CLS Holdings Half-Year Results: Property Values Fall and Dividend Paused

CLS Holdings PLC has reported a difficult first half of 2026, with rental income, earnings and property values all moving lower.

The European office landlord made progress on disposals and refinancing, but those actions have not yet been enough to offset tenant departures, asset sales and continued pressure on commercial property valuations.

Most notably for income investors, there will be no interim dividend. The Board plans to consider a single final dividend for the whole of 2026 once full-year earnings are known.

CLS Holdings' key figures

Metric	H1 2026	Comparator	Change
EPRA earnings	£10.9 million	£16.1 million	-32.3%
EPRA earnings per share	2.7p	4.0p	-32.5%
Statutory loss after tax	£69.6 million	£24.4 million loss	Not meaningful
Net rental income	£46.3 million	£53.3 million	-13.1%
EPRA NTA per share	177.7p	200.7p at December 2025	-11.5%
Portfolio valuation movement	-4.6%	Not disclosed	Not disclosed
Loan-to-value ratio	51.6%	50.0% at December 2025	+1.6 percentage points
Interim dividend	Nil	1.30p	Not meaningful

EPRA earnings strip out items such as property revaluations to provide a view of underlying property income. EPRA net tangible assets, or NTA, is a property-sector measure of net asset value.

Why earnings fell

EPRA earnings per share dropped by 32.5% to 2.7p. Net rental income fell 13.1% to £46.3 million, including a 4.7% like-for-like decline.

CLS attributed this to £201.2 million of disposals since the beginning of 2025, lease expiries and German tenant insolvencies during the second half of last year. The block expiries at New Printing House Square in June 2025 were particularly important.

Lower administration costs, property expenses and net finance costs provided some relief, but not enough to prevent the decline in earnings.

The full-year outlook remains subdued. Management expects 2026 EPS of between 4.6p and 5.5p, reflecting asset sales and the departure of its largest tenant. This is consistent with the pressure highlighted in the recent CLS Holdings earnings outlook update.

Falling property values drove the statutory loss

The portfolio declined by 4.6% in local currencies during the half, with valuations falling across all three regions:

• UK: down 7.2%
• Germany: down 2.5%
• France: down 3.7%

The valuation movement reflected a 27 basis point increase in property yields and a 1.8% decline in estimated rental values. A basis point is one-hundredth of a percentage point. When property yields rise, valuations generally fall if other factors remain unchanged.

The resulting £84.2 million reduction in investment property values was the main reason for the £69.6 million statutory loss after tax. EPRA NTA per share consequently fell 11.5% to 177.7p.

Sterling's 1.2% strengthening against the euro added further pressure when CLS translated its German and French assets into pounds.

Leasing activity offers some encouragement

CLS completed 57 new lettings and renewals, up from 52 a year earlier, securing £5.7 million of contracted annual rent. However, that was below the £7.5 million secured in H1 2025.

The headline leasing figure was 8.9% below December 2025 estimated rental values. That discount was largely caused by one short-term lease at New Printing House Square, agreed ahead of a planned redevelopment in 2029 to reduce void costs. The other 56 transactions were completed broadly in line with estimated rental value.

Group vacancy remained unchanged at 14.5%, while rent collection stayed strong at 98% of contracted rent due. A further £1.9 million of leases was signed in July.

Performance varied by country. UK vacancy improved slightly to 17.7%, while French vacancy fell sharply from 12.1% to 7.7%. German vacancy increased from 11.1% to 12.5%, partly because CLS sold the fully occupied Brix building.

Investors should note that vacancy is expected to rise when the National Crime Agency's lease at Spring Gardens expires at the end of September. This is CLS's largest tenant departure and remains a significant near-term earnings issue.

Disposals reduce debt, but leverage still increased

CLS completed £56.8 million of property sales during the half, broadly in line with book value. Including subsequent transactions, £75.7 million of disposals had been completed or exchanged, with another £22.5 million under offer.

Management continues to target around £100 million of disposals during 2026.

Net debt fell by £44.2 million to £808.3 million. Even so, the loan-to-value ratio increased from 50.0% to 51.6% because property values fell faster than debt.

That remains above CLS's medium-term target range of 35% to 45%. Further sales should reduce borrowings and improve financial flexibility, but they also remove rental income. Management therefore has to balance repairing the balance sheet against protecting future earnings.

Refinancing progress is important

CLS had refinanced, extended or repaid 57% of its 2026 debt maturities by 30 June. It subsequently received credit approval or agreed terms for another 32%, taking completed or agreed refinancing activity to 89%.

Discussions continue over the remaining 11%. The weighted average cost of debt increased slightly to 3.9%, while average debt maturity fell from 3.6 years to 3.2 years.

The group held £35.3 million of cash and cash equivalents, including restricted cash, alongside £44.1 million of undrawn credit facilities.

However, the accounts contain a material uncertainty related to going concern. CLS is relying on completing planned refinancings and property disposals during the assessment period, and their timing and value are outside management's control. The directors remain confident in their plans and continue to prepare the accounts on a going concern basis, but this disclosure deserves close attention from shareholders.

Why there is no interim dividend

The Board has prioritised reducing leverage and completing disposals, so no interim dividend will be paid. Instead, it will consider one final dividend covering the whole of 2026 after seeing the full-year earnings outcome.

Any payment will take account of the company's policy of covering the dividend between 1.5 and 3.0 times with EPRA earnings, alongside UK real estate investment trust distribution requirements.

This preserves cash during a demanding period, which is sensible from a balance-sheet perspective. The drawback is clear: investors receive no interim income, and the final distribution has not yet been determined.

What investors should watch in the second half

There are signs of operational progress, particularly the strong reduction in French vacancy, high rent collection and advanced refinancing programme. Disposals at book value also suggest CLS has so far avoided taking large headline discounts on completed sales.

The pressure points remain substantial. Earnings are falling, property values are lower, leverage is above target and the largest tenant is leaving. The going concern material uncertainty adds another layer of risk, even though management is confident that refinancing and disposal plans can be completed.

For the remainder of 2026, the crucial tests will be whether CLS can deliver around £100 million of disposals, refinance the outstanding maturities, convert its leasing pipeline into occupied space and limit the financial impact of the Spring Gardens departure.

The full figures and statutory disclosures are available in the original company announcement.