2007-07-20 11:46:18 CEST
2007-07-20 11:46:18 CEST
REGULATED INFORMATION
Citycon Oyj - Quarterly report
Citycon Oyj s Interim Report for 1 January-30 June 2007
Citycon Oyj Stock Exchange Release 20.7.2007 at 12.45 hrs
Summary of the Second Quarter Compared to the First Quarter
- Net rental income increased to EUR 25.8 million in the second
quarter (EUR 23.2 million).
- Citycon's second-quarter earnings per share amounted to EUR 0.70
(EUR 0.18 in the first quarter). Earnings per share exclusive of
changes in fair value were EUR 0.04 (EUR 0.04).
- The fair value of investment properties increased substantially, by
EUR 160.1 million, mainly due to lower valuation yield resulting from
continued yield compression. The fair value of investment properties
was EUR 1,799.2 million (EUR 1,546.9 million).
- The shopping centre Duo was opened in Hervanta, Tampere, as well as
a retail centre in Kaarina in the Turku region.
- In Umeå, the company acquired 75 per cent of the shopping centre
Strömpilen and the retail property Länken. An agreement was signed to
acquire the shopping centre Magistral in Tallinn. Closing of the
transaction took place on 16 July.
- In the beginning of July, Citycon was upgraded from mid cap to
large cap companies on the Nordic Exchange based on its market
capitalisation in May.
Key Figures
Q2/ Q2/ Q1/ Q1-2/ Q1-2/ Change 1-12
2007 2006 2007 2007 2006 % (1 2006
Turnover, EUR
million 35.9 27.8 34.2 70.2 55.0 27.5% 119.4
Net rental
income,
EUR million 25.8 19.6 23.2 49.0 39.0 25.6% 82.8
Operating
profit,
EUR million 181.6 76.8 50.4 231.9 108.7 113.4% 196.5
% of turnover 505.3 276.5 147.1 330.5 197.5 - 164.6
Profit before
taxes,
EUR million 171.6 70.9 40.9 212.5 95.8 121.9% 165.6
Profit
attributable
to parent
company
shareholders,
EUR million 134.6 54.3 33.0 167.6 72.4 131.4% 124.9
Earnings per
share
(basic), EUR 0.70 0.34 0.18 0.90 0.47 90.5% 0.78
Earnings per
share
(diluted), EUR
(EPRA EPS) 0.62 0.33 0.17 0.80 0.47 70.0% 0.74
Earnings per
share (basic),
excluding
the effects of
changes in fair
value, gains on
sale and other
extraordinary
items, EUR 0.04 0.05 0.04 0.08 0.10 -21.6% 0.20
Net cash from
operating
activities
per share, EUR 0.06 0.00 0.05 0.11 0.10 10.0% 0.20
Fair market
value of
investment
properties,
EUR million 1,546.9 1,799.2 1,143.2 57.4% 1,447.9
Equity per
share, EUR
(EPRA NAV) 4.42 2.98 48.5% 3.38
EPRA NNNAV 4.27 3.00 42.7% 3.22
Equity ratio, % 46.9 42.3 - 39.1
Gearing, % 96.2 122.9 - 136.6
Net interest-
bearing debt
fair value),
EUR million 863.3 608.5 41.9% 811.2
Net rental
yield, % (2 6.4 8.0 - 7.1
Occupancy
rate, % 95.8 96.7 - 97.1
Personnel (at
the end of the
period) 94 61 54.1% 73
1) Change-% is calculated based on exact figures and refers to the
change between Q1-2/2006 and Q1-2/2007.
2) Includes the lots for development projects.
Summary of the Reporting Period 1 January-30 June 2007
- Turnover increased by 27.5 per cent, to EUR 70.2 million
(Q1-2/2006: EUR 55.0 million), due mainly to property acquisitions.
- Profit before taxes improved to EUR 212.5 million (EUR 95.8
million), including a EUR 191.6 million (EUR 75.3 million) increase
in the fair value of investment properties.
- Reported net rental income increased by 25.6 per cent, to EUR 49.0
million (EUR 39.0 million), and that of like-for-like properties
increased by 8.8 per cent.
- Earnings per share were EUR 0.90 (EUR 0.47).
- Earnings per share excluding the effects of fair value changes were
EUR 0.08 (EUR 0.10). The decline derives from a one-time exchange
rate gain in the comparison period, divestment of non-core
properties, higher number of shares as well as from increased
development activities and costs related to expanded business
operations.
- Net cash flow from operating activities per share grew in spite of
increased interest rates and amounted to EUR 0.11 (EUR 0.10).
- Per-share net asset value (EPRA NAV) grew to EUR 4.42 (EUR 2.98).
- According to an external appraiser, the average net yield
requirement for investment properties stood at 5.8 per cent at the
end of the reporting period.
- Occupancy rate remained at a good level at 95.8 per cent, but
suffered from the increased number of premises temporarily vacated
due to redevelopment projects.
- In addition to the acquisitions of Strömpilen, Länken and Magistral
referred to above, acquisitions during the period include Tumba
Centrum close to Stockholm and the Hansa property within the Trio
shopping centre in Lahti.
- During the period, the company decided to initiate development and
redevelopment projects in Estonia and Sweden for an estimated total
aggregate value of EUR 178 million.
- The equity ratio increased to 46.9 per cent (42.3 per cent).
- In February, the company carried out a directed share issue worth
EUR 133.8 million by issuing 25,000,000 new shares.
CEO Petri Olkinuora:"Citycon continued implementing its growth strategy through
continuous redevelopment and proactive management of its portfolio
and reported growth in like-for-like net rents. Additionally, the net
cash flow from operating activities per share remained strong and the
increase in fair value resulted in a significant growth in earnings
per share. The recent very active property market resulted in a
reduction of valuation yields and substantial valuation gains as
assessed by the external appraiser. During the period, the company
also grew successfully through acquisitions. In Sweden, Citycon's
business expanded to Umeå, where the company acquired a majority
holding in the region's leading shopping centre Strömpilen and the
retail property Länken.
I am delighted with the level of the activity in development and
redevelopment, which is a direct execution of our strategy and will
lead to strong internal growth and improved quality of our portfolio.
We are seeking better long-term return from development projects
compared to acquisitions. The company has already demonstrated its
ability to deliver successful development and redevelopment of its
properties with the opening of the shopping centre Duo during the
reporting period. The company currently has six significant
development and redevelopment projects underway, with investments
totalling approximately EUR 340 million."
Business Environment
During the first six months of 2007, demand for retail premises
remained strong in Citycon's operating regions in Finland, Sweden and
the Baltic countries and occupancy rates remained high.
Economic growth has continued and retail trade has been active in all
of Citycon's operating countries. Investor interest in retail
properties has also remained high in all of the company's operating
regions. Since competition for offered investment properties has
remained tough, yield requirements for properties have fallen and
property prices have risen, in addition to which the general interest
rate level has increased. The increase in interest rate levels has
been especially fast in the Baltic countries. Property market
liquidity has remained at a good level and the company's operating
regions have plenty of investment properties that are, or will soon
be, on sale.
Business and Property Portfolio in Summary
Specialising in shopping centres and other large retail units,
Citycon is a property investment company operating in Finland, Sweden
and the Baltic countries. Citycon is the market leader in the Finnish
shopping centre business and has achieved a substantial position in
the Swedish shopping centre market. In the Baltic countries, the
company has established a firm foothold. Citycon's core competence
lies in the development of shopping centres into commercially more
attractive retail properties through property development and retail
property management, as well as competence associated with new retail
property acquisitions.
On 30 June 2007, Citycon owned 30 (23) shopping centres and 53 (133)
other retail units. Of the shopping centres, 20 (18) were located in
Finland, eight (3) in Sweden and two (2) in the Baltic countries. At
the end of the period, the market value of Citycon's property
portfolio totalled EUR 1,799.2 million, Finnish properties accounting
for 66.0 per cent (83.2 per cent), Swedish properties for 29.0 per
cent (10.0 per cent) and properties in the Baltic countries for 5.0
per cent (6.8 per cent). The gross leasable area at the end of the
period was 824,300 square metres.
Changes in Investment Property Portfolio's Fair Value
Citycon measures its investment property at fair value, under IAS 40,
according to which changes in its fair value are recognised through
profit or loss. Using International Valuation Standards (IVS), an
external professional appraiser conducts the valuation of the
company's property at least once a year. In 2007, the valuations by
an external appraiser will be conducted quarterly, due to active
market conditions.
Citycon has appointed a new external appraiser, with Realia
Management Oy having conducted its first appraisal of Citycon's
property portfolio for this interim report. Realia Management Oy is
part of the Realia Group and works in association with the world's
leading provider of real estate services, the international company
CB Richard Ellis. A Property Valuation Statement on the June-end
status, prepared by Realia Management Oy, can be found at
www.citycon.fi.
During the reporting period, the fair value of Citycon's property
portfolio rose by EUR 191.6 million as a result of changes in general
market conditions and the leasing business. The period saw a total
value increase of EUR 197.6 million and a total value decrease of EUR
6.0 million.
The average net yield requirement defined by Realia Management Oy for
Citycon's property portfolio fell to 5.8 per cent, due mainly to the
very active property market.
Lease Portfolio and Occupancy Rate
On 30 June 2007, Citycon had a total of 3,415 (2,373) leases. The
length of the leases averaged 2.9 (2.9) years. On the same date, the
occupancy rate for the company's property portfolio stood at 95.8 per
cent (96.7 per cent) and net rental yield at 6.4 per cent (8.0 per
cent). Occupancy rate suffered from the increased number of premises
temporarily vacated due to redevelopment projects.
Reported net rental income increased by 25.6 per cent, to EUR 49.0
million, and the gross leasable area (GLA) grew by 25.3 per cent, to
824,300 square metres. Net rental income for like-for-like properties
rose by 8.8. per cent. Like-for-like properties refer to properties
held by Citycon throughout the 24-month reference period, excluding
properties under development and expansion as well as lots. During
the reporting period, all of Citycon's like-for-like properties were
located in Finland as the first acquisitions outside Finland were
carried out in July 2005.
The calculation method for net yield and standing (like-for-like)
investments is based on the guidelines issued by the KTI Institute
for Real Estate Economics and the Investment Property Databank (IPD).
Lease portfolio summary
Q2/ Q2/ Q1/ Q1-2/ Q1-2/ Change, 1-12/
2007 2006 2007 2007 2006 % 2006
Number of leases
started during
the period 122 79 114 236 201 17.4% 369
Total area of leases
started, sq.m. 28,745 9,521 17,960 46,705 48,986 -4.7% 73,300
Occupancy rate at
the end of the
period , % 96.7 95.8 96.7 -0.9% 97.1
Average length of
lease portfolio at
the
end of the period,
year 2.9 2.9 2.9 0.0% 2.9
Development Projects
Maintaining its properties as attractive and dynamic centres for
shopping both for the customers and lessees is the key element in
Citycon's business. Citycon aims to increase the cash flow and return
from its shopping facilities in the long term through development
projects. In the short term, however, development projects may weaken
the returns from some properties as part of the retail premises have
to be temporarily vacated for refurbishment. This will impact the
rental income from properties under development in the short term.
The table below shows a list of the most significant development and
redevelopment projects in progress, decided by the Board of
Directors. In addition, Citycon is planning and preparing a number of
other development projects. More information on projects under
planning can be found in the management presentations and Annual
Report available at www.citycon.fi.
Development projects in progress
Actual gross-
Total expenditure
estimated up to 30 June
expenditure 2007 Estimated
(EUR (EUR year of
Property Location million) million) completion
Lippulaiva Espoo, Finland 60-70 1) 8.4 2008
Trio Lahti, Finland 50.5 4.2 2009
Lentola Kangasala, Finland 16.6 - 2007
Torikeskus Seinäjoki, Finland 4.0 1.9 2008
Åkersberga Österåker, Sweden 27 2) 4.1 2009
Liljeholmen Stockholm, Sweden 110 6.6 2009
Rocca al Mare Tallinn, Estonia 68 3) 4.2 2010
1) Both planned stages included in the figure.
2) Citycon owns 75 per cent of the Åkersberga shopping centre. The
estimated total value of the redevelopment project is EUR 40 million.
3) All three planned stages included in the figure.
Completed and partially completed development projects
Actual gross-
Total expenditure
estimated up to 30 Estimated
expenditure June 2007 year of
Property Location (EUR million) (EUR million) completion
Tampere,
Duo Finland 27.3 22.5 2007
Kaarina,
Lillinkulma 1) Finland 8.2 10.9 2) Completed
1) Lillinkulma was previously referred to as Piispanristi.
2) Includes stages 1 and 2. The 2nd stage was completed earlier than
anticipated.
The most significant project, which started during the period, is the
construction of a new shopping centre at Liljeholmen in Stockholm.
The value of the project is approximately EUR 110 million in addition
to the EUR 60.6 million paid for the property, and it is the largest
individual development project in Citycon's history. The gross area
of the shopping centre will be approximately 91,000 square metres,
including an underground car park. The new shopping centre will open
its doors in or around October-November 2009.
In early February, Citycon announced that it would begin to extend
the Rocca al Mare shopping centre in Tallinn, acquired in the summer
of 2005. Its first stage investment is worth a total of some EUR 25
million, increasing the gross leasable area by around 16,000 square
metres, while the project investment, covering several stages, totals
an estimated EUR 68 million.
An extension to the shopping centre Duo located in Finland's largest
suburb, Hervanta in Tampere, was completed in April. The leasable
area of the shopping centre is 15,500 square metres, consisting of
the old Hervanta retail centre (5,200 m2) and the new extension
(10,300 m2). The number of customers in the first week after the
opening day, 80,000 people, exceeded expectations. The project was
completed on budget and schedule. Refurbishment of the old section
will be completed for Christmas 2007.
Koskikeskus in Tampere also underwent commercial upgrading, and its
service offering was expanded during the period. A food court will be
opened at Myyrmanni in Vantaa in 2007, doubling the number of the
shopping centre's existing restaurants. The project's value is
approximately EUR 2 million. In the centre of the town of Salo, which
lies some 120 kilometres west of Helsinki, a retail property owned by
Citycon will be redeveloped into a shopping centre. The investment
amounts to approximately EUR 1.8 million, and the centre will be
opened for Christmas 2007.
Business Units
Since the end of 2006, Citycon's business is divided into three
business units, Finland, Sweden and the Baltic Countries, which are
further divided into business areas Retail Properties and Property
Development.
Finland
Citycon leads the Finnish market in the shopping centre business.
Reported net rental income rose by 4.8 per cent, to EUR 35.7 million
and that of like-for-like properties increased by 8.8 per cent.
Business unit Finland accounted for 72.9 per cent of Citycon's total
net rental income.
Rolling twelve month occupancy cost ratio for like-for-like
properties was 8.6 per cent (8.5 per cent). Occupancy cost ratio has
been calculated as a share of net rent and potential service charges,
paid by the tenant to Citycon, of tenant's sales excluding VAT.
VAT-percentage is an estimate.
Lease portfolio summary, Finland
Q2/ Q2/ Q1/ Q1-2/ Q1-2/ Change, 1-12/
2007 2006 2007 2007 2006 % 2006
Number of leases
started during
the
period 101 76 106 207 189 9.5% 321
Total area of
leases started,
sq.m. 24,350 8,419 16,900 41,250 45,885 -10.1% 66,500
Occupancy rate at
end of the
period,
% 96.4 95.9 96.5 -0.6% 97.2
Average length of
lease portfolio
at
the end of the
period, year 3.2 3.4 2.9 17.2% 3.1
Financial performance, Finland
Q2/ Q2/ Q1/ Q1-2/ Q1-2/ Change, 1-12/
2007 2006 2007 2007 2006 % 2006
Turnover,
EUR million 24.7 23.7 23.9 48.6 47.1 3.3% 95.8
Net fair value
gains on invest-
ment property,
EUR million 120.3 56.2 14.0 134.3 71.1 88.7% 104.8
Operating profit,
EUR million 137.1 72.5 30.2 167.3 103.2 62.0% 176.1
Gross rental
income,
EUR million 23.7 22.9 23.3 47.0 45.7 3.0% 93.1
Net rental
income,
EUR million 18.2 17.2 17.5 35.7 34.1 4.8% 68.8
Capital
expenditure,
EUR million 20.5 8.6 22.9 43.3 59.9 -27.6% 152.8
Fair market value
of investment
properties,
EUR million 1,046.6 1,187.4 950.9 24.9% 1,009.7
Net rental yield,
% (1 7.3 7.0 8.3 - 7.6
Net rental yield,
like-for-like
properties, % 7.9 7.7 8.4 - 7.9
1) Includes the lots for development projects.
During the reporting period, Citycon acquired all shares in
Kiinteistö Oy Lahden Hansa, adjacent to the Trio shopping centre in
Lahti, at a debt-free price of EUR 17.0 million. The acquired
property is an integral part of Trio, currently being refurbished by
Citycon. The leasable area of Hansa is about 11,000 square metres. As
a result of this acquisition, Citycon is almost the sole owner of the
Trio shopping centre, the gross leasable area in its possession
increasing to 46,000 square metres.
In May, Citycon acquired all shares in Lillinkulma Oy for EUR 0.8
million. The acquisition relates to the company's retail centre
construction project in Kaarina completed in May. The total
investment in the development project was EUR 10.9 million. In
addition, the company made several smaller investments during the
reporting period when it purchased shares in shopping centres from
minority shareholders, such as Isomyyri in Vantaa and Heikintori in
Tapiola, Espoo.
The largest ongoing shopping centre development projects in Finland
are listed in the table above under Development Projects.
New acquisitions carried out in Finland during the reporting period
were worth a total of EUR 29.8 million (EUR 48.7 million), while
development investments totalled EUR 13.6 million (EUR 11.1 million).
On 30 June 2007, Citycon owned 20 (18) shopping centres and 46 (127)
other retail properties in Finland.
Sweden
Citycon has achieved a substantial position in the Swedish shopping
centre market and has 15 (9) retail properties in Sweden, located in
the Greater Stockholm and Gothenburg areas and in Umeå. Business unit
Sweden's net rental income grew by 275.2 per cent, to EUR 10.4
million accounting for 21.3 per cent of Citycon's total net rental
income.
Lease portfolio summary, Sweden
Q2/ Q2/ Q1/ Q1-2/ Q1-2/ Change, 1-12/
2007 2006 2007 2007 2006 % 2006
Number of leases
started during the
period 15 2 3 18 3 500.0% 32
Total area of leases
started, sq.m. 4,138 492 270 4,408 599 635.9% 3,900
Occupancy rate at the
end of the period ,% 97.2 95.0 97.2 -2.3% 96.3
Average length of
lease portfolio at the
end of the period,
year 1.9 1.8 2.4 -25.0% 2.2
Financial performance, Sweden
Q2/ Q2/ Q1/ Q1-2/ Q1-2/ Change, 1-12/
2007 2006 2007 2007 2006 % 2006
Turnover,
EUR million 9.3 2.7 8.6 17.8 5.3 235.0% 17.3
Net fair value gains
on investment
property,
EUR million 35.5 1.2 15.1 50.6 1.1 4,515.4% 8.7
Operating profit,
EUR million 40.6 2.4 18.8 59.4 3.4 1,627.7% 16.8
Gross rental income,
EUR million 8.4 2.5 7.9 16.3 4.9 235.4% 15.9
Net rental income,
EUR million 6.0 1.3 4.4 10.4 2.8 275.2% 9.3
Capital expenditure,
EUR million 72.2 4.8 61.7 133.9 38.1 251.0% 267.2
Fair market value of
investment
properties,
EUR million 414.8 521.9 114.3 356.6% 354.8
Net rental yield, % (1 4,6 4.6 6,2 - 5.1
1) Includes the lots for development projects.
On 5 June 2007, Citycon acquired 75 per cent of the real estate
company Balticgruppen Handel AB from the Swedish Balticgruppen AB for
approximately SEK 490 million (approximately EUR 53.3 million). The
acquisition resulted in Citycon owning 75 per cent of the shopping
centre Strömpilen and the retail property Länken. Strömpilen is the
leading shopping centre in Umeå and has a leasable area of
approximately 25,000 square metres, with retail premises accounting
for approximately 22,300 square metres. Länken is a modern retail
property consisting of two buildings with a gross leasable area of
approximately 7,200 square metres. Both properties have potential for
substantial development and extension.
As agreed in December 2006, Citycon bought Tumba Centrumfastigheter
AB shares in late January. The company owns Tumba Centrum, a shopping
centre in the municipality of Botkyrka, south of Stockholm. The
property's debt-free purchase price amounted to SEK 547.7 million
(approx. EUR 60.5 million). Its gross leasable area is around 31,000
square metres, some 18,600 square meters of which are retail
premises.
The development projects underway in Sweden are listed in the table
under Development Projects. The most significant project, which
started during the period, is the construction of a new shopping
centre at Liljeholmen in Stockholm.
In Sweden, reported capital expenditure totalled roughly EUR 133.9
million, of which new acquisitions and development investments
accounted for EUR 128.9 million (EUR 36.2 million) and EUR 5.0
million (EUR 2.0 million), respectively. On 30 June 2007, Citycon
owned eight (3) shopping centres and seven (6) other retail
properties in Sweden.
Baltic Countries
At the end of the reporting period, Citycon owned two shopping
centres in the Baltic countries: Rocca al Mare in Tallinn, Estonia,
and Mandarinas in Vilnius, Lithuania. Furthermore, Citycon agreed in
June to acquire the shopping centre Magistral in Tallinn for
approximately EUR 16.5 million. The closing of the acquisition took
place on 16 July 2007.
Due to the limited size of the Baltic market, competition and the
limited availability of suitable properties, Citycon has been
cautious with investments in the region. However, the company is
continuously looking for potential investment opportunities.
Citycon's net rental income grew by 31.9 per cent, to EUR 2.8
million. The Baltic Countries accounted for 5.6 per cent of the
company's total net rental income.
Lease portfolio summary, Baltic Countries
Q2/ Q2/ Q1/ Q1-2/ Q1-2/ Change, 1-12/
2007 2006 2007 2007 2006 % 2006
Number of leases
started during the
period 6 1 5 11 9 22.2% 16
Total area of leases
started, sq.m. 257 610 790 1,047 2,502 -58.2% 2,900
Occupancy rate at
the end of the period,
% 100.0 99.9 100.0 -0.1% 100.0
Average length of
lease portfolio at the
end of the period,
year 3.2 3.0 3.8 -21.1% 3.3
Financial performance, Baltic Countries
Q2/ Q2/ Q1/ Q1-2/ Q1-2/ Change, 1-12/
2007 2006 2007 2007 2006 % 2006
Turnover,
EUR million 1.9 1.4 1.8 3.7 2.7 39.3% 6.2
Net fair value gains
on investment
property,
EUR million 4.3 2.4 2.4 6.7 3.1 118.2% 6.6
Operating profit,
EUR million 5.6 3.4 3.5 9.1 5.0 81.9% 10.9
Gross rental income,
EUR million 1.9 1.2 1.6 3.5 2.3 54.8% 6.1
Net rental income,
EUR million 1.4 1.1 1.3 2.8 2.1 31.9% 4.8
Capital expenditure,
EUR million 3.6 16.2 0.3 3.9 16.2 -76.0% 16.2
Fair market value of
investment
properties,
EUR million 85.6 89.9 77.9 15.3% 83.3
Net rental yield, % (1 6.6 6.6 7.0 - 6.7
1) Includes the lots for development projects.
The shopping centre Magistral referred to above is located in the
Mustamäe district of Tallinn having around 64,000 inhabitants.
Magistral, constructed in 2000, has a leasable area of 9,450 square
metres. This shopping centre provides significant opportunities for
development and extension and, in connection with the property
transaction, Citycon has also agreed on purchasing some 8,500 square
metres of building rights for the sum of EUR 2 million if a pending
amendment to the town plan becomes legally valid. The acquisition is
Citycon's third shopping centre acquisition in the Baltic countries
and the second one in Estonia.
A major redevelopment and extension project is going on in the Rocca
al Mare shopping centre. More details on the project can be found
under Development Projects.
In the Baltic Countries, reported capital expenditure totalled
roughly EUR 3.9 million, of which new acquisitions and development
investments accounted for EUR 0.0 million (EUR 16.2 million) and EUR
3.9 million (EUR 0.0 million), respectively.
Turnover and Profit
Turnover for the period came to EUR 70.2 million (EUR 55.0 million),
mainly coming from the rental income generated by Citycon's retail
premises, of which gross rental income accounted for 95.3 per cent
(96.0 per cent).
Operating profit rose to EUR 231.9 million (EUR 108.7 million).
Profit before taxes came to EUR 212.5 million (EUR 95.8 million) and
profit after tax was EUR 170.4 million (EUR 72.7 million). The
increase in operating profit was chiefly due to changes in the fair
value of the property portfolio, and the operating profit generated
by the acquired properties.
The effect of investment property fair value gains, gains on the sale
of investment property and other non-recurring items, including the
related tax effect, on the profit for the period attributable to
parent company shareholders came to EUR 152.7 million (EUR 56.8
million). Taking this into account, the reported profit attributable
to parent company shareholders after tax is EUR 0.7 million below the
Q2/2006 level. The decline derives from a one-time exchange rate gain
in the comparison period, divestment of non-core properties, higher
number of shares as well as from increased development activities and
costs related to expanded business operations.
Earnings per share were EUR 0.90 (EUR 0.47). Earnings per share
excluding fair value gains, gains on sale on investment property,
other non-recurring items and the resulting tax effects were EUR 0.08
(EUR 0.10).
Net cash flow from operating activities per share amounted to EUR
0.11 (EUR 0.10).
Human Resources and Administrative Expenses
On 30 June 2007, Citycon Group had a total of 94 (61) employees, 70
of whom worked in Finland, 18 in Sweden, five in Estonia and one in
Lithuania. Administrative expenses grew to EUR 8.6 million (EUR 5.9
million), including EUR 0.5 million (EUR 0.4 million) in share-based,
non-cash implicit expenses related to employee stock options and the
share-based incentive scheme announced in April. Higher expenses were
also attributable to expanding company operations and expenses
resulting from the creation of the new regional organisation.
Capital Expenditure
Reported gross capital expenditure totalled EUR 181.3 million (EUR
114.2 million), of which property acquisitions accounted for EUR
158.7 million (EUR 101.0 million), property development for EUR 22.5
million (EUR 13.1 million) and other investments for EUR 0.2 million
(EUR 0.1 million).
These investments were mainly financed with the proceeds from the EUR
133.8 million directed share issue carried out during the reporting
period.
Balance Sheet and Financial Position
The period-end balance sheet total stood at EUR 1,878.1 million (EUR
1,170.6 million), and liabilities totalled EUR 998.5 million (EUR
675.4 million), with short-term liabilities accounting for EUR 131.8
million (EUR 104.9 million). The Group's financial position remained
at a healthy level throughout the reporting period.
Year-on-year, reported interest-bearing debt increased by EUR 259.8
million, to EUR 886.0 million (EUR 626.2 million). The fair value of
Group interest-bearing debt stood at EUR 903.5 million (EUR 626.2
million) while cash and cash equivalents came to EUR 40.1 million
(EUR 17.7 million), resulting in EUR 863.3 million (EUR 608.5
million) in the fair value of net interest-bearing debt.
The interest rate of interest-bearing debt averaged 4.60 per cent
(4.33 per cent). The average loan maturity, weighted according to
loan principals, extended to 4.5 years (2.5 years) while the average
time to fixing lengthened to 3.4 years (2.4 years). On 30 June 2007,
the interest rate of interest-bearing debt, interest-rate swaps
included, averaged 4.65 per cent.
The Group's equity ratio stood at 46.9 per cent (42.3 per cent).
Period-end gearing was 96.2 per cent (122.9 per cent). A directed
share issue carried out during the period and good financial
performance pulled down gearing and improved the equity ratio.
Citycon's period-end interest-bearing debt included 79.4 per cent
(88.5 per cent) of floating-rate loans, of which 68.1 per cent (71.3
per cent) had been converted to fixed-rate ones by means of
interest-rate swaps. Fixed-rate debt accounted for 74.7 per cent of
the Group's period-end interest-bearing debt, the interest-rate swaps
included. On 30 June 2007, the nominal amount of derivative contracts
was EUR 627.6 million (EUR 395.1 million) while the fair value stood
at EUR 11.1 million (EUR -5.6 million).
Citycon applies hedge accounting, whereby changes in the fair value
of interest-rate swaps subject to hedge accounting are recognised
under equity. The period-end nominal amount of interest-rate swaps
totalled EUR 539.1 million (EUR 395.1 million), with hedge accounting
applied to interest-rate swaps whose nominal amount totalled to EUR
489.1 million (EUR 395.1 million).
Net financial expenses increased by EUR 6.5 million, to EUR 19.4
million (EUR 12.9 million), due mainly to higher interest-bearing
debt and reported expenses resulting from an option on convertible
bonds, as well as a non-recurring exchange rate gain of EUR 1.0
million recognised in the comparison period. Net financial expenses
shown in the income statement include EUR 0.9 million (EUR 0.0
million) in non-cash expenses related to the option component on
convertible bonds.
Share Capital and Shares
At the beginning of 2007, Citycon Oyj's registered share capital
totalled EUR 225.7 million and the number of shares 167.2 million.
During January-June, the company increased its share capital by EUR
33.9 million and 25.3 million shares, as a result of share
subscriptions based on a directed share issue and stock options. The
table below shows the changes in share capital in more detail. The
company's period-end registered share capital amounted to EUR 259.6
million and the number of shares totalled 192.5 million. The company
has a single series of shares, with each share entitling its holder
to one vote at the shareholders' meeting. The shares have no nominal
value.
Changes in share capital between 1 January and 30 June 2007
Change
Date in no. Share Number of
2007 Change, EUR of shares capital, EUR shares
1 225,697,293.00 167,183,180
Jan.
9 Increase 123,217.20 91,272 225,820,510.20 167,274,452
Feb. (stock
options)
15 Increase 33,750,000.00 25,000,000 259,570,510.20 192,274,452
Feb. (directed
share
issue)
27 Increase - 206,441 - 192,480,893
April (stock
options)
14 Increase - 21,854 - 192,502,747
June (stock
options)
30 June 2007 259,570,510.20 192,502,747
Since company shares no longer bear any nominal value and the AGM
amended the stock options' terms and conditions in such a way that
the share subscription price of shares subscribed on the basis of
stock options would be recognised under the invested unrestricted
equity fund, the company's share capital will no longer increase as a
result of share subscriptions based on stock options.
During January-June, the number of Citycon shares traded on the
Helsinki Stock Exchange totalled 66.4 million (29.1 million) at a
total value of EUR 357.6 million (EUR 108.4 million). The highest
quotation was EUR 6.09 (EUR 4.23) and the lowest EUR 4.61 (EUR 3.02).
The trade-weighted average price was EUR 5.39 (EUR 3.73) and the
share closed at EUR 4.77 (EUR 3.61). The company's market
capitalisation at the end of June totalled EUR 918.2 million (EUR
595.7 million).
Directed Share Issue
Citycon strengthened its balance sheet by a directed share issue in
February. The issue of new shares was based on the authorisation by
the Extraordinary General Meeting of 26 January 2007. The new shares
were offered to subscription to Finnish and international
institutional investors in a directed issue, waving the shareholders'
pre-emptive rights, and was carried out in an accelerated
book-building process between 12 February and 13 February 2007. A
total of 25 million new shares were subscribed for at a per-share
price of EUR 5.35. The new shares entitle their holders to a dividend
as of the financial year starting on 1 January 2007.
More detailed information on the directed share issue can be found in
Citycon's stock exchange releases published in February and available
on the company's website at www.citycon.fi.
Board Authorisations
The AGM of 13 March authorised the Board of Directors to decide on
issuing new shares and disposing of treasury shares held by the
company, through a rights or a free share issue. The company may
issue new shares and transfer its treasury shares to its shareholders
in proportion to their current shareholdings in the company or,
waiving the shareholders' pre-emptive right, through a directed share
issue, if the company has a weighty financial reason for doing so.
The Board may also decide on a bonus issue to the company itself. In
addition, the AGM authorised the Board of Directors to grant special
rights, as referred to in Chapter 10, Section 1 of the Companies Act,
entitling their holders to receive, against payment, new company
shares or treasury shares held by the company. The combined number of
new shares to be issued and treasury shares to be transferred,
including the shares granted on the basis of the special rights, may
not exceed 100 million. These authorisations are valid for five years
from the date of the AGM.
Other decisions made at the Annual General Meeting have been reported
in the previous interim report and the company's stock exchange
release published on 13 March 2007 and available on the company's
website at www.citycon.fi.
Notification of Changes in Ownership
In February, Fidelity International Limited notified that Fidelity
International Limited's and its direct and indirect subsidiaries'
shareholding in Citycon Oyj had fallen below ten (10) per cent.
According to the notification, on 14 February 2007 Fidelity
International Limited and its direct and indirect subsidiaries held a
total of 17,297,574 Citycon shares, accounting for nine per cent of
the company's fully paid share capital and votes at the time.
Stock Options
Citycon has two option schemes in force, the 1999 A/B/C scheme and
the 2004 A/B/C scheme, which form part of the Group's employee
incentive and motivation programme. The stock options 1999 and 2004 A
are listed on the Helsinki Stock Exchange.
The table below shows basic information on the stock option schemes.
Stock options 1999 A 1999 B 1999 C
Number of options granted 1,800,000 1,800,000 1,727,500
Held by Veniamo-Invest Oy, number (1 172,500
Subscription ratio, stock option/share 1:1,0927 1:1,0927 1:1,0927
Subscription price/share, EUR 1.35 1.35 1.35
Share subscription period starts 1.9.2000 1.9.2002 1.9.2004
Share subscription period ends 30.9.2007 30.9.2007 30.9.2007
Stock options 2004 A 2004 B 2004 C
Number of options granted 1,040,000 1,090,000 1,250,000
Held by Veniamo-Invest Oy, number (1 260,000 210,000 50,000
Subscription ratio, stock option/share 1:1,0611 1:1,0611 1:1,0611
Subscription price/share, EUR 2.1636 (2 2.6066 (2 4.55 (2
Share subscription period starts 1.9.2006 1.9.2007 1.9.2008
Share subscription period ends 31.3.2009 31.3.2010 31.3.2011
1) Veniamo-Invest Oy has no right to subscribe for its parent
company's shares.
2) After dividend distribution for 2006. The subscription price will
be reduced by half of the amount of annual dividends paid. However,
the share subscription price will always amount to at least EUR 1.35.
In January-June, the number of new shares subscribed exercising
Citycon's 1999 and 2004 stock options totalled 228,295. The number of
shares subscribed exercising the 1999 A/B/C stock options totalled
98,343 at a per-share subscription price of EUR 1.35 and that
exercising the 2004 A stock options 129,952 at a per-share
subscription price of EUR 2.1636.
After the reporting period, a total of 307,524 new shares were
subscribed for exercising stock options under Citycon's option
schemes. The number of shares subscribed exercising the 1999 A/B/C
stock options totalled 303,068 at a per-share subscription price of
EUR 1.35 and that exercising the 2004 A stock options 4,456 at a
per-share subscription price of EUR 2.1636. The new shares are
estimated to be registered in the Trade Register on 24 July 2007 and
traded on the Helsinki Stock Exchange starting from 25 July 2007.
Shares subscribed for in 2007 entitle their holders to a dividend for
the financial year 2007.The unexercised stock options under Citycon's 1999 option scheme
entitle their holders to subscribe for a further 613,077 new shares,
and the stock options A under the 2004 scheme for a further 1,155,307
new shares. The share subscription period for the 1999 stock options
will expire at the end of September this year.
Pages 34-36 in the Financial Statements Appendix to the Annual Report
2006 provide more detailed information on the company's stock option
schemes.
Near-term Risks and Uncertainties
Citycon estimates that major near-term risks and uncertainties are
associated with economic development in the company's operating
regions, and changes in the fair value of investment properties and
interest rates. As the focus of Citycon's growth strategy is shifting
from property acquisitions to own property development and
construction, also the risks associated with project management and
with increasing construction costs will be more significant. A marked
increase in interest rates, materialization of a major project risk,
considerably higher construction costs, a decline in the fair value
of investment properties or a sharp economic slowdown in Finland,
Sweden or the Baltic countries could have an adverse effect on
Citycon's business and profit performance.
Events after the Reporting Period
Through share transactions concluded after the reporting period,
Citycon Oyj acquired a majority holding in the Myllypuro retail
centre in Eastern Helsinki. The transaction is associated with a more
extensive refurbishment and development project in and around the
Myllypuro retail centre in co-operation with the City of Helsinki.
Outlook
Citycon will remain active in seeking acquisition and development
opportunities while implementing its expansion strategy in toughening
competitive environment. The company expects the development and
redevelopment projects to play a growing role in its business.
Citycon estimates that its operating profit, excluding fair value
changes and gains on sale of investment properties, will grow in
2007. This outlook is based on expected growth in the company's
leasable area, resulting from major acquisitions carried out and
development and redevelopment projects coming on line.
Helsinki, 20 July 2007
Citycon Oyj
Board of Directors
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS 30 JUNE 2007
Condensed Consolidated Income Statement, IFRS
Q2/ Q2/ Q1-2/ Q1-2/ 1-12/
EUR million 2007 2006 Change 2007 2006 Change 2006
Gross rental
income 34.1 26.7 27.8% 66.9 52.8 26.6% 115.1
Service charge
income 1.8 1.1 66.3% 3.3 2.2 49.2% 4.2
Turnover
(Note 3) 35.9 27.8 29.4% 70.2 55.0 27.5% 119.4
Property
operating
expenses 10.0 8.0 24.7% 21.1 15.9 33.0% 36.0
Other expenses
from leasing
operations 0.1 0.1 -12.4% 0.1 0.2 -42.3% 0.6
Net rental
income 25.8 19.6 31.5% 49.0 39.0 25.6% 82.8
Administrative
expenses 4.3 2.7 58.4% 8.6 5.9 44.9% 12.9
Other
operating
income and
expenses -0.1 0.0 - -0.1 0.3 - 0.6
Net fair value
gains on
investment
property 160.1 59.8 167.7% 191.6 75.3 154.4% 120.1
Net gains on
sale of
investment
property - - - - - - 5.9
Operating
profit 181.6 76.8 136.4% 231.9 108.7 113.4% 196.5
Net financial
income and
expenses 10.0 5.9 69.5% 19.4 12.9 50.5% 30.9
Profit
before taxes 171.6 70.9 142.0% 212.5 95.8 121.9% 165.6
Current taxes -2.8 -1.6 76.7% -4.2 -3.0 40.1% -7.4
Change in
deferred taxes -33.1 -15.6 112.4% -37.9 -20.1 88.4% -31.8
Profit for
the period 135.8 53.8 152.4% 170.4 72.7 134.5% 126.4
Attributable to
Parent
company
shareholders 134.6 54.3 147.7% 167.6 72.4 131.4% 124.9
Minority
interest 1.2 -0.6 - 2.8 0.2 1,269.0% 1.5
Earnings per
share (basic),
EUR 0.70 0.34 106.7% 0.90 0.47 90.5% 0.78
Earnings per
share (diluted),
EUR 0.62 0.33 85.7% 0.80 0.47 70.0% 0.74
Condensed Consolidated Balance Sheet, IFRS
31 Dec.
EUR million Note 30 June 2007 30 June 2006 2006
Assets
Non-current assets
Investment property 4 1,799.2 1,143.2 1,447.9
Development property 5 13.6 - -
Other property, plant
and equipment 0.7 0.7 0.6
Derivative financial
instruments and other
non-current assets 7 14.2 0.4 4.8
Total non-current assets 1,827.7 1,144.3 1,453.3
Current assets
Derivative financial
instruments 7 0.3 - 0.4
Trade and other
receivables 10.0 8.6 11.3
Cash and cash equivalents 6 40.1 17.7 21.3
Total current assets 50.3 26.3 33.1
Total assets 1,878.1 1,170.6 1,486.4
Liabilities and Shareholders'
Equity
Equity attributable to parent company
shareholders
Share capital 259.6 222.8 225.7
Share issue - - 0.1
Share premium fund and
other restricted reserves 131.1 116.0 131.1
Fair value reserve 7 6.9 -4.2 -1.3
Invested unrestricted
equity funds 99.2 - -
Retained earnings 354.1 156.7 209.7
Total equity attributable
to parent company
shareholders 850.9 491.4 565.3
Minority interest 28.6 3.8 15.0
Total shareholders' equity 879.5 495.2 580.3
Liabilities
Interest-bearing
liabilities 783.9 536.9 726.3
Derivative financial
instruments
and other non-interest
bearing liabilities 7 2.0 5.8 4.9
Deferred tax liabilities 80.7 27.7 40.4
Total long-term liabilities 866.7 570.5 771.7
Interest-bearing liabilities 102.1 89.3 87.6
Trade and other payables 29.7 15.7 46.8
Short-term liabilities 131.8 104.9 134.4
Total liabilities 998.5 675.4 906.1
Total liabilities and
shareholders' equity 1,878.1 1,170.6 1,486.4
Condensed Consolidated Statement of Changes in Shareholders' Equity,
IFRS
Equity attributable to parent
company shareholders
Share Invested
premium unre-
fund and Fair stricted
Share Share other value equity Retained
capital issue reserves reserve fund earnings
Balance at
1 Jan. 2006 184.1 1.1 85.4 -10.5 - 96.5
Cash flow
hedges 6.3
Profit for
the period 72.4
Total recognized
income and
expense for the
period 6.3 72.4
Share sub-
scriptions
based on stock
options 38.7 -1.1 37.2
Dividends
(Note 8) -6.6 -12.6
Share-based
payment 0.4
Balance at
30 June 2006 222.8 - 116.0 -4.2 0.0 156.7
Balance at
1 Jan. 2007 225.7 0.1 131.1 -1.3 - 209.7
Cash flow hedges 8.2
Profit for
the period 167.6
Total recognized
income and
expense for
the period 8.2 167.6
Change in
share capital 33.8 98.8
Share
subscriptions
based on stock
options 0.1 -0.1 0.0 0.4
Dividends
(Note 8) -23.4
Translation
differences -0.3
Share-based
payment 0.5
Other changes 0.0
Balance at
30 June 2007 259.6 0.0 131.1 6.9 99.2 354.1
Equity
attribut-
able to
parent Share-
company holders'
share- Minority equity
holders interest total
Balance at 1 Jan. 2006 356.6 3.6 360.2
Cash flow hedges 6.3 6.3
Profit for the period 72.4 0.2 72.7
Total recognized
income and expense
for the period 78.8 0.2 79.0
Share subscriptions
based on stock
options 74.8 74.8
Dividends (Note 8) -19.2 -19.2
Share-based payment 0.4 0.4
Balance at
30 June 2006 491.4 3.8 495.2
Balance at
1 Jan. 2007 565.3 15.0 580.3
Cash flow hedges 8.2 8.2
Profit for the period 167.6 2.8 170.4
Total recognized
income and expense
for the period 175.8 2.8 178.6
Change in
share capital 132.5 132.5
Share subscriptions
based on stock options 0.4 0.4
Dividends (Note 8) -23.4 -23.4
Translation differences -0.3 -0.3 -0.6
Share-based payment 0.5 0.5
Other changes 0.0 11.2 11.2
Balance at
30 June 2007 850.9 28.6 879.5
Condensed Consolidated Cash Flow Statement, IFRS
EUR million Note Q1-2/2007 Q1-2/2006 1-12/2006
Cash flow from operating activities
Profit before taxes 212.5 95.8 165.6
Adjustments -171.5 -62.2 -94.0
Cash flow before
change in working capital 41.0 33.5 71.6
Change in working capital -2.7 0.0 -0.5
Cash generated from operations 38.3 33.5 71.1
Paid interest and other
financial charges -15.2 -17.0 -34.1
Received interest and
other financial income 1.0 0.2 0.9
Taxes paid -3.7 -2.1 -5.9
Net cash from operating
activities 20.5 14.7 32.0
Cash flow from investing activities
Acquisition of subsidiaries,
less cash acquired -165.3 -66.7 -331.8
Acquisition of
investment property 4 - -32.3 -33.6
Capital expenditure on
investment properties 4 -15.4 -13.2 -35.6
Capital expenditure on
development properties,
other PP&E and intangible
assets 5 -7.3 - -
Sale of investment
property - - 73.9
Net cash used in
investing activities -188.0 -112.1 -327.1
Cash flow from financing activities
Proceeds from share issue 132.5 73.6 77.4
Proceeds from
short-term loans 130.0 180.0 421.2
Repayments of
short-term loans -115.5 -132.0 -392.2
Proceeds from
long-term loans 209.3 30.0 675.3
Repayments
long-term loans -146.4 -32.8 -461.8
Dividends paid 8 -23.4 -19.2 -19.2
Net cash from/used
in financing activities 186.6 99.6 300.8
Net change in cash
and cash equivalents 19.0 2.1 5.7
Cash and cash equivalents
at period-start 6 21.3 15.6 15.6
Effects of exchange
rate changes -0.2 0.0 -
Cash and cash equivalents
at period-end 6 40.1 17.7 21.3
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basic company data
Citycon is a real estate company investing in retail premises.
Citycon operates mainly in Finland, Sweden and the Baltic countries.
Citycon is a Finnish public limited company established under Finnish
law and domiciled in Helsinki. The Board of Directors approved the
interim financial statements on 20 July 2007.
2. Basis of preparation and accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six
months ended 30 June 2007 have been prepared in accordance with IAS
34 Interim Financial Reporting. The interim financial statements do
not include all the disclosures required in the annual financial
statements. Therefore, they should be read in conjunction with
Citycon's annual financial statements for the year ended 2006.
Accounting policies
Citycon changed its accounting policies related to IAS 23 Borrowing
Costs -standard as of 1 January 2007 and started to apply an
alternative treatment allowed by IAS 23. The standard allows that the
borrowing costs such as interest expenses and arrangement fees are
capitalised as part of the cost of development properties.
Otherwise, the accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those applied in the preparation of Citycon's annual financial
statements for the year ended 31 December 2006.
Acquisitions in the balance sheet
Balticgruppen Handel AB was acquired in June 2007. The identifiable
assets and liabilities of Balticgruppen Handel AB, corresponding to
the shares acquired, have been recognized at preliminary fair value
in the company's balance sheet.
Reporting to Gazit-Globe Ltd.
The company's main shareholder, Gazit-Globe Ltd, holding
approximately 38.9 per cent of the shares in the company, has
announced that it will start applying International Financial
Reporting Standards (IFRS) in its financial reporting in 2007.
According to IFRS one company may exercise a controlling interest in
another company even if its shareholding it that company does not
exceed 50 per cent. Gazit-Globe Ltd. holds the view that it exercises
controlling interest, as defined in IFRS, in Citycon Oyj based on the
fact that it has been able to exercise controlling interest in
Citycon Oyj's shareholders' meetings pursuant to its shareholding. In
accordance with an agreement concluded between the companies, Citycon
Oyj will provide Gazit-Globe Ltd. with a more detailed breakdown of
the accounting information it discloses in its interim and full-year
reports so that Gazit-Globe Ltd. can consolidate Citycon Group
figures into its own IFRS financial statements.
3. Segment Information
Citycon's business consists of the regional business units Finland,
Sweden and the Baltic Countries.
Q2/ Q2/ Q1-2/ Q1-2/ 1-12/
EUR million 2007 2006 Change 2007 2006 Change 2006
Turnover
Finland 24.7 23.7 4.2% 48.6 47.1 3.3% 95.8
Sweden 9.3 2.7 245.8% 17.8 5.3 235.0% 17.3
Baltic Countries 1.9 1.4 38.3% 3.7 2.7 39.3% 6.2
Total 35.9 27.8 29.4% 70.2 55.0 27.5% 119.4
Operating profit
Finland 137.1 72.5 89.1% 167.3 103.2 62.0% 176.1
Sweden 40.6 2.4 1,599.6% 59.4 3.4 1,627.7% 16.8
Baltic Countries 5.6 3.4 65.1% 9.1 5.0 81.9% 10.9
Other -1.8 -1.5 17.7% -3.8 -3.0 28.0% -7.2
Total 181.6 76.8 136.4% 231.9 108.7 113.4% 196.5
EUR million 30 June 2007 31 Dec. 2006 Change
Assets
Finland 1,190.5 1,016.6 17.1%
Sweden 535.8 358.0 49.6%
Baltic Countries 94.7 83.6 13.2%
Other 57.2 28.2 103.0%
Total 1,878.1 1,486.4 26.3%
The significant increase in segment assets for Sweden is due to the
acquisition of the shopping centres Tumba Centrum and Strömpilen as
well as the retail centre Länken.
4. Investment property
EUR million 30 June 2007 30 June 2006 31 Dec. 2006
At period-start 1,447.9 956.6 956.6
Additions 181.1 109.9 436.2
Disposals - - -67.9
Transfer into the
development properties -13.6 - -
Net fair value gains 191.9 75.3 120.1
Exchange differences -8.1 1.3 2.9
At period-end 1,799.2 1,143.2 1,447.9
An external professional appraiser has conducted the valuation of the
company's properties with a net rental income based cash flow
analysis. Market rents, occupancy rate, operating expenses and yield
requirement form the key variables used in the cash flow analysis.
The segments' yield requirements used by the external appraiser in
the cash flow analysis were as follows at 30 June 2007 and 31
December 2006:
Yield requirement (%) 30 June 2007 31 Dec. 2006
Finland 5.9 6.6
Sweden 5.5 6.4
Baltic Countries 6.3 7.1
Average 5.8 6.6
5. Development property
When Citycon redevelops its existing investment properties, the
properties remain as the investment properties in the balance sheet,
and they are measured based on fair value model in accordance with
IAS 40. The significant development projects, in which a new building
or significant extension is constructed, are exceptions and they are
treated in accordance with IAS 16 Property, Plant and Equipment
standard. The significant extension projects are presented separately
from the property, plant and equipment in the balance sheet based on
the recommendations of the European Public Real Estate Association
(EPRA). As at 30 June 2007, the development properties consisted of
the capital expenditure relating to extension projects in Rocca al
Mare, Åkerbserga and Liljeholmen shopping centres. Investments in
development properties during the six months ended 30 June 2007
amounted to EUR 7.1 million (EUR 0.0 million) and the development
property in the balance sheet totalled EUR 13.6 million at 30 June
2007.
6. Cash and cash equivalents
EUR million 30 June 2007 30 June 2006 31 Dec. 2006
Cash in hand and at bank 24.9 14.2 19.4
Restricted cash in hand
and at bank - 1.0 -
Short-term deposits 15.2 2.5 1.9
Total 40.1 17.7 21.3
7. Derivative Financial Instruments
EUR million 30 June 2007 30 June 2006 31 Dec. 2006
Nominal Fair Nominal Fair Nominal Fair
amount value amount value amount value
Interest rate derivatives
Interest rate swaps
Maturity:
less than 1 year 50.0 0.3 78.2 0.6 50.0 0.4
1-2 years 60.0 0.4 50.0 -0.4 40.0 0.0
2-3 years 149.0 -2.0 143.9 -2.6 86.0 -2.6
3-4 years 40.0 1.1 83.0 -3.4 83.0 -2.6
4-5 years 0.0 0.0 40.0 0.1 40.0 -0.8
over 5 years 240.1 11.8 0.0 0.0 242.7 3.8
Total 539.1 11.5 395.1 -5.6 541.7 -1.8
Foreign exchange derivatives
Forward agreements
Maturity:
less than 1 year 88.5 -0.4 0.0 0.0 14.8 0.0
Total 88.5 -0.4 0.0 0.0 14.8 0.0
The fair value of derivative financial instruments represents the
market value of the instrument with prices prevailing on the balance
sheet date. Derivative financial instruments are used in hedging the
interest rate risk of the interest bearing liabilities and foreign
currency risk.
The fair values include foreign exchange loss of EUR 0.9 million (EUR
0.0 million) which is recognized in the income statement.
Hedge accounting is applied for interest rates swaps which have
nominal amount of EUR 489.1 million (EUR 395.1 million). The fair
value gain recognized in the fair value reserve under shareholders'
equity taking account the tax effect totals EUR 6.9 million (EUR -4.2
million).
8. Dividends
In accordance with the proposal by the Board of Directors and the
decision by the Annual General Meeting held on 13 March 2007 dividend
for the financial year 2006 amounted to EUR 0.14 per share (EUR 0.14
for the financial year 2005).
Dividends paid amounted to EUR 23.4 million (EUR 19.2 million) during
the period.
9. Contingent Liabilities
EUR million 30 June 2007 30 June 2006 31 Dec. 2006
Mortgages on land and
buildings 47.6 7.8 21.1
Bank guarantees 20.1 5.4 37.1
Capital commitments 84.7 - 40.7
At 30 June 2007, Citycon had capital commitments of EUR 84.7 million
relating mainly to development projects.
10. Key Figures
Q2/ Q2/ Q1-2/ Q1-2/ 1-12/
2007 2006 Change 2007 2006 Change 2006
Earnings per share
(basic), EUR 0.70 0.34 106.7% 0.90 0.47 90.5% 0.78
Earnings per share
(diluted), EUR
(EPRA EPS) 0.62 0.33 85.7% 0.80 0.47 70.0% 0.74
Equity per share,
EUR (EPRA NAV) 4.42 2.98 48.5% 3.38
Equity ratio, % 46.9 42.3 - 39.1
The formulas for key figures can be found from the 2006 annual
financial statements.
The figures are unaudited.
Financial reports in 2007
The next interim report for the period Q1-3/2007 will be published on
Thursday, 18 October 2007, at approximately 12 noon.
Further information for investors is available at Citycon's website,
www.citycon.fi.
Further information:
Mr Petri Olkinuora, CEO
Tel. +358 9 6803 6738 or +358 400 333 256
petri.olkinuora@citycon.fi
Mr Eero Sihvonen, CFO
Tel. +358 50 557 9137
eero.sihvonen@citycon.fi
Distribution:
Helsinki Stock Exchange
Major media
www.citycon.fi
Report on the general review of Citycon Oyj's interim report for the
period 1.1.-30.6.2007
We have generally reviewed the interim report of Citycon Oyj for the
period 1.1.-30.6.2007. The Board of Directors and the Managing
Director have prepared an interim report in accordance with the
Securities Market Act, chapter 2, paragraph 5. Based on our interim
review we express at the request of the Board of Directors a report
in accordance with the Securities Market Act, chapter 2, paragraph 5
a.
We conducted our general review in accordance with the International
Standard on Auditing applicable to general review engagements. This
standard requires that we plan and perform the review to obtain
reasonable assurance as to whether the financial statements are free
of material misstatement. The general review is limited primarily to
inquiries of company personnel and analytical procedures applied to
financial data and thus provides less assurance than an audit. We
have not performed an audit and, accordingly, we do not express an
audit opinion.
Based on our general review, nothing has come to our attention that
causes us to believe that the interim report does not give a true and
fair view in accordance with the Securities Market Act regarding the
financial position of Citycon Oyj.
Helsinki, July 20, 2007
Ernst & Young Oy
Tuija Korpelainen, Authorized Public Accountant
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