2015-02-11 08:00:02 CET
2015-02-11 08:00:06 CET
REGULATED INFORMATION
Citycon Oyj - Financial Statement Release
Citycon Oyj's Financial Statement Release for 1 January – 31 December 2014
Citycon Oyj Stock Exchange Release 11 February 2015 at 09:00 hrs
The Financial Statement Release for the period 1 January-31 December 2014 in
its entirety is attached to this release. It is also available on the company's
website at www.citycon.com.
Financial Statements and the Report by the Board of Directors
On 10 February 2015, Citycon Oyj's Board of Directors approved the company's
Financial Statements and the Report by the Board of Directors for the financial
year 1 January-31 December 2014. The Financial Statements and the Report by the
Board of Directors in their entirety are attached to this release. Also,
Citycon Group's Corporate Governance Statement for the financial year 2014 has
been published simultaneously with the Financial Statements and the Report by
the Board of Directors. All these documents are available on the companys's
website at www.citycon.com.
Summary of the Fourth Quarter of 2014 Compared with the Previous Quarter
- Turnover decreased to EUR 60.8 million (EUR 61.4 million) mainly due to the
weaker Swedish krona and lower turnover rents.
- Net rental income decreased by EUR 2.7 million, or 6.1%, to EUR 41.3 million
(EUR 44.0 million), mainly as a result of higher property operating expenses
reflecting normal seasonal variation.
- EPRA Operating profit decreased by EUR 5.4 million, or 13.4%, to EUR 34.8
million (EUR 40.2 million), mainly due to lower net rental income and higher
direct administrative expenses.
- EPRA Earnings decreased to EUR 24.1 million (EUR 29.4 million) mainly due to
lower EPRA Operating profit and higher direct financial expenses due to
non-recurring expenses related to the write-off of unamortised arrangement fees
of the prepaid debt. EPRA Earnings per share (basic) decreased to EUR 0.041
(EUR 0.050) mainly due to lower Earnings as well as higher number of shares
resulting from the share issuances in June-July.
- The fair value change in investment properties was EUR 2.2 million (EUR 0.1
million), and the fair value of investment properties totalled EUR 2,769.1
million (EUR 2,759.0 million). The weighted average net yield requirement for
investment properties decreased to 6.1% (6.2%).
Summary of 2014 Compared with 2013
Citycon met its financial targets for 2014. The company specified its guidance
twice during the year. In the Q3 interim report, the company stated that it
expects its turnover to change by EUR -4-2 million, EPRA Operating profit to
change by EUR -2-4 million and EPRA Earnings to change by EUR 8-14 million in
2014 compared to 2013, and that it forecasted an EPRA Earnings per share of EUR
0.18-0.19. In 2014 turnover decreased by EUR 3.3 million, while EPRA Operating
profit increased by EUR 0.6 million and EPRA Earnings increased by EUR 13.0
million compared to 2013. EPRA Earnings per share was EUR 0.191, slightly
exceeding the company guidance.
- The Board of Directors proposes a return of equity from invested unrestricted
equity fund of EUR 0.15 per share and that no dividend will be paid.
- Turnover decreased to EUR 245.3 million (EUR 248.6. million) mainly due to
divestments and weaker Swedish krona.
- Despite the disposal of EUR 29.9 million of non-core assets, net rental
income increased by EUR 0.5 million, or 0.3%, to EUR 169.4 million (EUR 168.9
million) mainly due to strict property operating expenses management supported
by mild winter conditions in the first half of the year. Net rental income of
like-for-like properties increased by EUR 3.8 million, or 2.9%, excluding the
impact of the weaker Swedish krona, while the completion of (re)development
projects increased net rental income by EUR 1.9 million.
- Earnings per share were EUR 0.16 (EUR 0.22) mainly as a result of fair value
changes, change in deferred taxes and higher number of shares.
- EPRA Earnings increased by EUR 13.0 million, or 14.9% mainly as a result of
higher net rental income and lower financing expenses. EPRA Earnings per share
(basic) was EUR 0.191 (EUR 0.203).
- Net cash from operating activities per share came to EUR 0.13 (EUR 0.14).
Key figures
IFRS based key figures Q4/2014 Q4/2013 Q3/2014 2014 2013 Change
% 1)
--------------------------------------------------------------------------------
Turnover, EUR million 60.8 62.0 61.4 245.3 248.6 -1.3
--------------------------------------------------------------------------------
Net rental income, EUR 41.3 41.9 44.0 169.4 168.9 0.3
million
--------------------------------------------------------------------------------
Profit/loss attributable to 23.2 42.8 20.1 84.5 94.9 -10.9
parent company
shareholders, EUR million
--------------------------------------------------------------------------------
Earnings per share (basic), 0.04 0.10 0.03 0.16 0.22 -27.1
EUR 2)
--------------------------------------------------------------------------------
Net cash from operating 0.00 0.13 0.06 0.13 0.14 -7.0
activities per share, EUR
3)
--------------------------------------------------------------------------------
Fair value of investment 2,769.1 2,733.5 2,759.0 2,769.1 2,733.5 1.3
properties, EUR million
--------------------------------------------------------------------------------
Equity ratio, % 4) 54.6 43.2 54.9 54.6 43.2 -
--------------------------------------------------------------------------------
Loan to Value (LTV), % 4) 38.6 49.3 36.7 38.6 49.3 -
5)
--------------------------------------------------------------------------------
EPRA based key figures Q4/2014 Q4/2013 Q3/2014 2014 2013 Change
-% 1)
--------------------------------------------------------------------------------
EPRA operating profit, EUR 34.8 36.5 40.2 149.8 149.1 0.4
million
--------------------------------------------------------------------------------
% of turnover 57.3 58.8 65.6 61.0 60.0 -
--------------------------------------------------------------------------------
EPRA Earnings, EUR million 24.1 22.1 29.4 99.7 86.7 14.9
--------------------------------------------------------------------------------
EPRA Earnings per share 0.041 0.050 0.050 0.191 0.203 -5.9
(basic), EUR 2)
--------------------------------------------------------------------------------
EPRA Cost Ratio (including 19.6 25.0 15.0 19.4 22.4 -
direct vacancy costs)
(%)6)
--------------------------------------------------------------------------------
EPRA Cost Ratio (excluding 19.0 22.6 13.1 17.7 20.0 -
direct vacancy costs)
(%)6)
--------------------------------------------------------------------------------
EPRA NAV per share, EUR 3.01 3.13 3.01 3.01 3.13 -3.7
--------------------------------------------------------------------------------
EPRA NNNAV per share, EUR 2.63 2.78 2.65 2.63 2.78 -5.4
--------------------------------------------------------------------------------
1) Change-% is calculated from exact figures and refers to the change between
2014 and 2013.
2) Result per share key figures have been calculated with the issue-adjusted
number of shares resulting from the directed share issue executed in June 2014
and rights issue executed in July 2014.
3) Citycon changed the reporting of cash flows in the first quarter of 2014.
Realised exchange rate gains and losses have been moved from net cash flow from
operating activities to net cash flow from financing activities. The change has
been applied also to the comparison periods.
4) Citycon amended its accounting policy regarding deferred taxes in the third
quarter of 2014 which impacts both equity ratio and LTV. The change has been
applied also to comparison figures.
5) Citycon changed the reporting of LTV in the period by including also
'Investments in joint ventures' in the investment properties. The change has
been applied also to the comparison periods.
6) Citycon made an adjustment to its reporting of parking income during the
year 2014. Previously Citycon reported parking income within service charge
income, but starting from current year part of gross rental income. The change
affects the calculation of EPRA Cost Ratios. The change has been applied also
to the comparison periods.
Main Events in 2014
-- On 18 December Citycon signed a EUR 500 million committed syndicated
revolving credit facility agreement with a Nordic bank group.
-- Citycon acquired GIC's 40% stake in the Iso Omena shopping centre on 16
October. After the transaction, Citycon owns 100% of the existing shopping
centre.
-- Citycon placed a EUR 350 million 10-year Eurobond on 22 September. The
guaranteed euro-denominated bond carries a fixed annual interest of 2.50%.
The bond offering was oversubscribed and allocated to a broad base of
international investors.
-- On 9 September Citycon announced that it has signed a joint venture
agreement with NCC Property Development for the (re)development of Mölndals
Galleria in Gothenburg. Citycon's total investment will be approximately
EUR 120 million.
-- Citycon's two investment grade long-term corporate credit ratings were
upgraded in July. On 8 July Standard & Poor's upgraded Citycon's credit
rating to BBB (previous BBB-) and on 30 July Moody's upgraded Citycon's
credit rating to Baa2 (previous Baa3). The outlook for both ratings is
stable.
-- In June-July Citycon carried out a directed share issue and a consecutive
rights issue, whereby the company raised approximately EUR 400 million of
new equity capital. The directed share issue of EUR 206.4 million to CPP
Investment Board European Holdings S.àr.l. (“CPPIBEH”) was executed on 9
June and the rights issue of EUR 196.5 million was executed on 8 July.
-- Jurn Hoeksema started as Citycon's Chief Operating Officer and a member of
the Corporate Management Committee as of 1 June.
CEO's Comment
Comments from Citycon Oyj's Chief Executive Officer Marcel Kokkeel on the
Financial Year:
2014 was a good year for Citycon despite a challenging retail environment,
especially in Finland. Our actions continued to deliver solid financial
performance. Operationally, we were able to improve the quality of our
portfolio and to produce like-for-like net rental income growth of 2.9%. With
strong leasing efforts we also managed to increase our occupancy rate to 96.3%.
The results clearly demonstrate Citycon's resilient business model and capacity
to manage real growth.
The quality of the property portfolio was further enhanced through continued
focus on improved operations in a more systematic ‘One Citycon' way and as a
result of our efforts to recycle capital accretively. Since the strategy update
in July 2011 we have successfully divested 26 non-core assets for a total value
of approximately EUR 111 million. The significant growth in investment activity
seen in the Nordics creates good momentum to continue the sell-off of the
remaining non-core portfolio of approximately EUR 300 million. During the year,
we also strengthened our development pipeline and introduced a new larger
project, Mölndals Galleria in Gothenburg. The extension of Iso Omena progressed
well and, after the buy-out of GIC's 40% stake, we have full ownership of one
of the most desirable shopping centres in Finland.
The year was characterised by substantial financing transactions and the
introduction of another globally recognised real estate investor, CPPIBEH, as a
strategic shareholder. Our substantially stronger balance sheet with modest
Loan to Value provides us with the capacity to exploit further growth
opportunities within our current portfolio as well as through selective
acquisitions.
Events after the Financial Year
On 16 January Citycon announced that Harri Holmström, Citycon Oyj's Chief
Commercial Officer (CCO) and member of the Corporate Management Committee would
leave the company at the end of January 2015.
On 28 January the company announced that it has signed an agreement with TK
Development regarding the forward purchase of Straedet, a shopping centre to be
built in Køge in the greater Copenhagen area. The purchase price is estimated
to be approximately EUR 75 million and will be paid at completion in 2017.
Outlook
In 2015, Citycon gives guidance on three key metrics: EPRA Operating profit,
EPRA Earnings and EPRA Earnings per share. Citycon will not give guidance on
turnover going forward due to prediction uncertainties relating to e.g.
currency fluctuations. Citycon expects its EPRA Operating profit to change by
EUR -8 to 0 million and EPRA Earnings to change by EUR 6 to 14 million in 2015
compared with the previous year. The company forecasts an EPRA Earnings per
share (basic) of EUR 0.175-0.195.
These estimates are based on the existing property portfolio as well as on the
prevailing level of inflation, the euro-krona exchange rate, and current
interest rates. Premises taken offline for planned or ongoing (re)development
projects reduce net rental income during the year.
Business Environment
Market conditions continued to be challenging in Finland during 2014 while the
Swedish economy showed strong signs of recovery. According to the European
Commission (forecast), GDP growth in 2014 was 0.8% in the Euro area, -0.4% in
Finland, 2.0% in Sweden, 1.9% in Estonia and 0.8% in Denmark.
In 2015 the European Commission forecasts Euro area GDP growth to reach 1.1%,
with Sweden (2.4%), Estonia (2.0%) and Denmark (1.7%) showing stronger growth
figures. The GDP growth for Finland (0.6%) is expected to remain modest for a
fourth year in a row and is dependent on both the recovery of the European
export markets as well as domestic demand.
During the reporting period, consumer confidence levels have stayed relatively
stable in Citycon's operating countries. The consumer confidence levels in the
Nordics remain positive, while the consumer confidence in Estonia is slightly
negative. In general the Euro area still struggles with negative consumer
confidence. Consumer prices have continued to increase modestly in Finland and
Denmark, while Sweden, Estonia and Euro area are facing slightly negative
inflation. (Sources: Statistics Finland/Sweden/Estonia/Denmark) The
unemployment rates are substantially below the Euro area average (11.4%) in all
Citycon's operating countries. (Source: Eurostat)
In 2014 retail sales growth has been strong in Estonia (6.0%) and Sweden
(3.4%), but negative in Finland (-1.0%) and Denmark (-2.1%). (Sources:
Statistics Finland/Sweden/Estonia/Denmark) Year-on-year prime shopping centre
rents decreased slightly in Finland, while increasing approximately 2.0% in
Sweden. In Estonia prime shopping centre rents increased 1.5-3.0% due to
indexation and increases in turnover rents. In Finland the weak outlook for
retail sales limits the rental growth potential going forward. In Estonia prime
rental growth is expected to remain flat in 2015 as demand for large units is
limited and smaller units are already close to their maximum rental potential.
In Sweden prime rental growth is expected to continue, however, being slightly
limited by increased competition. Prime retail rents will perform better than
secondary retail rents in terms of growth. (Source: JLL)
Investment activity has remained positive during the year and peaked in the
fourth quarter. The demand for prime assets remains strong. Accordingly,
increased investor demand and the limited supply of prime shopping centres has
resulted in the compression of prime yields. In Finland the total retail
transaction volume far exceeded the previous year. In Sweden the total
transaction volume was record high, while the retail transaction volume was at
the level of the previous year. In Finland yields are expected to remain stable
in 2015 and in Sweden a minor decrease is expected for prime shopping centre
yields. In Estonia the continued investment activity and improved market
conditions has resulted in yields coming under pressure and yields are expected
to come down slightly in 2015. (Source: JLL)
Risks and Uncertainties
The company's core risks and uncertainties, along with its main risk management
actions and principles, have been described in detail on pages 49-51 of the
Financial Statements 2014 and in the upcoming Annual and Sustainability Report
2014.
Citycon's Board of Directors believes there have been no material changes to
the risks during 2014. The main risks are associated with property development
projects, weaker demand for retail premises, rising operating expenses,
environment and human related risks, decreasing fair values of investment
properties and availability and cost of funding.
Board Proposal for Dividend Distribution and Distribution of Assets
The Board of Directors proposes to the Annual General Meeting to be held on 19
March 2015 that no dividend be paid for the financial year 2014 and that the
shareholders are paid an equity repayment of EUR 0.15 per share from the
invested unrestricted equity fund. The equity repayment will be paid to a
shareholder registered in the company's shareholders' register maintained by
Euroclear Finland Ltd on the record date for equity repayment 23 March 2015.
The Board of Directors proposes that the equity repayment be paid on 30 March
2015.
Financial Reports in 2015
Citycon will publish its Annual and Sustainability Report 2014 on the company's
website in week nine of 2015 at the latest.
Citycon will issue three interim reports during the financial year 2015 as
follows:
January-March 2015 on 30 April 2015 at about 9.00 a.m.,
January-June 2015 on 15 July 2015 at about 9.00 a.m. and
January-September 2015 on 21 October 2015 at about 9.00 a.m.
Annual General Meeting 2015
Citycon Oyj will hold its Annual General Meeting at Finlandia Hall,
Mannerheimintie 13, Helsinki, Finland on Thursday, 19 March 2015 starting at
12:00 p.m.
For more investor information, please visit the company's website at
www.citycon.com.
Additional information:
Marcel Kokkeel , CEO
Tel. +358 20 766 4521 or +358 40 154 6760
marcel.kokkeel@citycon.com
Eero Sihvonen, Executive Vice President and CFO
Tel. +358 20 766 4459 or +358 50 557 9137
eero.sihvonen@citycon.com
Citycon Oyj (NASDAQ OMX: CTY1S) is a leading owner, developer and manager of
urban grocery-anchored shopping centres in the Nordic and Baltic regions,
managing assets that total approximately EUR 3.3 billion and with a market
capitalisation of approximately EUR 1.5 billion. For more information about
Citycon, please visit www.citycon.com
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