2013-02-06 08:01:00 CET
2013-02-06 08:01:08 CET
REGULATED INFORMATION
Citycon Oyj - Financial Statement Release
Citycon Oyj's Financial Statement Release for 1 January–31 December 2012 – Rental development was positive, with like-for-like net rental income growing by 4.9 per cent
Citycon Oyj Stock Exchange Release 6 February 2013 at 9:01 hrs
The Financial Statement Release for the period 1 January-31 December 2012 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 5 February 2013, 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 2012. 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 2012 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 2012 Compared with the Previous Quarter
- Turnover grew to EUR 62.1 million (Q3/2012: 60.9 million).
- Net rental income decreased by EUR 0.5 million or 1.3 per cent to EUR 42.1
million (EUR 42.6 million), mostly due to higher property operating expenses
reflecting common seasonal variations.
- EPRA operating profit decreased by EUR 3.1 million or 8.3 per cent to EUR
34.2 million (EUR 37.3 million), mostly due to EUR 2.5 million higher
administrative expenses, of which EUR 0.9 million were one-off restructuring
costs.
- The EPRA Earnings per share (EPRA EPS) decreased to EUR 0.049 (EUR 0.062)
also due to higher number of shares resulting from the rights issue executed in
October 2012. The EPRA figures do not include items outside of direct business
operations, such as changes in the fair value of investment properties.
- Fair value gain of investment properties came to EUR 3.8 million (13.8
million). The fair value of investment properties totalled EUR 2,714.2 million
(EUR 2,695.5 million), and their average net yield requirement was 6.3 per cent
(6.3%).
Summary of the Year 2012 Compared with the Year 2011
Citycon fulfilled the financial targets it had announced for 2012. On the
publication of its Q3 interim report, the company revised some of its targets,
announcing that it expected a growth in turnover by EUR 16-21 million, a growth
in EPRA operating profit by EUR 14-19 million, and a growth in its EPRA
earnings by EUR 6-11 million in 2012 as compared to 2011, and forecast an EPRA
EPS of EUR 0.195-0.215. The outcomes were that in 2012, turnover grew by EUR
22.2 million compared to 2011. The timing of tenant specific projects in Baltic
Countries, in particular, resulted in a higher turnover than what the company
expected in its third quarter report. The general circumstances and environment
related to turnover development did not change. The EPRA operating profit grew
by EUR 18.3 million and the EPRA earnings by EUR 10.6 million, and the EPRA EPS
was EUR 0.214.
-The Board of Directors proposes a per-share dividend of EUR 0.04 (EUR 0.04)
and a return of equity from invested unrestricted equity fund of EUR 0.11 (EUR
0.11) per share.
- Turnover grew to EUR 239.2 million (2011: 217.1 million).
- Net rental income increased by EUR 17.7 million or 12.3 per cent to EUR 162.0
million (EUR 144.3 million). The completion of development projects and the
acquisitions of shopping centres Kristiine, Högdalen Centrum, Arabia and
Albertslund had a positive impact of EUR 13.4 million on net rental income.
- Net rental income from like-for-like properties increased by EUR 5.5 million
or 4.9 per cent, excluding the impact of the strengthened Swedish krona.
- Earnings per share came to EUR 0.26 (EUR 0.05).
- The direct operating result per share (EPRA EPS, basic) increased to EUR
0.214 (EUR 0.197).
- Net cash flow from operating activities per share reduced to EUR 0.21 (EUR
0.25) due to timing differences and exceptional items.
Key Figures
IFRS based key figures Q4/201 Q4/201 Q3/2012 2012 2011 Change
2 1 % 1)
--------------------------------------------------------------------------------
Turnover, EUR million 62.1 56.0 60.9 239.2 217.1 10.2 %
--------------------------------------------------------------------------------
Net rental income, EUR 42.1 37.3 42.6 162.0 144.3 12.3 %
million
--------------------------------------------------------------------------------
Profit/loss attributable to 20.4 -5.4 30.2 77.2 13.0 495.7 %
parent company
shareholders, EUR million
--------------------------------------------------------------------------------
Earnings per share (basic), 0.06 -0.02 0.10 0.26 0.05 438.9 %
EUR 2)
--------------------------------------------------------------------------------
Net cash from operating 0.04 0.04 0.05 0.21 0.25 -16.2 %
activities per share, EUR
2)
--------------------------------------------------------------------------------
Fair value of investment 2 695.5 2 714.2 2 522.1 7.6 %
properties, EUR million
--------------------------------------------------------------------------------
Equity ratio, % 34.8 37.8 36.0 4.7 %
--------------------------------------------------------------------------------
EPRA based key figures Q4/201 Q4/201 Q3/2012 2012 2011 Change-
2 1 % 1)
--------------------------------------------------------------------------------
EPRA operating profit, EUR 34.2 28.9 37.3 135.7 117.4 15.5 %
million
--------------------------------------------------------------------------------
% of turnover 55.1 % 51.6 % 61.3 % 56.7 % 54.1 % 4.8 %
--------------------------------------------------------------------------------
EPRA Earnings, EUR million 16.2 12.5 17.8 63.9 53.3 20.0 %
--------------------------------------------------------------------------------
EPRA Earnings per share 0.049 0.043 0.062 0.214 0.197 8.5 %
(basic), EUR 2)
--------------------------------------------------------------------------------
EPRA NAV per share, EUR 3.71 3.49 3.62 -3.7 %
--------------------------------------------------------------------------------
EPRA NNNAV per share, EUR 3.24 3.08 3.29 -6.4 %
--------------------------------------------------------------------------------
Dividend per share, EUR 0.043) 0.04 0.0%
--------------------------------------------------------------------------------
Return from invested 0.113) 0.11 0.0%
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
2012 and 2011.
2) Result per share key figures have been calculated with the issue-adjusted
number of shares resulting from the rights issue initiated executed in October
2012.
3) Proposal by the Board of Directors.
CEO's Comment
Comments on 2012 from Marcel Kokkeel, CEO:
“For Citycon, the key focus in 2012 has been to improve earnings and quality of
cash flows.
This has meant sound operational improvements, identifying and working on
redevelopment potential and carrying through selective acquisitions. We have
broadened our portfolio geographically to Denmark by acquiring Albertslund
Centrum in Copenhagen in July and strengthened our market position considerably
in Sweden by acquiring Kista Galleria in Stockholm (closed in January 2013).
The acquisition of Kista Galleria balances the weight of Citycon's different
business areas in the company's property portfolio in accordance with its
growth strategy. Another key rationale for the acquisition is to further
improve the retail space offering and to better serve retailers with a wider
supply of quality shopping centres.
Citycon's strategy also includes investing in shopping centres with joint
venture partners. The co-operation with the global and respected joint venture
partner CPPIB is another example of executing this strategy. Half of the Kista
Galleria acquisition is financed together with CPPIB with a stand-alone asset
backed loan agreement. A share issue is currently under planning.
In 2012, the company's like-for-like net rental income grew by 4.9 per cent. In
accordance with our strategy, we managed to attract new international tenants
like Debenhams from the UK and the Italian Furla.
Last year, we achieved to cut administrative expenses and the efficiency
program continues with higher targets for 2013; the cost savings target
relating to administrative expenses for 2013 is to save up to EUR 5 million
compared to 2012 level.
We successfully refinanced practically all of the loans maturing in 2013,
expanded our financing sources to the bond markets and further strengthened our
balance sheet in October by a rights issue. After the acquisition of Kista
Galleria, the company started planning another rights issue mainly to finance
the acquisition as well as to strengthen the balance sheet.
Citycon turns 25 years in 2013. The year will be characterized with
strengthening the Citycon quality brand and profile towards shareholders,
tenants, customers and all other stakeholders. We believe that the power of the
local shopping centre brand should be combined with the strength and knowledge
of Citycon as a Nordic industry leader. ”
Business Environment
Generally speaking, 2012 was a year of financial uncertainty, although positive
developments were observed in the form of a growth in the retail trade in
Citycon's operating markets. Uncertainty increased during the year due to the
worsening Eurozone debt crisis.
Retail sales growth and the inflation rate are key drivers for Citycon's
business and have a direct impact on rents from business 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 all of Citycon's operating countries. In
December, the annual inflation rate was 2.4 per cent in Finland, -0.1 per cent
in Sweden, 3.9 per cent in Estonia and 2.8 per cent in Lithuania.
(Sources: Statistics Finland, Statistics Sweden, Statistics Estonia, Statistic
Lithuania)
Consumer confidence in their own financial situation was positive in the Nordic
countries, but negative during the whole year in the Baltic region. The
economic uncertainty and general weak news affected consumer confidence in each
of the Nordic countries, where the positive trend turned in the summer and
confidence declined in the final months of the year. In December, consumer
confidence was restored in Finland and Denmark to the positive figures of the
start of the year, but fell close to zero in Sweden. (Eurostat)
Retail sales growth and the inflation rate are key drivers for Citycon's
business, having an impact on rents from business premises. Retail sales grew
in both Finland and Sweden. The total retail sales growth rate in 2012 was 4.4
per cent in Finland and 2.3 per cent in Sweden compared to 2011. In January -
November 2012 compared to the previous year's corresponding period retail sales
grew by 7.0 per cent in Estonia and 4.8 per cent in Lithuania. (Statistics
Finland, Statistics Sweden, Statistics Estonia, Statistics Lithuania)
Unemployment adjusted for seasonal variation was below the EU average (10.7%)
in Finland, Sweden and Denmark: at the end of December, seasonally adjusted
unemployment was 7.7 per cent in Finland, 8.1 per cent in Sweden and 7.9 per
cent in Denmark. Unemployment remained high in Estonia and Lithuania but, in
contrast to the Nordic region, was falling, being 9.5 per cent in Estonia and
12.5 per cent in Lithuania at the end of October. (Eurostat)
The Europe-wide instability of the financial market continued to affect the
availability and cost of funding.
Property Market
Demand for investment has remained stable in the Finnish property investment
market but the scant supply of prime assets has lim¬ited transactional
activities. During 2012 retail investment volume exceeded low levels of 2011
ending up to EUR 400 million. The forecast for 2013 does not indicate any big
changes in the market. Shopping centre prime yields have remained stable but
the second¬ary yields are facing upward pressure. As a consequence of
relatively strong development in retail sales, retail rents have also kept
rising, although such increases have been concentrated in the very best
locations only.
In Sweden the retail property transaction volume SEK 13.4 billion for the year
2012 was clearly lower than in the previous year (SEK 16.1 billion). Investors'
interest is strong for retail properties which have a good location, strong
tenants and low vacancy rates. However, retail properties which do not meet
some or all of these criteria will be more difficult to sell. Prime yields for
shopping centres have generally remained stable since mid-2011 but prime yields
for retail warehouse parks increased in the last quarter of 2012.
In Estonia retail sales development has been strong which encourages demand for
retail space, especially in Tallinn downtown areas and professionally managed
modern shopping centres. Vacancy rates in shopping centres are close to zero
and rents have increased along with inflation. Also the retail property
investment market has picked up and retail yields have dropped below 8 per
cent. Also in Lithuania retail investment market is recovering and investor
demand is forecasted to decrease yield requirements.
(Source: Jones Lang LaSalle Finland Oy)
Tenants' Sales and Footfall in Citycon's Shopping Centres
During the year, total sales in Citycon's shopping centres grew by 6 per cent
and the footfall increased by 3 per cent year on year. There was sales growth
in all of the company's countries of operation: 5 per cent in Finland, 5 per
cent in Sweden and 14 per cent in the Baltic Countries and New Business.
Footfall increased by 2 per cent in Finland, 6 per cent in Sweden and 6 per
cent in the Baltic Countries and New Business. Positive developments in sales
and footfall are mainly attributable to (re)development projects completed
during recent years. Like-for-like shopping centre sales grew by 4 per cent and
footfall by 2 per cent. There are estimates included in the sales and footfall
figures.
Short-Term Risks and Uncertainties
Citycon's Board of Directors considers the company's major short-term risks and
uncertainties to be associated with economic development in the company's
operating regions, which affects demand, vacancy rates and market rents in
retail premises. In addition, key near-term risks include rising financial
expenses due to higher loan margins, reduced availability of debt financing and
the fair value development of properties in uncertain economic conditions.
Although the financial crisis' effects on both rent levels for retail premises
and occupancy rates have so far been minor in Citycon's operating areas, demand
for retail premises, reduction of vacancy rates and lower market rent levels
pose challenges in a sluggish economic environment. Economic trends,
particularly those impacting consumer confidence and behaviour, inevitably
affect demand for retail premises. The instability of the Eurozone has
continued in 2012, which has made forecasting financial growth difficult. Risks
to economic growth are still present and in conditions of weak economic growth,
rental levels of retail premises typically fall, leasing of new premises is
more difficult, and vacancy rates rise.
Implementation of Citycon's growth strategy requires new financing, which means
that risks associated with the availability and cost of financing are of
fundamental importance to the company. The Nordic banks' willingness to lend
money to real estate companies continues to be moderate, so the availability of
financing is limited and loan margins have remained at a high level. In the
future, tightening regulation of the banking and insurance sectors (Basel III
and Solvency II regulations) is likely to support the elevated costs of debt
financing, and to limit the availability of long-term bank loans. This will
probably raise the cost of Citycon's new loan financing. So far this change in
margins has been mitigated by reduced underlying base rates and Citycon's
active financing policy. Over the next few years, Citycon will have to
refinance loan agreements that were signed at low margins before the financial
crisis, and consequently, the margins on these loans will rise which will push
Citycon's average interest rate upwards in the future. The EUR 360 million
credit facility agreement signed with Nordic banks in September decreased the
refinancing risk for 2013 considerably. The facility enables the refinancing of
the material bank loans due in 2012 and 2013.
The company is actively seeking to diversify its funding sources, as
demonstrated by the EUR 150 million domestic bond issue in May, in order to
mitigate the risks related to bank financing, but there are no guarantees that
such alternative funding sources would be available in the future at cost
efficient prices.
The fair value development of investment properties continues to be
characterised by high uncertainty caused by the harsh economic conditions.
Several factors affect the fair value of the investment properties owned by
Citycon, such as general and local economic development, interest rate levels,
foreseeable inflation, the market rent trend, vacancy rates, property
investors' yield requirements and the competitive environment. This uncertainty
is reflected most strongly on retail properties that are located outside major
cities, or which are otherwise less attractive, because investor demand is
currently not focused on these properties, and banks are not particularly keen
to offer financing for such projects. Yet, at the same time, the fair value of
the best shopping centres, which attract investor interest in uncertain
conditions, remained stable or even increased during 2012.
The company's short-term risks and uncertainties, as well as its risk
management and risk management principles, are discussed in more depth at
www.citycon.com/riskmanagement, on pages 43-46 of the Financial Statements for
2012, and on pages 50-51 of the upcoming Annual Report for 2012.
Board Proposal for Dividend Distribution and Distribution of Assets from the
Invested Unrestricted Equity Fund
The parent company's retained earnings amount to EUR 17.3 million, including
the profit for the period of EUR 17.0 million. On 31 December 2012, the funds
in the parent company's invested unrestricted equity fund amounted to a total
of EUR 337.3 million.
The Board of Directors proposes to the Annual General Meeting to be held on 21
March 2013 that a per-share dividend of EUR 0.04 be paid out for the financial
year ending on 31 December 2012, and that a return of equity of EUR 0.11 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 26 March 2013 and that the dividend and equity return be paid on 4 April
2013.
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, selective
acquisitions and proactive asset management.
The initiation of planned (re)development projects will be carefully evaluated
against strict pre-leasing criteria. The company will continue selling off
non-core properties to improve its investment portfolio and strengthen its
balance sheet, and further refining its properties' sales strategies in order
to maximise their value through proactive management and leasing.
In 2013 Citycon expects to continue producing a stable cash flow and to
increase its turnover by EUR 5-20 million compared to 2012. It also predicts a
growth in EPRA operating profit by EUR 5-20 million based on the current
property portfolio (including recent acquisitions and disposals). Citycon
expects its EPRA earnings to increase by EUR 15-30 million over the previous
year. Based on the existing number of shares the EPRA EPS is expected to reach
EUR 0.22-0.26. These estimates are based on (re)development projects already
completed and to be completed, on the prevailing level of inflation and on the
euro-krona exchange rate. Properties taken offline for planned development
projects will reduce net rental income during the year.
In the outlook, Citycon has assumed Kista Galleria to be consolidated with the
equity method meaning that Citycon's share (50%) out of the net profit of Kista
Galleria shopping centre is recorded as share of result in jointly controlled
entities in the statement of comprehensive income. In the statement of
financial position, Citycon's share of Kista Galleria is reported within the
line called Investment in jointly controlled entities.
Helsinki, 5 February 2013
Citycon Oyj
Board of Directors
Financial Reports in 2013
Citycon will publish its Annual and Sustainability Report 2012 on the corporate
website in week nine of 2013 at the latest.
Citycon will issue three interim reports during the financial year 2013 as
follows:
January-March 2013 on Wednesday, 24 April 2013 at about 9.00 a.m.,
January-June 2013 on Wednesday, 10 July 2013 at about 9.00 a.m. and
January-September 2013 on Wednesday, 16 October 2013 at about 9.00 a.m.
Annual General Meeting
Citycon Oyj will hold its Annual General Meeting at Finlandia Hall,
Mannerheimintie 13, Helsinki, Finland, on Thursday 21 March 2013, starting at
3.00 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.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
www.citycon.com
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