2011-05-04 08:00:00 CEST
2011-05-04 08:00:16 CEST
REGULATED INFORMATION
Citycon Oyj - Interim report (Q1 and Q3)
Citycon Oyj's Interim Report for 1 January-31 March 2011
Citycon Oyj Stock Exchange Release 4 May 2011 at 09:00 hrs
Citycon has renewed the structure and content of its interim report to better
meet the feedback from investors. The Interim Report for the period 1
January-31 March 2011 in its entirety is enclosed to this release and it is
also available on the corporate website at www.citycon.com.
Summary of the First Quarter of 2011 Compared with the Previous Quarter
- Turnover increased to EUR 52.0 million (Q4/2010: EUR 49.9 million).
- Net rental income increased by EUR 0.6 million or 2.0 per cent to EUR 32.4
million (EUR 31.8 million). Net rental income increased due to completion of
redevelopment projects such as Espoontori, Forum in Jyväskylä and Åkersberga
Centrum and reduced by higher property operating expenses, reflecting common
seasonal variations.
- The fair value change of investment properties was EUR 1.2 million (EUR 11.3
million), with the fair value of investment properties totalling EUR 2,386.2
million (EUR 2,367.7 million). The average net yield requirement for investment
properties was 6.4 per cent (6.4%).
- Earnings per share fell to EUR 0.05 (EUR 0.06), mainly due to lower fair
value changes as well as the reference period's lower taxes.
- Direct result per share (diluted) decreased to EUR 0.05 (EUR 0.06), due
mainly to higher direct income taxes, while higher net rental income and lower
administrative expenses contributed positively.
Summary of the First Quarter of 2011 Compared with the Corresponding Quarter of
2010
- Turnover increased to EUR 52.0 million (Q1/2010: EUR 49.5 million).
- Net rental income increased by 5.8 per cent to EUR 32.4 million (EUR 30.6
million). With comparable exchange rates, net rental income grew by EUR 1.0
million or 3.2 per cent. The completion of redevelopment projects such as
Espoontori, Forum in Jyväskylä and Åkersberga Centrum increased net rental
income by EUR 0.7 million. Net rental income from like-for-like properties
increased by EUR 0.8 million or 3.2 per cent, excluding the impact of the
strengthened Swedish krona.
- Earnings per share fell to EUR 0.05 (EUR 0.06). The decrease was mainly due
to lower gains on sale, higher administration expenses and higher financial
expenses. The share issue taken place in September 2010 also increased the
number of shares.
- The direct result per share (diluted) was EUR 0.05 (EUR 0.05).
- Net cash from operating activities per share increased to EUR 0.09 (EUR 0.03)
due to higher direct operating profit, extraordinary items and timing
differences.
- The company agreed to acquire shopping centre Kristiine in Tallinn for EUR
105 million.
- Citycon Oyj's new CEO, Marcel Kokkeel, assumed his duties on 24 March 2011
and the company's new Executive Vice President, Finnish Operations, Michael
Schönach, in the beginning of March.
Key Figures
Q1/2011 Q1/2010 Change- Q4/201 2010
% 1) 0
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Turnover, EUR million 52.0 49.5 5.0 % 49.9 195.9
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Net rental income, EUR million 32.4 30.6 5.8 % 31.8 127.2
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Operating profit, EUR million 28.2 30.3 -7.1% 35.4 157.7
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% of turnover 54.2% 61.3% - 70.9% 80.5%
--------------------------------------------------------------------------------
Profit/loss before taxes, EUR 14.4 17.2 -16.1% 22.0 102.8
million
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Profit/ loss attributable to parent 11.2 13.0 -13.4% 14.4 78.3
company shareholders, EUR million
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Direct operating profit, EUR million 27.0 26.4 2.4% 24.3 105.0
--------------------------------------------------------------------------------
% of turnover 51.9% 53.3% - 48.8% 53.6%
--------------------------------------------------------------------------------
Direct result, EUR million 12.6 11.4 11.4% 13.5 47.3
--------------------------------------------------------------------------------
Indirect result, EUR million -1.4 1.6 - 0.9 31.1
--------------------------------------------------------------------------------
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Earnings per share (basic), EUR 0.05 0.06 -21.7% 0.06 0.34
--------------------------------------------------------------------------------
Earnings per share (diluted), EUR 0.05 0.06 -21.6% 0.06 0.34
--------------------------------------------------------------------------------
Direct result per share (diluted), 0.05 0.05 0.8% 0.06 0.21
(diluted EPRA EPS), EUR
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Net cash from operating activities 0.09 0.03 166.9% 0.00 0.09
per share, EUR
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--------------------------------------------------------------------------------
Fair value of investment properties, 2,386.2 2,193.5 8.8% 2,367.7
EUR million
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--------------------------------------------------------------------------------
Equity per share, EUR 3.43 3.20 7.2% 3.47
--------------------------------------------------------------------------------
Net asset value (EPRA NAV) per 3.70 3.57 3.8% 3.79
share, EUR 2)
--------------------------------------------------------------------------------
EPRA NNNAV per share, EUR 3.44 3.22 6,8% 3.49
--------------------------------------------------------------------------------
Equity ratio, % 36.3 32.7 10.9% 37.1
--------------------------------------------------------------------------------
Gearing, % 154.8 175.9 -12.0% 153.1
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Net interest-bearing debt (fair 1,389.5 1,327.2 4.7% 1,386.0
value), EUR million
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Net rental yield, % 5.8 6.0 - 5.8
--------------------------------------------------------------------------------
Net rental yield, like-for-like 6.1 6.0 - 6.1
properties, %
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Occupancy rate (economic), % 94.9 94.5 - 95.1
--------------------------------------------------------------------------------
Personnel (at the end of the period) 130 120 8.3% 129
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1) Change-% is calculated from exact figures and refers to the change between
2011 and 2010.
2) In accordance with a change in the EPRA's Best Practice Recommendations
2010, Citycon has changed net asset value (EPRA NAV) calculations so that the
fair value of all financial instruments is excluded from the net asset value.
CEO's Comment
Citycon Oyj's Chief Executive Officer Marcel Kokkeel comments on the reporting
period:
The positive market trend continued in the beginning of the year. The company's
like-for-like net rental growth was a positive sign. Especially Citycon's core
business, shopping centres, performed well in the like-for-like portfolio. The
negative result in the Finnish like-for-like portfolio was due mainly to two
largely vacant properties in the supermarkets and shops category in Helsinki
Metropolitan Area and one in Pori. One of these properties was the main reason
behind the 20 basis point decrease in the company's occupancy rate compared to
the year-end 2010 and these properties also showed fair value losses.
The 3.2 per cent growth in the like-for-like net rents was mainly thanks to
Liljeholmstorget's improved performance compared to the year before. Also in
the Baltic shopping centres, the sales have increased during the period and we
were able to fully charge the indexations from the tenants, although some
temporary rental rebates are still in place.
During the period Citycon entered a new line of business by taking up the
management responsibility for the commercial management - including the leasing
of retail premises - and marketing of Kämp Galleria, a shopping centre in the
heart of Helsinki. This fits well into our ambition to better serve the tenants
by offering the top downtown location in addition to the retail range of our
own shopping centres.
Citycon strengthened its position in Tallinn market by signing an agreement to
acquire the centrally located shopping centre Kristiine for approximately EUR
105 million. With a gross leasable area of 42,600 square metres, Kristiine is
Tallinn's second-largest shopping centre after Citycon's Rocca al Mare. This
acquisition shows Citycon's commitment for growth if and when interesting
opportunities arise.
I started as the CEO of the company this March and have been exploring the
company and the market these past few weeks. During that time I have already
discussed with most of the people working for Citycon as well as familiarized
myself with most of the Citycon's properties. I see opportunities in Citycon's
portfolio and in the market for further growth.
Business Environment
Retail sales have grown both in Finland and in Sweden. In February, sales grew
by 6.5 per cent in Finland and 3.0 per cent in Sweden compared to the previous
year. During the first months of the year, the retail sales grew in Finland by
6.0 per cent and in Sweden by 2.7 per cent. In Estonia, retail sales grew by
2.0 per cent in February. (Sources: Statistics Finland, Statistics Sweden,
Statistics Estonia)
Household consumer confidence remained strong in Sweden and Finland. Even in
Estonia, household consumer confidence took a turn for the positive, whereas in
Lithuania, confidence was significantly lower than in the Eurozone. (Source:
Eurostat)
Unemployment remained high, being 8.4 per cent in Finland and 7.9 per cent in
Sweden at the end of February. The unemployment remained high in Estonia as
well, being 13.6 per cent at the end of 2010. The changeover to the euro had a
positive impact on the Estonian economy, however. (Sources: Statistics Finland,
Statistics Sweden, Statistics Estonia)
In Finland and Sweden, consumer prices continued to rise during the first
quarter. The inflation rate in March was 3.3 per cent in Finland, 2.9 per cent
in Sweden and 5.2 per cent in Estonia. Interest rates continued to be low but
were on the rise. (Source: Ibid.)
Availability of financing continued improving compared with previous years. The
Nordic banks in particular have adopted a more active approach to financing
transactions.
Property Market
The atmosphere in the Finnish property market was expectant and cautiously
optimistic. For the time being, the number of executed transactions has been
low and investment demand has focused mainly on high-quality city-centre or
newly built properties. The Swedish property market has recovered faster than
the Finnish one and demand and trading have spread beyond the metropolitan area
as well. Also foreign investment demand grew in Sweden, but the property market
is, however, still mainly domestic-led. The Baltic countries are gradually
coming out of the worst recession but the rental market is still extremely
challenging. In spite of this, the first major post-recession property
transactions have already been made in Estonia. (Source: Realia Management Oy)
Tenants' Sales and Footfall in Citycon's Shopping Centres
Total sales in Citycon's shopping centres grew by 4 per cent and footfall
increased by 3 per cent in the first quarter, compared with the same period in
the previous year. There was growth in sales in all of the company's countries
of operation: 2 per cent in Finland, 8 per cent in Sweden and 5 per cent in the
Baltic countries. Footfall increased in Finland by 2 per cent and in Sweden by
6 per cent, while in the Baltic region it fell by 2 per cent. Most of the
growth in sales and footfall is attributable to the (re)development projects
completed in recent years. Like-for-like shopping centre sales (sales without
the effect of (re)development projects) grew by 4.0 per cent and were positive
in all of the countries of operation. Like-for-like footfall grew by 1.0 per
cent, being positive especially in the company's Swedish shopping centres.
Short-Term Risks and Uncertainties
Citycon's Board of Directors considers the company's short-term risks and
uncertainties to be associated with economic development in the company's
operating regions, which affects demand, rent and vacancy rates in retail
premises, as well as with the cost-efficiency of debt financing, changes in the
fair value of investment properties and the execution of redevelopment
projects. The Board estimates that major risks of these for the company are
related to the development of market interest rates, successful leasing of
retail premises, and reduction of vacancy.
The credit margins for new bank loans fell during the first quarter of 2011,
but market interest rates began to rise due to both the European Central Bank
and Sweden's Riksbank raising their rates. The three-month EURIBOR rate, which
is commonly used as a reference rate, rose by 0.32 percentage points during the
first quarter, while the three-month STIBOR rose by 0.48 percentage points. The
high hedging ratio of Citycon's debt portfolio reduces but does not completely
eliminate the impact of interest rate rises on financial expenses.
Generally speaking, the economic situation was favourable during the quarter,
but demand for retail premises still did not grow significantly, which made
leasing activities difficult. During Q1 2011, the vacancy rate in Citycon's
properties increased, and the occupancy rate fell to 94.9 per cent when
compared to the last quarter of 2010. The market rents for retail premises
developed moderately and even fell in some areas. The average rent level of new
lease agreements made during the quarter fell compared to the previous quarter.
Leasing of retail premises was particularly challenging in certain supermarket
and shop properties owned by Citycon.
The company's short-term risks and uncertainties are discussed in more depth in
the Report by the Board of Directors for 2010. More details of risk management
and its principles are available on the corporate website at
www.citycon.com/riskmanagement and on pages 35-37 and 49-51 of the Annual
Report and Financial Statements for 2010.
Outlook
Citycon continues to focus on increasing its net cash from operating activities
and direct operating profit. In order to implement this strategy, the company
will pursue value-added activities, selected acquisitions and proactive asset
management.
The initiation of planned projects will be carefully evaluated against strict
pre-leasing criteria. Citycon intends to continue the divestment of its
non-core properties to improve the property portfolio and strengthen the
company's financial position. The company is also considering alternative
property financing sources.
In 2011, Citycon expects its turnover to grow by EUR 10-22 million and its
direct operating profit by EUR 6-15 million compared with the previous year,
based on the existing property portfolio. The company expects its direct result
to increase by EUR 1-7 million from the previous year. These estimates are
based on already completed (re)development projects and those completed in the
future, as well as on the prevailing level of inflation and euro-krona exchange
rate. Properties taken offline for planned (re)development projects will reduce
net rental income during the year.
Helsinki, 3 May 2011
Citycon Oyj
Board of Directors
Financial Reports in 2011
In 2011, Citycon will publish another two interim reports:
January-June 2011 on Wednesday 13 July 2011, at approximately 9:00 a.m., and
January-September 2011 on Wednesday 12 October 2011, at approximately 9:00 a.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.fi
Eero Sihvonen, Executive Vice President and CFO
Tel. +358 20 766 4459 or +358 40 557 9137
eero.sihvonen@citycon.fi
Distribution:
NASDAQ OMX Helsinki
Major media
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