Trading Statement

                                                                                                            PRESS RELEASE

Release date:                21 November 2019

Embargoed until:            07:00

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

Trading Update for the period 1 July 2019 to 20 November 2019

Active recycling of capital to underpin continued growth

Fredrik Widlund, Chief Executive of CLS, commented:

"Our active portfolio management has continued in the second half of 2019 with further transactions resulting in a more focused Group.  Four property acquisitions, one of which had exchanged as at the end of July, have been completed in the period for a total of £109.2 million.  Four disposals, which had exchanged as at the end of July, have completed over the same period for a total of £91.7 million releasing £70 million of cash after repayment of the associated debt.  In September, we also sold our 10.5% shareholding in Catena AB realising c.£113 million in cash. These disposals put the Group in a strong position with cash and liquid resources of c.£185 million, which we intend to reinvest in further acquisitions.

"We anticipate that our full year results will be in line with expectations.  Whilst economic and political uncertainty persists, we remain confident in the long-term fundamentals of our markets and our strategy.  Furthermore, we have the resources, and a well-positioned portfolio, to continue to capture opportunities in our core markets and deliver sustainable growth."

A summary of our up to date, key operational and financial metrics is set out below:

Acquisitions and disposals

We have continued to manage our portfolio on an active basis to release capital from assets with limited strategic fit and/or growth potential in order to capture attractive growth opportunities:

·      Acquisitions: Completion of Office Connect, which had exchanged as at the end of July, together with the acquisitions of Clockwork, Lloyds Avenue and Pacific House in October.  Total consideration of £109.2 million (before costs), blended net initial yield of 6.1% and reversionary yield of 6.4%.  The acquisition of One Six Six Harrow for £13.8 million exchanged in November and is expected to complete in January 2020

·      Disposals: Completion of four disposals (Ateliers Victoires in Paris, East Gate in Munich, Schanzenstrasse in Dusseldorf and the Grange in Hayes), which had exchanged as at the end of July.  Total consideration of £91.7 million, realising £70 million after the repayment of the associated debt, at a blended net initial yield of 3.7%.  Two further disposals, Quayside in Fulham, which had exchanged as at the end of July, and another in the UK, are due to complete before the year-end for c.£25 million

·      Catena: At the start of September, CLS disposed of its entire 10.5% shareholding in Catena AB realising a gain of £15.4 million (3.8 pence per share) before costs since 30 June 2019 and proceeds of approximately £113 million.  In the first half, CLS recognised a gain of £21.0 million after foreign exchange on its Catena shareholding

Vacancy and lettings (up to 31 October 2019)

Vacancies increased during the period, largely as a result of transactions (selling well-let properties and acquiring limited vacancy to actively asset manage), but remain below our targeted level of 5%.  A healthy level of lettings was completed and our markets remain supportive:

·      Vacancy rate:

·      Lettings: Since the end of June, 42 deals have been signed securing over £5 million of annual rent, over 4% above December ERVs

Developments and refurbishments

Potential exists within the portfolio for a select number of value-add developments:

·      Planning has been submitted for three developments: one in Stuttgart, Germany; and two in the UK (Maidenhead and Vauxhall), with determinations expected during the next six months.  The forecast capital requirement is c.£90 million over the next two to three years which is targeted to deliver over £5.5 million of additional rental income

Financing

Cost of debt remains low with substantial cash and liquid resources available to capture opportunities.  As at 31 October 2019:

·      Weighted average cost of debt reduced to 2.42% (30 June 2019: 2.49%)

·      Balance sheet loan to value 34.7% (30 June 2019: 39.3%)

·      Cash and liquid resources of c.£185 million comprising over £150 million of cash and c.£35 million of corporate bonds, as well as £50 million of undrawn facilities

Portfolio and sustainability

CLS' strategy remains focused on the three largest economies in Europe transforming office properties into sustainable, modern spaces that help businesses to grow:

·      The property portfolio is split 51% UK, 34% Germany and 15% France

·      In the UK we have commissioned the installation of Electric Vehicle charging ports and additional solar photovoltaic systems at a number of our assets

·      These, and other sustainability improvements, reflected in our GRESB rating increasing from 63 to 70

Governance

On 15 August 2019, Lennart Sten became the Group's first independent Non-Executive Chairman following the retirement of Executive Chairman, Henry Klotz.

We also welcome Bill Holland who has been appointed to the Board and as a member of the Audit and Remuneration Committees.  It is anticipated that Bill will succeed Malcolm Cooper as Chairman of the Audit Committee following the publication of the Group's Final Results in March 2020.  He joins Denise Jagger who was appointed to the Board and as member of the Remuneration and Audit Committees in August 2019.

-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

Whitman Howard

Hugh Rich

+44 (0)20 7659 1261

Elm Square Advisers Limited

Jonathan Gray

+44 (0)20 7823 3695

Smithfield Consultants (Financial PR)
Alex Simmons

Rob Yates

+44 (0)20 3047 2546

Forward-looking statements

This announcement 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 should not be relied upon as an indicator of future performance or construed as a profit forecast.