Citycon Oyj - Interim report (Q1 and Q3)

Citycon Oyj's Interim Report for 1 January–31 March 2014

Citycon Oyj	Stock Exchange Release		24 April 2014 at 09:00 hrs

Summary of the First Quarter of 2014 Compared with the Previous Quarter
- Turnover decreased to EUR 61.3 million (Q4/2013: EUR 62.0 million) mainly due
to divestments of non-core properties. 
- Net rental income decreased by EUR 1.3 million, or 3.0%, to EUR 40.7 million
(EUR 41.9 million), mainly as a result of higher property operating expenses
reflecting normal seasonal variations as well as divestments. 
- EPRA Operating profit decreased by EUR 0.4 million, or 1.0%, to EUR 36.1
million (EUR 36.5 million), mainly due to lower net rental income, which was
partly offset by lower administrative expenses. 
- EPRA Earnings increased to EUR 22.3 million (EUR 22.1 million) mainly thanks
to lower direct financial and administrative expenses. EPRA Earnings per share
(basic) increased to EUR 0.051 (EUR 0.050). 
- The fair value change in investment properties was EUR 11.9 million (EUR 4.7
million), and the fair value of investment properties totalled EUR 2,744.3
million (EUR 2,733.5 million). The weighted average net yield requirement for
investment properties decreased to 6.2% (6.3%). 
- The company specifies its guidance regarding turnover.

Summary of January-March 2014 Compared with the Corresponding Period of 2013
-Turnover decreased to EUR 61.3 million (Q1/2013: EUR 62.9 million) mainly due
to divestments and a weaker Swedish krona. 
- Net rental income increased by EUR 0.3 million, or 0.8%, to EUR 40.7 million
(EUR 40.4 million) mainly due to strict operating expenses management supported
by mild winter conditions. Net rental income of like-for-like properties
increased by EUR 1.2 million, or 3.9%, excluding the impact of the weaker
Swedish krona, while the completion of (re)development projects increased net
rental income by EUR 0.4 million. 
- Earnings per share were EUR 0.08 (EUR 0.07).
- EPRA Earnings increased by EUR 2.6 million, or 13.4% mainly as a result of
higher net rental income and lower financing and administrative expenses. EPRA
Earnings per share (basic) were EUR 0.051 (EUR 0.052). 
- Net cash from operating activities per share increased to EUR 0.06 (EUR 0.05).

Key figures

IFRS based key figures                Q1/2014  Q1/2013  Change  Q4/2013     2013
                                                          -%1)                  
Turnover, EUR million                    61.3     62.9    -2.5     62.0    248.6
Net rental income, EUR million           40.7     40.4     0.8     41.9    168.9
Profit/loss attributable to parent       33.6     26.1    28.6     33.0     93.1
 company shareholders, EUR million                                              
Earnings per share (basic), EUR          0.08     0.07     9.8     0.07     0.22
Net cash from operating activities       0.06     0.05    17.7     0.08     0.14
 per share, EUR2)                                                               
Fair value of investment properties,  2,744.3  2,730.9     0.5  2,733.5  2,733.5
 EUR million                                                                    
Equity ratio, %                          44.2     40.4     9.6     45.3     45.3
Loan to Value (LTV), %3)                 50.3     49.0     2.5     49.3     49.3
EPRA based key figures                Q1/2014  Q1/2013  Change  Q4/2013     2013
                                                          -%1)                  
EPRA Operating profit, EUR million       36.1     35.4     1.9     36.5    149.1
% of turnover                            58.9     56.3     4.6     58.8     60.0
EPRA Earnings, EUR million               22.3     19.7    13.4     22.1     86.7
EPRA Earnings per share (basic), EUR    0.051    0.052    -3.2    0.050    0.204
EPRA Cost Ratio                          24.1     26.3    -8.4     25.0     22.4
(including direct vacancy costs)                                                
 (%)4)                                                                          
EPRA Cost Ratio                          21.6     22.9    -5.9     22.6     20.0
(excluding direct vacancy costs)                                                
 (%)4)                                                                          
EPRA NAV per share, EUR                  3.03     2.99     1.3     3.10     3.10
EPRA NNNAV per share, EUR                2.74     2.70     1.7     2.90     2.90

1) Change-% is calculated from exact figures and refers to the change between
2014 and 2013. 
2) 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. 
3) 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. 
4) 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 January-March 2014

  -- Citycon announced changes in its Corporate Management Committee. 
Jurn Hoeksema
 was appointed Chief Operating Officer and a member of the Corporate
     Management Committee starting 1 June 2014.
     Harri Holmström,
 current Chief Operating Officer, was appointed to a new role of Chief
     Commercial Officer.


CEO's Comment
Comments from Citycon Oyj's Chief Executive Officer Marcel Kokkeel on the
reporting period: 

‘Year 2014 started positively despite the challenging market conditions
especially in Finland. Like-for-like net rental income increased by 3.9%, which
is a solid result in a low inflation environment. EPRA Earnings per share
remained close to the same level as last year including the full impact of the
increased number of shares from the rights issue executed in March 2013.  The
positive fair value change of EUR 11.9 million (EUR 24.8 million including
Kista Galleria) is an indication of Citycon's strengthened portfolio
composition and the portfolio's resilient nature. 
During the first quarter, Citycon's occupancy rate remained fairly stable,
being 95.5% on 31 March. In Kista Galleria we successfully finalised some
important tenant negotiations which allows us to start the upgrade and
extension of the food court and refurbishment of the Northern entrance before
summer. 
During the quarter, the company appointed a new Chief Operating Officer with
broad international experience, Jurn Hoeksema, to strengthen the management
team. Harri Holmström, current COO (until 1 June), was appointed Chief
Commercial Officer that will allow Citycon to focus even more on successful
leasing. 
We expect the market conditions to remain tough especially in Finland though
the latest forecasts indicate that the Finnish economy has bottomed out.
Citycon's focus in 2014 will continue to be on cost control and increased
leasing efforts. ' 

Events after the Reporting Period
No material events after the reporting period.

Outlook
The company specifies its guidance regarding turnover.  In 2014, Citycon
expects its turnover to change by EUR -1-7 million compared with the previous
year (Q4/2013: EUR 1-9 million). The adjustment in the guidance is due to the
weaker SEK and divested properties. The company expects its EPRA Operating
profit to change by EUR -2-6 million and its EPRA Earnings to change by EUR
2-10 million from the previous year. The company forecasts an EPRA EPS (basic)
of EUR 0.20-0.22. 

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

Business Environment
The macroeconomic fundamentals in Citycon's operating countries have continued
to stabilise with GDP growth estimates for 2014 being positive and above 2013
level in all countries. The European Commission forecasts Euro area GDP growth
to reach 1.2% in 2014 with Sweden (2.5%), Estonia (2.3%), Lithuania (3.5%) and
Denmark (1.7%) coming in ahead of this. The GDP growth for Finland (forecast
0.2%) is dependent on both the recovery of the European export markets as well
as domestic demand. During the beginning of the year consumer confidence levels
have stayed stable or decreased slightly in Citycon's operating countries,
while the negative consumer confidence in the Euro area has continued to
recover. The consumer confidence levels in the Nordics remain positive. The
unemployment rates are substantially below the Euro area average (11.9%) in all
countries except for in Lithuania. (Source: Eurostat) Consumer prices continued
to rise during the beginning of the year in Finland while they remained fairly
stable in Estonia, Lithuania and Denmark. Inflation turned negative in Sweden. 

Retail sales growth for the first two months of 2014 have been strong in
Estonia (5.1%) and Lithuania (7.6%), positive in Sweden (2.9%), stable in
Finland (0.1%) and negative in Denmark (-0.4%). (Source: Statistics
Finland/Sweden/Estonia/Lithuania/Denmark) Year-on-year prime shopping centre
rents remained stable in Finland, while increasing 1.5% in Sweden and 1.5-2.0%
in Estonia. In Finland the softening outlook for retail sales limits the rental
growth potential going forward and in Estonia the rental growth is expected to
be almost flat in 2014. In Sweden prime retail rents are forecasted to increase
by 2.0 - 2.5% as retail sales growth improves. (Source: JLL) 

The transactional activity has remained modest in Finland and Sweden. However,
the demand for core assets remains strong and accordingly prime shopping centre
yields have remained stable. In Finland the first quarter of 2014 continued the
increasing investment activity set in Q4/2013, however, transaction volumes
were still low for retail properties. There are signs of modestly increasing
investor risk appetite, although stronger economic fundamentals are needed
before more robust growth can be expected. In Estonia the investment market has
been active, although the market lacks large volume transactions. Prime
shopping centre yields have dropped to 7.3% and are expected to remain stable
in 2014. (Source: JLL) 

Risks and Uncertainties
The company's core risks and uncertainties, along with its main risk management
actions and principles, are described in detail on pages 58-59 of the Annual
Report 2013 and on pages 53-56 of the Financial Statements 2013. 

Citycon's Board of Directors believes there have been no material changes to
the risks outlined in the Annual Report. The main risks are associated with
property development projects, weaker economic development, rising operating
expenses, environment and human related risks, decreasing fair values of
investment properties and availability and cost of funding. 

Helsinki, 23 April 2014

Citycon Oyj
Board of Directors


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


Distribution:
NASDAQ OMX Helsinki
Major media
www.citycon.com

Attachments:

Citycon_Interim_Report_ Q1_2014.pdf