EU COMMUNICATIONS: Cellnex: H125 Results & Comments On Leverage Tolerance
(CLNXSM; NR/BBB-pos/BBB-)
H1 results broadly in line with consensus. Looks credit neutral to us.
Yesterday’s S&P outlook upgrade was the result of a methodology update (relevant for AMT too) and saw the leverage threshold increased from 6x-7x to 7x-7.75x (vs. 6.9x at FY24). This has raised the prospects of increased buyouts though alternatively an upgrade is on the cards should management keep leverage steady.
S&P themselves flag the uncertainty “we are uncertain how the company will use the additional rating headroom and note its lack of a track record of maintaining credit metrics”. The call is currently ongoing though a management comment has noted the higher leverage tolerance but ultimately indicated that no decision has yet been taken (albeit the read here is subjective).
“S&P threshold for Cellnex investment grade rating have become more tolerant allowing us to have a higher debt ratio whilst maintaining the same rating. As of today, we have not taken any decision as to how this additional flexibility could impact our capital allocation strategy. This also be conditional upon agreeing a comparable level of flexibility with Fitch.”
- Q2 Revs €978mn (+1% YoY, 1% miss). H1 Org +6.0% YoY
- Q2 EBITDAal €1.2bn (+2% YoY, in line). Org +8.1% YoY.
- Q2 RLFCF €481mn (4% beat) on a strong normalisation of cash adjustments.
- Reported net debt €20.8bn flat vs. FY24.
- FY guidance affirmed.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
UK: Starmer Faces Tough PMQs After Gutting Welfare Reform Bill To Avoid Defeat
While usually a non-event for markets, prime minister's questions at 12:00BST (07:00ET, 13:00CET) may prove more instructive on gov't thinking than is often the case. This follows rebel Labour MPs delivering a major blow to the gov'ts political credibility on 1 July as they extracted concessions that turned a bill intended to save GBP5bln/year by 2030 into legislation with zero "net savings" according to the Institute for Fiscal Studies.
- While PM Sir Keir Starmer's working majority ostensibly stands at 166 (very large by UK standards), this was reduced to just 75 in the 1 July vote. Forty-nine Labour MPs voted against and 18 abstained despite huge concessions and a major whipping operation by the gov't.
- Such a rebellion, less than a year into the gov'ts five-year term, has baked in expectations of tax increases being used to plug holes in gov't finances rather than spending cuts for the duration of the parliament.
- Starmer emerges in a much weakened position following a series of U-turns in recent weeks. Labour disunity could provide a further boost to the right-wing populist Reform UK, already leading comfortably in opinion polling.
- Alex Wickham at Bloomberg: "Gilts calm this morning as traders see Reeves as solid on fiscal rules and likely to raise taxes to fill the hole in the public finances. But Downing St v wary of the risk of Labour MPs - who want her to ditch her fiscal rules to borrow more - risking an adverse market reaction."
DUTCH T-BILL AUCTION PREVIEW: On offer next week
DSTA has announced it will be looking to sell the following DTCs at its auction next Monday, July 7:
- E1.0-2.0bln of the 3-month Sep 29, 2025 DTC
- E0.5-1.5bln of the 4-month Oct 30, 2025 DTC
BOE: Taylor: 5 cuts and neutral rate 2.75-3.00% - lower than other MPC members
Taylor is done talking for now on Bloomberg and the text of his Sintra speech is here (which was due at 11:30BST / 12:30CET).
- In this speech he reiterates the 5 cuts in 2025 that he said in the Bloomberg TV interview (mentioned above): "After some shocks and noise clouded my view of the economy and global developments in the first quarter, my reading of the deteriorating outlook suggested to me that we needed to be on a lower rate path, needing five cuts in 2025 rather than the market-implied quarterly pace of four."
- On the neutral rate Taylor says "I estimate the UK neutral real rate to be about 0.75 to 1 percent, putting the neutral nominal rate at around 2.75 to 3 percent"
- "Getting there, under our baseline scenario without further shocks, would take more time and a continued removal of restrictiveness in 2026 and 2027 as the economy returns to long-run real and nominal equilibrium."
- We note that estimate of 2.75-3.00% for the neutral rate is much lower than said by other MPC members recently.
