Having a geographically diverse revenue stream paid off once again for property landlord CLS Holdings (CLI), with adjusted net asset value (NAV) rising by 8.5 per cent to 309.8p a share. Germany, which makes up one-third of the group portfolio, was the star performer, delivering a valuation uplift of 9 per cent. And while economic activity in Germany has slowed, office vacancy levels have been at record lows, while a limited supply of new space has driven rents and capital values higher.
The UK accounts for around half the group portfolio, and acquisition activity focused on London properties. Harman House in Uxbridge was bought for £51.4m at a net initial yield of 6.9 per cent, with a reversionary rent potential of 7.8 per cent. This and other acquisitions were part-financed through £38.6m of disposals at 5.2 per cent above book value.
Headline profits were down because disposal profits and a valuation uplift were lower than the previous year but, crucially, net rental income was up by 7.3 per cent at £107.3m. Demand for office space meant that the vacancy rate fell from 5.8 per cent to 3.8 per cent, and it’s also worth noting the quality of the revenue stream, with 57 per cent of contracted rent coming from government bodies and major corporations.
Analysts at Peel Hunt are forecasting adjusted NAV of 317.8p per share at the December 2019 year-end.
| CLS HOLDINGS (CLI) | ||||
| ORD PRICE: | 246p | MARKET VALUE: | £ 1.00bn | |
| TOUCH: | 245-246p | 12-MONTH HIGH: | 257p | LOW: 195p |
| DIVIDEND YIELD: | 2.8% | TRADING PROPERTIES: | £4.3m | |
| DISCOUNT TO NAV: | 11% | |||
| INVESTMENT PROP: | £1.89bn | NET DEBT: | 63% | |
| Year to 31 Dec | Net asset value (p)* | Pre-tax profit (£m) | Earnings per share (p)* | Dividend per share (p) |
| 2014 | 152 | 237 | 44.9 | nil |
| 2015 | 181 | 151 | 30.6 | nil |
| 2016 | 215 | 100 | 23.6 | 4 |
| 2017 | 252 | 191 | 38.5 | 6.35 |
| 2018 | 276 | 145 | 32.6 | 6.9 |
| % change | +9 | -24 | -15 | +9 |
| Ex-div: | 04 Apr | |||
| Payment: | 29 Apr | |||
| *NAV and EPS adjusted for one-for-10 share split | ||||
