loans 2016: 2 loans account for £105m•Swedish bond•Loan on a building let until 2026

Diverse Financing Strategy to lower risk

• Spread risk

– 22 banks (73%)

– 2 unsecured bonds (12%)

– 1 secured note (10%)

– 1 debenture (5%)

– Ring fencing model

• 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%)

Hedging of Finance

12

Hedged

Floating

29%Fixed

41%Capped

30%

ContentsOverview

Financials

Portfolio

Looking forwards

Summary

13

Property Portfolio Overview

• Diversified investment portfolio, primarily in major European cities:

– 469 customers in 109 properties (2012: 71)

– 544,000 sqm1 (2012: 424,000 sqm)

– Cost-effective rents

• 60% of rents indexed

• 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

141. Excludes developments

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)

Source: 1. CLS Holdings plc 2. JLL 15

16

• £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

South Wales & South West

Cardiff (x2), Plymouth, Bridgewater, Chippenham, Swansea,

North Wales & North West

Manchester (x2), Birkenhead, Chester, St Helens, St Asaph (Clwyd)

South East

Acton, Basildon, Bromley, Hayes, Southampton

Scotland

Aberdeen (x2), Dundee (x2), Edinburgh, Paisley

Yorkshire & North East

Billingham, Redcar, Bradford (x2), Rotherham

Midlands

Birmingham, Norwich, Peterborough, Bedford, Northampton, Wolverhampton

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• Receivership sale of 34 properties across the UK• Purchase price including costs: £123.7 million• NIY: 12.23%• Rent: £15.1 million, 66% index-linked• 99% Government occupied• 14 Government departments in occupation• Asset management opportunities encouraging

Expiry ProfileAs at end Dec 2013

Financed December 2013: •£80 million @ 4.17% •9 years (partially amortising)

Investment Property Portfolio

At 31 December 2013

Contracted Rent

£mValuation

£m

Revaluation in local

currency2

EPRA Net Initial

Yield %

Vacancy by rent

%WAULT(Years)

Rent £ psm

Capital Value1

£ psm

London 29.9 497.9

3.1% 5.8 3.2 8.0 216 3,119

Neo 15.2 119.9

3.2% 11.9 0.9 7.9 146 1,124

Total UK 45.1 617.8

1.9% 7.1 2.4 8.0 186 2,266

France 18.0 240.6

3.6% 6.6 10.6 4.8 206 2,495

Germany 16.2 214.4

0.2% 6.9 3.5 8.3 110 1,408

Sweden 6.3 60.1

2.3% 8.4 1.7 3.4 144 1,325

Total portfolio 85.6 1,132.9

0.1% 7.0 4.4 7.0 165 1,988

181 Excludes development sites: Spring Mews and Clifford’s Inn2 £7.9m purchase costs written off for 2013 purchases, average 5%

Movement in Rental Income£m

19

Movement in Investment PropertiesPortfolio Value £m

20

1 Jan 2013

Additions Development Refurbish Disposals Revaluation FX 31 Dec 2013

Vauxhall & Nine Elms Central London’s largest regeneration

21

Vauxhall SquareVauxhall Square

Spring MewsSpring Mews

Vauxhall Regeneration Intense Activity

US EmbassyUS Embassy

TfL Station upgrade

TfL Station upgrade

Vauxhall SquareVauxhall Square

Spring MewsSpring Mews

22

Dutch EmbassyDutch Embassy

Possible Chinese Embassy

Possible Chinese Embassy

Wanda 5 star hotel & residential

Wanda 5 star hotel & residential

Berkeley Group2 schemes

Berkeley Group2 schemes

St ModwenSt ModwenBarratt / SainsburyBarratt / Sainsbury BTBT

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

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 Q4 2012

• Completion late 2014

• Development cost c.£55m ex. land

• Estimated rental value £5.5m

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Adding Value

Clifford’s Inn, Fetter Lane, EC4 – On site• 3,423 sqm office refurbishment and

8 residential apartments• Construction to complete Q3 2014• £10.1m 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

SustainabilityLondon

• 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

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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%

ContentsOverview

Financials

Portfolio

Looking forwards

Summary

27

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

UK Gathering momentum

• UK momentum powered by London

• Clear rental growth emerging in suburbs

• Office vacancy at 6.9% around M25 - lowest for 10 years2

• Foreign capital prevalent – safe haven status increasing

• Vauxhall Nine Elms regeneration zone – successes continue

• New rules enhance residential conversion potential

M25 Office Take Up1

1. Source: Knight Frank 2. Source: Knight Frank, Q4 2013 29

10 Year Avg

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 109.5 (Dec 2013)• Most advantageous availability of bank debtFrance• 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-ySweden• GDP growth steady at 1.5% in 2013, 2.4% forecast consensus for 20142

• 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 stable2

30Source: DTZ, CLS, 1. Savills, 2. Swedish Statistic Central Office / CLS, 3. Riksbank

ContentsOverview

Financials

Portfolio

Looking forwards

Summary

31

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

Appendices

33

www.clsholdings.comCLS Holdings plc86 Bondway Tel: +44 (0) 20 7582 7766London Fax: +44 (0) 20 7820 7728SW8 1SF Email: enquiries@clsholdings.com

Corporate Bond Portfolio At 31 December 2013

Banking InsuranceTravel and

TourismFood

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

Lloyds

Investec

SNS Bank*

Rothschild

Commerzbank

Societe Generale

Brit

Phoenix Life

TUI

SAS

British Airways

Findus

Boparan

Dell

Enel

Stora Enso

Bombardier

Manutencoop

Corral Finans

Telecom Italia

34* Less than £0.1m market value

UK

• 65 properties• 250,000 sqm

35

• 26 properties• 17 in Paris• 96,400 sqm

France

36

LUXEMBOURG

PARIS

LILLE

LYON

ANTIBES

Germany

• 17 properties• 152,300 sqm

37

SÜDERHASTEDT

HAMBURG

BERLIN

BOCHUM

DÜSSELDORF

LANDSHUT

MUNICHFREIBURG

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

38

VÄNERPARKEN

GOTHENBURG

STOCKHOLM

EPRA Profit After Tax £m 2013 2012 DifferenceRental income 76.0 66.1 9.9

Other income 1.2 0.8 0.4

Net service charges (4.1) (4.0) (0.1)

Net rental income 73.1 62.9 10.2

Expenses (15.9) (13.4) (2.5)

Operating profit 57.2 49.5 7.7

Finance income 7.6 10.0 (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)

37.0 36.2 0.8

Tax (8.5) (7.4) (1.1)

EPRA Profit after Tax 28.5 28.8 (0.3)

39

Total Shareholder Return TSR of listed property companies 2008 – 2013

40Source: BloombergLondon-listed property investment and development companies with a market cap of over £50m, 6 Year TSR to 31 Dec 2013

CLS

%