CLS (CLI) H1 2024 earnings summary

Executive summary

• Strong leasing momentum in H1 2024, with leases signed at 5.9%–6% above ERVs and 23% higher by value compared to H1 2023, generating £6.4m annual rent.

• Net rental income increased 5.9% year-over-year to £58.9m, with underlying vacancy down to 10.8% and total vacancy at 13.2%.

• Property sales of £61m completed in H1 2024, in line with book value, with over £160m targeted for H2.

• EPRA NTA per share fell 10.1% to 227.4p, mainly from valuation declines and FX losses.

• Interim dividend maintained at 2.60p per share.

Financial highlights

• EPRA EPS down 7.7% to 4.8p due to higher finance costs.

• Total accounting return per share was -8% for the period.

• Weighted average cost of debt increased to 3.81%, with 82% of debt fixed or capped.

• Cash and undrawn facilities over £100m; net debt reduced by £40m.

• LTV increased to 50.3% due to valuation declines, but expected to fall below 50% after further sales.

Outlook and guidance

• Financing costs are expected to have peaked, with reductions anticipated as rate cuts materialize and higher-cost debt rolls off.

• Targeting 45% LTV by year-end, with further disposals and refinancing planned.

• Focus on reducing vacancy and letting completed refurbishments with strong ESG credentials.

• UK market recovery ahead of Europe; German sentiment fragile, French market stable for small/medium floorplates.

• Significant upside potential from capturing ERV in marketed and refurbished space, with potential rent rising to £131.4m.