Citycon Oyj Interim Report 24 October 2019 at 09:00 hrs
- Solid overall performance in January-September
- Total tenant sales grew by 4%; like-for-like sales by 1%
- Total footfall increased by 5%; like-for-like footfall by 1%
- Net rental income continued to grow, including like-for-like net rental income growth
- Continued positive leasing spread driven by Sweden
- Outlook narrowed after solid January-September performance and completed disposals
JULY—SEPTEMBER 2019
- Net rental income was EUR 54.2 million (Q3/2018: 53.6). Development project in Mölndal coming online increased net rental income by EUR 1.4 million, and like-for-like properties increased net rental income by EUR 0.4 million. Net rental income developed positively in best assets, in Iso Omena in particular. This was partly offset by planned divestments in 2018 and Q2/2019, impacting net rental income by EUR -1.8 million. Weaker currencies had an impact of EUR -0.7 million. Adoption of IFRS 16 standard increased net rental income in Q3/2019 by EUR 1.8 million in total.
- EPRA Earnings excluding the one-time expenses related to organizational changes was EUR 35.9 million or EUR 0.202 per share. Reported EPRA Earnings decreased slightly to EUR 35.5 million (36.8) as result of lower share of profit of joint ventures. EPRA Earnings per share (basic) was EUR 0.199 (0.207), impact from weaker currencies was EUR -0.003 per share.
- IFRS-based earnings per share increased to EUR 0.08 (-0.05) as a result of higher net rental income and lower net financial expenses.
- The reporting period includes the adoption of IFRS 16 from 1.1.2019 onwards. Please see Note 2 for more information.
JANUARY—SEPTEMBER 2019
- Net rental income was EUR 164.0 million (Q1-Q3/2018: 161.2). Completed (re)development projects increased net rental income by EUR 3.9 million, and like-for-like properties increased NRI by EUR 0.4 million. Divestments decreased net rental income by EUR 4.6 million and weaker SEK and NOK by EUR 1.9 million. Adoption of IFRS 16 standard increased net rental income in Q1-Q3/2019 by EUR 5.3 million in total.
- EPRA Earnings excluding the one-time expenses related to organizational changes increased to EUR 112.1 million or EUR 0.629 per share. Reported EPRA Earnings was EUR 110.0 million (109.3) due to higher net rental income and lower net financial expenses. EPRA Earnings per share (basic) was EUR 0.618 (0.614), negative impact from weaker currencies was EUR 0.010 per share.
- IFRS-based earnings per share was EUR 0.19 (0.06) as a result of higher net rental income, lower net financial expenses and higher other operating income and expenses.
- The reporting period includes the adoption of IFRS 16 from 1.1.2019 onwards. Please see Note 2 for more information.
KEY FIGURES
| Q3/2019 | Q3/2018 | % 1) | Comparable change % 3) |
|||
| Net rental income | MEUR | 54.2 | 53.6 | 1.2% | 2.6 % | |
| Direct Operating profit 2) | MEUR | 48.0 | 47.8 | 0.3% | 1.8 % | |
| IFRS Earnings per share (basic) 4) | EUR | 0.08 | -0.05 | - | - | |
| Fair value of investment properties | MEUR | 4,105.9 | 4,183.4 | -1.9% | - | |
| Loan to Value (LTV) 2) | % | 49.6 | 48.2 | 2.9 % | - | |
| EPRA based key figures 2) | Q3/2019 | Q3/2018 | % 1) | Comparable change % 3) |
||
| EPRA Earnings | MEUR | 35.5 | 36.8 | -3.6% | -1.9 % | |
| EPRA Earnings per share (basic) 4) | EUR | 0.199 | 0.207 | -3.6% | -1.9 % | |
| EPRA NAV per share 4) | EUR | 12.58 | 13.29 | -5.4% | - | |
| Q1-Q3/2019 | Q1-Q3/2018 | % 1) | Comparable change % 3) |
2018 | ||
| Net rental income | MEUR | 164.0 | 161.2 | 1.7 % | 2.9 % | 214.9 |
| Direct Operating profit 2) | MEUR | 146.4 | 143.6 | 1.9 % | 3.2 % | 187.6 |
| IFRS Earnings per share (basic) 4) | EUR | 0.19 | 0.06 | - | - | 0.09 |
| Fair value of investment properties | MEUR | 4,105.9 | 4,183.4 | -1.9% | - | 4,131.3 |
| Loan to Value (LTV) 2) | % | 49.6 | 48.2 | 2.9 % | - | 48.7 |
| EPRA based key figures 2) | Q1-Q3/2019 | Q1-Q3/2018 | % 1) | Comparable change % 3) |
2018 | |
| EPRA Earnings | MEUR | 110.0 | 109.3 | 0.6 % | 2.2 % | 143.5 |
| EPRA Earnings per share (basic) 4) | EUR | 0.618 | 0.614 | 0.6 % | 2.2 % | 0.806 |
| EPRA NAV per share 4) | EUR | 12.58 | 13.29 | -5.4% | - | 12.95 |
1) Change from previous year. Change-% is calculated from exact figures.
2) Citycon presents alternative performance measures according to the European Securities and Markets Authority (ESMA) guidelines. More information is presented in Basis of Preparation and Accounting Policies in the notes to the accounts.
3) Change from previous year (comparable exchange rates). Change-% is calculated from exact figures.
4) Key ratios have been adjusted in the comparison periods to reflect the new number of shares after the reversed share split executed in March 2019.
CEO F. SCOTT BALL:
“Citycon’s operational performance remained solid during the third quarter and total net rental income grew to EUR 164 million in January-September 2019. Like-for-like net rental income continued to grow driven by Finland and Norway. It should be noted that the like-for-like development in Finland continued to be positive after several subdued years. EPRA earnings remained solid and the EPRA earnings per share was EUR 0.618 in January-September 2019 and the profit for the period increased compared to prior year. The occupancy rate remained close to the previous year at 95.3% at the end of September 2019 illustrating the stability of our business model. We were pleased that total tenant sales increased by 4% and total footfall by 5% during January-September 2019.
The Citycon team carried out a strategic review during the past quarter in order to define the company’s short and long-term focus areas. As a result, Citycon held its Capital Markets Day 2019 in September and discussed its short-term performance improvement plans and long-term mixed-use development potential. Citycon’s immediate focus is to maximize the value of the existing assets. As noted previously, we have a new organization in place and have taken concrete steps to harmonize our processes across the Nordics.
Citycon has a great stable business model with assets in unique and growing urban locations that offer great densification potential. Our strategy is to become a mixed-use urban real estate investor and owner. We will significantly increase our residential footprint by densifying the urban areas around our assets. Citycon’s development team was strengthened in August with our new Chief Development Officer Erik Lennhammar and he and our development team have started the work to formalize our residential and densification strategy.
Strengthening the balance sheet is a near-term key priority for Citycon. The pressure on valuations has also contributed to our slightly elevated loan-to-value ratio, which stood at 49.6% at the end of September 2019. Currently, we have begun to take concrete measures to defend our investment grade credit ratings with a stronger balance sheet.
After a solid January-September and following the completed disposals of two shopping centres in Finland, we have narrowed our guidance further. We now expect EPRA EPS to be in the range of EUR 0.79-0.82 for the full year 2019.”
OUTLOOK FOR THE YEAR 2019 NARROWED
| Previously | |||
| EPRA Earnings per share (basic) | EUR | 0.79-0.82 | 0.785–0.850 |
| Direct operating profit | MEUR | 190-195 | 189–200 |
| EPRA Earnings | MEUR | 141-146 | 140–151 |
These estimates are based on the existing property portfolio as well as on the prevailing level of inflation, the EUR–SEK and EUR–NOK exchange rates, and current interest rates. Premises taken offline for planned or ongoing (re)development projects reduce net rental income during the year.
EVENTS AFTER THE REPORTING PERIOD
No material events after the reporting period.
AUDIOCAST
Citycon's investor, analyst and press conference call and live audiocasting will be arranged on Thursday 24 October 2019 at 10 am EEST. The audiocast can be participated by calling in and followed live on the following website: https://citycon.videosync.fi/2019-q3-results
Conference call numbers are:
Participants from Europe +44 3333 000 804 PIN: 82138243#
Participants from the US +1 855 857 06 86 PIN: 82138243#
For more investor information, please visit the company’s website at www.citycon.com.
Espoo, 23 October 2019
Citycon Oyj
Board of Directors
For further information, please contact:
Eero Sihvonen
Executive VP and CFO
Tel. +358 50 557 9137
eero.sihvonen@citycon.com
Mikko Pohjala
IR and Communications Director
Tel. +358 40 838 0709
mikko.pohjala@citycon.com
Citycon is a leading owner, manager and developer of urban, grocery-anchored shopping centres in the Nordic region, managing assets that total almost EUR 4.5 billion. Citycon is No. 1 shopping centre owner in Finland and among the market leaders in Norway, Sweden and Estonia. Citycon has also established a foothold in Denmark.
Citycon has investment-grade credit ratings from Moody's (Baa3) and Standard & Poor's (BBB-). Citycon Oyj’s share is listed in Nasdaq Helsinki.