2022-08-10 19:30:00 CEST

2022-08-10 19:30:15 CEST


REGULATED INFORMATION

English
Citycon Oyj - Half Year financial report

Citycon H1/2022: Strong operating results beat consensus estimates and result in raising full-year guidance midpoint


CITYCON OYJ   Stock exchange release   10 August 2022 at 20:30 hrs

CITYCON RESULTS SUMMARY:

FINANCIAL PERFORMANCE

  · Like-for-like net rental income in Q2 increased 9.1% compared to the
previous year (+6.2% excluding one-time items)
  · Year-to-date, LFL net rental income increased 6.1% (+4.6%, excluding one
-time items)
  · Continuing the Q1 trend, average rent per sq.m. increased by EUR 0.2 in Q2
    · Year-to-date, total average rent per sq.m. increased by EUR 1.0 to EUR
23.6 per sq.m through the combination of indexation and positive leasing spread
in all our countries
    · Indexation is calculated at the end of each year so the majority of
inflation impact on rents will benefit in 2023

  · Like-for-like footfall in Q2 increased 14.6% and year-to-date 15.3%
  · Like-for-like tenant sales in Q2 increased 8.8%; 5.4% higher than the same
period in Q1-Q2/2019 (pre-pandemic level)
    · Year-to-date, like-for-like tenant sales increased 10.0% compared to
previous year

  · Operating properties recorded a sixth consecutive quarter of uplift as fair
value change of investment properties in Q2/2022 increased by EUR 8.0 million

DEVELOPMENT ACTIVITIES

  · Phase I of Lippulaiva (retail) opened on 31 March 2022 to an excellent
reception from the tenants and customers
    ·
      · 94% retail occupancy rate with 1.5 million visitors during first 3
months

    · Anticipated partial 2022 NRI contribution approximately EUR 9 million
      · Stabilized NRI for full Lippulaiva project (retail and residentials)
estimated at EUR 21 million

    · Metro completed and opening by year-end 2022
    · Residential towers opening late 2022
      · Building rights for two residential towers sold demonstrates strong
market demand for apartment leasing
      · 6 of 8 residential towers under construction and opening between 2022
-2024 (Citycon will own 6).

  · Continue to execute on approximately EUR 300 million of additional building
rights' potential in our existing portfolio with minimal capital expenditure
required
    · Approximately EUR 60 million of building rights will be fully available in
the next 12 months
    · Opportunity to sell, develop or execute strategic joint ventures
    · Currently, all construction commitments are at guaranteed fix pricing

BALANCE SHEET

  · Repurchased EUR 33.8 million of notional bonds in Q2
    · Additional EUR 20.6 million purchased subsequent to Q2

  · Bond repurchases accretively funded by partial proceeds from non-core
Norwegian dispositions
    · 5.2% yield on asset sales vs. 5.3% average yield on recent bond
repurchases

  · Citycon has now completed EUR 79 million notional amount of bond repurchases
by using approx. EUR 75 million of cash


KEY FIGURES

                             Q2/202  Q2/202      %        FX
                                  2       1         Adjusted
                                                        % 1)
Net rental income      MEUR    52.8    50.8    3.9     4.3 %
                                                 %
Like-for-like net      %        9.1     0.9      -         -
rental income
development
Direct Operating       MEUR    46.3    44.1    4.9     5.2 %
profit  2)                                       %
IFRS Earnings per      EUR     0.13    0.18  -30.9   -30.6 %
share (basic) 3)                                 %
Fair value of          MEUR  4 216.  4 292.   -1.8         -
investment properties             9       7      %
Loan to Value (LTV)    %       40.8    38.9    5.0         -
2) 4)                                            %

EPRA based key
figures 2)
EPRA Earnings          MEUR    32.2    32.7   -1.5    -1.1 %
                                                 %
Adjusted EPRA          MEUR    24.6    27.6  -10.9   -10.5 %
Earnings 3)                                      %
EPRA Earnings per      EUR    0.192   0.183    4.4     4.8 %
share (basic)                                    %
Adjusted EPRA          EUR    0.146   0.155   -5.6    -5.2 %
Earnings per share                               %
(basic) 3)
EPRA NRV per share 5)  EUR    11.87   11.66    1.8         -
                                                 %

                                 Q1      Q1      %        FX   2021
                             -Q2/20  -Q2/20         Adjusted
                                 22      21             % 1)
Net rental income      MEUR   101.8   101.2    0.6     0.4 %     202.3
                                                 %
Like-for-like net      %        6.1    -4.5      -         -      -1.5
rental income
development
Direct Operating       MEUR    86.4    89.0   -2.9    -3.1 %     176.1
profit  2)                                       %
IFRS Earnings per      EUR     0.26    0.31  -15.4   -15.4 %      0.55
share (basic) 3)                                 %
Fair value of          MEUR  4 216.  4 292.   -1.8         -   4 189.2
investment properties             9       7      %
Loan to Value (LTV)    %       40.8    38.9    5.0         -      40.3
2) 4)                                            %

EPRA based key
figures 2)
EPRA Earnings          MEUR    60.3    64.3   -6.2    -6.4 %     124.4
                                                 %
Adjusted EPRA          MEUR    45.2    55.2  -18.2   -18.3 %     100.0
Earnings 3)                                      %
EPRA Earnings per      EUR    0.359   0.361   -0.6    -0.8 %     0.703
share (basic)                                    %
Adjusted EPRA          EUR    0.269   0.310  -13.3   -13.5 %     0.565
Earnings per share                               %
(basic) 3)
EPRA NRV per share 5)  EUR    11.87   11.66    1.8         -     12.15
                                                 %

1) Change from
previous year
(comparable exchange
rates). Change-% is
calculated from exact
figures.
2) Citycon presents
alternative
performance measures
according to the
European Securities
and Markets Authority
(ESMA) guidelines.
More information is
presented in Basis of
Preparation and
Accounting Policies
in the notes to the
accounts.
3) The adjusted key
figure includes
hybrid bond coupons
and amortized fees.
4) Highly liquid cash
investments has been
taken into account in
net debt.
5) Calculation
updated from this and
comparison periods.
Divided by number of
shares at balance
sheet date instead of
average amount of
shares during the
reporting period.
6) LTV Q4/2021
changed due to
correction related to
presentation of IFRS
16 assets. Previously
reported LTV for
Q4/2021 was 40.7

Standing portfolio
key figures 1)
                             Q2/202  Q2/202      %        Q1        Q1     %
                                  2       1         -Q2/2022  -Q2/2021

Net rental income      MEUR    52.8    47.5   11.2     100.5      92.2   9.0
                                                 %                         %
Direct Operating       MEUR    46.3    41.2   12.5      85.2      80.5   5.8
profit  2)                                       %                         %

EPRA based key
figures 2)
EPRA Earnings          MEUR    32.2    29.7    8.4      59.0      55.8   5.8
                                                 %                         %
Adjusted EPRA          MEUR    24.6    24.6   -0.1      43.9      46.7  -6.0
Earnings 3)                                      %                         %
EPRA Earnings per      EUR    0.192   0.167   14.9     0.351     0.313  12.1
share (basic)                                    %                         %
Adjusted EPRA          EUR    0.146   0.138    5.8     0.261     0.262  -0.4
Earnings per share                               %                         %
(basic) 3)

1) New presentation
method. Standing
portfolio key figures
include only income
and expenses from
investment properties
that were on group
balance sheet on 30
June 2022. The
portfolio is the same
in the reporting
period and in the
comparison period,
hence the numbers are
comparable.
2) Citycon presents
alternative
performance measures
according to the
European Securities
and Markets Authority
(ESMA) guidelines.
More information is
presented in Basis of
Preparation and
Accounting Policies
in the notes to the
accounts.
3) The adjusted key
figure includes
hybrid bond coupons
and amortized fees.

CEO F. SCOTT BALL:
At the half-way period of the year, the operating performance continues to
demonstrate the strength and resilience of Citycon´s portfolio.  Like-for-like
net rental income increased 9.1% for the quarter and 6.1% year-to-date,
(excluding one-time items 6.2% in Q2 and 4.6% in Q1-Q2).  NRI improvement was
driven by like-for-like tenant sales in Q2/2022, which were 8.8% above Q2/2021
and 5.4% above Q1-Q2/2019 pre-pandemic levels.  This performance reflects the
quality and stability of Citycon´s grocery- / municipal-anchored centres, which
serve as last mile logistic hubs for customers and tenants.  Moving forward into
2023, these assets will continue to benefit from inflation as 92% of leases are
tied to indexation, which is calculated at the end of the year.  Strong leasing
activity also contributed to the outperformance in the first half of the year as
retail occupancy grew to 95.0%.  Positive leasing spreads (+3%) translated to
average rent per square meter continuing its positive trend and increased 1.0
EUR to 23.6 EUR/sq.m, year-to-date.
Phase I of Lippulaiva opened on March 31, 2022 and the retail is currently 94%
leased.  Lippulaiva is the prototype of the direction of our portfolio,
combining large grocery anchors (44% of total GLA), a wide range of private and
municipal services, significant food and beverage, and great public
transportation access, as the brand-new metro line attached to the centre begins
operation by year-end. Just as importantly, the project is completely powered
using geothermal energy generated on site, and has been recognized as the
world´s first retail property to be awarded Smart Building's Gold certificate.
 In addition, the first residential towers at Lippulaiva will come online in
late 2022.  Leasing of these residential units has begun, and lease rates are
outperforming our underwriting.  Construction of the two pads, which were sold
to Hausia, are near completion and will open at the end of the year with sales
at the condos reported to be very strong.  In total, there will be 560
residential units as part of the final project.  As stated previously, we expect
Lippulaiva to contribute EUR 9+ million of NRI in partial-year 2022 with the
stabilized NRI estimated to be approximately EUR 21 million, including six
rental residential buildings.
As previously discussed, we have identified approximately EUR 300 million of
potential building rights imbedded in our existing assets, which offer
significant value creation potential with minimal capital expenditure.  We
expect that approximately EUR 60 million of building rights will be realized in
the next 12 months.  We have multiple ways to monetize the value of these rights
(sell, joint venture, self develop) and, they enhance our grocery-anchored urban
hubs, further solidifying these assets which are connected to transportation and
are located in most densely populated cities in the Nordics.  Our current
capital commitments consist of Lippulaiva residential units (EUR 47.9 million),
Origo/Stockholm (EUR 62.9 million in 2024) and Herkules (no capex as land
contributed to JV).  It is important to note that our limited construction
commitments are at guaranteed fixed pricing.
Looking to the balance sheet, Citycon remains committed to maintaining its an
investment grade rating.  During Q2 and subsequent to quarter end, we continued
to reduce debt by repurchasing bonds in the open market for approx. EUR 54
million notional and EUR 50 million in cash.   These actions, combined with
continued improvements in operating and fair value metrics, further stabilizes
Citycon´s well laddered maturity profile and credit metrics.  Year-to-date,
Citycon has now accretively repurchased EUR 79 million of notional bonds during
2022.  We have no significant maturities until October 2024, 100% of our debt is
fixed, 100% of our assets unencumbered, and over EUR 533.8 million of liquidity,
including the full availability of our credit facility.
Our operational metrics continue to positively impact asset values as our
operating properties recorded a sixth consecutive quarter of uplift in net fair
value change of investment properties.  Net fair value change of investment
properties in Q2/2022 was EUR 8.0 million.  Fair values were negatively impacted
by recently weaker SEK and NOK currency rates. EPRA NRV per share increased by
1.8% compared to Q2/2021.  Year-to-date we have sold two assets for EUR 145
million and over EUR 400 million over the last 18 months, at pricing that
exceeded our book values.
Overall, the operating performance has been strong in the face of an
inflationary environment.  With 92% of leases being indexed for inflation and
occupancy cost at 8.8%, there is ample headroom for rent growth. As mentioned,
this indexation is calculated at the end of each year so the bulk of the
inflation impact on rents will be seen starting in 2023.  Given our tenant mix,
our centres are also more resilient and less reliant on consumer discretionary
spending than fashion-oriented centres.   As evidenced by our operational
outperformance during the pandemic, Citycon's portfolio is positioned to, once
again, outperform in the current economic environment.  These factors, combined
with strong results from Q2, have provided us the confidence to tighten and
raise our guidance by 2% on Direct operating profit, 5% on EPRA EPS and 2% on
Adjusted EPRA EPS versus our initial 2022 guidance provided in February.

OUTLOOK FOR THE YEAR 2022 (SPECIFIED)
Citycon forecasts the 2022 direct operating profit to be in range EUR
170-180million, EPRA EPS EUR 0.68-0.72 and adjusted EPRA EPS EUR 0.50-0.58.

                 Current (10   Previous   Midpoint   Initial (17  Midpoint
                 August 2022)  (5 May     change vs  February     change vs.
                               2022)      previous   2022)        initial
Direct     MEUR  170-180       168-180    +1         164-180      +3
operating
profit
EPRA       EUR   0.68-0.72     0.66-0.72  +0.01      0.62-0.72    +0,03
Earnings
per
share
(basic)
Adjusted   EUR   0.50-0.58     0.49-0.58  +0.005     0.48-0.58    +0,01
EPRA
Earnings
per share
(basic)

The outlook assumes that there are no major changes in macroeconomic factors and
that there will not be another wave of COVID-19 with restrictions resulting in
significant store closures and no major disruptions from the war in Ukraine.
These estimates are based on the existing property portfolio as well as on the
prevailing level of inflation, the EUR-SEK and EUR-NOK exchange rates, and
current interest rates.
AUDIOCAST
Citycon's investor, analyst and press conference call and live audiocast will be
arranged on 11 August 2022 at 10 a.m. EEST. The audiocast can be participated by
calling in and followed live on the following website:
https://citycon.videosync.fi/2022-q2
Conference call numbers are:
Participants from Europe +44 (0)330 165 3641
Participants from the US +1 646-828-8082
PIN: 181139
For more investor information, please visit the company's website at
www.citycon.com.
Helsinki, 10 August 2022
Citycon Oyj
Board of Directors
For further information, please contact:

Bret McLeod
Chief Financial Officer
Tel. +46 73 326 8455
bret.mcleod@citycon.com
Sakari Järvelä
VP, Corporate Finance and Investor Relations
Tel. +358 50 387 8180
sakari.jarvela@citycon.com
Citycon is a leading owner, manager and developer of mixed-use real estate
featuring modern, necessity-based retail with residential, office and municipal
service spaces that enhance the communities in which they operate. Citycon is
committed to sustainable property management in the Nordic region with assets
that total approximately EUR 4.5 billion. Our centres are located in urban hubs
in the heart of vibrant communities with direct connections to public transport
and anchored by grocery, healthcare and other services that cater to the
everyday needs of customers.
Citycon has investment-grade credit ratings from Moody's (Baa3) and Standard &
Poor's (BBB-). Citycon Oyj's shares are listed on Nasdaq Helsinki.
www.citycon.com



08108995.pdf