2015-06-18 20:45:00 CEST
2015-06-18 20:45:05 CEST
REGULATED INFORMATION
Citycon Oyj - Company Announcement
Publication of the Finnish language prospectus relating to Citycon's rights issue
CITYCON OYJ Stock Exchange Release 18 June 2015 at 9:45 p.m.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR
INTO THE UNITED STATES, CANADA, AUSTRALIA, HONG KONG, SOUTH AFRICA OR JAPAN OR
ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.
Citycon Oyj (“Citycon” or the “Company”) announced on 25 May 2015 that it had
entered into an agreement to acquire all the shares in the Norwegian shopping
centre company Sektor Gruppen AS ("Sektor") (the "Transaction"). On 15 June
2015, the extraordinary general meeting of Citycon (the "EGM") passed the
necessary resolutions and the Company's Board of Directors decided on a rights
issue of approximately EUR 600 million based on the authorization granted by
the EGM (the "Rights Issue") as part of the financing arrangements relating to
the Transaction.
The Finnish Financial Supervisory Authority has today, on 18 June 2015,
approved the Company's Finnish language prospectus relating to the Rights
Issue, whereby Citycon will offer a maximum of 296,664,209 new shares ("New
Shares") in accordance with the shareholders' pre-emptive subscription right.
The subscription period of the Rights Issue will commence on 23 June 2015 at
9:30 a.m. and expire on 7 July 2015 at 4:30 p.m. (Finnish time). The
subscription rights are freely transferable and will be subject to public
trading on NASDAQ OMX Helsinki Ltd. between 23 June 2015 and 1 July 2015.
The Finnish language prospectus will be available as of today, 18 June 2015, at
the website of the Company at www.citycon.com/fi. In addition, the Finnish
language prospectus will be available on or about 22 June 2015 at the offices
of the Company at Korkeavuorenkatu 35, FI-00130 Helsinki, Finland as well as at
the service point of NASDAQ OMX Helsinki Ltd. at Fabianinkatu 14, FI-00100
Helsinki. In addition, the Finnish language prospectus is available as of 22
June 2015 until the listing of the New Shares on or about 14 July 2015 at
www.op.fi/merkinta and at www.sebgroup.com/prospectuses.
The Finnish language prospectus contains following previously unpublished
information (terms used in this release shall have the meanings assigned to
them in the prospectus):
Citycon after the completion of the Transaction
Business opportunities in the combined company
Citycon is a leading owner, manager and developer of urban typically
grocery-anchored shopping centres in the Nordic and Baltic regions. After the
completion of the Transaction, Citycon's assets under management will increase
from EUR 3.4 billion to EUR 4.9 billion.1 Headquartered in Helsinki, Citycon is
the number one shopping centre owner in Finland and Estonia, and will with the
acquisition of Sektor be the second largest shopping centre company in Norway.
Citycon is also among the market leaders in Sweden, and it also has established
a foothold in Denmark. On 31 March 2015, Citycon owned 35 shopping centres and
25 other retail properties. As a result of the Transaction, Citycon expects to
own 55 shopping centres and 25 other retail properties.
Citycon focuses on shopping centres with a strong position in the Nordic and
Baltic Countries. Citycon's properties are urban, typically grocery-anchored
and necessity-based. They are located close to where people live and work and
are easily accessible. Citycon actively develops its properties to ensure their
vitality and competitiveness.
Citycon's major tenants include specialty and grocery chains as well as cafés
and restaurants, banks and financial institutions and municipal and other
public tenants.
With the acquisition of Sektor, Citycon will become a true Nordic retail
operator. Citycon will seek to implement the “Urban crosspoints” strategy in
Norway, and share best practices within Sektor and Citycon. Citycon's increased
size and geographical footprint will provide both operational and financial
synergies.
1 Includes only GAV (gross asset value) for majority owned centres, and does
not include rented, minority owned or managed centres. Includes Kista Galleria.
Competitive strengths
Citycon is a pure retail player with exposure in the Nordic and Baltic
countries. Following the completion of the Transaction, Citycon will be a true
pan-Nordic retail player with a complete Nordic exposure and a strengthened
position as a leading shopping centre owner in the Nordics. The operational
focus will remain to be in capital cities and major cities with strong
demographics. Citycon will have meaningful size, in addition to Finland,
Sweden, Estonia, also in Norway. The Transaction allows increased portfolio
diversification, which is expected to further support the amount and stability
of cash flows. Through the Transaction, Citycon will increase its total annual
footfall from 150 million to 200 million. The increased footprint across
countries is expected to provide improved possibilities for tenants to expand
their businesses to the other countries in which Citycon operates. Citycon
estimates that its five largest tenants after the completion of the Transaction
will be Kesko, S-Group, Varner Gruppen, NorgesGruppen and H&M.
Key performance indicators of the property portfolio
Certain property portfolio KPIs for Citycon and Sektor individually and on a
combined basis using values as at and for the year ended 31 December 2014 can
be found in the table below:
KPI Citycon2 Sektor Combined
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Gross Asset Value (GAV, BEUR)1 2.8 1.33 4.1
Net Rental Income (NRI, MEUR)
Finland NRI 103.0 - 103.0
Norway NRI - 74.04 74.0
Sweden NRI 38.9 - 38.9
Baltic Countries and New Business NRI 27.5 - 27.5
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Total NRI (MEUR) 169.4 74.0 243.4
Occupancy Rate (%) 96.3 97 N/A
Gross Leasable Area (GLA, sq.m.) 933,0405 400,0006 1,333,040
Average Lease Length (years)7 3.2 3.5 N/A
Annual footfall (million) 150 628 212
1Gross Asset Value (GAV) refers to IFRS fair value.
2 Excluding Kista Galleria.
3 For owned and leased shopping centres and other retail properties.
4 Based on Citycon's pro forma figures.
5 1,030,000 sq.m. including Kista Galleria.
6 This figure is an estimate derived from the Net Leasable Area of Sektor's
owned and leased properties and calculated on the basis of Citycon's
calculation method in order to make the figure comparable with Citycon's
figures.
7 The figure states the average remaining lease length of the contracts.
8 Including managed shopping centres.
Unaudited pro forma financial information
The Finnish language prospectus contains previously unpublished information.
The pro forma information presented below has been based on the audited 2014
annual financial statements for Citycon and Sektor.
Citycon's audited consolidated financial statements are prepared according to
International Financial Reporting Standards as adopted by the EU. The audited
consolidated financial statements of Sektor Gruppen AS are prepared according
to Norwegian Generally Accepted Accounting Principles ("NGAAP"). Sektor's
unaudited consolidated IFRS statement of comprehensive income for the year
ended 31 December 2014 and unaudited statement of financial position as of 31
December 2014, and a description of identified differences between NGAAP and
the IFRS accounting policies of Citycon are presented below. Sektor's NGAAP
financial statements are originally presented in NOK and have been converted to
EUR after conversion to IFRS using the rate NOK/EUR 9.0365 for the balance
sheet and NOK/EUR 8.35340 for the statement of comprehensive income.
The following tables present Citycon's unaudited pro forma financial
information for the year ended 2014 and as of 31 December 2014, as described
above. The presentation used in the pro forma financial information is
Citycon's IFRS presentation format. Following the tables is a discussion of the
pro forma adjustments. The first table below sets out the unaudited pro forma
income statement information for Citycon for the year ended 31 December 2014,
as if the Transaction had taken place on 1 January 2014. The second and third
tables below set out the unaudited pro forma balance sheet information for
Citycon as of 31 December 2014, as if the Transaction had taken place on 31
December 2014.
Unaudited pro forma income statement for the year ended 31 December 2014
All figures in EUR Citycon Sektor Basis Adjustments Cityco
million, unaudited consoli consoli for 1 & 2 n
unless otherwise dated dated Pro Amortisation of Pro
stated IFRS IFRS forma intangible assets forma
financ acquired from Sektor and
ial transaction costs
inform associated with the
ation acquisition
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Gross rental Income 232.0 88.1 320.1 - 320.1
Service charge 13.3 38.9 52.2 - 52.2
Income
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Turnover 245.3 127.0 372.3 - 372.3
Property operating 74.4 53.0 127.4 1.3 128.8
expenses
Other expenses from 1.6 0.0 1.6 - 1.6
leasing operations
Net rental income 169.4 74.0 243.4 -1.3 242.0
Administrative 20.7 11.5 32.2 7.6 39.8
expenses
Other operating 1.0 5.6 6.6 - 6.6
income and
expenses
Net fair value 15.7 35.3 51.0 - 51.0
/(gains) losses on
investments
property
Net (gains)/losses 0.3 0.1 0.4 - 0.4
on sale of
investment property
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--------------------------------------------------------------------------------
Operating profit 165.0 103.5 268.5 -8.9 259.5
Financial income 55.3 5.2 60.5 - 60.5
Financial expenses -132.8 -54.2 -187.0 - -187.0
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Net financial income -77.5 -49.0 -126.5 - -126.5
and
expenses
Share profit of 14.9 2.6 17.5 - 17.5
joint venture
Profit before taxes 102.4 57.0 159.4 -8.9 150.5Current taxes -0.3 -0.3 -0.6 -0.4 -0.2
Change in deferred -12.4 -16.5 -28.9 - -28.9
taxes
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Income taxes -12.7 -16.8 -29.5 -0.4 -29.2
Profit for the 89.7 40.2 129.9 -8.6 121.3
period
Unaudited pro forma balance sheet as of 31 December 2014, Total Assets
All figures in Citycon Sektor Basis Adjust Adjust-me Total Citycon
EUR million, IFRS IFRS for Pro -ment nt 4 adjust Pro
unaudited unless Audited forma 3 Equity -ments forma
otherwise stated PPA financing &
Trans-act
ion costs
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Non-current
assets
Investment 2,769.1 1,308.3 4,077.4 104.5 - 104.5 4,181.9
properties
Investments in 182.8 19.1 201.9 2.0 - 2.0 203.9
joint ventures
Goodwill - - - 118.8 - 118.8 118.8
Intangible assets 5.3 - 5.3 12.4 - 12.4 17.7
Property, plant 0.7 9.2 9.9 - - - 9.9
and equipment
Deferred tax 5.7 18.8 24.5 - - - 24.5
assets
Derivative 1.7 4.2 5.9 - - - 5.9
financial
instruments and
other
non-current
assets
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--------------------------------------------------------------------------------
Total non-current 2,965.2 1,359.5 4,324.8 237.6 - 237.6 4,562.4
assets
Investment 7.2 - 7.2 - - - 7.2
properties held
for sale
Current assets
Derivative 0.2 - 0.2 - - - 0.2
financial
instruments
Current tax 0.4 - 0.4 - - - 0.4
receivables
Trade and other 29.8 7.4 37.2 - - - 37.2
receivables
Cash and cash 34.4 31.8 66.2 -502.5 604.0 101.5 167.7
equivalents
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--------------------------------------------------------------------------------
Total current 64.8 39.2 104.0 -502.5 604.0 101.5 205.5
assets
Total assets 3,037.2 1,398.8 4,436.0 -264.8 604.0 339.2 4,775.2
Unaudited pro forma balance sheet as of 31 December 2014, Total Shareholders'
equity & liabilities
All figures in Citycon Sektor Basis Adjust Adjust-me Total Citycon
EUR million, IFRS IFRS for Pro -ment nt 4 adjust Pro
unaudited unless Audited forma 3 Equity -ments forma
otherwise stated financi PPA financing
al &
informa Trans-act
tion ion costs
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--------------------------------------------------------------------------------
Equity
attributable to
parent company
shareholders
Share capital 259.6 10.6 270.2 -10.6 - -10.6 259.6
Share premium 131.1 343.5 474.6 -343.5 - -343.5 131.1
fund
Fair value -7.1 - -7.1 - - - -7.1
reserve
Invested 841.2 - 841.2 - 604.0 604.0 1,445.2
unrestricted
equity fund
Translation -19.7 - -19.7 - - - -19.7
differences
Retained earnings 445.7 -41.5 404.2 41.5 -7.6 33.9 438.1
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Total equity 1,650.7 312.6 1,963.3 -312.6 596.4 283.8 2,247.1
attributable to
parent company
shareholders
Non-controlling 1.8 32.1 33.9 3.5 - 3.5 37.3
interests
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Total 1,652.5 344.7 1,997.2 -309.2 596.4 287.2 2,284.4
shareholders'
equity
Long-term
liabilities
Loans 1,094.5 784.9 1,879.4 18.8 - 18.8 1,898.2
Derivative 6.0 22.6 28.6 - - - 28.6
financial
instruments
Deferred tax 129.6 163.2 292.8 25.5 - 25.5 318.3
liabilities
Other liabilities 0.6 2.1 2.7 - - - 2.7
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Total long-term 1,230.7 972.9 2,203.6 44.3 - 44.3 2,247.9
liabilities
Short-term
liabilities
Loans 83.1 50.7 133.8 - - - 133.8
Derivative 2.2 - 2.2 - - - 2.2
financial
instruments
Current tax 0.8 0.2 1.0 - - - 1.0
liabilities
Trade and other 67.9 30.3 98.2 - 7.6 7.6 105.8
payables
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Total short-term 154.1 81.2 235.3 - 7.6 7.6 242.9
liabilities
Total liabilities 1,384.8 1,054.1 2,438.9 44.3 7.6 51.9 2,490.8
Total liabilities 3,037.2 1,398.8 4,436.0 -264.8 604.0 339.2 4,775.2
and equity
Combined loan-to-value (LTV) of Citycon and Sektor is approximately 45 %.
Overview of the pro forma adjustments
The following information summarises the adjustments related to the unaudited
pro forma income statement for 2014 and the unaudited pro forma balance sheet
as of 31 December 2014. The adjustments are referenced in the table columns
above.
Notes to the pro forma adjustments:
1. Adjustment 1) in the income statement relates to the annual amortisation
expense for the intangible assets acquired in the transaction. The intangible
assets, except goodwill, are amortised over their average estimated useful
life. Pro forma amortisation expense is estimated at EUR 1.3 million for 2014.
Deferred taxes related to the amortisation expense are estimated at EUR 0.4
million.
These pro forma adjustments have continuing impact.
2. Adjustment 2) in the income statement relates to the transaction costs
associated with the purchase of Sketor. The Citycon Group has incurred costs in
the estimated amount of EUR 7.6 million for execution of the Transaction which
are not considered directly related to the issue of equity, and therefore
deemed as profit and loss expense items under IFRS as part of administrative
expenses. The transaction costs are reflected in the pro forma balance sheet as
an adjustment to retained earnings and accrued as part of Trade and other
payables. There is no deferred tax or current tax associated with the
transaction costs.
These pro forma adjustments do not have continuing impact.
3. Adjustment 3) is the purchase price allocation (PPA).2In connection with
the acquisition, Citycon is required to perform a purchase price allocation in
accordance with IFRS. The PPA exercise has identified the following
adjustments, shown in the table below. This resulted in an increase in the
carrying value of investment properties by EUR 104 million and a net change in
other assets and liabilities of EUR 4 million. Total goodwill from the
acquisition is EUR 118.8 million.3
2 PPA is preliminary by nature, not final. The final PPA is drafted after
closing of the Transaction based on Sektor's accounts on the closing date.
3 Changes due to the allocation of the acquisition cost in the value of
investment property and other items, as well as deferred taxes related to them,
reflect changes in the fair value between 31 December 2014 and the allocation
of the acquisition cost.
Citycon has elected the accounting principle option to not measure
non-controlling interests at acquisition-date fair value.
These pro forma adjustments have continuing impact.
Excess value to be allocated to parent company shareholders
----------------------------------------------------------------------
---------------------------------------------------------------------
Calculation of excess purchase price EUR million
Estimated purchase price 502.5
Total equity attributable to parent company shareholders -312.6
---------------------------------------------------------------------
---------------------------------------------------------------------
Excess value to be allocated to majority share holders 189.8
Summary of purchase price adjustments, EUR million
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-
Asset / liability included in 31 December 2014 PPA 31 December 2014
the PPA analysis IFRS unaudited adjustme Adjusted IFRS
consolidated nts1 unaudited
Sektor consolidated Sektor
balance sheet balance sheet items
items
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Contracts (center management) - 3.0 3.0
Contracts (rented centers) - 9.4 9.4
Investment properties 1,308.3 104.5 1,412.8
Investments in joint ventures 19.1 2.0 21.1
Bond fair value adjustment - -18.8 -18.8
Deferred tax liability -163.2 -25.5 -188.7
Goodwill - 118.8 118.8
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Total PPA adjustments before - 193.4 -
non-controlling interest
Non-controlling interest -32.1 -3.5 -35.6
portion of fair value PPA
adjustments
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--------------------------------------------------------------------------------
Total PPA adjustments - 189.8 -
1 Valuations of investment property, bonds, etc. are adjusted in the PPA
adjustments to comply with the time of acquisition (when the PPA has been
made).
4. The Group has incurred costs for execution of the Transaction which are not
considered directly related to the issue of equity, and therefore deemed as
profit and loss expense items under IFRS, which are reflected in the pro forma
balance sheet as an adjustment to retained earnings, in the estimated amount of
EUR 7.6 million. Net cash to be received from the issuance of new equity is
estimated at EUR 604 million, based on the Rights Issue being fully subscribed.
The Rights Issue is not underwritten. The Company has agreed on bridge
financing facilities of EUR 400 million, to be used to partly finance the
Transaction.
This pro forma adjustment is considered as non-recurring.
5. Sektor Gruppen AS is subject to corporate income tax in Norway. The Group
has chosen to give effect in the pro forma adjustments by using the relevant
statutory rate which would be expected to apply to the adjustments had they
happened in the period presented. Since pro forma information is hypothetical
information, the actual deductibility and eventual tax impact of the
Transaction will not mirror the tax effect included here and may be subject to
discussion with relevant tax authorities. However, consistent with IFRS, the
Group has given effect to possible taxation on the adjustments by using the
relevant statutory rate of 27 %.
This pro forma adjustment is considered as non-recurring.
Citycon's management has not identified any other adjustments that would
materially affect Citycon's pro forma financial information for use in the
Finnish language prospectus, or any other adjustments that were necessary in
order for the pro forma consolidated information of the Group to be stated in
accordance with IFRS for pro forma purposes.
Sektor's unaudited historical financial information according to IFRS
The Citycon audited consolidated financial statements are prepared according to
IFRS as adopted by the EU. The audited consolidated financial statements of
Sektor are prepared according to NGAAP.
Based on an analysis performed by Citycon's management of the applied NGAAP
accounting principles of Sektor, differences between NGAAP and Citycon's IFRS
accounting policies and financial statement presentation were identified. All
NGAAP to IFRS differences as of 31 December 2014 and for the year then ended
evaluated by management as relevant and significant for the purposes of the pro
forma presentation have been adjusted in the unaudited IFRS consolidated
financial statements presented below. All presentation and line item
classification differences considered relevant have been reclassified. The
purpose of these unaudited consolidated IFRS financial information is to
provide a basis for the presentation of the pro forma financial information for
Citycon and not to report Sektor as a separate entity in accordance with IFRS
as adopted by the EU.
The tables below include:
-- the Sektor audited NGAAP NOK consolidated income statement and the
undaudited Sektor Gruppen AS NGAAP NOK income statement together with the
presentation reclassifications and the IFRS adjustments identified by
Citycon for the year ended 31 December 2014;
-- the unaudited Sektor NGAAP and IFRS consolidated income statement for the
year ended 31 December 2014 reclassified using Citycon's IFRS presentation
format;
-- the audited Sektor Gruppen AS NGAAP NOK balance sheet 31 December 2014 and
the unaudited Sektor NGAAP NOK balance sheet reclassified using Citycon's
IFRS presentation format;
-- the unaudited Sektor NGAAP and IFRS consolidated balance sheet for the year
ended 31 December 2014 reclassified using Citycon's IFRS presentation
format.
The audited NOK NGAAP financial statements are reclassified to Citycon
presentation format in NOK thousands, as this is the presentation currency used
as reflected in the audited financial statements. Sektor IFRS financial
information is presented using Citycon's presentation format and presentation
currency EUR. Following the Sektor IFRS financial information is a discussion
of the NGAAP to IFRS adjustments and reclassifications.
The NGAAP to IFRS conversion was performed by first converting the 2014
beginning balance sheet to IFRS. All identified opening balance sheet
differences were posted as adjustments to opening retained earnings, for a
total adjustment of EUR -93.8 million. The conversion effect from NGAAP to IFRS
on the 31 December 2014 NGAAP retained earnings was an increase of EUR 40.5
million, for a total conversion effect on retained earnings of EUR -53.2
million. This EUR -53.2 million decrease is discussed in further detail below.
For presentation purposes, the NOK functional currency financial information of
Sektor and the IFRS adjustments are converted to EUR at the 31 December 2014
rate of NOK to EUR of 9.0365 for balance sheet items and the 2014 average
exchange rate NOK to EUR of 8.3534 for the income statement items.
The following Sektor NGAAP accounting policies and the corresponding Citycon
IFRS accounting policies were identified as accounting policies that created a
material difference in the Sektor financial information for the purposes of
presenting pro forma information in the Finnish language prospectus, and the
Sektor financial information has been accordingly adjusted for these items.
Other differences evaluated as not having a material impact on the financial
information presented in the Finnish language prospectus are not included in
this section.
Selected Sektor NGAAP Corresponding Citycon IFRS accounting policies
accounting policies
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Investment property at Investment property at fair value with fair value
historical cost and changes over the P&L
depreciated
Goodwill from business Goodwill not amortised but tested for impairment
combinations amortised over annually
the useful life
Derivative financial Derivative financial instruments at fair value
instruments recognised in over the P&L and recognised in the balance sheet
accordance with NGAAP hedge and recognised at fair value over the profit or
accounting practice loss
Deferred taxes at net Deferred taxes as nominal value in accordance with
present value IAS 12
Long-term debt at nominal Long-term debt at amortised cost, effective
values, and origination interest includes the origination fees
fees capitalised and
amortised over the life of
the loan
Long-term debt is classified Long-term debt is classified in accordance with
100 % as long-term, and IAS 1 as short-term for the portion that falls
accrued interest on due within one operating cycle, and accrued
inflation adjusted bonds is interest on inflation-adjusted bonds is
short-term classified as long-term.
Adjusting associate companies' financial statements to comply with NGAAP and
IFRS principles affects Citycon's share profit of the associate companies'
results.
Sektor NGAAP NOK audited income statement converted to Citycon IFRS
presentation format (unaudited)
Sektor Gruppen AS NOK 1,000 Sektor Gruppen AS NOK 1,000
NGAAP income statement NGAAP income statement
Audited reclassified using Citycon
IFRS
presentation and
classification
Unaudited
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Rental income 734,938 Gross rental income 736,027
Other operating revenue 373,052 Service charge income 325,266
Net fair value gains/losses - Turnover 1,061,293
on investment property
Gain on sale of fixed assets 511 Property operating expenses 629,667
Other expenses from leasing 350
operations
Turnover 1,108,501 Net rental income 431,276
Employee benefit expense 155,248 Administrative expenses 96,141
Depreciation 202,186 Other operating income and 46,696
expenses
Gains/loss derivatives - Net fair value gains/losses -
on investment property
Loss on sale of fixed assets 45 Net gains/losses on sale of 466
investment property
Other operating expenses 368,723
Total operating expenses 726,203
Operating profit 382,298 Operating profit 382,298
Financial income and
expenses
Financial income 51,144 Financial income 43,723
Financial expense (369,343) Financial expenses -369,343
Net financial items (318,199) Net financial income and -325,620
expenses
Share profit of joint 7,421
venture
Profit before taxes 64,100 Profit before taxes 64,100
Current taxes
Change in deferred taxes -33,192
Income taxes (33,192) Income taxes -33,192
Profit for the year 30,908 Profit for the period 30,908
Sektor NGAAP to IFRS consolidated statement of comprehensive income for the
financial year ended 31 December 2014
EUR million, unaudited Sektor IFRS Sektor
NGAAP adjustme IFRS
reclassified and using nts
Citycon IFRS presentation format
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Gross rental income 88.1 - 88.1
Service charge income 38.9 - 38.9
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Turnover 127.0 - 127.0
Property operating expenses 1) 75.4 -22.3 53.0
Other expenses from leasing 0.0 - 0.0
operations
Net rental income 51.6 -22.3 74.0
Administrative expenses 11.5 - 11.5
Other operating income and expenses 5.6 - 5.6
Net fair value gains/losses on - 35.3 35.3
investments property 1)
Net gains/losses on sale of 0.1 - 0.1
investment property
Operating profit 45.8 57.7 103.5
Financial income 5.2 - 5.2
Financial expenses 4) -44.2 -10.0 -54.2
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Net financial income and expenses -39.0 -10.0 -49.0
Share profit of joint venture 2) 0.9 1.7 2.6
Profit before taxes 7.7 49.4 57.0
Current taxes - -0.3 -0.3
Change in deferred taxes -4.0 -12.5 -16.5
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Income taxes -4.0 -12.8 -16.8
Profit for the period 3.7 36.5 40.2
Sektor NGAAP NOK audited balance sheet to Citycon IFRS presentation format
Sektor Gruppen AS 31 Sektor Gruppen AS 31
NGAAP Balance sheet December NGAAP Balance sheet December
Audited 2014 reclassified and using Citycon 2014
NOK 1,000 IFRS NOK 1,000
presentation format
Unaudited
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Intangible assets Non-current assets
Goodwill 2,466 Investment properties 11,247,915
Deferred tax assets 168,134 Investments in joint ventures 158,231
-----------------------------------
-----------------------------------
Total intangible 170,600 Intangible assets -
assets
Property, plant and 82,694
equipment
Tangible assets Deferred tax assets 168,134
Machinery and 25,900 Derivative financial 17,909
equipment instruments and other
non-current assets
Investment property 10,969,739
Investment projects 334,970
-----------------------------------
-----------------------------------
Total tangible assets 11,330,609
Non-current assets
Investments in 137,971
associated companies
Investments in joint 20,172
ventures
Investments in shares 88
Long-term receivables 15,443
-----------------------------------
-----------------------------------
Total non-current 173,674
assets
Total non-current 11,674,883 Total non-current assets 11,674,883
assets
Current assets
Current assets Derivative financial -
instruments
Work in progress 573 Current tax receivables -
Accounts receivable 66,246 Trade and other receivables 66,819
Cash and cash 287,177 Cash and cash equivalents 287,177
equivalents
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--------------------------------------------------------------------------------
Total current assets 353,995 Total current assets 353,996
Total assets 12,028,879 Total assets 12,028,879
Equity and liabilities Equity attributable to parent
company shareholders
Equity Share capital 96,000
Share capital 96,000 Share premium fund 3,103,981
Share premium 1,103,981 Fair value reserve -
Other contributed 2,000,000 Translation reserve -
equity
Invested unrestricted equity -
fund
Retained earnings 135,040
---------------------------------------------
---------------------------------------------
Total paid in equity 3,199,981 Total equity attributable to 3,335,021
parent company shareholders
Retained earnings 135,040
Non-controlling 260,986 Non-controlling interests 260,986
interests
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--------------------------------------------------------------------------------
Total equity 3,596,008 Total shareholders' equity 3,596,008
Non-current liabilities Long-term liabilities
Deferred tax liabilities 502,713 Loans 7,634,941
Other liabilities 11,609 Derivative financial -
instruments
---------------------------------------
---------------------------------------
Total non-current 514,323 Deferred tax liabilities 502,713
liabilities
Other liabilities 11,609
Long-term debt
Loans 7,634,941
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total long-term debt 7,634,941 Total long-term liabilities 8,149,263
Loans -
Current liabilities Derivative financial -
instruments
Short-term debt 283,608 Trade and other payables 283,608
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total current liabilities 283,608 Total short-term liabilities 283,608
Total liabilities 8,432,872 Total liabilities 8,432,871
Total equity and 12,028,879 Total equity and liabilities 12,028,879
liabilities
Sektor NGAAP to IFRS consolidated balance sheet as of 31 December 2014
EUR million, unaudited 31 December IFRS IFRS 31
2014 adjust Presentat December
NGAAP ments ion 2014
Citycon reclassif IFRS
presentation ications
format
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Non-current assets
Investment properties 1) 1,244.7 63.6 1,308.3
Investments in joint ventures 2) 17.5 1.6 19.1
Property, plant and equipment 9.2 - 9.2
Deferred tax assets 3) 18.6 0.2 18.8
Derivative financial instruments 2.0 2.2 4.2
and other non-current assets 4)
5)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total non-current assets 1,292.0 67.6 1,359.6
Current assets
Derivative financial instruments - -
Current tax receivables - -
Trade and other receivables 7.4 7.4
Cash and cash equivalents 31.8 31.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total current assets 39.2 39.2
Total assets 1,331.1 67.6 1,398.8
Equity attributable to parent -
company shareholders
Share capital 10.6 10.6
Share premium fund 343.5 343.5
Fair value reserve - -
Invested unrestricted equity fund - -
Retained earnings 14.9 -56.4 -41.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total equity attributable to 369.1 -56.4 312.6
parent company shareholders
Non-controlling interests 28.9 3.2 32.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total shareholders' equity 6) 397.9 -53.2 344.7
Long-term liabilities -
Loans 7) 844.9 -9.3 -50.7 784.9
Derivative financial instruments - 22.6 - 22.6
4)
Deferred tax liabilities 3) 55.6 107.6 - 163.2
Other liabilities 8) 1.3 0.9 2.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total long-term liabilities 901.8 120.9 -49.8 972.9
Short-term liabilities
Loans - 50.7 50.7
Derivative financial instruments - - -
Current tax liabilities - 0.2 0.2
Trade and other payables 8) 31.4 -1.1 30.3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total short-term liabilities 31.4 49.8 81.2
Total liabilities 933.2 120.9 - 1,054.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total liabilities and equity 1,331,1 67.6 1,398.8
Overview of the NGAAP to IFRS adjustments and reclassifications
The following information summarises the NGAAP - IFRS adjustments related to
the unaudited Sektor consolidated statement of income for 2014 and the 31
December 2014 consolidated statement of financial position. The numbering is
referenced from the numbered line items in the balance sheet. Conversion from
NOK to EUR is at the average exchange rate of NOK/EUR 8.3544 for the profit or
loss and NOK/EUR 9.0365 for the balance sheet.
Notes to IFRS adjustments and reclassifications:
1. In accordance with NGAAP, Sektor has recognised investment property at
historical cost with annual depreciation. Under IFRS there is an accounting
policy choice to recognise investment property at historical cost or fair
value. Citycon has decided to use the fair value model in compliance with IAS
40, which results in changes in fair value being posted to the income statement
and no recognition of depreciation. The investment property is therefore
recognised at a fair value of EUR 1,308.3 million (NOK 11,823 million) as of 31
December 2014 and NGAAP 2014 depreciation of EUR 22.3 million (NOK 186 million)
is adjusted in the profit or loss, as well as the 2014 change in fair value of
the investment property is recognised as a gain in fair value of EUR 35.3
million (NOK 295 million). An increase in deferred tax liabilities related to
investment property is recognised in the amount of EUR 14.4 million (NOK 130
million).
Leased investment property operated under an operating lease is not recognised
at fair value in the statement of financial position. Leasehold improvements
are at historical cost less depreciation. Citycon uses the IFRS accounting
principle option to present leased investment property at fair value, as if it
was a financial lease, with a corresponding in increase in the interest-bearing
debt related to the leased property.
Development projects are included in the same balance sheet line item as
investment property and are measured for under IFRS at fair value.
2. In accordance with NGAAP, Sektor has accounted for their 20 % investment in
an associated company using the equity method and based upon underlying NGAAP
financial statements. IFRS also requires use of the equity method, but with
application based on underlying IFRS financial statements for the associate
that are consistent with those of the group. Therefore, the associate's
financial statements were converted to IFRS before application of the equity
method. Adjustments were made to recognise investment property and derivative
financial instruments at fair value, as well as the related deferred tax effect
of these adjustments. These adjustments, including the effect of the deferred
taxes, resulted in an increase in the share of the result in the associate of
EUR 1.7 million (NOK 14,174 thousand) and a similar increase in the balance
sheet in the investments in associated companies. There is no deferred tax
impact related to the equity method posting of EUR 1.7 million in the financial
statements.
3. In accordance with NGAAP, Sektor has accounted for deferred taxes at net
present value. In accordance with IAS 12, an adjustment has been made to
present deferred taxes under IFRS at nominal value. This adjustment resulted in
a net increase in deferred tax liabilities of EUR 93.2 million (NOK 842
million). The net effect of all deferred tax asset and deferred tax liability
adjustments is a decrease of retained earnings of EUR 107.4 million (NOK 970
million).
4. In accordance with NGAAP hedge accounting, Sektor has not recognised their
interest rate swap derivative contracts in the financial statements. Under
IFRS, these derivative contracts do not qualify for hedge accounting, and are
therefore recognised at fair value over the profit or loss. Interest rate swaps
are recognised in the balance sheet as assets and liabilities, respectively
with a value of EUR 2.2 million (NOK 19 million) and EUR 22.6 million (NOK 205
million) as of 31 December 2014. A net deferred tax asset of EUR 5.5 million
(NOK 50 million) is recognised in the balance sheet related to all of the
derivatives, of which the majority is presented net of deferred tax
liabilities. The net profit or loss effect from the derivative financial
instruments in 2014 is a loss of EUR 11.7 million (NOK 98 million). A net
decreased tax expense of EUR 3.1 million (NOK 26 million) is recognised in the
2014 IFRS income statement.
5. In accordance with NGAAP, Sektor has recognised goodwill in connection with
business combinations, which is amortised over the useful life of five years.
IFRS does not permit goodwill amortisation and instead requires goodwill to be
tested annually for impairment. Accumulated amortisation as of 31 December 2014
of EUR 0.1 million (NOK 1 million) has been reversed. IFRS goodwill as of 31
December is EUR 0.4 million (NOK 3.5 million), and is considered not to be
impaired. There is no deferred tax impact related to the goodwill adjustment.
6. The change in total shareholders' equity of EUR 53.1 million (NOK 480
million) is further detailed in the NGAAP to IFRS equity reconciliation given
below. Non-controlling interests has been adjusted by EUR 3.2 million (NOK 29
million) to reflect the transition to IFRS within the sub-consolidation group
where there is a minority interest.
Sektor NGAAP to IFRS equity reconciliation, EUR million
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NGAAP - Equity 31 December 2014 397.9
Effects on IFRS adjustments
IFRS conversion effect on equity 1 January 2014 (cf. above) -93.8
Derivatives - assets (change in fair value) 1.3
Derivatives - liabilities (change in fair value) -9.9
Goodwill (reversal of NGAAP amortisation) 0.1
Investment property - reversal of NGAAP investment 16.3
property depreciation
Investment property - 2014 change in fair value 25.8
Investment in associated companies 1.7
IAS 39 - loans at amortised cost 1.2
Presentation currency translation effect NOK to EUR 4.0
Total net conversion effect on retained earnings -53.2
IFRS - Equity 31 December 2014 344.7
IFRS Equity 1 January 2014 341.1
Profit for the year 40.2
2014 purchase of minority interest (no IFRS - NGAAP difference; please -9.6
see 2014 NGAAP financial statements note 11)
Presentation currency translation effect NOK to EUR -27.0
IFRS Equity 31 December 2014 344.7
7. In accordance with NGAAP, Sektor has recognised long-term debt at nominal
values, as well as capitalised the debt origination fees, and amortised these
fees straight-line over the life of the loan. Sektor has also classified
accrued interest as part of short-term debt in the statement of financial
position. IFRS requires recognition of interest expense and debt at amortised
cost (or fair value), and Citycon elects to measure debt at amortised cost. All
long-term loans were converted to an amortised cost model, and the capitalised
origination fee and related NGAAP amortisation reversed. EUR 1.1 million (NOK
10 million) of accrued interest has been reclassified to IFRS long-term debt.
The total NGAAP to IFRS adjustment was an increase in 31 December 2014
long-term debt of EUR 9.3 million (NOK 84 million) and a profit or loss
decrease in financial expense of EUR 1.7 million (NOK 14 million).
8. Under NGAAP all debt was classified in the balance sheet as long-term. IFRS
requires the portion of debt due and payable within the next operating cycle to
be classified as short-term. EUR 52.9 million (NOK 478 million) of debt was
therefore reclassified as short-term loans. Additionally, the NGAAP balance
sheet classified accrued interest related to the inflation-adjusted debt as
short-term, and this has been reclassified as long-term for IFRS presentation
purposes.
Sektor has presented their financial statements using a NGAAP presentation
format. For purposes of the NGAAP to IFRS conversion and subsequent
presentation of the pro forma financial statements, the Sector NGAAP financial
statements were reclassified to the Citycon presentation format.
Reclassifications were made from a NGAAP line item to the Citycon IFRS balance
sheet line item for goodwill, derivatives, debt and current tax liabilities,
such that the starting point for the presentation of the financial information
given above is the Citycon presentation format. In the profit or loss, the
Sektor NGAAP line item Depreciation is included in the Citycon line item
Administrative expenses, and Sektor NGAAP line item Other operating expenses
are reclassified to Property operating expenses. The gain/loss on derivatives
is classified as a financial expense and financial income related to the
associate is reclassified to the Citycon presentation line item Share of profit
joint venture.
Citycon management has not identified any other adjustments from NGAAP to IFRS
that would materially affect the Citycon pro forma information to be stated in
accordance with IFRS for pro forma purposes for use in the Finnish language
prospectus.
Helsinki, 18 June 2015
CITYCON OYJ
Investor enquiries:
Henrica Ginström
Tel. +358 50 554 4296
henrica.ginstrom@citycon.com
About Citycon
Citycon is a leading owner, manager and developer of urban grocery-anchored
shopping centres in the Nordic and Baltic region, managing assets that total
approximately EUR 3.4 billion and with market capitalisation of EUR 1.8
billion. Citycon is the No. 1 shopping centre owner in Finland and Estonia and
among the market leaders in Sweden. Citycon has also established a foothold in
Denmark. www.citycon.com
About Sektor
Sektor Gruppen AS is the second largest company in managing, developing and
marketing of shopping centres in Norway. Sektor's portfolio consists of 20
fully and majority-owned shopping centres, 4 minority-owned centres, 2 rented
shopping centres and 8 managed shopping centres. With these 34 shopping
centres, Sektor creates excellent shopping experiences for its customers in
partnership with tenants. Sektor's total portfolio under management has a gross
leasable area of more than 600,000 sq.m. www.sektor.no
DISCLAIMER
This announcement is not an offer for sale of securities in the United States.
Securities may not be offered or sold in the United States absent registration
or an exemption from registration under the U.S. Securities Act of 1933, as
amended. Citycon does not intend to register any portion of the Rights Issue in
the United States or to conduct a public offering of securities in the United
States. The Joint Global Coordinators and Joint Bookrunners will not engage in
any actions or assume any responsibility with regard to the Rights Issue within
the United States. The offering of the Subscription Rights and the New Shares
to the eligible shareholders in the United States will be the sole
responsibility of the Company.
The Company has not authorized any offer to the public of securities in any
Member State of the European Economic Area other than Finland. With respect to
each Member State of the European Economic Area other than Finland and which
has implemented the Prospectus Directive (each, a “Relevant Member State”), no
action has been undertaken or will be undertaken to make an offer to the public
of securities requiring publication of a prospectus in any Relevant Member
State. As a result, the securities may only be offered in Relevant Member
States (a) to any legal entity which is a qualified investor as defined in the
Prospectus Directive; or (b) in any other circumstances falling within Article
3(2) of the Prospectus Directive. For the purposes of this paragraph, the
expression an “offer of securities to the public” means the communication in
any form and by any means of sufficient information on the terms of the offer
and the securities to be offered so as to enable an investor to decide to
exercise, purchase or subscribe the securities, as the same may be varied in
that Member State by any measure implementing the Prospectus Directive in that
Member State and the expression “Prospectus Directive” means Directive
2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive,
to the extent implemented in the Relevant Member State), and includes any
relevant implementing measure in the Relevant Member State and the expression
“2010 PD Amending Directive” means Directive 2010/73/EU.
No public offer or invitation to acquire securities of Citycon is being made by
or in connection with this release. Any such offer will be made solely by means
of a prospectus once it has been approved by the Finnish Financial Supervisory
Authority and published in accordance with the law, and any supplement thereto.
This document is being distributed to and is only directed at (i) persons who
are outside the United Kingdom or (ii) to investment professionals falling
within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (the “Order”) or (iii) high net worth companies, and
other persons to whom it may lawfully be communicated, falling within Article
49(2)(a) to (d) of the Order (all such persons in (i), (ii) and (iii) above
together being referred to as “relevant persons”). Any invitation, offer or
agreement to subscribe, purchase or otherwise acquire securities will be
engaged in only with relevant persons. Any person who is not a relevant person
should not act or rely on this document or any of its contents.
This announcement is not for publication, distribution or release, directly or
indirectly, in or into the United States, Canada, South Africa, Australia, Hong
Kong or Japan or to any other jurisdiction where such announcement or
publication would be unlawful. The distribution of this announcement may be
restricted by law in certain jurisdictions and persons into whose possession
any document or other information referred to herein comes should inform
themselves about and observe any such restriction. Any failure to comply with
these restrictions may constitute a violation of the securities laws of any
such jurisdiction.
Each of the Joint Global Coordinators and Joint Bookrunners and their
respective affiliates are acting exclusively for the Company and no one else in
connection with the Rights Issue. They will not regard any other person
(whether or not a recipient of this release) as their respective clients in
relation to the Rights Issue and will not be responsible to anyone other than
the Company for providing the protections afforded to their respective clients,
nor for giving advice in relation to the Rights Issue or any transaction or
arrangement referred to herein. No representation or warranty, express or
implied, is made by the Joint Global Coordinators and Joint Bookrunners as to
the accuracy, completeness or verification of the information set forth in this
release, and nothing contained in this release is, or shall be relied upon as,
a promise or representation in this respect, whether as to the past or the
future. The Joint Global Coordinators and Joint Bookrunners assume no
responsibility for its accuracy, completeness or verification and, accordingly,
disclaim, to the fullest extent permitted by applicable law, any and all
liability which they may otherwise be found to have in respect of this release.
The information contained in this announcement is for background purposes only
and does not purport to be full or complete. No reliance may or should be
placed by any person for any purposes whatsoever on the information contained
in this announcement or on its completeness, accuracy or fairness. The
information in this announcement is subject to change. Any subscription for
shares in the proposed Rights Issue should be made solely on the basis of the
information contained in the prospectus to be issued by Citycon in due course.
This announcement contains certain forward-looking statements. These
forward-looking statements involve risks and uncertainties that could
significantly affect expected results and are based on certain key assumptions.
Many factors could cause actual results to differ materially from those
projected or implied in any forward-looking statements. Due to these
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward-looking statements, which speak only as of the date of this
announcement. Citycon disclaims any obligation to update any forward-looking
statements contained in this announcement, except as required pursuant to
applicable law.
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