Citycon Oyj Interim Report 17 April 2019 at 09:00 hrs
- Solid start to the year.
- Growth in tenant sales and footfall.
- Positive leasing spreads on renewals and re-lettings, country-wise in Sweden, Norway and Finland.
- Administrative expenses declined by 12 % excluding one-off restructuring costs from organizational changes.
- EPRA NAV increased compared to December 31, 2018
JANUARY—MARCH 2019
- Net rental income was EUR 53.6 million (Q1/2018: 53.3). Development project in Mölndal coming online increased net rental income by EUR 1.1 million, which was offset by planned divestments in 2018, which impacted net rental income by EUR -1.8 million. Weaker currencies had an impact of EUR -0.6 million. Adoption of IFRS 16 standard in Q1/2019 increased net rental income by EUR 1.8 million in total.
- EPRA Earnings excluding the one-time expenses related to organizational changes increased to EUR 36.9 million or EUR 0.207 per share. Reported EPRA Earnings decreased slightly to EUR 35.8 million (36.1) as result of divestments, one-time expenses related to organizational changes and lower share of profit of joint ventures and associated companies. EPRA Earnings per share (basic) was EUR 0.201 (0.203), impact from weaker currencies was EUR -0.003 per share.
- The reporting period includes the adoption of IFRS 16 from 1.1.2019 onwards. IFRS 16 had a positive impact on net rental income of EUR 1.8 million, negative impact on financial costs of EUR 0.5 million and positive net impact on EPRA Earnings of EUR 1.4 million. In addition, impact of EUR -1.5 million was recorded in fair value changes, leading to negative net impact on IFRS profit for the period of EUR 0.1 million.
| KEY FIGURES | ||||||
| Q1/2019 | Q1/2018 | % 1) | Comparable change % 3) | 2018 | ||
| Net rental income | MEUR | 53.6 | 53.3 | 0.6 % | 1.8 % | 214.9 |
| Direct Operating profit 2) | MEUR | 47.7 | 47.4 | 0.5 % | 1.8 % | 187.6 |
| Earnings per share (basic) 4) | EUR | 0.07 | 0.11 | -35.2 % | -33.9 % | 0.09 |
| Fair value of investment properties | MEUR | 4,213.5 | 4,141.2 | 1.7 % | - | 4,131.3 |
| Loan to Value (LTV) 2) | % | 48.7 | 46.8 | 4.2 % | - | 48.7 |
| EPRA based key figures 2) | ||||||
| EPRA Earnings | MEUR | 35.8 | 36.1 | -0.8 % | 0.9 % | 143.5 |
| EPRA Earnings per share (basic) 4) | EUR | 0.201 | 0.203 | -0.8 % | 0.9 % | 0.806 |
| EPRA NAV per share 4) | EUR | 12.98 | 13.53 | -4.1 % | - | 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) new 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:
“During our first 100 days, Citycon’s new management has hit the ground running. During the first quarter of 2019 we completed an organizational change in order to intensify our focus on asset management, which included the establishment of one shopping center management function for all countries and introducing a new specialty leasing business unit as well as centralized purchasing. The new organization provides consistency across the portfolio and ensures we have the necessary resources in place to spend more time at the assets with the ultimate aim of increasing the value of our portfolio. We have assets with tremendous footfall across the Nordics and we see significant future potential with our expanded specialty leasing business, which includes common area leasing and media sales. Thanks to our urban locations with public transportation connections, our assets have great densification potential going forward and we have many interesting opportunities in our development pipeline.
Operational performance in January-March 2019 was solid and our net rental income totaled EUR 53.6 million. Our EPRA earnings remained stable and EPRA EPS was EUR 0.201, which included some remaining one-time restructuring costs related to organizational changes. Excluding these one-off costs, the EPRA EPS grew and amounted to EUR 0.207. The tight cost control continued during the quarter and administrative expenses declined 12% year-on-year excluding restructuring costs. Leasing spread of renewals and re-lettings was also positive during the first quarter of the year and we were particularly pleased to see a positive leasing spread in Finland for the first time in a number of years. Looking at our guidance for 2019, we have kept our guidance unchanged.
Strengthening balance sheet remains a priority for us. Currently we are in active discussions regarding the potential disposal of some secondary assets. During the first quarter we agreed to sell a land plot adjacent to our Columbus shopping centre in Helsinki, Finland. We will continue to recycle capital going forward as our vision is to focus on multi-functional shopping centres that are connected to public transportation in growing urban areas.
In March, our Annual General Meeting was held in the Iso Omena shopping centre in Espoo, Finland. The AGM approved the Board of Director's proposal of carrying out a reverse split on the Citycon share and trading with the new shares started on March 18, 2019. Due to the reverse split, conducted in a 5:1 ratio, the per share figures of January-March 2019 have changed accordingly. In addition, the AGM approved the Board of Director’s asset distribution proposal and the first distribution was paid in March 2019.
After the reporting period in early April, our Iso Omena shopping centre in Finland was awarded the best large expansion project in Europe by the International Council of Shopping Centres. We are very proud of this great accomplishment, which is also an acknowledgment to our development capabilities.“
OUTLOOK FOR THE YEAR 2019
Citycon adjusted its guidance for 2019 on March 18, 2019 to reflect the change in the number of shares following the reverse share split. Only the outlook for EPRA Earnings per share (basic) was adjusted, otherwise outlook remained unchanged.
Updated outlook for the year 2019 (18 March 2019)
| EPRA Earnings per share (basic) | EUR | 0.775 – 0.875 |
| Direct operating profit | MEUR | 188 – 206 |
| EPRA Earnings | MEUR | 138 – 156 |
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 arranged on Wednesday 17 April 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-q1
Conference call numbers are:
Participants from Europe +44 333 300 08 04
Participants from the US +1 631 913 14 22
PIN: 99779953#
For more investor information, please visit the company’s website at www.citycon.com.
Helsinki, 16 April 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
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 (Baa2) and Standard & Poor's (BBB-). Citycon Oyj’s share is listed in Nasdaq Helsinki.
www.citycon.com