Office landlord CLS is “hopeful” for improvements in the second half of the year, after reporting a 21% slump in profit.
The firm’s half-year results showed a fall in pretax profit to £24.7m, despite collecting 97% of rent due for the latest quarter.
However, net rental income decreased by 7.4% to £52.3m, as vacancy rates rose from 5.1% in December to 7.7%. CLS said the cause of the slump was the £2.8m decline in the value of its investment portfolio, against last year’s increase of £2.7m, along with foreign exchange reductions of £1.9m. Earnings per share were also hit by sterling hardening, falling by 22.9%.
CEO Fredrik Widlund said: “Investment, and especially letting, markets have yet to return to pre-pandemic levels, although we are seeing increasing levels of activity.”
The overall value of CLS’s portfolio increased marginally to £2.3bn, following deals in Germany and the UK. Over the past six months the UK has gone from having the majority of CLS’s portfolio – 52% – to being in the minority, with 49%, or £1.14bn of the total and 2.1m sq ft of lettable space. Germany now accounts for 38%, up from 34%, with £880m and 3.6m sq ft. France has stayed relative steady at 13%.
Widlund said that the company’s “resilient” balance sheet would support “opportunistic” deals, with “some selective deals likely in the second half”.
The FTSE 250 firm also announced its sustainability strategy, committing the office specialist to becoming net zero by 2030. The announcement closely follows the UN’s IPCC report on the impact of climate change earlier this week.
Widlund said: “The IPCC’s report this week brought into sharp relief the scale of the challenge ahead of us and reinforced the importance of this new strategy.”
He said that the plan, which it estimates will cost £58m over nine years, “shows a clear pathway to net zero”.
Widlund added: “All stakeholders which interact with our business require us to take a bold action on carbon reduction as well as on broader ESG issues.”
CLS has set a target of 50% of its debt to be comprised of ESG-linked loans. It agreed a £62m green loan with Scottish Widows in April.
CLS also said it had replaced long-standing auditor Deloitte with EY.
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