CLS : Annual financial results for the twelve months ended 31 December 2020

CLS HOLDINGS PLC

("CLS", the "Company" or the "Group") ANNOUNCES ITS ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

Resilient performance - well placed for the future

CLS is a leading FTSE250 office space specialist and a supportive, progressive and sustainably focused commercial landlord, with a c.£2.2 billion portfolio in the UK, Germany and France, offering geographical diversification with local presence and knowledge. For the year ended 31 December 2020, the Group has delivered the following results:

31 December

Change (%)

2020	2019
EPRA Net Tangible Assets ("NTA") per share (pence)	345.2	326.3	5.8
EPRA Net Asset Value ("NAV") per share (pence)	350.1	329.2	6.3
Basic NAV per share (pence)	311.9	295.1	5.7
Contracted rents (£'million)	107.9	109.3	(1.3)
Profit before tax (£'million)	96.5	159.0	(39.3)
EPRA Earnings per share ("EPS") (pence)	12.2	12.0	1.7
Basic EPS from continuing operations (pence)	19.0	33.3	(42.9)
Dividend per share (pence)	7.55	7.40	2.0

Note: A reconciliation of statutory to alternative performance measures is set out in Note 5 to the financial statements

Fredrik Widlund, Chief Executive Officer of CLS, commented:

"The strengths of our diversified business model and close relationships with our tenants proved invaluable during a challenging year and led to the delivery of positive financial results with EPRA EPS and EPRA NTA both increasing. Our active management approach resulted in our country teams in the UK, Germany and France delivering on leasing transactions, refurbishments and strong rent collection despite the backdrop of the pandemic.

"Our portfolio is strategically well placed for the future, concentrated on great locations and offering high quality, flexible space and leases. CLS' balance sheet remains strong and once the six most recent acquisitions complete, which were exchanged at the end of 2020 and the start of 2021, contracted annualised rent will increase to £115 million."

FINANCIAL HIGHLIGHTS

• • EPRA NTA up 5.8% and EPRA NAV up 6.3% primarily due to increased EPRA earnings, and portfolio valuation gains and profit on disposal of £36.8 million (2019: £52.5 million)

• • Profit before tax down 39.3% to £96.5 million (2019: £159.0 million) and basic EPS down 42.9% due to lower portfolio valuation gains and profit on disposal of our shareholding in Catena (2019: £38.7 million), sold in September 2019

• • EPRA EPS was up 1.7%, which was achieved through strong rent collection, operational cost savings and favourable foreign exchange movements

• • A proposed final dividend of 5.20 pence per share to be paid on 29 April 2021, resulting in a total 2020 dividend of 7.55 pence per share, an increase of 2.0% (2019: 7.40 pence per share) and total accounting return for the year of 8.1% (2019: 9.3%)

OPERATIONAL HIGHLIGHTS

• • Rent collection remained strong in 2020 with 99% collected (2019: 98%) and 98% of first quarter 2021 contracted rent due now collected

• • Net rental income flat at £109.8 million (2019: £110.6 million) with rental increases from net acquisitions offset by Covid-19 related weakness across our hotel and student accommodation

• • Portfolio valuation up 1.4% in local currency, largely driven by Germany up 8.6% through positive letting activity and other asset management with France up 0.3% and the UK down 2.6%

• • Acquired eleven properties for £202.7 million (4.7% net initial yield). Three of the acquisitions will complete in the first quarter of 2021 for £89.9 million. Three further acquisitions in Germany which exchanged at the start of 2021 for £79.2 million will complete by the end of May 2021

• • Disposed of eight properties for £69.7 million (4.0% net initial yield), two of which will complete in the first half of 2021 for £5.9 million. In February 2021, exchanged on the sale of a UK property at £6.1 million, which is over 20% above the 31 December 2020 valuation

• • Completed 116 lease deals securing £13.6 million of annual rent at 8.2% above 31 December 2019 estimated rental values

• • Vacancy rate has increased to 5.3% (2019: 4.0%) due to the current economic uncertainty which has impacted the pace of new lettings

FINANCING

• • Weighted average cost of debt at 31 December 2020 down 14 basis points to 2.28% (2019: 2.42%)

• • Balance sheet loan-to-value as at 31 December 2020 at 33.7% (2019: 31.4%) reflecting net acquisitions during the year.

  Gross debt of £970.8 million (2019: £891.7 million) with cash of £235.7 million (2019: £259.4 million) and £50 million (2019: £50 million) of undrawn facilities

• • First 'green' loan secured over 12 UK properties for £154.0 million at 2.62% fixed interest rate, split equally between 10-year and 12-year tranches. This transaction also significantly contributed to the increase in weighted average debt maturity to 4.6 years (2019: 3.5 years)

• • In 2020 financed, refinanced or extended £261.5 million of debt at an average of 2.08%, including £231.3 million fixed at 2.16%, and repaid £59.0 million of debt

• • The loan portfolio as at 31 December 2020 had 84% at fixed rates (31 December 2019: 77%)

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

• • On 15 December 2020, CLS was very sad to report that Mr Sten Mortstedt, founder and Executive Director passed away.

  He will be deeply missed by all at CLS

• • In March and April 2020, Bill Holland and Denise Jagger became the chairs of the Audit and Remuneration Committees respectively

• • Throughout 2020 the welfare of all stakeholders has been prioritised. It was pleasing that this prioritisation and our supportive culture were reflected in the very positive staff survey

• • GRESB score increased to 72 (2019: 70) and all managed buildings have been independently certified by BREEAM to assess their sustainability rating and highlight areas for improvement

• • Net Zero Carbon pathway target to be announced later in 2021 once detailed analysis concluded

DIVIDEND TIMETABLE

Further to this announcement, in which the Board recommended a final dividend of 5.20 pence per ordinary share, the Company confirmed its dividend timetable as follows:

Announcement date	10 March 2021
Ex-Dividend date	25 March 2021
Record date	26 March 2021
Payment date	29 April 2021

- ends -

Results presentation

A presentation for analysts and investors will be held by webcast and conference call on Wednesday 10 March 2021 at 10:30am followed by Q&A. Questions can be submitted either online via the webcast or to the operator on the conference call.

Webcast: The live webcast will be available here:https://secure.emincote.com/client/cls/cls002

Conference call: In order to dial in to the presentation via phone, please register at the following link and you will be provided with dial-in details and a unique access code:https://secure.emincote.com/client/cls/cls002/vip_connect

For further information, please contact:

CLS Holdings plc

(LEI: 213800A357TKB2TD9U78)www.clsholdings.com

Fredrik Widlund, Chief Executive Officer Andrew Kirkman, Chief Financial Officer [phone]

Liberum Capital Limited Richard Crawley

Jamie Richards [phone]

Panmure Gordon Hugh Rich [phone]

Elm Square Advisers Limited Jonathan Gray [phone]

Smithfield Consultants (Financial PR)

Alex Simmons

Rob Yates [phone]

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.

Chairman's letter

Dear shareholder,

The Covid-19 pandemic has had a profound effect globally in 2020 and CLS has responded quickly and dynamically to safeguard our staff and other stakeholders. All of our buildings have implemented safety measures to ensure that they are Covid-19 compliant so as to support our tenants, many who conduct essential work. A fuller description of the measures we have taken is included in the annual report.

In December, the sad news reached us that Sten Mortstedt, the founder of CLS, had died.

Sten founded CLS in the mid-1980s, listed the Company on the London Stock Exchange in 1994 and was instrumental in building CLS to the size and stature it now commands. I had the honour of working with Sten for many years and I am, along with the whole Company, deeply saddened by his loss. A tribute to Sten is included on the inside back cover of this annual report.

Performance and our property portfolio

In this challenging market, the benefits of our diversified approach and clear strategy again shone through in our positive financial and operational performance. EPRA NTA per share increased by 5.8% to 345.2 pence per share (2019: 326.3 pence) and total accounting return, including the dividends paid in the year, was 8.1% (2019: 9.4%). The value of our property portfolio rose by: £68.5 million from acquisitions net of disposals; £54.9 million as a result of the weakening of sterling by 5.4%; £17.9 million capital expenditure; and £29.8 million from net valuation increases of 1.4% in local currencies with Germany again the star performer delivering an uplift of 8.6%. Our property portfolio, which is now worth c.£2.2 billion, is split 52% in the UK, 34% in Germany and 14% in France.

Environmental, Social and Governance

In 2020, we completed the drafting of our new sustainability strategy which will come into effect in 2021. The strategy is built around investing in properties, working in partnerships with stakeholders and being a responsible business to deliver positive environmental impacts and socio-economic outcomes. In 2021, we will complete our technical portfolio assessment in order to launch our Net Zero Carbon pathway in our sustainability report later this year with a realistically achievable delivery date. More detail is set out in the annual report.

This year was clearly more challenging for employees in terms of personal interaction but we put significant emphasis on ensuring employee well-being, albeit necessarily much was done on a remote basis. Our concentration on our employees was reflected in the favourable staff survey results, which are discussed further in the annual report. There were several changes in the membership of the Board through retirements and appointments in 2019. In 2020 we implemented the changes in committee composition and chairs previously announced to continue to refresh and improve the balance and skills of the Board and committees.

A critical focus of the Group is to ensure that all stakeholders are considered in our decision-making and the annual report gives examples of how we discharged our S172 obligations when making significant decisions across our business model.

Looking to the future

The biggest unknown, and biggest debate, in our segment of the property market is around the future of the office. The section in the following pages provides an update to the thoughts we set in our half-year results. We remain convinced that offices have a vibrant future alongside working from home and that the benefits of offices in terms of collaboration, culture and employee well-being, amongst others, will be rediscovered and reinforced when we return en masse.

As highlighted, CLS' diversified approach in terms of countries, tenants and financing continues to serve the business well and is being maintained. Our strategy remains clear and we believe our focus on high-quality, non-prime offices in major cities in the three largest European economies continues to be the right approach. We have seen very little impact from the recent Brexit trade deal and the UK exit from the EU but are keeping a close watch on any developments.

Dividends

The interim dividend in September 2020 was held flat with the prior year whilst the economic impacts of Covid-19 were assessed. As a result of the strong full-year financial results and CLS' favourable strategic positioning, the Board has decided to propose an increase in the final dividend of 3% resulting in a 2% increase in the full-year dividend.

Thank you

CLS places particular emphasis on, and takes great pride in, our positive culture and excellent staff which we have highlighted on many occasions. However, it is often only through adversity that the real benefits of these are demonstrated. In 2020, the performance and dedication of our colleagues was outstanding and remains so as the pandemic continues. On behalf of the Board, I offer our heartfelt thanks for all of your efforts.

Lennart Sten