Citycon Oyj - Interim report (Q1 and Q3)

Citycon Q1: Good start to the year – EPRA Earnings growth fuelled by Sweden and Norway

Citycon Oyj      Interim Report      20 April 2017 at 09:00 hrs
JANUARY—MARCH 2017
-Net rental income increased to EUR 56.6 million (Q1/2016: 55.2) mainly due to
(re)development projects coming online (mainly Iso Omena) and the acquisition of
the adjacent building to Citycon’s Oasen shopping centre in Bergen, Norway. In
addition, positive like-for-like growth contributed to net rental income growth
by EUR 0.5 million. The non-core property divestments in 2016 and 2017 decreased
net rental income by EUR 2.0 million.
-EPRA Earnings increased by EUR 2.4 million, or 6.6%, to EUR 38.3 million,
especially due to the growth in net rental income and lower direct
administrative expenses. EPRA Earnings per share (basic) increased to EUR 0.043
(EUR 0.040).
-Earnings per share decreased to EUR 0.03 (0.06) mainly due to lower fair value
gains.

KEY FIGURES

                             Q1/2017  Q1/2016    %1)     2016
Net rental income      MEUR     56.6     55.2    2.5    224.9
Direct operating       MEUR     50.3     47.9    5.0    198.5
profit2)
Earnings per            EUR     0.03     0.06  -50.3     0.18
share (basic)
Fair value             MEUR  4,447.3  4,079.1    9.0  4,337.6
of investment
properties
Loan to Value (LTV)2)     %     47.1     45.0    4.8     46.6
EPRA based key figures2)
EPRA Earnings          MEUR     38.3     36.0    6.6    151.1
EPRA Earnings           EUR    0.043    0.040    6.6    0.170
per share (basic)
EPRA NAV                EUR     2.83     2.78    1.7     2.82
per share

1) Change from previous year. 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.

CEO, MARCEL KOKKEEL:
Citycon had a good start to the year 2017. The Swedish and Norwegian portfolio
showed continued strong performance, while the ongoing (re)developments and
performance of the non-core properties weighted negatively on the Finnish like
-for-like results. Overall, like-for-like net rental income growth including
Kista Galleria (50%) totalled 1.1%.
The outlook for the Finnish economy is gradually improving. We have seen leasing
demand increasing for our assets in the Helsinki area, including our large
(re)development projects, whereas we still expect some pressure on rental levels
in other parts of Finland. The second phase of the Iso Omena extension will open
on 20 April almost fully leased. With the opening of the new extended M.E.E.T
restaurant concept, seven-screen cinema and Espoo’s first Zara, Iso Omena has
become the natural heart of Espoo and one of the leading shopping and leisure
destinations in the Helsinki area.
In 2017, Citycon’s focus will remain on operational improvement and upgrading
the portfolio quality via asset rotation and (re)developments. Since the
strategy update in 2011, Citycon has divested 52 properties for a total value of
EUR 400 million and we aim to expedite further capital recycling. As previously
communicated, our plan is to divest EUR 200–250 million of non-core assets,
mainly in Finland, within the coming 1.5 years. Additionally, we have identified
further potential to recycle capital in Norway and plan to divest smaller, non
-urban Norwegian assets for up to EUR 200-250 million over the next three
years.

BUSINESS ENVIRONMENT
There were no major changes in Citycon’s macroeconomic environment during the
first quarter of 2017. The Finnish economy grew last year at its fastest pace in
five years and the economy is expected to continue to grow. Other Citycon’s
operating countries are expected to show positive economic development for the
on-going year: the business environment in Sweden, Estonia and Denmark remains
strong or relatively strong and the Norwegian economy is picking up momentum.
According to the European Commission (forecast), GDP growth for the Euro area in
2017 is expected to be approximately 1.6%. Sweden and Estonia are showing
stronger growth figures than the Euro area average and Denmark is in line with
the Euro area forecast, while the GDP growth for Finland and Norway is expected
to be slightly lower than the Euro area average. Overall the GDP growth is
expected to gradually converge in Citycon’s operating countries.
Business environment key figures

%                Finland  Norway  Sweden  Estonia  Denmark  Euro area
GDP growth           1.2     1.2     2.4      2.2      1.5        1.6
forecast, 2017
GDP growth           1.5     1.5     2.1      2.6      1.8        1.8
forecast, 2018
Unemployment,        8.7     4.2     6.8      5.8      6.4        9.5
Feb 2017
Retail sales         1.1     1.7     0.7      1.0     -1.8        1.8
growth, Jan-Feb
2017

Sources: European Commission, Eurostat, Statistics Finland/ Norway/Sweden/
Estonia/ Denmark

The unemployment decreased in Sweden, Estonia and Norway during the first
quarter of 2017, but increased slightly in Denmark. In Finland the unemployment
has remained unchanged during the reporting period. The unemployment rates in
all of Citycon’s operating countries remained below the Euro area average
(9.5%). For the first two months retail sales growth has been positive in
Finland, Norway, Sweden and Estonia, while Danish retail sales has been
negative. (Source: Statistics Finland/Norway/Sweden/Estonia/Denmark)
In Sweden, Finland and Denmark the consumer confidence levels during the
reporting period have continued a positive trend. The consumer confidence in
Estonia and on average in the Euro area is still negative. (Source: Eurostat)
Consumer prices have increased in all of Citycon’s operating countries during
the reporting period, and also in the Euro area generally. In Norway, Sweden and
Estonia the consumer prices have increased faster than the Euro area average.
(Source: Statistics Finland/Norway/Sweden/Estonia/Denmark)
In Finland, prime shopping centre rents have stayed unchanged quarter-to-quarter
and are forecast to remain stable or increase slightly in 2017. In Norway, prime
rents are forecast to remain unchanged. In Sweden, prime shopping centre rents
have increased marginally over the quarter while in Estonia rents have decreased
by 1% quarter-to-quarter. A slight decrease is forecasted to continue in Estonia
in 2017 due to intensifying competition. (Source: JLL)
In Finland, the demand for core properties remains strong and the demand for
secondary properties has alsoincreased. In Norway, the investment demand
continues strong but some upward pressure on yields may be expected. In Sweden
and in Estonia, the prime shopping centre yields have stabilized. (Source: JLL)

RISKS AND UNCERTAINTIES
The most significant near-term risks and uncertainties in Citycon's business
operations are associated with the general development of the economy and
consumer confidence in the Nordic countries and Estonia as well as how this
affects the fair values, occupancy rates and rental levels of the shopping
centres and thereby Citycon’s financial result. Especially a slower economic
recovery in Finland could hamper the achievement of the set financial
objectives.
The main risks that can materially affect Citycon's business and financial
results, along with the main risk management actions, are presented in detail in
Note 3.5 A) and on pages 73-74 in the Financial Statements 2016 as well as on
Citycon’s website in the Corporate Governance section. No material changes are
estimated to have taken place during the first quarter of the year in the risks
described.

DIVIDEND AND EQUITY REPAYMENT
Citycon’s dividends and equity repayments in 2017:

Dividends and              Record date              Payment date  EUR / share
equity
repayments
paid on
31 March
20171)
Dividend for             24 March 2017             31 March 2017         0.01
2016
Equity                   24 March 2017             31 March 2017       0.0225
repayment Q1
Remaining      Preliminary record date  Preliminary payment date       0.0975
Board
authorisation
for
equity
repayment2)
Equity                    22 June 2017              30 June 2017
repayment Q2
Equity               22 September 2017         29 September 2017
repayment Q3
Equity                14 December 2017          29 December 2017
repayment Q4

1) Board decision based on the authorisation issued by the AGM 2017.
2) The AGM 2017 authorised the Board of Directors to decide in its discretion on
the distribution of dividend and assets from the invested unrestricted equity
fund. Based on the authorisation the maximum amount of dividend to be
distributed shall not exceed EUR 0.01 per share and the maximum amount of equity
repayment distributed from the invested unrestricted equity fund shall not
exceed EUR 0.12 per share. Unless the Board of Directors decides otherwise for a
justified reason, the authorisation will be used to distribute dividend and/or
equity repayment four times during the period of validity of the authorisation.
In this case, the Board of Directors will make separate resolutions on each
distribution of the dividend and/or equity repayment so that the preliminary
record and payment dates will be as stated above. Citycon shall make separate
announcements of such Board resolutions.

OUTLOOK
Citycon forecasts the 2017 Direct operating profit to change by EUR -7 to 12
million and EPRA Earnings to change by EUR -13 to 5 million from the previous
year. Additionally, the company expects EPRA EPS (basic) to be EUR 0.155–0.175.

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. Premises taken offline for planned or ongoing
(re)development projects reduce net rental income during the year.

Financial calendar
Citycon will issue a half-year financial report and interim report of the third
quarter in accordance with the following schedule:

  January–June 2017 on Thursday, 13 July 2017 at about 9:00 a.m.
  January–September 2017 on Thursday, 19 October 2017 at about 9:00 a.m.

Helsinki, 19 April 2017

Citycon Oyj
Board of Directors

For further information, please contact:
Eero Sihvonen, Executive VP and CFO
Tel. +358 50 557 9137
eero.sihvonen@citycon.com

Henrica Ginström, VP, IR and Communications
Tel. +358 50 554 4296
henrica.ginstrom@citycon.com

Citycon is an owner, developer and manager of urban grocery-anchored shopping
centres in the Nordic and Baltic region, managing assets that total EUR 5
billion and with market capitalisation of EUR 2 billion. Citycon is the No. 1
shopping centre owner in Finland and Estonia and among the market leaders in
Norway and Sweden. Citycon has also established a foothold in Denmark.

Citycon has investment-grade credit ratings from Moody's (Baa1) and Standard &
Poor's (BBB). Citycon Oyj’s share is listed in Nasdaq Helsinki.

www.citycon.com

Attachments:

04195400.pdf

Citycon_Interim_Report_Q1_2017.pdf