"This is a good time in the cycle to be buying property." CLS Holdings (CLI) founder Sten Mortstedt opened his company's half-year results statement with this unequivocal statement of confidence. He has bought seven high-yielding properties so far this year at a cost of £41m, and is currently evaluating a government-let portfolio containing a further 34. These would take CLS outside of its comfort zone in the London suburbs, but chief executive Richard Tice stresses that "you can't close job centres in areas of high unemployment".
Adjusted net asset value (NAV) per share rose 6 per cent over the six months to 1,224p. As usual, that was mainly thanks to strong cash generation - the company made 46.4p per share in rental profits - although the gain was boosted by beneficial currency movements. At constant exchange rates, the standing portfolio was marked marginally down as the weak French office market offset gains in London and Germany. Mr Tice thinks that will now reverse as secondary property values start to rise.
One black mark in these results was the company's vacancy rate, which rose from 3.8 per cent to 5.5 per cent. That reflected a bout of lease expiries in France and half-empty acquisitions. The vacancy rate could increase further if the company decides to convert obsolete offices into flats; Mr Mortstedt is considering using new planning rules to create a private-rented portfolio.
Broker Liberum Capital expects year-end NAV of 1,272p.
CLS HOLDINGS (CLI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,160p | MARKET VALUE: | £495m | |
| TOUCH: | 1,157-1,189p | 12M HIGH / LOW | 1,171p | 655p |
| DIVIDEND YIELD: | nil* | TRADING PROP: | nil | |
| PREMIUM TO NAV: | 13% | |||
| INVESTMENT PROP: | £1.0bn | NET DEBT: | 135% | |
| Half-year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share* (p) |
|---|---|---|---|---|
| 2012 | 865 | 21.3 | 47.8 | nil |
| 2013 | 1025 | 22.7 | 52.7 | nil |
| % change | +18 | +7 | +10 | - |
Ex-div: na Payment: na *Tender offer buy back worth 11.68p per share in lieu of dividend (2012: 10.6p per share) | ||||
