2014-02-05 08:00:02 CET
2014-02-05 08:00:06 CET
REGULATED INFORMATION
Citycon Oyj - Financial Statement Release
Citycon Oyj’s Financial Statement Release for 1 January–31 December 2013
Citycon Oyj Stock Exchange Release 5.2.2014 at 9:00 hrs
The Financial Statement Release for the period 1 January-31 December 2013 in
its entirety is attached to this release. It is also available on the corporate
website at www.citycon.com.
Financial Statements and the Report by the Board of Directors
On 4 February 2014, 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 2013. 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 2013 has
been published simultaneously with the Financial Statements and the Report by
the Board of Directors. All these documents are available on the corporate
website at www.citycon.com.
Summary of the Fourth Quarter of 2013 Compared with the Previous Quarter
- Turnover was nearly unchanged at EUR 62.0 million (Q3/2013: EUR 62.1 million).
- Net rental income decreased by EUR 2.0 million, or 4.5 per cent, to EUR 41.9
million (EUR 43.9 million), mainly due to higher property operating expenses
reflecting normal seasonal variations.
-EPRA operating profit decreased by EUR 3.0 million, or 7.6 per cent, to EUR
36.5 million (EUR 39.5 million), primarily because of lower net rental income
and higher administrative expenses.
- EPRA earnings decreased to EUR 22.1 million (EUR 24.2 million), mainly due to
lower EPRA operating profit. Lower financial expenses offset part of the
decrease in earnings. The EPRA earnings per share (basic) was EUR 0.050 (EUR
0.055). The EPRA key figures exclude non-recurring items such as fair value
changes in investment properties.
- The fair value change in investment properties was EUR 4.7 million (EUR 6.3
million), and these properties' fair value came to EUR 2,733.5 million (EUR
2,739.4 million). The weighted average net yield requirement for investment
properties remained at 6.3 per cent (6.3%).
Summary of 2013 Compared with 2012
Citycon met the financial targets that it had announced for 2013. On the
publication of its Q3 interim report, the company specified some of its
targets, stating that it expected growth in turnover of EUR 8-13 million, an
increase of EUR 11-16 million in EPRA operating profit, and growth in EPRA
earnings of EUR 22-26 million in 2013 from 2012 figures, and it forecasted an
EPRA EPS of EUR 0.200-0.215. The realised 2013 figures show that turnover grew
by EUR 9.4 million from the 2012 level, the EPRA operating profit by EUR 13.5
million and EPRA earnings by EUR 22.8 million, and the EPRA earnings per share
was EUR 0.204.
-The Board of Directors proposes a per-share dividend of EUR 0.03 (EUR 0.04)
and a return of equity from invested unrestricted equity fund of EUR 0.12 (EUR
0.11) per share.
- Turnover increased to EUR 248.6 million (2012: EUR 239.2 million).
- Net rental income increased by EUR 6.9 million, or 4.2 per cent, to EUR 168.9
million (EUR 162.0 million). Net rental income for like-for-like properties
rose by EUR 5.5 million, or 4.6 per cent, excluding the impact of the stronger
Swedish krona, while the completion of (re)development projects and acquisition
of shopping centres in 2012 increased net rental income by EUR 1.8 million.
- Earnings per share came to EUR 0.22 (EUR 0.24). The decrease was mainly due
to non-recurring financial expenses of EUR 26.8 million in Q2/2013, related
mostly to the unwinding of interest rate swaps, and a higher number of shares.
- EPRA earnings per share (basic) increased to EUR 0.204 (EUR 0.199).
- Net cash from operating activities came to EUR 0.13 per share (EUR 0.19),
mainly on account of the above‑mentioned non-recurring financial expenses.
Key Figures
IFRS based key figures Q4/2013 Q4/2012 Q3/2013 2013 2012 Change
% 1)
--------------------------------------------------------------------------------
Turnover, EUR million 62.0 62.1 62.1 248.6 239.2 3.9%
--------------------------------------------------------------------------------
Net rental income, EUR 41.9 42.1 43.9 168.9 162.0 4.2%
million
--------------------------------------------------------------------------------
Profit/loss attributable to 33.0 20.4 32.3 93.1 77.2 20.6%
parent company
shareholders, EUR million
--------------------------------------------------------------------------------
Earnings per share (basic), 0.07 0.06 0.07 0.22 0.24 -9.0%
EUR 2)
--------------------------------------------------------------------------------
Net cash from operating 0.09 0.05 0.06 0.13 0.19 -30.5%
activities per share, EUR
2)
--------------------------------------------------------------------------------
Fair value of investment 2,733.5 2,714.2 2,739.4 2,733.5 2,714.2 0.7%
properties, EUR million
--------------------------------------------------------------------------------
Equity ratio, % 45.3 37.8 44.1 45.3 37.8 20.1%
--------------------------------------------------------------------------------
Loan to Value (LTV), % 52.1 54.5 53.4 52.1 54.5 -4.4%
--------------------------------------------------------------------------------
EPRA based key figures Q4/2013 Q4/2012 Q3/2013 2013 2012 Change
-% 1)
--------------------------------------------------------------------------------
EPRA operating profit, EUR 36.5 34.2 39.5 149.1 135.7 9.9%
million
--------------------------------------------------------------------------------
% of turnover 58.8% 55.1% 63.6% 60.0% 56.7%
--------------------------------------------------------------------------------
EPRA Earnings, EUR million 22.1 16.2 24.2 86.7 63.9 35.8%
--------------------------------------------------------------------------------
EPRA Earnings per share 0.050 0.046 0.055 0.204 0.199 2.5%
(basic), EUR 2)
--------------------------------------------------------------------------------
EPRA NAV per share, EUR 3.10 3.49 3.06 3.10 3.49 -11.0%
--------------------------------------------------------------------------------
EPRA NNNAV per share, EUR 2.90 3.08 2.83 2.90 3.08 -5.8%
--------------------------------------------------------------------------------
Dividend per share, EUR 0.033) 0.04 -25.0%
--------------------------------------------------------------------------------
Return from invested 0.123) 0.11 9.1%
unrestricted equity fund
per share,
EUR
--------------------------------------------------------------------------------
Dividend and return from 0.153) 0.15 0.0%
invested unrestricted
equity
fund per share total, EUR
--------------------------------------------------------------------------------
1) Change-% is calculated from exact figures and refers to the change between
2013 and 2012.
2) Result per share key figures have been calculated with the issue-adjusted
number of shares resulting from the rights issues executed in March 2013 and
October 2012.
3) Proposal by the Board of Directors
CEO's Comments
Comments on 2013 from Marcel Kokkeel, CEO:
‘In 2013, Citycon demonstrated that high-quality, grocery-anchored urban
shopping centres, in combination with active management, can deliver healthy
income growth even in a more challenging economic environment. Our EPRA
operating profit increased 9.9 per cent thanks to both successful leasing and
cuts in administrative expenses. We were able to exceed the ambitious target
set for 2013 of saving up to EUR 5 million on administrative expenses compared
to the previous year. The economic occupancy rate of Citycon's investment
properties remained stable at 95.7 per cent.
The quality of Citycon's property portfolio improved further over the course of
2013. The acquisition of Stockholm's Kista Galleria substantially strengthened
Citycon's position and market share in Sweden and offered a unique opportunity
to further increase the company's relevance in the eyes of international
retailers. The performance of Kista Galleria has been in accordance with
expectations.
Our divestment of non-core assets continued successfully in 2013. Eight
properties (including one residential building) were successfully disposed of,
for a total sales value of approximately EUR 60 million (including the 50 per
cent sale of existing shopping centre IsoKristiina) at an average price of
slightly above IFRS valuation. We will continue our strategy of maximising the
value of non-core assets before divestment.
During the year we made good progress in the implementation of our strategy of
diversifying funding sources and deleveraging the company. We were awarded two
investment-grade credit ratings from Standard & Poor's and Moody's, raised EUR
200 million in an oversubscribed rights issue, and refinanced EUR 500 million
through a successful Eurobond issue.
Citycon continues to be active in the (re)development of its properties. In the
first half of the year, we started two major (re)development projects: the
extension and (re)development of Iso Omena and of IsoKristiina. These projects
are proceeding as planned. There are several interesting urban (re)development
projects in the pipeline, among them refurbishment and upgrade of some parts of
Kista Galleria.
With a strong base of 37 shopping centres in urban locations, a pipeline of
accretive (re)development projects, and a strong balance sheet, Citycon is well
positioned to deliver earnings growth in 2014 also.'
Business Environment
Market conditions continued to be challenging in Citycon's operating countries
during 2013. There are signs of gradual strengthening of the Swedish economy,
but the recovery still eludes when it comes to the Finnish economy.
Retail sales growth and the inflation rate are key factors in Citycon's
business and have an impact on rent received from retail premises. Almost all
of the company's leases are tied to the consumer price index. A significant
number of leases also feature a turnover-linked component. Consumer prices
continued to rise during the year in Finland, Estonia, and Denmark, while they
remained fairly stable in Sweden and Lithuania. In December, inflation was 1.6
per cent in Finland, 0.1 per cent in Sweden, 1.4 per cent in Estonia, 0.4 per
cent in Lithuania, and 0.8 per cent in Denmark (sources: Statistics Finland,
Statistics Sweden, Statistics Estonia, Statistics Lithuania, and Statistics
Denmark). The year saw strong growth in retail sales in Estonia and Lithuania,
positive growth in Finland and Sweden, and negative growth in Denmark. Total
retail sales growth for the first eleven months was 0.4 per cent in Finland,
1.9 per cent in Sweden, 5.0 per cent in Estonia, 4.4 per cent in Lithuania and
-1.5 per cent in Denmark (sources: Statistics Finland, Statistics Sweden,
Statistics Estonia, Statistics Lithuania, and Statistics Denmark).
Household consumer confidence improved in all of Citycon's countries of
operation during the year and remained well above the euro area's average. In
Estonia and Lithuania, the household consumer confidence indicator has remained
negative (source: Eurostat).
In all of Citycon's operating countries, except Lithuania, seasonally adjusted
unemployment rates are lower than the euro area average, of 12.1 per cent. The
unemployment rate in Finland increased somewhat in the course of the year but
remained at a healthy 8.4 per cent, as in November. In Sweden, unemployment
remained stable at 8.0 per cent. Denmark's unemployment rate continued to be
low, 6.9 per cent in November. In Estonia, the unemployment rate has been
decreasing to 9.0 per cent, whereas unemployment in Lithuania has remained
high, at 11.1 per cent as per October (source: Eurostat).
Property market
In Finland the property investment market saw very few transactions during the
first three quarters of 2013; however, the last quarter was relatively active,
recording the highest investment volume since Q1 2008. Demand for core assets
remains strong, as equity rich investors keep looking for safe havens. There
are also signs of investors starting to diversify their portfolios, both in
terms of risk and geography. However, stronger economic fundamentals are needed
before more robust growth can be expected. Shopping centre prime yields have
remained stable both quarter-on-quarter and year-on-year, and no significant
change is expected in 2014. Prime shopping centre rents remained stable
compared to the previous quarter and year-on-year. The softening outlook for
retail sales limits the rental growth potential and has already made occupiers
somewhat more cautious which has lengthened leasing negotiations and slowed
down decision making.
In Sweden the demand for core retail assets remains strong. In Q4 the
transaction volume for retail properties was weaker compared to the previous
year. Comparing 2013 and 2012 as a whole in terms of retail transaction volume,
2013 transactions represented around 95 per cent of the previous year's volume.
Prime shopping centre yields remained stable quarter-on-quarter as well as
year-on-year, and no significant change is expected in 2014.
In Estonia prime shopping centre rents remained stable in Q4, but increased
year-on-year by approximately two per cent. Vacancy rates in professionally
managed prime shopping centres are close to zero per cent and demand for small
to mid-size units is high, whereas older shopping centres in remote locations
face challenges to renew contracts. The investment market in Q4 featured
transactions mainly in the office and industrial segment. Lack of investment
product has hindered growth of transaction volumes. Prime shopping centres
yields have dropped to 7.3 per cent and strong economic fundamentals support
further yield compression, although at the same time the increasing cost of
financing affects the yields negatively.
(Source: Jones Lang LaSalle Finland Oy)
Tenants' sales and footfall in Citycon's shopping centres
During the year under review, total sales at Citycon's shopping centres
increased by one per cent and footfall remained at the level of the previous
year. In Finland, sales decreased by one per cent, in Sweden sales increased by
two per cent and sales in the Baltic Countries and New Business grew by six per
cent. Footfall in Finland fell by three per cent, while it grew by four per
cent in Sweden and by eight per cent in the Baltic Countries and New Business.
The growth in footfall in Sweden resulted mainly from the larger shopping
centres, such as Liljeholmstorget Galleria, and in the Baltic Countries and New
business from the completion of the Magistral (re)development as the centre was
closed during the comparison period. Like-for-like shopping-centre sales and
footfall remained at the same level as in the previous year. It should be noted
that the sales and footfall figures include estimates.
Short-Term Risks and Uncertainties
The Citycon Board of Directors considers the company's major short-term risks
and uncertainties to be associated with economic developments in the company's
regions of operation. Such developments affect demand, vacancy rates, and
market rent levels for retail premises. In addition, key near-term risks
include the fair value development of properties in today's uncertain economic
conditions. Also the risks of rising financial expenses due to higher loan
margins or market interest rates and lower availability of debt financing are
of importance. These risks have however reduced lately, on account of the two
public investment grade credit ratings received in May, the EUR 500 million
Eurobond issued in June and recent positive development in banks' willingness
to lend money.
Although the financial situation has so far had only minor effects on the rent
levels of retail premises and on occupancy rates in Citycon's operating
regions, lower demand for retail premises, higher vacancy rates, and lower
market rent levels in Citycon's regions of operation pose challenges in a
sluggish economic environment. Economic developments, particularly trends
influencing consumer confidence and behaviour, inevitably affect demand for
retail premises. Risks to economic growth persisted in 2013. In times of weak
economic growth, rental levels of retail premises typically fall, leasing of
new premises is more difficult, and vacancy rates rise.
The implementation of Citycon's strategy will require new financing going
forward, which means that risks associated with the availability and cost of
financing are meaningful to Citycon. Banks' willingness to lend money is still
lower and the loan margins remain at higher levels than before the financial
crises, but both the availability and cost of financing have improved during
2013. In the future we will see stricter regulation of the banking and
insurance sectors (e.g., with the Basel III and Solvency II regulations) which
is likely to again elevate the costs of debt financing and limit the
availability of long-term bank loans. Some of Citycon's loan agreements were
signed at low margins before the financial crisis; when new loans are taken
out, the margins are likely to be higher. Along with rising market interest
rates, such an increase in loan margins is likely to push Citycon's average
interest rate upwards in the future.
The company is actively seeking to diversify its funding sources - as is
demonstrated by the EUR 500 million Eurobond issued in June - in order to
mitigate the risks related to bank financing. However, there are no guarantees
that such alternative funding sources will be available in the future at
cost-efficient margins. Bond issues, in combination with the EUR 360 million
credit facility agreement signed with Nordic banks in September 2012, the EUR
90 million rights issue in October 2012, and the EUR 200 million rights issue
in March 2013, considerably strengthened the company's balance sheet, improved
the available liquidity, and decreased the refinancing risk for the coming
years. Also the public investment grade credit ratings received in May 2013
improved the availability of funding at competitive terms.
The fair value development of investment properties continues to be
characterised by uncertainty caused by the sovereign debt crisis and the
resulting tough economic conditions. Several factors affect the fair value of
the investment properties owned by Citycon, among them general and local
economic developments, interest rate levels, foreseeable inflation rates,
trends in market rent levels, vacancy rates, property investors' yield
requirements, and the competitive environment. The associated uncertainty is
being reflected most strongly in developments for retail properties outside
major cities or in otherwise less attractive properties, because investor
demand is not currently focused on these properties and banks are more
reluctant to offer financing for projects related to such properties. On the
other hand, the fair value of winning shopping centres, which attract investor
interest amid uncertain conditions, remained stable or even increased during
2013.
The company's short-term risks and uncertainties, along with its risk
management and the principles applied therein, are discussed in more depth at
www.citycon.com/riskmanagement; on pages 53-56 of the Financial Statements for
2013; and on pages 58-59 of the annual report for 2013, soon to be released.
Board Proposal for Dividend Distribution and Distribution of Assets from the
Invested Unrestricted Equity Fund
The parent company's retained earnings amount to EUR 17.4 million, including
the profit for the period of EUR 13.1 million. On 31 December 2013, the funds
in the parent company's invested unrestricted equity fund amounted to a total
of EUR 501.6 million.
The Board of Directors proposes to the Annual General Meeting to be held on 19
March 2014 that a per-share dividend of EUR 0.03 be paid out for the financial
year ending on 31 December 2013, and that a return of equity of EUR 0.12 per
share be returned from the invested unrestricted equity fund. The Board of
Directors proposes that the record date for dividend payment and equity return
be 24 March 2014 and that the dividend and equity return be paid on 31 March
2014.
Future Outlook
Citycon focuses on increasing both its net cash flow from operating activities
and its direct operating profit. Therefore, the company pursues proactive asset
management, value-added activities, and selected acquisitions.
The initiation of planned (re)development projects will be carefully evaluated
against strict pre-leasing criteria. Citycon intends to continue divestment of
its non-core properties after value maximisation activities.
The company expects its turnover to increase by EUR +1 to +9 million and EPRA
operating profit to change by EUR -2 to +6 million compared to 2013 level,
based on the existing property portfolio. The company predicts its EPRA
Earnings to increase by EUR +2 to +10 million and on the basis of the current
number of shares its EPRA Earnings per share (basic) to be EUR 0.20-0.22. The
EPRA Earnings per share in 2013 of EUR 0.204 has been calculated with the
issue-adjusted average number of shares of approximately 425.4 million shares
(current number of shares approx. 441.3 million).
These estimates are based on (re)development projects that have already been
completed and on those yet to be completed, as well as on the prevailing level
of inflation, the euro-Swedish krona exchange rate, and current interest rates.
No major (re)development projects are scheduled to come online during 2014.
Financial Reports in 2014
Citycon will publish its Annual and Sustainability Report 2013 on the corporate
website in week nine of 2014 at the latest.
Citycon will issue three interim reports during the financial year 2014 as
follows:
January-March 2014 on Thursday, 24 April 2014 at about 9.00 a.m.,
January-June 2014 on Thursday, 10 July 2014 at about 9.00 a.m. and
January-September 2014 on Thursday, 16 October 2014 at about 9.00 a.m.
Annual General Meeting 2014
Citycon Oyj will hold its Annual General Meeting at Finlandia Hall,
Mannerheimintie 13, Helsinki, Finland on Wednesday, 19 March 2014 starting at
2:00 p.m.
For more investor information, please visit the corporate website at
www.citycon.com.
For further information, please contact:
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
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