2011-07-13 08:00:00 CEST
2011-07-13 08:00:13 CEST
REGULATED INFORMATION
Citycon Oyj - Interim report (Q1 and Q3)
Citycon Oyj's Interim Report for 1 January-30 June 2011
Citycon Oyj Stock Exchange Release 13 July 2011 at 09.00
The Interim Report for the period 1 January-30 June 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 Second Quarter of 2011 Compared with the Previous Quarter
- Turnover increased to EUR 54.1 million (Q1/2011: EUR 52.0 million).
- Net rental income increased by EUR 3.9 million or 12.2 per cent to EUR 36.3
million (EUR 32.4 million). The acquisitions of Kristine and Högdalen shopping
centres increased net rental income by EUR 1.7 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 -5.0 million (EUR 1.2
million), EUR 0.3 million for shopping centres and EUR -5.3 million for
supermarkets and shops, with the fair value of investment properties totalling
EUR 2,506.4 million (EUR 2,386.2 million). The average net yield requirement
for investment properties was 6.4 per cent (6.4%).
- Earnings per share fell to EUR 0.03 (EUR 0.05), mainly due to negative fair
value changes as well as higher financial expenses.
- Direct result per share (diluted) increased slightly and was EUR 0.05 (EUR
0.05) as higher net rental income increased the direct result while higher
financial expenses decreased it.
-The company specifies its guidance regarding turnover, direct operating profit
and direct result.
Summary of the Period January - June 2011 Compared with the Corresponding
Period of 2010
- Turnover increased to EUR 106.0 million (Q1-Q2/2010: EUR 98.1 million).
- Net rental income increased by EUR 6.3 million, or 10.1 per cent, to EUR 68.7
million (EUR 62.5 million). With comparable exchange rates, net rental income
grew by EUR 4.8 million or 7.6 per cent. The completion of redevelopment
projects such as Espoontori, Forum in Jyväskylä and Åkersberga Centrum
increased net rental income by EUR 2.7 million. The acquisitions of the
Kristine and Högdalen shopping centres increased net rental income by EUR 1.7
million. Net rental income from like-for-like properties increased by EUR 1.1
million, or 2.3 per cent, excluding the impact of the strengthened Swedish
krona.
- Earnings per share fell to EUR 0.08 (EUR 0.19). The decrease was mainly due
to negative fair value changes and higher financial expenses. In addition, the
share issue that took place in September 2010 increased the number of shares.
- The direct result per share (diluted) increased slightly to EUR 0.11 (EUR
0.10).
- Net cash from operating activities per share increased to EUR 0.08 (EUR 0.05)
due to higher direct operating profit, positive changes in working capital,
received tax returns, extraordinary items and timing differences.
- Citycon bought 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.
- 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
Q2/201 Q2/201 Q1/2011 Q1-Q2/2 Q1-Q2/2 Change 2010
1 0 011 010 -% 1)
Turnover, EUR 54.1 48.6 52.0 106.0 98.1 8.1% 195.9
million
Net rental income, 36.3 31.8 32.4 68.7 62.5 10.1% 127.2
EUR million
Operating profit, 26.0 49.2 28.2 54.2 79.6 -31.9% 157.7
EUR million
% of turnover 48.1% 101.3% 54.2% 51.1% 81.1% -37.0% 80.5%
Profit/loss before 9.5 34.8 14.4 23.9 52.0 -54.0% 102.8
taxes, EUR million
Profit/ loss 7.9 28.4 11.2 19.1 41.4 -53.9% 78.3
attributable to
parent company
shareholders, EUR
million
Direct operating 30.2 26.3 27.0 57.2 52.7 8.6% 105.0
profit, EUR million
% of turnover 56.0% 54.2% 51.9% 54.0% 53.7% 0.5% 53.6 %
Direct result, EUR 13.2 10.1 12.6 25.8 21.5 20.4% 47.3
million
Indirect result, EUR -5.3 18.3 -1.4 -6.8 19.9 - 31.1
million
Earnings per share 0.03 0.13 0.05 0.08 0.19 -58.2% 0.34
(basic), EUR
Earnings per share 0.03 0.12 0.05 0.08 0.18 -55.4% 0.34
(diluted), EUR
Direct result per 0.05 0.05 0.05 0.11 0.10 8.6% 0.21
share (diluted),
(diluted EPRA EPS),
EUR
Net cash from -0.01 0.01 0.09 0.08 0.05 60.1% 0.09
operating
activities per
share, EUR
Fair value of 2,386.2 2,506.4 2,229.5 12.4% 2,367.7
investment
properties, EUR
million
Equity per share, 3.43 3.43 3.30 4.0% 3.47
EUR
Net asset value 3.70 3.73 3.68 1.3% 3.79
(EPRA NAV) per
share, EUR 2)
EPRA NNNAV per 3.44 3.43 3.35 2.7% 3.49
share, EUR
Equity ratio, % 36.3 34.8 33.8 2.9% 37.1
Gearing, % 154.8 171.2 174.6 -2.0% 153.1
Net interest-bearing 1,389.5 1,540.1 1,369.6 12.4% 1,386.0
debt (fair value),
EUR million
Net rental yield, % 5.8 5.8 6.0 - 5.8
Net rental yield, 6.0 6.0 6.0 - 6.1
like-for-like
properties, %
Occupancy rate 94.9 95.1 94.6 - 95.1
(economic), %
Personnel (at the 130 134 124 8.1% 129
end of the 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 and updated strategy:
“In general, retail business in Citycon's operational regions experienced
positive developments especially in Finland and Sweden. Net rental income from
the company's like-for-like shopping centres grew particularly well by 6.6 per
cent. Net rental income from all like-for-like properties grew by 2.3 per cent,
but was still weighed down by three nearly empty supermarket properties located
in Finland.
In May, Citycon acquired two new shopping centres: Kristiine in Tallinn, and
the Högdalen Centrum in Stockholm. Högdalen, which provides growth
opportunities through more professional shopping centre management and future
development projects, is a good example of an investment that implements
Citycon's strategy. Kristiine, on the other hand, strengthens Citycon's
position in Tallinn, where the company now has more than 100,000 square metres
of shopping centre space available for lease. Both investments improve the
profitability of the company, are accretive to earnings per share from day one,
and increase rental income.
Together with this interim report, we introduce the updated strategy of
Citycon. Currently, Citycon is a market leader in Finland. While the company
intends to retain this position, it also aims to increase the relative
importance of other countries included in its strategy. Apart from Finland,
currently the company also owns shopping centres in Sweden, Estonia and
Lithuania. Going forward, Norway, Denmark and Latvia will also be included in
the strategy. Citycon will concentrate on competitive shopping centres located
in winning cities.
We are a focused retail real estate company in a focused area. The key
rationale for our expansion plan is to further improve the retail space
offering and to better serve retailers with a wider product offering. Several
international retail chains seek further expansion or entrance into the Nordic
and Baltic markets. Potential newcomers prefer to partner with a leader who can
provide them with strong retail positions and top locations. Citycon has the
expertise to be that leader. We know how to connect customer flows with strong
retail and real estate cash flows. This knowledge forms the basis of the
company's growth strategy.
A key part of Citycon's clarified strategy is improving the direct result from
operations. Costs will be controlled even more closely and the company will
strive for stronger rental growth. Marketing has a key role in this effort for
stronger rental growth. The company will further focus on improving the
occupancy rates by implementing appealing marketing programs and bringing in
new retailers. Internal targets have been set for improvement of metrics across
the property portfolio.
The winners in the shopping centre industry will be those who are able to
select best locations and combine them with best tenant mix and customer
services. Citycon will certainly be one of them, aiming to be the best in class
in the Nordic and Baltic region. We want to be the benchmark in the areas in
which we operate. By becoming better, we will improve the direct result per
share; by improving the balance sheet, we will be stronger; and ultimately
these foundations will allow us to achieve our vision of doubling the portfolio
over the next five years.”
Business Environment
Retail sales have grown both in Finland and in Sweden. During the first half of
the year, the retail industry grew by 6.3 per cent in Finland and by 2.0 per
cent in Sweden. In May, retail sales in Finland grew by 7.9 per cent, while in
Sweden retail sales decreased by 1.1 per cent year-on-year. However, the
Swedish office of statistics, Statistics Sweden (SCB), believes that the total
retail sales for 2011 will show growth. In May, retail sales in Estonia grew by
2.0 per cent. (Sources: Statistics Finland, Statistics Sweden, Statistics
Estonia).
Household consumer confidence remained strong in both Sweden and Finland. In
Estonia, household consumer confidence is on a higher level than in the other
Baltic countries, whereas in Lithuania, confidence was significantly lower than
in the Eurozone. (Source: Eurostat)
Unemployment has decreased and was 7.8 per cent in Finland and 7.7 per cent in
Sweden at the end of May. In Estonia the unemployment is still high and was
13.8 per cent at the end of the first quarter. The changeover to the euro has,
however, had a positive impact on the Estonian economy through tourism and
foreign investment. (Sources: Eurostat, Statistics Estonia)
In Finland and Sweden, consumer prices continued to rise during the first half
of the year. In May, inflation in both countries was at 3.3 per cent, and in
Estonia, 5.4 per cent. Interest rates continued to be low but were on the rise.
(Source: Statistics Finland, Statistics Sweden, Statistics Estonia)
The availability of financing continued to improve compared with previous
years. The Nordic banks, in particular, adopted a more active approach to
financing.
Property Markets
The atmosphere in the Finnish property market has been positively expectant
since summer 2010. The number of executed transactions has, however, remained
low even though some significant office property transactions have taken place
during the quarter. The investment demand has focused mainly on high-quality
city-centre or new build properties while there is still downward pressure on
the values of non-prime properties. The Swedish property market has recovered
faster than the Finnish one and demand and trading have spread beyond the
metropolitan area as well. The Baltic countries are gradually coming out of the
deepest recession, but the rental market is still challenging. In spite of
this, the first major post-recession property transactions have already been
seen in Estonia. (Source: Realia Management Oy)
Tenants' Sales and Footfall in Citycon's Shopping Centres
During the first half of the year, total sales in Citycon's shopping centres
grew by seven per cent and footfall increased by six per cent compared with the
same period in the previous year. There was growth in sales in all of the
company's countries of operation: five per cent in Finland, eight per cent in
Sweden, and 23 per cent in the Baltic countries. In Finland, footfall increased
by four per cent, in Sweden by seven per cent, and in the Baltic region by 19
per cent. The positive developments in sales and footfall are mainly
attributable to the completed (re)development projects and shopping centre
acquisitions completed during the period. Like-for-like shopping centre sales
(sales excluding the impact of redevelopment projects and acquisitions) grew by
four per cent, and were positive in all of the countries of operation.
Like-for-like footfall remained at previous year's level.
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 faced by the
company at the moment relate to general economic development, the success of
leasing activities for retail premises, and reducing the vacancy rate.
During the first half of the year, the general economic environment has been
relatively positive, but recently insecurity in the eurozone has increased,
particularly because of the debt crisis in Greece. In many regions, this has
led to the strong economic growth seen at the beginning of the year being
abated; in addition, share prices have fluctuated in the stock markets of the
Nordic countries. In Finland, economic recovery has continued, supported by
domestic demand. In Sweden, while the strongest economic growth has abated,
unemployment is still declining, and the undertone of the economy continues to
be positive. Of the Baltic countries, Estonia is in the best position in terms
of economic growth, with forecasted growth for Estonia surpassing that of
Finland and Sweden. Estonia is faced with the challenge of rapid inflation,
although that has recently appeared to be slowing down. (Source: SEB Nordic
Outlook May 2011)
Notwithstanding the fairly favourable economic environment, demand for retail
premises still did not grow significantly, making leasing activities
challenging. During the second quarter of 2011, vacancy rates in Citycon
premises decreased slightly, with occupancy rates increasing to 95.1 per cent
compared to the first quarter of 2011. The market rent prices for retail
premises only developed quite moderately. The average rent level of new lease
agreements made during the quarter increased compared to the previous quarter
but declined in Finland. Leasing of retail premises continued to be challenging
in certain Finnish supermarket and shop properties owned by Citycon.
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 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 15-23 million and its
direct operating profit by EUR 9-15 million compared with the previous year,
based on the existing property portfolio. The company expects its direct result
to increase by EUR 2-7 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 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, 12 July 2011
Citycon Oyj
Board of Directors
Financial Reports in 2011
Citycon will publish one more interim report in 2011:
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
www.citycon.com
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