2011-10-12 08:00:00 CEST
2011-10-12 08:00:18 CEST
REGULATED INFORMATION
Citycon Oyj - Interim report (Q1 and Q3)
Citycon Oyj's Interim Report for 1 January-30 September 2011
Citycon Oyj Stock Exchange Release 12 October 2011 at 09:00 hrs
The Interim Report for the period 1 January-30 September 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 Third Quarter of 2011 Compared with the Previous Quarter
- Turnover increased to EUR 55.0 million (Q2/2011: EUR 54.1 million).
- Net rental income increased by EUR 1.9 million, or 5.3 per cent, to EUR 38.3
million (EUR 36.3 million). The acquisitions of Kristiine and Högdalen Centrum
shopping centres increased net rental income by EUR 0.9 million and completion
of redevelopment projects by EUR 0.7 million. In addition, net rental income
increased due to lower property operating expenses reflecting common seasonal
variations.
- The fair value change of investment properties was EUR -14.4 million (EUR
-5.0 million): EUR -5.5 million for shopping centres and EUR -8.9 million for
supermarkets and shops, with the fair value of investment properties totalling
EUR 2,512.6 million (EUR 2,506.4 million). The average net yield requirement
for investment properties was 6.4 per cent (6.4%).
- Earnings per share fell to EUR 0.00 (EUR 0.03), mainly due to higher negative
fair value changes.
- Direct operating profit increased by EUR 1.0 million to EUR 31.3 million (EUR
30.2 million) due to higher net rental income partly offset by higher direct
administrative expenses that increased by EUR 0.9 million largely due to
changes in organisation.
- Direct result per share (diluted) (diluted EPRA EPS) increased slightly and
was EUR 0.06 (EUR 0.05) as higher direct operating profit increased the direct
result while higher number of shares impacted the per share figure.
- The company specifies its guidance regarding turnover, direct operating
profit and direct result.
Summary of the Period January-September 2011 Compared with the Corresponding
Period of 2010
- Turnover increased to EUR 161.0 million (Q1-Q3/2010: EUR 146.1 million).
- Net rental income increased by EUR 11.6 million, or 12.1 per cent, to EUR
107.0 million (EUR 95.4 million). With comparable exchange rates, net rental
income grew by EUR 10.1 million or 10.5 per cent. The completion of
redevelopment projects such as Espoontori, Forum in Jyväskylä and Åkersberga
Centrum increased net rental income by EUR 4.6 million. The acquisitions of the
Kristiine and Högdalen Centrum shopping centres increased net rental income by
EUR 4.3 million.
- Net rental income from like-for-like properties increased by EUR 2.0 million,
or 2.7 per cent, excluding the impact of the strengthened Swedish krona.
Like-for-like net rental income from shopping centres increased by EUR 3.7
million, or 6.4 per cent while like-for-like net rental income from
supermarkets and shops decreased by EUR 1.8 million, or 11.3 per cent.
- Earnings per share were EUR 0.07 (EUR 0.29). The decrease was mainly due to
negative fair value changes. In addition, the share issues taken place in July
2011 have increased the number of shares.
- The direct result per share (diluted) (diluted EPRA EPS) increased and was
EUR 0.16 (EUR 0.15).
- Net cash from operating activities per share increased to EUR 0.21 (EUR 0.09)
due to higher direct operating profit, positive changes in working capital,
received tax returns, extraordinary items and timing differences.
- Citycon acquired the shopping centre Högdalen Centrum in Stockholm for SEK
207.5 million (approx. EUR 23.1 million) and shopping centre Kristiine in
Tallinn for EUR 105 million.
- The redevelopment project of the Koskikeskus shopping centre in Tampere was
started, with the estimated investment cost being EUR 37.9 million.
- In May, Citycon signed a EUR 330 million long-term unsecured credit facility
agreement with a Nordic bank group. The facility consists of a bullet term loan
of EUR 220 million and a EUR 110 million revolving credit facility. The loan
period is five years.
- The company strengthened its balance sheet and improved liquidity by raising
approximately EUR 99 million in new equity through a directed share offering
arranged in July by issuing 33 million new shares. In August, the company
signed a 7-year unsecured term loan facility for a minimum committed amount of
EUR 50 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. At the end of July the company announced
that Ulf Attebrant, the company's Vice President, Swedish Operations, would
leave his position by 1 December and that Johan Elfstadius would start as new
Head of Swedish Operations on or about 1 December 2011.
Key Figures
Q3/201 Q3/201 Q2/2011 Q1-Q3/2 Q1-Q3/2 Change 2010
1 0 011 010 -% 1)
Turnover, EUR 55.0 48.0 54.1 161.0 146.1 10.3% 195.9
million
Net rental income, 38.3 33.0 36.3 107.0 95.4 12.1% 127.2
EUR million
Operating profit, 17.0 42.8 26.0 71.2 122.3 -41.8% 157.7
EUR million
% of turnover 30.9% 89.2% 48.1% 44.2% 83.8% -47.3% 80.5%
Profit/loss before 1.0 28.8 9.5 25.0 80.8 -69.1% 102.8
taxes, EUR million
Loss/profit -0.7 22.5 7.9 18.3 63.9 -71.3% 78.3
attributable to
parent company
shareholders, EUR
million
Direct operating 31.3 28.0 30.2 88.5 80.7 9.7% 105.0
profit, EUR million
% of turnover 56.8% 58.4% 56.0% 55.0% 55.3% -0.5% 53.6%
Direct result (EPRA 14.9 12.3 13.2 40.7 33.8 20.7% 47.3
earnings), EUR
million
Indirect result, EUR -15.6 10.2 -5.3 -22.4 30.1 - 31.1
million
Earnings per share 0.00 0.10 0.03 0.07 0.29 -74.8% 0.34
(basic), EUR
Earnings per share 0.00 0.10 0.03 0.08 0.28 -71.6% 0.34
(diluted), EUR
Direct result per 0.06 0.06 0.05 0.16 0.15 5.6% 0.21
share (diluted),
(diluted EPRA EPS),
EUR
Net cash from 0.14 0.04 -0.01 0.21 0.09 143.1% 0.09
operating
activities per
share, EUR
Fair value of investment properties, 2,506.4 2,512.6 2,299.9 9.3% 2,367.7
EUR million
Equity per share, 3.43 3.29 3.36 -2.2% 3.47
EUR
Net asset value (EPRA NAV) per 3.73 3.64 3.71 -1.8% 3.79
share, EUR 2)
EPRA NNNAV per 3.43 3.31 3.37 -1.8% 3.49
share, EUR
Equity ratio, % 34.8 37.7 35.9 4.8% 37.1
Gearing, % 171.2 148.3 153.4 -3.3% 153.1
Net interest-bearing debt (fair 1,540.1 1,445.2 1,343.1 7.6% 1,386.0
value), EUR million
Net rental yield, % 5.8 5.9 5.9 - 5.8
Net rental yield, 6.0 6.0 6.0 - 6.0
like-for-like properties, %
Occupancy rate 95.1 95.4 94.5 - 95.1
(economic), %
Personnel (at the end of the 134 129 123 4.9% 129
period)
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
Comments from Citycon Oyj's Chief Executive Officer Marcel Kokkeel on the
reporting period:
“The first three quarters of 2011 have been a period of solid performance: the
company's net rental income grew by 12.1 per cent, like-for-like net rental
income by 2.7 per cent, occupancy rate remained at high level and was 95.4 per
cent, shopping centre footfall has grown by 6 per cent and sales by 7 per cent.
Especially Liljeholmstorget Galleria in Sweden has improved during this year.
Our property portfolio is now more clearly split into prime, consisting of a
large majority of our portfolio, and the non-prime properties. This difference
can be seen in leasing and rental development, as well as in valuation of
properties. In general, demand for the best properties is solid and their fair
values remain stable, whereas non-prime properties show an opposite trend.
The company is in transition phase: our strategy has been updated and changes
have taken place in the management. This transition is also reflected in our
results: While managing an ongoing business improvement program which will also
lead to a lower cost base, 2011 will still show an increase in costs due to
this transition. The key part of Citycon's clarified strategy is improving the
direct result and rigorous cost control in all our operations. The aim is to be
close to customers, tenants and market places and to become a more pro-active
partner.
During the reporting period, the company has strengthened its property
portfolio by both acquisitions and redevelopment projects. In May, Citycon
acquired two new shopping centres: Kristiine in Tallinn, and Högdalen Centrum
in Stockholm. Kristiine has out-performed our expectations. The most
significant on-going redevelopment projects are in Finland: Koskikeskus in
Tampere, Martinlaakso in Vantaa and Myllypuro in Helsinki. Also some non-core
properties have been sold and their disposals will continue and - when possible
- be accelerated.
Citycon's financial position is good. The directed share issue arranged by the
company in July was completed successfully. At the period end, available
liquidity totalled EUR 292.8 million and equity ratio was 37.7 per cent.”
Business Environment
After the summer, economic sentiment turned negative, due to the euro area's
problems in particular. While this change was primarily visible on the stock
market, it did not yet have major impacts on consumer spending. During the
year, retail sales have grown both in Finland and Sweden. For the first eight
months, retail sales grew by 5.8 per cent in Finland, by 1.2 per cent in Sweden
and by 3.0 per cent in Estonia. In August, retail sales in Finland grew by 6.0
per cent, in Sweden by 1.7 per cent and in Estonia by 4.0 per cent
year-on-year. (Sources: Statistics Finland, Statistics Sweden, Statistics
Estonia)
Household consumer confidence has deteriorated during the past months in all of
the company's operating countries. In Finland and Sweden, the household
consumer confidence indicator was still positive unlike in Estonia and
Lithuania. (Source: Eurostat)
In Finland and Sweden, unemployment is lower than the European Union average:
at the end of August, unemployment rate in Finland was 7.8 per cent and in
Sweden 7.4 per cent. In Estonia, unemployment is still high, at 12.8 per cent
at the end of June. The changeover to the euro has, however, had a positive
impact on the Estonian economy, through tourism and foreign investment.
(Sources: Statistics Finland, Statistics Sweden, Statistics Estonia)
Consumer prices continued to rise during the reporting period. In August,
inflation was 3.8 per cent in Finland, 3.4 per cent in Sweden and 5.5 per cent
in Estonia. Interest rates remained low. (Source: ibid)
Property Markets
General uncertainty in the global economy has cast its shadow on real estate
market and the general sentiment is cautious and waiting. In the beginning of
the year, it was expected that the demand for average properties and properties
in regional towns would increase, but development after the summer has shifted
investors' and financiers' interest even more firmly towards prime properties
in major cities. The number of completed transactions has been low and it is
expected that transaction volumes will remain moderate during the rest of the
year. The current view is, that the relative position of prime properties will
strengthen and they will keep their value rather well, but there will be
downwards pressure on average and non-prime investment properties and on their
values. (Source: Realia Management Oy)
Tenants' Sales and Footfall in Citycon's Shopping Centres
During the first nine months of the year, total sales in Citycon's shopping
centres grew by 7 per cent and the footfall increased by 6 per cent,
year-on-year. There was sales growth in all of the company's operating
countries: 5 per cent in Finland, 7 per cent in Sweden and 21 per cent in the
Baltic countries. In Finland, the footfall increased by 4 per cent, in Sweden
by 9 percent and in the Baltic countries by 9 per cent. Positive developments
in sales and footfall are mainly attributable to redevelopment projects
completed during recent years. Like-for-like shopping centre sales (sales
excluding the impact of redevelopment projects) grew by 5 per cent and were
positive in all operating countries. Like-for-like footfall rose by 1 per cent,
being positive in Swedish shopping centres in particular.
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 the most significant risks now faced by the
company relate to general economic development, the success of leasing
activities for retail premises, reducing the vacancy rate, as well as the cost
and availability of financing.
During the first half of the year, the general economic climate was still
relatively positive and, for instance, consumer confidence increased in
Citycon's operating countries. In the summer, economic activity slowed down
while the mounting sovereign-debt crisis has led to major fluctuations in the
financial market. Recent economic forecasts for the current and next year have
been lowered markedly and the current outlook for the euro area is replete with
risks. However, regardless of slower economic growth, several forecasts still
expect the economic growth to remain positive next year in all of Citycon's
operating countries. Since the risks associated with economic development have
undoubtedly increased significantly, we cannot exclude the scenario of a sharp
economic downturn coupled with negative economic growth next year.
In such a challenging economic environment, demand for retail premises is
unlikely to grow significantly from the current level, which will make leasing
activities challenging. Leasing of retail premises was particularly challenging
in certain supermarket and shop properties owned by Citycon where the occupancy
rate is still clearly below the occupancy rate of the entire property
portfolio.
The availability of financing is still good, although greater uncertainty since
the summer of 2011 started to affect the cost of financing. Credit ratings of
certain European banks have already declined and, in general, banks' funding
costs clearly increased during the summer. Nordic banks, however, hold a
relatively stronger position and, in spite of the uncertainty, are still
willing to finance property companies, although they require slightly higher
loan margins than in the spring.
The company's short-term risks and uncertainties are discussed in more depth in
the Annual Report 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 both its net cash flow from operating
activities and its 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, in order 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 18-23 million and its
direct operating profit by EUR 10-15 million compared with the previous year,
based on the existing property portfolio. The company expects its direct result
to increase by EUR 4-8 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 the euro-krona
exchange rate as well as current interest rates. Properties taken offline for
planned development projects will reduce net rental income during the year.
Helsinki, 11 October 2011
Citycon Oyj
Board of Directors
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
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